Document:

Exhibit 10.5

                         ASSIGNMENT OF OPERATING RIGHTS

                      OCS-G 05391, East Cameron Block 299

OFFSHORE LOUISIANA         }
                           }
OUTER CONTINENTAL SHELF    }   KNOW BY ALL THESE PRESENTS:
                           }
UNITED STATES OF AMERICA   }

     THAT,  Millennium Offshore Group, Inc., 5300 Memorial,  Ste. 1070, Houston,
Texas 77007, hereinafter called "Assignor",  for and in consideration of the sum
of Ten Dollars ($10.00) and other good and valuable  consideration to it paid by
Ridgewood Energy  Corporation,  whose address is 947 Linwood Avenue,  Ridgewood,
New  Jersey  07450,   hereinafter  called  "Assignee",   the  receipt  and  full
sufficiency of which is hereby acknowledged, does hereby grant, convey, transfer
and assign unto  Assignee,  its heirs,  successors  and  assigns,  an  undivided
28.33333%  operating  rights  interest in and to the oil and gas  mineral  lease
identified below (hereafter called "Subject Lease"), to wit:

     That  certain  Oil and Gas Lease  from the  United  States of  America,  as
     Lessor,  to CNG  Producing  Company and Mark  Producing,  Inc., as Lessees,
     effective  as of July 1, 1983,  identified  in the  office of the  Minerals
     Management  Service,  Gulf of Mexico  OCS  Region,  as Oil and Gas Lease of
     Submerged Lands under the Outer  Continental Shelf Lands Act bearing Serial
     Number  OCS-G  05391,  describing  Block  299,  East  Cameron  Area,  South
     Addition,  as shown on OCS Official  Leasing Map,  Louisiana  Map No. LA2A,
     covering  5,000.0  acres,  more or less,  INSOFAR AND ONLY  INSOFAR as said
     OCS-G 05391 covers the rights from the stratigraphic equivalent of the base
     of the Lentic 4 Unit Sand, as  identified at 16,085 feet Measured  Depth in
     the  Induction-SFL  Electric Log for the CNG Producing  Company OCS-G 05391
     Well No. C-5,  (formerly  known as the OCS-G 05391 Well No. 5) having API #
     17 702 4090600, down to the 100,000 feet subsea.

     This  assignment is made subject to all of the terms of express and implied
covenants  and  conditions of the Subject  Lease,  the Lessor's  royalties  and,
further,  shall  bear  and  assume  its  proportionate  share  of  that  certain
overriding  royalties  interest affecting the Subject Lease as set forth in that
certain  Participation  Agreement,  dated  December  8,  2003,  by  and  between
Millennium   Offshore  Group,   Inc.  and  Ridgewood  Energy   Corporation  (the
"Participation  Agreement")  and the Offshore Operating Agreement dated February
18, 2004,  between Millennium  Offshore Group,  Inc., as Operator,  and Anadarko
Petroleum Corporation and Ridgewood Energy Corporation,  as Non-Operators,  (the
"Operating Agreement").

     This  assignment  is also made  subject  to and shall  bear and  assume its
proportionate share of any and all burdens and  responsibilities  created by the
following listed agreements,  of which all terms, conditions and reservations of
said agreements are incorporated herein by reference:

     (a)  The Participation Agreement;

     (b)  The Operating Agreement.

     Further, Assignee hereby agrees to be bound by all the terms and conditions
of  the   Participation   Agreement  and  the  Operating   Agreement.   Assignor
specifically  excludes  herefrom  all rights,  title,  interests  and  liability
associated with any presently existing platform(s),  pipeline(s),  wellbore(s),
and  other  personal  property  associated  with  the  Subject  Lease,  it being
understood and agreed that Assignee  shall only be responsible  for plugging and
abandonment  of the  wellbore  of the  Test  Well,  as  same is  defined  in the
Participation Agreement, and subsequent wells in which it participates and shall
bear no plugging,  abandonment or  decommissioning  expense related to any well,
facilities  or  pipelines  which  are not  drilled,  installed  and/or  owned by
Assignee.

<PAGE>

     THIS  ASSIGNMENT  OF  OPERATING  RIGHTS IS  EXECUTED  BY  ASSIGNOR  WITHOUT
WARRANTY OF TITLE,  EITHER  EXPRESSED OR IMPLIED,  EXCEPT AS TO ACTS BY, THROUGH
AND UNDER ASSIGNOR.

     IN WITNESS WHEREOF, this Assignment is executed by Assignor and Assignee on
the dates set forth in their respective  acknowledgements  hereto,  but shall be
effective  for all  purposes  as of 12:01  a.m.,  on August 1, 2004  ("Effective
Time"),  subject to the  approval  thereof by the Minerals  Management  Service,
United States Department of the Interior, pursuant to 30 CFR 256, Sub-Part J.

WITNESSES:                              ASSIGNOR:

                                        Millennium Offshore Group, Inc. (2383)

/s/ Illegible
-------------------------------------

/s/ Illegible                           By: /s/ D. Kent Singleton
-------------------------------------       ------------------------------------
                                            D. Kent Singleton, Vice President

WITNESSES:                              ASSIGNEE:

                                        Ridgewood Energy Corporation (1308)

/s/ Illegible
-------------------------------------

/s/ Illegible                           By: /s/ Robert E. Swanson
-------------------------------------       ------------------------------------
                                            Robert E. Swanson, President

STATE OF TEXAS

COUNTY OF HARRIS

On this 16th day of November,  2004,  before me,  appeared,  D. Kent  Singleton,
personally  known,  who,  being  by me duly  sworn,  did say that he is the Vice
President of Millennium Offshore Group, Inc., a Texas corporation,  and that the
foregoing instrument was signed on behalf of the corporation by authority of its
Board of Directors,  and that he acknowledged  the instrument to be the free act
and deed of the corporation.

            [SEAL]
       JERRY D. NIEKAMP
NOTARY PUBLIC, STATE OF TEXAS
    MY COMMISSION EXPIRES
        FEB. 20, 2005

                                        /s/ Jerry D. Niekamp
                                        ----------------------------------------
                                        Notary Public, State of Texas

                                        My Commission Expires: _______

STATE OF NEW JERSEY

COUNTY OF BERGEN

On this 18 day of November,  2004,  before me,  appeared Robert E. Swanson to me
personally  known, who, being by me duly sworn, did say that he is the President
of Ridgewood Energy Corporation, a Delaware corporation,  and that the foregoing
instrument was signed on behalf of the  corporation by authority of its Board of
Directors,  and that he acknowledged  the instrument to be the free act and deed
of the corporation.

                                        /s/ Jeanne Thompson
                                        ----------------------------------------
                                        Notary Public, State of New Jersey

                                        My Commission Expires: _______

                                                         [SEAL]
                                                     JEANNE THOMPSON
                                              A Notary Public of New Jersey
                                            My Commission Expires May 3, 2007

<PAGE>

                          PURCHASE AND SALE AGREEMENT

                                 BY AND BETWEEN

                         MILLENNIUM OFFSHORE GROUP, INC.
                                    AS SELLER

                                       AND
                          RIGDEWOOD ENERGY CORPORATION
                                    AS BUYER

                                EAST CAMERON 299
                                   OCS-G 05391
                                 GULF OF MEXICO

<PAGE>

1.    SALE AND PURCHASE OF THE ASSETS.....................................    3
      1.1   Acquired Assets...............................................    3
      1.2   Assumed Liabilities...........................................    4

2.    CONSIDERATION.......................................................    5
      2.1   Consideration.................................................    5
      2.2   Payment.......................................................    5
      2.3   Allocation....................................................    5
      2.4   Adjustments to Consideration..................................    5

3.    EFFECTIVE DATE......................................................    6

4.    CLOSING.............................................................    6
      4.1   Closing.......................................................    6
      4.2   Delivery by Seller............................................    6
      4.3   Further Cooperation...........................................    6

5.    REVIEW OF ASSETS....................................................    6

6.    TITLE...............................................................    6
      6.1   Examination...................................................    6
      6.2   Good and Marketable Title.....................................    6
      6.3   Special Warranty..............................................    9
      6.4   Permitted Encumbrances........................................    9

7.    REPRESENTATIONS AND WARRANTIES OF SELLER............................    9
      7.1   Seller's Representations and Warranties.......................    9
      7.2   Scope of Representations of Seller............................   10

8.    REPRESENTATIONS AND WARRANTIES OF BUYER.............................   11
      8.1   Buyer's Representations and Warranties........................   11

9.    RECORDS AND CONTRACTS...............................................   12

l0.   CERTAIN AGREEMENTS OF BUYER.........................................   12
      10.1  Plugging Obligation...........................................   12
      10.2  Plugging Bond.................................................   12

11.   ADDITIONAL COVENANTS................................................   13
      11.1  Preferential Rights to Purchase...............................   13

                                        1

<PAGE>

12.   CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER........................   13
      12.1  No Litigation.................................................   13
      12.2  Representations and Warranties................................   13

13.   CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER...................   14
      13.1  No Litigation.................................................   14
      13.2  Representations and Warranties................................   14

14.   TERMINATION.........................................................   14
      14.1  Causes of Termination.........................................   14
      14.2  Effect of Termination.........................................   14

15.   INDEMNIFICATION.....................................................   14
      15.1  INDEMNIFICATION BY SELLER.....................................   14
      15.2  INDEMNIFICATION BY BUYER......................................   16
      15.3  PHYSICAL INSPECTION...........................................   17
      15.4  Notification..................................................   17

16.   MISCELLANEOUS.......................................................   18
      16.1  Confidentiality...............................................   18
      16.2  Competition...................................................   19
      16.3  Notice........................................................   19
      16.4  Press Releases and Public Announcements.......................   19
      16.5  Governing Law.................................................   20
      16.6  Exhibits......................................................   20
      16.7  Fees, Expenses, Taxes and Recording...........................   20
      16.8  Assignment....................................................   20
      16.9  Entire Agreement..............................................   20
      16.10 Severability..................................................   20
      16.11 Captions......................................................   20
      16.12 Counterpart Execution.........................................   20
      16.13 Waiver of Certain Damages.....................................   21
      16.14 Amendments and Waivers........................................   21

Exhibits:

1.1(A)-1   Lease
l.l(A)-2   Wells
2          Litigation
3          Allocated Values
4          Assignment & Bill of Sale
5          Blocks with Preferential Rights
6          Assumed Contracts and Bonding

                                        2

<PAGE>

                           PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement  (this  "Agreement")  is entered into this 15th
day of October,  2004, by and between  MILLENNIUM  OFFSHORE GROUP, INC., a Texas
corporation,   ("Seller"),   and  RIDGEWOOD  ENERGY   CORPORATION,   a  Delaware
corporation,  ("Buyer"). Buyer and Seller are collectively referred to herein as
the "Parties" and sometimes individually referred to as a "Party."

                                    RECITALS:

A.   Seller and Buyer have agreed  that Seller will convey its right,  title and
     interest in an  undivided  20% Working  Interest in OCS-G  05391,  covering
     Block 299, East Cameron Area, South Addition,  Offshore  Louisiana,  in: 1)
     the  rights  below the  Lentic 4 Unit  Sand as  identified  at 16,085  feet
     Measured  Depth in the  Induction-SFL  Electric  Log for the CNG  Producing
     Company OCS-G 05391 Well No. C-5,  (formerly  known as the OCS-G 05391 Well
     No. 5), having API # 17 702 4090600,  and 2) the OCS-G 05391 C010 and OCS-G
     05391 C011 Wells  insofar as they  pertain to the rights below the Lentic 4
     Unit Sand as identified at 16,085 feet Measured Depth in the  Induction-SFL
     Electric  Log for the CNG  Producing  Company  OCS-G  05391  Well No.  C-5,
     (formerly known as the OCS-G 05391 Well No. 5), having API # 17 702 4090600
     (herein  collectively  referred to as the "Deep  Rights")  on East  Cameron
     Block 299, OCS-G 05391, Offshore Louisiana

                                   WITNESSETH:

     In  consideration  of the mutual  agreements  contained in this  Agreement,
Buyer and Seller agree as follows:

1.   SALE AND PURCHASE OF THE ASSETS.

     1.1  Acquired  Assets.   Subject  to  the  terms  and  conditions  of  this
          Agreement,  Seller agrees to transfer, convey and deliver to Buyer and
          Buyer agrees to acquire from Seller all of Seller's  right,  title and
          interest in and to the  following  (collectively,  the "Assets") as of
          the Effective Date:

          (A)  (i) The leasehold interests,  mineral rights,  royalty interests,
               overriding   royalty   interests,    reversionary   rights,   and
               contractual  rights  to  production  pertaining  to the lands and
               lease described in EXHIBIT 1.1(A)-1 (the "Lease"); (ii) all wells
               on the  Lease,  or  lands  pooled  therewith  listed  in  EXHIBIT
               l.l(A)-2 (the "Wells"); rights,  privileges,  benefits and powers
               with  respect  to the use and  occupation  of the  Lease;  Seller
               excludes  from the sale  herein all  existing  wells,  pipelines,
               facilities,  platforms  and  equipment,  except  those  interests
               therein  that  arise  directly  from  the  sale  of the  interest
               hereunder.  Further,  Buyer  assumes no plugging and  abandonment
               liabilities or obligations for the West Cameron 557 C Platform or
               the  East  Cameron  299 A  and  B  Platforms  and  the  pipelines
               associated therewith, except as to the wells that Buyer currently
               owns an interest,  being the East  Cameron  Block 299 OCS-G 05391
               C010 Well and East Cameron Block 299 OCS-G 05391 C011 Well.

                                        3

<PAGE>

          (B)  The oil and gas and  associated  hydrocarbons  ("Oil and Gas") in
               and under or otherwise attributable that are covered by the Lease
               or produced from the Wells;

          (C)  To the  extent  assignable  and  applicable  to the  Assets,  the
               licenses,  servitudes,  gas  purchase  and sale  contracts to the
               extent  that the same  pertain  or  relate to  periods  after the
               Effective Date, as hereinafter  defined,  crude purchase and sale
               agreements,  farmin agreements,  farmout agreements,  bottom hole
               contribution   agreements,   acreage   contribution   agreements,
               operating  agreements,  unit agreements,  processing  agreements,
               options,  leases  of  equipment  or  facilities,   joint  venture
               agreements,  pooling agreements,  transportation  agreements, and
               other  contracts,  agreements  and  rights,  which  are  owned by
               Seller, in whole or in part, and are appurtenant to the Lease and
               listed  on  Exhibit  6  attached  hereto  and made a part  hereof
               (collectively, the "Assumed Contracts");

          (D)  To the extent assignable,  all governmental permits, licenses and
               authorizations, as well as any applications for the same, related
               to the Lease or the use thereof; and

          (E)  All of Seller's  files,  records  and data  relating to the items
               described in subsections (A), (B), (C), and (D) above, including,
               title  records  (title  curative  documents);  surveys,  maps and
               drawings;  contracts;  correspondence;   geological  records  and
               information;   production  records,  electric  logs,  core  data,
               pressure data,  decline curves,  graphical  production curves and
               all related matters and construction documents [except (i) to the
               extent the  transfer,  delivery or copying of such records may be
               restricted by contract with a third party; (ii) all documents and
               instruments   of   Seller   that   may   be   protected   by  the
               attorney-client  privilege;  (iii) all  accounting and Tax files,
               books,  records,  Tax returns and Tax work papers related to such
               items;  and (iv) any of  Seller's  seismic  data or seismic  data
               licensed  from a third  party that are  restricted  by  contract]
               (collectively, the "Records").

     1.2  Assumed Liabilities. On the Closing Date, Buyer shall assume and agree
          to timely and fully pay,  perform  and  otherwise  discharge,  without
          recourse  to  Seller or its  affiliates,  all of the  liabilities  and
          obligations  of Seller  and its  affiliates,  successors,  assigns  or
          representatives,  direct or  indirect,  known or unknown,  asserted or
          unasserted,  absolute or contingent,  accrued or unaccrued,  including
          but not limited to,  Environmental  Laws (as defined  herein),  taxes,
          securities law,  personal  injury,  plugging,  abandonment and surface
          restoration, and all liabilities and obligations under the Oil and Gas
          Lease, Wells,  Contracts,  Related Assets and Records, which relate to
          the Assets, on or after the Effective Date (collectively, the "Assumed
          Liabilities").  Seller  shall be liable  for and  retain  any  Assumed
          Liabilities   prior  to  the  Effective  Date.   Notwithstanding   the
          foregoing,  Assumed  Liabilities  shall  not  include,  and  there  is
          excepted,  reserved and excluded  from such Assumed  Liabilities,  the
          liabilities  and obligations  for: 1) all existing  wells,  pipelines,
          facilities,  platforms and equipment,  except those interests  therein
          that arise  directly from the sale of the interest  hereunder,  and 2)
          which Seller  indemnifies  Buyer  against  pursuant to Article  15.1..
          Further, and also excluded from the Assumed Liabilities, Buyer assumes

                                        4

<PAGE>

          no plugging and  abandonment  liabilities or obligations  for the West
          Cameron 557 C Platform or the East  Cameron 299 A and B Platforms  and
          the pipelines associated  therewith.  Buyer shall reimburse Seller for
          20% of the East Cameron Block 299 OCS-G 05391 C011 Well costs incurred
          by Seller on and after the Effective Date.  Further,  on and after the
          Effective Date, Buyer shall be responsible for all costs, expenses and
          liabilities  attributable  to the sale hereunder,  including,  but not
          limited to the costs  associated with the East Cameron Block 299 OCS-G
          05391 C011 Well and the East  Cameron  Block 299 OCS-G 05391 C0l0 Well
          and any other subsequent wells that may be drilled to the Deep Rights,
          subject to participation elections made by Buyer. Additionally,  Buyer
          shall receive revenue  attributable to the sale hereunder for the East
          Cameron  Block 299 OCS-G  05391  C0l0 Well on and after the  Effective
          Date.

2.   CONSIDERATION.

     2.1  Consideration.  The  consideration  for the Assets is Buyer  paying to
          Seller the sum of THIRTY  MILLION  DOLLARS  ($30,000,000.00  U.S.) and
          Buyer assuming all of the Assumed Liabilities (the "Consideration").

     2.2  Payment.  Adjustments,  if any, pursuant to Section 2.4, shall be paid
          by  Seller  to Buyer or from  Buyer to  Seller,  by wire  transfer  of
          immediately  available funds on the Closing Date (hereinafter defined)
          or within twenty four hours thereafter.

     2.3  Allocation.   If  adjustments   pursuant  to  Section  6  occur,   the
          Consideration  shall be  allocated  to the Assets in  accordance  with
          EXHIBIT 3.

     2.4  Adjustments to Consideration.

          (A)  At Closing,  the Parties shall,  if  appropriate,  account to one
               another for proceeds from production as of the Effective Date and
               for  costs  and  expenses  associated  with the  Assets as of the
               Effective  Date as provided  for in any  applicable  operating or
               other  agreements.  Seller shall furnish Buyer with a Preliminary
               Closing  Statement  two days prior to the expected  Closing which
               shall set forth an estimate of proceeds from production as of the
               Effective Date and costs and expenses  associated with the Assets
               as of the Effective Date.

          (B)  A post-closing  adjustment  statement based on the actual revenue
               and expenses  shall be prepared and  delivered by Seller to Buyer
               within one hundred twenty (120) days after the Closing. Seller or
               Buyer,  as the case may be, shall be given access to and shall be
               entitled to review and audit the other Party's records pertaining
               to the  computation  of  amounts  claimed  in such  Post  Closing
               Statement.  Except for the  Post-Closing  Statement,  if any,  no
               additional adjustments shall be made for proceeds from production
               and for costs and  expenses  associated  with the Assets from the
               Effective

                                        5

<PAGE>

               Date to Closing,  unless  Anadarko  Petroleum  Corporation or its
               assign elects to exercise its  preferential  right to purchase as
               described in Section 11 herein.

3.   EFFECTIVE  DATE.  The effective date for the conveyance of the Assets shall
     be as of 12:01 a.m., local time at the location of the Lease on October 15,
     2004 (the "Effective Date").

4.   CLOSING.

     4.1  Closing.  The sale and purchase of the Assets  ("Closing")  shall take
          place at  Seller's  office  which is located at 5300  Memorial  Drive,
          Suite 1070, Houston,  Texas 77057, and will occur on or before two (2)
          business days after the expiration date of the  Preferential  Right to
          Purchase in favor of Anadarko Petroleum Corporation or its assign.

     4.2  Delivery  by  Seller.  At  Closing,  Seller  shall  deliver to Buyer a
          mutually acceptable Assignment of Operating Rights in the same form as
          attached  on  EXHIBIT  4.  Such   Assignment   shall  be  executed  in
          quadruplicate.

     4.3  Further  Cooperation.  At  the  Closing,  and  thereafter  as  may  be
          necessary,  Seller and Buyer  shall  execute  and  deliver  such other
          instruments  and  documents  and take  such  other  actions  as may be
          reasonably  necessary  to evidence  and  effectuate  the  transactions
          contemplated by this Agreement.

5.   REVIEW OF ASSETS.  Seller shall provide Buyer free access to the Assets and
     to all of its Records for Buyer's  examination.  In addition,  Seller shall
     allow  Buyer to conduct a physical  and  environmental  examination  of the
     Assets at Buyer's cost, risk and expense.

6.   TITLE.

     6.1  Examination.  Following the execution of this  Agreement,  Buyer shall
          conduct  such  examination  of the title to the Lease,  based upon the
          Contracts and Lease and the public data, as is deemed  appropriate  by
          Buyer, at its sole cost,  risk and expense.  The purpose of such title
          examination  shall be to determine if Seller has "Good and  Marketable
          Title" to its interest in the Lease and Wells.

     6.2  Good  and  Marketable  Title.  As  used  herein  the  term  "good  and
          marketable title" shall mean:

          (A)  As to the  Lease  and  Wells,  those  operating  rights of Seller
               which:

               (i)  entitles  Seller to receive from each Lease or Well not less
                    than  the  interests  shown in  EXHIBITl.l(A)-2  as the "Net
                    Revenue  Interest"  of all Oil and Gas  produced,  saved and
                    marketed  from  each  Lease  and Well and of all Oil and Gas
                    produced,  saved and  marketed  from any unit of which  each
                    Lease or Well is a part and

                                        6

<PAGE>

                    allocated  to such  Lease or Well,  all  without  reduction,
                    suspension or  termination of the interests in each Lease or
                    Well throughout the duration of such Lease or the Lease upon
                    which  such  Well  is  located,  except  as  stated  in such
                    EXHIBIT; and

               (ii) obligates  Seller  to bear a  percentage  of the  costs  and
                    expenses relating to the maintenance and development of, and
                    operations relating to, the Lease and Wells not greater than
                    the "Working Interest" shown in EXHIBIT 1.1(A)-1 and EXHIBIT
                    l.l(A)-2,  all  without  increase of the  interests  in each
                    Lease and Well  throughout  the  remaining  duration of such
                    Lease and Well, except as stated in such EXHIBIT.

          (B)  That the operational  character and title of Seller to the Assets
               which:

               (i)  as of the  Effective  Date,  is free and clear  (except  for
                    Permitted   Encumbrances   as  defined   herein)  of  liens,
                    encumbrances (including, but not limited to claims, demands,
                    damages,  liabilities,  judgments  and causes of action) and
                    operational restrictions;  and with respect to real property
                    interests  to  be  transferred   to  Buyer,   real  property
                    interests  are  of  record  in  the  relevant  counties  and
                    governmental offices.

          6.2.1 Defect Letters.

               (A)  No later than  three (3)  business  days  prior to  Closing,
                    Buyer may notify Seller in writing  ("Title  Notice") of any
                    liens,   charges,   contracts,   agreements,    obligations,
                    encumbrances,  defects  and  irregularities  of title  which
                    would  cause  title to all or part of the  Assets  not to be
                    good and  marketable  as defined in Section 6.2  hereof,  or
                    which would cause a breach of a  representation  or warranty
                    of Seller ("Title Defect"). Such Title Notice shall describe
                    in  reasonable  detail  the Title  Defect  and  include  the
                    estimated Title Defect Value attributable thereto. Any Title
                    Defect not timely  raised by Buyer  pursuant to this Section
                    6.2.1(A) shall be deemed waived.

               (B)  If a Title  Defect  as set  forth  in a  Notice  is given to
                    Seller as set forth  above prior to Closing and is not cured
                    to Buyer's  satisfaction  on or before the Closing,  Closing
                    shall be  postponed  as to the  affected  Assets  and Seller
                    shall have thirty  (30) days after the Closing  Date to cure
                    said Defect or at Seller's  option the affected Assets shall
                    be  withdrawn  from this  Agreement  as  stipulated  herein.
                    Should Seller not cure the Defect within the extended thirty
                    (30) day  period,  then the Title  Defect  shall be a "Title
                    Failure" unless waived by Buyer. Any Title Defect waived

                                        7

<PAGE>

                    by  Buyer  under  this  Section  shall  become  a  Permitted
                    Encumbrance as defined herein.

          6.2.2 Effect of Title Failure.

               (A)  In the event of a Title Failure  pursuant to Section  6.2.1,
                    the affected Asset(s) shall be withdrawn from this Agreement
                    or the  Consideration  shall  be  adjusted  pursuant  to the
                    Allocated  Value(s).  In the event that the affected  Assets
                    are withdrawn from this  Agreement,  the Parties shall Close
                    on the remaining Assets.

               (B)  Buyer shall not be liable for any portion of the cost of any
                    title curative performed by Seller.

               (C)  The value  attributable  to each Title  Defect  (the  "Title
                    Defect  Value")  notified in a Notice shall be determined by
                    the following:

                    (i)  if the Title  Defect  asserted  is that the Net Revenue
                         Interest attributable to any Lease or Well is less than
                         stated in the applicable EXHIBIT, then the Title Defect
                         Value is the product of the Allocated Value  attributed
                         to such Asset,  multiplied by a fraction, the numerator
                         of  which is the  difference  between  the Net  Revenue
                         Interest  set forth in the  applicable  EXHIBIT and the
                         Net   Revenue   Interest   actually   owned,   and  the
                         denominator of which is the Net Revenue Interest stated
                         in the applicable EXHIBIT; or

                    (ii) if  the  Title   Defect   represents   an   obligation,
                         encumbrance,  burden or charge upon the affected  Asset
                         (including  any increase in Working  Interest for which
                         there is not a  proportionate  increase  in Net Revenue
                         Interest),  the amount of the Title  Defect Value is to
                         be  determined  by taking into  account  the  Allocated
                         Value  of the  Asset,  multiplied  by a  fraction,  the
                         numerator  of  which  is  the  difference  between  the
                         Working  Interest set forth in the  applicable  EXHIBIT
                         and  the  Working  Interest  actually  owned,  and  the
                         denominator of which is the Working  Interest stated in
                         the applicable EXHIBIT.

               D.   No  adjustment  to Title.  Notwithstanding  anything  to the
                    contrary, there shall be no adjustments to the Consideration
                    for Title  Defects if the total  adjustment  is  $100,000 or
                    less in the  aggregate.  In the event that the Title Defects
                    are more than  $100,000  in the  aggregate,  (i) the Parties
                    shall Close on the  remaining  Assets,  or (ii) either Party
                    may terminate this Agreement by giving written notice to the
                    other Party.

                                        8

<PAGE>

     6.3  Special Warranty. The documents to be executed and delivered by Seller
          to Buyer  transferring  the  Assets to Buyer  shall be  subject to the
          Permitted  Encumbrances.  Seller  shall  warrant and defend the Assets
          unto Buyer  against every person  lawfully  claiming the Assets or any
          part thereof, by, through or under Seller, but not otherwise. Seller's
          interests  in the Assets are to be sold AS IS AND WHERE IS AND WITHOUT
          WARRANTY OF  MERCHANTABILITY,  CONDITION  OR FITNESS FOR A  PARTICULAR
          PURPOSE, EITHER EXPRESS OR IMPLIED.

     6.4  Permitted   Encumbrances.   As  used   herein   the  term   "Permitted
          Encumbrances"  shall  mean  any  one  (1) or  more  of  the  following
          described below or created or described in documents described below:

          (A)  The  terms  and  conditions  of  the  Lease,   including  without
               limitation lessors' royalties,  overriding royalties, net profits
               interests, carried interests,  production payments,  reversionary
               interests and similar  burdens,  if the net cumulative  effect of
               the  burdens  does not  operate to reduce the  interest of Seller
               with respect to all Oil and Gas produced  from any Well below the
               Net Revenue Interest for such Well set forth in EXHIBIT 1.1(A)-2;

          (B)  The  division  orders  and  sales  contracts  terminable  without
               penalty  upon  no  more  than  ninety  (90)  days  notice  to the
               purchaser;

          (C)  All rights to consent by,  required  notices to, filings with, or
               other actions by  governmental  entities in  connection  with the
               sale or conveyance of oil and gas leases or interests  therein if
               they are routinely obtained subsequent to the sale or conveyance;

          (D)  Easements, rights-of-way, servitudes, permits, surface leases and
               other  rights  in  respect  of  surface  operations  that  do not
               materially  interfere  with  the  oil and  gas  operations  to be
               conducted on any Well or Lease;

          (E)  All  operating  agreements,   unit  agreements,   unit  operating
               agreements, pooling agreements and pooling designations and other
               agreements affecting the Assets;

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

7.   REPRESENTATIONS AND WARRANTIES OF SELLER.

     7.1  Seller's  Representations  and Warranties.  Subject to the disclosures
          set  forth in the  EXHIBITs  referred  to in this  Article  7,  Seller
          represents and warrants (which  representations  and warranties  shall
          not  survive  the  Closing,  except as to 7.1 (E) and (G) which  shall
          survive Closing) as follows:

                                        9

<PAGE>

          (A)  Status.  Seller  is  a  Corporation  duly  incorporated,  validly
               existing  and in good  standing  under  the laws of the  State of
               Texas.

          (B)  Authority. Seller owns the Assets and has the requisite power and
               authority  to  enter  into  this  Agreement,  to  carry  out  the
               transactions  contemplated  hereby, to transfer the Assets in the
               manner  contemplated by this  Agreement,  and to undertake all of
               the obligations of Seller set forth in this Agreement.

          (C)  Validity of  Obligations.  This  Agreement  and any  documents or
               instruments  delivered by Seller at the Closing shall  constitute
               legal,  valid and binding  obligations of Seller,  enforceable in
               accordance with their terms.

          (D)  Contractual  Restrictions.   Seller  has  not  entered  into  any
               contracts for or received prepayments,  take-or-pay arrangements,
               buydowns,  buyouts  for Oil  and  Gas,  or  storage  of the  same
               relating to the Assets  which Buyer shall be  obligated  to honor
               and make  deliveries  of Oil and Gas or pay  refunds  of  amounts
               previously paid under such contracts or arrangements.

          (E)  Litigation. To Seller's knowledge, except as set forth in EXHIBIT
               2,  there is no  suit,  action,  claim,  judgment  or  proceeding
               pending,  arising  out of,  or  with  respect  to the  ownership,
               operation  or  environmental  condition  of the Assets that would
               have a material  adverse  affect  upon the  Assets.  Buyer  shall
               assume no liability or obligation  with respect to the litigation
               set forth on EXHIBIT 2 whether such claim or suit arises  before,
               on or after the Effective Date.

          (F)  Broker's  Fees.  Seller has incurred no  obligation or liability,
               contingent or otherwise, for brokers' or finders' fees in respect
               of the matters  provided for in this Agreement,  and, if any such
               obligation or liability  exists, it shall remain an obligation of
               Seller, and Buyer shall have no responsibility therefor.

          (G)  Qualification  and  Bonding.  Seller  is in  compliance  with the
               bonding and liability  insurance  requirements in accordance with
               all applicable  state or federal laws or regulations  and that it
               is and  henceforth  will  continue  to be  qualified  to own  and
               operate any  federal,  state oil and gas leases  that  constitute
               part of the Assets and will  continue  to be  properly  bonded to
               meet all abandonment  obligation  requirements  excluded from the
               Assumed Liabilities herein and retained by Seller.

     7.2  Scope of Representations  of Seller.  Except as expressly set forth in
          this Agreement,  Seller disclaims all liability and responsibility for
          any representation,  warranty, statements or communications (orally or
          in writing)  to Buyer,  including  any  information  contained  in any
          opinion, information or advice that may have been provided to Buyer by
          any employee, officer, director, agent, consultant,

                                       10

<PAGE>

          engineer or  engineering  firm,  trustee,  representative,  investment
          banker, financial advisor, partner, member,  beneficiary,  stockholder
          or contractor of Seller  wherever and however  made,  including  those
          made in any  data  room  or  internet  site  and  any  supplements  or
          amendments  thereto or during any  negotiations  with  respect to this
          Agreement or any confidentiality  agreement previously executed by the
          Parties with respect to the Asset. EXCEPT AS SET FORTH IN THIS ARTICLE
          7 OF THIS  AGREEMENT,  SELLER  MAKES NO  WARRANTY  OR  REPRESENTATION,
          EXPRESS, STATUTORY OR IMPLIED, AS TO (i) THE ACCURACY, COMPLETENESS OR
          MATERIALITY OF ANY DATA,  INFORMATION OR RECORDS FURNISHED TO BUYER IN
          CONNECTION WITH THE ASSETS OR OTHERWISE  CONSTITUTING A PORTION OF THE
          ASSETS;  (ii)  THE  PRESENCE,  QUALITY  AND  QUANTITY  OF  HYDROCARBON
          RESERVES  (IF  ANY)  ATTRIBUTABLE  TO THE  ASSETS,  INCLUDING  WITHOUT
          LIMITATION SEISMIC DATA AND SELLER'S INTERPRETATION AND OTHER ANALYSIS
          THEREOF;  (iii) THE  ABILITY OF THE  ASSETS TO  PRODUCE  HYDROCARBONS,
          INCLUDING  WITHOUT  LIMITATION  PRODUCTION  RATES,  DECLINE  RATES AND
          RECOMPLETION  OPPORTUNITIES;  (iv) THE PRESENT OR FUTURE  VALUE OF THE
          ANTICIPATED  INCOME,  COSTS OR PROFITS, IF ANY, TO BE DERIVED FROM THE
          ASSETS;  (v) THE  ENVIRONMENTAL  CONDITION  OF THE  ASSETS;  (vi)  ANY
          PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT OCCUR;  (vii) THE TAX
          ATTRIBUTES  OF ANY ASSET;  (viii) ANY OTHER  MATTERS  CONTAINED  IN OR
          OMITTED FROM ANY INFORMATION OR MATERIAL  FURNISHED TO BUYER BY SELLER
          OR  OTHERWISE  CONSTITUTING  A  PORTION  OF THE  ASSETS;  AND (ix) THE
          COMPLETENESS OR ACCURACY OF THE  INFORMATION  CONTAINED IN ANY EXHIBIT
          HERETO. ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY SELLER ARE
          PROVIDED TO BUYER AS A CONVENIENCE  AND BUYER'S  RELIANCE ON OR USE OF
          THE SAME IS AT BUYER'S SOLE RISK.

8.   REPRESENTATIONS AND WARRANTIES OF BUYER.

     8.1  Buyer's Representations and Warranties.  Buyer represents and warrants
          (which  representations  and warranties  shall survive the Closing) as
          follows:

          A.   Status   of   Incorporation.   Buyer   is  a   corporation   duly
               incorporated,  validly  existing and in good  standing  under the
               laws of the State of Delaware.

          B.   Authority.  Buyer has the corporate  power and authority to enter
               into this Agreement,  to carry out the transactions  contemplated
               hereby and to undertake all of the  obligations  of Buyer set out
               in this Agreement.

          C.   Validity of Obligations. The execution,  delivery and performance
               of  this  Agreement  and  the  performance  of  the  transactions
               contemplated  by this Agreement will not in any respect  violate,
               nor be in  conflict  with,  any  provision  of  Buyer's  charter,
               by-laws or other governing documents, or

                                       11

<PAGE>

               any  agreement  or  instrument  to  which  Buyer is a party or is
               bound,  or  any  judgment,   decree,   order,  statute,  rule  or
               regulation  applicable to Buyer (subject to governmental consents
               and  approvals  customarily  obtained  after the  Closing).  This
               Agreement  constitutes  legal,  valid and binding  obligations of
               Buyer, enforceable in accordance with its terms.

          D.   Qualification  and  Bonding.  Buyer  is in  compliance  with  the
               bonding and liability  insurance  requirements in accordance with
               all applicable  state or federal laws or regulations  and that it
               is and  henceforth  will  continue  to be  qualified  to own  any
               federal,  state oil and gas leases  that  constitute  part of the
               Assets.

          E.   Evaluation.  Buyer represents that by reason of Buyer's knowledge
               and experience in the  evaluation,  acquisition  and operation of
               oil and gas properties,  Buyer has evaluated the merits and risks
               of  purchasing  the Assets  from Seller and has formed an opinion
               based solely upon Buyer's  knowledge and  experience and not upon
               any representations or warranties by Seller.

          F.   Broker's  Fees.  Buyer has incurred no  obligation  or liability,
               contingent or otherwise, for brokers' or finders' fees in respect
               of the matters  provided for in this Agreement,  and, if any such
               obligation or liability  exists, it shall remain an obligation of
               Buyer, and Seller shall have no responsibility therefor.

9.   RECORDS  AND  CONTRACTS.  Seller  shall  have the right to make and  retain
     copies of the  Records  and  Contracts  as Seller may  desire  prior to the
     delivery of the  Records and  Contracts  to Buyer.  Buyer,  for a period of
     seven (7) years after the Closing Date,  shall make available to Seller (at
     the location of such Records and Contracts in Buyer's  organization) access
     to such Records and  Contracts as Buyer may have in its  possession  (or to
     which it may have  access) upon written  request of Seller,  during  normal
     business hours. Seller shall provide Buyer the Records and Contracts within
     seven (7) days of Closing.

10.  CERTAIN  AGREEMENTS OF BUYER. Buyer agrees and covenants that the following
     provisions shall apply:

     10.1 Plugging Obligation.  Buyer shall perform and assume all liability for
          its share of the necessary and proper  plugging and abandonment of the
          Wells.

     10.2 MMS  Qualification.  Buyer has in place the necessary bonds or letters
          of credit as required by the Minerals  Management  Service ("MMS") for
          qualification to conduct business on the Outer Continental Shelf under
          the O.C.S.L.A., as same has been amended.

                                       12

<PAGE>

11.  ADDITIONAL COVENANTS.

     11.1 Preferential  Rights to Purchase.  Seller and Buyer acknowledge that a
          preferential   right  to  purchase  in  favor  of  Anadarko  Petroleum
          Corporation  and  Ridgewood  Energy  Corporation  exist  affecting the
          Assets.  In the event  Anadarko  Petroleum  Corporation  or its assign
          elects to exercise their  preferential  right to purchase  pursuant to
          the terms of the Operating  Agreement dated July 1, 1983,  between TXP
          Operating Company and Amerada Hess Corporation,  all references herein
          to  the   Purchase   Price,   the  Assets  and  any   adjustments   to
          consideration,  revenues and expenses shall be proportionately reduced
          to the final  interest of Buyer due to the result of the  preferential
          right election.

     11.2 Consents. Buyer, under that certain Operating Agreement dated February
          18,  2004  covering  the  Lease,  hereby  consents  to the  assignment
          hereunder from Seller to Buyer.

12.  CONDITIONS  PRECEDENT TO  OBLIGATIONS  OF BUYER.  All  obligations of Buyer
     under this Agreement are, at Buyer's election,  subject to the fulfillment,
     prior to or at the Closing, of each of the following conditions:

     12.1 No Litigation.  At the Closing,  no suit,  action or other  proceeding
          against  Seller  shall be  pending  before  any court or  governmental
          agency which  attempts to prevent the  occurrence of the  transactions
          contemplated by this Agreement.

     12.2 Representations and Warranties.  All representations and warranties of
          Seller  contained  in this  Agreement  shall  be true in all  material
          aspects as of the Closing as if such  representations  and  warranties
          were made as of the Closing Date (except for those  representations or
          warranties  that are expressly made only as of another  specific date,
          which  representations  and  warranties  shall be true in all material
          respects as of such other date) and Seller  shall have  performed  and
          satisfied in all material  respects all  covenants  and  fulfilled all
          conditions required by this Agreement to be performed and satisfied by
          Seller at or prior to the Closing.

     12.3 Seller's  Bonds:  Seller  represents to Buyer that Seller has in force
          and  effect  the Bonds in favor of the MMS as set  forth on  Exhibit 6
          attached hereto and made a part hereof.

                                       13

<PAGE>

13.  CONDITIONS  PRECEDENT TO THE  OBLIGATIONS  OF SELLER.  All  obligations  of
     Seller  under this  Agreement  are,  at Seller's  election,  subject to the
     fulfillment,  prior  to or  at  the  Closing,  of  each  of  the  following
     conditions;

     13.1 No Litigation.  At the Closing,  no suit,  action or other  proceeding
          shall be pending against Buyer before any court or governmental agency
          which  attempts  to  prevent  the   occurrence  of  the   transactions
          contemplated by this Agreement.

     13.2 Representations and Warranties.  All representations and warranties of
          Buyer  contained  in this  Agreement  shall  be  true in all  material
          aspects as of the Closing,  as if such  representations and warranties
          were made as of the Closing Date (except for those  representations or
          warranties  that are expressly made only as of another  specific date,
          which  representations  and  warranties  shall be true in all material
          respects  as of such other date) and Buyer  shall have  performed  and
          satisfied in all material  respects all  covenants  and  fulfilled all
          conditions required by this Agreement to be performed and satisfied by
          Buyer at or prior to the Closing.

14.  TERMINATION.

     14.1 Causes  of   Termination.   This   Agreement   and  the   transactions
          contemplated herein may be terminated:

          (A)  At any time by mutual consent of the Parties.

          (B)  By either Party if a material adverse change to the Assets occurs
               prior to Closing or pursuant to Section 6.2.2(D).

          (C)  By Buyer if, on the Closing Date, any of the conditions set forth
               in Article 12 hereof shall not have been satisfied or waived.

          (D)  By Seller if, on the  Closing  Date,  any of the  conditions  set
               forth in  Article  13 hereof  shall not have  been  satisfied  or
               waived.

     14.2 Effect  of  Termination.  In the  event  of the  termination  of  this
          Agreement  pursuant to the  provisions of this Article 14 or elsewhere
          in this  Agreement,  this  Agreement  shall  become  void  and have no
          further force and effect and, except for the indemnities  provided for
          in  Section  15.3,  any  breach  of  this  Agreement   prior  to  such
          termination and any continuing  confidentiality  requirement,  neither
          Party shall have any further  right,  duty or  liability  to the other
          hereunder.  Upon termination,  Buyer agrees to use its best efforts to
          return to Seller or  destroy,  all  materials,  documents  and  copies
          thereof  provided,  obtained  or  discovered  in the course of any due
          diligence investigations.

15.  INDEMNIFICATION.

     15.1 INDEMNIFICATION BY SELLER. UPON CLOSING,  SELLER SHALL, TO THE FULLEST
          EXTENT PERMITTED BY LAW, RELEASE, DEFEND,

                                       14

<PAGE>

          INDEMNIFY,   AND  HOLD  HARMLESS  BUYER,  ITS  PARENT  AND  SUBSIDIARY
          COMPANIES,   AND  EACH  OF  THEIR  RESPECTIVE   DIRECTORS,   OFFICERS,
          EMPLOYEES,  AGENTS AND OTHER  REPRESENTATIVES (THE "BUYER GROUP") FROM
          AND AGAINST THE FOLLOWING:

          (A)  MISREPRESENTATIONS.  ALL CLAIMS, DEMANDS, LIABILITIES, JUDGMENTS,
               LOSSES AND REASONABLE  COSTS,  EXPENSES AND  ATTORNEYS'  FEES AND
               COURT  COSTS   (INDIVIDUALLY  A  "LOSS"  AND  COLLECTIVELY,   THE
               "LOSSES") ARISING FROM THE BREACH BY SELLER OF ANY REPRESENTATION
               OR WARRANTY SET FORTH IN THIS AGREEMENT THAT SURVIVES CLOSING;

          (B)  BREACH OF COVENANTS. ALL LOSSES ARISING FROM THE BREACH BY SELLER
               OF ANY COVENANT SET FORTH IN THIS AGREEMENT; AND

          (C)  OWNERSHIP AND  OPERATION.  ALL LOSSES  ARISING FROM THE OWNERSHIP
               AND OPERATION OF THE ASSETS PRIOR TO THE EFFECTIVE  DATE DIRECTLY
               ASSOCIATED WITH THE FOLLOWING MATTERS:

               (i)  DAMAGES TO PERSONS OR PROPERTY;

               (ii) THE  VIOLATION  BY  SELLER OF ANY LAW OR  REGULATION  OR THE
                    TERMS OF ANY AGREEMENT BINDING UPON SELLER;

               (iii) CLAIMS OF SELLER'S CO-OWNERS, PARTNERS, JOINT VENTURERS AND
                    OTHER PARTICIPANTS IN THE ASSETS;

               (iv) TAXES ATTRIBUTABLE TO THE ASSETS; AND

               (v)  THE  INCORRECT  PAYMENT OF ROYALTIES  AND BURDENS  UNDER THE
                    LEASE.

          (D)  ABANDONMENT  LIABILITIES.  Covering any  liabilities,  duties and
               obligations relating to properly plugging and abandoning existing
               wells,  removal of all  pipelines,  equipment,  and platforms and
               related  facilities now or hereafter  located on the Assets,  and
               cleaning  up,   restoring  and   remediation  of  the  Assets  in
               accordance with the applicable  Environmental Laws and the Lease,
               including but not limited to liabilities,  duties and obligations
               (including  but not limited to the  payment of fines,  penalties,
               monetary sanctions or other amounts payable for failure to comply
               with the requirements of applicable  Environmental  Laws) related
               to any  violation  of any  Environmental  Laws  or the  presence,
               disposal,   release  or  threatened   release  of  any  hazardous
               substance or hazardous

                                       15

<PAGE>

               waste  from the  Assets  into the  atmosphere  or into the  water
               whether  or  not  attributable  to  Seller's  activities  or  the
               activities of third parties; and

          (E)  Notwithstanding the above, the following  limitations shall apply
               to Seller's indemnification obligations:

               (i)  Seller shall not be  obligated  to  indemnify  Buyer for any
                    Loss unless  Buyer has  delivered  a written  notice of such
                    Loss  within  the   Survival   Period  (as  defined   below)
                    applicable to such Loss.  Any Loss for which Seller does not
                    receive written notice before the end of the Survival Period
                    shall be deemed to be an Assumed  Liability.  The  "Survival
                    Period" applicable to Losses shall mean:

                    (a)  With  regard to a breach of  covenants  and the matters
                         covered  by Article  15 for a period of  eighteen  (18)
                         months  after  Closing,  except  for  15.1 (D) and (E),
                         which  indemnities  from Seller to Buyer shall last the
                         life of the Assets;

               (ii) The  indemnification  obligations of Seller pursuant to this
                    Agreement  shall be limited  to actual  Losses and shall not
                    include incidental,  consequential,  indirect,  punitive, or
                    exemplary Losses or damages;

               (iii) The  amount  of  Losses required  to be paid by  Seller  to
                    indemnify  Buyer pursuant to this Agreement shall be reduced
                    to the  extent of any  amounts  actually  received  by Buyer
                    pursuant  to the terms of the  insurance  policies  (if any)
                    covering such claim and any tax benefits received by Buyer;

               (iv) Buyer  acknowledges  and  agrees  that  the  indemnification
                    provisions in this Article 15 and the termination  rights in
                    Article  14 shall be the  exclusive  remedies  of Buyer with
                    respect to the transactions contemplated by this Agreement.

     15.2 INDEMNIFICATION  BY BUYER.  UPON  CLOSING,  BUYER SHALL TO THE FULLEST
          EXTENT PERMITTED BY LAW, RELEASE, DEFEND, INDEMNIFY, AND HOLD HARMLESS
          SELLER,  ITS PARENT AND SUBSIDIARY  COMPANIES AND  AFFILIATED  LIMITED
          PARTNERSHIPS,  AND  EACH  OF  THEIR  RESPECTIVE  DIRECTORS,  OFFICERS,
          EMPLOYEES,  AGENTS AND OTHER REPRESENTATIVES (THE "SELLER GROUP") FROM
          AND AGAINST THE FOLLOWING:

          (A)  MISREPRESENTATIONS.  ALL LOSSES  ARISING FROM THE BREACH BY BUYER
               OF ANY  REPRESENTATION  OR WARRANTY  SET FORTH IN THIS  AGREEMENT
               THAT SURVIVES CLOSING;

                                       16

<PAGE>

          (B)  BREACH OF COVENANTS.  ALL LOSSES ARISING FROM THE BREACH BY BUYER
               OF ANY COVENANT SET FORTH IN THIS AGREEMENT;

          (C)  OWNERSHIP  AND  OPERATION.  ALL LOSSES  ARISING  FROM THE ASSUMED
               LIABILITIES,  AND ALL LOSSES  ARISING  ON OR AFTER THE  EFFECTIVE
               DATE FROM THE OWNERSHIP AND OPERATION OF THE ASSETS.

          (D)  ENVIRONMENTAL LIABILITIES.  SUBJECT TO ARTICLES 1.2 AND 15.1 (D),
               ALL ENVIRONMENTAL LIABILITIES,  ARISING ON OR AFTER THE EFFECTIVE
               DATE ATTRIBUTABLE TO BUYER'S INTEREST CONVEYED HEREIN,  AND BUYER
               SHALL BE  LIABLE  FOR ALL  PLUGGING  AND  ABANDONING  LIABILITIES
               ATTRIBUTABLE TO BUYER'S  INTEREST IN THE WELLS CONVEYED HEREIN ON
               AND AFTER THE EFFECTIVE DATE.  "ENVIRONMENTAL  LIABILITIES" MEANS
               ANY AND ALL  OBLIGATIONS  AND  LIABILITIES  ARISING  DIRECTLY  OR
               INDIRECTLY  FROM ANY  IMPAIRMENT  OR  DAMAGE  TO THE  ENVIRONMENT
               CAUSED BY OR PERTAINING  TO THE ASSETS OR THE  OPERATION  THEREOF
               INCLUDING  ANY  ABANDONMENT  AND  RECLAMATION  OBLIGATIONS,   ANY
               RELEASE,  AND ANY OTHER MATTERS RELATING TO SURFACE,  SUBSURFACE,
               AIR OR WATER  CONTAMINATION  OR THE  BREACH OF ANY  ENVIRONMENTAL
               LAWS.

     15.3 PHYSICAL INSPECTION.  BUYER INDEMNIFIES AND AGREES TO RELEASE, DEFEND,
          INDEMNIFY  AND HOLD HARMLESS THE SELLER GROUP FROM AND AGAINST ANY AND
          ALL LOSSES  ARISING FROM BUYER'S  INSPECTING AND OBSERVING THE ASSETS,
          INCLUDING (A) LOSSES FOR PERSONAL INJURIES TO OR DEATH OF EMPLOYEES OF
          THE BUYER, ITS CONTRACTORS,  AGENTS,  CONSULTANTS AND REPRESENTATIVES,
          AND  DAMAGE TO THE  PROPERTY  OF BUYER OR  OTHERS  ACTING ON BEHALF OF
          BUYER;  AND (B) LOSSES FOR PERSONAL  INJURIES TO OR DEATH OF EMPLOYEES
          OF THE SELLER  GROUP OR THIRD  PARTIES,  AND DAMAGE TO THE PROPERTY OF
          THE SELLER GROUP OR THIRD PARTIES.  THE FOREGOING  INDEMNITY INCLUDES,
          AND THE PARTIES INTEND IT TO INCLUDE, AN INDEMNIFICATION OF THE SELLER
          GROUP FROM AND AGAINST LOSSES ARISING OUT OF OR RESULTING, IN WHOLE OR
          PART,  FROM THE  CONDITION OF THE ASSETS OR THE SELLER  GROUP'S  SOLE,
          JOINT,  COMPARATIVE,  OR CONCURRENT  NEGLIGENCE,  STRICT  LIABILITY OR
          FAULT.

     15.4 Notification.   As  soon  as  reasonably   practical  after  obtaining
          knowledge thereof, the indemnified Party shall notify the indemnifying
          Party  of  any  claim  or  demand  which  the  indemnified  Party  has
          determined has given or could give rise to a

                                       17

<PAGE>

          claim for  indemnification  under this  Article 15. Such notice  shall
          specify the  agreement,  representation  or warranty  with  respect to
          which the claim is made,  the facts  giving  rise to the claim and the
          alleged  basis for the  claim,  and the  amount  (to the  extent  then
          determinable)  of liability  for which  indemnity is asserted.  In the
          event any action,  suit or proceeding is brought with respect to which
          a Party may be liable  under  this  Article  15,  the  defense  of the
          action, suit or proceeding (including all settlement  negotiations and
          arbitration,  trial,  appeal,  or  other  proceeding)  shall be at the
          discretion  of  and  conducted  by  the  indemnifying   Party.  If  an
          indemnified  Party shall  settle any such action,  suit or  proceeding
          without the written consent of the  indemnifying  Party (which consent
          shall not be  unreasonably  withheld),  the  right of the  indemnified
          Party to make any claim against the  indemnifying  Party on account of
          such settlement shall be deemed  conclusively  denied.  An indemnified
          Party shall have the right to be represented by its own counsel at its
          own  expense  in  any  such  action,  suit  or  proceeding,  and if an
          indemnified  Party is named as the  defendant  in any action,  suit or
          proceeding,  it shall be  entitled  to have its own counsel and defend
          such  action,  suit or  proceeding  with  respect to itself at its own
          expense.  Subject to the  foregoing  provisions  of this  Article  15,
          neither  Party  shall,  without  the other  Party's  written  consent,
          settle, compromise,  confess judgment or permit judgment by default in
          any action,  suit or  proceeding if such action would create or attach
          any liability or  obligation to the other Party.  The Parties agree to
          make  available  to each other,  and to their  respective  counsel and
          accountants,  all  information and documents  reasonably  available to
          them which relate to any action,  suit or proceeding,  and the Parties
          agree to render to each other such  assistance as they may  reasonably
          require  of each  other in order to ensure  the  proper  and  adequate
          defense of any such action, suit or proceeding.

16.  MISCELLANEOUS.

     16.1 Confidentiality.

          (A)  Prior to Closing,  to the extent not already public,  Buyer shall
               exercise all due diligence in safeguarding and maintaining secure
               all engineering,  geological and geophysical data,  seismic data,
               reports and maps,  the results and  findings of Buyer with regard
               to its  due  diligence  associated  with  the  Assets  (including
               without  limitation with regard to due diligence  associated with
               environmental  and title  matters) and other data relating to the
               Assets  (collectively,  the  "Confidential  Information").  Buyer
               acknowledges that, prior to Closing, all Confidential Information
               shall be treated as  confidential  and shall not be  disclosed to
               third parties without the prior written consent of Seller.

          (B)  In the event of  termination  of this  Agreement  for any reason,
               Buyer  shall  not use or  knowingly  permit  others  to use  such
               Confidential  Information in a manner  detrimental to Seller, and
               will  not  disclose  any  such  Confidential  Information  to any
               person,  firm,  corporation,  association or other entity for any
               reason or purpose whatsoever, except to Seller or to a

                                       18

<PAGE>

               governmental  agency  pursuant to a valid subpoena or other order
               or  pursuant to  applicable  governmental  regulations,  rules or
               statutes.

          (C)  The  undertaking  of  confidentiality  shall not diminish or take
               precedence over any separate  confidentiality  agreement  between
               the  Parties.  Should this  Agreement  terminate,  such  separate
               confidentiality agreement shall remain in full force and effect.

     16.2 Competition.   Buyer   acknowledges  that  Seller  may  presently  own
          interests or have leads, prospects, information or ideas on properties
          or leaseholds adjacent to, adjoining or in the vicinity of the Assets.
          Seller shall not be  prohibited  in any way from pursuing any activity
          or business  opportunity  on property not being  transferred  to Buyer
          pursuant to this Agreement.

     16.3 Notice. Any notice, request,  demand, or consent required or permitted
          to be given  hereunder  shall be in writing and delivered in person or
          by  certified  letter,  with return  receipt  requested  or by prepaid
          overnight delivery service, or by facsimile addressed to the Party for
          whom intended at the following addresses:

          SELLER:

                 Millennium Offshore Group, Inc.
                 5300 Memorial Drive, Suite 1070
                 Houston, Texas 77057
                 Attn: Mr. Kent Singleton
                 Tel: (713) 652-0137
                 Fax: (713) 652-0482

          BUYER:

                 Ridgewood Energy Corporation.
                 947 Linwood Avenue
                 Ridgewood, New Jersey 07450
                 Attn: Mr. Robert Swanson
                 Tel: (201) 447-9000
                 Fax: (201) 447-0474

          or at such other address as any of the above shall specify by like
          notice to the other.

     16.4 Press  Releases  and Public  Announcements.  No Party  shall issue any
          press release or make any public announcement  relating to the subject
          matter  of this  Agreement  prior to the  Closing  without  the  prior
          written approval of the other Party; provided, however, that any Party
          may make any public  disclosure  it believes in good faith is required
          by applicable law or any listing or trading  agreement  concerning its
          or its  affiliates'  publicly-traded  securities  (in  which  case the
          disclosing Party shall use all reasonable  efforts to advise the other
          Party,  and give the other  Party an  opportunity  to  comment  on the
          proposed disclosure, prior to making the disclosure).

                                       19

<PAGE>

     16.5 Governing  Law.  THIS  AGREEMENT  IS GOVERNED BY AND MUST BE CONSTRUED
          ACCORDING  TO  THE  LAWS  OF  THE  STATE  OF  TEXAS,   EXCLUDING   ANY
          CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT MIGHT APPLY THE LAW OF ANOTHER
          JURISDICTION.   ALL  DISPUTES  RELATED  TO  THIS  AGREEMENT  SHALL  BE
          SUBMITTED TO THE  JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND
          VENUE SHALL BE IN THE CIVIL DISTRICT  COURTS OF HARRIS COUNTY,  TEXAS.

     16.6 Exhibits.  The EXHIBITS  attached to this  Agreement are  incorporated
          into and made a part of this Agreement.

     16.7 Fees, Expenses, Taxes and Recording.

          (A)  Each Party shall be solely responsible for all costs and expenses
               incurred by it in connection  with this  transaction  (including,
               but  not  limited  to  fees  and  expenses  of  its  counsel  and
               accountants) and shall not be entitled to any reimbursements from
               the other Party, except as otherwise provided in this Agreement.

          (B)  Buyer shall, at its own cost,  immediately record all instruments
               of conveyance and sale in the MMS and the  appropriate  county or
               parish offices.  Buyer shall  immediately file for and obtain the
               necessary  approval of all federal  agencies to the assignment of
               the Assets.  Buyer shall  supply  Seller with a true and accurate
               photocopy  reflecting  the  recording   information  of  all  the
               recorded and filed assignments within a reasonable period of time
               after their recording and filing.

     16.8 Assignment.  This  Agreement or any part hereof may not be assigned by
          either  Party  without the prior  written  consent of the other Party.
          This Agreement is binding upon the Parties hereto and their respective
          successors and assigns.

     16.9 Entire  Agreement.  This Agreement  constitutes  the entire  agreement
          reached by the  Parties  with  respect to the subject  matter  hereof,
          superseding  all  prior  negotiations,   discussions,  agreements  and
          understandings,  whether  oral or written,  relating  to such  subject
          matter.

     16.10 Severability. In the event that any one or more covenants, clauses or
          provisions of this  Agreement  shall be held invalid or illegal,  such
          invalidity or  unenforceability  shall not affect any other provisions
          of this Agreement.

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

     16.12 Counterpart Execution. This Agreement may be executed in any number
          of counterparts,  and each such counterpart  hereof shall be deemed to
          be an original, and all of which together shall constitute one and the
          same instrument.

                                       20

<PAGE>

     16.13 Waiver of Certain  Damages.  Each of the  Parties  hereby  waives and
          agrees not to seek  consequential  or punitive damages with respect to
          any claim, controversy,  or dispute arising out of or relating to this
          Agreement or the breach thereof.

     16.14 Amendments and Waivers. This Agreement may not be modified or amended
          except by an instrument in writing  signed by both parties.  Any Party
          hereto may,  only by an  instrument  in writing,  waive  compliance by
          another Party with any term or provision of this Agreement on the part
          of such other  Party  hereto to be  performed  or complied  with.  The
          waiver by any Party  hereto  of a breach of any term or  provision  of
          this  Agreement  shall not be construed as a waiver of any  subsequent
          breach.

                            -Signature Page Follows-

                                       21

<PAGE>

Executed as of the day and year first above written.

                                        SELLER:
                                        MILLENNIUM OFFSHORE GROUP, INC.

                                        By:
                                            ------------------------------------
                                        Name:
                                        Title:

                                        BUYER:
                                        RIDGEWOOD ENERGY CORPORATION

                                        By: /s/ Illegible
                                            ------------------------------------
                                        Name: [Illegible]
                                        Title: President

                                       22

<PAGE>

                                EXHIBIT 1.1 (A)-l

     Attached  to and made a part of the  Purchase  and Sale  Agreement  between
Millennium  Offshore Group, Inc. as Seller,  and Ridgewood Energy Corporation as
Buyer.

                                      LEASE

     An  undivided  20%  Operating  Rights  Interest in that certain Oil and Gas
     Lease from the  United  States of  America,  as  Lessor,  to CNG  Producing
     Company and Mark Producing, Inc., as Lessees, effective as of July 1, 1983,
     identified in the office of The Minerals Management Service, Gulf of Mexico
     OCS  Region,  as Oil and Gas  Lease of  Submerged  Lands  under  the  Outer
     Continental Shelf Lands Act, bearing serial number OCS-G 05391,  describing
     Block  299,  East  Cameron  Area,  as shown on OCS  Official  Leasing  Map,
     Louisiana  Map No. 2A INSOFAR AND ONLY  INSOFAR as said OCS-G 05391  covers
     the following depths: the rights below the Lentic 4 Unit Sand as identified
     at 16,085 feet Measured Depth in the Induction-SFL Electric Log for the CNG
     Producing  Company OCS-G 05391 Well No. C-5,  (formerly  known as the OCS-G
     05391 Well No. 5), having API # 17 702 4090600.

     SELLER'S  OPERATING RIGHTS OWNERSHIP  INTEREST (Working  Interest) IN OCS-G
     05391: An undivided 20% Working Interest with a corresponding 16.10666% Net
     Revenue Interest

                                 END OF EXHIBIT

                                       23

<PAGE>

                                EXHIBIT 1.1 (A)-2

     Attached  to and made a part of the  Purchase  and Sale  Agreement  between
Millennium  Offshore Group, Inc. as Seller,  and Ridgewood Energy Corporation as
Buyer.

                                      WELLS

                                                 Seller's W.I.   Seller's N.R.I.
                                                 -------------   ---------------
EC 299 Well No. OCS-G 05391 C010                   20.00000%        16.10666%
EC 299 Well No. OCS-G 05391 C011                   20.00000%        16.10666%

The rights  being sold in the wells listed above are limited to rights below the
Lentic  4  Unit  Sand  as  identified  at  16,085  feet  Measured  Depth  in the
Induction-SFL  Electric Log for the CNG  Producing  Company OCS-G 05391 Well No.
C-5, (formerly known as the OCS-G 05391 Well No. 5), having API # 17 702 4090600

Note: W.I. is Working Interest, N.R.I, is Net Revenue Interest.

                                 END OF EXHIBIT

                                       24

<PAGE>

                                    EXHIBIT 2

     Attached  to and made a part of the  Purchase  and Sale  Agreement  between
Millennium  Offshore Group, Inc. as Seller,  and Ridgewood Energy Corporation as
Buyer.

                                   LITIGATION:

      TO THE EXTENT OF SELLER'S KNOWLEDGE, THERE IS NO EXISTING LITIGATION
                             AFFECTING THE ASSETS.

                                 END OF EXHIBIT

                                       25

<PAGE>

                                    EXHIBIT 3

     Attached  to and made a part of the  Purchase  and Sale  Agreement  between
Millennium  Offshore Group, Inc as Seller,  and Ridgewood Energy  Corporation as
Buyer.

                                ALLOCATED VALUES:

OCS-G 05391, East Cameron Block 299 Deep Rights:

WELLS:

Deep Rights in the Lease and in the East Cameron Block 299 OCS-G 05391 C010 Well
and East Cameron Block 299 OCS-G 05391 C011 Well

VALUE: $30,000,000.00

                                 END OF EXHIBIT

                                       26

<PAGE>

                                    EXHIBIT 4

     Attached to and made a part of the Purchase and Sale Agreement between
  Millennium Offshore Group, Inc. as Seller, and Ridgewood Energy Corporation
                                    as Buyer.

                         ASSIGNMENT OF OPERATING RIGHTS

                      OCS-G 05391, East Cameron Block 299

OFFSHORE LOUISIANA         }
                           }
OUTER CONTINENTAL SHELF    }   KNOW BY ALL THESE PRESENTS:
                           }
UNITED STATES OF AMERICA   }

     THAT,  Millennium Offshore Group, Inc., 5300 Memorial,  Ste. 1070, Houston,
Texas 77007, hereinafter called "Assignor",  for and in consideration of the sum
of Ten Dollars ($10.00) and other good and valuable  consideration to it paid by
Ridgewood Energy Corporation,  947 Linwood Avenue,  Ridgewood, New Jersey 07450,
hereinafter  called  "Assignee",  the receipt and full  sufficiency  of which is
hereby  acknowledged,  does  hereby  grant,  convey,  transfer  and assign  unto
Assignee,  its heirs,  successors and assigns,  an undivided 20.00000% operating
rights  interest  in and to the oil  and  gas  mineral  lease  identified  below
(hereafter called "Subject Lease"), to wit:

     That  certain  Oil and Gas Lease  from the  United  States of  America,  as
     Lessor,  to CNG  Producing  Company and Mark  Producing,  Inc., as Lessees,
     effective  as of July 1, 1983,  identified  in the  office of The  Minerals
     Management  Service,  Gulf of Mexico  OCS  Region,  as Oil and Gas Lease of
     Submerged  Lands under the Outer  Continental  Shelf Lands Act OCS-G 05391,
     describing  Block 299, East Cameron Area, as shown on OCS Official  Leasing
     Map,  Louisiana Map No. 2A, covering 5,000.0 acres,  more or less,  INSOFAR
     AND ONLY  INSOFAR as said OCS-G 05391  covers the rights below the Lentic 4
     Unit Sand as identified at 16,085 feet Measured Depth in the  Induction-SFL
     Electric  Log for the CNG  Producing  Company  OCS-G  05391  Well No.  C-5,
     (formerly  known as the  OCS-G  05391  Well  No.  5),  having  API # 17 702
     4090600.

     This  assignment is made subject to all of the terms of express and implied
covenants  and  conditions of the Subject  Lease,  the Lessor's  royalties  and,
further,  shall  bear  and  assume  its  proportionate  share  of  that  certain
overriding  royalties  interest affecting the Subject Lease as set forth in that
certain  Participation  Agreement,  dated  December  8,  2003,  by  and  between
Millennium   Offshore  Group,   Inc.  and  Ridgewood  Energy   Corporation  (the
"Participation  Agreement") and the Offshore Operating  Agreement dated February
18, 2004, between

                                       27

<PAGE>

Millennium Offshore Group, Inc., as Operator, and Anadarko Petroleum Corporation
and Ridgewood Energy Corporation, as Non-Operators, (the "Operating Agreement").

     This  assignment  is also made subject to the terms and  provisions  of the
following listed agreements,  of which all terms, conditions and reservations of
said agreements are incorporated herein by reference:

          (a)  the  Subject  Lease;

          (b)  the Participation Agreement;

          (c)  the Operating Agreement

          (d)  the Purchase and Sale Agreement dated effective October 15, 2004,
               by and between  Millennium  Offshore Group,  Inc., as Seller, and
               Ridgewood  Energy  Corporation.,  as Buyer,  ("Purchase  and Sale
               Agreement");

          (e)  the  Letter of  Intent  between  Millennium  Offshore,  Inc.  and
               Ridgewood   Energy   Corporation   dated   October  15,  2004  to
               Sell/Purchase  an Undivided 20% Working  Interest,  East Cameron,
               Block  299  Lower  Lentic - Deep  Rights  OCS-G  05391  Offshore,
               Louisiana.

          (f)  the Voluntary  Pooling and Unitization  Agreement dated September
               16, 1985,  between CNG Producing Company and Transco  Exploration
               Company,  et al, as amended by Letter  Agreement  dated September
               16,  1987,   between  CNG  Producing  Company  and  Amerada  Hess
               Corporation, et al;

          (g)  the  CoDevelopment  Agreement  dated  August  26,  1985,  between
               Belnorth Petroleum Corporation and CNG Producing Company, et al.

     Further,  Assignor  hereby  transfers,  assigns  and conveys to Assignee an
undivided Twenty Percent (20%) Working Interest in the OCS-G 05391 C010 Well and
the OCS-G 05391 C011 Well insofar as they pertain to the rights below the Lentic
4 Unit Sand as  identified at 16,085 feet  Measured  Depth in the  Induction-SFL
Electric Log for the CNG Producing  Company OCS-G 05391 Well No. C-5,  (formerly
known as the OCS-G  05391  Well No.  5),  having  API # 17 702  4090600  (herein
collectively  referred to as the "Deep Rights") on East Cameron Block 299, OCS-G
05391, Offshore Louisiana.

     Assignor specifically  excludes herefrom all rights,  title,  interests and
liabilities  associated with any presently  existing  platform(s),  pipeline(s),
wellbore(s),  and other personal property  associated with the Subject Lease, it
being understood and agreed that Assignee shall only be responsible for plugging
and abandonment of the wellbores in which Assignee owns an interest here through
this Assignment of Operating  Rights and shall bear no plugging,  abandonment or
decommissioning  expense related to any well,  facilities or pipelines which are
not drilled, installed and/or owned by Assignee.

     THIS  ASSIGNMENT  OF  OPERATING  RIGHTS IS  EXECUTED  BY  ASSIGNOR  WITHOUT
WARRANTY OF TITLE,  EITHER  EXPRESSED OR IMPLIED,  EXCEPT AS TO ACTS BY, THROUGH
AND UNDER ASSIGNOR.

                                       28

<PAGE>

     IN WITNESS WHEREOF, this Assignment is executed by ASSIGNOR and ASSIGNEE on
the dates set forth in their respective  acknowledgements  hereto,  but shall be
effective  for all  purposes as of 12:01 a.m.,  on October 15, 2004  ("Effective
Time"),  subject to the  approval  thereof by the Minerals  Management  Service,
United States Department of the Interior, pursuant to 30 CFR 256, Sub-Part J.

WITNESSES:                              ASSIGNOR:
                                        Millennium Offshore Group, Inc. (2383)

-------------------------------------

                                        By:
-------------------------------------       ------------------------------------

WITNESSES:                              ASSIGNEE:
                                        Ridgewood Energy Corporation (1308)

/s/ Kathleen McSherry
-------------------------------------

/s/ Illegible                           By: /s/ Robert E. Swanson
-------------------------------------       ------------------------------------

                                       29

<PAGE>

                                 ACKNOWLEDGMENT

STATE OF NEW JERSEY   Section
                      Section
COUNTY OF BERGEN      Section

          BEFORE ME, the undersigned authority, on this 8 day of November, 2004,
personally appeared Robert E. Swanson known to me to be the person whose name is
subscribed  to  the  foregoing  instrument  as  President  of  RIDGEWOOD  ENERGY
CORPORATION, a Delaware corporation, and acknowledged to me that he executed the
same for  purposes  and  consideration  therein  expressed,  and in the capacity
therein stated and is the act and deed of said corporation.

                                        /s/ Jeanne Thompson
                                        ----------------------------------------
                                        Notary Public in and for the State of
                                        New Jersey

                                        My Commission Expires: _______

                                                         [SEAL]
                                                     JEANNE THOMPSON
                                              A Notary Public of New Jersey
                                            My Commission Expires May 3,2007

STATE OF TEXAS     Section
                   Section
COUNTY OF HARRIS   Section

          BEFORE ME, the undersigned authority, on this ______ day of, _________
2004,  personally appeared  _______________,  known to me to be the person whose
name is subscribed to the foregoing  instrument as Vice  President of Millennium
Offshore  Group,  Inc.,  a Texas  corporation,  and  acknowledged  to me that he
executed the same for purposes and consideration  therein expressed,  and in the
capacity therein stated and is the act and deed of said corporation.

                                        ----------------------------------------
                                        Notary Public in and for the State of
                                        Texas

                                        My Commission Expires: _______

                                       30

<PAGE>

                                    EXHIBIT 5

     Attached to and made a part of the Purchase and Sale Agreement between
   Millennium Offshore Group, Inc. as Seller, and Ridgewood Energy Corporation
                                   as Buyer.

           PURSUANT TO ARTICLE 27 OF THAT CERTAIN OPERATING AGREEMENT
        COVERING OCS-G 05391, EAST CAMERON BLOCK 299, OFFSHORE LOUISIANA
      DATED FEBRUARY 18, 2004, AND PURSUANT TO ARTICLE 11.2 HEREIN, BUYER,
                           CONSENTS TO THE ASSIGNMENT

                                 END OF EXHIBIT

                                       31

<PAGE>

                                    EXHIBIT 6

     Attached to and made a part of the Purchase and Sale Agreement between
  Millennium Offshore Group, Inc as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

                                ASSUMED CONTRACTS

1.  Participation  Agreement  dated  effective  December 8, 2003, by and between
Millennium  Offshore Group, Inc. and Ridgewood Energy  Corporation.

2. Offshore  Operating  Agreement  dated  effective  February 18, 2004,  between
Millennium  Offshore Group, Inc., as Operator,  and Ridgewood Energy Corporation
and Anadarko Petroleum Corporation, as Non-Operators.

3. That certain Oil and Gas Lease from the United States of America,  as Lessor,
to CNG  Producing  Company,  et al, as  Lessee,  effective  as of July 1,  1983,
identified in the office of The Minerals Management Service,  Gulf of Mexico OCS
Region,  as Oil and Gas Lease of  Submerged  Lands  under the Outer  Continental
Shelf Lands Act bearing  Serial Number OCS-G 05391,  describing  Block 299, East
Cameron  Area,  South  Addition,  as shown on OCS  official  Leasing Map No. 2A,
covering 5000.0 acres more or less.

4. The Voluntary  Pooling and  Unitization  Agreement  dated September 16, 1985,
between CNG Producing Company and Transco Exploration Company, et al, as amended
by Letter Agreement dated September 16, 1987,  between CNG Producing Company and
Amerada Hess Corporation, et al;

5. The CoDevelopment Agreement dated August 26, 1985, between Belnorth Petroleum
Corporation and CNG Producing Company, et al

                            BONDS CURRENTLY EFFECTIVE

OCS Mineral  Lessee's and Operators  Supplemental  Plugging and Abandonment Bond
RLB0006827  from surety  company RLI Insurance  Company to principle  Millennium
Offshore Group, Inc. in the amount of $1,550,000 dated September 16, 2004

OCS Mineral  Lessee's and Operators  Supplemental  Plugging and Abandonment Bond
RLB0004073  from surety  company RLI Insurance  Company to principle  Millennium
Offshore Group, Inc. in the amount of $2,500,000 dated December 26, 2001

                                 END OF EXHIBIT

                                       32

<PAGE>

                          OFFSHORE OPERATING AGREEMENT

                          EAST CAMERON BLOCK 299 (DEEP)

                                   OCS-G 5391

                                     BETWEEN

                         MILLENNIUM OFFSHORE GROUP, INC.
                                   AS OPERATOR

                                       AND

                          RIDGEWOOD ENERGY CORPORATION

                                       AND

                         ANADARKO PETROLEUM CORPORATION
                                AS NON-OPERATORS

                        DATED EFFECTIVE FEBRUARY 18, 2004

<PAGE>

                          OFFSHORE OPERATING AGREEMENT
                             East Cameron Block 299

Section                                                                     Page
-------                                                                     ----

                                TABLE OF CONTENTS

Table of Contents                                                            1-4

                                    ARTICLE 1
                                  APPLICATIONS
Preliminary Recitals                                                           5
1.1    Application to Each Lease                                               5

                                    ARTICLE 2
                                   DEFINITIONS
2.0A   AFE                                                                     5
2.0B   Affiliate
2.0C   Casing Point Election                                                   5
2.1    Development Operation(s)                                                5
2.2    Development Well                                                        5
2.3    Exploratory Operation(s)                                                5
2.4    Exploratory Well                                                        5
2.5    Facilities                                                              5
2.6    Lease                                                                   5
2.7    Non-Consent Operations                                                  5
2.8    Non-Consent Platform                                                    6
2.9    Non-Consent Well                                                        6
2.10   Non-Operator                                                            6
2.11   Non-Participating Party                                                 6
2.12   Non-Participating Party's Share                                         6
2.13   Operator                                                                6
2.14   Participating Interest                                                  6
2.15   Participating Party                                                     6
2.16   Platform                                                                6
2.17   Producible Reservoir                                                    6
2.18   Producible Well                                                         6
2.19   Reservoir                                                               6
2.20   Sidetrack or Sidetracking                                               6
2.21   Working Interest                                                        6

                                    ARTICLE 3
                                    EXHIBITS
3.1    Exhibits                                                                6
       3.1.1  Exhibit "A" Leases, Parties, Working Interests,
          Addresses & Representatives                                          6
       3.1.2  Exhibit "B" Insurance Provisions                                 6
       3.1.3  Exhibit "C" Accounting Procedure                                 6
       3.1.4  Exhibit "D" Non-Discrimination                                   6
       3.1.5  Exhibit "E" Gas Balancing Agreement                              6
       3.1.6  Exhibit "F" Memorandum of Operating Agreement
          & Financing Statement                                                6

                                    ARTICLE 4
                                    OPERATOR
4.1    Operator                                                                6
4.2    Resignation                                                             6
4.3    Removal of Operator                                                     7
4.4    Selection of Successor                                                  7
4.5    Delivery of Property                                                    7

                                    ARTICLE 5
                        AUTHORITY AND DUTIES OF OPERATOR
5.1    Exclusive Right to Operate                                              7
5.2    Workmanlike Conduct                                                     7
5.3    Liens and Encumbrances                                                  7
5.4    Employees                                                               7
5.5    Records                                                                 7
5.6    Compliance                                                              7
5.7    Drilling                                                                7
5.8    Reports                                                                 8
5.9    Permits and Licenses                                                    8
5.10   Information to Participating Parties                                    8
5.11   Information to Non-Participating Parties                                8

                                    ARTICLE 6
                          VOTING AND VOTING PROCEDURES
6.1    Designation of Representatives                                          8
6.2    Voting Procedures                                                       8

                                        2

<PAGE>

                                    ARTICLE 6
                          VOTING AND VOTING PROCEDURES
6.1    Designation of Representatives                                          8
6.2    Voting Procedures                                                       8
       6.2.1  Voting Interest                                                  8
       6.2.2  Vote Required                                                    9
       6.2.3  Votes                                                            9
       6.2.4  Meetings                                                         9

                                    ARTICLE 7
                                     ACCESS
7.1    Access to Lease                                                         9
7.2    Reports                                                                 9
7.3    Confidentiality                                                         9
7.4    Limited Disclosure                                                      9
7.5    Press Releases                                                          9

                                    ARTICLE 8
                                  EXPENDITURES
8.1    Basis of Charge to the Parties                                          9
8.2    Authorization                                                          10
8.3    Advance Billings                                                       10
8.4    Failure to Commence Operations Timely                                  10
8.5    Refund of Excess Funds                                                 10
8.6    Commingling Funds                                                      10
8.7    Mortgages and Security Rights                                          10
       8.7.1    Mortgage and Pledge                                           10
       8.7.2    Security Interests                                            11
       8.7.3    Reliance on Operator's or Non-Operator's Statement            12
       8.7.4    Limit of the Mortgage                                         12
       8.7.5    Appointment of Keeper                                         13
       8.7.6    Priority; Successors                                          13
       8.7.7    Foreclosure                                                   13
       8.7.8    Waiver                                                        13
       8.7.9    Other Privilege and Lien Rights                               13
       8.7.10   Power of Sale                                                 14
       8.7.11   Recordation                                                   14
8.8    Default                                                                14
8.9    Unpaid Charges                                                         15
8.10   Carved-Out Interests                                                   15

                                    ARTICLE 9
                                     NOTICES
9.1    Giving and Receiving Notices                                           15
9.2    Content of Notice                                                      15
9.3    Response of Notices                                                    16
       9.3.1   Platform Construction                                          16
       9.3.2   Proposal Without Platform and/or Facilities                    16
       9.3.3   Other Matters                                                  16
9.4    Failure to Respond                                                     16
9.5    Timely Operations                                                      16
9.6    Restrictions on Multiple Well Proposals                                16

                                   ARTICLE 10
                               EXPLORATORY WELLS
10.1   Operations by All Parties                                              17
10.2   Second Opportunity to Participate                                      17
10.3   Operations by Fewer Than All Parties                                   17
       10.3.1 Subsequent Exploratory Wells                                    17
       10.3.2 Subsequent Exploratory Wells/Non-Production Reversion           18
10.4   Course of Action After Drilling to the Initial Objective Depth         18
10.5   Deeper Drilling                                                        19

                                   ARTICLE 11
                             DEVELOPMENT OPERATIONS
11.1   Operations By All Parties                                              20
11.2   Second Opportunity to Participate                                      20
11.3   Operations By Fewer Than All Parties                                   20
11.4   Timely Operations                                                      20
11.5   Course of Action After Drilling to Initial Objective Depth             20
11.6   Deeper Drilling                                                        21

                                   ARTICLE 12
                             NON-CONSENT OPERATIONS
12.1   Non-Consent Operations                                                 21
       12.1.1 Non-Interference                                                21
       12.1.2 Multiple Completion Limitation                                  21
       12.1.3 Liens                                                           21
       12.1.4 Metering                                                        21

                                        2

<PAGE>

       12.1.5 Platform Salvage                                                22
       12.1.6 Non-Consent Well                                                22
       12.1.7 Cost Information                                                22
       12.1.8 Completions                                                     22
12.2   Penalties                                                              22
12.3   Recoupment and Salvage                                                 23
12.4   Deepening of Non-Consent Wells                                         23
12.5   Operations from Non-Consent Platform                                   23
12.6   Discovery of Extension from Mobile Drilling Operations                 23
12.7   Allocation of Platform Costs to Non-Consent Operations                 24
       12.7.1 Charges                                                         24
       12.7.2 Operating and Maintenance Charges                               24
       12.7.3 Payments                                                        24
12.8   Retention of Lease by Non-Consent Well                                 24
12.9   Non-Consent Drilling to Maintain Lease                                 24
12.10  Allocation of Costs (Single Completion)                                25
12.11  Allocation of Costs Between Zones (Multiple Completions)               25
12.12  Allocation of Costs Between Zones (Dry Hole)                           25
12.13  Intangible Drilling and Completion Allocations                         25

                                   ARTICLE 13
                                   FACILITIES
13.1   Approval                                                               25
13.2   Ownership                                                              26
13.3   Contracts                                                              26

                                   ARTICLE 14
                            ABANDONMENT AND SALVAGE
14.1   Platform Salvage and Removal Costs                                     26
14.2   Abandonment of Producible Well                                         26
14.3   Assignment of Interest                                                 26
14.4   Abandonment Operations Required by Governmental Authority              26
14.5   Operator Purchase of Salvage Materials                                 27
14.6   Non-Operator Purchase of Salvage Materials                             27

                                   ARTICLE 15
                                   WITHDRAWAL
15.1   Withdrawal                                                             27
15.2   Limitations of Withdrawal                                              27

                                   ARTICLE 16
                     RENTALS, ROYALTIES, AND OTHER PAYMENTS
16.1   Creation of Overriding Royalty                                         27
16.2   Payment of Rentals and Minimum Royalties                               28
16.3   Non-Participation in Payments                                          28
16.4   Royalty Payments                                                       28

                                   ARTICLE 17
                                      TAXES
17.1   Property Taxes                                                         28
17.2   Contest of Property Tax Valuation                                      28
17.3   Production and Severance Taxes                                         28
17.4   Other Taxes and Assessments                                            28

                                   ARTICLE 18
                                    INSURANCE
18.1   Insurance                                                              29

                                   ARTICLE 19
                         LIABILITY, CLAIMS AND LAWSUITS
19.1   Individual Obligations                                                 29
19.2   Notice of Claim or Lawsuit                                             29
19.3   Settlements                                                            29
19.4   Legal Expense                                                          29
19.5   Liability for Losses, Damages, Injury or Death                         29
19.6   Indemnification                                                        29

                                   ARTICLE 20
                          INTERNAL REVENUE PROVISIONS
20.1   Election of Partnership Provisions                                     29

                                   ARTICLE 21
                                 CONTRIBUTIONS
21.1   Notice of Contributions Other Than Advances for Sale of Production     30
21.2   Cash Contributions                                                     30
21.3   Acreage Contributions                                                  30

                                        3

<PAGE>

                                   ARTICLE 22
                             DISPOSAL OF PRODUCTION
22.1   Facilities to Take In Kind                                             30
22.2   Duty to Take In Kind                                                   30
22.3   Failure to Take In Kind                                                30
22.4   Expenses of Delivery In Kind                                           31
22.5   Gas Balancing Agreement                                                31

                                   ARTICLE 23
                                 APPLICABLE LAW
23.1   Applicable Law                                                         31

                                   ARTICLE 24
                    LAWS, REGULATIONS AND NON-DISCRIMINATION
24.1   Laws and Regulations                                                   31
24.2   Non-Discrimination                                                     31

                                   ARTICLE 25
                                 FORCE MAJEURE
25.1   Force Majeure                                                          31
25.2   Notice                                                                 31

                                   ARTICLE 26
        SUCCESSORS, ASSIGNS, PREFERENTIAL RIGHT TO PURCHASE AND TRANSFERS
26.1   Successors and Assigns                                                 31
26.2   Preferential Right to Purchase                                         31
26.3   Transfer of Interest                                                   32
26.4   Assignments                                                            32

                                   ARTICLE 27
                                      TERM
27.1   Term                                                                   32

                                   ARTICLE 28
                                    EXECUTION
28.1   Counterpart Execution                                                  34

                                        4

<PAGE>

                          OFFSHORE OPERATING AGREEMENT

     THIS  AGREEMENT,  made  effective  the 18th day of February,  2004,  by the
signatories   hereof,   herein   referred  to   collectively  as  "Parties"  and
individually as "Party".

                                   WITNESSETH:

     WHEREAS,  the  Parties  are  owners  of the one or more oil and gas  leases
identified in Exhibit "A", and desire to explore,  develop,  produce and operate
said leases.

     NOW  THEREFORE,  in  consideration  of  the  premises  and  of  the  mutual
agreements  herein,  it  is  agreed  as  follows:

                                    ARTICLE 1
                                  APPLICATIONS

     1.1  Application  to Each  Lease.  If more  than  one oil and gas  lease is
identified in Exhibit "A", this  Agreement  shall apply  separately to each such
lease.

                                    ARTICLE 2
                                   DEFINITIONS

     2.0.A AFE. An  Authorization  for  Expenditure  prepared by a Party for the
purpose of  estimating  the costs to be  incurred  in  conducting  an  operation
hereunder

     2.0.B Affiliate.  In relation to any of the Parties, shall mean any company
or other legal entity which is a subsidiary of such Party or of which such Party
is a subsidiary  or which is a subsidiary  of a company of which such Party is a
subsidiary. For the purpose of this definition, the term "subsidiary" shall mean
a company  controlled  directly or indirectly by another  company which holds or
controls  fifty  percent (50%) or more of the voting shares of the former entity
to elect the majority of its board of directors or other governing bodies.

     2.0.C Casing Point.  The point in time when the Test Well,  Substitute Well
or any  Exploratory  and/or  Development  Well has been  drilled to its proposed
objective  depth, or mutually agreed to lesser depth,  and all tests included in
the approved Authority of Expenditure ("AFE"), have been performed unless waived
by mutual agreement of the Parties and a recommendation  is made by Operator to:
(i) set casing and  complete  the well (ii) plug and  abandon  the well or (iii)
conduct other operations as provided for in Section 10.4 or Section 11.5.

     2.1 Development Operation(s). Anything other than Exploratory Operation(s).

     2.2 Development Well. Any well proposed as a Development Operation.

     2.3 Exploratory  Operation(s).  An operation that is conducted on the Lease
and that is any of the following:

          (a)  proposed  for an  objective  horizon  that  is  not a  Producible
               Reservoir;

          (b)  proposed for an objective horizon that has a Producible Well, but
               that will be penetrated at a location where the distance  between
               the midpoint of the  objective  horizon to be  penetrated  by the
               proposed  well and the  midpoint  of the same  objective  horizon
               where it is actually  penetrated by a Producible  Well will be at
               least  one  thousand   five  hundred  feet  (1,500')  if  an  oil
               completion and three thousand (3000) feet if a gas completion;

          (c)  proposed for an objective  horizon that is unanimously  agreed by
               the Parties not to be in an existing Producible Reservoir; or

          (d)  proposed  as  deeper  drilling  operations  below the base of the
               deepest Producible Reservoir.

     2.4 Exploratory Well. Any well proposed as an Exploratory Operation.

     2.5  Facilities.  All  lease  equipment  beyond  the  wellhead  connections
including  but not  limited  to  equipment  for  gathering,  storage,  treating,
compression, transporting and production handling.

     2.6 Lease.  Each oil and gas lease  identified in Exhibit "A" and the lands
affected thereby.

     2.7 Non-Consent Operations. Exploratory or Development Operations conducted
by fewer than all Parties.

                                        5

<PAGE>

     2.8 Non-Consent  Platform. A drilling or production Platform owned by fewer
than all Parties.

     2.9  Non-Consent  Well. An Exploratory  or Development  Well owned by fewer
than all Parties.

     2.10 Non-Operator. Any Party to this Agreement other than the Operator.

     2.11 Non-Participating Party. Any Party other than a Participating Party.

     2.12   Non-Participating   Party's  Share.  The  Participating  Interest  a
Non-Participating  Party would have had if all Parties had  participated  in the
operation.

     2.13  Operator.  The Party  designated  under  this  Agreement  to  conduct
Exploratory and Development Operations.

     2.14  Participating   Interest.  A  Participating   Party's  percentage  of
participation in an operation conducted pursuant to this Agreement.

     2.15  Participating  Party.  A Party  who joins in an  operation  conducted
pursuant to this Agreement.

     2.16  Platform.  A structure  to be  installed  pursuant to this  Agreement
offshore for drilling or production operations on the Lease, including,  but not
limited to jackets, caissons and subsea templates.

     2.17 Producible Reservoir. An underground accumulation of oil or gas (a) in
a single and separate natural pool  characterized by a distinct pressure system,
(b) not in oil or gas communication with another accumulation of oil or gas, and
(c) into which a Producible Well has been drilled.

     2.18 Producible  Well. A well producing oil or gas, or if not producing oil
or gas, a well which meets  government  regulations of being declared capable of
producing in paying quantities.

     2.19  Reservoir.  An underground  accumulation  of hydrocarbon and minerals
comprising a single,  separate,  naturally  contained system  characterized by a
single pressure.

     2.20 Sidetrack or Sidetracking.  Any proposal to  directionally  control or
intentionally  deviate a well so as to change the bottom hole location from that
as  originally  proposed  and  shall  not  refer  to  operations  undertaken  to
straighten  the hole or to drill  around  junk in the hole or  because  of other
mechanical difficulties.

     2.21 Working  Interest. The  ownership of each Party in and to the Lease as
set forth in Exhibit "A".

                                    ARTICLE 3
                                    EXHIBITS

     3.1  Exhibits.  Attached  hereto  are the  following  exhibits,  which  are
incorporated herein by reference:

          3.1.1  Exhibit "A".  Description  of Leases,  Working  Interest of the
Parties in each Lease, the Parties' addresses and Designated Representatives.

          3.1.2 Exhibit "B". Insurance Provisions.

          3.1.3 Exhibit "C". Accounting Procedure.

          3.1.4 Exhibit "D". Non-Discrimination Provisions.

          3.l.5 Exhibit "E". Gas Balancing Agreement.

          3.1.6  Exhibit "F".  Memorandum  of Operating  Agreement and Financing
Statement (Louisiana)

                                    ARTICLE 4
                                    OPERATOR

     4.1  Operator.  Millennium  Offshore  Group,  Inc. is hereby  designated as
Operator.  Operator  shall not have the right to assign or transfer  any rights,
duties or obligations of Operator to another Party.

     4.2 Resignation. Subject to Section 4.4, Operator may resign at any time by
giving written notice to the Parties. Such resignation shall become effective at
7:00 a.m.  on the first day of the month  following a period of ninety (90) days
after the date of said  notice,  unless a  successor  Operator  has  assumed the
duties of Operator prior to such date.

                                        6

<PAGE>

     4.3  Removal  of  Operator.  Should  Operator  or  any  successor  Operator
hereunder (1) dissolve,  liquidate or terminate  its  corporate  existence,  (2)
become insolvent, bankrupt or subject to receivership,  (3) be unable to pay its
bills  as  they  come  due,  or  (4)  assign  an  interest  hereunder,   whether
accomplished  by one or more  transfers,  which reduces its Working  Interest to
less than 25% of 6/6ths;  it shall  thereupon  cease to be  Operator  hereunder.
Further,  should it commit a substantial  breach of a material provision of this
agreement  and fail to cure within 90 days after notice of breach,  or should it
fail to perform  its duties  hereunder,  it may be  removed  as  Operator  by an
affirmative  vote of two (2) or more Parties having a combined  Working Interest
of  fifty-one  percent  (51%) or more after  excluding  the Working  Interest of
Operator.

     4.4  Selection of Successor.  Upon  resignation  or removal of Operator,  a
successor  Operator shall be selected by an affirmative  vote of two (2) or more
Parties  having a combined  Working  Interest of  fifty-one  (51%) or more after
excluding  the Working  Interest of the  removed or  resigned  Operator.  On the
effective  date of the  designation,  the  successor  Operator  shall assume the
duties and responsibilities of Operator under this Agreement.  In no event shall
the  resignation  or removal of  Operator  become  effective  unless and until a
successor Operator has assumed the duties of Operator.

     4.5 Delivery of Property.  Prior to the effective  date of  resignation  or
removal,  Operator shall deliver  promptly to successor  Operator  copies of all
records, maps, design criteria, specifications,  engineering analysis and design
drawings for any Facilities and/or  Platform(s),  and other information and data
obtained affecting the Lease that the successor Operator is entitled to have and
that are not already in the possession of the successor Operator, as well as all
other property owned by the Parties pursuant to this Agreement.

                                    ARTICLE 5
                        AUTHORITY AND DUTIES OF OPERATOR

     5.1 Exclusive Right to Operate.  Unless otherwise provided,  Operator shall
have the  exclusive  right and duty to conduct all  operations  pursuant to this
Agreement.  Operator  shall  not be deemed  or hold  itself  out as the agent or
fiduciary of the Non-Operators.

     5.2  Workmanlike  Conduct.  Operator shall conduct all operations in a good
and workmanlike  manner,  as would a prudent  operator under the same or similar
circumstances.  Operator shall not be liable to the Parties for losses sustained
or liabilities  incurred except such as may result from its gross  negligence or
willful misconduct.  Unless otherwise provided,  Operator shall consult with the
Parties and keep them informed of all important matters.

     5.3 Liens and  Encumbrances.  Operator  shall  endeavor  to keep the Lease,
Platform,  wells  and all  Facilities  and  equipment  free  from all  liens and
encumbrances  occasioned by operations  hereunder,  except those provided for in
Section 8.5.

     5.4 Employees.  Operator shall select employees and determine their number,
hours of labor and compensation. Such employees shall be employees of Operator.

     5.5 Records.  Operator shall keep accurate  books,  accounts and records of
operations  hereunder which,  unless  otherwise  provided for in this Agreement,
shall  be  available  at  reasonable  times  to  each  Party  or its  authorized
representatives.

     5.6  Compliance.  Operator  shall  comply  with and  require all agents and
contractors to comply with all applicable laws, rules, regulations and orders of
any governmental agency having jurisdiction.

     5.7  Drilling.  Operator  shall  have  all  drilling  operations  including
mobilization  and   demobilization,   conducted  by  qualified  and  responsible
independent contractors under competitive contracts then prevailing.  A drilling
contract will be deemed to be a competitive  contract then  prevailing if it (a)
was  made  within  one (1)  year  before  the  commencement  of the well and (b)
contains terms,  rates, and provisions that, when the contract was made, did not
exceed  those  generally   prevailing  in  the  area  for  operations  involving
substantially equivalent

                                       7

<PAGE>

rigs that are capable of drilling  the  proposed  well.  However,  Operator  may
employ its own equipment and  personnel in the conduct of such  operations,  but
such work shall be performed  by Operator  acting as an  independent  contractor
under a written contract containing the terms and conditions and at rates as are
customary  and  then   prevailing  in   competitive   contracts  of  independent
contractors  who are doing work of a similar  nature and  pursuant  to a written
agreement among the Participating Parties.

     5.8 Reports.  Operator shall make reports to governmental  authorities that
it has a duty to make as Operator  and shall  furnish  copies of such reports to
Participating Parties.  Operator shall give timely written notice to the Parties
of all litigation and hearings affecting the Lease or operations hereunder.

     5.9 Permits and Licenses.  Operator shall secure any and all permits and/or
licenses  required by all applicable laws,  rules,  regulations or orders of any
governmental agency that it has a duty to secure, as Operator, and shall furnish
copies of same to each Participating Party.

     5.10  Information  to  Participating  Parties.  Operator shall furnish each
Participating Party the following information  pertaining to each well operation
being conducted:

          a)   copy of  application  for  permit  to  drill  and all  amendments
               thereto, along with a copy of permit issued;

          b)   copy of plat of well location;

          c)   daily  drilling   reports,   workover  and  daily  production  by
               telephone,  telecopy,  or facsimile for well operations conducted
               in the  preceding  24 hour  period,  followed  by weekly  written
               reports;

          d)   complete report of all core analysis;

          e)   copies of any logs or  surveys  delivered  currently  as they are
               run;

          f)   copies of any well test results, bottom-hole pressure surveys,
               gas and condensate analysis or similar information;

          g)   copies of reports made to regulatory agencies; and

          h)   (1) twenty-four  [24] hour notice of logging,  coring and testing
               operations;  and (2) samples of cuttings  and cores  marked as to
               depth,  to  be  packaged  and  shipped  at  the  expense  of  the
               requesting Party;

          i)   monthly  report of all oil, gas,  condensate  and water  produced
               from each well;

          j)   upon written request, any other pertinent  information  available
               to Operator and relative thereto.

Each  Participating  Party  shall  furnish  Operator,  in  writing,  the  names,
addresses, telephone and/or telecopy numbers of persons to whom such information
and notices shall be given.

     5.11 Information to  Non-Participating  Parties.  Operator shall furnish to
each  Non-Participating  Party  copies of all  non-confidential  reports made to
regulatory agencies.

                                    ARTICLE 6
                          VOTING AND VOTING PROCEDURES

     6.1  Designation  of  Representatives.  The  names  and  addresses  of  the
representative  and  alternate,  who are  authorized  to represent and bind each
Party with respect to  operations  hereunder,  are set forth in Exhibit "A". The
designated  representative  or alternate may be changed by written notice to the
other Parties.

     6.2 Voting  Procedures.  Unless  otherwise  provided,  any matter requiring
approval of the Parties shall be determined as follows:

          6.2.1 Voting  Interest.  Each Party shall have a voting interest equal
to its Working Interest or its Participating Interest, as applicable.

                                       8

<PAGE>

          6.2.2 Vote Required. Unless expressly stated to the contrary herein, a
matter  requiring  approval of the Parties  shall be decided by the  affirmative
vote of one (1) or more  Parties  having a  combined  voting  interest  of fifty
percent (50%) or more. If there are only two (2) Parties to this Agreement,  the
matter shall be determined by the Party having a majority voting interest or, if
the interests  are equal,  then either Party shall have the right to approve any
matter hereunder with no percentage vote required.

          6.2.3 Votes. The Parties may vote at meetings; by telephone,  promptly
confirmed in writing to Operator; or by letter,  telegram,  telex or telecopier.
Operator shall give prompt notice of the results of such voting to each Party.

          6.2.4 Meetings. Meetings of the Parties may be called by Operator upon
its own motion or at the  request of one (1) or more  Parties  having a combined
voting  interest  of not less than ten percent  (10%).  Except in the case of an
emergency,  no  meeting  shall be  called on less  than  seven (7) days  advance
notice,  with meeting agenda attached.  The  representative of Operator shall be
chairman of each meeting.

                                   ARTICLE 7
                                     ACCESS

     7.1 Access to Lease.  Each Party shall have access to the Lease at its sole
risk and  expense at all  reasonable  times to inspect  operations  and wells in
which it participates and records and data pertaining thereto.

     7.2 Reports.  Except as to  information  otherwise  provided to the Parties
under  Article 5 or elsewhere in this  Agreement,  Operator  shall  furnish to a
Party,  upon written  request,  any  information to which such Party is entitled
hereunder.  The costs of gathering  and  furnishing  information  not  otherwise
furnished under Article 5 shall be charged to the requesting Party.

     7.3 Confidentiality.  Except as provided in Sections 7.4 and 7.5 and except
for necessary disclosures to governmental agencies having jurisdiction, no Party
shall release any geological,  geophysical,  reservoir, engineering,  production
costs or technical  information or any logs or other  information  pertaining to
the progress,  tests,  or results of any well unless agreed to in writing by the
Participating Parties.

     7.4 Limited  Disclosure.  Any Party may make confidential data available to
reputable  engineering  firms and gas  transmission  companies  for  hydrocarbon
reserve and other technical evaluations, and to reputable financial institutions
for study prior to  commitment  of funds and to third parties with which a Party
is engaged in a bona fide effort to sell,  farmout,  trade, or otherwise dispose
of all or a portion of its  interest in the Lease.  The  confidential  data made
available  shall not be removed from the custody or premises of the Party making
such data available. Any third party permitted such access shall first agree, in
writing, to be bound by the confidentiality provisions of this Agreement.

     7.5 Press Releases. The Parties shall use reasonable efforts to unanimously
agree upon the  timing and  content  of  releases  to the news media  concerning
operations covered by this Agreement.  However,  in the event the Parties cannot
unanimously  agree upon  either the timing  and/or  content of the news  release
within twenty-four (24) hours of receipt of such proposed news release, then any
Party  shall be allowed to issue its own  release  without  the  approval of the
other Parties.

                                    ARTICLE 8
                                  EXPENDITURES

     8.1 Basis of Charge to the Parties.  Operator  shall pay all costs incurred
hereunder  and each Party shall  reimburse  Operator on a timely  basis for such
costs in  proportion to its  Participating  Interest.  All charges,  credits and
accounting for expenditures  shall be pursuant to Exhibit "C". The provisions of
this Agreement shall prevail in the event of conflict with Exhibit "C".

                                       9

<PAGE>

     8.2  Authorization.  Operator shall neither make any single expenditure nor
undertake  any  project  costing  in excess  of  Seventy-five  Thousand  Dollars
($75,000.00) without prior approval of the Participating Parties. Operator shall
furnish for informational  purposes written information to all the Participating
Parties on any expenditure in excess of Fifty Thousand Dollars ($50,000.00).  In
addition, should Operator determine during drilling operations that the proposed
costs will exceed one hundred and  twenty-five  percent  (125%) of its  original
AFE,  Operator shall tender a separate AFE to the  Non-Operator for its election
to participate in continuing drilling operations.  In the event the Non-Operator
elects not to participate in the AFE for continued drilling operations, it shall
be deemed  non-consent in the continued drilling operation and be subject to the
non-consent  penalties set forth in Sections  10.3.1 or 12.2, as the case may be
and shall not be  responsible  for any  further  costs,  save and  except  those
incurred  prior to its election not to  participate  in the  continued  drilling
operation. Subject to any election provided in Articles 10 and 11, approval of a
well  operation  shall include  approval of all necessary  expenditures  through
installation of the wellhead. Notwithstanding the provisions of this Article, in
the event of an emergency, Operator may immediately make such expenditures as in
its opinion are  required to  safeguard  life and  property in dealing  with the
emergency.  Operator shall report to the Parties,  as promptly as possible,  the
nature of the emergency and action taken.

     8.3 Advance  Billings.  Operator shall have the right to require each Party
to advance its respective  share of estimated  expenditures  pursuant to Exhibit
"C".

     8.4  Failure  to  Commence  Operations  Timely.  In the  event  a  proposed
operation for which funds are advanced to the Operator is not  commenced  timely
in accordance  with the terms of this  Agreement,  Operator shall, no later than
ten (10) days after the last date provided  herein for the  commencement of such
operation, remit to each Non-Operator an amount of money equal to the amount, if
any, each  Non-Operator  had  theretofore  advanced to Operator for the proposed
operation.

     8.5  Refund of Excess  Funds.  Not later  than  ninety  (90) days after the
completion  of an operation  proposed  hereunder,  Operator  shall remit to each
Non-Operator  participating  in such operation,  an amount of money equal to the
amount of cash  theretofore  advanced to Operator by each  Non-Operator  for the
operation  that was not  used,  if any,  by  Operator  in  connection  with such
completed operation.

     8.6 Commingling  Funds. Funds received by Operator under this Agreement may
be commingled with its own funds.

     8.7 Mortgages and Security Rights. In addition to any other security rights
and remedies  provided by law with respect to services rendered or materials and
equipment furnished under this Agreement,  for good and valuable  consideration,
the  receipt  and  sufficiency  of  which  are  hereby   acknowledged,   and  in
consideration  of the covenants and mutual  undertakings of the Operator and the
Non-Operators herein, the Parties shall have the following security rights:

          8.7.1  Mortgage  and Pledge:  Each  Non-Operator  mortgages,  pledges,
affects, and hypothecates to Operator, and Operator mortgages, pledges, affects,
and hypothecates to each Non-Operator,  all of its respective rights, title, and
interest in and to the following:

          (a)  the  Lease  and  any  interest  therein,  and all  accounts,  gas
               imbalance  accounts,  contract  rights,  inventory,  and  general
               intangibles relating thereto or arising therefrom;

          (b)  all property and fixtures,  moveable or  immovable,  corporeal or
               incorporeal,  attached  to or located on or off the Lease,  which
               are acquired by the Parties pursuant to this Agreement;

          (c)  all of the oil, gas and  associated  substances  in, on, or under
               the  Lease  and  that may be  produced  from  the  Lease  and the
               proceeds attributable to the sale of such oil, gas and associated
               substances; and

                                       10

<PAGE>

          (d)  all property,  moveable or immovable,  corporeal or  incorporeal,
               that is used, obtained or constructed (or under construction) for
               use, in connection with the Lease and operations thereon pursuant
               to this Agreement.

          8.7.2  Security  Interests.  Each  Non-Operator  hereby  grants to the
Operator, and Operator hereby grants to each Non-Operator, a continuing security
interest in and to all of its  respective  rights,  titles,  interests,  claims,
general  intangibles,  proceeds,  and products thereof,  whether now existing or
hereafter  acquired,  in and to (a) all oil and gas  produced  from the offshore
blocks covered by the Lease or attributable to the Lease when produced,  (b) all
accounts  receivable accruing or arising as a result of the sale of such oil and
gas (including, without limitation, accounts arising from gas imbalances or from
the sale of oil and gas at the  wellhead),  (c) all cash or other  proceeds from
the sale of such oil and gas once  produced,  and (d) all  Development  Systems,
platforms, wells, facilities, fixtures, tools, tubular goods and other corporeal
property,  whether movable or immovable,  whether now or hereafter placed on the
offshore  blocks  covered by the Lease or maintained or used in connection  with
the  ownership,  use,  or  exploitation  of the  Lease,  and other  surface  and
sub-surface equipment of any kind or character located on or attributable to the
Lease,  and the  cash or  other  proceeds  realized  from  the  sale,  transfer,
disposition or conversion thereof. The interest of the Parties in and to the oil
and gas  produced  from or  attributable  to the Lease  when  extracted  and the
accounts  receivable accruing or arising as the result of the sale thereof shall
be financed at the  wellhead of the well or wells  located on the Lease.  To the
extent  susceptible  under applicable law, the security interest granted by each
Party hereunder covers (i) all  substitutions,  replacements,  and accessions to
the property of such Party described  herein and is intended to cover all of the
rights,  titles,  and  interests  of such Party in all movable  property  now or
hereafter  located upon or used in connection with the Lease,  whether corporeal
or  incorporeal,  (ii) all rights  under any gas  balancing  agreement,  farmout
rights,  option farmout rights,  acreage and cash contributions,  and conversion
rights  of such  Party  in  connection  with  the  Lease,  or the  oil,  gas and
associated  substances  produced from or attributable to the Lease,  whether now
owned  and  existing  or  hereafter  acquired  or  arising,  including,  without
limitation,  all interests of each Party in any  partnership,  tax  partnership,
limited partnership,  association,  joint venture, or other entity or enterprise
that holds,  owns, or controls any interest in the Lease,  and (iii) all rights,
claims,  general  intangibles,  and proceeds,  whether now existing or hereafter
acquired, of each Party in and to the contracts,  agreements, permits, licenses,
rights-of-way,  servitudes and similar  rights and privileges  that relate to or
are appurtenant to the Lease, including the following:

          (a)  all of its rights,  titles, and interests,  whether now owned and
               existing or hereafter  acquired or arising,  in, to, and under or
               derived from any present or future operating,  farmout,  bidding,
               pooling,    unitization,    and    communitization    agreements,
               assignments,   and   subleases,   whether  or  not  described  in
               Attachment "1," to the extent, and only to the extent,  that such
               agreements,  assignments,  and subleases  cover or include any of
               its rights, titles, and interests, whether now owned and existing
               or hereafter acquired or arising, in and to all or any portion of
               the  Lease,   and  all  units   created  by  any  such   pooling,
               unitization, and communitization agreements, and all units formed
               under orders,  regulations,  rules, or other official acts of any
               governmental  authority  having  jurisdiction,  to the extent and
               only to the extent  that such units  cover or include  all or any
               portion of the Lease;

                                       11

<PAGE>

          (b)  all of its rights,  titles, and interests,  whether now owned and
               existing or hereafter  acquired or arising,  in, to, and under or
               derived from all presently  existing and future  advance  payment
               agreements, and oil, casinghead gas, and gas sales, exchange, and
               processing   contracts   and   agreements,   including,   without
               limitation,  those contracts and agreements that are described on
               Attachment  "1," to the  extent,  and only to the  extent,  those
               contracts and  agreements  cover or include all or any portion of
               the Lease; and

          (c)  all of its rights,  titles, and interests,  whether now owned and
               existing or hereafter  acquired or arising,  in, to, and under or
               derived  from  all  existing   and  future   permits,   licenses,
               rights-of-way,  servitudes and similar rights and privileges that
               relate to or are appurtenant to any of the Lease.

          8.7.3  Reliance  on  Operator's  or  Non-Operator's   Statement.   The
mortgages,  pledge  rights and security  interests  granted  herein are given to
secure the complete and timely  performance  of and payment by each Party of all
of its obligations and  indebtedness of every kind and nature,  whether now owed
by such Party or hereafter  arising  pursuant to this  Agreement.  To the extent
susceptible under applicable law, the mortgage, pledge and the security interest
granted  herein  shall secure the payment of costs and other  expenses  properly
charged to such Party  together with (a) interest on such  indebtedness,  costs,
and other  expenses at the rate set forth in the accounting  procedure  attached
hereto as Exhibit  "C", or the maximum  rate  allowed by law,  whichever  is the
lesser, (b) reasonable  attorneys' fees, (c) court costs, and (d) other directly
related  collection  costs.  If any  Party  does not pay such  costs  and  other
expenses or perform its obligations  under this Agreement when due, the Operator
(or the  Non-Operators  if the defaulting  Party is the Operator) shall have the
additional right to notify the purchaser or purchasers of the defaulting Party's
oil, gas and associated  substances  production and collect such costs and other
expenses out of the proceeds  from the sale of the  defaulting  Party's share of
oil, gas and  associated  substances  production  until the amount owed has been
paid. The Operator (or the Non-Operator if the defaulting Party is the Operator)
shall have the right to offset the amount  owed  against the  proceeds  from the
sale of such  defaulting  Party's  share of oil, gas and  associated  substances
production.  Any purchaser of such  production  shall be entitled to rely on the
Operator's  (or the  Non-Operators  if the  defaulting  Party  is the  Operator)
statement  concerning  the  amount  of  costs  and  other  expenses  owed by the
defaulting  Party and payment made to the Operator (or the  Non-Operators if the
defaulting  Party  is the  Operator)  by any  purchaser  shall  be  binding  and
conclusive as between such purchaser and such defaulting Party.

          8.7.4 Limit of the Mortgage. The maximum amount for which the mortgage
herein granted by each  Non-Operator  shall be deemed to secure the  obligations
and  indebtedness of such  Non-Operator to the Operator as stipulated  herein is
hereby fixed in an amount equal to $25,000,000.00 (the "Limit of the Mortgage of
each  Non-Operator"),  and the  maximum  amount  for which the  mortgage  herein
granted  by  the  Operator  shall  be  deemed  to  secure  the  obligations  and
indebtedness of the Operator to all Non-Operators as stipulated herein is hereby
fixed in an amount equal to  $25,000,000.00  in the aggregate (the "Limit of the
Mortgage of the  Operator").  Except as provided in the preceding  sentence (and
then only to the extent such limitations are required by law), the entire amount
of  obligations  and  indebtedness  of each  Party  is  secured  hereby  without
limitation.  Notwithstanding  the  foregoing  Limit  of  the  Mortgage  of  each
Non-Operator  and Limit of the Mortgage of the  Operator,  the liability of each
Party and the mortgage

                                       12

<PAGE>

and security  interest granted hereby shall be limited to (and no Party shall be
entitled to enforce the same against another Party for an amount  exceeding) the
actual  obligations and  indebtedness  (including all interest  charges,  costs,
attorneys'   fees,  and  other  charges  provided  for  or  in  this  Agreement)
outstanding  and unpaid and that are  attributable  to or  charged  against  the
interest of such Party pursuant to this Agreement.

          8.7.5 Appointment of Keeper. If Operator seeks to enforce the mortgage
granted it hereunder  against a  Non-Operator,  Operator shall have the right to
appoint a keeper of such Non-Operator's property, or any part thereof,  pursuant
to the terms and provisions of La. R.S. 9:5131 et seq. and 9:5136 et seq. If any
Non-Operator  seeks  to  enforce  the  mortgage  granted  it  hereunder  against
Operator,  such  Non-Operator  shall  have the  right  to  appoint  a keeper  of
Operator's property or any part thereof, pursuant to the terms and provisions of
La. R.S. 9:5131 et seq. and 9:5136 et seq.

          8.7.6 Priority;  Successors. Each Party represents and warrants to the
other Parties hereto that the mortgage, pledge and security interests granted by
such  Party to the other  Parties in this  Agreement  shall be a first and prior
mortgage, pledge and security interest, and each Party hereby agrees to maintain
the priority of said mortgage,  pledge and security interest against all persons
acquiring an interest in the Lease by, through or under such Party.  All Parties
acquiring an interest in the Lease,  whether by  assignment,  merger,  mortgage,
operation  of law, or  otherwise,  shall be deemed to have taken  subject to the
mortgages,  pledge rights and security interests hereunder as to all obligations
attributable to such interest  hereunder  whether or not such obligations  arise
before or after such interest is acquired.

          8.7.7  Foreclosure.  If  performance  of  any  obligation  under  this
Agreement or payment of any indebtedness created thereunder does not occur or is
not made when due under  this  Agreement  or upon  default  of any  covenant  or
condition of this  Agreement,  in addition to any other remedy  afforded by law,
each Party to this  Agreement  and any  successor  to such party by  assignment,
operation of law, or otherwise, shall have, and is hereby given and vested with,
the power and authority to foreclose the mortgage, pledge, and security interest
established in its favor herein and in this Agreement in the manner  provided by
law and to exercise all rights of a secured  party under the Uniform  Commercial
Code.

          8.7.8  Waiver.  If any Party does not perform  all of its  obligations
hereunder,  and the failure to perform  subjects  such Party to  foreclosure  or
execution  proceedings  pursuant to the provisions herein, to the extent allowed
by governing law, the defaulting  Party waives any available right of redemption
from and after the date of judgment,  any required  valuation or appraisement of
the  property  covered by the  mortgage,  pledge and security  interest  created
hereunder  prior to sale, any available  right to stay execution or to require a
marshalling  of  assets,  and any  required  bond in the  event  a  receiver  is
appointed.

          8.7.9 Other  Privilege  and Lien  Rights.  Each Party  agrees that the
other  Parties  shall be entitled to utilize the  provisions of oil and gas lien
law or privilege  or other lien law or  privilege  of any state  adjacent to the
Lease,  or that is otherwise  applicable,  to enforce the rights and remedies of
each Party hereunder.  Without limiting the generality of the foregoing,  to the
extent allowed by applicable law, the Operator may invoke and use the mechanics'
and materialmens'

                                       13

<PAGE>

lien law to secure the  payment to the  Operator  of any sum due  hereunder  for
services performed or materials supplied by the Operator.

          8.7.10 Power of Sale. To the extent  permitted by applicable law, each
Party hereby grants to the other Parties a power of sale as to any property that
is subject to the Security Rights granted hereunder,  such power to be exercised
in the  manner  provided  by  applicable  law  or  otherwise  in a  commercially
reasonable manner and upon reasonable notice.

          8.7.11 Recordation. To provide evidence of, and to further perfect the
Parties'  security  rights  created  hereunder,  upon request,  each Party shall
execute and  acknowledge  the  Memorandum  of Operating  Agreement and Financing
Statement  (Louisiana)  attached as Exhibit "F" (the  "Memorandum  of  Operating
Agreement and Financing  Statement  (Louisiana)")  in multiple  counterparts  as
appropriate.  Each Party may file the  Memorandum  of  Operating  Agreement  and
Financing  Statement  (Louisiana) in the public records set forth below to serve
as notice of the  existence  of this  Agreement  as a burden on the title of the
Operator  and the  Non-Operators  to their  interests in the Lease and all other
interests  mortgaged,  pledged or secured herein, and for purposes of satisfying
otherwise  relevant  recording and filing  requirements of applicable law and to
attach an  original of the  Memorandum  of  Operating  Agreement  and  Financing
Statement  (Louisiana)  to a standard  UCC-1 for filing in the UCC  records  set
forth below to perfect  the  security  interests  created by the Parties in this
Agreement.  Upon the  acquisition  of a  leasehold  interest  in the Lease,  the
Parties  shall,  within five (5) business days  following  request by one of the
Parties hereto, execute and furnish to the requesting Party for recordation such
a  Memorandum  of  Operating  Agreement  and  Financing  Statement   (Louisiana)
describing such leasehold  interest.  Such Memorandum of Operating Agreement and
Financing  Statement  (Louisiana)  shall  be  amended  from  time to  time  upon
acquisition  of  additional  leasehold  interests in the Lease,  and the Parties
shall,  within five (5) business  days  following  request by one of the Parties
hereto,  execute and furnish to the requesting  Party for  recordation  any such
amendment.  The  Memorandum  of  Operating  Agreement  and  Financing  Statement
(Louisiana)  is to be  filed  or  recorded,  as the  case  may  be,  in (a)  the
conveyance  records of the parish or parishes  adjacent to the lands or offshore
blocks  covered by the Lease or contained  within the Lease pursuant to La. R.S.
9:2731 et seq., (b) the mortgage records of such parish or parishes, and (c) the
appropriate Uniform Commercial Code records.

     8.8 Default.  If any Party does not pay its share of the charges authorized
under this  Agreement  when due,  including  cash  advances  and  interest,  the
Operator  may give that Party notice that unless  payment is made within  thirty
(30) days from delivery of the notice, the non-paying Party shall be in default.
Any Party in  default  shall  have no  further  access to the rig,  Platform  or
Facilities, any Confidential Data or other maps, records, data, interpretations,
or other  information  obtained in  connection  with  activities  or  operations
hereunder or be allowed to participate in meetings. A Party in default shall not
be  entitled to vote or to make an  election  until such time as the  defaulting
Party is no longer in default.  The voting interest of each non-defaulting Party
shall be counted in the proportion its Participating Interest share bears to the
total non-defaulting Participating Interest shares. As to any operation approved
during the time a Party is in default,  such defaulting Party shall be deemed to
be a  Non-participating  Party,  except  where such  approval  is binding on all
Parties or Participating  Parties, as applicable.  In the event a Party believes
that such statement of charges is incorrect,  such Party may notify the Operator
in writing that a good faith dispute  exists over such charges.  The Party shall
nevertheless  pay the amounts due as provided  herein,  and the  Operator  shall
attempt to resolve the issue as soon as

                                       14

<PAGE>

practicable,  but said attempt shall be made no later than sixty (60) days after
receiving notice from the Party of such disputed charges.

     8.9 Unpaid Charges.  If any  Participating  Party fails to pay its share of
the costs and other expenses  authorized under this Agreement in accordance with
Exhibit  "C" when due,  the Party to whom such  payment is due, in order to take
advantage of the  provisions  of this Article 8, shall notify the other Party by
certified or registered U.S. Mail that it is in default and has thirty (30) days
from the receipt of such  notice to pay.  If such  payment is not made timely by
the  non-paying  Party  after the  issuance  of such  notice  to pay,  the Party
requesting such payment may take immediate steps to diligently pursue collection
of the unpaid costs and other expenses owed by such  Participating  Party and to
exercise  the  mortgage  and  security  rights  granted by this  Agreement.  The
bringing of a suit and the  obtaining of a judgment by any Party for the secured
indebtedness shall not be deemed an election of remedies or otherwise affect the
security rights granted herein. In addition to any other remedy afforded by law,
each  Party  shall  have,  and is hereby  given and vested  with,  the power and
authority  to  foreclose  the lien,  mortgage,  pledge,  and  security  interest
established  hereby in its favor in the manner  provided by law, to exercise the
Power of Sale provided for herein, if applicable,  and to exercise all rights of
a secured  party  under the Uniform  Commercial  Code as adopted by the state in
which  the  Lease  is  located  or such  other  states  as such  Party  may deem
appropriate.  The Operator shall keep an accurate account of amounts owed by the
nonperforming  Party  (plus  interest  and  collection  costs)  and any  amounts
collected with respect to amounts owed by the nonperforming  Party. In the event
there become three or more Parties to this Agreement,  then if any nonperforming
Party's share of costs remains  delinquent for a period of sixty (60) days, each
other  Participating  Party shall, upon the Operator's  request,  pay the unpaid
amount of costs in the proportion  that its Working  Interest bears to the total
non-defaulting  Working Interests.  Each Participating Party paying its share of
the  unpaid  amounts  of a  nonperforming  Party  shall  be  subrogated  to  the
Operator's  mortgage  and  security  rights to the extent of the payment made by
such Participating Party.

     8.10 Carved-out Interests.  Any agreements creating any overriding royalty,
production  payment,  net  proceeds  interest,  net  profits  interest,  carried
interest  or any other  interest  carved out of a Working  Interest in the Lease
shall  specifically make such interests inferior to the rights of the Parties to
this  Agreement.  If any Party whose Working  Interest is so encumbered does not
pay its share of costs and other expenses  authorized under this Agreement,  and
the  proceeds  from  the sale of its  Hydrocarbon  production  pursuant  to this
Article 8 are  insufficient to pay such costs and expenses,  the security rights
provided for in this Article 8 may be applied  against the carved-out  interests
with which the  defaulting or  non-performing  Party's  interest in the Lease is
burdened.  In such event,  the rights of the owner of such  carved-out  interest
shall be subordinated to the security rights granted by this Article 8.

                                    ARTICLE 9
                                     NOTICES

     9.1 Giving and Receiving Notices. Except as specifically provided otherwise
herein,  all  notices  shall be in writing and  delivered  in person or by mail,
telegram,  telegraph,  telecopier or cable, postage or charges prepaid; however,
if a drilling  rig is on location  and standby  charges are  accumulating,  such
notices shall be given by telephone and immediately confirmed in writing. Notice
shall be deemed  given only when  received  by the Party to whom such  notice is
directed, except that any notice by certified mail or equivalent,  telegraph, or
cable  properly  addressed,  pursuant to Section  6.1,  and with all postage and
charges prepaid shall be deemed given  seventy-two  (72) hours after such notice
is  deposited in the mail or  twenty-four  (24) hours after such notice is filed
with an operating telegraph or cable company for immediate transmission.

     9.2 Content of Notice.  Any notice which requires a response shall indicate
the maximum  response  time  specified in Section 9.3. If a proposal  involves a
Platform, pipeline, or Facilities the notice shall contain a

                                       15

<PAGE>

description  of same,  including  location  and the  estimated  costs of design,
fabrication,   transportation   and  installation  and  the  estimated  date  of
commencement.  If a proposal involves a well operation, the notice shall include
the  proposed  depth,  the  objective  zone or zones to be tested,  the surface,
objective and bottom-hole  locations,  applicable details regarding  directional
drilling,  wellbore  schematics,  the type of  equipment  to be used  (such as a
mobile drilling unit, floating drilling vessel, or platform),  and the estimated
costs of the operation and any other  information  necessary to make an election
regarding  such  proposal.  If a proposed  operation is for a Lease  Maintenance
operation the notice shall specify that the operation is being proposed pursuant
to  Section  12.8.  A proposal  for  multiple  operations  on more than one well
location  by the  same rig  shall  contain  separate  AFEs or  notices  for each
operation  and shall specify in writing which  operation  will take  precedence.
Each Party  shall  respond to each  proposed  multiple  operation  in the manner
provided in Section 9.6.

     9.3 Response to Notices.  Each Party's  response to a proposal  shall be in
writing to all other Parties. Except for those notices in Articles 10,11,15, and
16, the maximum response time shall be as follows:

          9.3.1 Platform and/or Facilities  Construction.  When any proposal for
operations involve the construction of a Platform and/or Facilities, the maximum
response time shall be ninety (90) days.

          9.3.2 Proposal Without Platform and/or  Facilities.  When any proposal
for  well  operations  does  not  require  construction  of  a  Platform  and/or
Facilities,  maximum  response  time shall be thirty  (30) days;  however,  if a
drilling rig is on location and standby  charges are  accumulating,  the maximum
response time shall be forty-eight (48) hours  (inclusive of Saturdays,  Sundays
and legal  holidays).  Any Party may have  additional  time to make an  election
while a rig is on standby  provided such Party agrees to bear all cost, risk and
expense incurred during such additional standby period.

          9.3.3 Other  Matters.  For all other  matters  requiring  notice,  the
maximum response time shall be thirty (30) days.

     9.4 Failure to Respond.  Failure of any Party to respond to a notice within
the required period shall be deemed to be a negative response.

     9.5 Timely Operations.  All operations conducted pursuant to this Agreement
shall be commenced  within one hundred eighty (180) days following the date upon
which the last  applicable  election  may be made.  If no  operations  are begun
within such time  period,  the effect  shall be as if the  proposal had not been
made.  Operations  shall be deemed to have  commenced  (a) on the date design or
material procurement  commences or the contract for a Platform and/or Facilities
is let, if the notice involved construction of a Platform and/or Facilities;  or
(b) on the date  that  charges  begin  accruing  according  to the  terms of the
drilling contract.

     9.6  Restrictions on Proposals for Multiple  Operations.  Unless  otherwise
agreed to by the Parties  hereto,  no more than one operation shall be conducted
at the same time.  Proposals made under the terms hereof shall be limited to one
operation  each at a time and  except  as  provided  below,  no  Party  shall be
required  to make an election  under more than one  proposal at the same time or
while an operation is being conducted.  This paragraph shall not limit the right
of a Party to propose an operation  while another is being  conducted,  however,
the time to elect under such  proposal  shall be deferred  until (a) thirty (30)
days after the previous  operation has been completed or if a well,  plugged and
abandoned or (b) twenty four (24) hours from receipt and notification that a rig
has been moved to the new  location and standby  charges are being  accumulated,
whichever is earlier.

                                       16

<PAGE>

                                   ARTICLE 10
                               EXPLORATORY WELLS

     10.1  Operations  by All Parties.  Any Party may propose the drilling of an
Exploratory Well by notifying the other Parties in accordance with Article 9. If
all of the Parties agree to  participate  in the drilling of the proposed  well,
Operator shall proceed to drill such well for the account of all Parties.

     10.2 Second  Opportunity to  Participate.  If fewer than all but one (1) or
more Parties having a combined Working Interest of twenty-five  percent (25%) or
more elect to participate,  the proposing Party shall immediately notify each of
the Parties of the elections made,  whereupon any such Party originally electing
not to participate  may elect to participate as if it had originally  elected to
participate by so notifying the proposing  Party within  forty-eight  (48) hours
(exclusive  of Saturdays,  Sundays,  and legal  holidays)  after receipt of such
second notice. If, after said second notice, all Parties agree to participate in
the drilling of the proposed well, Operator shall proceed to drill such well for
the account of all Parties.

     10.3  Operations  by Fewer Than All Parties.  If,  after the second  notice
provided for in Section  10.2 above,  fewer than all but one (1) or more Parties
having a combined  Working  Interest of twenty-five  percent (25%) or more still
elect to participate  in the drilling of the proposed well, the proposing  Party
shall  immediately  notify each of the Parties  electing to  participate  of the
elections  made and such Parties  shall,  within five (5) days after  receipt of
such notice  (twenty-four [24] hours if a rig is on location and standby charges
are accumulating), notify the proposing Party what portion, if any, of the total
non-participating interest it wishes to carry; each such Party being entitled to
carry the  non-participating  interest  in the ratio that such  Party's  Working
Interest at the time the original  proposal was made bears to the total  Working
Interest of all  Parties  electing to  participate.  If the Parties  electing to
participate subscribe to all of the  non-participating  interest so as to permit
payment for one hundred percent (100%) of the cost of the well, Operator (or the
largest  interest owner  participating  in such  operations if Operator is not a
Participating  Party),  shall  proceed to drill such well for the account of the
Participating  Parties in accordance with the procedure including the recoupment
of cost  provisions of Section 10.3.1 set forth below;  provided,  if operations
are  being  conducted  from  a  Platform,   then  Operator  shall  conduct  such
operations.  If one  hundred  percent  (100%)  of the  cost  of the  well is not
subscribed  to,  then such well  shall not be  drilled  and it shall be as if no
proposal had been made.

          Operations by the Participating  Parties shall be commenced within one
hundred  eighty  (180)  days  following  the date on which  the last  applicable
election  must be made under  Section 10.2 above,  and once  commenced  Operator
shall diligently conduct the operation without unreasonable delay until the well
reaches the  objective  depth,  unless the well  encounters,  at a lesser depth,
impenetrable  conditions or mechanical  difficulties  that cannot be overcome by
reasonable  and  prudent   operations   and  that  render   further   operations
impracticable.  If no operations are commenced within such time period, it shall
be as if the  proposal  had not been made.  If the  proposed  well is  commenced
within such one hundred eighty (180) days period, then the following  provisions
shall apply:

          10.3.1  Subsequent  Exploratory  Wells.  If the  proposed  well is the
second  or  subsequent  Exploratory  Well  to be  drilled  on  the  Lease,  each
Non-Participating  Party  shall be deemed  to have  relinquished  its  operating
rights,  along with its interest in production,  in and to such Exploratory Well
in the  manner  provided  for in  Section  12.2.  Recoupment  of costs  shall be
determined  by Section  12.2 and the  drilling of such well shall be governed by
the provisions of Article 12; however,  percentages  under Section 12.2 shall be
as follows:

          12.2a) Eight Hundred Percent (800%)

          12.2b) Three Hundred Percent (300%)

          12.2c) Three Hundred Percent (300%)

          12.2d) Two Hundred Percent (200%)

                                       17

<PAGE>

Further, with respect to Exploratory Operations which result in a well completed
as a producer or which otherwise qualifies as producible under the provisions of
Section  2.18  hereof,  the  above  amounts  shall  be  recoverable  out  of the
Non-Participating Party's share of production as follows:

               i)   If the said well is completed as a producer,  then the above
                    amounts shall be recoverable, with respect to said well, not
                    only  out  of  the   Non-Participating   Party's   share  of
                    production therefrom, but also out of fifty percent (50%) of
                    such   Non-Participating   Party's   share   of   production
                    attributable to the productive  reservoir(s)  encountered in
                    said well in any and all wells  subsequently  drilled on the
                    Lease and completed in such reservoir(s);

               ii)  If  the  said  well  is not  completed  as a  producer,  but
                    otherwise  qualifies as producible  under the  provisions of
                    Section  2.18  hereof,  then  the  above  amounts  shall  be
                    recoverable  with respect to said well out of fifty  percent
                    (50%) of the  Non-Participating  Party's share of production
                    attributable to the productive  reservoir(s)  encountered in
                    said well in any and all wells  subsequently  drilled on the
                    Lease  and   completed   in  such   reservoir(s);   and  the
                    above-stated provisions for the relinquishment and reverting
                    of Non-Participating Party's operating rights and production
                    shall also apply with  respect to such fifty  percent  (50%)
                    interest, to said subsequently drilled well or wells.

          10.3.2 Subsequent Exploratory Wells - Non-Participating  Reversion. If
such  Non-Consent  Operations  under  Section  10.3.1  do not  result  in a well
determined to be capable of producing in paying  quantities  pursuant to Section
2.18 and said well is plugged and  abandoned;  and provided  that such well does
not result in a decision, within sixty (60) days from rig release date, to set a
Platform or drill another  Exploratory  Well, such operating rights in the Lease
shall revert to each Non-Participating  Party except that all Non-Consent Wells,
equipment,  Platforms and  Facilities  shall remain vested in the  Participating
Parties.

     10.4 Course of Action After Drilling to the Initial Objective Depth:

          10.4.1 Casing Point Election.

          a)   At such time as an Exploratory Well been drilled to the objective
               depth as set forth in the notice,  and has been logged and tested
               and   copies  of  the  logs  and   results   furnished   to  each
               Participating Party, but before any production pipe has been set,
               Operator  shall  notify the  Participating  Parties  and  provide
               Operator's  written   recommendation   with  respect  to  further
               operations.  Each Participating  Party shall,  within forty-eight
               (48) hours (inclusive of Saturdays,  Sundays, and legal holidays)
               after  receipt  of such  notice,  notify  Operator  and the other
               Participating   Parties  by  telephone   (promptly  confirmed  in
               writing) or telecopy whether it accepts Operator's recommendation
               or make additional  recommendations as to further operations with
               respect to such well. If additional recommendations are made, the
               Participating  Parties shall have an additional  twenty-four (24)
               hours to respond.  Any Party may request  additional  time beyond
               the herein specified time, in order to make an election; however,
               all costs  associated  to such  standby  rig time shall be at the
               expense of the Party or Parties requesting such additional time.

          b)   Any  recommendation  concurred to by a majority of  Participating
               Interests shall take  precedence over any other proposal.  In the
               event no recommendation  receives such majority support, then the
               recommendation to be followed shall be determined as follows with
               the lowest number taking precedence:

               1    additional  testing,  coring,  or logging.  (If  conflicting
                    proposals are approved,  the proposal  receiving the largest
                    percentage of  Participating  Interest  approval  shall take
                    precedence,  and in the  event of a tie  between  two (2) or
                    more  approved   proposals,   the  approved  proposal  first
                    received by the Parties shall take precedence.)

               2    Deepen.   (If  conflicting   proposals  are  approved,   the
                    operation   proposed  to  the   deepest   depth  shall  take
                    precedence.)

                                       18

<PAGE>

               3    Sidetrack.  (If  conflicting  proposals  are  approved,  the
                    proposal  receiving  the  largest  percentage  Participating
                    Interest approval shall take precedence, and in the event of
                    a tie  between  two  (2) or  more  approved  proposals,  the
                    approved  proposal  first received by the Parties shall take
                    precedence.)

               4    complete at the objective horizon

               5    complete  above  the  objective  horizon.   (If  conflicting
                    proposals  are  approved,  the  operation  proposed  at  the
                    deepest depth shall take precedence.)

               6    Other  operations.  (If conflicting  proposals are approved,
                    the proposal receiving the largest percentage  Participating
                    Interest approval shall take precedence, and in the event of
                    a tie  between  two  (2) or  more  approved  proposals,  the
                    approved  proposal  first received by the Parties shall take
                    precedence.)

               7    temporarily plug and abandon.

               8    plug and abandon.

     If the proposal is to complete  the well,  then it is  understood  that the
well may be suspended by the mutual agreement of the  Participating  Parties and
completed  at  a  later  date  to  coordinate   with  equipment  and  Facilities
construction and installation.

          In the event a  recommendation  to plug and abandon the well  receives
     majority  support,   any   Participating   Party  not  concurring  in  said
     recommendation  shall  have the  right to have the  Operator  perform  such
     additional  operation  with  respect  to such well as it  desires  and such
     operations  shall be performed in accordance with the provisions of Section
     10.4.c) below.

          If the decision as to the further  operation is other than to plug and
     abandon the well, any Party  electing not to  participate  therein shall be
     relieved of any further  obligations  and liabilities as to such operation,
     but shall pay to Operator its proportionate part of the cost, as reasonably
     estimated  by Operator in  accordance  with  Exhibit  "C", of plugging  and
     abandoning  the  well  at  the  initial   objective   depth.   The  Parties
     participating in such further  operations shall be entitled to recover from
     any Parties  not  participating  therein,  the amounts set forth in Section
     10.3.1 as to costs  incurred  subsequent  to the  initial  objective  depth
     having  been  reached  and  after  the  decision  respecting  such  further
     operations is made. Furthermore,  the amounts to be recouped by the Parties
     participating in such further operations shall also be recoverable out of a
     Non-Participating   Party's  share  of  production   attributable   to  the
     productive  reservoir(s)  encountered in such further operations in any and
     all  wells  subsequently  drilled  on  the  Lease  and  completed  in  such
     reservoir(s)  or qualifying as producible  under Section  10.3.1 i) and ii)
     above.

          c)   Operator  shall conduct such further  operations at the sole risk
               and expense of the Parties participating therein,  subject to the
               Non-Participating  Parties'  reversionary  rights as  provided in
               Section 12.2 below,  and such Parties shall carry the interest of
               the Parties not participating in such further  operations and all
               production   resulting  therefrom  in  the  proportion  that  the
               interest of each Party  participating  therein bears to the total
               interest of all Parties participating therein. If the well is not
               completed as a Producible  Well,  Operator shall plug and abandon
               such  well  at the  cost  of the  Parties  participating  in such
               further operation,  less those estimated costs paid previously by
               Parties not  participating in such further operation for plugging
               and abandoning at the initial objective depth.

     10.5 Deeper Drilling. If a well is proposed to be drilled below the deepest
Producible Reservoir penetrated by a Producible Well, any Party hereto may elect
either;  a) to participate in the well as proposed,  or b) to participate in the
well to the base of the deepest Producible  Reservoir penetrated by a Producible
Well. If a Party elects to  participate  in the proposed well to the base of the
deepest Producible  Reservoir  penetrated by a Producible Well, such Party shall
bear its proportionate part of the cost of such operations, including completion
or

                                       19

<PAGE>

abandonment, only to the depth to which such Party agreed to participate. In the
event  the well is  completed  below  the depth to which  such  Party  agreed to
participate,  all costs  incurred in the operations for that portion of the well
below the agreed depth shall be governed by the provisions of Section 10.3.1.

                                   ARTICLE 11
                             DEVELOPMENT OPERATIONS

     11.1  Operations  by All Parties.  Any  Party  may  propose  that a well be
drilled,  recompleted,  deepened,  or plugged back as a Development Operation by
notifying the other Parties. If all Parties elect to participate in the proposed
operation, Operator shall conduct such operation for the account of all Parties.

     11.2 Second  Opportunity to Participate.  If fewer than all, but one (1) or
more Parties having a combined Working Interest of twenty-five  percent (25%) or
more elect to participate,  the proposing Party shall immediately notify each of
the Parties of the elections made,  whereupon any such Party originally electing
not to participate  may elect to participate as if it had originally  elected to
participate by so notifying the proposing  Party within  forty-eight  (48) hours
(exclusive of Saturdays,  Sundays, and legal holidays) after the receipt of such
second notice.  If, after said second notice,  all Parties agree to participate,
Operator shall proceed with such operations for the account of all Parties.

     11.3  Operations  by Fewer Than All Parties.  If,  after the second  notice
provided for in Section  11.2 above,  fewer than all but one (1) or more Parties
owning  twenty-five  percent  (25%) or more interest in the Lease still elect to
participate  in  the  proposed  operation,  each  of  the  Parties  electing  to
participate shall notify the other Parties so electing what portion,  if any, of
the total  non-participating  interest it wishes to carry; each such Party being
entitled to carry the non-participating  interest in the ratio that such Party's
Working  Interest at the time the original  proposal was made bears to the total
Working Interest of all Parties electing to participate. If the Parties electing
to  participate  subscribe  to all of the  non-participating  interest  so as to
permit  payment for one hundred  percent  (100%) of the cost of such  operation,
then Operator (or the largest interest owner  participating in such operation if
Operator is not a Participating  Party), shall proceed to conduct such operation
in accordance with Article 12 below; provided,  however, if operations are being
conducted from a Platform,  then Operator shall conduct such  operation.  If one
hundred  percent (100%) of the cost of such operation is not subscribed to, then
such operation shall not be conducted and it shall be as if no proposal had been
made.

     11.4  Timely  Operations.  Operations  by  Participating  Parties  shall be
commenced  within one hundred  eighty (180) days following the date on which the
last  applicable  election  must be  made  and  once  commenced  Operator  shall
diligently  conduct  the  operation  without  unreasonable  delay until the well
reaches the  objective  depth,  unless the well  encounters,  at a lesser depth,
impenetrable  conditions or mechanical  difficulties  that cannot be overcome by
reasonable  and  prudent   operations   and  that  render   further   operations
impracticable.  If no operations are begun within such time period,  it shall be
as if the proposal had not been made. If a Platform is necessary for Non-Consent
Operations,  and the notice so indicated  that  necessity,  operations  shall be
deemed to have  commenced on the date the contract for design of the Platform is
let, or on the date rigging-up operations are commenced on an existing Platform.

     11.5 Course of Action After  Drilling to Initial  Objective  Depth:

          11.5.1 Casing Point Election.

          a)   At such  time as a  Development  Well  has  been  drilled  to the
               objective  depth as set forth in the notice,  and has been logged
               and tested and copies of the logs and results  furnished  to each
               Participating Party, but before any production pipe has been set,
               Operator  shall  notify the  Participating  Parties  and  provide
               Operator's  written   recommendation   with  respect  to  further
               operations.  Each Participating  Party shall,  within forty-eight
               (48) hours (inclusive of Saturdays,  Sundays, and legal holidays)
               after  receipt  of such  notice,  notify  Operator  and the other
               Participating   Parties  by  telephone   (promptly  confirmed  in
               writing) or telecopy

                                       20

<PAGE>

               whether it accepts  Operator's  recommendation or make additional
               recommendations  as to further  operations  with  respect to such
               well. If additional  recommendations  are made, the Participating
               Parties  shall  have an  additional  twenty-four  (24)  hours  to
               respond.  Any Party may request additional time beyond the herein
               specified time, in order to make an election;  however, all costs
               associated  to such  standby  rig time shall be at the expense of
               the Party or Parties requesting such additional time.

          b)   Any  recommendation  concurred to by a majority of  Participating
               Parties shall take  precedence  over any other  proposal.  In the
               event no recommendation  receives such majority support, then the
               recommendation to be followed shall be determined as follows with
               the lowest number taking precedence:

               1    additional  testing,  coring,  or logging.  (If  conflicting
                    proposals are approved,  the proposal  receiving the largest
                    percentage of  Participating  Interest  approval  shall take
                    precedence,  and in the  event of a tie  between  two (2) or
                    more  approved   proposals,   the  approved  proposal  first
                    received by the Parties shall take precedence.)

               2    complete at the objective horizon.

               3    complete  above  the  objective  horizon.   (If  conflicting
                    proposals  are  approved,  the  operation  proposed  to  the
                    deepest depth shall take precedence.)

               4    Deepen.   (If  conflicting   proposals  are  approved,   the
                    operation   proposed  to  the   deepest   depth  shall  take
                    precedence.)

               5    Sidetrack.  (If  conflicting  proposals  are  approved,  the
                    proposal  receiving the largest  percentage of Participating
                    Interest approval shall take precedence, and in the event of
                    a tie  between  two  (2) or  more  approved  proposals,  the
                    approved  proposal  first received by the Parties shall take
                    precedence.)

               6    other  operations.  (If conflicting  proposals are approved,
                    the   proposal   receiving   the   largest   percentage   of
                    Participating  Interest approval shall take precedence,  and
                    in the  event  of a tie  between  two (2) or  more  approved
                    proposals,  the  approved  proposal  first  received  by the
                    Parties shall take precedence.)

               7    temporarily plug and abandon.

               8    plug and abandon.

     If the proposal is to complete  the well,  then it is  understood  that the
well may be suspended by the mutual agreement of the  Participating  Parties and
completed  at  a  later  date  to  coordinate   with  equipment  and  Facilities
construction and installation.

                                   ARTICLE 12
                             NON-CONSENT OPERATIONS

     12.1 Non-Consent Operations.  Operator shall conduct Non-Consent Operations
at the sole risk and expense of the Participating Parties in accordance with the
following provisions:

          12.1.1  Non-interference.  Non-Consent  Operations shall not interfere
unreasonably with operations being conducted by all Parties.

          12.1.2 Multiple Completion  Limitation.  Non-Consent  Operations shall
not  be  conducted  in a well  having  multiple  completions  unless:  (a)  each
completion is owned by the same Parties in the same proportions; (b) the well is
incapable of producing  from any of its  completions;  or (c) all  Participating
Parties in the well consent to such operations.

          12.1.3  Liens.   In  the  conduct  of  Non-Consent   Operations,   the
Participating  Parties  shall  keep  the  Lease  free and  clear  of  liens  and
encumbrances.

          12.1.4 Metering. In Non-Consent Operations,  separate metering devices
shall not be required  to,  unless  required  by  governmental  agencies  having
jurisdiction,  measure  production  but such  production  may be determined on a
monthly well test basis.

                                       21

<PAGE>

          12.1.5  Platform  Salvage.   Provided  that  no  further  drilling  or
production is proposed from a Non-Consent  Platform,  the Participating  Parties
shall be responsible  for  dismantling and clearing away said Platform and shall
be entitled to all the salvage realized therefrom.

          12.1.6  Non-Consent  Well. A Non-Consent  Well shall not be completed,
recompleted, reworked, deepened, or plugged back in any zone(s) then productive,
or then known to be capable of  production  (as  determined  pursuant to Section
2.18  above) of oil or gas from any other well on the Lease  without the written
approval of the  Non-Participating  Party(ies),  unless:  (a) said zone(s) shall
have been  designated in the notice as an objective zone or one of the objective
zones for the  completion  of such  well;  (b)  completion  of such well in said
zone(s) will not increase the well density  theretofore  mutually agreed upon by
the Parties for said zone(s) or the density pattern with respect to said zone(s)
as theretofore  prescribed by the Federal authorities having jurisdiction of the
premises;  and (c) the horizontal  distance between the vertical  projections of
the midpoint of the zone within a reservoir  that is in  communication  with the
completion  zone in such  well and any  existing  well in the  same  zone of the
non-consent  well will not be less than one thousand  five hundred feet (1,500')
if an  oil-well  completion  or  three  thousand  feet  (3,000')  if a  gas-well
completion. The terms "oil well completion" and "gas well completion" as used in
this  Article  shall have the same  meaning as those terms are defined in 30 CFR
250.170  Gulf Coast  approved by the Chief,  Conservation  Division,  Geological
Survey,  United States  Department of the Interior,  effective  July 1, 1993, as
same may from time to time be amended.  Subject to the  foregoing  provisions of
this Article,  until the  Party(ies)  participating  in a  Non-Consent  Well has
recouped  out of the  production  therefrom  the amounts to which it is entitled
hereunder,  the  Participating  Party(ies)  shall be  entitled  to  conduct  any
reworking  operations in the well which it may desire,  including  plugging back
the hole to a shallower  reservoir.  The cost of such reworking operations shall
not be subject to the penalty  provisions  provided  in Section  12.2 or Section
10.3.1, as the case may be.

          12.1.7 Cost  Information.  Operator  shall,  within one hundred twenty
(120) days after  completion  of a Non-Consent  Well,  furnish all other Parties
with a statement of well costs prepared in accordance with Exhibit "C" or with a
copy of the monthly billing furnished to the Participating  Parties. The Parties
shall keep such cost  information  confidential.  Operator  shall furnish to all
Parties a monthly statement showing operating expenses and the proceeds from the
sale of production from the well(s) for the preceding month.

          12.1.8 Completions. For the purposes of determinations hereunder, each
completion  shall be considered a separate well.

     12.2 Penalties.  Except as to operations conducted pursuant to Section 12.8
or the first  Exploratory Well as contemplated in the  Participation  Agreement,
upon  commencement of Non-Consent  Operations,  each  Non-Participating  Party's
operating  rights in the well and its interest in production  therefrom shall be
relinquished  (without the execution of any instrument evidencing a transfer) to
the  Participating  Parties in the proportions that each  Participating  Party's
Interest bears to the total of the  Participating  Parties' Interest for as long
as the  operations  originally  proposed are being  conducted or  production  in
paying  quantities is obtained (or is capable of being obtained);  provided that
such  operating   rights  and  interest  in  production  shall  revert  to  each
Non-Participating  Party  as of 7:00  a.m.  on the day  when  the  Participating
Parties have received out of the proceeds of the production from such Operations
an amount equal to the sum of the following:

          a)   Six hundred percent (600%) of the Non-Participating Party's Share
               of the cost of  drilling,  completing,  recompleting,  deepening,
               sidetracking,  reworking or plugging  back the well,  as the case
               may be, and equipping it through the wellhead connection; plus

          b)   Four  hundred  percent  (400%) of the  Non-Participating  Party's
               Share of the cost of any  Facilities  necessary  to carry out the
               operations; plus

                                       22

<PAGE>

          c)   Four  hundred  percent  (400%) of the  Non-Participating  Party's
               Share  of the  cost of any  Non-Consent  Platform  which  must be
               installed to carry out the operations; plus

          d)   Two hundred percent (200%) of the Non-Participating Party's Share
               of the cost of using any Platform already installed; plus

          e)   Two hundred percent (200%) of the Non-Participating Party's share
               of the cost of pipelines  utilized to transport  production  from
               the Lease; plus

          f)   Non-Participating Party's Share of operating expenses, royalties,
               and gathering, windfall profit, severance,  production, and other
               taxes  imposed on  production,  other than  income and ad valorem
               taxes.  Recoupment  of costs shall be in the order listed  above.
               Upon the  recoupment  of such costs,  a  Non-Participating  Party
               shall become a Participating Party in such operations.

     12.3 Recoupment and Salvage. If a Non-Consent Well results in a dry hole or
ceases to produce in paying quantities  before the Participating  Parties recoup
the amount to which they are  entitled,  and  provided a proposal  to deepen the
Non-Consent  Well is not made in accordance with Section 12.4, the well shall be
abandoned and plugged at the sole risk and expense of the Participating Parties.
Any sum realized  from salvage in excess of the amounts to be recouped  from the
well shall be credited to all Parties.

     12.4 Deepening or Sidetracking of Non-Consent Wells. If after a Non-Consent
Well has been  drilled as  proposed,  and any  Participating  Party  proposes to
deepen or Sidetrack a Non-Consent  Well,  except for a Non-Consent  Well drilled
under  Section  12.8  or the  first  Exploratory  Well  as  contemplated  in the
Participation   Agreement,   then  an  original   Non-Participating   Party  may
participate in the proposed deepening or Sidetracking operation by notifying the
Operator within thirty (30) days (48 hours inclusive of Saturdays,  Sundays, and
legal  holidays if a rig is on location  and standby  charges are  accumulating)
after  receiving the proposal that it will join in the deepening or Sidetracking
operation  and by paying to the  Participating  Parties an amount  equal to such
Non-Participating Party's share of the actual costs incurred in the drilling and
casing  of such  well to the  point  at which  such  deepening  or  Sidetracking
operation is commenced.  The Participating Parties shall continue to be entitled
to recoup the full sum provided for in Section 10.3.1 or Section 12.2 applicable
to the non-consent portion of the well, less the amount paid under this Section.
Provided, however, in the event the payment specified in this Section 12.4 would
then cause the amount of money recouped by the  Participating  Parties to exceed
the full sum  provided  for in Section  10.3.1 or  Section  12.2,  whichever  is
applicable,  then such  payment  shall be reduced by an amount so that such full
sum shall not then be exceeded.

     12.5  Operations  from  Non-Consent   Platforms.  A  Party  which  did  not
originally  participate in a Platform shall be a  Non-Participating  Party as to
all  operations  from such  Platform and shall be subject to the  provisions  of
Section 12.2 above.  Reversion shall occur only after the original Participating
Parties  have  recouped  the sum set forth in said Section 12.2 for the Platform
and  the  Non-Consent   Operations  thereon;   provided,   however,   that  such
Non-Participating  Party  shall  have  the  right  at  any  time  to  pay to the
Participating  Parties  in such  Platform  an  amount,  in  cash,  equal to said
Non-Participating  Party's share of the  unrecovered  balance of the  recoupment
account  attributable  to such Platform  under Section 12.2 and thereby become a
Participating  Party with  regard to such  Platform  and  subsequent  operations
therefrom.

     12.6  Discovery  or  Extension  from  Mobile  Drilling  Operations.   If  a
Non-Consent  Well (other than a  subsequent  Exploratory  Well)  drilled  from a
mobile  drilling rig or floating  drilling  vessel  results in the  discovery or
extension of a productive  formation  with a Producible  Well, and if within one
year from the date the drilling equipment is released from such well, a Platform
or other fixed  structure is ordered which will serve the discovered or extended
productive  formations,  the recoupment of amounts applicable to such well shall
be  recovered  out of  such  original  Non-Participating  Party's  share  of all
production  from such non-consent well and one-half of its share of  production
from all other wells on the Platform or other fixed

                                       23

<PAGE>

structure drilled to develop reserves  resulting from the discovery or extension
of productive formations in said Non-Consent Well in which the Non-Participating
Party in such Non-Consent Well has a participating interest.

     12.7  Allocation of Platform Costs to Non-Consent  Operations.  Non-Consent
Operations shall also be subject to the following conditions:

          12.7.1  Charges.  If a  Non-Consent  Well is  drilled  from a Platform
constructed  pursuant  to  this  Agreement  and is  producible  or the  slot  is
otherwise rendered unusable, the Participating Parties in such well shall pay to
the  Operator for credit to the owners of the Platform a charge for the right to
use the Platform and its Facilities as follows:

          a)   Such Participating  Parties shall pay a sum equal to that portion
               of the total cost of the Platform  (including,  but not by way of
               limitation,    costs   of   design,    materials,    fabrication,
               transportation,   installation   and   other   costs   associated
               therewith,  plus any repairs and  maintenance  expense  resulting
               from the drilling of such well not  provided in Section  12.7.2),
               which one  Platform  slot bears to the total  number of  utilized
               slots on the Platform. If the Non-Consent Well is abandoned,  the
               right of  Participating  Parties to use that  Platform slot shall
               terminate,  unless such  Parties  commence  drilling a substitute
               well  from  the  same  slot   within   ninety   (90)  days  after
               abandonment.

          b)   If  the   Non-Consent   Well   production  is  handled  from  the
               Facilities,  the  Participating  parties shall pay a sum equal to
               that portion of the total cost of such Facilities  which one well
               bears to the total number of wells utilizing the Facilities.

          12.7.2 Operating and Maintenance  Charges.  The Participating  Parties
shall pay all costs necessary to connect the Non-Consent  Well to the Facilities
and that  proportionate  part of the expense of operating  and  maintaining  the
Platform and Facilities  applicable to the Non-Consent Well.  Platform operating
and  maintenance  expenses shall be allocated  equally to all wells served,  and
operating and maintenance expenses for the Facilities shall be allocated equally
to all producing wells.

          12.7.3  Payments.  Payment of sums pursuant to Section 12.7.1 is not a
purchase of any additional interest in the Platform or Facilities. Such payments
shall be  included  in the total  amount  which the  Participating  Parties  are
entitled to recoup out of production from the Non-Consent Well.

     12.8  Non-Consent  Drilling to Maintain Lease.  If it becomes  necessary to
conduct an operation (whether  Exploratory or Development) on the Lease in order
to maintain  the Lease or a portion  thereof in full force and effect,  then any
Party or Parties  electing to participate in the operation  shall have the right
to do so  regardless  of their  number or  combined  Working  Interests  and any
Non-Participating Party as to such operation shall assign unto the Participating
Parties  all of its  interest  in and to such  Lease  or such  affected  portion
thereof.  Any Party so assigning shall be relieved from any future  liability or
obligation with respect to said well, but such Party shall remain liable for any
liabilities or obligations  which have arisen (or which arise) out of operations
pursuant  to  this  Agreement  occurring  prior  to the  effective  date of such
assignment. If more than one operation should be proposed, either of which would
maintain the Lease or such jeopardized  portion thereof, an assignment shall not
be required  from any Party  participating  in any one of such wells,  but as to
those wells in which it fails to  participate  such failure shall be governed by
the non-consent  provisions of Section 10.3.1 or Section 12.2,  whichever may be
applicable.

     12.9 Allocation of Costs (Single Completion). For the purpose of allocating
costs on any well  completed in only one zone in which the  ownership is not the
same for the  entire  depth or the  completion  thereof,  the cost of  drilling,
completing and equipping such well shall be allocated on the following basis:

          a)   Intangible  drilling,  completion  and  material  costs  from the
               surface to a depth one  hundred  (100) feet below the base of the
               completed  zone shall be  charged  to the  owners or the  Parties
               participating in that zone.

                                       24

<PAGE>

          b)   Intangible  drilling,  completion,  casing  string  and  material
               costs, other than tubing costs, from a depth of one hundred (100)
               feet below the base of the completed zone to total depth shall be
               charged to the owners or the Parties  participating  in the costs
               to total depth.

     12.10  Allocation of Costs Between Zones  (Multiple  Completions).  For the
purpose of allocating  costs on any well  completed in dual or multiple zones in
which  the  ownership  is not the same for the  entire  depth or the  completion
thereof,  the costs of drilling,  completing  and  equipping  such well shall be
allocated on the following basis:

          a)   Intangible  drilling,  completion  and material  costs other than
               tubing costs,  from the surface to a depth one hundred (100) feet
               below  the base of the  upper  completed  zone  shall be  divided
               equally  between  the  completed  zones and charged to the owners
               thereof or to the Parties participating in such zone.

          b)   Intangible  drilling,  completion,  casing  string  and  material
               costs, other than tubing,  from a depth of one hundred (100) feet
               below the base of the upper completed zone to a depth one hundred
               (100) feet below the base of the second  completed  zone shall be
               divided  equally  between the second and any other zone completed
               below  such depth and  charged  to the  owners  thereof or to the
               Parties participating in each such zone. If the well is completed
               in additional zones, the costs applicable to each such zone shall
               be  determined  and  charged  to the  owners  thereof in the same
               manner as prescribed by the dual zones completion.

          c)   Intangible  drilling,  completion,  casing  string  and  material
               costs,  other than tubing  costs,  from a depth one hundred (100)
               feet below the base of the lower  completed  zone to total  depth
               shall be charged to the owners or to the Parties participating in
               the costs to total depth.

          d)   Costs of tubing  strings  serving  each  separate  zone  shall be
               charged to the  owners or to the  Parties  participating  in each
               zone.

          e)   For the  purposes of  allocating  tangible and  intangible  costs
               between  zones  that  occur at less than one  hundred  (100) foot
               intervals, the distance between the base of the upper zone to the
               top of the next  lower zone shall be  allocated  equally  between
               zones.

     12.11  Allocation  of Costs  Between  Zones (Dry Hole).  For the purpose of
allocating costs on any well determined to be a dry hole, in which the ownership
is not the same for the  entire  depth or the  completion  thereof,  the cost of
drilling,  plugging and abandoning such well shall be allocated on the following
basis:

          a)   Costs to drill,  plug and abandon a well proposed for  completion
               in  single,  dual or  multiple  zones  shall  be  charged  to the
               Participating  Parties  in the same  manner  as if the well  were
               completed as a producing well in all zones as proposed.

          b)   Plugging and  abandoning  of any well  following  any  deepening,
               completion  attempt or other  operation shall be at the sole risk
               and  expense  of the  Participating  Parties  in such  operation,
               subject however to the provisions of Section 11.5.

     12.12 Intangible  Drilling and Completion  Allocations.  For the purpose of
calculations  under  Sections  12.9,  12.10 and 12.11,  intangible  drilling and
completion costs, including  non-controllable material costs, shall be allocated
between  zones,  including the interval from the lowest  completed zone to total
depth,  on a  drilling  day  ratio  basis  where  the  factor  for each  zone is
determined  by a fraction for which the  numerator is the number of drilling and
completion  days applicable to that zone and the denominator is the total number
of days spent on the well,  beginning on the day the rig arrives on location and
terminating when the rig is released.

                                   ARTICLE 13
                           PLATFORM AND/OR FACILITIES

     13.1 Approval.  Any Party may propose the  installation  of Platform and/or
Facilities by notice to the other Parties with information  adequate to describe
the proposed Platform and/or Facilities and the estimated costs.

                                       25

<PAGE>

Platform  and/or  Facilities  shall require  approval of two (2) or more Parties
owning  sixty-five  percent  (65%) or more  interest  in the wells to be served.
Provided,  however,  any Party may install its own  Platform  and/or  Facilities
subject to the provisions of Section 22.1 below.

     13.2 Ownership.  Platform and/or  Facilities  constructed shall be owned in
proportionate shares or other sharing arrangement as agreed to in writing by the
Participating  Parties.  All cost, risk and expense incurred with respect to the
Platform and/or Facilities shall be charged to the Participating Parties.

     13.3 Contracts.  Subject to the other provisions hereof, the Operator shall
install or construct  Platform and/or  Facilities  which may be required for the
operations  agreed upon.  Operator  may enter into  contracts  with  independent
contractors  for the Platform and/or  Facilities and,  insofar as is reasonable,
shall utilize competitive bidding. A contract will be deemed to be a competitive
contract if it (a) was made within one (1) year before the  commencement  of the
Platform and/or  Facilities and (b) contains terms,  rates, and provisions that,
when the contract was made,  did not exceed those  generally  prevailing  in the
area  for  operations   involving   substantially   equivalent  Platform  and/or
Facilities. Further, Operator may employ its own equipment and personnel for the
selection,  installation and/or construction of the Facilities,  but if so, such
work shall be performed by Operator or its  Affiliate  acting as an  independent
contractor under a written contract containing terms and conditions and at rates
which are  customary  and  prevailing in  competitive  contracts of  independent
contractors  who are doing  work of a similar  nature  and who have as a primary
source of business  the  construction  of  Facilities  and pursuant to a written
agreement among the Participating Parties.

                                   ARTICLE 14
                             ABANDONMENT AND SALVAGE

     14.1 Platform Salvage and Removal Costs. When the Parties owning a Platform
mutually  agree to  dispose of such  Platform,  it shall be  disposed  of by the
Operator as approved by such Parties. The costs, risks and net proceeds, if any,
resulting from such disposition shall be shared by such Parties in proportion to
their Participating Interests. Any Party owning an interest in the Platform will
have the right to match the purchase price resulting in disposal of the Platform
and take over the salvage and removal costs at its own risk and expense.

     14.2  Abandonment  of Producible  Well. Any Party may propose the permanent
plugging and abandonment of a well by notifying the other Participating Parties.
No well shall be permanently  plugged and abandoned  without the written consent
of the Participating  Parties.  The Participating  Parties not consenting to the
plugging and abandonment shall pay to each Participating  Party desiring to plug
and abandon its share of the estimated value of the well's salvageable  material
and equipment as determined pursuant to Exhibit "C". less the estimated costs of
salvaging  same and of plugging and  abandoning  the well as  determined  by the
Participating Parties.

     14.3 Assignment of Interest.  Each Participating Party desiring to plug and
abandon a well pursuant to Section 14.2 shall  assign,  effective as of the date
on which  the last  applicable  election  must be  made,  to the  non-abandoning
Participating  Parties,  in proportion  to their  Participating  Interests,  its
interest  in such  well  and the  equipment  therein  and its  ownership  in the
production  from such well.  Any Party so assigning  shall be relieved  from any
future  liability or obligation  with respect to said well, but such Party shall
remain liable for any  liabilities  or  obligations  which have arisen (or which
arise)  out  of  operations  occurring  prior  to the  effective  date  of  such
assignment.

     14.4 Abandonment  Operations Required by Governmental  Authority.  Any well
abandonment  or Platform  removal  required by a governmental  authority  having
jurisdiction  shall be  accomplished  by Operator with the costs,  risks and net
proceeds,  if any, to be shared by the  Parties  owning such well or Platform in
proportion to their Participating Interests.

                                       26

<PAGE>

     14.5  Operator  Purchase  of  Salvage  Materials.  Operator  shall have the
preferred  right and option to  purchase  all  materials  not needed for further
operations  and which  have been  removed  from the Lease at the  expense of the
Parties so long as the price paid is equal to or greater than the highest  price
that could have been otherwise  obtained.  Such option shall be exercised within
sixty  (60)  days  after  such  removal  or,  as the  case may be,  after  final
determination  that such  Platform  or  Facilities  will not be used in  further
operations on the Lease.  Said  materials  shall be paid for on the basis of the
value thereof as determined  in accordance  with the  provisions of Exhibit "C".
Prefabricated  material shall be valued on the basis of cost including,  but not
limited to, cost of fabrication.

     14.6 Non-Operator  Purchase of Salvage  Materials.  Should Operator fail to
exercise the purchase option described in Section 14.5 above, such materials may
be purchased by a Non-Operator on the same basis as provided in such Section. If
more than one Non-Operator  desires to exercise the purchase option,  the matter
shall  be  decided  among  them by  mutual  consent.  If  neither  Operator  nor
Non-Operators desire to purchase said materials, the materials shall be disposed
of in accordance with the provisions of Exhibit "C".

                                   ARTICLE 15
                                   WITHDRAWAL

     15.1 Withdrawal.  A Party may withdraw from this Agreement as to a Lease by
assigning,  to the other Parties who do not desire to withdraw, all its interest
in such Lease and the wells, Platforms and Facilities used in operations on such
Lease;  provided  that such  assignment  shall not  relieve  such Party from any
obligation  or liability  which has arisen (or which  arises) out of  operations
occurring  prior to the first  day of the month  following  the  receipt  of the
assignment by Operator. The assigned interest shall be owned by the assignees in
proportion  to their  respective  Participating  Interests.  The  assignees,  in
proportion to the respective  interests so acquired,  shall pay the assignor for
its interest in the wells,  Platforms and Facilities the estimated salvage value
thereof less its share of the estimated current cost of salvaging same, plugging
and  abandoning  of wells,  and removal of all  Platforms  and  Facilities,  and
clearing the site, as determined by the Parties.  In the event such  withdrawing
Party's  interest in such salvage  value is less than such Party's  share of the
estimated  costs, the withdrawing  Party shall pay the Operator,  for benefit of
the  non-withdrawing  Parties, a sum equal to the deficiency.  Within sixty (60)
days after  receiving  notice of the  assignment,  Operator shall render a final
statement  to the  withdrawing  Party  for its  share of all  expenses  incurred
through  the  first  day of the  month  following  the  date of  receipt  of the
assignment by Operator, plus any deficiency in salvage value. Providing all such
expenses,  including any deficiency  hereunder,  due from the withdrawing  Party
have been paid  within  thirty  (30) days  after  the  rendering  of such  final
statement,  the  assignment  shall be effective as of the first day of the month
following its receipt by Operator, and the withdrawing Party shall thereafter be
relieved  from all further  obligations  and  liabilities  with  respect to such
Lease,  except those  obligations  and  liabilities  which have arisen (or which
arise) out of operations occurring prior to such effective date.

     15.2  Limitations  on  Withdrawal.  No  party  shall  be  relieved  of  its
obligations  hereunder  during a  blowout,  a fire or other  emergency,  but may
withdraw from this Agreement after termination of such emergency,  provided such
Party  shall  remain  liable  for its  share  of all  costs  arising  from  said
emergency,  including,  but not  limited  to,  the  drilling  of  relief  wells,
containment  and cleanup of oil spill and  pollution,  and all costs of Platform
debris removal made necessary by the emergency.

                                   ARTICLE 16
                      RENTALS, ROYALTIES AND OTHER PAYMENTS

     16.1 Creation of Overriding Royalty. If any Party has heretofore created or
hereafter creates any overriding royalty interest,  production payment, or other
similar burden payable out of production, except Lessor's

                                       27

<PAGE>

royalty,  which  is not  jointly  borne  such  Party  shall  pay  and  bear  all
liabilities  and  obligations  related  thereto  and  shall  indemnify  and hold
harmless  all other  Parties  from and  against  all claims  and/or  demands for
payment  asserted by the owners of such  burdens or  encumbrances.  If any other
Party becomes  entitled to an assignment of such Party's Working  Interest under
the  provisions  of this  Agreement or, as a result of  Non-Consent  Operations,
becomes   entitled   to   receive   the   Working   Interest   belonging   to  a
Non-Participating  Party in such  operations,  the Party entitled to receive the
assignment  from the  Working  Interest  of such  Non-Participating  Party shall
receive same free and clear of such burdens,  except Lessor's  royalty,  and the
Non-Participating  Party creating such burdens which are not jointly borne shall
indemnify,  defend and hold the Participating  Parties harmless from and against
all claims and/or  demands by the owners of such burdens.  All burdens which are
jointly borne are set forth in Exhibit "A".

     16.2  Payment of Rentals and  Minimum  Royalties.  Operator  shall pay in a
timely manner all rentals, minimum royalties, or similar payments accruing under
the terms of the Lease and submit  evidence of each such payment to the Parties.
Operator  shall not be held liable to the other  Parties in damages for the loss
of the Lease or interest  therein if, through mistake or oversight,  any rental,
minimum  royalty,  or other payment is not paid or is erroneously  paid,  unless
such error results from gross negligence or willful misconduct.

     16.3  Non-Participation in Payments.  Should any Party elect not to pay its
share of any  rental,  minimum  royalty,  or similar  payment,  such Party shall
notify the other Parties, in writing, at least sixty (60) days prior to the date
on which such  payment is due;  and,  in this  event,  Operator  shall make such
payment for the benefit of all the  Participating  Parties.  In such event,  the
Non-Participating  Party shall, upon the request of the  Participating  Parties,
assign to them such portions of its interest in the Lease as would be maintained
by such payment.  Unless otherwise agreed, such assigned interest shall be owned
by each Participating  Party in proportion to its Participating  Interest.  Such
assignment  shall be free  and  clear of any  overriding  royalties,  production
payment or other  similar  burdens on  production  which is not  jointly  borne.
Thereafter,  the Lease or portion thereof involved shall no longer be subject to
this agreement.  The Parties then owning the Lease, or portion thereof, agree to
operate said Lease, or portion thereof,  under a separate  agreement in the same
form as this agreement.

     16.4 Royalty  Payments.  Each Party shall  properly pay or cause to be paid
all royalty and other amounts payable out of its share of production. During any
time in which the Participating  Parties in a Non-Consent Operation are entitled
to receive a  Non-Participating  Party's share of production,  the Participating
Parties  shall bear the Lease  royalty and other  jointly  borne burdens on such
production.

                                   ARTICLE 17
                                      TAXES

     17.1  Property  Taxes.  Operator  shall  render  property  covered  by this
agreement as may be subject to ad valorem taxation,  and shall pay such property
taxes for the benefit of each Party.  Operator shall charge each Party its share
of such tax payments.

     17.2  Contest  of  Property  Tax  Valuation.   Operator  shall  timely  and
diligently protest to a final determination any valuation it deems unreasonable.
Pending such determination,  Operator may elect to pay under protest. Upon final
determination,  Operator shall pay the taxes and any interest,  penalty, or cost
accrued as a result of such protest, In either event, Operator shall charge each
Party its share.

     17.3 Production and Severance  Taxes.  Each Party shall pay, or cause to be
paid, all production and severance taxes due on any production which it receives
pursuant  to the terms of this  Agreement.

     17.4 Other Taxes and Assessments. Operator shall pay other applicable taxes
(other than income taxes) or assessments and charge each Party its proportionate
share.

                                       28

<PAGE>

                                   ARTICLE 18
                                   INSURANCE

     18.1 Insurance. Each Party shall comply with the provisions of Exhibit "B".

                                   ARTICLE 19
                         LIABILITY, CLAIMS, AND LAWSUITS

     19.1 Individual Obligations. The obligations, duties and liabilities of the
Parties  shall be several and not joint or  collective;  and  nothing  contained
herein  shall ever be  construed as creating a  partnership  of any kind,  joint
venture,  association, or other character of business entity recognizable in law
for any purpose.  In their relations with each other under this  Agreement,  the
Parties  shall  not  be  considered   fiduciaries  or  to  have   established  a
confidential  relationship,  except as specifically provided in Sections 7.3 and
7.4.  Each  Party  shall  hold all the other  Parties  harmless  from  liens and
encumbrances on the Lease arising as a result of its acts.

     19.2 Notice of Claim or Lawsuit. If a claim is made against any Party or if
any Party is sued on account of any matter arising from operations hereunder, or
receives notice of a material  hearing related to operations on the Lease,  such
Party shall give prompt written notice to the other Parties.

     19.3  Settlements.  Operator  may settle any  single  damage  claim or suit
involving  operations  hereunder  if the  expenditure  does  not  exceed  Twenty
Thousand  and no/100  Dollars  ($20,000.00)  and if the  payment is in  complete
settlement of such claim or suit. If the amount required for settlement  exceeds
such amount,  the Parties shall  determine the further  handling of the claim or
suit.

     19.4 Legal Expense.  Legal  expenses  shall be handled  pursuant to Exhibit
"C".

     19.5 Liability for Losses,  Damages, Injury or Death. To the extent allowed
by law,  liability for losses,  property damages,  injury, or death arising from
operations  under this  Agreement and to the extent such  liability  exceeds the
insurance  carried by Operator  under Section 18.1 shall be borne by the Parties
in proportion to their  Participating  Interests in the  operations out of which
such  liability  arises,  except  when  such  liability  results  from the gross
negligence or willful  misconduct of a Party,  in which case such Party shall be
liable.  In no event shall any Party be liable to any other Party for  exemplary
damages  or  consequential  damages,  including  without  limitation,   business
interruption, reservoir damage, lost production, or lost profits.

     19.6  Indemnification.  To the  extent  allowed by law,  the  Participating
Parties agree to hold the  Non-Participating  Parties  harmless and to indemnify
and  protect  them  against  all  claims,  demands,  liabilities,  and liens for
property  damage or personal  injury,  including  death,  caused by or otherwise
arising out of  Non-Consent  Operations,  and any loss and cost  suffered by any
Non-Participating Party as an incident thereof.

                                   ARTICLE 20
                           INTERNAL REVENUE PROVISIONS

     20.1 Election of  Partnership  Provisions.  Notwithstanding  any provisions
herein that the rights and  liabilities  hereunder  are several and not joint or
collective  or that  this  Agreement  and the  operations  hereunder  shall  not
constitute a partnership,  if for Federal Income Tax purposes this Agreement and
the operations hereunder are regarded as a partnership,  then for Federal Income
Tax purposes  each Party elects to be excluded from the  application  of all the
provisions of Subchapter K, Chapter 1, Subtitle A, Internal Revenue Code of 1986
as amended,  as  permitted  and  authorized  by Section 761 of said Code and the
regulations promulgated  thereunder;  Operator is hereby authorized and directed
to  execute on behalf of each Party such  evidence  of this  election  as may be
required by the Federal Internal Revenue Service including specifically, but not
by way of  limitation,  all of the  returns,  statements,  and data  required by
Federal  Regulation  1.761.1.  Should there be any  requirement  that each Party
further evidence this election,  each Party agrees to execute such documents and
furnish such other evidence as may be required by the Federal  Internal  Revenue
Service.  Each Party  further  agrees not to give any  notices or take any other
action  inconsistent  with the election  made  hereby.  If any present or future
income tax law of the

                                       29

<PAGE>

United  States of America or any state in which the area covered by the Lease is
located contains  provisions similar to those contained in Subchapter K, Chapter
1,  Subtitle A of the Internal  Revenue Code of 1986 as amended,  under which an
election  similar  to that  provided  by  Section  761 of said  Subchapter  K is
permitted, each Party makes such election or agrees to make such election as may
be permitted by such laws. In making this  election,  each Party states that the
income derived by it from the operations  under this Agreement can be adequately
determined without the computation of partnership taxable income.

                                   ARTICLE 21
                                 CONTRIBUTIONS

     21.1 Notice of  Contributions  Other Than Advances for Sale of  Production.
Each Party shall promptly notify the other Parties of all contributions  that it
may obtain,  or is attempting to obtain,  concerning the drilling of any well on
the Lease.  Payments  received as consideration for entering into a contract for
sale of production from the Lease, loans and other financing  arrangements shall
not be considered  contributions for the purpose of this Article. No Party shall
release  information in return for a  contribution  from an outside party toward
the  drilling  of a well  without the prior  written  consent of all the Parties
hereto.

     21.2 Cash Contributions.  In the event a Party receives a cash contribution
toward the drilling of a well, said cash contribution  shall be paid to Operator
and Operator  shall credit the amount  thereof to the Parties in  proportion  to
their  Participating  Interest in such well. If such well is a Non-Consent Well,
the amount of the  contribution  shall be deducted  from the cost  specified  in
Section 10.3.1 or Section 12.2.

     21.3  Acreage  Contributions.  In the  event a Party  receives  an  acreage
contribution  toward the drilling of a well, said acreage  contribution shall be
shared  by  each   Participating   Party  who  accepts  in   proportion  to  its
Participating  Interest in the well and said acreage shall become subject to the
terms and  conditions of this  Agreement.  If such well is a  Non-Consent  Well,
there shall be no deduction  from the costs to be recouped by the  Participating
Parties under Section 10.3.1 or Section 12.2., whichever is applicable,  because
of such acreage contribution.

                                   ARTICLE 22
                           DISPOSITION OF PRODUCTION

     22.1  Facilities  to Take in Kind.  Any Party shall have the right,  at its
sole  risk  and  expense,  to  construct  Facilities  for  taking  its  share of
production in kind, provided that such Facilities at the time of installation do
not interfere with continuing operations on the Lease.

     22.2 Duty to Take in Kind.  Each  Party  shall  take in kind or  separately
dispose of its share of the oil and gas produced and saved from the Lease.

     22.3 Failure to Take in Kind. If any Party fails to take in kind or dispose
of its share of the oil,  condensate,  or casinghead  gas,  Operator may, at any
time and from time to time, either (a) purchase oil,  condensate,  or casinghead
gas at  Operator's  posted price,  or in the absence of a posted  price,  at the
price prevailing in the area for oil, condensate,  or casinghead gas of the same
kind,  gravity,  quantity,  and quality;  or (b) sell such oil,  condensate,  or
casinghead  gas to others at the best price  obtainable by Operator,  subject to
revocation at will by the non-taking Party upon thirty (30) days advance written
notice.  All  contracts  of  sale  by  Operator  of any  Party's  share  of oil,
condensate,  or casinghead gas shall be only for such reasonable periods of time
as  are   consistent   with  the  minimum  needs  of  the  industry   under  the
circumstances,  but in no event shall any  contract be for a period in excess of
one (1) year.  Notwithstanding the foregoing,  Operator shall not make a sale of
any Party's share of gas  production  without giving such Party at least fifteen
(15) days' prior written notice of the intended sale. Proceeds of all sales made
by Operator  pursuant  to this  Article  shall be paid to the  Parties  entitled
thereto.

                                       30

<PAGE>

     22.4 Expenses of Delivery in Kind.  Any cost incurred by Operator in making
delivery  of any  Party's  share of oil,  condensate,  and  casinghead  gas,  or
disposing of same pursuant to Section 22.3, shall be borne by such Party.

     22.5 Gas Balancing  Agreement.  Notwithstanding  Section 22.3,  the Parties
agree that gas balancing shall be handled in accordance with Exhibit "E".

                                   ARTICLE 23
                                 APPLICABLE LAW

     23.1 Applicable  Law. This Agreement shall be interpreted  according to the
laws of the State of Louisiana.

                                   ARTICLE 24
                    LAWS, REGULATIONS AND NON-DISCRIMINATION

     24.1 Laws and  Regulations.  This  Agreement and  operations  hereunder are
subject  to all  applicable  laws,  rules,  regulations,  and  orders,  and  any
provisions of this Agreement  found to be contrary to or  inconsistent  with any
such law, rule, regulation, or order shall be deemed modified accordingly.

     24.2  Non-Discrimination.  In the performance of work under this Agreement,
the  Parties  agree to comply,  and  Operator  shall  require  each  independent
contractor to comply with the governmental requirements set forth in Exhibit "D"
and with all of the provisions of Section 202(1) to (7), inclusive, of Executive
Order No. 11246, as amended.

                                   ARTICLE 25
                                 FORCE MAJEURE

     25.1 Force  Majeure.  All  obligations  imposed by this  Agreement  on each
Party,  except for the payment of money,  shall be suspended while compliance is
prevented,  in whole or in part, by a labor  dispute,  fire,  flood,  hurricane,
lightening or other act of nature,  war, civil disturbance,  explosion or act of
God; by laws; by governmental  rules,  regulations,  or orders;  by inability to
secure  materials  (including  pipe); or by any other cause,  whether similar or
dissimilar,  beyond the reasonable control of the said Party; provided, however,
that  performance  shall be resumed  promptly after such cause has been removed;
and provided  further that no Party shall be required against its will to settle
any labor dispute.  The affected Party shall use reasonable  diligence to remove
the force majeure as quickly as possible.

     25.2 Notice.  Whenever a Party's  obligations  are suspended  under Section
25.1, such Party shall  immediately  notify the other Parties,  in writing,  and
give full particulars of the reason for such suspension, including the estimated
duration.  No Party shall be entitled to suspension due to a force majeure event
unless and until such notice is provided as described in this Section 25,2.

                                   ARTICLE 26
      SUCCESSORS AND ASSIGNS, PREFERENTIAL RIGHT TO PURCHASE AND TRANSFERS

     26.1 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors,  representatives,
and assigns and shall constitute a covenant  running with the Lease.  Each Party
shall incorporate in any assignment of an interest in the Lease a provision that
such assignment is subject to this Agreement.

     26.2  Preferential  Right to  Purchase.  If any Party  hereto  (hereinafter
called  "transferor")  desires  to sell,  farmout  or  otherwise  dispose of its
interest  in the Lease in whole or in part to a  bonafide  transferee,  it shall
promptly  give written  notice to all the other Parties  hereto giving  complete
information  relative to the  proposed  transfer,  including  the price or value
fixed for this  Lease and the name and  address of the  prospective  transferee,
which must be ready,  willing and able to purchase  the interest at the proposed
sales price,  or accept such farmout or other  disposition.  If said purchase is
part of an  acquisition  involving  other property such notice shall include all
details as to the  production,  reserves,  computations,  assumptions  and other
factors used by transferee

                                       31

<PAGE>

in arriving at such price or value  (including  if any exchange of properties is
involved,  such  information as to the  properties  proposed to be exchanged for
this Lease). Each recipient of said notice shall have the preferential right and
option  for a period  of  fifteen  (15) days  after  receipt  of said  notice to
exercise or waive its right and option to participate  in the purchase,  farmout
or other  disposition  pursuant to the terms and  provisions  stipulated in said
notice.  If two (2) or more Parties  exercise said right and option,  they shall
share the interest in the proportion their respective  interests  hereunder bear
to the aggregate  interests of such Parties.  Failure to reply or waiver of said
right and option  shall afford  transferor  the right,  if exercised  within one
hundred  twenty  (120) days  thereafter,  to effect  the sale,  farmout or other
disposition to the prospective  transferee  pursuant to the stipulations in said
notice.  A transfer of interest  hereunder shall not become  effective as to the
Parties  until the first day of the month  following  delivery to Operator of an
original  (or copies  thereof)  instrument  of  transfer  approved by the proper
governmental  authority and conforming to the  requirements of this Article.  No
such  transfer  shall  relieve  the  transferring  Party of any  obligations  or
liabilities  accrued  hereunder  prior to such effective date. This Section 26.2
shall not apply when a Party  wishes to mortgage  its  interest or to dispose of
its interest by merger, reorganization,  consolidation, assignment of production
payment,  sale of all or substantially  all of its assets, in the Gulf of Mexico
or sale or transfer of its interest to an affiliate.

     26.3  Transfer of Interest.  No sale or transfer of interest  shall be made
unless 1) the  transfer is  expressly  made  subject to this  Agreement;  2) the
transferee  is  financially  responsible  and  agrees in  writing  to assume all
obligations  hereunder as to the interest assigned;  3) a written notice,  which
shall include the name of the transferee and a description of the interest to be
transferred,  is  given  to the  other  Parties  hereto;  4) the  transferee  is
financially  capable of assuming  the  obligations  hereunder  and prior to such
transfer, the transferor furnishes the Parties with proof that the transferee is
currently qualified by the Minerals Management Service ("MMS") to own OCS leases
and that the transferee has on file with the MMS the  appropriate  Lessee and/or
Operator bonds that, when combined,  equal or exceed $500,000; and 5) notice has
been given  pursuant to the  requirements  of Section 26.2 and the other parties
hereto do not  elect to  purchase  all of the  interest  in the Lease  which the
disposing Party proposes to transfer. A transfer of interest hereunder shall not
become  effective as to the Parties  until the first day of the month  following
delivery to Operator of an original (or copies  thereof)  instrument of transfer
approved by the proper governmental authority and conforming to the requirements
of Section 26.2 and Section  26.3.  No such sale or transfer  shall  relieve the
transferring Party of any obligations or liabilities which have arisen (or which
arise) out of operations occurring prior to such effective date.

     26.4 Assignments.  Any assignment,  vesting,  or relinquishment of interest
between  the  Parties  shall be without  warranty  of title  express or implied,
except for the claims  arising from  Assignor's  own  actions,  or the claims of
those holding by, through, or under Assignor, but not otherwise.

                                   ARTICLE 27
                                      TERM

     27.1 Term.  This  Agreement  shall remain in effect from the effective date
and for so long as the Lease shall  remain in effect as to any  acreage  covered
thereby, whether by production or otherwise, and thereafter until:

          (a)  all wells have been plugged and abandoned;

          (b)  all property and equipment on and for the Lease area belonging to
               the Parties are  disposed  of by the  Operator  and all claims or
               lawsuits have been settled or otherwise disposed of; and,

          (c)  a final  accounting  and  settlement  has been  made  under  this
               Agreement (including settlement of any gas imbalances pursuant to
               Exhibit "E").

     The Operator shall have a reasonable period of time after the occurrence of
an  event  of  termination  in which to  conclude  the  administration  of joint
operations and to make a distribution of assets. During this period of

                                       32

<PAGE>

time,  the Operator shall continue to have and shall exercise all powers granted
and meet all  duties  imposed by this  Agreement  until all  provisions  of this
Agreement are fully executed.  Termination of this Agreement shall not relieve a
Party  of  liabilities  or  obligations   accrued  or  incurred  prior  to  such
termination.

                                       33

<PAGE>

                                   ARTICLE 28

                                    EXECUTION

     28.1 Counterpart  Execution.  This Agreement may be executed by signing the
original  or  a  counterpart   thereof.   If  this   Agreement  is  executed  in
counterparts,  all counterparts  taken together shall have the same effect as if
all the Parties had signed the same instrument.

WITNESSES:                              OPERATOR:
                                        Millennium Offshore Group, Inc.

/s/ Illegible
-------------------------------------

/s/ Illegible                           By: /s/ Illegible
-------------------------------------       ------------------------------------
                                        Its: Senior Vice President

WITNESSES:                              NON-OPERATOR:
                                        Ridgewood Energy Corporation

-------------------------------------

                                        By:
-------------------------------------       ------------------------------------
                                        Its:
                                             -----------------------------------

WITNESSES:                              NON-OPERATOR:
                                        Anadarko Petroleum Corporation

/s/ Illegible
-------------------------------------

/s/ Illegible                           By: /s/ Richard C. Pratt
-------------------------------------       ------------------------------------
                                            Richard C. Pratt
                                        Its: Manager, GOM Operations &
                                             Development

<PAGE>

STATE OF TEXAS

COUNTY OF HARRIS

     On this 3rd day of March,  2004, before me, appeared,  D. Kent Singleton to
me personally  known,  who,  being by me duly sworn,  did say that he is the Sr.
V.P. of  Millenium  Offshore  Group,  Inc.,  a Texas  corporation,  and that the
foregoing instrument was signed on behalf of the corporation by authority of its
Board of Directors,  and that he acknowledged  the instrument to be the free act
and deed of the corporation.

                                        /s/ JERRY D. NIEKAMP
                                        ----------------------------------------
                                        Notary Public, State of Texas

                                        My Commission Expires: _________________

            [SEAL]

       JERRY D. NIEKAMP
NOTARY PUBLIC, STATE OF TEXAS
    MY COMMISSION EXPIRES
        FEB. 20, 2005

STATE OF NEW JERSEY

COUNTY OF BERGEN

On  this   _______  day  of   _______________,   2004,   before  me,   appeared,
______________________________  to me personally  known,  who,  being by me duly
sworn, did say that he is the  ________________ of Ridgewood Energy Corporation,
a  _____________  corporation,  and that the foregoing  instrument was signed on
behalf of the  corporation  by authority of its Board of Directors,  and that he
acknowledged the instrument to be the free act and deed of the corporation.

                                        ----------------------------------------
                                        Notary Public in and for the State of
                                        New Jersey

                                        My Commission expires: _________________

STATE OF TEXAS

COUNTY OF MONTGOMERY

On this 4th day of March,  2004,  before  me,  appeared,  Richard C. Pratt to me
personally  known,  who, being by me duly sworn, did say that he is the Manager,
GOM  Operations &  Development  of Anadarko  Petroleum  Corporation,  a Delaware
corporation,  and that the  foregoing  instrument  was  signed  on behalf of the
corporation by authority of its Board of Directors, and that he acknowledged the
instrument to be the free act and deed of the corporation.

                                        /s/ DEBORAH J. PURSELL
                                        ----------------------------------------
                                        Notary Public, State of Texas

                                        My Commission Expires: _________________

                                                    [SEAL]

                                              DEBORAH J. PURSELL
                                         Notary Public, State of Texas
                                        My Commission Expires 11-09-06

<PAGE>

                                   EXHIBIT "A"

    Attached to and made a part of that certain Offshore Operating Agreement
     covering East Cameron Block 299, dated February 18, 2004, by and between
       Millennium Offshore Group, Inc., as Operator, and Ridgewood Energy
        Corporation and Anadarko Petroleum Corporation, as Non-Operators.

I.   CONTRACT  AREA:  The lands and  waterbottoms  within the East Cameron Block
     299.

II   RESTRICTIONS AS TO DEPTH, FORMATIONS or STRUCTURE: See IV. below.

III. PARTIES & INTERESTS:

                           Operating Rights Ownership

Ridgewood Energy Corporation       28.33333%
Anadarko Petroleum Corporation     25.00000%
Millennium Offshore Group, Inc.    46.66667%
                                  ---------
                                  100.00000%

IV.  OIL, GAS & MINERAL LEASES SUBJECT TO THIS  AGREEMENT:  That certain Oil and
     Gas Lease from the United  States of America,  as Lessor,  to CNG Producing
     Company, et al, as Lessee,  effective as of July 1, 1983, identified in the
     office  of The MMS,  Gulf of  Mexico  OCS  Region,  as Oil and Gas Lease of
     Submerged Lands under the Outer  Continental Shelf Lands Act bearing Serial
     Number  OCS-G  05391,  describing  Block  299,  East  Cameron  Area,  South
     Addition,  as shown on OCS  official  Leasing  Map,  Louisiana  Map No. 2A,
     covering  5,000.0 acres,  more or less,  SAVE AND EXCEPT  THEREFROM (a) all
     operating  rights  between the  stratigraphic  equivalent of the top of the
     Lentic 1 Sand as  identified  at  10,865  feet True  Vertical  Depth on the
     Induction-SFL  Electric Log for the Transco Exploration Company OCS-G 05346
     Well No. B-5,  (formerly the OCS-G 05346 Well No. 5), having API # 17 702
     4086900,  and the stratigraphic  equivalent of the base of Lentic 4 Sand as
     identified at 16,085 feet Measured Depth in Induction-SFL  Electric Log for
     the CNG Producing Company OCS-G 05391 Well No. C-5,  (formerly known as the
     OCS-G 05391 Well No. 5),  having API # 17 702  4090600;  (b) all  currently
     existing wellbores, structures and facilities located on the Block; and (c)
     all rights,  wellbores  and  production  within (i) the existing unit areas
     defined under the CoDevelopment  Agreement dated August 26, 1985,  covering
     portions of West  Cameron  557,  East Cameron 299 and East Cameron 316, and
     (ii) the Voluntary  Pooling and  Unitization  Agreement dated September 16,
     1985,  covering  portions of West Cameron 556 and East Cameron 299, as same
     have been amended.

     The mortgage, pledge and security rights created in the Operating Agreement
     do not apply to the Parties'  interest and rights in the existing  platform
     and  production  facilities  on the Lease as of the  effective  date of the
     Operating  Agreement.  Subsequent  to the  effective  date of the Operating
     Agreement,  such  mortgage,  pledge and security  rights shall apply to the
     Parties'  interests  and rights in such  existing  platform and  production
     facilities  only to the extent such  interest  and rights  arise out of the
     Operating Agreement.

V.   ADDRESSES OF THE PARTIES FOR NOTICES: For the purposes hereof,  notices may
     be delivered by the U.S. Mail service,  overnight  delivery  service and/or
     telecopier as provided below:

     OPERATOR:
     Millennium Offshore Group, Inc.
     5300 Memorial, Ste. 1070
     Houston, Texas 77007
     Attn: Mr. Kent Singleton
     Telephone: (713) 652-0137
     Fax: (713)652-0482

     NON-OPERATORS:
     Ridgewood Energy Corporation   Anadarko Petroleum Corporation
     947 Linwood Avenue             1201 Lake Robbins Drive
     Ridgewood, New Jersey 07450    The Woodlands, Texas 77380
     Attn: Mr. Robert Swanson       Attn: Mr. Richard Stites
     Telephone: (201) 447-9000      Telephone: (832) 636-3839
     Fax: (201)447-0474             Fax: (832)636-8297

VI.  JOINTLY OWNED BURDENS ON PRODUCTION:

     A 2.00000% of 6/6ths overriding  royalty in favor of Japex (U.S.) Corp. and
     a  0.80000%  of  6/6ths  overriding  royalty  in favor of Casey  Jones,  an
     individual, and 16.66667% royalty in favor of the United States of America,
     as Lessor.

                                       36

<PAGE>

                                   EXHIBIT "B"

    Attached to and made a part of that certain Offshore Operating Agreement
     covering East Cameron Block 299, dated February 18, 2004, by and between
       Millennium Offshore Group, Inc., as Operator, and Ridgewood Energy
        Corporation and Anadarko Petroleum Corporation, as Non-Operators.

                                    INSURANCE

Operator,  for the  benefit  of the  Joint  Account,  shall  carry,  pay for and
maintain  throughout the term of this Offshore  Operating  Agreement policies of
insurance,  providing the following coverages relative to Operator's  activities
hereunder and shall charge the Joint Account for such coverages.

(a)  Workmen's  Compensation  Insurance with statutory limits in accordance with
     all applicable state,  federal and maritime laws, and Employer's  Liability
     Insurance of $1,000,000 per accident/occurrence,  including but not limited
     to an "Alternate  Employer" or "Borrowed  Servant"  endorsement in favor of
     Company Indemnitees or Contractor Indemnitees,  whichever is applicable. If
     the  operations  are over  water or where  the laws  hereinafter  mentioned
     apply,  the  Party  shall  carry  the  following  additional  insurance  as
     applicable:  U.S.  Longshoremen's  and  Harbor  Worker's  Compensation  Act
     Liability  (including the Outer  Continental Shelf Lands Act) for statutory
     limits,   and   Maritime    Employer's    Liability   of   $1,000,000   per
     accident/occurrence  (including  but not limited to coverage for Jones Act,
     General  Maritime  Laws and  Death on the High  Seas  Act;  Transportation,
     Wages,   Maintenance   and   Cure;   Voluntary   Compensation;    Alternate
     Employer/Borrowed  Servant  endorsement in favor of Company  Indemnitees or
     Contractor Indemnitees, whichever is applicable; and "In rem" endorsement).

(b)  General Public Liability and Property Damage Insurance  endorsed to include
     offshore  operations,  covering operations  conducted hereunder by Operator
     for the Parties with a combined  single limit each occurrence of $1,000,000
     for bodily injury and property damage.  It is understood that Operator will
     not provide pollution coverage.

(c)  Automobile   Public  Liability  and  Property  Damage  Insurance   covering
     operations  conducted hereunder by Operator for the Participating  Interest
     Account with a combined  single limit each  occurrence  of  $1,000,000  for
     bodily injury and property damage.

(d)  Aviation Liability Insurance with a limit of $10,000,000 each occurrence to
     provide coverage on non-owned aircraft.

(e)  Charterer's Legal Liability  Insurance  provided with a limit of $1,000,000
     any one claim to provide  coverage  arising out of the use of any chartered
     barges or vessels.

(f)  Excess  General  Public  Liability   Insurance  with  a  minimum  limit  of
     $50,000,000 to include coverage for pollution liability.

(g)  Energy  Exploration  and Development  Insurance / Operator's  Extra Expense
     Insurance  which  shall  cover  well  control,  redrilling,  pollution  and
     contamination  with a minimum limit of $50,000,000 in the aggregate for one
     well.

Operator  shall  provide  the other  Parties  with a  certificate  of  insurance
evidencing the coverages set forth above.  Said  certificate of insurance  shall
specifically  provide  that the insurer  shall  waive all rights of  subrogation
against the other Parties to the extent of the liabilities  assumed hereunder by
such Party.

Anadarko  Petroleum  Corporation,  and  its  affiliates,  shall  be  allowed  to
self-insure  the above ((b) through (g))  insurance  covers.  With regard to the
other  Party(ies),  unless  a Party  provides  Operator  evidence  of  coverages
indicated above, such Party shall bear its share of the cost of such coverage.

Operator  shall  use  every  reasonable  effort  to  have  its  contractors  and
subcontractors  comply with applicable  Workers  Compensation  laws and to carry
such insurance in such amounts as Operator deems necessary.

                                       37

<PAGE>

                                                             COPAS-1986-OFFSHORE
                                                              Recommended by the
                                                            Council of Petroleum
                                                           Accountants Societies

                                                                 [LOGO OF COPAS]

                                   EXHIBIT "C"

    Attached to and made a part of that certain Offshore Operating Agreement
    covering East Cameron Block 299, dated February 18,2004, by and between
 Millennium Offshore Group, Inc., as Operator, and Ridgewood Energy Corporation
             and Anadarko Petroleum Corporation, as Non-Operators.

                              ACCOUNTING PROCEDURE
                           OFFSHORE JOINT OPERATIONS

                              I. GENERAL PROVISIONS

1.   Definitions:

"Joint  Property"  shall  mean the real and  personal  property  subject  to the
Agreement to which this  Accounting  Procedure is attached.

"Joint  Operations"  shall  mean all  operations  necessary  or  proper  for the
development, operation, protection and maintenance of the Joint Property.

"Joint  Account"  shall mean the account  showing  the charges  paid and credits
received  in the conduct of the Joint  Operations  and which are to be shared by
the Parties.

"Operator" shall mean the party designated to conduct the Joint Operations.

"Non-Operators"  shall  mean  the  Parties  of this  Agreement  other  than  the
Operator. "Parties" shall mean Operator and Non-Operators.

"First Level  Supervisors"  shall mean those employees whose primary function in
Joint  Operations is the direct  supervision of other employees  and/or contract
labor directly employed on the Joint Property in a field operating capacity.

"Technical  Employees"  shall mean those  employees  having special and specific
engineering, geological or other professional skills, and whose primary function
in Joint  Operations  is the  handling  of  specific  operating  conditions  and
problems for the benefit of the Joint Property

"Personal Expenses" shall mean travel and other reasonable reimbursable expenses
of Operator's employees.

"Material" shall mean personal property,  equipment or supplies acquired or held
for use on the Joint Property.

"Controllable  Material"  shall mean Material which at the time is so classified
in the  Material  Classification  Manual  as most  recently  recommended  by the
Council of Petroleum Accountants Societies,

"Shore  Base  Facilities"  shall mean  onshore  support  facilities  that during
drilling,  development,   maintenance  and  producing  operations  provide  such
services  to the  Joint  Property  as  receiving  and  transshipment  point  for
supplies, materials and equipment; debarkation point for drilling and production
personnel and services; communication,  scheduling and dispatching center; other
associated functions benefiting the Joint Property.

"Offshore  Facilities"  shall mean platforms and support systems such as oil and
gas handling facilities,  living quarters,  offices,  shops, cranes,  electrical
supply  equipment  and  systems,  fuel and water  storage and piping,  heliport,
marine docking  installations,  communication  facilities,  navigation aids, and
other similar facilities necessary in the conduct of offshore operations.

2.   Statements and Billings

Operator  shall bill  Non-Operators  on or before the last day of each month for
their  proportionate  share of the Joint Account for the preceding  month.  Such
bills will be  accompanied  by  statements  which  identify  the  authority  for
expenditure,  lease or  facility,  and all charges and  credits,  summarized  by
appropriate  classifications  of  investment  and  expense  except that items of
Controllable  Material  and  unusual  charges and  credits  shall be  separately
identified and fully described in detail.

3.   Advances and Payments by Non-Operators

     A.   Unless  otherwise  provided  for in the  Agreement,  the  Operator may
          require the  Non-Operators  to advance  their share of estimated  cash
          outlay for the succeeding  month's  operation within fifteen (15) days
          after  receipt  of the  billing  or by the  first day of the month for
          which the advance is  required,  whichever  is later.  Operator  shall
          adjust each  monthly  billing to reflect  advances  received  from the
          Non-Operators.

     B.   Each Non-Operator shall pay its proportion of all bills within fifteen
          (15) days after receipt.  If payment is not made within such time, the
          unpaid balance shall bear interest monthly at the prime rate in effect
          at Chase Manhattan Bank, New York City, New York______on the first day
          of the  month  in  which  delinquency  occurs  plus 1% or the  maximum
          contract  rate  permitted  by  the   applicable   usury  laws  of  the
          jurisdiction in which the Joint Property is located,  whichever is the
          lesser,  plus  attorney's  fees,  court  costs,  and  other  costs  in
          connection with the collection of unpaid amounts,

4.   Adjustments

Payment of any such bills shall not prejudice the right of any  Non-Operator  to
protest or question the correctness  thereof;  provided,  however, all bills and
statements  rendered to Non-Operators by Operator during any calendar year shall
conclusively  be presumed to be true and correct after  twenty-four  (24) months
following the end of any such calendar year,  unless within the said twenty-four
(24) month period a Non-Operator takes written exception thereto and makes claim
on Operator for  adjustment.  No adjustment  favorable to Operator shall be made
unless it is made within the same  prescribed  period.  The  provisions  of this
paragraph shall not prevent  adjustments  resulting from a physical inventory of
Controllable Material as provided for in Section V.

                                                             COPAS-1986-OFFSHORE
                                                              Recommended by the
                                                            Council of Petroleum
                                                           Accountants Societies

                                       38

<PAGE>

5.   Audits

     A.   A  Non-Operator,  upon  notice in  writing to  Operator  and all other
          Non-Operators,  shall have the right to audit Operator's  accounts and
          records relating to the Joint Account for any calendar year within the
          twenty-four (24) month period following the end of such calendar year;
          provided,  however,  the making of an audit  shall not extend the time
          for the taking of written exception to and the adjustments of accounts
          as provided  for in Paragraph 4 of this Section I. Where there are two
          or more  Non-Operators,  the Non-Operators shall make every reasonable
          effort to conduct a joint  audit in a manner  which  will  result in a
          minimum  of  inconvenience  to the  Operator.  Operator  shall bear no
          portion of the Non-Operators' audit cost incurred under this paragraph
          unless  agreed to by the  Operator.  The audits shall not be conducted
          more than once each year without  prior  approval of Operator,  except
          upon the resignation or removal of the Operator,  and shall be made at
          the expense of those Non-Operators approving such audit.

     B.   The Operator shall reply in writing to an audit report within 180 days
          after receipt of such report.

6.   Approval by Non-Operators

Where  an  approval  or other  agreement  of the  Parties  or  Non-Operators  is
expressly required under other sections of this Accounting  Procedure and if the
agreement to which this  Accounting  Procedure is attached  contains no contrary
provisions in regard  thereto,  Operator shall notify all  Non-Operators  of the
Operator's proposal,  and the agreement or approval of a majority in interest of
the Non-Operators shall be controlling on all Non-Operators.

                               II. DIRECT CHARGES

Operator shall charge the Joint Account with the following items:

1.   Rentals and Royalties

Lease rentals and royalties paid by Operator for the Joint Operations.

2.   Labor

     A.   (1) Salaries and wages of Operator's field employees directly employed
               on the Joint Property in the conduct of Joint Operations.

          (2)  Salaries and wages of Operator's  employees  directly employed on
               Shore Base  Facilities or other Offshore  Facilities  serving the
               Joint Property if such costs are not charged under Paragraph 7 of
               this Section II.

          (3)  Salaries of First Level Supervisors in the field.

          (4)  Salaries and wages of Technical  Employees  directly  employed on
               the Joint Property if such charges are excluded from the Overhead
               rates.

          (5)  Salaries and wages of Technical  Employees either  temporarily or
               permanently assigned to and directly employed in the operation of
               the Joint Property if such charges are excluded from the overhead
               rates.

     B.   Operator's cost of holiday, vacation, sickness and disability benefits
          and other  customary  allowances  paid to employees whose salaries and
          wages are  chargeable to the Joint Account under  Paragraph 2A of this
          Section  II. Such costs  under this  Paragraph  2B may be charged on a
          "when and as paid basis" or by  "percentage  assessment" on the amount
          of salaries and wages  chargeable to the Joint Account under Paragraph
          2A of this  Section II. If  percentage  assessment  is used,  the rate
          shall be based on the Operator's cost experience.

     C.   Expenditures or contributions made pursuant to assessments  imposed by
          governmental  authority  which  are  applicable  to  Operator's  costs
          chargeable  to the Joint  Account  under  Paragraphs 2A and 2B of this
          Section II.

     D.   Personal  Expenses of those  employees  whose  salaries  and wages are
          chargeable to the Joint Account under Paragraph 2A of this Section II.

3.   Employee Benefits

Operator's  current  costs  of  established  plans  for  employees'  group  life
insurance, hospitalization,  pension, retirement, stock purchase, thrift, bonus,
and other  benefit plans of a like nature,  applicable to Operator's  labor cost
chargeable to the Joint  Account  under  Paragraphs 2A and 2B of this Section II
shall be  Operator's  actual  cost  not to  exceed  the  percent  most  recently
recommended by the Council of Petroleum Accountants Societies.

4.   Material

Material  purchased or  furnished  by Operator for use on the Joint  Property as
provided  under  Section  IV.  Only  such  Material  shall be  purchased  for or
transferred  to the Joint  Property as may be required for  immediate use and is
reasonably  practical and consistent  with efficient and economical  operations.
The accumulation of surplus stocks shall be avoided.

5.   Transportation

     Transportation of employees and Material necessary for the Joins Operations
     but subject to the following limitations:

     A.   If  Material  is  moved to the  Joint  Property  from  the  Operator's
          warehouse  or other  properties,  no charge shall be made to the Joint
          Account  for a distance  greater  than the  distance  from the nearest
          reliable  supply  store where like  material is normally  available or
          railway receiving point nearest the Joint Property unless agreed to by
          the Parties.

     B.   If surplus Material is moved to Operator's  warehouse or other storage
          point,  no charge  shall be made to the Joint  Account  for a distance
          greater than the distance to the nearest  reliable  supply store where
          like  material  is  normally  available,  or railway  receiving  point
          nearest the Joint Property unless agreed to by the Parties,  No charge
          shall  be made to the  Joint  Account  for  moving  Material  to other
          properties belonging to Operator, unless agreed to by the Parties.

     C.   In the  application  of  subparagraphs  A and B above,  the  option to
          equalize or charge actual  trucking cost is available  when the actual
          charge is $400 or less excluding accessorial charges. The $400 will be
          adjusted to the amount  most  recently  recommended  by the Council of
          Petroleum Accountants Societies.

                                                             COPAS-1986-OFFSHORE
                                                              Recommended by the
                                                            Council of Petroleum
                                                           Accountants Societies

                                       39

<PAGE>

6.   Services

The cost of  contract  services,  equipment  and  utilities  provided by outside
sources,  except services excluded by Paragraph 9 of Section II and Paragraphs i
and ii of Section III. The cost of professional consultant services and contract
services of technical  personnel  directly engaged on the Joint Property if such
charges  are  excluded  from  the  overhead  rates.  The  cost  of  professional
consultant services or contract services of technical personnel directly engaged
in the operation of the Joint  Property shall be charged to the Joint Account if
such charges are excluded from the overhead rates.

7.   Equipment and Facilities Furnished by Operator

     A.   Operator  shall  charge the Joint  Account  for use of  Operator-owned
          equipment  and  facilities,  including  Shore  Base  and/ or  Offshore
          Facilities,   at  rates  commensurate  with  costs  of  ownership  and
          operation. Such rates may include labor,  maintenance,  repairs, other
          operating  expense,  insurance,  taxes,  depreciation  and interest on
          gross investment less  accumulated  depreciation not to exceed percent
          (%) per annum.  In addition,  for platforms only, the rate may include
          an element of the estimated cost of platform dismantlement. Such rates
          shall not exceed average commercial rates currently  prevailing in the
          immediate area of the Joint Property.

     B.   In lieu of charges in  Paragraph  7A above,  Operator may elect to use
          average commercial rates prevailing in the immediate area of the Joint
          Property less twenty percent (20%). For automotive equipment, Operator
          may elect to use rates  published  by the  Petroleum  Motor  Transport
          Association.

8.   Damages and Losses to Joint Property

All costs or expenses  necessary for the repair or replacement of Joint Property
made  necessary  because of damages or losses  incurred by fire,  flood,  storm,
theft,  accident,  or other causes, except those resulting from Operator's gross
negligence or willful misconduct.  Operator shall furnish  Non-Operator  written
notice of  damages  or losses  incurred  as soon as  practicable  after a report
thereof has been received by Operator.

9.   Legal Expense

Expense  of  handling,   investigating   and  settling   litigation  or  claims,
discharging of liens,  payments of judgements and amounts paid for settlement of
claims incurred in or resulting from operations under the Agreement or necessary
to protect or recover the Joint Property,  except that no charge for services of
Operator's  legal  staff or fees or expense of outside  attorneys  shall be made
unless  previously  agreed  to by  the  Parties.  All  other  legal  expense  is
considered  to be  covered by the  overhead  provisions  of  Section  III unless
otherwise  agreed to by the Parties,  except as provided in Section I, Paragraph
3.

10.  Taxes

All taxes of every kind and nature assessed or levied upon or in connection with
the Joint Property,  the operation  thereof,  or the production  therefrom,  and
which taxes have been paid by the Operator  for the benefit of the  Parties.  If
the ad valorem taxes are based in whole or in part upon  separate  valuations of
each party's working  interest,  then  notwithstanding  anything to the contrary
herein,  charges  to the  Joint  Account  shall be made and paid by the  Parties
hereto  in  accordance  with the tax value  generated  by each  party's  working
interest.

11.  Insurance

Net premiums paid for insurance  required to be carried for the Joint Operations
for the protection of the Parties.  In the event Joint  Operations are conducted
at offshore  locations in which  Operator may act as  self-insurer  for Workers'
Compensation and Employers'  Liability,  Operator may include the risk under its
self-insurance  program in providing  coverage  under State and Federal laws and
charge the Joint Account at Operator's cost not to exceed manual rates.

12.  Communications

Costs of acquiring,  leasing, installing,  operating,  repairing and maintaining
communication systems including radio and microwave facilities between the Joint
Property  and  the  Operator's  nearest  Shore  Base  Facility.   In  the  event
communication  facilities systems serving the Joint Property are Operator-owned,
charges to the Joint  Account  shall be made as provided in  Paragraph 7 of this
Section II.

13.  Ecological and Environmental

Costs  incurred on the Joint Property as a result of statutory  regulations  for
archaeological and geophysical surveys relative to identification and protection
of cultural resources and/or other environmental or ecological surveys as may be
required by the Bureau of Land Management or other regulatory  authority.  Also,
costs to provide or have available  pollution  containment and removal equipment
plus costs of actual control and cleanup and resulting  responsibilities  of oil
spills as required by applicable laws and regulations.

14.  Abandonment and Reclamation

Costs incurred for abandonment of the Joint  Property,  including costs required
by governmental or other regulatory authority.

15.  Other Expenditures

Any other  expenditure not covered or dealt with in the foregoing  provisions of
this  Section II, or in Section III and which is of direct  benefit to the Joint
Property and is incurred by the Operator in the necessary and proper  conduct of
the Joint Operations.

                                                             COPAS-1986-OFFSHORE
                                                              Recommended by the
                                                            Council of Petroleum
                                                           Accountants Societies

                                       40

<PAGE>

                                 III. OVERHEAD

As compensation for administrative, supervision, office services and warehousing
costs,  Operator shall charge the Joint Account in accordance  with this Section
III.

Unless otherwise agreed to by the Parties, such charge shall be in lieu of costs
and  expenses of all offices and salaries or wages plus  applicable  burdens and
expenses of all personnel,  except those directly  chargeable  under Section II.
The cost and expense of services from outside sources in connection with matters
of taxation,  traffic,  accounting or matters  before or involving  governmental
agencies  shall be considered as included in the overhead  rates provided for in
this  Section III unless such cost and expense are agreed to by the Parties as a
direct charge to the Joint Account.

i.   Except as  otherwise  provided in  Paragraph  2 of this  Section  III,  the
     salaries,  wages and Personal  Expenses of Technical  Employees  and/or the
     cost of professional consultant services and contract services of technical
     personnel directly employed on the Joint Property:

     ( ) shall be covered by the overhead rates.

     (X) shall not be covered by the overhead rates.

ii.  Except as  otherwise  provided in  Paragraph  2 of this  Section  III,  the
     salaries,  wages and Personal Expenses of Technical  Employees and/or costs
     of  professional  consultant  services and  contract  services of technical
     personnel  either  temporarily  or  permanently  assigned  to and  directly
     employed in the  operation of the Joint  Property:

     (X) shall be covered by the overhead rates.

     ( ) shall not be covered by the overhead rates.

1.   Overhead - Drilling and Producing Operations

     As  compensation  for overhead  incurred in  connection  with  drilling and
     producing operations, Operator shall charge on either:

     (X) Fixed Rate Basis, Paragraph 1A, or

     ( ) Percentage Basis, Paragraph 1B

     A.   Overhead - Fixed Rate Basis

          (1)  Operator  shall charge the Joint Account at the  following  rates
               per well per month:  Drilling Well Rate $ 34.000.00 (Prorated for
               less than a full month) Producing Well Rate $ 3,400.00

          (2)  Application of Overhead - Fixed Rate Basis for Drilling Well Rate
               shall be as follows:

               (a)  Charges  for  drilling  wells  shall  begin on the date when
                    drilling or  completion  equipment  arrives on location  and
                    terminates on the date the drilling or completion  equipment
                    moves off  location  or rig is  released,  whichever  occurs
                    first, except that no charge shall be made during suspension
                    of drilling  operations for fifteen (15) or more consecutive
                    calendar days.

               (b)  Charges  for  wells  undergoing  any  type  of  workover  or
                    recompletion  for a period of five (5) consecutive work days
                    or more  shall  be  made at the  drilling  well  rate.  Such
                    charges  shall be applied for the period from date  workover
                    operations,  with  rig or  other  units  used  in  workover,
                    commence  through date of rig or other unit release,  except
                    that no charge shall be made during suspension of operations
                    for fifteen (15) or more consecutive calendar days.

          (3)  Application  of  Overhead - Fixed Rate Basis for  Producing  Well
               Rate shall be as follows:

               (a)  An active  well either  produced  or  injected  into for any
                    portion  of the  month  shall be  considered  as a  one-well
                    charge for the entire month.

               (b)  Each active  completion in a  multi-completed  well in which
                    production is not  commingled  down hole shall be considered
                    as a one-well charge providing each completion is considered
                    a separate well by the governing regulatory authority.

               (c)  An inactive  gas well shut in because of  overproduction  or
                    failure  of  purchaser  to  take  the  production  shall  be
                    considered  as a one-well  charge  providing the gas well is
                    directly connected to a permanent sales outlet.

               (d)  A  one-well  charge  shall  be made  for the  month in which
                    plugging and  abandonment  operations  are  completed on any
                    well.  This one-well charge shall be made whether or not the
                    well has produced except when drilling well rate applies.

               (e)  All other  inactive  wells  (including  but not  limited  to
                    inactive wells covered by unit allowable,  lease  allowable,
                    transferred  allowable,  etc.)  shall  not  qualify  for  an
                    overhead charge.

          (4)  The well  rates  shall be  adjusted  as of the first day of April
               each year  following the effective date of the agreement to which
               this Accounting  Procedure is attached.  The adjustment  shall be
               computed  by  multiplying  the  rate  currently  in  use  by  the
               percentage increase or decrease in the average weekly earnings of
               production  workers for the oil and gas extraction  industry,  or
               its nearest equivalent successor index for the last calendar year
               compared to the calendar year  preceding as shown by the index of
               average  weekly  earnings  of  Crude  Petroleum  and  Gas  Fields
               Production  Workers as published by the United States  Department
               of Labor, Bureau of Labor Statistics,  or the equivalent Canadian
               index as published  by  Statistics  Canada,  as  applicable.  The
               adjusted rates shall be the rates currently in use, plus or minus
               the computed adjustment.

     B.   Overhead - Percentage Basis

          (1)  Operator shall charge-the Joint Account at the following rates:

               (a)  Development

                    _________________  Percent (__%) of cost of  Development  of
                    the  Joint  Property   exclusive  of  costs  provided  under
                    Paragraph 9 of Section II and all salvage credits.

               (b)  Operating

                    _________________ Percent (__%) of the cost of Operating the
                    Joint Property  exclusive of costs provided under Paragraphs
                    1 and 9 of Section  II, all  salvage  credits,  the value of
                    injected substances purchased for secondary recovery and all
                    taxes and  assessments  which are levied,  assessed and paid
                    upon the mineral interest in and to the Joint Property.

                                                             COPAS-1986-OFFSHORE
                                                              Recommended by the
                                                            Council of Petroleum
                                                           Accountants Societies

                                       41

<PAGE>

          (2)  Application of Overhead - Percentage Basis shall be as follows:

               For the  purpose of  determining  charges on a  percentage  basis
               under Paragraph 1B of this Section III, development shall include
               all costs in connection with drilling,  redrilling,  or deepening
               of any  or  all  wells,  and  shall  also  include  any  remedial
               operations  requiring a period of five (5) consecutive  work days
               or  more  on any or all  wells;  also,  preliminary  expenditures
               necessary in preparation for drilling and  expenditures  incurred
               in abandoning  when the well is not completed as a producer,  and
               original cost of  construction  or  installation of fixed assets,
               the  expansion  of fixed  assets  and any other  project  clearly
               discernible  as a  fixed  asset,  except  Major  Construction  as
               defined in Paragraph 2 of this Section III. All other costs shall
               be considered as Operating except that catastrophe costs shall be
               assessed overhead as provided in Section III, Paragraph 3.

2.   Overhead - Major Construction

To  compensate  Operator for overhead  costs  incurred in the  construction  and
installation  of fixed  assets,  the  expansion of fixed  assets,  and any other
project  clearly  discernible as a fixed asset required for the  development and
operation  of the Joint  Property,  or in the  dismantling  for  abandonment  of
platforms and related production  facilities,  Operator shall either negotiate a
rate prior to the beginning of  construction,  or shall charge the Joint Account
for Overhead based on the following rates for any Major Construction  project in
excess of $ 250.000.00.

     A.   If the Operator  absorbs the  engineering,  design and drafting  costs
          related to the project:

          (1)  5% of total costs if such costs are more than $10.000.00 but less
               than $100,000; plus

          (2)  3% of total costs in excess of $100,000 but less than $1,000,000;
               plus

          (3)  1% of total costs in excess of $1,000,000.

          Expenditures  subject  to the  overheads  above will not be reduced by
          insurance recoveries, and no other overhead provisions of this Section
          III shall apply.

     B.   If the Operator charges engineering, design and drafting costs related
          to the project directly to the Joint Account:

          (1)  3% of total costs if such costs are more than $l0,000,00 but less
               than $100,000; plus

          (2)  2% of total costs in excess of $100,000 but less than $1,000,000;
               plus

          (3)  1% of total costs in excess of $1,000,000.

     Total cost shall mean the gross cost of any one project. For the purpose of
     this  paragraph,  the  component  parts of a single  project  shall  not be
     treated  separately  and the  cost  of  drilling  and  workover  wells  and
     artificial  lift  equipment  shall be excluded.  On each project,  Operator
     shall advise  Non-Operator(s)  in advance  which of the above options shall
     apply.  In the  event  of any  conflict  between  the  provisions  of  this
     paragraph and those  provisions  under Section II, Paragraph 2 or Paragraph
     6, the provisions of this paragraph shall govern.

3.   Overhead - Catastrophe

To compensate  Operator for overhead costs incurred in the event of expenditures
resulting from a single occurrence due to oil spill, blowout,  explosion,  fire,
storm,  hurricane,  or other catastrophes as agreed to by the Parties, which are
necessary to restore the Joint Property to the equivalent condition that existed
prior to the event causing the  expenditures,  Operator shall either negotiate a
rate prior to charging the Joint  Account or shall charge the Joint  Account for
overhead based on the following rates:

     (1)  3% of total costs through $100,000; plus

     (2)  2% of total costs in excess of $100,000 but less than $1,000,000; plus

     (3)  1% of total costs in excess of $1,000,000.

Expenditures  subject to the  overheads  above will not be reduced by  insurance
recoveries, and no other overhead provisions of this Section III shall apply.

4.   Amendment of Rates

The Overhead  rates provided for in this Section III may be amended from time to
time only by mutual  agreement  between the Parties hereto if, in practice,  the
rates are found to be insufficient or excessive.

  IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS

Operator is  responsible  for Joint  Account  Material and shall make proper and
timely  charges and  credits  for all  Material  movements  affecting  the Joint
Property.  Operator  shall  provide all Material for use on the Joint  Property;
however,   at  Operator's   option,   such  Material  may  be  supplied  by  the
Non-Operator.  Operator  shall make timely  disposition  of idle and/or  surplus
Material,   such  disposal  being  made  either  through  sale  to  Operator  or
Non-Operator, division in kind, or sale to outsiders. Operator may purchase, but
shall be under no obligation to purchase,  interest of  Non-Operators in surplus
condition A or B Material.  The  disposal of surplus  Controllable  Material not
purchased by the Operator shall be agreed to by the Parties.

1.   Purchases

Material  purchased  shall  be  charged  at the  price  paid by  Operator  after
deduction of all discounts  received.  In case of Material found to be defective
or returned to vendor for any other reasons, credit shall be passed to the Joint
Account when adjustment has been received by the Operator.

2.   Transfers and Dispositions

Material furnished to the Joint Property and Material transferred from the Joint
Property or  disposed  of by the  Operator,  unless  otherwise  agreed to by the
Parties, shall be priced on the following basis exclusive of cash discounts:

     A.   New Material (Condition A)

          (1)  Tubular Goods Other than Line Pipe

                                                             COPAS-1986-OFFSHORE
                                                              Recommended by the
                                                            Council of Petroleum
                                                           Accountants Societies

               (a)  Tubular goods,  sized 2-3/8 inches OD and larger except line
                    pipe, shall be priced at Eastern mill published carload base
                    prices effective as of date of movement plus  transportation
                    cost using the 80,000 pound carload weight basis to

                                       42

<PAGE>

                    the railway  receiving  point nearest th; Joint Property for
                    which  published rail rates for tubular goods exist.  If the
                    80,000 pound rail rate is not  offered,  the 70,000 pound or
                    90,000  pound  rail rate may be used.  Freight  charges  for
                    tubing will be calculated from Lorain,  Ohio and casing from
                    Youngstown, Ohio.

               (b)  For grades which are special to one mill only,  prices shall
                    be   computed   at  the  mill   base  of  that   mill   plus
                    transportation  cost from that mill to the railway receiving
                    point  nearest  the  Joint  Property  as  provided  above in
                    Paragraph  2A.(l)(a).  For  transportation  cost from points
                    other than Eastern mills, the 30,000 pound Oil Field Haulers
                    Association interstate truck rate shall be used.

               (c)  Special  end  finish  tubular  goods  shall be priced at the
                    lowest published out-of-stock price, f.o.b. Houston,  Texas,
                    plus   transportation   cost,   using  Oil   Field   Haulers
                    Association  interstate  30,000  pound  truck  rate,  to the
                    railway receiving point nearest the Joint Property.

               (d)  Macaroni  tubing  (size  less  than  23/8  inch OD) shall be
                    priced at the lowest  published  out-of-stock  prices f.o.b.
                    the supplier plus transportation  costs, using the Oil Field
                    Haulers  Association  interstate  truck  rate per  weight of
                    tubing  transferred,  to the railway receiving point nearest
                    the Joint Property.

          (2)  Line Pipe

               (a)  Line pipe movements  (except size 24 inch OD and larger with
                    walls 3/4 inch  and  over) 30,000  pounds  or more  shall be
                    priced  under   provisions   of  tubular  goods  pricing  in
                    Paragraph A.(l)(a) as provided above.  Freight charges shall
                    be calculated from Lorain, Ohio.

               (b)  Line pipe movements  (except size 24 inch OD and larger with
                    walls 3/4 inch and over) less than  30,000  pounds  shall be
                    priced  at  Eastern  mill  published   carload  base  prices
                    effective  as of date of  shipment,  plus 20  percent,  plus
                    transportation  costs  based on  freight  rates as set forth
                    under  provisions  of tubular  goods  pricing  in  Paragraph
                    A.(1)(a)  as  provided  above.   Freight  charges  shall  be
                    calculated from Lorain, Ohio.

               (c)  Line pipe 24 inch OD and over and 3/4 inch  wall and  larger
                    shall be priced f.o.b.  the point of  manufacture at current
                    new published prices plus transportation cost to the railway
                    receiving point nearest the Joint Property.

               (d)  Line pipe,  including  fabricated line pipe,  drive pipe and
                    conduit not listed on published  price lists shall be priced
                    at quoted prices plus freight to the railway receiving point
                    nearest  the Joint  Property  or at prices  agreed to by the
                    Parties.

          (3)  Other  Material  shall be priced at the  current  new  price,  in
               effect at date of movement,  as listed by a reliable supply store
               nearest  the  Joint  Property,  or  point  of  manufacture,  plus
               transportation  costs,  if applicable,  to the railway  receiving
               point nearest the Joint Property.

          (4)  Unused new Material,  except tubular goods,  moved from the Joint
               Property  shall be priced at the current new price,  in effect on
               date of movement,  as listed by a reliable  supply store  nearest
               the Joint Property, or point of manufacture,  plus transportation
               costs, if applicable,  to the railway receiving point nearest the
               Joint  Property.  Unused new tubulars  will be priced as provided
               above in Paragraph 2.A. (1) and (2).

     B.   Good Used Material (Condition B)

          Material in sound and  serviceable  condition  and  suitable for reuse
          without reconditioning:

          (1)  Material moved to the Joint Property

               At seventy-five  percent (75%)of current new price, as determined
               by Paragraph A.

          (2)  Material used on and moved from the Joint Property

               (a)  At  seventy-five  percent  (75%) of current  new  price,  as
                    determined  by  Paragraph  A,  if  Material  was  originally
                    charged to the Joint Account as new Material or

               (b)  At  sixty-five  percent  (65%)  of  current  new  price,  as
                    determined  by  Paragraph  A,  if  Material  was  originally
                    charged to the Joint Account as used Material.

          (3)  Material not used on and moved from the Joint Property

               At seventy-five  percent (75%) of current new price as determined
               by  Paragraph  A. The cost of  reconditioning,  if any,  shall be
               absorbed by the transferring property.

     C.   Other Used Material

          (1)  Condition C

               Material which is not in sound and serviceable  condition and not
               suitable for its  original  function  until after  reconditioning
               shall be priced at fifty  percent  (50%) of current  new price as
               determined  by Paragraph A. The cost of  reconditioning  shall be
               charged to the  receiving  property,  provided  Condition C value
               plus cost of reconditioning does not exceed Condition B value.

          (2)  Condition D

               Material,  excluding  junk,  no longer  suitable for its original
               purpose,  but usable for some other  purpose shall be priced on a
               basis   commensurate  with  its  use.  Operator  may  dispose  of
               Condition D Material under  procedures  normally used by Operator
               without prior approval of Non-Operators.

               (a)  Casing,  tubing,  or drill  pipe used as line pipe  shall be
                    priced as Grade A and B  seamless  line  pipe of  comparable
                    size and weight. Used casing,  tubing or drill pipe utilized
                    as line pipe shall be priced at used line pipe prices.

               (b)  Casing, tubing or drill pipe used as higher pressure service
                    lines than standard line pipe,  e.g. power oil lines,  shall
                    be  priced  under  normal  pricing  procedures  for  casing,
                    tubing,  or drill pipe.  Upset tubular goods shall be priced
                    on a non-upset basis.

          (3)  Condition E

               Junk shall be priced at prevailing  prices.  Operator may dispose
               of Condition E Material  under  procedures  normally  utilized by
               Operator without prior approval of Non-Operators.

                                                             COPAS-1986-OFFSHORE
                                                              Recommended by the
                                                            Council of Petroleum
                                                           Accountants Societies

                                       43

<PAGE>

     D.   Obsolete Material

          Material which is serviceable and usable for its original function but
          condition  and/or  value of such  Material is not  equivalent  to that
          which would justify a price as provided above may be specially  priced
          as agreed to by the  Parties.  Such price  should  result in the Joint
          Account being  charged with the value of the service  rendered by such
          Material. E. Pricing Conditions

          (1)  Loading or unloading costs may be charged to the Joint Account at
               the rate of twenty-five cents (25 CENTS per hundred weight on all
               tubular goods  movements,  in lieu of actual loading or unloading
               costs  sustained at the stocking  point.  The above rate shall be
               adjusted as of the first day of April each year following January
               1,  1985 by the same  percentage  increase  or  decrease  used to
               adjust  overhead  rates in Section III,  Paragraph  l.A(4).  Each
               year,  the rate  calculated  shall be rounded to the nearest cent
               and shall be the rate in effect until the first day of April next
               year.  Such rate shall be  published  each year by the Council of
               Petroleum Accountants Societies.

          (2)  Material  involving erection costs shall be charged at applicable
               percentage of the current knocked-down price of new Material.

3.   Premium Prices

     Whenever  Material is not readily  obtainable at published or listed prices
     because of national emergencies, strikes or other unusual causes over which
     the Operator has no control,  the Operator may charge the Joint Account for
     the required  Material at the Operator's actual cost  incurred in providing
     such Material, in making it suitable for use, and in moving it to the Joint
     Property;  provided notice in writing is furnished to  Non-Operators of the
     proposed  charge prior to billing  Non-Operators  for such  Material.  Each
     Non-Operator  shall have the rights by so electing and  notifying  Operator
     within ten days after  receiving  notice from Operator,  to furnish in kind
     all or part of his share of such Material  suitable for use and  acceptable
     to Operator.

4.   Warranty of Material Furnished By Operator

     Operator  does not warrant the  Material  furnished.  In case of  defective
     Material,  credit shall not be passed to the Joint Account until adjustment
     has been received by Operator from the manufacturers or their agents.

                                 V. INVENTORIES

The Operator shall maintain detailed records of Controllable Material.

1.   Periodic Inventories, Notice and Representation

     At  reasonable  intervals,  inventories  shall be taken by  Operator of the
     Joint Account  Controllable  Material.  Written notice of intention to take
     inventory  shall be given by Operator at least  thirty (30) days before any
     inventory is to begin so that  Non-Operators  may be  represented  when any
     inventory  is taken.  Failure  of  Non-Operators  to be  represented  at an
     inventory  shall  bind  Non-Operators  to  accept  the  inventory  taken by
     Operator.

2.   Reconciliation and Adjustment of Inventories

     Adjustments  to the Joint Account  resulting from the  reconciliation  of a
     physical  inventory shall be made within six months following the taking of
     the inventory. Inventory adjustments shall be made by Operator to the Joint
     Account for overages and shortages, but, Operator shall be held accountable
     only for shortages due to lack of reasonable diligence.

3.   Special Inventories

     Special  inventories  may be taken  whenever  there is any sale,  change of
     interest, or change of Operator in the Joint Property. It shall be the duty
     of the party  selling  to notify all other  Parties as quickly as  possible
     after the transfer of interest takes place. In such cases,  both the seller
     and the purchaser shall be governed by such inventory. In cases involving a
     change of Operator, all Parties shall be governed by such inventory.

4.   Expense of Conducting Inventories

     A.   The expense of conducting periodic inventories shall not be charged to
          the Joint Account unless agreed to by the Parties.

     B.   The expense of conducting special  inventories shall be charged to the
          Parties requesting such inventories,  except inventories  required due
          to change of Operator shall be charged to the Joint Account

                                       44

<PAGE>

                                   EXHIBIT "D"

    Attached to and made a part of that certain Offshore Operating Agreement
    covering East Cameron Block 299, dated February 18, 2004, by and between
       Millennium Offshore Group, Inc., as Operator, and Ridgewood Energy
        Corporation and Anadarko Petroleum Corporation, as Non-Operators.

EQUAL EMPLOYMENT OPPORTUNITY

While  performing  under  this  Agreement,  Operator  agrees  to  the  following
additional terms and conditions to the extent they may be applicable to the work
to be performed  under such Farmout  Agreement in accordance with the provisions
of the following described Executive Orders:

A.   E. 0. 11246,  as amended by E. 0. 11375  (Race,  Color,  Religion,  Sex and
     National Origin):

     1.   If the  contract  is in excess of $10,000,  Operator  agrees to comply
          with  the  provisions  of  Section  202  of  such  Order  (the  "Equal
          Opportunity Clause"), which Clause is incorporated herein by reference
          pursuant to the  regulations  promulgated  under such Order [41 C.F.R.
          Sec. 60-1.4(d)].

     2.   If the contract is in excess of $10,000,  the  certifies  that it does
          not  maintain  or provide  nor will it  maintain  or  provide  for its
          employees any segregated facilities at any of its establishments,  and
          that it does not permit nor will it permit  its  employees  to perform
          their services at any location,  under its control,  where  segregated
          facilities  are  maintained.*  OPERATOR  agrees  that a breach of this
          certification  is a  violation  of the  Equal  Opportunity  Clause  of
          Executive Order 11246.  Operator  further agrees that (except where it
          has obtained identical certifications from proposed subcontractors for
          specific time periods) it will obtain  identical  certifications  from
          proposed  subcontractors prior to the award of subcontracts  exceeding
          $10,000  which  are  not  exempt  from  the  provisions  of the  Equal
          Opportunity  Clause;  that it will retain such  certifications  in its
          files; and that it will forward the prescribed notice to such proposed
          subcontractors   (except  where  the  proposed   subcontractors   have
          submitted identical certifications for specific time periods).**

     3.   If the  contract is in excess of $50,000 and Operator has more than 50
          employees, Operator agrees (a) to file annually, on or before March 31
          of each year,  (or within 30 days after the award of such  contract if
          not filed within 12 months preceding the date of the award),  complete
          and accurate reports on Standard Form 100 (EEO-1) with the appropriate
          governmental  agency, in accordance with the regulations issued by the
          Secretary  of Labor (41  C.F.R.  Sec.  60-1.7),  and (b) to  develop a
          written   affirmative  action  compliance  program  for  each  of  its
          establishments  in  accordance  with  the  regulations  issued  by the
          Secretary of Labor (41 C.F.R. Sec. 60-1.40).

*    As used in this certification,  the term "segregated  facilities" means any
     waiting rooms, work areas, rest rooms and wash rooms, restaurants and other
     eating  areas,  time  clocks,  locker  rooms and other  storage or dressing
     areas, parking lots, drinking fountains, recreation or entertainment areas,
     transportation  and housing  facilities  provided for  employees  which are
     segregated by explicit  directive or are in fact segregated on the basis of
     race, color or national origin because of habit, local custom or otherwise.

**   The form of the  prescribed  notice is as  follows:  NOTICE TO  PROSPECTIVE
     SUBCONTRACTORS   OF  REQUIREMENT  FOR   CERTIFICATIONS   OF   NONSEGREGATED
     FACILITIES.  A Certificate of  Nonsegregated  Facilities as required by the
     May  9,  1967,  order  on  Elimination  of  Segregated  Facilities,  by the
     Secretary of Labor (32 Fed. Reg.  7439,  May 19,  1967),  must be submitted
     prior to the award of a subcontract  exceeding  $10,000 which is not exempt
     from the provisions of the Equal Opportunity  Clause. The certification may
     be submitted either for each  subcontract or for all subcontracts  during a
     period (i.e., quarterly,  semiannually, or annually). Note: The penalty for
     making false statements in offers is prescribed in 18 U.S.C. 1001.

B.   E. O. 11701 (Employment of Veterans)

          If the  contract  is in excess of $10,000,  Operator  agrees to comply
     with the affirmative  action clause and regulations  promulgated under such
     Order (41  C.F.R.  Part  60-250)  which  clause is  incorporated  herein by
     reference pursuant to Section 60-250.22 of such regulations.

C.   E. 0. 11625 (Minority Business Enterprises)

     1.   If the  contract is in excess of $10,000,  Operator  agrees to use its
          best efforts to provide minority business enterprises with the maximum
          practicable  opportunity  to  participate  in the  performance of such
          contract  to  the  fullest  extent   consistent   with  the  efficient
          performance thereof [41 C.F.R. Sec. l-1.1310-2(a)].

     2.   If the  contract is in excess of $500,000,  Operator  agrees to comply
          with the Minority Business Enterprises  Subcontracting  Program Clause
          promulgated  under such Order [41 C.F.R.  Sec.  l-1.1310-2(b)],  which
          clause is incorporated herein by reference.

D.   E. 0. 11758 (Employment of Handicapped Persons)

          If the contract is in excess of $2,500, Operator agrees to comply with
     the affirmative  action clause and the regulations  promulgated  under such
     Order (41 C.F.R.  Part  60-741),  which  clause is  incorporated  herein by
     reference pursuant to Section 60-741.22 of such regulations.

<PAGE>

                                   EXHIBIT "E"

    Attached to and made a part of that certain Offshore Operating Agreement
    covering East Cameron Block 299, dated February 18, 2004, by and between
 Millennium Offshore Group, Inc., as Operator, and Ridgewood Energy Corporation
             and Anadarko Petroleum Corporation, as Non-Operators.

                       GAS BALANCING AND STORAGE AGREEMENT

          The  Parties  hereto own and are  entitled to share in the oil and gas
production from the Lease in accordance with their  respective  interests as set
forth in the  Operating  Agreement,  dated  February 6, 2004, by and between the
signatories  hereof  ("Party  or  Parties").  Each  Party  has made or will make
arrangements to sell or utilize its share of the gas production  however,  it is
recognized  that one or more of the  Parties  may be unable from time to time to
take in kind or  otherwise  dispose of its  interest in the gas  production.  In
order to permit  each party to produce  and  dispose of its  interest in the gas
production  with as much  flexibility  as possible,  the Parties hereto agree as
follows:

     1. From and  after  the date of  initial  delivery  of gas from the  Lease,
     during  any period  when a Party is taking  less than its full share of the
     gas  production,  any other  Party may  produce  from the Lease and take or
     deliver to a  purchaser,  each month,  all or a part of that portion of the
     allowable gas production  which is not produced by a Party taking less than
     its full  share.  The  Parties  hereto  shall  share in and own the  liquid
     hydrocarbons  recovered from such gas in accordance  with their  respective
     interests in the Lease as set forth in said Operating Agreement, whether or
     not such Parties are taking their full share of gas.

     2. On a  cumulative  basis,  a Party taking less than its full share of the
     gas produced  shall be credited with gas in storage equal to its full share
     of the  total gas  produced,  less  such  Party's  share of the gas used in
     operations on the Lease or vented or lost, and less that portion of the gas
     such Party took or delivered to its  purchaser.  Operator  will maintain an
     account of the gas balance between the Parties hereto and will furnish each
     Party monthly  statements  showing the total quantity of gas produced,  the
     portion thereof used in operations on the Lease,  vented or lost, the total
     quantity  of gas  taken  by each  Party,  and the  monthly  and  cumulative
     over-and-under delivery of each Party, within sixty (60) days of the end of
     each month of production.

     3. After written notice to the Operator,  a Party may begin taking its full
     share  of the gas  produced  (less  such  Party's  share of the gas used in
     operations on the Lease,  vented or lost).  To allow the recovery of gas in
     storage and to balance the gas account of the Parties,  a Party with gas in
     storage  shall be entitled to take its  current  share of the gas  produced
     (less such Party's share of the gas used in operations on the Lease, vented
     or lost),  plus a share of gas not to exceed its gas in storage  determined
     by multiplying (i) fifty percent (50%) by (ii) the interest of the Party or
     Parties  having taken more than their share of  cumulative  gas  production
     from the Lease by (iii) a fraction,  the numerator of which is the interest
     in the Lease of such Party with gas in storage and the denominator of which
     is the total  percentage  interest  in the Lease of all  Parties  currently
     recovering gas in storage.  Makeup volumes of gas produced shall be applied
     against  the gas  balance  account of the  Parties on a  first-in-first-out
     basis.  It is  specifically  agreed  that no  underproduced  Party  will be
     allowed  to take  make-up  gas during  the  months of  November,  December,
     January or February  ("The Winter  Period").  However,  gas make-up will be
     allowed  during The Winter Period if the  underproduced  Party has taken at
     least  eighty  percent  (80%) of the  make-up  gas to which it is  entitled
     during  the six (6)  consecutive  months  immediately  prior to The  Winter
     Period.

     4. Upon written notice to Operator,  any Party may deliver to its purchaser
     its full share of the allowable gas  production to meet the  deliverability
     tests required by its purchaser;  provided that such tests shall not exceed
     seventy-two (72) hours duration.

     5. Each Party shall pay all  production or severance  taxes,  excise taxes,
     royalties,   overriding  royalties,  production  payments  and  other  such
     payments  for  which it is  obligated  by law or by  lease  or by  contract
     (including  other provisions of said Operating  Agreement),  and nothing in
     these  gas  balancing  provisions  shall be  construed  as  affecting  such
     obligations.  Each Party hereto shall indemnify and hold harmless the other
     Parties hereto against all claims, losses or liabilities arising out of its
     failure to fulfill such obligations.

     6.  Should  production  of gas from the Lease be  permanently  discontinued
     before the gas account is balanced or if  sufficient  reserves do not exist
     to  physically  balance  the gas  account  of the  Parties  or if no gas is
     produced  from the Lease for six (6)  months,  a cash  settlement  (without
     interest) will be made between the underproduced and overproduced  Parties.
     Such  settlement  shall  be  coordinated  by  Operator.  Underproduced  and
     overproduced  Parties  are those  Parties  who have  received  credit for a
     lesser  and a  greater  quantity,  respectively,  than  their  share of the
     cumulative unit gas production  (less such Party's share of the gas used in
     operations  on the  Lease,  vented or lost) at such time as  production  is
     permanently  discontinued  or  at  such  time  as  it  is  determined  that
     sufficient  reserves do not exist to physically  balance the gas account of
     the Parties. In making such settlement,  the underproduced Party or Parties
     will  be  paid  a sum  of  money  by  the  overproduced  Party  or  Parties
     attributable to the overproduction which said overproduced Party or Parties
     received,  at actual price received,  subject to the further  provisions of
     this Paragraph 6, received by the overproduced Party or Parties at the time
     and from time to time when the overproduced  Party or Parties delivered and
     sold that portion of gas production from the Lease that was attributable to
     the interest of the underproduced Party or Parties,  minus payments made by
     the  overproduced  Party or Parties for Lessor's  royalties and  production
     taxes on such  overproduction.  In determining the overproduced volumes for
     which  settlement  is due,  the  following  rule  shall  be  used:  When an
     overproduced  party  takes less gas than its current  share of  production,
     only the

                                        2

<PAGE>

     volume  less than its  current  share  shall be  applied  to  reduce  prior
     overproduction,  in the order of  accrual  of such  overproduction.  In the
     event the  overproduced  Party or Parties  took such gas in kind or sold or
     transferred  such  gas  to an  affiliate,  the  price  basis  shall  be the
     prevailing  wellhead  price  in  the  field  of  the  gas  utilized  by the
     overproduced Party or Parties at the time when gas was so utilized, sold or
     transferred. As used herein, "affiliate" means an entity which controls, is
     controlled  by or is  under  common  control  with  the  Party  selling  or
     transferring  gas to it.  For  gas  sold  subject  to a  contingent  refund
     obligation, the price shall be the rate collected, from time to time, which
     is not  subject  to  possible  refund  as  provided  by the  FERC  (or  its
     successor) or any other  governmental  authority pursuant to final order or
     settlement  applicable  to the gas produced  from the Lease and sold by the
     overproduced  Party,  plus any  additional  collected  amount  which is not
     ultimately  required to be refunded by order of the FERC (or its successor)
     or any other  governmental  authority having  jurisdiction in the premises,
     such additional  collected amount to be accounted for at such time as final
     determination is made with respect thereto.

          Notwithstanding the foregoing, should the underproduced Party elect to
     receive  such  additional  collected  amount  which is subject to  possible
     refund pending the issuance of such final order, such  underproduced  Party
     shall be entitled to the payment of such additional  collected  amount from
     the  overproduced  Party upon the  underproduced  Party  delivering to such
     overproduced  Party a bond or  irrevocable  letter of credit (or such other
     assurances  as may be  required  by such  overproduced  Party) in which the
     underproduced  Party agrees to repay the  overproduced  Party the amount so
     paid that is  required by said final order to be  refunded,  plus  interest
     thereon  as  specified  by order of the  FERC (or its  successor)  or other
     governmental authority having jurisdiction.

     7.  This  Agreement  shall  remain  in full  force  and  effect  for a term
     concurrent with the term of the Operating Agreement to which this Agreement
     is attached and as long  thereafter  as is necessary to carry out the final
     settlement of the gas account of the Parties hereto.

     8.  This  Agreement  shall be deemed to be a  separate  agreement  for each
     separate  category of gas  produced  and sold from the Lease as  determined
     under the  provisions of the Natural Gas Policy Act of 1978 and  applicable
     regulations thereunder.

     9. Nothing herein shall change or affect each Party's obligation to pay its
     proportionate share of all costs and liabilities  incurred in operations on
     the Lease, as its share thereof is set forth in the Operating  Agreement to
     which this Agreement is attached.

                                        3

<PAGE>

                                   EXHIBIT "F"

    Attached to and made a part of that certain Offshore Operating Agreement
    covering East Cameron Block 299, dated February 18, 2004, by and between
 Millennium Offshore Group, Inc., as Operator, and Ridgewood Energy Corporation
              and Anadarko Petroleum Corporation, as Non-Operators.

                        MEMORANDUM OF OPERATING AGREEMENT
                             AND FINANCING STATEMENT
                                   (LOUISIANA)

   To be filed in the conveyance records and in the mortgage records and as a
    non-standard financing statement in accordance with Paragraph 6.0 herein.

1.0 This Memorandum of Operating Agreement and Financing  Statement  (Louisiana)
(this  "Memorandum")  is effective  as of the  effective  date of the  Operating
Agreement  referred to in Paragraph  2.0 below and is executed by the  following
undersigned duly authorized representative of Millennium Offshore Group, Inc., a
Texas corporation,  whose taxpayer identification number is __________ and whose
address  is  5300  Memorial  Drive,  Suite  1070,  Houston,   Texas  77007  (the
"Operator");  and the undersigned  duly authorized  representative  of Ridgewood
Energy Corporation,  a ___________  corporation,  whose taxpayer  identification
number is _________  and whose  address is 947 Linwood  Avenue,  Ridgewood,  New
Jersey 07450, duly authorized  representative of Anadarko Petroleum  Corporation
Corporation,  a Delaware  corporation,  whose taxpayer  identification number is
_______ and whose address is 1201 Lake Robbins Drive, The Woodlands, Texas 77380
(individually "Non-Operator" and collectively "Non-Operators"). The Operator and
the  Non-Operators  may be  referred  to herein  individually  as a "Party"  and
collectively as the "Parties".

2.0 The  Parties  have  entered  into that  certain  Operating  Agreement  dated
February  18,  2004  (the   "Operating   Agreement")   which  provides  for  the
exploration, development and production of crude oil, natural gas and associated
substances from the OCS blocks, or portions thereof, described in Exhibit "A" of
the Operating Agreement and in Attachment "1" to this Memorandum,  or covered by
the  Lease  (hereinafter  called  the  "Contract  Area")  and  which  designates
Millennium Offshore Group, Inc., as the Operator of certain wells located in OCS
blocks, or portions thereof, described in Exhibit "A" of the Operating Agreement
and in  Attachment  "1" hereof,  to conduct such  operations  for itself and the
Non-Operators  as permitted or required by and within the terms of the Operating
Agreement. All OCS federal oil and gas leases (or portions thereof) described in
Exhibit "A" of the Operating  Agreement and in Attachment "1" to this Memorandum
are  hereinafter  called the  "Lease." The  liability  of the Parties  under the
Operating  Agreement  shall be several and not joint or  collective.  Each Party
shall only be responsible  for its  obligations and shall only be liable for its
proportionate share of costs and expenses.

As used in this Memorandum, the following terms have the following meanings:

     a.   "Costs"  shall  mean  the  monetary  amount  of all  expenditures  (or
          indebtedness)  incurred by the Operator and the  Non-Operators for (or
          on  account  of) any  and all  operations  conducted  pursuant  to the
          Operating   Agreement  and   determined   pursuant  to  the  Operating
          Agreement, including the Accounting Procedure.

     b.   "Development Systems" means:

          (i)  systems  to  develop  and  produce  Hydrocarbons,  including  (1)
          offshore surface structures, whether fixed, compliant or floating, (2)
          offshore   subsea   structures  or  templates,   whether   capable  of
          accommodating  one or multiple  wells,  (3) any combination of (1) and
          (2),  (4) any other type of system  designed  to develop  and  produce
          Hydrocarbons,  and (5) all associated  components of any of the above;
          and

          (ii) associated  production  equipment beyond the wellhead connections
          that is  installed  on or outside the  Contract  Area  pursuant to the
          Operating   Agreement  in  order  to  handle  or  process  Hydrocarbon
          production,  including, but not limited to, injection and disposal and
          disposal  wells and the flowlines and gathering  lines that  transport
          Hydrocarbons from the wellhead.

     c.   "Hydrocarbon(s)"  means oil and gas and associated  liquid and gaseous
          by-products  (except  helium) from a wellbore  located on the Contract
          Area.

          Unless otherwise  defined herein,  all other  capitalized  terms shall
          have the meaning ascribed to them in the Operating Agreement.

                                        4

<PAGE>

3.0 Among other  provisions,  the  Operating  Agreement (a) provides for certain
liens,  mortgages,   pledges  and  security  interests  (collectively  "Security
Rights") to secure payment by the parties of their respective share of costs and
performance of other obligations under the Operating Agreement,  (b) contains an
"Accounting  Procedure",  which establishes,  among other things, interest to be
charged on  indebtedness,  certain costs, and other expenses under the Operating
Agreement at the rate set forth therein,  (c) includes non-consent clauses which
establish that parties who elect not to participate in certain  operations shall
(i) be  deemed to have  relinquished  their  interest  in  production  until the
consenting  parties  recover  their  costs of such  operations  plus a specified
amount or (ii)  forfeit  their  interest in certain  Lease or  portions  thereof
involved in such  operations,  (d) grants each party to the Operating  Agreement
the right to take in kind its  proportionate  share of all oil and gas  produced
from the Contract Area,  and (e) includes a volumetric  Gas Balancing  Agreement
which is attached as Exhibit "D" to the Operating Agreement.

4.0 The Operator hereby  certifies that a true and correct copy of the Operating
Agreement is on file and is available  for  inspection  by third  parties at the
offices of the Operator at the address set forth in paragraph 1.0 and Attachment
"1" of this Memorandum.

5.0 In addition to any other  security  rights and remedies  provided for by law
with respect to services rendered or materials and equipment furnished under the
Operating Agreement and/or this Memorandum, for good and valuable consideration,
the  receipt  and  sufficiency  of  which  are  hereby   acknowledged,   and  in
consideration  of the covenants and mutual  undertakings of the Operator and the
Non-Operators herein, the Parties hereby agree as follows:

5.1 Mortgage and Pledge:  Each Non-Operator  mortgages,  pledges,  affects,  and
hypothecates  to  Operator,  and  Operator  mortgages,   pledges,  affects,  and
hypothecates to each  Non-Operator,  all of its respective  rights,  title,  and
interest in and to the following:

     (a)  the Lease and any interest  therein,  and all accounts,  gas imbalance
          accounts, contract rights, inventory, and general intangibles relating
          thereto or arising therefrom;

     (b)  all  property  and  fixtures,  moveable  or  immovable,  corporeal  or
          incorporeal, attached to or located on or off the Contract Area, which
          are acquired by the Parties pursuant to the Operating Agreement and/or
          this Memorandum;

     (c)  all of the oil,  gas and  associated  substances  in, on, or under the
          Lease  and  that  may be  produced  from the  Lease  and the  proceeds
          attributable  to the sale of such oil, gas and associated  substances;
          and

     (d)  all property, moveable or immovable, corporeal or incorporeal, that is
          used,  obtained or  constructed  (or under  construction)  for use, in
          connection  with the  Lease and  operations  thereon  pursuant  to the
          Operating Agreement and/or this Memorandum.

5.2 Security Interests. Each Non-Operator hereby grants to the Operator, and the
Operator hereby grants to each Non-Operator,  a continuing  security interest in
and  to all  of  its  respective  rights,  titles,  interests,  claims,  general
intangibles,  proceeds, and products thereof,  whether now existing or hereafter
acquired,  in and to (a) all  oil and gas  produced  from  the  offshore  blocks
covered by the Lease or the Contract  Area or  attributable  to the Lease or the
Contract Area when produced,  (b) all accounts receivable accruing or arising as
a  result  of the  sale of such  oil and  gas  (including,  without  limitation,
accounts  arising  from  gas  imbalances  or from the sale of oil and gas at the
wellhead), (c) all cash or other proceeds from the sale of such oil and gas once
produced,  and  (d)  all  Development  Systems,  platforms,  wells,  facilities,
fixtures, tools, tubular goods and other corporeal property,  whether movable or
immovable, whether now or hereafter placed on the offshore blocks covered by the
Lease  or the  Contract  Area  or  maintained  or used in  connection  with  the
ownership,  use, or  exploitation  of the Lease or the Contract  Area, and other
surface  and  sub-surface  equipment  of any  kind or  character  located  on or
attributable  to the Lease or the Contract  Area, and the cash or other proceeds
realized  from the  sale,  transfer,  disposition  or  conversion  thereof.  The
interest of the Parties in and to the oil and gas produced from or  attributable
to the Lease or the Contract  Area when  extracted  and the accounts  receivable
accruing or arising as the result of the sale  thereof  shall be financed at the
wellhead of the well or wells located on the Lease or the Contract  Area. To the
extent  susceptible  under applicable law, the security interest granted by each
Party hereunder covers (i) all  substitutions,  replacements,  and accessions to
the property of such Party described  herein and is intended to cover all of the
rights,  titles,  and  interests  of such Party in all movable  property  now or
hereafter  located upon or used in connection  with the Contract  Area,  whether
corporeal or  incorporeal,  (ii) all rights under any gas  balancing  agreement,
farmout rights, option farmout rights, acreage and cash contributions,

                                        5

<PAGE>

and conversion rights of such Party in connection with the Lease or the Contract
Area,  or the  Hydrocarbons  produced from or  attributable  to the Lease or the
Contract Area,  whether now owned and existing or hereafter acquired or arising,
including,  without limitation,  all interests of each Party in any partnership,
tax  partnership,  limited  partnership,  association,  joint venture,  or other
entity or enterprise that holds,  owns, or controls any interest in the Contract
Area, and (iii) all rights, claims, general intangibles,  and proceeds,  whether
now  existing  or  hereafter  acquired,  of each Party in and to the  contracts,
agreements, permits, licenses, rights-of-way,  servitudes and similar rights and
privileges  that relate to or are  appurtenant  to the Lease and/or the Contract
Area, including the following:

     (a)  all of its  rights,  titles,  and  interests,  whether  now  owned and
          existing  or  hereafter  acquired  or  arising,  in,  to, and under or
          derived  from any  present  or  future  operating,  farmout,  bidding,
          pooling, unitization, and communitization agreements, assignments, and
          subleases,  whether or not described in Attachment "1," to the extent,
          and  only  to the  extent,  that  such  agreements,  assignments,  and
          subleases cover or include any of its rights,  titles,  and interests,
          whether now owned and  existing or hereafter  acquired or arising,  in
          and to all or any portion of the Lease or the Contract  Area,  and all
          units created by any such pooling,  unitization,  and  communitization
          agreements, and all units formed under orders, regulations,  rules, or
          other official acts of any governmental authority having jurisdiction,
          to the extent and only to the extent  that such units cover or include
          all or any portion of the Lease and/or the Contract  Area;

     (b)  all of its  rights,  titles,  and  interests,  whether  now  owned and
          existing  or  hereafter  acquired  or  arising,  in,  to, and under or
          derived  from  all  presently  existing  and  future  advance  payment
          agreements,  and oil,  casinghead  gas, and gas sales,  exchange,  and
          processing  contracts and agreements,  including,  without limitation,
          those  contracts and agreements  that are described on Attachment "1,"
          to the extent, and only to the extent,  those contracts and agreements
          cover or include all or any portion of the Lease  and/or the  Contract
          Area; and

     (c)  all of its  rights,  titles,  and  interests,  whether  now  owned and
          existing  or  hereafter  acquired  or  arising,  in,  to, and under or
          derived from all existing and future permits, licenses, rights-of-way,
          servitudes  and similar  rights and  privileges  that relate to or are
          appurtenant to any of the Lease and/or the Contract Area.

5.3 The  Security  Rights  granted  herein are given to secure the  complete and
timely  performance of and payment by each Party of all of its  obligations  and
indebtedness  of  every  kind and  nature,  whether  now  owed by such  Party or
hereafter  arising pursuant to the Operating  Agreement and this Memorandum.  To
the extent  susceptible  under  applicable  law,  the  mortgage and the security
interest  granted  herein shall  secure the payment of Costs and other  expenses
properly charged to such Party together with (a) interest on such  indebtedness,
Costs,  and other expenses at the rate set forth in the Accounting  Procedure or
the  maximum  rate  allowed by law,  whichever  is the  lesser,  (b)  reasonable
attorneys'  fees,  (c) court costs,  and (d) other directly  related  collection
costs.

5.4  The  maximum  amount  for  which  the  mortgage   herein  granted  by  each
Non-Operator  shall be deemed to secure the obligations and indebtedness of such
Non-Operator  to the Operator as stipulated  herein is hereby fixed in an amount
equal to $25,000,000.00 (the "Limit of the Mortgage of each Non-Operator"),  and
the maximum  amount for which the mortgage  herein granted by the Operator shall
be deemed to secure the  obligations  and  indebtedness  of the  Operator to all
Non-Operators  as  stipulated  herein  is  hereby  fixed in an  amount  equal to
$25,000,000.00  in the aggregate (the "Limit of the Mortgage of the Operator")..
Except as provided in the  preceding  sentence (and then only to the extent such
limitations  are  required  by  law),  the  entire  amount  of  obligations  and
indebtedness of each Party is secured hereby without limitation. Notwithstanding
the  foregoing  Limit of the  Mortgage  of each  Non-Operator  and  Limit of the
Mortgage of the  Operator,  the  liability  of each Party and the  mortgage  and
security  interest  granted  hereby  shall be limited to (and no Party  shall be
entitled to enforce the same against another Party for an amount  exceeding) the
actual  obligations and  indebtedness  (including all interest  charges,  Costs,
attorneys'  fees,  and other charges  provided for in this  Memorandum or in the
Operating  Agreement)  outstanding  and unpaid and that are  attributable  to or
charged  against the interest of such Party pursuant to the Operating  Agreement
and/or this Memorandum.

5.5 If Operator  seeks to enforce the mortgage  granted it  hereunder  against a
Non-Operator,  Operator  shall  have the  right  to  appoint  a  keeper  of such
Non-Operator's  property,  or  any  part  thereof,  pursuant  to the  terms  and
provisions  of La. R.S.  9:5131 et seq.  and 9:5136 et seq. If any  Non-Operator
seeks to enforce  the  mortgage  granted it  hereunder  against  Operator,  such
Non-Operator shall have the right to appoint a keeper of Operator's  property or
any part thereof,  pursuant to the terms and  provisions  of La. R.S.  9:5131 et
seq. and 9:5136 et seq.

5.6 Each Party  represents  and  warrants to the other  Parties  hereto that the
mortgage,  pledge  and  security  interests  granted  by such Party to the other
Parties  in this  Agreement  shall be a first and  prior  mortgage,  pledge  and
security interest, and each Party hereby agrees to maintain the priority of said
mortgage, pledge and security interest against all persons acquiring an interest
in the Lease or the Contract Area by,  through or under such Party.  All Parties
acquiring an interest in the Lease or the Contract Area,  whether by assignment,
merger, mortgage,  operation of law, or otherwise, shall be deemed to have taken
subject to the mortgages, pledge rights

                                        6

<PAGE>

and security  interests  hereunder as to all  obligations  attributable  to such
interest  hereunder  whether or not such obligations  arise before or after such
interest is acquired.

5.7 If performance of any obligation under the Operating Agreement or payment of
any indebtedness created thereunder does not occur or is not made when due under
the  Operating  Agreement  or upon  default of any  covenant or condition of the
Operating Agreement, in addition to any other remedy afforded by law, each Party
to the  Operating  Agreement  and any  successor  to such  party by  assignment,
operation of law, or otherwise, shall have, and is hereby given and vested with,
the power and authority to foreclose the mortgage, pledge, and security interest
established  in its favor  herein and in the  Operating  Agreement in the manner
provided by law and to exercise all rights of a secured  party under the Uniform
Commercial  Code.  If any Party  does not pay such Costs and other  expenses  or
perform its obligations under the Operating Agreement when due, the Operator (or
the  Non-Operators  if the  defaulting  Party is the  Operator)  shall  have the
additional right to notify the purchaser or purchasers of the defaulting Party's
Hydrocarbon(s)  production  and collect such Costs and other expenses out of the
proceeds  from  the  sale of the  defaulting  Party's  share  of  Hydrocarbon(s)
production.  Any purchaser of such  production  shall be entitled to rely on the
Operator's  (or the  Non-Operators  if the  defaulting  Party  is the  Operator)
statement  concerning  the  amount  of  Costs  and  other  expenses  owed by the
defaulting  Party and payment made to the Operator (or the  Non-Operators if the
defaulting  Party  is the  Operator)  by any  purchaser  shall  be  binding  and
conclusive as between such purchaser and such defaulting Party.

5.8 If any Party does not  perform  all of its  obligations  hereunder,  and the
failure to perform  subjects such Party to foreclosure or execution  proceedings
pursuant to the provisions  herein,  to the extent allowed by governing law, the
defaulting  Party waives any available  right of  redemption  from and after the
date of judgment, any required valuation or appraisement of the property covered
by the mortgage,  pledge and security  interest created hereunder prior to sale,
any available right to stay execution or to require a marshalling of assets, and
any required bond in the event a receiver is appointed.

5.9 Each Party  agrees that the other  Parties  shall be entitled to utilize the
provisions  of oil and gas lien law or  privilege or other lien law or privilege
of any state adjacent to the Contract Area, or that is otherwise applicable,  to
enforce the rights and remedies of each Party  hereunder.  Without  limiting the
generality  of the  foregoing,  to the extent  allowed by  applicable  law,  the
Operator may invoke and use the mechanics' and materialmens'  lien law to secure
the payment to the Operator of any sum due hereunder  for services  performed or
materials supplied by the Operator.

5.10 To the extent  permitted by applicable law, each Party hereby grants to the
other Parties a power of sale as to any property that is subject to the Security
Rights granted  hereunder,  such power to be exercised in the manner provided by
applicable  law or  otherwise  in a  commercially  reasonable  manner  and  upon
reasonable notice.

6.0 Recording/Filing.  To provide notice of, and to further perfect the Parties'
Security  Rights  created  hereunder,   this  Memorandum  (including  a  carbon,
photographic,  or other  reproduction  thereof and hereof)  shall  constitute  a
non-standard  form of  financing  statement  under the terms of Chapter 9 of the
Louisiana  Commercial Laws, La. R.S.  10:9-101 et seq. (the "Uniform  Commercial
Code," as adopted in the State of Louisiana) and, as such,  may be filed by any
Party for  record in the office of the Clerk of Court of any parish in the State
of  Louisiana,  with the  filing  Party  being the  secured  Party and the other
Parties  being the debtors with  respect to such filing.  Each Party filing this
Memorandum may attach thereto,  or file  separately,  any standard UCC financing
statement necessary to effectuate perfection of the security interests described
herein. Upon request,  each debtor Party hereunder agrees to execute and deliver
to each secured Party a UCC-1 or other UCC form  reflecting the Security  Rights
granted herein.

7.0 Upon  expiration of the  Operating  Agreement  and the  satisfaction  of all
obligations and  indebtedness  arising  thereunder,  the Party(ies)  filing this
Memorandum  shall file of record an appropriate  release and  termination of all
security  and other  rights  created  under  the  Operating  Agreement  and this
Memorandum executed by all parties to the Operating  Agreement.  Upon the filing
of such release and termination  instrument,  all benefits and obligations under
this Memorandum  shall terminate as to all parties who have executed or ratified
this  Memorandum.  In addition,  at any time prior to the filing of such release
and termination  instrument,  each of the Operator and the  Non-Operators  shall
have the right to (i) file a  continuation  statement  pursuant  to the  Uniform
Commercial  Code with respect to any  financing  statement  filed in their favor
under  the  terms  of  this  Memorandum  and  (ii)  reinscribe  this  act in the
appropriate mortgage records.

8.0 It is understood and agreed by the Parties hereto that if any part, term, or
provision of this  Memorandum is held by the courts to be illegal or in conflict
with any law of the state where made, the validity of the remaining  portions or
provisions shall not be affected,  and the rights and obligations of the Parties
shall be  construed  and  enforced  as if the  Memorandum  did not  contain  the
particular part, term, or provision held to be invalid.

9.0 This Memorandum  shall be binding upon and shall inure to the benefit of the
Parties  hereto  and their  respective  legal  representatives,  successors  and
permitted assigns. The failure of one or more persons owning an

                                        7

<PAGE>

interest in the Contract Area to execute this Memorandum shall not in any manner
affect the  validity of the  Memorandum  as to those  persons  who execute  this
Memorandum.

10.0 A party having an interest in the Contract Area may ratify this  Memorandum
by  execution  and  delivery of an  instrument  of  ratification,  adopting  and
entering into this Memorandum,  and such ratification shall have the same effect
as if the ratifying party had executed this Memorandum or a counterpart thereof.
By execution or ratification of this  Memorandum,  such Party hereby consents to
its  ratification  and  adoption  by any party who  acquires  or may acquire any
interest in the Contract Area.

11.0 This Memorandum may be executed or ratified in one or more counterparts and
all of the  executed or ratified  counterparts  shall  together  constitute  one
instrument.  The respective addresses of the Operator, as both secured Party and
debtor,  and the  Non-Operators,  as both debtors and secured Parties,  at which
information  with respect to the  security  interests  created in the  Operating
Agreement and this  Memorandum  may be obtained,  are set forth in Paragraph 1.0
and Attachment "1" of this Memorandum.

12.0 The Operator and the Non-Operators hereby agree to execute, acknowledge and
deliver or cause to be executed,  acknowledged and delivered,  any instrument or
take  any  action  necessary  or  appropriate  to  effectuate  the  terms of the
Operating Agreement, this Memorandum, and any Exhibit,  instrument,  certificate
or other document pursuant thereto.

13.0 Whenever the context  requires,  reference herein made to the single number
shall be  understood  to include the plural,  and the plural  shall  likewise be
understood to include the singular,  and specific  enumeration shall not exclude
the general, but shall be construed as cumulative.

EXECUTED on the dates set forth below each  signature  but  effective  as of the
18th day of February, 2004.

                                        OPERATOR:

                                        Millennium Offshore Group, Inc.

WITNESSES:

                                        By:
-------------------------------------       ------------------------------------
(Printed Name of Witness)               Printed Name:
                                                      --------------------------
                                        Title:
                                               ---------------------------------
                                        Date:
-------------------------------------         ----------
(Printed Name of Witness)

                           ACKNOWLEDGMENT - OPERATOR:

STATE OF TEXAS

COUNTY OF HARRIS

On  this  _________  day  of,  ____________,  __________,  before  me,  appeared
__________________  to me personally known, who, being by me duly sworn, did say
that he is the  _________________  of Millennium  Offshore Group,  Inc., a Texas
corporation,  and that the  foregoing  instrument  was  signed  on behalf of the
corporation  by authority of its Board of  Directors  and that  ________________
acknowledged the instrument to be the free act and deed of the corporation.

                                ------------------------------------------------
                                NOTARY PUBLIC in and for the State of Texas
                                My Commission expires:

                                        NON-OPERATOR:
                                        Ridgewood Energy Corporation

WITNESSES:

                                        By:
-------------------------------------       ------------------------------------
(Printed Name of Witness)               Printed Name:
                                                      --------------------------
                                        Title:
                                               ---------------------------------
                                        Date:
-------------------------------------         ----------
(Printed Name of Witness)

                         ACKNOWLEDGMENT - NON-OPERATOR:

STATE OF NEW JERSEY

                                        8

<PAGE>

COUNTY OF BERGEN

On   this   _________   day  of   _______,   ________,   before   me,   appeared
______________________  to me personally known, who, being by me duly sworn, did
say that he is the  ________________________  of Ridgewood Energy Corporation, a
___ corporation,  and that the foregoing  instrument was signed on behalf of the
corporation  by authority of its Board of Directors  and that  _________________
acknowledged the instrument to be the free act and deed of the corporation.

                                ------------------------------------------------
                                NOTARY PUBLIC in and for the State of New Jersey
                                My Commission expires:

                                        NON-OPERATOR:
                                        Anadarko Petroleum Corporation

WITNESSES:

                                        By:
-------------------------------------       ------------------------------------
(Printed Name of Witness)               Printed Name:
                                                      --------------------------
                                        Title:
                                               ---------------------------------
                                        Date:
-------------------------------------         ----------
(Printed Name of Witness)

                         ACKNOWLEDGMENT - NON-OPERATOR:

STATE OF TEXAS

COUNTY OF MONTGOMERY

On this _________ day of _____, _______,  before me, appeared  _________________
to me  personally  known,  who,  being by me duly sworn,  did say that he is the
_________________ of Anadarko Petroleum Corporation, a Delaware corporation, and
that the  foregoing  instrument  was  signed  on behalf  of the  corporation  by
authority of its Board of Directors  and that  ______________  acknowledged  the
instrument to be the free act and deed of the corporation.

                                ------------------------------------------------
                                NOTARY PUBLIC in and for the State of Texas
                                My Commission expires:

                          ATTACHMENT "1" TO EXHIBIT "F"

    Attached to and made a part of the Memorandum of Operating Agreement and
   Financing Statement (Louisiana), dated effective February 18, 2004, by and
   between Millennium Offshore Group, Inc., as Operator, and Ridgewood Energy
Corporation and Anadarko Petroleum Corporation, as Non-Operators, covering East
                               Cameron Block 299.

I.   DESCRIPTION OF LANDS AND LEASES WITHIN THE CONTRACT AREA:

     That  certain  Oil and Gas Lease  from the  United  States of  America,  as
     Lessor, to CNG Producing Company, et al, as Lessee, effective as of July 1,
     1983,  identified in the office of The MMS,  Gulf of Mexico OCS Region,  as
     Oil and Gas Lease of  Submerged  Lands  under the Outer  Continental  Shelf
     Lands Act bearing  Serial  Number OCS-G 05391,  describing  Block 299, East
     Cameron  Area,  South  Addition,  as shown  on OCS  official  Leasing  Map,
     Louisiana Map No. 2A, covering 5,000.0 acres, more or less, SAVE AND EXCEPT
     THEREFROM (a) all operating rights between the stratigraphic  equivalent of
     the top of the Lentic 1 Sand as  identified  at 10,865  feet True  Vertical
     Depth on the Induction-SFL Electric Log for the Transco Exploration Company
     OCS-G 05346 Well No. B-5, (formerly the OCS-G 05346 Well No. 5), having API
     # 17 702 4086900, and the stratigraphic  equivalent of the base of Lentic 4
     Sand as identified at 16,085 feet Measured Depth in Induction-SFL  Electric
     Log for the CNG Producing Company OCS-G 05391 Well No. C-5, (formerly known
     as the OCS-G  05391  Well No.  5),  having  API # 17 702  4090600;  (b) all
     currently  existing  wellbores,  structures and  facilities  located on the
     Block; and (c) all rights, wellbores and production within (i) the existing
     unit areas defined under the CoDevelopment Agreement dated August 26, 1985,
     covering  portions of West Cameron  557,  East Cameron 299 and East Cameron
     316,  and  (ii) the  Voluntary  Pooling  and  Unitization  Agreement  dated
     September 16, 1985,  covering portions of West Cameron 556 and East Cameron
     299, as same have been amended.

     The mortgage, pledge and security rights created in the Operating Agreement
     and this Memorandum do not apply to the Parties' interest and rights in the
     existing  platform  and  production  facilities  on  the  Lease  as of  the
     effective date of the Operating Agreement. Subsequent to the effective date
     of the Operating Agreement,

                                        9

<PAGE>

     such  mortgage,  pledge and  security  rights  shall apply to the  Parties'
     interests and rights in such existing  platform and  production  facilities
     only to the extent  such  interest  and rights  arise out of the  Operating
     Agreement.

II.  OPERATOR:

     Millennium Offshore Group, Inc.

III. PARTIES, REPRESENTATIVES, ADDRESSES, AND INTERESTS CONTRIBUTED:

     Millennium Offshore Group, Inc.
     5300 Memorial, Ste. 1070
     Houston, TX 77007
     Attn: Mr. Kent Singleton
     Telephone: (713) 652-0137
     Fax: (713) 652-0482
     46.66667% WI, 37.58222% NRI

     Ridgewood Energy Corporation
     947 Linwood Avenue
     Ridgewood, New Jersey 07450
     Attn: Mr. Robert Swanson
     Telephone: (201) 447-9000
     Fax: (201) 447-0474
     28.33333% WI, 22.81777% NRI

     Anadarko Petroleum Corporation
     1201 Lake Robbins Drive
     The Woodlands, Texas 77380
     Attn: Mr. Richard E. Stites
     Telephone: (832) 636-3839
     Fax: (832) 636-8297
     25.00000% WI, 20.13334% NRI

                                       10Exhibit 10.6

                        ASSIGNMENT OF CONTRACTUAL RIGHTS

       Portions of Fault Block A-3 & Fault Block B in Voluntary Unit dated
                               September 16, 1985
            OCS-G 05346, Block 556 West Cameron Area, South Addition
            OCS-G 05391, Block 299, East Cameron Area, South Addition

OFFSHORE LOUISIANA         }
                           }
OUTER CONTINENTAL SHELF    } KNOW BY ALL THESE PRESENTS:
                           }
UNITED STATES OF AMERICA   }

          THAT,  Millennium  Offshore  Group,  Inc.,  5300 Memorial,  Ste. 1070,
Houston, Texas 77007, hereinafter called "Assignor", for and in consideration of
the sum of Ten Dollars ($10.00) and other good and valuable  consideration to it
paid by Ridgewood Energy Corporation,  947 Linwood Avenue, Ridgewood, New Jersey
07450, hereinafter called "Assignee",  the receipt and full sufficiency of which
is hereby  acknowledged,  does hereby  grant,  convey,  transfer and assign unto
Assignee, its heirs,  successors and assigns, an undivided 40.00000% Contractual
Rights  Interest with a corresponding  33.01332% Net Revenue  Interest in and to
the oil and gas mineral  leases  identified  below  (hereafter  called  "Subject
Lease")  INSOFAR AND ONLY INSOFAR as they cover the lands within Fault Block A-3
and Fault Block B-4 as depicted on the plat  attached  hereto as Exhibit "A", to
wit:

     1.   Oil and Gas Lease from the United  States of  America,  as Lessor,  to
          Amerada hess Corporation,  et al, as Lessees,  effective as of July 1,
          1983,  identified  in the office of The Minerals  Management  Service,
          Gulf of Mexico OCS  Region,  as Oil and Gas Lease of  Submerged  Lands
          under the Outer  Continental  Shelf  Lands Act bearing  serial  number
          OCS-G 05346,  describing Block 556, West Cameron Area, South Addition,
          as shown on OCS Official Leasing Map, Louisiana Map No. LA1B; and

     2.   Oil and Gas Lease from the United States of America, as Lessor, to CNG
          Producing Company and Mark Producing,  Inc., as Lessees,  effective as
          of July 1, 1983,  identified in the office of The Minerals  Management
          Service,  Gulf of Mexico OCS Region, as Oil and Gas Lease of Submerged
          Lands  under  the Outer  Continental  Shelf  Lands  Act  OCS-G  05391,
          describing  Block 299,  East  Cameron  Area,  as shown on OCS Official
          Leasing Map, Louisiana Map No. 2A

          In the event  Anadarko  Petroleum  Corporation  or its assign does not
exercise their  preferential  right to purchase the interest  acquired by Seller
from Gulf of Mexico Oil and Gas  Properties LLC ("GOM  Interest"),  then the GOM
Interest of 11.25%  Working  Interest  with a  corresponding  8.375% Net Revenue
Interest  will pass to Assignor  and,  Assignee and Assignor  agree that if same
occurs,  then the interest  transferred to Assignee in Fault Block A-3 and Fault
Block B-4 shall be 40.0000% Working Interest with a corresponding  32.34236% Net
Revenue Interest.

<PAGE>

          In the event the East Cameron Block 299 OCS-G 05391 A003 Well is to be
utilized  for a sidetrack  operation  to either  Fault Block A-3 and Fault Block
B-4,  Assignor  agrees to transfer to Assignee an  undivided  40.00000%  Working
Interest in such well so that Assignee  shall have the right to utilize same for
such sidetracking operation in which it participates. Thereafter, Assignee shall
assume 40.00000% of the obligations  associated with such well,  including,  but
not limited to, the ultimate  plugging and  abandonment of same, and be entitled
to the associated net revenue interest as provided for above with such well.

          This  assignment  is made  subject to all of the terms of express  and
implied covenants and conditions of the Subject Lease.

          This  assignment  is also made subject to the terms and  provisions of
the following listed agreements, of which all terms, conditions and reservations
of said agreements are incorporated herein by reference:

               (a)  the Subject Lease;

               (b)  the Operating  Agreement  dated July 1, 1983,  covering West
                    Cameron  Block  556,  between  TXP  Operating  Company,   as
                    Operator,   and  Amerada   Hess   Corporation,   et  al,  as
                    Non-Operators;

               (c)  the Purchase and Sale Agreement dated effective  November 1,
                    2004, by and between  Millennium  Offshore  Group,  Inc., as
                    Seller,  and  Ridgewood  Energy   Corporation.,   as  Buyer,
                    ("Purchase and Sale Agreement");

               (d)  the Letter of Intent between Millennium  Offshore,  Inc. and
                    Ridgewood Energy Corporation dated October 15, 2004;

               (e)  the  "Voluntary  Pooling  and  Unitization  Agreement  dated
                    September  16,  1985,  between  CNG  Producing  Company  and
                    Transco  Exploration  Company,  et al, as  amended by Letter
                    Agreement  dated  September 16, 1987,  between CNG Producing
                    Company and Amerada Hess Corporation, et al;

               (f)  the CoDevelopment  Agreement dated August 26, 1985,  between
                    Belnorth Petroleum Corporation and CNG Producing Company, et
                    al;

               (g)  the Agreement for Purchase and Sale dated effective  October
                    1, 2004,  between Gulf of Mexico Oil and Gas Properties LLC,
                    as Seller, and Millennium Offshore Group, Inc., as Buyer;

               (h)  the Simultaneous  Like-Kind  Exchange Agreement dated August
                    25,  2004,  between  Anadarko   Petroleum   Corporation  and
                    Millennium Offshore Group, Inc.

          Assignor specifically  excludes herefrom all rights, title,  interests
and liabilities associated with any presently existing platform(s), pipeline(s),
wellbore(s),  (except, if assigned above, the East Cameron Block 299 OCS-G 05391
A003 Well) and other personal  property  associated  with the Subject Lease,  it
being understood and agreed that

<PAGE>

Assignee shall only be responsible for plugging and abandonment of the wellbores
in which  Assignee owns an interest here through this  Assignment of Contractual
Rights  and shall  bear no  plugging,  abandonment  or  decommissioning  expense
related to any well,  facilities or pipelines  which are not drilled,  installed
and/or owned by Assignee.

          THIS  ASSIGNMENT   SHALL  BE  GOVERNED,   CONSTRUED  AND  ENFORCED  IN
ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.

          THIS  ASSIGNMENT OF OPERATING  RIGHTS IS EXECUTED BY ASSIGNOR  WITHOUT
WARRANTY OF TITLE,  EITHER  EXPRESSED OR IMPLIED,  EXCEPT AS TO ACTS BY, THROUGH
AND UNDER ASSIGNOR.

          IN WITNESS  WHEREOF,  this  Assignment  is executed  by  ASSIGNOR  and
ASSIGNEE on the dates set forth in their respective acknowledgements hereto, but
shall be  effective  for all  purposes  as of 12:01  a.m.,  on  November 1, 2004
("Effective Time").

WITNESSES:                              ASSIGNOR:
                                        Millennium Offshore Group, Inc.

[Illegible]
------------------------------------    By: /s/ D. Kent Singleton
[Illegible]                                 ------------------------------------
                                            D. Kent Singleton, Vice President

WITNESSES:                              ASSIGNEE:
                                        Ridgewood Energy Corporation (1308)

[Illegible]
------------------------------------    By: /s/ Robert E. Swanson
[Illegible]                                 ------------------------------------
                                            Robert E. Swanson
                                            President and Chairman of the Board

<PAGE>

                                 ACKNOWLEDGMENT

STATE OF NEW JERSEY   Section
                      Section
COUNTY OF BERGEN      Section

               BEFORE ME, the  undersigned  authority,  on this _________ day of
December,  2004,  personally  appeared Robert E. Swanson,  known to me to be the
person whose name is  subscribed  to the  foregoing  instrument as President and
Chairman of the Board of RIDGEWOOD ENERGY CORPORATION,  a Delaware  corporation,
and acknowledged to me that he executed the same for purposes and  consideration
therein expressed, and in the capacity therein stated and is the act and deed of
said corporation.

                                /s/ Jeanne Thompson
                                ------------------------------------------------
                                Notary Public in and for the State of New Jersey

                                  My Commission Expires:______________________

                                                             [SEAL]

                                                        JEANNE THOMPSON
                                                 4 Notary Public of New Jersey
                                               My Commission Expires May 3, 2007

STATE OF TEXAS        Section
                      Section
COUNTY OF HARRIS      Section

               BEFORE  ME,  the  undersigned  authority,  on  this  10th  day of
December,  2004,  personally  appeared D. Kent Singleton,  known to me to be the
person whose name is subscribed to the foregoing instrument as Vice President of
Millennium  Offshore Group,  Inc., a Texas  corporation,  and acknowledged to me
that he executed the same for purposes and consideration therein expressed,  and
in the capacity therein stated and is the act and deed of said corporation.

                                /s/ Jerry D. Niekamp
                                ------------------------------------------------
                                Notary Public in and for the State of Texas

                                  My Commission Expires:______________________

            [SEAL]

       JERRY D. NIEKAMP
NOTARY PUBLIC, STATE OF TEXAS
    MY COMMISSION EXPIRES
        FEB. 20, 2005

<PAGE>

                                  Exhibit "A"

  Attached to and made a part of that certain Assignment of Contractual Rights
       between Millennium Offshore Group, Inc., as Assignor, and Ridgewood
                        Energy Corporation, as Assignee.

                                   [GRAPHIC]

<PAGE>

                           PURCHASE AND SALE AGREEMENT

                                 BY AND BETWEEN

                         MILLENNIUM OFFSHORE GROUP, INC.
                                    AS SELLER

                                       AND
                          RIGDEWOOD ENERGY CORPORATION
                                    AS BUYER

                                WEST CAMERON 556
                                   OCS-G 05346
                  Deep Rights in the Southeast Quarter (SE/4)
                                        &
                                EAST CAMERON 299
                                   OCS-G 05391
                                WEST CAMERON 556
                                   OCS-G 05346
            Fault Block A-3 and Fault Block B-4 Voluntary Unit Areas
                                 GULF OF MEXICO

<PAGE>

1.    SALE AND PURCHASE OF THE ASSETS..........................................3
      1.1    Acquired Assets...................................................3
      1.2    Assumed Liabilities...............................................4

2.    CONSIDERATION............................................................5
      2.1    Consideration.....................................................5
      2.2    Payment...........................................................5
      2.3    Allocation........................................................5
      2.4    Adjustments to Consideration......................................5

3.    EFFECTIVE DATE...........................................................6

4.    CLOSING..................................................................6
      4.1    Closing...........................................................6
      4.2    Delivery by Seller................................................6
      4.3    Further Cooperation...............................................6

5.    REVIEW OF ASSETS.........................................................6

6.    TITLE....................................................................6
      6.1    Examination.......................................................6
      6.2    Good and Marketable Title.........................................6
      6.3    Special Warranty..................................................9
      6.4    Permitted Encumbrances............................................9

7.    REPRESENTATIONS AND WARRANTIES OF SELLER................................10
      7.1    Seller's Representations and Warranties..........................10
      7.2    Scope of Representations of Seller...............................11

8.    REPRESENTATIONS AND WARRANTIES OF BUYER.................................11
      8.1    Buyer's Representations and Warranties...........................11

9.    RECORDS AND CONTRACTS...................................................12

10.   CERTAIN AGREEMENTS OF BUYER.............................................12
      10.1   Plugging Obligation..............................................12
      10.2   Plugging Bond....................................................13

11.   ADDITIONAL COVENANTS....................................................13
      11.1   Preferential Rights to Purchase..................................13
      11.2   Consents.........................................................13
      11.3   Buyer's Right to East Cameron Block 299 OCS-G 05391 Well A003....13
      11.4   Well Proposal by Seller..........................................14
      11.5   Seller's Agreement not to drill Offset Wells.....................14

                                        1

<PAGE>

12.   CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER............................14
      12.1   No Litigation....................................................14
      12.2   Representations and Warranties...................................14
      12.3   Seller's Bonds...................................................14

13.   CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER.......................14
      13.1   No Litigation....................................................14
      13.2   Representations and Warranties...................................15
      13.3   Seller's Bonds...................................................15

14.   TERMINATION.............................................................15
      14.1   Causes of Termination............................................15
      14.2   Effect of Termination............................................15

15.   INDEMNIFICATION.........................................................15
      15.1   INDEMNIFICATION BY SELLER........................................15
      15.2   INDEMNIFICATION BY BUYER.........................................17
      15.3   PHYSICAL INSPECTION..............................................18
      15.4   Notification.....................................................19

16.   MISCELLANEOUS...........................................................19
      16.1   Confidentiality..................................................19
      16.2   Competition......................................................20
      16.3   Notice...........................................................20
      16.4   Press Releases and Public Announcements..........................20
      16.5   Governing Law....................................................21
      16.6   Exhibits.........................................................21
      16.7   Fees, Expenses, Taxes and Recording..............................21
      16.8   Assignment.......................................................21
      16.9   Entire Agreement.................................................21
      16.10  Severability.....................................................21
      16.11  Captions.........................................................22
      16.12  Counterpart Execution............................................22
      16.13  Waiver of Certain Damages........................................22
      16.14  Amendments and Waivers...........................................22

Exhibits:
---------
1.1(A)-1    Lease
l.l(A)-2    Wells
2           Litigation
3           Allocated Values
4           Assignment of Operating Rights
5           Assignment of Contractual Rights
6           Blocks with Preferential Rights
7           Assumed Contracts and Bonding

                                        2

<PAGE>

                           PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this "Agreement") is entered into this 1st day
of November,  2004,  by and between  MILLENNIUM  OFFSHORE  GROUP,  INC., a Texas
corporation,   ("Seller"),   and  RIDGEWOOD  ENERGY   CORPORATION,   a  Delaware
corporation,  ("Buyer"). Buyer and Seller are collectively referred to herein as
the "Parties" and sometimes individually referred to as a "Party."

                                    RECITALS:

A.   Seller and Buyer have agreed  that Seller will convey its right,  title and
     interest in: 1) undivided  40% Operating  Rights  Interest in the Southeast
     Quarter (SE/4) of West Cameron Block 556, OCS-G 05346,  Offshore  Louisiana
     ("Lease")  LIMITED to the rights below the Lentic 4 Unit Sand as identified
     at 16,085 feet Measured Depth in the Induction-SFL Electric Log for the CNG
     Producing  Company OCS-G 05391 Well No. C-5,  (formerly  known as the OCS-G
     05391 Well No. 5), having API # 17 702 4090600  (herein  referred to as the
     "Deep  Rights"),  and 2) an undivided  40% Unit  Participation  Interest in
     Fault Block A-3 and Fault Block B-4 being in a portion of the East  Cameron
     299/West  Cameron  556  Voluntary  Unit  under the  Voluntary  Pooling  and
     Unitization  Agreement dated September 16, 1985,  covering portions of West
     Cameron  Block 556 and East Cameron Block 299, by and between CNG Producing
     Company and Amerada Hess  Corporation,  et al,  (herein  referred to as the
     "Transferred Interest").

                                   WITNESSETH:

     In  consideration  of the mutual  agreements  contained in this  Agreement,
Buyer and Seller agree as follows:

1.   SALE AND PURCHASE OF THE ASSETS.

1.1  Acquired  Assets.  Subject to the terms and  conditions of this  Agreement,
     Seller agrees to transfer,  convey and deliver to Buyer and Buyer agrees to
     acquire from Seller all of Seller's right, title and interest in and to the
     following (collectively, the "Assets") as of the Effective Date:

     (A)  (i)  The  leasehold  interests,  mineral  rights,  royalty  interests,
          overriding  royalty  interests,  reversionary  rights, and contractual
          rights to production  pertaining  to the lands and lease  described in
          EXHIBIT 1.1(A)-1 (the "Lease");  (ii) all wells on the Lease, or lands
          pooled  therewith  listed in EXHIBIT  l.l(A)-2 (the "Wells");  rights,
          privileges, benefits and powers with respect to the use and occupation
          of the Lease; Seller excludes from the sale herein all existing wells,
          pipelines, facilities, platforms and equipment, except those interests
          therein that arise  directly from the sale of the interest  hereunder.
          Further,  Buyer  assumes no plugging and  abandonment  liabilities  or
          obligations  for the West  Cameron 557 C Platform or the East  Cameron
          299 A and B Platforms and the pipelines associated therewith.

                                        3

<PAGE>

     (B)  The oil and gas and  associated  hydrocarbons  ("Oil  and Gas") in and
          under or  otherwise  attributable  that are  covered  by the  Lease or
          produced from the Wells;

     (C)  To the extent  assignable and applicable to the Assets,  the licenses,
          servitudes,  gas  purchase  and sale  contracts to the extent that the
          same  pertain  or  relate to  periods  after the  Effective  Date,  as
          hereinafter  defined,  crude  purchase  and  sale  agreements,  farmin
          agreements,  farmout agreements,  bottom hole contribution agreements,
          acreage   contribution   agreements,    operating   agreements,   unit
          agreements,  processing  agreements,  options,  leases of equipment or
          facilities,    joint   venture    agreements,    pooling   agreements,
          transportation agreements, and other contracts, agreements and rights,
          which are owned by Seller, in whole or in part, and are appurtenant to
          the Lease and  listed on  Exhibit 6  attached  hereto  and made a part
          hereof (collectively, the "Assumed Contracts");

     (D)  To the extent  assignable,  all  governmental  permits,  licenses  and
          authorizations,  as well as any applications for the same,  related to
          the Lease or the use thereof; and

     (E)  All of  Seller's  files,  records  and  data  relating  to  the  items
          described in  subsections  (A),  (B),  (C), and (D) above,  including,
          title records (title curative documents);  surveys, maps and drawings;
          contracts;   correspondence;   geological   records  and  information;
          production  records,  electric logs, core data, pressure data, decline
          curves,  graphical  production  curves  and all  related  matters  and
          construction  documents  [except  (i)  to  the  extent  the  transfer,
          delivery or copying of such records may be restricted by contract with
          a third party;  (ii) all documents and  instruments of Seller that may
          be protected by the  attorney-client  privilege;  (iii) all accounting
          and Tax files, books, records, Tax returns and Tax work papers related
          to such items;  and (iv) any of Seller's  seismic data or seismic data
          licensed   from  a  third  party  that  are   restricted  by  contract
          (collectively, the "Records").

1.2  Assumed  Liabilities.  On the Closing Date, Buyer shall assume and agree to
     timely and fully pay, perform and otherwise discharge,  without recourse to
     Seller or its affiliates,  all of the liabilities and obligations of Seller
     and its  affiliates,  successors,  assigns  or  representatives,  direct or
     indirect, known or unknown, asserted or unasserted, absolute or contingent,
     accrued or unaccrued,  including but not limited to, Environmental Laws (as
     defined  herein),  taxes,   securities  law,  personal  injury,   plugging,
     abandonment  and surface  restoration,  and all liabilities and obligations
     under the Lease, Wells, Contracts, Related Assets and Records, which relate
     to the Assets on or after the Effective  Date  (collectively,  the "Assumed
     Liabilities").   Seller   shall  be  liable  for  and  retain  any  Assumed
     Liabilities  prior to the Effective  Date.  Notwithstanding  the foregoing,
     Assumed Liabilities shall not include, and there is excepted,  reserved and
     excluded from such Assumed  Liabilities,  the  liabilities  and obligations
     for: 1) all existing wells, pipelines, facilities, platforms and equipment,
     except those  interests  therein that arise  directly  from the sale of the
     interest hereunder, and 2) which Seller

                                        4

<PAGE>

     indemnifies Buyer against pursuant to Article 15.1. Further,  Buyer assumes
     no plugging and abandonment liabilities or obligations for the West Cameron
     557 C Platform or the East Cameron 299 A and B Platforms  and the pipelines
     associated therewith.

2.   CONSIDERATION.

     2.1  Consideration.  The consideration  for the Assets,  Buyer is paying to
          Seller the sum of TWELVE  MILLION  DOLLARS  ($12,000,000.00  U.S.) and
          Buyer shall carry Seller for 10% of 6/6ths  Working  Interest  through
          the  installation  of the wellhead,  as  hereinafter  defined,  on the
          initial test well (OCS-G 05346 B004 Well) planned to be drilled in the
          First Quarter of 2005 to test the Deep Rights,  Buyer  assuming all of
          the Assumed Liabilities, (the "Consideration").

     2.2  Payment.  Adjustments,  if any, pursuant to Section 2.4, shall be paid
          by  Seller  to Buyer or from  Buyer to  Seller,  by wire  transfer  of
          immediately  available funds on the Closing Date (hereinafter defined)
          or within twenty four hours thereafter.

     2.3  Allocation.   If  adjustments   pursuant  to  Section  6  occur,   the
          Consideration  shall be  allocated  to the Assets in  accordance  with
          EXHIBIT 3.

     2.4  Adjustments to Consideration.

          (A)  At Closing,  the Parties shall,  if  appropriate,  account to one
               another for proceeds from production as of the Effective Date and
               for  costs  and  expenses  associated  with the  Assets as of the
               Effective  Date as provided  for in any  applicable  operating or
               other  agreements  Seller shall  furnish Buyer with a Preliminary
               Closing  Statement  two days prior to the expected  Closing which
               shall set forth an estimate of proceeds from production as of the
               Effective Date and costs and expenses  associated with the Assets
               as of the Effective Date.

          (B)  A post-closing  adjustment  statement based on the actual revenue
               and expenses  shall be prepared and  delivered by Seller to Buyer
               within one hundred twenty (120) days after the Closing. Seller or
               Buyer,  as the case may be, shall be given access to and shall be
               entitled to review and audit the other Party's records pertaining
               to the  computation  of  amounts  claimed  in such  Post  Closing
               Statement.  Except for the  Post-Closing  Statement,  if any,  no
               additional adjustments shall be made for proceeds from production
               and for costs and  expenses  associated  with the Assets from the
               Effective Date to Closing,  unless Anadarko Petroleum Corporation
               or its  assign  elects  to  exercise  its  preferential  right to
               purchase as described in Section 11 herein.

                                        5

<PAGE>

3.   EFFECTIVE  DATE.  The effective date for the conveyance of the Assets shall
     be as of 12:01 a.m., local time at the location of the Lease on November 1,
     2004 (the "Effective Date").

4.   CLOSING.

     4.1  Closing.  The sale and purchase of the Assets  ("Closing")  shall take
          place at  Seller's  office  which is located at 5300  Memorial  Drive,
          Suite 1070, Houston,  Texas 77057, and will occur on or before two (2)
          business days after the expiration date of the  Preferential  Right to
          Purchase in favor of Anadarko Petroleum Corporation or its assign.

     4.2  Delivery  by  Seller.  At  Closing,  Seller  shall  deliver to Buyer a
          mutually  acceptable  Assignment of Operating Rights and Assignment of
          Contractual Interest in the same forms as attached on EXHIBITS 4 and 5
          respectively. Such Assignment shall be executed in quadruplicate.

     4.3  Further  Cooperation.  At  the  Closing,  and  thereafter  as  may  be
          necessary,  Seller and Buyer  shall  execute  and  deliver  such other
          instruments  and  documents  and take  such  other  actions  as may be
          reasonably  necessary  to evidence  and  effectuate  the  transactions
          contemplated by this Agreement.

5.   REVIEW OF ASSETS.  Seller shall provide Buyer free access to the Assets and
     to all of its Records for Buyer's  examination.  In addition,  Seller shall
     allow  Buyer to conduct a physical  and  environmental  examination  of the
     Assets at Buyer's cost, risk and expense.

6.   TITLE.

     6.1  Examination.  Following the execution of this  Agreement,  Buyer shall
          conduct  such  examination  of the title to the Lease,  based upon the
          Contracts and Lease and the public data, as is deemed  appropriate  by
          Buyer, at its sole cost,  risk and expense.  The purpose of such title
          examination  shall be to determine if Seller has "Good and  Marketable
          Title" to its interest in the Lease and Wells.

     6.2  Good  and  Marketable  Title.  As  used  herein  the  term  "good  and
          marketable title" shall mean:

          (A)  As to the  Lease  and  Wells,  those  operating  rights of Seller
               which:

               (i)  entitles  Seller to receive from each Lease or Well not less
                    than  the  interests  shown in  EXHIBIT1.1(A)-2  as the "Net
                    Revenue  Interest"  of all Oil and Gas  produced,  saved and
                    marketed  from  each  Lease  and Well and of all Oil and Gas
                    produced,  saved and  marketed  from any unit of which  each
                    Lease or Well is a part and allocated to such Lease or Well,
                    all without reduction, suspension

                                        6

<PAGE>

                    or  termination  of the  interests  in  each  Lease  or Well
                    throughout  the  duration  of such  Lease or the Lease  upon
                    which  such  Well  is  located,  except  as  stated  in such
                    EXHIBIT; and

               (ii) obligates  Seller  to bear a  percentage  of the  costs  and
                    expenses relating to the maintenance and development of, and
                    operations relating to, the Lease and Wells not greater than
                    the "Working Interest" shown in EXHIBIT 1.1(A)-1 and EXHIBIT
                    l.l(A)-2,  all  without  increase of the  interests  in each
                    Lease and Well  throughout  the  remaining  duration of such
                    Lease and Well, except as stated in such EXHIBIT.

          (B)  That the operational  character and title of Seller to the Assets
               which:

               (i)  as of the  Effective  Date,  is free and clear  (except  for
                    Permitted   Encumbrances   as  defined   herein)  of  liens,
                    encumbrances (including, but not limited to claims, demands,
                    damages,  liabilities,  judgments  and causes of action) and
                    operational restrictions;  and with respect to real property
                    interests  to  be  transferred   to  Buyer,   real  property
                    interests  are  of  record  in  the  relevant  counties  and
                    governmental offices.

     6.2.1 Defect Letters.

               (A)  No later than  three (3)  business  days  prior to  Closing,
                    Buyer may notify Seller in writing  ("Title  Notice") of any
                    liens,   charges,   contracts,   agreements,    obligations,
                    encumbrances,  defects  and  irregularities  of title  which
                    would  cause  title to all or part of the  Assets  not to be
                    good and  marketable  as defined in Section 6.2  hereof,  or
                    which would cause a breach of a  representation  or warranty
                    of Seller ("Title Defect"). Such Title Notice shall describe
                    in  reasonable  detail  the Title  Defect  and  include  the
                    estimated Title Defect Value attributable thereto. Any Title
                    Defect not timely  raised by Buyer  pursuant to this Section
                    6.2.1 (A) shall be deemed waived.

               (B)  If a Title  Defect  as set  forth  in a  Notice  is given to
                    Seller as set forth  above prior to Closing and is not cured
                    to Buyer's  satisfaction  on or before the Closing,  Closing
                    shall be  postponed  as to the  affected  Assets  and Seller
                    shall have thirty  (30) days after the Closing  Date to cure
                    said Defect or at Seller's  option the affected Assets shall
                    be  withdrawn  from this  Agreement  as  stipulated  herein.
                    Should Seller not cure the Defect within the extended thirty
                    (30) day period, then the Title Defect shall be a

                                        7

<PAGE>

                    "Title  Failure"  unless  waived by Buyer.  Any Title Defect
                    waived by Buyer under this Section  shall become a Permitted
                    Encumbrance as defined herein.

     6.2.2 Effect of Title Failure.

          (A)  In the event of a Title Failure  pursuant to Section  6.2.1,  the
               affected  Asset(s)  shall be withdrawn from this Agreement or the
               Consideration   shall  be  adjusted  pursuant  to  the  Allocated
               Value(s).  In the event that the  affected  Assets are  withdrawn
               from this  Agreement,  the Parties  shall Close on the  remaining
               Assets.

          (B)  Buyer  shall not be  liable  for any  portion  of the cost of any
               title curative performed by Seller.

          (C)  The value  attributable  to each Title Defect (the "Title  Defect
               Value")   notified  in  a  Notice  shall  be  determined  by  the
               following:

               (i)  if the  Title  Defect  asserted  is  that  the  Net  Revenue
                    Interest  attributable  to any  Lease  or Well is less  than
                    stated in the  applicable  EXHIBIT,  then the  Title  Defect
                    Value is the product of the  Allocated  Value  attributed to
                    such Asset, multiplied by a fraction, the numerator of which
                    is the difference between the Net Revenue Interest set forth
                    in the  applicable  EXHIBIT  and  the Net  Revenue  Interest
                    actually  owned,  and the  denominator  of  which is the Net
                    Revenue Interest stated in the applicable EXHIBIT; or

               (ii) if the Title Defect  represents an obligation,  encumbrance,
                    burden or charge  upon the  affected  Asset  (including  any
                    increase  in  Working  Interest  for  which  there  is not a
                    proportionate increase in Net Revenue Interest),  the amount
                    of the Title Defect Value is to be determined by taking into
                    account the  Allocated  Value of the Asset,  multiplied by a
                    fraction,  the numerator of which is the difference  between
                    the Working Interest set forth in the applicable EXHIBIT and
                    the Working Interest  actually owned, and the denominator of
                    which  is the  Working  Interest  stated  in the  applicable
                    EXHIBIT.

          D.   No adjustment to Title. Notwithstanding anything to the contrary,
               there  shall be no  adjustments  to the  Consideration  for Title
               Defects  if the  total  adjustment  is  $100,000  or  less in the
               aggregate.  In the  event  that the Title  Defects  are more than
               $100,000 in the  aggregate,  (i) the  Parties  shall Close on the
               remaining Assets, or

                                        8

<PAGE>

                    (ii) either  Party may  terminate  this  Agreement by giving
                    written notice to the other Party.

     6.3  Special Warranty. The documents to be executed and delivered by Seller
          to Buyer  transferring  the  Assets to Buyer  shall be  subject to the
          Permitted  Encumbrances.  Seller  shall  warrant and defend the Assets
          unto Buyer  against every person  lawfully  claiming the Assets or any
          part thereof, by, through or under Seller, but not otherwise. Seller's
          interests  in the Assets are to be sold AS IS AND WHERE IS AND WITHOUT
          WARRANTY OF  MERCHANTABILITY,  CONDITION  OR FITNESS FOR A  PARTICULAR
          PURPOSE, EITHER EXPRESS OR IMPLIED.

     6.4  Permitted   Encumbrances.   As  used   herein   the  term   "Permitted
          Encumbrances"  shall  mean  any  one  (1) or  more  of  the  following
          described below or created or described in documents described below:

          (A)  The  terms  and  conditions  of  the  Lease,   including  without
               limitation lessors' royalties,  overriding royalties, net profits
               interests, carried interests,  production payments,  reversionary
               interests and similar  burdens,  if the net cumulative  effect of
               the  burdens  does not  operate to reduce the  interest of Seller
               with respect to all Oil and Gas produced  from any Well below the
               Net Revenue Interest for such Well set forth in EXHIBIT 1.1(A)-2;

          (B)  The  division  orders  and  sales  contracts  terminable  without
               penalty  upon  no  more  than  ninety  (90)  days  notice  to the
               purchaser;

          (C)  All rights to consent by,  required  notices to, filings with, or
               other actions by  governmental  entities in  connection  with the
               sale or conveyance of oil and gas leases or interests  therein if
               they are routinely obtained subsequent to the sale or conveyance;

          (D)  Easements, rights-of-way, servitudes, permits, surface leases and
               other  rights  in  respect  of  surface  operations  that  do not
               materially  interfere  with  the  oil and  gas  operations  to be
               conducted on any Well or Lease;

          (E)  All  operating  agreements,   unit  agreements,   unit  operating
               agreements, pooling agreements and pooling designations and other
               agreements affecting the Assets;

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

                                        9

<PAGE>

7.   REPRESENTATIONS AND WARRANTIES OF SELLER.

     7.1  Seller's  Representations  and Warranties.  Subject to the disclosures
          set  forth in the  EXHIBITs  referred  to in this  Article  7,  Seller
          represents and warrants (which  representations  and warranties  shall
          not  survive  the  Closing),  except as to 7.1 (E) and (G) which shall
          survive Closing, as follows:

          (A)  Status.  Seller  is  a  Corporation  duly  incorporated,  validly
               existing  and in good  standing  under  the laws of the  State of
               Texas.

          (B)  Authority. Seller owns the Assets and has the requisite power and
               authority  to  enter  into  this  Agreement,  to  carry  out  the
               transactions  contemplated  hereby, to transfer the Assets in the
               manner  contemplated by this  Agreement,  and to undertake all of
               the  obligations  of  Seller  set  forth in this  Agreement.

          (C)  Validity of  Obligations.  This  Agreement  and any  documents or
               instruments  delivered by Seller at the Closing shall  constitute
               legal,  valid and binding  obligations of Seller,  enforceable in
               accordance with their terms.

          (D)  Contractual  Restrictions.   Seller  has  not  entered  into  any
               contracts for or received prepayments,  take-or-pay arrangements,
               buydowns,  buyouts  for Oil  and  Gas,  or  storage  of the  same
               relating to the Assets  which Buyer shall be  obligated  to honor
               and make  deliveries  of Oil and Gas or pay  refunds  of  amounts
               previously paid under such contracts or arrangements.

          (E)  Litigation. To Seller's knowledge, except as set forth in EXHIBIT
               2,  there is no  suit,  action,  claim,  judgment  or  proceeding
               pending,  arising  out of,  or  with  respect  to the  ownership,
               operation  or  environmental  condition  of the Assets that would
               have a material  adverse  affect  upon the  Assets.  Buyer  shall
               assume no liability or obligation  with respect to the litigation
               set forth on  EXHIBIT 2 which  accrues  to  periods  prior to the
               Effective Date.

          (F)  Broker's  Fees.  Seller has incurred no  obligation or liability,
               contingent or otherwise, for brokers' or finders' fees in respect
               of the matters  provided for in this Agreement,  and, if any such
               obligation or liability  exists, it shall remain an obligation of
               Seller, and Buyer shall have no responsibility therefor.

          (G)  Qualification  and  Bonding.  Seller  is in  compliance  with the
               bonding and liability  insurance  requirements in accordance with
               all applicable  state or federal laws or regulations  and that it
               is and  henceforth  will  continue  to be  qualified  to own  and
               operate any  federal,  state oil and gas leases  that  constitute
               part of the Assets and will  continue  to be  properly  bonded to
               meet all abandonment  obligation  requirements  excluded from the
               Assumed Liabilities herein and retained by Seller.

                                       10

<PAGE>

     7.2  Scope of Representations  of Seller.  Except as expressly set forth in
          this Agreement,  Seller disclaims all liability and responsibility for
          any representation,  warranty, statements or communications (orally or
          in writing)  to Buyer,  including  any  information  contained  in any
          opinion, information or advice that may have been provided to Buyer by
          any  employee,  officer,  director,  agent,  consultant,  engineer  or
          engineering  firm,   trustee,   representative,   investment   banker,
          financial  advisor,  partner,  member,  beneficiary,   stockholder  or
          contractor of Seller  wherever and however made,  including those made
          in any data room or internet  site and any  supplements  or amendments
          thereto or during any  negotiations  with respect to this Agreement or
          any confidentiality  agreement previously executed by the Parties with
          respect  to the Asset.  EXCEPT AS SET FORTH IN THIS  ARTICLE 7 OF THIS
          AGREEMENT,  SELLER  MAKES  NO  WARRANTY  OR  REPRESENTATION,  EXPRESS,
          STATUTORY  OR  IMPLIED,  AS  TO  (i)  THE  ACCURACY,  COMPLETENESS  OR
          MATERIALITY OF ANY DATA,  INFORMATION OR RECORDS FURNISHED TO BUYER IN
          CONNECTION WITH THE ASSETS OR OTHERWISE  CONSTITUTING A PORTION OF THE
          ASSETS;  (ii)  THE  PRESENCE,  QUALITY  AND  QUANTITY  OF  HYDROCARBON
          RESERVES  (IF  ANY)  ATTRIBUTABLE  TO THE  ASSETS,  INCLUDING  WITHOUT
          LIMITATION SEISMIC DATA AND SELLER'S INTERPRETATION AND OTHER ANALYSIS
          THEREOF;  (iii) THE  ABILITY OF THE  ASSETS TO  PRODUCE  HYDROCARBONS,
          INCLUDING  WITHOUT  LIMITATION  PRODUCTION  RATES,  DECLINE  RATES AND
          RECOMPLETION  OPPORTUNITIES;  (iv) THE PRESENT OR FUTURE  VALUE OF THE
          ANTICIPATED  INCOME,  COSTS OR PROFITS, IF ANY, TO BE DERIVED FROM THE
          ASSETS;  (v) THE  ENVIRONMENTAL  CONDITION  OF THE  ASSETS;  (vi)  ANY
          PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT OCCUR;  (vii) THE TAX
          ATTRIBUTES  OF ANY ASSET;  (viii) ANY OTHER  MATTERS  CONTAINED  IN OR
          OMITTED FROM ANY INFORMATION OR MATERIAL  FURNISHED TO BUYER BY SELLER
          OR  OTHERWISE  CONSTITUTING  A  PORTION  OF THE  ASSETS;  AND (ix) THE
          COMPLETENESS OR ACCURACY OF THE  INFORMATION  CONTAINED IN ANY EXHIBIT
          HERETO. ANY DATA, INFORMATION OR OTHER RECORDS FURNISHED BY SELLER ARE
          PROVIDED TO BUYER AS A CONVENIENCE  AND BUYER'S  RELIANCE ON OR USE OF
          THE SAME IS AT BUYER'S SOLE RISK.

8.   REPRESENTATIONS AND WARRANTIES OF BUYER.

     8.1  Buyer's Representations and Warranties.  Buyer represents and warrants
          (which  representations  and warranties  shall survive the Closing) as
          follows:

          A.   Status   of   Incorporation.   Buyer   is  a   corporation   duly
               incorporated,  validly  existing and in good  standing  under the
               laws of the State of Delaware.

                                       11

<PAGE>

          B.   Authority.  Buyer has the corporate  power and authority to enter
               into this Agreement,  to carry out the transactions  contemplated
               hereby and to undertake all of the  obligations  of Buyer set out
               in this Agreement.

          C.   Validity of Obligations. The execution,  delivery and performance
               of  this  Agreement  and  the  performance  of  the  transactions
               contemplated  by this Agreement will not in any respect  violate,
               nor be in  conflict  with,  any  provision  of  Buyer's  charter,
               by-laws  or  other  governing  documents,  or  any  agreement  or
               instrument  to  which  Buyer  is a  party  or is  bound,  or  any
               judgment,  decree,  order, statute, rule or regulation applicable
               to  Buyer  (subject  to   governmental   consents  and  approvals
               customarily   obtained   after  the  Closing).   This   Agreement
               constitutes  legal,  valid  and  binding  obligations  of  Buyer,
               enforceable in accordance with its terms.

          D.   Qualification  and  Bonding.  Buyer  is in  compliance  with  the
               bonding and liability  insurance  requirements in accordance with
               all applicable  state or federal laws or regulations  and that it
               is and  henceforth  will  continue  to be  qualified  to own  any
               federal,  state oil and gas leases  that  constitute  part of the
               Assets.

          E.   Evaluation.  Buyer represents that by reason of Buyer's knowledge
               and experience in the  evaluation,  acquisition  and operation of
               oil and gas properties,  Buyer has evaluated the merits and risks
               of  purchasing  the Assets  from Seller and has formed an opinion
               based solely upon Buyer's  knowledge and  experience and not upon
               any representations or warranties by Seller.

          F.   Broker's  Fees.  Buyer has incurred no  obligation  or liability,
               contingent or otherwise, for brokers' or finders' fees in respect
               of the matters  provided for in this Agreement,  and, if any such
               obligation or liability  exists, it shall remain an obligation of
               Buyer, and Seller shall have no responsibility therefor.

9.   RECORDS  AND  CONTRACTS.  Seller  shall  have the right to make and  retain
     copies of the  Records  and  Contracts  as Seller may  desire  prior to the
     delivery of the  Records and  Contracts  to Buyer.  Buyer,  for a period of
     seven (7) years after the Closing Date,  shall make available to Seller (at
     the location of such Records and Contracts in Buyer's  organization) access
     to such Records and  Contracts as Buyer may have in its  possession  (or to
     which it may have  access) upon written  request of Seller,  during  normal
     business hours. Seller shall provide Buyer the Records and Contracts within
     seven (7) days of Closing.

10.  CERTAIN  AGREEMENTS OF BUYER. Buyer agrees and covenants that the following
     provisions shall apply:

     10.1 Plugging Obligation.  Buyer shall perform and assume all liability for
          its share of the necessary and proper  plugging and abandonment of the
          Wells.

                                       12

<PAGE>

     10.2 MMS  Qualification.  Buyer has in place the necessary bonds or letters
          of credit as required by the Minerals  Management  Service ("MMS") for
          qualification to conduct business on the Outer Continental Shelf under
          the O.C.S.L.A., as same has been amended.

     10.3 Carried Interest in Favor of Seller:  Buyer shall carry Seller for 10%
          of 6/6ths Working  Interest  through the installation of the Wellhead,
          as  hereinafter  defined,  on the initial  test well (OCS-G 05346 B004
          Well)  planned to be drilled in the First  Quarter of 2005 to test the
          Deep  Rights;  however,  in the event  Seller  only owns an  undivided
          6.66667%  Working Interest in Fault Block A-3 and Fault Block B-4, due
          to the  exercising  of the  preferential  right by Anadarko  Petroleum
          Corporation or its assignee, Buyer agrees to carry Seller for 6.66667%
          of the costs  incurred in the drilling and  completion  of OCS-G 05346
          B004 Well through  installation  of the Wellhead.  Installation of the
          Wellhead  shall  be  defined  as the  point  at  which a well has been
          drilled, production casing and tubing have been placed in the wellbore
          and the well has been  completed  and fraced,  if  necessary,  and the
          wellhead has been installed.

11.  ADDITIONAL COVENANTS.

     11.1 Preferential  Rights to Purchase.  Seller and Buyer acknowledge that a
          preferential   right  to  purchase  in  favor  of  Anadarko  Petroleum
          Corporation  and  Ridgewood  Energy  Corporation  exist  affecting the
          Assets.  In the event  Anadarko  Petroleum  Corporation  or its assign
          elects to exercise their  preferential  right to purchase  pursuant to
          the terms of the Operating  Agreement dated July 1, 1983,  between TXP
          Operating Company and Amerada Hess Corporation,  all references herein
          to  the   Purchase   Price,   the  Assets  and  any   adjustments   to
          consideration,  revenues and expenses shall be proportionately reduced
          to the final  interest of Buyer due to the result of the  preferential
          right election.

     11.2 Consents.  Buyer, under that certain Operating Agreement dated July 1,
          1983 covering the Lease,  hereby consents to the assignment  hereunder
          from Seller to Buyer.

     11.3 Buyer's  Right to East Cameron Block 299 OCS-G 05391 A003 Well: In the
          event  the East  Cameron  Block  299  OCS-G  05391  A003 Well is to be
          utilized for a sidetrack  operation to either Fault Block A-3 or Fault
          Block B-4,  Seller agrees to transfer to Buyer an undivided  40.00000%
          Working  Interest  in such well so that Buyer  shall have the right to
          utilize same for such sidetracking operation in which it participates.
          Thereafter, Buyer shall assume 40.00000% of the obligations associated
          with such well,  including,  but not limited to, the ultimate plugging
          and abandonment of same, and be entitled to the associated Net Revenue
          Interest of 33.01332% for such well;  however,  in the event  Anadarko
          Petroleum   Corporation   or  its  assign  does  not  exercise   their
          preferential  right to purchase the  interest  acquired by Seller from
          Gulf of Mexico Oil and Gas Properties LLC ("GOM  Interest"),  then the
          GOM Interest of 11.25% Working Interest with a

                                       13

<PAGE>

          corresponding  8.375% Net  Revenue  Interest  will pass to Seller and,
          Buyer  and  Seller  agree  that  if same  occurs,  then  the  interest
          transferred  to Buyer in Fault  Block A-3 and Fault Block B-4 shall be
          40.00000% Working Interest with a corresponding  32.34236% Net Revenue
          Interest.

     11.4 Well Proposal by Seller:  Seller agrees to propose the drilling of the
          West  Cameron 556  Prospect to test the Lower Lentic sands with a spud
          date estimated for the first quarter of 2005.

     11.5 Seller's  Agreement  not to Drill  Offset  Wells:  Seller has obtained
          rights on West Cameron Block 557, OCS-G 21058, and agrees not to drill
          a well on West Cameron  Block 557 that, in Seller's  opinion,  will be
          offsetting  and draining the wells that may be drilled on West Cameron
          Block 556 Deep Rights,  unless Buyer has an interest in such competing
          well.

12.  CONDITIONS  PRECEDENT TO  OBLIGATIONS  OF BUYER.  All  obligations of Buyer
     under this Agreement are, at Buyer's election,  subject to the fulfillment,
     prior to or at the Closing, of each of the following conditions:

     12.1 No Litigation.  At the Closing,  no suit,  action or other  proceeding
          shall be  pending  before  any  court  or  governmental  agency  which
          attempts to prevent the occurrence of the transactions contemplated by
          this Agreement.

     12.2 Representations and Warranties.  All representations and warranties of
          Seller  contained  in this  Agreement  shall  be true in all  material
          aspects as of the Closing as if such  representations  and  warranties
          were made as of the Closing Date (except for those  representations or
          warranties  that are expressly made only as of another  specific date,
          which  representations  and  warranties  shall be true in all material
          respects as of such other date) and Seller  shall have  performed  and
          satisfied in all material  respects all  covenants  and  fulfilled all
          conditions required by this Agreement to be performed and satisfied by
          Seller at or prior to the Closing.

     12.3 Seller's  Bonds:  Seller  represents to Buyer that Seller has in force
          and  effect  the Bonds in favor of the MMS as set  forth on  Exhibit 6
          attached hereto and made a part hereof.

13.  CONDITIONS  PRECEDENT TO THE  OBLIGATIONS  OF SELLER.  All  obligations  of
     Seller  under this  Agreement  are,  at Seller's  election,  subject to the
     fulfillment,  prior  to or  at  the  Closing,  of  each  of  the  following
     conditions:

     13.1 No Litigation.  At the Closing,  no suit,  action or other  proceeding
          shall be  pending  before  any  court  or  governmental  agency  which
          attempts to prevent the occurrence of the transactions contemplated by
          this Agreement.

                                       14

<PAGE>

     13.2 Representations and Warranties.  All representations and warranties of
          Buyer  contained  in this  Agreement  shall  be  true in all  material
          aspects as of the Closing,  as if such  representations and warranties
          were made as of the Closing Date (except for those  representations or
          warranties  that are expressly made only as of another  specific date,
          which  representations  and  warranties  shall be true in all material
          respects  as of such other date) and Buyer  shall have  performed  and
          satisfied in all material  respects all  covenants  and  fulfilled all
          conditions required by this Agreement to be performed and satisfied by
          Buyer at or prior to the Closing.

     13.3 Seller's  Bonds:  Seller  represents to Buyer that Seller has in force
          and  effect  the Bonds in favor of the MMS as set  forth on  Exhibit 6
          attached hereto and made a part hereof.

14.  TERMINATION.

     14.1 Causes  of   Termination.   This   Agreement   and  the   transactions
          contemplated herein may be terminated:

          (A)  At any time by mutual consent of the Parties.

          (B)  By either Party if a material adverse change to the Assets occurs
               prior to Closing or pursuant to Section 6.2.2(D).

          (C)  By Buyer if, on the Closing Date, any of the conditions set forth
               in Article 12 hereof shall not have been satisfied or waived.

          (D)  By Seller if, on the  Closing  Date,  any of the  conditions  set
               forth in  Article  13 hereof  shall not have  been  satisfied  or
               waived.

     14.2 Effect  of  Termination.  In the  event  of the  termination  of  this
          Agreement  pursuant to the  provisions of this Article 14 or elsewhere
          in this  Agreement,  this  Agreement  shall  become  void  and have no
          further force and effect and, except for the indemnities  provided for
          in  Section  15.3,  any  breach  of  this  Agreement   prior  to  such
          termination and any continuing  confidentiality  requirement,  neither
          Party shall have any further  right,  duty or  liability  to the other
          hereunder.  Upon termination,  Buyer agrees to use its best efforts to
          return to Seller or  destroy,  all  materials,  documents  and  copies
          thereof  provided,  obtained  or  discovered  in the course of any due
          diligence investigations.

15.  INDEMNIFICATION.

     15.1 INDEMNIFICATION BY SELLER. UPON CLOSING,  SELLER SHALL, TO THE FULLEST
          EXTENT PERMITTED BY LAW, RELEASE, DEFEND, INDEMNIFY, AND HOLD HARMLESS
          BUYER,  ITS  PARENT  AND  SUBSIDIARY  COMPANIES,  AND  EACH  OF  THEIR
          RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND OTHER

                                       15

<PAGE>

          REPRESENTATIVES (THE "BUYER GROUP") FROM AND AGAINST THE FOLLOWING:

          (A)  MISREPRESENTATIONS.  ALL CLAIMS, DEMANDS, LIABILITIES, JUDGMENTS,
               LOSSES AND REASONABLE  COSTS,  EXPENSES AND  ATTORNEYS'  FEES AND
               COURT  COSTS   (INDIVIDUALLY  A  "LOSS"  AND  COLLECTIVELY,   THE
               "LOSSES") ARISING FROM THE BREACH BY SELLER OF ANY REPRESENTATION
               OR WARRANTY SET FORTH IN THIS AGREEMENT THAT SURVIVES CLOSING;

          (B)  BREACH OF COVENANTS. ALL LOSSES ARISING FROM THE BREACH BY SELLER
               OF ANY COVENANT SET FORTH IN THIS AGREEMENT; AND

          (C)  OWNERSHIP AND  OPERATION.  ALL LOSSES  ARISING FROM THE OWNERSHIP
               AND OPERATION OF THE ASSETS PRIOR TO THE EFFECTIVE  DATE DIRECTLY
               ASSOCIATED WITH THE FOLLOWING MATTERS:

               (i)  DAMAGES TO PERSONS OR PROPERTY;

               (ii) THE  VIOLATION  BY  SELLER OF ANY LAW OR  REGULATION  OR THE
                    TERMS OF ANY AGREEMENT BINDING UPON SELLER;

               (iii)CLAIMS OF SELLER'S CO-OWNERS,  PARTNERS, JOINT VENTURERS AND
                    OTHER PARTICIPANTS IN THE ASSETS;

               (iv) TAXES ATTRIBUTABLE TO THE ASSETS; AND

               (v)  THE  INCORRECT  PAYMENT OF ROYALTIES  AND BURDENS  UNDER THE
                    LEASE.

          (D)  ABANDONMENT  LIABILITIES.  Covering any  liabilities,  duties and
               obligations relating to properly plugging and abandoning existing
               wells,  removal of all  pipelines,  equipment,  and platforms and
               related  facilities now or hereafter  located on the Assets,  and
               cleaning  up,   restoring  and   remediation  of  the  Assets  in
               accordance with the applicable  Environmental Laws and the Lease,
               including but not limited to liabilities,  duties and obligations
               (including  but not limited to the  payment of fines,  penalties,
               monetary sanctions or other amounts payable for failure to comply
               with the requirements of applicable  Environmental  Laws) related
               to any  violation  of any  Environmental  Laws  or the  presence,
               disposal,   release  or  threatened   release  of  any  hazardous
               substance or hazardous

                                       16

<PAGE>

               waste  from the  Assets  into the  atmosphere  or into the  water
               whether  or  not  attributable  to  Seller's  activities  or  the
               activities of third parties; and

          (E)  Notwithstanding the above, the following  limitations shall apply
               to Seller's indemnification obligations:

               (i)  Seller shall not be  obligated  to  indemnify  Buyer for any
                    Loss unless  Buyer has  delivered  a written  notice of such
                    Loss  within  the   Survival   Period  (as  defined   below)
                    applicable to such Loss.  Any Loss for which Seller does not
                    receive written notice before the end of the Survival Period
                    shall be deemed to be an Assumed  Liability.  The  "Survival
                    Period" applicable to Losses shall mean:

                    (a)  With  regard to a breach of  covenants  and the matters
                         covered  by Article  15 for a period of  eighteen  (18)
                         months  after  Closing,  except  for  15.1 (D) and (E),
                         which  indemnities  from Seller to Buyer shall last the
                         life of the Assets;

               (ii) The  indemnification  obligations of Seller pursuant to this
                    Agreement  shall be limited  to actual  Losses and shall not
                    include incidental,  consequential,  indirect,  punitive, or
                    exemplary Losses or damages;

               (iii)The  amount  of  Losses  required  to be paid by  Seller  to
                    indemnify  Buyer pursuant to this Agreement shall be reduced
                    to the  extent of any  amounts  actually  received  by Buyer
                    pursuant  to the terms of the  insurance  policies  (if any)
                    covering such claim and any tax benefits received by Buyer;

               (iv) Buyer  acknowledges  and  agrees  that  the  indemnification
                    provisions in this Article 15 and the termination  rights in
                    Article  14 shall be the  exclusive  remedies  of Buyer with
                    respect to the transactions contemplated by this Agreement

               (v)  Buyer  acknowledges  and  agrees  that  the  indemnification
                    provisions in this Article 15 and the termination  rights in
                    Article  14 shall be the  exclusive  remedies  of Buyer with
                    respect to the transactions contemplated by this Agreement.

     15.2 INDEMNIFICATION  BY BUYER.  UPON  CLOSING,  BUYER SHALL TO THE FULLEST
          EXTENT PERMITTED BY LAW, RELEASE, DEFEND, INDEMNIFY, AND HOLD HARMLESS
          SELLER,  ITS PARENT AND SUBSIDIARY  COMPANIES AND  AFFILIATED  LIMITED
          PARTNERSHIPS, AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS,

                                       17

<PAGE>

          EMPLOYEES,  AGENTS AND OTHER REPRESENTATIVES (THE "SELLER GROUP") FROM
          AND AGAINST THE FOLLOWING:

          (A)  MISREPRESENTATIONS.  ALL LOSSES  ARISING FROM THE BREACH BY BUYER
               OF ANY  REPRESENTATION  OR WARRANTY  SET FORTH IN THIS  AGREEMENT
               THAT SURVIVES CLOSING;

          (B)  BREACH OF COVENANTS.  ALL LOSSES ARISING FROM THE BREACH BY BUYER
               OF ANY COVENANT SET FORTH IN THIS AGREEMENT;

          (C)  OWNERSHIP  AND  OPERATION.  ALL LOSSES  ARISING  FROM THE ASSUMED
               LIABILITIES,  AND ALL LOSSES  ARISING  ON OR AFTER THE  EFFECTIVE
               DATE FROM THE OWNERSHIP AND OPERATION OF THE ASSETS.

          (D)  ENVIRONMENTAL LIABILITIES.  SUBJECT TO ARTICLES 1.2 AND 15.1 (D),
               ALL ENVIRONMENTAL LIABILITIES,  ARISING ON OR AFTER THE EFFECTIVE
               DATE ATTRIBUTABLE TO BUYER'S INTEREST  CONVEYED HEREIN,  SHALL BE
               THE  RESPONSIBILTY  OF BUYER  AND BUYER  SHALL BE LIABLE  FOR ALL
               PLUGGING  AND  ABANDONING  LIABILITIES  ATTRIBUTABLE  TO  BUYER'S
               INTEREST IN THE WELLS CONVEYED  HEREIN ON AND AFTER THE EFFECTIVE
               DATE.  "ENVIRONMENTAL  LIABILITIES" MEANS ANY AND ALL OBLIGATIONS
               AND   LIABILITIES   ARISING   DIRECTLY  OR  INDIRECTLY  FROM  ANY
               IMPAIRMENT OR DAMAGE TO THE  ENVIRONMENT  CAUSED BY OR PERTAINING
               TO THE ASSETS OR THE OPERATION  THEREOF INCLUDING ANY ABANDONMENT
               AND RECLAMATION  OBLIGATIONS,  ANY RELEASE, AND ANY OTHER MATTERS
               RELATING TO SURFACE,  SUBSURFACE,  AIR OR WATER  CONTAMINATION OR
               THE BREACH OF ANY ENVIRONMENTAL LAWS.

     15.3 PHYSICAL INSPECTION.  BUYER INDEMNIFIES AND AGREES TO RELEASE, DEFEND,
          INDEMNIFY  AND HOLD HARMLESS THE SELLER GROUP FROM AND AGAINST ANY AND
          ALL LOSSES  ARISING FROM BUYER'S  INSPECTING AND OBSERVING THE ASSETS,
          INCLUDING (A) LOSSES FOR PERSONAL INJURIES TO OR DEATH OF EMPLOYEES OF
          THE BUYER, ITS CONTRACTORS,  AGENTS,  CONSULTANTS AND REPRESENTATIVES,
          AND  DAMAGE TO THE  PROPERTY  OF BUYER OR  OTHERS  ACTING ON BEHALF OF
          BUYER;  AND (B) LOSSES FOR PERSONAL  INJURIES TO OR DEATH OF EMPLOYEES
          OF THE SELLER  GROUP OR THIRD  PARTIES,  AND DAMAGE TO THE PROPERTY OF
          THE SELLER GROUP OR THIRD PARTIES.  THE FOREGOING  INDEMNITY INCLUDES,
          AND THE PARTIES INTEND IT TO INCLUDE, AN INDEMNIFICATION OF THE SELLER
          GROUP FROM AND AGAINST

                                       18

<PAGE>

          LOSSES  ARISING  OUT OF OR  RESULTING,  IN  WHOLE  OR  PART,  FROM THE
          CONDITION  OF  THE  ASSETS  OR  THE  SELLER   GROUP'S   SOLE,   JOINT,
          COMPARATIVE, OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR FAULT.

     15.4 Notification.   As  soon  as  reasonably   practical  after  obtaining
          knowledge thereof, the indemnified Party shall notify the indemnifying
          Party  of  any  claim  or  demand  which  the  indemnified  Party  has
          determined has given or could give rise to a claim for indemnification
          under this  Article  15.  Such notice  shall  specify  the  agreement,
          representation  or warranty  with  respect to which the claim is made,
          the  facts  giving  rise to the claim  and the  alleged  basis for the
          claim,  and the amount (to the extent then  determinable) of liability
          for which  indemnity  is  asserted.  In the event any action,  suit or
          proceeding  is  brought  with  respect  to which a Party may be liable
          under this Article 15, the defense of the action,  suit or  proceeding
          (including all settlement negotiations and arbitration, trial, appeal,
          or other  proceeding)  shall be at the  discretion of and conducted by
          the indemnifying  Party. If an indemnified Party shall settle any such
          action,  suit  or  proceeding  without  the  written  consent  of  the
          indemnifying Party (which consent shall not be unreasonably withheld),
          the  right of the  indemnified  Party to make any  claim  against  the
          indemnifying  Party on  account  of such  settlement  shall be  deemed
          conclusively  denied.  An indemnified Party shall have the right to be
          represented  by its own counsel at its own expense in any such action,
          suit or  proceeding,  and if an  indemnified  Party  is  named  as the
          defendant in any action,  suit or proceeding,  it shall be entitled to
          have its own counsel and defend such action,  suit or proceeding  with
          respect  to  itself  at its  own  expense.  Subject  to the  foregoing
          provisions of this Article 15, neither Party shall,  without the other
          Party's  written  consent,  settle,  compromise,  confess  judgment or
          permit  judgment by default in any action,  suit or proceeding if such
          action would create or attach any liability or obligation to the other
          Party. The Parties agree to make available to each other, and to their
          respective  counsel and  accountants,  all  information  and documents
          reasonably  available  to them  which  relate to any  action,  suit or
          proceeding,  and the  Parties  agree  to  render  to each  other  such
          assistance  as they may  reasonably  require of each other in order to
          ensure the proper and  adequate  defense of any such  action,  suit or
          proceeding.

16.  MISCELLANEOUS.

     16.1 Confidentiality.

          (A)  Prior to Closing,  to the extent not already public,  Buyer shall
               exercise all due diligence in safeguarding and maintaining secure
               all engineering,  geological and geophysical data,  seismic data,
               reports and maps,  the results and  findings of Buyer with regard
               to its  due  diligence  associated  with  the  Assets  (including
               without  limitation with regard to due diligence  associated with
               environmental  and title  matters) and other data relating to the
               Assets  (collectively,  the  "Confidential  Information").  Buyer
               acknowledges that, prior to Closing, all Confidential Information
               shall be

                                       19

<PAGE>

               treated  as  confidential  and  shall not be  disclosed  to third
               parties without the prior written consent of Seller.

          (B)  In the event of  termination  of this  Agreement  for any reason,
               Buyer  shall  not use or  knowingly  permit  others  to use  such
               Confidential  Information in a manner  detrimental to Seller, and
               will  not  disclose  any  such  Confidential  Information  to any
               person,  firm,  corporation,  association or other entity for any
               reason  or  purpose   whatsoever,   except  to  Seller  or  to  a
               governmental  agency  pursuant to a valid subpoena or other order
               or  pursuant to  applicable  governmental  regulations,  rules or
               statutes.

          (C)  The  undertaking  of  confidentiality  shall not diminish or take
               precedence over any separate  confidentiality  agreement  between
               the  Parties.  Should this  Agreement  terminate,  such  separate
               confidentiality agreement shall remain in full force and effect.

     16.2 Competition.   Buyer   acknowledges  that  Seller  may  presently  own
          interests or have leads, prospects, information or ideas on properties
          or leaseholds adjacent to, adjoining or in the vicinity of the Assets.
          Seller shall not be  prohibited  in any way from pursuing any activity
          or business  opportunity  on property not being  transferred  to Buyer
          pursuant to this Agreement.

     16.3 Notice. Any notice, request,  demand, or consent required or permitted
          to be given  hereunder  shall be in writing and delivered in person or
          by  certified  letter,  with return  receipt  requested  or by prepaid
          overnight delivery service, or by facsimile addressed to the Party for
          whom intended at the following addresses:

          SELLER:

                    Millennium Offshore Group, Inc.
                    5300 Memorial Drive, Suite 1070
                    Houston, Texas 77057
                    Attn: Mr. Kent Singleton
                    Tel: (713) 652-0137
                    Fax: (713) 652-0482

          BUYER:

                    Ridgewood Energy Corporation.
                    947 Linwood Avenue
                    Ridgewood, New Jersey 07450
                    Attn: Mr. Robert Swanson
                    Tel: (201) 447-9000
                    Fax: (201) 447-0474

          or at such  other  address as any of the above  shall  specify by like
          notice to the other.

     16.4 Press  Releases  and Public  Announcements.  No Party  shall issue any
          press release or make any public announcement  relating to the subject
          matter of this Agreement

                                       20

<PAGE>

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

    16.12 Counterpart  Execution.  This  Agreement may be executed in any number
          of counterparts,  and each such counterpart  hereof shall be deemed to
          be an original, and all of which together shall constitute one and the
          same instrument.

    16.13 Waiver of  Certain  Damages.  Each of the  Parties  hereby  waives and
          agrees not to seek  consequential  or punitive damages with respect to
          any claim, controversy,  or dispute arising out of or relating to this
          Agreement or the breach thereof.

    16.14 Amendments and Waivers.  This Agreement may not be modified or amended
          except by an instrument in writing  signed by both parties.  Any Party
          hereto may,  only by an  instrument  in writing,  waive  compliance by
          another Party with any term or provision of this Agreement on the part
          of such other  Party  hereto to be  performed  or complied  with.  The
          waiver by any Party  hereto  of a breach of any term or  provision  of
          this  Agreement  shall not be construed as a waiver of any  subsequent
          breach.

Executed as of the day and year first above written.

                                        SELLER:
                                        MILLENNIUM OFFSHORE GROUP, INC.

                                        By: /s/ Stan Mendenhall
                                            -----------------------------------
                                        Name: Stan Mendenhall
                                        Title: Executive Vice President

                 [SEAL]

                                        RIDGEWOOD ENERGY CORPORATION

                                        By: /s/ Robert E. Swanson
                                            -----------------------------------
                                        Name: Robert E. Swanson
                                        Title: President

                                       22

<PAGE>

                                EXHIBIT 1.1 (A)-l

     Attached to and made a part of the Purchase and Sale Agreement between
 Millennium Offshore Group, Inc. as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

                                      LEASE

Oil and Gas Lease from the United States of America,  as Lessor, to Amerada hess
Corporation,  et al, as Lessees, effective as of July 1, 1983, identified in the
office of The Minerals Management Service, Gulf of Mexico OCS Region, as Oil and
Gas Lease of Submerged Lands under the Outer Continental Shelf Lands Act bearing
serial  number OCS-G 05346,  describing  Block 556,  West  Cameron  Area,  South
Addition, as shown on OCS Official Leasing Map, Louisiana Map No. LA1B, covering
5,000.00  acres,  more or less,  INSOFAR  AND ONLY  INSOFAR as said OCS-G  05346
covers the  Southeast  Quarter  (SE/4) and further  limited to those  rights and
depths below the Lentic 4 Unit Sand as identified at 16,085 feet Measured  Depth
in the Induction-SFL Electric Log for the CNG Producing Company OCS-G 05391 Well
No. C-5,  (formerly  known as the OCS-G  05391 Well No. 5),  having API # 17 702
4090600.

     Buyer shall own the following interests in the Lease:

1.   An  undivided  40% Working  Interest  with a  corresponding  32.66667%  Net
     Revenue  Interest in the rights below the Lentic 4 Unit Sand as  identified
     at 16,085 feet Measured Depth in the Induction-SFL Electric Log for the CNG
     Producing  Company OCS-G 05391 Well No. C-5,  (formerly  known as the OCS-G
     05391 Well No. 5), having API # 17 702 in the Southeast  Quarter  (SE/4) of
     West Cameron Block 556, OCS-G 05346.

2.   A 40%  Unit  Participation  Interest  with a  corresponding  33.01332%  Net
     Revenue  Interest,  within a portion of the Unit area  designated  as Fault
     Block A-3 and Fault Block B-4 in the existing  voluntary  unit  governed by
     the Voluntary  Pooling and Unitization  Agreement dated September 16, 1985,
     covering  portions  West  Cameron  Block 556,  OCS-G 05346 and East Cameron
     Block 299 OCS-G 05391; however, in the event Anadarko Petroleum Corporation
     or its assign does not exercise  their  preferential  right to purchase the
     interest  acquired by Seller from Gulf of Mexico Oil and Gas Properties LLC
     ("GOM  Interest"),  then the GOM Interest of 11.25% Working Interest with a
     corresponding  8.375% Net Revenue  Interest will pass to Seller and,  Buyer
     and Seller agree that if same  occurs,  then the  interest  transferred  to
     Buyer in Fault  Block A-3 and Fault  Block  B-4 shall be  40.0000%  Working
     Interest with a corresponding 32.34236% Net Revenue Interest.

                                 END OF EXHIBIT

                                       23

<PAGE>

                                EXHIBIT 1.1 (A)-2

     Attached to and made a part of the Purchase and Sale Agreement between
 Millennium Offshore Group, Inc. as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

                                      WELLS

     There are no existing  wellbores or facilities  being  conveyed  hereunder;
     however,  in the event the East Cameron  Block 299 OCS-G 05391 A003 Well is
     to be utilized for a sidetrack operation to either Fault Block A-3 or Fault
     Block  B-4,  Seller  agrees to  transfer  to Buyer an  undivided  40.00000%
     Working Interest in such well so that Buyer shall have the right to utilize
     same for such sidetracking operation in which it participates.  Thereafter,
     Buyer shall assume 40.00000% of the obligations  associated with such well,
     including,  but not limited to, the ultimate  plugging and  abandonment  of
     same.

                                 END OF EXHIBIT

                                       24

<PAGE>

                                    EXHIBIT 3

     Attached to and made a part of the Purchase and Sale Agreement between
  Millennium Offshore Group, Inc as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

                                ALLOCATED VALUES:

An undivided  40% Working  Interest with a  corresponding  32.66667% Net Revenue
Interest in the rights below the Lentic 4 Unit Sand as identified at 16,085 feet
Measured Depth in the  Induction-SFL  Electric Log for the CNG Producing Company
OCS-G 05391 Well No. C-5, (formerly known as the OCS-G 05391 Well No. 5), having
API # 17 702 in the Southeast  Quarter  (SE/4) of West Cameron Block 556,  OCS-G
05346;

AND

A 40% Unit  Participation  Interest within a portion of the Unit area designated
as Fault Block A-3 and Fault Block B-4 in the existing  voluntary  unit governed
by the Voluntary  Pooling and  Unitization  Agreement  dated September 16, 1985,
covering portions West Cameron Block 556, OCS-G 05346 and East Cameron Block 299
OCS-G 05391;

AND

Ridgewood shall carry  Millennium for 10% of 6/6ths Working Interest through the
installation  of the  Wellhead on the initial  test well (OCS-G 05346 B004 Well)
planned to be drilled in the First  Quarter of 2005 to test the Deep Rights.  In
the event Millennium only owns an undivided 6.66667% Working Interest due to the
exercising of the preferential  right by Anadarko  Petroleum  Corporation or its
assignee,  Ridgewood  agrees to carry Millennium for 6.66667% of the OCS-G 05346
B004 Well through installation of the Wellhead.

ESTIMATED VALUE: $12,000,000.00 (U.S.)

                                 END OF EXHIBIT

                                       26

<PAGE>

                                    EXHIBIT 4

     Attached to and made a part of the Purchase and Sale Agreement between
 Millennium Offshore Group, Inc. as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

                         ASSIGNMENT OF OPERATING RIGHTS

           OCS-G 05346, Block 556, West Cameron Area, South Addition,

OFFSHORE LOUISIANA               }
                                 }
OUTER CONTINENTAL SHELF          }       KNOW BY ALL THESE PRESENTS:
                                 }
UNITED STATES OF AMERICA         }

          THAT,  Millennium  Offshore  Group,  Inc.,  5300 Memorial,  Ste. 1070,
Houston, Texas 77007, hereinafter called "Assignor", for and in consideration of
the sum of Ten Dollars ($10.00) and other good and valuable  consideration to it
paid by Ridgewood Energy Corporation,  947 Linwood Avenue, Ridgewood, New Jersey
07450, hereinafter called "Assignee",  the receipt and full sufficiency of which
is hereby  acknowledged,  does hereby  grant,  convey,  transfer and assign unto
Assignee,  its heirs,  successors and assigns,  an undivided 40.00000% Operating
Rights  Interest  in and to the oil  and  gas  mineral  lease  identified  below
(hereafter called "Subject Lease"), to wit:

          Oil and Gas Lease from the United  States of  America,  as Lessor,  to
          Amerada hess Corporation,  et al, as Lessees,  effective as of July 1,
          1983,  identified  in the office of The Minerals  Management  Service,
          Gulf of Mexico OCS  Region,  as Oil and Gas Lease of  Submerged  Lands
          under the Outer  Continental  Shelf  Lands Act bearing  serial  number
          OCS-G 05346,  describing Block 556, West Cameron Area, South Addition,
          as shown on OCS Official Leasing Map, Louisiana Map No. LA1B, covering
          5,000.00 acres,  more or less,  INSOFAR AND ONLY INSOFAR as said OCS-G
          05346 covers the Southeast Quarter (SE/4) and further limited to those
          rights and depths below the Lentic 4 Unit Sand as identified at 16,085
          feet  Measured  Depth in the  Induction-SFL  Electric  Log for the CNG
          Producing  Company  OCS-G 05391 Well No. C-5,  (formerly  known as the
          OCS-G 05391 Well No. 5), having API # 17 702 4090600.

          This  assignment  is made  subject to all of the terms of express  and
implied covenants and conditions of the Subject Lease

          This  assignment  is also made subject to the terms and  provisions of
the following listed agreements, of which all terms, conditions and reservations
of said agreements are incorporated herein by reference:

                                       27

<PAGE>

               (a)  the Subject Lease;

               (b)  the  Operating  Agreement  dated July 1, 1983,  between  TXP
                    Operating   Company,   as   Operator,   and   Amerada   Hess
                    Corporation, et al, as Non-Operators;

               (c)  the Purchase and Sale Agreement dated effective  November 1,
                    2004, by and between  Millennium  Offshore  Group,  Inc., as
                    Seller,  and  Ridgewood  Energy   Corporation.,   as  Buyer,
                    ("Purchase and Sale Agreement");

               (d)  the Letter of Intent between Millennium  Offshore,  Inc. and
                    Ridgewood Energy Corporation dated October 15, 2004;

               (e)  the  Voluntary  Pooling  and  Unitization   Agreement  dated
                    September  16,  1985,  between  CNG  Producing  Company  and
                    Transco  Exploration  Company,  et al, as  amended by Letter
                    Agreement  dated  September 16, 1987,  between CNG Producing
                    Company and Amerada Hess  Corporation,  et al, as amended by
                    Letter  Agreement  dated  September  16,  1987,  between CNG
                    Producing Company and Amerada Hess Corporation, et al;

               (f)  the CoDevelopment  Agreement dated August 26, 1985,  between
                    Belnorth Petroleum Corporation and CNG Producing Company, et
                    al; the  Offshore  Operating  Agreement  dated July 1, 1983,
                    between TXP Operating  Company and Amerada Hess Corporation,
                    et al, as Non-Operators.

          Assignor specifically  excludes herefrom all rights, title,  interests
and liabilities associated with any presently existing platform(s), pipeline(s),
wellbore(s),  and other personal property  associated with the Subject Lease, it
being understood and agreed that Assignee shall only be responsible for plugging
and abandonment of the wellbores in which Assignee owns an interest here through
this Assignment of Operating  Rights and shall bear no plugging,  abandonment or
decommissioning  expense related to any well,  facilities or pipelines which are
not drilled, installed and/or owned by Assignee.

          THIS  ASSIGNMENT   SHALL  BE  GOVERNED,   CONSTRUED  AND  ENFORCED  IN
ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.

          THIS  ASSIGNMENT OF OPERATING  RIGHTS IS EXECUTED BY ASSIGNOR  WITHOUT
WARRANTY OF TITLE,  EITHER  EXPRESSED OR IMPLIED,  EXCEPT AS TO ACTS BY, THROUGH
AND UNDER ASSIGNOR.

                                       28

<PAGE>

     IN WITNESS WHEREOF, this Assignment is executed by ASSIGNOR and ASSIGNEE on
the dates set forth in their respective  acknowledgements  hereto,  but shall be
effective  for all  purposes as of 12:01 a.m.,  on November 1, 2004  ("Effective
Time"),  subject to the  approval  thereof by the Minerals  Management  Service,
United States Department of the Interior, pursuant to 30 CFR 256, Sub-Part J.

WITNESSES:                              ASSIGNOR:
                                        Millennium Offshore Group, Inc. (2383)
-------------------------------------

-------------------------------------   By:
                                            ------------------------------------

WITNESSES:                              ASSIGNEE:
                                        Ridgewood Energy Corporation (1308)

[Illegible]
-------------------------------------
[Illegible]                             By: [Illegible]
                                            ------------------------------------

             [SEAL]

                                       29

<PAGE>

                                 ACKNOWLEDGMENT

STATE OF NEW JERSEY   Section
                      Section
COUNTY OF BERGEN      Section

          BEFORE ME, the undersigned authority, on this 15 day of November 2004,
personally  appeared  [Illegible]  known to me to be the  person  whose  name is
subscribed  to  the  foregoing  instrument  as  President  of  RIDGEWOOD  ENERGY
CORPORATION, a Delaware corporation, and acknowledged to me that he executed the
same for  purposes  and  consideration  therein  expressed,  and in the capacity
therein stated and is the act and deed of said corporation.

                                /s/ Jeanne Thompson
                                ------------------------------------------------
                                Notary Public in and for the State of New Jersey

                                My Commission Expires:______________________

                                                        JEANNE THOMPSON
                                                 A Notary Public of New Jersey
                                               My Commission Expires May 3, 2007

STATE OF TEXAS     Section
                   Section
COUNTY OF HARRIS   Section

          BEFORE  ME,  the   undersigned   authority,   on  this  _____  day  of
___________,  2004, personally appeared  _______________,  known to me to be the
person whose name is subscribed to the foregoing instrument as Vice President of
Millennium  Offshore Group,  Inc., a Texas  corporation,  and acknowledged to me
that he executed the same for purposes and consideration therein expressed,  and
in the capacity therein stated and is the act and deed of said corporation.

                                     -------------------------------------------
                                     Notary Public in and for the State of Texas

                                     My Commission Expires: ____________________

                                       30

<PAGE>

                                    EXHIBIT 5

     Attached to and made a part of the Purchase and Sale Agreement between
 Millennium Offshore Group, Inc. as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

                        ASSIGNMENT OF CONTRACTUAL RIGHTS

       Portions of Fault Block A-3 & Fault Block B in Voluntary Unit dated
                               September 16, 1985
            OCS-G 05346, Block 556 West Cameron Area, South Addition
            OCS-G 05391, Block 299, East Cameron Area, South Addition

OFFSHORE LOUISIANA         }
                           }
OUTER CONTINENTAL SHELF    } KNOW BY ALL THESE PRESENTS:
                           }
UNITED STATES OF AMERICA   }

          THAT,  Millennium  Offshore  Group,  Inc.,  5300 Memorial,  Ste. 1070,
Houston, Texas 77007, hereinafter called "Assignor", for and in consideration of
the sum of Ten Dollars ($10.00) and other good and valuable  consideration to it
paid by Ridgewood Energy Corporation,  947 Linwood Avenue, Ridgewood, New Jersey
07450, hereinafter called "Assignee",  the receipt and full sufficiency of which
is hereby  acknowledged,  does hereby  grant,  convey,  transfer and assign unto
Assignee, its heirs,  successors and assigns, an undivided 40.00000% Contractual
Rights  Interest with a corresponding  33.01332% Net Revenue  Interest in and to
the oil and gas mineral  leases  identified  below  (hereafter  called  "Subject
Lease")  INSOFAR AND ONLY INSOFAR as they cover the lands within Fault Block A-3
and Fault Block B-4 as depicted on the plat  attached  hereto as Exhibit "A", to
wit:

     1.   Oil and Gas Lease from the United  States of  America,  as Lessor,  to
          Amerada hess Corporation,  et al, as Lessees,  effective as of July 1,
          1983,  identified  in the office of The Minerals  Management  Service,
          Gulf of Mexico OCS  Region,  as Oil and Gas Lease of  Submerged  Lands
          under the Outer  Continental  Shelf  Lands Act bearing  serial  number
          OCS-G 05346,  describing Block 556, West Cameron Area, South Addition,
          as shown on OCS Official Leasing Map, Louisiana Map No. LA1B; and

     2.   Oil and Gas Lease from the United States of America, as Lessor, to CNG
          Producing Company and Mark Producing,  Inc., as Lessees,  effective as
          of July 1, 1983,  identified in the office of The Minerals  Management
          Service,  Gulf of Mexico OCS Region, as Oil and Gas Lease of Submerged
          Lands  under  the  Outer  Continental  Shelf  Lands  Act OCS-G 05391,
          describing  Block 299,  East  Cameron  Area,  as shown on OCS Official
          Leasing Map, Louisiana Map No. 2A

          In the event  Anadarko  Petroleum  Corporation  or its assign does not
exercise their  preferential  right to purchase the interest  acquired by Seller
from Gulf of Mexico Oil and Gas  Properties LLC ("GOM  Interest"),  then the GOM
Interest of 11.25% Working Interest with a

                                       31

<PAGE>

corresponding  8.375% Net Revenue  Interest will pass to Assignor and,  Assignee
and  Assignor  agree  that if same  occurs,  then the  interest  transferred  to
Assignee  in Fault  Block A-3 and Fault  Block  B-4  shall be  40.0000%  Working
Interest with a corresponding 32.34236% Net Revenue Interest.

          In the event the East Cameron Block 299 OCS-G 05391 A003 Well is to be
utilized  for a sidetrack  operation  to either  Fault Block A-3 and Fault Block
B-4,  Assignor  agrees to transfer to Assignee an  undivided  40.00000%  Working
Interest in such well so that Assignee  shall have the right to utilize same for
such sidetracking operation in which it participates. Thereafter, Assignee shall
assume 40.00000% of the obligations  associated with such well,  including,  but
not limited to, the ultimate  plugging and  abandonment of same, and be entitled
to the associated net revenue interest as provided for above with such well.

          This  assignment  is made  subject to all of the terms of express  and
implied covenants and conditions of the Subject Lease.

          This  assignment  is also made subject to the terms and  provisions of
the following listed agreements, of which all terms, conditions and reservations
of said agreements are incorporated herein by reference:

               (a)  the Subject Lease;

               (b)  the  Operating  Agreement  dated July 1, 1983,  between  TXP
                    Operating   Company,   as   Operator,   and   Amerada   Hess
                    Corporation, et al, as Non-Operators;

               (c)  the Purchase and Sale Agreement dated effective  November 1,
                    2004, by and between  Millennium  Offshore  Group,  Inc., as
                    Seller,  and  Ridgewood  Energy   Corporation.,   as  Buyer,
                    ("Purchase and Sale Agreement");

               (d)  the Letter of Intent between Millennium  Offshore,  Inc. and
                    Ridgewood Energy Corporation dated October 15, 2004;

               (e)  the  Voluntary  Pooling  and  Unitization   Agreement  dated
                    September  16,  1985,  between  CNG  Producing  Company  and
                    Transco  Exploration  Company,  et al, as  amended by Letter
                    Agreement  dated  September 16, 1987,  between CNG Producing
                    Company and Amerada Hess  Corporation,  et al, as amended by
                    Letter  Agreement  dated  September  16,  1987,  between CNG
                    Producing Company and Amerada Hess Corporation, et al;

               (f)  the CoDevelopment  Agreement dated August 26, 1985,  between
                    Belnorth Petroleum Corporation and CNG Producing Company, et
                    al; the  Offshore  Operating  Agreement  dated July 1, 1983,
                    between TXP Operating  Company and Amerada Hess Corporation,
                    et al, as Non-Operators.

          Assignor specifically  excludes herefrom all rights, title,  interests
and liabilities associated with any presently existing platform(s), pipeline(s),
wellbore(s),  (except, if assigned above, the East Cameron Block 299 OCS-G 05391
A003 Well) and other personal property associated with

                                       32

<PAGE>

the Subject  Lease,  it being  understood and agreed that Assignee shall only be
responsible for plugging and abandonment of the wellbores in which Assignee owns
an interest here through this Assignment of Contractual Rights and shall bear no
plugging, abandonment or decommissioning expense related to any well, facilities
or pipelines which are not drilled, installed and/or owned by Assignee.

          THIS  ASSIGNMENT   SHALL  BE  GOVERNED,   CONSTRUED  AND  ENFORCED  IN
ACCORDANCE WITH THE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.

          THIS  ASSIGNMENT OF OPERATING  RIGHTS IS EXECUTED BY ASSIGNOR  WITHOUT
WARRANTY OF TITLE,  EITHER  EXPRESSED OR IMPLIED,  EXCEPT AS TO ACTS BY, THROUGH
AND UNDER ASSIGNOR.

          IN WITNESS  WHEREOF,  this  Assignment  is executed  by  ASSIGNOR  and
ASSIGNEE on the dates set forth in their respective acknowledgements hereto, but
shall be  effective  for all  purposes  as of 12:01  a.m.,  on  November 1, 2004
("Effective Time").

WITNESSES:                                ASSIGNOR:
                                          Millennium Offshore Group, Inc. (2383)
-----------------------------

-----------------------------             By:
                                              ----------------------------------
          [SEAL]

                                          ASSIGNEE:
                                          Ridgewood Energy Corporation (1308)

                                          By: /s/ [Illegible]
                                              ----------------------------------

                                       33

<PAGE>

                                 ACKNOWLEDGMENT

STATE OF NEW JERSEY   Section
                      Section
COUNTY OF BERGEN      Section

          BEFORE ME the undersigned authority,  on this 15 day of November 2004,
personally appeared Robert E. Swanson known to me to be the person whose name is
subscribed  to  the  foregoing  instrument  as  President  of  RIDGEWOOD  ENERGY
CORPORATION, a Delaware corporation, and acknowledged to me that he executed the
same for  purposes  and  consideration  therein  expressed,  and in the capacity
therein stated and is the act and deed of said corporation.

                                          /s/ Jeanne Thompson
                                          --------------------------------------
                                          Notary Public in and for the State of
                                          New Jersey

                                          My Commission Expires: _______________

                                                        JEANNE THOMPSON
                                                 A Notary Public of New Jersey
                                               My Commission Expires May 3, 2007

STATE OF TEXAS     Section
                   Section
COUNTY OF HARRIS   Section

          BEFORE ME the undersigned authority, on this ____ day of ____________,
2004,  personally  appeared  _________________________,  known  to me to be  the
person whose name is subscribed to the foregoing instrument as Vice President of
Millennium Offshore Group Inc., a Texas corporation, and acknowledged to me that
he executed the same for purposes and consideration  therein  expressed,  and in
the capacity therein stated and is the act and deed of said corporation.

                                          --------------------------------------
                                          Notary Public in and for the State of
                                          Texas

                                          My Commission Expires: _______________

                                       34

<PAGE>

                                   Exhibit "A"

  Attached to and made a part of that certain Assignment of Contractual Rights
       between Millennium Offshore Group, Inc., as Assignor, and Ridgewood
                        Energy Corporation, as Assignee.

                                    [GRAPHIC]

<PAGE>

                                    EXHIBIT 6

     Attached to and made a part of the Purchase and Sale Agreement between
 Millennium Offshore Group, Inc. as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

ARTICLE XXI OF THAT CERTAIN OPERATING  AGREEMENT DATED JULY 1, 1983, BETWEEN TXP
OPERATING  COMPANY,  AS  OPERATOR,  AND  AMERADA  HESS  CORPORATION,  ET AL,  AS
NON-OPERATORS, COVERING OCS-G 05346, WEST CAMERON BLOCK 556, OFFSHORE LOUISIANA,
PROVIDES FOR A PREFERENTIAL RIGHT TO PURCHASE.

                                 END OF EXHIBIT

                                       35

<PAGE>

                                    EXHIBIT 7

     Attached to and made a part of the Purchase and Sale Agreement between
  Millennium Offshore Group, Inc as Seller, and Ridgewood Energy Corporation as
                                     Buyer.

                                ASSUMED CONTRACTS

          (a)  the Subject Lease;

          (b)  the Operating Agreement dated July 1, 1983, between TXP Operating
               Company,  as Operator,  and Amerada Hess  Corporation,  et al, as
               Non-Operators;

          (c)  the Purchase and Sale Agreement dated effective November 1, 2004,
               by and between  Millennium  Offshore Group,  Inc., as Seller, and
               Ridgewood  Energy  Corporation.,  as Buyer,  ("Purchase  and Sale
               Agreement");

          (d)  the  Letter of  Intent  between  Millennium  Offshore,  Inc.  and
               Ridgewood Energy Corporation dated October 15, 2004;

          (e)  the Voluntary  Pooling and Unitization  Agreement dated September
               16, 1985,  between CNG Producing Company and Transco  Exploration
               Company,  et al, as amended by Letter  Agreement  dated September
               16,  1987,   between  CNG  Producing  Company  and  Amerada  Hess
               Corporation,   et  al,  as  amended  by  Letter  Agreement  dated
               September  16, 1987,  between CNG  Producing  Company and Amerada
               Hess Corporation, et al;

          (f)  the  CoDevelopment  Agreement  dated  August  26,  1985,  between
               Belnorth Petroleum  Corporation and CNG Producing Company, et al;
               the Offshore Operating  Agreement dated July 1, 1983, between TXP
               Operating  Company  and  Amerada  Hess  Corporation,  et  al,  as
               Non-Operators.

                            BONDS CURRENTLY EFFECTIVE

OCS Mineral  Lessee's and Operators  Supplemental  Plugging and Abandonment Bond
RLB0006827  from surety  company RLI Insurance  Company to principle  Millennium
Offshore Group, Inc. in the amount of $1,550,000 dated September 16, 2004

OCS Mineral  Lessee's and Operators  Supplemental  Plugging and Abandonment Bond
RLB0004073  from surety  company RLI Insurance  Company to principle  Millennium
Offshore Group, Inc. in the amount of $2,500,000 dated December 26, 2001

                                 END OF EXHIBIT

                                       36

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