Document:

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                                                                    EXHIBIT 10.3
                        PRODUCTION AND DELIVERY AGREEMENT

         This Agreement ("Agreement") is made and entered into this 31st day
of March, 2000, but effective as of 7:00 a.m. on March 1, 2000, by and
between ODESSA EXPLORATION INCORPORATED, a Delaware corporation, whose
address is 6010 Highway 191, Suite 210, Odessa, Texas 79762 ("Seller"), and
NORWEST ENERGY CAPITAL, INC., a Texas corporation, whose address is 500 West
Texas Avenue, Midland, Texas 79701 ("Buyer").

         WHEREAS, by Conveyance of Production Payment of even date herewith
from Seller to Buyer (the "Conveyance"), Buyer has purchased and acquired
from Seller and Seller has sold and conveyed to Buyer a production payment
interest in the Subject Interests described in Exhibit A hereto.

         NOW, THEREFORE, as a material inducement to cause Buyer to purchase
the Production Payment and in consideration of the mutual benefits and
obligations of the parties hereunder, Buyer and Seller have agreed, and
hereby agree, as follows:

         1. DEFINITIONS. Each capitalized term used herein but not defined
herein shall have the meaning given to it in the Conveyance.

         2. TAKING IN KIND; MARKETING. (a) The Hydrocarbons comprising a part
of the Production Payment (the "Production Payment Hydrocarbons") shall be
delivered to Buyer in kind or to the credit of Buyer, free of cost, at the
Delivery Point.

                  (b) It is recognized and understood that the Production
Payment Hydrocarbons are subject to the terms of product sales contracts
described on Exhibit B attached hereto (such contracts, together with any
amendments, renewals or extensions approved by Buyer pursuant to Subsection
2(c) hereof and any new or replacement contracts which Seller and Buyer may
hereafter agree in writing are Existing Sales Contracts, the "Existing Sales
Contracts"). It is the intention of Buyer and Seller that until Buyer gives
Seller thirty (30) days prior written notice that Buyer intends to take all
or any portion of the Production Payment Hydrocarbons in kind or enter into
separate product sales contracts therefor, Seller shall deliver under the
Existing Sales Contracts on behalf of and for the credit of Buyer all of the
Production Payment Hydrocarbons during the remaining term of the Existing
Sales Contracts and as any such term may be extended pursuant to paragraph
(c) of this Section 2 below, at the contract price and terms applicable
thereto without deduction for nonperformance or noncompliance.

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                  (c) Seller shall not amend the Existing Sales Contracts
without Buyer's prior written consent, which consent shall not be
unreasonably withheld. Other than for those periods of time which would allow
Seller to cancel any such Existing Sales Contract upon thirty (30) days
notice or unless Buyer consents in writing otherwise, which consent shall not
be unreasonably withheld, Seller shall not renew or extend the Existing Sales
Contracts. Upon Buyer giving Seller notice of Buyer's intention to take all
or any portion of the Production Payment Hydrocarbons in kind or enter
separate product sales contracts therefor pursuant to paragraph (b) of this
Section 2, Seller shall give such notices and take other actions, if any, as
may be required or appropriate to cause the relevant Existing Sales Contracts
not to be extended or renewed, but to expire at the end of their then
respective current terms.

                  (d) All Production Payment Hydrocarbons shall be delivered
to Buyer, or to Buyer's credit, into the facilities installed and maintained
by the First Transporter or first purchaser located at the Delivery Point,
currently as produced and saved, in its natural state after removal of other
substances by conventional mechanical field separation facilities.

                  (e) All Production Payment Hydrocarbons that Buyer has
elected to take in kind, if any, that is not made available to Buyer at the
Delivery Point (and excluding any Production Payment Hydrocarbons to be sold
pursuant to the Existing Sales Contracts) shall be marketed by Seller on
behalf of Buyer and sold pursuant to arm's length contracts with parties not
affiliated with Seller, containing terms negotiated by Seller as a prudent
operator. Any such sale by Seller shall be subject always to the right of
Buyer, upon notice to Seller, to separately dispose of all or any portion of
such Production Payment Hydrocarbons and shall be only for such minimum
periods of time (not to exceed one year) as are reasonably appropriate under
the circumstances, unless Buyer consents in writing to a longer contract term.

                  (f) All proceeds received by Seller from the sale of
Production Payment Hydrocarbons sold on behalf of Buyer pursuant to the terms
hereof (which shall include any Production Payment Hydrocarbons sold pursuant
to the Existing Sales Contracts) are received by Seller in trust for Buyer
and shall be held in trust by Seller for Buyer; provided, however, Seller
shall pay such proceeds by wire transfer to such account as Buyer shall have
designated from time to time to Buyer within forty-five (45) days after the
month of production; and provided further that in the event any proceeds
received by Seller from the sale of Production Payment Hydrocarbons payable
to Buyer are not received by Buyer within such period, interest shall
thereafter accrue at an annual rate of twelve percent (12%), calculated on
the basis of a three hundred sixty-five (365) day year, on the amount of said
unreceived proceeds and shall be paid to Buyer at the time said proceeds are
paid to Buyer.

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For all Gas comprising part of the Production Payment that is sold and for
which proceeds are received by Seller pursuant to any Existing Sales
Contract, Seller and Buyer agree that the amount payable to Buyer by Seller
pursuant to this paragraph (f) shall be calculated using the actual quantity
of Gas sold during the relevant month and for which proceeds are received by
Seller and a price per MMBtu for West Texas-Waha as published in the first of
the month publication for the month of production in Inside F.E.R.C.'s Gas
Market Report. For all Oil comprising part of the Production Payment that is
sold and for which proceeds are received by Seller pursuant to any Existing
Sales Contract, Seller and Buyer agree that the amount payable to Buyer by
Seller pursuant to this paragraph (f) shall be calculated using the actual
quantity of Oil sold during the relevant month and for which proceeds are
received by Seller and a price per Barrel for the month of production equal
to the price per Barrel in an Existing Sales Contract that governs the sale
of fifty percent (50%) or more of all of the Oil sold from the Subject
Interests in such month; provided, however, if no one Existing Sales Contract
governs the sale of fifty percent (50%) or more of all of the Oil sold from
the Subject Interests for a month, the price per Barrel shall equal the
unweighted average of the price per Barrel in those of the Existing Sales
Contracts which govern the largest quantities of Oil sold and which
cumulatively govern the sale of fifty percent (50%) or more of all Oil sold
from the Subject Interests; and further provided, however, if the average of
the daily price of West Texas Intermediate deemed 40 degrees (EDQ) posted by
Koch Oil falls below $21.00 for a month (or if there is no such posting, then
the daily average of the four highest postings for West Texas Intermediate
deemed 40 degrees (EDQ)), the amount payable to Buyer shall be increased by
$0.25 per Barrel for such month. Seller will diligently enforce the terms of
all sales agreements under which Production Payment Hydrocarbons are sold on
behalf of Buyer, including full and prompt payment of all amounts due from
such sales. In the event of any late payment by any purchaser, Seller shall
remit to Buyer any interest or penalties collected with respect to the sale
of Production Payment Hydrocarbons. In the event Seller is in default in its
obligations hereunder, and such default is continuing for fifteen (15) days
after written notice from Buyer, Buyer shall have the right to direct the
purchasers of any Production Payment Hydrocarbons to pay the proceeds thereof
directly to Buyer by delivering to such purchasers the letters in lieu of
transfer orders previously executed by Seller and held by Buyer. In the event
of Seller's default as described above and in the event Buyer requests direct
payment, Seller will cooperate in instructing the purchasers to pay such
proceeds directly to Buyer and shall execute such additional instruments as
may be necessary or appropriate in connection therewith.

         3. GATHERING AND TRANSPORTATION. Seller at its sole cost and expense
shall gather or cause to be gathered all Production Payment Hydrocarbons at
the wellheads where produced and transport the same to the Delivery Points,
without any charge or deduction to Buyer for any costs attributable to
preparing Hydrocarbons for delivery, and delivering same

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to the Delivery Points. Seller shall be in exclusive control and possession
of the Production Payment Hydrocarbons gathered at the wellheads and
responsible for any loss, damage or injury caused thereby until the same
shall have been redelivered to Buyer, or to Buyer's credit, as herein
provided.

         4. RATE OF PRODUCTION. Seller shall cause (or if Seller is not the
operator, shall use its reasonable best efforts to cause) any wells now
located or hereafter drilled on the lands covered by the Subject Interests
(the "Subject Wells") to be prudently operated and produced in accordance
with good engineering practices. Seller shall also use its reasonable best
efforts to cause the Subject Wells to produce each day that quantity of
Production Payment Hydrocarbons equal to its pro rata part of the Gas Subject
Quantity and Oil Subject Quantity for such day.

         5. QUALITY REQUIREMENTS. All Production Payment Hydrocarbons
delivered to Buyer, or to Buyer's credit, shall satisfy the quality
requirements and specifications as set forth in the First Transporter's
transportation agreements and/or published tariffs filed with the FERC for
acceptance and transportation of Gas at each Delivery Point or as set forth
in the first purchaser's agreements for acceptance and purchase of Oil, all
without penalty or deduction for nonconformity, as the same may be modified
from time to time. All costs and expenses of dehydrating, treating, and
compressing Production Payment Gas to satisfy such quality requirements shall
be borne and paid by Seller.

         6. PRESSURE. Seller shall deliver, or cause to be delivered, Gas
comprising a part of the Production Payment at a pressure sufficient to
deliver the same into the First Transporter's pipeline at each Delivery Point
against the operating pressure of First Transporter's pipeline in existence
from time to time. Seller shall inform Buyer, as often as may be necessary,
of the delivery rate and pressure of such Gas delivered to Buyer or to
Buyer's credit.

         7. OPERATION OF SUBJECT INTERESTS. Except to the extent that there
is no material adverse effect as to the ownership or operation of the Subject
Interests or Production Payment, at all times from the date hereof until the
termination of the Production Payment, if Seller is the operator of the
Subject Interests, Seller, at Seller's cost and expense, shall, (and in the
event Seller is not the operator, Seller shall use its reasonable best
efforts to cause the operator of such Subject Interests to):

                  (a) Cause the Subject Interests to be maintained in full force
         and effect, and to be developed, protected against drainage, and
         continuously operated for the production of Hydrocarbons in a good and
         workmanlike

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         manner as would a prudent operator (and without regard to the burden of
         the Production Payment), all in accordance with generally accepted
         industry practices, applicable operating agreements, and all applicable
         federal, state and local laws, rules and regulations (including any and
         all duties arising under common law or applicable laws, rules or
         regulations relating to the protection or conservation of human health
         or safety or the environment), and shall otherwise comply with all
         applicable laws, rules and regulations;

                  (b) Pay, or cause to be paid, promptly as and when due and
         payable, all rentals and royalties payable in respect of the Subject
         Interests or the production therefrom, and all costs, expenses and
         liabilities incurred in or arising from the operation or development of
         the Subject Interests, or the producing, treating, gathering, storing,
         marketing or transporting of Hydrocarbons therefrom;

                  (c) Cause all wells, machinery, equipment and facilities of
         any kind now or hereafter located on the Subject Interests, and
         necessary or useful in the operation thereof for the production of
         Hydrocarbons therefrom, to be provided and to be kept in good and
         effective operating condition as would a prudent operator (and without
         regard to the burden of the Production Payment), and all repairs,
         renewals, replacements, additions and improvements thereof or thereto,
         useful or needful to such end, to be promptly made;

                  (d) Give or cause to be given to Buyer written notice of every
         adverse claim or demand made by any person affecting the Subject
         Interests, the Hydrocarbons produced therefrom and/or the Production
         Payment in any manner whatsoever, and of any suit or other legal
         proceeding instituted with respect thereto, and at Seller's expense
         cause all necessary and proper steps to be taken with reasonable
         diligence to protect and defend the Subject Interests, the Hydrocarbons
         produced therefrom and/or the Production Payment against any such
         adverse claim or demand, including (but not limited to) the employment
         of counsel for the prosecution or defense of litigation and the
         contest, release or discharge of such adverse claim or demand;

                  (e) Cause the Subject Interests to be kept free and clear of
         liens, charges and encumbrances of every character, other than (i)
         Taxes constituting a lien but not due and payable (except to the extent
         contested in good faith), and (ii) the Permitted Encumbrances;

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                  (f) Pay all Taxes when due and before they become delinquent
         (except to the extent contested in good faith), and reimburse Buyer for
         any Taxes paid by Buyer as a result of the Production Payment or the
         Production Payment Hydrocarbons or the production of same;

                  (g) Pay promptly when due and before they become delinquent
         all operating expenses and all billings under applicable joint
         operating agreements (except to the extent contested in good faith);

                  (h) Not (i) resign as operator of any of the Subject Interests
         operated by Seller or (ii) approve a successor operator of any of the
         Subject Interests, in each case until and unless a successor operator
         has been consented to in writing by Buyer, which consent shall not be
         unreasonably withheld;

                  (i) Maintain or cause to be maintained segregated storage
         facilities, tank batteries and receiving vessels for Oil comprising a
         part of the Production Payment unless (a) any Oil which does not
         comprise part of the Production Payment which is commingled therewith
         is continuously metered separately, and (b) any such Oil which does not
         comprise part of the Production Payment is gathered with and sold to
         the same first purchaser to whom the Oil comprising a part of the
         Production Payment is sold; and

                  (j) Not conduct any work or operation in any well-bore of a
         Subject Well, which work or operation is related to any horizon, zone,
         formation or interval not included in the Subject Interests, without
         the prior written consent of Buyer, which consent shall not be
         unreasonably withheld.

         8. INSURANCE; DAMAGE OR LOSS. (a) Seller shall maintain or cause to
be maintained, at its sole cost and expense and with financially sound and
reputable insurers , insurance covering the Leases and all pipelines, wells,
and facilities located thereon against such liabilities, casualties, risks
and contingencies, and in such types as is customary in the case of
independent oil companies engaged in operations of similar property. Such
insurance shall name Buyer as an additional insured as Buyer's interests
appear. Seller shall furnish certificates of such insurance to Buyer and
shall obtain endorsements to such policies providing that the insurer will
notify Buyer not less than thirty (30) days prior to the expiration or
termination of such policy of insurance.

                  (b) In the event of any damage to or loss of any platform,
pipeline, well, equipment or facility on the Leases, Seller (at no cost to
Buyer) shall promptly redrill,

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rebuild, reconstruct, repair, restore or replace such damaged or lost
property, unless to do so would not be economically feasible (without regard
to the burden of the Production Payment, but taking into account insurance
proceeds and recoveries).

         9. ABANDONMENT OF WELLS. (a) Until the termination of the Production
Payment, Seller shall not (to the extent within its control), without first
obtaining the written consent of Buyer, which consent shall not be
unreasonably withheld, agree to the abandonment of any well heretofore or
hereafter completed for production of Hydrocarbons on any of the lands
covered by or attributable to the Subject Interests or agree to surrender,
abandon or release any Lease or Subject Interest or any part thereof;
provided, however, that, without the consent of Buyer:

                  (i) If and when, in Seller's reasonable judgment, exercised in
         good faith and as would a prudent operator not burdened by the
         Production Payment, a well becomes no longer capable of producing
         Hydrocarbons in paying quantities (without regard to the burden of the
         Production Payment) and it would not be economically feasible (without
         regard to the burden of the Production Payment) to restore the
         productivity of such well by reworking, reconditioning, deepening,
         plugging back, or otherwise, Seller shall have the right to agree to
         abandon such well, subject to the provisions of Section 9(b) of this
         Agreement.

                  (ii) Subject to the provisions of Section 9(b), Seller shall
         have the right to surrender and release any Subject Interest or part
         thereof when, in the reasonable judgment of Seller exercised in good
         faith and as would a prudent operator not burdened by the Production
         Payment, there is no well located thereon which is capable of producing
         Hydrocarbons in paying quantities and the drilling of an additional
         well thereon would not, in Seller's reasonable opinion, be economically
         feasible (without regard to the burden of the Production Payment).

                  (b) Subject to prior rights granted to other parties under
applicable contracts, before abandoning any well or surrendering or releasing
any Subject Interest or part thereof, Seller shall offer to assign the same
to Buyer upon Buyer's payment of the net salvage value (if any) attributable
to Seller's interest therein and assumption of the obligations attributable
to Seller's interest therein.

         10. DRILLING OF REPLACEMENT WELLS. Seller covenants and agrees that,
in the event that any well now or hereafter completed for production of
Hydrocarbons on any of the lands

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and waterbottoms covered by or attributable to the Subject Interests shall
for any reason (other than depletion of the reserves otherwise recoverable
from such well) be no longer capable of producing Hydrocarbons in paying
quantities, Seller shall, to the extent within its control, promptly drill a
well to replace such well, unless in Seller's reasonable judgment, exercised
in good faith and as would a prudent operator not burdened by the Production
Payment, the drilling of such replacement well would not be economically
feasible.

         11. SELLER'S FINANCIAL CAPABILITY. At all times from the date hereof
until the termination of the Production Payment,

                  (a) Seller will upon the execution of this Agreement, purchase
         and maintain in effect price hedging contracts which have a length of
         not less than two (2) years in volumes of Gas equal to at least
         seventy-five percent (75%) of the projected volumes of Gas attributable
         to the Subject Interests which do not comprise a part of the Production
         Payment and price hedging contracts which have a length of not less
         than two (2) years in volumes of Oil equal to at least seventy-five
         percent (75%) of the projected volumes of Oil attributable to the
         Subject Interests and which do not comprise a part of the Production
         Payment, and upon each anniversary of the execution of this Agreement,
         Seller will purchase and maintain in effect price hedging contracts for
         an additional year such that the hedged volumes are hedged for a period
         of two (2) years.

                  (b) Seller will not enter into any transaction of
         consolidation, merger or amalgamation; liquidate, wind up or dissolve
         (or suffer any liquidation or dissolution); or convey, sell, lease,
         assign, transfer or otherwise dispose of all or substantially all of
         its property or business.

                  (c) Seller will not allow any account payable to be in excess
         of ninety (90) days past due, except such as are being contested in
         good faith.

                  (d) Seller will not directly or indirectly, enter into any
         transaction (including the sale, lease or exchange of property or the
         rendering of service) with Key Energy Services, Inc., its parent
         corporation ("Parent"), or any of its affiliates, other than upon fair
         and reasonable terms no less favorable than could be obtained in an
         arm's length transaction with an entity which was not an affiliate.

                  (e) Seller will not enter into any contract to provide
         services to Seller with Parent or any of its affiliates which is in
         excess of thirty (30) days without

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         the prior written consent of Buyer, which consent shall not be
         unreasonably withheld.

                  (f) Seller will not make any material change in the character
         of its business, which is the management of, operation of, consulting
         about, drilling on and the acquisition and divestiture of oil and gas
         properties and equipment.

         12. INFORMATION. (a) At all times from the date hereof until the
termination of the Production Payment, Seller, at its own expense, shall
furnish to Buyer the following reports and information at the times indicated
below.

                  (i) Within one hundred five (105) days after the end of each
         fiscal year of Parent, Seller shall furnish the most recent audited
         consolidated financial statements of Parent as of the end of and for
         such period, including a balance sheet and statements of income,
         stockholder's equity and cash flow, each of which shall have been
         prepared in accordance with generally accepted accounting principles,
         including consolidating schedules prepared in sufficient detail to
         present the separate financial position and results of operations of
         Parent (including all consolidated subsidiaries other than Seller) and
         Seller, together with the related consolidating eliminations and
         consolidated amounts for the latest fiscal year, and accompanied by a
         report of KPMG LLP or another firm of independent certified public
         accountants reasonably acceptable to Buyer stating that their
         examination was made in accordance with generally accepted auditing
         standards and that in their opinion they fairly present the
         consolidated financial condition, results of operations and changes in
         the consolidated financial position of Parent in accordance with
         generally accepted accounting principles consistently applied.

                  (ii) Within sixty (60) days after the end of each fiscal
         quarter of Parent, Seller shall furnish the most recent unaudited
         consolidated financial statements of Parent as of the end of and for
         such period, including a balance sheet and statements of income,
         stockholder's equity and cash flow, each of which shall have been
         prepared in accordance with generally accepted accounting principles
         and accompanied by a certificate of the chief financial officer of
         Parent stating that such financial statements fairly present the
         consolidated financial condition, results of operations and changes in
         financial position of Parent in accordance with generally accepted
         accounting principles consistently applied, subject to changes
         resulting from year-end audit adjustments.

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                  (iii) Within sixty (60) days after the end of each fiscal
         quarter of Seller, Seller shall furnish the most recent unaudited
         financial statements of Seller as of the end of and for such period,
         including a balance sheet and statements of income, stockholder's
         equity and cash flow, each of which shall have been prepared in
         accordance with generally accepted accounting principles and
         accompanied by a certificate of the chief financial officer of Parent
         stating that such financial statements fairly present the financial
         condition, results of operations and changes in financial position of
         Seller in accordance with generally accepted accounting principles
         consistently applied, subject to changes resulting from year-end audit
         adjustments.

                  (iv) Annually on or before August 1 of each year (commencing
         August 1, 2000, Seller shall furnish an engineering report reasonably
         satisfactory to Buyer (together with Seller's internally prepared
         summary of such report), as of July 1 of such year prepared by an
         independent petroleum engineering consulting firm reasonably acceptable
         to Buyer, incorporating all current information and data available to
         Seller pertinent to the estimation of oil and gas reserves attributable
         to Subject Interests and setting forth the following:

                           (A) an estimation of the oil and gas reserves,
                  classified by appropriate categories, as of such date
                  attributable to the Subject Interests (with that portion of
                  such reserves attributable to the Production Payment and to
                  Seller's interest in the Subject Interests (after giving
                  effect to the Production Payment) being set forth separately
                  in the internally prepared summary),

                           (B) a projection of the rate of production of, and
                  net income from, such reserves,

                           (C) a calculation of the present worth of such net
                  income discounted at a rate or rates designated from time to
                  time by Buyer, and

                           (D) a schedule or complete description of all
                  assumptions, estimates and projections made or used in the
                  preparation of such report, including without limitation
                  estimated future product prices, capital expenditures,
                  operating expenses and taxes.

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         Each such report shall be prepared in accordance with customary and
         generally accepted standards and practices for petroleum engineers,
         shall be based on such assumptions as to costs, product prices and
         similar factors as Buyer shall designate from time to time. Buyer shall
         be furnished a copy of any other reserve report prepared for Seller by
         any independent petroleum engineering firm covering the Properties.

                  (v) Within sixty (60) days from the end of each calendar
         quarter for operated Subject Interests (and ninety (90) days for
         non-operated Subject Interests), and at such other time as may be
         requested by Buyer, Seller shall furnish reports for such calendar
         quarter covering the expediency of any change in methods of treatment
         or operation of all or any Subject Wells and productive of
         Hydrocarbons, any new drilling or development, any method of secondary
         recovery by repressuring or otherwise, or any other action with respect
         to the Subject Interests, the decision as to which may increase or
         reduce the quantity of Hydrocarbons ultimately recoverable from the
         Subject Interests, or the rate of production therefrom, or which may
         shorten or prolong the period of time required for liquidation of the
         Production Payment.

                  (vi) Within sixty (60) days from the end of each month for
         operated Subject Interests (and ninety (90) days for non-operated
         Subject Interests), Seller shall furnish a report for such month
         showing: (A) the gross production of Hydrocarbons from each Subject
         Well or Property, (B) the gross production of Hydrocarbons attributable
         to the Subject Interests (including any thereof used in lease
         operations), (C) the quantity of Hydrocarbons sold for Seller's account
         or taken in kind by Seller, (D) the quantity of Production Payment
         Hydrocarbons sold for Buyer's account, (E) the quantity of Production
         Payment Hydrocarbons delivered in kind to Buyer and disposed of by
         Buyer, (F) the Taxes, rentals and royalties paid by Seller on
         production from the Subject Interests (including the Production
         Payment) or deducted from or paid out of such proceeds (and upon
         request of Buyer, evidence of payment thereof), (G) the current status
         of any Gas imbalances, if any, affecting the Subject Interests, (H) the
         cumulative amount of Hydrocarbons remaining to be delivered pursuant to
         the Production Payment, and (I) the number of wells operated, wells
         drilled and wells abandoned.

                  (vii) Within sixty (60) days from the end of each month for
         operated Subject Interests (and ninety (90) days for non-operated
         Subject Interests), Seller shall furnish Buyer for such month a lease
         operating statement showing

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         gross and net volumes of Hydrocarbons produced and sold from the
         Leases, average sales prices, severance taxes, lease operating
         expenses, capital expenditure and any other revenues and expenses
         associated with each Lease.

                  (viii) Within forty-five (45) days from the end of each month,
         Seller shall furnish Buyer copies of all filings made during such month
         with the Texas Railroad Commission or any other state or federal agency
         which relate to the Subject Interests.

                  (ix) Upon request, Seller shall furnish Buyer copies of
         surface maps showing property lines and well locations, well logs, core
         analysis data, flow and pressure tests, natural gas analysis and casing
         programs and other similar information related to the Subject
         Interests, Subject Wells and the production therefrom.

                  (x) Within thirty (30) days from the end of each calendar
         quarter, Seller shall furnish Buyer a certificate executed by an
         officer of Seller certifying that as of the end of such calendar
         quarter that to the best of his knowledge after reasonable
         investigation Seller is in compliance in all material respects with the
         terms of the Conveyance and this Agreement, or if not, specifying in
         reasonable detail any exceptions thereto.

                  (xi) Upon request, Seller shall furnish such other information
         as Buyer may reasonably request.

                  (b) Buyer shall have the right from time to time but not more
often than once every fiscal quarter of Buyer to audit the books and records of
Seller with respect to the Subject Interests. Such audits shall be conducted by
Buyer so as to result in a minimum disruption in the ongoing business and
affairs of Seller and shall be conducted during normal business hours at
Seller's offices or at the offices where Seller maintains the records relating
to the items set forth above. This right to audit shall be a free and
unrestricted right, subject to limitations above set forth, and shall survive
the termination of the Production Payment and for one (1) year thereafter. If,
as a result of any such audit, it is determined that any amount is due Buyer as
a result of the failure of Seller to properly deliver all Production Payment
Hydrocarbons, or the proceeds thereof, to Buyer in accordance with the terms of
the Conveyance and this Agreement, Seller shall pay Buyer the value of the
Production Payment Hydrocarbons which Seller failed to deliver, or the proceeds
which Seller failed to remit, together with interest at an annual rate of twelve
percent (12%) calculated on the basis of a three hundred sixty-five (365) day
year, from the date that such amount should have

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been delivered or paid in accordance with the terms of the Conveyance and
this Agreement to the date of payment.

         13. ACCESS TO SUBJECT INTERESTS. Seller shall permit, or use its
reasonable best efforts to cause the operator of the Subject Wells to permit,
the duly authorized representatives of Buyer, at any reasonable time, but at
Buyer's risk and expense, to make such inspection of the Subject Interests
and the property, machinery, equipment and facilities used in the operation
thereof as such representatives shall deem proper.

         14. REMEDIES OF BUYER; MORTGAGE AND SECURITY INTEREST. At any time
and from time to time until the termination of the Production Payment, if
Seller shall fail to perform or observe any of the material covenants or
agreements provided herein or in the Conveyance to be performed or observed
by Seller which results or in Buyer's reasonable good faith opinion would
result in a material adverse affect to the Subject Interests or the
Production Payment, Buyer, in addition to Buyer's right to recover damages
and all other remedies available to Buyer at law or in equity, may, if such
failure shall continue unremedied 30 days after written notice thereof is
delivered to Seller (it being agreed that such 30-day grace period shall not
apply in emergencies or situations where observing such grace period might,
in the reasonable judgment of Buyer, result in a loss of rights or the
incurrence of penalties or other damages):

                  (a) pay, or cause to be paid, any of the costs, expenses,
         Taxes or other amounts (which Taxes are not being contested in good
         faith by Seller) which Seller has agreed to pay under the Conveyance
         which have become delinquent, and be reimbursed on demand by Buyer for
         all amounts so paid or incurred, together with interest at the Floating
         Rate from the date of such payment until the date of reimbursement; and

                  (b) sell, on behalf and for the account of Seller, all of the
         Hydrocarbons attributable to Seller's interest in the Subject Interests
         and apply the proceeds thereof to any amount owed by Seller hereunder;
         and

                  (c) setoff any amount owed by Seller or its affiliates to
         Buyer or its Affiliates against any amount owed to Seller hereunder;
         and

                  (d) apply to a court of equity for the specific performance or
         observance of any such covenant or condition and in aid of the
         execution of any power herein granted and for the appointment of a
         receiver of the Subject Interests and the Hydrocarbons produced
         therefrom.

                                       13
<PAGE>

         In order to secure payment of all amounts advanced or paid by Buyer
under this Section 14 and to secure performance by Seller of all of its other
obligations under this Agreement and the Closing Agreement of even date
herewith between Seller and Buyer, as such agreements may be modified or
amended from time to time, (all of such payment and performance obligations
being hereinafter collectively referred to as the "Obligations"), Seller does
hereby mortgage, grant, affect and hypothecate to Buyer, and grant to Buyer a
lien and security interest in all of Seller's interest in the Subject
Interests (all of which Subject Interests are more fully described in the
exhibits attached to this Agreement and any amendments or modifications to
this Agreement executed from time to time) and all of Seller's equipment,
fixtures, inventory, goods, accounts, contracts rights and general
intangibles, whether presently existing or to arise in the future, now owned
or hereafter acquired, insofar as the same are (x) located on the leases more
fully described in the exhibits to this Agreement and any amendments or
modifications to this Agreement executed from time to time (the "Leases"), or
(y) are used in connection with, or relate to the ownership or operation of,
the Leases or Subject Interests, or (z) arise out of the sale or other
conveyance of oil, gas or other minerals produced and saved from the Leases
relating to the Subject Interests, together with any and all products and
proceeds of any of the foregoing. The security interest perfected hereby will
attach to minerals, including oil and gas, at the wellheads and to accounts
resulting from the sale thereof, at the wellheads located on the Leases. The
mortgage, lien and security interest granted hereby shall be subject only to
the Permitted Encumbrances and Seller shall not create or suffer to exist any
mortgage, lien and security interest superior to those granted hereby, except
for the Permitted Encumbrances. The mortgage, lien and security interest
granted pursuant hereto is granted pursuant to the laws of the State of
Texas, and Buyer shall be entitled to exercise all of the rights and remedies
of a mortgagee and secured party under the laws of the State of Texas in the
event of any default by Seller in the performance or payment (as applicable)
of the Obligations.

         Any purchaser of Hydrocarbons from or attributable to the Subject
Interests is authorized to make payment to the Buyer out of the Hydrocarbons
attributable to Seller's interest in the Subject Interests for any amount
which Buyer shall certify to such purchaser that it has paid and which Seller
is obligated to pay hereunder. Any insurer is authorized to make payment to
the Buyer of proceeds of insurance described in Section 8(a) hereof for any
amount which Buyer shall certify to such insurer that it has expended in
redrilling, rebuilding, reconstructing, repairing, restoring or replacing
damaged or lost property which Seller has failed or refused to do promptly
pursuant to Section 8(b) hereof. Seller hereby designates Buyer as its agent
and attorney in fact to execute any instruments which may be necessary or
appropriate, including without limitation designations of operator, to enable
Buyer to exercise its rights under this Section 14. This designation and
appointment shall be irrevocable as long as the Production Payment remains in
effect.

                                       14
<PAGE>

         15. NOTICES. All notices, requests, demands, instructions and other
communications required or permitted to be given hereunder shall be in
writing and shall be delivered personally, mailed by certified mail, postage
prepaid and return receipt requested or sent by telecopier, as follows:

                  If to Seller, addressed to:

                           Odessa Exploration Incorporated
                           6010 Highway 191, Suite 210
                           Odessa, Texas 79762
                           Attn:  D. Kirk Edwards
                           Telecopy:  (915) 550-0544

                  With a copy to:

                           Key Energy Services Inc.
                           Two Tower Center, 20th Floor
                           East Brunswick, New Jersey 08816
                           Attn:  General Counsel
                           Telecopy:  (732) 247-5148

                  If to Buyer, addressed to:

                           Norwest Energy Capital, Inc.
                           500 West Texas Avenue
                           Midland, Texas 79701
                           Attention:  Mark D. McKinney
                           Telecopy:   (915) 685-5441

or to such other place within the United States of America as either party
may designate as to itself by written notice to the other. All notices given
by personal delivery or mail shall be effective on the date of actual receipt
at the appropriate address. Notice given by telecopier shall be effective
upon actual receipt if received during recipient's normal business hours or
at the beginning of the next business day after receipt if received after the
recipient's normal business hours.

         16. PURCHASE OF PRODUCTION PAYMENT. Seller may repurchase the
Production Payment from Buyer for an amount equal to the sum of:

                                       15
<PAGE>

          (a) an amount which when added to the product of the volume of
         Production Payment Hydrocarbons delivered or sold (and for which
         proceeds have been received by Seller and paid to Buyer) times the
         price per month set forth in Exhibit C attached hereto and made a part
         hereof equals the sum of (x) $19,435,000.00 plus (y) an amount
         sufficient to provide a twelve percent (12%) internal rate of return
         for the period from the effective date of the Production Payment to the
         effective date of any such repurchase (for purposes of making such
         internal rate of return calculation, each payment shall be deemed to
         have been made on the last day of the month during which it was paid or
         received); plus

          (b) so long as Buyer does not engage in any price hedge transactions
         with respect to Production Payment Hydrocarbons that do not comply with
         commodity derivative policies of Wells Fargo Bank, N.A., all costs and
         penalties, if any, incurred by Buyer in terminating any price hedge
         agreements entered into by Buyer with respect to Hydrocarbons
         comprising a part of the Production Payment (any gain resulting from
         any such termination shall be for the credit of Buyer); plus

         (c) all legal costs incurred by Buyer in connection with the sale of
         the Production Payment to Seller.

         17. INDEMNITY. It is understood and agreed that under neither this
Agreement nor the Conveyance does Buyer assume or shall Buyer ever be liable
or responsible in any way for the payment of any costs, expenses or
liabilities incurred in connection with developing, exploring, drilling,
equipping, testing, operating, producing, maintaining or abandoning the
Subject Interests or any well or facility thereon or storing, handling,
treating or transporting to each Delivery Point production therefrom. Seller
shall fully defend, protect, indemnify and hold Buyer, its successors and
permitted assigns, its general partners and limited partners and its and all
such partners' officers, employees, representatives and agents harmless from
and against any and all claims, demands, suits and causes of action of every
kind and character, including reasonable attorneys' fees and costs of
defense, which may be made or asserted by any third party or governmental
agency or entity, or by Seller, Seller's employees, agents, contractors and
subcontractors and their employees and agents, on account of personal injury,
death or property damage (including, without limitation, claims for pollution
and environmental damage), any civil or criminal fines or penalties and any
causes of action alleging statutory liability, relating to, arising out of,
or in any way incidental to the Subject Interests, the wells and facilities
thereon or used in connection therewith, the operation thereof and the
production therefrom (including, without limitation, rentals, royalties and

                                       16
<PAGE>

taxes thereon), WHETHER THROUGH AN ACT OR OMISSION OF BUYER OR ANY OTHER
PARTY HERETO OR OTHERWISE, AND WHETHER OR NOT ARISING OUT OF THE SOLE, JOINT
OR CONCURRENT NEGLIGENCE, FAULT OR STRICT LIABILITY OF BUYER OR ANY OTHER
PERSON OR ENTITY INDEMNIFIED HEREUNDER. This indemnity shall apply, without
limitation, to any liability imposed upon any party indemnified hereunder as
a result of any statute, rule, regulation or theory of strict liability.

         18. SUCCESSORS AND PERMITTED ASSIGNS. All the covenants and
agreements of Seller and Buyer herein contained shall be deemed to be
covenants running with the land and shall be binding upon the successors and
assigns of Seller's interest in the Subject Interests and Buyer's interest in
the Production Payment, and shall inure to the benefit of Seller, Buyer, and
their respective successors and permitted assigns and shall be enforceable by
their respective successors and permitted assigns. The foregoing
notwithstanding, nothing herein is intended to modify or shall have the
effect of modifying the restrictions on assignment set forth in the
Conveyance regarding assignments, transfer or pooling of Seller's interest in
the Subject Interests; and the preceding sentence shall not be deemed to
permit any assignment or other transfer of the interest of Seller in any of
the Subject Interests that is not specifically permitted by the provisions of
the Conveyance. Buyer, or Buyer's successors and assigns, shall not partially
transfer, sell, convey, assign or mortgage their respective rights or
obligations hereunder to any third party without the prior written consent of
Seller. Nothing contained in this instrument or in the Conveyance shall in
any way limit or restrict the right of Buyer, or Buyer's successors and
assigns, to transfer, sell, convey, assign or mortgage all of the Production
Payment and all of the respective rights or obligations hereunder
appertaining thereto without the consent of Seller. If Buyer, or Buyer's
successors and assigns, at any time shall execute a mortgage, pledge or deed
of trust covering all or any part of the Production Payment as security for
any obligation, the mortgagee, the pledgee or the trustee therein named or
the holder of the obligation secured thereby shall be entitled, to the extent
such mortgage, pledge or deed of trust so provides and upon the occurrence or
existence of the event or condition therein stated, if so conditioned, to
exercise all of the rights, remedies, powers and privileges herein conferred
upon Buyer, and to give or withhold all consents herein required or permitted
to be obtained from Buyer.

         19. DAMAGES. It is recognized that Buyer will look solely to the
Production Payment Hydrocarbons for satisfaction and discharge of the
Production Payment, and that Seller is not personally liable for the payment
and discharge thereof. However, the foregoing provision shall not relieve
Seller of any obligations under this Agreement or any obligation to respond
in damages for any breach of any of the provisions hereof or of the
Conveyance.

                                       17
<PAGE>

         20. COST OF LITIGATION. In the event of a breach of this Agreement,
or if a dispute arising hereunder is not resolved by mutual agreement, and
either party should sue the other party to enforce its rights hereunder or
for breach hereof, the party prevailing in such litigation shall be entitled
to recover its costs and reasonable attorneys' fees in addition to any other
remedy or recovery to which it may be entitled.

         21. ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement, the
Conveyance and that certain Closing Agreement of even date herewith
constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and thereof and supersede and replace any and all
prior or contemporaneous agreements, understandings, representations or
warranties by or between the parties hereto with respect to the subject
matter hereof. This Agreement may not be amended and no rights hereunder may
be waived except by a written document signed by the duly authorized
representatives of the parties. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute
a continuing waiver unless otherwise expressly provided.

         22. HEADINGS. The headings of the sections of this Agreement are for
guidance and convenience of reference only and shall not limit or otherwise
affect any of the terms or provisions of this Agreement.

         23. COUNTERPART EXECUTION. This Agreement is executed in multiple
counterparts. For recording purposes, various counterparts have been
executed, and there may be attached to each such counterpart an Exhibit A
containing only the description of the Subject Interests, or portions
thereof, which relates to the county in which the particular counterpart is
to be recorded. Each of the counterparts hereof so executed shall for all
purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. A complete counterpart
of this instrument shall be recorded in the records of the County Clerk of
Midland County, Texas and a complete counterpart of this instrument may be
obtained from Seller or Buyer.

         24. PARTIAL INVALIDITY. Except as otherwise expressly stated herein,
in the event any provision contained in this Agreement shall for any reason
be held invalid, illegal or unenforceable by a court or regulatory agency of
competent jurisdiction by reason of a statutory change or enactment, such
invalidity, illegality or unenforceability shall not affect the remaining
provisions of this Agreement.

         25. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

                                       18
<PAGE>

         26. NO THIRD-PARTY BENEFICIARY. This Agreement is not intended to
create, nor shall it be construed to create, any rights in any third party under
doctrines concerning third-party beneficiaries.

         EXECUTED in multiple originals on the date first set forth above.

                                            SELLER:

                                               ODESSA EXPLORATION INCORPORATED

                                               By: /s/ D. Kirk Edwards
                                                   ---------------------
                                                       D. Kirk Edwards
                                                       President

                                            BUYER:

                                               NORWEST ENERGY CAPITAL, INC.

                                               By: /s/ Mark D. McKinney
                                                   ---------------------
                                                       Mark D. McKinney
                                                       Senior Vice President
EXHIBITS:
A  -  Subject Interests
B  -  Existing Sales Contracts

                                       19
<PAGE>

STATE OF TEXAS             Section
                           Section
COUNTY OF HARRIS           Section

                  BEFORE ME, the undersigned authority, on this day
personally appeared D. Kirk Edwards, President of Odessa Exploration
Incorporated, a Delaware corporation, known to me to be the person whose name
is subscribed to the foregoing instrument, and acknowledged to me that he
executed the same for the purposes and consideration therein expressed, as
the act and deed of such corporation, and in the capacity therein stated.

                  GIVEN UNDER MY HAND AND SEAL OF OFFICE this 31st day of March,
2000.

                                                /s/ LindaAnn Wyman
                                               -------------------------------
                                               Notary Public in and for
                                               the State of Texas
My Commission Expires:
February 26, 2002                                LindaAnn Wyman
----------------------                         -------------------------------
                                               (Printed Name of Notary Public)

STATE OF TEXAS             Section
                           Section
COUNTY OF HARRIS           Section

                  BEFORE ME, the undersigned authority, on this day
personally appeared Mark D. McKinney, Senior Vice President of Norwest Energy
Capital, Inc., a Texas corporation, known to me to be the person whose name
is subscribed to the foregoing instrument, and acknowledged to me that he
executed the same for the purposes and consideration therein expressed, as
the act and deed of such corporation, and in the capacity therein stated.

                  GIVEN UNDER MY HAND AND SEAL OF OFFICE this 31st day of
March, 2000.

                                                 /s/ LindaAnn Wyman
                                                ------------------------------
                                                Notary Public in and for
                                                the State of Texas
My Commission Expires:
February 26, 2002                                LindaAnn Wyman
----------------------                         -------------------------------
                                                (Printed Name of Notary Public)

                                       20<PAGE>

                                                                    EXHIBIT 10.4
                                CLOSING AGREEMENT

         This Closing Agreement (this "Agreement") is made and entered into
this 31st day of March, 2000, by and between ODESSA EXPLORATION INCORPORATED,
a Delaware corporation ("Seller"), NORWEST ENERGY CAPITAL, INC., a Texas
corporation ("Buyer"), and KEY ENERGY SERVICES, INC., a Maryland corporation
("Parent").

                                    RECITALS

         Seller is the owner of certain oil and gas leasehold interests in
Carson, Dawson, Glasscock, Hutchinson, Loving, Martin, Midland, Pecos,
Potter, Reagan, Reeves and Upton Counties, Texas.

         On even date herewith, Seller has sold to Buyer, and Buyer has
purchased from Seller, a production payment interest in such oil and gas
leasehold interests.

         As an inducement to Buyer to purchase such production payment
interest, Seller and Parent have agreed to enter into this Agreement, and as
an inducement to Seller to sell such production payment interest, Buyer has
agreed to enter into this Agreement.

                                   AGREEMENTS

         NOW, THEREFORE, in consideration of the mutual benefits and
obligations of the parties contained herein, Buyer, Seller and Parent agree
as follows:

                                    ARTICLE I
                                   DEFINITIONS

         Any capitalized terms used herein but not defined shall have the
meaning given such term in that certain Conveyance of Production Payment of
even date herewith between Seller and Buyer, a copy of which is attached
hereto as Exhibit A (the "Conveyance").

                                   ARTICLE II
                       ACKNOWLEDGMENT OF PURCHASE AND SALE

         2.1 PURCHASE AND SALE. In consideration of the execution and
delivery by Seller of this Agreement, the Conveyance and that certain
Production and Delivery Agreement dated of even date herewith, a copy of
which is attached hereto as Exhibit B (the "Production

<PAGE>

and Delivery Agreement") (the Conveyance and the Production and Delivery
Agreement, together with any other documents or instruments referred to
hereunder, being herein referred to as the "Closing Documents"), and as full
payment of the purchase price for the Production Payment conveyed by Seller
to Buyer pursuant to the Conveyance, Buyer has paid to Seller, and Seller
acknowledges receipt of, an amount equal to $20,000,000.00.

         2.2      ADDITIONAL ACTIONS TAKEN. In connection with the purchase
by Buyer of the Production Payment from Seller, Buyer and Seller acknowledge
that the following events have taken place on or prior to the date hereof:

                  (a) Seller and Buyer have each executed and delivered to the
         other multiple counterparts of the Conveyance and the Production and
         Delivery Agreement;

                  (b) Seller has executed and delivered to Buyer such financing
         statements as Buyer has reasonably deemed necessary or appropriate to
         perfect the liens and security interests granted to Buyer pursuant to
         Section 14 of the Production and Delivery Agreement;

                  (c) Seller has executed and delivered to Buyer letters in lieu
         of transfer orders addressed in blank covering Hydrocarbons produced
         from or attributable to each of the Subject Interests;

                  (d) Seller has executed and delivered to Buyer such other
         instruments as Buyer has reasonably requested in order to effectuate
         the conveyance of the Production Payment to Buyer;

                  (e) Seller has delivered to Buyer a certificate of Seller's
         secretary certifying resolutions of the board of directors of Seller
         authorizing and approving the transactions contemplated in the
         Conveyance and the Production and Delivery Agreement;

                  (f) Seller has paid Buyer or Buyer's designee transaction fees
         totaling $565,000.00;

                  (g) Seller has delivered to Buyer an opinion of Porter &
         Hedges, L.L.P., counsel for Seller and Parent, in the form attached
         hereto as Exhibit C, and such opinion to cover corporate matters, due
         authorization, enforceability and no violations; and

                                       2
<PAGE>

                  (h) Other than Permitted Liens, Seller has delivered to Buyer
         a release of any liens and mortgages burdening the Subject Interests.

         2.3      RECORDING OF CERTAIN DOCUMENTS. After the date hereof,
Buyer shall cause (a) counterparts of the Conveyance, the Production and
Delivery Agreement and associated financing statements to be filed for record
in all appropriate records in Carson, Dawson, Glasscock, Hutchinson, Loving,
Martin, Midland, Pecos, Potter, Reagan, Reeves and Upton Counties, Texas and
(b) a counterpart of the financing statement associated with the Production
and Delivery Agreement to be filed with the Secretary of State of the State
of Texas. Seller shall reimburse Buyer for all documentary, filing and
recording fees required in connection with the filing and recording of such
Closing Documents.

                                   ARTICLE III
                    REPRESENTATIONS AND WARRANTIES OF SELLER

         3.1      REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby
represents and warrants to Buyer as follows:

                  (a) To the best of Seller's Knowledge (Seller's Knowledge
         shall mean the actual, not deemed, Knowledge of senior management of
         Seller), all of the information, reports and other data furnished by
         Seller to Buyer, or made available for review by Buyer, in connection
         with the transactions described herein all of which information is
         specifically described in Schedule 3.1(a) attached hereto and made a
         part hereof, is accurate and complete in all material respects and none
         of such information, reports or data contains an untrue statement of a
         material fact or omits to state any material fact which is necessary in
         order to make the statements therein, in light of the circumstances
         under which they were made, not misleading.

                  (b) The actions of Seller in furnishing information to Buyer
         in connection with the transactions described herein do not and will
         not violate any duty owed by Seller to any person to which such
         information relates or any obligation of Seller under any existing
         agreement.

                  (c) Seller owns Good and Marketable Title (as defined below)
         to the Subject Interests and, to the best of Seller's Knowledge, any
         other real or personal property interests of Seller used in connection
         with or attributable in any way to the Subject Interests (the Subject
         Interests and such other real or personal property interests being
         herein collectively referred to as the

                                       3
<PAGE>

         "Assets"). As used herein, the term "Good and Marketable Title" means
         such record title that:

                           (i) in the case of the Subject Interests, (1)
                  entitles Seller to receive a percentage of all Hydrocarbons
                  produced, saved and marketed from each Subject Well not less
                  than the net revenue interest set forth in Exhibit A to the
                  Conveyance for such well, without reduction, suspension or
                  termination for the respective productive life of such well,
                  (2) obligates Seller to bear a percentage of the costs and
                  expenses relating to operations on and the maintenance and
                  development of each Subject Well not greater than the
                  undivided leasehold or working interest set forth in Exhibit A
                  to the Conveyance for such well, without increase for the
                  respective productive life of each such well, (3) entitles
                  Seller to a share of the working interest or operating rights
                  in each Subject Well which is not less than the undivided
                  leasehold or working interest set forth in Exhibit A to the
                  Conveyance for such well and (4) is free and clear of any
                  encumbrances, liens, mortgages, or pledges, preferential
                  purchase rights or requirements for consents to assignment
                  applicable to or exercisable as a result of the Conveyance,
                  and any other defects that would materially affect or
                  interfere with the operation, use, possession, ownership or
                  value thereof, except for the Permitted Encumbrances; and

                           (ii) in the case of the Assets other than the Subject
                  Interests, constitutes good and indefeasible title, free and
                  clear of all encumbrances, liens, mortgages, or pledges,
                  preferential purchase rights or requirements for consents to
                  assignment applicable to or exercisable as a result of the
                  Conveyance, and any other defects that would materially affect
                  or interfere with the operation, use, possession, ownership or
                  value thereof, except for the Permitted Encumbrances.

                  (d)      All Taxes imposed or assessed with respect to or
         measured by or charged against or attributable to the Assets have been
         duly paid (except for those Taxes being disputed in good faith).

                                       4
<PAGE>

                  (e) Except as may be set forth on Exhibit D, there are no
         suits or proceedings pending or, to the best of Seller's Knowledge,
         threatened against Seller or the Assets before any court, or by or
         before any governmental commission, bureau or any regulatory authority,
         that if decided adversely to the interest of Seller could materially
         adversely affect Seller, any of the Assets or the rights of Buyer under
         the Closing Documents.

                  (f) The Leases are in full force and effect; and, to the best
         of Seller's Knowledge, Seller has complied with the terms of all
         governmental orders or directives naming Seller or applicable directly
         to the Subject Interests.

                  (g) All rents and royalties with respect to the Leases have
         been paid in a timely manner, and all liabilities of any kind or nature
         incurred with respect to the Leases have been paid before delinquent;
         Seller has not received any notice of default or, to the best of
         Seller's Knowledge, Seller has not received any notice of a claimed
         default with respect to the Subject Interests or any Lease or any part
         thereof; and, to the best of Seller's Knowledge, all wells, facilities
         and equipment which constitute part of the Assets are in good repair
         and working condition and have been designed, installed and maintained
         in accordance with good industry standards and all applicable legal
         requirements other than which would not have a material adverse effect
         on the ownership or operation of the Subject Interests.

                  (h) Except as set forth in Exhibit D, neither the Subject
         Interests nor the Hydrocarbons attributable thereto are subject,
         committed or dedicated to any contract, agreement or arrangement
         regarding the gathering, transportation, processing, storing, delivery,
         sale, use or marketing thereof; and no third party has any call, right
         of first refusal or preferential right to purchase any such
         Hydrocarbons.

                  (i) Except as set forth in Exhibit D, Seller is not a party to
         or bound by, and the Subject Interests and the Hydrocarbons
         attributable thereto are not encumbered or affected by, any gas
         balancing, deferred production, gas banking or similar agreement or
         arrangement; and except as shown on Exhibit D, Seller is not in an
         "overlift," "over-produced," or similar status under any such agreement
         or arrangement.

                  (j) Neither the Subject Interests nor the Hydrocarbons
         attributed thereto is subject to any contract, agreement or arrangement
         (including,

                                       5
<PAGE>

         without limitation, advance payment agreements, prepayments,
         take-or-pay makeup obligations or otherwise) whereby the owner of such
         Hydrocarbons or any part thereof is not entitled to convey such
         Hydrocarbons or to market such Hydrocarbons and to obtain the full
         market price or value of the same.

                  (k) To the best of Seller's Knowledge, the Subject Interests
         have been operated in accordance with all laws, rules and regulations
         of all governmental authorities having or asserting jurisdiction
         relating to the ownership and operation of the Subject Interests,
         including the production of Hydrocarbons attributable thereto, and,
         except as set forth on Exhibit D, are not subject to reduced allowances
         or other penalties on account of overproduction or otherwise. To the
         best of Seller's Knowledge, the Subject Interests are, and at all times
         have been, operated in accordance with all laws, rules, regulations and
         decisions (including any requirements under applicable common law)
         relating to the protection or conservation of human health or safety or
         the environment, and no conditions exist on the land covered by the
         Subject Interests that are in violation of such laws, rules,
         regulations or decisions or that require the taking of remedial action
         under such laws, rules, regulations or decisions which would have a
         material adverse effect on the ownership or operation of the Subject
         Interests.

                  (l) Seller is a corporation duly organized, validly existing
         and in good standing under the laws of the State of Delaware, is duly
         qualified and in good standing as a foreign corporation in the State of
         Texas, and has the legal right, power and authority, and qualifications
         to conduct its business and own its properties (including the Subject
         Interests); and Seller has the legal right, power and authority (i) to
         execute and deliver the Conveyance and to convey to Buyer the
         Production Payment and all of the rights and privileges appurtenant
         thereto and (ii) to execute and deliver this Agreement and those of the
         Closing Documents to which it is a party and perform all of its
         obligations under the same.

                  (m) The execution, delivery and performance by Seller of those
         of the Closing Documents to which it is a party are within its
         corporate powers, have been duly authorized by all necessary corporate
         action on the part of Seller and do not and will not (i) violate any
         provision of law or any rule, regulation, order, writ, judgment,
         decree, or determination currently in effect having applicability to
         Seller or Seller's certificate of incorporation, bylaws, or other
         governing documents, (ii) result in a breach of or constitute a default

                                       6
<PAGE>

         under any indenture, bank loan or credit agreement to which Seller is a
         party or by which Seller or its properties may be currently bound or
         affected, (iii) result in a breach of or constitute a default under any
         farmout agreement, program agreement or operating agreement, or any
         other agreement or instrument (other than any indenture, bank loan or
         credit agreement) to which Seller is a party or by which Seller or its
         properties may be currently bound or affected which would have a
         material adverse effect on the Production Payment , (iv) result in or
         require the creation or imposition of any mortgage, lien, pledge,
         security interest, charge, or other encumbrance upon or of any of the
         properties or assets of Seller (including the Subject Interests) under
         any such indenture, bank loan or credit agreement or (v) result in or
         require the creation or imposition of any mortgage, lien, pledge,
         security interest, charge, or other encumbrance upon or of any of the
         properties or assets of Seller (including the Subject Interests) under
         any other agreement or instrument (other than any indenture, bank loan
         or credit agreement) which would have a material adverse effect on the
         Production Payment; and Seller is not in default under any such order,
         writ, judgment, decree, determination, indenture, agreement, or
         instrument in any way that now or in the future will materially
         adversely affect the ability of Seller to perform its obligations under
         this Agreement or those of the Closing Documents to which it is a
         party; and all consents or approvals under such indentures, agreements,
         and instruments necessary to permit valid execution, delivery, and
         performance by Seller of those of the Closing Documents to which Seller
         is a party and the conveyance of the Production Payment to Buyer have
         been obtained.

                  (n) This Agreement and each of the Closing Documents to which
         Seller is a party has been duly executed and delivered by Seller and
         constitutes the legal, valid, and binding acts and obligations of
         Seller enforceable against Seller in accordance with its terms,
         subject, however, to bankruptcy, insolvency, reorganization, and other
         laws affecting creditors' rights generally and, with regard to any
         equitable remedies, to the discretion of the court before which
         proceedings to obtain such remedies may be pending. There are no
         bankruptcy, insolvency, reorganization, receivership or arrangement
         proceedings pending, being contemplated by, or to the Knowledge of
         Seller, threatened against Seller.

                  (o) Parent is a corporation duly organized, validly existing
         and in good standing under the laws of the State of Maryland, is duly
         qualified and in good standing as a foreign corporation in the State of
         Texas, and has the

                                       7
<PAGE>

         legal right, power and authority, and qualifications to conduct its
         business and own its properties; and Parent has the legal right, power
         and authority to execute and deliver those of the Closing Documents to
         which it is a party and perform all of its obligations under the same.

                  (p) The execution, delivery and performance by Parent of this
         Agreement are within its corporate powers, been duly authorized by all
         necessary corporate action on the part of Parent and do not and will
         not (i) violate any provision of law or any rule, regulation, order,
         writ, judgment, decree, or determination currently in effect having
         applicability to Parent or Parent's certificate of incorporation,
         bylaws, or other governing documents, (ii) result in a breach of or
         constitute a default under any indenture, bank loan or credit agreement
         to which Parent is a party or by which Parent or the capital stock of
         Seller may be currently bound or affected except as disclosed on
         Exhibit E, or (iii) result in or require the creation or imposition of
         any mortgage, lien, pledge, security interest, charge, or other
         encumbrance upon the capital stock of Seller under any such indenture,
         bank loan or credit agreement; and Parent is not in default under any
         such order, writ, judgment, decree, determination, indenture,
         agreement, or instrument in any way that now or in the future will
         materially adversely affect the ability of Parent to perform its
         obligations under those of the Closing Documents to which it is party;
         and all consents or approvals under such indentures, agreements, and
         instruments necessary to permit valid execution, delivery, and
         performance by Parent of those of the Closing Documents to which it is
         a party have been obtained.

                  (q) Each of the Closing Documents to which Parent is a party
         has been duly executed and delivered by Parent and constitutes the
         legal, valid, and binding acts and obligations of Parent enforceable
         against Parent in accordance with its terms, subject, however, to
         bankruptcy, insolvency, reorganization, and other laws affecting
         creditors' rights generally and, with regard to any equitable remedies,
         to the discretion of the court before which proceedings to obtain such
         remedies may be pending. There are no bankruptcy, insolvency,
         reorganization, receivership or arrangement proceedings pending, being
         contemplated by, or to the Knowledge of Seller, threatened against
         Parent.

                  (r) Upon due execution and delivery by Seller of the
         Conveyance, (i) the Conveyance will constitute the legal, valid, and
         binding conveyance of

                                       8
<PAGE>

         the Production Payment out of the entire Subject Interests, subject to
         (x) general principles of equity (regardless of whether such
         enforceability is considered in a proceeding at law or in equity) (y)
         matters of public policy and (z) other applicable laws and procedures
         which may affect the rights and remedies provided therein, (ii) the
         Production Payment will constitute an interest in real property, (iii)
         the Production Payment will constitute a "production payment" within
         the meaning of Section 541 of the United States Bankruptcy Code, and
         (iv) neither the Conveyance nor any Subject Interest will or does
         constitute an executory contract or unexpired lease within the meaning
         of Section 365 of the United States Bankruptcy Code.

                  (s) All consents and waivers of preferential purchase or other
         rights necessary to permit the valid conveyance to Buyer of the
         Production Payment and execution and delivery of this Agreement and the
         Closing Documents have been obtained or the time for giving such
         consents or waivers has expired following a written request therefor.

                  (t) All advance notifications to third parties of the
         transactions contemplated herein and in the Closing Documents necessary
         to permit the valid conveyance to Buyer of the Production Payment and
         execution and delivery of this Agreement and the Closing Documents have
         been timely and properly given.

                  (u) To the best of Seller's Knowledge, no authorization,
         consent, approval, license, or exemption of, and no filing or
         registration with, any court or governmental department, commission,
         board, bureau, agency, or instrumentality, domestic or foreign, is
         necessary to the valid execution and delivery by Seller of, or the
         performance by Seller of its obligations under, this Agreement or the
         Closing Documents that has not been obtained or performed or the period
         for objection thereto expired.

                  (v) No fire, explosion, accident, earthquake, act of public
         enemy, or other casualty (regardless of whether covered by insurance)
         adversely affecting any material portion of the Subject Interests or
         the operation thereof, or adversely affecting the ability of Seller to
         perform its obligations under this Agreement or the Closing Documents,
         has occurred.

                  (w) To the best of Seller's Knowledge, seller has obtained all
         permits, licenses and other authorizations which are required under
         federal,

                                       9
<PAGE>

         state and local laws with respect to pollution or protection of the
         environment relating to Subject Interests, the failure of which to
         obtain would materially adversely affect the value, use or operation of
         any of the Subject Interests; and Seller (with respect to the Assets
         operated by it), and to the best of Seller's Knowledge third parties
         operating the Assets for Seller (with respect to the Assets not
         operated by Seller) are in compliance in all material respects with all
         terms and conditions of such laws, permits, licenses and
         authorizations, relating to the Assets, the failure with which to
         comply would materially adversely affect the value, use or operation of
         any Subject Interest; and neither Seller nor, to Seller's Knowledge,
         any third party operator of the Subject Interests has received notice
         alleging or suggesting the violation of, or indicating that there will
         or may be an investigation relating to the possible violation of, any
         federal, state or local laws (including common law) with respect to
         pollution or protection of the environment, in either case which
         involves the Subject Interests.

                  (y) The financial statements furnished to Buyer listed as
         Schedule 3.1(a) have been prepared in accordance with generally
         accepted accounting principles, consistently applied, and fairly and
         accurately reflect the financial condition of Seller as of such date
         and the results of operations for such periods, as applicable, and
         Seller's financial position has not suffered a material adverse change
         since the date of such financial statements.

                                   ARTICLE IV
                     REPRESENTATIONS AND COVENANTS OF PARENT

         4.1 REPRESENTATIONS OF PARENT. Parent represents and warrants that it
owns good and indefeasible title to all of the capital stock of Seller free and
clear of all security interests, liens, adverse claims or options.

         4.2 COVENANTS OF PARENT. Parent covenants and agrees that it will not
pledge, mortgage, or otherwise encumber, create or suffer a security interest to
exist in or sell, assign, or otherwise transfer any of the capital stock of
Seller.

                                    ARTICLE V
                            REPRESENTATIONS OF BUYER

         5.1 REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants to
Seller as follows:

                                       10
<PAGE>

                  (a) Buyer is a corporation duly organized and validly existing
         under the laws of the State of Texas. The execution, delivery and
         performance of this Agreement and the transactions described herein
         have been duly and validly authorized by all necessary corporate action
         on the part of Buyer.

                  (b) This Agreement and each of the Closing Documents has been
         duly executed and delivered on behalf of Buyer and constitutes the
         legal, valid and binding obligations of Buyer enforceable against it in
         accordance with their terms, subject, however, to bankruptcy,
         insolvency, reorganization and other laws affecting creditors' rights
         generally and with regard to any equitable remedies, to the discretion
         of the court before which proceedings to obtain such remedies may be
         pending.

                                   ARTICLE VI
                                  MISCELLANEOUS

         6.1      ANNOUNCEMENTS. Each party covenants and agrees with the
other that, subject to applicable law, each party shall promptly advise and
consult with the other and obtain the other's written consent before issuing
any press release with respect to this Agreement or the transactions
described herein.

         6.2      FURTHER ASSURANCES. Seller and Buyer agree to take all such
further actions and to execute, acknowledge and deliver all such further
documents that are necessary or useful to effectuate the conveyance of the
Production Payment and to carry out the purposes of this Agreement or any of
the Closing Documents.

         6.3      SURVIVAL. The representations, warranties, covenants,
agreements and indemnities in this Agreement and the Closing Documents shall
survive the Closing and the consummation of the transactions described herein
and therein.

         6.4      EXPENSES. Seller shall reimburse Buyer for all legal and
title and environmental due diligence fees, costs and expenses reasonably
incurred by Buyer with respect to the negotiation, documentation and
consummation of the transactions described herein. Each party hereto shall
bear and be responsible for all other fees, costs and expenses incurred with
respect to the transaction described herein (including accounting and
engineering expenses). Seller shall indemnify and hold harmless Buyer from
and against any and all liability for any brokers' or

                                       11
<PAGE>

finders' fees arising with respect to brokers or finders retained or engaged by
Seller in respect of the transactions described herein and Buyer shall indemnify
and hold harmless Seller from and against any and all liability for any brokers'
or finders' fees arising with respect to brokers or finders retained or engaged
by Buyer in respect of the transactions described herein.

         6.5      NOTICES. All notices, requests, demands, instructions and
other communications required or permitted to be given hereunder shall be
delivered in the manner and to the addresses of Seller and Buyer as provided
in the Production and Delivery Agreement.

         6.6      INDEMNIFICATION. (a) Until the termination of the
Production Payment, Seller shall fully defend, protect, indemnify and hold
harmless Buyer, its successors and assigns, its officers, employees,
representatives and agents ("Indemnified Parties") from and against any and
all losses which may be suffered by Indemnified Parties and from and against
any and all claims, demands, suits and causes of action (collectively
"Claims") of every kind and character (together with reasonable attorneys'
fees and costs of defense) relating to, arising out of, or in any way
incidental to the breach of any warranty or representation contained in this
Agreement, regardless of whether Buyer may have known of such breach or of
the condition giving rise to such breach. Without limiting the foregoing, if
the representation and warranty contained in Section 3.1(r)(iv) is breached
and the Conveyance or any Subject Interest is rejected as an unexpired lease
or executory contract pursuant to any of the provisions of Section 365 of the
United States Bankruptcy Code, the damages recoverable as a result of such
rejection shall equal the value as of the date of rejection of the future
Hydrocarbons delivery obligations remaining under the Conveyance at the time
of the rejection determined in a commercially reasonably manner. Seller
acknowledges that the mortgage, lien and security interest granted in Section
14 of the Production and Delivery Agreement secures, among other things, any
amount owed pursuant to this Section 6.6.

                  (b) If any Indemnified Party discovers or otherwise becomes
aware of an indemnification Claim arising under Section 6.6(a) of this
Agreement, such Indemnified Party shall give written notice to the Seller,
specifying such Claim, and may thereafter exercise any remedies available to
such Indemnified Party under this Agreement; PROVIDED, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the Seller
of any obligations hereunder, to the extent the Indemnifying Party is not
materially prejudiced thereby. Further, promptly after receipt by an Indemnified
Party hereunder of written notice of the commencement of any action or
proceeding with respect to which a Claim for indemnification may be made
pursuant to Section 6.6(a), such Indemnified Party shall, if a Claim in respect
thereof is to be made against Seller, give written notice to the latter of the
commencement of such action; PROVIDED, that the failure of any Indemnified Party
to give notice as provided herein shall not relieve Seller of any obligations
hereunder, to the extent the Indemnifying Party is not materially prejudiced
thereby. In case any such action is brought against an Indemnified Party, the
Seller shall be entitled to participate in

                                       12
<PAGE>

and to assume the defense thereof to the extent that it may wish, with counsel
reasonably satisfactory to such Indemnified Party, and after such notice from
the Seller to such Indemnified Party of its election so to assume the defense
thereof, the Seller shall not be liable to such Indemnified Party for any legal
fees and expenses subsequently incurred by the latter in connection with the
defense thereof unless the Seller has failed to assume the defense of such Claim
and to employ counsel reasonably satisfactory to such Indemnified Party. The
Seller shall not be liable for the fees and expenses of more than one counsel in
any single jurisdiction for all parties indemnified by the Seller with respect
to such Claim or with respect to Claims separate but similar or related in the
same jurisdiction arising out of the same general allegations. Notwithstanding
any of the foregoing to the contrary, the Indemnified Party will be entitled to
select its own counsel and assume the defense of any action brought against it
if the Seller fails to select counsel reasonably satisfactory to the Indemnified
Party, the expenses of such defense to be paid by the Seller. The Seller shall
not consent to entry of any judgment or enter into any settlement with respect
to a Claim without the consent of the Indemnified Party, which consent shall not
be unreasonably withheld, or unless such judgment or settlement includes as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such Claim. No
Indemnified Party shall consent to entry of any judgment or enter into any
settlement of any such action, the defense of which has been assumed by the
Seller, without the consent of the Seller, which consent shall not be
unreasonably withheld.

         6.7    GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

         6.8    SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and, subject to the following restriction, shall inure to the benefit of the
parties hereto and their respective permitted successors and assigns. Buyer
or Buyer's successors and assigns, shall not partially transfer, sell,
convey, assign or mortgage their respective rights or obligations hereunder
to any third party without the prior written consent of Seller. Nothing
contained herein shall in any way limit or restrict the right of Buyer, or
Buyer's successors and assigns to transfer, sell, convey, assign or mortgage
all of the Production Payment and all of the respective rights or obligations
hereunder appertaining thereto without the consent of Seller. Except to the
extent same is effected in connection with and as a part of an assignment
permitted by the Conveyance, Seller shall not transfer, assign or pledge its
rights or obligations hereunder without the prior written consent of Buyer.

         6.9    SCHEDULES AND EXHIBITS. The Exhibits attached hereto and
referred to herein constitute a part of this Agreement.

                                       13
<PAGE>

         6.10    ENTIRE AGREEMENT; AMENDMENTS; WAIVERS. This Agreement and
the Closing Documents constitute the entire agreement between the parties
hereto with respect to the transactions described herein, superseding all
prior negotiations, discussions, agreements and understandings, whether oral
or written, relating to such subject matter. This Agreement may not be
amended and no rights hereunder may be waived except by a written document
signed by the party to be charged with such amendment or waiver. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.

         6.11    COUNTERPARTS. This Agreement may be executed by Buyer and
Seller in any number of counterparts, each of which shall be deemed an
original instrument, but all of which together shall constitute but one and
the same instrument.

         6.12    NO THIRD-PARTY BENEFICIARY. This Agreement is not intended
to create, nor shall it be construed to create, any rights in any third party
under doctrines concerning third-party beneficiaries.

         6.13    EXECUTION BY PARENT. Parent's execution of this Agreement is
for the sole purpose of making the representations and covenants set forth in
Article IV.

         EXECUTED on the date first set forth above.

                                         SELLER:

                                             ODESSA EXPLORATION INCORPORATED

                                             By: /s/ D. Kirk Edwards
                                                 -----------------------------
                                                     D. Kirk Edwards
                                                     President

                                         PARENT:

                                                  KEY ENERGY SERVICES, INC.

                                             By: /s/ Jack D. Loftis, Jr.
                                                 -----------------------------
                                                     Jack D. Loftis, Jr.
                                                     Senior Vice President and
                                                     General Counsel

                                       14
<PAGE>

                                            BUYER:

                                                 NORWEST ENERGY CAPITAL, INC.

                                                 By:   /s/ Mark D. McKinney
                                                    ---------------------------
                                                 Mark D. McKinney
                                                 Senior Vice President

EXHIBITS

A  -  Conveyance of Production Payment
B  -  Production and Delivery Agreement
C  -  Opinion of Counsel
D  -  Seller's Disclosure Statement

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