Document:

Exhibit 10.3

                       Exploration Participation Agreement

                                  Main Pass 221
                                     Bristol

                                 By and Between

                               Chevron U.S.A. Inc.

                                       And

       Ridgewood Energy Corporation, Manager Ridgewood Energy Q Fund, LLC.

                                September 1, 2005

Chevron / Ridgewood EPA 9-1-05.doc
Final Agreement

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                                TABLE OF CONTENTS

ARTICLE                                                                  PAGE

1.       SUBJECT MATTER, DEFINITIONS, EXHIBITS AND CONSTRUCTION .........2
     1.1   Subject Matter and Purpose ...................................2
     1.2   Defined Terms ................................................2
     1.3   Exhibits .....................................................7
     1.4   Rules of Construction ........................................7
2.         CONTRACT ACREAGE .............................................8
     2.1   Contract Acreage .............................................8
     2.2   Primary Package Prospects ....................................8
     2.3   Additional Opportunities Prospects ...........................8
     2.4   Area of Mutual Interest ......................................9
3.       ASSIGNMENT OF INTEREST .........................................10
     3.1   Leasehold Assignment .........................................10
     3.2   Ridgewood's Contribution to Well Costs .......................12
     3.3   Assignment Timing ............................................12
     3.4   Proportionate Adjustment. ....................................13
     3.5   Additional Earning Option ....................................14
4.       PROSPECT EVALUATION ............................................14
     4.1   Primary Package Prospect Well Cost Sharing ...................14
     4.2 Additional Opportunities Prospect Well Cost Sharing ............16
     4.3   Well Over-expenditure Limitation .............................17
     4.4   Third Party Participation in Prospects .......................18
     4.5   Rights Limitation on Use of Existing Wells ...................18
     4.6   Wells Proposed by Chevron after the Effective Date ...........18
     4.7   Protection from Drainage .....................................19
5.       FARMOUT OPTION .................................................19
     5.1   Exhibit A or B Prospect Substitute Wells .....................19
     5.2   Exhibit B Farmout Option .....................................20
     5.3   Chevron's Participation Options and Overriding Royalties .....20
     5.4   General Farmout Agreement Terms and Conditions ...............20
     5.5   Impenetrable Substances ......................................24
     5.6   Overriding Royalties .........................................24
     5.7   Joint Operations for Earned Depths ...........................24
6.       PRESSURE COMMUNICATION AND COMMON RESERVOIRS ...................25

Chevron / Ridgewood EPA 9-1-05.doc
Final Agreement

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                                TABLE OF CONTENTS

ARTICLE                                                                  PAGE

     6.1   Pressure Communication Restriction ...........................25
7.       OPERATING AGREEMENT ............................................26
     7.1   Offshore Operating, Agreements ...............................26
     7.2   Designation of Operator ......................................27
8.       ADDITIONAL PARTNERS/CO-VENTURERS ...............................27
     8.1   Partners/Co-Venturers ........................................27
9.       ACREAGE RELEASE ................................................27
     9.1   Option to Release Acreage ....................................27
     9.2   Rights Termination ...........................................28
     9.3   Automatic Release ............................................28
10.      NOTICES ........................................................28
     10.1  Notices ......................................................28
     10.2  Change in Designated Representative ..........................29
11.      EXISTING AGREEMIENTS ...........................................29
     11.1  Existing Agreements ..........................................29
12.      RIGHTS RESERVED ................................................30
     12.1  Lease Rights Reservations ....................................30
13.      PRODUCTION PROCESSING AND CONTRACT PUMPING .....................30
     13.1  Production Handling Option ...................................30
     13.2  Contract Operating Option ....................................31
     13.3  Use of Existing Facilities ...................................31
14.      TAX MATTERS ....................................................31
     14.1  Income Tax Election ..........................................31
15.      GEOPHYSICAL DATA ...............................................32
     15.1  Proprietary Seismic Data .....................................32
     15.2  Hazard Survey Data ...........................................33
     15.3  Speculative Seismic Data .....................................33
16.      RENTALS, MINIMUM ROYALTY AND LEASE MAINTENANCE .................33
     16.1  Rentals and Minimum Royalty ..................................34
17.      MEDIA RELEASES .................................................34
     17.1  Public Announcements .........................................34
     17.2  Media Releases ...............................................35
18.      FILES ..........................................................35
     18.1  Access to Files ..............................................35
19.      ASSIGNMENTS AND TRANSFER OF INTEREST ...........................36

Chevron / Ridgewood EPA 9-1-05.doc
Final Agreement

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                                TABLE OF CONTENTS

ARTICLE                                                                  PAGE

     19.1  Assignment of this Agreement .................................36
     19.2  Lease or Prospect Successors and Assigns .....................36
20.      CONFIDENTIALITY ................................................37
     20.1  Confidentiality ..............................................37
     20.2  Speculative Seismic Data .....................................37
     20.3  Disclosure of Confidential Data ..............................38
     20.4  Risk of Use of Confidential Data ............................ 38
21.      GOVERNING LAW ..................................................39
     21.1  Choice of Law ................................................39
     21.2  Future Litigation and Claims .................................39
22.      FORCE MAJEURE ................................................. 39
     22.1  Force Majeure ................................................39
23.      DISPUTE RESOLUTION .............................................40
     23.1  Dispute Resolution ...........................................40
24.      TERMINATION ....................................................41
     24.1  Termination ..................................................41
     24.2  Lease Expiration or Termination ..............................41
     24.3  Agreement Extension ..........................................41
25.      INDEMNITY ......................................................42
     25.1  Indemnity ....................................................42
26.      BREACH .........................................................42
     26.1  Breach .......................................................42
27.      SPECIAL WARRANTY ...............................................43
     27.1  Special Warranty .............................................43
28.      GENERAL PROVISIONS .............................................44
     28.1  Prospects Treated Separately ................................ 44
     28.2  Non-Interference .............................................44
     28.3  Governmental Approvals .......................................44
     28.4  Amendments ...................................................45
     28.5  Declaration of Agreement .....................................45
     28.6  Other Rights, Remedies Reserved ............................. 45
     28.7  No Waiver ....................................................45
     28.8  No New Lease Burdens .........................................45
     28.9  Permitting Cost Sharing ......................................46
     28.10 Audit Rights .................................................46

Chevron / Ridgewood EPA 9-1-05.doc
Final Agreement

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                                TABLE OF CONTENTS

ARTICLE                                                                  PAGE

     28.11 Severability .................................................46
     28.12 Entire Agreement .............................................46
     28.13 Further Assurances ...........................................47
     28.14 Surviving Obligation .........................................47
     28.15 Conflict of Terms ............................................47

Chevron / Ridgewood EPA 9-I-05.doc
Final Agreement

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                                LIST OF EXHIBITS

         Exhibit "A"       Primary Package Prospects

         Exhibit "B"       Additional Opportunities Prospects

         Exhibit "C"       List of Existing Agreement Restrictions, Exceptions
                           and Obligations

         Exhibit "D"       Area of Mutual Interest

         Exhibit "E"       Offshore Operating Agreement

         Exhibit "F"       Dispute Resolution Procedure

         Exhibit "G"       Declaration of Agreement

Chevron / Ridgewood EPA 9-1-05.doc
Final Agreement

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                       EXPLORATION PARTICIPATION AGREEMENT

         THIS EXPLORATION PARTICIPATION AGREEMENT ("Agreement") is made and
entered into this 15` day of September 2005, by and between Chevron U.S.A. Inc.,
a Pennsylvania corporation, hereinafter sometimes referred to as "Chevron" and
Ridgewood Energy Corporation, a Delaware corporation, Manager Ridgewood Energy Q
Fund, LLC. hereinafter sometimes referred to as "Ridgewood." Chevron and
Ridgewood are sometimes hereinafter referred to individually as "Party" and/or
collectively as "Parties."

                                   WITNESSETH:

         WHEREAS, Ridgewood has expressed a desire to secure the right to cam
and subsequently own certain leasehold interests currently owned by Chevron in
the Outer Continental Shelf, Offshore in the Gulf of Mexico; and WHEREAS,
Chevron is desirous of having an entity with proven expertise in oil and gas
operations in the United States to evaluate, through exploratory drilling, the
hydrocarbon potential on a portion of the leasehold currently owned by Chevron
in such areas; and

         WHEREAS, Ridgewood has demonstrated its ability to find commercial
quantities of hydrocarbons in various locations throughout the United States and
is willing to commit financial and personnel resources now and in the future to
explore and develop the acreage of Chevron as described herein; and

         WHEREAS, Chevron is agreeable to grant Ridgewood the right and option
to explore certain Chevron leasehold along with Chevron to earn an interest in
such leasehold all as more particularly set forth below.

         NOW THEREFORE, for and in consideration of the mutual advantages and
benefits accruing to the Parties hereto, the sufficiency of which is hereby
acknowledged, the Parties hereto agree that the following shall constitute the
agreement between Chevron and Ridgewood concerning the drilling of various wells
hereinafter described on the "Contract Acreage" hereinafter identified and, upon
the satisfaction of certain conditions contained herein, the acquisition of
interests by Ridgewood from Chevron. This Agreement upon execution by Chevron
and Ridgewood shall supersede and replace all prior agreements and oral

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conversations between Chevron and Ridgewood regarding the transaction set forth
herein including, but not limited to, that certain Letter from Ridgewood to
Chevron dated July 19, 2005.

                                    ARTICLE I

1. SUBJECT MATTER, DEFINITIONS, EXI IBITS AND CONSTRUCTION

         1.1      Subject Matter and Purpose.

         The subject matter of this Agreement is the exploration and development
of the Contract Acreage, as defined below, by Ridgewood and Chevron pursuant to
the terms and conditions hereinafter provided together with the rights and
obligations of Ridgewood and Chevron concerning such exploration and development
of the Contract Acreage. The purpose of this Agreement is to provide a means
whereby Chevron is to make available to Ridgewood acreage for the drilling of
Exploratory Wells by Chevron, Ridgewood and others in an attempt to find and
develop economic reserves for the benefit of the Parties. It is contemplated
that situations will arise during the term of this Agreement that is not
specifically covered herein. In the event these situations do arise the Parties
agree, in the spirit of cooperation, to use all reasonable efforts to resolve
such situations to the mutual benefit of all Parties.

         1.2      Defined Terms.

         For purposes of this Agreement, including the Exhibits, except as
otherwise expressly provided, the terms defined in this Section 1.2 have the
meanings assigned to them herein and the capitalized terms defined elsewhere in
the Agreement by inclusion in quotation marks and parentheses have the meanings
so ascribed to them.

         "AFE" means an Authority for Expenditure prepared by a Party to this
Agreement or a Co-Working Interest Owner, for the purpose of estimating the Well
Costs to be incurred in connection with a proposal to drill, deepen, or
sidetrack a well hereunder.

         "Additional Opportunities Prospects" mean the Prospects identified by
the Parties listed on Exhibit "B."

         "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by, or under common control
with, such Person. For purposes of this definition, the term "control"
(including, with correlative meanings, the terms "controlling," "controlled by"

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and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management of such Person, whether through ownership of voting securities, by
contract or otherwise, and specifically with respect to a corporation,
partnership or limited liability company means ownership of fifty percent (50%)
or more of the voting stock in such corporation or of the voting interest as a
partner in such partnership or as a member of such limited liability company.

         "Agreement" means this Exploration Participation Agreement between
Chevron and Ridgewood including the Exhibits attached hereto or referred to
herein.

         "Area of Mutual Interest" or "AMIE" means the areas and blocks listed
on Exhibits "A," B," and "D" attached hereto.

         "Available Acreage" shall mean Chevron's interest in the acreage
described on Exhibits "A" and "B" attached hereto and made a part hereof.

         "Business Day" means a day on which the Minerals Management Service New
Orleans Regional Office is open for business.

         "Casing Point" means that point in time when a well has reached the
Objective Depth, and all logs, cores and other tests have been completed that
are sufficient to make a determination concerning the running of production
casing or the plugging and abandonment of the well, and the results thereof have
been furnished to all Parties.

         "Contract Acreage" means collectively those portions of the Leases and
lands described as Available Acreage on Exhibits "A" and "B" attached hereto and
made a part hereof plus any acreage that becomes jointly owned pursuant to
Section 2.4.

         "Co-Working Interest Owner" is any Third Party, or their assignee, who
owns a Record Title Interest, Operating Rights Interest and/or real property
interest, with or without Chevron, in any Lease listed on or adjacent to
Exhibits "A" and "B," that either may or may not be a Party hereto.

         "Effective Date" means the effective date of this Agreement, being 7:00
a.m., Central Standard Time, September 1, 2005.

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         "Existing Facilities" means all property located on or associated with
the Contract Acreage as of the Effective Date used or held for use in connection
with the production, treatment, gathering, storage and compression of oil and/or
gas from. on, or attributable to any Lease listed on Exhibits "A" or "B,"
including but not limited to, (1) platforms, caissons, fixtures, tanks, pumps,
pipelines, appurtenances and improvements, (2) all equipment or material
permanently or temporarily located on the Contract Acreage; and, (3) other
structures located on or used in connection with the Leases.

         "Exploratory Objective" means any zone, interval or horizon not in
pressure communication with a zone, interval or horizon that is currently
producing or is currently known to be capable of producing oil and/or gas from
an existing wellbore located on a Lease.

         "Exploratory Well" means a well proposed to be drilled to evaluate an
Exploratory Objective. A well will be considered an Exploratory Well if any bona
fide objective in a well is an Exploratory Objective, even if other objectives
in the well do not qualify as Exploratory Objectives. Any substitute well for a
previously drilled Exploratory Well shall be considered an Exploratory Well if
and only if the substitute well is proposed to be drilled to not less than the
Objective Depth of the unsuccessful Exploratory Well it is replacing.

         "Farmout Agreement" means a mutually acceptable form of agreement to be
entered into by the Parties for each Exhibit "A" Prospect as to the Available
Acreage in the event Chevron elects not to participate in a Substitute Well as
to operations conducted in non jointly owned depths, and for each Exhibit "B"
Prospect in the event Chevron elects not to participate in the Initial Test
Well, or an Exhibit "B" Prospect where Chevron elects to participate in the
Initial Test Well but elects not to participate in a Substitute Well as to
operations conducted in non jointly owned depths.

         "Initial Test Well" shall be the first Exploratory Well proposed by
Chevron and drilled after the Effective Date of this Agreement on each Prospect
located on an Exhibit "A" or "B" Lease, or on lands pooled or unitized with an
Exhibit "A" or "B" Lease, or on a Prospect which includes all or a portion of an
Exhibit "A" or "B" Lease.

         "Land Cost" shall mean the total bonus, finder fees, accumulated annual
rentals and obligations to maintain any leases paid by Chevron before and after

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the Effective Date of this Agreement for each Lease listed on Exhibits "A" and
"B." Exhibits "A" and "B" list the Land Costs paid by Chevron for each Lease
prior to the Effective Date of this Agreement.

         "Lease" or "Leases" shall mean the oil and gas leases issued by the
United States of America all as listed on Exhibits "A," "B" and "D," but as may
be depth or interest limited thereby.

         "Objective Depth" shall mean the total depth of an Initial Test Well or
Substitute Well(s) as specified in the AFE for such well as proposed in
accordance with the provisions of this Agreement and as shown on Exhibits "A"
and "B."

         "Operating Agreement" means the offshore operating agreement to be
entered into by the Parties in accordance with the provisions of this Agreement
to govern operations of the Parties on wells drilled under this Agreement.

         "Operating Rights" shall mean all of the rights, obligations,
liabilities and attributes of a working interest ownership covering less than
all depths, and potentially less than the entire surface area, in and on a
Lease.

         "Person" means, and shall be interpreted broadly to include, without
limitation, any individual, corporation, association, company, limited liability
company, trust, estate, partnership, joint venture, unincorporated organization,
other business entity, any government or any department or agency thereof, or
any other legal entity.

         "Primary Package Prospect" shall mean those Prospects identified by
Chevron listed on Exhibit "A".

         "Prospect" shall mean an area believed to encompass an accumulation(s)
of hydrocarbons having one or more productive formations. The area encompassing
these accumulations shall be described on a surface acreage basis and subject to
any depth limitations as specified on Exhibits "A" or "B" or as agreed to by the
Parties. If Ridgewood and/or Chevron owns or acquires an interest in a lease
contiguous to a Lease subject to this Agreement that is not on acreage listed on
Exhibits "A," "B," or "D," such lease (or portion thereof) may also be included
in a Prospect at the request of Ridgewood, but subject to the approval of
Chevron.

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         "Record Title" shall mean all of the rights, obligations, liabilities
and attributes of a working interest ownership covering all depths in and on a
Lease.

         "Representatives" mean the directors, officers, supervisors, employees,
partners, lenders, consultants, attorneys and legal counsel, financial advisors,
accountants, marketing representatives and other agents of the Parties.

         "Reservoir" means a subsurface porous, permeable rock body that
contains or is thought to contain an accumulation of oil and/or gas, separated
by faulting or other subsurface anomaly from other areas containing
accumulations of oil and/or gas in the same or different strata.

         "Ridgewood ACP Interest" shall mean the interest of Ridgewood in each
Lease as listed on Exhibits "A" and "B" under the column titled "RIDGEWOOD
Interest AFTER Casing Point."

         "Ridgewood BCP Interest" shall mean the interest of Ridgewood in each
Lease as listed on Exhibits "A" and "B" under the column titled "RIDGEWOOD
Interest BEFORE Casing Point."

         "Substitute Well" means a well proposed by a Party to the Objective
Depth of a Prospect as listed on Exhibits "A" or "B," or as otherwise mutually
agreed to by the Parties, as a result of the Initial Test Well, or a previous
Substitute Well, on such Prospect not reaching its Objective Depth.

         "Successful Well" means a well determined by the MMS (or meeting the
requirements of the MMS without a written determination) to be a producible well
pursuant to 30 CFR Part 250, Subpart A, or any successor regulation, for Leases
located in Federal offshore waters, as used in Articles 3, 4 and 5 or if
actually completed for production by a Party hereto or Co-Working Owner.

         "Third Parties" means a Person not a Party to this Agreement.

         "Well Costs" means the costs and expenses of all services and materials
used and associated with drilling, sidetracking, deepening and testing a well
hereunder, including, but not limited to the costs and expenses associated with
the following items: (1) permitting with applicable government agencies; (2)
drill site preparation (excluding hazard surveys, which are provided for in
Section 15.2 of this Agreement); (3) actual drilling, deepening or sidetracking
operations (including mobilization and demobilization of the rig to the drill
site); (4) logging, coring and testing of the well for the presence of oil

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and/or gas; (5) the costs of plugging and abandonment if the well is not saved
for production; and (6) the cost to temporarily abandon a well.. All such costs
and expenses shall be determined in accordance with the accounting procedure
attached to the applicable Operating Agreement.
"Unit" means the pooling of all or a portion of one or more Leases with all or a
portion of another lease or leases not subject to this Agreement.

         1.3      Exhibits.

         The following Exhibits are attached hereto and incorporated herein by
reference:

         Exhibit "A"       Primary Package Prospects

         Exhibit "B"       Additional Opportunities Prospects

         Exhibit "C"       List of Existing Agreement Restrictions, Exceptions
                           and Obligations

         Exhibit "D"       Area of Mutual Interest

         Exhibit "E"       Offshore Operating Agreement

         Exhibit "F"       Dispute Resolution Procedure

         Exhibit "G"       Declaration of Agreement

         1.4      Rules of Construction.

         For purposes of this Agreement:

         (a) Unless the context otherwise requires: (1) "or" is not exclusive;
         (2) an accounting term not otherwise defined has the meaning assigned
         to it in accordance with accounting principles generally accepted in
         the United States of America; (3) words in the singular include the
         plural, and words in the plural include the singular; (4) words in the
         masculine include the feminine, words in the feminine include the
         masculine and words with appropriate correlative meanings include such
         correlative meanings; (5) any date specified for any action that is not
         a Business Day shall be deemed to mean the first Business Day after
         such date; (6) reference to a Person includes such Person's successors
         and assigns and, in the case of governmental bodies, Persons succeeding
         to their respective functions and capacities; (7) any amounts due or
         payable under this Agreement shall be paid in United States currency;
         and (8) the use of the words "contribute, contributing or contribution"
         shall refer to a payment due from one Party to the other as specified
         herein or in the applicable Operating Agreement.

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         (b) References to Articles and Sections are, unless otherwise
         specified, to Articles and Sections of this Agreement. Neither the
         captions to Articles or Sections thereof nor the Table of Contents
         shall be deemed to be a part of this Agreement but are added for
         convenience only.

         (c) References herein to any agreement or other instrument shall,
         unless the context otherwise requires (or the definition thereof
         otherwise specifies), be deemed references to the same as it may from
         time to time be changed, modified, supplemented, amended or extended.
         There is no incorporation by reference herein unless expressly so
         stated.

                                    ARTICLE 2

2.       CONTRACT ACREAGE

         2.1      Contract Acreage.

         This Agreement shall cover only the Available Acreage as described in
Exhibits "A" and "B." Should any acreage be jointly acquired pursuant to the
provisions of this Agreement as stated in Section 2.4 below, then said newly
acquired acreage shall automatically become part of the Contract Acreage.

         2.2      Primary Package Prospects.

         Attached hereto as Exhibit "A" is a list of Prospects Chevron has
identified covering various Leases subject to this Agreement. Prior to the
execution of this Agreement, a technical presentation was given to Ridgewood by
Chevron covering each of these Prospects. No acreage associated with the
Prospects listed on Exhibit "A" shall be expanded or contracted without the
mutual consent of the Parties. Notwithstanding the above, no approval by the
Parties will be required for the expansion of a Prospect as a result of acreage
acquired by Chevron pursuant to the provisions stated in Section 2.4; it being
understood that any such acreage acquired by Chevron pursuant to the provisions
stated in Section 2.4 would automatically be included in the affected Prospect.

         2.3      Additional Opportunities Prospects.

Exhibit "B" consists of a list of Leases and associated Prospects where a
technical presentation has been given to Ridgewood by Chevron. In accordance
with the provisions stated in this Agreement, it is anticipated the Parties may,
under the terms hereof, evaluate the hydrocarbon potential on these Exhibit "B"
Prospects to determine whether or not the Parties are interested in drilling an
Initial Test Well on these Prospects. Unless mutually agreed by the Parties
before, during or subsequent to the evaluation described herein regarding the

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Prospects listed on Exhibit "B," each Prospect on Exhibit "B" will not be
expanded or contracted to include or exclude acreage or Leases. Notwithstanding
the above, approval of any expansion to a Prospect will not apply to acreage
acquired by Chevron pursuant to the provisions stated in Section 2.4; it being
understood that any such acreage acquired by Chevron pursuant to the provisions
stated in Section 2.4 would automatically be included in the affected Prospect.

         2.4      Area of Mutual Interest.

         Absent an agreement to the contrary, and prior to Ridgewood earning an
interest in the Leases in a Prospect as described herein pursuant to Article 3,
should Ridgewood either (i) acquire an interest in an oil and gas lease covering
any of the blocks or acreage in such Prospect identified on Exhibits "A," "B" or
"D," or any portion of such blocks or acreage, or (ii) acquire the right to
acquire an interest in an oil and gas lease covering any of the blocks or
acreage identified in such Prospect, or (iii) acquire an interest in an oil and
gas lease covering any of the blocks or acreage identified on Exhibit "A," "B"
or "D" for such Prospect should the original Lease expire or terminate before
termination of this Agreement, then Chevron shall have the right but not the
obligation to acquire from Ridgewood sixty-five percent (65%) interest and/or
right(s) acquired by Ridgewood covering any of the blocks or acreage identified
on Exhibit "A," "B" or "D," except for Mobile Blocks 945, 946 and 947, wherein,
Chevron shall have the right but not the obligation to acquire from Ridgewood
seventy-five percent (75%) interest and/or right(s) acquired by Ridgewood
covering Mobile Blocks 945, 946 and 947. Chevron shall be notified in writing by
Ridgewood within fifteen (15) days of such acquisition and shall have fifteen
(15) days after receipt of such notice to advise Ridgewood whether or not
Chevron elects to acquire its proportionate share of the interest and/or rights
acquired by Ridgewood. Any notice given shall include whatever supporting
documentation Ridgewood has available. If Chevron elects to exercise its right
under this Agreement, the consideration owed by Chevron to Ridgewood shall be
equal to all the consideration paid and/or tendered by Ridgewood for such
interest and/or right attributable to Chevron's proportionate share. In the
event during the term of this Agreement, Ridgewood acquires any such interest or
acquires the right to acquire any such interest as a result of an acreage
exchange or multi-property transaction, Chevron shall be notified in writing by
Ridgewood within fifteen (15) days of such acquisition and Ridgewood and Chevron
shall make a good faith effort to negotiate a fair value wherein Chevron would
have the option to acquire from Ridgewood its proportionate share of the
interest and/or right acquired by Ridgewood in exchange for satisfactory
consideration equal to the total fair value of the acquired interest. Once
Chevron and Ridgewood have agreed on the fair value for the subject interest,
Chevron shall have fifteen (15) days after receipt of written notice from
Ridgewood to advise Ridgewood whether or not Chevron elects to acquire its
proportionate share of the interest and/or right acquired by Ridgewood. Should

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Chevron acquire any interest, or acquires a right to acquire any interest in any
acreage listed on Exhibits "A," "B" or "D" prior to Ridgewood earning an
interest in the Leases included in the Prospect covering such acreage, Chevron
will include the acquired acreage, or right to acquire acreage, in such Prospect
for all purposes of this Agreement.

         After earning an interest in the Leases in a Prospect by Ridgewood, the
applicable Operating Agreement will control the obligations between the Parties
in the AMI for such Prospect established under the Operating Agreement, which
will consist of the acreage identified on Exhibits "A," "B" and "D" for such
Prospect, plus any acreage added to such Prospect pursuant to this Agreement, if
any.

         This AMI obligation shall be binding upon and shall inure to the
Parties hereto, for the longer period of either, (i) the Confidentiality/AMI
Agreement dated July 6, 2005, (ii) this Agreement or (iii) any applicable
Operating Agreement.

                                    ARTICLE 3

         3.       ASSIGNMENT OF INTEREST

         3.1      Leasehold Assignment.

         Exhibits "A" and "B" list the current ownership interests of Chevron in
the Leases. Exhibits "A" and "B" also list the portions of Chevron's interest,
based on 100% leasehold working interest, that Chevron will assign to Ridgewood
subject to the earning provisions stated in this Article 3. Prospect acreage
earned and the assignment(s) due will cover Record Title or Operating Rights
Interest as to the Ridgewood ACP Interest in and to the acreage listed on
Exhibits "A" or "B" in all the Leases in the Prospect and shall be delivered
under special warranty of title and on a form of assignment approvable by the
Minerals Management Service ("NINIS"). Any assignment made as a result of this
Agreement shall be made specifically subject to this Agreement and the
restrictions, exceptions, limitations and obligations stated in the agreements
listed on Exhibit "C," as applicable, for each Lease to be assigned. These
agreements will be referenced in any assignment made.

         (a)      Upon (i) Ridgewood's participation in an Initial Test Well on
                  a Prospect, (ii) which reaches its Casing Point for the
                  Objective Depth, and (iii) regardless if the well is a
                  Successful Well or not in the Available Acreage for that
                  Prospect, then Ridgewood will be entitled to an assignment of
                  the Ridgewood ACP Interest in each of the Leases included in
                  the Prospect drilled as to the Available Acreage for that
                  Prospect.

                                       10
<PAGE>

         (b)      Upon (i) Ridgewood's participation in an Initial Test Well on
                  a Prospect, (ii) which fails to reach its Casing Point for the
                  Objective Depth, (iii) the Parties have expended at least one
                  hundred and twenty percent (120%) of the AFE dry hole costs
                  estimated to drill the Initial Test Well as stated in the
                  original AFE for such well, and (iv) regardless if the well is
                  a Successful Well or not in the Available Acreage for that
                  Prospect, then Ridgewood will be entitled to an assignment of
                  the Ridgewood ACP Interest in each of the Leases included in
                  the Prospect drilled as to the Available Acreage for that
                  Prospect.

         (c)      Upon (i) Ridgewood's participation in an Initial Test Well on
                  a Prospect, (ii) which fails to reach its Casing Point for the
                  Objective Depth, (iii) the Parties fail to spend at least one
                  hundred and twenty percent (120%) of the AFE dry hole costs
                  estimated to drill the Initial Test Well as stated in the
                  original APE for such well, (iv) the well is not a Successful
                  Well in the Available Acreage for that Prospect, and (v) the
                  Parties mutually agree to cease further operations on such
                  well, then Ridgewood will not have earned any interest in the
                  Leases making up the Prospect. Upon Ridgewood participating in
                  a Substitute Well on such Prospect and spending its obligated
                  portion of the original AFE dry hole costs up to twenty
                  percent (20%) over the original AFE dry hole costs for the
                  Initial Test Well for the Prospect as further defined in this
                  Agreement or upon such Substitute Well reaching Casing Point
                  for the Objective Depth, Ridgewood will be entitled to an
                  assignment of the Ridgewood ACP Interest in each of the Leases
                  included in the Prospect drilled as to the Available Acreage
                  for that Prospect. Ridgewood's cumulative costs on the Initial
                  Test Well and all Substitute Wells shall be used in
                  determining when and whether Ridgewood has satisfied its
                  spending obligation for earning purposes for the Prospect.

         (d)      Upon (i) Ridgewood's participation in an Initial Test Well on
                  a Prospect, (ii) which fails to reach its Casing Point for the
                  Objective Depth, (iii) the Parties fail to spend at least one
                  hundred and twenty percent (120/) of the AFE dry hole costs
                  estimated to drill the Initial Test Well as stated in the
                  original ATE for such well, (iv) the well is a Successful Well
                  in the Available Acreage for that Prospect, (v) and the
                  Parties mutually agree to cease further drilling operations,
                  then Ridgewood will be entitled to an assignment of the
                  Ridgewood ACP Interest in the Leases included in the Prospect,

                                       11
<PAGE>

                  but limited in depths down to the stratigraphic equivalent of
                  the base of the deepest interval that classifies such well to
                  be a Successful Well. Upon Ridgewood participating in the
                  drilling of a Substitute Well proposed and drilled to the
                  original Casing Point for the Objective Depth as approved for
                  the Initial Test Well on a Prospect, or upon Ridgewood
                  spending its obligated portion of the original AFE dry hole
                  cost up to twenty percent (20%) over the original AFE dry hole
                  cost for the Initial Test Well for the Prospect, whether or
                  not the Substitute Well is a Successful Well in the Available
                  Acreage for that Prospect, Ridgewood will be entitled to an
                  assignment of the Ridgewood ACP Interest in the deep rights
                  not previously assigned, if any, for each Lease in the
                  Prospect drilled as to the Available Acreage for that
                  Prospect. Ridgewood's cumulative costs on the Initial Test
                  Well and all Substitute Wells shall be used in determining
                  when and whether Ridgewood has satisfied its spending
                  obligation for earning purposes for the Prospect.

         3.2      Ridgewood's Contribution to Well Costs.

         Subject to the proportionate and disproportionate payment obligations
stated in Sections 4.1 and 4.2 below, Ridgewood will also contribute toward
Chevron's share of the costs of drilling the Initial Test Well, or any
Substitute Well, on each Prospect an amount equal to the total Chevron Land
Costs for such Prospect multiplied by the Ridgewood ACP Interest. Such
contribution shall be paid by Ridgewood to Chevron, within 30 days after
commencement of operations to participate in the drilling of the Initial Test
Well.

         3.3      Assignment Timing.

         As soon as reasonably possible, but no later than thirty (30) days
after any earning event as specified in Article 3.1; Chevron will forward to
Ridgewood the applicable executed assignments of the Leases in the Prospect
drilled, in a recordable form and in a form approvable by the MAWS, if
applicable. Should Ridgewood fail to meet its financial obligations as described
in this Agreement, or under the applicable Operating Agreement, Chevron will
have the right and option to withhold execution and delivery of the earned
assignments until any funds owed have been properly paid. Any assignment made to
Ridgewood will contain a special warranty of title by, through and under
Chevron, but with no other warranty or representation.

                                       12
<PAGE>

         3.4      Proportionate Adjustment.

         The Parties recognize that certain Prospects listed on Exhibits "B" may
involve acreage not under the ownership or control of Chevron on the Effective
Date of this Agreement. Should Chevron secure an agreement from the Third Party
owner(s) of any offsetting acreage or Prospect Contract Acreage necessary to
control a Prospect before drilling an Initial Test Well, and said agreement
results in the reduction of the interest of Chevron in the Initial Test Well and
Prospect, the obligations and duties of the Parties hereto in regard to the
Prospect included under the agreement with a Third Party shall be
proportionately adjusted to compensate for the reduction in interest by Chevron
in the Prospect, dependent upon whether such reduction in interest results from
(i) a recordable or N MS approvable cross-assignment of Record Title or
Operating Rights Interests with the Third Party or (ii) an assignment of
contractual interests in a Prospect with a Third Party.

         In the event of a cross-assignment with a Third Party of Record Title
or Operating Rights Interest in a Prospect, the interest Chevron would assign to
Ridgewood in the Leases in the Prospect would be proportionately reduced by the
Ridgewood ACP Interest of the specific Prospect area, to reflect the Record
Title or Operating Rights Interest of Chevron remaining after such
cross-assignment. Ridgewood would also be entitled to an assignment of a similar
Record Title or Operating Rights Interest in lands acquired by Chevron from the
Third Party as the result of any such cross-assignment.

         In the event of a reduction of Chevron's interest in a Prospect by
means of a contractual arrangement that does not result in the cross-assignment
of Record Title or Operating Rights Interest in a Prospect with a Third Party,
the interest Chevron would assign to Ridgewood in the Leases in the Prospect
would be subject to such contractual rights, and Ridgewood would be entitled to
its proportionate share, of the specific Prospect area, of the contractual
rights acquired. The interest to be assigned by Chevron to Ridgewood in the
Leases in the Prospect would be proportionately reduced by the Ridgewood ACP
Interest of the specific Prospect area to reflect the contractual arrangement.
Examples of such contractual arrangements would be a pooling arrangement or a
farmin between Chevron and a Third Party that was not approved by the MIS.

         In no event shall Ridgewood be liable for or entitled to receive any
benefit from or associated with any promoted costs the Third Party may be
required to pay to Chevron. Ridgewood's obligations, rights and duties under
this Agreement would be adjusted as appropriate to recognize the interests to be
assigned to, or the contractual arrangement agreed to with, the Third Party.
Notwithstanding anything to the contrary stated in this Section 3.4, in no event
will the provisions of this Section further reduce or diminish the obligations

                                       13
<PAGE>

and duties under this Agreement of the Parties to each other with the exception
of any interest earned which Chevron is obligated to assign to Ridgewood as to
Exhibit "B" Prospects would be adjusted to compensate for the interest assigned
to or contractual arrangement made with a Third Parry. Costs associated with any
obligation as to such prospects would also be adjusted accordingly.

         3.5      Additional Earning Option.

         During the term of this Agreement should Ridgewood fail to earn an
assignment on all or a portion of the Available Acreage in a Prospect after
participating in the Initial Test Well, Ridgewood's continuing right and option
to participate in the drilling of a Substitute Well on the Prospect to earn
rights hereunder will continue to exist until (a) the termination of this
Agreement, (b) the expiration or termination of the Leases where all depths have
not been assigned, or (c) Ridgewood elects not to participate in a Substitute
Well proposed by Chevron or a Co-Working interest Owner and such well is
thereafter drilled as proposed. Upon the occurrence of any of these events, on a
Prospect-by-Prospect basis, Ridgewood's option to earn the unearned acreage
shall cease without any further action by Chevron.

                                    ARTICLE 4

4.       PROSPECT EVALUATION

         4.1      Primary Package Prospect Well Cost Sharing.

         Chevron will have the obligation to propose to Ridgewood the drilling
of an Initial Test Well on the Primary Package Prospects listed on Exhibit "A."
It is anticipated drilling operations will commence by November 30, 2005 for the
Bristol Prospect and in the 1s` quarter 2006 for the Satellite Prospect; however
Chevron is only obligated to propose such wells during the term of the Leases
and is not committed to any order or exact date. When proposing a well, Chevron
will provide Ridgewood, an AFE detailing the specifications of the well to be
drilled for informational purposes only. The Parties will have the obligation to
participate, pursuant to the provisions of the applicable Operating Agreement
and this Agreement, in the drilling of an Initial Test Well on each of the
Primary Package Prospects listed on Exhibit "A." For each Exhibit "A" Prospect
drilled, Ridgewood will have the obligation of paying a contribution towards
Chevron's share of Well Costs (pursuant to Section 3.2) plus a share of the
Initial Test Well based on the Ridgewood BCP Interest for that Prospect as
listed on Exhibit "A" until Casing Point or until 120% of the estimated funds to
drill the Initial Test Well as stated in the original AFE have been spent to
drill the Initial Test Well, as required for the Ridgewood ACP Interest
assignment pursuant to Section 3.1. Upon earning an interest assignment for the
Prospect, Ridgewood will have the obligation of paying a share of any additional

                                       14
<PAGE>

cost associated with the Initial Test Well based on the Ridgewood ACP Interest
for the Lease upon which the Initial Test Well is located, subject to the
applicable provisions stated in the controlling Operating Agreement.

         The Parties shall have the option to participate in the drilling of a
Substitute Well(s). Should Ridgewood elect to participate in the drilling of a
Substitute Well, upon Ridgewood earning an interest assignment as described in
Article 3.1 herein, Ridgewood's disproportionate spending obligation will have
been satisfied for that particular Prospect and the cost of any operation
conducted thereafter shall be shared by the participating Parties in the
Substitute Well in accordance with the respective Ridgewood ACP Interest in the
Substitute Well. Upon Ridgewood earning an interest assignment as described in
Article 3.1 in each Prospect, the provisions of the applicable Operating
Agreement shall control the rights, obligations and options of the Parties
thereafter for that particular Prospect.

         Should Ridgewood elect not to participate in the drilling of a
Substitute Well before earning rights in a Prospect as provided herein,
Ridgewood's rights to earn an interest in that Prospect or the remaining
Prospect area shall terminate if such well is drilled as proposed. In addition,
should Ridgewood fail to participate in a Substitute Well before earning all the
interest in a Prospect as described herein, the non-consent provisions of the
applicable Operating Agreement shall not apply to the non-jointly owned interest
in such Substitute Well and Ridgewood will have no right to use of such
Substitute Well as to the unearned, non jointly owned interest unless mutually
agreed upon by the Parties. Should Chevron elect to participate in a Substitute
Well, Chevron will pay a share of the Well Cost of the Substitute Well based on
the residual portion of the Well Cost not being paid by Ridgewood or any
Co-Working Interest Owner. Should Chevron elect not to participate in the
drilling of a Substitute Well for the Initial Test Well, it will farmout as
applicable, a portion of its interest to Ridgewood, as specified in Article 5,
as to all depths not previously earned by Ridgewood pursuant to the drilling of
the Initial Test Well. Failure by Chevron to timely make an election pursuant to
the response periods provided in the applicable Operating Agreement shall be
deemed an election by Chevron not to participate in such operation and farmout
under Article 5. As to any depths previously earned by Ridgewood, a Party's
election not to participate in such Substitute Well shall be in accordance with
the provisions of the applicable Operating Agreement. The provisions of Article
5 shall apply to any farmout.

         Notwithstanding anything herein to the contrary, on any Substitute Well
being proposed on a Prospect where the Initial Test Well discovered a Reservoir,
a Party will have the right and option to limit its participation in the

                                       15
<PAGE>

drilling of any Substitute Well to those depths in the Available Acreage for
that Prospect previously drilled in the original Initial Test Well.

4.2      Additional Opportunities Prospect Well Cost Sharing.

         The Parties will attempt to agree on a timetable for the drilling of
one or more Initial Test Wells on the Additional Opportunities Prospects once
the Parties agree an Additional Opportunities Prospect is ready to be drilled.
Notwithstanding an attempt to agree on a timetable to drill the Initial Test
Wells, it is the intention of the Parties not to defer drilling Additional
Opportunities Prospects that are ready to be drilled and to test all Additional
Opportunities Prospects during the term of this Agreement. Therefore the Parties
agree that after April 1, 2006, either Party shall have the option to propose to
the other Party the drilling of an Initial Test Well on for any Prospects listed
on Exhibit "B." Between the Effective Date and April 1, 2006, the Parties agree
not to submit a proposal to the other regarding the drilling of an Initial Test
Well on any Prospect listed on Exhibit "B." After April 1, 2006, should a Party
wish to propose the drilling of an Initial Test Well on an Exhibit "B" Prospect,
the proposing Party shall provide the other Party with an AFE detailing the
specifications of the well to be drilled. The Parties will have the option, but
not the obligation, to elect to participate in the drilling of an Initial Test
Well on any Prospect listed on Exhibit "B." Should the Parties elect to drill an
Initial Test Well on any Prospect listed on Exhibit "B," Ridgewood will have the
obligation of paying its share of the cost as set out in Exhibit "B" or it's
proportionately reduced share as applicable.

         The Parties shall have the option to participate in the drilling of a
Substitute Well(s). Should Ridgewood elect to participate in a Substitute Well,
upon earning an interest assignment as described in Article 3.1 herein, the
provisions of the applicable Operating Agreement shall control the rights,
obligations and options of the Parties thereafter for that particular Prospect.
Should Ridgewood elect not to participate in the drilling of a Substitute Well
before earning all leasehold rights in a Prospect as provided herein,
Ridgewood's rights to an interest in that Prospect or the remaining Prospect
area shall terminate if such well is drilled as proposed. In addition, should
Ridgewood fail to participate in a Substitute Well before earning all the
interest in a Prospect as described herein, the non-consent provisions of the
applicable Operating Agreement shall not apply to the non jointly owned interest
in such Substitute Well and Ridgewood will have no right to use of the
Substitute Well as to the unearned, non jointly owned interest unless mutually
agreed upon by the Parties. Should Chevron elect to participate in a Substitute
Well, Chevron will pay a share of the Well Cost of the Substitute Well based on
the residual portion of the Well Cost not being paid by Ridgewood or a
Co-Working Interest Owner. Should Chevron elect not to participate in the
drilling of a Substitute Well for the Initial Test Well, it will farmout as

                                       16
<PAGE>

applicable, a portion of its interest to Ridgewood, as specified in Article 5,
as to all depths not previously earned by Ridgewood pursuant to the drilling of
the Initial Test Well, or elect not to participate under the provisions of the
applicable Operating Agreement. Failure by Chevron to timely make an election
pursuant to the response periods provided in the applicable Operating Agreement
shall be deemed an election by Chevron not to participate in such operation and
the non-consent provisions of such Operating Agreement shall apply. As to any
depths previously earned by Ridgewood, a Party's election not to participate in
such Substitute Well shall be in accordance with the provisions of the
applicable Operating Agreement. The provisions of Article 5 shall apply to any
farmout.

         Notwithstanding anything herein to the contrary, on any Substitute Well
being proposed on a Prospect where the Initial Test Well discovered a Reservoir,
a Party will have the right and option to limit its participation in the
drilling of any Substitute Well to those depths previously drilled in the
original Initial Test Well.

         Should Ridgewood elect not to participate in the drilling of an Initial
Test Well drilled on a Prospect listed on Exhibit "B" the Leases associated with
that Prospect will be excluded from this Agreement and Ridgewood will no longer
have any rights or options associated with earning an interest in those Leases.

         Should Chevron elect not to participate in the drilling of an Initial
Test Well on the Prospect listed on Exhibit "B" that is proposed to be drilled
to the Casing Point for the Objective Depth, Chevron will farmout, as
applicable, a portion of its interest to Ridgewood, as specified in Article 5,
its available acreage in the specific Prospect area. Should Chevron elect not to
participate in the drilling of an Initial Test Well on an Exhibit "B" Prospect,
the earning provisions for Ridgewood as described in Article 3 and this Section
4.2, including but not limited to the Land Cost reimbursement, shall not apply
and the earning provisions under the farmout shall control.

         4.3      Well Over-expenditure Limitation.

         Each Operating Agreement executed pursuant to this Agreement shall
include an over-expenditure provision that requires a new AFE for the current
well operation or substitute well operation if it appears that anticipated
expenditures will exceed the original well AFE estimate by twenty percent (20%),
allowing the Parties to elect not to participate in further operations on the
well.

                                       17
<PAGE>

         4.4      Third Party Participation in Prospects.

         The Prospects identified in Exhibit "B" could possibly involve
arrangements where Third Parties will be asked to assign acreage and/or
participate in the drilling of the Initial Test Well and/or Substitute Well for
those Prospects as referenced in Section 3.4. Should a Third Party join in the
drilling of a Prospect, and the Parties agree on a different cost sharing
percentage than what would be followed should a Third Party not be involved in
drilling the Initial Test Well and/or Substitute Well, the Parties agree to
adjust the cost sharing as described in Sections 4.1 and 4.2 to compensate for
the Third Parties participation. Ridgewood will continue to have the obligation
to pay, as appropriate, a proportionate share of the Well Cost, in the same
manner as provided under Sections 3.2 and 4.1 or 4.2 above, for the Initial Test
Well and/or Substitute Well on the Prospect based on the Chevron leasehold
assigned to the Prospect. Land Cost contribution will also be adjusted to
reflect this change in cost sharing percentage and Ridgewood will continue to
have the obligation to contribute its adjusted proportionate share of the Land
Costs incurred by Chevron in acquiring and maintaining the Leases in the
Prospect to be drilled as described above.

         4.5      Rights Limitation on Use of Existing Wells

         Notwithstanding anything to the contrary in this Agreement, without the
express approval of Chevron, Ridgewood shall not have the right and/or option to
propose or use any existing well bore which has been drilled into the Contract
Acreage prior to the Effective Date unless otherwise mutually agreed to by the
Parties and the owners of the well bore.

         4.6      Wells Proposed by Chevron after the Effective Date.

         During the term of this Agreement, Chevron may identify one or more new
prospects on the Contract Acreage prior to Ridgewood earning an interest in
certain Leases in the Prospects identified for such Leases. Should Chevron
identify a new prospect on unearned acreage, it will submit a proposal in
writing to Ridgewood to drill an Exploratory Well to an Exploratory Objective,
or to deepen or sidetrack an existing Chevron well or wells to evaluate such
prospect. Chevron's notice shall include an identification of the prospect and
the information regarding the Exploratory Well and the Exploratory Objective to
be drilled. It is agreed between the Parties hereto that in the event Chevron
identifies a new prospect and proposes an Exploratory Well after the Effective
Date of this Agreement, the rights and options of Chevron and Ridgewood as to
that prospect and well proposed shall apply as if the prospect had been listed
on Exhibit "B" at the time of execution of this Agreement. All Exhibit "B"
Prospects initiated under this Section 4.6 shall be drilled under the terms and
conditions stated in Section 4.2 above, with the exception that Chevron shall
propose the prospect to Ridgewood and Ridgewood shall have the right, for thirty
(30) days from the receipt of the well proposal, to accept the prospect for

                                       18
<PAGE>

inclusion under the terms of this Agreement. Should Ridgewood choose not to
include the new prospect under the terms of this Agreement, Chevron will have
the right and option to drill or cause to be drilled the prospect and exclude
the acreage associated with this prospect from this Agreement limited to the
deepest depths drilled in such well if such well is a Successful Well. The
remaining acreage and depths in the applicable Prospect area would continue to
be subject to this Agreement.

         4.7      Protection from Drainage.

         The Parties hereto recognize that producible Reservoirs common to both
a Lease and adjacent or adjoining lands not listed on Exhibits "A" and "B" may
exist. In the event the Parties hereto elect to develop or produce hydrocarbons
from such common Reservoirs from adjacent lands not listed on Exhibits "A" and
"B," Chevron and Ridgewood, in good faith, shall attempt to pool or unitize with
a Third Party that portion of the Lease so as to reasonably protect the Lease
from drainage. In addition, in the event a Third Party drills a well draining or
capable of draining the Contract Acreage, the Parties hereto will take
appropriate actions, to the extent they have the right to do so, to protect the
Contract Acreage from drainage, including but not limited to pooling,
unitization or the drilling a well as needed.

                                    ARTICLE 5

5.       FARMOUT OPTION

         5.1      Exhibit "A" or "B" Prospect Substitute Wells.

         Should Chevron be required to farmout a portion of Chevron's interest
to Ridgewood, in a specific Prospect area, pursuant to elections made under
Section 4.1 or 4.2, the Parties will execute a separate Farmout Agreement
containing the provisions set forth herein and such additional provisions as may
be mutually agreed upon.

         In as much as Chevron has or may enter into similar Agreements with
other parties or Co-Working Interest Owners which may cover Available Acreage on
one or more of the Prospects listed on Exhibit "A" and/or Exhibit "B," any
Chevron interest farmed out pursuant to this Agreement or participation
agreements shall be proportioned among the parties desiring to participate in
that specific Prospect well. Chevron's interest shall be farmed out to each
party based on the ratio of each Party's after casing point interest, as
stipulated in its respective agreement, to the total of after casing point
interests for all parties desiring to participate as stipulated in each party's
applicable agreement, unless otherwise mutually agreed by the parties.

                                       19
<PAGE>

         5.2      Exhibit "B" Farmout Option.

         In the event Chevron elects not to participate in the drilling of an
Initial Test Well on an Exhibit "B" Prospect, Chevron will farmout its interest
in the Prospect to Ridgewood pursuant to a separate Farmout Agreement containing
the provisions set forth herein and such additional provisions as may be
mutually agreed upon. Under the Farmout Agreement as contemplated under this
Section 5.2, the geographic acreage associated with the acreage to be
farmed-out, including any geological restrictions/depth limitations, will be
identified and specifically stated as constituting the farmout acreage. The
acreage to be covered by the Farmout Agreement will consist of the Available
Acreage as to the respective Prospect on Exhibit "B."

         5.3      Chevron's Participation Options and Overriding Royalties.

         All the terms and conditions for each farmout executed pursuant to the
provisions of this Agreement shall be found in the applicable Farmout Agreement.
Under any Farmout Agreement contemplated pursuant to this Agreement, Chevron
shall retain the continuing rights, options and elections as follows:

         For Substitute Wells drilled on any Exhibit "A" or "B" Prospects, as to
the depths previously unearned by Ridgewood, and for the Initial Test Well on an
Additional Opportunities Prospect, as shown on Exhibit "B," Chevron will retain
a proportionately reduced one-twelfth (I/12th) overriding royalty and shall have
the option at "payout," as defined in the Farmout Agreement, of the Prospect's
Initial Test Well to either (1) convert said ORRI and back-in for a
proportionately reduced undivided thirty percent (30%) working interest and
begin participating in the continued operations on the Prospect and all
subsequent operations pursuant to the terms and conditions of the applicable
Operating Agreement, or (2) escalate the retained proportionately reduced
one-twelfth (1/12th) overriding royalty interest to a proportionately reduced
one-tenth (1/10t') overriding royalty interest and Ridgewood shall have no
obligation to reimburse Chevron for Land Costs associated with such Prospect. In
the event Chevron elects to back-in for a working interest, in no event will
Chevron be required to reimburse Ridgewood for any costs or expenses incurred or
accrued in regard to any operations conducted on or associated with the Initial
Test Well prior Chevron's working interest back-in election, Chevron's "payout"
election as to the working interest option or overriding royalty interest option
shall be proportionately reduced based on the Chevron interest as shown on
Exhibits "A" or "B" under the column entitled "Chevron Interest."

         5.4      General Farmout Agreement Terms and Conditions.

         Except as otherwise provided in this Agreement, the following terms and
conditions shall be applicable to all the Farmout Agreements executed by the
Parties hereto pursuant to the provisions of this Agreement.

                                       20
<PAGE>

         5.4.1 Within one hundred and twenty (120) days from the execution of a
Farmout Agreement, or other mutually agreed period of time, Ridgewood will have
the option to, at its sole cost, risk and expense, and subject to rig
availability and the obtaining of required permits, commence the drilling of the
initial test well under the Farmout Agreement. The surface location, bottomhole
location and primary objective for the initial test well shall be mutually
agreed upon between Chevron and Ridgewood, provided, however, in the event the
Parties do not agree, Ridgewood's proposal(s) shall govern. The well
commencement deadlines will be reflected in the appropriate Farmout Agreements
and shall be subject to rig availability and the obtaining of required permits.

         5.4.2 If prior to reaching the objective depth on any well drilled
pursuant to the provisions stated in a Farmout Agreement, conditions are
encountered in such well which render further drilling operations impractical,
Ridgewood will have sixty (60) days in which to advise Chevron of its election
to drill a substitute well. In the event Ridgewood elects to drill a substitute
well, the well must be commenced within forty-five (45) days after the date the
rig is released from the previous well, subject to rig availability and the
obtaining of any required permits. Any substitute well drilled will be drilled
under the same terms and conditions as the well it is replacing.

         If, after reaching the objective depth on any well drilled pursuant to
the provisions stated in a Farmout Agreement, the well fails to satisfy the
standards stated in Subsection 5.4.3 below, and is abandoned by Ridgewood;
Ridgewood will not have earned any interest in the acreage fanned-out.
Ridgewood's right to earn an interest in the acreage farmed-out shall terminate
forty-five (45) days after the date of the release of the drilling rig from such
well, without further notice or demand from Chevron, unless within said
forty-five (45) day period, Ridgewood advises Chevron in writing that Ridgewood
elected to commence, within ninety (90) days after said release of the drilling
rig from such well, actual drilling operations for a substitute well at a
location selected by Ridgewood in the acreage farmed-out. If Ridgewood makes
such election, Ridgewood's right to earn an interest in the acreage farmed-out
by a substitute well shall terminate ninety (90) days after said release of the
drilling rig from such substitute well without further notice or demand from the
Chevron, unless within such ninety (90) day period, Ridgewood commences
operations for drilling said substitute well.

                                       21
<PAGE>

         Until Ridgewood earns Ridgewood's ACP Interest of Chevron's
proportionate share of the Prospect in the Record Title or Operating Rights
Interest in the acreage farmed-out, Ridgewood shall have the continuing right to
drill successive substitute wells in the acreage farmed-out so long as Ridgewood
complies with the applicable time periods and provisions as stated above
relative to the drilling of the first such substitute well. All provisions of
the Farmout Agreement relating to the said initial test well shall also, unless
clearly inappropriate, be applicable to each such substitute well.

         The only consequence for Ridgewood's failure to drill any well under
the Farmout Agreement shall be the forfeiture of its right to drill such well.
Ridgewood shall not be liable to Chevron or any other Third Party for any other
costs, expenses or damages related to such failure to drill such well.

         5.4.3 In the event (1) the initial test well or its substitute on any
individual Prospect is drilled to the objective depth and is a Successful Well
and (2) Ridgewood, within sixty (60) days from rig release, commits in writing
to Chevron its plans to install the necessary facilities as soon as practicable
to develop the hydrocarbons discovered, Ridgewood will have carried an
assignment from Chevron of Chevron's Record Title or Operating Rights Interest,
as specified in the Farmout Agreement, in that portion of the Contract Acreage
associated with the Prospect drilled, subject to the reservations stated in
Section 5.3 above.

         In the event any such initial test well or its substitute does not
reach the objective depth due to encountering any formation which cannot be
penetrated, or any adverse condition which cannot be overcome by means
considered reasonable and appropriate in the industry and at reasonable cost,
but such well otherwise satisfies the criteria described above in (1) and (2) of
this Section 5.4.3, Ridgewood will have earned an assignment of Record Title or
Operating Rights Interest, as specified herein in that portion of the Contract
Acreage associated with the Prospect limited in depths down to the stratigraphic
equivalent of the base of the deepest interval that classifies such well to be a
Successful Well. Ridgewood shall have the continuing right to earn deeper depths
in such Prospect as to those depths not previously earned by Ridgewood by
drilling additional wells under the terms of the Farmout Agreement.

                                       22
<PAGE>

         5.4.4 Unless otherwise specifically stated in this Agreement, any
Record Title or Operating Rights Interest assignment made by Chevron in favor of
Ridgewood where Chevron has made an election to retain only an overriding
royalty interest, pursuant to the provisions stated in the applicable Farmout
Agreement(s), will be made subject to Chevron retaining the overriding royalty
specified in Section 5.3 in and to all production from the farmed-out acreage.

         5.4.5 Ridgewood shall not earn or have the right to earn any interest
in nor be responsible or liable for any existing wells, platforms, flowlines or
environmental conditions which are located on any portion of the Contract
Acreage prior to the effective date of the applicable Farmout Agreement. In
addition, notwithstanding anything herein to the contrary, under no
circumstances will Ridgewood be allowed to earn any productive sand segment in
pressure communication with Chevron's wells located in or around any acreage
covered by any Farmout Agreement executed pursuant hereto except as otherwise
mutually agreed. The pressure communication and common reservoir restrictions
are found under Article 6 below.

         5.4.6 No well drilled by Ridgewood pursuant to any Farmout Agreement
shall be abandoned by Ridgewood without Ridgewood first giving Chevron written
notice thereof, together with a copy of the final electric log and copies of all
other wireline logs, sidewall core analyses and other information required to be
provided to Chevron under any Farmout Agreement. Within thirty (30) days
(inclusive of weekends and holidays) after Chevron's receipt of such notice and
logs [twenty-four (24) hours if the rig having drilled said well is on location
and a decision has been made by Ridgewood to immediately plug and abandon the
well], Chevron may notify Ridgewood that it elects to take over the well for
such further operations it may wish to conduct. Chevron shall, at its sole risk
and expense, thereupon take immediate possession of the well and of the
materials and equipment owned or controlled by Ridgewood located at the well
site in connection with Chevron's further operations testing, deepening, or
evaluating the well.

         If, within the time provided, Chevron elects to take the well over,
Ridgewood shall, except as hereinafter provided, have the same rights and
responsibilities as if it had abandoned the well with Chevron's approval. After
taking over the well, Chevron shall own all operating rights and working
interest in the well and shall be responsible for and shall bear the entire

                                       23
<PAGE>

expense of further operations in connection with the well, including the cost of
completion and or abandonment. In addition, Chevron shall own exclusively, free
and clear of any Farmout Agreement and of any assignment or operating agreement
entered into pursuant to the Farmout Agreement.

         5.5      Impenetrable Substances.

         If Ridgewood drills to a depth shallower than the agreed upon objective
depth and encounters "impenetrables," including any formation which cannot be
penetrated, or any adverse condition which cannot be overcome, by means
considered reasonable and appropriate in the industry and at reasonable cost,
Ridgewood shall have the right to drill a substitute well in accordance with
Subsection 5.4.2 above.

         5.6      Overriding Royalties.

         Chevron's reserved overriding royalty as described in Section 5.3 above
shall be free and clear of all cost, of exploring, operating, and developing on,
and producing from, the acreage farmed-out, and maintaining said lease in force
and effect, as well as all cost for plugging, abandoning, clean-up and
restoration, but shall bear its proportionate share of all severance, production
and other taxes which are now or which may hereafter become applicable thereto.
Said overriding royalty shall be computed and paid at the same time and in the
same manner as royalties are computed and paid to the lessor under the leases
farmed-out.

         If Chevron elects to participate for a working interest at "payout" in
a farmed-out well, Chevron will proportionately share in any royalty relief
granted based on its working interest starting at that time of Chevron's
election, but in no event should Chevron be entitled to any royalty relief
granted prior to payout. However, should a farmed-out well be unsuccessful and
the MMS grants royalty relief on the Lease drilled, the owners of the shallow
production on such Lease in which royalty relief is granted shall be entitled to
the royalty relief so granted if any.

         5.7      Joint Operations for Earned Depths.

         If Ridgewood has not earned an interest in all of the Available Acreage
in a Prospect listed on Exhibits "A" or "B," but has earned an interest in
shallower portions of the Leases comprising such Prospect by participating in an
Initial Test Well, then any well drilled by Ridgewood under the terms of this
Article 5 shall be subject to the terms of the applicable Operating Agreement
governing such shallower portions of the Lease unless otherwise mutually agreed
to by the Parties.

                                       24
<PAGE>

                                    ARTICLE 6

6.       PRESSURE COMUN CATION AD COMMON RESERVOIRS

         6.1      Pressure Communication Restriction.

         Notwithstanding anything herein to the contrary, any productive sand
interval encountered in any well drilled or caused to be drilled by the Parties
under this Agreement that is in a Reservoir or pressure communication with a
productive sand interval that is producing or is capable of producing from an
existing well in paying quantities from such sand interval drilled on a Lease by
Chevron or a Co-Working Interest Owners shall be excluded from this Agreement
and specifically reserved by Chevron. If at any time a Party proposes to drill a
well which could encounter a sand interval(s) which could potentially be in a
Reservoir or pressure communication with a productive sand interval(s) that is
producing or capable of producing in an existing well as described above, prior
to drilling such well Chevron and Ridgewood will establish the criteria for
determining whether the well once drilled would be in a Reservoir or pressure
communication. In the event the Parties drill a well and encounter a sand
interval(s) not originally anticipated to contain hydrocarbons in paying
quantities but, upon review by either Party is believed to potentially be in a
Reservoir or pressure communication with a productive sand interval(s) that is
producing or capable of producing in an existing well as described above, then
upon determination that such sand interval(s) could potentially be in a
Reservoir or pressure communication, the Parties hereto shall meet as soon as
reasonably possible to establish the criteria for determining whether or not the
well in question is actually, in a Reservoir or pressure communication.

         In the event there is a disagreement between Chevron and Ridgewood as
to whether or not a Chevron well and/or interval(s) is potentially in a
Reservoir or pressure communication with the new well and/or interval(s), then
within one hundred eighty (180) days after rig release from such well, Chevron
and Ridgewood shall furnish all available geological, geophysical and
engineering data, including bottom hole pressure data and Reservoir
characteristics, to a mutually acceptable engineering firm to determine, with
reasonable confidence, whether a Reservoir or pressure communication does or
does not exist between the wells. The decision of the engineering firm shall be
final and binding on the Parties hereto. The cost of the work performed by the
engineering firm shall be shared between Chevron and Ridgewood, at the ACP
Interests.

         In the event the only sand interval(s) capable of producing
hydrocarbons in commercial quantities discovered in a well drilled by the
Parties is in a Reservoir or pressure communication with one or more sand
interval(s) producing or capable of producing from Chevron's well(s) on a

                                       25
<PAGE>

Chevron Lease, and the well has no further utility for options on the Prospect
as agreed to by the Parties, then Chevron will have the option to take over the
well. If Chevron exercises this option by giving Ridgewood written notice,
Ridgewood shall be entitled to a Well Cost adjustment for that portion of the
wellbore associated with the drilling, completing and equipping the -yell from
the surface down to the base of the Reservoir in pressure communication with the
other well. All costs and expenses paid by Ridgewood for the drilling of the
well down to the base of said Reservoir, along with all costs and expenses paid
by Ridgewood, if any, in completing and equipping the well for the Reservoir in
pressure communication, shall be reimbursed to Ridgewood by Chevron in an
equitable manner, as agreed by the Parties, based on the value and allocation
recommended in the applicable COPAS guidelines, as amended from time to time.

                                    ARTICLE 7
7.       OPERATING AGREEMENT

         7.1      Offshore Operating Agreements.

         Chevron and Ridgewood shall execute an Operating Agreement, on the form
set out as Exhibit "E," no later than thirty (30) Business Days before the
Initial Test Well is drilled on a Prospect. A separate Operating Agreement shall
be executed between the Parties for each Prospect. All Contract Acreage within
the Leases and included in a Prospect shall be covered and governed by the
Operating Agreement for that Prospect.

         Should any Prospect be expanded to include acreage not under the
ownership or control of Chevron or Ridgewood, and the Third Party owner of such
acreage elects to participate with the Parties in drilling an Initial Test Well
on the Prospect, the Parties shall propose utilizing the Operating Agreement
attached as Exhibit "E" to the Third Party for the controlling agreement
covering operations on the Prospect. Should the Third Party refuse to accept the
use of Exhibit "E," the Parties shall negotiate with the Third Party to enter a
mutually acceptable form of operating agreement to cover the Prospect.

         Notwithstanding anything to the contrary herein, the terms of the
applicable Operating Agreement apply to all operations with regards to a
Prospect, and all payments made with respect to such Prospect under this
Agreement or the applicable Operating Agreement, unless specifically in conflict
with the terms of this Agreement, in which event the terms of this Agreement
shall control as provided under Section 28.15 below.

                                       26
<PAGE>

         7.2      Designation of Operator.

         As between the Parties, Chevron shall be designated as operator for the
Initial Test Well for each Prospect listed on Exhibits "A" and "B."

         The Parties will, if required, execute the appropriate Designation of
Operator forms, under the terms hereof, naming Chevron as Operator. Chevron
shall also assume the responsibility of the Designated Applicant for oil spill
financial responsibility purposes; however no Party is released from any its
liabilities for expenses, losses or damages by such assumption by Chevron. The
Parties will execute as soon as requested all necessary forms to reflect the
selection of operator and Designated Applicant for oil spill financial
responsibility purposes.

                                    ARTICLE 8

8.       ADDITIONAL PARTNERS/CO-VENTURERS

         8.1      Partners/Co-Venturers.

         Nothing in this Agreement shall be construed to limit Chevron's right
to seek another partner/co-venturer to participate in the drilling and
development of the Contract Acreage, but any such participation by a Third Party
shall not diminish Chevron's obligations under this Agreement, including, but
not limited to those obligations enumerated in Article 4. In addition, nothing
herein shall limit Chevron's right to sell, assign, transfer, exchange, burden
or deliver any Lease included under this Agreement as long as such conveyance is
made specifically subject and subordinate to this Agreement and the applicable
Operating Agreement.

                                    ARTICLE 9

9.       ACREAGE RELEASE

         9.1      Option to Release Acreage.

         At any time during the term of this Agreement, Ridgewood shall have the
right and option to relinquish its right to earn any Lease listed on Exhibit "B"
by notifying Chevron in writing. On any Lease within its primary term, such
notice shall be made at least sixty (60) days prior to the next rental date. If
the Lease is held by production, or beyond its primary term, such notice shall
be made at any time.

                                       27
<PAGE>

         9.2      Rights Termination.

         Upon receipt by Chevron of the Ridgewood release notification, the
rights and options granted Ridgewood under this Agreement as to the released
Leases and Contract Acreage shall terminate. Notwithstanding anything herein to
the contrary, in no event shall the notification of a release as described in
this Article 9 relieve Ridgewood of any financial obligation that has been
incurred or accrued pursuant to this Agreement or any Operating Agreement.

         9.3      Automatic Release.

         If, under the operation of any provisions of this Agreement an interest
in the Contract Acreage or acreage made subject to this Agreement pursuant to
Section 2.4 is excluded or relinquished or is or becomes no longer subject to
this Agreement, including but not limited to a Lease terminating under the
provisions stated in said Lease, the excluded or relinquished Lease, or any
portion thereof will automatically be deemed to be released by Ridgewood and no
longer subject to this Agreement.

         After the release or relinquishment by Ridgewood or automatic release
under Section 9.3 of any Lease subject to this Agreement as provided under this
Article 9, Chevron shall be free to drill, sell, farmout, joint venture or
dispose of, in any manner it so chooses, the released acreage. Ridgewood hereby
agrees and releases Chevron from any liability whatsoever with regard to the
released acreage relating to the activities of Ridgewood and any information
and/or data Ridgewood may have given to Chevron in regard thereto. In the event
Chevron discloses Ridgewood solely-owned confidential data obtained under and
through this Agreement to any Third Party within two (2) years of the release of
acreage, Chevron will require the Third Party to execute an appropriate
confidentiality agreement.

                                   ARTICLE 10
10.      NOTICES

         10.1     Notices.

         All notices authorized or required between the Parties by any of the
provisions of this Agreement, unless otherwise specifically provided, shall be
in writing and delivered in person or by United States mail, overnight express
delivery, courier service or facsimile (with receipt confirmed), postage or
charges prepaid, and addressed to such Parties at the addresses set forth below:

                                       28
<PAGE>

Chevron U.S.A. Inc. **                           Ridgewood Energy Corporation
14141Southwest Freeway                           11700 Old Katy Road, Suite 280
Sugar Land, Texas 77478                          Houston, Texas 77079
Attention: Gulf of Mexico - Land Manager         Attention: W. Greg Tabor
Fax: (281) 287-7575                              Fax: (281) 293 - 7391

**This address is temporary and will be amended as necessary by Letter
Agreement.

         Any originating notice and.-'or response thereto given under any
provision hereof shall be deemed given only when received by the Person to whom
such notice is directed, except that; (1) any notice or response by certified
U.S. mail, return receipt requested, properly addressed pursuant to this Article
10, and with all postage and charges prepaid, shall be deemed received on the
date that the Person to whom it was directed has received it, (2) any notice or
response given by facsimile to the above facsimile phone number shall be deemed
received as of the time of confirmed receipt or (3) by overnight express
delivery or courier shall be deemed received upon acknowledgement of receipt by
the Person to whom it was directed, or within 72 hours of delivery of such
notice whichever is sooner.

         10.2     Change in Designated Representative.

         Each Party shall have the right to change its address, facsimile number
and it's designated Representative at any time, and from time to time, by giving
prior written notice thereof to the other Party.

                                   ARTICLE 11

11.      EXISTING AGREEMENTS

         11.1     Existing Agreements.

         Ridgewood recognizes and acknowledges that certain Leases are subject
to certain agreements and other contracts that may affect the rights,
obligations and/or options granted to Ridgewood under this Agreement. These
existing agreements are listed on Exhibit "C." It is understood between the
Parties hereto that the rights and option of Ridgewood shall be specifically
subject to these existing agreements as those agreements apply to the Contract
Acreage. Ridgewood shall, upon execution of this Agreement, become bound by all
existing agreements, whether in Chevron's records or of Public records, relating
to the affected Prospects to the extent of any interest undertaken or earned by
Ridgewood. Ridgewood shall have the right of access to and review of copies of
such agreements, subject to any contractual restrictions therein and any

                                       29
<PAGE>

confidentiality agreements or arrangements required. Provided however, Ridgewood
shall be released from. such agreements in the event Ridgewood, when not in
breach, does not drill or is unable to drill or to cause to be drilled any well
governed under this Agreement.

                                   ARTICLE 12

12.      RIGHTS RESERVED

         12.1     Lease Rights Reservations.

         Chevron EXPRESSLY RETAINS AND RESERVES EXCLUSIVELY UNTO ITSELF THE
FOLLOWING:

         (a)      All rights of ingress, egress, use, occupancy, and any and all
                  other rights granted by, through and under the federal leases
                  subject hereto, necessary or convenient to exercise and enjoy
                  all oil, gas and mineral rights reserved to Chevron, including
                  but not limited to, construct, maintain and operate
                  facilities, platforms and pipelines on and across Leases,
                  subject to Ridgewood's rights to earn the assignment(s) as
                  provided hereunder.

         (b)      All rights of ownership and use held by Chevron's Affiliates
                  in any pipeline or rights of ways.

         (c)      The right of ownership and/or operatorship of the Existing
                  Facilities and the revenues realized therefrom.

         (d)      Chevron also reserves any platform, facilities, wellbores,
                  pipelines or rights-of-way installed, drilled or obtained in
                  the future located on or in the vicinity of the Contract
                  Acreage related to Chevron's operations on the Leases subject
                  hereto, in which Ridgewood does not own an interest.

         (e)      Any and all rights and interests not expressly granted to
                  Ridgewood.

                                   ARTICLE 13

13. PRODUCTION PROCESSING AND CONTRACT PUMPING

         13.1     Production Handling Option.

         The basic terms of production handling agreements will not be a part of
this Agreement but the Parties agree that it is the general intention of the
Parties to independently and in good faith evaluate the use of existing, nearby
sole ownership facilities of Chevron, if any and where appropriate, for the
handling of Prospect production from successful Prospect wells; however, neither

                                       30
<PAGE>

party is committed to bring its share of Prospect production to a Party's nearby
sole ownership facility or to accept production at a Party's nearby sole
ownership facility. The Parties will negotiate any such use in good faith, where
the Parties see mutual benefit to such use; however, the use of an Existing
Facility, or near by facility, will require the consent of both Parties to all
terms and condition of such use prior to such use.

         13.2     Contract Operating Option.

         Should the Parties decide to transport co-owned production to a
facility owned by one of the Party's hereto but not the other, and the Parties
are successful in negotiating an agreement with the owners of the facility to
handle the production, as an accommodation to the non-owning Party, the owning
Party will consider; but will not have the obligation, to contract operate any
producing wells owned by the Party not an owner of the facility.

         13.3     Use of Existing Facilities,

         Notwithstanding any rights and/or options provided Ridgewood under the
terms and conditions of this Agreement, this Agreement shall in no way be
construed in any manner whatsoever as a right and/or option for Ridgewood to
utilize any Existing Facility; provided, however, Chevron is agreeable to
assisting Ridgewood to provide Ridgewood with access to an Existing Facility if
capacity is available or projected to be available and not planned to be
utilized by Chevron and/or any Co-Working Interest Owners; provided Ridgewood
agrees to pay reasonable fees for the use of any such Existing Facility and the
services, if any, provided therewith. Notwithstanding the willingness of
Ridgewood to pay reasonable fees, under no circumstances will it be construed
that Chevron is under any obligation whatsoever to provide access to or capacity
on any Existing Facility located on any Lease subject to this Agreement. In no
event shall Ridgewood have any liability or obligation with respect to any
Existing Facility except as specifically provided in a separate written
agreement between Ridgewood and the owners of such facilities.

                                   ARTICLE 14

14.      TAX MATTERS

         14.1     Income Tax Election.

         Notwithstanding any other provision herein, the rights and liabilities
hereunder are several and not joint or collective and this Agreement shall not
constitute a partnership. If for federal income tax purposes this Agreement and
the operations or activity hereunder are regarded as a partnership, then for
federal income tax purposes each party elects to be excluded from the
application of all provisions of Subchapter K, Chapter 1. Subtitle A, Internal

                                       31
<PAGE>

Revenue Code of 1986 as amended ("Code"), as permitted and authorized by Section
761 of said Code and the regulations promulgated thereunder. Chevron is hereby
authorized and directed to execute on behalf of each Party such evidence of this
election as may be required, including specifically, but not by way of
limitation, all of the returns, statements and data required by law.

         Should there be any requirement that each Party further evidence this
election, each Party agrees to execute such documents and furnish such other
evidence as may be required. Each Party further agrees not to give any notices
or take any other action inconsistent with the election made hereby. If any
present or future income tax law of the United States or any state contains
provisions similar to those contained in Subchapter K, Chapter 1, Subtitle "A"
of the Code, under which an election similar to that provided by Section 761 of
said Subchapter K is permitted, each Party agrees to make such election as may
be permitted by such laws. In making this election, each Party states that the
income derived by it from the operations or activities under this Agreement can
be adequately determined without the computation of partnership taxable income.

         The provisions of this Article 14 shall not affect or demise the
Parties rights and obligations under any Operating Agreement entered into
pursuant to this Agreement. Notwithstanding anything herein to the contrary
under this Article 14, for purposes of operations to be conducted under the
applicable Operating Agreements, the Parties hereto agree to use that form of
tax partnership as shown on Exhibit "F" of Exhibit "E."

                                   ARTICLE 15

15.      GEOPHYSICAL DATA

         15.1     Proprietary Seismic Data.

         Should at any time prior to or during the term of this Agreement,
Ridgewood or Chevron acquire any proprietary seismic data covering a portion of
the Contract Acreage, the acquiring Party will allow the other Party access to
this proprietary seismic data. The acquiring Party will consider granting the
other Party a license covering that portion of the acquiring Party's proprietary
seismic data covering the Contract Acreage upon the other Party's request. The
fee to be paid to license the seismic data, and the licensing agreement to be
executed between the Parties, shall be negotiated at the time the Party elects
to license the data. Ridgewood or Chevron must submit a written proposal to the
acquiring Party prior to the termination of this Agreement proposing the license
of a portion of the acquiring Party's data. Failure of Ridgewood or Chevron to
submit such a proposal, or in the event the Parties are unable to negotiate a

                                       32
<PAGE>

mutually agreeable licensing fee and/or licensing agreement, shall terminate the
acquiring Party's option to consider licensing its data to the other Party. The
acquiring Party makes no representation and shall have no liability to the other
Party regarding the accuracy or completeness of any data disclosed to the other
Party hereunder. Any such information or data provided hereunder is provided as
a convenience only and any reliance on or use by Ridgewood or Chevron is at
Ridgewood's or Chevron's sole risk.

         15.2     Hazard Survey Data.

         Should Chevron possess or acquire any shallow hazard data covering any
Leases subject hereto, and that data is used in support of permitting a location
to drill a well as a result of this Agreement or the applicable Operating
Agreement, then the cost Chevron paid for the shallow hazard data will be added
to the cost Ridgewood is required to contribute. Only Ridgewood's proportionate
share of the actual cost paid by Chevron for the shallow hazard survey, based on
the interest Ridgewood will be assigned in the Lease were the well will be
drilled, will be owed to Chevron. Ridgewood will contribute such amount upon
receipt of written notice from Chevron detailing the hazard survey charge

         15.3     Speculative Seismic Data.

         The Parties hereto may have in their possession certain seismic data
licensed from Third Parties "Speculative Seismic Data") which impose various
restrictions and limitations on either Parties right to use, disclose and/or
display such data relating to the properties identified in Exhibit "A" or "B."
Treatment of this Speculative Seismic Data shall be controlled under
confidentiality provisions specified in Section 20.2 below.

                                   ARTICLE 16

16.      RENTALS, MINIMUM ROYALTY AND LEASE MAINTENANCE

         16.1     Rentals and Minimum Royalty.

         Notwithstanding the obligations to compensate Chevron for Land Costs as
described under Section 3.2 above, Ridgewood shall be responsible for
contributing a portion of any rental or minimum royalty that comes due and
payable, on a lease-by-lease basis, for each Lease it is assigned as provided
herein commencing on the effective date of each such assignment. The share of
the rental or minimum royalty Ridgewood will owe will be calculated based on the
interest assigned in a Lease. This responsibility shall continue until the first
to occur of the following: (a) Ridgewood relinquishes its right to earn an
interest in the affected Lease in accordance with this Agreement or the

                                       33
<PAGE>

applicable Operating Agreement, or (b) the Lease terminates. Chevron shall pay
or cause to be paid the rental and/or minimum royalty on each Lease. Ridgewood
agrees to contribute its proportionate share of such rental and/or minimum
royalty within thirty (30) days after receipt of written notice from Chevron for
same. However, on a lease-by-lease basis and pursuant to Section 9.1 of this
Agreement, Ridgewood, at its sole option and discretion, shall have the right to
relinquish to Chevron its rights in a Lease and thereby relieving itself of its
obligation to reimburse Chevron, Should Ridgewood elect to relinquish its
interest to Chevron, but fail to provide Chevron with the required notice under
Section 9.1 of this Agreement, Ridgewood will remain liable for the next ensuing
rental or minimum royalty payment for which proper notification was not
received.

         Chevron shall not be liable for failure to make a proper payment during
the time in which it is responsible for doing so, but agrees to use the same
degree of care used in making such payments under its other leases. The
termination of this Agreement shall not relieve Ridgewood of its obligations to
contribute to any payments so made during the period this Agreement was in
effect, and during the period that such Lease(s) are subject to this Agreement,
the right of such termination to be an additional right reserved by Chevron and
not a limitation of any of Chevron's rights herein.

                                   ARTICLE 17
17.      MEDIA RELEASES

         17.1     Public Announcements.

         The Parties hereto agree that prior to making any public announcement
or statement with respect to the transaction contemplated by this Agreement, the
Party desiring to make such public announcement or statement shall provide the
other Party with a copy of the proposed announcement or statement at least three
(3) Business Days prior to the intended release date of such announcement.
Release of reserves estimates is never permitted. The other Party shall
thereafter consult with the Party desiring to make the release, and the Parties
shall exercise their reasonable best efforts to (i) agree upon the text of a
joint public announcement or statement to be made by both such Parties or (ii)
in the case of a statement to be made solely by one Party, obtain approval of
the other Party hereto to the text of a public announcement or statement.
Nothing contained in this paragraph shall be construed to require either Party
to obtain approval of the other Party hereto to disclose information with
respect to the transaction contemplated by this Agreement to any state or
federal governmental authority or agency to the extent required by

                                       34
<PAGE>

applicable law or necessary to comply with disclosure requirements of the New
York Stock Exchange or any other regulated stock exchange.

         17.2     Media Releases.

         Except as may be otherwise authorized by the applicable Operating
Agreement, if any, neither Party shall make any press release or other public
announcement regarding operations conducted pursuant to this Agreement without
the prior written consent of the other, which consent shall not be unreasonably
withheld, Each Party will have three (3) Business Days within which to review
and comment prior to public disclosure. Release of reserves estimates is never
permitted. The foregoing, however, shall not restrict disclosures by either
Party which are required by applicable securities or other laws or regulations
or the applicable rules of any stock exchange having jurisdiction over the
disclosing Party or its Affiliates.

                                   ARTICLE 18
18.      FILES

         18.1     Access to Files.

         During the term of this Agreement, either Party ("disclosing Party")
shall permit, to the extent it has the right to do so, a Party ("reviewing
Party") and its Representatives at reasonable times during normal business hours
to examine, in the disclosing Party's offices at their actual locations, the
Prospect and land files (excluding all economic and risk evaluations, reserve
information, all legal files, attorney-client communications or attorney work
product, records and documents subject to confidentiality provisions and
auditor's reports) pertaining to the Prospects listed on Exhibits "A." In
addition, to the extent it has the right to do so, reviewing Party will be
allowed access to the disclosing Party's geological, geophysical, engineering
and land files, subject to the same exclusions listed above, covering the Leases
hereto in support of the development of the Leases and Prospects listed on
Exhibit "B." The reviewing Party shall be obligated to maintain the
confidentiality of such files and information in accordance with the provisions
and limitations described in Article 20 below. The disclosing Party and its
Representatives make no representation or warranty as to, and shall have no
liability to reviewing Party regarding, the accuracy or completeness of the
information disclosed to the reviewing Party hereunder. Any information or data
furnished hereunder by the disclosing Party is provided as a convenience only
and any reliance on or use of same is at the reviewing Party's sole risk. The
inadvertent disclosure by the disclosing Party to the reviewing Party of
attorney-client communications, attorney work product, legal files or other
confidential information shall not be deemed to be a waiver of the

                                       35
<PAGE>

attorney-client privilege, the attorney work-product privilege, or any other
privilege or right protecting the confidentiality of data or information.
Anything in this Agreement to the contrary notwithstanding, however, the
disclosing Party and their Representatives shall have no liability to the
reviewing Party for failing to allow the reviewing Party to examine, or to grant
the reviewing Party access to any of the files or materials referred herein.
Access to a disclosing Party's Prospect files is strictly and solely as an
accommodation to the reviewing Party.

                                   ARTICLE 19

19.      ASSIGNMENTS AND TRANSFER OF INTEREST

         19.1     Assignment of this Agreement.

         It is agreed that Ridgewood shall not assign, either in whole or in
part, its rights and interest in this Agreement without the prior written
consent of Chevron. Upon receipt of Chevron's written consent, which consent can
be conditioned on, but not limited to, requesting adequate security for the
future performance by assignee, payment of all delinquent accounts and resolving
all outstanding disputes, any assignment made by Ridgewood hereof shall 1)
contain a limitation in favor of Chevron requiring that Chevron's written
consent must also be obtained prior to any future assignments of this Agreement
in whole or in part, 2) that said instrument contain a provision indicating said
assignment is made subject to this Agreement, and 3) the assignee agrees in
writing to be bound by all the terms and conditions of this Agreement.

         19.2     Lease or Prospect Successors and Assigns

         It is agreed that Ridgewood, before earning an interest therein, shall
not assign, either in whole or in part, its interest or rights to interest in
and to any Lease or Prospect without the written consent of Chevron. Upon
receipt of Chevron's written consent any assignment made by Ridgewood hereof
shall 1) contain a limitation in favor of Chevron requiring that Chevron's
written consent must also be obtained prior to any future assignments of
interest in whole or in part, 2) that said instrument contain a provision
indicating said assignment is made subject to this Agreement, and 3) the
assignee agrees in writing to be bound by all the terms and conditions of this
Agreement. It shall be fully understood that in the event the assigning party
encumbers or burdens the Contract Acreage or any portion thereof after earning
an interest herein, the assigning party shall hold the non-assigning party free
and clear of any and all obligations, liability and/or responsibility for such
encumbrance(s) or burden(s). Any assignment made pursuant to this Section 19.2
shall be in accordance with and in compliance to the accepted practices,
guidelines and policies of the Minerals Management Service or other governmental

                                       36
<PAGE>

agencies that my claim jurisdiction. After Ridgewood receives an assignment in a
Lease, future restrictions, if any, on subsequent assignments will be covered in
the applicable Operating Agreement.

                                   ARTICLE 20
20.      CONFIDENTIALITY

         20.1     Confidentiality.

         It is understood and agreed that no Party to this Agreement, for a
period of thirty-six (36) months from the Effective Date hereof, shall divulge
to any Third Party any geophysical, geological or engineering information that
is disclosed or received from the other Party on the Contract Acreage without
first obtaining the written consent of such other Party to this Agreement to
release any such information that it disclosed or received- Such consent,
however, shall not be necessary for a Party to divulge such information to any
part(y)ies from whom said Party to this Agreement may receive a contribution for
the drilling of a well under any farmout agreement, to a financial institution
(or similar entity) from whom a Party is attempting to secure funds or
financing, or to a pipeline company for the purpose of securing a pipeline
connection. Notwithstanding the above, either Party may disclose confidential
data to its Affiliate(s), consultants or other Representatives provided that
such Affiliate, consultant or Representative agrees to maintain the
confidentiality of such confidential data under the same conditions as stated
herein.

         Subject to disclosures that may be authorized by any Operating
Agreement applicable to a particular Lease, any and all data revealed and
disclosed by Chevron to Ridgewood and Ridgewood to Chevron shall be treated as
confidential, less and except any data that now or hereafter becomes generally
available to the public, was known by Chevron or Ridgewood prior to the.
Effective Date of this Agreement, was already in Chevron's or Ridgewood's
possession prior to the Effective Date of this Agreement, or hereafter comes
into Chevron's or Ridgewood's possession from a Third Party who has the right to
disclose such information as applicable.

         20.2     Speculative Seismic Data.

         The Parties hereto have in their possession certain seismic data
licensed from Third Parties which impose various restrictions and limitations on
either Parties right to use, disclose and/or display such data relating to the
Leases identified in Exhibits "A" or "B." Notwithstanding any other provision in
this Agreement to the contrary, Chevron and Ridgewood both agree that neither
Party shall remove from each other's office, copy, or reveal to any Third Party,
any Speculative Seismic Data disclosed by one Party to the other Party. Each

                                       37
<PAGE>

Party agrees it will only view such Speculative Seismic Data for no other
purpose other than necessary to review the work product generated as a result of
the purpose of this Agreement. Under no circumstances will the Party who views
the Speculative Seismic Data be allowed to use the Speculative Seismic Data for
any other purpose than what viewing the data was intended unless the viewing
Party has first obtained a license from the Third Party owner of such
Speculative Seismic Data or the disclosing Party, or the owner of the
Speculative Seismic Data advises the Parties that such data is no longer to be
held confidential.

         20.3     Disclosure of Confidential Data.

         In the event a Party hereto, or its Representatives, are required by
any court or legislative or administrative body (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigation demand, or any similar process) to disclose any confidential
information or data not owned by said Party, the Party required to make such
disclosure shall 'provide the owner of the confidential information or data with
prompt notice of such requirement in order to afford the owner of such
information or data the opportunity to seek an appropriate protective order.
However, if the owner of such information or data is unable to obtain or does
not seek such protective order and the Party that is required to make such
disclosure, or its Representatives, are, in the opinion of counsel, compelled to
disclose confidential information or data under pain of liability for contempt
or other censure penalty, disclosure of such information or data may be made
without liability.

         20.4     Risk of Use of Confidential Data.

         It is understood by the Parties hereto that any confidential
information or data, both oral and written, furnished by one Party to the other
is to be considered accurate, however, neither Party hereto makes any
representations or warranties, express, implied, statutory or otherwise, with
respect to the accuracy or completeness of the confidential information or data
disclosed or any condition or aspect thereof. To the best of its knowledge, the
Party making such disclosure represents that it has full legal or contractual
authorization or right to disclose such information and data to the other Party.
Each Party hereto agrees that it will use such confidential information and data
at its sole peril and risk, and the disclosing Party shall have no liability
whatsoever with respect to the use by the receiving Party of any information or
data, whether confidential or otherwise, furnished by the disclosing Party to
the receiving Party. Any decision or action taken by the receiving Party of such
disclosed confidential information and data shall be based solely on the
receiving Party's independent evaluation, judgment and decisions.

                                       38
<PAGE>

                                   ARTICLE 21
21.      GOVERNING LAW

         21.1     Choice of Law.

         The terms and conditions of this Agreement shall be governed and
interpreted under the LAWS OF THE STATE OF ALABAMA excluding, however, any
provisions of Louisiana law which might direct or refer such determination to
the laws of any other jurisdiction.

         21.2     Future Litigation and Claims.

         Ridgewood acknowledges and agrees that Chevron and its Affiliates shall
have full and unfettered discretion in the handling and settling of any such
claim, demand, action, cause of action, or lawsuit for events which occurred, or
alleged to have occurred prior to the Effective Date pursuant to any future
litigation as they relate to the Chevron Leases, and Ridgewood specifically
waives any claim it may otherwise have against Chevron arising out of or
relating to the handling or settling of any such claim, demand, action, cause of
action, or lawsuit asserted under future litigation; provided, however, that in
the event that such claim contemplated by this Section 21.2 covers periods after
the Effective Date, Ridgewood may assist in defending the litigation. Chevron
agrees that no such claim, demand, action, or cause of action, or lawsuit
arising out of or related to acts or omissions occurring prior to the Effective
Date will impair or affect any interest to be assigned to Ridgewood under this
Agreement or will impose any cost or liability on Ridgewood.

                                   ARTICLE 22

22.      FORCE MAJEURE

         22.1     Force Majeure.

         Should either Party be prevented from complying with any express or
implied covenant of this Agreement (other than the obligation to make monetary
payments), or from meeting any deadline under this Agreement by reason of "Force
Majeure," as hereinafter defined, the express or implied covenant or deadline so
affected shall automatically be extended so long as the cause or causes for such
delays or interruptions continue and for an additional sixty (60) days following
the cessation of such delay or interruption. "Force Majeure" is herein defined
as an act of God, adverse weather conditions, inability to obtain materials in
the open market or transportation thereof, war, strikes, lockouts, riots,
insurrections or any other conditions or circumstances not wholly within the
control of a Party hereto (other than financial) or any federal, state or

                                       39
<PAGE>

municipal law, order, permit, rule or regulation. The Party subject to the Force
Majeure event shall not be liable to the other Party in damages for failure to
perform as required hereunder or to comply with any covenant, agreement or
requirement hereof during the time the Party subject to the Force Majeure event
is relieved from its obligations hereunder, provided that the Party subject to
the Force Majeure event has given written notice to the other Party within
thirty (30) days after the occurrence of the cause relied upon to suspend the
obligations of the Party subject to the Force Majeure event. The Party subject
to the Force Majeure event shall not be relieved from any express or implied
obligations under any Lease by operation of Force Majeure hereunder, unless such
Lease also suspends such obligations for the same cause. Further, if any Lease
provides for a time for the suspension of obligations less than sixty (60) days,
the provisions of such Lease shall control. The Parties recognize that time is
of the essence in the performance of the obligations under this Agreement, and
every reasonable effort should be made by the Party affected by the Force
Majeure event to avoid delay or suspension of any work or acts to be performed
under this Agreement and to make all reasonable efforts to overcome the impact
of the Force Majeure as soon as possible. The requirement that the Force Majeure
be remedied with all reasonable dispatch shall not require a Party to settle
strikes or other labor difficulties.

                                   ARTICLE 23

23.      DISPUTE RESOLUTION.

         23.1     Dispute Resolution.

         Notwithstanding anything contained heretofore in this Agreement to the
contrary, with the exceptions of decisions made by engineering firms or
consultants as provided under Article 6, the Parties specifically acknowledge
and agree that any claim, controversy or dispute arising out of, relating to, or
in connection with this Agreement, including the interpretation, validity,
termination or breach thereof, shall be resolved solely in accordance with the
Dispute Resolution Procedure set forth in Exhibit "F" attached hereto and made a
part hereof. Disputes related to pressure communication or common reservoir
issues will be addressed in accordance with the procedures stated under Article
6 as applicable and not Exhibit 64F."

                                       40
<PAGE>

                                   ARTICLE 24

24.      TERMINATION

         24.1     Termination.

         This Agreement shall begin on the Effective Date, and unless terminated
pursuant to another provision in this Agreement or unless extended pursuant to
another provision, shall remain in effect for a period of twenty-four (24)
months from the Effective Date at which time this Agreement shall automatically
terminate without any other action by any Party hereto. As to each Lease listed
on Exhibit "A" and "B," and any acreage made subject to this Agreement pursuant
to Section 2.4, as each Lease expires or terminates, it will no longer be
subject to this Agreement. It is understood between the Parties hereto that
after termination of this Agreement the only acreage Ridgewood will have access
to will be that acreage it has already earned or has committed to drill under
this Agreement as provided under Section 24.3 below. Notwithstanding the
termination of this Agreement, each Party shall continue to be obligated to
fulfill its existing commitments, obligations, liabilities both financial and
otherwise, and other undertakings theretofore incurred hereunder or incurred
under the terms of those agreements attached as Exhibits hereto.

         24.2     Lease Expiration or Termination.

         Although Chevron will use business-like efforts to monitor ongoing
activities on the Leases, Chevron shall not be liable to Ridgewood for any Lease
termination and/or Chevron's (or its co-owners) failure to maintain any Lease
during the term of this Agreement but Chevron will attempt, so long as Chevron
owns Record Title or Operating Rights Interest in any such Lease, to notify
Ridgewood at least sixty (60) days before such Lease will terminate.

         24.3     Agreement Extension.

         At the termination of this Agreement, should operations for the
drilling of an Initial Test Well or a Substitute Well have been commenced on a
Prospect, this Agreement shall continue in effect so long as operations are
continuously prosecuted on such well and any subsequent earning well with no
more than ninety (90) days elapsing from rig release of the preceding well and
commencement of operations on the next well. On the expiration of such period
this Agreement shall automatically terminate without any further action from any
Party hereto. As stated in Section 24.1 above, each Party shall continue to be
obligated to fulfill its existing commitments, obligations, liabilities both
financial and otherwise, and other undertakings theretofore incurred hereunder
or incurred under the terms of those agreements attached as Exhibits hereto.

                                       41
<PAGE>

                                   ARTICLE 25

25.      INDEMNITY

         25.1     Indemnity.

         Ridgewood, to the extent of the obligations undertaken herein, agrees
to protect, indemnify, and save Chevron, its parent, subsidiaries, affiliates,
and/or successors and the directors, officers, employees or agents of each
("Chevron Company Group") free and harmless from all obligations, business
dealings, liabilities, debts, charges, claims, damages, demands, costs
(including attorneys' fees and court costs), penalties and causes of action
arising directly or indirectly out of all of Ridgewood's actions or inactions
under this Agreement, and related to any dealing with any Third Party that
Ridgewood has or may have with regard to financing or the assignment of, in
whole or in part, any rights under this Agreement, and to relieve the Chevron
Company Group from any and all liability (exclusive of business debts and
charges) incurred as a result of such actions. The indemnities and covenants of
this Section 25.1 shall be effective whether or not such obligations, business
dealings, liabilities, debts, charges, claims, damages, demands, costs
(including attorneys' fees and court costs), penalties and causes of action
aforesaid are caused wholly or partly by negligence attributed to the Chevron
Company Group, or by any other means, excepting those occurrences involving the
gross negligence or willful misconduct of the Chevron Company Group.

                                   ARTICLE 26
26.      BREACH

         26.1     Breach.

         Anything herein to the contrary notwithstanding, any failure by
Ridgewood to comply with any material obligation hereunder shall be considered a
breach of this Agreement. In the event of any such breach, Chevron shall notify
Ridgewood of such breach and if Ridgewood does not correct or is not in good
faith attempting to correct such breach within thirty (30) days of receipt of
such notice, Chevron may terminate this Agreement in whole or in part by
notifying Ridgewood in writing of such termination, without prior notice or
demand being made upon Ridgewood and without the necessity of placing Ridgewood
in default; provided, however, the failure by Chevron to exercise at any time or
from time to time such right of termination shall not effect a waiver of any
breach or of Chevron's right subsequently to terminate this Agreement.

                                       42
<PAGE>

                                   ARTICLE 27

27.      SPECIAL WARRANTY

         27.1     Special Warranty.

         THIS AGREEMENT IS MADE WITHOUT ANY WARRANTY OF TITLE TO THE LEASES
EXCEPT BY, THROUGH AND UNDER Chevron. WITH THE EXCEPTION OF THIS LIMITED
WARRANTY, Chevron DOES NOT WARRANT EITHER EXPRESS, STATUTORY OR IMPLIED, AS TO
TITLE, MERCHANTABILITY, CONDITION, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE
AS TO THE Chevron LEASES, AND ALL OTHER PROPERTY COVERED BY THIS AGREEMENT,
INCLUDING, BUT NOT LIMITED TO THE WELL BORES, EQUIPMENT AND FACILITIES UTILIZED
BY THE PARTIES HEREUNDER, OR ANY OTHER SORT OF WARRANTY AND IS WITHOUT RECOURSE
AGAINST Chevron WHATSOEVER, EVEN AS TO THE RETURN OF CONSIDERATION. Chevron
REPRESENTS THAT IT HAS NOT ASSIGNED OR MORTGAGED THE Chevron LEASES. Chevron
MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING RIDGEWOOD'S RIGHT OF INGRESS TO
AND EGRESS FROM THE Chevron LEASES ACROSS ADJACENT OR ADJOINING LANDS.

         Chevron SPECIFICALLY DISCLAIMS, AND RIDGEWOOD EXPRESSLY WAIVES THE
IMPLIED WARRANTY OF TITLE NOTED IN LA. R. S. 31:120 WITH RESPECT TO THE Chevron
LEASES. RIDGEWOOD ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE CONSIDERED A
MATERIAL AND INTEGRAL PART OF THIS AGREEMENT AND PART OF THE CONSIDERATION GIVEN
THEREFOR. RIDGEWOOD FURTHER ACKNOWLEDGES THAT THIS WAIVER HAS BEEN SPECIFICALLY
BROUGHT TO RIDGEWOOD'S ATTENTION AND THAT RIDGEWOOD HAS VOLUNTARILY AND
KNOWINGLY CONSENTED TO THIS WAIVER. THE PARTIES AGREE THAT FOR THE PURPOSES OF
THIS WAIVER OF THE IMPLIED WARRANTY OF TITLE, Chevron AND THEIR AFFILIATES SHALL
BE CONSIDERED AS THE SELLER HEREUNDER AND RIDGEWOOD EXPRESSLY WAIVES ALL RIGHTS
OF SUBROGATION IN WARRANTY OF THE SELLER AGAINST OTHER PERSONS GRANTED TO A
BUYER BY LOUISIANA CIVIL CODE ARTICLE 2503.

         RIDGEWOOD ACKNOWLEDGES THAT (i) IT IS A SOPHISTICATED INVESTOR AND
OPERATOR IN THE OIL AND GAS BUSINESS; (ii) IT UNDERSTANDS THE RISKS INVOLVED IN
OIL AND GAS EXPLORATION AND DEVELOPMENT; AND (iii) IT UNDERSTANDS THAT ITS

                                       43
<PAGE>

PARTICIPATION IN THIS AGREEMENT IS A HIGHLY RISKY UNDERTAKING AND THAT RIDGEWOOD
MIGHT NOT RECOVER ANY OF ITS INVESTMENT MADE HEREUNDER.

                                   ARTICLE 28

28.      GENERAL PROVISIONS

         28.1     Prospects Treated Separately.

         Unless otherwise provided, the terms and provisions stated herein shall
apply separately to each Prospect listed on Exhibit "A" or "B."

         28.2     Non-Interference.

         Any and all operations conducted and/or performed on any Lease for
which Ridgewood is or becomes the well operator shall be conducted and performed
with due diligence and in a workmanlike manner and shall be coordinated and
scheduled so as not to unreasonably interfere with existing or anticipated
operations located on the interests in the Leases not transferred hereunder by
Chevron, if applicable. In the event that the proposed drilling of an Initial
Test Well on any Prospect is delayed because of potential interference with
operations on a Lease by Chevron or any of the Co-Working Interest Owner(s),
then Chevron and Ridgewood agree that the period to commence operations on the
Initial Test Well shall be extended, if requested by Ridgewood, for the duration
of the interference plus a reasonable amount of time for Ridgewood to coordinate
its activities after cessation of operations by Chevron or the Co-Working
Interest Owners.

         28.3     Governmental Approvals.

         From and after the execution hereof, each of the Parties hereto,
without further consideration, shall use its business-like efforts to execute,
deliver, submit, gain approvals of, and record (or cause to be executed,
delivered, submitted, and recorded) good and sufficient permits, designations,
other regulatory documents, and instruments of conveyance and transfer (as
applicable), and take such other action as may be reasonably required to carry
out the purposes of this Agreement and to give effect to the covenants,
stipulations and obligations of the Parties hereto.

                                       44
<PAGE>

         28.4     Amendments.

         This Agreement shall not be modified or amended except by mutual
agreement of the Parties in writing. No action or failure to act on the part of
either Party here .to shall be construed as a modification or amendment to, or a
waiver of, any of the provisions of this Agreement.

         28.5     Declaration of Agreement.

         Should either Party request a Declaration of Agreement be executed for
fling in the applicable public records, both Parties agree to execute a
Declaration of Agreement similar in form as that which is attached hereto as
Exhibit "G." Either Party shall have the right and option, at its own expense,
of fling such Declaration of record in the appropriate State and/or Federal
offices.

         28.6     Other Rights, Remedies Reserved.

         No provision contained herein providing for the termination of this
Agreement shall be construed as precluding, nor shall it preclude, Chevron from
asserting its respective rights to specific performance, damages, or any other
rights or remedies to which it may be entitled.

         28.7     No Waiver.

         Chevron's or Ridgewood's failure to enforce any of the provisions of
this Agreement shall not effect a waiver of any violation thereof nor preclude
enforcement of that or any other provisions hereof at that or any other time.

         28.8     No New Lease Burdens.

         As to each Lease that remains subject to this Agreement, until
Ridgewood has earned and received an assignment of an interest, or relinquishes
its rights to earn any interest therein, or until this Agreement terminates,
Chevron agrees not to create any additional lease burdens, marketing
commitments, or other contractual obligations on such Leases as to the Available
Acreage and agrees not to assign all or a portion of its interest in the
Contract Acreage, except as contemplated by Sections 3, 4 and 8. Prior to
Ridgewood receiving an assignment of an interest in a Prospect Chevron shall not
create or allow the creation of any additional lease burdens affecting the
Contract Acreage which Ridgewood has a right to earn hereunder. During the term
of this Agreement, Chevron will use business-like efforts not to unnecessarily
prejudice the rights and options of Ridgewood as stipulated hereunder.

                                       45
<PAGE>

         28.9     Permitting Cost Sharing.

         In addition to the obligations under Section 3.2, Ridgewood will be
obligated to contribute Ridgewood's ACP Interest share of all direct permitting
and regulatory costs incurred by Chevron subsequent to the Effective Date of
this Agreement on each of the Leases subject hereto. This contribution will only
come due once Ridgewood agrees to participate in the drilling of the Initial
Test Well on a Prospect. Ridgewood's ACP Interest share of such cost shall be
based on the interest it will be entitled to earn on the Lease to be drilled.
Payment will be due upon receipt of Chevron's written notice of all such costs.

         28.10    Audit Rights.

         Upon written notice to the other Party, any Party ("requesting Party")
may examine the accounts and records of the other Party from time to time during
normal business hours required to verify a Party's compliance with the financial
obligations assumed by that Party in this Agreement. Such examinations shall be
made directly by the requesting Party at its expense or through an independent
accounting firm of the requesting Party's choice retained at the requesting
Party's expense. If performed, the requesting Party shall commence its initial
audit of the other Party's accounts and records pursuant hereto, within
twenty-four (24) months from the Effective Date of this Agreement. After the
initial audit has been conducted or the initial audit period has expired without
such audit being commenced, the requesting Party may commence subsequent audits
only covering those periods following the end of the previous twenty-four (24)
month period.

         28.11    Severability.

         Every provision in this Agreement is intended to be severable. If any
term or provision hereof is held by a court of competent jurisdiction to be
illegal or invalid for any reason whatsoever, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect.

         28.12    Entire Agreement.

         This Agreement constitutes the entire understanding between the parties
with respect to the subject matter hereof, superseding all negotiations, prior
discussions and prior agreements and understandings relating to the subject
matter hereof including that certain Letter from Ridgewood to Chevron dated July
19, 2005.

                                       46
<PAGE>

         28.13    Further Assurances.

         Each Party agrees to execute and deliver all such additional documents,
instruments and assurances and to perform such additional acts as may be
necessary or appropriate to effectuate and perform all of the terms and
conditions of this Agreement.

         28.14    Surviving Obligation.

         THE TERMINATION OF THIS AGREEMENT SHALL NOT RELIEVE ANY PARTY HERETO
FROM ANY EXPENSE, LIABILITY OR OTHER OBLIGATION OR ANY REMEDY THEREFOR WHICH HAS
ACCRUED OR ATTACHED PRIOR TO THE DATE OF SUCH TERMINATION,

         28.15    Conflict of Terms.

         In the event of any conflict between the main body of this Agreement
and attached exhibits, the provisions of the main body of this Agreement shall
control.

IN WITNESS WHEREOF, this Agreement is executed and made effective by the Parties
hereto on the Effective Date as defined herein.

WITNESSES:              CHEVRON U.S.A. INC.

[ILLEGIBLE SIGNATURE]   By: /s/ G. R. Cain
                            ----------------------------------------------------
                        Name: G. R. Cain
                              --------------------------------------------------
[ILLEGIBLE SIGNATURE]   Title: Assistant Secretary & Gulf of Mexico Land Manager
                               -------------------------------------------------

                        RIDGEWOOD ENERGY CORPORATION
                        MANAGER, RIDGEWOOD ENERGY Q FUND, LLC.

                        By: /s/ W. G. Tabor
                            ----------------------------------------------------
                        Name: W. Greg Tabor
                              --------------------------------------------------
                        Title: Executive Vice President
                               -------------------------------------------------

                                       47
<PAGE>

                                   EXHIBIT "A"

                            Primary Package Prospects

                                [ILLEGIBLE TABLE]

<PAGE>

                                   EXHIBIT "B"

                        Additional Opportunity Prospects

                                [ILLEGIBLE TABLE]

<PAGE>

                                   EXHIBIT "C"

      Attached to and made a part of that certain Exploration Participation
      Agreement dated the 1st day of September 2005, by and between Chevron
                 U.S.A. Inc., and Ridgewood Energy Corporation.

      "List of Existing Agreement Restrictions, Exceptions and Conditions"
      --------------------------------------------------------------------

                             Bristol Prospect MP 221
                             -----------------------

LIS No. 698356    Main Pass Block 221 Letter Agreement dated July 20, 2004
                  between Contango Offshore Exploration LLC and Chevron U.S.A.
                  Inc. as amended.

                        SATELLITE PROSPECT - MO 946 & 947
                        ---------------------------------

LIS No. 039853    Mobile Block 990 Gathering Agreement effective May 24, 2000,
                  between Chevron Natural Gas Pipeline Company and Chevron
                  U.S.A. Production Company, affecting only Mobile Block 947
                  (OCS G 25045).

Chevron/Ridgewood EPA 9-1-05.doc
Exhibit C - Final

<PAGE>

                                   EXHIBIT "D"

      Attached to and made a part of that certain Exploration Participation
      Agreement dated the 1st day of September 2005, by and between Chevron
         U.S.A. Inc. and Ridgewood Energy Corporation.

"Area of Mutual Interest"'

--------------------------------------------------------------------------------
BRISTOL PROSPECT

         Block No.                 OCS Serial No.             Lease Status
         ---------                 --------------             ------------

Main Pass Block 219                 OCS-G 26161               Exp. 4/30/2009
Main Pass Block 220                 OCS-G 26162               Exp. 4/30/2009
Main Pass Block 252                     --                    OPEN
Main Pass Block 253                 OCS-G 22809               Exp. 4/30/2006
Main Pass Block 254                 OCS-G 22810               Exp. 4/30/2006
Viosca Knoll Block 521                  --                    OPEN
Viosca Knoll Block 564              OCS-G 25065               Exp. 6/30/2008
Viosca Knoll Block 609              OCS-G 25066               Exp. 5/31/2008
Viosca Knoll Block 610              OCS-G 26199               Exp. 4/30/2009
Destin Dome Block 573                   --                    OPEN
Destin Dome Block 574                   --                    OPEN
Destin Dome Block 617                   --                    OPEN
Destin Dome Block 618                   --                    OPEN

--------------------------------------------------------------------------------
Satellite Prospect

Mobile Block 945                        --                    OPEN

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

Chevron/Ridgewood EPA 9-1-05.doc
Exhibit D - FinalOFFSHORE OPERATING AGREEMENT

                                 by and between

                              Chevron U.S.A. Inc.,

                          Newfield Exploration Company
                                       and

       Ridgewood Energy Corporation, Manager Ridgewood Energy Q Fund, LLC.

                            effective October 1, 2005

                                    covering

                        Main Pass Block 221; OCS-G 26163

                        Main Pass Block 222; OCS-G 26164

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                               <C>
ARTICLE 1. APPLICATION ...........................................................................................1

   1.1      Application to Contract Area .........................................................................1

ARTICLE 2.  DEFINITIONS ..........................................................................................1

   2.1      Additional Testing ...................................................................................1
   2.2      Affiliate ............................................................................................1
   2.3      Authorization For Expenditure ........................................................................2
   2:4      Complete, Completing, Completion .....................................................................2
   2.5.     Completion Equipment .................................................................................2
   2.6      Confidential Data ....................................................................................2
   2.7      Contract Area ........................................................................................2
   2.8      Deepen, Deepening ....................................................................................2
   2.9      Development Facilities ...............................................................................2
   2.10     Development Operation ................................................................................3
   2.11     Development Well .....................................................................................3
   2.12     Exploratory Operation ................................................................................3
   2.13     Exploratory Well .....................................................................................3
   2.14     Export Pipelines .....................................................................................3
   2.15     Force Majeure ........................................................................................3
   2.16     Hydrocarbons .........................................................................................3
   2.17     Joint Account ........................................................................................4
   2.18     Lease ................................................................................................4
   2.19     MMS ..................................................................................................4
   2.20     Non-consent Operation ................................................................................4
   2.21     Non-consent Platform .................................................................................4
   2.22     Non-consent Well .....................................................................................4
   2.23     Non-operator .........................................................................................4
   2.24     Non-participating Party ..............................................................................4
   2.25     Non-participating Party's Share ......................................................................4
   2.26     Objective Depth ......................................................................................4
   2.27     Objective Horizon ....................................................................................4
   2.28     Offsite Host Facilities ..............................................................................4
   2.29     Operator .............................................................................................5
   2.30     Participating interest ...............................................................................5
   2.31     Participating Party ..................................................................................5
   2.32     Platform .............................................................................................5
   2.33     Producible Reservoir .................................................................................5
   2.34     Producible Well ......................................................................................5
   2.35     Production Interval ..................................................................................5
   2.36     Recomplete, Recompleting, Recompletion ...............................................................5
   2.37     Rework, Reworking ....................................................................................6
   2.38     Sidetrack, Sidetracking ..............................................................................6
   2.39     Take-in-Kind Facilities ..............................................................................6
   2.40     Transfer of Interest .................................................................................6
   2.41     Working Interest .....................................................................................6

ARTICLE 3.  EXHIBITS .............................................................................................6

   3.1      Exhibits .............................................................................................6
      3.1.1    Exhibit A - Operator, Description of Leases, etc ..................................................6
      3.1.2    Exhibit B - Insurance Provisions ..................................................................6
      3.1.3    Exhibit C - Accounting Procedure ..................................................................6
</TABLE>

<PAGE>
<TABLE>
<S>                                                                                                               <C>
      3.1.4    Exhibit D - Non-discrimination Provisions .........................................................7
      3.1.5    Exhibit E - Gas Balancing Agreement ...............................................................7
      3.1.6    Exhibit F -Tax Partnership Provision ..............................................................7
      3.1.7    Exhibit G - Memorandum of Operating Agreement and Financing Statement .............................7
      3.1.8    Exhibit H - Other .................................................................................7
      3.1.9    Exhibit I - Security Rights, Default, Unpaid Charges, Carved-out. Interests .......................7

   3.2      Conflicts ............................................................................................7

ARTICLE 4. OPERATOR ..............................................................................................7

   4.1      Operator .............................................................................................7
   4.2      Substitute Operator ..................................................................................7
      4.2.1    Circumstances Under Which the Operator Must Conduct a Non-Consent Operation .......................8
      4.2.2    Operator's Conduct of a Non-Consent Operation in Which it is a Non participating Party ............8
      4.2,3    Appointment of a Substitute Operator ..............................................................8
      4.2.4    Redesignation of Operator .........................................................................9
   4.3      Resignation of Operator ..............................................................................9
   4.4      Removal of Operator ..................................................................................9
   4.5      Selection of Successor Operator ......................................................................10
   4.6      Effective Date of Resignation or Removal .............................................................10
   4.7      Delivery of Property .................................................................................10

ARTICLE 5. AUTHORITY AND DUTIES OF OPERATOR ......................................................................11

   5.1      Exclusive Right to Operate ...........................................................................11
   5.2      Workmanlike Conduct ..................................................................................11
   5.3      Liens and Encumbrances ...............................................................................11
   5.4      Employees and Contractors ............................................................................11
   5.5      Records ..............................................................................................12
   5.6      Compliance ...........................................................................................12
   5.7      Contractors ..........................................................................................12
   5.8      Governmental Reports .................................................................................12
   5.9      Information to Participating Parties .................................................................12
   5.10     Information to Non-participating Parties .............................................................13

ARTICLE 6. VOTING AND VOTING PROCEDURES ..........................................................................14

   6.1     Voting Procedures .....................................................................................14
      6.1.1    Voting interest ...................................................................................14
      6.1.2    Vote Required .....................................................................................14
      6.1.3    Votes .............................................................................................14
      6.1.4    Meetings ..........................................................................................14

ARTICLE 7. ACCESS ................................................................................................14

   7.1      Access to Contract Area ..............................................................................14
   7.2      Reports ..............................................................................................15
   7.3      Confidentiality ......................................................................................15
   7.4      Limited Disclosure ...................................................................................15
   7.5      Limited Releases to Offshore Scout Association .......................................................16
   7.6      Media Releases .......................................................................................16

ARTICLE 8. EXPENDITURES ..........................................................................................16

   8.1      Basis of Charge to the Parties .......................................................................16
   8.2      AFEs .................................................................................................17
   8.3      Emergency and Required-Expenditures ..................................................................17
   8.4      Advance Billings .....................................................................................17
   8.5      Commingling of Funds .................................................................................17
   8.6      Security Rights (LA) .................................................................................17
</TABLE>

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<TABLE>
<S>                                                                                                               <C>
   8.7      Overexpenditures .....................................................................................17

ARTICLE 9. NOTICES ...............................................................................................18

   9.1      Giving and Receiving Notices .........................................................................18
   9.2      Content of Notice ....................................................................................19
   9.3      Response to Notices ..................................................................................19
      9.3.1    Platform and/or Development Proposals .............................................................19
      9.3.2    Well Proposals ....................................................................................20
      9.3.3    Proposal for Multiple Operations ..................................................................20
      9.3.4    Other Matters .....................................................................................20
   9.4      Failure to Respond ...................................................................................20
   9.5      Response to Counterproposals .........................................................................20
   9.6      Timely Well Operations ...............................................................................20
   9.7      Timely Platform/Development Facilities Operations ....................................................21

ARTICLE 10. EXPLORATORY OPERATIONS ...............................................................................21

   10.1     Proposing Operations .................................................................................21
   10.2     Counterproposals .....................................................................................21
   10.3     Operations by All Parties ............................................................................22
   10.4     Second Opportunity to Participate ....................................................................22
   10.5     Operations by Fewer Than All Parties .................................................................22
   10.6     Expenditures Approved ................................................................................23
   10.7     Conduct of Operations ................................................................................23
   10.8     Course of Action After Reaching Objective Depth ......................................................23
       10.8.1     Election by Participating Parties ..............................................................23
       10.8.2     Priority of Operations .........................................................................23
       10.8.3     Second Opportunity to Participate ..............................................................24
       10.8.4     Operations by Fewer Than All Parties ...........................................................24
       10.8.5     Subsequent Operations ..........................................................................25
   10.9    Wells Proposed Below Deepest Producible Reservoir .....................................................25

ARTICLE 11. DEVELOPMENT OPERATIONS ...............................................................................26

   11.1     Proposing Operations .................................................................................26
   11.2     Counterproposals .....................................................................................26
   11.3     Operations by All Parties ............................................................................27
   11.4     Second Opportunity to Participate ....................................................................27
   11.5     Operations by Fewer Than All Parties .................................................................27
   11.6     Expenditures Approved ................................................................................28
   11.7     Conduct of Operations ................................................................................28
   11.8     Course of Action After Reaching Objective Depth ......................................................28
       11.8.1     Election by Fewer Than All Parties .............................................................28
       11.8.2     Priority of Operations .........................................................................29
       11.8.3     Second Opportunity to Participate ..............................................................29
       11.8.4     Operations by Fewer Than All Parties ...........................................................30
       11.8.5     Subsequent Operations ..........................................................................30

   ARTICLE 12. PLATFORM AND DEVELOPMENT FACILITIES ...............................................................31

   12.1     Proposal .............................................................................................31
   12.2     Counterproposals .....................................................................................31
       12.2.1     Operations by All Parties ......................................................................31
       12.2.2     Second Opportunity to Participate ..............................................................31
       12.2.3     Operations by Fewer Than All Parties ...........................................................32
   12.3     Ownership and Use of the Platform and Development Facilities .........................................33
   12.4     Rights to Take in Kind ...............................................................................33
   12.5     Expansion or Modification of a Platform and/or Development Facilities ................................34
</TABLE>

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<TABLE>
<S>                                                                                                              <C>
   12.6     Offsite Host Facilities ..............................................................................35

ARTICLE 13. NON-CONSENT OPERATIONS ...............................................................................35

   13.1     Non-consent Operations ...............................................................................35
       13.1.1      Non-interference ..............................................................................35
       13.1.2      "Multiple Completion Limitation ...............................................................35
       13.1.3 Metering ...........................................................................................35
       13.1.4      Non-consent Well ..............................................................................35
       13.1.5      Cost Information ..............................................................................36
       13.1.6      Completions ...................................................................................36
   13.2     Relinquishment of Interest ...........................................................................36
       13.2.1      Production Reversion Recoupment ...............................................................37
       13.2.2      Non-production Reversion ......................................................................38
   13.3     Deepening or Sidetracking of Non-consent Well ........................................................38
   13.4     Deepening or Sidetracking Cost Adjustments ...........................................................38
   13.5     Subsequent Operations in Non-consent Well ............................................................39
   13,6     Operations in a Production Interval ..................................................................39
   13.7     Operations  Utilizing a Non-consent Platform and/or Development Facilities ...........................39
   13.8     Discovery or Extension from Non-consent Drilling .....................................................40
   13.9     Allocation of Platform/Development Facilities Costs to Non-consent Operations ........................40
      13.9.1     Investment Usage Fees ...........................................................................41
      13.9.2     Operating and Maintenance Charges ...............................................................43
   13.10    Allocation of Costs Between Zones ....................................................................44
   13.11    Lease Maintenance Operations .........................................................................44
      13.11.1    Participation in Lease Maintenance Operations ...................................................44
      13.11.2    Accounting for Non participation ................................................................45
   13.12    Retention of Lease by Non-consent Well ...............................................................45
   13.13    Non-Consent Premiums .................................................................................46

ARTICLE 14. ABANDONMENT, SALVAGE AND SURPLUS .....................................................................46

   14.1     Platform Salvage and Removal Costs ...................................................................46
   14.2     Abandonment of Platforms, Development Facilities or Wells ............................................46
   14.3     Assignment of Interest ...............................................................................47
   14.4     Abandonment Operations Required by Governmental Authority ............................................47
   14.5     Disposal of Surplus Material .........................................................................47

ARTICLE 15. WITHDRAWAL ...........................................................................................48

   15.1     Right to Withdraw ....................................................................................48
   15.2     Response to Withdrawal Notice ........................................................................48
      15.2.1     Unanimous Withdrawal ............................................................................48
      15.2.2     No Additional Withdrawing Parties ...............................................................49
      15.2.3     Acceptance of the Withdrawing Parties' Interests ................................................49
      15.2.4     Effects of Withdrawal ...........................................................................49
   15.3     Limitation Upon and Conditions of Withdrawal .........................................................49
      15.3.1     Prior Expenses ..................................................................................49
      15.3.2     Confidentiality .................................................................................50
      15.3.3     Emergencies and Force Majeure ...................................................................50

ARTICLE 16. RENTALS, ROYALTIES AND OTHER PAYMENTS ................................................................51

   16.1     Overriding Royalty and Other Burdens .................................................................51
   16.2     Subsequently Created Interest ........................................................................51
   16.3     Payment of Rentals and Minimum Royalties .............................................................52
   16.4     Non-participation in Payments ........................................................................52
</TABLE>

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<TABLE>
<S>                                                                                                              <C>
   16.5     Royalty Payments .....................................................................................52

ARTICLE 17. TAXES ................................................................................................52

   17.1     Property Taxes .......................................................................................52
   17.2     Contest of Property Tax Valuation ....................................................................53
   17.3     Production and Severance Taxes .......................................................................53
   17.4     Other Taxes and Assessments ..........................................................................53

ARTICLE 18. INSURANCE. ...........................................................................................53

   18.1     Insurance ............................................................................................53
   18.2     Bonds ................................................................................................53

ARTICLE 19. LIABILITY, CLAIMS AND LAWSUITS .......................................................................54

   19.1     Individual Obligations ...............................................................................54
   19.2     Notice of Claim or Lawsuit ...........................................................................54
   19.3     Settlements ..........................................................................................54
   19.4     Defense of Claims and Lawsuits .......................................................................54
   19.5     Liability for Damages ................................................................................55
   19.6     Indemnification for Non-Consent Operations ...........................................................55
   19.7     Damage to Reservoir, Loss of Reserves and Profit .....................................................56
   19.8     Non-Essential Personnel ..............................................................................56
   19.9     Dispute Resolution Procedure .........................................................................56

ARTICLE 20. INTERNAL REVENUE PROVISION ...........................................................................56

  20.1      Internal Revenue Provision ...........................................................................56

ARTICLE 21 CONTRIBUTIONS .........................................................................................57

   21.1     Notice of Contributions Other Than Advances for Sale of Production ...................................57
   21.2     Cash Contributions ...................................................................................57
   21.3     Acreage Contributions ................................................................................57

ARTICLE 22. DISPOSITION OF PRODUCTION ............................................................................58

   22.1     Take-in-Kind Facilities ..............................................................................58
   22.2     Duty to Take-in-Kind .................................................................................58
   22.3     Failure to Take Oil and Condensate in-Kind ...........................................................58
   22.4     Failure to Take Gas in-Kind ..........................................................................59
   22.5     Expenses of Delivery in-Kind .........................................................................59

ARTICLE 23. APPLICABLE LAW .......................................................................................59

   23.1     Applicable Law .......................................................................................59

ARTICLE 24. LAWS, REGULATIONS AND NON-DISCRIMINATION .............................................................60

   24.1     Laws and Regulations .................................................................................60
   24.2     Non-discrimination ...................................................................................60

ARTICLE 25. FORCE MAJEURE ........................................................................................60

   25.1     Force Majeure ........................................................................................60

ARTICLE 26. SUCCESSORS, ASSIGNS AND PREFERENTIAL RIGHTS ..........................................................60

   26.1     Successors and Assigns ...............................................................................60
   26.2     Transfer of Interest .................................................................................61
   26.3     Consent to Assign ....................................................................................61
   26.4     Transfers Between Parties ............................................................................61
</TABLE>

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<TABLE>
<S>                                                                                                              <C>
   26.5     Division of Interest .................................................................................62
   26.6     Preferential Rights ..................................................................................62

ARTICLE 27. ADMINISTRATIVE PROVISIONS ............................................................................63

   27.1     Term .................................................................................................63
   27.2     Waiver ...............................................................................................63
   27.3     Waiver of Right to Partition .........................................................................63
   27.4     Compliance With Laws and Regulations .................................................................64
      27.4.1      Severance of Invalid Provisions ................................................................64
      27.4.2      Fair and Equal Employment ......................................................................64
   27.5     Construction and Interpretation of this Agreement ....................................................64
      27.5.1      Headings for Convenience .......................................................................64
      27.5.2      Article References .............................................................................64
      27.5.3      Gender and Number ..............................................................................65
      27.5.4      Future References ..............................................................................65
      27.5.5      Currency .......................................................................................65
      27.5.6      Optional Provisions ............................................................................65
      27.5.7      Joint Preparation ..............................................................................65
      27.5.8      Integrated Agreement ...........................................................................65
      27.5.9      Binding Effect .................................................................................65
      27.5.10     Further Assurances .............................................................................65
      27.5.11     Counterpart Execution ..........................................................................66
   27.6     Restricted Bidding ...................................................................................66

ARTICLE 28. AREA OF MUTUAL INTEREST ..............................................................................66

   28.1    Area of Mutual Interest (AMI) .........................................................................66
</TABLE>

<PAGE>

                          OFFSHORE OPERATING AGREEMENT

THIS AGREEMENT, made effective the 1St day of October, 2005, by and between
Chevron U.S.A. Inc., Newfield Exploration Company-and Ridgewood. Energy
Corporation, Manager Ridgewood Energy Q Fund, LLC., their respective heirs,
successors, legal representatives, and assigns, herein referred to collectively
as the "Parties" and individually as a "Party."

                                   WITNESSETH:

WHEREAS, the Parties own a leasehold interest in one or more oil and gas Leases
identified in Exhibit "A" and desire to explore, develop, produce, and operate
those Leases pursuant to this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants in
this Agreement, the Parties agree as follows:

                                    ARTICLE 1

                                   APPLICATION

1.1    Application to Contract Area

       This Agreement applies to the entire Contract Area. For purposes of this
       Agreement, activities or operations affecting one Lease are considered
       activities or operations affecting all Leases. Unless otherwise provided
       in this Agreement, the Parties according to their respective Working
       interests, own all rights and obligations in and under the Leases, all
       property acquired with funds from the Joint Account, and all
       Hydrocarbons.

                                    ARTICLE 2

                                   DEFINITIONS

2.1    Additional Testing

       An operation not previously approved in the AFE and proposed for the
       specific purpose of obtaining additional subsurface data.

2.2    Affiliate

       For a person, another person that controls, is controlled by, or is under
       common control with that person. In this definition, (a) "control" means
       the ownership by one person, directly or Indirectly, of more than fifty
       percent (50%) of the voting securities of a corporation or, for other
       persons, the equivalent ownership interest (such as partnership

                                        1

<PAGE>

       interests), and (b) "person" means an individual, corporation,
       partnership, trust, estate, unincorporated organization, association, or
       other legal entity.

2.3    Authorization For Expenditure (AFE)

       An authority to expend funds prepared by a Party to estimate the costs to
       be incurred in conducting an operation under this Agreement.

2.4    Complete, Completing, Completion

       An operation to complete a well for initial Hydrocarbon production in one
       or more Producible Reservoirs, including, but not limited to, setting
       production casing, perforating the casing, stimulating the well,
       installing Completion Equipment, and/or conducting production tests.

2.5    Completion Equipment

       That certain equipment on an Exploratory Well or a Development Well
       required to be installed prior to the movement of a well-completion rig
       of that well

       (a)    under 30 CFR 250.502, or any succeeding order or regulation issued
              by the MMS, up to and including the tree, and

       (b)    by any other regulatory agency having jurisdiction, including, but
              not limited to, a caisson and navigational aids.

2.6    Confidential Data

       The information and data obtained under this Agreement, including, but
       not limited to, geological, geophysical, and reservoir information;
       originals and copies of logs; core and core analysis; and other well
       information including, but not limited to, the progress, tests, or
       results of a well drilled or an operation conducted under this Agreement,
       except data or information that becomes public other than by breach of
       this Agreement or as agreed to in writing by the Participating Parties.

2.7    Contract Area

       The Leases, or portions thereof, listed on Exhibit "A" to this Agreement.

2.8    Deepen, Deepening

       A drilling operation conducted in an existing wellbore below the
       Objective Depth to which the well was previously drilled.

2.9    Development Facilities

       Production equipment other than Completion Equipment that is installed on
       or outside the Contract Area in order to handle or process Hydrocarbon
       production. Development Facilities include, but are not limited to,

       (a)    compression, separation, dehydration, generators, treaters,
              skimmers, bunkhouses and metering equipment,

       (b)    the flowlines, gathering lines or lateral lines that deliver
              Hydrocarbons and water

              1      from the Completion Equipment to the Platform or to Offsite
                     Host Facilities, or

              2      from the Platform to Export Pipelines; and

       (c)    injection and disposal wells.

                                        2

<PAGE>

       Development Facilities include Export Pipelines.

2.10   Development Operation

       An operation on the Contract Area other than an Exploratory Operation.

2.11   Development Well A well or portion of a well proposed as a Development
       Operation.

2.12   Exploratory Operation

       An operation that is conducted on the Contract Area and that is any of
       the following:

       (a)    proposed to Complete an Exploratory Well;

       (b)    proposed for an Objective Horizon that is not a Producible
              Reservoir; or

       (c)    proposed for an Objective Horizon that has a Producible Well, but
              that will be penetrated at a location where the distance between
              the midpoint of the Objective Horizon to be penetrated by the
              proposed operation and the midpoint of the same Objective Horizon
              where it is actually penetrated by a Producible Well will be at
              least six thousand (6,000) feet for a gas Completion and at least
              three thousand five hundred (3,500) feet for an oil Completion.

       (d)    proposed for an Objective Horizon that is unanimously agreed by
              the Parties not to be in an existing Producible Reservoir; or

       (e)    proposed as a deeper drilling operation below the base of the
              deepest producible reservoir.

2.13   Exploratory Weil

       A well or portion of a well proposed as an Exploratory Operation.

2.14   Export Pipelines

       Pipelines to which a gathering line or lateral line downstream of the
       Platform and/or Development Facilities or, if there is no Platform, the
       Completion Equipment, is connected and which are used to transport
       Hydrocarbons or produced water to shore.

2.15   Force Majeure

       An event or cause that is reasonably beyond the control of the Party
       claiming the existence of such event or cause, which includes, but is not
       limited to, a flood, storm, hurricane, loop current/eddy, or other act of
       God, a fire, loss of well control, oil spill, or other environmental
       catastrophe, a war, terrorist act, a civil disturbance, a labor dispute,
       a strike, a lockout, compliance with a law, order, rule, or regulation,
       governmental. action or delay in granting necessary permits or permit
       approvals, and the inability to secure materials or a rig.

2.16   Hydrocarbons

       Oil and/or gas and associated liquid and gaseous by-products (except
       helium) which may be produced from a wellbore located on the Lease.

                                        3

<PAGE>

2.17   Joint Account

       This term has the same definition as the defined term "Joint Account" in
       Exhibit "C" (Accounting Procedure).

2.18   Lease

       Each oil and gas lease identified in Exhibit R' and the lands- covered by
       that-lease.

2:19   MMS

       The Minerals Management Service, United States Department of Interior, or
       its successor agency. Where appropriate, the reference to MMS shall
       include the appropriate state agency.

2.20   Non-consent Operation

       An operation conducted on the Contract Area by fewer than all Parties,
       which subjects the Nonparticipating Party to Article 13 (Non-Consent
       Operations).

2.21   Non-consent Platform

       A Platform owned by fewer than all Parties.

2.22   Non-consent Well

       An Exploratory Well or a Development Well owned by fewer than all
       Parties.

2.23   Non-operator

       A Party other than the Operator.

2.24   Non-participating Party

       A Party other than a Participating Party.

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

2.26   Objective Depth

       A depth sufficient to test the lesser of the Objective Horizon or the
       specific footage depth stated in the AFE and approved by the
       Participating Parties.

2.27   Objective Horizon

       The interval consisting of the deepest zone, formation, or horizon to be
       tested in an Exploratory Well, Development Well, Deepening operation, or
       Sidetracking operation, as stated in the AFE and approved by the
       Participating Parties.

2.28   Offsite Host Facilities

       Development and handling facilities that (a) are located off the Contract
       Area and (b) are either owned by one or more third parties or by one or
       more Participating Parties in a well, whose interests in the development
       and handling facilities differ from their respective Working Interest
       shares in the well.

                                       4

<PAGE>

2.29   Operator

       The Party designated in Article 4.1 (Designation of the Operator), a
       successor Operator-selected under Article 4.5, (Selection of Successor
       Operator), and, if applicable, a substitute Operator selected under
       Article 4.2 (Substitute Operator).

2.30   Participating Interest

       The percentage of the costs and risks of conducting an operation under
       this Agreement that a Participating Party agrees, or is otherwise
       obligated, to pay and bear.

2.31   Participating Party

       A Party that executes an AFE for a proposed operation or otherwise
       agrees, or becomes liable, to pay and bear a share of the costs and risks
       of conducting an operation under this Agreement.

2.32   Platform

       An offshore structure on the Contract Area that supports Wells,
       Completion Equipment, or Development Facilities, whether fixed,
       compliant, or floating, and the components of that structure, including,
       but not limited to, caissons or well protectors to the extent same are
       not Completion Equipment, rising above the water line and used for the
       exploration, development, or production of Hydrocarbons. The term
       "Platform" shall also mean any offshore equipment or template (excluding
       templates used for drilling operations) and any component thereof, other
       than Completion Equipment (including, but not limited to, flow lines and
       control systems), that is resting on or attached to the sea floor and
       used to obtain production of Hydrocarbons.

2.33   Producible Reservoir

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

2.34   Producible Well

       A well that is drilled under this Agreement and that (a) is producing
       Hydrocarbons; (b) is determined to be, or meets the criteria for being
       determined to be, capable of producing Hydrocarbons in paying quantities
       under an applicable order or regulation issued by the governmental
       authority having jurisdiction; or (c) is determined to be a Producible
       Well by two (2) or more Participating Parties having a combined Working
       Interest of forty-five percent (45%) or more, even if the well has been
       plugged and permanently or temporarily abandoned.

2.35   Production Interval

       A zone or interval producing or capable of producing Hydrocarbons from a
       well without Reworking operations.

2.36   Recomplete, Recompleting, Recompletion

       An operation whereby a Completion in one Producible Reservoir is
       abandoned in order to attempt a Completion in a different Producible
       Reservoir within the existing wellbore.

                                       5

<PAGE>

2.37   Rework, Reworking

       An operation conducted in a well, after it has been Completed in one or
       more Producible Reservoirs, to restore, maintain, or improve Hydrocarbon
       production from one or more of those Producible Reservoirs, but
       specifically excluding drilling, Sidetracking, Deepening, Completing, or
       Recompleting the well.

2.38   Sidetrack, Sidetracking

       The directional control and intentional deviation of a well to change the
       bottom-hole location, whether it be to the original Objective Depth or
       formation or another bottom-hole location not deeper than the
       stratigraphic equivalent. of the initial Objective Depth, unless the
       intentional 'deviation is done to straighten the hole or to drill around
       junk in the hole or to overcome other mechanical difficulties.

2.39   Take-in-Kind Facilities

       Facilities which (i) are not paid for by the Joint Account and (ii) are
       installed for the benefit and use of a particular Party or Parties to
       take its or their share of Hydrocarbon production in kind.

2.40   Transfer of Interest

       A conveyance, assignment, transfer, farmout, exchange, or other
       disposition of all or part of a Party's Working Interest.

2.41   Working Interest

              The record title interest, or where applicable, the leasehold
              interest or the operating rights of each Party in and to each
              Lease (expressed as the percentage provided in Exhibit "A"). If a
              Party's record title interest is different from its operating
              rights, the Working Interest of each Party is the interest
              provided in Exhibit "A".

                                    ARTICLE 3

                                    EXHIBITS

3.1    Exhibits

       The following exhibits are attached to this Agreement and incorporated
       into this Agreement by reference:

       (Check the exhibits the Parties wish to incorporate into this Agreement.)

       3.1.1  Exhibit "A"

              Operator, Description of Leases, Division of Interests, and
              Notification Addresses

       3.1.2  Exhibit "B"

              Insurance Provisions.

       3.1.3  Exhibit "C"

              Accounting procedure.

                                        6

<PAGE>

       3.1.4  Exhibit "D"

              Nan-discrimination Provisions.

       3.1.5  Exhibit "E"

              Gas Balancing Agreement.

       3.1.6  Exhibit "F"

              Tax Partnership Provision.

       3.1.7  Exhibit "G"

              Memorandum of Operating Agreement and Financing Statement.

       3.1.8  Exhibit "H".

              Other (e.g. -Dispute-Resolution).

       3.1.9  Exhibit "I"

              Security Rights; Default' Unpaid Charges' Carved-out Interests

3.2    Conflicts

       If a provision of an exhibit, except Exhibits "D," "E," or "F", is
       inconsistent with a provision in the body of this Agreement, the
       provision in the body of this Agreement shall prevail. If a provision of
       Exhibit "D," "E," or "F", is inconsistent with a provision in the body of
       this Agreement, however, the provision of the exhibit shall prevail.

                                    ARTICLE 4

                                    OPERATOR

4.1    Operator

       Chevron U.S.A. Inc. (Chevron) is designated as the Operator of the
       Contract Area covered by this Offshore Operating Agreement. The Parties
       shall promptly execute and provide Operator with all documents required
       by the MMS in connection with the designation of Chevron as Operator or
       with the designation of any other Party as a substitute or successor
       Operator. Unless agreed to the contrary by all Parties hereto, Operator
       shall also be classified as the designated applicant for oil spill
       financial responsibility purposes and each Non-operating Party shall
       promptly execute the appropriate documentation reflecting this
       designation and promptly provide same to Operator for filing with MMS.

4.2    Substitute Operator

       Except as otherwise provided in Article 4.2.1 (Circumstances Under Which
       the Operator Must Conduct a Non-Consent Operation), if the Operator
       becomes a Non-participating Party in a Non-consent Operation, the
       Participating Parties may approve the designation of any Participating
       Party as the substitute Operator by the vote of two (2) or more of the

                                        7

<PAGE>

       Participating Parties having a combined forty-five percent (45%) or more
       of the Participating Interests. The substitute Operator shall serve only
       (a) for the Non-consent Operation, (b) on the Lease, or that portion of
       the Lease, affected by the Non-consent Operation, and (c) with the same
       authority, rights, obligations, and duties as the Operator. If a
       Non-operator is the only Participating Party in a Non-consent Operation,
       then the Non-operator shall be designated as. the substitute Operator for
       that Non-consent Operation, with. no vote required, unless the
       Non-operator elects not to accept the designation. No Non-operator shall
       ever be designated as a substitute Operator against its will. If a
       substitute Operator is not designated under the foregoing procedures, the
       Operator shall, upon the unanimous agreement of the Participating Parties
       and the Operator, conduct the Non-consent Operation on behalf of the
       Participating Parties and at the Participating Parties' sole cost and
       risk under Article 13 (Non-Consent Operations).

       4.2.1  Circumstances Under Which the Operator Must Conduct a Non-Consent
              Operation If:

              (a)    a drilling rig is on location and the Operator becomes a
                     Non-participating Party in a supplemental AFE for an
                     Exploratory Operation, or Development Operation, or

              (b)    the Operator becomes a Non-participating Party in an
                     operation to be conducted from a Platform operated by the
                     Operator, the Operator, as a Non-participating Party, shall
                     conduct the Non-consent Operation on behalf of the
                     Participating Parties and at the Participating Parties'
                     sole cost and risk under Article 13 (Non-Consent
                     Operations).

       4.2.2  Operator's Conduct of a Non-Consent Operation in Which it is a
              Non-participating Party

              When, under Article 4.2 (Substitute Operator) or Article 4.2.1
              (Circumstances Under Which the Operator Must Conduct a Non-Consent
              Operation), the Operator conducts a Non-consent Operation in which
              it is a Non-participating Party, it shall follow the practices and
              standards in Article 5 (Authorities and Duties of Operator).
              Notwithstanding anything to the contrary in Exhibit "C", the
              Operator shall not be required to proceed with the Non consent
              Operation until the Participating Parties have advanced the total
              estimated costs of the Non-consent Operation to the Operator. The
              Operator shall never be obligated to expend any of its own funds
              for the Non-consent Operation in which it is a Non participating
              Party.

       4.2.3  Appointment of a Substitute Operator After expiration of all
              applicable response periods for the Non-consent Operation and
              selection of a substitute Operator, each Party shall promptly
              provide the substitute Operator with the appropriate MMS
              designation of operator forms and designation of oil spill
              responsibility forms. The Operator and the substitute Operator

                                        8

<PAGE>

              shall coordinate the change of operatorship to avoid interfering
              with ongoing activities and operations, if any, including but not
              limited to, lease maintenance activities and operations.

       4.2.4  Redesignation of Operator

              Within five (5) days after conclusion of the Non-consent
              Operation, all Parties shall execute and provide the Operator with
              the appropriate MMS designation of operator forms and designation
              of oil spill responsibility forms to return operatorship to the
              Operator, thereby superseding the Parties' designation of the
              substitute Operator under Article 4.2.3 (Appointment of a
              Substitute Operator).

4.3    Resignation of Operator

       Subject to Article 4.5 (Selection of Successor), the Operator may resign
       at any time by giving written notice to the Parties, except that the
       Operator may not resign during a Force Majeure or an emergency that poses
       a threat to life, safety, property, or the environment. If the. Operator
       ceases to own a Working Interest, the Operator automatically shall be
       deemed to have resigned as the Operator without any action by the
       Non-operators.

4.4    Removal of Operator

       Operator may be removed by an affirmative vote of the Parties owning a
       combined Working Interest of fifty-one percent (51%) or more of the
       remaining Working Interest after excluding the Operator's Working
       Interest if:

       (a)    Operator becomes insolvent or unable to pay its debts as they
              mature, makes an assignment for the benefit of creditors, commits
              an act of bankruptcy, or seeks relief under laws providing for the
              relief of debtors;

       (b)    a receiver is appointed for Operator or for substantially all of
              its property or affairs;

       (c)    a Transfer of Interest by the Operator which reduces the
              Operator's Working Interest to less than the Working Interest of a
              Non-operator, whether accomplished by one or more Transfer of
              Interest; or

       (d)    Operator commits a substantial breach of a material provision of
              this Agreement and fails to cure the breach within thirty (30)
              days after notice of the breach.

       If a petition for relief under the federal bankruptcy laws is filed by or
       against Operator, and if a federal bankruptcy court prevents the removal
       of Operator, all Non-operators and Operator shall comprise an interim
       operating committee to operate until Operator has elected to reject or
       assume this Agreement under the Bankruptcy Code. An election by Operator
       as a debtor-inpossession or by a trustee in bankruptcy to reject this
       Agreement shall be deemed to be a resignation by Operator without any
       action by the Non-operators, except the selection of a successor. To be
       effective, a vote to remove Operator for any cause described above must
       be taken within sixty (60) days after a Non-operator receives actual
       knowledge of the cause. A change of corporate name or structure of
       Operator shall not be deemed to be a resignation or basis for removing
       Operator.

                                        9

<PAGE>

4.5    Selection of Successor

       Upon resignation or removal of Operator, a successor Operator shall be
       selected from among the Parties by an affirmative vote of two (2) or more
       Parties having a combined Working Interest of forty-five percent (45%) or
       more. If the resigned or removed Operator is not entitled to vote, fails
       to vote, or votes only to succeed itself, then the successor Operator
       shall be selected by the affirmative vote of the Parties owning a
       combined Working Interest of fifty-one percent (51%) or more of the
       remaining Working Interest after excluding the Working Interest of the
       resigned or removed Operator. If the Operator assigns all or a part of
       its Working Interest, then under Article 4.3 (Resignation of Operator) or
       Article 4.4.(c), the Party who acquired all or a part of the former
       Operator's Working Interest shall not be excluded from voting for a
       successor Operator. If there are only two Parties to this Agreement when
       the Operator resigns or is removed, then the Non operator automatically
       has the right, but not the obligation, to become the Operator. If no
       Party is willing to become the Operator, this Agreement shall terminate
       under Article 27.1 (Term).

4.6    Effective Date of Resignation or Removal

       The resignation or removal of the Operator shall become effective as soon
       as practical but no later than 7:00 a.m. on the first day of the month
       following a period of ninety (90) days after the date of resignation or
       removal, unless a longer period is required for the Parties to obtain
       approval of the designation of the successor Operator, and designated
       applicant for oil spill financial responsibility purposes, by the MMS;
       however, in no event shall the resignation or removal of Operator become
       effective until a successor Operator has assumed the duties of Operator.
       The resignation or removal of the outgoing Operator shall not prejudice
       any rights, obligations, or liabilities resulting from its operatorship.
       The successor Operator may charge the Joint Account for reasonable costs
       incurred in connection with copying or obtaining the former Operator's
       records, information or data except when the change of Operator results
       from a merger, consolidation, reorganization or sale or transfer to an
       Affiliate of the Operator.

4.7    Delivery of Property

       On the effective date of resignation or removal of the Operator, the
       outgoing Operator shall deliver or transfer to the successor Operator
       custodianship of the Joint Account and possession of all items purchased
       for the Joint Account under this Agreement, all Hydrocarbons that are not
       the separate property of a Party, all equipment, materials, and
       appurtenances purchased for the Joint Account under this Agreement, which
       are not already in the possession of the successor Operator, and all
       books, records, and inventories relating to the Joint Account (other than
       those books, records, and inventories maintained by the outgoing Operator
       as the owner of a Working Interest). The outgoing Operator shall
       distribute or return all funds related to the Joint Account to the
       Parties who contributed the funds or are otherwise entitled to receive
       the funds under this Agreement. The outgoing Operator shall further use
       its reasonable efforts to transfer to the successor Operator, as of the
       effective date of the resignation or removal, its rights as Operator

                                       10

<PAGE>

       under all contracts exclusively relating to the activities or operations
       conducted under this Agreement, and the successor Operator shall assume
       all obligations of the Operator that are assignable under the contracts.
       The Parties may audit the Joint Account and conduct an inventory of all
       property and all Hydrocarbons that are not the separate property of a
       Party, and the inventory shall be used in the accounting to ' all Parties
       by the outgoing Operator of the property and the Hydrocarbons that are
       not the separate property of a Party. The inventory and audit shall be
       conducted under Exhibit "C".

                                    ARTICLE 5

                        AUTHORITY AND DUTIES OF OPERATOR

5.1    Exclusive Right to Operate

       Unless otherwise provided in this Agreement, Operator shall have the
       exclusive right and duty to conduct operations (or cause them to be
       conducted) under this Agreement. In performing services under this
       Agreement for the Non-operators, Operator shall be an independent
       contractor, not subject to the control or direction of Non-operators,
       except for the type of operation to be undertaken in accordance with the
       voting and election procedures in this Agreement. No Party shall be
       deemed to be, or hold itself out as, the agent or fiduciary of another
       Party.

5.2    Workmanlike Conduct

       Operator shall timely commence and conduct all operations in a good and
       workmanlike manner, as would a prudent operator under the same or similar
       circumstances. OPERATOR SHALL NOT BE LIABLE TO NON-OPERATORS FOR LOSSES
       SUSTAINED OR LIABILITIES INCURRED, EXCEPT AS MAY RESULT FROM OPERATOR'S
       GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Operator shall never be required
       under this Agreement to conduct an operation that it believes would be
       unsafe or would endanger persons, property or the environment. Unless
       otherwise provided in this Agreement, Operator shall consult with
       Non-operators and keep them informed of all important matters.

5.3    Liens and Encumbrances

       Operator shall endeavor to keep the Contract Area, wells, Platforms,
       Development Facilities, and other equipment free from all liens and other
       encumbrances occasioned by operations hereunder, except those provided in
       Article 8.6 (Security Rights).

5.4    Employees and Contractors

       Operator shall select employees and contractors and determine their
       number, hours of labor, and compensation. The employees shall be
       employees of Operator.

                                       11

<PAGE>

5.5    Records

       The Operator shall keep or cause to be kept accurate books, accounts, and
       records of activities or operations under this Agreement in compliance
       with the Accounting Procedure in Exhibit "C". Unless otherwise provided
       in this Agreement, all records of the Joint Account shall be available to
       a Non-operator as provided in Exhibit "C". The Operator shall use
       good-faith efforts to ensure the settlements, billings, and reports
       rendered to each Party under this Agreement are complete and accurate.
       The Operator shall notify the other Parties promptly upon the discovery
       of any error or omission pertaining to the settlements, billings, and
       reports rendered to each Party.

5.6    Compliance

       Operator shall comply, and shall require' all agents and contractors to
       comply, with all applicable laws, rules, regulations, and orders of
       governmental authorities having jurisdiction.

5.7    Contractors

       Operator may enter into contracts with qualified and responsible
       independent contractors for the design, construction, installation,
       drilling, production or operation of wells, Platforms and Development
       Facilities. Insofar as possible, Operator shall use competitive bidding
       to procure goods and services for the benefit of the Parties. All
       drilling operations conducted under this Agreement shall be conducted by
       properly qualified and responsible drilling contractors under current
       competitive contracts. A drilling contract will be deemed to be a current
       competitive contract if it (a) was made within twelve (12) months before
       the commencement of the well and (b) contains terms, rates, and
       provisions that, when the contract was made, did not exceed those
       generally prevailing in the area for operations involving substantially
       equivalent rigs that are capable of conducting the drilling operation. At
       its election, Operator may use its own or an Affiliate's drilling
       equipment, derrick barge, tools, or machinery to conduct drilling
       operations, but the work shall be (i) performed by Operator or its
       Affiliate acting as an independent contractor, (ii) approved by written
       agreement with the Participating Parties before commencement of
       operations, and (iii) conducted under the same terms and conditions and
       at the same rates as are customary and prevailing in competitive
       contracts of third parties doing work of similar nature.

5.8    Governmental Reports

       Operator shall make reports to governmental authorities it has a duty to
       make as Operator and shall furnish copies of the reports to the
       Participating Parties. The Operator shall provide each Non-operating
       Party with a copy of each notice, order, and directive received from the
       MMS. As soon as reasonably practicable, each Party shall give written
       notice to the other Parties before each meeting with government
       authorities of which it has notice and that affects the Contract Area.

5.9    Information to Participating Parties

       Except as provided in Article 8.6, Operator shall furnish each
       Participating Party the following information, if applicable, for each
       activity or operation conducted by Operator:

                                       12

<PAGE>

       5.9.1  A copy of the application for permit to drill and all amendments
              thereto.

       5.9.2  A daily drilling report (or Reworking report or Recornpletion
              report, if applicable), giving the depth, corresponding
              lithological information, data on drilling fluid characteristics,
              information about drilling or operational difficulties or delays,
              if any, and other pertinent information, by facsimile transmission
              or electronic mail within twenty-four (24) hours (exclusive of
              Saturdays, Sundays, and federal holidays) for well operations
              conducted in the preceding twenty-four (24) hour period.

       5.9.3  A complete report of each core analysis.

       5.9.4  A copy of each electrical survey, currently as it is run; all
              data for each radioactivity log, temperature survey, deviation or
              directional survey, caliper log, and other log or survey obtained
              during the drilling of the well; and, upon completion of the well,
              a composite of all electrical-type logs, insofar as is reasonable
              and customary.

       5.9.5  A copy of all well test results, bottom-hole pressure surveys, and
              fluid analyses.

       5.9.6  Upon written request received by Operator before commencement of
              drilling, samples of cuttings and cores taken from the well (if
              sufficient cores are retrieved), packaged in containers furnished
              by Operator at the expense of the requesting Party, marked as to
              the depths from which they were taken, and shipped at the expense
              of the requesting Party by express courier to the address
              designated by the requesting Party. 5.9.7 To the extent possible,
              twenty-four (24) hours' advance notice of, and access to, logging,
              coring, and testing operations.

       5.9.8  A monthly report on the volume of Hydrocarbons and water produced
              from each well; however, Operator shall provide reports more often
              if feasible.

       5.9.9  A copy of each report made to a governmental authority having
              jurisdiction.

       5.9.10 Upon written request, other pertinent information available to
              Operator, including, but not limited to, those portions of the
              contracts to be used for the benefit of the Joint Account and
              which pertain to the Lease, but excluding the Operator's
              proprietary or secret information and its subsurface
              interpretations that have been independently developed at
              Operator's sole cost and expense.

5.10   Information to Non-participating Parties

       Operator shall furnish each Non-participating Party a copy of each
       Operator's governmental report that is available to the public and
       associated with the applicable Non-consent Operation, Until the
       applicable recoupment under Article 13 (Non-consent Operations) is
       complete, a Non participating Party shall not receive or review any other
       information specified by Article 5.9 (information to Participating
       Parties), except as may be necessary for a payout audit of the Non
       consent Operation.

                                       13

<PAGE>

                                    ARTICLE 6

VOTING AND VOTING PROCEDURES

6.1    Voting Procedures

       Unless otherwise provided in this Agreement, each matter requiring
       approval of the Parties shall be determined as follows:

       6.1.1  Voting Interest

       Subject to Article 8.6 (Security Rights), each Party shall have a voting
       interest equal to its Working Interest or its Participating Interest, as
       applicable.

       6.1.2  Vote Required

       Unless expressly stated to the contrary herein, a matter requiring
       approval of the Parties shall be decided by the affirmative vote of two
       (2) or more Parties having a combined voting interest of forty-five
       percent (45%) or more. If, there are only two (2) Parties to this
       Agreement, the matter shall be determined by unanimous consent.

       6.1.3  Votes

       The Parties may vote at a meeting; by telephone, promptly confirmed in
       writing to Operator; or by facsimile transmission. Operator shall give
       each Party prompt notice of the results of the voting.

       6.1.4  Meetings

       Meetings of the Parties may be called by Operator upon its own motion or
       at the request of a Party having a voting interest of not less than ten
       percent (10%). Except in an emergency, no meeting shall be called on less
       than five (5) days' advance written notice, and the notice of meeting
       shall include the meeting agenda prepared by the Operator or the
       requesting Party. The representative of Operator shall be chairman of
       each meeting. Only matters included in the agenda may be discussed at a
       meeting, but the agenda and items included in the agenda may be amended
       prior to or during the meeting by unanimous agreement of all Parties.

                                    ARTICLE 7

                                     ACCESS

7.1    Access to Contract Area

       Except as provided in Article 8.6, each Party shall have access, at its
       sole risk and expense and at all reasonable times, to the Contract Area,
       Platform, Development Facilities and Joint Account assets to inspect
       activities, operations and wells in which it participates, and to
       pertinent records and data. A Non-operator shall give Operator at least
       twenty-four (24) hours' notice of the Non

                                       14

<PAGE>

       operator's intention to visit the Contract Area. To protect Operator and
       the Non-operators from unnecessary lawsuits, claims, and legal liability,
       if it is necessary for a person who is not performing services for
       Operator directly related to the joint operations, but is performing
       services solely for a Non-operator or pertaining to the business or
       operations of a Non-operator, to visit, use, or board a rig, well,
       Platform, or Development Facilities subject to this Agreement, the
       Nonoperator shall give Operator advance notice of the visit, use, or
       boarding, and shall secure from that person an agreement, in a form
       satisfactory to Operator, indemnifying and holding Operator and
       Non-operators harmless, or shall itself provide the same hold harmless
       and indemnification in favor of Operator and other Non-operators before
       the visit, use, or boarding.

7.2    Reports

       On written request, Operator shall furnish a requesting Party any
       information not otherwise furnished under Article 5 (Authority and Duties
       of Operator) to which that Party is entitled under this Agreement. The
       costs of gathering and furnishing information not furnished under Article
       5 shall be charged to the requesting Party. Operator is not obligated to
       furnish interpretative data that was generated by Operator at its sole
       cost.

7.3    Confidentiality

       Except as otherwise provided in Article 7.4 (Limited Disclosure), Article
       7.5 (Limited Releases to Offshore Scout Association), Article 7.6 (Media
       Releases), and Article 21.1 (Notice of Contributions Other Than Advances
       for Sale of Production), and except for necessary disclosures to
       governmental authorities having jurisdiction, or except as agreed in
       writing by all Participating Parties, no Party or Affiliate shall
       disclose Confidential Data to a third party. This Article 7.3 shall be in
       force and effect for a term of two (2) years after termination of this
       Agreement.

7.4    Limited Disclosure

       A Party may make Confidential Data to which it is entitled under this
       Agreement available to:

       (a)    outside professional consultants and reputable engineering firms
              for the purpose of evaluations and/or submitting bids;

       (b)    gas transmission companies for Hydrocarbon reserve or other
              technical evaluations;

       (c)    reputable financial institutions for study before commitment of
              funds;

       (d)    governmental authorities having jurisdiction or the public, to the
              extent required by applicable laws or by those governmental
              authorities;

       (e)    the public, to the extent required by the regulations of a
              recognized stock exchange;

       (f)    third parties with whom a Party is engaged in a bona fide effort
              to effect a merger or consolidation, sell all or a controlling
              part of that Party's stock, or sell all or substantially all
              assets of that Party or an Affiliate of that Party; and

       (g)    an Affiliate of a Party.

       (h)    such limited well information that is typically disclosed by
              Operator's representative during meetings of the Offshore Oil
              Scouts Association.

                                       15

<PAGE>

       (i) third parties with whom a Party is engaged in a bona fide effort to
       sell, farm out, or trade all or a portion of its interest in the Contract
       Area; Confidential Data, made available under Articles 7.4(f) and 7.4(i)
       shall not be removed from the custody or premises of the Party making the
       Confidential Data available to third parties described in those Articles.
       A third party permitted access under Articles 7.4, (a), (b), (c), (f),
       and (i) shall first agree in writing neither to disclose the Confidential
       Data to others nor to use the Confidential Data, except for the purpose
       for which it was disclosed. The disclosing Party shall give prior notice
       to the other Parties that it intends to make the Confidential Data
       available.

7.5    Limited Releases to Offshore Scout Association

       The Operator may disclose Confidential Data to the Offshore Oil Scouts
       Association at their regularly scheduled meetings. The Confidential Data
       that may be disclosed is limited to information concerning well
       locations, well operations, and well completions to the extent
       reasonable and customary in industry practice or required under the
       by-laws of the Offshore Oil Scouts Association.

7.6    Media Releases

       Without the prior written consent of the other Participating Parties,
       which such consent shall not be unreasonably withheld, or otherwise
       permitted by this Article, no Party shall issue a news or media release
       about operations on the Contract Area. In an emergency involving
       extensive property or environmental damage, operations failure, loss of
       human life, or other clear emergency, and for which there is insufficient
       time to obtain the prior approval of the Parties, Operator may furnish
       the minimum, strictly factual, information necessary to satisfy the
       legitimate public interest of the media and governmental authorities
       having jurisdiction. Operator shall then promptly advise the other
       Parties of the information furnished in response to the emergency. The
       foregoing, however, shall not restrict disclosures by either Party which
       are required by applicable securities or other laws or regulations or the
       applicable rules of any stock exchange having jurisdiction over the
       disclosing Party or its Affiliates.

                                    ARTICLE 8

                                  EXPENDITURES

8.1    Basis of Charge to the Parties

       Subject to the other provisions of this Agreement, Operator shall pay all
       costs incurred under this Agreement, and each Party shall reimburse
       Operator in proportion to its Participating Interest. All charges,
       credits, and accounting for expenditures shall be made and done pursuant
       to Exhibit "C".

                                       16

<PAGE>

8.2    AFEs

       Before undertaking an operation or making a single expenditure to be in
       excess of Two Hundred and Fifty Thousand Dollars ($250,000), and before
       conducting an activity or operation to drill, Sidetrack, Deepen,
       Complete, Rework or Recomplete a. well (regardless of the estimated
       cost), Operator shall submit an AFE for the operation or expenditure to
       the Parties for approval. Operator shall also furnish an informational
       AFE to all Parties for- an operation or single expenditure estimated to
       cost Two Hundred and Fifty Thousand Dollars ($250,000) or less, but in
       excess of Fifty-Thousand Dollars ($50,000).

8.3    Emergency and Required Expenditures

       Notwithstanding anything in -this Agreement to the contrary,. Operator is
       hereby authorized to conduct operations and incur expenses that in its
       opinion are reasonably necessary to safeguard life, property, and the
       environment in case of an actual or imminently. threatened. blowout,
       explosion, accident, fire, food, storm, hurricane, catastrophe, or other
       emergency, and the expenses shall be borne by the Participating Parties
       in the affected operation. Operator shall report to the Participating
       Parties, as promptly as possible, the nature of the emergency and the
       action taken. Operator is also authorized to conduct operations and incur
       expenses reasonably required by statute, regulation, order, or permit
       condition or by a governmental authority having jurisdiction, which
       expenses shall be borne by the Participating Parties in the affected
       operation, subject to Exhibit "C".

8.4    Advance Billings

       Operator may require each Party to advance its respective share of
       estimated expenditures pursuant to Exhibit "C".

8.5    Commingling of Funds

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

8.6    Security Rights (LA)

       Exhibit "I" (LOUISIANA) if applicable, applies.

8.7    Overexpenditures

       Operator shall notify the Participating Parties when it appears that
       actual expenditures for an approved operation in an Exploratory or
       Development Well or for the design, construction, and installation of a
       Platform or Development Facilities will exceed the AFE estimate (the
       excess being an "Overexpenditure"). If it appears that the
       Overexpenditure will be no more than twenty percent (20%), hereinafter
       referred to as the "Allowable Variance," Operator's notice shall be
       forwarded for information only. If Operator determines that the
       Overexpenditure will exceed the Allowable Variance, Operator shall submit
       a new AFE for the current operation ("Supplemental AFE") for approval of
       the Participating Parties. The Participating Parties may then elect
       whether to continue to participate within thirty (30) days or forty-eight
       (48) hours if a rig is on location, exclusive of Saturdays, Sundays, and

                                       17

<PAGE>

       federal holidays, after receipt of the Supplemental AFE. If fewer than
       all, but one (1) or more Participating Parties elect to continue to
       participate in the current operation and agree to pay and bear one
       hundred percent (100%) of the costs and risks of conducting it, Operator
       shall continue to conduct the current operation. Otherwise, the operation
       shall cease. A Participating Party that elects not to continue to
       participate in the current operation shall become a Non-participating
       Party in the operation, from and after the date when the Overexpenditure
       exceeds the Allowable Variance, not including emergency expenditures, and
       Article 13.2 (Relinquishment of Interest) shall apply to the Party only
       to the extent that the costs of the operation exceed the Allowable
       Variance. Unless otherwise agreed by the Participating Parties, each
       Participating Party. electing to continue to participate in the current
       operation may, but is not obligated to, pay and bear that portion of the
       costs and risks attributable to the interests of the Non-participating
       Parties in the ratio that the Participating Party's interest bears to the
       total interests of all Participating Parties electing to continue
       participating in the current operation. If it appears to Operator that
       actual expenditures for an approved operation will exceed the
       Supplemental AFE estimate, Operator shall again repeat the procedure of
       this Article 8.7, using the estimate in the most recently approved
       Supplemental AFE as the basis for determining the Overexpenditure and
       Allowable Variance. An initial Participating Party in an operation shall
       remain responsible for its share of all costs and risks for plugging,
       replugging, capping, burying, disposing, abandoning, removing, and
       restoring associated with the operation, subject to Article 14
       (Abandonment, Salvage, and Surplus), regardless of its subsequent
       election on a Supplemental AFE, except to the extent such costs were
       increased by subsequent operations in which it elected not to
       participate. Notwithstanding anything in this Article to the contrary, if
       expenditures exceed the Allowable Variance for an emergency, as provided
       in Article 8.3 (Emergency and Required Expenditures), Operator shall not
       be required to secure the approval of the Participating Parties, as the
       expenditures will be borne by all Participating Parties. However, once
       stabilization takes place and emergency expenditures are no longer' being
       incurred, Operator shall promptly furnish a Supplemental AFE to the
       Participating Parties for their review and election, as provided above.

                                    ARTICLE 9

                                     NOTICES

9.1    Giving and Receiving Notices

       Except as otherwise provided in this Agreement, all AFEs and notices
       required or permitted by this Agreement shall be in writing and shall be
       delivered in person or by mail, courier service, or facsimile
       transmission, with postage and charges prepaid, addressed to the Parties
       at the addresses in Exhibit "A". When a drilling rig is on location and

                                       18

<PAGE>

       standby charges are accumulating, however, notices pertaining to the rig
       shall be given orally or by telephone. All telephone or oral notices
       permitted by this Agreement shall be confirmed immediately thereafter by
       written notice. A notice shall be deemed to have been delivered only when
       received by the Party to whom it was directed, and the period for a Party
       to deliver a response thereto begins on the date the notice is received.
       "Receipt", for oral or telephone notice, means actual and immediate
       communication to the Party to be-notified, and for written notice, means
       actual delivery of the notice to the address of the Party to be notified,
       as specified in this Agreement, or to the facsimile machine of that
       Party. A responsive notice shall be deemed to have been delivered when
       the Party to be notified is in receipt of same. When a response is
       required in forty-eight. (48) hours or less, however, the response shall
       be given orally or by telephone or facsimile transmission within that
       period. If a Party is unavailable to accept delivery of a notice required
       to be given orally or by telephone, the notice may be delivered by any
       other method specified in this Article 9.1. A message left on an
       answering machine or with an answering service or other third person
       shall not be deemed to be adequate telephonic or oral notice.

9.2    Content of Notice

       An AFE or notice requiring a response shall indicate the maximum response
       time specified in Article 9.3 (Response to Notices). A proposal for a
       Platform and/or Development Facilities shall include an AFE, containing a
       description of the Platform and/or Development Facilities, including, but
       not limited to, location, and the estimated costs of design, fabrication,
       transportation, and installation. A proposal for a well operation shall
       include an AFE, describing the estimated commencement date, the proposed
       depth, the objective formation or formations to be penetrated or tested,
       the Objective Horizon, the surface and bottomhole locations, proposed
       directional or horizontal drilling operations, the type of equipment to
       be used, and the estimated costs of the operation, including, but not
       limited to, the estimated costs of drilling, testing, and Completing or
       abandoning the well. If a proposed operation is subject to Article 13.11
       (Lease Maintenance Operations), the notice shall specify that the
       proposal is a Lease Maintenance Operation. A proposal for multiple
       operations on more than one well location by the same rig shall contain
       separate AFEs or notices for each operation and shall specify in writing
       in what order the operations will be conducted. Each Party shall respond
       to each proposed multiple operation in the manner provided in Article
       9.3.3 (Proposal for Multiple Operations).

9.3    Response to Notices

       Except as provided in Article 9.1, each Party's response to a proposal
       shall be in writing to the proposing Party. Unless otherwise provided in
       this Agreement, the response time shall be as follows:

       9.3.1  Platform and/or Development Facilities Proposals

              Each Party shall respond within ninety (90) days after its receipt
              of the AFE or notice for a Platform and/or Development Facilities.

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<PAGE>

       9.3.2  Well Proposals

              Except as provided in Article 9.3.3 (Proposal for Multiple
              Operations), each Party shall respond within thirty (30) days
              after receipt of the well, Rework or Recompletion proposal, but if
              (a) a drilling rig is on location, (b) the proposal relates to the
              same well or its substitute, and (c) standby charges are
              accumulating, a response shall be made within forty-eight(48)
              hours after receipt of the proposal, exclusive of Saturdays,,
              Sundays, and federal holidays.

       9.3.3  Proposal for Multiple Operations

              When a proposal is made to conduct multiple Development
              Operations at separate well locations using the same rig, each
              Party shall respond (a) to the well operation taking precedence,
              within thirty (30) days after receipt of the proposal; and (b) to
              each subsequent well location, within forty-eight (48) hours after
              completion of approved operations at the prior location and
              notification thereof by Operator.

       9.3.4  Other Matters

              For all other matters requiring notice, each Party shall respond
              within thirty (30) days after receipt of notice.

9.4    Failure to Respond

       Failure of a Party to respond to a proposal or notice, to vote, or to
       elect to participate within the period required by this Agreement shall
       be deemed to be a negative response, vote, or election.

9.5    Response to Counterproposals

       Should a counterproposal be allowed under this Agreement, responses to
       that counterproposal must be made within the response period for the
       original proposal.

9.6    Timely Well Operations

       Unless otherwise provided, an approved well shall be commenced within one
       hundred twenty (120) days after the date when the last applicable
       election on that well may be made. Wells shall be deemed to have
       commenced on the day charges commence under the drilling contract for
       that well. If the Operator does not commence the drilling of an approved
       well within the one hundred twenty (120) day time frame, the other
       Participating Parties in that well may select a substitute Operator to
       drill the approved well. In all events, including the occurrence of a
       Force Majeure, if the substitute Operator fails to commence actual
       drilling operations on an approved well within one hundred eighty (180)
       days from the proposal of the approved well, the proposal of the well and
       its approval will be deemed to have been withdrawn. Subject to Exhibit
       "C", if a proposal for a well is deemed to have been withdrawn, all costs
       incurred in the preparation for or in furtherance of that well will be
       chargeable to the Parties who voted to participate in the well proposal
       for that well.

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<PAGE>

9.7    Timely Platform/Development Facilities Operations

       Unless otherwise provided, Operator shall commence, or cause to commence,
       the construction, acquisition, or refurbishment of an approved proposal
       for a Platform and/or Development Facilities within one hundred eighty
       (180) days after the date when the last applicable election on that
       Platform and/or Development Facilities may be made. The construction,
       acquisition, or refurbishment of an approved Platform and/or Development
       Facilities proposal shall be deemed to have commenced on the date the
       contract is awarded for the design, acquisition, fabrication, or
       refurbishment of the Platform and/or Development Facilities. If the
       Operator does not commence the construction, acquisition, or
       refurbishment of an approved Platform and/or Development Facilities
       proposal within the one hundred eighty (180) day time frame, the other
       Participating Parties in that Platform and/or Development Facilities
       proposal may select a substitute Operator to commence the Platform and/or
       Development Facilities. In all events, including the occurrence of a
       Force Majeure, if the substitute Operator fails to commence the
       construction, acquisition, or refurbishment of an approved Platform
       and/or Development Facilities within two hundred forty (240) days from
       the proposal of the approved Platform and/or Development Facilities, the
       proposal of the Platform and/or Development Facilities and their approval
       will be deemed to have been withdrawn. Subject to Exhibit "C", regardless
       of whether or not the construction, acquisition, or refurbishment of a
       Platform and/or Development Facilities is commenced, all costs incurred
       by Operator, attributable to that activity, shall be paid by the
       Participating Parties.

                                   ARTICLE 10

                             EXPLORATORY OPERATIONS

10.1   Proposing Operations

       A Party may propose an Exploratory Operation in accordance with Article 9
       (Notices) to the other Parties who are entitled to vote or make an
       election in regard to that operation.

10.2   Counterproposals

       When an Exploratory Operation is proposed, a Party may, within fifteen
       (15) days after receipt of the AFE or notice for the original proposal,
       make a counterproposal to conduct an alternative Exploratory Operation by
       sending an AFE or notice to such Parties in accordance with Article 9
       (Notices). The AFE or notice shall indicate that the proposal is a
       counterproposal to the original proposal. If one or more counterproposals
       are made, such Parties shall elect to participate in either the original
       proposal, one counterproposal, or neither the original proposal nor a
       counterproposal. If two or more proposals receive the approval of the
       number of Parties and combined Working Interests required by Article 10.5
       (Operations by Fewer Than All Parties), the proposal receiving the
       largest percentage of Working Interest approval shall take precedence,

                                       21

<PAGE>

       and in the event of a tie between two (2) or more approved proposals, the
       proposal first received by the Parties shall take precedence. Except for
       the response period provided in this Article 10.2, a counterproposal
       shall be subject to the same terms and conditions as the original
       proposal.

10.3   Operations by All Parties

       If all Parties elect to participate in the proposed operation, Operator
       shall conduct the operation at their cost and risk.

10.4   Second Opportunity to Participate

       If there are more than two (2) Parties to this Agreement and if fewer
       than all but two (2) or more Parties having a combined Working Interest
       of forty-five percent (45%) or more elect to participate, then the
       proposing Party shall notify the Parties of the elections made, whereupon
       a Party originally electing not to participate may then elect to
       participate by notifying the proposing Party within forty eight (48)
       hours, exclusive of Saturdays, Sundays, and federal holidays, after
       receipt of such notice. If all Parties elect to participate in the
       proposed operation, Operator shall conduct the operation at their cost
       and risk. If there are only two (2) Parties to this Agreement and one (1)
       of the Parties having forty-five percent (45%) or more of the Working
       Interest elects to participate and agrees to pay and bear one hundred
       percent (100%) of the costs and risks of the operation, then there shall
       be no second election and the Operator, subject to Article 4.2
       (Substitute Operator), shall conduct the operation as a Non-consent
       Operation for the benefit of the Participating Party, and the provisions
       of Article 13 (Non-consent Operations) shall apply.

10.5   Operations by Fewer Than All Parties

       If after the election (if applicable) made under Article 10.4 (Second
       Opportunity to Participate), fewer than all but two (2) or more Parties
       having a combined Working Interest of forty-five percent (45%) or more
       have elected to participate in the proposed operation, the proposing
       Party shall notify the Participating Parties, and each Participating
       Party shall have forty eight (48) hours, exclusive of Saturdays, Sundays,
       and federal holidays, after receipt of the notice to notify the proposing
       Party of the portion of costs and risks, attributable to the total
       Non-participating Parties' interests it elects to pay and bear. Unless
       otherwise agreed by the Participating Parties, each Participating Party
       may, but shall not be obligated to, pay and bear that portion of the
       costs and risks attributable to the total Non-participating Parties'
       interests in the ratio that the Participating Party's interest bears to
       the total interests of all Participating Parties who elect to pay and
       bear a portion of costs and risks attributable to the total
       Non-participating Parties' interests. Failure to respond shall be deemed
       to be an election not to pay or bear any additional costs or risks. If
       the Participating Parties agree to pay and bear one hundred percent
       (100%) of the costs and risks of the operation, Operator, subject to
       Article 4.2 (Substitute Operator), shall conduct the operation as a
       Non-consent Operation for the benefit of the Participating Parties, and
       the provisions of Article 13 (Non-consent Operations) shall apply. If
       such agreement is not obtained, however, the operation shall not be
       conducted and the effect shall be as if the proposal had not been made.

                                       22

<PAGE>

10.6   Expenditures Approved

       Approval of an Exploratory Operation shall cover all necessary
       expenditures associated with the operation proposed in the AFE or notice
       that are incurred by Operator in connection with (a) preparations for
       drilling; (b) the actual drilling; (c) evaluations, such as testing,
       coring, and logging; and (d) plugging and abandonment, subject to any
       limitation that may exist as provided under Article 8 above.

10.7   Conduct of Operations

       After commencement of drilling an Exploratory Well, Operator shall
       diligently conduct the operation without unreasonable delay until the
       well reaches the Objective Depth, unless the well encounters, at a lesser
       depth, impenetrable conditions or mechanical difficulties that cannot be
       overcome by reasonable and prudent operations and that render further
       operations impracticable, except as may otherwise be provided in optional
       provision Article 8.7 (Overexpenditures), if selected. If a well does not
       reach its Objective Depth as a result of the conditions mentioned in this
       Article 10.7, the operation shall be deemed to have been completed and
       Article 13 (Non consent Operations) shall apply to each Non-participating
       Party for the portion of the well drilled.

10.8   Course of Action After Reaching Objective Depth

       When an Exploratory Well has been drilled to its Objective Depth and
       reasonable testing, coring, and logging have been completed as set forth
       in the approved AFE and the results have been furnished to the
       Participating Parties, Operator shall notify the Participating Parties of
       Operator's recommendation for further operations in the well, and the
       following provisions shall apply:

       10.8.1 Election by Participating Parties

              A Participating Party shall have the right to propose another
              operation by notifying the Operator and the other Participating
              Parties of its proposed operation within twenty-four (24) hours,
              exclusive of Saturdays, Sundays, and federal holidays, of receipt
              of the Operator's notice. The Participating Parties shall notify
              Operator within forty-eight (48) hours, exclusive of Saturdays,
              Sundays, and federal holidays, of receipt of the Operator's
              proposal whether the Participating Parties elect to (a)
              participate in Operator's recommended operation, (b) participate
              in another proposed operation, or (c) not participate in any
              operation. Failure to respond shall be deemed to be an election
              not to participate in any of the proposed operations. The
              Participating Parties shall respond to all proposals within the
              period allotted to the original proposal.

       10.8.2 Priority of Operations

              If all Participating Parties elect to participate in the same
              proposed operation, Operator shall conduct the operation at their
              cost and risk. If more than one (1) operation is approved by two
              (2) or more Participating Parties having a combined Working
              Interest of forty-five percent (45%) or more, then the approved
              operation with the lowest number as indicated below shall take
              precedence:

                                       23

<PAGE>

              (Indicate the order of preference.)

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

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

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

              4      Complete at the Objective Horizon

              5      Complete above the Objective Horizon. (If conflicting
                     proposals are approved, the operation proposed at the
                     deepest depth shall take precedence.)

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

              7      Temporarily abandon.

              8      Plug and abandon.

       10.8.3 Second Opportunity to Participate

              If fewer than all but two (2) or more Participating Parties having
              a combined Working Interest of forty-five percent (45%) or more
              elect to participate in an operation, the proposing Party shall
              notify the Participating Parties of the elections made, whereupon
              a Party originally electing not to participate in the proposed
              operation may then elect to participate by notifying the proposing
              Party within twenty four (24) hours, exclusive of Saturdays,
              Sundays, and federal holidays, after receipt of such notice. If
              all Parties elect to participate in the proposed operation,
              Operator shall conduct the operation at their cost and risk.

       10.8.4 Operations by Fewer Than All Parties

              If, after the election (if applicable) made under Article 10.8.3
              (Second Opportunity to Participate), fewer than all but two (2) or
              more Parties having a combined Working Interest of forty-five
              percent (45%) or more elect to participate in the proposed
              operation that takes precedence, the proposing Party shall notify
              the Participating Parties and each Participating Party shall have

                                       24

<PAGE>

              twenty four (24) hours, exclusive of Saturdays, Sundays, and
              federal holidays, after receipt of the notice to notify the
              proposing Party of the portion of the costs and risks attributable
              to the total Non-participating Parties' interests it elects to pay
              and bear. Unless otherwise agreed by the Participating Parties,
              each Participating Party may, but shall not be obligated to, pay
              and bear that portion of the costs and risks attributable to the
              total Non-participating Parties' interests in the ratio that the
              Participating Party's interest bears to the total interests of all
              Participating Parties who elect to pay and bear a portion of costs
              and risks attributable to the Non-participating Parties'
              interests. Failure to respond shall be deemed to be an election
              not to pay or bear any additional costs or risks. If the
              Participating Parties agree to bear one hundred percent (100%) of
              the costs and risks of the operation, Operator, subject to Article
              4.2 (Substitute Operator), shall conduct the operation as a
              Non-consent Operation for the benefit of the Participating
              Parties, and the provisions. of Article 13 (Non-consent
              Operations) shall apply. If such agreement is not obtained,
              however, the operation shall not be conducted and the effect shall
              be as if the proposal had not been made. If a Participating Party
              in a well elects not to participate in the Deepening or
              Sidetracking operation in the well, such non-consenting Party
              shall become a Non-participating Party in all operations conducted
              in the Deepened or Sidetracked portion of the well after that
              election. If the Non-consent Operation is an Additional Testing,
              coring, or logging operation, Article 13 (Non-consent Operations)
              shall not apply, however, a Party electing not to participate in
              the Additional Testing, coring, or logging shall not be entitled
              to information resulting from the operation.

       10.8.5 Subsequent Operations

              Upon completion of an operation conducted under Article 10.8
              (Course of Action After Reaching Objective Depth), if the well is
              not either (a) Completed as a Producible Well, or (b) temporarily
              abandoned or permanently plugged and abandoned, Operator shall
              notify the Participating Parties of Operator's recommendation for
              further operations in the well under Articles 10.8.1 through
              10.8.4, which again shall apply. If sufficient approval is not
              obtained to conduct a subsequent operation in a well or if all
              Participating Parties elect to plug and abandon the well, subject
              to Article 14 (Abandonment, Salvage, and Surplus), Operator shall
              permanently plug and abandon the well at the cost and risk of all
              Participating Parties. Each Participating Party shall be
              responsible for its proportionate share of the plugging and
              abandonment costs associated with the operation in which it
              participated.

10.9   Wells Proposed Below Deepest Producible Reservoir

       If a proposal is made to conduct an Exploratory Operation involving the
       drilling of a well to an Objective Horizon below the base of the deepest

                                       25

<PAGE>

       Producible Reservoir, a Party may elect within the applicable period to
       limit its participation in the operation down to the base of the deepest
       Producible Reservoir. For purposes of this Article 10.9, a Party who
       elects to limit its participation in the operation down to the base of
       the deepest Producible Reservoir shall be referred to as "Shallow
       Participant and a Party who elects to participate in the entire operation
       shall be referred to as "Deep Participant". If a Party elects to limit
       its participation to the base of the deepest Producible Reservoir;
       Operator shall prepare and submit .to the Shallow Participant, for
       informational purposes, a separate AFE covering operations down to the
       deepest Producible Reservoir. The Shallow Participant shall be a
       Participating Party in, and shall pay and bear the costs and risks of,
       each operation to the base of the deepest Producible Reservoir, according
       to its Participating Interest. The Shallow Participant shall be a
       Non-participating Party in each operation below the deepest Producible
       Reservoir, and the operation shall be considered a Non consent Operation,
       and the provisions of Article 13 (Non-consent Operations) shall apply. If
       the, well is Completed and produces Hydrocarbons from a horizon below the
       deepest Producible Reservoir, the Deep Participant shall reimburse the
       Shallow Participant for its share of the actual well costs to the base of
       the deepest Producible Reservoir. Payment shall be due within thirty days
       after receipt of notice of the well being completed below the deepest
       Producible Reservoir. If the well is Completed and produces Hydrocarbons
       from a horizon below the deepest Producible Reservoir, the Shallow
       Participant shall reimburse the Deep Participant for its Working Interest
       share of the actual well costs to the base of the deepest Producible
       Reservoir in accordance with Article 13.4 (Deepening or Sidetracking Cost
       Adjustments), upon the earlier of the time that (a) the well is plugged
       back to a horizon above the base of the deepest Producible Reservoir, as
       determined when the original well was proposed, (b) the well is plugged
       and abandoned, or (c) the amount to be recouped by the Deep Participant
       under Article 13 (Non consent Operations) is recovered.

                                   ARTICLE 11

                             DEVELOPMENT OPERATIONS

11.1   Proposing Operations

       A Party may propose a Development Operation in accordance with Article 9
       (Notices) to the other Parties who are entitled to vote or make an
       election in regard to that operation.

11.2   Counterproposals

       When a Development Operation is proposed, a Party may, within fifteen
       (15) days after receipt of the AFE or notice for the original proposal,
       make a counterproposal to conduct an alternative Development Operation by
       sending an AFE or notice to such Parties in accordance with Article 9
       (Notices). The AFE or notice shall indicate that the proposal is a

                                       26

<PAGE>

       counterproposal to the original proposal. If one or more counterproposals
       are made, such Parties shall elect to participate in either the original
       proposal, one counterproposal, or neither the original proposal nor a
       counterproposal. If two or more proposals receive the approval of the
       number of Parties and combined Working Interests required by Article 11.5
       (Operations By Fewer Than All Parties), the proposal receiving the
       largest percentage Working Interest approval shall take precedence, and
       in the event of a tie between two (2) or more approved proposals, the
       approved proposal of first received by the Parties shall prevail. Except
       for the response period provided in this Article 11.2, a counterproposal
       shall be subject to the same terms and conditions as the original
       proposal.

11.3   Operations by All Parties

       If all Parties elect to participate in the proposed operation, Operator
       shall conduct the-operation at their cost and risk.

11.4   Second Opportunity to Participate

       If there are, more than two (2) Parties to this Agreement and if fewer
       than all but two (2) or more Parties having a combined Working Interest
       of forty-five (45%) or more elect to participate, then the proposing
       Party shall notify the Parties of the elections made, whereupon a Party
       originally electing not to participate may then elect to participate by
       notifying the proposing Party within forty eight (48) hours, exclusive of
       Saturdays, Sundays, and federal holidays, after receipt of such notice.
       If all Parties elect to participate in the proposed operation, Operator
       shall conduct the operation at their cost and risk. If there are only two
       (2) Parties to this Agreement and one (1) of the Parties having
       forty-five percent (45%) or more of the Working Interest elects to
       participate and agrees to pay and bear one hundred percent (100%) of the
       costs and risks of the operation, then there shall be no second election
       and the Operator, subject to Article 4.2 (Substitute Operator), shall
       conduct the operation as a Non-consent Operation for the benefit of the
       Participating Party, and the provisions of Article 13 (Non-consent
       Operations) shall apply.

11.5   Operations by Fewer Than All Parties

       If after the election (if applicable) made under Article 11.4 (Second
       Opportunity to Participate), fewer than all but two (2) or more Parties
       having a combined Working Interest of forty-five percent (45%) or more
       have elected to participate in the proposed operation, the proposing
       Party shall notify the Participating Parties, and each Participating
       Party shall have forty eight (48) hours, exclusive of Saturdays, Sundays,
       and federal holidays, after receipt of the notice to notify the proposing
       Party of the portion of the costs and risks attributable to the total
       Non-participating Parties' interests it elects to pay and bear. Unless
       otherwise agreed by the Participating Parties, each Participating Party
       may, but shall not be obligated to, pay and bear that portion of costs
       and risks attributable to the total Non-participating Parties' interests
       in the ratio that the Participating Party's interest bears to the total
       interests of all Participating Parties who elect to pay and bear a
       portion of the costs and risks attributable to the total
       Non-participating Parties' interests. Failure to respond shall be deemed
       to be an election not to pay or bear any additional costs or risks. If

                                       27

<PAGE>

       the Participating Parties agree to pay and bear one hundred percent
       (100%) of the costs and risks of the operation, Operator, subject to
       Article 4.2 (Substitute Operator) shall conduct the operation as a
       Non-consent Operation for the benefit of the Participating Parties, and
       the provisions of Article 13 (Non-consent Operations) shall apply. If
       such agreement is not obtained, however, the operation shall not be
       conducted and the effect shall be as if the proposal had not been made.

11.6   Expenditures Approved

       Approval of a Development Operation shall cover all necessary
       expenditures associated with the operation proposed in the AFE or notice
       that are incurred by Operator in connection with (a) preparations for
       drilling; (b) the actual drilling; (c) evaluations, such as testing,
       coring, and logging; and (d) plugging and abandonment, subject to any
       limitation that may exist as provided under Article 8 above.

11.7   Conduct of Operations

       After commencement of a Development Well, Operator shall diligently
       conduct the operation without unreasonable delay until the well reaches
       the Objective Depth, unless the well encounters, at a lesser depth,
       impenetrable conditions or mechanical difficulties that cannot be
       overcome by reasonable and prudent operations and render further
       operations impracticable, except as may otherwise be provided in
       optional provision Article 8.7 (Overexpenditures), if elected. If a
       well does not reach its Objective Depth as a result of the conditions
       mentioned in this Article 11.7, the operation shall be deemed to have
       been completed and Article 13 (Non consent Operations) shall apply to
       each Non-participating Party for the portion of the well drilled.

11.8   Course of Action After Reaching Objective Depth

       When a Development Well has been drilled to its Objective Depth and
       reasonable testing, coring, and logging have been completed and the
       results have been furnished to the Participating Parties, Operator shall
       notify the Participating Parties of Operator's recommendation for further
       operations in the well and the following provisions shall apply:

       11.8.1 Election by Fewer Than All Parties

              A Participating Party shall have the right to propose another
              operation by notifying the Operator and the other Participating
              Parties of its proposed operation within twenty-four (24) hours,
              exclusive of Saturdays, Sundays, and federal holidays, of receipt
              of the Operator's notice. The Participating Parties shall notify
              Operator within forty-eight (48) hours, exclusive of Saturdays,
              Sundays, and federal holidays, of receipt of the Operator's
              proposal whether the Participating Parties elect to (a)
              participate in Operator's recommended operation, (b) participate
              in another proposed operation, or (c) not participate in any
              operation. Failure to respond shall be deemed to be an election
              not to participate in any of the proposed operations. The
              Participating Parties shall respond to all proposals within the
              period allotted to the original proposal.

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<PAGE>

       11.8.2 Priority of Operations

              If all Participating Parties elect to participate in the same
              proposed operation, Operator shall conduct the operation at their
              cost and risk. If more than one (1) operation is approved by two
              (2) or more Participating Parties having a combined Working
              Interest of forty-five percent (45%) or more, then the approved
              operation with the lowest number as indicated below shall take
              precedence:

              (indicate the order of preference.)

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

              2      Complete at the Objective Horizon.

              3      Complete above the Objective Horizon. (If conflicting
                     proposals are approved, the operation proposed to the
                     deepest depth shall take precedence.)

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

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

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

              7      Temporarily abandon.

              8      Plug and abandon.

       11.8.3 Second Opportunity to Participate

              If fewer than all but two (2) or more Participating Parties having
              a combined Working Interest of forty-five percent (45%) or more
              elect to participate in an operation, the proposing Party shall
              notify the Participating Parties of the elections made, whereupon
              a Party originally electing not to participate in the proposed
              operation may then elect to participate by notifying the proposing
              Party within twenty four (24) hours, exclusive of Saturdays,
              Sundays, and federal holidays, after receipt of such notice. If

                                       29

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              all Parties elect to participate in the proposed operation,
              Operator shall conduct the operation at their cost and risk.

       11.8.4 Operations by Fewer Than All Parties

              If, after the election (if applicable) made under Article 11.8.3
              (Second Opportunity to Participate), fewer than all but two (2) or
              more Parties having a combined Working Interest of forty-five
              percent (45%) or more elect to participate in the proposed
              operation that takes precedence, the proposing Party shall notify
              the Participating Parties and each Participating Party shall have
              twenty four (24) hours, exclusive of Saturdays, Sundays, and
              federal holidays, after receipt of the notice to notify the
              proposing Party of the portion of the costs and risks attributable
              to the total Non-participating Parties' interests it elects to pay
              and bear. Unless otherwise agreed by the Participating Parties,
              each Participating Party may, but shall not be obligated to, pay
              and bear that portion of the costs and risks attributable to the
              total Non-participating Parties' interests in the ratio that the
              Participating Party's interest bears to the total interests of all
              Participating Parties who elect to pay and bear a portion of costs
              and risks attributable to the Non-participating Parties'
              interests. Failure to respond shall be deemed to be an election
              not to pay or bear any additional costs or risks. If the
              Participating Parties agree to pay and bear one hundred percent
              (100%) of the costs and risks of the operation, Operator, subject
              to Article 4.2 (Substitute Operator), shall conduct the operation
              as a Non-consent Operation for the benefit of the Participating
              Parties, and the provisions of Article 13 (Non-consent Operations)
              shall apply. If such agreement is not obtained, however, the
              operation shall not be conducted and the effect shall be as if the
              proposal had not been made. If a Participating Party in a well
              elects not to participate in the Deepening or Sidetracking
              operation in the well, such non-consenting Party shall become a
              Non-participating Party in all operations conducted in the
              Deepened or Sidetracked portion of the well after that election.
              If the Non-consent Operation is an Additional Testing, coring, or
              logging operation, Article 13 (Non-consent Operations) shall not
              apply, however, a Party electing not to participate in the
              Additional Testing, coring, or logging shall not be entitled to
              information resulting from the operation.

       11.8.5 Subsequent Operations

              Upon the completion of an operation conducted under Article 11.8
              (Course of Action After Reaching Objective Depth), if the well is
              not either (a) Completed as a well capable of producing
              Hydrocarbons in paying quantities, or (b) temporarily abandoned or
              permanently plugged and abandoned, Operator shall notify the
              Participating Parties of Operator's recommendation for operations
              in the well under Articles 11.8.1 through 11.8.4 which again shall
              apply. If sufficient approval is not obtained to conduct a

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<PAGE>

              subsequent operation in a well, or if all Participating Parties
              elect to plug and abandon the. well, subject to Article 14
              (Abandonment, Salvage, and Surplus), Operator shall permanently
              plug and abandon the well at the expense of all Participating
              Parties. Each Participating Party shall be responsible for its
              proportionate share, of the plugging and abandonment costs
              associated with the operation in which it participated.

                                   ARTICLE 12

                       PLATFORM AND DEVELOPMENT FACILITIES

12.1   Proposal

       A Party may propose the fabrication or acquisition and installation of a
       Platform and/or Development Facilities, by sending an AFE or notice to
       the other Parties in accordance with Article 9 (Notices). Any proposal by
       a Party for a Platform and/or Development Facilities shall not provide
       for excess capacity and/or space which is greater than ten percent (10%)
       of what is required for such Platform and/or Development Facilities based
       upon the expected size of the Producible Reservoir(s); the number of
       existing Producible Wells; the quality of Hydrocarbons to be produced,
       processed, and transported; and the number of scheduled Development
       Wells.

12.2   Counterproposals

       When a Platform and/or Development Facilities is proposed under Article
       12.1, a Party may, within thirty (30) days after receipt of the AFE or
       notice for the original proposal, make a counterproposal to fabricate or
       otherwise acquire and install said Platform and/or Development Facilities
       by sending an AFE or notice to the other Parties in accordance with
       Article 9 (Notices). The AFE or notice shall indicate that the proposal
       is a counterproposal to the original proposal. If one or more
       counterproposals are made, each Party shall elect to participate in
       either the original proposal, one counterproposal, or neither the
       original proposal nor a counterproposal. If two or more proposals receive
       the approval of the number of Parties and combined Working Interests
       required by Article 12.2.3 (Operations By Fewer Than All Parties), the
       proposal receiving the largest percentage Working Interest approval shall
       be deemed approved, and in the event two (2) or more approved proposals
       receive the same Working Interest approval, the approved proposal first
       received by the Parties shall be deemed approved.

       12.2.1 Operations by All Parties

              If all Parties elect to participate in the proposed operation,
              Operator shall conduct the operation at their cost and risk.

       12.2.2 Second Opportunity to Participate

              If there are more than two (2) Parties and if fewer than all but
              two (2) or more Parties having a combined Working Interest of

                                       31

<PAGE>

              forty-five percent (45%) or more elect to participate in the
              Platform and/or Development Facilities, then the proposing Party
              shall notify the Parties of the elections made, whereupon a Party
              originally electing not to participate may then elect to
              participate by notifying the proposing Party within forty eight
              (48) hours, exclusive of Saturdays, Sundays, and federal holidays,
              after receipt of such notice. If all Parties, elect to participate
              in the Platform and/or Development Facilities, Operator shall
              timely commence the fabrication and installation of the Platform
              and/or Development Facilities at their cost and risk. If there are
              only two (2) Parties to this Agreement and one (1) of the Parties
              having fifty-one percent (51%) or more of the Working Interest
              elects to participate and agrees to pay and bear one hundred
              percent (100%) of the costs and risks of the operation, then there
              shall be no second election and the Operator, subject to Article
              4.2 (Substitute Operator), shall conduct the operation as a
              Non-consent Operation for the benefit of the Participating Party,
              and the provisions of Article 13 (Non-consent Operations) shall
              apply.

       12.2.3 Operations by Fewer Than All Parties

              If after the election (if applicable) made under Article 12.2.2
              (Second Opportunity to Participate), fewer than all but two (2) or
              more Parties having a combined Working Interest of forty-five
              percent (45%) or more elect to participate in the Platform and/or
              Development Facilities, the proposing Party shall notify the
              Participating Parties, and each Participating Party shall have
              forty eight (48) hours, exclusive of Saturdays, Sundays, and
              federal holidays, after receipt of the notice to notify the
              proposing Party of the portion of the costs and risks attributable
              to the total Non-participating Parties' interests it elects to pay
              and bear. Unless otherwise agreed by the Participating Parties,
              each Participating Party may, but shall not be obligated to, pay
              and bear that portion of costs and risks attributable to the total
              Non-participating Parties' interests in the ratio that the
              Participating Party's interest bears to the total interests of all
              Participating Parties who elect to pay and bear a portion of the
              costs and risks attributable to the total Nonparticipating
              Parties' interests. Failure to respond shall be deemed to be an
              election not to pay or bear any additional costs or risks. If the
              Participating Parties agree to pay and bear one hundred percent
              (100%) of the costs and risks of the operation, the Operator,
              subject to Article 4.2 (Substitute Operator), shall conduct the
              operation as a Non-consent Operation for the benefit of the
              Participating Parties, and except as provided in Article 12.4
              (Rights to Take in Kind), the provisions of Article 13.2.1.(b)
              shall apply. If such agreement is not obtained, however, the
              fabrication and installation of the Platform and/or Development
              Facilities shall not be commenced, and the effect shall be as if
              the proposal had not been made.

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<PAGE>

12.3   Ownership and Use of the Platform and Development Facilities

       The Participating Parties in the Development Facilities own all of the
       excess capacity of the Development Facilities and the excess weight,
       space and buoyancy of the Platform. Each Participating Party in the
       Development Facilities does not have the right to use its Participating
       Interest share of the excess capacity, weight, space and buoyancy for
       hydrocarbon production from outside the Contract Area. Each Participating
       Party in the Development Facilities or Platform must obtain the unanimous
       approval of the other Participating Parties in the Development Facilities
       or Platform in order to utilize any portion of the excess capacity,
       weight, space and buoyancy. It must negotiate the payment of a fee with
       the Participating Parties in the Development Facilities or Platform in
       order to utilize any portion of the excess capacity, weight, space and
       buoyancy. Each of the Participating Parties in the Development Facilities
       or Platform shall receive its Participating Interest share of all fees
       derived from the utilization of the excess capacity, weight, space and
       buoyancy. All hydrocarbon production from outside the Contract Area shall
       be processed under a "Facilities Use and Production Handling Agreement"
       unanimously agreed to by the Participating Parties in the Development
       Facilities.

12.4   Rights to Take in Kind

       Nothing in this Article 12 shall act to limit a Party's rights under
       Article 22 (Disposition of Production), or to otherwise separately
       dispose of its share of Hydrocarbon production. If a Party elects (a) not
       to participate in an approved Development Facilities proposal and (b) to
       separately dispose of its share of Hydrocarbon production (the
       "Separately Disposing Party"), the Separately Disposing Party shall not
       be subject to the provisions of Article 13.2.1.(b), but must provide
       proof to the Participating Parties in the approved Development Facilities
       proposal, within sixty (60) days from the last applicable response date
       to the Development Facilities proposal that it has entered into
       fabrication and transportation contracts to separately dispose of its own
       share of Hydrocarbon production. If a Separately Disposing Party fails to
       provide such proof by that deadline and if there is sufficient capacity
       for the Development Facilities to accommodate the Separately Disposing
       Party's share of the Hydrocarbons, it shall immediately (I) become a
       Participating Party in the Development Facilities and utilize the
       Development Facilities for its share of Hydrocarbon production, (II) pay
       to the Participating Parties in the approved Development Facilities
       proposal an amount equal to one hundred fifty percent (150%) of what
       would have been the Separately Disposing Party's share of the costs and
       expense of the Development Facilities had it elected to participate in
       the Development Facilities under Article 12.1 or 12.2, and (III) assume
       its share of the risks and liabilities associated with the construction
       and ownership of the Development Facilities as of the date of
       commencement of the operations to construct same. The Participating
       Parties in the original Development Facilities and the Separately
       Disposing Party, which becomes a Participating Party in the original
       Development Facilities under Article 12.4 (1), shall own the original

                                       33

<PAGE>

       Development Facilities based on their Participating Interest share in the
       original Development Facilities. If a Separately Disposing Party fails to
       provide such proof by that deadline and if there is insufficient capacity
       for the Development Facilities to accommodate the Separately Disposing
       Party's share of the Hydrocarbons, the Separately Disposing Party shall
       (i) become a. Participating Party in the original Development Facilities
       and utilize the available capacity in the original Development
       Facilities, if any, for its share of Hydrocarbon production, (ii) pay one
       hundred percent (100%) of the costs of an expansion or modification of
       the Development Facilities, which is required to accommodate all or a
       portion of its share of the Hydrocarbons, and assume one hundred percent
       (100%) of the risks and liabilities associated, with (A) the
       construction, installation and commissioning of the expanded or modified
       Development Facilities and (B) the utilization of the expanded or
       modified Development Facilities for seven (7) days subsequent to the
       commencement of Hydrocarbon production through same, (iii) pay to the
       Participating Parties in' the approved Development Facilities proposal an
       amount equal to one hundred fifty percent (150%) of what would have been
       the Separately Disposing Party's share of the costs and expense of the
       original Development Facilities had it elected to participate in the
       original Development Facilities under Article 12.1 or 12.2, (iv) assume
       its share of the risks and liabilities associated with the construction
       and ownership of the original Development Facilities as of the date of
       commencement of the operations to construct the original Development
       Facilities. The Participating Parties in the original Development
       Facilities and the Separately Disposing Party, which becomes a
       Participating Party in the original Development Facilities under Article
       12.4(i), shall own the expanded or modified Development Facilities based
       on their Participating Interest share in the original Development
       Facilities, and the Participating Parties in the original Development
       Facilities shall assume their Participating Interest share of the risks
       and liabilities associated with the ownership of the expanded or modified
       Development Facilities seven (7) days after that the expanded or modified
       Development Facilities have been utilized.

12.5   Expansion or Modification of a Platform and/or Development Facilities

       After installation of a Platform and/or Development Facilities, any
       Participating Party in that Platform and/or Development Facilities may
       propose the expansion or modification of that Platform and/or Development
       Facilities by written notice (along with its associated AFE) to the other
       Participating Parties in that Platform and/or Development Facilities.
       That proposal requires approval by two of more of the Participating
       Parties in the Platform and/or Development Facilities with more than
       seventy five percent (75%) of the Participating Interest in the Platform
       and/or Development Facilities. If approved, that proposal will be binding
       on all Participating Parties in that Platform and/or Development
       Facilities, and the Operator shall commence that expansion or
       modification at the sole cost and risk of all of the Participating
       Parties in that Platform and/or Development Facilities unless otherwise
       agreed.

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<PAGE>

12.6   Offsite Host Facilities

       In the event that two (2) or more Parties with more than forty-five
       percent (45%) of the Participating Interest in Hydrocarbon production
       agree that Hydrocarbon production can most effectively be processed and
       handled by an Offsite Host Facilities, the Operator, with consultation
       and input from the Participating Parties, shall use reasonable efforts
       to secure a formal "Facilities Use and Production Handling Agreement"
       from the owners of the Offsite Host Facilities. If the Operator does
       secure access to Offsite Host Facilities in a Facilities Use and
       Production Handling Agreement, each Participating Party shall have the
       right, but not the obligation, to utilize its Participating interest
       share of the capacity so secured. This Article 12.6 shall not constitute
       a limit on a Party's right to install its own Take-in-Kind Facilities
       under Article 22 (Disposition of Production).

                                   ARTICLE 13

                             NON-CONSENT OPERATIONS

13.1   Non-consent Operations

       Operator or substitute Operator under Article 4.2 (Substitute Operator)
       shall conduct Non-consent Operations at the sole cost and risk of the
       Participating Parties in accordance with the following provisions:

       13.1.1 Non-interference

              Non-consent Operations shall not interfere unreasonably with
              operations approved by all of the Parties.

       13.1.2 Multiple Completion Limitation

              Subject to Article 10.9, a Non-consent Operation shall not be
              conducted in a well having multiple Completions unless (a) each
              Completion is owned by the same Parties in the same proportions;
              (b) the well is incapable of producing from any Completion; or (c)
              all Participating Parties in the well consent to the operation.

       13.1.3 Metering

              In Non-consent Operations, Hydrocarbon production shall be
              determined upon the basis of appropriate well tests, unless
              separate metering devices are required by a governmental authority
              having jurisdiction.

       13.1.4 Non-consent Well

              Operations on a Non-consent Well shall not be conducted in a
              Producible Reservoir without approval of all Parties unless (a)
              the Producible Reservoir is designated in the notice as a
              Completion objective; (b) Completion of the well in the Producible
              Reservoir will not increase the rates of Hydrocarbon production

                                       35

<PAGE>

              that are prescribed and approved for the Producible Reservoir by
              the governmental authority having jurisdiction; and (c) the
              horizontal. distance between the vertical projections of the
              midpoint of the Producible Reservoir in the well and an existing
              well currently completed in and producing from the same Producible
              Reservoir will be at least three thousand (3,000) feet for an
              oil-well Completion or five thousand (5,000) feet for a gas-well
              Completion.

       13.1.5 Cost Information

              Operator shall, within one hundred twenty (120) days after
              completion of a Non-consent Operation, furnish the Parties either
              (a) an inventory and an itemized statement of the cost of the
              Non-consent Operation and equipment pertaining thereto, or (b) a
              detailed statement of the monthly billings: Each month thereafer,
              while the Participating Parties are being reimbursed under Article
              13.2.1 (Production Reversion Recoupment), Operator shall furnish
              the Non-participating Parties a monthly statement detailing all
              costs -and' liabilities incurred in the Non-consent Operation,
              together with a statement of the quantities of Hydrocarbons
              produced from it and the amount of the proceeds from the sale of
              the Non-participating Parties' relinquished Hydrocarbon production
              from the Non consent Operation for the preceding month. Operator
              shall prepare the monthly statement of the quantities of
              Hydrocarbons produced and the amounts of the proceeds from the
              sale of Non-participating Parties' relinquished Hydrocarbon
              production based on the proceeds received for the Operator's share
              of Hydrocarbon production. When Operator's payout calculation
              indicates that payout has occurred, Operator shall promptly notify
              all Parties. The Participating Parties who assumed a portion of
              the Non participating Parties' relinquished interest shall then
              provide Operator all information pertaining to the cumulative
              proceeds received from the sale of the Non-participating Parties'
              relinquished Hydrocarbon production. Operator shall revise the
              payout date using the actual proceeds from the sale of the
              Non-participating Parties' relinquished Hydrocarbon production and
              administer any subsequent adjustments between the Parties.

       13.1.6 Completions

              For determinations under Article 13.1 (Non-consent Operations),
              each Non-consent Operation in a single wellbore shall be accounted
              for separately.

13.2   Relinquishment of Interest

       Upon commencement of Non-consent Operations, other than Non-consent
       Operations governed by Article 13.7 (Operations Utilizing a Non-consent
       Platform and/or Development Facilities), each Non-participating Party's
       interest and leasehold operating rights in the Non-consent Operation and
       title to Hydrocarbon production resulting therefrom; and if Article 13.8
       (Discovery or Extension from Non-consent Drilling) is effective, one-half
       (1/2) of each Non-participating Party's interest and leasehold operating

                                       36

<PAGE>

       rights and title to Hydrocarbon production from wells mentioned in
       Article 13.8 (Discovery or Extension from Non-consent Drilling); shall be
       owned by and vested in each Participating Party in proportion to its
       Participating Interest, or in the proportions otherwise agreed by the
       Participating Parties, for as long as the Non-Consent Operation is being
       conducted or Hydrocarbon production is obtained therefrom, subject to the
       following:

       13.2.1 Production Reversion Recoupment

              When the Participating Parties have recouped out of Hydrocarbon
              production from the Non-consent Operations attributable to the
              Non-participating Party's interest an amount, which when added to
              amounts received under Article 13.3 (Deepening or Sidetracking of
              Non-consent Well), equals the sum of the following:

              (a)    Eight hundred percent (800%) of the Non-participating
                     Party's share of the costs of the following Non-consent
                     Exploratory Operations, or four hundred percent (400%) of
                     the Non-participating Party's share of the costs of the
                     following Non' consent Development Operations: drilling,
                     testing, Completing, Recompleting, Deepening, Sidetracking,
                     Reworking, plugging back, and temporarily abandoning a
                     well, reduced by the Non-participating Party's Share of a
                     cash contribution received under Article 21.2 (Cash
                     Contributions);

              (b)    Three hundred percent (300%) of Non-participating Party's
                     Share of the cost of Platforms and/or Development
                     Facilities approved under Article 12.1 (Proposal) or
                     Article 12.2 (Counterproposals); such recoupment is limited
                     to the Non participating Party's Share of the Hydrocarbon
                     production that utilize such Platform and/or Development
                     Facilities;

              (c)    Four hundred percent (400%) of the Non-paricipating Party's
                     Share of the cost charged in accordance with Article 13.9
                     (Allocation of Platform/Development Facilities Costs to
                     Non-consent Operations) of using an existing
                     Platform/Development Facilities; and

              (d)    the Non-participating Party's Share of the costs of
                     operation, maintenance, treating, processing, gathering,
                     and transportation, including, but not limited to, an
                     Offsite Host Facilities' handling fees, as well as lessor's
                     royalties and severance, Hydrocarbon production, and excise
                     taxes,

              then, the relinquished interests of the Non-participating Party
              shall automatically revert to the Non-participating Party as of
              7:00 a.m. of the day after the recoupment occurs. Thereafter, the
              Non-participating Party shall own the same interest in the
              Non-consent Well, equipment pertaining thereto, including, but not
              limited to, any Platform or Development Facilities, and the
              Hydrocarbon production therefrom as the Nonparticipating Party
              would have owned or been entitled to if it had participated in the
              Nonconsent Operation. Upon reversion, the Non-participating Party

                                       37

<PAGE>

              shall become a Participating Party and, as such, shall become
              liable for its proportionate share of the further costs of the
              operation as set forth in this Agreement and Exhibit "C".

       13.2.2 Non-production Reversion

              If the Non-consent Operation fails to obtain Hydrocarbon
              production or if the operation results in Hydrocarbon production
              that ceases before complete recoupment by the Participating
              Parties under Article 13.2.1 (Production Reversion- Recoupment),
              such leasehold operating rights shall revert to each
              Non-participating Party, except that all Non-consent Wells,
              Platforms, and Development Facilities shall remain vested in the
              Participating Parties (but the salvage value in excess of the
              sum remaining under Article 13.2.1 shall be credited to all
              Parties).

13.3   Deepening or Sidetracking of Non-consent Well

       If a Participating Party proposes to Deepen or Sidetrack a Non-consent
       Well, a Non-participating Party may then elect to participate in the
       Deepening or Sidetracking operation by notifying Operator within thirty
       (30) days, or within forty-eight (48) hours, exclusive of Saturdays,
       Sundays, and federal holidays, if a rig is on location and standby
       charges are being incurred, after receiving notice of the proposal. A
       Non-participating Party that elects to participate in Deepening or
       Sidetracking the well, as proposed, shall immediately pay the
       Participating Parties, in accordance with Article 13.4 (Deepening or
       Sidetracking Cost Adjustments), its Working Interest share of actual well
       costs (excluding logging, coring, testing, and Completion costs other
       than the cost of setting any casing or Completion Equipment that is used
       in the Deepening or Sidetracking), less all amounts recovered by the
       Participating Parties from the proceeds of Hydrocarbon production from
       the well, as if the Non-participating Party had originally participated
       to the initial objective depth or formation, in the case of a Deepening
       operation, or the depth at which the Sidetracking operation is initiated.
       Thereafter, the Non-participating Party shall be deemed to be a
       Participating Party for the Deepening or Sidetracking operations, and
       Article 13.2.1 (a) shall not apply to that Party for the Deepened or
       Sidetracked portion of the well. The initial Participating Parties,
       however, shall continue to recoup out of the proceeds of Hydrocarbon
       production from the non-consent portion of the well any balance for the
       Non-consent Well remaining to be recovered under Article 13.2.1
       (Production Reversion Recoupment), less the amounts paid by the
       Non-participating Party under this Article 13.3.

13.4   Deepening or Sidetracking Cost Adjustments

       If a proposal is made to Deepen or Sidetrack a Non-consent Well, a well
       cost adjustment will be performed as follows:

       (a)    Intangible drilling will be valued at the actual cost incurred by
              the Participating Parties.

       (b)    Tangible materials will be valued at the actual cost incurred by
              the Participating Parties.

       (c)    For Sidetracking operations, the values determined in Articles
              13.4(a) and 13.4(b) shall be reduced by the amount allocated to

                                       38

<PAGE>

              that portion of the well from the surface to one hundred feet
              (100') below the point at which the Sidetracking was initiated.
              Such allocations shall be consistent with the guidelines
              recommended by the applicable Council of Petroleum Accountants
              Societies ("COPAS") Guideline, as amended from time to time.

       (d)    Amortization/depreciation shall be applied to both intangible and
              tangible values at the rate of ten percent (10%) per annum from
              the date the well commenced Hydrocarbon production to the date
              operations commence to Deepen or Sidetrack the well, provided,
              however, the value of tangible materials after applying
              depreciation shall never be less than fifty percent (50%) of the
              value determined in Article 13.4(b).

13.5   Subsequent Operations in Non-consent Well

       Except as provided in Article 13.3 (Deepening or Sidetracking of
       Non-consent Well), an election not to participate in the drilling,
       Sidetracking, or Deepening of a well shall be deemed to be an election
       not to participate in any subsequent operations in the well before full
       recovery by the Participating Parties of the Non-participating Party's
       recoupment amount.

13.6   Operations in a Production Interval

       A Participating Party in a Production Interval may propose Rework or
       Sidetrack operations within that Production Interval, or to permanently
       plug and abandon that Production Interval in a well; however, no
       Production Interval in a well shall be abandoned without the unanimous
       approval of the Participating Parties in the Production Interval. If a
       proposal, estimated to exceed the amount specified in Article 8.2
       (Authorization), is made to Rework or Sidetrack a Production Interval and
       the Participating Parties elect to participate in the proposed operation,
       Operator shall conduct the operation at their sole cost and risk. If
       fewer than all but two (2) or more Parties having a combined
       Participating Interest of forty-five percent (45%) or more elect to
       participate in the proposed operation, Operator shall conduct the
       Reworking or Sidetracking operation at the cost and risk of the
       Participating Parties owning an interest in the Production Interval. A
       proposal to Rework an interval, other than a Production Interval, shall
       be made and approved in accordance with Article 11.5 (Operations by Fewer
       Than All Parties).

13.7   Operations Utilizing a Non-consent Platform and/or Development Facilities

       Except as otherwise provided in Article 12.4 (Rights to Take in Kind) and
       this Article 13.7, if applicable, a Party that did not originally
       participate in a Platform and/or Development Facilities shall be a
       Non-participating Party for all operations utilizing the Platform and/or
       Development Facilities and shall be subject to Article 13.2
       (Relinquishment of Interest). Notice, in accordance with Article 9
       (Notices), shall be given to the Non-participating Party for all wells
       proposed to be drilled from or tied-back to the Non-consent Platform
       and/or handled by non-consent Development Facilities. If a
       Non-participating Party in a Non-consent Platform and/or Development
       Facilities desires to participate in the drilling of any such well
       proposed by the Participating Parties in the Platform and/or Development

                                       39

<PAGE>

       Facilities, the Non-participating Party desiring to join in the proposed
       well shall first pay the Participating Parties in the Platform and/or
       Development Facilities its proportionate share of the cost of the
       Platform and/or Development Facilities, including, but not limited to,
       costs of material, fabrication, transportation, and installation plus any
       remaining amounts to be recouped under Article 13.2.1(b). The
       Non-participating Party shall remit payment to Operator and Operator
       shall (a) reimburse the Participating Parties in the Platform and/or
       Development Facilities in the same proportions they are sharing in the
       Platforms and/or Development Facilities recoupment account, and (b)
       credit the applicable payout account, Upon payment of that amount, the
       original Non-participating Party shall become an owner and a
       Participating Party in the Platform and/or Development Facilities in. the
       same manner as if recoupment had occurred under Article 13.2.1
       (Production Reversion Recoupment), and may participate in all future
       wells drilled from or tied back to the Platform. As to well operations
       conducted from the Platform and/or Development Facilities prior to
       payment under this Article, 13.7, the original Non-participating Party
       shall remain a Non-participating Party in such Non consent Operations
       until such time as the entire recoupment balance applicable to all such
       Non consent Operations in the aggregate has occurred, as provided for in
       Articles 13.2.1 (a) and 13.2.1(d).

13.8   Discovery or Extension from Non-consent Drilling

       If a Non-consent Well (a) discovers a new Producible Reservoir or (b)
       extends an existing Producible Reservoir beyond its recognized
       boundaries, as unanimously agreed by the Participating Parties in all
       existing wells currently producing from the existing Producible Reservoir
       before commencement of drilling operations, the recoupment of costs for
       the well shall be governed by Article 13.2 (Relinquishment of Interest)
       and shall be recovered by the Participating Parties in-one of the
       following ways:

       (a)    if the Non-consent Well is not completed and produced, recoupment
              shall be out of one half (1/2) of each Non-participating Party's
              interest in Hydrocarbon production from all subsequently drilled
              and completed wells on the Contract Area that are completed in the
              Producible Reservoir discovered, or in that portion extended, by
              the Non-consent Well and in which the Non-participating Party has
              a Participating Interest; or

       (b)    if the Non-consent Well is completed and produced, recoupment
              shall be out of the Non participating Party's Share of all
              Hydrocarbon production from the Non-consent Well and one-half
              (1/2) of the Non-participating Party's interest in Hydrocarbon
              production from all subsequently drilled and completed wells on
              the Contract Area that are completed in the Producible Reservoir
              discovered, or in that portion extended, by the Non-consent Well
              and in which the Non-participating Party has a Participating
              Interest.

13.9   Allocation of Platform/Development Facilities Costs to Non-consent
       Operations

       In the event a well is drilled from or produced through a Platform or is
       produced through Development Facilities which are owned by the

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<PAGE>

       Participating Parties in different proportions than the ownership of the
       Non-consent well, the rights of the Participating Parties in such well
       and the costs to utilize such Platform or Development. Facilities for
       such well shall be determined as follows:

       13.9.1 Investment Usage Fees

              The Participating Parties in such well shall pay to the Operator,
              for credit to the owners of the Platform and/or Development
              Facilities; a one-time usage fee for the right to use the Platform
              and/or Development Facilities. Such usage fees shall be determined
              in accordance with paragraphs (a) and (b) below:

              (a)    A fee for slot usage will be determined as follows:

                     (i)    In the event the well uses a platform with well
                            slots and such platform has no Development
                            Facilities installed on it, the slot usage fee shall
                            be an amount equal to the ratio which one Platform
                            slot bears to the total number of slots on the
                            Platform times the total cost of the Platform.

                     (ii)   In the event the well uses a Platform with well
                            slots and such Platform has Development Facilities
                            installed on it, the slot usage fee shall be an
                            amount equal to the ratio which one Platform slot
                            bears to the total number of slots on the Platform
                            times the total cost of the Platform attributable to
                            well slot area, determined as follows:

                     Slot Usage Fee = (one platform slot divided by total
                       platform slots) x [(Total Cost of Platform - Any Cost of
                       Development Facilities Included In the Total Cost of
                       Platform) x Well Slot Area %]

                     Well Slot Area % = Deck Space Dedicated to Well Slots
                       divided by (Deck Space Dedicated to Well Slots + Deck
                       Space Dedicated to Development Facilities)

                     The cost of Development Facilities [as used in Article
                     13.9.1 (a) and (b)] shall include the cost of design,
                     material, fabrication, transportation, installation and
                     modifications of such Development Facilities.

                     For purposes of calculating the slot usage fee [under
                     Article 13.9.1 (a) (i) or (ii)], the total cost of the
                     Platform shall be reduced by 0.83333% per month, commencing
                     on the first day of the month following the date the
                     Platform was installed and continuing every month thereafer
                     until the month actual drilling operations on such well is
                     commenced; however, the total cost of the Platform shall
                     not be reduced by more than forty percent (40%) of the
                     total Platform costs.

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<PAGE>

                     The cost of additions to the Platform shall be reduced in
                     the same manner commencing the first day of the month after
                     the addition is installed

                     If such well is abandoned, having never produced, the right
                     of the. Participating Parties in such well to utilize the
                     Platform slot through which such well was drilled shall
                     terminate unless such Parties commence drilling a
                     substitute well for the abandoned well through the same
                     slot within ninety (90) days of the abandonment. If such
                     substitute well is abandoned, having never produced, the
                     right of the Participating Parties in such well to utilize
                     the Platform slot through which such well was drilled shall
                     terminate.

                     No refund or credit of the slot usage fee shall be given or
                     due if a subsequent well operation is conducted through the
                     same slot or if that Platform slot is restored to a usable
                     condition.

                     If subsequent Non-consent Operations (such as Workover,
                     Recompletion, Deepening, or Sidetracking operations) are
                     conducted in any wellbore where either all Parties to this
                     agreement participated in the original well drilling costs
                     or a previous Non-consent Operation was conducted, no slot
                     usage fee shall be charged to the Participating Parties in
                     the subsequent Non-consent Operation.

              (b)    The Participating Parties in such well shall pay to the
                     owners of the Development Facilities a sum equal to that
                     portion of the total cost of such Development Facilities
                     which the throughput volume of the Non-consent Operation
                     bears to the total design throughput volume of the
                     Development Facilities at the time such well is connected.
                     Throughput volume shall be estimated by the Operator using
                     an average daily volume of the first three months of
                     production from the Non consent Operation.

              The Total Cost of Development Facilities shall include the cost of
              design, material, fabrication, transportation, installation and
              modifications of Development Facilities plus that portion of the
              cost of the Platform attributable to Development Facilities Area.
              The Development Facilities Usage Fee shall be based on the
              following:

              Development Facilities Usage Fee = Total Cost of Development
                Facilities x Throughput Volume of Non-consent Well divided by
                Total Design Throughput of Facilities

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<PAGE>

              Total Cost of Development Facilities = Cost of Development
                Facilities + [(Total Cost of Platform - Any Cost of Development
                Facilities Included in the Total Cost of Platform) x Development
                Facilities Area %]

              Development Facilities Area % = Deck Space Dedicated to
                Development Facilities divided by (Deck Space Dedicated to Well
                Slots + Deck Space Dedicated to Development Facilities)

              For purposes of calculating the Development, Facilities usage fee,
              the total cost of the Development Facilities, shall be reduced by
              0.83333% per month, commencing from the first day of the month
              following the date when the Development Facilities where installed
              and continuing every month thereafter until the first day of the
              month during which production from the Non-consent Operation is
              commenced; however, the total cost of the Development Facilities
              shall not be reduced more than forty percent (40%). If
              modifications, expansions or additions to the Development
              Facilities are made after commencing first production and prior to
              the connection of the Non-consent Operation to the Development
              Facilities, such Development Facilities investment shall be
              reduced in the same manner as described above, from the first day
              of the month the Development Facilities modification, expansion or
              addition is completed until the first day of the month during
              which production from the Non-consent Operation is commenced.

              If modifications, expansions or additions are made to the
              Development Facilities after connection of the Non-consent Well
              which benefit the Non-consent Well, such costs shall be shared by
              the Non-consent Well based on that portion which the throughput
              volume of the Non-consent Well bears to the total design
              throughput volume of the Development Facilities at the time of
              completion of such modification, expansion or addition. The
              Non-consent well's throughput volumes shall be determined in the
              same manner as described above.

              Payment of sums under this Article 13.9.1 is not a purchase of an
              additional interest in the Platform or the Development Facilities.
              Such payment shall be included in the total amount that the
              Participating Parties are entitled to recoup out of Hydrocarbon
              production from the Non-consent Well.

       13.9.2 Operating and Maintenance Charges

              The Participating Parties shall pay all costs necessary to connect
              a Non-consent Well to the Platform and/or Development Facilities

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<PAGE>

              and that proportionate part of the costs of operating and
              maintaining the Platform and/or Development Facilities applicable
              to the Non-consent Well. Platform operating and maintenance costs.
              that are costs not directly attributable to a wellbore shall be
              allocated equally to all actively producing Completions. Operating
              and maintenance costs for the Development Facilities shall be
              allocated on a volume throughput basis, that is, in the proportion
              that the volume throughput of the well bears to the total volume
              throughput of all wells connected to the Development Facilities.
              Operating and maintenance expense for support facilities (e.g.,
              electrical systems and living quarters which do not handle
              production) shall be allocated by applying a usage basis
              appropriate for that support facility.

13.10  Allocation of Costs Between Zones

       Except as provided in Article 10.9 (Wells Proposed Below Deepest
       Producible Reservoir), if for any reason the Participating Interests of
       the Parties in a well are not the same for the entire depth or the
       Completion thereof, the costs of drilling, Completing, and equipping the
       well shall be allocated in an equitable manner, as agreed by the Parties,
       based on the value and allocation recommended in the applicable COPAS
       Guideline, as amended from time to time.

13.11  Lease Maintenance Operations

       An operation proposed within the last six (6) months of the primary term
       or, subsequent thereto, an operation proposed to perpetuate the Lease or
       portion thereof at its expiration date or otherwise, including, but not
       limited to, well operations, regulatory relief (for example, course of
       action necessary to satisfy the statutory or regulatory requirements of
       the governmental authority having jurisdiction), and other Lease
       operations, shall be deemed to be a "Lease Maintenance Operation." To
       invoke this Article 13.11, a notice or AFE that proposes an operation
       must state that the proposed operation is a Lease Maintenance Operation.

       13.11.1 Participation in Lease Maintenance Operations

              A Party may propose a Lease Maintenance Operation by giving notice
              to the other Parties. If fewer than all Parties elect to
              participate in the proposed Lease Maintenance Operation, the
              proposing Party shall notify the Parties of the elections made.
              Each Party electing not to participate shall then have a second
              opportunity to participate in the proposed operation by notifying
              the other Parties of its election within forty-eight (48) hours
              after receipt of the notice. A Lease Maintenance Operation shall
              not require minimum approval, either of the number of Parties or
              the percentage of the voting interests of the Parties otherwise
              required in Article 6.1.2 (Vote Required). For a Lease Maintenance
              Operation to be conducted, the Participating Parties must agree to
              pay and bear one hundred percent (100%) of the costs and risks of
              the operation. If more than one Lease Maintenance Operation is
              proposed, the operation with the greatest percentage approval
              shall be conducted. Notwithstanding the recoupment provisions of
              this Agreement, a Party electing not to participate in a well

                                       44

<PAGE>

              operation proposed as a Lease Maintenance Operation shall promptly
              assign, effective as of the date the operation commences, to the
              Participating Parties all of its right, title, and interest in
              and to that portion of the Lease that would otherwise expire and
              the property and equipment attributable thereto, in accordance
              with Article 26 (Successors, Assigns, [and Preferential Rights]).
              If more than one Lease Maintenance Operation is proposed and there
              is a tie between two proposed operations, both operations shall be
              conducted and the costs and risks of conducting both operations
              shall be paid and borne by the Participating Parties. If the
              drilling of a well is undertaken as a Lease Maintenance Operation,
              further operations conducted by the Participating Parties in the
              well shall be governed by Article 10.9 (Course of Action*After
              Reaching Objective Depth) or Article 11.9 (Course of Action After
              Reaching Objective Depth), whichever applies. If more than one
              well operation is conducted, any of which would perpetuate the
              Lease or such portion thereof, an, assignment shall not be
              required from a Party participating in any such well operation.

       13.11.2 Accounting for Non-participation

              If after one (1) year from completion of a well operation
              conducted as a Lease Maintenance Operation, the Lease or portion
              thereof is being perpetuated by a Lease Maintenance Operation, as
              provided in Article 13.11.1 (Participation in Lease Maintenance
              Operations), Operator shall render a final statement, if
              applicable, to the assigning Party for its share of all expenses
              attributed to the assigned interest before the effective date of
              the assignment, plus any credit or deficiency in salvage value
              calculated under Article 15.3.1 (Prior Expenses). The assigning
              Party shall settle any deficiency owed the non-assigning Parties
              within thirty (30) days after receipt of Operator's statement.

13.12  Retention of Lease by Non-consent Well

       If, at the expiration of the primary term of the Lease, one or more
       Non-consent Wells are the only wells perpetuating the Lease, Operator
       shall give written notice to each Non-participating Party that the
       Non-consent Wells are serving to perpetuate the Lease. Each
       Non-participating Party shall, within thirty (30) days after receipt of
       Operator's written notice, elect one of the following:

       (a)    to assign its entire interest in the Lease to the Participating
              Parties in the proportions in which the Non-consent Wells are
              owned; or

       (b)    to pay the Participating Parties, within sixty (60) days after its
              election, the lesser of its proportionate share of the actual well
              costs of the wells, as if the Non-participating Party had
              originally participated, or the balance of the recoupment account.
              The payment shall be made to Operator and credited to the account
              of each Participating Party. The Nonparticipating Party shall
              remain as a Non-participating Party until full recoupment is

                                       45

<PAGE>

              obtained, but the payment shall be credited against the total
              amount to be recouped by the Participating Parties.

       A Non-participating Party that fails to make the required election shall
       be deemed to have elected under Article 13.12(a) to relinquish its entire
       interest in the Lease. If a Non-participating Party elects to make
       payment under Article 13.12(b) but fails to make the required payment
       within sixty (60) days after its election, the Non-participating Party
       shall either remain liable on the -obligation. to pay or, by unanimous
       vote of the Participating Parties, be deemed to have elected under
       Article 13.12(a) to relinquish its entire interest in the Lease. Each
       relinquishing Non-participating Party shall promptly execute and deliver
       an assignment of its interest to the Participating Parties, in accordance
       with Article 26 (Successors; Assigns, [and Preferential Rights]).

13.13  Non-Consent Premiums

       A non-consent premium paid by a Non-Participating Party to the
       Participating Parties- shall be allocated to the Participating Parties
       based on their original Participating Interest share in the Non-consent
       Operation which generated the non-consent premium.

                                   ARTICLE 14

                        ABANDONMENT, SALVAGE, AND SURPLUS

14.1   Platform Salvage and Removal Costs

       When the Parties owning wells, Platforms and/or Development Facilities
       unanimously agree to dispose of the wells, Platforms and/or Development
       Facilities, it shall be disposed of by Operator in the time and manner
       approved by the Parties. The costs, risks, and net proceeds, if any, for
       the disposal shall be shared by the Parties in proportion to their
       Participating Interests therein.

14.2   Abandonment of Platforms, Development Facilities or Wells

       Except as provided in Article 10 (Exploratory Operations) and Article 11
       (Development Operations), a Participating Party may propose the
       abandonment of a Platform and Development Facilities or wells by
       notifying the other Participating Parties. No Platform and Development
       Facilities or wellbore shall be abandoned without the unanimous approval
       of the Participating Parties. If the Participating Parties do not approve
       abandoning the Platform and Development Facilities or wells, the Operator
       shall prepare a statement of the abandoning Party's share of estimated
       wellbore plugging and abandonment costs, Platform and Development
       Facilities removal costs and/or any related reclamation costs, less its
       share of estimated salvage value, as determined by the Operator pursuant
       to Exhibit "C". The Party desiring to abandon it shall pay the Operator,
       on behalf of the Participating Parties for that Party's share of the
       estimated abandonment costs, less its share of estimated salvage value,
       within thirty (30) days after receipt of the Operator's statement. If an

                                       46

<PAGE>

       abandoning Party's respective share of the estimated salvage value is
       greater than its share of the estimated costs, Operator, on behalf of the
       Participating Parties, shall pay a sum equal, to the deficiency to the
       abandoning Party within thirty (30) days after the abandoning Party's
       receipt of the Operator's statement.

14.3   Assignment of Interest

       Each Participating Party desiring to abandon a Platform and Development
       Facilities or wells under Article 14.2 (Abandonment of Platforms,
       Development Facilities or Wells) shall assign, effective as of the last
       applicable election date, to the non-abandoning Parties, in proportion to
       their Participating Interests, its interest in the Platform and
       Development Facilities or wells and the equipment therein and its
       ownership in the Hydrocarbon production from the wells. A Party so
       assigning shall be relieved from, further liability for the Platform and
       Development Facilities, or wells, except liability for payments under
       Article 14.2 (Abandonment of Platforms, Development Facilities or Wells).

14.4   Abandonment Operations Required by Governmental Authority

       A well abandonment or Platform and Development Facilities removal
       required by a governmental authority having jurisdiction shall be
       accomplished by Operator with the costs, risks, and net proceeds, if any,
       to be shared by the Parties owning the well or Platform and Development
       Facilities in proportion to their Participating Interests therein. No
       approval by the Parties will be necessary for Operator to proceed with
       the government required well abandonment, or Platform and Development
       Facilities removal. The Operator shall provide the Parties with an
       informational AFE prior to commencing such an abandonment or removal.

14.5   Disposal of Surplus Material

       Material and equipment acquired hereunder may be classified as surplus by
       Operator when deemed no longer needed in present or foreseeable
       operations. Operator shall determine the value and cost of disposing of
       the materials in accordance with Exhibit "C". If the material is
       classified as junk or if the value, less cost of disposal, is less than
       or equal to One Hundred Thousand Dollars ($100,000), Operator shall
       dispose of the surplus materials in any manner it deems appropriate. If
       the value, less the cost of disposal of the surplus material, is greater
       than One Hundred Thousand Dollars ($100,000), Operator shall give written
       notice thereof to the Parties owning the material. Unless purchased by
       Operator, the surplus material shall be disposed of in accordance with
       the method of disposal approved by the Parties owning the material.
       Proceeds from the sale or transfer of surplus material shall be promptly
       credited to each Party in proportion to its ownership of the material at
       the time of retirement or disposition.

                                       47

<PAGE>

                              ARTICLE 15 WITHDRAWAL

15.1   Right to Withdraw

       Subject to this Article 15.1, any Party may withdraw from this Agreement
       as to one or more Leases (the "Withdrawing Party") by giving prior
       written notice to all other Parties stating its decision to withdraw
       ("the withdrawal notice"). The withdrawal notice shall specify an
       effective date of withdrawal that is at least thirty (30) days, but not
       more than one hundred twenty (120) days, after the date of the withdrawal
       notice. Within thirty (30) days of receipt of the withdrawal notice, the
       other Parties may join in the withdrawal by giving written notice of
       that fact to the Operator ("written notice to join in the withdrawal")
       and upon giving written notice to join in the withdrawal are "Other
       Withdrawing Parties". The withdrawal notice and the written notice to
       join in the withdrawal are unconditional and irrevocable offers by the
       Withdrawing Party and the Other Withdrawing Parties to convey to the
       Parties who do not join in the withdrawal ("the Remaining Parties") the
       Withdrawing Party's and the Other Withdrawing Parties' entire Working
       Interest in all of the Lease or Leases, Hydrocarbon production, and other
       property and equipment owned under this Agreement.

15.2   Response to Withdrawal Notice

       Failure to respond to a withdrawal notice is deemed a decision not to
       join in the withdrawal.

       15.2.1 Unanimous Withdrawal

              If all the other Parties join in the withdrawal,

              (a)    no assignment of Working Interests shall take place;

              (b)    subject to Article 14.4, no further operations may be
                     conducted under this Agreement unless agreed to by all
                     Parties;

              (c)    the Parties shall abandon all activities and operations
                     within the Lease and relinquish all of their Working
                     Interests to the MMS within fifteen (15) days of the
                     conclusion of the thirty (30) day joining period; and

              (d)    notwithstanding anything to the contrary in Article 14
                     (Abandonment, Salvage and Surplus), the Operator shall:

                     1)     furnish all Parties a detailed abandonment plan, if
                            applicable, and a detailed cost estimate for the
                            abandonment within thirty (30) days after the
                            conclusion of the thirty (30) day joining period;
                            and

                     2)     cease operations and begin to permanently plug and
                            abandon all wells and remove all Facilities in
                            accordance with the abandonment plan.

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<PAGE>

       15.2.2 No Additional Withdrawing Parties

              If none of the other Parties join in the withdrawal, then the
              Remaining Parties must accept an assignment of their Participating
              Interest share of the Withdrawing Party's Working Interest.

       15.2.3 Acceptance of the Withdrawing Parties' Interests.

              If one or more but not all of the other Parties join in the
              withdrawal and become Other Withdrawing Parties, then within
              forty-eight (48) hours (exclusive of Saturdays, Sundays, and
              federal holidays) of the conclusion of the thirty (30) day joining
              period, each of the Remaining Parties shall submit to the Operator
              a written rejection or acceptance of its Participating Interest
              share of the Withdrawing Party's and Other Withdrawing Parties',
              Working Interest. Failure to make that written rejection or
              acceptance shall be deemed a written acceptance. If the Remaining
              Parties are unable to select a successor Operator, if applicable,
              or if a Remaining Party submits a written rejection and the other
              Remaining Parties do not agree to accept one hundred percent
              (100%) of the Withdrawing Party's and Other Withdrawing Parties'
              Working Interest within ten (10) days of the conclusion of the
              forty-eight (48) hour period to submit a written rejection or
              acceptance, the Remaining Parties will be deemed to have joined in
              the withdrawal, and Article 15.2.1 (Unanimous Withdrawal) will
              apply.

       15.2.4 Effects of Withdrawal

              Except as otherwise provided in this Agreement, after giving a
              withdrawal notice or a written notice to join in the withdrawal,
              the Withdrawing Party and Other Withdrawing Parties are not
              entitled to approve or participate in any activity or operation in
              the Lease, other than those activities or operations for which
              they retain a financial responsibility. The Withdrawing Party and
              Other Withdrawing Parties shall take all necessary steps to
              accomplish their withdrawal by the effective date referred to in
              Article 15.1 (Right to Withdraw) and shall execute and deliver to
              the Remaining Parties all necessary instruments to assign their
              Working Interest to the Remaining Parties. A Withdrawing Party and
              Other Withdrawing Parties shall bear all expenses associated with
              their withdrawal and the transfer of their Working Interest.

15.3   Limitation Upon and Conditions of Withdrawal

       15.3.1 Prior Expenses

              The Withdrawing Party and Other Withdrawing Parties remain liable
              for their Participating Interest share of the costs of all
              activities, operations, rentals, royalties, taxes, damages,
              Hydrocarbon imbalances, or other liability or expense accruing or
              relating to (i) obligations existing as of the effective date of
              the withdrawal, (ii) operations conducted before the effective
              date of the withdrawal, (iii) operations approved by the
              Withdrawing Party and Other Withdrawing Parties before the
              effective date of the withdrawal, or (iv)

                                       49

<PAGE>

              operations commenced by the Operator under one of its
              discretionary powers under this Agreement before the effective
              date of the withdrawal. Before the effective date of the
              withdrawal, the Operator shall provide a statement to the
              Withdrawing Party and Other Withdrawing Parties for (1) their
              respective shares of all identifiable costs under this Article
              15.3.1 and (2} their, respective Participating Interest shares of
              the. estimated current costs of plugging and abandoning all wells
              and removing all Platforms, Development Facilities, and other
              materiel and equipment owned by the Joint Account, less their
              respective Participating Interest Shares of the estimated salvage
              value of the assets at the time of abandonment, as approved by
              vote. This statement of expenses, costs, and salvage value shall
              be prepared by the Operator under Exhibit "C". Before
              withdrawing, the Withdrawing Party and Other Withdrawing Parties
              shall either pay the Operator, for the benefit of the Remaining
              Parties, the amounts allocated to-them as, shown in the
              statement, or provide security satisfactory to the Remaining
              Parties for all obligations and liabilities they have incurred
              and all obligations and liabilities attributable to them before
              the effective date of the withdrawal. All liens, charges, and
              other encumbrances, including but not limited to overriding
              royalties, net profits interest and production payments, which
              the Withdrawing Party and Other Withdrawing Parties placed (or
              caused to be placed) on their Working Interest shall be fully
              satisfied or released prior to the effective date of its
              withdrawal (unless the Remaining Parties are willing to accept
              the Working Interest subject to those liens, charges, and other
              encumbrances).

       15.3.2 Confidentiality

              The Withdrawing Party and Other Withdrawing Parties will continue
              to be bound by the confidentiality provisions of Article 7.3
              (Confidentiality) after the effective date of the withdrawal but
              will have no further access to technical information relating to
              activities or operations under this Agreement. The Withdrawing
              Party and Other Withdrawing Parties are not required to return to
              the Remaining Parties Confidential Data acquired prior to the
              effective date of the withdrawal.

       15.3.3 Emergencies and Force Majeure

              No Party may withdraw during a Force Majeure or emergency that
              poses a threat to life, safety, property or the environment but
              may withdraw from this Agreement after termination of the Force
              Majeure or emergency. The Withdrawing Party and Other Withdrawing
              Parties remain liable for their share of all costs and liabilities
              arising from the Force Majeure or emergency, including but not
              limited to the drilling of relief wells, containment and cleanup
              of oil spills and pollution, and all costs of debris removal made
              necessary by the Force Majeure or emergency.

                                       50

<PAGE>

                                   ARTICLE 16

                      RENTALS, ROYALTIES AND OTHER PAYMENTS

16.1   Overriding Royalty and Other Burdens

       If the Working Interest or Participating Interest of. a Party is subject
       to an overriding royalty, Hydrocarbon production payment, net profits
       interest, mortgage, lien, security interest, or other burden or
       encumbrance, other than lessor's royalty and other burdens listed in
       Exhibit "A", the Party so burdened shall pay and bear all liabilities and
       obligations created or secured by the burden or encumbrance and shall
       indemnify and hold the other Parties harmless from all claims and demands
       for payment asserted by the owners of the burdens or encumbrances. If a
       Party becomes entitled to an assignment under this Agreement, or as a
       result of Non-consent Operations hereunder becomes entitled to receive a
       relinquished interest, as provided in Article 13.2 (Relinquishment of
       Interest), otherwise belonging to a Non-participating Party whose Working
       Interest in the operations is so burdened or encumbered, the Party
       entitled to receive the assignment from the Non-participating Party or
       the relinquished interest of the Non-participating Party's Hydrocarbon
       production shall receive same free and clear of all such burdens and
       encumbrances, and the Non-participating Party whose interest is subject
       to the burdens and encumbrances shall hold the Participating Parties
       harmless for the burdens and encumbrances, and will bear same at its own
       expense.

16.2   Subsequently Created Interest

       Notwithstanding anything in this Agreement to the contrary, if a Party,
       after execution of this Agreement, creates an overriding royalty,
       Hydrocarbon production payment, net profits interest, carried interest,
       or any other interest out of its Working Interest which the Parties do
       not unanimously agree to list on Exhibit "A", (hereinafer called
       "Subsequently Created Interest"), the Subsequently Created Interest shall
       be made specifically subject to this Agreement. If the Party owning the
       interest from which the Subsequently Created Interest was established
       fails to pay, when due, its share of costs, and if the proceeds from the
       sale of Hydrocarbon production under Article 8.6 (Security Rights) are
       insufficient for that purpose, or elects to abandon a well, or elects to
       relinquish its interest in the Contract Area, the Subsequently Created
       interest shall be chargeable with a pro rata portion of all costs in the
       same manner as if the Subsequently Created Interest were a Working
       Interest, and Operator may enforce against the Subsequently Created
       Interest the lien and other rights granted or recognized under this
       Agreement to secure and enforce collection of costs chargeable to the
       Subsequently Created Interest. The rights of the owner of the
       Subsequently Created Interest shall be, and hereby are, subordinated to
       the rights granted or recognized by Article 8.6 (Security Rights).

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<PAGE>

16.3   Payment of Rentals and Minimum Royalties

       Operator shall pay in a timely manner, for the joint account of the
       Parties, all rental, minimum royalties, and other similar payments
       accruing under the Contract Area and shall, on request, submit evidence
       of each such payment to the Parties. Operator shall not be held liable.
       to the other Parties in damages for loss of the Contract Area or
       interest therein if, through mistake or oversight, a rental, minimum
       royalty, or other payment is not paid or is erroneously paid. The loss of
       a Lease or interest therein resulting from the Operator's failure to pay,
       or erroneous payment of rental or minimum royalty shall be a joint loss,
       and there shall be no readjustment of interests. For Hydrocarbon
       production delivered in kind by Operator to a Non-operator or to another
       for the account of a Non-operator, the Non-operator shall provide
       Operator with information about the Non-operator's proceeds received or
       the value of the Hydrocarbon production taken in kind in order that
       Operator may make payments of minimum royalties due.

16.4   Non-participation in Payments

       A Party that desires not to pay its share of a rental, minimum royalty,
       or similar payment shall notify the other Parties in writing at least
       sixty (60) days before the payment is due. Operator shall then make the
       payment for the benefit of the Parties that do desire to maintain the
       Lease. In such event, the Non-participating Party shall assign to the
       Participating Parties, upon their request, the portions of its interest
       in the Lease maintained by the payment. The assigned interest shall be
       owned by each Participating Party in proportion to its Participating
       Interest. The assignment shall be made in accordance with Article 27
       (Successors, Assigns, [and Preferential Rights]).

16.5   Royalty Payments

       Each Party shall be responsible for and shall separately bear and
       properly pay or cause to be paid all royalty and other amounts due on'
       its share of Hydrocarbon production taken in accordance with state or
       federal regulations, as may be amended from time-to-time. Adjustments
       shall be made among the Parties in accordance with Exhibit "E" (Gas
       Balancing Agreement). During a period when Participating Parties in a
       Non-consent Operation are receiving a Nonparticipating Party's share of
       Hydrocarbon production, the Participating Parties shall bear and properly
       pay, or cause to be paid, the Lease royalty on the Hydrocarbon production
       taken, and shall hold the Non-participating Parties harmless from
       liability for the payment.

                                   ARTICLE 17

                                      TAXES

17.1   Property Taxes

       Operator shall render property covered by this Agreement for ad valorem
       taxation, if applicable, and shall pay the property taxes for the benefit

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       of each Party. Operator shall charge each Party its share of the tax
       payments. If the ad valorem taxes are based in whole or in part upon
       separate valuations of each. Party's Working Interest, then
       notwithstanding anything in this Agreement to the contrary, each Party's
       share of property taxes shall be in proportion to the tax value generated
       by that Party's Working Interest.

17.2   Contest of Property Tax Valuation

       Operator shall timely and diligently protest to a final determination
       each tax valuation it deems unreasonable. Pending such determination,
       Operator may elect to pay under protest. Upon final determination,
       Operator shall pay the taxes and the interest, penalties, and costs
       accrued as a result of the protest. In either event, Operator shall
       charge each Party its share of any amounts due, and each Party shall be
       responsible for reimbursing Operator for any such amounts paid.

17.3   Production and Severance Taxes

       Each Party shall pay, or cause to be paid, all production and severance
       taxes due on Hydrocarbon production that it receives under this
       Agreement.

17.4   Other Taxes and Assessments

       Operator shall pay other applicable taxes (other than income taxes,
       excise taxes, or other similar types of taxes) or assessments and charge
       each Party its share.

                                   ARTICLE 18

                                    INSURANCE

18.1   Insurance

       Operator shall provide and maintain the insurance prescribed in Exhibit
       "B" and charge those costs to the Joint Account. No other insurance shall
       be carried for the benefit of the Parties under this Agreement, except as
       provided in Exhibit "B".

18.2   Bonds

       Operator shall obtain and maintain all bonds or financial guarantees
       required by an applicable law, regulation or rule. The costs of those
       bonds or financial guarantees acquired exclusively for the conduct of
       activities and operations under this Agreement shall be charged to the
       Joint Account, including an amount equivalent to the reasonable cost of
       that bond or financial guarantee if Operator provides that bond or
       guarantee itself and does not engage a third party to do so. Operator
       shall require all contractors to obtain and maintain all bonds required
       by an applicable law, regulation or rule.

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                                   ARTICLE 19

                         LIABILITY, CLAIMS, AND LAWSUITS

19.1   Individual Obligations

       The obligations, duties, and liabilities of the Parties under this
       Agreement are, several, hot joint or collective. Nothing in this
       Agreement shall ever be construed as creating a partnership of any kind,
       joint venture, agency relationship, association, or other character of
       business entity recognizable in law for any purpose. In their relations
       with each other under this Agreement, the Parties shall not be considered
       to be fiduciaries or to have established a confidential relationship,
       except as specifically provided in Article 7.3 (Confidentiality) and
       Article 7.4 (Limited Disclosure), but rather shall be free to act at
       arm's length in accordance with their own respective self-interests. Each
       Party shall hold all other Parties harmless from liens and encumbrances
       on the Contract Area arising as a result of its acts.

19.2   Notice of Claim or Lawsuit

       If, on account of a matter involving activities or operations under this
       Agreement, or affecting the Contract Area, a claim is made against a
       Party, or if a party outside of this Agreement files a lawsuit against a
       Party, or if a Party files a lawsuit, or if a Party receives notice of a
       material administrative or judicial hearing or other proceeding, that
       Party shall give written notice of the claim, lawsuit, hearing, or
       proceeding ("Claim") to the other Parties as soon as reasonably
       practicable.

19.3   Settlements

       The Operator may settle a Claim, or multiple Claims arising out of the
       same incident, involving activities or operations under this Agreement or
       affecting the Contract Area, if the aggregate expenditure does not exceed
       Fifty Thousand Dollars ($50,000) and if the payment is in complete
       settlement of these Claims. If the amount required for settlement exceeds
       this amount, the Parties shall determine the further handling of the
       Claims under Article 19.4 (Defense of Claims and Lawsuits).

19.4   Defense of Claims and Lawsuits

       The Operator shall supervise the handling, conduct, and prosecution of
       all Claims involving activities or operations under this Agreement or
       affecting the Contract Area. Claims may be settled in excess of the
       amount specified in Article 19.3 (Settlements) if the settlement is
       approved by vote of the Participating Parties. (in accordance with
       Article 6.1.2) in the activity or operation out of which the Claim arose,
       but a Party may independently settle a Claim or the portion of a Claim
       which is attributable to its Participating Interest share alone as long
       as that settlement does not directly adversely affect the interest or
       rights of the other Participating Parties. Charges for services performed
       by the legal staff of a Party shall be made in accordance with Exhibit
       "C", but all other expenses incurred by the Operator in the prosecution
       or defense

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       of Claims for the Parties, together with the amount paid to discharge a
       final judgment, are costs and shall be paid by the Parties in proportion
       to their Participating Interest share in the activity or operation out of
       which the Claim arose. The employment of outside counsel, but not the
       selection of that counsel, requires unanimous approval by the Parties
       involved in the activity or operation out, of which the Claim arose. If
       the use of outside counsel is approved, the fees and expenses incurred as
       a result thereof shall be charged to the Parties in proportion to their
       Participating' Interest share in the activity or operation out of which
       that Claim arose. Each Party has the right to hire its own outside
       counsel at its sole cost with respect to its own defense in which case
       the Party would not be obligated to participate in the cost of retaining
       outside counsel selected by Operator.

19.5   Liability for Damages

       UNLESS SPECIFICALLY PROVIDED OTHERWISE IN THIS AGREEMENT, LIABILITY FOR
       LOSSES, DAMAGES, COSTS, EXPENSES OR CLAIMS INVOLVING ACTIVITIES OR
       OPERATIONS UNDER THIS AGREEMENT OR AFFECTING THE CONTRACT AREA WHICH ARE
       NOT COVERED BY OR IN EXCESS OF THE INSURANCE CARRIED FOR THE JOINT
       ACCOUNT SHALL BE BORNE BY EACH PARTY IN PROPORTION TO ITS PARTICIPATING
       INTEREST SHARE IN THE ACTIVITY OR OPERATION OUT OF WHICH THAT LIABILITY
       ARISES, EXCEPT TO THE EXTENT LIABILITY RESULTS FROM THE GROSS NEGLIGENCE
       OR WILLFUL MISCONDUCT OF A PARTY, IN WHICH CASE THAT PARTY SHALL BE
       SOLELY RESPONSIBLE FOR LIABILITY RESULTING FROM ITS GROSS NEGLIGENCE OR
       WILLFUL MISCONDUCT.

19.6   Indemnification for Non-Consent Operations

       TO THE EXTENT ALLOWED BY LAW, THE PARTICIPATING PARTIES WILL HOLD THE
       NON-PARTICIPATING PARTIES (AND THEIR AFFILIATES, AGENTS, INSURERS,
       DIRECTORS, OFFICERS, AND EMPLOYEES) HARMLESS AND RELEASE, DEFEND, AND
       INDEMNITY THEM AGAINST ALL CLAIMS, DEMANDS, LIABILITIES, REGULATORY
       DECREES, AND LIENS FOR ENVIRONMENTAL POLLUTION AND PROPERTY DAMAGE OR
       PERSONAL INJURY, INCLUDING SICKNESS AND DEATH, CAUSED BY OR OTHERWISE
       ARISING OUT OF NON-CONSENT OPERATIONS, AND ANY LOSS AND COST SUFFERED BY
       A NON-PARTICIPATING PARTY AS AN INCIDENT THEREOF, EXCEPT WHERE THAT LOSS
       OR COST RESULTS FROM THE SOLE, CONCURRENT, OR JOINT NEGLIGENCE, FAULT OR
       STRICT LIABILITY OF THAT NON-PARTICIPATING PARTY, IN WHICH CASE EACH
       PARTY SHALL PAY OR CONTRIBUTE TO THE SETTLEMENT OR SATISFACTION OF
       JUDGMENT IN THE PROPORTION THAT ITS NEGLIGENCE, FAULT OR STRICT LIABILITY
       CAUSED OR CONTRIBUTED TO THE INCIDENT. IF AN INDEMNITY IN THIS AGREEMENT
       IS DETERMINED TO VIOLATE LAW OR PUBLIC POLICY, THAT INDEMNITY SHALL THEN
       BE ENFORCEABLE ONLY TO THE MAXIMUM EXTENT ALLOWED BY LAW.

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19.7   Damage to Reservoir, Loss of Reserves and Profit

       NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS AGREEMENT, OTHER THAN
       ARTICLES 10.8.6 AND 11.8.6, IF SELECTED, NO PARTY IS LIABLE TO ANY OTHER
       PARTY FOR DAMAGE TO A RESERVOIR, LOSS OF HYDROCARBONS, LOSS OF PROFITS,
       OR OTHER CONSEQUENTIAL DAMAGES, DAMAGES FOR BUSINESS INTERRUPTION, OR
       PUNITIVE DAMAGES, EXCEPT TO THE EXTENT THAT THE DAMAGE OR LOSS ARISES
       FROM A PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IN WHICH CASE THAT
       PARTY SHALL BE SOLELY RESPONSIBLE FOR DAMAGE OR LOSS ARISING FROM ITS
       GROSS NEGLIGENCE OR WILLFUL MISCONDUCT; NOR DOES A PARTY INDEMNIFY ANY
       OTHER PARTY FOR THAT DAMAGE OR LOSS.

19.8   Non-Essential Personnel

       A NON-OPERATOR THAT REQUESTS TRANSPORTATION OR ACCESS TO A DRILLING RIG,
       PLATFORM, VESSEL, OR OTHER FACILITY USED FOR ACTIVITIES OR OPERATIONS
       UNDER THIS AGREEMENT SHALL HOLD THE OTHER PARTIES HARMLESS AND SHALL
       RELEASE, DEFEND, AND INDEMNIFY THEM AGAINST (I) ALL CLAIMS, DEMANDS, AND
       LIABILITIES FOR PROPERTY DAMAGE AND (II) ALL CLAIMS, DEMANDS, AND
       LIABILITIES FOR ANY LOSS OR COST SUFFERED BY A PARTY AS AN INCIDENT
       THEREOF, INCLUDING, BUT NOT LIMITED TO, INJURY, SICKNESS AND DEATH,
       CAUSED BY OR OTHERWISE ARISING OUT OF THAT TRANSPORTATION OR ACCESS, OR
       BOTH, EXCEPT TO THE EXTENT THAT LOSS OR COST RESULTS FROM THE GROSS
       NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY SO INDEMNIFIED AND
       PROTECTED.

19.9   Dispute Resolution Procedure

       Any claim, controversy or dispute arising out of, relating to, or in
       connection with this Agreement or an activity or operation conducted
       under this Agreement shall be resolved under the Dispute Resolution
       Procedure in Exhibit "H" to this Agreement.

                                   ARTICLE 20

                           INTERNAL REVENUE PROVISION

20.1   Internal Revenue Provision

       Notwithstanding any provision in this Agreement to the effect that the
       rights and liabilities of the Parties are several, not joint or
       collective, and that this Agreement and the activities and operations
       under this Agreement do not constitute a partnership under state law;
       however, the Parties agree that the activities and operations under this

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       Agreement shall constitute a partnership for federal and, to the extent
       allowable, state and local income tax law and shall be governed for such
       purposes by the, terms of Exhibit F hereto.

                                   ARTICLE 21

                                  CONTRIBUTIONS

21.1   Notice of Contributions Other Than Advances for Sale of Production

       Each Party shall promptly notify the other Parties of all offers of
       contributions that it may obtain, or contributions it is attempting to
       obtain, for the drilling of a well or the conducting of an operation on
       the Contract Area. Payments received as consideration for entering into a
       contract for the sale of Hydrocarbon production from the Contract Area,
       loans, and other financial arrangements shall not be considered
       contributions for the purpose of this Article 21. No Party shall release
       or obligate itself to release Confidential Data in return for a
       contribution from a third party without prior written consent of the
       Participating Parties or Parties having the right to participate in the
       well.

21.2   Cash Contributions

       If a Party receives a cash contribution for drilling a well on the
       Contract Area or conducting an activity or operation on the Contract
       Area, the cash contribution shall be paid to Operator, and Operator shall
       credit the amount thereof to the Parties in proportion to their
       Participating Interests in the well or the Platform and/or Development
       Facilities. If the well is a Non-consent Well, the amount of the
       contribution shall be deducted from the cost specified in Article
       13.2.1(a) before computation of the amount to be recouped out of
       Hydrocarbon production.

21.3   Acreage Contributions

       If a Party receives an acreage contribution for the drilling of a well on
       the Contract Area, the acreage contribution shall be shared by each
       Participating Party that accepts it in proportion to its Participating
       Interest in the well. As between the Participating Parties, this
       Agreement shall apply separately to the acreage.

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                                   ARTICLE 22

                            DISPOSITION OF PRODUCTION

22.1   Take-in-Kind Facilities

       Subject to Article 22.2, a Party may, at its sole cost and risk,
       construct Take-in-Kind Facilities to take its share of Hydrocarbon
       production in kind.

22.2   Duty to Take in Kind

       Each Party shall own and, at its own cost and risk, shall take in kind or
       separately dispose of its share of the oil, gas, and condensate produced
       and saved from the Contract Area, exclusive of Hydrocarbon production
       used by Operator in activities or operations conducted under this
       Agreement, subject to this Article 22. In order to avoid interference
       with operations on or regarding the Platform, the Development Facilities,
       and the Contract Area, a Party exercising its right to construct Take-in
       Kind Facilities ("the Take in Kind Party") shall provide the Operator
       with a list of equipment it deems necessary for its Take in Kind
       Facilities ("the components") along with its notice informing the
       Operator of its election to take in kind. If the Operator agrees to
       install and operate the Take-in Kind Facilities, the Operator shall
       purchase the components and install it on behalf of the Take in Kind
       Party at the Take in Kind Party's sole risk and cost, including, but not
       limited to, any fees, penalties or other costs incurred as a result of
       any cancellation of placed orders as may be requested by the Take in Kind
       Party. The Operator shall provide the Take in Kind Party with monthly
       updates on the progress of the ordering and installation of the Take in
       Kind Facilities. The Operator, based on the instructions of Take in Kind
       Party, shall install and operate all of the components. The Operator
       shall not be responsible for any losses or damages to the components or
       the Take in Kind Party's Hydrocarbon production metered, treated,
       processed or transported by the components unless such losses or damages
       are the result of the Operator's gross negligence or willful misconduct.
       If the Operator refuses or falls to commence the installation of the
       Take-in Kind Facilities by thirty (30) days prior to the deadline
       provided in Section 12.4, the Take-in Kind Party shall have the right to
       install and operate the Take-in Kind Facilities providing that such
       operations do not interfere with existing operations or proposed
       operations that have been approved under terms of this Agreement.

22.3   Failure to Take Oil and Condensate in Kind

       Notwithstanding Article 22.2 (Duty to Take in Kind), if a Party fails to
       take in kind or dispose of its share of the oil or condensate, Operator
       shall have the right, but not the obligation, subject to revocation at
       will by the Party owning the Hydrocarbon production, to purchase for its
       own account, sell to others, or otherwise dispose of all or part of the
       Hydrocarbon production at the same price at which Operator calculates and
       pays lessor's royalty on its own portion of the oil or condensate.
       Operator shall notify the non-taking Party when the option is exercised.
       A purchase or sale by Operator of any other Party's share of the oil or

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       condensate shall be for such reasonable periods of time as are consistent
       with the minimum needs of the industry under the circumstances, but in,
       no event shall a contract be for a period in excess of one (1) year.
       Proceeds of the oil or condensate purchased, sold, or otherwise disposed
       of by Operator under this Article 22.3 shall be paid to the Party that
       had, but did not exercise, the right to take in kind and separately
       dispose of the oil or condensate. Operator, indisposing of another
       Party's oil or condensate, shall not be responsible for making any filing
       with regulatory agencies 'not required by law to be made by it in respect
       to another Party's share of oil or condensate. Unless required by
       governmental authority having jurisdiction or by judicial process, no
       Party shall be forced to share an available market with a non-taking
       Party.

22.4   Failure to Take Gas in Kind

       Article 22.3 (Failure to Take Oil and Condensate in Kind) shall not apply
       to gas produced from the Contract Area. In no event shall Operator be
       responsible for, or obligated to dispose of, another Party's share of gas
       production. If for any reason a Party fails to take or market its full
       share of gas as produced, that Party may later take, market, or receive a
       cash accounting for its full share in accordance with Exhibit "E".

22.5   Expenses of Delivery in Kind

       A cost that is incurred by Operator in making delivery of a Party's share
       of Hydrocarbons or disposing of same shall be paid by the Party.

                                   ARTICLE 23

                                 APPLICABLE LAW

23.1   Applicable Law

       THIS AGREEMENT AND THE RELATIONSHIP OF THE PARTIES UNDER THIS AGREEMENT
       SHALL BE GOVERNED BY AND INTERPRETED UNDER FEDERAL LAWS AND LAWS OF THE
       STATE OF ALABAMA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS THAT
       WOULD OTHERWISE REFER THE MATTER TO THE LAWS OF ANOTHER JURISDICTION.

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                                   ARTICLE 24

                    LAWS, REGULATIONS AND NON-DISCRIMINATION

24.1   Laws and Regulations

       This Agreement and operations under this Agreement are subject to all
       applicable laws, rules, regulations, and orders by all governmental
       authorities claiming jurisdiction now and in the future. A provision of
       this Agreement found to be contrary to or inconsistent with any such law,
       rule, regulation, or order shall be deemed to have been modified
       accordingly.

24.2   Non-discrimination

       In performing work under this Agreement, the Parties shall comply and
       Operator shall require each independent contractor to comply with the
       governmental requirements in Exhibit "D" and with Articles 202(1) to (7),
       inclusive of Executive Order 11246, as amended.

                                   ARTICLE 25

                                  FORCE MAJEURE

25.1   Force Majeure

       If a Party is unable, wholly or in part because of a Force Majeure, to
       carry out its obligations under this Agreement, other than the obligation
       to make money payments, that Party shall give the other Parties prompt
       written notice of the Force Majeure with full particulars about it.
       Effective upon the date notice is given, the obligations of the Party, so
       far as they are affected by the Force Majeure, shall be suspended during,
       but no longer than, the .continuance of the Force Majeure. Time is of the
       essence in the performance of this Agreement, and every reasonable effort
       will be made by the Party to avoid delay or suspension of any work or
       acts to be performed under this Agreement. The requirement that the Force
       Majeure be remedied with all reasonable dispatch shall not require a
       Party to settle strikes or other labor difficulties.

                                   ARTICLE 26

                   SUCCESSORS, ASSIGNS AND PREFERENTIAL RIGHTS

26.1   Successors and Assigns

       This Agreement binds and inures to the benefit of the Parties and their
       respective heirs, successors, and assigns and shall constitute a covenant
       running with the Contract Area. Each Party shall incorporate in each
       assignment of an interest in the Contract Area a provision that the
       assignment is subject to this Agreement.

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26.2   Transfer of interest

       No transfer, assignment, or other disposition of interest by a Party
       shall relieve the Party of liabilities and obligations it has incurred or
       that are attributable to the interest transferred before the date of the
       transfer, and the obligation to pay and bear all costs and risks
       attributable to an operation in which the Party was a Participating Party
       before making the transfer, and the lien and security rights granted by
       Section 8.6 (Security Rights) shall continue to burden the interest
       transferred to secure payment of the obligations. The transferor shall be
       liable for all costs, expenses, and liabilities for well plugging and
       abandonment, Platform and Development Facilities removal and disposal,
       and site clearance for property and equipment attributable to the
       assigned interest before the date of the transfer, net of salvage
       proceeds.

26.3   Consent to Assign

       A Party may not sell, transfer, farm out, assign, or otherwise dispose of
       all or part of its Working Interest in the Contract Area without the
       prior written consent of the other Parties, unless:

       (a)    the transferee is financially capable of assuming the obligations
              hereunder and, in accordance with Subsection 26.3(c), the
              transferor furnishes the Parties with proof of such financial
              capability that, in the case of Outer Continental Shelf leases,
              shall be proof that the transferee is currently qualified by the
              Minerals Management Service, an agency of the United States
              Department of the Interior, or a successor agency having
              jurisdiction (hereinafter "MMS"), to own Outer Continental Shelf
              leases and that the transferee would not be required by the MMS to
              post a supplemental bond pursuant to 30 CFR ss. 256.53(d) & (e) if
              such transferee owned 100% of the Working Interest in the Contract
              Area.

       (b)    the transferee agrees in writing to assume all obligations and
              liabilities under this Agreement related to the interest acquired
              arising from and after the effective date of the transfer, and

       (c)    the transferor has given the other Parties written notice of the
              transfer at least fifteen (15) days before the date of the
              transfer, such notice to include the name of each proposed
              transferee, a description of the interests to be transferred, and
              the proof set forth in Subsection 26.3(a).

       The requirements of this Section 26.3 shall not apply to a merger,
       consolidation, reorganization, sale or transfer to an Affiliate, a
       mortgage by a Party of its interest in the Contract Area, a sale of all,
       or substantially all, of a Party's domestic exploration and production
       properties, or a transfer or disposition between the Parties hereto.

26.4   Transfers Between Parties

       A transfer, relinquishment, or other disposition of interests in the
       Contract Area between Parties under the Acreage Out Option (if selected)
       under Section 10.5 (Operations by Fewer Than All Parties); Section 13.11
       (Lease Maintenance Operations); Section 13.12 (Retention of Lease by
       Non-consent Well); Article 15 (Withdrawal); or Section 16.4
       (Non-participation in Payments) shall be made without warranty of title.

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       Any such transfer between the Parties, if applicable, shall be free and
       clear of all Subsequently Created Interests, as defined in Section 16.2
       (Subsequently Created Interest), and all mortgages, liens, and
       encumbrances.

26.5   Division of interest

       If, at any time, the interest of a Party is divided among and owned by
       four (4) or more co-owners, Operator, at its discretion, may require the
       co-owners to appoint a single trustee or agent with full authority to
       receive notices, approve expenditures, receive billings for, and approve
       and pay the Party's share of the joint expenses, and to deal generally
       with, and with power to bind the co owners of the Party's interest within
       the scope of the operations embraced in this Agreement. All such
       co-owners may separately dispose of their respective shares of the oil,
       gas, and condensate produced from the Contract Area and may receive,
       separately, payment of the sale proceeds thereof.

26.6   Preferential Rights

       If a Party desires to transfer, sell, farm out, assign, or otherwise
       dispose of all or part of its Working Interest ("Disposing Party"), it
       shall promptly give written notice to the other Parties with full
       information about the proposed transaction, including, but not limited
       to, the name and address of the prospective transferee (who must be
       ready, willing, and able to acquire the interest and deliver the stated
       consideration therefor), the consideration for the transfer, farm out
       terms, and all other terms of the offer. In the case of a package sale of
       oil and gas interests that includes all or part of the Disposing Party's
       Working Interest, or if the proposed transaction is structured as a
       non-simultaneous, like-kind exchange under Section 1031 of the Internal
       Revenue Code of 1986, as amended ("Code"), the Working interest that is
       subject to this preferential right shall be separately valued in good
       faith and the notice shall state the value attributed to the interest by
       the prospective transferee. The other Parties shall then have an optional
       prior right, for a period of thirty (30) days after receipt of the
       notice, to elect to purchase or acquire on the same terms and conditions,
       or on equivalent terms for a non-cash transaction, all of the Working
       Interest that the Disposing Party is proposing to transfer. If this
       preferential right is exercised by a Party, the purchasing or acquiring
       Parties shall share the purchased or acquired interest in the proportions
       that the Working Interest of each bears to the total Working interest of
       all acquiring Parties, or in such proportions as the acquiring Parties
       otherwise agree. This preferential right shall apply separately to each
       Working Interest or part thereof covered by this Agreement, regardless of
       whether it is included in the proposed transaction along with other oil
       and gas interests, whether as a sale, farm out, or non-simultaneous,
       like-kind exchange, and no provision in this Agreement shall be
       interpreted to defeat this preferential right. Upon exercise of this
       preferential right, the acquiring Parties shall agree to perform all
       obligations of the prospective transferee under the proposed transaction
       only for the Working Interest subject to the proposed transaction. This
       preferential right, however, shall not exist or apply when a Party
       proposes (a) to mortgage its interest; (b) to dispose of or transfer its
       interest to a third party by (i) merger, (ii) reorganization, or

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       (iii) consolidation; (c) to sell all, or substantially all, of its
       exploration and production properties located in the Gulf of Mexico,
       Outer Continental Shelf of the United States of America; or (d) to
       transfer the interest under a property exchange transaction other than a
       non-simultaneous, likekind exchange under Section 1031 of the Code. If
       the proposed transaction is not consummated within six (6) months after
       receipt of the notice by the other Parties, the-Working Interest shall
       again be governed by this Section 26.6 and the preferential right shall
       again arise for the offered interest as herein described.

                                   ARTICLE 27

                            ADMINISTRATIVE PROVISIONS

27.1   Term

       This Agreement shall remain in effect so long as a Lease in the Contract
       Area remains in effect and thereafter until (a) all wells have been
       abandoned and plugged or turned over to the Parties owning an interest in
       the Lease on which the wells are located; (b) all Platforms, Development
       Facilities, and equipment have been disposed by the Operator in
       accordance with Article 14 (Abandonment, Salvage, and Surplus); (c) all
       Claims as defined in Article 19 (Liability, Claims, and Lawsuits) have
       been settled or otherwise disposed of; and (d) there has been a final
       accounting and settlement by all Parties. In accordance with Article 4.5
       (Selection of Successor Operator), this Agreement will terminate if no
       Party is willing to become Operator, effective after all conditions in
       clauses (a) through (d) above have been completed. In accordance with
       Article 15.2.1 (Unanimous Withdrawal), this Agreement will terminate if
       all Parties elect to withdraw, effective after all conditions in clauses
       (a) through (d) above have been completed. Termination of this Agreement
       shall not relieve a Party of a liability or obligation accrued or
       incurred before termination and is without prejudice to all continuing
       confidentiality obligations or other obligations in this Agreement.

27.2   Waiver

       A term, provision, covenant, representation, warranty, or condition of
       this Agreement may be waived only by written instrument executed by the
       Party waiving compliance. The failure or delay of a Party in the
       enforcement or exercise of the rights granted under this Agreement shall
       not constitute a waiver of said rights nor shall it be considered as a
       basis for estoppel. Time is of the essence in the performance of this
       Agreement and all time limits shall be strictly construed and enforced.

27.3   Waiver of Right to Partition

       Each Party waives the right to bring an action for partition of its
       interest in the Contract Area, wells, Platform, Development Facilities,

                                       63

<PAGE>

       and other equipment held under this Agreement, and covenants that during
       the existence of this Agreement it shall not resort at any time to an
       action at law or in equity to partition any or all of the Leases and
       lands or personal. property subject to this Agreement.

27.4   Compliance With Laws and Regulations

       This Agreement, and all activities or operations conducted by the Parties
       under this Agreement, are expressly subject to, and shall comply with,
       all laws, orders, rules, and regulations of all federal, state, and local
       governmental authorities having jurisdiction over the Contract Area.

       27.4.1 Severance of Invalid Provisions

              If, for any reason and for so long as, a clause or provision of
              this Agreement is held by a court of competent jurisdiction to be
              illegal, invalid, unenforceable or unconscionable under a present
              or future law (or interpretation thereof), the remainder of this
              Agreement will not be affected by that illegality or invaldity. An
              illegal or invalid provision will. be, deemed severed from this
              Agreement, as if this Agreement had been executed without the
              illegal or invalid provision. The surviving provisions of this
              Agreement will remain in full force and effect unless the removal
              of the illegal or invalid provision destroys the legitimate
              purposes of this Agreement; in which event this Agreement shall be
              null and void.

       27.4.2 Fair and Equal Employment

              Each of the Parties is an Equal Opportunity Employer, and the
              equal opportunity provisions of 30 CFR 270 and 41 CFR 60-1, as
              amended or modified, are incorporated in this Agreement by
              reference. The affirmative action clauses concerning disabled
              veterans and veterans of the Vietnam era (41 CFR 60-250) and the
              affirmative action clauses concerning employment of the
              handicapped (41 CFR 60-741) are also incorporated in this
              Agreement by reference. In performing work under this Agreement,
              the Parties shall comply with (and the Operator shall require each
              independent contractor to comply with) the governmental
              requirements in Exhibit "E" that pertain to non segregated
              facilities.

27.5   Construction and Interpretation of this Agreement

       27.5.1 Headings for Convenience

              Except for the definition headings in Article 2 (Definitions), all
              the table of contents, captions, numbering sequences, and
              paragraph headings in this Agreement are inserted for convenience
              only and do not define, expand or limit the scope, meaning, or
              intent of this Agreement.

       27.5.2 Article References

              Except as otherwise provided in this Agreement, each reference to
              an article of this Agreement includes all of the referenced
              article and its sub-articles.

                                       64

<PAGE>

       27.5.3 Gender and Number

              The use of pronouns in whatever gender or number is a proper
              reference to the Parties to this Agreement though the Parties may
              be individuals, business entities, or groups thereof. Reference in
              this Agreement to the singular of a noun or pronoun includes the
              plural and vice versa.

       27.5.4 Future References

              A reference to a Party includes such Party's successors and
              assigns and, in the case of governmental bodies, persons
              succeeding to their respective functions and capacities.

       27.5.5 Currency

              Any amounts due or payable under this Agreement- shall be paid in
              United States currency.

       27.5.6 Optional Provisions

              In the event that any "Optional" provision of this Agreement is
              not adopted by the Parties to this Agreement by a typed, printed
              or handwritten indication, such provision shall not form a part of
              this Agreement, and no inference shall be made concerning the
              intent of the Parties in regard to the subject matter of the
              "Optional" provision

       27.5.7 Joint Preparation

              This Agreement shall be deemed for all purposes to have been
              prepared through the joint efforts of the Parties and shall not be
              construed for or against one Party or the other as a result of the
              preparation, submittal, drafting, execution or other event of
              negotiation hereof.

       27.5.8 Integrated Agreement

              This Agreement contains the final and entire agreement of the
              Parties for the matters covered by this Agreement and, as such,
              supersedes all prior written or oral communications and
              agreements. This Agreement may not be modified or changed except
              by written amendment signed by the Parties.

       27.5.9 Binding Effect

              To the extent it is assignable, this Agreement shall bind and
              inure to the benefit of the Parties and their respective
              successors and assigns, and shall constitute a covenant running
              with the land comprising the Contract Area. This Agreement does
              not benefit or create any rights in a person or entity that is not
              a Party to this Agreement.

       27.5.10 Further Assurances

              Each Party will take all actions necessary and will sign all
              documents necessary to implement this Agreement. Except as
              otherwise provided in this Agreement, within (30) days after their
              receipt of a valid written request for those documents from a
              Party, all other Parties shall prepare and execute the documents.

                                       65

<PAGE>

       27.5.11 Counterpart Execution

              This Agreement may be executed by signing the original or a
              counterpart. If this Agreement is executed in counterparts, all
              counterparts taken together shall have the same effect as if all
              Parties had signed the same agreement. No Party shall be bound to
              this Agreement until all Parties have executed a counterpart or
              the original of this Agreement. This Agreement may also be
              ratified by a separate instrument that refers to this Agreement
              and adopts by reference all provisions of this Agreement. A
              ratification shall have the same effect as an execution of this
              Agreement.

27.6   Restricted Bidding

       If more than one Party is ever on the list of restricted joint bidders
       for Outer Continental Shelf. ("OCS") lease sales, as issued by the MMS
       under 30 CFR 256.44, as amended, the Parties shall comply with all
       statutes and regulations regarding restricted joint bidders on the OCS.

                                   ARTICLE 28

                            AREA OF MUTUAL INTEREST

28.1   Area of Mutual Interest (AMI)

       If either Party hereto, acting directly or through an agent, at any time
       prior to the third anniversary of the effective date of this Agreement,
       acquires, or has the right to acquire, by purchase, assignment, farmin,
       option or otherwise, an interest in an oil and gas lease covering lands
       listed on Exhibit "A" under the heading "Area of Mutual Interest (AMI)",
       then the Party so acquiring or having the right to acquire ("Acquiring
       Party") shall notify the other Party hereto in writing of the interest or
       rights acquired, within ten (10) days after acquisition thereof. The
       notice shall include all the terms and conditions of the interest or
       rights acquired. Said Party so notified ("Notified Party") shall have the
       option for a period of thirty (30) days after such notice is received to
       acquire its proportionate share (equal to its Working Interest as listed
       in Exhibit "A") in the acquired interest by reimbursing the Acquiring
       Party for its proportionate share of the costs attributable to the
       acquired interest and by assuming its proportionate share of the
       Acquiring Party's obligations, if any, attributable to the acquired
       interest. Failure of the Notifed Party to notify the Acquiring Party of
       its election within said thirty (30) day period shall be deemed an
       election not to participate.

       Chevron U.S.A. Inc. and Ridgewood Energy Corporation, Manager Ridgewood
       Energy Q Fund, LLC. hereby agree and acknowledge that this Agreement is
       made subject to that certain Exploration Participation Agreement (EPA)
       dated September 1, 2005 between Chevron U.S.A. Inc. and Ridgewood Energy

                                       66

<PAGE>

       Corporation, Manager Ridgewood Energy Q Fund, LLC., and that in the event
       of a conflict between the terms and provisions of this Agreement and the
       EPA, the terms and provisions of the EPA shall control.

       Chevron U.S.A. Inc. and Newfield Exploration Company hereby agree and
       acknowledge that this Agreement is made subject to that certain
       Exploration Participation Agreement (EPA) dated November 1, 2004 between
       Chevron U.S.A. Inc. and Newfield Exploration Company, and that in the
       event of a conflict between the terms and provisions of this Agreement
       and the EPA, the terms and provisions of the EPA shall control.

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
day and year first above written.

WITNESSES:                              Chevron U.S.A. Inc.

[ILLEGIBLE SIGNATURE]                   By: /s/ G.R. Cain
--------------------------------           ------------------------------

/s/ Diane Mayo                          Title: Assistant Secretary
--------------------------------              ---------------------------

                                        Newfield Exploration Company

________________________________        By:______________________________

________________________________        Title:___________________________

                                        Ridgewood Energy Corporation, Manager
                                        Ridgewood Energy Q Fund LLC.

/s/ Randy Bennett                       By: /s/ W.G. Tabor
---------------------------------          ------------------------------

/s/ Donna Ermis                         Title: Executive Vice President
---------------------------------             ---------------------------

                                       67

<PAGE>

                                   Exhibit "A"

    Attached to and made a part of that certain Offshore Operating Agreement
          effective as of October 1, 2005, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
                 Manager Ridgewood Energy Q Fund, LLC, covering
            Main Pass Blocks 221 and 222, Offshore, Gulf of Mexico:

1.     Chevron U.S.A. Inc. (Chevron) is designated as Operator

2.     Contract Area

       Oil and Gas Lease of Submerged Lands bearing Serial No. OCS-G 26163,
       dated, effective July 1, 2004, by and between the United States of
       America, as Lessor, and Contango Offshore Exploration LLC as Lessee
       covering all of Block 221, Main Pass Area, South and East Addition, OCS
       Leasing Map, Louisiana Map No. 10A, covering approximately 4,994.55
       acres, whereby 100% of the record title covering all of Block 221 was
       assigned from Contango Offshore Exploration LLC to Chevron U.S.A. Inc.,
       dated effective July 20, 2004.

       Oil and Gas Lease of Submerged Lands bearing Serial No. OCS-G 26164,
       dated effective July 1, 2004, by and between the United States of
       America, as Lessor, and Chevron U.S.A. Inc. as Lessee covering all of
       Block 222, Main Pass Area, South and East Addition, OCS Leasing Map,
       Louisiana Map No. 10A, covering approximately 4,994.55 acres.

3.     Division of Interest

       Company                                       Working Interest Percentage
       -------------------------------------------------------------------------
       Chevron U.S.A. Inc. (Chevron)                 55.000% *
       Cabot Oil & Gas Corporation (Cabot)            0.000% **
       Newfield Exploration Company (Newfield)       10.000% ***
       Ridgewood Energy Corporation (Ridgewood)      35.000% ****
                                                    --------
                                                    100.000%

       * Chevron's interest is subject to three (3) separated Exploration
       Participation Agreements between Cabot, Newfield and Ridgewood.

       ** Cabot's interest, rights and obligations are governed by the
       Exploration Participation Agreement (EPA) dated November 1, 2004 between
       Chevron and Cabot. Cabot has repudiated its obligations under the EPA and
       has been placed in default by Chevron. As a defaulting party, Cabot is
       not entitled to well information. Any Cabot working interest will be
       determined in accord with the Alternative Dispute Resolution provisions
       of the EPA. Any Cabot respective working interest percentages will be
       born out of Chevron's 55% working interest.

JOA Exhibit "A"

<PAGE>

       *** Newfield's interest, rights and obligations is pursuant to the
       Exploration Participation Agreement (EPA) dated November 1, 2004 between
       Chevron and Newfield. The 10% working interest represents Newfield's
       After Casing Point interest in the Contract Area as referenced in subject
       EPA.

       **** Ridgewood's interest, rights and obligations is pursuant to the
       Exploration Participation. Agreement (EPA) dated September 1, 2005
       between Chevron and Ridgewood. The 35% working interest represents
       Ridgewood's After Casing Point interest in the Contract Area as
       referenced in subject EPA.

4.     Notification Addressees

        Chevron U.S.A. Inc. *
        14141 Southwest Freeway
        Sugar Land, Texas 77478
        Tel.: (281) 287-7931
        Fax: (281) 287-7575
        Attention: Gordon R. Cain
                    Gulf of Mexico-Land Manager

        Newfield Exploration Company
        363 N. Sam Houston Pkwy. E., Suite 2020
        Houston, Texas 77060
        Tel: (281) 847-6037
        Fax: (281) 405-4207
        Attention: Gulf of Mexico - Land Manager

        Ridgewood Energy Corporation
        11700 Old Katy Road, Suite 280
        Houston, Texas 77079
        Tel: (281) 293-8449
        Fax: (281) 293-7391
        Attention: W. Greg Tabor

*This address is temporary and will be amended as necessary by Letter Agreement.

JOA Exhibit "A"

<PAGE>

                                  Exhibit "B"

    Attached to and made a part of that certain Offshore Operating Agreement
     effective as of October 1, 2005, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
                 Manager Ridgewood Energy Q Fund, LLC, covering
            Main Pass Blocks 221 and 222, Offshore, Gulf of Mexico.

                             INSURANCE REQUIREMENTS
                             ----------------------

1.   Operator shall carry insurance as follows for the benefit and protection of
     the Parties to this Agreement:

     a)   Worker's Compensation Insurance in accordance with laws of
          governmental bodies having jurisdiction including, if applicable,
          United States Longshore and Harbor Workers' Compensation Act with
          Outer Continental Shelf Extension, Maritime Employers' Liability
          (including, but not limited to, the Jones Act and Death on the High
          Seas Act) and Employers' Liability Insurance. Employers' Liability
          Insurance shall provide coverage of $1,000,000 per accident.

     b)   Operator may include the aforesaid risks under its qualified
          self-insurance program provided Operator complies with applicable
          laws, and in such event Operator shall charge to the Joint Account a
          premium determined by applying manual insurance rates to the payroll.

2.   Operator shall not be obligated or authorized to obtain or carry on behalf
     of the Joint Account any additional insurance covering the Parties or the
     operations to be conducted hereunder without the consent and agreement of
     all Parties. Such insurance, if authorized, shall contain waivers of
     subrogation in favor of the other Parties. Each Party individually may
     acquire at its own expense such insurance as it deems proper to protect
     itself against claims, losses, damage to or destruction of property of
     third parties, or personal injury or death of third persons arising out of
     the joint operations. All uninsured. losses and all damages to jointly
     owned property shall be borne by the Parties in proportion to their
     respective interests.

3.   Operator shall not carry physical damage insurance on jointly owned
     property, it being understood and agreed that each Party will be
     responsible for its own interest in such properties and will assume its
     portion of any loss that occurs. Each Party hereby waives its rights of
     recovery against all other Parties to the agreement, and agrees that all
     insurance policies covering its interest in the jointly owned property will
     be suitably endorsed to efectuate this waiver. Operator shall promptly
     notify Non-operators in writing of all losses involving damage to a jointly
     owned property in excess of $50,000.

4.   Operator shall require all contractors engaged in operations under this
     Agreement to comply with the applicable Worker's Compensation and
     Employers' Liability laws and to maintain such other insurance and in such
     amounts as Operator deems necessary.

5.   In the event less than all Parties participate in an operation conducted
     under the terms of this Agreement, then the insurance requirement and
     costs, as well as all losses, liabilities and expenses incurred as the
     result of such operation, shall be the burden of the Party or Parties
     participating therein.

JOA - Exhibit "B"

<PAGE>

                                   Exhibit "C"

    Attached to and made a part of that certain Offshore Operating Agreement
         effective as of October 1, 2005, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
              Manager Ridgewood Energy Q Fund, LLC, covering Main
               Pass Blocks 221-and 222, Offshore, Gulf of Mexico.

                              ACCOUNTING PROCEDURE
                            OFFSHORE JOINT OPERATIONS

                              I. GENERAL PROVISIONS

1.   Definitions

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

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

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

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

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

     "Parties" shall mean Operator and Non-Operators.

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

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

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

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

<PAGE>

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

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

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

2.   Statements and Billings

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

3.   Advances and Payments by Non-Operators

     A.   Unless otherwise provided for in the Agreement, the Operator may
          require the Non-Operators to advance their share of estimated cash
          outlay for the succeeding month's operation within fifteen (15) days

                                       1
JOA - Exhibit "C"

<PAGE>

     after receipt of the billing or by the first day of the month for which the
     advance is required, whichever is later. Operator shall adjust each monthly
     billing to reflect advances received from the Non-Operators.

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

4.   Adjustments

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

5.   Audits

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

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

<PAGE>

6.   Approval by Non-Operators

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

                                II. DIRECT CHARGES

Operator shall charge the Joint Account with the following items:

1.   Rentals and Royalties

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

2.   Labor

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

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

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

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

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

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

                                       2
JOA - Exhibit "C"

<PAGE>

     C.   Expenditures or contributions made pursuant to assessments imposed by
          governmental authority which are applicable to Operator's costs
          chargeable to the Joint Account under. Paragraphs 2A and 2B of this
          Section II. D, Personal Expenses of those employees whose salaries and
          wages are chargeable to the Joint Account under Paragraph 2A of this
          Section II.

3.   Employee Benefits

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

4.   Material

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

5.   Transportation

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

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

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

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

<PAGE>

6.   Services

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

7.   Equipment, Facilities and Affiliate Services Furnished by Operator

     A.   Operator shall charge the Joint Account for use of Operator-owned
          equipment and facilities, including Shore Base and/or Offshore
          Facilities, at rates commensurate with costs of ownership and
          operation. Such rates may include labor, maintenance, repairs, other
          operating expense, insurance, taxes, depreciation, abandonment,
          reclamation and interest on gross investment less accumulated
          depreciation not to exceed twelve percent 12% per annum. In addition,
          for platforms and facilities only, the rate may include an element of
          the estimated cost of dismantlement. Such rates shall not exceed
          average commercial rates currently prevailing in the immediate area of
          the Joint Property.

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

8.   Damages and Losses to Joint Property

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

                                       3
JOA - Exhibit "C"

<PAGE>

9.   Legal Expense

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

10.  Taxes

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

11.  Insurance

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

12.  Communications

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

13.  Ecological and Environmental

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

14.  Abandonment and Reclamation

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

<PAGE>

15.  Other Expenditures

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

                                  III. OVERHEAD

As compensation for administrative, supervision, office services and warehousing
costs, Operator shall charge the Joint Account in accordance with this Section
11.

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

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

          ( ) shall be covered by the overhead rates.

                                       4
JOA - Exhibit "C"

<PAGE>

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

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

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

1.   Overhead - Drilling and Producing Operations

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

          (X) Fixed Rate Basis, Paragraph IA, or
          ( ) Percentage Basis, Paragraph 1B

     A.   Overhead - Fixed Rate Basis

          (1)  Operator shall charge the Joint Account at the following rates
               per well per month:

               Drilling Well Rate $40,000 (Prorated for less than a full month)

               Producing Well Rate $4,000

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

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

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

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

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

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

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

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

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

<PAGE>

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

     B.   Overhead - Percentage Basis

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

               (a)  Development

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

               (b)  Operating

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

                                       5
JOA - Exhibit "C"

<PAGE>

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

               For the purpose of determining charges on a percentage basis
               under Paragraph 111 of this Section III, development shall
               include all costs in connection with drilling, redrilling, or
               deepening of any or all wells, and shall also include any
               remedial operations requiring a period of five (5) consecutive
               work days or more on any or all wells; also, preliminary
               expenditures necessary in preparation for drilling and
               expenditures incurred in abandoning when the well is not
               completed as a producer, and original cost of construction or
               installation of fixed assets, the expansion of fixed assets and
               any other project clearly discernible as a fixed asset, except
               Major Construction as defined in Paragraph 2 of this Section III.
               All other costs shall be considered as Operating except that
               catastrophe costs shall be assessed overhead as provided in
               Section III, Paragraph 3.

2.   Overhead - Major Construction

     To compensate Operator for overhead costs incurred in the construction and
     installation of fixed assets, the expansion of fixed assets, and any other
     project clearly discernible as a fixed asset or in the abandonment of fixed
     assets and any associated reclamation required for the exploration;
     development and operation of the Joint Property, Operator shall either
     negotiate a rate prior to the beginning of construction, or shall charge
     the Joint Account for Overhead based on the following rates for any Major
     Construction project in excess of $25,000

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

          (1)  5 % of total costs if such costs are more than $ 25,000 but less
               than $100,000; plus

          (2)  3 % of total costs in excess of $100,000 but less than
               $11,000,000; plus

          (3)  2.5 % of total costs in excess of $ 1,000,000.

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

          (1)  4 % of total costs if such costs are more than $ 25,000 but less
               than $100,000; plus

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

          (3)  2 % of total costs in excess of $ 1,000,000.

     Total costs shall mean the gross cost of any one project. For the purposes
     of this paragraph, the component parts of a single project shall not be
     treated separately and the cost of drilling and workover wells and
     artificial life equipment shall be excluded.

     On each project, Operator shall advise Non-Operator(s) in advance which of
     the above options shall apply. In the event of any conflict between the
     provisions of this paragraph and those provisions under Section II,
     Paragraph 2 or Paragraph 6, the provisions of this paragraph shall govern.

<PAGE>

3.   Overhead - Catastrophe

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

     (1)  5 % of total costs through $100,000; plus

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

     (3)  2 % of total costs in excess of $1,000,000.

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

4.   Amendment of Rates

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

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

Operator is responsible for Joint Account Material and shall make proper and
timely charges and credits for all Material movements affecting the Joint
Property. Operator shall provide all Material for use on the Joint Property;
however, at Operator's option, such Material may be supplied by the
Non-Operator. Operator shall make timely disposition of idle and/or surplus
Material, such disposal being made either through sale to Operator or
Non-Operator, division in kind, or sale to outsiders. Operator may purchase, but

                                       6
JOA - Exhibit "C"

<PAGE>

shall be under no obligation to purchase, interest of Non-Operators in surplus
condition A or B Material. The disposal of surplus Controllable Material not
purchased by the Operator shall be agreed to by the Parties.

1.   Purchases

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

2.   Transfers and Dispositions

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

     A.   New Material (Condition A)

          (1)  Tubular Goods Other than Line Pipe

               (a)  Tubular, goods, sized 2 3/8 inches OD and larger, except
                    line pipe, shall be priced at Eastern mill published carload
                    base prices effective as of date of movement plus
                    transportation cost using the 80,000 pound carload weight
                    basis to the railway receiving point nearest the Joint
                    Property for which published rail rates for tubular goods
                    exist. If the 80,000 pound rail rate is not offered, the
                    70,000 pound or 90,000 pound rail rate may be used. Freight
                    charges for tubing will be calculated from" Lorain, Ohio,
                    and casing from Youngstown, Ohio.

               (b)  For grades which are special to one mill only, prices shall
                    be computed at the mill base of that mill plus
                    transportation cost from that mill to the railway receiving
                    point nearest the Joint Property as provided above in
                    Paragraph 2.A.(1)(a). For transportation cost from points
                    other than Eastern mills, the 30,000 pound Oil Field Haulers
                    Association interstate truck rate shall be used.

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

               (d)  Macaroni tubing (size less than 2 3/8 inch OD) shall be
                    priced at the lowest published out-of stock prices f.o.b.
                    the supplier plus transportation costs, using the Oil Field
                    Haulers Association interstate truck rate per weight of
                    tubing transferred, to the railway receiving point nearest
                    the Joint Property.

          (2)  Line Pipe

               (a)  Line pipe movements (except size 24 inch OD and larger with
                    walls 3/4 inch and over) 30,000 pounds or more shall be
                    priced under provisions of tubular goods pricing in
                    Paragraph A.(1) (a) as provided above. Freight charges shall
                    be calculated from Lorain, Ohio.

               (b)  Line pipe movements (except size 24 inch OD and larger with
                    walls 3/4 inch and over) less than 30,000 pounds shall be
                    priced at Eastern mill published carload base prices
                    effective as of date of shipment, plus transportation costs

<PAGE>

                    based on freight rates as set forth under provisions of
                    tubular goods pricing in Paragraph from Lorain, Ohio.
                    A.(1)(a) as provided above. Freight charges shall be
                    calculated

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

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

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

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

     B.   Good Used Material (Condition B)

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

          (1)  Material moved to the Joint Property At seventy-five percent
               (75%) of current new price, as determined by Paragraph A.

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

                                       7
JOA - Exhibit "C"

<PAGE>

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

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

          (3)  Material not used on and moved from the Joint Property' At
               seventy-five percent (75%) of current new price as determined by
               Paragraph A.

          The cost of reconditioning, if any, shall be absorbed by the
          transferring property.

     C.   Other Used Material

          (1)  Condition C

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

          (2)  Condition D

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

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

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

          (3)  Condition E

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

     D.   Obsolete Material

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

<PAGE>

     E.   Pricing Conditions

          (1)  Loading or unloading costs may be charged to the Joint Account at
               the rate of twenty-five cents (250) per hundred weight on all
               tubular goods movements, in lieu of actual loading or unloading
               costs sustained at the stocking point. The above rate shall be
               adjusted as of the first day of April each year following January
               1, 1985 by the same percentage increase or decrease used to
               adjust overhead rates in Section II, Paragraph LA.(4). Each year,
               the rate calculated shall be rounded to the nearest cent and
               shall be the rate in effect. until the first day of April next
               year. Such rate shall be published each year by the Council of
               Petroleum Accountants Societies.

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

3.   Premium Prices

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

4.   Warranty of Material Furnished By Operator

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

                                 V. INVENTORIES

The Operator shall maintain detailed records of Controllable Material.

                                       8
JOA - Exhibit "C"

<PAGE>

1.   Periodic Inventories, Notice and Representation

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

2.   Reconciliation and Adjustment of Inventories

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

3.   Special Inventories

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

4.   Expense of Conducting Inventories

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

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

                                       9
JOA - Exhibit "C"

<PAGE>

                                   Exhibit "D"

    Attached to and made a part of that certain Offshore Operating Agreement
         effective as of October 1, 200,5, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
                 Manager Ridgewood Energy Q Fund, LLC, covering
            Main Pass Blocks 221 and 222, Offshore, Gulf of Mexico.

                            NONDISCRIMINATION CLAUSE

During the performance of this Agreement, the "contractor" (meaning and
referring separately to each party hereto) agrees, unless exempt therefrom to
comply with all provisions of Executive Order 11246 which are incorporated
herein by reference, and (a) if contractor has more than 50 employees or
contracts with another party hereto in excess of $10,000, contractor must file
Standard Form 100 (EEO-1), (b) if contractor has 50 or more employees and a
contract of $50,000 or more, contractor is required to develop a written
"Affirmative Action Compliance Program" for each of its establishments according
to the Rules and Regulations published by the United States Department of Labor
in 41 CFR, Chapter 60. Further, contractor hereby certifies that it does not now
and will not maintain any facilities provided for its employees in a segregated
manner or permit its employees to perform their services at any location under
its control where segregated facilities are maintained, as such segregated
facilities are defined in Title 41, Chapter 60-1.8, Code of Federal Regulations,
revised as of January 1, 1969, unless exempt therefrom. Contractor further
warrants that no other law, regulation or ordinance of the United States, or any
state, or any governmental authority or agency has been violated in the
manufacture, procurement or sale of any good furnished, work performed or
service rendered pursuant to this contract.

Unless exempt by rules, regulations or orders of the United States Secretary of
Labor, issued pursuant to Section 204 of Executive Order 11246, dated September
24, 1965, during the performance of this contract, the contractor agrees as
follows:

"(1) The contractor will not discriminate against any employee or applicant for
     employment because of race, color, religion, sex or national origin. The
     contractor will take affirmative action to ensure that applicants are
     employed and that employees are treated during employment, without regard
     to their race, color, religion, sex or national original. Such action shall
     include, but not be limited to, the following: Employment, upgrading,
     demotion, transfer, recruitment or recruitment advertising; layoff or
     termination; rates of pay or other forms of compensation; and selection for
     training, including apprenticeship. The contractor agrees to post in
     conspicuous places, available to employees and applicants for employment,
     notices to be provided by the contracting officer setting forth the
     provisions of this nondiscrimination clause."

"(2) The contractor will, in all solicitations or advertisements for employees
     placed by or on behalf of the contractor, state that all qualified
     applicants will receive consideration for employment without regard to
     race, color, religion, sex or national origin."

                                       1
JOA -- Exhibit "D"

<PAGE>

"(3) The contractor will send to each labor union or representative of workers
     with which he has a collective bargaining agreement or other contract or
     understanding, a notice to be provided by the agency contracting officer,
     advising the labor union or workers' representative of the contractor's
     commitments under Section-202 of Executive, Order 11246 of September 24,
     1965, and shall post copies of the notice in conspicuous places available
     to employees and applicants for employment."

"(4) The contractor will comply with all provisions of Executive Order 11246 of
     September 24, 1965, and of the rules, regulations and relevant, orders of,
     the Secretary of Labor."

"(5) The contractor will furnish all information and reports required by
     Executive Order 11246 of September 24, 1965, and by the rules, regulations
     and orders of the Secretary of Labor, or pursuant thereto, and will permit
     access to his books, records and accounts by the contracting agency and the
     Secretary of Labor for purposes of investigating to ascertain compliance
     with such rules, regulations and orders."

"(6) In the event of the contractor's noncompliance with the nondiscrimination
     clauses of this contract or with any of such rules, regulations or orders,
     this contract may be canceled, terminated or suspended in whole or in part
     and the contractor may be declared ineligible for further Government
     contracts in accordance with procedures authorized in Executive Order 11246
     of September 24, 1965, or by rule, regulation or order of the Secretary of
     Labor, or as otherwise provided by law."

"(7) The contractor will include the provisions of paragraph (1) through (8) in
     every subcontract or purchase order unless exempted by rules, regulations
     or orders of the Secretary of Labor issued pursuant to Section 204 of
     Executive Order 11246 of September 24, 1965, so that such provisions will
     be binding upon each subcontractor or vendor. The contractor will take such
     action with respect to any subcontract or purchase order as the contracting
     agency may direct as a means of enforcing such provisions including
     sanctions for noncompliance; provided, however, that in the event the
     contractor becomes involved in, or is result of such direction by the
     contracting agency, the contractor may request the United States to enter
     into such litigation to protect the interests of the United States."

"(8) Contractor agrees and covenants that none of its employees or employees of
     its subcontractors who provided services pursuant to this contract are
     unauthorized aliens, as defined in the Immigration, Reform and Control Act
     of 1986."

                                       2
JOA - Exhibit "D"

<PAGE>

                                   Exhibit "E"

    Attached to and made a part of that certain Offshore Operating Agreement
         effective as of October 1, 2005, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
                 Manager Ridgewood Energy Q Fund, LLC, covering
            Main Pass Blocks 221 and 222, Offshore, Gulf of Mexico.

                      GAS BALANCING AGREEMENT ("AGREEMENT")

1.   Definitions

     The following definitions shall apply to this Agreement:

     2.   "Arm's Length Agreement" shall mean any gas sales agreement with an
          unaffiliated purchaser or any gas sales agreement with an affiliated
          purchaser where the sales price and delivery conditions under such
          agreement are representative of prices and delivery conditions
          existing under other similar agreements in the area between
          unaffiliated parties at the same time for natural gas of comparable
          quality and quantity.

     3.   "Balancing Area" shall mean all of the acreage and depths subject to
          the Operating Agreement.

     4.   "Full Share of Current Production" shall mean the Percentage Interest
          of each Party in the Gas actually produced from the Balancing Area
          during each month.

     5.   "Gas" shall mean all hydrocarbons produced or producible from the
          Balancing Area, whether from a well classified as an oil well or gas
          well by the regulatory agency having jurisdiction in such matters,
          which are or may be made available for sale or separate disposition by
          the Parties, excluding oil, condensate and other liquids recovered by
          field equipment operated for the joint account. "Gas" does not include
          gas used in joint operations, such as for fuel, recycling or
          reinjection, or which is vented or lost prior to its sale or delivery
          from the Balancing Area.

     6.   "Makeup Gas" shall mean any Gas taken by an Underproduced Party from
          the Balancing Area in excess of its Full Share of Current Production,
          whether pursuant to Section 2.3. or Section 3.1. hereof.

     7.   "Mcf" shall mean one thousand cubic feet. A cubic foot of Gas shall
          mean the volume of gas contained in one cubic foot of space at a
          standard pressure base and at a standard temperature base.

JOA - Exhibit "E"

                                      -1-
3787:CRR

<PAGE>

          8.   "MMBtu" shall mean one million British Thermal Units. A British
               Thermal Unit shall mean the quantity of heat required to raise
               one pound avoirdupois of pure water from 58.5 degrees Fahrenheit
               to 59.5 degrees Fahrenheit at a constant pressure of 14.73 pounds
               per square inch absolute.

          9.   "Operator" shall mean the individual or entity designated under
               the terms of the Operating Agreement or, in the event this
               Agreement is not employed in connection with an operating
               agreement, the individual or entity designated as the operator of
               the well(s) located in the Balancing Area.

          10.  "Overproduced Party" shall mean any Party having taken a greater
               quantity of Gas from the Balancing Area than the Percentage
               Interest of such Party in the cumulative quantity of all Gas
               produced from the Balancing Area.

          11.  "Overproduction" shall mean the cumulative quantity of Gas taken
               by a Party in excess of its Percentage Interest in the cumulative
               quantity of all Gas produced from the Balancing Area.

          12.  "Party" shall mean those individuals or entities subject to this
               Agreement, and their respective heirs, successors, transferees
               and assigns.

          13.  "Percentage Interest" shall mean the percentage or decimal
               interest of each Party in the Gas produced from the Balancing
               Area pursuant to the Operating Agreement covering the Balancing
               Area.

          14.  "Royalty" shall mean payments on production of Gas from the
               Balancing Area to all owners of royalties, overriding royalties,
               production payments or similar interests.

          15.  "Underproduced Party" shall mean any Party having taken a lesser
               quantity of Gas from the Balancing Area than the Percentage
               Interest of such Party in the cumulative quantity of all Gas
               produced from the Balancing Area.

          16.  "Underproduction" shall mean the deficiency between the
               cumulative quantity of Gas taken by a Party and its percentage
               Interest in the cumulative quantity of all Gas produced from the
               Balancing Area.

          17.  "Winter Period" shall mean the months of November and December in
               one calendar year and the months of January, February and March
               in the succeeding calendar year.

JOA - Exhibit "E"

                                      -2-
3787:CRR

<PAGE>

1.     Balancing Area

       1.1.   If this Agreement covers more than one Balancing Area, it shall be
              applied as if each Balancing Area were covered by separate but
              identical agreements. All balancing hereunder shall be on the
              basis of Gas taken from the Balancing Area measured in MMBtus.

       1.2.   In the event that all or part of the Gas deliverable from a
              Balancing Area is or becomes subject to one or more lawful prices,
              any Gas not subject to price controls shall be considered as
              produced from a single Balancing Area and Gas subject to each
              price category shall, be considered produced from a separate
              Balancing Area.

2.     Right of Parties to Take Gas

       2.1.   Each Party desiring to take Gas will notify the Operator, or cause
              the Operator to be notified, of the volumes nominated, the name of
              the transporting pipeline and the pipeline contract number (if
              available) and meter station relating to such delivery,
              sufficiently in advance for the Operator, acting with reasonable
              diligence, to meet all nomination and other requirements. Operator
              is authorized to deliver the volumes so nominated and confirmed
              (if confirmation is required) to the transporting pipeline in
              accordance with the terms of this Agreement.

       2.2.   Each Party shall make a reasonable, good faith effort to take its
              Full Share of Current Production each month, to the extent that
              such production is required to maintain leases in effect, to
              protect the producing capacity of a well or reservoir, to preserve
              correlative rights, or to maintain oil production.

       2.3.   When a Party fails for any reason to take its full Share of
              Current Production (as such Share may be reduced by the right of
              the other parties to make up for Underproduction as provided
              herein), the other Parties shall be entitled to take any Gas which
              such Party fails to take. To the extent practicable, such Gas
              shall be made available initially to each Underproduced Party in
              the proportion that its Percentage Interest in the Balancing Area
              bears to the total Percentage Interests of all Underproduced
              Parties desiring to take such Gas. If all such Gas is not taken by
              the Underproduced Parties, the portion not taken shall then be
              made available to the other Parties in the proportion that their
              respective Percentage Interests in the Balancing Area bear to the
              total Percentage Interests of such Parties.

       2.4.   All Gas taken by a Party in accordance with the provisions of this
              Agreement, regardless of whether such Party is underproduced or

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                                      -3-
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<PAGE>

              overproduced, shall be regarded as Gas taken for its own account
              with title thereto being in such taking. Party.

       2.5.   Notwithstanding the provisions of Section 2.3. hereof, no
              Overproduced Party shall be entitled in any month to take any Gas
              in excess of three hundred percent (300%) of its Percentage
              Interest of the Balancing Area's then-current Maximum Monthly
              Availability; provided, however, that this limitation shall not
              apply to the extent that it would preclude production that is
              required to maintain lease in effect, to protect the producing
              capacity of a well or reservoir, to preserve correlative rights,
              or to maintain oil production. "Maximum Monthly Availability"
              shall mean the maximum average monthly rate of production at which
              Gas can be delivered from the Balancing Area, as determined by the
              Operator, considering the maximum efficient well rate for each
              well within the Balancing Area, the maximum allowable(s) set by
              the appropriate regulatory agency, mode of operation, production
              facility capabilities and pipeline pressures.

       2.6.   In the event that a Party fails to make arrangements to take its
              Full Share of Current Production required to be produced to
              maintain leases in effect, to protect the producing capacity of a
              well or reservoir, to preserve correlative rights, or to maintain
              oil production, the Operator may sell any part of such Party's
              Full Share of Current Production that such Party fails to take for
              the account of such Party and render to such Party, on a current
              basis, the full proceeds of the sale, less any reasonable
              marketing, compression, treating, gathering or transportation
              costs incurred directly in connection with the sale of such Full
              Share of Current Production. In making the sale contemplated
              herein, the Operator shall be obligated only to obtain such price
              and conditions for the sale as are reasonable under the
              circumstances and shall not be obligated to share any of its
              markets. Any such sale by Operator under the terms hereof shall be
              only for such' reasonable periods of time as are" consistent with
              the minimum needs of the industry under the particular
              circumstances, but in no event for a period in excess of one year.
              Notwithstanding the provisions of Article 2.4. hereof, Gas sold by
              Operator for a Party under the provisions hereof shall be deemed
              to be Gas taken for the account of such Party.

3.     In-Kind Balancing

       3.1.   Effective the first day of any calendar month following at least
              thirty (30) days' prior written notice to the Operator, any
              Underproduced Party may begin taking, in addition to its Full
              Share of Current Production and any Makeup Gas taken pursuant to
              Section 2.3. of this Agreement, a share of current production
              determined by multiplying thirty-seven and one-half percent
              (37.5%) of the Full Shares of Current Production of all
              Overproduced Parties by a fraction, the

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                                      -4-
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<PAGE>

              numerator of which is the Percentage Interest of such
              Underproduced Party and the denominator of which is the total of
              the Percentage Interests of all Underproduced Parties desiring to
              take Makeup Gas. In no event will an Overproduced Party be
              required to provide more than thirty-seven and one-half percent
              (37.5%) of its Full Share of Current Production for Makeup Gas.
              The Operator will promptly notify all Overproduced Parties of the
              election of an Underproduced Party to begin taking Makeup Gas.

       3.2.   Notwithstanding the provisions of Section 3.1., the average
              monthly amount of Makeup Gas taken by an Underproduced Party
              during the Winter Period pursuant to Section 3.1. shall not exceed
              the average monthly amount of Makeup Gas taken by such
              Underproduced Party during the six (6) months immediately
              preceding the Winter Period.

4.     Statement of Gas Balances

       4.1.   The Operator will maintain appropriate accounting on a monthly and
              cumulative basis of the volumes of Gas that each Party is entitled
              to receive and the volumes of Gas actually taken or sold for each
              Party's account. Within forty-five (45) days after the month of
              production, the Operator will furnish a statement for such month
              showing (1) each Party's Full Share of Current Production, (2) the
              total volume of Gas actually taken or sold for each Party's
              account, (3) the difference between the volume taken by each Party
              and that Party's Full Share of Current Production, (4) the
              Overproduction or Underproduction of each Party, and (5) other
              data as recommended by the provisions of the Council of Petroleum
              Accountants Societies Bulletin No. 24, as amended or supplemented
              hereafter. Each Party taking Gas will promptly provide to the
              Operator any data required by the Operator for preparation of the
              statements required hereunder.

       4.2.   If any Party fails to provide the data required herein for four
              (4) consecutive production months, the Operator, or where the
              Operator has failed to provide data, another Party, may audit the
              production and Gas sales and transportation volumes of the
              non-reporting Party to provide the required data. Such audit shall
              be conducted only after reasonable notice and during normal
              business hours in the office of the Party whose records are being
              audited. All costs associated with such audit will be charged to
              the account of the Party failing to provide the required data.

5.     Payments on Production

       5.1.   Each Party taking Gas shall pay or cause to be paid all production
              and severance taxes due on all volumes of Gas actually taken by
              such Party.

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                                      -5-
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<PAGE>

       5.2.   [_] (Alternative I -- Sales) Each Party shall pay or cause to be
              paid Royalty due with respect to Royalty owners to whom it is
              accountable based on the volume of Gas actually taken for its
              account.

              [_] (Alternative 2 - Entitlements) Each Party shall pay or cause
              to be paid all Royalty due with respect to Royalty owners to whom
              it is accountable as if such Party were taking its Full Share of
              Current Production, and only its Full Share of Current Production.

       5.3.   In the event that any governmental authority requires that Royalty
              payments be made on any other basis than that provided for in this
              Section 5., each Party agrees to make such Royalty payments
              accordingly, commencing on the effective date required by such
              governmental authority, and the method provided for herein shall
              be thereby superseded.

6.     Cash Settlements

       6.1.   Upon the earlier of the plugging and abandonment of the last
              producing interval in the Balancing Area, the termination of the
              Operating Agreement or any pooling or unit agreement covering the
              Balancing Area, or at any time no Gas is taken from the Balancing
              Area for a period of twelve (12) consecutive months, any Party may
              give written notice calling for cash settlement of the Gas
              production imbalances among the Parties. Such notice shall be
              given to all Parties in the Balancing Area.

       6.2.   Within sixty (60) days after the notice calling for cash
              settlement under Section 6.1., the Operator will distribute to
              each Party a Final Gas Settlement Statement detailing the quantity
              of Overproduction owed by each Overproduced Party to each
              Underproduced Party and identifying the month to which such
              Overproduction is attributed, pursuant to the methodology set out
              in Section 6.4.

       6.3.   Within sixty (60) days after receipt of the Final Gas Settlement
              Statement, each Overproduced Party will pay to each Underproduced
              Party entitled to settlement the appropriate cash settlement,
              accompanied by appropriate accounting detail. At the time of
              payment, the Overproduced Party will notify the Operator of the
              Gas imbalance settled by the Overproduced Party's payment.

       6.4.   The amount of the cash settlement will be based on the proceeds
              received by the Overproduced Party under an Arm's Length Agreement
              for the Gas taken from time to time by the Overproduced Party in
              excess of the Overproduced Party's Full Share of Current
              Production. Any Makeup Gas taken by the Underproduced Party prior
              to monetary settlement hereunder will be applied to offset
              Overproduction chronologically in the order of accrual.

       6.5.   The values used for calculating the cash settlement under Section
              6.4. will include all proceeds received for the sale of the Gas by
              the Overproduced Party calculated at the Balancing Area, after
              deducting

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                                      -6-
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<PAGE>

              any production or severance taxes paid and any Royalty actually
              paid by the Overproduced Party to an Underproduced Party's Royalty
              owner(s), to the extent said payments amounted to a discharge of,
              said Underproduced Party's Royalty, obligation, as well as any
              reasonable marketing, compression, treating, gathering or
              transportation costs incurred directly in connection with the sale
              of the Overproduction.

       6.6.   For Overproduction processed for the account of the Overproduced
              Party at a gas processing plant for the extraction of liquid
              hydrocarbons, the full quantity of the Overproduction will be
              valued for purposes of cash settlement at the prices received by
              the Overproduced Party for the sale of the residue gas
              attributable to the Overproduction without regard to proceeds
              attributable to liquid hydrocarbons which may have been extracted
              from the Overproduction.

       6.7.   To the extent the Overproduced Party did not sell all
              Overproduction. under an Arm's Length Agreement, the cash
              settlement will be based on the weighted average price received by
              the Overproduced Party for any gas sold from the Balancing Area
              under Arm's Length Agreements during the months to which such
              Overproduction is attributed. In the event that no sales under
              Arm's Length Agreements were made during any such month, the cash
              settlement for such month will be based on the spot sales prices
              published for the applicable geographic area during such month in
              a mutually acceptable pricing bulletin.

       6.8.   Interest per annum at the then-current prime rate of Citibank
              N.A., New York, New York, as published under "Money Rates" by the
              Wall Street Journal, or the maximum lawful rate of interest
              applicable to the Balancing Area, whichever is less, will accrue
              for all amounts due under Section 6.1., beginning the first day
              following the date payment is due pursuant to Section 6.3. Such
              interest shall be borne by the Overproduced Party in the
              proportion that its respective delays beyond the deadlines set out
              in Sections 6.2. or 6.3. contributed to the accrual of the
              interest.

       6.9.   In lieu of the cash settlement required by Section 6.3., an
              Overproduced Party may deliver to the Underproduced Party an offer
              to settle its Overproduction in-kind and at such rates,
              quantities, times and sources as may be agreed upon by the
              Underproduced Party. If the Parties are unable to agree upon the
              manner in which such in-kind settlement gas will be furnished
              within sixty (60) days after the Overproduced Party's offer to
              settle in kind, which period may be extended by agreement of said
              Parties, the Overproduced Party shall make a cash settlement as
              provided in Section 6.3. The making of an in-kind settlement offer
              under this Section 6.9. will not delay the accrual of interest on
              the cash settlement should the Parties fail to reach agreement on
              an in-kind settlement.

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                                      -7-
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<PAGE>

       6.10.  At any time during the term of this Agreement, any Overproduced
              Party may, in its sole discretion, make cash settlement(s) with
              the Underproduced Parties covering all or part of its outstanding
              Gas imbalance, provided that such settlements must be made with
              all Underproduced Parties proportionately based on. The relative
              imbalances of the Underproduced Parties, and provided further
              that such settlements may not be made more often. than once every
              twenty-four (24) months. Such settlements will be calculated in
              the same manner provided above for final cash settlements. The
              Overproduced Party will provide Operator a detailed accounting of
              any such cash settlement within thirty (30) days after the
              settlement is made.

7.     Testing

       Notwithstanding any provision of this Agreement to the contrary, any
       Party shall have the right, from time to time, to produce and take up to
       one hundred percent (100%) of a well's entire Gas stream to meet the
       reasonable deliverability test(s) required by such Party's Gas purchaser,
       and the right to take any Makeup Gas shall be subordinate to the right of
       any Party to conduct such tests; provided, however, that such tests shall
       be conducted in accordance with prudent operating practices only after
       thirty (30) days' prior written notice to the Operator and shall last no
       longer than twenty-four (24) hours.

8.     Operating Costs

       Nothing in this Agreement shall change or affect any Party's obligation
       to pay its proportionate share of all costs and liabilities incurred in
       operations on or in connection with the Balancing Area, as its share
       thereof is set forth in the Operating Agreement, irrespective of whether
       any party is at any time selling and using Gas or whether such sales or
       use are in proportion to its Percentage Interest in the Balancing Area.

9.     Liquids

       The Parties shall share proportionately in and own all liquid
       hydrocarbons recovered with Gas by field equipment operated for the joint
       account in accordance with their Percentage Interests in the Balancing
       Area.

10.    Audit Rights

       Notwithstanding any provision in this Agreement or any other agreement
       between the Parties hereto, and further notwithstanding any termination
       or cancellation of this Agreement, for a period of two (2) years from the
       end of the calendar year in which any information to be furnished under
       Section 4. or 6. hereof is supplied, any Party shall have the right to
       audit the records of any other Party regarding quantity, including but
       not limited to

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                                      -8-
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<PAGE>

       information regarding Btu content. Any Underproduced Party shall have the
       right for a period of two (2) years from the end of the calendar year in
       which any cash settlement is received pursuant to Section 6. to audit the
       records of any Overproduced Party as to all matters concerning values,
       including but not limited to information regarding prices and disposition
       of Gas from the Balancing Area. Any such audit shall be conducted at the
       expense of the Party or Parties desiring such audit, and shall be
       conducted, after reasonable notice, during normal business hours in the
       office of the Party whose records are being audited. Each Party hereto
       agrees to maintain records as to the volumes and prices of Gas sold each
       month and the volumes of Gas used in its own operations, along with the
       Royalty paid on any such. Gas used by a Party In its own operations. The
       audit rights provided for in this Section 10. shall be in addition to
       those provided for in Section 4.2. of this Agreement.

11.    Miscellaneous

       11.1.  As between the Parties, in the event of any conflict between the
              provisions of this Agreement and the provisions of any gas sales
              contract, or in the event of any conflict between the provisions
              of this Agreement and the provisions of the Operating Agreement,
              the provisions of this Agreement shall govern.

       11.2.  Each Party agrees to defend, indemnify and hold harmless all other
              Parties from and against any and all liabilities for any claims,
              which may be asserted by any third party which now or hereafter
              stands in a contractual relationship with such indemnifying Party
              and which arise out of the operation of this Agreement or any
              activities of such indemnifying Party under the provisions of this
              Agreement, and does further agree to save the other Parties
              harmless from all judgments or damages sustained and costs
              incurred in connection therewith.

       11.3.  Except as otherwise provided in this Agreement, Operator is
              authorized to administer the provisions of this Agreement, but
              shall have no liability to the other Parties for losses sustained
              or liability incurred which arise out of or in connection with the
              performance of Operator's duties hereunder, except such as may
              result from Operator's gross negligence or willful misconduct.
              Operator shall not be liable to any Underproduced Party for the
              failure of any Overproduced Party (other than Operator) to pay any
              amounts owed pursuant to the terms hereof.

       11.4.  This Agreement shall remain in full force and effect for as long
              as the Operating Agreement shall remain in force and effect as to
              the Balancing Area, and thereafer until the Gas accounts between
              the Parties are settled in full, and shall inure to the benefit of
              and be binding upon the Parties hereto, and their respective
              heirs, successors, legal representatives and assigns, if any. The
              Parties hereto agree to give

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                                      -9-
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<PAGE>

              notice of the existence of this Agreement to any successor in
              interest of any such Party and to provide that any such successor
              shall be bound by this Agreement, and shall further make any
              transfer of any interest subject to the Operating Agreement, or
              any part thereof, also subject to the terms of this Agreement.

       11.5.  Unless the context clearly indicates otherwise, words used in the
              singular include the plural, the plural includes the singular, and
              the neuter gender includes the masculine and the feminine.

       11.6.  This Agreement shall bind the Parties in accordance with the
              provisions hereof, and nothing herein shall be construed or
              interpreted as creating any rights in any person or entity not a
              signatory hereto, or as being a stipulation in favor of any such
              person or entity.

       11.7.  If contemporaneously with this Agreement becoming effective, or
              thereafer, any Party requests that any other Party execute an
              appropriate memorandum or notice of this Agreement in order to
              give third parties notice of record of same and submits same for
              execution in recordable form, such memorandum or notice shall be
              duly executed by the Party to which such request is made and
              delivered promptly thereafer to the Party making the request. Upon
              receipt, the Party making the request shall cause the memorandum
              or notice to be duly recorded in the appropriate real property or
              other records affecting the Balancing Area.

       11.8.  In the event Internal Revenue Service regulations require a
              uniform method of computing taxable income by all Parties, each
              Party agrees to compute and report income to the Internal Revenue
              Service as if such Party were taking its Full Share of Current
              Production during each relevant tax period in accordance with such
              regulations, insofar as same relate to entitlement method tax
              computations.

12.    Assignment and Rights upon Assignment

       12.1.  Subject to the provisions of Section 12.2. and 12.3. hereof, and
              notwithstanding anything in this Agreement or in the Operating
              Agreement to the contrary, if any Party assigns (including any
              sale, exchange or other transfer) any of its working interest in
              the Balancing Area when such Party is an Underproduced or
              Overproduced Party, the assignment or other act of transfer shall,
              insofar as the Parties hereto are concerned, include all interest
              of the assigning or transferring Party in the Gas, all rights to
              receive or obligations to provide or take Makeup Gas and all
              rights to receive or obligations to make any monetary payment
              which may ultimately be due hereunder, as applicable. Operator and
              each of the other Parties hereto shall thereafer treat the
              assignment accordingly, and the assigning or transferring Party
              shall look solely to its assignee or other

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                                      -10-
3787:CRR

<PAGE>

              transferee for any interest in the Gas or monetary payment that
              such Party may have or to which it may be entitled, and shall
              cause its assignee or other transferee to assume its obligations
              hereunder.

       12.2.  Notwithstanding anything in this Agreement (including but not
              limited to the provisions of Section 12.1. hereof) or in the
              Operating Agreement to the contrary, and subject to the provisions
              of Section 12.3. hereof, in the event an Overproduced Party
              intends to sell, assign, exchange or otherwise transfer any of its
              interest in a Balancing Area, such Overproduced Party shall notify
              in writing the other working interest owners who. are Parties
              hereto in such Balancing Area of such fact at least sixty (60)
              days prior to closing the transaction. Thereafer, any
              Underproduced Party may demand from such Overproduced Party in
              writing, within thirty (30) days after receipt of the Overproduced
              Party's notice, a cash settlement of its Underproduction from the
              Balancing Area. The Operator shall be notified of any such demand
              and of any cash settlement pursuant to this Section 12., and the
              Overproduction and Underproduction of each Party shall be adjusted
              accordingly. Any cash settlement pursuant to this Section 12.
              shall be paid by the Overproduced Party, accompanied by
              appropriate accounting detail, on or before the earlier to occur
              (1) of sixty (60) days after receipt of the Underproduced Party's
              demand or (2) at the closing of the transaction in which the
              Overproduced Party sells, assigns, exchanges or otherwise
              transfers its interest in a Balancing Area on the same basis as
              otherwise set forth in Sections 6.3. through 6.7., and shall bear
              interest at the rate set forth in Section 6.8. hereof, beginning
              sixty (60) days after the Overproduced Party's sale, assignment,
              exchange or transfer of its interest in the Balancing Area for any
              amounts not paid. Provided, however, if any Underproduced Party
              does not so demand such cash settlement of its Underproduction
              from the. Balancing Area, such Underproduced Party shall look
              exclusively to the assignee or other successor in interest of the
              Overproduced Party giving notice hereunder for the satisfaction of
              such Underproduced Party's Underproduction in accordance with the
              provisions of Section 12.1. hereof.

       12.3.  The provisions of this Section 12. shall not be applicable in the
              event any Party mortgages its interest or disposes of its interest
              by merger, reorganization, consolidation or sale of substantially
              all of its assets to a subsidiary or parent company, or to any
              company in which any parent or subsidiary of such party owns a
              majority of the stock of such company.

13.    Counterparts

       This Agreement may be executed in counterparts, each of which when taken
       with all other counterparts shall constitute a binding agreement between
       the Parties hereto; provided, however, that if a Party or Parties owning

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                                      -11-
3787:CRR

<PAGE>

       a Percentage Interest in the Balancing Area equal to or greater than
       [percent] percent therein fail(s) to execute this Agreement on or before
       [date], this Agreement shall not be binding upon any Party and shall be
       of no further force and effect.

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                                      -12-
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<PAGE>

       IN WITNESS WHEREOF, this agreement shall be effective as of [date].

ATTEST OR WITNESS:                       OPERATOR

                                         _________________________________

_________________________________        By:______________________________

_________________________________        _________________________________

                                         Type or print name

                                         Title ___________________________

                                         Date ____________________________

                                         Tax ID or S.S. No. ______________

ATTEST OR WITNESS:                       NON-OPERATORS

                                         _________________________________

_________________________________        By:______________________________

_________________________________        _________________________________

                                         Type or print name

                                         Title ___________________________

                                         Date ____________________________

                                         Tax ID or S.S. No. ______________

                                         _________________________________

_________________________________        By:______________________________

_________________________________        _________________________________

                                         Type or print name

                                         Title ___________________________

                                         Date ____________________________

                                         Tax ID or S.S. No. ______________

JOA -- Exhibit "E"

                                      -13-
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<PAGE>

                                   Exhibit "F"

    Attached to and made a part of that certain Offshore Operating Agreement
         effective as of October 1, 2005, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
                 Manager Ridgewood Energy Q Fund, LLC, covering
            Main-Pass Blocks 221 and 222, Offshore, Gulf of Mexico.

                           TAX PARTNERSHIP PROVISIONS
                    OF THE___________________________________
                                   PARTNERSHIP
  (For Name of Tax Reporting Partner and Special Elections, See Secs. 8 and 9)

Table of Contents

1. GENERAL PROVISIONS .........................................................1
   1.1 DESIGNATION OF DOCUMENTS ...............................................1
   1.2 RELATIONSHIP OF THE PARTIES ............................................1
   1.3 PRIORITY OF PROVISIONS OF THIS EXHIBIT .................................1
   1.4 SURVIVORSHIP ...........................................................1

2. TAX REPORTING PARTNER AND TAX MATTERS PARTNER ..............................2
   2.1 TAX REPORTING PARTNER ..................................................2
   2.2 IF SMALL PARTNERSHIP EXCEPTION FROM TEFRA NOT APPLICABLE ...............2

3. INCOME TAX COMPLIANCE AND CAPITAL ACCOUNTS .................................3
   3.1 TAX RETURNS ............................................................3
   3.2 FAIR MARKET VALUE CAPITAL ACCOUNTS .....................................3
   3.3 INFORMATION REQUESTS ...................................................3
   3.4 BEST EFFORTS WITHOUT LIABILITY .........................................4

4. TAX AND FMV CAPITAL ACCOUNT ELECTIONS ......................................4
   4.1 GENERAL ELECTIONS ......................................................4
   4.2 DEPLETION ..............................................................4
   4.3 ELECTION OUT UNDER CODE ss.761(a) ......................................4
   4.4 CONSENT REQUIREMENTS FOR SUBSEQUENT TAX OR FMV CAPITAL
       ACCOUNT ELECTIONS ......................................................4

5. CAPITAL CONTRIBUTIONS AND FMV CAPITAL ACCOUNTS .............................5
   5.1 CAPITAL CONTRIBUTIONS ..................................................5
   5.2 FMV CAPITAL ACCOUNTS ...................................................5

6. PARTNERSHIP ALLOCATIONS ....................................................6
   6.1 FMV CAPITAL ACCOUNT ALLOCATIONS
   6.2 TAX RETURN AND TAX BASIS CAPITAL ACCOUNT ALLOCATIONS ...................7

7. TERMINATION AND LIQUIDATING DISTRIBUTION ...................................8
   7.1 TERMINATION OF THE PARTNERSHIP .........................................8
   7.2 BALANCING OF FMV CAPITAL ACCOUNTS ......................................8
   7.3 DEEMED SALE GAIN/LOSS CHARGE BACK ......................................8
   7.4 DEFICIT MAKE-UP OBLIGATION AND BALANCING CASH CONTRIBUTIONS ............8
   7.5 DISTRIBUTION TO BALANCE CAPITAL ACCOUNTS ...............................8
   7.6 FMV DETERMINATION ......................................................9

JOA - Exhibit "F"

<PAGE>

   7.7 FINAL DISTRIBUTION .....................................................9
8. TRANSFERS, INDEMNIFICATION, AND CORRESPONDENCE .............................9
   8.1 TRANSFER OF PARTNERSHIP INTERESTS ......................................9
   8.2 CORRESPONDENCE .........................................................9
9. ELECTIONS AND CHANGES TO. ABOVE PROVISIONS ................................10
   9.1 OPERATOR NOT THE TRP ..................................................10
   9.2 SPECIAL TAX ELECTIONS .................................................10
   9.3 CHANGE OF MAJORITY FOR OTHER TAX ELECTIONS ............................10

                                     Page 2
JOA -- Exhibit "F"

<PAGE>

1.     GENERAL PROVISIONS

1.1    DESIGNATION OF DOCUMENTS.

This exhibit is referred to in, and is part of that Agreement identified above
and, if so provided, a part of any agreement to which the Agreement is an
exhibit. Such agreement(s) (including all exhibits thereto, other than this
exhibit) shall be hereinafer referred to as the "Agreement;" and this exhibit is
hereinafer referred to as the "Exhibit" or the "Tax Partnership Provisions" (the
"TPPs"). Except as may be otherwise provided in this Exhibit, terms defined and
used 'in the Agreement shall have the same meaning when used herein. o

1.2    RELATIONSHIP OF THE PARTIES.

The parties to the Agreement shall be hereinafter referred to as "Party" or
"Parties." The Parties understand and agree that the arrangement and
undertakings evidenced by the Agreement result in a partnership for purposes of
Federal income taxation and certain State income tax laws which incorporate or
follow Federal income tax principles as to tax partnerships. Such partnership
for tax purposes is hereinafter referred to as the "Partnership." For every
other purpose of the Agreement the Parties understand and agree that their legal
relationship to each other under applicable State law with respect to all
property subject to the Agreement is one of tenants in common, or undivided
interest owners, or lessee(s)-sublessee(s) and not a partnership; that the
liabilities of the Parties shall be several and not joint or collective; and
that each Party shall be responsible solely for its own obligations.

1.3    PRIORITY OF PROVISIONS OF THIS EXHIBIT.

If there is a conflict or inconsistency, whether direct or indirect, actual or
apparent, between the terms and conditions of this Exhibit and the terms and
conditions of the Agreement, or any other exhibit or any part thereof the terms
and conditions of this Exhibit shall govern and control.

1.4    SURVIVORSHIP.

1.4.1  Any termination of the Agreement shall not affect the continuing
application of the TPPs for the termination and liquidation.

1.4.2  Any termination of the Agreement shall not affect the continuing
application of the TPPs for the resolution of all matters regarding Federal and
State income tax reporting.

1.4.3 These TPPs shall inure to the benefit of, and be binding upon, the Parties
hereto and their successors and assigns.

1.4.4  The effective date of the Agreement shall be the effective date of these
TPPs. The Partnership shall continue in full force and effect from, and after
such date, until termination and liquidation.

                                     Page 1
JOA - Exhibit "F"

<PAGE>

2.     TAX REPORTING PARTNER AND TAX MATTERS PARTNER

2.1    TAX REPORTING PARTNER.

The Operator (or the Party listed in Sec. 9.1) as the Tax Reporting Partner
("TRP") is responsible for compliance with all tax reporting obligations of the
Partnership, see Sec. 3.1, below. In the event of any change in the TRP, the
Party serving as TRP at the beginning of a given taxable year shall continue as
TRP with respect to all matters concerning such year.

       2.2    IF SMALL PARTNERSHIP EXCEPTION FROM TEFRA NOT APPLICABLE.

       If the Partnership does not qualify for the "small partnership exception"
       from, or if the Partnership elects (see infra Elections at Secs. 4.1 and
       9.2) to be subject to, ss.ss.6221 et seq., Subchapter C of Chapter 53 of
       Subtitle A (the "TEFRA rules") of the Internal Revenue Code (the "Code")
       the TRP shall also be the Tax Matters Partner as defined in Code
       ss.6231(a) (the "TMP") and references to the TRP shall then include
       references to the TMP and vice versa.

       2.2.1 The TMP shall not be required to incur any expenses for the
       preparation for, or pursuance of administrative or judicial proceedings,
       unless the Parties agree on a method for sharing such expenses.

       2.2.2 The Parties shall furnish the TMP, within two weeks from the
       receipt of the request, the information the TMP may reasonably request to
       comply with the requirements on furnishing information to the Internal
       Revenue Service.

       2.2.3 The TMP shall not agree to any extension of the statute of
       limitations for making assessments on behalf of the Partnership without
       first obtaining the written consent of all Parties. The TMP shall not
       bind any other Party to a settlement agreement in tax audits without
       obtaining the written concurrence of any such Party.

       2.2.4 Any other Party who enters in a settlement agreement with the
       Secretary of the Treasury with respect to any partnership items, as
       defined in Code ss. 6231(a)(3), - shall notify the other Parties of the
       terms within ninety (90) days from the date of such settlement.

       2.2.5 If any Party intends to file a notice of inconsistent treatment
       under Code ss. 6222(b), such Party shall, prior to the fling of such
       notice, notify the TMP of the (actual or potential) inconsistency of the
       Party's intended treatment of a partnership item with the treatment of
       that item by the Partnership. Within one week of receipt the TMP shall
       remit copies of such notification to the other Parties. If an
       inconsistency notice is fled solely because a Party has not received

                                     Page 2
JOA - Exhibit "F"

<PAGE>

       a Schedule K-1 in time for fling of its income tax return, the TMP need
       not be notified.

       2.2.6 No Party shall file pursuant to Code ss.6227 a request for an
       administrative adjustment- of partnership items (the "RFAA") 'without
       first. notifying all other Parties.. If all other Parties agree with the
       requested adjustment, the TMP shall file the RFAA on' behalf of the
       Partnership. If unanimous consent is not. obtained within thirty (30)
       days from such notice, or within the period required to timely file the
       RFAA, if shorter, any Party, including the TMP, may file a RFAA on its
       own behalf.

       2.2.7 Any Party intending to file with respect to any partnership item,
       or any other tax matter involving the Partnership, a petition under Code
       ss.ss.6226, 6228, or any other provision, shall notify the other Parties
       prior to such fling of the nature of the contemplated proceeding. In the
       case where the TMP is the Party intending to file such petition, such
       notice shall be given within a reasonable time to allow the other Parties
       to participate in the choice of the forum for such petition. If the
       Parties do not agree on the appropriate forum, then the forum shall be
       chosen by majority vote. Each Party shall have a vote in accordance with
       its percentage interest in the Partnership for the year under audit. If a
       majority cannot agree, the TMP shall choose the forum. If a Party intends
       to seek review of any court decision rendered as a result of such
       proceeding, the Party shall notify the other Parties prior to seeking
       such review.

3.     INCOME TAX COMPLIANCE AND CAPITAL ACCOUNTS

3.1    TAX RETURNS.

The TRP shall prepare and file all required Federal and State partnership income
tax returns. Not less than thirty (30) days prior to the return due date
(including extensions), the TRP shall submit to each Party for review a copy of
the return as proposed.

3.2    FAIR MARKET VALUE CAPITAL ACCOUNTS.

The TRP shall establish and maintain for each Party fair market value ("FMV")
capital accounts and tax basis capital accounts. Upon request, the TRP shall
submit to each Party along with a copy of any proposed partnership income tax
return an accounting of such Party's FMV capital accounts as of the end of the
return period.

3.3    INFORMATION REQUESTS.

In addition to any obligation under Sec. 2.2.2, each Party agrees to furnish to
the TRP not later than sixty (60) days before the return due date (including
extensions) such information relating to the operations conducted under the
Agreement as may be required for the proper preparation of such returns.
Similarly, each Party agrees to furnish timely to the TRP, as requested, any the
information and data necessary for the preparation and/or filing of other
required reports and notifications, and for the computation of the capital
accounts. As provided in Code ss.6050K(c), a Party transferring its interest
must notify the TRP to allow compliance with Code ss.6050K(a) (see also Sec.
8.1).

                                     Page 3
JOA - Exhibit "F"

<PAGE>

3.4    BEST EFFORTS WITHOUT LIABILITY.

The TRP and the other Party(ies) shall use its/their best efforts to comply with
responsibilities o outlined in this Section,. and with - respect to the service
as TMP as outlined Sec. 2.2, and in doing so shall incur no liability to any
other Party.

4.     TAX AND FMV CAPITAL ACCOUNT ELECTIONS

4.1    GENERAL ELECTIONS.

For both income tax return ad capital account purposes, the Partnership shall
elect:

a) to deduct when-incurred intangible drilling and development costs ("IDC");

b) to use the maximum allowable accelerated tax method and the shortest
permissible tax life for depreciation;

c) the accrual method of accounting;

d) to report income on a calendar year basis; and the Partnership shall also
make any elections as specially noted in Sec. 9.2, below.

4.2    DEPLETION.

Solely for FMV capital account purposes, depletion shall be calculated by using
simulated cost depletion within the meaning of Treas. Reg. ss.
1.704-1(b)(2)(iv)(k)(2), unless the use of simulated percentage depletion is
elected in Sec. 9.2, below. The simulated cost depletion allowance shall be
determined under the principles of Code ss.612 and be based on the FMV capital
account basis of each Lease. Solely for purposes of this calculation, remaining
reserves shall be determined consistently by the TRP.

4.3    ELECTION OUT UNDER CODE ss.761(a).

4.3.1  The TRP shall notify all Parties' of an intended election to be excluded
from the application of Subchapter K of Chapter 1 of the Code not later than
sixty (60) days prior to the filing date or the due date (including extensions)
for the Federal partnership income tax return, whichever comes earlier. Any
Party that does not consent must provide the TRP with written objection within
thirty (30) days of such notice. Even after an effective election-out the TRP's
rights and obligations, other than the relief from tax return fling obligations
of the partnership, continue.

4.3.2  After an election-out, to avoid an unintended impairment of the
election-out: The Parties will avoid, without prior coordination, any
operational changes which would terminate the qualification for the election-out
status; all Parties will monitor the continuing qualification of the Partnership
for the election-out status and will notify the other Parties if, in their
opinion, a change in operations will jeopardize the election-out; and, all
Parties will use, unless agreed to by them otherwise, the cumulative gas
balancing method as described in Treas. Reg. ss. 1.761-2(d)(2).

4.4    CONSENT REQUIREMENTS FOR SUBSEQUENT TAX OR FMV CAPITAL ACCOUNT ELECTIONS.

                                     Page 4
JOA - Exhibit "F"

<PAGE>

Unless stipulated differently in Sec. 9.3, future elections, in addition to or
in amendment of those in this agreement, must be approved by the affirmative
vote of two (2) or more Parties owning a majority of the working interest based
upon post-Payout ownership.

5.     CAPITAL CONTRIBUTIONS AND FMV CAPITAL ACCOUNTS

The provisions of this Sec. 5 and any other provisions of the TPPs relating to
the maintenance of the capital accounts are intended to comply with Treas. Reg.
ss. 1.704-1(b) and shall be interpreted and applied in a manner consistent with
such regulations.

5.1    CAPITAL CONTRIBUTIONS.

The respective capital contributions of each Party to the Partnership shall be
(a) each Party's interest in the oil and gas lease(s), including all associated
lease and well equipment, committed to the Partnership, and (b) all amounts of
money paid by each Party in connection with the acquisition, exploration,
development, and operation of the lease(s), and all other costs characterized as
contributions or expenses borne by such Party under the Agreement. The
contribution of the leases and any other properties committed to the Partnership
shall be made by each Party's agreement to hold legal title to its interest in
such leases or other property as nominee of the Partnership.

5.2    FMV CAPITAL ACCOUNTS.

The FMV capital accounts shall be increased and decreased as follows:

5.2.1  The FMV capital account of a Party shall be increased by:

(i) the amount of money and the FMV (as of the date of contribution) of any
property contributed by such Party to the Partnership (net of liabilities
assumed by the Partnership or to which the contributed property is subject);

(ii) that Party's share of Partnership items of income or gain, allocated in
accordance with Sec. 6.1; and

(iii) that Party's share of any Code ss.705(a)(1)(B) item.

5.2.2  The FMV capital account of a Party shall be decreased by:

(i) the amount of money and the FMV of property distributed to a Party (net of
liabilities assumed by such Party or to which the property is subject);

(ii) that Party's Sec. 6.1 allocated share of Partnership loss and deductions,
or items thereof; and,

(iii) that Party's share of any Code ss.705(a)(2)(B) item.

5.2.3  "FMV" when it applies to property contributed by a Party to the
Partnership shall be assumed, for purposes of 5.2.1, to equal the adjusted tax
basis, as defined in Code ss. 1011, of that property unless the Parties agree
otherwise as indicated in Sec. 9.2.

5.2.4  As provided in Treas. Reg. ss.1.704-1(b)(2)(iv)(e), upon distribution of
Partnership property to a Party the capital accounts will be adjusted to reflect

                                     Page 5
JOA - Exhibit "F"

<PAGE>

the manner in which the unrealized income, gain, loss and deduction inherent in
distributed property (not previously reflected in the capital accounts) would be
allocated among the Parties if there were a disposition of such property at its
FMV as of the time of distribution. Furthermore, if so agreed to in Sec. 9.2,
under the rules of Treas. Reg. ss. 1.704 1 (b)(2)(iv)(f), the FMV
capital accounts shall be revalued at certain times to reflect value changes of
the Partnership property.

6.     PARTNERSHIP ALLOCATIONS

6.1    FMV CAPITAL ACCOUNT ALLOCATIONS.

Each item of income, gain, loss, or deduction shall be allocated to each Party
as follows:

6.1.1  Actual or deemed income from the sale, exchange, distribution or other
disposition of production shall be allocated to the Party entitled to such
production or the proceeds from the sale of such production. The amount received
from the sale of production and the amount of the FMV of production taken in
kind by the Parties are deemed to be identical; accordingly, such items may be
omitted from the adjustments made to the Parties' FMV capital accounts.

6.1.2  Exploration cost, IDC, operating and maintenance cost shall be allocated
to each Party in accordance with its respective contribution, or obligation to
contribute, to such cost.

6.1.3  Depreciation shall be allocated to each Party in accordance with its
contribution, or obligation to contribute, to the cost of the underlying asset.

6.1.4  Simulated depletion shall be allocated to each Party in accordance with
its FMV capital account adjusted basis in each oil and gas property of the
Partnership.

6.1.5  Loss (or simulated loss) upon the sale, exchange, distribution,
abandonment or other disposition of depreciable or depletable property shall be
allocated to the Parties in the ratio of their respective FMV capital account
adjusted bases in the depreciable or depletable property.

6.1.6  Gain (or simulated gain) upon the sale, exchange, distribution, or other
disposition of depreciable or depletable property shall be allocated to the
Parties so that the FMV capital account balances of the Parties will most
closely reflect their respective percentage or fractional interests under the
Agreement.

6.1.7  Costs or expenses of any other kind shall be allocated to each Party in
accordance with its respective contribution, or obligation to contribute, to
such costs or expense.

6.1.8 Any other income item shall be allocated to the Parties in accordance with
the manner in which such income is realized by each Party.

                                     Page 6
JOA- Exhibit "F"

<PAGE>

6.2    TAX RETURN AND TAX BASIS CAPITAL ACCOUNT ALLOCATIONS.

6.2.1  Unless otherwise expressly provided in this Sec. 6.2, the allocations of
the Partnership's items of income, gain, loss, or deduction for tax return and
tax basis capital account purposes shall follow the principles of the
allocations under Sec, 6.1. However, the Partnership's gain or loss on the
taxable disposition of a Partnership property in excess of the. gain or loss
under Sec. 6.1, if any, is allocated to the contributing Party to the extent of
such Party's pre-contribution gain or loss.

6.2.2  The Parties recognize that under Code ss.613A(c)(7)(D) the depletion
allowance is to be computed "separately by each Party. For this purpose, each
Party's share of the adjusted tax basis in each oil and gas property shall be
equal to its contribution to the adjusted tax basis of such property.

6.2.3  Under Codess.613A(c)(7)(D) gain or loss on the disposition of an oil and
gas property is to be computed separately by each Party. According to Treas.
Reg. ss. 1.7041 (b)(4)(v), the amount realized shall be allocated as follows:
(i) An amount that represents recovery of adjusted simulated depletion basis is
allocated (without being credited to the capital accounts) to the Parties in the
same proportion as the aggregate simulated depletion basis was allocated to such
Parties under Sec. 5.2; and (ii) any remaining realization is allocated in
accordance with Sec. 6.1.6.

6.2.4  Depreciation shall be allocated to each Party in accordance with its
contribution to the adjusted tax basis of the depreciable asset.

6.2.5  In accordance with Treas. Reg. ss.1.1245-1(e), depreciation recapture
shall be allocated, to the extent possible, among the Parties to reflect their
prior sharing of the depreciation.

6.2.6  In accordance with the principles of Treas. Reg. ss.1.1254-5, any
recapture of IDC is determined and reported by each Party separately. Similarly,
any recapture of depletion shall be computed separately by each Party, in
accordance with its depletion allowance computed pursuant to Sec. 6.2.2.

6.2.7  For Partnership properties with FMV capital account values different from
their adjusted tax bases the Parties intend that the allocations described in
this Section 6.2 constitute a "reasonable method" of allocating gain or loss
under Treas. Reg. ss.1.704 3 (a)(1).

6.2.8  Take-in-kind. If checked "Yes" in Sec. 9.2, below, each Party has the
right to determine the market for its proportionate share of production. All
items of income, deductions, and credits arising from such marketing of
production shall be recognized by the Partnership and shall be allocated to the
Party whose production is so marketed.

                                     Page 7
JOA - Exhibit "F"

<PAGE>

7.     TERMINATION AND LIQUIDATING DISTRIBUTION .

7.1    TERMINATION OF THE PARTNERSHIP.

7.1.1  Upon termination, as provided in Code ss.708(b)(1)(A), the business shall
be wound up and concluded, and the assets shall. be distributed to the Parties
as described below by the end of such calendar year (or, if later, within ninety
(90) days after the date of such termination). The assets shall be valued and
distributed to the Parties in the order provided in Sees. 7.1.2, 7.5, and 7.7.

7.1.2  First, all cash representing unexpended contributions by any Party and
any property in which no interest has been earned by any other Party under the
Agreement shall be returned to the contributor.

7.2    BALANCING OF FMV CAPITAL ACCOUNTS.

Second, the FMV capital accounts of the Parties shall be determined as described
hereafter. The TRP shall take the actions specified under Sees. 7.2 through 7.5
in order to cause the ratios of the Parties' FMV capital accounts to reflect as
closely as possible their interests under the Agreement. The ratio of a Party's
FMV capital account is represented by a fraction, the numerator of which is the
Party's FMV capital account balance and the denominator of which is the sum of
all Parties' FMV capital account balances. This is hereafter referred to as the
"balancing of the FMV capital accounts" and, when completed, the FMV capital
accounts of the Parties shall be referred to as "balanced."

7.3    DEEMED SALE GAIN/Loss CHARGE BACK.

The FMV of all Partnership properties shall be determined and the gain or loss
for each property, which would have resulted if sold -at such FMV, shall be
allocated in accordance with Sees. 6.1.5 and 6.1.6.

7.4    DEFICIT MAKE-UP OBLIGATION AND BALANCING CASH CONTRIBUTIONS.

If hereafter a Party has a negative FMV capital account balance, that is a
balance of less than zero, in accordance with of Treas. Reg.
ss.1.704-1(b)(2)(ii)(b)(3) such Party is obligated to contribute, by the end of
the taxable year or, if later, within 90 days from the Partnership's
liquidation, an amount of money to the Partnership sufficient to achieve a zero
balance FMV capital account (the `Deficit Make-Up Obligation"). Moreover, any
Party may contribute an amount of cash to the Partnership to facilitate the
balancing of the FMV capital accounts. If after these adjustments the FMV
capital accounts are not balanced, Sees. 7.5 shall apply.

7.5    DISTRIBUTION TO BALANCE CAPITAL ACCOUNTS.

7.5.1  If all Parties agree, any cash or an undivided interest in certain
selected properties shall be distributed to one or more Parties as necessary for
the purpose of balancing the FMV capital accounts.

                                     Page 8
JOA -- Exhibit "F"

<PAGE>

7.5.2  Distribution of undivided interests. Unless Sec. 7.5.1 applies, an
undivided interest in each and every property shall be distributed to one or
more Parties in accordance with the ratios of their FMV capital accounts.

7.6    FMV DETERMINATION.

If a property is to be valued for purposes of balancing the capital accounts and
making a distribution under this Sec. 7, the Parties must first attempt to agree
on the FMV of the property; failing such an agreement, the TRP shall cause a
nationally recognized independent engineering firm to prepare an appraisal of
the FMV of such property.

7.7    FINAL DISTRIBUTION.

After the FMV capital accounts of the Parties have been adjusted pursuant to
Sees. 7.2 to 7.5, all remaining property and interests then held by the
Partnership shall be distributed to the Parties in accordance with their
positive FMV capital account balances.

8.     TRANSFERS, INDEMNIFICATION, AND CORRESPONDENCE

8.1    TRANSFER OF PARTNERSHIP INTERESTS.

Transfers of Partnership interests shall be governed by the Agreement. A Party
transferring its interest, or any part thereof shall notify the TRP in writing
within two weeks after such transfer.

8.2    CORRESPONDENCE.

All correspondence relating to the preparation and fling of the Partnership's
income tax returns and capital accounts shall be sent to:

                      (Attach separate list, if necessary)

--------------------------------------------------------------------------------
TRP                                       "Attention to:" reference
--------------------------------------------------------------------------------
Chevron U.S.A. Inc.                       Attention: Partnership Compliance
Tax Department
P. O. Box 6028 (94583-0728)
2613 Camino Ramon (94583) San
Ramon, CA
--------------------------------------------------------------------------------
Other Parties:

                                     Page 9
JOA - Exhibit "F"

<PAGE>

9.     ELECTIONS AND CHANGES TO ABOVE PROVISIONS

9.1    OPERATOR NOT THE TRP.

With respect to Sec. 2.1, (insert name of Party to be TRP instead of Operator,
or indicate "N/A") N/A is designated as TRP.

9.2    SPECIAL TAX ELECTIONS.

With respect to Sec. 4.1, the Parties agree (if not applicable insert "N/A" or
strike):
<TABLE>
<CAPTION>
<S>                                                                                   <C>
-----------------------------------------------------------------------------------------------
e) that the Partnership shall elect to account for dispositions of depreciable        NO
assets under the NO general asset method to-the extent permitted by Code
168(i)(4);
-----------------------------------------------------------------------------------------------
f) that the Partnership shall elect under Code ss.754 to adjust the basis of          Upon
Partnership property, with the adjustments provided in Code ss.734 for a              any
distribution of property and in Code ss.743 for a transfer of a partnership           Party's
interest. In case of distribution of property the TRP shall adjust all tax basis      written
capital accounts. In the case of a transfer of a partnership interest the             request
acquiring party(ies) shall establish and maintain its (their) tax basis capital
account(s);
-----------------------------------------------------------------------------------------------
g) that the Partnership shall elect under Code ss.6231 to be subject to the           NO
TEFRA rules.
-----------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------
With respect to Sec. 4.2, Depletion the Parties agree that the Partnership shall      NO
use simulated percentage depletion instead of simulated cost depletion.
-----------------------------------------------------------------------------------------------
With respect to Sec. 5.2.4, under the rules of Treas. Reg.                            NO
ss.1.704-1(b)(2)(iv)(f) the Parties agree that the FMV capital accounts shall be
revalued to reflect value changes of the Partnership property upon the
occurrence of the events specified in (5)(i) through (iii) of said
-1(b)(2)(iv)(f) regulations.
-----------------------------------------------------------------------------------------------
With respect to Sec. 6.2.8, the income attributable to take-in-kind production        NO
will be reflected on the tax return.
-----------------------------------------------------------------------------------------------
</TABLE>

With respect to Sec. 5.2.3 the FMV for the listed properties are determined as
follows (mark as "N/A" if not applicable; use separate sheet if necessary)

--------------------------------------------------------------------------------
Property Description                                        FMV
--------------------------------------------------------------------------------
To be determined prior to the execution of the
Joint Operating Agreement.

9.3    CHANGE OF MAJORITY FOR OTHER TAX ELECTIONS.

Instead of the Sec. 4.4 majority for other tax elections, a majority shall be
considered if consisting of (specify or line out blanks)

                                     THE END

                                    Page 10
JOA - Exhibit "F"

<PAGE>

                                   Exhibit "G"

Attached to and made a part of that certain Offshore Operating Agreement
effective as of October 1, 2005, between Chevron U.S.A. Inc., Newfield
Exploration Company and Ridgewood Energy Corporation, Manager Ridgewood Energy Q
Fund, LLC, covering Main Pass Blocks 221 and 222, Offshore, Gulf of Mexico.

                        MEMORANDUM OF OPERATING AGREEMENT
                             AND FINANCING STATEMENT
                             -----------------------
                                   (LOUISIANA)

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

1.0    This Memorandum of Operating Agreement and Financing Statement
       (Louisiana) (this "Memorandum") is effective as of the effective date of
       the Operating Agreement referred to in Paragraph 2.0 below and is
       executed by the undersigned, duly authorized representative of
       _________________, a _______________ corporation, whose taxpayer
       identification number is _______________ and whose address is
       _________________________ (the "Operator"), and the undersigned, duly
       authorized representative of _____________________, a limited liability
       company, whose taxpayer identification number is _______________________
       and whose address is ____________________ (the "Non-Operating Party").

2.0    The Operator and the Non-Operating Party are parties to that certain
       Offshore Operating Agreement dated effective ______________________ (the
       "Operating Agreement") which Operating Agreement provides for the
       development and production of crude oil, natural gas and associated
       substances from the OCS blocks, or portions thereof, described in Exhibit
       "A" of the Operating Agreement and in Attachment "1" to this Memorandum,
       or covered by the Leases (hereinafter called the "Contract Area") and
       which designates ________________________, as the Operator, to conduct
       such operations for itself and the Non-Operating Party.

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

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

5.0    In addition to any other security rights and remedies provided for by law
       with respect to services rendered or materials and equipment furnished
       under the Operating Agreement, for and in consideration of the covenants
       and mutual undertakings of the Operator and the Non-Operating Party set
       forth in the Operating Agreement, the Operator and the Non-Operating
       Party hereby agree as follows:

                                       1
JOA - Exhibit "G"

<PAGE>

       5.1    Each Non-operator hereby grants to the Operator a mortgage,
              hypotheca, and pledge of and over all of its rights, titles, and
              interests in and to (a) the Contract Area, (b) the Hydrocarbons
              in, on, under, and that may be produced from the lands within the
              Contract Area, and (c) ail. other immovable property susceptible
              of mortgage situated within the Contract Area. This mortgage is
              given to secure the complete and timely performance of and payment
              by each Non-operator of all obligations and indebtedness of every
              kind and nature, whether now owed by such Non-operator or
              hereafter arising, pursuant to this Agreement., To the extent
              susceptible under applicable law, this mortgage and the security
              interests granted in favor of the Operator herein shall secure the
              payment of all costs and other expenses properly charged to such
              Party, together with (A) interest-on such indebtedness, costs, and
              other expenses at the rate set forth in the Accounting Procedure
              or the maximum rate allowed by law, whichever is the lesser, (B)
              reasonable attorneys' fees, (C) court costs, and (D) other
              directly related collection costs. If any Non-operator does not
              pay such costs and other expenses or perform its obligations under
              the Operating Agreement when due, the Operator shall have the
              additional right to notify the purchaser or purchasers of the
              defaulting Non-operator's Hydrocarbon production and collect such
              costs and other expenses out of the proceeds from the sale of the
              defaulting Non-operator's share of Hydrocarbon production until
              the amount owed has been paid. The Operator shall have the right
              to offset the amount owed against the proceeds from, the sale of
              such defaulting Non-operator's share of Hydrocarbon production.
              Any purchaser of such production shall be entitled to, rely on the
              Operator's statement concerning the amount of costs and other
              expenses owed by the defaulting Non-operator and payment made to
              the Operator by any purchaser shall be binding and conclusive as
              between such purchaser and such defaulting Non-operator.

              The maximum amount for which the mortgage herein granted by each
              Non-operator shall be deemed to secure the obligations and
              indebtedness of such Non-operator to the Operator as stipulated
              herein is hereby fixed in an amount equal to $25,000,000.00 (the
              "Limit of the Mortgage of each Non-operator"). Except as provided
              in the previous sentence (and then only to the extent such
              limitations are required by law), the entire amount of obligations
              and indebtedness of each Non-operator to the Operator is secured
              hereby without limitation. Notwithstanding the foregoing Limit of
              the Mortgage of each Non-operator, the liability of each
              Non-operator under this Agreement and the mortgage and security
              interest granted hereby shall be limited to (and the Operator
              shall not be entitled to enforce the same against such
              Non-operator for, an amount exceeding) the actual obligations and
              indebtedness [including all interest charges, costs, attorneys'
              fees, and other charges provided for in the Operating Agreement]
              outstanding and unpaid and that are attributable to or charged
              against the interest of such Non-operator pursuant to the
              Operating Agreement.

       5.2    To secure the complete and timely performance of and payment by
              each Non-operator of all obligations and indebtedness of every
              kind and nature, whether now owed by such Non-operator or
              hereafter arising, pursuant to the Operating Agreement, each Non
              operator hereby grants to the Operator a continuing security
              interest in and to all of its rights, titles, interests, claims,
              general intangibles, proceeds, and products thereof, whether now
              existing or hereafter acquired, in and to (a) all Hydrocarbons
              produced from the lands or offshore blocks covered by the Contract
              Area or attributable to the Contract Area when produced, (b) all
              accounts receivable accruing or arising as a result of the sale of
              such Hydrocarbons (including, without limitation, accounts arising
              from gas imbalances or from the sale of Hydrocarbons at the
              wellhead), (c) all cash or other proceeds from the sale of such
              Hydrocarbons once produced, and (d) all Platforms and Development
              Facilities, wells, fixtures, other corporeal property, whether
              movable or immovable, whether now or hereafter placed on the lands
              or offshore blocks covered by the Contract Area or maintained or
              used in connection with the ownership, use or exploitation of the
              Contract Area, and other surface and sub-surface equipment of any
              kind or character located on or attributable to the Contract Area
              and the cash or other proceeds realized from the sale, transfer,
              disposition or conversion thereof. The interest of the
              Nonoperators in and to the oil and gas produced from or
              attributable to the Contract Area when extracted and the accounts
              receivable accruing or arising as the result of the sale thereof
              shall be financed at the wellhead of the well or wells located on
              the Contract Area.

                                       2
JOA - Exhibit "G"

<PAGE>

              To the extent susceptible under applicable law, the security
              interest granted by each Nonoperator hereunder covers: (A) all
              substitutions, replacements, and accessions to the property of
              such Non-operator described herein and is intended to cover all of
              the rights, titles and interests of such Non-operator in all
              movable property now or hereafter located upon o r used in
              connection with the Contract Area, whether corporeal or
              incorporeal; (B) all rights' under any gas balancing agreement,
              farmout rights, option farmout rights, acreage and cash
              contributions, and conversion rights of such Non-operator in
              connection with the Contract Area, or the Hydrocarbons produced
              from- or attributable to the Contract 'Area, whether now owned and
              existing or hereafer acquired or arising, including, without
              limitation,' all interests of each Non-operator in any
              partnership, tax partnership, limited partnership, association,
              joint venture, or other entity or enterprise that holds, owns, or
              controls any interest in the Contract Area; and (C) all rights,
              claims, general intangibles, and proceeds, whether now existing or
              hereafter acquired, of each Non-operator in and to the contracts,
              agreements, permits, licenses, rights-of-way, and similar rights
              and privileges that relate to or are appurtenant to the Contract
              Area, including the following:

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

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

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

       5.3    This Memorandum (including a carbon, photographic, or other
              reproduction thereof and hereof) shall constitute a non-standard
              form of financing statement under the terms of Chapter 9 of the
              Louisiana Commercial Laws, La. R.S. 10:9-101 et seq. (the "Uniform
              Commercial Code," as adopted in the State of Louisiana) and, as
              such, for the purposes of the security interest in favor of the
              Operator, may be filed for record in the office of the Clerk of
              Court of any parish in the State of Louisiana, with the Operator
              being the secured party and the Non-Operating Party being the
              debtors with respect to such filing.

       5.4    The Operator hereby grants to each Non-operator a mortgage,
              hypotheca, and pledge of and over all of its rights, titles, and
              interests in and to (a) the Contract Area; (b) the Hydrocarbons
              in, on, under, and that my be produced from the lands within the
              Contract Area; and (c) all other immovable property or other
              property susceptible of mortgage situated within the Contract
              Area. This mortgage is given to secure the complete and timely
              performance of and payment by the Operator of all obligations and
              indebtedness of every kind and nature, whether now owed by the
              Operator or hereafer arising, pursuant to this Agreement. To the
              extent susceptible under applicable law, this mortgage and the

                                       3
JOA - Exhibit "G"

<PAGE>

              security interests granted in favor of each Non-operator herein
              shall secure the payment of all costs and other expenses properly
              charged to the Operator, together with (A) interest on such
              indebtedness, costs, and other expenses at the rate set forth in
              the Accounting Procedure or the maximum rate allowed by law,
              whichever is the lesser, (B) reasonable attorneys' fees, (C) court
              costs, and (D) other directly related collection costs. If the
              Operator does not pay such costs and other expenses or perform its
              obligations under the Operating Agreement when due, the
              Non-operators shall have the additional right to notify the
              purchaser or purchasers of the Operator's Hydrocarbon production
              and collect such costs and other expenses out of the proceeds from
              the sale of the Operator's share of Hydrocarbon production until
              the amount owed has been paid. The Non operators shall have the
              right to offset the amount owed against the proceeds from the sale
              of the Operator's share of Hydrocarbon production. Any purchaser
              of such production shall be entitled to rely on the Non-operators'
              statement concerning the amount of costs and other expenses owed
              by the Operator and payment made to the Non-operators by any
              purchaser shall be binding and conclusive as between such
              purchaser and the Operator.

              The maximum amount for which the mortgage herein granted by the
              Operator shall be. deemed to secure the obligations and
              indebtedness of the Operator to all Non-operators as stipulated
              herein is hereby fixed in an amount equal to $25,000,000.00 in the
              aggregate (the "Limit of the Mortgage of the Operator"). Except as
              provided in the previous sentence (and then only to the extent
              such limitations are required by law), the entire amount of
              obligations and indebtedness of the Operator to the Non-operators
              is secured hereby without limitation. Notwithstanding the
              foregoing Limit of the Mortgage of the Operator, the liability of
              the Operator under the Operating Agreement and the mortgage and
              security interest granted hereby shall be limited to (and the
              Non-operators shall not be entitled to enforce the same against
              the Operator for, an amount exceeding) the actual obligations and
              indebtedness [including all interest charges, costs, attorneys'
              fees, and other charges provided for in the Operating Agreement]
              outstanding and unpaid and that are attributable to or charged
              against the interest of the Operator pursuant to this Agreement.

       5.5    To secure the complete and timely performance of and payment by
              the Operator of all obligations and indebtedness of every kind and
              nature, whether now owed by the Operator or hereafter arising,
              pursuant to the Operating Agreement, the Operator hereby grants to
              each Non-operator a continuing security interest in and to all of
              its rights, titles, interests, claims, general intangibles,
              proceeds, and products thereof, whether now existing or hereafter
              acquired, in and to (a) all Hydrocarbons produced from the lands
              or offshore blocks covered by the Contract Area or included within
              the Contract Area or attributable to the Contract Area when
              produced, (b) all accounts receivable accruing or arising as a
              result of the sale of such Hydrocarbons (including, without
              limitation, accounts arising from gas imbalances or from the sale
              of Hydrocarbons at the wellhead), (c) all cash or other proceeds
              from the sale of such Hydrocarbons once produced, and (d) all
              Platforms and Development Facilities, wells, fixtures, other
              corporeal property whether movable or immovable, whether now or
              hereafer placed on the offshore blocks covered by the Contract
              Area or maintained or used in connection with the ownership, use
              or exploitation of the Contract Area, and other surface and
              sub-surface equipment of any kind or character located on or
              attributable to the Contract Area and the cash or other proceeds
              realized from the sale, transfer, disposition or conversion
              thereof. The interest of the Operator in and to the Hydrocarbons
              produced from or attributable to the Contract Area when extracted
              and the accounts receivable accruing or arising as the result of
              the sale thereof shall be financed at the wellhead of the well or
              wells located on the Contract Area. To the extent susceptible
              under applicable law, the security interest granted by the
              Operator hereunder covers: (A) all substitutions, replacements,
              and accessions to the property of the Operator described herein
              and is intended to cover all of the rights, titles and interests
              of the Operator in all movable property now or hereafer located
              upon or used in connection with the Contract Area, whether
              corporeal or incorporeal; (B) all rights under any gas balancing
              agreement, farmout rights, option farmout rights, acreage and cash
              contributions, and conversion rights of the Operator in connection
              with the Contract Area, the Hydrocarbons produced from or

                                       4
JOA -- Exhibit "G"

<PAGE>

              attributable to the Contract Area, whether now owned and existing
              or hereafter acquired or arising, including, without limitation,
              all interests of the Operator in any partnership, tax partnership,
              limited partnership, association, joint venture, or other entity
              or enterprise that holds, owns, or controls any interest in the
              Contract Area; and (C) all rights, claims, general intangibles,
              and proceeds, whether now existing or hereafer acquired, of the
              Operator in and to the contracts, agreements, permits, licenses,
              rights-of-way, and similar rights and privileges that relate to or
              are appurtenant to the Contract Area, including the following:

              (1)    all of its rights, titles, and interests; whether now owned
                     and existing or hereafter acquired or arising, in, to, and
                     under or derived from any present or future operating,
                     farmout, bidding, pooling, unitization, and communitization
                     agreements, assignments, and subleases, whether or not
                     described in Attachment "1," to the extent, and only to the
                     extent, that such agreements, assignments, and subleases
                     cover or include any of its rights, titles, and interests,
                     whether now owned and existing or hereafter acquired .4r
                     arising, in and to all or any portion of the Contract Area,
                     and all units created by any such pooling, unitization, and
                     communitization agreements and all units formed under
                     orders, regulations, rules, or other official acts of any
                     governmental authority having jurisdiction, to the extent
                     and only to the extent that such units cover or include all
                     or any portion of the Contract Area;

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

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

       5.6    For the purposes of the security interest in favor of the
              Non-Operating Party, this Memorandum (including a carbon,
              photographic, or other reproduction thereof and hereof) may be
              filed as a non-standard form of financing statement pursuant to
              the Uniform Commercial Code in the office of the Clerk of Court of
              any parish in the State of Louisiana, with the Non-Operating Party
              being the secured parties and the Operator being the debtor with
              respect to such filing.

6.0    To serve as notice of the existence of the Operating Agreement as a
       burden on the title of the Operator and the Non-Operating Party to their
       interests in and to the Contract Area and for purposes of satisfying
       otherwise relevant recording and filing requirements of applicable law,
       this Memorandum is to be fled or recorded, as the case may be, in (a) the
       conveyance records of the parish or parishes in which the offshore blocks
       covered by the Contract Area are located or adjacent pursuant to La. R.S.
       9:2731 et seq., (b) the mortgage records of such parish or parishes, and
       (c) the appropriate Uniform Commercial Code records. All parties to the
       Operating Agreement are identified on Attachment "1" hereto.

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

                                       5
JOA - Exhibit "G"

<PAGE>

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

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

10.0   This Memorandum shall be binding upon and shall inure to the benefit of
       the parties hereto and their respective legal representatives, successors
       and permitted assigns. The failure of one or more persons owning an
       interest in the Contract Area to expcute this Memorandum shall not in any
       manner affect the validity of the Memorandum as to those persons who
       execute this Memorandum.

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

12.0   This Memorandum may be executed or ratified in one or more counterparts
       and all of the executed or ratified counterparts shall together
       constitute one instrument. For purposes of recording in each of the
       records described in Paragraph 6 above, duplicate copies of this
       Memorandum with individual signature pages attached thereto may be filed
       of record, one copy of each to be indexed in the name of the Operator, as
       grantor, and one copy of each to be indexed in the name of each
       Non-Operating Party, as grantor, and duplicate copies of this Memorandum
       with individual signature pages attached thereto may be filed in the
       appropriate Uniform Commercial Code records, one filing for the Operator,
       as secured party, and another fling for the Non-Operating Party, as
       secured parties. The respective addresses of the Operator, as both
       secured party and debtor, and the Non-Operating Party, as both debtors
       and secured parties, at which information with respect to the security
       interests created in the Operating Agreement may be obtained, are set
       forth in Paragraph 1.0 of this Memorandum.

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

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

                                       6
JOA - Exhibit "G"

<PAGE>

EXECUTED on the dates set forth below each signature but effective as of the
________ day of __________, 20__.

                                           OPERATOR:
                                           ---------

WITNESSES:
                                           ____________________

__________________________________         By:_____________________________
                                           Title:__________________________
__________________________________         Date:___________________________

                                           NON-OPERATING PARTY:
                                           -------------------

WITNESSES:
                                           ____________________

__________________________________         By:_____________________________
                                           Title:__________________________
__________________________________         Date:___________________________

                                       7
JOA - Exhibit "G"

<PAGE>

                                 ACKNOWLEDGMENT

                                    OPERATOR:

STATE OF _____________

PARISH/COUNTY OF ______________________

       On this ________ day of ______, 200_, before me, appeared _____________,
to me personally known, who, being by me duly sworn, did say that he is the
____________________ of _____________, a ___________ corporation, and that the
foregoing instrument was signed on behalf of the corporation by authority of its
Board of Directors and that ____ acknowledged the instrument to be the free act
and deed of the corporation.

                                                 _________________________
                                                 NOTARY PUBLIC in and for
                                                 the State of ____________

My Commission expires:____________

                                 ACKNOWLEDGMENT

                              NON-OPERATING PARTY

STATE OF _____________

PARISH/COUNTY OF ______________________

       On this ________ day of ______, 20__, before me, appeared _____________,
to me personally known, who, being by me duly sworn, did say that he is the
____________________ of _____________, a ___________ limited liability company,
and that the foregoing instrument was signed on behalf of the company by
authority of its members and that _______ acknowledged the instrument to be the
free act and deed of the limited liability company.

                                                 _________________________
                                                 NOTARY PUBLIC in and for
                                                 the State of ____________

My Commission expires:____________

                                       8
JOA - Exhibit "G"

<PAGE>

                          ATTACHMENT "1" TO EXHIBIT "G"

                       Attached to and made a part of the
      Memorandum of Operating Agreement and Financing Statement (Louisiana)
                    effective _______________,by and between
                       __________________, as Operator, and
                      __________________, as Non-Operator.

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

II.    OPERATOR
       --------

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

                                       9
JOA - Exhibit "G"

<PAGE>

                                   Exhibit "H"

    Attached to and made a part of that certain Offshore Operating Agreement
         effective as of October 1, 2005, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
                 Manager Ridgewood Energy Q Fund, LLC, covering
            Main Pass Blocks 221 and 222, Offshore, Gulf of Mexico.

                          Dispute Resolution Procedure
                          ----------------------------

I.   OVERVIEW
     --------

     A. Description and Goals. Arbitration as used in this statement is a
procedure whereby an Arbitration Panel ("Panel") resolves any claim(s),
controversy(ies) or dispute(s) between Chevron U.S.A. Inc and Ridgewood Energy
Corporation (hereinafer referred to singularly as "Party" and collectively as
"Parties") arising out of, relating to or in connection with the Exploration
Participation Agreement (hereinafter "Agreement") including the interpretation,
validity, termination or breach thereof.

          (i) Binding. The arbitration process is binding on the Parties and
     this arbitration is intended to be a final resolution of the dispute(s)
     between the Parties as described above, to the same extent as a final
     judgment of a court of competent jurisdiction. Each Party hereby expressly
     covenants that it shall not resort to court remedies except as provided for
     herein, and for preliminary relief in aid of arbitration.

          (ii) Violation. A Party who violates the covenants in Section l.A.(i)
     shall pay all legal costs incurred by the other Party in connection with
     the enforcement thereof. Suits, actions or proceedings in connection with
     violations of the covenants in Section I.A.(i) shall be instituted in the
     United States District Court for the Eastern District of Louisiana, and
     pursuant to Title IX of the United States Code. Each Party waives any
     option or objection which it may now or thereafer have to the laying of the
     venue in any such suit, action or proceeding and irrevocably submits to the
     jurisdiction of such court in any such suit, action or proceeding.

     B. Duty to Negotiate. The Parties shall inform one another promptly
following the occurrence or discovery of any item or event which might
reasonably be expected to result in a dispute in connection with the Agreement.
The Parties will attempt to resolve satisfactorily any such matters.

     C. Notice of Unresolved Dispute. Should a dispute arise which the Parties
cannot resolve satisfactorily, either Party may deliver to the other Party a
written notice of the dispute with supporting documentation as to the
circumstances leading to the dispute (the "Notice of Dispute"). The Parties,
within ten (10) Business Days from delivery of such notice, shall then each
appoint a management representative ("Management Representative") who has no
prior direct involvement with the subject matter of the Notice of Dispute and
who is duly authorized to investigate, negotiate and settle the dispute. The
Management Representative for each Party shall meet and confer as often as they

                                       1
JOA - Exhibit "H"

<PAGE>

deem reasonably necessary for a period not exceeding thirty (30) days following
the delivery of the Notice of Dispute in good faith negotiations to resolve the
dispute amicably. The parties in their sole discretion may also agree to utilize
the service of a mediator pursuant to` a joint engagement. Unless otherwise
provided herein, all such notices shall be served in accordance with the
provisions of the Agreement.

II.  ARBITRATION PROCESS
     -------------------

     A. Arbitration. If the Parties are unable to resolve the dispute within
thirty (30) days following the receipt of the Notice of Dispute, the matter
shall be submitted to arbitration in accordance with the procedures set forth
below.

     B. Initiation of Arbitration. The arbitration shall be initiated by either
party delivering to the other a Notice of Intention to Arbitrate as provided for
in Section 6 of the Commercial Arbitration Rules and the Supplementary
Procedures for Large, Complex Disputes of the American Arbitration Association
(collectively, the "AAA Guidelines")

     C. Governing Procedures. Except as expressly provided herein, the
arbitration shall be conducted in accordance with applicable New York law
regarding arbitration. To the extent that a matter is not addressed by this
Agreement or New York law, the arbitration shall be conducted with reference to
the AAA Guidelines. The action of a majority of the members of the arbitration
Panel shall govern and their decision in writing shall be final and binding on
the Parties hereto.

          (i) Conflicts. In the event of a conflict between the AAA Guidelines
     and this Dispute Resolution Procedure, this Procedure shall govern.

          (ii) Governing Law. The Panel shall apply the governing substantive
     law chosen by the Parties to the Agreement.

     D. Arbitration Panel. There shall be three arbitrators, all of whom shall
be independent and impartial, and experienced in arbitration proceedings. For
those disputes involving the transfer of, or title to, any real property rights
or interests, including but not limited to mineral rights, or involving the
development of a mineral interest or the marketing of mineral production, each
arbitrator shall be experienced in the oil and gas industry and knowledgeable or
specializing as to the subject matter involved in the dispute. The arbitrators
shall be chosen as follows: each Party shall have thirty (30) days from the
delivery of a Notice of Intention to Arbitrate to designate an arbitrator and
notify the other Party of the name of such arbitrator. If such other Party shall
fail to name a second arbitrator within thirty (30) days, then the Party who
first served the notice may, within three (3) days after written notice to the
other Party, apply to the American Arbitration Association as the Appointing
Authority, for the appointment of such second arbitrator for or on behalf of the
other Party, and in such case the arbitrator appointed by the Appointing
Authority shall meet the criteria set forth in this Section II.D. and shall act
as if named by the other Party.

                                       2
JOA - Exhibit "H"

<PAGE>

           (i) Selection of Third Arbitrator. The two (2) arbitrators chosen
     as provided for above shall, within thirty (30) days after the
     appointment of the second arbitrator, choose the third arbitrator who
     shall meet the criteria set forth in this Section II.D., and in the event
     of their failure. to do so within said thirty (30) days, either of the
     Parties hereto may in like manner, within three (3) days after written
     notice to the other Party, apply to the Appointing Authority for the
     appointment of a third arbitrator: The third arbitrator shall then
     disclose any and all conflicts of interest and any business relationship
     that he or she has with any Party. Following that disclosure, the Parties
     shall agree to appoint the chosen third arbitrator or to continue the
     selection process in the same manner. The three (3) arbitrators selected
     shall constitute the Panel. The third arbitrator shall-serve as Chairman.
     of the Panel.

           (ii) Conflicts. All arbitrators, prior to their appointment shall
     disclose to the. Parties, and to the other members of the Panel all
     actual or perceived conflicts of interest and business relationships
     involving the dispute or the Parties, including but not limited to, any
     professional or social relationships, present or past, with any Party (or
     its affiliates), including any Party's (or its affiliates) directors,
     officers, and supervisory personnel and counsel. Any Party may challenge
     in writing the appointment or continued service of any arbitrator for
     lack of independence, partiality, or any other cause likely to impair
     such arbitrator's ability to effectively participate in the proceedings
     or render a fair and equitable decision. Where such challenge is made,
     the Appointing Authority shall uphold or dismiss the challenge. In the
     event a challenge is upheld, the arbitrator as to whom the challenge was
     upheld shall cease to be a member of the Panel. A replacement will be
     selected in the same manner as the original arbitrator was selected. If
     an arbitrator resigns or becomes unable or unwilling to continue to serve
     on the Panel, a replacement shall be selected in the same manner as that
     arbitrator was chosen.

          (iii) Multi-Party Arbitrations. Where more than two Parties are
     involved in the dispute ("Multi-Party Arbitration"), all Parties shall
     jointly name and agree as the appointment of the two arbitrators meeting
     the criteria set forth in Section N.D. above. The third arbitrator shall be
     appointed as set forth in Section ll.D.(i) above. If the Parties cannot
     agree as to the choice of the two arbitrators within the said thirty (30)
     days, either of the Parties hereto may in like manner, within three (3)
     days after written notice to the other Party, apply to the Appointing
     Authority for the appointment of the two arbitrators meeting the criteria
     set forth in Section II.D. above.

          (iv) Management of the Arbitration. The Panel shall actively manage
     the proceedings as it deems best so as to make the same expeditious,
     economical, and less burdensome and adversarial than litigation.

     E. Confidentiality All documents, briefs, testimony, transcripts, as well
as, all Panel decisions shall be confidential, except that, upon prior written
consent of both Parties, such information may be divulged to third parties who
agree in writing to keep such information confidential if such disclosure is
deemed necessary pursuant to common business practice or is required by law.
Likewise, the views, suggestions, admissions, proposals, and other information
exchanged in the arbitration are confidential and are inadmissible in any other
proceeding.

                                       3
JOA - Exhibit "H"

<PAGE>

     F. Costs and Expenses. Each side shall be solely responsible for all costs,
fees and expenses. incurred by its party-appointed arbitrator. The fees, costs,
and expenses of the third arbitrator and any other incidental costs incurred in
connection with: the arbitrator proceeding shall be borne equally by the
Parties. Each Party is solely responsible for its own attorneys' fees and
expenses incurred in the arbitration. In the event of a Multi-Party arbitration,
all costs and expenses shall be borne equally by all Parties.

     G. Submissions. Within thirty (30) days after the selection of the Panel,
each Party shall provide the Panel. with a short and plain submission defining
the issues to be, decided and the nature of the relief that the Panel may award
(the "Submission"). This Submission shall explicitly authorize the Arbitration
Panel to decide these issues. This authorization shall stay in force for six (6)
months from this Submission. If the Parties are unable to reach consensus as to
the issues involved, the Panel in its sole discretion shall frame the issues
through a reasonable procedure. The Panel will render decisions on the specific
issues established and shall fashion any remedy that the Panel deems appropriate
so long as that remedy is consistent with the Parties' Submissions hereunder.
Any money judgment entered by the Panel shall be payable in U.S. dollars.

     H. Transcriptions. The presentations and argument will be transcribed for
the benefit of the Panel and the Parties.

     I. Discovery. Commencing thirty (30) days after the receipt of the opposing
Party's Submission, each Party may serve upon the other Party up to fifteen (15)
requests for the production of documents, including sub-parts. The requests
shall be made in good faith and not be served for the purpose of delay or
harassment. Each request shall describe the type of document(s) sought and each
request shall be limited to documents that are relevant to a claim or defense in
the arbitration proceeding, or reasonably calculated to lead to the discovery of
admissible evidence. The requests need not be served all at once but may be
served in stages.

          (i) The Party served with a request under this provision shall provide
     the adverse Party with copies of the requested documents, and identify the
     request to which each document is responsive, within twenty (20) days of
     the receipt of the request. If the Party served with a request objects to
     the production of any of the requested documents, it shall nevertheless
     produce within the permitted time all documents responsive to any request
     that is not objected to by that Party.

           (ii) A Party that is served with a request may challenge the
     propriety of the request within the time permitted for response by a
     short written objection which shall be forwarded to the adverse Party and
     to each member of the Panel. The adverse Party shall submit its response,
     if any, to the objecting Party and each member of the Panel within five
     (5) days of receipt of the objection. The Panel shall consider the
     request, the objection, and the response, if any, and decide whether the
     production shall be allowed or denied or whether the request should be
     modified within ten (10) days after the submission of the adverse Party's
     response.

                                       4
JOA - Exhibit "H"

<PAGE>

     J. Presentations. No later than twenty-five (25) days prior to the date
that presentations to the Panel are to begin, each Party will submit to the
Panel and serve on the other Party a written position statement. The original
statement of each Party shall not exceed thirty-five '(35) typewritten
letter-sized pages. Each Party shall have the. right to . submit reply
statements no .later than fifteen (15) days prior -to. the date of the
presentation. Such reply statements shall- not exceed fifteen (15) typewritten
letter-sized pages.

          (i) All documents and affidavits that a Party intends to use during
     its presentation shall be submitted to the Panel and served on the other
     Party with the position and reply statements. All demonstrative exhibits
     shall be exchanged five (5) days in advance of the presentations,

          (ii) The presentations to the Panel shall extend for such time as the
     Panel agrees, to be appropriate. In the absence of any agreement, the
     presentations for both Parties shall extend for no longer than two (2) days
     and shall be concluded within six (6) months after selection of the Panel.
     Presentations of each Party shall occur successively with no intervening
     delay.

          (iii) Each Party shall make an oral and/or documentary presentation of
     its position in such order and in accordance with the time schedule
     established by the Panel. The Panel may question each of the presenters
     during or following any and all presentations.

The Panel shall determine a reasonable time and location for the presentations.

     K. Decision and Award. The Panel shall promptly (within sixty (60) days of
conclusion of the presentations or such longer period as the Parties may
mutually agree) determine the claims of the Parties and render their final
decision in writing. All decisions and awards shall be decided by a majority of
the Panel. The decision shall state with specificity the findings of fact and
conclusions of law on which it rests. The decision rendered by the Panel may be
enforced in any federal court having jurisdiction to do so and may only be
appealed pursuant to Section L below. The decision shall be served upon each of
the Parties by facsimile transmission and by first class mail. If there be no
majority as to any part of the award, such part of the award shall be made by
the third arbitrator.

          (i) If applicable law allows pre-award interest, the Panel may, in
     their discretion, grant pre-award interest and, if so, such interest may be
     at commercial rates during the relevant period. The Panel may award all or
     a part of a Party's reasonable attorney's fees and costs of arbitration,
     taking into account the final result of the arbitration, the conduct of the
     Parties and their counsel in the course of the arbitration, and other
     relevant factors. The Panel shall not award consequential or punitive
     damages.

          (ii) Within ten (10) days of receipt of the award either side may
     submit a Motion to Modify the award. A response shall be due within fifteen
     (15) days thereafer and the Panel shall rule thereon within fifteen (15)
     days after receipt of the response.

                                       5
7 JOA -- Exhibit "H"

<PAGE>

          (iii) Judgment on the award may be entered in a United States District
     Court for the federal district within which the decision was made at any
     time within one year after the decision is made.

     L. Vacation of Award and Appeal. The Parties. agree that an award made by
the Panel may only be vacated or confirmed. by a federal court of proper
jurisdiction. as established above. The Parties agree that an award made-by the
Panel may be vacated by a court only if the award was procured by or through
fraud or corruption or because the Panel refused to hear evidence material to
the controversy or otherwise so conducted the hearing as to substantially
prejudice the rights of a Party. An appeal from an order or judgment pursuant to
this Section II.L. shall be instituted in the United States District Court for
the Eastern District of Louisiana. Each Party .waives any option or objection
which it may now or thereafer have to the laying of the venue of any such suit,
action or proceeding and irrevocably submits to the jurisdiction of the court in
any such suit, action or proceeding. Each Party agrees that a remedy at law for
a violation of this Section II.L. may not be adequate and therefore agrees that
the remedies of specific performance and injunctive relief shall be available in
the event of any violation in addition to any other right or remedy at law or in
equity to which any Party may be entitled.

     M. Res Judicata. To the extent permitted by law, any decision of the Panel
shall not be resjudicata or have any binding effect in any unrelated litigation
or arbitration.

                                       6
JOA - Exhibit "H"

<PAGE>

                                   Exhibit "I"

    Attached to and made a part of that certain Offshore Operating Agreement
         effective as of October l, 2005, between Chevron U.S.A. Inc.,
         Newfield Exploration Company and Ridgewood Energy Corporation,
                 Manager Ridgewood Energy Q Fund, LLC, covering
             Main Pass Blocks 221 and 222, Offshore, Gulf of Mexico.

                               ARTICLE 8.6 ET SEQ.
                            SHELF OPERATING AGREEMENT
                                   (LOUISIANA)

         Security Rights; Default; Unpaid Charges; Carved-out Interests.

8.6    Security Rights (LA).

       In addition to any other security rights and remedies provided by law
       with respect to services, rendered or materials and equipment furnished
       under this Agreement, for and in consideration of the covenants and
       mutual undertakings of the Operator and the Non-operators herein, the
       Parties shall have the following security rights:

       8.6.1  Mortgage in Favor of the Operator.

       Each Non-operator hereby grants to the Operator a mortgage, hypotheca,
       and pledge of and over all of its rights, titles, and interests in and to
       (a) the Contract Area, (b) the Hydrocarbons in, on, under, and that may
       be produced from the lands within the Contract Area, and (c) all other
       immovable property susceptible of mortgage situated within the Contract
       Area. This mortgage is given to secure the complete and timely
       performance of and payment by each Non-operator of all obligations and
       indebtedness of every kind and nature, whether now owed by such
       Non-operator or hereafter arising, pursuant to this Agreement. To the
       extent susceptible under applicable law, this mortgage and the security
       interests granted in favor of the Operator herein shall secure the
       payment of all costs and other expenses properly charged to such Party,
       together with (A) interest on such indebtedness, costs, and other
       expenses at the rate set forth in Exhibit "C" attached hereto (the
       "Accounting Procedure") or the maximum rate allowed by law, whichever is
       the lesser, (B) reasonable attorneys' fees, (C) court costs, and (D)
       other directly related collection costs. If any Non-operator does not pay
       such costs and other expenses or perform its obligations under this
       Agreement when due, the Operator shall have the additional right to
       notify the purchaser or purchasers of the defaulting Non-operator's
       Hydrocarbon production and collect such costs and other expenses out of
       the proceeds from the sale of the defaulting Non-operator's share of
       Hydrocarbon production until the amount owed has been paid. The Operator
       shall have the right to offset the amount owed against the proceeds from
       the sale of such defaulting Non-operator's share of Hydrocarbon
       production. Any purchaser of such production shall be entitled to rely on
       the Operator's statement concerning the amount of costs and other
       expenses owed by the defaulting Non-operator and payment made to the
       Operator by any purchaser shall be binding and conclusive as between such
       purchaser and such defaulting Non-operator.

JOA -- Exhibit "I"
                                        7

<PAGE>

       The maximum amount for which the mortgage herein granted by each
       Non-operator shall be deemed to secure the obligations and indebtedness
       of such Non-operator to the Operator as stipulated herein is hereby fixed
       in an amount equal to $25,000,000.00 (the "Limit of the Mortgage of each
       Non-operator"). Except as provided in the previous sentence (and then
       only to the extent such limitations are required by law), the, entire
       amount of obligations and indebtedness of each 'Non-operator to the
       Operator is secured hereby without limitation. Notwithstanding the
       foregoing Limit of the Mortgage of each Non-operator, the liability of
       each Non-operator under this Agreement and the mortgage and security
       interest granted hereby shall be limited to (and the Operator shall not
       be entitled to enforce the same against such Non-operator for, an amount
       exceeding) the o .actual obligations and indebtedness- [including all
       interest. charges, costs, attorneys' fees, and other charges provided for
       in this Agreement or in the Memorandum of Operating Agreement and
       Financing Statement (Louisiana), as such term is defined in Article
       8.6.1.4 (Recordation) hereof] outstanding and unpaid and that are
       attributable to or charged against the interest of such Non-operator
       pursuant to this Agreement.

              8.6.1.1 Security Interest in Favor of the Operator.

              To secure the complete and timely performance of and payment by
              each Non-operator of all obligations and indebtedness of every
              kind and nature, whether now owed by such Non-operator or
              hereafter arising, pursuant to this Agreement, each Non-operator
              hereby grants to the Operator a continuing security interest in
              and to all of its rights, titles, interests, claims, general
              intangibles, proceeds, and products thereof, whether now existing
              or hereafter acquired, in and to (a) all Hydrocarbons produced
              from the lands or offshore blocks covered by the Contract Area or
              attributable to the Contract Area when produced, (b) all accounts
              receivable accruing or arising as a result of the sale of such
              Hydrocarbons (including, without limitation, accounts arising
              from gas imbalances or from the sale of Hydrocarbons at the
              wellhead), (c) all cash or other proceeds from the sale of such
              Hydrocarbons once produced, and (d) all Platforms and Development
              Facilities, wells, fixtures, other corporeal property, whether
              movable or immovable, whether now or hereafter placed on the
              lands or offshore blocks covered by the Contract Area or
              maintained or used in connection with the ownership, use or
              exploitation of the Contract Area, and other surface and
              sub-surface equipment of any kind or character located on or
              attributable to the Contract Area and the cash or other proceeds
              realized from the sale, transfer, disposition or conversion
              thereof. The interest of the Non-operators in and to the oil and
              gas produced from or attributable to the Contract Area when
              extracted and the accounts receivable accruing or arising as the
              result of the sale thereof shall be financed at the wellhead of
              the well or wells located on the Contract Area. To the extent
              susceptible under applicable law, the security interest granted
              by each Non-operator hereunder covers: (A) all substitutions,
              replacements, and accessions to the

JOA - Exhibit "I"
                                        2

<PAGE>

              property of such Non-operator described herein and is intended to
              cover all of the rights, titles and interests of such Non-operator
              in all movable property now or hereafter located upon or used in
              connection with the Contract Area, whether corporeal or
              incorporeal; (8) all rights under any gas balancing agreement,
              farmout rights, option farmout rights, acreage and cash
              contributions, and conversion rights of such Non-operator in
              connection with the Contract Area, or the Hydrocarbons produced
              from or attributable to the. Contract Area, whether . now owned
              and. existing or hereafter acquired or arising, including,
              without limitation, all interests of each Non-operator in any
              partnership, tax partnership, limited partnership, association,
              joint venture, or other entity or enterprise that holds, owns, or
              controls any interest in the Contract Area; and (C) all rights,
              claims, general intangibles, and proceeds, whether now existing or
              hereafter acquired, of each Non-operator in and to the contracts,
              agreements, permits, licenses, rights-of-way,- and similar rights
              and privileges that relate to or are appurtenant to the Contract
              Area, including the following:

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

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

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

              8.6.1.2 Mortgage in Favor of the Non-operators.

              The Operator hereby grants to each Non-operator a mortgage,

JOA - Exhibit"I"
                                        3

<PAGE>

              hypotheca, and pledge of and over all of its rights, titles, and
              interests in and to (a) the Contract Area; (b) the Hydrocarbons
              in, on, under, and that my be produced from the lands within the
              Contract Area; and (c) all other immovable property or other
              property susceptible of mortgage situated within the Contract
              Area.

                     This mortgage is given to secure the complete and timely
                     performance of and payment by the Operator of all
                     obligations and indebtedness of every kind and nature,
                     whether now owed by the Operator or hereafter arising,
                     pursuant to this Agreement. To the extent susceptible under
                     applicable law, this mortgage and the security interests
                     granted in favor of each Non-operator herein shall secure
                     the payment of all costs and other expenses properly
                     charged to the Operator, together with (A) interest on such
                     indebtedness, costs, and other expenses at the rate set
                     forth in Exhibit "C" or the maximum rate allowed by law,
                     whichever is the lesser, (B) reasonable attorneys' fees,
                     (C) court costs, and (D) other directly related collection
                     costs. If the Operator does not pay such costs and other
                     expenses or perform its obligations under this Agreement
                     when due, the Non-operators shall have the additional right
                     to notify the purchaser or purchasers of the Operator's
                     Hydrocarbon production and collect such costs and other
                     expenses out of the proceeds from the sale of the
                     Operator's share of Hydrocarbon production until the amount
                     owed has been paid. The Non-operators shall have the right
                     to offset the amount owed against the proceeds from the
                     sale of the Operator's share of Hydrocarbon production. Any
                     purchaser of such production shall be entitled to rely on
                     the Non-operators' statement concerning the amount of costs
                     and other expenses owed by the Operator and payment made to
                     the Non-operators by any purchaser shall be binding and
                     conclusive as between such purchaser and the Operator. The
                     maximum amount for which the mortgage herein granted by the
                     Operator shall be deemed to secure the obligations and
                     indebtedness of the Operator to all Non-operators as
                     stipulated herein is hereby fixed in an amount equal to
                     $25,000,000.00 in the aggregate (the "Limit of the Mortgage
                     of the Operator"). Except as provided in the previous
                     sentence (and then only to the extent such limitations are
                     required by law), the entire amount of obligations and
                     indebtedness of the Operator to the Non-operators is
                     secured hereby without limitation. Notwithstanding the
                     foregoing Limit of the Mortgage of the Operator, the
                     liability of the Operator under this Agreement and the
                     mortgage and security interest granted hereby shall be
                     limited to (and the Non-operators shall not be entitled to
                     enforce the same against the Operator for, an amount
                     exceeding) the actual obligations and indebtedness
                     [including all interest charges, costs, attorneys' fees,
                     and other charges provided for in this Agreement or in the
                     Memorandum of Operating Agreement and Financing Statement

JOA -- Exhibit" I"
                                        4

<PAGE>

                     (Louisiana), as such term is defined in Article 8.6.1.4
                     hereof] outstanding and unpaid and that are attributable to
                     or charged against the interest of the Operator pursuant to
                     this Agreement.

              8.6.1.3 Security Interest in Favor of the Non-operators.

              To secure the complete and timely performance of and payment by
              the Operator of all obligations and indebtedness of every kind and
              nature, whether now owed by the Operator or hereafer arising,
              pursuant to this Agreement, the Operator hereby grants to each
              Non-operator a continuing security interest in and to all of its
              rights, titles, interests, claims, general intangibles, proceeds,
              and products thereof, whether now existing or hereafter acquired,
              in and to (a) all Hydrocarbons produced from the lands or offshore
              blocks covered-by the Contract Area or included within-the
              Contract Area or attributable to the Contract Area when produced,
              (b) all accounts receivable accruing or arising as a result of the
              sale of such Hydrocarbons (including, without limitation, accounts
              arising from gas imbalances or from the sale of Hydrocarbons at
              the wellhead), (c) all cash or other proceeds from the sale of
              such Hydrocarbons once produced, and (d) all Platforms and
              Development Facilities, wells, fixtures, other corporeal property
              whether movable or immovable, whether now or hereafer placed on
              the offshore blocks covered by the Contract Area or maintained or
              used in connection with the ownership, use or exploitation of the
              Contract Area, and other surface and sub-surface equipment of any
              kind or character located on or attributable to the Contract Area
              and the cash or other proceeds realized from the sale, transfer,
              disposition or conversion thereof. The interest of the Operator in
              and to the Hydrocarbons produced from or attributable to the
              Contract Area when extracted and the accounts receivable accruing
              or arising as the result of the sale thereof shall be financed at
              the wellhead of the well or wells located on the Contract Area. To
              the extent susceptible under applicable law, the security interest
              granted by the Operator hereunder covers: (A) all substitutions,
              replacements, and accessions to the property of the Operator
              described herein and is intended to cover all of the rights,
              titles and interests of the Operator in all movable property now
              or hereafer located upon or used in connection with the Contract
              Area, whether corporeal or incorporeal; (B) all rights under any
              gas balancing agreement, farmout rights, option farmout rights,
              acreage and cash contributions, and conversion rights of the
              Operator in connection with the Contract Area, the Hydrocarbons
              produced from or attributable to the Contract Area, whether now
              owned and existing or hereafter acquired or arising, including,
              without limitation, all interests of the Operator in any
              partnership, tax partnership, limited partnership, association,
              joint venture, or other entity or enterprise that holds, owns, or
              controls any interest in the Contract Area; and (C) all rights,
              claims, general intangibles, and proceeds, whether now existing or
              hereafer acquired, of the Operator in and to the contracts,
              agreements, permits, licenses, rights-of-way, and similar rights
              and privileges that relate to or are appurtenant to the Contract
              Area, including the following:

JOA - Exhibit "I"
                                        5

<PAGE>

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

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

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

              8.6.1.4 Recordation.

              To provide evidence of, and to further perfect the Parties'
              security rights created hereunder, upon request, each Party shall
              execute and acknowledge the Memorandum of Operating Agreement and
              Financing Statement (Louisiana) attached as Exhibit "G" (the
              "Memorandum of Operating Agreement and Financing Statement
              (Louisiana)") in multiple counterparts as appropriate. The Parties
              authorize the Operator to file the Memorandum of Operating
              Agreement and Financing Statement (Louisiana) in the public
              records set forth below to serve as notice of the existence of
              this Agreement as a burden on the title of the Operator and the
              Non-operators to their interests in the Contract Area and for
              purposes of satisfying otherwise relevant recording and filing
              requirements of applicable law and to attach an original of the
              Memorandum of Operating Agreement and Financing Statement
              (Louisiana) to a standard UCC-1 in mutually agreeable forms for
              fling in the UCC records set forth below to perfect the security
              interests created by the Parties in this Agreement. Upon the
              acquisition of a leasehold interest in the Contract Area, the

JOA -- Exhibit "I"
                                        6

<PAGE>

              Parties shall, within five business days following request by one
              of the Parties hereto, execute and furnish to the requesting Party
              for recordation such a Memorandum of Operating Agreement and
              Financing Statement (Louisiana) describing such leasehold
              interest. Such Memorandum of Operating Agreement and Financing
              Statement (Louisiana) shall be amended from time to time upon
              acquisition of additional leasehold interests in the Contract
              Area, and the Parties shall, within five business days following
              request by one of the Parties hereto, execute and furnish to the
              requesting Party for recordation any such amendment.

              The Memorandum of Operating Agreement and Financing Statement
              (Louisiana) is to be filed or recorded, as the case may be, in (a)
              the conveyance records of the parish or parishes. adjacent to the
              lands or offshore blocks covered by the Contract Area or contained
              within the Contract Area pursuant to La. R.S. 9:2739 et seq., (b)
              the mortgage records of such parish or parishes, and (c) the
              appropriate Uniform Commercial Code records.

       8.6.2  Default.

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

       8.6.3  Unpaid Charges.

       If any Participating Party fails to pay its share of the costs and other
       expenses authorized under this Agreement in accordance with Exhibit "C"
       or to otherwise perform any of its obligations under this Agreement when
       due, the Party to whom such payment is due, in order to take advantage of
       the provisions of this Article 8.6, shall notify the other Party by
       certified or registered U.S. Mail that it is in default and has thirty
       (30) days from the receipt of such notice to pay. If such payment is not
       made timely by the non-paying Party after the issuance of such notice to
       pay, the Party requesting such payment may take immediate steps to
       diligently pursue collection of the unpaid costs and other expenses owed

JOA - Exhibit "1"
                                        7

<PAGE>

       by such Participating Party and to exercise the mortgage and security
       rights granted by this Agreement. The bringing of a suit and the
       obtaining of a judgment by any Party for the secured indebtedness shall
       not be deemed an election of remedies or otherwise affect the security
       rights granted herein. In. addition to any other remedy afforded by law,
       each Party shall have, and is hereby given and vested with, the power and
       authority to foreclose the lien, mortgage, pledge, and security interest
       established hereby in its favor in the manner provided by law, to
       exercise the Power of Sale provided for herein, if applicable, and to
       exercise all rights of a secured party under the Uniform Commercial Code
       as adopted by the state in which the Contract Area is located or such
       other states as such Party may deem appropriate. The Operator shall keep
       an accurate account of amounts owed by the nonperforming Party (plus
       interest and collection costs) and any amounts collected with respect to
       amounts owed by the nonperforming Party. In-the event there become three
       or more Parties to this. Agreement, then if any nonperforming Party's
       share of costs remains delinquent for a period of sixty (60) days, each
       other Participating Party shall, upon the Operator's request, pay the
       unpaid amount of costs in the proportion that its Working Interest bears
       to the total non-defaulting Working Interests. Each Participating Party
       paying its share of the unpaid amounts of a nonperforming Party shall be
       subrogated to the Operator's mortgage and security rights to the extent
       of the payment made by such Participating Party.

       8.6.4  Carved-out Interests.

       Any agreements creating any overriding royalty, production payment, net
       proceeds interest, net profits interest, carried interest or any other
       interest carved out of a Working Interest in the Contract Area shall
       specifically make such interests inferior to the rights of the Parties to
       this Agreement. If any Party whose Working Interest is so encumbered does
       not pay its share of costs and other expenses authorized under this
       Agreement, and the proceeds from the sale of its Hydrocarbon production
       pursuant to this Article 8.6 are insufficient to pay such costs and
       expenses, then subject to the provisions of Article 16.2, the security
       rights provided for in this Article 8.6 may be applied against the
       carved-out interests with which the defaulting or nonperforming Party's
       interest in the Contract Area is burdened. In such event, the rights of
       the owner of such carved-out interest shall be subordinated to the
       security rights granted by this Article 8.6.

JOA - Exhibit "I"
                                        8

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