Document:

Exhibit 10.2

                                     JOINT

                              OPERATING AGREEMENT

                                    BETWEEN

                          GRYPHON EXPLORATION COMPANY

                                  AS OPERATOR

                                      AND

                              MARINER ENERGY, INC.

                                      AND

                          RIDGEWOOD ENERGY CORPORATION

                                AS NON-OPERATORS

                                    COVERING

                             N/2 SW/4 and S/2 SW/4

                          GALVESTON AREA, BLOCK 246-L

                                 OFFSHORE TEXAS

                                     DATED

                                 August 1, 2004

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                           JOINT OPERATING AGREEMENT

     THIS  AGREEMENT  is made  effective  the 1st day of  August,  2004,  by the
signers hereof, herein referred to collectively as "Parties" and individually as
"Party".

                                  WITNESSETH:

     WHEREAS the PARTIES are owners of or have  contracted for the right to earn
an interest  in the oil and gas  lease(s)  identified  in Exhibit  "A",  and the
Parties desire to explore, develop, produce and operate said lease(s).

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

                                    ARTICLE I

                                   APPLICATION

     1.1  APPLICATION  TO BOTH  LEASES.  If more  than one oil and gas  lease is
identified  in Exhibit "A", this  Agreement  shall apply to both Leases and both
such Leases shall be considered as being covered by the operating agreement.

                                   ARTICLE II

                                  DEFINITIONS

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

     2.2 CASING POINT. That point at which a well drilled hereunder, has reached
the  proposed  objective  depth or zone,  logged  and  logs  distributed  to the
PARTICIPATING  PARTIES and any tests have been made which are necessary to reach
the decision whether to run casing.

     2.3 DEVELOPMENT OPERATIONS. Operations on the LEASES other than EXPLORATORY
OPERATIONS  as defined in Section  2.5 below.

     2.4 DEVELOPMENT WELL. Any well proposed as a DEVELOPMENT OPERATION.

     2.5 EXPLORATORY  OPERATIONS.  Operations on the LEASES, which are scheduled
for an objective zone, horizon or formation:

          (1)  which has not been  established as producible on the LEASES under
               2.18 below; or,

          (2)  which is already  established  as  producible on the Leases under
               2.18 below, but such objective zone, horizon or formation will be
               penetrated  at a location  more than 2,000 feet from the  nearest
               bottom  hole  location on the Lease at which such  objective  has
               been proved  producible,  or such objective is mutually agreed to
               be in a separate fault block.

     2.6 EXPLORATORY WELL. Any well proposed as an EXPLORATORY OPERATION.

     2.7  FACILITIES.  All  lease  equipment  beyond  the  wellhead  connections
acquired pursuant to this Agreement including any platform(s) necessary to carry
out the operation.

     2.8 LEASES.  The oil and gas leases identified in Exhibit "A" and the lands
affected  thereby.

     2.9 NON-CONSENT OPERATIONS. DEVELOPMENT or EXPLORATORY OPERATIONS conducted
by fewer than all Parties.

     2.10 NON-CONSENT PLATFORM. A drilling or production platform owned by fewer
than all PARTIES.

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     2.11  NON-CONSENT  WELL. A DEVELOPMENT or  EXPLORATORY  WELL owned by fewer
than all PARTIES.

     2.12 NON-OPERATOR. Any PARTY to the Agreement other than the OPERATOR.

     2.13 NON-PARTICIPATING PARTY. Any PARTY other than a PARTICIPATING PARTY.

     2.14  NON-PARTICIPATING  PARTY'S SHARE. The  PARTICIPATING  INTEREST a NON-
PARTICIPATING  PARTY  would  have had if all  PARTIES  had  participated  in the
operation.

     2.15  OPERATOR.  The PARTY  designated  under this Agreement to conduct all
operations.

     2.16  PARTICIPATING   INTEREST.  A  PARTICIPATING   PARTY'S  percentage  of
participation in an operation conducted pursuant to the Agreement.

     2.17  PARTICIPATING  PARTY.  A PARTY  who joins in an  operation  conducted
pursuant to this agreement.

     2.18 PRODUCIBLE  WELL. A well producing oil or gas, or if not producing oil
or gas,  a well  either  declared  or  capable of being  declared  producing  in
accordance  with any applicable  government  authority or by agreement of all of
the Parties.

     2.19 WORKING INTEREST.  The ownership of each PARTY to and to the LEASES as
set forth in Exhibit "A".

                                  ARTICLE III

                                    EXHIBITS

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

          3.1.1   Exhibit A.   Description of Leases and Working Interest

          3.1.2   Exhibit B.   Insurance Provision

          3.1.3   Exhibit C.   Accounting Procedure

          3.1.4   Exhibit D.   Nondiscrimination Provision

          3.1.5   Exhibit E.   Gas Balancing Agreement

                                   ARTICLE IV

                                    OPERATOR

     4.1 OPERATOR. Gryphon Exploration Company is hereby designated as OPERATOR.
OPERATOR  shall not have the right to assign or transfer  any rights,  duties or
obligations of OPERATOR to another PARTY subject to the provisions herein.

     4.2  RESIGNATION.  OPERATOR may resign at any time by giving  notice to the
PARTIES.  Such resignation  shall become effective at 7:00 a.m. on the first day
of the month following a period of ninety (90) days after said notice,  unless a
successor OPERATOR has assumed the duties of OPERATOR prior to that date.

     4.3 REMOVAL OF OPERATOR.  OPERATOR  may be removed if (1) OPERATOR  becomes
insolvent or unable to pay its debts as they mature or makes an  assignment  for
the benefit of creditors or commits any act of  bankruptcy or seeks relief under
laws  providing  for the relief of debtors;  or (2) a receiver is appointed  for
OPERATOR  or for  substantially  all  of its  property  and/or  affairs;  or (3)
OPERATOR or its  designee  no longer owns an interest in the  property or divest
itself of more than fifty percent  (50%) or more of the interest  owned by it in
the Lease at the time it was designated OPERATOR;  or (4) OPERATOR has committed
a material  breach of any substantive  provision  hereof or fails to perform its
duties  hereunder in a reasonable and prudent manner,  or failed to rectify such
default within sixty (60)

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days after  notice from another  PARTY to do so. The PARTY giving  notice to the
OPERATOR  of a default  shall  also  furnish a copy of such  notice to the other
PARTIES.  In such event,  the OPERATOR may be removed by an affirmative  vote of
two (2) or more  PARTIES  having a combined  WORKING  INTEREST of fifty  percent
(50%) in the LEASE.

     4.4  SELECTION OF SUCCESSOR.  Upon  resignation  or removal of OPERATOR,  a
successor  OPERATOR shall be selected by an affirmative  vote of two (2) or more
PARTIES having a combined WORKING  INTEREST of fifty-one  percent (51%) or more;
however,  if the  removed or  resigned  OPERATOR  fails to vote or votes only to
succeed itself,  the successor OPERATOR shall be selected by an affirmative vote
of the PARTIES having a combined WORKING INTEREST of fifty-one  percent (51%) or
more of the remaining  WORKING  INTEREST after excluding the WORKING INTEREST of
the removed or resigned OPERATOR.

     4.5 DELIVERY OF PROPERTY.  Prior to the effective  date of  resignation  or
removal, OPERATOR shall deliver promptly to successor OPERATOR the possession of
everything owned by the PARTIES pursuant to this Agreement.

                                    ARTICLE V

                        AUTHORITY AND DUTIES OF OPERATOR

     5.1 EXCLUSIVE RIGHT TO OPERATE.  Unless  provided,  OPERATOR shall have the
exclusive right and duty to conduct all operations pursuant to the Agreement.

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

     5.3 LIENS AND  ENCUMBRANCES.  OPERATOR shall endeavor to keep the LEASE and
equipment  free  from  all  liens  and  encumbrances  occasioned  by  operations
hereunder, except those provided for in Section 8.5.

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

     5.5 RECORDS.  OPERATOR shall keep accurate  books,  accounts and records of
operations  hereunder which,  unless  otherwise  provided for in this Agreement,
shall be  available  to  NON-OPERATOR  pursuant to the  provisions  contained in
Exhibit "C".

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

     5.7  DRILLING.  OPERATOR  shall have all drilling  operations  conducted by
qualified and responsible  independent  contractors under competitive contracts.
However,  OPERATOR may employ its equipment and personnel in the conduct of such
operations,  but its charges therefor shall not exceed the then prevailing rates
in the area and such work shall be  performed  pursuant  to a written  agreement
among the PARTICIPATING PARTIES.

     5.8 REPORTS.  OPERATOR shall make reports to governmental  authorities that
it has a duty to make as OPERATOR  and shall  furnish  copies of such reports to
the PARTIES.  OPERATOR  shall give timely  written  notice to the PARTIES of all
litigation and hearings affecting the LEASES or operations hereunder.

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     5.9  INFORMATION  TO  PARTICIPATING  PARTIES.  OPERATOR  shall  furnish all
PARTICIPATING PARTIES hereto the following  information  pertaining to each well
being drilled:

          (a)  copy of  application  for  permit  to  drill  and all  amendments
               thereto;

          (b)  daily drilling  reports by telephone  followed by written reports
               (or by FACSIMILE);

          (c)  complete report of all core analyses;

          (d)  two (2) copies of any logs or surveys as run;

          (e)  two (2)  copies of any well test  results,  bottom-hole  pressure
               surveys, gas and condensate analyses or similar information;

          (f)  one (1) copy of reports made to regulatory agencies; and

          (g)  twenty-four  (24) hour  notice of  logging,  coring  and  testing
               operations;

          (h)  upon request prior to resumption of drilling operations,  samples
               of cuttings  and cores  marked as to depth,  to be  packaged  and
               shipped to the requesting PARTY at their expense.

          (i)  all  other   reasonable   information,   available  to  OPERATOR,
               pertaining to any well drilled pursuant to this Agreement.

                                   ARTICLE VI

                          VOTING AND VOTING PROCEDURES

     6.1   DESIGNATION   OF   REPRESENTATIVE.   The  name  and  address  of  the
representative  and  alternate  authorized  to represent and bind each PARTY for
operations  provided  in  Article  IX,  shall be as shown on  Exhibit  "A".  The
designated  representative  or alternate may be changed by written notice to the
other PARTIES.

     6.2 VOTING  PROCEDURES.  Unless  otherwise  provided,  any matter requiring
approval of the PARTIES shall be determined as follows:

          6.2.1 Voting  Interest.  Each PARTY shall have a voting interest equal
to its WORKING INTEREST or its PARTICIPATING INTEREST as applicable.

          6.2.2 Vote Required.  Except as may be specifically provided elsewhere
herein,  if there are three or more  Parties  to this  agreement,  any  proposal
requiring approval of the PARTIES shall be decided by an affirmative vote of two
(2) or more PARTIES having a combined voting interest of fifty-one percent (51%)
or more. If there are only two parties to this agreement, any proposal requiring
approval of the Parties,  other than the proposals described in Article 12.7 and
Article 13.1, shall be decided by an affirmative vote of one (1) or more Parties
having a combined voting interest of fifty-one percent (51%) or more.

          6.2.3 Votes. The PARTIES may vote at meetings, by telephone, confirmed
in writing to OPERATOR; or by letter,  telegram,  telex or telecopies.  However,
any PARTY not  attending a meeting must vote prior to the meeting in order to be
counted.  Provided,  however,  no vote  shall be taken in a meeting in which all
Parties are not present unless such vote was  specifically set out in the formal
agenda.  OPERATOR shall give prompt notice of the results of such voting to each
PARTY.

          6.2.4 Meetings. Meetings of the PARTIES may be called by OPERATOR upon
its own motion or at the  request of one (1) or more  PARTIES  having a combined
voting  interest  of not less  than ten  percent  (10%).  Except  in the case of
emergency or except when agreed by unanimous consent, no meeting shall be called
on less than five (5) days advance  written  notice,  (including  the agenda for
such meeting). The OPERATOR shall be chairman of each meeting.

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                                   ARTICLE VII

                                     ACCESS

     7.1 ACCESS TO LEASE.  Each PARTY shall have access to the LEASE as its sole
risk and expense at all reasonable  times to inspect  operations and records and
data  pertaining  thereto.

     7.2 REPORTS.  OPERATOR shall furnish to a requesting  PARTY any information
to which such PARTY is entitled hereunder. The costs of gathering and furnishing
information  not  otherwise  furnished  under  Article V shall be charged to the
requesting PARTY.

     7.3  CONFIDENTIALITY.  Except as  provided  in  Section  7.4 and except for
necessary  disclosures  to  governmental  agencies,  no PARTY shall  release any
geological,  geophysical or reservoir  information or any logs, surveys or other
information  pertaining to the progress,  tests or results of any well or status
of the LEASE unless agreed to by the PARTICIPATING  PARTIES. At such time as the
PARTIES mutually agree such information is non-confidential, it may be publicly
released.  Unless otherwise provided,  OPERATOR shall initially release the same
subsequent  to approval of its content by the PARTIES.  OPERATOR  shall have the
exclusive  right to  designate  certain  wells as  "tight"  for the  competitive
protection of the PARTIES.

     7.4 LIMITED  DISCLOSURE.  Any PARTY may make confidential data available to
affiliates,  to reputable  engineering firms and gas transmission  companies for
hydrocarbon  reserve and other  technical  evaluations,  to reputable  financial
institutions  for study prior to commitment of funds and to bonafide  purchasers
of all of a PARTY'S interest in the LEASE. Any third party permitted such access
shall first agree in writing  neither to disclose such data to others nor to use
such data except for the purpose for which it is disclosed.  Each PARTY shall be
furnished with copies of third parties execution of the same.

                                  ARTICLE VIII

                                  EXPENDITURES

     8.1 BASIS OF CHARGE TO THE  PARTIES.  Subject to other  provisions  of this
Agreement,  OPERATOR shall pay all costs and each PARTY shall reimburse OPERATOR
in proportion to the PARTICIPATING INTEREST. All charges, credits and accounting
for expenditures  shall be pursuant to the Accounting  Procedure attached hereto
as Exhibit "C". The provisions of this  Agreement  shall prevail in the event of
conflict with Exhibit "C".

     8.2  AUTHORIZATION.  OPERATOR shall neither make any single expenditure nor
undertake  any  project  costing  in excess  of  Seventy-five  Thousand  Dollars
($75,000.00)  without prior  approval of the PARTIES.  OPERATOR  shall furnish a
written AFE, for information  purposes only, to the PARTIES on any  expenditures
in  excess  of  Twenty-five  Thousand  Dollars  ($25,000.00)  or when  costs are
anticipated to exceed 120% of a previously approved AFE. Subject to any election
provided  in  Article  X and XI,  approval  of a well  operation  shall  include
approval of a all necessary  expenditures  through installation of the wellhead.
In the event of an emergency, OPERATOR may immediately make such expenditures as
in its opinion are required to deal with the emergency. OPERATOR shall report to
the PARTIES,  as promptly as possible,  the nature of the  emergency  and action
taken.

     8.3 ADVANCE  BILLINGS.  OPERATOR shall have the right to require each PARTY
to advance its respective  share of estimated  expenditures  pursuant to Exhibit
"C". As to any party who fails to pay its share of said advance  payment  within
fifteen (15) days after  receipt of such  statement  and invoice,  Operator will
notify such affected

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party of its default by certified  mail,  return  receipt  requested and if such
party fails to cure the default within ten (10) days from the date of receipt of
Operator's  Notice,  by payment in full of the outstanding  invoices for advance
payment, at Operator's election,  the affected Party shall be deemed non-consent
as to the proposed well attributable thereto.

     8.4  COMMINGLING OF FUNDS.  Funds received by OPERATOR under this Agreement
may be commingled with its own funds.

     8.5 SECURITY RIGHTS.  In addition to any other security rights and remedies
provided by law with  respect to services  rendered or materials  and  equipment
furnished  under  this  Agreement,  OPERATOR  shall  have a first lien upon each
PARTY'S  PARTICIPATING  and/or  WORKING  INTEREST,  including the production and
equipment  credited thereto,  in order to secure payment of charges against such
PARTY,  together with  interest  thereon at the rate set forth in Exhibit "C" or
the maximum rate allowed by law,  whichever is less, plus attorneys' fees, court
costs and other related collection costs. If any PARTY does not pay such charges
when due, OPERATOR shall have the additional right to collect from the purchaser
the proceeds from the sale of such PARTY'S share of production  until the amount
owed has been paid.  Each  purchaser  shall be  entitled  to rely on  OPERATOR'S
statement  concerning the amount owed. Each  NON-OPERATOR  shall have comparable
security rights on OPERATOR'S PARTICIPATING and/or WORKING INTEREST.

     8.6 UNPAID  CHARGES.  If any PARTY fails to pay the charges due  hereunder,
including  billings under Section 8.3,  within thirty (30) days after payment is
due,  the  PARTICIPATING  PARTIES  shall have the  obligation,  upon  OPERATOR'S
request, to pay the unpaid amount in proportion to their interest. Each PARTY so
paying its share of the unpaid amount shall be subrogated to OPERATOR'S security
rights to the extent of such payment.

     8.7  DEFAULT.  If any PARTY does not pay its share of the charges when due,
or prior to  commencement  of the  approved  operation  for which it is  billed,
whichever  is the  earlier,  OPERATOR  may give such PARTY  notice  that  unless
payment is made within  fifteen (15) DAYS,  such PARTY shall be in default.  Any
PARTY in default shall have no further access to the maps, cores, logs, surveys,
records, data,  interpretations or other information obtained in connection with
said operation.  A defaulting  PARTY shall not be entitled to vote on any matter
until such time as PARTY'S  payments  are current.  The voting  interest of each
non-defaulting PARTY shall be in the proportion its PARTICIPATING INTEREST bears
to the total non-defaulting PARTICIPATING INTEREST. As to any operation approved
or commenced  during the time a PARTY is in default,  such PARTY shall be deemed
to be a NON-PARTICIPATING PARTY.

     8.8 CARVED-OUT  INTERESTS.  Subject to the  reservations set out in Article
16.1, any overriding royalty, production payment, net proceeds interest, carried
interest or any other interest  carved-out of the WORKING INTEREST in the LEASES
after the effective date of this Agreement shall be subject to the rights of the
PARTIES to this Agreement, and any PARTY whose WORKING INTEREST is so encumbered
shall be responsible therefor. If a PARTY does not pay its share of expenses and
the proceeds from the sale of production  under Section 8.5 are insufficient for
that purpose,  the security  rights  provided for therein may be applied against
the carved-out  interests with which such WORKING INTEREST is burdened.  In such
event, the rights of the owner of such carved-out interest shall be subordinated
to the security rights granted by Section 8.5.

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                                   ARTICLE IX

                                    NOTICES

     9.1 GIVING AND  RECEIVING  NOTICES.  All  notices  shall be in writing  and
delivered in person or by mail,  telex,  telegraph,  TWX,  telecopier  or cable;
however,  if a drilling  rig is on  location  at time of  proposal  and  standby
charges  are  accumulating,  such  notices  shall  be  given  by  telephone  and
immediately  confirmed  in  writing.  Notice  shall be  deemed  given  only when
received by the PARTY to whom such notice is directed, except that any notice by
certified mail or equivalent, telegraph or cable properly addressed, pursuant to
Section  6.1,  and with all postage and charges  prepaid  shall be deemed  given
seventy-two (72) hours after such notice is deposited in the mail or twenty-four
(24) hours after such notice is sent by facsimile (receipt  confirmed),  or when
filed with an operating, telegraph or cable company for immediate transmission.

     9.2 CONTENT OF NOTICE.  Any notice which requires a response shall indicate
the maximum  response  time  specified  in Section 9.3 If a proposal  involves a
Platform or Facility,  the notice shall contain a description of same, including
location  and  the   estimated   costs  of   fabrication,   transportation   and
installation.  If a proposal involves a well operation, the notice shall include
the estimated commencement date, the proposed depth, the objective zone or zones
to be tested,  the surface and bottom-hole  locations and the estimated costs of
the operation including all necessary  expenditures  through installation of the
wellhead.

     9.3 RESPONSE TO NOTICES.  Each PARTY'S  response to a proposal  shall be in
writing to OPERATOR,  with copies to the other PARTIES. Except for those notices
in Articles X, XI, XV and XVI, the maximum response time shall be as follows:

          9.3.1 Platform Construction. When any proposal for operations involves
the  construction of a platform,  the maximum  response time shall be forty-five
(45) days.

          9.3.2 Proposal Without Platform. When any proposal for operations does
not require  construction of a platform,  maximum  response time shall be thirty
(30) days;  however,  if a drilling rig is on location  and standby  charges are
accumulating, the maximum response time shall be forty-eight (48) hours.

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

     9.4 FAILURE TO RESPOND.  Failure of any PARTY to respond to a notice within
the required period shall be deemed to be a negative response.

     9.5 RESTRICTIONS ON MULTIPLE WELL PROPOSALS. Unless otherwise agreed by the
PARTIES,  no more than one well shall be drilling or completing  for the account
of the  Parties on the Lease at the same  time.  Well  proposals  made under the
terms hereof shall be limited to one well each and except as provided  below, no
PARTY shall be required to make an election under more than one well proposal at
the same time or while a well is drilling or completing.  This  paragraph  shall
not limit the right of a PARTY to propose a well while  another is  drilling  or
completing,  however,  the time to elect under such a proposal shall be deferred
until (a) thirty (30) days after the previous well has been completed or plugged
and abandoned or (b) twenty-four  (24) hours from receipt of  notification  that
the  drilling  rig has been moved to the new  location  and standby  charges are
being accumulated, whichever is earlier.

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                                    ARTICLE X

                                EXPLORATORY WELLS

     10.1 OPERATIONS BY ALL PARTIES.  Any PARTY may propose an EXPLORATORY  WELL
by notifying  the other  PARTIES.  If all the PARTIES  agree to  participate  in
drilling the  proposed  well,  OPERATOR  shall drill same for the benefit of all
PARTIES.

     10.2 SECOND OPPORTUNITY TO PARTICIPATE.  If fewer than all PARTIES elect to
participate,  OPERATOR shall inform all PARTIES of the elections made, whereupon
any PARTY  originally  electing not to participate may then elect to participate
by notifying the OPERATOR  within  forty-eight  (48) hours after receipt of such
information.

     10.3 OPERATIONS BY FEWER THAN ALL PARTIES. If fewer than all but one (1) or
more PARTIES owning not less than twenty percent (20%) WORKING INTEREST elect to
participate  in and  agree to bear the cost and risk of  drilling  the  proposed
well,  OPERATOR,  even if OPERATOR is a NON-PARTICIPATING  PARTY, shall have the
option of drilling such well for the PARTICIPATING PARTIES under this Agreement.
OPERATOR,  immediately after expiration of the applicable  notice period,  shall
advise  the  PARTICIPATING  PARTIES  of (a) the total  interest  of the  PARTIES
approving  such  operation,  and  (b)  its  recommendation  as  to  whether  the
PARTICIPATING  PARTIES  should  proceed with the  operation  as  proposed.  Each
PARTICIPATING  PARTY,  within  forty-eight  (48) hours  (inclusive  of Saturday,
Sunday or legal  holidays)  after  receipt  of such  notice,  shall  advise  the
proposing  PARTY  of its  desire  to (a)  limit  participation  to such  PARTY'S
interest  as shown on  Exhibit  "A",  or (b)  carry  its  proportionate  part of
NON-PARTICIPATING PARTIES' interest, or (c) participate with a lesser percentage
than its proportionate  part of the  NON-PARTICIPATING  PARTIES'  interest.  The
proposing  PARTY,  at its  election,  may  withdraw  such  proposal  if there is
insufficient  participation  and  shall  promptly  notify  all  PARTIES  of such
decision. If the well is commenced within ninety (90) days after the date of the
last applicable election date and is drilled as proposed in accordance with this
Agreement,  any  PARTY  electing  not to  participate  shall be  deemed  to have
relinquished its operating rights in such well as if it were a NON-CONSENT WELL.
However,  in the situation in which a rig is on location and standby charges are
accumulating,  thus  precipitating a forty-eight (48) hour response period,  the
well must be commenced  within  fifteen (15) days.  If no  operations  are begun
within such time  period,  the effect  shall be as if the  proposal had not been
made.  Operations shall be deemed to have commenced (a) on the date the contract
for a new platform is let, if the notice  indicated the need for such  platform;
or (b) the date rigging-up  operations on the well are commenced.  Recoupment of
costs shall be  determined by Sections  12.2 and 12.5,  if  applicable,  and the
drilling of such well shall be governed by Article XII as  applicable;  however,
percentages under Section 12.2 shall be as follows:

          12.2.1a) Eight hundred percent (800%)
          12.2.1b) Three hundred percent (300%)
          12.2.1c) One hundred percent (100%)
          12.2.1d) One hundred percent (100%)

Provided however,  if the proposed  EXPLORATORY WELL is the initial well drilled
by the PARTIES on the LEASE, then any NON-PARTICIPATING  PARTY shall permanently
assign its entire  interest  in the LEASE to the  PARTICIPATING  PARTIES and the
recoupment  of cost  provision  of this Article and Article XII shall not apply,
but the NON-PARTICIPATING PARTY shall not be relieved of any obligation accruing
prior to such assignment.

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     10.4 COURSE OF ACTION AFTER DRILLING TO INITIAL OBJECTIVE DEPTH

          10.4.1  Casing  Point  Election.  After an  Exploratory  Well has been
drilled for all Parties to the objective depth,  and all authorized  logging and
testing has been  completed,  OPERATOR shall  immediately  notify the PARTIES of
OPERATOR'S proposal to either;

               (a)  further log or test the well,

               (b)  complete the well as originally planned,

               (c)  plug-back  and  complete  the  well in a  shallower  zone in
                    ascending order,

               (d)  deepen the well within a previously approved objective zone,
                    in descending order,

               (e)  deepen the well below the deepest approved objective zone or
                    zones,

               (f)  sidetrack the well to a new bottom hole location  within the
                    approved objective zone,

               (g)  other operations in the well, or

               (h)  plug and abandon the well.

Within  forty-eight (48) hours after receipt of OPERATOR'S  proposal,  the other
PARTIES   shall   respond   thereto   by  either   approving   it  or  making  a
counter-proposal.  If a  counter-proposal  is made,  the  PARTIES  shall have an
additional  forty-eight (48) hours to respond thereto.  If all PARTIES approve a
proposal  or  counter-proposal,  OPERATOR  shall  conduct the  operation  at the
PARTICIPATING  PARTIES  cost  and  risk.  A  proposal  to  complete,  rework  or
recomplete a well at a particular  depth will take  precedence  over proposal to
complete, rework or recomplete the well above such depth, with a deeper proposal
for  such  operations  always  taking  precedence  over  a  shallower  proposal.
Proposals for such  operations at any depth will take  precedence over proposals
to deepen the well below its originally proposed total depth or to sidetrack the
well once it has reached such depth.  However, upon reaching the AFE total depth
as initially proposed,  should OPERATOR determine that the well is still in pay,
then  before  any  subsequent  proposal  is made and  approved  by the  PARTIES,
OPERATOR shall notify the PARTIES  accordingly.  At that point should  competing
proposals to deepen and  complete be made,  a vote by two or more with  combined
voting  interest of fifty  percent  (50%) will  determine  whether  deepening or
completing  the well will take  priority.  Proposals  of the same type  shall be
given  precedence  in the  order in which  they are  made.  No  action  shall be
required on a proposal while there is pending a proposal,  with precedence being
on the same well on which the  parties  have not acted or on which  work has not
been completed. If fewer than all, but one (1) or more, Parties having a Working
Interest of 40% or more approve a proposal or counterproposal made under Section
10.4 and agree to bear the cost and risk  thereof,  Operator  shall  conduct the
same pursuant to Article 12.

                                   ARTICLE XI

                           DEVELOPMENT WELL OPERATIONS

     11.1  OPERATIONS  BY ALL  PARTIES.  Any  PARTY may  propose  a  DEVELOPMENT
OPERATION,  including any platform required by such operations, by notifying the
other PARTIES.  If all PARTIES elect to  participate in the proposed  operation,
OPERATOR  shall  conduct such  operation for the benefit of the PARTIES at their
cost and risk.

     11.2 SECOND OPPORTUNITY TO PARTICIPATE.  If fewer than all PARTIES elect to
participate,  the  OPERATOR  shall  inform the  PARTIES of the  elections  made,
whereupon any PARTY  originally  electing not to  participate  may then elect to
participate  by  notifying  the  OPERATOR  within  forty-eight  (48) hours after
receipt of such  information.  Thereafter,  if fewer than all  PARTIES  elect to
participate, the PARTICIPATING PARTIES shall be afforded the alternatives as set
out under Article 10.3.

                                       10

<PAGE>

     11.3 OPERATIONS BY FEWER THAN ALL PARTIES. Except for a DEVELOPMENT WELL(S)
under  Section  12.7,  if fewer than all  PARTIES,  but one (1) or more  PARTIES
having a combined  WORKING  INTEREST of twenty  percent  (20%) or more approve a
DEVELOPMENT OPERATION; OPERATOR shall conduct such operation pursuant to Article
XII. If such  operations  are to be  conducted  from an existing  platform,  the
operations  participated in by all of the PARTIES shall have preference,  unless
otherwise agreed to by the PARTIES hereto.

     11.4 TIMELY  OPERATIONS.  Operations  shall be commenced within ninety (90)
days following the date upon which the last applicable  election may be made. If
no operations  are begun within such time period,  the effect shall be as if the
proposal had not been made.  Operations shall be deemed to have commenced (a) on
the date the  contract for a new  platform is let, if the notice  indicated  the
need for such platform;  or (b) on the date rigging-up  operations are commenced
on an existing platform.

     11.5 COURSE OF ACTION AFTER DRILLING TO INITIAL OBJECTIVE DEPTH.  After any
DEVELOPMENT WELL has reached its objective  depth, the identical  procedures and
alternatives provided under Article 10.4 shall apply.

     11.6 DEEPER DRILLING. If a well is proposed to be drilled below the deepest
producible zone penetrated by a PRODUCIBLE WELL on the LEASE any PARTY may elect
to  participate  either in the well as  proposed  or to the base of the  deepest
producible  zone. A PARTY  electing to  participate  in such well to the base of
said zone shall bear its proportionate  part of the cost and risk of drilling to
said zone including completion or abandonment. All operations below the depth to
which such PARTY agreed to participate shall be governed by Article X.

                                   ARTICLE XII

                             NON-CONSENT OPERATIONS

     12.1 NON-CONSENT OPERATIONS.  OPERATOR shall conduct NON-CONSENT OPERATIONS
at the sole risk and expense of the  PARTICIPATING  PARTIES,  in accordance with
the following provisions;

          12.1.1  Non-Interference.  NON-CONSENT  OPERATIONS shall not interfere
unreasonably with operations being conducted by all PARTIES.

          12.1.2 Multiple Completion  Limitation.  NON-CONSENT  OPERATIONS shall
not  be  conducted  in a well  having  multiple  completions  unless:  (a)  each
completion is owned by the same PARTIES in the same proportions; (b) the well is
incapable  of  producing  from  any  of its  current  completions;  or  (c)  all
PARTICIPATING PARTIES in the well consent to such operations.

          12.1.3  Metering.  In NON-CONSENT  OPERATIONS,  production need not be
separately metered but may be determined on the basis of well test.

          12.1.4  Liens.   In  the  conduct  of  NON-CONSENT   OPERATIONS,   the
PARTICIPATING  PARTIES  shall  keep  the  LEASE  free and  clear  of  liens  and
encumbrances.

          12.1.5 Non-Consent Well. Operations on a NON-CONSENT WELL shall not be
conducted  in any  producible  zone  penetrated  by a  PRODUCIBLE  WELL  without
approval of each  NON-PARTICIPATING  PARTY unless; (a) such zone shall have been
designated in the notice as a completion  zone;  (b)  completion of such well in
said  zone will not  increase  the well  density  governmentally  prescribed  or
approved for such zone; and (c) the horizontal

                                       11

<PAGE>

distance  between the vertical  projections  of the midpoint of the zone in such
well and any existing well in the same zone will be a least one thousand (1,000)
feet if an  oil-well  completion  or two  thousand  (2,000)  feet if a  gas-well
completion.  Subject to the  foregoing  provisions  of this  Article,  until the
PARTICIPATING  PARTIES in a  NON-CONSENT  WELL have recouped the amount to which
they are entitled  hereunder,  they may conduct any reworking  operation on such
well which they may desire, including plugging back to a shallower zone but only
if such  shallower  zone is subject to  NON-CONSENT  elections  in the  original
proposal.  In this event, the cost of such reworking  operation shall be subject
to the penalty provisions of Section 12.2.1.

          12.1.6  Cost-Information.  OPERATOR  shall,  within one hundred twenty
(120) days after  completion  of a  NON-CONSENT  WELL,  furnish  the  PARTIES an
inventory  and an  itemized  statement  of the cost of such  well and  equipment
pertaining  thereto.  OPERATOR shall furnish to the PARTIES a monthly  statement
showing operating expenses and the proceeds from the sale of production from the
well for the preceding month.

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

     12.2   RELINQUISHMENT   OF  INTEREST.   Upon  commencement  of  NON-CONSENT
OPERATIONS,  each  NON-PARTICIPATING  PARTY'S  interest and leasehold  operating
rights in the NON-CONSENT  OPERATION and title to production there from shall be
owned  by  and  vested  in  each  PARTICIPATING   PARTY  in  proportion  to  its
PARTICIPATING  INTEREST for as long as the  operations  originally  proposed are
being  conducted  or  production  is  obtained,  subject to Sections  12.2.1 and
12.2.2.

          12.2.1 Production  Reversion  Penalties.  Except as to such operations
conducted pursuant to Section 12.7 or for the initial  EXPLORATORY WELL referred
to in  Section  10.3,  such  interest,  rights  and title  shall  revert to each
NON-PARTICIPATING  PARTY when the PARTICIPATING PARTIES have recouped out of the
proceeds of production from such  NON-CONSENT  OPERATIONS an amount equal to the
sum of the following:

               (a)  Six  hundred   percent  (600%)  of  the  cost  of  drilling,
                    completing, recomputing,  sidetracking, deepening, deviating
                    or plugging  back each  NON-CONSENT  WELL and  equipping  it
                    through   the   wellhead   connections,   reduced   by   any
                    contribution received under Section 21.1; plus,

               (b)  Three  hundred  percent  (300%)  of the  cost of  FACILITIES
                    necessary to carry out the operation; plus,

               (c)  One  hundred  percent  (100%)  of  the  cost  of  using  any
                    FACILITIES already installed  determined pursuant to Section
                    12.6 below; plus,

               (d)  One  hundred   percent  (100%)  of  the  cost  of  operating
                    expenses, royalties and severance, gathering, production and
                    windfall profit taxes.

Recoupment of costs shall be in the order listed above.  Upon the  recoupment of
such costs, a NON-PARTICIPATING PARTY shall become a PARTICIPATING PARTY in such
operations.

          12.2.2 Non-Production  Reversion.  If such NON-CONSENT OPERATIONS fail
to obtain  production or such operations result in production which ceases prior
to recoupment by the PARTICIPATING  PARTIES of the penalties provided for above,
such operating rights shall revert to each  NON-PARTICIPATING  PARTY except that
all  NON-CONSENT  wells,  platforms  and  FACILITIES  shall remain vested in the
PARTICIPATING PARTIES; however, any salvage in excess of the sum remaining under
Section 12.2.1 shall be credited to all PARTIES.

                                       12

<PAGE>

     12.3 DEEPENING OR  SIDETRACKING OF NON-CONSENT  WELL. If any  PARTICIPATING
PARTY  proposes to deepen or sidetrack a NON-CONSENT  WELL, a  NON-PARTICIPATING
PARTY may  participate by notifying the OPERATOR  within fifteen (15) days after
receiving  the proposal (48 hours if a rig is on location)  that it will join in
the (deepening or sidetracking)  operations,  and by paying to the PARTICIPATING
PARTIES an amount equal to such  NON-PARTICIPATING  PARTY'S  share of the actual
costs of drilling  and casing such well to the point at which such  deepening or
sidetracking operation is commenced. The PARTICIPATING PARTIES shall continue to
be entitled to recoup the full sum specified in Section 12.2.1 applicable to the
NON-CONSENT  WELL, less the amount paid under this section,  out of the proceeds
of production from the NON-CONSENT portion of the well.

     12.4 OPERATIONS FROM  NON-CONSENT  PLATFORMS.  Subject to the following,  a
PARTY which did not originally  participate in a platform  proposed  pursuant to
the terms herein,  shall be a NON-PARTICIPATING  PARTY as to ownership therein
and all operations  thereon until the PARTICIPATING  PARTIES as to such platform
have  recouped  the full sum  specified  in Section  12.2.1  applicable  to such
NON-CONSENT  PLATFORM  and the  NON-CONSENT  OPERATIONS  which  resulted  in the
setting of such PLATFORM and other NON-CONSENT  OPERATIONS thereon or therefrom.
However,  an original  NON-PARTICIPATING  PARTY may  participate  in  additional
operations  from such PLATFORM by notifying the OPERATOR within thirty (30) days
after  receiving a proposal for operations from such PLATFORM (48 hours if a rig
is on location and standby rig charges are being  incurred) that it will join in
such proposed operations by paying to the PARTICIPATING PARTIES in such PLATFORM
an amount equal to 300% of such  NON-PARTICIPATING  PARTY'S  share of the actual
cost of  such  PLATFORM,  less  any  recoupment  therefor  previously  obtained.
Thereafter,  such original NON-PARTICIPATING PARTY in the PLATFORM shall own its
proportionate  share  thereof.  The  PARTICIPATING  PARTIES in such NON-CONSENT
PLATFORM  shall  continue  to be entitled  to recoup the full sum  specified  in
Section  12.2.1  applicable  to any  other  NON-CONSENT  OPERATIONS  thereon  or
therefrom.

     12.5  DISCOVERY OR EXTENSION  FROM MOBILE  DRILLING  OPERATIONS.  If a NON-
CONSENT  WELL drilled from a mobile  drilling  rig or floating  drilling  vessel
results in the discovery or extension of productive  formations  and, if within
one (1) year from the date the drilling  equipment  is  released,  a platform or
other  fixed  structure  is ordered and if its  location is within one  thousand
(1,000) feet from an oil well or three  thousand  (3,000) feet if gas,  from the
vertical projection of the bottom-hole location of any such well (unless limited
by surface  restrictions),  the  recoupment  of amounts  applicable to such well
under Section  12.2.1 shall be out of such original NON-PARTICIPATING  PARTY'S
SHARE of all production from such  NON-CONSENT WELL and one-half of its share of
production from all other wells on the platform or other fixed structure drilled
to develop  reserves  resulting  from the  discovery or extension of  productive
formations in said NON-CONSENT WELL in which the NON-PARTICIPATING PARTY in such
NON-CONSENT WELL has a PARTICIPATING INTEREST.

     12.6  ALLOCATION OF PLATFORM COSTS TO NON-CONSENT  OPERATIONS.  NON-CONSENT
OPERATIONS shall be subject to further conditions as follows:

          12.6.1 Charges.  If a NON-CONSENT WELL is drilled from a platform (and
is producible or the slot is otherwise  rendered  unusable),  the  PARTICIPATING
PARTIES in such well shall pay to the  OPERATOR for credit to the owners of such
platform a charge (due upon completion of operations for such NON-CONSENT  WELL)
for

                                       13

<PAGE>

the  right  to use  the  platform  and  its  FACILITIES  as  follows:

               (a)  Such  PARTICIPATING  PARTIES  shall  pay a sum equal to that
                    portion of the total cost of the  platform  (including,  but
                    not  by way  of  limitation,  costs  of  design,  materials,
                    fabrication,  transportation,  installation  and other costs
                    associated  therewith,  plus  any  repairs  and  maintenance
                    expense  resulting  from  the  drilling  of  such  well  not
                    provided in Section  12.6,2),  which one platform slot bears
                    to  the  total  number  of  slots  on the  platform.  If the
                    NON-CONSENT   WELL   is   abandoned,   the   right   of  the
                    PARTICIPATING  PARTIES  to  use  that  platform  slot  shall
                    terminate unless such PARTIES commence drilling a substitute
                    well  from the same  slot  within  ninety  (90)  days  after
                    abandonment.

               (b)  If  the  NON-CONSENT  WELL  production  is  handled  through
                    existing FACILITIES, the PARTICIPATING PARTIES shall pay the
                    owners of the  facilities a sum equal to that portion of the
                    total   cost  of  such   FACILITIES   which  the  number  of
                    completions  in said  NON-CONSENT  WELL  bears to the  total
                    number of completions utilizing the FACILITIES.

          12.6.2 Operating  and Maintenance  Charges.  The PARTICIPATING PARTIES
shall pay all costs  necessary to connect a NON-CONSENT  WELL to the  FACILITIES
and that  proportionate  part of the expense of operating  and  maintaining  the
platform and other FACILITIES  applicable to the NON-CONSENT WELL, including the
cost of  insurance  thereon or in  connection  therewith,  whether by  insurance
policy of  self-insurance  by each PARTY for its interest or by OPERATOR for the
joint account.  Platform  operating and maintenance  expenses shall be allocated
equally to all completions served and operating and maintenance expenses for the
other FACILITIES shall be allocated equally to producing completions.

          12.6.3 Payments.  Payments of sums pursuant to Section 12.6.1 is not a
purchase of an  additional  interest in the platform or other  FACILITIES.  Such
payments shall be included in the total amount, which the PARTICIPATING  PARTIES
are entitled to recoup out of production from the NON-CONSENT WELL.

     12.7 NON-CONSENT DRILLING TO MAINTAIN LEASE. A lease maintenance  operation
is defined for the  purposes of this  paragraph  as one required to maintain the
joint LEASE or a portion  thereof,  at its  expiration  date or otherwise.  This
shall  include,  but not be  limited  to,  a well  proposed  to be and  actually
commenced and drilled during the last year of the primary term of the LEASE,  or
subsequent  thereto,  when: (a) the LEASE, or affected portion  thereof,  is not
otherwise  being held by  operations  or  production;  (b) a PRODUCIBLE  WELL(S)
thereon has not  established  sufficient  reserves,  as determined by one (1) or
more  PARTICIPATING  PARTIES owning fifty percent (50%) working  interest in the
well, to justify a platform;  or (c) any governmental agency having jurisdiction
requires  the same to avoid  loss or  forfeiture  of all or any  portion  of the
LEASE. Any PARTY may propose and carry out a lease maintenance operation and any
PARTY(S)  electing not to  participate  in such an operation  will assign to the
PARTICIPATING  PARTIES in the proportions in which they participate therein, all
of its rights,  titles and interest in such LEASE block, or the affected portion
thereof,  free and clear of any burdens  thereon  occurring  since the effective
date of this Agreement as provided herein,  retaining,  however, its interest in
previously completed wells which are

                                       14

<PAGE>

producing,  shut-in or temporarily  abandoned.  Such assignment,  effective upon
commencement  of lease  maintenance  operations,  will be promptly signed before
witnesses,  acknowledged and delivered to the PARTICIPATING  PARTIES.  If only a
portion of the LEASE is involved,  the  PARTICIPATING  PARTIES at their election
may require an assignment of operating  rights in lieu of the  assignment of all
interest. Upon acceptance by assignees, the assigning PARTY will thereupon cease
to be1 a PARTY hereto as to the assigned  interest,  subject to final accounting
between the PARTIES.  If such assignment is not accepted by the Assignees,  they
shall promptly prepare a release of such affected LEASE or portion thereof which
shall be executed by all PARTIES.  However,  nothing  herein  contained  will be
construed to permit any PARTY to refuse to pay in cash its share of the cost and
expense of any operation required on the joint LEASE block by final order of any
governmental authority or court having jurisdiction.

          12.7.1  Retention of Lease by Non-Consent  Well. If a NON-CONSENT WELL
is the only well on the  LEASE(S)  and is serving to  perpetuate  the  LEASE(S),
within  thirty (30) days after  expiration of the LEASE(S)  primary  term,  each
NON-PARTICIPATING PARTY shall elect one of the following;

               (a)  Immediately  assign its entire  interest in the  LEASE(S) to
                    the  PARTICIPATING  PARTIES in the  proportions in which the
                    NON-CONSENT OPERATION was conducted; or

               (b)  Immediately  pay to the  PARTICIPATING  PARTIES its share of
                    all costs  associated  with such well,  less any  recoupment
                    therefore previously  obtained,  such payment to be credited
                    against the total amount to be recovered out of its share of
                    production by the PARTICIPATING  PARTIES pursuant to Article
                    X or XII, whichever is applicable.

     12.8 ALLOCATION OF COSTS (SINGLE COMPLETION). For the purpose of allocating
costs on any well in which the  ownership is not the same for the entire  depth,
the cost of drilling,  completing  or equipping  such well shall be allocated on
the following basis;

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

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

     12.9  ALLOCATION  OF  COSTS  (MULTIPLE  COMPLETIONS).  For the  purpose  of
allocating  costs on any well  completed in dual or multiple  zones in which the
ownership is not the same for the entire depth or the completions  thereof,  the
cost of drilling,  completing  and equipping such well shall be allocated on the
following basis:

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

          (b)  Intangible  drilling,  completion,  casing  string  and  material
               costs, other than tubing costs, from

                                       15

<PAGE>

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

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

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

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

     12.10  ALLOCATION OF COSTS (DRY HOLE).  For the purpose of allocating costs
on any well  determined to be a dry hole, in which the ownership is not the same
for the entire depth or the completion thereof,  the cost of drilling,  plugging
and abandoning such well shall be allocated on the following basis:

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

          (b)  Plugging and  abandoning  of any well  following  any  deepening,
               completion  attempt or other  operation shall be at the sole risk
               and  expense  of the  PARTICIPATING  PARTIES  in such  operation,
               subject however to the provisions of Section 10.4.

     12.11 INTANGIBLE  DRILLING AND COMPLETION  ALLOCATIONS.  For the purpose of
calculations  hereunder,  intangible  drilling and completion  costs,  including
non-controllable material costs, shall be allocated between zones, including the
interval from the lower  completed zones to total depth, on a drilling day ratio
basis beginning on the day the rig arrives on location and terminating  when the
rig is released.

     12.12 OPERATED WELLS. The designated  OPERATOR  hereunder shall operate all
wells drilled pursuant to the NON-CONSENT provision of this Agreement.  However,
notwithstanding  anything  herein to the contrary,  if the  NON-CONSENT  WELL is
drilled  from  a  mobile  drilling  rig  and  if the  designated  OPERATOR  is a
NON-PARTICIPATING  PARTY  therein,  the  PARTICIPATING  PARTY owning the largest
PARTICIPATING  INTEREST  shall serve as Operator for the drilling and completion
of such well, unless the PARTICIPATING PARTIES agree otherwise.  Upon completion
of any such well as a productive  well  (completion  through the wellhead),  the
well shall be turned over to the designated OPERATOR for further operations.

                                       16

<PAGE>

                                  ARTICLE XIII

                                   FACILITIES

     13.1  APPROVAL.  Any PARTY may propose the  installation  of  FACILITIES by
notice to the other PARTIES with  information  adequate to describe the proposed
FACILITIES  and the estimated  costs.  The  affirmative  vote of one (1) or more
PARTIES having a combined  PARTICIPATING INTEREST of forty percent (40%) or more
in the  wells to be served  shall be  required  before  such  FACILITIES  may be
installed.  If such required  approval is obtained,  the  PARTICIPATING  PARTIES
therein shall  proceed with the  installation  of such  FACILITIES at their sole
cost,  risk and expense  and the  NON-PARTICIPATING  PARTIES in such  FACILITIES
shall have no rights with respect thereto,  subject to recoupment of amounts set
forth under Article 12.2.1 from the completions  served  thereby.  Each PARTIES'
share shall be calculated by  multiplying  the total cost of the FACILITIES by a
fraction,  the  numerator of which is that  PARTY'S  number of  PRODUCIBLE  WELL
completions  served by the FACILITIES and the  denominator of which is the total
number  of  PRODUCIBLE  WELL  completions  served  by  the  FACILITIES.  Nothing
hereunder  shall limit a PARTY'S  rights under  Section 22.1;  however,  a PARTY
acting thereunder shall not be required to pay for joint account FACILITIES that
duplicate its FACILITIES constructed pursuant to Section 22.1

                                   ARTICLE XIV

                             ABANDONMENT AND SALVAGE

     14.1 PLATFORM SALVAGE AND REMOVAL COSTS. When the PARTIES owning FACILITIES
consisting of a platform, mutually agree to dispose of such platform it shall be
disposed of by the OPERATOR as approved by such  PARTIES.  The costs,  risks and
net proceeds,  if any,  resulting from such disposition  shall be shared by such
PARTIES  in  proportion  to  their   PARTICIPATING   INTEREST.   To  secure  the
availability  and  sufficiency  of funds for the  dismantling,  abandonment  and
removal of such platform,  the PARTICIPATING PARTIES, prior to the construction,
shall  assign to a trustee  of a bank (the  "Assignee")  an  overriding  royalty
interest equal to one-half percent (1/2%) of the whole of the oil, gas and other
minerals  produced,  saved and marketed  from the LEASE.  The assignee  shall be
selected  by an  affirmative  vote  of two or more  parties  having  a  combined
PARTICIPATING  INTEREST of fifty percent (50%) or more. The assigned  overriding
royalty interest shall burden the interest of the PARTIES in proportion to their
participation in the platform.  The Assignee,  who shall have no interest in the
overriding  royalty  interest,  shall  receive the proceeds and place same in an
interest bearing account or in insured certificates of deposit (the "Abandonment
Fund").  If a  platform  is not  constructed  within  one  year  of the  date of
overriding royalty interest is assigned,  the overriding royalty shall terminate
and  the  Assignee  shall  reassign  the  interest  and  properly  disburse  the
Abandonment  Fund to the  appropriate  Parties.  Any  proposal  to  construct  a
platform shall provide estimated cost of dismantling, abandonment and removal of
same. At such time as the  Abandonment  Fund equals these estimated  costs,  the
overriding  royalty  shall  be  assigned  to the  PARTICIPATING  PARTIES  by the
Assignee.  Similarly,  any excess Abandonment Funds after complete  dismantling,
abandonment  and removal costs are paid shall be disbursed to the  PARTICIPATING
PARTIES in proportion to their interest. A PARTICIPATING PARTY's interest in the
Abandonment  Fund may only be assigned or  transferred  in  conjunction  with an
assignment  or transfer of the subject  Lease(s).  In lieu of an  assignment  of
overriding  royalty interest,  any  PARTICIPATING  PARTY may elect to furnish an
irrevocable letter

                                       17

<PAGE>

of credit in favor of the Assignee, or proof of coverage under adequate plugging
and abandonment bonds,  subrogated in favor of the OPERATOR, to provide for that
PARTY's  estimated  proportionate  share of  platform  dismantling,  removal and
abandonment  costs. The letter of credit or plugging and abandonment bonds shall
provide that either  instrument shall remain in force in the event of a transfer
or  assignment  of the PARTY's  interest  until such time as the  transferee  or
assignee  provides  a similar  irrevocable  letter of  credit  or  plugging  and
abandonment bonds.

     14.2 PURCHASE OF SALVAGE MATERIALS. OPERATOR shall give all PARTIES written
notice  when it is  determined  under  Section  14.1  that  FACILITIES  or other
materials are not needed for further operations and may be moved from the LEASE.
Within  fifteen  (15) days after  receipt of such  notice any PARTY  desiring to
acquire such materials shall give OPERATOR  written notice of such fact. If more
than one PARTY desires to acquire such  materials,  OPERATOR  shall  designate a
time and place at which each PARTY may submit  written bids for such  materials.
If only one PARTY desires to acquire such  materials,  it may do so on the basis
of the value thereof as determined in accordance  with the provisions of Exhibit
"C", with  prefabricated  materials  being valued on the basis of cost including
but not limited to cost of  fabrication.  All  materials  removed from the LEASE
shall be removed at the expense of the PARTIES unless purchased hereunder,  then
at the expense of the acquiring PARTY. In the event no PARTY desires to purchase
said  materials,  the  materials  shall be  disposed of in  accordance  with the
provisions of Exhibit "C".

     14.3  ABANDONMENT OF PRODUCING  WELL. Any PARTY may propose the abandonment
of a well by  notifying  the other  PARTIES,  who shall have the time period set
forth in Section  9.3.2 from receipt  thereof  within which to respond.  No well
shall be abandoned without the mutual consent of the PARTICIPATING  PARTIES. The
PARTICIPATING  PARTIES  not  consenting  to the  abandonment  shall  pay to each
PARTICIPATING  PARTY  desiring to abandon its share of the current  value of the
well's salvageable material and equipment as determined pursuant to Exhibit "C",
less  the  estimated  current  costs  of  salvaging  same  and of  plugging  and
abandoning  the  well as  determined  by the  PARTICIPATING  PARTIES.  Provided,
however,  if such salvage value is less than such estimated  current costs, then
each  PARTICIPATING  PARTY  desiring to abandon  shall pay to  OPERATOR  for the
benefit of the  PARTICIPATING  PARTIES not consenting to abandonment a sum equal
to its share of such deficiency.

     14.4 ASSIGNMENT OF INTEREST. Each PARTICIPATING PARTY desiring to abandon a
well pursuant to Section 14.3 shall assign  effective as of the last  applicable
election  date,  to  the   non-abandoning   PARTIES,   in  proportion  to  their
PARTICIPATING INTERESTS, its interest in such well and the equipment therein and
its ownership in the  production of such well.  Any PARTY so assigning  shall be
relieved from any further  liability  with respect to said well except as to any
accrued liability.

     14.5 ABANDONMENT  OPERATIONS REQUIRED BY GOVERNMENTAL  AUTHORITY.  Any well
abandonment or platform  removal  required by a governmental  authority shall be
accomplished by OPERATOR with the costs,  risks and net proceeds,  if any, to be
shared by the  PARTIES  owning  such well or  platform  in  proportion  to their
PARTICIPATING INTEREST.

                                       18

<PAGE>

                                   ARTICLE XV

                                   WITHDRAWAL

     15.1 WITHDRAWAL.  Any PARTY may withdraw from this Agreement and thereby be
relieved of all  responsibilities  with respect to the LEASE by giving notice to
the other PARTIES of such desire  together with an offer to convey at no cost by
a recordable instrument,  without warranty,  express or implied,  except for its
own acts,  all of its  interest  in and to the LEASE,  the oil and gas,  and the
property and equipment owned hereunder.  Any such conveyance or assignment shall
be free and clear of any  overriding  royalties,  production  payments  or other
burdens on production  created after the  effective  date of this  Agreement and
shall be subject to the LEASE provisions and to the rules and regulations of the
lessor.  If any  PARTY(S)  desires to acquire  such  interest  and to assume the
obligations  of the  assigning  PARTY under this  Agreement  and the LEASE,  the
withdrawing  PARTY shall deliver such  conveyance  or assignment  ratably to the
acquiring  PARTIES,  unless the acquiring  PARTIES agree  otherwise. If no PARTY
desires to acquire such interest,  the PARTY desiring to withdraw may do so only
by paying to those  PARTIES not desiring to withdraw  its pro-rata  share of the
estimated  costs of  plugging  and  abandoning  all  wells  and  removal  of all
platforms,  structures and other equipment on the LEASE,  less any salvage value
approved under the voting procedure  hereof,  and such  withdrawing  PARTY shall
remain liable for any costs,  expenses or damages theretofore accrued or arising
out of any event occurring  prior to such PARTY'S  withdrawal.  Thereafter,  the
withdrawing  PARTY shall  assign its entire  interest  ratably to the  remaining
PARTIES.  If the  remaining  PARTIES do not wish to continue  operations  on the
LEASE, all PARTIES shall proceed with abandoning and surrendering the same.

     15.2  LIMITATIONS  ON  WITHDRAWAL.  No  PARTY  shall  be  relieved  of  its
obligations hereunder during a well or platform fire, blowout or other emergency
thereon,  but  may  withdraw  from  this  Agreement  and  be  relieved  of  such
obligations  after  termination of such emergency,  provided such PARTY shall be
and remain liable for its full share of all costs arising out of said emergency,
including  without  limitation,  the drilling of a relief well,  containment and
cleanup of oil spill and pollution and all costs of platform debris removal made
necessary by the emergency.

                                   ARTICLE XVI

                      RENTALS, ROYALTIES AND OTHER PAYMENTS

     16.1 CREATION OF OVERRIDING  ROYALTY.  If after the effective  date of this
Agreement, any PARTY creates any overriding royalty, production payment or other
burden payable out of production  attributable to such PARTY'S WORKING  INTEREST
in the LEASE owned and if any other PARTY(S)  becomes  entitled to an assignment
pursuant to the provisions of this Agreement (except for Paragraph 26.2) or as a
result of  NON-CONSENT  OPERATIONS  hereunder  becomes  entitled  to receive the
WORKING  INTEREST  otherwise  belonging  to a  NON-PARTICIPATING  PARTY  in such
operations,  the PARTY  entitled to receive the  assignment  from or the WORKING
INTEREST production of such NON-PARTICIPATING  PARTY shall receive same free and
clear of such burdens,  and the  NON-PARTICIPATING  PARTY  creating such burdens
shall save the  PARTICIPATING  PARTIES  harmless  with respect to the receipt of
such assigned interest or such WORKING INTEREST production.  Notwithstanding the
provisions  herein, the Parties agree to bear their  proportionate  share of the
overriding royalty interests set out on Exhibit "A".

                                       19

<PAGE>

     16.2  PAYMENT OF RENTALS  AND  MINIMUM  ROYALTIES.  OPERATOR  shall pay all
rentals,  minimum royalties, or similar payments accruing under the terms of the
LEASE and submit  evidence of such payment to the PARTIES.  As to any production
delivered in kind by OPERATOR to any  NON-OPERATOR or to another for the account
of such NON-OPERATOR,  said NON-OPERATOR shall provide OPERATOR with information
as to the  proceeds or value of such  production  in order that the OPERATOR may
make  payment of any minimum  royalty  due. The amount of such payment for which
each PARTY is  responsible  shall be charged by the  OPERATOR  to such  PARTIES.
OPERATOR shall diligently attempt to make proper payment,  but shall not be held
liable to the PARTIES in damages  for the loss of any LEASE or interest  therein
of through  mistake or oversight  any rental or minimum  royalty  payment is not
paid for or is erroneously paid. The loss of any LEASE or interest therein which
results  from a failure  to pay or an  erroneous  payment  of rental or  minimum
royalty  shall be a joint loss and there shall be no  readjustment  of interest.

     16.3  NON-CONCURRENCE  IN  PAYMENTS.  Should any PARTY(S) not concur in the
payment of any rental,  minimum royalty or similar payment,  such PARTY(S) shall
notify  OPERATOR  and all other owners in writing at least sixty (60) days prior
to the date on which such payment is due or accrues; and, in this event OPERATOR
shall make such payment for the benefit of all concurring PARTIES. In such event
the  non-concurring  PARTY(s)  shall,  upon request of any  concurring  PARTIES,
assign to the  concurring  PARTIES  in the ratio  that each  concurring  PARTY'S
interest  at the time bears to the total  interest  of all  concurring  PARTIES,
without warranty,  except for its own acts, such portions of its interest in and
to the LEASE or portion thereof involved as would be maintained by such payment.
That assignment shall be free and clear of any overriding royalties,  production
payments or other burdens on production created after the effective date hereof.
Thereafter,  the LEASE, or portion thereof,  involved shall no longer be subject
to this  Agreement.  The PARTIES then owning such LEASE or portion thereof agree
to operate said LEASE or portion thereof under a separate  agreement in the same
form as this Agreement.

     16.4 ROYALTY PAYMENTS, Each PARTY shall pay, deliver or cause to be paid or
delivered its pro- rata share of LEASE royalties, overriding royalties, payments
out of production or other amounts or charges which may be or become payable out
of its share of  production  and  shall  hold the  other  PARTIES  free from any
liability therefore. Each Party, electing to pay his share of royalties pursuant
to the terms of the Lease,  shall promptly  notify Operator of said election and
shall thereafter  provide to Operator a detailed  accounting of revenue received
and value paid to the  Lessor for such  Party's  share of  production  produced,
marketed  and sold.  Monthly  reports  shall be  submitted  to  Operator  within
forty-five days of actual receipt of the previous  month's  production  revenue.
During any time in which  PARTICIPATING  PARTIES in a NON-CONSENT  OPERATION are
entitled  to  receive  a  NON-PARTICIPATING  PARTY'S  share of  production,  the
PARTICIPATING  PARTIES  shall bear the LEASE  royalty  due with  respect to such
share of production and shall hold the  NON-PARTICIPATING  PARTIES harmless from
liability in connection therewith.  Any PARTY acting under the provisions of the
Article  shall  never be liable for a standard  of  performance  in making  such
payments or  deliveries  in excess of a good faith effort to pay or deliver same
prior to the due date and no liability (other than the liability to correct such
payment)  shall be  incurred  for  failure  through  error or  omissions  of the
employees of any such PARTY to make payment or delivery  within the time, in the
manner and for the amounts due

     16.5  FEDERAL  OFFSHORE OIL  POLLUTION  COMPENSATION  FUND FEE.  Each PARTY
agrees to pay and bear the Federal Offshore Oil Pollution  Compensation Fund Fee
payable on its share of oil produced,

                                       20

<PAGE>

such fee being required by Section 302 of the Outer  Continental Shelf Lands Act
Amendment of 1971 and any  regulation  lawfully  promulgated  pursuant  thereto;
provided, however, should the oil owned by a PARTY be reported by another PARTY,
it shall be the obligation of such reporting  PARTY and such reporting  PARTY is
specifically  authorized to an agrees to pay the Federal  Offshore Oil Pollution
Compensation  Fund Fee on those  volumes which it reports for the benefit of the
non-reporting  PARTY,  and such  reporting  PARTY may charge such  non-reporting
PARTY for the payments so made.

                                  ARTICLE XVII

                                      TAXES

     17.1  PROPERTY  TAXES.  OPERATOR  shall  render  property  covered by tills
Agreement as may be subject to ad valorem  taxation and shall pay such  property
taxes for the benefit of each PARTY.  OPERATOR shall charge each PARTY its share
of such tax  payments.  If the OPERATOR is required  hereunder to pay ad valorem
taxes based in whole or in part upon separate  valuation 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 percentage of tax value generated by each PARTY'S WORKING INTEREST.

     17.2  CONTEST  OF  PROPERTY  TAX  VALUATION.   OPERATOR  shall  timely  and
diligently protest to a final determination any valuation it deems unreasonable.
Pending such determination,  OPERATOR may elect to pay under protest. Upon final
determination,  OPERATOR  shall pay the taxes and any interest,  penalty or cost
accrued as a result of such protest. In either event, OPERATOR shall charge each
PARTY its share.

     17.3 PRODUCTION AND SEVERANCE  TAXES.  Each PARTY shall pay, or cause to be
paid, all production,  severance and other taxes due on any production, which it
received pursuant to the terms of this Agreement.

     17.4 OTHER TAXES AND ASSESSMENTS. OPERATOR shall pay other applicable taxes
or assessments and charge each PARTY its share.

                                  ARTICLE XVIII

                                    INSURANCE

     18.1 INSURANCE. OPERATOR shall obtain the insurance provided in Exhibit "B"
and charge each PARTICIPATING  PARTY its proportionate share of the cost of such
coverage.

                                   ARTICLE XIX

                         LIABILITY, CLAIMS AND LAWSUITS

     19.1 INDIVIDUAL OBLIGATIONS. The obligations, duties and liabilities of the
PARTIES  shall be several and not joint or  collective;  and  nothing  contained
herein  shall ever be  construed as creating a  partnership  of any kind,  joint
venture,  association or other character of business entity  recognizable in law
for any purpose. Each PARTY shall hold all the other PARTIES harmless from liens
and encumbrances on the LEASE arising as a result of its acts.

     19.2 NOTICE OF CLAIM OR LAWSUIT. If a claim is made against any PARTY or if
any PARTY is sued on account of any matter  arising from  operations  hereunder,
such PARTY shall give prompt written notice to the other PARTIES.

                                       21

<PAGE>

     19.3  SETTLEMENTS.  OPERATOR  may settle any  single  damage  claim or suit
involving  operations  hereunder if the expenditure does not exceed Ten Thousand
Dollars  ($10,000.00),  if the claim is not  covered by  Exhibit  "B" and if the
payment is in complete settlement of such claim or suit.

     19.4  LEGAL  EXPENSE.  Legal  Expenses  shall be  handled  pursuant  to the
provisions of Exhibit "C".

     19.5 LIABILITY FOR LOSSES,  DAMAGES, INJURY OR DEATH. Liability for losses,
damages,  injury or death arising from operations  under this Agreement shall be
borne by the  PARTIES in  proportion  to their  PARTICIPATING  INTERESTS  in the
operations  out of which  such  liability  arises,  except  when such  liability
results from the gross  negligence or willful  misconduct of any party, in which
case such PARTY shall be liable.

     19.6  INDEMNIFICATION.  The  PARTICIPATING  PARTIES  agree to hold the NON-
PARTICIPATING  PARTIES  harmless and to  indemnify  and protect them against all
claims,  demands,  liabilities and liens for property damage or personal injury,
including death,  caused by or otherwise arising out of NON-CONSENT  OPERATIONS,
and any loss and costs  suffered by any  NON-PARTICIPATING  PARTY as an incident
thereof.

                                   ARTICLE XX

                           INTERNAL REVENUE PROVISION

     20.1 INTERNAL REVENUE PROVISION. Notwithstanding any provisions herein that
the rights and liabilities  hereunder are several and not joint or collective or
that  this  Agreement  and the  operations  hereunder  shall  not  constitute  a
partnership,  if  for  Federal  Income  Tax  purposes  this  Agreement  and  the
operations hereunder are regarded as a partnership,  then for Federal Income Tax
purposes  each  PARTY  elects to be  excluded  from the  application  of all the
provisions of  Subchapter  K, Chapter 1,  Subtitle A,  Internal  Revenue Code of
1986,  as  permitted  and  authorized  by  Section  761 of  said  Code  and  the
regulations promulgated  thereunder.  OPERATOR is hereby authorized and directed
to  execute on behalf of each PARTY such  evidence  of this  election  as may be
required by the Federal Internal Revenue Service including specifically, but not
by way of  limitation,  all of the  returns,  statements  and data  required  by
Federal  Regulations  1.761.1 and 1.761.2.  Should there be any requirement that
each PARTY  further  evidence this  election,  each PARTY agrees to execute such
documents  and  furnish  such other  evidence  as may be required by the Federal
Internal Revenue  Service.  Each PARTY further agrees not to give any notices or
take any other action inconsistent with the election made hereby. If any present
or future income tax law of the United  States of America or any state  contains
provisions  similar to those contained in Subchapter K, Chapter 1, Subtitle A of
the  Internal  Revenue  Code of 1986,  under which an  election  similar to that
provided by Section 761 of said Subchapter K is permitted, each PARTY makes such
election or agrees to make such  election as may be permitted  by such laws.  In
making this  election,  each PARTY states that the income derived by it from the
operations  under  this  Agreement  can be  adequately  determined  without  the
computation of partnership taxable income.

                                   ARTICLE XXI

                                  CONTRIBUTIONS

     21.1 NOTICE OF  CONTRIBUTIONS  OTHER THAN ADVANCES FOR SALE OF  PRODUCTION.
Each PARTY shall promptly notify the other PARTIES of all  contributions,  which
it may obtain, or is

                                       22

<PAGE>

attempting to obtain, concerning the drilling of any well on the LEASE. Payments
received as  consideration  for entering  into a contract for sale of production
from the LEASE,  loans and other financing  arrangements shall not be considered
contributions  for the  purposes  of the  Article.  No PARTY  shall  release  or
obligate  itself or release  information  in return for a  contribution  from an
outside party toward the drilling of a well without prior written consent of the
other PARTICIPATING PARTIES therein.

     21.2 CASH CONTRIBUTIONS.  In the event a PARTY receives a cash contribution
toward the drilling of a well, said cash contribution  shall be paid to OPERATOR
and OPERATOR  shall credit the amount  thereof to the PARTIES in  proportion  to
their PARTICIPATING INTEREST.

     21.3  ACREAGE  CONTRIBUTIONS.  In the  event a PARTY  receives  an  acreage
contribution  toward the drilling of a well, said acreage  contribution shall be
shared  by  each   PARTICIPATING   PARTY  who  accepts  in   proportion  to  its
PARTICIPATING INTEREST in the well.

                                  ARTICLE XXII

                            DISPOSITION OF PRODUCTION

     22.1  FACILITIES  TO TAKE IN KIND.  Any PARTY shall have the right,  at its
sole  risk  and  expense,  to  construct  FACILITIES  for  taking  its  share of
production in kind, provided that such FACILITIES at the time of installation do
not interfere  with  continuing  operations  on the LEASE and adequate  space is
available therefore.

     22.2 DUTY TO TAKE IN KIND. Each PARTY shall have the right and duty to take
in kind or separately dispose of its share of the oil and gas produced and saved
from the LEASE.

     22.3 FAILURE TO TAKE IN KIND. If any PARTY fails to take in kind or dispose
of its share of the oil and condensate,  OPERATOR may either (a) purchase oil or
condensate at OPERATOR'S  posted price or, in the absence of a posted price,  in
no event  less than the price  prevailing  in the area for oil of the same kind,
gravity and quality,  or (b) sell such oil or  condensate  to others at the best
price obtainable by OPERATOR, subject to revocation by the non-taking PARTY upon
thirty  (30) days  advance  notice.  All  contracts  of sale by  OPERATOR of any
PARTY'S share of oil or condensate shall be only for such reasonable  periods of
time as are  consistent  with  the  minimum  needs  of the  industry  under  the
circumstances,  but in no event shall any  contract be for a period in excess of
one (1) year.  Proceeds of all sales made by OPERATOR  pursuant to this  Section
shall be paid to the PARTIES entitled  thereto.  Unless required by governmental
authority  or judicial  process,  no PARTY shall be forced to share an available
market with any non-taking PARTY.

     22.4 EXPENSES OF DELIVERY IN KIND.  Any cost incurred by OPERATOR in making
delivery  of any  PARTY'S  share of oil and  condensate,  or  disposing  of same
pursuant to Section 22.3, shall be borne by such PARTY.

     22.5 GAS BALANCING PROVISIONS. Attached hereto is Exhibit "E" entitled "Gas
Balancing  Agreement",   containing  an  agreement  of  the  PARTIES,  which  is
incorporated into this Agreement as if copied at length herein.

                                       23

<PAGE>

                                  ARTICLE XXIII

                                 APPLICABLE LAW

     23.1 APPLICABLE  LAW. This Agreement shall be interpreted  according to the
laws of the State of Texas.

                                  ARTICLE XXIV

                    LAWS, REGULATIONS AND NON-DISCRIMINATION

     24.1 LAWS AND  REGULATIONS.  This  Agreement and  operations  hereunder are
subject to all applicable laws, rules, regulations and orders, and any provision
of the  Agreement  found to be  contrary to or  inconsistent  with any such law,
rule, regulation or order shall be deemed modified accordingly.

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

                                   ARTICLE XXV

                                  FORCE MAJEURE

     25.1 NOTICE.  If any PARTY is rendered unable,  wholly or in part, by force
majeure  to carry out its  obligations  under  this  Agreement,  other  than the
obligation  to make money  payments,  that PARTY shall give to all other PARTIES
prompt  written  notice of the force majeure with  reasonably  full  particulars
concerning it; thereupon, the obligations of the PARTY giving the notice, so far
as they are affected by the force  majeure,  shall be suspended  during,  but no
longer than, the continuance of the force majeure.  The affected PARTY shall use
reasonable diligence to remove the force majeure as quickly as possible.

     25.2 STRIKES. The requirement that any force majeure shall be remedied with
all reasonable dispatch shall not require the settlement of strikes.

     25.3 FORCE MAJEURE.  The term "force majeure" as herein employed shall mean
an act of God,  strike,  lockout,  or other industrial  disturbance,  act of the
public  enemy,  war,  blockade,  public riot,  lightning,  fire,  storm,  flood,
explosion,  governmental  restraint,  unavailability  of equipment and any other
cause, whether of the kind specifically enumerated above or otherwise,  which is
not reasonably within the control of the PARTY claiming suspension.

                                  ARTICLE XXVI

                      SUCCESSORS, ASSIGNS AND PREFERENTIAL
                                RIGHT TO PURCHASE

     26.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to  the  benefit  of  the  PARTIES  and  their  respective  heirs,   successors,
representatives  and assigns and shall  constitute  a covenant  running with the
LEASE.  Each PARTY shall  incorporate  in any  assignment  of an interest in the
LEASE a provision that such assignment is subject to this Agreement.

     26.2  NOTICE OF  TRANSFER.  Should  any PARTY  desire to sell,  farmout  or
otherwise  dispose al all or any part of its Working  Interest in the Lease,  it
shall  promptly  give  written  notice  to the  other  PARTIES  giving  complete
information relative to the proposed  disposition.  The other PARTIES shall have
the right for a period of fifteen (15)

                                       24

<PAGE>

days after receipt of the notice to attempt to purchase or acquire the interest,
which the PARTY proposes to sell,  farmout or otherwise  dispose.  A transfer of
interest  hereunder shall not become effective as to the PARTIES until the first
day of the month  following  delivery  to  OPERATOR  of an  original  (or copies
thereof)  instrument of transfer approved by the proper  governmental  authority
and  conforming  to the  requirements  of this Section.  No such transfer  shall
relieve  the  transferring  PARTY  of any  obligations  or  liabilities  accrued
hereunder  prior to such  effective  date.  This Section  shall not apply when a
PARTY  wishes to mortgage  its interest or to dispose of its interest by merger,
reorganization,  consolidation, assignment of production payment, sale of all or
substantially  all of its  assets,  or sale or  transfer  of its  interest to an
affiliate.

          26.2.1 A PARTY may  sell,  transfer  or assign  all or any part of its
interest  in the  property  or this  Agreement  without the consent of any other
PARTY hereto, provided that:

               (a)  Any such sale,  transfer or assignment shall be made only to
                    a financially responsible PARTY or PARTIES.

               (b)  Such PARTY shall give the other  PARTIES  written  notice of
                    such sale,  transfer or assignment at least thirty (30) days
                    prior to executing any  instrument(s)  evidencing  the sale,
                    transfer or  assignment  (such notice to include the name of
                    each   proposed   transferee   and  the   interests)  to  be
                    transferred).

               (c)  Such PARTY shall  incorporate in each instrument  evidencing
                    the sale, transfer or assignment a provision making the same
                    expressly  subject  to the  Operating  Agreement  and  shall
                    obtain (and furnish to the other PARTIES) such  transferee's
                    written  consent  to be bound by all the  provisions  of the
                    Operating Agreement.

               (d)  If the  original  interest  of  any  PARTY  is at  any  time
                    transferred to two (2) or more transferees, OPERATOR may, at
                    its discretion, require such transferees to appoint a single
                    trustee with full authority to receive notices and payments,
                    approve  expenditures and pay the share of costs,  which are
                    chargeable against such transferees.

          26.2.2 The Provisions of this Article shall not, however, apply to and
it shall not be necessary to obtain the consent of any party in connection with;

               (a)  Any mortgage or other pledge,  including without  limitation
                    the  granting  of any  lien  or  security  interest  and any
                    assignment  of production  executed as further  security for
                    the debt secured by any such mortgage or pledge,  by a Party
                    hereto of its  interest or any portion  thereof in the joint
                    leases,  or the  Agreement,  or any  judicial,  trustee's or
                    other sales to foreclose the same;

               (b)  Any  transfer  or  disposition  of the  interest  of a PARTY
                    hereto by corporate  merger or  consolidation or by any sale
                    or sales of substantially all of its oil and gas properties;
                    or

               (c)  Any sale, merger, consolidation or other transfer by a PARTY
                    hereto  of  any  part  of  its   interest  to  or  with  any
                    "affiliate" (as such term is defined in Regulation C, issued
                    under the Securities Act of 1933).

                                       25

<PAGE>

               (d)  Any mortgage,  pledge,  transfer,  sale, merger or any other
                    disposition  enumerated in subparagraphs  (a), (b) or (c) of
                    this  Paragraph  shall  be made  expressly  subject  to this
                    Agreement.  Any  assignment  under this  provision  shall be
                    effective  upon  approval  of the lessor or at such  earlier
                    date as agreed to by the lessor.

     26.3  ASSIGNMENTS.  Any assignment,  vesting or  relinquishment of interest
between the PARTIES shall be without warranty of title,  except as to overrides,
production  payments,  liens,  encumbrances  or similar  burdens on the interest
assigned. Any assignment to a Third Party or a Working Interest herein shall not
be effective until approved by the Minerals Management Service.

                                  ARTICLE XXVII

                                      TERM

     27.1 TERM. This Agreement may be amended only in writing and only by mutual
consent of all  PARTIES.  This  Agreement  shall remain in effect so long as the
LEASE shall remain in effect and thereafter  until all claims,  liabilities  and
obligations  incurred in operations  hereunder have been settled;  however,  all
property  belonging  to the PARTIES  shall be  disposed of and final  settlement
shall be made under this Agreement.

                                 ARTICLE XXVIII

                             AREA OF MUTUAL INTEREST

     28.1 AREA OF MUTUAL  INTEREST.  The PARTIES hereby create an Area of Mutual
Interest  ("AMI")  identified on Exhibit "A-1"  attached  hereto and made a part
hereof.  This AMI shall  remain in force and effect as long as any leases  lying
within the AMI are being  maintained by the parties  hereto.  Any acquisition of
any right,  title or interest  acquired in, to and under any oil or gas lease or
any other interest in oil or gas,  including,  without  limitation,  contractual
rights,  which confer on the holder  thereof the right to share,  or acquire the
right to share,  in the  production or the proceeds of production of oil and gas
within the AMI (the  "Acquisition")  by a PARTY  herein  shall be for the mutual
benefit of the PARTIES.  Each PARTY shall have the right to  participate  in any
such  Acquisition in the same proportion as such PARTY'S WORKING INTEREST in and
to the LEASE as set forth in Exhibit "A". The PARTY making the Acquisition  (the
"Acquiring  Party")  shall  notify each of the other  PARTIES in writing  within
thirty (30) days of such  Acquisition  and shall  furnish a copy of all executed
agreements  pertaining thereto and such title information as the Acquiring PARTY
has,  stating  the cost of such  acquisition  or the  obligations  that  must be
assumed in connection  therewith.  Each of the other PARTIES shall have a period
of fifteen (15) working days (48 hours exclusive of Saturdays, Sundays and legal
holidays in the event that a well is being drilled within the AMI) after receipt
of such notice within which to elect and notify the  Acquiring  PARTY whether or
not it desires to participate in such Acquisition.  Failure to timely respond to
the  Acquiring   PARTY'S  notice  or  reimburse  the  Acquiring  PARTY  for  the
proportionate  share of the acquired interest shall be deemed an election not to
acquire such  interest.  Upon election and payment to the  Acquiring  PARTY of a
non-acquiring PARTY'S share of the cost of such acquisition,  such non-acquiring
PARTY shall be  entitled to an  assignment  of its  proportionate  share in such
Acquisition.

                                       26

<PAGE>

     If fewer than all PARTIES elect to  participate in the  Acquisition  within
the AMI,  the  Acquiring  PARTY shall  inform all  PARTIES  who have  elected to
participate in the  Acquisition,  in writing,  of the elections made. Each PARTY
receiving notice,  within forty-eight (48) hours (inclusive of Saturday,  Sunday
or legal  holidays)  after  receipt of such notice,  shall advise the  Acquiring
PARTY of its desire to (a) limit  participation to its WORKING INTEREST,  or (b)
acquire  its  proportionate  share  of the  interest  of  the  non-participating
PARTY(IES),  or  (c)  participate  for a  percentage  of  the  interest  of  the
non-participating PARTY(IES).

     The  interest  of any PARTY who elects to  participate  in any  acquisition
within the AMI shall be subject to and be burdened by the  obligations set forth
on Exhibit "A" with respect to the leases.

                                  ARTICLE XXIX

                             HEADINGS AND EXECUTION

     29.1 TOPICAL HEADINGS. The topical headings used herein are for convenience
only and shall not be construed  as having any  substantive  significance  or as
indicating  that all of the provisions of this  Agreement  relating to any topic
are to be found in any particular Section.

     29.2 COUNTERPART EXECUTIONS.  This Agreement may be signed in counterparts,
and shall be binding upon the PARTIES and upon their successors, representatives
and assigns.

                                        GRYPHON EXPLORATION COMPANY

                                        BY: /s/ Charles H. Odom
                                            ------------------------------------
                                            Charles H. Odom
                                            Vice President-Land

                                        MARINER ENERGY, INC.

                                        BY:
                                            ------------------------------------
                                        NAME:
                                              ----------------------------------
                                        TITLE:
                                               ---------------------------------

                                        RIDGEWOOD ENERGY CORPORATION

                                        BY: /s/ W. Greg Tabor
                                            ------------------------------------
                                        NAME: W. GREG TABOR
                                        TITLE: EXEC. VICE PRESIDENT

                                       27

<PAGE>

STATE OF Texas

COUNTY OF Harris

ON THIS  9th day of  September,  2004,  before  me  appeared  C.H.  Odom,  to me
personally  known,  who,  being  by me duly  sworn,  did say that he is the Vice
President for Gryphon Exploration Company, and that the foregoing instrument was
signed in behalf of said corporation by authority of its Board of Directors, and
said C.H. Odom  acknowledges  said  instrument to be a free act and deed of said
corporation.

----------------------------
[SEAL]     WANDA L. MARTIN
       MY COMMISSION EXPIRES               /s/ Wanda L. Martin
          DECEMBER 6, 2007                 -------------------------------------
----------------------------               Notary Public in and for State of
                                           Texas

STATE OF TEXAS

COUNTY OF HARRIS

ON THIS 9th day of  September,  2004,  before me appeared  W. GREG TABOR,  to me
personally  known,  who,  being  by me duly  sworn,  did say that he is the Vice
President for RIDGEWOOD ENERGY  CORPORATION,  and that the foregoing  instrument
was signed in behalf of said corporation by authority of its Board of Directors,
and said W. GREG TABOR acknowledges said instrument to be a free act and deed of
said corporation.

------------------------------
           MERCEDES S. ZUNIGA
[SEAL]   MY COMMISSION EXPIRES             /s/ Mercedes S. Zuniga
             June 16, 2005                 -------------------------------------
------------------------------             Notary Public in and for

STATE OF

COUNTY OF

ON THIS ____ day of  _________,  2004,  before me  appeared  ___________,  to me
personally  known,  who,  being  by me  duly  sworn,  did  say  that  he is  the
____________ for ________________,  and that the foregoing instrument was signed
in behalf of said  corporation by authority of its Board of Directors,  and said
__________  acknowledges  said  instrument  to be a free  act  and  deed of said
corporation.

                                           -------------------------------------
                                           Notary Public in and for

                                       28

<PAGE>

     If fewer than all PARTIES elect to  participate in the  Acquisition  within
the AMI,  the  Acquiring  PARTY shall  inform all  PARTIES  who have  elected to
participate in the  Acquisition,  in writing,  of the elections made. Each PARTY
receiving notice,  within forty-eight (48) hours (inclusive of Saturday,  Sunday
or legal  holidays)  after  receipt of such notice,  shall advise the  Acquiring
PARTY of its desire to (a) limit  participation to its WORKING INTEREST,  or (b)
acquire  its  proportionate  share  of the  interest  of  the  non-participating
PARTY(IES),  or  (c)  participate  for a  percentage  of  the  interest  of  the
non-participating PARTY(IES).

     The  interest  of any PARTY who elects to  participate  in any  acquisition
within the AMI shall be subject to and be burdened by the  obligations set forth
on Exhibit "A" with respect to the leases.

                                  ARTICLE XXIX

                             HEADINGS AND EXECUTION

     29.1 TOPICAL HEADINGS. The topical headings used herein are for convenience
only and shall not be construed  as having any  substantive  significance  or as
indicating  that all of the provisions of this  Agreement  relating to any topic
are to be found in any particular Section.

     29.2 COUNTERPART EXECUTIONS.  This Agreement may be signed in counterparts,
and shall be binding upon the PARTIES and upon their successors, representatives
and assigns.

                                           GRYPHON EXPLORATION COMPANY

                                           BY: /s/ Charles H. Odom
                                               ---------------------------------
                                               Charles H. Odom
                                               Vice President-Land

                                           MARINER ENERGY, INC.

                                           BY: /s/ Mike C. van den Bold
                                               ---------------------------------
                                           NAME: Mike C. van den Bold
                                           TITLE: Vice President - Exploration

                                           RIDGEWOOD ENERGY CORPORATION

                                           BY:
                                               ---------------------------------
                                           NAME:
                                                 -------------------------------
                                           TITLE:
                                                  ------------------------------

                                       29

<PAGE>

STATE OF Texas

COUNTY OF Harris

ON  THIS  9th day of  September,  2004,  before  me  appeared  C.H  Odom,  to me
personally  known,  who,  being  by me duly  sworn,  did say that he is the Vice
President for Gryphon Exploration Company, and that the foregoing instrument was
signed in behalf of said corporation by authority of its Board of Directors, and
said C.H. Odom  acknowledges  said  instrument to be a free act and deed of said
corporation.

------------------------------
            WANDA L. MARTIN
[SEAL]   MY COMMISSION EXPIRES             /s/ Wanda L. Martin
            DECEMBER 6, 2007               -------------------------------------
------------------------------             Notary Public in and for State of
                                           Texas

STATE OF TEXAS

COUNTY OF HARRIS

ON THIS 9TH day of SEPTEMBER,  2004, before me appeared MIKE C. VAN DEN BOLD, to
me personally  known,  who, being by me duly sworn,  did say that he is the VICE
PRESIDENT  for MARINER  ENERGY and that the foregoing  instrument  was signed in
behalf of said corporation by authority of its Board of Directors, and said MIKE
C. VAN DEN BOLD  acknowledges  said instrument to be a free act and deed of said
corporation.

------------------------------------
              SUSAN G. EDWARDS
[SEAL] NOTARY PUBLIC, STATE OF TEXAS
           MY COMMISSION EXPIRES           /s/ Susan G. Edwards
               SEPT. 2, 2007               -------------------------------------
------------------------------------       Notary Public in and for State of
                                           Texas

STATE OF

COUNTY OF

ON THIS ____ day of  _________,  2004,  before me  appeared  ___________,  to me
personally  known,  who,  being  by me  duly  sworn,  did  say  that  he is  the
____________ for ________________,  and that the foregoing instrument was signed
in behalf of said  corporation by authority of its Board of Directors,  and said
_________________ acknowledges said instrument to be a free act and deed of said
corporation.

                                           -------------------------------------
                                           Notary Public in and for

                                       30

<PAGE>

                                   EXHIBIT "A"

      Attached to and made a part of that certain Joint Operating Agreement
   dated effective August 1, 2004 by and between GRYPHON EXPLORATION COMPANY,
         as Operator, and MARINER ENERGY, INC., et al, as Non-Operators

OIL AND GAS LEASES:

     1.   Lease No. M-102437 by and between the Commissioner of the General Land
          Office of the State of  Texas,  as  Lessor,  and  Gryphon  Exploration
          Company,  as  Lessee,  effective  April 9,  2002,  covering  the North
          One-Half of the  Southwest  One-Quarter  (N/2 of SW/4) of Tract 246-L,
          Gulf of Mexico,  Galveston County, Texas, containing approximately 720
          acres as shown on the  official  map of the Gulf of  Mexico on file in
          the Texas General Land Office,  Austin, Texas, and recorded on May 29,
          2002 under File No.  ###-##-####  of the records of Galveston  County,
          Texas.

     2.   Lease No. M-102438 by and between the Commissioner of the General Land
          Office of the State of  Texas,  as  Lessor,  and  Gryphon  Exploration
          Company,  as  Lessee,  effective  April 9,  2002,  covering  the South
          One-Half of the  Southwest  One-Quarter  (S/2 of SW/4) of Tract 246-L,
          Gulf of Mexico,  Galveston County, Texas, containing approximately 720
          acres as shown on the  official  map of the Gulf of  Mexico on file in
          the Texas General Land Office,  Austin, Texas, and recorded on May 29,
          2002 under File No.  ###-##-####  of the records of Galveston  County,
          Texas.

PARTICIPANTS AND ADDRESSES:

     Gryphon Exploration Company
     1200 Smith Street
     Suite 1700
     Houston, Texas 77002
     Attention: Land Department
     Phone: (713) 576-2400
     FAX: (713) 576-2500

     Mariner Energy, Inc.
     2101 Citywest Blvd., Suite 1900
     Houston, Texas 77042-3020
     Attention: Mr. John Davis
     Phone: (713) 954-5500
     FAX: (713) 954-5570

     Ridgewood Energy Corporation
     5300 Memorial Drive, Suite 1070
     Houston, Texas 77007
     Attn: Mr. Greg Tabor
     Phone: (713) 862-9856
     Fax: (713) 802-9734

WORKING INTEREST

                               To Casing Point*   At Casing Point*
                               ----------------   ----------------
Gryphon Exploration Company        33.33333%          40.00000%
Mariner Energy, Inc.               40.00000%          40.00000%
Ridgewood Energy Corporation       26.66667%          20.00000%
                                  ---------          ---------
                                  100.00000%         100.00000%

          *The working  interest of Gryphon  Exploration  Company and  Ridgewood
     Energy  Corporation  to Casing  Point and at Casing Point is subject to the
     terms  and  conditions  of  that  certain  Participation   Agreement  dated
     September 2, 2004 between said parties.

     The above leases,  including  any leases  acquired by virtue of the Area of
     Mutual  Interest  provisions of Article XXVIII hereof,  are burdened by the
     following overriding royalty interests:

Jebco Seismic, L.P.            7.5% of 1.0% of 8/8ths
Multi Klient Invest AS        92.5% of 1.0% of 8/8ths
Gryphon Exploration Company        2.0% of 8/8ths

                                       31

<PAGE>

                                  EXHIBIT "A-l"
                            AREA OF MUTUAL INTEREST

      Attached to and made a part of that certain Joint Operating Agreement
   dated effective August 1, 2004 by and between GRYPHON EXPLORATION COMPANY,
         as Operator, and MARINER ENERGY, INC., et al, as Non-Operators

     The Area of Mutual Interest is comprised of the SW/4 of Tract 246-L and the
     SE/4 of Tract 247-L, Gulf of Mexico, Galveston County, Texas.

                                       32

<PAGE>

                                   EXHIBIT "B"
                                   INSURANCE

   Attached to and made a part of that certain Joint Operating Agreement dated
    effective August 1, 2004, by and between GRYPHON EXPLORATION COMPANY, as
           Operator, and MARINER ENERGY, INC., et al, as Non-Operators

Operator  shall, at all times while  conducting  operations on the Contract Area
and/or  Assigned  Premises,  carry  or  cause to be  carried  insurance  for the
following coverage's and in at least the minimum amounts noted.

     1.   Workers' Compensation and Occupational Disease insurance in accordance
          with the  statutory  requirements  of the state in which work is to be
          performed,  the state in which the Operator,  herein "Contractor",  or
          any of Operator's contractor(s) or sub-contractor(s), employees reside
          and the  state  in  which  the  Contractor  is  domiciled;  Employer's
          Liability  insurance  with limits of not less than  $1,000,000.  These
          coverage's shall include:

          a.   Protection for liabilities under the Federal  Longshoremen's  and
               Harbor Worker's  Compensation Act and the Outer Continental Shelf
               Lands Act.

          b.   Coverage for  liability  under the  Merchant  Marine Act of 1920,
               commonly known as the Jones Act; the Admiralty Act; and the Death
               on the High Seas Act with limits of not less than  $1,000,000 per
               accident.

          c.   Protection    against    liability   of   employer   to   provide
               transportation, wages, maintenance and cure to maritime employees
               and a Voluntary Compensation Endorsement.

          d.   Coverage  amended to provide that a claim In Rem shall be treated
               as a claim against the employer.

          e.   Territorial extension shall cover all work areas.

     2.   Comprehensive  General Liability insurance,  written on any occurrence
          reported basis with limits of $1,000,000 per occurrence  Bodily Injury
          and Property Damage, combined single limits, an annual aggregate of no
          less  than  $2,000,000  (if   applicable),   including  the  following
          coverage's:

          a.   Premises and Operations coverage's.

          b.   Independent Contractor's Contingent coverage.

          c.   Contractual  Liability  covering  liabilities  assumed under this
               Contract.

          d.   Products and Completed Operations coverage.

          e.   Coverage for explosion,  collapse and  underground  resources and
               property  damage under both  Premises/Operations  and Contractual
               Liability coverage parts, where applicable.

          f.   Broad Form Property Damage Liability endorsement.

          g.   Personal Injury Liability.

          h.   In Rem endorsement.

          i.   Territorial extension shall cover all work areas.

          j.   Where  applicable,  coverage  for  liability  resulting  from the
               consumption   of  food   prepared  or  served  by  contractor  or
               subcontractor.

          k.   Watercraft  exclusion deleted or Protection & Indemnity  provided
               as per 4.B.

          l.   Coverage is provided  for "Action  Over"  suits.

          m.   Coverage is silent as respects Punitive Damages.

     3.   Automobile  Liability  insurance  covering owned,  hired and non-owned
          vehicles with limits of $1,000,000  per  occurrence  Bodily Injury and
          Property Damage combined single limits.

                                       33

<PAGE>

     4.   Where the work  described by this Contract  involves the use of marine
          equipment.  Operator  will  require  the  contractor  to  provide  the
          following insurance:

          a.   Full Form Hull and Machinery  insurance,  with coverage  equal to
               that provided by the American  Institute  Hull Clauses  including
               collision liability,  with the sister ship clause unamended, with
               limits  of  liability  at least  equal  to the full  value of the
               vessel and with navigational  limitations adequate for Contractor
               to perform  the  contracted  work.  Where the  vessels  engage in
               towing  operations,  said  insurance  shall  include full tower's
               liability with the sister ship clause unamended.

          b.   Protection and indemnity insurance coverage in an amount at least
               equal  to the  full  value  of each  vessel  employed  under  the
               Contract.  Protection and indemnity  insurance shall include full
               coverage  for all  crew  liabilities  if  coverage  for  maritime
               employees is not provided under  Coverage B, Employers  Liability
               for Admiralty Jurisdiction.

          c.   Excess Protection and Indemnity  insurance,  including  Collision
               and Tower's  (where  applicable)  Liability in an amount at least
               equal  to the  value of each  vessel  covered  or the  difference
               between  the  full  value  of  each  vessel  and  $1,000,000  per
               occurrence.

          d.   Voluntary  Removal  of Wreck  and/or  Debris  insurance  covering
               Contractor's  operations in an amount of not less than $1,000,000
               per occurrence.

     All of the marine  coverage's  cited above shall name  Operator and all its
subsidiary and affiliated  companies as additional  insured's as their interests
may appear,  to the extent of  contractor's  obligations to defend and indemnify
the Parties.

     5.   Aircraft Liability insurance (for contracts involving use of aircraft
          or helicopters) with combined single limit coverage for public
          liability, passenger liability and property damage liability of not
          less than $5,000,000 covering all owned and non-owned aircraft used by
          Contractor in connection with work to be performed.

     6.   Umbrella Liability insurance written on an occurrence basis with no
          claims made features with a minimum combined single limit of $
          15,000,000 each occurrence/aggregate where applicable, to be excess of
          the coverage's and limits required in 1, 2, 3,4 and 5 above.

     7.   OPERATOR shall carry or cause to be carried the following coverage's
          for the benefit of and at the expense of the Joint Account, however,
          proportionate coverage may be carried individually by each NON-
          OPERATOR, subject to proper evidence of such proportionate coverage
          being provided to Operator at least fifteen (15) days prior to
          commencement of operations for the drilling of the initial EXPLORATORY
          WELL.

          a.   Operator's Extra Expense Insurance, including control of well and
               redrilling of the well (full restoration redrill), including, but
               not limited to, Seepage and Pollution and Containment and
               Evacuation Expense with a limit of liability of $30,000,000.

          b.   Physical Damage and Removal of Wreck Coverage for facilities
               hereunder, with limits not less than the replacement value
               thereof. Notwithstanding the foregoing, this coverage to be
               provided fifteen(15) days prior to placement of such facilities.

                                       34

<PAGE>

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

                                   EXHIBIT "C"

      Attached to and made a part of that certain Joint Operating Agreement
   dated effective August 1, 2004, by and between GRYPHON EXPLORATION COMPANY,
         as Operator, and MARNIER ENERGY, INC., et al, as Non-Operators.

                              ACCOUNTING PROCEDURE

                            OFFSHORE JOINT OPERATIONS

                              I. GENERAL PROVISIONS

1.   Definitions

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

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

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

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

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

     "Parties" shall mean Operator and Non-Operators.

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

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

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

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

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

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

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

2.   Statement 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 costs to
          be incurred for the succeeding  month's  operation within fifteen (15)
          days after receipt of the billing or by the first day of the month for
          which the advance is  required,  whichever  is later.  Operator  shall
          adjust each  monthly  billing to reflect  advances  received  from the
          Non-Operators.

     B.   Each Non-Operator shall pay its proportion of all bills within fifteen
          (15) days after receipt.  If payment is not made within such time, the
          unpaid balance shall bear interest monthly at the prime rate in effect
          at Bank One,  Texas,  Houston,  Texas 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 in
          the 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

                                        1

<PAGE>

     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.

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  and
               contract  personnel  directly employed on the Joint Property
               in the conduct of Joint Operations.

          (2)  Salaries and wages of Operator's  employees or contract personnel
               directly  employed  on Shore Base  Facilities  or other  Offshore
               Facilities  serving the Joint  Property if such costs are charged
               under Paragraph 7 of this Section II.

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

          (4)  Salaries   and  wages  and  fees  of   Technical   Employees   or
               professional  consultants directly employed on the Joint Property
               if such charges are excluded from the overhead rates.

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

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

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

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

3.   Employee Benefits

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

                                       2

<PAGE>

     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.

6.   Services

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

7.   Equipment and Facilities Furnished By Operator

     A.   Operator  shall  charge the Joint  Account  for use of  Operator-owned
          equipment  and  facilities,   including  Shore  Base  and/or  Offshore
          Facilities,   at  rates  commensurate  with  costs  of  ownership  and
          operation. Such rates may include labor,  maintenance,  repairs, other
          operating expense,  insurance,  taxes,  depreciation,  and interest on
          gross  investment  less  accumulated  depreciation  not to exceed  Ten
          percent (10%) per annum. In addition, for platforms only, the rate may
          include an element of the  estimated  cost of platform  dismantlement.
          Such  rates  shall  not  exceed  average  commercial  rates  currently
          prevailing in the immediate area of the Joint Property.

     B.   In lieu of charges in  paragraph  7A above,  Operator may elect to use
          average commercial rates prevailing in the immediate area of the Joint
          Property.  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 cause, except those resulting from
     Operator's gross negligence or willful  misconduct.  Operator shall furnish
     Non-Operator  written  notice  of  damages  or losses  incurred  as soon as
     practicable after a report thereof has been received by Operator.

9.   Legal Expense

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

10.  Taxes

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

11.  Insurance

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

12.  Communications

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

13.  Ecological and Environmental

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

14.  Abandonment and Reclamation

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

15.  Other Expenditures

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

                                       3

<PAGE>

                                  III. OVERHEAD

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

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

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

          |_|  shall be covered by the overhead rates.

          |X|  shall not be covered by the overhead rates.

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

          |X|  shall be covered by the overhead rates.

          |_|  shall not be covered by the overhead rates.

1.   Overhead - Drilling and Producing  Operations

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

          |X|  Fixed Rate Basis, Paragraph 1A, or

          |_|  Percentage Basis, Paragraph 1B

     A.   Overhead - Fixed Rate Basis

          (1)  Operator  shall charge the Joint Account at the  following  rates
               per well per month.
               Drilling Well Rate $35,000 (Prorated for less than a full month)
               Producing Well Rate $3,500

          (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 four (4) consecutive work days
                    or more  shall  be  made at the  drilling  well  rate.  Such
                    charges  shall be applied for the period from date  workover
                    operations,  with  rig or  other  units  used  in  workover,
                    commence  through date of rig or other unit release,  except
                    that no charge shall be made during suspension of operations
                    for fifteen (15) or more consecutive calendar days.

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

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

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

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

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

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

          (4)  The well  rates  shall be  adjusted  as of the first day of April
               each year  following the effective date of the agreement to which
               this Accounting  Procedure is attached.  The adjustment  shall be
               computed  by  multiplying  the  rate  currently  in  use  by  the
               percentage increase or decrease in the average weekly earnings of
               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
               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.

                                       4

<PAGE>

B.   Overhead - Percentage Basis

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

               (a)  Development

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

               (b)  Operating

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

          (2)  Application  of Overhead - Percentage  Basis shall be as follows:
               For the  purpose of  determining  charges on a  percentage  basis
               under Paragraph 1B of this Section III, development shall include
               all costs in connection with drilling,  redrilling,  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 costs
               of construction or installation of fixed assets, the expansion of
               fixed assets and any other project clearly discernible as a fixed
               asset,  except  Major  Construction  as defined in Paragraph 2 of
               this  Section  III.  All  other  costs  shall  be  considered  as
               Operating  except  that  catastrophe   costs  shall  be  assessed
               overhead as provided in Section III, Paragraph 3.

2.   Overhead - Major Construction

     To compensate  Operator for overhead costs incurred in the construction and
     installation of fixed assets,  the expansion of fixed assets, and any other
     project  clearly  discernible as a fixed asset required for the development
     and operation of the Joint Property,  or in the dismantling for abandonment
     of  platforms  and related  production  facilities,  Operator  shall either
     negotiate a rate prior to the  beginning of  construction,  or shall charge
     the Joint Account for overhead  based on the following  rates for any Major
     Construction project in excess of $ 25,000.00

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

          (1)  6% of total costs if such costs are more than $25,000.00 but less
               than $100,000; plus

          (2)  4% of total costs in excess of $100,000 but less than $l,000,000;
               plus

          (3)  2% 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)  3% of total costs if such costs are more than $25,000.00 but less
               than $100,000; plus

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

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

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

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

3.   Catastrophe Overhead

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

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

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

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

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

4.   Amendment of Rates

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

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

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

                                       5

<PAGE>

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 current new prices effective as of
                    date of movement plus  transportation  cost using the 80,000
                    pound carload weight basis to the railway receiving point or
                    shore based facilities  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.

               (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 or shore based  facilities  nearest the Joint Property
                    as provided above in Paragraph 2.A.(1)(a).

               (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 or shore based  facilities  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 or shore
                    based facilities 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.

               (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  current  new  prices  effective  as of  date  of
                    shipment plus 20 percent, plus transportation costs based on
                    freight rates as set forth under provisions of tubular goods
                    pricing in Paragraph A.(1)(a) as provided above.

               (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
                    CEPS  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
                    or shore based  facilities  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 or shore based facilities 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 or shore
               based facilities nearest the Joint Property.  Unused new tubulars
               will be priced as provided above in Paragraph 2.A.(1) and (2).

     B.   Good Used Material (Condition B)

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

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

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

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

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

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

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

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

     C.   Other Used Material

          (1)  Condition C

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

                                       6

<PAGE>

          (2)  Condition D

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

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

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

          (3)  Condition E

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

     D.   Obsolete Material

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

     E.   Pricing Conditions

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

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

3.   Premium Prices

     Whenever  Material is not readily  obtainable at published or listed prices
     because of national emergencies, strikes or other unusual causes over which
     the Operator has no control,  the Operator may charge the Joint Account for
     the required  Material at the Operator's  actual cost incurred in providing
     such  Material,  in making it suitable  for use, and in moving 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 reports of Controllable Material.

1.   Periodic Inventories, Notice and Representation

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

2.   Reconciliation and Adjustment of Inventories

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

3.   Special Inventories

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

4.   Expense of Conducting Inventories

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

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

                                       7

<PAGE>

                                   EXHIBIT "D"

   Attached to and made a part of that certain Joint Operating Agreement dated
      effective August 1, 2004, by and between GRYPHON EXPLORATION COMPANY,
         as Operator, and MARINER ENERGY, INC., et al, as Non-Operators

                    CERTIFICATION OF NONSEGREGATED FACILITIES

Contractor  certifies that it does not maintain or provide for its employees any
segregated  facilities at any of its  establishments and that it does not permit
its  employees to perform  their  services at any  location,  under its control,
where segregated facilities are maintained. Contractor certifies further that it
will not maintain or provide for its employees any segregated  facilities at any
of its establishments and that it will not permit its employees to perform their
services at any location,  under its control,  where  segregated  facilities are
maintained. Contractor agrees that a breach of this certification is a violation
of the Equal Opportunity  Clause in any Government  contract between  Contractor
and Corporation. As used in this certification, the term "segregated facilities"
means any waiting rooms, work areas, rest rooms and wash rooms,  restaurants and
other  eating  areas,  time clocks,  locker rooms and other  storage or dressing
areas,  parking lots,  drinking  fountains,  recreation or entertainment  areas,
transportation,   and  housing  facilities  provided  for  employees  which  are
segregated by explicit directive or are in fact segregated on the basis of race,
color,  religion,  or  national  origin,  because  of habit,  local  customs  or
otherwise.  Contractor further agrees that (except where it has obtain identical
certifications  from proposed  subcontractors for specific time periods) it will
obtain identical  certifications from proposed subcontractors prior to the award
of  subcontracts  exceeding  $10,000 which are not exempt from the provisions of
the Equal  Opportunity  Clause;  that it will retain such  certifications in its
files;  and  that  it  will  forward  the  following  notice  to  such  proposed
subcontractors   (except  where  the  proposed   subcontractors  have  submitted
identical certifications for specific time periods):

NOTICE TO  PROSPECTIVE  SUBCONTRACTORS  OF  REQUIREMENT  FOR  CERTIFICATIONS  OF
NONSEGREGATED  FACILITIES.  A Certification  of  Non-segregated  Facilities,  as
required by the May 9, 1967, order on Elimination of Segregated  Facilities,  by
the Secretary of Labor (32 Fed.  Reg.  7439,  May 19,  1967),  must be submitted
prior to the award of a subcontract exceeding $10,000,  which is not exempt from
the  provisions  of the  Equal  Opportunity  Clause.  The  certification  may be
submitted either for each  subcontract or for all  subcontracts  during a period
(i.e., quarterly, semi-annually or annually). (1968 MAR.) (Note: The penalty for
making false statements in offers is prescribed in 18 U.S.C. 1001.)

Whenever used in the foregoing  Section,  the term  "contractor"  refers to each
party to this agreement.

                                       35

<PAGE>

                                   Exhibit "E"

                             GAS BALANCING AGREEMENT

      Attached to and made a part of that certain Joint Operating Agreement
       dated effective August 1, 2004, by and between GRYPHON EXPLORATION
     COMPANY, as Operator, and MARINER ENERGY, INC., et al, as Non-Operators

I.   Definitions

     A.   "Agreement" shall mean this Gas Balancing Agreement.

     B.   "Balanced"  is that  condition  which  occurs when a party  hereto has
          taken the same  percentage of the cumulative  volume of Gas production
          it is  entitled  to  take  pursuant  to the  terms  of  the  Operating
          Agreement.

     C.   "Gas" includes natural gas produced from a Well that produces Gas Well
          Gas, including all constituent parts of such natural gas except liquid
          hydrocarbons and condensate recovered by primary separation equipment.

     D.   "Gas Well Gas" is gas produced from a Well classified as a gas well by
          the regulatory body having jurisdiction.

     E.   "Overproduced"  is the  status of a party when the  percentage  of the
          cumulative  volume of Gas taken by that  party  exceeds  that  party's
          percentage  interest of the volume of cumulative Gas production of all
          parties to the Operating  Agreement under and pursuant to the terms of
          the Operating Agreement.

     F.   "Underproduced"  is the  status  of a party  when  the  percentage  of
          cumulative volume of Gas taken by that party is less than that party's
          percentage  interest of the volume of cumulative Gas production of all
          parties to the Operating  Agreement under and pursuant to the terms of
          said Operating Agreement.

     G.   "Well" is defined as each well subject to the Operating Agreement that
          produces  Gas Well Gas. If a single Well is  completed  in two or more
          reservoirs, such Well shall be considered a separate Well with respect
          to,  but only with  respect  to,  each  reservoir  from  which the Gas
          produced is not commingled in the well bore.

II.  Application of this Agreement

     The  parties  to the  Operating  Agreement  own the  working  or  operating
     interests in the Gas  underlying the Contract Area covered by the Operating
     Agreement and are entitled to share in the  percentages  therein  stated in
     the Operating Agreement.

     In  accordance  with the terms of the  Operating  Agreement,  each party is
     responsible  for marketing  it's share and shall take its full share of Gas
     produced from the Contract Area and market or otherwise dispose of same. In
     the event a party  hereto  elects in writing  not to take in kind or market
     its full share of Gas or has  contracted  to sell its share of Gas produced
     from  the  Contract  Area to a  purchaser  which,  at any time  while  this
     Agreement is in effect,  fails to take the share of Gas attributable to the
     interest of such party,  the terms of this  Agreement  shall  automatically
     become effective.

     The Operator is responsible  for  administering  the provisions of this Gas
     Balancing Agreement and as such shall have the sole option of administering
     all  reporting  of the same for the Parties or  retaining  the  services of
     third party  professionals  for this  specific  purpose.  The costs of such
     third party  services by Operator  shall be  considered  as included in the
     overhead rates.  The Operator shall cause  deliveries to be made to the Gas
     purchasers  at such rates as may be  required  to give effect to the extent
     practicable, to be or become Balanced.

     The  provisions of this  agreement  shall be applied to the Contract  Area,
     regardless of the number of wells.

III. Storing and Making Up Gas Production

     A.   Right to Take and Market Gas

          During any periods or periods when any party hereto does not take, has
          no market  for,  or the market of a party is not  sufficient  to take,
          that party's  full share of the Gas produced  from any Well located on
          the Contract Area, or such party's  purchaser  otherwise fails to take
          such party's  share of Gas produced  from any such Well located on the
          Contract Area,  resulting in such party becoming  Underproduced  (such
          party being herein referred to as an "Underproduced Party"), the other
          party or parties shall be entitled,  but not required, to produce from
          said  Well  on the  Contract  Area  (and  take  or  deliver  to  their
          respective purchaser(s)),  each month all or a part of that portion of
          the allowable Gas  production  assigned to such Well by the regulatory
          body having jurisdiction.  Any party so taking or delivering Gas which
          results in such party becoming  Overproduced  is herein referred to as
          an "Overproduced Party".

                                       36

<PAGE>

          Those parties which are capable of taking and/or marketing  quantities
          of Gas  allocable  to an  Underproduced  Party,  in the absence of any
          other  agreement  between  them,  shall  each  take a share of the Gas
          attributed  to the  Underproduced  Party  or  Parties  in  the  direct
          proportion that their respective  interests bear to the total interest
          of all parties taking Gas which are also considered Overproduced.

          All  parties  hereto  shall  share in and own the liquid  hydrocarbons
          recovered from such Gas by primary separation  equipment in accordance
          with  their  respective  interests  and  subject  to the  terms of the
          above-described  Operating Agreement,  whether or not such parties are
          actually taking and/or marketing Gas at such time.

     B.   Making Up Underproduction

          Any Underproduced Party shall endeavor to bring its taking of Gas into
          a Balanced  condition.  Upon thirty (30) days prior written  notice to
          the Operator,  any Underproduced  Party may thereafter begin taking or
          delivering  to its purchaser its full share of the Gas produced from a
          Well (less any used in operations,  vented or lost).  To allow for the
          recovery  of Gas in  storage  and to  balance  the Gas  account of the
          parties in accordance with their respective  interests,  Underproduced
          Party shall be  entitled  to take or deliver to a  purchaser  its full
          share of Gas  produced  from such Well  (less any used in  operations,
          vented or lost) plus, (i) for the months of March,  April,  May, June,
          July,  August,  September and October only of any calendar year during
          which this  agreement  may be in place,  an amount up to an additional
          fifty percent (50%) of the monthly quantity of Gas attributable to the
          Overproduced  Party or  Parties,  or (ii) for the months of  November,
          December,  January and  February  only of any  calendar  year or years
          during  which  this  agreement  may be in  place,  an  amount up to an
          additional  twenty-five  percent (25%) of the monthly  quantity of Gas
          attributable to the  Overproduced  Party or Parties.  If more than one
          Underproduced  Party is entitled to take  additional  Gas,  they shall
          divide  the   additional   Gas  in  proportion  to  their   respective
          Underproduced  accounts.  The first Gas made up shall be assumed to be
          the first Gas Underproduced.

     C    Gas Balance Reporting

          Each party  taking  will  promptly  provide to the  Operator  any data
          required by the Operator for  preparation of the  statements  required
          hereunder. Operator shall not be required to adjust its Gas accounting
          statements reflecting a different Gas purchaser until the first day of
          the month  following the month in which such notice is received by the
          Operator.  The Operator  will  maintain  appropriate  accounting  on a
          monthly and  cumulative  basis of the  quantities of Gas each party is
          entitled to take and/or market and the  quantities of Gas taken and/or
          marketed by each of the parties to their  respective  Gas  purchasers.
          Within  ninety  (90)  days  after the end of each  producing  calendar
          month,  the Operator shall furnish each party a statement  showing the
          status of the Overproduced and Underproduced accounts of all parties.

          To determine respective volumes of Gas taken by separate gas pipelines
          connected to the Well, measurement of Gas for overproduction and
          underproduction shall be accomplished by use of sales meters and lease
          measurement equipment, which shall be in accordance with AGA
          requirements.

          Each  party to this  Agreement  agrees  that it will not  utilize  any
          information obtained hereunder for any purpose other than implementing
          or administering the terms of this Agreement.

     D.   Royalty and Production Tax

          At all times  while Gas is produced  from the  Contract  Area,  unless
          otherwise  required by any State or Federal law or  regulations,  each
          party shall pay or cause to be paid all royalty due and payable on the
          actual volumes of gas taken for its account. Each party agrees to hold
          each other party harmless from any and all claims for royalty payments
          asserted by its royalty owners. The term "royalty owner" shall include
          owners of  royalty,  overriding  royalties,  production  payments  and
          similar interests payable out of production.

          Each party  producing or taking or delivering Gas to its Gas purchaser
          shall pay, or cause to be paid, all production and severance taxes due
          on all volumes of Gas actually taken or sold by such party.

IV.  Cash Settlement

     A    Volume/Value

          If, at the  permanent  termination  of  production  of Gas from a Well
          located on the Contract Area, an imbalance exists between the parties,
          a cash  settlement  of the imbalance  between the parties  relative to
          such Well  shall be made.  The amount of the cash  settlement  will be
          limited to the proceeds actually received by the Overproduced Party or
          Parties  at  the  time  of  overproduction,  less  transportation  and
          applicable treating charges and production and severance taxes paid on
          such overproduction. Royalty shall only be deducted from such proceeds
          attributable to the  overproduction if actually paid to royalty owners
          by the  Overproduced  Party or Parties.  No interest shall be added to
          any cash settlement hereunder.  If there is more than one Overproduced
          Party, the cash settlement shall be based on a weighted average of the
          proceeds  actually  received as above  described  by all  Overproduced
          Parties.

                                       37

<PAGE>

     B.   Collection and Distribution

          Operator shall provide to all parties hereto within sixty (60) days of
          permanent  determination  of Gas production a final  accounting of the
          Gas balance.  Overproduced Parties, within thirty (30) days of receipt
          of the final accounting of the Gas balance, shall pay their respective
          shares of the above  described  cash  settlement to the  Underproduced
          Parties in that proportion that each such Underproduced Party's volume
          of gas in  storage  bears to the total of all  Underproduced  Parties'
          volumes of gas in storage.

V.   Miscellaneous

     A.   Term

          This  Agreement  shall  remain  in  force  and  effect  as long as the
          Operating  Agreement  to which it is  attached  remains  in force  and
          effect,  and  thereafter  until the Gas balance  accounts  between the
          parties are settled in full,  and shall inure to the benefit of and be
          binding  upon the  parties  hereto,  their  heirs,  successors,  legal
          representatives and assigns.

     B.   Expenses

          Nothing herein shall change or affect each party's  obligations to pay
          its  proportionate  share of all costs  and  liabilities  incurred  in
          operations  on the Contract  Area as its share thereof is set forth in
          the Operating Agreement to which this Agreement is attached.

     C.   Well Tests

          Nothing  herein shall be  construed to deny any party the right,  from
          time to time,  to produce and take or deliver to its Gas  purchaser up
          to one  hundred  percent  (100%) of the entire Well stream to meet the
          deliverability test required by its Gas purchaser,  provided that such
          tests are reasonable in light of overall industry standards.

     D.   Monitoring of Takes of Production

          Each party shall,  at all times,  use its best efforts to regulate its
          takes and  deliveries  from each Well on said Contract Area so that no
          Well will be shut-in for overproducing the allowable  assigned thereto
          by the regulatory body having jurisdiction.  Additionally,  each party
          shall communicate, as necessary, the contents of this agreement to its
          respective Gas  purchaser(s) or  transporter(s)  and shall monitor its
          deliveries to its respective Gas purchaser(s) or  transporter(s) so as
          to ensure to the greatest extent practicable that its Gas purchaser(s)
          or  transporter(s)  does  not  take Gas in  excess  of the  quantities
          provided for herein.

     E.   Liquefiable Hydrocarbons Not Covered Under Agreement

          The  parties  shall  share  proportionately  in  and  own  all  liquid
          hydrocarbons  recovered with the gas by lease  equipment in accordance
          with their respective interests.

                                       38

<PAGE>

                                   EXHIBIT "B"
       Attached to and made a part of that certain Participation Agreement
              dated May 25, 2004 by and between Gryphon Exploration
                    Company and Ridgewood Energy Corporation

                                      JOINT

                               OPERATING AGREEMENT

                                     BETWEEN

                          GRYPHON EXPLORATION COMPANY,

                                  AS OPERATOR,

                                       And

                          RIDGEWOOD ENERGY CORPORATION,

                                AS NON-OPERATOR,

                                    COVERING

                          WEST CAMERON AREA, BLOCK 103

                               OFFSHORE LOUISIANA

                                      DATED

                                  May 25, 2004

<PAGE>

                            JOINT OPERATING AGREEMENT

     THIS  AGREEMENT is made  effective the 25th day of May, 2004 by the signers
hereof,  herein  referred to  collectively  as  "Parties"  and  individually  as
"Party".

                                   WITNESSETH:

     WHEREAS the PARTIES are owners of or have  contracted for the right to earn
an interest  in the oil and gas  lease(s)  identified  in Exhibit  "A",  and the
Parties desire to explore, develop, produce and operate said lease(s).

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

                                    ARTICLE I

                                   APPLICATION

     1.1  APPLICATION  TO BOTH  LEASES.  If more  than one oil and gas  lease is
identified in Exhibit "A", this Agreement  shall apply  separately to each Lease
and each Lease shall be considered as being covered by the operating agreement.

                                   ARTICLE II

                                  DEFINITIONS

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

     2.2 CASING POINT. That point at which a well drilled hereunder, has reached
the proposed  objective depth or zone,  logged and logs have been distributed to
the  PARTICIPATING  PARTIES and any tests have been made which are  necessary to
reach the decision whether to run casing.

     2.3 DEVELOPMENT OPERATIONS. Operations on the LEASES other than EXPLORATORY
OPERATIONS as defined in Section 2.5 below.

     2.4 DEVELOPMENT WELL. Any well proposed as a DEVELOPMENT OPERATION.

     2.5 EXPLORATORY  OPERATIONS.  Operations on the LEASES, which are scheduled
for an objective zone, horizon or formation:

          (1)  which has not been  established  as producible on the LEASE under
               2.18 below; or,

          (2)  which is already  established  as  producible  on the LEASE under
               2.18 below, but such objective zone, horizon or formation will be
               penetrated  at a location  more than 2,000 feet from the  nearest
               bottom  hole  location on the LEASE at which such  objective  has
               been proved  producible,  or such objective is mutually agreed to
               be in a separate fault block.

     2.6  EXPLORATORY WELL. Any well proposed as an EXPLORATORY OPERATION.

     2.7  FACILITIES.  All  lease  equipment  beyond  the  wellhead  connections
acquired pursuant to this Agreement including any platform(s) necessary to carry
out the operation.

     2.8 LEASE.  The oil and gas leases  identified in Exhibit "A" and the lands
affected thereby.

     2.9 NON-CONSENT OPERATIONS. DEVELOPMENT or EXPLORATORY OPERATIONS conducted
by fewer than all Parties.

     2.10 NON-CONSENT PLATFORM. A drilling or production platform owned by fewer
than all PARTIES.

     2.11  NON-CONSENT  WELL. A DEVELOPMENT or  EXPLORATORY  WELL owned by fewer
than

                                        2

<PAGE>

all PARTIES.

     2.12 NON-OPERATOR. Any PARTY to the Agreement other than the OPERATOR.

     2.13 NON-PARTICIPATING PARTY. Any PARTY other than a PARTICIPATING PARTY.

     2.14  NON-PARTICIPATING  PARTY'S SHARE. The  PARTICIPATING  INTEREST a NON-
PARTICIPATING  PARTY  would  have had if all  PARTIES  had  participated  in the
operation.

     2.15  OPERATOR.  The PARTY  designated  under this Agreement to conduct all
operations.

     2.16  PARTICIPATING   INTEREST.  A  PARTICIPATING   PARTY'S  percentage  of
participation in an operation conducted pursuant to the Agreement.

     2.17  PARTICIPATING  PARTY.  A PARTY  who joins in an  operation  conducted
pursuant to this agreement.

     2.18 PRODUCIBLE  WELL. A well producing oil or gas, or if not producing oil
or gas,  a well  either  declared  or  capable of being  declared  producing  in
accordance  with any applicable  government  authority or by agreement of all of
the Parties.

     2.19 WORKING INTEREST.  The ownership of each PARTY in and to the LEASES as
set forth in Exhibit "A".

                                   ARTICLE III

                                    EXHIBITS

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

3.1.1   Exhibit A.   Description of Leases and Working Interest
3.1.2   Exhibit B.   Insurance Provision
3.1.3   Exhibit C.   Accounting Procedure
3.1.4   Exhibit D.   Nondiscrimination Provision
3.1.5   Exhibit E.   Gas Balancing Agreement

                                   ARTICLE IV

                                    OPERATOR

     4.1 OPERATOR. Gryphon Exploration Company is hereby designated as OPERATOR.
OPERATOR  shall not have the right to assign or transfer  any rights,  duties or
obligations  of  OPERATOR  to  another  PARTY  except  in  accordance  with  the
provisions herein.

     4.2  RESIGNATION.  OPERATOR may resign at any time by giving  notice to the
PARTIES.  Such resignation  shall become effective at 7:00 a.m. on the first day
of the month following a period of ninety (90) days after said notice,  unless a
successor OPERATOR has assumed the duties of OPERATOR prior to that date.

     4.3 REMOVAL OF OPERATOR.  OPERATOR  may be removed if (1) OPERATOR  becomes
insolvent or unable to pay its debts as they mature or makes an  assignment  for
the benefit of creditors or commits any act of  bankruptcy or seeks relief under
laws  providing  for the relief of debtors;  or (2) a receiver is appointed  for
OPERATOR  or for  substantially  all  of its  property  and/or  affairs;  or (3)
OPERATOR or its  designee  no longer owns an interest in the  property or divest
itself of more than fifty percent  (50%) or more of the interest  owned by it in
the Lease at the time it was designated OPERATOR;  or (4) OPERATOR has committed
a material  breach of any substantive  provision  hereof or fails to perform its
duties  hereunder in a reasonable and prudent manner,  or failed to rectify such
default within sixty (60)

                                        3

<PAGE>

days after  notice from another  PARTY to do so. The PARTY giving  notice to the
OPERATOR  of a default  shall  also  furnish a copy of such  notice to the other
PARTIES.  In such event,  the OPERATOR may be removed by an affirmative  vote of
two (2) or more  PARTIES  having a combined  WORKING  INTEREST of fifty  percent
(50%) in the LEASE.

     4.4  SELECTION OF SUCCESSOR.  Upon  resignation  or removal of OPERATOR,  a
successor  OPERATOR shall be selected by an affirmative  vote of two (2) or more
PARTIES having a combined WORKING  INTEREST of fifty-one  percent (51%) or more;
however,  if the  removed or  resigned  OPERATOR  fails to vote or votes only to
succeed itself,  the successor OPERATOR shall be selected by an affirmative vote
of the PARTIES having a combined WORKING INTEREST of fifty-one  percent (51%) or
more of the remaining  WORKING  INTEREST after excluding the WORKING INTEREST of
the removed or resigned OPERATOR.

     4.5 DELIVERY OF PROPERTY.  Prior to the effective  date of  resignation  or
removal, OPERATOR shall deliver promptly to successor OPERATOR the possession of
everything owned by the PARTIES pursuant to this Agreement.

                                    ARTICLE V

                        AUTHORITY AND DUTIES OF OPERATOR

     5.1 EXCLUSIVE RIGHT TO OPERATE.  Unless otherwise provided herein, OPERATOR
shall have the exclusive  right and duty to conduct all  operations  pursuant to
the Agreement.

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

     5.3 LIENS AND  ENCUMBRANCES.  OPERATOR shall endeavor to keep the LEASE and
equipment  free  from  all  liens  and  encumbrances  occasioned  by  operations
hereunder, except those provided for in Section 8.5.

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

     5.5 RECORDS.  OPERATOR shall keep accurate  books,  accounts and records of
operations  hereunder which,  unless  otherwise  provided for in this Agreement,
shall be  available  to  NON-OPERATOR  pursuant to the  provisions  contained in
Exhibit "C".

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

     5.7  DRILLING.  OPERATOR  shall have all drilling  operations  conducted by
qualified and responsible  independent  contractors under competitive contracts.
However,  OPERATOR may employ its equipment and personnel in the conduct of such
operations,  but its charges therefor shall not exceed the then prevailing rates
in the area and such work shall be  performed  pursuant  to a written  agreement
among the PARTICIPATING PARTIES.

     5.8 REPORTS.  OPERATOR shall make reports to governmental  authorities that
it has a duty to make as OPERATOR  and shall  furnish  copies of such reports to
the PARTIES.  OPERATOR  shall give timely  written  notice to the PARTIES of all
litigation and hearings affecting the LEASES or operations hereunder.

                                       4

<PAGE>

     5.9  INFORMATION  TO  PARTICIPATING  PARTIES.  OPERATOR  shall  furnish all
PARTICIPATING PARTIES hereto the following  information  pertaining to each well
being drilled:

          (a)  copy of  application  for  permit  to  drill  and all  amendments
               thereto;

          (b)  daily drilling reports by facsimile or e-mail;

          (c)  complete report of all core analyses;

          (d)  two (2) copies of any logs or surveys as run;

          (e)  two (2)  copies of any well test  results,  bottom-hole  pressure
               surveys, gas and condensate analyses or similar information;

          (f)  one (1) copy of reports made to regulatory agencies; and

          (g)  twenty-four  (24) hour  notice of  logging,  coring  and  testing
               operations;

          (h)  upon request prior to resumption of drilling operations,  samples
               of cuttings  and cores  marked as to depth,  to be  packaged  and
               shipped to the requesting PARTY at their expense.

          (i)  all  other   reasonable   information,   available  to  OPERATOR,
               pertaining to any well drilled pursuant to this Agreement.

                                   ARTICLE VI

                          VOTING AND VOTING PROCEDURES

     6.1   DESIGNATION   OF   REPRESENTATIVE.   The  name  and  address  of  the
representative  and  alternate  authorized  to represent and bind each PARTY for
operations  provided  in  Article  IX,  shall be as shown on  Exhibit  "A".  The
designated  representative  or alternate may be changed by written notice to the
other PARTIES.

     6.2 VOTING  PROCEDURES.  Unless  otherwise  provided,  any matter requiring
approval of the PARTIES shall be determined as follows:

          6.2.1 Voting  Interest.  Each PARTY shall have a voting interest equal
to its WORKING INTEREST or its PARTICIPATING INTEREST as applicable.

          6.2.2 Vote Required.  Except as may be specifically provided elsewhere
herein,  if there are three or more  Parties  to this  agreement,  any  proposal
requiring approval of the PARTIES shall be decided by an affirmative vote of two
(2) or more PARTIES having a combined voting interest of fifty-one percent (51%)
or more. If there are only two parties to this agreement, any proposal requiring
approval of the Parties,  other than the proposals described in Article 12.7 and
Article 13.1, shall be decided by an affirmative vote of one (1) or more Parties
having a combined voting interest of fifty-one percent (51%) or more.

          6.2.3 Votes. The PARTIES may vote at meetings, by telephone, confirmed
in writing to OPERATOR; or by letter, telegram,  e-mail or telecopies.  However,
any PARTY not  attending a meeting must vote prior to the meeting in order to be
counted.  Provided,  however,  no vote  shall be taken in a meeting in which all
Parties are not present unless such vote was  specifically set out in the formal
agenda.  OPERATOR shall give prompt notice of the results of such voting to each
PARTY.

          6.2.4 Meetings. Meetings of the PARTIES may be called by OPERATOR upon
its own motion or at the  request of one (1) or more  PARTIES  having a combined
voting  interest  of not less  than ten  percent  (10%).  Except  in the case of
emergency or except when agreed by unanimous consent, no meeting shall be called
on less than five (5)

                                       5

<PAGE>

days  advance  written  notice,  (including  the agenda for such  meeting).  The
OPERATOR shall be chairman of each meeting.

                                   ARTICLE VII

                                     ACCESS

     7.1 ACCESS TO LEASE.  Each PARTY shall have access to the LEASE as its sole
risk and expense at all reasonable  times to inspect  operations and records and
data pertaining thereto.

     7.2 REPORTS.  OPERATOR shall furnish to a requesting  PARTY any information
to which such PARTY is entitled hereunder. The costs of gathering and furnishing
information  not  otherwise  furnished  under  Article V shall be charged to the
requesting PARTY.

     7.3  CONFIDENTIALITY.  Except as  provided  in  Section  7.4 and except for
necessary  disclosures  to  governmental  agencies,  no PARTY shall  release any
geological,  geophysical or reservoir  information or any logs, surveys or other
information  pertaining to the progress,  tests or results of any well or status
of the LEASE unless agreed to by the PARTICIPATING  PARTIES. At such time as the
PARTIES mutually agree such information is non-confidential,  it may be publicly
released.  Unless otherwise provided,  OPERATOR shall initially release the same
subsequent  to approval of its content by the PARTIES.  OPERATOR  shall have the
exclusive  right to  designate  certain  wells  as  "tite"  for the  competitive
protection of the PARTIES.

     7.4 LIMITED  DISCLOSURE.  Any PARTY may make confidential data available to
affiliates,  to reputable  engineering firms and gas transmission  companies for
hydrocarbon  reserve and other  technical  evaluations,  to reputable  financial
institutions  for study prior to commitment of funds and to bonafide  purchasers
of all of a PARTY'S interest in the LEASE. Any third party permitted such access
shall first agree in writing  neither to disclose such data to others nor to use
such data except for the purpose for which it is disclosed.  Each PARTY shall be
furnished with copies of third parties execution of the same. Any Party may make
limited releases of confidential data to the Offshore Oil Scouts  Association to
the extent and only to the extent such data  satisfies the minimum  requirements
for membership in the Offshore Oil Scouts Association.

                                  ARTICLE VIII

                                  EXPENDITURES

     8.1 BASIS OF CHARGE TO THE  PARTIES.  Subject to other  provisions  of this
Agreement,  OPERATOR shall pay all costs and each PARTY shall reimburse OPERATOR
in proportion to the PARTICIPATING INTEREST. All charges, credits and accounting
for expenditures  shall be pursuant to the Accounting  Procedure attached hereto
as Exhibit "C". The provisions of this  Agreement  shall prevail in the event of
conflict with Exhibit "C".

     8.2  AUTHORIZATION.  OPERATOR shall neither make any single expenditure nor
undertake  any  project  costing  in excess  of  Seventy-five  Thousand  Dollars
($75,000.00)  without prior  approval of the PARTIES.  OPERATOR  shall furnish a
written AFE, for information  purposes only, to the PARTIES on any  expenditures
in  excess  of  Twenty-five  Thousand  Dollars  ($25,000.00).   When  costs  are
anticipated to exceed 120% of a previously  approved AFE, OPERATOR shall issue a
Supplemental AFE for information  purposes only Subject to any election provided
in Article X and XI, approval of a well operation shall include  approval of all
necessary  expenditures through installation of the wellhead. In the event of an
emergency, OPERATOR may immediately make such expenditures as in its opinion are

                                       6

<PAGE>

required to deal with the emergency.  OPERATOR  shall report to the PARTIES,  as
promptly as possible, the nature of the emergency and action taken.

     8.3 ADVANCE  BILLINGS.  OPERATOR shall have the right to require each PARTY
to advance its respective  share of estimated  expenditures  pursuant to Exhibit
"C". As to any party who fails to pay its share of said advance  payment  within
fifteen (15) days after  receipt of such  statement  and invoice,  Operator will
notify such  affected  party of its default by certified  mail,  return  receipt
requested and if such party fails to cure the default  within ten (10) days from
the date of receipt of Operator's  Notice, by payment in full of the outstanding
invoices for advance payment, at Operator's  election,  the affected Party shall
be deemed non-consent as to the proposed operation attributable thereto.

     8.4  COMMINGLING OF FUNDS.  Funds received by OPERATOR under this Agreement
may be commingled with its own funds.

     8.5 SECURITY RIGHTS.  In addition to any other security rights and remedies
provided by law with  respect to services  rendered or materials  and  equipment
furnished  under  this  Agreement,  OPERATOR  shall  have a first lien upon each
PARTY'S  PARTICIPATING  and/or  WORKING  INTEREST,  including the production and
equipment  credited thereto,  in order to secure payment of charges against such
PARTY,  together with  interest  thereon at the rate set forth in Exhibit "C" or
the maximum rate allowed by law,  whichever is less, plus attorneys' fees, court
costs and other related collection costs. If any PARTY does not pay such charges
when due, OPERATOR shall have the additional right to collect from the purchaser
the proceeds from the sale of such PARTY'S share of production  until the amount
owed has been paid.  Each  purchaser  shall be  entitled  to rely on  OPERATOR'S
statement  concerning the amount owed. Each  NON-OPERATOR  shall have comparable
security rights on OPERATOR'S PARTICIPATING and/or WORKING INTEREST. Such offset
rights shall not apply to amounts owing that are in dispute.

     8.6 UNPAID  CHARGES.  If any PARTY fails to pay the charges due  hereunder,
including  billings under Section 8.3,  within thirty (30) days after payment is
due,  the  PARTICIPATING  PARTIES  shall have the  obligation,  upon  OPERATOR'S
request, to pay the unpaid amount in proportion to their interest. Each PARTY so
paying its share of the unpaid amount shall be subrogated to OPERATOR'S security
rights to the extent of such payment.

     8.7  DEFAULT.  If any PARTY does not pay its share of the charges when due,
or prior to  commencement  of the  approved  operation  for which it is  billed,
whichever  is the  earlier,  OPERATOR  may give such PARTY  notice  that  unless
payment is made within  fifteen (15) DAYS,  such PARTY shall be in default.  Any
PARTY in default shall have no further access to the maps, cores, logs, surveys,
records, data,  interpretations or other information obtained in connection with
said operation.  A defaulting  PARTY shall not be entitled to vote on any matter
until such time as PARTY'S  payments  are current.  The voting  interest of each
non-defaulting PARTY shall be in the proportion its PARTICIPATING INTEREST bears
to the total non-defaulting PARTICIPATING INTEREST. As to any operation approved
or commenced  during the time a PARTY is in default,  such PARTY shall be deemed
to be a NON-PARTICIPATING PARTY.

     8.8 CARVED-OUT  INTERESTS.  Subject to the  reservations set out in Article
16.1, any overriding royalty, production payment, net proceeds interest, carried
interest or any other interest  carved-out of the WORKING INTEREST in the LEASES
after the effective date of this Agreement shall be subject to the rights of the
PARTIES to this Agreement, and any PARTY whose WORKING INTEREST is so encumbered
shall be responsible therefor. If a

                                        7

<PAGE>

PARTY  does not pay its  share of  expenses  and the  proceeds  from the sale of
production  under Section 8.5 are  insufficient  for that purpose,  the security
rights provided for therein may be applied against the carved-out interests with
which such WORKING INTEREST is burdened.  In such event, the rights of the owner
of such carved-out interest shall be subordinated to the security rights granted
by Section 8.5.

                                   ARTICLE IX

                                    NOTICES

     9.1 GIVING AND  RECEIVING  NOTICES.  All  notices  shall be in writing  and
delivered in person or by mail,  telex,  telegraph,  TWX,  telecopier  or cable;
however,  if a drilling  rig is on  location  at time of  proposal  and  standby
charges  are  accumulating,  such  notices  shall  be  given  by  telephone  and
immediately  confirmed  in  writing.  Notice  shall be  deemed  given  only when
received by the PARTY to whom such notice is directed, except that any notice by
certified mail or equivalent, telegraph or cable properly addressed, pursuant to
Section  6.1,  and with all postage and charges  prepaid  shall be deemed  given
seventy-two (72) hours after such notice is deposited in the mail or twenty-four
(24) hours after such notice is sent by facsimile (receipt  confirmed),  or when
filed with an operating, telegraph or cable company for immediate transmission.

     9.2 CONTENT OF NOTICE.  Any notice which requires a response shall indicate
the maximum  response  time  specified in Section 9.3. If a proposal  involves a
Platform or Facility,  the notice shall contain a description of same, including
location  and  the   estimated   costs  of   fabrication,   transportation   and
installation.  If a proposal involves a well operation, the notice shall include
the estimated commencement date, the proposed depth, the objective zone or zones
to be tested,  the surface and bottom-hole  locations and the estimated costs of
the operation including all necessary  expenditures  through installation of the
wellhead.

     9.3 RESPONSE TO NOTICES.  Each PARTY'S  response to a proposal  shall be in
writing to OPERATOR,  with copies to the other PARTIES. Except for those notices
in Articles X, XI, XV and XVI, the maximum response time shall be as follows:

          9.3.1 Platform Construction. When any proposal for operations involves
the  construction of a platform,  the maximum  response time shall be forty-five
(45) days,

          9.3.2 Proposal Without Platform. When any proposal for operations does
not require  construction of a platform,  maximum  response time shall be thirty
(30) days;  however,  if a drilling rig is on location  and standby  charges are
accumulating, the maximum response time shall be forty-eight (48) hours.

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

     9.4 FAILURE TO RESPOND.  Failure of any PARTY to respond to a notice within
the required period shall be deemed to be a negative response.

     9.5 RESTRICTIONS ON MULTIPLE WELL PROPOSALS. Unless otherwise agreed by the
PARTIES,  no more than one well shall be drilling or completing  for the account
of the  Parties on the Lease at the same  time.  Well  proposals  made under the
terms hereof shall be limited to one well each and except as provided  below, no
PARTY shall be required to make an election under more than one well proposal at
the same time or while a well is

                                        8

<PAGE>

drilling or completing.  This paragraph  shall not limit the right of a PARTY to
propose a well while  another is drilling or  completing,  however,  the time to
elect under such a proposal  shall be deferred  until (a) thirty (30) days after
the previous well has been completed or plugged and abandoned or (b) twenty-four
(24) hours from receipt of notification  that the drilling rig has been moved to
the new  location  and  standby  charges  are being  accumulated,  whichever  is
earlier.

                                    ARTICLE X

                               EXPLORATORY WELLS

     10.1 OPERATIONS BY ALL PARTIES.  Any PARTY may propose an EXPLORATORY  WELL
by notifying  the other  PARTIES.  If all the PARTIES  agree to  participate  in
drilling the  proposed  well,  OPERATOR  shall drill same for the benefit of all
PARTIES.

     10.2 SECOND OPPORTUNITY TO PARTICIPATE.  If fewer than all PARTIES elect to
participate,  OPERATOR shall inform all PARTIES of the elections made, whereupon
any PARTY  originally  electing not to participate may then elect to participate
by notifying the OPERATOR  within  forty-eight  (48) hours after receipt of such
information.

     10.3 OPERATIONS BY FEWER THAN ALL PARTIES. If fewer than all but one (1) or
more PARTIES owning not less than forty percent (40%) WORKING  INTEREST elect to
participate  in and  agree to bear the cost and risk of  drilling  the  proposed
well,  OPERATOR,  even if OPERATOR is a NON-PARTICIPATING  PARTY, shall have the
option of drilling such well for the PARTICIPATING PARTIES under this Agreement.
OPERATOR,  immediately after expiration of the applicable  notice period,  shall
advise  the  PARTICIPATING  PARTIES  of (a) the total  interest  of the  PARTIES
approving  such  operation,  and  (b)  its  recommendation  as  to  whether  the
PARTICIPATING  PARTIES  should  proceed with the  operation  as  proposed.  Each
PARTICIPATING  PARTY,  within  forty-eight  (48) hours  (inclusive  of Saturday,
Sunday or legal  holidays)  after  receipt  of such  notice,  shall  advise  the
proposing  PARTY  of its  desire  to (a)  limit  participation  to such  PARTY'S
interest  as shown on  Exhibit  "A",  or (b)  carry  its  proportionate  part of
NON-PARTICIPATING PARTIES' interest, or (c) participate with a lesser percentage
than its proportionate  part of the  NON-PARTICIPATING  PARTIES'  interest.  The
proposing  PARTY,  at its  election,  may  withdraw  such  proposal  if there is
insufficient  participation  and  shall  promptly  notify  all  PARTIES  of such
decision. If the well is commenced within ninety (90) days after the date of the
last applicable election date and is drilled as proposed in accordance with this
Agreement,  any  PARTY  electing  not to  participate  shall be  deemed  to have
relinquished its operating rights in such well as if it were a NON-CONSENT WELL.
However,  in the situation in which a rig is on location and standby charges are
accumulating,  thus  precipitating a forty-eight (48) hour response period,  the
well must be commenced  within  fifteen (15) days.  If no  operations  are begun
within such time  period,  the effect  shall be as if the  proposal had not been
made.  Operations shall be deemed to have commenced (a) on the date the contract
for a new platform is let, if the notice  indicated the need for such  platform;
or (b) the date rigging-up  operations on the well are commenced.  Recoupment of
costs shall be  determined by Sections  12.2 and 12.5,  if  applicable,  and the
drilling of such well shall be governed by Article XII as  applicable;  however,
percentages under Section 12.2 shall be as follows:

12.2.1a)   Eight hundred percent (800%)
12.2.1b)   Three hundred percent (300%)
12.2.1c)   One hundred percent (100%)
12.2.1d)   One hundred percent (100%)

                                       9

<PAGE>

Provided however,  if the proposed  EXPLORATORY WELL is the initial well drilled
by the PARTIES on the LEASE, then any NON-PARTICIPATING  PARTY shall permanently
assign its entire  interest  in the LEASE to the  PARTICIPATING  PARTIES and the
recoupment  of cost  provision  of this Article and Article XII shall not apply,
but the NON-PARTICIPATING PARTY shall not be relieved of any obligation accruing
prior to such assignment.

     10.4 COURSE OF ACTION AFTER DRILLING TO INITIAL OBJECTIVE DEPTH

          10.4.1  Casing  Point  Election.  After an  Exploratory  Well has been
drilled for all Parties to the objective depth,  and all authorized  logging and
testing has been  completed,  OPERATOR shall  immediately  notify the PARTIES of
OPERATOR'S proposal to either;

               (a)  further log or test the well,

               (b)  complete the well as originally planned,

               (c)  plug-back and complete the well in a shallower zone in
                    ascending order,

               (d)  deepen the well within a previously approved objective zone,
                    in descending order,

               (e)  deepen the well below the deepest approved objective zone or
                    zones,

               (f)  sidetrack the well to a new bottom hole location within the
                    approved objective zone,

               (g)  other operations in the well, or

               (h)  plug and abandon the well.

Within  forty-eight (48) hours after receipt of OPERATOR'S  proposal,  the other
PARTIES   shall   respond   thereto   by  either   approving   it  or  making  a
counter-proposal.  If a  counter-proposal  is made,  the  PARTIES  shall have an
additional  forty-eight (48) hours to respond thereto.  If all PARTIES approve a
proposal  or  counter-proposal,  OPERATOR  shall  conduct the  operation  at the
PARTICIPATING  PARTIES  cost  and  risk.  A  proposal  to  complete,  rework  or
recomplete a well at a particular  depth will take  precedence  over proposal to
complete, rework or recomplete the well above such depth, with a deeper proposal
for  such  operations  always  taking  precedence  over  a  shallower  proposal.
Proposals for such  operations at any depth will take  precedence over proposals
to deepen the well below its originally proposed total depth or to sidetrack the
well once it has reached  such depth.  Proposals of the same type shall be given
precedence in the order in which they are made. No action shall be required on a
proposal while there is pending a proposal,  with  precedence  being on the same
well on  which  the  parties  have  not  acted  or on  which  work  has not been
completed.  If fewer  than all,  but one (1) or more,  Parties  having a Working
Interest  of 25% or more  approve a  proposal  or  counter-proposal  made  under
Section 10.4 and agree to bear the cost and risk thereof, Operator shall conduct
the same pursuant to Article 12.

                                   ARTICLE XI

                             DEVELOPMENT OPERATIONS

     11.1  OPERATIONS  BY ALL  PARTIES.  Any  PARTY may  propose  a  DEVELOPMENT
OPERATION,  including any platform required by such operations, by notifying the
other PARTIES.  If all PARTIES elect to  participate in the proposed  operation,
OPERATOR  shall  conduct such  operation for the benefit of the PARTIES at their
cost and risk.

     11.2 SECOND OPPORTUNITY TO PARTICIPATE.  If fewer than all PARTIES elect to
participate,  the  OPERATOR  shall  inform the  PARTIES of the  elections  made,
whereupon any PARTY  originally  electing not to  participate  may then elect to
participate  by  notifying  the  OPERATOR  within  forty-eight  (48) hours after
receipt of such  information.  Thereafter,  if fewer than all  PARTIES  elect to
participate, the PARTICIPATING PARTIES shall be afforded the alternatives as set
out under Article 10.3.

                                     10

<PAGE>

     11.3 OPERATIONS BY FEWER THAN ALL PARTIES. Except for a DEVELOPMENT WELL(S)
under  Section  12.7,  if fewer than all  PARTIES,  but one (1) or more  PARTIES
having NOT LESS THAN forty percent (40%) WORKING INTEREST approves a DEVELOPMENT
OPERATION;  OPERATOR  shall conduct such  operation  pursuant to Article XII. If
such  operations are to be conducted from an existing  platform,  the operations
participated in by all of the PARTIES shall have  preference,  unless  otherwise
agreed to by the PARTIES hereto.

     11.4 TIMELY  OPERATIONS.  Operations  shall be commenced within ninety (90)
days following the date upon which the last applicable  election may be made. If
no operations  are begun within such time period,  the effect shall be as if the
proposal had not been made.  Operations shall be deemed to have commenced (a) on
the date the  contract for a new  platform is let, if the notice  indicated  the
need for such platform;  or (b) on the date rigging-up  operations are commenced
on an existing platform.

     11.5 COURSE OF ACTION AFTER DRILLING TO INITIAL OBJECTIVE DEPTH.  After any
DEVELOPMENT WELL has reached its objective  depth, the identical  procedures and
alternatives provided under Article 10.4 shall apply.

     11.6 DEEPER DRILLING. If a well is proposed to be drilled below the deepest
producible zone penetrated by a PRODUCIBLE WELL on the LEASE any PARTY may elect
to  participate  either in the well as  proposed  or to the base of the  deepest
producible  zone. A PARTY  electing to  participate  in such well to the base of
said zone shall bear its proportionate  part of the cost and risk of drilling to
said zone including completion or abandonment. All operations below the depth to
which such PARTY agreed to participate shall be governed by Article X.

                                   ARTICLE XII

                             NON-CONSENT OPERATIONS

     12.1 NON-CONSENT OPERATIONS.  OPERATOR shall conduct NON-CONSENT OPERATIONS
at the sole risk and expense of the  PARTICIPATING  PARTIES,  in accordance with
the following provisions;

          12.1.1  Non-Interference.  NON-CONSENT  OPERATIONS shall not interfere
unreasonably with operations being conducted by all PARTIES.

          12.1.2 Multiple Completion  Limitation.  NON-CONSENT  OPERATIONS shall
not  be  conducted  in a well  having  multiple  completions  unless:  (a)  each
completion is owned by the same PARTIES in the same proportions; (b) the well is
incapable  of  producing  from  any  of its  current  completions;  or  (c)  all
PARTICIPATING PARTIES in the well consent to such operations.

          12.1.3  Metering.  In NON-CONSENT  OPERATIONS,  production need not be
separately metered but may be determined on the basis of well test.

          12.1.4  Liens.   In  the  conduct  of  NON-CONSENT   OPERATIONS,   the
PARTICIPATING  PARTIES  shall  keep  the  LEASE  free and  clear  of  liens  and
encumbrances.

          12.1.5 Non-Consent Well. Operations on a NON-CONSENT WELL shall not be
conducted  in any  producible  zone  penetrated  by a  PRODUCIBLE  WELL  without
approval of each  NON-PARTICIPATING  PARTY unless; (a) such zone shall have been
designated in the notice as a completion  zone;  (b)  completion of such well in
said  zone will not  increase  the well  density  governmentally  prescribed  or
approved for such zone; and (c) the horizontal

                                       11

<PAGE>

distance  between the vertical  projections  of the midpoint of the zone in such
well and any existing well in the same zone will be a least one thousand (1,000)
feet if an  oil-well  completion  or two  thousand  (2,000)  feet if a  gas-well
completion.  Subject to the  foregoing  provisions  of this  Article,  until the
PARTICIPATING  PARTIES in a  NON-CONSENT  WELL have recouped the amount to which
they are entitled  hereunder,  they may conduct any reworking  operation on such
well which they may desire, including plugging back to a shallower zone but only
if such  shallower  zone is subject to  NON-CONSENT  elections  in the  original
proposal.  In this event, the cost of such reworking  operation shall be subject
to the penalty provisions of Section 12.2.1.

          12.1.6  Cost-Information.  OPERATOR  shall,  within one hundred twenty
(120) days after  completion  of a  NON-CONSENT  WELL,  furnish  the  PARTIES an
inventory  and an  itemized  statement  of the cost of such  well and  equipment
pertaining  thereto.  OPERATOR shall furnish to the PARTIES a monthly  statement
showing operating expenses and the proceeds from the sale of production from the
well for the preceding month.

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

     12.2   RELINQUISHMENT   OF  INTEREST.   Upon  commencement  of  NON-CONSENT
OPERATIONS,  each  NON-PARTICIPATING  PARTY'S  interest and leasehold  operating
rights in the NON-CONSENT  OPERATION and title to production there from shall be
owned  by  and  vested  in  each  PARTICIPATING   PARTY  in  proportion  to  its
PARTICIPATING  INTEREST for as long as the  operations  originally  proposed are
being  conducted  or  production  is  obtained,  subject to Sections  12.2.1 and
12.2.2.

          12.2.1 Production  Reversion  Penalties.  Except as to such operations
conducted  pursuant to Section  12.7 or for the  initial  EXPLORATORY  WELL,  or
subsequent  EXPLORATORY WELL referred to in Section 10.3, such interest,  rights
and title shall revert to each  NON-PARTICIPATING  PARTY when the  PARTICIPATING
PARTIES have  recouped out of the proceeds of production  from such  NON-CONSENT
OPERATIONS an amount equal to the sum of the following:

               (a)  Six  hundred   percent  (600%)  of  the  cost  of  drilling,
                    completing, recompleting, sidetracking, deepening, deviating
                    or plugging  back each  NON-CONSENT  WELL and  equipping  it
                    through   the   wellhead   connections,   reduced   by   any
                    contribution received under Section 21.1; plus,

               (b)  Three  hundred  percent  (300%)  of the  cost of  FACILITIES
                    necessary to carry out the operation; plus,

               (c)  One  hundred  percent  (100%)  of  the  cost  of  using  any
                    FACILITIES already installed  determined pursuant to Section
                    12.6 below; plus,

               (d)  One  hundred   percent  (100%)  of  the  cost  of  operating
                    expenses, royalties and severance, gathering, production and
                    windfall  profit taxes.

Recoupment of costs shall be in the order listed above.  Upon the  recoupment of
such costs, a NON-PARTICIPATING PARTY shall become a PARTICIPATING PARTY in such
operations.

          12.2.2 Non-Production  Reversion.  If such NON-CONSENT OPERATIONS fail
to obtain  production or such operations result in production which ceases prior
to recoupment by the PARTICIPATING  PARTIES of the penalties provided for above,
such operating rights shall revert to each  NON-PARTICIPATING  PARTY except that
all  NON-CONSENT  wells,  platforms  and  FACILITIES  shall remain vested in the
PARTICIPATING PARTIES; however, any salvage in excess of the sum remaining under
Section 12.2.1 shall be credited to all PARTIES.

     12.3 DEEPENING OR SIDETRACKING OF NON-CONSENT WELL. If any PARTICIPATING

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PARTY  proposes to deepen or sidetrack a NON-CONSENT  WELL, a  NON-PARTICIPATING
PARTY may  participate by notifying the OPERATOR  within fifteen (15) days after
receiving  the proposal (48 hours if a rig is on location)  that it will join in
the (deepening or sidetracking)  operations,  and by paying to the PARTICIPATING
PARTIES an amount equal to such  NON-PARTICIPATING  PARTY'S  share of the actual
costs of drilling  and casing such well to the point at which such  deepening or
sidetracking operation is commenced. The PARTICIPATING PARTIES shall continue to
be entitled to recoup the full sum specified in Section 12.2.1 applicable to the
NON-CONSENT  WELL, less the amount paid under this section,  out of the proceeds
of production from the NON-CONSENT portion of the well.

     12.4 OPERATIONS FROM  NON-CONSENT  PLATFORMS.  Subject to the following,  a
PARTY which did not originally  participate in a platform  proposed  pursuant to
the terms herein, shall be a NON-PARTICIPATING PARTY as to ownership therein and
all operations thereon until the PARTICIPATING  PARTIES as to such platform have
recouped the full sum specified in Section 12.2.1 applicable to such NON-CONSENT
PLATFORM and the  NON-CONSENT  OPERATIONS  which resulted in the setting of such
PLATFORM and other  NON-CONSENT  OPERATIONS  thereon or therefrom.  However,  an
original  NON-PARTICIPATING  PARTY may participate in additional operations from
such PLATFORM by notifying the OPERATOR  within thirty (30) days after receiving
a proposal for  operations  from such PLATFORM (48 hours if a rig is on location
and standby rig charges are being  incurred)  that it will join in such proposed
operations  by paying to the  PARTICIPATING  PARTIES in such  PLATFORM an amount
equal to 300% of such NON-PARTICIPATING PARTY'S share of the actual cost of such
PLATFORM,  less any recoupment therefor previously  obtained.  Thereafter,  such
original  NON-PARTICIPATING  PARTY in the PLATFORM  shall own its  proportionate
share thereof.  The  PARTICIPATING  PARTIES in such  NON-CONSENT  PLATFORM shall
continue  to be  entitled  to recoup the full sum  specified  in Section  12.2.1
applicable to any other NON-CONSENT OPERATIONS thereon or therefrom.

     12.5  DISCOVERY OR EXTENSION  FROM MOBILE  DRILLING  OPERATIONS.  If a NON-
CONSENT  WELL drilled from a mobile  drilling  rig or floating  drilling  vessel
results in the  discovery or extension of productive  formations  and, if within
one (1) year from the date the drilling  equipment  is  released,  a platform or
other  fixed  structure  is ordered and if its  location is within one  thousand
(1,000) feet from an oil well or three  thousand  (3,000) feet if gas,  from the
vertical projection of the bottom-hole location of any such well (unless limited
by surface  restrictions),  the  recoupment  of amounts  applicable to such well
under  Section  12.2.1 shall be out of such original  NON-PARTICIPATING  PARTY'S
SHARE of all production from such  NON-CONSENT WELL and one-half of its share of
production from all other wells on the platform or other fixed structure drilled
to develop  reserves  resulting  from the  discovery or extension of  productive
formations in said NON-CONSENT WELL in which the NON-PARTICIPATING PARTY in such
NON-CONSENT WELL has a PARTICIPATING INTEREST.

     12.6  ALLOCATION OF PLATFORM COSTS TO NON-CONSENT  OPERATIONS.  NON-CONSENT
OPERATIONS shall be subject to further conditions as follows:

          12.6.1 Charges. If a NON-CONSENT WELL is drilled from a platform (and
is producible or the slot is otherwise rendered unusable), the PARTICIPATING
PARTIES in such well shall pay to the OPERATOR for credit to the owners of such
platform a charge (due upon completion of operations for such NON-CONSENT WELL)
for the right to use the platform and its FACILITIES as follows:

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<PAGE>

               (a)  Such  PARTICIPATING  PARTIES  shall  pay a sum equal to that
                    portion of the total cost of the  platform  (including,  but
                    not  by way  of  limitation,  costs  of  design,  materials,
                    fabrication,  transportation,  installation  and other costs
                    associated  therewith,  plus  any  repairs  and  maintenance
                    expense  resulting  from  the  drilling  of  such  well  not
                    provided in Section  12.6.2),  which one platform slot bears
                    to  the  total  number  of  slots  on the  platform.  If the
                    NON-CONSENT   WELL   is   abandoned,   the   right   of  the
                    PARTICIPATING  PARTIES  to  use  that  platform  slot  shall
                    terminate unless such PARTIES commence drilling a substitute
                    well  from the same  slot  within  ninety  (90)  days  after
                    abandonment.

               (b)  If  the  NON-CONSENT  WELL  production  is  handled  through
                    existing FACILITIES, the PARTICIPATING PARTIES shall pay the
                    owners of the  facilities a sum equal to that portion of the
                    total   cost  of  such   FACILITIES   which  the  number  of
                    completions  in said  NON-CONSENT  WELL  bears to the  total
                    number of completions utilizing the FACILITIES.

          12.6.2 Operating and Maintenance  Charges.  The PARTICIPATING  PARTIES
shall pay all costs  necessary to connect a NON-CONSENT  WELL to the  FACILITIES
and that  proportionate  part of the expense of operating  and  maintaining  the
platform and other FACILITIES  applicable to the NON-CONSENT WELL, including the
cost of  insurance  thereon or in  connection  therewith,  whether by  insurance
policy of  self-insurance  by each PARTY for its interest or by OPERATOR for the
joint account.  Platform  operating and maintenance  expenses shall be allocated
equally to all completions served and operating and maintenance expenses for the
other FACILITIES shall be allocated equally to producing completions.

          12.6.3 Payments.  Payments of sums pursuant to Section 12.6.1 is not a
purchase of an  additional  interest in the platform or other  FACILITIES.  Such
payments shall be included in the total amount, which the PARTICIPATING  PARTIES
are entitled to recoup out of production from the NON-CONSENT WELL.

          12.7  NON-CONSENT  DRILLING TO  MAINTAIN  LEASE.  A lease  maintenance
operation  is defined for the  purposes  of this  paragraph  as one  required to
maintain  the  joint  LEASE or a  portion  thereof,  at its  expiration  date or
otherwise.  This shall include, but not be limited to, a well proposed to be and
actually  commenced and drilled  during the last year of the primary term of the
LEASE, or subsequent thereto,  when: (a) the LEASE, or affected portion thereof,
is not  otherwise  being held by  operations  or  production;  (b) a  PRODUCIBLE
WELL(S) thereon has not established  sufficient  reserves,  as determined by one
(1) or more PARTICIPATING PARTIES owning fifty percent (50%) working interest in
the  well,  to  justify  a  platform;  or (c)  any  governmental  agency  having
jurisdiction requires the same to avoid loss or forfeiture of all or any portion
of the LEASE. Any PARTY may propose and carry out a lease maintenance  operation
and any PARTY(S) electing not to participate in such an operation will assign to
the PARTICIPATING  PARTIES in the proportions in which they participate therein,
all of its rights,  titles and  interest in such LEASE  block,  or the  affected
portion  thereof,  free and clear of any  burdens  thereon  occurring  since the
effective date of this Agreement as provided  herein,  retaining,  however,  its
interest in previously completed wells which are

                                       14

<PAGE>

producing,  shut-in or temporarily  abandoned.  Such assignment,  effective upon
commencement  of lease  maintenance  operations,  will be promptly signed before
witnesses,  acknowledged and delivered to the PARTICIPATING  PARTIES.  If only a
portion of the LEASE is involved,  the  PARTICIPATING  PARTIES at their election
may require an assignment of operating  rights in lieu of the  assignment of all
interest. Upon acceptance by assignees, the assigning PARTY will thereupon cease
to be a PARTY hereto as to the assigned  interest,  subject to final  accounting
between the PARTIES.  If such assignment is not accepted by the Assignees,  they
shall promptly prepare a release of such affected LEASE or portion thereof which
shall be executed by all PARTIES.  However,  nothing  herein  contained  will be
construed to permit any PARTY to refuse to pay in cash its share of the cost and
expense of any operation required on the joint LEASE block by final order of any
governmental authority or court having jurisdiction.

          12.7.1  Retention of Lease by Non-Consent  Well. If a NON-CONSENT WELL
is the only well on the  LEASE(S)  and is serving to  perpetuate  the  LEASE(S),
within  thirty (30) days after  expiration of the LEASE(S)  primary  term,  each
NON-PARTICIPATING PARTY shall elect one of the following;

               (a)  Immediately  assign its entire  interest in the  LEASE(S) to
                    the  PARTICIPATING  PARTIES in the  proportions in which the
                    NON-CONSENT OPERATION was conducted; or

               (b)  Immediately  pay to the  PARTICIPATING  PARTIES its share of
                    all costs  associated  with such well,  less any  recoupment
                    therefore previously  obtained,  such payment to be credited
                    against the total amount to be recovered out of its share of
                    production by the PARTICIPATING  PARTIES pursuant to Article
                    X or XII, whichever is applicable.

     12.8 ALLOCATION OF COSTS (SINGLE COMPLETION). For the purpose of allocating
costs on any well in which the  ownership is not the same for the entire  depth,
the cost of drilling,  completing  or equipping  such well shall be allocated on
the following basis:

          (a)  Intangible  drilling,  completion and material  costs  (including
               casing and tubing  costs) from the surface to a depth one hundred
               (100) feet below the base of the completed  zone shal1 be charged
               to the owners or the PARTIES participating in that zone.

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

     12.9  ALLOCATION  OF  COSTS  (MULTIPLE  COMPLETIONS).  For the  purpose  of
allocating  costs on any well  completed in dual or multiple  zones in which the
ownership is not the same for the entire depth or the completions  thereof,  the
cost of drilling,  completing  and equipping such well shall be allocated on the
following basis:

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

                                       15

<PAGE>

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

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

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

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

     12.10  ALLOCATION OF COSTS (DRY HOLE).  For the purpose of allocating costs
on any well  determined to be a dry hole, in which the ownership is not the same
for the entire depth or the completion thereof,  the cost of drilling,  plugging
and abandoning such well shall be allocated on the following basis:

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

          (b)  Plugging and  abandoning  of any well  following  any  deepening,
               completion  attempt or other  operation shall be at the sole risk
               and  expense  of the  PARTICIPATING  PARTIES  in such  operation,
               subject however to the provisions of Section 10.4.

     12.11 INTANGIBLE  DRILLING AND COMPLETION  ALLOCATIONS.  For the purpose of
calculations  hereunder,  intangible  drilling and completion  costs,  including
non-controllable material costs, shall be allocated between zones, including the
interval from the lower  completed zones to total depth, on a drilling day ratio
basis beginning on the day the rig arrives on location and terminating  when the
rig is released.

     12.12 OPERATED WELLS. The designated  OPERATOR  hereunder shall operate all
wells drilled pursuant to the NON-CONSENT provision of this Agreement.  However,
notwithstanding  anything  herein to the contrary,  if the  NON-CONSENT  WELL is
drilled  from  a  mobile  drilling  rig  and  if the  designated  OPERATOR  is a
NON-PARTICIPATING  PARTY  therein,  the  PARTICIPATING  PARTY owning the largest
PARTICIPATING  INTEREST  shall serve as Operator for the drilling and completion
of such well, unless the PARTICIPATING PARTIES agree otherwise.  Upon completion
of any such well as a productive  well  (completion  through the wellhead),  the
well shall be turned over to the designated OPERATOR for further operations.

                                       16

<PAGE>

                                  ARTICLE XIII

                                   FACILITIES

     13.1  APPROVAL.  Any PARTY may propose the  installation  of  FACILITIES by
notice to the other PARTIES with  information  adequate to describe the proposed
FACILITIES  and the estimated  costs.  The  affirmative  vote of one (1) or more
PARTIES having a combined  PARTICIPATING INTEREST of forty percent (40%) or more
in the  wells to be served  shall be  required  before  such  FACILITIES  may be
installed.  If such required  approval is obtained,  the  PARTICIPATING  PARTIES
therein shall  proceed with the  installation  of such  FACILITIES at their sole
cost,  risk and expense  and the  NON-PARTICIPATING  PARTIES in such  FACILITIES
shall have no rights with respect thereto,  subject to recoupment of amounts set
forth under Article 12.2.1 from the  completions  served  thereby.  Each PARTY'S
share shall be calculated by  multiplying  the total cost of the FACILITIES by a
fraction,  the  numerator of which is that  PARTY'S  number of  PRODUCIBLE  WELL
completions  served by the FACILITIES and the  denominator of which is the total
number  of  PRODUCIBLE  WELL  completions  served  by  the  FACILITIES.  Nothing
hereunder  shall limit a PARTY'S  rights under  Section 22.1;  however,  a PARTY
acting thereunder shall not be required to pay for joint account FACILITIES that
duplicate its FACILITIES constructed pursuant to Section 22.1

                                   ARTICLE XIV

                             ABANDONMENT AND SALVAGE

     14.1 PLATFORM SALVAGE AND REMOVAL COSTS. When the PARTIES owning FACILITIES
consisting of a platform, mutually agree to dispose of such platform it shall be
disposed of by the OPERATOR as approved by such  PARTIES.  The costs,  risks and
net proceeds,  if any,  resulting from such disposition  shall be shared by such
PARTIES in proportion to their PARTICIPATING INTEREST.

     14.2 PURCHASE OF SALVAGE MATERIALS. OPERATOR shall give all PARTIES written
notice  when it is  determined  under  Section  14.1  that  FACILITIES  or other
materials are not needed for further operations and may be moved from the LEASE.
Within  fifteen  (15) days after  receipt of such  notice any PARTY  desiring to
acquire such materials shall give OPERATOR  written notice of such fact. If more
than one PARTY desires to acquire such  materials,  OPERATOR  shall  designate a
time and place at which each PARTY may submit  written bids for such  materials.
If only one PARTY desires to acquire such  materials,  it may do so on the basis
of the value thereof as determined in accordance  with the provisions of Exhibit
"C", with  prefabricated  materials  being valued on the basis of cost including
but not limited to cost of  fabrication.  All  materials  removed from the LEASE
shall be removed at the expense of the PARTIES unless purchased hereunder,  then
at the expense of the acquiring PARTY. In the event no PARTY desires to purchase
said  materials,  the  materials  shall be  disposed of in  accordance  with the
provisions of Exhibit "C".

     14.3  ABANDONMENT OF PRODUCING  WELL. Any PARTY may propose the abandonment
of a well by  notifying  the other  PARTIES,  who shall have the time period set
forth in Section  9.3.2 from receipt  thereof  within which to respond.  No well
shall be abandoned without the mutual consent of the PARTICIPATING  PARTIES. The
PARTICIPATING  PARTIES  not  consenting  to the  abandonment  shall  pay to each
PARTICIPATING  PARTY  desiring to abandon its share of the current  value of the
well's salvageable material and equipment as determined

                                       17

<PAGE>

pursuant to Exhibit "C", less the estimated  current costs of salvaging same and
of plugging and abandoning the well as determined by the PARTICIPATING  PARTIES.
Provided,  however,  if such salvage value is less than such  estimated  current
costs, then each  PARTICIPATING  PARTY desiring to abandon shall pay to OPERATOR
for the benefit of the PARTICIPATING PARTIES not consenting to abandonment a sum
equal to its share of such deficiency.

     14.4 ASSIGNMENT OF INTEREST. Each PARTICIPATING PARTY desiring to abandon a
well pursuant to Section 14.3 shall assign  effective as of the last  applicable
election  date,  to  the   non-abandoning   PARTIES,   in  proportion  to  their
PARTICIPATING INTERESTS, its interest in such well and the equipment therein and
its ownership in the  production of such well.  Any PARTY so assigning  shall be
relieved from any further  liability  with respect to said well except as to any
accrued liability.

     14.5 ABANDONMENT  OPERATIONS REQUIRED BY GOVERNMENTAL  AUTHORITY.  Any well
abandonment or platform  removal  required by a governmental  authority shall be
accomplished by OPERATOR with the costs,  risks and net proceeds,  if any, to be
shared by the  PARTIES  owning  such well or  platform  in  proportion  to their
PARTICIPATING INTEREST.

                                   ARTICLE XV

                                   WITHDRAWAL

     15.1 WITHDRAWAL.  Any PARTY may withdraw from this Agreement and thereby be
relieved of all  responsibilities  with respect to the LEASE by giving notice to
the other PARTIES of such desire  together with an offer to convey at no cost by
a recordable instrument,  without warranty,  express or implied,  except for its
own acts,  all of its  interest  in and to the LEASE,  the oil and gas,  and the
property and equipment owned hereunder.  Any such conveyance or assignment shall
be free and clear of any  overriding  royalties,  production  payments  or other
burdens on production  created after the  effective  date of this  Agreement and
shall be subject to the LEASE provisions and to the rules and regulations of the
lessor.  If any  PARTY(S)  desires to acquire  such  interest  and to assume the
obligations  of the  assigning  PARTY under this  Agreement  and the LEASE,  the
withdrawing  PARTY shall deliver such  conveyance  or assignment  ratably to the
acquiring  PARTIES,  unless the acquiring  PARTIES agree otherwise.  If no PARTY
desires to acquire such interest,  the PARTY desiring to withdraw may do so only
by paying to those  PARTIES not desiring to withdraw  its pro-rata  share of the
estimated  costs of  plugging  and  abandoning  all  wells  and  removal  of all
platforms,  structures and other equipment on the LEASE,  less any salvage value
approved under the voting procedure  hereof,  and such  withdrawing  PARTY shall
remain liable for any costs,  expenses or damages theretofore accrued or arising
out of any event occurring  prior to such PARTY'S  withdrawal.  Thereafter,  the
withdrawing  PARTY shall  assign its entire  interest  ratably to the  remaining
PARTIES.  If the  remaining  PARTIES do not wish to continue  operations  on the
LEASE, all PARTIES shall proceed with abandoning and surrendering the same.

     15.2  LIMITATIONS  ON  WITHDRAWAL.  No  PARTY  shall  be  relieved  of  its
obligations hereunder during a well or platform fire, blowout or other emergency
thereon,  but  may  withdraw  from  this  Agreement  and  be  relieved  of  such
obligations  after  termination of such emergency,  provided such PARTY shall be
and remain liable for its full share of all costs arising out of said emergency,
including  without  limitation,  the drilling of a relief well,  containment and
cleanup of oil spill and pollution and all costs of platform debris removal made
necessary by the emergency.

                                       18

<PAGE>

                                   ARTICLE XVI

                      RENTALS, ROYALTIES AND OTHER PAYMENTS

     16.1 CREATION OF OVERRIDING  ROYALTY.  If after the effective  date of this
Agreement, any PARTY creates any overriding royalty, production payment or other
burden payable out of production  attributable to such PARTY'S WORKING  INTEREST
in the LEASE owned and if any other PARTY(S)  becomes  entitled to an assignment
pursuant to the provisions of this Agreement (except for Paragraph 26.2) or as a
result of  NON-CONSENT  OPERATIONS  hereunder  becomes  entitled  to receive the
WORKING  INTEREST  otherwise  belonging  to a  NON-PARTICIPATING  PARTY  in such
operations,  the PARTY  entitled to receive the  assignment  from or the WORKING
INTEREST production of such NON-PARTICIPATING  PARTY shall receive same free and
clear of such burdens,  and the  NON-PARTICIPATING  PARTY  creating such burdens
shall save the  PARTICIPATING  PARTIES  harmless  with respect to the receipt of
such assigned interest or such WORKING INTEREST production.  Notwithstanding the
provisions  herein, the Parties agree to bear their  proportionate  share of the
overriding royalty interests set out on Exhibit "A".

     16.2  PAYMENT OF RENTALS  AND  MINIMUM  ROYALTIES.  OPERATOR  shall pay all
rentals,  minimum royalties, or similar payments accruing under the terms of the
LEASE and submit  evidence of such payment to the PARTIES.  As to any production
delivered in kind by OPERATOR to any  NON-OPERATOR or to another for the account
of such NON-OPERATOR,  said NON-OPERATOR shall provide OPERATOR with information
as to the  proceeds or value of such  production  in order that the OPERATOR may
make  payment of any minimum  royalty  due. The amount of such payment for which
each PARTY is  responsible  shall be charged by the  OPERATOR  to such  PARTIES.
OPERATOR shall diligently attempt to make proper payment,  but shall not be held
liable to the PARTIES in damages  for the loss of any LEASE or interest  therein
of through  mistake or oversight  any rental or minimum  royalty  payment is not
paid for or is erroneously paid. The loss of any LEASE or interest therein which
results  from a failure  to pay or an  erroneous  payment  of rental or  minimum
royalty shall be a joint loss and there shall be no readjustment of interest.

     16.3  NON-CONCURRENCE  IN  PAYMENTS.  Should any PARTY(S) not concur in the
payment of any rental,  minimum royalty or similar payment,  such PARTY(S) shall
notify  OPERATOR  and all other owners in writing at least sixty (60) days prior
to the date on which such payment is due or accrues; and, in this event OPERATOR
shall make such payment for the benefit of all concurring PARTIES. In such event
the  non-concurring  PARTY(s)  shall,  upon request of any  concurring  PARTIES,
assign to the  concurring  PARTIES  in the ratio  that each  concurring  PARTY'S
interest  at the time bears to the total  interest  of all  concurring  PARTIES,
without warranty,  except for its own acts, such portions of its interest in and
to the LEASE or portion thereof involved as would be maintained by such payment.
That assignment shall be free and clear of any overriding royalties,  production
payments or other burdens on production created after the effective date hereof.
Thereafter,  the LEASE, or portion thereof,  involved shall no longer be subject
to this  Agreement.  The PARTIES then owning such LEASE or portion thereof agree
to operate said LEASE or portion thereof under a separate  agreement in the same
form as this Agreement.

                                       19

<PAGE>

     16.4 ROYALTY PAYMENTS. Each PARTY shall pay, deliver or cause to be paid or
delivered its pro-rata share of LEASE royalties,  overriding royalties, payments
out of production or other amounts or charges which may be or become payable out
of its share of  production  and  shall  hold the  other  PARTIES  free from any
liability therefore. Each Party, electing to pay his share of royalties pursuant
to the terms of the Lease,  shall promptly  notify Operator of said election and
shall thereafter  provide to Operator a detailed  accounting of revenue received
and value paid to the  Lessor for such  Party's  share of  production  produced,
marketed  and sold.  Monthly  reports  shall be  submitted  to  Operator  within
forty-five days of actual receipt of the previous  month's  production  revenue.
During any time in which  PARTICIPATING  PARTIES in a NON-CONSENT  OPERATION are
entitled  to  receive  a  NON-PARTICIPATING  PARTY'S  share of  production,  the
PARTICIPATING  PARTIES  shall bear the LEASE  royalty  due with  respect to such
share of production and shall hold the  NON-PARTICIPATING  PARTIES harmless from
liability in connection therewith.  Any PARTY acting under the provisions of the
Article  shall  never be liable for a standard  of  performance  in making  such
payments or  deliveries  in excess of a good faith effort to pay or deliver same
prior to the due date and no liability (other than the liability to correct such
payment)  shall be  incurred  for  failure  through  error or  omissions  of the
employees of any such PARTY to make payment or delivery  within the time, in the
manner and for the amounts due.

     16.5  FEDERAL  OFFSHORE OIL  POLLUTION  COMPENSATION  FUND FEE.  Each PARTY
agrees to pay and bear the Federal Offshore Oil Pollution  Compensation Fund Fee
payable on its share of oil produced,  such fee being required by Section 302 of
the Outer  Continental  Shelf  Lands Act  Amendment  of 1978 and any  regulation
lawfully promulgated pursuant thereto;  provided,  however, should the oil owned
by a PARTY be  reported by another  PARTY,  it shall be the  obligation  of such
reporting PARTY and such reporting PARTY is specifically authorized to an agrees
to pay the Federal Offshore Oil Pollution Compensation Fund Fee on those volumes
which it reports for the benefit of the non-reporting  PARTY, and such reporting
PARTY may charge such non-reporting PARTY for the payments so made.

                                  ARTICLE XVII

                                      TAXES

     17.1  PROPERTY  TAXES.  OPERATOR  shall  render  property  covered  by this
Agreement as may be subject to ad valorem  taxation and shall pay such  property
taxes for the benefit of each PARTY.  OPERATOR shall charge each PARTY its share
of such tax  payments.  If the OPERATOR is required  hereunder to pay ad valorem
taxes based in whole or in part upon separate  valuation 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 percentage of tax value generated by each PARTY'S WORKING INTEREST.

     17.2  CONTEST  OF  PROPERTY  TAX  VALUATION.   OPERATOR  shall  timely  and
diligently protest to a final determination any valuation it deems unreasonable.
Pending such determination,  OPERATOR may elect to pay under protest. Upon final
determination,  OPERATOR  shall pay the taxes and any interest,  penalty or cost
accrued as a result of such protest. In either event, OPERATOR shall charge each
PARTY its share.

     17.3 PRODUCTION AND SEVERANCE  TAXES.  Each PARTY shall pay, or cause to be
paid, all production,  severance and other taxes due on any production, which it
received pursuant to the terms of this Agreement.

                                       20

<PAGE>

     17.4 OTHER TAXES AND ASSESSMENTS. OPERATOR shall pay other applicable taxes
or assessments and charge each PARTY its share.

                                  ARTICLE XVIII

                                    INSURANCE

     18.1 INSURANCE. OPERATOR shall obtain the insurance provided in Exhibit "B"
and charge each PARTICIPATING  PARTY its proportionate share of the cost of such
coverage.

                                   ARTICLE XIX

                         LIABILITY, CLAIMS AND LAWSUITS

     19.1 INDIVIDUAL OBLIGATIONS. The obligations, duties and liabilities of the
PARTIES  shall be several and not joint or  collective;  and  nothing  contained
herein  shall ever be  construed as creating a  partnership  of any kind,  joint
venture,  association or other character of business entity  recognizable in law
for any purpose. Each PARTY shall hold all the other PARTIES harmless from liens
and encumbrances on the LEASE arising as a result of its acts.

     19.2 NOTICE OF CLAIM OR LAWSUIT. If a claim is made against any PARTY or if
any PARTY is sued on account of any matter  arising from  operations  hereunder,
such PARTY shall give prompt written notice to the other PARTIES.

     19.3  SETTLEMENTS.  OPERATOR  may settle any  single  damage  claim or suit
involving  operations  hereunder if the expenditure does not exceed Ten Thousand
Dollars ($10,000.00),  if the claim is not  covered by Exhibit  "B" and if the
payment is in complete settlement of such claim or suit.

     19.4  LEGAL  EXPENSE.  Legal  Expenses  shall be  handled  pursuant  to the
provisions of Exhibit "C".

     19.5 LIABILITY FOR LOSSES,  DAMAGES, INJURY OR DEATH. Liability for losses,
damages,  injury or death arising from operations  under this Agreement shall be
borne by the  PARTIES in  proportion  to their  PARTICIPATING  INTERESTS  in the
operations  out of which  such  liability  arises,  except  when such  liability
results from the gross  negligence or willful  misconduct of any party, in which
case such PARTY shall be liable.

     19.6  INDEMNIFICATION.  The  PARTICIPATING  PARTIES  agree to hold the NON-
PARTICIPATING  PARTIES  harmless and to  indemnify  and protect them against all
claims,  demands,  liabilities and liens for property damage or personal injury,
including death,  caused by or otherwise arising out of NON-CONSENT  OPERATIONS,
and any loss and costs  suffered by any  NON-PARTICIPATING  PARTY as an incident
thereof.

                                   ARTICLE XX

                           INTERNAL REVENUE PROVISION

     20.1 INTERNAL REVENUE PROVISION. Notwithstanding any provisions herein that
the rights and liabilities  hereunder are several and not joint or collective or
that  this  Agreement  and the  operations  hereunder  shall  not  constitute  a
partnership,  if  for  Federal  Income  Tax  purposes  this  Agreement  and  the
operations hereunder are regarded as a partnership,  then for Federal Income Tax
purposes  each  PARTY  elects to be  excluded  from the  application  of all the
provisions of  Subchapter  K, Chapter 1,  Subtitle A,  Internal  Revenue Code of
1986, as permitted and authorized by

                                       21

<PAGE>

Section 761 of said Code and the regulations promulgated thereunder. OPERATOR is
hereby  authorized and directed to execute on behalf of each PARTY such evidence
of this  election as may be required by the  Federal  Internal  Revenue  Service
including  specifically,  but  not  by way of  limitation,  all of the  returns,
statements and data required by Federal Regulations 1.761.2. Should there be any
requirement that each PARTY further evidence this election, each PARTY agrees to
execute such documents and furnish such other evidence as may be required by the
Federal  Internal  Revenue  Service.  Each PARTY further  agrees not to give any
notices or take any other action  inconsistent with the election made hereby. If
any  present or future  income  tax law of the  United  States of America or any
state contains provisions similar to those contained in Subchapter K, Chapter 1,
Subtitle A of the Internal Revenue Code of 1986, under which an election similar
to that provided by Section 761 of said  Subchapter K is  permitted,  each PARTY
makes such  election or agrees to make such election as may be permitted by such
laws. In making this  election,  each PARTY states that the income derived by it
from the operations  under this Agreement can be adequately  determined  without
the computation of partnership taxable income.

                                  ARTICLE XXI

                                 CONTRIBUTIONS

     21.1 NOTICE OF  CONTRIBUTIONS  OTHER THAN ADVANCES FOR SALE OF  PRODUCTION.
Each PARTY shall promptly notify the other PARTIES of all  contributions,  which
it may obtain,  or is attempting to obtain,  concerning the drilling of any well
on the LEASE.  Payments  received as consideration  for entering into a contract
for sale of production from the LEASE,  loans and other  financing  arrangements
shall not be considered  contributions for the purposes of the Article. No PARTY
shall  release  or  obligate  itself or  release  information  in  return  for a
contribution  from an outside  party toward the drilling of a well without prior
written consent of the other PARTICIPATING PARTIES therein.

     21.2 CASH CONTRIBUTIONS.  In the event a PARTY receives a cash contribution
toward the drilling of a well, said cash contribution  shall be paid to OPERATOR
and OPERATOR  shall credit the amount  thereof to the PARTIES in  proportion  to
their PARTICIPATING INTEREST.

     21.3  ACREAGE  CONTRIBUTIONS.  In the  event a PARTY  receives  an  acreage
contribution  toward the drilling of a well, said acreage  contribution shall be
shared  by  each   PARTICIPATING   PARTY  who  accepts  in   proportion  to  its
PARTICIPATING INTEREST in the well.

                                  ARTICLE XXII

                           DISPOSITION OF PRODUCTION

     22.1  FACILITIES  TO TAKE IN KIND.  Any PARTY shall have the right,  at its
sole  risk  and  expense,  to  construct  FACILITIES  for  taking  its  share of
production in kind, provided that such FACILITIES at the time of installation do
not interfere  with  continuing  operations  on the LEASE and adequate  space is
available therefore.

     22.2 RIGHT TO TAKE IN KIND. Each PARTY shall have the right to take in kind
or  separately  dispose of its share of the oil and gas  produced and saved from
the LEASE.

     22.3 FAILURE TO TAKE IN KIND. If any Party fails to take in kind or dispose
of its share of the gas, oil and/or condensate produced from a Prospect Area, at
the request of such Party, the Operator will market that Party's share of

                                       22

<PAGE>

production  from the Contract Area ratably with  Operator's  own production in a
manner  maintaining  as near as  practicable  a zero gas imbalance at the end of
each production month. With regard to oil and/or condensate, Operator may either
(a)  purchase  the  non-taking  Party's  share  of  the  oil  and/or  condensate
production at the Operator's, or a third party's posted price or, in the absence
of a posted price or a disagreement as to Operator's or the third party's posted
price, at the price no less than the price prevailing in the area for oil and/or
condensate of similar kind subject to adjustments for gravity, quality, and less
transportation  to market,  or, with regard to gas, oil and/or  condensate,  (b)
sell  such gas,  oil  and/or  condensate  to  others  under  the same  terms and
conditions  as Operator is selling its own share of  production  (including  any
applicable  taxes,  fees and costs  deducted by the purchaser or  transporter or
paid to third parties for marketing  arrangements  and  consultation),  provided
that if the  production  is sold to an affiliate of Operator the price  received
shall  not be less  than the  price  prevailing  in the area  for gas,  oil,  or
condensate  of the same kind,  gravity and  quality.  All  contracts  of sale by
Operator of any Party's share of gas, oil, or condensate  shall be only for such
reasonable  periods  of time as are  consistent  with the  minimum  needs of the
industry  under the  circumstances,  but in no event shall any contract be for a
period in excess of three (3)  months.  Proceeds  of all sales made by  Operator
pursuant to this Section shall be paid to the Parties entitled thereto.

     22.4  EXPENSES  OF  DELIVERY  IN KIND.  Any third  party cost  incurred  by
OPERATOR in making delivery of any PARTY'S share of gas, oil and condensate,  or
disposing of same pursuant to Section 22.3, shall be borne by such PARTY.

     22.5 GAS BALANCING PROVISIONS. Attached hereto is Exhibit "E" entitled "Gas
Balancing  Agreement",   containing  an  agreement  of  the  PARTIES,  which  is
incorporated into this Agreement as if copied at length herein.

                                  ARTICLE XXIII

                                 APPLICABLE LAW

     23.1 APPLICABLE  LAW. This Agreement shall be interpreted  according to the
laws  of  the   State   of   Texas.

                                  ARTICLE XXIV

                    LAWS, REGULATIONS AND NON-DISCRIMINATION

     24.1 LAWS AND  REGULATIONS.  This  Agreement and  operations  hereunder are
subject to all applicable laws, rules, regulations and orders, and any provision
of the  Agreement  found to be  contrary to or  inconsistent  with any such law,
rule, regulation or order shall be deemed modified accordingly.

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

                                  ARTICLE XXV

                                 FORCE MAJEURE

     25.1 NOTICE.  If any PARTY is rendered unable,  wholly or in part, by force
majeure  to carry out its  obligations  under  this  Agreement,  other  than the
obligation  to make money  payments,  that PARTY shall give to all other PARTIES
prompt  written  notice of the force majeure with  reasonably  full  particulars
concerning it; thereupon, the obligations of the PARTY giving the notice, so far
as they are affected by the force  majeure,  shall be suspended  during,  but no
longer than, the continuance of the force majeure.  The affected PARTY shall use
reasonable diligence to remove the force majeure as quickly as possible.

                                       23

<PAGE>

     25.2 STRIKES. The requirement that any force majeure shall be remedied with
all reasonable dispatch shall not require the settlement of strikes.

     25.3 FORCE MAJEURE.  The term "force majeure" as herein employed shall mean
an act of God,  strike,  lockout,  or other industrial  disturbance,  act of the
public  enemy,  war,  blockade,  public riot,  lightning,  fire,  storm,  flood,
explosion,  governmental  restraint,  unavailability  of equipment and any other
cause, whether of the kind specifically enumerated above or otherwise,  which is
not reasonably within the control of the PARTY claiming suspension.

                                  ARTICLE XXVI

                             SUCCESSORS AND ASSIGNS

     26.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to  the  benefit  of  the  PARTIES  and  their  respective  heirs,   successors,
representatives  and assigns and shall  constitute  a covenant  running with the
LEASE.

     26.2  NOTICE OF  TRANSFER.  Should  any PARTY  desire to sell,  farmout  or
otherwise  dispose al all or any part of its Working  Interest in the Lease,  it
shall  promptly  give  written  notice  to the  other  PARTIES  giving  complete
information relative to the proposed  disposition.  The other PARTIES shall have
the right for a period of  fifteen  (15) days  after  receipt  of the  notice to
attempt to purchase or acquire the interest,  which the PARTY  proposes to sell,
farmout or otherwise  dispose. A transfer of interest hereunder shall not become
effective as to the PARTIES until the first day of the month following  delivery
to OPERATOR of an original (or copies thereof)  instrument of transfer  approved
by the proper governmental  authority and conforming to the requirements of this
Section.   No  such  transfer  shall  relieve  the  transferring  PARTY  of  any
obligations or liabilities accrued hereunder prior to such effective date.

     26.2.1 The Provisions of this Section 26.2 shall not, however, apply to and
it shall not be necessary to obtain the consent of any Party in connection with;

               (a)  Any mortgage or other pledge,  including without  limitation
                    the  granting  of any  lien  or  security  interest  and any
                    assignment  of production  executed as further  security for
                    the debt secured by any such mortgage or pledge,  by a Party
                    hereto of its interest or any portion  thereof in the Lease,
                    or the Agreement, or any judicial,  trustee's or other sales
                    to foreclose the same;

               (b)  Any  transfer  or  disposition  of the  interest  of a PARTY
                    hereto by corporate  merger or  consolidation or by any sale
                    or sales of substantially all of its oil and gas properties;
                    or

               (c)  Any sale, merger, consolidation or other transfer by a PARTY
                    hereto  of  any  part  of  its   interest  to  or  with  any
                    "affiliate" (as such term is defined in Regulation C, issued
                    under the Securities Act of 1933).

               (d)  Any mortgage,  pledge,  transfer,  sale, merger or any other
                    disposition  enumerated in subparagraphs  (a), (b) or (c) of
                    this  Paragraph  shall  be made  expressly  subject  to this
                    Agreement.

     26.3  RIGHT TO  TRANSFER.  Subject to the terms and  conditions  of Section
26.2,  a PARTY may sell,  transfer or assign all or any part of its  interest in
the property or this Agreement without the consent of any other PARTY

                                       24

<PAGE>

hereto, provided that:

          (a)  Any such sale,  transfer  or  assignment  shall be made only to a
               financially responsible PARTY or PARTIES.

          (b)  If the original  interest of any PARTY is at any time transferred
               to two (2) or more transferees,  OPERATOR may, at its discretion,
               require such  transferees  to appoint a single  trustee with full
               authority to receive notices and payments,  approve  expenditures
               and pay the share of costs,  which are  chargeable  against  such
               transferees.

     26.4  ASSIGNMENTS.  Each PARTY shall  incorporate  in any  assignment of an
interest  in the LEASE a  provision  that such  assignment  is  subject  to this
Agreement.  Any assignment,  vesting or  relinquishment  of interest between the
PARTIES  shall be with  special  warranty  of title  by,  through  and under the
assignor, but not otherwise, and shall be subject to the terms and conditions of
Section 16.1. Any assignment to a Third Party of a Working Interest herein shall
not be  effective as to the Parties  until the first day of the month  following
the  delivery  to Operator of a copy of the  instrument  evidencing  the sale or
assignment, approved by the proper governmental authority, and conforming to the
requirements of this Article.

                                  ARTICLE XXVII

                                      TERM

     27.1 TERM. This Agreement may be amended only in writing and only by mutual
consent of all  PARTIES.  This  Agreement  shall remain in effect so long as the
LEASE shall remain in effect and thereafter  until all claims,  liabilities  and
obligations  incurred in operations  hereunder have been settled;  however,  all
property  belonging  to the PARTIES  shall be  disposed of and final  settlement
shall be made under this Agreement.

                                 ARTICLE XXVIII

                            AREA OF MUTUAL INTEREST

     28.1 AREA OF MUTUAL  INTEREST.  The PARTIES hereby create an Area of Mutual
Interest  ("AMI")  identified on Exhibit "A-l"  attached  hereto and made a part
hereof.  This AMI shall  remain in force and effect as long as any leases  lying
within the AMI are being  maintained by the parties  hereto.  Any acquisition of
any right,  title or interest  acquired in, to and under any oil or gas lease or
any other interest in oil or gas,  including,  without  limitation,  contractual
rights,  which confer on the holder  thereof the right to share,  or acquire the
right to share,  in the  production or the proceeds of production of oil and gas
within the AMI (the  "Acquisition")  by a PARTY  herein  shall be for the mutual
benefit of the PARTIES.  Each PARTY shall have the right to  participate  in any
such  Acquisition in the same proportion as such PARTY'S WORKING INTEREST in and
to the LEASE as set forth in Exhibit "A". The PARTY making the Acquisition  (the
"Acquiring  Party")  shall  notify each of the other  PARTIES in writing  within
thirty (30) days of such  Acquisition  and shall  furnish a copy of all executed
agreements  pertaining thereto and such title information as the Acquiring PARTY
has,  stating  the cost of such  acquisition  or the  obligations  that  must be
assumed in connection  therewith.  Each of the other PARTIES shall have a period
of fifteen (15) working days (48 hours exclusive of Saturdays, Sundays and legal
holidays in the event that a well is being drilled within the AMI) after receipt
of such notice within

                                       25

<PAGE>

which to elect and  notify  the  Acquiring  PARTY  whether  or not it desires to
participate  in such  Acquisition. Failure to timely  respond to the  Acquiring
PARTY'S notice or reimburse the Acquiring PARTY for the  proportionate  share of
the acquired  interest shall be deemed an election not to acquire such interest.
Upon  election and payment to the  Acquiring  PARTY of a  non-acquiring  PARTY'S
share  of the  cost of such  acquisition,  such  non-acquiring  PARTY  shall  be
entitled to an assignment of its  proportionate  share in such  Acquisition.

     If fewer than all PARTIES elect to  participate in the  Acquisition  within
the AMI,  the  Acquiring  PARTY shall  inform all  PARTIES  who have  elected to
participate in the  Acquisition,  in writing,  of the elections made. Each PARTY
receiving notice,  within forty-eight (48) hours (inclusive of Saturday,  Sunday
or legal  holidays)  after  receipt of such notice,  shall advise the  Acquiring
PARTY of its desire to (a) limit  participation to its WORKING INTEREST,  or (b)
acquire  its  proportionate  share  of the  interest  of  the  non-participating
PARTY(IES),  or  (c)  participate  for a  percentage  of  the  interest  of  the
non-participating   PARTY(IES).

     The  interest  of any PARTY who elects to  participate  in any  acquisition
within the AMI shall be subject to and be burdened by the  obligations set forth
on Exhibit "A" with respect to the leases.

                                  ARTICLE XXIX

                             HEADINGS AND EXECUTION

     29.1 TOPICAL HEADINGS. The topical headings used herein are for convenience
only and shall not be construed  as having any  substantive  significance  or as
indicating  that all of the provisions of this  Agreement  relating to any topic
are to be found in any particular Section.

     29.2 COUNTERPART EXECUTIONS.  This Agreement may be signed in counterparts,
and shall be binding upon the PARTIES and upon their successors, representatives
and assigns.

                                          GRYPHON EXPLORATION COMPANY

                                          BY: /s/ Charles H. Odom
                                              ----------------------------------
                                              Charles H. Odom
                                              Vice President-Land

                                          RIDGEWOOD ENERGY CORPORATION

                                          BY: [Illegible]
                                              ----------------------------------

                                       26

<PAGE>

STATE OF TEXAS

COUNTY OF HARRIS

ON THIS ___ day of ___________,  2004, before me appeared Charles H. Odom, to me
personally  known,  who,  being  by me duly  sworn,  did say that he is the Vice
President - Land  for  Gryphon  Exploration  Company  and  that  the  foregoing
instrument was signed in behalf of said corporation by authority of its Board of
Directors,  and said Charles H. Odom  acknowledges  said instrument to be a free
act and deed of said corporation.

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

STATE OF TEXAS
COUNTY OF
         -------

ON THIS____ day of _____________, 2004, before me, to me personally known, who,
being by me duty sworn, did say that he is the _____________ of _____________
and that the foregoing instrument was signed in behalf of said corporation, and
said acknowledges said instrument to be a free act and deed of said corporation.

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

Notary  page to Joint  Operating  Agreement  dated May 25,  2004  covering  West
Cameron Area, Block 103.

                                       27

<PAGE>

                                   EXHIBIT "A"

   Attached to and made a part of that certain Joint Operating Agreement dated
effective May 25, 2004 by and between GRYPHON EXPLORATION COMPANY, as Operator,
                and RIDGEWOOD ENERGY CORPORATION, as Non-Operator

OIL AND GAS LEASE:

Oil and Gas Lease dated May 1, 2001,  from the United  States  Department of the
Interior, Minerals Management Service, as Lessor, to Samson Offshore Company and
Gryphon Exploration Company, as Lessees, covering all of Block 103, West Cameron
Area,  OCS Leasing Map,  Louisiana  Map No. 1,  containing  approximately  5,000
acres, more or less, and bearing Serial Number OCS-G 22511.

PARTICIPANTS AND ADDRESSES:

Gryphon Exploration Company
1200 Smith Street, Suite 1740
Houston, TX 77002
Attn: Mr. Bob Kelsey
Phone: (713) 756-2400
Fax: (713) 756-2500

Ridgewood Energy Corporation
5300 Memorial Drive, Suite 1070
Houston, Texas 77007
Attn: Mr. Greg Tabor
Phone: (713) 862-9856
Fax: (713) 802-9734

WORKING INTEREST

                               To Casing Point*   At Casing Point*
                               ----------------   ----------------
Gryphon Exploration Company           20%                40%
Ridgewood Energy Corporation          80%                60%
                                     ---                ---
                                     100%               100%

* As more specifically set forth in that certain  Participation  Agreement dated
May  25,  2004  between  Gryphon   Exploration   Company  and  Ridgewood  Energy
Corporation

The lease above is burdened by the following overriding royalty interest:

Fairfield                     2% of 8/8ths

Gryphon Exploration Company   2% of 8/8ths

                                       28

<PAGE>

                                  EXHIBIT "A-1"

   Attached to and made a part of that certain Joint Operating Agreement dated
effective May 25, 2004 by and between GRYPHON EXPLORATION COMPANY, as Operator,
                and RIDGEWOOD ENERGY CORPORATION, as Non-Operator

The Area of Mutual  Interest  is  comprised  of all of Blocks 103 and 104,  West
Cameron Area.

                                       29

<PAGE>

                                   EXHIBIT "B"
                                    INSURANCE

   Attached to and made a part of that certain Joint Operating Agreement dated
effective May 25, 2004 by and between GRYPHON EXPLORATION COMPANY, as Operator,
                and RIDGEWOOD ENERGY CORPORATION, as Non-Operator

Operator  shall, at all times while  conducting  operations on the Contract Area
and/or  Assigned  Premises,  carry  or  cause to be  carried  insurance  for the
following coverage's and in at least the minimum amounts noted.

     1.   Workers' Compensation and Occupational Disease insurance in accordance
          with the  statutory  requirements  of the state in which work is to be
          performed,  the state in which the Operator,  herein "Contractor",  or
          any of Operator's contractor(s) or sub-contractor(s), employees reside
          and the  state  in  which  the  Contractor  is  domiciled;  Employer's
          Liability  insurance  with limits of not less than  $1,000,000.  These
          coverage's shall include:

          a.   Protection for liabilities under the Federal Longshoremen's and
               Harbor Worker's Compensation Act and the Outer Continental Shelf
               Lands Act.

          b.   Coverage for  liability  under the  Merchant  Marine Act of 1920,
               commonly known as the Jones Act; the Admiralty Act; and the Death
               on the High Seas Act with limits of not less than  $1,000,000 per
               accident.

          c.   Protection    against    liability   of   employer   to   provide
               transportation, wages, maintenance and cure to maritime employees
               and a Voluntary Compensation Endorsement.

          d.   Coverage  amended to provide that a claim In Rem shall be treated
               as a claim against the employer.

          e.   Territorial extension shall cover all work areas.

     2.   Comprehensive  General Liability insurance,  written on any occurrence
          reported basis with limits of $1,000,000 per occurrence  Bodily Injury
          and Property Damage, combined single limits, an annual aggregate of no
          less  than  $2,000,000  (if   applicable),   including  the  following
          coverage's:

          a.   Premises and Operations coverage's.

          b.   Independent Contractor's Contingent coverage.

          c.   Contractual  Liability  covering  liabilities  assumed under this
               Contract.

          d.   Products and Completed Operations coverage.

          e.   Coverage for explosion,  collapse and  underground  resources and
               property  damage under both  Premises/Operations  and Contractual
               Liability coverage parts, where applicable.

          f.   Broad Form Property Damage Liability endorsement.

          g.   Personal Injury Liability.

          h.   In Rem endorsement.

          i.   Territorial extension shall cover all work areas.

          j.   Where  applicable,  coverage  for  liability  resulting  from the
               consumption   of  food   prepared  or  served  by  contractor  or
               subcontractor.

          k.   Watercraft  exclusion deleted or Protection & Indemnity  provided
               as per 4.B.

          l.   Coverage is provided for "Action Over" suits.

          m.   Coverage is silent as respects Punitive Damages.

     3.   Automobile  Liability  insurance  covering owned,  hired and non-owned
          vehicles with limits of $1,000,000  per  occurrence  Bodily Injury and
          Property Damage combined single limits.

                                       30

<PAGE>

TRANSITION ENERGY, LLC             3% WI BPO   2.4% WI APO
952 Echo Lane - Suite 420
Houston, TX 77024
Attn: Jeffrey W. Wheelock
Tax ID#
        ------------------------
Telephone: 713-722-8118
Fax:
     ---------------------------
EMAIL: iwheelock@dwlegal.com

LOWE PARTNERS, L.P.                5% WI BPO   4% WI APO
223 W. Wall Street, Suite 900
Midland, Texas 79701
Attn: Joe C. Pulido
Tax ID#
        ------------------------
Telephone: 713-622-5420
Fax:
     ---------------------------
EMAIL: ioepulido@maralo.com

EXCESS ENERGY LTD.                 5% WI BPO   4% WI APO
14825 St. Mary's Lane, Suite 270
Houston, TX 77079
Attn: Norman Rowlinson
Tax ID# 20-0204983
Telephone: 281-679-7601
Fax:
     ---------------------------
EMAIL: nrowlinson@bigcity.net

<PAGE>

     4.   Where the work  described by this Contract  involves the use of marine
          equipment.  Operator  will  require  the  contractor  to  provide  the
          following insurance:

          a.   Full Form Hull and Machinery  insurance,  with coverage  equal to
               that provided by the American  Institute  Hull Clauses  including
               collision liability,  with the sister ship clause unamended, with
               limits  of  liability  at least  equal  to the full  value of the
               vessel and with navigational  limitations adequate for Contractor
               to perform  the  contracted  work.  Where the  vessels  engage in
               towing  operations,  said  insurance  shall  include full tower's
               liability with the sister ship clause unamended.

          b.   Protection and indemnity insurance coverage in an amount at least
               equal  to the  full  value  of each  vessel  employed  under  the
               Contract.  Protection and indemnity  insurance shall include full
               coverage  for all  crew  liabilities  if  coverage  for  maritime
               employees is not provided under  Coverage B, Employers  Liability
               for Admiralty Jurisdiction.

          c.   Excess Protection and Indemnity  insurance,  including  Collision
               and Tower's  (where  applicable)  Liability in an amount at least
               equal  to the  value of each  vessel  covered  or the  difference
               between  the  full  value  of  each  vessel  and  $1,000,000  per
               occurrence.

          d.   Voluntary  Removal  of Wreck  and/or  Debris  insurance  covering
               Contractor's  operations in an amount of not less than $1,000,000
               per occurrence.

     All of the marine  coverage's  cited above shall name  Operator and all its
subsidiary and affiliated  companies as additional  insured's as their interests
may appear,  to the extent of  contractor's  obligations to defend and indemnify
the Parties.

     5.   Aircraft Liability  insurance (for contracts involving use of aircraft
          or  helicopters)  with  combined  single  limit  coverage  for  public
          liability,  passenger  liability and property damage  liability of not
          less than $5,000,000 covering all owned and non-owned aircraft used by
          Contractor in connection with work to be performed.

     6.   Umbrella  Liability  insurance  written on an occurrence basis with no
          claims  made  features  with  a  minimum   combined  single  limit  of
          $15,000,000 each  occurrence/aggregate  where applicable, to be excess
          of the coverage's and limits required in 1, 2, 3,4 and 5 above.

     7.   OPERATOR  shall carry or cause to be carried the following  coverage's
          for the benefit of and at the expense of the Joint  Account,  however,
          proportionate  coverage  may be  carried  individually  by  each  NON-
          OPERATOR,  subject to proper evidence of such  proportionate  coverage
          being  provided  to  Operator  at least  fifteen  (15)  days  prior to
          commencement of operations for the drilling of the initial EXPLORATORY
          WELL.

          a.   Operator's Extra Expense Insurance, including control of well and
               redrilling of the well (full restoration redrill), including, but
               not  limited  to,  Seepage  and  Pollution  and  Containment  and
               Evacuation Expense with a limit of liability of $30,000,000.

          b.   Physical  Damage and  Removal of Wreck  Coverage  for  facilities
               hereunder,  with  limits  not  less  than the  replacement  value
               thereof.  Notwithstanding  the  foregoing,  this  coverage  to be
               provided fifteen(15) days prior to placement of such facilities.

                                       31

<PAGE>

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

                                   EXHIBIT "C"

   Attached to and made a part of that certain Joint Operating Agreement dated
                  effective May 25, 2004 by and between GRYPHON
                      EXPLORATION COMPANY, as Operator, and
                  RIDGEWOOD ENERGY CORPORATION, as Non-Operator

                              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, professional consultants,
     or contract personnel having, special and specific engineering,  geological
     or  other  professional   skills,  and  whose  primary  function  in  Joint
     Operations is the handling of specific  operating  conditions  and problems
     for the benefit of the Joint Property.

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

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

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

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

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

2.   Statement 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
          outlays for the succeeding  month's operation within fifteen (15) days
          after  receipt  of the  billing  or by the  first day of the month for
          which the advance is  required,  whichever  is later.  Operator  shall
          adjust each  monthly  billing to reflect  advances  received  from the
          Non-Operators.

     B.   Each Non-Operator shall pay its proportion of all bills within fifteen
          (15) days after receipt. If payment is not made within such time, the
          unpaid balance shall bear interest monthly at the prime rate in effect
          at Bank One, Texas, Houston, Texas 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 in
          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

                                        1

<PAGE>

     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.

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  and contract
               personnel  directly employed on the Joint Property in the conduct
               of Joint Operations.

          (2)  Salaries and wages of Operator's  employees or contract personnel
               directly  employed  on Shore Base  Facilities  or other  Offshore
               Facilities  serving the Joint  Property if such costs are charged
               under Paragraph 7 of this Section II.

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

          (4)  Salaries   and  wages  and  fees  of   Technical   Employees   or
               professional  consultants directly employed on the Joint Property
               if such charges are excluded from the overhead rates.

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

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

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

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

3.   Employee Benefits

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

                                        2

<PAGE>

     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.

6.   Services

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

7.   Equipment and Facilities Furnished By Operator

     A.   Operator shall charge the Joint Account for use of Operator-owned
          equipment and facilities, including Shore Base and/or Offshore
          Facilities, at rates commensurate with costs of ownership and
          operation. Such rates may include labor, maintenance, repairs, other
          operating expense, insurance, taxes, depreciation, and interest on
          gross investment less accumulated depreciation not to exceed Ten
          percent (10%) per annum. In addition, for platforms only, the rate may
          include an element of the estimated cost of platform dismantlement.
          Such rates shall not exceed average commercial rates currently
          prevailing in the immediate area of the Joint Property.

     B.   In lieu of charges in  paragraph  7A above,  Operator may elect to use
          average commercial rates prevailing in the immediate area of the Joint
          Property.  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 cause, except those resulting from
     Operator's gross negligence or willful  misconduct.  Operator shall furnish
     Non-Operator  written  notice  of  damages  or losses  incurred  as soon as
     practicable after a report thereof has been received by Operator.

9.   Legal Expense

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

10.  Taxes

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

11.  Insurance

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

12.  Communications

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

13.  Ecological and Environmental

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

14.  Abandonment and Reclamation

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

15.  Other Expenditures

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

                                        3

<PAGE>

                                    III. OVERHEAD

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

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

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

          |_|  shall be covered by the overhead rates.

          |X|  shall not be covered by the overhead rates,

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

          |X|  shall be covered by the overhead rates.

          |_|  shall not be covered by the overhead rates.

I.   Overhead - Drilling and Producing Operations

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

          |X|  Fixed Rate Basis, Paragraph 1A, or

          |_|  Percentage Basis, Paragraph 1B

     A. Overhead - Fixed Rate Basis

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

               Drilling Well Rate $31,960 (Prorated for less than a full month)

               Producing Well Rate $3,196

          (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 four (4) consecutive work days
                    or more  shall  be  made at the  drilling  well  rate.  Such
                    charges  shall be applied for the period from date  workover
                    operations,  with  rig or  other  units  used  in  workover,
                    commence  through date of rig or other unit release,  except
                    that no charge shall be made during suspension of operations
                    for fifteen (15) or more consecutive calendar days.

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

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

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

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

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

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

          (4)  The well  rates  shall be  adjusted  as of the first day of April
               each year  following the effective date of the agreement to which
               this Accounting  Procedure is attached.  The adjustment  shall be
               computed  by  multiplying  the  rate  currently  in  use  by  the
               percentage increase or decrease in the average weekly earnings of
               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
               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.

                                       4

<PAGE>

B.   Overhead - Percentage Basis

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

               (a)  Development

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

               (b)  Operating

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

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

               For the  purpose of  determining  charges on a  percentage  basis
               under Paragraph 1B of this Section III, development shall include
               all costs in connection with drilling,  redrilling,  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 costs
               of construction or installation of fixed assets, the expansion of
               fixed assets and any other project clearly discernible as a fixed
               asset,  except  Major  Construction  as defined in Paragraph 2 of
               this  Section  III.  All  other  costs  shall  be  considered  as
               Operating  except  that  catastrophe   costs  shall  be  assessed
               overhead as provided in Section III, Paragraph 3.

2.   Overhead - Major Construction

     To compensate  Operator for overhead costs incurred in the construction and
     installation of fixed assets,  the expansion of fixed assets, and any other
     project  clearly  discernible as a fixed asset required for the development
     and operation of the Joint Property,  or in the dismantling for abandonment
     of  platforms  and related  production  facilities,  Operator  shall either
     negotiate a rate prior to the  beginning of  construction,  or shall charge
     the Joint Account for overhead  based on the following  rates for any Major
     Construction project in excess of $25,000.00

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

          (1)  6% of total costs if such costs are more than $25,000.00 but less
               than $100,000; plus

          (2)  4% 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.

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

          (1)  3% of total costs if such costs are more than $25,000.00 but less
               than $100,000; plus

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

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

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

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

3.   Catastrophe Overhead

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

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

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

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

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

4.   Amendment of Rates

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

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

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

                                       5

<PAGE>

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 current new prices effective as of
                    date of movement plus  transportation  cost using the 80,000
                    pound carload weight basis to the railway receiving point or
                    shore based facilities  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.

               (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 or shore based  facilities  nearest the Joint Property
                    as provided above in Paragraph 2.A.(l)(a).

               (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 or shore based  facilities  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 or shore
                    based facilities nearest the Joint Property.

          (2)  Line Pipe

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

               (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  current  new  prices  effective  as of  date  of
                    shipment plus 20 percent, plus transportation costs based on
                    freight rates as set forth under provisions of tubular goods
                    pricing in Paragraph A.(l)(a) as provided above.

               (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
                    CEPS  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
                    or shore based  facilities  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 or shore based facilities 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 or shore
               based facilities nearest the Joint Property. Unused new tubulars
               will be priced as provided above in Paragraph 2.A.(l)and(2).

     B.   Good Used Material (Condition B)

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

          (1)  Material  moved to the Joint  Property

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

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

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

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

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

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

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

     C.   Other Used Material

          (1)  Condition C

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

                                       6

<PAGE>

          (2)  Condition D

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

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

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

          (3)  Condition E

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

     D.   Obsolete Material

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

     E.   Pricing Conditions

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

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

3.   PremiumPrices

     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 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 reports of Controllable Material.

1.   Periodic Inventories, Notice and Representation

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

2.   Reconciliation and Adjustment of Inventories

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

3.   Special Inventories

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

4.   Expense of Conducting Inventories

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

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

                                        7

<PAGE>

                                   EXHIBIT "D"

           Attached to and made a part of that certain Joint Operating
              Agreement dated effective May 25, 2004 by and between
                  GRYPHON EXPLORATION COMPANY, as Operator, and
                  RIDGEWOOD ENERGY CORPORATION, as Non-Operator

                    CERTIFICATION OF NONSEGREGATED FACILITIES

Contractor  certifies that it does not maintain or provide for its employees any
segregated  facilities at any of its  establishments and that it does not permit
its  employees to perform  their  services at any  location,  under its control,
where segregated facilities are maintained. Contractor certifies further that it
will not maintain or provide for its employees any segregated  facilities at any
of its establishments and that it will not permit its employees to perform their
services at any location,  under its control,  where  segregated  facilities are
maintained. Contractor agrees that a breach of this certification is a violation
of the Equal Opportunity  Clause in any Government  contract between  Contractor
and Corporation. As used in this certification, the term "segregated facilities"
means any waiting rooms, work areas, rest rooms and wash rooms,  restaurants and
other  eating  areas,  time clocks,  locker rooms and other  storage or dressing
areas,  parking lots,  drinking  fountains,  recreation or entertainment  areas,
transportation,   and  housing  facilities  provided  for  employees  which  are
segregated by explicit directive or are in fact segregated on the basis of race,
color,  religion,  or  national  origin,  because  of habit,  local  customs  or
otherwise.  Contractor further agrees that (except where it has obtain identical
certifications  from proposed  subcontractors for specific time periods) it will
obtain identical  certifications from proposed subcontractors prior to the award
of  subcontracts  exceeding  $10,000 which are not exempt from the provisions of
the Equal  Opportunity  Clause;  that it will retain such  certifications in its
files;  and  that  it  will  forward  the  following  notice  to  such  proposed
subcontractors   (except  where  the  proposed   subcontractors  have  submitted
identical certifications for specific time periods):

NOTICE TO  PROSPECTIVE  SUBCONTRACTORS  OF  REQUIREMENT  FOR  CERTIFICATIONS  OF
NONSEGREGATED  FACILITIES.  A Certification  of  Non-segregated  Facilities,  as
required by the May 9, 1967, order on Elimination of Segregated  Facilities,  by
the Secretary of Labor (32 Fed.  Reg.  7439,  May 19,  1967),  must be submitted
prior to the award of a subcontract exceeding $10,000,  which is not exempt from
the  provisions  of the  Equal  Opportunity  Clause.  The  certification  may be
submitted either for each  subcontract or for all  subcontracts  during a period
(i.e., quarterly, semi-annually or annually). (1968 MAR.) (Note: The penalty for
making false statements in offers is prescribed in 18 U.S.C. 1001.)

Whenever used in the foregoing  Section,  the term  "contractor"  refers to each
party to this agreement.

                                       32

<PAGE>

                                   Exhibit "E"

                             GAS BALANCING AGREEMENT

           Attached to and made a part of that certain Joint Operating
              Agreement dated effective May 25, 2004 by and between
                  GRYPHON EXPLORATION COMPANY, as Operator, and
                  RIDGEWOOD ENERGY CORPORATION, as Non-Operator

I.   Definitions

     A.   "Agreement" shall mean this Gas Balancing Agreement.

     B.   "Balanced"  is that  condition  which  occurs when a party  hereto has
          taken the same  percentage of the cumulative  volume of Gas production
          it is  entitled  to  take  pursuant  to the  terms  of  the  Operating
          Agreement.

     C.   "Gas" includes natural gas produced from a Well that produces Gas Well
          Gas, including all constituent parts of such natural gas except liquid
          hydrocarbons and condensate recovered by primary separation equipment.

     D.   "Gas Well Gas" is gas produced from a Well classified as a gas well by
          the regulatory body having jurisdiction.

     E.   "Overproduced"  is the  status of a party when the  percentage  of the
          cumulative  volume of Gas taken by that  party  exceeds  that  party's
          percentage  interest of the volume of cumulative Gas production of all
          parties to the Operating  Agreement under and pursuant to the terms of
          the Operating Agreement.

     F.   "Underproduced"  is the  status  of a party  when  the  percentage  of
          cumulative volume of Gas taken by that party is less than that party's
          percentage  interest of the volume of cumulative Gas production of all
          parties to the Operating  Agreement under and pursuant to the terms of
          said Operating Agreement.

     G.   "Well" is defined as each well subject to the Operating Agreement that
          produces  Gas Well Gas. If a single Well is  completed  in two or more
          reservoirs, such Well shall be considered a separate Well with respect
          to,  but only with  respect  to,  each  reservoir  from  which the Gas
          produced is not commingled in the well bore.

II.  Application of this Agreement

     The  parties  to the  Operating  Agreement  own the  working  or  operating
     interests in the Gas  underlying the Contract Area covered by the Operating
     Agreement and are entitled to share in the  percentages  therein  stated in
     the Operating Agreement.

     In  accordance  with the terms of the  Operating  Agreement,  each party is
     responsible  for marketing  it's share and shall take its full share of Gas
     produced from the Contract Area and market or otherwise dispose of same. In
     the event a party  hereto  elects in writing  not to take in kind or market
     its full share of Gas or has  contracted  to sell its share of Gas produced
     from  the  Contract  Area to a  purchaser  which,  at any time  while  this
     Agreement is in effect,  fails to take the share of Gas attributable to the
     interest of such party,  the terms of this  Agreement  shall  automatically
     become effective.

     The Operator is responsible  for  administering  the provisions of this Gas
     Balancing Agreement and as such shall have the sole option of administering
     all  reporting  of the same for the Parties or  retaining  the  services of
     third party  professionals  for this  specific  purpose.  The costs of such
     third party  services by Operator  shall be  considered  as included in the
     overhead rates.  The Operator shall cause  deliveries to be made to the Gas
     purchasers  at such rates as may be  required  to give effect to the extent
     practicable, to be or become Balanced.

     The  provisions of this  agreement  shall be applied to the Contract  Area,
     regardless of the number of wells.

III. Storing and Making Up Gas Production

     A.   Right to Take and Market Gas

          During any periods or periods when any party hereto does not take, has
          no market  for,  or the market of a party is not  sufficient  to take,
          that party's  full share of the Gas produced  from any Well located on
          the Contract Area, or such party's  purchaser  otherwise fails to take
          such party's  share of Gas produced  from any such Well located on the
          Contract Area,  resulting in such party becoming  Underproduced  (such
          party being herein referred to as an "Underproduced Party"), the other
          party or parties shall be entitled,  but not required, to produce from
          said  Well  on the  Contract  Area  (and  take  or  deliver  to  their
          respective purchaser(s)),  each month all or a part of that portion of
          the allowable Gas  production  assigned to such Well by the regulatory
          body having jurisdiction.  Any party so taking or delivering Gas which
          results in such party becoming  Overproduced  is herein referred to as
          an "Overproduced Party".

                                       33

<PAGE>

          Those parties which are capable of taking and/or marketing  quantities
          of Gas  allocable  to an  Underproduced  Party,  in the absence of any
          other  agreement  between  them,  shall  each  take a share of the Gas
          attributed  to the  Underproduced  Party  or  Parties  in  the  direct
          proportion that their respective  interests bear to the total interest
          of all parties taking Gas which are also considered Overproduced.

          All  parties  hereto  shall  share in and own the liquid  hydrocarbons
          recovered from such Gas by primary separation  equipment in accordance
          with  their  respective  interests  and  subject  to the  terms of the
          above-described  Operating Agreement,  whether or not such parties are
          actually taking and/or marketing Gas at such time.

     B.   Making Up Underproduction

          Any Underproduced Party shall endeavor to bring its taking of Gas into
          a Balanced  condition.  Upon thirty (30) days prior written  notice to
          the Operator,  any Underproduced  Party may thereafter begin taking or
          delivering  to its purchaser its full share of the Gas produced from a
          Well (less any used in operations,  vented or lost).  To allow for the
          recovery  of Gas in  storage  and to  balance  the Gas  account of the
          parties in accordance with their respective  interests,  Underproduced
          Party shall be  entitled  to take or deliver to a  purchaser  its full
          share of Gas  produced  from such Well  (less any used in  operations,
          vented or lost) plus, (i) for the months of March,  April,  May, June,
          July,  August,  September and October only of any calendar year during
          which this  agreement  may be in place,  an amount up to an additional
          fifty percent (50%) of the monthly quantity of Gas attributable to the
          Overproduced  Party or  Parties,  or (ii) for the months of  November,
          December,  January and  February  only of any  calendar  year or years
          during  which  this  agreement  may be in  place,  an  amount up to an
          additional  twenty-five  percent (25%) of the monthly  quantity of Gas
          attributable to the  Overproduced  Party or Parties.  If more than one
          Underproduced  Party is entitled to take  additional  Gas,  they shall
          divide  the   additional   Gas  in  proportion  to  their   respective
          Underproduced  accounts.  The first Gas made up shall be assumed to be
          the first Gas Underproduced.

     C.   Gas Balance Reporting

          Each party  taking  will  promptly  provide to the  Operator  any data
          required by the Operator for  preparation of the  statements  required
          hereunder. Operator shall not be required to adjust its Gas accounting
          statements reflecting a different Gas purchaser until the first day of
          the month  following the month in which such notice is received by the
          Operator.  The Operator  will  maintain  appropriate  accounting  on a
          monthly and  cumulative  basis of the  quantities of Gas each party is
          entitled to take and/or market and the  quantities of Gas taken and/or
          marketed by each of the parties to their  respective  Gas  purchasers.
          Within  ninety  (90)  days  after the end of each  producing  calendar
          month,  the Operator shall furnish each party a statement  showing the
          status of the Overproduced and Underproduced accounts of all parties.

          To determine respective volumes of Gas taken by separate gas pipelines
          connected  to the  Well,  measurement  of Gas for  overproduction  and
          underproduction shall be accomplished by use of sales meters and lease
          measurement   equipment,   which  shall  be  in  accordance  with  AGA
          requirements.

          Each  party to this  Agreement  agrees  that it will not  utilize  any
          information obtained hereunder for any purpose other than implementing
          or administering the terms of this Agreement.

     D.   Royalty and Production Tax

          At all times  while Gas is produced  from the  Contract  Area,  unless
          otherwise  required by any State or Federal law or  regulations,  each
          party shall pay or cause to be paid all royalty due and payable on the
          actual volumes of gas taken for its account. Each party agrees to hold
          each other party harmless from any and all claims for royalty payments
          asserted by its royalty owners. The term "royalty owner" shall include
          owners of  royalty,  overriding  royalties,  production  payments  and
          similar interests payable out of production.

          Each party  producing or taking or delivering Gas to its Gas purchaser
          shall pay, or cause to be paid, all production and severance taxes due
          on all volumes of Gas actually taken or sold by such party.

IV.  Cash Settlement

     A.   Volume/Value

          If, at the  permanent  termination  of  production  of Gas from a Well
          located on the Contract Area, an imbalance exists between the parties,
          a cash  settlement  of the imbalance  between the parties  relative to
          such Well  shall be made.  The amount of the cash  settlement  will be
          limited to the proceeds actually received by the Overproduced Party or
          Parties  at  the  time  of  overproduction,  less  transportation  and
          applicable treating charges and production and severance taxes paid on
          such overproduction. Royalty shall only be deducted from such proceeds
          attributable to the  overproduction if actually paid to royalty owners
          by the  Overproduced  Party or Parties.  No interest shall be added to
          any cash settlement hereunder.  If there is more than one Overproduced
          Party, the cash settlement shall be based on a weighted average of the
          proceeds  actually  received as above  described  by all  Overproduced
          Parties.

                                       34

<PAGE>

     B.   Collection and Distribution

          Operator shall provide to all parties hereto within sixty (60) days of
          permanent  determination  of Gas production a final  accounting of the
          Gas balance.  Overproduced Parties, within thirty (30) days of receipt
          of the final accounting of the Gas balance, shall pay their respective
          shares of the above  described  cash  settlement to the  Underproduced
          Parties in that proportion that each such Underproduced Party's volume
          of gas in  storage  bears to the total of all  Underproduced  Parties'
          volumes of gas in storage.

V.   Miscellaneous

     A.   Term

          This  Agreement  shall  remain  in  force  and  effect  as long as the
          Operating  Agreement  to which it is  attached  remains  in force  and
          effect,  and  thereafter  until the Gas balance  accounts  between the
          parties are settled in full,  and shall inure to the benefit of and be
          binding  upon the  parties  hereto,  their  heirs,  successors,  legal
          representatives and assigns.

     B.   Expenses

          Nothing herein shall change or affect each party's  obligations to pay
          its  proportionate  share of all costs  and  liabilities  incurred  in
          operations  on the Contract  Area as its share thereof is set forth in
          the Operating Agreement to which this Agreement is attached.

     C.   Well Tests

          Nothing  herein shall be  construed to deny any party the right,  from
          time to time,  to produce and take or deliver to its Gas  purchaser up
          to one  hundred  percent  (100%) of the entire Well stream to meet the
          deliverability test required by its Gas purchaser,  provided that such
          tests are reasonable in light of overall industry standards.

     D.   Monitoring of Takes of Production

          Each party shall,  at all times,  use its best efforts to regulate its
          takes and  deliveries  from each Well on said Contract Area so that no
          Well will be shut-in for overproducing the allowable  assigned thereto
          by the regulatory body having jurisdiction.  Additionally,  each party
          shall communicate, as necessary, the contents of this agreement to its
          respective Gas  purchaser(s) or  transporter(s)  and shall monitor its
          deliveries to its respective Gas purchaser(s) or  transporter(s) so as
          to ensure to the greatest extent practicable that its Gas purchaser(s)
          or  transporter(s)  does  not  take Gas in  excess  of the  quantities
          provided for herein.

     E.   Liquefiable Hydrocarbons Not Covered Under Agreement

          The  parties  shall  share  proportionately  in  and  own  all  liquid
          hydrocarbons  recovered with the gas by lease  equipment in accordance
          with their respective interests.

                                       35

<PAGE>

                             Gryphon Exploration Co.
                             1200 Smith, Suite 1740
                              Houston, Texas 77002
                                 (713) 756-2400

<TABLE>
<S>                                             <C>                                  <C>
                                                                                                      -----------------------
                                                                                                         INITIALS - DATE
                                                                                                         ---------------
                                                                                                      LAND DEPT.  [Illegible]
                                                                                                                  -----------
                                                                                                      FIN. DEPT.  [Illegible]
                                                                                                                  -----------
                                                                                                      LEGAL DEPT.
                                                                                                                  -----------
                                                                                                      EXPL. DEPT. [Illegible]
                                                                                                                  -----------
                EXHIBIT "C"                                                                           ENGR. DEPT. [Illegible]
Attached to and made a part of that certain                                                                       -----------
 Participation Agreement dated May 25, 2004
    by and between Gryphon Exploration                                                                EXEC. DEPT. [Illegible]
 Company and Ridgewood Energy Corporation                                                                         -----------
                                                                                                      -----------------------

-----------------------------------------------------------------------------------------------------------------------------
Operator: Gryphon Exploration Co.               AFE No.: D04003                      Property Number: WC10300001
-----------------------------------------------------------------------------------------------------------------------------
Lease: OCS-G 22511                              Well No.: 1                          Blk/Prospect: West Cameron Block 103
-----------------------------------------------------------------------------------------------------------------------------
PTD: 17,500' TVD/MD                             Field: Wildcat                       Formation Objective: Marg A
-----------------------------------------------------------------------------------------------------------------------------
State: Louisiana                                CO / PH: Federal Offshore            Contractor: TODCO 203
-----------------------------------------------------------------------------------------------------------------------------
Location: PSL: 4,500' FNL & 566' FEL of WC Blk 103 (X= 1,449,918 & Y= 330,258) [Illegible]
-----------------------------------------------------------------------------------------------------------------------------
Remarks:
-----------------------------------------------------------------------------------------------------------------------------

This request for AFE will serve to document the turnkey  costs  required by ADTI to drill a straight hole to 17,500' TVD/ MD.
It is anticipated a 7-5/8" drilling liner will be run before reaching turnkey depth. Completion costs will be presented under
a seperate AFE after final evaluation.

-----------------------------------------------------------------------------------------------------------------------------
                                                   Intangible Drilling Cost
-----------------------------------------------------------------------------------------------------------------------------
Acct   Line                                                                           Drilling    Pre-Completion   Total Well
Code   Item                                                     Rate   Days   Days      Cost           Cost           Cost
-----------------------------------------------------------------------------------------------------------------------------
215     101   Location Permit & Surveys                                              $   10,000                    $   10,000
-----------------------------------------------------------------------------------------------------------------------------
215     103   Cuttings Disposal, Boat Cleaning                                                                     $        0
-----------------------------------------------------------------------------------------------------------------------------
215     201   Rig Move (Demobilization only)                                         $  150,000                    $  150,000
-----------------------------------------------------------------------------------------------------------------------------
215     301   Drilling Rig (Daywork, Labor, Meals, etc)                  0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     304   Primary Turnkey to 17,500' TVD/MD                                      $6,934,000                    $6,934,000
-----------------------------------------------------------------------------------------------------------------------------
215     304   Run 7-5/8" drilling liner before reaching PTD                          $  985,000                    $  985,000
-----------------------------------------------------------------------------------------------------------------------------
215     401   Fuel, Lubes and Water                                      0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     404   Cementing (Materials, Equip & Personnel)                                                             $        0
-----------------------------------------------------------------------------------------------------------------------------
        404   P&A Cement (Materials, Equip & Personnel)                              $  303,000                    $  303,000
-----------------------------------------------------------------------------------------------------------------------------
215     405   Open Hole Cement Plugs                                                                               $        0
-----------------------------------------------------------------------------------------------------------------------------
215     406   Bits, Stabilizers, Reamers                                                                           $        0
-----------------------------------------------------------------------------------------------------------------------------
215     407   Misc. Materials & Supplies                                                                           $        0
-----------------------------------------------------------------------------------------------------------------------------
215     501   Marine Transportation (Crew & Supply Boats)                0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     502   Air Transportation                                                                                   $        0
-----------------------------------------------------------------------------------------------------------------------------
215     503   Land Transportation                                        0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     504   Diving Services                                                                                      $        0
-----------------------------------------------------------------------------------------------------------------------------
215     507   Optional Open Hole Logging Services                                                                  $        0
-----------------------------------------------------------------------------------------------------------------------------
        507   LWD Formation Evaluation                                                                             $        0
-----------------------------------------------------------------------------------------------------------------------------
215     508   Mud Logging Services                                       0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     509   Correction Runs @ $152,000                                             $  152,000                    $  152,000
-----------------------------------------------------------------------------------------------------------------------------
215     510   Fishing Tools & Pipe Recovery                                                                        $        0
-----------------------------------------------------------------------------------------------------------------------------
        510   Coil Tbg & Nitrogen Services                                                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
        510   Pipe Cutting for P&A                                                                                 $        0
-----------------------------------------------------------------------------------------------------------------------------
215     511   Rental Equipment                                           0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     512   Surface Well Test Equipment & Personnel                                                              $        0
-----------------------------------------------------------------------------------------------------------------------------
        512   Sub-Surface Well Test Equipment & Personnel                                                          $        0
-----------------------------------------------------------------------------------------------------------------------------
215     513   Pipe Inspection (Casing, Drill Pipe, BHA's)                                                          $        0
-----------------------------------------------------------------------------------------------------------------------------
215     514   Casing Tools & Hammer Services                                                                       $        0
-----------------------------------------------------------------------------------------------------------------------------
215     515   Contract Labor                                                                                       $        0
-----------------------------------------------------------------------------------------------------------------------------
215     516   Shorebase & Dock Facilities                                0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     517   Communications                                                         $   23,000                    $   23,000
-----------------------------------------------------------------------------------------------------------------------------
215     518   Well Control Insurance @ $20.40 /ft @ 50%                              $  179,000                    $  179,000
-----------------------------------------------------------------------------------------------------------------------------
215     602   Engineering / On Site Logging                                                                        $        0
-----------------------------------------------------------------------------------------------------------------------------
215     603   Well Site Supervision Services                    $900    75           $   67,500                    $   67,500
-----------------------------------------------------------------------------------------------------------------------------
        603   Dispatching Services                                       0                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
215     701   Overhead (COPAS)                                                       $   75,000                    $   75,000
-----------------------------------------------------------------------------------------------------------------------------
215                                                                                                                $        0
-----------------------------------------------------------------------------------------------------------------------------
215     999   Contingency (10.0% of IDC's)                                           $  888,000                    $  888,000
-----------------------------------------------------------------------------------------------------------------------------
       Subtotal - Intangible Drilling Cost                                           $9,766,500         $0         $9,766,500
-----------------------------------------------------------------------------------------------------------------------------
                                                    Tangible Drilling Cost
-----------------------------------------------------------------------------------------------------------------------------
                                                                          Csg Cost
                                                                Footage    ($/ft)
-----------------------------------------------------------------------------------------------------------------------------
225     801   Drive Pipe: 30" x 1"                                  340     $0.00                                  $        0
-----------------------------------------------------------------------------------------------------------------------------
225     802   Conductor Casing: 18-5/8"                             800     $0.00                                  $        0
-----------------------------------------------------------------------------------------------------------------------------
225     803   Surface Casing: 13-3/8"                             4,500     $0.00                                  $        0
-----------------------------------------------------------------------------------------------------------------------------
225     804   Intermediate Casing: 9-5/8"                        13,800     $0.00                                  $        0
-----------------------------------------------------------------------------------------------------------------------------
225     805   Drilling Liner: 7-5/8"                             16,000     $0.00                                  $        0
-----------------------------------------------------------------------------------------------------------------------------
225     805   Drilling Liner:                                                                                      $        0
-----------------------------------------------------------------------------------------------------------------------------
225     808   Liner Hanger & Liner Top Packers                                                                     $        0
-----------------------------------------------------------------------------------------------------------------------------
225     901   Casing Head, Hanger & Valves                                                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
        901   Casing Spool(s), Hanger(s) & Valves(s)                                                               $        0
-----------------------------------------------------------------------------------------------------------------------------
225     902   Mudline Suspension Equipment                                                                         $        0
-----------------------------------------------------------------------------------------------------------------------------
225     904   Access Equip (Nav-Aids, Boat Landing, etc)                                                           $        0
-----------------------------------------------------------------------------------------------------------------------------
225           P/F Conductor Guide for 30"                                                                          $        0
-----------------------------------------------------------------------------------------------------------------------------
225     999   Contingency (15% of TDC's)                                                                           $        0
-----------------------------------------------------------------------------------------------------------------------------
       Subtotal - Tangible Drilling Cost                                             $        0         $0         $        0
-----------------------------------------------------------------------------------------------------------------------------
       Total Dry Hole Cost (Tangible & Intangible)                                   $9,766,500         $0         $9,766,500
-----------------------------------------------------------------------------------------------------------------------------
                                                   Working Interest                       Working Interest Owner Share
                                              -------------------------------------------------------------------------------
Working Interest Owner                        Dry Hole (BCP)   Completion (ACP)     Dry Hole      Completion   Total Producer
-----------------------------------------------------------------------------------------------------------------------------
Gryphon Exploration                              20.00000%        40.00000%       $1,953,300.00      $0.00      $1,953,300.00
-----------------------------------------------------------------------------------------------------------------------------
Ridgewood Energy Corporation                     80.00000%        60.00000%       $7,813,200.00      $0.00      $7,813,200.00
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                $        0.00
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                $        0.00
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                $        0.00
-----------------------------------------------------------------------------------------------------------------------------
Prepared                             Jack D. Shelledy                                 Joint Interest Approval

   By /s/ Jack D. Shelledy            Date: 6/7/2004   Company:
      ---------------------------
-----------------------------------------------------------------------------------------------------------------------------
Approved                                               Approved

   By /s/ [Illegible]                 Date: 6/7/2004      By
      ---------------------------
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Note: It is recognized  that the amounts  herein are estimated only and approval
      of  the  authorization  shall  extend  to the  actual  costs  incurred  in
      conducting the operations specified, whether more or less than that herein
      set out.Exhibit 10.3

                                         [LOGO]
                                         Dwight Pickle
                                         BHP Billiton Petroleum (Deepwater) Inc.
                                         1360 Post Oak Blvd., Suite 15O
                                         Houston, TX 77056-3020
                                         Phone: (713) 961-8437
                                         Fax: (713) 961-8339
                                         dwight.p.pickle@bhpbilliton.com

February 8, 2005

VIA FAX AND MAIL

Ms. Michelle Mauzy
The Houston Exploration Company
1100 Louisiana, Suite 2000
Houston, TX 77002-5219

Mr. Greg Tabor                    Mr. Melvin Baiamonte
Ridgewood Energy Corporation      Dominion Exploration & Production Inc.
5300 Memorial Drive, Suite 1070   1450 Poydras Street
Houston, TX 77007                 New Orleans, LA 70112-6000

RE: West Cameron 76 Unit
    OCS-G 9386 B#6 Well
    Gulf of Mexico

Ladies and Gentlemen:

Attached for your review and approval  please find AFE NO.  3370.C.02802  in the
gross  amount  of  $23,983,837  and a well plan  that has been  approved  by BHP
Billiton to drill and  complete the B-6 at the West Cameron 61 field B platform.
This well is proposed to uplift the  production  rate from the main reservoir in
this field, the MA3D and increase recoverable reserves.

BHPB and  partners  have a limited  opportunity  to capture a slot for the Ocean
Titan rig. It is anticipated  that the Titan rig will be available to begin work
on the B6 well in June 2005 following completion of the Mustang well. As per the
JOA,  there is a 30 day response  time to this AFE. Due to the proximity of this
well to other  producers in the Ma3D,  unanimous  approval by the partnership is
required.  It is  necessary  to obtain  unanimous  partnership  approval to this
project in the 30 day period to  facilitate  the  execution  of the  contractual
option on the Titan for this well.  The design of the B-6 9 5/8"  casing  string
requires the extra lift capacity provided by the Titan further  necessitating we
maintain this rig program if possible.

<PAGE>

The B6 well will  target the main field pay in the Ma3  downthrown  fault  block
with the objective of  increasing  ultimate  recoverable  reserves in this water
drive  gas  reservoir.  The off take  rate from the MA3D  reservoir  is  rapidly
declining and water production has significantly encroached on the B5 completion
leaving  only the A5 water free.  A new take point is needed to keep the voidage
rate as high as  possible.  For that  objective,  it is  proposed to employ sand
control in the B6 which allow higher  production  rates than have been  achieved
with the existing completions. The well can lift significant water production if
the section contains wet sand stringers. The B platform currently has 3,000 bwpd
available water handling capacity.

The B6 well is proposed  as a drill and  complete  operation.  The well has been
designed  for  maximum  flow rates.  The well  design  includes a 300' frac pack
completion with 4 1/2 "production  tubing and a large casing program (9 5/8") on
bottom to  accommodate  premium  gravel pack screens with shunt tubes.  The pore
pressure  prediction  work increased our confidence  level in our ability to get
the well down.

In addition to the Ma3 sand,  the B6 well will  appraise  the Rob C sand at this
location for a potential  sidetrack of the A4 well. Ma1 and Ma2 Sands could also
prove  productive  in the  subject  wellbore  but are not  considered  secondary
objectives. The economics are based solely on the Ma3 sand.

BHPB  proposes to have a partner  meeting to discuss this AFE if required by the
partnership on February 23, 2005. If you have questions please call Jim McFadden
at 713-961-8377 or the undersigned at 713-961-8437.

Very truly yours,

BHP BILLITON PETROLEUM (AMERICAS) INC.

/s/ Dwight Pickle
-------------------------------
Dwight Pickle
Senior Staff Negotiator

<PAGE>

                           AUTHORITY FOR EXPENDITURE
                    Americas Operating and Development Team

<TABLE>
<S>                                                   <C>
Project    West Cameron 76 (OCS-G 9386) B6            BHP AFE No.  3370.C.02802.
           OCS                                        Property No. _______________
Operator   BHP-Billiton                               Supplement   _______________
Contract/Agreement No.      __________      Budget Year        2005
                                                                Yes     Amount      No
Operator AFE #              __________
Estimated Start Date        May 1, 2005     Budget              |_|   $8,096,943   |x|
Estimated Completion Date   July 23, 2005   Current Forecast    |x|   $8,096,943   |_|

====================================================================================================
Lease Name & Well No.   County and State: Offshore Louisiana   Region: Gulf of Mexico OCA
                        ----------------------------------------------------------------------------
OCSG 9386 B6            Location (Sec-Twn-Rng): West Cameron Blk 76 - OCS-G 09386 B6
----------------------------------------------------------------------------------------------------
Field or Area           Prospect Name (Exploration Only)                         Last Well on Lease
                        -----------------------------------------------------
West Cameron            Prospect#                                               Yes   |_|   No   |x|
----------------------------------------------------------------------------------------------------
Type of AFE:            Formation                        Yes    No                 BHP Interest
Expense          |_|     & Depth     New Capital Proj.   |X|   |_|                BPO        APO
Development      |X|
Exploratory      |_|    Marg A3                                       Working
   Class Inventory      16,300' MD                                   Interest    33.76%     33.76%
----------------------------------------------------------------------------------------------------
</TABLE>

Project Description: Drill the B6 well to the Ma3 sand.

The primary objective is acceleration of Ma3 reserves. Secondary targets include
the Rob C sands. AFE includes costs to drill and complete the well in the Ma3
sand. Also includes costs to run wireline logs over two intervals.

================================================================================
                        Estimated Costs
--------------------------------------------------------------------------------
      Company         Working Interest    Drilling      Completion    Total Cost
--------------------------------------------------------------------------------
BHP Billiton            33.76%           $ 4,536,101   $ 3,560,843   $ 8,096,943
--------------------------------------------------------------------------------
Dominion                40.00%           $ 5,374,527   $ 4,219,008   $ 9,593,535
--------------------------------------------------------------------------------
Houston Exploration     15.00%           $ 2,015,448   $ 1,582,128   $ 3,597,576
--------------------------------------------------------------------------------
Ridgewood               11.24%           $ 1,510,242   $ 1,185,541   $ 2,695,783
--------------------------------------------------------------------------------
TOTAL                     100%           $13,436,317   $10,547,520   $23,983,837
================================================================================
Prepared by: Andrea Stewart              Date: December 20, 2004

<TABLE>
<CAPTION>
Recommended (Signatures):
====================================================================================
Geology     Date     Reservoir      Date     Production     Date   Geophysics   Date
====================================================================================
<S>        <C>      <C>           <C>        <C>            <C>    <C>          <C>
CP         12/20    AS            12/20/04   EC 12/20              NA
====================================================================================
Drilling    Date     Economics      Date     Petrophysics   Date     Finance    Date
------------------------------------------------------------------------------------
JR         21 Dec   MB 12/20/04              NA                    NA
====================================================================================
</TABLE>

BHP Approval:                            Date: 12-20-04

Joint Interest Approval - It is recognized that the amounts provided for herein
are estimates only, and approval of this authorization shall extend to the
actual costs incurred in conducting the operation specified, either more or less
than herein set out.

-------------------------------------------------------
Company       By          Title                  Date
-------------------------------------------------------
RIDGEWOOD    [Illegible]  EXEC. VICE PRESIDENT   3/7/05
-------------------------------------------------------
ENERGY
-------------------------------------------------------
CORPORATION
-------------------------------------------------------

<PAGE>

                                     [LOGO]

Memorandum                                                       Americas Region
                                                                 Petroleum
15 December 2004

TO:        Claiborne Vansant, Development Manager

cc:        J. Stobart, J. Russell, M. Atkins, A. Klein, J. McFadden, Y. Dalal

FROM:      Gene Riddle, Drilling Engineering Supervisor

OUR REF:   R:\Drilling\Campaign\Shelf\WESTCAM\B6\AFE\B6 AFE All Inclusive Cover
           Note 15 dec 04.doc

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

                             WEST CAMERON 76 B6 AFE

Please find attached an AFE cost estimate for the WC 76 B6 well. To drill, log
and abandon will require 57.5 days and $14.0 MM. The success case to drill and
complete will require 84 days and $23.9 MM.

This cost estimate considers the performance of the BHP offsets in the field as
well as similar wells drilled by competitors in the area. The cost includes 27%
NPT during drilling and 15% during completion.

The cost derivation was also based on the following:

     o    An estimated contract rig rate $65,000/day.

     o    Build hold build shaped well PTD 16,313/14,200 MD/TVD. WD 40 ft.

     o    Costs include:

          o    5 planned casing strings to reach TD.

          o    Synthetic based mud system.

          o    Wireline logs in two hole intervals.

          o    9-5/8" production liner, no production tieback, 4-1/2" production
               tubing.

          o    No coring or sidetracks.

          o    Single zone 300 ft frac pack.

A derivation of the cost in discrete steps is included below.

--------------------------------------------------------------------------------
                                            Days               Cost $MM
--------------------------------------------------------------------------------
            Mob / Demob                     2.8                   1.0
--------------------------------------------------------------------------------
            Drill to TD                    48.4                  11.1
--------------------------------------------------------------------------------
                Log                         3.8                   1.3
--------------------------------------------------------------------------------
               P & A                        2.5                   0.6
--------------------------------------------------------------------------------
       Run Liner & Clean Out               4.95                   1.8
--------------------------------------------------------------------------------
              Complete                     24.1                   8.7
--------------------------------------------------------------------------------

/s/ Gene Riddle
-----------------------------------
Gene Riddle, Drilling Engineering Supervisor

<PAGE>

                               West Cameron 76 B6

                                   [GRAPHIC]

<PAGE>

Schlumberger                    bhpbilliton                   [LOGO]

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
[Illegible]                                                                 Field

OCS-G-09386 B006 ST00BP00                                                   West Cameron BIks 60,61,76,77,96
---------------------------------------------------------------------------------------------------------------------------------
<S>      <C>         <C>         <C>         <C>            <C>             <C>       <C>         <C>     <C>         <C>
                                                                            Surface   NA027 Lousiane State Planes,
                                                                            Location  Southern Zones, US Foot

Magnetic [Illegible] [Illegible] [Illegible] Date           October 8, 2004 Latitude  [Illegible] Morning [Illegible] [Illegible]

[Illegible] 2004     [Illegible] [Illegible] Field Strength [Illegible]     Longitude [Illegible] Evening [Illegible] [Illegible]
---------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
---------------------------------------------------------------------------
Structure

BHP WC-61 B-Platform
---------------------------------------------------------------------------
<S>           <C>                                  <C>
Miscellaneous

[Illegible]   G-09388 B006 (RKB-120) FVD Reference RKB (120000 A above MSL)

Plan          [Illegible]                          [Illegible]
---------------------------------------------------------------------------
</TABLE>

                                   [GRAPHIC]

Surface Location: 3377.6' FSL, 1805.23' FWL BLK. WC-61
PBHL: 2052.16' FNL, 887.91' FWL BLK. WC-76

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                                     Targets
Name               SSTVD       TVD      Northing     Easting       NS         EW       Shape       Dimensions
----------------------------------------------------------------------------------------------------------------
<S>              <C>        <C>        <C>         <C>          <C>        <C>       <C>        <C>
Rob C -11675ss   11675.00   11795.00   35O200.00   1348300.00   -2693.85   -682.84   CIRCULAR   Diameter: 300.00
----------------------------------------------------------------------------------------------------------------
MA3 -13290ss     13290.00   13410.00   348450.00   1348150.00   -4443.94   -832.85   CIRCULAR   Diameter: 300.00
----------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
                                            Critical Points
-------------------------------------------------------------------------------------------------------
Comments                           Survey MD   Inclination   Azimuth   Sub-Sea TVD      TVD        VS
-------------------------------------------------------------------------------------------------------
<S>                                 <C>           <C>         <C>        <C>         <C>        <C>
Slot3 WC-61 B-PLATFORM                  0.00       0.00       196.49      -120.00        0.00      0.00
-------------------------------------------------------------------------------------------------------
Mud Line-36ss                         156.00       0.00       196.49        36.00      156.00      0.00
-------------------------------------------------------------------------------------------------------
KOP Build 2DEG./100'                 6600.00       0.00       196.49      6480.00     6600.00      0.00
-------------------------------------------------------------------------------------------------------
Begin 29.68DEG. Tangent              8083.97      29.68       196.49      7898.49     8018.49    373.11
-------------------------------------------------------------------------------------------------------
Begin 1.5DEG./100' Bld & Turn       11211.26      29.68       196.49     10615.51    10735.51   1910.38
-------------------------------------------------------------------------------------------------------
Begin 47.4DEG. Tangent              12482.75      47.40       184.90     11607.32    11727.32   2696.59
-------------------------------------------------------------------------------------------------------
Rob C -11675ss                      12582.75      47.40       184.90     11675.00    11795.00   2769.96
-------------------------------------------------------------------------------------------------------
MA3 -13290ss                        14968.87      47.40       184.90     13290.00    13410.00   4520.59
-------------------------------------------------------------------------------------------------------
PBHL/TD                             16313.37      47.40       184.90     14200.00    14320.00   5507.01
-------------------------------------------------------------------------------------------------------

<CAPTION>
-------------------------------------------------------------------------------------
                                   Critical Points
-------------------------------------------------------------------------------------
Comments                              NS         EW     Northing      Easting     DLS
-------------------------------------------------------------------------------------
<S>                                <C>        <C>       <C>         <C>          <C>
Slot3 WC-61 B-PLATFORM                 0.00      0.00   352893.70   1348982.80   0.00
-------------------------------------------------------------------------------------
Mud Line-36ss                          0.00      0.00   352893.70   1348982.80   0.00
-------------------------------------------------------------------------------------
KOP Build 2DEG./100'                   0.00      0.00   352893.70   1348982.80   0.00
-------------------------------------------------------------------------------------
Begin 29.68DEG. Tangent             -360.38   -106.65   352533.34   1348876.16   2.00
-------------------------------------------------------------------------------------
Begin 1.5DEG./100' Bld & Turn      -1845.20   -546.05   351048.60   1348436.78   0.00
-------------------------------------------------------------------------------------
Begin 47.4DEG. Tangent             -2620.50   -676.55   350273.34   1348306.29   1.50
-------------------------------------------------------------------------------------
Rob C -11675ss                     -2693.85   -682.84   350200.00   1348300.00   0.00
-------------------------------------------------------------------------------------
MA3 -13290ss                       -4443.94   -832.85   348450.00   1348150.00   0.00
-------------------------------------------------------------------------------------
PBHL/TD                            -5430.06   -917.37   347463.00   1348065.48   0.00
-------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                       B6, OCSG 09386, West Cameron 76 B6

RIG POSITIONING DAYS: 2.8       SHL:   1348982.8' E &352893.7 N NAD27
DRILL & ABANDON DAYS: 49.2      BHL:   1348065' E&347363.9' N NAD 27
TOTAL DAYS            51.9      Rig:   Ocean Titan
DEPTH:                16,300'   AFE# & Revision Date:                  20-OCT-04
WD:                   0,040'

Assumptions:
1. $65k/day rig rate
2. Open hole logs in two intervals
3. No Coring or Sidetracks
4. 12-1/4* hole through primary objective

<TABLE>
<CAPTION>
DESCRIPTION                           RIG MOB/DEMOB   DRY HOLE W/LOGS   WC 76 B6 TOTAL
-----------------------------------   -------------   ---------------   --------------
<S>                                      <C>            <C>               <C>
Section 1 : Time Sensitive
Rig Rate                                  208,000         3,197,176         3,405,176
Support Vessels                            33,058           590,248           623,306
BHP Supervision                            15,427           275,449           290,876
BHP Well Site G&G                               0            42,500            42,500
Aviation                                        0                 0                 0
Mud Logging                                     0           152,000           152,000
Mud Engineering                             4,992           115,590           120,582
Cementing Services                          5,510            98,375           103,884
Communications                              3,306            59,025            62,331
Solids Control                              2,755           104,099           106,854
Diving / ROV                                    0                 0                 0
Directional Drilling                            0         1,806,554         1,806,554
Wellhead Services                               0                 0                 0
Metocean                                      931            16,625            17,556
Completion and Workover Services                0                 0                 0
Supply Base                                11,019           196,749           207,769
Rental Tools                                4,138            83,879            88,017
Fishing Services                                0                 0                 0
Rig Contractor Additional Charges           2,755            49,187            51,942
                                         --------       -----------       -----------
Total Time Sensitive                      291,890         6,787,458         7,079,347

Section 2 : Non Time Sensitive
Rig Positioning                            35,700                 0            35,700
Site Survey                                     0                 0                 0
HSE                                             0           200,000           200,000
Studies / Analysis                              0            80,000            80,000
Wireline Logging                                0           330,000           330,000
Freight and Materials Handling              6,887           122,968           129,855
Tubular Running Services                        0           241,000           241,000
Inspection and refurbishment                    0           118,375           118,375
Abandonment & Suspension                        0           600,000           600,000
                                         --------       -----------       -----------
Total Non Time Sensitive                   42,587         1,692,343         1,734,930

Section 3: Tangibles & Consumables
Wellhead Equipment                              0           186,000           186,000
Tubulars                                        0         1,792,068         1,792,068
Tubular Accessories                             0           235,000           235,000
Mud and Chemicals                               0         1,590,000         1,690,000
Cement and Additives                            0           200,000           200,000
Drill Bits                                      0           137,590           137,590
Completion Consumables                          0                 0                 0
Solids Control Equipment                        0           211,164           211,164
Rig Consumables                                 0            75,000            75,000
Fuel                                       12,397           221,343           233,740
Miscellaneous                                   0                 0                 0
                                         --------       -----------       -----------
Total Tangibles & Consumables              12,397         4,648,165         4,760,562

Section 4: Administration
Timewriting                                 9,539           347,247           359,536
Training                                        0            50,000            50,000
Travel                                          0            49,187            51,942
                                         --------       -----------       -----------
Total Administration                        9,539           446,434           461,478
                                         --------       -----------       -----------
Class 'A' Estimate (+/-15%)              $356,413       $13,574,400       $14,036,317
                                         ========       ===========       ===========
Original AFE
                                         --------       -----------       -----------
SUPPLEMENTAL AFE ESTIMATE
                                         ========       ===========       ===========
</TABLE>

DRILLING RESOURCE TEAM SIGN OFF:
--------------------------------

PREPARED BY:   RECOMMENDED BY:   RECOMMENDED BY:   RECOMMENDED BY:

DATE:          DATE:             DATE:             DATE:

<PAGE>

<TABLE>
<S>                                                        <C>
------------------------------------------------------------------------------------------------------------------------------------
Preliminary AFE Estimate $10,547.52                        BHP PETROLEUM
1 x Zones x 300ft FracPack - Deviated Well -38 deg         DRILLING & COMPLETION
Days    29.07                                              FIELD:              TBA
NPT        15%                                             WELL:               WC77-B6 COMPLETION - PLATFORM
WD         40 ft.                                          Last Revision Date: 18-Nov-04
MD     16,300 ft.                                          AFE Number:         TBA
TVD    14,200 ft.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                   Install Tree-   Run Liner              Install Upper
                                                   Rate  Rig Move   Riser & BOP    Clean-Out   Perforate    Completion
  GSAP   GSAP Code  CONTRACT SERVICES/EQUIPMENT    US$    In/Out      Run/Pull    & Displace  + FracPack      & Test        Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>    <C>              <C>       <C>        <C>            <C>        <C>
                    Time Estimate                                           1.08        9.93       10.58           7.47        29.07
------------------------------------------------------------------------------------------------------------------------------------
Section 1: Time Sensitive Costs                          Day       Day            Day         Day         Day            196.8937799
------------------------------------------------------------------------------------------------------------------------------------
                    DRILLING RIG
                    Rig Rate                      60.00                    64.71      595.96      635.08         448.40     1,744.15
                    Rig Rate - Mob / DeMob        60.00
GSAP 1   702090     DRILLING RIG TOTAL                                     64.71      595.96      635.08         448.40     1,744.15
GSAP 2   715140     SUPPORT VESSELS TOTAL                                  23.19      213.55      227.57         160.68       624.99
GSAP 3   715240     BHP SUPERVISION TOTAL                                  10.73       98.83      105.32          74.36       289.24
GSAP 4   715200     WELLSITE G&G TOTAL
GSAP 5   730180     AVIATION TOTAL
GSAP 6   715090     MUD LOGGING TOTAL
GSAP 7   716120     MUD ENGINEERING TOTAL                                   1.62       94.36      100.55          71.00       267.53
GSAP 8   715100     CEMENTING SERVICES TOTAL                                4.04      137.25       39.69          28.03       209.01
GSAP 9   722045     COMMUNICATIONS TOTAL                                    1.62       14.90       15.88          11.21        43.60
GSAP 10  715150     SOLIDS CONTROL TOTAL
GSAP 11  715060     DIVING / ROV TOTAL
GSAP 12  715180     DIRECTIONAL DRILLING TOTAL
GSAP 13  715230     WELLHEAD SERVICES TOTAL
GSAP 14  715070     METOCEAN TOTAL                                          0.54        4.97        5.29           3.74        14.53
GSAP 15  715110     WELL TESTING TOTAL                                                            201.11         141.99       343.10
GSAP 16  715210     COMPLETIONS & WORKOVER
                    SERVICES TOTAL                                                     59.66      968.66         614.33     1,809.48
GSAP 17  730200     SUPPLY BASE TOTAL                                       8.36       76.98       82.03          57.92       225.29
GSAP 19  702100     RENTAL TOOLS TOTAL                                      2.16       19.87       21.17          14.95        58.14
GSAP 20  715120     FISHING SERVICES TOTAL                                  1.08        9.93       10.58           7.47        29.07
GSAP 21  702091     RIG CONTRACTOR ADDITIONAL
                    CHARGES TOTAL                                           0.81        7.45        7.94           5.61        21.80

SECTION 1: Time Sensitive Total                                           119.38    1,338.66    2,426.16       1,643.41     5,694,46

------------------------------------------------------------------------------------------------------------------------------------
Section 2: Non Time Sensitive Costs
------------------------------------------------------------------------------------------------------------------------------------
GSAP 22  715080     RIG POSITIONING TOTAL
GSAP 23  742000     SITE SURVEY TOTAL
GSAP 24  760000     HSE TOTAL
GSAP 25  743040     STUDIES / ANALYSIS TOTAL                                                                      15.00        15.00
GSAP 28  715170     WIRELINE LOGGING TOTAL                                                                       170.00       170.00
GSAP 30  730000     FREIGHT & MATERIALS HANDLING
                    TOTAL                                                   2.70       24.83       26.46          18.68        72.67
GSAP 31  715160     TUBULAR RUNNING SERVICES
                    TOTAL                                                              50.00       95.26          67.26       212.52
GSAP 32  710090     INSPECTION & REFURBISHMENT
                    TOTAL                                                   2.70       24.83       26.46          68.68       122.67

SECTION 2: Non Time Sensitive Total                                         5.39       99.66      148.19         339.63       592.87

------------------------------------------------------------------------------------------------------------------------------------
Section 3: Tangibles & Consumables
------------------------------------------------------------------------------------------------------------------------------------
GSAP 34  620117     WELLHEAD EQUIPMENT TOTAL                                                                     185.00       185.00
GSAP 35  620116     TUBULARS TOTAL                                                    301.80                     820.52     1,122.32
GSAP 36  620118     TUBULAR ACCESSORIES TOTAL                                          30.50                                   30.50
GSAP 37  620114     MUD & CHEMICALS TOTAL                                             100.00      659.60         150.00       909.60
GSAP 38  620113     CEMENT & ADDITIVES TOTAL
GSAP 39  640100     DRILL BITS TOTAL                                                   20.00                                   20.00
GSAP 40  620119     COMPLETION CONSUMABLES
                    TOTAL                                                                         758.43         490.41     1,248.84
GSAP 41  702120     SOLIDS CONTROL EQUIPMENT
                    TOTAL
GSAP 42  620115     RIG CONSUMABLES TOTAL                                   1.08        9.93       10.58           7.47        29.07
GSAP 43  642100     RIG FUEL TOTAL                                         10.78       99.33      105.85          74.73       290.69

SECTION 3: TANGIBLES & CONSUMABLES TOTAL                                   11.86      561.66    1,534.46       1,728.14     3,838.02

------------------------------------------------------------------------------------------------------------------------------------
Section 4: Administration
------------------------------------------------------------------------------------------------------------------------------------
GSAP 45             RESOURCE TEAM TIMEWRITING
                    TOTAL
GSAP 48  601800     TRAINING TOTAL                                                                                75.00        75.00
GSAP 49  801000     TRAVEL TOTAL                                                                                  75.00        75.00

SECTION 4: ADMINISTRATION TOTAL                                                                                  150.00       150.00

------------------------------------------------------------------------------------------------------------------------------------
GSAP 46             OVERHEAD TOTAL                                          3.76       55.00      112.99         106.16       274.17

                    ESTIMATED TOTAL                                       140.39    2,054.88    4,221.80       3,967.36    10,547.52
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S>                                                                                                 <C>
                                         REVIEWED BY: _____________________________________         _____________________
                                                      DRILLING ENGINEER SUPERVISOR                  DATE

                                                      _____________________________________         _____________________
                                                      COMPLETION ENGINEER SUPERVISOR                DATE

                                         APPROVED BY: _____________________________________         _____________________
                                                      DRILLING MANAGER                              DATE

------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                  Attachment 1

                               B6 Well Discussion

1.   Pertinent Drilling History

     West Cameron Block 76 produces gas with minor  amounts of  condensate  from
     the MA (Marg A) interval (MA1, MA2, and MA3 sands) below-13,000' TVDss.

     MA3

     The MA3 sand,  the field's main reservoir  (Attachment  7), is divided into
     upthrown    and    downthrown    segments    by   a    large    intervening
     down-to-the-southeast fault. Most of the field's production has been from 6
     wells in the  downthrown  MA3  reservoir  (A-l,  B-2, B-3, B-4, B-5 and A-5
     wells).  The B-4 well was later  recompleted  in the  shallower MA1 sand in
     2003.

     In 1997, the B-2 well discovered the expanded downthrown MA3 reservoir.  In
     late 1998,  the B-3 was drilled as an offset to the B-2 and the B-4 and B-5
     wells  were  immediately  drilled in early  1999  during the same  drilling
     campaign.  The A-5 was drilled in the downthrown MA3 in 2001, to accelerate
     production.

     Rob C

     The A-4  well  was  drilled  on the  west  into  the  upthrown  MA  section
     (Attachment  6) but  rapidly  depleted  on test  and was  recompleted  in a
     shallower  Lower  Miocene  reservoir  near -11800' in the Robulus C (Rob C)
     section.  The Rob C  reservoir  also has gas behind pipe in the A-l and A-3
     wells,  which  have  not yet been  produced.  The A-4 Rob C  production  is
     nearing the end of its life and an updip sidetrack is planned, dependent on
     reservoir quality seen in the B-6 Rob C interval.

2.   Structure

     The West Cameron Block 76 Field is located  downthrown to a large northeast
     striking  down-to-southeast  growth  fault.  A large  regional  shale ridge
     controls the strike of the fault and parallels it along the upthrown  side.
     The WC 76 field's structure is a circular  anticlinal closure protruding as
     a salient  off the SE flank of the ridge.  Two narrow  grabens  trend SW-NE
     across the center of closure at the  four-block  junction  southwest of the
     platforms.  A small structural  ridge diverges  westward from the center of
     closure  through  the  penetration  point  of the A-2 and  B-l  wells.  The
     structure is highly faulted by synthetic and antithetic  faults striking in
     a general northeasterly direction.

     A large SW-NE  trending  down-to-SE  buried fault crosses the center of the
     structure  and  separates  the thinner  upthrown NW side from the  expanded
     downthrown  SE side.  The  upthrown MA section  between the MA2 top and MA3
     base averages 590' in thickness,  while the downthrown B-3 well  penetrated
     2,050' of MA sands without encountering the base.

     The upper extent of the fault terminates against  unconformities within the
     MA section and does not extend  above it.  Upthrown MA  production  is from
     isolated  fault blocks while  downthrown MA3 production is from an expanded
     stacked section of deltaic sands with a gas column of over 600' on a common
     water contact. The MA1 and MA2

<PAGE>

     reservoirs  occur mainly in the upthrown  areas and are  shaled-out or have
     low permeabilities in the downthrown wells.

3.   Stratigraphy

     The West Cameron 76 MA sands were  deposited  during a drop in sea level in
     the Lower Miocene (17.8 mmyrs ago) by shelf edge deltas The large expansion
     fault which divides the MA3 Reservoir into upthrown and downthrown segments
     was active  near the shelf edge  during MA  deposition.  Deposition  on the
     upthrown shelf side was controlled by wave and deltaic erosion.  Deposition
     on the downthrown basin side was controlled by space being maintained below
     erosional base by the continuous downward movement of the fault block. This
     resulted in a massive  stacked  downthrown  sand section as compared to the
     thinner, but cleaner winnowed upthrown sands.

     Transgressive  marine  shale  and  sands  covered  the MA  sands  during  a
     subsequent  rise in sea  level.  The top of the  transgressive  section  is
     capped by the Rob C reservoir and unconformity. This erosional unconformity
     was  created  in  shallow   shelf   waters  by  wave   action   during  the
     transgression.  A sand "lag" deposit covered it and the Rob C reservoir was
     created  from a buildup  of the sand into a bar or shoal  during a pause in
     the transgression.

4.   MA 3 Production History

     The MA3  downthrown  (MA3D) has produced 177 Bscf, 1.1 MM Bc and 3 MM Bw as
     of January 1, 2005. Of the six producers, 3 are now offline. The B2, B3 and
     B4 wells  located on the eastern  side of the  reservoir  have  watered out
     leaving the  remaining  three wells,  A1, B5 and A5  producing.  The B5 has
     recently started making  significant  water heralding the onset of water in
     it's drainage area. The A5 is the western most well and is producing  water
     free.  All wells  except the Al have been  drilled and  completed  over the
     entire  interval.  This tends to suggest there is more lateral  movement of
     the water versus vertical due to the lack of water influx into the A5.

     The water  movement is  consistent  with the mapped water  contact which is
     located on the eastern side of the accumulation  (Attachment 7). The north,
     south and west are bounded by faults.  Water underlies the gas accumulation
     and is  moving  vertically  and  laterally  (east to  west) as a result  of
     pressure depletion due to production.

     The reservoir is very  heterogeneous  with  permeability  ranging from 1 to
     1,000 md. Well tests support lower  permeability  than the log and sidewall
     core data.  Vertical  permeability  is probably  greatly reduced due to the
     depositional  model  placing  interbedded  shales over the sand  deposition
     without amalgamation.

     Average porosity is estimated to be 20% with a water saturation of 35%. The
     net to gross ratio of the MA3D is not well defined.  Estimates ranging from
     44% to 66% based on different permeability cutoffs have been reported.

     The gas is 89%  methane  with a  condensate  yield of 6 barrels per million
     cubic feet of 42 API degree  condensate.  A possible dew point of 4,000 psi
     has been estimated based on the gas analysis  performed on the MA1 sand gas
     sample from the B4 well,  which appears  similar to the  composition of the
     MA3D.

<PAGE>

     The initial  reservoir  pressure  was measured in well A1 to be 11,436 psi.
     Current pressure is estimated to be approximately 6,000 psi.

     Existing  MA3D wells have been  completed  without the use of sand control.
     Well  production  rates of ~ 20 MMscfpd were obtained on most  completions,
     the B5 obtained a maximum rate of ~30 mmscfpd in 2001.  Sand production has
     occurred and is presumed to emanate from the less cemented  sand  stringers
     which  are  typically  the  highest  permeability.   Water  production  has
     typically exacerbated sand production under high flow rates.

     In 2003 BHP Billiton  under took internal  studies to identify  options for
     increasing the offtake rate of the MA3D to improve recovery. A new well was
     proposed  but before  investing in this option it was decided to attempt to
     increase  the existing  flow rates to the maximum  sand free rate.  Surface
     sand detectors were installed and calibrated. Increases of ~ 5 MMscfpd were
     obtained  in the A5 and B5  wells  from  the  winter  of 2003 to  mid-2004.
     Declining   reservoir   pressure  made   maintenance  of  sustained   rates
     impossible.  A "flux"  based  maximum  flow rate  model was  developed  and
     calibrated  to sand  production  events.  This model is used today for rate
     management.

     Without  sand  control  the MA3D  completions  cannot be produced at higher
     rates than they are currently.  The A5 and B5 completions currently produce
     a combined  rate of ~ 42 MMscfpd.  The  offtake  rate peaked in 2000 at 102
     MMscfpd from all wells combined.

     It  is  proposed  to  significantly   increase  the  offtake  rate  by  the
     installation of the B6 well.

5.   Gas in Place Estimate

     The MA3D  reservoir has an estimated  gross rock volume range of 300,000 to
     325,000 acft. The well averages for porosity,  water  saturation and net to
     gross are 0.20,  0.35 and 0.44 to 0.66 (n/g).  The FVF is  estimated  to be
     ~360  scf/rcf.  Given  these  parameters,  the  original  gas in  place  is
     estimated to be between 269 and 437 Bscf. This range is primarily driven by
     the net to gross  ratio.  A most likely net to gross of 53% yields a gas in
     place of 324 to 351 Bscf.

6.   Remaining Recoverable Reserves

     Decline curve  modeling  suggests  that without  additional  drilling,  the
     reservoir will deplete with an ultimate  recovery of 233 Bscf which equates
     to a recovery factor of 66% to 71% based on the most likely GIP range.

     The addition of the B6 well is proposed to lower the  abandonment  pressure
     approximately  1,000 to 2,000  psi and  increase  the  recovery  factor  by
     approximately 5% to 20%. This would yield incremental  recovery of 15 to 70
     Bscf. Attachment 8 shows the comparison of production rate predictions with
     and  without  the B6  well.  Attachment  9  shows  the  yearly  incremental
     production associated with the B6 for a 15 Bscf uplift in recovery.

7.   B6 Well Objective

     The primary objective of the B6 well is to increase the voidage rate of the
     reservoir  and  improve  ultimate  recovery  by  lowering  the  abandonment
     pressure.

<PAGE>

     The  secondary  objective of the B6 well is to appraise the location in the
     Rob C reservoir.  Logs and pressures will be obtained in this interval. Due
     to the casing design,  the B6 cannot be used for a completion in the Rob C.
     It is proposed to sidetrack the A4 in this area if proven to be productive.

     It is proposed to install  sand  control in the well which will enable much
     higher  production  rates than  previously  obtained  with past  completion
     techniques.

     The  well  location  objective  is to  place  the  perforations  updip  and
     laterally  west in the  reservoir  to  avoid  water  influx.  Modeling  has
     concluded that the well can lift  significant  water volumes  maintain high
     rates  sufficient  for economic  success.  The "B" platform has ~3,000 bwpd
     processing  capacity.  It is  anticipated  the well will  produce  30 to 60
     mmscpd.  The  quality of the  section  found in the well and the  resultant
     completion skin will dictate the rate potential.

     The B6 well location co-ordinates are shown in Attachment 5.

     The proposed completion is envisioned to be up to 300' and will extend from
     the top of the reservoir down (Attachment 1). It is not planned to drill to
     the water contact to eliminate  potential water breakthrough behind pipe. A
     special well design to provide 9 5/8" casing on bottom has been  developed.
     The larger  casing will  assist in the sand  control  installation  that is
     planned to use shunt tube  technology.  A 300' frac pack or gravel  pack is
     technically  challenging  but has been performed  recently in the industry.
     BHP  Billiton  is  partner  in one  recent  installation  and  is  actively
     participating  in the technology  and techniques  required for the scope of
     this  completion.  While a  "Fracpack"  is  desirable  for reduced skin and
     improved  performance,  the  possibility  of wet  stringers  in the drilled
     section might make this application undesirable. A more conventional "water
     pack" coupled with  selective  perforations  may provide  better water free
     production.  Both  techniques  are  under  consideration  and the  ultimate
     decision will be made when the section is logged.

     The drilling program for the well has been developed  considering the risks
     associated  with drilling  through the depleted sands above and in the MA3D
     (Attachment 2 Pore Pressure  Plot and  Attachment 3 Casing Seat Depths).  A
     large bore  wellhead  has been  obtained  to provide an  additional  casing
     string  enabling  the  installation  of  9  5/8"  casing  in  the  MA3D.  A
     geomechanical   study  by  GMI  was  conducted  in  2004  to  evaluate  the
     recommended maximum hole angle. Hole stability is a primary risk due to the
     pore  pressure  differences  between the  depleted  sands and  shales.  The
     maximum hole angle for the B6 is 47 degress.

8.   Risk Issues and Mitigation

     Primary risk issues  associated  with this project have been  identified to
     be:

          a.   Potential pore pressure problems in the Rob C section.

          b.   Successfully getting the well down and 9 5/8" on bottom.

          c.   Realizing a reservoir section that has suitable Kh to provide the
               well rates expected.

          d.   Finding  wet sand  stringers  in the  section  high  permeability
               layers.

          e.   Installation of a 300' long gravel pack.

          f.   Inducing  water  encroachment  and  production in the well due to
               high withdrawal rates.

<PAGE>

     Mitigation or acceptance of these risks has been evaluated as:

          a.   The area to be  penetrated  by the B6 may not connect to the area
               drained by the A4 based on the recovery and  performance  of that
               well.  In the event it is  depleted,  a scenario  exists  where a
               casing string may be required.

          b.   The A-5  well was  successful  drilled  with  similar  levels  of
               depletion in the sands  overlaying  the MA3D.  The A-5 program is
               being used as a template for this plan.

          c.   The B-6  location  is  projected  to be between the A1 and the B5
               wells. The A1 section is very condensed and multiple scenarios of
               how  the  section  will  change  between  A1  and B5  exist.  Our
               expectation  is an  acceptable  section will be found at the well
               location.

          d.   If the section found  contains wet sands,  a high rate water pack
               is being  evaluated  as the  completion  technique  coupled  with
               selective   perforation   of   only   the  gas   bearing   sands.
               Additionally,  there is sufficient water handling capacity on the
               facility  to manage a high rate gas well with  significant  water
               production.  Nodal modeling  suggests the gas production  rate is
               robust with high water yields.

          e.   BHP  Billiton is  technically  prepared  to execute  this type of
               completion and has experience with recent similar jobs.

          f.   The project is  economically  viable in the event of  significant
               water production.

<PAGE>

[LOGO]

[GRAPHIC]

--------------------------------------------------------------------------------
                                 WEST CAM 76 #B6
                            WELL COMPLETION DIAGRAM
                               ACTUAL o PROPOSED
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
FIELD   West Cameron 76
--------------------------------------------------------------------------------
WELL #  B6
--------------------------------------------------------------------------------
LEASE   OCS-G-9386
--------------------------------------------------------------------------------
RKB TO WL       RKB TO CHF
--------------------------------------------------------------------------------
RKB TO ML       WATER DEPTH   40'
--------------------------------------------------------------------------------
ANNULAR FLUID   8.3 ppg KCL
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                DIRECTIONAL DATA
--------------------------------------------------------------------------------
MAX ANGLE   47   THRU ZONE    47
--------------------------------------------------------------------------------
KOP       8084   HOLE TYPE Build & hold
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                               SURFACE EQUIPMENT
--------------------------------------------------------------------------------
TREE   4 1/16" x 10 M
--------------------------------------------------------------------------------
SWAB CAP SIZE & THRD
--------------------------------------------------------------------------------
TOP TREE PLANGE
--------------------------------------------------------------------------------
TUBING SPOOL FLANGE
--------------------------------------------------------------------------------
NOTE  Tree Tto be rated for PSL 3 Service
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                               RISER DESCRIPTION
--------------------------------------------------------------------------------
#     SIZE     WGHT   GRADE     THRD     DEPTH
--------------------------------------------------------------------------------
I
--------------------------------------------------------------------------------
II
--------------------------------------------------------------------------------
III
--------------------------------------------------------------------------------

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

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

--------------------------------------------------------------------------------
                                 TUBING DETAIL
--------------------------------------------------------------------------------
             Production Tbg.
--------------------------------------------------------------------------------
SIZE              4-1/2"
--------------------------------------------------------------------------------
WEIGHT            13.5#
--------------------------------------------------------------------------------
GRADE            13 Cr 80
--------------------------------------------------------------------------------
DEPTH
--------------------------------------------------------------------------------
THREAD
--------------------------------------------------------------------------------
NEW/USED           NEW
--------------------------------------------------------------------------------
COATING
--------------------------------------------------------------------------------
SCSSV
--------------------------------------------------------------------------------
MIN. I.D.'s       3.812"
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                           PRODUCTION ASSEMBLY DETAIL
--------------------------------------------------------------------------------
#     O.D.   I.D.   LENGTH   DESCRIPTION
--------------------------------------------------------------------------------
       (")    (")     (")
--------------------------------------------------------------------------------
1.
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2.
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3.
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4.
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5.
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6.
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7.
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8.
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9.
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10.
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11.
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12.
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13.
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14.
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15.
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16.
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17.
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18.
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19.
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20.
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21.
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27.
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29.
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30.
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31.
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32.
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33.
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34.
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                 CASING DETAIL
--------------------------------------------------------------------------------
#     SIZE     WGHT   GRADE     THRD     DEPTH
--------------------------------------------------------------------------------
A     30"       1"      DP                370'
--------------------------------------------------------------------------------
B     20"      133#    N-80     BTC      4500'
--------------------------------------------------------------------------------
C   13 3/8"    72#    P-110     SLIJ    13,380'
--------------------------------------------------------------------------------
D   11 7/8"   71.8#   Q-125     SLX     14,380'
--------------------------------------------------------------------------------
E    9 5/8"   53.5#   Q-125   SLIJ II   15,800'
--------------------------------------------------------------------------------
F
--------------------------------------------------------------------------------
G
--------------------------------------------------------------------------------
H
--------------------------------------------------------------------------------
I
--------------------------------------------------------------------------------
J
--------------------------------------------------------------------------------
K
--------------------------------------------------------------------------------
L
--------------------------------------------------------------------------------
                                TIE BACK DETAIL
--------------------------------------------------------------------------------
M
--------------------------------------------------------------------------------
N
--------------------------------------------------------------------------------
O
--------------------------------------------------------------------------------
P
--------------------------------------------------------------------------------
Q
--------------------------------------------------------------------------------
R
--------------------------------------------------------------------------------
S
--------------------------------------------------------------------------------
Completed:                      Workovers:                      none
--------------------------------------------------------------------------------

                                  Attachment 1

<PAGE>

[LOGO]

                                   WC 76 - B6
                         Pre-Drill Estimated PPFG Plot

                                      ppge

                                   [GRAPHIC]

                                  Attachment 2

<PAGE>

--------------------------------------------------------------------------------
                            WC 77 B-6 Proposed Casing
                          Relative to Formation Picks
--------------------------------------------------------------------------------

                                   [GRAPHIC]

                                  Attachment 3

<PAGE>

                                    [GRAPHIC]

        Surface Location
-------------------------------
WC 76 A001 -93.382591 29.621445
WC 60 A002 -93.382613 29.621442
WC 61 A003 -93.382628 29.621445
WC 77 A004 -33.382644 29.621459
WC 77 A005 -93.382631 29.621475

      Bottom Hole Location
-------------------------------
WC 76 A001 -93.380664 29.609126
WC 60 A002 -93.391250 29.616684
WC 61 A003 -93.381961 29,616386
WC 77 A004 -93.392145 29.607277
WC 77 A005 -93.393643 29.600839

                                    [GRAPHIC]

        Surface Location
-------------------------------
WC 60 B001 -93.382353 29.621078
WC 76 B002 -93.382318 29.621048
WC 76 B003 -93.382299 29.621062
WC 76 B004 -93.382337 29.621062
WC 77 B005 -93.382322 29.621079

      Bottom Hole Location
-------------------------------
WC 60 B001 -93.398225 29.614423
WC 76 B002 -93.379251 29.601585
WC 76 B003 -83.379281 29.595382
WC 76 B004 -93.377252 29.608954
WC 77 B005 -93.387986 29.600287
WC 76 B006 -93.38243  29.621090

                                    [GRAPHIC]

        Surface Location
-------------------------------
WC 76 A001 3507' FSL & 1727 FWL
WC 60 A002 3506' FSL & 1720' FWL
WC 61 A003 3507' FSL & 1715' FWL
WC 77 A004 3512' FSL & 1710' FWL
WC 77 A005 3518' FSL S 1715' FWL
WC 60 B001 3372' FSL & 1800' FWL
WC 76 B002 3361' FSL & 1811' FWL
WC 76 B003 3366' FSL & 1817' FWL
WC 76 B004 3366" FSL & 1805' FWL
WC 77 B005 3372' FSL & 1811' FWL
WC 76 B006 3378' FSL & 1805' FWL
    X = 1,348,982.768
    Y = 352,893.696
    Lat 29(DEG.) 37' 15.937" N
    Lon 93(DEG.) 22' 56,413" W

                                     [LOGO]

                           Federal Offshore Louisiana
                               West Cameron Area
                              West Cameron 76 B006

                                SCALE 1" = 2000'
                                  UTM, Zone 16

                                  Attachment 5

<PAGE>

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

                                   WC76_Field

                                    [GRAPHIC]

                                Rob C1 Structure

                                   [GRAPHIC]

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

                                     [LOGO]

                           WEST CAMERON BLOCK 76 FIELD

                                   ROB C1 SAND
                                TOP OF STRUCTURE

--------------------------------------------------------------------------------
[Illegible]
--------------------------------------------------------------------------------
[Illegible]
--------------------------------------------------------------------------------
[Illegible]
--------------------------------------------------------------------------------

                                  Attachment 6

<PAGE>

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

                                    [GRAPHIC]

                             MA-3U Top of Structure

                                    [GRAPHIC]

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

                                     [LOGO]

                           WEST CAMERON BLOCK 76 FIELD

                                 MA-3 UpperBand
                                TOP OF STRUCTURE

--------------------------------------------------------------------------------
[Illegible]
--------------------------------------------------------------------------------
[Illegible]
--------------------------------------------------------------------------------
[Illegible]
--------------------------------------------------------------------------------

                                  Attachment 7

<PAGE>

                            MA3D Forecast Comparison
                             Eclipse 050203C Series

                                    [GRAPHIC]

                                  Attachment 8

<PAGE>

------------------------
MA3D Production Forecast
------------------------

           W/OB6        W/B6
Year     MMscf/Yr     MMscf/Yr
----     --------     --------
2005       2,985        4,291
2006      10,498       15,280
2007       8,944       12,502
2008       7,878       10,849
2009       7,359        9,381
2010       7,020        8,366
2011       6,245        6,095
         -------      -------
          50,927       66,764
     Incremental    15,836.80 MMscf Gross

                                  Attachment 9

<PAGE>

                           AUTHORITY FOR EXPENDITURE
                    Americas Operating and Development Team

<TABLE>
<S>                         <C>             <C>                <C>
                                  [Illegible]
Contract/Agreement No.      _____________   Budget Year        2005
                                                               Yes     Amount      No
Operator AFE #              _____________
Estimated Start Date        May 1, 2005     Budget             |_|   $8,096,943   |x|
Estimated Completion Date   July 23, 2005   Current Forecast   |x|   $8,096,943   |_|

============================================================================================================
Lease Name & Well No.      County and State: Offshore Louisiana   Region: Gulf of Mexico OCA
                           ---------------------------------------------------------------------------------
OCSG 9386 B6               Location (Sec-Twn-Rng): West Cameron Blk 76 - OCS-G 09386 B6
------------------------------------------------------------------------------------------------------------
Field or Area              Prospect Name (Exploration Only)                   Last Well on Lease
                           ---------------------------------------------------------------------------------
West Cameron               Prospect#                                         Yes   |_|   No   |x|
------------------------------------------------------------------------------------------------------------
Type of AFE:               Formation                        Yes    No                   [Illegible]
[Illegible]          |_|   [Illegible]                      |X|   |_|               [Illegible]  [Illegible]
Development          |X|                 [Illegible]
Exploratory          |_|   Marg A3                                       Working
   Class Inventory         [Illegible]                                   Interest        [Illegible]
------------------------------------------------------------------------------------------------------------

                                  [Illegible]

================================================================================
                                  [Illegible]
--------------------------------------------------------------------------------
                                  [Illegible]
--------------------------------------------------------------------------------
      Company                             Drilling      Completion    Total Cost
--------------------------------------------------------------------------------
BHP Billiton            33.76%            $4,536,101    $3,560,843    $8,096,943
--------------------------------------------------------------------------------
Dominion                40.00%            $5,374,527    $4,219,008    $9,593,535
--------------------------------------------------------------------------------
                                  [Illegible]
</TABLE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00090-of-00352.parquet"}]]