Document:

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                                                                    Exhibit 10.1

                           ASSET PURCHASE, FARMOUT AND
                           JOINT EXPLORATION AGREEMENT
                             Treasure Island Project

    THIS AGREEMENT is made and entered into as of the 1st day of March, 2002
   ("EFFECTIVE DATE"), by and between BP Exploration & Production Inc., ("BP")
    and EEX Corporation, ("EEX"). In this Agreement BP and EEX are sometimes
     referred to individually as a "Party" and are referred to collectively
                                 as "Parties".

         WHEREAS, the Parties were the successful bidders to acquire interest in
certain OCS lease blocks at OCS Lease Sale No. 182, pursuant to the terms of
that certain Joint Bidding Agreement dated March 1, 2002, by and between the
Parties.

         WHEREAS, BP desires to acquire interest in certain other leases
currently owned by EEX in the OCS-Gulf of Mexico, and to provide for evaluation
leading to potential exploratory drilling on such leases.

         WHEREAS, due to the magnitude of the anticipated risks inherent in oil
and gas exploration by virtue of variable geological conditions, the inexact
nature of technological measurements and interpretations involved in the
prediction of oil and gas accumulations and the anticipated high costs of
seismic processing, lease acquisition and the exploration and development of the
OCS Leases covered by this Agreement, the Parties deem it necessary to join
together under the terms of this Agreement for the purpose of sharing such risks
and minimizing their individual costs related to the proper exploration and
development of those leases acquired at OCS Lease Sale No. 182 by the Parties,
and of those certain leases currently owned by EEX;

         WHEREAS, EEX owns an interest in certain OCS leases as more fully
described on Exhibit "A" hereto.

         WHEREAS, EEX desires to transfer, assign, and farmout those Leases and
the operatorship of those Leases (where EEX is currently designated as operator)
on the terms and conditions set forth herein.

         WHEREAS, EEX desires to enter into this transaction with BP because BP
brings certain financial and engineering resources, to develop the Leases and
Prospects.

         WHEREAS, BP is able to acquire and reprocess the seismic data necessary
to develop the Prospects.

         WHEREAS, EEX acknowledges that BP's commitment to acquire and reprocess
the seismic data for the Prospects, as well as BP's ability to explore and
develop the Leases and Prospects and carry EEX on certain development costs are
fair and adequate consideration to support this Agreement.

         WHEREAS, this Agreement, and the technical and financial resources of
BP, will allow EEX to expedite exploration and development of the Leases and
Prospects.

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

                             SECTION 1-DEFINED TERMS

Definitions As used in this Agreement, the defined terms listed below shall have
the following meanings:

Adverse Downhole Conditions: shall mean conditions encountered in the drilling
of any well drilled pursuant to this Agreement such as mechanical difficulties,
heaving shale, rocksalt, excessive saltwater flow, excessive pressure,
practicably impenetrable formations or other conditions in the hole that would
cause a reasonably prudent operator under the same or similar circumstance to
discontinue drilling and to plug and abandon such well.

AFE: shall mean an authority to expend funds prepared by a Party to describe an
operation being proposed and to estimate the costs to be incurred in conducting
an operation under the JOA.

AMI: shall mean the geographical confines of the area or areas for the Prospects
described in Exhibit "C". The terms and conditions of the AMI shall be set forth
in the JOA.

Cretaceous Section: shall mean the lesser depth of 31,500 feet (true vertical
depth) or 1,500 feet (true vertical depth) below that depth at which the benthic
foraminifera Globotruncana Gansseri, or an older fossil, is first encountered.
The Globotruncana Gansseri is seen at 8,920 feet (measured depth) in the OCS-G
5701 Well No. 1 at Main Pass Block 154.

EEX Carry: BP's obligation to bear the risks, costs and expense of EEX's
twenty-five percent (25%) interest in the drilling of the Initial Well, Second
Well or Third Well, as set forth more fully herein. The EEX Carry shall not
apply to costs for sidetrack or other subsequent operations. beyond the drilling
of the Initial Well, Second Well or Third Well, after rig release for such well,
including but not limited to, construction of facilities, delivery
infrastructure, processing costs or other development costs. The EEX Carry shall
not apply to subsequent operations once Objective Depth is attained, except as
provided in the final paragraph of Sections 7, 10, and 12.

Exhibits:  shall mean the Exhibits listed as follows:

Exhibit "A" Leases Jointly Owned by the Parties:
Section I-EEX Owned Leases (Working Interest to be assigned to BP).
Section II-Leases Acquired by the Parties at OCS Lease Sale No. 182.
Section III-Listing of Currently Existing Agreements.
Exhibit "B-1"  Form of Record Title Assignment.
Exhibit "B-2"  Form of Operating Rights Assignment.
Exhibit "C"    Prospects and Areas of Mutual Interest ("AMI").
Exhibit "D"    Joint Operating Agreement ("JOA").
Exhibit "E"    Repurchase Price-Properties

Initial Well: shall mean the first well (or its substitute) on the first
Prospect drilled pursuant to this Agreement.

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JOA: shall mean the joint operating agreement to be executed concurrently with
execution of this Agreement, by the Parties covering the Leases within the AMI
for each Prospect. BP is designated as Operator under the JOA. The form of JOA
shall be as set forth in Exhibit "D". The JOA shall govern the mutual
obligations of BP and EEX to develop and operate the Leases and Prospects;
provided, however, that in the event of conflict between the provisions of the
JOA and this Agreement, the provisions of this Agreement shall rule and take
precedence.

Leases: shall mean those OCS federal oil and gas leases (or portion thereof) and
the lands covered by the Leases and governed by this Agreement, as described in
Sections I and II of Exhibit "A" and any OCS federal oil and gas leases (or
portions thereof) acquired jointly pursuant to the terms of the AMI.

Objective Depth:  shall mean the shallower of:
         1. 27,500 feet (true vertical depth); or,
         2. 500 feet (true vertical depth) below that depth at which the benthic
            foraminifera Cristellaria R, or an equivalent or older fossil, is
            first encountered. The Cristellaria R is seen at 6,480 feet
            (measured depth) in the OCS-G 5701 Well No. 1 at Main Pass Block
            154.

Permitted Encumbrances:  shall mean:

            (a)   Royalties, overriding royalties, production payments, net
                  profits interests and similar burdens to the extent the net
                  cumulative effect of such burdens do not operate to reduce the
                  Net Revenue Interests of the Leases to less than the Net
                  Revenue Interests set forth in Exhibit "A";

            (b)   Rights reserved to or vested in any governmental agency having
                  appropriate jurisdiction to control or regulate any of the
                  Leases in any manner whatsoever;

            (c)   Easements, rights-of-way, servitudes, sub-surface leases,
                  production handling agreements, platform usage agreements,
                  pipelines, and structures on, over and through the Leases, to
                  the extent such rights, interests and structures do not
                  materially interfere with the operation or value of the Leases
                  to BP;

            (d)   Liens for taxes or assessments not yet due or not yet
                  delinquent or, if delinquent, that are being contested by EEX
                  in good faith in the normal course of business; provided
                  however, that such contest would not interfere with the
                  operation or value of the Leases to BP, and EEX shall remain
                  responsible for any and all taxes and other assessments
                  associated with the period of time prior to the Effective
                  Date; and

            (e)   Liens of operators relating to obligations not yet due or not
                  yet delinquent or, if delinquent, that are being contested by
                  EEX in good faith in the normal course of business; provided
                  however, that such contest would not interfere with the
                  operation or value of the Leases to BP, and EEX shall remain
                  responsible for any and all liens associated with the period
                  of time prior to the Effective Date.

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Project Costs: shall mean one hundred percent (100%) of those costs incurred by
BP prior to January 1, 2004, in the acquisition and/or reprocessing of all
seismic data (including data from those blocks over which EEX may already own
licenses to such data) reasonably incurred by BP in its evaluation of the
Treasure Island Project and twenty-five percent (25%) of those costs incurred by
BP in the acquisition of leasehold interest in the Treasure Island Project in
which EEX elects to participate, including the cost of acquisition of those
Leases described in Section II of Exhibit "A".

Prospect or Prospects: shall mean the areas described in Exhibit "C", and any
Leases owned jointly by the Parties within the AMI for that Prospect.

Repurchase Price: shall mean all of EEX's right, title and interest in and to
one (1) of those properties listed in Exhibit "E". The choice of such interest
shall be at the option of EEX, subject to BP's right (i) to conduct due
diligence with respect to the interest to be assigned prior to acceptance, and
(ii) to reject the assignment in the event in BP's sole opinion good defensible
title without any liens, encumbrances or impediments, can be conveyed to BP's
satisfaction. EEX's offer of assignment shall be deemed to satisfy the
Repurchase Price consideration obligations, regardless of whether BP rejects or
accepts assignment of the interests offered.

Right of Repurchase: shall mean the right of EEX, upon: (i) withdrawal of BP
upon the terms and conditions set forth herein and in the JOA and (ii) to
payment to BP of the Repurchase Price, to repurchase from BP an assignment of
BP's Working Interest in the Leases described in Exhibit "A" within the
applicable Prospect(s) which Working Interests shall bear no liens or burdens in
excess of those existing at the time of BP's acquisition of such Working
Interest (except as may be contemplated in the Agreement or the JOA), and which
assignment shall be made using the applicable form as set forth in Exhibit "B-1"
or Exhibit "B-2". The Repurchase Price shall be set forth in the JOA. EEX shall
have no Right of Repurchase with respect to any Lease or interest therein
acquired by BP pursuant to the provisions of the AMI. As between the parties
hereto, it is agreed that the first well drilled subsequent to the assignment of
BP's working interest in the Leases within a Prospect(s) pursuant to this Right
of Repurchase, shall be considered to be an Exploratory Well within the meaning
of the JOA with respect to the Prospect on which said well is drilled.

Second Well: shall mean the second well (or its substitute) on the second
Prospect drilled pursuant to this Agreement.

Shallow Discovery: shall mean a discovery of commercial hydrocarbons made at any
depth above the Objective Depth in the drilling of the Initial Well, Second Well
and/or Third Well based upon the reasonable judgment of BP. The declaration by
BP of a Shallow Discovery may only apply to one well whether it is the Initial
Well, Second Well or Third Well.

Substitute Well: shall mean that if prior to reaching Objective Depth in the
Initial Well, Second Well or Third Well, BP encounters Adverse Downhole
Conditions and elects to abandon such well ("Discontinued Well"), BP shall have
the right, but not the obligation, to commence sidetracking operations on such
well or actual drilling operations on another well, (hereinafter referred to as
the "Substitute Well") at a location of its choice on the Prospect upon which
the Discontinued Well was located within sixty (60) days after the date the rig
was released from the last operation on the Discontinued Well in an effort to
reach Objective Depth. If such Substitute Well is timely and properly commenced
and drilled in compliance with all terms and conditions provided herein for the
Discontinued Well, and BP has satisfied all other then applicable covenants and
conditions of this Agreement, the Substitute Well shall in all respects be

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considered as if it were the Initial Well, Second Well or Third Well (as the
case may be). BP shall have a continuing option to drill additional Substitute
Wells on the Prospect upon which the Discontinued Well was located, provided
that no more than sixty (60) days elapse between the date the rig was released
from the last operation on such well and the date of commencement of drilling
operations for the next Substitute Well drilled therefor.

Third Well: shall mean the first well (or its substitute) on the third Prospect
drilled pursuant to this Agreement.

Treasure Island Project: shall mean the area covered by all OCS blocks in all of
the AMIs.

Working Interest: shall mean the record title interest and associated operating
rights interest of each Party in and to each of the Leases covered by this
Agreement, expressed as the percentage set forth in Exhibit "A" to the JOA for
each Prospect, by virtue of which a Party has the right to explore for, develop
and produce hydrocarbons or to conduct any other operations contemplated by the
Leases.

                     SECTION 2-ASSIGNMENT OF LEASE INTEREST
                    AND OPERATORSHIP, AND PREFERENTIAL RIGHTS

Subject to the provisions of the next paragraph, concurrently with the execution
of this Agreement, EEX shall sell, transfer, convey, and assign to BP all of
EEX's right, title and interest, oil and gas leasehold interest, mineral
leasehold interests, to an undivided seventy-five percent (75%) of its Working
Interest in those Leases set forth in Section I of Exhibit "A". Such assignment
of Working Interest shall utilize the form of assignment as set forth for record
title interest in Exhibit "B-1", or for operating rights interest in Exhibit
"B-2", as appropriate. The interests assigned from EEX to BP shall bear no
burdens in excess of those set forth in Exhibit "A", but shall be subject to the
terms of those currently existing agreements which are identified in Section III
of Exhibit "A". Additionally, as to those Leases where EEX is currently
designated as operator, EEX shall transfer operatorship and shall designate BP
as the operator of the Leases. Furthermore, EEX grants to BP the exclusive right
to drill Exploratory Wells on the Leases and Prospects as set forth herein by
virtue of its farmout of the remaining 25% interest in those Leases for the
duration of the EEX Carry.

OCS-G 18020 (Ship Shoal Block 260), OCS-G 14505 (Ship Shoal Block 261) and OCS-G
14439 (South Marsh Island Block 80) are subject to pre-existing agreements which
provide for preferential rights to purchase in favor of third parties. EEX has
established a value of $237,944.10 for OCS-G 18020, $297,430.70 for OCS-G 14505
and $133,843.10 for OCS-G 14439. Concurrent with execution of this Agreement,
EEX will notify such third parties of their preferential right to purchase for
the value established by EEX. In the event either or both third parties exercise
their preferential right to purchase, the total amount of Project Costs and the
amount of Project Costs that BP must spend prior to January 1, 2003, as provided
in Section 4, or pay to EEX as provided in Sections 5, 6, 8 or 9, shall be
reduced by the amount received by EEX from the third party or parties as a
result of their exercise of the preferential right to purchase.

                           SECTION 3 - PURCHASE PRICE

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          The Leases and operatorship thereof (where EEX is designated as
operator) shall be assigned in consideration for: (a) BP's obligation to
acquire, process and reprocess the seismic data or acquire leasehold interest as
set forth in Sections 4 and 5 hereof and (b) for the assumed obligations of BP
as set forth in Sections 6 - 14 hereof and in the JOA, including the EEX Carry
and expenditures of Project Costs. EEX has estimated that the consideration
given to EEX for this transaction has a fair market value of $23.75 million.

                      SECTION 4-BP WORK COMMITMENT, SEISMIC
                              AND LEASE ACQUISITION

BP shall spend, or incur binding commitments to spend, and thereafter spend, a
total of five million dollars ($5,000,000.00 U.S.D.) in Project Costs prior to
January 1, 2004, of which three million dollars ($3,000,000.00) must be spent,
or contractually committed to be spent, prior to January 1, 2003. BP, at its
option, may spend Project Costs in excess of what is required. EEX shall incur
no expense in connection with BP's spending, or its binding commitments for
spending, of Project Costs prior to commencement of the Initial Well.

Any Project Costs associated with the acquisition of leasehold interest shall be
limited to two million dollars ($2,000,000.00) net to the Working Interest of
EEX in its acquisition of such interest. Subsequent to this spending limit being
reached with respect to the leasehold interest acquisition, EEX, subject to the
provisions of Section 3., shall be obligated to pay for its proportionate share
of any leasehold interest which it elects to acquire.

EEX shall receive copies of all seismic data acquired and/or reprocessed as a
result of BP's expenditure of the Project Costs, as if EEX were a paying
participant in the acquisition thereof. However, EEX's rights to receive such
data shall be subject to third party licensing agreements and restrictions
customary in the industry.

BP shall negotiate with vendors of seismic data to acquire licenses to seismic
data covering OCS lease blocks within the Treasure Island Project. As a material
consideration to EEX, BP agrees to negotiate in good faith with such vendors of
seismic data to allow EEX the opportunity, but not the obligation, to acquire
licenses to the seismic data at the same rate, and for the same cost, as BP. EEX
shall pay the costs to acquire its license(s) to such seismic data, and such
costs shall not be a part of the Project Costs. BP shall have no liability to
EEX for its failure to obtain such rights for EEX, but shall make commercially
reasonable efforts to do so. In the event EEX fails to obtains licenses from
such vendors, BP shall have no liability for failure to provide any reprocessing
with respect thereto, but BP expenditures of reprocessing cost therefore, shall
nonetheless be considered to be Project Costs.

                   SECTION 5-FAILURE TO FUND WORK COMMITMENT,
                          SEISMIC AND LEASE ACQUISITION

If BP, at its option, elects not to fully fund the Project Costs as provided in
the first paragraph of Section 4 prior to January 1, 2003, then the result shall
be:

          1. Termination of this Agreement as to the rights of both Parties;
          2. BP will pay EEX on or before January 11, 2003, the difference
             between three million dollars ($3,000,000.00) and the amount of
             Project Costs actually spent, or contractually committed to be
             spent, by BP prior to January 1, 2003.; and

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          3. EEX shall be entitled to exercise its Right of Repurchase.

                        SECTION 6-INITIAL WELL COMMITMENT

On or before June 1, 2003, BP shall give written notice to EEX of its decision
concerning the drilling of the Initial Well. BP's election to not drill the
Initial Well shall result in:

     .    Termination of this Agreement as to the rights of both Parties.
     .    BP obligation to pay EEX within ten (10) days from termination of
          this Agreement, the difference (if any) between five million dollars
          ($5,000,000.00) and the amount of Project Costs actually spent, or
          contractually committed to be spent, by BP, and
     .    EEX shall be entitled to exercise its right of Right of Repurchase.

                     SECTION 7-DRILLING OF THE INITIAL WELL

If BP, in its sole discretion, elects to drill the Initial Well as provided in
Section 5., then BP shall commence the drilling of the Initial Well on or before
December 31, 2003. The Initial Well shall be drilled at a location mutually
agreeable to the Parties. BP shall provide EEX with notice of its proposed
location no later than one hundred and twenty (120) days prior to commencement
of such well. In event the Parties cannot agree on the location for the Initial
Well within ninety (90) days from the date of the proposal of such well by BP,
then the location proposed by BP shall be considered mutually agreeable by the
Parties.

The cost of drilling the Initial Well shall be based upon a reasonable, good
faith estimate for such costs in the AFE prepared and furnished by BP. The
Initial Well shall be drilled to a minimum of the Objective Depth, but BP, at
its option, may propose to drill deeper.

The proposal for the Initial Well, and all operations conducted pursuant
thereto, shall be governed by the provisions of the JOA. BP shall be the
designated operator under the JOA.

BP shall pay the EEX Carry through the drilling of the Initial Well to Objective
Depth (or such deeper depth as proposed by BP), which shall include the cost of
temporary abandonment or permanent abandonment of the Initial Well at its
ultimate total depth, as the case may be. The EEX Carry shall be limited to one
hundred and fifteen percent (115%) of the amount set forth in the AFE.
Thereafter, subject to the provisions of the next paragraph, all risk, costs and
expense on the Initial Well, and on the Prospect where the Initial Well was
drilled, shall be shared by the Parties on a proportionate basis, as per the
JOA.

After reaching Objective Depth in the Initial Well (or such deeper depth as
proposed by BP), but prior to rig release for the Initial Well, should BP elect
to participate in a proposal that results in a deepening operation as defined in
the JOA, then BP shall pay the EEX Carry for such deepening operation in the
same manner as provided in the immediately preceding paragraph, subject to the
limits as set forth therein.

                   SECTION 8-FULL EXPENDITURE OF PROJECT COSTS

As of January 1, 2004, if BP has timely commenced the drilling of the Initial
Well, but has not fully spent, or incurred binding commitments to spend, the
Project Costs, it shall pay to EEX the

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difference (if any) between five million dollars ($5,000,000.00) and the amount
of Project Costs actually spent, or contractually committed to be spent, by BP.

                    SECTION 9-INITIAL WELL-TERMINATION EVENTS

If BP elects, at its option, not to timely commence the Initial Well, or, if
timely commenced, to, a) drill the Initial Well to Objective Depth (or a
Substitute Well); or b) spend one hundred and fifteen percent (115%) of the
amount set forth in the AFE the result shall be:

          1.   Termination of this Agreement; and,
          2.   BP being obligated to pay EEX within ten (10) days from
               termination of this Agreement, the difference (if any) between
               five million dollars ($5,000,000.00) and the amount of Project
               Costs actually spent, or contractually committed to be spent, by
               BP as of such date of termination; and
          3.   EEX shall be entitled to exercise its Right of Repurchase.

Notwithstanding the foregoing consequences and obligations set forth in this
Section:

A)        Initial Well Encounters Adverse Downhole Conditions:  In the event,
            .  the Initial Well is timely commenced,
            .  reaches a minimum depth of 18,000 feet true vertical depth; and,
            .  BP is unable to drill deeper due to Adverse Downhole Conditions
               and elects not to timely commence  a Substitute Well,

          BP shall not be subject to the consequences or obligations set forth
          previously in this Section if it provides written notice to EEX within
          thirty (30) days of rig release of such well, of its commitment to
          timely drill the Second Well. Such written notice shall be accompanied
          by depth restricted assignment of all of BP's interest in the Leases
          listed in Exhibit "A" the Prospect upon which the Initial Well was
          drilled, limited to only those rights below the total depth drilled in
          the Initial Well. Such depth restricted assignment shall be at no cost
          to EEX and the interest assigned therein shall be subject to no
          burdens other than those existing on such interests at the time of
          BP's acquisition thereof.

          Concurrent with the partial assignment by BP under 9A) the JOA shall
          terminate for the Prospect as to those depths assigned by BP to EEX,
          and the AMI for such Prospect shall terminate in its entirety to all
          depths. Notwithstanding anything to the contrary herein, EEX has no
          Right of Repurchase for any interest above the total depth drilled in
          the Initial Well as to those Leases in the Prospect on which the
          Initial Well was drilled.

B)        Initial Well is the Shallow Discovery: In the event the Initial Well
          reaches a minimum depth of 18,000 feet true vertical depth and BP
          determines that it is a Shallow Discovery, BP shall not be subject to
          the consequences or obligations set forth previously in this Section
          if, within ninety (90) days (if Shallow Discovery is at a shallower
          depth than 18,000') or one hundred fifty (150) (if Shallow Discovery
          is at a deeper depth than 18,000') from rig release from the Shallow
          Discovery, BP i) commences and diligently pursues operations to
          appraise and/or develop the Shallow Discovery, and; ii) bears the
          portion of the EEX Carry for the Initial Well (if any) that was not
          expended in the drilling of the Shallow Discovery. Failure by BP to
          meet the conditions of i) and ii) herein shall result in:

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          .    termination of future rights to be gained by the Parties under
               this Agreement; and,
          .    BP being obligated to pay EEX within ten (10) days from
               termination of this Agreement, the difference (if any) between
               five million dollars ($5,000,000.00) and the amount of Project
               Costs actually spent, or contractually committed to be spent, by
               BP; and,
          .    EEX shall be entitled to exercise its Right of Repurchase.

                     SECTION 10-DRILLING OF THE SECOND WELL

BP shall have the option to commence the drilling of the Second Well within one
hundred and eighty (180) days from the date of rig release on the Initial Well.
The Second Well shall be drilled at a location mutually agreeable to the
Parties. BP shall provide EEX with notice of its proposed location no later than
one hundred and twenty (120) days prior to commencement of such well. In event
the Parties cannot agree on the location for the Second Well within ninety (90)
days from the date of the proposal of such well by BP, then the location
proposed by BP shall be considered mutually agreeable by the Parties.

The cost of drilling the Second Well shall be based upon a reasonable, good
faith estimate for such costs in the AFE prepared and furnished by BP.

The Second Well shall be drilled to a minimum of the Objective Depth, but BP, at
its option, may propose to drill deeper.

The proposal for the Second Well, and all operations conducted pursuant thereto,
shall be governed by the provisions of the JOA. BP shall be the designated
operator under the JOA.

BP shall pay the EEX Carry through the drilling of the Second Well to Objective
Depth or such deeper depth as proposed by BP), which shall include the cost of
temporary abandonment or permanent abandonment of the Second Well at its
ultimate total depth, as the case may be. The EEX Carry shall be limited to one
hundred and fifteen percent (115%) of the amount set forth in the AFE.
Thereafter, subject to the provisions of the next paragraph, all risk, costs and
expense on the Second Well, and on the Prospect where the Second Well was
drilled, shall be shared by the Parties on a proportionate basis, as per the
JOA.

After reaching Objective Depth in the Second Well (or such deeper depth as
proposed by BP), should BP elect to participate in a proposal that results in a
deepening operation as defined in the JOA, then BP shall pay the EEX Carry for
such operation in the same manner as provided in the immediately preceding
paragraph, subject to the limits as set forth therein.

                    SECTION 11-SECOND WELL-TERMINATION EVENTS

If BP elects, at its option, not to timely commence the Second Well, or, if
timely commenced, to, a) drill the Second Well (or a Substitute Well) to
Objective Depth; or b) spend one hundred and fifteen percent (115%) of the
amount set forth in the AFE the result shall be:

          1.   Termination of future rights to be gained by the Parties under
               this Agreement, subject to BP's retention of any rights or
               interests above the total depth drilled in the Initial Well as to
               those Leases in the Prospect on which the Initial Well was
               drilled; and,

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          2.   EEX may exercise its Right of Repurchase. However, in this event,
               the Right of Repurchase, as to those Leases in the Prospect on
               which the Initial Well was drilled, shall be limited to those
               rights below the total depths drilled in the Initial Well.

Notwithstanding the foregoing consequences and obligations set forth in this
Section:

A)   Second Well Encounters Adverse Downhole Conditions: In the event,
      .  the Second Well is timely commenced, and;
      .  reaches a minimum depth of 18,000 feet true vertical depth; and,
      .  BP is unable to drill deeper due to Adverse Downhole Conditions and
         elects not to timely commence a Substitute Well,

     BP shall not incur the foregoing consequences or obligations set forth
     previously in this Section if it provides written notice to EEX within
     thirty (30) days of rig release of such well, of its commitment to timely
     drill the Third Well. Such written notice shall be accompanied by
     assignment of all of BP's interest in the Leases listed in Exhibit "A" in
     the Prospect upon which the Second Well was drilled, limited to those
     rights below the total depth drilled in the Second Well. Such assignment
     shall be at no cost to EEX and the interest assigned therein shall be
     subject to no burdens other than those existing on such interests at the
     time of BP's acquisition thereof; or,

B)   Second Well is the Shallow Discovery: Provided BP has not previously
     declared the Initial Well as the Shallow Discovery, and the Second Well
     reaches a minimum depth of 18,000 feet true vertical depth, and BP
     determines that it is a Shallow Discovery, BP shall not be subject to the
     consequences or obligations set forth previously in this Section if, within
     ninety (90) days (if Shallow Discovery is at a shallower depth than
     18,000') or one hundred ten (110) (if Shallow Discovery is at a deeper
     depth than 18,000') from rig release from the Shallow Discovery, BP i)
     commences and diligently pursues operations to appraise and/or develop the
     Shallow Discovery, and; ii) bears the portion of the EEX Carry for the
     Second Well (if any) that was not expended in the drilling of the Shallow
     Discovery. Failure by BP to meet the conditions of i) and ii) herein shall
     result in:

               .    termination of future rights to be gained by the Parties
                    under this Agreement; subject to BP's retention of any
                    rights or interests above the total depth drilled in the
                    Initial Well as to those Leases listed in Exhibit "A" in the
                    Prospect on which the Initial Well was drilled, and,
               .    EEX may exercise its Right of Repurchase, subject to BP's
                    retention of rights or interests in the Prospect for the
                    Initial Well above the total depth drilled in the Initial
                    Well. However, as to the Prospect upon which the Initial
                    Well was drilled, the Right of Repurchase shall be limited
                    to those rights below the total depth drilled in the Initial
                    Well. Such assignment shall be at no cost to EEX and the
                    interest assigned therein shall be subject to no burdens
                    other than those existing on such interests at the time of
                    BP's acquisition thereof.

     Concurrent with the assignment by BP under 11A) or 11B), the JOA shall
     terminate for the Prospect(s) as to those depths assigned by BP to EEX, and
     the AMI for such Prospect(s) shall terminate in its entirety as to all
     depths. Notwithstanding anything to the contrary herein, EEX has no Right
     of Repurchase for any interest above the total depth drilled in the Initial
     Well (or Second Well, if applicable for 11A) ) as to those Leases listed in
     Exhibit "A" in the Prospect on which the Initial Well was drilled (or

                                      -10-

<PAGE>

     Second Well, as applicable for 11A) ) on a Prospect by Prospect basis. The
     Right of Repurchase shall not apply if BP timely commences to appraise
     and/or develop the Shallow Discovery.

                      SECTION 12-DRILLING OF THE THIRD WELL

BP shall have the option to commence the drilling of the Third Well within one
hundred twenty (120) days from the date of rig release on the Second Well. The
Third Well shall be drilled at a location mutually agreeable to the Parties. In
event the Parties cannot agree on the location for the Third Well within sixty
(60) days from the date of the proposal of such well by BP, then the location
proposed by BP shall be considered mutually agreeable by the Parties.

The cost of drilling the Third Well shall be based upon a reasonable, good faith
estimate for such costs in the AFE prepared and furnished by BP.

The Third Well shall be drilled to a minimum of the Objective Depth, but BP, at
its option, may propose to drill deeper.

The proposal for the Third Well, and all operations conducted pursuant thereto,
shall be governed by the provisions of the JOA. BP shall be the designated
operator under the JOA.

Subject to the provisions of the next paragraph, BP shall pay the EEX Carry
through the drilling of the Third Well to Objective Depth (or to such deeper
depth as proposed by BP), which shall include the cost of temporary abandonment
or permanent abandonment of the Third Well at its ultimate total depth, as the
case may be. The EEX Carry shall be limited to one hundred and fifteen percent
(115%) of the amount set forth in the AFE. Thereafter, subject to the provisions
of the next paragraph, all risk, costs and expense on the Third Well, and on the
Prospect where the Third Well was drilled, and in the Treasure Island Project,
shall be shared by the Parties on a proportionate basis, as per the JOA.

In the event that either the Initial Well or Second Well has tested the
Cretaceous Section, then BP shall be obligated to pay only one-half of the EEX
Carry in the drilling of the Third Well (i.e. EEX shall pay one half of its cost
share for the drilling of the Third Well in this event). As to the remaining
Working Interest of EEX in the Prospect not subject to the EEX Carry for the
Third Well, EEX shall make its election concerning participation in the Third
Well as provided in the JOA.

Should BP elect to participate in a proposal that results in a deepening
operation as defined in the JOA, then BP shall pay the EEX Carry for such
deepening operation in the same manner as provided previously in this Section,
subject to the limit as set forth therein.

                    SECTION 13-THIRD WELL-TERMINATION EVENTS

If BP elects, at its option, not to timely commence the Third Well, or, if
timely commenced, to, a) drill the Third Well (or a Substitute Well) to
Objective Depth; or b) spend one hundred and fifteen percent (115%) of the
amount set forth in the AFE; the result shall be:

     1.   Termination of future rights to be gained by the Parties under this
          Agreement, subject to BP's retention of any rights or interests above
          the total depths drilled in the Initial and Second Wells, on a
          Prospect by Prospect basis; and,

                                      -11-

<PAGE>

     2.   EEX may exercise its Right of Repurchase. However, in this event, the
          Right of Repurchase, as to those Leases in the Prospects on which the
          Initial Well and Second Well were drilled, shall be limited to those
          rights below the total depths drilled in the Initial Well and Second
          Well, on a Prospect by Prospect basis.

Notwithstanding the foregoing consequences and obligations set forth in this
Section:

A)   Third Well Encounters Adverse Downhole Conditions:  In the event,
       .    the Third Well is timely commenced, and;
       .    reaches a minimum depth of 18,000 feet true vertical depth; and,
       .    BP is unable to drill deeper due to Adverse Downhole Conditions and
            elects not to commence a Substitute Well,

     BP shall within ten (10) days from rig release, assign EEX all rights of
     BP's interest in the Leases listed in Exhibit `A" in the Prospect upon
     which the Third Well was drilled, limited to those rights below the total
     depth drilled in the Third Well. Such assignment shall be at no cost to EEX
     and the interest assigned therein shall be subject to no burdens other than
     those existing on such interests at the time of BP's acquisition thereof;
     or,

B)   Third Well is the Shallow Discovery: Provided BP has not previously
     declared the Initial Well or Second Well as the Shallow Discovery, and the
     Third Well reaches a minimum depth of 18,000 feet true vertical depth, BP
     may determine the well to be a Shallow Discovery, and shall not be subject
     to the consequences or obligations set forth previously in this Section if,
     within ninety (90) days (if Shallow Discovery is at a shallower depth than
     18,000') or one hundred ten (110) (if Shallow Discovery is at a deeper
     depth than 18, 000') from rig release from the Shallow Discovery, BP i)
     commences and diligently pursues operations to appraise and/or develop the
     Shallow Discovery, and; ii) bears the portion of the EEX Carry for the
     Third Well (if any) that was not expended in the drilling of the Shallow
     Discovery. Failure by BP to meet the conditions of i) and ii) herein shall
     result in:

            .  termination of future rights to be gained by the Parties under
               this Agreement, subject to BP's retention of any rights or
               interests as to those Leases listed in Exhibit "A" in the
               Prospects on which the Initial Well and Second Well were drilled,
               above the total depths drilled in the Initial and Second Wells,
               on a Prospect by Prospect basis; and,
            .  EEX may exercise its Right of Repurchase. However, in this event,
               the Right of Repurchase, as to those Leases in the Prospects on
               which the Initial Well and Second Well were drilled, shall be
               limited to those rights below the total depths drilled in the
               Initial Well and Second Well, on a Prospect by Prospect basis.
               Such assignment shall be at no cost to EEX and the interest
               assigned therein shall be subject to no burdens other than those
               existing on such interests at the time of BP's acquisition
               thereof

     Concurrent with the assignment by BP under 13A) or 13B), the JOA shall
     terminate for the Prospect as to those depths assigned by BP to EEX, and
     the AMI for such Prospect shall terminate in its entirety to all depths.
     Notwithstanding anything to the contrary herein, EEX has no Right of
     Repurchase for any interests above the total depth drilled in the Initial
     Well and Second Well (or Third Well if applicablefor 13A) as to those
     Leases listed in Exhibit "A" in the Prospects on which the Initial Well and
     Second Well were

                                      -12-

<PAGE>

     drilled (or Third Well, as applicable for 13A )), on a Prospect by Prospect
     basis. The Right of Repurchase shall not apply if BP timely commences to
     appraise and/or develop the Shallow Discovery.

                 SECTION 14- RIGHT TO OBTAIN THIRD PARTY SUPPORT

BP shall have the right to obtain third party support for the drilling of any
wells pursuant to this Agreement, and may show any Confidential Data (as defined
in the JOA) with respect to any wells drilled pursuant to this Agreement. BP
shall provide prior written notice to EEX that it intends to make Confidential
Data available to third Parties. EEX shall be granted the same right to make
Confidential Data available to third parties for the purpose of obtaining
support for any operation to be conducted pursuant to this Agreement that is not
subject to the EEX Carry. These rights shall be applied on a Prospect by
Prospect basis.

Prior to the commencement of the Third Well the interest of BP as covered by the
JOA shall not be subject to the provisions of the JOA concerning the
maintenance, sale or transfer of interest.

EEX shall have the right to sell, transfer or convey all or a portion of its
twenty-five percent (25%) interest in Leases subject to this Agreement to a
third party, but subject to the provisions of the JOA concerning the
maintenance, sale or transfer of interest.

                            SECTION 15-FORCE MAJEURE

All obligations of one party to the other parties hereto shall be suspended,
except the obligation to make payments hereunder, if and so long as the
performance of such obligation is prevented or hindered in whole or in part by
reason of fire, earthquake, action of the elements, strikes, riots, lockouts,
civil commotion, acts of the country's enemy, contractor delay, inability to
obtain the necessary material for the performance of such obligations on the
open market, or for any other cause except financial, whether similar or
dissimilar to those specifically enumerated herein (but not including Adverse
Downhole Conditions), which shall be beyond the reasonable control of the party
claiming such suspension ("Force Majeure"). Upon the occurrence of any such
Force Majeure event, any party claiming a suspension of obligations by reason
thereof shall verbally notify the other parties followed by a written
communication within seven (7) days, specifying in reasonable detail the reason
for non-performance. The party giving such notice shall thereafter exercise all
reasonable diligence to eliminate such cause, but it shall not be or become
obligated to settle any strike or lockout.

                            SECTION 16- TITLE REVIEW

     16.1  Review of Title. EEX shall make available to BP, in EEX's offices
located at 2500 CityWest Blvd, Suite 1400, Houston, Texas 77042 all records in
EEX's possession or control relating to the title to the Leases, and BP shall be
entitled to review such records. BP shall have the right to receive from EEX
copies of any and all such title records.

                              SECTION 17- WARRANTY

     17.1  Special Warranty of Title. EEX shall warrant and forever defend title
to the Leases conveyed to BP against every person whomsoever lawfully claiming
title to the

                                      -13-

<PAGE>

Leases or any part thereof by, through or under EEX, but not otherwise. The
conveyance of the Leases from EEX to BP shall be made with full substitution and
subrogation given in and to all of the rights and actions of warranty that EEX
may have against EEX's predecessors in title.

                        SECTION 18- EEX'S REPRESENTATIONS
                                 AND WARRANTIES

     EEX represents and warrants to BP that, as of the date of execution of this
Agreement:

     18.1  Organization and Good Standing. EEX is a corporation duly organized,
validly existing and in good standing under the laws of the State of Texas and
has all requisite corporate power and authority to own and lease the Leases. EEX
is duly licensed or qualified to do business as a foreign corporation and is in
good standing in all jurisdictions in which the Leases are located.

     18.2  Corporate Authority; Authorization of Agreement. EEX has all
requisite corporate power and authority to execute and deliver this Agreement,
to consummate the transactions contemplated herein and to perform all of the
terms and conditions to be performed by it as provided for in this Agreement.
The execution and delivery of this Agreement by EEX, the performance by EEX of
all of the terms and conditions to be performed by it and the consummation of
the transactions contemplated herein have been duly authorized and approved by
all necessary corporate action. This Agreement has been duly executed and
delivered by EEX and constitutes the valid and binding obligation of EEX,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws relating
to or affecting the enforcement of creditors' rights and general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity).

     18.3  No Violations. Assuming expiration or termination of the applicable
waiting period under the Hart Scott Rodino (HSR) Act, if applicable, the
execution and delivery of this Agreement by EEX does not, and the fulfillment
and compliance with the terms and conditions hereof and the consummation of the
transactions contemplated herein, will not:

           (a) Conflict with or require the consent of any person or entity
               under any of the terms, conditions or provisions of the
               certificate of incorporation or bylaws of EEX;

           (b) Violate any provision of, or require any filing, consent or
               approval under any law applicable to or binding upon EEX;

           (c) Conflict with, result in a breach of, constitute a default under
               or constitute an event that with notice or lapse of time, or
               both, would constitute a default under, accelerate or permit the
               acceleration of the performance required by, or require any
               consent, authorization or approval under, (i) any mortgage,
               indenture, loan, credit agreement or other agreement evidencing
               indebtedness for borrowed money to which EEX is a party, by which
               EEX is bound or to which the Leases are subject, or (ii) any
               order, judgment or decree of any governmental entity; or

                                      -14-

<PAGE>

           (d) Result in the creation or imposition of any lien or encumbrance
               upon the Leases.

     18.4  No Default. The Leases are in full force and effect in accordance
with their respective terms, and there exist no defaults in the performance of
any obligation thereunder. Additionally, EEX is not aware of any event that with
notice or lapse of time, or both, would constitute a default under any of the
Leases.

     18.5  Absence of Certain Changes. Since the execution of the March 1, 2002
OCS Lease Sale 182 agreement, there has not been:

           (a) A sale, assignment or other disposition of the Leases;

           (b) A mortgage, pledge or grant of a lien or security interest in any
               of the Leases; or

           (c) A contract or commitment to do any of the foregoing.

     18.6  Operating Costs. All costs and expenses incurred in connection with
the operation of the Leases have been fully paid and discharged by EEX, except
normal costs and expenses incurred in operating the Leases within the previous
thirty (30) Days or as to which EEX has not yet been billed.

     18.7  Litigation. There is no action, suit or proceeding pending against
EEX or the Leases which could have a adverse effect on the value or operation of
the Leases or that would prevent the consummation of the transaction
contemplated by this Agreement.

     18.8  Compliance with Laws. EEX is in compliance with all laws applicable
to the ownership, and, with respect to the Leases which EEX operates, operation,
maintenance or repair of the Leases, including all environmental laws applicable
to the ownership or operation of the Leases. EEX has not entered into and the
Leases are not subject to any agreements, consent orders, administrative orders
or similar obligation based on a violation or an alleged violation of
environmental laws.

     18.9  Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by, or threatened against EEX.

     18.10 Employment Matters. BP shall have no obligation to employ or consider
employing the employees of EEX. Additionally, BP shall not incur any liability
of any kind whatsoever with respect to employment matters of EEX or any
affiliate of EEX, including without limitation, liability for compensation or
other benefits as a consequence of consummating the transactions contemplated by
this Agreement, nor will the Leases be subject to any kind of lien or
encumbrance in connection with such employment matters.

     18.11 Marketing Agreements. None of the Leases or production therefrom is
subject to any purchase agreement, sale agreements or similar marketing
arrangement.

     18.12 Tax Partnerships. The Leases are not subject to any tax partnerships.

                                      -15-

<PAGE>

     18.13 Tax Filings. All returns, statements and reports with respect to
taxes based upon, measured by or imposed with respect to the ownership or
operation of the Leases have been timely filed with the appropriate governmental
entity and all such taxes have been paid.

     18.14 Non-Consent Operations. Since the execution of this Agreement, there
           have been no operations under an operating agreement, unit agreement
           or governmental order with respect to which EEX has become a
           non-consenting party.

     18.15 Defensible Title: Subject to and except for the Permitted
           Encumbrances:

           (a) EEX is entitled to receive not less than the "Net Revenue
               Interests" set forth in Exhibit "A" of all oil, gas and
               associated liquid and gaseous hydrocarbons produced, saved and
               marketed from the Leases;

           (b) EEX is obligated to bear costs and expenses relating to the
               ownership, operation, maintenance and repair of the wells and
               facilities located on or attributable to the Leases in an amount
               not greater than the "Working Interests" set forth in Exhibit
               "A".

           (c) The Leases are free and clear of liens, encumbrances and
               encroachments.

                 SECTION 19- BP'S REPRESENTATIONS AND WARRANTIES

     19.1  Organization and Good Standing. BP is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and lease the Leases.
BP is duly licensed or qualified to do business as a foreign corporation and is
in good standing in all jurisdictions in which the Leases are located.

     19.2  Corporate Authority; Authorization of Agreement. BP has all requisite
corporate power and authority to execute and deliver this Agreement, to
consummate the transactions contemplated herein and to perform all the terms and
conditions to be performed by it as provided for in this Agreement. The
execution and delivery of this Agreement by BP, the performance by BP of all the
terms and conditions to be performed by it and the consummation of the
transactions contemplated herein have been duly authorized and approved by all
necessary corporate action. This Agreement has been duly executed and delivered
by BP and constitutes the valid and binding obligation of BP, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency or other laws relating to or affecting the
enforcement of creditors' rights and general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).

     19.3  No Violations. Assuming expiration or termination of the applicable
waiting period under the HSR Act, if applicable, the execution and delivery of
this Agreement by BP does not, and the fulfillment and compliance with the terms
and conditions hereof by BP and the consummation of the transactions
contemplated herein, will not:

           (a) Conflict with or require the consent of any person or entity
               under any of the terms, conditions or provisions of the
               certificate of incorporation or bylaws of BP;

                                      -16-

<PAGE>

           (b) Violate any provision of, or require any filing, consent or
               approval under any law applicable to or binding upon BP; or

           (c) Conflict with, result in a breach of, constitute a default under
               or constitute an event that with notice or lapse of time, or
               both, would constitute a default under, accelerate or permit the
               acceleration of the performance required by, or require any
               consent, authorization or approval under, (i) any mortgage,
               indenture, loan, credit agreement or other agreement evidencing
               indebtedness for borrowed money to which BP is a party or by
               which BP is bound, or (ii) any order, judgment or decree of any
               governmental entity.

     19.4  SEC Disclosure. BP is acquiring the Leases for its own account for
use in its trade or business, and not with a view toward or for sale in
connection with any distribution thereof, nor with any present intention of
making a distribution thereof within the meaning of the Securities Act of 1933,
as amended.

                        SECTION 20-ADDITIONAL ASSURANCES

     20.1  Negative Assurances of EEX. From the Effective Date hereof until
execution of this Agreement, EEX represents that it has not:

               (a)  Waived any right relating to any of the Leases;

               (b)  Conveyed, encumbered, mortgaged, pledged or disposed of any
                    of the Leases;

               (c)  Entered into, modified or terminated any of the Leases; or

               (d)  Contracted or committed itself to do any of the foregoing.

     20.2  Affirmative Assurances of EEX. From the Effective Date hereof until
execution of this Agreement, EEX represents that it has:

               (a)  Operated the Leases (where it is designated as operator) in
                    a prudent manner in accordance with good industry standards
                    and practices;

               (b)  Performed all its obligations in accordance with the terms
                    and conditions contained in the Leases;

               (c)  Maintained the oil and gas leases in full force and effect,
                    including without limitation, made all payments of
                    royalties, overriding royalties, delay rentals, minimum
                    royaltiesand similar payments which have become due;

               (d)  Maintained all required bonds related to the Leases;

               (e)  Filed or caused to be filed all reports or filings required
                    by any governmental entity having appropriate jurisdiction
                    relating to the ownership or operation of the Leases;

                                      -17-

<PAGE>

               (f)  Obtained BP's prior written consent before electing, voting
                    (whether affirmatively or negatively) or failing to vote
                    under any operating agreement, unit agreement or similar
                    agreement;

               (g)  Obtained BP's prior written consent before electing or
                    voting (whether affirmatively or negatively) under any order
                    of a governmental entity; and

               (h)  Consulted with BP prior to making any decision which could
                    have a material impact on the value or operation of the
                    Leases.

     20.3  Notice of Loss. From the Effective Date hereof until execution of
this Agreement, EEX has promptly notified BP of any loss or damage to the
Leases, or any part thereof, known to EEX and exceeding Five Hundred Thousand
and No/100 Dollars (US$500,000.00).

     20.4  Exclusive Negotiations. From the Effective Date hereof until the
execution date of this Agreement, EEX has not solicited from any person or
entity any proposals or offers, or entered into any negotiations, relating to
the interest in the Leases to be assigned to BP.

     20.4  BP's Assumption of Obligations. Except as otherwise provided in this
Agreement, BP assumes and shall timely perform and discharge its proportionate
duties and obligations of the owner, to the extent applicable to the interest
being acquired, and as operator of the Leases relating to the period of time
after the execution of this Agreement and during the term of this Agreement;
provided, however, BP shall not assume responsibility for the following:

               (a)  Any condition existing as of the execution date of this
                    Agreement attributable to operations conducted by or on
                    behalf of EEX, including without limitations, spills,
                    releases, and disposal, sites;

               (b)  Any obligation, commitment, debt, lien or liability not
                    disclosed in writing by EEX to BP;

               (c)  Any litigation to the extent the claims are based on acts,
                    omissions, events or occurrences attributable to operations
                    conducted or actions taken or not taken prior to the
                    execution of this Agreement;

               (d)  Federal, state, local, or other tax liability to the extent
                    attributable to EEX's ownership or operation of the Leases
                    accruing prior to the Effective Date; or

               (e)  Federal, state, local, or other income tax liability to the
                    extent attributable to EEX's ownership or operation of the
                    Leases accruing prior to the execution of this Agreement.

     20.6 Records. Within ten (10) Days after the execution of this Agreement,
EEX shall furnish to BP copies of all records pertinent to the Leases which are
maintained by or in the possession or control of EEX.

                      SECTION 21-ADMINISTRATIVE PROVISIONS

                                      -18-

<PAGE>

               a.   Assignability: Except as provided in Section 14, neither
                    Party shall have the right to transfer or assign its
                    interest in this Agreement (or the lands affected thereby).

               b.   Governing Law: This Agreement (and the incorporated exhibits
                    and attachments) shall be governed by the laws of the State
                    of Texas without reference to choice of law principles which
                    might refer matters in dispute to the law of another
                    jurisdiction.

               c.   Entire Agreement: This Agreement, including the
                    Confidentiality Agreements dated September 26, 2001 and
                    February 22, 2002 (except as expressly set forth in Section
                    22 hereof), OCS Lease Sale 182 Agreement dated March 1, 2002
                    and the Joint Bidding Agreement of the same date which are
                    deemed incorporated as if restated in their entirety
                    represents the entire Agreement by and between the Parties.
                    It may not be changed except by a written agreement executed
                    by all the Parties.

               d.   Incorporation of Exhibits: Each of the exhibits and
                    attachments attached to this Agreement are incorporated into
                    this Agreement by reference as fully as if the text of each
                    exhibit and attachment were set forth within the body of
                    this Agreement.

               e.   Severability: If any provision of this Agreement is for any
                    reason held in violation of any applicable law, governmental
                    rule or regulation, or if the provision is held to be
                    unenforceable or unconscionable, then the invalidity of that
                    specific provision shall not be held to invalidate the
                    remaining provisions of this Agreement. All other provisions
                    in the entirety of this Agreement (including all exhibits
                    and attachments) shall remain in full force and effect
                    unless the removal of the invalid provisions destroys the
                    legitimate purposes of this Agreement, in which event this
                    Agreement shall be canceled and terminated.

               f.   Binding Effect: Upon execution by all Parties, this
                    Agreement shall be binding upon and inure to the benefit of
                    the Parties, their successors and assigns. This Agreement
                    may be executed in multiple counterparts each of which shall
                    be deemed an original, and all of which when taken together
                    shall constitute but one in the same Agreement. This
                    Agreement does not benefit or create any rights in any
                    person or entity not a party to this Agreement.

               g.   Further Assurances: Each Party (including any related
                    entities successors or assigns) further agrees that it shall
                    take any and all steps and sign and execute any and all
                    documents and agreements reasonably necessary to implement
                    the terms of this Agreement. EEX agrees to provide all
                    necessary approvals necessary for BP to obtain permits and
                    to fulfill the obligations hereunder. Each Party further
                    agrees to refrain from taking any action, either expressly
                    or impliedly, which would have the effect of prohibiting or
                    hindering the performance of any Party to this Agreement.
                    The Parties agree that this Agreement may not be terminated,
                    nor shall a Party be deemed to be in default hereunder, if
                    any obligations owed by one Party to another are frustrated,
                    impeded, or

                                      -19-

<PAGE>

                    prevented by creditors, lenders, orders of courts or
                    government agencies.

               h.   Drafting of Agreement: BP and EEX each declare that they
                    have contributed to the drafting of this Agreement or have
                    had it reviewed by their counsel before signing it. It is
                    expressly agreed that this Agreement shall not be construed
                    against any Party on the basis of who drafted this Agreement
                    or who supplied the form of Agreement. Each Party agrees
                    that it has been purposefully drawn and correctly reflects
                    their understanding of this transaction that it
                    contemplates.

               i.   Notices: the Parties agree that for the purposes of giving
                    and receiving any notices under this Agreement, the
                    following persons are designated as authorized
                    representatives:

                    For BP:
                    E. P. Zseleczky, Jr.(Designated Representative)
                    Tel: (281) 366-0939
                    Fax: (281) 366-7569
                    Chris Wager (Alternate Representative)
                    Tel: (281) 366-7675
                    Fax: (281) 366-7569
                    501 WestLake Park Blvd.
                    Houston, Texas 77079

                    For EEX:
                    Ben Davis (Designated Representative)
                    Tel: (713) 243-3247
                    Fax: (713) 243-3422
                    Mike Padgett (Alternate Representative)
                    Tel: (713) 243-3559
                    Fax: (713) 243-3422
                    2500 CityWest Blvd., Suite 1400
                    Houston, Texas 77042

                    Except as otherwise specified in this Agreement, all
                    required notices and responses shall be made in writing and
                    delivered to the designated representative of the other
                    Party in person or by facsimile transmission (followed by a
                    phone call confirming receipt), U.S. Mail, overnight
                    express, or private courier service. Any notice, may be
                    given to the designated representative by telephone,
                    provided that such telephonic communication shall be
                    confirmed by each Party in writing within twenty four (24)
                    hours of the telephone call (Saturdays, Sundays and national
                    holidays excepted). Any notices and responses shall be
                    effective only when received by the designated
                    representative of the Party to whom such notice or response
                    is directed unless receipt is presumed under one of the
                    following circumstances:

                         .    Any notice or response transmitted by facsimile
                         shall be deemed given and received only after the
                         receiving Party has confirmed receipt of such
                         facsimile by telephone.

                                      -20-

<PAGE>

                         .  Any notice or response transmitted by overnight
                         express or courier shall be deemed given and received
                         twenty-four (24) hours (exclusive of Saturdays,
                         Sundays, and federal holidays) after such notice or
                         response is deposited or transmitted.

                         .  Any notice or response by U.S. Mail (other than
                         overnight express) shall be deemed given and received
                         seventy-two (72) hours (exclusive of Saturdays,
                         Sundays, and federal holidays) after the notice or
                         response is deposited in the mail.

               j. Waiver: Any failure by any party to comply with any of its
               obligations, agreements or conditions herein contained may be
               waived, by the party to whom such compliance is owed by an
               instrument signed by the party to whom compliance is owed and
               expressly identified as a waiver, but not in any other manner. No
               waiver of, or consent to a change in, any of the provisions of
               this Joint Venture Agreement shall be deemed or shall constitute
               a waiver of, or consent to a change in, other provisions hereof
               (whether or not similar), nor shall such waiver constitute a
               continuing waiver unless otherwise expressly provided.

               k. Waiver of Consequential Damages: Notwithstanding anything to
               the contrary contained herein and except for subsection (g)
               above, no Party to this Agreement shall be liable to any other
               Party to this Agreement for damage to a reservoir(s), loss of
               hydrocarbons, or for loss of profits or for other consequential
               or business interruption damages.

               l. Recitals. The parties to this Agreement acknowledge that the
               Recitals set forth hereinabove are true and correct and are
               incorporated into this Agreement and become an integral part
               hereof.

               m. No Further Obligation of EEX/Survival. Except as set forth in
               the JOA and the representations, covenants and warranties which
               survive the execution of this Agreement, after EEX has assigned
               the Leases as contemplated in Section 3 hereinabove, EEX shall
               have no further obligations to explore, develop or operate the
               Leases

               n. Confidentiality and Public Announcements. EEX and BP agree
               that the terms and conditions of this Agreement are confidential
               and proprietary. Neither EEX nor BP (including any of its
               affiliates in either case) shall disclose the terms of this
               Agreement to any third party, or issue a public statement or
               press release with respect to the terms of this transaction
               (including the consideration and other terms) without the prior
               written consent of the other party, except as required by law or
               listing agreement with a national security exchange and then only
               after prior consultation with the other party.

                         SECTION 22-PREVIOUS AGREEMENTS

This Agreement shall replace and supersede the provisions of the following
agreements:

                                      -21-

<PAGE>

          1.   Paragraph 16 of that certain Confidentiality Agreement dated
               September 26, 2001, by and between the Parties.

          2.   Paragraph 16 of that certain Confidentiality Agreement dated
               February 22, 2002, by and between the Parties.

IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement effective as of the date first above
written.

               BP EXPLORATION & PRODUCTION INC.

               By:       /s/ O. Kirk Wardlaw
                   ---------------------------------
                   O. Kirk Wardlaw
                   Attorney-in-Fact

               EEX CORPORATION

               By:       /s/ Ben Davis
                   ---------------------------------
                   Ben Davis
                   Land Manager-Offshore

                                      -22-

<PAGE>

                                   EXHIBIT "A"

Attached to and made a part of that certain Joint Venture Agreement for the
Treasure Island Project
dated March 1, 2002 by and between
BP Exploration & Production Inc. and EEX Corporation

SECTION I:  EEX Owned Leases

<TABLE>
<CAPTION>
                                                            EXPIRATION
PROSPECT         AREA NAME           BLOCK NO.    OCS-G        DATE            RI            WI          NRI
------------------------------------------------------------------------------------------------------------------------
<S>              <C>                 <C>         <C>        <C>            <C>           <C>          <C>
Dawson           S. Timbalier           188       21670 *    4/30/05       16.66667%     100.00000%   83.33333%
                                        224       21673      4/30/05       16.66667%     100.00000%   83.33333%
                                        226       21674      4/30/05       16.66667%     100.00000%   83.33333%
                                        227       21675      4/30/05       16.66667%     100.00000%   83.33333%

Blackbeard, W.   S. Timbalier           141       21665      4/30/05       16.66667%     100.00000%   83.33333%
                                        142       21666      4/30/05       16.66667%     100.00000%   83.33333%
                                        167       21668      4/30/05       16.66667%     100.00000%   83.33333%
                                        168       21669      4/30/05       16.66667%     100.00000%   83.33333%

Blackbeard, E.   S. Timbalier           144       21667      6/30/05       16.66667%     100.00000%   83.33333%

Morgan           S. Timbalier           215       21672      4/30/05       16.66667%     100.00000%   83.33333%
                 Ship Shoal             211       22714      4/30/06       16.66667%     100.00000%   83.33333%
                 Ship Shoal             236       22716      4/30/06       16.66667%     100.00000%   83.33333%

Capt. Kidd       Ship Shoal             260 **    18020      6/30/02       16.66667%     20.00000%    16.26667%  ***
                                        261 **    14506        HBP         16.66667%     25.00000%    20.83333%
                                        263       21658      4/30/05       16.66667%     100.00000%   83.33333%
                                        281       21660      4/30/05       16.66667%     100.00000%   83.33333%
                                        282       22720      4/30/06       16.66667%     100.00000%   83.33333%

Bellamy          Ship Shoal             306       22724      4/30/06       16.66667%     100.00000%   83.33333%
                                        331       21661      4/30/05       16.66667%     50.00000%    41.66667%

Lafitte          Eugene Island          222       22672      4/30/06       16.66667%     100.00000%   83.33333%
                                        223       21640      4/30/05       16.66667%     100.00000%   83.33333%

Barataria        S. Marsh Island         80 **    14439        HBP         16.66667%     11.25000%     9.15000%  ***
</TABLE>

  *Lease covers only S 1/2 and NE 1/4 of Block.

                                      -23-

<PAGE>

 **Depth Limitations
   SS 260 - EEX owns 20% WI below 12,000 ft TVD.
   SS 261 - EEX owns 25% WI below 15,000'.
   SMI 80 - S/2 N/2 N/2; S/2 N/2; S/2: EEX owns 11.25% WI below the
               stratigraphic equivalent of the deepest productive reservoir
               discovered in the field which is defined as the base of the
               11200' Sand as seen in the OCS-G 14439 Well No. A-5 ST at
               approximately 13,146' MD; and N/2 N/2 N/2: EEX owns 11.25% WI
            below 9,000' subsea.
***Leases burdened by 2% ORRI in favor of Lee B. Backsen, et al.

SECTION II:  Leases Acquired by the Parties at OCS Lease Sale No. 182

<TABLE>
<CAPTION>
                                                               EXPIRATION
PROSPECT       AREA NAME           BLOCK NO.        OCS-G         DATE            RI         WI        NRI
-----------------------------------------------------------------------------------------------------------------
<S>            <C>                 <C>             <C>         <C>             <C>          <C>     <C>
Morgan         Ship Shoal                212       Pending        2007         16.66667%    100%    83.33333%
                                         235       Pending        2007         16.66667%    100%    83.33333%

Blackbeard W.  Ship Shoal                186       Pending        2007         16.66667%    100%    83.33333%

Bellamy        Ship Shoal                309       Pending        2007         16.66667%    100%    83.33333%
                                         310       Pending        2007         16.66667%    100%    83.33333%

Lafitte        Eugene Island             201       Pending        2007         16.66667%    100%    83.33333%
</TABLE>

SECTION III:  Currently Existing Agreements

           1.  Offshore Operating Agreement attached as Exhibit "B-3" to that
               certain Amended Acquisition & Management Agreement dated March 5,
               1994, by and between General Atlantic Resources, Inc.,
               General Atlantic Oils Ltd., General Atlantic Gulf Coast, Inc. and
               Taurus Exploration U.S.A., Inc.,
               covering OCS-G 14439 (South Marsh Island Block 80).

           2.  Offshore Operating Agreement dated August 1, 1997, by and between
               UMC Petroleum Corporation,
               Taurus Exploration U.S.A., Inc. and Smacko, Ltd., covering OCS-G
               10820 (Ship Shoal Block 260).

           3.  Offshore Operating Agreement dated March 19, 1996, by and between
               Enserch Exploration, Inc. and
               Cairn Energy USA, Inc., covering OCS-G 14506 (Ship Shoal Block
               261).

                                      -24-

<PAGE>

           4.  Offshore Operating Agreement dated May 1, 2000, by and between
               Remington Oil & Gas Corporation and
               EEX Corporation, covering OCS-G 21661 (Ship Shoal Block 331).

           5.  Letter Agreement dated January 22, 2002, by and between Aviara
               Energy Corporation and EEX Corporation, covering OCS-G 22712
               (Ship Shoal 188).

                                      -25-

<PAGE>

                                  EXHIBIT "B-1"
                   Attached to and made a part of that certain
                         Joint Venture Agreement for the
                       Treasure Island Project dated March
                           1, 2002, by and between BP
                        EXPLORATION & PRODUCTION INC. and
                                EEX CORPORATION.

ASSIGNMENT OF RECORD TITLE INTEREST IN OIL AND GAS LEASE

OCS-G_________
______________

UNITED STATES OF AMERICA (S)
                         (S)        KNOW ALL MEN BY THESE PRESENTS:
OUTER CONTINENTAL SHELF  (S)

         That ____________________________ ("Assignor"), whose address is
____________________________________________________, for and in consideration
of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable
consideration in hand paid by _______________, a _____ corporation,
("Assignee"), whose address is __________________________, the receipt and
sufficiency of which consideration are hereby acknowledged and confessed by
Assignor, does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER
and DELIVER unto Assignee, effective _____________ (the "Effective Date"), an
undivided 75% of Assignor's right, title and interest in and to:

         That certain Oil and Gas Lease dated ____________, executed by the
         United States of America, as "Lessor," to ______________________, as
         "Lessee", covering Block ___ in the ____________________,
         ______________, OCS Leasing Map, ________________, OCS-G Lease No.
         _____ (the "Lease").

said undivided _75% interest in and to the Lease being herein referred to as the
"Subject Interest".

As a result of the assignment of an undivided 75% interest in and to the Leases,
the interests in the Lease shall be held by the parties hereto in the
proportions set forth opposite their names below

         EEX      25%
         BP       75%

                                      -26-

<PAGE>

         This Assignment is made by Assignor and accepted by Assignee subject to
the terms and provisions of (a) the Lease, including a pro rata part of the
burden of the lessor's royalties therein reserved, (b) that certain Asset
Purchase, Farmout, and Joint Exploration Agreement dated March 1, 2002, by and
between Assignor and Assignee. This Assignment is further subject to approval by
the Minerals Management Service of the U.S. Department of the Interior.

         By its acceptance hereof, Assignee assumes, and agrees to be bound by,
all of the future obligations accruing after the Effective Date under the
Subject Interest, insofar as the same are attributable to the period after the
Effective Date. The terms and provisions of this Assignment shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.

         Assignor shall indemnify and hold Assignee harmless for any and all
claims, demands or causes of action arising from operations on or in any way
connected with the Lease before the Effective Date hereof.

         TO HAVE AND TO HOLD the Subject Interest, together with all and
singular the rights and appurtenances thereunto in anywise belonging, unto
Assignee, its successors and assigns, forever, and Assignor does hereby bind
itself, its successors and assigns, to warrant and forever defend all and
singular the Subject Interest unto Assignee, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, by, through or under Assignor, but not otherwise, subject, however, to
the matters set forth herein.

         IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed in multiple counterparts, each of which shall be deemed an original
for all purposes but all of which shall constitute one and the same instrument,
on the dates of the respective acknowledgements set forth hereinbelow, to be
effective, however, for all purposes, as of the Effective Date.

WITNESSES:

                                              ASSIGNOR:

                                    ______________________________

______________________________      BY: __________________________
                                    NAME:    _____________________
______________________________      TITLE: _______________________

                                              ASSIGNEE:

______________________________
______________________________      BY: __________________________

                                    NAME:_________________________
                                    TITLE: _______________________

                                      -27-

<PAGE>

THE STATE OF TEXAS       (S)
                         (S)
COUNTY OF HARRIS         (S)

         Be it known, that on this ______ day of ______________, ____, before me
the undersigned authority, personally came and appeared ___________________, of
___________________________, to me personally known, and known by me to be the
person whose genuine signature is affixed to the foregoing document, who signed
said document before me and in the presence of the two witnesses whose names are
thereto subscribed as such, being competent witnesses, and who acknowledged, in
my presence and in the presence of said witnesses, that he signed the above and
foregoing document as his own fee act and deed and for the uses and purposes
therein set forth and apparent.

         In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal, together with the said witnesses on the
day and date first above written.

         ___________________________________________
                                                    Notary Public in and for the
State of Texas

THE STATE OF TEXAS       (S)
                         (S)
COUNTY OF HARRIS         (S)

         Be it known, that on this ______ day of ______________, ____, before me
the undersigned authority, personally came and appeared
_________________________, of ____________________, a _____ Corporation, to me
personally known, and known by me to be the person whose genuine signature is
affixed to the foregoing document, who signed said document before me and in the
presence of the two witnesses whose names are thereto subscribed as such, being
competent witnesses, and who acknowledged, in my presence and in the presence of
said witnesses, that he signed the above and foregoing document as his own fee
act and deed and for the uses and purposes therein set forth and apparent.

         In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal, together with the said witnesses on the
day and date first above written.

         ___________________________________________
         Notary Public in and for the State of Texas

                                      -28-

<PAGE>

                                  EXHIBIT "B-2"
                   Attached to and made a part of that certain
                         Joint Venture Agreement for the
                       Treasure Island Project dated March
                           1, 2002, by and between BP
                        EXPLORATION & PRODUCTION INC. and
                                EEX CORPORATION.

OCS-G _____
__________________

                         ASSIGNMENT OF OPERATING RIGHTS

UNITED STATES OF AMERICA (S)
                         (S)                 KNOW ALL MEN BY THESE
OUTER CONTINENTAL SHELF  (S)                 PRESENTS:

         That _______________, a _____ corporation, whose address is
__________________________ __________________________ ("Assignor"), for and in
consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and
valuable consideration in hand paid by ____________________________,
("Assignee"), whose address is ______________________________, the receipt and
sufficiency of which consideration are hereby acknowledged and confessed by
Assignor, does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER
and DELIVER unto Assignee, effective as of ._______________ (the "Effective
Date"), an undivided _______% interest in and to:

         The entire (i.e. 100%) operating rights in and to the following
described oil and gas lease, to-wit:

         That certain Oil and Gas Lease dated ____________, executed by the
         United States of America, as "Lessor," to _______________, as "Lessee,"
         covering Block ____ in the ____________ Area of the Outer Continental
         Shelf, OCS Official Protraction Diagram, _______, OCS-G Lease No.
         ______ (the "Lease").

         (the "Subject Lands");

said undivided ________% interest in and to the operating rights in and to the
Lease insofar as the Lease covers the Subject Lands being herein referred to as
the "Subject Interest".

         As a result of this Assignment, ownership of the operating rights owned
by Assignor in the Lease insofar as such operating rights pertain to the Subject
Lands, immediately prior to the Effective Date (being an undivided _________%
interest in the entire (i.e. 100%) operating rights in and to the Lease insofar
as such operating rights pertain to the "Subject Lands") shall be held by the
parties hereto in the proportions set forth opposite their names below:

                                       -29-

<PAGE>

         _________________________________                            _______%
         Total                                                               %

This Assignment is made by Assignor and accepted by Assignee subject to the
terms and provisions of (a) the Lease, including a pro rata (i.e., ________%)
part of the burden of the lessor's royalties therein reserved, and (b) that
certain Asset Purchase, Farmout, and Joint Exploration Agreement between
Assignor and Assignee dated as of March 1, 2002. This Assignment is further
subject to approval by the Minerals Management Service of the U.S. Department of
the Interior.

         By its acceptance hereof, Assignee assumes, and agrees to be bound by,
all of the future obligations accruing after the Effective Date under the
Subject Interest insofar as the same are attributable to the period after the
Effective Date. The terms and provisions of this Assignment shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.

         TO HAVE AND TO HOLD the Subject Interest, together with all and
singular the rights and appurtenances thereunto in anywise belonging, unto
Assignee, its successors and assigns, forever, and Assignor does hereby bind
itself, its successors and assigns, to warrant and forever defend all and
singular the Subject Interest unto Assignee, its successors and assigns, against
every person whomsoever lawfully claiming or to claim the same or any part
thereof, by, through or under Assignor, but not otherwise, subject, however, to
the matters set forth herein.

         IN WITNESS WHEREOF, the parties hereto have caused this Assignment to
be executed in multiple counterparts, each of which shall be deemed an original
for all purposes but all of which shall constitute one and the same instrument,
on the dates of the respective acknowledgments set forth hereinbelow, to be
effective, however, for all purposes, as of the Effective Date.

WITNESSES:

                                             ASSIGNOR:

______________________________

                                             By:____________________________
                                             Name: _________________________
                                             Title: ________________________
______________________________

                                             ASSIGNEE:

______________________________

                                             By: ___________________________
                                             Name:__________________________
______________________________               Title:_________________________

                                      -30-

<PAGE>

THE STATE OF TEXAS       (S)
                         (S)
COUNTY OF HARRIS         (S)

         On this ______ day of ______________, ____, before me, appeared
__________________________, of __________________________, a _____ Corporation,
to me personally known and known by me to be the person whose genuine signature
is affixed to the foregoing document, who signed said document before me and in
the presence of the two witnesses whose names are thereto subscribed as such,
being competent witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and foregoing document as
his own free act and deed and for the uses and purposes therein set forth and
apparent.

         In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal on the day and date first above written.

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

THE STATE OF TEXAS       (S)
                         (S)
COUNTY OF HARRIS         (S)

         On this ______ day of ______________, ____, before me, appeared
__________________________, of __________________________, a _____ Corporation,
to me personally known and known by me to be the person whose genuine signature
is affixed to the foregoing document, who signed said document before me and in
the presence of the two witnesses whose names are thereto subscribed as such,
being competent witnesses, and who acknowledged, in my presence and in the
presence of said witnesses, that he signed the above and foregoing document as
his own free act and deed and for the uses and purposes therein set forth and
apparent.

         In witness whereof, the said appearer has signed these presents and I
have hereunto affixed my hand and seal on the day and date first above written.

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

                                      -31-

<PAGE>

                                   EXHIBIT "C"

                   Attached to and made a part of that certain
                         Joint Venture Agreement for the
                       Treasure Island Project dated March
                           1, 2002, by and between BP
                        EXPLORATION & PRODUCTION INC. and
                                EEX CORPORATION.

                        AREA OF MUTUAL INTEREST (AMI)
PROSPECT NAME           Area Name                  Block Numbers

Dawson                  South Timbalier           160, 161, 176-180, 184-
                                                  189, 204-204, 223-228,
                                                  232-235, 252, 253, 262,
                                                  263

Blackbeard West         Ship Shoal                186-190
                        South Timbalier           141, 142, 167-170

Blackbeard East         South Timbalier           108-110, 143-145, 164-
                                                  166, 171-173, 192, 193,
                                                  201

Morgan                  Ship Shoal                209-214, 234-237, 258,
                                                  259

                        South Timbalier           196-198, 214-217

Bellamy                 Ship Shoal                285, 286, 305, 306,
                                                  308-310, 329-331

Captain Kidd            Ship Shoal                238, 256, 257, 260-263
                                                  280-282

Lafitte                 South Marsh Island        62-65
                        Eugene Island             200, 201, 221-225, 241-
                                                  244

Barataria               South Marsh Island        77-81

                                      -32-

<PAGE>

                                   EXHIBIT "D"

                Attached to and made a part of that certain Joint
                    Venture Agreement for the Treasure Island
                   Project dated March 1, 2002, by and between
                    BP EXPLORATION & PRODUCTION INC. AND EEX
                                  CORPORATION.

Form of Joint Operating Agreement ("JOA")

                                 INSERT JOA HERE

                                       -33-

<PAGE>

                                   EXHIBIT "E"

                   Attached to and made a part of that certain
                         Joint Venture Agreement for the
                     Treasure Island Project dated March 1,
                      2002, by and between BP EXPLORATION &
                      PRODUCTION INC. AND EEX CORPORATION.

Repurchase Price-Properties

Property No. 1 (9M-07020)

An undivided one-fourth (1/4) mineral interest in an 88.36 acre tract in the
SE/4NE/4 and the E/2NE/4 of Section 3, Township 9 North, Range 12 West, Van
Buren County, Arkansas.

Property No. 2 (9M-12004)

An undivided eleven and four-tenths (11.4) mineral interest in 175.5 acres in
three tracts in Sections 8,17 and 20, Township 7 South, Range 18 East, Alachua
County, Florida.

Property No. 3 (9R-04006)

An undivided one one-hundredth (1/100/th/) royalty interest in the E/2 of
Section 8, Township 27 North, Range 2 West, Pondera County, Montana.

                                       -34-<PAGE>
                                                                    Exhibit 10.2

                          OFFSHORE OPERATING AGREEMENT

                        BP EXPLORATION & PRODUCTION INC.
                                 EEX CORPORATION

        THIS AGREEMENT, made effective the 1st day of March, 2002, by the
signers hereof, their respective heirs, successors, legal representatives, and
assigns, herein referred to collectively as the "Parties" and individually as a
"Party."

                                   WITNESSETH:

        WHEREAS, the Parties own the one or more oil and gas leases identified
in Exhibit "A" and desire to explore, develop, produce, and operate those
leases.

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

                                    ARTICLE 1

                                   APPLICATION

        1.1  Application to Each Prospect. This Agreement applies separately to
 each Prospect described in Exhibit "A."

                                    ARTICLE 2

                                   DEFINITIONS

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

        2.2 Affiliate. For a person, another person that controls, is controlled
by, or is under common control with that person. In this definition, (a)
"control" means the possession by one person, directly or indirectly, of more
than fifty percent (50%) of the voting securities of a corporation or, for other
persons, the equivalent ownership interest (such as partnership interests), and
(b) "person" means an individual, corporation, partnership, trust, estate,
unincorporated organization, association, or other legal entity.

        2.3 Authorization For Expenditure (AFE). An authority to expend funds
prepared by a Party to estimate the costs to be incurred in conducting an
operation under this Agreement.

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

        2.5 Completion Equipment. That certain equipment on an Exploratory Well
or a Development Well that is required to be installed prior to the movement of
a well-completion rig off that well

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

                                        1

<PAGE>

                   Model Form of Offshore Operating Agreement

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

     2.6  Confidential Data. The information and data obtained under this
Agreement, including, but not limited to, geological, geophysical, and reservoir
information; originals and copies of logs; and other information about the
progress, tests, or results of a well drilled or an operation conducted under
this Agreement, except data or information that becomes public, other than by
breach of this Agreement.

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

     2.8  Development Operation. An operation on the Prospect other than an
Exploratory Operation.

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

     2.10 Exploratory Operation. An operation that is conducted on the Prospect
and that is any of the following:

          (A) proposed to Complete an Exploratory Well;

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

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

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

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

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

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

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

     2.16 Lease. Each oil and gas lease identified in Exhibit "A" and the lands
covered by that lease.

     2.17 MMS. The Minerals Management Service, United States Department of
Interior, or its successor agency.

     2.18 Non-consent Operation. An operation conducted on the Prospect by fewer
than all Parties, which subjects the Non-participating Party to Article 13
(Non-Consent Operations).

     2.19 Non-consent Platform. A Platform owned by fewer than all Parties.

                                       2

<PAGE>

                   Model Form of Offshore Operating Agreement

     2.20 Non-consent Well. An Exploratory Well or a Development Well owned by
fewer than all Parties.

     2.21 Non-operator. A Party other than the Operator.

     2.22 Non-participating Party. A Party other than a Participating Party.

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

     2.24 Objective Depth. A depth sufficient to test the lesser of the
Objective Horizon or the specific footage depth stated in the Authorization for
Expenditure.

     2.25 Objective Horizon. The interval consisting of the deepest zone,
formation, or horizon to be tested in an Exploratory Well, Development Well,
Deepening operation, or Sidetracking operation, as stated in the Authorization
for Expenditure.

     2.26 Offsite Host Facilities: Processing and handling facilities that (a)
are located off the Prospect and (b) are either owned by one or more third
parties or by one or more Participating Parties in a well, whose interests in
the processing and handling facilities differ from their respective Working
Interest shares in the well.

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

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

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

     2.30 Platform. An offshore structure that supports Wells, Completion
Equipment, or Processing Facilities, whether fixed, compliant, or floating, and
the components of that structure, including, but not limited to, caissons or
well protectors, rising above the water line and used for the exploration,
development, or production of Hydrocarbons from the Prospect. The term
"Platform" shall also mean an offshore subsea structure or template (excluding
templates used for drilling operations) and any component thereof (including,
but not limited to, flow lines and control systems, other than those installed
in connection with Completion of a well) that is attached to the sea floor and
used to obtain production of Hydrocarbons from the Prospect.

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

          (A) compression, separation, dehydration and metering equipment,

          (B) the flowlines, gathering lines or lateral lines that deliver
              Hydrocarbons and water 1) from the Completion Equipment to the
              Platform and/or Processing Facilities or to Offsite Host
              Facilities, or

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                   Model Form of Offshore Operating Agreement

                     2) from the Platform to Export Pipelines, and

                 (C) injection and disposal wells.

Processing Facilities exclude (1) Platforms, (2) Export Pipelines, and (3)
Take-in-Kind Facilities.

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

        2.33 Producible Well. A well that is drilled under this Agreement and
that (a) is producing oil or gas; or (b) is determined to be, or meets the
criteria for being determined to be, capable of producing oil or gas in paying
quantities under an applicable order or regulation issued by the governmental
authority having jurisdiction.

        2.34 Prospect. The geographical areas described in Exhibit "A", and any
Leases within such individual areas that are jointly owned by the Parties.

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

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

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

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

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

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

        2.41 Working Interest. The ownership of each Party in and to the
Prospect and all wells, equipment, Platforms, and Processing Facilities, located
on the Prospect, as well as all Hydrocarbon production from the Prospect, in the
percentage set forth in Exhibit "A" except as otherwise provided by this
Agreement.

        2.42 APA: That Certain Asset Purchase, Farmout and Joint Exploration
Agreement dated March 1, 2002 between the Parties.

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                   Model Form of Offshore Operating Agreement

                                    ARTICLE 3
                                    EXHIBITS

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

                    3.1.1   Exhibit "A." Operator, Description of Leases and
                    Prospects, Division of Interests, and Notification
                    Addresses.
                    3.1.2   Exhibit "B." Insurance Provisions.
                    3.1.3   Exhibit "C." Accounting Procedure.
                    3.1.4   Exhibit "D." Gas Balancing Agreement
                    3.1.5   Exhibit "E." Non-discrimination Provisions.
                    3.1.6   Exhibit "F." Tax Partnership Provision.
                    3.1.7   Exhibit "G." Memorandum of Operating Agreement and
                    Financing Statement.
                    3.1.8   Exhibit "H." Arbitration.

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

                                    ARTICLE 4

                                    OPERATOR

        4.1  Operator. BP Exploration & Production Inc. is designated as the
Operator of the Prospect. The Parties shall promptly execute and file all
documents required by the MMS in connection with the designation of BP
Exploration & Production Inc. as Operator or with the designation of any other
Party as a substitute or successor Operator.

        4.2  Substitute Operator. Except as otherwise provided in Article 4.2.1
(Circumstances Under Which the Operator Must Conduct a Non-Consent Operation),
if the Operator becomes a Non-participating Party in a Non-consent Operation,
the Participating Parties may approve the designation of any Participating Party
as the substitute Operator by the vote of fifty-one percent (51%) of the
Participating Interests. The substitute Operator shall serve only (a) for the
Non-consent Operation, (b) of the Prospect affected by the Non-consent
Operation, and (c) with the same authority, rights, obligations, and duties as
the Operator. If a Non-operator is the only Participating Party in a Non-consent
Operation, then the Non-operator shall be designated as the substitute Operator
for that Non-consent Operation, with no vote required, unless the Non-operator
elects not to accept the designation. No Non-operator shall ever be designated
as a substitute Operator against its will. If a substitute Operator is not
designated under the foregoing procedures, the Operator shall, upon the
unanimous agreement of

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                   Model Form of Offshore Operating Agreement

the Participating Parties and the Operator, conduct the Non-consent Operation on
behalf of the Participating Parties and at the Participating Parties' sole cost
and risk under Article 13 (Non-Consent Operations).

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

                 If:
                        (A) a drilling rig is on location and the Operator
                        becomes a Non-participating Party in a supplemental
                        AFE for an Exploratory Operation, or Development
                        Operation, or (B) the Operator becomes a
                        Non-participating Party in an operation to be
                        conducted from a Platform operated by the Operator,

                 the Operator, as a Non-participating Party, shall conduct the
                 Non-consent Operation on behalf of the Participating Parties
                 and at the Participating Parties' sole cost and risk under
                 Article 13 (Non-Consent Operations).

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

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

                 4.2.3. Appointment of a Substitute Operator. After expiration
of all applicable response periods for the Non-consent Operation and selection
of a substitute Operator, each Party shall promptly provide the substitute
Operator with the appropriate MMS designation of operator forms and designation
of oil spill responsibility forms. The Operator and the substitute Operator
shall coordinate the change of operatorship to avoid interfering with ongoing
activities and operations, if any, including but not limited to, lease
maintenance activities and operations.

                 4.2.4. Redesignation of Operator. Within thirty (30) days after
conclusion of the Non-consent Operation, all Parties shall execute and provide
the Operator with the appropriate MMS designation of operator forms and
designation of oil spill responsibility forms to return operatorship to the
Operator, thereby superseding the Parties' designation of the substitute
Operator under Article 4.2.3 (Appointment of a Substitute Operator).

         4.3     Resignation of Operator. Subject to Article 4.5 (Selection of
Successor), The Operator may resign at any time by giving written notice to the
Parties, except that the Operator may not resign during a Force Majeure or an
emergency that poses a threat to life, safety, property, or the environment. If

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                   Model Form of Offshore Operating Agreement

the Operator ceases to own a Working Interest, the Operator automatically shall
be deemed to have resigned as the Operator without any action by the
Non-operators.

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

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

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

                 (C) A Transfer of Interest by the Operator (excluding an
                     interest assigned to an Affiliate) reduces the Operator's
                     Working Interest to less than the Working Interest of a
                     Non-operator, whether accomplished by one or more Transfer
                     of Interest.

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

                 (E) Operator proposes to sell, trade, transfer, or assign more
                     than seventy-five percent (75%) of its Working Interest to
                     a party in a transaction that would require Operator to
                     provide a notice of preferential right to purchase to the
                     Non-operators under Article 26 (Successors, Assigns, and
                     Preferential Rights).

If a petition for relief under the federal bankruptcy laws is filed by or
against Operator, and if a federal bankruptcy court prevents the removal of
Operator, all Non-operators and Operator shall comprise an interim operating
committee to operate until Operator has elected to reject or assume this
Agreement under the Bankruptcy Code. An election by Operator as a
debtor-in-possession or by a trustee in bankruptcy to reject this Agreement
shall be deemed to be a resignation by Operator without any action by the
Non-operators, except the selection of a successor. To be effective, a vote to
remove Operator for any cause described above must be taken within thirty (30)
days after a Non-operator receives actual knowledge of the cause. A change of
corporate name or structure of Operator or a transfer of Operator's interest to
a single Affiliate shall not be deemed to be a resignation or basis for removing
Operator. Subject to Article 8.7 (Unpaid Charges and Default), the resignation
or removal of Operator shall become effective at the earlier of (a) 7:00 a.m. on
the first day of the calendar month following the expiration of ninety (90) days
after the giving of notice of resignation by Operator or action by Non-operators
to remove Operator, or (b) the time when a successor Operator assumes the duties
of Operator.

        4.5 Selection of Successor. Upon resignation or removal of Operator, a
successor Operator shall be selected from among the Parties by an affirmative
vote of one (1) or more Parties having a combined Working Interest of fifty-one
percent (51%) or more. If the resigned or removed Operator is not entitled to
vote, fails to vote, or votes only to succeed itself, then the successor
Operator shall be selected by the affirmative vote of the Parties owning a
combined Working Interest of fifty-one percent (51%) or more

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                   Model Form of Offshore Operating Agreement

of the remaining Working Interest after excluding the Working Interest of the
resigned or removed Operator. If the Operator assigns all or a part of its
Working Interest, then under Article 4.3 (Resignation of Operator) or Article
4.4.(C), the Party who acquired all or a part of the former Operator's Working
Interest shall not be excluded from voting for a successor Operator. If there
are only two Parties to this Agreement when the Operator resigns or is removed,
then the Non-operator automatically has the right, but not the obligation, to
become the Operator. If no Party is willing to become the Operator, this
Agreement shall terminate under Article 27.1 (Term).

        4.6 Effective Date of Resignation or Removal. The resignation or removal
of the Operator shall become effective as soon as practical but no later than
7:00 a.m. on the first day of the month following a period of ninety (90) days
after the date of resignation or removal, unless a longer period is required for
the Parties to obtain approval of the designation of the successor Operator by
the MMS. In no event shall the resignation or removal of Operator become
effective unless and until a successor Operator has assumed the duties of
Operator. The resignation or removal of the outgoing Operator shall not
prejudice any rights, obligations, or liabilities resulting from its
operatorship. The successor Operator may charge the Joint Account for the
reasonable costs incurred in connection with the change of operatorship.

        4.7 Delivery of Property. On the effective date of resignation or
removal of the Operator, the outgoing Operator shall deliver to the successor
Operator possession of all items purchased for the Joint Account under this
Agreement, all Hydrocarbons that are not the separate property of a Party, all
equipment, materials, and appurtenances purchased for the Joint Account under
this Agreement, and all books, records, and inventories relating to the Joint
Account (other than those books, records, and inventories maintained by the
outgoing Operator as the owner of a Working Interest). The outgoing Operator
shall distribute or return all funds related to the Joint Account to the Parties
who contributed the funds or are otherwise entitled to receive the funds under
this Agreement. The outgoing Operator shall further use its reasonable efforts
to transfer to the successor Operator, as of the effective date of the
resignation or removal, its rights as Operator under all contracts exclusively
relating to the activities or operations conducted under this Agreement, and the
successor Operator shall assume all obligations of the Operator that are
assignable under the contracts. The Parties may audit the Joint Account and
conduct an inventory of all property and all Hydrocarbons that are not the
separate property of a Party, and the inventory shall be used in the return of,
and the accounting by the outgoing Operator of, the property and the
Hydrocarbons that are not the separate property of a Party. The inventory and
audit shall be conducted under Exhibit "C."

                                    ARTICLE 5

                        AUTHORITY AND DUTIES OF OPERATOR

        5.1 Exclusive Right to Operate.  Unless otherwise provided in this
Agreement, Operator shall have the exclusive right and duty to conduct
operations (or cause them to be conducted) under this Agreement. In

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                   Model Form of Offshore Operating Agreement

performing services under this Agreement for the Non-operators, Operator shall
be an independent contractor, not subject to the control or direction of
Non-operators, except for the type of operation to be undertaken in accordance
with the voting and election procedures in this Agreement. Operator shall not be
deemed to be, or hold itself out as, the agent or fiduciary of Non-operators.

        5.2 Workmanlike Conduct. Operator shall timely commence and conduct all
operations in a good and workmanlike manner, as would a prudent operator under
the same or similar circumstances. Operator shall not be liable to Non-operators
for losses sustained or liabilities incurred, except as may result from
Operator's gross negligence or willful misconduct. Operator shall never be
required under this Agreement to conduct an operation that it believes would be
unsafe or would endanger persons or property. Unless otherwise provided in this
Agreement, Operator shall consult with Non-operators and keep them informed of
all important matters.

        5.3 Liens and Encumbrances. Operator shall endeavor to keep the
Prospect, Leases, wells, Platforms, Processing Facilities, and other equipment
free from all liens and other encumbrances occasioned by operations hereunder,
except those provided in Article 8.6 (Security Rights) or Exhibit "G".

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

        5.5 Records. The Operator shall keep accurate books, accounts, and
records of activities or operations under this Agreement in compliance with the
Accounting Procedure in Exhibit "C." Unless otherwise provided in this
Agreement, all records of the Joint Account shall be available to a Non-operator
as provided in Exhibit "C." The Operator shall use good-faith efforts to ensure
the settlements, billings, and reports rendered to each Party under this
Agreement are complete and accurate. The Operator shall notify the other Parties
promptly upon the discovery of any error or omission pertaining to the
settlements, billings, and reports rendered to each Party. This provision does
not affect a Party's audit rights under this Agreement.

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

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

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                   Model Form of Offshore Operating Agreement

contracts of third parties doing work of similar nature. Before awarding a
drilling contract or performing work with its own or an Affiliate's drilling
equipment, derrick barge, tools, or machinery, Operator shall attempt to obtain
competitive bids for the work from independent contractors.

        5.8    Governmental Reports. Operator shall make reports to governmental
authorities it has a duty to make as Operator and shall furnish copies of the
reports to the Participating Parties.

        5.9    Information to Participating Parties. Operator shall furnish each
Participating Party the following information, if applicable, for each well
operation conducted by Operator:

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

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

               5.9.3   A complete report of each core analysis.

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

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

               5.9.6   Upon written request received by Operator before
commencement of drilling, samples of cuttings and cores taken from the well (if
sufficient cores are retrieved), packaged in containers furnished by Operator at
the expense of the requesting Party, marked as to the depths from which they
were taken, and shipped collect by express courier to the address designated by
the requesting Party.

               5.9.7   To the extentpossible,  forty-eight (48) hours' advance
notice of, and access to, logging, coring, and testing operations.

               5.9.8   A monthly report on the volume of oil, gas, condensate,
and water produced from each well.

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

               5.9.10  Upon written request, other pertinent information
available to Operator.

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

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                   Model Form of Offshore Operating Agreement

                                    ARTICLE 6

                          VOTING AND VOTING PROCEDURES

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

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

               6.1.2   Vote Required. Unless expressly stated to the contrary
herein, a matter requiring approval of the Parties shall be decided by the
affirmative vote of two (2) or more Parties having a combined voting interest of
fifty-one percent (51%) or more. If there are only two (2) Parties to this
Agreement, the matter shall be determined by the Party having a majority voting
interest or, if the interests are equal, the matter shall require unanimous
consent.

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

               6.1.4   Meetings. Meetings of the Parties may be called by
Operator upon its own motion or at the request of a Party having a voting
interest of not less than twenty-five percent (25%). Except in an emergency, no
meeting shall be called on less than seven (7) days' advance written notice, and
the notice of meeting shall include the proposed meeting agenda. The
representative of Operator shall be chairman of each meeting. Only matters
included in the agenda may be discussed at a meeting, but the agenda and items
included in the agenda may be amended by unanimous agreement of all Parties.

                                    ARTICLE 7

                                     ACCESS

        7.1    Access to Prospect. Each Party shall have access, at its sole
risk and expense and at all reasonable times, to the Prospect to inspect
operations and wells in which it participates, and to the pertinent records and
data. A Non-operator shall give Operator at least twenty-four (24) hours' notice
of the Non-operator's intention to visit the Prospect. To protect Operator and
the Non-operators from unnecessary lawsuits, claims, and legal liability, if it
is necessary for a person who is not performing services for Operator directly
related to the joint operations, but is performing services solely for a
Non-operator or pertaining to the business or operations of a Non-operator, to
visit, use, or board a rig, Wells, Platform, or Processing Facilities on a
Prospect subject to this Agreement, the Non-operator shall give Operator advance
notice of the visit, use, or boarding, and shall secure from that person an
agreement, in a mutually agreeable form, indemnifying and holding Operator and
Non-operators harmless, or shall itself provide the same hold harmless and
indemnification in favor of Operator and other Non-operators before the visit,
use, or boarding.

        7.2    Reports. On written request, Operator shall furnish a requesting
Party any information not otherwise furnished under Article 5 (Authority and
Duties of Operator) to which that Party is entitled under this Agreement. The
costs of gathering and furnishing information not furnished under Article 5
shall be charged to the

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                   Model Form of Offshore Operating Agreement

requesting Party. Operator is not obligated to furnish interpretative data that
was generated by Operator at its sole cost.

        7.3    Confidentiality. Except as otherwise provided in Article 7.4
(Limited Disclosure), Article 7.5 (Media Releases), and Article 21.1 (Notice of
Contributions Other Than Advances for Sale of Production), and except for
necessary disclosures to governmental authorities having jurisdiction, or except
as agreed in writing by all Participating Parties, no Party or Affiliate shall
disclose Confidential Data to a third party.

               This Article 7.3 shall be in force and effect for a term of two
               (2) years after termination of this Agreement.

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

               (A) outside professional consultants and reputable engineering
               firms for the purpose of evaluations;

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

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

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

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

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

               (G) an  Affiliate of a Party.

               (H) third parties with whom a Party is engaged in a bona fide
                   effort to sell, farm out, or trade all or a portion of its
                   interest in the Prospect. Notwithstanding the foregoing
                   provision, no Confidential Data gained from wells drilled
                   pursuant to this Agreement may be divulged by a Party
                   engaged in a bona fide effort to sell, farm out, or trade
                   all or a portion of its interest in the Prospect without
                   the consent of other Parties for a period of one (1) year
                   following rig release from the Exploration Well .

Confidential Data made available under Articles 7.4(F) and 7.4(H) shall not be
removed from the custody or premises of the Party making the Confidential Data
available to third parties described in those Articles. A third party permitted
access under Articles 7.4, (A), (B), (C), (F), and (H) [if applicable] shall
first agree in writing neither to disclose the Confidential Data to others nor
to use the Confidential Data, except for the purpose for which it was disclosed
for a period of at least two (2) years following disclosure. The disclosing
Party shall give prior notice to the other Parties that it intends to make the
Confidential Data available.

        7.5    Media Releases. Except as agreed by all Parties or otherwise
permitted by this Article, no Party shall issue a news or media release about
operations on the Prospect. In an emergency involving extensive

                                       12

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                   Model Form of Offshore Operation Agreement

property damage, operations failure, loss of human life, or other clear
emergency, and for which there is insufficient time to obtain the prior approval
of the Parties, Operator may furnish the minimum, strictly factual, information
necessary to satisfy the legitimate public interest of the media and
governmental authorities having jurisdiction. Operator shall then promptly
advise the other Parties of the information furnished in response to the
emergency.

                                    ARTICLE 8

                                  EXPENDITURES

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

       8.2 AFEs. Before undertaking an operation or making a single expenditure
to be in excess of Two hundred and fifty thousand Dollars ($ 250,000.00), and
before conducting an activity or operation to drill, Sidetrack, Deepen,
Complete, or Recomplete a well (regardless of the estimated cost), Operator
shall submit an AFE for the operation or expenditure to the Parties for
approval. Operator shall also furnish an informational AFE to all Parties for an
operation or single expenditure estimated to cost less than two hundred and
fifty thousand Dollars ($250,000.00) or less, but in excess of One hundred
thousand Dollars ($100,000.00). Operator shall notify the Participating Parties
as soon as reasonably possible when it appears the cost of an activity or
operation will exceed the original AFE by more than ten percent (10%). Subject
to the provisions of Article 8.7 (Overexpenditures), this notice shall be
furnished to the Participating Parties as a supplemental AFE for informational
purposes only and is not subject to an election by any of the Parties.

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

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

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

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                   Model Form of Offshore Operation Agreement

       8.6 Security Rights. In addition to any other security rights and
remedies provided by law with respect to services rendered or materials and
equipment furnished under this Agreement, for and in consideration of the
covenants and mutual undertakings of the Operator and the Non-operators herein,
the Parties shall have the following security rights:

           8.6.1 Mortgage in Favor of the Operator. Each Non-operator hereby
grants to the Operator a mortgage, hypothecate, and pledge of and over all of
its rights, titles, and interests in and to (a)the Prospect, (b) the oil and gas
in, on, under, and that may be produced from the lands within the Prospect, and
(c) all other immovable property susceptible of mortgage situated within the
Prospect.

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

           The maximum amount for which the mortgage herein granted by each
Non-operator shall be deemed to secure the obligations and indebtedness of such
Non-operator to the Operator as stipulated herein is hereby fixed in an amount
equal to $25,000,000.00 (the "Limit of the Mortgage of each Non-operator").
Except as provided in the previous sentence (and then only to the extent such
limitations are required by law), the entire amount of obligations and
indebtedness of each Non-operator to the Operator is secured hereby without
limitation. Notwithstanding the foregoing Limit of the Mortgage of each
Non-operator, the liability of each Non-operator under this Agreement and the
mortgage and security interest granted hereby shall be limited to (and the
Operator shall not be entitled to enforce the same against such Non-operator
for, an amount exceeding) the actual obligations and indebtedness [including all
interest charges, costs, attorneys' fees, and other charges provided for in this
Agreement or in the Memorandum of Operating Agreement and Financing Statement
(Louisiana), as such term is defined in Article 8.6.1.4 (Recordation) hereof]
outstanding and unpaid and that are attributable to or charged against the
interest of such Non-operator pursuant to this Agreement.

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                   Model Form of Offshore Operation Agreement

           8.6.1.1 Security Interest in Favor of the Operator. To secure the
complete and timely performance of and payment by each Non-operator of all
obligations and indebtedness of every kind and nature, whether now owed by such
Non-operator or hereafter arising, pursuant to this Agreement or the APA, each
Non-operator hereby grants to the Operator a continuing security interest in and
to all of its rights, titles, interests, claims, general intangibles, proceeds,
and products thereof, whether now existing or hereafter acquired, in and to (a)
all oil and gas produced from the lands or offshore blocks covered by the
Prospect or attributable to the Prospect when produced, (b) all accounts
receivable accruing or arising as a result of the sale of such oil and gas
(including, without limitation, accounts arising from gas imbalances or from the
sale of oil and gas at the wellhead), (c) all cash or other proceeds from the
sale of such oil and gas once produced, and (d) all Platforms and Processing
Facilities, wells, fixtures, other corporeal property, whether movable or
immovable, whether now or hereafter placed on the lands or offshore blocks
covered by the Prospect or maintained or used in connection with the ownership,
use or exploitation of the Prospect, and other surface and sub-surface equipment
of any kind or character located on or attributable to the Prospect and the cash
or other proceeds realized from the sale, transfer, disposition or conversion
thereof. The interest of the Non-operators in and to the oil and gas produced
from or attributable to the Prospect when extracted and the accounts receivable
accruing or arising as the result of the sale thereof shall be financed at the
wellhead of the well or wells located on the Prospect. To the extent susceptible
under applicable law, the security interest granted by each Non-operator
hereunder covers: (A) all substitutions, replacements, and accessions to the
property of such Non-operator described herein and is intended to cover all of
the rights, titles and interests of such Non-operator in all movable property
now or hereafter located upon or used in connection with the Prospect, whether
corporeal or incorporeal; (B) all rights under any gas balancing agreement,
farmout rights, option farmout rights, acreage and cash contributions, and
conversion rights of such Non-operator in connection with the Prospect, or the
oil and gas produced from or attributable to the Prospect, whether now owned and
existing or hereafter acquired or arising, including, without limitation, all
interests of each Non-operator in any partnership, tax partnership, limited
partnership, association, joint venture, or other entity or enterprise that
holds, owns, or controls any interest in the Prospect; and (C) all rights,
claims, general intangibles, and proceeds, whether now existing or hereafter
acquired, of each Non-operator in and to the contracts, agreements, permits,
licenses, rights-of-way, and similar rights and privileges that relate to or are
appurtenant to the Prospect, including the following:

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

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                   Model Form of Offshore Operation Agreement

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

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

           8.6.1.2 Mortgage in Favor of the Non-operators. The Operator hereby
grants to each Non-operator a mortgage, hypothecate, and pledge of and over all
of its rights, titles, and interests in and to (a) the Prospect; (b) the oil and
gas in, on, under, and that my be produced from the lands within the Prospect;
and (c) all other immovable property or other property susceptible of mortgage
situated within the Prospect.

     This mortgage is given to secure the complete and timely performance of and
payment by the Operator of all obligations and indebtedness of every kind and
nature, whether now owed by the Operator or hereafter arising, pursuant to this
Agreement and the APA. To the extent susceptible under applicable law, this
mortgage and the security interests granted in favor of each Non-operator herein
shall secure the payment of all costs and other expenses properly charged to the
Operator, together with (A) interest on such indebtedness, costs, and other
expenses at the rate set forth in the Accounting Procedure or the maximum rate
allowed by law, whichever is the lesser, (B) reasonable attorneys' fees, (C)
court costs, and (D) other directly related collection costs. If the Operator
does not pay such costs and other expenses or perform its obligations under this
Agreement when due, the Non-operators shall have the additional right to notify
the purchaser or purchasers of the Operator's Hydrocarbon production and collect
such costs and other expenses out of the proceeds from the sale of the
Operator's share of Hydrocarbon production until the amount owed has been paid.
The Non-operators shall have the right to offset the amount owed against the
proceeds from the sale of the Operator's share of Hydrocarbon production. Any
purchaser of such production shall be entitled to rely on the Non-operators'
statement concerning the amount of costs and other expenses owed by the Operator
and payment made to the Non-operators by any purchaser shall be binding and
conclusive as between such purchaser and the Operator.

     The maximum amount for which the mortgage herein granted by the Operator
shall be deemed to secure the obligations and indebtedness of the Operator to
all Non-operators as stipulated herein is hereby fixed in an amount equal to
$25,000,000.00 in the aggregate (the "Limit of the Mortgage of the Operator").
Except as provided in the previous sentence (and then only to the extent such
limitations are required by law), the entire amount of obligations and
indebtedness of the Operator to the Non-operators is secured hereby without
limitation. Notwithstanding the foregoing Limit of the Mortgage of the Operator,
the liability of the Operator under this Agreement and the mortgage and security
interest granted hereby shall be limited to (and the Non-operators shall not be
entitled to enforce the same against the Operator for, an amount exceeding) the
actual obligations and indebtedness [including all interest charges, costs,
attorneys' fees, and other charges provided for in this Agreement

                                       16

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                   Model Form of Offshore Operation Agreement

or in the Memorandum of Operating Agreement and Financing Statement (Louisiana),
as such term is defined in Article 8.6.1.4 hereof] outstanding and unpaid and
that are attributable to or charged against the interest of the Operator
pursuant to this Agreement.

           8.6.1.3 Security Interest in Favor of the Non-operators. To secure
the complete and timely performance of and payment by the Operator of all
obligations and indebtedness of every kind and nature, whether now owed by the
Operator or hereafter arising, pursuant to this Agreement and the APA, the
Operator hereby grants to each Non-operator a continuing security interest in
and to all of its rights, titles, interests, claims, general intangibles,
proceeds, and products thereof, whether now existing or hereafter acquired, in
and to (a) all oil and gas produced from the lands or offshore blocks covered by
the Prospect or included within the Prospect or attributable to the Prospect
when produced, (b) all accounts receivable accruing or arising as a result of
the sale of such oil and gas (including, without limitation, accounts arising
from gas imbalances or from the sale of oil and gas at the wellhead), (c) all
cash or other proceeds from the sale of such oil and gas once produced, and (d)
all Platforms and Processing Facilities, wells, fixtures, other corporeal
property whether movable or immovable, whether now or hereafter placed on the
offshore blocks covered by the Prospect or maintained or used in connection with
the ownership, use or exploitation of the Prospect, and other surface and
sub-surface equipment of any kind or character located on or attributable to the
Prospect and the cash or other proceeds realized from the sale, transfer,
disposition or conversion thereof. The interest of the Operator in and to the
oil and gas produced from or attributable to the Prospect when extracted and the
accounts receivable accruing or arising as the result of the sale thereof shall
be financed at the wellhead of the well or wells located on the Prospect. To the
extent susceptible under applicable law, the security interest granted by the
Operator hereunder covers: (A) all substitutions, replacements, and accessions
to the property of the Operator described herein and is intended to cover all of
the rights, titles and interests of the Operator in all movable property now or
hereafter located upon or used in connection with the Prospect, whether
corporeal or incorporeal; (B) all rights under any gas balancing agreement,
farmout rights, option farmout rights, acreage and cash contributions, and
conversion rights of the Operator in connection with the Prospect, the oil and
gas produced from or attributable to the Prospect, whether now owned and
existing or hereafter acquired or arising, including, without limitation, all
interests of the Operator in any partnership, tax partnership, limited
partnership, association, joint venture, or other entity or enterprise that
holds, owns, or controls any interest in the Prospect; and (C) all rights,
claims, general intangibles, and proceeds, whether now existing or hereafter
acquired, of the Operator in and to the contracts, agreements, permits,
licenses, rights-of-way, and similar rights and privileges that relate to or are
appurtenant to the Prospect, including the following:

       (A) all of its rights, titles, and interests, whether now owned and
existing or hereafter acquired or arising, in, to, and under or derived from any
present or future operating, farmout, bidding, pooling, unitization, and
communitization agreements, assignments, and subleases, whether or not described
in Exhibit "A," to the extent, and only to the extent, that such agreements,
assignments, and subleases cover or include any of its

                                       17

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                   Model Form of Offshore Operation Agreement

rights, titles, and interests, whether now owned and existing or hereafter
acquired or arising, in and to all or any portion of the Prospect, and all units
created by any such pooling, unitization, and communitization agreements and all
units formed under orders, regulations, rules, or other official acts of any
governmental authority having jurisdiction, to the extent and only to the extent
that such units cover or include all or any portion of the Prospect;

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

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

               8.6.1.4 Recordation. To provide evidence of, and to further
perfect the Parties' security rights created hereunder, upon request, each Party
shall execute and acknowledge the Memorandum of Operating Agreement and
Financing Statement (Louisiana) attached as Exhibit "G" (the "Memorandum of
Operating Agreement and Financing Statement (Louisiana)") in multiple
counterparts as appropriate. The Parties authorize the Operator to file the
Memorandum of Operating Agreement and Financing Statement (Louisiana) in the
public records set forth below to serve as notice of the existence of this
Agreement as a burden on the title of the Operator and the Non-operators to
their interests in the Prospect and for purposes of satisfying otherwise
relevant recording and filing requirements of applicable law and to attach an
original of the Memorandum of Operating Agreement and Financing Statement
(Louisiana) to a standard UCC-1 in the forms attached to Exhibits "G" to the
Agreement for filing in the UCC records set forth below to perfect the security
interests created by the Parties in this Agreement. Upon the acquisition of a
leasehold interest in the Prospect, the Parties shall, within five business days
following request by one of the Parties hereto, execute and furnish to the
requesting Party for recordation such a Memorandum of Operating Agreement and
Financing Statement (Louisiana) describing such leasehold interest. Such
Memorandum of Operating Agreement and Financing Statement (Louisiana) shall be
amended from time to time upon acquisition of additional leasehold interests in
the Prospect, and the Parties shall, within five business days following request
by one of the Parties hereto, execute and furnish to the requesting Party for
recordation any such amendment.

     The Memorandum of Operating Agreement and Financing Statement (Louisiana)
is to be filed or recorded, as the case may be, in (a) the conveyance records of
the parish or parishes adjacent to the lands or offshore blocks covered by the
Prospect or contained within the Prospect pursuant to La. R.S. 9:2731 et seq.,
(b) the mortgage records of such parish or parishes, and (c) the appropriate
Uniform Commercial Code records.

          8.6.2 Default. If any Party does not pay its share of the charges
authorized under this Agreement when due, the Operator may give the defaulting
Party notice that unless payment is made within thirty (30) days from delivery
of the notice, the non-paying Party shall be in default. A Party in default
shall have no

                                       18

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                   Model Form of Offshore Operating Agreement

further access to the rig, Platform or Processing Facilities, any Confidential
Data or other maps, records, data, interpretations, or other information
obtained in connection with activities or operations hereunder or be allowed to
participate in meetings. A Party in default shall not be entitled to vote or to
make an election until such time as the defaulting Party is no longer in
default. The voting interest of each non-defaulting Party shall be counted in
the proportion its Working Interest bears to the total non-defaulting Working
Interests. As to any operation approved during the time a Party is in default,
such defaulting Party shall be deemed to be a Non-participating Party, except
where such approval is binding on all Parties or Participating Parties, as
applicable. In the event a Party believes that such statement of charges is
incorrect, the Party shall nevertheless pay the amounts due as provided herein,
and the Operator shall attempt to resolve the issue as soon as practicable, but
said attempt shall be made no later than thirty (30) days after receiving notice
from the Party of such disputed charges.

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

          8.6.4 Carved-out Interests. Any agreements creating any overriding
royalty, production payment, net proceeds interest, net profits interest,
carried interest or any other interest carved out of a Working Interest in the
Prospect other than those listed in Exhibit "A" shall specifically make such
interests inferior to the rights of the Parties to this Agreement. If any Party
whose Working Interest is so encumbered does not pay its

                                       19

<PAGE>

                   Model Form of Offshore Operating Agreement

share of costs and other expenses authorized under this Agreement, and the
proceeds from the sale of its Hydrocarbon production pursuant to this Article
8.6 are insufficient to pay such costs and expenses, the security rights
provided for in this Article 8.6 may be applied against the carved-out interests
with which the defaulting or non-performing Party's interest in the Prospect is
burdened. In such event, the rights of the owner of such carved-out interest
shall be subordinated to the security rights granted by this Article 8.6.

          8.7 Overexpenditures. Operator shall notify the Participating Parties
when it appears that actual expenditures for an approved operation in an
Exploratory or Development Well or for the design, construction, and
installation of a Platform (other than a Platform that solely supports
Processing Facilities) will exceed the AFE estimate (the excess being an
"Overexpenditure"). If it appears that the Overexpenditure will be no more than
the greater of Three million Dollars ($3,000,000.00) or fifteen percent (15%),
or in the case of an operation involving the design, construction, and
installation of a Platform, or Processing Facilities, no more than the greater
of Three million Dollars ($3,000,000.00) or fifteen percent (15%), hereinafter
referred to as the "Allowable Variance," Operator's notice shall be forwarded
for information only. If Operator determines that the Overexpenditure will
exceed the Allowable Variance, Operator shall submit a new AFE for the current
operation ("Supplemental AFE") for approval of the Participating Parties. The
Participating Parties may then elect whether to continue to participate within
thirty (30) days or forty-eight (48) hours if a rig is on location, exclusive of
Saturdays, Sundays, and federal holidays, after receipt of the Supplemental AFE.
If fewer than all, but one (1) or more Participating Parties elect to continue
to participate in the current operation and agree to pay and bear one hundred
percent (100%) of the costs and risks of conducting it, Operator shall continue
to conduct the current operation. Otherwise, the operation shall cease. A
Participating Party that elects not to continue to participate in the current
operation shall become a Non-participating Party in the operation, from and
after the date when the Overexpenditure exceeds the Allowable Variance, not
including emergency expenditures, and Article 13.2 (Relinquishment of Interest)
shall apply to the Party only to the extent that the costs of the operation
exceed the Allowable Variance. Unless otherwise agreed by the Participating
Parties, each Participating Party electing to continue to participate in the
current operation may, but is not obligated to, pay and bear that portion of the
costs and risks attributable to the interests of the Non-participating Parties
in the ratio that the Participating Party's interest bears to the total
interests of all Participating Parties electing to continue participating in the
current operation. If it appears to Operator that actual expenditures for an
approved operation will exceed the Supplemental AFE estimate, Operator shall
again repeat the procedure of this Article 8.7, using the estimate in the most
recently approved Supplemental AFE as the basis for determining the
Overexpenditure and Allowable Variance. An initial Participating Party in an
operation shall remain responsible for its share of all costs and risks for
plugging, replugging, capping, burying, disposing, abandoning, removing, and
restoring associated with the operation, subject to Article 14 (Abandonment,
Salvage, and Surplus), regardless of its subsequent election on a Supplemental
AFE, except in the case of a Platform and/or Processing Facilities when an
election not to continue to participate in its construction and installation is
made on a Supplemental AFE before Platform and/or Processing Facilities loadout.
Notwithstanding anything in this Article

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<PAGE>

                   Model Form of Offshore Operating Agreement

to the contrary, if expenditures exceed the Allowable Variance for an emergency,
as provided in Article 8.3 (Emergency and Required Expenditures), Operator shall
not be required to secure the approval of the Participating Parties, as the
expenditures will be borne by all Participating Parties. However, once
stabilization takes place and emergency expenditures are no longer being
incurred, Operator shall promptly furnish a Supplemental AFE to the
Participating Parties for their review and election, as provided above.

                                    ARTICLE 9
                                     NOTICES

          9.1 Giving and Receiving Notices. Except as otherwise provided in this
Agreement, all AFEs and notices required or permitted by this Agreement shall be
in writing and shall be delivered in person or by mail, courier service, or
facsimile transmission, with postage and charges prepaid, addressed to the
Parties at the addresses in Exhibit "A." When a drilling rig is on location and
standby charges are accumulating, however, notices pertaining to the rig shall
be given orally or by telephone. All telephone or oral notices permitted by this
Agreement shall be confirmed immediately thereafter by written notice. The
originating AFE or notice shall be deemed to have been delivered only when
received by the Party to whom it was directed, and the period for a Party to
deliver an AFE or notice in response thereto shall begin on the date the
originating AFE or notice is received. For proposals and responses thereto,
"receipt," for oral or telephone notice, means actual and immediate
communication to the Party to be notified, and for written notice, means actual
delivery of the notice to the address of the Party to be notified, as specified
in this Agreement, or to the facsimile machine of that Party. A responsive
notice shall be deemed to have been delivered when the Party to be notified is
in receipt of same. When a response is required in forty-eight (48) hours or
less, however, the response shall be given orally or by telephone or facsimile
transmission within that period. If a Party is unavailable to receive a notice
required to be given orally or by telephone, the notice may be delivered by any
other method specified in this Article 9.1 and shall be deemed to have been
delivered in the same manner provided in this Article 9.1 for a responsive
notice. A message left on an answering machine or with an answering service or
other third person shall not be deemed to be adequate telephonic or oral notice.

          9.2 Content of Notice. An AFE or notice requiring a response shall
indicate the maximum response time specified in Article 9.3 (Response to
Notices). A proposal for a Platform and/or Processing Facilities shall include
an AFE, containing a description of the Platform and/or Processing Facilities,
including, but not limited to, location, and the estimated costs of design,
fabrication, transportation, and installation. A proposal for a well operation
shall include an AFE, describing the estimated commencement date, the proposed
depth, the objective formation or formations to be penetrated or tested, the
Objective Horizon, the surface and bottomhole locations, proposed directional
drilling operations, the type of equipment to be used, and the estimated costs
of the operation, including, but not limited to, the estimated costs of
drilling, testing, and Completing or abandoning the well. If a proposed
operation is subject to Article 13.11 (Lease Maintenance Operations), the notice
shall specify that the proposal is a Lease Maintenance Operation. A proposal for
multiple operations on more than one well location by

                                       21

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                   Model Form of Offshore Operating Agreement

the same rig shall contain separate AFEs or notices for each operation and shall
specify in writing which operation will take precedence. Each Party shall
respond to each proposed multiple operation in the manner provided in Article
9.3.3 (Proposal for Multiple Operations).

     9.3  Response to Notices. Each Party's response to a proposal shall be in
writing to the proposing Party. Unless otherwise provided in this Agreement, the
response time shall be as follows:

          9.3.1 Platform and/or Processing Facilities Proposals. Each Party
shall respond within one hundred and eighty (180) days after its receipt of the
AFE or notice for a Platform and/or Processing Facilities.

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

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

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

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

     9.5  Response to Counterproposals. Responses must be made within the
response period for the original proposal.

     9.6  Timely Well Operations. Unless otherwise provided, an approved well
shall be commenced within one hundred and twenty (120) days after the date when
the last applicable election on that well may be made. Wells shall be deemed to
have commenced on the day charges commence under the drilling contract for that
well . If the Operator does not commence the drilling of an approved well within
the one hundred and twenty (120) day time frame, the other Participating Parties
in that well may select a substitute Operator to drill the approved well. That
substitute Operator shall be selected from among the Participating Parties by an
affirmative vote of one (1) or more Participating Parties having a combined
Participating Interest of fifty-one percent (51%) or more. If the Operator fails
to vote or votes only to succeed itself, then the successor Operator shall be
selected by an affirmative vote of the Participating Parties owning a combined
Participating Interest of fifty-one percent (51%) or more of the remaining
Participating Interest after excluding the Participating Interests of the
Operator. In all events, including the occurrence of a Force Majeure, if no
Participating Party commences actual drilling operations on an

                                       22

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                   Model Form of Offshore Operating Agreement

approved well within one hundred and twenty (120) days from the proposal of the
approved well, the proposal of the well and its approval will be deemed to have
been withdrawn. Regardless of whether or not the well is commenced, all costs
incurred by the Operator, attributable to an approved operation, shall be paid
by the Participating Parties.

     9.7  Timely Platform/Processing Facilities Operations. Unless otherwise
provided, Operator shall commence, or cause to commence, the construction,
acquisition, or refurbishment of an approved Platform and/or Processing
Facilities within one hundred and eighty (180) days after the date when the last
applicable election on that Platform and/or Processing Facilities may be made.
The construction, acquisition, or refurbishment of an approved Platform and/or
Processing Facilities shall be deemed to have commenced on the date the contract
is awarded for the design, fabrication, or refurbishment of the Platform and/or
Processing Facilities. If the Operator does not commence the construction,
acquisition, or refurbishment of an approved Platform and/or Processing
Facilities within the one hundred and eighty (180) day time frame, the other
Participating Parties in that Platform and/or Processing Facilities may select a
substitute Operator to commence the Platform and/or Processing Facilities. That
substitute Operator shall be selected from among the Participating Parties by an
affirmative vote of one (1) or more Participating Parties having a combined
Participating Interest of fifty-one percent (51%) or more. If the Operator fails
to vote or votes only to succeed itself, then the successor Operator shall be
selected by an affirmative vote of the Participating Parties owning a combined
Participating Interest of fifty-one percent (51%) or more of the remaining
Participating Interest after excluding the Participating Interests of the
Operator. In all events, including the occurrence of a Force Majeure, if no
Participating Party commences the construction, acquisition, or refurbishment of
an approved Platform and/or Processing Facilities within one hundred and eighty
(180) days from the proposal of the approved Platform and/or Processing
Facilities, the proposal of the Platform and/or Processing Facilities and their
approval will be deemed to have been withdrawn. Regardless of whether or not the
construction, acquisition, or refurbishment of a Platform and/or Processing
Facilities is commenced, all costs incurred by Operator, attributable to that
activity, shall be paid by the Participating Parties.

                                   ARTICLE 10
                             EXPLORATORY OPERATIONS

     10.1 Proposing Operations. A Party may propose an Exploratory Operation by
sending an AFE or notice to the other Parties in accordance with Article 9
(Notices).

     10.2 Counterproposals. When an Exploratory Operation is proposed, a Party
may, within ten (10) days after receipt of the AFE or notice for the original
proposal, make a proposal, hereinafter referred to as "Counterproposal," to
conduct an alternative Exploratory Operation by sending an AFE or notice to the
other Parties in accordance with Article 9 (Notices). The AFE or notice shall
indicate that the proposal is a Counterproposal to the original proposal. If one
or more Counterproposals are made, each Party shall elect to

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participate in either the original proposal, one Counterproposal, or neither the
original proposal nor a Counterproposal Except for the response period provided
in this Article 10.2, a Counterproposal shall be subject to the same terms and
conditions as the original proposal.

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

     10.4 Second Opportunity to Participate. If there are more than two (2)
Parties to this Agreement and if fewer than all but one (1) or more Parties
having a combined Working Interest of fifty-one percent (51%) or more elect to
participate, then the proposing Party shall notify the Parties of the elections
made, whereupon a Party originally electing not to participate may then elect to
participate by notifying the proposing Party within forty-eight (48) hours,
inclusive of Saturdays, Sundays, and federal holidays, after receipt of such
notice. If all Parties elect to participate in a proposed operation, Operator
shall conduct the operation at their cost and risk. If there are only two (2)
Parties to this Agreement and one (1) of the Parties having fifty-one percent
(51%) or more elects to participate and agrees to pay and bear one hundred
percent (100%) of the costs and risks of the operation, then there shall not be
a second opportunity to elect to participate, and the Operator, subject to
Article 4.2 (Substitute Operator), shall conduct the operation as a Non-consent
Operation for the benefit of the Participating Party, and the provisions of
Article 12 (Non-consent Operations) shall apply.

     10.5 Operations by Fewer Than All Parties. If, after the election (if
applicable) made under Article 10.4 (Second Opportunity to Participate), fewer
than all but one (1) or more Parties having a combined Working Interest of
fifty-one percent (51%) or more elect to participate in the proposed operation,
the proposing Party shall notify the Participating Parties, and each
Participating Party shall have forty-eight (48) hours, exclusive of Saturdays,
Sundays, and federal holidays, after receipt of the notice to notify the
proposing Party of the portion of costs and risks attributable to the total
Non-participating Parties' interests it elects to pay and bear. Unless otherwise
agreed by the Participating Parties, each Participating Party may, but shall not
be obligated to, pay and bear that portion of the costs and risks attributable
to the total Non-participating Parties' interests in the ratio that the
Participating Party's interest bears to the total interests of all Participating
Parties who elect to pay and bear a portion of costs and risks attributable to
the total Non-participating Parties' interests. Failure to respond shall be
deemed to be an election not to pay or bear any additional costs or risks. If
the Participating Parties agree to pay and bear one hundred percent (100%) of
the costs and risks of the operation, Operator, subject to Article 4.2
(Substitute Operator), shall conduct the operation as a Non-consent Operation
for the benefit of the Participating Parties, and the provisions of Article 13
(Non-consent Operations) shall apply. If such agreement is not obtained,
however, the operation shall not be conducted and the effect shall be as if the
proposal had not been made.

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                   Model Form of Offshore Operating Agreement

          10.5.1 Acreage Out Option. A Party electing not to participate in an
          approved proposal to drill the first well on the Prospect shall
          withdraw from this Agreement in accordance with Article 15
          (Withdrawal), with the withdrawal to be effective on the date actual
          drilling operations are commenced.

     10.6 Expenditures Approved. Approval of an Exploratory Operation shall
cover all necessary expenditures associated with the operation proposed in the
AFE or notice that are incurred by Operator in connection with (a) preparations
for drilling; (b) the actual drilling; (c) evaluations, such as testing, coring,
and logging; and (d) plugging and abandonment.

     10.7 Conduct of Operations. Upon commencement of drilling an Exploratory
Well, Operator shall diligently conduct the operation without unreasonable delay
until the well reaches the Objective Depth, unless the well encounters, at a
lesser depth, impenetrable conditions or mechanical difficulties that cannot be
overcome by reasonable and prudent operations and that render further operations
impracticable, except as may otherwise be provided in Article 8.7
(Overexpenditures). If a well does not reach its Objective Depth as a result of
the conditions mentioned in this Article 10.8, the operation shall be deemed to
have been completed and Article 13 (Non-consent Operations) shall apply to each
Non-participating Party for the portion of the well drilled.

     10.8 Course of Action After Reaching Objective Depth. When an Exploratory
Well has been drilled to its Objective Depth and reasonable testing, coring, and
logging have been completed and the results have been furnished to the
Participating Parties, Operator shall notify the Participating Parties of
Operator's recommendation for further operations in the well, and the following
provisions shall apply:

          10.8.1 Election by Participating Parties. The Participating Parties
shall notify Operator within forty-eight (48) hours, inclusive of Saturdays,
Sundays, and federal holidays, of receipt of the notice whether the
Participating Parties elect to (a) participate in the recommended operation, (b)
propose another operation, or (c) not participate in the recommended operation.
Failure to respond shall be deemed to be an election not to participate in the
recommended operation. To propose another operation, a Party shall submit notice
of the operation to the Participating Parties within twenty-four (48) hours,
exclusive of Saturdays, Sundays, and federal holidays, after receipt of the
notice of proposal by Operator.

          10.8.2 Priority of Operations. If all Participating Parties elect to
participate in the same proposed operation, Operator shall conduct the operation
at their cost and risk. If more than one (1) operation is approved by one (1) or
more Participating Parties having a combined Working Interest of forty percent
(40%) or more, then the approved operation with the lowest number as indicated
below shall take precedence:

          1 Additional Testing, coring, or logging. (If conflicting proposals
          are approved, the proposal receiving the largest percentage of Working
          Interest approval shall take

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          precedence, and in the event of a tie between two (2) or more approved
          proposals, the approved proposal first received by the Parties shall
          take precedence.)

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

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

          4 Complete at the Objective Horizon

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

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

          7 Temporarily abandon.

          8 Plug and abandon.

          10.8.3 Second Opportunity to Participate. If fewer than all but one
(1) or more Participating Parties having a combined Working Interest of forty
percent (40%) or more elect to participate in an operation, the proposing Party
shall notify the Participating Parties of the elections made, whereupon a Party
originally electing not to participate in the proposed operation may then elect
to participate by notifying the proposing Party within twenty-four (24) hours,
inclusive of Saturdays, Sundays, and federal holidays, after receipt of such
notice. If all Parties elect to participate in the proposed operation, Operator
shall conduct the operation at their cost and risk.

          10.8.4 Operations by Fewer Than All Parties. If, after the election
(if applicable) made under Article 10.8.3 (Second Opportunity to Participate),
fewer than all but one (1) or more Parties having a combined Working Interest of
forty percent (40%) or more elect to participate in the proposed operation that
takes precedence, the proposing Party shall notify the Participating Parties and
each Participating Party shall have twenty-four (24) hours, inclusive of
Saturdays, Sundays, and federal holidays, after receipt of the notice to notify
the proposing Party of the portion of the costs and risks attributable to the
total Non-participating Parties' interests it elects to pay and bear. Unless
otherwise agreed by the Participating Parties, each Participating Party may, but
shall not be obligated to, pay and bear that portion of the costs and risks
attributable to the total Non-participating Parties' interests in the ratio that
the Participating Party's interest bears to the total interests of all
Participating Parties who elect to pay and bear a portion of costs and risks
attributable to the non-participating interests. Failure to respond shall be
deemed to be an election not to pay or bear any additional costs or risks. If
the Participating Parties agree to bear one hundred percent (100%) of the costs
and risks of the operation, Operator, subject to

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                   Model Form of Offshore Operating Agreement

Article 4.2 (Substitute Operator), shall conduct the operation as a Non-consent
Operation for the benefit of the Participating Parties, and the provisions of
Article 13 (Non-consent Operations) shall apply. If such agreement is not
obtained, however, the operation shall not be conducted and the effect shall be
as if the proposal had not been made. If a Participating Party in a well elects
not to participate in the Deepening or Sidetracking operation in the well, such
non-consenting Party shall become a Non-participating Party in all operations
conducted after the election, through the Completing and equipping of the
Deepened or Sidetracked portion of the well. If the Non-consent Operation is an
Additional Testing, coring, or logging operation, Article 13 (Non-consent
Operations) shall not apply, however, a Party electing not to participate in the
Additional Testing, coring, or logging shall not be entitled to information
resulting from the operation.

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

          10.8.6 Restoration of Damaged Well. If, during an Additional Testing,
coring, or logging operation or during a Deepening or Sidetracking operation
that does not result in the well being Completed as a Producible Well, the well
is damaged to the extent that the well is rendered incapable of having a
lower-priority operation conducted and a Party (a) who participated in the well,
but not in the operation being conducted when the well was damaged, and (b) who
elected to conduct a lower-priority operation still desires to conduct the
lower-priority operation after the well has been damaged may conduct the
lower-priority operation, which would include operations to either restore the
well to a condition that will allow the lower-priority operation to be conducted
or to drill a new well to a sufficient depth to allow the lower-priority
operation to be conducted. Upon conclusion of the lower-priority operation, the
Participating Parties in the operation being conducted when the well was damaged
shall reimburse the Participating Parties conducting the lower-priority
operation all their costs associated with restoration of the well to the point
at which the lower-priority operation was conducted. In no event, however, shall
Participating Parties in the operation being conducted when the well was damaged
be required to reimburse the Participating Parties conducting the lower-priority
operations an amount greater than what was actually incurred in the damaged
well.

     10.9 Wells Proposed Below Deepest Producible Reservoir. If a proposal is
made to conduct an Exploratory Operation involving the drilling of a well to an
Objective Horizon below the base of the deepest

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                   Model Form of Offshore Operating Agreement

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

                                   ARTICLE 11

                             DEVELOPMENT OPERATIONS

     11.1 Proposing Operations. A Party may propose a Development Operation by
sending an AFE or notice to the other Parties in accordance with Article 9
(Notices).

     11.2 Counterproposals. When a Development Operation is proposed, a Party
may, within ten (10) days after receipt of the AFE or notice for the original
proposal, make a proposal, hereinafter referred to as "Counterproposal," to
conduct an alternative Development Operation by sending an AFE or notice to the
other Parties in accordance with Article 9 (Notices). The AFE or notice shall
indicate that the proposal is a Counterproposal to the original proposal. If one
or more Counterproposals are made, each Party shall elect to participate in
either the original proposal, one Counterproposal, or neither the original
proposal nor a Counterproposal. Except for the response period provided in this
Article 11.2, a Counterproposal shall be subject to the same terms and
conditions as the original proposal.

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

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                   Model Form of Offshore Operating Agreement

     11.4 Second Opportunity to Participate. If there are more than two (2)
Parties to this Agreement and if fewer than all but one (1) or more Parties
having a combined Working Interest of fifty-one percent (51%) or more elect to
participate, then the proposing Party shall notify the Parties of the elections
made, whereupon a Party originally electing not to participate may then elect to
participate by notifying the proposing Party within forty-eight (48) hours,
inclusive of Saturdays, Sundays, and federal holidays, after receipt of such
notice. If all Parties elect to participate in the proposed operation, Operator
shall conduct the operation at their cost and risk. If there are only two (2)
Parties to this Agreement and one (1) of the Parties having fifty-one percent
(51%) or more elects to participate and agrees to pay and bear one hundred
percent (100%) of the costs and risks of the operation, then there shall not be
a second opportunity to elect to participate, and the Operator, subject to
Article 12.13, shall conduct the operation as a Non-consent Operation for the
benefit of the Participating Party, and the provisions of Article 12
(Non-consent Operations) shall apply.

     11.5 Operations by Fewer Than All Parties. If, after the election (if
applicable) made under Article 11.4 (Second Opportunity to Participate), fewer
than all but one (1) or more Parties having a combined Working Interest of
fifty-one percent (51%) or more elect to participate in the proposed operation,
the proposing Party shall notify the Participating Parties, and each
Participating Party shall have forty-eight (48) hours, exclusive of Saturdays,
Sundays, and federal holidays, after receipt of the notice to notify the
proposing Party of the portion of the costs and risks attributable to the total
Non-participating Parties' interests it elects to pay and bear. Unless otherwise
agreed by the Participating Parties, each Participating Party may, but shall not
be obligated to, pay and bear that portion of costs and risks attributable to
the total Non-participating Parties' interests in the ratio that the
Participating Party's interest bears to the total interests of all Participating
Parties who elect to pay and bear a portion of the costs and risks attributable
to the total Non-participating Parties' interests. Failure to respond shall be
deemed to be an election not to pay or bear any additional costs or risks. If
the Participating Parties agree to pay and bear one hundred percent (100%) of
the costs and risks of the operation, Operator, subject to Article 4.2
(Substitute Operator) shall conduct the operation as a Non-consent Operation for
the benefit of the Participating Parties, and the provisions of Article 13
(Non-consent Operations) shall apply. If such agreement is not obtained,
however, the operation shall not be conducted and the effect shall be as if the
proposal had not been made.

          11.6 Expenditures Approved. Approval of a Development Operation shall
cover all necessary expenditures associated with the operation proposed in the
AFE or notice that are incurred by Operator in connection with (a) preparations
for drilling; (b) the actual drilling; (c) evaluations, such as testing, coring,
and logging; and (d) plugging and abandonment. All Participating Parties in the
drilling of the well shall participate in the Completion operation, and Article
11.8 (Course of Action After Reaching Objective Depth) shall not apply unless
the well is not Completed in the Objective Horizon or the Completion is
unsuccessful.

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                   Model Form of Offshore Operating Agreement

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

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

             11.8.1 Election by Fewer Than All Parties. The Participating
Parties shall notify Operator within forty-eight (48) hours, inclusive of
Saturdays, Sundays, and federal holidays, of receipt of the notice whether the
Participating Parties elect to (a) participate in the recommended operation, (b)
propose another operation, or (c) not participate in the recommended operation.
Failure to respond shall be deemed to be an election not to participate in the
recommended operation. To propose another operation, a Party shall submit notice
of the operation to the Participating Parties within twenty-four (24) hours,
inclusive of Saturdays, Sundays, and federal holidays, after receipt of notice
of the proposal by Operator.

             11.8.2 Priority of Operations. If all Participating Parties
elect to participate in the same proposed operation, Operator shall conduct the
operation at their cost and risk. If more than one (1) operation is approved by
one (1) or more Participating Parties having a combined Working Interest of
fifty-one percent (51%) or more, then the approved operation with the lowest
number as indicated below shall take precedence:

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

             2      Complete at the Objective Horizon.

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

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

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

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                   Model Form of Offshore Operating Agreement

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

             7      Temporarily abandon.

             8      Plug and abandon.

             11.8.3 Second Opportunity to Participate. If fewer than all but one
(1) or more Participating Parties having a combined Working Interest of forty
percent (40%) or more elect to participate in an operation, the proposing Party
shall notify the Participating Parties of the elections made, whereupon a Party
originally electing not to participate in the proposed operation may then elect
to participate by notifying the proposing Party within twenty-four (24) hours,
inclusive of Saturdays, Sundays, and federal holidays, after receipt of such
notice. If all Parties elect to participate in the proposed operation, Operator
shall conduct the operation at their cost and risk.

             11.8.4 Operations by Fewer Than All Parties. If, after the election
(if applicable) made under Article 11.8.3 (Second Opportunity to Participate),
fewer than all but one (1) or more Parties having a combined Working Interest of
forty percent (40%) or more elect to participate in the proposed operation that
takes precedence, the proposing Party shall notify the Participating Parties and
each Participating Party shall have twenty-four (24) hours, inclusive of
Saturdays, Sundays, and federal holidays, after receipt of the notice to notify
the proposing Party of the portion of the costs and risks attributable to the
total Non-participating Parties' interests it elects to pay and bear. Unless
otherwise agreed by the Participating Parties, each Participating Party may, but
shall not be obligated to, pay and bear that portion of the costs and risks
attributable to the total Non-participating Parties' interests in the ratio that
the Participating Party's interest bears to the total interests of all
Participating Parties who elect to pay and bear a portion of costs and risks
attributable to the non-participating interests. Failure to respond shall be
deemed to be an election not to pay or bear any additional costs or risks. If
the Participating Parties agree to pay and bear one hundred percent (100%) of
the costs and risks of the operation, Operator, subject to Article 4.2
(Substitute Operator), shall conduct the operation as a Non-consent Operation
for the benefit of the Participating Parties, and the provisions of Article 13
(Non-consent Operations) shall apply. If such agreement is not obtained,
however, the operation shall not be conducted and the effect shall be as if the
proposal had not been made. If a Participating Party in a well elects not to
participate in the Deepening or Sidetracking operation in the well, such
non-consenting Party shall become a Non-participating Party in all operations
conducted after the election, through the Completing and equipping of the
Deepened or Sidetracked portion of the well. If the Non-consent Operation is an
Additional Testing, coring, or logging operation, Article 13 (Non-consent
Operations) shall not apply, however, a Party electing not to participate in the
Additional Testing, coring, or logging shall not be entitled to information
resulting from the operation.

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             11.8.5 Subsequent Operations. Upon the completion of an operation
conducted under Article 11.8 (Course of Action After Reaching Objective Depth),
if the well is not either (a) Completed as a well capable of producing
Hydrocarbons in paying quantities, or (b) temporarily abandoned or permanently
plugged and abandoned, Operator shall notify the Participating Parties of
Operator's recommendation for operations in the well under Articles 11.8.1
through 11.8.4, which again shall apply. If sufficient approval is not obtained
to conduct a subsequent operation in a well or if all Participating Parties
elect to plug and abandon the well, subject to Article 14 (Abandonment, Salvage,
and Surplus), Operator shall permanently plug and abandon the well at the
expense of all Participating Parties. Each Participating Party shall be
responsible for its proportionate share of the plugging and abandonment costs
associated with the operation in which it participated.

             11.8.6 Restoration of Damaged Well. If, during an Additional
Testing, coring, or logging operation or during a Deepening or Sidetracking
operation that does not result in the well being Completed as a Producible Well,
the well is damaged to the extent that the well is rendered incapable of having
a lower-priority operation conducted and a Party (a) who participated in the
well, but not in the operation being conducted when the well was damaged, and
(b) who elected to conduct a lower-priority operation, still desires to conduct
the lower-priority operation after the well has been damaged, may conduct the
lower-priority operation, which would include operations to either restore the
well to a condition that will allow the lower-priority operation to be conducted
or to drill a new well to a sufficient depth to allow the lower-priority
operation to be conducted. Upon conclusion of the lower-priority operation, the
Participating Parties in the operation being conducted when the well was damaged
shall reimburse the Participating Parties conducting the lower-priority
operation all their costs associated with restoration of the well to the point
at which the lower-priority operation was conducted. In no event, however, shall
Participating Parties in the operation being conducted when the well was damaged
be required to reimburse the Participating Parties conducting the lower-priority
operations an amount greater than what was actually incurred in the damaged
well.

                                   ARTICLE 12
                       PLATFORM AND PROCESSING FACILITIES

        12.1 Approval. A Party may propose the fabrication and installation
of a Platform and/or Processing Facilities, with information adequate to
describe the proposed Platform and/or Processing Facilities and their estimated
costs.

        12.2 Counterproposals. When a Platform and/or Processing Facilities is
proposed under Article 12.1, a Party may, within thirty (30) days after receipt
of the AFE or notice for the original proposal, make a proposal, hereinafter
referred to as "Counterproposal," to fabricate and install said Platform and/or
Processing Facilities by sending an AFE or notice to the other Parties in
accordance with Article 9 (Notices). The AFE or notice shall indicate that the
proposal is a Counterproposal to the original proposal. If one or more
Counterproposals are made, each Party shall elect to participate in either the
original proposal, one Counterproposal, or neither the original proposal nor a
Counterproposal. If a proposal receives the approval of the

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number of Parties and combined Working Interests required by Article 12.5
(Operations By Fewer Than All Parties), the proposal shall be deemed approved.

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

             12.2.2 Second Opportunity to Participate. If there are more than
two (2) Parties and if fewer than all but one (1) or more Parties having a
combined Working Interest of fifty-one percent (51%) or more elect to
participate in the Platform and/or Processing Facilities, then the proposing
Party shall notify the Parties of the elections made, whereupon a Party
originally electing not to participate may then elect to participate by
notifying the proposing Party within forty-eight (48) hours, exclusive of
Saturdays, Sundays, and federal holidays, after receipt of such notice. If all
Parties elect to participate in the Platform and/or Processing Facilities,
Operator shall timely commence the fabrication and installation of the Platform
and/or Processing Facilities at their cost and risk.

             12.2.3 Operations by Fewer Than All Parties. If, after the election
made under Article 12.2.2 (Second Opportunity to Participate), fewer than all
but (1) or more Parties having a combined Working Interest of fifty-one percent
(51%) or more elect to participate in the Platform and/or Processing Facilities,
the proposing Party shall notify the Participating Parties, and each
Participating Party shall have forty-eight (48) hours, exclusive of Saturdays,
Sundays, and federal holidays, after receipt of the notice to notify the
proposing Party of the portion of the costs and risks attributable to the total
Non-participating Parties' interests it elects to pay and bear. Unless otherwise
agreed by the Participating Parties, each Participating Party may, but shall not
be obligated to, pay and bear that portion of costs and risks attributable to
the total Non-participating Parties' interests in the ratio that the
Participating Party's interest bears to the total interests of all Participating
Parties who elect to pay and bear a portion of the costs and risks attributable
to the total Non-participating Parties' interests. Failure to respond shall be
deemed to be an election not to pay or bear any additional costs or risks. If
the Participating Parties agree to pay and bear one hundred percent (100%) of
the costs and risks of the operation, the Operator, subject to Article 4.2
(Substitute Operator), shall conduct the operation as a Non-consent Operation
for the benefit of the Participating Parties, and except as provided in Article
12.4 (Rights to Take in Kind), the provisions of Article 13.2.1.(B) shall apply.
If such agreement is not obtained, however, the fabrication and installation of
the Platform and/or Processing Facilities shall not be commenced, and the effect
shall be as if the proposal had not been made.

        12.3 Ownership and Use of the Platform and Processing Facilities. The
Participating Parties in the Processing Facilities own all of the excess
capacity of the Processing Facilities and the excess weight, space and buoyancy
of the Platform, and each Participating Party in the Processing Facilities does
not have the right to use its Working Interest share of the excess capacity,
weight, space and buoyancy for hydrocarbon production from outside the area of
any Prospects identified in Exhibit "A" to the APAat its sole discretion and for
its sole account. To the extent any excess capacity exists, any Participating
Party may use its share of the excess capacity, weight, space and buoyancy for
production which is produced from any Prospects described on Exhibit "A" of the

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                   Model Form of Offshore Operating Agreement

APA (including any leases acquired pursuant to the AMI provision in Section 26.4
of the Joint Operating Agreements for such Prospects. Each Participating Party
in the Processing Facilities or Platform must obtain the unanimous approval of
the other Participating Parties in the Processing Facilities or Platform in
order to utilize any portion of the excess capacity, weight, space and buoyancy
for production from outside the Prospects identified in the APA. It must
negotiate the payment of a fee with the Participating Parties in the Processing
Facilities or Platform in order to utilize any portion of the excess capacity,
weight, space and buoyancy. Each of the Participating Parties in the Processing
Facilities or Platform shall receive its Working Interest share of all fees
derived from the utilization of the excess capacity, weight, space and buoyancy.
All hydrocarbon production from outside the Prospects identified in the APA
shall be processed under a "Facilities Use and Production Handling Agreement"
unanimously agreed to by the Participating Parties in the Processing Facilities.

        12.4 Rights to Take in Kind. Nothing in this Article 12 shall act to
limit a Party's rights under Article 22 (Disposition of Production), or to
otherwise separately dispose of its share of Hydrocarbon production. If a Party
elects (a) not to participate in an approved Processing Facilities proposal and
(b) to separately dispose of its share of Hydrocarbon production (the
"Separately Disposing Party"), the Separately Disposing Party shall not be
subject to the provisions of Article 13.2.1.(B), but must provide proof to the
Participating Parties in the approved Processing Facilities proposal, within one
hundred and eighty (180 days from the last applicable response date to the
Processing Facilities proposal that it has begun disposing (i.e. the actual
"flowing") its own share of Hydrocarbon production. If a Separately Disposing
Party fails to provide such proof by that deadline, it must immediately (i)
utilize the Processing Facilities for its share of Hydrocarbon production, (ii)
pay to the Participating Parties in the approved Processing Facilities proposal,
in proportion to their ownership percentages in the Processing Facilities, a sum
equal to one hundred and twenty-five percent (125%) of the Separately Disposing
Party's share of the costs and expense of the Processing Facilities, and (iii)
assume its share of the risks and liabilities associated with the construction
and ownership of the Processing Facilities as of the date of commencement of the
operations to construct same.

        12.5 Expansion or Modification of a Platform and/or Processing
Facilities. After installation of a Platform and/or Processing Facilities, any
Participating Party in that Platform and/or Processing Facilities may propose
the expansion or modification of that Platform and/or Processing Facilities by
written notice (along with its associated AFE) to the other Participating
Parties in that Platform and/or Processing Facilities. That proposal requires
approval by two of more of the Participating Parties in the Platform and/or
Processing Facilities with more than fifty-one percent (51%) of the
Participating Interest in the Platform and/or Processing Facilities. If
approved, that proposal will be binding on all Participating Parties in that
Platform and/or Processing Facilities, and the Operator shall commence that
expansion or modification at the sole cost and risk of all of the Participating
Parties in that Platform and/or Processing Facilities unless otherwise agreed.

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                   Model Form of Offshore Operating Agreement

             12.6   Third Party Facilities. In the event that one or more
Parties with more than fifty-one percent (51%) of the Participating Interest in
Hydrocarbon production agree that Hydrocarbon production can most effectively be
processed and handled by a third party facility, the Operator, on behalf of the
Participating Parties, shall use reasonable efforts to secure a formal
"Facilities Use and Production Handling Agreement" from the owners of the
Offsite Host Facilities. However, if the Operator does secure access to an
Offsite Host Facilities in a Facilities Use and Production Handling Agreement,
each Participating Party shall have the right, but not the obligation, to have
its Participating Interest share of the Hydrocarbon production dedicated to the
Facilities Use and Production Handling Agreement providing for access and use of
Offsite Host Facilities. This Article 12.6 shall not constitute a limit on a
Party's right to install its own Take-in-Kind Facilities under Article 22
(Disposition of Production).

                                   ARTICLE 13
                             NON-CONSENT OPERATIONS

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

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

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

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

             13.1.4 Non-consent Well. Operations on a Non-consent Well shall not
be conducted in a Producible Reservoir without approval of all Parties unless
(a) the Producible Reservoir is designated in the notice as a Completion
objective; and (b) Completion of the well in the Producible Reservoir will not
increase the rates of Hydrocarbon production that are prescribed and approved
for the Producible Reservoir by the governmental authority having jurisdiction.

             13.1.5 Cost Information. Operator shall, within one hundred
twenty (120) days after completion of a Non-consent Operation, furnish the
Parties either (a) an inventory and an itemized statement of the cost of the
well and equipment pertaining thereto, or (b) a detailed statement of the
monthly billings. Each quarter thereafter, while the Participating Parties are
being reimbursed under Article 13.2.1 (Production Reversion Recoupment),
Operator shall furnish the Non-participating Parties a quarterly statement of
all costs and liabilities incurred in the operation of the well, together with a
statement of the

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                   Model Form of Offshore Operating Agreement

quantities of oil and gas produced from it and the amount of the proceeds from
the sale of the Non-participating Parties' relinquished Hydrocarbon production
from the well for the preceding quarter. Operator shall prepare the monthly
statement of the quantities of oil and gas produced and the amounts of the
proceeds from the sale of Non-participating Parties' relinquished Hydrocarbon
production based on the proceeds received for the Operator's share of
Hydrocarbon production. When Operator's payout calculation indicates that payout
has occurred, Operator shall promptly notify all Parties. The Participating
Parties who carried a portion of the Non-participating Parties' relinquished
interest shall then provide Operator all information pertaining to the
cumulative proceeds received from the sale of the Non-participating Parties'
relinquished Hydrocarbon production. Operator shall revise the payout date using
the actual proceeds from the sale of the Non-participating Parties' relinquished
Hydrocarbon production and administer any subsequent adjustments between the
Parties.

                 13.1.6 Completions. For determinations under Article 13.1
(Non-consent Operations), each Completion shall be considered a separate well.

           13.2  Relinquishment of Interest. Upon commencement of Non-consent
Operations, other than Non-consent Operations governed by the Acreage Out Option
(if selected) under Article 10.5 (Operations by Fewer Than All Parties) or
Article 13.7 (Operations Utilizing a Non-consent Platform and/or Processing
Facilities), each Non-participating Party's interest and leasehold operating
rights in the Non-consent Operation and title to Hydrocarbon production
resulting therefrom; and if Article 13.8 (Discovery or Extension from
Non-consent Drilling) is effective, one-half (1/2) of each Non-participating
Party's interest and leasehold operating rights and title to Hydrocarbon
production from wells mentioned in Article 13.8 (Discovery or Extension from
Non-consent Drilling); shall be owned by and vested in each Participating Party
in proportion to its Participating Interest or in the proportions otherwise
agreed by the Participating Parties for as long as the operations originally
proposed are being conducted or Hydrocarbon production is obtained, subject to
the following:

                 13.2.1 Production Reversion Recoupment. The interest, right,
and title described in Article 13.2 (Relinquishment of Interest) shall revert to
each Non-participating Party when the Participating Parties have recouped out of
Hydrocarbon production from the Non-consent Operations attributable to the
Non-participating Party's interest an amount, which when added to amounts
received under Article 13.3 (Deepening or Sidetracking of Non-consent Well),
equals the sum of the following:

                 (A)    Eight hundred percent (800%) of the Non-participating
                 Party's share of the costs of the Non-consent operations
                 conducted in an Exploratory Well which are proposed subsequent
                 to commencement of such Exploratory Well; or six hundred
                 percent (600%) of the Non-participating Party's share of the
                 costs of the following Non-consent Operations conducted in the
                 initial Development Operation on the Prospect: drilling,
                 testing, Completing, Recompleting, Deepening, Sidetracking,
                 Reworking, plugging back, and temporarily abandoning a well; or
                 four hundred percent (400%) of the Non-participating Party's
                 share of the costs of the following Non-consent Operations
                 conducted in the subsequent Development Operations on the
                 Prospect:

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                   Model Form of Offshore Operating Agreement

                 drilling,testing, Completing, Recompleting, Deepening,
                 Sidetracking, Reworking, plugging back, and temporarily
                 abandoning a well reduced by the Non-participating Party's
                 Share of a cash contribution received under Article 21.2 (Cash
                 Contributions);

                 (B)     if applicable, three hundred percent (300%) of
                 Non-participating Party's Share of the cost of Platforms and/or
                 Processing Facilities; such recoupment is limited to the
                 Non-participating Party's Share of the Hydrocarbon production
                 that utilize such Platform and/or Processing Facilities.

                 (C)     two hundred percent (200%) of the Non-participating
                 Party's Share of the cost charged in accordance with Article
                 13.9 (Allocation of Platform/Processing Facilities Costs to
                 Non-consent Operations) of using an existing
                 Platform/Processing Facilities; and

                 (D)     the Non-participating Party's Share of the costs of
                 operation, maintenance, treating, processing, gathering, and
                 transportation, as well as lessor's royalties and severance,
                 Hydrocarbon production, and excise taxes.

When the Participating Parties have recovered from a Non-participating Party's
relinquished interests the specified sums, the relinquished interests of the
Non-participating Party shall automatically revert to the Non-participating
Party as of 7:00 a.m. of the day after the recoupment occurs. Thereafter, the
Non-participating Party shall own the same interest in the Non-consent Well,
equipment pertaining thereto, including, but not limited to, any applicable
Wells, Platform or Processing Facilities, and the Hydrocarbon production
therefrom as the Non-participating Party would have owned or been entitled to if
it had participated in the Non-consent Operation. Upon reversion, the
Non-participating Party shall become a Participating Party and, as such, shall
become liable for its proportionate share of the further costs of the operation
under this Agreement and Exhibit "C."

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

            13.3 Deepening or Sidetracking of Non-consent Well. Operator shall
notify Non-operators of each proposal by a Participating Party to Deepen or
Sidetrack a Non-consent Well. A Non-participating Party may then elect to
participate in the Deepening or Sidetracking operation by notifying Operator
within thirty (30) days, or within forty-eight (48) hours, exclusive of
Saturdays, Sundays, and federal holidays, if a rig is on location and standby
charges are being incurred, after receiving notice of the proposal. A
Non-participating Party that elects to participate in Deepening or Sidetracking
the well, as proposed, shall immediately pay the Participating Parties, in
accordance with Article 13.4 (Deepening or Sidetracking Cost Adjustments), its
Working Interest share of actual well costs (excluding logging, coring, testing,
and Completion costs), less all amounts recovered by the

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<PAGE>

                   Model Form of Offshore Operating Agreement

Participating Parties from the proceeds of Hydrocarbon production from the well,
as if the Non-participating Party had originally participated to the initial
Objective Depth or formation, in the case of a Deepening operation, or the depth
at which the Sidetracking operation is initiated. Thereafter, the
Non-participating Party shall be deemed to be a Participating Party for the
Deepening or Sidetracking operations, and Article 13.2.1(A) shall not apply to
that Party for the Deepened or Sidetracked portion of the well. The initial
Participating Parties, however, shall continue to recoup out of the proceeds of
Hydrocarbon production from the non-consent portion of the well any balance for
the Non-consent Well remaining to be recovered under Article 13.2.1 (Production
Reversion Recoupment), less the amounts paid by the Non-participating Party
under this Article 13.3.

         13.4    Deepening or Sidetracking Cost Adjustments. If a proposal is
made to Deepen or Sidetrack a Non-consent Well, a well cost adjustment will be
performed as follows:

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

                 (B)  Tangible materials will be valued as transfers of new
                      material in accordance with the provisions of Exhibit "C."

                 (C)  For Sidetracking operations, the values determined in
                      Articles 13.4(A) and 13.4(B) shall be reduced by the
                      amount allocated to that portion of the well one hundred
                      (100) feet below the point of Sidetrack. Such allocations
                      shall be accomplished consistent with guidelines
                      recommended by the Council of Petroleum Accountants
                      Societies (COPAS) in COPAS Bulletin No. 2, Determination
                      of Values for Well Cost Adjustments Joint Operations,
                      September 1965/1/, as amended from time to time.

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

         13.5    Subsequent Operations in Non-consent Well. Except as provided
in Article 13.3 (Deepening or Sidetracking of Non-consent Well), an election not
to participate in the drilling, Sidetracking, or Deepening of a well shall be
deemed to be an election not to participate in any subsequent operations in the
well before full recovery by the Participating Parties of the Non-participating
Party's recoupment amount. A subsequent operation conducted during the
recoupment period by the Parties entitled to participate shall be subject to the
recoupment provided in Article 13.2.1 (Production Reversion Recoupment).

         13.6   Operations in a Production Interval. An owner in the Production
Interval may propose Rework or Sidetrack operations within a Production
Interval, or to permanently plug and abandon a Production Interval in a well;
however, no Production Interval in a well shall be plugged and abandoned without
the unanimous approval of the Participating Parties in the Production Interval.
If a proposal, estimated to exceed the amount specified

_______________________
/1/ Available from Kraftbilt Products, Inc., P.O. Box 800, Tulsa, OK 74101
    (telephone: 800-331-7290; fax: 918-627-7138.)

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<PAGE>

                   Model Form of Offshore Operating Agreement

in Article 8.2 (Authorization), is made to Rework or Sidetrack a Production
Interval and the Participating Parties elect to participate in the proposed
operation, Operator shall conduct the operation at their sole cost and risk. If
fewer than all but two (2) or more Parties having a combined Participating
Interest of fifty-one percent (51%) or more elect to participate in the proposed
operation, Operator shall conduct the Reworking or Sidetracking operation at the
cost and risk of the Participating Parties owning an interest in the Production
Interval.

A proposal to Rework an interval, other than a Production Interval, shall be
made and approved in accordance with Article 11.5 (Operations by Fewer Than All
Parties).

          13.7   Operations Utilizing a Non-consent Platform and/or Processing
Facilities. Except as otherwise provided in Article 12.4 (Rights to Take in
Kind) and this Article 13.7, if applicable,, a Party that did not originally
participate in a Platform and/or Processing Facilities shall be a
Non-participating Party for all operations utilizing the Platform and/or
Processing Facilities and shall be subject to Article 13.2 (Relinquishment of
Interest). Notice, in accordance with Article 9 (Notices), shall be given to the
Non-participating Party for all wells proposed to be drilled from or tied-back
to the Non-consent Platform and/or handled by non-consent Processing Facilities.
If a Non-participating Party in a Non-consent Platform and/or Processing
Facilities desires to participate in the drilling of any such well proposed by
the Participating Parties in the Platform and/or Processing Facilities, the
Non-participating Party desiring to join in the proposed well shall first pay
the Participating Parties in the Platform and/or Processing Facilities its
proportionate share of the cost of the Platform and/or Processing Facilities,
including, but not limited to, costs of material, fabrication, transportation,
and installation plus any remaining amounts to be recouped under Article
13.2.1(B). The Non-participating Party shall remit payment to Operator and
Operator shall (a) reimburse the Participating Parties in the Platform and/or
Processing Facilities in the same proportions they are sharing in the Platforms
and/or Processing Facilities recoupment account, and (b) credit the applicable
payout account. Upon payment of that amount, the original Non-participating
Party shall become an owner and a Participating Party in the Platform and/or
Processing Facilities in the same manner as if recoupment had occurred under
Article 13.2.1 (Production Reversion Recoupment), and may participate in all
future wells drilled from or tied back to the Platform. As to well operations
conducted from the Platform and/or Processing Facilities prior to payment under
this Article 13.7, the original Non-participating Party shall remain a
Non-participating Party in such Non-consent Operations until such time as the
entire recoupment balance applicable to all such Non-consent Operations in the
aggregate has occurred, as provided for in Articles 13.2.1(A) and 13.2.1(D).

          13.8   Discovery or Extension from Non-consent Drilling. If a
Non-consent Well (a) discovers a new Producible Reservoir or (b) extends an
existing Producible Reservoir beyond its recognized boundaries, as unanimously
agreed by the Parties before commencement of drilling operations, the recoupment
of costs for the

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<PAGE>

                   Model Form of Offshore Operating Agreement

well shall be governed by Article 13.2 (Relinquishment of Interest) and shall be
recovered by the Participating Parties in one of the following ways:

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

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

        13.9     Allocation of Platform/Processing Facilities Costs to
Non-consent Operations. Non-consent Operations shall be subject to further
conditions as follows:

                 13.9.1 Charges. In the event a well is drilled or produced from
a Platform or is produced through Processing Facilities whose Participating
Parties are different from the Participating Parties in that well or if the
Participating Parties' Participating Interest shares in that Platform or
Processing Facilities are different from their Participating Interest shares in
that well, the rights of the Participating Parties in that well and the costs to
use the Platform or Processing Facilities for that well shall be determined as
follows:

                        (A)    The Participating Parties in that well shall pay
                               to the Operator a one-time slot usage fee for the
                               use of a slot on the Platform equal to that
                               portion of the total costs of the Platform, which
                               one Platform slot bears total number of Platform
                               slots. Within fifteen (15) days of its receipt of
                               that fee, the Operator shall distribute to the
                               Participating Parties in the Platform their
                               Participating Interest share of that payment. For
                               purposes of calculating the slot usage fee, the
                               total cost of the Platform shall be reduced by
                               one percent (1%) per month, commencing on the
                               date the Platform was installed and continuing
                               every month thereafter until the month actual
                               drilling operations on that well is commenced;
                               however, the total cost of the Platform shall not
                               be reduced by more than fifty percent (50%) of
                               the total Platform's costs. The cost of additions
                               to the Platform shall be reduced in the same
                               manner commencing the first month after the
                               addition is installed.

                               If that well is abandoned, having never produced
                               Hydrocarbons, the right of the Participating
                               Parties in that well to use the Platform slot
                               through which

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<PAGE>

                   Model Form of Offshore Operating Agreement

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

                               The slot usage fee shall not apply to a slot
                               deemed to be "surplus." A slot may be deemed
                               surplus only by the unanimous agreement of the
                               owners of the Platform.

                          (B)  The Participating Parties in that well shall pay
                               to the owners of the Processing Facilities a lump
                               sum equal to that portion of the total cost of
                               those Processing Facilities that the throughput
                               volume of the Non-consent Operation bears to the
                               total design throughput volume of the Processing
                               Facilities. Throughput volume shall be estimated
                               by the Operator in barrels produced per day (with
                               1 barrel of oil equaling 5.8 mcf of gas), using
                               an average daily volume of the first three months
                               of Hydrocarbon production from the Non-consent
                               Operation. For purposes of calculating the
                               Processing Facilities lump sum payment, the total
                               cost of the Processing Facilities, shall be
                               reduced by one percent (1%) per month, commencing
                               from the date when the Processing Facilities were
                               installed and continuing every month thereafter
                               until the first month during which Hydrocarbon
                               production from the Non-consent Operation
                               commences, but the total cost of the Processing
                               Facilities shall not be reduced more than fifty
                               percent (50%) of the total Processing Facilities'
                               cost. If a modification, expansion, or addition
                               to the Processing Facilities is made after
                               commencing first Hydrocarbon production and
                               before connection of the Non-consent Operation to
                               the Processing Facilities, the Processing
                               Facilities lump sum payment shall be reduced in
                               the same manner described above, from the month
                               in which the Processing Facilities modification,
                               expansion or addition is completed until the
                               first month during which Hydrocarbon production
                               from the Non-consent Operation is commenced.

                               Payment of sums under this Article 13.9.1 is not
                               a purchase of an additional interest in the
                               Platform or the Processing Facilities. Such
                               payment shall be

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<PAGE>

                   Model Form of Offshore Operating Agreement

                            included in the total amount that the Participating
                            Parties are entitled to recoup out of Hydrocarbon
                            production from the Non-consent Well.

                13.9.2  Operating and Maintenance Charges. The Participating
Parties shall pay all costs necessary to connect a Non-consent Well to the
Processing Facilities and that proportionate part of the costs of operating and
maintaining the Platform and Processing Facilities applicable to the Non-consent
Well. Platform operating and maintenance costs that are costs not directly
attributable to a wellbore shall be allocated equally to all actively producing
Completions. Operating and maintenance costs for the Processing Facilities shall
be allocated on a volume throughput basis, that is, in the proportion that the
volume throughput of the well bears to the total volume throughput of all wells
connected to the Processing Facilities. Volume throughput, as used in this
Artcile 13.9.2, shall be determined by considering all Hydrocarbons and water
volumes.

        13.10   Allocation of Costs Between Zones. Except as provided in
Article 10.9 (Wells Proposed Below Deepest Producible Reservoir), if for any
reason the Participating Interests of the Parties in a well are not the same for
the entire depth or the Completion thereof, the costs of drilling, Completing,
and equipping the well shall be allocated in an equitable manner, as agreed by
the Parties, based on the value and allocation guidelines recommended by the
Council of Petroleum Accountants Societies (COPAS) in COPAS Bulletin No. 2,
Determination of Values for Well Costs Adjustments Joint Operations, September
1965, as amended from time to time.

13.11   Non-Consent Operations to Maintain Prospect: The following provisions
        shall only be applicable subsequent to the drilling of the Initial
        Well, Second Well or Third Well drilled pursuant to the APA:

        (a)     if an operation is required, pursuant to a governmental agency
                order, notice, regulation, SOO or SOP requirement or Lease
                obligation, to maintain all or any portion of the Prospect; or,

        (b)     if a proposal is made for an operation within the final fifteen
                (15) months of the primary term of a Lease which has no
                Producible Well and such Lease is not held by a unit, SOO or
                SOP,

        then such operation must be timely commenced and shall be conducted
        pursuant to this Article 13.11. The response time for a proposal made
        hereunder shall be the earlier of:

       (a)      the response time provided in Article 9 or;

       (b)      forty-five (45) days before the deadline under the order,
                notice, regulation, SOO or SOP requirement, unit plan of
                operation requirement or Lease obligation, whichever is earlier.

        If the proposal requires a vote approval and such approval is not
        obtained within the applicable response period, then any Party who made
        an election to participate in the Non-Consent Operation may proceed with
        such operation after giving notice to the other Parties. The other
        Parties will have five (5) days after receipt of the notice to make an
        election to participate in the operation, as proposed.

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                   Model Form of Offshore Operating Agreement

         13.11.1    Acreage Forfeiture in the Entire Prospect: If it is
                    necessary to drill or rework a well or conduct other
                    operations to maintain an entire Prospect, then each
                    Non-Participating Party in the Non-Consent Operation shall
                    relinquish and permanently assign to the Participating
                    Parties one hundred percent (100%) of the Non-Participating
                    Party's Working Interest in the entire Prospect within
                    thirty (30) days after commencement of such well or other
                    operation. Failure to participate in such well or other
                    operations shall be deemed a withdrawal and the provisions
                    of Article 15 shall apply.

         13.11.2    Acreage Forfeiture in a Portion of the Prospect: If a well
                    is drilled or reworked or other operations are conducted in
                    order to maintain a portion of the Prospect Area, then each
                    Non-Participating Party in the Non-Consent Operation shall
                    relinquish and permanently assign to the Participating
                    Parties one hundred percent (100%) of the Non-Participating
                    Party's Working Interest in the affected portion of the
                    Prospect within thirty (30) days after commencement of such
                    well or other operation. If a Party forfeits its Working
                    Interest pursuant to this Article, then such Party shall
                    have no further rights under this Agreement as to the
                    portion of the Prospect Area forfeited. The remaining
                    Parties shall amend this Agreement to provide for a separate
                    operational area for the forfeited portion of the Prospect
                    and this Agreement shall apply separately to such
                    operational area.

         13.11.3    Limitations on Acreage Forfeiture: Notwithstanding the
                    foregoing, if more than one well is drilled or more than one
                    operation is proposed to be conducted, any of which would
                    maintain the entire Prospect or the affected portion of the
                    Prospect, an assignment shall not be required from any
                    Participating Party in any such well or other operation. In
                    addition, no Party shall be required to relinquish or assign
                    all or any portion of its Working Interest in the Prospect
                    if the order, requiring the well or other operation, is
                    appealed and successfully overturned.

         13.11.4    Accounting for Non-participation. If after one (1) year from
                    completion of a well operation conductedto maintain all or a
                    portion of a Prospect, the Prospect or portion thereof is
                    being perpetuated by such an operation, as provided in
                    Article 13.11 ( Non-Consent Operations to Maintain Prospect
                    Area), Operator shall render a final statement, if
                    applicable, to the assigning Party for its share of all
                    expenses attributed to the assigned interest before the
                    effective date of the assignment, plus any credit or
                    deficiency in salvage value calculated under Article 15.3.1
                    (Prior Expenses). The assigning Party shall settle any
                    deficiency owed the non-assigning Parties within thirty (30)
                    days after receipt of Operator's statement.

         13.12   Retention of Lease by Non-consent Well. If, at the expiration
of the primary term of a Lease, one or more Non-consent Wells, except wells
drilled under the Acreage Out Option under Article 10.5 (Operations by Fewer
Than All Parties), are the only wells perpetuating the Lease, Operator shall
give written notice to each

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Non-participating Party that the Non-consent Wells are serving to perpetuate the
Lease. Each Non-participating Party shall, within thirty (30) days after receipt
of Operator's written notice, elect one of the following:

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

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

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

                                   ARTICLE 14
                        ABANDONMENT, SALVAGE, AND SURPLUS

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

        14.2     Abandonment of Platforms, Processing Facilities or Wells.
Except as provided in Article 10 (Exploratory Operations) and Article 11
(Development Operations), a Party may propose the abandonment of a Platform and
Processing Facilities or wells by notifying the other Participating Parties. No
Platform and Processing Facilities or wellbore shall be abandoned without the
unanimous approval of the Participating Parties. If all Parties do not approve
abandoning the Platform and Processing Facilities or wells, the Party desiring
to abandon it shall pay the Operator, on behalf of the Participating Parties for
that Party's share of the estimated costs of abandonment, removal, and site
clearance of the Platform and Processing Facilities or plugging and abandonment
of the wells, less estimated salvage value, as determined under Exhibit "C." If
an abandoning Party's respective share of the estimated salvage value is greater
than its share of the estimated costs, Operator, on behalf of the Participating
Parties, shall pay a sum equal to the deficiency to the abandoning Party.

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

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

        14.5  Disposal of Surplus Material. Material and equipment acquired
hereunder may be classified as surplus by Operator when deemed no longer needed
in present or foreseeable operations. Operator shall determine the value and
cost of disposing of the materials in accordance with Exhibit "C." If the
material is classified as junk or if the value, less cost of disposal, is less
than or equal to Fifty thousand Dollars ($50,000.00), Operator shall dispose of
the surplus materials in any manner it deems appropriate. If the value, less the
cost of disposal of the surplus material, is greater than Fifty thousand Dollars
($50,000.00), Operator shall give written notice thereof to the Parties owning
the material. Unless purchased by Operator, the surplus material shall be
disposed of in accordance with the method of disposal approved by the Parties
owning the material. Proceeds from the sale or transfer of surplus material
shall be promptly credited to each Party in proportion to its ownership of the
material at the time of retirement or disposition.

                                   ARTICLE 15
                                   WITHDRAWAL

        15.1  Right to Withdraw. Subject to this Article 15.1, any Party may
withdraw from this Agreement as to a Prospect (the "Withdrawing Party") by
giving prior written notice to all other Parties stating its decision to
withdraw ("the withdrawal notice"). The withdrawal notice shall specify an
effective date of withdrawal that is at least sixty (60) days, but not more than
one hundred and twenty (120) days, after the date of the withdrawal notice.
Within thirty (30) days of receipt of the withdrawal notice, the other Parties
may join in the withdrawal by giving written notice of that fact to the Operator
("written notice to join in the withdrawal") and upon giving written notice to
join in the withdrawal are "Other Withdrawing Parties." The withdrawal notice
and the written notice to join in the withdrawal are unconditional and
irrevocable offers by the Withdrawing Party and the Other Withdrawing Parties to
convey to the Parties who do not join in the withdrawal ("the Remaining
Parties") the Withdrawing Party's and the Other Withdrawing Parties' entire
Working Interest in all of the Lease or Leases, Hydrocarbon production, and
other property and equipment owned under this Agreement.

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        15.2     Response to Withdrawal Notice. Failure to respond to a
withdrawal notice is deemed a decision not to join in the withdrawal.

                 15.2.1.  Unanimous Withdrawal

                          If all the other Parties join in the withdrawal,

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

                          (B) no further operations may be conducted under this
                          Agreement unless agreed to by all Parties;

                          (C) the Parties shall abandon all activities and
                          operations within the Prospect and relinquish all of
                          their Working Interests to the MMS within ninety (90)
                          days of the conclusion of the thirty (30) day joining
                          period; and

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

                              (1) furnish all Parties a detailed abandonment
                              plan, if applicable, and a detailed cost estimate
                              for the abandonment within sixty (60) days after
                              the conclusion of the thirty (30) day joining
                              period; and

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

                 15.2.2.  No Additional Withdrawing Parties. If none of the
other Parties join in the withdrawal, then the Remaining Parties must accept an
assignment of their Participating Interest share of the Withdrawing Party's
Working Interest.

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

                 15.2.4.  Effects of Withdrawal. Except as otherwise provided
in this Agreement, after giving a withdrawal notice or a written notice to join
in the withdrawal, the Withdrawing Party and Other Withdrawing Parties are not
entitled to approve or participate in any activity or operation in the Prospect,

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                   Model Form of Offshore Operating Agreement

other than those activities or operations for which they retain a financial
responsibility. The Withdrawing Party and Other Withdrawing Parties shall take
all necessary steps to accomplish their withdrawal by the effective date
referred to in Article 15.1 (Right to Withdraw) and shall execute and deliver to
the Remaining Parties all necessary instruments to assign their Working Interest
to the Remaining Parties. A Withdrawing Party and Other Withdrawing Parties
shall bear all expenses associated with their withdrawal and the transfer of
their Working Interest.

        15.3     Limitation Upon and Conditions of Withdrawal.

                 15.3.1. Prior Expenses. The Withdrawing Party and Other
Withdrawing Parties remain liable for their Participating Interest share of the
costs of activities, operations, rentals, royalties, taxes, damages, or other
liability or expense accruing or relating to (i) obligations existing as of the
effective date of the withdrawal, (ii) operations conducted before the effective
date of the withdrawal, (iii) operations approved by the Withdrawing Party and
Other Withdrawing Parties before the effective date of the withdrawal, or (iv)
operations commenced by the Operator under one of its discretionary powers under
this Agreement before the effective date of the withdrawal. Before the effective
date of the withdrawal, the Operator shall render a statement to the Withdrawing
Party and Other Withdrawing Parties for (1) their respective shares of all
identifiable costs under this Article 15.3.1 and (2) their respective
Participating Interest shares of the estimated current costs of plugging and
abandoning all wells and removing all Platforms, Processing Facilities, and
other materiel and equipment serving the Prospect, less their respective
Participating Interest Shares of the estimated salvage value of the assets at
the time of abandonment, as approved by vote. This statement of expenses, costs,
and salvage value shall be prepared by the Operator under Exhibit "C." Before
withdrawing, the Withdrawing Party and Other Withdrawing Parties shall either
pay the Operator, for the benefit of the Remaining Parties, the amounts
allocated to them in the statement or provide security satisfactory to the
Remaining Parties for all obligations and liabilities they have incurred and all
obligations and liabilities attributable to them before the effective date of
the withdrawal. All liens, charges, and other encumbrances which the Withdrawing
Party and Other Withdrawing Parties placed (or caused to be placed) on their
Working Interest shall be fully satisfied or released prior to the effective
date of its withdrawal (unless the Remaining Parties are willing to accept the
Working Interest subject to those liens, charges, and other encumbrances).

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

                 15.3.3. Emergencies and Force Majeure. No Party may withdraw
during a Force Majeure or emergency that poses a threat to life, safety,
property or the environment but may withdraw from this Agreement after
termination of the Force Majeure or emergency. The Withdrawing Party and Other

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                   Model Form of Offshore Operating Agreement

Withdrawing Parties remain liable for their share of all costs and liabilities
arising from the Force Majeure or emergency, including but not limited to the
drilling of relief wells, containment and cleanup of oil spills and pollution,
and all costs of debris removal made necessary by the Force Majeure or
emergency.

                                   ARTICLE 16
                     RENTALS, ROYALTIES, AND OTHER PAYMENTS

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

        16.2  Subsequently Created Interest. Notwithstanding anything in this
Agreement to the contrary, if a Party, after execution of this Agreement,
creates an overriding royalty, Hydrocarbon production payment, net profits
interest, carried interest, or any other interest out of its Working Interest
(hereinafter called "Subsequently Created Interest"), the Subsequently Created
Interest shall be made specifically subject to this Agreement. If the Party
owning the interest from which the Subsequently Created Interest was established
fails to pay, when due, its share of costs and the proceeds from the sale of
Hydrocarbon production under Article 8.6 (Security Rights) and Exhibit "G" are
insufficient for that purpose, or elects to abandon a well, or elects to
relinquish its interest in the Prospect, the Subsequently Created Interest shall
be chargeable with a pro rata portion of all costs in the same manner as if the
Subsequently Created Interest were a Working Interest, and Operator may enforce
against the Subsequently Created Interest the lien and other rights granted or
recognized under this Agreement to secure and enforce collection of costs
chargeable to the Subsequently Created Interest. The rights of the owner of the
Subsequently Created Interest shall be, and hereby are, subordinated to the
rights granted or recognized by Article 8.6 (Security Rights) and Exhibit "G"].

        16.3  Payment of Rentals and Minimum Royalties. Operator shall pay in a
timely manner, for the joint account of the Parties, all rental, minimum
royalties, and other similar payments accruing under the Leases and shall, on
request, submit evidence of each such payment to the Parties. Operator shall not
be held liable to the other Parties in damages for loss of the Leases or
interest therein if, through mistake or oversight, a rental,

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                   Model Form of Offshore Operating Agreement

minimum royalty, or other payment is not paid or is erroneously paid . The loss
of a Leases or interest therein that results from a failure to pay or erroneous
payment of rental or minimum royalty shall be a joint loss, and there shall be
no readjustment of interests. For Hydrocarbon production delivered in kind by
Operator to a Non-operator or to another for the account of a Non-operator, the
Non-operator shall provide Operator with information about the proceeds or value
of the Hydrocarbon production in order that Operator may make payments of
minimum royalties due.

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

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

                                   ARTICLE 17

                                      TAXES

        17.1 Property Taxes. Operator shall render property covered by this
Agreement for ad valorem taxation, if applicable, and shall pay the property
taxes for the benefit of each Party. Operator shall charge each Party its share
of the tax payments. If the ad valorem taxes are based in whole or in part upon
separate valuations of each Party's Working Interest, then notwithstanding
anything in this Agreement to the contrary, each Party's share of property taxes
shall be in proportion to the tax value generated by that Party's Working
Interest.

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

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

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

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                   Model Form of Offshore Operating Agreement

                                   ARTICLE 18

                                    INSURANCE

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

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

                                   ARTICLE 19

                         LIABILITY, CLAIMS, AND LAWSUITS

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

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

        19.3 Settlements. The Operator may settle a Claim, or multiple Claims
arising out of the same incident, involving activities or operations under this
Agreement or affecting the Prospect, if the aggregate expenditure does not
exceed One hundred thousand dollars ($100,000.00) and if the payment is in
complete settlement of these Claims. If the amount required for settlement
exceeds this amount, the Parties shall determine the further handling of the
Claims under Article 19.4 (Defense of Claims and Lawsuits).

        19.4 Defense of Claims and Lawsuits. The Operator shall supervise the
handling, conduct, and prosecution of all Claims involving activities or
operations under this Agreement or affecting the Prospect. Claims may be settled
in excess of the amount specified in Article 19.3 (Settlements) if the
settlement is approved by vote in accordance with Article 6.1.2 of the
Participating Parties in the activity or

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operation out of which the Claim arose, but a Party may independently settle a
Claim or the portion of a Claim which is attributable to its Participating
Interest share alone as long as that settlement does not directly adversely
affect the interest or rights of the other Participating Parties. No charge
shall be made for services performed by the staff attorneys of a Party, but all
other expenses incurred by the Operator in the prosecution or defense of Claims
for the Parties, together with the amount paid to discharge a final judgment,
are costs and shall be paid by the Parties in proportion to their Participating
Interest share in the activity or operation out of which the Claim arose. The
employment of outside counsel, but not the selection of that counsel, requires
approval by vote of the Participating Parties in the activity or operation out
of which the Claim arose. If the use of outside counsel is approved, the fees
and expenses incurred as a result thereof shall be charged to the Parties in
proportion to their Participating Interest share in the activity or operation
out of which that Claim arose. Each Party has the right to hire its own outside
counsel at its sole cost with respect to its own defense.

        19.5 Liability for Damages. Unless specifically provided otherwise in
this Agreement, liability for losses, damages, costs, expenses or Claims
involving activities or operations under this Agreement or affecting the
Prospect which are not covered by or in excess of the insurance carried for the
Joint Account shall be borne by each Party in proportion to its Participating
Interest share in the activity or operation out of which that liability arises,
except that when liability results from the gross negligence or willful
misconduct of a Party, that Party shall be solely responsible for liability
resulting from its gross negligence or willful misconduct.

        19.6 Indemnification for Non-Consent Operations. To the extent allowed
by law, the Participating Parties will hold the Non-participating Parties (and
their Affiliates, agents, insurers, directors, officers, and employees) harmless
and release, defend, and indemnity them against all claims, demands,
liabilities, regulatory decrees, and liens for environmental pollution and
property damage or personal injury, including sickness and death, caused by or
otherwise arising out of Non-consent Operations, and any loss and cost suffered
by a Non-participating Party as an incident thereof, except where that loss or
cost results from the sole, concurrent, or joint negligence, fault or strict
liability of that Non-participating Party, in which case each Party shall pay or
contribute to the settlement or satisfaction of judgment in the proportion that
its negligence, fault or strict liability caused or contributed to the incident.
If an indemnity in this Agreement is determined to violate law or public policy,
that indemnity shall then be enforceable only to the maximum extent allowed by
law.

        19.7 Damage to Reservoir, Loss of Reserves and Profit. Notwithstanding
any contrary provision of this Agreement, no Party is liable to any other Party
for damage to a reservoir, loss of Hydrocarbons, loss of profits, or other
consequential damages, damages for business interruption, or punitive damages,
except if that damage or loss arises from a Party's gross negligence or willful
misconduct, nor does a Party indemnify any other Party for that damage or loss.

        19.8 Non-Essential Personnel. A Non-operator that requests
transportation or access to a drilling rig, Platform, vessel, or other facility
used for activities or operations under this Agreement shall

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hold the other Parties harmless and shall release, defend, and indemnify them
against (i) all claims, demands, and liabilities for property damage and (ii)
all claims, demands, and liabilities for any loss or cost suffered by a Party as
an incident thereof, including, but not limited to, sickness and death, caused
by or otherwise arising out of that transportation or access, or both, except if
that loss or cost results from the gross negligence or willful misconduct of the
Party so indemnified and protected.

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

                                   ARTICLE 20

                           INTERNAL REVENUE PROVISION

        20.1 Internal Revenue Provision. Notwithstanding any provision in this
Agreement to the effect that the rights and liabilities of the Parties are
several, not joint or collective, and that this Agreement and the activities and
operations under this Agreement do not constitute a partnership under state law,
each Party elects not to be excluded from the application of Subchapter K,
Chapter 1, Subtitle A, Internal Revenue Code of 1986, as amended, and similar
provisions of applicable state laws. The tax partnership shall be governed by
Exhibit "F."

                                   ARTICLE 21

                                  CONTRIBUTIONS

        21.1 Notice of Contributions Other Than Advances for Sale of Production.
Each Party shall promptly notify the other Parties of all offers of
contributions that it may obtain, or contributions it is attempting to obtain,
for drilling a well on the Prospect. Payments received as consideration for
entering into a contract for the sale of Hydrocarbon production from the
Prospect, loans, and other financial arrangements shall not be considered
contributions for the purpose of this Article 22. No Party shall release or
obligate itself to release Confidential Data in return for a contribution from a
third party for drilling a well without prior written consent of the
Participating Parties or Parties having the right to participate in the well.

        21.2 Cash Contributions. If a Party receives a cash contribution for
drilling a well on the Prospect, the cash contribution shall be paid to Operator
and Operator shall credit the amount thereof to the Parties in proportion to
their Participating Interests in the well. If the well is a Non-consent Well,
the amount of the contribution shall be deducted from the cost specified in
Article 13.2.1(A) before computation of the amount to be recouped out of
Hydrocarbon production.

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

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                                   ARTICLE 22

                            DISPOSITION OF PRODUCTION

        22.1 Take-in-Kind Facilities. A Party may, at its sole cost and risk,
construct Take-in-Kind Facilities to take its share of Hydrocarbon production in
kind.

        22.2 Duty to Take in Kind. Each Party shall own and, at its own cost and
risk, shall take in kind or separately dispose of its share of the oil, gas, and
condensate produced and saved from the Prospect, exclusive of Hydrocarbon
production used by Operator in developing and producing operations, subject to
this Article 22. In order to avoid interference with operations on or regarding
the Platform , the Processing Facilities, and the Prospect, a Party exercising
its right to construct Take-in Kind Facilities ("the Take in Kind Party") shall
provide the Operator with a list of equipment it deems necessary for its Take in
Kind Facilities ("the Equipment") along with its notice informing the Operator
of its election to take in kind. The Operator shall purchase the Equipment and
install it on behalf of the Take in Kind Party at the Take in Kind Party's sole
risk and cost, including, but not limited to, any fees, penalties or other costs
incurred as a result of any cancellation of placed orders as may be requested by
the Take in Kind Party. The Take in Kind Party shall have the right, upon
providing the Operator with two week's written notice prior to a scheduled order
of Equipment, to stop or postpone the Operator's placing of the scheduled order.
The cancellation provisions contained in any Equipment order shall be similar in
all material respects to the cancellation provisions used by the Operator for
similar project equipment orders. The Operator shall provide the Take in Kind
Party with monthly updates on the progress of the ordering and installation of
the Take in Kind Facilities. The Operator, based on the instructions of Take in
Kind Party, shall install and operate all of the Equipment. The Operator shall
not be responsible for any losses or damages to the Equipment or the Take in
Kind Party's Hydrocarbon production metered, treated, processed or transported
by the Equipment unless such losses or damages are the result of the Operator's
gross negligence or willful misconduct.

        22.3 Failure to Take Oil and Condensate in Kind. Notwithstanding Article
22.2 (Duty to Take in Kind), if a Party fails to take in kind or dispose of its
share of the oil or condensate, Operator shall have the right, but not the
obligation, subject to revocation at will by the Party owning the Hydrocarbon
production, to purchase for its own account, sell to others, or otherwise
dispose of all or part of the Hydrocarbon production at the same price at which
Operator calculates and pays lessor's royalty on its own portion of the oil or
condensate. Operator shall notify the non-taking Party when the option is
exercised. A purchase or sale by Operator of any other Party's share of the oil
or condensate shall be for such reasonable periods of time as are consistent
with the minimum needs of the industry under the circumstances, but in no event
shall a contract be for a period in excess of one (1) year. Proceeds of the oil
or condensate purchased, sold, or otherwise disposed of by Operator under this
Article 22.3 shall be paid to the Party that had, but did not exercise, the
right to take in kind and separately dispose of the oil or condensate. Operator,
in disposing of another Party's oil or condensate, shall not be responsible for
making any filing with regulatory agencies not required by law to be made by it
in respect to another Party's share of oil or condensate. Unless required by
governmental authority having jurisdiction or by judicial process, no Party
shall be forced to share an available market with a non-taking Party.

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                   Model Form of Offshore Operating Agreement

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

        22.5 Expenses of Delivery in Kind. A cost that is incurred by Operator
in making delivery of a Party's share of oil, gas, or condensate or disposing of
same shall be paid by the Party.

                                   ARTICLE 23

                                 APPLICABLE LAW

        23.1 Applicable Law. This Agreement shall be governed by and construed,
interpreted, and applied under the laws of Texas, excluding choice of law rules
that would refer the matter to the laws of another jurisdiction.

                                   ARTICLE 24

                    LAWS, REGULATIONS, AND NONDISCRIMINATION

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

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

                                   ARTICLE 25

                                  FORCE MAJEURE

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

                                   ARTICLE 26

        SUCCESSORS, ASSIGNS, PREFERENTIAL RIGHTS, MAINTENANCE OF UNIFORM
INTEREST ,MINIMUM TRANSFER OF INTEREST, AND AREA OF MUTUAL INTEREST

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                   Model Form of Offshore Operating Agreement

        26.1     Transfer of Interest. Except as provided in 26.1.1 (Exceptions
to Prior Written Notice), a Transfer of Interest shall be preceded by written
notice to the Operator and the other Parties ("the transfer notice"). Any
Transfer of Interest shall be made to a party financially capable of assuming
the corresponding obligations under this Agreement. No Transfer of Interest
shall release a Party from its obligations and liabilities under this Agreement,
and the security rights under Exhibit "G" [Article 8.6 (Security Rights)] shall
continue to burden the Working Interest transferred and to secure the payment of
those obligations and liabilities. No Transfer of Interest may be made if the
assigning Party is in default under the terms of this Agreement.

                 26.1.1  Exceptions to Transfer Notice. Notwithstanding any
contrary provision of this Agreement, the transfer notice is not required when a
Party proposes to mortgage, pledge, hypothecate or grant a security interest in
all or a portion of its Working Interest (including assignments of Hydrocarbon
production executed as further security for the debt secured by that security
device), any wells, Platforms, Processing Facilities or other equipment.
However, an encumbrance arising from the financing transaction shall be
expressly made subject and subordinated to this Agreement.

                 26.1.2. Effective Date of Transfer of Interest. The effective
date of a Transfer of Interest shall be at least thirty (30) days, but not more
than one hundred eighty (180) days, after the date of the transfer notice. No
Transfer of Interest, other than those provided in Article 15.1 (Right to
Withdraw) and Article 26.1.1 (Exceptions to Prior Written Notice), is binding
upon the Parties unless and until (i) the assignor or assignee provides all
remaining Parties with a photocopy of a fully executed Transfer of Interest, an
executed MMS Form 1123, "Designation of Operator" and a designation of oil spill
responsibility form and (ii) evidence of receipt of all necessary approvals by
the MMS. The Parties shall promptly undertake all reasonable actions necessary
to secure those approvals and shall execute and deliver all documents necessary
to effectuate that Transfer of Interest. All costs attributable to a Transfer of
Interest are the sole obligation of the assigning Party.

                 26.1.3. Form of Transfer of Interest. Any Transfer of Interest
shall incorporate provisions that the Transfer of Interest is subordinate to and
made expressly subject to this Agreement and provide for the assumption by the
assignee of the performance of all of the assigning Party's obligations under
this Agreement. Any Transfer of Interest not in compliance with this provision
is voidable by the non-assigning Parties.

                 26.1.4. Warranty. Any Transfer of Interest, vesting or
relinquishment of Working Interest as between the Parties under this Agreement
shall be made without warranty of title.

        26.2. Preferential Right to Purchase. Any Transfer of Interest shall be
subject to the following provisions:

                 26.2.1. Notice of Proposed Transfer of Interest. The transfer
notice shall provide full information about the proposed Transfer of Interest,
including, but not limited to, the name and address of

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                   Model Form of Offshore Operating Agreement

the prospective assignee (who must be ready, willing, and able to acquire the
interest and deliver the stated consideration therefor), the full consideration
for the Transfer of Interest, and all other terms of the offer. In the case of a
package sale of oil and gas interests that includes all or part of the assigning
Party's Working Interest, or if the proposed Transfer of Interest is structured
as a like-kind exchange, the Working Interest that is subject to the Transfer of
Interest shall be separately valued and the transfer notice shall state the
monetary value attributed to the Working Interest by that prospective assignee.
Article 26.2 (Preferential Right to Purchase) shall apply only to the Working
Interest that is subject to the Transfer of Interest.

                 26.2.2. Exercise of Preferential Right to Purchase. Within
fifteen (15) days from receipt of the transfer notice, each non-assigning Party
may exercise its preferential right to purchase its Participating Interest share
of the Working Interest offered (on the same terms and conditions, or on
equivalent terms for a non-cash transaction as stated in the notice) without
reservations or conditions by written notice of that fact to all of the Parties.
If a non-assigning Party does not exercise its preferential right to purchase
its Participating Interest share of the Working Interest offered and the
non-assigning Parties, who wish to exercise their preferential right to
purchase, do not agree to pay the full consideration for the Transfer of
Interest and accept all of the other terms of the third party offer within seven
(7) days of the fifteen (15) day period in which the non-assigning Parties may
exercise their preferential right to purchase, the assigning Party shall be free
to complete the proposed conveyance on the terms disclosed in the notice. If the
other non-assigning Parties agree to pay the full consideration for the Transfer
of Interest and accept all of the other terms of the third party offer, the
assigning Party shall transfer the Working Interest to the non-assigning Parties
who exercised their preferential right to purchase under this Article 26
(Successors, Assigns, Preferential Rights, Maintenance Of Uniform Interest
,Minimum Transfer Of Interest, And Area Of Mutual Interest). The Transfer of
Interest shall be concluded within a reasonable time, but no later thirty (30)
days after the applicable period in which the non-assigning Parties may exercise
their preferential right to purchase.

                 26.2.3. Transfer of Interest Not Affected by the Preferential
Right to Purchase. Article 26.2 (Preferential  Right to Purchase) shall not
apply when a Party proposes to:

                         (A) mortgage, pledge, hypothecate or grant a security
                         interest in all or a portion of its Working Interest
                         (including assignments of Hydrocarbon production
                         executed as further security for the debt secured by
                         that security device), , or

                         (B) grant an overriding royalty, a net profits
                         interest, or a production payment

                         (C) dispose of its Working Interest by:

                             (1) a simultaneous like-kind exchange under Section
                         1031 of the Internal Revenue Code of 1986, as amended,
                         ("Code");

                             (2) a property exchange transaction other than a
                         non-simultaneous like-kind exchange under Section 1031
                         of the Code;

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                   Model Form of Offshore Operating Agreement

                             (4) a merger, reorganization, or consolidation;

                             (5) a Transfer of Interest of substantially all of
                         a Party's exploration and production properties in the
                         Gulf of Mexico; or

                             (6) a Transfer of Interest to an Affiliate.

                26.2.4. Completion of Transfer of Interest. If the proposed
Transfer of Interest is not executed and filed of record with the MMS within six
(6) months after receipt of the transfer notice by the non-assigning Parties, or
if the terms of the proposed Transfer of Interest conveyance are materially
altered, the proposed Transfer of Interest shall be deemed withdrawn, and the
Working Interest included in the proposed Transfer of Interest shall again be
governed by this Article 26.2 (Preferential Right to Purchase).

                26.3. Maintenance of Uniform Interest and Minimum Transfer of
Interest. Unless unanimously agreed otherwise, any transfer to a third party
shall be limited to a minimum Working Interest of twelve and one-half percent
(12.5%) in an entire Prospect. No assignment or transfer of any interest in this
Agreement or any Lease or lands subject to this Agreement shall be made that is
not an undivided Working Interest in all of a Party's Working Interest in the
Prospect unless otherwise provided under this Agreement. If the Working
Interest of any Party is subsequently conveyed or distributed to other entities,
so that any one of them owns a Working Interest of less than twelve and one half
percent (12.5%), such entities collectively shall be entitled to only a single
joint representative at meetings of the Parties and shall vote or act
collectively matters. Such Parties shall be entitled to only a single set of
logs, samples, information and reports and shall be considered as only one Party
for all purposes under this Agreement.

                26.4 Area of Mutual Interest. The Parties establish an Area of
Mutual Interest ("AMI") for each of the Prospects as set forth in Exhibit "A".
Subsequent to the execution of the APA or this Agreement, if any Party hereto
("Acquiring Party") acquires either an oil and gas lease (or any interest
therein) or any other mineral interest covering lands and/or water bottoms
and/or seabeds lying within an AMI, or if the Acquiring Party is offered the
opportunity to enter into any type of agreement by which such an interest may be
earned or otherwise acquired by conducting drilling, seismic, or other
operations on the lands lying within an AMI, then the Acquiring Party shall
promptly notify the other Party(ies) ("Non-Acquiring Party(ies)") of such
acquisition or such opportunity. Any interest acquired by a Party hereto in
lands outside of the AMI, however, shall not be subject to the terms of this
Section. The notification provided for in this Section shall contain all
available title information, and copies of leases, agreements by which the
interests may be acquired, and all other pertinent instruments. It shall also
describe in detail the cost and expense of such acquisition and any other
obligation which may be incurred pursuant thereto.

The Non-acquiring Party(ies) shall have the opportunity to participate in any
acquisition hereunder, and in the working interest proportion set out under
Exhibit "A" for the Prospect in which the acquisition of interest was made. As
of the date of this Agreement, the interests of the Parties in the Leases, each
Prospect, and each AMI, are BP-seventy-five percent (75%), and EEX-twenty-five
percent (25%).

If drilling, seismic, or other operations are not required to acquire the
interest, Non-acquiring Party(ies) shall have fifteen (15) days from receipt of
notice thereof in which to elect to participate in such acquisition. Failure to
notify the Acquiring Party of its election within fifteen (15) days shall be
deemed an election by the Non-acquiring Party(ies) not to participate.

If the acquisition requires drilling, seismic, or other operations to depths
below the base of the Weld, the election of a Non-acquiring Party(ies) to
participate in such operations shall be deemed an election to participate in all
of the terms and conditions of the agreement governing such operations, to the
extent necessary to acquire the interest. No party shall be required to make
such election more than one hundred fifty (150) days nor less than fifteen (15)
days prior to commencement of initial operations.

To receive an assignment of its proportionate share of the interest acquired as
a result of conducting drilling, seismic, or other operations on the AMI, a
Non-acquiring Party must have: (1) participated in all operations necessary for
the acquisition of the interest, including, but not limited to, completion
operations and also must have paid all costs and expenses incurred in connection
therewith; and (2) participated in accordance with the terms, provisions,
covenants, and conditions of the agreements governing the acquisition of
interest. At such time the Non-acquiring Party(ies) shall become an Acquiring
Party(ies). The Acquiring Parties shall then share in the acquisition in the
proportion that each such Acquiring Party's respective working interest, as set
forth in the JOA bears to the sum of the working interests of the all Acquiring
Parties. On receipt of an invoice from the Acquiring Party setting forth in
detail the cost and expense of the acquisition, the other Acquiring Party(ies)
shall promptly reimburse the original Acquiring Party for its proportionate
share thereof. The original Acquiring Party shall then promptly assign to the
other Acquiring Party(ies) its proportionate interest in the acquisition.

If all Parties to this Agreement elect to participate in any acquisition, then
any such acquired interest shall thereafter be subject to the JOA and the
Parties shall amend Exhibit "A" thereof, to reflect the newly acquired interest.
Such amendment shall be effective with the award of a lease or the effective
date of any such transfer; and shall be executed by the Parties within ninety
(90) days from lease issuance or the effective date of the assignment of
interest. If less than all Parties elect to participate in an acquisition, the
Acquiring Party or Parties will execute an agreement to cover such acquisition
in substantially the same form as this Agreement.

In the event that the lease acquisition involves a third party (not a Party to
this Agreement), the Parties agree to utilize the form of JOA as the starting
point for negotiation of a mutually acceptable form of operating agreement with
the third party.

The term of this AMI provision shall terminate upon the earlier of 1)
termination of this Agreement, 2) commencement of the Third Well drilled
pursuant to the APA, or 3) June 30, 2006.

                                   ARTICLE 27

                            ADMINISTRATIVE PROVISIONS

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

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

        27.3     Waiver of Right to Partition. Each Party waives the right to
bring an action for partition of its interest in the Prospect, wells, Platform,
Processing Facilities, and other equipment held under this Agreement, and
covenants that during the existence of this Agreement it shall not resort at any
time to an action at law or in equity to partition any or all of the Prospects
and lands or personal property subject to this Agreement.

        27.4     Compliance With Laws and Regulations. This Agreement, and all
activities or operations conducted by the Parties under this Agreement, are
expressly subject to, and shall comply with,

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                   Model Form of Offshore Operating Agreement

all laws, orders, rules, and regulations of all federal, state, and local
governmental authorities having jurisdiction over the Prospect.

                 27.4.1. Conflicts. This Agreement is subject to the terms and
provisions of the APA (which incorporated therein that certain Joint Bidding
Agreement dated March 1, 2002), by and between the Parties APA. In the event of
conflict between this Agreement and the APA , the provisions of the APA shall
prevail.

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

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

        27.5.    Construction and Interpretation of this Agreement

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

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

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

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

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                   Model Form of Offshore Operating Agreement

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

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

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

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

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

IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement effective as of the date first above
written.

                 BP EXPLORATION & PRODUCTION INC.

                 By:  ___________________________________
                      O. Kirk Wardlaw
                      Attorney-in-Fact

                 EEX CORPORATION

                 By:  ___________________________________
                      Ben Davis
                      Land Manager-Offshore

                                       59

<PAGE>

                                   EXHIBIT "A"
 Attached to and made a part of that certain Offshore Operating Agreement dated
   March 1, 2002, by and between BP Exploration & Production Company and EEX
                                  Corporation.

SECTION I: LEASES AND WORKING INTERESTS OF THE PARTIES

                                                WORKING INTEREST
                                                ----------------
OCS #        AREA/BLOCK                         BP           EEX
-----        ----------                         --           ---

21665        South Timbalier 141                75%          25%

21666        South Timbalier 142                75%          25%

21667        South Timbalier 144                75%          25%

21668        South Timbalier 167                75%          25%

21669        South Timbalier 168                75%          25%

21670        South Timbalier 188*               75%          25%

21672        South Timbalier 215                75%          25%

21673        South Timbalier 224                75%          25%

21674        South Timbalier 226                75%          25%

21675        South Timbalier 227                75%          25%

23904        Ship Shoal 186                     75%          25%

22712        Ship Shoal 188**                   75%          25%

22714        Ship Shoal 211                     75%          25%

23905        Ship Shoal 212                     75%          25%

23908        Ship Shoal 235                     75%          25%

22716        Ship Shoal 236                     75%          25%

21658        Ship Shoal 263                     75%          25%

21660        Ship Shoal 281                     75%          25%

22720        Ship Shoal 282                     75%          25%

22724        Ship Shoal 306                     75%          25%

23916        Ship Shoal 309                     75%          25%

23917        Ship Shoal 310                     75%          25%

21661        Ship Shoal 331                   37.5%        12.5%

23870        Eugene Island 201                  75%          25%

22672        Eugene Island 222                  75%          25%

21640        Eugene Island 223                  75%          25%

14439        South Marsh Island 80***       8.4375%      2.1825%

March 1, 2002 - JOA

<PAGE>

*OCS-G 21670 covers only the South Half and Northeast Quarter of South Timbalier
Block 188.
**Only as to depths below 17,000 feet.
***South Half and South Three-Fourths of North Half-Only as to depths below
11,200' Sand as seen in OCS-G 14439 Well No. A-5 ST at depth of approximately
13,146' measured depth. North One-Fourth of North Half-Only as to depths below
9,000' subsea.

SECTION II: OPERATOR

BP is designated as the Operator of all blocks except for OCS-G 21661 (Ship
Shoal Block 331), and OCS-G 14439 (South Marsh Island Block 80), which are
covered by existing operating agreements naming other parties as Operator.

SECTION III: DESCRIPTION OF AREA OF PROSPECTS

Prospect Name           Area                      Block Numbers
-------------           ----                      -------------

Dawson                  South Timbalier           160, 176-180, 184-189,
                                                  204-208, 223-228, 232-235,
                                                  252, 253, 262, 263

Blackbeard West         Ship Shoal                186, 188-190
                        South Timbalier           141, 142, 167-170

Blackbeard East         South Timbalier           108-110, 143-145, 164-166,
                                                  171-173, 192, 193, 201

Morgan                  Ship Shoal                211-214, 234-237, 258, 259
                        South Timbalier           196-198, 214-217

Captain Kidd            Ship Shoal                238, 256, 257, 260-263, 280-
                                                  282

Bellamy                 Ship Shoal                285, 286, 305, 306, 308-310,
                                                  329-331

Lafitte                 South Marsh Island        62-65
                        Eugene Island             200, 201, 221-223, 225, 241-
                                                  244

Barataria               South Marsh Island        77-81

SECTION IV: PRE-EXISTING, CARVED-OUT INTERESTS

OCS-G 22712 (Ship Shoal Block 188)-Five percent of eight-eighths (5% x 8/8)
overriding royalty interest in favor of Aviara Energy Corporation. OCS-G 14439
(South Marsh Island Block 80)-Two percent of eight-eighths (2% x 8/8) overriding
royalty interest in favor of Lee B. Backsen, et al.

March 1, 2002 - JOA

<PAGE>

SECTION V: ADDRESSES OF THE PARTIES

BP Exploration & Production Company           E. P. Zseleczky
501 WestLake Park Boulevard                   Tel: (281) 366-0939
Houston, Texas 77079                          Fax: (281) 366-7569

EEX Corporation                               Ben Davis
2500 CityWest Blvd, Suite 1400                Tel: (713) 243-3247
Houston, Texas 77042                          Fax: (713) 243-3422

March 1, 2002 - JOA

<PAGE>

                                   EXHIBIT "B"

 Attached to that certain Joint Operating Agreement dated March 1, 2002, by and
          between BP Exploration & Production Inc. and EEX Corporation

                          OFFSHORE INSURANCE PROVISIONS

I.  WORKERS COMPENSATION & EMPLOYERS LIABILITY INSURANCE

Operator will carry Workers Compensation insurance in compliance with all State
and Federal Regulations in the jurisdiction where any of the work under this
agreement shall be performed, including the following special coverage
extensions:

    1. Employers' Liability coverage with limits of not less than $1 Million per
       accident.

    2. U.S. Longshoremen and Harbor Workers' Act and Outer Continental Shelf
       Lands Act coverage.

    3. Employers' Liability arising out of Maritime operations including
       coverage for benefits and damages under the Jones Act with limits of at
       least $1,000,000 per occurrence.

    4. "In Rem" endorsement providing that a claim "In Rem" shall be treated as
       a claim against the Operator.

    5. Waiver of Subrogation endorsement which waives the insurers rights of
       subrogation against all of the Parties to this agreement.

Premiums for the insurance above specified shall be charged to the Joint
Account. Provided, however, that if the Operator either self-insures or
effectively self-insures, the Operator shall charge to the joint account, in
lieu of any premiums for such insurance, an amount not to exceed the workers
compensation manual rates times the payroll. Claims under Operator's
self-insurance program shall not be charged to the joint account.

Except as provided above, Operator shall not be obligated to obtain or cause to
be carried insurance for the benefit of the joint account. Operator shall not
obtain or cause to be carried for the benefit of the joint account, control of
well or seepage and pollution insurance nor insurance against the hazards of
fire, windstorm, explosion, blowout, cratering, reservoir damage, or insurance
other than specified above.

II. INSURANCE NOT CHARGED TO THE JOINT ACCOUNT

JOA                                                                  Exhibit "B"
March 1, 2002                       Page 1

<PAGE>

At all times while the Joint Operating Agreement is in effect, each party to the
Agreement shall insure or self-insure for their share of any liabilities assumed
under the Joint Operating Agreement. The cost of these insurance or
self-insurance programs shall be the individual responsibilities of each of the
parties and none of the cost associated with these programs shall be charged to
the Joint Account. Each party shall insure or self-insure the following coverage
for the minimum limits stated.

    1. Commercial General Liability Insurance covering all of the Parties
       operations, including their offshore operations, and including
       contractual liability coverage with combined single limits of at least
       $10,000,000 per occurrence and in the annual aggregate.

    2. Automobile Liability covering all owned, non-owned and leased vehicles
       with combined single limits of at least $1,000,000 per occurrence and in
       the annual aggregate.

    3. Pollution Liability insurance covering offshore oil pollution with limits
       of at least $10,000,000 per occurrence.

    4. Physical Damage insurance and coverage for Wreck Removal for Facilities
       covered by the Joint Operating Agreement, with limits not less than the
       Parties share of the replacement cost of the facility.

    5. Control of Well and Seepage and Pollution insurance with limits of at
       least $10,000,000 per occurrence.

    6. Non-owned aviation liability insurance in the amount of $1,000,000 per
       occurrence covering liability arising out of any leased aircraft used in
       the connection with the work to be performed under the Joint Operating
       Agreement.

All of the above coverages shall be endorsed to waive the insurers' rights of
subrogation against Operator and all other Parties to the Agreement but only to
the extent of those liabilities assumed by the Parties herein. Any Party to the
Agreement, at the request of any other Party to the Agreement, shall advise all
of the other Parties to the Joint Operating Agreement as to whether it will
insure or self-insure the above mention coverages. If Insurance is purchased,
upon request, a Party will provide all other Parties to the Joint Operating
Agreement with a certificate of insurance evidencing that all of the above
insurance and special insuring provisions are in place.

In the event a Party elects to self-insure all or part of the above
requirements, and if any of the other Parties to the Joint Operating Agreement
believe or have a concern that the Party does not have the financial capability
to meet its obligations under such self-insurance programs, any Party to the
Agreement may request any other Party to provide proof of its ability to
self-insure these risks. Proof will consist of independently

JOA                                                                  Exhibit "B"
March 1, 2002                       Page 2

<PAGE>

audited financial statements demonstrating Net Worth and assets in the United
States in an amount at least equal to six (6) times the amount of the above
required insurance that the Party elects to self-insure. If the self-insuring
Party is unable to meet that test, the other Parties to the Agreement may, but
are not required to do so, purchase any or all of the insurance that the Party
elected to self-insure. The cost of said insurance shall be for the individual
account of the Party on whose behalf the insurance was purchased.

III.   CONTRACTORS INSURANCE

Operator (including any Party conducting Non-Consent Operations) shall use its
best efforts to require each contractor who performs work on behalf of the Joint
Operating Agreement to carry the following insurance and special insuring
provisions.

    1. Workers' Compensation and Employers' Liability insurance in accordance
       with all State and Federal Regulations in the jurisdiction where the work
       is to be performed. This coverage shall contain the following special
       endorsements:

       a. Employers' Liability coverage with limits of not less than $1,000,000
          per accident.

       b. U.S. Longshoremen and Harbor Workers' Act and Outer Continental Shelf
          Lands Act coverage.

       c. Employers' Liability arising out of Maritime operations including
          coverage for benefits and damages under the Jones Act with limits of
          at least $1,000,000 per person and $2,000,000 all persons any one
          occurrence.

       d. "In Rem" endorsement providing that a claim "In Rem" shall be treated
          as a claim against the Contractor.

       e. "Borrowed Servant" endorsement providing that a Workers' Compensation
          claim brought against Operator or any Party to the Agreement, by a
          Contractors employee will be treated as a claim against the
          Contractor.

       f. Waiver of Subrogation endorsement which waives the insurers rights of
          subrogation against all of the Parties to this agreement.

    2. Commercial General Liability insurance and/or Excess Liability insurance,
       including contractual liability covering the indemnity obligations
       assumed in the contract with Operator, with combined single limits of
       $5,000,000 per occurrence for injuries to or death of persons and damage
       to property.

JOA                                                                  Exhibit "B"
March 1, 2002                       Page 3

<PAGE>

    3. Automobile Liability insurance covering all owned, non-owned and hired
       vehicles with combined single limits of at least $1,000,000 per
       occurrence for injuries to or death of persons and damage to property.

    4. In the event watercraft is used by the Contractor, contractor shall carry
       or require owners of such watercraft to carry Protection and Indemnity
       Insurance in the amount of not less than the market value of the vessel
       or $1,000,000, whichever is greater.

    5. If Contractor's operations require it to use aircraft, Contractor shall
       carry or require the owners of such aircraft to carry aircraft liability
       insurance with a combined single limit of $500,000 per passenger seat or
       $1,000,000, whichever is greater.

    6. Any other insurance that Operator deems necessary.

    7. All of the insurance carried by Contractors pursuant to Sections 2
       through 6 above shall contain endorsements waiving the insured's rights
       of subrogation against Operator and all other Parties to the Agreement.

Operator shall make a good faith effort to obtain all of the above required
insurance and special insuring provisions. Operator shall also make a good faith
effort to obtain endorsements naming the Operator as an Additional Insured on
the policies of insurance where appropriate and to provide that the word
`Insured' also includes any Party, Co-Owner or Joint Venturer. However, Operator
shall not be liable to non-operators or to their parent companies, subsidiaries
or any affiliated companies for failure to do any of the above. It is recognized
in the industry that there are certain contractors and service companies whose
services are necessary to operations contemplated by the Parties, who as a
matter of their policy refuse contractually to indemnify working interest owners
or to carry any insurance indemnifying Working Interest owners. As to those
entities, Operator may waive any requirement of contractual indemnity or any or
all of the insurance or special insurance provisions required above.

IV.    NOTICE

Operator shall promptly notify Non-operators of any loss, damage or claim not
covered by the insurance obtained hereunder for the joint account. All losses
which are not covered and all losses in excess of insurance coverage shall be
borne by the Parties in accordance with the terms of the Joint Operating
Agreement under which said operations are being conducted by the Parties.

JOA                                                                  Exhibit "B"
March 1, 2002                       Page 4

<PAGE>

                                   EXHIBIT "C"

       Attached to and made part of that certain Joint Operating Agreement
     dated effective March 1, 2002 between BP Exploration & Production Inc.
                              and EEX Corporation.

                              ACCOUNTING PROCEDURE
                             PROJECT TEAM(Optional)
                                JOINT OPERATIONS

                              I. GENERAL PROVISIONS

1.   DEFINITIONS

     All terms used in this Accounting Procedure, if not otherwise defined in
     the Agreement to which this Accounting Procedure is attached, shall have
     the following meaning:

     "Affiliate" shall mean, with respect to any Party, any entity directly or
     indirectly controlling, controlled by, or under common control with such
     Party, unless otherwise defined in the Agreement to which this Accounting
     Procedure is attached

     "Controllable Material" shall mean Material that at the time of acquisition
     or disposition by the Joint Account is so classified in the Material
     Classification Manual as most recently recommended by the Council of
     Petroleum Accountants Societies (COPAS).

     "First Level Supervisors" shall mean those employees whose primary function
     in Joint Operations is the direct supervision of the Operator's field
     employees and/or contract labor directly employed on the Joint Property in
     the conduct of Joint Operations. For the purpose of this definition, the
     words "employees and /or contract labor" shall not include Technical
     Employees.

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

     "Joint Operations" shall mean activities required to handle operating
     conditions and problems for the exploration, appraisal, development,
     production, protection, maintenance, abandonment, and restoration of the
     Joint Property.

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

<PAGE>

     involving subsea or remote structures, the phrase "on the Joint Property"
     may include a platform, surface production facility, remote facility, or
     floating production storage facility, which is the surface location from
     which Joint Operations are conducted, even if such location is not owned by
     the Joint Account.

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

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

     "Offshore Facilities" shall mean platforms, surface and subsea development
     and production systems, and other 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, all of which are located offshore.

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

     "Parties" shall mean legal entities signatory to the Agreement or their
     successors or assigns to which this Accounting Procedure is attached.

     "Personal Expenses" shall mean reimbursed costs for travel, temporary
     living, relocation, and other expenses of Operator's employees, as well as
     similar expenses incurred by a Non-Operator or any Party's Affiliate for
     personnel assigned to a Project Team.

     "Project Team" shall mean employees of the Parties, Affiliates, or
     contractors assigned to perform work and/or studies as which may be
     proposed and shall require the unanimously approval by the Parties to this
     Agreement.

     "Shore Base Facilities" shall mean onshore support facilities that during
     Joint Operations provide such services to the Joint Property as a receiving
     and transshipment point for Materials; debarkation point for drilling and
     production personnel and services; communication, scheduling and
     dispatching center; and other associated functions benefiting the Joint
     Property.

     "Technical Employees" shall mean personnel having special and specific
     engineering, geoscience, 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.

2.   STATEMENTS AND BILLINGS

<PAGE>

     A.  The Operator shall bill Non-Operators on or before the last day of the
         month for their proportionate share of the Joint Account for the
         preceding month. Such bills shall be accompanied by statements that
         identify the authority for expenditure, lease or facility, and all
         charges and credits summarized by appropriate categories of investment
         and expense. In lieu of detailed descriptions, Controllable Material
         may be summarized by major Material classifications. Intangible
         drilling costs, audit adjustments, and unusual charges and credits
         shall be separately and clearly identified.

     B.  Non-Operators shall bill the Operator, on a monthly basis, in
         accordance with the provisions contained herein, for the salaries,
         wages, payroll burden, and Personal Expenses, if any, of its employees
         assigned to the Project Team. In a like manner, the Non-Operator shall
         bill the Operator for such expenses of the Non-Operator's Affiliate
         employees and/or contractor employees retained by the Non-Operator who
         are assigned to the Project Team. The Operator shall reimburse the
         Non-Operators in accordance with Section I, Paragraph 3.B. For the
         purposes of Paragraphs 3, 4, and 5 of this Section I, the
         Non-Operator's costs shall be considered a Joint Account expense.

3.   ADVANCES AND PAYMENTS BY THE PARTIES

     A.  If gross expenditures for the Joint Account are expected to exceed
         $1,000,000.00 in the next succeeding month's operations, the Operator
         may require the Non-Operators to advance their share of the estimated
         cash outlay for such month's operations. Unless otherwise provided in
         the Agreement, any billing for such advance shall be payable within 15
         days after receipt of the advance request or by the first day of the
         month for which the advance is required, whichever is later. The
         Operator shall adjust each monthly billing to reflect advances received
         from the Non-Operators for such month. If a refund is due, the Operator
         shall apply the excess to subsequent month's billings or advances,
         unless a refund is specifically requested in writing by the
         Non-Operator.

     B.  Except as provided below, each Party shall pay its proportion of all
         bills within 15 days of receipt date. If payment is not made within
         such time, the unpaid balance shall bear interest compounded monthly
         using the U.S. Treasury Bill 13-week discount rate plus 3% in effect on
         the first day of the month for each month that the payment is
         delinquent or the maximum contract rate permitted by the applicable
         usury laws governing the Joint Property, whichever is the lesser, plus
         attorney's fees, court costs, and other costs in connection with the
         collection of unpaid amounts. Interest shall begin accruing on the
         first day of the month in which the payment was due.

     Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

     C.  Payments by Parties for monthly cash advances and billings shall be
         made by Electronic Fund Transfer (EFT) or Automated Clearing House
         (ACH) transaction.

4.   ADJUSTMENTS

     A.  Payment of any such bills shall not prejudice the right of any Party to
         protest or question the correctness thereof; however, all bills and
         statements (including payout status statements) rendered during any
         calendar year shall conclusively be presumed to be true and correct,
         with respect only to expenditures, after 24 months following the end of
         any such calendar year, unless within said period a Party takes
         specific detailed written exception thereto requesting review for
         adjustment.

     B.  All adjustments initiated by the billing Parties except those described
         in (1) through (4) below are limited to the 24-month period following
         the end of the calendar year in which the original charge appeared or
         should have appeared on the billing Party's Joint Account statement or
         payout status statement. Adjustments made beyond the 24-month period
         are limited to the following:

         (1) a physical inventory of Controllable Material as provided for in
             Section V
         (2) an offsetting entry (whether in whole or in part) that is the
             direct result of a specific joint interest audit exception granted
             by the Party relating to another property
         (3) a government/regulatory audit, and
         (4) working interest ownership adjustments

5.   EXPENDITURE AUDITS

     A.  A Non-Operator, upon notice in writing to the Operator and other
         Non-Operators including any non-participating Parties, shall have the
         right to audit the Operator's accounts and records relating to the
         Joint Account for any calendar year within the 24-month period
         following the end of such calendar year; however, conducting an audit
         shall not extend the time for the taking of written exception to and
         the adjustment 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. The
         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

      Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

         year without prior approval of the Operator, except upon the
         resignation or removal of the Operator, and shall be made at the
         expense of those Non-Operators approving such audit. The lead audit
         company's audit report shall be issued within 90 days after completion
         of the audit testing and analysis but no later than 90 days from the
         end of the calendar year in which the audit was commenced; however, the
         90-day time period shall not extend the 24-month requirement for taking
         specific detailed written exception as required in Paragraph 4.A above.
         All claims shall be supported with sufficient documentation. Failure to
         issue the report within the prescribed time or to take specific written
         exception within the 24-month period will preclude the Non-Operator
         from taking exception to any charge billed within the time period
         audited.

         A timely filed audit report or any timely submitted response thereto
         shall suspend the running of any applicable statute of limitations
         regarding claims made in the audit report. While any audit claim is
         being resolved, the applicable statute of limitations will be
         suspended; however, the failure to comply with the deadlines provided
         herein shall cause the statute to commence running again.

     B.  The Operator shall allow or deny all exceptions in writing to an audit
         report within 180 days after receipt of such report. Denied exceptions
         shall be accompanied by a substantive response. Failure to respond to
         an exception with substantive information on denials within the time
         provided will result in the Operator paying interest on that exception,
         if ultimately granted, from the date of the audit report. The interest
         charged shall be calculated in the same manner as used in Section I,
         Paragraph 3.B.

     C.  The lead audit company shall reply to the Operator's response to an
         audit report within 90 days of receipt, and the Operator shall reply to
         the lead audit company's follow-up response within 90 days of receipt.
         If the lead audit company does not provide a substantive response to an
         exception within 90 days, that unresolved audit exception will be
         disallowed. If the Operator does not provide a substantive response to
         lead auditor's follow-up response within 90 days, that unresolved audit
         exception will be allowed and adjustments made to the Joint Account.

     D.  The Operator or any audit participant may call an audit resolution
         meeting for the purpose of resolving audit issues/exceptions that are
         outstanding at least 15 months after the date of the audit report. The
         meeting will require one month's written notice to the Operator and all
         audit participants, a mutually agreed upon time and location, and
         attendance by representatives of the Operator and audit participants
         with authority to resolve such outstanding audit issues. Any Party who
         fails to attend the resolution meeting shall be bound by any resolution
         reached at the meeting. The lead audit company will coordinate the
         responses and

      Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

         positions of the Non-Operators and continue to maintain its traditional
         role throughout the audit resolution process. Attendees will make good
         faith efforts to resolve outstanding issues, and each Party will be
         required to present substantive information supporting its position. An
         audit resolution conference may be held as often as approved to by the
         Parties. Issues that remain unresolved sixty (60) days after an audit
         resolution conference shall be submitted to arbitration in accordance
         with Exhibit "H" (Dispute Resolution Procedure) of the Joint Operating
         Agreement.

     E   This Accounting Procedure contemplates Non-Operators may incur Project
         Team expenditures that are subsequently billed to the Operator and
         charged to the Joint Account pursuant to Section I, Paragraph 2.B.
         Accordingly, such Non-Operators are required to maintain auditable
         records supporting such charges. Regarding such charges, the Operator
         and/or any other Non-Operators are hereby provided the same rights and
         obligations of the Operator as set forth in Section I, Paragraphs 5.A.
         through 5.D., as pertain to the Non-Operators in audit of the Joint
         Account. Conversely in such situation, the Non-Operator being audited
         is hereby provided the same rights and obligations of the Operator as
         set forth in Section I, Paragraphs 5.A. through 5.D.

6.   APPROVAL BY PARTIES

     Where an approval or other agreement is required the Parties shall use the
     voting procedures provided in the Joint Operating Agreement.

                               II. DIRECT CHARGES

The Operator shall charge the Joint Account with the following items:

1.   RENTALS AND ROYALTIES

     Lease rentals and royalties paid by the Operator, on behalf of all Parties,
     for the Joint Operations.

      Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

2.   LABOR

     A.  Salaries and Wages including Incentive Compensation Programs, as set
         forth in COPAS Interpretation 30, for personnel serving the Joint
         Property shall be chargeable in accordance with the following
         provisions.

         (1)  Project Team - If formed by the Parties

              All salaries and wages of employees of the Operator and
              Non-Operator assigned to the Project Team on a full-time basis
              shall be considered a direct cost and shall be charged to the
              Joint Account. Such employees shall include personnel who are
              directly engaged in project management, evaluation, design,
              construction, and installation activities regardless of location.
              Part-time Project Team personnel specifically assigned to the
              Project Team shall be charged to the Joint Account, based on
              actual days worked, only when such time involves at least one
              full-day equivalent per month that is devoted to the project.
              Technical Employees not assigned to the Project Team but working
              under the direction of the Project Team shall be charged to the
              Joint Account based on actual days worked, only when such time
              involves at least one full-day equivalent per month. Contractor
              and Affiliate charges for personnel assigned to the Project Team
              are chargeable pursuant to Section II, Paragraphs 5 and 7.

         (2)  Other Operations--Non-Project Team

              The following salaries and wages shall be charged for employees:

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

              (b) Salaries and wages of the Operator's employees directly
                  employed on Shore Base Facilities or other Offshore Facilities
                  serving the Joint Property if such costs are not charged under
                  Paragraph 6 of this Section II

              (c) Salaries of First Level Supervisors

              (d) Salaries and wages of Technical Employees directly employed on
                  the Joint Property in the conduct of Joint Operations, or on
                  Offshore Facilities serving the Joint Property, if such
                  charges are excluded from the Overhead rates

              (e) Salaries and wages of Technical Employees either temporarily
                  or permanently assigned to and directly employed in the
                  operation of

      Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

              the Joint Property if such charges are excluded from the overhead
              rates

     B.  Cost of holiday, vacation, sickness and disability benefits, and other
         customary allowances paid to personnel to the extent their salaries and
         wages are chargeable to the Joint Account under Paragraph 2.A of this
         Section II, excluding severance payments or other termination
         allowances. Such costs under this Paragraph 2.B 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 2.A
         of this Section II. If percentage assessment is used, the rate shall be
         based on the Operator's or Non-Operators' cost experience, as
         appropriate.

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

     D.  Personal Expenses, other than relocation costs, of personnel whose
         salaries and wages are chargeable to the Joint Account under Paragraph
         2.A of this Section II.

     E.  Relocation costs, consistent with the employer's established policy,
         are chargeable to the extent their salaries and wages are chargeable,
         in accordance with the following:

         (1)  For personnel transferred and assigned full-time to a Project Team
              for a minimum of 12 consecutive months

                 shall be charged to the Joint Account
              X  shall not be charged to the Joint Account
              -

              For those assigned for less than 12 consecutive months shall not
              be chargeable unless agreed to by the Parties.

         (2)  For Operator's field employees and/or First Level Supervisors

              X  shall be charged to the Joint Account
              -
              _  shall be chargeable for the initial staffing upon commencement
                 of Joint Operations for a given platform, facility, or
                 production system
              _  shall be chargeable for First Level Supervisors
              _  shall not be chargeable to the Joint Account

              Notwithstanding the foregoing, relocation costs that result from
              reorganization or merger of a Party shall not be chargeable to the
              Joint Account. Extraordinary relocation costs, such as those
              incurred as a result of transfers from remote locations such as
              Alaska or overseas,

      Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

              shall be approved by the Parties pursuant to the provisions in
              Section I, Paragraph 6.

     F.  Training costs shall be chargeable as specified in COPAS Interpretation
         27 and as provided in Section II, Paragraph 13. This training charge
         shall include the wages, salaries, training course cost, and Personal
         Expenses incurred during the training session for personnel to the
         extent their salaries and wages are chargeable under Paragraph 2.A of
         this Section II. In addition, any third party fees for instructors,
         books, tuition, and training facility costs are chargeable to the
         Joint Account. Operator-developed comparable training shall be charged
         at Operator's cost not to exceed prevailing commercial rates in the
         area.

     G.  Actual cost of established plans for employees' benefits not to exceed
         the employee benefits limitation percentage most recently recommended
         by COPAS to the chargeable salaries and wages.

3.   MATERIAL

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

4.   TRANSPORTATION

     Transportation of Operator's, Non-Operator's, Affiliate's or contractor's
     personnel, 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
         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 the 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 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
         unless agreed to by the Parties.

      Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

     C.  In the application of Paragraphs 4.A. and 4.B. above, the option to
         equalize or charge actual trucking cost is available when the actual
         charge is less than the amount most recently recommended by COPAS,
         excluding accessorial charges, as set forth in COPAS Bulletin 21.

5.   SERVICES

     The cost of contract services, equipment, and utilities used in the conduct
     of Joint Operations and provided by sources other than the Parties, except
     for contract services, equipment, and utilities covered by the Section III
     overhead provisions, Paragraph 7 of this Section II, or excluded under
     Paragraph 9 of this Section II. Notwithstanding anything herein to the
     contrary, the cost of contract personnel assigned to the Project Team are
     directly chargeable to the Joint Account (if excluded from overhead rates).

6.   EQUIPMENT AND FACILITIES FURNISHED BY OPERATOR

     In the absence of a separately negotiated agreement, equipment and
     facilities furnished by the Operator will be charged as follows:

     A.  Equipment and facilities owned by the Operator shall be charged to the
         Joint Account at the average prevailing commercial rate for such
         equipment. If an average commercial rate is used to bill the Joint
         Account, the Operator shall adequately document and support such rate
         and shall periodically review and update the rate and the supporting
         documentation.

     B.  In lieu of charges in Paragraph 6.A. above, or if a prevailing
         commercial rate is not available, equipment and facilities owned by the
         Operator will be charged to the Joint Account at the Operator's actual
         cost. Such costs shall be limited to expenses that would be chargeable
         pursuant to this Section II if such equipment and facilities were
         jointly owned, depreciation using straight line depreciation method,
         and interest on investment (less gross accumulated depreciation) not to
         exceed 10% per annum. In addition, for platforms, subsea production
         systems, and production handling facilities, the rate may include an
         element of the estimated cost of abandonment, reclamation, and
         dismantlement. Depreciation shall not be charged when the equipment and
         facilities investment have been fully depreciated. Charges shall not
         exceed the average prevailing commercial rate, if available.

     C.  When applicable for Operator-owned or leased motor vehicles, the
         Operator shall use rates published by the Petroleum Motor Transport
         Association or such other organization recognized by COPAS as the

     Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

     official source of such rates. When such rates are not available, the
     Operator shall comply with the provisions of Paragraph 6.A. or 6.B. above.

7.   AFFILIATES

     Affiliate Materials, facilities, and services provided for the Joint
     Operations shall be chargeable to the Joint Account as herein provided.

     A.  If any Operator Affiliate provides Materials, facilities, or services
         for operations not under the direction of a Project Team that are
         expected to exceed two hundred fifty thousand dollars ($250,000.00) per
         annum, per Affiliate, or if such expenditures exceeded said amount
         during the preceding 12-month period, such charges to the Joint Account
         for such Materials, facilities or services shall be pursuant to written
         agreement between the Parties.

     B.  If a Non-Operator's Affiliate provides Materials, facilities, or
         services for operations not under the direction of a Project Team,
         charges shall be considered third-party services as provided in
         Paragraph 5 of this Section II.

     C.  An Affiliate of the Operator or Non-Operator working at the request of
         a Project Team shall be chargeable to the Joint Account using the
         methods indicated below. If more than one option is selected below,
         notification of the method to be used shall be required prior to
         commencement of the activity utilizing the Affiliate.

     XX    Fixed Rate Basis

         Affiliate equipment, facilities and services, exclusive of reasonable
         personal expenses, shall be charged on an all inclusive standard rate
         of nine hundred dollars per day ($900/day) for senior consultants,
         seven hundred dollars per day ($700/day) for engineers and six hundred
         dollars per day ($600/day) for technicians. Reasonable personal
         expenses of such senior consultants, engineers and technicians of
         Affiliates providing services for the joint account, for which expenses
         such senior consultants, engineers and technicians of Affiliates are
         reimbursed under the Operator's usual practice, shall be charged to the
         Joint Account in addition to the standard rate. The rates shall be
         subject to annual adjustment as of the first day of April each year
         beginning in 2002. The adjustment shall be computed by multiplying the
         rate currently in use by the percentage increase or decrease
         recommended by COPAS each year. The adjusted rate shall be the rates
         currently in use, plus or minus the computed adjustment. Any Party may
         request adjustments to Affiliate costs or rates at any time it deems
         appropriate but no more than once per year, and

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         such adjustments shall require the approval of the Parties. The Parties
         shall respond to proposals for revised Affiliate costs or rates within
         thirty (30) days of receipt of the request. Approval of proposed
         Affiliate costs or rates shall not be unreasonably withheld by the
         Parties.

     D.  Each Party will make a good faith effort to obtain sufficient
         evidentiary supporting documentation from its Affiliate and shall
         maintain auditable records to support all Affiliate charges to the
         Joint Account. Unless otherwise provided below, such documentation
         shall be subject to audit in accordance with Section I, Paragraph 5.
         Since Affiliate charges are based on rates established using a fixed
         rate basis, the audit of the Affiliate charges shall be limited to
         verification that the rates charged were as agreed to by the Parties,
         and that the units or basis to which the rates were applied are
         correct.

8.   DAMAGES AND LOSSES TO JOINT PROPERTY

     All costs or expenses necessary for the repair or replacement of Joint
     Property resulting because of damages or losses incurred, except to the
     extent such damages or losses result from a Party's gross negligence or
     willful misconduct, in which case such Party shall be solely liable.

9.   LEGAL EXPENSE

     The Operator may not charge for services of the Operator's legal staff or
     fees and expenses of outside attorneys unless approved by the Parties in
     writing, except that title examinations and curative work shall be
     chargeable, unless otherwise provided for in the Agreement. Other types of
     legal expense, other than attorney fees, such as recording fees and
     handling, settling, or otherwise discharging litigation, claims, and liens
     necessary to protect or recover the Joint Property shall be chargeable.

10.  TAXES AND PERMITS

     All taxes and permits of every kind and nature, assessed or levied upon or
     in connection with the Joint Property, or the production therefrom, and
     which have been paid by the Operator for the benefit of the Parties,
     including penalties and interest, except to the extent the penalties and
     interest result from the Operator's gross negligence or willful misconduct

     If ad valorem taxes paid by the Operator are based in whole or in part upon
     separate valuations of each Party's working interest, then notwithstanding
     any

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     contrary provisions, the charges to Parties will be made 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 Joint Operations
     for the protection of the Parties. If Joint Operations are conducted at
     locations where the Operator acts as self-insurer in regard to its workers'
     compensation and employer's liability insurance obligation, the Operator
     shall charge the Joint Account manual rates for the risk assumed in its
     self-insurance program as regulated by the jurisdiction governing the Joint
     Property. Such rates shall be adjusted for offshore operations by the U.S.
     Longshoreman and Harbor Workers (USL&H) or Jones Act surcharge, as
     appropriate.

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 offices directly
     responsible for field operations. In the event communication systems
     serving the Joint Property are Operator or Affiliate-owned, charges to the
     Joint Account shall be made as provided in Section II, Paragraph 6 or 7 as
     applicable.

13.  ECOLOGICAL, ENVIRONMENTAL, AND SAFETY

     A.  Ecological and Environmental costs incurred

         XX  for the benefit of the Joint Property
         --
         __  on the Joint Property

         resulting from laws, rules, regulations, or orders 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 Minerals Management Service or other regulatory
         authority. Also, costs to provide or have available pollution
         containment and removal equipment plus actual costs of control and
         cleanup and resulting responsibilities of oil and other spills as well
         as discharges from permitted outfalls as required by applicable laws
         and regulations are chargeable. Ecological and environmental costs
         incurred by the Operator as deemed by the Operator to be appropriate
         for prudent operations are also chargeable to the extent such costs
         directly benefit Joint Operations.

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     B.  Safety costs incurred

         XX  for the benefit of the Joint Property
         --
         __  on the Joint Property

         to conduct and/or implement safe operational practices/guidelines as a
         result of laws, rules, regulations, or orders or as recommended for
         voluntary compliance. Examples are the requirements mandated by the
         Occupational Safety and Hazards Act (OSHA), Safety and Environmental
         Management Program (SEMP), Process Safety Management (PSM), and/or
         requirements which may be mandated/recommended by similar programs or
         by other current or successor regulatory agencies. Safety costs
         incurred by the Operator as deemed by the Operator to be appropriate
         for prudent operations are also chargeable to the extent such costs
         directly benefit Joint Operations.

     C.  Environmental, ecological, and safety training costs for personnel
         whose time would otherwise be chargeable under Paragraph 13.A or B
         above, regardless of whether training is mandated by statute or
         regulatory agency, is chargeable to the Joint Account.

     D.  Safety and other team accomplishment awards for personnel chargeable to
         the Joint Account

         XX  shall be chargeable to the Joint Account
         --
         __  shall not be chargeable to the Joint Account

         In the event of a conflict between the provisions of this Paragraph 13
         and Section III, Paragraphs i. and ii., the following election shall
         prevail:

         XX  Section II, Paragraph 13
         --
         __  Section III, Paragraphs i. and ii.

14.  ABANDONMENT AND RECLAMATION

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

                                  III. OVERHEAD

     As compensation for administrative, supervision, office services and
     warehousing costs, or other costs not specifically identified as being
     chargeable to the Joint Account pursuant to Section II of this Accounting

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     Procedure, the 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 offices and salaries or wages plus applicable burdens
     and expenses of personnel, except those costs identified as directly
     chargeable under Section II. The cost and expense of services from outside
     sources in connection with matters of taxation, traffic, purchasing,
     accounting, administrative or clerical duties, or matters before or
     involving governmental agencies shall be considered as included in the
     overhead rates provided for in this Section III unless directly chargeable
     under Section II or such costs are agreed to by the Parties as a direct
     charge to the Joint Account. Costs of functions which solely benefit the
     Operator are not recoverable from the Joint Account.

         i.   Except as otherwise provided in Paragraphs 1 and 3 of this Section
              III, the salaries, wages, related payroll burden 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 in the conduct of Joint
              Operations

                  __  shall be covered by the overhead rates
                  XX  shall not be covered by the overhead rates
                  --

         ii.  Except as otherwise provided in Paragraphs 1 and 3 of this Section
              III, the salaries, wages, related payroll burden and Personal
              Expenses of Technical Employees, and/or costs of professional
              consultant services and contract services of technical personnel
              either temporarily or permanently assigned to and directly
              employed in the operation of the Joint Property

                  XX  shall be covered by the overhead rates
                  --
                  __  shall not be covered by the overhead rates

1.   OVERHEAD--PROJECT TEAM

     To compensate the Parties for overhead costs incurred to support a Project
     Team, the Parties shall charge Project Team Overhead. Such overhead costs
     may include, but shall not be limited to the following: all personnel not
     directly chargeable to the Project Team, all computer equipment and
     supplies, office space, utilities, office furniture and equipment, cleaning
     and general housekeeping, office supplies, conference room facilities,
     facsimile machines, copy machines, telephones, and other general costs of
     supporting the Project Team.:

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       The overhead recovery shall be made pursuant to the following:

       X  The Operator shall charge a rate of two and one half percent (2.5%) of
       -
          the total cost of the Project Team.

2.     OVERHEAD--DEVELOPMENT AND OPERATING

       As compensation for overhead in connection with drilling and producing
       operations not covered by other provisions of this Section III, Operator
       shall charge on either

       __  Fixed Rate Basis, Paragraph 2.A.
       X   Percentage Basis, Paragraph 2.B.
       -

       A.  OVERHEAD--FIXED RATE BASIS

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

               Drilling Well Rate per month $___________________________
               (Prorated for less than a full month)

               Producing Well Rate per month $___________________________

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

               (a) Charges for onshore drilling wells shall begin on spud date
                   and terminate on the date the drilling or completion
                   equipment is released, whichever occurs later. Charges for
                   offshore drilling wells shall begin on the date the 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. No
                   charge shall be made during suspension of drilling or
                   completion operations for 15 or more consecutive calendar
                   days.

               (b) Charges for wells undergoing any type of workover,
                   recompletion, or abandonment for a period of five 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, and commence through date of rig or other unit
                   release, except that no charges shall be made during
                   suspension of operations for 15 or more consecutive calendar
                   days.

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

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       (a) An active well completion for any portion of the month shall qualify
           for a one-well charge for the entire month. An active completion is
           one that is

           [1] produced
           [2] injected into for recovery or disposal
           [3] used to obtain water supply to support production operations

       (b) Each active completion in a multi-completed well shall qualify for a
           one-well charge providing each completion is considered a separate
           well by the governing regulatory authority.

       (c) 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
           the drilling well rate applies.

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

       (e) All wells not meeting the criteria set forth in this Paragraph
           2.A.(3) (a), (b), (c), or (d) shall not qualify for a producing
           overhead charge.

   (4) The well rates shall be adjusted on the first day of the production month
       of April each year following the effective date of the Agreement to which
       this Accounting Procedure is attached or the effective date of any
       overhead rate amendment. The adjusted rates shall be the rates on the
       effective date of the overhead rate, increased or decreased by the COPAS
       percentage wage index adjustment for each year from such effective date
       to the date of the adjustment.

B. OVERHEAD--PERCENTAGE BASIS

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

       (a) Development rate two and one half Percent (2.5%) of the cost of
           development of the Joint Property exclusive of costs provided under
           Section II, Paragraph 9, all salvage credits, and all Project Team
           expenses and overhead.
       (b) Operating rate thirteen Percent (13%) of the cost of operating the
           Joint Property exclusive of costs provided under Section II,
           Paragraphs 1 and 9; all salvage credits; the value of substances
           purchased for enhanced recovery; all property and ad valorem

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           taxes and any other taxes and assessments that 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:

       (a) Development rate shall be applied to all costs in connection with

           [1] drilling, redrilling, plugging back, sidetracking, or
               deepening of a well
           [2] workover operations requiring a period of 15 consecutive work
               days or more on a well
           [3] preliminary expenditures necessary in preparation for drilling
           [4] expenditures incurred in abandoning when the well is not
               completed as a producer
           [5] original construction or installation of fixed assets, expansion
               of fixed assets, and any other project clearly discernible as a
               fixed asset except Major Construction as defined in Section III,
               Paragraph 3 or any Project Team expenses and overhead.

       (b) Operating rate shall be applied to all other costs in connection with
           Joint Operations except those subject to Section III Paragraphs 1 and
           3.

3. OVERHEAD--MAJOR CONSTRUCTION AND CATASTROPHE

   Major Construction is defined as any project requiring an AFE, under the
   terms of the Agreement to which this Accounting Procedure is attached, for
   the construction and installation of fixed assets; the expansion of fixed
   assets; or in the abandonment of fixed assets and any associated reclamation
   required for the exploration, development, and operation of the Joint
   Property.

   Catastrophe is defined as a calamitous event bringing damage, loss, or
   destruction resulting from a single occurrence requiring an AFE to restore
   the Joint Property to the equivalent condition that existed prior to the
   event causing the damage.

   To compensate the Operator for overhead costs incurred in connection with
   Major Construction and Catastrophes, the Operator shall charge the Joint
   Account for overhead based on the following rates:

   A. If the Parties form a Project Team, the overhead assessment shall be two
      percent (2 %) of total costs for the engineering, design and drafting
      costs associated with a Major Construction or Catastrophe project AFE,
      excluding the costs of the Project Team. Third Party costs for the
      engineering, design and drafting costs associated with a Major

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       Construction or Catastrophe project AFE shall be treated as direct charge
       under Section II, Paragraph 5.

       B. If the Parties do not form a Project Team , the overhead assessment
       shall be five percent (5%) of total costs for the engineering, design and
       drafting costs associated with a Major Construction or Catastrophe
       project AFE.

       For calculating Major Construction overhead, the cost of drilling and
       workover wells shall be excluded. For calculating Catastrophe overhead
       the cost of drilling relief wells, substitute wells, or conducting other
       well operations resulting from the catastrophic event shall be included.
       Expenditures to which these rates apply shall not be reduced by insurance
       recoveries. Overhead assessed under the Major Construction and
       Catastrophe provisions shall be in lieu of all other overhead provisions.
       In the event of any conflict between the provisions of this paragraph and
       the provisions of Section II, Paragraphs 2 and 5, the provisions of this
       paragraph shall govern.

4. AMENDMENT OF RATES

   The Overhead rates provided for in this Section III may be amended from time
   to time if, in practice, the rates are found to be insufficient or excessive
   and shall require the unanimous consent of the Parties.

                     IV. MATERIAL PURCHASES, TRANSFERS, AND
                                  DISPOSITIONS

The Operator is responsible for Joint Account Material and shall make proper and
timely charges and credits for direct purchases, transfers, and dispositions.
The Operator normally provides all Material for use in the conduct of Joint
Operations but does not warrant the Material furnished. Except as otherwise
provided in Section IV, Paragraph 4.A., Material may be supplied by
Non-Operators at the Operator's option.

1. DIRECT PURCHASES

   Direct purchases shall be charged to the Joint Account at the price paid by
   the Operator after deduction of all discounts received. A direct purchase is
   determined to occur when an agreement is made between an Operator and a third
   party for the acquisition of Materials for a specific well site or location.
   Material provided by the Operator under "vendor stocking programs," where

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   the initial use is for a Joint Property and title of the Material does not
   pass from the vendor until usage, is considered a direct purchase. If
   Material is found to be defective or is returned to the vendor for any other
   reason, credit shall be passed to the Joint Account when adjustments have
   been received by the Operator from the manufacturer, distributor, or agent.

2. TRANSFERS

   A transfer is determined to occur when the Operator furnishes Material from
   its storage facility or from another operated property. Additionally, the
   Operator has assumed liability for the storage costs and changes in value and
   has previously secured and held title to the transferred Material. Similarly,
   the removal of Material from a Joint Property to the Operator's facility or
   to another operated property is also considered a transfer. Material that is
   moved from the Joint Property to a temporary storage location pending
   disposition may remain charged to the Joint Account and is not considered a
   transfer.

   A. PRICING

      The value of Material transferred to/from the Joint Property should
      generally reflect the market value on the date of transfer. Transfers of
      new Material will be priced using one of the following new Material bases:

      (1) Published prices in effect on date of movement as adjusted by the
          appropriate COPAS Historical Price Multiplier (HPM) or prices provided
          by the COPAS Computerized Equipment Pricing System (CEPS)

          The HPMs and the associated date of published price to which they
          should be applied will be published by COPAS periodically.

          (a) For oil country tubulars and line pipe, the published price shall
              be based upon eastern mill (Houston for special end) carload base
              prices effective as of date of movement, plus transportation cost
              as defined in Section IV, Paragraph 2.B.

          (b) For other Material, the published price shall be the published
              list price in effect at date of movement, as listed by a supply
              store nearest the Joint Property (where like Material is normally
              available) or point of manufacture, plus transportation costs as
              defined in Section IV, Paragraph 2.B.

      (2) A price quotation that reflects a current realistic acquisition cost
          may be obtained from a supplier/manufacturer.

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          (3) Historical purchase price may be used, providing it reflects a
              current realistic acquisition cost on date of movement. Sufficient
              documentation should be available to Non-Operators for purposes of
              verifying Material transfer valuation.

          (4) As agreed to by the Parties

          When higher than specification grade or size tubulars from the
          Operator's inventory are used on the Joint Property in the conduct of
          Joint Operations, the Operator shall charge the Joint Account at the
          equivalent price for well design specification tubulars.

      B.  FREIGHT

      Transportation costs should be added to the Material transfer price based
      on one of the following:

          (1) Transportation costs for oil country tubulars and line pipe shall
              be calculated using the distance from eastern mill to the railway
              receiving point nearest the Joint Property based on the carload
              weight basis as recommended by COPAS in Bulletin 21 and COPAS
              Interpretations in effect at the time of the transfer.

          (2) Transportation costs for special mill items shall be calculated
              from that mill's shipping point to the railway receiving point
              nearest the Joint Property. For transportation costs from other
              than eastern mills, the 30,000-pound Specialized Motor Carriers
              interstate truck rate shall be used. Transportation costs for
              macaroni tubing shall be calculated based on the Specialized Motor
              Carriers rate per weight of tubing transferred to the railway
              receiving point nearest the Joint Property.

          (3) Transportation costs for special end tubular goods shall be
              calculated using the 30,000-pound Specialized Motor Carriers
              interstate truck rate from Houston, Texas to the railway receiving
              point nearest the Joint Property.

          (4) Transportation costs for Material other than that described in
              Section IV, Paragraphs 2.B (1) through (3), if applicable, shall
              be calculated from the supply store or point of manufacture,
              whichever is appropriate, to the railway receiving point nearest
              the Joint Property.

      C.  CONDITION

          (1) Condition "A"--New and unused Material in sound and serviceable
              condition shall be charged at 100% of the price as determined in
              Section IV, Paragraphs 2.A. and 2.B. Material transferred from the
              Joint Property that was not placed in service shall be credited as
              charged without gain or loss. Any unused Material that was charged
              to the Joint Account through a direct purchase will be credited to
              the Joint

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              Account at the original cost paid less restocking charges. All
              refurbishing costs required or necessary to return the Material to
              original condition or to correct handling or transportation
              damages and other related costs will be borne by the divesting
              property. The Joint Account is responsible for Material
              preparation, handling, and transportation costs for new and unused
              Material charged to the Joint Property either through a direct
              purchase or transfer. Any preparation costs incurred, including
              any internal or external coating and wrapping, will be credited on
              new Material provided these services were not repeated for such
              Material for the receiving property.

          (2) Condition "B"--Used Material in sound and serviceable condition
              and suitable for reuse without reconditioning shall be priced by
              multiplying the price determined in Section IV, Paragraphs 2.A.
              and 2.B. by

              XX  75%
              --
              __  the condition percentage most recently recommended by COPAS

              All refurbishing cost or reconditioning required to return the
              Material to Condition "B" or to correct handling or transportation
              damages and other related costs will be borne by the divesting
              property.

              If the Material was originally charged to the Joint Account as
              used Material and placed in service for the Joint Property, the
              Material will be credited at the price determined in Section IV,
              Paragraphs 2.A. and 2.B. multiplied by

              XX  65%
              --
              __  the condition percentage most recently recommended by COPAS

              Used Material transferred from the Joint Property that was not
              placed in service on the property shall be credited as charged
              without gain or loss.

          (3) Condition "C"--Material that is not in sound and serviceable
              condition and not suitable for its original function until after
              reconditioning shall be priced by multiplying the price determined
              in Section IV, Paragraphs 2.A. and 2.B. by

              XX  50%
              --
              __  the condition percentage most recently recommended by COPAS

              The cost of reconditioning shall be charged to the receiving
              property to the extent Condition "C" value, plus cost of
              reconditioning, does not exceed Condition "B" value.

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         (4)  Condition "D"--Other Material that is no longer suitable for its
              original purpose but useable for some other purpose is considered
              Condition "D" Material. Included under Condition "D" is also
              obsolete items or Material that does not meet original
              specifications but still has value and can be used in other
              services as a substitute for items with different specifications.
              Due to the condition or value of other used and obsolete items, it
              is not possible to price these items under Section IV, Paragraph
              2.A. The price used should result in the Joint Account being
              charged or credited with the value of the service rendered or use
              of the Material. In some instances, it may be necessary or
              desirable to have the Material specially priced as agreed to by
              the Parties.

         (5)  Condition "E"--Junk shall be priced at prevailing scrap value
              prices.

     D.  OTHER PRICING PROVISIONS

         (1)  Preparation Costs

              Costs incurred by the Operator in making Material serviceable
              including inspection, third party surveillance services, and other
              similar services will be charged to the Joint Account at prices
              which reflect the Operator's actual costs of the services.
              Documentation must be retained to support the cost of service. New
              coating and/or wrapping may be charged in accordance with Section
              IV, Paragraph 2.A.

         (2)  Loading and Unloading Costs

              Loading and unloading costs related to the movement of the
              Material to the Joint Property shall be charged at the rate most
              recently recommended by COPAS in accordance with the methods
              specified in COPAS Bulletin 21.

3.   DISPOSITION OF SURPLUS

     Surplus Material is that Material, whether new or used, that is no longer
     required for Joint Operations. The Operator may purchase, but shall be
     under no obligation to purchase, the interest of the Non-Operator in
     surplus Material.

     Dispositions for the purpose of this procedure are considered to be the
     relinquishment of title of the Material from the Joint Property to either a
     third party, a Non-Operator, or to the Operator. To avoid the accumulation
     of surplus Materials, the Operator should make good faith efforts to
     dispose of surplus within 12 months through buy/sale agreements, trade,
     sale to a third party, division in-kind, or other dispositions as agreed to
     by the Parties.

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     The Operator may, through a sale to an unrelated third party or entity,
     dispose of surplus Material having a gross sale value that is less than or
     equal to the Operator's expenditure limit as set forth in the Agreement to
     which this Accounting Procedure is attached without the prior approval of
     the Non-Operator. If the gross sale value exceeds the Agreement expenditure
     limit, the disposal must be agreed to by the Parties owning such Materials.

     The Operator may dispose of Condition "D" and "E" Material under procedures
     normally utilized by the Operator without prior approval.

4.   SPECIAL PRICING PROVISIONS

     A.  PREMIUM PRICING

         Whenever Material is not readily replaceable due to national
         emergencies, strikes, or other unusual causes over which the Operator
         has no control, the Operator may charge the Joint Account for the
         required Material at the Operator's actual cost incurred in providing
         such Material, in making it suitable for use, and in moving it to the
         Joint Property provided notice in writing is furnished to Non-Operators
         of the proposed charge prior to use and to billing Non-Operators for
         such Material. During premium pricing periods, each Non-Operator shall
         have the right to furnish in-kind all or part of its share of such
         Material suitable for use and acceptable to the Operator by so electing
         and notifying the Operator within 10 days after receiving notice from
         the Operator.

     B.  SHOP-MADE ITEMS

         Shop-made items shall be priced using the value of the Material used to
         construct the item plus the cost of labor to fabricate the item. If the
         Material is from the Operator's scrap or junk account, the Material
         shall be priced at either 25% of the current price as determined in
         Section IV, Paragraph 2.A. or scrap value, whichever is higher, plus
         the cost of labor to fabricate the item.

     C.  MILL REJECTS

         Mill rejects purchased as "limited service" casing or tubing shall be
         priced at 80% of K-55/J-55 price as determined in Section IV,
         Paragraphs 2.A. and 2.B. Line pipe converted to casing or tubing with
         casing or tubing couplings attached shall be priced as K-55/J-55 casing
         or tubing at the nearest size and weight.

         V. INVENTORIES OF CONTROLLABLE MATERIAL

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The Operator shall maintain records of Controllable Material charged to the
Joint Account as defined in the most recent COPAS Material Classification
Manual, with sufficient detail to perform the physical inventories requested
unless directed otherwise by the Non-Operators.

Adjustments to the Joint Account by the Operator resulting from a physical
inventory of jointly owned Controllable Material shall be made within six months
following the taking of the inventory or receipt of Non-Operator inventory.
Charges and credits for overages or shortages will be valued for the Joint
Account based on the Condition "B" prices in effect on the date of physical
inventory as determined in accordance with Section IV, Paragraph 2.A. and 2.B.
unless the inventorying Parties can prove another Material condition applies.

1.   DIRECTED INVENTORIES

     With an interval of not less than five years, physical inventories shall be
     performed by the Operator upon written request of a majority in working
     interests of the Non-Operators.

     Expenses of directed inventories will be borne by the Joint Account and may
     include the following:

     A.  Audit per diem rate for each inventory person in accordance with the
         auditor rates recommended by COPAS at the time the inventory is
         conducted.

         The per diem should also be applied to a reasonable number of days for
         pre-inventory work and for report preparation. The amount of time
         required for this additional work may vary from inventory to inventory.

     B.  Actual travel including Operator-provided transportation and Personal
         Expenses for the inventory team.

     C.  Reasonable charges for report typing and processing.

         The Operator is expected to exercise judgment in keeping expenses
         within reasonable limits. Unless otherwise agreed, costs associated
         with any post-report follow-up work in settling the inventory will be
         absorbed by the Party incurring such costs. Any anticipated
         disproportionate costs should be discussed and agreed upon prior to
         commencement of the inventory.

         When directed inventories are performed, all Parties shall be governed
         by the results of such inventory.

     Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

2.   NON-DIRECTED INVENTORIES

     A.  OPERATOR INVENTORIES

         Periodic physical inventories that are not requested by the
         Non-Operator may be performed by the Operator at the Operator's
         discretion. The expenses of conducting such Operator inventories shall
         not be charged to the Joint Account.

     B.  NON-OPERATOR INVENTORIES

         Any Non-Operators may conduct a physical inventory at reasonable times
         at their sole cost and risk with prior notification to the Operator of
         at least 90 days. Non-Operator inventory findings shall be furnished to
         the Operator in writing within 90 days of completing the inventory
         field work.

     C.  OTHER INVENTORIES

         Other inventories may be taken whenever there is any sale or change of
         interest. When possible, the selling Party shall notify all other
         owners at least 30 days prior to the anticipated closing date. When
         there is a change in Operator of the Joint Property, an inventory by
         the former and new Operator shall be taken. The expenses of conducting
         other inventories shall be charged to the Joint Account in accordance
         with Section V, Paragraph 1.

     Copyright (C) 1998 by the Council of Petroleum Accountants Societies.

<PAGE>

                                   EXHIBIT "D"

   Attached to and made a part of that certain Joint Operating Agreement dated
 March 1, 2002, between BP Exploration and Production Inc. and EEX Corporation.

                      GAS BALANCING AGREEMENT ("AGREEMENT")

1.   DEFINITIONS: The following definitions shall apply to this Agreement:

     1.01   "Arms Length Agreement" shall mean any gas sales agreement with an
            unaffiliated purchaser or any gas sales agreement with an affiliated
            purchaser where the sales price represents market value in the
            Balancing Area.

     1.02   "Balancing Area" shall mean all of the acreage and depths subject to
            the Operating Agreement.

     1.03   "Full Share of Current Production" shall mean the Percentage
            Interest of each Party in the Gas actually produced from the
            Balancing Area during each month.

     1.04   "Gas" shall mean all hydrocarbons produced or producible from the
            Balancing Area, whether from a well classified as an oil well or gas
            well by the regulatory agency having jurisdiction in such matters,
            which are or may be made available for sale or separate disposition
            by the Parties, excluding oil, condensate and other liquids
            recovered by field equipment operated for the joint account. "Gas"
            does not include gas used in joint operations, such as for fuel,
            recycling or reinjection, or which is vented or lost prior to its
            sale or delivery from the Balancing Area.

     1.05   "Makeup Gas" shall mean any Gas taken by an Underproduced Party from
            the Balancing Area in excess of its Full Share of Current
            Production, whether pursuant to Section 3.3 or Section 4.1 hereof.

     1.06   "Mcf" shall mean one thousand cubic feet. A cubic foot of Gas shall
            mean

JOA                                  Page 1                          Exhibit "D"
March 1, 2002

<PAGE>

            the volume of gas contained in one cubic foot of space at sixty
            degrees Fahrenheit, 14.73 pounds per square inch absolute (PSIA) and
            having a specific gravity of 1.00.

     1.07   "MMBtu" shall mean one million British Thermal Units. A British
            Thermal Unit shall mean the quantity of heat required to raise one
            pound avoirdupois of pure water from 58.5 degrees Fahrenheit to 59.5
            degrees Fahrenheit at a constant pressure of 14.73 pounds per square
            inch absolute.

     1.08   "Operator" shall mean the individual or entity designated under the
            terms of the Operating Agreement or, in the event this Agreement is
            not employed in connection with an operating agreement, the
            individual or entity designated as the operator of the well(s)
            located in the Balancing Area.

     1.09   "Overproduced Party" shall mean any Party having taken a greater
            quantity of Gas from the Balancing Area than the Percentage Interest
            of such Party in the cumulative quantity of all Gas produced from
            the Balancing Area.

     1.10   "Overproduction" shall mean the cumulative quantity of Gas taken by
            a Party in excess of its Percentage Interest in the cumulative
            quantity of Gas produced from the Balancing Area.

     1.11   "Party" shall mean those individuals or entities subject to this
            Agreement, and their respective heirs, successors, transferees and
            assigns.

     1.12   "Percentage Interest" shall mean the percentage or decimal interest
            of each Party in the Gas produced from the Balancing Area pursuant
            to the Operating Agreement covering the Balancing Area.

     1.13   "Royalty" shall mean payments on production of Gas from the
            balancing Area to all owners of royalties, overriding royalties,
            production payments or similar interests.

JOA                                  Page 2                          Exhibit "D"
March 1, 2002

<PAGE>

         1.14     "Underproduced Party" shall mean any Party having taken a
                  lesser quantity of Gas from the Balancing Area than the
                  Percentage Interest of such Party in the cumulative quantity
                  of all Gas produced from the Balancing Area.

         1.15     "Underproduction" shall mean the deficiency between the
                  cumulative quantity of Gas taken by a Party and its Percentage
                  Interest in the cumulative quantity of all Gas produced from
                  the Balancing Area.

         1.16     "Winter Period" shall mean the months October, November and
                  December in one calendar year and the month of January,
                  February and March in the succeeding calendar year.

2.       BALANCING AREA

         2.1      If this Agreement covers more than one Balancing Area, it
                  shall be applied as if each Balancing Area were covered by
                  separate but identical agreements. All balancing hereunder
                  shall be on the basis of Gas taken from the Balancing Area
                  measured in MMBtus.

         2.2      In the event that all or part of the Gas deliverable from a
                  Balancing Area is or becomes subject to one or more maximum
                  lawful prices, any Gas not subject to price controls shall be
                  considered as produced from a single Balancing Area and Gas
                  subject to each maximum lawful price category shall be
                  considered produced from a separate Balancing Area.

3.       RIGHT OF PARTIES TO TAKE GAS

         3.1      Each Party desiring to take Gas will notify the Operator of
                  the volumes nominated, the name of the transporting pipeline
                  and the pipeline contract number (if available) and meter
                  station relating to such delivery, sufficiently in advance for
                  the Operator, acting with reasonable diligence, to meet all
                  nomination and other requirements. Operator is authorized to
                  deliver the volumes so nominated and confirmed (if
                  confirmation is

JOA                                  Page 3                          Exhibit "D"
March 1, 2002

<PAGE>

                  required) to the transporting pipeline in accordance with the
                  terms of this Agreement.

         3.2      Each Party shall make a reasonable, good faith effort to take
                  its Full Share of Current Production each month to the extent
                  that such production is required to maintain leases in effect,
                  to protect the producing capacity of a well or reservoir, to
                  preserve correlative rights, or to maintain oil production.

         3.3      When a Party fails for any reason to take its Full Share of
                  Current Production (as such Share may be reduced by the right
                  of the other Parties to make up for Underproduction as
                  provided herein), the other Parties shall be entitled to take
                  any Gas which such Party fails to take. To the extent
                  practicable, such Gas shall be made available initially to
                  each Underproduced Party in the proportion that its Percentage
                  Interest in the Balancing Area bears to the total Percentage
                  Interest of all Underproduced Parties desiring to take such
                  Gas. If all such Gas is not taken by the Underproduced
                  Parties, the portion not taken shall then be made available to
                  the other Parties in the proportion that their respective
                  Percentage Interest in the Balancing Area bears to the total
                  Percentage Interest of such Parties.

         3.4      All Gas taken by a Party in accordance with the provisions of
                  this Agreement, regardless of whether such Party is
                  underproduced or overproduced, shall be regarded as Gas taken
                  for its own account with title thereto being in such taking
                  Party.

         3.5      Notwithstanding the provisions of Section 3.3 hereof, no
                  Overproduced Party shall be entitled in any month to take any
                  Gas in excess of three hundred percent (300%) of its
                  Percentage Interest of the Balancing Area's then current
                  Maximum Monthly Availability; provided, however, that this
                  limitation shall not apply to the extent that it would
                  preclude production that is required to maintain leases in
                  effect, to protect the producing capacity of a well or
                  reservoir, to preserve correlative rights, or to maintain oil
                  production. "Maximum Monthly Availability" shall mean

JOA                                  Page 4                          Exhibit "D"
March 1, 2002

<PAGE>

                  the maximum average monthly rate of production at which Gas
                  can be delivered from the Balancing Area, as determined by the
                  Operator, considering the maximum efficient well rate for each
                  well within the Balancing Area, the maximum allowable(s) set
                  by the appropriate regulatory agency, mode of operation,
                  production facility capabilities and pipeline pressures.

         3.6      In the event that a Party fails to make arrangements to take
                  its Full Share of Current Production required to be produced
                  to maintain leases in effect, to protect the producing
                  capacity of a well or reservoir, to preserve correlative
                  rights, or to maintain oil production, the Operator may sell
                  any part of such Party's full share of Current Production that
                  such Party fails to take for the account of such Party and
                  render to such Party, on a current basis, the full proceeds of
                  the sale less any reasonable marketing, compression, treating,
                  gathering or transportation costs incurred directly in
                  connection with the sale of such Full Share of Current
                  Production. In making the sale contemplated herein, the
                  Operator shall be obligated only to obtain such price and
                  conditions for the sale as are reasonable under the
                  circumstances and shall not be obligated to share any of its
                  markets. Any such sale by Operator under the terms hereof
                  shall be only for such reasonable periods of time as are
                  consistent with the minimum needs of the industry under the
                  particular circumstances, but in no event for a period in
                  excess of one year. Notwithstanding the provisions of Article
                  3.4 hereof, Gas sold by Operator for a Party under the
                  provisions hereof shall be deemed to be Gas taken for the
                  account of such Party.

 4.      IN-KIND BALANCING

         4.1      Effective the first day of any calendar month following at
                  least thirty (30) days' prior written notice to the Operator,
                  any Underproduced Party may begin taking, in addition to its
                  Full Share of Current Production and any Makeup Gas taken
                  pursuant to Section 3.3 of this Agreement, a share of current
                  production determined by multiplying fifty percent (50%) of
                  the Full Shares of Current Production of all Overproduced
                  Parties by a fraction, the numerator of which is the
                  Percentage Interest of such

JOA                                  Page 5                        Exhibit "D"
March 1, 2002

<PAGE>

                  Underproduced Party and the denominator of which is the total
                  of the Percentage Interests of all Underproduced Parties
                  desiring to take Makeup Gas. In no event will an Overproduced
                  Party be required to provide more than fifty percent (50%) of
                  its Full Share of Current Production for Makeup Gas. The
                  Operator will promptly notify all Overproduced Parties of the
                  election of an Underproduced Party to begin taking Makeup Gas.

         4.2      Notwithstanding the provisions of Section 4.1, no Overproduced
                  Party will be required to provide more than twenty-five
                  percent (25%) of its Full Share of Current Production for
                  Makeup Gas during the Winter Period.

         4.3      Notwithstanding any other provision of this Agreement, at such
                  time and for so long as Operator, or (insofar as concerns
                  production by the Operator) any Underproduced Party,
                  determines in good faith that an Overproduced Party has
                  produced all of its share of the ultimately recoverable
                  reserves in the Balancing Area, such Overproduced Party may be
                  required to make available for Makeup Gas, upon the demand of
                  the Operator or any Underproduced Party, up to one hundred
                  percent (100%) of such Overproduced Party's Full Share of
                  Current Production.

 5.      STATEMENT OF GAS BALANCES

         5.1      The Operator will maintain appropriate accounting on a monthly
                  and cumulative basis of the volumes of Gas that each Party is
                  entitled to receive and the volumes of Gas actually taken or
                  sold for each Party's account. Within forty-five (45) days
                  after the month of production, the Operator will furnish a
                  statement for such month showing (1) each Party's Full Share
                  of Current Production, (2) the total volume of Gas actually
                  taken or sold for each Party's account, (3) the difference
                  between the volume taken by each and that Party's Full Share
                  of Current Production, (4) the Overproduction or
                  Underproduction of each Party, and (5) other data as
                  recommended by the provisions of the Council of Petroleum
                  Accountants Societies Bulletin No. 24, as amended or
                  supplemented

JOA                                  Page 6                          Exhibit "D"
March 1, 2002

<PAGE>

                  hereafter. Each Party taking Gas will promptly provide to the
                  Operator any data required by the Operator for preparation of
                  the statements required hereunder.

         5.2      If any Party fails to provide the data required herein for
                  four (4) consecutive production months, the Operator, or where
                  the Operator has failed to provide data, another Party, may
                  audit the production and Gas sales and transportation volumes
                  of the non-reporting Party to provide the required data. Such
                  audit shall be conducted only after reasonable notice and
                  during normal business hours in the office of the Party whose
                  records are being audited. All costs associated with such
                  audit will be charged to the account of the Party failing to
                  provide the required data.

 6.      PAYMENTS ON PRODUCTION

         6.1      Each Party taking Gas shall pay or cause to be paid all
                  production and severance taxes due on all volumes of Gas
                  actually taken by such Party.

         6.2      Each Party shall pay or cause to be paid Royalty due with
                  respect to Royalty owners to whom it is accountable based on
                  the volume of Gas actually taken for its account.

         6.3      In the event that any governmental authority requires that
                  Royalty payments be made on any other basis than that provided
                  for in this Section 6, each Party agrees to make such Royalty
                  payments accordingly, commencing on the effective date
                  required by such governmental authority, and the method
                  provided for herein shall be thereby superseded.

7.       CASH  SETTLEMENTS

         7.1      Upon the earlier of the plugging and abandonment of the last
                  producing interval in the Balancing Area, the termination of
                  the Operating Agreement or any pooling or unit agreement
                  covering the Balancing Area, or at any time no Gas is taken
                  from the Balancing Area for a period of

JOA                                  Page 7                          Exhibit "D"
March 1, 2002

<PAGE>

                  twelve (12) consecutive months, any Party may give written
                  notice calling for cash settlement of the Gas production
                  imbalances among the Parties. Such notice shall be given to
                  all Parties in the Balancing Area.

         7.2      Within sixty (60) days after the notice calling for cash
                  settlement under Section 7.1, the Operator will distribute to
                  each Party a Final Gas Settlement Statement detailing the
                  quantity of Overproduction owed by each Overproduced Party to
                  each Underproduced Party and identifying the month to which
                  such Overproduction is attributed, pursuant to the methodology
                  set out in Section 7.4.

         7.3      Within sixty (60) days after receipt of the Final Gas
                  Settlement Statement, each Overproduced Party will pay to each
                  Underproduced Party entitled to settlement the appropriate
                  cash settlement, accompanied by appropriate accounting detail.
                  At the time of payment, the Overproduced Party will notify the
                  Operator of the Gas imbalance settled by the Overproduced
                  Party's payment.

         7.4      The amount of the cash settlement will be based on the
                  proceeds received by the Overproduced Party under an Arm's
                  Length Agreement for the Gas taken from time to time by the
                  Overproduced Party in excess of the Overproduced Party's Share
                  of Current Production. Any Makeup Gas taken by the
                  Underproduced Party prior to monetary settlement hereunder
                  will be applied to offset Overproduction chronologically in
                  the order of accrual.

         7.5      The values used for calculating the cash settlement under
                  Section 7.1 will be based on the proceeds received for the
                  sale of the Gas by the Overproduced Party calculated at the
                  Balancing Area, under an Arm's Length Agreement, after
                  deducting any production or severance taxes paid and any
                  Royalty actually paid by the Overproduced Party to an
                  Underproduced Party's Royalty owner(s), to the extent said
                  payment amounted to a discharge of said Underproduced Party's
                  Royalty obligation, as well as any reasonable marketing,
                  compression, treating, gathering or transportation costs
                  incurred directly in connection with the

JOA                                  Page 8                          Exhibit "D"
March 1, 2002

<PAGE>
                  sale of the Overproduction.

         7.6      To the extent the Overproduced Party did not sell
                  Overproduction under an Arm's Length Agreement, the cash
                  settlement will be based on the weighted average price
                  received by the Overproduced Party for any gas sold from the
                  Balancing Area under Arm's Length Agreements during the months
                  to which such Overproduction is attributed. In the event that
                  no sales under Arm's Length Agreements were made during any
                  such month, the cash settlement for such month will be based
                  on the spot sales price published for the applicable
                  geographic area during such month in a mutually acceptable
                  pricing bulletin.

         7.7      Interest compounded at the rate specified in Exhibit "C" of
                  the Operating Agreement to which this Gas Balancing Agreement
                  is attached or the maximum lawful rate of interest applicable
                  to the Balancing Area, whichever is less, will accrue for all
                  amounts due under Section 7.1, beginning the first day
                  following the date payment is due pursuant to Section 7.3.
                  Such interest shall be borne by the Operator or any
                  Overproduced Party in the proportion that their respective
                  delays beyond the deadlines set out in Sections 7.2 and 7.3
                  contributed to the accrual of the interest.

         7.8      In lieu of the cash settlement required by Section 7.3, an
                  Overproduced Party may deliver to the Underproduced Party an
                  offer to settle its Overproduction in-kind and at such rates,
                  quantities, time and sources as may be agreed upon by the
                  Underproduced Party. If the Parties are unable to agree upon
                  the manner in which such in-kind settlement gas will be
                  furnished within sixty (60) days after the Overproduced
                  Party's offer to settle in-kind, which period may be extended
                  by agreement of said Parties, the Overproduced Party shall
                  make a cash settlement as provided in Section 7.3. The making
                  of an in-kind settlement offer under this Section will not
                  delay the accrual of interest on the cash settlement should
                  the Parties fail to reach agreement on an in-kind settlement.

         7.9      At any time during the term of this Agreement, any
                  Overproduced Party

JOA                                  Page 9                          Exhibit "D"
March 1, 2002

<PAGE>

                  may, in its sole discretion, make cash settlement(s) with the
                  Underproduced Parties covering all or part of its outstanding
                  Gas imbalance, provided that such settlements must be made
                  with all Underproduced Parties proportionately based on the
                  relative imbalances of the Underproduced Parties, and provided
                  further that such settlements may not be made more often than
                  once every twenty-four (24) months. Such settlements will be
                  calculated in the same manner provided above for final cash
                  settlements. The Overproduced Party will provide Operator a
                  detailed accounting of any such cash settlement within thirty
                  (30) days after the settlement is made.

 8.      TESTING

         8.1      NOT APPLICABLE

 9.      OPERATING COSTS

         Nothing in this Agreement shall change or affect any Party's obligation
         to pay its proportionate share of all costs and liabilities incurred in
         operations on or in connection with the Balancing Area, as its share
         thereof is set forth in the Operating Agreement, irrespective of
         whether any Party is at any time selling and using Gas or whether such
         sales or use are in proportion to its Percentage Interest in the
         Balancing Area.

10.      LIQUIDS

         The Parties shall share proportionately in and own all liquid
         hydrocarbons recovered with Gas by field equipment operated for the
         joint account in accordance with their Percentage Interests in the
         Balancing Area.

11.      AUDIT RIGHTS

         Notwithstanding any provision in this Agreement or any other agreement
         between the Parties hereto, and further notwithstanding any termination
         or cancellation of this Agreement, for a period of two (2) years from
         the end of the

JOA                                  Page 10                         Exhibit "D"
March 1, 2002

<PAGE>

         calendar year in which any information to be furnished under Section 5
         or 7 hereof is supplied, any Party shall have the right to audit the
         records of any other Party regarding quantity, including but not
         limited to information regarding Btu-content. Any Underproduced Party
         shall have the right for a period of two (2) years from the end of the
         calendar year in which any cash settlement is received pursuant to
         Section 7 to audit the records of any Overproduced Party as to all
         matters concerning values, including but not limited to information
         regarding prices and disposition of Gas from the Balancing Area. Any
         such audit shall be conducted at the expense of the Party or Parties
         desiring such audit, and shall be conducted, after reasonable notice,
         during normal business hours in the office of the Party whose records
         are being audited. Each Party hereto agrees to maintain records as to
         the volumes and prices of Gas sold each month and the volumes of Gas
         used in its own operations, along with the Royalty paid on any such Gas
         used by a Party in its own operations. The audit rights provided for in
         this Section 11 shall be in addition to those provided for in Section
         5.2 of this Agreement.

12.      MISCELLANEOUS

         12.1     As between the Parties, in the event of any conflict between
                  the provisions of this Agreement and the provisions of any gas
                  sales contract, or in the event of any conflict between the
                  provisions of this Agreement and the provisions of the
                  Operating Agreement, the provisions of this Agreement shall
                  govern.

         12.2     Each Party agrees to defend, indemnify and hold harmless all
                  other Parties from and against any and all liability for any
                  claims, which may be asserted by any third party which now or
                  hereafter stands in a contractual relationship with such
                  indemnifying Party and which arise out of the operation of
                  this Agreement or any activities of such indemnifying Party
                  under the provisions of this Agreement, and does further agree
                  to save the other Parties harmless from all judgments or
                  damages sustained and costs incurred in connection therewith.

         12.3     Except as otherwise provided in this Agreement, Operator is
                  authorized

JOA                                  Page 11                         Exhibit "D"
March 1, 2002

<PAGE>

                  to administer the provisions of this Agreement, but shall have
                  no liability to the other Parties for losses sustained or
                  liability incurred which arise out of or in connection with
                  the performance of Operator's duties hereunder, except such as
                  may result from Operator's gross negligence or willful
                  misconduct. Operator shall not be liable to any Underproduced
                  Party for the failure of any Overproduced Party (other than
                  Operator) to pay any amounts owed pursuant to the terms
                  hereof.

         12.4     This Agreement shall remain in full force and effect for as
                  long as the Operating Agreement shall remain in force and
                  effect as to the Balancing Area, and thereafter until the Gas
                  accounts between the Parties are settled in full, and shall
                  inure to the benefit of and be binding upon the Parties
                  hereto, and their respective heirs, successors, legal
                  representatives and assigns, if any. The Parties hereto agree
                  to give notice of the existence of this Agreement to any
                  successor in interest of any such Party and to provide that
                  any such successor shall be bound by this Agreement, and shall
                  further make any transfer of any interest subject to the
                  Operating Agreement, or any part thereof, also subject to the
                  terms of this Agreement.

         12.5     Unless the context clearly indicates otherwise, words used in
                  the singular include the plural, the plural includes the
                  singular, and the neuter gender includes the masculine and the
                  feminine.

         12.6     This Agreement shall bind the Parties in accordance with the
                  provisions hereof, and nothing herein shall be construed or
                  interpreted as creating any rights in any person or entity not
                  a signatory hereto, or as being a stipulation in favor of any
                  such person or entity.

         12.7     If contemporaneously with this Agreement becoming effective,
                  or thereafter, any Party requests that any other Party execute
                  an appropriate memorandum or notice of this Agreement in order
                  to give third parties notice of record of same and submits
                  same for execution in recordable form, such memorandum or
                  notice shall be duly executed by the Party to which such
                  request is made and delivered promptly thereafter to the

JOA                                  Page 12                         Exhibit "D"
March 1, 2002

<PAGE>

                  Party making the request. Upon receipt, the Party making the
                  request shall cause the memorandum or notice to be duly
                  recorded in the appropriate real property or other records
                  affecting the Balancing Area.

         12.8     In the event Internal Revenue Service regulations require a
                  uniform method of computing taxable income by all Parties,
                  each Party agrees to compute and report income to the Internal
                  Revenue Service based on the quantity of Gas taken for its
                  account in accordance with such regulations, insofar as same
                  relate to sales method tax computations.

13.      ASSIGNMENT AND RIGHTS UPON ASSIGNMENT

         13.1     Subject to the provisions of Sections 13.2 (if elected) and
                  13.3 hereof, and notwithstanding anything in this Agreement or
                  in the Operating Agreement to the contrary, if any Party
                  assigns (including any sale, exchange or other transfer) any
                  of its working interest in the Balancing Area when such Party
                  is an Underproduced or Overproduced Party, the assignment or
                  other act of transfer shall, insofar as the Parties hereto are
                  concerned, include all interest of the assigning or
                  transferring Party in the Gas, all rights to receive or
                  obligations to provide or take Makeup Gas and all rights to
                  receive or obligations to make any monetary payment which may
                  ultimately be due hereunder, as applicable. Operator and each
                  of the other parties hereto shall thereafter treat the
                  assignment accordingly, and the assigning or transferring
                  Party shall look solely to its assignee or other transferee
                  for any interest in the Gas or monetary payment that such
                  Party may have or to which it may be entitled, and shall cause
                  its assignee or other transferee to assume its obligations
                  hereunder.

         13.2     Notwithstanding anything in this Agreement (including but not
                  limited to the provisions of Section 13.1 hereof) or in the
                  Operating Agreement to the contrary, and subject to the
                  provisions of Section 13.3 hereof, in the event an
                  Overproduced Party intends to sell, assign, exchange or
                  otherwise transfer any of its interest in a Balancing Area,
                  such Overproduced Party shall notify in writing the other
                  working interest owners who are Parties hereto in such
                  Balancing Area of such fact at least

JOA                                  Page 13                         Exhibit "D"
March 1, 2002

<PAGE>

                  sixty (60) days prior to closing the transaction. Thereafter,
                  any Underproduced Party may demand from such Overproduced
                  Party in writing, within thirty (30) days after receipt of the
                  Overproduced Party's notice, a cash settlement of its
                  Underproduction from the Balancing Area. The Operator shall be
                  notified of any such demand and of any cash settlement
                  pursuant to this Section 13, and the Overproduction and
                  Underproduction of each Party shall be adjusted accordingly.
                  Any cash settlement pursuant to this Section 13 shall be paid
                  by the Overproduced Party on or before the earlier to occur
                  (i) of sixty (60) days after receipt of the Underproduced
                  Party's demand or (ii) at the closing of the transaction in
                  which the Overproduced Party sells, assigns, exchanges or
                  otherwise transfers its interest in a Balancing Area on the
                  same basis as otherwise set forth in Sections 7.3 through 7.6
                  hereof, and shall bear interest at the rate set forth in
                  Section 7.7 hereof, beginning sixty (60) days after the
                  Overproduced Party's sale, assignment, exchange or transfer of
                  its interest in the Balancing Area for any amounts not paid.
                  Provided, however, if any Underproduced Party does not so
                  demand such cash settlement of its Underproduction from the
                  Balancing Area, such Underproduced Party shall look
                  exclusively to the assignee or other successor in interest of
                  the Overproduced Party giving notice hereunder for the
                  satisfaction of such Underproduced Party's Underproduction in
                  accordance with the provision of Section 13.1 hereof.

         13.3     The provisions of this Section 13 shall not be applicable in
                  the event any Party mortgages its interest or disposes of its
                  interest by merger, reorganization, consolidation or sale of
                  substantially all of its assets to a subsidiary or parent
                  company, or to any company in which any parent or subsidiary
                  of such Party owns a majority of the stock of such company.

JOA                                  Page 14                         Exhibit "D"
March 1, 2002

<PAGE>

                                   EXHIBIT "E"
   Attached to and made a part of that certain Joint Operating Agreement dated
effective March 1, 2002, by and between BP Exploration & Production Inc. and EEX
                                  Corporation.

                    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 Operator. As used in this certification, the term "segregated facilities"
means any waiting rooms, work areas, rest 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 custom or otherwise.
Contractor further agrees that (except where it has obtained 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.

March 1, 2002 - JOA                    1                             Exhibit "E"

<PAGE>

                                   EXHIBIT "F"

   Attached to and made a part of that certain Joint Operating Agreement dated
  March 1, 2002, between BP Exploration & Production Inc. and EEX Corporation.

                           TAX PARTNERSHIP PROVISIONS
                           TREASURE ISLAND PARTNERSHIP

  (For Name of Tax Reporting Partner and Special Elections, See Secs. 8 and 9)

Table of Contents

<TABLE>
<S>                                                                                        <C>
1. General Provisions.................................................................     1
   1.1 Designation of Documents.......................................................     1
   1.2 Relationship of the Parties....................................................     2
   1.3 Priority of Provisions of This Exhibit.........................................     2
   1.4 Survivorship...................................................................     2

2. Tax Reporting Partner and Tax Matters Partner......................................     2
   2.1 Tax Reporting Partner..........................................................     2
   2.2 If Small Partnership Exception From Tefra Not Applicable.......................     2

3. Income Tax Compliance and Capital Accounts.........................................     3
   3.1 Tax Returns....................................................................     3
   3.2 Fair Market Value Capital Accounts.............................................     3
   3.3 Information Requests...........................................................     3
   3.4 Best Efforts Without Liability.................................................     3

4. Tax and FMV Capital Account Elections..............................................     3
   4.1 General Elections..............................................................     3
   4.2 Depletion......................................................................     3
   4.3 Election Out Under Code (S)761(A)..............................................     4
   4.4 Consent Requirements for Subsequent Tax or FMV Capital Account Elections.......     4

5. Capital Contributions and FMV Capital Accounts.....................................     4
   5.1 Capital Contributions..........................................................     4
   5.2 FMV Capital Accounts...........................................................     4

6. Partnership Allocations............................................................     5
   6.1 FMV Capital Account Allocations................................................     5
   6.2 Tax Return and Tax Basis Capital Account Allocations...........................     5

7. Termination and Liquidating Distribution...........................................     6
   7.1 Termination of the Partnership.................................................     6
   7.2 Balancing of FMV Capital Accounts..............................................     6
   7.3 Deemed Sale Gain/loss Charge Back..............................................     6
   7.4 Deficit Make-up Obligation and Balancing Cash Contributions....................     6
   7.5 Distribution to Balance Capital Accounts.......................................     6
   7.6 FMV Determination..............................................................     6
   7.7 Final Distribution.............................................................     6

8. Transfers, Indemnification, and Correspondence.....................................     6
   8.1 Transfer of Partnership Interests..............................................     6
   8.2 Correspondence.................................................................     7

9. Elections and Changes to Above Provisions..........................................     7
   9.1 Operator Not the TRP...........................................................     7
   9.2 Special Tax Elections..........................................................     7
   9.3 Change of Majority for Other Tax Elections.....................................     7
</TABLE>

1. General Provisions

1.1    Designation of Documents.

This exhibit is referred to in, and is part of, that Agreement identified above
and, if so provided, a part of any agreement to which the Agreement is an
exhibit. Such agreement(s) (including all exhibits thereto,

<PAGE>

other than this exhibit) shall be hereinafter referred to as the "Agreement;"
and this exhibit is hereinafter referred to as the "Exhibit" or the "Tax
Partnership Provisions" (the "TPPs"). Except as may be otherwise provided in
this Exhibit, terms defined and used in the Agreement shall have the same
meaning when used herein.

1.2   Relationship of the Parties.

The parties to the Agreement shall be hereinafter referred to as "Party" or
"Parties." The Parties understand and agree that the arrangement and
undertakings evidenced by the Agreement result in a partnership for purposes of
Federal income taxation and certain State income tax laws which incorporate or
follow Federal income tax principles as to tax partnerships. Such partnership
for tax purposes is hereinafter referred to as the "Partnership." For every
other purpose of the Agreement the Parties understand and agree that their legal
relationship to each other under applicable State law with respect to all
property subject to the Agreement is one of tenants in common, or undivided
interest owners, or lessee(s)-sublessee(s) and not a partnership; that the
liabilities of the Parties shall be several and not joint or collective; and
that each Party shall be responsible solely for its own obligations.

1.3   Priority of Provisions of This Exhibit.

If there is a conflict or inconsistency, whether direct or indirect, actual or
apparent, between the terms and conditions of this Exhibit and the terms and
conditions of the Agreement, or any other exhibit or any part thereof, the terms
and conditions of this Exhibit shall govern and control.

1.4   Survivorship.

1.4.1     Any termination of the Agreement shall not affect the continuing
application of the TPPs for the termination and liquidation.

1.4.2     Any termination of the Agreement shall not affect the continuing
application of the TPPs for the resolution of all matters regarding Federal and
State income reporting.

1.4.3     These TPPs shall inure to the benefit of, and be binding upon, the
Parties hereto and their successors and assigns.

1.4.4     The effective date of the Agreement shall be the effective date of
these TPPs. The Partnership shall continue in full force and effect from, and
after such date, until termination and liquidation.

2.    Tax Reporting Partner and Tax Matters Partner

2.1   Tax Reporting Partner.

The Operator (or the Party listed in Sec.9.1) as the Tax Reporting Partner
("TRP") is responsible for compliance with all tax reporting obligations of the
Partnership, see Sec. 3.1, below. In the event of any change in the TRP, the
Party serving as TRP at the beginning of a given taxable year shall continue as
TRP with respect to all matters concerning such year.

2.2   If Small Partnership Exception From Tefra Not Applicable.

If the Partnership does not qualify for the "small partnership exception" from,
or if the Partnership elects (see infra Elections at Secs. 4.1 and 9.2) to be
subject to, (S)(S)6221 et seq., Subchapter C of Chapter 53 of Subtitle A (the
"TEFRA rules") of the Internal Revenue Code (the "Code") the TRP shall also be
the Tax Matters Partner as defined in Code (S)6231(a) (the "TMP") and references
to the TRP shall then include references to the TMP and vice versa.

2.2.1     The TMP shall not be required to incur any expenses for the
preparation for, or pursuance of, administrative or judicial proceedings, unless
the Parties agree on a method for sharing such expenses.

2.2.2     The Parties shall furnish the TMP, within two weeks from the receipt
of the request, the information the TMP may reasonably request to comply with
the requirements on furnishing information to the Internal Revenue Service.

2.2.3     The TMP shall not agree to any extension of the statute of
limitations for making assessments on behalf of the Partnership without first
obtaining the written consent of all Parties. The TMP shall not bind any other
Party to a settlement agreement in tax audits without obtaining the written
concurrence of any such Party.

2.2.4     Any other Party who enters in a settlement agreement with the
Secretary of the Treasury with respect to any partnership items, as defined in
Code (S)6231(a)(3), shall notify the other Parties of the terms within ninety
(90) days from the date of such settlement.

2.2.5     If any Party intends to file a notice of inconsistent treatment under
Code (S)6222(b), such Party shall, prior to the filing of such notice, notify
the TMP of the (actual or potential) inconsistency of the

<PAGE>

Party's intended treatment of a partnership item with the treatment of that item
by the Partnership. Within one week of receipt the TMP shall remit copies of
such notification to the other Parties. If an inconsistency notice is filed
solely because a Party has not received a Schedule K-1 in time for filing of its
income tax return, the TMP need not be notified.

2.2.6     No Party shall file pursuant to Code (S)6227 a request for an
administrative adjustment of partnership items (the "RFAA") without first
notifying all other Parties. If all other Parties agree with the requested
adjustment, the TMP shall file the RFAA on behalf of the Partnership. If
unanimous consent is not obtained within thirty (30) days from such notice, or
within the period required to timely file the RFAA, if shorter, any Party,
including the TMP, may file a RFAA on its own behalf.

2.2.7     Any Party intending to file with respect to any partnership item, or
any other tax matter involving the Partnership, a petition under Code
(S)(S)6226, 6228, or any other provision, shall notify the other Parties prior
to such filing of the nature of the contemplated proceeding. In the case where
the TMP is the Party intending to file such petition, such notice shall be given
within a reasonable time to allow the other Parties to participate in the choice
of the forum for such petition. If the Parties do not agree on the appropriate
forum, then the forum shall be chosen by majority vote. Each Party shall have a
vote in accordance with its percentage interest in the Partnership for the year
under audit. If a majority cannot agree, the TMP shall choose the forum. If a
Party intends to seek review of any court decision rendered as a result of such
proceeding, the Party shall notify the other Parties prior to seeking such
review.

3.    Income Tax Compliance and Capital Accounts

3.1   Tax Returns.

The TRP shall prepare and file all required Federal and State partnership income
tax returns. Not less than thirty (30) days prior to the return due date
(including extensions), the TRP shall submit to each Party for review a copy of
the return as proposed. 3.2 FAIR MARKET VALUE CAPITAL ACCOUNTS.

The TRP shall establish and maintain for each Party fair market value ("FMV")
capital accounts and tax basis capital accounts. Upon request, the TRP shall
submit to each Party along with a copy of any proposed partnership income tax
return an accounting of such Party's FMV capital accounts as of the end of the
return period.

3.3   Information Requests.

In addition to any obligation under Sec. 2.2.2, each Party agrees to furnish to
the TRP not later than sixty (60) days before the return due date (including
extensions) such information relating to the operations conducted under the
Agreement as may be required for the proper preparation of such returns.
Similarly, each Party agrees to furnish timely to the TRP, as requested, any the
information and data necessary for the preparation and/or filing of other
required reports and notifications, and for the computation of the capital
accounts. As provided in Code (S)6050K(c), a Party transferring its interest
must notify the TRP to allow compliance with Code (S)6050K(a) (see also Sec.
8.1).

3.4   Best Efforts Without Liability.

The TRP and the other Party(ies) shall use its/their best efforts to comply with
responsibilities outlined in this Section, and with respect to the service as
TMP as outlined Sec. 2.2 and in doing so shall incur no liability to any other
Party.

4.    Tax and FMV Capital Account Elections

4.1   General Elections.

For both income tax return and capital account purposes, the Partnership shall
elect:
a) to deduct when incurred intangible drilling and development costs ("IDC");
b) to use the maximum allowable accelerated tax method and the shortest
permissible tax life for depreciation;
c) the accrual method of accounting;
d) to report income on a calendar year basis; and the Partnership shall also
make any elections as specially noted in Sec. 9.2, below.

4.2   Depletion.

Solely for FMV capital account purposes, depletion shall be calculated by using
simulated cost depletion within the meaning of Treas. Reg.
(S)1.704-1(b)(2)(iv)(k)(2), unless the use of simulated percentage depletion is
elected in Sec. 9.2, below. The simulated cost depletion allowance shall be
determined under the principles of Code (S)612 and be based on the FMV capital
account basis of each Lease. Solely

<PAGE>

for purposes of this calculation, remaining reserves shall be determined
consistently by the TRP.

4.3   Election Out Under Code (S)761(a).

4.3.1     The TRP shall notify all Parties of an intended election to be
excluded from the application of Subchapter K of Chapter 1 of the Code not later
than sixty (60) days prior to the filing date or the due date (including
extensions) for the Federal partnership income tax return, whichever comes
earlier. Any Party that does not consent must provide the TRP with written
objection within thirty (30) days of such notice. Even after an effective
election-out the TRP's rights and obligations, other than the relief from tax
return filing obligations of the partnership, continue.

4.3.2     After an election-out, to avoid an unintended impairment of the
election-out: The Parties will avoid, without prior coordination, any
operational changes which would terminate the qualification for the election-out
status; all Parties will monitor the continuing qualification of the Partnership
for the election-out status and will notify the other Parties if, in their
opinion, a change in operations will jeopardize the election-out; and, all
Parties will use, unless agreed to by them otherwise, the cumulative gas
balancing method as described in Treas. Reg. (S)1.761-2(d)(2).

4.4   Consent Requirements for Subsequent Tax or Fmv Capital Account Elections.

Unless stipulated differently in Sec. 9.3, future elections, in addition to or
in amendment of those in this agreement, must be approved by the affirmative
vote of two (2) or more Parties owning a majority of the working interest based
upon post-Payout ownership.

5.    Capital Contributions and FMV Capital Accounts

The provisions of this Sec. 5 and any other provisions of the TPPs relating to
the maintenance of the capital accounts are intended to comply with Treas. Reg.
(S)1.704-1(b) and shall be interpreted and applied in a manner consistent
with such regulations.

5.1 Capital Contributions.

The respective capital contributions of each Party to the Partnership shall be
(a) each Party's interest in the oil and gas lease(s), including all associated
lease and well equipment, committed to the Partnership, and (b) all amounts of
money paid by each Party in connection with the acquisition, exploration,
development, and operation of the lease(s), and all other costs characterized as
contributions or expenses borne by such Party under the Agreement. The
contribution of the leases and any other properties committed to the Partnership
shall be made by each Party's agreement to hold legal title to its interest in
such leases or other property as nominee of the Partnership.

5.2 FMV Capital Accounts.

The FMV capital accounts shall be increased and decreased as follows:

5.2.1     The FMV capital account of a Party shall be increased by:

(i)   the amount of money and the FMV (as of the date of contribution) of any
property contributed by such Party to the Partnership (net of liabilities
assumed by the Partnership or to which the contributed property is subject);

(ii)  that Party's share of Partnership items of income or gain, allocated in
accordance with Sec.6.1; and

(iii) that Party's share of any Code(S)705(a)(1)(B)item.

5.2.2     The FMV capital account of a Party shall be decreased by:
(i) the amount of money and the FMV of property distributed to a Party (net of
liabilities assumed by such Party or to which the property is subject); (ii)
that Party's Sec. 6.1 allocated share of Partnership loss and deductions, or
items thereof; and, (iii) that Party's share of any Code (S)705(a)(2)(B)
item.

5.2.3     "FMV" when it applies to property contributed by a Party to the
Partnership shall be assumed, for purposes of Sec.5.2.1, to equal the adjusted
tax basis, as defined in Code (S)1011, of that property unless the Parties agree
otherwise as indicated in Sec. 9.2.

<PAGE>

5.2.4     As provided in Treas. Reg. (S)1.704-1(b)(2)(iv)(e), upon distribution
of Partnership property to a Party the capital accounts will be adjusted to
reflect the manner in which the unrealized income, gain, loss and deduction
inherent in distributed property (not previously reflected in the capital
accounts) would be allocated among the Parties if there were a disposition of
such property at its FMV as of the time of distribution. Furthermore, if so
agreed to in Sec. 9.2, under the rules of Treas. Reg. (S)1.704-1(b)(2)(iv)(f),
the FMV capital accounts shall be revalued at certain times to reflect value
changes of the Partnership property.

6. Partnership Allocations

6.1   FMV Capital Account Allocations.

Each item of income, gain, loss, or deduction shall be allocated to each Party
as follows:

6.1.1     Actual or deemed income from the sale, exchange, distribution or other
disposition of production shall be allocated to the Party entitled to such
production or the proceeds from the sale of such production. The amount received
from the sale of production and the amount of the FMV of production taken in
kind by the Parties are deemed to be identical; accordingly, such items may be
omitted from the adjustments made to the Parties' FMV capital accounts.

6.1.2     Exploration cost, IDC, operating and maintenance cost shall be
allocated to each Party in accordance with its respective contribution, or
obligation to contribute, to such cost.

6.1.3     Depreciation shall be allocated to each Party in accordance with its
contribution, or obligation to contribute, to the cost of the underlying asset.

6.1.4     Simulated depletion shall be allocated to each Party in accordance
with its FMV capital account adjusted basis in each oil and gas property of the
Partnership.

6.1.5     Loss (or simulated loss) upon the sale, exchange, distribution,
abandonment or other disposition of depreciable or depletable property shall be
allocated to the Parties in the ratio of their respective FMV capital account
adjusted bases in the depreciable or depletable property.

6.1.6     Gain (or simulated gain) upon the sale, exchange, distribution, or
other disposition of depreciable or depletable property shall be allocated to
the Parties so that the FMV capital account balances of the Parties will most
closely reflect their respective percentage or fractional interests under the
Agreement.

6.1.7     Costs or expenses of any other kind shall be allocated to each Party
in accordance with its respective contribution, or obligation to contribute, to
such costs or expense.

6.1.8     Any other income item shall be allocated to the Parties in accordance
with the manner in which such income is realized by each Party.

6.2   Tax Return and Tax Basis Capital Account Allocations.

6.2.1     Unless otherwise expressly provided in this Sec. 6.2, the allocations
of the Partnership's items of income, gain, loss, or deduction for tax return
and tax basis capital account purposes shall follow the principles of the
allocations under Sec. 6.1. However, the Partnership's gain or loss on the
taxable disposition of a Partnership property in excess of the gain or loss
under Sec. 6.1, if any, is allocated to the contributing Party to the extent of
such Party's pre-contribution gain or loss.

6.2.2     The Parties recognize that under Code (S)613A(c)(7)(D) the depletion
allowance is to be computed separately by each Party. For this purpose, each
Party's share of the adjusted tax basis in each oil and gas property shall be
equal to its contribution to the adjusted tax basis of such property.

6.2.3     Under Code (S)613A(c)(7)(D) gain or loss on the disposition of an
oil and gas property is to be computed separately by each Party. According to
Treas. Reg. (S)1.704-1(b)(4)(v), the amount realized shall be allocated as
follows: (i) An amount that represents recovery of adjusted simulated depletion
basis is allocated (without being credited to the capital accounts) to the
Parties in the same proportion as the aggregate simulated depletion basis was
allocated to such Parties under Sec. 5.2; and (ii) any remaining realization is
allocated in accordance with Sec. 6.1.6.

6.2.4     Depreciation shall be allocated to each Party in accordance with its
contribution to the adjusted tax basis of the depreciable asset.

6.2.5     In accordance with Treas. Reg. (S)1.1245-1(e), depreciation recapture
shall be allocated, to the extent possible, among the Parties to reflect their
prior sharing of the depreciation.

6.2.6     In accordance with the principles of Treas. Reg. (S)1.1254-5, any
recapture of IDC is determined and reported by each Party separately. Similarly,
any recapture of depletion shall be computed separately by each Party, in
accordance with its depletion allowance computed pursuant to

<PAGE>

Sec.6.2.2.

6.2.7   For Partnership properties with FMV capital account values different
from their adjusted tax bases the Parties intend that the allocations described
in this Section 6.2 constitute a "reasonable method" of allocating gain or loss
under Treas. Reg. (S)1.704-3(a)(1).

6.2.8   Take-in-kind.

If checked "Yes" in Sec. 9.2, below, each Party has the right to determine the
market for its proportionate share of production. All items of income,
deductions, and credits arising from such marketing of production shall be
recognized by the Partnership and shall be allocated to the Party whose
production is so marketed.

7. Termination and Liquidating Distribution

7.1   Termination of the Partnership.

7.1.1   Upon termination, as provided in Code 708(b)(1)(A), the business shall
be wound-up and concluded, and the assets shall be distributed to the Parties as
described below by the end of such calendar year (or, if later, within ninety
(90) days after the date of such termination). The assets shall be valued and
distributed to the Parties in the order provided in Secs. 7.1.2, 7.5 and 7.7.

7.1.2   First, all cash representing unexpended contributions by any Party and
any property in which no interest has been earned by any other Party under the
Agreement shall be returned to the contributor.

7.2   Balancing of FMV Capital Accounts.

Second, the FMV capital accounts of the Parties shall be determined as described
hereafter. The TRP shall take the actions specified under Secs. 7.2 through 7.5
in order to cause the ratios of the Parties' FMV capital accounts to reflect as
closely as possible their interests under the Agreement. The ratio of a Party's
FMV capital account is represented by a fraction, the numerator of which is the
Party's FMV capital account balance and the denominator of which is the sum of
all Parties' FMV capital account balances. This is hereafter referred to as the
"balancing of the FMV capital accounts" and, when completed, the FMV capital
accounts of the Parties shall be referred to as "balanced."

7.3   Deemed Sale Gain/loss Charge Back.

The FMV of all Partnership properties shall be determined and the gain or
loss for each property, which would have resulted if sold at such FMV, shall be
allocated in accordance with Secs. 6.1.5 and 6.1.6.

7.4   Deficit Make-up Obligation and Balancing Cash Contributions.

If hereafter a Party has a negative FMV capital account balance, that is a
balance of less than zero, in accordance with of Treas. Reg.
(S)1.704-1(b)(2)(ii) (b)(3) such Party is obligated to contribute, by the end of
the taxable year or, if later, within 90 days from the Partnership's
liquidation, an amount of money to the Partnership sufficient to achieve a zero
balance FMV capital account (the "Deficit Make-Up Obligation"). Moreover, any
Party may contribute an amount of cash to the Partnership to facilitate the
balancing of the FMV capital accounts. If after these adjustments the FMV
capital accounts are not balanced, Secs. 7.5 shall apply.

7.5   Distribution to Balance Capital Accounts.

7.5.1   If all Parties agree, any cash or an undivided interest in certain
selected properties shall be distributed to one or more Parties as necessary for
the purpose of balancing the FMV capital accounts.

7.5.2   Distribution of undivided interests.

Unless Sec. 7.5.1 applies, an undivided interest in each and every property
shall be distributed to one or more Parties in accordance with the ratios of
their FMV capital accounts.

7.6   FMV Determination.

If a property is to be valued for purposes of balancing the capital accounts and
making a distributions under this Sec. 7, the Parties must first attempt to
agree on the FMV of the property; failing such an agreement, the TRP shall cause
a nationally recognized independent engineering firm to prepare an appraisal of
the FMV of such property.

7.7   Final Distribution.

After the FMV capital accounts of the Parties have been adjusted pursuant to
Secs.7.2 to 7.5, all remaining property and interests then held by the
Partnership shall be distributed to the Parties in accordance with their
positive FMV capital account balances.

8. Transfers, Indemnification, and Correspondence

8.1     Transfer of Partnership Interests.

Transfers of Partnership interests shall be governed by the Agreement. A Party
transferring its interest,

<PAGE>

or any part thereof, shall notify the TRP in writing within two weeks after such
transfer.

8.2 Correspondence.

All correspondence relating to the preparation and filing of the Partnership's
income tax returns and capital accounts shall be sent to:
(Attach separate list, if necessary)

--------------------------------------------------------------------------------
TRP                                                     "Att to:" reference
--------------------------------------------------------------------------------

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

--------------------------------------------------------------------------------
Other Parties                                           "Att to:" reference
--------------------------------------------------------------------------------

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

9. Elections and Changes to Above Provisions

9.1     Operator Not the TRP.

With respect to Sec. 2.1 BP Exploration & Production Inc. is designated as TRP.

9.2     Special Tax Elections.
With respect to Sec. 4.1, the Parties agree (if not applicable insert "N/A" or
strike):

<TABLE>
<S>                                                                             <C>
                                                                                 ------
                                                                                  Yes
                                                                                 ------
--------------------------------------------------------------------------------
 e) that the Partnership shall elect to account for dispositions of depreciable
assets under the general asset method to the extent permitted by Code
(S)168(i)(4);
-------------------------------------------------------------------------------
 f) that the Partnership shall elect under Code 754 to adjust the basis of
Partnership property, with the adjustments provided in Code 734 for a
distribution of property and in Code 743 for a transfer of a partnership
interest. In case of distribution of property the TRP shall adjust all tax basis
capital accounts. In the case of a transfer of a partnership interest the
acquiring party(ies) shall establish and maintain its (their) tax basis capital
account(s);
--------------------------------------------------------------------------------
 g) that the Partnership shall elect under Code 6231 to be subject to the TEFRA
rules.                                                                             X
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
With respect to Sec. 4.2, Depletion the Parties agree that the Partnership shall
use simulated percentage depletion instead of simulated cost depletion.
--------------------------------------------------------------------------------
With respect to Sec.5.2.4, under the rules of Treas. Reg.
(S)1.704-1(b)(2)(iv)(f) the Parties agree that the FMV capital accounts shall be   X
revalued to reflect value changes of the Partnership property upon the
occurrence of the events specified in (5)(i) through (iii) of said
-1(b)(2)(iv)(f) regulations.
--------------------------------------------------------------------------------
With respect to Sec. 6.2.8, the income attributable to take-in-kind production
will be reflected on the tax return.
--------------------------------------------------------------------------------
With respect to Sec.5.2.3 the FMV for the listed properties are determined as
follows (mark as "N/A" if not applicable; use separate sheet if necessary)
--------------------------------------------------------------------------------
Property Description FMV
--------------------------------------------------------------------------------

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

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

--------------------------------------------------------------------------------
</TABLE>

    9.3 Change of Majority for Other Tax Elections.

    Instead of the Sec. 4.4  majority for other tax elections, a majority shall
    be considered if consisting of (specify or line out blanks).

<PAGE>

                                  EXHIBIT "G"

      Attached to and made a part of that certain Joint Operating Agreement
                 dated effective March 1, 2002, by and between
              BP Exploration & Production Inc. and EEX Corporation.

                        MEMORANDUM OF OPERATING AGREEMENT
                             AND FINANCING STATEMENT

1.0     This Memorandum of Operating Agreement and Financing Statement
        (hereinafter called "Memorandum") is effective as of the 1/st/ day of
        March, 2002.

2.0     The parties hereto have entered into a Joint Operating Agreement
        effective March 1, 2002 (hereinafter referred to as the "Operating
        Agreement") providing for the development and production of crude oil,
        natural gas and associated substances from the lands and oil and gas
        leases described in Exhibit "A" of the Operating Agreement attached
        hereto as Attachment "1" (hereinafter called the "Contract Area"), and
        designating BP Exploration & Production Inc. or its agent as Operator
        to conduct such operations for itself and the undersigned
        Non-Operators.

3.0     The Operating Agreement provides for certain liens, mortgages, pledges
        and/or security interests to secure payment by the parties of their
        respective share of costs under the Operating Agreement. The Operating
        Agreement contains an Accounting Procedure, along with other
        provisions, which supplement the lien, mortgage, pledge and/or security
        interest provisions, including non-consent clauses which provide that
        parties who elect not to participate in certain operations shall be
        deemed to have relinquished their interest in production until the
        carrying consenting parties are able to recover their costs of such
        operations plus a specified amount. Should any person or firm desire
        additional information regarding the Operating Agreement or wish to
        inspect a copy of the Operating Agreement, said person or firm should
        contact the Operator at 501 WestLake Park Blvd., Houston, Texas 77079.

4.0     The purpose of this Memorandum is to more fully describe and implement
        the liens, mortgages, pledges and/or security interests provided for in
        the Operating Agreement, and to place third parties on notice thereof.
        The purpose of this Memorandum is also to place third parties on notice
        that the Operating Agreement does contain a Preferential Right to
        Purchase provision.

5.0     In consideration of the mutual rights and obligations of the parties
        hereunder, the parties hereto agree as follows:

5.1     The Operator shall conduct and direct and have full control of all
        Operations on the Contract Area as permitted and required by, and within
        the limits of the Operating Agreement.

March 1, 2002 - JOA                                                 Exhibit "G"

                                       1

<PAGE>

5.2     The liability of the parties shall be several, not joint or collective.
        Each party shall be responsible only for its obligations and shall be
        liable only for its proportionate share of costs.

5.3     Each Non-Operator grants to Operator a lien and mortgage upon all its
        rights, title and interests in the oil, gas and mineral leases and
        other real property, in the Contract Area, and a pledge and security
        interest in its share of oil and gas when extracted and its interest in
        all equipment and property whether movable or immovable, corporeal or
        incorporeal attached thereon, all such property being more fully
        described in Paragraph 6.0, to secure payment of its share of expense,
        arising out of the Operating Agreement together with interest thereon
        at the rate provided in the Accounting Procedure referred to in
        Paragraph 3.0 above. To the extent that Operator has a security
        interest under the Uniform Commercial Code of the state, Operator shall
        be entitled to exercise the rights and remedies of a secured party
        under the Code. The bringing of a suit and the obtaining of judgement
        by Operator for the secured indebtedness shall not be deemed an
        election of remedies or otherwise affect the rights or security
        interest for the payment thereof.

5.4     If any Non-Operator fails to pay its share of costs when due, Operator
        may require other Non-Operators to pay their proportionate part of the
        unpaid share, whereupon the other Non-Operators shall be subrogated to
        Operator's lien and security interest.

5.5     The Operator grants to Non-Operators a lien, mortgage, pledge and
        security interest equivalent to that granted to Operator as described
        in Paragraph 5.3 above, to secure payment by Operator of its own share
        of costs when due.

6.0     For purposes of protecting said liens, mortgages, pledges and security
        interests, the parties hereto agree that the mutual lien, mortgage,
        pledge, security interest, and this Memorandum shall cover all right,
        title and interest of the debtor(s) in:

6.1     Property Subject to Liens, Pledges, and Security Interests

        (A) All personal property located upon or used in connection with the
        Contract Area.

        (B) All equipment, fixtures, and appurtenances upon or used in
        connection with the Contract Area, whether movable or immovable,
        corporeal or incorporeal.

        (C) All oil, gas and associated substances of value in, on or under the
        Contract Area which may be extracted therefrom.

        (D) All accounts and revenues resulting from the sale of the items
        described in subparagraph (C) at the wellhead of every well located on
        the Contract Area or on lands pooled or unitized therewith.

        (E) All items used, useful, or purchased for the production, treatment,
        storage, transportation, manufacture, or sale of the items described in

March 1, 2002 - JOA                                                  Exhibit "G"

                                       2

<PAGE>

            subparagraph (C).

        (F) All accounts, contract rights, rights under any gas balancing
            agreement, general intangibles, equipment, inventory, farmout
            rights, option farmout rights, acreage and or cash
            contributions, and conversion rights, whether now owned or
            existing or hereafter acquired or arising, including but not
            limited to all interest in any partnership, tax partnership,
            limited partnership, association, joint venture, or other
            entity or enterprise that holds, owns, or controls any
            interest in the Contract Area or in any property encumbered by
            this Memorandum.

        (G) All severed and extracted oil, gas, and associated substances
            now or hereafter produced from or attributable to the Contract
            Area, including without limitation oil, gas and associated
            substances in tanks or pipelines or otherwise held for
            treatment, transportation, manufacture, processing or sale.

        (H) All the proceeds and products of the items described in the
            foregoing paragraphs now existing or hereafter arising, and
            all substitutions therefor, replacements thereof, or
            accessions thereto.

        (I) All personal property and fixtures now and hereafter acquired
            in furtherance of the purposes of the Operating Agreement.
            Certain of the above-described items are or are to become
            fixtures on the Contract Area.

        (J) The proceeds and products of collateral are also covered.

6.2     Property Subject to Liens and Mortgages

        (A) All real property and oil and gas leases within the Contract Area,
            including all oil, gas and associated substances of value in, on or
            under the Contract Area which may be extracted therefrom.

        (B) All equipment, fixtures, and appurtenances upon or used in
            connection with the Contract Area, whether movable or immovable,
            corporeal or incorporeal.

        (C) All real property and fixtures now and hereafter acquired in
            furtherance of the purposes of the Operating Agreement, including
            any easement, right-of-way, surface leases, and fee acreage.

7.0     The property described in Paragraphs 6.1 and 6.2 will be financed at
        the wellhead of the well or wells located on the Contract Area or on
        lands pooled or unitized therewith, and this Memorandum is to be filed
        for record in the real estate records of the county or parish in which
        the Contract Area is located, or, in the case of offshore leases, in
        the county or parish adjacent thereto and in the appropriate Uniform
        Commercial Code records. All parties who have executed the Joint
        Operating Agreement are identified on Attachment "1". The Uniform
        Commercial Code form to be filed of record by the Parties shall as
        shown on Attachment "2".

8.0     Upon default of any covenant or condition of the Operating Agreement, in
        addition to any other remedy afforded by law, each party to the
        Operating Agreement and any successor to such party by assignment,
        operation of law, or

March 1, 2002 - JOA                                                  Exhibit "G"

                                       3

<PAGE>

        otherwise, shall have, and is hereby given and vested with, the
        power and authority to take possession of and sell any interest which
        the defaulting party has in the property described in Paragraphs 6.1
        and 6.2 and to foreclose this lien, mortgage, pledge, and security
        interest in the manner provided by law.

9.0     Upon expiration of the subject Operating Agreement and the satisfaction
        of all debts, the Operator shall file of record a release and
        termination on behalf of all parties concerned. Upon the filing of such
        release and termination, all benefits and obligations under this
        Memorandum shall terminate as to all parties who have executed or
        ratified this Memorandum. In addition, the Operator shall have the
        right to file a continuation statement on behalf of all parties who
        have executed or ratified this Memorandum.

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

11.0    This Memorandum shall be binding upon and shall inure to the benefit of
        the parties hereto and to their respective heirs, devisees, legal
        representatives, successors and assigns. The failure of one or more
        persons owning an interest in the Contract Area to execute this
        Memorandum shall not in any manner affect the validity of the
        Memorandum as to those persons who have executed this Memorandum.

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

13.0    This Memorandum may be executed or ratified in one or more counterparts
        and all of the executed or ratified counterparts shall together
        constitute one instrument. For purposes of recording, only one copy of
        this Memorandum with individual signature pages attached thereto needs
        to be filed of record.

                                           Non-Operators:

WITNESSES:

                                           ------------------
                                           (Company)
                                           Attorney - in - Fact

                                           Date: _______________

March 1, 2002 - JOA                                                  Exhibit "G"

                                       4

<PAGE>

                                 ACKNOWLEDGMENTS

STATE OF _____________

______ OF _____________:

         On this _______ day of ___________, 20___, before me, appeared
______________, to me personally known, who, being by me duly sworn, did say
that he/she is the ____________ of ______________________ and that the foregoing
instrument was signed in behalf of that corporation by authority of its Board of
Directors and acknowledged the instrument to be the free act and deed of that
corporation.

                                             NOTARY PUBLIC in and for

                                             ________________________

My Commission expires:

                                   * * * * *

STATE OF _____________

______ OF _____________:

         On this __________day of ___________, 19___, before me, appeared
______________, to me personally known, who, being by me duly sworn, did say
that he/she is the ____________ of ______________________ and that the foregoing
instrument was signed in behalf of that corporation by authority of its Board of
Directors and acknowledged the instrument to be the free act and deed of that
corporation.

                                             NOTARY PUBLIC in and for

                                             ________________________

My Commission expires:

<PAGE>

                          ATTACHMENT "1" TO EXHIBIT "G"

     Attached to and made a part of that certain Joint Operating Agreement
                 dated effective March 1, 2002, by and between
              BP Exploration & Production Inc. and EEX Corporation

                        MEMORANDUM OF OPERATING AGREEMENT
                             AND FINANCING STATEMENT

I.   DESCRIPTION OF LEASES

II.  OPERATOR

     BP Exploration & Production Inc.

III. REPRESENTATIVES AND ADDRESSES

     BP Exploration & Production                  E.P. Zseleczky
     501 WestLake Park Blvd.                      (281) 366-0939
     Houston, TX 77079
     Facsimile: (281) 366-7569

     EEX Corporation                              Ben Davis
     2500 CityWest Blvd. Suite 1400               (713) 243-3247
     Houston, TX  77042
     Facsimile: (713) 243-3422

Alta JOA 7

                                       6

<PAGE>

                                   EXHIBIT "H"

      Attached to and made a part of that certain Joint Operating Agreement
                  dated effective March 1, 2002, by and between
              BP Exploration & Production Inc. and EEX Corporation.

                          DISPUTE RESOLUTION PROCEDURE

I.    OVERVIEW

      A.  Description and Goals. Arbitration as used in this statement is a
          procedure whereby an Arbitrator resolves any claim(s),
          controversy(ies) or dispute(s) (the "Dispute") between EEX Corporation
          and BP Exploration & Production Inc. (hereinafter referred to
          singularly as "Party" and collectively as "Parties") arising out of,
          relating to or in connection with this Joint Operating Agreement
          (hereinafter "Agreement") including the interpretation, validity,
          termination or breach thereof.

          (i)   Binding: The arbitration process is binding on the Parties and
                this arbitration is intended to be a final resolution of any
                Dispute between the Parties as described above, to the same
                extent as a final judgment of a court of competent jurisdiction.
                Each Party hereby expressly covenants that it shall not resort
                to court remedies except as provided for herein, and for
                preliminary relief in aid of arbitration.

          (ii)  Violation:  A  non-prevailing Party shall pay all legal and
                court costs incurred by the other Party in connection with the
                enforcement of the final resolution of any Dispute under this
                Dispute Resolution Procedure. Suits, actions or proceedings in
                connection with such enforcement shall be instituted in the
                United States District Court for the Southern District of Texas,
                and pursuant to Title IX of the United States Code. Each Party

March 1, 2002 - JOA                    1                             Exhibit "H"

<PAGE>

                       waives any option or objection which it may now
                       orthereafter have to the laying of the venue in any such
                       suit, action or proceeding and irrevocably submits to the
                       jurisdiction of such court in any such suit, action or
                       proceeding.

            B.    Duty to Negotiate: The Parties shall inform one another
                  promptly following the occurrence or discovery of any item or
                  event which might reasonably be expected to result in a
                  Dispute in connection with the Agreement. The Parties will
                  attempt to resolve satisfactorily any such matters.

            C.    Notice of Unresolved Dispute: Should a Dispute arise which the
                  Parties cannot resolve satisfactorily, either Party may
                  deliver to the other Party a written notice of the Dispute
                  with supporting documentation as to the circumstances leading
                  to the Dispute (the "Notice of Dispute"). The Parties, within
                  ten (10) Business Days from delivery of such notice, shall
                  then each appoint a management representative ("Management
                  Representative") who has no prior direct involvement with the
                  subject matter of the Notice of Dispute and who is duly
                  authorized to investigate, negotiate and settle the Dispute.
                  The Management Representative for each Party shall meet and
                  confer as often as they deem reasonably necessary for a period
                  not exceeding thirty (30) days following the delivery of the
                  Notice of Dispute in good faith negotiations to resolve the
                  Dispute amicably. The parties in their sole discretion may
                  also agree to utilize the service of a mediator pursuant to a
                  joint engagement. Unless otherwise provided herein, all such
                  notices shall be served in accordance with the provisions of
                  the Agreement.

II.         ARBITRATION PROCESS

            A.    Arbitration:  If the Parties are unable to resolve the Dispute
                  within forty (40) days  following  the receipt of the Notice
                  of Dispute, or such

March 1, 2002 - JOA                     2                            Exhibit "H"

<PAGE>

                  additional time as may be mutually agreed, the matter shall be
                  submitted to arbitration in accordance with the procedures set
                  forth below.

         B.       Initiation of Arbitration: The arbitration shall be initiated
                  by either party delivering to the other a Notice of Intention
                  to Arbitrate.

         C.       Governing Procedures: Except as expressly provided herein, the
                  arbitration shall be conducted in accordance with procedures
                  that are mutually acceptable to the Parties, including limited
                  depositionless discovery.

                  (i)   Governing Law: The Arbitrator shall apply the governing
                        substantive law of the state chosen by the Parties to
                        the Agreement.

         D.       Arbitrator:  There shall be one Arbitrator, who shall be
                  independent, impartial and experienced in arbitration
                  proceedings. Arbitrator shall be experienced in the oil and
                  gas industry and knowledgeable or specializing as to the
                  subject matter involved in the Dispute. The Arbitrator shall
                  be chosen as follows: the Parties shall have thirty (30) days
                  from the delivery of a Notice of Intention to Arbitrate to
                  mutually agree on an Arbitrator. If the Parties cannot
                  mutually agree within said thirty (30) day period, then the
                  Parties shall, within three (3) days after expiration of the
                  thirty (30) day period, apply to the American Arbitration
                  Association as the Appointing Authority, for the appointment
                  of an Arbitrator for or on behalf of the Parties, and in such
                  case the Arbitrator appointed by the Appointing Authority
                  shall meet the criteria set forth in this Section II.D. and
                  shall act as if mutually agreed to by the Parties.

                  (i)   Conflicts:  Any Arbitrator, prior to his or her
                        appointment, shall disclose to the Parties all actual or
                        perceived conflicts of interest

March 1, 2002 - JOA                    3                             Exhibit "H"

<PAGE>

                           and business relationships involving the Dispute or
                           the Parties, including but not limited to, any
                           professional or social relationships, present or
                           past, with any Party (or its affiliates), including
                           any Party's (or its affiliates) directors, officers
                           and supervisory personnel and counsel. Any Party may
                           challenge in writing the appointment or continued
                           service of any Arbitrator for lack of independence,
                           partiality or any other cause likely to impair such
                           Arbitrator's ability to effectively participate in
                           the proceedings or render a fair and equitable
                           decision. Where such challenge is made, the
                           Appointing Authority shall uphold or dismiss the
                           challenge. In the event a challenge is upheld, the
                           Arbitrator shall be replaced. A replacement will be
                           selected in the same manner as the original
                           Arbitrator was selected. If an Arbitrator resigns or
                           becomes unable or unwilling to continue to serve as
                           the Arbitrator, a replacement shall be selected in
                           the same manner as that Arbitrator was chosen.

                  (ii)     Multi-Party Arbitrations: Where more than two Parties
                           are involved in the Dispute ("Multi-Party
                           Arbitration"), all Parties shall jointly name and
                           agree as the appointment of the Arbitrator meeting
                           the criteria set forth in Section II.D. above. If the
                           Parties cannot agree as to the choice of the
                           Arbitrator within the said thirty (30) days, any of
                           the Parties hereto may in like manner, within three
                           (3) days after written notice to the other Parties,
                           apply to the Appointing Authority for the appointment
                           of an Arbitrator meeting the criteria set forth in
                           Section II.D. above.

                  (iii)    Management of the Arbitration: The Arbitrator shall
                           actively manage the proceedings as he or she deems
                           best so as to make the same expeditious, economical
                           and less burdensome and adversarial than litigation.

         E.       Confidentiality: All documents, briefs, testimony,
                  transcripts,  as well as,

March 1, 2002 - JOA                    4                             Exhibit "H"

<PAGE>

                  all Arbitrator decisions shall be confidential. Likewise, the
                  views, suggestions, admissions, proposals and other
                  information exchanged in the arbitration are confidential and
                  are inadmissible in any other proceeding.

         F.       Costs and Expenses: The Parties involved in the dispute shall
                  be equally responsible for all costs, fees and expenses
                  incurred by the Arbitrator and any other incidental costs
                  incurred in connection with the arbitration proceeding shall
                  also be borne equally by the Parties. Each Party is solely
                  responsible for its own attorneys' fees and expenses incurred
                  in the Arbitration. In the event of a Multi-Party Arbitration,
                  all costs and expenses shall be borne equally by all Parties.

         G.       Submissions: Within thirty (30) days after the selection of
                  the Arbitrator, each Party shall provide the Arbitrator with a
                  short and plain submission defining the issues to be decided
                  and the nature of the relief that the Arbitrator may award
                  (the "Submission"). This Submission shall explicitly authorize
                  the Arbitrator to decide these issues. This authorization
                  shall stay in force for period no longer than nine (9) months
                  from this Submission. If the Parties are unable to reach
                  consensus as to the issues involved, the Arbitrator in his or
                  her sole discretion shall frame the issues through a
                  reasonable procedure. The Arbitrator will render decisions on
                  the specific issues established and shall fashion any remedy
                  that the Arbitrator deems appropriate so long as that remedy
                  is consistent with the Parties' Submissions hereunder. Any
                  money judgment entered by the Arbitrator shall be payable in
                  U.S. dollars.

         H.       Transcriptions: The presentations and argument will be
                  transcribed  for the benefit of the  Arbitrator  and the
                  Parties.

         I.       Discovery: Commencing thirty (30) days after the receipt of
                  the opposing Party's Submission, each Party may serve upon the
                  other

March 1, 2002 - JOA                    5                             Exhibit "H"

<PAGE>

                  Party up to ten (10) requests for the production of
                  documents, including subparts. The requests shall be made in
                  good faith and not be served for the purpose of delay or
                  harassment. Each request shall describe the type of
                  document(s) sought and each request shall be limited to
                  documents that are relevant to a claim or defense in the
                  Arbitration proceeding, or reasonably calculated to lead to
                  the discovery of admissible evidence. The requests need not be
                  served all at once but may be served in stages.

                  (i)      The Party served with a request under this provision
                           shall provide the adverse Party with copies of the
                           requested documents, and identify the request to
                           which each document is responsive, within twenty (20)
                           days of the receipt of the request. If the Party
                           served with a request objects to the production of
                           any of the requested documents, it shall nevertheless
                           produce within the permitted time all documents
                           responsive to any request that is not objected to by
                           that Party.

                  (ii)     A Party that is served with a request may challenge
                           the propriety of the request within the time
                           permitted for response by a short written objection
                           which shall be forwarded to the adverse Party and to
                           the Arbitrator. The adverse Party shall submit its
                           response, if any, to the objecting Party and the
                           Arbitrator within five (5) days of receipt of the
                           objection. The Arbitrator shall consider the request,
                           the objection and the response, if any, and decide
                           whether the production shall be allowed or denied or
                           whether the request should be modified within ten
                           (10) days after the submission of the adverse Party's
                           response.

         J.       Presentations: No later than twenty-five (25) days prior to
                  the date that presentations to the Arbitrator are to begin,
                  each Party will submit to the Arbitrator and serve on the
                  other Party a written position statement. The original
                  statement of each Party shall not exceed thirty-five (35)
                  typewritten letter-size pages. Each Party shall have the right
                  to submit

March 1, 2002 - JOA                    6                             Exhibit "H"

<PAGE>

                  reply statements no later than fifteen (15) days prior to the
                  date of the presentation. Such reply statements shall not
                  exceed fifteen (15) typewritten letter-size pages.

                  (i)      All documents and affidavits that a Party intends to
                           use during its presentation shall be submitted to the
                           Arbitrator and served on the other Party with the
                           position and reply statements. All demonstrative
                           exhibits shall be exchanged five (5) days in advance
                           of the presentations.

                  (ii)     The presentations to the Arbitrator shall extend for
                           such time as the Arbitrator agrees to be appropriate.
                           In the absence of any agreement, the presentations
                           for both Parties shall extend for no longer than two
                           (2) days and shall be concluded within six (6) months
                           after selection of the Arbitrator. Presentations of
                           each Party shall occur successively with no
                           intervening delay.

                  (iii)    Each Party shall make an oral and/or documentary
                           presentation of its position in such order and in
                           accordance with the time schedule established by the
                           Arbitrator. The Arbitrator may question each of the
                           presenters during or following any and all
                           presentations.

          The Arbitrator shall determine a reasonable time and location for the
          presentations.

          K.      Decision and Award:  The Arbitrator shall promptly (within
                  sixty (60) days of conclusion of the presentations or such
                  longer period as the Parties may mutually agree) determine the
                  claims of the Parties and render a final decision in writing.
                  The decision shall state with specificity the findings of fact
                  and conclusions of law on which it rests. The decision
                  rendered by the Arbitrator may be enforced in accordance with
                  Section I.A.(ii), above, and may only be appealed pursuant to

March 1, 2002 - JOA                    7                             Exhibit "H"

<PAGE>

                  Section L below. The decision shall be served upon each of the
                  Parties by facsimile transmission and by first class mail.

                  (i)      If applicable law allows pre-award interest, the
                           Arbitrator may, in his or her discretion, grant
                           pre-award interest and, if so, such interest may be
                           at commercial rates in the state chosen by the
                           Parties pursuant to Section II.C.(i) during the
                           relevant period. Each Party shall be responsible for
                           its own attorney's fees and costs of arbitration. The
                           Arbitrator shall not award consequential, punitive,
                           indirect or other noncompensatory damages.

                  (ii)     Within ten (10) days of receipt of the award either
                           side may submit a Motion to Modify the award. A
                           response shall be due within fifteen (15) days
                           thereafter and the Arbitrator shall rule thereon
                           within fifteen (15) days after receipt of the
                           response.

                  (iii)    Judgment on the award may be entered in a United
                           States District Court for the Southern District of
                           Texas at any time within one year after the decision
                           is made.

        L.        Vacation of Award and Appeal: An appeal from an order or
                  judgment pursuant to this Section II.L. shall be instituted in
                  the United States District Court for the Southern District of
                  Texas. The court may vacate the award only if the award was
                  procured by or through fraud or corruption. Each Party waives
                  any option or objection which it may now or thereafter have to
                  the laying of the venue of any such suit, action or proceeding
                  and irrevocably submits to the jurisdiction of the court in
                  any such suit, action or proceeding. Each Party agrees that a
                  remedy at law for a violation of this Section II.L. may not be
                  adequate and therefore agrees that the remedies of specific
                  performance and injunctive relief shall be available in the
                  event of any violation in addition to any other right or
                  remedy at law or in equity to which any

March 1, 2002 - JOA                    8                             Exhibit "H"

<PAGE>

               Party may be entitled.

          M.   Res Judicata: To the extent permitted by law, any decision of the
               Arbitrator shall not be res judicata or have any binding effect
               in any other litigation or arbitration where any Party to this
               Agreement may also be a party.

March 1, 2002 - JOA                    9                             Exhibit "H"

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