Document:

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                                                                   EXHIBIT 10.34

                               OPERATING AGREEMENT

                                       OF

                               SHANA NATIONAL LLC

         This Operating Agreement is made as of September 5, 2001, by the
undersigned member pursuant to and in accordance with the Delaware Limited
Liability Company Act (the "Act").

         1. Formation; Name. The limited liability company (the "Company") was
formed on September 5, 2001 upon the filing of the certificate of limited
liability company in the office of the Secretary of State of the State of
Delaware in accordance with the Act. The name of the Company is "Shana National
LLC" and all business shall be conducted under that name.

         2. Purpose. The purpose for which the Company has been formed is to
engage in any lawful act or activity which the member may from time to time
determine.

         3. Registered Office. The registered office of the Company in the State
of Delaware is located at 2711 Centerville Road, Suite 400, Wilmington, Delaware
19808.

         4. Registered Agent. The name and address of the registered agent of
the Company for service of process on the Company in the State of Delaware are
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.

         5. Admission. Upon execution and delivery of this Operating Agreement,
SHANA PETROLEUM COMPANY, A MISSISSIPPI CORPORATION, is admitted as the sole
member of the Company. The member shall not be required to make any capital
contribution to the Company but may make capital contributions from time to
time.

         6. Resignation of Member. The member may resign from the Company at any
time.

         7. Assignment of Interest. The member may assign all or any portion of
its membership interest in the Company to any person ("Assignee"). Each Assignee
shall become a member of the Company upon the approval of the member.

         8. Title to Property. Title to any property (whether real, personal or
mixed) owned by or leased to the Company shall be held in the name of the
Company, or in the name of any nominee the member may in its discretion
designate.

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         9. Members. There shall be a managing member ("Managing Member") of the
Company, which Managing Member shall have the powers and duties equivalent to
the duties of a corporate board of directors.

         10. Profits and Losses. All profits and losses of the Company shall be
allocated to the member. The member shall not be liable for any debts or losses
of the Company beyond the aggregate amount of its capital contribution, except
as otherwise required by law.

         11. Distributions. At such times as determined by the member taking
into account, among other things, the member's obligation to the extent same
exists, to make distributions to its members under its operating agreement, the
member shall cause the Company to distribute to the member any cash or property
held by it which is neither reasonably necessary for the operation of the
Company nor in violation of the Act. The member shall be liable to the Company
for distributions made pursuant to this Section 11 only to the extent now or
hereafter provided by the Act.

         12. Dissolution. The Company shall dissolve, and its affairs shall be
wound up, upon the occurrence of an event of dissolution of the Company under
the Act.

         13. Amendment. This Operating Agreement may be amended only in writing.

         14. Application of Delaware Law. This Operating Agreement, and the
application of interpretation hereof, shall be governed exclusively by its terms
and by the laws of the State of Delaware, and specifically the Act.

         15. Taxable Year. The taxable year of the Company shall be the calendar
year.

         16. No Third Party Beneficiaries. No person, other than the member,
shall have any rights hereunder.

         17. Headings. The headings in this Operating Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define or
limit the scope, extent or intent of this Operating Agreement or any provision
hereof.

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         IN WITNESS WHEREOF, the undersigned has caused the execution of this
Operating Agreement of Shana National LLC, as of September 5, 2001.

                                SHANA PETROLEUM COMPANY, Sole Member

                                By: /s/ EDWARD E. MATTNER
                                    --------------------------------
                                    Name:  Edward E. Mattner
                                    Title: President

           [Signature Page of Shana National LLC, Operating Agreement
                         dated as of September 5, 2001]

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                              AMENDED AND RESTATED
                               OPERATING AGREEMENT

                                       OF

                               SHANA NATIONAL LLC

                                     *****

         This Amended and Restated Operating Agreement is made as of September
12, 2001, by the undersigned member pursuant to and in accordance with the
Delaware Limited Liability Company Act (the "Act").

1.       Formation; Name. The limited liability company (the "Company") was
         formed on September 5, 2001 upon the filing of the certificate of
         limited liability company in the office of the Secretary of State of
         the State of Delaware in accordance with the Act. The name of the
         Company is "Shana National LLC" and all business shall be conducted
         under that name.

2.       Purpose. The purpose for which the Company has been formed is to
         engage in any lawful act or activity which the member may from time to
         time determine.

3.       Registered Office. The registered office of the Company in the State of
         Delaware is located at 2711 Centerville Road, Suite 400, Wilmington,
         Delaware 19808.

4.       Registered Agent. The name and address of the registered agent of the
         Company for service of process on the Company in the State of Delaware
         are Corporation Service Company, 2711 Centerville Road, Suite 400,
         Wilmington, Delaware 19808.

5.       Admission. Upon execution and delivery of this Operating Agreement,
         SHANA PETROLEUM COMPANY, A MISSISSIPPI CORPORATION, was admitted as the
         sole member of the Company. Subsequent thereto, Shana Petroleum Company
         transferred its entire membership interest to Gascon Partners, which
         thereupon became the sole member. Subsequent thereto, Gascon Partners
         transferred its entire membership interest to NEG Holding LLC, which
         thereupon became the sole member. Subsequent thereto, on September 12,
         2001, NEG Holding LLC transferred its entire membership interest to NEG
         Operating LLC which thereupon became the sole member. Upon the last of
         such transfers, the sole member determined to amend and restate this
         Operating Agreement in the manner set forth herein. The member shall
         not be required to make any capital contribution to the Company but may
         make capital contributions from time to time.

6.       Resignation of Member. The member may resign from the Company at any
         time.

7.       Assignment of Interest. The member may assign all or any portion of its
         membership interest in the Company to any person ("Assignee"). Each
         Assignee shall become a member of the Company upon the approval of the
         member.

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8.       Title to Property. Title to any property (whether real, personal or
         mixed) owned by or leased to the Company shall be held in the name of
         the Company, or in the name of any nominee the member may in its
         discretion designate.

9.       Members. There shall be a managing member ("Managing Member") of the
         Company which Managing Member shall have the powers and duties
         equivalent to the duties of a corporate board of directors.

10.      Profits and Losses. All profits and losses of the Company shall be
         allocated to the member. The member shall not be liable for any debts
         or losses of the Company beyond the aggregate amount of its capital
         contribution, except as otherwise required by law.

11.      Distributions. At such times as determined by the member taking into
         account, among other things, the member's obligation to the extent same
         exists, to make distributions to its members under its operating
         agreement, the member shall cause the Company to distribute to the
         member any cash or property held by it which is neither reasonably
         necessary for the operation of the Company nor in violation of the Act.
         The member shall be liable to the Company for distributions made
         pursuant to this Section 11 only to the extent now or hereafter
         provided by the Act.

12.      Dissolution. The Company shall dissolve, and its affairs shall be wound
         up, upon the occurrence of an event of dissolution of the Company under
         the Act.

13.      Amendment. This Operating Agreement may be amended only in writing.

14.      Application of Delaware Law. This Operating Agreement, and the
         application of interpretation hereof, shall be governed exclusively by
         its terms and by the laws of the State of Delaware, and specifically
         the Act.

15.      Taxable Year. The taxable year of the Company shall be the calendar
         year.

16.      No Third Party Beneficiaries. No person, other than the member, shall
         have any rights hereunder.

17.      Headings. The headings in this Operating Agreement are inserted for
         convenience only and are in no way intended to describe, interpret,
         define or limit the scope, extent or intent of this Operating Agreement
         or any provision hereof.

18.      Other Matter. Gascon Partners, for itself and not as Managing Member of
         NEG Holding LLC, hereby agrees to be personally liable for the debt,
         obligations and liabilities of the Company to the extent that same are
         attributable to any oil or gas property owned by the Company and were
         incurred during the period that all of the following conditions
         existed: (i) NEG Operating LLC was the Managing Member of the Company,
         (ii) NEG Holding LLC was the Managing Member of NEG Operating LLC, and
         (iii) Gascon Partners was the Managing Member of KEG Holding LLC.

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         IN WITNESS WHEREOF, the undersigned has caused the execution of this
Operating Agreement of Shana National LLC, as of September 12, 2001.

                              NEG OPERATING LLC, Sole Member
                              By: NEG Holding LLC, Sole Member
                              By: Gascon Partners, Managing Member
                              By: Astral Gas Corp., General Partner

                              With respect only to Paragraph 18 hereof,
                              Gascon Partners

                              By: Astral Gas Corp. and Cigas Corp.,
                              General Partners

                              By: EDWARD E. MATTNER
                                  --------------------------------------
                                  Name:  Edward E. Mattner
                                  Title: President

           [Signature Page of Shana National LLC, Operating Agreement
                         dated as of September 12, 2001]

                                       3<PAGE>
                                                                   EXHIBIT 10.35

                              MANAGEMENT AGREEMENT

         THIS MANAGEMENT AGREEMENT ("Agreement") is entered into as of May 1,
2001 by and between National Energy Group, Inc. ("NEG") and NEG Operating LLC, a
Delaware Limited Liability Company, ("LLC").

                                    RECITALS

         WHEREAS, LLC is together with Shana National LLC, a Delaware Limited
Liability Company ("Shana LLC"), of which LLC is the sole member, (LLC and Shana
LLC being together referred to as "Operating LLC") is the owner of certain oil
and gas properties formerly owned by NEG and Shana Petroleum Company, and
anticipates acquiring other oil and gas properties from time to time;

         WHEREAS, LLC is a single member LLC whose single member is NEG Holding
LLC, whose members are NEG and Gascon Partners, an affiliate of Arnos Corp.;

         WHEREAS, pursuant to the terms of the Plan of Reorganization for NEG
effective as of August 4, 2000, provision was made for the creation and
operation of an LLC that would own properties formerly owned by NEG and which
would receive assets and cash from Arnos Corp. or an affiliate thereof;

         WHEREAS, the member of the LLC and its members desire that the assets
of the Operating LLC be managed by management familiar with the oil and gas
business and have determined that NEG can provide such management;

         WHEREAS, as Operating LLC desires that NEG be engaged to manage the
properties owned by the Operating LLC;

         NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:

                                   AGREEMENTS

1        APPOINTMENT; COMMENCEMENT DATE; AND TERM

         1.1 APPOINTMENT. LLC appoints and employs NEG as its agent to manage
and operate the Operating LLC's oil and gas assets wherever found and howsoever
constituted ("Managed Properties"). By acting within the scope of the authority
granted by this Agreement NEG shall be acting only as the appointed agent and
representative of LLC with respect to only the Managed Properties, and nothing
in this Agreement shall be construed as creating a tenancy, partnership, joint
venture, or any other relationship between the NEG and LLC, other than as exists
independently of this Agreement.

         1.2 COMMENCEMENT DATE. This Agreement and NEG's appointment pursuant to
paragraph 1.1 shall be effective on May 1, 2001 (the "Commencement Date").

         1.3 TERM. Subject to earlier termination pursuant to paragraphs 5.1 and
5.2, this Agreement shall be in effect until the earlier of (a) November 1,
2006, and (b) such time as the Operating LLC no longer owns any Managed
Properties.

2        OPERATIONS

         2.1 GENERAL. NEG shall supervise and direct the general day-to-day
operations of the Managed Properties. In performing its duties, NEG shall
operate the Managed Properties using operational practices and procedures that
are consistent with those of other Managed Properties of similar type, size and
quality and with the operational practices and procedures which NEG employed
with respect to its own properties from time to time.

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         2.2 EMPLOYEES. All personnel of the Managed Properties, except for
directors of NEG, shall be employees of or consultants to NEG. NEG shall have
the authority to hire, supervise, direct and discharge all personnel working in
the Managed Properties.

         2.3 LICENSES AND PERMITS. All fees and expenses relating to such
licenses, approvals and permits, as are necessary to operate the Managed
Properties, shall be the paid by LLC.

         2.4 INSURANCE. NEG shall obtain for LLC and LLC shall maintain and pay
all premiums relating to insurance coverage with respect to the Managed
Properties.

         2.5 OPERATING EXPENSES. All costs and expenses of operating the Managed
Properties in the ordinary course of business, including without limitation,
costs of insurance coverage, repairs and maintenance to the Managed Properties
shall be the obligation of and paid by LLC. All debts and liabilities incurred
by NEG within the scope of the authority granted and permitted herein in the
course of its management and operation of the Managed Properties shall be the
debts and liabilities of Operating LLC only, and, subject to the provisions of
Paragraph 4 hereof, NEG shall not be liable therefor for its own account. NEG
shall not, however, without the prior written consent of LLC, which consent may
be withheld by LLC at its absolute discretion: (a) incur any capital
expenditures at the Managed Properties in excess of those amounts approved
pursuant to an operating budget adopted by LLC, (b) incur any indebtedness on
the part of LLC other than in the ordinary course of business of the Managed
Properties, or (c) permit any lien or other encumbrance to be placed on any
Managed Properties assets as a result of NEG's failure to perform its
obligations hereunder.

         2.6 OPERATING REVENUES. All revenues generated at the Managed
Properties shall be the sole property of Operating LLC and all such revenues
shall be accounted for and deposited by NEG into Operating LLC's designated bank
accounts.

         2.7 NEG HOLDING LLC'S RIGHTS TO ACCESS. Notwithstanding any provision
herein to the contrary, NEG Holding LLC shall have the right to have its
representatives on the premises of the Managed Properties at all times and such
representatives shall have full access to all areas of the Managed Properties at
all times and shall be entitled to inspect, observe and audit all aspects of the
operations of the Managed Properties; provided that such activities do not
interfere with the orderly operation of the Managed Properties by NEG.

3        MANAGEMENT FEE

         3.1 MANAGEMENT FEE. As consideration for the performance of its
obligations hereunder, LLC will pay to NEG a fee which shall be payable monthly
in arrears initially equal to 115% ("Fee") of the actual direct and indirect
administrative and reasonable overhead costs incurred by NEG in operating the
Managed Properties pursuant hereto, it being agreed that for the purposes of
this provision, the salaries of the Chief Executive Officer of NEG shall be 70%
attributable to the Managed Properties, the salaries of the Vice-President and
General Counsel and of the Chief Financial Officer shall be 20% attributable to
the Managed Properties. The fee shall be set forth with specificity and shall be
billed to LLC on a monthly basis and paid within 30 days thereafter, and
interest or any unpaid amounts shall accrue at the prime rate per annum as
published by Citibank New York, New York. No bill shall be deemed to have been
rendered unless a copy thereof has been delivered to NEG Holding LLC.
Notwithstanding the foregoing, either LLC or NEG may, at any time and from time
to time, seek to change the amount of the Fee to any other number within the
range of 110% to 115% and the parties shall make such change if they agree it is
warranted, but, absent such agreement, the Fee shall remain as it was prior to
time the change was sought. In addition, such parties will consult with each
other with a view to ensuring that the actual overhead costs attributable to the
managed properties be properly reflected in the Fee which is paid to NEG.

         3.2 COMPENSATION OF NEG DIRECTORS AND OFFICERS. Any compensation due
and owing from NEG to any director, officer or employee or consultant of NEG
shall be paid solely by NEG, provided, however, that to the extent that any such
compensation is part of the actual administrative and reasonable overhead costs
incurred by NEG as specified in Paragraph 3.1 hereof, then LLC shall comply with
Paragraph 3.1 with respect thereto.

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<PAGE>

4        INDEMNIFICATION

         4.1 INDEMNIFICATION OF NEG.

                  4.1.1 LLC shall indemnify and hold NEG free and harmless from
any liability for injury or death to persons or damage or destruction of
property due to any cause whatsoever, either in or about the Managed Properties
or elsewhere, as a result of the performance of this Agreement by NEG, its
agents, officers, directors, employees or consultants, irrespective of whether
alleged to be caused, wholly or partially, by NEG, its agents, officers,
directors, or employees.

                  4.1.2 LLC shall reimburse NEG upon demand for any money or
other property that NEG is required to pay out for judgments, settlements, or
expenses in defense of any claim, civil or criminal action, proceeding, charge,
or prosecution made, instituted, or maintained against NEG or LLC, jointly or
severally, because of the condition or use of the Managed Properties or arising
out of or based upon any law, regulation, requirement, contract, or award.

                  4.1.3 LLC shall defend any claim, action, suit, or proceeding
brought against NEG or LLC, jointly or severally, arising out of or connected
with any of the foregoing, and shall hold harmless and fully indemnify NEG from
any judgment, loss, or settlement on account thereof, regardless of the
jurisdiction in which any such claims, actions, suits or proceedings may be
brought.

                  4.1.4 Notwithstanding the provisions of paragraphs 4.1.1,
4.1.2, and 4.1.3, LLC shall not be liable to indemnify and hold NEG harmless
from any liability resulting from the gross negligence, misconduct or willful
misconduct of NEG, its agents, employees, consultants, officers, or directors,
including employees selected and supervised by NEG under this Agreement in
connection with NEG's management and/or operation of the Managed Properties.

         4.2      INDEMNIFICATION OF LLC.

                  4.2.1 NEG agrees to indemnify and hold LLC free and harmless
from any liability for injury or death to any person or damage or destruction of
property due to the gross negligence, misconduct or willful misconduct of NEG,
its agents, employees, consultants, officers, or directors in connection with
NEG's management and/or operation of the Managed Properties.

                  4.2.2 NEG agrees to reimburse LLC on demand for any money or
other property that LLC is required to pay out by reason of the negligence,
gross negligence, misconduct or willful misconduct of NEG.

                  4.2.3 NEG agrees to defend any claim, action, suit or
proceeding brought against LLC arising out of or in connection with the gross
negligence, misconduct or willful misconduct of NEG, and to hold harmless and
fully indemnify LLC from any judgment, loss, or settlement on account thereof,
regardless of the jurisdiction in which any such claims, actions, suits, or
proceedings may be brought.

         4.3      GENERAL. As used in this paragraph, the party or parties
required to indemnify shall be referred to as the "Indemnitor," and the party or
parties entitled to be indemnified shall be referred to as the "Indemnitee." If
the Indemnitor becomes obligated to the Indemnitee, or if a suit, action,
investigation, claim, or proceeding is instituted as a result of which the
Indemnitor may become obligated to the Indemnitee, the Indemnitee shall promptly
give written notice to the Indemnitor. The Indemnitor shall defend, contest, and
otherwise protect against any such suit, action, investigation, claim, or
proceeding at the Indemnitor's own cost and expense. The Indemnitee shall have
the right but not the obligation to participate at its own expense in the
defense thereof by counsel of its own choice. If the Indemnitor fails timely to
defend, contest, or otherwise protect against any such suit, action,
investigation, claim, or proceeding, the Indemnitee shall have the right to
defend, contest, or otherwise protect against the same and may make any
compromise or settlement thereof consented to in writing by the Indemnitor and
recover the entire cost thereof from the Indemnitor including, but not limited
to, reasonable attorneys' fees, disbursements, and all amounts paid as a result
of such suit, action, investigation, claim, or proceeding, or the compromise or
settlement thereof.

                                        3
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5        TERMINATION

         5.1 TERMINATION BY LLC. LLC may at its sole option, without prior
notice except as set forth in this Paragraph 5.1, terminate this agreement if
NEG fails, in the opinion of LLC, to correct, on a continuing basis, any actions
or failure to take action with respect to the Managed Properties in accordance
with the standards set forth in this Agreement after NEG has been given, at
least 90 days prior to the termination, written notice of LLC's intent to
terminate this Agreement.

         5.2 TERMINATION BY NEG. NEG may terminate this Agreement at any time
upon giving LLC 60 days written notice of such termination.

6        MISCELLANEOUS PROVISIONS

         6.1 FURTHER ACTS. Each party shall execute all documents and take all
other actions necessary to effectuate the provisions and purposes of this
Agreement.

         6.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior oral and written agreements between the parties concerning the subject
matter hereof.

         6.3 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.

             Notices shall be given in writing and are deemed given when
received and shall be given to the following addresses and/or telecopy numbers:

          (a)      If to NEG:        National Energy Group, Inc.
                                     4925 Greenville Avenue, Suite 1400
                                     Dallas, Texas 75206
                                     (214)692-5055 - Facsimile

          (b)      If to LLC:        NEG Operating LLC
                                     c/o Icahn Associates Corp.
                                     767 Fifth Avenue, 47th Floor
                                     New York, NY 10153
                                     (212)750-5815 - Facsimile

         6.4 COUNTERPARTS. This Agreement maybe executed in counterparts, each
of which shall be deemed an original, and all of which, taken together, shall
constitute one and the same instrument.

         DATED this 12th day of September, 2001

LLC                                          NEG
NEG Operating LLC                            National Energy Group, Inc.
By NEG Holding LLC, Member
By Gascon Partners, Member
By Astral Gas Corp., General Partner         By: /s/ BOB G. ALEXANDER
                                                ------------------------------
                                                CEO
By: /s/ EDWARD E. MATTNER
   ---------------------------------
   Edward E. Mattner, President

                                       4

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