Document:

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                                                                   EXHIBIT 10.19

                               FARMOUT AGREEMENT

                                     BETWEEN

                               CHEVRON U.S.A. INC.

                                        &

                              KEWANEE INDUSTRIES, INC.

                                       AND

                              ENERGY PARTNERS, LTD.

                               DATED JUNE 9, 1998

                           MAIN PASS BLOCKS 122 & 133
                               OFFSHORE LOUISIANA

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                                FARMOUT AGREEMENT

                                TABLE OF CONTENTS

1.     DEFINITIONS ................................................... 1
       1.1.    Farmout Lease(s) ...................................... 1
       1.2.    Farmout Well(s) ....................................... 1
       1.3.    Optional Well(s) ...................................... 1
       1.4.    Authorization for Expenditure (AFE) ................... 1
       1.5.    Original AFE .......................................... 1
       1.6.    Supplemental AFE ...................................... 1
       1.7.    Subsequent AFE ........................................ 2
       1.8.    AFE Operations ........................................ 2
       1.9.    AFE Equipment ......................................... 2
       1.10.   Earning Well(s) ....................................... 2
       1.11.   Payout Amount ......................................... 2
       1.12.   Net Proceeds Amount ................................... 2
       1.13.   Gross Proceeds ........................................ 2
       1.14.   Chargeable Expenditures ............................... 2
       1.15.   Paying Quantities ..................................... 2

2.     TERMINATION OF LETTER AGREEMENT ............................... 3

3.     RIGHTS AND ACCESS ............................................. 3

4.     FARMOUT WELLS ................................................. 3

5.     OPTIONAL WELLS ................................................ 5

6.     EARNING ....................................................... 5

7.     OPERATIONS AFTER EARNING WELL COMPLETION ...................... 7

8.     PURCHASE AND SALE OF OIL AND GAS .............................. 8

9.     PAYOUT ACCOUNT ................................................ 8

10.    DRILLING AND GEOLOGICAL REQUIREMENTS .......................... 9

11.    REPORTS AND STATEMENTS ........................................ 9
       11.1.   Notice of Commencement ................................ 9
       11.2.   Inventory of Material and Equipment ................... 9

12.    TAX MATTERS ...................................................10

13.    COMPLIANCE ....................................................10

14.    INSURANCE .....................................................10
       14.1.   Provision of Certificate ..............................10
       14.2.   Specific Insurance of Farmout Risks ...................10

15.    INDEMNITY .....................................................10

16.    PRIOR OBLIGATIONS MAINTAINED ..................................11

17.    NO LIENS OR ENCUMBRANCES ......................................11

18.    NO PLEDGES ....................................................11

19.    PAYMENT OF DEBTS, CHARGES .....................................11

20.    BREACH ........................................................11

21.    OTHER RIGHTS, REMEDIES RESERVED ...............................11

22.    NO WAIVER .....................................................11

23.    AUDIT RIGHTS ..................................................12

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24.    ASSIGNMENTS ...................................................12

25.    FORCE MAJEURE .................................................12

26.    NOTICES .......................................................12

27.    AMENDMENTS ....................................................12

28.    TOPICAL HEADINGS ..............................................12

EXHIBITS
       'A'     FARMOUT LEASES, FARMOUT WELLS AND OPTIONAL WELLS
       'B'     TAX PARTNERSHIP
       'C'     DRILLING AND GEOLOGICAL REQUIREMENTS
       'D'     INSURANCE PROVISIONS
       'E'     ORIGINAL AFES
       'F'     FORM ASSIGNMENT

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                                FARMOUT AGREEMENT

     THIS AGREEMENT is made and entered into DATED JUNE 9, 1998, by and between
CHEVRON U.S.A. INC., a Pennsylvania corporation (hereinafter sometimes referred
to as "Chevron"), KEWANEE INDUSTRIES, INC., a Pennsylvania corporation
(hereinafter sometimes referred to as "Kewanee"), and ENERGY PARTNERS, LTD., a
Delaware corporation (hereinafter sometimes referred to as "EPL").

                                   WITNESSETH

     WHEREAS, Chevron owns certain mineral rights and interests created by a
certain oil and gas lease covering Main Pass Block 122, and Chevron, Kewanee and
Mobil Oil Exploration & Producing Southeast Inc. ("Mobil") own certain mineral
rights and interests created by a certain oil and gas lease covering Main Pass
Block 133 (both being collectively referred to as the "Farmout Leases"), both
being Offshore Louisiana and further described on the attached Exhibit `A'.
Pursuant to said Farmout Leases, Chevron and Kewanee have the right to conduct
operations including, but not limited to, the drilling, recompletion, reworking,
reconditioning, sidetracking and completion (and associated downhole operations)
of wells which are the subject of this Agreement (the "Farmout Wells"), and to
own the production obtained from such wells; and

     WHEREAS, Chevron and EPL have entered into a Letter Agreement dated April
9, 1998 (the "Letter Agreement") pursuant to which EPL agreed to pay the costs,
and physically manage the conduct of specific downhole well activities approved
pursuant to the provisions of this Agreement (such activities being sometimes
hereinafter referred to as "AFE Operations") in an effort to re-establish
production from the above-referenced wells, with EPL recouping costs (as fully
described herein); and

     WHEREAS, Chevron and EPL desire to execute this Agreement to supersede said
Letter Agreement, and to include the detailed provisions necessary to realize
the intents generally outlined in said Letter Agreement, as well as to allow
Kewanee to ratify such intents;

     NOW, THEREFORE, in consideration of the mutual benefits and advantages
accruing to the parties hereto, Chevron, Kewanee and EPL have agreed and do
hereby agree, as follows:

1.   DEFINITIONS

     As used in this Agreement, the following words and terms shall be defined
     as follows:

     1.1.  FARMOUT LEASE(S)

           The oil and gas lease(s) governing operations in and on the Farmout
           Wells, being OCS-G 13964 (covering Main Pass Block 122) and OCS-G
           1633 (covering Main Pass Block 133).

     1.2.  FARMOUT WELL(S)

           Each well (listed on Exhibit "A" attached) in which EPL has the
           obligation to conduct operations in accordance with the terms of this
           Agreement, with the intent of establishing production in Paying
           Quantities.

     1.3.  OPTIONAL WELL(S)

           Each well (listed on Exhibit "A" attached) in which EPL has the
           option to conduct operations in accordance with the terms of this
           Agreement, with the intent of establishing production in Paying
           Quantities. An AFE for an Optional Well must be approved by Chevron,
           Kewanee and EPL prior to conducting operations on said well.

     1.4.  AUTHORIZATION FOR EXPENDITURE (AFE)

           A written summary, approved by Chevron and Kewanee and in a format
           similar to that which is standard in the oil and gas industry, of a
           proposed AFE Operation to be performed by EPL in an effort to
           establish a well capable of producing in Paying Quantities. Said
           summary shall include, but not be limited to, the estimated cost
           associated with the conduct of such Operation and the method by which
           the Operation shall be conducted. An AFE under this Agreement can be
           an Original AFE, a Supplemental AFE or a Subsequent AFE. Each
           Original AFE for the Farmout Wells is attached hereto as Exhibit 'E',
           and shall be considered approved by Chevron, Kewanee and EPL for
           purposes of this Agreement.

     1.5.  ORIGINAL AFE

           An AFE covering the first AFE Operation on a Farmout Well pursuant to
           this Agreement.

     1.6.  SUPPLEMENTAL AFE

           An AFE which expands or changes the cost or scope in an Original AFE
           for a specific Farmout Well, which plan is commenced within thirty
           (30) days of the completion of operations under an Original AFE for
           the same well.

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     1.7.  SUBSEQUENT AFE

           Each AFE (other than an Original or Supplemental AFE) for a specific
           Farmout or Optional Well which is approved and implemented following
           the complete implementation of the Original AFE and any Supplemental
           AFE for such well.

     1.8.  AFE OPERATIONS

           All activities set forth on the attached Original AFEs, and on any
           other approved Original, Supplemental or Subsequent AFEs, which are
           conducted on the Farmout and/or Optional Wells. All AFE Operations
           must be approved by Chevron, Kewanee and EPL. AFE Operations shall
           not include plugging and abandonment of any Farmout Well, unless
           separately agreed to in writing by Chevron, Kewanee and EPL. AFE
           Operations shall include only those operations conducted under
           Original, Supplemental or Subsequent AFEs, whether conducted by
           Chevron or EPL (and if by Chevron, for cost purposes only as set
           forth on such Original AFEs).

     1.9   AFE EQUIPMENT

           All equipment (including but not limited to pipelines, flowlines,
           risers, structures, processing vessels and wellheads) and materials
           for AFE Operations in, on or in support of the Farmout Wells pursuant
           to this Agreement. The acquisition and installation (pursuant to an
           AFE) of all AFE Equipment must be approved by Chevron, Kewanee and
           EPL.

     1.10. EARNING WELL(S)

           The Farmout Well(s) that EPL or Chevron has caused to produce oil
           and/or gas in Paying Quantities, the production from which EPL shall
           recover costs paid by EPL to generate said production.

     1.11. PAYOUT AMOUNT

           The total aggregate amount of money to be recouped by EPL, from EPL's
           Net Proceeds Amount, for costs of AFE Operations conducted and AFE
           Equipment installed. Such aggregate amount shall be the total of the
           following:

           (a) one hundred twenty percent (120%) of the actual costs paid or
               incurred by EPL for AFE Operations performed and AFE Equipment in
               and on the Farmout Wells and Farmout Leases; plus

           (b) 120% of all actual costs incurred due to emergencies or force
               majeure occurrences; minus

           (c) any applicable "E&S Penalty" or "Additional Mechanical Costs", as
               more fully described in Article 6.3 below.

     1.12. NET PROCEEDS AMOUNT

           The amount by which EPL's share of "Gross Proceeds" (as defined
           below) exceed EPL's share of "Chargeable Expenditures" (as defined
           below) for any accounting month.

     1.13. GROSS PROCEEDS

           The total aggregate amount received by EPL from the sale of its
           working interest share of oil, gas, casinghead gas, associated
           hydrocarbon liquids and all other salable products obtained from or
           attributable to the Earning Well(s) prior to its recovery of the
           Payout Amount, less ordinary and reasonable expenses of marketing the
           product therefrom.

     1.14. CHARGEABLE EXPENDITURES

           As used herein, Chargeable Expenditures shall be EPL's share of (1)
           lease royalties that are applicable to its working interest in the
           Earning Well(s), (2) severance, production, excise and other
           non-income taxes attributable to its working interest in said
           production, and 3) its share of lease operating expenses associated
           with a Mobil non-consented interest, if any, acquired by EPL pursuant
           to Article 4.4 of this Agreement.

     1.15. PAYING QUANTITIES

           For the purpose of this Agreement, a Farmout Well shall be considered
           as being capable of producing in Paying Quantities (and therefore
           classified as an Earning Well) when production of oil, gas or both at
           the wellhead is producible in quantities sufficient to yield the
           oil/gas equivalent of 25 BOPD based on initial production well tests
           conducted for regulatory reporting purposes. The gas to oil
           conversion rate for this determination shall be 6 MCF for 1 barrel of
           oil. Notwithstanding anything to the contrary, no well shall be
           considered as producing in Paying Quantities if the produced water
           volume exceeds the produced oil volume or gas equivalent by a
           multiple higher than twenty to one, without the written approval of
           Chevron and Kewanee.

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2.   TERMINATION OF LETTER AGREEMENT

     Concurrent with the effective date of this Agreement, the Letter Agreement
     dated April 9, 1998 between Chevron and EPL shall be superseded by this
     Agreement. Any and all AFE Operations or issues associated with the Letter
     Agreement shall be governed by this Agreement, whether or not such AFE
     Operations or issues occurred prior to or after the execution date of this
     Agreement.

3.   RIGHTS AND ACCESS

     3.1.  Chevron and Kewanee agree to designate EPL as operator of the Farmout
           Leases as to the Farmout Wells, and to make a good-faith effort to
           obtain such designations from Mobil. At such time as EPL becomes a
           operator qualified by the Minerals Management Service (MMS) to
           conduct all of the operations contemplated by this Agreement, Chevron
           and Kewanee hereby grant EPL the right of access to, entry upon and
           use of the Farmout Leases, the Farmout Wells, the Main Pass 133 'A'
           Platform and associated properties and facilities, when and as
           necessary for the purpose of conducting AFE Operations pursuant to
           this Agreement. Each party shall make a good-faith effort to conduct
           its operations in a manner as to not interfere with any other
           operations on or impacted by the Main Pass 133 'A' Platform.

     3.2.  EPL shall have exclusive charge, control and supervision of its
           operations on the Farmout Wells, together with all obligations
           arising from its AFE Operations. Chevron and Kewanee retain the right
           to access EPL's operations conducted pursuant to this Agreement at
           all times, except as detrimental to EPL's operations.

     3.3.  EPL's right to receive the Payout Amount shall terminate only upon
           the earlier of (i) EPL's receipt of such Payout Amount, or (ii) the
           expiration of all rights of EPL to conduct or propose operations in
           the Farmout Wells.

4.   FARMOUT WELLS

     4.1.  This Agreement shall become effective upon the satisfaction of all of
           the following conditions (the "Effective Time"):

           (i)   Execution of this Agreement and all executable exhibits by the
                 parties;

           (ii)  Receipt by EPL of Mobil's written release of EPL to EPL's
                 reasonable satisfaction relating to operations by EPL pursuant
                 to this Agreement;

           (iii) Receipt of all consents and agreements of both Mobil and
                 Kewanee pursuant to their joint operating agreements with
                 Chevron and any other related agreements; and

           (iv)  The filing and effectiveness of the designations of EPL for
                 operatorship of the Farmout Wells as contemplated by this
                 Agreement.

           EPL shall assume control of the Farmout Well upon which operations
           are being conducted by Chevron at the Effective Time within
           seventy-two (72) hours (excluding weekends and force majeure) of the
           Effective Time. EPL shall finish AFE Operations on said Farmout Well
           in accordance with the applicable attached AFE. Failure to timely
           commence AFE Operations as described in this Article 4.1 shall
           terminate this Agreement in its entirety immediately.

     4.2.  Chevron will provide EPL with all pertinent data and information
           (which it has the right to provide) relevant to said Farmout Well(s)
           on which AFE Operations are proposed, and which is necessary to
           assist EPL in the conduct of the AFE Operations required hereunder.
           All data and information shared by Chevron with EPL shall be subject
           to that certain Confidentiality Agreement between Chevron and EPL
           dated March 25, 1998.

     4.3.  EPL must commence AFE Operations on the fourth (4th) Farmout Well
           within fifteen (15) days of completion of its AFE Operations on the
           prior well (subject to force majeure, and subject to any limitations
           necessary to obtain the consent or non-consent of Mobil). For the
           purpose of this Article 4.3, EPL shall have completed AFE Operations
           on a Farmout Well at such time as the well is completed through the
           christmas tree or at such time as the well is temporarily abandoned
           by EPL or turned over to Chevron and Kewanee in accordance with
           Article 4.6 herein. Failure to commence timely such AFE Operations,
           or failure to conduct same in accordance with the approved AFE
           without prior notice and approval of any significant, adverse
           deviation from such AFE by Chevron or Kewanee (except for emergencies
           or force majeure occurrences), shall terminate this Agreement as to
           all Farmout Wells in which operations have not been commenced prior
           to said termination.

     4.4.  EPL shall conduct AFE Operations strictly as proposed in the AFE for
           each Farmout Well, with due diligence and in a workmanlike manner.
           EPL shall conduct such AFE Operations in a good

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           faith effort to produce oil and/or gas from each such well pursuant
           to the terms hereof. All contractors or subcontractors of EPL shall
           be taken from the Chevron approved contractors list. EPL shall be
           obligated for, and shall coordinate the provision of and the payment
           for, the cost of all AFE Equipment and services used in AFE
           Operations. Notwithstanding any provision to the contrary contained
           herein, it is agreed that in the event of an emergency situation, EPL
           shall use its best efforts to contact Chevron but shall have the
           right to utilize all services and procure all materials and equipment
           reasonably necessary in light of the circumstances, which costs shall
           be recouped by EPL pursuant to the payout provisions of this
           Agreement.

           Should Mobil non-consent (under the terms of the JOA) any AFE
           Operation conducted by EPL in any Farmout Well, EPL shall pay all
           costs of the AFE Operation by EPL associated with Mobil's
           non-consented interest as though the interest was farmed out by
           Chevron and Kewanee to EPL pursuant to this Agreement. EPL shall
           recoup a) 120% of such costs, and b) all of the amounts recoupable
           from Chevron's and Kewanee's interest as provided herein. However,
           Mobil's share of the cost of non-consent well operations shall be
           recouped only out of One Hundred Percent (100%) of Mobil's share of
           such production, less Mobil's share of lease operating expense and
           MMS royalties. It is the intention of the parties that should EPL's
           recovery of the Payout Amount occur prior to recoupment by EPL of the
           costs associated with Mobil's non-consented interest, EPL shall
           continue to receive its Net Proceeds Amount hereunder until full
           recoupment of the Mobil non-consent interest or until the well
           bearing the penalty is abandoned with no future utility by EPL. EPL
           shall not have the right to recoup its Mobil non-consent penalty from
           the Net Proceeds Interest until the Payout Amount is recouped, and
           then (individually or collectively) only from the well(s)
           non-consented by Mobil.

           If Mobil elects to participate, EPL may (at its option) cash call
           Mobil. If Mobil will not allow EPL to cash call Mobil's interest
           directly, then upon payment of the cash calls by Mobil to Chevron,
           Chevron will promptly forward such amount to EPL for credit against
           Mobil's share of costs incurred by EPL. EPL shall prepare Joint
           Interest Billings for the "Joint Account" (being Chevron, Mobil,
           Kewanee and EPL) for AFE Operations in compliance with the Joint
           Operating Agreement and Accounting Procedure currently governing the
           leases subject to this Agreement. EPL shall reconcile the cash calls
           attributable to Mobil's share against Joint Interest Billings for
           Mobil's share of any operations approved by Mobil. EPL shall forward
           copies of its Joint Interest Billings and cash call reconciliations
           directly to Mobil, and provide informational copies to Chevron.
           However, Chevron shall not be liable for any differences in such cash
           call/Joint Interest Billing Cost reconciliations. EPL shall also
           retain Joint Account records in accordance with the Joint Operating
           Agreement and Accounting Procedure currently governing the leases
           subject to this Agreement. Chevron, Kewanee, Mobil and EPL shall have
           the right to audit each other's Joint Account records in accordance
           with the previously referenced Accounting Procedure. EPL shall
           indemnify and hold harmless Chevron and Kewanee from and against any
           and all losses incurred as a result of accounting errors made by EPL
           with respect to the computation of Mobil's interest in the Farmout
           Wells.

           If at any time a Farmout Well fails to produce or ceases to produce
           in Paying Quantities prior to full recovery of the Payout Amount by
           EPL, that well shall cease to be considered part of this Agreement,
           and EPL's interest in each such well and associated Farmout Lease
           acreage will immediately be reassigned to Chevron and Kewanee (if any
           such assignment has previously been made), unless EPL proposes a new
           workover program acceptable to Chevron and Kewanee within ninety (90)
           days of last operations or production (whichever occurs later) on
           said well. Any other operations for that well (other than those
           approved under a Subsequent AFE) not allowed under this Agreement
           shall require new and separate negotiations unless added to the scope
           of this Agreement by the mutual consent of all parties.

     4.5.  No AFE Operations shall be conducted in a Farmout Well without
           Chevron's and Kewanee's express consent. Chevron and Kewanee shall
           not unreasonably withhold consent to EPL's rework of a Farmout Well
           during such time as EPL is recouping the Payout Amount. The
           expenditure for such rework which has been approved by Chevron and
           Kewanee through an AFE shall be added to the Payout Amount to be
           recouped by EPL as provided in Article 6 below.

           Either Chevron or Kewanee shall have the sole discretion to suspend
           the AFE Operations upon reasonable notice to EPL, as Chevron or
           Kewanee deem reasonably necessary and prudent for safe operations, or
           for the economical or successful completion or temporary abandonment
           of any of said Farmout Wells, provided EPL shall receive the Payout
           Amount for work completed. Any AFE Operation may be modified by
           Chevron and Kewanee pursuant to a Supplemental AFE prepared by EPL,
           which shall require the approval of EPL only if the change in scope
           creates costs and risks to EPL in excess of those approved under the
           Original AFE Operation. If EPL does not approve a proposed
           Supplemental AFE requested by Chevron or Kewanee, Chevron and/or
           Kewanee shall have the right to conduct said operations at its/their
           sole cost, risk and expense, and in compliance with all laws, rules
           and regulations bearing thereon, with the

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           right to utilize the contracts, materials and equipment (to the
           extent possible) in place at the time that the approved AFE
           Operations were completed, and with the right to utilize the drilling
           services contracted by EPL at the time of Chevron's and/or Kewanee's
           takeover on a day-rate basis consistent with those rates charged
           hereunder. In such case, EPL shall pay for all costs it incurs to
           conduct the AFE Operation, and Chevron and/or Kewanee shall pay and
           be responsible for (outside the terms of this Agreement) all
           additional operations which Chevron conducts that EPL does not
           approve. The Net Proceeds Amount payable to EPL from any Earning Well
           completed by Chevron pursuant to AFE Operations not approved by EPL
           shall be suspended, as to such Earning Well, until such time as
           Chevron has recovered 100% of its costs associated with said
           operations. Additionally, EPL may propose modifications to the AFE
           Operations, which if approved by Chevron shall be set forth in a
           Supplemental AFE executed by the parties.

     4.6.  If a Farmout Well is incapable of producing in Paying Quantities
           after AFE Operations have been conducted by EPL, or if EPL chooses,
           at its sole discretion, not to complete or recomplete the well, said
           Farmout Well shall be dropped from this Agreement (subject to the
           option to commence additional AFE Operations as provided in Paragraph
           4 of Article 4.4 above). Chevron and Kewanee shall have forty-eight
           (48) hours of rig standby time at EPL's cost (and subject to recovery
           as part of the Payout Amount), plus whatever amount of rig standby
           time they wish to utilize at Chevron's and Kewanee's cost, after
           receiving notice from EPL of its intent to temporarily abandon the
           well in which to inform EPL as to whether Chevron and Kewanee wish to
           take over the well and associated rig, or allow EPL to proceed with
           its temporary abandonment efforts. If Chevron and Kewanee take over
           the well, EPL shall release the rig to Chevron and Kewanee and shall
           have no further responsibility or liability for the rig costs upon
           the retransfer of operating rights to Chevron and Kewanee, and the
           well shall be owned by Chevron and Kewanee. In addition, Chevron and
           Kewanee shall have sole responsibility and liability for the well
           operations thereafter, including the plugging and permanent
           abandonment of said wells. EPL shall bear no obligation for the
           plugging and abandonment of said well (nor any other well) subject to
           this Agreement.

     4.7   EPL agrees to pay all charges that are incurred by AFE Operations
           (listed on the attached Exhibit 'E') within twenty (20) days of EPL's
           receipt of a final invoice in its name.

     4.8   Chevron and Kewanee hereby waive any preferential right they may have
           as to the interest being transferred to and assigned to EPL.

5.   OPTIONAL WELLS

     5.1.  One or both of the wells identified on Exhibit 'A' as an "Optional
           Well" are wells which may be designated as "Farmout Wells" by mutual
           agreement of the parties hereto, and AFE Operations on such wells
           shall be governed by the provisions of Article 3 above.

     5.2.  All of the terms and conditions which apply to each Farmout Well
           operated by EPL hereunder shall also apply to each Optional Well.

6.   EARNING

     6.1.  As a result of the successful completion of the OCS-G 1633 #A-6 and
           OCS-G 1633 #A-10/A-10 S/T as Earning Wells and upon the successful
           completion of the other Farmout Wells or Optional Wells, EPL shall be
           assigned of 75% of Chevron's and Kewanee's operating rights and
           working interest in the 1/4 1/4 1/4 square of Farmout Lease acreage
           in each respective completion in said Earning Well is located (the
           "Earned Acreage"), together with the right to recover the Payout
           Amount from production generated by all Earning Wells. Each such
           assignment shall include rights from the surface to the base of the
           deepest producing interval, plus one hundred feet (100'), in the
           Earned Acreage for each Earning Well. Said assignment shall be
           effective, as to each Earning Well, as of the date of initial AFE
           Operations by EPL on said well, or date of initial production from
           said well, whichever occurs first. EPL shall recoup the Payout Amount
           from all Earning Wells (rather than recouping the Payout Amount on a
           well-by-well basis). As such, EPL shall receive the Net Proceeds
           Amount from its working interest share of production from all Earning
           Wells, until such time as EPL has fully recouped the Payout Amount
           associated with all AFE Operations and AFE Equipment paid for by EPL
           hereunder. During the time EPL is recouping the Payout Amount,
           Chevron and Kewanee shall retain 25% of their working interest in the
           Earning Wells and the Earned Acreage, and shall also be responsible
           for all of EPL's costs (other than Chargeable Expenses) associated
           with EPL's operating rights and working interest in the Earning
           Wells, including operating expenses.

     6.2.  In the event recoupment of the Payout Amount occurs within six months
           of the date of the completion of all operations conducted on the
           Farmout Wells pursuant to this Agreement, the one hundred twenty
           percent (120%) risk premium specified in Article 1.10. shall be
           reduced to one hundred eighteen percent (118%). If EPL has not
           recouped the Payout Amount from production resulting from the Earning
           Wells after one (1) year of the date of the completion of all EPL
           operations conducted on the Farmout Wells, the Payout Amount as of
           the conclusion of the twelfth month, and every month thereafter,
           shall be increased by one point five percent (1.5%) per month until
           payout from production from the Earning Wells is achieved (i.e. if
           the Payout

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           Amount at the end of the twelfth month is $1,000,000, the payout
           amount shall be increase to $1,015,000 on the first day of thirteenth
           [13th] month).

           The approved sums expended by EPL pursuant to this Agreement shall be
           recovered solely from the Earning Wells. Recovery from Net Proceeds,
           as defined in Article 1.11, for sums expended by EPL pursuant to
           obligations under this contract IS NOT GUARANTEED. Except for all
           indemnity obligations hereunder, Chevron and Kewanee shall have no
           obligation to reimburse EPL for any portion of the Payout Amount not
           reimbursed by the Net Proceeds. Chevron and Kewanee shall bear all
           lease operating expenses attributable to the interests earned by EPL
           pursuant to this Agreement.

     6.3.  EPL's Payout Amount shall be reduced by an "E&S Penalty" upon the
           occurrence of an "E&S Event" caused by EPL'S operations conducted
           pursuant to this Agreement. An "E&S Event" is defined as any OSHA
           recordable accident, oil spill, material incident of non-compliance
           with law or regulation or any material permit non-compliance by EPL
           during its work on the Farmout Wells. The "E&S Penalty" shall be a
           One Percent (1%) reduction of the Payout Amount of the well in which
           such "E&S Event" occurs [up to a maximum of Two Percent (2%) per
           Farmout Well], for each E&S Event occurring during its conduct of AFE
           Operations. No operations conducted on the Farmout Wells by parties
           other than EPL, its agents and contractors shall be considered E&S
           Events as defined herein.

           The Payout Amount shall also be reduced as the result of "Additional
           Mechanical Costs" incurred by EPL during the course of operations
           conducted by EPL pursuant to the Farmout Agreement. "Additional
           Mechanical Costs" are defined as that percentage of the actual costs
           incurred and/or paid by EPL for AFE Operations performed and AFE
           Equipment installed by EPL in and on a Farmout Well which are in
           excess of the amounts of the approved AFEs for said AFE Operation and
           said AFE Equipment. The reduction of the Payout Amount associated
           with Additional Mechanical Costs shall be calculated as follows:

           (a)  For Additional Mechanical Costs of Five Percent (5%) to Fourteen
                Point Nine Percent (14.9%), the Payout Amount on the particular
                Farmout Well shall be reduced by One Percent (1%);

           (b)  For Additional Mechanical Costs of Fourteen Point Nine Percent
                (14.9%) to Twenty-Four Point Nine Percent (24.9%), the Payout
                Amount on the particular Farmout Well shall be reduced by Two
                Percent (2%);

           (c)  For Additional Mechanical Costs in excess of Twenty-Five Percent
                (25%), the Payout Amount on the particular Farmout Well shall be
                reduced by Three Percent (3%);

           provided, however, that in no event shall the cumulative reduction
           per Farmout Well from the Payout Amount for Additional Mechanical
           Costs alone exceed Three Percent (3%); and further provided that in
           no event shall the cumulative reductions from the Payout Amount for
           E&S Risk plus Additional Mechanical Costs combined exceed Five
           Percent (5%) for the combination of all Farmout Wells in the program.
           Additionally, if at such time as EPL has recovered the Payout Amount,
           the cumulative actual costs for the entire program are less than the
           cumulative costs listed on the AFEs for the entire program, then any
           portion of the difference which represents a deduction from the
           Payout Amount for Additional Mechanical Costs shall be reimbursed to
           EPL.

     6.4.  Upon the full remittance of the adjusted Payout Amount to EPL, EPL's
           Net Proceeds Amount shall automatically re-invest in Chevron and
           Kewanee, and EPL agrees to execute any and all documents Chevron and
           Kewanee require to effectuate a reassignment of any interest in the
           Earning Wells and the Farmout Leases earned by EPL hereunder to
           Chevron and Kewanee.

     6.5.  At such time as EPL has recovered the Payout Amount, EPL's
           seventy-five percent (75%) working interest in the Earning Well(s)
           shall be reduced to a one percent (1%) working interest, and
           Chevron's and Kewanee's working interest in each said well shall
           automatically be converted into a ninety-nine percent (99%) working
           interest therein. In addition, Chevron and Kewanee shall own 100%
           interest in all equipment, facilities, pipelines, and other property
           paid for by EPL and reimbursed as part of the Payout Amount. EPL
           shall bear no cost or expense of any nature in regards to its working
           interest ownership in the Farmout Wells, and Chevron and Kewanee
           shall bear such costs and indemnify EPL for all such costs and
           expenses, including attorney's fees.

           EPL shall then ratify the appropriate operating agreement bearing on
           such well(s), and its one percent (1%) working interest shall be
           represented by Chevron and Kewanee as to any voting issues. However,
           EPL shall have the right to non-consent any AFE proposal made by
           Chevron and Kewanee or Mobil after recovering the Payout Amount by
           assigning all of EPL's interest in the Earning Well subject to the
           AFE to Chevron and Kewanee (subject to Chevron's and

                                      -6-
<PAGE>   10

           Kewanee's right to reject said offer). EPL shall bear no cost of
           plugging and permanent abandonment of said wells and areas.

     6.6.  Upon receipt of a written request by EPL, Chevron and Kewanee shall
           execute and record an assignment of the rights and interests earned
           by EPL, subject to the right of re-assignment to Chevron and Kewanee
           as described herein. Prior to EPL's recovery of the Payout Amount,
           any assignment earned under this Agreement shall contain a provision
           that the interest vested in EPL as to each Earning Well individually
           thereby shall automatically terminate and re-vest in Chevron and
           Kewanee or their successors or assigns when EPL abandons production
           from or AFE Operations on the applicable well. Such assignment
           provision shall provide such automatic termination upon cessation of
           production in Paying Quantities from the applicable well for a period
           of ninety (90) consecutive days after receipt of notice from Chevron
           that the well is no longer producing in Paying Quantities, and EPL
           does not propose a new workover program acceptable to Chevron and
           Kewanee within ninety (90) days (or shorter, if necessary to maintain
           a Farmout Lease by its lease obligations) after notice is received by
           EPL from Chevron that the well is no longer producing in Paying
           Quantities. If and when necessary and upon receipt of a written
           request, EPL agrees to execute an appropriate assignment to evidence
           such revestiture. Said reassignment shall be made without cost or
           expense to Chevron and Kewanee or their successors or assigns, and
           shall be free and clear of any liens, encumbrances or carved-out
           interests whatsoever (including, but not limited to, any overriding
           royalty or production payment) created by EPL.

           In addition, at the end of the life of production pursuant to this
           Agreement, if the Payout Amount has not yet been recovered by EPL,
           Chevron and Kewanee or their successors or assigns shall have the
           option to receive an assignment of all leasehold equipment on the
           reassigned premises added pursuant to this Agreement, and Chevron and
           Kewanee shall pay EPL the net salvage value thereof, not to exceed
           the remaining balance of the Payout Amount as of that date.

     6.7.  Chevron and Kewanee shall hold the continuing right and option, at
           their sole election, to purchase at any time after EPL's conversion
           to a 1% working interest, all of EPL's right, title and interest
           earned hereunder, including but not limited to working interest in
           the Farmout Leases and production from any and all Earning Wells,
           for a total of $1.00.

     6.8.  Chevron and Kewanee represent that their working interests and net
           revenue interests in the Farmout Leases are as set forth in Exhibit
           'A', and that their are no liens or encumbrances affecting said
           interests.

7.   OPERATIONS AFTER EARNING WELL COMPLETION

     7.1.  It is understood that upon completion of any Earning Well and the
           hooking up of such well for production as delineated in its AFE for
           the well, EPL shall turn over the well operations to Chevron. Chevron
           shall thereafter operate the well and take such immediate actions as
           are necessary to insure that the said well is placed on production
           within a reasonable period of time after the well is so turned over
           to Chevron by EPL.

     7.2.  Upon assuming operational control of any Earning Well, Chevron shall
           be designated operator of the well. Chevron shall conduct all
           operations and produce the well in a good and workmanlike manner as a
           prudent operator, and shall comply with all applicable federal, state
           and local laws, rules and regulations. However, notwithstanding
           Chevron's designation as operator of an Earning Well, it is
           understood and agreed that prior to EPL's recovery of the Payout
           Amount, Chevron shall obtain EPL's consent before conducting any
           downhole work other than routine paraffin cutting and Chevron shall
           also, prior to EPL's recovery of the Payout Amount, consult with EPL
           concerning flow rates, choke sizes, gas lift design and other
           production practices on and for each Earning Well. Notwithstanding
           anything to the contrary herein, Chevron shall not be required to
           conduct any operation or continue operations under conditions it
           determines, as a reasonably prudent operator, would create a risk to
           human safety or the environment, nor shall EPL be released from any
           obligation for operations conducted by Chevron in an emergency
           situation.

     7.3.  Prior to EPL's recovery of the Payout Amount, if EPL wishes to
           perform any Operation in a Farmout Well, EPL may give the other party
           written notice of the proposed Operation. The aforesaid written
           notice shall specify the work to be performed, the location, the
           depth within the Farmout Well, objective formation and the estimated
           cost of the Operation. Chevron and Kewanee shall have thirty (30)
           days after receipt of such notice within which to respond. If a rig
           is on location, notice of such a proposal may be given by telephone
           and the response period shall

                                      -7-

<PAGE>   11

          be limited to twenty-four (24) hours. This limited notice shall not
          apply to a well whose rig is not being moved immediately from an
          Operation in another Farmout Well. No proposed operation shall be
          conducted without Chevron's, Kewanee's and EPL's express consent;
          however, consent shall not be unreasonably withheld to rework a
          Farmout Well. The expenditure for such rework which has been approved
          by Chevron and Kewanee through an AFE shall be added to the Payout
          Amount to be recouped by EPL as provided in Article 6 above.

     7.4. It is understood and agreed that, prior to EPL's recovery of the
          Payout Amount, no well in which EPL has earned an interest hereunder
          may have any non-emergency work performed upon it that could adversely
          affect production from the then producing sand, unless EPL consents to
          same in writing.

8.   PURCHASE AND SALE OF OIL AND GAS

     8.1. Chevron, Kewanee and EPL shall each have the right to take in kind and
          control the transportation, processing, and sale of its working
          interest share of all oil, gas and associated liquid hydrocarbons
          produced from the Earning Well(s) pursuant to this Agreement. When EPL
          sells a product for its own account (including Mobil's non-consent
          share of production, if any), EPL shall be responsible for providing
          Chevron with the Gross Proceeds and Chargeable Expenses information
          described in Article 9 below in order for Chevron to calculate the
          Payout Amount on a monthly basis. EPL shall also be responsible for
          paying any royalties and severance, production excise and other
          non-income taxes attributable to its working interest share of
          production to the appropriate governmental agency or party.

     8.2. If EPL elects not to market its share of production (including Mobil's
          non-consent share of production, if any) during any period that this
          Agreement is in effect, Chevron shall market EPL's production on a
          monthly basis under the terms received by Chevron for its share of
          production from the Earning Wells, less any reasonable and mutually
          agreed upon costs incurred by Chevron to market such production. In no
          case will EPL's oil production receive less than Chevron's posting for
          crude oil of like grade and gravity for production from the Main Pass
          133 'A' Platform (before the mutually agreed upon deduction for
          Chevron's marketing costs). Additionally, EPL's gas production will be
          pegged to a mutually agreed upon index price (before the mutually
          agreed upon deduction for Chevron's marketing costs).

          Chevron shall not have the obligation to market EPL's production if
          such marketing would cause material detriment to Chevron. In no case
          will Chevron commit EPL's production to sales for a period greater
          than thirty-one (31) days without the prior written consent of EPL.

          When Chevron markets EPL's production (and Mobil's non-consent share
          of production, if any) and receives the proceeds thereof, Chevron
          shall pay the Net Profit Interest payments, less royalties to EPL
          within fifteen (15) days after payment of MMS royalties on such
          monthly production is due. Chevron shall pay the lease royalties
          associated with said production. Additionally, if production is
          associated with a Mobil non-consent share, lease operating expenses
          attributed to that production will be deducted.

          Chevron and Kewanee agree that should any of EPL's portion of the gas
          stream from the Farmout Wells be captured by Mobil due to an imbalance
          situation between Mobil, Chevron and Kewanee, Chevron will reimburse
          EPL the equivalent value of the gas not available for sale to EPL's
          account. Additionally, should there be a difference between EPL's
          deliveries and entitlements, Chevron and EPL will cash out the
          difference every month.

9.   PAYOUT ACCOUNT

     9.1. For purposes of this Agreement, there is to be created an account to
          be called the "Chevron/Kewanee/EPL Payout Account", pursuant to which
          Gross Proceeds and Chargeable Expenditures are to be credited and
          debited on a monthly basis and applied toward the Payout Amount to be
          recouped by EPL, to determine the status of said account. Chevron
          shall maintain the aforesaid account and shall provide monthly
          statements as further provided for herein.

          9.1.1.    Information used to calculate the Net Proceeds Amount on
                    production obtained from or allocated to Earning Wells shall
                    be provided by EPL to Chevron (at the address shown in
                    Article 9.1.3 below) within 30 days of EPL's receipt of such
                    information, and credited by Chevron to the
                    Chevron/Kewanee/EPL Payout Account not later than thirty
                    (30) days following EPL's receipt of the Net Proceeds Amount
                    information by Chevron from EPL. The Net Proceeds
                    information provided by EPL shall include a monthly
                    statement by well which itemizes EPL's share of production
                    by product (such as oil, gas and products) and shows the EPL
                    volumes and Gross Proceeds Amounts and Chargeable
                    Expenditures (as defined herein) used to calculate the Net
                    Proceeds Amount.

                                      -8-
<PAGE>   12

          9.1.2.    If Chargeable Expenditures in any one month exceed the Gross
                    Proceeds in the same month, resulting in a net loss, such
                    net loss shall be applied against the Payout Amount.

          9.1.3.    EPL shall provide itemized statements of actual drilling,
                    sidetracking, reworking or recompleting costs within ninety
                    (90) days following the completion of any such operation to
                    Chevron U.S.A. Inc. at P. O. Box J, Concord, CA 94524,
                    Attention: Joint Interest Accounting -- Net Profits and
                    Payouts. In the event this information is not provided
                    within the above time frame, Chevron shall be authorized to
                    withhold payment of any Net Profit Payments to EPL until
                    such information is provided. Such costs shall be in
                    accordance with the provisions of the 1986 Offshore COPAS as
                    recommended by the Council of Petroleum Accountants
                    Societies.

     9.2. Monthly, after the establishment of the Payout Account referenced in
          Article 8.1 above, Chevron shall provide EPL a report setting forth
          the full details and status of the Chevron/Kewanee/EPL Payout
          Account. The report shall include all information necessary for EPL to
          properly monitor the account, including, but not limited to, the
          following:

          (a)       A monthly statement itemizing the Gross Proceed volumes and
                    dollars, less itemized Chargeable Expenditures used to
                    arrive at the Net Proceeds Amount received by EPL for the
                    month.

          (b)       A summary statement reflecting the beginning balance in the
                    Payout Account, Net Proceeds for the month, and the ending
                    Payout Account balance for the said month.

     9.3. EPL acknowledges and agrees that production from individual wells in
          the Main Pass 133 Field is not continuously measured and, as a result,
          agrees that the percentage of total production allocated to an Earning
          Well shall be determined based upon metering or well tests pursuant to
          approved commingling authorizations from the MMS and other applicable
          rules and regulations of the Federal Government.

     9.4. If EPL earns a Net Proceeds Amount in more than one well, the
          calculations of Gross Proceeds and Chargeable Expenditures shall be
          combined so that the Net Proceeds Amount is calculated on an aggregate
          basis as to all wells in which EPL has earned. In addition, it is
          understood and agreed that all actual costs for Earning Wells, plus
          the actual costs for the unsuccessful Farmout Wells, shall be
          aggregated for the purposes of calculating the Payout Amount to be
          paid to EPL out of Net Proceeds Amount from the Earning Wells. (For
          example, should EPL drill or rework two wells in attempting to earn a
          Net Proceeds Amount in an Earning Well and should one be temporarily
          plugged and abandoned while the other is completed as a well capable
          of producing in Paying Quantities as defined herein, then the Payout
          Amount for the successful Earning Well and the actual costs for the
          unsuccessful Farmout Well shall be used to calculate the Payout Amount
          to be recovered under Article 5 by EPL out of the Net Proceeds Amount
          from the Earning Well or Wells.)

10.  DRILLING AND GEOLOGICAL REQUIREMENTS

     EPL shall comply with the requirements of Exhibit "C", attached hereto and
     made a part hereof for all purposes, and at EPL's sole cost and expense,
     shall furnish Chevron and Kewanee (via one set of information to Chevron)
     the material therein specified for all AFE Operations on the Farmout
     Leases. Chevron and Kewanee shall be entitled to receive all such materials
     pertaining to any well(s) reworked or recompleted on the Farmout Leases
     while this Agreement and any lease rights earned hereunder continue in
     force and effect. Failure to materially comply with Exhibit "C"
     requirements shall suspend EPL's earning rights hereunder until satisfied.

11.  REPORTS AND STATEMENTS

     11.1. NOTICE OF COMMENCEMENT

           Prior to moving any drilling equipment onto a farmout lease, EPL
           shall give a 36-hour notice to:

                          Chevron U.S.A. Production Company
                          935 Gravier Street
                          New Orleans, LA 70112
                          Attention:  MP 133 Field Geologist
                          Phone: (504) 592-6037
                          Fax: (504) 592-6525

     11.2. INVENTORY OF MATERIAL AND EQUIPMENT

           Upon receipt of each transfer of interest in an Earning Well pursuant
           to this Agreement, EPL shall furnish Chevron an inventory of the AFE
           Equipment in and on the well which EPL has

                                      -9-
<PAGE>   13

           installed and an itemized statement of the costs of sidetracking,
           reworking, recompleting, drilling, testing, completing and equipping
           such well for production.

           One (1) copy of the said EPL inventory shall be forwarded to the
           following address:

                          Chevron U.S.A. Production Company
                          935 Gravier Street
                          New Orleans, LA 70112
                          Attention: MP 133 Field Geologist
                          Phone:  (504) 592-6037
                          Fax: (504) 592-6525

12.  TAX MATTERS

     As to all operations hereunder, the parties hereto shall be subject to and
     shall comply and abide with the tax election provisions set out in Exhibit
     "B" attached hereto and made a part hereof for all purposes.

13.  COMPLIANCE

     All AFE Operations by EPL pursuant to this Agreement shall be conducted in
     accordance with all the terms, provisions and conditions of the farmout
     lease and in compliance with all applicable laws, rules and regulations of
     State and Federal governments, or any agency thereof. Without limiting the
     generality of the foregoing, EPL shall comply with all provisions of the
     Immigration Reform and Control Act of 1986 and EPL hereby certifies (to the
     best of its knowledge) that none of its employees or employees of its
     contractors who provide services pursuant to this Agreement are
     unauthorized aliens as defined in said Act.

14.  INSURANCE

     14.1. PROVISION OF CERTIFICATE

           EPL shall commence no AFE Operations hereunder before Chevron and
           Kewanee receive from EPL's insurer and approves a "Certificate of
           Insurance", the requirements of which are more fully described on the
           attached Exhibit 'D', and which shall describe the type, policy,
           limits, deductibles, and period of coverage of and state the party
           insured by EPL's insurance. Such policies shall name Chevron and
           Kewanee as additional assureds and waive subrogation against Chevron
           and Kewanee.

     14.2. SPECIFIC INSURANCE OF FARMOUT RISKS

           EPL agrees to require its insurer to insert a provision in any policy
           included in the Certificate of Insurance specified in Article 14.1 to
           cover all of the obligations as set forth as Exhibit 'D'.

15.  INDEMNITY

     15.1. Except as set forth elsewhere in this Agreement, EPL agrees to
           defend, protect, indemnify, and hold Chevron and Kewanee harmless
           from all obligations, debts, charges, claims, damages, expenses,
           fines and causes of action (collectively, "Claims") arising directly
           or indirectly from EPL's or EPL's subcontractors' AFE Operations
           under this Agreement, whether or not such Claims are caused wholly or
           partly by negligence attributed to Chevron and Kewanee, their
           employees, or agents, except to the extent such Claims arise or are
           caused by Chevron's and Kewanee's gross negligence or willful
           misconduct. Chevron shall have the right, as operator of the lease,
           to recover any such Claims on behalf of the interests of Mobil and
           Kewanee, being non-operators of the lease. In no event shall EPL be
           liable or obligated to nor shall EPL indemnify any party for
           consequential, punitive, loss of profit or production, loss of
           reservoir or any other such indirect damages.

     15.2. Chevron and Kewanee agree to defend, protect, indemnify, and hold EPL
           harmless from all Claims to the extent that they arise directly or
           indirectly from Chevron or Kewanee's gross negligence or willful
           misconduct during EPL's operations under this Agreement, whether or
           not such Claims are caused partly by negligence or strict liability
           attributed to EPL, its subcontractors, their employees, or agents.

     15.3. Chevron and Kewanee agree to defend, protect, indemnify, and hold EPL
           harmless from all Claims to the extent that they are caused by
           pre-existing defective conditions at the Farmout Wells or their
           pertinent platforms or facilities whether or not such Claims are
           caused partly by negligence or strict liability attributed to EPL,
           its subcontractors, their employees, or agents.

     15.4. Chevron and Kewanee agree to defend, protect, indemnify, and hold EPL
           harmless from all Claims to the extent that they are caused by tax
           liability of Chevron or Kewanee, and all Claims in connection with
           any liens, encumbrances, rights, levies or any defects in title
           whatsoever regarding the Farmout Wells (other than those arising from
           EPL's operations hereunder),

                                      -10-
<PAGE>   14
           whether or not such Claims are caused partly by negligence or strict
           liability attributed to EPL, its subcontractors, their employees, or
           agents.

     15.5. Chevron and Kewanee agree to defend protect, indemnify, and hold EPL
           harmless from all Claims to the extent that they are caused by
           actions or omissions of Chevron, its contractors, agents or its
           invitees which arise or occur prior to or after EPL's operations at
           the Farmout Wells, whether or not such Claims are caused partly by
           negligence or strict liability attributed to EPL, its subcontractors,
           their employees, or agents.

     15.6. Chevron and Kewanee agree to defend protect, indemnify, and hold EPL
           harmless from all Claims to the extent that they pertain to the
           assignment of leasehold interests to EPL pursuant to this Agreement,
           including but not limited to plugging and abandonment obligations,
           lease operating expenses (other than those attributable to Mobil's
           share as set forth in section 4.4 hereof), tax liabilities, third
           party liabilities, MMS liabilities, or Claims brought by any other
           governmental entity or regulatory agency or department, whether or
           not such Claims are caused partly by negligence or strict liability
           attributed to EPL, its subcontractors, their employees, or agents.

16.  PRIOR OBLIGATIONS MAINTAINED

     The termination of this Agreement, or the retransfer of interests to
     Chevron and Kewanee, in whole or in part, for any reason whatsoever, shall
     not relieve Chevron, Kewanee or EPL of any obligation to each other
     theretofore incurred or which may subsequently occur as a result of its
     acceptance of this Agreement, any AFE Operations hereunder, or the
     noncompliance with any of the provisions of this Agreement.

17.  NO LIENS OR ENCUMBRANCES

     EPL agrees to use its best efforts to maintain the Farmout Leases, the
     lease premises, the Farmout Wells, and all equipment used in connection
     with its APE Operations hereunder free of debts, charges, liens, or other
     encumbrances, except as to any interest committed to Energy Income Fund,
     L.P. ("EIF") pursuant to Article 25 below. EPL agrees to bond out any third
     party lien arising from operations it conducts or causes to be conducted
     pursuant hereto.

18.  NO PLEDGES

     This Agreement nor any interest earned hereunder shall not be subject to
     mortgage, pledge, or hypothecation by EPL in any manner whatsoever, except
     as to any interest committed to EIF pursuant to Article 25 below.

19.  PAYMENT OF DEBTS, CHARGES

     EPL agrees to pay or satisfy all accounts payable and charges incurred in
     its APE Operations hereunder within an industry standard number of days
     after such become due and payable, or EPL shall make known to Chevron and
     Kewanee why such debt or charge is in dispute. The provisions of this
     Article 19 shall not apply to any amounts cash called against Mobil that
     are not remitted to EPL or Chevron in a timely manner.

20.  BREACH

     Anything to the contrary notwithstanding, in the event that EPL should, in
     the reasonable opinion of Chevron and Kewanee, be considered to be in
     breach or default of any of the express, material provisions of this
     Agreement, other than EPL's obligation to timely commence AFE Operations on
     any well or wells provided for under this Agreement, then Chevron shall
     notify EPL of such breach or default in writing, setting out specifically
     in what respects EPL has not complied with the terms of the Agreement. EPL
     shall then have thirty (30) days after receipt of such notice within which
     time to meet or comply with the terms of the Agreement. Failure by EPL to
     remedy or correct such breach or to fulfill such obligation within the time
     period prescribed hereinabove will constitute default under this Agreement
     and Chevron and Kewanee, at their election, may terminate this Agreement in
     whole or in part, except as to those portions of the Farmout Area
     previously assigned or earned by EPL; provided, however, that the failure
     by Chevron and Kewanee to exercise at any time or from time to time, such
     right of termination shall not effect a waiver of any breach of Chevron's
     and Kewanee's right to subsequently terminate this Agreement in the manner
     described hereinabove.

21.  OTHER RIGHTS, REMEDIES RESERVED

     No provision contained herein providing for the termination of this
     Agreement or termination of any transfer of interest executed pursuant
     hereto shall be construed as precluding, nor shall it preclude, Chevron,
     Kewanee and EPL from asserting their respective rights to specific
     performance, damages, or any other rights or remedies to which they may be
     entitled.

22.  NO WAIVER

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

                                      -11-
<PAGE>   15

23.  AUDIT RIGHTS

     Upon written notice to another party, each party may audit the accounts and
     records of another party related to operations conducted under the terms of
     this Agreement for any calendar year, within the twenty-four month (24)
     period following the end of such calendar year. Where there are two or more
     parties, the non-operating parties shall make every reasonable effort to
     conduct a joint audit in a manner which will result in a minimum of
     inconvenience to the party being audited. The party being audited shall not
     bear a portion of the non-operating parties' audit costs incurred. The
     audit of a party's accounts and records shall not be conducted more than
     once each year without the prior approval of the party being audited and
     shall be made at the expense of the party conducting such audit. The lead
     audit company's audit report shall be issued within one hundred eighty
     (180) days after completion of the audit field work; provided, however, the
     one hundred eighty (180) day time period shall not extend the twenty-four
     (24) month requirement for taking specific detailed exception. All
     exceptions shall be supported with sufficient documentation Failure to
     issue the report within the prescribed time or to take specific written
     exception within the twenty-four (24) month period will preclude the
     parties from taking written exception to any accounting transaction within
     the time frame audited.

24.  ASSIGNMENTS

     It is agreed that EPL shall not transfer, assign or sublease, either in
     whole or in part, its interest in this Agreement or the Farmout Area
     without the written consent of Chevron and Kewanee; notwithstanding this
     provision, Chevron and Kewanee hereby agree to any assignment of rights
     earned by EPL hereunder EIF or EIF's successor financial institution or
     entity. Any further assignment by EIR shall require Chevron's and Kewanee's
     consent, which consent shall not be unreasonably withheld.

25.  FORCE MAJEURE

     In the event that EPL is rendered unable, wholly or in part, by a force
     majeure (as hereinafter defined) to carry out its obligations under this
     Agreement, other than the obligations to make money payments, EPL shall
     give Chevron and Kewanee prompt written notice of the force majeure with
     reasonably full particulars concerning the situation; thereupon the
     obligations of EPL, insofar as they are affected by the force majeure shall
     be suspended during the continuance of all of the force majeure, but not
     thereafter. EPL shall use all possible diligence to remove the force
     majeure as quickly as possible. For the purposes of this Agreement, the
     term force majeure shall mean lightening, fire, storm, flood, or explosion,
     the inability or unavoidable delay in obtaining governmental permits or
     authorizations for the drilling or other operations to be conducted
     hereunder, and any other governmental action, governmental delay, restraint
     or inaction, or the unavailability of equipment.

26.  NOTICES

     Except as otherwise herein provided, any notice required hereunder shall be
     addressed to the parties hereto as follows:

                 Chevron U.S.A. Inc.
                 935 Gravier Street
                 New Orleans, LA 70112
                 Attention: Harvest Asset Team Landman
                 Telephone:  504-592-7570
                 Telecopy:    504-592-6750

                 Kewanee Industries, Inc.
                 935 Gravier Street
                 New Orleans, LA 70112
                 Attention: Land Manager
                 Telephone:   504-592-7570
                 Telecopy:   504-592-6750

                 Energy Partners, Ltd.
                 1100 Poydras Street, Suite 1850
                 New Orleans, LA 70112
                 Attention:  Mr. James E. Orth
                 Telephone:  504-569-1877
                 Telecopy:    504-569-1874

27.  AMENDMENTS

     This Agreement shall not be modified or amended except by mutual agreement
     of the parties in writing, and no action or failure to act on the part of
     any party hereto shall be construed as a modification or amendment to, or a
     waiver of, any of the provisions of this Agreement.

28.  TOPICAL HEADINGS

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

                                      -12-
<PAGE>   16

     IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.

                                   FARMOUTOR:

                                   CHEVRON U.S.A. INC.

/s/ ROGER WORRELL                  By /s/ M. C. SMITH
-------------------------            ----------------------------------
/s/ Witness                    Title Assistant Secretary
-------------------------               -------------------------------

                                   FARMOUTOR:

                                   KEWANEE INDUSTRIES, INC.

/s/ ROGER WORRELL                  By /s/ GORDON R. CAIN
-------------------------            ----------------------------------
/s/ Witness                    Title Assistant Secretary
-------------------------               -------------------------------

                                   FARMOUTEE:

                                   ENERGY PARTNERS, LTD.

/s/ CLINTON W. COLDREN             By /s/ RICHARD A. BACHMANN
-------------------------            ----------------------------------
/s/ JEAN M. STALLARO               Title President
-------------------------               -------------------------------

                                      -13-<PAGE>   1
                                                                   EXHIBIT 10.20

                           PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement ("Agreement") is made this 31st day of March,
2000, between UNION OIL COMPANY OF CALIFORNIA, a California corporation, whose
address is P. O. Box 69200, Lafayette, Louisiana 70593-9200 ("Seller"), and
ENERGY PARTNERS, LTD., a Delaware corporation, whose address is 201 St. Charles
Avenue, Suite 3400, New Orleans, Louisiana 70170 ("Purchaser").

                                    RECITALS

WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to purchase
from Seller on the terms and conditions set forth in this Agreement certain oil
and gas interests, properties and related rights.

NOW, THEREFORE, for good and valuable consideration and the covenants and
agreements contained herein, Seller and Purchaser agree as follows:

                                       I.

                                PURCHASE AND SALE

1.1      EFFECTIVE DATE AND ASSETS AND DISCLAIMER OF REPRESENTATIONS AND
         WARRANTIES: Subject to the terms and conditions of this Agreement,
         Seller shall sell and Purchaser shall purchase and pay for at Closing
         (as defined herein), effective as of 7:00 a.m. on January 1, 2000
         ("Effective Date"), ON AN "AS IS, WHERE IS, WITH ALL FAULTS" BASIS,
         WITHOUT ANY REPRESENTATION OR WARRANTY OF TITLE, EXCEPT AS SET FORTH IN
         SECTION 1.6, WHATSOEVER, EITHER EXPRESS OR IMPLIED, EVEN FOR THE RETURN
         OF THE PURCHASE PRICE, AND WITHOUT ANY OTHER REPRESENTATIONS AND
         WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING,
         WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY OF TITLE, FITNESS
         FOR A PARTICULAR PURPOSE, MERCHANTABILITY, OR FREEDOM FROM HIDDEN VICES
         OR DEFECTS OF THE MATERIAL, EQUIPMENT OR FACILITIES CONVEYED, AND
         WITHOUT WARRANTY OF ANY KIND OR NATURE WHATSOEVER, the following:

<PAGE>   2

Purchase and Sale Agreement
Page No. 2

All of Seller's right, title and interest in and to:

(a)      The oil, gas and mineral leases described on Exhibit "A" attached
         hereto, including any and all record title, operating rights, leasehold
         interests, oil and gas leasehold estates, royalties, overriding
         royalties and other mineral interests as set forth in Exhibit "A"
         attached hereto and made a part hereof, whether or not specifically
         described on said exhibit ("Leasehold Property"); and,

(b)      All wells, equipment and facilities which are located on, appurtenant
         to, or used directly in connection with the production, treatment or
         transportation of oil and gas from the Leasehold Property including but
         not limited to platforms, pipelines, gathering systems, fixtures, tools
         and other personal property acquired for use or used on the Leasehold
         Property; and,

(c)      Any easements, rights of way, permits, licenses, surface leases, use
         agreements, and servitudes to the extent assignable, applicable or used
         in connection with operation of the Leasehold Property, including but
         not limited to those listed on Exhibit "B", together with all of
         Seller's rights and interests in and to all units, pooling and
         unitization agreements, operating agreements, gas balancing agreements,
         gas sales contracts and other agreements and instruments to the extent
         that they directly relate to or are associated with the Leasehold
         Property, including, but not limited to those identified on Exhibit "E"
         attached hereto; except any insurance contracts or bonds held by Seller
         or its parent, subsidiary or affiliated Corporations for Seller's
         benefit; and any employment, consulting, office lease or accounting
         service contracts; and,

(d)      All other miscellaneous interests or other assets on or used in
         connection with the Leasehold Property, including at Purchaser's
         expense, copies of all files and records (except as set forth below)
         relating to the Leasehold Property: subject to any restrictions on
         Seller's disclosure of the same, including but not limited to lease
         files, unit files, lease contract files, well files and geological
         data, but excluding data or information which is (1) utilized to
         calculate reserves (2) restricted by third party agreement (3) covered
         by the attorney-client privilege and (4) corporate, tax or computer
         records (collectively, the "Records"). THIS AGREEMENT BY SELLER TO
         CONVEY COPIES OF THE AFOREMENTIONED RECORDS IS GRANTED BY SELLER TO THE
         EXTENT THAT SELLER HAS AUTHORITY TO DO SO WITHOUT VIOLATING ANY
         CONFIDENTIALITY OBLIGATIONS TO A THIRD PARTY, IS WITHOUT WARRANTY AS TO
         THE ACCURACY OR COMPLETENESS OF THE INFORMATION DELIVERED, AND SHALL BE
         AT PURCHASER'S SOLE EXPENSE.

All of the foregoing rights, interests and properties are hereinafter
collectively referred to as the "Assets."

It is specifically agreed that Seller is not selling and Purchaser is not
purchasing the following assets ("Excluded Assets"):

<PAGE>   3

Purchase and Sale Agreement
Page No. 3

         (i)      Those interests in pipelines, facilities, contract rights and
                  surface access agreements owned by Unocal that are not used in
                  connection with the Assets or which cover lands described in
                  the Leasehold Property, but which are used in connection with
                  properties that are not being sold under the terms of this
                  Agreement to the extent only identified on Exhibit "C";

         (ii)     any right to use the "Seller" name, marks, trade dress or
                  insignia, or to use the name of any other subsidiary of Seller
                  and all of Seller's intellectual property, including, but not
                  limited to patents, trade secrets, and copyrights;

         (iii)    all amounts due or payable to Seller as adjustments or refunds
                  under any contracts affecting the Assets for all periods of
                  time prior to the Effective Date, specifically including,
                  without limitation, amounts recoverable from audits under
                  operating agreements;

         (iv)     all rights, titles, claims and interests of Seller or its
                  Affiliates, which accrued prior to the Effective Date, to or
                  under any policy or agreement of insurance or indemnity, any
                  bond, or to any insurance proceeds or awards; and any
                  employment, consulting, office lease or accounting service
                  contracts;

         (v)      all claims and chooses in action of Seller arising from acts,
                  omissions or events, or damages to or destruction of property,
                  occurring prior to the Effective Date; and

         (vi)     all proceeds, benefits, refunds, settlement, income or revenue
                  accruing and attributable to the Assets prior to the Effective
                  Date, and any claims of Seller for refunds of or losses
                  carried forwards with respect to taxes attributable to the
                  Assets for any period prior to the Effective Date.

1.2      CLOSING: Closing, as used herein, shall mean the date on which the
         Purchase Price (as defined below) is to be paid to Seller and the
         conveyancing instruments (as described herein) are to be delivered to
         Purchaser. Closing shall occur on March 31, 2000, at Seller's office
         located at Suite 3400, 201 St. Charles Avenue, New Orleans, Louisiana
         70170, or at such other place, date and time as may be mutually agreed
         upon by Seller and Purchaser.

1.3      ASSUMPTION OF OBLIGATIONS: From and after the Effective Date, but
         subject to the terms of Section 1.5 and except for those matters
         specifically retained by Seller in this Agreement and those matters set
         forth on Exhibit "D", for which Seller retains liability ("Retained
         Matters"), Purchaser shall personally assume, pay for, discharge, be
         responsible for, perform and comply with all duties, liabilities and
         obligations of Seller, express or implied, relating to the Assets,
         including, but not limited to, those arising from or by virtue of
         Contract, as hereinafter defined, and those arising from or by virtue
         of any permit, statute, rule, regulation or order of any governmental
         authority, together with all

<PAGE>   4

Purchase and Sale Agreement
Page No. 4

         Assumed Liabilities (as hereinafter defined), REGARDLESS OF WHETHER
         ATTRIBUTABLE (IN WHOLE OR IN PART) TO THE SOLE, JOINT OR CONCURRENT
         NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT, ENVIRONMENTAL
         LIABILITY, REGULATORY LIABILITY OR OTHER FAULT OR RESPONSIBILITY OF
         SELLER OR ANY OTHER PERSON OR PARTY, except as otherwise set forth
         herein. For purposes hereof, the following terms shall have the
         following respective definitions:

         "ASSUMED LIABILITIES" means all Environmental Liabilities, General
         Liabilities, Plugging and Abandonment Obligations and other liabilities
         and obligations assumed by Purchaser under the terms of this Agreement.

         "GENERAL LIABILITIES" means subject to the limitations of Section 1.5
         below, all obligations, duties, losses, liabilities, claims, fines,
         expenses, damages, costs (including attorneys fees and expenses) or
         penalties created by, related to, or arising out of ownership or
         operation of the Assets, any contractual relationship, or any
         applicable law, order, rule, regulation, judgment or decree of any
         federal, state, tribal, county or municipal governing authority having
         jurisdiction over the Assets or the Parties, whether Accruing before or
         after the Effective Date and whether attributable, in whole or in part,
         to actions, events or conditions existing or occurring before or after
         the Effective Date; excluding those obligations, duties or liabilities
         for the payment of royalties, overriding royalties and taxes which
         Accrued prior to the Effective Date, those addressed in Section 1.5 and
         Retained Matters.

         "ENVIRONMENTAL LAWS" means any applicable laws, orders, rules,
         regulations, judgments or decrees of any federal, state, tribal, county
         or municipal governing authority having jurisdiction over any Asset or
         Party which relate to pollution, the protection or cleanup of the
         environment, or the release or disposal of deleterious substances into
         the environment, including but not limited to ambient air, surface
         water, groundwater, land surface or subsurface strata; including all
         such laws, orders, rules, regulations, judgments or decrees as they may
         be amended, varied or modified in the future.

         "ENVIRONMENTAL LIABILITIES" means all obligations, duties, losses,
         liabilities, claims, fines, expenses, damages, costs (including
         attorney's fees and expenses) or penalties created by, related to, or
         arising out of any Environmental Law, whether Accruing before or after
         the Effective Date, and whether attributable, in whole or in part, to
         actions, events or conditions existing or occurring before or after the
         Effective Date.

         "PLUGGING AND ABANDONMENT OBLIGATIONS" means all usual and normal
         prudent operations for the plugging, abandonment, surface restoration,
         site clearance, and disposal of related waste materials, including NORM
         and asbestos, of all oil, gas, injection, water or other wells, sumps,
         pits, ponds, tanks, impoundments, foundations, pipelines, structures
         and equipment of any kind or description on the Assets, in compliance
         with all applicable contractual obligations and applicable rules and
         regulations of governmental bodies having

<PAGE>   5

Purchase and Sale Agreement
Page No. 5

         jurisdiction over the Assets. Plugging and Abandonment Obligations do
         not include cleanup of polluted lands, air or water other than routine
         cleanup normally associated with plugging and abandonment (such cleanup
         obligations which are other than routine being included within the
         definition of Environmental Liabilities).

         "ACCRUING" or "ACCRUED" means, with respect to any obligation, duty,
         loss, liability, claim, fine, expense, damage, cost or penalty, the
         occurring or happening of any event which causes such obligation, duty,
         loss, liability, claim, fine, expense, damage, cost or penalty to
         become demandable, requirable, assertible, enforceable, due and owing,
         or being incurred or occurring, as the case may be.

1.4      CALL ON PRODUCTION:

(a)      On Oil - If not already reserved by another party, Seller hereby
         reserves, at its option, the option to buy any and all oil and other
         liquid hydrocarbons produced from or attributable to the Assets from
         the Effective Date to May 1, 2000 at 7:00 a.m.

(b)      Applicable price - The price to be paid shall be:

         (i)      Seller's posted market price at the wells for oil or
                  condensate, or if Seller has no posted price at the well
                  prevailing in the field where produced for substance of like
                  grade and gravity. If there are no such posted price, the
                  price to be paid by Seller will be the average price being
                  paid by purchasing companies in the field or locality where
                  the Assets are located for substance of like grade and
                  gravity.

         (ii)     Seller shall never be required to pay a price higher than the
                  price allowed by State or Federal statutes or regulations in
                  effect at the time of purchase.

1.5      RETAINED CONTRACTUAL OBLIGATIONS: To the extent binding on Seller,
         Purchaser and Seller agree that the Assets shall be conveyed subject to
         the terms and conditions of the contracts, agreements, letter
         agreements, pooling agreements, easements, rights-of-way and all other
         agreements or instruments which are listed on Exhibit "E" and the
         leases described on Exhibit "A" hereto (collectively the "Contracts").

         Upon closing, Purchaser shall expressly assume Seller's obligations
         under the Contracts insofar as such obligations relate to the Assets
         and are attributable to the period of time after the Effective Date.

         However, under no circumstance shall Purchaser assume or be responsible
         for (i) contractual performance or non-performance by Seller due and
         owing prior to the Effective Date; (ii) underpayments or failure to pay
         royalties, overriding royalties, and other burdens due by Seller on or
         under the Assets prior to the Effective Date; or (iii) any accounting
         or payments due to third parties for hydrocarbon production (or the
         proceeds from the sale thereof) or transportation or processing
         attributable to the period of time

<PAGE>   6

Purchase and Sale Agreement
Page No. 6

         prior to the Effective Date; all of which shall remain the
         responsibility of Seller for which Seller shall indemnify and hold
         harmless Purchaser.

1.6      TITLE:

         Seller will convey all of its rights, title and interest in and to the
         Assets to Purchaser without warranty of title, express, statutory or
         implied, EXCEPT that Seller specifically warrants and agrees to defend
         title to the interests in the Assets as set forth and described on
         Exhibit "A" hereto, against any and all claims and demands of all
         persons claiming an interest (including an encumbrance) in the Assets
         by, through and/or under Seller and/or Spirit (as hereinafter defined)
         but not otherwise; and with full substitution and subrogation to all
         rights and actions of warranty against all former owners and vendors.

                                       II.

                                  CONSIDERATION

2.1      PURCHASE PRICE; ALLOCATIONS: Subject to the terms and conditions of
         this Agreement, Purchaser shall purchase the Assets at Closing for
         forty-eight million two hundred fifty thousand ($48,250,000.00)
         ("Purchase Price"), in cash, subject to the adjustments provided in
         Section 2.3 below and other amounts provided elsewhere herein.

2.2      Intentionally omitted.

2.3      ADJUSTED PURCHASE PRICE: The net price which Purchaser shall pay for
         the Assets ("Adjusted Purchase Price") shall be:

(a)      The Purchase Price as set forth in Section 2.1 above;

(b)      Plus the amount of all expenditures made by Seller that are
         attributable to the Assets for the period between the Effective Date
         and Closing, including, without limitation, royalties, rentals and
         similar charges and expenses, including those billed under applicable
         operating agreements, and all prepaid expenses;

(c)      Less the amount of (or Purchaser's good faith estimate of) any
         expenditures that are attributable to the Assets prior to the Effective
         Date, which have not been paid for or satisfied by Seller.

(d)      Plus the value of all oil in storage at 7:00 a.m. on the Effective Date
         that is credited to the Assets (value to be the market or contract
         price in effect as of Effective Date less royalties, other lease
         burdens and taxes on production) which has not been sold prior to
         closing. If the Effective Date is subsequent to the date of this
         instrument, all oil, condensate or liquid hydrocarbons in storage shall
         be gauged and all gas meter charts

<PAGE>   7

Purchase and Sale Agreement
Page No. 7

         shall be replaced at the Effective Date with Purchaser having the right
         to have a representative present at the Effective Date for
         Seller-operated interests;

(e)      Less the amount of the proceeds received by Seller between the
         Effective Date and Closing that are attributable to the Assets after
         the Effective Date, net of any royalties, other lease burdens and any
         production, severance, sales or windfall profit taxes not reimbursed to
         Seller by the Purchaser;

(f)      Less the amount of (or Seller's good faith estimate of) all proceeds
         owed by Seller to Purchaser for the oil and other liquid hydrocarbons
         produced from or attributable to the Assets from the Effective Date to
         May 1, 2000 at 7:00 a.m.

(g)      Less or plus, as applicable, any amounts determined to be a price
         adjustment pursuant to Article III hereof ("Title Examination");

(h)      Less an amount equal to the value of the Assets, determined pursuant to
         Article III hereof, with respect to which Preferential Purchase Rights
         have been exercised;

(i)      Less or plus any other amounts mutually agreed upon in writing by the
         parties hereto;

(j)      Plus the amount of royalty overpaid to the MMS by Purchaser for
         production attributable to Seller's interest in the Assets prior to the
         Effective Date. The parties agree for the limited purpose of this
         adjustment (subject to the provisions of Section 9.3 below) that this
         amount is $2,447,124.92.

2.4      PAYMENT OF ADJUSTED PURCHASE PRICE: At Closing, Purchaser shall pay to
         Seller the Adjusted Purchase Price, by cashier's check or wire transfer
         of cash in United States Currency, in a manner specified by Seller in
         writing. Seller shall present to Purchaser at least three business days
         prior to Closing a proposed closing statement and the parties shall
         agree on said statement prior to Closing.

2.5      Intentionally omitted.

                                      III.

                                TITLE EXAMINATION

3.1      ACCESS TO TITLE INFORMATION: After the date of this Agreement and until
         Closing, at Purchaser's request, Seller shall make the records
         described in Section 1.1(d) available to Purchaser at Seller's office
         located at 4021-4023 Ambassador Caffery Parkway, Lafayette, Louisiana
         70503, or such other place as deemed appropriate by Seller, during
         normal business hours for examination by Purchaser. Seller shall not be
         obligated to perform any additional title work, and any additional
         abstracts and title opinions will not be made current by Seller. NO
         WARRANTY OR REPRESENTATION OF ANY KIND

<PAGE>   8

Purchase and Sale Agreement
Page No. 8

         IS MADE BY SELLER, AS TO THE INFORMATION SO SUPPLIED, AND PURCHASER
         AGREES THAT ANY CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS
         OWN INDEPENDENT REVIEW AND JUDGMENT. NO WARRANTY OF ANY KIND IS MADE BY
         SELLER AS TO THE INFORMATION SO SUPPLIED, AND PURCHASER AGREES THAT ANY
         CONCLUSIONS DRAWN THEREFROM SHALL BE THE RESULT OF ITS OWN INDEPENDENT
         REVIEW AND JUDGMENT. SUBJECT TO THE OTHER PROVISIONS OF THIS AGREEMENT,
         PURCHASER ASSUMES THE RISK OF ANY TITLE DEFECTS AND/OR CONFLICTING
         ADVERSE RIGHT(S), TITLE(S) AND/OR INTEREST(S) WHICH A RECORD TITLE
         CHECK AND/OR PHYSICAL INSPECTION REVEALS OR WOULD HAVE REVEALED.

3.2      TITLE DEFECTS: For the purpose of this Agreement, a "Title Defect"
         shall mean a material (defined as greater than $10,000) deficiency
         (other than with respect to a Permitted Encumbrance, as defined below)
         in one or more of the following respects only:

(a)      Seller's title at the Effective Date, as to one or more of the Assets,
         is subject to an outstanding mortgage, deed of trust, lien or
         encumbrance or adverse claim that is not listed on Exhibit "F" attached
         hereto, nor considered a "Permitted Encumbrance," as that term is
         defined below;

(b)      Seller's interest in any of the Assets is more or less than represented
         on Exhibit "A" hereto;

(c)      Seller's rights and interests are subject to being reduced now or in
         the future by virtue of the exercise by a third party of a
         reversionary, back-in or similar right not listed on Exhibit "G"
         attached hereto, nor considered a "Permitted Encumbrance," as that term
         is defined below;

3.3      PERMITTED ENCUMBRANCES: "Permitted Encumbrances," as that term is used
         in this Agreement, means:

(a)      liens for taxes not yet delinquent;

(b)      lessor's royalties, overriding royalties, reversionary interests and
         other lease burdens that do not operate, now or in the future, to
         reduce the net revenue interest of Seller in any of the Assets to less
         than the amount set forth therefor on Exhibit "A";

(c)      Contracts that do not, now or in the future, operate to increase the
         working interest or decrease the net revenue interest of Seller in any
         of the Assets from that set forth on Exhibit "A";

(d)      rights of way, easements, and other agreements of a similar nature
         relating to or restricting surface use on, over or in respect of the
         Assets;

<PAGE>   9

Purchase and Sale Agreement
Page No. 9

(e)      preferential rights to purchase which, prior to Closing, have either
         expired or have been waived by the holders thereof to the extent such
         rights affect the Assets;

(f)      all necessary consents, permissions and approvals by third parties in
         connection with the sale and transfer of the Assets which have been
         obtained prior to Closing and those governmental consents customarily
         generated and received in the ordinary course of business at a
         post-Closing date;

(g)      such Title Defects or other deficiencies or irregularities waived by
         Purchaser in writing;

(h)      liens released at or prior to Closing;

(i)      rights reserved or vested in any governmental subdivision, political
         entity or public authority to control rights or regulate the Assets in
         any manner, and all applicable laws, rules and orders of such
         subdivisions, entities and authorities; and

(j)      all matters disclosed in Exhibit "H" hereto which affect the quality or
         quantity of title.

3.4      NOTICE OF TITLE DEFECT: Upon discovery of a Title Defect, the
         discovering party shall immediately notify the other party in writing
         of the nature of the Title Defect and the proposed adjustment in the
         Purchase Price attributable to such Title Defect.

3.5      REMEDIES FOR TITLE DEFECTS:

(a)      Upon timely delivery of notice of a Title Defect either by Purchaser or
         by Seller of an increase or decrease in interest, Purchaser and Seller
         shall meet and use their reasonable efforts to agree on the validity of
         the claim and the amount of any required price adjustment. If the
         parties cannot agree on the amount of a price adjustment, such amount
         shall be determined in accordance with the following guidelines:

         (i)      If it is determined that a Title Defect exists which results
                  in Seller owning a different interest than that shown on
                  Exhibit "A" and Seller has elected not to attempt to cure such
                  Title Defect, then Seller shall reduce or increase the
                  Purchase Price, as appropriate. Purchaser must accept or
                  reject this adjusted Purchase Price within twenty-four (24)
                  hours from receipt of written notice thereof. If rejected by
                  Purchaser, this Agreement shall terminate.

         (ii)     Seller may elect to cure any or all Title Defects; provided,
                  however, if Seller elects to cure a Title Defect, but has not
                  been able to do so by the Closing Date, the Parties shall
                  proceed with the Closing, with the Defect Value being an
                  adjustment to the Purchase Price.

<PAGE>   10

Purchase and Sale Agreement
Page No. 10

         (iii)    If a Title Defect is a lien, encumbrance or other charge which
                  is liquidated in amount, and provided that Purchaser approves
                  same, Seller can reserve the option to retain the obligation
                  of this Title Defect and to challenge the validity of any such
                  Title Defect or any portion thereof and to hold Purchaser
                  harmless with regard thereto. Purchaser agrees to cooperate
                  with Seller in such efforts at no risk or expense to
                  Purchaser.

(b)      Notwithstanding anything to the contrary hereinabove, the Purchase
         Price will be adjusted only if the net amount of all adjustments in
         favor of Purchaser or Seller, taken together, exceeds five percent (5%)
         of the Purchase Price. In the event the net amount of the purchase
         price adjustments exceeds twenty percent (20%) of the total Purchase
         Price, then either Seller or Purchaser may, upon written notice to the
         other party, terminate this Agreement, and the same shall be of no
         further force and effect.

(c)      If a Title Defect is a Section 3.2 (a)-(c) Title Defect which increases
         or decreases Seller's interest in the Assets, and Seller does not elect
         to or does not cure the Title Defect, the Purchase Price shall be
         adjusted up or down by the Defect Value of the Title Defect.

(d)      If Seller contests the existence of a Title Defect or Purchaser's good
         faith estimate of the Defect Value of the Title Defect or if Purchaser
         contests Seller's cure, the Parties shall meet and use their best
         efforts to agree on the validity, cure and/or value of the Title
         Defect. If the Parties cannot agree on the validity, cure and/or value
         of a Title Defect, and neither Party elects to waive its claim, the
         dispute shall be submitted to arbitration in accordance with the
         arbitration procedures set forth in EXHIBIT "I".

(e)      For purposes hereof, the term "Defect Value shall mean (i) with respect
         to a claim of Title Defect is made pursuant to Section 3.2 (a) for a
         matter not covered by Sections 3.2 (b) or (c), the value of the defect
         for a defect that is a liquidated or certain amount shall be such
         liquidated or certain amount, and as to unliquidated or uncertain
         amounts it shall be an amount necessary to compensate Purchaser for the
         adverse economic effect of such Title Defect on the value of the
         property(ies) affected, taking into consideration all relevant factors,
         including the practical and legal effect of the Title Defect.

(f)      If Purchaser is entitled to receive an adjustment for a Title Defect,
         as provided in this Agreement, Seller shall have the right, but not the
         obligation, to attempt to cure the Title Defect and cancel the
         reduction in the Purchase Price. If Seller chooses to cure the Title
         Defect, but has not done so by Closing, Seller shall have the right to
         postpone Closing for a period not to exceed twenty (20) business days
         from the original Closing Date.

3.6      PREFERENTIAL PURCHASE RIGHTS: With respect to each preferential
         purchase right covering the Leasehold Property, Seller shall send to
         the holder of such right a notice offering to sell to such holder, in
         accordance with the contractual provisions applicable to such right,
         those Assets covered by such right on substantially the same terms
         hereof, subject to

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Purchase and Sale Agreement
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         adjustments in the same manner as the Purchase Price is adjusted
         pursuant to Section 3.5 of this Agreement. Preferential purchase rights
         shall not be considered Title Defects hereunder provided such are
         waived or exercised prior to Closing.

         If, prior to Closing, any holder of a preferential purchase right
         notifies Seller that it intends to consummate the purchase of the
         Assets to which its preferential purchase right applies, then those
         Assets shall be excluded from the Assets to be conveyed to Purchaser,
         and the Purchase Price shall be reduced as set forth in Section 3.5.

                                       IV.

                             ENVIRONMENTAL CONDITION

4.1      NO ADMISSION AGAINST INTEREST: Nothing contained in this Article IV, or
         elsewhere in this Agreement, shall be construed to be an admission
         against interest as to Seller or Purchaser. Seller and Purchaser have
         not included environmental liability related provisions herein due to
         any perceived liability and specifically disclaim the existence of any
         such liability to third parties (including governmental entities) based
         on contract, tort, statute or otherwise.

4.2      PHYSICAL CONDITION OF THE ASSETS: The Assets have been used for oil and
         gas drilling and production operations, related oil field operations,
         and possibly, for the storage and disposal of waste materials or
         hazardous substances. Physical changes in or under the Leasehold
         Properties or adjacent lands may have occurred as a result of such
         uses. The Assets also may contain buried pipelines and other equipment,
         whether or not of a similar nature, the locations of which may not now
         be known by Seller nor readily apparent by a physical inspection of the
         property. Purchaser understands that Seller does not have the requisite
         information with which to determine the exact nature or condition of
         the Assets nor the effect any such use has had on the physical
         condition of the Assets. Pursuant to the Safe Water Drinking and Toxic
         Enforcement Act of 1986, Purchaser is hereby notified and assumes the
         risk that detectable amounts of chemicals known to cause cancer, birth
         defects and other reproductive harm may be found in, on or around the
         Assets. In addition, Purchaser acknowledges that some oil field
         production equipment may contain asbestos and/or naturally-occurring
         radioactive material (NORM). In this regard, Purchaser expressly
         understands that NORM may affix or attach itself to the inside of
         wells, materials and equipment as scale or in other forms, and that
         wells, materials and equipment located on the Assets described herein
         may contain NORM and that NORM-containing materials may be buried or
         have been otherwise disposed of on or under the Assets. Purchaser also
         expressly understands that special procedures may be required for the
         removal and disposal of asbestos and NORM from the Assets where it may
         be found, and that Purchaser assumes all liability and responsibility
         for such activities when and if performed.

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4.3      ENDANGERED SPECIES, CRITICAL HABITAT, WETLANDS, GEOLOGIC HAZARDS AND
         FLOODING: "Endangered Species" as used herein shall have the same
         meaning as "endangered species" is defined pursuant to 16 U.S.C.
         1532(6) or the laws of the state in which the Leasehold Property is
         located; as "threatened species" is defined pursuant to 16 U.S.C.
         1533(30) or the laws of the state in which the Leasehold Property is
         located; and/or, as a candidate species for such listing under federal
         or state law. "Critical Habitat" as used herein shall have the meaning
         as defined pursuant to 16 U.S.C. 1532(5). "Wetland" as used herein
         shall have the meaning as defined in 40 Code of Federal Regulations
         ss.230.3(a), or under the laws of the state in which the Leasehold
         Property is located. "Geologic Hazards" as used herein shall include
         seismic hazard and any earth slides or other earth movement. "Flooding"
         as used herein shall include the risks associated with a flood plain,
         flood way or restriction zone and/or any diminution in the value of the
         Leasehold Property or restriction of its use by reason of the risk of
         water entering or remaining thereon. WITHOUT IN ANY WAY LIMITING ANY
         OTHER DISCLAIMERS OF WARRANTY HEREIN AND NOTWITHSTANDING ANY
         DISCLOSURES MADE BY SELLER TO PURCHASER, SELLER DISCLAIMS ANY EXPRESS
         OR IMPLIED WARRANTY OR REPRESENTATION AS OF THE DATE OF THIS AGREEMENT
         AND/OR AS OF THE CLOSING OF THE COMPLETENESS OF ANY SUCH DISCLOSURE OR
         THAT THE PROPERTY IS FREE FROM ANY ENDANGERED SPECIES OR THAT ALL OR
         ANY PART OF THE PROPERTY IS NOT A CRITICAL HABITAT OR A WETLAND, OR
         THAT ANY PART OF THE ASSETS DOES NOT INCLUDE A GEOLOGIC HAZARD, OR THAT
         ANY PART OF THE PROPERTY IS NOT SUBJECT TO FLOODING. Notwithstanding
         any knowledge that could be imputed to Seller, Purchaser has the
         obligation to ascertain the presence of and extent of any Endangered
         Species, Critical Habitat, Wetland, Geologic Hazards and the risk of
         Flooding on the Property.

4.4      ENVIRONMENTAL ASSESSMENT DURING EXAMINATION PERIOD: Purchaser has had
         at least thirty (30) days to make its environmental assessment
         ("Examination Period"). Purchaser and its agents shall have the right
         to enter upon the Assets and all buildings and improvements thereon,
         inspect the same, conduct soil and water tests and borings, and
         generally conduct such tests, examinations, investigations and studies
         as may be necessary or appropriate for the preparation of appropriate
         engineering and other reports, and evaluations relating to the Assets,
         their condition, and the presence of waste or contaminants. If such an
         assessment was performed, Purchaser agrees to immediately provide to
         Seller a copy of the environmental assessment, including any reports,
         data and conclusions upon which it is based.

4.5      WITHDRAWAL BY PURCHASER DUE TO ENVIRONMENTAL PROBLEMS: If, during the
         Examination Period, Purchaser, in its sole discretion, determines that
         hazardous waste materials located on the Assets may create substantial
         problems for Purchaser or users of the Assets and the reasonable
         remediation and/or clean up costs which are asserted and currently
         required by a governmental entity, having jurisdiction over the
         affective property(ies), pursuant to applicable law exceeds 5% of the
         Purchase Price, then, by so notifying Seller in writing within the
         Examination Period, Purchaser may, if Seller in its

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Purchase and Sale Agreement
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         sole discretion elects not to indemnify Purchaser against any loss,
         terminate this Agreement, upon which termination of this Agreement
         shall be null and void, and Purchaser shall have no further obligation
         or liability of any kind hereunder or with respect hereto. Failure of
         Purchaser to so notify Seller within the Examination Period shall be
         deemed a waiver of any right to terminate the Agreement relating to any
         environmental problems. If Seller contests the existence of an
         environmental problem or the amount of reasonable remediation and/or
         clean-up costs (which shall mean only the cost to remedy such
         Environmental Liability using the most cost effective methods and
         manner to satisfy applicable Environmental Laws, and which are
         consistent with the continued use of the affected Assets in the same
         capacity and for the same purposes as they were being used on the
         Effective Dates) and the parties are unable to reach mutual agreement,
         then if after Seller notifies Purchaser that it does not concur with
         the existence of a required remediation or cleanup or with respect to
         Purchaser's determination of the estimated remediation and/or clean-up
         costs, Purchaser may still elect to terminate this Agreement and
         request a determination of the value of the required remediation and/or
         clean-up costs by the following procedure: the Parties will submit the
         issue to arbitration in accordance with the arbitration procedures set
         forth in EXHIBIT "I". If the arbitrators determine that the required
         remediation and/or clean-up costs are equal to or less than 5% of the
         Purchase Price, Purchaser will pay the arbitration costs. If the
         arbitrators find that the required remediation and/or clean-up costs do
         exceed 5% of the Purchase Price, Seller will pay the arbitration costs.
         If Purchaser does not elect to terminate this Agreement in a written
         notice to Seller prior to the commencement of arbitration in connection
         with this Section, then Purchaser shall be deemed to have waived its
         right to terminate this Agreement under this Section unless and until
         the arbitors determine that the required remediation and/or clean-up
         costs do exceed 5% of the Purchase Price, and if such arbitors
         determine that the required remediation and/or clean-up costs are equal
         to or less than 5% of the Purchase Price, then Purchaser shall pay all
         arbitration costs an proceed toward Closing, subject to the other terms
         and conditions of this Agreement. Notwithstanding anything stated
         herein to the contrary, if Purchaser elects to pursue arbitration under
         this Section, then at any time prior to a determination by the
         arbitors, Seller has the right, upon written notice to Purchaser, to
         elect to terminate this Agreement (and this Agreement shall thereafter
         be null and void) and the parties will be responsible for their own
         respective fees or other costs regarding arbitration incurred them.

4.6      CONDITIONAL ACCESS TO ASSETS: Purchaser is hereby granted access to the
         Assets to conduct its environmental assessment upon the following
         conditions:

(a)      The environmental assessment shall be conducted at Purchaser's sole
         risk and expense, and Purchaser waives and releases all claims against
         Seller, its directors, officers, employees and agents and parent or
         subsidiary companies for injury to, or death of, persons or damage to
         property arising in any way from the exercise of rights granted to
         Purchaser hereby. REGARDLESS OF THE SOLE, JOINT OR CONCURRENT
         NEGLIGENCE, STRICT LIABILITY, PREMISES LIABILITY, BREACH OF

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Purchase and Sale Agreement
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         CONTRACT OR OTHER FAULT OR RESPONSIBILITY OF SELLER OR ANY OTHER PERSON
         OR PARTY.

(b)      Purchaser RELEASES AND AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS
         Seller, its directors, officers, employees, agents and Affiliates
         against all claims for injury to, or death of, persons or damage to
         property arising in any way from the exercise of access rights granted
         to Purchaser for environmental due diligence or due diligence for any
         other purpose. Purchaser shall indemnify Seller, its directors,
         officers, employees, agents and Affiliates against and hold each and
         all of said indemnitees harmless from any and all loss, cost, damage,
         expense or liability, including attorney's fees, arising out of (i) any
         and all third party statutory or common-law liens or other encumbrances
         for labor or materials furnished in connection with such tests,
         samplings, studies or surveys as Purchaser may conduct with respect to
         the Assets; and (ii) any injury to or death of persons or damage to
         property occurring in, on or about the Assets as the result of
         Purchaser's due diligence activities REGARDLESS OF THE SOLE, JOINT OR
         CONCURRENT NEGLIGENCE, STRICT LIABILITY, PREMISES LIABILITY, BREACH OF
         CONTRACT, OR OTHER FAULT OR RESPONSIBILITY OF SELLER OR ANY OTHER PARTY
         OR PERSON (except for any such injuries or damages caused solely by the
         gross negligence or willful misconduct of any said indemnitees). The
         foregoing obligation of indemnity shall survive Closing or termination
         of this Agreement without Closing.

4.7      "AS IS, WHERE IS" PURCHASE: In the event Purchaser does not elect to
         terminate this Agreement as above provided, then Purchaser shall
         acquire the Assets in their "AS IS, WHERE IS, WITH ALL FAULTS"
         condition and shall assume the risks that the Assets may contain waste
         materials, contaminants or hazardous substances, that adverse physical
         conditions, including, but not limited to, the presence of waste
         materials, contaminants or hazardous substances or the presence of
         unknown abandoned oil and gas wells, water wells, pits, sumps and
         pipelines may not have been revealed by Purchaser's investigation,
         including, but not limited to, any and all Environmental Liabilities
         and other Assumed Liabilities. Except as otherwise set forth herein, on
         and after the Effective Date, all responsibility and liability related
         to all such adverse environmental conditions, whether known or unknown,
         shall be transferred to and borne solely by Purchaser.

4.8      ASSUMPTION AND INDEMNIFICATION OF ENVIRONMENTAL RISK AND ENVIRONMENTAL
         LIABILITIES: Except as otherwise set forth herein, Purchaser, subject
         to the terms of this Agreement, shall assume full responsibility for,
         and agrees to comply with and perform all environmentally-related
         duties and obligations of Seller and TO INDEMNIFY, DEFEND AND HOLD
         HARMLESS SELLER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
         REPRESENTATIVES AND AFFILIATED OR PARENT COMPANIES (WHICH ADDITIONAL
         PARTIES ARE HEREINAFTER COLLECTIVELY REFERRED TO AS "SELLER'S AGENTS"),
         from and against all losses, liabilities, causes of action, damages,
         liens, penalties, fines, settlements, judgments, expenses, attorney's
         fees, court costs and claims (hereinafter

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Purchase and Sale Agreement
Page No. 15

         referred to collectively as "claims") caused by or arising out of any
         rule, order, permit, statute, or regulation of a governmental authority
         applicable to any waste material, contaminant or hazardous substance on
         or included with the Assets or the presence, disposal, release or
         threatened release of any waste material, contaminant or hazardous
         substance from the Assets into the atmosphere or into or upon land or
         any water course or body of water, including ground water, whether or
         not such claims are attributable to Seller's activities or the
         activities of third parties, whether or not Seller or the Seller's
         Agents were or are aware of such activities and whether or not such
         claims arose prior to, during or after the period of Seller's ownership
         of the Assets, including, but not limited to, any and all Environmental
         Liabilities. This indemnification and assumption of responsibility
         shall also apply to liability for voluntary environmental response
         actions undertaken pursuant to the Comprehensive Environmental Response
         Compensation and Liability Act (CERCLA) or any other federal, state or
         local law, regulation or order. THE ASSUMPTION AND INDEMNIFICATION OF
         ALL ENVIRONMENTAL LIABILITIES BY PURCHASER, UNDER SECTION IV SHALL
         APPLY REGARDLESS OF WHETHER SUCH LIABILITIES ARE KNOWN OR UNKNOWN,
         RELATE TO ACTIONS, EVENTS OR CONDITIONS EXISTING OR OCCURRING PRIOR TO
         OR AFTER THE EFFECTIVE DATE, AND REGARDLESS OF WHETHER ATTRIBUTABLE (IN
         WHOLE OR IN PART) TO THE ACTIONS, SOLE, JOINT OR CONCURRENT NEGLIGENCE,
         STRICT LIABILITY, BREACH OF CONTRACT, PRODUCTS LIABILITY, ENVIRONMENTAL
         LIABILITY, OR OTHER FAULT, LIABILITY OR RESPONSIBILITY OF SELLER, THE
         SELLER'S AGENTS OR ANY OTHER PERSON OR PARTY, AND REGARDLESS OF WHETHER
         ASSERTED UNDER ANY THEORY OF LIABILITY; PROVIDED, HOWEVER, THAT THIS
         ASSUMPTION AND INDEMNIFICATION BY PURCHASER SHALL NOT COVER OR INCLUDE
         CLAIMS OR LIABILITIES DIRECTLY RELATING TO THOSE HAZARDOUS MATERIALS
         WHICH HAVE BEEN TRANSPORTED FOR DISPOSAL PRIOR TO THE EFFECTIVE DATE BY
         SELLER OFF OF THE ASSETS TO PROPERTIES OWNED BY SELLER AND/OR THIRD
         PARTIES (INSOFAR AS SUCH HAZARDOUS MATERIALS ARE REGULATED BY
         GOVERNMENTAL AGENCIES UNDER CURRENT, APPLICABLE ENVIRONMENTAL LAWS) AND
         SELLER RETAINS SUCH LIABILITY AND SHALL INDEMNIFY PURCHASER FOR SAME.

4.9      EXCLUSIVE REMEDY. The indemnities provided in this Article IV and
         elsewhere in this Agreement set forth the exclusive remedy of the
         parties with respect to the claims, liabilities and obligations covered
         thereby.

                                       V.

5.1      CASUALTY LOSS: The risk of casualty loss relating to the Assets shall
         pass from Seller to Purchaser as of the Effective Date, and Purchaser
         shall assume all risk of any change in condition of the Assets from and
         after the Effective Date, REGARDLESS OF THE

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Purchase and Sale Agreement
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         SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, BREACH OF
         CONTRACT OR OTHER FAULT OR RESPONSIBILITY OF SELLER OR ANY OTHER PARTY
         OR PERSON, except to the extent any change in condition is directly
         caused by the gross negligence or willful misconduct of Seller.

                                       VI.

                                 REPRESENTATIONS

6.1      PURCHASER'S REPRESENTATIONS: Purchaser represents and warrants to
         Seller as of the Effective Date and Closing as follows:

(a)      EXISTENCE: Purchaser is duly organized, validly existing, and in good
         standing under the corporation laws of the jurisdiction of its
         organization and is duly qualified at Closing to carry on business in
         the state(s) where the Assets are located.

(b)      AUTHORIZATION: Purchaser has the corporate power and authority to enter
         into and perform this Agreement and the transactions contemplated
         hereby. The execution, delivery and performance of this Agreement and
         the transactions contemplated hereby have been duly and validly
         authorized by all requisite corporate action on the part of Purchaser.
         This Agreement has been duly executed and delivered on behalf of
         Purchaser, and at Closing all documents and instruments required
         hereunder to be executed and delivered by Purchaser shall have been
         fully executed and delivered.

(c)      BROKERS: Purchaser has not incurred any obligation or liability,
         contingent or otherwise, for brokers' or finders' fees with respect to
         the matters provided for in this Agreement which will be the
         responsibility of Seller; and any such obligation or liability that may
         exist shall be the sole obligation of the creating party.

(d)      ENFORCEABILITY: This Agreement constitutes, and the documents and
         instruments to be executed pursuant hereto will constitute, the legal,
         valid and binding obligations of Purchaser, enforceable against
         Purchaser in accordance with their respective terms, except to the
         extent that such enforcement may be limited by applicable bankruptcy,
         insolvency and similar laws affecting creditors' rights generally and
         by general equitable principles.

(e)      FURTHER DISTRIBUTION: Purchaser is acquiring the Assets for its own
         account and not with the intent of making a public distribution thereof
         within the meaning of the Securities Act of 1933, as amended, and the
         rules and regulations promulgated thereunder.

(f)      FEDERAL LEASES: If the Assets include any federal leases, Purchaser is
         qualified to own such federal leases or will be so qualified at
         Closing, and, if Purchaser intends to operate such assets, Purchaser is
         qualified to operate such federal lease or will be so qualified at
         Closing.

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Purchase and Sale Agreement
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6.2      SELLER'S REPRESENTATIONS: Seller represents and warrants to Purchaser
         as follows as of the Effective Date and the Closing:

(a)      EXISTENCE: Seller is duly organized, validly existing, and in good
         standing under the corporation laws of the jurisdiction of its
         organization and is duly qualified at to carry on business in the
         state(s) where the Assets are located.

(b)      AUTHORIZATION: Seller has the corporate power and authority to enter
         into and perform this Agreement and the transactions contemplated
         hereby. The execution, delivery and performance of this Agreement and
         the transactions contemplated hereby have been duly and validly
         authorized by all requisite corporate action on the part of Seller.
         This Agreement has been duly executed and delivered on behalf of
         Seller, and at Closing all documents and instruments required hereunder
         to be executed and delivered by Seller shall have been fully executed
         and delivered.

(c)      BROKERS: Seller has not incurred any obligation or liability,
         contingent or otherwise, for brokers' or finders' fees with respect to
         the matters provided for in this Agreement which will be the
         responsibility of Purchaser; and any such obligation or liability that
         may exist shall be the sole obligation of the creating party.

(d)      ENFORCEABILITY: This Agreement constitutes, and the documents and
         instruments to be executed pursuant hereto will constitute, the legal,
         valid and binding obligations of Seller, enforceable against Seller in
         accordance with their respective terms, except to the extent that such
         enforcement may be limited by applicable bankruptcy, insolvency and
         similar laws affecting creditors' rights generally and by general
         equitable principles.

(e)      NO VIOLATIONS: The execution, delivery and performance of this
         Agreement by Seller, and the transactions contemplated hereby, will not
         violate (i) any material agreement or instrument to which Seller is a
         party or by which Seller or the Assets is bound, (ii) any judgment,
         order, ruling or decree applicable to Seller or the Assets, (iii) any
         law, rule or regulation applicable to Seller or the Assets or (iv) any
         of the organizational documents of Seller.

(f)      NO CONSENTS: The execution, delivery and performance of this Agreement
         by Seller does not require the consent, approval, authorization, order
         or other action of, nor any filing with, any third party.

(g)      PREFERENTIAL PURCHASE RIGHTS AND CONSENTS TO ASSIGNMENT: To the best of
         Seller's knowledge, the Assets are not subject to any agreements
         containing preferential purchase rights or consent to assignment
         provisions that must be complied with prior to the assignment of the
         Assets to Purchaser.

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Purchase and Sale Agreement
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(h)      LITIGATION: Excluding any ongoing MMS audits, and except as set forth
         on Exhibit "J" is neither any claim, suit, action, or other proceeding
         pending before any court or governmental agency nor, to Seller's
         knowledge, any claim, dispute, suit, action, investigation or other
         proceeding threatened against the Assets or against Seller or any
         Affiliate of Seller relating to the Assets.

(i)      TAXES: To Seller's knowledge, all ad valorem, property, production,
         excise, severance, windfall profit and similar taxes and assessments
         payable with respect to the Assets and based on or measured by the
         ownership of property or the production or removal of hydrocarbons or
         the receipt of proceeds therefrom have been and will be timely paid in
         all respects.

(j)      LEASES: To Seller's knowledge, (i) Seller is not in material default
         under any of the terms and provisions of any of the leases or under any
         agreement to which the same are subject; and (ii) all royalties,
         rentals, and other payments due thereunder by Seller have been timely
         and properly paid in full on or before the due dates thereof.

(k)      MARKETING: Except as provided in Section 1.4 above and as set forth on
         Exhibit "K", no amount of Seller's hydrocarbons produced from the
         Assets and marketed by others is subject to a sales or processing
         contract (except for contracts terminable without penalty by Seller on
         not more than 30 days' notice), and no person has any call upon, option
         to purchase or similar rights under any agreement with respect to the
         Assets or to the production therefrom. Seller has not in any respect
         collected, nor will Seller in any respect collect, any proceeds from
         the Assets that are subject to refund by Purchaser. Seller has not been
         nor will Seller be obligated by virtue of any prepayment made under any
         gas transportation, production sales contract or any other contract
         containing a "take or pay" clause, or under any gas balancing, deferred
         production or similar arrangement to deliver oil, gas or other minerals
         produced from or allocated to any of the Assets at some future time
         without receiving full payment therefor at the time of delivery.

(l)      CONTRACT RIGHTS: To Seller's knowledge, with respect to the Contracts:
         (i) all Contracts are identified on Exhibit "E" which have not
         previously expired or been terminated by mutual agreement and all such
         Contracts are in full force and effect and are the valid and legally
         binding obligations of the parties thereto and are enforceable in
         accordance with their respective terms, except to the extent that such
         enforcement may be limited by applicable bankruptcy, insolvency and
         similar laws affecting creditors' rights generally, and by general
         equitable principles; (ii) Seller is not in material breach or default
         with respect to any of its obligations under any Contract; and (iii)
         neither Seller nor any other party to any Contract has given or
         threatened to give notice of any action to terminate, cancel, rescind,
         or procure a judicial reformation of any Contract or any provision
         thereof.

6.3      DISCLAIMER OF REPRESENTATIONS AND WARRANTIES: Except as otherwise set
         forth herein, including but not limited to the warranties set forth in
         Section 1.6, THE ASSETS ARE SOLD "AS IS," "WHERE IS" AND "WITH ALL
         FAULTS AS TO ALL MATTERS,"

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Purchase and Sale Agreement
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         AND SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR
         WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE
         RELATING TO (a) THE CONDITIONS OF THE ASSETS (INCLUDING, WITHOUT
         LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, OF
         FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES
         OF MATERIALS), (b) ANY INFRINGEMENT BY SELLER OF ANY PATENT OR
         PROPRIETARY RIGHT OF ANY THIRD PARTY, (c) ANY INFORMATION, DATA OR
         OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED TO PURCHASER BY OR ON
         BEHALF OF SELLER (INCLUDING WITHOUT LIMITATION, IN RESPECT OF
         GEOLOGICAL AND ENGINEERING DATA, THE EXISTENCE OR EXTENT OF OIL, GAS OR
         OTHER MINERAL RESERVES, THE RECOVERABILITY OF OR THE COST OF RECOVERING
         ANY SUCH RESERVES, THE VALUE OF SUCH RESERVES, ANY PRODUCT PRICING
         ASSUMPTIONS, AND THE ABILITY TO SELL OIL OR GAS PRODUCTION AFTER
         CLOSING), (d) THE ENVIRONMENTAL CONDITION AND OTHER CONDITION OF THE
         ASSETS AND ANY POTENTIAL LIABILITY ARISING FROM OR RELATED TO THE
         ASSETS, AND (e) THE FAILURE OF ANY COMPUTER, ELECTRONICS, SOFTWARE, OR
         COMPONENTS TO BE FREE OF ANY BUGS OR ERRORS, INCLUDING, BUT NOT LIMITED
         TO, ANY DEFICIENCIES RELATING TO THE INABILITY TO PROPERLY FUNCTION
         BEYOND DECEMBER 31, 1999.

                                      VII.

                              CONDITIONS OF CLOSING

Purchaser's and Seller's obligations to consummate the transactions provided for
herein are subject to the satisfaction or waiver by the other party of the
following conditions:

7.1      REPRESENTATIONS: The representations of Purchaser and Seller contained
         in Article VI hereof shall be true and correct in all material respects
         on the date of Closing as though made on and as of that date.

7.2      PERFORMANCE: Both Purchaser and Seller shall have performed in all
         material respects the obligations, covenants and agreements hereunder
         to be performed by them at or prior to Closing.

7.3      PENDING MATTERS: No suit, action or other proceeding by a third party
         or a governmental authority shall be pending or threatened which seeks
         substantial damages from Purchaser or Seller in connection with the
         Assets, or seeks to restrain, enjoin or otherwise prohibit the
         consummation of the transactions contemplated by this Agreement.

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Purchase and Sale Agreement
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7.4      HART-SCOTT-RODINO ACT: If either party is of the opinion that the
         transaction described in this instrument falls within the purview of
         the Hart-Scott-Rodino ("HSR Act"), Purchaser shall prepare and submit
         in a timely manner, any necessary filings for Purchaser in connection
         with the transactions contemplated by this Agreement under the HSR Act
         and the rules and regulations thereunder. Purchaser shall request
         expedited treatment of such filing by the Federal Trade Commission,
         shall promptly make any appropriate or necessary subsequent or
         supplemental filings, and shall furnish to Seller copies of all filings
         made under the HSR Act at the same time they are filed with the
         government.

7.5      GOVERNMENTAL BONDS: Purchaser shall have delivered to Seller either:
         (i) copies of any bonds covering the Assets required under any laws,
         rules or regulations of any federal, state or local governmental agency
         having jurisdiction over the Assets issued by corporate sureties
         satisfactory to Seller; or (ii) a commitment by a surety company,
         satisfactory to Seller, to issue such bonds upon Closing, and (iii)
         copies of all other necessary or appropriate consents, permits,
         insurance, approvals, authorizations and similar items required of
         Purchaser to purchase, receive, own, and operate the Assets as of the
         Closing and to otherwise transact business in the applicable
         jurisdiction(s).

7.6      CONSENTS AND WAIVERS: All necessary consents, permissions and approvals
         by third parties in connection with the sale and transfer of the Assets
         shall have been received prior to Closing, except those governmental
         consents customarily generated and received in the ordinary course of
         business at a post-Closing date.

7.7      PLUGGING AND ABANDONMENT: The parties hereto recognize that the United
         States Department of Interior, Minerals Management Service ("MMS")
         shall require Purchaser to post supplemental bonds specific to the
         plugging and abandonment and restoration of the Leasehold Property (the
         "P&A Bonds"). In the event (i) Purchaser qualifies with the MMS as a
         company exempt from this type of supplemental bonding requirement and
         (ii) as a result of such qualification, the MMS releases in favor of
         Purchaser the P&A Bonds, Purchaser shall immediately provide to Seller
         a bond in an amount equal to the lessor of (i) an amount sufficient to
         cover the costs (limited to Seller's interest, being 80%), at the time,
         to plug and abandon and restore the Leasehold Property to the extent
         and only the extent such Leasehold Property includes those wells and
         platforms, which were in existence before the date that the Regional
         Director of the MMS approves the assignment of leasehold interest from
         Seller in favor of Purchaser (the "Assignment"); or (ii) an amount
         equal to the amount of the P&A Bonds, as required by the MMS to approve
         the Assignment.

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                                      VIII.

                                     CLOSING

8.1      CLOSING ITEMS: At Closing, as defined in Section 1.2 hereof, the
         following shall occur, unless postponed pursuant to Section 3.5(g)
         hereof:

(a)      Seller shall execute, acknowledge and deliver Assignments of Oil and
         Gas Lease and a Bill of Sale substantially in the form and substance of
         Exhibit "L" attached hereto, covering all of the Assets to be sold
         pursuant hereto and the Indemnity Agreement substantially in the form
         and substance of Exhibit "L-1" attached hereto ("Indemnity Agreement").

(b)      Purchaser shall deliver to Seller either by cashier's check or wire
         transfer of cash as specified by Seller the remaining balance of the
         total Purchase Price as adjusted hereunder.

(c)      Purchaser shall provide Seller with executed change of operator forms
         on all wells (active or inactive) operated by Seller, as required by
         the Minerals Management Service to effect a change of operator for the
         properties being sold. Seller shall execute same at Closing, and
         promptly thereafter, file said forms with the Minerals Management
         Service.

(d)      Seller shall provide Purchaser with executed non-foreign affidavits,
         and such other instruments and documents as may be reasonably requested
         by Seller.

(e)      Seller shall (subject to the terms of applicable operating agreements
         and other provisions hereof) deliver to Purchaser exclusive possession
         of the Assets, effective as of the Effective Date.

(f)      Upon Purchaser's request, Seller shall, at or as promptly as reasonably
         possible after Closing, provide Purchaser, at Purchaser's expense, with
         copies of the Records. All information and data shall be furnished as a
         matter of convenience only to Purchaser and Purchaser's reliance on
         same shall be at Purchaser's sole risk.

(g)      Seller shall deliver letters in lieu of transfer orders directing all
         purchasers of production to pay Purchaser the proceeds of production
         produced from the Assets from and after the Effective Date, to the
         extent that such purchasers of production have not already paid the
         same to Seller.

(h)      Seller and Purchaser will execute all documentation necessary to
         reflect the termination of agreements between the parties relating to
         the Assets described on Exhibit "M". Copies of such instruments shall
         be in substantially the form and substance of Exhibit "M-1" attached
         hereto.

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Immediately after Closing, Purchaser shall notify all pertinent operators,
non-operators, oil or gas purchasers, governmental agencies and royalty owners
that it has purchased the Assets.

8.2      ADDITIONAL CLOSING ITEMS: Contemporaneously with the Closing of the
         transactions contemplated hereby, and for the same stated
         consideration, Seller will (i) cause Spirit Energy Management, L.L.C.
         and Spirit 76 Development, L.P. (collectively "Spirit") to convey to
         Purchaser all of their rights in the Assets, being all rights in the
         Assets created by that certain deed entitled "Conveyance of Overriding
         Royalty Interest", executed by Seller in favor of Spirit and (ii)
         execute and cause Spirit and Concord Investors LLC to execute a waiver
         in connection therewith. Such conveyance and waiver to be in the form
         attached hereto as Exhibit "N-1". At Closing, Seller shall provide to
         Purchaser a legal opinion in a form similar to that attached hereto as
         Exhibit "N" upon which Purchaser may rely in connection with these
         matters.

         Contemporaneously with the Closing, Seller will also cause Unocal
         Pipeline Company to convey in favor EPL Pipeline, L.L.C. the pipeline,
         rights-of-way, surface lease and equipment, as further identified in
         the Pipeline Purchase Agreement to be entered into by said parties, a
         copy of which is attached hereto and made a part hereof as Exhibit "O".

                                       IX.

                             CONTINUING OBLIGATIONS

9.1      FINAL ACCOUNTING: Within 120 days after Closing, Seller shall provide
         Buyer with a statement of accounting ("Final Accounting"). Buyer shall
         have the right to cause its accountant, in consultation with Seller's
         accountant, to review the Final Accounting within an additional sixty
         (60) days following Seller's delivery of such notice. If Buyer's
         accountant and Seller's accountant are unable to agree upon the Final
         Accounting within an additional sixty (60) days following completion of
         Buyer's review thereof, then the two respective accountants jointly
         shall select, within such sixty (60) day period, an independent
         accounting firm of national reputation that shall determine the Final
         Accounting as soon as reasonably possible, but in no event later than
         210 days after Closing. The determination by such independent
         accounting firm shall be conclusive. The expense of such independent
         accounting firm shall be borne by Seller and Buyer, in equal
         proportions. The Final Accounting, including a determination by an
         accounting firm, shall not limit the parties' rights and obligations
         pursuant to Section 9.3 below.

9.2      RECEIPTS AND CREDITS: Except as otherwise provided in this Agreement,

(a)      All monies, proceeds, receipts, credits and income attributable to the
         Assets for all periods of time on and after the Effective Date shall be
         the sole property and entitlement of the Purchaser, and to the extent
         received by Seller, Seller shall fully disclose, account for and
         transmit same to Purchaser promptly.

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(b)      All monies, proceeds, receipts and income attributable to the Assets
         for all periods of time prior to the Effective Date shall be the sole
         property and entitlement of Seller and, to the extent received by
         Purchaser, Purchaser shall fully disclose, account for and transmit
         same to Seller promptly.

(c)      All costs, expenses, disbursements, obligations and liabilities
         attributable to the Assets for periods of time prior to the Effective
         Date, regardless of when due or payable shall be the sole obligation of
         Seller and Seller shall promptly pay, or if paid by Purchaser, promptly
         reimburse Purchaser for and hold Purchaser harmless from and against
         same.

(d)      All costs, expenses, disbursements, obligations and liabilities
         attributable to the Assets for periods of time on and after the
         Effective Date, regardless of when due or payable, shall be the sole
         obligation of Purchaser, and Purchaser shall promptly pay, or if paid
         by Seller, promptly reimburse Seller for and hold Seller harmless from
         and against same.

9.3      UNDERPAYMENT OR FAILURE TO PAY ROYALTY

         Notwithstanding the adjustment to the Purchase Price contained in
         Section 2.3(j) or the Final Accounting (including a determination by an
         accounting firm), the obligation of Seller to indemnify and hold
         harmless Purchaser from any claims or damages arising out of or related
         to Seller's underpayment or failure to pay royalties shall survive the
         Final Accounting and any determination by an accounting firm pursuant
         thereto.

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Purchase and Sale Agreement
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9.4      INDEMNITIES:

(a)      Purchaser agrees to indemnify, defend and hold harmless Seller, its
         officers, directors, employees, agents, representatives and affiliated
         or parent companies (which additional parties are hereinafter
         collectively referred to as "Seller Agents") from and against any and
         all losses, liabilities, causes of action, damages, liens, penalties,
         fines, settlements, judgments, expenses, attorney's fees, court costs
         and claims (hereinafter referred to collectively as "claims") arising
         (i) from the breach of this Agreement by Purchaser, (ii) from the
         Assumed Liabilities, or (iii) on or after the Effective Date, in any
         way connected with, attributable to, or resulting from Purchaser's
         ownership or operation of, or activities on the Assets, including, but
         not limited to, claims for damage to property or injury or death to
         persons, claims for breach of duties and obligations arising under or
         by virtue of any lease, contract, agreement, permit, applicable statute
         or rule. Purchaser's obligations to indemnify, defend and hold
         harmless, as set forth above, shall also specifically extend to all
         such claims REGARDLESS OF WHETHER ATTRIBUTABLE, IN WHOLE OR IN PART TO,
         CLAIMS WHICH ARE KNOWN OR UNKNOWN, CLAIMS ARISING FROM THE SOLE, JOINT,
         CONCURRENT NEGLIGENCE, STRICT LIABILITY, BREACH OF CONTRACT,
         ENVIRONMENTAL LIABILITY, PRODUCTS LIABILITY, OR OTHER FAULT OR
         RESPONSIBILITY OF SELLER, ITS SELLER AGENTS OR ANY OTHER PARTY OR
         PERSON, AND REGARDLESS WHETHER OR NOT SUCH CLAIMS AROSE PRIOR TO THE
         EFFECTIVE DATE OR RELATE TO CONDITIONS THAT EXISTED PRIOR TO THE
         EFFECTIVE DATE. In addition, and without limiting the generality of the
         foregoing, Purchaser shall be solely liable and responsible for the
         proper plugging and abandoning of all wells now located on or hereafter
         drilled on the Assets, and any surface restoration or environmental
         clean-up associated therewith, and shall indemnify, defend and hold
         harmless Seller and its agents from and against all claims relating to
         same.

(b)      Except as otherwise set forth herein and except for the Assumed
         Liabilities of Purchaser, Seller agrees to indemnify, defend and hold
         harmless, Purchaser and its agents, officers, from and against any and
         all claims arising from the breach of this Agreement by Seller and/or
         any obligations or liabilities retained by Seller hereinafter. Seller's
         obligations to indemnify, defend and hold harmless, as set forth above,
         shall also specifically extend to all such claims REGARDLESS OF WHETHER
         ATTRIBUTABLE, IN WHOLE OR IN PART TO, CLAIMS WHICH ARE KNOWN OR
         UNKNOWN, CLAIMS ARISING FROM THE SOLE, JOINT, CONCURRENT NEGLIGENCE,
         STRICT LIABILITY, BREACH OF CONTRACT, ENVIRONMENTAL LIABILITY, PRODUCTS
         LIABILITY, OR OTHER FAULT OR RESPONSIBILITY OF PURCHASER, ITS
         PURCHASER AGENTS OR ANY OTHER PARTY OR PERSON.

(c)      Nothing in this section shall reduce or diminish the specific indemnity
         and assumption of liability and responsibility by Purchaser with regard
         to environmental risks set forth

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Purchase and Sale Agreement
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         hereinabove in Article IV or the specific indemnity and assumption of
         liability and responsibility of Seller as set forth in Indemnity
         Agreement to be executed by Seller at Closing.

(d)      Any claim for indemnity under any provision of this Agreement,
         including Sections 4.8 and 9.4, shall be made by written notice from
         the party seeking indemnification (the "Indemnified Party") to the
         party required to provide same (the "Indemnifying Party"), together
         with a written description of any third party claim against the
         Indemnified Party, stating the nature and basis of such claim and, if
         ascertainable, the amount thereof. The Indemnifying Party shall have a
         period of thirty (30) days after receipt of such notice within which to
         respond thereto or, in the case of a third party claim which requires a
         shorter time for response, then within such shorter period as specified
         by the Indemnified Party in such notice (the "Notice Period"). If the
         Indemnifying Party denies liability or fails to respond to the notice
         within the Notice Period, the Indemnified Party may defend or
         compromise the claim as it deems appropriate without prejudice to any
         of the Indemnified Party's rights hereunder, with no further obligation
         to inform the Indemnifying Party of the status of the claim and no
         right of the Indemnifying Party to approve or disapprove any action,
         taken in connection therewith by the Indemnified Party. If the
         Indemnifying Party accepts liability, it shall so notify the
         Indemnified Party within the Notice Period and elect either: (i) to
         undertake the defense or compromise of such third party claim with
         counsel selected by the Indemnifying Party and reasonably approved by
         the Indemnified Party, or (ii) to instruct the Indemnified Party to
         defend or compromise such claim. If the Indemnifying Party undertakes
         the defense or compromise of such third party claim, the Indemnified
         Party shall be entitled, at its own expense, to participate in such
         defense. No compromise or settlement of any third party claim shall be
         made without reasonable notice to the Indemnified Party and, unless
         such compromise or settlement includes a general release of the
         Indemnified Party in respect of the matter with no admission of
         liability on the part of the Indemnified Party and non constraints on
         the future conduct of its business, without the prior written approval
         of the Indemnified Party.

9.5      FURTHER ASSURANCES: After Closing, Seller and Purchaser agree to take
         such further actions and to execute, acknowledge and deliver all such
         further documents that are necessary or useful in carrying out the
         purposes of this Agreement or of any document delivered pursuant
         hereto.

9.6      RECORDING: Purchaser shall immediately file for all requisite approvals
         of the appropriate federal governmental agencies to the Assignment(s)
         of the Assets. The Assignment(s) of federal oil and gas leases shall be
         filed in the appropriate governmental offices in compliance with the
         applicable rules of such governmental agencies. Purchaser shall supply
         Seller with a true and accurate photocopy of all the recorded and filed
         Assignment(s) within a reasonable period of time after their recording
         and filing.

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Purchase and Sale Agreement
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9.7      CONFIDENTIALITY AND PUBLICITY: In the event Closing does not occur for
         any reason except as required by law and with prior notice to Seller,
         Purchaser and its officers, directors, employees, agents and
         representatives will hold in strict confidence all data and information
         obtained from Seller in connection with the Assets, whether before or
         after execution of this Agreement, except any data or information
         which:

(a)      at the time of the disclosure to Purchaser by Seller is in the public
         domain;

(b)      after disclosure to Purchaser by Seller becomes part of the public
         domain by publication or otherwise, except by breach of this provision
         by Purchaser;

(c)      Purchaser can establish by competent proof was rightfully in its
         possession at the time of disclosure to Purchaser by Seller;

(d)      Purchaser rightfully received from third parties free of any
         obligations of confidence; or,

(e)      is developed independently by Purchaser, provided the person or persons
         alleged to have independently developed the information shall not have
         any access to data or information obtained from Seller in connection
         with the transactions contemplated by this Agreement.

If this Agreement is terminated for any reason, Purchaser shall return to Seller
all copies of confidential information, as requested by Seller, in the
possession of Purchaser obtained from Seller or pursuant to any provision of
this Agreement, which information is at the time of termination required to be
held in confidence pursuant to this section.

9.8      PRESERVATION OF BOOKS AND RECORDS: For a period of six (6) years after
         Closing, Seller will retain the books, records and files pertaining to
         the Assets and will make such books, records and files available to
         Purchaser upon reasonable notice at Seller's headquarters (or at such
         other location in the United States as Seller may designate in writing
         to Purchaser) at reasonable times and during regular office hours.

9.9      THIRD-PARTY CONSENTS Certain of the transfers contemplated by this
         Agreement are subject to various forms of third-party consents, which
         are identified on Exhibit "P" ("Consents"). Seller and Purchaser shall
         cooperate and shall promptly take such action as may be required to
         obtain all necessary Consents prior to Closing. Seller and Purchaser
         agree that to the extent any Assets, contract or permit that would
         otherwise be assigned under this Agreement is not capable of being
         assigned, transferred, subleased or sublicensed without any such
         Consent of, or waiver by any other party thereto, or any other Person,
         or if such assignment, transfer, sublease or sublicense or attempted
         assignment, transfer, sublease or sublicense would constitute a breach
         thereof, or a violation of any law, this Agreement shall not constitute
         an assignment, transfer, sublease or sublicense, or an attempted
         assignment, transfer, sublease or sublicense of any such contract or
         permit. With respect to each Asset, contract that, but for the reasons
         set forth in the first sentence of this Section, would be assigned,
         Seller agrees to provide Purchaser with the benefits (including the
         right to

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Purchase and Sale Agreement
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         terminate any such contract or permit in accordance with the terms
         thereof) of such Asset, contract or permit, to the extent related to
         transactions or periods that occur at or after Closing, and to the
         extent it is possible to do so; and, if and to the extent such benefits
         are provided to Purchaser, Purchaser agrees to observe and perform such
         contract or permit. Seller shall continue to use its reasonable efforts
         to obtain an assignment to Purchaser of each Asset, contract or permit
         that, but for the reasons set forth in the first sentence of this
         Section, would be assigned; provided, however, that Seller shall not be
         required to pay any consideration or suffer any financial disadvantage
         to obtain such assignment.

                                       X.

                                      TAXES

10.1     APPORTIONMENT OF AD VALOREM AND PROPERTY TAXES: All ad valorem taxes,
         real property taxes, personal property taxes and similar obligations
         with respect to the Assets for the tax period in which the Effective
         Date occurs shall be apportioned as of the Effective Date between
         Seller and Purchaser. That portion of such apportioned tax liability
         which is attributable to Seller shall be credited to Purchaser's
         account. Purchaser shall file or cause to be filed all required reports
         and returns incident to such taxes and shall pay or cause to be paid to
         the taxing authorities all such taxes relating to the tax period in
         which the Effective Date occurs. Seller will use its reasonable efforts
         to provide Purchaser with all necessary information. Purchaser shall
         supply Seller with copies of the filed reports and proof of payment
         promptly after filing and paying them.

10.2     SALES TAXES, FILING FEES, ETC.: The transactions contemplated by this
         Agreement are an occasional sale and should be deemed exempt from any
         state and local sales and use taxes, and the Parties hereto will use
         reasonable efforts to report and have this transfer treated as exempt
         from such taxes. The Purchase Price and the Adjusted Purchase Price
         provided for herein are net of any sales taxes or other transfer taxes
         in connection with the sale of the Assets. Purchaser shall be liable
         for any sales tax or other transfer tax, as well as any applicable
         conveyance, transfer and recording fees and real estate transfer stamps
         or taxes imposed on the transfer of the Assets pursuant to this
         Agreement. If Seller is required by applicable state law to report and
         pay these taxes and/or fees, Purchaser shall, upon presentment of an
         invoice by Seller, promptly deliver a check to Seller in full payment
         of the invoice. Purchaser shall defend, indemnify and hold Seller
         harmless with respect to the payment of any of those taxes including
         any interest or penalties assessed thereon.

10.3     OTHER TAXES: All production, severance, excise, and other similar such
         taxes or fees (other than income taxes) relating to production of oil,
         gas and condensate attributable to the Assets prior to the Effective
         Date shall be paid by Seller, and all such taxes relating to such
         production on and after the Effective Date shall be paid by Purchaser.
         Purchaser and Seller shall supply each other with copies of the filed
         reports and proof of payment promptly after filing and paying them.

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                                       XI.

                                   TERMINATION

This Agreement and the transactions contemplated hereby may be terminated only
in the following instances:

(a)      If the conditions set forth in Article VII are not satisfied or waived
         as of Closing;

(b)      By way of Sections 3.5(b), 4.5 hereof or any other right to terminate
         under Article IV hereof;

(c)      At any time by mutual written agreement of Seller and Purchaser and in
         accordance with any other express provisions of this Agreement.

                                      XII.

                                  MISCELLANEOUS

12.1     GOVERNING LAW: This Agreement shall be governed by and interpreted in
         accordance with the laws of the State of Louisiana. All assignments and
         instruments executed in accordance with this Agreement shall be
         governed by and interpreted in accordance with the laws of the state
         where the Assets conveyed thereby are located.

12.2     ENTIRE AGREEMENT: This Agreement, together with any confidentiality
         agreements relating to the Assets previously executed by Purchaser, and
         the Indemnity Agreement to be executed by Seller at Closing constitute
         the entire agreement between the parties and supersede all prior
         agreements, understandings, negotiations and discussions, whether oral
         or written, of the parties. No supplement, amendment, alteration,
         modification, waiver or termination of this Agreement shall be binding
         unless executed in writing by the parties hereto.

12.3     WAIVER: No waiver of any of the provisions of this Agreement shall be
         deemed or shall constitute a waiver of any other provisions hereof
         (whether or not similar), nor shall such waiver constitute a continuing
         waiver unless otherwise expressly provided.

12.4     CAPTIONS: The captions in this Agreement are for convenience only and
         shall not be considered a part of or affect the construction or
         interpretation of any provision of this Agreement.

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12.5     ASSIGNMENT: Prior to closing, neither party hereto shall assign this
         Agreement or any of its rights or obligations hereunder without the
         prior written consent of the other party, and any assignment made
         without such consent shall be void. Except as otherwise provided
         herein, this Agreement shall be binding upon and inure to the benefit
         of the parties hereto and their respective permitted successors and
         assigns.

12.6     NOTICES: Any notice provided or permitted to be given under this
         Agreement shall be in writing, and may be served by personal delivery
         or by depositing same in the United States mail, addressed to the party
         to be notified, postage prepaid, and registered or certified with a
         return receipt requested. Notices deposited in the mail in the manner
         hereinabove described shall be deemed to have been given and received
         upon the date of delivery as shown on the return receipt. Notice served
         in any other manner shall be deemed to have been given and received
         only if and when actually received by the addressee. For purposes of
         notice, until receipt of written notice changing same, the addresses of
         the parties shall be as follows:

         SELLER'S MAILING
         Union Oil Company of California
         4021-4023 Ambassador Caffery Parkway
         Post Office Box 69200 (70596-9200)
         Lafayette, Louisiana 70503
         Attention: Dalton F. Smith III

         PURCHASER'S MAILING ADDRESS:
         Energy Partners, Ltd.
         201 St. Charles Avenue
         Suite 3400
         New Orleans, Louisiana  70170
         Attention: L. Keith Vincent

12.7     WAIVER OF COMPLIANCE WITH BULK TRANSFER LAWS: Purchaser waives
         compliance with any applicable bulk transfer law relating to the
         transactions contemplated by this Agreement, and agrees to assume all
         risk and liability in connection with the failure to so comply.

12.8     UTPCPL WAIVER: TO THE EXTENT APPLICABLE TO THE ASSETS OR ANY PORTION
         THEREOF, PURCHASER HEREBY WAIVES THE PROVISIONS OF THE LOUISIANA UNFAIR
         TRADE PRACTICES AND CONSUMER PROTECTION LAW (LA. R. S. 51:1402, ET
         SEQ.). PURCHASER WARRANTS AND REPRESENTS THAT IT: (i) IS EXPERIENCED
         AND KNOWLEDGEABLE WITH RESPECT TO THE OIL AND GAS INDUSTRY GENERALLY
         AND WITH TRANSACTIONS OF THIS TYPE SPECIFICALLY; (ii) POSSESSES AMPLE
         KNOWLEDGE, EXPERIENCE AND EXPERTISE TO EVALUATE INDEPENDENTLY THE
         MERITS AND RISKS OF THE TRANSACTION HEREIN CONTEMPLATED; AND, (iii) IS

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         NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION IN NEGOTIATIONS
         WITH SELLER.

12.9     WAIVER OF CONSUMER RIGHTS PURCHASER HEREBY WAIVES ITS RIGHTS UNDER THE
         DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET
         SEQ., BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL
         RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN
         SELECTION, PURCHASER VOLUNTARILY CONSENTS TO THIS WAIVER. IN ADDITION,
         TO THE EXTENT APPLICABLE TO THE ASSETS OR ANY PORTION THEREOF,
         PURCHASER HEREBY WAIVES THE PROVISIONS OF THE TEXAS CONSUMER PROTECTION
         LAWS REGARDING FALSE, MISLEADING AND DECEPTIVE BUSINESS PRACTICES,
         UNCONSCIONABLE ACTIONS AND BREACHES OF WARRANTY; PROVIDED, HOWEVER,
         THAT NOTHING HEREIN CONTAINED SHALL BE DEEMED A WAIVER BY PURCHASER
         WHERE SUCH WAIVER IS PROHIBITED BY LAW. IN ORDER TO EVIDENCE ITS
         ABILITY TO GRANT SUCH WAIVER, PURCHASER HEREBY REPRESENTS AND WARRANTS
         TO SELLER THAT PURCHASER (i) IS IN THE BUSINESS OF SEEKING OR
         ACQUIRING, BY PURCHASE OR LEASE, GOODS, OR SERVICES FOR COMMERCIAL OR
         BUSINESS USE, (ii) HAS ASSETS OF FIVE MILLION DOLLARS OR MORE ACCORDING
         TO IT MOST RECENT FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH
         GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, (iii) HAS KNOWLEDGE AND
         EXPERIENCE IN FINANCIAL MATTERS THAT ENABLE IT TO EVALUATE THE MERITS
         AND RISKS OF THE TRANSACTION CONTEMPLATED HEREBY, AND (iv) IS NOT IN A
         SIGNIFICANTLY DISPARATE BARGAINING POSITION. Nothing in this Section
         shall be interpreted as a waiver of the express representations and
         warranties in this Agreement.

12.10    WAIVER OF JURY TRIAL: SELLER AND PURCHASER DO HEREBY IRREVOCABLY WAIVE,
         TO THE FULLEST EXTENT PERMITTED BY LAW, AND ANY AND ALL RIGHT TO A
         TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER LEGAL PROCEEDING BASED UPON,
         ARISING OUT OF, OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
         CONTEMPLATED HEREBY.

12.11    LIMITATION OF LIABILITY: NOTWITHSTANDING ANYTHING HEREIN PROVIDED TO
         THE CONTRARY, SELLER AND PURCHASER DO HEREBY COVENANT AND AGREE THAT
         THE RECOVERY BY EITHER PARTY HERETO OF ANY DAMAGES SUFFERED OR INCURRED
         BY IT AS A RESULT OF ANY BREACH BY THE OTHER PARTY OF ANY OF ITS
         COVENANTS, AGREEMENTS, REPRESENTATIONS, GUARANTIES, WARRANTIES,
         DISCLAIMERS, WAIVERS OR CONTINUING OBLIGATIONS UNDER THIS AGREEMENT
         SHALL BE LIMITED TO THE ACTUAL DAMAGES SUFFERED OR INCURRED BY THE
         NON-BREACHING PARTY AS A RESULT OF SUCH BREACH, AND IN NO EVENT SHALL
         SUCH RECOVERY INCLUDE ANY INDIRECT,

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         CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES; PROVIDED, HOWEVER, THAT
         NOTHING IN THIS SECTION SHALL REDUCE OR DIMINISH THE SPECIFIC INDEMNITY
         AND ASSUMPTIONS OF LIABILITY AND RESPONSIBILITY OF SELLER AS SET FORTH
         IN THE INDEMNITY AGREEMENT TO BE EXECUTED BY SELLER AT CLOSING.

12.12    NO ADMISSIONS: The Purchaser and Seller agree that neither this
         Agreement, nor any part hereof, nor any performance under this
         Agreement, nor any payment of any amount pursuant to any provision of
         this Agreement shall constitute or be construed as a finding, evidence
         of, or an admission or acknowledgment of any liability, fault, or past
         or present wrongdoing, or violation of any law, rule, regulation, or
         policy, by either Seller or Purchaser or by their respective officers,
         directors, employees or agents.

12.13    ANNOUNCEMENTS: Purchaser agrees that prior to the issuance of its
         initial press announcement, if any, which specifically addresses its
         acquisition of the Assets as being from Seller, it shall seek the
         approval of Seller of same; provided, however, that such approval
         cannot be unreasonably withheld. Seller and Purchaser, including their
         respective Affiliates, agree that from the date of this Agreement and
         continuing for twelve (12) months after the Closing if reserve volumes
         are estimated in a news release in conjunction with a Purchase Price
         disclosure the release must state that the reserve estimates are the
         disclosing Party's reserve estimates; provided, that either Party may
         make all disclosures which are required or prudent under applicable
         laws, including, but not limited to, rules, regulations and guidelines
         of the Securities and Exchange Commission and applicable stock
         exchanges.

12.14    BOOKS AND RECORDS: Seller shall, at or as promptly as reasonably
         possible after Closing, provide and make available to the Purchaser, at
         Purchaser's cost and expense, subject to the attorney-client privilege,
         photocopies of the Records. Notwithstanding any other provision herein
         contained, Purchaser shall retain all original documents, if any,
         delivered by Seller hereunder which pertain to the Assets (documents
         delivered by Seller hereunder may be maintained on compact discs) for
         as long as it so desires and make the same available after the Closing
         for inspection and copying by Seller during normal business hours, upon
         reasonable request and upon reasonable notice; provided, however, that
         during the first six (6) years after Closing, such books, records or
         documents shall not be disposed of or destroyed by Purchaser without
         first advising Seller in writing and giving Seller reasonable
         opportunity to obtain possession thereof.

12.15    THIRD PARTY BENEFICIARIES: Neither this Agreement, nor any performance
         hereunder by Seller or Purchaser, shall be deemed or interpreted to
         create any right, claim, cause of action, or remedy on behalf of any
         person not a party hereto.

12.16    EXPENSES: Except as otherwise provided herein, each party shall be
         solely responsible for all expenses incurred by it in connection with
         this transaction, including without limitation, fees and expenses of
         its own legal counsel and accountants.

<PAGE>   32

Purchase and Sale Agreement
Page No. 32

12.17    SEVERABILITY: If any term or other provision of this Agreement is
         invalid, illegal or incapable of being enforced under any applicable
         rule or law, all other conditions and provisions of this Agreement
         shall nevertheless remain in full force and effect so long as the
         economic or legal substance of the transaction contemplated hereby is
         not affected in a materially adverse manner with respect to either
         party.

12.18    USE OF SELLER'S NAME: As soon as practicable after Closing, Purchaser
         shall remove or cause to be removed the names and marks used by Seller
         and all variations and derivations thereof and logos relating thereto
         from the Assets and shall not thereafter make any use whatsoever of
         those names, marks and logos.

12.19    SURVIVAL: Except as otherwise specifically provided in this Agreement,
         all covenants, agreements, representations, guaranties, warranties,
         disclaimers, waivers and continuing obligations shall survive the
         execution of the Agreement, the Closing, and the delivery and recording
         of any deeds, assignments or bills of sale which convey title to the
         Assets from Seller to Purchaser.

12.20    LISTING OF EXHIBITS: The Exhibits listed below are attached to this
         Agreement and by this reference are fully incorporated herein:

         Exhibit "A" - Assets
         Exhibit "B" - Easements etc.
         Exhibit "C" - Assets Not Sold
         Exhibit "D" - Retained Matters
         Exhibit "E" - Contracts
         Exhibit "F" - Liens, Mortgage etc.
         Exhibit "G" - Back-in, Reversion etc.
         Exhibit "H" - Quality or Quantity of Title
         Exhibit "I" - Arbitration
         Exhibit "J" - Litigation
         Exhibit "K" - Marketing
         Exhibit "L" - Assignment and Bill of Sale
         Exhibit "L-1" - Indemnity Agreement
         Exhibit "M" - Termination of Agreement
         Exhibit "M-1" - Termination of Agreement
         Exhibit "N" - Legal Opinion
         Exhibit "N-1" - Override Conveyance
         Exhibit "N-2" - Consent and Waiver
         Exhibit "O" - Pipeline Purchase Agreement
         Exhibit "P" - Consents

12.21    COUNTERPARTS: This Agreement may be executed in one or more
         counterparts, each of which shall be deemed an original, but all of
         which shall constitute one and the same instrument.

<PAGE>   33

Purchase and Sale Agreement
Page No. 33

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.

WITNESSES:                                   SELLER:

                                             UNION OIL COMPANY OF CALIFORNIA

/s/ Witness                              BY: /s/ ROBERT C. GNAGY
-------------------------------                 --------------------------------
                                                 Robert C. Gnagy
                                                 Attorney-in-Fact

/s/ Witness
-------------------------------

                                             PURCHASER:

                                             ENERGY PARTNERS, LTD.

/s/ Witness                              BY: /s/ RICHARD A. BACHMANN
-------------------------------                 --------------------------------
                                                 Richard A. Bachmann
                                                 President

/s/ Witness
-------------------------------

<PAGE>   34

Purchase and Sale Agreement
Page No. 34

STATE OF LOUISIANA

PARISH OF ORLEANS

         On this 31st day of March, 2000, before me appeared Robert C. Gnagy, to
me personally known, who, being by me duly sworn, did say that he is the
Attorney-in-Fact of UNION OIL COMPANY OF CALIFORNIA, a California Corporation,
and that the foregoing instrument was executed on behalf of said Corporation and
said Appearer acknowledged said instrument to be the free act and deed of said
Corporation.

                             ------------------------
                                  NOTARY PUBLIC

My commission is for life.

STATE OF LOUISIANA

PARISH OF ORLEANS

         On this 31st day of March, 2000, before me appeared Richard A.
Bachmann, to me personally known, who, being by me duly sworn, did say that he
is the President of ENERGY PARTNERS, LTD. a Delaware Corporation, and that the
foregoing instrument was executed on behalf of said Corporation and said
Appearer acknowledged said instrument to be the free act and deed of said
Corporation.

                             ------------------------
                                  NOTARY PUBLIC

My commission is for life.

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