Document:

ex10_13.htm

    Exhibit
10.13

    

    AMENDED TEXT OF THE AREA
“BAJADA DEL PALO” JOINT VENTURE CONTRACT

    

    

    

    PETROLERA
ENTRE LOMAS S.A.

    

    APCO
ARGENTINA INC., ARGENTINE BRANCH

    

    PETROBRAS
ENERGÍA S.A.

    

    

    

    
      
        
           

          [Initials]

        

         

      

      
         

        
          

        

      

      
         

      

    

    JOINT VENTURE CONTRACT FOR
THE EXECUTION OF JOINT OPERATIONS IN THE AREA “BAJADA DEL PALO” (PROVINCE OF
NEUQUÉN)

    

    CONTENTS

    

    ARTICLE
1 – DEFINITIONS

    ARTICLE
2 – UTE’S TRADE NAME, DOMICILE, REPRESENTATIVE AND

                              COMMON
OPERATING FUND

    ARTICLE
3 – SUBJECT MATTER AND CONTRACT TERM

    ARTICLE
4 – PARTICIPATING INTEREST

    ARTICLE
5 – OPERATING COMMITTEE

    ARTICLE
6 – OBLIGATIONS OF THE PARTIES

    ARTICLE
7 – ABOUT THE OPERATOR

    ARTICLE
8 – ANNUAL BUDGET

    ARTICLE
9 – CONTRIBUTIONS – EXPENSES AND INCOME

    ARTICLE
10 – DEFAULT PAYMENT

    ARTICLE
11 – OWNERSHIP OF ASSETS

    ARTICLE
12 – SOLE RISK OPERATIONS

    ARTICLE
13 – ALLOCATION OF NET PRODUCTION

    ARTICLE
14 – ASSIGNMENT OF RIGHTS

    ARTICLE
15 – INSURANCE AND LITIGATIONS

    ARTICLE
16 – CONFIDENTIAL INFORMATION

    ARTICLE
17 – EXCLUSION AND ACCEPTANCE OF PARTIES

    ARTICLE
18 – RELATIONSHIP AMONG PARTIES

    ARTICLE
19 – TAX REGULATIONS

    ARTICLE
20 - ROYALTIES

    ARTICLE
21 – ACT OF GOD OR FORCE MAJEURE

    ARTICLE
22 – APPLICABLE LAW, JURISDICTION AND ARBITRATION

    ARTICLE
23 – LEGAL DOMICILES AND NOTICES

    ARTICLE
24 – TERMINATION OF CONTRACT

    ARTICLE
25 – MISCELLANEA

    

    ANNEX
A – ACCOUNTING PROCEDURE

    ANNEX
B – INSURANCE COVERAGE

    
      
        
           

          [Initials]

        

         

      

      
        1

        
          

        

      

      
         

      

    

    AREA “BAJADA DEL PALO” JOINT
VENTURE CONTRACT

    

    BY AND
BETWEEN

    

    PETROLERA
ENTRE LOMAS S.A., a company registered and doing business pursuant to the laws
of the Argentine Republic, domiciled at H. Bouchard 680, floor 18, of the City
of Buenos Aires, Argentine Republic, registered in the Public Register of
Traders on April 14, 1954 under number 378, leaf number 405, Volume A of
Domestic By-laws,

    

    APCO
ARGENTINA INC., ARGENTINE BRANCH, a company registered and doing business
pursuant to the laws of the Cayman Islands, domiciled at del Libertador Ave.
498, floor 26, of the City of Buenos Aires, Argentine Republic, registered in
the Public Register of Traders, General Inspection Board of Legal Entities, on
September 20, 1973 under number 25, leaf number 144, Book number 51, Volume B of
Foreign By-laws, and

    

    PETROBRAS
ENERGÍA S.A., a company registered and doing business pursuant to the laws of
the Argentine Republic, domiciled at Maipú 1, floor 22, of the City of Buenos
Aires, Argentine Republic, registered in the Public Register of Traders on
November 17, 1947 under number 759, leaf number 569, Book number 47, Volume A of
Domestic By-laws.

    

    Whereas:

    

    
      	
              I.  

            	
              The
      Adjudication of the Area CNQ -11 “BAJADA DEL PALO” offered in the
      International Public Bidding number 1/90 was approved by Executive Order
      of the National Executive Branch (Argentine Republic) number 1769/90
      granting the exploitation license over said area pursuant to the
      provisions of Article 98 of Act number 17319 to the Shipping Company PEREZ
      COMPANC S.A.C.F.I.M.F.A., currently named PETROBRAS ENERGÍA
      S.A.

            

    

    

    
      	
              II.  

            	
              Pursuant
      to several rights and assets assignment agreements entered into by the
      PARTIES, the exploitation rights over the area CNQ – 11 “BAJADA DEL PALO”
      are currently owned by the PARTIES according to the participating
      interests stated in article 4.01 of this JOINT VENTURE
      CONTRACT.

            

    

    

    
      	
              III.  

            	
              The
      PARTIES have authorized the execution of this CONTRACT in accordance with
      what was resolved by each of their competent domestic business
      organs.

            

    

    

    
      	
              IV.  

            	
              The
      PARTIES with the purpose of defining their respective assets and
      liabilities in relation with their operations in the AREA enter into this
      JOINT VENTURE CONTRACT.

            

    

    

    To that
effect the PARTIES agree:

    

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    ARTICLE
1

    DEFINITIONS

    

    For the
purpose of this CONTRACT the following definitions shall apply:

    

    1.01.
CALENDAR YEAR: shall mean the period of twelve (12) months going
from

    January
1st
to December 31st of any
year.

    

    1.02.
CONTRACTUAL YEAR: shall mean a period of three hundred sixty-five
(365)

    consecutive
days as from the DATE OF LEGAL EFFECT OF THE CONTRACT.

    

    1.03.
BUDGET YEAR: shall mean those periods of three hundred and sixty-five
(365)

    consecutive
days as from September 1st of each
year, except the first BUDGET YEAR which shall mean the period between the DATE
OF LEGAL EFFECT OF THE CONTRACT and the following August 31st.

    

    1.04.
OPERATING COMMITTEE: it is the organ of highest authority of the
JOINT

    VENTURE
(U.T.E.) resulting from the association of the PARTIES in relation with the
JOINT OPERATIONS ruled by this CONTRACT.

    

    1.05.
CONTRACT: shall mean the agreement that rules the relationship among
the

    PARTIES
for the execution of JOINT OPERATIONS in the AREA CNQ – 11 “BAJADA DEL
PALO”.

    

    1.06.
SOLE RISK ACCOUNT: it is the accounts plan carried out by the OPERATOR
in

    order to
debit and credit all the financial allotments related to the SOLE RISK
OPERATIONS.

    

    1.07.
JOINT ACCOUNT: it is the accounts plan carried out by the OPERATOR
in

    order to
debit and credit the financial allotments related to the JOINT
PROPERTY.

    

    1.08.
DOLLAR/S: it is the legal currency in use in the United States of
America.

    

    1.09.
DATE OF LEGAL EFFECT OF THE CONTRACT: it is the date on which the

    PARTIES
sign these presents.

    

    1.10.
EFFECTIVE DATE: shall mean the DATE OF LEGAL EFFECT of this

    CONTRACT
from which the terms and time periods set forth in the CONTRACT shall be
counted.

    

    
      	
              1.11.  

            	
               SUBSIDIARY:
      shall mean:

            

    

    

    
      	
              a)  

            	
              A
      person capable of holding legal rights who in a direct or indirect way
      controls any of the PARTIES.

            

    

    

    
      	
              b)  

            	
              A
      person capable of holding legal rights who in a direct or indirect way is
      controlled by any of the PARTIES.

            

    

    

    A person
capable of holding legal rights shall be deemed controlled by another person
capable of holding legal rights when any of the provisions set forth in
subsections 1) and 2) of Article 33 of Act number 19550 apply.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    1.12.
HYDROCARBONS: CRUDE OIL, NATURAL GAS AND LIQUIFIED

                GASES
in any of the conditions and relations referred to.

    

    1.13.
INDIRECT TAXES: the V.A.T., any tax replacing or supplementing
V.A.T.

    in the
future as well as any other tax, right, duty or contribution established or to
be established by the municipal, provincial and/or national government created
or to be created with the purpose of transferring it to be borne by the buyer or
borrower with respect to general supplies, particular supplies, etc., either
calculated as a percentage of the price or sales amount or collected as a fixed
amount.  Under no conditions shall the term Indirect Tax mean income
tax or tax on the minimum presumptive income or on bank debits and credits, nor
shall do any other tax that replaces or supplements V.A.T. in the
future.

    

    
      	
               
      

            	
              1.14.
      DIRECT TAXES: it is the income tax and the tax on the minimum presumptive
      income and/or said tax, right, duty or contribution established by the
      municipal,    provincial and/or national government,
      created with the purpose of laying its economic burden on the payer,
      excluding the tax on bank debits and
credits.

            

    

    

    1.15.
NON- RECOVERABLE TAXES: all taxes, rights, duties or contributions

    established
by the municipal, provincial and/or national government which

    cannot
be: a) taken as payment on account or credited against themselves or any other
tax, right, duty or contribution and/or, b) paid back to payer, and/or c)
allowed to  be transferred to third parties.

    

    1.16.
V.A.T.: shall mean the value added tax or any other tax to be created in
the

                future
to supplement or replace V.A.T., either fixed or variable, or to be

                established
on supplies, withdrawals, uses or sales, of a general or particular

                nature,
and which is added to the price of the transaction so that its

                economic
burden be transferred to the buyer, employer or borrower.

    

    1.17.
MATERIAL/S: personal property, equipment or supplies acquired to be
used

                in
the JOINT OPERATIONS.

    

    1.18.
SOLE RISK OPERATION: it is the set of activities tending to explore

    and/or
extract HYDROCARBONS which one PARTY or any of the PARTIES carries out at their
exclusive expense, in accordance with the CONTRACT, and which is not included in
an ANNUAL PROGRAMME.

    

    1.19.
JOINT OPERATIONS: shall mean all the necessary activities carried out
upon

    the
common agreement of the PARTIES in order to perform the CONTRACT.

    

    
      	
               
      

            	
              1.20.
      OPERATOR shall be the PARTY appointed to carry out the
      JOINT            OPERATIONS
      pursuant to article 7 of the
CONTRACT.

            

    

    

    1.21.
PARTY or PARTIES: shall mean one party or all the parties to this
CONTRACT

                and
their successors by any title whatsoever.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    1.22.
PARTICIPATING INTEREST: shall mean the share each of the PARTIES
has

                in
the assets and liabilities arising from this CONTRACT.

    

    1.23.
DELINEATION WELL: any oil well drilled with the purpose of defining
the

    production
boundaries of a hydrocarbon geologic trap
previously             discovered
by an EXPLORATION WELL.

    

    1.24.
DEVELOPMENT WELL: any well that, at the moment of deciding its

                drilling,
is located within the limits of a OIL FIELD in which one or more

                wells
ready to produce HYDROCARBONS in commercial quantities have

                been
drilled.

    

    1.25.
EXPLORATION WELL: any well whose objective is to determine the

                 existence
of commercial hydrocarbon geographic trap separated

                 from
those already existing and within which no other well is located or may
be

                 drilled
in the future.

    

    1.26.
COST PRICE: shall mean the value of an asset or service which shall include
the

                 invoiced
price after discounts have been deducted and increased by all the

                 direct
expenses that its purchase or hiring originated.

    

    1.27.
ANNUAL BUDGET: shall mean a detailed estimate of the income and
expenses

                 corresponding
to an ANNUAL PROGRAMME approved by the OPERATING

                 COMMITTEE.

    

    1.28.
ACCOUNTING PROCEDURE: it is the accounting system stated in Annex

                 “A”.

    

    1.29. NET
PRODUCTION: volumes of HYDROCARBONS produced under

    quality
and purity standards agreed upon to be delivered at the MEASURING AND DELIVERY
POINT, after discounting those used as supplies in the AREA.

    

    1.30.
ANNUAL PROGRAMME: shall mean all those works, investments and

                 expenses
approved by the OPERATING COMMITTEE for a BUDGET

                 YEAR.

    

    1.31.
JOINT PROPERTY: shall mean the things and rights acquired in relation
with

                 the
JOINT OPERATIONS.

    

    1.32.
MEASURING AND DELIVERY POINT: it shall be that one designated by
the

                 PARTIES
where each one of them shall have the NET PRODUCTION

                 available
in accordance with their PARTICIPATING INTERESTS.

    

    1.33.
REVERSION: shall mean that one PARTY not participating in SOLE RISK

    OPERATIONS
has the free availability of the NET PRODUCTION and acquires assets and
liabilities in proportion to its PARTICIPATING INTEREST in the SOLE RISK
OPERATIONS.

    

    1.34.
TAX: all public resource payable under demand of the National,
Provincial

                or
Municipal Authority.

    

    
      	
               
      

            	
              1.35.
      OILFIELD: shall mean an underground accumulation
      of              HYDROCARBONS,
      or two or more of those accumulations placed one on top of the other in
      horizons or reserves connected or separated, related to one or several
      entrapments agreed upon which shall be considered as a unit for the
      purposes of their rational
exploitation.

            

    

    

    

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    ARTICLE
2

    UTE’S TRADE NAME, DOMICILE,
REPRESENTATIVE
AND                           COMMON
OPERATING FUND

    

    
      	
               
      

            	
              2.1
      TRADE NAME: U.T.E.’s trade name is “PETROLERA ENTRE LOMAS S.A. APCO
      ARGENTINA INC., ARGENTINE BRANCH – PETROBRAS ENERGÍA S.A. – “BAJADA DEL
      PALO” – JOINT VENTURE”

            

    

    

    
      	
               
      

            	
              2.2
      DOMICILE: for all effects arising from the CONTRACT with respect to third
      parties, the PARTIES establish their domicile for special legal purposes
      at H. Bouchard 680, floor 18, of the City of Buenos Aires, Argentine
      Republic, or at any other domicile which may be established in the
      future.

            

    

    

    2.3
REPRESENTATIVE

    

    
      	
               
      

            	
              2.3.1
      For the purposes provided for in Articles 378, subsection 7, and 379 of
      Act number 19550 (Amended Text 1984), PETROLERA ENTRE LOMAS S.A. is
      appointed as UTE’s Representative with domicile at H. Bouchard 680, floor
      18, of the City of Buenos Aires, Argentine Republic, with powers to
      exercise the rights and assume the obligations inherent to the development
      and execution of the operations under the
  CONTRACT.

            

    

    

    2.3.2.
Should it be necessary, for representation purposes, the PARTIES
shall

    grant the
corresponding powers in favor of PETROLERA ENTRE LOMAS S.A., who shall be
entitled to replace and/or grant them in favor of one or more persons dependant
on PETROLERA ENTRE LOMAS S.A.

    

    
      	
               
      

            	
              2.3.3.
      All the activities of the LEGAL REPRESENTATIVE carried out either in a
      direct way or with the intervention of third parties shall be executed in
      its capacity of agent of the PARTIES and all operations shall be carried
      out on their behalf and at their
expense.

            

    

    

    2.4.
COMMON OPERATING FUND

    The
common operating fund is established with a hundred thousand Argentine pesos
($100,000) that the PARTIES shall pay in cash in proportion to their respective
PARTICIPATING INTERESTS within seven (7) days as from the EFFECTIVE
DATE.

    

    Establishing
the common operating fund does not imply any limitation whatsoever to the powers
of the OPERATOR to submit requests for funds nor to the obligation of the
PARTIES to comply with their contributions.

    

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    ARTICLE
3

    SUBJECT MATTER AND CONTRACT
TERM

    

    
      	
               
      

            	
              3.01
      This CONTRACT shall rule the relationship among the PARTIES and the
      exploitation, supplementary exploration and hydrocarbons development works
      that the PARTIES carry out jointly in the AREA CNQ – 11 “BAJADA DEL PALO”
      (“AREA”) for the term of twenty-five (25) years as from the date of
      adjudication plus any extensions that may apply under the provisions of
      article 35 of Act number 17319.

            

    

    

    

    

    ARTICLE
4

    PARTICIPATING
INTEREST

    

    
      	
               
      

            	
              4.01
      The PARTIES shall share in the assets and liabilities derived from
      this   CONTRACT according to the following participating
      interests:

            

    

    

    PETROLERA
ENTRE LOMAS S.A.: 73.15% (SEVENTY-THREE POINT FIFTEEN per cent);

    

    APCO
ARGENTINA INC. ARGENTINE BRANCH: 23% (TWENTY-THREE (per cent), and

    

    PETROBRAS
ENERGÍA S.A.: 3.85% (THREE POINT EIGHTY-FIVE per cent).

    

    
      	
               
      

            	
              4.02
      With the exceptions of the provisions in 9.01, 9.02 and 9.03 all
      obligations, costs, expenses and liabilities arising from or generated by
      the JOINT OPERATIONS shall be borne by the PARTIES in proportion to their
      respective PARTICIPATING INTERESTS.

            

    

    

    
      	
               
      

            	
              4.03
      All rights acquired pursuant to the CONTRACT shall be the PARTIES’
      property in proportion to their respective PARTICIPATING
      INTERESTS.

            

    

    

    
      	
               
      

            	
              4.04
      The JOINT PROPERTY shall belong to the PARTIES as undivided interests, in
      proportion to their respective PARTICIPATING
  INTERESTS.

            

    

    

    
      	
               
      

            	
              4.05
      Each PARTY has automatically the ownership from wellhead and the free
      availability of the HYDROCARBONS extracted in proportion to their
      PARTICIPATING INTERESTS and the right to receive the percentages
      established in 4.01 out of the NET
PRODUCTION.

            

    

    

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    ARTICLE
5

    OPERATING
COMMITTEE

    

    
      	
               
      

            	
              5.01
      The OPERATING COMMITTEE shall be made up by one (1) regular and one (1)
      alternate representative for each one of the PARTIES.  For
      representation purposes, within five (5) days as from the EFFECTIVE DATE,
      each PARTY shall notify the other PARTIES in writing the names and
      domiciles of the appointed
representatives.

            

    

    

    The
regular and alternate representatives may be changed at any moment by written
notification from the interested PARTY to the other PARTIES.  Each
representative shall have enough powers to decide and bind its represented party
on all the subjects submitted at each meeting.

    

    Each
regular or alternate representative can have as many assistants as it is
reasonably necessary.

    

    The
remuneration of the PARTIES’ representatives and of their prospective assistants
shall be paid by whoever appointed them.  The replacement of the
regular representative shall be automatic upon its absence due to any
cause.

    

    
      	
               
      

            	
              5.02
      A representative of the OPERATOR shall act as President of the OPERATING
      COMMITTEE.

            

    

    

    
      	
               
      

            	
              5.03
      The meetings of the OPERATING COMMITTEE shall take place in Buenos Aires
      or in any other place the PARTIES agree on at least once every
      year.  They shall be convened at any moment by the President, on
      his own initiative or upon the written request of any of the
      PARTIES.  The agenda of the meetings shall be determined by the
      President except in the case of those meetings convened at the written
      request of one of the PARTIES, in which case the agenda shall include the
      subject or subjects that gave rise to the
  request.

            

    

    

    The call
shall be notified in writing to each PARTY no later than ten (10) days in
advance, stating the day, time, place and agenda of the meeting.  Only
upon the consent of all the PARTIES, it shall be possible to call meetings with
less time in advance, or adopt decisions on questions not included in the agenda
notified in the call.  Each one of the PARTIES shall have a number of
votes equivalent to their PARTICIPATING INTEREST.

    

    
      	
              a)  

            	
              QUORUM: The meetings
      shall take place only if attended by at least two PARTIES representing the
      majority of the votes.  If the quorum requested is not reached,
      after an hour from the call, the meeting shall be arranged for at least
      one (1) working day after the day of the call and in this case the meeting
      shall take place no matter the number of PARTIES
      attending.  Except for the cases provided for in item (b)
      hereinafter, all decisions, approvals and other actions of the OPERATING
      COMMITTEE with respect to all the subjects submitted for consideration
      shall be decided upon by the affirmative vote of at least two PARTIES
      representing at least seventy per cent (75%) of the whole PARTICIPATING
      INTERESTS.

            

    

    

    
      	
              b)  

            	
              UNANIMOUS DECISIONS: The
      attendance of all the Parties and their unanimous consent shall be
      required in order to resolve: (i) the termination of the CONTRACT before
      the performance of its subject matter; (ii) the approval of ANNUAL
      PROGRAMMES of works and their respective budgets; (iii) the approval of
      ANNUAL PROGRAMMES of exploration works during the Exploitation Stage and
      their respective budgets; (iv) the plugging and abandonment of all wells
      drilled in compliance with a JOINT OPERATION; (v) any revision of the
      approved ANNUAL BUDGETS AND ANNUAL PROGRAMMES in what they exceed twenty
      per cent (20%) of any of the items envisaged therein or ten per cent (10%)
      of the whole ANNUAL BUDGET AND/OR ANNUAL PROGRAMME; (vi) the voluntary
      release of the AREA in whole or in part, and (vii) any modification,
      addition and/or revision of the
CONTRACT.

            

    

    

    

    5.04 The
OPERATING COMMITTEE shall have the following powers:

    

    
      	
               
      

            	
              a)
      To determine all those matters of administration policy necessary for
      carrying out the JOINT OPERATIONS and so that the OPERATOR, on the basis
      of its own procedural rules, comply with its
  function.

            

    

    

    
      	
               
      

            	
              b)
      To consider and approve the ANNUAL PROGRAMMES, their modifications and
      extension, which shall tend to obtain the highest profitability and
      production being at the same time compatible with a rational and economic
      exploitation of the OIL FIELDS, all of this pursuant to the provisions in
      5.03 (b).

            

    

    

    
      	
               
      

            	
              c)
      To consider and approve the ANNUAL BUDGET expressed in United States
      dollars, its modifications and extensions, pursuant to the provisions in
      5.03 (b).

            

    

    

    
      	
               
      

            	
              d)
      To establish a guideline so that the OPERATOR shall be entitled to
      underwrite all contracts of service, for services, supply, purchase orders
      of materials or equipment, or the direct execution of works or rendering
      of services or supplies whose cost, in each disbursement, exceeds the
      amount equivalent to a hundred thousand United States dollars (U$S
      100,000), or the amount set forth in each ANNUAL
  BUDGET.

            

    

    

    
      	
               
      

            	
              e)
      To order, to be charged to the JOINT ACCOUNT, the auditing of the account
      statements submitted by the OPERATOR, and supervise the full compliance
      with all its obligations carrying out the technical inspections deemed
      necessary at reasonable moments in order to verify the normal course of
      the activities without interfering with their
  development.

            

    

    

    
      	
               
      

            	
              f)
      To establish the regularity of the reports on operations and production
      and on all other information that shall be submitted by the
      OPERATOR.  If any of the PARTIES requests the OPERATOR to submit
      additional information apart from that stated by the OPERATING COMMITTEE,
      the cost thereof shall be borne by the party requesting
  it.

            

    

    

    
      	
               
      

            	
              g)
      To adopt or have adopted all those decisions necessary for the compliance
      of the obligations arising out of the PARTIES’ capacity as
      licensees.

            

    

    

    
      	
               
      

            	
              h)
      To decide the abandonment of any well, except when it is a DEVELOPMENT
      WELL.  In case no agreement is reached, the OPERATOR shall
      decide about the abandonment of the well if there were no PARTY interested
      in carrying out the SOLE RISK
OPERATION.

            

    

    

    
      	
               
      

            	
              i)
      To resolve the setting up of the Subcommittees it may deem
      necessary.  Their functions and procedure shall be established
      by the OPERATING COMMITTEE.  Each PARTY shall be entitled to
      appoint a representative in each Subcommittee, who shall be entitled to
      have as many assistants as is reasonably
  necessary.

            

    

    

    
      	
               
      

            	
              j)
      One of said Subcommittees, of a technical character, shall have the main
      mission of defining the location of the wells to be drilled, the workover
      programs or the recompletion of wells and other aspects related with the
      exploration and development of the AREA, as a step prior to its
      execution.

            

    

    

    
      	
               
      

            	
              k)
      To set the procedure to be followed for the receipt and distribution of
      HYDROCARBONS.

            

    

    

    
      	
               
      

            	
              l)
      To appoint and remove the OPERATOR of the
  CONTRACT.

            

    

    

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    ARTICLE
6

    OBLIGATIONS OF THE
PARTIES

    

    6.1
COMMON OBLIGATIONS

    

    The
PARTIES have the following obligations, among others:

    

    
      	
               
      

            	
              6.1.1
      To comply with the national, provincial and municipal legal rules and
      especially with Act number 17319 and the Executive Orders of the National
      Executive Branch number 1055/89, 1212/89, 1589/89 and 1216/90 and/or any
      other norm that modifies or replaces them in the
  future.

            

    

    

    
      	
               
      

            	
              6.1.2
      To perform the CONTRACT subject to the most rational, modern and efficient
      techniques corresponding to the characteristics and extension of the
      reserves found in order to obtain the highest production of HYDROCARBONS
      compatible with an adequate economic and technical exploitation of the
      AREA.

            

    

    

    
      	
               
      

            	
              6.1.3
      To adopt, through the action of the OPERATOR, the measures of security and
      prevention and control of environmental pollution imposed by the
      applicable laws or advised by accepted practices in the subject with the
      purpose of avoiding or reducing accidents of any kind and harming the
      environment.

            

    

    

    
      	
               
      

            	
              6.1.4
      To let the APPLICATION AUTHORITY have access to the AREA with the purpose
      of carrying out inspections and supervisions necessary for the fulfillment
      of the laws in force.

            

    

    

    
      	
               
      

            	
              6.1.5
      To submit the information that the Province of Neuquén, through the
      APPLICATION AUTHORITY, may request in order to facilitate a correct
      assessment of the royalties that may correspond to it, as well as the
      compliance with the provisions of Article
6.1.3.

            

    

    

    

    

    ARTICLE
7

    ABOUT THE
OPERATOR

    

    7.01 The
PARTIES herein appoint PETROLERA ENTRE LOMAS S.A. to act as

    OPERATOR.

    

    7.02 The
OPERATOR shall have the following powers and obligations:

    

    a) To
defend the common interest of the PARTIES.

    

    b) To
carry out the decisions of the OPERATING COMMITTEE.

    

    c) To
execute the JOINT OPERATIONS, and comply with the obligations and exercise the
common rights arising out of the license.

    

    d) To
carry out, hire, acquire and/or obtain all the assets, services, works or
materials, equipment, supplies, permits and rights related to the JOINT
OPERATIONS, under the provisions in 5.04 d).  The OPERATOR shall act
with utmost diligence when obtaining said assets and services in the technical,
economic and financial conditions that are most convenient for the
PARTIES.

    

    e) To
represent and be the official spokesperson of the PARTIES as regards their
relationship with the National, Provincial and Municipal Authorities, the
non-operating PARTIES being entitled to accompany the OPERATOR when justified by
the importance of the subject to be dealt with.  To these purposes the
OPERATOR shall notify the PARTIES enough time in advance and shall keep them
informed about the subjects dealt with in the meetings held.

    f) To
care, guard, keep and maintain the JOINT PROPERTY.

    

    g) To
decide what is necessary for the import of machines, equipment or any other
materials.

    

    h) To
incur all expenses related to the JOINT OPERATIONS.

    i) To
comply with the measures and preventions stated in 6.1.3.

    

    
      	
               
      

            	
              j)
      To adopt, in case of explosion, fire, floods or any other similar
      emergency, the necessary decisions in order to secure lives and
      goods.  The OPERATOR shall communicate the decisions adopted to
      the PARTIES as soon as possible, the cost being charged to the JOINT
      ACCOUNT.

            

    

    

    k) To
ensure the fulfillment of the obligations and the protection of the rights
arising from the LICENSE, as well as the effect and maintenance of the
latter.

    

    l) To
dispose, in favor of the PARTIES, of any thing or right not necessary for the
JOINT OPERATIONS, the approval of the OPERATING COMMITTEE being required when
the value of the assets involved exceeds the equivalent to a hundred thousand
United States dollars (U$S 100,000).  The operator shall be entitled
to sell the assets and rights above mentioned on behalf of the PARTIES and at
their expense.

    

    m) To
submit before the OPERATING COMMITTEE the program for the winding up and
participation of the JOINT PROPERTY once the term of legal effect of the license
has elapsed.

    

    n) To
draw up the minutes of the meetings of the OPERATING COMMITTEE, which shall be
delivered to the PARTIES within seven (7) running days as from the date said
meetings are held.  The minutes shall be deemed approved if there were
no observations raised by the PARTIES within seven (7) running days as from the
moment of their receipt.

    

    
      	
               
      

            	
              o)
      To provide the non-Operators with a copy of all technical data,
      information, interpretations and reports, together with all other material
      concerning the AREAS of the LICENSE, including the following without
      limitation:

            

    

    

    1) well
logs and surveys;

    

    2) the
daily progress of drillings and geological reports;

    

    3) all
the reports about drilling tests and core analysis;

    

    4) the
sealing report in case any well is completed as a dry well or is abandoned for
other reason;

    

    5) the
final geological report and the drilling time report of all the
wells;

    

    6) all
the geological and geophysical formal reports and the maps related to the work
carried out by the OPERATOR or independent contractors for the JOINT
ACCOUNT;

    

    7) data
on field and well and field performance;

    

    8) all
the reports submitted by the OPERATOR to the Government in relation with the
operations in the AREA of the license;

    

    9) a
report on the progress and operations when geological and/or drilling programs
are being carried out.

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    
      	
               

               

               
      

            	
              7.03
      All staff effectively in charge of tasks related to the JOINT OPERATIONS
      shall be employed by the OPERATOR, and the cost thereof shall be debited
      from the JOINT ACCOUNT, in accordance with the provisions of the
      ACCOUNTING PROCEDURE (Annex “A”).

            

    

    

    
      	
               
      

            	
              7.04
      The OPERATOR shall make its greatest effort to carry out with diligence
      all the JOINT OPERATIONS in accordance with the techniques generally
      followed in the oil industry and the good practices of the oil
      engineering, tending to carry out tasks in an efficient and economic
      way.  In all cases, the OPERATOR’S common sense and prudence,
      exercised in good faith, shall be the limit of its responsibility, and in
      no case whatsoever shall it be held responsible for decisions adopted or
      omitted in good faith within the conditions before
    mentioned.

            

    

    In no
case whatsoever shall the OPERATOR be held responsible for lost profits, damage
to the reservoir or loss of production.

    

    
      	
               
      

            	
              7.05
      The OPERATOR shall keep a detailed accounting and documentation in
      relation with JOINT OPERATIONS and SOLE RISK OPERATIONS, whichever be the
      case.

            

    

    

    
      	
               
      

            	
              7.06
      In the event there is no ANNUAL BUDGET approved, the OPERATOR shall carry
      out all acts and operations necessary in order to ensure the best
      performance of these presents and the adequate protection of the JOINT
      PROPERTY.  When adopting said measures and actions, the OPERATOR
      shall act with utmost diligence and shall keep the PARTIES informed about
      them immediately.  The expenses incurred or obligations assumed
      by the OPERATOR under these circumstances shall be considered authorized
      expenses.  The payment of said amounts to the OPERATOR shall be
      effected by the PARTIES under the terms and conditions set forth in this
      CONTRACT.  The payment of the corresponding amounts shall not
      prejudice the PARTIES’ right to claim the total or partial reimbursement
      thereof whenever the OPERATOR acted in breach of the rules governing
      agents.

            

    

    

    
      	
               
      

            	
              7.07
      The OPERATOR shall cease acting as such or shall be removed for any of the
      following causes:

            

    

    

    a) By
written renunciation, notified to the PARTIES no later than sixty (60) days
before the date it becomes effective.

    

    b) By
OPERATOR’S dissolution, winding-up or court judgment of bankruptcy.

    

    c) In
case of repeated non-compliance with its contribution as PARTY, notwithstanding
the application of the provisions of Article 10 hereof.

    

    d) In
case of repeated and serious non-compliance with the obligations laid upon it,
which shall be determined under the procedure of Article 22 of this
CONTRACT.

    

    e) In
case, due to an assignment, the PARTICIPATING INTEREST of the OPERATOR in
addition to its BRANCH OFFICES’ participating interest reaches an amount under
thirty per cent (30%).

    

    
      	
               
      

            	
              7.08
      In case the OPERATOR ceases to act as such or were removed, the OPERATING
      COMMITTEE shall appoint a new OPERATOR in the following
      manner:

            

    

    

    a) In the
case of subsection a) of item 7.07, taking into account the right to vote of the
PARTICIPATING INTEREST corresponding to the
leaving  OPERATOR.

    

    b) In the
case of subsections b), c), d) or e) of item 7.07, without taking into account
the right to vote of the leaving OPERATOR.

    

    7.09
ACQUISITIONS AND HIRINGS

    

    When
acquisitions and/or hirings exceed U$S 250,000, the OPERATOR shall send to the
PARTIES for their information prior to the adjudication the
specifications    established and the quotations
received.

    

    The
PARTIES and their branch offices shall be entitled to bid in any Competitive
Bid, and a bid of one PARTY or its subsidiary equal or better than any other bid
shall be accepted with preference over a bid of a third party.  The
PARTIES that made bids shall be entitled to equal the best price
obtained.

    

    

    

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    ARTICLE
8

    ANNUAL
BUDGET

    

    
      	
               
      

            	
              8.01
      Sixty (60) days before the legal effect of an ANNUAL BUDGET elapses, the
      OPERATING COMMITTEE shall meet to approve the ANNUAL BUDGET corresponding
      to the next ANNUAL PROGRAMME.

            

    

    

    
      	
               
      

            	
              8.02  The
      OPERATOR shall serve on each PARTY a draft ANNUAL BUDGET together with an
      explanatory Technical Report no later than ninety (90) days before the
      legal effect of the ANNUAL BUDGET elapses.  Each PARTY shall be
      entitled to offer modifications to the draft of ANNUAL BUDGET, which shall
      be considered at the respective
meeting.

            

    

    

    
      	
               
      

            	
              8.03
      The meetings on budget topics shall commence no later than the fifth day
      following the day on which the draft of ANNUAL BUDGET was
      received.  Said meetings shall be held in two
      stages:

            

    

    

    a) The
first stage shall take a maximum of fifteen (15) days and shall aim at
exchanging opinions so that the PARTIES express their points of view and due
harmonization of different criteria is achieved.

    

    b) The
second stage, which shall take a maximum of ten (10) days as from the expiration
date of the term of the previous stage, shall aim at discussing and approving
the ANNUAL BUDGET for the next period.

    

    
      	
               
      

            	
              8.04
      An approved ANNUAL BUDGET could be modified at any moment by the OPERATING
      COMMITTEE under the same conditions required for its approval and taking
      into account the provisions of paragraph 5.04. c) of Article
      5.

            

    

    

    
      	
               
      

            	
              8.05
      The OPERATOR shall serve on the PARTIES the first ANNUAL BUDGET within
      thirty (30) days after the EFFECTIVE DATE of this CONTRACT.  The
      first ANNUAL BUDGET shall be approved by the OPERATING COMMITTEE within
      fifteen (15) days after its
submission.

            

    

    

    
      	
               
      

            	
              8.06
      The OPERATOR agrees to carry out each ANNUAL PROGRAMME within the limit of
      the ANNUAL BUDGET, and shall not carry out any operation not included in
      an ANNUAL PROGRAMME, nor shall it incur any expenses during the budgeted
      period exceeding the amount stipulated in the ANNUAL BUDGET, except in the
      following cases:

            

    

    

    a) If it
were necessary to carry out an ANNUAL PROGRAMME, the OPERATOR may exceed any
ANNUAL BUDGET up to a maximum of ten per cent (10%) of the updated total budget
or up to a maximum of twenty per cent (20%) of each updated financial allotment,
the amounts in excess not exceeding ten per cent (10%) of the updated total
budget.  The decision on this subject shall be notified to the PARTIES
as soon as possible.

    

    b) In
case of emergency, the OPERATOR may make such disbursements as deemed necessary
for the performance of the CONTRACT and the protection of life or JOINT
PROPERTY.  The OPERATOR shall notify said emergency disbursements to
the PARTIES as soon as possible.

    

    

    

    ARTICLE
9

    CONTRIBUTIONS – EXPENSES AND
INCOME

    

    
      	
               
      

            	
              9.01
      The PARTIES shall contribute, on a pro rata basis according to their
      respective PARTICIPATING INTERESTS, the sums necessary to pay all expenses
      of any kind that the OPERATOR must settle, in accordance with the terms of
      each approved ANNUAL BUDGET and ANNUAL
  PROGRAMME.

            

    

    

    The
OPERATOR shall keep a bank account exclusively for the operation, opened on
behalf of U.T.E. and under U.T.E.’s C.U.I.T. number.

    

    
      	
               
      

            	
              9.02
      All expenses of any kind the OPERATOR must settle shall be charged to the
      JOINT ACCOUNT.

            

    

    

    
      	
               
      

            	
              9.03
      No later than five (5) working days in advance, the OPERADOR shall serve
      on each one of the PARTIES a monthly budget, opened every fortnight,
      stating the expenses foreseen for the next month and requesting the
      contribution corresponding to each one of the PARTIES.  This
      information may be sent by fax or email to the PARTIES.  The
      PARTIES shall pay this contribution no later than the first working day of
      the fortnight to which it will be
charged.

            

    

    

    
      	
               
      

            	
              9.04
      Together with the detailed information of the expenses of the next month,
      the OPERATOR shall send to the PARTIES a report of the contributions and
      expenses paid during the preceding month.  In the event a
      positive balance resulted from the report, the exceeding contributions
      shall be employed in the JOINT OPERATIONS decreasing the requirements of
      contributions in the following periods, except when one of the PARTIES
      requests the reimbursement of the funds, within ten (10) days after
      receipt of the report; the reimbursement shall take place within five days
      after the request.  The request for reimbursement by one of the
      PARTIES shall bind the OPERATOR to pay back the excess to all the
      PARTIES.  In the event a negative balance resulted from the
      report, the PARTIES shall cover the difference within the banking hours on
      the first working day corresponding to the month being
      budgeted.

            

    

    

    
      	
               
      

            	
              9.05
      The OPERATOR shall be entitled to request additional contributions of
      funds from the PARTIES not provided for in the monthly budgets, but
      included in the ANNUAL BUDGET.  These contributions shall be
      made effective within three (3) days after being
  requested.

            

    

    

    
      	
               
      

            	
              9.06
      All the expenses to be paid by the OPERATOR in order to carry out the SOLE
      RISK OPERATIONS shall be contributed by the PARTIES participating in SOLE
      RISK OPERATIONS and entered in the SOLE RISK ACCOUNT according to the
      provisions of Annex “A”.

            

    

    

    
      	
               
      

            	
              9.07
      The PARTIES’ contributions shall be paid in Argentine legal currency, in
      DOLLARS or in any other currency requested for the
    operations.

            

    

    

    

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    ARTICLE
10

    DEFAULT
PAYMENT

    

    
      	
               
      

            	
              10.01
      In the event any of the PARTIES does not pay its contribution within the
      time limit fixed to that effect, the rest of the PARTIES shall rectify the
      default payment at the request of the OPERATOR within a term of five (5)
      working days after receipt of the notification and on a pro rata basis
      according to their respective PARTICIPATING INTERESTS.  The
      PARTY which refuses to pay the share of the default contribution
      corresponding to it shall be deemed in breach of this CONTRACT for all its
      purposes, and its default shall be rectified by the rest of the PARTIES on
      a pro rata basis according to their PARTICIPATING INTERESTS.  In
      all cases, arrears shall be
automatic.

            

    

    

    
      	
               
      

            	
              10.2
      The default in paying the contribution shall have the following
      effects:

            

    

    

    a) The
PARTY in default shall not exercise the right to vote nor shall it attend the
meetings of the OPERATING COMMITTEE nor of the subcommittees.

    

    b) It
shall not receive any report, statement, book and/or information of any kind
related to the JOINT OPERATIONS.

    

    c) It
shall not receive its participating share in the NET PRODUCTION, the fifty per
cent (50%) of which shall be used to pay off compensation to the complying
PARTIES in accordance with their participating shares.  The other
fifty per cent (50%) of the NET PRODUCTION shall be employed for the
reimbursement provided for in 10.04.

    

    d) It
shall not receive any payment and/or reimbursement, either in cash or in kind,
owed at the arrears date or owed while the default continues.

    

    The
amounts owed in Argentine legal currency shall be converted into DOLLARS
according to the sell exchange rate at the market price of Banco de la Nación
Argentina for transfers corresponding to the close of the day on which said
amount was to be paid.  This amount converted into DOLLARS and all
other unpaid sum in DOLLARS shall accrue interest able to be capitalized every
thirty (30) days equivalent to the “prime rate” with more than seven (7) points
quoted at the close of the date of default or at the close of each
capitalization period, whichever is the case, by the Chase Manhattan Bank of New
York, or other first class bank of the same market if said bank ceases quoting,
as from the date of default and until the party in default pays the owed amount
to the complying PARTIES, together with the accrued interest, notwithstanding
greater damages caused by the default.  In case it corresponds, the
Indirect Taxes levied on the interest and money receipts and/or partial payments
applicable shall be added.

    

    
      	
               
      

            	
              10.03
      The complying PARTIES shall be paid the reimbursement of the substitutive
      contributions they made on behalf of the party in default out of: a) all
      income and credit that may be estimated in pecuniary value which may
      correspond to the latter; b) fifty per cent (50%) of the NET PRODUCTION
      that would have corresponded to the party in default as from the date of
      arrears and until the moment said party pays off the total amount of the
      debt.  The OPERATOR shall sell, at the request of the complying
      PARTIES and on behalf of and at the expense of the complying PARTY so
      requesting, the corresponding share of the fifty per cent (50%) of the
      PARTICIPATING INTEREST the PARTY in default has in the NET PRODUCTION,
      distributing among the complying PARTIES that request said sale the sums
      of money derived from those transactions, net of pertinent costs, expenses
      and commissions.  The appraisal of the crude oil that may have
      corresponded to the PARTY in default shall be established by the OPERATING
      COMMITTEE.  Furthermore, the PARTY in default shall acknowledge
      before the complying PARTIES the costs, expenses and commissions related
      to the sale of said production.

            

    

    

    10.04
Assignment of PARTICIPATING INTEREST

    

    In case
the default continues for a period of a hundred and eighty (180) days and the
amounts set forth in Article 10.04 are not enough for the complying PARTIES to
recover the sums owed plus interest, each one of the complying PARTIES shall
have the option to demand that the PARTY in default immediately assign to them
its whole PARTICIPATING INTEREST.  Should said option be exercised by
more than one complying PARTY, the PARTY in default shall immediately assign its
PARTICIPATING INTEREST to each one of them in proportion to the PARTICIPATING
INTERESTS they respectively have in the total amount of PARTICIPATING INTERESTS
of all the complying PARTIES that have exercised the option.  In any
case, the value of the assignment shall be the amount of the debt being paid off
thereby.  The complying PARTY or PARTIES that decide to exercise the
option before mentioned shall notify their decision to the PARTY in default and
to all the other PARTIES expressly stating that their intention to have access
to the PARTICIPATING INTEREST of the PARTY in default is exercised pursuant to
the provisions of this Article 10.05.  The assignment shall take place
free from all charge, encumbrance and/or lien on the PARTICIPATING INTEREST and
at the expense of the PARTY in default.  The assignment shall have
full legal effect when the complying PARTY notifies the PARTY in default that
this option was exercised.

    

    
      	
               
      

            	
              10.06
      Rectification of the default
payment

            

    

    

    The PARTY
in default shall have the right to rectify its default at any moment by paying
directly to each complying PARTY all the sums owed, including the corresponding
interest.  Should said rectification take place before the period of a
hundred and eighty (180) running days mentioned in Article 10.05 elapses, the
former shall be under no duty to assign its PARTICIPATING INTEREST.

    

    
      	
               
      

            	
              10.07
      Royalties

            

    

    

    Notwithstanding
the provisions of this article 10, the PARTY in default shall bear the cost of
royalties corresponding to its share in the NET PRODUCTION.

    

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    ARTICLE
11

    OWNERSHIP OF
ASSETS

    

    
      	
               
      

            	
              11.01
      The assets acquired by the OPERATOR with relation to JOINT OPERATIONS
      shall be the JOINT PROPERTY of the PARTIES in proportion to their
      PARTICIPATING INTERESTS.

            

    

    

    
      	
               
      

            	
              11.02
      The assets acquired by the OPERATOR with relation to the execution of SOLE
      RISK OPERATIONS shall be the property of the PARTY or PARTIES
      participating in SOLE RISK OPERATIONS.  Once reversion took
      place, said assets shall be the PARTIES’ JOINT PROPERTY, pursuant to the
      provisions of paragraph 11.01.

            

    

    

    

    

    ARTICLE
12

    SOLE RISK
OPERATIONS

    

    
      	
               
      

            	
              12.01.
      SOLE RISK OPERATIONS shall comprehend those works for which the approval
      provided for in order to include them in an ANNUAL PROGRAMME was not
      obtained; said works may include without limitation: the drilling,
      completion, workover or deepening of a new well, or of any well that does
      not produce or which does not produce in convenient commercial
      quantities.

            

    

    

    The
proposed SOLE RISK OPERATIONS shall not be carried out when they affect the
rights of the non-participating PARTIES, disrupt the execution of JOINT
OPERATIONS or affect, directly or indirectly, the proven reserves under the
JOINT OPERATIONS.

    

    
      	
               
      

            	
              12.02
      If one PARTY wishes to carry out a SOLE RISK OPERATION, it shall notify so
      in writing to the other PARTIES, attaching thereto the relevant
      project.  Within sixty (60) days after receiving this
      notification, the PARTIES shall communicate their intention to participate
      in the SOLE RISK OPERATION.  The absence of an answer within the
      stated period of time shall be considered as a refusal to participate in
      the project.

            

    

    

    In the
event all the PARTIES decide in time to participate in the SOLE RISK OPERATION,
this operation shall be carried out as a JOINT OPERATION.

    

    
      	
               
      

            	
              12.03
      The PARTY participating in a SOLE RISK OPERATION shall commence the
      execution of the works within a hundred and eighty (180) days after the
      time period for notification set forth in 12.02 elapses and it shall
      continue said works without interruption until they are
      finished.  If said works are not commenced within the term
      established, the question shall be subjected again to the procedure
      provided for in the previous
paragraph.

            

    

    

    
      	
               
      

            	
              12.04
      The SOLE RISK OPERATIONS shall be conducted by the OPERATOR on behalf of
      and at the expense of the participating PARTIES and in accordance with the
      relevant provisions of this
AGREEMENT.

            

    

    

    The
PARTIES participating in SOLE RISK OPERATIONS shall bear in proportion to their
participation in said SOLE RISK OPERATIONS all the expenses arising from said
operations until REVERSION takes place.  To that effect, the OPERATOR,
in its capacity of intermediary, shall make the relevant investments and
expenses on behalf of and at the expense of the participating PARTIES, who shall
act as principals to that effect.

    

    If the
SOLE RISK OPERATIONS are profitable, the participating PARTY shall be entitled
to the repayment of:

    

    
      	
              a)  

            	
              The
      total investment incurred in the SOLE RISK
  OPERATIONS.

            

    

    

    
      	
              b)  

            	
              The
      accumulated cost of the operating and production expenses incurred by
      virtue of said operations.

            

    

    

    
      	
              c)  

            	
              The
      highest tax on the gross income that may correspond due to the
      commercialization of the NET PRODUCTION derived from the SOLE RISK
      OPERATIONS and, in general, any other non-recoverable Tax borne by the
      participating PARTY as a consequence of the SOLE RISK
      OPERATIONS.

            

    

    

    
      	
              d)  

            	
              The
      V.A.T. paid on the investments and expenses related to said
      operations.

            

    

    

    The
repayment shall be effected according to the share ascribed to the PARTICIPATING
INTERESTS corresponding to the non-participating PARTIES.

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    The
reimbursement shall be collected exclusively through the share in the NET
PRODUCTION that corresponds to the non-participating PARTY, and in consequence,
said right is conditional upon the existence of the production referred to
before.

    

    Once the
items mentioned in a), b), c), d) are repaid, there shall rise in favor of the
participating PARTY the right to a DIFFERENTIAL for the SOLE
RISK  OPERATION, which shall be an amount equivalent to 200% of the
sums mentioned in a), b) and c) (the “DIFFERENTIAL”).

    

    The
DIFFERENTIAL shall be collected exclusively through the share in the NET
PRODUCTION that corresponds to the non-participating PARTY, and in consequence,
said right is conditional upon the existence of the production referred to
before.

    

    The
appraisal of the NET PRODUCTION shall be made taking into account the average of
the actual prices obtained by the PARTIES in the sales of Hydrocarbons derived
from the Area CNQ 11 – BAJADA DE PALO during the same month.  In the
event there are no sales during said period for some of the participating
PARTIES, for said PARTIES the values informed in the affidavits of royalties of
the same Area shall be considered, subject to the relevant gravity and quality
modifications.

    

    In the
event there is no accountable production in the referred period for the AREA CNQ
– 11 BAJADA DE PALO, the appraisal of the net production shall be effected on
the basis of the average value of the basin, and in a subsidiary way, the crude
oil value of other basins could be extrapolated, duly revised to adapt it to the
quality of the crude oil in question.

    

    The value
of the Hydrocarbons shall take into account the incidence on said value of the
export duties, contributions to trusts created or to be created in the future
and any other transfer of resources to the National, Provincial or Municipal
Government or to similar legal entities that must be effected.

    

    12.05. Up
to the moment REVERSION takes place, the PARTIES participating inSOLE RISK
OPERATIONS may use the facilities existing in the AREA OF

    THE
CONTRACT in order to carry out the SOLE RISK OPERATIONS.

    

    
      	
               
      

            	
              12.06.
      The PARTIES that carry out SOLE RISK OPERATIONS shall release the
      non-participating PARTIES from all liability before third parties with
      respect to any event that takes place in relation to said SOLE RISK
      OPERATION up to the moment REVERSION takes
  place.

            

    

    

    
      	
               
      

            	
              12.07.
      REVERSION shall be deemed effected when the value of the monthly appraisal
      of the PRODUCTION delivered by the non-participating PARTIES to the
      participating PARTIES is equivalent to the reimbursement of costs,
      expenses, taxes, investments and DIFFERENTIAL mentioned in covenant
      12.04.

            

    

    

    
      	
               
      

            	
              12.08.
      Once REVERSION is effected, all the PARTIES, as from that moment, shall
      share in the NET PRODUCTION and in all profits and expenses derived from
      the SOLE RISK OPERATIONS, in proportion to their respective PARTICIPATING
      INTERESTS set forth herein; and the materials, equipment and facilities of
      the SOLE RISK OPERATIONS shall receive equal treatment as the rest of the
      JOINT PROPERTY.

            

    

    

    The
PARTIES that have not participated in the SOLE RISK OPERATIONS may obtain the
information and carry out the verifications they deem necessary with the purpose
of determining whether REVERSION was effected.  In case there is more
than one participating PARTY in SOLE RISK OPERATIONS, the NET PRODUCTION shall
be distributed among them in equal proportion to the costs borne in the SOLE
RISK OPERATIONS.

    

    
      	
               
      

            	
              12.09.
      The participating PARTIES shall bear the Direct Taxes derived from the
      DIFFERENTIAL as well as the Indirect Taxes on the PRODUCTION given as
      payment by the non-participating PARTIES.  The non-participating
      PARTY shall not benefit from the Indirect Tax that is transferred to the
      participating PARTY.  In such a case, the amount borne by the
      participating PARTY shall be reduced up to the amount at which there is no
      profit for the non-participating
PARTY.

            

    

    

    
      	
               
      

            	
              12.10.
      The non-participating Parties shall bear the Indirect Taxes applicable to
      the DIFFERENTIAL and to the reimbursement of the items mentioned in
      12.04.  Furthermore, said Party shall bear the Direct Taxes and
      royalties on the PRODUCTION given as payment to the participating
      PARTIES.

            

    

    

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    

    ARTICLE
13

    ALLOCATION OF THE NET
PRODUCTION

    

    
      	
               
      

            	
              13.01
      The OPERATOR shall extract, treat and transport the NET PRODUCTION up to
      the storage, measurement and delivery premises common to all the PARTIES,
      where the NET PRODUCTION shall be measured in accordance with the rules
      and methods set forth and it shall be delivered by the OPERATOR to the
      PARTIES in proportion to their respective PARTICIPATING INTERESTS to the
      sole effect of calculating the Value Added Tax, Article 4 of Act number
      23349 as amended.  To all other legal or tax effect, said
      allocation shall be considered as a recovery in kind in total or as
      partial payment of the investments, costs and expenses incurred or to be
      incurred by the PARTIES for the extraction of the product.  In
      the case of the payment of royalties in kind, the OPERATOR shall act in
      accordance with the provisions of Article
20.

            

    

    

    
      	
               
      

            	
              13.02
      At the MEASURING AND DELIVERY POINT each PARTY, pursuant to the provisions
      of Article 4.05, shall have the right and obligation to receive the share
      of the NET PRODUCTION corresponding to its PARTICIPATING INTEREST, which
      shall be freely available in accordance with the terms and conditions set
      forth in Article 6 of Act number 17319 and Executive Orders number
      1055/89, 1212/89, 1589/89 and 1216/90.  All cost incurred in the
      sale or separate disposition by any of the PARTIES of their proportional
      share in the NET PRODUCTION shall be borne by said
  PARTY.

            

    

    

    
      	
               
      

            	
              13.03
      If any of the PARTIES, due to any reason whatsoever, shall not receive and
      separately dispose in total or in part of its proportional share in the
      NET PRODUCTION within seventy-two (72) hours as from the moment the latter
      is at their disposal, the OPERATOR shall be entitled but under no
      obligation to dispose of said production and buy it for itself at the
      average price obtained for its sale in the three (3) months prior to the
      sale.  In the case it sells it to third parties on behalf of and
      at the expense of said PARTY, having all costs, expenses and commissions
      related to the sale been deducted, it shall deliver the corresponding
      income to the owner of the NET PRODUCTION
sold.

            

    

    

    
      	
               
      

            	
              13.04
      Notwithstanding the provisions of Article 13.02, the OPERATOR and each one
      of the PARTIES may agree in writing that the former shall be in charge of
      the sale of the NET PRODUCTION on behalf of each one of the
      PARTIES.

            

    

    

    
      	
               
      

            	
              13.05
      The OPERATOR shall inform monthly the forecast of the NET PRODUCTION for
      the next 3 months.

            

    

    

    

    

    ARTICLE
14

    ASSIGNMENT OF
RIGHTS

    

    
      	
               
      

            	
              14.01
      Any of the PARTIES may assign in all or in part their PARTICIPATING
      INTEREST subject to the following
conditions:

            

    

    

    
      	
               
      

            	
              14.01.01.
      The assignor shall notify all the other PARTIES at the same time its
      intention to assign its PARTICIPATING INTEREST, giving notice of the terms
      and conditions of the transaction and the identity of the party interested
      in making it legally effective.

            

    

    

    
      	
               
      

            	
                14.01.02.
      If the rest of the PARTIES as a whole do not reasonably object to the
      interested third party within thirty (30) days as from the receipt of the
      notification, the PARTIES shall have priority to acquire, in proportion to
      their PARTICIPATING INTERESTS, the share offered, under the same terms and
      conditions notified by the assignor.  Having said time period
      elapsed and no PARTY having issued a decision, the offer shall be deemed
      as rejected.

            

    

    

      14.01.03.
If any of the PARTIES did not exercise the right to acquire the
share

    offered
within the time period set forth in 14.01.02, the remaining percentage of said
share shall be offered again to the PARTIES who did exercise said right under
the provisions of 14.01.02.  The percentage of the share offered again
shall be accepted by the PARTIES within thirty (30) days of the
re-offer.  Having said time period elapsed and no PARTY having issued
a decision, the new offer shall be deemed as rejected.

    

    
      	
               
      

            	
                14.01.04.
      Should the PARTIES not accept the offer under the terms and conditions
      provided for in 14.01.02 and 14.01.03 if applicable, the assignor may
      freely assign its PARTICIPATING INTEREST or the share in such in favor of
      the proposed assignee.  In this case, the assignment shall
      become legally effective within a hundred and twenty (120) days after the
      time periods set forth in 14.01.02 and 14.01.03 have elapsed and in no
      more favorable terms than those notified to the PARTIES.  If the
      assignment does not become legally effective within the time period
      established, the assignor shall re-offer its PARTICIPATING INTEREST
      pursuant to the above-mentioned
provisions.

            

    

    

    
      	
               
      

            	
              14.02.
      The PARTIES may assign, at any moment, in all or in part their
      PARTICIPATING INTEREST to a BRANCH OFFICE in a direct way and without
      being subject to the procedure provided for in
      14.01.  Notwithstanding this, with respect to the rest of the
      PARTIES, the assignment shall have effect as from the moment they are
      notified thereof, the PARTIES being entitled to request from the assignor
      and the assignee all the reports and documents they may deem relevant to
      evidence the condition of BRANCH OFFICE invoked by the assignor and/or
      assignee.

            

    

    

    
      	
               
      

            	
              14.03.
      No PARTY shall encumber its PARTICIPATING INTEREST in no way whatsoever
      without the prior consent in writing of the other
  PARTIES.

            

    

    

    
      	
               
      

            	
              14.04.
      In all cases, the assignor shall be joint and severally responsible with
      the assignee for the pending liabilities, of any kind whatsoever, that may
      apply to the assigned PARTICIPATING INTEREST at the moment of the
      assignment.

            

    

    

    
      	
               
      

            	
              14.05.
      In all cases the assignment shall have the approval of the enforcement
      authority of Acts number 17319 and
26197.

            

    

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    ARTICLE
15

    INSURANCE AND
LITIGATIONS

    

    
      	
               
      

            	
              15.01.
      Besides the insurance provided for in Annex “B”, the OPERATOR shall take
      out the insurance the OPERATING COMMITTEE so
  decides.

            

    

    

    
      	
               
      

            	
              15.02.
      All compensation for damage caused by the JOINT OPERATIONS that is not
      covered by the insurance policies taken out, shall be satisfied by the
      PARTIES in proportion to their PARTICIPATING INTERESTS at the moment it
      takes place and/or arises.

            

    

    

    
      	
               
      

            	
              15.03.
      For the SOLE RISK OPERATIONS, the OPERATOR shall take out on behalf of the
      PARTIES participating in such SOLE RISK OPERATIONS and at their exclusive
      expense the insurance set forth in Annex “B”, which shall include the
      non-participating PARTIES and the OPERATOR as insured
    parties.

            

    

    

    
      	
               
      

            	
              15.04
      The OPERATOR shall promptly notify the PARTIES about the claims and
      litigations that may be raised with reference to the JOINT OPERATIONS, and
      it shall solve, settle or defend all the claims and complaints derived
      from the JOINT OPERATIONS filed by third parties against the OPERATOR or
      the PARTIES.  Notwithstanding this, the OPERATOR shall not pay
      more than the equivalent to fifty thousand United States dollars (U$S
      50,000) to settle any claim or complaint unless the OPERATING COMMITTEE
      authorizes a higher payment.  When the amount involved in any
      claim or complaint against the OPERATOR or the PARTIES exceeds said limit,
      the OPERATOR shall promptly request the assistance of the OPERATING
      COMMITTEE in this respect and shall comply with the directions issued by
      said committee.  Each PARTY shall be entitled to participate
      through its own lawyer and at its own expense in the transaction, solution
      or defense of any claim or complaint which may involve figures exceeding
      the amount stated.  However, all expenses incurred by the
      OPERATOR in suing, defending, settling or solving any claim in accordance
      with the directions of the OPERATING COMMITTEE shall be borne equally by
      the PARTIES and charged to the JOINT
ACCOUNT.

            

    

    

    

    

    ARTICLE
16

    CONFIDENTIAL
INFORMATION

    

    
      	
               
      

            	
              16.01.
      The PARTIES and the OPERATOR bind themselves to keep strict
      confidentiality as regards the contents of this CONTRACT or of any prior
      or subsequent agreement, as well as any geological, geophysical, technical
      or other information, such as studies, assessments, including own
      interpretations, maps or reports based on the information that may be
      obtained during the execution of the JOINT OPERATIONS, except when the
      information must be disclosed:

            

    

    

    a) by
operation of an Act, norm, regulation and/or contract, or by order of a
competent court;

    

    b) to a
branch office;

    

    c) to
external experts of a technical, legal or financial nature, as privileged
information;

    

    d) to a
possible assignee or financial entity that may so require to grant guarantees or
financing, only if it agrees in writing to deal with such information under the
most strict confidentiality rules and not to disclose or allow the disclosure of
such information to third parties.

    

    
      	
               
      

            	
              16.02.
      The press releases related to JOINT OPERATIONS shall be unanimously agreed
      upon by the OPERATING COMMITTEE prior to their publication, being
      understood that none of the PARTIES shall be forbidden from releasing news
      or issuing reports to the press or carrying out presentations that may be
      required in order to comply with any law, governmental resolution or stock
      market norms to which the PARTIES are subject
  to.

            

    

    

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

    ARTICLE
17

    EXCLUSION AND ACCEPTANCE OF
PARTIES

    

    17.01.
EXCLUSION

    

    Any of
the PARTIES may be excluded as a consequence of the sanctions for default
payment provided for in Article 10 of the CONTRACT.

    

    17.02.
ACCEPTANCE

    

    The
acceptance of new PARTIES to U.T.E. may be effected by total or partial
assignment of the PARTICIPATING INTERESTS of the PARTIES in favor of third
parties or BRANCH OFFICES pursuant to Article 14 of the CONTRACT.

    

    

    

    ARTICLE
18

    RELATIONSHIP AMONG
PARTIES

    

    
      	
               
      

            	
              18.01
      The rights and duties of the PARTIES shall be simply joint and not joint
      and several, each one of them being responsible only up to the limit of
      their PARTICIPATING INTEREST.

            

    

    

    

    

    ARTICLE
19

    TAX
REGULATIONS

    

    
      	
               
      

            	
              19.01
      The PARTIES shall be subject to the tax legislation generally applicable
      in the Argentine Republic.  The TAXES applicable to the PARTIES
      as individual subjects shall be borne by each one according to the
      applicable legal regulations.

            

    

    

    
      	
               
      

            	
              19.02.
      Each one of the PARTIES, separately, shall be responsible for determining
      and paying the TAXES that may correspond and, by reason of this, binds
      itself to keep the remaining PARTIES free from any damage, harm or
      liability suffered as a consequence of any claim the national, provincial
      or municipal treasury may file against the debtor or liable
      party.

            

    

    

    
      	
               
      

            	
              19.03.
      The OPERATOR or the PARTY named by the law shall have the obligation to
      determine and pay the TAXES that correspond on any JOINT PROPERTY or JOINT
      OPERATIONS or those in which the legal taxpayer is U.T.E..  The
      total amount of TAXES paid in accordance with this Article by the OPERATOR
      or the PARTY, as the case may be, shall be charged to the JOINT
      ACCOUNT.

            

    

    

    
      	
               
      

            	
              19.04.
      The tax on bank debits and credits shall be borne by the owner of each
      bank account or by the party responsible for the movement of funds in its
      own name or the party ordering the delivery of the funds in case they were
      delivered by a third party.

            

    

    

    
      	
               
      

            	
              19.05.
      Upon prior notification to the JOINT OPERATING COMMITTEE no later than ten
      (10) days before the claim is filed, and if within five (5) days as from
      such notification no instructions are received, the OPERATOR may, by its
      own decision, file objections, claims, legal actions, complaints, motions
      or any other claim of an administrative or judicial nature with respect to
      the TAXES referred to in paragraph 19.03., with the purpose of maintaining
      the right to a just and fair taxation and not to be encumbered with
      unlawful and inadmissible tax duties or obligations, either procedural or
      substantive.

            

    

    

    

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    ARTICLE
20

    ROYALTIES

    

    
      	
               
      

            	
              20.01.
      Each PARTY shall be responsible for determining and paying to the Province
      of Neuquén, and in proportion to the volume of HYDROCARBONS extracted from
      its territory, the royalties on the value of the NET PRODUCTION that
      correspond to its PARTICIPATING INTEREST and in accordance with the
      provisions of the laws in force; the OPERATOR shall provide each PARTY
      with the necessary information reasonable time in
  advance.

            

    

    

    
      	
               
      

            	
              20.02.
      Each PARTY binds itself to compensate for and keep free from harm and
      liability all other PARTIES against all and any loss, duty, complaint or
      harm suffered or incurred by reason of the non-fulfillment of the
      obligations imposed on it related to
royalties.

            

    

    

    
      	
               
      

            	
              20.03.
      Should the payment of royalties be effected in kind, the OPERATOR shall,
      before delivering the NET PRODUCTION to each PARTY, withhold the
      percentage of the NET PRODUCTION each one of them is bound to allocate for
      the payment of its royalties, each PARTY having to bear in proportion to
      their PARTICIPATING INTEREST the expenses implied by this method of
      payment.

            

    

    

    
      	
               
      

            	
              20.04.
      Should the payment of royalties be effected in cash, its settlement and
      payment shall be effected in accordance with the legal provisions in
      force.

            

    

    

    

    

    ARTICLE
21

    ACT OF GOD OR FORCE
MAJEURE

    

    
      	
               
      

            	
              21.01.
      In the event an ACT OF GOD or FORCE MAJEURE takes place, the compliance
      with the relevant obligation shall be suspended for all the time period
      during which the preventing fact subsists.  The compliance with
      the obligation suspended due to an ACT OF GOD or FORCE MAJEURE shall
      become effective in a reasonable time, immediately after the preventing
      fact has disappeared.

            

    

    

    Under no
circumstances may an ACT OF GOD or FORCE MAJEURE be relied upon to suspend the
fulfillment of an obligation to give sums of money whether they are the legal
currency of the Argentine Republic or not.

    

    
      	
               
      

            	
              21.02.
      In case one PARTY is affected by an ACT OF GOD or FORCE MAJEURE, it shall
      promptly notify the other PARTIES, specifying the relevant ACT OF GOD or
      FORCE MAJEURE; it shall also notify when the compliance with the
      obligation becomes effective again because said ACT OF GOD or FORCE
      MAJEURE has ceased.

            

    

    

    

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    ARTICLE
22

    APPLICABLE LAW, JURISDICTION
AND ARBITRATION

    

    22.01.
APPLICABLE LAW

    

    The
CONTRACT shall be subject to and interpreted pursuant to the laws of the
Argentine Republic in force at the EFFECTIVE DATE of the CONTRACT.

    

    22.02.
INTERPRETATION

    

    For
interpretation purposes of the CONTRACT the following order of priority is
established:

    

    
      	
              a)  

            	
              the
      CONTRACT, its Annexes and the modifications the PARTIES may agree
      upon;

            

    

    

    
      	
              b)  

            	
              the
      documents the PARTIES may exchange during the execution and performance of
      the CONTRACT.

            

    

    

    22.03.
ARBITRATION

    

    
      	
               
      

            	
              22.03.01
      The parties shall solve in good faith all question or dispute that may
      arise from or in relation to the CONTRACT and shall try to reach a
      satisfying agreement on those questions and
  disputes.

            

    

    

    
      	
               
      

            	
              22.03.02
      In case the PARTIES’ representatives do not reach a satisfying agreement
      on the respective question or dispute in relation to the CONTRACT, they
      shall submit to the highest authorities of each one of the PARTIES all the
      records and evidence relevant to the disputed question so it can be
      resolved at such level.

            

    

    

    
      	
               
      

            	
              22.03.03
      If once the steps provided for in 22.03.01 and 22.03.02 have been complied
      with, the argument still subsists, any of the PARTIES shall be entitled to
      request that the arguments arising while this CONTRACT is in force be
      submitted to arbitration, in accordance with the Conciliation and
      Arbitration Regulations of the International Chamber of Commerce, before a
      board of one or more arbitrators appointed by virtue of said
      Regulations.  The arbitration award shall not be subject to
      appeal.  To that effect, it is agreed that the seat of the
      arbitration shall be the City of Buenos Aires, and the arbitration
      procedure shall develop in Spanish.

            

    

    

    
      	
               
      

            	
              22.03.04
      All technical dispute related to the JOINT OPERATIONS that may arise among
      the PARTIES, before applying the procedure provided for in 22.03.03, shall
      be raised and dealt with in good faith by the PARTIES in the OPERATING
      COMMITTEE.  If it is necessary, the PARTIES may agree to hire an
      expert in the disputed matter in order to issue an opinion on the
      subject.  The term “technical dispute” shall mean all question
      whose solution substantially depends on establishing facts or
      circumstances related to a specific art or
  profession.

            

    

    

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    

    ARTICLE
23

    LEGAL DOMICILES AND
NOTICES

    

    23.01.
The PARTIES establish legal domicile as follows:

    

    
      	
               
      

            	
              Petrolera
      Entre Lomas S.A.:

            

    

    
      	
               
      

            	
              H.
      Bouchard 680, floor 18

            

    

    
      	
               
      

            	
              Buenos
      Aires

            

    

    
      	
               
      

            	
              Argentine
      Republic

            

    

    
      	
               
      

            	
              Attention:
      Ruben Kondratzky

            

    

    
      	
               
      

            	
              Fax
      number: 4313-4260 extension number 197 or
196

            

    

    

    
      	
               
      

            	
              Apco
      Argentina Inc., Argentine Branch:

            

    

    
      	
               
      

            	
              del
      Libertador Ave. 498, floor 26

            

    

    
      	
               
      

            	
              Buenos
      Aires

            

    

    
      	
               
      

            	
              Argentine
      Republic

            

    

    
      	
               
      

            	
              Attention:
      Ernesto A. Hermo

            

    

    
      	
               
      

            	
              Fax
      number: 5277-1810

            

    

    

    
      	
               
      

            	
              Petrobras
      Energía S.A.:

            

    

    
      	
               
      

            	
              Maipú
      1, floor 22

            

    

    
      	
               
      

            	
              Buenos
      Aires

            

    

    
      	
               
      

            	
              Argentine
      Republic

            

    

    
      	
               
      

            	
              Attention:
      Guillermo Miguez

            

    

    
      	
               
      

            	
              Fax
      number: 4344-6397

            

    

    

    
      	
               
      

            	
              23.02.
      All notices shall be effected by any reliable means and sent to the legal
      domiciles set forth in item 23.01
hereinbefore.

            

    

    

    
      	
               
      

            	
              23.03.
      Should any PARTY change its legal domicile for notification purposes, it
      shall communicate so in writing to the others ten (10) days in
      advance.

            

    

    

    

    

    ARTICLE
24

    TERMINATION OF THE
CONTRACT

    

    24.01.
The CONTRACT shall be terminated as follows:

    

    a)
Expiration of the term provided for in Article 3.

    

    b)
Subsequent frustration of the CONTRACT, expressly stated by the OPERATING
COMMITTEE upon the unanimous vote of the PARTIES.

    

    c)
Unanimous consent of the PARTIES.

    

    d)
Exclusion of PARTIES which reduces the number of PARTIES to one.

    

    The
CONTRACT shall not be dissolved or terminated in case of adjudication in
bankruptcy of any of the PARTIES.  In this case, the rest of the
PARTIES shall agree on the means to comply with the obligations corresponding to
the PARTY adjudged in bankruptcy.

    

    
      	
               
      

            	
              24.02.
      Upon the termination of the CONTRACT, it shall be settled pursuant to the
      applicable legal provisions.  The OPERATOR shall be in charge of
      said settlement, and it shall have the power to carry out all acts
      inherent to the settlement on behalf of the PARTIES, under the directions
      and supervision of the OPERATING
COMMITTEE.

            

    

    

    

    

    ARTICLE
25

    MISCELLANEOUS

    

    
      	
               
      

            	
              25.01.
      Except when expressly stated to the contrary, the time periods stated in
      this CONTRACT shall be counted as running
days.

            

    

    
      
        
           

          [Initials]

        

         

      

      
        20

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              ANNEX
      “A”

            

    

    
      	
               
      

            	
              ACCOUNTING
      PROCEDURE

            

    

    AREA “BAJADA DEL
PALO”

    

    ARTICLE
1

    GENERAL
PROVISIONS

    

    1.01
Purpose

    

    
      	
               
      

            	
              The
      purpose of the ACCOUNTING PROCEDURE is to keep equitable methods to
      determine charges and credits applicable to the JOINT ACCOUNT which truly
      reflect the actual costs and the Financial Situation of the JOINT
      OPERATIONS.  This ACCOUNTING PROCEDURE shall be applicable both
      to the JOINT OPERATIONS and to the Sole Risk Operations carried out by the
      OPERATOR.  However, the PARTIES agree that if at any moment or
      from time to time any of said methods turns out to be unfair or not
      equitable for the OPERATOR or the other PARTIES, the PARTIES shall meet
      and, in good faith, make an effort to agree on changes in the methods
      deemed necessary in order to rectify all unfairness or
      inequality.  Once the changes have been agreed upon unanimously
      by the PARTIES, they shall be registered complying with the applicable
      formalities and in writing and they shall become an integral part of this
      ACCOUNTING PROCEDURE.  Furthermore, if any of the specific
      mechanisms of this ACCOUNTING PROCEDURE, including without limitation
      procedures for the transfer of funds, turns out to be burdensome or
      oppressive for any of the PARTIES, the PARTIES shall meet and consult in
      good faith with the objective of considering and trying to relieve said
      PARTY from such burden without binding, however, the PARTIES not affected
      to accept mechanisms that may have a negative effect on
      themselves.  The ACCOUNTING PROCEDURE shall be wholly in
      accordance with the technical and legal rules applicable to the
      activity.

            

    

    

    10.02.
Conflict with the CONTRACT

    

    In the
event of conflict between the specifications of this ACCOUNTING PROCEDURE and
the provisions of the CONTRACT to which this ACCOUNTING PROCEDURE is attached,
the provisions of the CONTRACT shall prevail.

    

    10.03.
Definitions

    

    The
definitions in Article 1 of the CONTRACT to which this ACCOUNTING PROCEDURE is
attached shall apply to this ACCOUNTING PROCEDURE and shall have the same
meanings when used herein.  Whenever the term FISCAL YEAR is mentioned
in this annex, it shall have the same meaning and scope as the definition of
BUDGET YEAR in item 1.03. of the CONTRACT.

    

    1.04.
Registration as JOINT ACCOUNT

    

    
      	
               
      

            	
              1.04.01
      Pursuant to the provisions of Article 378, subsection 12, of Act number
      19550, as amended by Act number 22903, the OPERATOR shall keep according
      to the formalities set forth by the Commerce Code the books with revenue
      stamps attached on behalf of U.T.E. that the nature and importance of the
      common activity may require.

            

    

    

    1.04.02
The OPERATOR shall at all moment keep truthful and correct

    records
of the production and disposition of all HYDROCARBONS, investments, costs and
expenses, and credits under the CONTRACT, of all JOINT PROPERTY as well as any
further data necessary or appropriate for settling accounts among the PARTIES to
the CONTRACT with relation to their rights and obligations under the CONTRACT,
and to enable the PARTIES to comply with the laws of the Argentine
Republic.  Said records shall be open to inspection and copy by
authorized representatives of the other PARTIES prior consent of the applying
PARTY and the OPERATOR.  All accounting records shall be expressed
according to the accrual method, in Spanish, in the Argentine legal currency and
in United States dollars.  Each PARTY to the CONTRACT is responsible
for keeping its own accountability and tax returns of those encumbrances in
relation to which the PARTIES are individual taxpayers with the aim of complying
with any governmental requirement as regards the operations under the CONTRACT
and pursuant to the provisions therein established.  The OPERATOR
shall provide the accounting information necessary for the PARTIES to comply
with said duties.

    

    
      
         

      

      
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    1.05.
Monthly reports

    

    
      	
               
      

            	
              1.05.01.
      The OPERATOR shall submit to each PARTY before the eighth (8) working day
      of each calendar month reports on the investments, costs and expenses and
      credits entered in the JOINT ACCOUNT during the previous month, stating
      their nature through an appropriate classification.  The
      OPERATOR shall prepare these monthly reports on the basis of its own
      accounting planning.  The OPERATOR shall prepare and deliver to
      the PARTIES:

            

    

    

    i. A
Historical statement of Estate Situation expressed in Argentine
pesos    and in dollars, and the Historical Income Statement
expressed in Argentine pesos and in dollars with the aim of allowing the
follow-up of the financial economic situation of U.T.E. under the management of
the OPERATOR, all of this in accordance with the close of the FISCAL YEAR of the
OPERATOR.

    

    ii. A
Statement of Financial Income and Expenses of the JOINT ACCOUNT expressed in
Argentine pesos and in dollars.  Said Statement shall keep record of
the income derived from the PARTIES’ contribution and other income if any, and a
record of the expenses classified according to their nature.  The
information contained in this Statement shall arise from the records of the
JOINT ACCOUNT.

    

    
      	
               
      

            	
              1.05.02.
      The other PARTIES shall not receive on a regular basis copies of invoices
      or other supporting documents related to expenses incurred by the
      OPERATOR.  As an exception, upon request and at the expense of
      any of the PARTIES, the OPERATOR shall provide the requesting PARTY with
      copies of invoices and any other supporting document available used for
      registration in the JOINT ACCOUNT.

            

    

    

    1.06.
Payments and payments in advance effected by the PARTIES

    

    Upon the
approval of any ANNUAL PROGRAMME and BUDGET, if so requested by the OPERATOR,
each PARTY shall pay in advance its share of the required funds estimated for
the JOINT OPERATIONS of the following month, under the procedure of Article 9.03
of the CONTRACT.  The payments in advance shall take place on or
before the maturity date provided for in each request of funds.  In
case these payments are not satisfied by the maturity date, then the procedures
for payment default referred to in Article 10 of the CONTRACT shall
apply.  The payments shall be effected in the currency requested by
the OPERATOR in accordance with Article 9.07 of the CONTRACT or in any other
currency previously agreed upon by the OPERATOR and the other
PARTIES.

    

    1.07.
Foreign currency conversion

    

    
      	
               
      

            	
              1.07.01.
      All record in the JOINT ACCOUNT of any conversion between the DOLLAR or
      any other foreign currency and the Argentine legal currency shall be
      according to the sell exchange rate of the currency being converted into,
      in accordance with the market price of the Banco de la Nación Argentina
      for transfers at the close of the day of the transaction.  This
      exchange rate shall be applicable in a free exchange
      market.  Contrarily, the exchange rate best reflecting reality
      shall be determined.

            

    

    

    
      	
               
      

            	
              1.07.02.
      In converting currencies that affect JOINT OPERATIONS it is intended that
      none of the PARTIES have profits or losses at the expense or in favor of
      the other PARTIES.  Any profit or loss suffered by the OPERATOR
      shall be credited or charged to the JOINT
  ACCOUNT.

            

    

    

    1.08.
Adjustments

    

    Any
advance payment whatsoever shall not prevent any PARTY from exercising the right
to object to or question its accuracy.  All the reports and account
statements delivered to the PARTIES by the OPERATOR during any FISCAL YEAR shall
be deemed conclusively truthful and correct after a time period of twelve (12)
months has elapsed as from the closing of the FISCAL YEAR during which said
reports and account statements were delivered, except when within said term of
twelve (12) months a PARTY submits an objection in writing requesting the
OPERATOR to make the corresponding adjustment.  In the event no PARTY
submits a claim to the OPERATOR requesting an adjustment within said time
period, the accuracy of said reports and account statements shall be deemed
established and any further submission of objections thereto or adjustment
claims thereon shall not be allowed.  No adjustment in favor of the
OPERATOR shall be made unless it is submitted within the same period
prescribed.  The provisions of this paragraph shall not disallow the
adjustments derived from a physical inventory of the MATERIALS pursuant to
Article 8 of this ACCOUNTING PROCEDURE.

    

    

    

    
      
         

      

      
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    ARTICLE
2

    DIRECT
CHARGES

    

    The
OPERATOR shall charge to the JOINT ACCOUNT all costs and expenses directly
related to JOINT OPERATIONS.  Without limiting the general scope of
the aforementioned, chargeable costs and expenses shall include:

    

    2.01.
Licenses, permits and easements

    

    All
direct cost, if any, by reason of the acquisition, renewal or abandonment of all
surface rights, licenses or permits acquired and maintained in effect for JOINT
OPERATIONS.

    

    2.02.
Employment costs and the like

    

    2.02.01
Wages, salaries, remunerations and fees of:

    

    a) The
employees of the OPERATOR and its SUBSIDIARIES and the independent contractors
hired by the OPERATOR that work exclusive and permanently in connection with
JOINT OPERATIONS.  These costs shall be evidenced by the records of
wages and salaries and invoices for fees, as the case may be.

    

    b) The
employees of the OPERATOR and its SUBSIDIARIES that work on a temporary basis in
projects directly related to JOINT OPERATIONS.

    

    c) The
independent contractors hired by the OPERATOR to work on a temporary basis in
projects that directly benefit JOINT OPERATIONS.

    

    The costs
set forth in (b) and (c) shall be calculated on an hourly based amount according
to the monthly remuneration and the number of hours actually worked during the
month, in the case of employees of the OPERATOR or its SUBSIDIARIES, or
according to the invoiced amount for fees, in the case of independent
contractors, in effect at the moment of the execution of the
works.  They shall be charged to the JOINT ACCOUNT according to the
actual time spent and shall be evidenced by daily time charts. Moreover, they
shall have been specifically included in the approved ANNUAL PROGRAMME and
BUDGET.

    

    
      	
               
      

            	
              2.02.02.
      The cost for the OPERATOR of public holidays, vacations, sickness leaves,
      disability benefits, maintenance and dwelling allowances, traveling time
      expenses, bonuses and other customary allowances applicable to wages and
      salaries chargeable in accordance with this ACCOUNTING PROCEDURE, as well
      as the costs for the OPERATOR of the benefits for employees, including but
      not limited to, collective life insurance contributions, medical aid
      contributions, pension contributions, bonuses and other similar benefits
      applicable to the employment costs of the OPERATOR in accordance with the
      OPERATOR’S customary practices.  Said costs shall be charged on
      an actual basis to the amount of wages and salaries chargeable under this
      Article 2.02.

            

    

    

    In case a
percentage basis on the amount of salaries chargeable to the JOINT ACCOUNT is
used, the percentage shall be based on the legal provisions in effect and on the
ordinary practices of the OPERATOR.

    

    2.02.03.
The costs arising from employer’s contributions made in accordance

    with the
encumbrances laid by a government authority applicable to the employment costs
of the OPERATOR by reason of wages and salaries pursuant to this Article
2.02.

    

    2.02.04.
Reasonable traveling and representation expenses of those employees

    and
contractors whose wages and salaries are chargeable to the JOINT ACCOUNT under
this Article 2.02.

    

    2.02.05.
Training expenses of the staff working for the benefit of JOINT

    OPERATIONS.

    

    2.02.06.
The cost of the OPERATOR due to the transfer of employees to and

    from the
vicinity of the AREA or the place where the employees shall reside or
work.  Said transfer costs shall include the transportation of
employees, their families, personal and home chattels belonging to the employee
and their family, traveling costs, and all other similar expenses in accordance
with the OPERATOR’S customary practices.  The costs of relocation of
the OPERATOR’S employees moved to another work place under the OPERATOR’S
control shall not be chargeable to the JOINT ACCOUNT.

    

    
      
         

      

      
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    2.03.
MATERIALS

    

    The cost
of the MATERIALS purchased or supplied by the OPERATOR for the JOINT
ACCOUNT.  Said costs shall include export commission agents’ fees,
transportation charges, fees for loading and unloading, export and import duties
and fees for licenses related to obtaining MATERIALS and equipment, dispatch,
packing and port dues and expenses, and losses in transit, if any, not covered
by insurance.  Only the MATERIALS required for an efficient and
economic operation shall be chargeable to the JOINT ACCOUNT taking into account
the distance from the source of supply and the time required for the receipt of
the MATERIALS in far away locations.

    

    2.04.
Transportation

    

    The
transportation of staff and MATERIALS necessary for the JOINT
OPERATIONS.  If the MATERIALS are transported to the AREA from a
warehouse or other premises of the OPERATOR, no cost shall be charged to the
JOINT ACCOUNT for a distance greater than the existing one between the closest
place of delivery of MATERIALS by the habitual supplier or trustworthy supplying
store and the AREA warehouse, unless so agreed upon by the
PARTIES.  In case non-used MATERIALS are transported to the warehouse
or other storage premises of the OPERATOR, no cost shall be charged to the JOINT
ACCOUNT for a distance greater than the existing one up to the place of delivery
of the habitual supplier or trustworthy supplying store, unless so agreed upon
by the PARTIES.  No cost shall be charged to the JOINT ACCOUNT for the
transportation of MATERIALS to other premises belonging to the OPERATOR, unless
so agreed upon by the PARTIES.

    

    2.05.
Services

    

    The
actual cost of services, special studies and equipment hired from outside
sources and/or hired from the PARTIES and/or their SUBSIDIARIES and which are
not covered by Articles 2.06 and 2.11, including without limitation, the
services of professional or technical assistants directly related to the JOINT
OPERATIONS and the services of independent contractors mainly responsible for
the execution, under the general direction and supervision of the OPERATOR, of
geological and geophysical exploration operations and exploitation operations
such as well drilling, completion and workover, assembly and maintenance of
facilities and development and general maintenance of the
exploitation.

    

    2.06.
Equipment and facilities belonging exclusively to the OPERATOR

    

    The
charges for equipment, facilities and services belonging exclusively to the
OPERATOR, on the basis of their actual use in the JOINT OPERATIONS in accordance
with the prices corresponding to the ownership and operation cost, but not
exceeding the prevailing prices at said moment for similar services and
equipment in the area in which the JOINT OPERATIONS are carried
out.  Upon request, the OPERATOR shall provide the PARTIES with a
price list and its application basis.  Said prices shall be modified
from time to time if they happen to be excessive or insufficient.  The
drilling tools and other equipment lost in a well or broken down for good may be
charged at an agreed value taking into account the depreciation rate and the
transportation cost to deliver a similar equipment at that place.

    

    2.07.
Insurance

    

    The
insurance premiums paid by virtue of the insurance provided for in Article 15 of
the CONTRACT and taken out for the benefit of the JOINT OPERATIONS, together
with all expenses and compensation amounts originated and paid and all losses,
claims and other expenses that have not been covered by insurance
companies.  All actual expenses incurred and paid by the OPERATOR due
to accidents for which insurance was not provided for by the program mentioned
in Article 15 of the CONTACT and approved by the OPERATING COMMITTEE shall also
be charged to the JOINT ACCOUNT.

    

    
      
         

      

      
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    2.08.
Environmental protection

    

    The costs
incurred to satisfy environmental and ecological requirements in accordance with
laws and regulations applicable to the JOINT OPERATIONS, including studies and
collection of data about the environment and proceedings and facilities
established for pollution control.

    

    2.09.
Damages and losses suffered by the JOINT PROPERTY

    

    Notwithstanding
the liabilities set forth in Article 7.02 of the CONTRACT, all costs and
expenses necessary to replace the JOINT PROPERTY or repair damages or losses
suffered by it and not covered in total or in part by the insurance taken out at
the expense of the JOINT ACCOUNT, the OPERATOR shall provide the PARTIES with a
written notice about the damages and losses suffered exceeding the sum of fifty
thousand DOLLARS (U$S 50,000) as soon as possible after the report thereof was
received by the OPERATOR.  All losses exceeding the sum of five
thousand DOLLARS (U$S 5,000) shall be listed separately in a monthly report of
costs and expenses.

    

    2.10.
Offices, camping sites and other facilities

    

    The net
maintenance cost of any OPERATOR’S offices, sub offices, camping sites,
warehouses, dwellings and other facilities rendering direct services to the
JOINT OPERATIONS.  In case those facilities render services to other
operations besides the JOINT OPERATIONS, and the charges cannot be assessed as
direct charges of the served operations, the OPERATOR shall propose and the
OPERATING COMMITTEE shall approve the distribution of the costs among all those
operations on a pro rata basis according to the respective actual cost and
effort.

    

    2.11.
Litigation and legal costs

    

    All costs
and expenses due to litigation or legal services by any means necessary or
appropriate for the protection of the JOINT OPERATIONS, including attorneys’
expenses and fees, together with all the court judgments that may correspond
against the PARTIES or any of them as a consequence of the JOINT OPERATIONS, and
the actual costs incurred by one PARTY or PARTIES to the CONTRACT to collect
evidence with the aim of defending themselves against any legal action or
complaint filed against the JOINT ACCOUNT or the covenants of the
CONTRACT.  If so agreed by the PARTIES, the legal actions or
complaints affecting the JOINT OPERATIONS under the CONTRACT may be dealt with
by the legal department of one or any of the PARTIES to the CONTRACT and the
corresponding cost of providing said services may be charged to the JOINT
ACCOUNT, but no charge shall be made until previously approved by all the
PARTIES.

    

    2.12.
Taxes and duties

    

    The value
of all taxes in general paid or originated in favor of the JOINT OPERATIONS,
excluding those corresponding to each one of the PARTIES as individual
taxpayers.

    

    2.13.
Emergency disbursements

    

    All
disbursements provided for in Article 7.06 of the CONTRACT, including interest
for the period between the day of the disbursement and the day on which the
request for funds shall be satisfied in accordance with the term provided for in
Article 9.07 of the CONTRACT or the day on which it is effectively satisfied,
whichever arrives first in favor of the OPERATOR, which periods shall be
calculated on the basis of the value of the disbursements expressed in DOLLARS
or their equivalent in DOLLARS at the exchange rate applying at the moment of
the disbursements and one and a half time (1.5) the “prime rate” set forth in
Article 10.03 of the CONTRACT.  The immediate term set forth in
Article 7.06 of the CONTRACT for the request of funds shall be the day following
the day when the disbursement took place.

    

    2.14.
Other disbursements

    

    Any other
costs and expenses incurred by the OPERATOR that are necessary for the
appropriate execution of the JOINT OPERATIONS in accordance with
the  approved ANNUAL PROGRAMME and BUDGET and which are not provided
for in this Article 2 or in Article 3.

    

    

    

    
      
         

      

      
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    ARTICLE
3

    INDIRECT
CHARGES

    

    3.01.
Monthly percentage charge

    

    The JOINT
ACCOUNT shall be monthly charged with the services and actual costs of staff,
and office costs thereto related, who has a position in relation with direction,
managerial, administrative, legal, accounting, purchase, treasury, taxation,
industrial relations, computing services, financial and administrative, and
office service tasks and any other general position in favor of the JOINT
OPERATIONS, provided that they are not included in Article 2 “Direct
Charges”.  This charge shall cover the services and costs of all the
staff and headquarters of the OPERATOR and OPERATOR’S SUBSIDIARIES not subject
to any other provision in the other articles of this ACCOUNTING
PROCEDURE.

    

    

    

    ARTICLE
4

    CREDITS TO THE JOINT
ACCOUNT

    

    The
OPERATOR shall credit the following to the JOINT ACCOUNT:

    

    
      	
              a)  

            	
              Regular
      and additional contributions of funds paid by the PARTIES to satisfy the
      needs of the JOINT OPERATIONS.

            

    

    

    
      	
              b)  

            	
              Collection
      of insurance, credits upon adjustments received from the insurance company
      and others, including the repayment of premiums, compensation or any other
      disposition of assets of the insurance company in favor of the JOINT
      ACCOUNT, with reference to premiums charged to the JOINT
      ACCOUNT.

            

    

    

    
      	
              c)  

            	
              Compensation
      received due to a litigation outcome favorable to
  U.T.E.

            

    

    

    
      	
              d)  

            	
              Any
      other credit arising from transactions, contracts or sales previously
      authorized by the OPERATING COMMITTEE and/or the CONTRACT and in this
      ACCOUNTING PROCEDURE.

            

    

    

    

    
      
         

      

      
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    ARTICLE
5

    ACQUISITION OF MATERIALS AND
EQUIPMENT

    

    5.01.
Purchases

    

    The
MATERIAL required for the joint operations shall be purchased and charged
directly to the JOINT ACCOUNT.  The MATERIALS and equipment purchased
shall be charged at the net prices paid by the OPERATOR; however, said prices
shall not exceed those prevailing in the habitual transactions in the open
market.  The price of the MATERIALS and equipment purchased shall
include such items as export commission agents’ fee, transportation charges,
fees for loading and unloading, import duties and fees for licenses related to
obtaining MATERIALS and equipment, and the taxes in force.  The prices
paid for purchases from SUBSIDIARIES of any of the PARTIES shall be subject to
the approval of the OPERATING COMMITTEE and shall be competitive in relation to
those prevailing in the habitual transactions in the open market.

    

    5.02.
Transfers

    

    The
OPERATOR or one PARTY may supply the JOINT ACCOUNT withMATERIALS of their own
stock under the following conditions:

    

    5.02.01
New MATERIALS (Condition “A”): The new MATERIAL transferred from the warehouse
or other premises of the OPERATOR or a PARTY shall be appraised at the
replacement cost provided that said cost shall not exceed the international
prices for MATERIAL of similar quality supplied under conditions similar to
those prevailing at the moment said MATERIAL was supplied plus the necessary
expenses for its delivery at the operation site.

    

    5.02.02
Second-hand MATERIAL (Conditions “b” and “c”):

    

    
      	
               
      

            	
              a)
      MATERIAL and equipment in good working condition and adequate to be used
      without prior repair or reconditioning shall be classified as condition
      “B” and, with the exception of the provisions hereinafter, appraised at
      seventy-five per cent (75%) of the market price of a similar new MATERIAL
      located at the operation site.

            

    

    

    
      	
               
      

            	
                 b)
      MATERIAL and equipment not fulfilling the requirements of Article 5.02.02.
      (a) but which may be adapted for their use after repair or reconditioning
      shall be classified as Condition “C” and appraised at fifty per cent (50%)
      of the market price of a similar new MATERIAL located at the operation
      site.

            

    

    

    
      	
               
      

            	
              c)
      The MATERIAL that cannot be classified either as Condition “B” or
      Condition “C” shall be appraised at a value corresponding to its
      use.

            

    

    

    
      	
               
      

            	
              d)
      Tanks, towers, buildings and other MATERIAL items that involve assembly
      costs, if transferred not assembled, shall be classified according to
      their condition under this Article 5.02.02. and appraised on the basis of
      a new similar not assembled
MATERIAL.

            

    

    

    
      	
               
      

            	
              e)
      MATERIALS and equipment including drill pipe, casing and tubing, which are
      no longer likely to be used for their original purpose but which are still
      likely to be used for any other purpose shall be classified according to
      their condition under the provisions of this Article 5.02.02 and appraised
      on the basis of the market price for new items normally used for said
      other purpose if they are sold to third parties, and if retained in the
      JOINT ACCOUNT, appraised at a price not higher than their depreciated
      value.

            

    

    
      	
               
      

            	
                 The
      new price, provided that it is used under this Article 5.02.02, shall have
      the same meaning and shall be determined pursuant to Article
      5.02.01.

            

    

    

    5.03.
Increased prices

    

    Whenever
the MATERIAL is not easily obtained at posted or list prices due to national
emergencies, strikes or other unusual causes over which the OPERATOR has no
control, the OPERATOR may charge the required MATERIAL to the JOINT ACCOUNT
according to the actual cost the OPERATOR must incur to supply said MATERIAL,
adapt it for its use, and transfer it to the AREA, provided that it has
previously notified the PARTIES in writing about the purchase of said MATERIAL
for the JOINT ACCOUNT.  Each PARTY shall have the right to decide and
notify the OPERATOR within ten (10) days after receipt of the OPERATOR’S
notification to supply in kind, in total or in part, its share of said MATERIAL
provided that it is appropriate to be used and acceptable for the
OPERATOR.

    

    5.04.
Guarantee of the MATERIAL supplied by the OPERATOR

    

    The
OPERATOR shall not guarantee the MATERIAL supplied beyond the guarantee provided
by the distributor or manufacturer.  In case of defective MATERIALS,
no credit shall be charged until the adjustment has been received by the
OPERATOR from the manufacturers or their agents.

    

    5.05.
Return of MATERIAL to the warehouses of the JOINT OPERATIONS

    

    The
MATERIAL returned by the operating sectors to the warehouses of the JOINT
OPERATIONS shall be discharged from the account they were originally charged to
and shall be appraised under the provisions of Article 5.02.

    

    

    
      
         

      

      
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    ARTICLE
6

    DISPOSAL OF MATERIALS AND
EQUIPMENT OF THE JOINT PROPERTY

    

    The
OPERATOR shall not be bound to purchase the interest of the PARTIES in exceeding
MATERIALS, either new or second-hand.  Unless the removal of the
exceeding equipment and MATERIAL is otherwise restricted in the CONTRACT, the
OPERATOR shall enter in the account the disposal of the exceeding equipment and
MATERIAL under the provisions of this Article 6.

    

    6.01.
MATERIAL purchased by the OPERATOR or the PARTIES

    

    a) In
case the OPERATOR sells exceeding MATERIALS to one of the PARTIES, it shall get
the prior approval of the other PARTIES.

    

    b) The
value of the MATERIALS and equipment transferred to any of the PARTIES shall be
credited to the JOINT ACCOUNT at its net value.

    

    c) The
MATERIALS and equipment transferred to any of the PARTIES shall be paid by the
acquiring PARTY within five (5) working days of receipt of the relevant
invoice.  The OPERATOR shall immediately enter a credit for the
payment thereof in the monthly report.

    

    6.02.
Division in kind

    

    When the
MATERIALS and equipment are divided in kind between the OPERATOR and the
PARTIES, the value of the MATERIALS and equipment so divided shall be charged
individually to each PARTY in proportion to their PARTICIPATING INTEREST and the
corresponding credits shall be entered in the monthly report.

    

    6.03.
Sales to third parties

    

    The sales
to third parties of MATERIALS or equipment with an original value of a hundred
thousand DOLLARS (U$S 100,000) or more shall take place with the consent of the
PARTIES with reference to both the conditions and the price, and once the sales
are carried out, the proceeds shall be credited by the OPERATOR the amount being
the total sum received from the buyer.  Any claim from the buyer in
relation to defective MATERIAL or any other cause shall be entered again
provided that it is paid by the OPERATOR.

    

    6.04.
Disposal of scrap metal

    

    The
OPERATOR, on its own name and on behalf of the PARTIES, shall be entitled to
remove from the AREA and dispose of the scrap metal and surplus
MATERIAL.  The net income arising from the sale or transfer of all
those MATERIALS shall be credited in the monthly report.

    

    

    

    
      
         

      

      
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    ARTICLE
7

    PRICE BASE OF MATERIALS
TRANSFERRED FROM THE JOINT ACCOUNT

    

    The
MATERIALS and equipment transferred to the OPERATOR or to the PARTIES or divided
in kind between them, unless otherwise agreed, shall be appraised on the price
and condition base set forth in this Article 7.

    

    7.01. New
MATERIAL

    

    The new
MATERIAL and equipment (Condition “A”) acquired for the JOINT ACCOUNT but not
used shall be appraised at hundred per cent (100%) of the market price for new
MATERIALS and equipment.

    

    7.02.
Second-hand MATERIAL

    

    a) The
MATERIALS and equipment in good working condition and adequate to

    be used
without prior repair or reconditioning shall be classified as condition “b” and,
with the exception of the provisions hereinafter, appraised at seventy-five per
cent (75%) of the market price of similar new MATERIALS.

    

    
      	
               
      

            	
              b)
      The MATERIALS and equipment not fulfilling the requirements of Article
      7.02. a) but which, if repaired or reconditioned, satisfy the requirements
      for the MATERIAL under Condition “B” shall be classified as Condition “C”
      and, with the exception of the provisions hereinafter, appraised at fifty
      per cent (50%) of the market price of similar new
      MATERIALS.  When the OPERATOR wishes a transfer of MATERIAL
      under Condition “c”, the repair and reconditioning costs shall be charged
      to the JOINT ACCOUNT.  The value of the MATERIAL shall be that
      of Condition “B” (75%), or that of Condition “C” plus the actual
      reconditioning cost when the addition of these is higher than the value of
      the MATERIAL under Condition “B”.

            

    

    

    
      	
               
      

            	
              c)
      The MATERIALS and equipment, including drill pipe, casing and tubing,
      which are no longer likely to be used for their original purpose but which
      are still likely to be used for any other purpose shall be classified
      according to their condition under the provisions of Article
      5.02.02.

            

    

    

    
      	
               
      

            	
              d)
      The useless and surplus MATERIALS shall be considered as scrap metal,
      classified as Condition “D” and, if transferred to any of the PARTIES,
      appraised at the prevailing prices for scrap metal in the zone where the
      AREA is located.

            

    

    

    
      	
               
      

            	
              e)
      In those cases in which more important pieces of equipment, due to unusual
      circumstances or conditions, cannot be classified regarding their
      condition pursuant to Article 5.02.02., said pieces shall be appraised by
      the OPERATOR on a just and equitable
basis.

            

    

    

    
      	
               
      

            	
              f)
      The new price, provided that it is used under this Article 7.02., shall
      have the same meaning and shall be determined pursuant to Article
      5.02.01.

            

    

    

    

    

    
      
         

      

      
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    ARTICLE
8

    INVENTORIES AND
AUDITING

    

    8.01.
Regular inventories

    

    The
OPERATOR shall keep detailed records of the MATERIALS existing in
warehouses.  At reasonable intervals, but no less than once every
twelve (12) months, the OPERATOR shall take inventories of all the warehouses
stock of the JOINT ACCOUNT normally subject to accounting records with the
purpose of controlling the MATERIAL.

    

    Furthermore,
at least once a year, the PARTIES shall agree on the physical counting of the
HYDROCARBONS extracted and not delivered at the date of the
counting.  The OPERATOR shall notify in writing at least thirty (30)
days in advance its intention to take said inventories in order to allow the
PARTIES to be present or represented, at their exclusive expense, whenever an
inventory is taken; the PARTIES shall accept the inventory taken by the OPERATOR
in case they were not represented at the moment of the
inventory.  Within sixty (60) days as from the physical counting, the
OPERATOR shall carry out a comparative examination of the physical counting and
the detailed records of the inventory and/or the accounting records, and a list
of surpluses and shortages shall be given to the PARTIES and the OPERATING
COMMITTEE.

    

    The
OPERATOR shall record the inventory in the JOINT ACCOUNT as surpluses and
shortages.

    

    The
OPERATOR shall only be responsible before the PARTIES for the shortage owed to a
lack of reasonable diligence.  Upon the termination of the CONTRACT,
the PARTIES shall take inventories of the MATERIALS kept in warehouses and which
are owned by the JOINT ACCOUNT, distributing them among themselves according to
their PARTICIPATING INTERESTS.  The CRUDE OIL of the AREA kept at
gathering batteries, in the pipelines that lead from there to the storage tanks
or in the storage tanks shall be distributed among the PARTIES according to
their PARTICIPATING INTERESTS.

    

    8.02.
Special inventories

    

    Whenever
a change in the PARTICIPATING INTERESTS in the CONTRACT takes place due to an
assignment, the assignor or assignee may, at their exclusive expense, carry out
a physical counting of the assets of the JOINT PROPERTY.  In case the
physical counting is carried out due to a change of the OPERATOR, the cost shall
be borne by the JOINT ACCOUNT.  Copies of the supporting documents of
these inventories shall be given to the PARTIES under the same terms and
conditions as those set forth in Article 8.01.

    

    8.03.
Auditing

    

    
      	
               
      

            	
              8.03.01
      A PARTY, upon prior notice of no less than thirty (30) days to the
      OPERATOR and all the other PARTIES, shall be entitled to audit the
      accounts and records of the OPERATOR related to the JOINT OPERATIONS of
      any FISCAL YEAR within the term of twelve (12) months following the
      closing of said FISCAL YEAR.  Audits shall not be possible more
      than once a year, except in case of renunciation or removal of the
      OPERATOR, and shall have a reasonable term for
  execution.

            

    

    

    
      	
               
      

            	
              8.03.02.  Within
      thirty (30) days of the end of the auditing work, the PARTY which carried
      out the auditing shall communicate in writing to the OPERATOR the relevant
      observations arising form said auditing.  Within sixty (60) days
      after said communication, the PARTY shall send to the OPERATOR by
      certified mail with notice of receipt the final report of the auditing
      with all the raised observations.

            

    

    

    
      	
               
      

            	
              8.03.03.
      The OPERATOR shall respond in writing to the final reports of auditing
      within sixty (60) days of their
receipt.

            

    

    

    
      	
               
      

            	
              8.03.04.
      Within sixty (60) days of receipt of the OPERATOR’S response and although
      the twelve (12) months terms has elapsed, the PARTY which carried out the
      auditing shall be entitled to have access to the accounts and records
      referring to the points in dispute.  Should any disagreement
      subsist between the OPERATOR and the PARTY which carried out the auditing
      as regards the acknowledgement of any adjustment derived from an auditing,
      it shall be dealt with during a meeting of the OPERATING COMMITTEE within
      six (6) months after the receipt of the OPERATOR’S response by the
      PARTIES.  All adjustments, mistakes or omissions detected and
      acknowledged as such by the PARTIES as a result of an auditing shall be
      promptly rectified by the OPERATOR, making the corresponding entries in
      the accounts.

            

    

    

    
      	
               
      

            	
              8.03.05.
      Whenever there are two or more PARTIES, they shall make their greatest
      effort to carry out joint or simultaneous auditing to cause the least
      possible disruption to the
OPERATOR.

            

    

    

    
      	
               
      

            	
              8.03.06.
      The cost of the auditing carried out by the PARTIES under this Article
      8.03. shall be borne by the PARTY carrying out the
    auditing.

            

    

    

    
      	
               
      

            	
              8.03.07.
      The OPERATOR shall appoint a firm of public accountants, of great prestige
      in the market, to revise and issue within sixty (60) days after the date
      of closing of the FISCAL YEAR an opinion on the Accounting Records that
      U.T.E. may have prepared in compliance with the legal provisions in
      force.  The cost of this audit shall be charged to the JOINT
      ACCOUNT.  A copy of the report that the external auditors issued
      on the financial statements of U.T.E. shall be delivered to each one of
      the PARTIES.

            

    

    

    

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

    

    ARTICLE
9

    SOLE RISK
OPERATIONS

    

    The
provisions of this ACCOUNTING PROCEDURE shall be applicable to the Sole Risk
Operations.  The OPERATOR shall especially consider and comply with
the following duties:

    

    9.01.
SOLE RISK ACCOUNT

    

    It shall
keep for each one of these operations records and documents separate from those
records and documents supporting JOINT OPERATIONS, keeping a SOLE RISK ACCOUNT
for each one of the operations referred to in Article 12 of the
CONTRACT.  The entries in the records shall be kept in the Argentine
legal currency and in United States dollars.  With the aim of
determining the amount of investments, costs and expenses incurred by the
OPERATOR and the emerging credits, the OPERATOR shall keep a Recovery Control
Account in DOLLARS for each one of the Sole Risk Operations under the provisions
of Article 12.07 of the CONTRACT, so that in case the project is profitable, the
moment when the recovery or the reimbursement provided for in Article 12 of the
CONTRACT took place can be ascertained.  To this purpose, values shall
be converted into DOLLARS following the methodology set forth in Article 3 of
this ACCOUNTING PROCEDURE.

    

    9.02.
Direct charges

    

    The
OPERATOR shall charge to the SOLE RISK ACCOUNTS all the investments, costs,
expenses and credits directly related to the SOLE RISK OPERATIONS, in accordance
with the provisions of Article 2 of this ACCOUNTING PROCEDURE.

    

    9.03.
Indirect charges

    

    The
OPERATOR shall charge monthly to each SOLE RISK ACCOUNT the actual charge of all
service or cost not included in Article 2 of this ACCOUNTING
PROCEDURE.

    

    9.04.
Statement of profitability

    

    The
OPERATOR shall communicate to the PARTIES in writing within five (5) days when
it determines that the Sole Risk Operation has turned out to be profitable,
submitting, within thirty (30) days following the end of the month in which the
profitability was ascertained, information about the total amount of the
investments, costs, expenses and income incurred until the last day of the month
in which the operation turned out to be profitable according to the Recovery
Control Account.  The non-participating PARTIES shall have thirty (30)
days to verify the investments, costs and expenses incurred by the OPERATOR for
the execution of this type of operations, and shall issue a statement on their
reasonability and application.

    

    9.05.
Monthly reports

    

    The
OPERATOR shall, within thirty (30) days of the following month, deliver to the
PARTIES both the statement of the Recovery Control Account set forth in Article
10.01. of this ACCOUNTING PROCEDURE and a report on the production affected to
the recovery provided for in Article 12.07, which correspond to the previous
month.

    

    

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    

    ARTICLE
10

    TAXES

    

    10.01.
General guidelines

    

    The
record and documentation of the value added tax (hereinafter V.A.T.) shall be
effected pursuant to the provisions of Act number 23349 as amended and AFIP
(Federal Administration of Public Income) Regulation number 1415/2003 and its
supplements, notwithstanding the adequacy in the future to variations in the
legal system applicable.

    

    10.01.02.
Presentation and payment of V.A.T.

    

    Since
under the legislation in force U.T.E. is a V.A.T. taxpayer and the PARTIES are
third parties with respect to it to the effects of the activity encumbered by
said tax, the OPERATOR shall make all the presentations of U.T.E. before the
competent entities with the aim of paying the tax.

    

    10.01.03.
Purchases, hiring of services and imports.

    

    In the
corresponding cases, the OPERATOR shall request from its suppliers the
discrimination of V.A.T. in the invoices.  To that effect, the
OPERATOR shall send its suppliers detailed information about U.T.E.’s data to
allow drawing up invoices in accordance with the formalities required by the
legislation in force.

    

    10.01.04. Record of V.A.T. – Fiscal
Credit

    

    The
Fiscal Credit derived from the encumbered operations shall be recorded in a
credit account, under the heading “Credits”, separate from any other different
item of V.A.T.- Fiscal Credit.

    

    10.01.05. Procedure for the allocation
of the NET PRODUCTION

    

    Upon the
allocation of the NET PRODUCTION under the provisions of Article 13 of the
CONTRACT, the OPERATOR shall proceed to deliver to each PARTY their
PARTICIPATING INTEREST through the issuance of a “note of product allocation”,
which shall state the data required by the General Resolution number 1415/2003
of AFIP or that one which in the future may replace it.  Said note
shall contain the volume of the product delivered expressed in cubic meters and
its appraisal to the effects of the Value Added Tax, which shall be effected
according to the value of the cubic meter resulting from relating the values
provided for in the investment and expenses plans with those of production, on
technically reasonable basis.  The discriminated V.A.T. shall be added
to the value so ascertained.

    

    In case
of non-fulfillment of the obligation of receipt provided for in Article 13.03.
of the CONTRACT, the NET PRODUCTION not taken shall be allocated to the PARTY
not taking it all the same pursuant to the provisions of this Article,
notwithstanding the proceedings for disposal provided for in said Article
13.03.

    

    10.01.06
Sole Risk Operations

    

    In the
case of Sole Risk Operations, the applicable proceedings and guidelines for
appraisal shall be those provided for in item 10.01.05 of this Article,
notwithstanding the appraisal set forth in Article 12.07 of the CONTRACT to the
effects of recovery by the non-participating PARTIES.

    

    10.01.07
Record of V.A.T. – Fiscal Debit

    

    The
Fiscal Debit arising from the notes of product allocation to the PARTIES under
the provisions of item 10.01.05. shall be recorded in a debit account, under the
heading “Fiscal Debits”, separate from any other item of V.A.T. – Fiscal
Debit.

    

    10.02.
Tax on bank debits and credits

    

    While
this tax subsists with the mechanism that allows entering as advance payment on
account of the Income Tax or the Minimum Presumptive Income Tax, without
distinction, 34% of the amounts settled and collected by the tax collection
agent on the amounts credited in bank accounts covered by the general rate of
0.6%, said credit shall be allocated to each PARTY in proportion to their
PARTICIPATING INTEREST.

    
      
        
           

          [Initials]

        

         

      

      
        32

        
          

        

      

      
         

      

    

    ANNEX
“B”

    INSURANCE
COVERAGE

    

    The
OPERATOR shall take out and charge to the JOINT ACCOUNT while the CONTRACT is in
force the insurance policies described hereinafter.  Said policies
shall name as insured parties all the PARTIES in proportion to their
PARTICIPATING INTERESTS.

    

    
      	
              1.  

            	
              Automobile
      insurance

            

    

    

    With
reference to motor vehicles, civil liability insurance, insurance of persons and
insurance of third parties’ property without limitation.

    

    
      	
              2.  

            	
              Indemnity
      insurance of Property in Transit

            

    

    

    This
policy shall cover loss or damage to the material, equipment
and          supplies while
they are being moved or transported.

    

    
      	
              3.  

            	
              Fire
      insurance

            

    

    

    Fire
insurance shall be taken out for all the surface property, covering
risks    of hurricane, gale, cyclone or tornado and material
damages and fire due to earthquake.

    
      
        
           

          [Initials]

        

         

      

      
        33

        
          

        

      

      
         

      

    

    ACKNOWLEDGEMENT.
Law 404

    [There appears a seal that
reads:] Association of
Notaries Public, City of Buenos Aires, Argentina. [There appears an illegible
signature and seal].
Annex. F 001146982.

    Buenos
Aires, January 26, 2009. I HEREBY CERTIFY, in my capacity as notary public, Head
of Notarial Registry 2089 of the City of Buenos Aires, that the signatures on
the document attached hereto, the certification of which is simultaneously
required under RECORD number 092, Book number 81, have been set before me by the
following  parties, the identity of which I hereby attest to. Jose
Pantano, holder of Argentine ID No. 18,687,766; Ruben Nicolás Kondratzky, holder
of Argentine ID No. 11,338,184; Ernesto Alejandro Hermo, holder of Argentine ID
No. 14,596,340; Ignacio Maria Sammartino, holder of Argentine ID No. 18,367,128;
Carlos Alberto Da Costa, holder of Argentine ID No. 93,768,313, known to me to
be the persons that have personally appeared before me. I further certify that
the aforementioned parties represent that they act in the following capacities:
1) Jose Pantano and Ruben Nicolás Kondratzky, as attorneys-in-fact of PETROLERA
ENTRE LOMAS S.A., registered at the Public Registry of Commerce (Registro
Público de Comercio) under Number 15553, Book 23 of  Stock
Corporations, on October 27, 2003, pursuant to a General Power of Attorney for
Administration and Disposition purposes, notarized deed 731 dated November 26,
2008, filed with Notarial Registry 2089 of the City of Buenos Aires; 2) Ernesto
Alejandro Hermo, as the Legal Representative of APCO ARGENTINA INC., registered
at the Public Registry of Commerce under Number 25, Folio 144, Book 51, Volume B
of Bylaws of Foreign Companies on September 29, 1973, pursuant to an appointment
registered at the Public Registry of Commerce under Number 802, Book 55, Volume
B of Bylaws of Foreign Companies on April 22, 1999; 3)  Ignacio Maria
Sammartino, as attorney-in-fact of PETROURUGUAY S.A.,  registered at
the Public Registry of Commerce under Number 4681, Book 109, Volume A of
Corporations on July 10, 1991, pursuant to a Special Power of Attorney,
notarized deed 281 dated March 16, 2007, which is filed with Notarial Registry
359 of this City, and the Minutes of the Board of Directors dated October 8,
2007, which consents to this acknowledgement; 4) Carlos Alberto Da Costa, as
attorney-in-fact of PETROBRAS ENERGIA S.A., registered at the Public Registry of
Commerce under Number 759, Folio 569, Book 47, Volume A of Bylaws of Domestic
Companies on November 11, 1947, pursuant to a General Power of Attorney,
notarized deed 30, dated January 19, 2009 filed with Notarial Registry 2089 of
the City of Buenos Aires. I hereby certify that the parties mentioned
hereinabove are duly empowered to execute this document. I further certify that
the document consists of fifty three folios. This is a true and correct copy of
the original Notarial Record Number F 4890642.

    /s/ Matías Pablo
Seoane

    Notary
Public, License No. 4545.

    

    
      
         

      

      
        34ex1023.htm

    
      
         

      

      
        
          

        

      

       

    

    Exhibit
10.23

    NON-QUALIFIED
STOCK OPTION AGREEMENT

    

    
      	
              OPTION
      NO. _____

            	
              TO
      PURCHASE  ________

            
	 
      	
              SHARES
      OF COMMON STOCK

            
	 
      	
              ($0.01
      PAR VALUE)

            

    

    

    TXCO
RESOURCES INC.

    

    INCORPORATED
UNDER THE LAWS OF

    

    THE STATE
OF DELAWARE

    

    For valuable consideration, receipt of
which is hereby acknowledged, TXCO RESOURCES INC., a Delaware
corporation  (hereinafter called the "Corporation"), hereby grants to
__________  (hereinafter called the
"Optionee"), a non-qualified stock option (hereinafter called the "Option"),
subject to the terms and conditions thereof, and subject to the terms and
conditions of the 2005 Stock Incentive Plan of the Corporation (hereinafter
called the "Plan") which Plan is hereby incorporated herein by
reference.  In the event of any conflict between the terms of the Plan
and this Agreement, the terms of the Plan shall govern.

    

    A.Basic
Terms.  This
certifies that, for value received, the registered owner is entitled, subject to
the terms and conditions of this Option and the 2005 Stock Incentive Plan, until
the expiration date, to purchase up to the number of shares of the Common Stock,
par value $.01 (the "Common Stock") from the Corporation at the purchase price
shown below, on delivery of this Option to the Corporation with the exercise
form duly executed and payment of the Purchase
Price:  (a)  in United States dollars in cash or by
check, bank draft or money order payable to the order of the
Corporation,  (b)  by delivering Common Stock already owned
by the Optionee with an aggregate Fair Market Value on the date of exercise
equal to the Option Price, or  (c)  by a combination of the
above methods of payment, together with payment or arrangement for payment of
any federal income tax required to be withheld by the Corporation.  If
Common Stock is to be delivered as a payment of part or all of the Option Price,
it must be tendered in accordance with methods determined by the Committee to be
acceptable and appropriate as considered in Section 5.2(b) of the
Plan.  As soon as practicable after receipt of such notice and
payment, the Corporation shall, without transfer or issue tax or other
incidental expense to the Optionee, deliver to Optionee at the office of the
Corporation, or such other place as may be mutually acceptable, or, at the
election of the Corporation, by first class mail addressed to the Optionee at
the address shown in the records of the Corporation, a certificate or
certificates for such shares out of theretofore authorized but unissued shares
or reacquired shares of its Common Stock, as the Corporation may
elect.

    

    
      	
               
      

            	
              Registered
      Owner:__________ 

            

    

                                    __________ 

                                   
__________ 

    

    
      	
               
      

            	
              Purchase
      Price:$ _____ per Common Share

            

    

    

    
      	
               
      

            	
              Expiration
      Date:__________ ,
      unless earlier terminated pursuant to this paragraph, the paragraph
      immediately following or Paragraph K of this Option.  If, prior
      to the Expiration Date, the Optionee ceases to serve as a director of the
      Corporation, this Option shall terminate as to any portion of the Option
      not fully vested.  This Option shall be void and of no effect
      after the Expiration Date.

            

    

    

    
      	
               
      

            	
              Vesting
      Schedule:This Option is intended as an incentive to retain the Optionee as
      a director of the Corporation.  Therefore, the Optionee shall
      become fully vested as to one third (1/3) of the Option, __________  shares,
      after one year of continuous service as a director from the date
      hereof.  The Optionee shall become fully vested as to an
      additional one-third (1/3) of the Option, __________  shares,
      after two years of continuous service as a director from the date
      hereof.  The Optionee shall become fully invested as to the
      remaining one-third (1/3) of the Option, __________  shares,
      after three years of continuous service as a director from the date
      hereof.  Should the Optionee’s service as a director be
      terminated, either voluntarily or involuntarily, any portion of the Option
      that has not been fully vested shall be immediately
      forfeited.  Any portion of the Option that has been fully vested
      shall be subject to the terms and conditions of this Option and the
      Plan.

            

    

    
      
         

      

      
        
          

        

      

       

    

    B.Corporation's Covenants as
to Common Stock.  Shares deliverable on the exercise of this
Option shall, at delivery, be fully paid and non-assessable, free from taxes,
liens and charges with respect to their purchase.  The Corporation
shall take any necessary steps to assure that the par value per share of the
Common Stock is at all times equal to or less than the then current Option
purchase price per share of the Common Stock issuable pursuant to this
Option.  The Corporation shall at all times reserve and hold available
sufficient shares of Common Stock to satisfy all conversion and purchase rights
of outstanding convertible securities, options and warrants.

    

    C.Method
of Exercise.  The purchase
rights represented by this Option are exercisable at the option of the
registered owner in whole at any time, on or prior to the expiration date, by
payment of the Purchase Price in a manner specified in Paragraph A for each
share purchased.  The Corporation may postpone the time of
delivery of certificates for shares for such additional time as the Corporation
shall deem necessary or desirable to enable it to comply with all applicable
laws, regulations, rules, orders and approvals which shall then be in effect and
required by any governmental entities or any stock exchanges on which the Common
Stock is traded.

    

    D.Adjustment of Shares
Purchasable.  The number of shares purchasable hereunder and
the purchase price per share are subject to adjustment from time to time as
specified in this Option.

    

    E.Limited Rights of
Owner.  This Option does not entitle the owner to any voting
rights or other rights as a shareholder of the Corporation, or to any other
rights whatsoever except the rights herein expressed.  No dividends
are payable or will accrue on this Option or the shares purchasable hereunder
until, and except to the extent that, this Option is exercised.

    

    F.Transfer.  This
Option shall, during the Optionee's lifetime, be exercisable only by the
registered owner and neither it nor any right hereunder shall be transferable
other than by will or the laws of descent and distribution or be subject to
attachment, execution or other similar process.

    

    G.Recognition of Registered
Owner.  Prior to due presentment for registration of transfer
of this Option, the Corporation may treat the registered owner as the person
exclusively entitled to receive notices and otherwise to exercise rights
hereunder.

    

    H.Effect of Stock Split,
etc.  If the Corporation, through stock dividend, split,
reverse split or reclassification of shares, changes as a whole the outstanding
Common Stock into a different number of class of shares,
then:  (1)  the number and class of shares so changed shall,
for the purposes of this Option, replace the shares outstanding immediately
prior to the change; and  (2)  the Option purchase price in
effect, and the number of shares purchasable under this Option, immediately
prior to the date upon which the change becomes effective, shall be
proportionately adjusted  (the price to the nearest
cent).  Irrespective of any adjustment or change in the Option
purchase price or the number of shares that were purchasable under this or any
other Option of like tenor, the Options theretofore and thereafter issued may
continue to express the Option purchase price per share and the number of shares
that were purchasable were expressed in the Options when initially
issued.

    

    I.Effect of Merger,
etc.  If the Corporation consolidates with or merges into
another corporation, the registered owner shall thereafter be entitled on
exercise to purchase, with respect to each share of Common Stock purchasable
hereunder immediately before the consolidation or merger becomes effective, the
securities or other consideration to which a holder of one share of Common Stock
is entitled in the consolidation or the merger without any change in or payment
in addition to the Option purchase price in effect immediately prior to the
merger or consolidation.  The Corporation shall take any necessary
steps in connection with a consolidation or merger to assure that all the
provisions of the Option shall thereafter be applicable, as nearly as reasonably
may be, to any securities or other consideration so deliverable on exercise of
this Option.  A sale or lease of all or substantially all the assets
of the Corporation for a consideration  (apart from the assumption of
obligations)  consisting primarily of securities is a consolidation or
merger for the foregoing purposes.

    

    J.Notice of
Adjustment.  On the happening of an event requiring an
adjustment of the Option purchase price or the shares purchasable hereunder, the
Corporation shall forthwith give written notice to the registered owner stating
the adjusted Option purchase price and the adjusted number and kind of
securities or other property purchasable hereunder resulting from the event and
setting forth in reasonable detail the method of calculation and the facts upon
which the calculation is based.  The Board of Directors of the
Corporation, acting in good faith, shall determine the calculation.

    

     

    
      
         

      

      
        
          

        

      

       

    

    K.Notice and Effect of
Dissolution, etc.  In case a voluntary or involuntary
dissolution, liquidation, or winding up of the Corporation  (other
than in connection with a consolidation or merger covered by Paragraph I
above)  is at any time proposed, the Corporation shall give at least
30 days prior written notice to the registered owner.  Such notice
shall contain:  (1)  the date on which the transaction is to
take place;  (2)  the record date  (which shall be
at least 30 days after the giving of the notice)  as of which holders
of Common Stock will be entitled to receive distributions as a result of the
transaction;  (3)  a brief description of the
transaction;  (4)  a brief description of the distributions
to be made to holders of Common Stock as a result of the
transaction;  and  (5)  an estimate of the fair
value of the distributions.  On the date of the transaction, if it
actually occurs, this Option and all rights hereunder shall
terminate.

    

    L.Method of Giving Notice;
Extent Required.  Notices shall be given by first class mail,
postage prepaid, addressed to the registered owner at the address of the owner
appearing in the records of the Corporation.  No notice to Option
holders is required except as specified in Paragraph J, K and N.

    

    M.THE REGISTERED OWNER HAS REPRESENTED
TO THE CORPORATION THAT THE SECURITIES REPRESENTED BY THIS OPTION ARE BEING
ACQUIRED BY THE REGISTERED OWNER FOR INVESTMENT.  SUCH SECURITIES MAY
NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT").  SUCH SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED AT
ANY TIME WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE, EXCEPT UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE
SUBMISSION TO THE CORPORATION OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
THE CORPORATION TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF
THE ACT OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION
PROMULGATED THEREUNDER.

    

    N.Registration
Rights.  As the shares issued under this Option may not be
registered and may be restricted pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”), the Corporation agrees that in the
event it files to register shares under the Plan, it will include these
shares.  If the Corporation files any registration statement with the
SEC it will, upon the timely written request of the Registered Owner, include,
in the first registration statement filed after the shares have been purchased,
shares of its Common Stock that have been previously purchased under the terms
of this Option.  Any such written request shall be delivered to the
Corporation within no more than 10 days following the Registered Owner’s receipt
of written notice from the Corporation that it intends to file a registration
statement with the SEC.

    

    IN WITNESS WHEREOF, this Option has
been executed as of this         day
of __________  .

    

    
      
        	 
      	
                TXCO
      RESOURCES INC.

              
	 
      	 
      
	 
      	
                By: _____________

              
	 
      	
                       James
      E. Sigmon,

              
	 
      	
                       Chief
      Executive Officer

              

      

    

    
      
         

      

      
        
          

        

      

       

    

    EXERCISE
FORM

    

    TXCO
Resources Inc.

    777 E.
Sonterra Blvd., Suite 350

    San
Antonio, Texas  78258

    

    Ladies
and Gentlemen:

    

    The undersigned
hereby:  (1)  irrevocably subscribes for __________________________
shares of your Common Stock pursuant to this Option, and enclosed payment
of  $_____________
therefor;  (2)  requests that a certificate for the shares
be issued in the name of the undersigned and delivered to the undersigned at the
address below;  and  (3)  if such number of shares
is not all of the shares purchasable hereunder, that a new Option of like tenor
for the balance of the remaining shares purchasable hereunder be issued in the
name of the undersigned and delivered to the undersigned at the address
below.

    

    
      
        	 
      	
                ________________________________ 

              
	
                Date:___________________

              	
                (Please
      sign exactly as name

              
	 
      	
                 appears
      on Option)

              
	 
      	
                Address:___________________________

              
	 
      	
                __________________________________

              
	 
      	
                Taxpayer
      ID No.____________________

              

      

    

    

                               
__________  __________  __________  __________  __________  __________  __________  __________  __________  __________  ____

    

    NOTE:  Options,
substantially in the form shown above, under TXCO's 2005 Stock Incentive Plan
(the "Plan") may be granted to directors, management and other employees, from
time to time, at the discretion of TXCO's Board of Directors
("Board").  The number of options awarded and the vesting terms are
set by the Board at the time of grant.  Options typically have a
ten-year life. Options granted to employees and management generally are
considered Incentive Stock Options, while those granted to the Board under this
Plan will be Non-Qualified Options. 

    

    The Board
granted the first options under the Plan at its meeting on December 5,
2008.  Each non-employee director was granted options to purchase
50,000 shares of TXCO's common stock at an exercise price of $2.05, 110% of the
closing price on that date for the Company's common stock.  These
options become exercisable one-third per year on the anniversary date of the
grant.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00155-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00155-of-00352.parquet"}]]