Document:

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                                                                   EXHIBIT 10.11

                              MONTY PROSPECT AREA

                       PECOS AND TERRELL COUNTIES, TEXAS

                          JOINT DEVELOPMENT AGREEMENT

                                BY AND BETWEEN

                             PURE RESOURCES, L.P.
                                      AND
                 CHAPARRAL ROYALTY COMPANY, DDDF COMPANY, INC.
                      J. DON LOONEY, and GEORGE G. STALEY

                        EFFECTIVE DATE: MARCH 10, 2000
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                          JOINT DEVELOPMENT AGREEMENT

                              MONTY PROSPECT AREA

                       PECOS AND TERRELL COUNTIES, TEXAS

THIS AGREEMENT is dated effective as of March 10, 2000 by and between PURE
RESOURCES, L.P., a Texas limited partnership, whose address is 500 West Texas,
Suite 200, Midland, Texas 79701, hereinafter referred to as "PURE" and CHAPARRAL
ROYALTY COMPANY, whose address is P.O. Box 1604 Midland, Texas, 79702; DDDF
COMPANY, INC., whose address is P.O. Box 554, Midland, Texas, 79702; J. DON
LOONEY, whose address is P.O. Box 3362, Midland, Texas, 79702; and GEORGE G.
STALEY, whose address is 500 West Texas, Suite 200, Midland, Texas, 79702,
hereinafter collectively referred to as "CHAPARRAL, ET AL".

                                   RECITALS
                                   --------

WHEREAS, CHAPARRAL, ET AL represents, but does not warrant, that it owns various
Existing Properties in Pecos and Terrell Counties, Texas, which cover lands
located within the blue boundary shown on the plat attached hereto and
identified as Exhibit "A".  Said Existing Properties owned by CHAPARRAL, ET AL
are specifically described on Exhibit "A-1" attached hereto; and

WHEREAS, PURE represents, but does not warrant, that it owns various Existing
Properties in Pecos and Terrell Counties, Texas, which cover lands located
within said blue boundary shown on the plat attached hereto and identified as
Exhibit "A".  Said Existing Properties owned by PURE are specifically described
on Exhibit "A-2" attached hereto; and

WHEREAS, PURE and CHAPARRAL, ET AL intend by this Agreement to provide a means
to evaluate the lands subject to this Agreement and to determine the potential
for oil and/or gas production whereby such Parties i) establish an Area of
Mutual Interest ("AMI"), ii) jointly acquire oil and gas leases, and iii)
provide a means for the drilling of exploration and development wells on

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the Existing Properties and such additional Properties as may be acquired under
the terms and conditions hereinafter provided.

NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed as follows:

                                   ARTICLE 1
                                   ---------
                                  DEFINITIONS
                                  -----------

As used in this Agreement, the terms indicated below shall be construed as
follows:

1.1  "Agreement"  means this Agreement, including all amendments, schedules,
     -----------
     plats, maps, exhibits and annexes hereto, which are incorporated herein by
     this reference.

1.2  "AMI" or "Area of Mutual Interest"  means the lands lying in Pecos and
     ----------------------------------
     Terrell Counties, Texas that are located within the blue outline indicated
     on the plat attached hereto as Exhibit "A", and further described on
     Exhibit "A-3" attached hereto.

1.3  "Development Well"  means any well drilled on lands located within the
     ------------------
     AMI subsequent to the drilling of an Initial Exploratory Well and three (3)
     Subsequent Exploratory Wells on lands located within the AMI, and in
     accordance with the Operating Agreement therefor.

1.4  "Existing Properties" means PURE'S and/or CHAPARRAL, ET AL's Properties
     ---------------------
     existing as of the date of this Agreement, which are located within the
     AMI.

1.5  "Exploration Expenditures" means all costs attributable to operations,
     --------------------------
     accounted for in accordance with the terms and provisions of the Operating
     Agreement, on or with respect to the Initial Exploratory Well and
     Subsequent Exploratory Wells, including, without limitation, drillsite
     preparation, roads, surface damages, water wells, drilling, coring and
     drillstem testing, completion and equipping, and reworking until such wells
     have been drilled, completed and equipped and are capable of production,
     including gathering lines, pipelines and facilities necessary to deliver
     pipeline quality gas, along with the costs of plugging and abandoning such
     wells if no completion attempt is made thereon.  Exploration Expenditures
     shall not include Leasehold

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     Costs as defined herein. In lieu thereof, PURE shall be entitled to include
     the fixed sum of $92,000.00 as a fixed acreage cost.

1.6  "Initial Exploratory Well" means the first well drilled on lands located
     --------------------------
     within the AMI in accordance with this Agreement which well shall be
     drilled free of cost to CHAPARRAL, ET AL.

1.7  "Leasehold Costs"  means those direct charges incurred for acquisition
     -----------------
     of Properties, including, without limitation, records examination and title
     costs, mineral and leasehold ownership reports, broker fees and expenses,
     travel costs, the purchase price, option costs, rentals, recording costs
     and any other costs associated with the acquisition of Properties.

1.8  "Operating Agreement" shall mean the Operating Agreement dated effective
     ---------------------
     March 10, 2000, between the Parties hereto. In the event of a conflict
     between this Agreement and the Operating Agreement, the provisions of this
     Agreement shall prevail.

1.9  "Operating Costs" shall mean all costs incurred by PURE in operating the
     -----------------
     IEW or SEW pursuant to this Agreement and the Operating Agreement, and the
     disposition of hydrocarbons produced therefrom, including but not limited
     to:

     (a)  Labor and other services necessary for maintenance and operations of
          such wells;

     (b)  Insurance, materials, supplies, transportation, repairs and
          replacements used in the maintenance and operations of such wells,
          including replacements for all parts of machinery, equipment tanks or
          other equipment to replace and/or repair original well and/or lease
          equipment;

     (c)  Reworking, deepening, sidetracking, recompleting or re-equipping such
          wells plus plugging and abandonment costs applicable to previously
          producing wells, less salvage;

     (d)  Gathering, treating, processing, transporting and marketing of
          hydrocarbons produced from such wells, and all ad valorem, severance,
          gathering, windfall profits or other applicable taxes; and

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     (e)  Overhead costs as defined in the Copas accounting procedure attached
          as Exhibit "C" to the Operating Agreement.

1.10 "Operator" shall mean the Party designated as Operator pursuant to Article
     ----------
     V of the Operating Agreement.

1.11 "Participate"  means to agree to bear and pay a Party's proportionate
     -------------
     share of the cost and expense of the operations and also to undertake the
     obligations and be accorded the rights and privileges associated therewith
     which are specified herein with respect to the particular activity.

1.12 "Party or Parties" means PURE and/or CHAPARRAL, ET AL, their assigns or
     ------------------
     successors, subject to the limitations set forth in Paragraph 6.9 hereof.

1.13 "Proceeds" means the sum of all payments realized by PURE, directly or
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     indirectly, as prepayments, advances, payments in kind, and the revenue
     realized from the sale of production from the three Subsequent Exploratory
     Wells, after excluding the existing burdens attributable thereto; provided,
     however, Proceeds shall not mean the sale of all or part of PURE's
     undivided working interest in a leasehold estate.

1.14 "Project Payout" means that point in time when the cumulative Proceeds
     ----------------
     received by PURE from the three Subsequent Exploratory Wells and any
     replacement or substitute wells therefore, shall equal the Exploration
     Expenditures and Operating Costs for these wells. In calculating Project
     Payout, as to the Exploration Expenditures expended for drilling and
     completing, PURE shall be limited to the costs set out in the Authority for
     Expenditures provided to the Parties prior to drilling the Subsequent
     Exploratory Wells. Notwithstanding the foregoing, it is anticipated that
     Project Payout could occur at some point in time before all three SEW have
     been drilled. As an example, should Project Payout occur prior to PURE
     drilling the third SEW, CHAPARRAL, ET AL would be vested with a working
     interest in the two SEW that had been previously drilled to that point. If
     and when the third SEW were later drilled, CHAPARRAL, ET AL would
     relinquish their working interest in the SEW to PURE until Project Payout
     is achieved after drilling the final SEW. All revenues earned or accrued
     prior to relinquishing the working interest shall accrue to and remain the
     property of CHAPARRAL, ET AL. At any

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     time and at their option, CHAPARRAL ET AL may buy and discharge the pay out
     obligation by paying PURE the accrued sum of the payout amount and
     thereafter be subject to the terms and provisions hereof and of the
     Operating Agreement in an after payout position.

1.15 "Property or Properties" means those certain existing oil and gas leases
     ------------------------
     and mineral interests made subject to this Agreement and described on
     Exhibits "A-1" and "A-2" attached hereto (Existing Properties) plus any
     additional oil and gas leasehold interests hereafter acquired within the
     AMI and made subject to the terms and conditions of this Agreement, or
     rights to acquire such interests through option, purchase, extension,
     pooling, unitization, top lease, renewal, farm-in, farm-in option, acreage
     contribution or other agreement with third parties to earn an interest.

1.16 "Proposing Party" means the Party who proposes one or more of the proposals
     -----------------
     provided for herein.

1.17 "Proration and/or Spacing Unit"  means the drilling or production unit
     -------------------------------
     prescribed or permitted for a particular well for full allowable purposes
     by or in accordance with the regulation of the Texas Railroad Commission or
     any governmental authority having jurisdiction thereof.  As between the
     Parties hereto, in the absence of Special Field Rules, and until Special
     Field Rules are established, a Proration or Spacing Unit shall be
     considered to contain 80 acres for an oil well and 160 acres for a gas well
     of 10,000 feet or shallower, and 640 acres for a gas well of 10,001 feet or
     deeper.

1.18 "Subsequent Exploratory Wells" means the second, third and fourth wells
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     drilled on lands located within the AMI in accordance with this Agreement.

                                   ARTICLE II
                                   ----------
                         AREA OF MUTUAL INTEREST (AMI)
                         -----------------------------

2.1  Lands. The Area of Mutual Interest (AMI) means the lands lying in Pecos
     -----
     and Terrell Counties, Texas that are located within the blue outline on the
     plat attached hereto as Exhibit "A and further described on Exhibit "A-3"
     attached hereto.

2.2  Acquisitions. PURE shall be the only Party responsible for the
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     acquisition of Properties within the AMI from March 10, 2000 forward and
     shall negotiate for and acquire Properties exercising its judgment as a
     reasonable and prudent operator to determine which Properties to acquire
     and the terms and provisions applicable to same. PURE agrees to pay for all
     of the Leasehold Costs associated with the acquisition of oil and gas
     leases or lease options acquired by or on behalf of PURE covering land
     within the AMI after March 10, 2000 and until the spud date of the IEW,
     including any acquisition of oil and gas leases or lease options in Section
     31, Block 2, CCSD&RGNG, Terrell County, Texas and in the N/2 of Section 19,
     and the N/2 of Section 21, both in Block 102, John H. Gibson Survey, Pecos
     County, Texas. Within sixty (60) days of acquisition, PURE shall assign the
     oil and gas leases or options acquired by or on behalf of PURE to the other
     Parties hereto in the following percentages:

                    DDDF Company Inc.  10%
                    George G. Staley   10%
                    Chaparral Royalty  10%
                    J. Don Looney      10%

     With respect to any oil and gas leases or options which PURE acquires, and
     except for any royalties, overriding royalties and burdens then in
     existence, PURE shall not further burden same prior to assignment of the
     proportionate interest to the other Parties.

     After the spud date of the IEW, if a Party acquires a Property or a mineral
     or royalty interest within the AMI, the acquiring Party shall, within
     thirty (30) days of such acquisition, provide written notice thereof to the
     other Parties, together with full details of the acquisition, including,
     without limitation, the lands and minerals acquired, a copy of the
     assignment and/or deed and all title information obtained, and a list of
     the acquisition costs thereof.  The acquiring party shall have the option,
     but not the obligation to obtain a title opinion for the acquisition of the
     mineral interest or royalty interest and shall provide the non-acquiring
     Party a copy of all title information it obtains as associated with the
     acquisition of the interest.  For a period of fifteen (15) days following
     receipt of such notice, the non-acquiring Party shall have the right and
     option to purchase its proportionate percentage as stated in this
     paragraph, of the acquiring Party's interest.  Failure of the non-acquiring
     Party to advise the acquiring Party in writing within said fifteen (15)
     days of

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     its election, shall be deemed as an election not to acquire the interest.
     Upon the non-acquiring Party electing to participate and accepting title to
     the interest, it shall reimburse the acquiring Party for the acquisition
     costs applicable to same and shall tender payment to the acquiring Party
     pursuant to the provisions of this Agreement. In the event that the non-
     acquiring Party shall reject title to any of the interest, the acquiring
     Party shall have a period of thirty (30) days to cure the applicable title
     defect to the reasonable satisfaction of the non-acquiring Party. If the
     acquiring Party does not so cure such title defect or if the non-acquiring
     Party does not accept title to the interest within such time period, then
     such interest shall not be subject to any of the terms of this Agreement.
     With respect to interests which the non-acquiring Party elects to acquire,
     the acquiring Party shall, within thirty (30) days of timely receipt of
     payment, assign to the non-acquiring Party its proportionate percentage as
     stated in Paragraph 2.3, of the acquiring Party's interest, free of any
     additional burdens by acquiring Party.

2.3  Prior Acquisitions. The Properties within the AMI acquired by CHAPARRAL, ET
     ------------------
     AL, prior to March 10, 2000, as described on Exhibit A-1, shall be owned by
     the Parties in the following percentages:

               DDDF Company Inc.     10%
               George G. Staley      10%
               Chaparral Royalty     10%
               J. Don Looney         10%
               Pure Resources, L.P.  60%

     The Parties agree to effectuate this ownership by delivering whatever
     assignments are required, which shall be delivered to the Parties
     contemporaneously with the execution of this Agreement.  The difference
     between the lease burdens on these Properties and the 80% net revenue
     interest delivered to the Parties, shall be owned as an overriding royalty
     by Robert McClesky dba JSM Oil & Gas Inc., P.O. Box 3362, Midland, TX
     79702.

2.4  Assignment.  Any assignment made pursuant to Paragraph 2.2 or 2.3 shall
     ----------
     be in substantially the same form as Exhibit B attached hereto.

2.5  Title Loss. Should any Property, mineral interest or royalty interest be
     ----------
     lost through failure of title, such loss shall for all purposes

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     whatsoever be considered a joint loss and shall be borne by the Parties in
     proportion to their respective interest therein.

2.6  Outside Properties. Where less than all of the acquired Properties lie
     ------------------
     within the AMI, the acquiring Parties shall have the right only to acquire
     its proportionate interest in that   part of the Properties lying within
     the AMI.

2.7  Term of AML. Unless earlier terminated as herein provided, the AMI shall
     -----------
     expire three (3) years from the effective date of this Agreement.

                                  ARTICLE III
                                  -----------
                              EXPLORATORY DRILLING
                              --------------------

3.1  Initial Exploratory Well. On or before March 10, 2001, PURE has the right
     --------------------------
     but not the obligation to drill an Initial Exploratory Well ("IEW") at its
     choice of location within the AMI, which well shall be drilled to a depth
     sufficient to test the Devonian formation, but at PURE'S discretion may be
     drilled deeper. The IEW may be drilled as a horizontal well at PURE'S
     discretion. PURE shall pay 100% of the Exploration Expenditures for the
     IEW. At such time as the IEW is completed, equipped and ready to produce,
     CHAPPERAL, ET AL shall be vested with a working interest in the IEW for
     their respective AMI percentages as set out in Paragraph 2.3, as reflected
     in the Operating Agreement. Subsequent operations for the IEW will be
     subject to said Operating Agreement. Failure to drill the IEW as herein
     provided, as either a well capable of production or a plugged and abandoned
     well, shall result in PURE'S reassigning to CHAPARRAL, ET AL any interest
     PURE acquired pursuant to Paragraph 2.3 above. PURE shall retain its
     proportionate interest of any interest acquired pursuant to Paragraph 2.2,
     above.

3.2  Subsequent Exploratory Wells. After the drilling of the IEW, PURE has the
     -----------------------------
     right but not the obligation to drill three (3) Subsequent Exploratory
     Wells ("SEW") at its choice of location within the AMI area, which wells
     may be drilled to any depth and may be drilled as horizontal wells. PURE
     shall pay 100% of the Exploration Expenditures for the SEW. When Project
     Payout has been reached, the other Parties shall be vested with a working
     interest in the SEW for their respective AMI percentages as set out in
     Paragraph 2.3, as reflected in the Operating Agreement.

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3.3  Exploratory Substitute Wells. If in the drilling of the IEW, impenetrable
     -----------------------------
     substances or mechanical difficulties are encountered which, in the opinion
     of PURE would make further drilling impractical or inadvisable, PURE shall
     have the right to plug and abandon the IEW. In that event, and within
     ninety (90) days of plugging, PURE may commence the drilling of a
     substitute well to be drilled in place of the IEW and then such substitute
     well shall become the IEW for all intents and purposes of this Agreement.

                                   ARTICLE IV
                                   ----------
                               DEVELOPMENT WELLS
                               -----------------

4.1  Development Operations. All proposals and operations, subsequent to the
     -----------------------
     completion of the IEW and SEW, shall be in accordance with the terms of the
     Operating Agreement executed by the Parties pursuant to Article III.

4.2  Non-Participation Penalties. Should a Party elect not to Participate in the
     ----------------------------
     drilling of a Development Well, provided the well begins drilling within
     sixty (60) days of an election not to Participate, a Non-Participating
     Party shall be required to assign to the Participating Parties, all of its
     undivided working interest in the Spacing Unit for the Development Well,
     from the surface down to the base of the formation from which the
     Development Well produces. Such assignment supersedes and replaces making
     such interest subject to the non-consent penalties set forth in the
     Operating Agreement. Provided, however, the Non-Participating Party shall
     nevertheless retain an overriding royalty, proportionately reduced to its
     interest, in an amount equal to the difference between twenty-five percent
     (25%) and the existing lease burdens on the NonParticipating Party's
     interest assigned to the Participating Parties.

     Notwithstanding the foregoing, if the Development Well is completed in a
     producing horizon different from the horizon set forth in the original
     proposal, the Non-Participating Party shall have thirty (30) days from the
     receipt of the proposal to complete in a different producing horizon in
     which to elect to participate in the Development Well as completed.  If the
     Non-Participating Party elects to participate in said well, the Non-
     Participating Party shall pay its share of the cost of drilling the
     Development Well by multiplying the cost of drilling the Development Well
     times a fraction based upon one of the following: (i) on a Development Well
     completed above the original proposed depth of the Development Well, the
     fraction shall be the Non-Participating Party's percentage ownership times
     a fraction, the numerator of which is the completion depth of the
     Development Well and the denominator of which is the original proposed
     depth: or (ii) on a Development Well completed below the original proposed
     depth of the Development Well, the fraction shall be the Non-Participating
     Party's percentage ownership.  Upon electing and

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     paying its pro-rata share as provided herein, the Non-Participating Party
     shall become a participant in the Development Well as if it were an
     original participant.

                                   ARTICLE V
                                   ---------
                             DUTIES OF THE PARTIES
                             ---------------------

5.1  Delay Rentals and Releases. During the term of this Agreement and any
     --------------------------
     Operating Agreement executed in connection herewith, PURE shall have the
     responsibility for payment of any rentals, shut-in payments and minimum
     royalty payments necessary to maintain in force and effect the leases and
     agreements covering the Properties.  PURE shall be reimbursed by the other
     Parties for their proportionate share of these rentals, shut-in payments
     and minimum royalty payments.

5.2  Insurance. At all times while operations are conducted hereunder, all
     ---------
     Parties shall comply with all laws including the applicable workman's
     compensation laws.  Operator shall also carry or provide insurance for the
     benefit of the joint account as outlined in Exhibit "D" attached to the
     Operating Agreement.  Both Parties shall require all contractors employed
     by it to comply with the applicable workman's compensation laws and to
     maintain such other insurance as both Parties may require.  PURE may be a
     self insurer for liability under the compensation and general liability
     laws, provided however, in such event the only charge that shall be made by
     Operator to the joint account shall be as provided in Article V.D.9 of the
     Operating Agreement and in Exhibit "C" attached to the Operating Agreement.

                                   ARTICLE VI
                                   ----------
                                 MISCELLANEOUS
                                 -------------

6.1  Relationship of the Parties. This Agreement and the rights and liabilities
     ---------------------------
     under this Agreement are several and not joint or collective, and are not
     intended to create, and shall not be construed to create, an association
     for profit, a trust, a joint venture, a mining partnership or other
     relationship of partnership, or entity of any kind between or among the
     Parties, except as provided in Paragraph 6.2 or in the Tax Partnership
     Provisions attached as Exhibit "C" to this Agreement.

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6.2  Tax Partnership. Notwithstanding Paragraph 6.1 above, the Parties intend
     ---------------
     that the execution of this Agreement and the joint operations hereunder
     shall be treated as the formation and operation of a partnership for
     federal income tax purposes ("Tax Partnership"). In that regard, the
     Parties understand and intend that the provisions of the Agreement shall be
     interpreted and applied in a manner consistent with such treatment and that
     Subchapter K of the Internal Revenue Code of 1986, as amended, shall apply
     to all actions taken pursuant to the terms of this Agreement. Thus, without
     limitation or exclusion of other provisions hereof, the Parties intend that
     the following provisions of this Agreement shall be treated and interpreted
     in the manner hereafter specified for federal income tax purposes:

     a)   The Parties will make capital contributions to the Tax Partnership as
          follows:

          i)   Existing Properties, as described in Paragraphs 1.4 and 2.3; and

          ii)  Leasehold Costs, as described in Paragraphs 1.7 and 2.2; and

          iii) Exploration Expenditures, as described in Paragraphs 1.5, 3.1
               and 3.2; and

          iv)  Development Well costs, as described in Paragraphs 1.3 and 4.1;
               and

          v)   Operating Costs, as described in Paragraphs 1.9 and 4.1.

     All acquired Properties will be acquired on behalf of the Tax Partnership
     and the Parties will hold title to all Properties as nominees of the Tax
     Partnership;

     b)   The Tax Partnership shall allocate all costs, deductions and credits
          described in Paragraph 6.2(a) above, to the Parties based on each
          Party's contribution to such costs.

     c)   Except as provided in subparagraphs 6.2(b) above and 6.2(c) (iii)
          below, the Tax Partnership shall allocate all income, gain, loss,
          deduction, or credit, 40% to Chaparral, ET AL (based on the
          percentages reflected in Paragraphs 2.2 and 2.3 and 60% to PURE. As
          described in Articles III and IV, the Tax Partnership shall make all
          cash distributions pursuant to subparagraphs 6.2(c)(i) and (ii) below
          in the following percentages;

               i)   All cash distributions shall be made 40% to Chaparral, ET AL
                    and 60% to PURE except as provided in Paragraph 6.2(c)(ii)
                    below;

               ii)  During Project Payout, as described in Paragraph 1.4, with

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                    respect to only the three (3) Subsequent Exploratory Wells,
                    cash distributions shall be made 100% to PURE; and

               iii) During Project Payout, the Tax Partnership shall allocate
                    all income, deduction and credits resulting from the
                    Subsequent Exploratory Wells 100% to PURE.

     d)   The Parties capital accounts will be charged for in-kind distributions
          in accordance with the non-participating penalties provisions as
          described in Paragraph 4.2.  For example, in the event a Non-
          Participating Party assigns all of it's right, title and interest in
          the Spacing Unit for the Development Well, such Party's capital
          account will be charged with its tax basis in the Spacing Unit and any
          overriding royalty interest retained by such Party will be reported
          outside of the Tax Partnership (i.e., the in-kind distribution of
          partnership property).

     Additional provisions relating to this Tax Partnership are contained in
     Exhibit "C" to this Agreement.  Notwithstanding anything to the contrary in
     this Agreement, the terms of this Article VI and Exhibit "C" will survive
     any termination of this Agreement.

     6.3  Notices. Unless otherwise provided herein, all notices, advice or
          -------
          communications required or convenient to be given by any Party to the
          other Party hereto, shall be deemed to have been properly given when
          given in writing by registered, certified, U.S. mail, return receipt
          requested, or by telegram, fax, telex or cable when addressed to the
          Parties at the following address:

                    PURE RESOURCES, L. P.
                    500 West Texas, Suite 200
                    Midland, Texas 79701
                    Attn: Land Manager
                    Phone: (915) 498-8600
                    Fax: (915) 498-8692

                    CHAPARRAL ROYALTY COMPANY
                    P. O. Box 1604
                    Midland, Texas 79702
                    Phone: (915) 697-5222
                    Fax: (915) 694-9381

                    DDDF COMPANY, INC.
                    P.O. Box 554
                    Midland, Texas 79702
                    Phone: (915) 683-1088
                    Fax: (915) 682-7111

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                    J. DON LOONEY
                    % Robert McCleskey
                    P.O. Box 3362
                    Midland, Texas 79701
                    Phone: (915) 685-1212
                    Fax: (915) 683-5482

                    GEORGE G. STALEY
                    500 W. Texas, Suite 200
                    Midland, Texas 79701
                    Phone: (915) 498-8600
                    Fax: (915) 498-2607

     The originating notice shall be deemed given when received and the
     responsive notice shall be deemed given when mailed. Each Party shall have
     the right to change its address from time to time by written notice to the
     other Party as prescribed herein; provided, however, that nothing herein
     shall supersede the notice provisions specified in the Operating Agreement.

6.4  Laws. This Agreement shall be conducted in conformity with all valid
     ----
     applicable federal, state and local laws, rules, orders and regulations of
     any constituted federal, state or local regulatory body hereunder.

6.5  Operations. All operations or other activities conducted hereunder shall be
     ----------
     conducted in a reasonable and prudent manner in accordance with good oil
     field practices. Provided, however, that the Operator shall be liable to
     the other Parties only for losses sustained or liabilities incurred which
     result from Operator's gross negligence or willful misconduct.

6.6  Governing Law. This Agreement shall be construed and enforced in accordance
     -------------
     with the laws of the State of Texas and shall bind and inure to the benefit
     of the Parties hereto and their respective successors and assigns.

6.7  Waiver. The failure of a Party to insist on the strict performance of any
     ------
     provision of this Agreement or to exercise any right, power or remedy upon
     a breach thereof shall not constitute a waiver of any provision of this
     Agreement or limit the Party's right thereafter to enforce any provision or
     exercise any right.

6.8  Waiver of Implied Obligations. There are no implied covenants contained in
     -----------------------------
     this Agreement.

6.9  Assignment. No Party shall assign any right or interest under this
     ----------
     Agreement to other parties without the written consent of the other Parties
     hereto. However, such consent shall not be unreasonably withheld.  The
     foregoing

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     notwithstanding and subject to the other provisions of this Agreement, each
     of the Parties may pledge or encumber the Properties provided that such
     pledge or encumbrance is limited to that interest in the Properties owned
     by such Party and that such pledge or encumbrance is expressly made subject
     to the terms and conditions of this Agreement.

6.10 Ownership of Information. Subject to the limitations of Paragraph 6.9, any
     ------------------------
     and all Information, whether completed or not shall be the joint property
     of the Parties for their copying, use, modification, distribution or
     disclosure without accounting to the other Parties in whatever way the
     Party may determine notwithstanding copyright or other restrictive legends
     placed thereon.

6.11 Covenants Running with Land. All covenants and obligations provided for
     ---------------------------
     herein shall be deemed to be covenants running with the land and the
     leasehold estates therein and any transfer or other disposition of any of
     the Properties shall be made subject to the terms of this Agreement.

6.12 Entire Understanding. The terms of this Agreement and the Schedules, Maps,
     --------------------
     Plats, Exhibits and Annexes, attached hereto constitute the entire contract
     of the Parties hereto, and there are no Agreements, undertaking,
     obligations, promises, assurances or conditions, whether precedent or
     otherwise, except those specifically set forth herein. No modification of
     this Agreement shall be valid unless made in writing and duly executed by
     the Parties.

6.13 Media Release. No Party shall use any other Party's name in any promotional
     -------------
     material or in any publicity release regarding the program conducted under
     this Agreement without first obtaining the written permission of the Party
     whose name is going to be used.

6.14 No Third Party Beneficiary. Except as expressly provided herein, this
     --------------------------
     Agreement is not intended to create, nor shall it be construed to create,
     any rights in any third party under doctrines concerning third party
     beneficiaries.

                                       14
<PAGE>

IN WITNESS WHEREOF the Parties have executed this Agreement on the dates shown
below, but effective as of the 10th day of March,  2000.

PURE RESOURCES, L.P. by and through
its General Partner PURE RESOURCES I, INC.

By: /s/ Dan P. Colwell
   ------------------------------

Title: Vice President
      --------------------------

Date: 8/31/00
     -----------------------------

DDDF COMPANY INC.                        CHAPARRAL ROYALTY COMPANY

By: /s/ F. H. Mills, Jr.                 By: /s/ Jack Russell
   ------------------------------           -----------------------------

Title: President                         Title: President
      ---------------------------             --------------------------

Date: 9/1/00                             Date: 9/1/00
     ----------------------------             ---------------------------

 /s/ George G. Staley                      /s/ Robert A. McClesky
---------------------------------        --------------------------------
GEORGE G. STALEY                         ROBERT A. MCCLESKY,
                                         Attorney-in-Fact for J. DON LOONEY
Date: 9/1/00                             Date: 9/1/00
     ----------------------------             ----------------------------

                                       15<PAGE>

                                                                   EXHIBIT 10.12

                                    MASTER
                                PROMISSORY NOTE
                                ---------------
                                 (this "Note")
                                        ----

$10,000,000.00                                                  October 18, 2000

  FOR VALUE RECEIVED, the undersigned, PURE RESOURCES, INC. ("Company") promises
                                                              -------
to pay to the order of THE CHASE MANHATTAN BANK ("Bank"), at its offices located
                                                  ----
at 712 Main Street, Houston, Texas 77002 in lawful money of the United States of
America and in immediately available funds, the principal amount of each loan (a
"Loan") shown in Bank's records to have been made by Bank and on the relevant
 ----
maturity date as set forth in Bank's records. Each Loan shall have its own date
of maturity agreed by Company and Bank. The rate of interest on each Loan
evidenced hereby from time to time shall be the interest rate which shall be
determined for each Loan by agreement between Company and Bank but, in no event,
shall exceed the maximum interest rate permitted under applicable law ("Highest
                                                                        -------
Lawful Rate"). To the extent that Texas law determines the Highest Lawful Rate,
-----------
the Highest Lawful Rate is the weekly rate ceiling as defined in the Texas
Finance Code Chapter 303. All past due amounts shall bear interest at a per
annum interest rate equal to the Prime Rate plus one percent (1%). "Prime Rate"
                                                                     ----------
means the rate determined from time to time by Bank as its prime rate. The Prime
Rate shall change automatically from time to time without notice to Borrower or
any other person. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE BANK'S
LOWEST RATE.

  Interest on each Loan shall be: (i) computed on the unpaid principal amount of
the Loan outstanding from the date of advance until paid; (ii) payable at the
maturity of such Loan and thereafter on demand; and (iii) calculated on the
basis of a year of 360 days for the actual days elapsed.

  The total amount of interest (as defined under applicable law) contracted for,
charged or collected under this Note will never exceed the Highest Lawful Rate.
If Bank contracts for, charges or receives any excess interest, it will be
deemed a mistake. Bank will automatically reform the contract or charge to
conform to applicable law, and if excess interest has been received, Bank will
either refund the excess or credit the excess on the unpaid principal amount of
this Note. All amounts constituting interest will be spread throughout the full
term of this Note in determining whether interest exceeds lawful amounts.

  Each of the following is an event of default ("Events of Default"):
                                                 -----------------
  (a) Company shall fail to pay any amount of principal of or interest on this
      Note when due;
  (b) Company shall fail to pay when due any amount of principal or interest
      with respect to any obligation to Bank (other than this Note); or
  (c) Company shall fail to pay any amount relating to any other
      indebtedness for borrowed money or other pecuniary obligation
      (including any such contingent obligation) or an event or condition
      shall occur or exist which gives the holder of any such indebtedness
      or obligation the right or option to accelerate the maturity thereof.
  (d) Company shall commence any bankruptcy, reorganization or similar case
      or proceeding relating to it or its property under the law of any
      jurisdiction, or a trustee or receiver shall be appointed for itself
      or any substantial part of its property;
  (e) any involuntary bankruptcy, reorganization or similar case or
      proceeding under the law of any jurisdiction shall have been commenced
      against Company or any substantial part of its property and such case
      or proceeding shall not have been dismissed within 60 days, or Company
      shall have consented to such case or proceeding; or
  (f) Company shall admit in writing its inability to pay its debts as they
      become due; or
  (g) Company shall be acquired, dissolved or otherwise cease to exist.

  Upon the happening of any Event of Default specified in paragraphs (d), (e) or
(f) above, automatically the Loans evidenced by this Note (with accrued interest
thereon) shall immediately become due and payable, and upon the happening of an
Event of Default specified in paragraphs (a), (b), (c) or (g) above, Bank may,
by notice to Company, declare the Loans evidenced by this Note (with accrued
interest thereon) to be due and payable, whereupon the same shall immediately
become due and payable. Except as expressly provided above, presentment, demand,
protest, notice of intent to accelerate, acceleration and all other notices of
any kind are hereby expressly waived.

  The Company hereby agrees to pay on demand, in addition to unpaid principal
and interest, all Bank's costs and expenses incurred in attempting or effecting
collection hereunder, including the reasonable fees and expenses of counsel
(which may include, to the extent permitted by applicable law, allocated costs
of in-house counsel), whether or not suit is instituted.

  This Note is executed and delivered by Company to evidence Loans which may be
made by Bank to Company under a discretionary line of credit ("Discretionary
                                                               -------------
Line of Credit") not to exceed $10,000,000.00. COMPANY UNDERSTANDS THAT BANK
--------------
HAS NO OBLIGATION TO MAKE ANY LOAN TO COMPANY UNDER THIS NOTE. BANK MAY CANCEL
THE DISCRETIONARY LINE OF CREDIT AT ANY TIME IN ITS SOLE AND ABSOLUTE
DISCRETION.

  All Loans evidenced by this Note are and will be for business and commercial
purposes and no Loan will be used for the purpose of purchasing or carrying any
margin stock as that term is defined in Regulation U of the Board of Governors
of the Federal Reserve System (the "Board").
                                    -----

  Chapter 346 of the Texas Finance Code (which regulates certain revolving
credit loan accounts) does not apply to this Note or to any Loan evidenced by
this Note. This Note shall be governed by the laws of the State of Texas and the
laws of the United States as applicable.

  Bank shall, and is hereby authorized by Company, to record in its records the
date, amount, interest rate and due date of each Loan as well as the date and
amount of each payment by the undersigned in respect thereof. Payments may be
applied to accrued interest or principal in whatever order Bank chooses. Absent
manifest error, Bank's records shall be conclusive as to amounts used.

  Loans evidenced by this Note may not be prepaid. In the event any such
prepayment occurs, Company shall indemnify Bank against any loss, liability,
damage, cost or expense which Bank may sustain or incur as a consequence
thereof, including without limitation any loss, liability, damage, cost or
expense sustained or incurred in liquidating or employing deposits from third
parties acquired to effect or maintain such Loan or any part thereof. Bank shall
provide to Company a written statement explaining the amount of any such loss or
expense, which statement shall be conclusive absent manifest error.

  No waiver of any default shall be deemed to be a waiver of any other default.
No failure to exercise or delay in exercising any right or power under this Note
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power preclude any further or other exercise thereof or the
exercise of any other right or power. No amendment, modification or waiver of
this Note shall be effective unless the same is in writing and signed by the
person against whom such amendment, modification or waiver is sought to be
enforced. No notice to or demand on any person shall entitle any person to any
other or further notice or demand in similar or other circumstances.

  This Note shall be binding upon the successors and assigns of Company and
inure to the benefit of Bank, its successors, endorsees and assigns
(furthermore, Bank may assign or pledge this Note or any interest therein to any
Federal Reserve Bank). If any term or provision of this Note shall be held
invalid, illegal or unenforceable the validity of all other terms and provisions
will not be affected.

  THIS NOTE REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

                         COMPANY:   PURE RESOURCES, INC.

                                    By: /s/ William K. White
                                        ---------------------------------
                                    Name:  William K. White
                                        ---------------------------------
                                    Title:  Vice President - Finance, CFO
                                         --------------------------------

(The Bank's signature is provided as
its acknowledgment of the above as
the final written agreement between the parties.)

THE CHASE MANHATTAN BANK

By: /s/ Robert C. Mertensotto
    -------------------------
Name: Robert C. Mertensotto
      -----------------------
Title: Managing Director
       ----------------------

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