Document:

Exhibit 10.3

                            PARTICIPATION AGREEMENT
                                PATRICIA PROSPECT
                 SOUTH MARSH ISLAND AREA, BLOCK 231, OCS-G 26014
                     OUTER CONTINENTAL SHELF, GULF OF MEXICO

     This Agreement is entered into effective September 1, 2005, by and between
Stone Energy Corporation ("Stone"), whose address is 625 East Kaliste Saloom
Road, Lafayette, LA 70508, and Ridgewood Energy Corporation, Manager Ridgewood
Energy P Fund, LLC. ("Ridgewood"), whose address is 11700 Old Katy Road, Suite
280, Houston, TX 77079, concerning the drilling and evaluation of the OCS-G
26014, South Marsh Island Block 231, Outer Continental Shelf, Gulf of Mexico.

     Whereas, Stone owns one hundred percent (100%) record title interest in
OCS-G 26014 (hereinafter defined as "Lease"),

     Whereas, Ridgewood desires to earn an undivided thirty percent (30%)
Operating Rights Title Interest (as hereinafter defined) from Stone in the Lease
by participating in and bearing a disproportionate fifty percent (50%) of all of
the costs, of drilling an Initial Test Well (as hereinafter defined) to Casing
Point (as hereinafter defined), subject to the limitations set forth in Article
3.1 and conducting all other testing and logging operations as set forth in the
AFE (as hereinafter defined) for the Initial Test Well (as hereinafter defined);
and

     Whereas, Ridgewood desires to earn an assignment of the above described
interest in the Lease in accordance with the further terms and conditions of
this Agreement, and the Parties (as hereinafter defined) hereto desire to set
forth their agreement concerning the obligations of Ridgewood with respect to
earning such interest from Stone.

     Now, Therefore, for $510,000 cash in hand representing reimbursement to
Stone by Ridgewood of thirty percent (30%) of Stone's leasehold costs in the
Lease and in consideration of the premises and the mutual benefits set forth'
herein and other good and valuable consideration, the Parties hereby agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth
below:

1.1      "AFE" means the Authorization for Expenditure #1533-D submitted by
         Stone dated July 1, 2005 in the gross amount of $15,876,000.00 to cover
         the estimated costs to drill the Initial Test Well and/or other
         operations conducted under the attached JOA (as hereinafter defined),
         which is attached as Exhibit "A".

1.2      "Affiliate" means a company or partnership or other legal entity which
         controls, or is controlled by, or which is controlled by an entity
         which controls a Party. Control means the ownership directly or
         indirectly of more than fifty percent (50%) of the voting rights in a
         company, partnership or legal entity.

                                       1
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         Objective Depth and all other approved logging and testing operations
         have been conducted.

4.2      The interest assigned will be without warranty of title except by,
         through and under Stone and shall' be made without recourse or
         warranty, express, implied or statutory, except as to actions by
         through or under Stone, but not otherwise. Stone will represent that
         there are no existing encumbrances on production from the Leases other
         than the Lessor's royalty. Such assignment shall be made effective as
         of the first day of the month in which Objective Depth is reached.

                                    ARTICLE V
               LEASE OWNERSHIP AND SHARING OF COSTS AFTER EARNING

5.1.1    In the event Ridgewood earns an assignment of the Operating Rights
         Title Interest, then the joint working interest ownership in the
         Initial Test Well, or Substitute Well therefor, and in the Lease shall
         be in the proportions of seventy percent (70%) Stone and thirty percent
         (30%) Ridgewood or as otherwise agreed to pursuant to the JOA.

         The cost, risk, expense and liability of all subsequent approved
         operations, including but not limited to, the cost of setting casing
         and completing and equipping the Initial Test Well for production, as
         well as all other approved operations conducted on the Lease, shall be
         borne in accordance with those working interest percentages set forth
         immediately above in this Article 5.1 or as otherwise agreed to
         pursuant to the JOA.

                                   ARTICLE VI
                  OPERATING AGREEMENT AND CONDUCT OF OPERATIONS

6.1      All operations on the Initial Test Well, or Substitute Well, and the
         Leases will be conducted under the terms and conditions of the Joint
         Operating Agreement. Simultaneously with the execution of this
         Agreement, the Parties will execute a Joint Operating Agreement
         utilizing the form attached hereto as Exhibit "B", which will reflect
         working interest percentages of Stone and Ridgewood as established by
         this Agreement.

6.2      In the event of a conflict between a provision of this Agreement and a
         provision of the Joint Operating Agreement, then the applicable
         provision of this Agreement shall prevail and control.

                                   ARTICLE VII
                             ASSIGNMENT OF AGREEMENT

7.1      Until such time Ridgewood has earned an assignment as set forth in
         Article IV above, Ridgewood shall not have the right to assign any
         portion of its rights and obligations pursuant to this Agreement
         without the prior written consent of Stone. Any such assignment
         consented to by Stone shall be made subject to this Agreement and shall
         not be binding on Stone until Stone has been furnished a copy of the
         assignment(s). Notwithstanding any assignment that Ridgewood may make,
         as between Stone and Ridgewood, Stone shall have the right to continue
         to look solely to Ridgewood for the performance of all of the cost
         obligations undertaken and the satisfaction of all liabilities

                                       2
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         documents are necessary or desirable to carry out its purposes, the
         Parties shall take or cause to be taken all such necessary action or
         execute and deliver such deeds and documents.

13.8     This Agreement is the entire agreement of the Parties with respect to
         the subject matter contained herein and supersedes all prior written
         and verbal understandings and negotiations of the Parties including
         that certain "Offer to Participate-Patricia Prospect" between Stone
         Energy Corporation and Ridgewood Energy Corporation dated August 31,
         2005.

                                   ARTICLE XIV
                               EFFECT OF AGREEMENT

14.1     The terms, covenants and conditions of this Agreement shall be binding
         upon, and shall inure to the benefit of, the Parties hereto and their
         respective heirs, successors and assigns; and the terms, covenants and
         conditions shall be covenants running with the leases covered hereby
         and the leasehold estate therein and with each transfer or assignment
         of the land or leasehold estate.

     In Witness Whereof, this Agreement is executed in the presence of
competent witnesses by the Parties to this Agreement as of the dates set out
below, but is made effective as of date first above written.

WITNESSES:                               RIDGEWOOD ENERGY CORPORATION,
                                         MANAGER RIDGEWOOD ENERGY
                                         P FUND, LLC

[SIGNATURE ILLEGIBLE]                    By: /s/ W. Greg Tabor
 -------------------                        ------------------------------------
                                         Name: W. Greg Tabor
                                               ---------------------------------
[SIGNATURE ILLEGIBLE]                    Title: Executive Vice President
 -------------------                            --------------------------------
                                         Date: 12-15-05

                                         STONE ENERGY CORPORATION

[SIGNATURE ILLEGIBLE]                    By: /s/ E.J. Louviere
 -------------------                         -----------------------------------
                                         Name: E.J. Louviere
                                               ---------------------------------
[SIGNATURE ILLEGIBLE]                    Title: Senior Vice President - Land
 -------------------                            --------------------------------
                                         Date: December 9, 2005

                                       3
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                                 ACKNOWLEDGMENT
                                 --------------

STATE OF TEXAS
COUNTY OF HARRIS

On this 15th day of December, 2005, before me, appeared W. Greg Tabor, to me
personally known, who, being by me duly sworn, did say that he is the Executive
Vice President for Ridgewood Energy Corporation, Manager Ridgewood Energy P
Fund, LLC. and that the foregoing instrument was signed in behalf of said
corporation by authority of its Board of Directors, and said appearer
acknowledged said instrument to be the free act and deed of said corporation.

                                                 /s/ Donna Ermis
                                                 ---------------
                                                  NOTARY PUBLIC

My Commission expires: October 1, 2008

                                         [SEAL]   DONNA ERMIS
                                                 Notary Public,
                                                 State of Texas
                                              My Commission Expires
                                                 October 01, 2008

                                 ACKNOWLEDGMENT
                                 --------------

STATE OF LOUISIANA
PARISH OF LAFAYETTE

On this 9th day of December, 2005, before me, appeared, E. J. Louviere to me
personally known, who, being by me duly sworn, did say that he is a Senior Vice
President, Land of Stone Energy Corporation, and that the foregoing instrument
was executed in behalf of said corporation by authority of its Board of
Directors, and said appearer acknowledged said instrument to be the free act and
deed of said corporation.

                                                 /s/ Thomas E. Barry
                                                 --------------------
                                                     NOTARY PUBLIC

My Commission expires: ____________

                                              OFFICIAL SEAL
                                             THOMAS E. BARRY
                                          NOTARY PUBLIC NO. 20185
                                            STATE OF LOUISIANA
                                           PARISH OF LAFAYETTE
                                         My Commission Is For Life

                                       4
<PAGE>

                                         Ridgewood Energy Corporation,
                                         Manager Ridgewood Energy P Fund, LLC.

__________________________________       By: _______________________________

__________________________________       Title: _____________________________

                                       5EXHIBIT "B"

    Attached to and made a part of that certain Participation Agreement dated
     September 1, 2005 by and between Stone Energy Corporation and Ridgewood
                                     Energy
               Corporation, Manager Ridgewood Energy P Fund, LLC.

                          OFFSHORE OPERATING AGREEMENT

                                 by and between

                            Stone Energy Corporation

                                       and

                          Ridgewood Energy Corporation

                             Dated September 1, 2005

                                    covering

                          South Marsh Island Block 231

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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                                                                                                      <C>
               TABLE OF CONTENTS .........................................................................................1

               WITNESSETH: .............................................................................................. 7

               ARTICLE 1 APPLICATION .................................................................................... 7

                  1.1   APPLICATION TO EACH LEASE ....................................................................... 7

               ARTICLE 2 DEFINITIONS .................................................................................... 7

                  2.1   ADDITIONAL TESTING .............................................................................. 7
                  2.2   AFFILIATE ....................................................................................... 7
                  2.3   AUTHORIZATION FOR EXPENDITURE (AFE) ............................................................. 8
                  2.4   COMPLETE, COMPLETING, COMPLETION ................................................................ 8
                  2.5   COMPLETION EQUIPMENT ............................................................................ 8
                  2.6   CONFIDENTIAL DATA ............................................................................... 8
                  2.7   DEEPEN, DEEPENING ............................................................................... 8
                  2.8   DEVELOPMENT FACILITIES .......................................................................... 8
                  2.9   DEVELOPMENT OPERATION ........................................................................... 8
                  2.10     DEVELOPMENT WELL ............................................................................. 9
                  2.11     EXPLORATORY OPERATION ........................................................................ 9
                  2.12     EXPLORATORY WELL ............................................................................. 9
                  2.13     EXPORT PIPELINES ............................................................................. 9
                  2.14     FORCE MAJEURE ................................................................................ 9
                  2.15     HYDROCARBONS ................................................................................. 9
                  2.16     JOINT ACCOUNT ................................................................................ 9
                  2.17     LEASE ........................................................................................ 9
                  2.18     MMS .......................................................................................... 9
                  2.19     NON-CONSENT OPERATION ........................................................................10
                  2.20     NON-CONSENT PLATFORM .........................................................................10
                  2.21     NON-CONSENT WELL .............................................................................10
                  2.22     NON-OPERATOR .................................................................................10
                  2.23     NON-PARTICIPATING PARTY ......................................................................10
                  2.24     NON-PARTICIPATING PARTY'S SHARE ..............................................................10
                  2.25     OBJECTIVE DEPTH ..............................................................................10
                  2.26     OBJECTIVE HORIZON ............................................................................10
                  2.27     OFFSITE HOST FACILITIES ......................................................................10
                  2.28     OPERATOR .....................................................................................10
                  2.29     PARTICIPATING INTEREST .......................................................................10
                  2.30     PARTICIPATING PARTY ..........................................................................10
                  2.31     PLATFORM .....................................................................................11
                  2.32     PRODUCIBLE RESERVOIR .........................................................................11
                  2.33     PRODUCIBLE WELL ..............................................................................11
                  2.34     PRODUCTION INTERVAL ..........................................................................11
                  2.35     RECOMPLETE, RECOMPLETING, RECOMPLETION .......................................................11
                  2.36     REWORK, REWORKING ............................................................................11
                  2.37     SIDETRACK, SIDETRACKING ......................................................................11
                  2.38     TAKE-IN-KIND FACILITIES ......................................................................12
                  2.39     TRANSFER OF INTEREST .........................................................................12
                  2.40     WORKING INTEREST .............................................................................12

               ARTICLE 3 EXHIBITS .......................................................................................12

                  3.1   EXHIBITS ........................................................................................12
</TABLE>

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<TABLE>
<S>                  <C>                                                                                                <C>
                     3.1.1    Exhibit "A" ...............................................................................12
                     3.1.2    Exhibit "B" ...............................................................................12
                     3.1.3    Exhibit "C" ...............................................................................12
                     3.1.4    Exhibit "D" ...............................................................................12
                     3.1.5    Exhibit "E ................................................................................12
                     3.1.6    Exhibit "F" ...............................................................................12
                     3.1.7    Exhibit "G" ...............................................................................12
                     3.1.8    Exhibit "H" ...............................................................................13
                     3.1.9    Exhibit "1" ...............................................................................13
                  3.2   CONFLICTS .......................................................................................13

               ARTICLE 4 OPERATOR .......................................................................................13

                  4.1   OPERATOR ........................................................................................14
                  4.2   SUBSTITUTE OPERATOR .............................................................................14
                     4.2.1    Circumstances Under Which the Operator Must Conduct a Non-Consent Operation ...............14
                     4.2.2    Operator's Conduct of a Non-Consent Operation in Which it is a Non participating Party ....14
                     4.2.3    Appointment of a Substitute Operator ......................................................14
                     4.2.4    Redesignation of Operator .................................................................14
                  4.3   RESIGNATION OF OPERATOR .........................................................................15
                  4.4   REMOVAL OF OPERATOR .............................................................................15
                  4.5   SELECTION OF SUCCESSOR ..........................................................................15
                  4.6   EFFECTIVE DATE OF RESIGNATION OR REMOVAL ........................................................16
                  4.7   DELIVERY OF PROPERTY ............................................................................16

               ARTICLE 5 AUTHORITY AND DUTIES OF OPERATOR ...............................................................17

                  5.1   EXCLUSIVE RIGHT TO OPERATE ......................................................................17
                  5.2   WORKMANLIKE CONDUCT .............................................................................17
                  5.3   LIENS AND ENCUMBRANCES ..........................................................................17
                  5.4   EMPLOYEES AND CONTRACTORS .......................................................................17
                  5.5   RECORDS .........................................................................................17
                  5.6   COMPLIANCE ......................................................................................17
                  5.7   CONTRACTORS .....................................................................................18
                  5.8   GOVERNMENTAL REPORTS ............................................................................18
                  5.9   INFORMATION TO PARTICIPATING PARTIES ............................................................18
                  5.10     INFORMATION TO NON-PARTICIPATING PARTIES .....................................................19

               ARTICLE 6 VOTING AND VOTING PROCEDURES ...................................................................19
                  6.1   VOTING PROCEDURES ...............................................................................19

                     6.1.1    Voting Interest ...........................................................................19
                     6.1.2    Vote Required .............................................................................19
                     6.1.3    Votes .....................................................................................19
                     6.1.4    Meetings ..................................................................................20

               ARTICLE 7 ACCESS .........................................................................................20

                  7.1   ACCESS TO LEASE .................................................................................20
                  7.2   REPORTS .........................................................................................20
                  7.3   CONFIDENTIALITY .................................................................................21
                  7.4   LIMITED DISCLOSURE ..............................................................................21
                  7.5   LIMITED RELEASES TO OFFSHORE SCOUT ASSOCIATION ..................................................21
                  7.6   MEDIA RELEASES ..................................................................................21

               ARTICLE 8 EXPENDITURES ...................................................................................22

                  8.1   BASIS OF CHARGE TO THE PARTIES ..................................................................22
                  8.2   AFES ............................................................................................22
                  8.3   EMERGENCY AND REQUIRED EXPENDITURES .............................................................22
                  8.4   ADVANCE BILLINGS ................................................................................22
</TABLE>

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<TABLE>
<S>               <C>                                                                                                   <C>
                  8.5   COMMINGLING OF FUNDS ............................................................................23
                  8.6   SECURITY RIGHTS (TX-MS-AL-FL OR LA) .............................................................23
                  8.7   OVEREXPENDITURES ................................................................................23

               ARTICLE 9 NOTICES ........................................................................................24

                  9.1   GIVING AND RECEIVING NOTICES ....................................................................24
                  9.2   CONTENT OF NOTICE ...............................................................................24
                  9.3   RESPONSE TO NOTICES .............................................................................25
                     9.3.1    Platform and/or Development Facilities Proposals ..........................................25
                     9.3.2    Well Proposals ............................................................................25
                     9.3.3   Proposal for Multiple Operations ...........................................................25
                     9.3.4    Other Matters .............................................................................25
                  9.4   FAILURE TO RESPOND ..............................................................................25
                  9.5   RESPONSE TO COUNTERPROPOSALS ....................................................................25
                  9.6  TIMELY WELL OPERATIONS ...........................................................................26
                  9.7  TIMELY PLATFORM/DEVELOPMENT FACILITIES OPERATIONS ................................................26

               ARTICLE 10 EXPLORATORY OPERATIONS ........................................................................27

                  10.1    PROPOSING OPERATIONS ..........................................................................27
                  10.2    COUNTERPROPOSALS ..............................................................................27
                  10.3    OPERATIONS BY ALL PARTIES .....................................................................27
                  10.4    SECOND OPPORTUNITY TO PARTICIPATE .............................................................27
                  10.5    OPERATIONS BY FEWER THAN ALL PARTIES ..........................................................28
                  10.6    EXPENDITURES APPROVED .........................................................................28
                  10.7    CONDUCT OF OPERATIONS .........................................................................28
                  10.8    COURSE OF ACTION AFTER REACHING OBJECTIVE DEPTH ...............................................28
                     10.8.1  Election by Participating Parties ..........................................................29
                     10.8.2  Priority of Operations .....................................................................29
                     10.8.3  Second Opportunity to Participate ..........................................................30
                     10.8.4   Operations by Fewer Than All Parties ......................................................30
                     10.8.5  Subsequent Operations ......................................................................31
                  10.9    WELLS PROPOSED BELOW DEEPEST PRODUCIBLE RESERVOIR .............................................31

               ARTICLE 11     DEVELOPMENT OPERATIONS ....................................................................32

                  11.1    PROPOSING OPERATIONS ..........................................................................32
                  11.2    COUNTERPROPOSALS ..............................................................................32
                  11.3    OPERATIONS BY ALL PARTIES .....................................................................32
                  11.4    SECOND OPPORTUNITY TO PARTICIPATE .............................................................32
                  11.5    OPERATIONS BY FEWER THAN ALL PARTIES ..........................................................33
                  11.6    EXPENDITURES APPROVED .........................................................................33
                  11.7    CONDUCT OF OPERATIONS .........................................................................33
                  11.8    COURSE OF ACTION AFTER REACHING OBJECTIVE DEPTH ...............................................33
                     11.8.1  Election by Fewer Than All Parties .........................................................34
                     11.8.2  Priority of Operations .....................................................................34
                     11.8.3  Second Opportunity to Participate ..........................................................35
                     11.8.4  Operations by Fewer Than All Parties .......................................................35
                     11.8.5  Subsequent Operations ......................................................................36

               ARTICLE 12 PLATFORM AND DEVELOPMENT FACILITIES ...........................................................36

                  12.1    PROPOSAL ......................................................................................36
                  12.2    COUNTERPROPOSALS ..............................................................................36
                     12.2.1   Operations by All Parties .................................................................36
                     12.2.2  Second Opportunity to Participate ..........................................................37
                     12.2.3  Operations by Fewer Than All Parties .......................................................37
                  12.3    OWNERSHIP AND USE OF THE PLATFORM AND DEVELOPMENT FACILITIES ..................................38
                  12.4    RIGHTS TO TAKE IN KIND ........................................................................38
</TABLE>

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<PAGE>
<TABLE>
<S>               <C>                                                                                                   <C>
                  12.5     EXPANSION OR MODIFICATION OF A PLATFORM AND/OR DEVELOPMENT FACILITIES ........................39
                  12.6     OFFSITE HOST FACILITIES ......................................................................40

               ARTICLE 13 NON-CONSENT OPERATIONS ........................................................................40

                  13.1     NON-CONSENT OPERATIONS .......................................................................40
                     13.1.1   Non-interference ..........................................................................40
                     13.1.2   Multiple Completion Limitation ............................................................40
                     13.1.3   Metering ..................................................................................40
                     13.1.4   Non-consent Well ..........................................................................40
                     13.1.5   Cost Information ..........................................................................41
                     13.1.6   Completions ...............................................................................41
                  13.2     RELINQUISHMENT OF INTEREST ...................................................................41
                     13.2.1   Production Reversion Recoupment ...........................................................42
                     13.2.2   Non-production Reversion ..................................................................43
                  13.3     DEEPENING OR SIDETRACKING OF NON-CONSENT WELL ................................................43
                  13.4     DEEPENING OR SIDETRACKING COST ADJUSTMENTS ...................................................43
                  13.5     SUBSEQUENT OPERATIONS IN NON-CONSENT WELL ....................................................44
                  13.6     OPERATIONS IN A PRODUCTION INTERVAL ..........................................................44
                  13.7     OPERATIONS UTILIZING A NON-CONSENT PLATFORM AND/OR DEVELOPMENT FACILITIES ....................44
                  13.8     DISCOVERY OR EXTENSION FROM NON-CONSENT DRILLING .............................................45
                  13.9     ALLOCATION OF PLATFORM/DEVELOPMENT FACILITIES COSTS TO NON-CONSENT OPERATIONS ................45
                     13.9.1   Investment Usage Fees .....................................................................45
                     13.9.2   Operating and Maintenance Charges .........................................................48
                  13.10    ALLOCATION OF COSTS BETWEEN ZONES ............................................................49
                  13.11    LEASE MAINTENANCE OPERATIONS .................................................................49
                     13.11.1     Participation in Lease Maintenance Operations ..........................................49
                     13.11.2     Accounting for Non-participation .......................................................50
                  13.12    NON-CONSENT PREMIUMS .........................................................................50

               ARTICLE 14 ABANDONMENT, SALVAGE, AND SURPLUS .............................................................50

                  14.1     PLATFORM SALVAGE AND REMOVAL COSTS ...........................................................50
                  14.2     ABANDONMENT OF PLATFORMS, DEVELOPMENT FACILITIES OR WELLS ....................................50
                  14.3     ASSIGNMENT OF INTEREST .......................................................................51
                  14.4     ABANDONMENT OPERATIONS REQUIRED BY GOVERNMENTAL AUTHORITY ....................................51
                  14.5     DISPOSAL OF SURPLUS MATERIAL .................................................................51

               ARTICLE 15 WITHDRAWAL ....................................................................................52

                  15.1     RIGHT TO WITHDRAW ............................................................................52
                  15.2     RESPONSE TO WITHDRAWAL NOTICE ................................................................52
                     15.2.1   Unanimous Withdrawal., ....................................................................52
                     15.2.2   No Additional Withdrawing Parties .........................................................52
                     15.2.3   Acceptance of the Withdrawing Parties' Interests ..........................................53
                     15.2.4   Effects of Withdrawal .....................................................................53
                  15.3     LIMITATION UPON AND CONDITIONS OF WITHDRAWAL .................................................53
                     15.3.1   Prior Expenses ............................................................................53
                     15.3.2   Confidentiality ...........................................................................54
                     15.3.3   Emergencies and Force Majeure .............................................................54

               ARTICLE 16 RENTALS, ROYALTIES, AND OTHER PAYMENTS ........................................................55

                  16.1     OVERRIDING ROYALTY AND OTHER BURDENS .........................................................55
                  16.2     SUBSEQUENTLY CREATED INTEREST ................................................................55
                  16.3     PAYMENT OF RENTALS AND MINIMUM ROYALTIES .....................................................56
                  16.4     NON-PARTICIPATION IN PAYMENTS ................................................................56
                  16.5     ROYALTY PAYMENTS .............................................................................56

               ARTICLE 17 TAXES .........................................................................................56
</TABLE>

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<TABLE>
<S>               <C>                                                                                                   <C>
                  17.1     PROPERTY TAXES ...............................................................................56
                  17.2     CONTEST OF PROPERTY TAX VALUATION ............................................................57
                  17.3     PRODUCTION AND SEVERANCE TAXES ...............................................................57
                  17.4     OTHER TAXES AND ASSESSMENTS ..................................................................57

               ARTICLE 18 INSURANCE .....................................................................................57

                  18.1     INSURANCE ....................................................................................57
                  18.2     BONDS ........................................................................................57

               ARTICLE 19 LIABILITY, CLAIMS, AND LAWSUITS ...............................................................58

                  19.1     INDIVIDUAL OBLIGATIONS .......................................................................58
                  19.2     NOTICE OF CLAIM OR LAWSUIT ...................................................................58
                  19.3     SETTLEMENTS ..................................................................................58
                  19.4     DEFENSE OF CLAIMS AND LAWSUITS ...............................................................58
                  19.5     LIABILITY FOR DAMAGES ........................................................................59
                  19.6     INDEMNIFICATION FOR NON-CONSENT OPERATIONS ...................................................59
                  19.7     DAMAGE TO RESERVOIR, Loss OF RESERVES AND PROFIT .............................................60
                  19.8     NON-ESSENTIAL PERSONNEL ......................................................................60
                  19.9     DISPUTE RESOLUTION PROCEDURE .................................................................60

               ARTICLE 20 INTERNAL REVENUE PROVISION ....................................................................60

                  20.1     INTERNAL REVENUE PROVISION ...................................................................60

               ARTICLE 21     CONTRIBUTIONS .............................................................................61

                  21.1     NOTICE OF CONTRIBUTIONS OTHER THAN ADVANCES FOR SALE OF PRODUCTION ...........................61
                  21.2     CASH CONTRIBUTIONS ...........................................................................61
                  21.3     ACREAGE CONTRIBUTIONS ........................................................................61

               ARTICLE 22 DISPOSITION OF PRODUCTION .....................................................................62

                  22.1     TAKE-IN-KIND FACILITIES ......................................................................62
                  22.2     DUTY TO TAKE IN KIND .........................................................................62
                  22.3     FAILURE TO TAKE OIL AND CONDENSATE IN KIND ...................................................62
                  22.4     FAILURE To TAKE GAS IN KIND ..................................................................63
                  22.5     EXPENSES OF DELIVERY IN KIND .................................................................63

               ARTICLE 23 APPLICABLE LAW ................................................................................63

                  23.1     APPLICABLE LAW ...............................................................................63

               ARTICLE 24 LAWS, REGULATIONS, AND NONDISCRIMINATION ......................................................64

                  24.1     LAWS AND REGULATIONS .........................................................................64
                  24.2     NONDISCRIMINATION ............................................................................64

               ARTICLE 25 FORCE MAJEURE .................................................................................64

                  25.1     FORCE MAJEURE ................................................................................64

               ARTICLE 26 SUCCESSORS, ASSIGNS, AND PREFERENTIAL RIGHTS ..................................................64

                  26.1     TRANSFER OF INTEREST .........................................................................64
                     26.1.1   Exceptions to Transfer Notice .............................................................65
                     26.1.2   Effective Date of Transfer of Interest ....................................................65
                     26.1.3   Form of Transfer of Interest ..............................................................65
                     26.1.4   Warranty ..................................................................................65
                  26.2     PREFERENTIAL RIGHT TO PURCHASE ...............................................................66
                     26.2.1   Notice of Proposed Transfer of Interest ...................................................66
                     26.2.2   Exercise of Preferential Right to Purchase ................................................66
                     26.2.3   Transfer of Interest Not Affected by the Preferential Right to Purchase ...................67
</TABLE>

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<TABLE>
<S>                  <C>                                                                                                <C>
                     26.2.4   Completion of Transfer of Interest ........................................................67

               ARTICLE 27 ADMINISTRATIVE PROVISIONS .....................................................................67

                  27.1     TERM .........................................................................................67
                  27.2     WAIVER .......................................................................................68
                  27.3     WAIVER OF RIGHT TO PARTITION .................................................................68
                  27.4     COMPLIANCE WITH LAWS AND REGULATIONS .........................................................68
                     27.4.1   Severance of Invalid Provisions ...........................................................68
                     27 4.2   Fair and Equal Employment .................................................................69
                  27.5     CONSTRUCTION AND INTERPRETATION OF THIS AGREEMENT ............................................69
                     27.5.1   Headings for Convenience ..................................................................69
                     27.5.2   Article References ........................................................................69
                     27.5.3   Gender and Number .........................................................................69
                     27.5.4   Future References .........................................................................69
                     27.5.5   Currency ..................................................................................69
                     27.5.6   Optional Provisions .......................................................................69
                     27.5.7   Joint Preparation .........................................................................70
                     27.5.8   Integrated Agreement ......................................................................70
                     27.5.9   Binding Effect ............................................................................70
                     27.5.10     Further Assurances .....................................................................70
                     27.5.11     Counterpart Execution ..................................................................70
                  27.6     RESTRICTED BIDDING ...........................................................................70
</TABLE>

                                                                       6

<PAGE>

                          OFFSHORE OPERATING AGREEMENT

THIS AGREEMENT, made effective the 1st day of September, 2005, by the signers
hereof, their respective heirs, successors, legal representatives, and assigns,
herein referred to collectively as the "Parties" and individually as a "Party."

                                   WITNESSETH:

WHEREAS, the Parties own a leasehold interest in one or more oil and gas Leases
identified in Exhibit "A" and desire to explore, develop, produce, and operate
those Leases pursuant to this Agreement.

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

                                    ARTICLE I

                                   APPLICATION

1.1    Application to Each Lease

       This Agreement applies separately to each oil and gas Lease or portion
       thereof described in Exhibit "A".

                              ARTICLE 2 DEFINITIONS

2.1    Additional Testing

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

2.2    Affiliate

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

                                        7

<PAGE>

2.3    Authorization For Expenditure (AFE)

       An authority to expend funds prepared by a Party to estimate the costs to
       be incurred in conducting an operation under this Agreement.

2.4    Complete, Completing, Completion

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

2.5    Completion Equipment

       That certain equipment on an Exploratory Well or a Development Well
       required to be installed prior to the movement of a well-completion rig
       of that well

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

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

2.6    Confidential Data

       The information and data obtained under this Agreement, including, but
       not limited to, geological, geophysical, and reservoir information;
       originals and copies of logs; core and core analysis; and other well
       information including, but not limited to, the progress, tests, or
       results of a well drilled or an operation conducted under this Agreement,
       except data or information that becomes public other than by breach of
       this Agreement or as agreed to in writing by the Participating Parties.

2.7    Deepen, Deepening

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

2.8    Development Facilities

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

       (a)    compression, separation, dehydration, generators, treaters,
              skimmers, bunkhouses and metering equipment,

       (b)    the flowlines, gathering lines or lateral lines that deliver
              Hydrocarbons and water

              1      from the Completion Equipment to the Platform or to Offsite
                     Host Facilities, or

              2      from the Platform to Export Pipelines; and

       (c)    injection and disposal wells.

       Development Facilities exclude Export Pipelines.

2.9    Development Operation

       An operation on the Lease other than an Exploratory Operation.

                                        8

<PAGE>

2.10   Development Well

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

2.11   Exploratory Operation

       An operation that is conducted on the Lease and that is any of the
       following:

       (a)    proposed to Complete an Exploratory Well;

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

       (c)    proposed for an Objective Horizon that has a Producible Well, but
              that will be penetrated at a location where the distance between
              the midpoint of the Objective Horizon to be penetrated by the
              proposed operation and the midpoint of the same Objective Horizon
              where it is actually penetrated by a Producible Well will be at
              least four thousand (4000) feet for a gas Completion and at least
              two thousand (2000) feet for an oil Completion.

2.12   Exploratory Well

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

2.13   Export Pipelines

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

2.14   Force Majeure

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

2.15   Hydrocarbons

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

2.16   Joint Account

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

2.17   Lease

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

2.18   MMS

       The Minerals Management Service, United States Department of Interior, or
       its successor agency. Where appropriate, the reference to MMS shall
       include the appropriate state agency.

                                        9

<PAGE>

2.19   Non-consent Operation

       An operation conducted on the Lease by fewer than all Parties, which
       subjects the Nonparticipating Party to Article 13 (Non-Consent
       Operations).

2.20   Non-consent Platform

       A Platform owned by fewer than all Parties.

2.21   Non-consent Well

       An Exploratory Well or a Development Well owned by fewer than all
       Parties.

2.22   Non-operator

       A Party other than the Operator.

2.23   Non-participating Party

       A Party other than a Participating Party.

2.24   Non-participating Party's Share

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

2.25   Objective Depth

       A depth sufficient to test the lesser of the Objective Horizon or the
       specific footage depth stated in the AFE and approved by the
       Participating Parties.

2.26   Objective Horizon

       The interval consisting of the deepest zone, formation, or horizon to be
       tested in an Exploratory Well, Development Well, Deepening operation, or
       Sidetracking operation, as stated in the AFE and approved by the
       Participating Parties.

2.27   Offsite Host Facilities

       Development and handling facilities that (a) are located of the Lease and
       (b) are either owned by one or more third parties or by one or more
       Participating Parties in a well, whose interests in the development and
       handling facilities differ from their respective Working Interest shares
       in the well.

2.28   Operator

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

2.29   Participating Interest

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

2.30   Participating Party

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

                                       10

<PAGE>

2.31   Platform

       An offshore structure on the Lease that supports Wells, Completion
       Equipment, or Development Facilities, whether fixed, compliant, or
       floating, and the components of that structure, including, but not
       limited to, caissons or well protectors to the extent same are not
       Completion Equipment, rising above the water line and used for the
       exploration, development, or production of Hydrocarbons. The term
       "Platform" shall also mean any offshore equipment or template (excluding
       templates used for drilling operations) and any component thereof, other
       than Completion Equipment (including, but not limited to, flow lines and
       control systems), that is resting on or attached to the sea floor and
       used to obtain production of Hydrocarbons.

2.32   Producible Reservoir

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

2.33   Producible Well

       A well that is drilled under this Agreement and that (a) is producing
       Hydrocarbons; (b) is determined to be, or meets the criteria for being
       determined to be, capable of producing Hydrocarbons in paying quantities
       under an applicable order or regulation issued by the governmental
       authority having jurisdiction; or (c) is determined to be a Producible
       Well by one (1) or more Participating Parties having a combined Working
       Interest of twenty percent (20% or more, even if the well has been
       plugged and permanently or temporarily abandoned.

2.34   Production Interval

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

2.35   Recomplete, Recompleting, Recompletion

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

2.36   Rework, Reworking

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

2.37   Sidetrack, Sidetracking

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

                                       11

<PAGE>

2.38   Take-in-Kind Facilities

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

2.39   Transfer of Interest

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

2.40   Working Interest

       The record title interest, or where applicable, the operating rights of
       each Party in and to each Lease (expressed as the percentage provided in
       Exhibit "A"). If a Party's record title interest is different from its
       operating rights, the Working Interest of each Party is the interest
       provided in Exhibit "A".

                               ARTICLE 3 EXHIBITS

3.1    Exhibits

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

       (Check the exhibits the Parties wish to incorporate into this Agreement.)

       3.1.1  Exhibit "A"

              Operator, Description of Leases, Division of Interests, and
              Notification Addresses

       3.1.2  Exhibit "B"

              Insurance provisions.

       3.1.3  Exhibit "C"

              Accounting procedure.

       3.1.4  Exhibit "D"

              Non-discrimination Provisions.

       3.1.5  Exhibit "E"

              Gas Balancing Agreement.

       11.6   Exhibit "F"

              Omitted

       3.1.7  Exhibit "G"

              Memorandum of Operating Agreement and Financing Statement.

       3.1.8  Exhibit "H"

              Other (e.g. Dispute Resolution).

                                       12

<PAGE>

       3.1.9  Exhibit "I"

              Security Rights; Default' Unpaid Charges' Carved-out Interests

3.2    Conflicts

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

                                    ARTICLE 4

                                    OPERATOR

4.1    Operator

       Stone Energy Corporation is designated as the Operator of the Lease. The
       Parties shall promptly execute and provide Operator with all documents
       required by the MMS in connection with the designation of Stone Energy
       Corporation as Operator or with the designation of any other Party as a
       substitute or successor Operator. Unless agreed to the contrary by all
       Parties hereto, Operator shall also be classified as the designated
       applicant for oil spill financial responsibility purposes and each
       Non-operating Party shall promptly execute the appropriate documentation
       reflecting this designation and promptly provide same to Operator for
       filing with MMS.

4.2    Substitute Operator

       Except as otherwise provided in Article 4.2.1 (Circumstances Under Which
       the Operator Must Conduct a Non-Consent Operation), if the Operator
       becomes a Non-participating Party in a Non-consent Operation, the
       Participating Parties may approve the designation of any Participating
       Party as the substitute Operator by the vote of one (1) or more of the
       Participating Parties having a combined fifty-one percent (51 %) or more
       of the Participating Interests. The substitute Operator shall serve only
       (a) for the Non-consent Operation, (b) on the Lease, or that portion of
       the Lease, affected by the Non-consent Operation, and (c) with the same
       authority, rights, obligations, and duties as the Operator. If a
       Non-operator is the only Participating Party in a Non-consent Operation,
       then the Non-operator shall be designated as the substitute Operator for
       that Non consent Operation, with no vote required, unless the
       Non-operator elects not to accept the designation. No Non-operator shall
       ever be designated as a substitute Operator against its will. If a
       substitute Operator is not designated under the foregoing procedures, the
       Operator shall, upon the unanimous agreement of the Participating Parties
       and the Operator, conduct the Non-consent Operation on behalf of the
       Participating Parties and at the Participating Parties' sole cost and
       risk under Article 13 (Non-Consent Operations).

                                       13

<PAGE>

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

              If:

              (a)    a drilling rig is on location and the Operator becomes a
                     Non-participating Party in a supplemental AFE for an
                     Exploratory Operation, or Development Operation, or

              (b)    the Operator becomes a Non-participating Party in an
                     operation to be conducted from a Platform operated by the
                     Operator, the Operator, as a Non-participating Party, shall
                     conduct the Non-consent Operation on behalf of the
                     Participating Parties and at the Participating Parties'
                     sole cost and risk under Article 13 (Non-Consent
                     Operations).

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

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

       4.2.3  Appointment of a Substitute Operator

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

       4.2.4  Redesignation of Operator

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

4.3    Resignation of Operator

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

                                       14

<PAGE>

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

4.4    Removal of Operator

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

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

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

       (c)    a Transfer of Interest by the Operator (excluding an interest
              assigned to an Affiliate) reduces the Operator's Working Interest
              to less than the Working Interest of a Nonoperator, whether
              accomplished by one or more Transfer of Interest. (d) Operator
              commits a substantial breach of a material provision of this
              Agreement and fails to cure the breach within thirty (30) days
              after notice of the breach.

       If a petition for relief under the federal bankruptcy laws is filed by or
       against Operator, and if a federal bankruptcy court prevents the removal
       of Operator, all Non-operators and Operator shall comprise an interim
       operating committee to operate until Operator has elected to reject or
       assume this Agreement under the Bankruptcy Code. An election by Operator
       as a debtor-in-possession or by a trustee in bankruptcy to reject this
       Agreement shall be deemed to be a resignation by Operator without any
       action by the Non-operators, except the selection of a successor. To be
       effective, a vote to remove Operator for any cause described above must
       be taken within ninety (90) days after a Non-operator receives actual
       knowledge of the cause. A change of corporate name or structure of
       Operator or a transfer of Operator's interest to a single Affiliate shall
       not be deemed to be a resignation or basis for removing Operator. Subject
       to Article 8.6.2 (Default) & Article 8.6.3 (Unpaid Charges), the
       resignation or removal of Operator shall become effective at the earlier
       of (a) 7:00 a.m. on the first day of the calendar month following the
       expiration of ninety (90) days after the giving of notice of resignation
       by Operator or action by Non operators to remove Operator, or (b) the
       time when a successor Operator assumes the duties of Operator.

4.5    Selection of Successor

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

                                       15

<PAGE>

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

4.6    Effective Date of Resignation or Removal

       The resignation or removal of the Operator shall become effective as soon
       as practical but no later than 7:00 a.m. on the first day of the month
       following a period of ninety (90) days after the date of resignation or
       removal, unless a longer period is required for the Parties to obtain
       approval of the designation of the successor Operator, and designated
       applicant for oil spill financial responsibility purposes, by the MMS;
       however, in no event shall the resignation or removal of Operator become
       effective until a successor Operator has assumed the duties of Operator.
       The resignation or removal of the outgoing Operator shall not prejudice
       any rights, obligations, or liabilities resulting from its operatorship.
       The successor Operator may charge the Joint Account for reasonable costs
       incurred in connection with copying or obtaining the former Operator's
       records, information or data except when the change of Operator results
       from a merger, consolidation, reorganization or sale or transfer to an
       Affiliate of the Operator.

4.7    Delivery of Property

       On the effective date of resignation or removal of the Operator, the
       outgoing Operator shall deliver or transfer to the successor Operator
       custodianship of the Joint Account and possession of all items purchased
       for the Joint Account under this Agreement, all Hydrocarbons that are not
       the separate property of a Party, all equipment, materials, and
       appurtenances purchased for the Joint Account under this Agreement, which
       are not already in the possession of the successor Operator. The outgoing
       Operator shall further use its reasonable efforts to transfer to the
       successor Operator, as of the effective date of the resignation or
       removal, its rights as Operator under all contracts exclusively relating
       to the activities or operations conducted under this Agreement, and the
       successor Operator shall assume all obligations of the Operator that are
       assignable under the contracts. The Parties may audit the Joint Account
       and conduct an inventory of all property and all Hydrocarbons that are
       not the separate property of a Party, and the inventory shall be used in
       the accounting to all Parties by the outgoing Operator of the property
       and the Hydrocarbons that are not the separate property of a Party. The
       inventory and audit shall be conducted under Exhibit "C".

                                       16

<PAGE>

                                    ARTICLE 5

                        AUTHORITY AND DUTIES OF OPERATOR

5.1    Exclusive Right to Operate

       Unless otherwise provided in this Agreement, Operator shall have the
       exclusive right and duty to conduct operations (or cause them to be
       conducted) under this Agreement. In performing services under this
       Agreement for the Non-operators, Operator shall be an independent
       contractor, not subject to the control or direction of Non-operators,
       except for the type of operation to be undertaken in accordance with the
       voting and election procedures in this Agreement. No Party shall be
       deemed to be, or hold itself out as, the agent or fiduciary of another
       Party.

5.2    Workmanlike Conduct

       Operator shall timely commence and conduct all operations in a good and
       workmanlike manner, as would a prudent operator under the same or similar
       circumstances. OPERATOR SHALL NOT BE LIABLE TO NON-OPERATORS FOR LOSSES
       SUSTAINED OR LIABILITIES INCURRED, EXCEPT AS MAY RESULT FROM OPERATOR'S
       GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. Operator shall never be required
       under this Agreement to conduct an operation that it believes would be
       unsafe or would endanger persons, property or the environment. Unless
       otherwise provided in this Agreement, Operator shall consult with
       Non-operators and keep them informed of all important matters.

5.3    Liens and Encumbrances

       Operator shall endeavor to keep the Lease, wells, Platforms, Development
       Facilities, and other equipment free from all liens and other
       encumbrances occasioned by operations hereunder, except those provided in
       Article 8.6 (Security Rights).

5.4    Employees and Contractors

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

5.5    Records

       The Operator shall keep or cause to be kept accurate books, accounts, and
       records of activities or operations under this Agreement in compliance
       with the Accounting Procedure in Exhibit "C". Unless otherwise provided
       in this Agreement, all records of the Joint Account shall be available to
       a Non-operator as provided in Exhibit "C". The Operator shall use
       good-faith efforts to ensure the settlements, billings, and reports
       rendered to each Party under this Agreement are complete and accurate.

5.6    Compliance

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

                                       17

<PAGE>

5.7    Contractors

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

5.8    Governmental Reports

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

5.9    Information to Participating Parties

       Except as provided in Article 8.6, Operator shall furnish each
       Participating Party the following information, if applicable, for each
       activity or operation conducted by Operator:

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

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

       5.9.3  A complete report of each core analysis.

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

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

       5.9.6  Upon written request received by Operator before commencement of
              drilling, samples of cuttings and cores taken from the well (if

                                       18

<PAGE>

              sufficient cores are retrieved), packaged in containers furnished
              by Operator at the expense of the requesting Party, marked as to
              the depths from which they were taken, and shipped at the expense
              of the requesting Party by express courier to the address
              designated by the requesting Party.

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

       5.9.8  A monthly report on the volume of Hydrocarbons and water produced
              from each well.

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

5.10   Information to Non-participating Parties

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

                                    ARTICLE 6

                          VOTING AND VOTING PROCEDURES

6.1    Voting Procedures

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

       6.1.1  Voting Interest

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

       6.1.2  Vote Required

              Unless expressly stated to the contrary herein, a matter requiring
              approval of the Parties shall be decided by the affirmative vote
              of one (1) or more Parties having a combined voting interest of
              fifty-one percent (51 %) or more. If there are only two (2)
              Parties to this Agreement, the matter shall be determined by the
              Party having a majority voting interest or, if the interests are
              equal, the matter shall require unanimous consent.

       6.1.3  Votes

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

                                       19

<PAGE>

       6.1.4  Meetings

              Meetings of the Parties may be called by Operator upon its own
              motion or at the request of a Party having a voting interest of
              not less than twenty percent (20%). Except in an emergency, no
              meeting shall be called on less than five (5) days' advance
              written notice, and the notice of meeting shall include the
              meeting agenda prepared by the Operator or the requesting Party.
              The representative of Operator shall be chairman of each meeting.
              Only matters included in the agenda may be discussed at a meeting,
              but the agenda and items included in the agenda may be amended
              prior to or during the meeting by unanimous agreement of all
              Parties.

                                    ARTICLE 7

                                     ACCESS

7.1    Access to Lease

       Except as provided in Article 8.6, each Party shall have access, at its
       sole risk and expense and at all reasonable times, to the Lease,
       Platform, Development Facilities and Joint Account assets to inspect
       activities, operations and wells in which it participates, and to
       pertinent records and data. A Non-operator shall give Operator at least
       twenty-four (24) hours' notice of the Nonoperator's intention to visit
       the Lease. To protect Operator and the Non-operators from unnecessary
       lawsuits, claims, and legal liability, if it is necessary for a person
       who is not performing services for Operator directly related to the joint
       operations, but is performing services solely for a Non-operator or
       pertaining to the business or operations of a Non-operator, to visit,
       use, or board a rig, well, Platform, or Development Facilities subject to
       this Agreement, the Nonoperator shall give Operator advance notice of the
       visit, use, or boarding, and shall secure from that person an agreement,
       in a form satisfactory to Operator, indemnifying and holding Operator and
       Non-operators harmless, or shall itself provide the same hold harmless
       and indemnification in favor of Operator and other Non-operators before
       the visit, use, or boarding.

7.2    Reports

       On written request, Operator shall furnish a requesting Party any
       information not otherwise furnished under Article 5 (Authority and Duties
       of Operator) to which that Party is entitled under this Agreement. The
       costs of gathering and furnishing information not furnished under Article
       5 shall be charged to the requesting Party. Operator is not obligated to
       furnish interpretative data that was generated by Operator at its sole
       cost.

                                       20

<PAGE>

7.3    Confidentiality

       Except as otherwise provided in Article 7.4 (Limited Disclosure), Article
       7.5 (Limited Releases to Offshore Scout Association), Article 7.6 (Media
       Releases), and Article 21.1 (Notice of Contributions Other Than Advances
       for Sale of Production), and except for necessary disclosures to
       governmental authorities having jurisdiction, or except as agreed in
       writing by all Participating Parties, no Party or Affiliate shall
       disclose Confidential Data to a third party.

7.4    Limited Disclosure

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

       (a)    outside professional consultants and reputable engineering firms
              for the purpose of evaluations and/or submitting bids;

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

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

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

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

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

       (g)    an Affiliate of a Party.

       (h)    such limited well information that is typically disclosed by
              Operator's representative during meetings of the Offshore Oil
              Scouts Association.

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

7.5    Limited Releases to Offshore Scout Association

       The Operator may disclose Confidential Data to the Offshore Oil Scouts
       Association at their regularly scheduled meetings. The Confidential Data
       that may be disclosed is limited to information concerning well
       locations, well operations, and well completions to the extent reasonable
       and customary in industry practice or required under the by-laws of the
       Offshore Oil Scouts Association.

7.6    Media Releases

       Except as otherwise permitted by this Article, no Party shall issue a
       news or media release about operations on the Lease without first giving

                                       21

<PAGE>

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

                                    ARTICLE 8

                                  EXPENDITURES

8.1    Basis of Charge to the Parties

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

8.2    AFEs

       Before undertaking an operation or making a single expenditure to be in
       excess of one-hundred fifty thousand Dollars ($150,000), and before
       conducting an activity or operation to drill, Sidetrack, Deepen,
       Complete, Rework or Recomplete a well (regardless of the estimated cost),
       Operator shall submit an AFE for the operation or expenditure to the
       Parties for approval. Operator shall also furnish an informational AFE to
       all Parties for an operation or single expenditure estimated to cost
       one-hundred fifty thousand Dollars ($150,000) or less, but in excess of
       fifty thousand Dollars ($50,000).

8.3    Emergency and Required Expenditures

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

8.4    Advance Billings

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

                                       22

<PAGE>

8.5    Commingling of Funds

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

8.6    Security Rights (LA)

       Exhibit "I" (Louisiana) applies.

8.7    Overexpenditures

       Operator shall notify the Participating Parties when it appears that
       actual expenditures for an approved operation in an Exploratory or
       Development Well or for the design, construction, and installation of a
       Platform and/or Development Facilities will exceed the AFE estimate (the
       excess being an "Overexpenditure"). If it appears that the
       Overexpenditure will be no more than the twenty five percent (25%),
       hereinafter referred to as the "Allowable Variance," Operator's notice
       shall be forwarded for information only. If Operator determines that the
       Overexpenditure will exceed the Allowable Variance, Operator shall submit
       a new AFE for the current operation ("Supplemental AFE") for approval of
       the Participating Parties. The Participating Parties may then elect
       whether to continue to participate within thirty (30) days or forty-eight
       (48) hours if a rig is on location, exclusive of Saturdays, Sundays, and
       federal holidays, after receipt of the Supplemental AFE. If fewer than
       all, but one (1) or more Participating Parties elect to continue to
       participate in the current operation and agree to pay and bear one
       hundred percent (100%) of the costs and risks of conducting it, Operator
       shall continue to conduct the current operation. Otherwise, the operation
       shall cease. A Participating Party that elects not to continue to
       participate in the current operation shall become a Non-participating
       Party in the operation, from and after the date when the Overexpenditure
       exceeds the Allowable Variance, not including emergency expenditures, and
       Article 13.2 (Relinquishment of Interest) shall apply to the Party only
       to the extent that the costs of the operation exceed the Allowable
       Variance. Unless otherwise agreed by the Participating Parties, each
       Participating Party electing to continue to participate in the current
       operation may, but is not obligated to, pay and bear that portion of the
       costs and risks attributable to the interests of the Non-participating
       Parties in the ratio that the Participating Party's interest bears to the
       total interests of all Participating Parties electing to continue
       participating in the current operation. If it appears to Operator that
       actual expenditures for an approved operation will exceed the
       Supplemental AFE estimate, Operator shall again repeat the procedure of
       this Article 8.8, using the estimate in the most recently approved
       Supplemental AFE as the basis for determining the Overexpenditure and
       Allowable Variance. An initial Participating Party in an operation shall
       remain responsible for its share of all costs and risks for plugging,
       replugging, capping, burying, disposing, abandoning, removing, and
       restoring associated with the operation, subject to Article 14
       (Abandonment, Salvage, and Surplus), regardless of its subsequent
       election on a Supplemental AFE, except to the extent such costs were
       increased by subsequent operations in which it elected not to
       participate. Notwithstanding anything in this Article to the contrary, if
       expenditures exceed the Allowable Variance for an emergency, as provided

                                       23

<PAGE>

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

                                    ARTICLE 9

                                     NOTICES

9.1    Giving and Receiving Notices

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

9.2    Content of Notice

       An AFE or notice requiring a response shall indicate the maximum response
       time specified in Article 9.3 (Response to Notices). A proposal for a
       Platform and/or Development Facilities shall include an AFE, containing a
       description of the Platform and/or Development Facilities, including, but
       not limited to, location, and the estimated costs of design, fabrication,
       transportation, and installation. A proposal for a well operation shall
       include an AFE, describing the estimated commencement date, the proposed
       depth, the objective formation or formations to be penetrated or tested,
       the Objective Horizon, the surface and bottomhole locations, proposed

                                       24

<PAGE>

       directional or horizontal drilling operations, the type of equipment to
       be used, and the estimated costs of the operation, including, but not
       limited to, the estimated costs of drilling, testing, and Completing or
       abandoning the well. If a proposed operation is subject to Article 13.11
       (Lease Maintenance Operations), the notice shall specify that the
       proposal is a Lease Maintenance Operation. A proposal for multiple
       operations on more than one well location by the same rig shall contain
       separate AFEs or notices for each operation and shall specify in writing
       in what order the operations will be conducted. Each Party shall respond
       to each proposed multiple operation in the manner provided in Article
       9.3.3 (Proposal for Multiple Operations).

9.3    Response to Notices

       Except as provided in Article 9.1, each Party's response to a proposal
       shall be in writing to the proposing Party. Unless otherwise provided in
       this Agreement, the response time shall be as follows:

       9.3.1  Platform and/or Development Facilities Proposals

              Each Party shall respond within ninety (90) days after its receipt
              of the AFE or notice for a Platform and/or Development Facilities.

       9.3.2  Well Proposals

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

       9.3.3  Proposal for Multiple Operations

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

       9.3.4  Other Matters

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

9.4    Failure to Respond

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

9.5    Response to Counterproposals

       Should a counterproposal be allowed under this Agreement, responses to
       that counterproposal must be made within the response period for the
       original proposal.

                                       25

<PAGE>

9.6    Timely Well Operations

       Unless otherwise provided, an approved well shall be commenced within
       one-hundred eighty (180) days after the date when the last applicable
       election on that well may be made. Wells shall be deemed to have
       commenced on the day charges commence under the drilling contract for
       that well. If the Operator does not commence the drilling of an approved
       well within the one-hundred eighty (180) day time frame, the other
       Participating Parties in that well may select a substitute Operator to
       drill the approved well. In all events, including the occurrence of a
       Force Majeure, if the substitute Operator fails to commence actual
       drilling operations on an approved well within one-hundred eighty (180)
       days from the proposal of the approved well, the proposal of the well and
       its approval will be deemed to have been withdrawn. Subject to Exhibit
       "C, if a proposal for a well is deemed to have been withdrawn, all costs
       incurred in the preparation for or in furtherance of that well will be
       chargeable to the Parties who voted to participate in the well proposal
       for that well.

9.7    Timely Platform/Development Facilities Operations

       Unless otherwise provided, Operator shall commence, or cause to commence,
       the construction, acquisition, or refurbishment of an approved proposal
       for a Platform and/or Development Facilities within one-hundred eighty
       (180) days after the date when the last applicable election on that
       Platform and/or Development Facilities may be made. The construction,
       acquisition, or refurbishment of an approved Platform and/or Development
       Facilities proposal shall be deemed to have commenced on the date the
       contract is awarded for the design, acquisition, fabrication, or
       refurbishment of the Platform and/or Development Facilities. If the
       Operator does not commence the construction, acquisition, or
       refurbishment of an approved Platform and/or Development Facilities
       proposal within the one-hundred eighty (180) day time frame, the other
       Participating Parties in that Platform and/or Development Facilities
       proposal may select a substitute Operator to commence the Platform and/or
       Development Facilities. In all events, including the occurrence of a
       Force Majeure, if the substitute Operator fails to commence the
       construction, acquisition, or refurbishment of an approved Platform
       and/or Development Facilities within two-hundred forty (240) days from
       the proposal of the approved Platform and/or Development Facilities, the
       proposal of the Platform and/or Development Facilities and their approval
       will be deemed to have been withdrawn. Subject to Exhibit "C", regardless
       of whether or not the construction, acquisition, or refurbishment of a
       Platform and/or Development Facilities is commenced, all costs incurred
       by Operator, attributable to that activity, shall be paid by the
       Participating Parties.

                                       26

<PAGE>

                                   ARTICLE 10

                             EXPLORATORY OPERATIONS

10.1   Proposing Operations

       A Party may propose an Exploratory Operation in accordance with Article 9
       (Notices) to the other Parties who are entitled to vote or make an
       election in regard to that operation.

10.2   Counterproposals

       When an Exploratory Operation is proposed, a Party may, within fifteen
       (15) days after receipt of the AFE or notice for the original proposal,
       make a counterproposal to conduct an alternative Exploratory Operation by
       sending an AFE or notice to such Parties in accordance with Article 9
       (Notices). The AFE or notice shall indicate that the proposal is a
       counterproposal to the original proposal. If one or more counterproposals
       are made, such Parties shall elect to participate in either the original
       proposal, one counterproposal, or neither the original proposal nor a
       counterproposal. If two or more proposals receive the approval of the
       number of Parties and combined Working Interests required by Article 10.5
       (Operations by Fewer Than All Parties), the proposal receiving the
       largest percentage of Working Interest approval shall take precedence,
       and in the event of a tie between two (2) or more approved proposals, the
       proposal first received by the Parties shall take precedence. Except for
       the response period provided in this Article 10.2, a counterproposal
       shall be subject to the same terms and conditions as the original
       proposal.

10.3   Operations by All Parties

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

10.4   Second Opportunity to Participate

       If there are more than two (2) Parties to this Agreement and if fewer
       than all but one (1) or more Parties having a combined Working Interest
       of twenty percent (20%) or more elect to participate, then the proposing
       Party shall notify the Parties of the elections made, whereupon a Party
       originally electing not to participate may then elect to participate by
       notifying the proposing Party within twenty-four (24) hours, exclusive of
       Saturdays, Sundays, and federal holidays, after receipt of such notice.
       If all Parties elect to participate in the proposed operation, Operator
       shall conduct the operation at their cost and risk. If there are only two
       (2) Parties to this Agreement, then there shall not be a second
       opportunity to elect to participate, and if the Participating Party
       agrees to pay and bear one hundred percent (100%) of the costs and risks
       of the operation, then the Operator, subject to Article 4.2 (Substitute
       Operator), shall conduct the operation as a Non consent Operation for the
       benefit of the Participating Party, and the provisions of Article 13 (Non
       consent Operations) shall apply.

                                       27

<PAGE>

10.5   Operations by Fewer Than All Parties

       If there are more than two (2) Parties to this Agreement, then, after the
       election made under Article 10.4 (Second Opportunity to Participate),
       fewer than all but one (1) or more Parties having a combined Working
       Interest of twenty percent (20%) or more have elected to participate in
       the proposed operation, the proposing Party shall notify the
       Participating Parties, and each Participating Party shall have
       twenty-four (24) hours, exclusive of Saturdays, Sundays, and federal
       holidays, after receipt of the notice to notify the proposing Party of
       the portion of costs and risks attributable to the total
       Non-participating Parties' interests it elects to pay and bear. Unless
       otherwise agreed by the Participating Parties, each Participating Party
       may, but shall not be obligated to, pay and bear that portion of the
       costs and risks attributable to the total Nonparticipating Parties'
       interests in the ratio that the Participating Party's interest bears to
       the total interests of all Participating Parties who elect to pay and
       bear a portion of costs and risks attributable to the total
       Non-participating Parties' interests. Failure to respond shall be deemed
       to be an election not to pay or bear any additional costs or risks' If
       the Participating Parties agree to pay and bear one hundred percent
       (100%) of the costs and risks of the operation, Operator, subject to
       Article 4.2 (Substitute Operator), shall conduct the operation as a
       Non-consent Operation for the benefit of the Participating Parties, and
       the provisions of Article 13 (Non-consent Operations) shall apply. If
       such agreement is not obtained, however, the operation shall not be
       conducted and the effect shall be as if the proposal had not been made.

10.6   Expenditures Approved

       Approval of an Exploratory Operation shall cover all necessary
       expenditures associated with the operation proposed in the AFE or notice
       that are incurred by Operator in connection with (a) preparations for
       drilling; (b) the actual drilling; (c) evaluations, such as testing,
       coring, and logging; and (d) plugging and abandonment, subject to any
       limitation that may exist as provided under Article 8 above.

10.7   Conduct of Operations

       After commencement of drilling an Exploratory Well, Operator shall
       diligently conduct the operation without unreasonable delay until the
       well reaches the Objective Depth, unless the well encounters, at a lesser
       depth, impenetrable conditions or mechanical difficulties that cannot be
       overcome by reasonable and prudent operations and that render further
       operations impracticable, except as may otherwise be provided in optional
       provision Article 8.8 (Overexpenditures), if selected. If a well does not
       reach its Objective Depth as a result of the conditions mentioned in this
       Article 10.7, the operation shall be deemed to have been completed and
       Article 13 (Non consent Operations) shall apply to each Non-participating
       Party for the portion of the well drilled.

10.8   Course of Action After Reaching Objective Depth

       When an Exploratory Well has been drilled to its Objective Depth and
       reasonable testing, coring, and logging have been completed as set forth

                                       28

<PAGE>

       in the approved AFE and the results have been furnished to the
       Participating Parties, Operator shall notify the Participating Parties of
       Operator's recommendation for further operations in the well, and the
       following provisions shall apply:

       10.8.1 Election by Participating Parties

              A Participating Party shall have the right to propose another
              operation by notifying the Operator and the other Participating
              Parties of its proposed operation within twenty-four (24) hours,
              exclusive of Saturdays, Sundays, and federal holidays, of receipt
              of the Operator's notice. The Participating Parties shall notify
              Operator within forty-eight (48) hours, exclusive of Saturdays,
              Sundays, and federal holidays, of receipt of the Operator's
              proposal whether the Participating Parties elect to (a)
              participate in a recommended operation, or (b) not participate in
              a recommended operation. Failure to respond shall be deemed to be
              an election not to participate in any of the recommended
              operations.

       10.8.2 Priority of Operations

              If all Participating Parties elect to participate in the same
              proposed operation, Operator shall conduct the operation at their
              cost and risk. ' If more than one (1) operation is approved by one
              (1) or more Participating Parties having a combined Working
              Interest of twenty percent (20%) or more, then the approved
              operation with the lowest number as indicated below shall take
              precedence:

              (Indicate the order of preference.)

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

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

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

              4      Complete at the Objective Horizon

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

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

              7      Temporarily abandon.

              8      Plug and abandon.

                                       29

<PAGE>

       10.8.3 Second Opportunity to Participate

              If fewer than all but one (1) or more Participating Parties having
              a combined Working Interest of twenty percent (20%) or more elect
              to participate in an operation, the proposing Party shall notify
              the Participating Parties of the elections made, whereupon a Party
              originally electing not to participate in the proposed operation
              may then elect to participate by notifying the proposing Party
              within twenty-four (24) hours, exclusive of Saturdays, Sundays,
              and federal holidays, after receipt of such notice. If all Parties
              elect to participate in the proposed operation, Operator shall
              conduct the operation at their cost and risk.

       10.8.4 Operations by Fewer Than All Parties

              If, after the election (if applicable) made under Article 10.8.3
              (Second Opportunity to Participate), fewer than all but one (1) or
              more Parties having a combined Working Interest of twenty percent
              (20%) or more elect to participate in the proposed operation that
              takes precedence, the proposing Party shall notify the
              Participating Parties and each Participating Party shall have
              twenty-four (24) hours, exclusive of Saturdays, Sundays, and
              federal holidays, after receipt of the notice to notify the
              proposing Party of the portion of the costs and risks attributable
              to the total Non-participating Parties' interests it elects to pay
              and bear. Unless otherwise agreed by the Participating Parties,
              each Participating Party may, but shall not be obligated to, pay
              and bear that portion of the costs and risks attributable to the
              total Non-participating Parties' interests in the ratio that the
              Participating Party's interest bears to the total interests of all
              Participating Parties who elect to pay and bear a portion of costs
              and risks attributable to the Non-participating Parties'
              interests. Failure to respond shall be deemed to be an election
              not to pay or bear any additional costs or risks. If the
              Participating Parties agree to bear one hundred percent (100%) of
              the costs and risks of the operation, Operator, subject to Article
              4.2 (Substitute Operator), shall conduct the operation as a
              Non-consent Operation for the benefit of the Participating
              Parties, and the provisions of Article 13 (Non-consent Operations)
              shall apply. If such agreement is not obtained, however, the
              operation shall not be conducted and the effect shall be as if the
              proposal had not been made. If a Participating Party in a well
              elects not to participate in the Deepening or Sidetracking
              operation in the well, such non-consenting Party shall become a
              Non-participating Party in all operations conducted in the
              Deepened or Sidetracked portion of the well after that election.

              If the Non-consent Operation is an Additional Testing, coring, or
              logging operation, Article 13 (Non-consent Operations) shall not

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              apply, however, a Party electing not to participate in the
              Additional Testing, coring, or logging shall not be entitled to
              information resulting from the operation.

       10.8.5 Subsequent Operations

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

10.9   Wells Proposed Below Deepest Producible Reservoir

       If a proposal is made to conduct an Exploratory Operation involving the
       drilling of a well to an Objective Horizon below the base of the deepest
       Producible Reservoir, a Party may elect within the applicable period to
       limit its participation in the operation down to the base of the deepest
       Producible Reservoir. For purposes of this Article 10.9, a Party who
       elects to limit it participation in the operation down to the base of the
       deepest Producible Reservoir shall be referred to as "Shallow
       Participant" and a Party who elects to participate in the entire
       operation shall be referred to as "Deep Participant". If a Party elects
       to limit its participation to the base of the deepest Producible
       Reservoir, Operator shall prepare and submit to the Shallow Participant,
       for informational purposes, a separate AFE covering operations down to
       the deepest Producible Reservoir. The Shallow Participant shall be a
       Participating Party in, and shall pay and bear the costs and risks of,
       each operation to the base of the deepest Producible Reservoir, according
       to its Participating Interest. The Shallow Participant shall a
       Non-participating Party in each operation below the deepest Producible
       Reservoir, and the operation shall be considered a Non-consent Operation,
       and the provisions of Article 13 (Non-consent Operations) shall apply. If
       the well is Completed and produces Hydrocarbons from a horizon below the
       deepest Producible Reservoir, the Deep Participant shall reimburse the
       Shallow Participant for its share of the actual well costs to the base of
       the deepest Producible Reservoir. Payment shall be due within thirty days
       after receipt of notice of the well being completed below the deepest
       Producible Reservoir. If the well is Completed and produces Hydrocarbons
       from a horizon below the deepest Producible Reservoir, the Shallow
       Participant shall reimburse the Deep Participant for its Working Interest
       share of the actual well costs to the base of the deepest Producible
       Reservoir in accordance with Article 13.4 (Deepening or Sidetracking Cost
       Adjustments), upon the earlier of the time that (a) the well is plugged
       back to a horizon above the base of the deepest Producible Reservoir, as
       determined when the original well was proposed, (b) the well is plugged

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       and abandoned, or (c) the amount to be recouped by the Deep Participant
       under Article 13 (Non-consent Operations) is recovered.

                                   ARTICLE 11

                             DEVELOPMENT OPERATIONS

11.1   Proposing Operations

       A Party may propose a Development Operation in accordance with Article 9
       (Notices) to the other Parties who are entitled to vote or make an
       election in regard to that operation.

11.2   Counterproposals

       When a Development Operation is proposed, a Party may, within fifteen
       (15) days after receipt of the AFE or notice for the original proposal,
       make a counterproposal to conduct an alternative Development Operation by
       sending an AFE or notice to such Parties in accordance with Article 9
       (Notices). The AFE or notice shall indicate that the proposal is a
       counterproposal to the original proposal. If one or more counterproposals
       are made, such Parties shall elect to participate in either the original
       proposal, one counterproposal, or neither the original proposal nor a
       counterproposal. If two or more proposals receive the approval of the
       number of Parties and combined Working Interests required by Article 11.5
       (Operations By Fewer Than All Parties), the proposal receiving the
       largest percentage Working Interest approval shall take precedence, and
       in the event of a tie between two (2) or more approved proposals, the
       approved proposal first received by the Parties shall prevail. Except for
       the response period provided in this Article 11.2, a counterproposal
       shall be subject to the same terms and conditions as the original
       proposal.

11.3   Operations by All Parties

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

11.4   Second Opportunity to Participate

       If there are more than two (2) Parties to this Agreement and if fewer
       than all but one (1) or more Parties having a combined Working Interest
       of twenty percent (20%) or more elect to participate, then the proposing
       Party shall notify the Parties of the elections made, whereupon a Party
       originally electing not to participate may then elect to participate by
       notifying the proposing Party within forty-eight (48) hours, exclusive of
       Saturdays, Sundays, and federal holidays, after receipt of such notice.
       If all Parties elect to participate in the proposed operation, Operator
       shall conduct the operation at their cost and risk. If there are only two
       (2) Parties to this Agreement, then there shall not be a second
       opportunity to elect to participate, and if the Participating Party
       agrees to pay and bear one hundred percent (100%) of the costs and risks
       of the operation, then the Operator, subject to Article 4.2 (Substitute
       Operator), shall conduct the operation as a Non consent Operation for the
       benefit of the Participating Party, and the provisions of Article 13 (Non
       consent Operations) shall apply.

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11.5   Operations by Fewer Than All Parties

       If there are more than two (2) Parties to this Agreement, then, after the
       election made under Article 11.4 (Second Opportunity to Participate),
       fewer than all but one (1) or more Parties having a combined Working
       Interest of twenty percent (20%) or more have elected to participate in
       the proposed operation, the proposing Party shall notify the
       Participating Parties, and each Participating Party shall have
       forty-eight (48) hours, exclusive of Saturdays, Sundays, and federal
       holidays, after receipt of the notice to notify the proposing Party of
       the portion of the costs and risks attributable to the total
       Non-participating Parties' interests it elects to pay and bear. Unless
       otherwise agreed by the Participating Parties, each Participating Party
       may, but shall not be obligated to, pay and bear that portion of costs
       and risks attributable to the total Non-participating Parties' interests
       in the ratio that the Participating Party's interest bears to the total
       interests of all Participating Parties who elect to pay and bear a
       portion of the costs and risks attributable to the total
       Non-participating Parties' interests. Failure to respond shall be deemed
       to be an election not to pay or bear any additional costs or risks. If
       the Participating Parties agree to pay and bear one hundred percent
       (100%) of the costs and risks of the operation, Operator, subject to
       Article 4.2 (Substitute Operator) shall conduct the operation as a
       Non-consent Operation for the benefit of the Participating Parties, and
       the provisions of Article 13 (Non-consent Operations) shall apply. If
       such agreement is not obtained, however, the operation shall not be
       conducted and the effect shall be as if the proposal had not been made.

11.6   Expenditures Approved

       Approval of a Development Operation shall cover all necessary
       expenditures associated with the operation proposed in the AFE or notice
       that are incurred by Operator in connection with (a) preparations for
       drilling; (b) the actual drilling; (c) evaluations, such as testing,
       coring, and logging; and (d) plugging and abandonment, subject to any
       limitation that may exist as provided under Article 8 above.

11.7   Conduct of Operations

       After commencement of a Development Well, Operator shall diligently
       conduct the operation without unreasonable delay until the well reaches
       the Objective Depth, unless the well encounters, at a lesser depth,
       impenetrable conditions or mechanical difficulties that cannot be
       overcome by reasonable and prudent operations and render further
       operations impracticable, except as may otherwise be provided in optional
       provision Article 8.8 (Overexpenditures), if elected. If a well does not
       reach its Objective Depth as a result of the conditions mentioned in this
       Article 11.7, the operation shall be deemed to have been completed and
       Article 13 (Non-consent Operations) shall apply to each Non-participating
       Party for the portion of the well drilled.

11.8   Course of Action After Reaching Objective Depth

       When a Development Well has been drilled to its Objective Depth and
       reasonable testing, coring, and logging have been completed and the

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       results have been furnished to the Participating Parties, Operator shall
       notify the Participating Parties of Operator's recommendation for further
       operations in the well and the following provisions shall apply:

       11.8.1 Election by Fewer Than All Parties

              A Participating Party shall have the right to propose another
              operation by notifying the Operator and the other Participating
              Parties of its proposed operation within twenty-four (24) hours,
              exclusive of Saturdays, Sundays, and federal holidays, of receipt
              of the Operator's notice. The Participating Parties shall notify
              Operator within forty-eight (48) hours, exclusive of Saturdays,
              Sundays, and federal holidays, of receipt of the Operator's
              proposal whether the Participating Parties elect to (a)
              participate in a recommended operation, or (b) not participate in
              a recommended operation. Failure to respond shall be deemed to be
              an election not to participate in any of the recommended
              operations.

       11.8.2 Priority of Operations

              If all Participating Parties elect to participate in the same
              proposed operation, Operator shall conduct the operation at their
              cost and risk. If more than one (1) operation is approved by one
              (1) or more Participating Parties having a combined Working
              Interest of twenty percent (20%) or more, then the approved
              operation with the lowest number as indicated below shall take
              precedence:

              (Indicate the order of preference.)

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

              2      Complete at the Objective Horizon.

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

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

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

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

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<PAGE>

                     more approved proposals, the approved proposal first
                     received by the Parties shall take precedence.)

              7      Temporarily abandon.

              8      Plug and abandon.

       11.8.3 Second Opportunity to Participate

              If fewer than all but one (1) or more Participating Parties having
              a combined Working Interest of twenty percent (20%) or more elect
              to participate in an operation, the proposing Party shall notify
              the Participating Parties of the elections made, whereupon a Party
              originally electing not to participate in the proposed operation
              may then elect to participate by notifying the proposing Party
              within twenty-four (24) hours, exclusive of Saturdays, Sundays,
              and federal holidays, after receipt of such notice. If all Parties
              elect to participate in the proposed operation, Operator shall
              conduct the operation at their cost and risk.

       11.8.4 Operations by Fewer Than All Parties

              If, after the election (if applicable) made under Article 11.8.3
              (Second Opportunity to Participate), fewer than all but one (1) or
              more Parties having a combined Working Interest of twenty percent
              (20%) or more elect to participate in the proposed operation that
              takes precedence, the proposing Party shall notify the
              Participating Parties and each Participating Party shall have
              twenty-four. (24) hours, exclusive of Saturdays, Sundays, and
              federal holidays, after receipt of the notice to notify the
              proposing Party of the portion of the costs and risks attributable
              to the total Non-participating Parties' interests it elects to pay
              and bear. Unless otherwise agreed by the Participating Parties,
              each Participating Party may, but shall not be obligated to, pay
              and bear that portion of the costs and risks attributable to the
              total Non-participating Parties' interests in the ratio that the
              Participating Party's interest bears to the total interests of all
              Participating Parties who elect to pay and bear a portion of costs
              and risks attributable to the Non-participating Parties'
              interests. Failure to respond shall be deemed to be an election
              not to pay or bear any additional costs or risks. If the
              Participating Parties agree to pay and bear one hundred percent
              (100%) of the costs and risks of the operation, Operator, subject
              to Article 4.2 (Substitute Operator), shall conduct the operation
              as a Non-consent Operation for the benefit of the Participating
              Parties, and the provisions of Article 13 (Non-consent Operations)
              shall apply. If such agreement is not obtained, however, the
              operation shall not be conducted and the effect shall be as if the
              proposal had not been made. If a Participating Party in a well
              elects not to participate in the Deepening or Sidetracking
              operation in the well, such non-consenting Party shall become a
              Non-participating Party in all operations conducted in the
              Deepened or Sidetracked portion of the well after that election.

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<PAGE>

              If the Non-consent Operation is an Additional Testing operation,
              Article 13 (Non-consent Operations) shall not apply, however, a
              Party electing not to participate in the Additional Testing shall
              not be entitled to information resulting from the operation.

       11.8.5 Subsequent Operations

              Upon the completion of an operation conducted under Article 11.8
              (Course of Action After Reaching Objective Depth), if the well is
              not either (a) Completed as a well capable of producing
              Hydrocarbons in paying quantities, or (b) temporarily abandoned or
              permanently plugged and abandoned, Operator shall notify the
              Participating Parties of Operator's recommendation for operations
              in the well under Articles 11.8.1 through 11.8.4, which again
              shall apply. If sufficient approval is not obtained to conduct a
              subsequent operation in a well, or if all Participating Parties
              elect to plug and abandon the well, subject to Article 14
              (Abandonment, Salvage, and Surplus), Operator shall permanently
              plug and abandon the well at the expense of all Participating
              Parties. Each Participating Party shall be responsible for its
              proportionate share of the plugging and abandonment costs
              associated with the operation in which it participated. ARTICLE 12

                       PLATFORM AND DEVELOPMENT FACILITIES

12.1   Proposal

       A Party may propose the fabrication or acquisition and installation of a
       Platform and/or Development Facilities, by sending an AFE or notice to
       the other Parties in accordance with Article 9 (Notices).

12.2   Counterproposals

       When a Platform and/or Development Facilities is proposed under Article
       12.1, a Party may, within thirty (30) days after receipt of the AFE or
       notice for the original proposal, make a counterproposal to fabricate or
       otherwise acquire and install said Platform and/or Development Facilities
       by sending an AFE or notice to the other Parties in accordance with
       Article 9 (Notices). The AFE or notice shall indicate that the proposal
       is a counterproposal to the original proposal. If one or more
       counterproposals are made, each Party shall elect to participate in
       either the original proposal, one counterproposal, or neither the
       original proposal nor a counterproposal. If two or more proposals receive
       the approval of the number of Parties and combined Working Interests
       required by Article 12.5 (Operations By Fewer Than All Parties), the
       proposal receiving the largest percentage Working Interest approval shall
       be deemed approved, and in the event two (2) or more approved proposals
       receive the same Working Interest approval, the approved proposal first
       received by the Parties shall be deemed approved.

       12.2.1 Operations by All Parties

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

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       12.2.2 Second Opportunity to Participate

              If there are more than two (2) Parties and if fewer than all but
              one (1) or more Parties having a combined Working Interest of
              fifty percent (50%) or more elect to participate in the Platform
              and/or Development Facilities, then the proposing Party shall
              notify the Parties of the elections made, whereupon a Party
              originally electing not to participate may then elect to
              participate by notifying the proposing Party within forty-eight
              (48) hours, exclusive of Saturdays, Sundays, and federal holidays,
              after receipt of such notice. If all Parties elect to participate
              in the Platform and/or Development Facilities, Operator shall
              timely commence the fabrication and installation of the Platform
              and/or Development Facilities at their cost and risk. If there are
              only two (2) Parties to this Agreement, then there shall not be a
              second opportunity to elect to participate, and if the
              Participating Party agrees to pay and bear one hundred percent
              (10b%) of the costs and risks of the operation, then the Operator,
              subject to Article 4.2 (Substitute Operator), shall conduct the
              operation as a Non-consent Operation for the benefit of the
              Participating Party, and the provisions of Article 13 (Non-consent
              Operations) shall apply.

       12.2.3 Operations by Fewer Than All Parties

              If there are more than two (2) Parties to this Agreement, then,
              after the election made under Article 12.2.2 (Second Opportunity
              to Participate), fewer than all but one (1) or more Parties having
              a combined Working Interest of fifty percent (50%) or more elect
              to participate in the Platform and/or Development Facilities, the
              proposing Party shall notify the Participating Parties, and each
              Participating Party shall have forty-eight (48) hours, exclusive
              of Saturdays, Sundays, and federal holidays, after receipt of the
              notice to notify the proposing Party of the portion of the costs
              and risks attributable to the total Non participating Parties'
              interests it elects to pay and bear. Unless otherwise agreed by
              the Participating Parties, each Participating Party may, but shall
              not be obligated to, pay and bear that portion of costs and risks
              attributable to the total Non-participating Parties' interests in
              the ratio that the Participating Party's interest bears to the
              total interests of all Participating Parties who elect to pay and
              bear a portion of the costs and risks attributable to the total
              Non-participating Parties' interests. Failure to respond shall be
              deemed to be an election not to pay or bear any additional costs
              or risks. If the Participating Parties agree to pay and bear one
              hundred percent (100%) of the costs and risks of the operation,
              the Operator, subject to Article 4.2 (Substitute Operator), shall
              conduct the operation as a Non-consent Operation for the benefit
              of the Participating Parties, and except as provided in Article
              12.4 (Rights to Take in Kind), the provisions of Article
              13.2.1.(b) shall apply. If such agreement is not obtained,

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              however, the fabrication and installation of the Platform and/or
              Development Facilities shall not be commenced, and the effect
              shall be as if the proposal had not been made.

12.3   Ownership and Use of the Platform and Development

       Facilities The Participating Parties in the Development Facilities own
       all of the excess capacity of the Development Facilities and the excess
       weight, space and buoyancy of the Platform. Each Participating Party in
       the Development Facilities does not have the right to use its
       Participating Interest share of the excess capacity, weight, space and
       buoyancy for hydrocarbon production from outside the Lease. Each
       Participating Party in the Development Facilities or Platform must obtain
       the unanimous approval of the other Participating Parties in the
       Development Facilities or Platform in order to utilize any portion of the
       excess capacity, weight, space and buoyancy. It must negotiate the
       payment of a fee with the Participating Parties in the Development
       Facilities or Platform in order to utilize any portion of the excess
       capacity, weight, space and buoyancy. Each of the Participating Parties
       in the Development Facilities or Platform shall receive its Participating
       Interest share of all fees derived from the utilization of the excess
       capacity, weight, space and buoyancy. All hydrocarbon production from
       outside the Lease shall be processed under a "Facilities Use and
       Production Handling Agreement" unanimously agreed to by the Participating
       Parties in the Development Facilities.

12.4   Rights to Take in Kind

       Nothing in this Article 12shall act to limit a Party's rights under
       Article 22 (Disposition of Production), or to otherwise separately
       dispose of its share of Hydrocarbon production. If a Party elects (a) not
       to participate in an approved Development Facilities proposal and (b) to
       separately dispose of its share of Hydrocarbon production (the
       "Separately Disposing Party), the Separately Disposing Party shall not be
       subject to the provisions of Article 13.2.1.(b), but must provide proof
       to the Participating Parties in the approved Development Facilities
       proposal, within sixty (60) days from the last applicable response date
       to the Development Facilities proposal that it has entered into
       fabrication and transportation contracts to separately dispose of its own
       share of Hydrocarbon production. If a Separately Disposing Party fails to
       provide such proof by that deadline and if there is sufficient capacity
       for the Development Facilities to accommodate the Separately Disposing
       Party's share of the Hydrocarbons, it shall immediately (I) become a
       Participating Party in the Development Facilities and utilize the
       Development Facilities for its share of Hydrocarbon production, (II) pay
       to the Participating Parties in the approved Development Facilities
       proposal an amount equal to one-hundred fifty percent (150%) of what
       would have been the Separately Disposing Party's share of the costs and
       expense of the Development Facilities had it elected to participate in
       the Development Facilities under Article 12.1 or 12.2, and (III) assume
       its share of the risks and liabilities associated with the construction
       and ownership of the Development Facilities as of the date of
       commencement of the operations to construct same. The Participating
       Parties in the original Development Facilities and the Separately
       Disposing Party, which becomes a Participating Party in the original

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       Development Facilities under Article 12.4 (I), shall own the original
       Development Facilities based on their Participating Interest share in the
       original Development Facilities. If a Separately Disposing Party fails to
       provide such proof by that deadline and if there is insufficient capacity
       for the Development Facilities to accommodate the Separately Disposing
       Party's share of the Hydrocarbons, the Separately Disposing Party shall
       (i) become a Participating Party in the original Development Facilities
       and utilize the available capacity in the original Development
       Facilities, if any, for its share of Hydrocarbon production, (ii) pay one
       hundred percent (100%) of the costs of an expansion or modification of
       the Development Facilities, which is required to accommodate all or a
       portion of its share of the Hydrocarbons, and assume one hundred percent
       (100%) of the risks and liabilities associated with (A) the construction,
       installation and commissioning of the expanded or modified Development
       Facilities and (B) the utilization of the expanded or modified
       Development Facilities for seven (7) days subsequent to the commencement
       of Hydrocarbon production through same, (iii) pay to the Participating
       Parties in the approved Development Facilities proposal an amount equal
       to one hundred fifty percent (150%) of what would have been the
       Separately Disposing Party's share of the costs and expense of the
       original Development Facilities had it elected to participate in the
       original Development Facilities under Article 12.1 or 12.2, (iv) assume
       its share of the risks and liabilities associated with the construction
       and ownership of the original Development Facilities as of the date of
       commencement of the operations to construct the original Development
       Facilities. The Participating Parties in the original Development
       Facilities and the Separately Disposing Party, which becomes a
       Participating Party in the original Development Facilities under Article
       12.4 (i), shall own the expanded or modified Development Facilities based
       on their Participating Interest share in the original Development
       Facilities, and the Participating Parties in the original Development
       Facilities shall assume their Participating Interest share of the risks
       and liabilities associated with the ownership of the expanded or modified
       Development Facilities seven (7) days after that the expanded or modified
       Development Facilities have been utilized. 12.5 Expansion or Modification
       of a Platform and/or Development Facilities After installation of a
       Platform and/or Development Facilities, any Participating Party in that
       Platform and/or Development Facilities may propose the expansion or
       modification of that Platform and/or Development Facilities by written
       notice (along with its associated AFE) to the other Participating Parties
       in that Platform and/or Development Facilities. That proposal requires
       approval by two of more of the Participating Parties in the Platform
       and/or Development Facilities with more than seventy percent (70%) of the
       Participating Interest in the Platform and/or Development Facilities. If
       approved, that proposal will be binding on all Participating Parties in
       that Platform and/or Development Facilities, and the Operator shall
       commence that expansion or modification at the sole cost and risk of all
       of the Participating Parties in that Platform and/or Development
       Facilities unless otherwise agreed.

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12.6   Offsite Host Facilities

       In the event that one (1) or more Parties with more than fifty percent
       (50%) of the Participating Interest in Hydrocarbon production agree that
       Hydrocarbon production can most effectively be processed and handled by
       an Offsite Host Facilities, the Operator, on behalf of the Participating
       Parties, shall use reasonable efforts to secure a formal "Facilities Use
       and Production Handling Agreement" from the owners of the Offsite Host
       Facilities. If the Operator does secure access to Offsite Host Facilities
       in a Facilities Use and Production Handling Agreement, each Participating
       Party shall have the right, but not the obligation, to utilize its
       Participating Interest share of the capacity so secured. This Article
       12.6 shall not constitute a limit on a Party's right to install its own
       Take-in-Kind Facilities under Article 22 (Disposition of Production).

                                   ARTICLE 13

                             NON-CONSENT OPERATIONS

13.1   Non-consent Operations

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

       13.1.1 Non-interference

              Non-consent Operations shall not interfere unreasonably with
              operations approved by all of the Parties.

       13.1.2 Multiple Completion Limitation

              Subject to Article 10.9, a Non-consent Operation shall not be
              conducted in a well having multiple Completions unless (a) each
              Completion is owned by the same Parties in the same proportions;
              (b) the well is incapable of producing from any Completion; or (c)
              all Participating Parties in the well consent to the operation.

       13.1.3 Metering

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

       13.1.4 Non-consent Well

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

                                       40

<PAGE>

              horizontal distance between the vertical projections of the
              midpoint of the Producible Reservoir in the well and an existing
              well currently completed in and producing from the same Producible
              Reservoir will be at least one thousand (1,000) feet for an
              oil-well Completion or two thousand (2,000) feet for a gas-well
              Completion.

       13.1.5 Cost Information

              Operator shall, within one-hundred twenty (120) days after
              completion of a Non-consent Operation, furnish the Parties either
              (a) an inventory and an itemized statement of the cost of the
              Non-consent Operation and equipment pertaining thereto, or (b) a
              detailed statement of the monthly billings. Each month thereafter,
              while the Participating Parties are being reimbursed under Article
              13.2.1 (Production Reversion Recoupment), Operator shall furnish
              the Non-participating Parties a monthly statement detailing all
              costs and liabilities incurred in the Non-consent Operation,
              together with a statement of the quantities of Hydrocarbons
              produced from it and the amount of the proceeds from the sale of
              the Non-participating Parties' relinquished Hydrocarbon production
              from the Non consent Operation for the preceding month. Operator
              shall prepare the monthly statement of the quantities of
              Hydrocarbons produced and the amounts of the proceeds from the
              sale of Non-participating Parties' relinquished Hydrocarbon
              production based on the proceeds received for the Operator's share
              of Hydrocarbon production. When Operator's payout calculation
              indicates that payout has occurred, Operator shall promptly notify
              all Parties. The Participating Parties who assumed a portion of
              the Non participating Parties' relinquished interest shall then
              provide Operator all information pertaining to the cumulative
              proceeds received from the sale of the Non-participating Parties'
              relinquished Hydrocarbon production. Operator shall revise the
              payout date using the actual proceeds from the sale of the
              Non-participating Parties' relinquished Hydrocarbon production and
              administer any subsequent adjustments between the Parties.

       13.1.6 Completions

              For determinations under Article 13.1 (Non-consent Operations),
              each Non-consent Operation in a single wellbore shall be accounted
              for separately.

13.2   Relinquishment of Interest

       Upon commencement of Non-consent Operations, other than Non-consent
       Operations Article 13.7 (Operations Utilizing a Non-consent Platform
       and/or Development Facilities), each Nonparticipating Party's interest
       and leasehold operating rights in the Non-consent Operation and title to
       Hydrocarbon production resulting therefrom; and if Article 13.8
       (Discovery or Extension from Non-consent Drilling) is effective, one-half
       (1/2) of each Non-participating Party's interest and leasehold operating
       rights and title to Hydrocarbon production from wells mentioned in
       Article 13.8 (Discovery or Extension from Non-consent Drilling); shall be

                                       41

<PAGE>

       owned by and vested in each Participating Party in proportion to its
       Participating Interest, or in the proportions otherwise agreed by the
       Participating Parties, for as long as the Non-Consent Operation is being
       conducted or Hydrocarbon production is obtained therefrom, subject to the
       following:

       13.2.1 Production Reversion Recoupment

              When the Participating Parties have recouped out of Hydrocarbon
              production from the Non-consent Operations attributable to the
              Non-participating Party's interest an amount, which when added to
              amounts received under Article 13.3 (Deepening or Sidetracking of
              Non-consent Well), equals the sum of the following:

              (a)    Eight hundred percent (800%) of the Non-participating
                     Party's share of the costs of the following Non-consent
                     Exploratory Operations, or four hundred percent (400%) of
                     the Non-participating Party's share of the costs of the
                     following Non consent Development Operations: drilling,
                     testing, Completing, Recompleting, Deepening, Sidetracking,
                     Reworking, plugging back, and temporarily abandoning a
                     well, reduced by the Non-participating Party's Share of a
                     cash contribution received under Article 21.2 (Cash
                     Contributions);

              (b)    if applicable, three hundred percent (300%) of
                     Non-participating Party's Share of the cost of Platforms
                     and/or Development Facilities approved under Article 12.1
                     (Proposal) or Article 12.2 (Counterproposals); such
                     recoupment is limited to the Non-participating Party's
                     Share of the Hydrocarbon production that utilize such
                     Platform and/or Development Facilities;

              (c)    Three hundred percent (300%) of the Non-participating
                     Party's Share of the cost charged in accordance with
                     Article 13.9 (Allocation of Platform/Development Facilities
                     Costs to Non-consent Operations) of using an existing
                     Platform/Development Facilities; and

              (d)    the Non-participating Party's Share of the costs of
                     operation, maintenance, treating, processing, gathering,
                     and transportation, including, but not limited to, an
                     Offsite Host Facilities' handling fees, as well as lessor's
                     royalties and severance, Hydrocarbon production, and excise
                     taxes,

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

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<PAGE>

       13.2.2 Non-production Reversion

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

13.3   Deepening or Sidetracking of Non-consent Well

       If a Participating Party proposes to Deepen or Sidetrack a Non-consent
       Well, a Non-participating Party may then elect to participate in the
       Deepening or Sidetracking operation by notifying Operator within thirty
       (30) days, or within forty-eight (48) hours, exclusive of Saturdays,
       Sundays, and federal holidays, if a rig is on location and standby
       charges are being incurred, after receiving notice of the proposal. A
       Non-participating Party that elects to participate in Deepening or
       Sidetracking the well, as proposed, shall immediately pay the
       Participating Parties, in accordance with Article 13.4 (Deepening or
       Sidetracking Cost Adjustments), its Working Interest share of actual well
       costs (excluding logging, coring, testing, and Completion costs other
       than the cost of setting any casing or Completion Equipment that is used
       in the Deepening or Sidetracking), less all amounts recovered by the
       Participating Parties from the proceeds of Hydrocarbon production from
       the well, as if the Non-participating Party had originally participated
       to the initial objective depth or formation, in the case of a Deepening
       operation, or the depth at which the Sidetracking operation is initiated.
       Thereafter, the Non-participating Party shall be deemed to be a
       Participating Party for the Deepening or Sidetracking operations, and
       Article 13.2.1(a) shall not apply to that Party for the Deepened or
       Sidetracked portion of the well. The initial Participating Parties,
       however, shall continue to recoup out of the proceeds of Hydrocarbon
       production from the non consent portion of the well any balance for the
       Non-consent Well remaining to be recovered under Article 13.2.1
       (Production Reversion Recoupment), less the amounts paid by the
       Non-participating Party under this Article 13.3.

13.4   Deepening or Sidetracking Cost Adjustments

       If a proposal is made to Deepen or Sidetrack a Non-consent Well, a well
       cost adjustment will be performed as follows:

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

       (b)    Tangible materials will be valued in accordance with the
              provisions of Exhibit "C".

       (c)    For Sidetracking operations, the values determined in Articles
              13.4(a) and 13.4(b) shall be reduced by the amount allocated to
              that portion of the well from the surface to one hundred feet
              (100') below the point at which the Sidetracking was initiated.

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<PAGE>

              Such allocations shall be consistent with the guidelines
              recommended by the applicable Council of Petroleum Accountants
              Societies ("COPAS") Guideline, as amended from time to time.

       (d)    Amortization/depreciation shall be applied to both intangible and
              tangible values at the rate of ten percent (10%) per annum from
              the date the well commenced Hydrocarbon production to the date
              operations commence to Deepen or Sidetrack the well, provided,
              however, the value of tangible materials after applying
              depreciation shall never be less than fifty percent (50%) of the
              value determined in Article 13.4(b).

13.5   Subsequent Operations in Non-consent Well

       Except as provided in Article 13.3 (Deepening or Sidetracking of
       Non-consent Well), an election not to participate in the drilling,
       Sidetracking, or Deepening of a well shall be deemed to be an election
       not to participate in any subsequent operations in the well before full
       recovery by the Participating Parties of the Non-participating Party's
       recoupment amount.

13.6   Operations in a Production Interval

       A Participating Party in a Production Interval may propose Rework or
       Sidetrack operations within that Production Interval, or to permanently
       plug and abandon that Production Interval in a well; however, no
       Production Interval in a well shall be abandoned without the unanimous
       approval of the Participating Parties in the Production Interval. If a
       proposal, estimated to exceed the amount specified in Article 8.2
       (Authorization), is made to Rework or Sidetrack a Production Interval,
       the unanimous approval of the Parties owning an interest in the
       Production Interval shall be required to conduct the operation. A
       proposal to Rework an interval, other than a Production Interval, shall
       be made and approved in accordance with Article 11.5 (Operations by Fewer
       Than All Parties).

13.7   Operations Utilizing a Non-consent Platform and/or Development Facilities

       Except as otherwise provided in Article 12.4 (Rights to Take in Kind) and
       this Article 13.7, if applicable, a Party that did not originally
       participate in a Platform and/or Development Facilities shall be a
       Non-participating Party for all operations utilizing the Platform and/or
       Development Facilities and shall be subject to Article 13.2
       (Relinquishment of Interest). Notice, in accordance with Article 9
       (Notices), shall be given to the Non-participating Party for all wells
       proposed to be drilled from or tied-back to the Non-consent Platform
       and/or handled by non-consent Development Facilities. If a
       Non-participating Party in a Non-consent Platform and/or Development
       Facilities desires to participate in the drilling of any such well
       proposed by the Participating Parties in the Platform and/or Development
       Facilities, the Non-participating Party desiring to join in the proposed
       well shall first pay the Participating Parties in the Platform and/or
       Development Facilities its proportionate share of the cost of the
       Platform and/or Development Facilities, including, but not limited to,
       costs of material, fabrication, transportation, and installation plus any
       remaining amounts to be recouped under Article 13.2.1(b). The
       Non-participating Party shall remit payment to Operator and Operator

                                       44

<PAGE>

       shall (a) reimburse the Participating Parties in the Platform and/or
       Development Facilities in the same proportions they are sharing in the
       Platforms and/or Development Facilities recoupment account, and (b)
       credit the applicable payout account. Upon payment of that amount, the
       original Non-participating Party shall become an owner and a
       Participating Party in the Platform and/or Development Facilities in the
       same manner as if recoupment had occurred under Article 13.2.1
       (Production Reversion Recoupment), and may participate in all future
       wells drilled from or tied back to the Platform. As to well operations
       conducted from the Platform and/or Development Facilities prior to
       payment under this Article 13.7, the original Non-participating Party
       shall remain a Non-participating Party in such Non consent Operations
       until such time as the entire recoupment balance applicable to all such
       Non consent Operations in the aggregate has occurred, as provided for in
       Articles 13.2.1 (a) and 13.2.1(d).

13.8   Discovery or Extension from Non-consent Drilling

       If a Non-consent Well (a) discovers a new Producible Reservoir or (b)
       extends an existing Producible Reservoir beyond its recognized
       boundaries,' as unanimously agreed by the Participating Parties in all
       existing wells currently producing from the existing Producible Reservoir
       before commencement of drilling operations, the recoupment of costs for
       the well shall be governed by Article 13.2 (Relinquishment of Interest)
       and shall be recovered by the Participating Parties in one of the
       following ways:

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

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

13.9   Allocation of Platform/Development Facilities Costs to Non-consent
       Operations

       In the event a well is drilled from or produced through a Platform or is
       produced through Development Facilities which are owned by the
       Participating Parties in different proportions than the ownership of the
       Non-consent well, the rights of the Participating Parties in such well
       and the costs to utilize such Platform or Development Facilities for such
       well shall be determined as follows:

       13.9.1 Investment Usage Fees

              The Participating Parties in such well shall pay to the Operator,

                                       45

<PAGE>

              for credit to the owners of the Platform and/or Development
              Facilities, a one-time usage fee for the right to use the Platform
              and/or Development Facilities. Such usage fees shall be determined
              in accordance with paragraphs (a) and (b) below:

              (a)    A fee for slot usage will be determined as follows:

                     (i)    In the event the well uses a platform with well
                            slots and such platform has no Development
                            Facilities installed on it, the slot usage fee shall
                            be an amount equal to the ratio which one Platform
                            slot bears to the total number of slots on the
                            Platform times the total cost of the Platform.

                     (ii)   In the event the well uses a Platform with well
                            slots and such Platform has Development Facilities
                            installed on it, the slot usage fee shall be an
                            amount equal to the ratio which one Platform slot
                            bears to the total number of slots on the Platform
                            times the total cost of the Platform attributable to
                            well slot area, determined as follows:

                     Slot Usage Fee = (one platform slot divided by total
                       platform slots) x [(Total Cost of Platform - Any Cost of
                       Development Facilities Included In the Total Cost of
                       Platform) x Well Slot Area %]

                     Well Slot Area % = Deck Space Dedicated to Well Slots
                       divided by (Deck Space Dedicated to Well Slots + Deck
                       Space Dedicated to Development Facilities)

                     The cost of Development Facilities [as used in Article
                     13.9.1 (a) and (b)] shall include the cost of design,
                     material, fabrication, transportation, installation and
                     modifications of such Development Facilities.

                     For purposes of calculating the slot usage fee [under
                     Article 13.9.1 (a) (i) or (ii)], the total cost of the
                     Platform shall be reduced by 0.83333% per month, commencing
                     on the first day of the month following the date the
                     Platform was installed and continuing every month
                     thereafter until the month actual drilling operations on
                     such well is commenced; however, the total cost of the
                     Platform shall not be reduced by more than forty percent
                     (40%) of the total Platform costs. The cost of additions to
                     the Platform shall be reduced in the same manner commencing
                     the first day of the month after the addition is installed

                     If such well is abandoned, having never produced, the right
                     of the Participating Parties in such well to utilize the

                                       46

<PAGE>

                     Platform slot through which such well was drilled shall
                     terminate unless such Parties commence drilling a
                     substitute well for the abandoned well through the same
                     slot within ninety (90) days of the abandonment. If such
                     substitute well is abandoned, having never produced, the
                     right of the Participating Parties in such well to utilize
                     the Platform slot through which such well was drilled shall
                     terminate. No refund or credit of the slot usage fee shall
                     be given or due if a subsequent well operation is conducted
                     through the same slot or if that Platform slot is restored
                     to a usable condition.

                     If subsequent Non-consent Operations (such as Workover,
                     Recompletion, Deepening, or Sidetracking operations) are
                     conducted in any wellbore where either all Parties to this
                     agreement participated in the original well drilling costs
                     or a previous Non-consent Operation was conducted, no slot
                     usage fee shall be charged to the Participating Parties in
                     the subsequent Non-consent Operation.

              (b)    The Participating Parties in such well shall pay to the
                     owners of the Development Facilities a sum equal to that
                     portion of the total cost of such Development Facilities
                     which the throughput volume of the Non-consent Operation
                     bears to the total design throughput volume of the
                     Development Facilities at the time such well is connected.
                     Throughput volume shall be estimated by the Operator using
                     an average daily volume of the first three months of
                     production from the Non consent Operation.

              The Total Cost of Development Facilities shall include the cost of
              design, material, fabrication, transportation, installation and
              modifications of Development Facilities plus that portion of the
              cost of the Platform attributable to Development Facilities Area.
              The Development Facilities Usage Fee shall be based on the
              following:

              Development Facilities Usage Fee =Total Cost of Development
                Facilities x Throughput Volume of Non-consent Well divided by
                Total Design Throughput of Facilities

              Total Cost of Development Facilities = Cost of Development
                Facilities + [(Total Cost of Platform - Any Cost of Development
                Facilities Included In the Total Cost of Platform) x Development
                Facilities Area %]

              Development Facilities Area % = Deck Space Dedicated to
                Development Facilities divided by (Deck Space Dedicated to Well
                Slots + Deck Space Dedicated to Development Facilities)

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<PAGE>

              For purposes of calculating the Development Facilities usage fee,
              the total cost of the Development Facilities, shall be reduced by
              0.83333% per month, commencing from the first day of the month
              following the date when the Development Facilities where installed
              and continuing every month thereafter until the first day of the
              month during which production from the Non-consent Operation is
              commenced; however, the total cost of the Development Facilities
              shall not be reduced more than forty percent (40%). If
              modifications, expansions or additions to the Development
              Facilities are made after commencing first production and prior to
              the connection of the Non-consent Operation to the Development
              Facilities, such Development Facilities investment shall be
              reduced in the same manner as described above, from the first day
              of the month the Development Facilities modification, expansion or
              addition is completed until the first day of the month during
              which production from the Non-consent Operation is commenced. If
              modifications, expansions or additions are made to the Development
              Facilities after connection of the Non-consent Well which benefit
              the Non-consent Well, such costs shall be shared by the
              Non-consent Well based on that portion which the throughput volume
              of the Non-consent Well bears to the total design throughput
              volume of the Development Facilities at the time of completion of
              such modification, expansion or addition. The Non-consent well's
              throughput volumes shall be determined in the same manner as
              described above.

              Payment of sums under this Article 13.9.1 is not a purchase of an
              additional interest in the Platform or the Development Facilities.
              Such payment shall be included in the total amount that the
              Participating Parties are entitled to recoup out of Hydrocarbon
              production from the Non-consent Well.

       13.9.2 Operating and Maintenance Charges

              The Participating Parties shall pay all costs necessary to connect
              a Non-consent Well to the Platform and/or Development Facilities
              and that proportionate part of the costs of operating and
              maintaining the Platform and/or Development Facilities applicable
              to the Non-consent Well. Platform operating and maintenance costs
              that are costs not directly attributable to a wellbore shall be
              allocated equally to all actively producing Completions. Operating
              and maintenance costs for the Development Facilities shall be
              allocated on a volume throughput basis, that is, in the proportion
              that the volume throughput of the well bears to the total volume
              throughput of all wells connected to the Development Facilities.
              Operating and maintenance expense for support facilities (e.g.,
              electrical systems and living quarters which do not handle
              production) shall be allocated by applying a usage basis
              appropriate for that support facility.

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<PAGE>

13.10  Allocation of Costs Between Zones

       Except as provided in Article 10.9 (Wells Proposed Below Deepest
       Producible Reservoir), if for any reason the Participating Interests of
       the Parties in a well are not the same for the entire depth or the
       Completion thereof, the costs of drilling, Completing, and equipping the
       well shall be allocated in an equitable manner, as agreed by the Parties,
       based on the value and allocation recommended in the applicable COPAS
       Guideline, as amended from time to time.

13.11  Lease Maintenance Operations

       An operation proposed within the last six (6) months of the primary term
       or, subsequent thereto, an operation proposed to perpetuate the Lease or
       portion thereof at its expiration date or otherwise, including, but not
       limited to, well operations, regulatory relief (for example, course of
       action necessary to satisfy the statutory or regulatory requirements of
       the governmental authority having jurisdiction), and other Lease
       operations, shall be deemed to be a "Lease Maintenance Operation." To
       invoke this Article 13.11, a notice or AFE that proposes an operation
       must state that the proposed operation is a Lease Maintenance Operation.

       13.11.1 Participation in Lease Maintenance Operations

              A Party may propose a Lease Maintenance Operation by giving notice
              to the other Parties. If fewer than all Parties elect to
              participate in the proposed Lease Maintenance Operation, the
              proposing Party shall notify the Parties of the elections made.
              Each Party electing not to participate shall then have a second
              opportunity to participate in the proposed operation by notifying
              the other Parties of its election within forty-eight (48) hours
              after receipt of the notice. A Lease Maintenance Operation shall
              not require minimum approval, either of the number of Parties or
              the percentage of the voting interests of the Parties otherwise
              required in Article 6.1.2 (Vote Required). For a Lease Maintenance
              Operation to be conducted, the Participating Parties must agree to
              pay and bear one hundred percent (100%) of the costs and risks of
              the operation. If more than one Lease Maintenance Operation is
              proposed, the operation with the greatest percentage approval
              shall be conducted. Notwithstanding the recoupment provisions of
              this Agreement, a Party electing not to participate in a well
              operation proposed as a Lease Maintenance Operation shall promptly
              assign, effective as of the date the operation commences, to the
              Participating Parties all of its right, title, and interest in and
              to that portion of the Lease that would otherwise expire and the
              property and equipment attributable thereto, in accordance with
              Article 26 (Successors, Assigns, [and Preferential Rights]). If
              more than one Lease Maintenance Operation is proposed and there is
              a tie between two proposed operations, both operations shall be
              conducted and the costs and risks of conducting both operations
              shall be paid and borne by the Participating Parties. If the
              drilling of a well is undertaken as a Lease Maintenance Operation,
              further operations conducted by the Participating Parties in the

                                       49

<PAGE>

              well shall be governed by Article 10.9 (Course of Action After
              Reaching Objective Depth) or Article 11.9 (Course of Action After
              Reaching Objective Depth), whichever applies. If more than one
              well operation is conducted, any of which would perpetuate the
              Lease or such portion thereof, an assignment shall not be required
              from a Party participating in any such well operation.

       13.11.2 Accounting for Non-participation

              If after one (1) year from completion of a well operation
              conducted as a Lease Maintenance Operation, the Lease or portion
              thereof is being perpetuated by a Lease Maintenance Operation, as
              provided in Article 13.11.1 (Participation in Lease Maintenance
              Operations), Operator shall render a final statement, if
              applicable, to the assigning Party for its share of all expenses
              attributed to the assigned interest before the effective date of
              the assignment, plus any credit or deficiency in salvage value
              calculated under Article 15.3.1 (Prior Expenses). The assigning
              Party shall settle any deficiency owed the non-assigning Parties
              within thirty (30) days after receipt of Operator's statement.

13.12  Non-Consent Premiums

       A non-consent premium paid by a Non-Participating Party to the
       Participating Parties shall be allocated to the Participating Parties
       based on their original Participating Interest share in the Nonconsent
       Operation which generated the non-consent premium.

                                   ARTICLE 14

                        ABANDONMENT, SALVAGE, AND SURPLUS

14.1   Platform Salvage and Removal Costs

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

14.2   Abandonment of Platforms, Development Facilities or Wells

       Except as provided in Article 10 (Exploratory Operations) and Article
       11(Development Operations), a Participating Party may propose the
       abandonment of a Platform and Development Facilities or wells by
       notifying the other Participating Parties. No Platform and Development
       Facilities or wellbore shall be abandoned without the unanimous approval
       of the Participating Parties. If the Participating Parties do not approve
       abandoning the Platform and Development Facilities or wells, the Operator
       shall prepare a statement of the abandoning Party's share of estimated
       abandonment costs, less its share of estimated salvage value, as
       determined by the Operator pursuant to Exhibit "C". The Party desiring to
       abandon it shall pay the Operator, on behalf of the Participating Parties

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<PAGE>

       for that Party's share of the estimated abandonment costs, less its share
       of estimated salvage value, within thirty (30) days after receipt of the
       Operator's statement. If an abandoning Party's respective share of the
       estimated salvage value is greater than its share of the estimated costs,
       Operator, on behalf of the Participating Parties, shall pay a sum equal
       to the deficiency to the abandoning Party within thirty (30) days after
       the abandoning Party's receipt of the Operator's statement.

14.3   Assignment of Interest.

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

14.4   Abandonment Operations Required by Governmental Authority

       A well abandonment or Platform and Development Facilities removal
       required by a governmental authority having jurisdiction shall be
       accomplished by Operator with the costs, risks, and net proceeds, if any,
       to be shared by the Parties owning the well or Platform and Development
       Facilities in proportion to their Participating Interests therein. No
       approval by the Parties will be necessary for Operator to proceed with
       the government required well abandonment, or Platform and Development
       Facilities removal. The Operator shall provide the Parties with an
       informational AFE prior to commencing such an abandonment or removal.

14.5   Disposal of Surplus Material

       Material and equipment acquired hereunder may be classified as surplus by
       Operator when deemed no longer needed in present or foreseeable
       operations. Operator shall determine the value and cost of disposing of
       the materials in accordance with Exhibit "C". If the material is
       classified as junk or if the value, less cost of disposal, is less than
       or equal to one-hundred thousand Dollars ($100,000), Operator shall
       dispose of the surplus materials in any manner it deems appropriate. If
       the value, less the cost of disposal of the surplus material, is greater
       than one-hundred thousand Dollars ($100,000), Operator shall give written
       notice thereof to the Parties owning the material. Unless purchased by
       Operator, the surplus material shall be disposed of in accordance with
       the method of disposal approved by the Parties owning the material.
       Proceeds from the sale or transfer of surplus material shall be promptly
       credited to each Party in proportion to its ownership of the material at
       the time of retirement or disposition.

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                              ARTICLE 15 WITHDRAWAL

15.1   Right to Withdraw

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

15.2   Response to Withdrawal Notice

       Failure to respond to a withdrawal notice is deemed a decision not to
       join in the withdrawal.

       15.2.1 Unanimous Withdrawal

              If all the other Parties join in the withdrawal,

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

              (b)    subject to Article 14.4, no further operations may be
                     conducted under this Agreement unless agreed to by all
                     Parties;

              (c)    the Parties shall abandon all activities and operations
                     within the Lease and relinquish all of their Working
                     Interests to the MMS within fifteen (15) days of the
                     conclusion of the thirty (30) day joining period; and

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

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

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

       15.2.2 No Additional Withdrawing Parties

              If none of the other Parties join in the withdrawal, then the
              Remaining Parties must accept an assignment of their Participating
              Interest share of the Withdrawing Party's Working Interest.

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       15.2.3 Acceptance of the Withdrawing Parties' Interests.

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

       15.2.4 Effects of Withdrawal

              Except as otherwise provided in this Agreement, after giving a
              withdrawal notice or a written notice to join in the withdrawal,
              the Withdrawing Party and Other Withdrawing Parties are not
              entitled to approve or participate in any activity or operation in
              the Lease, other than those activities or operations for which
              they retain a financial responsibility. The Withdrawing Party and
              Other Withdrawing Parties shall take all necessary steps to
              accomplish their withdrawal by the effective date referred to in
              Article 15.1 (Right to Withdraw) and shall execute and deliver to
              the Remaining Parties all necessary instruments to assign their
              Working Interest to the Remaining Parties. A Withdrawing Party and
              Other Withdrawing Parties shall bear all expenses associated with
              their withdrawal and the transfer of their Working Interest.

15.3   Limitation Upon and Conditions of Withdrawal

       15.3.1 Prior Expenses

              The Withdrawing Party and Other Withdrawing Parties remain liable
              for their Participating Interest share of the costs of all
              activities, operations, rentals, royalties, taxes, damages,
              Hydrocarbon imbalances, or other liability or expense accruing or
              relating to (i) obligations existing as of the effective date of
              the withdrawal, (ii) operations conducted before the effective
              date of the withdrawal, (iii) operations approved by the
              Withdrawing Party and Other Withdrawing Parties before the
              effective date of the withdrawal, or (iv) operations commenced by
              the Operator under one of its discretionary powers under this

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              Agreement before the effective date of the withdrawal. Before the
              effective date of the withdrawal, the Operator shall provide a
              statement to the Withdrawing Party and Other Withdrawing Parties
              for (1) their respective shares of all identifiable costs under
              this Article 15.3.1 and (2) their respective Participating
              Interest shares of the estimated current costs of plugging and
              abandoning all wells and removing all Platforms, Development
              Facilities, and other materiel and equipment owned by the Joint
              Account, less their respective Participating Interest Shares of
              the estimated salvage value of the assets at the time of
              abandonment, as approved by vote. This statement of expenses,
              costs, and salvage value shall be prepared by the Operator under
              Exhibit "C". Before withdrawing, the Withdrawing Party and Other
              Withdrawing Parties shall either pay the Operator, for the benefit
              of the Remaining Parties, the amounts allocated to them as shown
              in the statement, or provide security satisfactory to the
              Remaining Parties for all obligations and liabilities they have
              incurred and all obligations and liabilities attributable to them
              before the effective date of the withdrawal. All liens, charges,
              and other encumbrances, including but not limited to overriding
              royalties, net profits interest and production payments, which the
              Withdrawing Party and Other Withdrawing Parties placed (or caused
              to be placed) on their Working Interest shall be fully satisfied
              or released prior to the effective date of its withdrawal (unless
              the Remaining Parties are willing to accept the Working Interest
              subject to those liens, charges, and other encumbrances).

       15.3.2 Confidentiality

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

       15.3.3 Emergencies and Force Majeure

              No Party may withdraw during a Force Majeure or emergency that
              poses a threat to life, safety, property or the environment but
              may withdraw from this Agreement after termination of the Force
              Majeure or emergency. The Withdrawing Party and Other Withdrawing
              Parties remain liable for their share of all costs and liabilities
              arising from the Force Majeure or emergency, including but not
              limited to the drilling of relief wells, containment and cleanup
              of oil spills and pollution, and all costs of debris removal made
              necessary by the Force Majeure or emergency.

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                                   ARTICLE 16

                     RENTALS, ROYALTIES, AND OTHER PAYMENTS

16.1   Overriding Royalty and Other Burdens

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

16.2   Subsequently Created Interest

       Notwithstanding anything in this Agreement to the contrary, if a Party,
       after execution of this Agreement, creates an overriding royalty,
       Hydrocarbon production payment, net profits interest, carried interest,
       or any other interest out of its Working Interest which the Parties do
       not unanimously agree to list on Exhibit "A", (hereinafter called
       "Subsequently Created Interest"), the Subsequently Created Interest shall
       be made specifically subject to this Agreement. If the Party owning the
       interest from which the Subsequently Created Interest was established
       fails to pay, when due, its share of costs, and if the proceeds from the
       sale of Hydrocarbon production under Article 8.6 (Security Rights) are
       insufficient for that purpose, or elects to abandon a well, or elects to
       relinquish its interest in the Lease, the Subsequently Created Interest
       shall be chargeable with a pro rata portion of all costs in the same
       manner as if the Subsequently Created Interest were a Working Interest,
       and Operator may enforce against the Subsequently Created Interest the
       lien and other rights granted or recognized under this Agreement to
       secure and enforce collection of costs chargeable to the Subsequently
       Created Interest. The rights of the owner of the Subsequently Created
       Interest shall be, and hereby are, subordinated to the rights granted or
       recognized by Article 8.6 (Security Rights).

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16.3   Payment of Rentals and Minimum Royalties

       Operator shall pay in a timely manner, for the joint account of the
       Parties, all rental, minimum royalties, and other similar payments
       accruing under the Lease and shall, on request, submit evidence of each
       such payment to the Parties. Operator shall not be held liable to the
       other Parties in damages for loss of the Lease or interest therein if,
       through mistake or oversight, a rental, minimum royalty, or other payment
       is not paid or is erroneously paid. The loss of a Lease or interest
       therein resulting from the Operator's failure to pay, or erroneous
       payment of rental or minimum royalty shall be a joint loss, and there
       shall be no readjustment of interests. For Hydrocarbon production
       delivered in kind by Operator to a Non-operator or to another for the
       account of a Non-operator, the Non-operator shall provide Operator with
       information about the Non-operator's proceeds received or the value of
       the Hydrocarbon production taken in kind in order that Operator may make
       payments of minimum royalties due.

16.4   Non-participation in Payments

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

16.5   Royalty Payments

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

                                   ARTICLE 17

                                      TAXES

17.1   Property Taxes

       Operator shall render property covered by this Agreement for ad valorem
       taxation, if applicable, and shall pay the property taxes for the benefit
       of each Party. Operator shall charge each Party its

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       share of the tax payments. If the ad valorem taxes are based in whole or
       in part upon separate valuations of each Party's Working Interest, then
       notwithstanding anything in this Agreement to the contrary, each Party's
       share of property taxes shall be in proportion to the tax value generated
       by that Party's Working Interest.

17.2   Contest of Property Tax Valuation

       Operator shall timely and diligently protest to a final determination
       each tax valuation it deems unreasonable. Pending such determination,
       Operator may elect to pay under protest. Upon final determination,
       Operator shall pay the taxes and the interest, penalties, and costs
       accrued as a result of the protest. In either event, Operator shall
       charge each Party its share of any amounts due, and each Party shall be
       responsible for reimbursing Operator for any such amounts paid.

17.3   Production and Severance Taxes

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

17.4   Other Taxes and Assessments

       Operator shall pay other applicable taxes (other than income taxes,
       excise taxes, or other similar types of taxes) or assessments and charge
       each Party its share. ARTICLE 18

                                    INSURANCE

18.1   Insurance

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

18.2   Bonds

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

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                                   ARTICLE 19

                         LIABILITY, CLAIMS, AND LAWSUITS

19.1   Individual Obligations

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

19.2   Notice of Claim or Lawsuit

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

19.3   Settlements

       The Operator may settle a Claim, or multiple Claims arising out of the
       same incident, involving activities or operations under this Agreement or
       affecting the Lease, if the aggregate expenditure does not exceed Fifty
       Thousand Dollars ($50,000) and if the payment is in complete settlement
       of these Claims. If the amount required for settlement exceeds this
       amount, the Parties shall determine the further handling of the Claims
       under Article 19.4 (Defense of Claims and Lawsuits).

19.4   Defense of Claims and Lawsuits

       The Operator shall supervise the handling, conduct, and prosecution of
       all Claims involving activities or operations under this Agreement or
       affecting the Lease. Claims may be settled in excess of the amount
       specified in Article 19.3 (Settlements) if the settlement is approved by
       vote in accordance with Article 6.1.2 of the Participating Parties in the
       activity or operation out of which the Claim arose, but a Party may
       independently settle a Claim or the portion of a Claim which is
       attributable to its Participating Interest share alone as long as that
       settlement does not directly adversely affect the interest or rights of
       the other Participating Parties. Charges for services performed by the
       legal staff of a Party shall be made in accordance with Exhibit "C", but
       all other expenses incurred by the Operator in the prosecution or defense
       of Claims for the Parties, together with the amount paid to discharge a
       final judgment, are costs and shall be paid by the Parties in proportion
       to their Participating Interest share in the activity or operation out of

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       which the Claim arose. The employment of outside counsel, but not the
       selection of that counsel, requires approval by vote of the Participating
       Parties in the activity or operation out of which the Claim arose. If the
       use of outside counsel is approved, the fees and expenses incurred as a
       result thereof shall be charged to the Parties in proportion to their
       Participating Interest share in the activity or operation out of which
       that Claim arose. Each Party has the right to hire its own outside
       counsel at its sole cost with respect to its own defense.

19.5   Liability for Damages

       UNLESS SPECIFICALLY PROVIDED OTHERWISE IN THIS AGREEMENT, LIABILITY FOR
       LOSSES, DAMAGES, COSTS, EXPENSES OR CLAIMS INVOLVING ACTIVITIES OR
       OPERATIONS UNDER THIS AGREEMENT OR AFFECTING THE LEASE WHICH ARE NOT
       COVERED BY OR IN EXCESS OF THE INSURANCE CARRIED FOR THE JOINT ACCOUNT
       SHALL BE BORNE BY EACH PARTY IN PROPORTION TO ITS PARTICIPATING INTEREST
       SHARE IN THE ACTIVITY OR OPERATION OUT OF WHICH THAT LIABILITY ARISES,
       EXCEPT TO THE EXTENT LIABILITY RESULTS FROM THE GROSS NEGLIGENCE OR
       WILLFUL MISCONDUCT OF A PARTY, IN WHICH CASE THAT PARTY SHALL BE SOLELY
       RESPONSIBLE FOR LIABILITY RESULTING FROM ITS GROSS NEGLIGENCE OR WILLFUL
       MISCONDUCT.

19.6   Indemnification for Non-Consent Operations

       TO THE EXTENT ALLOWED BY LAW, THE PARTICIPATING PARTIES WILL HOLD THE
       NON-PARTICIPATING PARTIES (AND THEIR AFFILIATES, AGENTS, INSURERS,
       DIRECTORS, OFFICERS, AND EMPLOYEES) HARMLESS AND RELEASE, DEFEND, AND
       INDEMNITY THEM AGAINST ALL CLAIMS, DEMANDS, LIABILITIES, REGULATORY
       DECREES, AND LIENS FOR ENVIRONMENTAL POLLUTION AND PROPERTY DAMAGE OR
       PERSONAL INJURY, INCLUDING SICKNESS AND DEATH, CAUSED BY OR OTHERWISE
       ARISING OUT OF NON-CONSENT OPERATIONS, AND ANY LOSS AND COST SUFFERED BY
       A NON-PARTICIPATING PARTY AS AN INCIDENT THEREOF, EXCEPT WHERE THAT LOSS
       OR COST RESULTS FROM THE SOLE, CONCURRENT, OR JOINT NEGLIGENCE, FAULT OR
       STRICT LIABILITY OF THAT NON-PARTICIPATING PARTY, IN WHICH CASE EACH
       PARTY SHALL PAY OR CONTRIBUTE TO THE SETTLEMENT OR SATISFACTION OF
       JUDGMENT IN THE PROPORTION THAT ITS NEGLIGENCE, FAULT OR STRICT LIABILITY
       CAUSED OR CONTRIBUTED TO THE INCIDENT. IF AN INDEMNITY IN THIS AGREEMENT
       IS DETERMINED TO VIOLATE LAW OR PUBLIC POLICY, THAT INDEMNITY SHALL THEN
       BE ENFORCEABLE ONLY TO THE MAXIMUM EXTENT ALLOWED BY LAW.

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19.7   Damage to Reservoir, Loss of Reserves and Profit

       NOTWITHSTANDING ANY CONTRARY PROVISION OF THIS AGREEMENT, OTHER THAN
       ARTICLES 10.8.6 AND 11.8.6, IF SELECTED, NO PARTY IS LIABLE TO ANY OTHER
       PARTY FOR DAMAGE TO A RESERVOIR, LOSS OF HYDROCARBONS, LOSS OF PROFITS,
       OR OTHER CONSEQUENTIAL DAMAGES, DAMAGES FOR BUSINESS INTERRUPTION, OR
       PUNITIVE DAMAGES, EXCEPT TO THE EXTENT THAT THE DAMAGE OR LOSS ARISES
       FROM A PARTY'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IN WHICH CASE THAT
       PARTY SHALL BE SOLELY RESPONSIBLE FOR DAMAGE OR LOSS ARISING FROM ITS
       GROSS NEGLIGENCE OR WILLFUL MISCONDUCT; NOR DOES A PARTY INDEMNIFY ANY
       OTHER PARTY FOR THAT DAMAGE OR LOSS.

19.8   Non-Essential Personnel

       A NON-OPERATOR THAT REQUESTS TRANSPORTATION OR ACCESS TO A DRILLING RIG,
       PLATFORM, VESSEL, OR OTHER FACILITY USED FOR ACTIVITIES OR OPERATIONS
       UNDER THIS AGREEMENT SHALL HOLD THE OTHER PARTIES HARMLESS AND SHALL
       RELEASE, DEFEND, AND INDEMNIFY THEM AGAINST (I) ALL CLAIMS, DEMANDS, AND
       LIABILITIES FOR PROPERTY DAMAGE AND (Il) ALL CLAIMS, DEMANDS, AND
       LIABILITIES FOR ANY LOSS OR COST SUFFERED BY A PARTY AS AN INCIDENT
       THEREOF, INCLUDING, BUT NOT LIMITED TO, INJURY, SICKNESS AND DEATH,
       CAUSED BY OR OTHERWISE ARISING OUT OF THAT TRANSPORTATION OR ACCESS, OR
       BOTH, EXCEPT TO THE EXTENT THAT LOSS OR COST RESULTS FROM THE GROSS
       NEGLIGENCE OR WILLFUL MISCONDUCT OF THE PARTY SO INDEMNIFIED AND
       PROTECTED.

19.9   Dispute Resolution Procedure

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

                                   ARTICLE 20

                           INTERNAL REVENUE PROVISION

20.1   Internal Revenue Provision

       Notwithstanding any provision in this Agreement to the effect that the
       rights and liabilities of the Parties are several, not joint or
       collective, and that the Agreement and the activities and operations
       under this Agreement do not constitute a partnership under state law,
       each Party elects to be excluded from the application of all or any part

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       of the provisions of Subchapter K, Chapter 1, Subtitle A, of the Internal
       Revenue Code of 1986, as amended, or similar provisions of applicable
       state laws regardless of whether for federal income tax purposes this
       Agreement and the activities and operations under this Agreement are
       regarded as a partnership.

                                   ARTICLE 21

                                  CONTRIBUTIONS

21.1   Notice of Contributions Other Than Advances for Sale of Production

       Each Party shall promptly notify the other Parties of all offers of
       contributions that it may obtain, or contributions it is attempting to
       obtain, for the drilling of a well or the conducting of an operation on
       the Lease. Payments received as consideration for entering into a
       contract for the sale of Hydrocarbon production from the Lease, loans,
       and other financial arrangements shall not be considered contributions
       for the purpose of this Article 21. No Party shall release or obligate
       itself to release Confidential Data in return for a contribution from a
       third party without prior written consent of the Participating Parties or
       Parties having the right to participate in the well.

21.2   Cash Contributions

       If a Party receives a cash contribution for drilling a well on the Lease
       or conducting an activity or operation on the Lease, the cash
       contribution shall be paid to Operator, and Operator shall credit the
       amount thereof to the Parties in proportion to their Participating
       Interests in the well or the Platform and/or Development Facilities. If
       the well is a Non-consent Well, the amount of the contribution shall be
       deducted from the cost specified in Article 13.2.1(a) before computation
       of the amount to be recouped out of Hydrocarbon production.

21.3   Acreage Contributions

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

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                                   ARTICLE 22

                            DISPOSITION OF PRODUCTION

22.1   Take-in-Kind Facilities

       Subject to Article 22.2, a Party may, at its sole cost and risk,
       construct Take-in-Kind Facilities to take its share of Hydrocarbon
       production in kind.

22.2   Duty to Take in Kind

       Each Party shall own and, at its own cost and risk, shall take in kind or
       separately dispose of its share of the oil, gas, and condensate produced
       and saved from the Lease, exclusive of Hydrocarbon production used by
       Operator in activities or operations conducted under this Agreement,
       subject to this Article 22. In order to avoid interference with
       operations on or regarding the Platform, the Development Facilities, and
       the Lease, a Party exercising its right to construct Take-in Kind
       Facilities ("the Take in Kind Party) shall provide the Operator with a
       list of equipment it deems necessary for its Take in Kind Facilities
       ("the components") along with its notice informing the Operator of its
       election to take in kind. If the Operator agrees to install and operate
       the Take-in Kind Facilities, the Operator shall purchase the components
       and install it on behalf of the Take in Kind Party at the Take in Kind
       Party's sole risk and cost, including, but not limited to, any fees,
       penalties or other costs incurred as a result of any cancellation of
       placed orders as may be requested by the Take in Kind Party. The Operator
       shall provide the Take in Kind Party with monthly updates on the progress
       of the ordering and installation of the Take in Kind Facilities. The
       Operator, based on the instructions of Take in Kind Party, shall install
       and operate all of the components. The Operator shall not be responsible
       for any losses or damages to the components or the Take in Kind Party's
       Hydrocarbon production metered, treated, processed or transported by the
       components unless such losses or damages are the result of the Operator's
       gross negligence or willful misconduct. If the Operator refuses or fails
       to install the Take-in Kind Facilities by thirty (30) days prior to the
       deadline provided in Section 12.4, the Take in Kind Party shall have the
       right to install and operate the Take-in Kind Facilities providing that
       such operations do not interfere with existing operations or proposed
       operations that have been approved under terms of this Agreement.

22.3   Failure to Take Oil and Condensate in Kind

       Notwithstanding Article 22.2 (Duty to Take in Kind), if a Party fails to
       take in kind or dispose of its share of the oil or condensate, Operator
       shall have the right, but not the obligation, subject to revocation at
       will by the Party owning the Hydrocarbon production, to purchase for its
       own account, sell to others, or otherwise dispose of all or part of the
       Hydrocarbon production at the same price at which Operator calculates and
       pays lessor's royalty on its own portion of the oil or condensate.
       Operator shall notify the non-taking Party when the option is exercised.
       A purchase or sale by Operator of any other Party's share of the oil or

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       condensate shall be for such reasonable periods of time as are consistent
       with the minimum needs of the industry under the circumstances, but in no
       event shall a contract be for a period in excess of one (1) year.
       Proceeds of the oil or condensate purchased, sold, or otherwise disposed
       of by Operator under this Article 22.3 shall be paid to the Party that
       had, but did not exercise, the right to take in kind and separately
       dispose of the oil or condensate. Operator, in disposing of another
       Party's oil or condensate, shall not be responsible for making any filing
       with regulatory agencies not required by law to be made by it in respect
       to another Party's share of oil or condensate. Unless required by
       governmental authority having jurisdiction or by judicial process, no
       Party shall be forced to share an available market with a non-taking
       Party.

22.4   Failure to Take Gas in Kind

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

22.5   Expenses of Delivery in Kind

       A cost that is incurred by Operator in making delivery of a Party's share
       of Hydrocarbons or disposing of same shall be paid by the Party.

                                   ARTICLE 23

                                 APPLICABLE LAW

23.1   Applicable Law

       THIS AGREEMENT AND THE RELATIONSHIP OF THE PARTIES UNDER THIS AGREEMENT
       SHALL BE GOVERNED BY AND INTERPRETED UNDER FEDERAL LAWS AND LAWS OF THE
       STATE OF LOUISIANA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
       THAT WOULD OTHERWISE REFER THE MATTER TO THE LAWS OF ANOTHER
       JURISDICTION.

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                                   ARTICLE 24

                    LAWS, REGULATIONS, AND NONDISCRIMINATION

24.1   Laws and Regulations

       This Agreement and operations under this Agreement are subject to all
       applicable laws, rules, regulations, and orders by all governmental
       authorities claiming jurisdiction now and in the future. A provision of
       this Agreement found to be contrary to or inconsistent with any such law,
       rule, regulation, or order shall be deemed to have been modified
       accordingly.

24.2   Nondiscrimination

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

                                   ARTICLE 25

                                  FORCE MAJEURE

25.1   Force Majeure

       If a Party is unable, wholly or in part because of a Force Majeure, to
       carry out its obligations under this Agreement, other than the obligation
       to make money payments, that Party shall give the other Parties prompt
       written notice of the Force Majeure with full particulars about it.
       Effective upon the date notice is given, the obligations of the Party, so
       far as they are affected by the Force Majeure, shall be suspended during,
       but no longer than, the continuance of the Force Majeure. Time is of the
       essence in the performance of this Agreement, and every reasonable effort
       will be made by the Party to avoid delay or suspension of any work or
       acts to be performed under this Agreement. The requirement that the Force
       Majeure be remedied with all reasonable dispatch shall not require a
       Party to settle strikes or other labor difficulties. ARTICLE 26

                  SUCCESSORS, ASSIGNS, AND PREFERENTIAL RIGHTS

26.1   Transfer of Interest

       Except as provided in 26.1.1 (Exceptions to Transfer Notice), a Transfer
       of Interest shall be preceded by written notice to the Operator and the
       other Parties ("the transfer notice"). Any Transfer of Interest shall be
       made to a party financially capable of assuming the corresponding
       obligations under this Agreement. No Transfer of Interest shall release a
       Party from its obligations and liabilities under this Agreement, and the

                                       64

<PAGE>

       security rights under Article 8.6 (Security Rights) shall continue to
       burden the Working Interest transferred and to secure the payment of
       those obligations and liabilities.

       26.1.1 Exceptions to Transfer Notice

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

       26.1.2 Effective Date of Transfer of Interest

              A Transfer of Interest becomes effective thirty (30) days after
              the day all Parties are in receipt of the transfer notice. No
              Transfer of Interest, other than those provided in Article 15.1
              (Right to Withdraw) and Article 26.1.1 (Exceptions to Prior
              Written Notice), is binding upon the Parties unless and until (i)
              the assignor or assignee provides all remaining Parties with a
              photocopy of a fully executed Transfer of Interest, an executed
              MMS "Designation of Operator" form and a designation of oil spill
              responsibility form and (ii) evidence of receipt of all necessary
              approvals by the MMS. The Parties shall promptly undertake all
              reasonable actions necessary to secure those approvals and shall
              execute and deliver all documents necessary to effectuate that
              Transfer of Interest. All costs attributable to a Transfer of
              Interest are the sole obligation of the assigning Party.

       26.1.3 Form of Transfer of Interest

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

       26.1.4 Warranty

              Any Transfer of Interest, vesting or relinquishment of Working
              Interest between the Parties under this Agreement shall be made
              without warranty of title. All liens, charges, and other
              encumbrances, including but not limited to overriding royalties,
              net profits interest and production payments, which a Party placed
              (or caused to be placed) on its Working Interest shall be fully
              satisfied or released prior to the effective date of a Transfer of
              Interest, vesting or relinquishment of Working Interest between
              that Party and another Party under this Agreement (unless the
              other Party is willing to accept the Working Interest subject to
              those liens, charges, and other encumbrances).

                                       65

<PAGE>

26.2   Preferential Right to Purchase

       Any Transfer of Interest shall be subject to the following provisions:

       26.2.1 Notice of Proposed Transfer of Interest

              The transfer notice shall provide full information about the
              proposed Transfer of Interest, including, but not limited to, the
              name and address of the prospective assignee (who must be ready,
              willing, and able to acquire the interest and deliver the stated
              consideration therefor), the full consideration for the Transfer
              of Interest, and all other terms of the offer. In the case of a
              sale of oil and gas interests that includes all or part of the
              assigning Party's Working Interest, or if the proposed Transfer of
              Interest is structured as a like-kind exchange, the Working
              Interest that is subject to the Transfer of Interest shall be
              separately valued and the transfer notice shall state the monetary
              value attributed to the Working Interest by that prospective
              assignee. Article 26.2 (Preferential Right to Purchase) shall
              apply only to the Working Interest that is subject to the Transfer
              of Interest. '

       26.2.2 Exercise of Preferential Right to Purchase

              Within twenty (20) days from receipt of the transfer notice, each
              non-assigning Party may exercise its preferential right to
              purchase its Participating Interest share of the Working Interest
              offered (on the same terms and conditions, or on equivalent terms
              for a non-cash transaction as stated in the notice) without
              reservations or conditions by written notice of that fact to all
              of the Parties. If one or more non-assigning Parties, but not all
              non-assigning Parties, exercise their preferential right to
              purchase (the "Acquiring Parties"), then within fifteen (15) days
              of the termination of the twenty (20) day notice period set forth
              in the previous sentence, each Acquiring Party may exercise its
              preferential right to purchase its Participating Interest share of
              the Working Interest offered based on its Participating Interest
              share as a non-assigning Party or based on its Participating
              Interest share as an Acquiring Party. If within the fifteen (15)
              day notice period set forth in the previous sentence an Acquiring
              Party does not exercise its preferential right to purchase its
              Participating Interest share of the Working Interest offered based
              on its Participating Interest share as an Acquiring Party but does
              exercise its preferential right to purchase its Participating
              Interest share of the Working Interest offered based on its
              Participating Interest share as a non-assigning Party, then the
              other Acquiring Parties shall have ten (10) days in which to agree
              to pay the remainder of the full consideration for the Transfer of
              Interest and notify the assigning Party of that fact. If within
              the ten (10) day period set forth in the previous sentence the
              other Acquiring Parties do not agree to pay the remainder of the
              full consideration for the Transfer of Interest, or if the other
              Acquiring Parties do agree to pay the remainder of the full
              consideration for the Transfer of Interest but do not notify the
              assigning Party of the fact, the assigning Party shall be free to

                                       66

<PAGE>

              complete the proposed conveyance on the terms disclosed in the
              notice. If the non assigning Parties or the Acquiring Parties
              agree to pay the full consideration for the Transfer of Interest
              and accept all of the other terms of the third party offer, the
              assigning Party shall transfer the Working Interest to the
              non-assigning Parties or Acquiring Parties who exercised their
              preferential right to purchase under this Article 26 (Successors,
              Assigns, and Preferential Rights). The Transfer of Interest shall
              be concluded within a reasonable time, but no later thirty (30)
              days after the applicable period in which the non assigning
              Parties or Acquiring Parties may exercise their preferential right
              to purchase. 26.2.3 Transfer of Interest Not Affected by the
              Preferential Right to Purchase Article 26.2 (Preferential Right to
              Purchase) shall not apply when a Party proposes to:

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

              (b)    grant a net profits interest, or a production payment

              (c)    dispose of its Working Interest by:

                     (1)    a merger, reorganization, or consolidation;

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

                     (3)    a Transfer of Interest to an Affiliate.

       26.2.4 Completion of Transfer of Interest

              If the proposed Transfer of Interest is not executed and fled of
              record with the MMS within three (3) months after receipt of the
              transfer notice by the non-assigning Parties, or if the terms of
              the proposed Transfer of Interest conveyance are materially
              altered, the proposed Transfer of Interest shall be deemed
              withdrawn, and the Working Interest included in the proposed
              Transfer of Interest shall again be governed by this Article 26.2
              (Preferential Right to Purchase).

                                   ARTICLE 27

                            ADMINISTRATIVE PROVISIONS

27.1   Term

       This Agreement shall remain in effect so long as a Lease remains in
       effect and thereafter until (a) all wells have been abandoned and plugged
       or turned over to the Parties owning an interest in the Lease on which
       the wells are located; (b) all Platforms, Development Facilities, and
       equipment have been disposed by the Operator in accordance with Article
       14 (Abandonment, Salvage, and Surplus); (c) all Claims as defined in
       Article 19 (Liability, Claims, and Lawsuits) have been settled or
       otherwise disposed of; and (d) there has been a final accounting and
       settlement by all Parties.

                                       66

<PAGE>

       In accordance with Article 4.5 (Selection of Successor Operator), this
       Agreement will terminate if no Party is willing to become Operator,
       effective after all conditions in clauses (a) through (d) above have been
       completed. In accordance with Article 15.2.1 (Unanimous Withdrawal), this
       Agreement will terminate if all Parties elect to withdraw, effective
       after all conditions in clauses (a) through (d) above have been
       completed. Termination of this Agreement shall not relieve a Party of a
       liability or obligation accrued or incurred before termination and is
       without prejudice to all continuing confidentiality obligations or other
       obligations in this Agreement.

27.2   Waiver

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

27.3   Waiver of Right to Partition

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

27.4   Compliance With Laws and Regulations

       This Agreement, and all activities or operations conducted by the Parties
       under this Agreement, are expressly subject to, and shall comply with,
       all laws, orders, rules, and regulations of all federal, state, and local
       governmental authorities having jurisdiction over the Lease.

       27.4.1 Severance of Invalid Provisions

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

       27.4.2 Fair and Equal Employment

              Each of the Parties is an Equal Opportunity Employer, and the
              equal opportunity provisions of 30 CFR 270 and 41 CFR 60-1, as

                                       67

<PAGE>

              amended or modified, are incorporated in this Agreement by
              reference. The affirmative action clauses concerning disabled
              veterans and veterans of the Vietnam era (41 CFR 60-250) and the
              affirmative action clauses concerning employment of the
              handicapped (41 CFR 60-741) are also incorporated in this
              Agreement by reference. In performing work under this Agreement,
              the Parties shall comply with (and the Operator shall require each
              independent contractor to comply with) the governmental
              requirements in Exhibit "E" that pertain to non segregated
              facilities.

27.5   Construction and Interpretation of this Agreement

       27.5.1 Headings for Convenience

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

       27.5.2 Article References

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

       27.5.3 Gender and Number

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

       27.5.4 Future References

              A reference to a Party includes such Party's successors and
              assigns and, in the case of governmental bodies, persons
              succeeding to their respective functions and capacities.

       27.5.5 Currency

              Any amounts due or payable under this Agreement shall be paid in
              United States currency.

       27.5.6 Optional Provisions

              In the event that any "Optional" provision of this Agreement is
              not adopted by the Parties to this Agreement by a typed, printed
              or handwritten indication, such provision shall not form a part of
              this Agreement, and no inference shall be made concerning the
              intent of the Parties in regard to the subject matter of the
              "Optional" provision

       27.5.7 Joint Preparation

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

                                       68

<PAGE>

       27.5.8 Integrated Agreement

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

       27.5.9 Binding Effect

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

       27.5.10 Further Assurances

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

       27.5.11 Counterpart Execution

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

27.6   Restricted Bidding

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

IN WITNESS WHEREOF, this Agreement has been executed by the Parties as of the
day and year first above written.

WITNESSES:                                 Stone Energy Corporation

_________________________                  By:_______________________________

_________________________                  Title:____________________________

                                       69

<PAGE>

                                       Ridgewood Energy Corporation,
                                       Manager Ridgewood Energy P Fund, LLC.

__________________________             By: /s/ W.G. Tabor
                                          -------------------------------

__________________________             Title: Executive Vice President
                                             ----------------------------

                                       70

<PAGE>

                                   EXHIBIT "A"

 Attached to and made a part of that certain Offshore Operating Agreement dated
    effective September 1, 2005, by and between Stone Energy Corporation and
      Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC.

  DESCRIPTION OF CONTRACT AREA AND LEASE, LEASE WORKING INTEREST OWNERSHIP AND
                           DESIGNATED REPRESENTATIVES
                           --------------------------

I.     Contract Area and Lease
       -----------------------

       Oil and Gas Lease No. OCS-G26014 effective as of July 1, 2004, by and
       between the United States of America, as Lessor, and Stone Energy
       Corporation, as Lessee, covering a portion of Block 231, South Marsh
       Island Area, OCS Official Protraction Diagram, NG 3-D.

       The Contract Area shall be limited to the surface area covered by said
       leases, insofar and only insofar as said leases cover rights and depths
       from the surface to a subsea true vertical depth of 16,500 feet or lesser
       depth as determined per the Participation Agreement.

II.    Lease Working Interest Ownership
       --------------------------------

       Ridgewood Energy Corporation, Manager
       Ridgewood Energy P Fund, LLC.              30%
       Stone Energy Corporation                   70%

III.   Designated Representatives
       --------------------------

       RIDGEWOOD ENERGY CORPORATION,
       Manager Ridgewood Energy P Fund, LLC.
       11700 Old Katy Road, Suite 280
       Houston, TX 77079
       Representative: Primary-Randy A. Bennett, Alternative-Greg W. Tabor
       Telephone:       (281) 293-9384
       Facsimile:       (281) 293-7391

       STONE ENERGY CORPORATION
       625 East Kaliste Saloom Road
       Post Office Box 52807
       Lafayette, LA 70508 and 70505
       Representative: Primary-Michael D. Deville, Alternative-E.J. Louviere
       Telephone:       (337) 237-0410
       Facsimile:       (337) 272-0996

<PAGE>

                                   EXHIBIT "B"

 Attached to and made a part of that certain Offshore Operating Agreement dated
 effective as of September l, 2005, by and between Stone Energy Corporation and
      Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC.

                             INSURANCE REQUIREMENTS
                             ----------------------

Operator shall carry insurance as follows for the benefit and protection of the
Parties to this Agreement:

I.     Worker's Compensation and Employer's Liability

       Worker's Compensation Insurance in accordance with the laws of
       governmental bodies having jurisdiction including, if applicable, United
       States Longshore and Harbor Worker's Compensation Act with Outer
       Continental Shelf Extension, Maritime Employer's Liability (including,
       but not limited to, the Jones Act, the Death on the High Seas Act, as
       well as an endorsement to the effect that a claim in rem shall be treated
       as a claim against the insured) and Employer's Liability Insurance.
       Employer's Liability Insurance shall provide minimum coverage of
       $1,000,000 for bodily injury per accident and by disease.

II.    Business Automobile Liability Insurance covering all Owned, Leased, Hired
       or Non-Owned Vehicles

       Bodily Injury and Property Damage with minimum limits of $1,000,000 per
       occurrence, combined single limit.

III.   Vessels

       Hull Protection and Indemnity Insurance (or equivalent coverage) shall
       cover all vessels owned by Operator to the scheduled value of each
       vessel, plus P and I insurance with limits of at least $1,000,000 per
       occurrence.

       If operator charters any vessels, Charterer's Legal Liability (or
       equivalent coverage) with minimum limits of $1,000,000 will be carried.

IV.    Aircraft

       Aircraft Liability Insurance with limits of at least $1,000,000 per
       occurrence shall cover all aircraft owned or chartered by Operator.

<PAGE>

V.     Umbrella Liability

       Operator shall carry Umbrella Liability Insurance with a minimum limit of
       $10,000,000 excess of all primary limits of the insurance specified in
       paragraphs I through IV above.

Operator shall not be obligated or authorized to obtain or carry on behalf of
the joint account any additional insurance covering the Parties or the
operations to be conducted hereunder. Each Party individually may acquire at its
own expense such insurance as it deems proper to protect itself against claims,
losses, damage to or destruction of property, or personal injury or death of
persons arising out of joint operations. All uninsured losses and all damages to
jointly owned property shall be borne by the Parties in proportion to their
respective interests, unless the loss is caused by the gross negligence or
willful misconduct of a party hereto.

The Non-Operators shall be named as Additional Insureds on a blanket basis under
the insurance policies required by Paragraphs II through V above inclusive, with
respect to joint activities, and all such policies shall provide for Waivers of
Subrogation between Operator and Non-Operators. Operator shall furnish
Certificates of Insurance to Non-Operators if so requested.

Operator shall use reasonable efforts to require all contractors working or
performing services hereunder to comply with Worker's Compensation and
Employer's Liability laws, both State and Federal, and said contractors or
others performing services shall be required to procure and maintain
Comprehensive General Liability insurance with policy limits of at least
$1,000,000 per occurrence, combined single limit, and $2,000,000 aggregate. Said
policy, or policies, shall include Contractual Liability assumed under any
contract between the contractor and Operator. Operator may require contractors
to carry such other insurance as deemed necessary.

Operator will maintain the appropriate MMS Bond or other governmentally required
bonds required to conduct operations in the OCS, if applicable.

Operator shall charge to the joint account all premiums for the insurance
coverages required by this exhibit. All deductibles, retentions and losses not
covered by such insurance shall be charged to the joint account. To the extent
that any policy that Operator obtains for the joint account pursuant to this
exhibit also covers Operator's operations outside the scope of the Agreement,
the cost of premiums for such policies shall be allocated between the joint
account and Operator on a fair and reasonable basis.

In the event less than all Parties participate in an operation conducted under
the terms of this Agreement, then the insurance requirements and costs, as well

<PAGE>

as all losses, liabilities and expenses incurred as the result of such
operation, shall be the burden of the Party or Parties participating therein.

Operator reserves the sole right to select the insurance carrier(s) and to
purchase from such insurance carrier(s) the types and kinds of coverage
available under the above-described policies to cover any loss that may occur.
The inability of the carrier(s) to pay the claim or the insolvency of the
insurance carrier(s) selected by Operator shall not be the responsibility of
Operator nor be deemed the negligence of Operator.

If any of the above described insurance policies not required by law are not
available (or become unavailable) at reasonable premium rates in the judgment of
the Operator, then Operator thereafter shall not be required to obtain or
continue such insurance in force. In the event of such occurrence, Operator
shall use its best efforts to notify Non-Operators before the coverage lapses.

<PAGE>

                                WC 95#4 E-AFE (2)

                               [TABLE ILLEGIBLE]

<PAGE>

<TABLE>
<CAPTION>

                                                                                    Time

West Cameron 95 No.4

DRILLING TIME ESTIMATE                                                     DAYS      SUM

<S>                                                                       <C>       <C>
Skid Rig, RDMO Rig                                                         2.50      2.50
NU, DO                                                                     0.50      3.00
Drill 26" HOLE to 1000'                                                    0.86      3.86
Set 20" casing, N/U, DO                                                    2.70      6.56
Directionally drill 17-1/2" HOLE to 4852' MD / 4500' TVD                   4.60     11.16
Set 13.3/8" casing                                                         1.00     12.16
N/D diverter. NU BOP's                                                     1.00     13.16
DO, CIO to OBM, LOT                                                        1.10     14.26
Directionally drill 12-1/4" HOLE to 12,158' MD / 11.000' TVD              13.50     27.76
Log, Set 9.7/8" casing                                                     2.60     30.36
N/D diverter, NU BOP's                                                     1.50     31.86
DO, LOT                                                                    2.50     34.36
Directionally drill 8-1/2" x 9-1/2" HOLE to 15,658' MD / 14.500' TVD      16.10     50.46
EVALUATE - Triple Combo                                                    2.50     52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    62.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
  TOTAL DRILLING TIME - this will be placed in drilling column of AFE     52.96     52.96

                                                                                    52.96
PRODUCTION Casing/Liner TIME ESTIMATE                                               52.96

                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
                                                                                    52.96
   TOTAL PROD CSG/LNR TIME - This will be summed in compl column           0.00      0.00

                                                                                     0.00
COMPLETION TIME ESTIMATE                                                             0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     O.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
                                                                                     0.00
  TOTAL COMPLETION TIME - this will be summed in compl column              0.00      0.00
</TABLE>

                                     Page 1

<PAGE>

                                                        Stone Energy Corporation
                                               Form modeled after the COPAS 1986
                                                   Offshore Accounting Procedure

                                   EXHIBIT "C"

Attached to and made a part of that certain Offshore Operating Agreement dated
effective September 1, 2005 by and between Stone Energy Corporation and
Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC.

                              ACCOUNTING PROCEDURE
                            OFFSHORE JOINT OPERATIONS

                              I. GENERAL PROVISIONS

1.   Definitions

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

     "Joint Operations" shall mean all operations necessary or proper for the
     development, operation, protection and maintenance of the Joint Property.

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

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

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

     "Parties" shall mean Operator and Non-Operators.

     "First Level Supervisors" shall mean those employees whose primary function
     in Joint Operations is the direct supervision of other employees and/or
     contract labor directly employed on the Joint Property in a field operating
     capacity.

     "Technical Employees" shall mean those employees having special and
     specific engineering, geological or other professional skills, and whose
     primary function in Joint Operations is the handling of specific operating
     conditions and problems for the benefit of the Joint Property.

     "Personal Expenses" shall mean travel and other reimbursable expenses of
     Operator's employees.

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

     "Controllable Material" shall mean Material which at the time is so
     classified in the Material Classification Manual as most recently
     recommended by the Council of Petroleum Accountants Societies.

     "Shore Base Facilities" shall mean onshore support facilities that during
     drilling, development, maintenance and producing operations provide such
     services to the Joint Property as receiving and transshipment point for
     supplies, materials and equipment; debarkation point for drilling and
     production personnel and services; communication, scheduling and
     dispatching center; other associated functions benefiting the Joint
     Property.

     "Offshore Facilities" shall mean platforms and support systems such as oil
     and gas handling facilities, living quarters, offices, shops, cranes,
     electrical supply equipment and systems, fuel and water storage and piping,
     heliport, marine docking installations, communication facilities,
     navigation aids, and other similar facilities necessary in the conduct of
     offshore operations.

<PAGE>

2.   Statements and Billings

     Operator shall bill Non-Operators on or before the last day of each month
     for their proportionate share of the Joint Account for the preceding month.
     Such bills will be accompanied by statements which identify the authority
     for expenditure, lease or facility, and all charges and credits, summarized
     by appropriate classifications of investment and expense except that items
     of Controllable Material and unusual charges and credits shall be
     separately identified and fully described in detail.

3.   Advances and Payments by Non-Operators

     A.   Unless otherwise provided for in the Agreement, the Operator may
          require the Non-Operators to advance their share of estimated cash
          outlay for the succeeding month's operation within fifteen (15) days
          after receipt of the billing or by the first day of the month for
          which the advance is required, whichever is earlier. Operator shall
          adjust each monthly billing to reflect advances received from the
          Non-Operators.

     B.   Each Non-Operator shall pay its proportion of all bills within fifteen
          (15) days after receipt. If payment is not made within such time, the
          unpaid balance shall bear interest monthly at the prime rate in effect
          at Citibank, New York, New York on the first day of the month in which
          delinquency occurs plus 1% or the maximum contract rate permitted by
          the applicable usury laws of the jurisdiction in which the Joint
          Property is located, whichever is the lesser, plus attorney's fees,
          court costs, and other costs in connection with the collection of
          unpaid amounts.

4.   Adjustments

     Payment of any such bills shall not prejudice the right of any Non-Operator
     to protest or question the correctness thereof; provided, however, all
     bills and statements rendered to Non-Operators by Operator during any
     calendar year shall conclusively be presumed to be true and correct after
     twenty-four (24) months following the end of any such calendar year, unless
     within the said twenty-four (24) month period a Non-Operator takes written
     exception thereto and makes claim on Operator for adjustment. No adjustment
     favorable to Operator shall be made unless it is made within the same
     prescribed period. The provisions of this paragraph shall not prevent
     adjustments resulting from a physical inventory of Controllable Material as
     provided for in Section V.

5.   Audits

     A.   A Non-Operator, upon notice in writing to Operator and all other
          Non-Operators, shall have the right to audit Operator's accounts and
          records relating to the Joint Account for any calendar year within the
          twenty-four (24) month period following the end of such calendar year;
          provided, however, the making of an audit shall not extend the time
          for the taking of written exception to and the adjustments of accounts
          as provided for in Paragraph 4 of this Section I. Where there are two
          or more Non-Operators, the Non-Operators shall make every reasonable

                                       -1-

<PAGE>

          effort to conduct a joint audit in a manner which will result in a
          minimum of inconvenience to the Operator. Operator shall bear no
          portion of the Non-Operators' audit cost incurred under this paragraph
          unless agreed to by the Operator. The audits shall not be conducted
          more than once each year without prior approval of Operator, except
          upon the resignation or removal of the Operator, and shall be made at
          the expense of those Non-Operators approving such audit.

     B.   The Operator shall reply in writing to an audit report within 180 days
          after receipt of such report.

6.   Approval by Non-Operators

     Where an approval or other agreement of the Parties or Non-Operators is
     expressly required under other sections of this Accounting Procedure and if
     the agreement to which this Accounting Procedure is attached contains no
     contrary provisions in regard thereto, Operator shall notify all
     Non-Operators of the Operator's proposal, and the agreement or approval of
     a majority in interest of the Non-Operators shall be controlling on all
     Non-Operators.

                               II. DIRECT CHARGES

Operator shall charge the Joint Account with the following items:

1.   Rentals and Royalties

     Lease rentals and royalties paid by Operator for the Joint Operations.

2.   Labor

     A.   (1) Salaries and wages of Operator's field employees directly employed
          on the Joint Property in the conduct of Joint Operations.
          (2) Salaries and wages of Operator's employees directly employed on
          Shore Base Facilities or other Offshore Facilities serving the Joint
          Property if such costs are not charged under Paragraph 7 of this
          Section II.
          (3) Salaries of First Level Supervisors in the field.
          (4) Salaries and wages of Technical Employees directly employed on the
          Joint Property if such charges are excluded from the Overhead rates.
          (5) Salaries and wages of Technical Employees either temporarily or
          permanently assigned to and directly employed in the operation of the
          Joint Property if such charges are excluded from the overhead rates.

     B.   Operator's cost of holiday, vacation, sickness and disability benefits
          and other customary allowances paid to employees whose salaries and
          wages are chargeable to the Joint Account under Paragraph 2A of this
          Section IT. Such costs under this Paragraph 2B may be charged on a
          "when and as paid basis" or by "percentage assessment" on the amount
          of salaries and wages chargeable to the Joint Account under Paragraph
          2A of this Section II. If percentage assessment is used, the rate
          shall be based on the Operator's cost experience.

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

     D.   Personal Expenses of those employees whose salaries and wages are
          chargeable to the Joint Account under Paragraph 2A of this Section II.

3.   Employee Benefits

     Operator's current costs of established plans for employee's group life
     insurance, hospitalization, pension, retirement, stock purchase, thrift,
     bonus, and other benefit plans of a like nature, applicable to Operator's
     labor cost chargeable to the Joint Account under Paragraphs 2A and 2B of
     this Section I shall be Operator's actual cost not to exceed the percent
     most recently recommended by the Council of Petroleum Accountants
     Societies.

<PAGE>

4.   Material

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

5.   Transportation

     Transportation of employees and Material necessary for the Joint Operations
     but subject to the following limitations:

     A.   If Material is moved to the Joint Property from the Operator's
          warehouse or other properties, no charge shall be made to the Joint
          Account for a distance greater than the distance from the nearest
          reliable supply store where like material is normally available or
          railway receiving point nearest the Joint Property unless agreed to by
          the Pasties.

     B.   If surplus Material is moved to Operator's warehouse or other storage
          point, no charge shall be made to the Joint Account for a distance
          greater than the distance to the nearest reliable supply store where
          like material is normally available, or railway receiving point
          nearest the Joint Property unless agreed to by the Parties. No charge
          shall be made to the Joint Account for moving Material to other
          properties belonging to Operator, unless agreed to by the Parties.

     C.   In the application of subparagraphs A and B above, the option to
          equalize or charge actual trucking cost is available when the actual
          charge is $400 or less excluding accessorial charges. The $400 will be
          adjusted to the amount most recently recommended by the Council of
          Petroleum Accountants Societies.

6.   Services

     The cost of contract services, equipment and utilities provided by outside
     sources, except services excluded by Paragraph 9 of Section I and
     Paragraphs i and ii of Section III. The cost of professional consultant
     services and contract services of technical personnel directly engaged on
     the Joint Property if such charges are excluded from the overhead rates.
     The cost of professional consultant services or contract services of
     technical personnel directly engaged in the operation of the Joint Property
     shall be charged to the Joint Account if such charges are excluded from the
     overhead rates.

7.   Equipment, Facilities and Affiliate Services Furnished by Operator

     A.   Operator shall charge the Joint Account for use of Operator-owned
          equipment and facilities, including Shore Base and/or Offshore
          Facilities, at rates commensurate with costs of ownership and
          operation. Such rates may include labor, maintenance, repairs, other
          operating expense, insurance, taxes, depreciation, abandonment,
          reclamation and interest on gross investment less accumulated
          depreciation not to exceed eight-percent (8%) per annum. In addition,

                                       -2-

<PAGE>

          for platforms and facilities only, the rate may include an element of
          the estimated cost of dismantlement. Such rates shall not exceed
          average commercial rates currently prevailing in the immediate area of
          the Joint Property.

     B.   In lieu of charges in Paragraph 7A above, Operator may elect to use
          average commercial rates prevailing in the immediate area of the Joint
          Property. For automotive equipment, Operator may elect to use rates
          published by the Petroleum Motor Transport Association.

8.   Damages and Losses to Joint Property

     All costs or expenses necessary for the repair or replacement of Joint
     Property made necessary because of damages or losses incurred by fire,
     flood, storm, theft, accident, or other causes, except those resulting from
     Operator's gross negligence or willful misconduct. Operator shall furnish
     Non-Operator written notice of damages or losses incurred as soon as
     practicable after the report thereof has been received by Operator.

9.   Legal Expense

     Expense of handling, investigating and settling litigation or claim,
     discharging of liens, payments of judgments and amounts paid for settlement
     of claims incurred in or resulting from operations under the Agreement or
     necessary to protect or recover the Joint Property, except that no charge
     for services of Operator's legal staff or fees or expense of outside
     attorneys shall be made unless previously agreed to by the Parties. All
     other legal expense is considered to be covered by the overhead provisions
     of Section III unless otherwise agreed to by the Parties, except as
     provided in Section I, Paragraph 3.

10.  Taxes

     All taxes of every kind and nature assessed or levied upon or in connection
     with the Joint Property, the operation thereof or the production therefrom,
     and which taxes have been paid by the Operator for the benefit of the
     Parties. If the ad valorem taxes are based in whole or in part upon
     separate valuations of each party's working interest, then notwithstanding
     anything to the contrary herein, charges to the Joint Account shall be made
     and paid by the Parties hereto in accordance with the tax value generated
     by each party's working interest.

11.  Insurance

     Net premiums paid for insurance required to be carried for. the Joint
     Operations for the protection of the Parties. In the event Joint Operations
     are conducted at offshore locations in which Operator may act as
     self-insurer for Workers' Compensation and Employers' Liability, Operator
     may include the risk under its self-insurance program in providing coverage
     under State and Federal laws and charge the Joint Account at Operator's
     cost not to exceed manual rates.

12.  Communications

     Costs of acquiring, leasing, installing, operating, repairing and
     maintaining communication systems including radio and microwave facilities
     between the Joint Property and the Operator's nearest Shore Base Facility.
     In the event communication facilities systems serving the Joint Property
     are Operator-owned, charges to the Joint Account shall be made as provided
     in Paragraph 7 of this Section II.

13.  Ecological and Environmental

     Costs incurred on the Joint Property as a result of statutory regulations
     for archaeological and geophysical surveys relative to identification and
     protection of cultural resources and/or other environmental or ecological
     surveys as may be required by the Bureau of Land Management or other
     regulatory authority. Also, costs to provide or have available pollution
     containment and removal equipment plus costs of actual control and cleanup
     and resulting responsibilities of oil spills as required by applicable laws
     and regulations.

<PAGE>

14.  Abandonment and Reclamation

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

15.  Other Expenditures

     Any other expenditure not covered or dealt with in the foregoing provisions
     of this Section II, or in Section III and which is of direct benefit to the
     Joint Property and is incurred by the Operator in the necessary and proper
     conduct of the Joint Operations.

                                  III. OVERHEAD

As compensation for administrative, supervision, office services and warehousing
costs, Operator shall charge the Joint Account in accordance with this Section
III.

Unless otherwise agreed to by the Parties, such charge shall be in lieu of costs
and expenses of all offices and salaries or wages plus applicable burdens and
expenses of all personnel, except those directly chargeable under Section H. The
cost and expense of services from outside sources in connection with matters of
taxation, traffic, accounting or matters before or involving governmental
agencies shall be considered as included in the overhead rates provided for in
this Section II unless such cost and expense are agreed to by the Parties as a
direct charge to the Joint Account.

     i.   Except as otherwise provided in Paragraph 2 of this Section III, the
     salaries, wages and Personal Expenses of Technical Employees and/or the
     cost of professional consultant services and contract services of technical
     personnel directly employed on the Joint Property:

          ( ) shall be covered by the overhead rates.
          (X) shall not be covered by the overhead rates.

     ii.  Except as otherwise provided in Paragraph 2 of this Section III, the
     salaries, wages and Personal Expenses of Technical Employees and/or costs
     of professional consultant services and contract services of technical
     personnel either temporarily or permanently assigned to and directly
     employed in the operation of the Joint Property:

          (X) shall be covered by the overhead rates.
          ( ) shall not be covered by the overhead rates.

<PAGE>

1.   Overhead - Drilling and Producing Operations

     As compensation for overhead incurred in connection with drilling and
     producing operations, Operator shall charge on either:

          (X) Fixed Rate Basis, Paragraph 1A, or
          ( ) Percentage Basis, Paragraph lB

     A.   Overhead - Fixed Rate Basis

          (1)  Operator shall charge the Joint Account at the following rates
               per well per month: Drilling Well Rate $_40,000 (Prorated for
               less than a full month) Producing Well Rate $_4,000

          (2)  Application of Overhead - Fixed Rate Basis for Drilling Well Rate
               shall be as follows:

               (a)  Charges for drilling wells shall begin on the date when
                    drilling or completion equipment arrives on location and
                    terminate on the date the drilling or completion equipment
                    moves off location or rig is released, whichever occurs
                    first, except that no charge shall be made during suspension
                    of drilling operations for fifteen (15) or more consecutive
                    calendar days.

               (b)  Charges for wells undergoing any type of workover or
                    recompletion for a period of five (5) consecutive work days
                    or more shall be made at the drilling well rate. Such
                    charges shall be applied for the period from date workover
                    operations, with rig or other units used in workover,
                    commence through the date of rig or other unit release,
                    except that no charge shall be made during suspension of
                    operations for fifteen (15) or more consecutive calendar
                    days.

          (3)  Application of Overhead - Fixed Rate Basis for Producing Well
               Rate shall be as follows:

               (a)  An active well either produced or injected into for any
                    portion of the month shall be considered as a one-well
                    charge for the entire month.

               (b)  Each active completion in a multi-completed well in which
                    production is not commingled down hole shall be considered
                    as a one-well charge providing each completion is considered
                    a separate well by the governing regulatory authority.

               (c)  An inactive gas well shut in because of overproduction or
                    failure of purchaser to take the production shall be
                    considered as a one-well charge providing the gas well is
                    directly connected to a permanent sales outlet.

               (d)  A one-well charge shall be made for the month in which
                    plugging and abandonment operations are completed on any
                    well. This one-well charge shall be made whether or not the
                    well has produced except when drilling well rate applies.

               (e)  All other inactive wells (including but not limited to
                    inactive wells covered by unit allowable, lease allowable,
                    transferred allowable, etc.) shall not qualify for an
                    overhead charge.

          (4)  The well rates shall be adjusted as of the first day of April
               each year following the effective date of the agreement to which
               this Accounting Procedure is attached by the percent increase or
               decrease published by COPAS.

<PAGE>

     B.   Overhead - Percentage Basis

          (1)  Operator shall charge the Joint Account at the following rates:

               (a)  Development Percent ( %) of cost of Development of the Joint
                    Property exclusive of costs provided under Paragraph 9 of
                    Section I and all salvage credits.

               (b)  Operating Percent ( %) of the cost of Operating the Joint
                    Property exclusive of costs provided under Paragraphs 1 and
                    9 of Section II, all salvage credits, the value of injected
                    substances purchased for secondary recovery and all taxes
                    and assessments which are levied, assessed and paid upon the
                    mineral interest in and to the Joint Property.

          (2)  Application of Overhead - Percentage Basis shall be as follows:

               For the purpose of determining charges on a percentage basis
               under Paragraph 1B of this Section III, development shall include
               all costs in connection with drilling, redrilling, or deepening
               of any or all wells, and shall also include any remedial
               operations requiring a period of five (5) consecutive work days
               or more on any or all wells; also, preliminary expenditures
               necessary in preparation for drilling and expenditures incurred
               in abandoning when the well is not completed as a producer, and
               original cost of construction or installation of fixed assets,
               the expansion of fixed assets and any other project clearly
               discernible as a fixed asset, except Major Construction as
               defined in Paragraph 2 of this Section III. All other costs shall
               be considered as Operating except that catastrophe costs shall be
               assessed overhead as provided in Section III, Paragraph 3.

2.   Overhead - Major Construction

     To compensate Operator for overhead costs incurred in the construction and
     installation of fixed assets, the expansion of fixed assets, and any other
     project clearly discernible as a fixed asset or in the abandonment of fixed
     assets and any associated reclamation required for the exploration,
     development and operation of the Joint Property, Operator shall either
     negotiate a rate prior to the beginning of construction, or shall charge
     the Joint Account for Overhead based on the following rates for any Major
     Construction project in excess of $ 25,000.

     A.   If the Operator absorbs the engineering, design and drafting costs
          related to the project:

          (1)  6 % of total costs if such costs are more than $ 25000 but less
               than $100,000; plus

          (2)  4 % of total costs in excess of $100,000 but less than
               $1,000,000; plus

          (3)  3 % of total costs in excess of $ 1,000,000.

     B.   If the Operator charges engineering, design and drafting costs related
          to the project directly to the Joint Account:

          (1)  5 % of total costs if such costs are more than $ 25,000 but less
               than $100,000; plus

          (2)  3 % of total costs in excess of $100,000 but less than
               $1,000,000; plus

          (3)  2 % of total costs in excess of $1,000,000.

<PAGE>

     Total costs shall mean the gross cost of any one project. For the purposes
     of this paragraph, the component parts of a single project shall not be
     treated separately and the cost of drilling and workover wells and
     artificial lift equipment shall be excluded. On each project, Operator
     shall advise Non-Operator(s) in advance which of the above options shall
     apply. In the event of any conflict between the provisions of this
     paragraph and those provisions under Section II, Paragraph 2 or Paragraph
     6, the provisions of this paragraph shall govern.

3.   Overhead - Catastrophe

     To compensate Operator for overhead costs incurred in the event of
     expenditures resulting from a single occurrence due to oil spill, blowout,
     explosion, fire, storm, hurricane, or other catastrophes as agreed to by
     the Parties, which are necessary to restore the Joint Property to the
     equivalent condition that existed prior to the event causing the
     expenditures, Operator shall either negotiate a rate prior to charging the
     Joint Account or shall charge the Joint Account for overhead based on the
     following rates:

     (1)  5 % of total costs through $100,000; plus

     (2)  3 % of total costs in excess of $100,000 but less than $1,000,000;
          plus

     (3)  2 % of total costs in excess of $1,000,000.

     Expenditures subject to the overheads above will not be reduced by
     insurance recoveries, and no other overhead provisions of this Section III
     shall apply.

4.   Amendment of Rates

     The Overhead rates provided for in this Section III may be amended from
     time to time only by mutual agreement between the Parties hereto if, in
     practice, the rates are found to be insufficient or excessive.

   IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS

     Operator is responsible for Joint Account Material and shall make proper
     and timely charges and credits for all Material movements affecting the
     Joint Property. Operator shall provide all Material for use on the Joint
     Property; however, at Operator's option, such Material may be supplied by
     the Non-Operator. Operator shall make timely disposition of idle and/or
     surplus Material, such disposal being made either through sale to Operator
     or Non-Operator, division in kind, or sale to outsiders. Operator may
     purchase, but shall be under no obligation to purchase, interest of
     Non-Operators in surplus condition A or B Material. The disposal of surplus
     Controllable Material not purchased by the Operator shall be agreed to by
     the Parties.

1.   Purchases

     Material purchased shall be charged at the price paid by Operator after
     deduction of all discounts received. In case of Material found to be
     defective or returned to vendor for any other reasons, credit shall be
     passed to the Joint Account when adjustment has been received by the
     Operator.

2.   Transfers and Dispositions

     Material furnished to the Joint Property and Material transferred from the
     Joint Property or disposed of by the Operator, unless otherwise agreed to
     by the Parties, shall be priced on the following basis exclusive of cash
     discounts:

<PAGE>

     A.   New Material (Condition A)

          (1)  Tubular Goods Other than Line Pipe

               (a)  Tubular goods, sized 2 3/8 inches OD and larger, except line
                    pipe, shall be priced at Eastern mill published carload base
                    prices effective as of date of movement plus transportation
                    cost using the 80,000 pound carload weight basis to the
                    railway receiving point nearest the Joint Property for which
                    published rail rates for tubular goods exist. If the 80,000
                    pound rail rate is not offered, the 70,000 pound or 90,000
                    pound rail rate may be used. Freight charges for tubing will
                    be calculated from Lorain, Ohio, and casing from Youngstown,
                    Ohio.

               (b)  For grades which are special' to one mill only, prices shall
                    be computed at the mill base of that mill plus
                    transportation cost from that mill to the railway receiving
                    point nearest the Joint Property as provided above in
                    Paragraph 2.A.(l)(a). For transportation cost from points
                    other than Eastern mills, the 30,000 pound Oil Field Haulers
                    Association interstate truck rate shall be used.

               (c)  Special end finish tubular goods shall be priced at the
                    lowest published out-of-stock price, f.o.b. Houston, Texas,
                    plus transportation cost, using Oil Field Haulers
                    Association interstate 30,000 pound truck rate, to the
                    railway receiving point nearest the Joint Property.

               (d)  Macaroni tubing (size less than 2 3/8 inch OD) shall be
                    priced at the lowest published out-of-stock prices f.o.b.
                    the supplier plus transportation costs, using the Oil Field
                    Haulers Association interstate truck rate per weight of
                    tubing transferred, to the railway receiving point nearest
                    the Joint Property.

          (2)  Line Pipe

               (a)  Line pipe movements (except size 24 inch OD and larger with
                    walls 3/4 inch and over) 30,000 pounds or more shall be
                    priced under provisions of tubular goods pricing in
                    Paragraph A.(1) (a) as provided above. Freight charges shall
                    be calculated from Lorain, Ohio.

               (b)  Line pipe movements (except size 24 inch OD and larger with
                    walls 3/4 inch and over) less than 30,000 pounds shall be
                    priced at Eastern mill published carload base prices
                    effective as of date of shipment, plus 20 plus
                    transportation costs based on freight rates as set forth
                    under provisions of tubular goods pricing in Paragraph
                    A.(1)(a) as provided above. Freight charges shall be
                    calculated from Lorain, Ohio.

               (c)  Line pipe 24 inch OD and over and 3/4 inch wall and larger
                    shall be priced f.o.b. the point of manufacture at current
                    new published prices plus transportation cost to the railway
                    receiving point nearest the Joint Property.

               (d)  Line pipe, including fabricated line pipe, drive pipe and
                    conduit not listed on published price lists shall be priced
                    at quoted prices plus freight to the railway receiving point
                    nearest the Joint Property or at prices agreed to by the
                    Parties.

          (3)  Other Material shall be priced at the current new price, in
               effect at date of movement, as listed by a reliable supply store
               nearest the Joint Property, or point of manufacture, plus
               transportation costs, if applicable, to the railway receiving
               point nearest the Joint Property.

          (4)  Unused new Material, except tubular goods, moved from the Joint
               Property shall be priced at the current new price, in effect on
               date of movement, as listed by a reliable supply store nearest
               the Joint Property, or point of manufacture, plus transportation
               costs, if applicable, to the railway receiving point nearest the
               Joint Property. Unused new tubulars will be priced as provided
               above in Paragraph 2.A.(l) and (2).

                                       -5-

<PAGE>

     B.   Good Used Material (Condition B)

          Material in sound and serviceable condition and suitable for reuse
          without reconditioning:

          (1)  Material moved to the Joint Property At seventy-five percent
               (75%) of current new price, as determined by Paragraph A.

          (2)  Material used on and moved from the Joint Property

               (a)  At seventy-five percent (75%) of current new price, as
                    determined by paragraph A, if Material was originally
                    charged to the Joint Account as new Material or

               (b)  At sixty-five percent (65%) of current new price, as
                    determined by Paragraph A, if Material was originally
                    charged to the Joint Account as used Material.

          (3)  Material not used on and moved from the Joint Property

          At seventy-five percent (75%) of current new price as determined by
          Paragraph A. The cost of reconditioning, if any, shall be absorbed by
          the transferring property.

     C.   Other Used Material

          (1)  Condition C

               Material which is not in sound and serviceable condition and not
               suitable for its original function until after reconditioning
               shall be priced at fifty percent (50%) of current new price as
               determined by Paragraph A. The cost of reconditioning shall be
               charged to the receiving property, provided Condition C value
               plus cost of reconditioning does not exceed Condition B value.

          (2)  Condition D

               Material, excluding junk, no longer suitable for its original
               purpose, but usable for some other purpose shall be priced on a
               basis commensurate with its use. Operator may dispose of
               Condition D Material under procedures normally used by Operator
               without prior approval of Non-Operators.

               (a)  Casing, tubing, or drill pipe used as line pipe shall be
                    priced as Grade A and B seamless line pipe of comparable
                    size and weight. Used casing, tubing or drill pipe utilized
                    as line pipe shall be priced at used line pipe prices.

               (b)  Casing, tubing or drill pipe used as higher pressure service
                    lines than standard line pipe, e.g., power oil lines, shall
                    be priced under normal pricing procedures for casing,
                    tubing, or drill pipe. Upset tubular goods shall be priced
                    on a non-upset basis.

          (3)  Condition E

               Junk shall be priced at prevailing prices. Operator may dispose
               of Condition E Material under procedures normally utilized by
               Operator without prior approval of Non-Operators.

     D.   Obsolete Material

          Material which is serviceable and usable for its original function but
          condition and/or value of such Material is not equivalent to that
          which would justify a price as provided above may be specially priced
          as agreed to by the Parties. Such price should result in the Joint
          Account being charged with the value of the service rendered by such
          Material.

<PAGE>

     E.   Pricing Conditions

          (1)  Loading or unloading costs may be charged to the Joint Account at
               the rate of twenty-five cents (250) per hundred weight on all
               tubular goods movements, in lieu of actual loading or unloading
               costs sustained at the stocking point. The above rate shall be
               adjusted as of the first day of April each year following January
               1, 1985 by the same percentage increase or decrease used to
               adjust overhead rates in Section II, Paragraph 1.A.(4). Each
               year, the rate calculated shall be rounded to the nearest cent
               and shall be the rate in effect until the first day of April next
               year. Such rate shall be published each year by the Council of
               Petroleum Accountants Societies.

          (2)  Material involving erection costs shall be charged at applicable
               percentage of the current knocked-down price of new Material.

3.   Premium Prices

     Whenever Material is not readily obtainable at published or listed prices
     because of national emergencies, strikes or other unusual causes over which
     the Operator has no control, the Operator may charge the Joint Account for
     the required Material at the Operator's actual cost incurred in providing
     such Material, in making it suitable for use, and in moving it to the Joint
     Property; provided notice in writing is furnished to Non-Operators of the
     proposed charge prior to billing Non-Operators for such Material. Each
     Non-Operator shall have the right, by so electing and notifying Operator
     within ten days after receiving notice from Operator, to furnish in kind
     all or part of his share of such Material suitable for use and acceptable
     to Operator.

4.   Warranty of Material Furnished By Operator

     Operator does not warrant the Material famished. In case of defective
     Material, credit shall not be passed to the Joint Account until adjustment
     has been received by Operator from the manufacturers or their agents.

                                 V. INVENTORIES

The Operator shall maintain detailed records of Controllable Material.

1.   Periodic Inventories, Notice and Representation

     At reasonable intervals, inventories shall be taken by Operator of the
     Joint Account Controllable Material. Written notice of intention to take
     inventory shall be given by Operator at least thirty (30)'days before any
     inventory is to begin so that Non-Operators may be represented when any
     inventory is taken. Failure of Non-Operators to be represented at an
     inventory shall bind Non-Operators to accept the inventory taken by
     Operator.

2.   Reconciliation and Adjustment of Inventories

     Adjustments to the Joint Account resulting from the reconciliation of a
     physical inventory shall be made within six months following the taking of
     the inventory. Inventory adjustments shall be made by Operator to the Joint
     Account for overages and shortages, but, Operator shall be held accountable
     only for shortages due to lack of reasonable diligence.

3.   Special Inventories

     Special inventories may be taken whenever there is any sale, change of
     interest, or change of Operator in the Joint Property. It shall be the duty
     of the party selling to notify all other Parties as quickly as possible

                                       -6-

<PAGE>

     after the transfer of interest takes place. In such cases, both the seller
     and the purchaser shall be governed by such inventory. In cases involving a
     change of Operator, all Parties shall be governed by such inventory.

4.   Expense of Conducting Inventories

     A.   The expense of conducting periodic inventories shall not be charged to
          the Joint Account unless agreed to by the Parties.

     B.   The expense of conducting special inventories shall be charged to the
          Parties requesting such inventories, except inventories required due
          to change of Operator shall be charged to the Joint Account.

<PAGE>

                                   EXHIBIT "D"

   Attached to and made a part of that certain Offshore Operating Agreement
   dated effective September 1, 2005, by and between Stone Energy Corporation
   and Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC.

                            NONDISCRIMINATION CLAUSE

During the performance of this Agreement, the "contractor" (meaning and
referring separately to each party hereto) agrees, unless exempt therefrom to
comply with all provisions of Executive Order 11246 which are incorporated
herein by reference, and (a) if contractor has more than 50 employees or
contracts with another party hereto in excess of $10,000, contractor must file
Standard Form 1Q0 (EEO-1), (b) if contractor has 50 or more employees and a
contract of $50,000 or more, contractor is required to develop a written
"Affirmative Action Compliance Program" for each of its establishments according
to the Rules and Regulations published by the United States Department of Labor
in 41 CFR, Chapter 60. Further, contractor hereby certifies that it does not now
and will not maintain any facilities provided for its employees in a segregated
manner or permit its employees to perform their services at any location under
its control where segregated facilities are maintained, as such segregated
facilities are defined in Title 41, Chapter 60-1.8, Code of Federal Regulations,
revised as of January 1, 1969, unless exempt therefrom. Contractor further
warrants that no other law, regulation or ordinance of the United States, or any
state, or any governmental authority or agency has been violated in the
manufacture, procurement or sale of any good furnished, work performed or
service rendered pursuant to this contract.

Unless exempt by rules, regulations or orders of the United States Secretary of
Labor, issued pursuant to Section 204 of Executive Order 11246, dated September
24, 1965, during the performance of this contract, the contractor agrees as
follows:

"(1) The contractor will not discriminate against any employee or applicant for
     employment because of race, color, religion, sex or national origin. The
     contractor will take affirmative action to ensure that applicants are
     employed and that employees are treated during employment, without regard
     to their race, color, religion, sex or national original. Such action shall
     include, but not be limited to, the following: Employment, upgrading,
     demotion, transfer, recruitment or recruitment advertising; layoff or
     termination; rates of pay or other forms of compensation; and selection for
     training, including apprenticeship. The contractor agrees to post in
     conspicuous places, available to employees and applicants for employment,
     notices to be provided by the contracting officer setting forth the
     provisions of this nondiscrimination clause."

<PAGE>

"(2) The contractor will, in all solicitations or advertisements for employees
     placed by or on behalf of the contractor, state that all qualified
     applicants will receive consideration for employment without regard to
     race, color, religion, sex or national origin." '

"(3) The contractor will send to each labor union or representative of workers
     with which he has a collective bargaining agreement or other contract or
     understanding, a notice to be provided by the agency contracting officer,
     advising the labor union or workers' representative of the contractor's
     commitments under Section 202 of Executive Order 11246 of September 24,
     1965, and shall post copies of the notice in conspicuous places available
     to employees and applicants for employment."

"(4) The contractor will comply with all provisions of Executive Order 11246 of
     September 24, 1965, and of the rules, regulations and relevant orders of
     the Secretary of Labor."

"(5) The contractor will furnish all information and reports required by
     Executive Order 11246 of September 24, 1965, and by the rules, regulations
     and orders of the Secretary of Labor, or pursuant thereto, and will permit
     access to his books, records and accounts by the contracting agency and the
     Secretary of Labor for purposes of investigating to ascertain compliance
     with such rules, regulations and orders."

"(6) In the event of the contractor's noncompliance with the nondiscrimination
     clauses of this contract or with any of such rules, regulations or orders,
     this contract may be canceled, terminated or suspended in whole or in part
     and the contractor may be declared ineligible for further Government
     contracts in accordance with procedures authorized in Executive Order 11246
     of September 24, 1965, or by rule, regulation or order of the Secretary of
     Labor, or as otherwise provided by law."

"(7) The contractor will include the provisions of paragraph (1) through (8) in
     every subcontract or purchase order unless exempted by rules, regulations
     or orders of the Secretary of Labor issued pursuant to Section 204 of
     Executive Order 11246 of September 24, 1965, so that such provisions will
     be binding upon each subcontractor or vendor. The contractor will take such
     action with respect to any subcontract or purchase order as the contracting
     agency may direct as a means of enforcing such provisions including
     sanctions for noncompliance; provided, however, that in the event the
     contractor becomes involved in, or is result of such direction by the
     contracting agency, the contractor may request the United States to enter
     into such litigation to protect the interests of the United States."

"(8) Contractor agrees and covenants that none of its employees or employees of
     its subcontractors who provided services pursuant to this contract are
     unauthorized aliens, as defined in the Immigration, Reform and Control Act
     of 1986."

<PAGE>

                                   EXHIBIT "E"

          ATTACHED TO AND MADE PART OF THAT CERTAIN OPERATING AGREEMENT
       DATED SEPTEMBER 1, 2005 BY AND BETWEEN STONE ENERGY CORPORATION AND
      RIDGEWOOD ENERGY CORPORATION, MANAGER RIDGEWOOD ENERGY P FUND, LLC.

                             GAS BALANCING AGREEMENT

1.     Definitions

       The following definitions shall apply to this Agreement:

       1.1.   "Arm's Length Agreement" shall mean any gas sales agreement with
              an unaffiliated purchaser or any gas sales agreement with an
              affiliated purchaser where the sales price and delivery conditions
              under such agreement are representative of prices and delivery
              conditions existing under other similar agreements in the area
              between unaffiliated parties at the same time for natural gas of
              comparable quality and quantity.

       1.2.   "Balancing Area" shall mean all of the acreage and depths subject
              to the Operating Agreement.

       1.3.   "Full Share of Current Production" shall mean the Percentage
              interest of each Party in the Gas actually produced from the
              Balancing Area during each month.

       1.4.   "Gas" shall mean all hydrocarbons produced or producible from the
              Balancing Area, whether from a well classified as an oil well or
              gas well by the regulatory agency having jurisdiction in such
              matters, which are or may be made available for sale or separate
              disposition by the Parties, excluding oil, condensate and other
              liquids recovered by field equipment operated for the joint
              account. "Gas" does not include gas used in joint operations, such
              as for fuel, recycling or reinjection, or which is vented or lost
              prior to its sale or delivery from the Balancing Area.

       1.5.   "Makeup Gas" shall mean any Gas taken by an Underproduced Party
              from the Balancing Area in excess of its Full Share of Current
              Production, whether pursuant to Section 3.3. or Section 4.1.
              hereof.

       1.6.   "Mcf' shall mean one thousand cubic feet. A cubic foot of Gas
              shall mean the volume of gas contained in one cubic foot of space
              at a standard pressure base and at a standard temperature base.

       1.7.   "MMBtu" shall mean one million British Thermal Units. A British
              Thermal Unit shall mean the quantity of heat required to raise one
              pound avoirdupois of pure water from 58.5 degrees Fahrenheit to
              59.5 degrees Fahrenheit at a constant pressure of 14.73 pounds per
              square inch absolute.

       1.8.   "Operator" shall mean the individual or entity designated under
              the terms of the Operating Agreement or, in the event this

                                       -1-

<PAGE>

              Agreement is not employed in connection with an operating
              agreement, the individual or entity designated as the operator of
              the well(s) located in the Balancing Area.

       1.9.   "Overproduced Party" shall mean any Party having taken a greater
              quantity of Gas from the Balancing Area than the Percentage
              Interest of such Party in the cumulative quantity of all Gas
              produced from the Balancing Area.

       1.10.  "Overproduction" shall mean the cumulative quantity of Gas taken
              by a Party in excess of its Percentage Interest in the cumulative
              quantity of all Gas produced from the Balancing Area.

       1.11.  "Party" shall mean those individuals or entities subject to this
              Agreement, and their respective heirs, successors, transferees and
              assigns.

       1.12.  "Percentage Interest' shall mean the percentage or decimal
              interest of each Party in the Gas produced from the Balancing Area
              pursuant to the Operating Agreement covering the Balancing Area. I

       1.13.  "Royalty" shall mean payments on production of Gas from the
              Balancing Area to all owners of royalties, overriding royalties,
              production payments or similar interests.

       1.14.  "Underproduced Party" shall mean any Party having taken a lesser
              quantity of Gas from the Balancing Area than the Percentage
              Interest of such Party in the cumulative quantity of all Gas
              produced from the Balancing Area.

       1.15.  "Underproduction" shall mean the deficiency between the cumulative
              quantity of Gas taken by a Party and its percentage Interest in
              the cumulative quantity of all Gas produced from the Balancing
              Area.

       1.16.  "Winter Period" shall mean the months of November and December in
              one calendar year and the months of January, February and March in
              the succeeding calendar year.

2.     Balancing Area

       2.1.   If this Agreement covers more than one Balancing Area, it shall be
              applied as if each Balancing Area were covered by separate but
              identical agreements. All balancing hereunder shall be on the
              basis of Gas taken from the Balancing Area measured in MMBtus.

       2.2.   In the event that all or part of the Gas deliverable from a
              Balancing Area is or becomes subject to one or more lawful prices,
              any Gas not subject to price controls shall be considered as
              produced from a single Balancing Area and Gas subject to each
              price category shall be considered produced from a separate
              Balancing Area.

3.     Right of Parties to Take Gas

3.1.   Each Party desiring to take Gas will notify the Operator, or cause the
       Operator to be notified, of the volumes nominated, the name of the
       transporting pipeline and the pipeline contract number (if available) and
       meter station relating to such delivery, sufficiently in advance for the
       Operator, acting with reasonable diligence, to meet all nomination and
       other requirements. Operator is authorized to deliver the volumes so

<PAGE>

       nominated and confirmed (if confirmation is required) to the transporting
       pipeline in accordance with the terms of this Agreement.

3.2.   Each Party shall make a reasonable, good faith effort to take its Full
       Share of Current Production each month, to the extent that such
       production is required to maintain teases in effect, to protect the
       producing capacity of a well or reservoir, to preserve correlative
       rights, or to maintain oil production.

3.3.   When a Party fails for any reason to take its full Share of Current
       Production (as such Share may be reduced by the right of the other
       parties to make up for Underproduction as provided herein), the other
       Parties shall be entitled to take any Gas which such Party fails to take.
       To the extent practicable, such Gas shall be made available initially to
       each Underproduced Party in the proportion that its Percentage Interest
       in the Balancing Area bears to the total Percentage Interests of all
       Underproduced Parties desiring to take such Gas. If all such Gas is not
       taken by the Underproduced Parties, the portion not taken shall then be
       made available to the other Parties in the proportion that their
       respective Percentage Interests in the Balancing Area bear to the total
       Percentage Interests of such Parties.

3.4.   All Gas taken by a Party in accordance with the provisions of this
       Agreement, regardless of whether such Party is underproduced or
       overproduced, shall be regarded as Gas taken for its own account with
       title thereto being in such taking Party.

3.5.   Notwithstanding the provisions of Section 3.3. hereof, no Overproduced
       Party shall be entitled in any month to take any Gas in excess of three
       hundred percent (300%) of its Percentage Interest of the Balancing Area's
       then-current Maximum Monthly Availability; provided, however, that this
       limitation shall not apply to the extent that it would preclude
       production that is required to maintain lease in effect, to protect the
       producing capacity of a well or reservoir, to preserve correlative
       rights, or to maintain oil production. "Maximum Monthly Availability"
       shall mean the maximum average monthly rate of production at which Gas
       can be delivered from the Balancing Area, as determined by the Operator,
       considering the maximum efficient well rate for each well within the
       Balancing Area, the maximum allowable(s) set by the appropriate
       regulatory agency, mode of operation, production facility capabilities
       and pipeline pressures.

3.6.   In the event that a Party fails to make arrangements to take its Full
       Share of Current Production required to be produced to maintain leases in
       effect, to protect the producing capacity of a well or reservoir, to
       preserve correlative rights, or to maintain oil production, the Operator
       may sell any part of such Party's Full Share of Current Production that
       such Party fails to take for the account of such Party and render to such
       Party, on a current basis, the full proceeds of the sale, less any
       reasonable marketing, compression, treating, gathering or transportation
       costs incurred directly in connection with the sale of such Full Share of
       Current Production. In making the sale contemplated herein, the Operator
       shall be obligated only to obtain such price and conditions for the sale
       as are reasonable under the circumstances and shall not be obligated to
       share any of its markets. Any such sale by Operator under the terms
       hereof shall be only for such reasonable periods of time as are
       consistent with the minimum needs of the industry under the particular
       circumstances, but in no event for a period in excess of one year.
       Notwithstanding the provisions of Article 3.4. hereof, Gas sold by
       Operator for a Party under the provisions hereof shall be deemed to be
       Gas taken for the account of such Party.

                                       -3-

<PAGE>

4.     In-Kind Balancing

       4.1.   Effective the first day of any calendar month following at least
              thirty (30) days' prior written notice to the Operator, any
              Underproduced Party may begin taking, in addition to its Full
              Share of Current Production and any Makeup Gas taken pursuant to
              Section 3.3. of this Agreement, a share of current production
              determined by multiplying thirty-seven and one-half percent
              (37.5%) of the Full Shares of Current Production of all
              Overproduced Parties by a fraction, the numerator of which is the
              Percentage Interest of such Underproduced Party and the
              denominator of which is the total of the Percentage Interests of
              all Underproduced Parties desiring to take Makeup Gas. In no event
              will an Overproduced Party be required to provide more than
              thirty-seven and one-half percent (37.5%) of its Full Share of
              Current Production for Makeup Gas. The Operator will promptly
              notify all Overproduced Parties of the election of an
              Underproduced Party to begin taking Makeup Gas.

       4.2.   Notwithstanding the provisions of Section 4.1., the average
              monthly amount of Makeup Gas taken by an Underproduced Party
              during the Winter Period pursuant to Section 4.1. shall not exceed
              the average monthly amount of Makeup Gas taken by such
              Underproduced Party during the six (6) months immediately
              preceding the Winter Period.

5.     Statement of Gas Balances

       5.1.   The Operator will maintain appropriate accounting on a monthly and
              cumulative basis of the volumes of Gas that each Party is entitled
              to receive and the volumes of Gas actually taken or sold for each
              Party's account. Within forty-five (45) days after the month of
              production, the Operator will furnish a statement for such month
              showing (1) each Party's Full Share of Current Production, (2) the
              total volume of Gas actually taken or sold for each Party's
              account, (3) the difference between the volume taken by each Party
              and that Party's Full Share of Current Production, (4) the
              Overproduction or Underproduction of each Party, and (5) other
              data as recommended by the provisions of the Council of Petroleum
              Accountants Societies Bulletin No. 24, as amended or supplemented
              hereafter. Each Party taking Gas will promptly provide to the
              Operator any data required by the Operator for preparation of the
              statements required hereunder.

       5.2.   If any Party fails to provide the data required herein for four
              (4) consecutive production months, the Operator, or where the
              Operator has failed to provide data, another Party, may audit the
              production and Gas sales and transportation volumes of the
              non-reporting Party to provide the required data. Such audit shall
              be conducted only after reasonable notice and during normal
              business hours in the office of the Party whose records are being
              audited. All costs associated with such audit will be charged to
              the account of the Party failing to provide the required data.

6.     Payments on Production

       6.1.   Each Party taking Gas shall pay or cause to be paid all production
              and severance taxes due on all volumes of Gas actually taken by
              such Party.

       6.2.   [_]    (Alternative 1 - Sales) Each Party shall pay or cause to be
                     paid Royalty due with respect to Royalty owners to whom it
                     is accountable based on the volume of Gas actually taken
                     for its account.

                                      -4-

<PAGE>

              [_]    (Alternative 2 - Entitlements) Each Party shall pay or
                     cause to be paid all Royalty due with respect to Royalty
                     owners to whom it is accountable as if such Party were
                     taking its Full Share of Current Production, and only its
                     Full Share of Current Production.

       6.3.   In the event that any governmental authority requires that Royalty
              payments be made on any other basis than that provided for in this
              Section 6., each Party agrees to make such Royalty payments
              accordingly, commencing on the effective date required by such
              governmental authority, and the method provided for herein shall
              be thereby superseded.

7.     Cash Settlements

       7.1.   Upon the earlier of the plugging and abandonment of the last
              producing interval in the Balancing Area, the termination of the
              Operating Agreement or any pooling or unit agreement covering the
              Balancing Area, or at any time no Gas is taken from the Balancing
              Area for a period of twelve (12) consecutive months, any Party may
              give written notice calling for cash settlement of the Gas
              production imbalances among the Parties. Such notice shall be
              given to all Parties in the Balancing Area.

       7.2.   Within sixty (60) days after the notice calling for cash
              settlement under Section 7.1., the Operator will distribute to
              each Party a Final Gas Settlement Statement detailing the quantity
              of Overproduction owed by each Overproduced Party to each
              Underproduced Party and identifying the month to which such
              Overproduction is attributed, pursuant to the methodology set out
              in Section 7.4.

       7.3.   Within sixty (60) days after receipt of the Final Gas Settlement
              Statement, each Overproduced Party will pay to each Underproduced
              Party entitled to settlement the appropriate cash settlement,
              accompanied by appropriate accounting detail. At the time of
              payment, the Overproduced Party will notify the Operator of the
              Gas imbalance settled by the Overproduced Party's payment.

       7.4.   The amount of the cash settlement will be based on the proceeds
              received by the Overproduced Party under an Arm's Length Agreement
              for the Gas taken from time to time by the Overproduced Party in
              excess of the Overproduced Party's Full Share of Current
              Production. Any Makeup Gas taken by the Underproduced Party prior
              to monetary settlement hereunder will be applied to offset
              Overproduction chronologically in the order of accrual.

       7.5.   The values used for calculating the cash settlement under Section
              7.4. will include all proceeds received for the sale of the Gas by
              the Overproduced Party calculated at the Balancing Area, after
              deducting any production or severance taxes paid and any Royalty
              actually paid by the Overproduced Party to an Underproduced
              Party's Royalty owner(s), to the extent said payments amounted to
              a discharge of said Underproduced Party's Royalty obligation, as
              well as any reasonable marketing, compression, treating, gathering
              or transportation costs incurred directly in connection with the
              sale of the Overproduction.

       7.6.   For Overproduction processed for the account of the Overproduced
              Party at a gas processing plant for the extraction of liquid
              hydrocarbons, the full quantity of the Overproduction will be
              valued for purposes of cash settlement at the prices received by
              the Overproduced Party for the sale of the residue gas

                                      -5-

<PAGE>

              attributable to the Overproduction without regard to proceeds
              attributable to liquid hydrocarbons which may have been extracted
              from the Overproduction.

       7.7.   To the extent the Overproduced Party did not sell all
              Overproduction under an Arm's Length Agreement, the cash
              settlement will be based on the weighted average price received by
              the Overproduced Party for any gas sold from the Balancing Area
              under Arm's Length Agreements during the months to which such
              Overproduction is attributed. In the event that no sales under
              Arm's Length Agreements were made during any such month, the cash
              settlement for such month will be based on the spot sales prices
              published for the applicable geographic area during such month in
              a mutually acceptable pricing bulletin.

       7.8.   Interest per annum at the then-current prime rate of Citibank
              N.A., New York, New York, as published under "Money Rates" by the
              Wall Street Journal, or the maximum lawful rate of interest
              applicable to the Balancing Area, whichever is less, will accrue
              for all amounts due under Section 7.1., beginning the first day
              following the date payment is due pursuant to Section 7.3. Such
              interest shall be borne by the Overproduced Party in the
              proportion that its respective delays beyond the deadlines set out
              in Sections 7.2. or 7.3. contributed to the accrual of the
              interest.

       7.9.   In lieu of the cash settlement required by Section 7.3., an
              Overproduced Party may deliver to the Underproduced Party an offer
              to settle its Overproduction in-kind and at such rates,
              quantities, times and sources as may be agreed upon by the
              Underproduced Party. If the Parties are unable to agree upon the
              manner in which such in-kind settlement gas will be furnished
              within sixty (60) days after the Overproduced Party's offer to
              settle in kind, which period may be extended by agreement of said
              Parties, the Overproduced Party shall make a cash settlement as
              provided in Section 7.3. The making of an in-kind settlement offer
              under this Section 7.9. will not delay the accrual of interest on
              the cash settlement should the Parties fail to reach agreement on
              an in-kind settlement.

       7.10.  At any time during the term of this Agreement, any Overproduced
              Party may, in its sole discretion, make cash settlement(s) with
              the Underproduced Parties covering all or part of its outstanding
              Gas imbalance, provided that such settlements must be made with
              all Underproduced Parties proportionately based on the relative
              imbalances of the Underproduced Parties, and provided further that
              such settlements may not be made more often than once every
              twenty-four (24) months. Such settlements will be calculated in
              the same manner provided above for final cash settlements. The
              Overproduced Party will provide Operator a detailed accounting of
              any such cash settlement within thirty (30) days after the
              settlement is made.

8.     Testing

       Notwithstanding any provision of this Agreement to the contrary, any
       Party shall have the right, from time to time, to produce and take up to
       one hundred percent (100%) of a well's entire Gas stream to meet the
       reasonable deliverability test(s) required by such Party's Gas purchaser,
       and the right to take any Makeup Gas shall be subordinate to the right of
       any Party to conduct such tests; provided, however, that such tests shall
       be conducted in accordance with prudent operating practices only after
       thirty (30) days' prior written notice to the Operator and shall last no
       longer than twenty-four (24) hours.

                                      -6-

<PAGE>

9.     Operating Costs

       Nothing in this Agreement shall change or affect any Party's obligation
       to pay its proportionate share of all costs and liabilities incurred in
       operations on or in connection with the Balancing Area, as its share
       thereof is set forth in the Operating Agreement, irrespective of whether
       any party is at any time selling and using Gas or whether such sales or
       use are in proportion to its Percentage Interest in the Balancing Area.

10.    Liquids

       The Parties shall share proportionately in and own all liquid
       hydrocarbons recovered with Gas by field equipment operated for the joint
       account in accordance with their Percentage Interests in the Balancing
       Area.

11.    Audit Rights

       Notwithstanding any provision in this Agreement or any other agreement
       between them Parties hereto, and further notwithstanding any termination
       or cancellation of this Agreement, for a period of two (2) years from the
       end of the calendar year in which any information to be furnished under
       Section 5. or 7. hereof is supplied, any Party shall have the right to
       audit the records of any other Party regarding quantity, including but
       not limited to information regarding Btu content. Any Underproduced Party
       shall have the right for a period of two (2) years from the end of the
       calendar year in which any cash settlement is received pursuant to
       Section 7. to audit the records of any Overproduced Party as to all
       matters concerning values, including but not limited to information
       regarding prices and disposition of Gas from the Balancing Area. Any such
       audit shall be conducted at the expense of the Party or Parties desiring
       such audit, and shall be conducted, after reasonable notice, during
       normal business hours in the office of the Party whose records are being
       audited. Each Party hereto agrees to maintain records as to the volumes
       and prices of Gas sold each month and the volumes of Gas used in its own
       operations, along with the Royalty paid on any such Gas used by a Party
       in its own operations. The audit rights provided for in this Section 11.
       shall be in addition to those provided for in Section 5.2. of this
       Agreement.

12.    Miscellaneous

       12.1.  As between the Parties, in the event of any conflict between the
              provisions of this Agreement and the provisions of any gas sales
              contract, or in the event of any conflict between the provisions
              of this Agreement and the provisions of the Operating Agreement,
              the provisions of this Agreement shall govern.

       12.2.  Each Party agrees to defend, indemnify and hold harmless all other
              Parties from and against any and all liabilities for any claims,
              which may be asserted by any third party which now or hereafter
              stands in a contractual relationship with such indemnifying Party
              and which arise out of the operation of this Agreement or any
              activities of such indemnifying Party under the provisions of this
              Agreement, and does further agree to save the other Parties
              harmless from all judgments or damages sustained and costs
              incurred in connection therewith.

       12.3.  Except as otherwise provided in this Agreement, Operator is
              authorized to administer the provisions of this Agreement, but
              shall have no liability to the other Parties for losses sustained
              or liability incurred which arise out of or in connection with the
              performance of Operator's duties hereunder, except such as may

                                      -7-

<PAGE>

              result from Operator's gross negligence or willful misconduct.
              Operator shall not be liable to any Underproduced Party for the
              failure of any Overproduced Party (other than Operator) to pay any
              amounts owed pursuant to the terms hereof.

       12.4.  This Agreement shall remain in full force and effect for as long
              as the Operating Agreement shall remain in force and effect as to
              the Balancing Area, and thereafter until the Gas accounts between
              the Parties are settled in full, and shall inure to the benefit of
              and be binding upon the Parties hereto, and their respective
              heirs, successors, legal representatives and assigns, if any. The
              Parties hereto agree to give notice of the existence of this
              Agreement to any successor in interest of any such Party and to
              provide that any such successor shall be bound by this Agreement,
              and shall further make any transfer of any interest subject to the
              Operating Agreement, or any part thereof, also subject to the
              terms of this Agreement.

       12.5.  Unless the context clearly indicates otherwise, words used in the
              singular include the plural, the plural includes the singular, and
              the neuter gender includes the masculine and the feminine.

       12.6.  This Agreement shall bind the Parties in accordance with the
              provisions hereof, and nothing herein shall be construed or
              interpreted as creating any rights in any person or entity not a
              signatory hereto, or as being a stipulation in favor of any such
              person or entity.

       12.7.  If contemporaneously with this Agreement becoming effective, or
              thereafter, any Party requests that any other Party execute an
              appropriate memorandum or notice of this Agreement in order to
              give third parties notice of record of same and submits same for
              execution in recordable form, such memorandum or notice shall be
              duly executed by the Party to which such request is made and
              delivered promptly thereafter to the Party making the request.
              Upon receipt, the Party making the request shall cause the
              memorandum or notice to be duly recorded in the appropriate real
              property or other records affecting the Balancing Area.

       12.8.  In the event Internal Revenue Service regulations require a
              uniform method of computing taxable income by all Parties, each
              Party agrees to compute and report income to the Internal Revenue
              Service as if such Party were taking its Full Share of Current
              Production during each relevant tax period in accordance with such
              regulations, insofar as same relate to entitlement method tax
              computations.

13.    Assignment and Rights upon Assignment

       13.1.  Subject to the provisions of Section 13.2. and 13.3. hereof, and
              notwithstanding anything in this Agreement or in the Operating
              Agreement to the contrary, if any Party assigns (including any
              sale, exchange or other transfer) any of its working interest in
              the Balancing Area when such Party is an Underproduced or
              Overproduced Party, the assignment or other act of transfer shall,
              insofar as the Parties hereto are concerned, include all interest
              of the assigning or transferring Party in the Gas, all rights to
              receive or obligations to provide or take Makeup Gas and all
              rights to receive or obligations to make any monetary payment
              which may ultimately be due hereunder, as applicable. Operator and
              each of the other Parties hereto shall thereafter treat the
              assignment accordingly, and the assigning or transferring Party
              shall look solely to its assignee or other transferee for any
              interest in the Gas or monetary payment that such Party may have

                                       -8-

<PAGE>

              or to which it may be entitled, and shall cause its assignee or
              other transferee to assume its obligations hereunder.

       13.2.  Notwithstanding anything in this Agreement (including but not
              limited to the provisions of Section 13.1. hereof) or in the
              Operating Agreement to the contrary, and subject to the provisions
              of Section 13.3. hereof, in the event an Overproduced Party
              intends to sell, assign, exchange or otherwise transfer any of its
              interest in a Balancing Area, such Overproduced Party shall notify
              in writing the other working interest owners who are Parties
              hereto in such Balancing Area of such fact at least sixty (60)
              days prior to closing the transaction. Thereafter, any
              Underproduced Party may demand from such Overproduced Party in
              writing, within thirty (30) days after receipt of the Overproduced
              Party's notice, a cash settlement of its Underproduction from the
              Balancing Area. The Operator shall be notified of any such demand
              and of any cash settlement pursuant to this Section 13., and the
              Overproduction and Underproduction of each Party shall be adjusted
              accordingly. Any cash settlement pursuant to this Section 13.
              shall be paid by the Overproduced Party, accompanied by
              appropriate accounting detail, on or before the earlier to occur
              (1) of sixty (6O) days after receipt of the Underproduced Party's
              demand or (2) at the closing of the transaction in which the
              Overproduced Party sells, assigns, exchanges or otherwise
              transfers its interest in a Balancing Area on the same basis as
              otherwise set forth in Sections 7.3. through 7.7., and shall bear
              interest at the rate set forth in Section 7.8. hereof, beginning
              sixty (60) days after the Overproduced Party's sale, assignment,
              exchange or transfer of its interest in the Balancing Area for any
              amounts not paid. Provided, however, if any Underproduced Party
              does not so demand such cash settlement of its Underproduction
              from the Balancing Area, such Underproduced Party shall look
              exclusively to the assignee or other successor in interest of the
              Overproduced Party giving notice hereunder for the satisfaction of
              such Underproduced Party's Underproduction in accordance with the
              provisions of Section 13.1. hereof.

       13.3.  The provisions of this Section 13. shall not be applicable in the
              event any Party mortgages its interest or disposes of its interest
              by merger, reorganization, consolidation or sale of substantially
              all of its assets to a subsidiary or parent company, or to any
              company in which any parent or subsidiary of such party owns a
              majority of the stock of such company.

14.    Counterparts

       This Agreement may be executed in counterparts, each of which when taken
       with all other counterparts shall constitute a binding agreement between
       the Parties hereto; provided, however, that if a Party or Parties owning
       a Percentage Interest in the Balancing Area equal to or greater than
       [percent] percent therein fail(s) to execute this Agreement on or before
       [date], this Agreement shall not be binding upon any Party and shall be
       of no further force and effect.

              IN WITNESS WHEREOF, this agreement shall be effective as of
       September 1, 2005.

                                      -9-

<PAGE>

WITNESSES:                              OPERATOR

                                        STONE ENERGY CORPORATION

_________________________________       By:__________________________________
                                        E.J. LOUVIERE, Sr. Vice President, Land
_________________________________
                                        Date:________________________________

                                        Tax ID or S.S. No. __________________

                                        NON-OPERATOR

                                        RIDGEWOOD ENERGY
                                        CORPORATION, MANAGER
                                        RIDGEWOOD ENERGY P
                                        FUND, LLC.

__________________________________      By:__________________________________
                                        W. GREG TABOR, Executive Vice President
__________________________________
                                        Date_________________________________

                                        Tax ID or S.S. No.___________________

                                      -10-

<PAGE>

                                   EXHIBIT "G"

    Attached to and made a part of that certain Offshore Operating Agreement
 dated effective September 1, 2005, by and between Stone Energy Corporation and
       Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC.

                        MEMORANDUM OF OPERATING AGREEMENT
                             AND FINANCING STATEMENT
                             -----------------------

              To be filed in the conveyance records and in the mortgage records
              and as a non-standard financing statement in accordance with
              Paragraph 11.0 herein. `

1.0    This Memorandum of Operating Agreement and Financing Statement (this
       "Memorandum") is effective as of the effective date of the .Offshore
       Operating, Agreement referred to in Paragraph 2.0 below and is executed
       by Forest Oil Corporation, whose address is 1600 Broadway, Denver, CO
       80202, Stone Energy Corporation, whose address is 625 East Kaliste Saloom
       Road, Lafayette, LA 70508, and Dominion Exploration & Production, Inc.,
       whose mailing address is 1450 Poydras Street, New Orleans, LA 70112-6000,
       (the "Non-Operator(s)").

2.0    The Operator and the Non-Operator are parties to that certain Offshore
       Operating Agreement dated ' the _ day of September, 2005 ("Operating
       Agreement") providing for the development and production of crude oil,
       natural gas and associated substances from the lands and oil and gas
       Leases described in Exhibit "A" of the Operating Agreement (therein and
       herein called the "Contract Area"), and described more particularly on
       Attachment "1" to this Memorandum, and designating Stone Energy
       Corporation, to conduct such operations for itself and the Non-Operator.
       Reference is made hereby to the Operating Agreement for all purposes, and
       its terms and provisions are incorporated herein by this reference to the
       same extent as if the Operating Agreement were reproduced herein.
       Capitalized terms not otherwise defined herein are defined and shall have
       the same meaning herein as set forth in the Operating Agreement.

3.0    The Operator hereby certifies that a true and correct copy of the
       Operating Agreement is on file and is available for inspection by third
       parties at the offices of the Operator at the address set forth in this
       Memorandum.

4.0    Among other provisions, the Operating Agreement (i) provides for certain
       liens and security interests to secure payment by the parties of their

<PAGE>

       respective share of costs and performance of other obligations under the
       Operating Agreement and contains a power of sale, (ii) contains an
       Accounting Procedure, and (iii) includes non-consent clauses which
       establish that parties who elect not to participate in certain operations
       shall be deemed to have relinquished their interest in production until
       the carrying consenting parties recover their costs of such operations
       plus a specified amount, or in some cases to permanently forfeit their
       interest in all or part of the Leases. Certain provisions of Section 8.6
       of the Operating Agreement are set forth as follows:

              First Lien in Favor of the Operator. For valuable consideration,
              the receipt and sufficiency of which are hereby acknowledged, and
              in consideration of the mutual covenants and agreements contained
              in this Agreement, each Non-Operator, to secure the performance of
              and payment by such Non-Operator to the Operator of all
              obligations and indebtedness, whether now owed or hereafter
              arising, of such Non-Operator to the Operator pursuant to this
              Agreement, grants to the Operator a lien upon the following
              described property:

                     (a)    all of its rights, titles, and interests, including,
                            without limitation, any Working Interest, whether
                            now owned and existing or hereafter acquired or
                            arising, in and to (1) the Leases, subject to any
                            surface acreage or depth limitations set forth in
                            Exhibit "A", attached hereto and incorporated herein
                            for all purposes, (2) all fixtures on or used or
                            obtained for use in connection with the Leases or
                            the Contract Area, and (3) all other real property
                            susceptible of the lien granted hereby located
                            within the Contract Area;

                     (b)    all of its rights, titles, and interests, whether
                            now owned and existing or hereafter acquired or
                            arising, in' and to any rights-of-way or other
                            documents described in Exhibit "A" and all renewals
                            and extensions thereof and all new oil, gas and
                            mineral Leases, rights-of-way, or other documents
                            (i) in which it acquires an interest after the
                            termination or expiration of any Leases,
                            right-of-way, or other document described in Exhibit
                            "A", and (ii) that cover all or any part of the
                            property described in and covered by such terminated
                            or expired Leases, right-of-way, or other document,
                            to the extent, and only to the extent, such new oil,
                            gas and mineral Leases, rights-of-way, or other
                            documents may cover the property that was described
                            in and covered by such terminated or expired Leases,
                            right-or-way or other document; and

<PAGE>

                     (c)    all of its rights, titles, and interests, whether
                            now owned and existing or hereafter acquired or
                            arising, in and to any of the oil, gas, and minerals
                            in, on, or under the Contract Area, including,
                            without limitation, all contractual rights,
                            operating rights, leaseshold interests, working
                            interests, royalty interests, overriding royalty
                            interests, non-participating royalty interests,
                            mineral interests, production payments, net profits
                            interests, or any other interest measured by or
                            payable out of production of oil, gas, or other
                            minerals attributable to the Leases or Contract Area
                            (as such interests may be enlarged by the discharge
                            of any payments out of production or by the removal
                            of any charges or encumbrances).

              Security Interest in Favor of the Operator. For valuable
              consideration, the receipt and sufficiency of which are hereby
              acknowledged, and in consideration of the mutual covenants and
              agreements contained in this Agreement, each Non-Operator, to
              secure the performance of and payment by such Non-Operator to the
              Operator of all obligations and indebtedness, whether now owed or
              hereafter arising, of such Non-Operators to the Operator pursuant
              to this Agreement, each such Non-Operator grants to the Operator a
              continuing security interest in and to all of its rights, titles,
              interests, claims, general intangibles, proceeds, and products
              thereof, whether now existing or hereafter acquired or arising, in
              and to (a) all oil, gas, and other minerals produced from or
              attributable to the Leases or the Contract Area when produced; (b)
              all accounts receivable accruing or arising as a result of the
              sale of such oil, gas, and other minerals (including, without
              limitation, accounts arising from gas imbalances or from the sale
              of oil, gas and other minerals at the wellhead); (c) all cash or
              other proceeds from the sale of such oil, gas, and other minerals
              once produced; and (d) all platforms, wells, facilities, fixtures,
              tools, tubular goods, other personal property, whether now or
              hereafter placed on the Leases or the Contract Area or maintained
              or used or obtained for use in connection with the ownership, use
              or exploitation of the Leases or the Contract Area, and other
              surface and sub-surface equipment of any kind or character located
              on or attributable to the Leases or the Contract Area, and the
              cash or other proceeds realized from the sale, transfer,
              disposition or conversion thereof, excluding, however, any
              platforms, wells, facilities, fixtures, equipment or property
              located on the Leases or the Contract Area and used exclusively in
              connection with the ownership, use or exploitation of acreage or
              depths not included within the Leases or Contract Area. The
              interest of the Non-Operators in and to the oil, gas, and other
              minerals produced from or attributable to the Leases when

<PAGE>

              extracted and the accounts receivable accruing or arising as the
              result of the sale thereof shall be financed at the wellhead of
              the well or wells located on the Leases or the Contract Area. To
              the extent permissible under applicable law, the security interest
              granted by each Non-Operator hereunder covers: (a) all
              substitutions, replacements, and accessions to the property of
              such Non-Operator described herein and is intended to cover all of
              the rights, titles and interests of such Non-Operator in all
              personal property now or hereafter located upon or used in
              connection with the Contract Area, whether tangible or intangible,
              except for property used exclusively in connection with acreage or
              depths not included in the Leases or Contract Area as aforesaid;
              (b) all rights under any gas balancing agreement, farmout rights,
              option farmout rights, acreage and cash contributions, and
              conversion rights of such Non-Operator in connection with the
              Leases or the Contract Area, or the oil, gas and other minerals
              produced from or attributable to the Leases or the Contract Area,
              whether now owned and existing or hereafter acquired or arising,
              including, without limitation, all interests of each of the
              Non-Operators in any partnership, tax partnership, limited
              partnership, association, joint venture, or other entity or
              enterprise to the extent that it holds, owns, or controls any
              interest in the Contract Area; and (c) all rights, claims, general
              intangibles, and proceeds, whether now existing or hereafter
              acquired, in and to the contracts, agreements, permits, licenses,
              rights-of-way, and similar rights and privileges that relate to or
              are appurtenant to the Leases or the Contract Area, including the
              following:

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

                     (2)    all of its rights, titles, and interests, whether
                            now owned and existing or hereafter acquired or

<PAGE>

                            arising, in, to, and under or derived from all
                            presently existing and future advance payment
                            agreements, oil, casinghead gas, and gas sales,
                            exchange, and processing contracts and agreements,
                            including, without limitation, those contracts and
                            agreements that are described on Exhibit "A", to the
                            extent, and only to the extent, those contracts and
                            agreements cover or include all or any portion of
                            the Leases or the Contract Area; and

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

              Obligations and Indebtedness of Non-Operators Secured. To the
              extent permissible under applicable law, the liens and security
              interests granted by each Non-Operator in this Agreement shall
              secure (a) the performance of and payment by such Non-Operator to
              the Operator of all of its obligations ' and indebtedness, whether
              now owed or hereafter arising pursuant to this Agreement, and (b)
              the payment of all expenses incurred by the Operator and the
              Participating Parties for (or on account of) any and all
              operations conducted pursuant to this Agreement ("Costs") and
              other expenses properly charged to such Non-Operator, together
              with (1) interest on such indebtedness, Costs, and other expenses
              at the rate set forth in Exhibit "C" attached hereto (the
              `'Accounting Procedure") or the maximum rate allowed by law,
              whichever is the lesser, (2) reasonable attorneys' fees, (3) court
              costs, and (4) other directly related collection costs. If any
              Non-Operator does not pay such Costs and other expenses when due,
              the Operator shall have the additional right to notify the
              purchaser or purchasers of the defaulting Non-Operator's
              production and collect such Costs and other expenses out of the
              proceeds from the sale of the defaulting Non-Operator's share of
              production until the amount owed has been paid. The Operator shall
              have the right to offset the amount owed against the proceeds from
              the sale of such defaulting Non-Operator's share of production.
              Any purchaser of such production shall be entitled to rely on the
              operator's statement concerning the amount of Costs and other
              expenses owed by the defaulting Non-Operator and payment made to
              the Operator by any purchaser shall be binding and conclusive as
              between such purchaser and such defaulting Non-Operator.

              First Lien in Favor of the Non-Operators. For valuable
              consideration, the receipt and sufficiency of which are hereby
              acknowledged, and in consideration of the mutual covenants and

<PAGE>

              agreements contained in this Agreement, to secure the performance
              of and payment by the Operator to each of the Non-Operators of all
              obligations and indebtedness, whether now owed or hereafter
              arising, of the Operator to such Non-Operators pursuant ,to this
              Agreement, the Operator grants to each such Non-Operator a lien
              upon the following described property:

                     (a)    all of its rights, titles, and interests, including,
                            without limitation, any Working Interest, whether
                            now owned and existing or hereafter acquired or
                            arising, in and to (1) the Leases, subject to any
                            surface acreage or depth limitations set forth in
                            Exhibit "A", attached hereto and incorporated herein
                            for all purposes, (2) all fixtures on or used or
                            obtained for use in connection with the Leases or
                            the Contract Area, and (3) all other real property
                            susceptible of the lien granted hereby located
                            within the Contract Area;

                     (b)    all of its rights, titles, and interests, whether
                            now owned and existing or hereafter acquired or
                            arising, in and to any rights-of-way or other
                            documents described in Exhibit "A" and all renewals
                            and extensions thereof and all new oil, gas and
                            mineral Leases, rights-of-way, or other documents
                            (1) in which it acquires an interest after the
                            termination or expiration of any Leases,
                            right-of-way, or other document described in Exhibit
                            "A", and (2) that cover all or any part of the
                            property described in and covered by such terminated
                            or expired Leases, right-of-way, or other document,
                            to the extent, and only to the extent, such new oil,
                            gas and mineral Leases, rights-of-way, or other
                            documents may cover the property that was described
                            in and covered by such terminated or expired Leases,
                            right-of-way or other document; and

                     (c)    all of its rights, titles, and interests, whether
                            now owned and existing or hereafter acquired or
                            arising, in and to any of the oil, gas, and minerals
                            in, on, or under the Contract Area, including,
                            without limitation, all contractual rights,
                            operating rights, leaseshold interests, working
                            interests, royalty interests, overriding royalty
                            interests, non-participating royalty interests,
                            mineral interests, production payments, net profits
                            interests, or any other interest measured by or
                            payable out of production of oil, gas, or other
                            minerals attributable to the Leases or Contract Area
                            (as such interests may be enlarged by the discharge

<PAGE>

                            of any payments out of production or by the removal
                            of any charges or encumbrances).

              Security Interest in Favor of the Non-Operators. For valuable
              consideration, the receipt and sufficiency of which are hereby
              acknowledged, and in consideration of the mutual covenants and
              agreements contained in this Agreement, to secure the performance
              of and payment by the Operator to each of the Non-Operators of all
              obligations and indebtedness, whether now owed or hereafter
              arising, of the Operator to such Non-Operators pursuant to this
              Agreement, the Operator grants to each of the Non-Operators a
              continuing security interest in and to all of its rights, titles,
              interests, claims, general intangibles, proceeds, and products
              thereof, whether now existing or hereafter acquired or arising, in
              and to (a) all oil, gas, and other minerals produced from or
              attributable to the Leases or the Contract Area--when produced;
              (b) all accounts receivable accruing or arising as a result of the
              sale of such oil, gas, and other minerals (including, without
              limitation, accounts arising from gas imbalances or from the sale
              of oil, gas and other minerals at the wellhead); (c) all cash or
              other proceeds from the sale of such oil, gas, and other minerals
              once produced; and (d) all platforms; wells, facilities, fixtures,
              tools, tubular goods, other personal property, whether now or
              hereafter placed on the Leases or the Contract Area or maintained
              or used or obtained for use in connection with the ownership, use
              or exploitation of the Leases or the Contract Area, and other
              surface and sub-surface equipment of any kind or character located
              on or attributable to the Leases or the Contract Area, and the
              cash or other proceeds realized from the sale, transfer,
              disposition or conversion thereof, excluding, however, any
              platforms, wells, facilities, fixtures, equipment or property
              located on the Leases or the Contract Area and used exclusively in
              connection with the ownership, use or exploitation of acreage or
              depths not included within the Leases or Contract Area. The
              interest of the, Operator in and to the oil, gas, and other
              minerals produced from or attributable to the Leases when
              extracted and the accounts receivable accruing or arising as the
              result of the sale thereof shall be financed at the wellhead of
              the well or wells located on the Leases or the Contract Area. To
              the extent permissible under applicable law, the security interest
              granted by the Operator hereunder covers: (a) all substitutions,
              replacements, and accessions to the property of the Operator
              described herein and is intended to cover all of the rights,
              titles and interests of the Operator in all personal property now
              or hereafter located upon or used in connection with the Contract
              Area, whether tangible or intangible, except for property used
              exclusively in connection with acreage or depths not included in
              the Leases or Contract Area as aforesaid; (b) all rights under any

<PAGE>

              gas balancing agreement, farmout rights, option farmout rights,
              acreage and cash contributions, and conversion rights of the
              Operator in connection with the Leases or the Contract Area, or
              the oil, gas and other minerals produced from or attributable to
              the Leases or the Contract Area, whether now owned and existing or
              hereafter acquired or arising, including, without limitation, all
              interests of the Operator in any partnership, tax partnership,
              limited partnership, association, joint venture, or other entity
              or enterprise to the extent that it holds, owns, or controls any
              interest in the Contract Area; and (c) all rights, claims, general
              intangibles, and proceeds, whether now existing or hereafter
              acquired or arising, in and to the contracts, agreements, permits,
              licenses, rights-of-way, and similar rights and privileges that
              relate to or are appurtenant to the Leases or the Contract Area,
              including the following:

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

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

<PAGE>

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

              Obligations and Indebtedness of the Operator Secured. To the
              extent permissible under applicable law, the liens and security
              interests granted by the Operator in this Agreement shall secure
              (a) the performance of and payment by the Operator to each of the
              Non-Operators of all of its obligations and indebtedness, whether
              now owed or hereafter arising pursuant to this Agreement, and (b)
              the payment of all Costs and other expenses properly charged to
              the Operator, together with (1) interest on such indebtedness,
              Costs, and other expenses at the rate set forth in the Accounting
              Procedure or the maximum rate allowed by law, whichever is the
              lesser, (2) reasonable attorneys' fees, (3) court costs, and (4)
              other directly related collection costs. If the Operator does not
              pay such Costs and other expenses when due, any Non-Operator shall
              have the additional right to notify the purchaser or purchasers of
              the defaulting Operator's production and collect such Costs and
              other expenses out of the proceeds from the sale of the defaulting
              Operator's share of production until the amount owed has been
              paid. The Non-Operator shall. have the right to offset the amount
              owed against the proceeds from the sale of such defaulting
              Operator's share of production. Any purchaser of such production
              shall be entitled to rely on the Operator's statement concerning
              the amount of Costs and other expenses owed by the defaulting
              Operator and payment made to the Non-Operator by any purchaser
              shall be binding and conclusive as between such purchaser and such
              defaulting Operator.

              Priority; Successors. Each Party represents and warrants to the
              other Parties hereto that the lien and security interest granted
              by such Party to the other Parties shall be a first and prior lien
              and security interest, and each Party hereby agrees to maintain
              the priority of said lien and security interest against all
              persons acquiring an interest in the Leases or the Contract Area
              by, through or under such Party. All Parties acquiring an interest
              in the Leases or the Contract Area, whether by assignment, merger,
              mortgage, operation of law, or otherwise, shall be deemed to have
              taken subject to the lien and security interest hereunder as to
              all obligations attributable to such interest hereunder whether or
              not such obligations arise before or after such interest is
              acquired.

              Waiver. If any Party does not perform all of its obligations
              hereunder, and the failure to perform subjects such Party to
              foreclosure or execution proceedings pursuant to the provisions of

<PAGE>

              this Agreement, to the extent allowed by governing law, the
              defaulting Party waives any available right of redemption from and
              after the date of judgment, and any available right to require a
              marshaling of assets.

              Other Lien Rights. Each Party agrees that the other Parties shall
              be entitled to utilize the provisions of oil and gas lien law or
              other lien law of any state adjacent to the Contract Area, or that
              is otherwise applicable, to enforce the obligations and
              indebtedness of each Party hereunder. Without limiting the
              generality of the foregoing, to the extent permitted by applicable
              law, each of the Non-Operators agree that the Operator may invoke
              or utilize the mechanics' or materialmen's lien law of the state
              adjacent to the Contract Area, or that is otherwise applicable, in
              order to secure the payment to the Operator of any sum due
              hereunder for services performed or materials supplied by the
              Operator.

              Power of Sale. To the extent permitted by applicable law, each
              Party hereby grants to the other parties a power of sale ("Power
              of Sale") as to any property that is subject to the lien and
              security rights granted hereunder, such power to be exercised in
              the manner provided by these Power of Sale provisions and in the
              manner provided by applicable law or otherwise in a commercially
              reasonable manner and upon reasonable notice, including reasonable
              notice of intent to foreclose said lien or security right by
              exercise of such Power of Sale of not less than thirty (30) days.
              Subject to the provisions of this Agreement, if a Party should
              elect to foreclose the lien (the "Lien") granted to such party
              (the "Foreclosing Party") pursuant to this Agreement against the
              interests in the leaseshold estate of the Leases or any future
              Leases comprising the Contract Area ("Real Property Interest") of
              a Party that has failed to pay any liquidated and undisputed
              portion of its payment obligations hereunder (the "Defaulting
              Party"), the Parties hereby authorize a non-judicial sale under
              the laws of the State of Texas James M. Alexander is hereby
              appointed as Trustee for such purpose (whether the Trustee named
              herein or appointed as a substitute or successor Trustee pursuant
              to the terms of this Agreement, the "Trustee"). The Foreclosing
              Party may appoint a substitute or successor Trustee in the event
              the Trustee above named resigns or is unable for any reason to
              serve, or if the Foreclosing Party should elect at any time (with
              or without cause) to remove the Trustee. Upon such default, and
              upon request by the Foreclosing Party to the Trustee to foreclose
              the Lien pursuant to this Power of Sale, the Trustee shall, at
              least twenty-one (21) days preceding the date of non-judicial
              sale, serve written notice of the proposed sale by certified mail
              on the Defaulting Party according to the records of the
              Foreclosing Party. Service of such notice shall be deemed
              completed upon the deposit in a post office or other official

<PAGE>

              depository under the care and custody of the United States Postal
              Service of such notice enclosed in a post-paid wrapper properly
              addressed to the Defaulting Party, together with each other Party
              obligated to pay the obligations secured by the Lien, at the most
              recent address or addresses shown on the records of the
              Foreclosing Party. The affidavit of any person having knowledge of
              the facts to the effect that such service was completed shall be
              prima facie evidence of the facts of service. After such notice,
              the Trustee shall proceed to sell all of the Real Property
              Interest of the Defaulting Party in the Contract Area at public
              auction to the highest bidder for cash after having given notice
              of the time and place of sale and in the manner and after the
              advertisement of such sale as required by the statutes of the
              State of Texas in making sales of real estate under deeds of
              trust. Sale of a part of the Defaulting Party's Real Property
              Interest in the Contract Area shall not exhaust the Power of Sale,
              and subsequent sales may be made from time to time until all of
              such Real Property -Interest is sold or the obligations of the
              Defaulting Party secured by the Lien are paid in full. The Trustee
              shall have the authority to appoint an attorney in fact to act as
              Trustee in conducting the foreclosure sale and executing a deed to
              the purchasers. It is further agreed that the Trustee may sell the
              full Real Property Interest of the Defaulting Party in the
              Contract Area or may limit such sale to such portions of the Real
              Property Interest of the Defaulting Party in the Contract Area as
              the Trustee shall deem expedient. After the completion of any sale
              pursuant hereto, the Trustee shall make, execute, and deliver to
              the purchaser or purchasers of the Real Property Interest of the
              Defaulting Party in the Contract Area good and sufficient deeds,
              assignments, or other lawful conveyances to vest in such purchaser
              or purchasers title to such Real Property Interest in fee simple
              together with all personal property used or obtained in connection
              therewith and together with all of the proceeds of production
              attributable thereto on or subsequent to the effective date of
              such sale. From the proceeds of such sale, the Trustee shall make
              disbursements in the following order:

                     (a)    pay all charges, costs, and expenses of executing
                            these provisions;

                     (b)    pay any sums due and paid by the Trustee for taxes
                            in the preservation of the security;

                     (c)    pay to the Foreclosing Party up to the amount
                            necessary to satisfy the Defaulting Party's
                            obligations and indebtedness hereunder; and

                     (d)    the balance, if any, shall be paid to the Defaulting
                            Party.

<PAGE>

                     It is agreed that such sale shall be a perpetual bar
              against the Defaulting Party and its heirs, successors, assigns,
              legal representatives, and all other persons claiming under him,
              them, or any of them. It is further agreed that the Trustee, or
              any holder or holders of the obligation of the Defaulting Party,
              or the Foreclosing Party shall have the right to become the
              purchaser or purchasers at such sale if such Party is the highest
              bidder or bidders, in which event the bid or bids may be credited
              upon the indebtedness of the Defaulting Party. It is stipulated
              and agreed that, in case of any sale hereunder by Trustee or its
              successor, all prerequisites of such sale shall be presumed to
              have been performed; and any conveyance given hereunder and all
              statements of fact or recitals therein made as to (a) the
              nonpayment of money secured, (b) any default under the terms
              hereof, (c) the request by the Foreclosing Party to the Trustee to
              foreclose the Lien, (d) the proper and due appointment of any
              successor or substitute Trustee, (e) the advertisement of sale,
              (f) the time, place, and terms of sale, or (g) any other
              preliminary act or thing shall be taken in all courts of law and
              equity as prima facie evidence that the facts so stated are true.
              If the Foreclosing Party consists of more than one Party, actions
              and directions of the Foreclosing Party under this Power of Sale
              shall require the approval of the holders of a majority in amount
              of the Defaulting Party's liquidated and undisputed payment
              obligations which are then due.

5.0    This Memorandum is to be flied or recorded, as the case may be, in (a)
       the applicable real estate records of the parish or parishes adjacent to
       the offshore blocks contained within the Contract Area, (b) the mortgage
       records or lien records or other appropriate records of such parish or
       parishes, (c) the appropriate Uniform Commercial Code records of such
       county or counties and the Secretary of State of Louisiana, and (d) the
       Minerals Management Service. This Memorandum (including a carbon,
       photographic, or other reproduction thereof and hereof) shall constitute
       a non-standard form of financing statement under the terms of the Uniform
       Commercial Code as adopted in the State of Louisiana (the "Uniform
       Commercial Code,") and, as such, for the purposes of the security
       interest in favor of the Operator, may be filed for record in the office
       of the Secretary of State of the State of Louisiana, with the Operator
       being the secured party and the Non-Operator being the debtor with
       respect to such filing. For the purposes of the security interest in
       favor of the Non-Operator, this Memorandum (including a carbon,
       photographic, or other reproduction thereof and hereof) may be filed in
       such office as a non-standard form of financing statement with the
       Non-Operator being the secured party and the Operator being the debtor
       with respect to such fling. With respect to such fling as a financing
       statement, the security interests created in the Operating Agreement
       cover minerals or the like (including oil and gas) and accounts subject
       to subsection (e) of Section 9.103 of the Uniform Commercial Code. In

<PAGE>

       addition, this Memorandum also constitutes a financing statement fled as
       a fixture filing. All parties to the Operating Agreement are identified
       on Attachment "I" hereto.

6.0    If payment of any indebtedness created under the Operating Agreement is
       not made when due under the Operating Agreement, in addition to any other
       remedy afforded by law, each party to the Operating Agreement and any
       successor to such party by assignment, operation of law, or otherwise,
       shall have, and is hereby given and vested with, the power and authority
       to foreclose the lien and security interest established in its favor in
       the Operating Agreement in the manner provided by law or therein and to
       exercise all rights of a secured party under the Uniform Commercial Code.

7.0    Upon expiration of the Operating Agreement and the satisfaction of all
       obligations and indebtedness established thereunder, on behalf of all
       parties to the Operating Agreement, the Operator and the Non-Operator, as
       appropriate, shall file of record an appropriate releases and termination
       of all security and other rights created under the Operating Agreement
       and this Memorandum. Upon the filing of such releases and termination
       instrument, all benefits and obligations under this Memorandum shall
       terminate as to all parties who have executed or ratified this
       Memorandum. In addition, at any time prior to the fling of such releases
       and termination instrument, the Operator and the Non-Operator shall have
       the right to file a continuation statement pursuant to the Uniform
       Commercial Code with respect to any financing statement fled in their
       favor under the terms of this Memorandum.

8.0    It is understood and agreed by the parties hereto that if any part, term,
       or provision of this Memorandum is held by the courts to be illegal or in
       conflict with any law of the state where made, the validity of the
       remaining portions or provisions shall not be affected, and the rights
       and obligations of the parties shall be construed and enforced as if the
       Memorandum did not contain the particular part, term or provision held to
       be invalid.

9.0    This Memorandum .shall be binding upon and shall inure to the benefit of
       the parties hereto and to their respective legal representatives,
       successors and permitted assigns. The failure of one or more persons
       owning an interest in the Contract Area to execute this Memorandum shall
       not in any manner affect the validity of the Memorandum as to those
       persons who execute this Memorandum.

10.0   A party having an interest in the Contract Area may ratify this
       Memorandum by execution and delivery of an instrument of ratification,
       adopting and entering into this Memorandum, and such ratification shall
       have the same effect as if the ratifying party had executed this
       Memorandum or a counterpart thereof. By execution or ratification of this
       Memorandum, such party hereby consents to its

<PAGE>

       ratification and adoption by any party who acquires or may acquire any
       interest in the Contract Area.

11.0   This Memorandum may be executed or ratified in one or more counterparts
       and all of the executed or ratified counterparts shall together
       constitute one instrument. For purposes of recording, in each of the
       records described in Paragraph 5 above, duplicate copies of this
       Memorandum with individual signature pages attached thereto may be filed
       of record, one copy to be indexed in the name of the Operator, as
       grantor, and one copy to be indexed in the name of the Non-Operator, as
       grantor, and duplicate copies of this Memorandum with individual
       signature pages attached thereto may be fled in the appropriate Uniform
       Commercial Code records, one filing for the Operator, as secured party,
       and another filing for the Non-Operator, as secured party. The respective
       addresses of the Operator, as both secured party and debtor, and the Non
       Operator, as both debtor and secured party, at which information with
       respect to" the security interests created in the Operating Agreement may
       be obtained, are set forth in Paragraph 1.0 of this Memorandum.

12.0   The Operator and the Non-Operator hereby agree to execute, acknowledge
       and deliver or cause to be executed, acknowledged and delivered any
       instrument, or take any action necessary or appropriate to effectuate the
       terms of the Operating Agreement or any Exhibit, instrument, certificate
       or other document pursuant thereto.

13.0   Whenever the context requires, reference herein made to the single number
       shall be understood to include the plural, and the plural shall likewise
       be understood to include the singular, and specific enumeration shall not
       exclude the general, but shall be construed as cumulative.

       EXECUTED on the dates set forth below each signature but effective as of
September 1, 2005.

STONE ENERGY CORPORATION

By:_________________________________
E.J. Louviere, Sr. Vice President, Land

Date:_______________________________

<PAGE>

RIDGEWOOD ENERGY CORPORATION,
MANAGER RIDGEWOOD ENERGY P FUND, LLC.

By:___________________________________
   W. Greg Tabor, Executive Vice President

Date:_________________________________

STATE OF TEXAS      ss.
COUNTY OF HARRIS    ss.

BEFORE ME, the undersigned authority, on this day personally appeared W. Greg
Tabor known to me to be the person whose name is subscribed to the foregoing
instrument as Executive Vice President of RIDGEWOOD ENERGY CORPORATION, MANAGER
RIDGEWOOD ENERGY P FUND, LLC. a Delaware limited liability corporation, and
acknowledged to me that he executed the same for an on behalf of said
corporation, for the purposes and consideration therein expressed, and in the
capacity therein stated.

       GIVEN under my hand and seal of office this ___ of ______________ 2005.

                                       ____________________________________
                                       Notary Public, State of Texas
                                       My Commission Expires______________

STATE OF LOUISIANA    ss.
PARISH OF LAFAYETTE   ss.

BEFORE ME, the undersigned authority, on this day personally appeared E. J.
Louviere known to me to be the person whose name is subscribed to the foregoing
instrument as Sr. Vice President, Land of STONE ENERGY CORPORATION a Delaware
corporation, and acknowledged to me that he executed the same for an on behalf
of said corporation, for the purposes and consideration therein expressed, and
in the capacity therein stated.

GIVEN under my hand and seal of office this ___ of _____________________ 2005.

                                       _____________________________________
                                       Notary Public, State of Louisiana
                                       My Commission Expires at Death

<PAGE>

                          ATTACHMENT "1" TO EXHIBIT "G"

 Attached to and made a part of the Memorandum of Offshore Operating Agreement
     and Financing Statement (Louisiana) dated effective September 1, 2005
                  by and between Stone Energy Corporation and
      Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC.

I.     DESCRIPTION OF LANDS AND LEASES WITHIN THE CONTRACT AREA
       --------------------------------------------------------

       OCS-G             Area                 Block                 Dated
       -----             ----                 -----                 -----

       26014       South Marsh Island         231 (Portion)         7/1/04

II.    CONTRACT AREA AND DEPTHS
       ------------------------

       All of South Marsh Island Block Block 231, INSOFAR AND ONLY INSOFAR as
       said block is covered by OCS-G 26014 and further limited to depths from
       the surface to a subsea true vertical depth of 16,500 feet.

III.   OPERATOR
       --------

       Stone Energy Corporation

IV.    PARTIES, REPRESENTATIVES, ADDRESSES, AND INTERESTS
       --------------------------------------------------

       RIDGEWOOD ENERGY CORPORATION,
       MANAGER RIDGEWOOD ENERGY P FUND, LLC.             30%
       11700 Old Katy Road, Suite 280
       Houston, TX 77079
       PHONE: 281-293-9384
       FAX:   281-293-7391
       ATTN: Mr. Randy a. Bennett

       STONE ENERGY CORPORATION                          70%
       625 East Kaliste Saloom Road
       Lafayette, LA 70508
       PHONE: 337-237-0410
       FAX:  337-237-0996
       ATTN: Mr. E.J. Louviere

<PAGE>

                                   EXHIBIT "H"

     Attached to and made part of that certain Offshore Operating Agreement
   dated effective September 1, 2005, by and between Stone Energy Corporation
    and Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC.

                          DISPUTE RESOLUTION PROCEDURE
                          ----------------------------

The parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation either 1) between the Parties
or 2) by mediation if mutually agreed upon. Any such mediation shall take place
in New Orleans, Louisiana, and shall be conducted by a mediator who is a neutral
third party having no direct or personal interest in the outcome of the dispute,
appointed by agreement of the Parties. In the evens; the Parties are unable to
agree to a mediator, the Parties agree to appointment of a mediator pursuant to
the Commercial Mediation Rules of the American Arbitration Association ("AAA).
The cost of mediation shall be shared equally between the parties and each party
shall bear its own expenses.

     In the event the Parties are unsuccessful in their good faith attempt to
negotiate the dispute within sixty (60) days of a Party's request for
negotiation, either Party may demand in writing that the Dispute be resolved by
binding arbitration ("Arbitration Demand"}in accordance with the Arbitration
Rules of the American Arbitration Association ("AAA"), subject to the following
modifications:

     a.   The arbitration shall be conducted by a sole arbitrator to be agreed
          upon by the Parties within thirty (30) days of the Arbitration Demand,
          unless any claim or counterclaim (excluding interests and costs)
          exceeds one million dollars ($1,000,000.00), in which case the
          arbitration shall be conducted by a panel of three arbitrators, which
          shall be mutually agreed upon by the Parties within thirty (30) days
          of the Arbitration Request.

     b.   Should the Parties be unable to mutually agree as to the selection of
          the sole arbitrator for disputes involving claims not greater than one
          million dollars ($1,000,000.00), the arbitrator shall be selected as
          follows:

          1)   the AAA shall designate five persons meeting the qualifications
               set out in section (d) below, each Party shall be entitled to
               strike two designees on a peremptory basis, and any designee not
               stricken may be appointed by the AAA;

          2)   the arbitrator shall be appointed within sixty (60) days of the
               Arbitration Demand.

<PAGE>

     c.   Should the Parties be unable to mutually agree as to the selection of
          the three arbitrators for the panel for disputes involving claims
          exceeding one million dollars ($1,000,000.00), the panel shall be
          selected as follows:

          1)   each Party shall select an arbitrator with the qualifications set
               out in section (d), subject to three peremptory strikes by the
               other Party;

          2)   the third arbitrator shall be mutually agreed upon by the Parties
               by selection from a list of arbitrators submitted by the AAA, or
               if the Parties are unable to agree then the AAA shall designate
               five persons meeting the qualifications set out in section (d)
               below, each Party shall be entitled to strike two designees on a
               peremptory basis, and any designee not stricken may be appointed
               by the AAA;

          3)   the panel shall be selected within sixty (50) days of the
               Arbitration Demand.

     d.   Every person nominated or selected to serve as an arbitrator under
          this Agreement shall be a neutral and impartial person with excellent
          academic and professional credentials who has had both training and
          experience as an arbitrator, and who is either 1) a lawyer with at
          least ten years of experience specializing in commercial litigation
          and with experience in the natural gas industry, or 2) a business
          person who has had at least ten years of experience in the natural gas
          industry. Any dispute as to whether a nominated or selected person
          meets these qualifications shall be submitted to the AAA to determine
          whether that person should be disqualified, which decision shall be
          conclusive.

     e.   The arbitration shall take place in New Orleans, Louisiana.

     f.   A preliminary hearing shall be held, at which the arbitrator(s) shall
          order the exchange of non-privileged documents and other information
          on which the Parties will rely in support of their position and/or
          which they intend to introduce as exhibits at the arbitration hearing,
          and the identification of witnesses who the Parties may call as
          witnesses or experts to testify at the arbitration hearing. Each Party
          may take one deposition of an opposing Party or a person under the
          opposing Party's control. Other discovery may be ordered by the
          arbitrator(s) to the extent that the arbitrator(s) deems additional
          discovery relevant and necessary. The arbitrator(s) may address other
          administrative matters at the preliminary hearing as appropriate to
          expedite and simplify the arbitration proceedings.

<PAGE>

     g.   Completion of the process and a decision by the arbitrator(s) shall be
          made no later than 120 days after the Arbitration Request or as soon
          thereafter as possible.

     h.   The decision by the arbitrator(s) shall be based on the terms of this
          Agreement, the laws of the State of Louisiana and judicial precedent.
          Any decision not so based will not be eligible for confirmation.

     i.   Each party shall pay its own fees and costs no matter which Party
          prevails, unless the arbitrator(s) finds that the claim or defense
          brought by any Party was frivolous, lacked a reasonable basis in fact
          or law, or made in bad faith, in which case the arbitrator(s) may
          assess against that Party all or a portion of the fees and costs of
          the other Party.

     j.   The arbitration award shall be in writing and shall specify the
          factual and legal basis for the award. The arbitration award shall be
          final and binding. Any sums awarded by the arbitrator(s) shall be
          payable within sixty (60) days from the date of the award.

     k.   The Parties hereby agree to forego any claim for and the arbitrator(s)
          shall have no power to award punitive damages.

     l.   The award may be enforced by judgment or otherwise in any court having
          jurisdiction over the award or over the persons or the assets of the
          owing Party. Applications may be made to such court for judicial
          recognition of the award and/or an order of enforcement, as the case
          may be.

     All negotiations pursuant to this clause are confidential and shall be
treated as compromise and settlement negotiations for purposes of the Federal
Rules of Evidence and State Rules of Evidence.

     Notwithstanding the provisions of this clause, either Party may seek from
any court having jurisdiction hereof any interim, provisional or injunctive
relief that may be necessary to protect the rights or property of any party or
maintain the status quo before, during or after the pendency of the arbitration
proceeding; provided, however, that after an arbitrator(s) has been selected and
qualified, the arbitrator(s) shall have the sole authority to hear and determine
an application for such relief, and the parties agree that the relief ordered by
the arbitrator(s) may be immediately and specifically enforced by a court
otherwise having jurisdiction over the parties. The institution and maintenance
of any judicial action or proceeding for any such interim, provisional or

<PAGE>

injunctive relief shall not constitute a waiver of the right or obligation of
either Party to submit the dispute to negotiation, mediation and arbitration as
described above, including any claims or disputes arising from the exercise of
such interim, provisional or injunctive relief.

<PAGE>

                                   EXHIBIT "I"
    Attached to and made a part of that certain Offshore Operating Agreement
 dated effective September 1, 2005, by and between Stone Energy Corporation and
       Ridgewood Energy Corporation, Manager Ridgewood Energy P Fund, LLC

                               ARTICLE 8.6 ET SEQ.
                            SHELF OPERATING AGREEMENT
                                   (LOUISIANA)

         Security Rights; Default; Unpaid Charges; Carved-out Interests.

8.6    Security Rights (LA).

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

       8.6.1  Mortgage in Favor of the Operator.

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

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

                                        1

<PAGE>

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

              8.6.1.1 Security Interest in favor of the Operator.

              To secure the complete and timely performance of and payment by
              each Non-operator of all obligations and indebtedness of every
              kind and nature, whether now owed by such Non-operator or
              hereafter arising, pursuant to this Agreement, each Non-operator
              hereby grants to the Operator a continuing security interest in
              and to all of its rights, titles, interests, claims, general
              intangibles, proceeds, and products thereof, whether now existing
              or hereafter acquired, in and to (a) all Hydrocarbons produced
              from the lands or offshore blocks covered by the Lease or
              attributable to the Lease when produced, (b) all accounts
              receivable accruing or arising as a result of the sale of such
              Hydrocarbons (including, without limitation, accounts arising from
              gas imbalances or from the sale of Hydrocarbons at the wellhead),
              (c) all cash or other proceeds from the sale of such Hydrocarbons
              once produced, and (d) all Platforms and Development Facilities,
              wells, fixtures, other corporeal property, whether movable or
              immovable, whether now or hereafter placed on the lands or
              offshore blocks covered by the Lease or maintained or used in
              connection with the ownership, use or exploitation of the Lease,
              and other surface and sub-surface equipment of any kind or
              character located on or attributable to the Lease and the cash or
              other proceeds realized from the sale, transfer, disposition or
              conversion thereof. The interest of the Non-operators in and to
              the oil and gas produced from or attributable to the Lease when
              extracted and the accounts receivable accruing or arising as the
              result of the sale thereof shall be financed at the wellhead of
              the well or wells located on the Lease. To the extent susceptible
              under applicable law, the security interest granted by each
              Non-operator hereunder covers: (A) all substitutions,
              replacements, and accessions to the property of such Non-operator

                                        2

<PAGE>

              described herein and is intended to cover all of the rights,
              titles and interests of such Non-operator in all movable property
              now or hereafter located upon or used in connection with the
              Lease, whether corporeal or incorporeal; (B) all rights under any
              gas balancing agreement, farmout rights, option farmout rights,
              acreage and cash contributions, and conversion rights of such
              Non-operator in connection with the Lease, or the Hydrocarbons
              produced from or attributable to the Lease, whether now owned and
              existing or hereafter acquired or arising, including, without
              limitation, all interests of each Non-operator in any partnership,
              tax partnership, limited partnership, association, joint venture,
              or other entity or enterprise that holds, owns, or controls any
              interest in the Lease; and (C) all rights, claims, general
              intangibles, and proceeds, whether now existing or hereafter
              acquired, of each Non-operator in and to the contracts,
              agreements, permits, licenses, rights-of-way, and similar rights
              and privileges that relate to or are appurtenant to the Lease,
              including the following:

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

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

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

                                        3

<PAGE>

              8.6.1.2 Mortgage in Favor of the Non-operators.

              The Operator hereby grants to each Non-operator a mortgage,
              hypotheca, and pledge of and over all of its rights, titles, and
              interests in and to (a) the Lease; (b) the Hydrocarbons in, on,
              under, and that my be produced from the lands within the Lease;
              and (c) all other immovable property or other property susceptible
              of mortgage situated` within the Lease.

                     This mortgage is given to secure the complete and timely
                     performance of and payment by the Operator of all
                     obligations and indebtedness of every kind and nature,
                     whether now owed by the Operator or hereafter arising,
                     pursuant to this Agreement. To the extent susceptible under
                     applicable law, this mortgage and the security interests
                     granted in favor of each Non-operator herein shall secure
                     the payment of all costs and other expenses properly
                     charged to the Operator, together with (A) interest on such
                     indebtedness, costs, and other expenses at the rate set
                     forth in Exhibit "C" or the maximum rate allowed by law,
                     whichever is the lesser, (B) reasonable attorneys' fees,
                     (C) court costs, and (D) other directly related collection
                     costs. If the Operator does not pay such costs and other
                     expenses or perform its obligations under this Agreement
                     when due, the Non-operators shall have the additional right
                     to notify the purchaser or purchasers of the operator's
                     Hydrocarbon production and collect such costs and other
                     expenses out of the proceeds from the sale of the
                     Operator's share of Hydrocarbon production until the amount
                     owed has been paid. The Non-operators shall have the right
                     to offset the amount owed against the proceeds from the
                     sale of the operator's share of Hydrocarbon production. Any
                     purchaser of such production shall be entitled to rely on
                     the Non-operators' statement concerning the amount of costs
                     and other expenses owed by the Operator and payment made to
                     the Non-operators by any purchaser shall be binding and
                     conclusive as between such purchaser and the Operator. The
                     maximum amount for which the mortgage herein granted by the
                     Operator shall be deemed to secure the obligations and
                     indebtedness of the Operator to all Non-operators as
                     stipulated herein is hereby fixed in an amount equal to
                     $25,000,000.00 in the aggregate (the "Limit of the Mortgage
                     of the Operator"). Except as provided in the previous
                     sentence (and then only to the extent such limitations are
                     required by law), the entire amount of obligations and
                     indebtedness of the Operator to the Non-operators is
                     secured hereby without limitation. Notwithstanding the
                     foregoing Limit of the Mortgage of the Operator, the
                     liability of the Operator under this Agreement and the
                     mortgage and security interest granted hereby shall be
                     limited to (and the Non-operators shall not be entitled to
                     enforce the same against the Operator for, an amount

                                        4

<PAGE>

                     exceeding) the actual obligations and indebtedness
                     [including all interest charges, costs, attorneys' fees,
                     and other charges provided for in this Agreement or in the
                     Memorandum of Operating Agreement and Financing Statement
                     (Louisiana), as such term is defined in Article 8.6.1.4
                     hereof] outstanding and unpaid and that are' attributable
                     to or charged against the interest of the Operator pursuant
                     to this Agreement.

              8.6.1.3 Security Interest in Favor of the Non-operators.

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

                                        5

<PAGE>

              intangibles, and proceeds, whether now existing or hereafter
              acquired, of the Operator in and to the contracts, agreements,
              permits, licenses, rights-of=way, and similar rights and
              privileges that relate to or are appurtenant to the Lease,
              including the following:

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

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

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

              8.6.1.4 Recordation.

              To provide evidence of, and to further perfect the Parties'
              security rights created hereunder, upon request, each Party shall
              execute and acknowledge the Memorandum of Operating Agreement and
              Financing Statement (Louisiana) attached as Exhibit "G" (the
              "Memorandum of Operating Agreement and Financing Statement
              (Louisiana)") in multiple counterparts as appropriate. The Parties
              authorize the Operator to file the Memorandum of Operating
              Agreement and Financing Statement (Louisiana) in the public
              records set forth below to serve as notice of the existence of
              this Agreement as a burden on the title of the Operator and the
              Non-operators to their interests in the Lease and for purposes of
              satisfying otherwise relevant recording and filing requirements of

                                        6

<PAGE>

              applicable law and to attach an original of the Memorandum of
              Operating Agreement and Financing Statement (Louisiana) to a
              standard UCC-1 in mutually agreeable forms for fling in the UCC
              records set forth below to perfect the security interests created
              by the Parties in this Agreement. Upon the acquisition of a
              leasehold interest in the Lease, the Parties shall, within five
              business days following request by one of the Parties hereto,
              execute and furnish to the requesting Party for recordation such a
              Memorandum of Operating Agreement and Financing Statement
              (Louisiana) describing such leasehold interest. Such Memorandum of
              Operating Agreement and Financing Statement (Louisiana) shall be
              amended from time to time upon acquisition of additional leasehold
              interests in the Lease, and the Parties shall, within five
              business days following request by one of the Parties hereto,
              execute and furnish to the requesting Party for recordation any
              such amendment. The Memorandum of Operating Agreement and
              Financing Statement (Louisiana) is to be filed or recorded, as the
              case may be, in (a) the conveyance records of the parish or
              parishes adjacent to the lands or offshore blocks covered by the
              Lease or contained within the Lease pursuant to La. R.S. 9:2731 et
              seq., (b) the mortgage records of such parish or parishes, and
              (c) the appropriate Uniform Commercial Code records.

       8.6.2  Default.

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

       8.6.3  Unpaid Charges.

       If any Participating Party fails to pay its share of the costs and other
       expenses authorized under this Agreement in accordance with Exhibit "C"
       or to otherwise perform any of its obligations under this Agreement when
       due, the Party to whom such payment is due, in order to take advantage of
       the provisions of this Article 8.6, shall notify the other Party by
       certified or registered U.S. Mail that it is in default and has thirty

                                        7

<PAGE>

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

       8.6.4  Carved-out Interests.

       Any agreements creating any overriding royalty, production payment, net
       proceeds interest, net profits interest, carried interest or any other
       interest carved out of a Working Interest in the Lease shall specifically
       make such interests inferior to the rights of the Parties to this
       Agreement. If any Party whose Working Interest is so encumbered does not
       pay its share of costs and other expenses authorized under this
       Agreement, and the proceeds from the sale of its Hydrocarbon production
       pursuant to this Article 8.6 are insufficient to pay such costs and
       expenses, the security rights provided for in this Article 8.6 may be
       applied against the carved-out interests with which the defaulting or
       non-performing Party's interest in the Lease is burdened. In such event,
       the rights of the owner of such carved-out interest shall be subordinated
       to the security rights granted by this Article 8.6.

                                        8

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