Document:

<PAGE>

                                                                    EXHIBIT 10.2

PNG-1

     NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE ON REDEMPTION OF
THIS NOTE (THE "SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE. THE
HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY
THAT THIS NOTE AND THE SHARES MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED OR DISPOSED OF UNLESS THE NOTE OR THE SHARES AS THE CASE MAY BE, HAS
BEEN REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS ARE
AVAILABLE.

     IF THE HOLDER OF THIS NOTE WAS AN AFFILIATE OF THE COMPANY AT ANY TIME
DURING THE THREE MONTHS PRECEDING THE DATE OF ANY SUCH TRANSFER, THE FOREGOING
CONDITIONS MUST BE COMPLIED WITH REGARDLESS OF WHEN SUCH TRANSFER IS MADE.

     ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE U.S. INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED
IN SECTIONS 165(j) AND 1287(a) OF THE UNITED STATES INTERNAL REVENUE CODE OF
1986, AS AMENDED.

     THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY ANY AGENCY OF THE
UNITED STATES GOVERNMENT.

                            HARKEN ENERGY CORPORATION
                      PROMISSORY NOTE DUE 1 SEPTEMBER, 2003

     Harken Energy Corporation, a Delaware corporation (hereinafter, the
"Company," which term includes any successor to the Company), for value
received, hereby promises to pay to Waverley Investments Limited, upon
presentation and surrender of this Note (the "Note") the principal sum of ONE
MILLION SEVEN HUNDRED AND FIVE THOUSAND DOLLARS (U.S. $1,705,000) (the
"Principal Amount") on September 1, 2003 without interest.

     Upon failure of the Company to make any payment of principal on the date
when due and payable, the outstanding principal balance of the Note will bear
interest at the Default Rate beginning on the date such payment was due until
the default is cured.

     Payments of default interest on this Note shall be paid by the Company on
the last Business Day of each calendar month to a bank account nominated in
writing by the registered holder of such Note as shown in the Note Register at
the close of business on the applicable Record Date.

     Notwithstanding any other provision of the Note to the contrary, in no
event shall the default interest contracted for, charged or received in
connection with the Note (including any other costs or considerations that
constitute default interest under applicable law which are contracted for,
charged or received pursuant to the Note) exceed the maximum rate of nonusurious
interest allowed under applicable

<PAGE>

law as presently in effect and to the extent an increase is allowable by such
laws, but in no event shall any amount ever be paid or payable greater than the
amount contracted for in the Note, and all amounts paid by the Company which
constitute usurious interest under the applicable law shall be applied in the
manner described herein.

     The principal on this Note shall be paid to a bank account nominated in
writing by the registered holder of this Note as shown on the Note Register at
the close of business on the applicable Record Date.

     This Note has been issued pursuant to resolutions adopted by the Board of
Directors of the Company by unanimous written consent effective 3 March 2003.

     This Note and the Terms and Conditions shall be governed by and construed
in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed in its
corporate name by the manual or facsimile signatures of the undersigned duly
authorized officers of the Company.

Dated as of  March 18, 2003.

                                            HARKEN ENERGY CORPORATION

                                            By: /s/ Bruce N. Huff
                                               ------------------------------
                                                Bruce N. Huff, President and
                                                Chief Operating Officer

[Corporate Seal]

ATTEST:

By: /s/  A. Wayne Hennecke
   --------------------------------
    A. Wayne Hennecke,
    Senior Vice President-Finance
    and Secretary

                                                                               2

<PAGE>

                        TERMS AND CONDITIONS OF THE NOTE

     The U.S. $1,705,000 Promissory Note Due 1 September 2003 (the "Note" or
"Notes") of Harken Energy Corporation, a Delaware corporation (the "Company") is
constituted by, and authorized to be issued pursuant to these Terms and
Conditions and resolutions of the Board of Directors of the Company by unanimous
written consent effective on 3 March 2003.

     Certain terms not otherwise defined in the text hereof are defined in
Condition 19 herein.

1. Form, Denominations, and Title, and Certain Administrative Provisions

     (A) The Note is issued in registered certified form in denominations of
U.S. $1,000 or multiples thereof (the "Authorized Denomination") and with such
numerical and other identification designation as the Company shall deem
desirable.

     (B) Title to the Note will pass by form of transfer as set out in Schedule
B and reregistration of new ownership in the Note Register. The Company may (to
the fullest extent permitted by applicable laws) deem and treat the registered
Holder of the Note as the absolute owner thereof for all purposes (whether or
not the Note shall be overdue and notwithstanding any notice to the contrary).

     (C) The Note shall be executed on behalf of the Company by its President
and Chief Operating Officer under its corporate seal or a facsimile of such seal
reproduced thereon and attested by its Senior Vice President-Finance and
Secretary or an Assistant Secretary. The signature of any of these officers on
the Note may be manual or facsimile signatures of the present or any future such
authorized officer and may be imprinted or otherwise reproduced on the Note.

     The Note bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the delivery of the Notes or did not hold such offices at the
date of the Note.

     Upon surrender for transfer or exchange of the Note to an office of the
Note Registrar designated by the Company for that purpose, the Company shall
execute and deliver in the name of the transferee or transferees a new Note or
Notes of the same series and interest rate and in Authorised Denominations, and
for the aggregate principal amount the owner is entitled to receive. No transfer
of the Note shall be binding upon the Company, unless made at such office and
shown on the Note Register. The Bank of New York will initially serve as the
Note Registrar.

     In case the Company, pursuant to Conditions 3(B) and 3(C), shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its Properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have entered into an amendment
hereto, the Note may, from time to time, at the request of the successor Person,
be exchanged for another Note executed in the name of the successor Person with
such changes in phraseology and form as may be appropriate, but otherwise in
substance of like tenor as the Note surrendered for such exchange and of like
principal amount.

     (D) Except as otherwise provided herein, no service charge shall be made
for any exchange or redemption of Notes, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any exchange of Notes.

     (E) (1) The Holder of this Note may grant proxies and otherwise authorize
any person to take any action which a Noteholder is entitled to take under these
Terms and Conditions.

                                                                               3

<PAGE>

     (2) Nothing contained herein shall be deemed to authorize any transfers of
this Note otherwise than in accordance with the Securities Act. Unless otherwise
required by applicable law, the Company shall not recognize or give effect to
any attempt to transfer any Note or any interest therein in violation of the
Securities Act.

     (F) The Noteholder by acceptance of the Note hereby covenants and agrees
that neither the Note nor the Redemption Shares will be offered, sold,
transferred, pledged, converted or otherwise disposed of unless the Note and/ or
the Redemption Shares have been registered under the Securities Act or any
applicable state securities or blue sky laws or exemptions from the registration
requirements of such laws are available.

     (G) If (i) any mutilated Note is surrendered to the Company or the Note
Registrar, or (ii) the Company or the Note Registrar, as the case may be,
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and there is delivered to the Company and the Note Registrar such security
and/or indemnity as may be required by them to save them harmless, then, in the
absence of notice to the Company or the Note Registrar that such Note has been
acquired by a bona fide purchaser, the Company shall execute and deliver, in
exchange for any such mutilated Note or in lieu of any such destroyed, lost or
stolen Note, a new Note of like tenor and principal amount, bearing a number not
contemporaneously Outstanding.

     In case any such mutilated, destroyed, lost or stolen Note has become or is
about to become due and payable, the Company in its discretion may, instead of
issuing a new Note, pay such Note, as the case may be.

     Upon the issuance of any new Note under this Condition, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses connected
therewith.

     Every new Note issued pursuant to this Condition in lieu of any destroyed,
lost or stolen Note shall constitute an original additional contractual
obligation of the Company, whether or not the destroyed, lost or stolen Note
shall be at any time enforceable by anyone, and shall be entitled to all
benefits hereunder equally and proportionately with any and all other Notes duly
issued hereunder.

     The provisions of this Condition are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of a mutilated, destroyed, lost or stolen Note.

     (H) The Company shall maintain an office or agency where the Note may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent" or
"paying agent"). The Registrar shall keep a register of the Note and of its
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" or "paying agent" includes any additional paying
agent. The Company may change any paying agent or Registrar without notice to
any Holder. The Company shall notify the Noteholder in writing of the name and
address of the Registrar or any paying agent, if the Company is not serving as
such. The Company or any of its Subsidiaries may act as paying agent or
Registrar. The Bank of New York will initially act as Registrar and paying
agent.

2. Status

     The Note is a direct, unconditional and unsecured obligation of the
Company. The Note will rank senior to all Subordinated Obligations of the
Company, present and future, but, in the event of bankruptcy or insolvency of
the Company, only to the extent permitted by the applicable laws relating to
creditors' rights. The Notes will not be secured by any assets or property of
the Company. The Note will rank pari passu with all other present and future
Indebtedness of the Company (including the Company's 5.0% Senior Convertible
Notes due 2003) other than Subordinated Obligations.

                                                                               4

<PAGE>

3. Covenants

     (A) The Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises of the Company; provided, however, that
the Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer in
the best interests of the Company and the conduct of its business, and that the
loss thereof is not disadvantageous in any material respect to the Noteholders;
and provided, further, that nothing contained in this Condition 3(A) shall
prohibit any transaction permitted by Condition 3(B) or Condition 3(C) herein.

     (B) The Company will not merge or consolidate with or sell, convey,
transfer or lease or otherwise dispose of all, or substantially all of its
Properties and assets substantially as an entirety to any Person, unless: (a)
either (i) the Company shall be the surviving Person or (ii) the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or the Person which acquired by conveyance or transfer, or which
leases, the Properties and assets of the Company substantially as an entirety
(1) shall be a Person organized and validly existing under the laws of the
United States of America, any state thereof or the District of Columbia and (2)
shall expressly assume, by a written instrument, the Company's obligation for
the due and punctual payment of the principal of and interest on the Note and
the performance and observance of every Term and Condition contained herein.

     (C) Upon any consolidation of the Company with or merger of the Company
with or into any other Person or any conveyance, transfer or lease of the
Properties and assets of the Company substantially as an entirety to any person,
the successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under the Terms and Conditions contained herein with the same effect as if such
successor Person had been named as the Company herein, and in the event of any
such conveyance or transfer, the Company, except in the case of a lease, shall
be discharged of all obligations and covenants under the Note and may be
dissolved and liquidated.

     (D) The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (a) all taxes, assessments and
governmental charges levied or imposed upon the Company or upon the income,
profits or Property of the Company and (b) all lawful claims for labour,
materials and supplies which, if unpaid, might by law become a Lien upon the
Property of the Company; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.

     (E) The Company will not amend its Certificate of Incorporation or Bylaws
except as required by law, except in respect to such amendments that the Board
of Directors reasonably determines do not materially adversely affect the rights
of the Noteholder, or except to the extent that such amendment would not have a
material adverse effect on (a) the ability of the Company to perform its
obligations under the Note or (b) the rights of the Noteholder, except that
neither (i) increases in the number of Shares and issuance thereof with related
securities, nor (ii) designations of Preferred Stock of the Company,
modifications of the terms of such designations and issuance thereof with
related securities, nor (iii) modification or expansion of the indemnity
provisions provided by the Company to its directors and officers, nor (iv)
change of the Company's registered agent shall be deemed an amendment hereunder.

     (F) To the extent permitted by law, the Company will provide to the
Noteholder such statements, certificates or other documentation concerning the
organization or operations of the Company as may be reasonably necessary to
establish any exceptions or exemptions from United States federal income tax
withholding and reporting requirements.

                                                                               5

<PAGE>

     (G) The Company shall file a registration statement on Form S-3 (or such
other form as the Company may determine is appropriate or required under the
rules of the Commission), within ninety (90) days following the issue of any
Redemption Shares in respect of all Shares that may be issuable at any time upon
the redemption of the Note. The Company shall use its best efforts to cause the
Commission to declare such registration statement (and any necessary amendments
thereto) effective. The Company shall also use its best efforts to maintain the
effectiveness of such registration statement, and to refile such a registration
statement from time to time in the event its effectiveness lapses, until all
such Shares that either are issued or that may be issued are Freely Tradable in
the United States once the registration statement has been declared effective.

     The Company will use its best efforts to list and maintain a listing of all
Shares issued upon redemption of the Note on a Stock Exchange. In the event a
Stock Exchange requires stockholder approval in order to complete the listing of
the Shares to be so issued upon redemption of the Note, then the Company will
use its best efforts to obtain such stockholder approval at the earliest
possible stockholder meeting. In this event, the redemption in Shares will occur
only if and when stockholder approval has been obtained. If the Company is
unable to obtain or maintain such listing of Shares, it will forthwith give not
less than 30 calendar days notice to the Noteholder of the listing, de-listing
or quotation or lack of quotation of the Shares (as a class) by any such Stock
Exchange.

     (H) If the Company shall at any time act as its own paying agent, it will,
on or before the due date of the principal on any of the Notes, segregate and
hold in trust for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided.

4. Interest

     The Note does not bear interest other than default interest at the Default
Rate.

     Any money held by the Company in trust for the payment of the principal of
or default interest on the Note and remaining unclaimed for two years after such
principal or default interest has become due and payable shall be discharged
from such trust; and the Holder of the Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof, and all
liability of the Company with respect to such trust money, and all liability of
the Company as trustee thereof, shall thereupon cease.

     Default interest is calculated on the basis of a 360 day year consisting of
12 months of 30 days each and, in the case of an incomplete month, the number of
days elapsed.

5. Payments

     Payments of default interest on the Note shall be paid by the Company or
its paying agent on the last Business Day of each calendar month, commencing
October 31, 2003, to the Holder of such Note as shown on the Note Register at
the close of business on the Special Record Date, such payment to be made as
provided in the next paragraph.

     Payments of principal in respect of the Note will only be made, against
presentation and surrender of the certificate for the Note at the specified
office of the Company or its paying agent. All payments of principal and default
interest shall be made in U.S. dollars. Each such payment will be made at the
specified office of the Company or its paying agent, at the option of the
Holder, by U.S. dollar cheque mailed to an address, or, with respect to a Holder
of at least $1,000,000 in principal amount of Notes, delivered in accordance
with the Holder's instructions, or by transfer to a U.S. dollar account
maintained by the Holder in accordance with the holder's instructions, subject
in all cases to any applicable fiscal or other laws and regulations, but without
prejudice to the provisions of Condition 9, provided that the final payment of
principal shall be made upon presentation of the Notes at the office of the
Company or the specified office of the Paying Agent.

                                                                               6

<PAGE>

     If, at any time, in the opinion of the Company or of the paying agent,
payments in U.S. dollars cannot be so made, payments will be made in U.S.
dollars in such other manner as may be approved by the Company and the paying
agent and notice of the alternative manner of payment will be given to the
Noteholder in accordance with Condition 15.

     All monies paid by the Company to a paying agent for the payment of
principal or default interest on any Note which remain unclaimed at the end of
two (2) years after the principal on such Note will have become due and payable
will be repaid to the Company and the Holder of such Note will thereafter have
only the rights of a creditor of the Company as described in these Terms and
Conditions or such rights as may be otherwise provided by applicable law.

     A Holder shall be entitled to present a Note for payment only on a
Presentation Date and shall not be entitled to any further payment if a
Presentation Date is after the due date.

     When making payments to Noteholders, fractions of one cent will be rounded
down to the nearest whole cent.

6. Conversion

     A Noteholder does not have any right to convert the Note into any
securities of the Company.

7. Redemption and Purchase

     (A) Unless previously redeemed or purchased and canceled as provided
herein, the Company will redeem the Note at its principal amount on 1 September,
2003.

     (B) (i) The Company may, at its option and after having given not less than
30 nor more than 60 calendar days' notice to the Noteholder(s) in accordance
with Condition 15 (which notice shall be irrevocable), redeem the Note(s) for
cash, in whole or in part, at a Redemption Price equal to 100 per cent of their
principal amount together with default interest (if any) accrued to (but
excluding) the Redemption Date. If the Company elects to redeem less than all
the Notes, Company or its paying agent will select which Notes to redeem by lot,
random, or such other method as it shall deem fair and appropriate. Upon expiry
of any such notice period as is referred to in this Condition 7(B) (and subject
as provided above), the Company shall be bound to redeem Notes at their
principal amount, together with default interest accrued to but excluding the
Redemption Date.

     (ii) Provided that the Shares which may be issued pursuant to this
paragraph shall be Freely Tradeable and listed on a Stock Exchange following the
registration statement referred to in Condition 3(G) being declared effective,
on 1 September 2003, the Company may redeem upon not less than 30 nor more than
60 days notice, pursuant and subject the Conditions listed above, up to 100% of
the Outstanding Notes for Shares. If the Company elects to redeem all or part of
the Notes for Shares, each Note will be redeemed for the number of shares of
Common Stock equal to the sum of the face value of the Note redeemed divided by
the average of the Market Price of the Shares over all the Stock Exchange
Business Days during August 2003. If the Company elects to redeem less than all
the Notes, the Company will select which Notes to redeem by lot, random, or such
other method as it shall deem fair and appropriate. Upon expiry of any such
notice period as is referred to in this Condition 7(B) (and subject as provided
above), the Company shall be bound to redeem Notes as described above.

     (C) Subject to applicable law, the Company or any of its Subsidiaries may
at any time purchase Notes in any manner and at any price in the open market or
by private treaty. If purchases are made by tender, tenders must be available to
all Noteholders alike. Notes purchased by the Company or any of its Subsidiaries
will forthwith be surrendered for cancellation and shall no longer be deemed
Outstanding.

                                                                               7

<PAGE>

     (D) All Notes which are redeemed by the Company will forthwith be canceled
and may not be reissued or resold.

8. Taxation

     All payments in respect of the Notes by the Company shall be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature ("Taxes") imposed
or levied by or on behalf of the U.S. or any political sub-division of, or any
authority in, or of, the U.S. having power to tax, unless the withholding or
deduction of the Taxes is required by law. In that event, the Company will pay
such additional amounts as may be necessary in order that the net amounts
received by the Noteholders after the withholding or deduction shall equal the
respective amounts which would have been receivable in respect of the Notes in
the absence of the withholding or deduction; except that no additional amounts
shall be payable in relation to any payment in respect of any Note:

     (A) to, or to a third party on behalf of, a Holder who is liable for the
Taxes in respect of the Note by reason of such Holder having some connection
with the U.S. other than the mere holding of the Note; and

     (B) presented for payment more than 30 calendar days after the Relevant
Date except to the extent that a Holder would have been entitled to additional
amounts on presenting the same for payment on the last day of such period of 30
calendar days; or

     (C) to, or to a third party on behalf of, a Holder who would not be liable
or subject to the withholding or deduction by making a declaration of
non-residence or other similar claim for exemption to the relevant tax
authority.

     Any reference in these Terms and Conditions to any amounts in respect of
the Notes shall be deemed also to refer to any additional amounts which may be
payable under this Condition.

9. Additional Covenants

     During the term of the Note, the Company will, save with the approval of an
Extraordinary Resolution:

     (1) at all times after ninety (90) days from the date of the initial
issuance of the Notes keep available for issuance free from any preemptive
rights out of its authorized but unissued capital such number of Shares as would
enable the rights of redemption into Shares to be satisfied in full;

     (2) maintain a listing for all the issued Shares and all Shares to be
issued on the exercise of any redemption rights on a Stock Exchange, it being
understood that if the Company is unable to obtain or maintain such listing of
Shares and will forthwith give notice to the Noteholders in accordance with
Condition 15 of the listing, de-listing or quotation or lack of quotation of the
Shares (as a class) by any such Stock Exchange; and

     (3) not in any way modify the rights attaching to the Shares with respect
to voting, dividends or liquidation.

10. Prescription

     Notes will become void unless presented for payment within periods of ten
(10) years (in the case of principal) and five (5) years (in the case of default
interest) from the Relevant Date in respect of the Notes, as the case may be,
subject to the provisions of Condition 5.

11. Events of Default and Enforcement

     (A) Event of Default

                                                                               8

<PAGE>

     "Event of Default," wherever used in these Terms and Conditions, means any
one of the following events (whatever the reason for such Event of Default,
whether voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body) which shall have occurred and is
continuing:

          (1) if default is made for a period of five (5) Business Days or more
     in the payment of principal due in respect of the Notes or any of them; or

          (2) if the Company fails to perform or observe any of its other
     obligations, covenants, conditions or provisions under the Notes, these
     Terms and Conditions, the Company's 5.0% Senior Notes due 2003, or the
     trust indenture pursuant to which such 5.0% Senior Notes due 2003 were
     issued, and such failure continues for the period of 30 calendar days (or
     such longer period as the Majority Holders may in their absolute discretion
     permit) next following the service by the one or more of the Holders on the
     Company of notice requiring the same to be remedied; or

          (3) if (i) any other Indebtedness of the Company becomes due and
     payable prior to its Stated Maturity by reason of an event of default
     (howsoever defined) or (ii) any such Indebtedness of the Company is not
     paid when due or, as the case may be, within any applicable grace period or
     (iii) the Company fails to pay when due (or, as the case may be, within any
     applicable grace period) any amount payable by it under any present or
     future guarantee for, or indemnity in respect of, any Indebtedness of any
     Person or (iv) any security given by the Company or any subsidiary for any
     Indebtedness of any Person or any guarantee or indemnity of Indebtedness of
     any Person by the Company becomes enforceable by reason of default in
     relation thereto and steps are taken to enforce such security save in any
     such case where there is a bona fide dispute as to whether the relevant
     Indebtedness or any such guarantee or indemnity as aforesaid shall be due
     and payable (following any applicable grace period); provided, however,
     that in each such case the Indebtedness exceeds in the aggregate U.S.
     $2,000,000 and in each such case such event continues unremedied for a
     period of 30 calendar days (or such longer period as the Majority Holders
     may in their sole discretion consent to in writing upon receipt of written
     notice from the Company); or

          (4) if the Company shall generally fail to pay its debts as such debts
     come due (except debts which the Company may contest in good faith
     generally) or shall be declared or adjudicated by a competent court to be
     insolvent or bankrupt, shall consent to the entry of an order of relief
     against it in an involuntary bankruptcy case, shall enter into any
     assignment or other similar arrangement for the benefit of its creditors or
     shall consent to the appointment of a custodian (including, without
     limitation, a receiver, liquidator or Company); or

          (5) if a receiver, administrative receiver, administrator or other
     similar official shall be appointed in relation to the Company or in
     relation to the whole or a substantial part its undertaking or assets or a
     distress, execution or other process shall be levied or enforced upon or
     sued out against, or an encumbrancer shall take possession of, the whole or
     a substantial part of the assets of any of them and in any of the foregoing
     cases is not paid out or discharged within 90 calendar days (or such longer
     period as the Majority Holders may in their absolute discretion consent to
     in writing upon receipt of written notice from the Company); or

          (6) if the Company institutes proceedings to be adjudicated a
     voluntary bankrupt, or shall consent to the filing of a bankruptcy
     proceeding against it, or shall file a petition or answer or consent
     seeking organization under the laws of the Federal Bankruptcy Code or any
     similar applicable U.S. federal, state or foreign law, or shall consent to
     the filing of any such petition, or shall consent to the appointment of a
     receiver or liquidator or trustee or assignee (or other similar official)
     in bankruptcy or insolvency of it or its Property, or shall make an
     assignment for the benefit of creditors, or shall admit in writing its
     inability to pay its debts generally as they come due; or

          (7) if a decree or order by a court having jurisdiction in the
     premises shall have been entered adjudging the Company a bankrupt or
     insolvent, or approving as properly filed a petition seeking the
     reorganization of the Company under the Federal Bankruptcy Code or any
     other similar applicable U.S. federal, state or foreign

                                                                               9

<PAGE>

     law, and such decree or order shall have continued undischarged or unstayed
     for a period of 90 calendar days; or a decree or order of a court having
     jurisdiction in the premises for the appointment of a receiver or
     liquidator or trustee or assignee (or other similar official) in bankruptcy
     or insolvency of the Company or of all or substantially all of its
     Property, or for the winding up or liquidation of its affairs, shall have
     been entered, and such decree or order shall have continued undischarged
     and unstayed for a period of 90 calendar days; or

          (8) if a warranty, representation, or other statement made by or on
     behalf of the Company contained herein or any certificate or other
     agreement furnished in compliance herewith is false in any material respect
     when made and such falsity continues for a period of 30 calendar days (or
     such longer period as the Majority Holders may in their absolute discretion
     permit) next following the service by one or more of the Holders on the
     Company of notice requiring the same to be remedied; or

          (9) if there is any final judgment or judgments for the payment of
     money exceeding in the aggregate U.S. $2,000,000 outstanding against the
     Company which has been outstanding for more than 60 calendar days from the
     date of its entry and shall not have otherwise been discharged in full or
     stayed by appeal, bond or otherwise.

     (B) Acceleration of Maturity; Rescission and Annulment

     If an Event of Default (other than an Event of Default specified in
Condition 11(A)(6) or 11(A)(7)) occurs and is continuing, then and in every such
case the Majority Holders may declare the principal amount of all the Notes to
be due and payable immediately, by a notice in writing to the Company, and upon
any such declaration such principal amount shall become immediately due and
payable.

     If an Event of Default specified in Condition 11(A)(6) or Condition
11(A)(7) occurs and is continuing, then the principal amount of all the Notes
shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of any Noteholder.

     At any time after a declaration of acceleration has been made and before a
judgment or decree for payment of the money due has been obtained by the
Majority Holders as hereinafter in this Condition provided, the Majority
Holders, with written notice to the Company, may rescind and annul such
declaration and its consequences if

          (1) the Company has paid or deposited in a manner satisfactory to such
     Holders a sum sufficient to pay

               (i) all unpaid principal of any Outstanding Notes which has
          become due otherwise than by such declaration of acceleration, and

               (ii) all reasonable sums paid or advanced by the such Holders
          hereunder; and

          (2) all Events of Default, other than the non-payment of amounts of
     principal on Notes which have become due solely by such declaration of
     acceleration, have been cured or waived as provided in Condition 11(K)

     No such rescission shall affect any subsequent default or impair any right
consequent thereon.

     (C) Collection of Indebtedness and Suits for Enforcement by the Majority
Holders

     The Company covenants that if default is made in the payment of the
principal of any Note at the Maturity thereof and such default continues for a
period of five (5) Business Days, the Company will, upon demand of the

                                                                              10

<PAGE>

Majority Holders, pay to the Holders of the Notes, the whole amount then due and
payable on the Notes for principal and default interest on any overdue principal
and, to the extent that payment of such interest shall be legally enforceable,
upon any overdue installment of interest, at the rate prescribed therefor in the
Notes, and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable expenses,
disbursements and advances of the Holders, their agents and counsel, and the
reasonable compensation of such agents and counsel.

     If the Company fails to pay such amounts forthwith upon such demand, the
Majority Holders in their name, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company or any
other obligor upon the Notes and collect the moneys adjudged or decreed to be
payable in the manner provided by law out of the Property of the Company or any
other obligor upon the Notes, wherever situated.

     If an Event of Default occurs and is continuing, the Majority Holders may
in their discretion proceed to protect and enforce their rights and the rights
of the other Noteholders by such appropriate judicial proceedings as such
Holders shall deem most effectual to protect and enforce any such rights,
whether for the specific enforcement of any covenant or agreement in these terms
and conditions or to enforce any other proper remedy.

     (D) Majority Holders May File Proofs of Claim

     In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the Notes
or the Property of the Company or of such other obligor or their creditors, the
Majority Holders (irrespective of whether the principal of the Notes shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Majority Holders shall have made any demand on the
Company for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,

     (1) to file and prove a claim for the whole amount of principal and default
interest owing and unpaid in respect of the Notes and to file such other papers
or documents as may be necessary or advisable in order to have the claims of the
Holders (including any claim for the reasonable expenses, disbursements and
advances of such Holders, their agents and counsel) and of the other Noteholders
allowed in such judicial proceeding, and the reasonable compensation of such
agents and counsel, and

     (2) to collect and receive any moneys or other Property payable or
deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Majority Holders due them for the
reasonable expenses, disbursements and advances of such Holders, their agents
and counsel and the reasonable compensation of such agents and counsel, and to
pay to the Paying Agent (where one is appointed) all such other sums due under
the Notes. In the absence of such appointment, any such sums shall be paid for
the rateable benefit of all the Noteholders.

     Nothing herein contained shall be deemed to authorize the Majority Holders,
except as permitted by law and these Terms and Conditions, to authorize or
consent to or accept or adopt on behalf of any Noteholder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Noteholder thereof, or to authorize the such Holder to vote in
respect of the claim of any Noteholder in any such proceeding, except to the
extent permitted by law.

                                                                              11

<PAGE>

     (E) Majority Holders May Enforce Claims Without Possession of Notes

     All rights of action and claims under these Terms and Conditions may be
prosecuted and enforced by the Majority Holders without the possession of any of
the Notes or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Majority Holders shall be brought in their own
name and any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Majority
Holders, their agents and counsel, be paid to the Paying Agent (where one is
appointed) for the rateable benefit of all the Noteholders in respect of which
such judgment has been recovered.

     (F) Application of Money Collected

     Any money collected by the Majority Holder pursuant to this Condition shall
be applied in the following order in case of the distribution of such money on
account of principal or interest, upon presentation of the Notes and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:

          FIRST: To the payment of the amounts then due and unpaid for principal
     of and default interest on the Notes in respect of which or for the benefit
     of which such money has been collected, ratably, without preference or
     priority of any kind, according to the amounts due and payable on such
     Notes for principal and default interest, respectively; and

          SECOND: The balance, if any, to the Person or Persons entitled
     thereto.

     (G) Unconditional Right of Holders to Receive Principal and Default
Interest

     Notwithstanding any other provision in these Terms and Conditions, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment, as provided herein and in such Note of the principal of and
default interest on, such Note on the respective Stated Maturity or expressed in
such Note (or, in the case of redemption, on the Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder; provided, that all monies
paid by the Company to the Paying Agent (if appointed) for the payment of
principal or default interest on any Note which remain unclaimed at the end of
two (2) years after the Stated Maturity or Redemption Date of such Note will be
repaid to the Company and the Holder of any Note shall thereafter have only the
rights of a creditor of the Company or such rights as may be otherwise provided
by applicable law.

     (H) Restoration of Rights and Remedies

     If the Majority Holders or any Noteholder has instituted any proceeding to
enforce any right or remedy under these Terms and Conditions and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the Majority Holders or to such Noteholder, then and in every such
case, subject to any determination in such proceeding, the Company, the Majority
Holders and the Noteholders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Majority Holders and the Noteholders shall continue as though no such proceeding
had been instituted.

     (I) Rights and Remedies Cumulative

                                                                              12

<PAGE>

     Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Notes as provided herein, no right or
remedy herein conferred upon or reserved to the Noteholders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

     (J) Delay or Omission Not Waiver

     No delay or omission of the Majority Holders or Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Noteholders.

     (K) Waiver of Past Defaults

     Subject to Condition 11(B), the Majority Holders may on behalf of the
Holders of all the Notes waive any past default hereunder and its consequences,
except a default

          (1) in respect of the payment of the principal of or default interest
     on any Note, or

          (2) in respect of a covenant or provision hereof which under Condition
     17 cannot be modified or amended without the consent of the Holder of each
     Outstanding Note affected.

     Upon any such waiver, such default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of these Terms and Conditions; but no such waiver shall extend to any subsequent
or other default or Event of Default or impair any right consequent thereon.

     (L) Waiver of Stay or Extension Laws

     The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of these Terms and Conditions; and the Company (to the extent that
it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law.

     (M) Requirements Regarding Agents (if appointed)

          (1) At any time after an Event of Default has occurred and is
     continuing the Majority Holders shall notify in writing the Company and the
     Paying Agent (if appointed), and may by notice in writing to the Company
     and the Paying Agent (if appointed):

               (i) require the Paying Agent, until notified to the contrary by
          Majority Holders, to hold all Notes and all moneys, documents and
          records held by it in respect of Notes to the order of the Holders; or

               (ii) require the Paying Agent to deliver to the Holders on a pro
          rata basis all funds held by it for the benefit of the Holders, and to
          deliver the documents and records held by it in respect of Notes to
          the Holders, provided that such notice shall be deemed not to apply to
          any documents or records which the relevant Paying Agent is obliged to
          release by any law or regulation; and

                                                                              13

<PAGE>

               (iii) require the Company to make all subsequent payments in
          respect of the Notes to or to the order of the Holders and not to the
          Paying Agent.

          (2) The Majority Holders shall notify the Paying Agent immediately
     upon the cure or waiver of an Event of Default. Upon receipt of such
     notice, the provisions of this Condition 11(M) shall no longer apply.

          (3) Prior to taking any action under this Agreement at the direction
     of any Person with respect to the Notes, the Paying Agent shall be entitled
     to receive (and shall receive) indemnity or security satisfactory to it.

12. Liability Solely Corporate

     No recourse shall be had for the payment of the principal of or default
interest on any Notes or any part thereof, or for any claim based thereon or
otherwise in respect thereof, or of the indebtedness represented thereby, or
upon any obligation, covenant or agreement in these Terms and Conditions,
against any incorporator, or against any stockholder, officer or director, as
such, past, present or future, of the Company, or of any predecessor or
successor Person, either directly or through the Company or any such predecessor
or successor Person, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, it being
expressly agreed and understood that the Notes and these Terms and Conditions
which are a part thereof are solely corporate obligations, and that no personal
liability whatsoever shall attach to, or be insured by, any such incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any predecessor or successor Person, either directly or through
the Company or any such predecessor or successor Person, because of the
indebtedness hereby authorized or under or by reason of any of the obligations,
covenants, promises or agreements contained in the Notes or the these Terms and
Conditions which constitute a part thereof or to be implied herefrom; and that
any such personal liability is hereby expressly waived and released as a
condition of, and as part of the consideration for the exchange transaction
pursuant to which the Notes were issued; provided, however, that nothing herein
contained shall be taken to prevent recourse to and the enforcement of the
liability, if any, of any stockholder or subscriber to capital stock of the
Company upon or in respect of shares of capital stock not fully paid up.

13. Defeasance and Covenant Defeasance

     (A) Company's Option to Effect Defeasance or Covenant Defeasance

     The Company may, at its option by Board Resolution, at any time, with
respect to the Notes, elect to have either Condition 13(B) or Condition 13(C)
applied to all Outstanding Notes upon compliance with the conditions set forth
below in this Condition, The Company shall promptly give notice of such election
to the Holders.

     (B) Legal Defeasance and Discharge

     Upon the Company's exercise under Condition 13(A) of the option applicable
to this Condition 13(B), the Company shall be deemed to have been discharged
from its obligations with respect to all Outstanding Notes on the date the
conditions set forth in Condition 13(D) are satisfied (hereinafter, "legal
defeasance"). For this purpose, such legal defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the Outstanding Notes, which shall thereafter be deemed to be "Outstanding"
only for the purposes of Condition 13(E) and the other Conditions of these Terms
and Conditions referred to in (1) and (2) below, and to have satisfied all its
obligations under such Notes, including the obligation to pay default interest
on the Notes, and these Terms and Conditions insofar as such Notes are concerned
(and the Holders, at the expense of the Company, shall execute proper
instruments acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder: (1) the rights of
Holders of Outstanding Notes to receive, solely from the trust fund described in
Condition 13(D) and as more fully set forth in such Condition, payments in
respect of the principal of and default interest on such Notes when such
payments are due, and (B) the Company's obligations with respect to the Notes
under Conditions 1(D), 1(E), 1(H), 3(D) or 3(L). Subject to compliance with this
Condition, the

                                                                              14

<PAGE>

Company may exercise its option under this Condition 13(B) notwithstanding the
prior exercise of its option under Condition 13(C) with respect to the Notes.

     (C) Covenant Defeasance

     Upon the Company's exercise under Condition 13(A) of the option applicable
to this Condition 13(C), the Company shall be released from its obligations
under any covenant contained in Condition 3 (except Condition 3(D) with respect
to the Outstanding Notes on and after the date the conditions set forth in
Condition 13(D)) are satisfied (hereinafter, "covenant defeasance"), and the
Notes shall thereafter be deemed not to be "Outstanding" for the purposes of any
request, demand, authorization, direction, declaration, notice, consent, waiver
or Act of Noteholders (and the consequences of any thereof) in connection with
such covenants, but shall continue to be deemed "Outstanding" for all other
purposes hereunder. For this purpose, such covenant defeasance means that, with
respect to the Outstanding Notes, the Company may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Condition 11(A)(4), but, except as specified above, the remainder of these and
the Notes shall be unaffected thereby.

     (D) Conditions to Legal Defeasance or Covenant Defeasance

     The following shall be the conditions to application of either Condition
13(B) or Condition 13 (C) to the Outstanding Notes:

          (1) The Company shall irrevocably have deposited or caused to be
     deposited with a paying agent as trust funds in trust for the purpose of
     making the following payments, specifically pledged as security for, and
     dedicated solely to, the benefit of the Holders of such Notes, (A) money in
     an amount, or (B) U.S. Government Obligations which through the scheduled
     payment of principal in respect thereof in accordance with their terms will
     provide, not later than one day before the due date of any payment, money
     in an amount, or (C) a combination thereof, sufficient, in the opinion of a
     nationally recognized firm of independent public accountants expressed in a
     written certification thereof delivered to the paying agent, to pay and
     discharge, and which shall be applied by the paying agent to pay and
     discharge, the principal of the Outstanding Notes on the Stated Maturity
     (or Redemption Date, if applicable) of such principal; provided that the
     paying agent shall have been irrevocably instructed to apply such money or
     the proceeds of such U.S. Government Obligations to said payments with
     respect to the Notes; and provided further that, upon the effectiveness of
     this Condition 13(D), the money or U.S. Government Obligations deposited
     shall not be subject to the rights of the Noteholders pursuant to the
     provisions of this Condition. Before or after such a deposit, the Company
     may give to the paying agent a notice of its election to redeem all of the
     Outstanding Notes at a future date in accordance with Condition 7, which
     notice shall be irrevocable. Such irrevocable redemption notice, if given,
     shall be given effect in applying the foregoing.

          (2) No Default or Event of Default with respect to the Notes shall
     have occurred and be continuing on the date of such deposit or, insofar as
     paragraphs (6) and (7) of Condition 11(A) hereof are concerned, at any time
     during the period ending on the 91st day after the date of such deposit (it
     being understood that this condition shall not be deemed satisfied until
     the expiration of such period).

          (3) No event or condition shall exist that pursuant to the provisions
     of Condition 13(B) or 13(C) would prevent the Company from making payments
     of the principal of the Notes on the date of such deposit or at any time
     during the period ending on the 91st day after the date of such deposit (it
     being understood that this condition shall not be deemed satisfied until
     the expiration of such period).

                                                                              15

<PAGE>

          (4) Such legal defeasance or covenant defeasance shall not result in a
     breach or violation of, or constitute a default under any material
     agreement or material instrument to which the Company is a party or by
     which it is bound.

          (5) In the case of an election under Condition 13(B), the Company
     shall have delivered to the paying agent an Opinion of Counsel stating that
     the Holders of the Outstanding Notes will not recognize income, gain or
     loss for U.S. federal income tax purposes as a result of such defeasance
     and will be subject to federal income tax on the same amounts, in the same
     manner and at the same times as would have been the case if such defeasance
     had not occurred.

          (f) The Company shall have delivered to the paying agent an Officers'
     Certificate and an Opinion of Counsel, each stating that all conditions
     precedent provided for relating to either the legal defeasance under
     Condition 13(B) or the covenant defeasance under Condition 13(C) (as the
     case may be) have been complied with.

     (E) Deposited Money and U.S. Government Obligations to Be Held in Trust;
Other Miscellaneous Provisions

     Subject to the provisions of the disposition of unclaimed moneys contained
herein, all money and U.S. Government Obligations (including the proceeds
thereof) deposited with the paying agent pursuant to Condition 13(D) in respect
of the Outstanding Notes shall be held in trust and applied by the paying agent,
in accordance with the provisions of these terms and conditions, to the payment,
either directly or through the paying agent (including the Company acting as its
own paying agent) to the Holders of the Notes of all sums due and to become due
thereon in respect of principal, but such money and U.S. Government Obligations
need not be segregated from other funds except to the extent required by law.

     (F) Reinstatement

     If the paying agent is unable to apply any money or U.S. Government
Obligations in accordance with Condition 13(E) by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, then the Company's obligations under
these Terms and Condition shall be revived and reinstated as though no deposit
had occurred pursuant to Condition 13(B) or 13(C), as the case may be, until
such time as the paying agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Condition 13(E); provided, however,
that no action taken in good faith by the Company after a deposit of money or
U.S. Government Obligations or both pursuant to Condition 13(E) and prior to the
revival and reinstatement of obligations under these Terms and Conditions
pursuant to this Condition 13(F) shall constitute the basis for the assertion of
an Event of Default pursuant to Condition 11; and provided, further, that if the
Company makes any payment of principal of or default interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money or U.S. Government Obligations held the Paying Agent.

14. Replacement of Notes

     As provided in Conditions 1(H), should any Note be lost, stolen, mutilated,
defaced or destroyed, it may be replaced at the specified office of the paying
agent or Company upon payment by the claimant of the expenses incurred in
connection with the replacement and on such terms as to evidence indemnity and
security as the Company and the Paying Agent may reasonably require. Mutilated
or defaced Notes must be surrendered before replacements will be issued.

                                                                              16

<PAGE>

15. Notices

     (A) Notices to all the Noteholders will be valid if posted by ordinary mail
to the address of the Noteholder on the Note Register (unless another form of
notice is permitted by these Terms and Conditions) with a written copy provided
to RP&C International, Limited. Any notice shall be deemed to have been given on
the date which is 5 Business Days after the date of posting. If posting of
notice as provided above is not practicable, notice will be given in such other
manner, and shall be deemed to have been given on such date, as the Company may
reasonably approve.

     (B) Any request, demand, authorization, direction, declaration, notice,
consent, waiver, Extraordinary Resolution or Act of Noteholders or other
document provided or pertained by these Terms and Conditions (herein
collectively called "Notice") to be made upon, given or furnished to, or filed
with the Company by any Noteholder shall be sufficient for every purpose
hereunder (unless otherwise herein expressly provided) if made, given, furnished
or filed in writing to or with the Company addressed to it at the address of its
principal office which shall initially be: Harken Energy Corporation, 580
WestLake Park Boulevard, Suite 600, Houston, Texas 77079, Attention: Mikel D.
Faulkner, Chairman of the Board and Chief Executive Officer Tel. (281) 504-4000,
Fax, (281) 504-4100; with a copy to A. Wayne Hennecke, Senior Vice
President-Finance and Secretary: Tel. (281) 504-4040, Fax. (281) 504-4110.

16. Acts of Noteholders, Meetings of Noteholders

     (A) Any Extraordinary Resolution, request, demand, authorization,
direction, declaration, notice, consent, waiver or other action provided by
these Terms and Conditions to be given or taken by Noteholders may be embodied
in and evidenced by one or more instruments of substantially similar tenor
signed by such Noteholders in person or by agents duly appointed in writing;
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of these Terms and Conditions and conclusive in favor of the Company, if
made in the manner provided in this Condition.

     (B) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to such witness, notary public or other such officer the
execution thereof. Where such execution is by a signer acting in a capacity
other than such signer's individual capacity, such certificate or affidavit
shall also constitute sufficient proof of authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Company
deems sufficient.

     (C) Any Extraordinary Resolution, request, demand, authorization,
direction, notice, consent, waiver or other Act of the Holders of any Note shall
bind every future Holder of the same Note and the Holder of every Note issued
upon redemption thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done the Company or any paying agent in
reliance thereon, whether or not notation of such action is made upon such Note.

     (D) The Noteholders may convene a meeting at any time and from time to time
to consider any matter affecting the Holders of the Notes, including the
modification of the Terms and Conditions and to make, give or take any request,
demand, authorization, direction, notice, consent, waiver or other action
provided by this these Terms and Conditions to be made, given or taken by
Holders of the Notes.

                                                                              17

<PAGE>

     (E) Notice of every meeting of the Holders of the Notes, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be given in the manner provided in Condition 15,
not less than 21 nor more than 180 days prior to the date fixed for the meeting.

     (F) To be entitled to vote at any meeting of Holders of the Notes, a Person
shall be (i) a Holder of one or more Outstanding Notes, or (ii) a Person
appointed by an instrument in writing as proxy for a Holder or Holders of one or
more Outstanding Notes by such Holder or Holders. The only Persons who shall be
entitled to be present or to speak at any meeting of Noteholders shall be the
Persons entitled to vote at such meeting and their counsel, any representatives
of the Company, and their respective counsel.

     (G) The quorum at any meeting for passing any Extraordinary Resolution will
be one or more Persons present holding or representing 50% or more in principal
amount of the Outstanding Notes as of the date of the meeting, or at any
adjourned such meeting one or more Persons present whatever the principal amount
of the Notes held or represented by such Person and the vote required for
passing an Extraordinary Resolution at such meeting will be not less than a
majority of the principal amount of the Outstanding Notes and represented at
such meeting or adjournment thereof; provided, that at any meeting, the business
of which includes the modification of the provisions of the Terms and Conditions
and the provisions of these Terms and Conditions, the necessary quorum and vote
required for passing an Extraordinary Resolution will be one or more Persons
present holding or representing not less than a majority, or at any adjourned
such meeting not less than one-third, of the principal amount of the Outstanding
Notes. An Extraordinary Resolution passed at any meeting of the Holders of the
Notes will be binding on all Holders of the Notes, whether or not such
Noteholders are present at the meeting.

17. Amendments to Terms and Conditions

     (A) Amendments with Consent of Noteholders

     With the consent of the Holders of a majority in principal amount of the
Notes Outstanding, the Company, when authorized by a Board Resolution, may amend
these Terms and Conditions for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions hereof or of
modifying in any manner the rights of the Noteholders hereunder; provided,
however, that no such amendment shall, without the consent of the Holder of each
Outstanding Note affected thereby:

          (1) change the Stated Maturity of the principal of any Note, or reduce
     the principal amount thereof or the rate of default interest thereon, or
     change the coin or currency in which any Note or the default interest
     thereon is payable, or impair the right to institute suit for the
     enforcement of any such payment after the Stated Maturity thereof (or, in
     the case of redemption, on or after the Redemption Date), or

          (2) reduce the percentage in principal amount of the Outstanding
     Notes, the consent of whose Holders is required for any amendment of these
     terms and conditions, or the consent of whose Holders is required for any
     waiver of compliance with certain provisions of these Terms and Conditions
     or certain defaults hereunder and their consequences provided for herein,
     or

          (3) modify any of the provisions of Condition 11(K), except to
     increase any such percentage or to provide that certain other provisions of
     these Terms and Conditions be modified or waived without the consent of the
     Holder of each Outstanding Note affected thereby,

          (4) modify any of the provisions of these Terms and Conditions
     relating to the subordination of the Notes in a manner adverse to the
     Holders thereof, or

          (5) modify any of the provisions of these Terms and Conditions
     relating to redemption rights.

                                                                              18

<PAGE>

     It shall not be necessary for any Act of Noteholders under this Condition
to approve the particular form of any proposed amendment to the Terms and
Conditions, but it shall be sufficient if such Act shall approve the substance
thereof.

     (B) Effect of Amendments

     Upon the entering into of an amendment of these Terms and Conditions
pursuant to the terms hereof, these Terms and Conditions shall be modified in
accordance therewith, and amendment shall form a part of these Terms and
Conditions for all purposes; and every Holder of Notes theretofore or thereafter
delivered hereunder shall be bound thereby.

18. Governing Law

     The Notes, including these Terms and Conditions, are governed by, and will
be construed in accordance with, the laws of the State of New York.

19. Definitions of Certain Terms

     "Act," when used with respect to any Noteholder, has the meaning specified
in Condition 16.

     "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.

     "Authorized Denomination" means U.S. $1,000.

     "Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.

     "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is a day on which banking institutions in the City of New York, New York,
and London, England are not authorized or obliged by law, regulation or
executive order to close.

     "Capitalized Lease Obligation" means the amount of the liability under any
capital lease that, in accordance with GAAP, is required to be capitalized and
reflected as a liability on the balance sheet of the relevant Person.

     "Commission" means the Securities and Exchange Commission, as from time to
time constituted or, if at any time after the Issue Date such Commission is not
existing, then the body performing similar duties at such time.

     "Common Stock" means, with respect to any Person, any and all shares,
interests, participation and other equivalents (however designated, whether
voting or non-voting) of such Person's common stock, whether now outstanding or
issued after the Issue Date, and includes, without limitation, all series and
classes of such common stock.

     "Company" means Harken Energy Corporation, until a successor Person shall
have become such pursuant to the applicable provisions of these Terms and
Conditions, and thereafter "Company" shall mean such successor Person.

                                                                              19

<PAGE>

     "Corporation" includes corporations, limited liability companies, limited
and general partnerships, associations, joint-stock companies and business
trusts.

     "Default Rate" means, with respect to the Notes, ten percent (10%) per
annum.

     "Effective Date" means the first Business Day following the date upon which
the Commission declares to be effective a registration statement filed by the
Company pursuant to the Securities Act relating to the Redemption Shares.

     "Extraordinary Resolution" means a resolution passed at a meeting of the
Noteholders duly convened and held in these Terms and Conditions.

     "Federal Bankruptcy Code" means the Bankruptcy Act or Title 11 of the
United States Code, as amended from time to time.

     "Freely Tradable" means, with respect to the Notes and the Redemption
Shares, that under the Securities Act the holders thereof may then offer and
sell any amount of such outstanding securities to the public in the United
States without restrictions in transactions that are not brokers' transactions
(as defined in the Securities Act) either (i) pursuant to an effective
registration statement then in effect or (ii) pursuant to Rule 144(k). For
purposes of determining whether such securities are Freely Tradable, it shall be
assumed that no person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Company has ever held such securities from and after their issuance.

     "Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, as applied from time to
time by the Company and its Subsidiaries in the preparation of its financial
statements.

     "Guaranty" means all obligations of any Person (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation, of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including without
limitation all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or obligation or
any Property or assets constituting security therefor, or (ii) to advance or
supply funds (1) for the purchase or payment of such Indebtedness or obligation,
or (2) to enable the recipient of such funds to maintain certain financial
conditions (e.g. agreed amount of working capital) under loan or similar
documents, or (iii) to lease Property or to purchase securities or other
Property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under these Terms and
Conditions, a Guaranty in respect of any Indebtedness shall be deemed to be
Indebtedness equal to the principal amount and accrued interest of such
Indebtedness which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.

     "Holder or Noteholder" means a Person in whose name a Note is registered in
the Note Register.

     "Indebtedness" of any Person means and includes all present and future
obligations of such Person, which shall include all obligations (i) which in
accordance with generally accepted accounting principles in the United States
shall be classified upon a balance sheet of such Person as liabilities of such
Person, (ii) for borrowed money, (iii) which have been incurred in connection
with the

                                                                              20

<PAGE>

acquisition of Property (including, without limitation, all obligations of such
Person evidenced by any debenture, bond, note, commercial paper or other similar
security, but excluding, in any case, obligations arising from the endorsement
in the ordinary course of business of negotiable instruments for deposit or
collection), (iv) secured by any Lien existing on Property owned by such Person,
even though such Person has not assumed or become liable for the payment of such
obligations, (v) created or arising under any conditional sale or other title
retention agreement with respect to Property acquired by such Person,
notwithstanding the fact that the rights and remedies of the seller, lender or
lessor under such agreement in the event of default are limited to repossession
or sale of such Property, (vi) which are Capitalized Lease Obligations, (vii)
for all Guaranties, whether or not reflected in the balance sheet of such Person
and (viii) which are all reimbursement and other payment obligations (whether
contingent, matured or otherwise) of such Person in respect of any acceptance or
documentary credit. Notwithstanding the foregoing, Indebtedness shall not
include (i) Indebtedness incidental to the operation of the business of the
Person in the ordinary course and in the aggregate not material to the business
and operations of the Person, (ii) Indebtedness for which the Company or any of
its Subsidiaries are the sole obligors and obligees, and (iii) Indebtedness
represented by purchase, rental or lease obligations not to exceed $1,000,000 in
any period of 12 months for any Person and its Subsidiaries.

     "Issue Date" means the date of the initial issuance of the Note.

     "Lien" means any mortgage, charge, pledge, lien, security interest or
encumbrance of any kind whatsoever, including any interest in Property securing
an obligation owed to, or a claim by, a Person other than the owner of the
Property, whether such interest is based on the common law, statute or contract,
and including but not limited to the security interest lien arising from a
mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purposes of these Terms and Conditions, the Company
or its Subsidiary shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes.

     "Majority Holders" means the Holders of a majority of the principal amount
of Notes Outstanding.

     "Market Price" means the daily closing sale price of the Shares for a Stock
Exchange Business Day on a Stock Exchange. If the Common Stock is not quoted on
any Stock Exchange, then the Market Price shall be for any particular day shall
be calculated promptly at the Company's expense by a reputable investment bank
selected by the Company.

     "Maturity," when used with respect to any Note, means the date on which the
principal of such Note becomes due and payable as therein or herein provided,
whether at the Stated Maturity or the Redemption Date and whether by declaration
of acceleration, call for redemption or otherwise.

     "Note Register" means the register maintained by the Company for the
registration and transfer of the Note.

     "Note Registrar" means the registrar appointed by the Company from time to
time to act as Note Registrar.

     "Outstanding," when used with respect to Notes, means, as of the date of
determination, all Notes theretofore issued, except: (1) Notes heretofore
cancelled by the paying agent or delivered to the paying agent or Company for
cancellation; (2) Notes, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited any paying agent
(other than the Company) in trust or set aside and segregated in trust by the
Company (if the Company shall act as its own paying agent) for the Holders of
such Notes; provided that, if such Notes are to be redeemed, notice of such
redemption has been duly given or provision therefor satisfactory to the paying
agent (if appointed) has been made; (3) Notes, except to the extent provided in
Conditions 13 (B) and 13(C), with respect to which the Company has effected
defeasance and/or covenant defeasance as provided in Condition 13; and (4) Notes
which have been paid pursuant to or in

                                                                              21

<PAGE>

exchange for or in lieu of which other Notes have been issued, however, that in
determining whether the Holders of the requisite principal amount of Outstanding
Notes have taken any Act or given or made any Extraordinary Resolution, Notes
owned by the Company or any other obligor upon the Notes or any Affiliate of the
Company (other than Persons whose Affiliate relationship arises solely from
ownership of Shares) or such other obligor shall be disregarded and deemed not
to be Outstanding.

     "Paying Agent" or "paying agent" means any Person (including the Company
acting as paying agent) authorized by the Company to pay the principal of or
default interest on any Notes on behalf of the Company. Pursuant to the terms
and conditions hereof, the Company has initially appointed The Bank of New York
as the paying agent.

     "Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

     "Preferred Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued on or
after the Issue Date, and includes, without limitation, all classes and series
of preferred or preference stock.

     "Presentation Date" means the date on which a Note is presented by a
Noteholder for payment of principal or if such date is not a Business Day in
London and New York, the next date which is a Business Day in each of the
foregoing cities.

     "Property" or "Properties" means any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, and any interest therein.

     "Redemption Date," when used with respect to any Note to be redeemed, in
whole or in part, means the date fixed for such redemption by or pursuant to
these Terms and Conditions.

     "Redemption Price," when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to the terms hereof,
expressed in a number of Redemption Shares into which such Note shall be
redeemed in the event the Notes are to be redeemed for Shares and, in the event
of any other redemption, a cash amount.

     "Redemption Shares" means the Shares into which the Notes are redeemable by
the Company pursuant to Condition 7.

     "Relevant Date" means the date on which the payment first becomes due;
provided, that if the full amount of the money payable has not been received by
the Paying Agent on or before the due date, it shall mean the date on which, the
full amount of the money having been so received, notice to that effect shall
have been duly given to the Noteholders by the Company in accordance with
Condition 15.

     "Rule 144A" means Rule 144A, as amended, promulgated by the Commission
pursuant to the Securities Act.

     "Rule 144" means Rule 144, as amended, promulgated by the Commission
pursuant to the Securities Act.

     "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated from time to time by the Commission pursuant
thereto.

                                                                              22

<PAGE>

     "Shares" means the common stock, par value U.S. $0.01, of the Company (and
all other (if any) shares or stock resulting from any sub-division,
consolidation or reclassification of such shares).

     "Special Record Date" means five (5) Business Days prior to the last
Business Day of each calendar month commencing 31 October 2003.

     "Stated Maturity," when used with respect to any Indebtedness or any
installment of principal thereof, means the date specified in such Indebtedness
as the fixed date on which the principal of such Indebtedness or such
installment of principal is due and payable.

     "Stock Exchange" means any United States national or regional stock
exchange or quotation service such as NASDAQ National Market System or any
similar quotation service maintained by the National Quotation Bureau or any
successor thereto.

     "Stock Exchange Business Day" means any day (other than a Saturday or
Sunday) on which the a Stock Exchange is open for business.

     "Subordinated Obligation" means any Indebtedness of the Company outstanding
on such date which is contractually subordinate or junior in right of payment to
the Notes.

     "Subsidiary" of any Person means any Corporation of which at least a
majority of the shares of stock having by the terms thereof ordinary voting
power to elect a majority of the Board of Directors of such Corporation
(irrespective of whether or not at the time stock of any other class or classes
of such Corporation shall have or might have voting power by reason of the
happening of any contingency) is directly or indirectly owned or controlled by
the Person.

     "U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof, and
shall also include a depository receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act), as custodian with respect to any such U.S.
Government Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account of the
holder of such depository receipt, provided that (except as required by law)
such custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of principal of or interest on the U.S. Government Obligation evidenced by such
depository receipt.

                                                                              23

<PAGE>

                                   SCHEDULE A

                          Principal Amount of this Note

     The aggregate principal amount of this Note is as shown by the latest entry
made by or on behalf of the Paying Agent in the fourth column below. Reductions
in the outstanding principal amount of this Note following redemption or the
purchase and cancellation of Notes are entered in the second and third columns
below.

<TABLE>
<CAPTION>
                                                                       Outstanding          Notation made by or on
                        Reasons for change in                           principal       Behalf of the Company (other
                           The outstanding                            Amount of this                than
                         Principal amount of        Amount of      Note following such    In respect of the initial
         Date                   Note               Such change           Change               Principal amount
----------------------------------------------------------------------------------------------------------------------
<S>                     <C>                       <C>              <C>                  <C>
        , 2003             Not applicable         Not applicable                               Not applicable
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              24

<PAGE>

                                   SCHEDULE B

                                Form of Transfer

FOR VALUE RECEIVED, [ ] being the registered holder of this Note hereby
transfers to [ ] of [ ] U.S. $[ ] in principal amount of the US$1,705,000 (the
"Note") of HARKEN ENERGY CORPORATION (the "Issuer") and irrevocably requests and
authorizes the Issuer or its Note Registrar in the capacity as registrar in
relation to the Note to effect the relevant transfer by means of appropriate
entries in the register kept by it.

Dated:

By:      _______________________________
         (duly authorized)

In connection with any transfer of this Note, the undersigned confirms that
documents are being furnished to the registrar which comply with the conditions
set forth in this Note.

The registrar shall not be obligated to register this Note in the name of any
Person other than the Holder hereof unless and until the conditions to any such
registration or transfer set forth here in have been satisfied.

Note

The name of the Person by or on whose behalf this form of transfer is signed
must correspond with the name of the registered holder as it appears on the face
of this Note.

(1)  A representative of such registered holder should state the capacity in
     which he signed, e.g. executor.

(2)  The signature of the Person effecting a transfer shall conform to any list
     of duly authorized specimen signatures supplied by the registered holder or
     be certified by a recognized bank, notary public or in such other manner as
     the registrar may require.

(3)  Any transfer of the Note shall be in an amount equal to U.S.$1,000 or any
     integral multiple of U.S.$1,000 in excess thereof.

                                                                              25

<PAGE>

                                   SCHEDULE C

                    COMPANY'S NOTICE OF REDEMPTION FOR SHARES

To: [Paying Agent] [Noteholder]

     Harken Energy Corporation (the "Company") hereby irrevocably exercises the
option to redeem _______ United States dollars (U.S. $__) principal amount of
the Promissory Note Due 1 September 2003 (the "Notes") of the Company that have
not been previously redeemed and are Outstanding at the date of this notice into
shares of its Common Stock, in accordance with the Terms and Conditions,
pursuant to which the Company has issued its U.S. $1,705,000 Promissory Note,
and confirms that the Redemption Shares issuable and deliverable upon redemption
shall be issued and delivered to the Noteholder in accordance with the
instructions for registration and delivery of the Redemption Shares to each
Holder, to be provided by each Holder to the Paying Agent/Company.

     Each Note so redeemed will be redeemed for the number of Shares of Common
Stock equal to 100% of the face value of the Note divided by U.S. $___ , which
represents the average of the Market Price of the Common Stock over all the
Stock Exchange Days during August 2003.

     All terms used and not otherwise defined herein shall have the respective
meanings set forth in the Terms and Conditions.

DATE:__________________________          HARKEN ENERGY CORPORATION

                                         By:
                                            ------------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------

                                      C-1<PAGE>

                                                                   Exhibit 10.24

================================================================================

                                 PCC ENERGY INC.
                                PCC ENERGY CORP.
                             PCC LIMITED PARTNERSHIP

================================================================================

                            SHARE PURCHASE AGREEMENT

                                DECEMBER 24, 2002

BLAKE, CASSELS & GRAYDON LLP                                FREDERIC DORWART
  3500 Bankers Hall East                                      Old City Hall
   855 - 2nd Street S.W.                                  124 East Fourth Street
 Calgary, Alberta T2P 4J8                                  Tulsa, OK 74103-5010
                                                                  U.S.A.

<PAGE>

                                TABLE OF CONTENTS
                                                                            PAGE

                                    ARTICLE 1
                                 INTERPRETATION

1.1      Definitions..........................................................1
1.2      Schedules...........................................................16
1.3      References and Headings.............................................17
1.4      Singular/Plural; Derivatives........................................17
1.5      Statutory References................................................17
1.6      Conflicts...........................................................17
1.7      Accounting References...............................................18
1.8      Business Day........................................................18
1.9      Vendor's Knowledge..................................................18
1.10     Purchaser's Knowledge...............................................18
1.11     Joint and Several...................................................18

                                    ARTICLE 2
                                PURCHASE AND SALE

2.1      Purchase of Purchased Shares........................................19
2.2      Purchase Price......................................................19
2.3      Adjustments to the Purchase Price...................................19
2.4      Deposit.............................................................22
2.5      Adjustment Holdback Amount..........................................22
2.6      Interest Accrues On Amounts Owing...................................23
2.7      Withholding Tax.....................................................24
2.8      Manner of Payment...................................................26

                                    ARTICLE 3
                                     CLOSING

3.1      Place and Closing Time..............................................26
3.2      Deliveries at Closing...............................................27

                                    ARTICLE 4
                                 INTERIM PERIOD

4.1      Access..............................................................30
4.2      Maintenance of Business and PNG Assets..............................31
4.3      Certain Restrictions................................................31
4.4      Interim Operations-Maintenance of Assets............................33
4.5      Proposals for Dealings or Operations re PNG Assets..................34
4.6      Existing Authorizations for Expenditure.............................34
4.7      Insurance...........................................................35
4.8      Purchaser's or Affiliate Distribution of Securities.................35

                                      -i-

<PAGE>
                               TABLE OF CONTENTS
                                  (CONTINUED)
                                                                            PAGE

                                    ARTICLE 5
                    REPRESENTATIONS AND WARRANTIES OF PARTIES

5.1      Vendor's Representations And Warranties.............................35
5.2      Purchaser's Representations And Warranties..........................50
5.3      Survival Of Representations And Warranties..........................51
5.4      No Additional Representations Or Warranties By Vendor...............52
5.5      No Merger...........................................................53

                                    ARTICLE 6
                              CONDITIONS TO CLOSING

6.1      Conditions to the Obligations of the Purchaser to Close.............53
6.2      Conditions to Obligations of Vendor to Close........................55
6.3      Parties To Exercise Diligence With Respect To Conditions, etc.......55
6.4      Waiver Of Conditions................................................56
6.5      Failure To Satisfy Conditions.......................................56

                                    ARTICLE 7
                                   TERMINATION

7.1      Grounds for Termination.............................................56
7.2      Effect of Termination...............................................57
7.3      Entitlement to Deposit on Termination...............................57

                                    ARTICLE 8
                  INFORMATION, MATERIALS AND CONTINUING REPORTS

8.1      Access to Information...............................................58
8.2      Maintenance of Information..........................................58
8.3      Tax Returns.........................................................59
8.4      Financial Information...............................................59
8.5      Information Systems.................................................60

                                    ARTICLE 9
                          LIABILITY AND INDEMNIFICATION

9.1      Defined Terms.......................................................60
9.2      Responsibility of Vendor............................................61
9.3      Responsibility Of Purchaser.........................................61
9.4      Limit on Responsibility.............................................62
9.5      Responsibility Extends To Legal Costs and Settlements...............63
9.6      Limitations.........................................................63
9.7      Specific Performance................................................64
9.8      Letter of Credit....................................................64
9.9      Limitation on Rights or Remedies....................................65

                                      -ii-

<PAGE>
                               TABLE OF CONTENTS
                                  (CONTINUED)
                                                                            PAGE

9.10     Procedure - Indemnities.............................................65
9.11     No Merger Of Legal Responsibilities.................................66

                                   ARTICLE 10
                                 CONFIDENTIALITY

10.1     Restrictions on Disclosure of Purchaser.............................66
10.2     Restrictions on Disclosure of Vendor................................66

                                   ARTICLE 11
                                    GUARANTEE

11.1     Guarantee...........................................................67

                                   ARTICLE 12
                            MISCELLANEOUS PROVISIONS

12.1     Waiver Must Be In Writing...........................................67
12.2     No Amendment Except In Writing......................................67
12.3     Assignments Before Closing..........................................67
12.4     Service Of Notice...................................................67
12.5     Addresses For Notices...............................................68
12.6     Consultants and Advisors Bound......................................70
12.7     Parties To Discuss Press Releases...................................70
12.8     Costs and Expenses..................................................70
12.9     Further Assurances..................................................70
12.10    Governing Law; Attornment; Etc......................................70
12.11    Invalidity of Provisions............................................71
12.12    Time................................................................71
12.13    Supersedes Earlier Agreements.......................................71
12.14    Enurement...........................................................72
12.15    Counterpart Execution...............................................72

                                     -iii-

<PAGE>

                            SHARE PURCHASE AGREEMENT

        THIS SHARE PURCHASE AGREEMENT made this 24/th/ day of December, 2002.

BETWEEN:

                   PETROCORP INCORPORATED, a Texas corporation
                   ("PCI")

                                     - and -

                   PETROCORP ACQUISITION COMPANY, a Delaware
                   corporation ("PAC" and, together with PCI,
                   is hereafter called the "Vendor")

                                     - and -

                   1022694 ALBERTA LTD., an Alberta corporation
                   (the "Purchaser")

                                     - and -

                   AS TO ARTICLE 11 ONLY, ENERMARK INC., an
                   Alberta corporation (the "Guarantor")

WHEREAS:

A.      The Purchased Shares are currently owned by the Vendor;

B.      The Vendor desires to sell and the Purchaser desires to purchase and all
        of the Purchased Shares, upon and subject to the terms and conditions
        set forth in this Agreement; and

C.      The Guarantor owns all of the capital stock of the Purchaser which has
        been formed for the purpose of effecting the purchase and sale
        contemplated by this Agreement.

        NOW THEREFORE the Parties agree as follows:

                                   ARTICLE 1
                                 INTERPRETATION

1.1     DEFINITIONS

        In this Agreement, including the recitals, this Section and the
        Schedules, unless otherwise stated or the context otherwise requires:

<PAGE>

                                     - 2 -

        "Abandonment and Reclamation Obligations" means, with respect to the PNG
        Assets, all remediation and reclamation obligations of the Purchased
        Entities, including:

        (a)     the abandonment and reclamation of any Wells; and

        (b)     the closure, decommissioning and dismantling of Tangibles, and
                the restoration of the surface in respect thereto;

        all in accordance with good oil and gas field practices, and in
        compliance with Applicable Law.

        "Accounting Firm" means Ernst & Young, LLP.

        "Additional Indemnitees" has the meaning attributed to it in Section
        9.1.

        "Adjusted Working Capital" means the amount of the Current Assets of the
        Purchased Entities, as recorded on the Effective Date Working Capital
        Statement, less the aggregate of (i) the amount of the Current
        Liabilities of the Purchased Entities, as recorded on the Effective Date
        Working Capital Statement, plus (ii) the amount of the long term debt of
        the Purchased Entities as at the Effective Date, as recorded on the
        Effective Date Working Capital Statement; provided, however, that the
        Non-Recourse Notes shall not be deemed long term debt; and provided,
        further, that (A) all revenues, expenses and costs of whatever nature of
        the Purchased Entities on a consolidated basis, without duplication,
        prior to the Effective Date will be accrued in accordance with GAAP as
        of the Effective Date; (B) Adjusted Working Capital will be decreased to
        the extent Taxes applicable to the Purchased Entities for periods ending
        on or before the Effective Date are not paid by the Purchased Entities
        prior to the Closing Date; (C) Adjusted Working Capital will be
        decreased by the amount, if any, of any cash payment, liability incurred
        or benefit conferred by any of the Purchased Entities to any Affiliate
        pursuant to transactions which would be subject to a transfer price
        adjustment pursuant to Section 247(2)(c) of the Tax Act during the
        period from the Effective Date through to Closing; and (D) Adjusted
        Working Capital will be decreased by the amount of all costs (excluding
        the outstanding principal amount and accrued interest) to prepay the
        Credit Facility as at the Closing Time, including fees, breakage costs,
        penalties and lender out-of-pocket costs.

        "Adjustment Holdback Amount" means $[omitted].

        "AFE's" has the meaning provided in Section 4.6.

        "Affiliate" means, in respect of a Person, any other Person or group of
        Persons acting in concert, directly or indirectly, that controls, is
        controlled by or under common control with the first mentioned Person,
        and for the purposes of this definition "control" means the possession,
        directly or indirectly, by such Person or group of Persons acting in
        concert of the power to direct or cause the direction of the management
        and policies of the first mentioned Person, whether through the
        ownership of voting securities or otherwise.

<PAGE>

                                     - 3 -

        "Agreement" means this document, together with the Schedules attached
        hereto and made a part hereof, all as amended, supplemented or modified
        from time to time in accordance with the provisions hereof.

        "Applicable Law" means, in relation to any Person, transaction or event,
        all applicable provisions of laws, statutes, rules, regulations,
        official directives and orders of all federal, provincial, municipal and
        local governmental bodies (whether administrative, legislative,
        executive or otherwise) and final, non-appealable judgements, orders and
        decrees of all courts, arbitrators, commissions or bodies exercising
        similar functions in actions or proceedings in which the Person in
        question is a party, by which it is bound or having application to the
        transaction or event in question.

        "Arbitrator" shall have the meaning set forth in Section 2.3(g).

        "Assumption of Liabilities Agreement" means a general conveyance and
        assumption of liabilities agreement to be made, in a form satisfactory
        to the Purchaser and the Vendor consistent with the terms of this
        Agreement, during the Interim Period between the Vendor and PEC.

        "Bank" means the Toronto-Dominion Bank, as Agent for the Credit
        Facility.

        "Burdens" means, collectively, the Royalty Interests, the Security
        Interests and all other encumbrances.

        "Business Day" means a day on which banks are generally open for the
        transaction of commercial business in Calgary, Alberta but does not in
        any event include a Saturday or a Sunday or a statutory holiday under
        Applicable Law.

        "Canadian Management Agreement" means a management agreement to be made
        between the Manager and 1022700 Alberta Ltd., pursuant to which the
        Manager will provide management, technical and administrative support
        services for 1022700 Alberta Ltd., all in a form and substance
        satisfactory to PCI and the Purchaser.

        "CCRA" has the meaning attributed to it in Section 2.7(b)(ii).

        "Closing" means the completion of the purchase and sale of the Purchased
        Shares as contemplated by this Agreement.

        "Closing Date" means 10:00 a.m. on the 15th day of January, 2003 or such
        other date as is mutually agreed among the Parties.

        "Closing Time" means the time that the documents or actions effecting
        the transactions comprising the Closing are delivered or taken and
        released from the terms of any escrow governing the Closing.

        "Competition Act" means the Competition Act (Canada).

<PAGE>

                                     - 4 -

        "Confidentiality Agreement" means the confidentiality agreement dated
        July 24, 2002 made between Enerplus Global Energy Management Company and
        PCI.

        "Credit Facility" means the Credit Agreement dated July 21, 2000 among
        PCI, PEC, Toronto Dominion (Texas), Inc., The Toronto Dominion Bank, TD
        Securities, Inc. and various lenders signature thereto.

        "Current Assets" means the aggregate of the book value of the current
        assets of the Purchased Entities on a consolidated basis, without
        duplication, as at the Effective Date determined in accordance with
        GAAP.

        "Current Liabilities" means the aggregate of the book value of the
        current liabilities of the Purchased Entities on a consolidated basis,
        without duplication, as at the Effective Date determined in accordance
        with GAAP.

        "Deposit" means an amount equal to $8,500,000.

        "Disclosure Schedule" means the Schedule attached as Schedule 1.2(e).

        "Dollar" or "$" means, unless otherwise provided herein, a dollar in the
        lawful money of Canada.

        "Effective Date" means 12:01 a.m. on the 1st day of October, 2002.

        "Effective Date Working Capital Statement" means an unaudited statement
        setting forth:

                (i)     the Adjusted Working Capital of the Purchased Entities
                        as at the Effective Date, prepared, except as otherwise
                        specified herein, in accordance with GAAP; and

                (ii)    the Resource Pool Adjustment Amount of the Purchased
                        Entities as at the Effective Date.

        "Encumbrance Discharge" means, with respect to a Security Interest
        affecting all or any portion of the PNG Assets or Purchased Shares, one
        or more registrable discharges executed by the holder of such Security
        Interest which results in a discharge of such Security Interest;
        provided that, to the extent of any Security Interest affecting all or a
        portion of the PNG Assets or Purchased Shares or any other assets of the
        Purchased Entities, a letter of no interest executed by the holder of
        the Security Interest wherein the holder acknowledges it has no interest
        in the PNG Assets, the Purchased Shares or such other assets shall be
        deemed to be an Encumbrance Discharge.

        "Environmental Law" means any Applicable Law respecting the protection
        of, or the control, remediation or reclamation of contamination or
        pollution of soil, air or water (including ground water).

<PAGE>

                                     - 5 -

        "Escrow Agent" means Blake, Cassels & Graydon LLP.

        "Escrow Agreement" means the escrow agreement, substantially in the form
        attached hereto as Schedule 1.2(b), dated the date hereof and made
        between the Vendor, the Purchaser and the Escrow Agent, pursuant to
        which the Escrow Agent will hold the Deposit and, if applicable,
        pursuant to Section 2.7, the Withheld Amount.

        "Financial Impact" means any transaction, matter or thing which affects
        or would affect revenue, expenses, liabilities or income of a Purchased
        Entity.

        "Financial Information" has the meaning provided in Section 8.4.

        "Financial Statements" means, collectively (i) the consolidated audited
        balance sheet of PCI as at December 31, 2001 and related consolidated
        income statement and consolidated statement of cash flow for the fiscal
        year then ended and (ii) the unaudited balance sheets of each Purchased
        Corporation as at December 31, 2001 and as at September 30, 2002 and
        related income statements for the twelve and nine months then ended,
        respectively, all prepared in accordance with GAAP (except, with respect
        to the unaudited statements, such statements omit footnotes and year-end
        adjustments), a copy of which is attached as Schedule 1.2(b).

        "Futures Transaction" means any derivatives or futures transaction
        (including an agreement with respect thereto), including any transaction
        commonly referred to as a hedge transaction, rate swap transaction,
        basis swap, forward rate transaction, commodity swap, commodity option,
        equity or equity index swap, equity or equity index option, bond option,
        interest rate option, foreign exchange transaction, cap transaction,
        floor transaction, collar transaction, currency swap transaction,
        cross-currency rate swap transaction, currency option or any other
        similar transaction (including any option with respect to any of these
        transactions) or any combination of these transactions.

        "GAAP" or "generally accepted accounting principles" means accounting
        principles generally accepted at the date of the Financial Statements in
        the United States of America which are applicable on the relevant date.

        "Guarantor" has the meaning first provided above.

        "Holdback Agreement" means the Holdback Agreement dated as of the
        Closing Date, pursuant to which the Escrow Agent will hold the
        Adjustment Holdback Amount, substantially in the form of Schedule
        1.2(d).

        "include" and "including" mean "include, without limitation" and
        "including, without limitation", respectively.

        "Indemnified Losses" has the meaning attributed to it in Section 9.1.

        "Interim Period" means the period from and after the Signing Date to and
        including the Closing Date.

<PAGE>

                                     - 6 -

        "Land Schedule" means Schedule 1.2(a), as amended by the Parties at
        anytime prior to Closing.

        "Lands" means, collectively, the lands set forth and described in the
        Land Schedule including the Petroleum Substances within, upon or under
        such lands (subject to the restrictions and exclusions set forth in the
        Leases as to the Petroleum Substances and geological formations), but
        does not include Surface Rights.

        "LC Amount" means $[omitted].

        "LC Claim Period" means the period ending on the day which is 2 years
        after the Closing Date.

        "Leases" means, collectively, the leases, licences, permits and other
        documents of title set forth and described in the Land Schedule, by
        virtue of which the holder thereof is entitled to drill for, win, take,
        own or remove the Petroleum Substances within, upon or under the Lands
        or by virtue of which the holder thereof is deemed to be entitled to a
        share of Petroleum Substances removed from the Lands or any lands with
        which the Lands are pooled or unitized and includes, if applicable, all
        renewals and extensions of such documents and all documents issued in
        substitution therefor.

        "Letter of Credit" means an unconditional irrevocable letter of credit
        drawn on a chartered bank listed in the Schedule I to the Bank Act
        (Canada), in a form mutually acceptable to the Vendor and the Purchaser.

        "Letter of Intent" means the letter of intent dated November 5, 2002
        made between Enerplus Resources Fund and PCI.

        "Management Agreement" means the First Amended and Restated Management
        Agreement dated March 2, 2001 made between the Manager and PCI, pursuant
        to which the Manager has agreed to provide management, technical and
        administrative support services for PCI and its Affiliates, which
        includes the Purchased Entities.

        "Manager" means Kaiser-Francis Oil Company.

        "Material Contract" means any written agreement to which a Purchased
        Entity is a party or by which a Purchased Entity or any of the PNG
        Assets is bound or affected except for (i) the Title and Operating
        Documents, (ii) the agreements required to be disclosed on the
        Disclosure Schedule pursuant to Sections 5.1(ww) and 5.1(yy), and (iii)
        any agreement which involves or may reasonably be expected to involve
        the payment to or by a Purchased Entity from and after the Effective
        Date of less than $100,000 over the term of the agreement and is not
        otherwise material to a Purchased Entity.

        "Miscellaneous Interests" means all of the right, title, interest and
        estate of the Purchased Entities in and to all property, rights and
        assets, whether contingent or absolute, legal or beneficial, present or
        future, vested or not, and not being Petroleum and

<PAGE>

                                     - 7 -

        Natural Gas Rights or Tangibles, which pertain to such Petroleum and
        Natural Gas Rights or Tangibles, including the following property,
        rights and assets:

                (i)     contracts, agreements and documents (including Title and
                        Operating Documents) relating to any of such Petroleum
                        and Natural Gas Rights, Tangibles or items listed in
                        items (ii) to (vi) of this definition or any rights in
                        relation thereto;

                (ii)    Surface Rights which are used or useful in connection
                        with any of such Petroleum and Natural Gas Rights or
                        Tangibles;

                (iii)   permits, licences, authorizations and deposits relating
                        to any of such Petroleum and Natural Gas Rights or
                        Tangibles, or the use thereof;

                (iv)    all well bores located on the Lands or lands pooled or
                        unitized therewith which may be used to produce
                        Petroleum Substances from the Lands or lands pooled or
                        unitized therewith or otherwise serve such lands;

                (v)     all subsisting disposal and injection leases relating to
                        any of such Petroleum and Natural Gas Rights;

                (vi)    books, maps, records, documents, seismic, geological,
                        production, engineering, geophysical, data processing,
                        well, plant and other reports, files, data,
                        interpretations, information, tapes, disks, computer
                        programs, papers or other records and any archive
                        samples including core and liquid samples and cuttings,
                        other than Proprietary Information, which relate to or
                        are necessary or useful in connection with any of such
                        Petroleum and Natural Gas Rights or Tangibles or any of
                        the property or assets referred to in (i) to (iv) of
                        this definition;

                (vii)   all extensions, renewals, replacements or amendments of
                        the foregoing items described in items (i) to (vi) of
                        this definition; and

                (viii)  all Petroleum Substances in the course of production
                        from the Lands but not at the Effective Date beyond the
                        point of delivery to a buyer thereof.

        "Non-PNG Related Environmental Damage" means any one or more of:

                (i)     ground water, surface water or aquifer contamination;

                (ii)    soil contamination, including contamination in any way
                        relating to the presence or disposal of waste materials
                        of any nature whatsoever;

                (iii)   corrosion or deterioration of tangibles;

                (iv)    substance or energy emissions which are either toxic or
                        hazardous;

<PAGE>

                                     - 8 -

                (v)     death or injury to plant, animals or human beings due in
                        whole or in part to any of the foregoing items (i)
                        through (iv);

        but does not include PNG Related Environmental Damage.

        "Non-PNG Related Environmental Liabilities" means all costs, claims,
        actions, suits, fines, penalties or other liabilities of any nature
        whatsoever (whether accrued, contingent, absolute, now existing or
        arising at any time in the future and whether or not determined or
        determinable), which are attributable to Non-PNG Related Environmental
        Damage that occurred or arose prior to the Closing Date for which PEC or
        any of its predecessors or subsidiaries of predecessors are now or
        hereafter liable or otherwise responsible for.

        "Non-Recourse Notes" means those notes issued August 9, 1994 by PEI upon
        conversion of preferred shares of PEI pursuant to a Purchase Agreement
        dated July 22, 1994 between PEI, AT2 Corp., MS2 Corp., MH2 Corp., KK2
        Corp., DA2 Corp., G2 Corp., H2 Corp., NX2 Corp., Howard Hughes Medical
        Institute and UBS Asset Management (New York) Inc., a copy of which are
        attached at Schedule 1.2(h).

        "Notice of Claim" has the meaning attributed to it in Section 9.1.

        "Objection Date" shall have the meaning attributed to it in Section
        2.3(e).

        "Outside Date" means 10:00 a.m. on January 31, 2003, or such later date
        as the Vendor and the Purchaser may agree in writing or may be expressly
        provided for herein.

        "PAC" has the meaning first provided above.

        "PAC Compliance Certificate" has the meaning attributed to it in Section
        2.7(a)(i).

        "PAC Share Consideration" has the meaning provided in Section 2.2.

        "PAC Shares" means 14,329,948.83 Shares in the capital of PEC held by
        PAC.

        "PAC Tax Amount" has the meaning attributed to it in Section 2.7(b)(ii).

        "PAC Withheld Amount" has the meaning attributed to it in Section
        2.7(b).

        "Parties" means PCI, PAC, the Purchaser and the Guarantor and "Party"
        means one of them.

        "PCC Limited Partnership" means PCC Limited Partnership, a limited
        partnership organized under the laws of Alberta.

        "PCI" has the meaning first provided above.

        "PCI Compliance Certificate" has the meaning attributed to it in Section
        2.7(a)(ii).

<PAGE>

                                     - 9 -

        "PCI Share Consideration" has the meaning provided in Section 2.2.

        "PCI Shares" means:

                (i)     18,962,366 Shares in the capital of PEC held by PCI; and

                (ii)    868.08 Shares in the capital of PEI held by PCI.

        "PCI Tax Amount" has the meaning attributed to it in Section 2.7(c)(ii).

        "PCI Withheld Amount" has the meaning attributed to it in Section
        2.7(c).

        "PEC" means PCC Energy Corp., a corporation organized under the laws of
        Alberta.

        "PEC Contribution Agreement" means a contribution and assumption
        agreement dated December 20, 2002 between PEC and PEI and PEC, carrying
        on business under the name PCC Limited Partnership.

        "PEC Price" means:

                (i)     $74,525,400; or

                (ii)    if Closing occurs after December 31, 2002, $75,022,236;

        being the aggregate amount payable by the Purchaser to the Vendor as
        consideration for the issued and outstanding shares of PEC pursuant to
        Section 2.2, as modified by the adjustments provided for herein.

        "PEI" means PCC Energy Inc., a corporation organized under the laws of
        Alberta.

        "PEI" Contribution Agreement" means a contribution and assumption
        agreement dated December 20, 2002 between PEI and PEC and PEI, carrying
        on business under the name PCC Limited Partnership.

        "PEI Price" means:

                (i)     $91,974,600; or

                (ii)    if Closing occurs after December 31, 2002, $92,587,764;

        being the aggregate amount payable by the Purchase to the Vendor in
        consideration for the issued and outstanding shares of PEI pursuant to
        Section 2.2, as modified by the adjustments provided for herein.

        "Permitted Defects" means Abandonment and Reclamation Obligations which
        (i) under Applicable Law, as of the Closing Date, are not yet required
        to be undertaken, and (ii) apply to any of the Wells.

<PAGE>

                                     - 10 -

        "Permitted Encumbrances" means:

                (i)     easements, rights of way, servitudes or other similar
                        Surface Rights, including, without limitation, rights of
                        way and servitudes for highways, railways, sewers,
                        drains, gas and oil pipelines, gas and water mains,
                        electric light, power, telephone or cable television
                        conduits, poles, wires or cables;

                (ii)    the right reserved to or vested in any government,
                        municipality or other public authority by the term of
                        any Title and Operating Document or by Applicable Law to
                        terminate any Title and Operating Document or to require
                        annual or other periodic payments as a condition of the
                        continuance thereof;

                (iii)   rights of general application reserved to or vested in
                        any governmental authority to levy Taxes or other levies
                        on Petroleum Substances or the income or revenue
                        therefrom and governmental requirements pertaining to
                        production rates from wells on the Lands or operations
                        being conducted on the Lands or otherwise affecting the
                        value of any property;

                (iv)    any rights reserved to or vested in any municipality or
                        governmental, statutory or public authority to control
                        or regulate any of the PNG Assets in any manner;

                (v)     Title Defects arising out of a request by the Purchaser
                        for a Purchased Entity to not consent under Section 4.5;

                (vi)    the terms and conditions of the Title and Operating
                        Documents, provided such do not create Burdens not
                        disclosed in the Land Schedule or which would not be a
                        Permitted Encumbrance pursuant to any other item of this
                        definition;

                (vii)   undetermined or inchoate liens incurred or created in
                        the ordinary course of business as security in favour of
                        any Person for the Purchased Entities' proportionate
                        share of the costs and expenses applicable to the
                        development or operation of any of the PNG Assets which
                        are not due or delinquent or are being contested in good
                        faith;

                (viii)  the reservations, limitations, provisos and conditions
                        in any grants or transfers from the Crown of any of the
                        Lands or interests therein, and statutory exceptions to
                        title;

                (ix)    provisions for penalties and forfeitures under
                        agreements as a consequence of non-participation in
                        operations;

<PAGE>

                                     - 11 -

                (x)     liens granted in the ordinary course of business to a
                        public utility, municipality or governmental authority
                        with respect to operations pertaining to any of the PNG
                        Assets;

                (xi)    agreements and plans relating to pooling or unitization;

                (xii)   builder's, mechanic's, materialmen's and similar liens
                        in respect of services rendered or goods supplied for
                        which payment is not at the time due or, if due, are (A)
                        being contested in good faith and (B) set forth on the
                        Disclosure Schedule; and

                (xiii)  the Burdens, reduction or conversion or alteration of
                        interests and adverse claims, in each case, set forth in
                        the Land Schedule and all ad valorem, property,
                        production, severance and similar taxes and assessments
                        based on or measured by the ownership of Petroleum and
                        Natural Gas Rights or the production of Petroleum
                        Substances in respect of such Petroleum and Natural Gas
                        Rights, set forth on the Land Schedule.

        "Person" includes an individual, a partnership (limited or general), a
        corporation, a trust, a joint venture, an unincorporated organization, a
        union, a government or any department or agency thereof and the heirs,
        executors, administrators or other legal representatives of an
        individual.

        "Petroleum and Natural Gas Rights" means all of the right, title, estate
        and interest, whether absolute or contingent, legal or beneficial,
        present or future, vested or not, and whether or not an "interest in
        land", held by the Purchased Entities in or to any of the following, by
        whatever name the same are known:

                (i)     rights to explore for, drill for, extract, win, produce,
                        take, save or market Petroleum Substances;

                (ii)    rights to a share of the production of Petroleum
                        Substances;

                (iii)   rights to a share of the proceeds of, or to receive
                        payment calculated by reference to, the quantity or
                        value of the production of Petroleum Substances;

                (iv)    the interests set forth in the Land Schedule hereto in
                        and to and in respect of the Leases and the Lands
                        subject to the Permitted Encumbrances;

                (v)     rights to acquire any of the rights described in
                        subparagraphs (i) to (iv) of this definition; and

                (vi)    interests in any rights described in subparagraphs (i)
                        to (v) of this definition;

<PAGE>

                                     - 12 -

        including all interests and rights known as working interests, royalty
        interests, overriding royalty interests, gross overriding royalty
        interests, production payments, profits interests, net profits
        interests, revenue interests, net revenue interests, economic interests
        and other interests, fractional or undivided interests in any of the
        foregoing, and all fee simple, leasehold or other interests in any
        Lands.

        "Petroleum Substances" means petroleum, crude bitumen, natural gas,
        natural gas liquids, related hydrocarbons and any and all other
        substances, whether liquid, solid or gaseous (other than coal), whether
        hydrocarbon or not, produced or producible in association with any of
        the foregoing, including hydrogen sulphide and sulphur.

        "Place of Closing" means the offices of the Purchaser's Counsel located
        at 3500 Bankers Hall East, 855 - 2nd Street S.W., Calgary, Alberta, or
        such other place as may be agreed upon in writing by the Vendor and the
        Purchaser.

        "PNG Assets" means the Petroleum and Natural Gas Rights, the Tangibles
        and the Miscellaneous Interests.

        "PNG Related Environmental Damage" means, as it relates to Canadian
        petroleum and natural gas exploration, development and production
        operations, any one or more of:

                (i)     ground water, surface water or aquifer contamination;

                (ii)    soil contamination;

                (iii)   corrosion or deterioration of Tangibles;

                (iv)    substance or energy emissions which are either toxic or
                        hazardous;

                (v)     death or injury to plan, animals or human beings due in
                        whole or in part to any of the foregoing items (i)
                        through (iv);

        but only to the extent the foregoing is or has been in breach of or
        exceeds limitations imposed by Environmental Law and shall not include
        (1) Abandonment or Reclamation Obligations and (2) Non-PNG Related
        Environmental Damage.

        "Prime Rate" means the annual rate of interest designated by the main
        branch in Calgary of the Toronto Dominion Bank as its reference rate for
        Canadian dollar commercial loans made in Canada and which is announced
        by such bank as its prime rate.

        "Proposal" has the meaning attributed to it in Section 4.5.

        "Proprietary Information" means any evaluations of the Purchased
        Entities or its respective business, assets or properties, prepared by
        PCI, PAC, the Purchased Entities or any of their Affiliates, or any of
        their respective consultants, agents or advisors.

<PAGE>

                                     - 13 -

        "Purchase Agreement Default" means any material breach of a
        representation or warranty made by a Party, or the failure of a Party to
        perform or observe in any material respect any of the covenants or
        agreements to be performed by such Party under this Agreement or any
        agreement or other certificate or instrument delivered in connection
        herewith, and includes the obligations set forth in Section 6.3.

        "Purchased Corporations" means PEI and PEC, and "Purchased Corporation"
        means one of them.

        "Purchased Entities" means each Purchased Corporation and the PCC
        Limited Partnership and "Purchased Entity" means one of them.

        "Purchase Price" means, collectively, the PEC Price and the PEI Price.

        "Purchased Shares" means, collectively, the PCI Shares and the PAC
        Shares.

        "Purchaser" has the meaning first provided above.

        "Purchaser's Counsel" means Blake, Cassels & Graydon LLP.

        "Remittance Date" has the meaning attributed to it in Section 2.7(b)(i).

        "Resource Pool Adjustment Amount" shall have the meaning attributed to
        it in Section 2.3(b).

        "Resource Pools" means, collectively, in respect of any Person, the:

                (i)     cumulative Canadian exploration expense;

                (ii)    cumulative Canadian development expense;

                (iii)   cumulative Canadian oil and gas property expense;

                (iv)    undepreciated capital cost; and

                (v)     non-capital loss carry forward;

        as such terms are defined in the Tax Act, of such Person.

        "Royalty Interests" means all carried profits, net profits, net revenue,
        royalty interests (including ad valorem, property, production, severance
        and similar taxes and assessments based on or measured by the ownership
        of Petroleum and Natural Gas Rights or the production of Petroleum
        Substances in respect of such Petroleum and Natural Gas Rights) and
        similar Petroleum and Natural Gas Rights reserved or payable (by way of
        a share in production of Petroleum Substances or by way of money) to any
        Person or entity.

<PAGE>

                                     - 14 -

        "Security Interest" means any mortgage, charge, pledge, lien, hypothec,
        assignment by way of or in effect as security, or security interest
        whatsoever, but does not include a right of set-off or a set-off.

        "Share Rights" means any instruments or contractual rights capable of
        being converted into, exchanged for or exercised for Shares of any class
        of a Person or giving the holder the right on the occurrence of any
        events, including on the payment of money, whether such events have
        occurred or not, to require delivery by a Person of Shares of any class
        of a Person and includes options, warrants, conversion or exchange
        privileges and similar rights.

        "Shareholder Debt" means any indebtedness owed by a Purchased Entity to
        PCI or PAC, or any Affiliate of PCI or PAC.

        "Shares" means any shares of any class of a corporation or body
        corporate.

        "Signing Date" means the date of this Agreement.

        "Subsidiary" when used in relation to any Person, means any Affiliate
        controlled, directly or indirectly, by that Person.

        "Surface Rights" means rights (whether fee simple or pursuant to orders,
        licences, leases, easements, rights-of-way or otherwise) to enter upon,
        use and occupy the surface of any Lands, any lands with which the same
        have been pooled or unitized, any lands upon which the Tangibles are
        located or any lands used to gain access thereto.

        "Survival Period" has the meaning attributed to it in Section 9.1.

        "Take or Pay Delivery Obligations" means the obligation of the Purchased
        Entities arising under or pursuant to any contract whereby Petroleum
        Substances attributable to the Petroleum and Natural Gas Rights or any
        of them may be sold for or in respect of payments or credits previously
        received by the Purchased Entities, their predecessors or others in
        respect of Petroleum Substances, the delivery of which had not been
        taken by the buyer thereof at the time of the payment or crediting,
        whether or not:

                (i)     a Purchased Entity is party to such contract;

                (ii)    the buyer of such Petroleum Substances recognizes a
                        Purchased Entity as a seller or has recourse to a
                        Purchased Entity; or

                (iii)   the payment, credit or assumption was made to or by a
                        Purchased Entity or was remitted by a Purchased Entity
                        to any other Person.

        "Take or Pay Payments" means, as at a particular time, the amounts
        received or receivable by and for the account of a Purchased Entity
        prior to such time as a result of which the Purchased Entity has Take or
        Pay Delivery Obligations which, as at such time, have not been satisfied
        and have not expired.

<PAGE>

                                     - 15 -

        "Tangibles" means all right, title, estate and interest, whether
        absolute or contingent, legal or beneficial, present or future, vested
        or not, held by the Purchased Entities in and to any tangible property,
        apparatus, plant, equipment, machinery and facilities, fixed or
        non-fixed, real or personal, used or capable of use in exploiting any
        Petroleum Substances (whether the Petroleum and Natural Gas Rights to
        which such Petroleum Substances are attributable are owned by the
        Purchased Entities or by others or both), including:

                (i)     systems, plants and facilities used or useful in
                        producing, gathering, compressing, dehydrating,
                        scrubbing, processing, treating, separating, extracting,
                        collecting, refrigerating, refining, measuring, storing,
                        transporting or shipping Petroleum Substances;

                (ii)    tangible property and assets used or intended for use in
                        exploring for, producing, storing, injecting or removing
                        Petroleum Substances;

                (iii)   all extensions, additions and accretions to any item
                        described in subparagraphs (i) and (ii) of this
                        definition; and

                (iv)    the Wells;

        and including all producing, shut-in, injection, disposal and other
        wells, casing, tubing, wellheads, buildings, plants, erections,
        production equipment, improvements, flowlines, pipelines, pipeline
        connections, extraction facilities, meters, generators, motors,
        compressors, separators, gas treating and processing equipment,
        dehydrators, scrubbers, pumps, refineries, pump jacks, tanks, boilers,
        communications equipment, enhanced recovery systems and other machinery,
        apparatus and equipment.

        "Tax" means all income, capital, gross receipts, sales, excise,
        petroleum and gas revenue, value added, goods and services, use,
        franchise, profits or property taxes, fees, assessments or charges
        imposed in accordance with Applicable Law and includes penalties,
        interest and fines with respect thereto.

        "Tax Act" mean the Income Tax Act (Canada).

        "Tax Returns" means all returns, declarations and reports and
        information returns and statements required to be filed (taking into
        account any extension of time to file or send granted to or obtained by
        any such filing entity) by a Purchased Entity on or prior to the Closing
        Date by or with respect to it in respect of any Tax for any period
        including or ending on or before the Closing Date.

        "Title and Operating Documents" means, in respect of any Petroleum and
        Natural Gas Rights, Tangibles, Surface Rights or Petroleum Substances of
        the Purchased Entities:

                (i)     all of the agreements, contracts, instruments and other
                        documents (including the Leases and all other leases,
                        reservations, permits, licences

<PAGE>

                                     - 16 -

                        of all sorts, exploration agreements, operating
                        agreements, unit agreements, pooling agreements,
                        assignments, trust declarations or other agreements to
                        recognize the Purchased Entities' interests,
                        participation agreements, farmin or farmout agreements,
                        royalty agreements, purchase agreements and transfers,
                        (A) gas, oil, condensate and other production sale
                        contracts, (B) gathering, common stream, extraction,
                        transportation, refining and processing agreements, (C)
                        agreements for the construction, ownership and/or
                        operation of Tangibles) by virtue of which such
                        Petroleum and Natural Gas Rights or Tangibles were
                        acquired or constructed or are held by a Purchased
                        Entity or pursuant to which the construction, ownership,
                        operation, exploration, exploitation, extraction,
                        development, production, transportation, refining or
                        marketing of such Petroleum and Natural Gas Rights,
                        Tangibles or Petroleum Substances are subject or which
                        grant rights which are or may be used by the Person in
                        connection therewith; and

                (ii)    the rights of the Purchased Entities (except for
                        Petroleum and Natural Gas Rights) granted under or
                        created by such agreements, contracts, instruments and
                        other documents.

        "Title Defect" means a defect, deficiency or discrepancy in the title of
        a Purchased Entity in and to any of the PNG Assets which would not be
        acceptable to a prudent purchaser of the Purchased Shares, acting
        reasonably, and which materially adversely affects the title of a
        Purchased Entity in and to any of the Petroleum and Natural Gas Rights.

        "Vendor" has the meaning first provided above.

        "Vendor's Counsel" means Frederic Dorwart, Lawyers.

        "Wells" means all producing, suspended, shut-in, abandoned, water source
        disposal or injection wells located on the Lands or any lands pooled or
        unitized therewith, including the wells listed in the Land Schedule.

        "Withheld Amount" means, collectively, the PCI Withheld Amount, if any,
        and the PAC Withheld Amount, if any.

1.2     SCHEDULES

        The following Schedules are attached hereto and made part of this
        Agreement:

<TABLE>
        <S>    <C>                         <C>
        (a)    Schedule 1.2(a)            Land Schedule
        (b)    Schedule 1.2(b)            Financial Statements
        (c)    Schedule 1.2(c)            Escrow Agreement
        (d)    Schedule 1.2(d)            Holdback Agreement
        (e)    Schedule 1.2(e)            Disclosure Schedule
</TABLE>

<PAGE>

                                     - 17 -

<TABLE>
        <S>    <C>                         <C>
        (f)    Schedule 1.2(f)             Form of Officer's Certificate of the Vendor
        (g)    Schedule 1.2(g)             Form of Officer's Certificate of the Purchaser
        (h)    Schedule 1.2(h)             Non-Recourse Notes
        (i)    Schedule 3.2(a)(xviii)(A)   Form of Release
        (j)    Schedule 3.2(a)(xviii)(B)   Form of Release
        (k)    Schedule 3.2(a)(xix)        Form of Management Agreement Release
        (l)    Schedule 4.6                Authorizations for Expenditure
        (m)    Schedule 4.8                Securities Disclosure
</TABLE>

1.3     REFERENCES AND HEADINGS

        The references "hereunder", "herein" and "hereof" refer to the
        provisions of this Agreement, and references to Articles and Sections
        herein refer to articles, sections, or subsections of this Agreement.
        Any reference to time shall refer to Mountain Standard Time or Mountain
        Daylight Saving Time during the respective intervals in which each is in
        force in the Province of Alberta. The headings of the Articles,
        Sections, Schedules and any other headings, captions or indices herein
        are inserted for convenience of reference only and shall not be used in
        any way in construing or interpreting any provision hereof.

1.4     SINGULAR/PLURAL; DERIVATIVES

        Whenever the singular or masculine or neuter is used in this Agreement
        or in the Schedules, it shall be interpreted as meaning the plural or
        feminine or body politic or corporate, and vice versa, as the context
        requires. Where a term is defined herein, a capitalized derivative of
        such term shall have a corresponding meaning unless the context
        otherwise requires.

1.5     STATUTORY REFERENCES

        Any reference to a statute shall include and shall be deemed to be a
        reference to such statute and to the regulations made pursuant thereto,
        and all amendments made thereto and enforced from time to time, and to
        any statute or regulation that may be passed which has the effect of
        supplementing the statute so referred to or the regulations made
        pursuant thereto.

1.6     CONFLICTS

        If there is any conflict or inconsistency between a provision of the
        body of this Agreement and that of a Schedule the provision of the body
        of this Agreement shall prevail.

1.7     ACCOUNTING REFERENCES

        Where the character or amount of any asset or liability or item of
        income or expense is required to be determined, or any consolidation or
        other accounting computation is required to be made for the purposes of
        this Agreement, the same shall be done in

<PAGE>

                                     - 18 -

        accordance with GAAP except where the application of such principles is
        inconsistent with, or limited by, the terms of this Agreement in which
        case the terms of this Agreement shall apply.

1.8     BUSINESS DAY

        Whenever any payment to be made or action to be taken under this
        Agreement is required to be made or taken on a day other than a Business
        Day, such payment shall be made or action taken or the next Business Day
        following.

1.9     VENDOR'S KNOWLEDGE

        Where in this Agreement, or in any certificate or document delivered in
        connection herewith or to effect any of the transactions contemplated
        hereby, any statement, representation or warranty is made as to, or as
        being based on, the awareness, knowledge, information or belief of the
        Vendor, such awareness, knowledge, information or belief, as applicable,
        is limited to the actual knowledge, after due inquiry, of: (a) any
        director or officer of PCI, PAC, the Purchased Corporations and the PCC
        Limited Partnership, and (b) the officers and directors of the Manager
        who are responsible for the supervision of the subject matter of such
        statement, representation and warranty.

1.10    PURCHASER'S KNOWLEDGE

        Where in this Agreement, or in any certificate or document delivered in
        connection herewith or to effect any of the transactions contemplated
        hereby, any statement, representation or warranty is made as to, or as
        being based on, the awareness, knowledge, information or belief of the
        Purchaser, such awareness, knowledge, information or belief, as
        applicable, is limited to the actual knowledge, after due inquiry, of
        officers of the Purchaser who are responsible for the supervision of
        such statement, representation and warranty.

1.11    JOINT AND SEVERAL

        The obligations and liabilities of PCI and PAC pursuant to this
        Agreement and any agreement or document delivered under or pursuant to
        this Agreement are joint and several.

                                   ARTICLE 2
                                PURCHASE AND SALE

2.1     PURCHASE OF PURCHASED SHARES

        The Purchaser agrees to purchase the Purchased Shares from the Vendor
        and the Vendor agrees to sell the Purchased Shares to the Purchaser at
        the Closing, all in accordance with and subject to the terms and
        conditions in this Agreement.

<PAGE>

                                     - 19 -

2.2     PURCHASE PRICE

        In consideration of the sale by the Vendor to the Purchaser of the
        Purchased Shares, the Purchaser agrees, at the Closing, to pay to PCI
        (on behalf of the Vendor) the Purchase Price, less the Deposit, plus
        accrued interest thereon, paid by the Purchaser pursuant to Section 2.4,
        which shall be adjusted:

        (a)     at Closing, on an interim basis in the manner set forth in
                Sections 2.3(a), 2.3(b) and 2.3(d)(i); and

        (b)     after Closing, in the manner set forth in Section 2.3(c) and the
                other remaining provisions of Section 2.3.

        The Purchase Price shall additionally include simple interest on the
        amount of Purchase Price (less the Deposit) plus or minus the
        adjustments pursuant to Section 2.3, at a rate equal to the Prime Rate
        minus 2%, which interest shall accrue from and including the Effective
        Date until the Closing Date. The Purchase Price shall be allocated for
        all purposes as follows: (i) to the PCI Shares, an amount equal to
        91.2514% of such amount (the "PCI Share Consideration"); and (ii) to the
        PAC Shares, an amount equal to 8.7486% of such amount (the "PAC Share
        Consideration").

2.3     ADJUSTMENTS TO THE PURCHASE PRICE

        (a)     Calculation of Adjustment at Closing: The Purchase Price shall
                be increased or decreased on a dollar for dollar basis by the
                amount by which the Adjusted Working Capital as of the Effective
                Date is greater or less than "nil". If the Adjusted Working
                Capital:

                (i)     exceeds "nil", the Purchase Price shall be increased by
                        the amount of such excess; or

                (ii)    is less than "nil", the Purchase Price shall be
                        decreased by the amount of such shortfall.

        (b)     Calculation of Tax Pool Adjustment at Closing: The Purchase
                Price shall, without duplicating any adjustments calculated
                pursuant to Section 2.3(a), be decreased by an amount equal to
                $0.10 for every $1.00 by which the aggregate Resource Pools of
                the Purchased Entities is exceeded by $42,645,000 as at the
                Effective Date (the "Resource Pool Adjustment Amount"). If the
                Resource Pool Adjustment Amount is negative, the Purchase Price
                shall be decreased by such amount.

        (c)     Calculation of Adjustment after Closing: The adjustments to the
                Purchase Price as provided in Sections 2.3(a) and 2.3(b) shall
                be calculated and paid on the Closing Date based on the
                Effective Date Working Capital Statement. Such adjustments to
                the Purchase Price shall be recalculated and paid based on the
                final

<PAGE>

                                     - 20 -

        Effective Date Working Capital Statement as contemplated in Section
        2.3(i). Any amounts payable by the Purchaser or the Vendor, as
        applicable, based on the final Effective Date Working Capital Statement
        shall be adjusted to give credit for adjustments paid on the Closing
        Date pursuant to Sections 2.3(a) and 2.3(b).

        (d)     Effective Date Working Capital Statement:

                (i)     The Effective Date Working Capital Statement shall be
                        used by the Vendor and the Purchaser for the purposes of
                        initially determining the Adjusted Working Capital,
                        subject to the adjustments after the Closing Date in
                        accordance with the remaining provisions of this Section
                        2.3. No later than 5 days prior to the Closing Date, the
                        Vendor shall prepare and deliver to the Purchaser an
                        interim Effective Date Working Capital Statement. The
                        Vendor shall consult with the Purchaser during the
                        preparation of such statement.

                (ii)    Within 120 days after the Closing Date, the Vendor shall
                        prepare and deliver to the Purchaser a final Effective
                        Date Working Capital Statement. The Purchaser shall
                        provide, or cause to be provided, to the Vendor and its
                        agents full access to the relevant records of the
                        Purchased Entities to aid in the preparation of such
                        Statement. The Vendor shall provide to the Purchaser the
                        right to review the Effective Date Working Capital
                        Statement and full access to the working papers of the
                        Vendor to aid in such review.

                (iii)   Any receipts in respect of the items listed on the
                        Disclosure Schedule received after settlement pursuant
                        to the Effective Date Working Capital Statement and
                        which relate to matters which accrued to or for the
                        benefit of a Purchased Entity prior to the Effective
                        Date shall be received by the Purchaser and the
                        Purchased Entities, as applicable, in trust for the use
                        and benefit of the Vendor and shall be promptly paid
                        over to the Vendor.

        (e)     Purchaser's Objections: If the Purchaser, acting reasonably,
                believes that any change is required to be made to the final
                Effective Date Working Capital Statement as prepared by the
                Vendor, it shall, on or before that date (the "Objection Date")
                which is 10 Business Days after the delivery of the Effective
                Date Working Capital Statement by the Vendor pursuant to Section
                2.3(d)(ii), give written notice of any such proposed change,
                including the reason for such change, to the Vendor. In the
                event that the Purchaser does not notify the Vendor of any
                proposed change on or before the Objection Date, then the
                Purchaser shall be deemed to have accepted the final Effective
                Date Working Capital Statement.

        (f)     Settlement by Accounting Firm: If the Purchaser gives written
                notice of any such proposed change on or before the Objection
                Date, and if the proposed change is disputed by the Vendor and
                the Purchaser and the Vendor fail to resolve such matter within
                10 Business Days after the Objection Date, then the Accounting

<PAGE>

                                     - 21 -

                Firm shall be engaged forthwith by the Purchaser and the Vendor
                to resolve the dispute that cannot be agreed upon and the
                Accounting Firm shall be required to render its decision without
                qualifications, other than the usual qualifications relating to
                engagements of this nature, within 14 days after the dispute is
                referred to it. If the Purchaser and the Vendor fail to so
                forthwith jointly engage the Accounting Firm, then either Party,
                on behalf of itself and the other Parties, is hereby authorized
                to so forthwith engage the Accounting Firm. The decision of the
                Accounting Firm shall be final and binding. The fees and
                expenses of the Accounting Firm shall be shared, one half to the
                Vendor and one half to the Purchaser.

        (g)     Settlement by Arbitrator: In the event that the Accounting Firm
                cannot or will not make a decision in the manner provided above,
                the Purchaser and the Vendor shall refer such matter to Ernst &
                Young, LLP (the "Arbitrator") to arbitrate the dispute as a
                single arbitrator in accordance with the Arbitration Act
                (Alberta) within 60 days after the Objection Date. If the
                Purchaser and the Vendor fail to refer such matter to the
                Arbitrator within such 60 day period, then any one Party, on
                behalf of itself and the other Parties, is hereby authorized to
                so engage the Arbitrator, or failing which, a judge of the Court
                of Queen's Bench (Calgary) shall direct the Purchaser and the
                Vendor to arbitrate this dispute in accordance herewith. The
                decision of the Arbitrator with respect to any matter in dispute
                (including as to all procedural matters) shall be final and
                binding on the Vendor and the Purchaser and shall not be subject
                to appeal by either Party. The fees and expenses of the
                Arbitrator shall be shared, one half to the Vendor and one half
                to the Purchaser.

        (h)     Amendments to Effective Date Working Capital Statement: Upon
                agreement with respect to all matters in dispute, or upon a
                decision of the Accounting Firm or the Arbitrator with respect
                to all matters in dispute, such amendments shall be made to the
                Effective Date Working Capital Statement as may be necessary to
                reflect such agreement or such decision, as the case may be. In
                such event, references in this Agreement to the Effective Date
                Working Capital Statement shall refer to the Effective Date
                Working Capital Statement, as so amended.

        (i)     Final Effective Date Working Capital Statement: Payment of any
                adjustment in the Purchase Price as a result of the final
                Effective Date Working Capital Statement shall be made by the
                Vendor to the Purchaser or by the Purchaser to the Vendor, as
                the case may be, together with interest at the rate specified in
                Section 2.5 calculated from the Closing Date to the date of
                payment, within 10 Business Days after the delivery of the
                Effective Date Working Capital Statement, pursuant to Section
                2.3(c) or 2.3(h), as applicable; provided that, in the event
                there is an objection to the Effective Date Working Capital
                Statement by the Purchaser pursuant to Section 2.3(e) which is
                resolved pursuant to Section 2.3(f) and/or Section 2.3(g), then,
                payment of the disputed portion or any part thereof, if any, of
                any adjustment in the Purchase Price shall be made by the Vendor
                to the

<PAGE>

                                     - 22 -

                Purchaser or by the Purchaser to the Vendor, as the case may be,
                together with interest at the rate specified in Section 2.6
                calculated from the Closing Date to the date of payment or
                repayment, within 5 Business Days after the disputed portion has
                been agreed upon by the Purchaser and the Vendor or determined
                by the Accounting Firm or Arbitrator as provided herein.

2.4     DEPOSIT

        Concurrent with the execution and delivery of this Agreement (i) the
        Purchaser shall pay the Deposit to the Escrow Agent, and (ii) the
        Purchaser, the Vendor and the Escrow Agent shall enter into the Escrow
        Agreement whereupon the Escrow Agent shall receive and hold the Deposit
        pursuant to the terms of the Escrow Agreement. The Escrow Agent shall
        invest the Deposit in an interest bearing trust account until Closing.
        In the event Closing does not occur, the Deposit and interest earned
        thereon shall be paid to the Party ultimately entitled to the Deposit
        pursuant to Section 7.3. If Closing occurs, the Deposit and interest
        earned thereon shall be paid to the Vendor as a partial payment of the
        Purchase Price.

2.5     ADJUSTMENT HOLDBACK AMOUNT

        (a)     The Purchaser shall retain from the Purchase Price otherwise
                payable on the Closing Date an amount equal to the Adjustment
                Holdback Amount. The Adjustment Holdback Amount shall, on the
                Closing Date, be paid by the Purchaser to the Escrow Agent
                whereupon the Escrow Agent shall receive and hold the Adjustment
                Holdback Amount pursuant to the terms of the Holdback Agreement.
                The Escrow Agent shall invest the Adjustment Holdback Amount in
                an interest bearing trust account. The Purchaser shall pay all
                costs of the Escrow Agent.

        (b)     The Adjustment Holdback Amount shall be released as follows:

                (i)     If the Purchaser does not give a written notice to the
                        Vendor on or before the Objection Date as contemplated
                        in Section 2.3(e), then the Vendor and the Purchaser
                        shall forthwith prepare, sign and deliver a joint notice
                        to the Escrow Agent directing the Escrow Agent to
                        release the Adjustment Holdback Amount, plus accrued
                        interest thereon, to the Vendor on account of the
                        Purchase Price, whereupon the Escrow Agent shall,
                        subject to Section 2.7(d), so release such amount to the
                        Vendor;

                (ii)    If the Purchaser gives a written notice to the Vendor on
                        or before the Objection Date as contemplated in Section
                        2.3(e), then:

                        (A)     the amount which is the subject of the written
                                notice and which is not more than the Adjustment
                                Holdback Amount (the "Disputed Amount") shall
                                continue to be held in trust by the Escrow Agent
                                pending the resolution of the objection pursuant
                                to Sections 2.3(f)

<PAGE>

                                     - 23 -

                                or 2.3(g). Within 5 Business Days after the
                                portion of the Disputed Amount has been agreed
                                upon by the Purchaser and the Vendor or
                                determined by the Accounting Firm or Arbitrator
                                (the "Agreed Amount"):

                                (I)     the Vendor and the Purchaser shall
                                        forthwith prepare, sign and deliver a
                                        joint notice to the Escrow Agent
                                        directing the Escrow Agent to release
                                        the Agreed Amount, plus accrued interest
                                        thereon, to the Party determined to be
                                        entitled thereto pursuant to Sections
                                        2.3(f) or 2.3(g), whereupon such amount
                                        shall, subject to Section 2.7(d), be so
                                        released; and

                                (II)    the Vendor and the Purchaser shall, if
                                        applicable, forthwith prepare, sign and
                                        deliver a joint notice to the Escrow
                                        Agent directing the Escrow Agent to
                                        release to the Vendor the amount, if
                                        any, plus accrued interest thereon, by
                                        which the Disputed Amount exceeds the
                                        Agreed Amount, whereupon such amount
                                        shall, subject to Section 2.7(d), be
                                        released to the Vendor by the Escrow
                                        Agent on account of the Purchase Price;
                                        and

                        (B)     the Vendor and the Purchaser shall forthwith
                                prepare, sign and deliver a joint notice to the
                                Escrow Agent directing the Escrow Agent to
                                release the amount, if any, plus accrued
                                interest thereon, by which the Adjustment
                                Holdback Amount exceeds the Disputed Amount,
                                whereupon such amount shall, subject to Section
                                2.7(d), be released to the Vendor by the Escrow
                                Agent on account of the Purchase Price.

                        For greater certainty, the Agreed Amount shall not
                        exceed the Disputed Amount.

2.6     INTEREST ACCRUES ON AMOUNTS OWING

        Any amount owing to a Party by the other Party pursuant to any provision
        of this Agreement after Closing and remaining unpaid shall bear interest
        calculated daily and compounded monthly, from the day such amount was
        due to be paid until the day such amount was paid, at the Prime Rate
        regardless of whether such Party has given the other Party prior notice
        of the accrual of interest hereunder.

2.7     WITHHOLDING TAX

        (a)     The Purchaser and the Vendor acknowledge that, pursuant to
                Section 116 of the Tax Act, the Purchaser must withhold and
                remit to the Receiver General the prescribed percentage of the
                amount, if any, by which:

<PAGE>

                                     - 24 -

                (i)     the PAC Share Consideration exceeds the certificate
                        limit set out in a certificate of compliance (the "PAC
                        Compliance Certificate") obtained by PAC for the
                        purposes of Section 116 of the Tax Act in respect of the
                        sale of the PAC Shares by PAC; and

                (ii)    the PCI Share Consideration exceeds the certificate
                        limit set out in a certificate of compliance (the "PCI
                        Compliance Certificate") obtained by PCI for the
                        purposes of Section 116 of the Tax Act in respect of the
                        sale of the PCI Shares by PCI.

                The applications for the PAC Compliance Certificate and the PCI
                Compliance Certificate, along with any related correspondence,
                shall be provided to and approved by the Purchaser, acting
                reasonably.

        (b)     If a PAC Compliance Certificate, in respect of the sale of the
                PAC Shares, is not delivered to the Purchaser by PAC at or prior
                to Closing, the Purchaser will pay the prescribed percentage of
                the PAC Share Consideration (the "PAC Withheld Amount") to the
                Escrow Agent, whereupon the Escrow Agent shall receive and hold
                the PAC Withheld Amount pursuant to the terms of the Escrow
                Agreement. The Escrow Agent shall invest the PAC Withheld Amount
                in an interest bearing trust account, and the PAC Withheld
                Amount shall be released by the Escrow Agent as follows:

                (i)     If a PAC Compliance Certificate in respect of the sale
                        of the PAC Shares is delivered to the Escrow Agent
                        before 12:00 p.m. on the date which is 3 Business Days
                        prior to the end of the month following the month which
                        includes the Closing Date (the "Remittance Date") and
                        the certificate limit of such PAC Compliance Certificate
                        is not less than the PAC Share Consideration, then the
                        PAC Withheld Amount shall be released to PCI (on behalf
                        of PAC) on account of the PAC Share Consideration;

                (ii)    If the Canada Customs and Revenue Agency (the "CCRA")
                        indicates that payment of an amount (the "PAC Tax
                        Amount") which is not more than the PAC Withheld Amount
                        would allow the CCRA to issue a PAC Compliance
                        Certificate meeting the criteria described in Section
                        2.7(b)(i), the Escrow Agent shall pay the PAC Tax Amount
                        to the CCRA from the PAC Withheld Amount held in trust
                        by it and, upon delivery of the relevant PAC Compliance
                        Certificate to the Escrow Agent, the amount by which the
                        PAC Withheld Amount exceeds the PAC Tax Amount shall be
                        released to PCI (on behalf of PAC) on account of the PAC
                        Share Consideration;

                (iii)   If a PAC Compliance Certificate in respect of the sale
                        of the PAC Shares is delivered to the Escrow Agent
                        before 12:00 p.m. on the Remittance Date and the
                        certificate limit of such PAC Compliance Certificate is
                        less than the PAC Share Consideration then that portion
                        of the PAC Withheld

<PAGE>

                                     - 25 -

                        Amount which is equal to 25% of the certificate limit
                        shall be released to PCI (on behalf of PAC) on account
                        of the PAC Share Consideration; and

                (iv)    Any funds held in trust on account of the PAC Withheld
                        Amount by the Escrow Agent which are not paid or payable
                        pursuant to Sections 2.7(b)(i), 2.7(b)(ii) and
                        2.7(b)(iii) by 12:00 p.m. on the Remittance Date shall
                        be remitted by the Escrow Agent to the CCRA pursuant to
                        Section 116 of the Tax Act.

                All interest earned on the PAC Withheld Amount shall be paid to
                PCI (on behalf of PAC), net of all applicable withholdings,
                which shall be remitted by the Escrow Agent to the CCRA in
                accordance with Applicable Law.

        (c)     If a PCI Compliance Certificate, in respect of the sale of the
                PCI Shares, is not delivered to the Purchaser by PCI at or prior
                to Closing, the Purchaser will pay the prescribed percentage of
                the PCI Share Consideration (the "PCI Withheld Amount") to the
                Escrow Agent, whereupon the Escrow Agent shall receive and hold
                the PCI Withheld Amount pursuant to the terms of the Escrow
                Agreement. The Escrow Agent shall invest the PCI Withheld Amount
                in an interest bearing trust account, and the PCI Withheld
                Amount shall be released by the Escrow Agent as follows:

                (i)     If a PCI Compliance Certificate in respect of the sale
                        of the PCI Shares is delivered to the Escrow Agent
                        before 12:00 p.m. on the Remittance Date and the
                        certificate limit of such PCI Compliance Certificate is
                        not less than the PCI Share Consideration, then the PCI
                        Withheld Amount shall be released to PCI on account of
                        the PCI Share Consideration;

                (ii)    If the CCRA indicates that payment of an amount (the
                        "PCI Tax Amount") which is not more than the PCI
                        Withheld Amount would allow the CCRA to issue a PCI
                        Compliance Certificate meeting the criteria described in
                        Section 2.7(c)(i), the Escrow Agent shall pay the PCI
                        Tax Amount to the CCRA from the PCI Withheld Amount held
                        in trust by it and, upon delivery of the relevant PCI
                        Compliance Certificate to the Escrow Agent, the amount
                        by which the PCI Withheld Amount exceeds the PCI Tax
                        Amount shall be released to PCI on account of the PCI
                        Share Consideration;

                (iii)   If a PCI Compliance Certificate in respect of the sale
                        of the PCI Shares is delivered to the Escrow Agent
                        before 12:00 p.m. on the Remittance Date and the
                        certificate limit of such PCI Compliance Certificate is
                        less than the PCI Share Consideration then that portion
                        of the PCI Withheld Amount which is equal to 25% of the
                        certificate limit shall be released to PCI on account of
                        the PCI Share Consideration; and

<PAGE>

                                     - 26 -

                (iv)    Any funds held in trust on account of the PCI Withheld
                        Amount by the Escrow Agent which are not paid or payable
                        pursuant to Sections 2.7(c)(i), 2.7(c)(ii) and
                        2.7(c)(iii) by 12:00 p.m. on the Remittance Date shall
                        be remitted by the Escrow Agent to the CCRA pursuant to
                        Section 116 of the Tax Act.

                All interest earned on the PCI Withheld Amount shall be paid to
                PCI, net of all applicable withholdings, which shall be remitted
                by the Escrow Agent to the CCRA in accordance with Applicable
                Law.

        (d)     To the extent any Purchase Price is, pursuant to the provisions
                hereof, payable by the Purchaser to the Vendor after Closing,
                then Purchaser and the Vendor acknowledge and agree that Section
                2.7(a), 2.7(b) and 2.7(c) (as applicable) shall apply mutatis
                mutandis in respect of such payment, except that the "Remittance
                Date", shall for the purposes of this Section 2.7(d), mean 12:00
                p.m. on the date which is 3 Business Days prior to the end of
                the month following the month which includes the date in which
                such additional Purchase Price becomes payable.

2.8     MANNER OF PAYMENT

        All payments to be made by the Vendor to the Purchaser pursuant hereto
        shall be made by certified cheque, bank draft or wire transfer in
        immediately available funds. All payments to be made by the Purchaser to
        the Vendor pursuant hereto shall be made by wire transfer in immediately
        available funds to the following account of PCI:

                      [Omitted - Confidential Information]

                                    ARTICLE 3
                                     CLOSING

3.1     PLACE AND CLOSING TIME

        Unless otherwise agreed in writing by the Parties, Closing shall take
        place at the Closing Time at the Place of Closing on the Closing Date.

3.2     DELIVERIES AT CLOSING

        (a)     Vendor Deliveries:

                At Closing, the Vendor shall deliver or shall cause to be
                delivered the following to the Purchaser:

                (i)     certificate(s) representing the Purchased Shares,
                        accompanied by stock transfer powers duly executed in
                        blank or duly executed instruments of

<PAGE>

                                     - 27 -

                        transfer, and any other documents necessary to transfer
                        to the Purchaser title to the Purchased Shares;

                (ii)    original share books, share ledgers and minute books and
                        corporate seals of the Purchased Corporations;

                (iii)   original minute books of the PCC Limited Partnership;

                (iv)    all books, records, files, reports, data and documents
                        pertaining to the Purchased Entities and in the
                        possession or control of the Purchased Entities, the
                        Vendor or the Manager, including any related to (A) the
                        PNG Assets described in items (i), (iii), (v) and (vi)
                        of the definition of Miscellaneous Interests, and (B)
                        the Title and Operating Documents, but excluding all
                        Proprietary Information;

                (v)     a certified copy of a resolution of the board of
                        directors of PCI which resolution authorizes the
                        execution and delivery of this Agreement and the
                        completion of the sale of the PCI Shares and the other
                        transactions contemplated by this Agreement;

                (vi)    a certified copy of a resolution of the board of
                        directors of PAC which resolution authorizes the
                        execution and delivery of this Agreement and the
                        completion of the sale of the PAC Shares and the other
                        transactions contemplated by this Agreement;

                (vii)   a certified copy of a resolution of the board of
                        directors of PEC authorizing the transfer of all of the
                        issued and outstanding Shares of PEC to the Purchaser as
                        contemplated by this Agreement;

                (viii)  a certified copy of a resolution of the board of
                        directors of PEI authorizing the transfer of all of the
                        issued and outstanding Shares of PEI from the Vendor to
                        the Purchaser as contemplated by this Agreement;

                (ix)    a certified copy of a resolution of the shareholders of
                        PEI authorizing the sale of all of the PNG Assets of PEI
                        to the PCC Limited Partnership pursuant to the PEI
                        Contribution Agreement;

                (x)     a certified copy of a resolution of the shareholders of
                        PEC authorizing the sale of all of the PNG Assets of PEC
                        to the PCC Limited Partnership pursuant to the PEC
                        Contribution Agreement;

                (xi)    all third Person consents required in respect of the
                        sale of the PNG Assets of PEI to the PCC Limited
                        Partnership;

                (xii)   all third Person consents required in respect of the
                        sale of all of the issued and outstanding shares of PEI
                        held by PCI to the Purchaser;

<PAGE>

                                     - 28 -

                (xiii)  original executed copies of the PEI Contribution
                        Agreement and the PEC Contribution Agreement for the
                        conveyance of all of the respective PNG Assets of PEI
                        and PEC to the PCC Limited Partnership;

                (xiv)   original executed copies of the Assumption of
                        Liabilities Agreement;

                (xv)    signed copies of all agreements and resolutions entered
                        into by the Purchased Corporations or their directors in
                        connection with the declaration of dividends payable in
                        stock and cash and the conversion of the debt of PEC
                        held by PCI and/or PAC to equity, as disclosed in the
                        Disclosure Schedule;

                (xvi)   certificates of status from appropriate authorities,
                        dated as of or about the Closing Date, as to the legal
                        existence of the Vendor and the Purchased Entities and
                        qualification to do business in the jurisdiction in
                        which each of such entities is organized;

                (xvii)  resignations of all directors and officers of each
                        Purchased Corporation;

                (xviii) a release:

                        (A)     in the form attached as Schedule
                                3.2(a)(xviii)(A), from each Purchased
                                Corporation of its directors and officers of and
                                from any indebtedness or liability owed by the
                                directors and officers of each Purchased
                                Corporation to such Purchased Corporation; and

                        (B)     in the form attached as Schedule
                                3.2(a)(xviii)(B), from each director or officer
                                of each Purchased Corporation, of and from any
                                indebtedness, liability or claim owed by such
                                Purchased Corporation to such director or
                                officer;

                (xix)   a release in respect of the Management Agreement, in the
                        form attached as Schedule 3.2(a)(xix), executed by
                        Kaiser-Francis and PCI;

                (xx)    an original copy of the Canadian Management Agreement,
                        executed by the Manager;

                (xxi)   a release, signed by the Bank, of all liability of PEI
                        and PEC under the Credit Facility (including in respect
                        of the payment of the principal amount thereof and
                        interest accrued thereon) and of all liens on the assets
                        of PEI and PEC arising pursuant to the Credit Facility,
                        all satisfactory to the Purchaser;

                (xxii)  a Letter of Credit in the amount of the LC Amount;

                (xxiii) the certificates and other documents required by Section
                        6.1;

<PAGE>

                                     - 29 -

                (xxiv)  any PAC Compliance Certificates and PCI Compliance
                        Certificates obtained by the Vendor in accordance with
                        Section 2.7;

                (xxv)   an irrevocable direction to the Escrow Agent to release
                        the Deposit and all interest earned thereon as partial
                        payment of the Purchase Price payable pursuant to
                        Section 2.2;

                (xxvi)  a receipt for the Purchase Price;

                (xxvii) an opinion of Vendor's Counsel, in form and substance
                        satisfactory to the Vendor and the Purchaser;

                (xxviii)the Holdback Agreement; and

                (xxix)  such other documents required to be delivered by the
                        Vendor at the Closing pursuant to this Agreement.

        (b)     Purchaser Deliveries:

                At Closing, the Purchaser shall deliver, or cause to be
                delivered, the following to:

                (i)     the Vendor, an irrevocable direction to the Escrow Agent
                        to release the Deposit and all interest earned thereon
                        as a partial payment of the Purchase Price payable
                        pursuant to Section 2.2(a);

                (ii)    PCI, on behalf of the Vendor, the Purchase Price payable
                        pursuant to Section 2.2, less the Deposit, the
                        Adjustment Holdback Amount and, if applicable pursuant
                        to Section 2.7, the PAC Withheld Amount and/or the PCI
                        Withheld Amount;

                (iii)   a certificate of status from the appropriate authority,
                        dated as of or about the Closing Date, as to the legal
                        existence of the Purchaser and qualification to do
                        business in the jurisdiction in which such entity is
                        organized;

                (iv)    an opinion of Purchaser's Counsel, in form and substance
                        satisfactory to the Vendor and the Purchaser;

                (v)     the Escrow Agent, the Adjustment Holdback Amount;

                (vi)    the Escrow Agent, the PAC Withheld Amount and/or the PCI
                        Withheld Amount, if required pursuant to Section 2.7;

                (vii)   the Vendor, an original copy of the Management Agreement
                        signed by 1022700 Alberta Ltd.;

                (viii)  the Vendor, the certificates and other documents
                        required by Section 6.2;

<PAGE>

                                     - 30 -

                (ix)    the Vendor and the Escrow Agent, the Holdback Agreement;
                        and

                (x)     the Vendor, such other documents required to be
                        delivered by the Purchaser at Closing pursuant to this
                        Agreement.

                                    ARTICLE 4
                                 INTERIM PERIOD

4.1     ACCESS

        (a)     The Vendor shall and shall cause the Purchased Entities,
                directly or indirectly (through the activities of the Manager
                pursuant to the Management Agreement), to furnish to the
                Purchaser and its authorized representatives reasonable access
                during the Interim Period, during normal business hours, to the
                Purchased Entities' properties, books and records (including the
                PNG Assets) and will cause the Purchased Entities, directly or
                indirectly (through the activities of the Manager pursuant to
                the Management Agreement), to furnish to the Purchaser such
                additional financial and operating data and other information as
                it may reasonably request.

        (b)     The access afforded to the Purchaser and its representatives
                pursuant to Section 4.1(a) shall include:

                (i)     access to the Purchased Entities' records, files,
                        reports, title opinions or title reports, if any, data
                        and documents directly or indirectly relating to the PNG
                        Assets at the offices of Kaiser Energy, Ltd. in Calgary,
                        Alberta and the offices of Kaiser-Francis Oil Company in
                        Tulsa, Oklahoma, during normal business hours, for the
                        purpose of the Purchaser's review of the PNG Assets and
                        the title of the Purchased Entities thereto, including:

                        (A)     all operating, technical, financial and
                                environmental data and information and the Title
                                and Operating Documents; and

                        (B)     the PNG Assets described in items (i), (ii),
                                (iii), (vi), (vii) and (viii) of the definition
                                of Miscellaneous Interests;

                (ii)    a reasonable opportunity to conduct a physical
                        inspection of the PNG Assets (including the Wells,
                        Tangibles and surface areas included therein or
                        associated therewith) at the Purchaser's sole cost, risk
                        and expense, insofar as the Vendor can cause the
                        Purchased Entities or, pursuant to the Title and
                        Operating Documents, any third party to reasonably
                        provide such access to the PNG Assets; and

                (iii)   access to the Purchased Entities' minute books, books of
                        account, Tax records and technology;

<PAGE>

                                     - 31 -

                provided that access to all such information and data described
                in this Section 4.1(b) shall be subject to the restrictions
                described in Section 4.1(a).

4.2     MAINTENANCE OF BUSINESS AND PNG ASSETS

        Except as contemplated herein or as otherwise consented to by the
        Purchaser in writing during the Interim Period (which consent shall not
        be unreasonably withheld) and, subject to Section 4.6, the Vendor shall
        (having regard to the terms and provisions of the Title and Operating
        Documents and to the nature of the Purchased Entities' interest in the
        PNG Assets) cause the Purchased Entities, directly or indirectly
        (through the activities of the Manager pursuant to the Management
        Agreement) to:

        (a)     conduct their activities and operations in the ordinary and
                usual course of their business; and

        (b)     operate, maintain and effect repairs to the PNG Assets in a
                proper and prudent manner in accordance with generally accepted
                oil and gas industry practices, and in compliance with the Title
                and Operating Documents and Applicable Law.

4.3     CERTAIN RESTRICTIONS

        Except as contemplated herein and subject to Section 4.6, without first
        obtaining the written consent of the Purchaser (which consent will not
        be unreasonably withheld), during the Interim Period, the Vendor shall
        ensure that the Purchased Entities, directly or indirectly (through the
        activities of the manager pursuant to the Management Agreement), will
        not:

        (a)     make or commit any single capital or extraordinary expenditure
                in excess of $100,000 (except in the event of a catastrophe or
                other event endangering life or property);

        (b)     issue, sell, lease, pledge, dispose of, grant, encumber, or
                authorize the issuance, sale, lease, pledge, disposition, grant
                or encumbrance of any assets or properties whether now or
                hereafter acquired, except for Permitted Encumbrances, except
                for sales of Petroleum Substances in the ordinary course of
                business, except for matters which would have a Financial Impact
                on a Purchased Entity of less than $100,000 and except for the
                contribution and conveyance of the PNG Assets of PEI and PEC as
                contemplated in the PEI Contribution Agreement and PEC
                Contribution Agreement, respectively;

        (c)     amalgamate with, merge into or with or otherwise consolidate
                with any other Person or acquire all of the business or assets
                of any Person;

        (d)     make loans to any Person or incur any indebtedness for borrowed
                money or issue, deliver or sell or propose the issuance,
                delivery or sale of any securities, options, warrants, calls,
                conversion rights or commitments relating to its securities of
                any

<PAGE>

                                     - 32 -

                kind or issue or issue or authorize issuance of any debt
                securities or assume, guarantee or endorse or otherwise as an
                accommodation become responsible for the obligation of any
                Person;

        (e)     hire an employee, increase the compensation paid to, or amend or
                implement any termination or severance arrangements with any
                director, officer, agent, independent contractor or employee;

        (f)     other than the declaration of the dividends payable in stock and
                cash and the conversion of debt of PEC held by PCI and/or PAC to
                equity, each as disclosed in the Disclosure Schedule, declare,
                set aside or pay any dividends, or make any distributions
                (whether in cash, stock or property) in respect of its stock or
                partnership interests (as the case may be) whether now or
                hereafter outstanding, or split, combine or reclassify any of
                its capital stock or partnership interests (as the case may be)
                or issue or authorize the issuance of any other securities in
                respect of, in lieu of or in substitution for shares of its
                capital stock or for its partnership interests (as the case may
                be), or repurchase, redeem or otherwise acquire any shares of
                its stock or partnership interest (as the case may be);

        (g)     amend its articles, by-laws or other constating documents;

        (h)     make any payment to or incur any obligation of any kind or
                nature to PCI, PAC or any Affiliate of PCI or PAC or any
                director or officer of the foregoing except in the ordinary
                course of business consistent with past practices;

        (i)     take any action that will result in a change in the composition
                of the board of directors of the Purchased Corporations, subject
                to an exception in the case of the death or resignation or
                disqualification of a director;

        (j)     change accounting policies or practices (including any change in
                depreciation or amortization practices), except as required
                under GAAP;

        (k)     propose or initiate the exercise of any right (including bidding
                rights at Crown sales, rights under area of mutual interest
                provisions and rights of first refusal) or option relative to,
                or arising as a result of the ownership of, any of the PNG
                Assets, or propose or initiate any operations on the Lands which
                have not commenced or have not been committed to by a Purchased
                Entity or by the Manager on their behalf as of the commencement
                of the Interim Period, if such exercise or option would result
                in a financial obligation of a Purchased Entity, after the
                commencement of the Interim Period, in excess of $100,000;

        (l)     resign as operator or issue any notice of its intention to
                resign as operator, of any of the Lands, Tangibles or the
                Petroleum and Natural Gas Rights;

        (m)     purchase any securities (within the meaning of the Securities
                Act (Alberta)) of any Person; or

<PAGE>

                                     - 33 -

        (n)     enter into or amend a contract, agreement, commitment or
                arrangement with respect to any matter set forth in this Section
                4.3, subject to any of the thresholds or limitations specified
                therein.

4.4     INTERIM OPERATIONS-MAINTENANCE OF ASSETS

        During the Interim Period, the Vendor will cause the Purchased Entities,
        directly or indirectly (through the activities of the Manager pursuant
        to the Management Agreement), to:

        (a)     unless consented to in writing by the Purchaser, refrain from
                amending or agreeing to amend in any material respect or
                terminating any of the Material Contracts or the agreements
                required to be disclosed on the Disclosure Schedule pursuant to
                Sections 5.1(ww) and 5.1(yy) prior to the expiration thereof or,
                except in the ordinary course of business, any of the Title and
                Operating Documents;

        (b)     unless consented to in writing by the Purchaser, refrain from
                entering into any new material agreement respecting the PNG
                Assets which would have a Financial Impact on a Purchased Entity
                of more than $100,000;

        (c)     unless consented to in writing by the Purchaser, refrain from
                surrendering or abandoning or allowing to expire any of the PNG
                Assets except in the ordinary course of business;

        (d)     pay or cause to be paid all costs and expenses relating to the
                PNG Assets which become due during the Interim Period;

        (e)     perform and comply with all covenants and conditions contained
                in the Material Contracts, the agreements required to be
                disclosed on the Disclosure Schedule pursuant to Sections
                5.1(ww) and 5.1(yy) and in any other agreements and documents
                (including the Title and Operating Documents) to which the PNG
                Assets are subject; and

        (f)     continue in force all existing policies of insurance or renewals
                thereof presently maintained by each Purchased Entity, take out
                any additional insurance as may be reasonably requested by the
                Purchaser, at the sole expense of the Purchaser, and give all
                notices and present all claims under all policies of insurance
                in a due and timely fashion.

4.5     PROPOSALS FOR DEALINGS OR OPERATIONS RE PNG ASSETS

        Subject to Section 4.6, if a Purchased Entity, directly or indirectly
        (through the activities of the Manager pursuant to the Management
        Agreement), receives notice of proposed operations, or the exercise of
        any right or option, respecting the PNG Assets from a third party during
        the Interim Period in circumstances in which such operation or the
        exercise of such right or option would require the consent of the
        Purchaser pursuant to Sections

<PAGE>

                                     - 34 -

        4.3 or 4.4, the following paragraphs shall apply to such operation or
        the exercise of such right or option (the "Proposal"):

        (a)     The Vendor shall cause the applicable Purchased Entity to,
                directly or indirectly (through the activities of the Manager
                pursuant to the Management Agreement), give prompt notice of the
                Proposal to the Purchaser, including with such notice the
                particulars of such Proposal in reasonable detail, and whether
                the applicable Purchased Entity recommends the exercise of its
                rights with respect to the Proposal.

        (b)     The Purchaser shall, not later than (i) 4 Business Days prior to
                the time the applicable Purchased Entity is required to make its
                election with respect to the Proposal or (ii) one half of the
                time remaining for an election with respect to the Proposal,
                whichever is greater (the "Election Time"), advise the Vendor
                and the applicable Purchased Entity, by written notice, whether
                it wishes the applicable Purchased Entity to exercise its rights
                with respect to the Proposal, provided that failure of the
                Purchaser to provide such notice within such period shall be
                deemed to be an election by the Purchaser to have the applicable
                Purchased Entity proceed with its recommendation with respect to
                the Proposal as specified in the notice delivered pursuant to
                Section 4.5(a).

        (c)     The Vendor shall cause the applicable Purchased Entity to,
                directly or indirectly (through the activities of the Manager
                pursuant to the Management Agreement), make the election
                requested by the Purchaser with respect to the Proposal within
                the period during which the applicable Purchased Entity may
                respond to the Proposal.

        (d)     A request by the Purchaser not to consent to any Proposal
                required to preserve the existence of any of the PNG Assets
                shall not entitle the Purchaser to any reduction of the Purchase
                Price in the event that the Purchased Entity's interest therein
                is terminated or reduced as a result of thereof, and such
                termination or reduction shall be deemed to be a Permitted
                Encumbrance and shall not constitute a failure of the Vendor's
                representations and warranties pertaining to such PNG Assets.

4.6     EXISTING AUTHORIZATIONS FOR EXPENDITURE

        Notwithstanding the preceding provisions of this Article 4, a Purchased
        Entity shall be entitled to conduct those activities and operations
        arising out of or incidental to the authorizations for expenditures
        ("AFE's") existing and effective as of the Signing Date, which AFE's
        have been listed on Schedule 4.6.

4.7     INSURANCE

        The Purchaser acknowledges that the Vendor maintains in favour of the
        Purchased Entities, or causes the Purchased Entities to, directly or
        indirectly (through the activities of the Manager pursuant to the
        Management Agreement), maintain, adequate policies of

<PAGE>

                                     - 35 -

        insurance and surety bonds. The Vendor will or will cause the Purchased
        Entities to, directly or indirectly (through the activities of the
        Manager pursuant to the Management Agreement), maintain such existing
        policies of insurance and surety bonds until 11:59 p.m. on the Closing
        Date. Thereafter the Purchaser will or will cause the Purchased Entities
        to procure and maintain any and all policies of insurance as the
        Purchaser or the Purchased Entities, at its or their respective cost and
        expense, deem advisable. All risk of loss with respect to the Purchased
        Entities or the PNG Assets or other properties of the Purchased Entities
        shall pass to the Purchaser upon completion of Closing. After the
        Closing Date the Vendor shall have no further responsibility or duty to
        administer, in any fashion, claims under any insurance policies.

4.8     PURCHASER'S OR AFFILIATE DISTRIBUTION OF SECURITIES

        The Vendor hereby consents to the disclosure by Enerplus Resources Fund,
        the Purchaser or an Affiliate of such entities in a prospectus, offering
        memorandum or other offering or disclosure document of such Persons of
        the information concerning:

        (a)     PCI, PAC and the Purchased Entities and such other information
                as is set forth in Schedule 4.8;

        (b)     the PNG Assets;

        (c)     the terms of and transactions contemplated by this Agreement;
                and

        (d)     the Financial Statements.

        The consent granted by this Section shall not constitute a
        representation or warranty as to the accuracy or completeness of the
        foregoing information.

                                    ARTICLE 5
                    REPRESENTATIONS AND WARRANTIES OF PARTIES

5.1     VENDOR'S REPRESENTATIONS AND WARRANTIES

        The Vendor represents and warrants to the Purchaser that:

        CONCERNING THE VENDOR AND THE PURCHASED ENTITIES

        (a)     Standing - Vendor, PEC and PEI: PCI, PAC and each Purchased
                Corporation:

                (i)     is a corporation duly organized, validly existing and up
                        to date with all of its corporate filings under the laws
                        of its constating jurisdiction;

                (ii)    has all necessary corporate power and authority to own
                        or lease its properties and assets (which, at Signing
                        Date, in the case of Purchased Corporations, includes
                        the PNG Assets) and to carry on its business as now
                        being conducted; and

<PAGE>

                                     - 36 -

                (iii)   is duly qualified to own or lease its properties and
                        assets (which, at Signing Date, in the case of Purchased
                        Corporations, includes the PNG Assets) and to carry on
                        its business and is up to date with all of its corporate
                        filings required to be made in each jurisdiction in
                        which the nature of the business conducted by it or the
                        character of the properties and assets owned or leased
                        by it makes such qualification necessary.

        (b)     Standing - PCC Limited Partnership: The PCC Limited Partnership:

                (i)     is a limited partnership duly organized, validly
                        existing and up to date with all of its filings under
                        the laws of its constating jurisdiction;

                (ii)    has all necessary power and authority to own or lease
                        its properties and assets (which, at the Closing Date,
                        includes the PNG Assets) and to carry on its business as
                        now being conducted; and

                (iii)   is duly qualified to own or lease its properties and
                        assets (which, at the Closing Date includes the PNG
                        Assets) and to carry on its business and is up to date
                        with all of its filings required to be made in each
                        jurisdiction in which the nature of the business
                        conducted by it or the character of the properties and
                        assets owned or leased by it makes such qualification
                        necessary.

        (c)     Requisite Authority: Each of PCI and PAC has the requisite
                corporate capacity, power and authority to execute this
                Agreement and each of PCI, PAC and the Purchased Entities has
                the requisite corporate or other capacity, power and authority
                to execute the other agreements and documents required to be
                delivered by it pursuant hereto and to perform the obligations
                to which it thereby becomes subject.

        (d)     Authorization And Enforceability: Each of PCI and PAC has taken
                all necessary corporate actions to authorize the execution,
                delivery and performance of this Agreement, and the other
                agreements and documents required to be delivered by it pursuant
                hereto, including the sale of the PCI Shares by PCI and the sale
                of the PAC Shares by PAC in accordance with the provisions of
                this Agreement. Each Purchased Corporation has taken all
                necessary corporate action to authorize the execution, delivery
                and performance of those agreements and documents required to be
                delivered by it pursuant hereto and to authorize the transfer
                and assignment of the Purchased Shares to the Purchaser in
                accordance with the provisions of this Agreement. The PCC
                Limited Partnership has taken all necessary actions to authorize
                the execution, delivery and performance of those agreements and
                documents required to be delivered by it pursuant hereto. This
                Agreement has been duly executed and delivered by each of PCI
                and PAC and this Agreement constitutes, and all other documents
                executed and delivered on behalf of PCI, PAC and a Purchased
                Entity pursuant hereto shall, when executed and delivered,
                constitute, valid and binding obligations of PCI, PAC and such
                Purchased Entity

<PAGE>

                                     - 37 -

                enforceable in accordance with their respective terms and
                conditions, subject to the qualification that such
                enforceability may be subject to (i) bankruptcy, insolvency,
                fraudulent preference, reorganization or other laws affecting
                creditors' rights generally, and (ii) general principles of
                equity (regardless of whether such enforceability is considered
                in a proceeding at equity or law).

        (e)     No Conflict: The execution and delivery of this Agreement and
                the completion of the sale of the Purchased Shares to the
                Purchaser in accordance with the terms of this Agreement are not
                and will not be in material violation or breach of, or be in
                material conflict with or require any material consent,
                authorization or approval under:

                (i)     any term or provision of the constating documents of
                        PCI, PAC or a Purchased Entity other than any thereof
                        which have been obtained prior to the Signing Date or
                        will be obtained prior to the Closing Date;

                (ii)    other than the Title and Operating Documents, any permit
                        or other governmental authorization to which one or more
                        of PCI, PAC and a Purchased Entity are a party or by
                        which one or more of PCI, PAC and a Purchased Entity are
                        bound; or

                (iii)   any Applicable Law (except for approvals required under
                        the Competition Act) or any judicial order, award,
                        judgement or decree applicable to one or more of PCI,
                        PAC, a Purchased Entity, the Petroleum and Natural Gas
                        Rights, the Tangibles and the Purchased Shares.

        (f)     Private Companies: Each Purchased Corporation is not a
                "reporting issuer" under relevant securities legislation or a
                "distributing corporation" under relevant corporate legislation.

        (g)     Residency For Tax Purposes: Each of PCI and PAC is a
                non-resident of Canada within the meaning of the Tax Act.

        (h)     GST Registrant: The PCC Limited Partnership is a registrant for
                the purposes of the Excise Tax Act (Canada) and will be a
                registrant at the time it acquires the PNG Assets. The GST
                registration number of the PCC Limited Partnership is [omitted -
                confidential information].

        (i)     Authorized and Issued Capital of the Purchased Corporations:

                (i)     The authorized share capital of PEC consists of an
                        unlimited number of common voting Shares, an unlimited
                        number of common non-voting Shares and an unlimited
                        number of first preferred Shares, of which 33,292,314.83
                        common voting Shares (forming part of the Purchased
                        Shares) have been validly issued and are outstanding as
                        fully paid and non-assessable Shares of PEC;

<PAGE>

                                     - 38 -

                (ii)    All shares of PEC which may be issued upon the
                        conversion of debt to equity by PCI prior to or at the
                        Closing shall be PCI Shares, shall form part of the
                        Purchased Shares and shall be, when issued, validly
                        issued and fully paid and non-assessable Shares of PEC;
                        and

                (iii)   The authorized share capital of PEI consists of an
                        unlimited number of common voting shares, of which
                        868.08 common voting Shares (together, forming part of
                        the Purchased Shares) have been validly issued and are
                        outstanding as fully paid and non-assessable shares of
                        PEI.

        (j)     Title to Purchased Shares:

                (i)     PCI is the registered and beneficial owner of all of the
                        PCI Shares and has good and marketable title to the PCI
                        Shares free and clear of all Security Interests except
                        those of the Purchaser arising pursuant to this
                        Agreement, and free and clear of any voting trusts,
                        demands or claims by any Person whatsoever; and

                (ii)    PAC is the registered and beneficial owner of all of the
                        PAC Shares and has good and marketable title to the PAC
                        Shares free and clear of all Security Interests except
                        those of the Purchaser arising pursuant to this
                        Agreement, and free and clear of any voting trusts,
                        demands or claims by any Person whatsoever.

        (k)     Subsidiaries: None of the Purchased Corporations have any
                Subsidiaries and no other (and no agreement to acquire any)
                equity or ownership interest in any Person, except that the PCC
                Limited Partnership is a subsidiary of the Purchased
                Corporations.

        (l)     No Share Rights: Other than the Shares referred to in Section
                5.1(j), no Person shall have any Share Right or other agreement,
                option or privilege (whether pre-emptive, contractual or
                otherwise) capable of becoming a Share Right and the execution,
                delivery and performance of this Agreement shall not give any
                Person other than the Purchaser any Share Right.

        (m)     Minute Books: Except as it relates to transactions or matters
                arising from or contemplated in this Agreement, the minute book
                and share ledger of each Purchased Entity will be true and
                correct in all material respects and such minute books shall
                contain copies of all meetings of the directors and shareholders
                or partners (as applicable) of each Purchased Entity and all
                resolutions by consent (if any) of the directors and
                shareholders or partners (as applicable) of each Purchased
                Entity.

        (n)     Partners of the PCC Limited Partnership: At all times since the
                formation of the PCC Limited Partnership, the only partners
                (limited or general) of the PCC Limited Partnership have been
                PEC and PEI.

<PAGE>

                                     - 39 -

        (o)     Partnership Interests Held:

                (i)     PEC is the registered and beneficial owner of a 1%
                        general partnership interest and 10,000 limited
                        partnership units in the PCC Limited Partnership and,
                        pursuant to the PEC Contribution Agreement, is entitled
                        to and will receive an additional 73,900,740 limited
                        partnership units on January 1, 2003, each free and
                        clear of all Security Interests, burdens, profit
                        interests, options, conversion privileges, restrictions,
                        encumbrances or other adverse claims of any kind or
                        character whatsoever.

                (ii)    PEI is the registered and beneficial owner of 10,000
                        limited partnership units in the PCC Limited Partnership
                        and, pursuant to the PEC Contribution Agreement, is
                        entitled to and will receive an additional 89,078,800
                        limited partnership limits on January 1, 2003, each free
                        and clear of all Security Interests, burdens, profit
                        interests, options, conversion privileges, restrictions,
                        encumbrances or other adverse claims of any kind or
                        character whatsoever.

        (p)     No Partnership Interest Rights: Other than as specified in
                Section 5.1(o), no Person shall have any partnership interest or
                other agreement, option or privilege (whether pre-emptive,
                contractual or otherwise) capable of becoming a partnership
                interest in the PCC Limited Partnership and the execution,
                delivery and performance of this Agreement shall not give any
                Person other than the Purchaser of any right to a partnership
                interest in the PCC Limited Partnership.

        (q)     Financial Statements: The Financial Statements fairly present
                the financial position of PCI and each Purchased Entity (as
                applicable) as at the respective dates thereof, as well as the
                results of operations and changes in financial position of PCI
                and each Purchased Entity (as applicable) for the periods
                covered thereby, as applicable, in accordance with GAAP
                consistently applied and the accounting policies set out in the
                notes to such Financial Statements; provided, however, that
                those Financial Statements which are unaudited omit footnotes
                and year-end adjustments.

        (r)     No Undisclosed Liabilities: Except as set forth in the
                Disclosure Schedule, and except for:

                (i)     liabilities which are disclosed or adequately provided
                        for in the Financial Statements;

                (ii)    liabilities incurred in the ordinary course of business
                        of the Purchased Entities subsequent to September 30,
                        2002; and

                (iii)   liabilities as a result of transactions contemplated by
                        this Agreement;

<PAGE>

                                     - 40 -

                each Purchased Entity has no liabilities which would be required
                by GAAP to be disclosed in the financial statements of such
                Purchased Entity and which in the aggregate are material to the
                business, financial condition and results of operations of such
                Purchased Entity, taken as a whole.

        (s)     Intellectual Property: Neither the Vendor nor any Purchased
                Entity has received, directly or indirectly (through the
                activities of the Manager pursuant to the Management Agreement),
                notice that the technology owned or used by such Purchased
                Entity infringes upon any patents, trade marks, trade secrets or
                copyrights owned by other Persons.

        (t)     Bank Accounts: The Disclosure Schedule contains a complete and
                correct list of all bank accounts and safety deposit boxes
                maintained by the Purchased Entities.

        (u)     Loans and Credit Facilities: Except as set forth on the
                Disclosure Schedule, the Purchased Entities have not entered
                into, or otherwise arranged for, any loans, operating lines of
                credit or other credit facilities or has outstanding any bonds,
                debentures, mortgages, notes or similar indebtedness for
                borrowed money or indebtedness in connection with capital or
                operating leases having a financial impact in excess of $100,000
                or non-recourse project financing not disclosed in or provided
                for in the Financial Statements and the Purchased Entities are
                not obligated to create or issue any bonds, debentures,
                mortgages, notes or similar indebtedness for borrowed money or
                indebtedness in connection with capital or operating leases
                having a financial impact in excess of $100,000 or non-recourse
                project financing not disclosed in or provided for in the
                Financial Statements. The Disclosure Schedule contains an
                accurate and complete summary of all loans, operating lines of
                credit or other credit facilities, bonds, debentures, mortgages,
                notes or similar indebtedness of the Purchased Entities for
                borrowed money or indebtedness in connection with capital or
                operating leases having a financial impact in excess of $100,000
                or non-recourse project financing not disclosed in or provided
                for in the Financial Statements. The only Security Interests
                granted or created by the Purchased Entities in connection with
                the foregoing indebtedness are those described in the Disclosure
                Schedule.

        (v)     No Dividends or Fees: Other than as set forth on the Disclosure
                Schedule, since the Effective Date, the Purchased Entities have
                not:

                (i)     declared, authorized, paid or made any dividend or other
                        distribution to any shareholder or partner thereof which
                        would have effect after the Effective Date; or

                (ii)    paid or agreed to pay any corporate management fee other
                        than as disclosed in the Financial Statements, or in the
                        ordinary course of business and in accordance with past
                        practice.

<PAGE>

                                     - 41 -

        (w)     No Default: Neither the Vendor nor any Purchased Entity is in
                default under, and, to the knowledge of the Vendor, no condition
                exists that, with notice or lapse of time or both, would
                constitute a default under:

                (i)     any loan agreement, evidence of indebtedness, or
                        instrument granting a Security Interest to which such
                        Purchased Entity is a party or by which such Purchased
                        Entity or its assets (including the PNG Assets) are
                        bound; or

                (ii)    any judgment, order or injunction of any court,
                        arbitrator or governmental agency,

                which default or potential default would reasonably be expected
                to affect materially and adversely the business, financial
                condition or results of operations of a Purchased Entity, taken
                as a whole.

        (x)     Applicable Law: Neither the Vendor nor any Purchased Entity has,
                directly or indirectly (through the activities of the Manager
                pursuant to the Management Agreement), received nor delivered
                any written notices of non-compliance or alleged non-compliance
                of any provisions of Applicable Law, non-compliance with which
                would reasonably be expected to affect materially and adversely
                the business, financial condition or results of operations of a
                Purchased Entity, taken as a whole, and, to the Vendor's
                knowledge, no Purchased Entity is in default under nor does any
                condition exist that, with notice or lapse of time or both,
                would constitute a default or a violation of Applicable Law
                which such default or violation would reasonably be expected to
                affect materially and adversely the business, financial
                condition or results of operations of a Purchased Entity, taken
                as a whole.

        (y)     Litigation: Except as set forth in the Disclosure Schedule, at
                the date hereof:

                (i)     there are no actions, suits or other legal proceedings
                        subsisting or, to the knowledge of the Vendor,
                        threatened, in respect of a material aspect of the
                        business of any Purchased Entity, against a Purchased
                        Entity;

                (ii)    no Purchased Entity has been charged with a material
                        violation of, nor, to the knowledge of the Vendor,
                        threatened with a charge of a material violation of, any
                        Applicable Law relating to any material aspect of their
                        respective businesses or assets; and

                (iii)   the Purchased Entities have not commenced any litigation
                        which will not, as at the Closing Date, be discontinued,
                        on a without costs basis.

        (z)     Taxes: The fiscal year end of the Purchased Corporations, for
                income tax purposes, is December 31 and the fiscal year end of
                the PCC Limited Partnership has not as of the Signing Date been
                set. The Purchased Corporations are taxable

<PAGE>

                                     - 42 -

                Canadian corporations and the PCC Limited Partnership is, and
                has been at all times, a Canadian partnership, for the purposes
                of the Tax Act. Except as set forth in the Disclosure Schedule:

                (i)     the Purchased Entities have filed, or will prior to the
                        Closing file, all Tax Returns required to be filed under
                        Applicable Law prior to Closing;

                (ii)    the Purchased Entities have, to the knowledge of the
                        Vendor, made complete and accurate disclosure in such
                        returns and in all materials accompanying such Tax
                        Returns;

                (iii)   the Purchased Entities have paid or accrued all Taxes
                        due and payable under the Tax Returns referred to in
                        Section 5.1(z)(i);

                (iv)    the Purchased Entities have paid all Tax assessments and
                        reassessments and any penalties, interest, fines,
                        governmental charges and other amounts which the
                        relevant authority is entitled to collect from the
                        Purchased Entities;

                (v)     there are no actions, audits, assessments,
                        reassessments, suits, proceedings, investigations or
                        claims now subsisting against a Purchased Entity in
                        respect of Taxes paid or payable affecting the business
                        carried on by such Purchased Entity;

                (vi)    there are no matters which are the subject of any
                        agreement with any governmental authority relating to
                        claims for additional Taxes which affect the business of
                        a Purchased Entity nor, to the knowledge of the Vendor,
                        are any such matters under discussion with such
                        authorities;

                (vii)   there are no agreements, waivers or other arrangements
                        providing for an extension of time with respect to the
                        assessments or reassessment of any Tax or the filing of
                        any Tax Returns by, or the payment of any Tax by, or
                        levy of any governmental charge against a Purchased
                        Entity; and

                (viii)  the Purchased Entities have withheld from each payment
                        made by it the amount of all Taxes and other deductions
                        required to be withheld therefrom and have paid all such
                        amounts due and payable before the date hereof to the
                        proper taxing or other authority within the time
                        prescribed under Applicable Law.

        (aa)    Futures Transactions: Except as set forth on the Disclosure
                Schedule, there are no Futures Transactions to which a Purchased
                Entity is a party or by which a Purchased Entity is bound,
                either as principal or surety.

        (bb)    Absence of Certain Changes: Except as set forth in the
                Disclosure Schedule, since the Effective Date there has not
                been:

<PAGE>

                                     - 43 -

                (i)     any material change by a Purchased Entity in accounting
                        methods or principles which would be required to be
                        disclosed under GAAP;

                (ii)    any outstanding dividend payable, any declaration or
                        payment of any dividend on, or any other distribution
                        with respect to, the Shares of the Purchased
                        Corporations or the partnership interest of the PCC
                        Limited Partnership or any repurchase, redemption or
                        other acquisition of any such Shares or partnership
                        interests;

                (iii)   a grant of any power of attorney;

                (iv)    other than as contemplated herein, a reduction in the
                        Purchased Corporations' stated capital; and

                (v)     authorized or paid, any bonus or similar payment not in
                        the ordinary course of business to any officer or
                        director of the Purchased Corporations.

        (cc)    Certain Contracts, Agreements, Plans and Commitments: Other than
                in respect of the Title and Operating Documents and the
                agreements required to be disclosed in the Disclosure Schedule
                pursuant to Sections 5.1(ww) and 5.1(yy), the Disclosure
                Schedule contains a complete and correct list of all of all
                Material Contracts to which a Purchased Entity is a party or by
                which it is bound, or in the case of item (ii), to which any of
                them adhere or in which any of them participates (complete and
                correct copies of descriptions of each of which, as in effect on
                the date hereof, have been made available to the Purchaser),
                including:

                (i)     any material management or employment contract providing
                        for personal services with respect to any period after
                        the Closing Date with any officer, consultant, director,
                        employee or any other Person;

                (ii)    any written agreements that contain any liability of a
                        Purchased Entity after the Closing Date for severance
                        pay, liabilities or obligations in respect of
                        termination or severance of employment;

                (iii)   any contract or agreement under which a Purchased Entity
                        has outstanding indebtedness for borrowed money or the
                        deferred purchase price of property in an amount which
                        is in the aggregate in excess of $100,000 or has the
                        right or obligation to incur any such indebtedness;

                (iv)    any guarantee or surety entered into by a Purchased
                        Entity that continues after Closing;

                (v)     any confidentiality or non-competition agreement which
                        restricts the right of a Purchased Entity to engage in
                        any type of business after the consummation of the
                        transactions contemplated by this Agreement; and

<PAGE>

                                     - 44 -

                (vi)    any lease or sublease entered into by a Purchased Entity
                        for office space.

        (dd)    Material Agreements: To the knowledge of the Vendor:

                (i)     none of the Material Contracts has, except as described
                        therein, been assigned or is the subject of any security
                        agreement entered into by PCI, PAC or a Purchased Entity
                        except for any assignment which could not reasonably be
                        expected to have a material adverse effect;

                (ii)    each of the Material Contracts constitute a legal and
                        binding obligation of the applicable Purchased Entity
                        and the third parties thereto enforceable in accordance
                        with their respective terms, subject to limitations with
                        respect to enforcement imposed by Applicable Law in
                        connection with bankruptcy, or similar proceedings and
                        to the extent that equitable remedies such as specific
                        performance and injunction are in the discretion of the
                        courts from which they are sought; and

                (iii)   the Purchased Entities have not terminated or cancelled
                        any term or condition of any Material Contract, no such
                        term or condition has been modified, amended or waived
                        where the effect of such modification, amendment or
                        waiver extends beyond the Effective Date and no proposal
                        or discussion with third parties for any such
                        termination, modification, amendment or waiver is
                        ongoing, except in each of the foregoing cases in a
                        manner which could not reasonably be expected to have a
                        material adverse effect on a Purchased Entity.

        (ee)    Employees: The Purchased Entities have not had since April 30,
                2000 and will, as at the Closing Date not have, any employees or
                consultants and have no outstanding claims, obligations or
                liabilities, statutory or otherwise, relating to any previous
                employees or consultants.

        (ff)    Resource Pools: The cumulative amount of the Resource Pools of
                PEC as at September 30, 2002 will not be less than $19,600,000.
                The cumulative amount of the Resource Pools of PEI as at
                September 30, 2002 will not be less than $23,045,000. The
                Purchased Entities have not since September 30, 2002, and will
                not prior to Closing, use or renounce any of their Resource
                Pools.

        (gg)    Intercompany Debt: The adjusted cost base of any advances or
                inter-company debt owned by PEI to PEC or by PEI to PEC is not
                less than the outstanding principal amount thereof which is, and
                which will be at Closing, $42,832,923.

        (hh)    No Other Business Activities: To Vendor's knowledge, the
                Purchased Entities do not, other than as set forth on the
                Disclosure Schedule, have not previously (either directly or
                through its predecessors or subsidiaries of predecessors),
                carried out any business activities other than activities which
                are incidental to or related to the Canadian upstream oil and
                gas business.

<PAGE>

                                     - 45 -

        (ii)    Non-Oil and Gas Liabilities:

                (i)     Each of PCI and PAC has taken all necessary corporate
                        actions to authorize the execution, delivery and
                        performance of the Assumption of Liabilities Agreement
                        and that agreement has been duly executed and delivered
                        by each of PCI and PAC, is in full force and effect and
                        constitutes the valid and binding obligations of PCI and
                        PAC enforceable against it in accordance with its terms.

                (ii)    None of the Vendor or any Purchased Entity or any of
                        their subsidiaries has received, directly or indirectly,
                        notice or demand for or in respect of any Non-PNG
                        Related Environmental Liabilities, and to the Vendor's
                        knowledge, there are no current obligations in respect
                        of any Non-PNG Related Environmental Liabilities that
                        are outstanding.

        (jj)    Managed Interests: PEI has calculated and paid all amounts
                required to be calculated and paid by it and performed all other
                obligations required to be performed of it in accordance with
                the terms of (i) a Royalty Agreement dated December 12, 1991
                between PEI and 507317 Alberta Ltd., (ii) an Overriding
                Royalties Conveyance dated December 12, 1991 between PEI and
                507317 Alberta Ltd., (iii) a Gas Sales Agreement dated December
                12, 1991 between PEI and 507317 Alberta Ltd., (iv) a Purchase
                Agreement dated July 22, 1994, and (v) the Non-Recourse Notes,
                each as amended; and there exists no "event of default" or
                "event of non-performance" (as the case may be), which has not
                been cured, as contemplated under a Fixed Charge Debenture dated
                December 12, 1991 and a Fixed Charge Debenture dated August 9,
                1994, each granted by PCI to 507317 Alberta Ltd.

        (kk)    No Ongoing Obligations: As at the Closing Date, none of PCI or
                PAC nor any Affiliate of PCI or PAC, the Manager nor any
                Affiliate of the Manager nor any shareholder, director or
                officer of the Purchased Corporations: (i) will be a party to
                any transaction with a Purchased Entity; or (ii) will have any
                contractual or other claim, express or implied, of any kind
                whatsoever against a Purchased Entity except for transactions
                accrued at or prior to Closing arising in the ordinary course of
                business consistent with past practice.

        (ll)    Securities Disclosure: The information contained in Schedule 4.8
                has been prepared in accordance with the requirements of the
                United States Securities Exchange Act of 1934.

        (mm)    No Fees etc.: None of PCI, PAC or the Purchased Entities have
                incurred any obligation or liability, contingent or otherwise,
                for brokers' or finders' fees or commissions with respect to the
                transactions herein for which the Purchaser or a Purchased
                Entity shall have any obligation or liability.

        CONCERNING THE PNG ASSETS

<PAGE>

                                     - 46 -

        (nn)    Title to PNG Assets: None of the Manager (or any Affiliate
                thereof) nor the Purchased Entities nor any other Affiliate of
                PCI and PAC has done any act or thing whereby any of the PNG
                Assets may be cancelled or determined except for actions or
                inactions which a prudent operator would take or fail to take
                and, except for Permitted Encumbrances, the PNG Assets are now,
                and will be at Closing, free and clear of all Burdens created
                by, through or under the Manager (or any Affiliate thereof) the
                Purchased Entities, PCI, PAC or any other Affiliate of PCI or
                PAC.

        (oo)    Conveyance of PNG Assets: All of the right, title, estate and
                interest in the assets (including the PNG Assets) held by PEI
                and PEC on the Signing Date will be sold, assigned, transferred
                and conveyed to the PCC Limited Partnership, absolutely on
                January 1, 2003, together with all of the benefits and
                advantages to be derived therefrom.

        (pp)    Quiet Enjoyment: Subject to the rents, covenants, conditions and
                stipulations in the Title and Operating Documents and on the
                lessee's or holder's part thereunder to be paid, performed and
                observed, the PCC Limited Partnership may, as at Closing, hold
                and enjoy its interest in the PNG Assets for the residue of
                their respective terms and all renewals or extensions thereof,
                where applicable, for its own use and benefit without any lawful
                interruption of or by the Vendor or its Affiliates or any Person
                claiming by, through or under the Manager (or any Affiliate
                thereof) or by, through or under the Purchased Entities, PCI,
                PAC or any other Affiliate of PCI or PAC.

        (qq)    AMIs and Areas of Exclusion: Except as set forth in the
                Disclosure Schedule, to the knowledge of the Vendor, there are
                no material area of mutual interest or area of exclusion
                provisions applicable to and binding upon a Purchased Entity.

        (rr)    No Reduction: As at Closing, the interests of the PCC Limited
                Partnership in the PNG Assets are not subject either to
                reduction by virtue of the conversion or other alteration of the
                interest of any third Person claiming by, through or under the
                Manager (or any Affiliate thereof) or by, through or under the
                Purchased Entities, PCI, PAC or any other Affiliate of PCI or
                PAC, except for the Permitted Encumbrances or as set out in the
                Land Schedule.

        (ss)    Joint Venture Audits: Except as set forth in the Disclosure
                Statement, as of the Signing Date, there are no joint venture
                audits which have been commenced against any Purchased Entity
                having a Financial Impact in excess of $100,000 in respect of
                those PNG Assets currently operated by a Purchased Entity (or
                the Manager on its behalf) or to Vendor's knowledge, in respect
                of those PNG Assets not operated by a Purchased Entity (or the
                Manager on its behalf), pursuant to the Title and Operating
                Documents, which joint venture audits have not been concluded as
                at the Signing Date.

<PAGE>

                                     - 47 -

        (tt)    No Withholding: To the knowledge of the Vendor, all Title and
                Operating Documents affecting a Purchased Entity's title to the
                PNG Assets which are in the possession of the Manager (or any
                Affiliate thereof) or a Purchased Entity, PCI or PAC or any
                other Affiliate of PCI or PAC have been or will be made
                available for investigation by the Purchaser pursuant to Section
                4.1.

        (uu)    Insurance: No Purchased Entity has had coverage with respect to
                the PNG Assets denied or limited by any insurance carrier to
                which it has applied for insurance or with which it has carried
                insurance, during the last two years.

        (vv)    Take or Pay Delivery Obligations and Payments: There are no Take
                or Pay Delivery Obligations or Take or Pay Payments.

        (ww)    Production Sales Contracts: Except as listed on the Disclosure
                Schedule, to the knowledge of the Vendor, there are no
                production sales agreements or arrangements under which a
                Purchased Entity, or any third party acting on behalf of a
                Purchased Entity, is obligated to sell or deliver Petroleum
                Substances allocable to the Petroleum and Natural Gas Rights,
                other than contracts which are terminable on not more than 30
                days notice without penalty or payment and which have a
                Financial Impact of less than $100,000.

        (xx)    No Balancing Agreements: There are no agreements or arrangements
                (commonly known as gas balancing, over-production or
                underlift-overlift agreements or arrangements) having a
                Financial Impact of more than $100,000 which are among two or
                more Persons owning interests in a portion of the Lands or lands
                pooled or unitized therewith, nor has there been any
                circumstance or case whereby one of such Persons has taken, or
                may hereafter take, a share of the production of Petroleum
                Substances from such lands greater than it would otherwise be
                entitled to by virtue of its interest in such Lands and which
                excess taking entitles the other Persons to a credit in respect
                of subsequent production from such lands by which a Purchased
                Entity is bound and which pertain to the PNG Assets.

        (yy)    Transportation Agreements: Except as listed in the Disclosure
                Schedule, to the knowledge of the Vendor, no Purchased Entity is
                party to any agreement respecting the firm transportation of
                Petroleum Substances having a term which expires more than 91
                days after the Closing and having a Financial Impact of more
                than $100,000.

        (zz)    Processing Agreements: To the knowledge of the Vendor, except as
                set out in the Disclosure Schedule, no Purchased Entity is party
                to any agreement respecting the processing of Petroleum
                Substances other than contracts which are terminable on not more
                than 91 days notice without penalty or payment.

        (aaa)   CO&O Agreements: To the knowledge of the Vendor, except as set
                out in the Disclosure Schedule, no Purchased Entity is party to
                any agreement respecting the

<PAGE>

                                     - 48 -

                construction, ownership and operation of any Tangible having a
                Financial Impact more than $100,000.

        (bbb)   No Default Notices: Neither the Vendor nor any Purchased Entity
                has, directly or indirectly (through the activities of the
                Manager pursuant to the Management Agreement), received nor
                delivered any written notices of default under the Title and
                Operating Documents or any notice alleging material default
                under any other agreement pertaining to the PNG Assets.

        (ccc)   Offset and Accrued Drilling Obligations: Other than as disclosed
                in the Disclosure Schedule, neither the Vendor nor any Purchased
                Entity has, directly or indirectly (through the activities of
                the Manager pursuant to the Management Agreement), received
                written notice that any of the Leases are subject to any accrued
                or drilling or off-set obligations which have not been satisfied
                or waived.

        (ddd)   Royalties to Affiliated Persons: No officer, director or
                consultant of the Purchased Corporations, PCI or PAC, nor any
                associate or Affiliate of any such Person or any party not at
                arm's length to the Purchased Corporations owns, has or is
                entitled to any royalty, net profits interest, carried interest
                or other encumbrance of any nature whatsoever which are based on
                production from a Purchased Entity's properties or assets
                (including the PNG Assets) or any revenue or rights attributed
                thereto.

        (eee)   Payment of Royalties and Taxes: Neither the Vendor nor any
                Purchased Entity has, directly or indirectly (through the
                activities of the Manager pursuant to the Management Agreement),
                received any written notice which remains in effect of
                non-payment of royalties and ad valorem, property, production,
                severance and similar taxes and assessments based on, or
                measured by, ownership of the PNG Assets, the production of
                Petroleum Substances from the Lands or the receipt of proceeds
                therefrom that are payable by a Purchased Entity.

        (fff)   Environmental Matters: Except as set forth in the Disclosure
                Schedule, the Purchased Entities:

                (i)     nor the Vendor have received, directly or indirectly
                        (through the activities of the Manager pursuant to the
                        Management Agreement), any orders or directives which
                        relate to environmental matters and which require any
                        work, repairs, construction or capital expenditures with
                        respect to the PNG Assets, where such orders or
                        directives have not been complied with in all material
                        respects;

                (ii)    nor the Vendor have received, directly or indirectly
                        (through the activities of the Manager pursuant to the
                        Management Agreement), any demand or notice issued with
                        respect to the breach of any Environmental Law
                        applicable to the PNG Assets, including, without
                        limitation, respecting the use, storage, treatment,
                        transportation or disposition of environmental

<PAGE>

                                     - 49 -

                        contaminants, which demand or notice remains outstanding
                        on the Closing Date; and

                (iii)   have obtained all permits, licenses and other
                        authorizations which are required under Environmental
                        Law to own or operate the PNG Assets and the failure of
                        which to obtain would have a material adverse effect
                        upon the current use or operation of such PNG Assets.

        (ggg)   Wells: To the knowledge of the Vendor, the Land Schedule
                contains a list of all Wells.

        (hhh)   Abandonment of Wells:

                (i)     Neither the Vendor nor any Purchased Entity has
                        received, directly or indirectly (through the activities
                        of the Manager pursuant to the Management Agreement),
                        any notice under Applicable Law which remains
                        outstanding or from any operator of any of the Wells to
                        the effect that any of the Wells are required to be
                        abandoned.

                (ii)    To the extent, the Purchased Entities operated the Wells
                        at the time of abandonment, or to the extent the
                        Purchased Entities did not operate same at the time of
                        abandonment, to the Vendor's knowledge, all of the
                        Wells, if any, which have been abandoned were abandoned
                        in accordance with all Applicable Laws regarding the
                        abandonment of wells.

        (iii)   Operation of PNG Assets: The PNG Assets have been operated in
                all material respects in accordance with generally accepted oil
                and gas industry practices in a good and workmanlike fashion and
                in compliance with Applicable Law and the terms and conditions
                of all agreements relating thereto and the Purchased
                Corporations currently maintain insurance for the joint account
                in respect of loss or damage to such PNG Assets and the income
                therefrom, which insurance has coverage limits that are
                reasonable and prudent in the circumstances.

        (jjj)   Tangibles:

                (i)     To the knowledge of the Vendor, no material tangible
                        depreciable property and assets which are used, were
                        used or are intended to be used in producing,
                        processing, gathering, treating, measuring, making
                        marketable or injecting the Petroleum Substances or any
                        of them or in connection with water injection or removal
                        operations that pertain to the Petroleum and Natural Gas
                        Rights has been removed from its location since the
                        Signing Date nor has a Purchased Entity alienated or
                        encumbered any such tangible depreciable property and
                        assets since such date.

<PAGE>

                                     - 50 -

                (ii)    The Tangibles operated by the Purchased Entities (or the
                        Manager on its behalf), if any, are in good and operable
                        condition, reasonable wear and tear excepted.

        (kkk)   Production Allowables: None of the Wells operated by the
                Purchased Entities (or the Manager on its behalf) have been
                produced in excess of applicable production allowables imposed
                by Applicable Law since the Purchased Entities first acquired
                their interests in the relevant PNG Assets.

        (lll)   AFE's: To the knowledge of the Vendor, other than as disclosed
                in Schedule 4.6, there are no third party AFE's approved by a
                Purchased Entity whereby such Purchased Entity's share of the
                AFE which becomes payable after the date hereof would exceed
                $25,000 individually and there are no outstanding cash calls, a
                Purchased Entity's share of which exceeds $25,000, except as
                listed on in Schedule 4.6.

5.2     PURCHASER'S REPRESENTATIONS AND WARRANTIES

        The Purchaser represents and warrants to the Vendor that:

        (a)     Standing: The Purchaser is a corporation, duly organized,
                validly existing under the laws of its jurisdiction of
                incorporation, and duly registered and authorized to carry on
                business in the Province of Alberta.

        (b)     Requisite Authority: The Purchaser has the requisite corporate
                capacity, power and authority to execute this Agreement and the
                other agreements and documents required to be delivered hereby
                and to perform the obligations to which it thereby becomes
                subject.

        (c)     Execution and Enforceability: The Purchaser has taken all
                necessary corporate actions to authorize the execution, delivery
                and performance of this Agreement, including the purchase of the
                Purchased Shares in accordance with the provisions of this
                Agreement. This Agreement has been duly executed and delivered
                by the Purchaser, and this Agreement constitutes, and all other
                documents executed and delivered on behalf of the Purchaser
                hereunder shall, when executed and delivered constitute, valid
                and binding obligations of the Purchaser enforceable in
                accordance with their respective terms and conditions, subject
                to the qualification that such enforceability may be subject to
                (i) bankruptcy, insolvency, fraudulent preference,
                reorganization or other laws affecting creditors' rights
                generally, and (ii) general principles of equity (regardless of
                whether such enforceability is considered in a proceeding at
                equity or law).

        (d)     No Conflict: The execution and delivery of this Agreement by the
                Purchaser and the completion of the purchase of the Purchased
                Shares by the Purchaser in accordance with the terms of this
                Agreement are not and will not be in violation

<PAGE>

                                     - 51 -

                or breach of, or be in conflict with or require any consent,
                authorization or approval under:

                (i)     any term or provision of the constating documents of the
                        Purchaser;

                (ii)    any permit or authority to which the Purchaser is a
                        party or by which the Purchaser is bound; or

                (iii)   Applicable Law (except for approvals required under the
                        Competition Act) or any judicial order, award, judgement
                        or decree applicable to the Purchaser.

        (e)     Litigation: There are no actions, suits or proceedings pending
                or, to the knowledge of the Purchaser, threatened against the
                Purchaser seeking relief which would prevent or materially
                hinder the consummation of the transactions contemplated by this
                Agreement.

        (f)     Investment Canada Act: The Purchaser is not a "non-Canadian"
                within the meaning of the Investment Canada Act (Canada).

        (g)     Acting as Principal: The Purchaser is purchasing the Purchased
                Shares as principal.

        (h)     Funds Available: The Purchaser has sufficient cash, available
                lines of credit or other sources of immediately available funds
                to enable the Purchaser to make payment of the Purchase Price
                and any other amounts to be paid by it hereunder (including any
                adjustment to the Purchase Price).

        (i)     No Fees etc.: The Purchaser has not incurred any obligation or
                liability, contingent or otherwise, for brokers' or finders'
                fees or commissions with respect to the transactions herein for
                which the Vendor shall have any obligation or liability.

5.3     SURVIVAL OF REPRESENTATIONS AND WARRANTIES

        Each Party acknowledges that the other may rely on the representations
        and warranties made by such Party pursuant to Sections 5.1 or 5.2, as
        the case may be. The representations and warranties in Sections 5.1 and
        5.2 shall be true on the Signing Date and on the Closing Date, and such
        representations and warranties shall continue in full force and effect
        and shall survive the Closing Date for the Survival Period applicable
        thereto for the benefit of the Party for which such representations and
        warranties were made.

5.4     NO ADDITIONAL REPRESENTATIONS OR WARRANTIES BY VENDOR

        Except as and to the extent set forth in Section 5.1, the Vendor makes
        no representation or warranties whatsoever, and disclaims all liability
        and responsibility for any

<PAGE>

                                     - 52 -

        representation, warranty, statement or information made or communicated
        (orally or in writing) to the Purchaser (including any opinion,
        information or advice which may have been provided to the Purchaser by
        any officer, shareholder, director, employee, agent, consultant or
        representative of a Purchased Entity, the Vendor, Affiliates of the
        Vendor, the Vendor's Counsel or any other agent, consultant,
        representative or Person, collectively referred to as the "Vendor's
        Representatives"). Without limiting the generality of the foregoing,
        except as and to the extent, if any, set forth in Section 5.1, the
        Vendor makes no representations or warranties as to:

        (a)     title to any of the Purchased Entity's interests in any
                properties or assets, including the PNG Assets;

        (b)     the quantity, quality or recoverability of Petroleum Substances
                respecting the Lands;

        (c)     any estimates of the value of the PNG Assets or the revenues
                applicable to future production from the Lands;

        (d)     any engineering, geological, environmental or other
                interpretations or economic evaluations respecting the PNG
                Assets;

        (e)     the rates of production of Petroleum Substances from the Lands;

        (f)     the quality, condition or serviceability of the PNG Assets;

        (g)     the suitability of any of the PNG Assets use for any purpose; or

        (h)     any information provided or made available to the Purchaser by
                the Vendor, a Purchased Entity or the Vendor's Representatives,
                including the Title and Operating Documents, the Financial
                Statements, any engineering report or update, books, accounts,
                records, minute books, Tax Returns and filings and other
                information and documents of the Purchased Entities and the
                Vendor.

        Without restricting the generality of the foregoing, subject to the
        Vendor and the Purchased Entities complying with Section 4.1, the
        Purchaser acknowledges that it has had full access to all information
        with respect to the PNG Assets and the business, financial condition,
        operations and prospects of the Purchased Entities and has made its own
        independent investigation, analysis, evaluation and inspection of the
        Purchased Entities, the PNG Assets and the business, financial
        condition, operations and prospects of the Purchased Entities, the PNG
        Assets and the extent and value of the reserves of Petroleum Substances
        attributable thereto and that it has relied solely on such
        investigation, analysis, evaluation and inspection as to its assessment
        of the quantum and value of the PNG Assets and the value of the
        Purchased Shares.

<PAGE>

                                     - 53 -

5.5     NO MERGER

        The representations and warranties in Sections 5.1 and 5.2 shall be
        deemed to apply to all transfers, assignments and other documents
        conveying any of the Purchased Shares from the Vendor to the Purchaser.
        Until the end of the Survival Period applicable thereto, there shall not
        be any merger of any of such representations or warranties in such
        assignments, transfers or other documents, notwithstanding any rule of
        law, equity or statute to the contrary, and all such rules are hereby
        waived.

                                   ARTICLE 6
                              CONDITIONS TO CLOSING

6.1     CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER TO CLOSE

        The obligation of the Purchaser to complete the purchase of the
        Purchased Shares from the Vendor pursuant to this Agreement is subject
        to the fulfilment, on or prior to the Closing Date, of the following
        conditions precedent:

        (a)     Representations and Warranties: All representations and
                warranties of the Vendor contained in this Agreement shall,
                except where a specific time is otherwise indicated, be true at
                and as of the Signing Date and the Closing Date as if made then
                in each case, except for inaccuracies which are not in the
                aggregate material, and a certificate in the form attached as
                Schedule 1.2(f) to that effect from a senior officer of PCI and
                PAC shall have been delivered to the Purchaser.

        (b)     Covenants and Agreements: The Vendor shall have complied with
                and performed in all material respects all covenants and
                agreements required by this Agreement to be complied with and
                performed by the Vendor at or prior to the Closing Date and a
                certificate in the form attached as Schedule 1.2(f) to that
                effect from a senior officer of PCI and PAC shall have been
                delivered to the Purchaser.

        (c)     No Adverse Physical Changes: The Purchaser shall be satisfied,
                acting reasonably, that, from the Signing Date to the Closing
                Date, there has been no: (i) physical change in any of the PNG
                Assets (other than production of Petroleum Substances in the
                ordinary course) which has or would have a material adverse
                effect on the value, use or operation of the PNG Assets in the
                aggregate; and (ii) material adverse effect on or a material
                adverse change to any of the Purchased Entities (including their
                business, financial condition, operations or future prospects)
                but excluding all those effects and changes that may affect the
                Canadian upstream oil and gas industry in general, and a
                certificate in the form attached as Schedule 1.2(f) to that
                effect from a senior officer of PCI and PAC shall have been
                delivered to the Purchaser.

        (d)     PNG Assets: The Purchaser shall be satisfied that (i) the PNG
                Assets shall have been sold, transferred, assigned, conveyed and
                contributed to the PCC Limited

<PAGE>

                                     - 54 -

                Partnership by PEI and PEC, and (ii) immediately prior thereto,
                the Vendor and PEC shall have entered into the Assumption of
                Liabilities Agreement.

        (e)     No Action or Proceeding: No suit, action or other proceeding
                shall, at Closing, be pending against any of the Parties or a
                Purchased Entity before any court or governmental entity seeking
                to restrain, prohibit, obtain damages or other relief in
                connection with the consummation of the transactions herein
                which would materially and adversely affect the Purchaser or a
                Purchased Entity.

        (f)     Release of Security: The Purchaser shall have received delivery
                of an Encumbrance Discharge in respect of all Security Interests
                to the extent such security encumbers the PNG Assets, the
                Purchased Shares or the partnership interests of the Purchased
                Corporations in the PCC Limited Partnership (except to the
                extent that such Security Interests are Permitted Encumbrances).

        (g)     Due Diligence: The Purchaser shall have conducted and completed
                a due diligence investigation relating to all aspects (including
                with respect to environmental, legal and operational due
                diligence matters) of all mining and non-Canadian oil or gas
                exploration, development, operations and activities (including
                all mining claims, prospects and interests) held or carried on,
                directly or indirectly, by a Purchased Entity or by any of its
                predecessors or any subsidiary of a predecessor and the
                Purchaser, shall be satisfied, acting reasonably, that the
                results of any and all such investigations, if determined
                adversely, could not reasonably be expected to result in a
                Financial Impact, whether absolute or contingent, on PEC in
                excess of $[omitted].

        (h)     Consents: The Purchaser shall have received delivery of all
                third Person consents, waivers and approvals to the transaction
                contemplated herein and to the restructuring to be effected
                post-Closing by the Purchaser and its Affiliates required in
                respect of PEI and its PNG Assets, in a manner and on terms and
                conditions satisfactory to the Purchaser.

        (i)     Letter of Credit: The Purchaser shall be satisfied, acting
                reasonably, with the form of and content of the Letter of Credit
                to be provided pursuant to Section 9.8.

        (j)     Closing Deliveries: The Purchaser shall have received delivery
                of all documents required to be delivered by the Vendor pursuant
                to Section 3.2(a).

        (k)     Outside Date: The Closing shall have occurred not later than the
                Outside Date.

6.2     CONDITIONS TO OBLIGATIONS OF VENDOR TO CLOSE

        The obligation of the Vendor to complete the sale of the Purchased
        Shares to the Purchaser pursuant to this Agreement is subject to the
        satisfaction at or prior to the Closing Date of the following conditions
        precedent:

<PAGE>

                                     - 55 -

        (a)     Representations and Warranties: All representations and
                warranties of the Purchaser contained in this Agreement shall,
                except where a specific time is otherwise indicated, be true at
                and as of the Signing Date and the Closing Date as if made then
                in each case except for inaccuracies which are not in the
                aggregate material and a certificate in the form attached as
                Schedule 1.2(g) to that effect from a senior officer of the
                Purchaser shall have been delivered to the Vendor.

        (b)     Covenants and Agreements: The Purchaser shall have complied with
                and performed in all material respects all covenants and
                agreements required by this Agreement to be complied with and
                performed by the Purchaser at or prior to the Closing Date and a
                certificate in the form attached as Schedule 1.2(g) to that
                effect from a senior officer of the Purchaser shall have been
                delivered to the Vendor.

        (c)     No Action or Proceeding: No suit, action or other proceeding
                shall, at Closing, be pending against any of the Parties or a
                Purchased Entity before any court or governmental entity seeking
                to restrain, prohibit, obtain damages or other relief in
                connection with the consummation of the transactions herein
                which would materially and adversely affect the Vendor or a
                Purchased Entity.

        (d)     Consents: The Vendor shall have received delivery of all third
                Person consents, waivers and approvals to the transaction
                contemplated herein required in respect of PEI and its PNG
                Assets, in a manner and on terms and conditions satisfactory to
                the Vendor.

        (e)     Closing Deliveries: The Vendor shall have received delivery of
                all documents required to be delivered by the Purchaser pursuant
                to Section 3.2(b).

        (f)     Outside Date: The Closing shall have occurred not later than the
                Outside Date.

6.3     PARTIES TO EXERCISE DILIGENCE WITH RESPECT TO CONDITIONS, ETC.

        Each Party shall proceed diligently, honestly and in good faith and use
        all reasonable efforts with respect to all matters within its control to
        satisfy the conditions referred to in Sections 6.1 and 6.2. In
        particular:

        (a)     The Vendor and the Purchaser shall each use all of their
                respective reasonable efforts, and shall cooperate with each
                other, to obtain all governmental and regulatory filings,
                approvals and consents as may be or become necessary for or in
                connection with the consummation of the transactions
                contemplated by this Agreement.

        (b)     The Vendor and Purchaser will, at the request of the other
                Party, from time to time during the Interim Period, provide the
                other Party and its representatives with copies of all
                correspondence or documents (including drafts thereof) related
                to the satisfaction of all the conditions to Closing together
                with such written

<PAGE>

                                     - 56 -

                advice and information with respect to the status of the
                Purchaser's or the Vendor's (as the case may be) efforts to
                obtain the satisfaction of the conditions to Closing as the
                Vendor or the Purchaser (as the case may be) may reasonably
                request.

        The Vendor shall reimburse the Purchaser for 50% of the application fee
        for the filing by the Purchaser of a request for an advance ruling
        certificate pursuant to the Competition Act in respect of the
        transactions contemplated herein.

6.4     WAIVER OF CONDITIONS

        The conditions in Section 6.1 are for the sole benefit of the Purchaser
        and the conditions in Section 6.2 are for the sole benefit of the
        Vendor. The Party for the benefit of which such conditions have been
        included may waive any of them, in whole or in part, by written notice
        to the other Party.

6.5     FAILURE TO SATISFY CONDITIONS

        If any of the conditions in Sections 6.1 or 6.2 has not been satisfied
        at or before the Closing Date and such condition has not been waived by
        the Party for the benefit of which such condition has been included,
        such Party may terminate this Agreement pursuant to Section 7.1 by
        written notice to the other Party prior to the Closing. The Purchaser
        shall use reasonable efforts to waive the condition set out at Section
        6.1(g) as soon as possible after the Signing Date.

                                    ARTICLE 7
                                   TERMINATION

7.1     GROUNDS FOR TERMINATION

        This Agreement may be terminated prior to the Closing Date:

        (a)     by the mutual written agreement of the Vendor and the Purchaser;

        (b)     in accordance with Section 6.5 by the Party and in the
                circumstances contemplated thereby; or

        (c)     by the Vendor or by the Purchaser if the consummation of such
                transactions would violate any non-appealable final order,
                decree or judgment of any court or governmental body having
                competent jurisdiction;

        provided that, notwithstanding anything to the contrary express or
        implied herein, a Party shall not be allowed to exercise any right of
        termination pursuant to this Section 7.1 if the event giving rise to
        such right is due to a Purchase Agreement Default by such Party.

<PAGE>

                                     - 57 -

7.2     EFFECT OF TERMINATION

        If this Agreement is terminated by the Vendor or by the Purchaser as
        permitted under Section 7.1:

        (a)     except as contemplated by this Section 7.2, such termination
                shall be without liability of any Party to any other Party to
                this Agreement, or to any of their shareholders, directors,
                officers, employees, agents, consultants or representatives, and
                the Parties shall be released from all of their obligations
                under this Agreement;

        (b)     if such termination shall result from the Purchase Agreement
                Default of a Party, such Party shall not be released from such
                Purchase Agreement Default and shall be fully liable for any and
                all losses, costs, damages (excluding consequential damages),
                expenses, charges, fines, penalties, assessments or other
                liabilities sustained or incurred by the other Party or Parties
                directly or indirectly as a result thereof;

        (c)     the Deposit and all interest earned thereon shall be paid to the
                Party entitled thereto as determined in Section 7.3;

        (d)     the Purchaser shall promptly return to the Vendor all materials
                delivered to the Purchaser by the Vendor hereunder, together
                with all copies of them that may have been made by or for the
                Purchaser; and

        (e)     Article 8, Article 9 and Section 12.6 shall survive any
                termination of this Agreement.

7.3     ENTITLEMENT TO DEPOSIT ON TERMINATION

        If this Agreement is terminated pursuant to Section 7.1 and the event
        giving rise to the termination is not due to the Purchase Agreement
        Default of the Purchaser, then the Deposit provided for in Section 2.4
        shall be returned to the Purchaser, together with interest earned
        thereon. However, if this Agreement is terminated pursuant to Section
        7.1 prior to Closing as a result of a Purchase Agreement Default by the
        Purchaser, then such Deposit, together with the interest earned thereon,
        may be retained by the Vendor and applied by the Vendor on account of
        its damages contemplated by Section 7.2(b) as a genuine pre-estimate of
        the Vendor's liquidated damages and not as a penalty. If the Vendor's
        actual damages exceed the Deposit and all interest earned thereon, the
        Vendor shall not be entitled to recover the full amount of its actual
        damages.

<PAGE>

                                     - 58 -

                                    ARTICLE 8
                  INFORMATION, MATERIALS AND CONTINUING REPORTS

8.1     ACCESS TO INFORMATION

        After the Closing Date, the Vendor may upon reasonable notice to the
        Purchaser and subject to contractual restrictions relating to
        disclosure, have access during business hours to the relevant Title and
        Operating Documents, any engineering report, the Financial Statements
        and the financial statements, books, accounts, records, minute books,
        Tax Returns, Tax assessments, filings, maps, documents, files,
        information and materials of the Purchased Entities and to obtain and
        copy information in respect of matters arising out of or relating to any
        period of time through the Closing if copies of such records or if the
        information derived from such access would be helpful and beneficial to
        the Vendor or its Affiliates:

                (i)     in connection with audits;

                (ii)    in connection with the Vendor's dealings with taxing and
                        other regulatory authorities;

                (iii)   to comply with Applicable Law; and

                (iv)    in connection with any action, suit or proceeding
                        commenced or threatened by the Purchased Entities, the
                        Purchaser or any third Person against the Vendor, its
                        Affiliates, or its or their respective directors,
                        officers, employees, agents, solicitors, engineers,
                        accountants and consultants for which the Vendor or its
                        Affiliates may have any liability.

8.2     MAINTENANCE OF INFORMATION

        The Purchaser agrees that all of the information, materials and other
        records of the Purchased Entities, including the general corporate or
        partnership records, the financial and accounting records and the Tax
        records, to the extent such information, material and other records
        relate to or were created with respect to matters arising or relating to
        the period through the Closing, shall be retained, maintained in good
        order and good condition and kept in a reasonably accessible location by
        the Purchaser and its Affiliates for a period of time (the "Retention
        Period") beginning on the Closing Date and ending on the later of:

        (a)     the expiration of any applicable limitations periods for all Tax
                periods beginning before the Closing, as such limitations are
                provided for under Applicable Law;

        (b)     the end of such period as may be required by Applicable Law; or

        (c)     5 years following the Closing.

<PAGE>

                                     - 59 -

        The Purchaser further agrees that the Vendor and its Affiliates may,
        during the Retention Period at their expense, make such copies of the
        information and materials described above as they may reasonably
        request, provided that at any time prior to the expiration of the
        Retention Period, the Purchaser may destroy or give up possession of any
        such information or materials if it first offers the Vendor the
        opportunity (by delivery of at least 60 days prior written notice to the
        Vendor, which notice shall contain a detailed listing of the information
        and materials proposed to be destroyed, with an additional copy of such
        notice delivered to the attention of the Vendor's Tax department), at
        the Vendor's expense, without any payment to the Purchaser, to obtain
        delivery of or a copy of so much of such information or materials as the
        Vendor, in its sole discretion, desires.

8.3     TAX RETURNS

        The Vendor shall prepare and file all Tax Returns and forms for Taxes
        applicable to the Purchased Entities for periods ending on or before the
        Closing Date and the Purchaser shall (i) provide the Vendor reasonable
        access to all information required to do so on a timely basis, and (ii)
        have an opportunity to review, comment on and approve, acting
        reasonably, such Tax Returns prior to the filing of same. The Vendor
        shall be entitled to use Resource Pools of a Purchased Entity to
        eliminate any liabilities of such Purchased Entity for Taxes in such Tax
        Returns, to the extent such pools are eligible to eliminate any such
        liabilities.

8.4     FINANCIAL INFORMATION

        (a)     The Vendor agrees that upon the written request of the
                Purchaser, if required by any securities regulator in connection
                with the filing by the Purchaser or its Affiliates, or any of
                them, of public disclosure or other documents after the Closing,
                indicating what financial or other information in relation to a
                Purchased Entity is required and the purpose of such request,
                the Vendor will to the extent required by Applicable Law provide
                to the Purchaser and its auditors access to any financial
                information in the possession of the Vendor relating to a
                Purchased Entity (including without limitation source records,
                production records and invoices, and all other financial
                statements and summaries previously prepared by the Vendor or a
                Purchased Entity or predecessors in title to any of them and in
                the possession of the Vendor) and reasonable access to its
                personnel during normal hours (such access and financial
                information referred to in this Section 8.4 as the (the
                "Financial Information"), the intention of this Section 8.4(a)
                being that the Vendor will use reasonable commercial efforts to
                provide access to the Financial Information sufficient to allow
                the Purchaser to prepare any such financial statements and to
                allow the Purchaser's auditors to express an audit opinion
                without reservation in respect of any financial statements
                prepared in respect of a Purchased Entity.

        (b)     The Vendor shall provide a representation letter in connection
                with any matter referred to in Section 8.4(a) to the auditors of
                the Purchaser, which is reasonable in form and substance under
                the circumstances.

<PAGE>

                                     - 60 -

        (c)     Any disclosure by the Purchaser of the Financial Information
                solely for the purposes set out in Section 8.4(a) and to the
                extent reasonably necessary to fulfil same shall not constitute
                a breach by the Purchaser of any confidentiality obligations
                pursuant to this Agreement or the Confidentiality Agreement.

8.5     INFORMATION SYSTEMS

        From and after Closing, the Vendor will use its best efforts to work and
        co-operate with the Purchaser in an effort to provide to the Purchaser
        all information pertaining to the Purchased Entities (including the
        information pertaining to the PNG Assets) in a form which will
        accommodate the integration of such information into the Purchaser.

                                    ARTICLE 9
                          LIABILITY AND INDEMNIFICATION

9.1     DEFINED TERMS

        In this Agreement:

        "Additional Indemnitees" means, with respect to any Person to which an
        indemnity is granted pursuant to this Article 9, its Affiliates and the
        respective directors, officers, servants, agents, advisors and employees
        of that Person and its Affiliates.

        "Indemnified Losses" means all losses, costs, damages, expenses,
        charges, fines, penalties, assessments or other liabilities whatsoever,
        but does not (except to the extent claimed by a third Person in respect
        of Non-PNG Related Environmental Liabilities) include consequential,
        incidental, economic or punitive losses, damages or claims.

        "Notice of Claim" means a notice by the Vendor or the Purchaser, as
        applicable, on behalf of itself or one or more Additional Indemnities
        (if applicable) of a claim for Indemnified Losses pursuant to Section
        9.2 or 9.3, as applicable, together with detailed particulars as to the
        nature and amount of the claim, the basis which it is sought and the
        provisions of this Agreement applicable to such claim.

        "Survival Period" means:

                (i)     in respect of the representations and warranties set out
                        in Sections 5.1(z) and 5.1(ee), the period ending on the
                        day which is [omitted] days after the expiry of all
                        reassessment periods in respect of any taxation years,
                        or similar reporting periods, of a Purchased Entity
                        which ended, or end, on, or prior to, the Closing Date;

                (ii)    in respect of the representations, warranties, covenants
                        and agreements set out in Sections 5.1(j), 5.1(o),
                        5.1(hh), 5.1(ii), 9.2(d), 9.2(f), 9.2(g) and 9.2(h) an
                        indefinite period following the Closing Date; and

<PAGE>

                                     - 61 -

                (iii)   for all other representations, warranties, covenants and
                        agreements, a period ending [omitted] months after the
                        Closing Date.

9.2     RESPONSIBILITY OF VENDOR

        Subject to the limitations set forth herein, the Vendor shall:

        (a)     be liable to the Purchaser and its Additional Indemnitees
                (which, after Closing, shall include the Purchased Entities) for
                all Indemnified Losses which any one or more of them could
                suffer, sustain, pay or incur; and

        (b)     indemnify and save harmless the Purchaser and its Additional
                Indemnitees (which, after Closing, shall include the Purchased
                Entities) from and against all Indemnified Losses which could be
                brought against or suffered by any one or more of them or which
                any one or more of them could sustain, pay or incur;

        as a direct result of any act, omission, circumstance or other matter
        arising out of, resulting from, attributable to or connected with:

        (c)     any Purchase Agreement Default made by the Vendor herein or in
                any document delivered at Closing;

        (d)     a breach by the Vendor or the failure of the Vendor to perform
                or observe any of the covenants, indemnities or agreements to be
                performed by the Vendor under the Assumption of Liabilities
                Agreement having a Financial Impact on PEC, the Purchaser or any
                of the Purchaser's Affiliates in excess of $100,000,
                individually or in the aggregate;

        (e)     any termination of this Agreement by the Purchaser as
                contemplated in Section 7.2(b);

        (f)     any reassessment by the Minister of National Revenue for
                withholding Tax, plus penalties and interest attributable to the
                Purchase Price;

        (g)     any reassessment by the Minister of National Revenue for Tax,
                plus penalties and interest attributable to the declaration of
                dividends payable in stock made by PEC and PEI during the
                Interim Period or on the Closing Date; and

        (h)     any Tax, plus penalties and interest arising from the conversion
                of debt of PEC to equity as per Section 5.1(i).

9.3     RESPONSIBILITY OF PURCHASER

        Subject to the limitations set forth herein, the Purchaser shall:

        (a)     be liable to the Vendor and its Additional Indemnitees for all
                Indemnified Losses which any one or more of them may suffer,
                sustain, pay or incur; and

<PAGE>

                                     - 62 -

        (b)     indemnify and save harmless the Vendor and its Additional
                Indemnitees from and against all Indemnified Losses which may be
                brought against or suffered by any one or more of them or which
                any one or more of them may sustain, pay or incur,

        as a direct result of any act, omission, circumstance or other matter
        arising out of, resulting from, attributable to or connected with
        (whether before, on or after the Closing Date):

        (c)     any Purchase Agreement Default made by the Purchaser herein or
                in any document delivered at Closing; or

        (d)     any termination of this Agreement by the Vendor pursuant to
                Section 7.2(b); or

        (e)     the PNG Assets or a Purchased Entity, including all Abandonment
                and Reclamation Obligations and PNG Related Environmental Damage
                (but excluding all Non-PNG Related Environmental Liabilities),
                except in-so-far as the Purchaser remains entitled to make a
                claim against the Vendor pursuant to Section 9.2.

9.4     LIMIT ON RESPONSIBILITY

        (a)     Limit on Vendor's Responsibility: The Vendor's obligations and
                liability under this Agreement shall be subject to the following
                limitations:

                (i)     Other than in respect of Indemnified Losses attributable
                        to Sections 9.2(c), 9.2(e) and attributable to a
                        Purchase Agreement Default in respect of Section
                        5.1(ii), the Vendor shall have no liability in
                        connection with any Indemnified Losses until the
                        aggregate of such claims exceeds $[omitted] and upon the
                        aggregate of such Indemnified Losses exceeding
                        $[omitted], the Vendor shall be required to indemnify in
                        respect of the amount of all such Indemnified Losses.
                        With respect to Indemnified Losses attributable to
                        Sections 9.2(c), 9.2(e) and attributable to a Purchase
                        Agreement Default in respect of Section 5.1(ii), the
                        Vendor shall be liable for and required to indemnify in
                        respect of the amount of all such Indemnified Losses.

                (ii)    The total of the liabilities and indemnities of the
                        Vendor under this Agreement, including any claims for
                        Indemnified Losses arising out of, resulting from,
                        attributable to or connected with Purchase Agreement
                        Defaults, shall not exceed 100% of the Purchase Price,
                        as adjusted pursuant hereto.

                (iii)   The Vendor shall have no liability in connection with
                        Indemnified Losses unless the Purchaser shall, prior to
                        the expiry of the Survival Period, have provided the
                        Vendor with a Notice of Claim.

<PAGE>

                                     - 63 -

        (b)     Limit on Purchaser's Responsibility: The Purchaser's obligations
                and liability under this Agreement shall be subject to the
                following limitations:

                (i)     The Purchaser shall have no liability in connection with
                        any Indemnified Losses until the aggregate of such
                        claims exceeds $[omitted] and upon the aggregate of such
                        Indemnified Losses exceeding $[omitted], the Purchaser
                        shall be required to indemnify in respect of the amount
                        of all such Indemnified Losses.

                (ii)    The total of the liabilities and indemnities of the
                        Purchaser under this Agreement, including any claims for
                        Indemnified Losses arising out of, resulting from,
                        attributable to or connected with Purchase Agreement
                        Defaults, shall not exceed 100% of the Purchase Price,
                        as adjusted pursuant hereto.

                (iii)   The Purchaser shall have no liability in connection with
                        Indemnified Losses unless the Vendor shall, prior to the
                        expiry of the Survival Period, have provided the
                        Purchaser with a Notice of Claim.

                (iv)    Following the Survival Period, the limitations of this
                        Section 9.4 shall not apply to the responsibilities of
                        Purchaser described in Section 9.3(e) for acts,
                        omissions, circumstances or other matters arising after
                        the Closing.

9.5     RESPONSIBILITY EXTENDS TO LEGAL COSTS AND SETTLEMENTS

        Notwithstanding any provision to the contrary contained in this Article
        9, references to costs in the liability and indemnification obligations
        prescribed by Sections 9.2 and 9.3 shall be deemed to include legal (on
        a solicitor-client basis) and other professional fees and disbursements
        on a full indemnity basis, and shall extend to settlements,
        satisfactions or other compromises with respect to claims by third
        Persons for Indemnified Losses.

9.6     LIMITATIONS

        Notwithstanding anything herein to the contrary:

        (a)     The indemnities provided in Sections 9.2 and 9.3 and shall not
                apply to the extent that claims for Indemnified Losses are
                reimbursed to the Person to be indemnified by insurance.

        (b)     If Indemnified Losses suffered, sustained, paid or incurred by
                Persons claiming indemnity at any time before or subsequent to
                the making of an indemnity payment are reduced by any Tax
                benefit or recovery, the amount of such reduction, together with
                interest thereon from the date of payment thereof at the rate
                specified in Section 2.5, shall promptly be paid by the Person
                claiming indemnity to the indemnifying party.

<PAGE>

                                     - 64 -

        (c)     The Purchaser and its Additional Indemnitees shall, except as it
                relates to Non-PNG Related Environmental Liabilities, have no
                remedy or cause of action for a Purchase Agreement Default by
                the Vendor in respect of any act, omission, circumstance or
                other matter actually known to the Purchaser or its Affiliates
                or their respective directors, officers, servants, agents, or
                employees as at the Closing Date.

9.7     SPECIFIC PERFORMANCE

        Notwithstanding any provision to the contrary contained in this
        Agreement, no claim for indemnification by the Purchaser pursuant to
        this Article 9 shall limit the Purchaser's right to seek and obtain
        specific performance as against the Vendor for any act, omission,
        circumstance or other matter arising out of, resulting from,
        attributable to or connected with any Purchase Agreement Default made by
        the Vendor.

9.8     LETTER OF CREDIT

        (a)     The Vendor shall secure its obligations under Section 9.2(c),
                insofar as it relates to a Purchase Agreement Default in respect
                of Section 5.1(ii), and Section 9.2(d) by providing the
                Purchaser with a Letter of Credit naming the Purchaser as
                beneficiary for an amount equal to the LC Amount. Such Letter of
                Credit shall be delivered to the Purchaser concurrently with the
                execution of this Agreement, and the Vendor shall maintain the
                Letter of Credit in effect, including by way of renewals for the
                entire LC Claim Period, from time to time prior to its expiry
                date. The Purchaser will be entitled to present such Letter of
                Credit for payment if it provides the Vendor with a Notice of
                Claim for Indemnified Losses pursuant to Section 9.2(c), insofar
                as it relates to a Purchase Agreement Default in respect of
                Section 5.1(ii), or Section 9.2(d) but only to the extent of
                such Indemnified Losses or if a renewal Letter of Credit is not
                provided by the Vendor to the Purchaser at least 30 days prior
                to the expiry of the then outstanding Letter of Credit;
                provided, that, the Vendor shall maintain the Letter of Credit
                for the full LC Amount in effect for the entire LC Claim Period
                notwithstanding that the Purchaser may have presented a Letter
                of Credit for payment earlier in the LC Claim Period. At any
                time after the Closing Date, the Vendor may, in lieu of the
                Letter of Credit, secure its obligations under Section 9.2(c),
                by providing environmental insurance wherein the insurer (who
                shall be satisfactory to the Purchaser, acting reasonably)
                agrees to unconditionally indemnify, for the remainder of the LC
                Claim Period, PEC, the Purchaser and the Purchaser's Affiliates
                for any Non-PNG Related Environmental Liabilities on terms
                satisfactory to the Purchaser, acting reasonably, having regard
                to all information (the "non-PNG information") that the
                Purchaser as of the Signing Date or at any time thereafter has
                in respect of non-Canadian petroleum and natural gas
                exploration, development and production operations carried out
                by any one or more of PEC or any of its predecessors or
                subsidiaries of predecessors; provided, however, that the Vendor
                shall be solely liable for all premiums and related costs
                associated with such insurance. The

<PAGE>

                                     - 65 -

                Purchaser shall grant reasonable access to the non-PNG
                information to any such insurer.

        (b)     Section 9.8(a) shall not impair, effect or limit in any way
                whatsoever the rights and remedies of the Purchaser and its
                Additional Indemnities otherwise available in this Article 9.

9.9     LIMITATION ON RIGHTS OR REMEDIES

        Subject to Sections 9.7 and 9.8:

        (a)     this Article 9 sets forth the sole rights and remedies of each
                Party and its Additional Indemnitees in connection with (i) the
                transactions contemplated herein, and (ii) any act, omission,
                circumstance or other matter arising out of, resulting from,
                attributable to or connected with any Purchase Agreement Default
                made by the other Party, and such first mentioned Party and its
                Additional Indemnitees shall have no further right or remedy
                (whether legal, equitable, fiduciary or in tort) whatsoever,
                against the other Party, or its Affiliates or their respective
                directors, officers, servants, agents, advisors or employees;
                and

        (b)     the Purchaser acknowledges that it shall not be entitled to any
                rights or remedies as against the Vendor, its Affiliates or
                their respective directors, officers, servants, agents and
                employees under Applicable Law, including common law or in
                equity, pertaining to any Indemnified Losses, in respect of
                which it is required to indemnify the Vendor pursuant to Section
                9.3 and that it shall not be entitled to name the Vendor or its
                Affiliates or their respective directors, officers, servants,
                agents and employees under Section 9.3 as third party to any
                action commenced by any third Person against the Purchaser or a
                Purchased Entity.

9.10    PROCEDURE - INDEMNITIES

        Any Person seeking indemnification (including by way of presentation of
        Letter of Credit pursuant to Section 9.8) shall give reasonably prompt
        notice thereof to the Person from whom indemnification is sought. The
        Party from whom indemnification (including by way of presentation of
        Letter of Credit pursuant to Section 9.8) is sought shall have the sole
        right to conduct, settle or otherwise dispose of any legal action in
        respect of which indemnification (including by way of presentation of
        Letter of Credit pursuant to Section 9.8) is sought in any manner it
        deems appropriate without the consent of the other Party if but only if
        it has agreed that the matters in the action are indemnified pursuant to
        Sections 9.2 or 9.3. If the Party from whom indemnification (including
        by way of presentation of Letter of Credit pursuant to Section 9.8) is
        sought pays the indemnified amount to the other Party seeking
        indemnification, the paying Party shall not be responsible for any costs
        described in Section 9.5 incurred after such payment.

<PAGE>

                                     - 66 -

9.11    NO MERGER OF LEGAL RESPONSIBILITIES

        The liabilities and indemnities created in this Article 9 shall be
        deemed to apply to, and shall not merge in, any and all assignments,
        transfer and other documents conveying any of the Purchased Shares to
        the Purchaser, notwithstanding the terms of such assignments, transfers,
        conveyances, novations and other documents, Applicable Law or any rule
        of law or equity to the contrary, and all such rules are hereby waived.

9.12    NO LIMITATION

        Closing of the transactions contemplated herein or any waiver or
        satisfaction of any condition precedent resulting in Closing of the
        transactions contemplated herein shall not in any way whatsoever limit,
        impact or derogate from the indemnities provided for herein.

                                   ARTICLE 10
                                 CONFIDENTIALITY

10.1    RESTRICTIONS ON DISCLOSURE OF PURCHASER

        Prior to the Closing, the Purchaser shall keep confidential all
        information disclosed to it by the Vendor, a Purchased Entity or their
        agents relating to the Purchased Entities and the PNG Assets in
        accordance with the provisions of the Confidentiality Agreement.

10.2    RESTRICTIONS ON DISCLOSURE OF VENDOR

        Provided Closing occurs (except to the extent required pursuant to
        Applicable Law), the Vendor shall keep confidential all information
        respecting the PNG Assets for a term of 18 months from the date of
        Closing. Such confidential information respecting the PNG Assets shall,
        following the Closing Date, be disclosed only to those of its employees,
        agents, legal counsel, accountants or other representatives on a "need
        to know" basis. The foregoing restrictions on disclosure shall not apply
        to information, to the extent it:

        (a)     is or becomes publicly available through no act or omission of
                the Vendor or their employees, agents, consultants, advisors or
                other representatives;

        (b)     is subsequently obtained lawfully from a third party who, after
                reasonable inquiry, the Vendor does not know is bound to the
                Purchaser or the Purchased Entities to restrict the use or
                disclosure of such information;

        (c)     is already in the Vendor's possession, or in the possession of
                any Affiliate of the Vendor, at the time of disclosure, without
                any restriction on its disclosure; or

        (d)     is required to be disclosed pursuant to Applicable Law.

        Specific items of information shall not be considered to be in the
        public domain merely because more general information respecting the PNG
        Assets is in the public domain.

<PAGE>

                                     - 67 -

                                   ARTICLE 11
                                    GUARANTEE

11.1    GUARANTEE

        The Guarantor hereby unconditionally and irrevocably guarantees the
        punctual and complete performance by the Purchaser of all of its
        obligations under this Agreement and any agreement delivered under or
        pursuant to this Agreement.

                                   ARTICLE 12
                            MISCELLANEOUS PROVISIONS

12.1    WAIVER MUST BE IN WRITING

        No waiver by any Party of any breach (whether actual or anticipated) of
        any of the terms, conditions, representations or warranties contained
        herein shall take effect or be binding upon that Party unless the waiver
        is expressed in writing under the authority of that Party. Any waiver so
        given shall extend only to the particular breach so waived and shall not
        limit or affect any rights with respect to any other or future breach.

12.2    NO AMENDMENT EXCEPT IN WRITING

        This Agreement may be amended only by written instrument executed by the
        Vendor and the Purchaser.

12.3    ASSIGNMENTS BEFORE CLOSING

        Prior to Closing, neither Party may assign its interest in or under this
        Agreement without the prior written consent of the other Party.

12.4    SERVICE OF NOTICE

        Notwithstanding anything to the contrary contained herein, all notices
        required or permitted hereunder shall be in writing. Any notice to be
        given hereunder shall be deemed to be served properly if served in any
        of the following modes:

        (a)     personally, by delivering the notice to the Party on which it is
                to be served at that Party's address for service. Personally
                served notices shall be deemed to be received by the addressee
                when actually delivered as aforesaid, provided that such
                delivery shall be during normal business hours on any Business
                Day. If a notice is not delivered on a Business Day or is
                delivered after the addressee's normal business hours, such
                notice shall be deemed to have been received by such Party at
                the commencement of the addressee's first Business Day next
                following the time of the delivery;

        (b)     by facsimile directed to the Party on which it is to be served
                at that Party's address for service. A notice so served shall be
                deemed to be received by the addressee

<PAGE>

                                     - 68 -

                when actually received by it, if received within normal business
                hours on any Business Day or at the commencement of the next
                ensuing Business Day following transmission if such notice is
                not received during business hours; or

        (c)     by mailing it first class (air mail if to or from a location
                outside of Canada) registered post, postage prepaid, directed to
                the Party on which it is to be served at that Party's address
                for service. Notices so served shall be deemed to be received by
                the addressee at noon, local time, on the earlier of the actual
                date of receipt or the 4th Business Day following the mailing
                thereof. However, if postal service is (or is reasonably
                anticipated to be) interrupted or operating with unusual delay,
                notice shall not be served by such means during such
                interruption or period of delay.

12.5    ADDRESSES FOR NOTICES

        The address for service of notices hereunder of each of the Parties
        shall be as follows:

        VENDOR:           c/o PetroCorp Incorporated
                          Business Address:     6733 South Yale Avenue
                                                Tulsa, OK 74136
                                                U.S.A.

                          Mailing Address:      P.O. Box 21298
                                                Tulsa, OK 74121-1298
                                                U.S.A.

                          Attention:    Mr. Gary R. Christopher
                                        President and Chief Executive Officer

                          Fax:          [omitted]
                          Telephone:    [omitted]

        Copy to:          Frederic Dorwart, Lawyers
                          Old City Hall
                          124 East Fourth Street
                          Tulsa, OK 74103-5010
                          U.S.A.

                          Attention:    Mr. Fred Dorwart
                          Fax:          [omitted]
                          Telephone:    [omitted]

<PAGE>

                                     - 69 -

        PURCHASER:        1022694 Alberta Ltd.
                          The Dome Tower
                          3000, 333 - 7th Avenue S.W.
                          Calgary, AB  T2P 2Z1

                          Attention:    Mr. G.J. Kerr
                                        President and CEO

                          Fax:          [omitted]
                          Telephone:    [omitted]

        Copy to:          Blake, Cassels & Graydon LLP
                          3500, 855 - 2nd Street S.W.
                          Calgary, AB  T2P 4J8

                          Attention:    Mr. Mungo Hardwicke-Brown

                          Fax:          [omitted]
                          Telephone:    [omitted]

        GUARANTOR:        EnerMark Inc.
                          The Dome Tower
                          3000, 333 - 7th Avenue S.W.
                          Calgary, AB T2P 2Z1

                          Attention:    Mr. G.J. Kerr
                                        President and CEO

                          Fax:          [omitted]
                          Telephone:    [omitted]

        Copy to:          Blake, Cassels & Graydon LLP
                          3500, 855 - 2nd Street S.W.
                          Calgary, AB  T2P 4J8

                          Attention:    Mr. Mungo Hardwicke-Brown

                          Fax:          [omitted]
                          Telephone:    [omitted]

        A Party may change its address for service by notice to the other Party,
        and such changed address for service thereafter shall be effective for
        all purposes of this Agreement.

<PAGE>

                                     - 70 -

12.6    CONSULTANTS AND ADVISORS BOUND

        If the Purchaser employs consultants, advisors or agents to assist in
        its review of the Purchased Corporations pursuant to Article 4, the
        Purchaser shall be responsible to the Vendor for ensuring that such
        consultants, advisors and agents comply with the restrictions on the use
        and disclosure of information set forth in this Agreement.

12.7    PARTIES TO DISCUSS PRESS RELEASES

        The Parties shall co-operate with each other in relaying to third
        parties information concerning this Agreement and the transactions
        contemplated herein, and shall discuss drafts of all press releases and
        other releases of information for dissemination to the public pertaining
        hereto. However, nothing in this Section 12.7 shall prevent a Party from
        furnishing any information to any governmental agency or regulatory
        authority or stock exchange or to the public, insofar only as is
        required by this Agreement, Applicable Law or securities laws applicable
        to such Party, provided that a Party which proposes to make such a
        public disclosure shall, to the extent reasonably possible, provide the
        other Party with a draft of such statement a sufficient time prior to
        its release to enable such other Party to review such draft and advise
        that Party of any comments it may have with respect thereto.

12.8    COSTS AND EXPENSES

        Except as specifically provided herein, all legal and other costs and
        expenses in connection with this Agreement and the transactions
        contemplated hereby shall be paid by the Party which incurred the same.
        PCI shall be solely liable for all reasonable legal costs and expenses
        incurred by it and the Purchaser and its Affiliates for the matters
        contemplated in or otherwise related to Sections 6.1(h) and 6.2(d).

12.9    FURTHER ASSURANCES

        At the Closing Date and thereafter as may be necessary, the Parties
        shall execute, acknowledge and deliver such instruments and take such
        other actions as may be reasonably necessary to fulfil their respective
        obligations under this Agreement.

12.10   GOVERNING LAW; ATTORNMENT; ETC.

        (a)     This Agreement shall be governed by, and construed and enforced
                in accordance with, the applicable laws, other than conflict of
                laws rules, prevailing in the Province of Alberta.

        (b)     The Parties irrevocably:

                (i)     submit and attorn to the non-exclusive jurisdiction of
                        the Courts of the Province of Alberta for all matters
                        arising out of or relating to this Agreement, or any of
                        the transactions contemplated hereby;

<PAGE>

                                     - 71 -

                (ii)    waive all right to object to jurisdiction of such Courts
                        in any legal action or proceeding relative to this
                        Agreement or the transactions contemplated hereby or
                        execution of any judgment, order or decree issued in or
                        as a result of any such action, suit or proceeding which
                        they may now or hereafter have by reason of domicile or
                        otherwise;

                (iii)   waive any objection to the laying of venue in such
                        Courts of any of the aforesaid actions, suits or
                        proceedings arising out of or in connection with this
                        Agreement or the transactions contemplated hereby;

                (iv)    waive and agree not to plead or claim that any action,
                        suit or proceeding in such Courts has been brought in an
                        inconvenient forum; and

                (v)     waive any right they may have to, or to apply for, trial
                        by jury in connection with any matter, action,
                        proceeding, claim or counterclaim arising out of or
                        relating to this Agreement or any of the transactions
                        contemplated hereby.

        (c)     The Vendor shall appoint and maintain an attorney in Alberta for
                service of process in respect of actions, suits or proceedings
                arising out of or in connection with this Agreement or the
                transactions contemplated hereby and advise the Purchaser at
                Closing of the name and address of such attorney, provided that
                they shall not change the attorney so appointed or terminate the
                appointment unless (and no change or termination shall be
                effective until) they have previously given written advice to
                the Purchaser of a new attorney in Alberta for such purpose, in
                which case this proviso shall again apply in respect of the new
                attorney so appointed.

12.11   INVALIDITY OF PROVISIONS

        If any of the provisions of this Agreement are determined to be invalid,
        illegal or unenforceable in any respect, the validity, legality or
        enforceability of the remaining provisions shall not in any way be
        affected or impaired thereby.

12.12   TIME

        Time shall be of the essence in this Agreement.

12.13   SUPERSEDES EARLIER AGREEMENTS

        This Agreement constitutes the entire agreement between the Parties
        relating to the subject matter hereof; and there are no collateral or
        other statements, understandings, covenants, agreements, representations
        or warranties, written or oral, relating to the subject matter hereof,
        except the Confidentiality Agreement. Other than the Confidentiality
        Agreement, this Agreement supersedes all prior agreements,
        understandings, negotiations and discussions, whether oral or written,
        between the Parties

<PAGE>

                                     - 72 -

        or their predecessors relating to the subject matter of this Agreement,
        including the Letter of Intent.

12.14   ENUREMENT

        This Agreement shall be binding upon and enure to the benefit of the
        Parties and their respective successors and permitted assigns.

12.15   COUNTERPART EXECUTION

        This Agreement may be executed in separate counterparts and all executed
        counterparts together shall constitute one agreement. A signed
        counterpart provided by way of telecopier will be as binding upon the
        Parties as an originally signed counterpart.

        IN WITNESS WHEREOF the Parties have duly executed this Agreement.

                                PETROCORP INCORPORATED

                                Per:    /s/  Gary R. Christopher
                                        ------------------------
                                        Name: Gary R. Christopher
                                        Title: President and CEO

                                PETROCORP ACQUISITION COMPANY

                                Per:    /s/ Gary R. Christopher
                                        -----------------------
                                        Name: Gary R. Christopher
                                        Title: President and CEO

                                1022694 ALBERTA LTD.

                                Per:    /s/ Gord Kerr
                                        -------------
                                        Name: Gord Kerr
                                        Title: President

                                ENERMARK INC.

                                Per:    /s/ Gord Kerr
                                        -------------
                                        Name: Gord Kerr
                                        Title: President

<PAGE>

The following is a list of schedules which have been omitted for purposes of
this filing:

<TABLE>
        <S>   <C>                         <C>
        (a)   Schedule 1.2(a)             Land Schedule
        (b)   Schedule 1.2(b)             Financial Statements
        (c)   Schedule 1.2(c)             Escrow Agreement
        (d)   Schedule 1.2(d)             Holdback Agreement
        (e)   Schedule 1.2(e)             Disclosure Schedule
        (f)   Schedule 1.2(f)             Form of Officer's Certificate of the Vendor
        (g)   Schedule 1.2(g)             Form of Officer's Certificate of the Purchaser
        (h)   Schedule 1.2(h)             Non-Recourse Notes
        (i)   Schedule 3.2(a)(xviii)(A)   Form of Release
        (j)   Schedule 3.2(a)(xviii)(B)   Form of Release
        (k)   Schedule 3.2(a)(xix)        Form of Management Agreement Release
        (l)   Schedule 4.6                Authorizations for Expenditure
        (m)   Schedule 4.8                Securities Disclosure
</TABLE>

PetroCorp Incorporated agrees to furnish supplementally a copy of any omitted
schedule to the Securities and Exchange Commission upon request.

<PAGE>

[LETTERHEAD OF ENERPLUS]

February 20, 2003

PetroCorp Incorporated
PetroCorp Acquisition Company c/o PetroCorp Incorporated
6733 South Yale Avenue
Tulsa, OK 74136
U.S.A.

Attention:        Mr. Gary R. Christoper, President and Chief Executive Officer
                  (918.491.4584)

Dear Sir:

Re:     Share Purchase Agreement dated December 24, 2002 between PetroCorp
        Incorporated ("PCI"), PetroCorp Acquisition Company ("PAC"), 1022694
        Alberta Ltd. (the "Purchaser") and EnerMark Inc. ("EnerMark"), as
        amended by a letter agreement dated January 14, 2003 and acknowledged
        and agreed to on January 15, 2003 between PCI, PAC, the Purchaser and
        EnerMark and by a letter agreement dated January 28, 2003 and
        acknowledged and agreed as of even date therewith between PCI, PAC, the
        Purchaser and EnerMark (collectively, the "Agreement")

        Further to our recent discussions, this will confirm our agreement to
amend to the Agreement.

        In consideration of the covenants and agreements between the Vendor, the
Purchaser and EnerMark contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Vendor, the Purchaser and EnerMark agree as follows:

1.      Definitions. Capitalized words and phrases used herein, that are not
        defined herein, shall have the meanings set out in the Agreement.

2.      Amendments. Effective as of the date hereof, the Agreement is amended:

        (a)     by deleting the definitions of "Closing Date" in Section 1.1
                thereof in its entirety and replacing the following therefor:

                ""Closing Date" means 10.00 a.m. on the 5th day of March, 2003
                or such other date as is mutually agreed among the Parties."

        (b)     by deleting the definition of "Outside Date" in Section 1.2
                thereof in its entirety and replacing the following therefor:

<PAGE>

                                       -2-
[LETTERHEAD OF ENERPLUS]

                ""Outside Date" means 10.00 a.m. on the 5th day of March, 2003,
                or such later date as the Vendor and the Purchaser may agree in
                writing or may be expressly provided for herein"

3.      Continuing Effect. Each of the Vendor, the Purchaser and EnerMark
        acknowledges and agrees that the Agreement, as amended herein, shall be
        and continue in full force and effect and is hereby confirmed and the
        rights and obligations of the Vendor, the Purchaser and EnerMark
        thereunder shall not be affected or prejudiced in any manner except as
        specifically provided for herein.

        Please confirm your agreement to the foregoing by executing and
returning the duplicate copy of this letter to the undersigned. Execution may be
by counterpart and facsimile.

Yours truly,
ENERMARK INC.                               1022694 ALBERTA LTD.

By: /s/ Ian C. Dundas                       By: /s/ David McCoy
   -------------------------------------       ---------------------------
   Name: Ian C. Dundas                         Name: David McCoy
   Title: Vice President & Director            Title: General Counsel
          Business Development

THE FOREGOING IS ACKNOWLEDGED AND
AGREED TO THIS _____ day of February, 2003

PETROCORP INCORPORATED

By: /s/ Gary R. Christopher
   -------------------------------------
   Name: Gary R. Christopher
   Title: President & C.E.O.

PETROCORP ACQUISITION COMPANY

By: /s/ Gary R. Christopher
   -------------------------------------
   Name: Gary R. Christopher
   Title: President & C.E.O.

<PAGE>

[LETTERHEAD OF ENERPLUS]

January 28, 2003

PetroCorp Incorporated
PetroCorp Acquisition Company c/o PetroCorp Incorporated
6733 South Yale Avenue
Tulsa, OK 74136
U.S.A.

Attention:        Mr. Gary R. Christopher, President and Chief Executive Officer
                  (918.491.4584)

Dear Sir:

Re:     Share Purchase Agreement dated December 24, 2002 between PetroCorp
        Incorporated, PetroCorp Acquisition Company, 1022694 Alberta Ltd. and
        EnerMark Inc., as amended by a letter agreement dated January 14, 2003
        and acknowledged and agreed to on January 15, 2003 between PetroCorp
        Incorporated, PetroCorp Acquisition Company, 1022694 Alberta Ltd. and
        EnerMark Inc. (collectively, the "Agreement")

        Further to our recent discussions, this will confirm our agreement to
amend the Agreement.

        In consideration of the covenants and agreements between the Vendor, the
Purchaser and EnerMark contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Vendor, the Purchaser and EnerMark agree as follows:

1.      Definitions. Capitalized words and phrases used herein, that are not
        defined herein, shall have the meanings set out in the Agreement.

2.      Amendments. Effective as of the date hereof, the Agreement is amended:

        (a)     by deleting the definition of "Closing Date" in Section 1.1
                thereof in its entirety and replacing the following therefor:

                ""Closing Date" means 10:00 a.m. on the 21st day of February,
                2003 or such other date as is mutually agreed among the
                Parties."

        (b)     by deleting the definition of "Outside Date" in Section 1.1
                thereof in its entirety and replacing the following therefor:

<PAGE>
                                     - 2 -

                ""Outside Date" means 10:00 a.m. on the 21st day of February,
                2003, or such later date as the Vendor and the Purchaser may
                agree in writing or may be expressly provided for herein."

3.      Continuing Effect. Each of the Vendor, the Purchaser and EnerMark
        acknowledges and agrees that the Agreement, as amended herein, shall be
        and continue in full force and effect and is hereby confirmed and the
        rights and obligations of the Vendor, the Purchaser and EnerMark
        thereunder shall not be affected or prejudiced in any manner except as
        specifically provided for herein.

        Please confirm your agreement to the foregoing by executing and
returning the duplicate copy of this letter to the undersigned. Execution may be
by counterpart and facsimile.

Yours truly,
ENERMARK INC.                               1022694 ALBERTA LTD.

By: /s/ G. F. (Gerry) Stevenson             By: /s/ David McCoy
   ------------------------------------        ---------------------------
   Name: G. F. (Gerry) Stevenson                Name: David McCoy
   Title: Vice President, Acquisitions          Title: General Counsel

THE FOREGOING IS ACKNOWLEDGED AND
AGREED TO THIS 28th day of January, 2003

PETROCORP INCORPORATED

BY: /s/ Rick Dunham
   -------------------------------------
    Name: Rick Dunham
    Title: Executive Vice President

PETROCORP ACQUISITION COMPANY

BY: /s/ Rick Dunham
   -------------------------------------
   Name: Rick Dunham
   Title: Executive Vice President

<PAGE>

[LETTERHEAD OF ENERPLUS]

January 14, 2003

PetroCorp Incorporated
PetroCorp Acquisition Company c/o PetroCorp Incorporated
6733 South Yale Avenue
Tulsa, OK 74136
U.S.A.

Attention:    Mr. Gary R. Christopher, President and Chief Executive Officer

Dear Sir:

Re:     Share Purchase Agreement dated December 24, 2002 between PetroCorp
        Incorporated, PetroCorp Acquisition Company, 1022694 Alberta Ltd. and
        EnerMark Inc. (the "Agreement")

        Further to our recent discussions, this will confirm our agreement to
amend the Agreement.

        In consideration of the covenants and agreements between the Vendor, the
Purchaser and EnerMark contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Vendor, the Purchaser and EnerMark agree as follows:

1.      Definitions. Capitalized words and phrases used herein, that are not
        defined herein, shall have the meanings set out in the Agreement.

2.      Amendments. Effective as of the date hereof, the Agreement is amended by
        deleting the definition of "Closing Date" in Section 1.1 thereof in its
        entirety and replacing the following therefor:

                ""Closing Date" means 10:00 a.m. on the 31st day of January,
                2003 or such other date as is mutually agreed among the
                Parties."

3.      Continuing Effect. Each of the Vendor, the Purchaser and EnerMark
        acknowledges and agrees that the Agreement, as amended herein, shall be
        and continue in full force and effect and is hereby confirmed and the
        rights and obligations of the Vendor, the Purchaser and EnerMark
        thereunder shall not be affected or prejudiced in any manner except as
        specifically provided for herein.

<PAGE>
                                      - 2 -

        Please confirm your agreement to the foregoing by executing and
returning the duplicate copy of this letter to the undersigned. Execution may be
by counterpart and facsimile.

Yours truly,
ENERMARK INC.                               1022694 ALBERTA LTD.

/s/ G. F. (Gerry) Stevenson                 /s/ David McCoy
----------------------------------------    ------------------------------
G. F. (Gerry) Stevenson                     David Mccoy
Vice President, Acquisitions                General Counsel

THE FOREGOING IS ACKNOWLEDGED AND
AGREED TO THIS 15th day of January, 2003

PETROCORP INCORPORATED

By: /s/ Gary R. Christopher
   -------------------------------------
   Name: Gary R. Christopher
   Title: President & CEO

PETROCORP ACQUISITION COMPANY

By: /s/ Gary R. Christopher
   -------------------------------------
   Name: Gary R. Christopher
   Title: President & CEO

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00048-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00048-of-00352.parquet"}]]