BLUE DOLPHIN ENERGY CO
ASSET PURCHASE AND SALE AGREEMENT
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>bluedol8kex101110502.txt
<DESCRIPTION>ASSET PURCHASE AND SALE AGREEMENT
<TEXT>

                        ASSET PURCHASE AND SALE AGREEMENT


         THIS ASSET PURCHASE AND SALE AGREEMENT ("Agreement"),  made and entered
into this 1st day of October,  2002 by and between AMERICAN RESOURCES  OFFSHORE,
INC.,  whose  address  is 801  Travis  Street,  Suite  2100,  Houston,  TX 77002
("Seller"), and FIDELITY EXPLORATION & PRODUCTION COMPANY, whose address is 1700
Lincoln, Suite 4600, Denver, CO 80293 ("Buyer").

                                    ARTICLE 1
                                    ---------

                                PURCHASE AND SALE

         1.01 Purchase and Sale. Subject to the terms of this Agreement,  Seller
agrees to sell the  hereinafter  described  Assets to Buyer and Buyer  agrees to
purchase the Assets from Seller.

         1.02 Assets. The following items comprise the Assets:

                  (a) all of Seller's  right,  title and  interest in and to the
         oil and gas leases and lands described in Exhibit A hereof,  and in the
         wells  located in and on such oil and gas  leases,  including,  without
         limitation,  operating  rights and record  title,  working,  leasehold,
         mineral,  royalty,  overriding  royalty,  net  revenue,  net profits or
         reversionary  interests and any and all other interests in such oil and
         gas leases and lands (the "Leases");

                  (b) all of Seller's  right,  title and  interest in and to all
         wells,   equipment,   fixtures,   platforms,   personal   property  and
         improvements   (including,   without   limitation,   wellbores,   pipe,
         inventory, facilities, supplies, materials, plant, pipelines, gathering
         lines,  facilities and systems,  processing  facilities and systems and
         salt  water  disposal  facilities  and  systems  and any and all  other
         personal, real , movable and immovable property,  fixtures or equipment
         located on,  appurtenant to or used in connection  with the Leases now,
         as of the Effective Time or as of the Closing Date ("Equipment");

                  (c) all of Seller's  right,  title and  interest in and to any
         and all  contracts  or  agreements  attributable  to the  ownership  or
         operation of the Assets,  any and all  instruments,  payout balances or
         commitments,  any and  all  licenses,  orders,  permits,  easements  or
         rights-of-way  and any and all other  rights,  privileges,  benefits or
         powers of Seller relating to the Assets,  together with all of Seller's
         rights,  claims and causes of action under or otherwise  deriving  from
         the Assets after the Effective Time ("Contracts");

                  (d) all of Seller's  right,  title and  interest in and to any
         and all oil, gas,  condensate,  related hydrocarbons and other minerals
         produced from the Leases after the Effective Time ("Substances");



<PAGE>

                  (e)  any  and  all  accounts  and  funds  including,   without
         limitation,  Seller's share of any gas imbalances,  makeup obligations,
         abandonment escrow accounts,  instruments,  general intangibles,  liens
         and security  interests  arising from the sale or other  disposition of
         the items described in this Section 1.02 on or after the Effective Time
         ("Accounts").

                  (f) any and all of Seller's information relating to the Assets
         ,  including,  without  limitation,   reservoir,  land,  operation  and
         production files and other data including  geological,  engineering and
         proprietary  geophysical data (both "2-D" and "3-D", to the extent that
         Seller is allowed to  transfer  such data  pursuant  to the  applicable
         license  agreements),  maps,  logs,  core  analyses,  formation  tests,
         production  records and legal,  title,  accounting and contract  files.
         ("Technical Files").

                  (g) Any and all of Seller's  escrowed accounts for abandonment
         and the payment of taxes for production of oil or gas.

         1.03  Effective  Time.  The  purchase  and sale of the Assets  shall be
effective  for all purposes on October 1, 2002, at 7:00 a.m.,  Central  Standard
Time ("Effective Time").

                                    ARTICLE 2
                                    ---------

                                 PURCHASE PRICE

         2.01  Purchase  Price.  The  purchase  price for the Assets is U.S. TWO
MILLION,  SEVEN HUNDRED THIRTY THOUSAND DOLLARS  ($2,730,000.00)  (the "Purchase
Price").

         2.02 THIS SPACE IS INTENTIONALLY LEFT BLANK

         2.03  Adjustments  to  Purchase  Price.  The  Purchase  Price  shall be
adjusted as provided in this  Section  2.03 and the  resulting  amount  shall be
referred to as the "Adjusted  Purchase Price".  Not less than two (2) days prior
to the  Closing  Date,  Seller  shall  deliver  to Buyer a  Preliminary  Closing
Statement,  substantially in the form attached hereto as Schedule 2.03,  setting
forth  adjustments  to the  Purchase  Price  using  the  best  information  then
available and prepared in accordance with customary  accounting  principles used
in the oil and gas industry.

                  (a) The Purchase Price shall be increased by the following:

                           (1) an amount equal to the  quantity of  merchantable
                  oil produced  from the Leases and in storage at the  Effective
                  Time, and not sold or disposed of prior to Closing, multiplied
                  by the market price for such oil at the Effective Time, net of
                  all taxes and gravity adjustments and transportation  expenses
                  necessary to market such production.


                                       2
<PAGE>

                           (2)  the  amount  of  the   operating   and   capital
                  expenditures   together  with  any  lease  operating  expenses
                  charged under applicable  operating agreements and general and
                  administrative   costs  charged  as  overhead   charges  under
                  applicable operating agreements,  that are (i) attributable to
                  the Assets during the period  between the  Effective  Time and
                  Closing,  (ii) incurred and paid by Seller,  including without
                  limitation  capital  expenditures  approved in accordance with
                  Section  4.01  or  otherwise  made  in  compliance  with  this
                  Agreement.

                           (3) taxes  paid by Seller  for  assessments  based on
                  ownership  of  the  Assets  after  the  Effective   Time,  the
                  production  of  hydrocarbons  therefrom,  or  the  receipt  of
                  proceeds  attributable  thereto (excluding income taxes) after
                  the Effective Time.  Taxes based on production of hydrocarbons
                  from the  Assets  prior  to the  Effective  Time but  assessed
                  thereafter  shall,  unless payment thereof is covered by funds
                  escrowed for that purpose, be the responsibility of Seller and
                  no  upward  purchase  adjustment  shall  be  made  on  account
                  thereof.

                           (4)  an  amount   equal  to  all   prepaid   expenses
                  attributable to the Assets paid by Seller and  attributable to
                  the  period  from and  after  the  Effective  Time,  including
                  without limitation,  prepaid insurance and prepaid ad valorem,
                  property,  production  and other taxes accruing to the benefit
                  of Buyer  subsequent  to the  Effective  Time.  Taxes based on
                  production  of  hydrocarbons  from  the  Assets  prior  to the
                  Effective Time but assessed  thereafter shall,  unless payment
                  thereof is covered by funds escrowed for that purpose,  be the
                  responsibility  of Seller  and no upward  purchase  adjustment
                  shall be made on account thereof.

                  (b) The Purchase Price shall be decreased by the following:

                          (1) the amount of net proceeds or other value received
                  by Seller for the sale or disposition of Substances, as
                  defined herein, including net proceeds from the sale of
                  liquids and other constituents removed in gas plants or other
                  processing facilities for production occurring after the
                  Effective Time;

                           (2) the amount of proceeds or other value received by
                  Seller for the sale or disposition after the Effective Time of
                  any portion of the Assets;

                           (3) an amount equal to the value of all uncured Title
                  Defects as determined under Section 5.08; and

                           (4) the  amount of all unpaid  taxes and  assessments
                  based  on  the  ownership  of  property,   the  production  of
                  hydrocarbons  or the  receipt of  proceeds,  excluding  income
                  taxes,  accruing to the Assets prior to the Effective Time and
                  for the payment of which Buyer assumes liability subsequent to
                  Closing. If possible,  this adjustment shall be computed using
                  the tax rate and  values for the tax  period in  question.  If
                  this is not  possible,  the  adjustment  shall be based on the
                  taxes assessed for the  immediately  preceding tax period.  If
                  taxes  assessed for the preceding tax period are determined to
                  be more or less than the actual taxes, the difference shall be
                  a  Post-Closing  Adjustment  or  Subsequent  Adjustment  under
                  Sections 9.01 and 9.02.



                                       3
<PAGE>

         2.04 Payment of Adjusted  Purchase Price.  At Closing,  Buyer shall pay
Seller an amount equal to the Adjusted  Purchase Price in immediately  available
funds.

         2.05  Allocation of Purchase  Price/Tangibles-Intangibles.  Exhibit A-4
contains the  allocation  of the value of each  individual  property as mutually
agreed by Seller and Buyer (the "Allocated  Value").  The parties shall allocate
the value of each individual Asset among tangibles and intangibles after Closing
in  accordance  with  Section  1060 of the  Internal  Revenue  Code of 1986,  as
amended.  Buyer and Seller agree to be bound by such  allocation of the Purchase
Price among tangibles and intangibles for all purposes;  to consistently  report
such  allocations for all federal,  state and local income tax purposes;  and to
timely  file all reports  required  by the  Internal  Revenue  Code of 1986,  as
amended, concerning the Purchase Price allocation.

                                    ARTICLE 3
                                    ---------

                         REPRESENTATIONS AND DISCLAIMERS

         3.01 Seller's  Representations  and Warranties.  Seller  represents and
warrants to Buyer as of the date hereof,  as of Closing and as of the  Effective
Date that:

                  (a) Seller is a  corporation  organized,  existing and in good
         standing under the laws of the State of Delaware and is qualified to do
         business  in, and is in good  standing  under the laws of the States of
         Louisiana  and Texas.  Seller is  qualified  under  applicable  law and
         regulation to own the Assets.  With respect to all persons  claiming by
         through or under Seller but not otherwise,  Seller has, and will convey
         to Buyer,  Defensible  Title (as defined in Section  5.06 below) to the
         Assets.  Seller  warrants  and  agrees  to defend  title to the  Assets
         against the lawful claims of all persons  claiming by, through or under
         Seller, but not otherwise.

                  (b)  Seller  has the  authority  to carry on its  business  as
         presently  conducted,  to enter into this  Agreement and to perform its
         obligations under this Agreement.

                  (c) The  execution  and delivery of this  Agreement  have been
         authorized by all necessary  action,  corporate and  otherwise,  on the
         part of Seller.  Execution and delivery of this Agreement does not, and
         the  consummation  of the  transactions  contemplated by this Agreement
         will not,  violate or be in conflict  with any  agreement,  instrument,
         judgment, order, decree, law or regulation by which Seller is bound.

                  (d) Subject to laws and  equitable  principles  affecting  the
         rights of creditors,  this Agreement is a binding  obligation of Seller
         enforceable according to its terms.

                  (e) Except as set forth on Schedule 3.01 (e), no suit,  claim,
         demand or  investigation,  of which  Seller  has  received  notice,  is
         pending or, to Seller's Knowledge, (as hereinafter defined), threatened
         that might result in impairment or loss or diminution of Seller's title


                                       4
<PAGE>

         to the Assets or otherwise  adversely affect the Assets in any material
         respect. There are no bankruptcy or reorganization  proceedings pending
         or  threatened  against  Seller.  As used in this  Agreement,  the term
         "Knowledge"  means actual  knowledge  acquired or which should,  in the
         exercise of reasonable  care,  given Sellers status as a  non-operator,
         have been acquired by the  management of Seller in the ordinary  course
         and operation of Seller's business.

                  (f) All contracts  which burden or will burden or encumber the
         Assets  or  which  are  otherwise  material  to the  ownership,  use or
         operation  of the Assets are  described  on Exhibit A hereof.  All such
         contracts were entered into in the ordinary  course of business and, if
         executed by Seller,  were duly executed and delivered by Seller and are
         in force according to their terms.  Neither Seller, nor any other party
         to  Seller's  Knowledge,  is in breach of any  obligation  which  might
         adversely affect the Assets in any material respect.

                  (g) To Seller's  Knowledge,  all rentals,  royalties,  shut-in
         royalties,  overriding  royalties and other payments due pursuant to or
         with respect to the Leases have been properly paid.

                  (h) To Seller's  Knowledge  (i) the Leases have been  drilled,
         completed,  operated,  developed  and produced in  compliance  with all
         applicable  judgments,  orders,  laws,  rules and regulation;  (ii) all
         necessary   certificates,   consents,   permits,   licenses  and  other
         governmental authorizations affecting the Assets have been obtained and
         are in force  and  (iii)  there  are no  violations  of any  applicable
         regulations,   rules  or  orders  of  the  Federal  Energy   Regulatory
         Commission,  the Department of Energy, the Minerals  Management Service
         or any other regulatory agency with respect to the Assets, except under
         circumstances  as would not adversely affect the Assets in any material
         respect.

                  (i) The  Leases  are not  obligated,  under a  take-or-pay  or
         similar  arrangement,  and  Seller  is not  obligated  by  virtue of an
         election  to  non-consent,  or not  participate  in a past  or  current
         operation on the Leases pursuant to applicable operating agreements, to
         produce  Substances,  or  allow  Substances  to  be  produced,  without
         receiving  full  payment  at the time of  delivery  in an  amount  that
         corresponds to the net revenue interest described in Exhibit A.

                  (j) To  Seller's  Knowledge  taxes based on or measured by the
         ownership of property,  the production or removal of  hydrocarbons  and
         the receipt of proceeds  which are due and  relating to the Assets have
         been properly paid, subject to possible  adjustment for volume or price
         corrections.

                  (k) Seller is timely  receiving its share of proceeds from the
         sale  of  hydrocarbons  produced  from  the  Leases  without  suspense,
         counterclaim  or  set-off.  To  Seller's  Knowledge,  there has been no


                                       5
<PAGE>

         production of  hydrocarbons  from the Leases in excess of the allowable
         production  established  pursuant to applicable state or federal law or
         regulation  that would result in a restriction  on production  from the
         Leases subsequent to the Effective Time.

                  (l) To Seller's Knowledge,  except for Casualty Losses covered
         by  Section  5.07,  there has been no  material  adverse  change in the
         condition of any of the Leases or Equipment  after the  Effective  Time
         except   depletion   through  normal   production   within   authorized
         allowables,  changes in rates of production  that occur in the ordinary
         course of operation and depreciation of Equipment through ordinary wear
         and tear.

                  (m) Seller has incurred no liability  for brokers' or finders'
         fees related to the  transactions  contemplated  by this  Agreement for
         which Buyer shall be liable.

                  (n)  To   Seller's   Knowledge,   there  are  no   outstanding
         authorizations  for expenditures or any oral or written  commitments or
         proposals to conduct  operations on the Leases which are required to be
         approved  by  non-operators  under  the terms of the  applicable  joint
         operating agreement.

                  (o)  Except  as  set  forth  on  Schedule  3.01(o),  as of the
         Effective  Time,  no  portion  of the  Assets is over  produced,  under
         produced or otherwise  subject to an imbalance in respect of substances
         produced from the Leases.

         3.02 Buyer's  Representations  and  Warranties.  Buyer  represents  and
warrants to Seller as of the date hereof,  as of Closing and as of the Effective
Date as follows:

                  (a) Buyer is a  corporation  organized,  existing  and in good
         standing under the laws of the State of Delaware and is qualified to do
         business and is in good standing  under the laws of the States of Texas
         and Louisiana.  Buyer is qualified under  applicable law and regulation
         to own the Assets and, in particular, Buyer is qualified to do business
         in each of the adjacent States,  and on the Continental  Shelf, Gulf of
         Mexico,  in which the Assets are located to the extent the laws of such
         place require Buyer to so qualify.

                  (b)  Buyer  has the  authority  to  carry on its  business  as
         presently  conducted,  to enter into this  Agreement and to perform its
         obligations under this Agreement.

                  (c) The  execution  and delivery of this  Agreement  have been
         authorized by all necessary  action,  corporate and  otherwise,  on the
         part of Buyer.  Execution and delivery of this  Agreement does not, and
         the  consummation  of the  transactions  contemplated by this Agreement
         will not,  violate or be in conflict  with any  agreement,  instrument,
         judgment, order, decree, law or regulation by which Buyer is bound.

                  (d) Subject to laws and  equitable  principles  affecting  the
         rights of creditors,  this  Agreement is a binding  obligation of Buyer
         enforceable  according  to  its  terms.  There  are no  bankruptcy  nor
         reorganization proceedings pending or, to Buyer's Knowledge, threatened
         against Buyer.



                                       6
<PAGE>

                  (e) Buyer has incurred no  liability  for brokers' or finders'
         fees related to the  transactions  contemplated  by this  Agreement for
         which Seller shall be liable.

                  (f) There are no pending suits,  actions or other  proceedings
         in which  Buyer is a party (or, to Buyer's  Knowledge,  which have been
         threatened to be instituted  against  Buyer) which affect the execution
         and delivery of this Agreement or the  consummation of the transactions
         contemplated hereby.

                  (g) Buyer is a knowledgeable purchaser,  owner and operator of
         oil and gas  properties,  has the  ability to  evaluate  the Assets for
         purchase,  and is acquiring the Assets for its own account and not with
         the intent to make a distribution in violation of the Securities Act of
         1933 as amended.

                                    ARTICLE 4
                                    ---------

                                    COVENANTS

         4.01  Seller's  Covenants.  Seller  covenants  and agrees with Buyer as
follows:

                  (a) Following  execution of this  Agreement and until Closing,
         Seller  shall (i) continue to operate the Assets or cause the Assets to
         be operated,  in a good and workmanlike manner; (ii) maintain insurance
         now in force with  respect to the  Assets;  (iii)  notify  Buyer of any
         suit,  claim or demand within Seller's  Knowledge which might adversely
         affect the  Assets;  (iv) pay or cause to be paid all costs,  taxes and
         expenses which Seller is obligated to pay in connection with the Assets
         as they become  due;  (v) pay or cause to be paid all rentals and other
         payments  necessary to maintain the Leases in force  according to their
         terms and comply with all express and implied  covenants  contained  in
         the Leases or Contracts;  (vi)  exercise due diligence in  safeguarding
         the Assets and  maintaining the  confidentiality  of all data and other
         confidential  or proprietary  materials  relating to the Assets;  (vii)
         promptly notify Buyer of all significant  operations which are proposed
         with respect to the Assets; and (viii) use efforts, consistent with the
         standards  expected of a  reasonably  prudent  operator but without any
         obligation  to pay money to obtain  any  consents,  waivers  (including
         waiver of preferential purchase rights) and approvals required of third
         parties or governmental  authorities in connection with consummation of
         the  transactions  contemplated by this Agreement.  Buyer  acknowledges
         that Seller  owns  undivided  interests  in the Leases and that acts or
         omissions of other  owners of  undivided  interests in the Leases shall
         not be a breach of any covenant in this Agreement.  Seller shall not be
         obligated  to perform  any act which  would be in breach of a provision
         in, or its duties under, a Lease,  Contract or applicable  law, rule or
         regulation.

                  (b) Following  execution of this Agreement,  Seller shall not,
         without  Buyer's  consent;  (i) abandon any well capable of  commercial
         production; (ii) release all or a portion of a Lease; (iii) commence or


                                       7
<PAGE>

         consent to an  operation  estimated  to cost an amount in excess of the
         amount an operator is entitled to expend without non-operator  approval
         under  the  applicable  operating  agreement(s)   (excluding  emergency
         operations and  operations  undertaken to avoid a penalty or forfeiture
         provision of any  applicable  agreement or order);  (iv) create a lien,
         security  Interest  or other  encumbrance  on the  Assets;  (v) sell or
         dispose of the Assets (except in connection with preferential rights to
         purchase) other than Assets sold,  consumed or produced in the ordinary
         course of  business;  (vi) amend a Lease or amend a Contract or Account
         or enter into new  contracts  affecting  the  Assets  other than in the
         ordinary  course of  business;  (vii) waive,  compromise  or settle any
         claim that diminishes or adversely burdens an Assets.

                  (c)  Following  the  execution  of this  Agreement  and  until
         Closing,  Seller  will  provide  Buyer  and its  attorneys,  employees,
         accountants,    engineers,   consultants   and   agents   (collectively
         "representatives"),  at Buyer's sole expense, risk and cost, reasonable
         access,  during  business  hours, to the Contracts and other records of
         Seller  pertaining  to the  ownership  and/or  operation  of the Assets
         (including,  without limitation, title files, division order files, and
         production,  severance  and ad valorem tax  records) for the purpose of
         Buyer's  conducting a due diligence review of the Assets insofar as the
         same are in Seller's  possession  or control,  or insofar as Seller has
         access to the same, and to the extent, in each case, that Seller may do
         so without violating legal constraints or any legal obligation.  Seller
         shall not be obligated to furnish any updated abstracts, title opinions
         or  additional  title  information  which  are not in  Seller's  or its
         attorney's  possession,  but  shall  cooperate  with  Buyer in  Buyer's
         efforts  to  obtain  (at  Buyer's   expense)  such   additional   title
         information as Buyer may reasonably require.

         BUYER  RECOGNIZES AND AGREES THAT ALL MATERIALS MADE AVAILABLE TO BUYER
         AND ITS REPRESENTATIVES IN CONNECTION WITH THE TRANSACTION CONTEMPLATED
         HEREBY,  WHETHER MADE AVAILABLE  PURSUANT TO THIS SECTION OR OTHERWISE,
         ARE  MADE  AVAILABLE  TO  BUYER  AS  AN   ACCOMMODATION,   AND  WITHOUT
         REPRESENTATION  OR  WARRANTY  OF  ANY  KIND  AS  TO  THE  ACCURACY  AND
         COMPLETENESS  OF SUCH  MATERIALS.  NO  WARRANTY  OF ANY KIND IS MADE BY
         SELLER AS TO THE  INFORMATION  SUPPLIED TO BUYER OR WITH RESPECT TO THE
         ASSETS TO WHICH THE INFORMATION  RELATES,  AND BUYER  EXPRESSLY  AGREES
         THAT ANY  CONCLUSIONS  DRAWN  THEREFROM  SHALL BE THE RESULT OF ITS OWN
         INDEPENDENT REVIEW AND JUDGMENT.

                  (d) Seller will identify,  with respect to all Assets, (A) all
         preferential rights to purchase  ("Preferential Rights") which would be
         applicable to the transaction  contemplated  hereby and of which Seller
         has  Knowledge  (B) the names and  addresses  of parties  holding  such
         rights  insofar as Seller has  Knowledge of the same,  (it being agreed
         that, in attempting to identify such Preferential Rights, and the names
         and  addresses  of such parties  holding the same,  Seller shall not be
         obligated to go beyond its own  records),  and (ii)  request,  from the
         parties so identified  (and in accordance  with the documents  creating
         such  rights),   execution  of  waivers  of   Preferential   Rights  so
         identified.  Seller shall  indemnify  and hold Buyer (and its officers,
         directors,  employees,  attorneys,  contractors and agents)  completely


                                       8
<PAGE>

         free and harmless from and against any and all claims,  actions, causes
         of action, liabilities,  damages, losses, costs or expenses (including,
         without  limitation,  court costs and attorney's  fees) whatsoever that
         arise out the  exercise  of any  Preferential  Right or the  failure to
         obtain consent or waivers of Preferential Rights with respect to any of
         the Assets.  If a party from whom a waiver of a  Preferential  Right is
         requested refuses to give such waiver, Seller will tender to such party
         the Asset to which  such  waiver  appertains  (at a price  equal to the
         amount  specified  in  Exhibit  A-4  hereto  for such  Asset ,  reduced
         appropriately,  as  determined  by  mutual  agreement  of Buyer and the
         Seller,  if less than the entire  interest in and to such Asset must be
         tendered),  and to the extent that such Preferential Right is exercised
         by such  party,  and  such  Asset  is  actually  sold to such  party so
         exercising such right, such Asset will be excluded from the transaction
         contemplated hereby and the Purchase Price will be adjusted downward by
         the amount actually paid to Seller by the party exercising such right.

         If the  holder of  Preferential  Rights  fails to fully  exercise  such
         rights and purchase the Assets, or part thereof,  pursuant to the terms
         of this  Agreement  within 30 days of the  Closing  Date  provided  for
         herein  then  Buyer  will,  subject  to the  indemnification  contained
         herein,  purchase such Assets as originally  contemplated herein before
         the  holder  of such  Preferential  Rights  failed  to  consummate  the
         purchase transaction.

                  (e)  Seller,  and its  respective  representatives  shall keep
         confidential   all  terms  and  provisions  of  this   Agreement,   the
         transaction  contemplated  by this  Agreement,  and all information and
         data concerning the Assets, and Buyer's business,  financial condition,
         operations, strategies and prospects.

                  (f) Seller shall take or cause to be taken all such actions as
         may be  necessary or advisable to  consummate  and make  effective  the
         purchase  of the  Assets  and  the  transactions  contemplated  by this
         Agreement  and to  assure  that as of the  Closing  Date it will not be
         under any material  corporate,  legal or contractual  restriction  that
         would prohibit or delay the timely consummation of such transactions.

                  (g) Seller shall cause all the  representations and warranties
         of Seller  contained in this Agreement to be true and correct on and as
         of the Closing  Date.  To the extent the  conditions  precedent  to the
         obligations  of Buyer are within the  control  of Seler,  Seller  shall
         cause such  conditions  to be satisfied on or prior to the Closing Date
         and, to the extent the conditions precedent to the obligations of Buyer
         are not within the control of Seller,  Seller shall take or cause to be
         taken all such commercially  reasonable  actions as may be necessary to
         cause such conditions to be satisfied on or prior to the Closing Date.

                  (h)   Seller   shall   promptly   notify   Buyer  (i)  if  any
         representation  or warranty of Seller  contained  in this  Agreement is
         discovered to be or becomes untrue,  or (ii) if Seller fails to perform
         or comply with any covenant or agreement contained in this Agreement or
         it is reasonably  anticipated  that Seller will be unable to perform or
         comply with any covenant or agreement contained in this Agreement.


                                       9
<PAGE>

         4.02  Buyer's  Covenants.  Buyer  covenants  and agrees  with Seller as
follows:


                  (a)  Buyer  and  its  respective  representatives  shall  keep
         confidential   all  terms  and  provisions  of  this   Agreement,   the
         transaction  contemplated  by this  Agreement,  and all information and
         data concerning the Assets,  Seller's  business,  financial  condition,
         operations, strategies and prospects.

                  (b) Buyer shall take or cause to be taken all such  actions as
         may be  necessary or advisable to  consummate  and make  effective  the
         purchase  of the  Assets  and  the  transactions  contemplated  by this
         Agreement  and to  assure  that as of the  Closing  Date it will not be
         under any material  corporate,  legal or contractual  restriction  that
         would prohibit or delay the timely consummation of such transactions.

                  (c) Buyer shall cause all the  representations  and warranties
         of Buyer  contained in this  Agreement to be true and correct on and as
         of the Closing  Date.  To the extent the  conditions  precedent  to the
         obligations  of Seller  are within the  control of Buyer,  Buyer  shall
         cause such  conditions  to be satisfied on or prior to the Closing Date
         and,  to the extent the  conditions  precedent  to the  obligations  of
         Seller are not within the  control of Buyer,  Buyer shall take or cause
         to be  taken  all  such  commercially  reasonable  actions  as  may  be
         necessary to cause such  conditions  to be satisfied on or prior to the
         Closing Date.

                  (d)  Buyer   shall   promptly   notify   Seller   (i)  if  any
         representation  or warranty of Buyer  contained  in this  Agreement  is
         discovered to be or becomes  untrue,  or (ii) if Buyer fails to perform
         or comply with any covenant or agreement contained in this Agreement or
         it is  reasonably  anticipated  that Buyer will be unable to perform or
         comply with any covenant or agreement contained in this Agreement.

                                    ARTICLE 5
                                    ---------

                            BUYER'S REVIEW AND TITLE

         5.01 Due Diligence. Buyer may, prior to Closing and at its cost, review
data and  information,  title  documents  and  conduct  other  examinations  and
investigations  in respect of the Assets.  Should,  as a result of such  review,
examinations  and  investigations,  or  otherwise,  one or more  matters come to
Buyer's attention which would constitute a Title Defect, as described below, and
should  there be one or more of such Title  Defects  which Buyer is unwilling to
waive and close the transaction  contemplated  herein  notwithstanding  the fact
that such Title  Defects  exist,  Buyer shall  notify  Seller in writing of such
Title Defects as soon as the same are identified by Buyer, but in no event later
than 1 day prior to the Closing Date. Such  notification  shall include for each
asserted  Title Defect (i) a description of the Title Defect and the Interest to
which it  applies;  (ii) an  explanation  of the  basis for the claim of a Title
Defect and (iii) the amount by which Buyer would  propose to adjust the Purchase
Price in view of such Title  Defect.  Buyer's  failure to give notice of a Title
Defect  within the time and in the manner  required by this  Section  5.01 shall
constitute  a waiver by Buyer of the Title  Defect and the Title  Defect will be
treated as a Permitted Encumbrance as set forth below.



                                       10
<PAGE>

         5.02 Access to Assets.  Following the  execution of this  Agreement and
until  Closing,  subject to the consent and  cooperation  of operators and other
third parties,  Seller shall provide Buyer and its representatives access to the
Assets  and the  right to  observe  operations  and  inspect  any and all of the
Assets,  Equipment,  improvements  and fixtures  included in the Assets,  to the
extent  that  Seller  has the legal  right to grant such  access and right.  All
visits to Seller's facilities by Buyer, and on Buyer's behalf, will be scheduled
by mutual consent of the Parties, subject to Buyer's providing Seller reasonable
notice of the  locations  that Buyer wishes to visit and the  proposed  times of
such visits.  Seller may accompany  Buyer and its  representatives  during their
site  visits.  Entry  onto the  Assets  will (i)  subject  Buyer to third  party
restrictions,  if any, and to Seller's industrial safety,  hygiene, and drug and
alcohol requirements and (ii) be at Buyer's sole risk and expense.

         5.03  Environmental  Assessment.  Buyer may  conduct  an  environmental
assessment  of the Assets,  including  investigations  to identify  wetlands and
sensitive  and  protected   habitats.   If  Buyer  undertakes  an  environmental
assessment,  both the consultant (if  consultants are employed) and the scope of
the proposed  assessment,  including  testing  protocols,  must be acceptable to
Seller  before the work may begin.  If Buyer and Seller  cannot agree on Buyer's
proposed  environmental  assessment  plan,  then Seller may, at its sole option,
withdraw from this  Agreement  any of the Assets that Buyer  proposes to assess,
and the Purchase  Price will be adjusted  for each  withdrawn  Asset.  If Seller
withdraws  all  the  Assets  pursuant  to  this  Section,  this  Agreement  will
terminate.

If Buyer takes  samples  from the Assets,  Seller may require  splitting of each
sample.  Notwithstanding  anything  in the  foregoing  that  may  appear  to the
contrary,  the presence of naturally  occurring  radioactive  materials ("NORM")
will not  constitute  a Title  Defect  (hereinafter  defined).  IT IS  EXPRESSLY
RECOGNIZED THAT THE LANDS AND/OR WATER BOTTOM ALONG WITH SURFACE  FACILITIES AND
PRODUCTION  EQUIPMENT  LOCATED THEREON,  HAVING BEEN USED IN CONNECTION WITH OIL
AND GAS PRODUCTION ACTIVITIES, MAY CONTAIN NORM AS A RESULT OF THESE OPERATIONS.
ACCORDINGLY,   LANDS  AND/OR  WATER  BOTTOMS,   THE  WELLS,  AND  THE  EQUIPMENT
TRANSFERRED  HEREIN ARE TRANSFERRED  WITH THE RESTRICTION THAT THEY WILL BE USED
ONLY IN CONNECTION  WITH OIL AND GAS PRODUCING  ACTIVITIES  ASSOCIATED  WITH THE
LEASES, AND WILL NOT BE SUBSEQUENTLY TRANSFERRED FOR UNRESTRICTED USE UNLESS THE
CONCENTRATIONS  OF NORM ASSOCIATED  THEREWITH ARE BELOW THE LEVELS  SPECIFIED AS
ALLOWABLE FOR UNRESTRICTED TRANSFER AS SET FORTH IN ANY AND ALL APPLICABLE LAWS,
ORDERS,  RULES  OR  REGULATIONS  OF ANY  GOVERNMENTAL  AGENCY  OR  COURT  HAVING
JURISDICTION.  ADDITIONALLY,  BUYER AGREES TO COMPLY WITH ALL PROVISIONS OF SUCH
LAWS, ORDERS RULES OR REGULATIONS APPLICABLE TO SAID LANDS AND/OR WATER BOTTOMS,
THE WELLS,  AND THE  PERSONAL  PROPERTY.  BUYER  FURTHER  AGREES TO INCLUDE  THE
PROVISIONS OF THIS CLAUSE IN ANY  SUBSEQUENT  SALE OR ASSIGNMENT OF ANY INTEREST
THEREIN TRANSFERRED.


                                       11
<PAGE>

         5.04 Gas Imbalance. Upon the occurrence of Closing, but effective as of
the  Effective  Time,  Buyer shall  succeed to and assume the position of Seller
with respect to all gas imbalances and make-up obligations related to the Assets
(regardless  of whether  such  imbalances  or make-up  obligations  arise at the
wellhead,  pipeline,  gathering system or other level, and regardless of whether
the same arise under  contract or  otherwise).  As a result of such  succession,
Buyer shall (i) be entitled to receive any and all  benefits  which Seller would
have been  entitled to receive by virtue of such  position  (including,  without
limitation,  rights to produce and receive  volumes of  production  in excess of
volumes which it would otherwise be entitled to produce and receive by virtue of
ownership of the Interest rights to receive cash balancing  payments),  and (ii)
be obligated to suffer any detriments  which Seller would have been obligated to
suffer by virtue of such position (including, without limitation, the obligation
to  deliver  to others  production  volumes  which  would  have  otherwise  been
attributable to its ownership of the Assets, to deliver production to purchasers
hereof  without  receiving  full  payment  therefor,  or to make cash  balancing
payments or to repay take or pay  payments) and (iii) shall be  responsible  for
any and all royalty  obligations  with  respect to such  imbalances  (including,
without limitation, any of the same arising out of royalties having been paid on
an "entitlements" basis rather than a "receipts" basis).

         5.05 Title Defects. "Title Defect" means any encumbrance,  irregularity
or defect in Seller's  title to an Asset  which,  alone or in  combination  with
other defects,  causes  Seller's title to be less than Defensible  Title.  Title
Defects  shall  include a Casualty  Loss treated as a Title Defect under Section
5.07.

         5.06 Defensible Title.

                  (a)  "Defensible  Title"  means such right,  title or interest
         held by Seller that (i) will entitle Buyer, as Seller's  successor,  to
         receive not less than the Net Revenue  Interests or ("NRI"),  described
         in Exhibit A of all oil,  gas,  condensate,  related  hydrocarbons  and
         other  minerals  produced  under  the  terms of the  Leases  (or  other
         property  denominated  in Exhibit  A);  (ii) will  obligate  Buyer,  as
         Seller's  successor to bear a percentage of costs and expenses  related
         to the  maintenance,  operation and development of the Leases (or other
         property  denominated  in  Exhibit  A) not  greater  than  the  Working
         Interest or ("WI") (being Operating Rights or Record Title, as the case
         may be) shown in  Exhibit  A,  unless  the  circumstances  causing  the
         Working Interest to be greater will cause the corresponding Net Revenue
         Interest to increase in the same  proportion;  and (iii) is free of all
         liens,  security  interests,   encumbrances  and  defects,  except  for
         Permitted Encumbrances.


                  (b) "Permitted Encumbrances" are:

                           (1)   lessor's   royalties,   overriding   royalties,
                  production  payments,  net  profits,  interests,  reversionary
                  interests and similar  burdens on production  that do not, and
                  will not,  reduce  Buyer's Net Revenue  Interest below the Net
                  Revenue  Interest  shown  in  Exhibit  A or  increase  Buyer's
                  Working Interest above the Working Interest shown in Exhibit A
                  (unless  the  circumstance  causing  the  Working  Interest to
                  increase will cause the  corresponding Net Revenue Interest to
                  increase in the same proportion);



                                       12
<PAGE>

                           (2)  preferential  rights to purchase and third party
                  consents with respect to which, prior to Closing,  (i) waivers
                  or consents are obtained from the appropriate  parties or (ii)
                  the  time  for  asserting  such  rights  has  expired  without
                  exercise;

                           (3) mechanics',  materialmen's,  operators',  tax and
                  similar  liens or charges  arising in the  ordinary  course of
                  business  related to an Asset,  if such liens secure  payments
                  not yet due;

                           (4) all consents  from,  notices to,  approvals by or
                  other actions by  governmental  authority in  connection  with
                  sale or  transfer  of  properties  such as the  Assets if such
                  matters are customarily and  appropriately  obtained after the
                  sale or transfer;

                           (5) liens,  security  interests or other encumbrances
                  to be released at or prior to Closing;

                           (6)  rights of a  governmental  entity to  control or
                  regulate the Assets,  together with all applicable laws, rules
                  and regulations;

                           (7)  easements,  rights-of-way,  surface  leases  and
                  other surface use restrictions if such  restrictions  will not
                  materially adversely affect the use, value or operation of the
                  Assets;

                           (8)  title  matters  waived or deemed to be waived by
                  Buyer and described on Schedule 5.06(b)(8);

                           (9) the presence of NORM; and

                           (10) the Contracts

         5.07  Casualty  Loss.  If,  prior to Closing,  all or any portion of an
Interest  is  destroyed  or taken under the right of eminent  domain  ("Casualty
Loss"), Buyer may elect (i) to treat the Casualty Loss as a Title Defect or (ii)
purchase the affected  Asset  notwithstanding  the  Casualty  Loss.  If Buyer so
purchases the affected Asset,  there shall be no reduction of the Purchase Price
and Seller  shall,  at Closing,  pay to Buyer all sums paid to Seller  which are
associated  with the  Casualty  Loss and shall  assign to Buyer all of  Seller's
interest in any unpaid payments or causes of action associated with the Casualty
Loss.  Prior to Closing,  Seller shall not  compromise or settle a Casualty Loss
without Buyer's consent.

         5.08 Disposition of Title Defects. In the event that Buyer gives Seller
notice of Title Defects:



                                       13
<PAGE>

                  (a) Seller may (but shall have no  obligation  to)  attempt to
         cure, prior to Closing, Title Defects.

                  (b)  Whether or not  Seller has then begun to, or ever  begins
         to, cure  asserted  Title  Defects,  Seller may postpone the Closing by
         designating  a new  Closing  Date to be a date not  later  than 30 days
         after  Seller's  receipt of a Defect notice.  Notwithstanding  any such
         election to postpone  Closing,  there shall still be no  obligation  to
         cure Title Defects.

                  (c) Notwithstanding any other election made under this Section
         (without  limitation,  it being  expressly  recognized that attempts to
         cure asserted  Title Defects may continue  while the parties are acting
         under this  election),  Seller  may elect to have one or more  asserted
         Title Defects handled under the following Section.

         5.09 Purchase Price Adjustments.

                  (a) Except as provided in Section  5.09(b) below, in the event
         that,  as a part of Buyer's due  diligence  review,  Title  Defects are
         presented  to Seller and Seller is unable (or  unwilling)  to cure such
         Title Defects prior to Closing, then:

                           (i) Buyer and  Seller  shall,  with  respect  to each
                  Asset  affected  by such  matters,  attempt  to agree  upon an
                  appropriate  adjustment  of the Purchase  Price to account for
                  such matters; and

                           (ii) with  respect  to  Assets as to which  Buyer and
                  Seller are unable to agree upon an adjustment  for an asserted
                  Title   Defect,   such  Assets  will  be  excluded   from  the
                  transaction contemplated hereby and the Purchase Price will be
                  reduced by the amount  attributed  to such Asset on Exhibit A;
                  provided,  however,  in the event an  adjustment  is required,
                  pursuant to this  paragraph,  but such Asset is to be excluded
                  as provided herein, Seller may, at its sole discretion,  elect
                  to not  close  and  such  election  shall be  considered  as a
                  failure to close that is permitted in Section 6.01 hereof.

                  (b) If an asserted Title Defect reflects (or Seller  otherwise
         determines)  that Seller's share of Substances  produced and saved from
         the Leases  comprising  an Asset is less than,  or  greater  than,  the
         decimal  share set forth as the Net  Revenue  Interest  in Exhibit A or
         causes  Seller to be  obligated  to pay a share of costs of  operations
         greater  than the  percentage  share of Working  Interest  set forth on
         Exhibit A hereof  (without  at least a  proportionate  increase  in the
         corresponding  Net Revenue  Interest)  then the Purchase  Price for the
         Asset  shall  be  adjusted  downward,  or  upward  as the  case may be,
         proportionately,  by multiplying  such Purchase Price by a fraction (A)
         the numerator of which is the amount of the actual Net Revenue Interest
         and (B) the  denominator of which is the Net Revenue  Interest shown on
         Exhibit A.


                                       14
<PAGE>

                  (c) If the aggregate  Purchase  Price  reduction (or increase)
         with  respect to a Title  Defect,  which  would  result  from the above
         stated  procedure does not exceed $5,000,  no adjustment  shall me made
         for such Title  Defect,  and the Assets  affected  thereby  will not be
         excluded  as a result of the  existence  of such Title  Defect.  If the
         Purchase  Price  reduction  (or  increase)  which would result from the
         above stated  procedure,  as applied to all Title  Defects for which an
         adjustment is to be made, does not exceed $5,000, then no adjustment of
         the Purchase  Price shall occur,  and none of the Assets which would be
         otherwise excluded by such procedure shall be excluded. If the Purchase
         Price  reduction (or increase) which would result from the above stated
         procedure  exceeds $5,000,  the Purchase Price shall be adjusted by the
         amount  by  which  such   reduction  (or  increase)   exceeds   $5,000.
         Notwithstanding the provisions of this paragraph 5.09 (c), in the event
         that through the exercise of  preferential  rights to purchase by third
         parties, the value of the properties, as listed on Exhibit "A-4", after
         said exercise of preferential  rights results in a downward  adjustment
         fifty percent (50%) or more of the Purchase  Price,  this Agreement may
         be terminated by either party by written notice to the  non-terminating
         party. In the event of such  termination,  neither party shall have any
         obligation whatsoever to the other party hereunder.

         5.10 NO WARRANTY OF  MERCHANTABILITY  OR FITNESS.  EXCEPT AS  OTHERWISE
SPECIFICALLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO WARRANTIES, EXPRESS OR
IMPLIED,  INCLUDING THE WARRANTY OF MERCHANTABILITY  AND THE IMPLIED WARRANTY OF
FITNESS  FOR A  PARTICULAR  PURPOSE,  REGARDING  THE  EQUIPMENT  AND OTHER  LIKE
PERSONAL  PROPERTY  LOCATED ON OR  INCLUDED IN THE ASSETS AND THE SAME ARE TO BE
SOLD ON AN "AS IS, WHERE IS" BASIS AND CONDITION.

         5.11 WAIVER OF CONSUMER RIGHTS. BUYER WAIVES ITS RIGHTS UNDER THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER  PROTECTION ACT, SECTION 17.41 ET SEQ., TEXAS
BUSINESS  &  COMMERCE  CODE,  A LAW THAT  GIVES  CONSUMERS  SPECIAL  RIGHTS  AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BUYER'S OWN SELECTION, BUYER
VOLUNTARILY  CONSENTS TO THIS WAIVER.  IN ORDER TO EVIDENCE ITS ABILITY TO GRANT
SUCH WAIVER, BUYER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT BUYER (I) IS IN
THE BUSINESS OF SEEKING OR  ACQUIRING,  BY PURCHASE OR LEASE,  GOODS OR SERVICES
FOR  COMMERCIAL  OR BUSINESS USE,  (II) HAS ACTUAL  KNOWLEDGE AND  EXPERIENCE IN
FINANCIAL  AND BUSINESS  MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS
OF THE  TRANSACTION  CONTEMPLATED  HEREBY  AND  (III)  IS  NOT IN  SIGNIFICANTLY
DISPARATE BARGAINING POSITION.

         5.12 WAIVER OF LOUISIANA RIGHTS IN REDHIBITION.  BUYER EXPRESSLY WAIVES
THE WARRANTY OF FITNESS FOR INTENDED  PURPOSES OR  GUARANTEE  AGAINST  HIDDEN OR
LATENT  REDHIBITORY  VICES UNDER LOUISIANA LAW,  INCLUDING  LOUISIANA CIVIL CODE
ARTICLES 2520 (1870) THROUGH 2548, AND THE WARRANTY  IMPOSED BY LOUISIANA  CIVIL
CODE ARTICLES 2476; WAIVES ALL RIGHTS IN REDHIBITION PURSUANT TO LOUISIANA CIVIL
CODE  ARTICLES  2520,  ET SEQ.; OR FOR  RESTITUTION  OR OTHER  DIMINUTION OF THE


                                       15
<PAGE>

PURCHASE  PRICE;  ACKNOWLEDGES  THAT THIS EXPRESS  WAIVER SHALL BE  CONSIDERED A
MATERIAL  AND  INTEGRAL  PART OF THIS SALE AND THE  CONSIDERATION  THEREOF;  AND
ACKNOWLEDGES  THAT THIS WAIVER HAS BEEN  BROUGHT TO THE  ATTENTION  OF BUYER AND
EXPLAINED IN DETAIL AND THAT BUYER HAS  VOLUNTARILY  AND KNOWINGLY  CONSENTED TO
THIS WAIVER OF WARRANTY OF FITNESS AND/OR WARRANTY AGAINST REDHIBITORY VICES AND
DEFECTS FOR THE ASSETS.  SELLER  MAKES THIS SALE OF THE ASSETS TO BUYER  WITHOUT
ANY WARRANTY AS TO THE  CONDITION OF THE ASSETS,  INCLUDING  ABSENCE OF VICES OR
DEFECTS (WHETHER APPARENT OR LATENT,  KNOWN OR UNKNOWN,  EASILY  DISCOVERABLE OR
HIDDEN),  FITNESS  FOR ANY  ORDINARY  USE, OR FITNESS  FOR ANY  INTENDED  USE OR
PARTICULAR  PURPOSE,  EVEN FOR  RETURN OR  REDUCTION  OF THE  PURCHASE  PRICE OR
OTHERWISE,  IT BEING  UNDERSTOOD  THAT BUYER TAKES THE ASSETS "AS IS" AND "WHERE
IS";  BUYER HEREBY  ACKNOWLEDGING  RELIANCE  SOLELY ON ITS OWN INSPECTION OF THE
ASSETS, AND NOT ON ANY WARRANTIES OR REPRESENTATIONS FROM SELLER WITH RESPECT TO
THE CONDITION OF THE ASSETS.  IN ADDITION,  BUYER  ACKNOWLEDGES  THAT, EXCEPT AS
EXPRESLY STATED HEREIN,  SELLER HAS MADE NO REPRESENTATIONS OR WARRANTIES OF ANY
KIND OR  CHARACTER,  EXPRESS OR IMPLIED,  WITH  RESPECT TO THE  CONDITION OF THE
ASSETS, INCLUDING,  WITHOUT LIMITATION,  ANY WARRANTIES OR REPRESENTATIONS AS TO
ABSENCE OF VICES OR DEFECTS  (WHETHER  APPARENT  OR  LATENT,  KNOWN OR  UNKNOWN,
EASILY  DISCOVERABLE OR HIDDEN),  FITNESS FOR ANY ORDINARY USE,  FITNESS FOR ANY
INTENDED USE OR PARTICULAR PURPOSE, TAX CONSEQUENCES,  ENVIRONMENTAL  CONDITION.
EXCEPT AS EXPRESSLY STATED HEREIN,  ALL WARRANTIES WITH RESPECT TO THE CONDITION
OF THE ASSETS ARE HEREBY  DISCLAIMED  BY SELLER AND  EXPRESSLY  WAIVED BY BUYER.
EXCEPT AS EXPRESSLY  STATED  HEREIN,  BUYER HAS NOT RELIED AND WILL NOT RELY ON,
AND SELLER IS NOT  LIABLE  FOR OR BOUND BY, AN  EXPRESS  OR IMPLIED  WARRANTIES,
GUARANTIES,  STATEMENTS,   REPRESENTATIONS  OR  INFORMATION  PERTAINING  TO  THE
CONDITION OF THE ASSETS OR RELATING  THERETO  MADE OR  FURNISHED BY SELLER,  ANY
PARTY  ACTING  OR  PURPORTING  TO  ACT  FOR  SELLER,  OR  ANY  BROKER  OR  AGENT
REPRESENTING  OR  PURPORTING  TO REPRESENT  SELLER,  TO WHOMEVER  MADE OR GIVEN,
DIRECTLY OR INDIRECTLY, ORALLY OR IN WRITING.



                                    ARTICLE 6
                                    ---------

                              CONDITIONS TO CLOSING

         6.01 Seller's  Conditions.  Seller's obligations at Closing are subject
to the satisfaction at or prior to Closing of the following conditions:

                  (a) Buyer's  representations and warranties under Section 3.02
         shall be true in all material  respects on the date of this  Agreement,
         the Effective Date and as of Closing.



                                       16
<PAGE>

                  (b) Buyer shall have  performed in all  material  respects the
         covenants and agreements which Buyer was required to perform or satisfy
         at or prior to Closing.

                  (c) Except  for  matters  not  customarily  and  appropriately
         obtained  prior to  Closing,  Seller  has  received  evidence,  in form
         reasonably  satisfactory  to its counsel,  that all permits,  consents,
         approvals, licenses, qualifications and orders required by governmental
         authority,  or the terms of the Assets, to be obtained prior to Closing
         have been obtained or waived.

                  (d) The aggregate downward adjustment (if any) of the Purchase
         Price which results from the  procedures set forth in Section 5.09 does
         not exceed ten percent (10%) of the Purchase Price.

                  (e) There is no action or  proceeding  pending  or  threatened
         before  a  court,  arbitrator  or  governmental  authority  seeking  to
         restrain or prohibit the consummation of the transactions  contemplated
         by this Agreement or to obtain substantial  damages from Seller related
         to this Agreement.

         6.02 Buyer's Conditions.  Buyer's obligations at Closing are subject to
the satisfaction at or prior to Closing of the following conditions:

                  (a) Seller's representations and warranties under Section 3.01
         shall be true in all material  respects on the date of this  Agreement,
         the Effective Date and as of Closing.

                  (b) Seller shall have  performed in all material  respects the
         covenants  and  agreements  which  Seller  was  required  to perform or
         satisfy at or prior to Closing.

                  (c) Except  for  matters  not  customarily  and  appropriately
         obtained  prior  to  Closing,  Buyer  has  received  evidence,  in form
         reasonably  satisfactory  to its counsel,  that all permits,  consents,
         approvals, licenses, qualifications and orders required by governmental
         authority,  or the terms of the Assets, to be obtained prior to Closing
         have been obtained or waived.

                  (d) The aggregate  upward  adjustment (if any) of the Purchase
         Price which results from the  procedures  set forth in and Section 5.09
         does not exceed ten percent (10%) of the Purchase Price.

                  (e) There is no action or  proceeding  pending  or  threatened
         before  a  court,  arbitrator  or  governmental  authority  seeking  to
         restrain or prohibit the consummation of the transactions  contemplated
         by this Agreement or to obtain  substantial  damages from Buyer related
         to this Agreement.



                                       17
<PAGE>

                                    ARTICLE 7
                                    ---------

                                     CLOSING

         7.01  Closing  Date.  Subject  to the  terms  of  this  Agreement,  the
consummation of the  transactions  contemplated  by this Agreement  ("Closing"),
shall occur at Seller's  office listed above (or at such other place and time as
the  Parties may agree) on or before  October  31, 2002 at 10:00 a.m.  ("Closing
Date").

         7.02 Closing  Obligations.  At Closing, the following shall occur, each
being a condition precedent to the others and each being deemed to have occurred
simultaneously:

                  (a) Seller  shall  execute  and  deliver to Buyer  assignments
         conveying the Assets to Buyer in forms  acceptable to Buyer and Seller.
         Seller  shall  also  execute  and  deliver  such other  assignments  on
         appropriate forms as may be required by governmental authority

                  (b) Seller and Buyer  shall  execute and deliver to each other
         the Preliminary Closing Statement.

                  (c) Buyer shall deliver the Adjusted  Purchase Price to Seller
         by direct bank or wire transfer, as directed by Seller.

                  (d) Seller shall deliver to Buyer possession of the Assets.

                  (e) Seller shall execute transfer orders or letters-in-lieu on
         forms  prepared  by  Buyer,  and  reasonably  satisfactory  to  Seller,
         directing  purchasers  of  production  to  make  payment  to  Buyer  as
         contemplated by this Agreement.

                  (f) Seller  shall  deliver  releases  of all  liens,  security
         interests  and  encumbrances  affecting  the Assets to be  released  at
         Closing.

                  (g)  Seller  and  Buyer  will  coordinate  the  filing  and/or
         recording of assignment and  conveyancing  documents in the appropriate
         governmental records. The recording party (which maybe either Seller or
         Buyer or both) will provide  either the original or  photocopies of the
         filed  and/or  recorded  documents  as  agreed by the  parties,  to the
         non-recording   party.  All  costs  of  filing,   recording  and  other
         reasonable fees will be borne by Buyer.

                                    ARTICLE 8
                                    ---------

                                   TERMINATION

         8.01 Termination.  This Agreement and the transactions  contemplated by
this Agreement may be terminated in the following situations:

                  (a) by Seller or Buyer if Closing  does not occur on or before
         the Closing Date provided, however, that a party cannot so terminate if
         it is in breach of this Agreement;



                                       18
<PAGE>

                  (b) by Seller if the conditions  contained in Section 6.01 are
         not satisfied or waived as of the Closing Date;

                  (c) by Buyer if the  conditions  contained in Section 6.02 are
         not satisfied or waived as of the Closing Date; and

                  (d) by Seller and Buyer pursuant to written Agreement.

         8.02 Liabilities Upon Termination.

         If this Agreement is terminated for any reason or is breached,  nothing
contained  herein  shall be  construed  to limit  Seller's  or Buyer's  legal or
equitable  remedies,  including  damages  for  the  breach  of  failure  of  any
representation, warranty covenant or agreement contained herein and the right to
enforce specific performance of this Agreement.

                                    ARTICLE 9
                                    ---------

                            OBLIGATIONS AFTER CLOSING

         9.01  Post-Closing  Adjustments.  Seller and Buyer acknowledge that the
amount of all  adjustments  under  Section  2.03 may not be  available  prior to
Closing.  As soon as practicable after Closing,  Seller shall prepare and submit
to Buyer a statement  containing  adjustments  contemplated by Section 2.03 that
were not finally determined as of Closing ("Final Settlement Statement"). Seller
shall promptly notify Buyer of any changes Seller proposes and the parties shall
negotiate in good faith to agree on these  adjustments  within  ninety (90) days
after the Closing Date.  Payment to the  appropriate  party shall be made within
five (5) days after agreement is reached ("Final Settlement Date").

         9.02  Subsequent  Adjustments.  Seller and Buyer  recognize that either
party may receive funds or pay expenses  after the Final  Settlement  Date which
are properly the property or obligation of the other party.  Upon receipt of net
proceeds or net expenses due to or payable by the other party,  whichever occurs
first,  such party  shall  submit a  statement  showing  the items of income and
expense.  Payment by the appropriate party shall be made within ten (10) days of
receipt of the statement.

         9.03  Reservation  of Claims.  Except as  provided  in this  Agreement,
Seller is entitled to all claims  related to the Assets  prior to the  Effective
Time  regardless of when payment is made.  Except as provided in this Agreement,
Buyer is  entitled  to all claims  related to the  Assets  that arise  after the
Effective Time.

         9.04 Files and Records.  Upon Closing,  Seller shall permit  Buyer,  at
Buyer's expense, to take possession of originals of all files,  records and data
in Seller's  possession  relating to the Assets.  Seller shall have the right to
copy (at  Seller's  expense)  and retain a copy of all such  files,  records and
data.


                                       19
<PAGE>

         9.05  Further  Assurances.  After  Closing,  Seller and Buyer  agree to
execute  and  deliver  such  instruments  and take such  other  action as may be
necessary or advisable to carry out their obligations under this Agreement.

         9.06 Survival and Indemnity.

                  (a) The representations, covenants, agreements and indemnities
         (the  "obligations")  of or by  Seller  and  Buyer  shall  survive  the
         Closing.

                  (b) Allocation of Liability.

                           (i)  Liabilities.   Buyer  agrees  to  assume,   pay,
                  perform,  fulfill,  discharge  and be liable  for all  Assumed
                  Liabilities,  and  Seller  agrees  to  retain,  pay,  perform,
                  fulfill,  discharge  and be and remain liable for all Retained
                  Liabilities.

                           (ii)  Definitions.  The  term  "Assumed  Liabilities"
                  shall mean and include:

                                    (x) all  costs,  expenses,  liabilities  and
                           obligations assumed or otherwise agreed to be paid by
                           Buyer pursuant to the terms of this Agreement; and

                                    (y) all costs, expenses, liabilities, claims
                           and obligations  arising out of, in connection  with,
                           or  resulting   directly  or   indirectly   from  the
                           ownership  or  operation  of  the  Assets,  including
                           environmental  cleanup  liabilities  and plugging and
                           abandonment    liabilities    for   existing   wells,
                           platforms,  facilities,  or pipelines arising out of,
                           in  connection   with,   or  resulting   directly  or
                           indirectly  from the  ownership  or  operation of the
                           Assets (the "Abandonment and Clean-up Liability") but
                           excluding Retained Liabilities.

                  The term "Retained Liabilities" shall mean and include:

                                    (x) all  costs,  expenses,  liabilities  and
                           obligations assumed or otherwise agreed to be paid by
                           Seller pursuant to the terms of this Agreement; and

                                    (y) all costs, expenses, liabilities, claims
                           and  obligations  (except  Abandonment  and  Clean-up
                           Liability and related costs,  expenses,  liabilities,
                           claims and obligations) arising out of, in connection
                           with,  or  resulting   directly  or  indirectly  from



                                       20
<PAGE>

                           production or sale of  hydrocarbons  attributable  to
                           the  Assets or the  proper  accounting  or payment to
                           parties for their  interest  therein  insofar as such
                           claims  relate  to  periods  of  time  prior  to  the
                           Effective Time.

                  (c) In the event  that the  Closing  occurs,  (i) Buyer  shall
         protect,  defend,  indemnify and hold Seller  harmless from any and all
         damages,   claims,  losses,  demands,   fines,   penalties,   judgments
         (including interest), costs, expenses,  environmental liabilities,  and
         other  liabilities,   direct,   contingent,  or  otherwise,   including
         consulting and attorneys' fees and costs of court  ("Damages")  arising
         or accruing  with  respect to the Assumed  Liabilities  and (ii) Seller
         shall  protect,  defend,  indemnify  and hold Buyer  harmless  from any
         Damages  arising or accruing with respect to the Retained  Liabilities.
         The term  "Damages,"  as used herein,  shall not include (i) any amount
         which was taken into account as an  adjustment  to the  Purchase  Price
         pursuant to this Agreement or (ii) either party's costs and expenses as
         described in Section 10.02.  Buyer and Seller agree that their sole and
         exclusive remedies with respect to claims arising, after closing, under
         this Agreement,  shall be limited to remedies set forth in this Section
         9.06.

         9.07 CONSPICUOUSNESS/EXPRESS  NEGLIGENCE. THE DEFENSE,  INDEMNIFICATION
AND HOLD HARMLESS  PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE
WHETHER OR NOT THE DAMAGES, LOSSES, INJURIES,  LIABILITIES, COSTS OR EXPENSES IN
QUESTION  AROSE  SOLELY  OR IN PART  FROM  THE  ACTIVE,  PASSIVE  OR  CONCURRENT
NEGLIGENCE,   OR  OTHER  FAULT  OF  ANY  INDEMNIFIED  PARTY.  BUYER  AND  SELLER
ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS
CONSPICUOUS.

         9.08 Allocation of Proceeds. Seller shall receive all proceeds from the
sale of Substances  physically  produced or allocable to the Assets prior to the
Effective  Time.  Buyer shall  receive all proceeds  from the sale of Substances
physically produced or allocable to the Assets on or after the Effective Time.





                                   ARTICLE 10
                                   ----------

                                  MISCELLANEOUS

         10.01 Notices.  All notices  required or permitted under this Agreement
shall be effective upon receipt if personally delivered, if mailed by registered
or certified mail,  postage  prepaid,  or if delivered by telegram,  telecopy or
facsimile if directed to the parties as follows:



                                       21
<PAGE>

  TO BUYER:                                    TO SELLER:

  Fidelity Exploration & Production Company    American Resources Offshore, Inc.
  1700 Lincoln, Suite 4600                     801 Travis Street, 2100
  Denver, CO  80203                            Houston, TX  77002
  Telephone:  (303) 893-3133                   Telephone: (713) 227-7660
  Fax: (303) 893-1964                          Fax:  (713) 227-7626
  Attn: George M. Soulis                       Attn:  John P. Atwood


Any party may give written  notice of a change in the address or  individual  to
whom delivery shall be made.

         10.02 Expenses.  Except as otherwise  provided in this  Agreement,  all
fees,  costs and expenses  incurred by the parties in negotiating this Agreement
or in consummating the transactions contemplated by this Agreement shall be paid
by the party incurring them.

         10.03 Amendment.  This Agreement may not be altered or amended, nor any
rights  waived,  except  by a  written  instrument  executed  by the party to be
charged  with the  amendment  or  waiver.  No  waiver of any  provision  of this
Agreement shall be construed as a continuing waiver of the provision.

         10.04  Assignment.  Buyer shall not have the right to assign its rights
and delegate its duties under this Agreement  without written consent of Seller,
which consent shall not be unreasonably withheld..

         10.05  Conditions.  The  inclusion in this  Agreement of  Conditions to
Seller's and Buyer's  obligations  at Closing shall not, in and of itself,  be a
covenant  of  either  party to  satisfy  the  conditions  to the  other  party's
obligations at Closing.

         10.06 Headings.  The headings are for convenience only and do not limit
or otherwise affect the provisions of this Agreement.

         10.07  Counterparts.  This  Agreement may be executed in  counterparts,
each of which shall be an original and which,  taken together,  shall constitute
the same instrument.


         10.08  References.  References,  including  use  of  a  pronoun,  shall
include, where applicable,  masculine,  feminine, singular or plural individuals
or legal entities.

         10.09 Governing Law. This Agreement and the  transactions  contemplated
by this  Agreement  shall be  governed  and  construed  in  accordance  with the
internal laws of the State of Texas without  giving effect to any  principles of
conflicts of laws.


                                       22
<PAGE>

         10.10  Announcements.  Except as  otherwise  provided  for herein or as
required by law,  prior to Closing,  neither  Seller nor Buyer shall announce or
otherwise  publicize this  Agreement or the  transactions  contemplated  by this
Agreement without the prior written consent of the other party.

         10.11 Entire  Agreement.  This  Agreement  is the entire  understanding
between Seller and Buyer  concerning the subject matter of this Agreement.  This
Agreement  supersedes  all  negotiations,  discussions,  representations,  prior
agreements and understandings, whether oral or written.

         10.12  Parties in  Interest.  This  Agreement is binding upon and shall
inure to the benefit of Seller and Buyer and,  except  where  prohibited,  their
heirs,  successors,  representatives  and assigns. No other party is intended to
have any  benefits,  rights  or  remedies  under  this  Agreement.  There are no
third-party beneficiaries.

         10.13 Exhibits.  All Exhibits and Schedules  attached to this Agreement
are incorporated into this Agreement for all purposes.

         10.14  Severance.  If any  provision  of this  Agreement is found to be
illegal or  unenforceable,  the other terms of this  Agreement  shall  remain in
effect and this Agreement shall be construed as if the illegal or  unenforceable
provision had not been included.


BUYER:                                         SELLER:

FIDELITY EXPLORATION & PRODUCTION COMPANY      AMERICAN RESOURCES OFFSHORE, INC.

By: _________________________________
Name: John S. Geyer                            By: _____________________________
Its: Vice President Land                       Name: John P. Atwood
                                               Its: Vice President














                                       23
<PAGE>
<TABLE>
<CAPTION>

                       Exhibit A-1 - Leases - Page 1 of 2
                       ----------------------------------



                              EXHIBIT A-1 - Leases

                To the Purchase and Sale Agreement By and Between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

                                                         Lease
                                                         Effective                 Lease
Lease No.    Block No.   Block Name                      Date          Acreage     Status         Description
------------------------------------------------------------------------------------------------------------------------------------
<S>          <C>         <C>                             <C>           <C>         <C>            <C>

G18903       BA A2       Brazos Area Block A-2           01/01/98      5,760.00    Primary Term   All of Block A-2,  Brazos  Area,
                                                                                                  OCS Leasing  Map,  Texas Map No.
                                                                                                  5.

G12465       BA 542      Brazos Area Block 542           11/01/90      5,760.00    Producing      All of Block 542,  Brazos  Area,
                                                                                                  OCS Leasing  Map,  Texas Map No.
                                                                                                  5.

G17120       GA 213      Galveston Area Block 213        02/01/97      4,679.71    Producing      That   portion   of  Block  213,
                                                                                                  Galveston Area, OCS Leasing Map,
                                                                                                  Texas Map No. 6,  seaward of the
                                                                                                  Federal/State          Boundary,
                                                                                                  specifically  described  in  the
                                                                                                  OCS Block  Diagram  attached  to
                                                                                                  the Lease Form MMS-2005.

G18921       GA 418      Galveston Area Block 418        01/01/98      5,760.00    Producing      All  of  Block  418,   Galveston
                                                                                                  Area, OCS Leasing Map, Texas Map
                                                                                                  No. 6.

G15769       HI 37       High Island Area Block 37       12/01/95      5,760.00    Producing      All of  Block  37,  High  Island
                                                                                                  Area, OCS Leasing Map, Texas Map
                                                                                                  No. 7.

00419        SS 150      Ship Shoal Area Block 150       11/01/54      5,000.00    Producing      All of  Block  150,  Ship  Shoal
                                                                                                  Area,   as  shown  on   official
                                                                                                  leasing  map,  La.  Map  No.  5,
                                                                                                  Effective  Lease Lease No. Block
                                                                                                  No.   Block  Name  Date  Acreage
                                                                                                  Status Description


                                                                                                  Exhibit A-1 - Leases - Page 1 of 2
<PAGE>


                              EXHIBIT A-1 - Leases
                              --------------------

                To the Purchase and Sale Agreement By and Between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company


                                                         Lease
                                                         Effective                 Lease
Lease No.    Block No.   Block Name                      Date          Acreage     Status         Description
------------------------------------------------------------------------------------------------------------------------------------


G16435       ST 211      South Timbalier Area
                         South Addition Block 211        07/01/96      5,000.00    Producing      All   of   Block   211,    South
                                                                                                  Timbalier Area,  South Addition,
                                                                                                  OCS L Map No. 6A.

G01998       WC 152      West Cameron Area Block 152     07/01/96      5,000.00    Producing      All of Block 152,  West  Cameron
                                                                                                  Area,   Official   Leasing  Map,
                                                                                                  Louisiana Map No. 1.

G16122       WC 172      West Cameron Area Block 172     02/01/71      5,000.00    Producing      All of Block 172,  West  Cameron
                                                                                                  Area,   Official   Leasing  Map,
                                                                                                  Louisiana Map No. 1.

G16123       WC 195      West Cameron Area Block 195     06/01/96      5,000.00    Producing      All of Block 195,  West  Cameron
                                                                                                  Area,   Official   Leasing  Map,
                                                                                                  Louisiana Map No. 1.

G05315       WC 368      West Cameron Area
                         West Addition Block 368         07/01/83      5,000.00    Producing      All of Block 368,  West  Cameron
                                                                                                  Area, West Addition, OCS Leasing
                                                                                                  Map, Louisiana Map No. 1A.


                                                                                                  Exhibit A-1 - Leases - Page 1 of 2
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                  EXHIBIT "A-2"
                                  -------------

                                    INTERESTS
                                    ---------

                To the Purchase and Sale Agreement By and Between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

                                                                     Payment
                       Interest Before        Interest If Only          A             Interest After
                          Any Payout         Payout A Occurs      Defined by     Any and All Payouts
Block     Lease         WI         NRI        WI           NRI     Contract No.    WI            NRI
                                                                        *
------------------------------------------------------------------------------------------------------
<S>       <C>        <C>        <C>          <C>         <C>         <C>           <C>         <C>
BA A2     G18903     4.93340    3.94672      4.44010     3.55204       9512      4.44010       3.55204

BA A2     G18903     0.82233    0.65790      0.74010     0.59208       9512      0.74010       0.59208

BA 542    G12465     0.82233    0.68527      0.82233     0.68527       9908      0.82233       0.68527

GA 213    G17120     6.66680    5.33340      6.00012     4.80010       9512      6.00012       4.80010

GA 418    G18921     6.00000    4.80000      5.40000     4.32000       9512      5.40000       4.32000

HI 37     G15769     3.33333    2.60000      3.00000     2.34000       9407      3.00000       2.34000

HI 37     G15769     5.33333    4.16001      4.80000     3.74400       9407      4.80000       3.74400



                             Type
               Current        of
Block          Status      Leasehold    Description
--------------------------------------------------------------------------------


BA A2            BPO          RT        All of Block A-2,  Brazos Area, less and
                                        except  the SW/4  from  surface  down to
                                        50,000',  OCS Leasing Map, Texas Map No.
                                        5.

BA A2            BPO          RT        Block  A-2,   Brazos  Area,   SW/4  from
                                        surface  down to  50,000',  OCS  Leasing
                                        Map, Texas Map No. 5.

BA 542           APO          OR        Block 542,  Brazos Area, NE/4 SE/4; SE/4
                                        NW/4 WE/4:  S/2 SE/4;  from surface down
                                        to 50,000,  OCS Leasing  Map,  Texas Map
                                        No. 5

GA 213           APO          RT(1)     That  portion  of Block  213,  Galveston
                                        Area,  OCS Leasing Map, Texas Map No. 6,
                                        seaward of the  Federal/State  Boundary,
                                        specifically  described in the OCS Block
                                        Diagram   attached  to  the  Lease  Form
                                        MMS-2005.

GA 418           BPO          RT        All of Block 418,  Galveston  Area,  OCS
                                        Leasing Map, Texas Map No. 6.

HI 37            BPO          RT(2)     All of Block 37, High Island  Area,  OCS
                                        Leasing  Map,  Texas  No.  7,  less  and
                                        except  the  OCS-G  15769 No. 1 well and
                                        any production therefrom.

HI 37            BPO          RT        OCS-G15769 No. 1 Well




*Contract No. As Listed in                RT = Record Title
Exhibit A-3 to this Assignment            OR = Operating Rights
                                          RI = Royalty Interest

                                          Exhibit A-2 - Interests - Page  1 of 5
<PAGE>

                                  EXHIBIT "A-2"

                                    INTERESTS

                To the Purchase and Sale Agreement By and Between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

                                                                     Payment
                       Interest Before        Interest If Only          A             Interest After
                          Any Payout         Payout A Occurs      Defined by     Any and All Payouts
Block     Lease         WI         NRI        WI           NRI     Contract No.    WI            NRI
                                                                        *
------------------------------------------------------------------------------------------------------

SS 150    G0419-A    10.0000    6.83333      10.0000     6.48333       9001      10.0000       6.48333

SS 150    G0419-B    0.00000    0.50000      0.00000     0.50000       9001      0.00000       0.50000



                             Type
               Current        of
Block          Status      Leasehold    Description
--------------------------------------------------------------------------------

SS 150           BPO          OR3       OCS 0419,  INSOFAR  AND ONLY  INSOFAR As
                                        the Lease  covers  the W/2;  NE/4 of the
                                        NE4;  N/2 of the NW/4 of the NE/4;  SW/4
                                        of the  NW/4  of the  NE/4;  SW/4 of the
                                        NE/4; NE/4 of the SE/4 of the NE/4; SW/4
                                        of  the  SE/4  of the  NE/4;  W/2 of the
                                        SE/4;  W/2 of the  NE/4  of the  SE/4 of
                                        Block 150, Ship Shoal Area,  INSOFAR AND
                                        ONLY  INSOFAR  as the lease  covers  and
                                        affects the  operating  rights in depths
                                        from  the  earth's  surface  down to the
                                        stratigraphic  equivalent  of  the  true
                                        vertical  depth of 11,177 (being the TVD
                                        drilled  in the OCS  0419  #9 Well  plus
                                        100'),  LESS AND EXCEPT the OCS 0419 No.
                                        B-3,  No.  B-4ST and No. C-1 Wells,  and
                                        FURTHER   LESS  AND   EXCEPT  OCS  0419,
                                        INSOFAR  AND ONLY  INSOFAR  as the lease
                                        covers and  affects the E/2 of the NW/4,
                                        the  SW/4 of the  NE/4,  the SW/4 of the
                                        NW/4 of the  NE/4,  and the  SW/4 of the
                                        NE/4 of the  NE/4  of  Block  150,  Ship
                                        Shoal Area, and further  limited INSOFAR
                                        AND ONLY INSOFAR as the lease covers and
                                        affects  operating rights in depths from
                                        the   earth's   surface   down   to  the
                                        stratigraphic the true vertical depth of
                                        10, 625 feet  (being the TVD  drilled in
                                        the OCS 0419 #C-1 Well,  plus 100') LESS
                                        AND EXCEPT the stratigraphic equivalents
                                        ot the BN-7  Sand,  1-3 Sand,  1-4 Sand,
                                        and J-1 Sand.

SS 150           APO          RI7       OCS-0419,  INSOFAR  AND ONLY  INSOFAR as
                                        the lease  covers and affects the E/2 of
                                        the NW/4, the SW/4 of the NE/4, the SW/4
                                        of the NW/4 of the NE/4, and the SW/4 of
                                        the NE/4 of the NE/4 of Block 150,  Ship
                                        Shoal Area, and further  limited INSOFAR
                                        AND ONLY INSOFAR as the lease covers and
                                        affects  operating rights in depths from
                                        the   earth's   surface   down   to  the
                                        stratigraphic  equivalent  of  the  true
                                        vertical depth of 10,625 feet (being the
                                        TVD  drilled  in the OCS 0419 #C-1 Well,
                                        plus   100')   LESS   AND   EXCEPT   the
                                        stratigraphic  equivalents  of the  BN-7
                                        Sand, 1-3 Sand, 1-4 Sand and J-1 Sand.





*Contract No. As Listed in                RT = Record Title
Exhibit A-3 to this Assignment            OR = Operating Rights
                                          RI = Royalty Interest

                                          Exhibit A-2 - Interests - Page  2 of 5
<PAGE>

                                  EXHIBIT "A-2"

                                    INTERESTS

                To the Purchase and Sale Agreement By and Between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

                                                                      Payment
                       Interest Before        Interest If Only          A             Interest After
                          Any Payout         Payout A Occurs      Defined by     Any and All Payouts
Block     Lease         WI         NRI        WI           NRI     Contract No.    WI            NRI
                                                                        *
------------------------------------------------------------------------------------------------------

SS 150    G0419-B3   10.00000   6.80533      10.00000    6.45553       9001      10.00000      6.45553

SS 150    G0419-B4   10.00000   6.83333      10.00000    6.48333       9001      10.00000      6.48333

SS 150    G0419-C1   0.00000    0.33340      0.00000     0.50000       9619      0.00000       0.50000

ST 211    G16435     6.66680    5.33344      6.00012     4.80010       9512      6.00012       4.80010

ST 211    G16435      0.00000   0.19200      0.36001     0.45491       9512      0.36001       0.45491

WC 152    G16122      4.60000   3.58800      4.14000     3.22920       9407      4.14000       3.22920


WC 152    G16122      0.00000   0.13034      0.00000     0.13034       0103      0.00000       0.13034

                             Type
               Current        of
Block          Status      Leasehold    Description
--------------------------------------------------------------------------------

SS 150           BPO         OR3&4      OCS 0419 No. B-3 Well

SS 150           BPO          OR3       OCS 0419 No. B-4ST Well

SS 150           BPO          RT        OCS-G0419 No. C-1 Well

ST 211           APO          RT5       All of Block 211, South  Timbalier Area,
                                        South   Addition,   OCS   Leasing   Map,
                                        Louisiana Map No. 6A; less the SW/4 SW/4
                                        from the earth's surface to 10,380' TVD.

ST 211           APO          RT        SW/4 SW/4  Block 211,  South  Timbalier,
                                        South   Addition,   OCS   Leasing   Map,
                                        Louisiana  Map No. 6A;  from the earth's
                                        surface to 10,380' TVD.

WC 152           BPO          RT8       All of Block  152,  West  Cameron  Area,
                                        less and except the S/2 from the surface
                                        down  to  7,000',   OCS   Leasing   Map,
                                        Louisiana Map No. 1.

WC 152           APO          RT8       S/2 of Block  152,  West  Cameron  Area,
                                        from the  surface  down to  7,000',  OCS
                                        Leasing


*Contract No. As Listed in                RT = Record Title
Exhibit A-3 to this Assignment            OR = Operating Rights
                                          RI = Royalty Interest

                                          Exhibit A-2 - Interests - Page  3 of 5

<PAGE>

                                  EXHIBIT "A-2"

                                    INTERESTS

                To the Purchase and Sale Agreement By and Between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company


                                                                     Payment
                       Interest Before        Interest If Only          A             Interest After
                          Any Payout         Payout A Occurs      Defined by     Any and All Payouts
Block     Lease         WI         NRI        WI           NRI     Contract No.    WI            NRI
                                                                        *
------------------------------------------------------------------------------------------------------

WC 172    G01998     5.40000    4.21200      4.86000     3.79080       9407      4.86000       3.79080


WC 0172   G01998-A   0.00000    0.000000     1.350000    1.053000      9407      1.215000      0.947700


                             Type
               Current        of
Block          Status      Leasehold    Description
--------------------------------------------------------------------------------
WC 172
                 APO          OR6       Oil and Gas  Lease  of  Submerged  Lands
                                        under the Outer  Continental Shelf Lands
                                        Act   between   the  United   States  of
                                        America,  as  Lessor,  and  Chevron  Oil
                                        Company,  as  Lessee,   dated  effective
                                        February 1, 1971, designated with serial
                                        No.  OCS-G 1998 (the  "Lease"),  INSOFAR
                                        AND ONLY  INSOFAR  as the  Lease  covers
                                        Block 172,  West Cameron  Area, as shown
                                        on  Official  containing   approximately
                                        5,000 acres, and FURTHER INSOFAR ONLY as
                                        to  operating   rights  in  and  to  the
                                        following portions and depths:  N/2, N/2
                                        of the S/2 from  7,000'  TVD and  below;
                                        N/2,  SW/4,  N/2 of the SE/4, N/2 of the
                                        SW/4 of the SE/4 and NW/4 of the SE/4 of
                                        the SE/4 from the  surface  of the earth
                                        down to  7,000'  TVD;  N/2 of the S/2 of
                                        the  SW/4,  N/2 of the  SW/4 of the SE/4
                                        and NW/4 of the  SE/4 of the  SE/4  from
                                        8,200' TVD and below;  S/2 of the S/2 of
                                        the SW/4  from  10,000'  TVD and  below,
                                        LESS AND EXCEPT  operating rights in the
                                        following  portions and depths:  NW/4 of
                                        the  NW/4  from  those  depth  intervals
                                        described    as    the     stratigraphic
                                        equivalent  of the Middle Cib Op Sand as
                                        seen in the  OCS-G  1998  No.  E-1  Well
                                        between  the depths of 9,933' and 9,987'
                                        measured  depth,  and the  stratigraphic
                                        equivalent  of the  Upper Cib Op Sand as
                                        seen in the same well between the depths
                                        of 9,499' and 9,593' measured depth.

                 APO          OR        OCS-G01998,   Block  172,  West  Cameron
WC 0172                                 Area,  INSOFAR  AND ONLY  INSOFAR  AS to
                                        operating  rights in NW/4 of the NW/4 of
                                        Block  172 from  those  depth  intervals
                                        described    as    the     stratigraphic
                                        equivalent  of the Middle Cib Op Sand as
                                        seen in the  OCS-G  1998  No.  E-1  Well
                                        between  the depths of 9,933' and 9,987'
                                        measured  depth,  and the  stratigraphic
                                        equivalent  of the  Upper Cib Op Sand as
                                        seen in the same well between the depths
                                        of 9,499'  and  9,593'  measured  depth,
                                        including without limitation, all right,
                                        title and interest in the OCS-G 1998 No.
                                        E-1 Well.

*Contract No. As Listed in                RT = Record Title
Exhibit A-3 to this Assignment            OR = Operating Rights
                                          RI = Royalty Interest

                                          Exhibit A-2 - Interests - Page  4 of 5
<PAGE>

                                  EXHIBIT "A-2"

                                    INTERESTS

                To the Purchase and Sale Agreement By and Between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

                                                                     Payment
                       Interest Before        Interest If Only          A             Interest After
                          Any Payout         Payout A Occurs      Defined by     Any and All Payouts
Block     Lease         WI         NRI        WI           NRI     Contract No.    WI            NRI
                                                                        *
------------------------------------------------------------------------------------------------------

WC 195    G16123     4.60000    3.58800      4.14000     3.22920       9407      4.14000       3.22920

WC 0368   G05315     6.00000    4.23977      0.00000     0.00000                 6.00000       4.23977

WC 0368   G05315     5.87360    4.15042      5.87356     4.15042                 5.87356       4.15042

WC 0368   G05315     0.00000    0.542166     0.00000     0.00000                 0.00000       0.542166

WC 0368   G05315     0.00000    0.032814     0.00000     0.00000                 0.00000       0.032814


                             Type
               Current        of
Block          Status      Leasehold    Description
--------------------------------------------------------------------------------

WC 195           BPO          RT9       All of Block  195,  West  Cameron  Area,
                                        less  and   except  the  SE/4  from  the
                                        surface  down  to  12,000'  SSTVD,   OCS
                                        Leasing Map, Louisiana Map No. 1.

WC 0368                       RT        All of Block  368,  West  Cameron  Area,
                                        West   Addition,    OCS   Leasing   Map,
                                        Louisiana Map No. 1A.

WC 0368                       OR        All of Block  368,  West  Cameron  Area,
                                        West  Addition,  LIMITED to those depths
                                        from the  subsea  surface  down to 9,584
                                        feet TVD.

WC 0368                       RI        All of Block  368,  West  Cameron  Area,
                                        West   Addition,    OCS   Leasing   Map,
                                        Louisiana Map No. 1A.

WC 0368                       RI        All of Block  368,  West  Cameron  Area,
                                        West  Addition,  LIMITED to those depths
                                        from the  subsea  surface  down to 9,584
                                        feet TVD.
</TABLE>


Footnotes to Leasehold Description

1    Interest in #1 Well  suspended due to  non-consent  on sidetrack  operation
     under JOA dated February 1, 1997 (Contract No. 9705).
2    Subject to Farmout  Agreement  dated July 1, 2002, by and between  American
     Resources Offshore, Inc. and Pure Resources, L.P.
3    The interests  shown in the "Interest After Payout" columns is actually the
     interest  after an  escalation  of ORRI,  based on a cumulative  production
     under the terms of the Chevron Farmout Agreement (Contract No. 9001), it is
     displayed in these columns for simplicity of presentation.
4    Interest subject to the overriding  royalty interest  assignment to Jack G.
     Avare, et ux.
5    Subject to the terms and  conditions of a farmout  agreement as outlined in
     the Letter  Ageement  (Contract  No. 9902) by and between ARO and Spinnaker
     Exploration  Company  regarding  the SW/4 of the SW/4 of Block  211,  South
     Timbalier Area, South Addition.
6    ARO owns additional contractual rights in the OCS-G1998 No. D-1 Well as the
     result of the acceptance of a proportionate  share of non-consent  interest
     in the well.
7    The interest shown is that reserved under the terms of the Pennzoil Farmout
     Agreement (Contract No. 9619).  Assignments  pursuant to this Agreement may
     not have been approved by the MMS.
8    Subject to Farmout Agreement dated April 6, 2001, by and between TDC Energy
     and American  Resources  Offshore,  Inc., et al.,  covering Block 152, West
     Cameron Area, Offshore, Louisiana.
9    Subject  to  Letter  Agreement  dated May 10,  2001,  by and  between  Pure
     Resources,  L.P. and American Resources Offshore, Inc., covering Block 195,
     West Cameron Area, Offshore, Louisiana.

*Contract No. As Listed in                RT = Record Title
Exhibit A-3 to this Assignment            OR = Operating Rights
                                          RI = Royalty Interest

                                          Exhibit A-2 - Interests - Page  5 of 5
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company




    ARO
Contract No.
------------

    8701        Offshore Operating Agreement dated April 30, 1987 by and between
                Century Offshore  Management  Corporation  (Operator) and Apache
                Corporation  (Non-Operator)  covering  Block 368,  West  Cameron
                Area, Offshore Louisiana.

    8702        Farmout  Agreement,  dated April 20, 1987,  by and between Shell
                Offshore,   Inc.,  et  al,  as  farmors  and  Century   Offshore
                Management  Corporation  covering  OCS-G 5315,  Block 368,  West
                Cameron Area, West Addition, Offshore Louisiana.

    9001        Farmout  Agreement  dated  effective  August  30,  1990,  by and
                between Chevron U.S.A.,  Inc., as farmor,  and Century  Offshore
                Management  Corporation,  as  farmee,  covering a portion of OCS
                0419, Block 150, Ship Shoal Area, Offshore Louisiana.

    9101        Gas  Purchase  Contract  dated  December  1, 1991 by and between
                Amoco Energy Trading  Corporation  (Buyer) and K. E.  Resources,
                Ltd. (Seller).

    9405        Joint Operating Agreement dated December 1, 1994, as amended, by
                and between Century Offshore Management Corporation  (Operator),
                and Settle  Oil and Gas  Company  and  Southern  Gas  Company of
                Delaware, Inc.  (Non-Operators),  covering Block 150, Ship Shoal
                Area, Offshore Louisiana.


                                          Exhibit A-3 - Contracts - Page 1 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------


    9406        Purchase and Sale Agreement dated effective October 31, 1994, by
                and between Settle Oil and Gas Company (seller) and Southern Gas
                Company of  Delaware,  Inc.  covering  the sale of interest in a
                portion of OCS 419, Block 150, Ship Shoal Area.

    9407        Louisiana Offshore Ventures Program dated January 1, 1994.

    9408        Purchase and Sale Agreement dated effective October 31, 1994, by
                and between  Settle Oil and Gas Company  (seller)  and  American
                Resources of Delaware, Inc. the sale of interest in a portion of
                OCS 419, Block 150, Ship Shoal Area.

    9409        Letter  Agreement dated December 30, 1994, by and between Settle
                Oil and Gas Company and Southern  Gas Company of Delaware,  Inc.
                covering a portion of OCS 419, Block 150, Ship Shoal Area.

    9511        Joint  Operating  Agreement  dated December 1, 1995, as amended,
                between IP Petroleum  Company,  Inc.  (Operator)  and Teco Gas &
                Oil, Inc., et al (Non-Operators), covering Block 37, High Island
                Area, Offshore Texas, as amended July 12, 1997.

    9512        Texas 3D Ventures Program Agreement dated April 1, 1995

    9513        Letter  Agreement  dated May 26, 1995 by and between  Settle Oil
                and Gas  Company and  Southern  Gas  Company of  Delaware,  Inc.
                covering a portion of OCS 419, Block 150, Ship Shoal Area.


                                          Exhibit A-3 - Contracts - Page 2 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------


    9514        Severance  Agreement  dated  effective  November 30, 1995 by and
                between American Resources of Delaware, Inc. and Andrew J. Kacic
                including  a  provision  for  the  assignment  of an  overriding
                royalty  interest  on the OCS 419 No.  B4ST  Well at Ship  Shoal
                Block 150, and the Assignments to be executed pursuant thereto.

    9609        Joint  Operating  Agreement  dated  June  1,  1996,  between  IP
                Petroleum Company,  Inc. (Operator) and TECO Gas & Oil, Inc., et
                al  (Non-Operators),  covering  Block 195,  West  Cameron  Area,
                Offshore, Louisiana, as amended July 12, 1997.

    9613        Joint  Operating  Agreement  dated  July  1,  1996,  between  IP
                Petroleum Company,  Inc. (Operator) and TECO Gas & Oil, Inc., et
                al  (Non-Operators),  covering  Block 152,  West  Cameron  Area,
                Offshore, Louisiana, as amended July 12, 1997.


    9619        Farmout  Agreement  dated November 14, 1996, as amended,  by and
                between  Century  Offshore  Management  Corporation and American
                Resources  of   Delaware,   Inc.,   as  Farmors,   and  Pennzoil
                Exploration  and  Production  Company , as  Farmee,  covering  a
                portion  of OCS 0419,  Block  150,  Ship  Shoal  Area,  Offshore
                Louisiana.


                                          Exhibit A-3 - Contracts - Page 3 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    9621        Area of Mutual  Interest  dated  March 26,  1996,  covering  the
                "South  Timbalier  Area Block 211",  by and between IP Petroleum
                Company,  Inc., The William G. Helis Company,  L.L.C.,  MG Oil &
                Gas  Corp.,   TECO  Gas  &  Oil,  Inc.  and  Houston   Energy  &
                Development, Inc.

    9622        Area of Mutual Interest dated April 16, 1996, covering the "High
                Island  Area Block 37",  by and  between IP  Petroleum  Company,
                Inc., Cockrell Oil and Gas, L.P., TECO Gas & Oil, Inc., MG Oil &
                Gas Corp.,  The William G. Helis  Company,  L.L.C.  and Browning
                Offshore, Inc.

    9623        Joint  Operating  Agreement  dated  July 1,  1996,  as  amended,
                between IP Petroleum,  Inc. (Operator) and TECO Gas & Oil, Inc.,
                Et Al (Non-Operators), covering Block 211, South Timbalier Area,
                Offshore Louisiana.

    9624        Area of Mutual  Interest  dated  August 22,  1996,  covering the
                "Galveston 213 AMI", by and between IP Petroleum Company,  Inc.,
                MG Oil and Gas Corp.,  The  William G.  Helis  Company,  L.L.C.,
                Houston Energy and Development, Inc. and TECO Gas & Oil, Inc.

    9625        Platform  Use  Agreement  dated  May 26,  1996,  by and  between
                Century  Offshore  Management  Corporation,  Settle  Oil  &  Gas
                Company,  and Southern Gas Company of Delaware,  Inc.  regarding
                the  production and  processing of oil and gas  attributable  to
                Southern's  interest through platform,  facilities and pipelines
                owned by Century and Settle, covering Ship Shoal Block 150.

    9626        Letter Agreement dated September 23, 1996,  between IP Petroleum
                Company,  Inc., and Cockrell Oil Corporation,  covering the High
                Island Block 37.

                                          Exhibit A-3 - Contracts - Page 4 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    9627        Letter  Agreement  dated  October 3, 1996,  between IP Petroleum
                Company, Inc. and Cockrell Oil Corporation, covering High Island
                Block 37.

    9705        Joint  Operating  Agreement  dated February 1, 1997,  between IP
                Petroleum Company,  Inc. (Operator) and TECO Gas & Oil, Inc., et
                al (Non-Operators), covering Block 213, Galveston Area, Offshore
                Texas.

    9708        Joint  Operating  Agreement  dated  August 1,  1997,  between IP
                Petroleum Company,  Inc. (Operator) and Teco Gas & Oil, Inc., et
                al  (Non-Operators),  covering  Block 172,  West  Cameron  Area,
                Offshore Louisiana.

    9711        Exchange  Agreement  dated  August  21,  1997,  between  Chevron
                U.S.A., Inc. and IP Petroleum Company, Inc. and covering federal
                offshore  leases OCS-G 1998,  West  Cameron  Block 172 and OCS-G
                14300.

    9714        Production  Handling  Agreement  dated September 23, 1997 by and
                between the owners of West  Cameron  Block 364 and the owners of
                West Cameron Block 368, as defined in the  Agreement,  regarding
                the  processing of natural gas,  condensate  and water  produced
                from  Block 364 at the  production  facilities  located on Block
                368.

    9716        Bidding  Agreement  dated August 20, 1997,  between IP Petroleum
                Company,  Inc.,  Teco  Gas & Oil,  Inc.  The  William  G.  Helis
                Company,   L.L.C.,  and  Houston  Energy  &  Development,   Inc.
                regarding  the bidding  process  for the  purchase of Block 418,
                Galveston  Area  and  stipulating  the  form  of  the  Operating
                Agreement for the Lease.


                                          Exhibit A-3 - Contracts - Page 5 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    9717        Joint  Operating  Agreement  dated August 22,  1997,  between IP
                Petroleum  Company,   Inc.  and  Barrett  Resources  Corporation
                (CoOperator)  and The William G. Helis  Company,  L.L.C.,  et al
                (Non-Operators),  covering Block A2 High Island Area,  Offshore,
                Texas,   attached  as  Exhibit  "B"  to  the  Bidding  Agreement
                effective the same date and by and between the same parties.

    9722        Area of Mutual Interest dated July 17, 1997,  covering the "West
                Cameron Area Block 172",  by and between IP  Petroleum  Company,
                Inc., TECO Gas & Oil, Inc., The William G. Helis Company, L.L.C.
                and Browning Offshore, Inc.

                Area of  Mutual  Interest  dated  and  effective  August 6, 1997
    9723        covering the  "Galveston  Area Block 418 AMI", by and between IP
                Petroleum Company,  Inc., The William G. Helis Company,  L.L.C.,
                Houston Energy and Development, Inc. and TECO Gas and Oil, Inc.

                Purchase and Sale Agreement dated  effective  September 1, 1997,
    9724        by and  between K. E.  Resources,  Ltd.  (seller)  and  American
                Resources Offshore,  Inc. covering the sale of interest in OCS-G
                5315,  Block 368, West Cameron Area, West Addition,  OCS-G 1525,
                Block 222, Ship Shoal Area and OCS-G 1984, Block 225, Ship Shoal
                Area, Offshore Louisiana.

    9801        Farmout  Agreement  dated  December  29,  2000,  by and  between
                Century Offshore Management Corporation, as farmee, and American
                Resources  Offshore,  Inc., and Fidelity Oil Holdings,  Inc., as
                farmees,  covering a portion  of  OCS-G05315,  Block  368,  West
                Cameron Area, West Addition, Offshore Louisiana.


                                          Exhibit A-3 - Contracts - Page 6 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    9806        Closing Agreement dated January 5, 1998,  effective  November 1,
                1997, by and between  Apache  Corporation  (Seller) and American
                Resources,  Inc.  (Buyer)  covering  the  sale  of  interest  in
                OCS-G05315,   Block  368,  West  Cameron  Area,  West  Addition,
                Offshore Louisiana.

    9807        Letter Agreement dated January 23, 1998,  effective  November 1,
                1997, by and between Nuevo Energy Company  (Seller) and American
                Resources,  Inc.  (Buyer),  covering  the  sale of  interest  in
                OCS-G05315,   Block  368,  West  Cameron  Area,  West  Addition,
                Offshore Louisiana.

                Purchase and Sale  Agreement  dated  February  17, 1998,  by and
    9808        between American Resources Offshore, Inc., as Buyer and TECO Oil
                and Gas, Inc., as Seller.

    9809        Joint  Operating  Agreement  dated January 1, 1998,  between The
                William  G.  Helis  Company,   L.L.C.  (Operator)  and  American
                Resources Offshore, Inc., Et Al (Non-Operators),  covering Block
                418, Galveston Area, Offshore Texas.

    9810        Farmout Agreement dated October 28, 1998, by and between Century
                Offshore  Management   Corporation,   as  farmor,  and  American
                Resources  Offshore,  Inc.,  as  farmee,  covering  a portion of
                OCS-G05315,   Block  368,  West  Cameron  Area,  West  Addition,
                Offshore Louisiana.

    9903        Purchase and Sale Agreement  dated March 9, 1999, by and between
                American  Resources  Offshore,   Inc.  (Seller)  and  Challenger
                Minerals,  Inc.  (Buyer)  covering  the  sale of  interest  in a
                portion of  OCS-G01998,  Block 172, West Cameron Area,  Offshore
                Louisiana.



                                          Exhibit A-3 - Contracts - Page 7 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    9905        Participation  Agreement  dated August 2, 1999 by and between IP
                Petroleum Company,  Inc. ("IPP"),  The William G. Helis Company,
                L.L.C.  ("Helis"),  American Resources  Offshore,  Inc. ("ARO"),
                Challenger  Minerals,  Inc.  ("CMI"),  JN Exploration  Company &
                Production Limited Partnership ("JN"),  Panaco, Inc. ("Panaco"),
                and Equitable  Production  Company  ("Equitable")  covering West
                Cameron Block 172.

    9906        Farmout Agreement dated August 20, 1999 by and between the lease
                owners of OCS-G 14538,  Block 212, South Timbalier  Area,  South
                Addition,  and OCS-G 16435,  Block 211,  South  Timbalier  Area,
                South  Addition,  Offshore  Louisiana,  as Farmors and Spinnaker
                Exploration   Company,   as  Farmee,   defining  the  terms  and
                conditions of the farmout of the SW/4 SW/4 of the Lease.

    9907        Operating   Agreement  dated  July  30,  1999,  by  and  between
                Spinnaker  Exploration  Company,  L.L.C., Ocean Energy, Inc. and
                Case-Pomeroy  Oil  Corporation,  as it covers  INSOFAR  AND ONLY
                INSOFAR as SW/4 SW/4 of South Timbalier Block 211.

    9908        Joint  Development  Agreement  dated  November 11, 1999,  by and
                between  Cockrell  Oil  and  Gas,  L.P.,  Newfield   Exploration
                Company,   IP  Petroleum  Company,   Inc.,   American  Resources
                Offshore,  Inc., Samson Offshore Company,  Houston Energy,  Inc.
                and The William G. Helis Company, L.L.C.

    0001        Agreement and Settlement of Compromise  dated March 22, 2000, by
                and between  American  Resources  Offshore,  Inc.  ("ARO"),  The
                William G. Helis Company, L.L.C.  ("Helis"),  Basin Exploration,
                Inc.  ("Basin")  and Fidelity Oil  Holdings,  Inc.  ("Fidelity")
                covering West Cameron Block 172.


                                          Exhibit A-3 - Contracts - Page 8 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    0002        Offer to Purchase dated April 19, 2000, by and between  American
                Resources  Offshore,  Inc., as Seller, and IP Petroleum Company,
                Inc.,  and The  William  G.  Helis  Company,  L.L.C.,  as Buyer,
                covering High Island Block 37.

    0003        Ratification of Operating  Agreement dated September 1, 2000, to
                the Joint  Operating  Agreement  dated January 1, 1998,  whereas
                Virgin Offshore U.S.A.,  Inc.  ("Virgin") has acquired a portion
                of the interests covering Galveston Block 418, of The William G.
                Helis Company,  L.L.C., American Resources Offshore,  Inc., Duke
                Energy  Hydrocarbons,  LLC,  and Houston  Energy,  Inc.,  in the
                Lease.

    0004        Ratification of Operating  Agreement dated September 1, 2000, to
                the Joint  Operating  Agreement  dated January 1, 1998,  whereas
                Palace Exploration  Company ("Palace") has acquired a portion of
                the interests  covering  Galveston  Block 418, of The William G.
                Helis Company,  L.L.C., American Resources Offshore,  Inc., Duke
                Energy  Hydrocarbons,  LLC,  and Houston  Energy,  Inc.,  in the
                Lease.

    0005        Ratification of Operating  Agreement dated September 1, 2000, to
                the Joint  Operating  Agreement  dated January 1, 1998,  whereas
                Duke Energy Hydrocarbons,  LLC ("DEH") has acquired a portion of
                the  interests  covering  Galveston  Block 418, of Fidelity  Oil
                Holdings,  Inc., American Resources Offshore,  Inc., and Houston
                Energy, Inc., in the Lease.

    0006        Letter  Agreement  dated September 21, 2000, but effective as of
                September  1, 2000 by and between  Fidelity Oil  Holdings,  Inc.
                ("Fidelity"), American Resources Offshore, Inc. ("ARO"), Houston
                Energy,  Inc.  ("HEI")   (hereinafter   sometimes   collectively
                referred to as "Assignors"),  and Duke Energy Hydrocarbons,  LLC
                ("DEH")  (hereinafter   sometimes  referred  to  as  "Assignee")
                covering Galveston Block 418.

                                          Exhibit A-3 - Contracts - Page 9 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    0007        Letter  Agreement  dated  October 4, 2000 between The William G.
                Helis Company,  L.L.C.  ("Helis"),  American Resources Offshore,
                Inc.  ("ARO"),  Houston  Energy,  Inc.  ("HEI") and Fidelity Oil
                Holdings, Inc. ("Fidelity") covering Galveston Block 418.

    0008        Letter  Agreement  dated  October 10, 2000,  but effective as of
                September  1, 2000 by and between The William G. Helis  Company,
                L.L.C.  ("Helis"),  American Resources  Offshore,  Inc. ("ARO"),
                Houston Energy, Inc. ("HEI") and Duke Energy  Hydrocarbons,  LLC
                ("DEH")  (hereinafter  sometimes  collectively  referred  to  as
                "Assignors")  and  Virgin  Offshore  U.S.A.,   Inc.   ("Virgin")
                (hereinafter  sometimes  referred  to  as  "Assignee")  covering
                Galveston Block 418.

    0009        Letter  Agreement  dated  October 16, 2000,  but effective as of
                September  1, 2000 by and between The William G. Helis  Company,
                L.L.C.  ("Helis"),  American Resources  Offshore,  Inc. ("ARO"),
                Houston Energy, Inc. ("HEI") and Duke Energy  Hydrocarbons,  LLC
                ("DEH")  (hereinafter  sometimes  collectively  referred  to  as
                "Assignors")   and   Palace   Exploration   Company   ("Palace")
                (hereinafter  sometimes  referred  to  as  "Assignee")  covering
                Galveston Block 418.

    0010        Production  Handling  Agreement dated December 10, 2000, Century
                Exploration  Company,  as  Producer,   and  Century  Exploration
                Company,  American  Resources  Offshore,  Inc., and Fidelity Oil
                Holdings, Inc., as Handler, covering West Cameron Block 368.


                                         Exhibit A-3 - Contracts - Page 10 of 11
<PAGE>

                             EXHIBIT A-3 - CONTRACTS

                To the Purchase and Sale Agreement by and between
 American Resources Offshore, Inc. and Fidelity Exploration & Production Company

    ARO
Contract No.
------------

    0101        Production  Handling  Agreement  dated  April 16,  2001,  by and
                between Pure Partners,  L.P. ("Pure"), Duke Energy Hydrocarbons,
                LLC ("DEH"),  The William G. Helis  Company,  L.L.C.  ("Helis"),
                Houston  Energy,  Inc.  ("HEI"),  Shell Offshore  Properties and
                Capital II, Inc. ("SOPAC"),  American Resources  Offshore,  Inc.
                ("ARO"),  Fidelity  Oil  Holdings,  Inc.  ("Fidelity"),  H.E.&D.
                Offshore,  Inc. ("HED"),  Palace Exploration  Company ("Palace")
                and  Virgin   Offshore   U.S.A.,   Inc.   ("Virgin")   sometimes
                hereinafter  referred  to  collectively  as  the  "Parties"  and
                individually as "Party", covering Galveston Block 418.

    0102        Letter  Agreement  date  May  10,  2001,  by  and  between  Pure
                Resources,  L.P. and American Resources Offshore, Inc., covering
                Block 195, West Cameron Area, Offshore, Louisiana.

    0103        Farmout Agreement dated April 6, 2001, by and between TDC Energy
                (Farmee) and American Resources Offshore,  Inc., et al, (Farmor)
                covering Block 152, West Cameron Area, Offshore, Louisiana.

    0201        Farmout  Agreement  dated July 1, 2002, by and between  American
                Resources  Offshore,  Inc.  (Farmor)  and Pure  Resources,  L.P.
                (Farmee) covering Block 37, High Island Area, Offshore Texas.

    0202        Operating and Platform Use Agreement  dated  September 19, 2002,
                by and between  Century  Exploration  Company,  as Operator  and
                Century Exploration Company,  American Resources Offshore, Inc.,
                and Fidelity  Exploration  & Production  Company,  as Producers,
                covering West Cameron Block 368.


                                         Exhibit A-3 - Contracts - Page 11 of 11
<PAGE>

                                   EXHIBIT A-4

                                     ASSETS

                To the Purchase and Sale Agreement By and Between
                     American Resources Offshore, Inc. and
                  Fidelity Exploration and Production Company


                                                                      ALLOCATED
PROPERTY                                                                VALUE
--------                                                                -----
Brazos Block A2                                                       $        0

Brazos Block 542                                                      $        0
Galveston Block 213                                                   $        0

Galveston Block 418                                                   $  625,000

High Island Block 37                                                  $        0

Ship Shoal Block 150                                                  $  727,000

South Timbalier Block 211                                             $  568,000

West Cameron Block 152                                                $    5,000

West Cameron Block 172                                                $  450,000

West Cameron Block 195                                                $        0

West Cameron Block 368                                                $  355,000
                                                                      ----------

                                                                      $2,730,000


<PAGE>

                                  Schedule 2.03


                   Attached to and made apart of that certain
                     Asset Purchase and Sale Agreement among
                  American Resources Offshore, Inc. as "Seller"
                                       and
              Fidelity Exploration & Production Company, as "Buyer"


                                   PRELIMINARY
                                CLOSING STATEMENT
                  AMERICAN RESOURCES OFFSHORE, INC. / FIDELITY
                  --------------------------------------------


1.       AGREEMENT         Purchase and Sale Agreement  dated October 1, 2002 by
         ---------         and between  American  Resources  Offshore,  Inc., as
                           Seller,   and  Fidelity   Exploration   &  Production
                           Company, as Buyer (the "Agreement").

2.       ASSETS SOLD       All of Seller's  right,  title and interest in and to
         -----------       Oil and Gas Leases as follows:


                                                                 Effective Lease
         Lease No.         Block No.   Block Name                      Date
         ---------         ---------   ----------                      ----

         OCS-G 1998        WC 172      West Cameron Block 172        02/01/71
         OCS-G 5315        WC 368      West Cameron Block 368        07/01/83
         OCS-G 15769       HI 37       High Island Block 37          12/01/95
         OCS-G 16435       ST 211      South Timbalier Block 211     07/01/96
         OCS-G 17120       GA 213      Galveston Block 213           02/01/97
         OCS-G 18921       GA 418      Galveston Block 418           01/01/98
         OCS-G 0419        SS 150      Ship Shoal Block 150          11/01/54
         OCS-G 18903       BA A-2      Brazos Block A-2              01/01/98
         OCS-G 12465       BA 542      Brazos Block 542              11/01/90
         OCS-G 16122       WC 152      West Cameron Block 152        07/01/96
         OCS-G 16123       WC 195      West Cameron Block 195        06/01/96

                           and other property (the  "Assets") more  particularly
                           described in the Agreement.


3.       EFFECTIVE TIME   October 1, 2002 at 7:00 a.m. C.S.T.
         --------------

<PAGE>

4.       PURCHASE PRICE
         --------------
         Section 2.01                                           $2,730,000.00

                                             PLUS

         Section 2.03(a)(1)    Value of oil storage in a
                               Effective Time...............           (1)     .
                                                                ----------------
                                             PLUS

         Section 2.03(a)(2)    Post Effective Time operating
                               and capital expenditures paid
                               by Seller....................           (1)     .
                                                                ----------------
                                             PLUS

         Section 2.03(a)(3)    Post Effective Time Taxes paid
                               by Seller....................           (1)     .
                                                                 ---------------

                                             PLUS

         Section 2.03(a)(4)    Post Effective Time prepaid
                               expenses paid by Seller......           (1)     .
                                                                ----------------

                                             LESS

         Section 2.03(b)(1)    Proceeds received by Seller from
                               the sale of substances produced
                               after the Effective Time.....           (1)     .
                                                                ----------------

                                             LESS

         Section 2.03(b)(2)    Proceeds received by Seller from
                               the sale of Assets after the
                               Effective Time...............           (1)     .
                                                                ----------------
                                             LESS

         Section 2.03(b)(3)    Value of uncured Title
                               Defects......................           -0-     .
                                                                ----------------

                                             LESS

         Section 2.03(b)(4)    Pre-Effective Time Taxes
                               on production to be paid
                               by Buyer.....................           -0-     .
                                                                ----------------

         Section 2.04          ADJUSTED PURCHASE PRICE          $2,730,000.00(2)
                                                                ----------------

(1)      Estimate  subject to  confirmation  on a post closing basis pursuant to
         Section 1.05
(2)      To Be Paid by Wire Transfer

<PAGE>

1.       The wiring instructions for American Resources Offshore, Inc.:

         Bank:                                 Bank One
         Transit Routing Number (ABA):         111000614
         Bank Account Number:                  157-183-4629
         Bank Account Name:                    American Resources Offshore, Inc.

2.       DOCUMENTS TO BE SIGNED AND DELIVERED
         BY SELLER AND BUYER AT CLOSING

         7.02(a)    Assignments of Record Title                  16435, 17120,
                                                                 17691, 18921,
                                                                 5315-1, 16122,
                                                                 16123, 18903

                    Assignments of Operating Rights              1998-1, 1998-2,
                                                                 1998-3, 1998-4,
                                                                 5315-2,0419-1,
                                                                 12465

                    Assignments of Overriding Royalty Interest   0419-2

         7.02(f)    Partial Release of Mortgages and Security Interests

                    UCC Release

         Such other  instruments as are  reasonably  necessary to effectuate the
         conveyance of the Properties to the Buyer



BUYER                    SELLER

FIDELITY EXPLORATION &   AMERICAN RESOURCES
PRODUCTION COMPANY       OFFSHORE, INC.



By:________________________________        By:__________________________________


Its:_______________________________        Its:_________________________________


U.S. Tax ID No.:___________________        U.S. Tax ID No.:_____________________
1700 Lincoln, Suite 4600                   801 Travis, Suite 2100
Denver, Colorado  80203                    Houston, Texas  77002


<PAGE>

                                Schedule 3.01(e)


                   Attached to and made apart of that certain
                     Asset Purchase and Sale Agreement among
                 American Resources Offshore, Inc., as "Seller"
                                       and
              Fidelity Exploration & Production Company, as "Buyer"





                    Suits, Claims, Demands or Investigations
                    ----------------------------------------



1.       Cause No. 2002-14352 - OSCA Inc. vs IP Petroleum  Company,  Inc. in the
         55th Judicial  District  Court of Harris County,  Texas;  covering High
         Island Block 37, OCS-G 15769. Buyer and Seller agree that Buyer assumes
         Seller's  obligation  and  liability  under this  suit,  and Buyer will
         receive the benefit  under  Counterclaim  and Petition in  Intervention
         filed on behalf of Buyer, Seller and others.


<PAGE>

                                Schedule 3.01(o)


                   Attached to and made apart of that certain
                     Asset Purchase and Sale Agreement among
                 American Resources Offshore, Inc., as "Seller"
                                       and
              Fidelity Exploration & Production Company, as "Buyer"



                                 Gas Imbalances
                                 --------------






                                      None


<PAGE>

                               Schedule 5.06(b)(8)


                   Attached to and made apart of that certain
                     Asset Purchase and Sale Agreement among
                 American Resources Offshore, Inc., as "Seller"
                                       and
              Fidelity Exploration & Production Company, as "Buyer"



                              Title Matters Waived
                              --------------------






                                      None
<PAGE>

                                  Schedule 5.07


                   Attached to and made apart of that certain
                     Asset Purchase and Sale Agreement among
                 American Resources Offshore, Inc., as "Seller"
                                       and
              Fidelity Exploration & Production Company, as "Buyer"



                                  Casualty Loss
                                  -------------


1.       Ship Shoal Block 150 - OCS-G 0419 - Property  sustained  post Effective
         Time  hurricane  damage  to  platform  and  facility.   Buyer  will  be
         responsible for Seller's share of these damages.

2.       West Cameron Block 368 - OCS-G 5315 - Property sustained post Effective
         Time  hurricane  damage  to  platform  and  facility.   Buyer  will  be
         responsible for Seller's share of these damages.

Seller  will,  with Buyers  approval  file an  insurance  claim under Seller and
Buyers joint property  insurance coverage and will remit any funds received from
the claim to Buyer net of  deductibles.  Buyer shall be responsible for Seller's
share of any deductable.



















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