PIONEER NATURAL RESOURCES CO
PIONEER 3/31/05 FORM 10-Q EXH. 10.18
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>14
<FILENAME>exh1018.txt
<DESCRIPTION>PIONEER 3/31/05 FORM 10-Q EXH. 10.18
<TEXT>
                                                                  EXHIBIT 10.18


                           PURCHASE AND SALE AGREEMENT
                           LOOKOUT BUTTE AREA, ALBERTA
                             MARTIN CREEK AREA, B.C.


THIS AGREEMENT made this 28th day of April, 2005

BETWEEN:

                            PIONEER  NATURAL  RESOURCES  CANADA
                            INC., a body corporate having an
                            office in Calgary, Alberta ("Pioneer
                            Can" or the "Vendor")


                                     - and -

                            KETCH RESOURCES LTD., a body corporate
                            having an office in Calgary,  Alberta
                           (the "Purchaser")


     WHEREAS the Vendor has agreed to sell the Assets to the  Purchaser  and the
Purchaser  has agreed to  purchase  the Assets  from the Vendor on the terms and
conditions set forth herein;

     NOW THEREFORE in consideration of the premises and the mutual covenants and
warranties herein contained, the parties hereto agree as follows:

1.   INTERPRETATION
     --------------

1.01   Definitions

       In this  Agreement,  including the  recitals and  the schedules  attached
       hereto, the following terms shall have the following meanings:

       (a) "Affiliate" or "Affiliates" have the same meaning as ascribed to such
           terms in the Business Corporations Act (Alberta);

       (b) "Agreement" means this document, together with the Schedules attached
           hereto and made a part hereof;

       (c) "Assets" means the  Petroleum and Natural Gas  Rights,  the Tangibles
           and the Miscellaneous Interests;

       (d) "Base Price" has the meaning set forth in Subclause 3.01(a);

       (e) "Burden" means a  royalty,  net  profits  interest,  carried  working
           interest or  similar encumbrance;  a right to  convert a royalty to a
           working interest at payout of a well; a mortgage,  lien or charge; an
           option to purchase; a farmout agreement  under which  earning has not
           occurred; a penalty or forfeiture  arising as a result of an election
           prior to the Effective Time not to participate in a drilling or other
           operation; and any other similar  encumbrance, but does not include a
           right of first refusal, preemptive purchase right or similar right;


<PAGE>


                                      -2-


       (f) "Business Day" means a day other than a Saturday, Sunday or statutory
           holiday in Calgary, Alberta;

       (g) "Claim"  means  any  claim,  demand,   lawsuit,   legal   proceeding,
           arbitration or governmental investigation;

       (h) "Closing"  means  the  consummation of  the  purchase and sale of the
           Assets  by the  Purchaser  and  the  Vendor as  contemplated  in this
           Agreement;

       (i) "Closing Time" means 10:00 a.m. on May 31, 2005 or such other date or
           time as may be agreed to in writing by the Parties;

       (j) "Competition  Act   Approval"  means   that (i) the  Commissioner  of
           Competition (the "Commissioner") appointed  under the Competition Act
           has issued an advance ruling  certificate  pursuant to section 102 of
           the  Competition  Act in  respect of  the  transactions  contemplated
           herein on  terms and  conditions satisfactory to the Parties,  acting
           reasonably;  or (ii)  notification of the  transactions  contemplated
           herein pursuant to section  114 of the Competition Act has been given
           and either (A) the applicable waiting period under section 123 of the
           Competition Act  has expired without  the Commissioner having advised
           the Parties  that he intends  to apply  to the  Competition  Tribunal
           established pursuant to subsection  3(1) of the  Competition Tribunal
           Act  (Canada)  for an order  under  section 92 or section  100 of the
           Competition Act in respect of the transactions  contemplated  herein;
           or (B) the Commissioner has advised  Purchaser that the  Commissioner
           does not intend to  apply to the  Competition  Tribunal  for an order
           under  section   92   of  the  Competition  Act  in  respect  of  the
           transactions contemplated herein.

       (k) "Competition Act" means the Competition Act R.S.C. 1985, c. C-34;

       (l) "Confidentiality Agreement" means the Confidentiality Agreement dated
           April 1, 2005 between the Vendor and the Purchaser;

       (m) "Conveyance" means  the Conveyance Agreement attached as Schedule "G"
           hereto;

       (n) "Data Room"  means the data  room established by or on  behalf of the
           Vendor in  connection  with the  sale process  that  resulted in this
           Agreement;

       (o) "Deposit  Amount"  means  the payment  set forth in  Clause 3.04 plus
           interest at  the Prime  Rate from  (and  including)  the  date hereof
           until (but excluding) the Closing Date;


<PAGE>


                                      -3-


       (p) "Effective Time" means 8:00 a.m. on the first day of March, 2005;

       (q) "Environment" includes the components of the earth and the atmosphere
           and includes all layers of the atmosphere, ambient air, the soil, the
           surface  and  sub-surface  strata of  land,  groundwater  and surface
           water (including lakes,  rivers, streams,  oceans and  aquifers), all
           organic  and  inorganic  matter   and  living  organisms,   and   the
           interacting natural systems that include such components;

       (r) "Environmental  Law"  means  any  Regulation  intended  to protect or
           preserve   the   Environment  and  any  Regulation  relating  to  the
           production,  manufacture,  storage,  handling,  transportation,  use,
           spill, release or emission of toxic or hazardous substances;

       (s) "Environmental and  Reclamation  Liabilities"  means  (i)  all of the
           Environmental Liabilities  (whether arising or accruing prior to,  on
           or after the  Effective  Date)  relating to  the Assets or arising in
           connection  with  operations  relating  to  the  Assets  and (ii) all
           obligations to abandon the Wells and restore and  reclaim the surface
           sites  thereof,   to  decommission  and  remove  the  facilities  and
           equipment  comprised  in the  Tangibles  and  restore and reclaim the
           surface sites thereof and to reclaim  and restore  the lands to which
           the Surface  Rights relate,  including such  obligations  relating to
           Wells which were abandoned prior to the Effective Time;

       (t) "Environmental Liabilities"  means any and all Liabilities in respect
           of the Environment, including:

           (i)   Liabilities in  respect of  contamination,  pollution or  other
                 damage to the Environment;

           (ii)  Liabilities in  respect  of  damage caused  by the  production,
                 manufacture,  presence, storage, transportation, release, spill
                 or emission of any  toxic or hazardous substance (including any
                 form of energy),  including,  without limitation,  corrosion or
                 deterioration  of structures  or  other  property  and death or
                 injury to human beings, plants or animals;

           (iii) Liabilities for the remediation, restoration or  reclamation of
                 the Environment; and

           (iv)  Liabilities under Environmental Laws;

       (u) "EUB" means the Alberta Energy and Utilities Board;

       (v) "EUB  License  Transfers"  means   transfers  in  suitable  form  for
           registration with  the EUB  of the  well  licenses for  the Wells and
           facilities comprised  in the  Tangibles  which are  registered in the
           name of the Vendor;

       (w) "Field Employees"  means those individuals  which are employed by the
           Vendor who normally work in the field at or near the Assets and whose
           names are listed in Schedule "H";



<PAGE>


                                      -4-



       (x) "Files and Records"  means well files,  agreement files, lease files,
           surface rights files,  production records  and other  files, records,
           data and  information  directly pertaining  to the Assets  and in the
           possession or  control of Vendor excluding historical information not
           relevant to future operations  such as accounting  source information
           and   also   excluding   Seismic  Data,   income  tax  and  financial
           information, evaluations, geological maps and interpretations;

       (y) "GST"  means the Goods and Services Tax payable  under the Excise Tax
           Act,  1980  R.S.C.,  c.  E-15,  as  amended  and  the  schedules  and
           regulations thereunder;

       (z) Indemnity Threshold" means an amount equal to one percent (1%) of the
           Base Price;

      (aa) "Interim Period Pre-Tax Income" means the revenues and costs of every
           kind and nature  (whether incurred  or accrued,  paid or  received or
           payable or receivable) in respect of the Assets between the Effective
           Time  and  the  Closing  Date  calculated  on  an  accrual  basis  in
           accordance with normal industry practices, excluding income taxes;

      (bb) "Investment Canada Act" means the Investment Canada Act, R.S.C. 1985,
           c. 28 (1st Suppl.);

      (cc) "Joint Seismic Data"  means  the Seismic  Data which  is beneficially
           owned  by the  Vendor jointly with  one or more third  parties and is
           associated with the seismic lines listed in Schedule "J";

      (dd) "knowledge",  "aware  of"  and  similar  terms  mean,  when used in a
           representation or warranty  by the  Vendor,  the actual  knowledge or
           awareness, as the case may be,  of the officers of the Vendor and the
           seven (7) employees  of the  Vendor who  are currently  designated as
          "Managers",  without  specific  inquiry or investigation in connection
           herewith;

      (ee) "Lands" means  the lands described in Schedule "A", insofar as rights
           pertaining to the Petroleum  Substances  underlying those  lands, are
           granted by the Leases;

      (ff) "Leases" means the leases,  licences,  permits and other documents of
           title described in Schedule "A" by virtue of which the holder thereof
           is entitled to drill for, win, take,  own and/or remove the Petroleum
           Substances within,  upon or under the Lands or by virtue of which the
           holder thereof is entitled to a share of Petroleum Substances removed
           from the Lands or lands pooled or unitized therewith and includes, if
           applicable,  all renewals  and extensions  of such  documents and all
           documents issued in substitution therefor;


<PAGE>


                                      -5-


      (gg) "Liabilities"  means all  liabilities and  obligations, whether under
           common  law,  in equity,  under the  Regulations,  under contract  or
           otherwise,  whether  torts,  contractual,  statutory  or   otherwise,
           whether absolute  or contingent  and whether  based on fault,  strict
           liability or otherwise;

      (hh) "Losses" means,  for purposes  of the indemnification  of a person in
           respect of a matter, all losses, costs, liabilities, taxes (excluding
           GST  and  other  refundable  taxes)  and  damages  which such  person
           suffers, sustains, pays or  incurs in connection with such matter and
           includes  reasonable  costs of  legal  counsel  (on a  full indemnity
           basis) and other  consultants and reasonable  costs of  investigating
           and defending  Claims arising from such matter, regardless of whether
           such  Claims  are  sustained  but do  not  include  consequential  or
           indirect losses or loss of future profits;

      (ii) "Miscellaneous  Interests"  means  the   Vendor's  Interest  in   all
           property,  assets, interests and rights (other than the Petroleum and
           Natural  Gas  Rights  and   the Tangibles)  directly  related  to the
           Petroleum and Natural  Gas Rights or the Tangibles including, without
           limitation, any and all of the following:

           (i)   the Title and  Operating Documents to the extent related to the
                  Petroleum and Natural Gas Rights or the Tangibles;

           (ii)  rights to  use  or  occupy the  surface of lands which are used
                  exclusively in  connection with the  Petroleum and Natural Gas
                  Rights or the  Tangibles,  including rights  to enter upon and
                  occupy the surface of  lands on  which the  Tangibles  and the
                  Wells are located  and rights  to use  the surface of lands to
                  gain access thereto,  excluding any such  rights that  pertain
                  only to a well or wells other than the Wells;

           (iii) all Files and Records; and

           (iv)  the Wells, including well bores and casing,

           but specifically  excludes  the  3-32  Well and the well bore thereof
           and casing  therein,  the  Seismic  Data,  income  tax and  financial
           information, evaluations, geological maps and interpretations;

      (jj) "Other Indemnitees"  means, in respect of a Party, its Affiliates and
           its and its Affiliates' directors, officers and employees;

      (kk) "Party" means the Vendor or  the Purchaser;

      (ll) "Permitted Encumbrances" means:

           (i)    easements, rights of way,  servitudes or  other similar rights
                  in land  including,  without  limiting the  generality  of the
                  foregoing,  rights of way and servitudes for railways, sewers,


<PAGE>


                                      -6-


                  drains,  gas and  oil  pipelines,  gas  and  water  mains  and
                  electric   light,   power,  telephone,   telegraph  or   cable
                  television conduits, poles, wires or cables;

           (ii)   the right  reserved  to or  vested  in any government or other
                  public authority, by the terms of the Leases or by statute, to
                  terminate  any of  the  Leases or  to require  annual or other
                  periodic payments as a condition of the continuance thereof;

           (iii)  taxes  on  Petroleum  Substances  or  the  income  or  revenue
                  therefrom;

           (iv)   all  Regulations  respecting  the  operation  of  the  Assets,
                  including, without limitation,  regulations regarding the rate
                  of production of Petroleum Substances from the Wells;

           (v)    the terms and conditions of the Title and Operating Documents,
                  excluding  Burdens which are  not listed in Schedule "A";

           (vi)   any liens in favour of  a person  conducting the  operation of
                  any of  the Assets  securing  the  portion of  the  costs  and
                  expenses of such operation payable by the Vendor;

           (vii)  mechanics', builders' or materialmen's liens and similar liens
                  in  respect of  services rendered or goods  supplied for which
                  payment is not due;

           (viii) the reservations, limitations,  provisos and conditions in any
                  original  grants  from  the  Crown  of  any  of  the  Lands or
                  interests therein and statutory exceptions to title,  which do
                  not materially adversely effect the use of the Assets affected
                  thereby in the oil and gas business;

           (ix)   liens granted  in the ordinary  course of business to a public
                  utility, municipality or governmental  authority in connection
                  with operations conducted with respect to the Assets;

           (x)    any security held  by any third party encumbering the Vendor's
                  interest in and to the Assets or  any part or portion thereof,
                  in respect  of which  the Vendor delivers  a discharge  to the
                  Purchaser at or prior to Closing;

           (xi)   the Burdens  set forth  in  Schedule  "A"; and

           (xii)  the ROFRs listed in Schedule "A";

      (mm) "Personal  Information"  means   information  about  an  identifiable
           individual which has been disclosed to the Purchaser or to any of its
           representatives  in connection  with the  transaction contemplated by
           this  Agreement,  but does  not  include  the name,  title,  business
           address or telephone number of an employee of an organization;



<PAGE>


                                      -7-


      (nn) "Petroleum and Natural Gas Rights" means the Vendor's Interest as set
           forth in Schedule "A" hereto in and to the Lands and, insofar as they
           pertain to the Lands, the Leases;

      (oo) "Petroleum Substances"  means  petroleum, natural  gas,  sulphur  and
           related hydrocarbons and  every other  mineral or substance,  whether
           liquid or solid  and whether  hydrocarbon or not, or any of them, the
           right to  explore  for  which,  or an interest  in which,  is granted
           pursuant to the Leases, insofar only as they pertain to the Lands;

      (pp) "Place of Closing" shall mean the offices of the Vendor;

      (qq) "Prime Rate" means the annual rate of interest announced from time to
           time by  the Royal Bank of Canada as the reference rate which is used
           by  such bank  for determining  interest  rates  on  Canadian  dollar
           commercial  loans made  by it in Canada,  as varied by such bank from
           time to time;

      (rr) "Proprietary  Seismic  Data"  means  the  Seismic  Data which is 100%
           beneficially  owned by  the  Vendor  which  is  associated  with  the
           seismic lines listed in Schedule "I";

      (ss) "Purchase Price"  means the  amount payable  by the  Purchaser to the
           Vendor pursuant to Clause 3.01;

      (tt) "Regulations" means all statutes, laws, rules, orders and regulations
           in effect from time to time  and made  by governments or governmental
           boards or agencies having jurisdiction over the Assets;

      (uu) "Restricted Joint Seismic Data" means Joint Seismic Data which is not
           Unrestricted  Joint  Seismic  Data;

      (vv) "ROFR"  has  the  meaning specified in Clause  7.01;

      (ww) "Seismic  Data"  means  all   records,  books,  documents,  licences,
           reports and data associated with  seismic lines which  the Vendor has
           possession  or to which  the Vendor  and its  Affiliates have access,
           excluding interpretations, but including, without limitation:

           (i)  all permanent  records  of  basic field  data including, but not
                limited to,  any and all  microfilm or  paper copies  of seismic
                driller's  reports,  monitor  records,  observer's  reports  and
                survey notes and any and all copies  of magnetic field  tapes or
                conversions thereof;

          (ii)  all permanent records of the processed field data including, but
                not limited to,  any and  all microfilm  or paper copies of shot
                point  maps,  pre-and  post-stacked  record  sections  including
                amplitude,  phase,  structural displays or  other interpretative
                processes,   post-stack  data  manipulations  including filters,


<PAGE>


                                      -8-


                migrations and  wavelet enhancements,  and any and all copies of
                final  stacked  tapes  and  any  manipulations  and  conversions
                thereof; and

          (iii) in the  case of  3D seismic,  in addition  to the foregoing, all
                permanent   records   or  bin   locations,  bin   fold,   static
                corrections,   surface   elevations   and   any  other  relevant
                information;

     (xx)  "Seismic License"  means a perpetual, non-exclusive, non-transferable
           licence to  use the Proprietary  Seismic Data  and the  Joint Seismic
           Data which is  Unrestricted  Joint Seismic Data  at the  Closing Time
           which will  be granted  by the Vendor to the Purchaser at Closing and
           which will contain generally accepted industry terms;

     (yy)  "Tangibles" means  the Vendor's Interest in all tangible, depreciable
           property and assets that are:

           (i)  located in, on or appurtenant to the Lands and used, or intended
                for  use,   by   the  Vendor   exclusively  in  connection  with
                production,   processing,   gathering,  storage,   treatment  or
                transportation  operations respecting the  Petroleum and Natural
                Gas Rights,  including,  without limitation, the well equipment,
                if any, relating to the Wells; and

           (ii) any additional items,  whether located on or off the Lands, that
                are indicated  in Schedule  "B" to be  specifically  included as
                Tangibles;

     (zz)  "3-32 Well" means the well located at 3-32-1-28W4M;

     (aaa) "Title  and  Operating  Documents"  means  (i)  the  Leases  (ii) all
           agreements  relating  to the  ownership  or  operation  of the Assets
           entered into in the  normal  course  of  the  upstream  oil  and  gas
           business,  including, without limitation, joint operating agreements;
           unit agreements and  unit operating  agreements;  agreements  for the
           construction,  ownership and operation of gas plants,  pipelines, gas
           gathering systems and similar facilities; pooling agreements, royalty
           agreements, farmin agreements,  farmout agreements and  participation
           agreements;  contracts for the  processing,  compressing,  treatment,
           gathering,  transportation  or sale of  Petroleum Substances;  common
           stream agreements;  well operating  contracts; and easements, surface
           leases,  rights  of  way,  road  use  agreements,  pipeline  crossing
           agreements  and other  surface  rights  agreements;   and  (iii)  all
           permits, licences  and approvals  issued or  granted by  governmental
           authorities pertaining to the ownership or operation of the Assets;

     (bbb) "Title Defect"  means a  defect,  deficiency  or  discrepancy  in  or
           affecting the title of the  Vendor to any of  the Assets  which would
           not be acceptable  to a ready,  willing and  able buyer of the Assets
           affected  thereby,  excluding  Permitted  Encumbrances,  and  matters
           specifically disclosed herein or in Schedule "A";



<PAGE>


                                      -9-


     (ccc) "Trade  Seismic  Data"   means  Seismic Data  that is not Proprietary
           Seismic Data or Joint Seismic Data;

     (ddd) "Unrestricted Joint Seismic Data"  means Joint Seismic Data which the
           Vendor is  entitled to  license to the  Purchaser without  the Vendor
           being in breach  of any agreement or obligation or being obligated to
           compensate  any third  party  or  share  with  any  third  party  the
           proceeds of such license;

     (eee) "Vendor's Interest"  means the  entire  interest of the Vendor at the
           Effective Time; and

     (fff) "Wells" means the wells located in or on the Lands or lands pooled or
           unitized therewith including,  producing, shut-in, suspended, capped,
           abandoned and  injection  wells,  if any,  listed in  Schedule  "E"",
           provided that the "Wells" do not include the 3-32 Well.

1.02   The following  Schedules pertaining to the following matters are attached
       to and are made part of this Agreement:

         Schedule "A"  -  Lands, Leases, Petroleum and Natural Gas Rights,
                          Burdens and ROFRs
         Schedule "B"  -  Tangibles
         Schedule "C"  -  Production Sale Contracts
         Schedule "D"  -  Financial Commitments
         Schedule "E"  -  Wells
         Schedule "F"  -  Units
         Schedule "G"  -  Conveyance
         Schedule "H"  -  Field Employees
         Schedule "I"  -  Proprietary Seismic Data Lines
         Schedule "J"  -  Joint Seismic Data Lines

1.03   The headings in this  Agreement are inserted for convenience of reference
       only and shall not be  used in any way in  construing or interpreting any
       provision hereof.

1.04   Whenever the  singular or  masculine or neuter  is used in this Agreement
       or in Schedules attached hereto,  it shall be interpreted  as meaning the
       plural or feminine or body politic or corporate,  and vice versa,  as the
       context requires.

1.05   If there  is any  conflict or inconsistency  between a  provision  of the
       body of this Agreement and that of a Schedule or any document prepared to
       convey  the Assets  to the Purchaser,  the provision of  the body of this
       Agreement shall prevail.

1.06   All monetary  references in  this Agreement  are  expressed  in  Canadian
       dollars.  Except as otherwise provided  in this  Agreement,  all payments
       made pursuant hereto shall be made in Canadian dollars.



<PAGE>


                                      -10-



1.07   For purposes  of this Agreement,  interest for  a period will accrue on a
       daily  basis  from and  including the  first day  of the  period  to  but
       excluding the last day of the period and will not be compounded.

1.08   Unless  otherwise  stated,  references  in  this  Agreement  to a Clause,
       Subclause  or Schedule  is a reference to a clause, subclause or schedule
       of this Agreement.

1.09   A term which has a generally accepted meaning in the upstream oil and gas
       industry in western Canada has the same meaning in this Agreement, unless
       the context  otherwise requires  or the term is otherwise defined in this
       Agreement.

2.   PURCHASE AND SALE
     -----------------

2.01   The Vendor  agrees to  sell and  convey the  Assets to  the Purchaser and
       grant the Seismic License  to the Purchaser and the  Purchaser  agrees to
       purchase,  receive and  pay for  the Assets  and the Seismic License, all
       in accordance  with  and  subject to  the  terms  and conditions  of this
       Agreement.

3.   PURCHASE PRICE AND ALLOCATION
     -----------------------------

3.01   The Purchase Price to  be paid by  the  Purchaser to  the Vendor  for the
       Assets and the Seismic  License,  subject to adjustments, shall be:

       (a) $255,700,000.00 (the "Base Price"); plus

       (b) an amount equal to interest on the  Base Price at the Prime Rate from
           the Effective Time to the Closing Time (the "Notional Interest").

3.02   The Base Price shall be allocated among the Assets as follows:

<TABLE>
<S>                                                      <C>
       (a)  To Petroleum and Natural Gas Rights          $ 179,049,990.00
       (b)  To Tangibles                                 $  74,650,000.00
       (c)  To the Seismic License                       $   2,000,000.00
       (d)  To Miscellaneous Interests                   $          10.00
                                                          ---------------
                  Base Price                             $ 255,700,000.00
</TABLE>

       The Notional Interest shall be allocated to the Petroleum and Natural Gas
       Rights.

3.03   The Purchase Price does not include GST, sales taxes or similar taxes. At
       Closing the Purchaser  shall pay  to the  Vendor an amount equal to 7% of
       the portion  of  the Purchase  Price allocated  to the  Tangibles and the
       Seismic  License pursuant  to Clause 3.02.  The Vendor's GST Registration
       number is R132693219.


<PAGE>


                                      -11-



       The Purchaser  shall be  solely liable for  any and all sales and similar
       taxes  imposed by  provincial  or federal  legislation in  respect of the
       acquisition  of the  Assets pursuant  hereto  (including,  if applicable,
       British Columbia Social Services Tax).  If the Vendor  is required by law
       to collect such taxes,  the Purchaser  shall pay such taxes to the Vendor
       at Closing.  The Vendor shall  remit the taxes  collected by it  pursuant
       to this  Clause  to the appropriate  authorities in  accordance  with the
       applicable legislation.

       After Closing,  the Purchaser will be responsible for,  and indemnify and
       save the  Vendor harmless in  respect of,  any amounts  of GST  and sales
       and similar taxes  (including interest and penalties) which the Purchaser
       is liable to  pay in  respect  of the  acquisition of the Assets pursuant
       hereto which are in excess  of the  amounts collected  by the Vendor from
       the Purchaser at Closing on account of such taxes.

3.04   The Vendor acknowledges that  the Purchaser has paid the Vendor a deposit
       of five (5%)  percent of the Base Price  which shall  be deemed to accrue
       interest at the Prime Rate from  (and including) the date  hereof to (but
       excluding)  the Closing Date.  The  Deposit  Amount  shall  be applied in
       accordance with the following terms:

       (a) if Closing occurs, the Deposit Amount paid shall be applied to
           payment of the Purchase Price;

       (b) if Closing  does not  occur due  to a breach of this Agreement by the
           Purchaser,  the Deposit Amount  shall be  forfeited  to the Vendor on
           account of the damages  suffered  by the Vendor  as a  consequence of
           such breach.  The Parties  agree that  an amount equal to ten percent
           (10%) of the Base Price constitutes their genuine pre-estimate of the
           damages  which  will be  suffered  by the  Vendor  by virtue  of such
           breach; and

       (c) if Closing  does not occur  for any reason or circumstance other than
           that described in  Subclause 3.04(b),  the  Vendor  shall  refund the
           Deposit Amount to the Purchaser.

3.05   The Purchase  Price  and  the GST  and other  taxes  payable  at  Closing
       pursuant to  Clause 3.03 less  the Deposit  Amount  shall be  paid by the
       Purchaser  to  the   Vendor  at  the   Closing  Time,   per  the  written
       instructions of Vendor, by wire  transfer of immediately  available funds
       to the Vendor.

4.   EFFECTIVE TIME AND ADJUSTMENTS
     ------------------------------

4.01   The transfer  and assignment of the Assets by the Vendor to the Purchaser
       shall occur  at the  Closing Time  and be  effective as  of the Effective
       Time. The Vendor will  be responsible to cause  the payment  of all costs
       incurred  prior  to  the   Effective  Time  and  the  Purchaser  will  be
       responsible to  cause the payment  of all  costs incurred on or after the
       Effective Time.

4.02   Except as otherwise provided in this Agreement, all costs relating to the
       Assets (including,  without limitation, maintenance, development, capital
       and operating costs) and all revenues attributable to the Assets shall be


<PAGE>


                                      -12-



       apportioned  between the  Parties as  of the Effective Time on an accrual
       basis, provided that:

       (a)  except as  otherwise  provided  in  this Clause, costs, expenses and
            revenues  shall be  deemed to  accrue  in accordance  with generally
            accepted accounting principles;

       (b)  costs of work done,  services provided and  goods supplied  shall be
            deemed to accrue when the work is done or the  goods or services are
            provided;

       (c)  Petroleum Substances produced prior to the Effective Time (including
            those in  tanks at  the Effective  Time) and  the revenues therefrom
            shall be credited to the  Vendor and  Petroleum  Substances produced
            after the  Effective  Time  and  the  revenues  therefrom  shall  be
            credited to the Purchaser;

       (d)  fees  payable to the  Vendor as owner of the Tangibles in respect of
            the  custom   processing,   compression,   treatment,  gathering  or
            transportation  of  Petroleum Substances  therein shall  be revenues
            attributable  to  the Assets  which  accrue  at the  time  that  the
            Petroleum Substances are processed, compressed, treated, gathered or
            transported therein;

       (e)  amounts payable  by the  Parties on account of royalties and similar
            Burdens in respect of Petroleum  Substances produced  from the Lands
            or lands  pooled  or  unitized  therewith  and fees  payable  by the
            Parties in respect of the custom processing, compression, treatment,
            gathering or  transportation  of Petroleum  Substances produced from
            the Lands or lands pooled or unitized therewith  shall be charged to
            the Party  to  whom the  revenues  from  the Sale  of the  Petroleum
            Substances are credited;

       (f)  other  than as  provided in  Subclauses  (j)  and  (k),  rentals and
            similar  payments  in  respect  of  the  Leases  or  surface  rights
            comprised in the Assets, taxes levied with respect  to the Assets or
            operations in respect  thereof  and  prepaid expenses  will be costs
            attributable  to the  Assets and  will be  apportioned on a per diem
            basis as of the Effective Time;

       (g)  amounts payable  by a  Party to  an operator under a joint operating
            agreement   on   account  of  the  operator's  recoverable  overhead
            (including,  where  a Party  is the  operator,  the  amount  of  the
            recoverable overhead attributable to such  Party's working interest)
            shall be costs  related to  the Assets which accrue in the period to
            which the recoverable  overhead is attributable under the applicable
            joint operating agreement;

       (h)  except as provided  in Subclause (g), no adjustment shall be made in
            respect of general administrative and overhead costs;

       (i)  no adjustments  shall be  made in respect of overhead recovered by a
            Party  in its  capacity  as  an  operator  under a  joint  operating
            agreement;



<PAGE>


                                      -13-


       (j)  Alberta  Royalty Tax  Credits will  not be  considered to be revenue
            attributable to the  Assets  and no  adjustments  shall be  made  in
            respect thereof;

       (k)  there shall  be an adjustment in favor of the Vendor equal to 15% of
            the  Pre-Tax Interim  Period  Income on  account of the income taxes
            payable by the Vendor in respect thereof.; and

       (l)  except as  provided in paragraph(k), no adjustments shall be made in
            respect of income taxes or capital taxes.

 4.03   An interim accounting  of the adjustments  required under Clause 4.02 in
        respect of the period from the  Effective Time to  the Closing Date will
        be made at Closing,  based on the  Vendor's good faith estimate of costs
        paid by the Vendor prior to Closing and  revenues received by the Vendor
        prior to Closing.  The Vendor  shall provide  a statement  setting forth
        such estimates  not later  than three (3) Business Days prior to Closing
        and shall assist  the Purchaser  in verifying  the amounts  set forth in
        such statement.

4.04    The Parties  shall make  further adjustments  in accordance  with Clause
        4.02  following  the  Closing as  and when  they  are  ascertained.  The
        Parties  shall  meet  approximately  one hundred  and twenty  (120) days
        after the Closing  Date to finalize,  to the extent reasonably possible,
        the adjustments  pursuant to  Clause 4.03.  In  any  event,  subject  to
        Clause 4.05, the Parties shall not be obligated to make an adjustment in
        accordance with Clause 4.02 more than one (1)  year after Closing unless
        such adjustment has been  specifically  requested,  by  written  notice,
        within such period.

4.05    During the  one (1)  year period following the Closing Date, a Party may
        audit the books, records and  accounts of the other Party respecting the
        Assets,  for the  purpose of  effecting  adjustments  pursuant  to  this
        Article.  Such audits  shall be  conducted upon reasonable notice to the
        Party being audited and at the cost of the auditing Party.

4.06    Notwithstanding  Clause 4.04,  the Parties  will be  required to make an
        adjustment in accordance  with Clause 4.02 more than  one (1) year after
        Closing if:

        (a)  the adjustment is required by a Crown royalty audit commenced prior
             to or within four (4) years after Closing and a written request for
             the adjustment is given by one Party to  the other Party within 120
             days of its receipt of the results of the audit;

        (b)  the  adjustment is  required  by a  joint venture  audit  commenced
             within the  term permitted under  the governing Title and Operating
             Document and a written request  for the adjustment  is given by one
             Party to the other  Party within one hundred  and twenty (120) days
             of its receipt of the final results of the audit; or

        (c)  the adjustment  is required  by a  13  month  adjustment  generated
             within the  term permitted under the  governing Title and Operating
             Documents and  written request for such  adjustment is given by one
             Party to the other  Party within one hundred  and twenty (120) days
             of its  receipt  of the  notice of  the 13  month  adjustment  (for
             purposes of the foregoing, a "13 month adjustment"  is a payment or


<PAGE>


                                      -14-


             refund which  arises when payments or  revenues under  an agreement
             are initially based upon an estimate of annual costs or revenues or
             both and  an adjustment  is made  following  the  annual  period to
             reflect differences between the estimates and actual amounts).

4.07    An adjustment payable by a Party after Closing pursuant hereto which is
        not paid within  thirty (30) days  of a written request for payment from
        the other Party,  shall bear  interest at the  Prime Rate payable by the
        paying Party  to the  other Party  from the end  of such thirty (30) day
        period until the adjustment is paid.

4.08    The Vendor shall continue to invoice joint  interest owners for billable
        costs  attributable  to the  operations  pertaining  to the  Assets  for
        periods prior to the Closing  Date and  for the  month in  which Closing
        occurs and the Vendor  shall be entitled  to overhead  recoveries in its
        capacity as an operator for such  periods (including the  month in which
        Closing occurs).  Subsequent  joint interest  billings shall be prepared
        and  distributed  by the  Purchaser.  For  a  period  of  one year after
        Closing, the Parties shall  provide reasonable assistance  to each other
        in the collection or  recoupment of  any overpayment  or underpayment of
        joint operations accounts receivable and royalties.

4.09    The Assets do not  include deposits  made by  the Vendor which relate to
        the Assets or cash call  advances,  operating fund  payments or  similar
        advances  made by  the Vendor  to an  operator  under a  joint operating
        agreement. Such amounts shall either be  returned to the  Vendor and (if
        required) replaced by  the Purchaser  or be transferred by the Vendor to
        the Purchaser,  in which event the  Purchaser shall reimburse the amount
        thereof to the Vendor.

4.10    No item of cost  or revenue will be  accounted for more than once in the
        adjustments made pursuant to this Article.

4.11    After Closing,  either  Party may,  at any time,  refer to arbitration a
        dispute  between the  Parties  respecting  the  requirement  for  or the
        amount of an adjustment pursuant to the provisions of this Article 4.

5.   CLOSING
     -------

5.01    Closing shall take place at the Place of Closing at the Closing Time.

5.02    The Vendor  shall  prepare,  at  its  cost, and  table at  Closing,  all
        conveyances,  assignments,  transfers,  notice of assignments, novations
        and  other   documents  and   instruments  the   Vendor  determines  are
        reasonably required or desirable, in  accordance with normal oil and gas
        industry practices  in western Canada,  to convey,  assign  and transfer
        the Vendor's  title to  the Assets  to the  Purchaser and  to novate the
        Purchaser into the Title and Operating Documents in the  place and stead
        of the Vendor with respect  to the Assets.  The Purchaser shall bear all
        costs incurred  in registering  such  conveyances  and  registering  any
        further assurances required to convey the Vendor's  title to  the Assets
        to the Purchaser.



<PAGE>


                                      -15-



5.03    The Vendor shall provide the  Purchaser with  originals of the Files and
        Records within one (1) day  following the Closing Time. The Vendor shall
        have the right to retain copies  of Files and Records and to have access
        to the originals after Closing for  purposes arising  as a result of its
        prior ownership or operation thereof,  including  joint venture  audits,
        tax matters, litigation and claims.

5.04    The Purchaser shall retain the Files  and Records in good order and good
        condition and in a reasonably  accessible location for a period of seven
        (7) years  after the  Closing  Date,  provided  that  the  Purchaser may
        destroy or give  up possession of any of such  information or  materials
        if it  first offers the  Vendor the opportunity (by delivery of at least
        sixty (60)  days' prior  written  notice  to  the  Vendor  containing  a
        detailed  listing  of the  information  and  materials  proposed  to  be
        destroyed), to obtain a copy of so much of such information or materials
        as the Vendor,  in its sole discretion, desires at the Vendor's expense,
        without any payment to the Purchaser.

6.   PURCHASER'S TITLE REVIEW
     ------------------------

6.01    Between the  date this Agreement is fully executed and the Closing Time,
        subject to contractual  and fiduciary obligations and limits, the Vendor
        shall provide the Purchaser and  its nominees  reasonable access  to the
        Vendor's records, files  and documents directly relating  to the Assets,
        at the Vendor's  office during normal business hours, for the purpose of
        the Purchaser's  review  of the  Assets and  the Vendor's title thereto,
        including, without limitation, the Title and Operating Documents.

6.02    The Purchaser  shall  conduct its  review of  the Vendor's  title to the
        Assets with reasonable diligence. Not later than ten  (10) days prior to
        the  Closing  Time  (determined without  reference to any  change in the
        Closing Time  pursuant to  Clause  6.04), the  Purchaser shall  give the
        Vendor written notice (the "Purchaser's Title Defects Notice")  of Title
        Defects which the Purchaser does  not waive.  Such notice shall  specify
        such  Title Defects  in reasonable detail,  the Assets directly affected
        thereby, the Purchaser's requirements  for the  rectification  or curing
        thereof and  the Purchaser's  estimate  of the reduction in the value of
        the Assets  resulting therefrom.  The Vendor  shall thereupon diligently
        make reasonable  efforts to cure  or remove such Title Defects not later
        than the  Closing Time  (determined  without reference  to any change in
        the Closing Time pursuant to Clause 6.04).

6.03    Insofar as the Title Defects described in  the Purchaser's Title Defects
        Notice  have not been  cured by  the Closing  Time  to  the  Purchaser's
        reasonable  satisfaction,  the Purchaser  may elect,  subject  to Clause
        6.04, at or  before the  Closing Time  (determined without  reference to
        any  change in the  Closing Time  pursuant to Clause 6.04), by notice to
        the Vendor, to do one of the following:

        (a)  waive the  uncured Title Defects and proceed with the completion of
             the transaction;

        (b)  if the  reduction in  the value  of the  Assets resulting  from the
             uncured Title Defects which it does not  waive is  more than  5% of
             the Base  Price,  require that  the  Base  Price be  reduced by the


<PAGE>


                                      -16-


             amount that the reduction in the value of the Assets resulting from
             such uncured and unwaived Title  Defects is greater  than 5% of the
             Base Price and,  in such event,  the Base Price shall be reduced by
             such amount,  provided that  if the  reduction in  the value of the
             Assets resulting from the uncured,  unwaived Title  Defects exceeds
             20% of the Base Price, the Vendor will have the right, at or before
             the Closing Time,  to terminate this  Agreement in its  entirety in
             accordance with Article 13 and the Deposit Amount shall be returned
             to the Purchaser; or

        (c)  if the  reduction in  the value  of the  Assets resulting  from the
             uncured  Title  Defects  that the  Purchaser does  not waive  is in
             excess of  20% of the  Base Price,  terminate this Agreement in its
             entirety in accordance with Article 13 and the Deposit Amount shall
             be returned to the Purchaser.

        Failure by the Purchaser to  make such election at or before the Closing
        Time shall  be deemed  to be an election pursuant  to Subclause 6.03(a).
        If the reduction in the value of the  Assets resulting  from the uncured
        and unwaived  Title Defects  is equal  to or  less than  5% of  the Base
        Price, the Purchaser shall be deemed to have waived the Title Defects.

6.04    If there is a dispute in relation to Clause 6.03 regarding the existence
        of a Title Defect,  whether it  has been  cured or  the reduction in the
        value of the Assets resulting from a Title Defect, either Party may,  at
        any time prior to the occurrence of Closing as then scheduled, refer the
        determination thereof  to arbitration in accordance with  Article 14 and
        the following:

        (a)  if the  arbitration  is with  respect  to the  existence of a Title
             Defect, the arbitrator shall be a  recognized oil and gas lawyer in
             private practice in Calgary,  Alberta who does not represent either
             Party;

        (b)  if the arbitration is with respect to the reduction in the value of
             the Assets resulting from a Title Defect, the arbitrator shall be a
             firm of recognized,  independent reservoir  engineering consultants
             carrying on business in Calgary, Alberta;

        (c)  each  Party  shall  be  required  to  submit  a  written  statement
             respecting the matter to the arbitrator not later than two Business
             Days after  the arbitrator  is appointed,  including  such  Party's
             proposed resolution and if a Party fails  to do so, the  arbitrator
             shall be required to accept the proposal of the other Party;

        (d)  the Purchaser's  submissions to the  arbitrator shall be consistent
             with the elections and  notices provided  by it pursuant to Clauses
             6.02 and 6.03,  both as to  the existence of Title  Defects and the
             reductions in the value of the Assets resulting therefrom;

        (e)  the arbitrator shall be instructed to render its decision not later
             than five (5) Business Days after its appointment;


<PAGE>



                                      -17-


        (f)  the Closing Time shall be postponed until  10:00 a.m. on  the third
             Business  Day after the  decision of  the arbitrator is rendered to
             the Parties;

        (g)  if,  after  application  of the  decision  of the  arbitrator,  the
             reduction in the  value of  the Assets  resulting from  the uncured
             Title Defects  which the  Purchaser does not waive at or before the
             Closing Time  (determined without reference  to any  change  in the
             Closing Time pursuant to  Clause 6.04) is  greater than 20%  of the
             Base Price  and at or  before the  Closing Time (determined without
             reference to  any change  in the  Closing Time  pursuant to  Clause
             6.04)  a  Party had  elected  pursuant  to  Subclause  6.04(c),  to
             terminate  this  Agreement  in its  entirety,  this Agreement shall
             terminate in its  entirety in  accordance with  Article 13  and the
             Deposit Amount shall be returned to the Purchaser; and

        (h)  if the arbitrator  accepts the proposal of the Vendor, the Notional
             Interest  shall be computed  until the  date upon which the Closing
             actually occurs and the Purchaser  shall pay the  fees and expenses
             of the arbitrator and if the arbitrator selects the proposal of the
             Purchaser, the Notional Interest shall be calculated only until the
             date that the Closing would have  occurred but for such arbitration
             and the Vendor shall pay the fees and expenses of the arbitrator.

7.   ROFRS, CONSENTS AND COMPETITION ACT APPROVAL
     --------------------------------------------

7.01    If the  sale of any of the  Assets pursuant hereto is subject to a right
        of first refusal, preferential  right of purchase or similar restriction
        (a "ROFR") or requires the consent of any  third party, the Vendor shall
        promptly serve all  notices as  are required  in respect  of the ROFR or
        consent requirement. Unless otherwise agreed by the Purchaser, each such
        notice shall include a request  for a waiver  of the ROFR  and a request
        for consent to the sale of the Assets in question to the Purchaser.

7.02    The Purchaser,  acting reasonably and in good faith,  shall allocate the
        Base Price  to Assets  which are subject to a  ROFR and shall advise the
        Vendor in writing of  such allocation within two (2) Business Days after
        the execution hereof. Such allocations shall be used for the purposes of
        ROFRs.  The Purchaser  will  indemnify  the Vendor  and save  the Vendor
        harmless from  all Losses  that the  Vendor suffers as a consequence  of
        using such  allocations for purposes of the ROFRs.

7.03    The Assets which are subject to ROFRs  which are validly exercised shall
        not be sold to the  Purchaser pursuant hereto but  shall be deleted from
        and cease to be subject to this Agreement and:

        (a)  the terms "Assets", "Lands", "Leases",  "Miscellaneous  Interests",
             "Petroleum and Natural  Gas Rights" and "Tangibles" shall be deemed
             to be revised to reflect the deletion of such Assets;

        (b)  the Base  Price shall  be reduced  by the  amount allocated to such
             Assets pursuant to Clause 7.02; and


<PAGE>


                                      -18-



        (c)  subject  to the  other  provisions  of this  Agreement, the Parties
             shall complete  the sale  of the  balance  of the  Assets  pursuant
             hereto.

7.04    The Purchaser  shall promptly  file a  request  for  an  advance  ruling
        certificate under  the Competition Act  in respect  of the  transactions
        herein,  and the  applicable  filing fee  and all Taxes thereon shall be
        payable by the Parties in equal shares. The Vendor shall co-operate with
        and provide reasonable assistance to the Purchaser in the preparation of
        such request.  The Purchaser  shall  provide  to the  Vendor  in advance
        copies of all applications  and filings for  approval by the Vendor, not
        to be unreasonably withheld. The Purchaser shall provide the Vendor with
        a copy of the Competition Act Approval immediately upon receipt of same.

8.      REPRESENTATIONS AND WARRANTIES
        ------------------------------

8.01    Each Party represents and warrants to the other Party that:

        (a)  Incorporation:  It  is  a  corporation   duly  organized,   validly
             subsisting and in good standing  under the laws of the jurisdiction
             of its incorporation,  continuance or amalgamation (as the case may
             be) and is duly registered and  authorized to carry  on business in
             Alberta;

        (b)  Authorization:  All necessary corporate action has been taken by it
             to authorize  the  execution,  delivery  and  performance  of  this
             Agreement  and  all  other documents,  instruments  and  agreements
             contemplated by this Agreement;

        (c)  Enforceability:  This Agreement has been,  and each other document,
             instrument and agreement  executed by it pursuant to this Agreement
             will be,  duly  executed  and  delivered  by it  and,  if  properly
             executed and delivered by the other parties thereto, constitutes or
             will constitute  its valid  and binding  obligation  enforceable in
             accordance with its terms;

        (d)  s. 116  Tax  Act:  It is not a  non-resident  of Canada  within the
             meaning of section 116 of the Income Tax Act R.S.C. 1985, c. 1 (5th
             Supplement) as amended;

        (e)  Finders' Fees:  It has  not incurred  any obligation  or liability,
             contingent or otherwise,  for brokers' or finders'  fees in respect
             of this  transaction  for which  the other  Party  shall  have  any
             obligation or liability;

        (f)  Licensee Liability Rating:  It is a registrant with the EUB and its
             Licensee Liability Rating:

             (i)    is greater than or equal to one (1);

             (ii)   shall,  as a result of the  consummation of the Transaction,
                    be greater than or equal to one (1); and


<PAGE>


                                      -19-



             (iii)  shall be greater  than or equal to one  (1) at the time  the
                    EUB considers approval of any EUB License Transfers pursuant
                    to this Agreement; and

        (g)  No  Violation  of  Agreements  or Regulations:  The  execution  and
             delivery of  this Agreement and the  completion of the purchase and
             sale of the Assets in accordance  with the terms of  this Agreement
             are not and  will not  be in  violation  or  breach  of,  or  be in
             conflict with:

             (i)    any  term  or provision  of its  charter,  by-laws  or other
                    governing documents; or

             (ii)   any  agreement, instrument,  permit or authority to which it
                    is a party or by which it is bound; or

             (iii)  any judicial order, award, judgement or decree applicable to
                    it;

8.02    The Vendor represents and warrants to the Purchaser that:

        (a)  Title:  Except for the  Permitted Encumbrances, the Assets are free
             and clear of all Burdens and ROFRs created by, through or under the
             Vendor or  of which  the Vendor  otherwise  has  knowledge  and the
             Vendor is not  aware  of  there  having been  committed  any act or
             omission whereby the interest of the Vendor in and to the Assets or
             any  part or  portion  thereof  may  be  cancelled  or  determined,
             provided that except as set forth in this Subclause (a), the Vendor
             does not warrant its title to the Assets;

        (b)  Payment of Rents and Royalties: To the knowledge of the Vendor, all
             royalties, rentals and  other payments due under each of the Leases
             have been properly and timely paid, and all conditions necessary to
             keep each of the Leases in force have been fully performed;

        (c)  No Breaches of the Regulations:  The Vendor has no knowledge of any
             breach of the Regulations with respect to  the Assets which has not
             been  remedied  as of  the  Effective Time  which has  had or could
             reasonably be expected  to have a  materially adverse effect on the
             Assets or the owner thereof;

        (d)  Judgements and Claims:  There are no  judgements against the Vendor
             relating to the Assets, the Vendor has not  received written notice
             of any Claim relating to the Assets and, to the Vendor's knowledge,
             there are no  other judgements or Claims in existence, contemplated
             or threatened  against  or  with  respect  to  the  Assets  or  the
             interests  of the  Vendor therein  nor any  circumstances which the
             Vendor reasonably believes  will give rise  to a Claim  relating to
             the Assets which,  in the case of any of  the foregoing, has had or
             could reasonably be expected to have a materially adverse effect on
             the Assets or the owner thereof;


<PAGE>


                                      -20-



        (e)  Good Standing Under Agreements:  To the Vendor's knowledge, neither
             the Vendor nor any other party to the Title and Operating Documents
             is in breach  of any  term or  provision thereof  which has  had or
             could reasonably be expected to have a materially adverse effect on
             the Assets or the owner thereof,  provided  that the  Vendor shall
             have  no  liability  hereunder  with  respect  to title  matters or
             environmental matters;

        (f)  Assessments: To the Vendor's knowledge, all ad valorem, property,
             production, severance and similar taxes and assessments based on or
             measured by the ownership of property or the production of
             Petroleum Substances or the receipt of proceeds therefrom in
             respect of the Assets which have become due and payable prior to
             the Effective Time (including all prior years) have been properly
             and fully paid and discharged;

        (g)  Take or Pay,  Gas Balancing and  Production Sales Contracts: Except
             as specifically  identified  in  Schedule "C",  the  Petroleum  and
             Natural Gas Rights are not  subject to any take or pay obligations,
             any gas  balancing  agreement  or any  agreement  for  the  sale of
             Petroleum Substances that  is not  terminable on  notice of  thirty
             (30) days or  less without  an early  termination penalty  or other
             cost;

        (h)  Financial Commitments:  Except as disclosed in  Schedule "D", there
             are no financial  commitments in excess of $50,000.00 in any single
             case and which are due as of the  date hereof  or which  may become
             due by virtue  of matters  occurring or  arising  prior to the date
             hereof;

        (i)  Hedging Contracts:  there  are  no  interest  rate  swaps,  foreign
             exchange  swaps,  commodity  price  hedging  contracts  or  similar
             derivative contracts relating to the Assets for which the Purchaser
             will acquire any liability  pursuant hereto or which will  apply to
             the Assets  after  the  Closing  Date  or  which  will  affect  the
             adjustments made pursuant to Article 4 hereof;

        (j)  Environmental Matters:  To the knowledge of the Vendor,  the Vendor
             has not received notice from any governmental agency of:

             (i)   any  non-compliance with any  Environmental Law which has not
                   been remedied in all material respects; or


             (ii)  any Claim of damage to, or contamination or pollution of, the
                   environment or the release,  emission, or escape of any toxic
                   or hazardous  substance  occurring  in  connection  with  the
                   operation or development of the Assets;

        (k)  Authorizations or Approvals:  No authorization or approval or other
             action by,  and no  notice to  or  filing  with,  any  governmental
             authority or  regulatory  body  exercising  jurisdiction  over  the
             Assets is required for the due execution, delivery and  performance
             by  the  Vendor  of  this  Agreement,  other  than  authorizations,
             approvals  or  exemptions  from  requirement  therefor,  previously
             obtained and currently  in force,  approvals of  the EUB, and under
             the Competition Act;



<PAGE>


                                      -21-


        (l)  ROFR's:  Except  as may  be set  out in  Schedule  "A", none of the
             interest of  Vendor in  and to  the Assets is  subject to  any ROFR
             created by, through  or under Vendor  or of which  Vendor is aware,
             that   become  operative   by  virtue  of  this  Agreement  or  the
             transaction to be effected by it;

        (m)  Adverse Claims:  To the knowledge of the Vendor, the Vendor has not
             received notice from any third party claiming an interest in and to
             the Assets adverse to the interest of the Vendor;

        (n)  Compliance by the  Vendor:  To the  knowledge  of the  Vendor,  the
             Vendor has not  failed to comply  with, perform, observe or satisfy
             any term, condition,  obligation or liability which has  heretofore
             arisen under  the provisions  of any  of the  Title  and  Operating
             Documents or any other agreements and documents to which the Assets
             are subject which has had or could reasonably be expected to have a
             materially adverse  effect  on the  Assets  or the  owner  thereof,
             provided that  the Vendor shall  have no  liability  hereunder with
             respect to title matters or environmental matters;

        (o)  Licences and Permits: To the knowledge of the Vendor, in respect of
             the Assets that  are operated by the Vendor,  the Vendor  holds all
             material licenses,  permits and  similar rights and privileges that
             are required and  necessary  under  applicable  law to  operate the
             Assets as presently operated;

        (p)  Operations:  To the  knowledge  of  the  Vendor,  in  all  material
             respects, any and  all operations  in respect  of the  Assets, have
             been  conducted  in  accordance  with  good  oil  and gas  industry
             practices and in  material  compliance  with all  applicable  laws,
             rules, regulations, orders and directions of governmental and other
             competent authorities;

        (q)  Tangibles:  To the knowledge of the Vendor,  the Tangibles operated
             by the Vendor, if any, are in  good and operable  condition for the
             purpose for  which they  are being used,  reasonable wear  and tear
             excepted, and to the  knowledge of the Vendor,  the Vendor  has not
             received any  notice that  the Tangibles operated by third parties,
             if any, are not in good and  operable condition for the purpose for
             which they are being used, reasonable wear and tear excepted;

        (r)  Drilling Obligations:  To the knowledge of the Vendor,  no material
             obligations  have  accrued  pursuant  to  the  Title and  Operating
             Documents that  may be satisfied  by the  drilling  of a well,  the
             payment of compensatory  royalty or the surrender of some or all of
             the interests granted, reserved  or otherwise conferred pursuant to
             the Title and Operating Documents, other than obligations that have
             been satisfied (by means  other than by the payment of compensatory
             royalties) or have been permanently waived;

        (s)  Areas  of  Mutual  Interest:  There  are  no  active area of mutual
             interest provisions in  any of the Title and Operating Documents or
             other agreements or documents to which the Assets are subject; and



<PAGE>


                                      -22-



        (t)  Production  or Other  Penalties:  Excepting  production  limits  of
             general application  in the oil and gas industry, none of the Wells
             is subject to  production or  other penalties  imposed by the Title
             and Operating Documents or by any other agreements and documents to
             which the Assets are subject, or by the Regulations,.

8.03    The Purchaser represents and warrants to the Vendor that:

        (a)  Investment Canada:  the Purchaser is a Canadian for purposes of the
             Investment Canada Act.; and

        (b)  Financial Capacity:  the Purchaser  has made necessary arrangements
             so that at the  Closing  Time  the  Purchaser  will have  available
             sufficient  funds so  that it is able to pay the amounts payable by
             it at Closing pursuant to this Agreement.

8.04     The Vendor  makes no  representations  or warranties  to the  Purchaser
         other  than those expressly  enumerated in Clauses  8.01 and 8.02.  The
         Vendor does  not warrant  or make  representations  or warranties  with
         respect to:

        (a)  except as  specifically set forth in  Subclause (a) of Clause 8.02,
             title to the Assets;

        (b)  the quantity or quality of  Petroleum  Substances  recoverable from
             the Lands;

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

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

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

        (f)  the quality,  condition or  serviceability of  any of the Assets or
             the suitability of their use for any purpose ; or

        (g)  except  as  set  forth  in  Subclause  8.02(j),  any  Environmental
             Liabilities.

        Further  without  restricting  the  generality  of  the  foregoing,  the
        Purchaser   acknowledges  that   it  has   made  its   own   independent
        investigation, analysis, evaluation and inspection of the Assets and the
        state  and  condition  thereof and  that it  has relied  solely  on such
        investigation, analysis,  evaluation and inspection as to its assessment
        of the condition, quantum and value of  the Assets and is purchasing the
        Assets on an "as is, where is" basis.

8.05    Each Party  acknowledges that the  other may rely on the representations
        and warranties made by  such Party  pursuant to  Clauses 8.01,  8.02 and
        8.03. The representations and warranties contained in Clauses 8.01, 8.02
        and 8.03 shall  be true at  the Effective Time  and at the Closing Time,
        and  the  representations  and  warranties of  both the  Vendor  and the


<PAGE>


                                      -23-


        Purchaser  shall continue  to be  in full  force and  effect  and  shall
        survive the Effective Time for a period of one (1) year, for the benefit
        of the Party for which such representations and warranties were made. In
        the absence of fraud,  however,  no claim or  action shall be  commenced
        with respect to a breach of any such representation or warranty, unless,
        within such period,  written notice specifying such breach in reasonable
        detail has been  provided to the Party which made such representation or
        warranty.

9.   LIABILITY AND INDEMNIFICATION
     -----------------------------

9.01    Subject to other provisions of this Article 9 and provided Closing has
        occurred and the Vendor has received payment from the Purchaser of the
        Purchase Price, as adjusted, pursuant to Clause 4., the Vendor shall:

        (a)  indemnify and save harmless the Purchaser and its Other Indemnitees
             from and against all Losses and Liabilities which the Purchaser and
             its  Other  Indemnitees   suffer,  sustain,  pay  or  incur   as  a
             consequence of  a breach of  a representation  and warranty made by
             the Vendor in Clause 8.01 or 8.02 or a breach by the  Vendor of any
             of the covenants made by it in this Agreement; and

        (b)  be liable for,  and indemnify and  save harmless the  Purchaser and
             its Other Indemnitees from and against, all Claims made against the
             Purchaser and its Other Indemnitees as a consequence of a breach of
             a representation  and warranty made by the Vendor in Clause 8.01 or
             8.02 or a breach by the Vendor  of any of the covenants  made by it
             in  this  Agreement  and  all  Losses  and  Liabilities  which  the
             Purchaser and its  Other Indemnitees suffer,  sustain, pay or incur
             as a consequence of such Claims;

        except  to  the   extent  reimbursed  (or  reimbursable)   by  insurance
        maintained by the Purchaser or caused by  the gross negligence or wilful
        misconduct  of the  Purchaser or  its Other  Indemnitees.  The indemnity
        granted by the Vendor herein, however, is not a title warranty and shall
        not provide any remedy in respect of Losses suffered by the Purchaser or
        its Other  Indemnitees or  its successors  or  assigns as  a result of a
        failure of  title  to the  Assets  or an  encumbrance or  Burden  on the
        Assets.

9.02    The Purchaser shall:

        (a)  indemnify and  save harmless the  Vendor and  its Other Indemnitees
             from and against all  Losses and  Liabilities which the  Vendor and
             its  Other  Indemnitees   suffer,   sustain,  pay  or  incur  as  a
             consequence of a  breach of a  representation and  warranty made by
             the Purchaser in Clause  8.01 or 8.03 or a breach by the  Purchaser
             of any of the covenants made by it in this Agreement;

        (b)  be liable for,  and indemnify and save  harmless the Vendor and its
             Other Indemnitees  from and  against,  all Claims made  against the
             Vendor and its Other Indemnitees  as a consequence of a breach of a
             representation and warranty made by the Purchaser in Clause 8.01 or
             8.03 or a breach by the Purchaser  of any of the  covenants made by
             it in this  Agreement  and all  Losses and  Liabilities  which  the


<PAGE>


                                      -24-



             Vendor and its Other Indemnitees  suffer, sustain, pays or incur as
             a consequence of such Claims; and

        (c)  if Closing occurs,  be liable for,  and indemnify and save harmless
             the Vendor and its Other  Indemnitees from and against,  all Claims
             made  against  the Vendor and  its Other  Indemnitees  by a  person
             (other than a Party) in respect of a  matter relating to the Assets
             which  occurs on  or after  the  Closing  Date  and  all Losses and
             Liabilities  which the  Vendor and  its Other  Indemnitees  suffer,
             sustain,  pay or  incur as a  consequence of such Claims other than
             anything directly related to or connected with the 3-32 Well;

        except  to  the  extent  reimbursed  (or   reimbursable)  by   insurance
        maintained by  the Vendor  or caused  by the  gross negligence or wilful
        misconduct of the Vendor.

9.03    The Purchaser is not relying upon any  representation or warranty of the
        Vendor as to the  condition,  environmental or otherwise, of the Assets,
        except  as  is   specifically  made  pursuant  to   Subclause   8.02(j).
        Notwithstanding Clause 9.01,  but subject to the Purchaser's right under
        this  Article  9 in  respect  of  the  representation  and  warranty  in
        Subclause  8.02(j),  the  Purchaser  further  agrees  that,  if  Closing
        occurs, the Purchaser shall:

        (a)  be solely liable and responsible for; and

        (b)  indemnify and  save the  Vendor and its  Other Indemnitees harmless
             from any  and all  Losses they  suffer,  sustain,  pay or  incur in
             respect of

         all Environmental  and Reclamation Liabilities (whether related to acts
         or omissions  occurring  before,  on  or  after  the  Effective  Time),
         including, without  limitation, damage from  or removal of hazardous or
         toxic substances,  pollution,  clean-up,  abandonment  of the Wells and
         reclamation , but excluding anything  directly related to or  connected
         with the 3-32 Well.

9.04     The indemnification obligations of Vendor under Clause 9.01 are subject
         to the following restrictions and limitations:

        (a)  The  Purchaser shall  not be  entitled to seek indemnification from
             the  Vendor  pursuant  to  Clause  9.01  in  respect  of  any  act,
             omission,  circumstance  or  other  matter  actually  known  to the
             Purchaser prior  to or at Closing  or any  matter disclosed  in the
             Data Room.

        (b)  No claim by the Purchaser shall be made against the Vendor pursuant
             to Clause 9.01 in  respect of Vendor's breach of any representation
             or  warranty in  Clause 8.01  or 8.02  or a  covenant contained  in
             Clause  10.01,  10.02  10.03  or  unless  the  aggregate of  all of
             Purchaser's Losses  in respect of all of  breaches of the  Vendor's
             representations  or warranties  in  Clauses  8.01 and  8.02 and the
             covenants contained in Clauses 10.01,  10.02 and 10.03  exceeds the
             Indemnity Threshold. If the total amount of all such Losses exceeds
             the  Indemnity  Threshold,   then  the  Vendor's   obligations  for


<PAGE>


                                      -25-



             Purchaser's Losses under Clause 9.01 shall be limited to the amount
             by which  the aggregate amount  of all of  such Losses  exceeds the
             Indemnity Threshold.

        (c)  In no event  shall the  Vendor be  liable  for  Purchaser's  Losses
             pursuant to Clause 9.01 after Closing in respect of all of breaches
             of the Vendor's representations and  warranties in Clauses 8.01 and
             8.02 and the covenants  contained in Clauses 10.01, 10.02 and 10.03
             on an aggregate basis for more than the Base Price.

        (d)  The Purchaser  shall not  be entitled  to seek indemnification from
             the Vendor pursuant  to Clause 9.01  in respect of a  breach of the
             Vendor's representations or warranties  in Clause 8.01 or 8.02 or a
             covenant  contained in  Clause  10.01,  10.02 or  10.03  unless the
             Purchaser shall  have  provided  the Vendor  with a  notice of  its
             claim in respect thereof within 12 months after the Closing Date.

9.05    The Vendor  shall not  be entitled  to  seek  indemnification  from  the
        Purchaser  pursuant  to  Clause  9.02  in  respect  of  breaches  of the
        Purchaser's  representations  or warranties  in Clause  8.01  unless the
        Vendor shall have  provided the Purchaser with  a notice of its claim in
        respect thereof within 12 months after the Closing Date.

9.06    Notwithstanding  anything to  the contrary  set forth in this Agreement,
        neither  Party  shall  have any  liability  to the  other Party  for any
        incidental,  special, indirect  or consequential damages suffered by the
        other Party or its successors or assigns.

9.07    A Party's  sole remedy  for a misrepresentation or breach of a warranty,
        covenant or other  agreement contained  in this  Agreement is limited to
        the indemnity  contained  in  Clause  9.01 or 9.02  (as  applicable)  as
        limited by the other provisions of this Article 9.

9.08    The following  procedures shall be applicable to any claim by a Party or
        any of its Additional Indemnitees (the "Indemnitee") for indemnification
        pursuant to  this Agreement  from the  other Party (the "Indemnitor") in
        respect of a claim by a third party:

        (a)  upon the  third party claim being made against or commenced against
             the Indemnitee, the Indemnitee shall within 10 Business Days of its
             receipt  thereof provide  notice thereof  to  the  Indemnitor.  The
             notice shall describe  the third party  claim in  reasonable detail
             and  indicate   the  estimated  amount,   if  practicable,  of  the
             indemnifiable  Losses  that  has been  or may  be sustained  by the
             Indemnitee in respect thereof.  If the Indemnitee  does not provide
             notice to the Indemnitor  within such 10 Business Day period,  then
             such failure shall  only lessen or limit the Indemnitee's rights to
             indemnity  hereunder  to the  extent that the  defence of the third
             party claim was prejudiced by such lack of timely notice;

        (b)  if the  Indemnitor  acknowledges  to the Indemnitee in writing that
             the  Indemnitor  is responsible  to  indemnify  the  Indemnitee  in
             respect of  the third  party claim pursuant  hereto, the Indemnitor
             shall have the right to do either or both of the following:

              (i)   assume  carriage  of the  defence of  the third party  claim
                    using legal  counsel  of its  choice and  at its  sole cost;
                    and/or


<PAGE>


                                      -26-



              (ii)  settle the  third party  claim  provided the Indemnitor pays
                    the  full  monetary  amount  of   the  settlement   and  the
                    settlement does not impose any restrictions  or  obligations
                    on the Indemnitee;

        (c)  the Indemnitee and  the Indemnitor  shall co-operate with the other
             in the defence of the third party claim, including making available
             to  the  other  Party,  its   directors,  officers,  employees  and
             consultants whose assistance, testimony  or presence is of material
             assistance in evaluation and defending the third party claim;

        (d)  the Indemnitee  shall  not enter into any settlement, consent order
             or other compromise with respect  to the third  party claim without
             the prior written  consent of  the Indemnitor  (which consent shall
             not be  unreasonably  withheld or delayed),  unless the  Indemnitee
             waives its rights to indemnification in respect  of the third party
             claim;

        (e)  upon payment  of the  third party  claim, the  Indemnitor  shall be
             subrogated  to all claims the Indemnitee may have relating thereto.
             The Indemnitee  shall give  such  further assurances and co-operate
             with  the  Indemnitor  to  permit  the  Indemnitor  to pursue  such
             subrogated claims as reasonably requested by it; and

        (f)  if  the   Indemnitor   has   paid  an   amount  pursuant   to   the
             indemnification  obligations   herein  and   the  Indemnitee  shall
             subsequently be  reimbursed from any source in respect of the third
             party claim  from any  other Person,  the Indemnitee shall promptly
             pay the amount of the  reimbursement  (including interest  actually
             received) to  the Indemnitor,  net of  Taxes required to be paid by
             the Indemnitee as a result of any such receipt.

10.      MAINTENANCE OF BUSINESS
         -----------------------

10.01    Between the date hereof and the Closing Time, the Vendor shall,  to the
         extent that the  nature of  its  interests  permit  and  subject to the
         Title and Operating  Documents:

        (a)  maintain the  Assets in  a proper and  prudent manner in accordance
             with good oil and gas industry practices and in material compliance
             with the Regulations;

        (b)  pay or cause  to be paid  all costs relating  to the Assets as they
             become due;

        (c)  perform and comply with  all covenants and conditions  contained in
             the Title and  Operating  Documents  and any  other agreements  and
             documents to which the Assets are subject;

        (d)  not enter into  or authorize any material contractual commitment or
             transaction or any material  variation of  existing commitments  or
             transactions pertaining to the Assets; and


<PAGE>



                                      -27-



        (e)  conduct its business relating to  the Assets in the  normal course,
             consistent with its past practices.

         During the period  between  the Effective Time and the Closing Time the
         Vendor shall  maintain the property damage  insurance respecting of the
         Assets currently  in effect and  all other insurance  it is required to
         maintain pursuant to the Title and Operating Documents.

10.02    During the  period from  the date of  execution of this Agreement until
         Closing Time, the Vendor shall not,  without the prior  written consent
         of the Purchaser,  assume any obligations or commitments or  propose or
         initiate  any  operations  (in  either  event  to the  extent exceeding
         $50,000 for any one item) with respect to the Assets, unless and to the
         extent that the Vendor reasonably determines that  such expenditures or
         actions are necessary for the  protection of life or property, in which
         case the Vendor shall  promptly notify the  Purchaser of such intention
         or  actions  and  the  Vendor's  estimate  of the  costs  and  expenses
         associated therewith.

10.03    The Vendor  shall  permit  the Purchaser  and  its  legal  counsel  and
         authorized representatives  to have  access to the Assets to the extent
         the Vendor has the  right to provide such  access and  to  the Vendor's
         books,  records and files,  in each  case,  upon  reasonable notice and
         during  normal   business  hours   prior  to-Closing  for  purposes  of
         performing  due diligence with  respect  to  the  Assets  for  purposes
         hereof. The provisions  of the Confidentiality Agreement shall continue
         to be  applicable  to any  information  made  available  by  the Vendor
         pursuant to the provisions of this Agreement.

10.04    Following Closing:

        (a)  the Vendor  shall hold  its  title  to an  Asset in  trust for  the
             Purchaser until  all  necessary  notifications,  registrations  and
             other steps required to transfer such  title to the  Purchaser have
             been completed; and

        (b)  the Vendor  shall represent  the Purchaser  in all  matters arising
             under  a  Title  and  Operating  Document  until  the  Purchaser is
             substituted as a party thereto in the place of the Vendor,  whether
             by novation, notice of assignment or otherwise and,  in furtherance
             thereof:

             (i)    all payments  relating to  the Assets received by the Vendor
                    pursuant to the  Title and  Operating  Document,  other than
                    those to which the Vendor is entitled under Article 4, shall
                    be received  and held  by the  Vendor as  a  trustee for the
                    Purchaser and the Vendor promptly remitted to the Purchaser;

             (ii)   the Vendor  shall forward all statements,  notices and other
                    information  received  by  it  pursuant  to such  Title  and
                    Operating  Documents  that  pertain  to  the  Assets  to the
                    Purchaser promptly  following their receipt  by the  Vendor;
                    and



<PAGE>


                                      -28-


             (iii)  the  Purchaser shall  forward to  other parties to the Title
                    and Operating Documents such notices  and elections pursuant
                    to such  Title and  Operating  Documents  pertaining  to the
                    Assets as the Vendor may reasonably request.

10.05   If Closing occurs,  the Vendor shall be deemed to have been the agent of
        the Purchaser with respect to the  maintenance of the Assets pursuant to
        this Article  and the  Purchaser shall  be deemed  to have  ratified all
        actions  which the Vendor takes  or refrains  from taking as  authorized
        hereunder,  with the  intention that all such actions shall be deemed to
        be those of the Purchaser.

10.06   If Closing occurs,  the Purchaser be liable for,  and indemnify and save
        harmless  the  Vendor and its  Other  Indemnitees from and against,  all
        Claims made against the  Vendor and its Other Indemnitees resulting from
        the maintenance  of the  Assets by  the Vendor  pursuant to this Article
        and  all  Losses  and  Liabilities  which  the  Vendor  and   its  Other
        Indemnitees  suffer,  sustain, pay  or incur  as a  consequence  of such
        Claims,  insofar as  such Claims  and Losses  are not a direct result of
        the gross negligence  or wilful  misconduct  of the Vendor  or its Other
        Indemnitees.   An  action  or  omission  of  the  Vendor  or  its  Other
        Indemnitees  shall  not  be  regarded  as  gross  negligence  or  wilful
        misconduct, however, to the extent it was done or omitted  to be done in
        accordance with the instructions of or with the concurrence of the
        Purchaser.

10.07   If Closing  occurs,  Vendor will  commence the  abandonment of  the 3-32
        Well  within six  (6) months  after  the  Closing  Date  and  thereafter
        diligently  abandon the  3-32  Well  and  reclaim  the  surface location
        thereof in accordance with the  Regulations and good oilfield  practices
        all at Vendor's sole cost and risk.

11.     PURCHASER'S CLOSING CONDITIONS
        ------------------------------

11.01   The Purchaser's  obligation to  purchase the  Assets pursuant  hereto is
        subject to the satisfaction of the  following conditions,  which are for
        the  exclusive  benefit of  the  Purchaser  and  may  be  waived  by the
        Purchaser, in whole or in part:

        (a)  Representations  True and  Obligations  Performed:  Except  to  the
             extent which, in the aggregate,  does not  have a  material adverse
             effect on the Purchaser:

             (i)    the  representations  and warranties  made by  the Vendor in
                    Clauses 8.01 and 8.02 shall be  true when made and as of the
                    Closing Time; and

             (ii)   the Vendor shall  have observed  and performed  in a  timely
                    manner all of its obligations  under this Agreement which it
                    was required to observe and perform prior to or at Closing;

        (b)  Regulatory  Approvals:  All  approvals  to the  sale of  the Assets
             pursuant  hereto  required  under  the  Regulations,  except  those
             customarily  obtained after  closing in  accordance with normal oil
             and gas  industry  practices in  western  Canada,  shall  have been
             obtained on terms satisfactory to the Vendor acting reasonably;


<PAGE>


                                      -29-



        (c)  Closing  Certificate:  If requested  by the  Purchaser,  the Vendor
             shall have furnished to the Purchaser at Closing a certificate of a
             senior  officer of  the Vendor  dated the  date the  Closing occurs
             certifying on  behalf of the  Vendor and without personal liability
             that the covenants  and representations  and warranties made by the
             Vendor in Clauses 8.01 and 8.02 hereof are true  and correct at the
             Effective Time and the Closing Time;

        (d)  No Material Adverse Change:  No material adverse change of any kind
             to the Petroleum and Natural Gas Rights or the Tangibles shall have
             occurred without  the Purchaser having  agreed thereto  between the
             date hereof and the Closing Time except:

             (i)    depreciation of equipment through ordinary wear and tear;

             (ii)   depletion of reserves through normal production at allowable
                    rates;

             (iii)  changes in  prices of  Petroleum Substances,  changes in tax
                    laws and other circumstances generally affecting the oil and
                    gas industry in the province  in which  the Assets  affected
                    thereby are located;

             (iv)   changes in the  rate or  quality of  production of Petroleum
                    Substances  from the Wells unless caused by  a breach by the
                    Vendor of its obligations under this Agreement; and

             (v)    damage  to the  Assets which  is  substantially  covered  by
                    insurance,  in which  event the  insurance proceeds shall be
                    paid to the Purchaser at Closing or when received, whichever
                    is later; and

        (e)  Title: Neither Party shall have elected to terminate this Agreement
             pursuant to Clause 6.03.

        If any  of the  foregoing  conditions have  not been  complied  with, or
        waived by the Purchaser  at or before  the Closing  Time, the  Purchaser
        may, in addition  to any other  remedies which it may  have available to
        it, terminate this Agreement by written notice to the Vendor  specifying
        what  conditions  have not  been  satisfied and,  in such event,  Clause
        13.01 will be applicable.

12.     VENDOR'S CLOSING CONDITIONS
        ---------------------------

12.01   The Vendor's obligation to sell the Assets pursuant hereto is subject to
        the  satisfaction  of  the  following  conditions,  which  are  for  the
        exclusive  benefit of  the Vendor  and may  be waived  by the Vendor, in
        whole or in part:

        (a)  Representations  True and  Obligations  Performed:  Except  to  the
             extent which, in the aggregate,  does not  have a  material adverse
             effect on the Vendor:


<PAGE>


                                      -30-



             (i)    the  representations  and warranties  made by  the Purchaser
                    in Clause 8.01 shall be true when made and as of the Closing
                    Time; and

             (ii)   the Purchaser shall have observed and performed  in a timely
                    manner all of its obligations  under this Agreement which it
                    was required to observe and perform prior to or at Closing;

        (b)  Regulatory Approvals:  All  approvals  to  the  sale of  the Assets
             pursuant  hereto  required  under  the  Regulations,  except  those
             customarily obtained  after closing  in accordance with  normal oil
             and gas  industry  practices in  western  Canada,  shall  have been
             obtained on terms satisfactory to the Vendor acting reasonably.

        (c)  Closing  Certificate:  If  requested  by the Vendor,  the Purchaser
             shall have  furnished to the Vendor at  Closing a  certificate of a
             senior officer of the  Purchaser dated the  date the Closing occurs
             certifying  on  behalf  of   the  Purchaser  and  without  personal
             liability that  the covenants  and representations  and  warranties
             made by the Purchaser in Clause 8.01 hereof are true and correct at
             the Effective Time and the Closing Time;

        (d)  Transfers of Well  Licenses and  Pipeline Permits: The Vendor shall
             be reasonably satisfied at the Closing Time  that the  transfers of
             well licences  and  pipeline  permits  to  the  Purchaser  pursuant
             hereto,  if any,  will  be  accepted by  the appropriate regulatory
             authorities; and

        (e)  Title: Neither Party shall have elected to terminate this Agreement
             pursuant to Clause 6.03.

        If any of the foregoing conditions has not been complied with, or waived
        by the Vendor at or before the Closing Time, the Vendor may, in addition
        to any other  remedies which it may have available to it, terminate this
        Agreement by written notice to  the Purchaser specifying what conditions
        have not  been satisfied  and,  in  such  event,  Clause  13.01  will be
        applicable.

13.     TERMINATION
        -----------

13.01   In the event that this Agreement is terminated pursuant to Article 6.00,
        11.00 or  12.00,  each Party  shall be  released  from  all  obligations
        hereunder except its obligations under Clause 3.04 and Article 9.

14.     ARBITRATION
        -----------

14.01   If any  matter upon  which the  Parties  do  not agree  is  referred  to
        arbitration  pursuant  to a  right to  refer the  matter to  arbitration
        contained in this Agreement or if the Parties agree  to refer any matter
        arising  hereunder  to  arbitration, the  arbitration shall  be before a
        single arbitrator.  Any such arbitration, including the selection of the
        arbitrator,  shall be  governed  by the  Arbitration Act  (Alberta). The
        decision of  any  such  arbitrator  shall  be final  and binding  on the


<PAGE>


                                      -31-


        Parties and except  as specifically  provided for in  Subclause 6.04(h),
        the  costs and fees  relating thereto  shall be  borne and  paid in the
        manner the arbitrator determines to be fair and equitable.

14.02   If a  dispute is  referred to  arbitration  pursuant  to  Clause 4.11 or
        Clause 6.04, each Party  shall be required to  submit to  the arbitrator
        such  Parties'  proposed  resolution of the dispute. The arbitrator will
        be required to select one of  such submissions  to be  its ruling on the
        dispute.

15.     OPERATORSHIP AND SIGNS
        ----------------------

15.01   The Purchaser  acknowledges that the  Vendor may not be able to transfer
        operatorship of some or all  of the Assets to the  Purchaser at or after
        Closing.  The  Vendor covenants  to do  such  reasonable  things  as the
        Purchaser  may request in order  to obtain the appropriate  consents and
        approvals for  the  assignment  and  transfer  (conditional  on  Closing
        occurring) to the Purchaser of operatorship of those of the Assets which
        the Vendor currently operates.

15.02   After Closing,  the Vendor  may remove  any  signs  which  indicate  its
        ownership or operation of the Assets.  The Purchaser will be responsible
        to erect or install signs  required by governmental agencies to indicate
        that the  Purchaser is the operator  of the  Assets and  to notify other
        working  interest  owners,   gas  purchasers,   suppliers,  contractors,
        governmental agencies and other third  party of the Purchaser's interest
        in the Assets on and after Closing.

16.     NOTICE
        ------

16.01   Notwithstanding anything  to the  contrary contained herein, all notices
        required or permitted hereunder  shall be  in writing.  Any notice to be
        given hereunder  shall be deemed  to be served properly if served in any
        of the following modes:

        (a)  by telecopier  directed to the Party on which it is to be served at
             that Party's fax number for  service.  A notice so  served shall be
             deemed to  be received by  the addressee when actually  received by
             it,  if received  within normal business hours  on any Business Day
             and otherwise at the commencement of the next  ensuing Business Day
             following transmission; or

        (b)  by mailing  it first  class (air  mail  if  to or  from a  location
             outside of Canada)  registered post,  postage prepaid,  directed to
             the Party on which it is to  be served at  that Party's address for
             service.  Notices so  served shall be  deemed to be received by the
             addressee at noon, local time, on the earlier of the actual date of
             receipt or the fourth (4th) day (excluding  Saturdays,  Sundays and
             statutory holidays  in  Alberta)  following  the  mailing  thereof.
             However,  if postal service is (or is reasonably anticipated to be)
             interrupted or  operating with  unusual delay,  notice shall not be
             served by such means during  such interruption or period  of delay;
             or

        (c)  by delivering  the notice  to the Party on which it is to be served
             at that Party's address for service.



<PAGE>


                                      -32-



16.02   The address  and fax number for service  of notices hereunder of each of
        the Parties shall be as follows:

         VENDOR:

                  Pioneer Natural Resources Canada Inc.
                  2900, 255 - 5th Avenue S.W.
                  Calgary, Alberta T2P 3G6

                  Attn:  Land Department
                  Fax:   (403) 231-3276

         PURCHASER:

                  Ketch Resources Ltd.
                  300, 440 - 2nd Avenue S.W.
                  Calgary, Alberta T2P 5E9

                  Attn:  Land Department
                  Fax:   (403) 781-8585

        A Party may  change its  address or  fax number for service by notice to
        the other Party, and such  changed address for service  thereafter shall
        be effective for all purposes of this Agreement.

17      EUB LICENSE TRANSFERS
        ---------------------

17.01   Prior to  Closing,  the  Vendor  shall  prepare  and  where  applicable,
        electronically  submit an  application to  the EUB  for the  EUB License
        Transfers and the Purchaser shall  electronically ratify  and sign  such
        application.

17.02   Should the EUB deny a EUB License  Transfer because of misdescription or
        other minor  deficiencies  in the  application the  Vendor shall  within
        five (5) Business Days correct  the application and amend and  re-submit
        an application  for the  EUB License  Transfer  and the  Purchaser shall
        electronically ratify and sign such application.

17.03   If,  for any  reason,  the EUB  requires a  Party to  make a  deposit or
        furnish any  other form  of security  in order  to approve a EUB License
        Transfer, such Party shall  and covenants  to immediately  (i) make such
        deposit  and  (ii)  furnish  such  other  form of  security as  the  EUB
        requires.

17.04   If a Party  (the "Defaulting Party")  fails to make a deposit or furnish
        security it is required to  make or  furnish under  Clause  17.03 within
        ten (10) days of  the Defaulting Party's  receipt of  notification  from
        the EUB that such deposit or security is required,  the other Party (the
        "Non-Defaulting Party")  shall have the  right to  make such  deposit or
        furnish such  security.  In such event,  the Defaulting  Party shall (as
        applicable) reimburse  the amount of such deposit  or the costs  of such
        security to the Non-Defaulting  Party plus interest thereon at the Prime


<PAGE>


                                      -33-


        Rate plus  2% from  the  date  such  deposit  or  security  is  made  or
        furnished by the  Non-Defaulting Party until  such reimbursement is made
        and, in the case of security,  cause the security to be  returned to the
        Non-Defaulting  Party  as  soon  as   possible  and  indemnify  the Non-
        Defaulting  Party for  the amount and costs of any draws on the security
        plus interest thereon at the Prime  Rate plus 2% from the date such draw
        is made  until such  indemnification is  made. In  addition to all other
        rights  to enforce  such reimbursement otherwise  available to  the Non-
        Defaulting Party,  it shall have the right to set-off the amount of such
        reimbursement  or  indemnification  (including  interest)  against other
        monies due to the Defaulting Party pursuant to this Agreement.

17.05   Should the Purchaser  fail to perform the obligations requested, ordered
        or   directed  by  a  governmental  authority  respecting  Environmental
        Liabilities  within the time specified by the governmental authority and
        the EUB declines to approve a EUB  License Transfer as a result thereof,
        the Vendor  shall be entitled  to enter  upon and  access the  Assets to
        perform such  obligations for and  on behalf  of the  Purchaser, without
        liability to the Purchaser for  trespass or otherwise and  the Purchaser
        shall reimburse the Vendor for all  costs, charges and expenses incurred
        by the Vendor in the performance of such obligations, by payment thereof
        to the Vendor, within thirty  (30) days of the  Vendor'  delivery to the
        Purchaser of an  invoice for  such costs,  charges and expenses together
        with interest  thereon at  the Prime  Rate plus  2% from  the date  such
        costs,  charges  or  expenses  are   paid  by  the  Vendor  until   such
        reimbursement is made.

18      EMPLOYEES
        ---------

18.01   Prior to Closing, Purchaser shall provide an offer of employment to each
        Field  Employee,  substantially  the  same  in  aggregate  as  the Field
        Employee's current employment by the Vendor,  which will be  conditional
        on Closing occurring.

18.02   Purchaser covenants and agrees to use and disclose  Personal Information
        only for those purposes for which the Personal Information was initially
        collected from  or in  respect of  the individual to which such Personal
        Information relates, unless:

        (a)  Vendor or  Purchaser  has  first  notified such  individual of such
             additional purpose, and where required by the Regulations, obtained
             the consent of such individual to such additional purpose; or

        (b)  such   use  or   disclosure  is  permitted  or  authorized  by  the
             Regulations, without notice to, or consent from, such individual.

19      SEISMIC DATA
        ------------

19.01   The Vendor  shall use  commercially  reasonable  efforts to  obtain  the
        third party consents and waivers  necessary to  cause the  Joint Seismic
        Data which  is Restricted  Joint Seismic  Data on the  date hereof to be
        Unrestricted Joint Seismic Data at the Closing Time.

19.02   The Purchaser acknowledges that it will acquire the Seismic Data License
        without representation and warranty  (including, without limitation, any



<PAGE>


                                      -34-

        representation and warranty as to its accuracy or  quality), and without
        reliance on any information provided by the Vendor or its Affiliates.

19.03   Under no  circumstances shall the Purchaser sell, license, distribute or
        otherwise transfer  to a  third party  any of  the Seismic  Data that is
        licensed to the Purchaser pursuant to  the Seismic  Data License  or any
        copies thereof,  in whole or in part,  provided that the Purchaser shall
        be permitted to display  such Seismic Data to its joint venture partners
        holding interests  in the Purchaser's  joint properties  on a  view-only
        basis. The Purchaser  shall take all  reasonable actions to  prevent the
        disclosure to  third parties of the Seismic Data that is licensed to the
        Purchaser  pursuant to the  Seismic Data License. The Purchaser shall be
        liable to the  Vendor and its  Affiliates for  and  shall,  in addition,
        indemnify the Vendor and its Affiliates  from and against all Losses and
        third party liability in respect  of the Purchaser's disclosure to third
        parties of the Seismic  Data that is licensed  to the Purchaser pursuant
        to the Seismic Data License.

19.04   The Purchaser shall be  responsible  for payment of all costs of copying
        the Seismic  Data that is licensed  to  the  Purchaser  pursuant  to the
        Seismic Data License.

20      GENERAL
        -------

20.01   Each Party shall from time to time execute and  deliver all such further
        documents and instruments and do all acts  and things as the other Party
        may,  either  before  or after  the Closing  Date, reasonably require to
        effectively  carry out or better evidence or perfect the full intent and
        meaning of this Agreement.

20.02   Unless and until  Closing occurs, the Confidentiality Agreement shall be
        binding  upon  the  Purchaser.   If  Closing  occurs,   thereafter,  the
        Confidentiality  Agreement shall cease to  be applicable with respect to
        information  directly  related to  the Assets,  but will  continue to be
        binding upon the Purchaser and in full force and  effect with respect to
        all other information.

20.03   No public announcement or press release concerning the sale and purchase
        of the Assets shall be made by a Party without the prior written consent
        and approval of the other Party; provided  that nothing contained herein
        shall  prevent a  Party at  any time  furnishing any  information to any
        governmental authority or to the public  if required by  the Regulations
        or the rules of a stock exchange.  A Party which proposes to make such a
        public disclosure shall, to the  extent reasonably possible, provide the
        other Party with a draft of such statement  in sufficient  time prior to
        its release to enable such other Party to review such  draft and  advise
        that Party of any comments it may have  with respect  thereto, it  being
        understood that,  upon  signing  this  Agreement,  the  Vendor  will  be
        permitted  to  immediately  issue   a  press   release  announcing   the
        transaction  provided  such  press  release  has  been  reviewed  by the
        Purchaser.

20.04.  This  Agreement  shall  be  governed  by,  construed  and  enforced   in
        accordance with the  laws in  effect in  the Province  of Alberta.  Each
        Party accepts the  jurisdiction of the courts of the Province of Alberta
        and all courts of appeal therefrom.


<PAGE>


                                      -35-



20.05   No waiver by any Party  of any breach (whether actual or anticipated) of
        any of  the  terms, conditions,  representations or warranties contained
        herein shall take  effect or  be  binding  upon that  Party  unless  the
        waiver is expressed in writing in  accordance with the terms hereof. Any
        waiver so  given shall  extend only  to the  particular breach so waived
        and shall not limit or affect any  rights with  respect to  any other or
        future breach.

20.06   Time shall be of the essence in this Agreement.

20.07   The representations,  warranties, liabilities and indemnities created in
        this  Agreement  shall   be  deemed   to  apply   to  all   assignments,
        conveyances,  transfers and  other documents conveying any of the Assets
        from the Vendor to the Purchaser.  There shall not be  any merger of any
        of such representations, warranties, liabilities or  indemnities in such
        assignments, transfers or other documents.

20.08    This Agreement supersedes all other agreements between the Parties with
         respect to the sale of the Assets other than the Confidentiality
         Agreement and this Agreement and the Confidentiality Agreement express
         the entire agreement of the Parties with respect to the transactions
         contained herein.

20.09    No Person other than the Parties and their successors and permitted
         assigns and the Other Indemnitees shall be entitled to any rights or
         benefits hereunder.

20.10    This  Agreement may  be amended  only by written instrument executed by
         the Vendor and the Purchaser.

20.11    This  Agreement  shall enure to the benefit of and be binding  upon the
         Parties hereto and their respective successors and permitted assigns.

20.12    This  Agreement  may be  executed  in two  or more  counterparts by the
         Parties  hereto, each of  which counterpart shall be deemed an original
         but all of which together shall constitute one and the same agreement.

20.13    (a)  Upon  the written request of the Purchaser, and only to the extent
              necessary to  comply with  the Securities Requirements, the Vendor
              shall:

              (i)  provide  the   Purchaser  or  an  independent  auditing  firm
                   selected   by   the   Purchaser   (who   provide   a   signed
                   confidentiality   undertaking   in   favour  of  the   Vendor
                   consistent with that required pursuant to the Confidentiality
                   Agreement),  with the  Historical Information  as  reasonably
                   requested by the Purchaser; and

              (ii) provide reasonable access during normal business hours to its
                   personnel who are responsible for Historical Information.

         (b)  Subject to  Clause 20.13(d), the Vendor hereby consents to the use
              by the Purchaser  or its  Affiliates of the Historical Information
              (including  the   Audited  Net  Operating   Statements)   and  any


<PAGE>


                                      -35-


              information derived therefrom in any public disclosure required by
              the  Purchaser   or  its  Affiliates  to  comply  with  Securities
              Requirements.

         (c)  The  obligations of the Vendor  to  disclose or provide reasonable
              access to any Historical Information pursuant to this clause 20.13
              shall terminate December 31, 2008.

         (d)  Except  in  such   form  as   may  be   required  for   Securities
              Requirements,  the Purchaser  shall and shall cause its Affiliates
              to keep all  Historical  Information  confidential and  shall  not
              disclose  such  Historical  Information  to any  of its Affiliates
              except any  of  the  foregoing  who  have  a  need  to  know  such
              Historical Information for the purposes set forth in this  Clause.
              The Purchaser shall be liable for and in  addition,  indemnify the
              Vendor and its Other Indemnitees  for any and all Losses suffered,
              sustained, paid or incurred by the Vendor or its Other Indemnitees
              directly or  indirectly in the event of a breach of this Clause by
              the Purchaser or  any Claim  arising out  of any use whatsoever of
              the Historical  Information  including a  preliminary  prospectus,
              final prospectus or other  disclosure  document that  incorporates
              such Historical Information.

         (e)  The Historical Information  shall be provided by the Vendor to the
              Purchaser  or  its  Affiliates  pursuant  to this  Clause  on  the
              condition that the Vendor  assumes no  liability whatsoever to the
              Purchaser or its Affiliates  or their  respective  successors  and
              assigns  or  any  other  Person  in   respect  of  such Historical
              Information,   or  the  accuracy  or  sufficiency  thereof  or  in
              connection  with  any  claim   arising  out  of   the   Historical
              Information  and Purchaser  acknowledges  for  itself,  its  Other
              Indemnitees,  its  Affiliates'  unitholders and  trustees,  and on
              behalf  of its  respective  successors and assigns that the Vendor
              make no  representation  or warranty  with  respect to  any of the
              Historical  Information  and  expressly  disclaims any  implied or
              constructive representation or warranty.

         (f)  In this Clause:

              (i)    "Historical   Information"   means   historical   financial
                     information  relating  to the  Assets, including (i) source
                     records,   books,   general  ledger,   invoices,  operating
                     statements in  the Vendor's possession or  to which  it has
                     reasonable  access,  and  (ii)  the  Audited  Net Operating
                     Statements;

              (ii)   "Audited  Net  Operating Statements"  means  the historical
                     audited net operating  statements in respect of  the Assets
                     for the  12 month  periods  ended  December  31,  2003  and
                     December 31, 2004 that were in the Data Room; and

              (iii)  "Securities Requirements"  means the  legal requirements in
                     existence    related    to   alternative    disclosure  for
                     acquisitions  under  Section 5.3  of the  Companion  Policy
                     44-101 CP to National Instrument 44-101 and Section 8.10 of
                     National  Instrument  51-102 and  any amendments thereto or
                     any additional  requirements  under  applicable  securities
                     laws that the Purchaser or its  Affiliates may  be required


<PAGE>


                                      -37-



                     to  comply  with  by  a  securities  commission or  similar
                     securities  regulatory  authority  in  connection  with the
                     filing by the Purchaser or its Affiliates  of a  prospectus
                     or other public disclosure documents.

     IN WITNESS  WHEREOF the Parties have duly executed this Agreement as of the
date first above written.

KETCH RESOURCES LTD.                         PIONEER NATURAL RESOURCES
                                             CANADA INC.

Per:    /s/ Russell J. Tripp                 Per:  /s/ Todd A. Dillabough
      -------------------------------             -----------------------------
                                                  Todd A. Dillabough
                                                  President & C.E.O.


Per:    /s/ Korby D. Zimmerman               Per:  /s/ Cindy L. Rainsford
      -------------------------------             -----------------------------
                                                   Cindy L. Rainsford
                                                   Controller


This is the Execution  Page to the Purchase and Sale  Agreement  dated April 28,
2005 between Pioneer Natural Resources Canada Inc. and Ketch Resources Ltd..



<PAGE>



Schedule  "A" to a Purchase  and Sale  Agreement  dated April 28,  2005  between
Pioneer Natural  Resources Canada Inc., as Vendor,  and Ketch Resources Ltd., as
Purchaser.





<PAGE>



Schedule  "G" to a Purchase  and Sale  Agreement  dated April 28,  2005  between
Pioneer Natural  Resources Canada Inc., as Vendor,  and Ketch Resources Ltd., as
Purchaser.



                              CONVEYANCE AGREEMENT


     THIS AGREEMENT made this 31st day of May, 2005

BETWEEN:

                      PIONEER NATURAL RESOURCES CANADA
                      INC., a body corporate having an office in Calgary,
                      Alberta (the "Vendor")

                               - and -

                      KETCH RESOURCES LTD., a body corporate
                      having an office in Calgary, Alberta (the
                      "Purchaser")

     WHEREAS  the  Vendor  has  agreed  to sell and  convey  the  Assets  to the
Purchaser  and the  Purchaser has agreed to purchase and receive the Assets from
the Vendor;

     NOW  THEREFORE  for the  consideration  provided in the  Purchase  and Sale
Agreement  and in  consideration  of the premises  hereto and the  covenants and
agreements  hereinafter  set forth and  contained,  the parties  hereto agree as
follows:

1.00    DEFINITIONS
        -----------

        In this Agreement, including the premises hereto:

        (a)  "Purchase and Sale Agreement" means the Purchase and Sale Agreement
             dated April 28, 2005,  and made  between Pioneer  Natural Resources
             Canada Inc., as Vendor and o, as Purchaser.

     In  addition,  the  definitions  provided  for in  the  Purchase  and  Sale
Agreement are adopted herein by this reference.

2.00    CONVEYANCE
        ----------

        The Vendor,  pursuant to  and for  the consideration provided for in the
        Purchase  and  Sale  Agreement,  the  receipt and  sufficiency  of  such
        consideration  being hereby  acknowledged by the  Vendor,  hereby sells,
        assigns,  transfers,  conveys and sets  over to the Purchaser the entire
        right, title,  estate and interest of the  Vendor in and  to the Assets,
        to have and to hold  the same  absolutely, together with all benefit and
        advantage to be derived therefrom.



<PAGE>



3.00    EFFECTIVE TIME
        --------------

        This conveyance shall be effective as of the Effective Time.

4.00    SUBORDINATE DOCUMENT
        --------------------

        This Agreement  is executed and delivered by the Parties hereto pursuant
        to and  for the  purposes of  the provisions  of the  Purchase  and Sale
        Agreement and the  provisions of  the Purchase and Sale Agreement  shall
        prevail and govern  in the event of a conflict between the provisions of
        the Purchase and Sale Agreement and this Agreement.

5.00    ENUREMENT
        ---------

        This Agreement  shall be  binding upon and shall enure to the benefit of
        each of the  Parties hereto  and their  respective trustees,  receivers,
        receiver-managers, successors and assigns.

6.00    FURTHER ASSURANCES
        ------------------

        Each Party  hereto will,  from time  to time and at all times hereafter,
        at the request of the other Party but  without further consideration, do
        all  such  further  acts  and  execute  and  deliver  all  such  further
        documents as shall be reasonably required in order to fully  perform and
        carry out the terms hereof.

     IN WITNESS  WHEREOF the Parties  hereto have executed this  Agreement as of
the date first above written.

KETCH RESOURCES LTD.                         PIONEER NATURAL RESOURCES
                                             CANADA INC.

Per:                                         Per:
      -------------------------------             -----------------------------




Per:                                         Per:
      -------------------------------             -----------------------------




This is an execution page to a Conveyance  Agreement  dated May 31, 2005 between
Pioneer Natural  Resources Canada Inc., as Vendor,  and Ketch Resources Ltd., as
Purchaser.



<PAGE>


</TEXT>
</DOCUMENT>
