APACHE CORP
DEED OF GUARANTY AND INDEMNITY DATED 1/11/2003
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>5
<FILENAME>h02486exv10w1.txt
<DESCRIPTION>DEED OF GUARANTY AND INDEMNITY DATED 1/11/2003
<TEXT>
<PAGE>

                                                                    EXHIBIT 10.1


THIS DEED OF GUARANTEE AND INDEMNITY is made the 11th day of January 2003

GIVEN BY:

APACHE CORPORATION, a company incorporated in the State of Delaware, United
States of America, whose principal place of business is at 2000 Post Oak
Boulevard, Suite 100, Houston Texas 77056-4400 (the "PURCHASER'S GUARANTOR")

IN FAVOUR OF:

BP EXPLORATION OPERATING COMPANY LIMITED, a company incorporated in England
(registered number 00305943) whose registered office is at Britannic House, 1
Finsbury Circus, London EC2M 7BA (the "SELLER").

WHEREAS:

(A)   The Seller has today entered into the Sale and Purchase Agreement with
      Apache North Sea Limited a company incorporated in England (registered
      number 4614761) whose registered office is at Level 1, Exchange House,
      Primrose Street, London EC2A 2HS (the "PURCHASER");

(B)   The Seller has agreed to enter into the Sale and Purchase Agreement
      subject to the Purchaser's Guarantor agreeing to enter into this Deed of
      Guarantee and Indemnity in respect of the Guaranteed Obligations as set
      out in Clause 2; and

(C)   The Purchaser's Guarantor has agreed (it being in its best commercial
      interests to do so) to enter into this Deed of Guarantee and Indemnity in
      respect of the Guaranteed Obligations.

NOW THIS DEED WITNESSETH AS FOLLOWS:

1.    INTERPRETATION

1.1   Unless otherwise defined or provided for in this Deed of Guarantee and
      Indemnity, words and expressions shall have the following meanings:-

      "ABANDONMENT COST" means the estimated cost, calculated in accordance with
      the Assumption, in money of the day (i.e. at the predicted abandonment
      date) to the Purchaser and the other parties to each JOA of final
      abandonment and/or demolition and removal of all platforms, pipelines,
      plant, machinery, wells and facilities and other offshore installations
      and structures comprising the Interests together with any necessary site
      reinstatement as may be required by the Licences, other Licensed


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      Interest Documents (to the extent that such documents affect the Seller or
      the Seller's Affiliates) and/or any Act of Parliament or any other
      statutory provision (including, without limitation, any order, regulation,
      instrument or other subordinate legislation) or common law in each case
      from time to time in force, after allowing for estimated salvage value (if
      any) and any other expected receipts arising from abandonment and/or
      demolition and removal (excluding tax and royalty relief);

      "ABANDONMENT PROGRAMME" means the abandonment programme(s) related to the
      Interests required to be submitted or as submitted to, and approved
      (within the meaning of Section 32 of the Petroleum Act 1998) by, the
      Secretary pursuant to and in accordance with the Petroleum Act 1998, or
      other relevant statute, regulations or order from any competent authority
      or guidelines from time to time in force, as the same may be amended or
      modified with the approval or concurrence of the Secretary;

      "ACCEPTABLE BANK" means a bank or other financial institution rated a
      minimum of "A2" by Moody's or "A" by Standard and Poor's (or such other
      comparable credit rating agency as may be approved by the Seller) or
      better on their senior, unsubordinated, unsecured long term debt, or any
      other bank or other financial institution with the prior written agreement
      of the Seller;

      "ANNUAL C" means the value of C calculated annually or otherwise in
      accordance with Clauses 9.3.1 and 9.3.2;

      "ASSUMPTION" means the following assumption: the calculation of the cost
      of decommissioning will be on the basis of the OSPAR Decision 98/3 and any
      IMO guidelines, both as so amended or replaced from time to time, and good
      oilfield practice in the United Kingdom continental shelf, or to meet
      United Kingdom government regulation from time to time if requiring a more
      demanding standard. The foregoing basis will be interpreted to mean that
      if decommissioning was to take place at the date of this Deed of Guarantee
      and Indemnity, at least the following would require to take place:
      topsides facilities being removed and recycled onshore with all steel
      jackets removed, transported onshore and recycled. Permanent well
      abandonment, including removal of conductors. Pipelines exceeding twelve
      inches (12") diameter may be left in position, disconnected and cleaned of
      all hydrocarbons. Pipelines less than twelve (12") diameter which are
      adequately buried may also be left in position;

      "CALCULATION EVENT" shall mean the occurrence of either of the
      following:-


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       (i)    the Guarantor's Rating maintained by either rating agency falling
              below the Relevant Rating or being removed by such rating agency;

       (ii)   the Guarantor's Rating maintained by either rating agency being at
              the level specified in Clause 9.1.1(A) but being placed on "credit
              watch" with negative implications; or

       (iii)  the currently provided Abandonment Cost in money of the day the
              relevant costs are incurred used by the Purchaser's Guarantor for
              a calculation of Interim Annual C under paragraph (ii) of the
              definition thereof being less than the Floor;

      "C" means the present value of that portion of the Abandonment Cost as is
      attributable to the Interests (subject to Clause 9.11) as at 31st December
      of the calendar year prior to that in which the calculation is made,
      calculated by the discounted cash flow technique at the discount rate
      proposed by the Purchaser's Guarantor in its calculation of Annual C and
      approved by the Seller (or determined by the expert) in accordance with
      Clause 9.3;

      the "FLOOR" means L395,800,000 x 0.7 x (1.025)(x) where x is the period in
      years (expressed as a fraction for part years) from the date of this
      document until the date to which the audited financial statements of the
      Purchaser's Guarantor were drawn up for the relevant calculation of
      Interim Annual C.

      "GUARANTOR'S RATING" has the meaning given to it in Clause 9.1.1;

      "IMO" means the International Maritime Organisation;

      "INTERIM ANNUAL C" shall mean:

      (i)   on and from the date hereof until the date of filing with the
            Securities and Exchange Commission of the annual audited financial
            statements of the Purchaser's Guarantor for the year ending 31st
            December 2003, L175,000,000; and

      (ii)  thereafter, either (aa) the figure used by the Purchaser's Guarantor
            for the asset retirement obligations associated with the Interests
            in computing its aggregate asset retirement obligations for the
            purposes of its most recent annual audited financial statements,
            determined in accordance with generally accepted accounting
            principles in the United States, in respect of which an


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            officer's certificate has been provided in accordance with clause
            9.5(C) or (bb) if the calculation in (aa) above results in a
            Calculation Event arising by virtue of paragraph (iii) of the
            definition of "Calculation Event", the most recent previous figure
            for Interim Annual C which did not result in a Calculation Event
            (or, if since the date of that figure Annual C or Provisional Annual
            C shall have been calculated or determined, then that amount);

      "LETTER OF CREDIT" means the irrevocable letter(s) of credit in favour of
      the Seller payable in London, England issued by an Acceptable Bank in
      substantially the form set out in the Schedule (and taking into account
      the reasonable comments of the issuing bank) and any replacement or
      renewal thereof or addition thereto;

      "LC TRUST ACCOUNT" has the meaning given to it in Clause 9.12.1;

      "OSPAR" means the OSPAR Convention which came into force on 25 March 1998;

      "PARTIES" means the Purchaser's Guarantor and the Seller;

      "PETROLEUM ACT 1998" means the Petroleum Act 1998 (as amended, modified or
      re-enacted from time to time) or any successor legislation, and any
      reference to a section of the Petroleum Act 1998 shall also be a reference
      to the corresponding section of any such amended, modified, re-enacted or
      successor legislation;

      "PROVISIONAL ANNUAL C" means the value of C calculated in substitution for
      Annual C pursuant to Clause 9.3.4;

      "RATING LOSS DATE" means the date that the second of the relevant rating
      agencies discloses that the Guarantor's Rating has fallen below the
      Relevant Rating (as defined in Clause 9.1.1) or been removed;

      "SALE AND PURCHASE AGREEMENT" means the agreement of even date herewith
      and entered into between the Seller and the Purchaser for the sale and
      purchase of certain interests in United Kingdom Continental Shelf
      Petroleum Production
      Licences;

      "STAMP DUTY AGREEMENT" means the agreement dated of even date herewith and
      entered into between the Seller and the Purchaser concerning the retention
      of the Sale and Purchase Agreement and certain other documents outside the
      United Kingdom;


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      "SECTION 29 PARTY" means (i) those parties (other than the Purchaser or an
      Affiliate of the Purchaser) who are currently the recipients of notices
      given under Section 29 of the Petroleum Act 1998 in relation to the
      Interests, (ii) any other person (other than the Purchaser or an Affiliate
      of the Purchaser) who at any time becomes the recipient of such notice in
      relation to the Interests and (iii) any person (other than the Purchaser
      or an Affiliate of the Purchaser) on whom a duty is at any time imposed
      under Section 34 of the Petroleum Act 1998 to secure that the Abandonment
      Programme is carried out;

      "SUPPLEMENTAL SECURITY" means the aggregate amount of the value of any
      security or other cover and/or credit balances which meets the
      requirements of Clause 9.7 including the proviso thereto and any
      alternative security cover has been approved by the Seller pursuant to
      Clause 9.10; and

      "TAXATION" means:

      (a)   all forms of taxation and statutory, governmental, state, federal,
            provincial, local government or municipal charges, duties, imposts,
            contributions, levies, withholdings or liabilities wherever
            chargeable and whether of the United Kingdom or any other
            jurisdiction; and

      (b)   any penalty, fine, surcharge, interest, charges or costs payable in
            connection with any Taxation within (a) above.

1.2   Words and expressions defined in the Sale and Purchase Agreement shall
      (except where the context otherwise requires) have the same meanings
      wherever used herein.

1.3   All references to clauses and recitals are, unless otherwise expressly
      stated, references to clauses and recitals to this Deed of Guarantee and
      Indemnity.

1.4   The headings in this Deed of Guarantee and Indemnity are inserted for
      convenience only and shall be ignored in construing this Deed of Guarantee
      and Indemnity. Unless the context otherwise requires in this Deed of
      Guarantee and Indemnity the singular shall include the plural and vice
      versa.

1.5   Reference to statutory provisions shall be construed as reference to those
      provisions as amended, consolidated, extended or re-enacted from time to
      time.

1.6   References in this Deed of Guarantee and Indemnity to the words "include",
      "including" and "other" shall be construed without limitation.


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2.    GUARANTEE

      The Purchaser's Guarantor hereby unconditionally guarantees the due and
      punctual performance by the Purchaser of its obligations under the Sale
      and Purchase Agreement and/or the Stamp Duty Agreement (the "GUARANTEED
      OBLIGATIONS") to the intent that if the Purchaser shall fail to observe
      and perform any of the Guaranteed Obligations the Purchaser's Guarantor
      shall be liable to perform the same as if the Purchaser's Guarantor were
      the party principally bound thereby in place of the Purchaser (subject to
      all the same limitations on liability to which the Purchaser is entitled
      under or in respect of the Sale and Purchase Agreement or the Stamp Duty
      Agreement, as the case may be).

3.    MATTERS NOT TO REDUCE THE PURCHASER'S GUARANTOR'S LIABILITY

3.1   If any purported obligation or liability of the Purchaser under the Sale
      and Purchase Agreement or the Stamp Duty Agreement which, if valid, would
      have been the subject of this Deed of Guarantee and Indemnity is not or
      ceases to be valid or enforceable on any ground by reason of any defect in
      or want of powers of the Purchaser or irregular exercise thereof or lack
      of authority by any person apparently authorised to act on behalf of the
      Purchaser or any legal incapacity or any change in the constitution of or
      any amalgamation, reconstruction or liquidation of the Purchaser, the
      Purchaser's Guarantor shall nevertheless be liable in respect of that
      purported obligation or liability as if the same were fully valid and
      enforceable and as if the Purchaser's Guarantor were the principal debtor
      in respect thereof. The Purchaser's Guarantor hereby agrees to keep the
      Seller fully indemnified in accordance with the terms of this Deed of
      Guarantee and Indemnity against all Losses and Expenses arising from any
      failure of the Purchaser to carry out any such purported obligation or
      liability by reason of it not being or ceasing to be valid or enforceable
      as aforesaid.

3.2   The Purchaser's Guarantor undertakes that if any of the Guaranteed
      Obligations are not recoverable on the basis of a guarantee for any
      reason, it will (as a separate and independent stipulation) pay the Seller
      on demand whatever amount or amounts shall equal what it would have been
      liable to pay but for such irrecoverability.

3.3   The Guaranteed Obligations shall be discharged by the full performance by
      the Purchaser of its obligations under the Sale and Purchase Agreement and
      the Stamp Duty Agreement, but otherwise shall not be discharged or
      affected by any act, omission, matter or thing which, but for this
      provision, might operate to release or otherwise exonerate the Purchaser's
      Guarantor from those obligations in whole or in part including:


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      3.3.1 the granting of time, or any waiver or other indulgence (including
            any extension, renewal, acceptance, forbearance or release in
            respect of any of the Guaranteed Obligations);

      3.3.2 the taking, variation, compromise, renewal or release of or refusal
            or neglect to perform or enforce any rights, remedies or securities
            against the Purchaser;

      3.3.3 any modification, variation or addition to the terms
            of any of the Guaranteed Obligations or of any other
            document or security;

      3.3.4 any irregularity, defect or informality in the terms of any of the
            Guaranteed Obligations or any other document or security or any
            legal limitation, disability, incapacity or want of authority of any
            person other than the Seller or its Affiliates;

      3.3.5 any corporate reorganisation, reconstruction, amalgamation,
            dissolution, liquidation, merger, acquisition of or by or other
            alteration in the corporate existence or structure of the Seller or
            the Purchaser or the Purchaser's Guarantor;

      3.3.6 any composition or similar arrangement by the Seller or the
            Purchaser or the Purchaser's Guarantor or any other person; or

      3.3.7 any other act or thing whatsoever done or omitted or neglected to be
            done by the Seller in relation to the Guaranteed Obligations.

4.    NO COMPETITION

      Until all the Guaranteed Obligations have been paid, discharged or
      satisfied in full, the Purchaser's Guarantor waives all rights of
      subrogation and indemnity against the Purchaser in respect of Guaranteed
      Obligations and agrees not to share in any security held or monies
      received by the Seller on account of such liabilities or to claim or prove
      in competition with the Seller in the liquidation of the Purchaser (or its
      equivalent in any relevant jurisdiction) in respect of any monies paid by
      the Purchaser's Guarantor to the Seller under this Deed of Guarantee and
      Indemnity.

5.    DISCHARGE

      Where any discharge (whether in respect of any of the Guaranteed
      Obligations or any security for the Guaranteed Obligations or otherwise)
      is made in whole or in part or any


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      arrangement is made on the faith of any payment, security or other
      disposition which is avoided or must be restored for any reason, the
      liability of the Purchaser's Guarantor under this Deed of Guarantee and
      Indemnity shall continue as if the discharge or arrangement had not been
      made.

6.    ENFORCEMENT

6.1   The Seller shall not be obliged before taking steps to enforce this Deed
      of Guarantee and Indemnity:

      6.1.1 to take any action or obtain judgement in any court
            against the Purchaser or any other person;

      6.1.2 to make or file any claim in any bankruptcy or liquidation (or its
            equivalent in an relevant jurisdiction) of the Purchaser or of any
            other person;

      6.1.3 to make, enforce or seek to enforce any claim against the Purchaser
            or any other person under any security or other document, agreement
            or arrangement; or

      6.1.4 to enforce against and/or realise (or seek so to do) any security
            that it may have in respect of all or any part of the Guaranteed
            Obligations.

7.    WARRANTIES

7.1   The Purchaser's Guarantor hereby warrants to the Seller that:

      7.1.1 the Purchaser's Guarantor is duly incorporated with limited
            liability and validly existing under the laws of the State of
            Delaware, United States of America;

      7.1.2 the documents which contain or establish Purchaser's Guarantor's
            constitution incorporate provisions which authorise, and all
            necessary corporate action has been taken to authorise, Purchaser's
            Guarantor to execute and deliver this Deed of Guarantee and
            Indemnity and perform the transactions contemplated hereby;

      7.1.3 the signing and delivery of this Deed of Guarantee and Indemnity and
            the performance of the obligations contemplated by this Deed of
            Guarantee and Indemnity, will not contravene or constitute a default
            under any provision contained in any material agreement, instrument,
            law, judgment, order,


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            licence, permit or consent by which Purchaser's Guarantor or any of
            its Affiliates or any of its assets is bound or affected; and

      7.1.4 no litigation, arbitration, administrative proceeding, dispute or
            judgment against Purchaser's Guarantor or to which Purchaser's
            Guarantor is a party which is reasonably likely to by itself or
            together with any such other proceedings have a material adverse
            effect on its business, assets or condition and which would
            materially and adversely affect its ability to observe or perform
            its obligations under this Deed of Guarantee and Indemnity, is
            subsisting or, so far as Purchaser's Guarantor is aware, threatened
            or pending against Purchaser's Guarantor or any of its assets.

8.    CONTINUING AND ADDITIONAL SECURITY

8.1   This Deed of Guarantee and Indemnity is a continuing security and shall
      remain in full force and effect until all the Guaranteed Obligations have
      been discharged or satisfied in full notwithstanding the liquidation or
      other incapacity or any change in the constitution of the Purchaser or of
      the Purchaser's Guarantor, or in the name and style of either of them, any
      intermediate payment or performance or the invalidity or unenforceability
      in whole or in part of the Guaranteed Obligations or any other matter
      whatsoever.

8.2   This Deed of Guarantee and Indemnity is in addition to and shall not merge
      with or otherwise prejudice or affect or be prejudiced by any other right,
      remedy, guarantee, indemnity or security and may be enforced without first
      having recourse to the same or any other bill, note, mortgage, charge,
      pledge or lien now or hereafter held by or available to the Seller.

9.    LETTER OF CREDIT

9.1.1 If at any time the credit rating of the senior, unsubordinated, unsecured
      long term debt of the Purchaser's Guarantor ("Guarantor's Rating") falls
      below both "A-" by Standard and Poor's and "A3" by Moody's (or such other
      comparable credit rating agency or agencies as may be proposed by the
      Purchaser's Guarantor and approved by the Seller such approval not to be
      unreasonably withheld) (the "Relevant Rating") or is removed by both such
      rating agencies, then the Purchaser's Guarantor shall supply to the Seller
      a Letter of Credit in accordance with the provisions of this Clause 9
      failing which it shall forthwith pay an amount equal to the face value of
      the Letter of Credit which should have been supplied into the LC Trust
      Account. Each Letter of Credit delivered pursuant to this Clause 9 shall
      have an expiry date of 31st December in the year for which the calculation
      of "Annual C", "Interim Annual C" or "Provisional Annual C" has been
      determined.


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9.1.2 The Letter of Credit shall be renewed on or prior to its expiry date in
      accordance with Clause 9.6 unless a Guarantor's Rating is increased or
      reinstated to a rating level at least equivalent to either Relevant
      Rating. If at any time either Guarantor's Rating is increased or
      reinstated to a rating level at least equivalent to a Relevant Rating any
      then outstanding Letter of Credit shall forthwith be returned by the
      Seller to the Purchaser's Guarantor for surrender and cancellation.

9.2   Amount of Letters of Credit

      Subject as provided in this Clause 9, within 10 London and New York
      business days of the occurrence of a Rating Loss Date the Purchaser's
      Guarantor will supply a Letter of Credit in the amount of Interim Annual C
      (or if Annual C or Provisional Annual C shall have been previously
      calculated or determined for that relevant period, that amount), in each
      case less any Supplemental Security.

9.3   Calculation of the Annual C

      9.3.1 (A)   Calculation of Annual C shall be commenced and completed in
                  accordance with this Clause 9 as soon as reasonably
                  practicable after any Calculation Event, provided that if at
                  any time the event that caused the Calculation Event ceases to
                  apply then that calculation of Annual C shall cease and this
                  Clause 9 shall not apply (save for Clause 9.3.3(D) and the
                  provisions of Clauses 9.5 and 9.12, to the extent relevant)
                  unless and until a further Calculation Event shall occur.

            (B)   The Purchaser's Guarantor, acting reasonably, shall give the
                  Seller its calculation of Annual C by no later than 1 month
                  after the Calculation Event together with reasonable
                  supporting calculations and documentation. The Seller shall
                  give notice to the Purchaser's Guarantor within 1 month of
                  receipt of that calculation stating whether it approves or
                  disapproves the calculation of Annual C, and in the event that
                  it fails to give such a notice within such period, it shall be
                  deemed to have approved such calculation of Annual C.

      9.3.2 Annual C shall thereafter be calculated for each subsequent calendar
            year, (provided that if the event that caused the Calculation Event
            ceases to apply then that calculation of Annual C shall cease and
            this Clause 9 shall not apply (save for Clause 9.3.3(D) and the
            provisions of Clauses 9.5 and 9.12, to the extent relevant) unless
            and until a further Calculation Event shall occur) by the
            Purchaser's Guarantor, acting reasonably, and will be provided to
            the Seller, together with reasonable supporting calculations and
            documentation, no later than 6 months before the expiry


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            date of the current Letter of Credit. The Seller shall give notice
            to the Purchaser's Guarantor within 1 month of receipt of that
            calculation stating whether it approves or disapproves the
            calculation of the Annual C, and in the event that it fails to give
            such a notice within such period, it shall be deemed to have
            approved such calculation of Annual C.

      9.3.3 (A)   If the Seller disapproves the calculation of the Annual C,
                  then, by no later than 10 days after receipt by the
                  Purchaser's Guarantor of the Seller's notice of disapproval,
                  an independent expert shall be appointed to determine the
                  value of Annual C. The independent expert shall be selected by
                  the mutual agreement of the Parties and in the absence of
                  agreement shall be appointed on the application of either
                  Party by the President for the time being of the Institute of
                  Petroleum in England (or any successor body thereto).

            (B)   The independent expert shall be a firm of engineers skilled by
                  reason of its qualification, experience and expertise in the
                  estimation of abandonment costs for offshore oil and gas
                  facilities.

            (C)   The independent expert shall act as an expert and not as an
                  arbitrator, it shall be appointed on the basis that it keeps
                  strictly confidential to the Parties all information provided
                  to it by the Parties hereunder and its decision shall, in the
                  absence of manifest error, be final and binding on the
                  Parties.

            (D)   The costs of the independent expert shall be borne as to fifty
                  per cent (50%) by the Seller and fifty per cent (50%) by the
                  Purchaser's Guarantor.

            (E)   The Purchaser's Guarantor shall use its best endeavours to
                  provide such data as the independent expert may reasonably
                  require for the purposes of its determination.

      9.3.4 Where an independent expert has been appointed it shall review the
            calculation of Annual C provided by the Purchaser's Guarantor and
            any calculation of Annual C provided by the Seller. The Purchaser's
            Guarantor shall use its reasonable endeavours to procure that the
            independent expert will notify the Seller and the Purchaser's
            Guarantor in writing by no later than the date falling 1 month after
            the date of its appointment of its approval of the calculation of
            Annual C by the Purchaser's Guarantor or (if any) the Seller or
            (where it approves neither) its own determination of Annual C. If
            the independent expert fails to


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            notify the Purchaser's Guarantor and the Seller as aforesaid, by the
            date falling 2 months after the date of its appointment then:-

            (A)   (save where paragraph (B) below applies), the average of the
                  respective estimates of Annual C prepared by the Purchaser's
                  Guarantor and the Seller, will thereupon be the Annual C, or
                  if no estimate has been provided by the Seller, the estimate
                  provided by the Purchaser's Guarantor will thereupon be Annual
                  C (such calculation or estimate being the "Provisional Annual
                  C"). Annual C or the Provisional Annual C shall, less any
                  Supplemental Security, (and subject as provided in Clause
                  9.3.5) determine the aggregate amount of the Letter of Credit
                  to be provided for the remainder of the calendar year; and

            (B)   if an amount for Annual C has previously been determined and a
                  Letter of Credit is outstanding calculated by reference to it
                  or would have been but for a payment into the LC Trust Account
                  under clause 9.1, the Annual C shall remain at the level last
                  determined (such amount being the "Provisional Annual C").
                  Annual C or the Provisional Annual C shall, less any
                  Supplemental Security, (and subject as provided in Clause
                  9.3.5) determine the aggregate amount of the Letter of Credit
                  to be provided for the following calendar year.

      In the event that the aggregate undrawn amount of the outstanding Letter
      of Credit issued pursuant to Clause 9.2, together with the Supplemental
      Security:-

            (C)   is less than the value of Provisional Annual C calculated in
                  accordance with Clause 9.4 the Purchaser's Guarantor shall,
                  within 3 months of the date of appointment of the independent
                  expert, deliver to the Seller a further Letter of Credit in an
                  amount which, when taken together with all other undrawn
                  amounts under any outstanding Letter of Credit and the
                  Supplemental Security, equals the value of the Provisional
                  Annual C; or

            (D)   is more than the calculated value of Provisional Annual C, the
                  Purchaser's Guarantor may, by the date of expiry of the
                  outstanding Letter of Credit, deliver to the Seller a Letter
                  of Credit in an amount which, together with the Supplemental
                  Security, equals the value of the Provisional Annual C and the
                  Seller shall promptly return to the Purchaser's Guarantor for
                  surrender, upon the receipt of the replacement Letter of
                  Credit, the Letter of Credit which has been replaced.


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      9.3.5 If the independent expert notifies the Seller and the Purchaser's
            Guarantor that it has approved the calculation of Annual C of either
            the Seller or the Purchaser's Guarantor or has determined its own
            calculation of Annual C, then Annual C shall be the amount so
            approved or determined by the independent expert and where the
            amount so approved or determined is:

            (A)   greater than the value of the Interim C or Provisional Annual
                  C, then the Purchaser's Guarantor shall provide a further
                  Letter of Credit in a sum which, together with the
                  Supplemental Security, represents the difference between the
                  value of the Interim Annual C or Provisional Annual C (as the
                  case may be) and the amount so approved or determined as
                  Annual C by the expert, within one month of such notification
                  from the expert (or, if later, by no later than one month
                  prior to the date the new Annual C is to become effective); or

            (B)   is less than the value of Interim Annual C or the Provisional
                  Annual C, then the Purchaser's Guarantor may provide a Letter
                  of Credit in a sum, together with the Supplemental Security,
                  equal to the amount of the Annual C so approved or determined
                  by the expert and the Seller shall promptly return to the
                  Purchaser's Guarantor for surrender, upon the receipt of the
                  replacement Letter of Credit, the Letter of Credit which has
                  been replaced.

      9.3.6 Each of "C", "Interim Annual C", "Annual C" and "Provisional Annual
            C" shall be determined in Sterling.

      9.3.7 Notwithstanding the foregoing provisions, if the Purchaser's
            Guarantor fails to supply its calculation of Annual C to the Seller
            by the date specified in this Clause 9.3, then (without prejudice to
            any other remedies available to the Seller), for the relevant
            calendar year, the amount of Annual C shall be the then value of
            Interim Annual C.

9.4   Purchaser's Guarantor's obligation to provide further Letter of Credit for
      an increase in Annual C

      In the event that the aggregate undrawn amount of the outstanding Letter
      of Credit, together with the Supplemental Security:

      9.4.1 is less than the value of Annual C calculated in accordance with
            Clause 9.3, the Purchaser's Guarantor shall, by no later than one
            month prior to the date of expiry of the outstanding Letter of
            Credit, deliver to the Seller a further Letter of Credit in an
            amount which, when taken together with all other undrawn amounts
            under any outstanding Letter of Credit and the Supplemental
            Security, equals the value of the Annual C; or


                                                                              13
<PAGE>
      9.4.2 is more than the calculated value of the Annual C, the Purchaser's
            Guarantor may no later than one month prior to the date of expiry of
            the outstanding Letter of Credit, deliver to the Seller a Letter of
            Credit in an amount which, together with the Supplemental Security,
            equals the value of the Annual C and the Seller shall promptly
            return to the Purchaser's Guarantor for surrender, upon the receipt
            of the replacement Letter of Credit, the Letter of Credit which has
            been replaced.



9.5   Provision of information

      (A)   The Purchaser's Guarantor shall at all times following Completion
            provide to the Seller in a timely manner data and information
            relating to the Interests which may have a material and adverse
            effect on one or more of the fields comprising the Interests or on
            the level of Abandonment Costs.

      (B)   If the Seller considers that an event has occurred which is
            reasonably likely to have a material adverse effect on the Interests
            the Purchaser's Guarantor shall use its best endeavours to provide
            to the Seller in a timely manner data and information relating to
            the effect of the event on the Interests; and

      (C)   Within 5 London and New York business days of the filing with the
            Securities and Exchange Commission by the Purchaser's Guarantor of
            its audited annual consolidated accounts, the Purchaser's Guarantor
            will notify the Seller of the updated amount of Interim Annual C
            together with a certificate from an officer of the Purchaser's
            Guarantor confirming that such figure is the amount used by the
            Purchaser's Guarantor for the asset retirement obligations
            associated with the Interests for the purposes of its most recent
            annual audited financial statements, determined in accordance with
            generally accepted accounting principles in the United States.

9.6   Obligation to produce Letter of Credit before expiry of then current
      Letter of Credit

      The Purchaser's Guarantor shall no later than thirty (30) days before the
      expiry date of the then current Letter of Credit deliver to the Seller a
      replacement Letter of Credit in the amount of the expiring Letter of
      Credit (unless a different amount is otherwise provided for hereunder) and
      forthwith return to the Purchaser's Guarantor for cancellation, the Letter
      of Credit which has been replaced.


                                                                              14
<PAGE>
9.7   Reduction of undrawn amount under the Letter of Credit

      Notwithstanding any other provision of this Clause 9 the aggregate undrawn
      amount required to be outstanding at any time under the Letter of Credit
      provided to the Seller pursuant to this Clause 9 shall be reduced by the
      aggregate of:

      9.7.1 the value of any security or other equivalent cover in respect of
            Abandonment Costs provided by the Purchaser or any of its Affiliates
            pursuant to any document provided in accordance with the provisions
            of any JOA or pursuant to any scheme or requirement of the Secretary
            or any applicable law or guidance;

      9.7.2 the aggregate credit balance standing to the credit of any trust
            fund established by the Purchaser or any of its Affiliates in
            accordance with the provisions of any JOA or pursuant to any scheme
            or requirement of the Secretary or any applicable law or guidance;
            and

      9.7.3 the aggregate credit balance in the LC Trust Account,

      provided that the aggregate undrawn amount referred to in this Clause 9.7
      shall only be reduced if either (a) the Purchaser's Guarantor has procured
      that the Seller has become a party to the relevant JOA or such other
      agreement which governs the matters referred to in Clauses 9.7.1 and 9.7.2
      with all rights in respect of such matters only but with no obligations
      such that the Seller will have the benefit of any security or other
      equivalent cover or trust fund referred to in Clauses 9.7.1 or 9.7.2; or
      (b) the Secretary will participate in any security or other equivalent
      cover or trust fund referred to in Clauses 9.7.1 or 9.7.2 and the Seller,
      acting reasonably, is satisfied that the arrangements are such that the
      amounts in question are and will remain available to be applied towards
      the Abandonment Costs and will be so applied to the extent required.

9.8   Events giving rise to demands under Letter of Credit

      The Seller shall be entitled to draw on the then current Letter of Credit
      if any of the following circumstances occur:

      9.8.1 the Purchaser's Guarantor is in breach of Clause 9.6 by failing to
            deliver a replacement Letter of Credit in which case the Seller
            shall be entitled to draw down:

            (A)   if no replacement Letter of Credit is provided, the whole of
                  any Letter of Credit which the Purchaser's Guarantor was
                  obliged to replace pursuant to Clause 9.6; or


                                                                              15
<PAGE>
            (B)   if one or more replacement Letters of Credit are provided, the
                  amount equal to the difference between the amount which the
                  Purchaser's Guarantor was obliged to provide pursuant to
                  Clause 9.6 and the amount of the replaced Letters of Credit;

      9.8.2 if:

            the Purchaser has failed to carry out its obligations to submit
            and/or undertake the Abandonment Programme and:

            (A)   the Seller or any other Section 29 Party has been required by
                  the Secretary to submit the Abandonment Programme and/or has a
                  duty under the Petroleum Act 1998 to secure that it is carried
                  out; and

            (B)   the Seller or a Section 29 Party has made, or is expected to
                  make, expenditures relating to the Abandonment Programme in
                  the next thirty (30) days;

            in which case the Seller shall be entitled to draw down the amount
            of the expenditures referred to at (C) above;

      9.8.3 if the entity which has issued the Letter of Credit ceases to be an
            Acceptable Bank and the Purchaser's Guarantor fails to provide a
            replacement Letter of Credit issued by an Acceptable Bank within
            thirty (30) Business Days of the Seller notifying the Purchaser's
            Guarantor that the issuing entity is no longer an Acceptable Bank,
            the Seller shall be entitled to draw down the whole Letter of
            Credit; and

      9.8.4 save as provided in Clause 9.8.2, the Seller is legally obligated,
            by the Secretary or otherwise, to pay within the next thirty (30)
            Business Days all or part of the Abandonment Costs (other than
            pursuant to any JOA or similar document relating to the Interests
            that the Seller or its Affiliates enters into after the date
            hereof), in which case the Seller shall be entitled to draw down an
            amount equal to the amount the Seller is obligated to pay.

9.9   Completion of abandonment programme

      Subject as aforesaid, the obligations of the Purchaser's Guarantor under
      this Clause 9 will continue until the Purchaser's Guarantor has delivered
      to the Seller a copy of the Licence Operator's bona fide notice to the
      Secretary that the Abandonment Programme in respect of all of the Fields
      comprising the Interests has been completed and the Secretary has not,
      during the twelve (12) months following the delivery of such notice to the
      Secretary notified the Licence Operator of any additional clean-up or
      other abandonment activity. If the


                                                                              16
<PAGE>
      Purchaser's Guarantor has delivered to the Seller a copy of such notice to
      the Secretary that the Abandonment Programme has been completed and such
      12 month period has elapsed as aforesaid, the Seller will promptly return
      the Letter of Credit then in its possession to the Purchaser's Guarantor
      and remit to the Purchaser's Guarantor any balance then standing to the
      credit of the LC Trust Account. The Purchaser's Guarantor shall supply,
      together with a copy of such notice to the Secretary, reasonable evidence
      that it has paid the Abandonment Costs which have been incurred.

9.10  Alternative Security

      The Purchaser's Guarantor may, with the prior written consent of the
      Seller (such consent not to be unreasonably withheld), from time to time
      offer in lieu of or in combination with a Letter of Credit alternative
      security or cover for the Abandonment Costs, including cash and/or
      treasury instruments.

9.11  Assignment of Clause 9 Rights and Obligations

      The Purchaser's Guarantor shall be entitled to assign all or part of its
      rights and obligations under this Clause 9 to any third party which
      acquires all or part of the Interests, provided that the Purchaser's
      Guarantor shall remain responsible for its obligations under this Clause 9
      in respect of any part of the Interests retained by the Purchaser or any
      of its Affiliates and shall remain responsible for its obligations under
      this Clause 9 in respect of such part of the Interests as it has assigned
      unless and until the assignee agrees in writing with the Seller (which
      agreement the Seller shall not unreasonably withhold) to provide security
      affording at least equivalent protection to the Seller in respect of the
      part of the Interests to be acquired.

9.12  LC Trust Account

      9.12.1  If the Seller makes a demand under Letter(s) of Credit, the Seller
              shall hold the payments received on trust for itself and the
              Purchaser's Guarantor in accordance with the provisions of this
              Clause 9.12. The Seller shall deposit such payments in a separate
              interest bearing account (the "LC Trust Account") established in
              the United Kingdom with a bank that is and continues to be
              reasonably acceptable to the Purchaser's Guarantor. Interest that
              accrues on amounts held in the LC Trust Account shall be deposited
              in the LC Trust Account and may be withdrawn only in accordance
              with the provisions of this Clause.

      9.12.2  Subject to Clauses 9.9, 9.12.4, 9.12.7 and 9.12.8 the Seller shall
              only withdraw such amounts as are necessary from the LC Trust
              Account (a) to meet the bank charges with respect to such account
              and (b) to meet any Abandonment Costs which the Seller has
              incurred and paid or is due to pay within 5 Business Days of the
              date of such withdrawal.


                                                                              17
<PAGE>
      9.12.3  The Seller shall promptly notify the Purchaser's Guarantor of any
              withdrawals.

      9.12.4  In the case of Clauses 9.8.1 and/or 9.8.3 applying, if the
              Purchaser's Guarantor remedies its breach by delivering to the
              Seller the Letter of Credit in compliance with the requirements of
              this Clause 9, the Seller shall promptly remit the outstanding
              balance of the LC Trust Account to the Purchaser's Guarantor.

      9.12.5  The Seller shall not grant any security or create any other form
              of encumbrance over amounts held in the LC Trust Account (and
              shall procure that the bank holding the account waives its rights
              of set off in relation to such account).

      9.12.6  The perpetuity for the trusts established pursuant to this Clause
              9.12 shall be eighty (80) years from the date of this Deed of
              Guarantee and Indemnity.

      9.12.7  If the proviso to Clause 9.3.1(A) applies, then all amounts
              standing to the credit of the LC Trust Account shall forthwith be
              remitted to the Purchaser's Guarantor and the Letter of Credit
              shall forthwith be returned by the Seller to the Purchaser's
              Guarantor.

      9.12.8  If at any time following the coming into effect of Interim Annual
              C, Annual C or Provisional Annual C the Supplemental Security
              exceeds such amount then the Seller shall forthwith return to the
              Purchaser's Guarantor the lesser of the amount of such excess and
              the amount standing to the credit of the LC Trust Account.

      9.12.9  The Seller will open the LC Trust Account and notify the
              Purchaser's Guarantor of the details thereof within 21 days of the
              date hereof.

10.   PAYMENT AND WITHHOLDINGS

10.1  Any demand hereunder shall be given in writing or by facsimile
      transmission addressed to the Purchaser's Guarantor and served on the
      Purchaser's Guarantor in accordance with the provisions of clause 16
      below.

10.2  Any payment to the Seller to be made hereunder shall be made within 5
      Business Days from demand in cleared funds to the Seller's Account,
      delivery to which account shall be an effective discharge of the
      Purchaser's Guarantor's obligations to pay the amount concerned.

10.3  Subject to clause 10.4 below all payments made by the Purchaser's
      Guarantor under this Deed of Guarantee and Indemnity shall be made gross
      free of any rights of counterclaim or set-off and without any deductions
      or withholdings of any nature.


                                                                              18
<PAGE>
10.4  If the Purchaser's Guarantor is required by law to make any deductions or
      withholdings from any payment hereunder it shall do so and the sum due
      from the Purchaser's Guarantor in respect of such payment shall be
      increased to the extent necessary to ensure that after the making of such
      deduction or withholding the Seller receive and retain (free and clear of
      any liability in respect of any such deduction or withholding) a net sum
      equal to the sum they would have received and retained had no deduction or
      withholding been required to be made.

10.5  If the Seller is satisfied that any payment under this Deed of Indemnity
      and Guarantee will be or has been subject to Taxation the Seller may
      demand in writing from the Purchaser's Guarantor from time to time such
      amount (after taking into account any such Taxation payable in respect of
      such amount) as will ensure that the Seller receives and retains a net sum
      equal to the sum it would have received had the payment not been subject
      to such Taxation. Notice of such amount shall be certified in writing by
      the Seller. The Purchaser's Guarantor shall pay such amount to the Seller
      in cleared funds on or before the fifth Business Day following the date of
      demand.

11.   WAIVER

      No waiver by the Seller or the Purchaser's Guarantor of any breach of a
      provision of this Deed of Guarantee and Indemnity shall be binding unless
      made expressly and in writing and any such waiver shall relate only to the
      matter to which it expressly relates and shall not apply to any subsequent
      or other matter.

12.   INDEMNITY

      The Purchaser's Guarantor hereby agrees to indemnify (save insofar as
      otherwise indemnified hereunder) the Seller on demand against all Losses
      and Expenses incurred or sustained by the Seller in any enforcement of
      this Deed of Guarantee and Indemnity or occasioned by any breach by the
      Purchaser's Guarantor of any of the covenants or obligations to the Seller
      under this Deed or Guarantee and Indemnity.

13.   PROVISIONS SEVERABLE

      Every provision contained in this Deed of Guarantee and Indemnity shall be
      severable and distinct from every other such provision and if at any time
      any one or more of such provisions is or becomes invalid, illegal or
      unenforceable, the validity, legality and enforceability of the remaining
      such provisions shall not in any way be affected thereby.


                                                                              19
<PAGE>
14.   AMENDMENTS

      The terms and conditions of this Deed of Guarantee and Indemnity shall
      only be varied by an agreement in writing signed by the Seller and the
      Purchaser's Guarantor and specifically referring to this Deed of Guarantee
      and Indemnity.

15.   CONTINUATION OF DEED OF GUARANTEE AND INDEMNITY

      This Deed of Guarantee and Indemnity shall remain in full force and effect
      notwithstanding any amendments or variations from time to time to the Sale
      and Purchase Agreement and/or the Stamp Duty Agreement.

16.   ASSIGNMENT

      16.1 Subject to Clause 9.11 and 16.2, this Deed of Guarantee and Indemnity
           shall be binding on and enure for the benefit of the successors of
           the parties but shall not be assignable by any party without the
           prior written consent of the other parties.

      16.2 The Seller may not assign any of its rights and obligations hereunder
           save for an assignment of the entirety of its rights and obligations
           to:

           (A)    an Affiliate; or

           (B)    a purchaser of substantially the whole of the
                  business of the Seller,

           provided that the identity of such Affiliate or purchaser has been
           approved by the Purchaser's Guarantor, such approval not to be
           unreasonably withheld.


17.   NOTICES

17.1  Except as otherwise provided in this Deed of Guarantee and Indemnity any
      notice or other document to be given under this Deed of Guarantee and
      Indemnity shall be in writing and shall be deemed to be duly given if it
      (or the envelope containing it) identifies the party to whom it is
      intended to be given as the addressee and:

      17.1.1  it is delivered personally; or

      17.1.2  it is sent by (i) airmail or (ii) facsimile transmission to the
              respective addresses shown in this Deed of Guarantee and Indemnity
              or the respective


                                                                              20
<PAGE>
              registered or principal offices for the time being of the relevant
              company or to such other addresses and/or numbers as such parties
              may by notice to all other parties hereto expressly substitute
              therefor;

      when in the ordinary course of the means of transmission it would first be
      received by the addressee in normal business hours.

17.2  In proving the giving of a notice it shall be sufficient to prove that the
      notice was left or that the envelope containing such notice was properly
      addressed and posted or that the applicable means of telecommunications
      was properly addressed and despatched (as the case may be).

17.3  Any notice duly given within the meaning of clause 17.1 shall be deemed to
      have been both given and received:

      17.3.1  if it is delivered in accordance with clause 17.1.1, on such
              delivery;

      17.3.2  if it is duly posted or transmitted in accordance with clause
              17.1.2 by any of the methods there specified, on the fifth
              Business Day after the day of posting or (in the case of a notice
              transmitted by facsimile transmission) upon receipt by the sender
              of the correct transmission report.

17.4  For the purposes of this clause 17 "notice" shall include any request,
      demand, instructions or other document.

17.5  The facsimile numbers for the parties to this Deed of Guarantee and
      Indemnity are as follows:

      Purchaser's Guarantor: General Counsel
                             Apache Corporation
                             2000 Post Oak Boulevard
                             Suite 100
                             Houston
                             Texas 77056-4400

                             Fax no: (713) 296 6458

       The Seller:           BP Exploration Operating Company Limited
                             Burnside Road
                             Farburn Industrial Estate
                             Dyce
                             Aberdeen AB27 7PB

                             Attention: Business Unit Leader


                                                                              21
<PAGE>
                             Mid North Sea Business Unit

                             Fax no: 01224 834800


18.   RIGHTS OF THIRD PARTIES

18.1  Subject to Clause 18.2, nothing in this Deed of Guarantee and Indemnity is
      intended to confer on any person any right to enforce any term of this
      Deed of Guarantee and Indemnity which that person would not have had but
      for the Contracts (Rights of Third Parties) Act 1999. The parties to this
      Deed of Guarantee and Indemnity may by agreement rescind or vary any term
      of this Deed of Guarantee and Indemnity without the consent of any of the
      Seller's Affiliates.

18.2  The Purchaser's Guarantor acknowledges and declares that any Seller's
      Affiliate having rights against the Purchaser under Clauses 3.14, 6.6 or
      6.7 of the Sale and Purchase Agreement shall be entitled to exercise such
      rights against the Purchaser's Guarantor hereunder to the same extent and
      with the same effect as the Seller could have done notwithstanding that
      such Seller's Affiliate is not a party to this Deed of Guarantee and
      Indemnity.



19.   APPOINTMENT OF AGENT FOR SERVICE OF PROCESS

19.1  The Purchaser's Guarantor irrevocably agrees that any writ, summons, claim
      form, order, judgment or other process issued out of the courts of England
      and Wales in connection with any proceedings arising out of or in
      connection with this Deed of Indemnity and Guarantee (a "Service
      Document") may be sufficiently and effectively served on it by service on
      the Purchaser's Solicitors, if no replacement agent has been appointed and
      notified to the Seller pursuant to sub-clause 19.4, or on the replacement
      agent if one has been appointed and notified to the Seller.

19.2  Any Service Document served pursuant to this clause shall be
      marked for the attention of:-

      19.2.1  Paul Griffin and Henry Davey at Herbert Smith, Exchange House,
              Primrose Street, London EC2A 2HS or such other address in England
              and Wales as may be notified to the Seller by Herbert Smith; or

      19.2.2  such other person as is appointed as agent for service pursuant to
              clause 19.4 at the address notified pursuant to clause 19.4.

19.3  Any Service Document addressed in accordance with clause 19.2 shall be
      deemed to have been duly served if left at the specified address, when it
      is left; or, if sent by first class post, two clear Business Days after
      the date of posting.


                                                                              22
<PAGE>
19.4  If the agent referred to in sub-clause 19.1 (or any replacement agent
      appointed pursuant to this sub-clause) at any time ceases for any reason
      (including its dissolution) to act as the Purchaser's Guarantor's agent
      for service, the Purchaser's Guarantor shall promptly appoint another
      person with an address for service in England and Wales to be the
      Purchaser's Guarantor's agent for service on the terms of this clause 19
      and promptly notify the Seller of the replacement's name and address.
      Failing such appointment and notification, the Seller shall be entitled by
      notice to the Purchaser's Guarantor to appoint such a replacement
      (including itself) on the replacement's standard or usual terms (if any)
      for such appointments to act on the Purchaser's Guarantor's behalf in
      accordance with this clause.

20.   GOVERNING LAW AND JURISDICTION

      The construction validity and performance of this Deed of Guarantee and
      Indemnity and all agreements executed pursuant hereto shall be governed by
      English law (other than choice of law rules) and the Parties hereby
      irrevocably submit to the exclusive jurisdiction of the English Courts.


                                                                              23
<PAGE>
IN WITNESS WHEREOF the Purchaser's Guarantor and the Seller have executed and
delivered this Deed of Guarantee and Indemnity as a deed the day and year first
above written.


EXECUTED and DELIVERED as a DEED BY
APACHE CORPORATION
acting by Lisa A. Stewart, Executive Vice President Business
Development and E&P Services

/s/
..........................................

Signature of witness:
Name:
Address:
Occupation:


EXECUTED and DELIVERED as a DEED BY BP EXPLORATION OPERATING COMPANY LIMITED
acting by its duly authorised attorney

/s/
..........................................

Signature of witness:
Name:
Address:
Occupation:


                                                                              24

</TEXT>
</DOCUMENT>
