SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549
                                               

                                                                  
                                  FORM 8-K 

                               CURRENT REPORT 


                   Pursuant to Section 13 or 15(d) of the
                       Securities Exchange Act of 1934 


 Date of Report  (Date of earliest event reported)      December 4, 1996 
    

                         Berry Petroleum Company                     
           (Exact name of registrant as specified in its charter) 


     Delaware                    1-9735                      77-0079387
     (State or other          (Commission                  IRS Employer
     jurisdiction of          File Number)               Identification No.
     incorporation)


            28700 Hovey Hills Road,   P.O. Bin X,  Taft, CA 93268     
                  (Address of principal executive offices)


     Registrant's telephone number, including area code (805) 769-8811 


                                   N/A                                 
      (Former name or former address, if changed since last report) 






<PAGE> 2

Item 5.     Other Events.

          On December 4, 1996 Berry Petroleum Company entered
into a three-year unsecured revolving line of credit agreement in
the amount of $150 million with NationsBank of Texas.  The
initial borrowing base will be $50 million which can be
redetermined periodically based on the needs of the Company,
agreement with the Bank and approval of the Company's Board of
Directors.  Initial borrowings under the agreement will bear
interest at LIBOR plus 60 basis points, with a committment fee on
the unused portion of the borrowing base of 20 basis points.


Item 7.     Financial Statements and Exhibits.

          (a).     Financial Statements.    None required.

          (b).     Exhibits.

                   10.1  Credit Agreement, dated as of December   
                         1, 1996, by and between the Registrant and     
                         NationsBank of Texas, N.A.


                                                                  

                       SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.Date:   

December 18, 1996                  BERRY PETROLEUM COMPANY,
                                   a Delaware corporation



                                                                  
                                   By: Kenneth A. Olson,
                                       Corporate Secretary and        
                                       Treasurer









                         CREDIT AGREEMENT

                              among

                     BERRY PETROLEUM COMPANY
                           as Borrower,

                    NATIONSBANK OF TEXAS, N.A.
                             as Agent

                               and

     The Financial Institutions Listed on Schedule 1 Hereto, 
                             as Banks


                           $150,000,000



                              dated

                         December 1, 1996














<PAGE> 
ARTICLE I TERMS DEFINED  . . . . . . . . . . . . . . . . . . .  1

     SECTION 1.1.  Definitions . . . . . . . . . . . . . . . .  1
     SECTION 1.2.  Accounting Terms and Determinations . . . . 16
     SECTION 1.3.  Petroleum Terms . . . . . . . . . . . . . . 17

ARTICLE II THE CREDIT  . . . . . . . . . . . . . . . . . . . . 17

     SECTION 2.1.  Commitments . . . . . . . . . . . . . . . . 17
     SECTION 2.2.  Method of Borrowing . . . . . . . . . . . . 20
     SECTION 2.3.  Method of Obtaining Letters of Credit . . . 23
     SECTION 2.4.  Notes . . . . . . . . . . . . . . . . . . . 24
     SECTION 2.5.  Interest Rates. . . . . . . . . . . . . . . 24
     SECTION 2.6.  Mandatory Repayments 
                  after Conversion Date. . . . . . . . . . . . 25
     SECTION 2.7.  Voluntary Prepayments . . . . . . . . . . . 25
     SECTION 2.8.  Mandatory Reduction of Commitments. . . . . 26
     SECTION 2.9.  Voluntary Reduction of Commitments
                  and Prepayment of Loans. . . . . . . . . . . 26
     SECTION 2.10. Termination of Commitments; Final
                  Maturity; Maturity of Eurodollar and
                  Competitive Bid Loans. . . . . . . . . . . . 26
     SECTION 2.11. Application of Payments . . . . . . . . . . 26
     SECTION 2.12. Commitment Fee. . . . . . . . . . . . . . . 26
     SECTION 2.13. Agency Fee. . . . . . . . . . . . . . . . . 27

ARTICLE III BORROWING BASE . . . . . . . . . . . . . . . . . . 27

     SECTION 3.1.  Reserve Report; Proposed Borrowing Base . . 27
     SECTION 3.2.  Scheduled Redeterminations of the
          Borrowing
                  Base; Procedures and Standards . . . . . . . 27
     SECTION 3.3.  Special Redetermination . . . . . . . . . . 28
     SECTION 3.4.  Borrowing Base Deficiency . . . . . . . . . 28
     SECTION
 3.5.  Initial Borrowing Base. . . . . . . . . . . 29

ARTICLE IV GENERAL PROVISIONS  . . . . . . . . . . . . . . . . 29

     SECTION 4.1.  Delivery and Endorsement of Notes . . . . . 29
     SECTION 4.2.  General Provisions as to Payments . . . . . 29
     SECTION 4.3.  Computation of Interest . . . . . . . . . . 30
     SECTION 4.4.  Overdue Principal and Interest. . . . . . . 30
     SECTION 4.5.  Capital Adequacy. . . . . . . . . . . . . . 30
     SECTION 4.6.  Taxes . . . . . . . . . . . . . . . . . . . 31
     SECTION 4.7.  Limitation on Number of Eurodollar Loans
                  and Competitive Bid Loans. . . . . . . . . . 31



<PAGE>
     SECTION 4.8.  Foreign Lenders, Participants, and
          Assignees. . . . . . . . . . . . . . . . . . . . . . 31
     SECTION 4.9.  Replacement of a Bank . . . . . . . . . . . 32

ARTICLE V SPECIAL PROVISIONS REGARDING EURODOLLAR LOANS  . . . 32

     SECTION 5.1.  Funding Losses. . . . . . . . . . . . . . . 32
     SECTION 5.2.  Basis  for Determining Interest Rate
          Applicable
                  to Eurodollar Loans Inadequate . . . . . . . 32
     SECTION 5.3.  Illegality of Eurodollar Loans. . . . . . . 33
     SECTION 5.4.  Increased Cost of Eurodollar Loans. . . . . 33
     SECTION 5.5.  Alternative Loans Substituted for
                  Affected Eurodollar Loans. . . . . . . . . . 34
     SECTION 5.6.  Discretion of Banks as to Manner of
          Funding  . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE VI CONDITIONS  . . . . . . . . . . . . . . . . . . . . 35

     SECTION 6.1.  Conditions to Initial Borrowing and 
                  Participation in Letter of Credit Exposure . 35
     SECTION 6.2.  Conditions to Each Borrowing and
          Participation
                  in Letter of Credit Exposure . . . . . . . . 36
     SECTION 6.3.  Materiality of Conditions . . . . . . . . . 37

ARTICLE VII REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 37

     SECTION 7.1.  Corporate Existence and Power (Borrower). . 37
     SECTION 7.2.  Existence and Power (Subsidiaries). . . . . 37
     SECTION 7.3.  Corporate and Governmental
                  Authorization; Contravention . . . . . . . . 37
     SECTION 7.4.  Binding Effect. . . . . . . . . . . . . . . 38
     SECTION 7.5.  Financial Information . . . . . . . . . . . 38
     SECTION 7.6.  Litigation. . . . . . . . . . . . . . . . . 38
     SECTION 7.7.  ERISA . . . . . . . . . . . . . . . . . . . 38
     SECTION 7.8.  Taxes and Filing of Tax Returns . . . . . . 39
     SECTION 7.9.  Ownership of Properties Generally . . . . . 40
     SECTION 7.10. Mineral Properties. . . . . . . . . . . . . 40
     SECTION 7.11. [intentionally deleted] . . . . . . . . . . 40
     SECTION 7.12. Licenses, Permits, Etc. . . . . . . . . . . 40
     SECTION 7.13. Compliance with Law . . . . . . . . . . . . 40
     SECTION 7.14. Full Disclosure . . . . . . . . . . . . . . 41
     SECTION 7.15. Corporate Structure . . . . . . . . . . . . 41
     SECTION 7.16. Environmental Matters . . . . . . . . . . . 41
     SECTION 7.17. Burdensome Obligations. . . . . . . . . . . 42
     SECTION 7.18. Fiscal Year . . . . . . . . . . . . . . . . 42
     SECTION 7.19. No Default. . . . . . . . . . . . . . . . . 42
     SECTION 7.20. Government Regulation . . . . . . . . . . . 42
     SECTION 7.21. Insider . . . . . . . . . . . . . . . . . . 42



<PAGE>
     SECTION 7.22. Gas Balancing Agreements and Advance
          Payment Contracts. . . . . . . . . . . . . . . . . . 42

ARTICLE VIII AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 43

     SECTION 8.1.  Information . . . . . . . . . . . . . . . . 43
     SECTION 8.2.  Maintenance of Existence. . . . . . . . . . 45
     SECTION 8.3.  Right of Inspection . . . . . . . . . . . . 45
     SECTION 8.4.  Maintenance of Insurance. . . . . . . . . . 46
     SECTION 8.5.  Payment of Taxes and Claims . . . . . . . . 46
     SECTION 8.6.  Compliance with Laws and Documents. . . . . 46
     SECTION 8.7.  Operation of Properties and Equipment . . . 46
     SECTION 8.8.  Environmental Law Compliance. . . . . . . . 47
     SECTION 8.9.  ERISA Reporting Requirements. . . . . . . . 47
     SECTION 8.10. Additional Documents. . . . . . . . . . . . 48

ARTICLE IX NEGATIVE COVENANTS  . . . . . . . . . . . . . . . . 48

     SECTION 9.1.  Incurrence of Debt. . . . . . . . . . . . . 49
     SECTION 9.2.  Restrictions on Distributions . . . . . . . 49
     SECTION 9.3.  Negative Pledge . . . . . . . . . . . . . . 49
     SECTION 9.4.  Consolidations and Mergers. . . . . . . . . 49
     SECTION 9.5.  Asset Dispositions. . . . . . . . . . . . . 49
     SECTION 9.6.  Amendments to Organizational Documents. . . 49
     SECTION 9.7.  Use of  Proceeds. . . . . . . . . . . . . . 50
     SECTION 9.8.  Investments . . . . . . . . . . . . . . . . 50
     SECTION 9.9.  Transactions with Affiliates. . . . . . . . 50
     SECTION 9.10. ERISA  . .  . . . . . . . . . . . . . . . . 50
     SECTION 9.11. Hedge Transactions. . . . . . . . . . . . . 50
     SECTION 9.12. Fiscal Year . . . . . . . . . . . . . . . . 50
     SECTION 9.13. Change in Business. . . . . . . . . . . . . 51

ARTICLE X FINANCIAL COVENANTS  . . . . . . . . . . . . . . . . 51

     SECTION 10.1.  Minimum Consolidated Tangible Net Worth
          of Borrower. . . . . . . . . . . . . . . . . . . . . 51

ARTICLE XI DEFAULTS  . . . . . . . . . . . . . . . . . . . . . 51

     SECTION 11.1.  Events of Default. . . . . . . . . . . . . 51

ARTICLE XII AGENT  . . . . . . . . . . . . . . . . . . . . . . 53

     SECTION 12.1.  Appointment and Authorization. . . . . . . 53
     SECTION 12.2.  Agent and Affiliates . . . . . . . . . . . 53
     SECTION 12.3.  Action by Agent. . . . . . . . . . . . . . 54
     SECTION 12.4.  Consultation with Experts. . . . . . . . . 54
     SECTION 12.5.  LIABILITY OF AGENT . . . . . . . . . . . . 54



<PAGE>
     SECTION 12.6.  Delegation of Duties . . . . . . . . . . . 54
     SECTION 12.7.  Indemnification. . . . . . . . . . . . . . 55
     SECTION 12.8.  Credit Decision. . . . . . . . . . . . . . 55
     SECTION 12.9.  Successor Agent. . . . . . . . . . . . . . 55

ARTICLE XIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . 56

     SECTION 13.1.  Notices. . . . . . . . . . . . . . . . . . 56
     SECTION 13.2.  No Waivers . . . . . . . . . . . . . . . . 56
     SECTION 13.3.  Expenses; Documentary Taxes;
          Indemnification  . . . . . . . . . . . . . . . . . . 56
     SECTION 13.4.  Right and Sharing of Set-Offs. . . . . . . 57
     SECTION 13.5.  Amendments and Waivers . . . . . . . . . . 58
     SECTION 13.6.  Survival . . . . . . . . . . . . . . . . . 58
     SECTION 13.7.  Limitation on Interest . . . . . . . . . . 58
     SECTION 13.8.  Invalid Provisions . . . . . . . . . . . . 59
     SECTION 13.9.  Waiver of Consumer Credit Laws . . . . . . 59
     SECTION 13.10. Successors and Assigns . . . . . . . . . . 59
     SECTION 13.11. TEXAS LAW. . . . . . . . . . . . . . . . . 60
     SECTION 13.12. [Intentionally Deleted]. . . . . . . . . . 60
     SECTION 13.13. Counterparts; Effectiveness. . . . . . . . 60
     SECTION 13.14. No Third Party Beneficiaries . . . . . . . 61
     SECTION 13.15. COMPLETE AGREEMENT . . . . . . . . . . . . 61
     SECTION 13.16. WAIVER OF JURY TRIAL . . . . . . . . . . . 61

                         EXHIBITS

     EXHIBIT A  FORM OF COMMITTED NOTE
     EXHIBIT B  FORM OF COMPETITIVE BID NOTE
     EXHIBIT C  FORM OF COMPETITIVE BID REQUEST
     EXHIBIT D  FORM OF NOTICE OF COMPETITIVE BID REQUEST
     EXHIBIT E  FORM OF COMPETITIVE BID
     EXHIBIT F  FORM OF REQUEST FOR COMMITTED LOANS
     EXHIBIT G  FORM OF REQUEST FOR LETTER OF CREDIT
     EXHIBIT H  FORM OF CERTIFICATE OF OWNERSHIP
     EXHIBIT I  FORM OF CERTIFICATE OF FINANCIAL OFFICER
     EXHIBIT J  FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

                         SCHEDULES

     SCHEDULE 1  FINANCIAL INSTITUTIONS
     SCHEDULE 2  INVESTMENT GUIDELINES
     SCHEDULE 3  LITIGATION
     SCHEDULE 4  ENVIRONMENTAL DISCLOSURE
     SCHEDULE 5  PRINCIPAL SHAREHOLDERS



<PAGE> 1
     THIS AGREEMENT (herein so called) is entered into effective as of 
the 1st day of December, 1996, among BERRY PETROLEUM COMPANY, a Delaware 
corporation ("Borrower"), NATIONSBANK OF TEXAS, N.A., as Agent ("Agent"), 
and the financial institutions listed on Schedule 1 hereto as Banks 
(individually a "Bank" and collectively "Banks").

                       W I T N E S S E T H:

     WHEREAS, Borrower has requested that Banks provide Borrower with a 
revolving/term credit facility and Banks are willing to provide such 
facility on the terms and subject to the conditions hereinafter set 
forth; and

     WHEREAS, pursuant to Article XII of this Agreement, NationsBank of 
Texas, N.A. has been appointed Agent for Banks hereunder.

     NOW, THEREFORE, in consideration of the premises, the 
representations, warranties, covenants and agreements contained herein, 
and other good and valuable consideration, the receipt and adequacy of 
which are hereby acknowledged, Borrower, Agent and Banks agree as 
follows:


                            ARTICLE I

                          TERMS DEFINED

     SECTION 1.1.  Definitions.  The following terms, as used herein, 
have the following meanings:

     "Additional Interest" has the meaning set forth in Section 2.5(d).

     "Adjusted Eurodollar Rate" applicable to any Interest Period, means 
a rate per annum equal to the quotient obtained (rounded upwards, if 
necessary to the next higher 1/100 of 1%) by dividing (i) the applicable 
Eurodollar Rate by (ii) 1.00 minus the Eurodollar Reserve Percentage.  

     "Advance Payment Contract" means any contract whereby Borrower or 
any of its Subsidiaries either (a) receives or becomes entitled to 
receive (either directly or indirectly) any payment (an "Advance 
Payment") to be applied toward payment of the purchase price of 
hydrocarbons produced or to be produced from Mineral Interests owned by 
Borrower or any of its Subsidiaries and which Advance Payment is paid or 
to be paid in advance of actual delivery of such production to or for the 
account of the purchaser regardless of such production, or (b) grants an 
option or right of refusal to the purchaser to take delivery of such 
production in lieu of payment, and, in either of the foregoing instances, 
the Advance Payment is, or is to be, applied as payment in full for such 
production when sold and delivered or is, or is to be, applied as payment 
for a portion only of the purchase price thereof or of a percentage or 
share of such production; provided that inclusion of the standard "take 
or pay" provision in any gas sales or 



<PAGE> 2
purchase contract or any other similar contract shall not, in and of itself,
constitute such contract as an Advance Payment Contract for the purposes 
hereof.

     "Affiliate" means, as to any Person, any Subsidiary of such Person, 
or any other Person which, directly or indirectly, controls, is 
controlled by, or is under common control with, such Person and, with 
respect to Borrower, means, any director or executive officer of Borrower 
and any Person who holds ten percent (10%) or more of the voting stock of 
Borrower.  For the purposes of this definition, "control" (including, 
with correlative meanings, the terms "controlled by" and "under common 
control with"), as used with respect to any Person, shall mean the 
possession, directly or indirectly, of the power to direct or cause the 
direction of the management and policies of such Person, whether through 
the ownership of voting securities or partnership interests, or by 
contract or otherwise.  

     "Agent" means NationsBank of Texas, N.A. in its capacity as agent 
for Banks hereunder or any successor thereto.

     "Agreement" shall mean this Agreement as the same may hereafter be 
modified, amended or supplemented pursuant to Section
13.5.

     "Applicable Environmental Law" means any Law affecting any real or 
personal property owned, operated or leased by Borrower or any Subsidiary 
of Borrower or any other operation of Borrower or any Subsidiary of 
Borrower in any way pertaining to health or the environment, including, 
without limitation, health and environmental Laws, and further including 
without limitation, (a) the Comprehensive Environmental Response, 
Compensation, and Liability Act of 1980, as amended by the Superfund 
Amendments and Reauthorization Act of 1986 (as amended from time to time, 
herein referred to as "CERCLA"), (b) the Resource Conservation and 
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, 
the Solid Waste Recovery Act of 1976, the Used Oil Recycling Act of 1980, 
the Solid Waste Disposal Act of 1980, and the Hazardous and Solid Waste 
Amendments of 1984 (as amended from time to time herein referred to as 
"RCRA"), (c) the Safe Drinking Water Act, as amended from time to time, 
(d) the Toxic Substances Control Act, as amended from time to time, (e) 
the Clean Air Act, as amended from time to time, (f) the Occupational 
Safety and Health Act of 1970, as amended from time to time, and (g) any 
Laws which may now or hereafter require removal of asbestos or other 
hazardous wastes or impose any liability related to asbestos or other 
hazardous wastes.  The terms "hazardous substance", "petroleum", 
"release" and "threatened release" have the meanings specified in CERCLA, 
and the terms "solid waste" and "disposal" (or "disposed") have the 
meanings specified in RCRA; provided, that in the event either CERCLA or 
RCRA is amended so as to broaden the meaning of any term defined thereby, 
such broader meaning shall apply subsequent to the effective date of such 
amendment with respect to all provisions of this Agreement; and provided 
further, that to the extent the Laws of any nation, province, state or 
political subdivision of any of the foregoing in which any real or 
personal property owned, operated or leased by Borrower or any Subsidiary 
of Borrower is located establish a meaning for "hazardous substance", 
"petroleum", "release", "solid waste" or "disposal" which is broader than 
that specified in either CERCLA or RCRA, such broader meaning shall 
apply.



<PAGE> 3
     "Applicable Margin" means, on any date, with respect to each Type of 
Loan, the amount determined in accordance with the table below by 
reference to the ratio of (a) Outstanding Credit on such date, to (b) the 
Borrowing Base in effect on such date; provided, that, so long as the 
Outstanding Credit is equal to or less than $50,000,000, the Applicable 
Margin for Base Rate Loans shall be 0% and the Applicable Margin for 
Committed Eurodollar Loans shall be .60%:


  Ratio of Outstanding      Applicable Margin       Applicable Margin for
Credit to Borrowing Base   for Base Rate Loans    Committed Eurodollar Loans


   <= .50 to 1                      0%                         .60%


>.50 to 1 <= .75 to 1               0%                         .75%


   > .75 to 1                     .25%                        1.00%


     "Approved Petroleum Engineer" means DeGolyer and MacNaughton or any 
other reputable firm of independent petroleum engineers as shall be 
selected by Borrower and approved by the Required Banks, such approval 
not to be unreasonably withheld.

     "Authorized Officer" means, as to any Person, its Chief Executive 
Officer, its President, its Chief Financial Officer, any of its Vice 
Presidents, its Treasurer or its Corporate Secretary.

     "Availability" means, as of any date, the remainder of (a) the 
Borrowing Base in effect on such date, minus (b) the Outstanding Credit 
on such date.

     "Bank" means any financial institution reflected on Schedule 1 
hereto as having a Commitment and its successors and permitted Assignees, 
and "Banks" shall mean all of Banks. 

     "Base Rate" means the floating rate of interest established from 
time to time by Agent as its "prime rate" of interest, which rate is not 
the lowest rate of interest charged by Agent, each change in the Base 
Rate to become effective without notice to Borrower on the effective date 
of each such change.  

     "Base Rate Loan" means a Loan bearing interest with reference to the 
Base Rate.

     "Borrower" means Berry Petroleum Company, a Delaware corporation.

     "Borrowing" means a Competitive Bid Borrowing or a Committed 
Borrowing.

     "Borrowing Base" has the meaning set forth in Section 3.2 hereof.

     "Borrowing Base Deficiency" means, as of any date, the amount, if 
any, by which the Outstanding Credit on such date exceeds the Borrowing 
Base in effect on such date; provided, that, for purposes of determining 
the existence and amount of any Borrowing Base Deficiency, Letter of 
Credit Exposure will not be deemed to be outstanding to the extent it is 
secured by cash or U.S. Treasury securities in the manner contemplated by 
Section 2.1(b).



<PAGE> 4
     "Borrowing Base Properties" means (a) the Mineral Interests owned by 
Borrower on the Closing Date located in the South Midway Sunset, North 
Midway Sunset and Montalvo Fields, in Kern and Ventura Counties, 
California, and (b) any other Proved Mineral Interest acquired by 
Borrower after the Closing Date in a single transaction for a cash 
purchase price in excess of $1,000,000.

     "Closing Date" means December 1, 1996.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Committed Borrowing" means a borrowing consisting of simultaneous 
Committed Loans of a single Type and having the same Interest Period from 
each of Banks distributed ratably among Banks in the manner described in 
Section 2.1(a).

     "Committed Loan" means a Loan from a Bank to Borrower pursuant to 
Section 2.2.2, which shall be a Base Rate Loan or a Eurodollar Loan.

     "Committed Note" means a promissory note of Borrower payable to the 
order of a Bank, in substantially the form of Exhibit A hereto, 
evidencing the aggregate indebtedness of Borrower to such Bank resulting 
from Committed Loans made by such Bank to Borrower, together with all 
modifications, extensions, renewals and rearrangements thereof; and 
"Committed Notes" means all Committed Notes.

     "Commitment" means, with respect to each Bank, the amount indicated 
opposite the name of such Bank on Schedule 1 hereto, as such amount is 
reduced from time to time in accordance with the provisions hereof.

     "Commitment Fee Percentage" means, on any date, a per annum 
percentage determined in accordance with the table below by reference to 
the ratio of (a) the Outstanding Credit on such date, to (b) the 
Borrowing Base in effect on such date; provided, that, so long as the 
Outstanding Credit is equal to or less than $50,000,000, the Commitment 
Fee Percentage shall be .20%:
          
          
    Ratio of Outstanding                         Commitment Fee
    Credit to Borrowing Base                        Percentage
          
          
       <=.50 to 1                                       .20%
          
   > .50 to 1 <= .75 to 1                               .25%
        
      > .75 to 1                                        .35%
          
          
     "Commitment Percentage" means, with respect to each Bank, the 
percentage determined by dividing its Commitment by the Total Commitment.

     "Competitive Bid" means an offer by a Bank to make a Competitive Bid 
Loan pursuant to Section 2.2.1.



<PAGE> 5
     "Competitive Bid Availability" means, on any date, the remainder of 
(a) (i) seventy-five percent (75%) of the Borrowing Base in effect on 
such date, or (ii) if the Borrowing Base is then $50,000,000 or less, one 
hundred percent (100%) of the Borrowing Base in effect on such date, 
minus (b) the Outstanding Credit on such date.

     "Competitive Bid Borrowing" means a borrowing hereunder consisting 
of a single Competitive Bid Loan from a Bank or simultaneous Competitive 
Bid Loans from each Bank whose Competitive Bid, as all or as part of such 
Competitive Bid Borrowing, has been accepted by Borrower under the 
bidding procedure described in Section 2.2.1.

     "Competitive Bid Loan" means a Loan from a Bank to Borrower pursuant 
to the bidding procedure described in Section 2.2.1. 

     "Competitive Bid Note" means a promissory note of Borrower payable 
to the order of a Bank, in substantially the form of Exhibit B hereto, 
evidencing the aggregate indebtedness of Borrower to such Bank resulting 
from the Competitive Bid Loans made by such Bank to Borrower, together 
with all modifications, extensions, renewals and rearrangements thereof; 
and "Competitive Bid Notes" means all Competitive Bid Notes.

     "Competitive Bid Rate" means, as to any Competitive Bid made by a 
Bank pursuant to Section 2.2.1, the fixed rate of interest offered by the 
Bank making such Competitive Bid expressed as a decimal to no more than 
four decimal places.

     "Competitive Bid Request" means a request for Competitive Bids to be 
made pursuant to Section 2.2.1 which Competitive Bid Request shall be in 
the form of Exhibit C.

     "Consolidated Net Income" means, for any Person for any period, 
consolidated net earnings (after income taxes) of such Person and its 
Consolidated Subsidiaries for such period, determined in accordance with 
GAAP.

     "Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for 
any Person, any Subsidiary or other entity the accounts of which would be 
consolidated with those of such Person in its consolidated financial 
statements.

     "Consolidated Tangible Net Worth" means, for any Person at any time, 
the consolidated shareholder's equity of such Person at such time, less 
the consolidated Intangible Assets of such Person at such time.  For 
purposes of this definition "Intangible Assets" means the amount (to the 
extent reflected in determining such consolidated shareholder's equity) 
of all unamortized debt discount and expense, unamortized deferred 
charges, goodwill, patents, trademarks, service marks, trade names, 
copyrights and organization expenses.

     "Conversion Date" means November 30, 1999.



<PAGE> 6
     "Debt" means, for any Person at any time, without duplication, (a) 
all obligations of such Person for borrowed money, (b) all obligations of 
such Person evidenced by bonds, debentures, notes or other similar 
instruments, (c) all other indebtedness (including capitalized lease 
obligations, other than usual and customary oil and gas leases) of such 
Person on which interest charges are customarily paid or accrued, (d) all 
Guarantees by such Person, (e) the unfunded or unreimbursed portion of 
all letters of credit issued for the account of such Person, (f) any 
amount owed by such Person representing the deferred purchase price of 
property or services other than accounts payable incurred in the ordinary 
course of business and in accordance with customary trade terms, and (g) 
all liability of such Person as a general partner of a partnership for 
obligations of such partnership of the nature described in (a) through 
(f) preceding.   

     "Default" means any condition or event which constitutes an Event of 
Default or which with the giving of notice, lapse of time or both would, 
unless cured or waived, become an Event of Default.  

     "Distribution" by any Person, means (a) with respect to any stock 
issued by such Person or any partnership interest of such Person, the 
retirement, redemption, purchase, or other acquisition for value of any 
such stock or partnership interest, (b) the declaration or payment of any 
dividend or other distribution on or with respect to any stock or any 
partnership interest of any Person, and (c) any other payment by such 
Person with respect to such stock or partnership interest.

     "Domestic Business Day" means any day except a Saturday, Sunday or 
other day on which national banks in Dallas, Texas, are authorized by Law 
to close.  

     "Domestic Lending Office" means, as to each Bank, its office located 
at its address identified on Schedule 1 hereto as its Domestic Lending 
Office or such other office as such Bank may hereafter designate as its 
Domestic Lending Office by notice to Borrower and Agent.  

     "ERISA" means the Employee Retirement Income Security Act of 1974, 
as amended.

     "ERISA Affiliate" means any corporation or trade or business under 
common control with Borrower as determined under section 414(b), (c), (m) 
or (o) of the Code.

     "Eurodollar Business Day" means any Domestic Business Day on which 
commercial banks are open for international business (including dealings 
in dollar deposits) in London.  

     "Eurodollar Lending Office" means, as to each Bank, its office, 
branch or affiliate located at its address identified on Schedule 1 
hereto as its Eurodollar Lending Office or such other office, branch or 
affiliate of such Bank as it may hereafter designate as its Eurodollar 
Lending Office by notice to Borrower and Agent.



<PAGE> 7
     "Eurodollar Loan" means a Loan bearing interest with reference to 
the Adjusted Eurodollar Rate.  Each Eurodollar Loan having a different 
Interest Period shall be deemed to be a separate Eurodollar Loan.  

     "Eurodollar Rate" applicable to any Interest Period means the rate 
per annum determined by Agent (rounded upward, if necessary, to the next 
higher 1/100th of 1%) at which deposits in dollars are offered to Agent 
by first class banks in the London interbank market at approximately 
10:00 a.m. (Dallas, Texas time) two (2) Eurodollar Business Days before 
the first day of such Interest Period in an amount approximately equal to 
the principal amount of the Eurodollar Loan to which such Interest Period 
is to apply and for a period of time comparable to such Interest Period.  
Agent shall determine the Eurodollar Rate and shall notify Borrower and 
Banks as soon as practicable.

     "Eurodollar Reserve Percentage" means for any day that percentage 
(expressed as a decimal) which is in effect on such day, as prescribed by 
the Board of Governors of the Federal Reserve System (or any successor) 
for determining the maximum reserve requirement for a member bank of the 
Federal Reserve System in Dallas, Texas in respect of "Eurocurrency 
liabilities" (or in respect of any other category of liabilities which 
includes deposits by reference to which the interest rate on Eurodollar 
Loans is determined or any category of extensions of credit or other 
assets which includes loans by a non-United States office of any Bank to 
United States residents).  The Adjusted Eurodollar Rate shall be adjusted 
automatically on and as of the effective date of any change in the 
Eurodollar Reserve Percentage.  

     "Events of Default" has the meaning set forth in Section 11.1.
     
     "Exhibit" refers to an exhibit attached to this Agreement and 
incorporated herein by reference, unless specifically provided otherwise.  

     "Financial Officer" of any Person means its Chief Financial Officer; 
provided, that if no Person serves in such capacity, "Financial Officer" 
shall mean the highest ranking executive officer of such Person with 
responsibility for accounting, financial reporting, cash management and 
similar functions.

     "Fiscal Quarters" means the three month periods ending on March 31, 
June 30, September 30 and December 31.

     "Fiscal Year" means the period from and including January 1 of each 
year to and including December 31 of such year.

     "Fully Funded" means, with respect to any Bank at the time in 
question, that such Bank is prohibited from making any further Loans 
pursuant to the Single Bank Credit Limit.

     "GAAP" means those generally accepted accounting principles and 
practices which are recognized as such by the American Institute of 
Certified Public Accountants acting through its



<PAGE> 8
Accounting Principles Board or by the Financial Accounting Standards Board
or through other appropriate boards or committees thereof and which are
consistently applied for all periods after the date hereof so as to properly
reflect the financial condition, and the results of operations and changes in
financial position, of Borrower and its Consolidated Subsidiaries, except 
that any accounting principle or practice required to be changed by the 
said Accounting Principles Board or Financial Accounting Standards Board 
(or other appropriate board or committee of the said Boards) in order to 
continue as a generally accepted accounting principle or practice may be 
so changed.  

     "Gas Balancing Agreement" means any agreement or arrangement whereby 
Borrower or any of its Subsidiaries or any other party having an interest 
in any hydrocarbons to be produced from Mineral Interests in which 
Borrower or any of its Subsidiaries have a right to take more than its 
proportionate share of production therefrom.

     "Governmental Authority" means any court or governmental department, 
commission, board, bureau, agency, or instrumentality of the United 
States or of any state, commonwealth, nation, territory, possession, 
county, parish, or municipality, whether now or hereafter constituted or 
existing. 

     "Guarantee" by any Person means any obligation, contingent or 
otherwise, of such Person directly or indirectly guaranteeing any Debt of 
any other Person and, without limiting the generality of the foregoing, 
any obligation, direct or indirect, contingent or otherwise, of such 
Person (a) to purchase or pay (or advance or supply funds for the 
purchase or payment of) such Debt or other obligation (whether arising by 
virtue of partnership arrangements, by agreement to keep-well, to 
purchase assets, goods, securities or services, to take-or-pay, or to 
maintain financial statement conditions, by "comfort letter" or other 
similar undertaking of support or otherwise) or (b) entered into for the 
purpose of assuring in any other manner the obligee of such Debt or other 
obligation of the payment thereof or to protect such obligee against loss 
in respect thereof (in whole or in part), provided that the term 
Guarantee shall not include endorsements for collection or deposit in the 
ordinary course of business.  

     "Hedge Transaction" means a transaction pursuant to which Borrower 
or its Subsidiaries hedge the price to be received by them for future 
production of hydrocarbons, including price swap agreements under which 
Borrower or its Subsidiaries agree to pay a price for a specified amount 
of hydrocarbons determined by reference to a recognized market on a 
specified future date and the contracting party agrees to pay Borrower or 
its Subsidiaries a fixed price for the same or similar amount of 
hydrocarbons.

     "Initial Reserve Report" means that certain Appraisal Report dated 
February 12, 1996 prepared by DeGolyer and MacNaughton as of December 31, 
1995, setting forth an engineering and economic analysis of certain 
Mineral Interests owned by Borrower on the Closing Date, including, 
without limitation, the Mineral Interests described in clause (a) of the 
definition of "Borrowing Base Properties."



<PAGE> 9
     "Interest Period" means: (a) with respect to each Borrowing 
comprised of Eurodollar Loans, the period commencing on the date of such 
Borrowing and ending one (1), two (2), three (3) or six (6), and, if 
available to Banks, nine (9) or twelve (12) months thereafter, as 
Borrower may elect in the applicable Request for Committed Loans; 
provided that: 

          (i) any Interest Period which would otherwise end on a day 
              which is not a Eurodollar Business Day shall be extended to
              the next succeeding Eurodollar Business Day unless such 
              Eurodollar Business Day falls in another calendar month, in 
              which case such Interest Period shall end on the next preceding
              Eurodollar Business Day; 

          (ii) any Interest Period which begins on the last Eurodollar 
               Business Day of a calendar month (or on a day for which there
               is no numerically corresponding day in the calendar month at 
               the end of such Interest Period) shall, subject to clause 
               (iii) below, end on the last Eurodollar Business Day of a 
               calendar month; and

          (iii) if any Interest Period includes a date on which any payment
                of principal of such Loans is required to be made hereunder,
                but does not end on such date, then (A) the principal amount
                of each Eurodollar Loan required to be repaid on such date 
                shall have an Interest Period ending on such date, and 
                (B) the remainder of each such Eurodollar Loan shall have an
                Interest Period determined as set forth above; and

     (b)  with respect to each Competitive Bid Borrowing, the period 
commencing on the date of such Borrowing and ending 7, 30, 60 or 90 days 
thereafter as Borrower may elect in the applicable Competitive Bid 
Request; provided, that:

          (i)   any Interest Period (other than an Interest Period 
                determined pursuant to clause (ii)(A) below) which would
                otherwise end on a day which is not a Domestic Business Day
                shall be extended to the next succeeding Domestic Business
                Day;  and 

          (ii)  if any Interest Period includes a date on which any payment
                of principal of the Loans is required to be made hereunder,
                but does not end on such date, then (A) the principal amount
                of each Competitive Bid Loan required to be repaid on such 
                date shall have an Interest Period ending on such date, and
                (B) any remainder of each such Competitive Bid Loan shall have
                an Interest Period determined as set forth above; and

          (iii) no Interest Period shall extend past the thirtieth (30th) 
                day prior to the Conversion Date.

     "Investment" means, with respect to any Person, any loan, advance, 
extension of credit, capital contribution to, investment in or purchase 
of the stock or other securities of, or interests


<PAGE> 10
in, any other Person; provided, that "Investment" shall not include current
customer and trade accounts which are payable in accordance with customary 
trade terms. 
     
     "Investment Guidelines" means the guidelines in effect on the date 
hereof for investment of Borrower's cash and cash equivalents which have 
been adopted by Borrower's Board of Directors, a true and correct copy of 
which is attached hereto as Schedule 2.

     "Issuer" has the meaning set forth in Section 2.1(b).

     "Laws" means all applicable statutes, laws, ordinances, regulations, 
orders, writs, injunctions, or decrees of any state, commonwealth, 
nation, territory, possession, county, township, parish, municipality or 
Governmental Authority.

     "Lending Office" means as to any Bank its Domestic Lending Office or 
its Eurodollar Lending Office, as the context may require.  

     "Letters of Credit" means letters of credit issued for the account 
of Borrower pursuant to Section 2.1(b).

     "Letter of Credit Exposure" of any Bank means such Bank's aggregate 
participation in the unfunded portion and the funded but unreimbursed 
portion of Letters of Credit outstanding at any time.

     "Letter of Credit Fee" means, with respect to any Letter of Credit 
issued hereunder, a fee in an amount equal to the greater of (a) $500, or 
(b) a percentage of the stated amount of such Letter of Credit 
(calculated on a per annum basis based on the stated term of such Letter 
of Credit) determined in accordance with the table below by reference to 
the ratio of (i) the Outstanding Credit on the date of issuance of such 
Letter of Credit, to (ii) the Borrowing Base in effect on such date; 
provided, that, so long as the Outstanding Credit is equal to or less 
than $50,000,000, the Letter of Credit Fee shall be the greater of (y) 
$500, or (z) .60% of the stated amount of such Letter of Credit 
(calculated on a per annum basis):

          
   Ratio of Outstanding                      Per Annum Letter of
   Credit to Borrowing Base                  Credit Fee

       <= .50 to 1                               .60%
          
          
 > 50 to 1 <= .75 to 1                           .75%
          
          
       > .75 to 1                               1.00%
          
          
     "Letter of Credit Fronting Fee" means, with respect to any Letter of 
Credit issued hereunder with a stated amount of $1,000,000 or greater, a 
fee equal to one tenth of one percent (.10%) of the stated amount of such 
Letter of Credit. 



<PAGE> 11
     "Lien" means, with respect to any asset, any mortgage, lien, pledge, 
charge, security interest or encumbrance of any kind in respect of such 
asset.  For the purposes of this Agreement, Borrower and its Subsidiaries 
shall be deemed to own subject to a Lien any asset which is acquired or 
held subject to the interest of a vendor or lessor under any conditional 
sale agreement, capital lease or other title retention agreement relating 
to such asset.

     "Loan" means a Committed Loan, a Competitive Bid Loan, a Base Rate 
Loan or a Eurodollar Loan and "Loans" means Committed Loans, Competitive 
Bid Loans, Base Rate Loans, Eurodollar Loans, or any combination thereof.

     "Loan Papers" means this Agreement, the Notes, and all other 
certificates, documents or instruments delivered in connection with this 
Agreement, as the foregoing may be amended from time to time. 
 
     "Margin Regulations" means Regulations G, T, U and X of the Board of 
Governors of the Federal Reserve System, as in effect from time to time.  

     "Margin Stock" means "margin stock" as defined in Regulation U.

     "Material Agreement" means any material written or oral agreement, 
contract, commitment, or understanding to which a Person is a party, by 
which such Person is directly or indirectly bound, or to which any assets 
of such Person may be subject, which is not cancelable by such Person 
upon notice of thirty (30) days or less without liability for further 
payment other than nominal penalty.  

     "Maximum Lawful Rate" means, for each Bank, the maximum rate (or, if 
the context so permits or requires, an amount calculated at such rate) of 
interest which, at the time in question would not cause the interest 
charged on the portion of the Loans owed to such Bank at such time to 
exceed the maximum amount which such Bank would be allowed to contract 
for, charge, take, reserve, or receive under applicable Laws after taking 
into account, to the extent required by applicable Laws, any and all 
relevant payments or charges under the Loan Papers.  To the extent the 
Laws of the State of Texas are applicable for purposes of determining the 
"Maximum Lawful Rate," such term shall mean the "indicated rate ceiling" 
from time to time in effect under Article 1.04, Title 79, Revised Civil 
Statutes of Texas, 1925, as amended, or, if permitted by applicable law 
and effective upon the giving of the notices required by such Article 
1.04 (or effective upon any other date otherwise specified by applicable 
law), the "quarterly ceiling" or "annualized ceiling" from time to time 
in effect under such Article 1.04, whichever Agent (with the approval of 
the Required Banks) shall elect to substitute for the "indicated rate 
ceiling," and vice versa, each such substitution to have the effect 
provided in such Article 1.04, and Agent (with the approval of the 
Required Banks) shall be entitled to make such election from time to time 
and one or more times and, without notice to Borrower, to leave any such 
substitute rate in effect for subsequent periods in accordance with 
subsection (h)(1) of such Article 1.04.  



<PAGE> 12
     "Mineral Interests" means rights, estates, titles, and interests in 
and to oil, gas, sulphur, or other mineral leases and any mineral 
interests, royalty and overriding royalty interest, production payment, 
net profits interests, mineral fee interests, and other rights therein, 
including, without limitation, any reversionary or carried interests 
relating to the foregoing, together with rights, titles, and interests 
created by or arising under the terms of any unitization, communization, 
and pooling agreements or arrangements, and all properties, rights and 
interests covered thereby, whether arising by contract, by order, or by 
operation of Laws, which now or hereafter include all or any part of the 
foregoing.

     "Minimum Consolidated Tangible Net Worth" means the sum of (a) 
$74,000,000, plus (b) seventy five percent (75%) of any increase in the 
shareholders equity of Borrower resulting from the issuance of equity 
securities by Borrower after the Closing Date.

     "Moody's" means Moody's Investor Services, or any successor thereto.

     "Note" means a Competitive Bid Note or a Committed Note and "Notes" 
means all Competitive Bid Notes and all Committed Notes.

     "Obligations" means all present and future indebtedness, obligations 
and liabilities, and all renewals and extensions thereof, or any part 
thereof, of Borrower or any of its Subsidiaries to any Bank arising 
pursuant to the Loan Papers, and all interest accrued thereon and costs, 
expenses, and attorneys' fees incurred in the enforcement or collection 
thereof, regardless of whether such indebtedness, obligations and 
liabilities are direct, indirect, fixed, contingent, liquidated, 
unliquidated, joint, several or joint and several.

     "Outstanding Credit" means, on any date, the sum of (a) the 
aggregate outstanding Letter of Credit Exposure on such date including 
the aggregate Letter of Credit Exposure related to Letters of Credit to 
be issued on such date, plus (b) the aggregate outstanding principal 
balance of all Loans on such date, including the outstanding principal 
balance of all Loans to be made on such date.

     "Over Funded Bank" means any Bank which holds Committed Loans and 
Letter of Credit Exposure which, when considered in the aggregate, exceed 
its Commitment Percentage of the sum of (a) all Committed Loans, and (b) 
the aggregate outstanding Letter of Credit Exposure of all Banks. 

     "Participant" has the meaning given such term in Section 13.10 
hereof.

     "PBGC" means the Pension Benefit Guaranty Corporation or any entity 
succeeding to any or all of its functions under ERISA.



<PAGE> 13
     "Permitted Encumbrances" means with respect to any asset: 

          (a)  Liens (if any) securing the Notes in favor of Banks; 

          (b)  Minor defects in title which do not secure the payment of 
money and otherwise have no material adverse effect on the value or 
operation of the subject property, and for the purposes of this 
Agreement, a minor defect in title shall include easements, rights-of-
way, servitudes, permits, surface leases and other similar rights in 
respect of surface operations, and easements for pipelines, streets, 
alleys, highways, telephone lines, power lines, railways and other 
easements and rights-of-way, on, over or in respect of any of the 
properties of Borrower or its Subsidiaries that are customarily granted 
in the oil and gas industry; 

          (c)  Inchoate statutory or operators' liens securing 
obligations for labor, services, materials and supplies furnished to 
Mineral Interests which are not delinquent (except to the extent 
permitted by Section 8.5);

          (d)  Mechanic's, materialmen's, warehouseman's, journeyman's 
and carrier's liens and other similar liens arising by operation of Law 
in the ordinary course of business which are not delinquent (except to 
the extent permitted by Section 8.5);

          (e)  Liens for Taxes or assessments not yet due or not yet 
delinquent, or, if delinquent, that are being contested in good faith in 
the normal course of business by appropriate action, as permitted by 
Section 8.5;

          (f)  Lease burdens payable to third parties which are deducted 
in the calculation of discounted present value in the Reserve Report 
including, without limitation, any royalty, overriding royalty, net 
profits interest, production payment, carried interest or reversionary 
working interest and which have been disclosed to Agent in writing; 

          (g)  Liens securing Debt incurred to finance the acquisition of 
the assets which are the subject of such Liens; provided, that the 
aggregate outstanding balance of all Debt secured by such Liens shall not 
exceed $2,000,000 at any time; and

          (h)  Liens in effect on the Closing Date encumbering cash and 
cash equivalents in any aggregate amount not to exceed $2,000,000 
securing certain obligations of Borrower to Governmental Authorities.

     "Permitted Investments"  means (a) readily marketable direct 
obligations of the United States of America, (b) fully insured time 
deposits and certificates of deposit with maturities of one year or less 
of any commercial bank operating in the United States having capital and 
surplus in excess of $50,000,000, (c) commercial paper of a domestic 
issuer if at the time of purchase such paper is rated in one of the two 
highest ratings categories of S&P or Moody's, or of a comparable or 
higher quality of any other rating agency acceptable to Banks, (d) to the 
extent not permitted under clause (a) through (c) preceding, Investments 
which are permitted pursuant



<PAGE> 14
to the Investment Guidelines as in effect on the date hereof, or as amended
hereafter, provided that no Investments in equity securities will constitute
Permitted Investments under this clause (d), and no Investments in debt 
securities will constitute Permitted Investments under this clause (d) unless
such securities are rated "A-1" or higher by Moody's or "A+" or higher by S&P,
or of a comparable or higher quality of any other rating agency acceptable to
Banks and (e) other Investments in Persons engaged primarily in the business
of the acquisition, development and production of Mineral Interests or the 
production, refining, processing, transportation or marketing of hydrocarbons
and businesses reasonably related thereto; provided, that, the sum of (i) the
aggregate amount of outstanding Investments made pursuant to this clause 
(e), plus (ii) the aggregate amount of capital expenditures made by Borrower
and its Subsidiaries to purchase assets used in the transportation, processing,
refining or marketing of petroleum products (in each case measured on a cost
basis), shall not exceed $15,000,000 at any time.

     "Person" means an individual, a corporation, a partnership, an 
association, a trust or any other entity or organization, including a 
Government Authority.

     "Plan" means an employee benefit plan within the meaning of section 
3(3) of ERISA, and any other similar plan, policy or arrangement, whether 
formal or informal and whether legally binding or not, under which 
Borrower or an ERISA Affiliate has any current or future obligation or 
liability or under which any present or former employee of Borrower or an 
ERISA Affiliate, or such present or former employee's dependents or 
beneficiaries, has any current or future right to benefits resulting from 
the present or former employee's employment relationship with Borrower or 
an ERISA Affiliate. 

     "Proved Mineral Interests" means Proved Producing Mineral Interests, 
Proved Nonproducing Mineral Interests, and Proved Undeveloped Mineral 
Interests.

     "Proved Nonproducing Mineral Interests" means all Mineral Interests 
which constitute proved developed nonproducing reserves.

     "Proved Producing Mineral Interests" means all Mineral Interests 
(including all acreage subject to such Mineral Interests that may be 
perpetuated beyond the primary term therefor) which constitute proved 
developed producing reserves.

     "Proved Undeveloped Mineral Interests" means all Mineral Interests 
which constitute proved undeveloped reserves.

     "Quarterly Date" means the last day of each March, June, September 
and December.

     "Redetermination" means any redetermination of the Borrowing Base 
pursuant to Section 3.2 or 3.3 hereof.  

     "Refunding Borrowing" means a Borrowing made solely for the purpose 
of refinancing Loans which are then outstanding, including any Borrowing 
made to refinance Eurodollar Loans



<PAGE> 15
or Competitive Bid Loans on the expiration of the Interest Period applicable
thereto.  Refunding Borrowings may be Base Rate Borrowings or Eurodollar 
Borrowings.

     "Regulation U" means Regulation U of the Board of Governors of the 
Federal Reserve System, 12 C.F.R. Part 221, as in effect from time to 
time.  

     "Request for Committed Loan(s) has the meaning set forth in Section 
2.3.2(a).

     "Request for Letter of Credit" has the meaning set forth in Section 
2.3(a).

     "Required Banks" means (a) so long as no Default has occurred which 
is continuing, Banks holding at least sixty-six and two-thirds percent 
(66 2/3%) of the Total Commitment, and (b) during the continuance of any 
Default, Banks holding at least sixty-six and two-thirds percent (66 
2/3%) of the Outstanding Credit.

     "Reserve Engineer's Letter" means, with respect to each Reserve 
Report, a letter addressed to Borrower from the Approved Petroleum 
Engineer which prepared such Reserve Report setting forth the scope of 
such Reserve Report, the methodology employed in the preparation of such 
report and a summary of the reserve data set forth in such report.

     "Reserve Report" means an unsuperseded engineering analysis of the 
Mineral Interests owned by Borrower, in form and substance acceptable to 
the Required Banks, prepared by an Approved Petroleum Engineer in 
accordance with customary and prudent practices in the petroleum 
engineering industry and Financial Accounting Standards Board Statement 
69; provided, however, that in connection with any Special 
Redetermination requested by Borrower, the Reserve Report shall be in 
form and scope mutually acceptable to Borrower and Required Banks.  For 
purposes of Section 7.10, the Initial Reserve Report shall be considered 
a Reserve Report.

     "Reserve Report Summary" means, with respect to any Reserve Report, 
a summary in form, substance and scope reasonably acceptable to Required 
Banks of the reserve data included in such Reserve Report.

     "S&P" means Standard & Poor's Rating Services, a division of The 
McGraw-Hill Companies, Inc., or any successor thereto.

     "Schedule" means a "schedule" attached to this Agreement and 
incorporated herein by reference, unless specifically indicated 
otherwise.

     "Scheduled Redetermination" means any Redetermination of the 
Borrowing Base pursuant to Section 3.2.

     "Section" refers to a "section" or "subsection" of this Agreement 
unless specifically indicated otherwise.



<PAGE> 16
     "Sharing Percentage" means, with respect to any Bank at any time, 
the percentage determined by dividing (a) the sum of (i) such Bank's 
aggregate Letter of Credit Exposure at such time, plus (ii) the 
outstanding principal balance of all Loans held by such Bank at such 
time, by (b) the Outstanding Credit at such time.

     "Single Bank Credit Limit" has the meaning set forth in Section 
2.1(a).

     "Special Redetermination" means any Redetermination of the Borrowing 
Base pursuant to Section 3.3.

     "Subsidiary" means, for any Person, any corporation or other entity 
of which securities or other ownership interests having ordinary voting 
power to elect a majority of the Board of Directors or other persons 
performing similar functions (including that of a general partner) are at 
the time directly or indirectly owned, collectively, by such Person and 
any Subsidiaries of such Person.  The term Subsidiary shall include 
Subsidiaries of Subsidiaries (and so on). 

     "Taxes" means all taxes, assessments, filing or other fees, levies, 
imposts, duties, deductions, withholdings, stamp taxes, capital 
transaction taxes, foreign exchange taxes or other charges, or other 
charges of any nature whatsoever, from time to time or at any time 
imposed by Law or any Governmental Authority.  "Tax" means any one of the 
foregoing.

     "Termination Date" means November 30, 2003.

     "Total Commitment" means the aggregate of all Banks' Commitments.

     "Type" means with reference to a Loan, the characterization of such 
Loan as a Base Rate Loan or a Eurodollar Loan based on the method by 
which the accrual of interest on such Loan is calculated.

     "Under Funded Bank" means any Bank which is not Fully Funded and 
which holds Committed Loans and Letter of Credit Exposure which, when 
considered in the aggregate, are less than its Commitment Percentage of 
the sum of (a) all Committed Loans held by all Banks, and (b) the 
aggregate Letter of Credit Exposure of all Banks. 

     SECTION 1.2.  Accounting Terms and Determinations.  Unless otherwise 
specified herein, all accounting terms used herein shall be interpreted, 
all accounting determinations hereunder shall be made, and all financial 
statements required to be delivered hereunder shall be prepared in 
accordance with GAAP, applied on a basis consistent with the most recent 
audited consolidated financial statements of Borrower and its 
Consolidated Subsidiaries delivered to Banks except for changes concurred 
in by Borrower's independent certified public accountants and which are 
disclosed to Agent on the next date on which financial statements are 
required to be delivered to Banks pursuant to Sections 8.1(a) or (b); 
provided that, unless the Required Banks shall otherwise agree in 
writing, no such change shall modify or affect the manner in which 
compliance with the covenants contained in Article X are computed such 
that all such



<PAGE> 17
computations shall be conducted utilizing financial information presented
consistently with prior periods.

     SECTION 1.3.  Petroleum Terms.  As used herein, the terms "proved 
reserves," "proved developed reserves," "proved developed producing 
reserves," "proved developed nonproducing reserves," and "proved 
undeveloped reserves" have the meaning given such terms from time to time 
and at the time in question by the Society of Petroleum Engineers of the 
American Institute of Mining Engineers.


                            ARTICLE II

                            THE CREDIT

     SECTION 2.1.  Commitments.  (a) Each Bank severally agrees, subject 
to Section 2.1(c) and the other terms and conditions set forth in this 
Agreement, to lend to Borrower from time to time amounts not to exceed in 
the aggregate at any one time outstanding, the amount of such Bank's 
Commitment reduced by an amount equal to the sum of such Bank's Letter of 
Credit Exposure.  Loans made pursuant to this Section 2.1(a) shall be 
Committed Loans or, solely at the option of each Bank and subject to all 
restrictions and limitations set forth herein, Competitive Bid Loans.  
Notwithstanding the foregoing, Borrower shall not be entitled to obtain 
Loans from a Bank and no Bank shall be permitted to make Loans to 
Borrower in an amount which would cause the sum of (i) all Loans held by 
such Bank, and (ii) such Bank's Letter of Credit Exposure to exceed such 
Bank's Commitment Percentage of the Borrowing Base then in effect (the 
limitation in this sentence is hereinafter referred to as the "Single 
Bank Credit Limit").  Each Committed Borrowing (i) shall be in an 
aggregate principal amount of $1,000,000 or any larger integral multiple 
of $100,000 (except that any Base Rate Committed Borrowing may be in an 
amount equal to the Availability), and (ii) shall be made (A) first, by 
any Bank which is an Under Funded Bank to the extent necessary to 
eliminate the under funded position of such Bank, and (B) then, from 
Banks ratably in accordance with their respective Commitment Percentages; 
provided, that to the extent any Bank's ability to make any Committed 
Loan on the occasion of any Committed Borrowing is limited as a result of 
the Single Bank Credit Limit, such Bank shall make a Committed Loan in 
the maximum amount it is permitted to make without violating such limit 
and the remaining Banks which are not subject to such limitation shall 
make Committed Loans in an aggregate amount equal to the remaining 
portion of such Committed Borrowing.  Such Committed Loans shall be made 
by such unlimited Banks ratably based on the amount of each such 
unlimited Bank's Commitment Percentage relative to the aggregate 
Commitment Percentages of all such unlimited Banks.  Any Competitive Bid 
Loans held by any Bank which are to be refinanced pursuant to a Committed 
Borrowing will not be deemed to be outstanding for purposes of 
determining the amount of Committed Loans to be made by each Bank as part 
of such Committed Borrowing.  Subject to the foregoing limitations and 
the other provisions of this Agreement, Borrower may obtain Borrowings 
under this Section 2.1(a), and repay Loans and request new Borrowings 
under this Section 2.1(a); provided, that any partial repayment of 
Committed Loans shall be applied first, to the Committed Loans held by 
each Over Funded Bank



<PAGE> 18
to the extent necessary to eliminate the over funded position of each such
Bank (each such partial repayment shall be allocated to the Over Funded Banks
ratably based on the amount of Committed Loans held by each Over Funded Bank),
and second, to each Bank in accordance with its Commitment Percentage.  
Borrower shall not be permitted to obtain Borrowings hereunder after the 
Conversion Date other than Refunding Borrowings.

       Each Bank which is an Under Funded Bank at the time an Event of 
Default occurs shall be irrevocably and unconditionally obligated, for so 
long as such Event of Default shall be continuing, to purchase from each 
Over Funded Bank at par, a non-recourse participation interest in all 
outstanding Committed Loans and all Letter of Credit Exposure held by 
each Over Funded Bank in an amount which (after giving effect to the 
simultaneous fulfillment of the obligations pursuant to this paragraph of 
all other Under Funded Banks) will result in the elimination of the under 
funded position of each Under Funded Bank and the over funded position of 
each Over Funded Bank.  Each Under Funded Bank will pay the purchase 
price for each participation interest required to be purchased by it 
pursuant to this paragraph by wire transfer of immediately available 
funds promptly upon being advised by Agent of the occurrence of an Event 
of Default, but in all events within two (2) Domestic Business Days 
following demand by any Over Funded Bank.

     Borrower's right to request Competitive Bid Loans and the right of 
each Bank to make Competitive Bid Loans hereunder shall also be subject 
to the following restrictions: (i) no Bank shall be permitted to make 
Competitive Bid Loans at any time that the ratio of the Outstanding 
Credit to the Borrowing Base then in effect is greater than .75 to 1, 
(ii) no Bank shall be permitted to make Competitive Bid Loans after the 
Conversion Date, and (iii) no Bank shall be permitted to make Competitive 
Bid Loans with an Interest Period expiring on or after the thirtieth 
(30th) day prior to the Conversion Date.

          (b)  Agent, or such Bank designated by Agent which (without 
obligation to do so) consents to the same ("Issuer") will, from time to 
time until the ninetieth (90th) day prior to the Conversion Date, upon 
request by Borrower, issue Letters of Credit for the account of Borrower 
so long as (i) the sum of (A) the total Letter of Credit Exposure then 
existing and (B) the amount of the requested Letter of Credit does not 
exceed twenty five percent (25%) of the Borrowing Base then in effect, 
and (ii) Borrower would be entitled to a Committed Borrowing under 
Section 2.1(a) in an amount greater than or equal to the requested Letter 
of Credit.  Not less than three (3) Domestic Business Days prior to the 
requested date of issuance of any such Letter of Credit, Borrower shall 
execute and deliver to Issuer, Issuer's customary letter of credit 
application.  Each Letter of Credit shall be in the minimum amount of 
$5,000 and shall be in form and substance acceptable to Issuer.  No 
Letter of Credit shall have an expiration date later than the earlier of 
(i) thirty (30) days prior to the Conversion Date, or (ii) one (1) year 
from the date of issuance.  Upon the date of issuance of a Letter of 
Credit, Issuer shall be deemed to have sold to each other Bank, and each 
other Bank  shall be deemed to have purchased from Issuer, a 
participation in the related Letter of Credit and Letter of Credit 
Exposure equal to the amount of any Committed Loan which such Bank would 
be required to make under Section 2.1(a) if Borrower were requesting a 
Committed Borrowing on such day in the amount of such Letter of



<PAGE> 19
Credit.  Issuer shall notify each Bank by telephone, teletransmission or telex
of each Letter of Credit issued pursuant to the terms hereof.  If any Letter 
of Credit is presented for payment by the beneficiary thereof, Agent 
shall cause a Committed Borrowing comprised of Base Rate Loans to be made 
to reimburse Issuer for the payment under the Letter of Credit, whether 
or not Borrower would then be entitled to a Committed Borrowing pursuant 
to the terms hereof, and each Bank which participated in such Letter and 
Letter of Credit Exposure shall be obligated to make a Base Rate Loan 
equal to the amount of its participation interest.  At the time of 
issuance of each Letter of Credit, Borrower shall pay to Agent in respect 
of such Letter of Credit (a) the applicable Letter of Credit Fee, and (b) 
to the extent the stated amount of such Letter of Credit is equal to or 
in excess of $1,000,000, the applicable Letter of Credit Fronting Fee.  
Agent shall distribute the Letter of Credit Fee payable upon the issuance 
of each Letter of Credit to Banks participating in such Letter of Credit 
and Letter of Credit Exposure based on the relative amounts of their 
participation in such Letter of Credit and Letter of Credit Exposure and 
Agent shall distribute the Letter of Credit Fronting Fee to the Issuer of 
such Letter of Credit for its own account.

     Upon the occurrence of any Event of Default, and at the times 
required by Section 3.4 hereof, Borrower shall deposit with Agent cash or 
readily marketable United States Treasury securities with a maturity of 
one year or less in such amounts as Agent may request, up to a maximum 
amount equal to the aggregate existing Letter of Credit Exposure of all 
Banks.  Any cash or securities so deposited shall be held by Agent for 
the ratable benefit of all Banks with Letter of Credit Exposure as 
security for such Letter of Credit Exposure and as security for the Base 
Rate Loans to be made pursuant to this Section 2.1(b) upon any payment of 
any related Letter of Credit, and Borrower will, in connection therewith, 
execute and deliver such security agreements in form and substance 
satisfactory to Agent which it may, in its discretion, require.  As 
drafts or demands for payment are presented under any Letter of Credit, 
Agent shall apply such cash (and liquidate such treasury securities and 
apply the cash proceeds thereof) to satisfy such drafts or demands.  When 
either (i) all Letters of Credit have expired, the Obligations have been 
repaid in full and the Commitments of all Banks have been terminated, or 
(ii) all Events of Default have been cured to the satisfaction of the 
Required Banks, Agent shall release to Borrower any remaining cash and 
securities deposited under this Section 2.1(b). 

     Whenever Borrower is required to make deposits under this Section 
2.1(b) and fails to do so on the day such deposit is due, Agent or any 
Bank may, without notice to Borrower, make such deposit (whether by 
transfers from other accounts maintained with any Bank or otherwise) 
using any funds then available to any Bank of Borrower, any guarantor, or 
any other person liable for all or any part of the Obligations.

          (c)  No Bank will be obligated to lend to Borrower or incur 
Letter of Credit Exposure, and Borrower shall not be entitled to borrow 
any amount or obtain Letters of Credit hereunder in an amount which would 
cause the Outstanding Credit to exceed the Borrowing Base then in effect 
under Article III.  Nothing in this Section 2.1(c) shall be deemed to 
limit any Bank's obligation to fund Base Rate Loans with respect to its 
participation in Letters of Credit



<PAGE> 20
in connection with any Committed Borrowing comprised of Base Rate Loans made
as a result of the drawing under any Letter of Credit.

      SECTION 2.2.  Method of Borrowing. 

          2.2.1.    Competitive Bid Procedure.  (a) In order to request 
Competitive Bids, Borrower shall hand deliver, telex or telecopy to Agent 
a duly completed Competitive Bid Request, to be received by Agent not 
later than 12:00 noon (Dallas, Texas time), three (3) Business Days 
before the date specified for a proposed Competitive Bid Borrowing.  No 
Base Rate Loan or Eurodollar Loan shall be requested, or made pursuant 
to, a Competitive Bid Request.  A Competitive Bid Request that does not 
conform substantially to the format of Exhibit C may be rejected at 
Agent's sole discretion, and Agent shall promptly notify Borrower of such 
rejection by telex or telecopier.  Each Competitive Bid Request shall in 
each case refer to this Agreement and specify (y) the Borrowing date of 
such Competitive Bid Loans (which shall be a Domestic Business Day) and 
the aggregate principal amount thereof (which shall not be less than 
$5,000,000 or greater than the Competitive Bid Availability on such 
Borrowing date and shall be an integral multiple of $100,000) and (z) the 
Interest Period with respect thereto.  Promptly after its receipt of a 
Competitive Bid Request that is not rejected as aforesaid, Agent shall 
invite by telex or telecopier (in the form set forth in Exhibit D hereto) 
Banks to bid, on the terms and conditions of this Agreement, to make 
Competitive Bid Loans pursuant to such Competitive Bid Request.  

         (b)  Each Bank may, in its sole discretion, make one 
or more Competitive Bids to Borrower responsive to each Competitive Bid 
Request. Each Competitive Bid by a Bank must be received by Agent via 
telex or telecopier, in the form of Exhibit E hereto, not later than 
10:00 a.m. (Dallas, Texas time), two (2) Domestic Business Days before 
the date specified for a proposed Competitive Bid Borrowing.  Competitive 
Bids that do not conform substantially to the format of Exhibit E may be 
rejected by Agent after conferring with, and upon the instruction of 
Borrower, and Agent shall notify Bank of such rejection as soon as 
practicable.  Each Competitive Bid shall refer to this Agreement and (x) 
specify the principal amount (which shall be in a minimum principal 
amount of $1,000,000 and in an integral multiple of $100,000 and which, 
subject to the conditions set forth in Section 2.1, may equal the entire 
principal amount of the Competitive Bid Borrowing requested by Borrower) 
of the Competitive Bid Loan that Bank is willing to make to Borrower, (y) 
specify the Competitive Bid Rate at which Bank is prepared to make the 
Competitive Bid Loan and (z) confirm the Interest Period with respect 
thereto specified by Borrower in its Competitive Bid Request.  If



<PAGE> 21
any Bank shall elect not to make a Competitive Bid, such Bank shall so notify 
Agent via telex not later than 10:00 a.m. (Dallas, Texas time), one (1) 
Domestic Business Day before the date specified for a proposed 
Competitive Bid Borrowing; provided, however, that failure by any Bank to 
give such notice shall not cause such Bank to be obligated to make any 
Competitive Bid Loan as part of such Competitive Bid Borrowing.  A 
Competitive Bid submitted by a Bank pursuant to this paragraph (b) shall 
be irrevocable.

      (c)  Agent shall promptly notify Borrower and each Bank by telex or 
telecopier of all the Competitive Bids made, the Competitive Bid Rate and 
the principal amount of each Competitive Bid Loan in respect of which a 
Competitive Bid was made and the identity of Bank that made each bid. 
Agent shall send a copy of all Competitive Bids to Borrower and each Bank 
for their records as soon as practicable after completion of the bidding 
process set forth in this Section 2.2.1.

      (d)  Borrower may in its sole and absolute discretion, subject only
to the provisions of this Section 2.2.1(d), accept or reject any Competitive
Bid referred to in paragraph (c) above; provided, however, that the aggregate
amount of the Competitive Bids so accepted by Borrower may not exceed the
principal amount of the Competitive Bid Borrowing requested by Borrower. 
Borrower shall notify Agent by telex or telecopier whether and to what extent
it has decided to accept or reject any or all of the bids referred to in 
paragraph (c) above, not later than 10:00 a.m. (Dallas, Texas time), one (1)
Domestic Business Day before the date specified for a proposed Competitive Bid
Borrowing; provided, however, that (w) the failure by Borrower to give 
such notice shall be deemed to be a rejection of all the bids referred to 
in paragraph(c) above, (x) Borrower shall not accept a bid made at a 
particular Competitive Bid Rate if Borrower has decided to reject a bid 
made at a lower Competitive Bid Rate, (y) if Borrower shall accept bids 
made at a particular Competitive Bid Rate but shall be restricted by 
other conditions hereof from borrowing the principal amount of all 
Competitive Bid Loans in respect of which bids at such Competitive Bid 
Rate have been made, then Borrower shall accept a pro rata portion of 
each bid made at such Competitive Bid Rate based as nearly as possible on 
the respective principal amounts of Competitive Bid Loans for which such 
bids were made, and (z) no bid shall be accepted for a Competitive Bid 
Loan unless such Competitive Bid Loan is in a minimum principal amount of 
$1,000,000 and an integral multiple of $100,000. Notwithstanding the 
foregoing, if it is necessary for Borrower to accept a pro rata 
allocation of the bids made in response to a Competitive Bid Request 
(whether pursuant to the events specified in clause (y) above or 
otherwise) and the available principal amount of 



<PAGE> 22
Competitive Bid Loans to be allocated among Banks is not sufficient to enable
Competitive Bid Loans to be allocated to each Bank in a minimum principal 
amount of $1,000,000 and in integral multiples of $100,000, then Borrower 
shall select Banks to be allocated such Competitive Bid Loans and shall round 
allocations up or down to the next higher or lower multiple of $100,000 
as it shall deem appropriate.  A notice given by Borrower pursuant to 
this paragraph (d) shall be irrevocable.

      (e)  Agent shall promptly notify each bidding Bank whether or not its
Competitive Bid has been accepted (and if so, in what amount and at what 
Competitive Bid Rate) by telex or telecopier sent by Agent, and each 
successful bidder will thereupon become bound, subject to the other applicable
conditions hereof, to make the Competitive Bid Loan in respect of which its 
bid has been accepted.  After completing the notifications referred to in the
immediately preceding sentence, Agent shall notify each Bank of the aggregate
principal amount of all Competitive Bids accepted.

       (f)  No Competitive Bid Borrowing shall be made within five (5) 
Business Days of the date of any other Competitive Bid Borrowing unless 
Borrower and Agent shall mutually agree otherwise.

       (g)  If Agent shall at any time have a Commitment hereunder and 
shall elect to submit a Competitive Bid in its capacity as a Bank, it shall
submit such bid directly to Borrower at least one half of an hour earlier
than the latest time at which the other Banks are required to submit their
bids to Agent pursuant to paragraph (b) above.

       (h)  All notices required by this Section 2.2.1 shall be made 
in accordance with Section 13.1.

          2.2.2.    Method of Committed Borrowing.  (a) In order to 
request Committed Loans, Borrower shall hand deliver, telex or telecopy 
to Agent a duly completed Request for Committed Loans prior to 12:00 noon 
(Dallas, Texas time), (i) at least one (1) Domestic Business Day before 
the date specified for a proposed Base Rate Borrowing, and (ii) at least 
three (3) Eurodollar Business Days before the date of a proposed 
Eurodollar Borrowing.  Each Request for Committed Loans shall be 
substantially in the form of Exhibit F hereto, and shall specify:

                    (i)   the date of such Committed Borrowing, which 
                          shall be a Domestic Business Day in the case of a
                          Committed Borrowing comprised of Base Rate Loans or
                          a Eurodollar Business Day in the case of a Committed
                          Borrowing comprised of Eurodollar Loans; 



<PAGE> 23
                    (ii)  the aggregate amount of such Committed Borrowing; 

                    (iii) whether the Loans comprising such Committed 
                          Borrowing are to be Base Rate Loans or Eurodollar
                          Loans; and

                    (iv)  in the case of a Committed Borrowing comprised 
                          of Eurodollar Loans the duration of the Interest
                          Period applicable thereto, subject to the provisions
                          of the definition of Interest Period.

                    (b)   Upon receipt of a Request for Committed Loans, 
         Agent shall promptly notify each Bank of the contents thereof and the 
         amount of the Committed Borrowing to be loaned by such Bank pursuant 
         thereto, and such Request for Committed Loans shall not thereafter be 
         revocable by Borrower.

                    (c)   Not later than 12:00 noon (Dallas, Texas time) on 
         the date of each Committed Borrowing, each Bank shall (except as 
         provided in Section 2.2.2(d)) make available that portion of such 
         Committed Borrowing allocated to such Bank pursuant to Section 2.1
         (a) in Federal or other funds immediately available in Dallas, Texas
         to Agent at its address referred to in Section 13.1.  Notwithstanding
         the foregoing, if Borrower delivers to Agent a Request for Committed
         Loans prior to 10:00 a.m. (Dallas, Texas time) on a Domestic Business
         Day requesting a Committed Borrowing comprised of Base Rate Loans on
         such day, each Bank shall use its best efforts to make available to
         Agent that portion of such Committed Borrowing allocated to such 
         Bank pursuant to Section 2.1 by 1:00 p.m. (Dallas, Texas time) on 
         the same day. Unless Agent determines that any applicable condition
         specified in Section 6.2 has not been satisfied, Agent will make the
         funds so received from Banks available to Borrower at Agent's 
         aforesaid address.

                    (d)   If any Bank makes a new Committed Loan hereunder 
         on a day on which Borrower is to repay all or any part of an 
         outstanding Loan from much Bank, such Bank shall apply the proceeds 
         of its new Committed Loan to make such repayment and only an amount
         equal to the difference (if any) between the amount being borrowed 
         and the amount being repaid shall be made available by such Bank to
         Agent or remitted by Borrower to Agent, as the case may be.

     SECTION 2.3.  Method of Obtaining Letters of Credit.  (a) Borrower 
shall give Agent notice (a "Request for Letter of Credit") prior to 12:00 
noon (Dallas, Texas time) at least three Domestic Business Days before 
the date Borrower requests that a Letter of Credit be issued.  Each 
Request for Letter of Credit shall be substantially in the form of 
Exhibit G attached hereto 



<PAGE> 24
and shall be accompanied by the executed, complete letter of credit 
application and agreement referenced in Section 2.1(b).

          (b)  Upon receipt of a Request for Letter of Credit, Agent 
shall promptly notify each Bank of the contents thereof and of the 
material provisions of the related letter of credit application and 
agreement.  Agent shall provide a copy of the Request for Letter of 
Credit and the original counterpart of the letter of credit application 
and agreement to the proposed Issuer.

          (c)  Provided that the proposed Issuer agrees to issue the 
requested Letter of Credit, and provided further that Agent has not 
determined that a condition to such issuance referred to in Section 6.2 
has not been satisfied, not later than 12:00 noon (Dallas, Texas time) on 
the date Borrower requests that such Letter of Credit be issued, the 
Issuer shall issue such Letter of Credit and deliver the same to the 
beneficiary thereof and shall promptly thereafter provide notice thereof 
to each other Bank.  

     SECTION 2.4.  Notes.  The Committed Loans of each Bank shall be 
evidenced by a single Committed Note payable to the order of such Bank in 
an amount equal to such Bank's Commitment.  The Competitive Bid Loans of 
each Bank shall be evidenced by a single Competitive Bid Note payable to 
the order of such Bank in an amount equal to such Bank's Commitment.  

     SECTION 2.5.  Interest Rates.  (a) Each Committed Base Rate Loan 
shall bear interest on the outstanding principal balance thereof at a 
rate per annum equal to the sum of the Applicable Margin plus the Base 
Rate in effect from day to day, each change in the Base Rate to be 
effective without notice to Borrower on the effective date of each such 
change, provided that in no event shall the rate charged hereunder or 
under the Notes exceed the Maximum Lawful Rate.  Interest on each Base 
Rate Loan shall be payable as it accrues on each Quarterly Date.

          (b)  Each Eurodollar Loan shall bear interest on the 
outstanding principal amount thereof, for the Interest Period applicable 
thereto, at a rate per annum equal to the sum of the Applicable Margin 
plus the applicable Adjusted Eurodollar Rate; provided that in no event 
shall the rate charged hereunder or under the Notes exceed the Maximum 
Lawful Rate.  Interest on each Eurodollar Loan having an Interest Period 
of one, two or three months shall be payable on the last day of the 
Interest Period applicable thereto.  Interest on each Eurodollar Loan 
having an Interest Period of six, nine, or twelve months, shall be 
payable on the last day of the Interest Period applicable thereto and on 
each Quarterly Date during such Interest Period.

          (c)   Each Competitive Bid Loan shall bear interest at a rate 
per annum equal to the fixed rate of interest offered by Bank making such 
Competitive Bid Loan in such Bank's Competitive Bid and accepted by 
Borrower pursuant to Section 2.2.1; provided, that in no event shall the 
rate charged hereunder or under the Notes exceed the Maximum Lawful Rate.  
Interest on each Competitive Bid Loan shall be payable on the last day of 
the Interest Period applicable thereto.  



<PAGE> 25
          (d)  In addition to the interest which accrues and is payable 
on Competitive Bid Loans pursuant to Section 2.5(c) above, on any date 
that (i) the Borrowing Base is greater than $60,000,000, and (ii) the 
ratio of (a) Outstanding Credit, to (b) the Borrowing Base in effect on 
such date, equals or exceeds .75 to 1, additional interest ("Additional 
Interest") shall accrue on the outstanding principal balance of all 
Competitive Bid Loans at the rate of .25% per annum; provided, that, in 
no event shall Additional Interest be charged hereunder or under the 
Competitive Bid Notes to the extent that such Additional Interest causes 
the aggregate interest charged hereunder or under the Competitive Bid 
Notes to exceed the Maximum Lawful Rate.  All Additional Interest which 
accrues on Competitive Bid Loans shall be payable on the same day as, but 
in addition to, the interest which is otherwise payable on such 
Competitive Bid Loans pursuant to Section 2.5(c).

          (e)  With respect to Committed Loans, Agent shall determine 
each interest rate applicable to the Committed Loans in accordance with 
the terms hereof.  Agent shall promptly notify Borrower and Banks by 
telex, telecopy or cable of each rate of interest so determined, and its 
determination thereof shall be conclusive in the absence of manifest 
error.

          (f)  Notwithstanding the foregoing, if at any time the rate of 
interest calculated with reference to the Base Rate, any Competitive Bid 
Rate accepted by Borrower or the Adjusted Eurodollar Rate hereunder 
together with any Additional Interest, if applicable, (the "contract 
rate") is limited to the Maximum Lawful Rate, any subsequent reductions 
in the contract rate shall not reduce the rate of interest on the 
affected Loan below the Maximum Lawful Rate until the total amount of 
interest accrued equals the amount of interest which would have accrued 
if the contract rate had at all times been in effect.  In the event that 
at maturity (stated or by acceleration), or at final payment of any Note, 
the total amount of interest paid or accrued on such Note is less than 
the amount of interest which would have accrued if the contract rate had 
at all times been in effect with respect thereto, then at such time, to 
the extent permitted by law, Borrower shall pay to the holder of such 
Note an amount equal to the difference between (i) the lesser of the 
amount of interest which would have accrued if the contract rate had at 
all times been in effect and the amount of interest which would have 
accrued if the Maximum Lawful Rate had at all times been in effect, and 
(ii) the amount of interest actually paid on such Note.

     SECTION 2.6.  Mandatory Repayments after Conversion Date.  On each 
Quarterly Date after the Conversion Date (commencing with the Quarterly 
Date immediately following the Conversion Date), Borrower shall make a 
mandatory prepayment of the principal of the Loans then outstanding in an 
amount equal to one sixteenth (1/16th) of the aggregate principal balance 
of all Loans outstanding on the Conversion Date.

     SECTION 2.7.  Voluntary Prepayments.  Borrower may, subject to 
Section 5.1 and the other provisions of this Agreement, upon three (3) 
Business Days advance notice to Agent, prepay the principal of Loans then 
outstanding in whole or in part.  Any partial prepayment shall be in a 
minimum amount of $500,000 and shall be in an integral multiple of 
$100,000 and, to the extent made after the Conversion Date (a) may not be 
reborrowed hereunder, and (b) shall 



<PAGE> 26
be applied to the mandatory prepayments required by Section 2.6 hereof in
the inverse order of maturity.

     SECTION 2.8.  Mandatory Reduction of Commitments.  The Total 
Commitment shall reduce (and the Commitments of each Bank shall reduce 
ratably) on the Conversion Date to an amount equal to the aggregate 
principal balance of all Loans outstanding on the Conversion Date.  The 
Total Commitment shall reduce thereafter (and the Commitments of each 
Bank shall reduce ratably) (a) on each Quarterly Date in an amount equal 
to the mandatory prepayment required to be made on such date pursuant to 
Section 2.6, and (b) on the date of each voluntary prepayment make 
pursuant to Section 2.7 after the Conversion Date, by the amount of such 
voluntary prepayment.

     SECTION 2.9.  Voluntary Reduction of Commitments and Prepayment of 
Loans.  Borrower may, by notice to Agent five (5) Domestic Business Days 
prior to the effective date of any such reduction, reduce the Total 
Commitment (and thereby reduce the Commitment of each Bank ratably) in 
amounts not less than $5,000,000 or any larger multiple of $5,000,000.  
On the effective date of any such reduction, Borrower shall, to the 
extent required as a result of such reduction, make a principal payment 
on the Loans in an amount sufficient to cause the principal balance of 
all Loans then outstanding to be equal to or less than the Total 
Commitment as thereby reduced.  Notwithstanding the foregoing, Borrower 
shall not be permitted to voluntarily reduce the Total Commitment to an 
amount less than the aggregate Letter of Credit Exposure of all Banks.

     SECTION 2.10.  Termination of Commitments; Final Maturity; Maturity 
of Eurodollar and Competitive Bid Loans.  The Total Commitment (and the 
Commitment of each Bank) shall terminate, and the entire outstanding 
principal balance of all Loans, all interest accrued thereon, all accrued 
but unpaid fees hereunder and all other outstanding Obligations shall be 
due and payable in full on the Termination Date.  All Eurodollar Loans 
and Competitive Bid Loans shall be due and payable on the expiration of 
the Interest Period applicable thereto; provided, that, to the extent 
permitted by Section 2.1(a) and 6.2, such Loans may be refinanced on such 
date pursuant to a Refunding Borrowing.

     SECTION 2.11.  Application of Payments.  Each repayment pursuant to 
Sections 2.6, 2.7, 2.9, 2.10, 3.4 or 4.5 shall be made together with 
accrued interest on the amount repaid to the date of payment, and shall 
be applied to payment of the Loans of Banks in accordance with Section 
4.2 and the other provisions of this Agreement.

     SECTION 2.12.  Commitment Fee.  On the Conversion Date, on each 
Quarterly Date prior to the Conversion Date, and, in the event the 
Commitments are terminated in their entirety prior to the Conversion 
Date, on the date of such termination, Borrower shall pay to Agent, for 
the ratable benefit of each Bank based on each Bank's Commitment 
Percentage, a commitment fee equal to the Commitment Fee Percentage 
(applied on a per annum basis and computed on the basis of actual days 
elapsed and as if each calendar year consisted of 365 days) of the 
average daily Availability for the Fiscal Quarter (or portion thereof) 
ending on such Quarterly Date.



<PAGE> 27
     SECTION 2.13.  Agency Fee.  Borrower shall pay to Agent and its 
Affiliates such other fees and amounts as Borrower shall be required to 
pay to Agent and its Affiliates from time to time pursuant to any 
separate agreement between Borrower and Agent or such Affiliates.  Such 
fees and other amounts shall be retained by Agent and its Affiliates, and 
no Bank (other than Agent) shall have any interest therein. 


                           ARTICLE III

                         BORROWING BASE

     SECTION 3.1.  Reserve Report; Proposed Borrowing Base.  As soon as 
available and in any event by March 1 of each year, Borrower shall (a) 
make or cause to be made available to Agent and each Bank for its review 
and inspection at Borrower's offices in Taft, California and at the 
offices of the Approved Petroleum Engineer a Reserve Report prepared as 
of the immediately preceding December 31, and (b) deliver to Agent and 
each Bank a Reserve Summary and a Reserve Engineer's Letter prepared with 
respect to such Reserve Report.  Simultaneously with the delivery to 
Agent and each Bank of each Reserve Summary and Reserve Engineer's 
Letter, Borrower shall notify each Bank of the amount of the Borrowing 
Base which Borrower requests become effective on the next April 1 (or 
such date promptly following April 1 as Required Banks shall elect).  

     SECTION 3.2.  Scheduled Redeterminations of the Borrowing Base; 
Procedures and Standards.  Based in part on the Reserve Report made 
available to Banks pursuant to Section 3.1, Banks shall redetermine the 
Borrowing Base on or prior to the next April 1 (or such date promptly 
thereafter as Required Banks shall elect).  Any Borrowing Base which 
becomes effective as a result of any Redetermination of the Borrowing 
Base shall be subject to the following restrictions: (a) such Borrowing 
Base shall not exceed the Borrowing Base requested by Borrower pursuant 
to Sections 3.1 or 3.3 (as applicable), (b) such Borrowing Base shall not 
exceed the Total Commitment then in effect, (c) to the extent such 
Borrowing Base represents an increase from the Borrowing Base in effect 
prior to such Redetermination, such Borrowing Base shall be approved by 
all Banks, and (d) any Borrowing Base which represents a decrease in the 
Borrowing Base in effect prior to such Redetermination shall be approved 
by Required Banks.  Subject to Banks consistent application of their 
respective standards for similar credits (which may vary from Bank to 
Bank) each Redetermination shall be made by Banks in their sole 
discretion.  Without limiting such discretion, Borrower acknowledges and 
agrees that Banks (i) may make such assumptions regarding appropriate 
existing and projected pricing for hydrocarbons as they deem appropriate 
in their sole discretion, (ii) may make such assumptions regarding 
projected rates and quantities of future production of hydrocarbons from 
the Borrowing Base Properties as they deem appropriate in their sole 
discretion, (iii) may consider the projected cash requirements of 
Borrower, (iv) are not required to consider any asset other than 
Borrowing Base Properties, and (v) may make such other assumptions, 
considerations and exclusions as Banks deem appropriate in the exercise 
of their sole discretion.  Promptly following any Redetermination of the 
Borrowing Base, Agent shall notify Borrower of the amount of the 



<PAGE> 28
Borrowing Base as redetermined, which Borrowing Base shall be effective as of
the date of such notice, and shall remain in effect for all purposes of 
this Agreement until the next Scheduled or Special Redetermination.

     SECTION 3.3  Special Redetermination.  (a) In addition to Scheduled 
Redeterminations, Required Banks shall be permitted to make a Special 
Redetermination of the Borrowing Base once in each Fiscal Year if (i) 
Required Banks have determined, in their sole discretion, that the 
discounted present value of the Borrowing Base Properties has decreased 
by twenty five percent (25%) or more since the effective date of the most 
recent Redetermination (and in making such determination, Banks may make 
such assumptions regarding appropriate existing and projected pricing for 
hydrocarbons and rates and quantities of future production of 
hydrocarbons as such Banks deem appropriate in their sole discretion), 
and (ii) either (A) a Borrowing Base Deficiency will exist after such 
Special Redetermination is made, or (B) the Borrowing Base in effect 
after such Special Redetermination is made will be at least twenty five 
percent (25%) less than the Borrowing Base in effect prior to such 
Redetermination.  Any request by Required Banks pursuant to this Section 
3.3(a) shall be submitted to Agent and Borrower.

          (b)  In addition to Scheduled Redeterminations, Borrower shall 
be permitted to request a Special Redetermination of the Borrowing Base 
once in each Fiscal Year.  Such request shall be submitted to Agent and 
Required Banks and at the time of such request Borrower shall (i) make, 
or cause to be made, a Reserve Report available to Agent and the Banks 
for their review and inspection at Borrower's offices in Taft, 
California, and at the offices of the Approved Petroleum Engineer, and 
(ii) deliver to Agent and each Bank a Reserve Summary and Reserve 
Engineer's Letter prepared with respect to such Reserve Report.  Together 
with such request, Borrower shall also notify each Bank of the Borrowing 
Base requested by Borrower in connection with such Special 
Redetermination;

          (c)  Any Special Redetermination shall be made by Banks in 
accordance with the procedures and standards set forth in Section 3.2; 
provided, that, no Reserve Report, Reserve Summary or Reserve Engineer's 
Letter will be required to be made available or delivered to Banks in 
connection with any Special Determination requested by Required Banks 
pursuant to clause (a) above.

     SECTION 3.4.  Borrowing Base Deficiency.  If a Borrowing Base 
Deficiency exists after giving effect to any Redetermination, Borrower 
shall be obligated to eliminate such Borrowing Base Deficiency over a 
period not to exceed six (6) months from the effective date of such 
Redetermination by making six (6) mandatory, equal, consecutive, monthly 
payments of principal on the Loans, each of which shall be in the amount 
of one sixth (1/6th) of such Borrowing Base Deficiency.  The first of 
such six (6) payments shall be due on the thirtieth (30th) day following 
the effective date of each such Redetermination and each subsequent 
payment shall be due on the same day of each month thereafter (or if 
there is no corresponding day of any subsequent month, then on the last 
day of such month).  If a Borrowing Base Deficiency cannot be eliminated 
pursuant to this Section 3.4, by prepayment of all outstanding Loans in 
full (as a result of outstanding Letter of Credit Exposure), 
simultaneously with each principal payment required 



<PAGE> 29
pursuant to this Section 3.4, Borrower shall deposit cash or U.S. Treasury 
securities with a maturity of one year or less with Agent, to be held by 
Agent to secure outstanding Letter of Credit Exposure in the manner 
contemplated by Section 2.1(b), in an amount at least equal to one sixth
(1/6th) of the aggregate amount of cash or Treasury securities which must be
deposited with Agent to fully eliminate such Borrowing Base Deficiency.

     SECTION 3.5.  Initial Borrowing Base.  The Borrowing Base shall be 
$50,000,000 for the period commencing on the Closing Date and ending on 
the effective date of the first Redetermination after the Closing Date.


                            ARTICLE IV

                        GENERAL PROVISIONS

     SECTION 4.1.  Delivery and Endorsement of Notes.  Simultaneously 
with the execution of this Agreement, Agent shall deliver to each Bank 
the Notes payable to such Bank referenced in Section 6.1(a).  Each Bank 
may endorse (and prior to any transfer of its Note shall endorse) on the 
schedules forming a part thereof appropriate notations to evidence the 
date and amount of each Loan made by it, the Interest Period applicable 
thereto, and the date and amount of each payment of principal made by 
Borrower with respect thereto, provided that the failure by any Bank to 
so endorse its Note shall not affect the liability of Borrower for the 
repayment of all amounts outstanding under such Note together with 
interest thereon.  Each Bank is hereby irrevocably authorized by Borrower 
to endorse its Note and to attach to and make a part of any Note a 
continuation of any such schedule as required.

     SECTION 4.2.  General Provisions as to Payments.  (a)  Borrower 
shall make each payment of principal of, and interest on, the Loans and 
all fees payable hereunder shall be paid not later than 12:00 noon  
(Dallas, Texas time) on the date when due, in Federal or other funds 
immediately available in Dallas, Texas, to Agent at its address referred 
to in Section 13.1.  Agent will promptly (and if such payment is received 
by Agent by 10:00 a.m., and otherwise if reasonably possible, on the same 
Domestic Business Day) distribute to each Bank its share (as determined 
in accordance with the other provisions of this Agreement) of each such 
payment received by Agent for the account of Banks.  Whenever any payment 
of principal of, or interest on, Base Rate Loans or Competitive Bid Loans 
or of fees shall be due on a day which is not a Domestic Business Day, 
the date for payment thereof shall be extended to the next succeeding 
Domestic Business Day (subject to the definition of Interest Period).  
Whenever any payment of principal of, or interest on, the Eurodollar 
Loans shall be due on a day which is not a Eurodollar Business Day, the 
date for payment thereof shall be extended to the next succeeding 
Eurodollar Business Day (subject to the definition of Interest Period).  
If the date for any payment of principal is extended by operation of Law 
or otherwise, interest thereon shall be payable for such extended time.  
Borrower hereby authorizes Agent to charge from time to time against 
Borrower's accounts with Agent any amount then due.



<PAGE> 30
          (b)  Prior to the occurrence of an Event of Default, all 
principal payments received by Banks on Competitive Bid Loans shall be 
applied to the Competitive Bid Loans directed by Borrower, and all 
principal payments received by Banks in respect of Committed Loans shall 
be applied to the Committed Loans of each Bank in the manner required 
pursuant to Section 2.1(a) hereof.  Any payments so received by any Bank 
shall, to the extent consistent with the foregoing, be applied, first, to 
Loans with Interest Periods ending on the date of such payment, then to 
Base Rate Loans next maturing, then to Eurodollar Loans or Competitive 
Bid Loans (as Borrower shall elect but in the absence of such election, 
in such order as Agent shall elect), next maturing until such principal 
payment is fully applied with such adjustments in such order of payment 
as Agent shall specify in order that each Bank receives its ratable share 
of each such payment.

          (c)  After the occurrence of an Event of Default, all amounts 
collected or received by Agent or any Bank in respect of the Obligations 
shall be applied first to the payment of all proper costs incurred by 
Agent in connection with the collection thereof (including reasonable 
expenses and disbursements of Agent), second to the payment of all proper 
costs incurred by Banks in connection with the collection thereof 
(including reasonable expenses and disbursements of Banks), third to the 
reimbursement of any advances made by Banks to effect performance of any 
unperformed covenants of Borrower under any of the Loan Papers, fourth to 
the payment of any unpaid agency fees required pursuant to Section 2.13, 
fifth to the payment of any unpaid fees required pursuant to Sections 
2.1(b), and 2.12 and sixth, to payment of the Loans to each Bank in 
accordance with each Bank's Sharing Percentage.

     SECTION 4.3.  Computation of Interest.  Interest payable on the 
Loans hereunder shall be computed based on the number of actual days 
elapsed assuming that each calendar year consisted of 360 days.

     SECTION 4.4.  Overdue Principal and Interest.  Any overdue principal 
of and, to the extent permitted by Law, overdue interest on any Loan 
shall bear interest, payable on demand, for each day until paid at a rate 
per annum equal to the lesser of (a) the sum of three percent (3%) plus 
the Base Rate, or (b) the Maximum Lawful Rate.

      SECTION 4.5.  Capital Adequacy.  Notwithstanding any provision 
contained herein to the contrary, if, with respect to all or any portion 
of any Commitment, any Law is hereafter promulgated or adopted regarding 
capital adequacy, or any change is hereafter made or adopted with respect 
to any existing Law regarding capital adequacy, or any ruling or 
interpretation regarding capital adequacy is hereafter made by any 
Governmental Authority or central bank or other comparable authority, or 
any Bank complies with any request or directive hereafter made by any 
Governmental Authority or central bank or other comparable authority 
regarding capital adequacy (whether or not having the force of Law), and 
the effect of any of the foregoing is to cause a reduction in the rate of 
return on such Bank's capital as a consequence of such Bank's obligations 
hereunder to a level below that which such Bank otherwise could have 
achieved (taking into consideration its policies with respect to capital 
adequacy) by an amount deemed by such Bank to be material (and such Bank 
may, in determining such amount, utilize such 



<PAGE> 31
assumptions and allocations of costs and expenses as such Bank shall deem 
reasonable and may use any reasonable averaging or attribution method), then,
such Bank shall notify Borrower and Agent and deliver to Borrower and Agent a
certificate setting forth in reasonable detail (a) the Law (or change therein
or change in interpretation thereof) giving rise to such request for 
compensation, and (b) the calculation of the amount necessary to 
compensate such Bank therefor, which certificate shall constitute prima 
facie evidence of the contents thereof.  Borrower shall promptly pay such 
amount to such Bank; provided, however, that no Bank shall make any 
request for compensation under this Section 4.5, and Borrower shall not 
be obligated to compensate any Bank under this Section 4.5 for any 
reduction on the rate of return on such Bank's capital for any period 
prior to the 180th day prior to the date of any notice requesting 
compensation delivered pursuant to this Section 4.5.

     SECTION 4.6.  Taxes.  All amounts payable by Borrower under the Loan 
Papers (whether principal, interest, fees, expenses, or otherwise) to or 
for the account of each Bank shall be paid in full, free of any 
deductions or withholdings for or on account of any Taxes.  If Borrower 
is prohibited by Law from paying any such amount free of any such 
deductions and withholdings, then (at the same time and in the same 
manner that such original amount is otherwise due under the Loan Papers) 
Borrower shall pay to or for the account of such Bank such additional 
amount as may be necessary in order that the actual amount received by 
such Bank after deduction and/or withholding (and after payment of any 
additional Taxes due as a consequence of the payment of such additional 
amount, and so on) will equal the amount such Bank would have received if 
such deduction or withholding were not made.

     SECTION 4.7.  Limitation on Number of Eurodollar Loans and 
Competitive Bid Loans.  Unless otherwise agreed by Agent with the consent 
of the Required Banks, there may be no more than an aggregate of ten (10) 
Eurodollar and Competitive Bid Loans outstanding at any time.

     SECTION 4.8.  Foreign Lenders, Participants, and Assignees.  Each 
Bank, Participant (by accepting a participation interest under this 
Agreement), and Assignee (by executing an Assignment and Assumption 
Agreement) that is not organized under the laws of the United States of 
America or one of its states (a) represents to each Agent and Borrower 
that (i) no Taxes are required to  be withheld by Agent or Borrower with 
respect to any payments to be made to it in respect of the Obligations 
and (ii) it has furnished to Agent and Borrower two duly completed copies 
of either U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, 
or other form acceptable to Agent that entitles it to exemption from U.S. 
federal withholding Tax on all interest payments under the Loan Papers, 
and (b) covenants to (i) provide Agent and Borrower a new Form 4224, Form 
1001, Form W-8, or other form acceptable to Agent upon the expiration or 
obsolescence of any previously delivered form according to applicable 
laws and regulations, duly executed and completed by it, and (ii) comply 
from time to time with all applicable laws and regulations with regard to 
the withholding Tax exemption.  If any of the foregoing is not true or 
the applicable forms are not provided, then Borrower and Agent (without 
duplication) may deduct and withhold from interest payments under the 
Loan Papers any United States federal-income Tax at the maximum rate 
under the Code, and Borrower shall not have to pay such withheld funds to 
the applicable Bank, Participant or Assignee to satisfy Section 4.6 
hereof.



<PAGE> 32
     SECTION 4.9.  Replacement of a Bank.  If any Bank has requested 
compensation or reimbursement in accordance with the terms of Sections 
4.5, 4.6 or 5.4 hereof or any Bank has notified Agent and Borrower that 
its obligations to make Eurodollar Loans has been suspended pursuant to 
Section 5.3 hereof, and (a) such request or notification is not the 
result of any uniform changes in the statutes or regulations for capital 
adequacy or eurodollar deposits generally, (b) there exists no Default or 
Event of Default hereunder, and (c) the Borrower and such Bank are unable 
to reach a written agreement regarding such request or suspension within 
30 days following written notice by such Bank to the Borrower and Agent 
of such request or suspension, then after the expiration of 30 days 
following the delivery of the notice under Sections 4.5, 4.6, 5.3 or 5.4, 
Borrower may replace such Bank in whole with an Assignee reasonably 
acceptable to Agent pursuant to an Assignment and Assumption Agreement in 
accordance with Section 13.10 hereof.  Until such time as any Bank is 
replaced by Borrower, the Borrower shall reimburse or compensate such 
Bank in accordance with the terms of Sections 4.5, 4.6, or 5.4.


                            ARTICLE V

          SPECIAL PROVISIONS REGARDING EURODOLLAR LOANS
                                 
     SECTION 5.1.  Funding Losses.  If Borrower makes any payment of 
principal with respect to any Eurodollar Loan (whether pursuant to 
Sections 2.6, 2.7, 2.9, 2.10, 3.4, 11.1, the remaining provisions of this 
Article V or as a voluntary or mandatory prepayment or otherwise) on any 
day other than the last day of an Interest Period applicable thereto, or 
if Borrower fails to borrow any Eurodollar Loan or Competitive Bid Loan 
after notice has been given to any Bank in accordance with Section 2.2, 
Borrower shall reimburse each Bank on demand for any resulting loss or 
expense incurred by it, including (without limitation) any loss incurred 
in obtaining, liquidating or employing deposits from third parties, or 
any loss arising from the reemployment of funds at rates lower than the 
cost to such Bank of such funds and related costs, which in the case of 
the payment or prepayment prior to the end of the Interest Period for any 
Eurodollar Loan or Competitive Bid Loan shall include the amount, if any, 
by which (i) the interest which such Bank would have received, absent 
such payment or prepayment for the applicable Interest Period exceeds 
(ii) the interest which such Bank would receive if the amount of such 
Eurodollar Loan or Competitive Bid Loan were deposited, loaned, or placed 
by such Bank in the interbank eurodollar market on the date of such 
payment or prepayment for the remainder of the applicable Interest 
Period.  Such Bank shall promptly deliver to Borrower and Agent a 
certificate as to the amount of such loss or expense, which certificate 
shall be conclusive in the absence of manifest error. 

     SECTION 5.2.  Basis  for Determining Interest Rate Applicable to 
Eurodollar Loans Inadequate.  If on or prior to the first day of any 
Interest Period the Required Banks advise Agent that the Adjusted 
Eurodollar Rate as determined by Agent will not adequately and fairly 
reflect the cost to such Banks of funding their Eurodollar Loans for such 
Interest Period, Agent shall give notice thereof to Borrower and Banks, 
whereupon the obligations of Banks to make



<PAGE> 33
Eurodollar Loans shall be suspended until Agent notifies Borrower that the
circumstances giving rise to such suspension no longer exist.  Unless 
Borrower notifies Agent at least two (2) Domestic Business Days before the
date of any Eurodollar Borrowing for which a Request for Committed Loans has
previously been given that it elects not to borrow on such date, such 
Borrowing shall instead be made as a Base Rate Loan.

     SECTION 5.3.  Illegality of Eurodollar Loans.  (a) If, after the 
date of this Agreement, the adoption of any Law or any change therein, or 
any change in the interpretation or administration thereof by any 
Governmental Authority, central bank or comparable agency charged with 
the interpretation or administration thereof, or compliance by any Bank 
(or its Eurodollar Lending Office) with any request or directive (whether 
or not having the force of law) of any such authority, central bank or 
comparable agency shall make it unlawful or impossible for any Bank (or 
its Eurodollar Lending Office) to make, maintain or fund its Eurodollar 
Loans and such Bank shall so notify Agent, Agent shall forthwith give 
notice thereof to the other Banks and Borrower.  Until such Bank notifies 
Borrower and Agent that the circumstances giving rise to such suspension 
no longer exist, the obligation of such Bank to make Eurodollar Loans 
shall be suspended.  Before giving any notice to Agent pursuant to this 
Section 5.3, such Bank shall designate a different Eurodollar Lending 
Office if such designation will avoid the need for giving such notice and 
will not, in the judgment of such Bank, be otherwise disadvantageous to 
such Bank.  If such Bank shall determine that it may not lawfully 
continue to maintain and fund any of its outstanding Eurodollar Loans to 
maturity and shall so specify in such notice, Borrower shall immediately 
convert the principal amount of each such Eurodollar Loan to a Base Rate 
Loan of an equal principal amount from such Bank (on which interest and 
principal shall be payable contemporaneously with the unaffected 
Eurodollar Loans made by the other Banks).

          (b)  No Bank shall be required to make any Loan hereunder if 
the making of such Loan would be in violation of any Law applicable to 
such Bank.  

     SECTION 5.4.  Increased Cost of Eurodollar Loans.  If, after the 
date hereof, the adoption of any applicable Law or any change therein, or 
any change in the interpretation or administration thereof by any 
Governmental Authority, central bank or comparable agency charged with 
the interpretation or administration thereof, or compliance by any Bank 
(or its Lending Office) with any request or directive (whether or not 
having the force of Law) of any such authority, central bank or 
comparable agency: 

          (a)  shall subject any Bank (or its Lending Office) to any Tax 
with respect to its Eurodollar Loans, or its Notes or its obligation to 
make Eurodollar Loans or shall change the basis of taxation of payments 
to any Bank (or its Lending Office) of the principal of or interest on 
its Eurodollar Loans or any other amounts due under this Agreement in 
respect of its Eurodollar Loans or its obligation to make Eurodollar 
Loans (except for changes in the rate of Tax on the overall net income of 
such Bank or its Lending Office imposed by the jurisdiction in which such 
Bank's principal executive office or Lending Office is located); or 



<PAGE> 34
          (b)  shall impose, modify or deem applicable any reserve, 
special deposit or similar requirement (including, without limitation, 
any such requirement imposed by the Board of Governors of the Federal 
Reserve System, but excluding with respect to any Eurodollar Loan any 
such requirement included in an applicable Eurodollar Reserve Percentage) 
against assets of, deposits with or for the account of or credit extended 
by, any Bank's Lending Office or shall impose on any Bank (or its Lending 
Office) or the London interbank market any other condition affecting its 
Eurodollar Loans, its Notes or its obligation to make Eurodollar Loans; 

and the result of any of the foregoing is to increase the cost to such 
Bank (or its Lending Office) of making or maintaining any Eurodollar 
Loan, or to reduce the amount of any sum received or receivable by such 
Bank (or its Lending Office) under this Agreement or under its Notes with 
respect thereto, by an amount deemed by such Bank to be material, then, 
within five (5) days after demand by such Bank (with a copy to Agent), 
Borrower shall pay to such Bank such additional amount or amounts as will 
compensate such Bank for such increased cost or reduction.  Each Bank 
will promptly notify Borrower and Agent of any event of which it has 
knowledge, occurring after the date hereof, which will entitle such Bank 
to compensation pursuant to this Section 5.4 and will designate a 
different Lending Office if such designation will avoid the need for, or 
reduce the amount of, such compensation and will not, in the judgment of 
such Bank, be otherwise disadvantageous to such Bank.  A certificate of 
any Bank claiming compensation under this Section 5.4 and setting forth 
the additional amount or amounts to be paid to it hereunder shall be 
conclusive in the absence of manifest error.  In determining such amount, 
such Bank may use any reasonable averaging and attribution methods.  

     SECTION 5.5.  Alternative Loans Substituted for Affected Eurodollar 
Loans.  If (a) the obligation of any Bank to make Eurodollar Loans has 
been suspended pursuant to Section 5.3 or (b) any Bank has demanded 
compensation under Section 5.4 and Borrower shall, by at least five (5) 
Eurodollar Business Days prior notice to such Bank through Agent, have 
elected that the provisions of this Section 5.5 shall apply to such Bank, 
then, unless and until such Bank notifies Borrower that the circumstances 
giving rise to such suspension or demand for compensation no longer 
apply: 

          (a)  all Loans which would otherwise be made by such Bank as 
Eurodollar Loans shall be made instead as Base Rate Loans (on which 
interest and principal shall be payable contemporaneously with the 
unaffected Eurodollar Loans of the other Banks), and 

           (b)  after each of its Eurodollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such 
Eurodollar Loans shall be applied to repay its Base Rate Loans.

     SECTION 5.6.  Discretion of Banks as to Manner of Funding.  
Notwithstanding any provisions of this Agreement to the contrary, each 
Bank shall be entitled to fund and maintain its funding of all or any 
part of its Loans in any manner it sees fit, it being understood, 
however, that for the purposes of this Agreement all determinations 
hereunder shall be made as if such Bank had actually funded and 
maintained each Eurodollar Loan during the Interest Period for



<PAGE> 35
such Eurodollar Loan through the purchase of deposits having a maturity 
corresponding to the last day of such Interest Period and bearing an 
interest rate equal to the Eurodollar Rate for such Interest Period.


                            ARTICLE VI

                            CONDITIONS

     SECTION 6.1.  Conditions to Initial Borrowing and Participation in 
Letter of Credit Exposure.  The obligation of each Bank to make a Loan on 
the initial Borrowing and to participate in Letter of Credit Exposure 
hereunder is subject to the condition precedent that, on or before the 
date of such Borrowing or issuance of such Letter of Credit, Agent shall 
have received the following, in form and substance satisfactory to the 
Required Banks:

          (a) a Committed Note and a Competitive Bid Note payable to the 
order of each Bank, each in the amount of such Bank's Commitment, duly 
executed by Borrower, dated the date hereof;

          (b) a copy of the Certificate of Incorporation, and all 
amendments thereto, of Borrower accompanied by a certificate that such 
copy is true, correct and complete, and dated within twenty (20) days of 
the Closing Date, issued by the Secretary of State of the State of 
Delaware, and accompanied by a certificate of the Secretary of Borrower 
or such Subsidiary that such copy is true, correct and complete on the 
date hereof;

          (c) a copy of the Bylaws, and all amendments thereto, of 
Borrower accompanied by a certificate of the Secretary of Borrower that 
such copy is true, correct and complete as of the date hereof;

          (d) certain certificates and other documents issued by the 
appropriate Governmental Authorities of such jurisdictions as Agent has 
requested, relating to the existence of Borrower and to the effect that 
Borrower is in good standing with respect to the payment of franchise and 
similar Taxes and is duly qualified to transact business in such 
jurisdictions;

          (e) a certificate of incumbency of all officers of Borrower who 
will be authorized to execute or attest to any Loan Paper, dated the date 
hereof, executed by the Secretary of Borrower;

          (f) copies of resolutions approving the Loan Papers and 
authorizing the transactions contemplated by this Agreement and the other 
Loan Papers, duly adopted by the Board of Directors of Borrower 
accompanied by certificates, dated the date hereof, of the Secretary of 
Borrower that such copies are true and correct copies of resolutions duly 
adopted at a meeting of or (if permitted by applicable Law and, if 
required by such Law, by the Bylaws of Borrower) by the unanimous written 
consent of the Board of Directors of Borrower, and that such 



<PAGE> 36
resolutions constitute all the resolutions adopted with respect to such 
transactions, have not been amended, modified, or revoked in any respect,
and are in full force and effect as of the date hereof;

          (g) the results of a review of the status of title to the 
Borrowing Base Properties which review shall not reflect that the 
representations and warranties contained in Section 7.10 are inaccurate 
in any respect;

          (h) payment of the fees and other amounts then due pursuant to 
Section 2.12;

          (i) an opinion of Nordman, Cormany, Hair & Compton, counsel for 
Borrower dated the date hereof, favorably opining as to the 
enforceability of each of the Loan Papers and otherwise in form and 
substance satisfactory to Agent and Banks;

          (j)  an opinion of Gardere & Wynne, L.L.P., special counsel for 
Agent, dated the date hereof in form and substance satisfactory to Agent;

          (k)  a certificate signed by an Authorized Officer stating that 
(i) the representations and warranties contained in this Agreement are 
true and correct in all respects, and (ii) no Default has occurred and 
none is in existence;

          (l)  a Certificate of Ownership Interests signed by an 
Authorized Officer of Borrower in the form of Exhibit H attached hereto; 
and

          (m)  such other documents, instruments, agreements and actions 
as may reasonably be required by Agent and each Bank.

     SECTION 6.2.  Conditions to Each Borrowing and Participation in 
Letter of Credit Exposure.  The obligation of each Bank to make Loans on 
each Borrowing and to participate in Letter of Credit Exposure hereunder 
is subject to the satisfaction of each of the following conditions:

          (a)  timely receipt by Agent of a Competitive Bid Request, a 
Request for Committed Loans or a Request for a Letter of Credit (as 
applicable); 

          (b)  immediately before and after giving effect to such 
Borrowing or issuance of such Letter of Credit, no Default shall have 
occurred and be continuing and the making of any Loan in connection with 
such Borrowing or the issuance of the requested Letter of Credit (as 
applicable) shall not cause a Default; 

          (c)  the representations and warranties of Borrower contained 
in this Agreement shall be true and correct on and as of the date of such 
Borrowing or issuance of such Letter of Credit (as applicable); 



<PAGE> 37
          (d)  the amount of the requested Borrowing or the amount of the 
requested Letter of Credit shall not exceed the Availability;

          (e)  no material adverse change in the business, financial 
condition, operations or prospects of Borrower or any of its Subsidiaries 
shall have occurred; and

          (f)  the making of such Loans or the issuance of such Letter of 
Credit shall be permitted by applicable Law.

Each Borrowing hereunder shall be deemed to be a representation and 
warranty by Borrower on the date of such Borrowing as to the facts 
specified in Sections 6.2(b) through (e).  

     SECTION 6.3.  Materiality of Conditions.  Each condition precedent 
herein is material to the transactions contemplated herein, and time is 
of the essence in respect of each thereof.


                           ARTICLE VII

                  REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to Agent and each Bank as follows:

     SECTION 7.1.  Corporate Existence and Power (Borrower).  Borrower 
(a) is a corporation duly incorporated, validly existing and in good 
standing under the laws of the State of Delaware, (b) has all corporate 
power and all material governmental licenses, authorizations, consents 
and approvals required to carry on its businesses as now conducted and as 
proposed to be conducted, and (c) is duly qualified to transact business 
as a foreign corporation in each jurisdiction where a failure to be so 
qualified could have a material adverse effect on the business, financial 
condition, operations or prospects of Borrower and its Subsidiaries 
considered as a whole.

     SECTION 7.2.  Existence and Power (Subsidiaries).  Each Subsidiary 
of Borrower (a) is a corporation, limited liability company or 
partnership duly incorporated or organized (as applicable) validly 
existing and in good standing under the laws of its state of 
incorporation or organization (as applicable), (b) has all corporate, 
limited liability company or partnership power (as applicable) and all 
material governmental licenses, authorizations, consents and approvals 
required to carry on its businesses as now conducted and as proposed to 
be conducted, and (c) is duly qualified to transact business as a foreign 
corporation, foreign limited liability company or foreign partnership (as 
applicable) in each jurisdiction where a failure to be so qualified could 
have a material adverse effect on their respective financial condition or 
operations.

     SECTION 7.3.  Corporate and Governmental Authorization; 
Contravention.  The execution, delivery and performance of this 
Agreement, the Notes and the other Loan Papers by Borrower are within 
Borrower's corporate powers, when executed will be duly authorized by all 
necessary corporate action, require no action by or in respect of, or 
filing with, any Governmental 



<PAGE> 38
Authority and do not contravene, or constitute a default under, any provision
of applicable Law (including, without limitation, the Margin Regulations) or
of the Certificate of Incorporation or bylaws of Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon Borrower
or any of its Subsidiaries or result in the creation or imposition of any 
Lien on any asset of Borrower or any of its Subsidiaries.

     SECTION 7.4.  Binding Effect.  This Agreement constitutes a valid 
and binding agreement of Borrower; the Notes and the other Loan Papers 
when executed and delivered in accordance with this Agreement, will 
constitute valid and binding obligations of Borrower; and each Loan Paper 
is enforceable against Borrower in accordance with its terms except as 
(i) the enforceability thereof may be limited by bankruptcy, insolvency 
or similar laws affecting creditors rights generally, and (ii) the 
availability of equitable remedies may be limited by equitable principles 
of general applicability.

     SECTION 7.5.  Financial Information.  (a) The most recent annual 
audited consolidated balance sheet of Borrower and the related 
consolidated statements of operations and cash flows for the fiscal year 
then ended, copies of which have been delivered to each of Banks, fairly 
present, in conformity with GAAP, the consolidated financial position of 
Borrower as of the end of such fiscal year and its consolidated results 
of operations and cash flows for such fiscal year.

          (b)  The most recent quarterly unaudited consolidated balance 
sheet of Borrower delivered to Banks, and the related unaudited 
consolidated statements of operations and cash flows for the portion of 
Borrower's fiscal year then ended, fairly present, in conformity with 
GAAP applied on a basis consistent with the financial statements referred 
to in Section 7.5(a), the consolidated financial position of Borrower as 
of such date and its consolidated results of operations and cash flows 
for such portion of Borrower's fiscal year.

          (c)  Except as disclosed in writing to Banks prior to the 
execution and delivery of this Agreement, since the date of the most 
recent quarterly consolidated balance sheet and consolidated statements 
of operations and cash flow delivered to Banks, there has been no 
material adverse change in the business, financial position, results of 
operations or prospects of Borrower or any of its Subsidiaries.

     SECTION 7.6.  Litigation.  Except for matters disclosed on Schedule 
3 attached hereto, there is no action, suit or proceeding pending 
against, or to the knowledge of Borrower, threatened against or affecting 
Borrower or any of its Subsidiaries before any Governmental Authority in 
which there is a reasonable possibility of an adverse decision which 
could materially adversely affect the business, financial condition, 
operations or prospects of Borrower and its Subsidiaries considered as a 
whole, or which could in any manner draw into question the validity of 
the Loan Papers.

     SECTION 7.7.  ERISA.  Neither Borrower nor any ERISA Affiliate 
maintains or contributes to any Plan other than those disclosed to Agent 
in writing.  Neither Borrower nor any ERISA Affiliate maintains or has 
ever maintained or been obligated to contribute to any Plan 



<PAGE> 39
covered by Title IV of ERISA or subject to the funding requirements of Section
412 of the Code or Section 302 of ERISA, or a "multiemployer plan" as defined 
in Section 4001(a)(3) of ERISA.  Each Plan maintained by Borrower or any 
ERISA Affiliate is in compliance in all material respects with the 
applicable provisions of ERISA, the Code and any other applicable Federal 
or state law, rule or regulation.  All returns, reports and notices 
required to be filed with any regulatory agency with respect to any Plan 
have been filed timely.  Neither Borrower nor any ERISA Affiliate has 
failed to make any contribution or pay any amount due or owing as 
required by the terms of any Plan.  There are no pending or, to the best 
of Borrower's knowledge, threatened claims, lawsuits, investigations or 
actions (other than routine claims for benefits in the ordinary course) 
asserted or instituted against, and neither Borrower nor any ERISA 
Affiliate has knowledge of any threatened litigation or claims against, 
the assets of any Plan or its related trust or against any fiduciary of a 
Plan with respect to the operation of such Plan that are likely to result 
in liability of Borrower having a material adverse effect on the 
business, financial condition, operations or prospects of Borrower and 
its Subsidiaries considered as a whole.  Each Plan that is intended to be 
"qualified" within the meaning of section 401(a) of the Code is, and has 
been during the period from its adoption to date, so qualified, both as 
to form and operation and all necessary governmental approvals, including 
a favorable determination as to the qualification under the Code of such 
Plan and each amendment thereto, have been or will be timely obtained.  
Neither Borrower nor any ERISA Affiliate has engaged in any prohibited 
transactions, within the meaning of section 406 of ERISA or section 4975 
of the Code, in connection with any Plan which would result in liability 
of Borrower having a material adverse effect on the business, financial 
condition, operations or prospects of Borrower and its Subsidiaries 
considered as a whole.  Neither Borrower nor any ERISA Affiliate 
maintains or contributes to any Plan that provides a post-employment 
health benefit, other than a benefit required under Section 601 of ERISA, 
or maintains or contributes to a Plan that provides health benefits that 
is not fully funded.  Neither Borrower nor any ERISA Affiliate maintains, 
has established or has ever participated in a multiple employer welfare 
benefit arrangement within the meaning of section 3(40)(A) of ERISA.

     SECTION 7.8.  Taxes and Filing of Tax Returns.  Borrower and each of 
its Subsidiaries have filed all material tax returns required to have 
been filed and have paid all Taxes shown to be due and payable on such 
returns, including interest and penalties, and all other Taxes which are 
payable by such party, to the extent the same have become due and 
payable, other than Taxes with respect to which a failure to pay would 
not have a material adverse effect on the business, financial condition, 
operations or prospects of Borrower and its Subsidiaries considered as a 
whole.  Borrower does not know of any proposed material Tax assessment 
against it or any of its Subsidiaries, and all Tax liabilities of each of 
Borrower and its Subsidiaries are adequately provided for.  Except as 
hereinafter disclosed in writing to Banks, no income tax liability of 
Borrower or any of its Subsidiaries has been asserted by the Internal 
Revenue Service for Taxes in excess of those already paid which assertion 
is reasonably expected to be ultimately resolved in a manner adverse to 
Borrower and which, if so resolved, will have a material adverse effect 
on the business, financial condition, operations or prospects of Borrower 
and its Subsidiaries considered as a whole.



<PAGE> 40
     SECTION 7.9.  Ownership of Properties Generally.  Borrower and each 
of its Subsidiaries have good and valid fee simple or leasehold title to 
all material properties and assets purported to be owned by them, 
including, without limitation, all assets reflected in the balance sheets 
referred to in Section 7.5 (a) and (b) and all assets which are used by 
Borrower and its Subsidiaries in the operation of their respective 
businesses, and none of such properties or assets is subject to any Lien 
other than Permitted Encumbrances.

     SECTION 7.10.  Mineral Properties.  Borrower has good, indefeasible, 
record title to all Mineral Interests described in the Reserve Report, 
free and clear of all Liens except Permitted Encumbrances.  All such 
Mineral Interests are valid, subsisting, and in full force and effect, 
and all rentals, royalties, and other amounts due and payable in respect 
thereof have been duly paid.  Without regard to any consent or non-
consent provisions of any joint operating agreement covering any of 
Borrower's Proved Mineral Interests, Borrower's share of (a) the costs 
for each Proved Mineral Interest described in the Reserve Report is not 
greater than the decimal fraction set forth in the Reserve Report, before 
and after payout, as the case may be, and described therein by the 
respective designations "working interests", "WI", "gross working 
interest", "GWI", or similar terms, and (b) production from, allocated 
to, or attributed to each such Proved Mineral Interest is not less than 
the decimal fraction set forth in the Reserve Report, before and after 
payout, as the case may be, and described therein by the designations net 
revenue interest, NRI, or similar terms.  Each well drilled in respect of 
each Proved Producing Mineral Interest described in the Reserve Report 
(y) is capable of, and is presently, producing hydrocarbons in 
commercially profitable quantities, and Borrower is currently receiving 
payments for its share of production, with no funds in respect of any 
thereof being presently held in suspense, other than any such funds being 
held in suspense pending delivery of appropriate division orders, and (z) 
has been drilled, bottomed, completed, and operated in compliance with 
all applicable Laws and no such well which is currently producing 
hydrocarbons is subject to any penalty in production by reason of such 
well having produced in excess of its allowable production.  

     SECTION 7.11.  [intentionally deleted]

     SECTION 7.12.  Licenses, Permits, Etc.  Borrower and each of its 
Subsidiaries possess such valid franchises, certificates of convenience 
and necessity, operating rights, licenses, permits, consents, 
authorizations, exemptions and orders of Governmental Authorities, as are 
necessary to carry on their respective businesses as now conducted, 
except to the extent a failure to obtain any such item would not have a 
material adverse effect on the business, financial condition, operations 
or prospects of Borrower and its Subsidiaries considered as a whole.

     SECTION 7.13.  Compliance with Law.  The business and operations of 
Borrower and its Subsidiaries have been and are being conducted in 
accordance with all applicable Laws other than violations of Laws which 
do not (either individually or collectively) have a material adverse 
effect on the business, financial condition, operations or prospects of 
Borrower and its Subsidiaries considered as a whole.



<PAGE> 41
     SECTION 7.14.  Full Disclosure.  All information heretofore 
furnished by Borrower (or any other party in its behalf) to Agent or any 
Bank for purposes of or in connection with this Agreement or any 
transaction contemplated hereby is, and all such information hereafter 
furnished by Borrower or in its behalf to Agent or any Bank will be, 
true, complete and accurate in every material respect or (to the extent 
disclosed) based on reasonable estimates on the date as of which such 
information is stated or certified.  Borrower has disclosed to Banks in 
writing any and all facts (other than facts of general public knowledge) 
which might reasonably be expected to materially and adversely affect the 
business, financial condition, operations or prospects of Borrower and 
its Subsidiaries considered as a whole or the ability of Borrower and its 
Subsidiaries to perform their obligations under this Agreement and the 
other Loan Papers.

     SECTION 7.15.  Corporate Structure.  Borrower does not have any 
Subsidiaries on the Closing Date.

     SECTION 7.16.  Environmental Matters.  Except for matters disclosed 
on Schedule 4 hereto, no real or personal property owned or leased by 
Borrower or any Subsidiary of Borrower (including, without limitation, 
Borrower's and its Subsidiaries Mineral Interests) and no operations 
conducted thereon, and to Borrower's knowledge, no operations of any 
prior owner, lessee or operator of any such properties, is or has been in 
violation of any Applicable Environmental Law other than violations which 
neither individually or in the aggregate will have a material adverse 
effect on Borrower and its Subsidiaries taken as a whole.  Except for 
matters disclosed on Schedule 4 hereto, neither Borrower, any Subsidiary 
of Borrower, nor any such property or operation is the subject of any 
existing, pending or, to Borrower's knowledge, threatened action, suit, 
investigation, inquiry or preceding with respect to Applicable 
Environmental Laws which could, individually or in the aggregate, have a 
material adverse effect on Borrower and its Subsidiaries taken as a 
whole.  All notices, permits, licenses, and similar authorizations, 
required to be obtained or filed in connection with the ownership or 
operation of each tract of real property and each item of personal 
property owned, leased or operated by Borrower or any of its 
Subsidiaries, including, without limitation, notices, licenses, permits 
and authorizations required in connection with any past or present 
treatment, storage, disposal, or release of hazardous substances, 
petroleum, or solid waste into the environment, have been duly obtained 
or filed except to the extent the failure to obtain or file such notices, 
licenses, permits and authorizations would not have a material adverse 
effect on Borrower or any of its Subsidiaries taken as a whole.  To 
Borrower's knowledge, all hazardous substances, generated at each tract 
of real property and by each item of personal property owned, leased or 
operated by Borrower or any of its Subsidiaries have been transported, 
treated, and disposed of only by carriers maintaining valid permits under 
RCRA and all other Applicable Environmental Laws.  Except for matters 
disclosed on Schedule 4 hereto, there has been no release or threatened 
release of any quantity of any hazardous substances or petroleum on, to 
or from any real or personal property owned, leased, or operated by 
Borrower or any Subsidiary which was not in compliance with Applicable 
Environmental Laws other than releases which would not, individually or 
in the aggregate, have a material adverse effect on Borrower and its 
Subsidiaries considered as a whole.  Except for matters disclosed on 
Schedule 4 hereto, neither Borrower nor any Subsidiary has any contingent 
liability in connection with any release or threatened release of any 
hazardous 



<PAGE> 42
substance, petroleum, or solid waste into the environment which 
could reasonably be expected to have a material adverse effect on 
Borrower and its Subsidiaries considered as a whole.  

     SECTION 7.17.  Burdensome Obligations.  Neither Borrower, any 
Subsidiary of Borrower, nor any of their respective properties, is 
subject to any Law or any pending or threatened change of Law or subject 
to any restriction under its certificate (or articles) of incorporation 
or bylaws or under any agreement or instrument to which Borrower or any 
Subsidiary of Borrower is a party or by which Borrower or any Subsidiary 
of Borrower or any of their respective properties may be subject or 
bound, which is so unusual or burdensome as to be likely in the 
foreseeable future to have a material adverse effect on the business, 
financial condition, operations or prospects of Borrower and its 
Subsidiaries considered as a whole.  Without limiting the foregoing, 
neither Borrower nor any of its Subsidiaries is a party to or bound by 
any agreement or subject to any order of any Governmental Authority which 
prohibits or restricts in any way the right of a Subsidiary of Borrower 
to make Distributions. 

     SECTION 7.18.  Fiscal Year.  Borrower's Fiscal Year is January 1 
through December 31.

     SECTION 7.19.  No Default.  Neither a Default nor an Event of 
Default has occurred or will exist after giving effect to the 
transactions contemplated by this Agreement.

     SECTION 7.20.  Government Regulation.  Neither Borrower nor any of 
its Subsidiaries is subject to regulation under the Public Utility 
Holding Company Act of 1935, the Federal Power Act, the Interstate 
Commerce Act (as any of the preceding acts have been amended), the 
Investment Company Act of 1940 or any other law which regulates the 
incurring by Borrower of Debt, including, but not limited to laws 
relating to common contract carriers or the sale of electricity, gas, 
stream, water or other public utility services.

     SECTION 7.21.  Insider.  Neither Borrower nor any of its 
Subsidiaries is, nor any officer of Borrower or its Subsidiaries, and no 
Person having "control" (as that term is defined in 12 U.S.C. Section 
375(b) or regulations promulgated thereunder) of Borrower or any 
Subsidiary is an "executive officer", "director" or "shareholder" having 
"control" (as that term is defined in 12 U.S.C. Section 375(b) or 
regulations promulgated thereunder) of any Bank or any bank holding 
company of which any Bank is a Subsidiary or of any Subsidiary of such 
bank holding company.

     SECTION 7.22.  Gas Balancing Agreements and Advance Payment 
Contracts.  On the date of this Agreement, (a) the net gas imbalances to 
Borrower and its Subsidiaries (considered in the aggregate) under all Gas 
Balancing Agreements to which Borrower or any of its Subsidiaries is a 
party or by which any Mineral Interest owned by Borrower or any of its 
Subsidiaries is bound, is not in excess of $500,000, and (b) the 
aggregate amount of all Advance Payments received by Borrower or any of 
its Subsidiaries under Advance Payment Contracts which have not been 
satisfied by delivery of production does not exceed $500,000.



<PAGE> 43
                           ARTICLE VIII

                      AFFIRMATIVE COVENANTS

     Borrower agrees that, so long as any Bank has any commitment to lend 
or participate in Letter of Credit Exposure  hereunder or any amount 
payable under any Note remains unpaid or any Letter of Credit remains 
outstanding: 

     SECTION 8.1.  Information.  Borrower will deliver, or cause to be 
delivered, to each of Banks:

          (a)  as soon as available and in any event within ninety (90) 
days after the end of each Fiscal Year, consolidated and consolidating 
balance sheets of Borrower as of the end of such Fiscal Year and the 
related consolidated and consolidating statements of income and changes 
in financial position for such Fiscal Year, setting forth in each case in 
comparative form the figures for the previous Fiscal Year, all reported 
by Borrower in accordance with GAAP and audited by a firm of independent 
public accountants of nationally recognized standing and acceptable to 
Agent;

          (b)  (i) as soon as available and in any event within forty-
five (45) days after the end of each of the first three (3) Fiscal 
Quarters of each Fiscal Year, consolidated and consolidating balance 
sheets of Borrower as of the end of such Fiscal Quarter and the related 
consolidated and consolidating statements of income and changes in 
financial position for such quarter and for the portion of Borrower's 
fiscal year ended at the end of such Fiscal Quarter, setting forth in 
each case in comparative form the figures for the corresponding quarter 
and the corresponding portion of Borrower's previous Fiscal Year.  All 
financial statements delivered pursuant to this Section 8.1(b) shall be 
certified as to fairness of presentation, GAAP and consistency by a 
Financial Officer of Borrower;

          (c)  simultaneously with the delivery of each set of financial 
statements referred to in Sections 8.1(a) and (b), a certificate of a 
Financial Officer in the form of Exhibit I attached hereto, (i) setting 
forth in reasonable detail the calculations required to establish whether 
Borrower was in compliance with the requirements of Article X on the date 
of such financial statements, (ii) stating whether there exists on the 
date of such certificate any Default and, if any Default then exists, 
setting forth the details thereof and the action which Borrower is taking 
or proposes to take with respect thereto, (iii) stating whether or not 
such financial statements fairly reflect the business and financial 
condition of Borrower as of the date of the delivery of such financial 
statements, (iv) setting forth the aggregate amount of all Investments 
made by Borrower which are outstanding on the date of such certificates 
which are of the type described in clause (d) of the definition of 
"Permitted Investments", herein contained, (v) setting forth (A) the 
amount of net gas imbalances under Gas Balancing Agreements to which 
Borrower or any of its Subsidiaries are parties or by which any Mineral
Interests owned by Borrower or any of its Subsidiaries are bound, and
(B) the aggregate amount of all Advance Payments received under Advance 
Payment Contracts to which Borrower or any of its Subsidiaries are 
parties or by which



<PAGE> 44
any Mineral Interests owned by Borrower or any of its Subsidiaries 
are bound which have not been satisfied by delivery of production, if 
any, and (vi) setting forth a list and description of Hedge Transactions
to which Borrower or any of its Subsidiaries is then a party, including
a calculation of Borrower's and its Subsidiaries' termination liability
assuming each of such Hedge Transactions was terminated as of such date
(whether or not such Hedge Transactions are then terminable but without 
giving effect to penalties for early termination, if any);

          (d)  promptly upon the mailing thereof to the stockholders of 
Borrower generally, copies of all financial statements, reports and proxy 
statements so mailed;

          (e)  promptly upon the filing thereof, copies of all final 
registration statements, post-effective amendments thereto and annual, 
quarterly or special reports which Borrower shall have filed with the 
Securities and Exchange Commission; provided, that Borrower must deliver, 
or cause to be delivered, any annual reports which Borrower shall have 
filed with the Securities and Exchange Commission, within ninety (90) 
days after the end of each Fiscal Year of Borrower, and any quarterly 
reports which Borrower shall have filed with the Securities and Exchange 
Commission, within forty-five (45) days after the end of each of the 
first three (3) Fiscal Quarters of each Fiscal Year of Borrower;

          (f)  promptly upon request therefore by any Bank, such title 
opinions and other information in its possession, control or direction 
regarding title to the oil and gas properties owned by Borrower or its 
Subsidiaries as are appropriate to determine the status thereof;  

          (g)  promptly upon receipt of same, any notice or other 
information received by Borrower or any Subsidiary of Borrower indicating 
any potential, actual or alleged (i) non-compliance with or violation of 
the requirements of any Applicable Environmental Law which could result 
in liability to Borrower or any Subsidiary for fines, clean up or any 
other remediation obligations or any other liability in excess of 
$2,000,000 in the aggregate; (ii) release or threatened release of any 
toxic or hazardous waste, substance, or constituent, or other substance 
into the environment which release would impose on Borrower or any 
Subsidiary a duty to report to a governmental authority or to pay cleanup 
costs or to take remedial action under any Applicable Environmental Law 
which could result in liability to Borrower or any Subsidiary for fines, 
clean up and other remediation obligations or any other liability in 
excess of $2,000,000 in the aggregate; or (iii) the existence of any Lien 
arising under any Applicable Environmental Law securing any obligation to 
pay fines, clean up or other remediation costs or any other liability in 
excess of $2,000,000 in the aggregate.  Without limiting the foregoing, 
Borrower shall provide to Banks promptly upon receipt of same copies of 
all environmental consultants or engineers reports received by Borrower 
or any Subsidiary of Borrower which would render the representation and 
warranty contained in Section 7.16 untrue or inaccurate in any respect; 
provided, however, that no report shall be required to be delivered if 
such report is subject to an attorney-client privilege or contains 
information or discloses facts which could result in liability to 
Borrower or any Subsidiary of Borrower for fines, cleanup and any other 
remediation obligations or any other liability of less than $2,000,000 in 
the aggregate;



<PAGE> 45
          (h)  in the event any notification is provided by Borrower to 
any Bank or Agent pursuant to Section 8.1(g) hereof or Agent or any Bank 
otherwise learns of any event or condition under which any such notice 
would be required, then, upon request of Required Banks, Borrower shall 
deliver to Agent and each Bank such information regarding such event, 
condition or circumstance as Agent or Required Banks shall reasonably 
require;

          (i)  immediately upon any Authorized Officer becoming aware of 
the occurrence of any Default, a certificate of an Authorized Officer 
setting forth the details thereof and the action which Borrower is taking 
or proposes to take with respect thereto; 

          (j)  on or before thirty (30) days following the expiration of 
each month, reports of net production volume and prices received for each 
Borrowing Base property by field during the preceding calendar month;

          (k)  notify Agent within thirty (30) days of any change in 
Borrower's Investment Guidelines;

          (l)  promptly notify Banks of any material adverse change in 
the business, financial condition, operations or prospects of Borrower or 
any of its Subsidiaries; and

          (m)  from time to time such additional information regarding 
the financial position or business of Borrower and its Subsidiaries as 
Agent, at the request of any Bank, may reasonably request.  

     SECTION 8.2.  Maintenance of Existence.  Borrower, shall, and shall 
cause each Subsidiary to, at all times (a) maintain its corporate, 
partnership or limited liability company existence in its state of 
incorporation or organization except to the extent any Subsidiary ceases 
to be in existence as a result of a merger or consolidation expressly 
permitted pursuant to Section 9.4, and (b) maintain its good standing and 
qualification to transact business in all jurisdictions where the failure 
to maintain good standing or qualification to transact business could 
have a material adverse effect on the business, financial condition, 
operations or prospects of Borrower or any of its Subsidiaries. 

     SECTION 8.3.  Right of Inspection.  Borrower will permit and will 
cause each of its Subsidiaries to permit any officer, employee or agent 
of Agent or any of Banks to visit and inspect any of the assets of 
Borrower and its Subsidiaries, examine Borrower's and its Subsidiaries' 
books of record and accounts, take copies and extracts therefrom, and 
discuss the affairs, finances and accounts of Borrower and its 
Subsidiaries with Borrower's and its Subsidiaries' officers, accountants 
and auditors, all at such reasonable times and as often as Agent or any 
of Banks may desire, all at the expense of Borrower; provided, that, 
prior to the occurrence of an Event of Default neither Agent nor any Bank 
will require Borrower or any of its Subsidiaries to incur any 
unreasonable expense as a result of the exercise by Agent or any Bank of 
its rights pursuant to this Section 8.3. 



<PAGE> 46
     SECTION 8.4.  Maintenance of Insurance.  Borrower will, and will 
cause each of its Subsidiaries to (and will use its best efforts to cause 
all operators of Mineral Interests owned by Borrower and its 
Subsidiaries) at all times maintain or cause to be maintained insurance 
covering such risks as are customarily carried by businesses similarly 
situated.

     SECTION 8.5.  Payment of Taxes and Claims.  Borrower will, and will 
cause each of its Subsidiaries to, pay (a) all Taxes imposed upon it or 
any of its assets or with respect to any of its franchises, business, 
income or profits before any material penalty or interest accrues thereon 
and (b) all material claims (including, without limitation, claims for 
labor, services, materials and supplies) for sums which have become due 
and payable and which by law have or might become a Lien (other than a 
Permitted Encumbrance) on any of its assets; provided, however, no 
payment of Taxes or claims shall be required if (i) the amount, 
applicability or validity thereof is currently being contested in good 
faith by appropriate action promptly initiated and diligently conducted 
in accordance with good business practices and no material part of the 
property or assets of Borrower or any of its Subsidiaries are subject to 
levy or execution, (ii) Borrower as and to the extent required in 
accordance with GAAP, shall have set aside on its books reserves 
(segregated to the extent required by GAAP) deemed by it to be adequate 
with respect thereto, and (iii) Borrower has notified Agent of such 
circumstances, in detail satisfactory to Agent.

     SECTION 8.6.  Compliance with Laws and Documents.  Borrower will and 
will cause each of its Subsidiaries to comply with all Laws, their 
respective certificates (or articles) of incorporation, bylaws and 
similar organizational documents and all Material Agreements to which 
Borrower or any of its Subsidiaries are a party, if a violation, alone or 
when combined with all other such violations, could have a material 
adverse effect on the business, financial condition, operations or 
prospects of Borrower or any of its Subsidiaries.

     SECTION 8.7.  Operation of Properties and Equipment.  (a) Borrower 
will, and will cause each of its Subsidiaries to, maintain, develop and 
operate their respective Mineral Interests in a good and workmanlike 
manner, and observe and comply with all of the terms and provisions, 
express or implied, of all oil and gas leases relating to such Mineral 
Interests so long as such Mineral Interests are capable of producing 
hydrocarbons and accompanying elements in paying quantities.

          (b)  Borrower will, and will cause each of its Subsidiaries to, 
comply in all respects with all contracts and agreements applicable to or 
relating to their respective Mineral Interests or the production and sale 
of hydrocarbons and accompanying elements therefrom, except to the extent 
a failure to so comply could not have a material adverse effect on the 
business, financial condition, operations or prospects of Borrower or any 
of its Subsidiaries.

          (c)  Borrower will, and will cause each of its Subsidiaries, at 
all times, to maintain, preserve and keep all operating equipment used 
with respect to the Mineral Interests of Borrower and its Subsidiaries in 
proper repair, working order and condition, and make all necessary or 
appropriate repairs, renewals, replacements, additions and improvements 
thereto so that the efficiency of such operating equipment shall at all 
times be properly preserved and 



<PAGE> 47
maintained; provided that no item of operating equipment need be so 
repaired, renewed, replaced, added to or improved, if Borrower shall in 
good faith determine that such action is not necessary or desirable for 
the continued efficient and profitable operation of the business of Borrower
and its Subsidiaries.

     SECTION 8.8.  Environmental Law Compliance.  Except to the extent a 
failure to comply would not have a material adverse effect on the 
business, financial condition, operations or prospects of Borrower and 
its Subsidiaries considered as a whole, Borrower will, and will cause 
each of its Subsidiaries to, comply with all Applicable Environmental 
Laws, including, without limitation, (a) all licensing, permitting, 
notification and similar requirements of Applicable Environmental Laws, 
and (b) all provisions of all Applicable Environmental Laws regarding 
storage, discharge, release, transportation, treatment and disposal of 
hazardous substances, petroleum, solid waste or other contaminants.  
Borrower will, and will cause each of its Subsidiaries to, promptly pay 
and discharge when due all legal debts, claims, liabilities and 
obligations with respect to any clean-up or remediation measures 
necessary to comply with Applicable Environmental Laws.  

     SECTION 8.9.  ERISA Reporting Requirements.  Borrower shall furnish 
or cause to be furnished to Agent:

          (a)  Promptly and in any event (i) within thirty (30) days 
after Borrower or any ERISA Affiliate receives notice from any regulatory 
agency of the commencement of an audit, investigation or similar 
proceeding with respect to a Plan, and (ii) within ten (10) days after 
Borrower or any ERISA Affiliate contacts the Internal Revenue Service for 
the purpose of participation in a closing agreement or any voluntary 
resolution program with respect to a Plan or knows or has reason to know 
that any event with respect to any Plan of Borrower or any ERISA 
Affiliate has occurred that could have a material adverse effect on 
Borrower or any ERISA Affiliate;

          (b)  Promptly and in any event within thirty (30) days after 
the receipt by Borrower of a request therefor by a Bank, copies of any 
annual and other report (including Schedule B thereto) with respect to a 
Plan filed by Borrower or any ERISA Affiliate with the United States 
Department of Labor, the Internal Revenue Service or the PBGC;

          (c)  Notification within thirty (30) days of the effective date 
thereof of any material increases in the benefits of any existing Plan 
which is not a multiemployer plan (as defined in section 4001(a)(3) of 
ERISA), or the establishment of any new Plans, or the commencement of 
contributions to any Plan to which Borrower or any ERISA Affiliate was 
not previously contributing;

          (d)  Promptly after receipt of written notice of commencement 
thereof, notice of all (i) claims made by participants or beneficiaries 
with respect to any Plan and (ii) actions, suits and proceedings before 
any court or governmental department, commission, board, bureau, agency 
or instrumentality, domestic or foreign, affecting Borrower or any ERISA 
Affiliate with 



<PAGE> 48
respect to any Plan, except those which, in the aggregate, if adversely
determined could not have a material adverse effect on Borrower or any 
ERISA Affiliate.

     SECTION 8.10.  Additional Documents.  Borrower shall cure promptly 
any defects in the creation and issuance of each Note , and the execution 
and delivery of this Agreement and the other Loan Papers and, at 
Borrower's expense, Borrower shall promptly and duly execute and deliver 
to each Bank, upon reasonable request, all such other and further 
documents, agreements and instruments in compliance with or 
accomplishment of the covenants and agreements of Borrower in this 
Agreement and the other Loan Papers as may be reasonably necessary or 
appropriate in connection therewith.

     SECTION 8.11.  Environmental Matters.  Promptly upon Borrower or any 
Subsidiary of Borrower receiving any notice or other information 
indicating any potential, actual or alleged (i) non-compliance with or 
violation of the requirements of any Applicable Environmental Law which 
could result in liability to Borrower or any Subsidiary for fines, clean 
up or any other remediation obligations or any other liability in excess 
of $15,000,000 (without any reductions for insurance or offsets) in the 
aggregate; (ii) release or threatened release of any toxic or hazardous 
waste, substance, or constituent, or other substance into the environment 
which release would impose on Borrower or any Subsidiary a duty to report 
to a governmental authority or to pay cleanup costs or to take remedial 
action under any Applicable Environmental Law which could result in 
liability to Borrower or any Subsidiary for fines, clean up and other 
remediation obligations or any other liability in excess of $15,000,000 
(without any reductions for insurance or offsets) in the aggregate; or 
(iii) the existence of any Lien arising under any Applicable 
Environmental Law securing any obligation to pay fines, clean up or other 
remediation costs or any other liability in excess of $15,000,000 
(without any reductions for insurance or offsets) in the aggregate; then 
Banks shall have the right to have environmental consultants and 
engineers chosen by Banks prepare reports relating to the condition 
described above which creates this right.  Borrower shall reimburse Banks 
for the fees and expenses of such consultants and engineers up to 
$350,000 in the aggregate for each event described in the immediately 
preceding sentence.  Such consultants and engineers, in conducting any 
testing, reviews and evaluations, shall operate at the direction of 
Borrower.  Banks will make their best efforts to protect any attorney-
client privilege which exists with respect to the reports prepared by 
such engineers and consultants pursuant to this Section 8.11.


                            ARTICLE IX

                        NEGATIVE COVENANTS

     Borrower agrees that, so long as any Bank has any commitment to lend 
or participate in Letter of Credit Exposure  hereunder or any amount 
payable under any Note remains unpaid or any Letter of Credit remains 
outstanding: 



<PAGE> 49
     SECTION 9.1.  Incurrence of Debt.  Borrower shall not, and shall not 
permit any of its Subsidiaries to, incur any Debt other than (a) the 
Obligations, and (b) other Debt in an aggregate amount outstanding at any 
time not to exceed $10,000,000.

     SECTION 9.2.  Restrictions on Distributions.  Borrower shall not, 
directly or indirectly, declare or pay, or incur any liability to declare 
or pay, Distributions in any Fiscal Year; provided, that (a) so long as 
no Default or Event of Default exists on the date any such Distribution 
is declared or paid and no Default or Event of Default would result 
therefrom, Borrower shall be permitted to declare and pay Distributions 
in any period of four (4) consecutive Fiscal Quarters in an amount not to 
exceed the greater of (i) $12,000,000, or (ii) seventy five percent (75%) 
of Borrower's Consolidated Net Income for such period of four (4) 
consecutive Fiscal Quarters (as reflected in the financial statements for 
Borrower for such Fiscal Quarters delivered pursuant to Section 8.1(a) 
and (b), hereof), and (b) any Subsidiary of Borrower may make 
Distributions to Borrower and to any wholly owned Subsidiary of Borrower.  
Borrower shall not, and shall not permit any of its Subsidiaries to, 
enter into any agreement or become subject to any order of any 
Governmental Authority which prohibits or restricts in any way the right 
of any of Borrower's Subsidiaries to pay Distributions.  

     SECTION 9.3.  Negative Pledge.  Borrower shall not, and shall not 
permit any Subsidiary to create, assume or suffer to exist any Lien on 
any asset of Borrower or any of its Subsidiaries other than Permitted 
Encumbrances.  Borrower shall not, and shall not permit any of its 
Subsidiaries to, enter into or become bound by any agreement  (other than 
this Agreement) that prohibits or otherwise restricts the right of 
Borrower or any of its Subsidiaries to create, assume or suffer to exist 
any Lien on any of Borrower's or any of its Subsidiaries' assets in favor 
of Agent.

     SECTION 9.4.  Consolidations and Mergers.  Borrower shall not, and 
shall not permit any Subsidiary to, consolidate or merge with or into any 
other Person; provided, that so long as no Default or Event of Default 
exists or will result (a) Borrower may merge or consolidate with another 
Person so long as Borrower is the surviving corporation, (b) any wholly 
owned Subsidiary of Borrower may merge or consolidate with any other 
Person so long as a wholly owned Subsidiary of Borrower is the surviving 
corporation, and (c) any Subsidiary of Borrower may merge with any other 
Person so long as such Subsidiary is the surviving corporation.       

     SECTION 9.5.  Asset Dispositions.  Borrower shall not and shall not 
permit any Subsidiary to sell, lease, transfer, abandon or otherwise 
dispose of any asset other than (a) the sale in the ordinary course of 
business of hydrocarbons produced from Borrower's and its Subsidiaries' 
Mineral Interests, and (b) the sale, lease, transfer, abandonment or 
other disposition of other assets, provided that the aggregate value of 
all assets, sold, leased, transferred or disposed of pursuant to this 
clause (b) in any period of twelve (12) consecutive months shall not 
exceed Five Million Dollars ($5,000,000).  

     SECTION 9.6.  Amendments to Organizational Documents.  Borrower 
shall not and shall not permit any of its Subsidiaries to enter into or 
permit any modification or amendment of, or 



<PAGE> 50
waive any material right or obligation of any Person under its certificate 
or articles of incorporation, bylaws, partnership agreement, regulations or
other organizational documents other than amendments, modifications and 
waivers which are not, individually or in the aggregate, material.

     SECTION 9.7.  Use of  Proceeds.  The proceeds of Borrowings will not 
be used for any purpose other than (a) working capital, (b) to finance 
the acquisition, exploration and development of Mineral Interests, and 
(c) for general corporate purposes.  None of such proceeds (including, 
without limitation, proceeds of Letters of Credit issued hereunder) will 
be used, directly or indirectly, for the purpose, whether immediate, 
incidental or ultimate, of purchasing or carrying any Margin Stock, and 
none of such proceeds will be used in violation of applicable Law 
(including, without limitation, the Margin Regulations).  Letters of 
Credit will be issued hereunder only for the purpose of securing bids, 
tenders, bonds, contracts and other obligations entered into in the 
ordinary course of Borrower's business.   Without limiting the foregoing, 
no Letters of Credit will be issued hereunder for the purpose of or 
providing credit enhancement with respect to any debt or equity security 
of Borrower or any of its Subsidiaries or to secure interest rate, 
commodity, currency or other swaps, caps, collars, futures contracts or 
similar hedging arrangements.

     SECTION 9.8.  Investments.  Borrower shall not and shall not permit 
any of its Subsidiaries to directly or indirectly, make any Investment 
other than Permitted Investments.  
 
     SECTION 9.9.  Transactions with Affiliates.  Borrower shall not, and 
shall not permit any of its Subsidiaries, to engage in any transaction 
with an Affiliate unless such transaction is as favorable to Borrower or 
such Subsidiary as could be obtained in an arm's length transaction with 
an unaffiliated Person in accordance with prevailing industry customs and 
practices.

     SECTION 9.10.  ERISA.  Borrower agrees that it will not knowingly 
take action or fail to take action which would result in a violation of 
ERISA, the Code or other laws applicable to the Plans maintained or 
contributed to by it or any ERISA Affiliate.  Neither Borrower nor any 
ERISA Affiliate shall, without the prior written consent of the Required 
Banks, materially modify the term of, or the funding obligations or 
contribution requirements under any existing Plan, establish a new Plan, 
or become obligated or incur any liability under a Plan that is not 
maintained or contributed to by Borrower or any ERISA Affiliate as of the 
Closing Date.

     SECTION 9.11.  Hedge Transactions.  Borrower shall not, and shall 
not permit any of its Subsidiaries to, enter into any Hedge Transactions 
which would cause the amount of hydrocarbons which are the subject of 
Hedge Transactions in existence at such time to exceed seventy five 
percent (75%) of Borrower's anticipated production from Proved, Producing 
Mineral Interests during the term of such existing Hedge Transactions.

     SECTION 9.12.  Fiscal Year.  Borrower shall not change its fiscal 
year.



<PAGE> 51
     SECTION 9.13.  Change in Business.  Borrower shall not, and shall 
not permit any of its Subsidiaries to, engage in any business other than 
the acquisition, exploration, production and development of Mineral 
Interests; provided, that, this Section 9.13 shall not prevent Borrower 
or any of its Subsidiaries from (a) making Permitted Investments 
described in clause (e) of the definition of Permitted Investments, or 
(b) making capital expenditures to purchase assets used in the 
transportation, processing, refining or marketing of petroleum products; 
provided, that the sum of (i) the aggregate amount of capital 
expenditures made by Borrower and its Subsidiaries in such "downstream" 
assets, plus (ii) the aggregate amount of the outstanding Investments 
made pursuant to clause (e) of the definition of Permitted Investments 
(in each case measured on a cost basis), shall not exceed $15,000,000 at 
any time.


                            ARTICLE X

                       FINANCIAL COVENANTS

     Borrower agrees that, so long as any Bank has any commitment to lend 
or participate in Letter of Credit Exposure  hereunder or any amount 
payable under any Note remains unpaid or any Letter of Credit remains 
outstanding: 

     SECTION 10.1.  Minimum Consolidated Tangible Net Worth of Borrower.  
Borrower will not permit its Consolidated Tangible Net Worth at any time 
to be less than the Minimum Consolidated Tangible Net Worth at such time.


                            ARTICLE XI

                             DEFAULTS

     SECTION 11.1.  Events of Default.  If one or more of the following 
events (collectively "Events of Default" and individually an "Event of 
Default") shall have occurred and be continuing:

          (a)  Borrower shall fail to pay when due any principal on any 
Note;

          (b)  Borrower shall fail to pay when due accrued interest on 
any Note or any fees or any other amount payable hereunder and such 
failure shall continue for a period of three (3) days following the due 
date;

          (c)  Borrower shall fail to observe or perform any covenant or 
agreement contained in Sections 8.1(a), (b), (c), (e) or (g), 8.10, 
Article IX or Article X of this Agreement; 

          (d)  Borrower or any Subsidiary of Borrower shall fail to 
observe or perform any covenant or agreement contained in this Agreement 
or the other Loan Papers (other than 



<PAGE> 52
those referenced in Sections 11.1(a), (b) and (c)) and such failure 
continues for a period of twenty (20) days after the earlier of (i) the 
date any Authorized Officer of Borrower acquires knowledge of such 
failure, or (ii) written notice of such failure has been given to 
Borrower by Agent or any Bank;

          (e)  any representation, warranty, certification or statement 
made or deemed to have been made by Borrower in this Agreement or by 
Borrower, any Subsidiary of Borrower or any other Person on behalf of 
Borrower or on behalf of any Subsidiary of Borrower in any certificate, 
financial statement or other document delivered pursuant to this 
Agreement shall prove to have been incorrect in any material respect when 
made; 

          (f)  Borrower or any of its Subsidiaries shall fail to make any 
payment when due on any Debt of such Person in a principal amount equal 
to or greater than $2,500,000 or any other event or condition shall occur 
which (i) results in the acceleration of the maturity of any such Debt, 
or (ii) entitles the holder of such Debt to accelerate the maturity 
thereof;

          (g)  Borrower or any of its Subsidiaries shall commence a 
voluntary case or other proceeding seeking liquidation, reorganization or 
other relief with respect to itself or its debts under any bankruptcy, 
insolvency or other similar law now or hereafter in effect or seeking the 
appointment of a trustee, receiver, liquidator, custodian or other 
similar official of it or any substantial part of its property, or shall 
consent to any such relief or to the appointment of or taking possession 
by any such official in an involuntary case or other proceeding commenced 
against it, or shall make a general assignment for the benefit of 
creditors, or shall fail generally to pay its debts as they become due, 
or shall take any corporate action to authorize any of the foregoing; 

          (h)  an involuntary case or other proceeding shall be commenced 
against Borrower or any of its Subsidiaries seeking liquidation, 
reorganization or other relief with respect to it or its debts under any 
bankruptcy, insolvency or other similar law now or hereafter in effect or 
seeking the appointment of a trustee, receiver, liquidator, custodian or 
other similar official of it or any substantial part of its property, and 
such involuntary case or other proceeding shall remain undismissed and 
unstayed for a period of sixty (60) days; or an order for relief shall be 
entered against Borrower or any of its Subsidiaries of any of them under 
the federal bankruptcy Laws as now or hereafter in effect; 

          (i)  one (1) or more judgments or orders for the payment of 
money aggregating in excess of $2,500,000 shall be rendered against 
Borrower or any of its Subsidiaries and such judgment or order shall 
continue unsatisfied and unstayed for thirty (30) days;

          (j)  (i) any event occurs with respect to any Plan or Plans 
pursuant to which Borrower and/or any ERISA Affiliate incur a liability 
due and owing at the time of such event, without existing funding 
therefor, for benefit payments under such Plan or Plans in excess of 
$1,500,000; or (ii) Borrower, any ERISA Affiliate, or any other "party-
in-interest" or "disqualified person", as such terms are defined in 
section 3(14) of ERISA and section 4975(e)(2)



<PAGE> 53
of the Code, shall engage in transactions which in the aggregate would 
reasonably result in a direct or indirect liability to Borrower or any 
ERISA Affiliate in excess of $500,000 under section 409 or 502 of ERISA or
section 4975 of the Code; or

            (k)  as of any date either (i) thirty percent (30%) 
of the Persons who are members of Borrower's board of directors are 
Persons who were not members of Borrower's board of directors on the date 
which was twelve (12) months prior to such date, or (ii) any single 
Person or group of Affiliated Persons (excluding Persons who are 
directors or executive officers of Borrower on the Closing Date or are 
listed on Schedule 5, attached hereto) shall acquire thirty percent (30%) 
or more of the outstanding voting stock of Borrower (whether in a single 
transaction or series of related or unrelated transactions);

then, and in every such event, Agent shall without presentment,  notice 
or demand (unless expressly provided for herein) of any kind (including, 
without limitation, notice of intention to accelerate and acceleration), 
all of which are hereby waived, (a) if requested by the Required Banks, 
terminate the Commitments and they shall thereupon terminate, and (b) if 
requested by the Required Banks, take such other actions as may be 
permitted by the Loan Papers including, declaring the Notes (together 
with accrued interest thereon) to be, and the Notes shall thereupon 
become, immediately due and payable; provided that (c) in the case of any 
of the Events of Default specified in Sections 11.1(f) or (g), without 
any notice to Borrower or any other act by Agent or Banks, the 
Commitments shall thereupon terminate and the Notes (together with 
accrued interest thereon) shall become immediately due and payable.


                           ARTICLE XII

                              AGENT

     SECTION 12.1.  Appointment and Authorization.  Each Bank irrevocably 
appoints and authorizes Agent to take such action as Agent on its behalf 
and to exercise such powers under this Agreement, the Notes and the other 
Loan Papers as are delegated to Agent by the terms hereof or thereof, 
together with all such powers as are reasonably incidental thereto, 
provided that, as between and among Banks, Agent will not prosecute, 
settle or compromise any claim against Borrower or release or institute 
enforcement proceedings, except with the consent of the Required Banks.  
Each Bank and Borrower agree that Agent is not a fiduciary for Banks or 
for Borrower but simply is acting in the capacity described herein to 
alleviate administrative burdens for both Borrower and Banks and that 
Agent has no duties or responsibilities to Banks or Borrower except those 
expressly set forth herein.

     SECTION 12.2.  Agent and Affiliates.  NationsBank of Texas, N.A. 
shall have the same rights and powers under this Agreement as any other 
Bank and may exercise or refrain from exercising the same as though it 
were not Agent, and NationsBank of Texas, N.A. and its affiliates may 
accept deposits from, lend money to, and generally engage in any kind of 
business with Borrower and its Subsidiaries or any affiliate of Borrower 
as if it were not Agent hereunder.



<PAGE> 54
     SECTION 12.3.  Action by Agent.  The obligations of Agent hereunder 
are only those expressly set forth herein.  Without limiting the 
generality of the foregoing, Agent shall not be required to take any 
action with respect to any Default, except as expressly provided in 
Article XI.  Notwithstanding the administrative authority delegated to 
Agent, Agent shall not without the prior written approval of all Banks 
cause or permit any modification of the Loan Papers pertaining to (a) the 
scheduled payment of principal, interest or fees in respect of the Loans 
including the Termination Date, (b) the rate of interest applicable to 
the Loans or the amount of fees payable hereunder, (c) increasing the 
Commitment of any Bank, or (d) Article III or the definitions contained 
in Section 1.1 applicable thereto.  Agent shall make such requests or 
take such actions in respect of Borrower as the Required Banks shall 
direct.  Further, Agent shall grant such waivers, consents or approvals 
in favor of Borrower as the Required Banks shall direct.

     SECTION 12.4.  Consultation with Experts.  Agent may consult with 
legal counsel (who may be counsel for Borrower), independent public 
accountants and other experts selected by it and shall not be liable for 
any action taken or omitted to be taken by it in good faith in accordance 
with the advice of such counsel, accountants or experts.

     SECTION 12.5.  LIABILITY OF AGENT.  NEITHER AGENT NOR ANY OF ITS 
DIRECTORS, OFFICERS, AGENTS, OR EMPLOYEES SHALL BE LIABLE FOR ANY ACTION 
TAKEN OR NOT TAKEN BY IT IN CONNECTION HEREWITH (A) WITH THE CONSENT OR 
AT THE REQUEST OF THE REQUIRED BANKS OR (B) IN THE ABSENCE OF ITS OWN 
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IT BEING THE INTENTION OF BANKS 
THAT SUCH PARTIES SHALL NOT BE LIABLE FOR THE CONSEQUENCES OF THEIR OWN 
NEGLIGENCE.  Neither Agent nor any of its directors, officers, agents or 
employees shall be responsible for or have any duty to ascertain, inquire 
into or verify (a) any statement, warranty or representation made in 
connection with this Agreement or any Borrowing hereunder, (b) the 
performance or observance of any of the covenants or agreements of 
Borrower, (c) the satisfaction of any condition specified in Article VI, 
except receipt of items required to be delivered to Agent, or (d) the 
validity, effectiveness or genuineness of this Agreement, the Notes or 
any other instrument or writing furnished in connection herewith.  Agent 
shall not incur any liability by acting in reliance upon any notice, 
consent, certificate, statement, or other writing (which may be a bank 
wire, telex or similar writing) believed by it to be genuine or to be 
signed by the proper party or parties or upon any oral notice which Agent 
believes will be confirmed in writing by the proper party or parties.  If 
Agent fails to take any action required to be taken by it under the Loan 
Papers after a default and within a reasonable time after being requested 
to do so by any Bank (after such requesting Bank has obtained the 
approval of such other Banks as required), Agent shall not suffer or 
incur any liability as a result thereof, but such requesting Bank may 
request Agent to resign, whereupon Agent shall so resign pursuant to 
Section 12.9.

     SECTION 12.6.  Delegation of Duties.  Agent may execute any of its 
duties hereunder by or through officers, directors, employees, attorneys, 
or agents.



<PAGE> 55
     SECTION 12.7.  Indemnification.  Each Bank shall, ratably in 
accordance with its commitment, indemnify Agent (to the extent not 
reimbursed by Borrower) against any cost, expense (including counsel fees 
and disbursements), claim, demand, action, loss or liability (except such 
as result from Agent's gross negligence or willful misconduct) that Agent 
may suffer or incur in connection with this Agreement or any action taken 
or omitted by Agent hereunder, including, without limitation,  matters 
arising out of Agent's own ordinary negligence.  IT IS THE EXPRESS 
INTENTION OF EACH BANK THAT AGENT SHALL BE INDEMNIFIED HEREUNDER FOR THE 
CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE.

SECTION 12.8.  Credit Decision.  Each Bank acknowledges that it has, 
independently and without reliance upon Agent or any other Bank, and 
based on such documents and information as it has deemed appropriate, 
made its own credit analysis and decision to enter into this Agreement.  
Each Bank also acknowledges that it will, independently and without 
reliance upon Agent or any other Bank, and based on such documents and 
information as it shall deem appropriate at the time, continue to make 
its own credit decisions in taking or not taking any action under this 
Agreement.

     SECTION 12.9.  Successor Agent.  Agent may resign at any time that 
an Event of Default is continuing by giving written notice thereof to 
Banks and Borrower.  In addition, Borrower may, prior to a Default, 
request the designation by Banks of a successor Agent.  Upon any such 
request by Borrower or resignation by Agent (which, in the absence of an 
Event of Default, shall be made only with the consent of Borrower), the 
Required Banks shall have the right to appoint a successor Agent, which 
shall be one of Banks and, except during the continuance of an Event of 
Default, shall be approved by Borrower, such approval to not be 
unreasonably withheld.  If no successor Agent shall have been so 
appointed by the Required Banks, so approved by Borrower (if necessary), 
and accepted such appointment within thirty (30) days after the retiring 
Agent's giving of notice of resignation or Borrower's request for a 
successor Agent, then the retiring Agent may, on behalf of Banks, appoint 
a successor Agent, which shall (i) be a commercial bank organized under 
the laws of the United States of America or of any State thereof and 
having a combined capital and surplus of at least $500,000,000 and (ii) 
unless an Event of Default is continuing, be approved by Borrower (such 
approval to not be unreasonably withheld).  Upon the acceptance of its 
appointment as a successor Agent hereunder, such successor Agent shall 
thereupon succeed to and become vested with all the rights and duties of 
the retiring Agent, and the retiring Agent shall be discharged from its 
duties and obligations hereunder.  After any Agent's resignation 
hereunder as Agent, the provisions of this Article XII shall continue to 
inure to its benefit as to any actions taken or omitted to be taken by it 
while it was Agent.  Borrower shall be entitled to recommend a successor 
Agent at the time of designation of any successor Agent pursuant to this 
Section 12.9.  Banks shall give due consideration to the successor 
nominated by Borrower, but shall have no obligation to approve such 
nominee.



<PAGE> 56
                           ARTICLE XIII

                          MISCELLANEOUS

     SECTION 13.1.  Notices.  All notices, requests and other 
communications to any party hereunder shall be in writing  (including 
bank wire, telecopy or similar writing) and shall be given, if to Agent 
or any Bank, at its address or telecopier number set forth on Schedule 1 
hereto, and if given to Borrower, at its address or telecopy number set 
forth on the signature pages hereof (or in either case, at such other 
address or telecopy number as such party may hereafter specify for the 
purpose by notice to Agent, Borrower and each Bank).  Each such notice, 
request or other communication shall be effective (a) if given by 
telecopy, when such telecopy is transmitted to the telecopy number 
specified in this Section 13.1 and the appropriate answerback is received 
or receipt is otherwise confirmed, (b) if given by mail, three (3) 
Domestic Business Days after deposit in the mails with first class 
postage prepaid, addressed as aforesaid or (c) if given by any other 
means, when delivered at the address specified in this Section 13.1; 
provided that notices to Agent under Article II or VI shall not be 
effective until received.  

     SECTION 13.2.  No Waivers.  No failure or delay by Agent or any Bank 
in exercising any right, power or privilege hereunder or under any Note 
or other Loan Paper shall operate as a waiver thereof nor shall any 
single or partial exercise thereof preclude any other or further exercise 
thereof or the exercise of any other right, power or privilege.  The 
rights and remedies herein provided shall be cumulative and not exclusive 
of any rights or remedies provided by law or in any of the other Loan 
Papers.  

     SECTION 13.3.  Expenses; Documentary Taxes; Indemnification.  (a) 
Borrower shall pay (i) all reasonable out-of-pocket expenses of Agent, 
including reasonable fees and disbursements of special counsel for Agent, 
in connection with the preparation of this Agreement and the other Loan 
Papers and, if appropriate, the recordation of the Loan Papers, any 
waiver or consent hereunder or any amendment hereof or supplement hereto 
or any Default or alleged Default hereunder; provided, that the fees and 
expenses of counsel to Agent incurred in connection with the preparation 
of this Agreement and the other Loan Papers to be executed on or before 
the Closing Date and closing the transactions contemplated hereby shall 
not exceed the sum of (A) $20,000, (B) reasonable fees of counsel to 
Agent in connection with the title review contemplated by Section 6.1(g), 
and (c) travel expenses related to out of town travel to the extent 
required, and (ii) if an Event of Default occurs, all reasonable out-of-
pocket expenses incurred by Agent or any Bank, including fees and 
disbursements of counsel in connection with such Event of Default and 
collection and other enforcement proceedings resulting therefrom, fees of 
auditors and consultants incurred in connection therewith and 
investigation expenses incurred by Agent or any Bank in connection 
therewith.  Borrower shall indemnify each Bank against any Taxes imposed 
by reason of the execution and delivery of this Agreement or the Notes 
(other than Taxes imposed on the overall net income of such Bank or its 
Lending Office, unless and to the extent that such income Taxes are 
assessed in a jurisdiction in which such Bank was not previously subject 
to income Taxes and are assessed solely as a result of such Bank's rights 
and obligations under this Agreement and the other Loan Papers).  Without 
limiting Borrower's rights under Section 2.9, 



<PAGE> 57
Banks agree that if Taxes of the type described in this Section 13.3 are
imposed on any Bank and such Bank requests indemnification therefor in an
amount greater than $100,000, Borrower shall have the right to either 
(i) reduce the Total Commitment to zero pursuant to and in accordance with
Section 2.9, or (ii) replace such Bank with an Assignee reasonably acceptable
to Agent pursuant to an Assignment and Assumption Agreement in accordance 
with Section 13.10 hereof.

          (b)  Borrower agrees to indemnify Agent and each Bank and hold 
Agent and each Bank harmless from and against any and all liabilities, 
losses, damages, costs and expenses of any kind (including, without 
limitation, the reasonable fees and disbursements of counsel for Agent 
and each Bank in connection with any investigative, administrative or 
judicial proceeding, whether or not such Bank shall be designated a party 
thereto) which may be incurred by any Bank or by Agent relating to or 
arising out of (i) the existence of this Agreement or any of the Loan 
Papers, including the performance by Borrower, Agent or any Bank of its 
obligations hereunder, (ii) any transactions contemplated hereby or by 
any of the other Loan Papers, (iii) the exercise of any rights or 
remedies by Agent or any Bank under this Agreement or applicable Law 
following any Default or Event of Default hereunder or (iv) any actual or 
proposed use of proceeds of Loans or Letters of Credit hereunder; 
provided that neither Agent nor any Bank shall have the right to be 
indemnified hereunder for its own gross negligence or willful misconduct, 
IT BEING THE EXPRESS INTENTION OF BORROWER THAT EACH BANK AND AGENT SHALL 
BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE.  The 
obligation of Borrower to provide indemnification under this Section 13.3 
for fees and expenses of counsel shall be limited to the fees and 
expenses of one counsel in each jurisdiction representing all of the 
Persons entitled to such indemnification, except to the extent that, in 
the reasonable judgment of any such indemnified Person, the existence of 
actual or potential conflicts of interest make representation of all of 
such indemnified Persons by the same counsel inappropriate; in such a 
case, the Person exercising such judgment shall be indemnified for the 
reasonable fees and expenses of the separate counsel to the extent 
provided in this Section 13.3 without giving effect to the first clause 
of this sentence.  Nothing in this Section 13.3 is intended to limit the 
obligations of Borrower under any other provision of this Agreement.

     SECTION 13.4.  Right and Sharing of Set-Offs.  (a) Upon the 
occurrence and during the continuance of an Event of Default, each Bank 
is hereby authorized at any time and from time to time, to the fullest 
extent permitted by Law, to set off and apply any and all deposits 
(general or special, time or demand, provisional or final) at any time 
held and other indebtedness at any time owing by such Bank to or for the 
credit or the account of Borrower against any and all of the Obligations 
of Borrower now or hereafter existing under this Agreement and any Note 
held by such Bank, irrespective of whether or not such Bank shall have 
made any demand under this Agreement or such Note and although such 
Obligations may be unmatured.  Each Bank agrees promptly to notify 
Borrower after any such setoff and application made by such Bank, 
provided that the failure to give such notice shall not affect the 
validity of such setoff and application.  The rights of each Bank under 
this Section 13.4(a) are in addition to other rights and remedies 
(including, without limitation, other rights of setoff) which such Bank 
may have.  



<PAGE> 58
          (b)  Each Bank agrees that if it shall, by exercising any right 
of setoff or counterclaim or otherwise, receive payment of a proportion 
of the aggregate amount of principal and interest due with respect to any 
Note held by it which is greater than the proportion received by any 
other Bank in respect of the aggregate amount of principal and interest 
due with respect to any Note held by such other Bank, Bank receiving such 
proportionately greater payment shall purchase such participations in the 
Notes held by the other Banks, and such other adjustments shall be made, 
as may be required so that all such payments of principal and interest 
with respect to the Notes held by Banks shall be shared by Banks ratably; 
provided that nothing in this Section 13.4 shall impair the right of any 
Bank to exercise any right of setoff or counterclaim it may have and to 
apply the amount subject to such exercise to the payment of indebtedness 
of Borrower other than its indebtedness under the Notes.  Borrower 
agrees, to the fullest extent it may effectively do so under applicable 
Law, that any holder of a participation in a Note may exercise rights of 
setoff or counterclaim and other rights with respect to such 
participation as fully as if such holder of a participation were a direct 
creditor of Borrower in the amount of such participation.  

     SECTION 13.5.  Amendments and Waivers.  Any provision of this 
Agreement, the Notes or the other Loan Papers may be amended or waived 
if, but only if such amendment or waiver is in writing and is signed by 
Borrower and the Required Banks (and, if the rights or duties of Agent 
are affected thereby, by Agent); provided that no such amendment or 
waiver shall, unless signed by all Banks, (a) increase the Commitments of 
Banks or subject any Bank to any additional obligation, (b) forgive any 
of the principal of or reduce the rate of interest on any Loan or any 
fees hereunder, (c) postpone the date fixed for any payment of principal 
of or interest on any Loan or any fees hereunder including the 
Termination Date, (d) change the percentage of the Commitments or of the 
aggregate unpaid principal amount of the Notes, or the number of Banks, 
which shall be required for Banks or any of them to take any action under 
this Section 13.5 or any other provision of this Agreement, (e) Article 
III or the definitions contained in Section 1.1 applicable thereto.

     SECTION 13.6.  Survival.  All representations, warranties and 
covenants made by Borrower herein or in any certificate or other 
instrument delivered by it or in its behalf under the Loan Papers shall 
be considered to have been relied upon by Banks and shall survive the 
delivery to Banks of such Loan Papers or the extension of the Loans (or 
any part thereof), regardless of any investigation made by or on behalf 
of Banks.  

     SECTION 13.7.  Limitation on Interest.  Regardless of any provision 
contained in the Loan Papers, Banks shall never be entitled to receive, 
collect, or apply, as interest on the Loans, any amount in excess of the 
Maximum Lawful Rate, and in the event any Bank ever receives, collects or 
applies as interest any such excess, such amount which would be deemed 
excessive interest shall be deemed a partial prepayment of principal and 
treated hereunder as such; and if the Loans are paid in full, any 
remaining excess shall promptly be paid to Borrower.  In determining 
whether or not the interest paid or payable under any specific 
contingency exceeds the Maximum Lawful Rate, Borrower and Banks shall, to 
the extent permitted under applicable Law, (a) characterize any 
nonprincipal payment as an expense, fee or premium rather than as



<PAGE> 59 
interest, (b) exclude voluntary prepayments and the effects thereof and 
(c) amortize, prorate, allocate and spread, in equal parts, the total 
amount of the interest throughout the entire contemplated term of the 
Notes, so that the interest rate is the Maximum Lawful Rate throughout 
the entire term of the Notes; provided, however, that if the unpaid 
principal balance thereof is paid and performed in full prior to the end 
of the full contemplated term thereof, and if the interest received for 
the actual period of existence thereof exceeds the Maximum Lawful Rate, 
Banks shall refund to Borrower the amount of such excess and, in such 
event, Banks shall not be subject to any penalties provided by any laws 
for contracting for, charging, taking, reserving or receiving interest in 
excess of the Maximum Lawful Rate.
   
     SECTION 13.8.  Invalid Provisions.  If any provision of the Loan 
Papers is held to be illegal, invalid, or unenforceable under present or 
future Laws effective during the term thereof, such provision shall be 
fully severable, the Loan Papers shall be construed and enforced as if 
such illegal, invalid, or unenforceable provision had never comprised a 
part thereof, and the remaining provisions thereof shall remain in full 
force and effect and shall not be affected by the illegal, invalid, or 
unenforceable provision or by its severance therefrom.  Furthermore, in 
lieu of such illegal, invalid, or unenforceable provision there shall be 
added automatically as a part of the Loan Papers a provision as similar 
in terms to such illegal, invalid, or unenforceable provision as may be 
possible and be legal, valid and enforceable.  

     SECTION 13.9.  Waiver of Consumer Credit Laws.  Pursuant to Article 
15.10(b) of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 
1925, as amended, Borrower agrees that such Chapter 15 shall not govern 
or in any manner apply to the Loans.  

     SECTION 13.10.  Successors and Assigns. (a)  Each Loan Paper binds 
and inures to the parties to it, any intended beneficiary of it, and each 
of their respective successors and permitted assigns.  Borrower shall not 
assign or transfer any rights or obligations under any Loan Paper without 
first obtaining all Banks' consent, and any purported assignment or 
transfer without all Banks' consent is void.  No Bank may transfer, 
pledge, assign, sell any participation in, or otherwise encumber its 
portion of the Obligations except as permitted by clauses (b) or (c) 
below.

          (b)  Any Bank may (subject to the provisions of this section, 
in accordance with applicable law, in the ordinary course of its 
business, and at any time) sell to one or more Persons (each a 
"Participant") participating interests in its portion of the Obligations.  
The selling Bank remains a "Bank" under the Loan Papers, the Participant 
does not become a  "Bank" under the Loan Papers, and the selling Bank's 
obligations under the Loan Papers remain unchanged. The selling Bank 
remains solely responsible for the performance of its obligations and 
remains the holder of its share of the outstanding Loans for all purposes 
under the Loan Papers.  Borrower and each Agent shall continue to deal 
solely and directly with the selling Bank in connection with that Bank's 
Rights and obligations under the Loan Papers, and each Bank must retain 
the sole right and responsibility to enforce due obligations of Borrower.  
Participants have no rights under the Loan Papers except certain voting 
rights as provided below.  Subject to the following, each Bank may obtain 
(on behalf of its Participants) the benefits of Article XII with respect 
to all participations in its part of the Obligations outstanding from 
time to time so long 



<PAGE> 60
as Borrower is not obligated to pay any amount in excess of the amount that
would be due to that Bank under Article XII calculated as though no 
participations have been made.  No Bank may sell any participating interest
under which the Participant has any Rights to approve any amendment, 
modification, or waiver of any Loan Paper except as to matters in Section 13.5.
 
          (c)  Each Bank may make assignments to the Federal Reserve 
Bank.  Each Bank may also assign to one or more assignees (each an 
"Assignee") all or any part of its rights and obligations under the Loan 
Papers so long as  (i) the assignor Bank and Assignee execute and deliver 
to Agent and Borrower for their consent and acceptance (that may not be 
unreasonably withheld) an assignment and assumption agreement in 
substantially the form of Exhibit J (an "Assignment and Assumption 
Agreement") and, in the case of any assignment occurring on or after the 
ninetieth (90th) day after the Closing Date, pay to Agent a processing 
fee of $2,500, and (ii) the conditions (including, without limitation, 
minimum amounts of the Total Commitment that may be assigned or that must 
be retained) for that assignment set forth in the applicable Assignment 
and Assumption Agreement are satisfied.  The "Effective Date" in each 
Assignment and Assumption Agreement must (unless a shorter period is 
agreeable to Borrower and Agent) be at least five Domestic Business Days 
after it is executed and delivered by the assignor Bank and the Assignee 
to each Agent and Borrower for acceptance.  Once that Assignment and 
Assumption Agreement is accepted by Agent and Borrower, then, from and 
after the Effective Date stated in it (i) the Assignee automatically 
becomes a party to this agreement and, to the extent provided in that 
Assignment and Assumption Agreement, has the Rights and obligations of a 
Bank under the Loan Papers, (ii) the assignor Bank, to the extent 
provided in that Assignment and Assumption Agreement, is released from 
its obligations to fund Borrowings under this Agreement and its 
reimbursement obligations under this Agreement and, in the case of an 
Assignment and Assumption Agreement covering all of the remaining portion 
of the assignor Bank's rights and obligations under the Loan Papers, that 
Bank ceases to be a party to the Loan Papers, (iii) Borrower shall 
execute and deliver to the assignor Bank and the Assignee the appropriate 
Notes in accordance with this Agreement following the transfer, (iv) upon 
delivery of the Notes under clause (iii) preceding, the assignor Bank 
shall return to Borrower all Notes previously delivered to that Bank 
under this agreement, and (v) Schedule 1 is automatically deemed to be 
amended to reflect the name, address, telecopy number, and Commitment of 
the Assignee and the remaining Commitment (if any) of the assignor Bank, 
and Agent shall prepare and circulate to Borrower and Banks an amended 
Schedule 1 reflecting those changes.

     SECTION 13.11.  TEXAS LAW.  THIS AGREEMENT AND EACH NOTE AND THE 
OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY 
THE LAWS OF THE STATE OF TEXAS.  

     SECTION 13.12.  [Intentionally Deleted].

     SECTION 13.13.  Counterparts; Effectiveness.  This Agreement may be 
signed in any number of counterparts, each of which shall be an original, 
with the same effect as if the signatures thereto and hereto were upon 
the same instrument.  This Agreement shall become effective when Agent 
shall have received counterparts hereof signed by all of the parties 
hereto 



<PAGE> 61
or, in the case of any Bank as to which an executed counterpart shall 
not have been received, Agent shall have received telegraphic or 
other written confirmation from such Bank of execution of a counterpart 
hereof by such Bank.  

     SECTION 13.14.  No Third Party Beneficiaries.  It is expressly 
intended that there shall be no third party beneficiaries of the 
covenants, agreements, representations or warranties herein contained 
other than third party beneficiaries permitted pursuant to Section 
13.10(b).

     SECTION 13.15.  COMPLETE AGREEMENT.  THIS AGREEMENT  AND THE OTHER 
LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG 
BANKS, AGENT AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF 
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANKS, AGENT AND 
BORROWER.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN BANKS, AGENT 
AND BORROWER.

     SECTION 13.16. WAIVER OF JURY TRIAL. BORROWER AND BANKS HEREBY 
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION 
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS 
AND FOR ANY COUNTERCLAIM THEREIN.



<PAGE> 62
     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to 
be duly executed by their respective authorized officers effective as of 
the day and year first above written.   

BORROWER:

BERRY PETROLEUM COMPANY
a Delaware corporation



By:  /s/ Jerry V. Hoffman                         
     Jerry V. Hoffman,
     President and Chief Executive Officer

By:  /s/ Ralph J. Goehring                         
     Ralph J. Goehring,
     Chief Financial Officer

[Two signatures required]


Berry Petroleum Company
28700 Hovey Hills Road
P.O. Bin X
Taft, California  93268
Attn: Chief Financial Officer

Telecopy No.:  (805) 769-8960


BANKS:

NATIONSBANK OF TEXAS, N.A.
                                                                 

By:  /s/ Richard P. Stults           
     Richard P. Stults, Vice President



<PAGE> 63
AGENT:

NATIONSBANK OF TEXAS, N.A.


By:  /s/ Richard P. Stults                         
     Richard P. Stults, Vice President



<PAGE> 1                                                                  
                            EXHIBIT A

                     FORM OF COMMITTED NOTE


$_______________          Dallas, Texas     _______________, 1996


     FOR VALUED RECEIVED, the undersigned, Berry Petroleum
Company, a Delaware corporation ("Maker"), hereby promises to pay
to the order of [Name of Bank or Lending Office] ("Payee"), at
the offices of NationsBank of Texas, N.A., as Agent (herein so
called) for Payee and the other Banks hereinafter described at
the offices of Agent, 901 Main St., 64th Floor, Dallas, Texas 
75202, Dallas County, Texas, the principal sum of [Amount of such
Bank's Commitment] ($___________), or so much thereof as may be
advanced and outstanding, together with interest, as hereinafter
described.

     This Committed Note has been executed and delivered pursuant
to, and is subject to and governed by, the terms of that certain
Credit Agreement dated as of December 1, 1996 (as hereafter
renewed, extended, amended, or supplemented, the "Agreement")
among Maker, Payee, Agent and the other Banks named therein and
is one of the "Committed Notes" referred to therein.  Unless
otherwise defined herein or unless the context hereof otherwise
requires, each term used herein with its initial letter
capitalized has the meaning given to such term in the Agreement.

     Maker also promises to pay interest on the unpaid principal
amount hereof in like money at the offices of Agent above
referenced from the date hereof at the rates applicable to
Committed Loans provided in the Agreement.

     Accrued interest shall be due and payable (a) in the case of
Committed Loans which are Eurodollar Loans, at the expiration of
the Interest Period applicable thereto, and in the event such
Interest Period is for a term longer than three (3) months, on
each Quarterly Date during such Interest Period, (b) in the case
of Base Rate Loans, on each Quarterly Date, and (c) at the times
required by Section 2.11 of the Agreement.  The principal balance
of the Committed Loans evidenced by this Committed Note shall be
paid at the times and in the amounts required by Sections 2.6,
2.7, 2.9, 2.10, 3.4, 5.3 and 5.5 of the Agreement.  The entire
outstanding principal balance hereof and all accrued but unpaid
interest thereon shall be due and payable in full on the
Termination Date.

     Upon and subject to the terms and conditions of the
Agreement, Maker shall be entitled to prepay the principal of or
interest on this Committed Note from time to time and at any
time, in whole or in part.

     Upon the occurrence and continuance of an Event of Default,
and upon the conditions stated in the Agreement, the holder
hereof may, at its option, declare the entire unpaid principal of
and accrued interest on this Committed Note immediately due and
payable (provided that, upon the occurrence of certain Events of
Default, and upon the conditions stated in the Agreement, such
acceleration shall be automatic), without notice (except as
otherwise required by the Agreement), demand, or presentment, all
of which are hereby waived, and the holder hereof shall have the
right to offset against this Note any sum or sums owed by the
holder hereof to Maker.  All past-due principal of and, to the
extent permitted by law, accrued interest on this Committed Note
shall, at the option of the holder hereof, bear interest at the
lesser of (a) the Maximum Lawful Rate or (b) the Base Rate plus
3% until paid.


<PAGE 2>
     Notwithstanding the foregoing, if at any time, any rate of
interest calculated under Section 2.5(a) and (b) of the Agreement
(the "Contract Rate") exceeds the Maximum Lawful Rate, the rate
of interest hereunder shall be limited to the Maximum Lawful
Rate, but any subsequent reductions in the Contract Rate shall
not reduce the rate of interest on this Committed Note below the
Maximum Lawful Rate until the total amount of interest accrued
equals the amount of interest which would have accrued (including
the amount of interest which would have accrued prior to the
payment or prepayment of any portion of this Committed Note) if
the Contract Rate had at all times been in effect.  In the event
that at maturity (stated or by acceleration), or at final payment
of this Committed Note, the total amount of interest paid or
accrued on this Committed Note is less than the amount of
interest which would have accrued if the Contract Rate had at all
times been in effect with respect thereto, then at such time the
Maker shall pay to the holder of this Committed Note an amount
equal to the difference between (a) the lesser of the amount of
interest which would have accrued if the Contract Rate had at all
times been in effect and the amount of interest which would have
accrued if the Maximum Lawful Rate had at all times been in
effect, and (b) the amount of interest actually paid or accrued
on this Committed Note.

                                   BERRY PETROLEUM COMPANY,
                                    a Delaware corporation



                                   By:                           
                                   Name:                              
                                   Title:                             



                                   By:                           
                                   Name:                              
                                   Title:                             



                                   [Two signatures required]                 


<PAGE 3>                                   
                         
                 COMMITTED LOANS, MATURITIES, AND
                PAYMENTS OF PRINCIPAL AND INTEREST
                                   
                                         Rate of Interest
             Amount of    Maturity of      Applicable to
Borrowing    Committed    Committed         Committed          Amount of
  Date         Loan         Loan               Loan         Principal Paid




                         Unpaid
    Amount of           Principal         Notation Made
  Interest Paid          Balance                By



<PAGE 1>
                             EXHIBIT B
                                 
                   FORM OF COMPETITIVE BID NOTE


$_______________          Dallas, Texas         ___________, 1996

     FOR VALUED RECEIVED, the undersigned, Berry Petroleum
Company, a Delaware corporation ("Maker"), hereby promises to pay
to the order of [Name of Bank or Lending Office] ("Payee"), at
the offices of NationsBank of Texas, N.A., as Agent (herein so
called) for Payee and the other Banks hereinafter described at
the offices of Agent, 901 Main St., 64th Floor, Dallas, Texas 
75202, Dallas County, Texas, the principal sum of [Amount of such
Bank's Commitment] ($___________), or so much thereof as may be
advanced and outstanding, together with interest, as hereinafter
described.

     This Competitive Bid Note has been executed and delivered
pursuant to, and is subject to and governed by, the terms of that
certain Credit Agreement dated as of December 1, 1996 (as
hereafter renewed, extended, amended or supplemented, the
"Agreement") among Maker, Payee, Agent and the other Banks named
therein and is one of the "Competitive Bid Notes" referred to
therein.  Unless otherwise defined herein or unless the context
hereof otherwise requires, each term used herein with its initial
letter capitalized has the meaning given to such term in the
Agreement.

     Maker also promises to pay interest on the unpaid principal
amount hereof in like money at the offices of Agent above
referenced from the date hereof at the rates provided in the
Agreement applicable to Competitive Bid Loans and in the
applicable Competitive Bids under which Competitive Bid Loans
outstanding hereunder are made.

     Accrued interest shall be due and payable on the expiration
of each Interest Period with respect to those Competitive Bid
Loans which are subject to the Interest Period then expiring and
at the times required by Section 2.11 of the Agreement.  The
principal balance of the Competitive Bid Loans evidenced by this
Competitive Bid Note shall be paid at the times and in the
amounts required by Sections 2.6, 2.7, 2.9, 2.10, 3.4, 5.3 and
5.5 of the Agreement.  The entire outstanding principal balance
hereof and all accrued but unpaid interest thereon shall be due
and payable in full on the Conversion Date.  The amount and type
of each Competitive Bid Loan made by the Bank to the Maker and
the maturity thereof, the rate of interest applicable thereto and
all payments made on account of principal and interest hereof,
shall be recorded by the Bank and, prior to any transfer hereof,
endorsed on the grid attached hereto which is part of this
Competitive Bid Note.

     Upon and subject to the terms and conditions of the
Agreement, Maker shall be entitled to prepay the principal of or
interest on this Competitive Bid Note from time to time and at
any time, in whole or in part.


<PAGE 2>
     Upon the occurrence and continuance of an Event of Default,
and upon the conditions stated in the Agreement, the holder
hereof may, at its option, declare the entire unpaid principal of
and accrued interest on this Competitive Bid Note immediately due
and payable (provided that, upon the occurrence of certain Events
of Default, and upon the conditions stated in the Agreement, such
acceleration shall be automatic), without notice (except as
otherwise required by the Agreement), demand, or presentment, all
of which are hereby waived, and the holder hereof shall have the
right to offset against this Competitive Bid Note any sum or sums
owed by the holder hereof to Maker.  All past-due principal of
and, to the extent permitted by law, accrued interest on this
Competitive Bid Note shall, at the option of the holder hereof,
bear interest at the lesser of (a) the Maximum Lawful Rate or (b)
the Base Rate plus 3% until paid.

     Notwithstanding the foregoing, if at any time, any rate of
interest calculated under Section 2.5(b), (c) or (d) of the
Agreement (the "Contract Rate") exceeds the Maximum Lawful Rate,
the rate of interest hereunder shall be limited to the Maximum
Lawful Rate, but any subsequent reductions in the Contract Rate
shall not reduce the rate of interest on this Competitive Bid
Note below the Maximum Lawful Rate until the total amount of
interest accrued equals the amount of interest which would have
accrued (including the amount of interest which would have
accrued prior to the payment or prepayment of any portion of this
Competitive Bid Note) if the Contract Rate had at all times been
in effect.  In the event that at maturity (stated or by
acceleration), or at final payment of this Competitive Bid Note,
the total amount of interest paid or accrued on this Competitive
Bid Note is less than the amount of interest which would have
accrued if the Contract Rate had at all times been in effect with
respect thereto, then at such time the Maker shall pay to the
holder of this Competitive Bid Note an amount equal to the
difference between (a) the lesser of the amount of interest which
would have accrued if the Contract Rate had at all times been in
effect and the amount of interest which would have accrued if the
Maximum Lawful Rate had at all times been in effect, and (b) the
amount of interest actually paid or accrued on this Competitive
Bid Note.

                                   BERRY PETROLEUM COMPANY,
                                    a Delaware corporation


                                   By:                           
                                   Name:                              
                                   Title:                             


                                   By:                           
                                   Name:                              
                                   Title:                             


                                   [Two signatures required]


<PAGE 3>
                  COMPETITIVE BID LOANS, MATURITIES, 
                AND PAYMENTS OF PRINCIPAL AND INTEREST

              Amount of      Maturity of      Rate of Interest                  
           Competitive Bid   Competitive        Applicable to      
Borrowing       Loan          Bid Loan         Competitive Bid     
  Date                                               Loan                   
  


  Amount of         Amount of          Unpaid         
Principal Paid     Interest Paid      Principal       Notation Made   
                                       Balance              By
                            
<PAGE 1>                            
                           EXHIBIT C

                 FORM OF COMPETITIVE BID REQUEST




NationsBank of Texas, N.A.,
   as Agent for the Banks
   parties to the Credit
   Agreement referred to below
901 Main Street
Dallas, Texas 75202                                        [Date]

Attention:

Dear Sirs:

     The undersigned hereby gives notice pursuant to
Section 2.2.1 of the Credit Agreement dated December 1, 1996 (the
"Agreement")(capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in
the Agreement) among the undersigned, the Banks named therein and
NationsBank of Texas, N.A., as Agent, that it requests a
Competitive Bid Borrowing under the Credit Agreement, and set
forth below are the terms on which such Competitive Bid Borrowing
is requested to be made:


(1)  Borrowing Date of Competitive Bid Borrowing 1                
     (which is a Domestic Business Day)

(2)  Principal Amount of Competitive Bid Borrowing 2            

(3)  Interest Period and the last day thereof 3                 
  

     Borrower and the officer of Borrower signing this instrument
     hereby certify that:
  
       (a)  Such officer is the duly elected, qualified and
     acting officer of Borrower as indicated below such officer's
     signature hereto;


1   At least three (3) Domestic Business Days after receipt of this
    Request by Agent.

2   Not less than $5,000,000 or greater than the Competitive Bid
    Availability, and in integral multiples of $100,000.

3   Which shall have a duration of 7, 30, 60 or 90 days, and which,
    in either case, shall end by the thirtieth day prior to the
    Conversion Date.


<PAGE 2>
       (b)  The representations and warranties of Borrower set
  forth in the Agreement and the Loan Papers delivered to
  Banks are true and correct on and as of the date hereof,
  with the same effect as though such representations and
  warranties had been made on and as of the date hereof or, if
  such representations and warranties are expressly limited to
  particular dates, as of such particular dates.  No material
  changes have occurred in the business, financial condition,
  operations or prospects of Borrower or any of its
  Subsidiaries since the date of the last financial reports
  delivered to Banks pursuant to Section 8.1 of the Agreement.

       (c)  There does not exist on the date hereof, any
  condition or event which constitutes a Default, nor will any
  such Default exist upon Borrower's receipt and application
  of the proceeds requested hereby.  Borrower will use the
  proceeds hereby requested in compliance with the applicable
  provisions of the Agreement.

       (d)  Borrower has performed and complied with all
  agreements and conditions in the Agreement required to be
  performed or complied with by Borrower on or prior to the
  date hereof, and each of the conditions precedent contained
  in the Agreement to making the Loans requested herein have
  been and remain satisfied in all respects.

                                   Sincerely,
  
                                BERRY PETROLEUM COMPANY

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

                                [TWO (2) SIGNATURES REQUIRED]               
                                

<PAGE 1>
                           EXHIBIT D            
                         
            FORM OF NOTICE OF COMPETITIVE BID REQUEST


[Name of Bank]                                             [Date]
[Address of Bank]


Attention:

Dear Sirs:

     Reference is made to the Credit Agreement dated as of
December 1, 1996 (the "Credit Agreement"), among Berry Petroleum
Company (the "Company"), the Banks named therein, and NationsBank
of Texas, N.A., as Agent.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such
terms in the Credit Agreement.  The Company delivered a Request
for Competitive Bids requesting a Competitive Bid on
_______________, 19____ pursuant to Section 2.2.1(a) of the
Credit Agreement, and in that connection you are invited to
submit a Competitive Bid by     [Date]    ,     [Time]   1. 
Your Competitive Bid must comply with Section 2.2.1(b) of the
Credit Agreement and the terms set forth below on which the
Notice of Competitive Borrowing was made:

(1)    Date of Competitive Bid Borrowing                                

(2)    Principal amount of Competitive Bid Borrowing                      

(3)    Interest Period and the last day thereof               

                                Very truly yours,
  
                                NATIONSBANK OF TEXAS, N.A.,
                                 as Agent
  

                                By:                           
                                Name:                              
                                Title:                             

1   The Competitive Bid must be received by Agent not later than 10:00 a.m.
    Dallas, Texas time, two Domestic Business Days before the proposed
    Competitive Bid Borrowing.


<PAGE 1>                             
                            EXHIBIT E

                     FORM OF COMPETITIVE BID



NationsBank of Texas, N.A.,
   as Agent for the Banks
   parties to the Credit
   Agreement referred to below
901 Main Street
Dallas, Texas 75202                                        [Date]

Attention:                     

Dear Sirs:

  The undersigned,       [Name of Bank]      , refers to the
Credit Agreement dated as of December 1, 1996 (the "Credit
Agreement"), among Berry Petroleum Company (the "Company"), the
Banks named therein, and NationsBank of Texas, N.A., as Agent. 
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Credit
Agreement.  The undersigned hereby makes a Competitive Bid
pursuant to Section 2.2.1(b) of the Credit Agreement, in response
to the Request for Competitive Bids (the "Competitive Bid
Request") made by the Company on _______________, 19____, and in
that connection sets forth below the terms on which such
Competitive Bid is made:


(1)    Principal Amount 1    ______________________

(2)    Competitive Bid Rate 2  ____________________

(3)    Interest Period and
       the last day thereof 3  ____________________

  The undersigned hereby confirms that it is prepared to
extend credit to the Company upon acceptance by the Company of
this bid in accordance with Section 2.2.1(d) of the Credit
Agreement.  The undersigned hereby represents that the sum of
(i) the aggregate principal amount of all Committed Loans made by
it, plus (ii) the aggregate principal amount of all Competitive


1   Not less than $1,000,000 or greater than the Competitive Bid
    Borrowing requested by Borrower and in integral multiples of
    $100,000.

2   Expressed in the form of a decimal to no more than four decimal
    places.

3   The Interest Period must be the Interest Period specified in the
    Competitive Bid Request.


<PAGE 2>
Bid Loans made by it (after giving effect to this Competitive
Bid), plus (iii) the amount of the undersigned's Letter of Credit
Exposure, does not exceed the undersigned's Commitment Percentage
of the Borrowing Base now in effect.


                                Very truly yours,
  
                                [Name of Bank]                
                                     

                                By:                           
                                Name:                              
                                Title:                             


<PAGE 1>                                
                             EXHIBIT F

               FORM OF REQUEST FOR COMMITTED LOANS


  Reference is made to that certain Credit Agreement dated as
of December 1, 1996, (as from time to time amended, the
"Agreement") by and among Berry Petroleum Company ("Borrower"),
NationsBank of Texas, N.A., as Agent ("Agent"), and certain other
Banks named therein.  Terms which are defined in the Agreement
and which are used but not defined herein are used herein with
the meanings given them in the Agreement. Pursuant to the terms
of the Agreement, Borrower hereby requests each Bank to make a
Committed Loan to Borrower in the amount allocated to such Bank
pursuant to Section 2.1(a) of the Agreement (as applicable) of
the full amount of the Borrowing requested hereby, said amount
being $ ________________________ to be advanced on             
______________, 19__  .1 

  Borrower requests that the Committed Loans to be made
hereunder shall be Base Rate Loans and/or Eurodollar Loans and
shall have the Interest Periods all as set forth below:


  Type of Loan              Aggregate Amount              Interest Period 2


                                                              


   Borrower and the officer of Borrower signing this instrument
   hereby certify that:

         (a)  Such officer is the duly elected, qualified and
   acting officer of Borrower as indicated below such officer's
   signature hereto;

         (b)  The representations and warranties of Borrower set
   forth in the Agreement and the Loan Papers delivered to Banks 
   are true and correct on and as of the date hereof, with the same 
   effect as though such representations and warranties had been 
   made on and as of the date hereof or, if such representations and 
   warranties are expressly limited to particular dates, as of such 
   particular dates.  No material changes have occurred in the business, 
   financial condition, operations or prospects of Borrower or any of its 
   
1  For a Base Rate Borrowing, at least one (1) Domestic Business Day    
   after receipt of this Request by Agent, and for a Eurodollar Borrowing,
   at least three (3) Eurodollar Business Days after receipt of this
   Request by Agent.

2  For Eurodollar Loans only, a duration of one, two, three or six, and,
   if available to Banks, twelve months.


<PAGE 2>
   Subsidiaries since the date of the last financial reports
   delivered to Banks pursuant to Section 8.1 of the Agreement.

         (c)  There does not exist on the date hereof, any
   condition or event which constitutes a Default, nor will any
   such Default exist upon Borrower's receipt and application
   of the proceeds requested hereby.  Borrower will use the
   proceeds hereby requested in compliance with the applicable
   provisions of the Agreement.

         (d)  Borrower has performed and complied with all
   agreements and conditions in the Agreement required to be
   performed or complied with by Borrower on or prior to the
   date hereof, and each of the conditions precedent contained
   in the Agreement to making the Loans requested herein have
   been and remain satisfied in all respects.

   IN WITNESS WHEREOF, this instrument is executed as of
   _______________, 19____.


                                BERRY PETROLEUM COMPANY
                                a Delaware corporation



                                By:                           
                                Name:                              
                                Title:                             


                                By:                           
                                Name:                              
                                Title:                             

                                [TWO (2) SIGNATURES REQUIRED]


<PAGE 1>
                            EXHIBIT G

               FORM OF REQUEST FOR LETTER OF CREDIT


     Reference is made to that certain Credit Agreement dated as
of December 1, 1996 (as from time to time amended, the
"Agreement"), by and among Berry Petroleum Company ("Borrower"),
NationsBank of Texas, N.A., as Agent ("Agent"), and certain other
Banks named therein.  Terms which are defined in the Agreement
and which are used but not defined herein are used herein with
the meanings given them in the Agreement.  Pursuant to the terms
of the Agreement, Borrower hereby requests ___________________
                 ("Issuer") to issue a Letter of Credit for the
account of Borrower as follows:


       Requested Amount 1
        $ ___________________
       Requested Date of Issuance 2     ___________________
       Requested Expiration Date  3         
       ___________________
       Beneficiary                      ___________________

     Borrower and the officer of Borrower signing this instrument
     hereby certify that:

          (a)  Such officer is the duly elected, qualified and
     acting officer of Borrower as indicated below such officer's
     signature hereto;

          (b)  The representations and warranties of Borrower set
     forth in the Agreement and the other Loan Papers delivered
     to Banks are true and correct on and as of the date hereof,
     with the same effect as though such representations and
     warranties had been made on and as of the date hereof or, if
     such representations and warranties are expressly limited to
     particular dates, as of such particular dates.  No material
     changes have occurred in the business, financial condition,
     operations or prospects of Borrower or any of its
     Subsidiaries since the date of the last financial reports
     delivered to Banks pursuant to Section 8.1 of the Agreement.

          (c)  There does not exist on the date hereof any
     condition or event which constitutes a Default, nor will any
     such Default exist upon the issuance of the Letter of 
  

1   Minimum amount of $5,000.00.

2   At least three (3) Domestic Business Days after this Request
    for Letter of Credit, and at least ninety (90) days prior
    to the Conversion Date.

3   Not later than the earlier of (i) thirty (30) days prior to
    the Conversion Date, or (ii) one (1) year from the date of
    issuance.

<PAGE 2>
    Credit requested hereby.  Borrower will use the Letter of Credit
    solely for purposes permitted by the Agreement.
  
          (d)  Borrower has performed and complied with all
    agreements and conditions in the Agreement required to be
    performed or complied with by Borrower on or prior to the
    date hereof, and each of the conditions precedent contained
    in the Agreement to the issuance of Letters of Credit have
    been and remain satisfied.

          (e)  After the issuance of the Letter of Credit
    requested hereby, Borrower will have Availability on the
    date requested for the issuance of such Letter of Credit.

    IN WITNESS WHEREOF, this instrument is executed as of        
             , 19     .


                                BERRY PETROLEUM COMPANY,
                                a Delaware corporation

                           
                                By:                              
                                Name:                            
                                Title:                           


                                By:                              
                                Name:                            
                                Title:                           

                                [TWO (2) SIGNATURES REQUIRED]


<PAGE 1>
                            EXHIBIT H
                                                                 
            FORM OF CERTIFICATE OF OWNERSHIP INTEREST


     This Certificate of Ownership Interest (this "Certificate")
is executed and delivered pursuant to that certain Credit
Agreement dated December 1, 1996, but effective for all purposes
as of ____________, 1996 (the "Agreement"), by and among Berry
Petroleum Company, as Borrower, NationsBank of Texas, N.A., as
Agent and certain other Banks named therein.  Unless otherwise
defined herein, all capitalized terms shall have the meanings
given such terms in the Agreement.

     In order to induce each Bank to enter into the Agreement and
to make Loans thereunder, Borrower hereby represents and warrants
to each Bank that Borrower has good and indefeasible title,
beneficially and of record, subject only to Permitted
Encumbrances, to all Mineral Interests described in the most
recent Reserve Report delivered to Banks pursuant to the Credit
Agreement.  All such Mineral Interests are valid, subsisting, and
in full force and effect, and all rentals, royalties and other
amounts due and payable in respect thereof have been duly paid. 
Without regard to any consent or non-consent provisions of any
joint operating agreement covering any of Borrower's Proved
Mineral Interests, Borrower's share of (a) the costs for each
Proved Mineral Interest described in the Reserve Report is not
greater than the decimal fraction set forth in the Reserve
Report, before and after payout, as the case may be, and
described therein by the respective designations "working
interests", "WI", "gross working interest", "GWI", or similar
terms, and (b) production from, allocated to, or attributed to
each such Proved Mineral Interest is not less than the decimal
fraction set forth in the Reserve Report, before and after
payout, as the case may be, and described therein by the
designations net revenue interest, NRI, or similar terms.

     Borrower acknowledges and agrees that the Banks are relying
on this Certificate, and the representations and warranties
herein contained, in entering into the Agreement and committing
to make Loans and issue Letters of Credit thereunder, and but for
Borrower's execution and delivery of this Certificate, Banks
would not enter into the Agreement and commit to make Loans and
issue Letters of Credit to Borrower thereunder.

     Executed the ____ day of _______, 1996.

                                BERRY PETROLEUM COMPANY
                                a Delaware corporation


                                By:                           
                                Name:                              
                                Title:                                  


<PAGE 1>
                            EXHIBIT I

             FORM OF CERTIFICATE OF FINANCIAL OFFICER


     The undersigned, the __________________________ of Berry
Petroleum Company, a Delaware corporation ("Borrower"), hereby
(a) delivers this Certificate pursuant to Section 8.1(c) of that
certain Credit Agreement ("Credit Agreement") dated as of
December 1, 1996, by and among Borrower, NationsBank of Texas,
N.A., as Agent ("Agent"), and the financial institutions listed
on the signature pages thereto, as Banks ("Banks"), and
(b) certifies to Banks, with the knowledge and intent that Banks
may, without any independent investigation, rely fully on the
matters herein in connection with the Credit Agreement, as
follows:

     1.   Attached hereto as Schedule I are the consolidated
financial statements of Borrower [and its Subsidiaries] as of and
for the Fiscal   Year   Quarter (check one) ended
________________, 19____.

     2.   Such consolidated financial statements are true and
correct in all material respects, have been prepared on a
consistent basis in accordance with GAAP (except as otherwise
noted therein) and fairly present the financial condition of
Borrower [and its Subsidiaries] as of the date indicated therein
and the results of operations for the respective period indicated
therein.

     3.   Unless otherwise disclosed on Schedule II attached
hereto and incorporated herein by reference for all purposes,
neither a Default nor an Event of Default has occurred which is
in existence on the date hereof; provided, that for any Default
or Event of Default disclosed on Schedule II attached hereto,
Borrower is taking or proposes to take the action to cure such
Default or Event of Default set forth on Schedule II.

     4.   The representations and warranties of Borrower set
forth in the Credit Agreement and the Loan Papers delivered to
Banks are true and correct on and as of the date hereof, with the
same effect as though such representations and warranties had
been made on and as of the date hereof or, if such
representations and warranties are expressly limited to
particular dates, as of such particular dates.  No material
changes have occurred in the business, financial condition,
operations or prospects of Borrower or any of its Subsidiaries
since the date of the last financial reports delivered to Banks
pursuant to Section 8.1 of the Credit Agreement.

     5.   Attached hereto as Schedule III is a list and
description of all Hedge Transactions to which Borrower or any of
its Subsidiaries is then a party, including a calculation of
Borrower's and its Subsidiaries' termination liability assuming
each of such Hedge Transactions was terminated as of such date
(whether or not such Hedge Transactions are then terminable, but
without giving effect to penalties for early termination if any). 


<PAGE 2>
     6.   The aggregate amount of all Investments of Borrower, of
the type described in clause (d) of the definition of "Permitted
Investments", which are outstanding as of the date this
Certificate, is $____________________.

     7.   The Consolidated Tangible Net Worth of Borrower, as of
the date of this Certificate, is $_______________.  The Minimum
Consolidated Tangible Net Worth of Borrower is $_______________
(sum of $74,000,000 plus 75% of any increase in the shareholders
equity of Borrower resulting from the issuance of any equity
securities of Borrower after the Closing Date).

     IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate as of _______________, 19__.
  
                                BERRY PETROLEUM COMPANY
  

                                By:                           
                                Name:                              
                                Title:                             


<PAGE 3>                                
                     Schedule I to Exhibit I

                       Financial Statements
                         (to be attached)




<PAGE 4>
                     Schedule II to Exhibit I

          Defaults or Events of Default/Remedial Action
                         (to be attached)




<PAGE 5>
                    Schedule III to Exhibit I

                        Hedge Transactions
                         (to be attached)



<PAGE 1>
                            EXHIBIT J

               ASSIGNMENT AND ASSUMPTION AGREEMENT


     THIS ASSIGNMENT AND ASSUMPTION AGREEMENT ("Assignment and
Assumption") is dated ____________________, 199__, among
__________________________ ("Assignor") and
______________________________ ("Assignee") and NationsBank of
Texas, N.A., as Agent ("Agent").


                           BACKGROUND.

     A.   Reference is made to the Credit Agreement dated as of
December 1, 1996 (as it may hereafter be amended or otherwise
modified from time to time, being referred to as the "Credit
Agreement") among Berry Petroleum Company (the "Borrower"), the
financial institutions parties thereto as Banks thereunder, and
Agent.  Unless otherwise defined, terms are used herein as
defined in the Credit Agreement.

     B.   This Assignment and Assumption Agreement is made with
reference to the following facts:

          (i)  Assignor is a Bank under and as defined in the
     Credit Agreement and, as such, presently holds a percentage
     of the rights and obligations of Banks under the Credit
     Agreement.

          (ii) As of the date hereof, the Total Commitment is
     $__________, Assignor's Commitment is $______________ and
     Assignor's Commitment Percentage is ______%.

          (iii)     As of the date hereof, the outstanding
     balance of Assignor's Competitive Bid Loans is
     $_______________ and the outstanding balance of its
     Committed Loans is $_______________.

          (iv) On the terms and conditions set forth below,
     Assignor desires to sell and assign to Assignee, and
     Assignee desires to purchase and assume from Assignor, as of
     the Effective Date (as defined below), ___________ percent
     (_______%) of the Total Commitment (the "Assigned
     Percentage").

                            AGREEMENT.

     NOW, THEREFORE, Assignor and Assignee hereby agree as
     follows:

     1.   By this agreement, and effective as of _____________,
19__ (which must be at least five (5) Domestic Business Days
after the execution and delivery of this Assignment and


<PAGE 2>
Assumption to both Borrower and Agent for acceptance), Assignor
hereby sells and assigns to Assignee, without recourse and,
except as provided in paragraph 2 of this Assignment and
Assumption, without representation and warranty, and Assignee
hereby purchases and assumes from Assignor, Assignor's rights and
obligations under the Credit Agreement, to the (a) extent of the
Assigned Percentage of the Committed Loans, the Letter of Credit
Exposure, and the Commitment as in effect on the Effective Date,
and (b) ______% of each of the Competitive Bid Loans owing to
Assignor on the Effective Date).

     2.   Assignor (a) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse
claim; (b) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit
Agreement, any other Loan Paper or any other instrument or
document furnished pursuant thereto, or with respect to the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement or any other Loan
Paper or any other instrument or document furnished pursuant
thereto; and (c) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the
Borrower or any Person or the performance or observance by the
Borrower or any Person of any of its obligations under the Loan
Papers or any other instrument or document furnished pursuant
thereto.

     3.   Assignee (a) confirms that it has received a copy of
the Credit Agreement, together with copies of the most recent
financial statements delivered to Assignor pursuant to
Section 8.1 of the Credit Agreement, and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and
Assumption; (b) agrees that it will, independently and without
reliance upon the Agent, Assignor or any other Bank and based on
such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement and the other Loan
Papers; (c) appoints and authorizes Agent to take such action as
agent on its behalf and to exercise such powers under the Credit
Agreement and the other Loan Papers as are delegated to Agent by
the terms thereof, together with such powers as are reasonably
incidental thereto; (d) agrees that it will perform in accordance
with their terms all of the obligations which, by the terms of
the Credit Agreement and the other Loan Papers, are required to
be performed by it as a Bank; (e) specifies, as its address for
notice and Lending Office, the office set forth beneath its name
on the signature pages hereof, and (f) if Assignee is not
organized under the Laws of the United States of America or one
of its states, it (a) represents and warrants to Assignor, Agent
and Borrower that (i) no Taxes are required to be withheld by
Agent or Borrower with respect to any payments to be made to it
in respect of the Obligations and (ii) it has furnished to Agent
and Borrower two duly completed copies of either U.S. Internal
Revenue Service Form 4224, Form 1001, Form W-8, or other form
acceptable to Agent that entitles it to exemption from U.S.
federal withholding Tax on all interest payments under the Loan
Papers, (b) covenants to (i) provide Agent and Borrower a new
form 4224, Form 1001, Form W-8, or other form acceptable to Agent
upon the expiration or obsolescence of any previously delivered
form according to applicable laws and regulations, duly executed
and completed by it, and (ii) comply from time to time with all
applicable laws and regulations with 


<PAGE 3>
regard to the withholding Tax exemption, and (c) agrees that if 
any of the foregoing is not true or the applicable forms are not 
provided, then Borrower and Agent (without duplication) may deduct 
and withhold from interest payments under the Loan Papers any United 
States federal income Tax at the maximum rate under the Code.

     4.   Borrower acknowledges its obligations under the Credit
Agreement, and agrees, within five Domestic Business Days after
receiving an executed copy of this Assignment and Assumption to
execute and deliver to Agent, in exchange for the Notes
originally delivered to Assignor, new Notes to the order of
Assignor and Assignee in amounts equal to their respective
Commitment Percentages of the Commitment.

     5.   As of the Effective Date, (a) Assignee shall be a party
to the Credit Agreement and, to the extent provided in this
Assignment and Assumption, have the rights and obligations of a
Bank thereunder, (b) Assignor shall, to the extent provided in
this Assignment and Assumption, relinquish its rights and be
released from its obligations under the Credit Agreement and
other Loan Papers, and (c) Assignor's Commitment Percentage shall
be ______%, and Assignee's Commitment Percentage shall be
______%.

     6.   From and after the Effective Date, Agent shall make all
payments under the Credit Agreement in respect of the interest
assigned hereby (including, without limitation, all payments of
principal, interest, fees and other amounts with respect thereto)
to Assignee.  Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods
prior to the Effective Date directly between themselves.

     7.   This Assignment and Assumption shall not become
effective until (a) counterparts of this Assignment and
Assumption are executed and delivered by Assignor and Assignee to
Borrower, Agent and each Bank, (b) Borrower, Agent and each Bank
execute such counterparts, and (c) if the Effective Date is
ninety (90) days or more after the Closing Date of the Credit
Agreement, Agent receives a processing fee of $2,500 from
Assignor or Assignee.

     8.   This Assignment and Assumption shall be governed by,
and construed in accordance with, the laws of the State of Texas,
without reference to principles of conflict of laws. 


                                ASSIGNOR:

                                                              
                                By:                           
                                Name:                              
                                Title:                             

                                
<PAGE 4>
                                ASSIGNEE:
Address:
                      
                      
                      
Attn:                                By:                      
Tel:                                 Name:                         
Fax:                                 Title:                        


LIBOR Lending Office:                
                      
Attn:                      
Tel:                       
Fax:                       


                                AGENT:
                                NATIONSBANK OF TEXAS, N.A.
                                                    as Agent



                                By:                           
                                Name:                              
                                Title:                             

Accepted and approved this ____ day
of ________________________, 199__:


BERRY PETROLEUM COMPANY, Borrower



By:                        
Name:                      
Title:                     

<PAGE 5>

Accepted and approved this ____ day
of ________________________, 199__:


[BANK]



By:                        
Name:                      
Title:                     


Accepted and approved this ____ day
of ________________________, 199__:


[BANK]


By:                        
Name:                      
Title:                     




<PAGE> 1
                                SCHEDULE 1

                          FINANCIAL INSTITUTIONS


Banks                     Commitment Amount            Commitment Percentage

NationsBank of Texas, N.A.  $150,000,000                       100%




           Banks                         Domestic Lending Office       
                                           901 Main Street, 64th Floor
                                           Dallas, Texas  75202
NationsBank of Texas, N.A.                 Fax No. (214) 508-1285


Eurodollar Lending Office                    Address for Notice
901 Main Street, 64th Floor                901 Main Street, 64th Floor
Dallas, Texas  75202                       Dallas, Texas  75202
Fax No. (214) 508-1285                     Fax No. (214) 508-1285


Agent - Address:

901 Main Street, 64th Floor
Dallas, Texas  75202
Attn:  Richard P. Stults
Fax: (214) 508-1285 



<PAGE> 1
                           SCHEDULE 2

                      INVESTMENT GUIDELINES

1  Commercial Paper    A maximum of 70% of the portfolio is to be invested
                       in commercial paper with a rating of A1/P1 or better.
                       Maximum 10% in any one issuer.

2  Short-term bonds    60% maximum.  RAN's, TAN's, BAN's or equivalents are
   including RAN's,    to be direct state obligations or insured instruments
   TAN's, BAN's or     only.  AAA or AA state-rated GO's with no more than
   equivalent          10% in any one state.

3  US treasury bills   15% minimum, 100% maximum with no more than 10%
   notes or bonds      maturing beyond 2 years.

4  Repurchase          5% maximum secured by US treasuries with overnight
   Agreements          liquidity.

5  Certificate of      10% maximum in banks with O'Keefe rating of B or
   Deposit             better, or Standard & Poor's/Moody's long-term debt
                       rating of AA/aa or better.  Domestic banks only.

6  Auction/Money       25% only in issuers with CP rating of A1/P1 or better
   Market Preferreds   Auction market preferreds should have AAA/aaa rating.

7  Short-term bonds    10% maximum in well known liquid agency bonds or notes
   or notes issued     out to 2 years.
   By agencies of the
   US

8  Corporate debt      A maximum of 15% of the portfolio may be invested in
                       corporate debt rated A1/a or better out to 2 years.

9  Collateralize       No collateralized mortgage obligations, bankers
   Obligations/        acceptances, zero coupon bonds or warrants.
   Bankers Acceptances

10 A maximum of 50% of portfolio can be in the 1 to 2 year period.



<PAGE> 1
                            SCHEDULE 3

                            LITIGATION

1     On December 25, 1993, the Company experienced a crude oil spill on its
PRC735 State lease located in the West Montalvo field in Ventura County,
California.  The clean-up of the spill was substantially completed in January
1994.  The Company negotiated a resolution of the state criminal investigation
for a total of $.6 million in August 1994.  Governmental investigations 
continue regarding potential civil and federal criminal penalties, if any.

      Management believes the Company has an adequate amount of insurance
coverage for the majority of the costs associated with the spill and has
received preliminary coverage letters from its insurance carriers tendering
coverage, subject to certain reservations.  The Company estimates the total
cost of the spill, net of insurance reimbursement, to be a minimum of $3.3
million and a maximum of $5.1 million.  The minimum amount was expensed by
the Company ($1.3 million in 1994 and $2 million in 1993).  The costs 
incurred and estimated to be incurred in connection with the spill not yet
paid by the Company are included in current liabilities at September 30, 
1996, and the probable remaining minimum insurance reimbursement is included
in accounts receivable.  As of September 30, 1996, the Company had received
approximately $8.1 million under its insurance coverage as reimbursement for
costs incurred and paid by the Company associated with the spill.

2     On May 6, 1996, Berry Petroleum filed a complaint against Rincon Island
Limited Partnership and Windsor Energy Corporation ("Rincon") for breach of 
an obligation under the Purchase and Sale Agreement by which Berry sold its
Rincon, et al., to reimburse Berry for certain expenses related to a pipeline
connection.  The prayer in the complaint is $472,893.90.  On or about June 13,
1996, Rincon cross-complained against Berry denying the obligation to pay as
described in the complaint and asserting causes of action for breach of 
contract, negligence, negligent misrepresentation and fraud.  The prayer in
the cross-complaint filed for fraud is for compensatory and punitive damages.
Answers have been filed to the complaint and the cross-complaint and the 
matter is proceeding to discovery.



<PAGE> 1
                            SCHEDULE 4

                     ENVIRONMENTAL DISCLOSURE

Investments in real property generally, and especially investments in oil
and gas producing properties, create a potential for environmental liability
on the part of the owner of such real property.  No formal Phase I or Phase II
environmental studies have been done on the properties of the Company.  The
Company does maintain policies and practices with regard to compliance with
environmental statutory and regulatory requirements.  While the Company 
strives to maintain its compliance, there can be no assurance that there may
not be environmental issues related to such properties; however, the Company
has no specific knowledge of any material outstanding environmental claims
except as follows:

Montalvo Oil Spill - On December 25, 1993, the Company experienced crude oil
spill on its PRC735 State lease located in the West Montalvo field in Ventura
County, California.  The clean-up of the spill was substantially completed in
January 1994.  The Company negotiated a resolution of the state criminal
investigation for a total of $.6 million in August 1994.  Governmental
investigations continue regarding potential civil and federal criminal 
penalties, if any.  Management believes the Company has an adequate amount of
insurance coverage for the majority of the costs associated with the spill
and has received preliminary coverage letters from its insurance carriers
tendering coverage, subject to certain reservations.  The Company estimates
the total cost of the spill, net of insurance reimbursement, to be a minimum
of $3.3 million and a maximum of $5.1 million.  The minimum amount was 
expensed by the Company ($1.3 million in 1994 and $2 million in 1993).  The
costs incurred and estimated to be incurred in connection with the spill not
yet paid by the Company are included in current liabilities at September 30,
1j996, and the probable remaining minimum insurance reimbursement is included
in accounts receivable.  As of September 30, 1996, the Company had received
approximately $8.1 million under its insurance coverage as reimbursement for
costs incurred and paid by the Company associated with the spill.



<PAGE> 1
                            SCHEDULE 5


                      PRINCIPAL SHAREHOLDERS


                          C.J. Bennett
                        William F. Berry
                        Winifred Lowell