10KSB

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

0-20915
(Commission file number)

GEO PETROLEUM, INC.
(Name of small business issuer in its charter)

California
(State or other jurisdiction of
incorporation or organization)
33-0328958
(I.R.S. Employer Identification No.)

18281 Lemon Drive,
Yorba Linda, California
(Address of principal executive offices)

92886
(Zip Code)

(714) 779-9897
(Issuer’s telephone number)

Securities registered under Section 12(b) of the Exchange Act:

Name of each exchange on which registered

Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value

             Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [  ] No [x]

             Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [  ]

             The registrant’s revenues for its fiscal year ended December 31, 1999 were $162,401. At October 16, 2000, 16,090,047 shares of common stock (the registrants only class of voting stock) were outstanding. The aggregate market value of the common stock on that date (based upon the closing price on the over-the-counter market on October 16, 2000 of $0.80) held by non-affiliates was approximately $9,917,764.

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS)

             Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [  ] No [x]

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

             State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date 16,090,047 shares as of October 15, 2000.

DOCUMENTS INCORPORATED BY REFERENCE
None.

             Transitional Small Business Disclosure Format (check one): Yes [  ] No [x]

GEO PETROLEUM, INC.

Index

		Page
PART I.	BUSINESS INFORMATION
Item 1.	Description of Business	3
Item 2.	Description of Property	7
Item 3.	Legal Proceedings	15
Item 4.	Submission of Matters to a Vote of Security Holders	16
PART II.	OTHER INFORMATION
Item 5.	Market For Common Equity and Related Stockholder Matters	17
Item 6.	Management’s Discussion and Analysis of Plan of Operation	17
Item 7.	Financial Statements	19
Item 8.	Changes in and Disagreements with Accountants on    Accounting and Financial Disclosure	19
PART III.	OTHER INFORMATION
Item 9.	Directors, Executive Officers, Promoters and Control Persons; Compliance with    Section 16(a) of the Exchange Act	21
Item 10.	Executive Compensation	22
Item 11.	Security Ownership of Certain Beneficial Owners and Management	24
Item 12.	Certain Relationships and Related Transactions	24
Item 13.	Exhibits and Reports Form 8-K	26

SIGNATURES	28
INDEX TO THE FINANCIAL STATEMENTS	F-1

PART I

Item 1.   Description of Business

General

             Geo Petroleum, Inc. (“We,” “Geo” or the “Company”) is a California corporation formed in 1986 by Gerald T. Raydon, who, until December 15, 1999, was its chief executive officer and majority shareholder. Geo was formed primarily to develop a large tar sand deposit in Ventura County, California (see “Properties”) and to engage in the oil field waste disposal business. Our principal place of business is located at 18281 Lemon Drive, Yorba Linda, California 92886. Its telephone number is (714) 779-9897 and its facsimile number is (714) 779-0814.

Reorganization of the Company—Failure to Comply with Certain Formalities

             In 1998, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In December, 1999 we emerged from Bankruptcy under a plan which, among other things, provided for the issuance of approximately 1,900,000 shares of our common stock to our creditors, relinquishment by Mr. Raydon and certain affiliates of claims to 1.39 million shares of common stock in favor of our creditors and the change in our management. Pursuant to the Plan of Reorganization, we issued 803,674 shares during the year 2000 of its common stock and will issue an additional 1,096,326 shares. Present management was installed as part of our reorganization. During 1997, we had interests in approximately 6,880 gross acres (6,430 net) of oil and gas leases or mineral rights, of which 1,950 gross acres (1,820 net) were developed for oil and gas production and 4,930 gross acres (4,610 net) were undeveloped. At that time we owned an interest in and operated a waste disposal well. At the time of our Bankruptcy filing, we had sold or otherwise transferred a substantial portion of our oil and gas holdings and had interests in approximately 2230 gross acres (2030 net acres) of oil and gas leases or mineral rights, of which approximately 1630 gross acres (1410 net acres) were developed for oil and gas production and approximately 600 gross and net acres were undeveloped. After emerging from Bankruptcy, our oil and gas holdings were reduced to approximately 2,000 gross and 1860 net acres. See “Description of Property.”

             Shortly before filing the petition for Reorganization, we sold for cash and relief of indebtedness and other obligations, all of our interests in our Bandini and East Los Angeles oil and gas properties. Such properties had produced approximately 89% of our oil production and 95% of our production of natural gas during the calendar year 1998 (the year during which such properties were sold). We also reduced the carrying cost of our remaining oil and gas properties. These items resulted in the decrease in the carrying value of these properties from approximately $6,343,000 at December 31, 1997 to approximately $0 at December 31, 1998. The rapidly declining prices received for oil and gas production caused the present value of net future cash flows to be zero. Consequently, even though the estimated future cash flows from its properties substantially exceed the carrying value of our properties, the properties are carried on our books at nominal value.

             We filed no public reports under the Securities Exchange Act since filing a report on Form 10-Q for the third quarter of the calendar year 1998 and a report on Form 8-K regarding our petition in bankruptcy. Our last annual report on Form 10-KSB was for the calendar year ended December 31, 1997.

             We have not held a meeting of our shareholders since 1997. California law permits a shareholder to obtain an order of Court requiring us to hold a meeting of shareholders. No shareholder has demanded that we hold such a meeting, and we anticipate holding our annual meeting during the second quarter of 2001. Additionally, our corporate records are deficient in many respects. We believe that these matters will be substantially rectified at or before our annual meeting of shareholders.

Glossary of Terms Used in This Report

             The terms below are used in this document and have specific SEC definitions as follows:

             Proved oil and gas reserves. Proved oil and gas reserves are the estimated quantities of crude oil, natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions.

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             Proved developed oil and gas reserves. Proven developed oil and gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for implementing the natural forces and mechanisms of primary recovery should be included as “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

             Proved undeveloped reserves. Proved undeveloped oil and gas reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Under no circumstances should estimates for proved undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.

             As used in this Form 10-KSB:

             “Mcf” means thousand cubic feet, “MMcf” means million cubic feet, “Bcf” means billion cubic feet, “Bbl” means barrel, “MBbls” means thousand barrels, “MMBbls” means million barrels, “BOE” means equivalent barrels of oil, “MBOE” means thousand equivalent barrels of oil and “MMBOE” means million equivalent barrels of oil.

             Unless otherwise indicated in this Form 10-KSB, gas volumes are stated at the legal pressure base of the state or area in which the reserves are located and at 60 degrees Fahrenheit. Equivalent barrels of oil are determined using the ratio of 5.56 Mcf of gas to 1 Bbl of oil.

             The term “gross” refers to the total acres or wells in which we have a working interest, and “net” refers to gross acres or wells multiplied by the percentage working interest owned by us. “Net production” means production that is owned by us less royalties and production due others.

Cautionary Information about Forward-Looking Statements

             This document contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical facts, included in or incorporated by reference into this Form 10-KSB which address activities, events or developments, which we expect, believe, or anticipate will or may occur in the future are forward-looking statements. The words “believes,” “intends,” “expects,” “anticipates,” “projects,” “estimates,” “predicts” and similar expressions are also intended to identify forward-looking statements. These forward-looking statements include, among others, statements concerning:

• the benefits expected to result from implementation of our proposed development of our Vaca Tar Sands property, discussed below, including increased revenues and oil production, other statements of:

• expectations,

• anticipations,

• beliefs,

• estimations,

• projections, and

other similar matters that are not historical facts, including such matters as:

• future capital,

• development and exploration expenditures (including the timing, amount and nature thereof),

• drilling and reworking of wells, reserve estimates (including estimates of future net revenues associated with such reserves and the present value of such future net revenues),

• future production of oil and gas,

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• repayment of debt,

• business strategies,

• oil and gas prices and demand,

• exploitation and exploration prospects,

• expansion and other development trends of the oil and gas industry, and

• expansion and growth of business operations.

             These statements are based on certain assumptions and analyses made by the management of Geo in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances.

             These forward-looking statements are subject to risks and uncertainties, including those associated with:

• the financial environment,

• general economic, market and business conditions,

• the regulatory environment,

• business opportunities that may be presented to and pursued by Geo,

• changes in laws or regulations

• exploitation and exploration successes,

• availability to obtain additional financing on favorable conditions,

• trend projections, and

• other factors, many of which are beyond our control that could cause actual events or results to differ materially from those expressed or implied by the statements. Such risks and uncertainties include those risks and uncertainties identified in the Description of the Business and Management’s Discussion and Analysis sections of this document and risk factors discussed from time to time in our filings with the Securities and Exchange Commission. In addition, the reserve estimates contained herein are based upon assumptions as to prices, timing of operations and other factors. To the extent that any of such assumptions prove to be inaccurate, the quantities of oil and gas and the timing of production may vary from those contained in this report. See “Description of Properties—Cautionary Note.”

             Significant factors that could prevent us from achieving our stated goals include:

• the inability of Geo to obtain financing for capital expenditures and acquisitions,

• declines in the market prices for oil, gas and asphalt, and

• adverse changes in the regulatory environment affecting us.

             The cautionary statements contained or referred to in this document should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our or their behalf. We undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Competition and Position in the Industry

             We are a minor factor in the California oil and gas industry and faces competition from numerous companies, which have considerably more resources, both financial, property and manpower, than do we. We are in a weak financial condition and must rely upon third party sources of funds to conduct our proposed operations. Essentially, our only revenue producing operations are expected to be our Vaca Tar Sands, Rosecrans and Waste Disposal properties, each of which require significant cash expenditures to realize their potential. See “Description of Property.”

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Regulation

             Our operations are regulated by certain federal and state agencies. In particular, oil and natural gas production and related operations are or have been subject to price controls, taxes and other laws relating to the oil and natural gas industry. We cannot predict how existing laws and regulation may be interpreted by enforcement agencies or court rulings, whether additional laws and regulations will be adopted, or the effect such changes may have on our business or financial condition.

             All of our operations are subject to extensive federal, state and local laws and regulations relating to the generation, storage, handling, and transportation of materials and their potential discharge into the environment. Permits are required for all of our operations, and these permits are subject to revocation, modification and renewal by issuing authorities.

             Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines, injunctions or both. It is possible that increasingly strict requirements will be imposed by environmental laws and enforcement policies thereunder. We do not anticipate that we will be required in the near future to expend amounts that are material to the Company’s financial position or results of operations by reason of environmental laws and regulations, but because such laws and regulations are frequently changed, we are unable to predict the ultimate cost of such compliance.

             It is our belief that the oil and gas industry may experience increasing liabilities and risks under the Comprehensive Environmental Response, Compensation and Liability Act, as well as other federal, state and local environmental laws, as a result of increased enforcement of environmental laws by various regulatory agencies. As an “owner” or “operator” of property where hazardous materials may exist or be present, we, like all others engaged in the oil and gas industry, could be liable for the release or remediation of any hazardous substances. Under previous management, we have been subject to imposition of “clean-up” orders by the government for accidental spillage of oil, but have not been subject to hazardous waste removal orders. The potential for sudden and unpredictable liability for environmental problems is a consideration of increasing importance to us and to the oil and gas industry as a whole. We have suffered some oil spills, in amounts which we consider to have been minor and have cleaned up such spills. At times we have been supervised in so doing by governmental agencies.

             During 1997, regulatory agencies of the State of California and Los Angeles County cited us for an accidental oil spill at a property, which we no longer own. We complied with the citation requirements and were required to pay fines and fees (approximately $28,000) that were discharged in bankruptcy. As a result of the citation, we were placed in a probationary status. In 1999, while we were in bankruptcy, local agencies alleged that we had violated various environmental and other regulatory requirements in failing to clean up a small oil spill and to maintain our Rosecrans properties in compliance with regulations. During the bankruptcy and after, we were able to obtain funds enabling it to remedy the asserted violations. On November 22, 1999, the District Attorney of Los Angeles County, California filed an information accusing us and certain of our former officers of violating certain provisions of the County Health Code and various provisions of the fire protection ordinances as a result of the allegations described above. All proceedings and our probationary status were terminated without fines being assessed on October 24, 2000, and we were not subjected to any additional penalties; however, a former officer was compelled to accept performance of 100 hours of community service. See “Litigation.” The Company estimates that compliance with environmental laws and regulations in 1999 was negligible and will amount to approximately $90,000 during the year 2000.

             We are required to comply with various federal and state regulations regarding plugging and abandonment of oil and gas wells. We provide a reserve for the estimated cost of plugging and abandoning our wells on a unit of production basis. We maintain a $100,000 certificate of deposit for State of California authorization purposes to perform additional oil and gas well recompletions. These funds are subject to withdrawal restrictions. We also have $60,000 in restricted cash, $50,000 with the City of Los Angeles and $10,000 with Ventura County, for the purposes of paying for any future environmental liabilities that could arise. See “ Note 4 to Financial Statements.” In addition, we carry $3,000,000 in pollution insurance, which covers many, but not all, sources of pollution.

Principal Purchasers and Marketing of Production

             During the calendar year 1999, we produced and sold insignificant amounts of oil and gas. The principal purchasers of our oil and gas during such period were Equiva Trading Co. as to all of oil produced and Pacific Energy Resources as to all gas produced. We produced very small amounts of oil and gas during the first three

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quarters of the year 2000. Commencing in the third quarter 2000, we began production of and sales from our Vaca Tar Sands Property. All of the production from such property consisting solely of oil, was sold to Equiva Trading Co. We believe that multiple purchasers of any oil produced by us exist and that the loss of any one purchaser would not have a material effect on our ability to sell our oil and gas. Alternative purchasers are available for all of our production, except for gas production at the Rosecrans field where there is only one purchaser. See “Description of Properties.”

             Essentially all of the oil that may be produced from our properties is transported to the purchaser by truck, which reduces the net price we receive for our oil.

Volatility of Commodity Prices and Markets

             Oil and gas prices have been and are likely to continue to be volatile and subject to wide fluctuations in response to any of the following and other factors:

• relatively minor changes in the supply of and demand for oil and gas;

• market uncertainty;

• political conditions in international oil producing regions;

• the extent of domestic production and importation of oil in certain relevant markets;

• the level of consumer demand;

• weather conditions;

• the competitive position of oil or gas as a source of energy as compared with other energy sources;

• the refining capacity of oil purchasers;

• the effect of regulation on the production, transportation and sale of oil and natural gas, and other factors beyond our control.

Employees and Consultants

             We have 6 full time employees, 5 of whom are professional or technical and 1 is clerical. All of our employees are located at our executive offices at Yorba Linda, California, except for 2 who are engaged full time at our Vaca facility. In addition, we retain two engineering consultants at our Vaca facility on an almost full time basis. See “Description of Property—Vaca Tar Sands” and “Description of Property—Waste Disposal Facility.”

Item 2.   Description of Property

Cautionary Note

             Reserve information presented herein is based upon reports prepared by our independent petroleum reservoir engineers, Krummrich Engineering and Stan Brown, P.E. Reserve estimates are inherently imprecise and estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available.

             Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed oil and gas reserves are those expected to be recovered through existing wells with existing equipment and operating methods.

             Although we believe that our expectations are based upon reasonable assumptions, it can give no assurance that our goals will be achieved. Important factors that could cause actual results to differ materially from those in the forward-looking statements contained in this report include, but are not limited to: the time and extent of changes in commodity prices for oil and gas; increases in the cost of conducting operations, including remedial operations; the extent of our success in discovering, developing and producing reserves; political conditions; condition of capital and equity markets; changes in environmental laws and other laws affecting our ability to explore for and produce oil and gas and the cost of so doing; and other factors which are described in this report.

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             The proved developed and undeveloped oil and gas reserve figures presented in this report are estimates based on reserve reports prepared by independent petroleum engineers. The estimation of reserves requires substantial judgment on the part of the petroleum engineers, resulting in imprecise determinations, particularly with respect to new discoveries. Estimates of reserves and of future net revenues prepared by different petroleum engineers may vary substantially, depending, in part, on the assumptions made, and may be subject to material adjustment. Estimates of proved undeveloped reserves, which comprise a substantial portion of our reserves, are, by their nature, much less certain than proved developed reserves.

             The accuracy of any reserve estimate depends on the quality of available data as well as engineering and geological interpretation and judgment. Results of drilling, testing and production or price changes subsequent to the date of the estimate may result in changes to such estimates. The estimates of future net revenues in this report reflect oil and gas prices and production costs as of the date of estimation, without escalation, except where changes in prices were fixed under existing contracts. There can be no assurance that such prices will be realized or that the estimated production volumes will be produced during the periods specified in such reports. Proven reserves are estimates of hydrocarbons to be recovered in the future.

             Reservoir engineering is a subjective process of estimating the sizes of underground accumulations of oil and gas that cannot be measured in an exact way. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Reserve reports of other engineers might differ from the reports contained herein. Results of drilling, testing, and production subsequent to the date of the estimate may justify revision of such estimate. Future prices received for the sale of oil and gas may be different from those used in preparing these reports. The amounts and timing of future operating and development costs may also differ from those used. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered.

Oxnard Field

General

             The Vaca Tar Sands accumulation on our property in the Oxnard Field, Ventura County, California, contains an estimated 33,000,000 gross Bbls of recoverable heavy oil. Geo and Gerald T. Raydon (as to a 25% interest), former president and a major shareholder of Geo, purchased the property from Sun Oil Company in 1990, for a total cost of $150,000. Mr. Raydon subsequently transferred the property to us in two transactions for a consideration consisting solely of the common stock of the Company. In addition, Mr. Raydon retained a five percent net profits interest in the income or sales proceeds from the property. During October, 2000, we released one parcel of approximately 170 acres of land to settle a dispute with the lessor of such parcel. As a result of such release, the gross barrels underlying our properties in the Oxnard Field are estimated to be approximately 26,000,000 barrels. See “Saba Agreement” for a discussion of Saba’s right to acquire an interest in this property. We understand that Sun purchased the property in 1984 for $14 million and had invested some $3.9 million in attempting to establish economic production before selling the property to us. We produced the Vaca using conventional methods, including cyclic steaming operations, in the wells drilled by Sun and its predecessor, and achieved a production rate of 275 barrels of oil per day from a total of eleven vertically drilled wells. Production has steadily declined from its maximum to a point at which the wells were non-producing at year-end 1999. We attribute the decline primarily to low oil prices and our financial instability.

             Our Vaca property is fully equipped for the transportation, processing, storage, and sale of oil, the separation and disposal of wastewater, and for the injection of high pressure steam into the wells. The equipment, in general, consists of: heated and insulated oil flow lines; gas and water pipelines; an automatic well tester; 9,600 barrels of oil storage capacity in three insulated, heated tanks; waste water disposal tanks; two steam generators capable of producing high quality steam at rates of 24,000,000 BTU per hour; tank heaters; a water treatment plant; a vapor recovery system; oil shipping equipment; a fresh water well to provide what appears to be sufficient amounts of good quality water for steam generation; and an injection well to dispose of all wastewater produced with the oil. The property is also in close proximity to several oil pipelines and a rail line. At year-end 1999, a substantial portion of the equipment was in a deteriorated state because of a lack of maintenance. We commenced to repair and maintenance of this equipment during 2000.

             The production in this field is from the prolific and massive Vaca Tar Sands that are found at depths of between 1,950 and 2,400 feet. In 325 acres of the leases, the thickness of the oil-saturated sand averages 225 feet.

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The reservoir is highly porous (32%) and permeable (1,800 Md.). The oil is heavy, approximately 6 - 8 degrees API, of high sulfur content (6-7% by weight) and is highly viscous. Consequently, steam injection is necessary to heat the oil and reduce its viscosity, permitting it to flow readily through the well bores and pipelines into storage tanks. In previous operations, we generated steam at the surface and injected it into the producing formation through vertical wells. The heat permeates that portion of the formation adjacent to the well bore, rendering it more mobile than in its natural state. To increase mobility and lower the gravity and viscosity of the crude, we inject diluent (a light crude oil) into the well bore, after which the oil is pumped in a conventional manner. Because of the use of steam and diluent, operations are comparatively expensive while the price received for the oil is relatively low compared to better grades of crude. Increasing costs for natural gas, which is used to fire the steam generators, which are an integral element of producing oil from this property, have increased the operating costs of producing the Vaca. However, as a result of the recent favorable increases in the price for crude oil, this property should become profitable.

             Development of the Vaca Property carries with it the risk that removal of the tar may create a void, which will result in subsidence of the surface of the property. Presently, the surface is used for agricultural purposes. We do not believe that subsidence is a high risk, since the reservoir is 1,500 to 2,000 feet below the surface, which we believe is sufficient support for the surface. Additionally, we have not seen any evidence of subsidence, in our leased area or in adjacent areas, which have been developed for oil and gas purposes. We do not carry insurance, which would protect us from claims resulting from subsidence.

Saba Agreement

             In 1996 and 1997, we entered into a series of agreements with Saba Petroleum Company (“Saba”) for the joint development of the Vaca Tar Sands. As last amended, the agreements provide that we, as operator with a 2/3 interest, and Saba, as a non-operating farm-in participant with the right to earn a 1/3 interest, will commence development of the Vaca Tar Sand with a SAGD well by 1999. SAGD is a process which consists of drilling two parallel horizontal wells, with one spaced approximately 15 feet above the other, with the lower well located at the bottom of the producing zone. The wells extend horizontally for as far as 2,600 feet. Steam is injected into the upper well at a temperature of approximately 500 degrees Fahrenheit. The steam lowers the viscosity of the oil so that it becomes substantially more mobile than in its natural state. The oil then gravitates to the lower horizontal well, and then flows with high temperatures (above 400 degrees Fahrenheit) and pressures to the surface through the lower well. The well production rates are assumed to increase each year until the tenth year, and then gradually decline after achieving a productive life of approximately 17 years. We understand that the SAGD process has been used with success in Canada on accumulations, which are similar to the Vaca Tar Sand, but such process has not been widely accepted in the United States. An alternative SAGD method employs a single horizontal well bore into which steam is cyclically injected and from which production is obtained through gravity drainage much as is described above.

             The agreement provides that Saba and we will share equally in the cost of operations and development until Saba has invested $5,000,000. Thereafter, Saba is to pay one-third of the costs and receive one-third of the revenues, and we are to pay two-thirds of the costs and receive two-thirds of the revenues. As to the wells for which Saba pays a disproportionately higher share of the costs, Saba can recover its costs out of one-half of production revenues, after which its interest in these wells will be reduced to one-third. Since we do not believe that Saba has earned its interest in the property, our reserves as reported herein do not take into account Saba’s potential interest.

             The agreement provides that the first well to be drilled on the property shall be a SAGD well. However, because of the deteriorated economics of drilling oil wells, neither Saba nor we attempted to commence operations for such a well. It is our interpretation that Saba is responsible for payment of fifty percent of all costs properly chargeable under an Operating Agreement, which is in effect between the parties. Subsequent to year-end 1999,we billed Saba for such costs and Saba has declined to pay the same. Subsequent to year-end 1999, we commenced operations to restore two vertical wells to production and to place the production facilities to an operable condition Saba has been unavailable to our representatives to discuss operations and the billings made to Saba.

             The agreement provides that should Saba fail to perform its material obligations, we may terminate Saba’s interest in the joint property.

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Non-Conventional Fuels Credit

             Under Sec. 29 of the Internal Revenue Code, a tax credit is allowed to producers of “Non-Conventional Fuels.” The tax credit for 1999 is $6 per barrel and is subject to annual increases with inflation. The tax credit is applicable to production from all redrilled Vaca Tar Sands wells. The previous owners of our property, and the owners of offsetting leases, have taken the tax credit on production from the Vaca Tar Sands since 1980, the first year of the credit.

             We treat the production from existing wells in the Oxnard Field as oil from “non-conventional” sources, which thus qualifies for tax credits provided under Section 29 of the Internal Revenue Code. At this time, we do not pay federal income taxes and the credit is not currently available for use by us. We have, in the past, secured funds for operations on this lease by entering into transactions designed to provide these credits to investors in exchange for payments. We intend to continue seeking such funding on an ad hoc basis. Funding from such sources would not, however, be sufficient to develop the property to any material extent.

Status of Leases and Current Permits

             Except for one 230-acre lease, our leases have no current drilling obligations nor do they require the payment of rentals to keep the leases in good standing. The leases are subject to a Pooling Agreement executed in 1987, which essentially combined the leases for operating and royalty purposes, and reserve an average royalty of 16.67% of gross revenues to the lessors. One 230-acre parcel is outside the unit and is subject to a 12.5% royalty and an annual delay rental in the amount of $5,225. We hold a 100% working interest and a related average 88% net revenue interest in these properties, subject to Saba’s right to acquire a portion of our interest and to the five percent net profits interest held by Mr. Raydon. See discussion above. Vertical wells cost approximately $265,000 to drill and complete for production. In connection with our Reorganization Proceedings, certain lessors asserted claims to the effect that our leases had terminated because production had ceased for extended periods of time. Rather than litigating the issue, we settled the matter by agreeing to an increase of the royalty on certain of our leases to an average of 15.6% and by agreeing to make an annual minimum royalty payment to the lessor. The property covers some 635 acres of land. In addition, we, subsequent to year-end 1999, released one of our leases, which had covered approximately 160 acres of land and lay on the periphery of our holdings, reducing our holdings to approximately 465 acres.

             We have two conditional use permits from Ventura County, allowing us to drill up to120 wells on part of our property and a sufficient number of wells to develop the balance of our property. Steaming operations require compliance with various environmental regimes, including those designed to protect air quality. The Ventura Air Pollution Control District has permitted our operations and has found them to be in compliance with relevant requirements. Emission limits under existing permits are sufficient to allow the drilling and steaming of a number of wells on the property, but are not sufficient to permit a full development of the property. We intend to apply for amendments to existing or additional permits to allow full-scale development when economic justify that action. There is no assurance that such operations will remain in compliance or that necessary amendments or additional permits will be obtained.

Rosecrans Field

             We purchased 30 wells in the Rosecrans Oil Field located in Los Angeles County, California, in December, 1994, with the plan of improving the seven active wells and repairing or reworking an additional 19 wells in order to return them to production. Wells in this field were drilled during a period of between ten and fifty years ago. The royalty amounts to 16.67% of gross revenues. According to the report of Stan W. Brown, independent petroleum engineer, if an investment of $172,600 is made by us to restore the wells to production, the estimated proven developed reserves (currently designated as non-producing) would amount to 488,200 barrels of oil (406,400 net) and 556,000 Mcf (463,600 net) of natural gas. There are seven principal producing zones of Miocene and Pliocene age in the Field, ranging from depths of 4500 to 8,400 feet. The wells have been drilled through these zones, but have not produced from all of them. This provides the opportunity to commence production from bypassed zones in the future. During 1999, the property produced no oil but produced a small amount of gas continuously. The purchaser of the gas has completed a gas processing facility that is now connected by pipeline to our wells.

             The property consists of five “community” oil and gas leases. The average royalty burden on the property is 16.67 % and we have a 100% working interest and an 83.33% related net revenue interest. The property covers

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approximately 800 acres of land in a semi-industrialized and low-income residential area. At year-end 1999, the property was not producing oil or gas. We intend to restore the property to production during the year 2000 or 2001, depending largely upon the financing that we will seek. Since significant production has ceased for a considerable period of time, there is a considerable risk that the leases have terminated or are subject to termination by action of the lessors. We intend to attempt to secure appropriate documentation from as many of the lessors as is practicable in an effort to validate or confirm our title to the oil and gas leases. It is not certain that we will be able to obtain such documentation and in lieu thereof may assume a business risk and pursue restoration of production without all such documentation.

Environmental Services

             We own two commercial Class II (as designated by the Environmental Protection Agency) disposal facilities at which waste fluids and solids produced in oil field operations conducted by ourselves and by other operators are injected into the subsurface for disposal. Such facilities are located at our Oxnard property and cover approximately four acres of land. Lessors are compensated by sharing in ten percent or twelve and one-half percent of gross revenues from the operations depending on the type of substance disposed. In late 1999, we obtained a new contract with a lessor authorizing the use of a second disposal well, and settled a dispute with the lessor of the first disposal site. We commenced disposal operations in the second well in August, 2000 and intend to repair the first well. Until our financial condition and disputes with lessors resulted in a discontinuance of operations in 1999, the waste disposal operations were becoming an increasing source of our revenues for Geo.

             The most significant increase in revenues (which has since decreased) has resulted from the September 1996 granting of a new permit to us by the California Division of Oil and Gas. This permit provides for the disposal of liquids containing various solids in suspension, including “tank bottoms”, drilling mud, water softener wastes, and other oilfield waste materials in our wells, in addition to produced wastewater. Tank bottoms consist of the mud, paraffin, and sand, which accumulate at the bottom of oil production tanks and must be periodically removed and disposed of. The past primary method for handling such wastes is an expensive surface disposal process. We can offer substantial savings to oil operators by disposing of the waste in our disposal well.

             Water and other wastes produced by other oil operators are hauled to our disposal sites, treated, stored, screened, and injected into wells operated in a joint venture with Capitan Resources, Inc., an affiliate, which provided the capital for disposal facilities and retained 25% of the revenues. In 1996, Capitan entered into a transaction with affiliates of Drake Capital Securities, Inc. by which the latter acquired a portion of Capitan’s interest in the disposal facilities. We subsequently acquired both the interests of Drake and Capitan. See “Certain Relationships and Related Transactions.”

             The price received for Class II fluids averages about $0.60 per barrel for water and $6.50 for tank bottoms. In 1999 we had contracts with, among others, AERA Energy L.L.C. (a consortium owned by Shell & Mobil), POPCO, Exxon Corporation, Chevron Corporation, Southern California Gas Company, Rincon Island L.P., Torch Operating Company, and several other independent oil companies to dispose of wastes. Because there are few high-capacity waste disposal wells permitted by the California Division of Oil & Gas, and an expanding need by operators to dispose of their waste water and tank bottoms, we believe that operations of this type are capable of substantial growth. The contracts which we had, have now terminated, but we are seeking to reestablish our old customer base.

             During the first half of 1999,our financial condition and regulatory compliance problems led to the curtailment of our waste disposal operations and disputes with our lessors. At year-end 1999, the facility was not operating. We plan to reinstitute operations at the facility during 2000 and to remediate our facilities, which have fallen into a state of disrepair. All of the contracts with oil operators named above, terminated because of the lack of operations at our facility. In late 2000, we resumed operation of one disposal well.

Estimated Oil and Gas Reserves

             At January 1, 2000, our net proved oil and gas reserves, as estimated by our independent petroleum engineers, Krummrich Engineering (as to the Oxnard Field Properties) and Stan W. Brown, Consulting Petroleum Engineer, (as to the Rosecrans properties) amounted to 26,340,000 barrels of oil and 464,000 Mcf of natural gas, of which 827,000 barrels and 464,000 Mcf were classified as proved developed. Future cash flows attributable to such proved developed reserves (before income taxes) are estimated to be $9,912,000 at December 31, 1999, and the discounted value thereof, at 10%, is estimated to be $5,352,000.

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             Proved undeveloped reserves were a net 25,513,000 barrels of oil. Estimated future net revenues (before income taxes) are $234,707,000 having a present net worth, discounted at 10% per annum, of $130,141,000.

             A major portion of our oil reserves is comprised of heavy crude. This portion is highly price sensitive, costs more to produce than lighter crudes, and receives a lower price in the market. Accordingly, a price at or above 1999 levels is needed in order to cover operating costs and yield a profit utilizing conventional completion and production techniques.

             In general, the volume of production from oil and gas properties declines as reserves are depleted. The SAGD process, which is described above, if successfully deployed, has an opposite effect essentially until exhaustion of the resource. Except to the extent we acquire properties containing proved reserves or conduct successful exploration and development activities, or both, our proven reserves will decline as reserves are produced. Our future oil and gas production is, therefore, highly dependent upon our level of success in acquiring or developing additional reserves.

             For additional information concerning the discounted future net cash flows to be derived from these reserves see Note 11 to the Financial Statements included elsewhere herein.

             The Company’s estimates of reserves have not been filed with or included in reports to any federal agency other than the Securities and Exchange Commission.

Estimated Proved Oil and Gas Reserves

	At December 31,
	1998		1999
Net oil reserves (Mbbl):
Proved developed producing		—		—
Proved developed non-producing		—		827
Proved undeveloped		—		25,513
Total proved oil reserves (Mbbl)		—		26,340
Net natural gas reserves (MMcf):
Proved developed producing		—		—
Proved developed non-producing		—		464
Proved undeveloped		—		—
Total proved natural gas reserves (MMcf)		—		464
Total proved reserves (MBOE)		—		26,424

             Estimates of proved reserves vary from year to year reflecting changes in the price of oil and gas and results of drilling activities during the intervening period. Reserves previously classified as proved undeveloped may be completely removed from the proved reserves classification in a subsequent year as a consequence of negative results from additional drilling or product price declines which make such undeveloped reserves non-economic to develop. Conversely, successful development and/or increases in product prices may result in additions to proved undeveloped reserves.

Estimated Present Value of Future Net Revenue

	At December 31,
	1998		1999
	(in thousands)
PV-10 Value:
Proved developed producing		—		—
Proved developed non-producing		—	$	5,352
Proved undeveloped		—	$	130,141
Total		—	$	135,493

             As used herein, the terms “proved oil and gas reserves,” “proved developed oil and gas reserves,” and “proved undeveloped reserves” have the meanings defined by the SEC as set forth in the forepart of this document. Reservoir engineering is a subjective process of estimating the sizes of underground accumulations of oil and gas that cannot be measured in an exact way. The accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Reserve reports of other engineers might differ from the

12

reports contained herein. Results of drilling, testing and production subsequent to the date of the estimate may justify revision of such estimate. Future prices received for the sale of oil and gas may be different from those used in preparing these reports. The amounts and timing of future operating and development costs may also differ from those used. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered.

             The following table summarizes sales volume, sales price and production cost information for our net oil and gas production for each of the years in the two-year period ended December 31, 1999.

	Year Ended December 31,
	1998		1999
Production Data:
Oil (MBbls)		36		—
Gas (MMcf)		17		—
Total (MBOE)		39		—
Average Sales Price Data (Per Unit):
Oil (Bbls)	$	4.31		—
Gas (Mcf)	$	0.76		—
BOE	$	4.45		—
Selected Data per BOE:
Production costs (2)	$	3.98		—
General and administrative	$	18.09		—
Depletion, depreciation and amortization	$	2.98		—

______________

   (2)   Production costs include production taxes.

Drilling Activity

             The following tables set forth certain information for each of the years in the two-year period ended December 31, 1999, relating to our participation in the drilling of exploratory and development wells, all of which are located in California:

	Year Ended December 31,
	1998				1999
	Gross (1)		Net (2)		Gross (1)		Net (2)
Exploratory Wells:
Oil
Gas
Dry (3)		—		—		—		—
Development Wells:
Oil		1		.5		0		0
Gas		—		—		—		—
Dry (3)		—		—		—		—
Total Wells:
Oil		1		.5		0		0
Gas		—		—		—		—
Dry (3)		—		—		—		—

______________

   (1)   A gross well is a well in which a working interest is owned. The number of gross wells is the total number of wells in which a working interest is owned.

   (2)   A net well is deemed to exist when the sum of fractional ownership working interest in gross wells equals one. The number of net wells is the sum of fractional working interests owned in gross wells expressed as whole numbers and fractions thereof.

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   (3)   A dry hole is an exploratory or development well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. A Productive well is an exploratory or a development well that is not a dry well.

Productive Oil and Gas Wells

             The following table sets forth information at December 31, 1999, relating to the number of productive oil and gas wells (producing wells and wells capable of production, including wells that are shut in or suspended) in which we owned a working interest:

Oil

Gas

Total

Gross

Net

Gross

Net

Gross

Net

California

57

57

0

0

57

57

Oil and Gas Acreage

             The following table sets forth certain information at December 31, 1999, relating to oil and gas acreage (all of which is located in California) in which Geo owned a working interest:

	Developed (1)				Undeveloped
	Gross		Net		Gross		Net
United States		1460		1240		600		600

______________

   (1)   Developed acreage is acreage assigned to productive wells.

Recent Activities

             Since year-end 1999, we have not participated in the drilling of any oil or gas wells. We are, however, repairing two wells at our Vaca property and have restored one of our waste disposal wells to active service. We are attempting to reattract customers to our waste disposal facility and are meeting with moderate success in our efforts.

Title to Properties

             Many of our oil and gas properties are held in the form of mineral leases, licenses and similar agreements. In general, these agreements do not convey a fee simple title to us, but rather create lesser interests, such as a profit a prendre. As is customary in the oil and gas industry, a preliminary investigation of title is made at the time of acquisition of undeveloped properties. Title investigations are generally completed, however, before commencement of drilling operations or the acquisition of producing properties. Because most of our oil and gas leases require continuous production beyond the primary term, it is always possible that a cessation of producing or operating activities could result in the loss of one or more leases. Prior to and during our bankruptcy proceedings, most of our properties did not produce oil or gas on a continuous basis. We have taken steps to cure deficiencies in our title at our Vaca facility, but have not yet done so with respect to any other property.

             While we have been in possession of our two major properties (Oxnard—approximately 10 years and Rosecrans—approximately 6 years) a number of years and have not received notice of a third-party adverse claim, we have not obtained title insurance or a title opinion covering such properties, but have relied upon title abstracts of the public records and the apparently unchallenged possession of our predecessors in interest. Consequently, while we believes that title to our properties is satisfactory, we would be unable to demonstrate such fact without obtaining title insurance or opinions that we believe is not cost-effective or otherwise warranted under the circumstances. Generally, once production has been established on an oil and gas lease, production must be maintained in quantities sufficient to pay the costs of operations, or the lease will terminate of its own accord. We believe that all of our material leases have been kept in force by production, but because there have been interruptions in continuous production at various times, we cannot give any assurance that a claim will not be asserted that one or more of such leases have terminated.

             Title to our properties is, in addition, subject to royalty and overriding royalty interests and to contractual arrangements customary in the oil and gas industry, to liens for work and materials, current taxes not yet due and to other minor encumbrances. We have not encumbered any of our properties to secure bank indebtedness. Our working interest in properties may be subject to liens for non-payment of labor or services provided to us. In the

14

event of our non-payment or untimely payment of our obligations, we expect liens to be filed against our assets and to be subject to lawsuits. Oil and gas leases in which we have an interest may be deficient, require ratifications and be subject to action by us.

Average Sales Price and Production Cost

             The following table sets forth information concerning average per unit sales price and production cost for our oil and gas production for the periods indicated:

	Year Ended December 31,
	1998		1999
Average sales price per BOE	$	4.45		N/A
Average production cost per BOE	$	25.05		N/A

Markets

             The market for oil and natural gas produced by us depends on factors beyond our control, including the extent of domestic production and imports of oil and natural gas, the proximity and capacity of natural gas pipelines and other transportation facilities, demand for oil and natural gas, the marketing of competitive fuels and the effects of state and federal regulation of oil and natural gas production and sales. The oil and gas industry as a whole also competes with other industries in supplying the energy and fuel requirements of industrial, commercial and individual consumers.

             During 1997, we experienced a substantial decrease in the price paid for our oil. During the latter part of 1999, prices increased significantly. We anticipate that there may be a strengthening of the prices for both our oil and gas production, but that periods of unstable pricing may occur. We will be subject to variations in cash flow depending upon changes in prices paid for oil and gas.

Competition

             The oil and gas industry is highly competitive. Competitors include major oil companies, other independent oil and gas companies, and individual producers and operators, many of which have financial resources, staffs and facilities substantially greater than ours. The Company faces intense competition for the acquisition of producing oil and gas properties that are being divested by major and independent oil and gas companies.

Offices

             We lease office space in Yorba Linda, California, on a month-to-month tenancy from an affiliate (see “Certain Transactions”) aggregating some 5000 square feet for a monthly rental of $5,000.

Item 3.   Legal Proceedings

             From time to time, we may be involved in legal proceedings, including those arising out of our operations and the amounts due suppliers or royalty owners. None of such proceedings are generally considered material to our operations or financial condition. During the course of our bankruptcy proceedings, which was styled In re Geo Petroleum, Inc., Debtor, U. S. Bankruptcy Court for the Central District of California, Santa Barbara Division, number 98-15477-RR, we were involved in several adversary proceedings, all of which were settled as part of the bankruptcy proceedings, except for Bud Antle, Inc. v. Geo Petroleum, Inc, an adversary action in the bankruptcy proceedings. In the proceedings, the lessor of a 170-acre tract assertedly not part of the Vaca Tar Sand Unit, claimed that our lease had terminated by reason of non-production of oil or gas. The lessor sought a declaration that the lease had terminated, that damages of over $450,000 were owed, and an order requiring Geo to abandon three wells on our property. Subsequent to year-end 1999, we settled this dispute, which resulted in our quitclaiming the lease and abandoning the three wells.

Item 4.   Submission of Matters to a Vote of Security Holders

             No matters were submitted for a vote of Security Holders during the fourth quarter of 1999. See “Description of Business—Failure to Comply With Certain Formalities” for a discussion of our failure to hold an annual meeting.

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PART II

Item 5.   Market For Common Equity and Related Stockholder Matters

Market Information

             Since August 1996, the shares of our common stock have been traded on the Electronic Bulletin Board of the National Association of Securities Dealers, Inc. In December 1999, the common stock was removed from the Electronic Bulletin Board by action of the manager thereof, and commenced trading in the over-the–counter market (pink sheets). We believe that at October 1, 2000 there were nine firms are making a market in the common stock. Prior to August 1996, there was no public market for the common stock. The following table sets forth the high and low bid prices of the common stock for the periods indicated as reported by the National Association of Securities Dealers, Inc. for periods prior to December 10, 1999, and by the National Quotation Services for periods after December 9, 1999. The prices set forth below reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

	High Bid		Low Bid
Year Ended 1998:
First Quarter		1.5		1.0
Second Quarter		1.5		.80
Third Quarter		.75		.20
Fourth Quarter		.20		.02
Year Ended 1999:
First Quarter		.08		.02
Second Quarter		.08		.02
Third Quarter		.50		.06
Fourth Quarter		.55		.27

             On October 16, 2000, the reported closing price per share was $0.80.

Holders of Common Equity

             At December 31, 1999, there were approximately 400 holders of record known to us of our common equity. Based on a broker count, we believe at least an additional 230 persons are shareholders with street name positions.

Dividends

             Holders of our common stock are entitled to receive such dividends as may be declared by our board of directors. We have never paid dividends on our common equity and have no plans to do so in the foreseeable future. There are no agreements to which we are a party or by which our property is bound which restricts the payment of dividends. Our board of directors presently intends to pursue a policy of retaining earnings, if any, for use in our operations and to finance expansion of our business.

Item 6.   Management’s Discussion and Analysis of Plan of Operation

             The following discussion and analysis for the years ended December 31, 1999 and December 31, 1998 should be read in conjunction with our Financial Statements and the Notes thereto elsewhere in this statement.

             During 1998 we filed petitions for relief under Chapter 11 of the federal bankruptcy laws. As a result of the proceedings under Chapter 11, we continued operations as Debtor-in-possession and the court ultimately approved a plan of reorganization in December 1999. The plan of reorganization includes the compromise of most of our liabilities and the infusion of $500,000 of additional capital from the sale of 4,500,000 shares of common stock. In addition, new management has replaced the former President and Chief Executive Officer, Secretary/Treasurer and other members of management.

             During 1998 and 1999 we disposed of significant assets by sale or by transfer as part of the bankruptcy proceedings. Also, the operations of remaining oil and gas properties as well as waste disposal operations were curtailed during 1998 and ultimately ceased during 1999. However, despite these constrictions of our asset base and

16

operations, significant assets have been retained and we are pursuing development of these assets. An immediate priority is the restoration of the waste disposal operations and some of the oil and gas operations to provide an internal source of cash flow. Further, we are continuing efforts to obtain additional funds so that we can meet our obligations, commence operations and develop our oil and gas properties. Potential opportunities for additional funds include, among other things, private placement of debt, and/or equity securities, bank loans using oil and gas properties as collateral, and/or the sale of the interests in certain oil and gas properties, and or entering into joint ventures or partnerships to develop oil and gas properties.

Results of Operations

             During the years ended December 31, 1999 and 1998, we had losses of $1,028,762 and $6,309,539 and negative cash flows from operations of $69,945 and $286,625, respectively.

             Oil and gas revenues decreased from $135,298 in 1998 to $872 in 1999. Decreases in 1999 were primarily related to sharp declines in oil prices resulting in the reduction of production from properties that became economically unviable. The further reduction in revenue reflects the disposition of the East LA/Bandini property in late 1998, combined with the continued shut-in of all other producing properties. Low oil prices combined with our weak financial position caused all production to cease by the end of 1998. Consequently, oil and gas revenues for 1999 were effectively zero.

             Industrial waste disposal revenues decreased from $446,446 in 1998 to $157,529 in 1999. The decrease in 1999 was due to the curtailment of all operations during 1999 resulting from our weak financial position. Dwindling finances while we were in bankruptcy rendered us incapable of meeting the operating costs associated with the waste disposal operations. Ultimately, all such operations were ceased during 1999. As part of the reorganization in bankruptcy, we acquired all of the rights including an additional 25% revenue interest in the waste disposal operations previously owned by Capitan Resources, Inc. Acquisition of this revenue interest resulted in our owning 100% of the waste disposal operations. Consequently, revenues from waste disposal are anticipated to increase when we renew these operations in the future.

             Lease operating expenses decreased from $482,167 in 1998 to $204,336 in 1999. These decreases were due to the curtailment of operations caused by our weakened financial position.

             In 1998 we incurred a charge for the write-off of costs of oil and gas properties due to the application of the “cost ceiling” limitation under the full-cost method of accounting for oil and gas operations. The combination of depressed oil prices and relatively high development and lifting costs resulted in the reduction of the valuation of proven reserves. Consequently, the historical cost basis of oil and gas properties was written-off to reflect the decline in value.

             Expenses incurred for environmental remediation decreased from $589,521 in 1998 to $42,832 in 1999. The significant decrease in these costs during 1999 was primarily related to a judgment in 1998 against us requiring either the clean up of two abandoned wells or the payment of $352,000. This liability was approved by the bankruptcy court as an unsecured creditor. An additional liability in the amount of $232,000 was incurred in connection with certain leases previously acquired by us.

             General and administrative expenses decreased from $705,386 in 1998 to $199,769 in 1999. As operations were curtailed in 1999, general and administrative expenses were naturally reduced significantly.

             We sold a major oil and gas property in 1998 known as the East LA/Bandini property. This sale resulted in a loss of $3,702,481, as the portion of costs capitalized for the purchase and development of this property were written-off against the proceeds from the sale. This property was sold to provide operating capital and to eliminate costs associated with the continued ownership and operation of this property. Management considered the sale necessary in light of the financial difficulties that ultimately forced us to seek the protection of the United States Bankruptcy Court. No oil and gas properties were sold in 1999.

             Expenses incurred in connection with the reorganization under bankruptcy in 1998 represent payments to legal counsel to begin the proceedings. These expenses increased to $880,359 in 1999 as the bankruptcy proceedings progressed and the reorganization plan was approved by the court. Professional fees increased from $36,000 in 1998 to $226,883 in 1999 due to the requirement for legal and accounting services during the full year of bankruptcy proceedings. Settlement costs of $648,248 were incurred in 1999 were primarily related to the elimination of a

17

receivable from Capitan Resources, Inc. whereby we received an additional 25% revenue interest in the waste disposal operations. The face amount of this receivable was in excess of $1,056,503; however, a reserve was recorded as a valuation allowance in the amount of $500,000.

             Interest income decreased from $8,944 in 1998 to $5,225 in 1999 as cash reserves decreased. Interest expense decreased from $102,760 to $865 in 1999 as we ceased accruing interest on outstanding debts after filing bankruptcy.

Capital Resources and Liquidity

             As of December 31, 1997, our total assets were $6,179,391. Total assets decreased to $913,728 at December 31, 1998. The most significant component of this decrease was the reduction of costs capitalized for the acquisition and development of oil and gas properties. As previously discussed, in 1998 we sold a major oil and gas property know as the East LA/Bandini property. This sale resulted in the write-off of approximately $4,084,000 of capitalized costs and a recognized loss on the sale of $3,702,481. In addition, the balance of oil and gas properties were written-off in 1998 as a result of the “cost ceiling” limitation under the full-cost method of accounting for oil and gas operations. This limitation requires us to compare the total capitalized costs for our oil and gas properties net of any depletion to the present value of future net revenues from production of proven reserves. Since the price of oil was very low in 1998, the present value of future net revenues (gross revenue less projected development and lifting costs) was negative. This resulted in the write-off of the remaining balance of oil and gas properties.

             Cash and equivalents increased from $6,861 in 1998 to $436,916 when we realized additional funds through the sale of shares of our common stock pursuant to the plan of reorganization.

             Receivable from Capitan Resources, Inc., a related party, decreased from $556,503 as December 31, 1998 to zero as of December 31, 1999. As previously discussed, this receivable was eliminated in 1999 as part of the plan of reorganization and we acquired Capitan’s 25% interest in the property.

             Due to our financial distress, substantially all of our liabilities as of December 31, 1997 remained unpaid when the petitions for bankruptcy were filed. Additional liabilities were incurred during 1998 prior to the bankruptcy filing and the total liabilities at the time of filing were then subject to compromise. Liabilities subject to compromise at December 31, 1998 totaled $2,478,094. During 1999 we continued to operate in a severely diminished capacity. Additional liabilities were incurred and are reflected on the balance sheet as of December 31, 1999. Also reflected on the balance sheet as of December 31, 1999 are the liabilities remaining after implementation of the plan of reorganization approved by the bankruptcy court on December 15, 1999. A summary of the provisions of the plan of reorganization is provided as Footnote 7 in the Notes to Financial Statements.

             Our primary sources of liquidity and capital resources in the near term will consist of the working capital on hand and funds derived from oil and gas production and waste disposal operations. We intend to concentrate our efforts on restoring operation of the waste disposal facility and selected oil and gas wells in order to reestablish sources of cash flow.

Item 7.   Financial Statements

             Please see accompanying Index to Financial Statements commencing on page F-1.

Item 8.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        (a)  On January 18, 2000, we engaged Kelly & Company to replace Ernst & Young, LLP, who resigned as our independent accountants during the third quarter of 1998. Ernst & Young, LLP did not issue an opinion on our 1998 financial statements. Our Board of Directors approved the change in our independent accountant.

             The independent auditor’s report of Ernst & Young, LLP for our financial statements for the year ended December 31, 1997 contained a going concern qualification but otherwise did not contain an adverse opinion or a disclaimer of opinion, and was not modified as to uncertainty, audit scope, or accounting principles. The report of Kelly & Company for the years ended December 31, 1998 and 1999 contains a similar going concern qualification.

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             During our two most recent fiscal years and through the date of the resignation of Ernst & Young, LLP, We did not have any disagreements with Ernst & Young, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.

             (b) Inapplicable.

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PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act

Directors and Executive Officers

             The following table lists the directors, executive officers and key employees of the Company.

Name of Individual	Age		Position Held with Company		Director Since
Gerald T. Raydon (1)		70		Chairman of the Board, President		1986
Alyda L. Raydon (1)		58		Secretary-Treasurer, Chief Financial Officer,Principal Accounting Officer		1986
Larry R. Burroughs (1)		58		President		1997
William J. Corcoran		69		Director		1989
Dennis Timpe (2)		53		President and Chief Executive Officer		1999
Lori Timpe-Long (2)		31		Chief Financial Officer, PrincipalAccounting Officer		1999
Christopher Dillon (2)		55		Director, General Counsel		1999

______________

   (1)   Mr. G.T. Raydon, Mr. William J. Corcoran and Mrs. Alyda L. Raydon each resigned all positions with the Company in December 1999 in accordance with our Plan of Reorganization. See “Business—Reorganization of the Company.” Mr. Burroughs resigned in November 1998, and Mr. E. J. Raydon resigned in October 1998.

   (2)   Messrs. Timpe and Dillon and Mrs. Timpe-Long were appointed to the Board and elected to their current positions in December 1999 in accordance with our Plan of Reorganization.

             The following is a brief description of the business experience during the preceding five years of each of the nominees for the office of Director of the Company, indicating their principal occupation and employment during the period and the name and principal business of any organization in which such occupations and employment were carried out.

             Mr. Dennis Timpe joined the Company in December 1999, pursuant to our Plan of Reorganization. Mr. Timpe is the founder and since 1986 has been chief executive office of TD & Associates, a firm which is engaged in the organization of entities which are engaged in the exploration and development of oil and gas. Mr. Timpe and certain companies with which he was or is affiliated have been the subject of administrative orders issued by the securities administrators of the States of Pennsylvania, Montana and Wisconsin, the effect of which is to require Mr. Timpe and such companies to refrain from selling securities or acting as a broker in such states unless appropriate registration or qualification is in effect. In addition, Mr. Timpe has been preliminarily enjoined from violating the Pennsylvania Securities Laws by selling unregistered securities and has been found by a State Court, in an uncontested matter, to have violated the Pennsylvania Securities laws by selling unregistered securities in the State of Pennsylvania. Mr. Timpe is the father of Lori Timpe-Long.

             Lori Timpe-Long is Secretary—Treasurer of the Company, having been appointed to such office pursuant to the Plan of Reorganization of the Company. Mrs. Long has been the treasure of TD & Associates since 1985. Mrs. Long has a Bachelor of Arts degree from California State University, Long Beach and a Master of Arts degree in Psychology from California Graduate Institute. Mrs. Timpe-Long is the daughter of Dennis Timpe.

             Christian Dillon is an attorney in private practice and acts as counsel to the Company and to TD & Associates. Mr. Dillon received his J.D. degree from Western State University, College of Law in 1979; he is a member of the State Bar of California and is admitted to practice in various federal courts.

             The following persons resigned from the Company in or prior to December 1999:

             Gerald T. Raydon founded Geo in 1986. He has over 40 years of experience in the California oil business as a geologist, attorney, and oil company president, commencing his career with Chevron USA, Inc. He was for sixteen years the President of American Pacific International, Inc., a public oil company located in Los Angeles, California, which achieved a market capitalization of $55,000,000 before it was merged it into Worldwide Energy Corporation in 1984. Subsequently he served as a director of Worldwide and as President of its West Coast subsidiary until 1986.

20

In March 1989, he was appointed as Receiver of Fountain Oil & Gas Company by the Chief Judge of the United States District Court, Central District of California, and served four years, concurrently with his service to Geo, until the receivership was concluded. Mr. Raydon holds B.A. and M.A. degrees in Geological Sciences from the University of California, Berkeley, and the J.D. degree from the University of Southern California, School of Law. He is a member of the American Association of Petroleum Geologists, the Society of Petroleum Engineers, and of the California State Bar. Mr. Raydon is the husband of Alyda L. Raydon and the father of Eric J. Raydon.

             Alyda L. Raydon was Secretary/Treasurer and was employed in such position since October, 1986. She has completed college courses in financial and investment management, accounting, computer science, and office procedures. Alyda L. Raydon is the wife of Gerald T. Raydon and the mother of Eric J. Raydon.

             William J. Corcoran was employed by an investment management firm representing the W. Averell Harriman family from 1963 until his retirement in 1995. He served as Secretary-Treasurer of the Mary A. H. Rumsey Foundation, the Gladys and Roland Harriman Foundation, and the W. Averell Harriman and Pamela C. Harriman Foundation. Mr. Corcoran graduated from Fordham University with B.A. and M.A. degrees in accounting.

             Eric J. Raydon joined the Company in June, 1995. He has over six years of experience in oil and gas, finance, real estate development, accounting, and management. Mr. Raydon received his Bachelor of Science degree in Business Administration/Real Property Development and Management from the University of Southern California in May, 1991. Eric J. Raydon is the son of Gerald and Alyda Raydon.

Compliance with Section 16(a) of the Exchange Act

             Based solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to us with respect to calendar year 1999, we believe that Mr. G. T. Raydon, Mrs. A. L. Raydon filed such forms late and that Mr. Corcoran and Mr. Burroughs failed to file any such forms with respect to such year. We believe that either Form 4 or Form 5 should have been filed by each such person disclosing their respective resignations from all positions with the Company. Additionally, we believe that Mr. Raydon and Mrs. Raydon did not timely report a reduction in holdings of common stock or the right to acquire the same as a result of our Plan of Reorganization. No member of our Board of Directors (Messrs. Timpe, Dillon and Mrs. Timpe-Long) nor its executive officers (Mr. Timpe and Mrs. Timpe-Long) filed a Form 3 Report for the calendar year 1999.

Item 10.   Executive Compensation

Compensation

             None of our officers received compensation, including salary and bonus, in excess of $100,000 during either of the two preceding years. The Board authorized compensation to Mr. Raydon in the amount of $120,000 per year commencing January 1, 1997, and pursuant to such authorization Mr. Raydon received $120,000 during the calendar year 1997, and no cash compensation during 1998 and 1999. The obligation to make further payments (other than $4,300 which was allowed as a priority wage claim to each of Mr. and Mr. Raydon) was discharged as part of the Plan of Reorganization of the Company. The following tables contain information concerning our Chief Executive Officer and any other executive officer whose aggregate cash compensation exceeds $100,000 per year.

21

Summary Compensation Table

Long-Term Compensation

Annual Compensation

Awards

Payouts

Name and Principal Position

Year

Salary ($)

Bonus ($)

Other Annual Comp. ($)

Restrict Stock Awards ($)

Securities Underlying Options/SARs (#)

LTIP Payouts ($)

All Other Compensation ($)

G.T. Raydon, CEO

1998

1,000

(1)

G. T. Raydon, CEO

1999

1,000

(1)

Dennis Timpe, CEO

1999

0

Lori Timpe-Long    Sec.-Treasurer

1999

0

______________

   (1)   Consisting of an award of Common Stock valued at $1 per share, which shares had not been issued at December 31, 1999.

             The Company has no option or other incentive compensation plans at December 31, 1999.

Option/SAR Grants In Last Fiscal Year
(Individual Grants)

Name	Number of Securities Underlying Options/SARs Granted (#)	Percent of Total Options/SARs Granted to Employees in 1999	Exercise or Base Price ($/share)	Expiration Date
None

Aggregated Option/SAR Exercises In Last Fiscal Year And Fiscal Year-End Option/SAR Values

Name	Shares Acquired on Exercise (#)	Value Realized ($)	No. of Unexercised Securities Underlying Options SARs at FY-End (#)	Value of Unexercised In-the-Money Options/SARs at FY-End ($)
			(Exerciseable/Unexerciseable)
None

Long Term Incentive Plans

             The Company has no long-term incentive plans.

Compensation of Directors

             Directors currently receive an annual issuance of 1,000 shares of common shares as compensation. Directors do not receive reimbursement for their out of pocket costs in attending board meetings.

Employment Contracts and Termination of Employment, and Change-In Control Arrangements

             We have no benefit plans and no employment agreements, other than at will agreements, with any of our employees.

             In 1996, the Board authorized the Company to enter into employment contracts for periods of five years with each of Mr. Gerald T. Raydon, Mrs. Alyda Raydon and Mr. Eric J. Raydon. Such agreements were executed in August 1997 and provided for annual compensation of $120,000, $39,000 and $52,000, respectively, all subject to escalation on an annual basis as approved by the Board. The agreements did not contain provisions restricting a change of control in the Company. As a consequence of our Plan of Reorganization, all such contracts were

22

terminated without payment of accrued but unpaid portions of salaries in December 1999, other than an allowance to each of Mr. and Mrs. Raydon of $4,300 as priority wage claims. During the pendancy of the bankruptcy proceedings, Mr. Raydon received $5,000 per month and Mrs. Raydon received $3,250 per monthly. See Compensation Table above.

Item 11.   Security Ownership of Certain Beneficial Owners and Management

             The following table sets forth information, as of December 31, 1999, with respect to the beneficial ownership of our Common Stock by: (i) each stockholder known to us to be the beneficial owner of more than 5% of our Common Stock; (ii) each director; (iii) each of the Chief Executive Officer and any executive officer that received $100,000 or more in compensation during the fiscal year.

Title of Class	Name and Address of Beneficial Owner		Amount and Nature of Beneficial Ownership		Percent of Class
Common Stock		Drake Capital Securities, Inc. (1)		95,000		.6	%
Common Stock		Drake Holding Corp. (1)		60,000		.4	%
Common Stock		Drake Energy Corp. (1)		323,675		2.0	%
Common Stock		Gerald T. Raydon (2)		2,462,842		15.3	%
Common Stock		Harriman Interests		140,832		.9	%
Common Stock		Dennis Timpe (3)		3,649,279		24.0	%

______________

   (1)   Based upon information contained in a Schedule 13D dated December 31, 1996, filed by a group consisting of the named companies. Each member of the group disclaimed beneficial ownership or voting power of the shares held by any other member. Each of the named companies is controlled by substantially the same persons.

   (2)   In December 1999, Mr. Raydon resigned as an officer and director of the Company. Includes 1,209,865 shares held by Alyda L. Raydon, Mr. Raydon’s wife, and 43,113 shares held by other members of Mr. Raydon’s family, as to all of which Mr. Raydon disclaims beneficial ownership.

   (3)   Includes 2,419,279 shares formerly held by Mr. Raydon as to which he granted an irrevocable proxy to Mr. Timpe. Such proxy grants Mr. Timpe and his nominees the right to vote all shares subject to such proxy on all matters for a period of two years expiring on December 20, 2001.

Item 12.   Certain Relationships and Related Transactions

             In 1998, we filed a voluntary petition for Reorganization under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court, Central District of California, Santa Barbara Division (No. ND 98-15477-RR). In December 1999, our Third Amended Plan of Reorganization was confirmed by the Court.

             Until December 1999, Capitan Resources, Inc. owned an undivided 25% interest in the waste disposal facilities owned and operated by us at our Oxnard properties. Gerald T. Raydon and his family own all of the stock of Capitan Resources, Inc. As part of our Reorganization, we acquired all of the interests of Capitan Resources in the jointly owned properties and terminated the agreement pursuant to which Capitan operated such properties. Relations between the Company and Capitan Resources were governed by an agreement, which provides for a proportionate sharing of costs and revenues.

             During 1996, affiliates of Drake Investment Securities, Inc. invested $50,000 in Capitan in exchange for an undivided 25% share of profits in the disposal of solid wastes by Capitan. This interest was subsequently acquired by the Company.

             Capitan Resources, Inc. was the purchaser of natural gas from our Bandini-East Los Angeles properties, which were sold during 1998. Capitan purchased the natural gas under a contract dated June 30, 1991, which provides for a payment to Capitan of 30% of gross sales in exchange for advancing capital and other costs of gas processing and transportation. Capitan then resold the natural gas to other purchasers. This contract was terminated as part of our reorganization.

             From time to time there were outstanding balances and credits between Capitan and us pursuant to the agreements above mentioned. At December 31, 1998 and 1999 we had a receivable of $556,503 and $0,

23

respectively, from Capitan. Similar credits and balances were outstanding from time to time with respect to the Bandini-East Los Angeles properties and Vaca properties; during the two years ended December 1999, the largest balance receivable from Capitan was approximately $1 million and on December 31, 1999, the receivable balance was $0 as a consequence of our Plan of Reorganization which provided for the release of all claims of Capitan against us and all of our claims against Capitan in exchange for the conveyance to us of Capitan’s interest in the waste disposal project and termination of its operating contract.

             The Harriman affiliated group currently owns approximately 365,576 shares or 2.27% of our outstanding common stock. In 1992, members of the group provided collateral to a bank for a loan to us in the principal amount of $1,200,000 ($650,000 as of June 30, 1997). The group received 273,669 shares of our common stock as partial consideration for providing such collateral. The loan was extended to January 15, 1998 on the condition that it be reduced by one-half, which we did by making a $750,000 payment in December, 1996. We paid the Harriman group 51,010 shares of the common stock in 1996 as consideration for retaining the use of their collateral for the loan through the period of extension. In 1998, a further extension was granted in exchange for an additional 25,000 shares of common stock. The indebtedness was discharged in our reorganization and the Harriman affiliated group received $664,990 in allowed claims as a creditor.

             In 1998, Drake Energy Company, an affiliate of Drake Securities Corporation, loaned us $16,500 and purchased 33,000 shares of common stock for $16,500. The note was discharged in the bankruptcy and Drake Energy received an allowed unsecured claim for $16,500.

             Under our Plan of Reorganization, which was confirmed on December 15, 1999, the following transactions, among others, occurred:

             1. TD & Associates, a company owned by Mr. Dennis Timpe received 1,270,000 shares of our common stock related to our sale of 3,230,000 common shares in exchange for $500,000.

             2. Capitan Resources, Inc., a company owned by Mr. G. T. Raydon, relinquished all of its rights under agreements with us by which Capitan operated certain of our properties, acted as natural gas reseller for us, and released any claims it may have had against us. We released Capitan and Mr. Raydon from any claims we may have had against either. We asserted claims of approximately $1 million against Capitan.

             3. Mr. Raydon released claims for 1,390,000 shares of our common stock as replacement for shares owned by him lost through sale by a third party, which were provided by Mr. Raydon as collateral for an indirect loan to us.

             4. Mr. Raydon released certain collateral and claims secured thereby on certain of our properties.

             5. The Harriman affiliated group released its claims against us, including that for repayment of $652,000, in exchange for the payment of $25,000, a two year installment ($2,487.50 monthly) note bearing 8% interest, principal amount of $55,000, and a general unsecured claim of $584,990 for which they have received 210,595 shares of common stock and will receive a maximum of 497,978 additional shares.

             6. Unsecured notes in the amount of $185,000 held by Mr. And Mrs. Raydon are to be discharged and various liens of the Raydons on our properties were released.

             7. Advances in the amounts of $33,000 from Mr. Eric Raydon were discharged in exchange for an allowed claim of $33,919 for which he received shares of the Common Stock on the same basis as other creditors of his class.

             As a condition to investing in our common stock, Mr. Timpe required that Mr. G. T. Raydon grant Mr. Timpe a proxy covering all of the shares owned of record by Mr. Raydon. Such proxy was granted in December 1999, and permits Mr. Timpe and his nominees to vote the shares subject thereto for a period ending December 20, 2001.

             We occupy approximately 5000 square feet of office space in Yorba Linda, California, which it subleases from TD & Associates, Inc., a company owned by Dennis Timpe, our president. The Company pays TD $5,000 per month for rental and administrative support, an amount which approximates TD’s cost of providing such office space and administrative support to us.

             From time to time and when Geo was controlled by previous management, ventures organized by Mr. Timpe or an affiliate, have participated in the drilling of wells on properties owned and operated by Geo. We believe that

24

the terms of such participation were as favorable to Geo as could be obtained from other unaffiliated parties. None of the transactions were economic to the ventures.

Item 13.   Exhibits and Reports on Form 8-K

             (a) Exhibits

Exhibit Number	Description
2.1	Agreement of Merger and Plan of Reorganization between Drake Investment Corp. and Geo Petroleum, Inc. dated November 1, 1995.*
2.2	Certificate of Approval of Agreement of Merger between Drake Investment Corp. and Geo Petroleum, Inc., dated April 9, 1996.*
2.3	Permit to issue stock in merger, dated March 26,1996.*
2.4	Plan of Reorganization of Geo Petroleum, Inc. dated October 12, 1999, and confirmed by the U. S. Bankruptcy Court for the Central District of California, Santa Barbara Division, on December 15,1999.
3.1	Articles of Incorporation of Geo Petroleum, Inc., filed November 6, 1986.*
3.1(a)	First Amendment to Articles of Incorporation of Geo Petroleum, Inc. filed June 1, 1994.*
3.1(b)	Second Amendment to Articles of Incorporation of Geo Petroleum, Inc. filed November 7, 1995.*
3.1(c)	Third Amendment to Articles of Incorporation of Geo Petroleum, Inc. filed December 5, 1995.*
3.2	By-laws of Geo Petroleum, Inc., dated November 30, 1986.*
4.1	Corporate Resolution establishing Rights, Preferences and Privileges of Preferred Stock, Series A, dated August 23, 1994.*
4.1(a)	Form of Preferred Stock Certificate.*
4.2	Form of Common Stock Certificate.*
4.3	Form of Promissory Note, Deed of Trust, and Assignment of Oil Payment of Geo Petroleum, Inc.*
10.3(a)	Form of Oil and Gas lease covering various lands in Oxnard Field (Vaca Tar Sands Unit) (exemplar), dated January 1, 1987.*
10.3(b)	Pooling Agreement, Vaca Tar Sands Unit, Ventura County, California.*
10.4	Form of Oil and Gas lease covering various lands in the Rosecrans Oil Field, Los Angeles County, CA. (exemplar), dated October 15, 1956.*
10.5	Gas Sales Contract dated August 31, 1991, between Geo Petroleum Inc. and Capitan Resources, Inc. (East Los Angeles/Bandini fields).*
10.6(a)	Gas Sales Contract dated August 9, 1991 between Pacific Tube Company and Geo Petroleum, Inc.*
10.6(b)	Assignment of Gas Sales Contract, Geo Petroleum, Inc. To Capitan Resources, Inc.*
10.7	Settlement Agreement between Geo Petroleum, Inc. and William Lennox, dated February 28, 2000 (Vaca Properties)
10.8(a)	Oil Sales Contract dated November 22, 1994 between Geo Petroleum, Inc. and Texaco Trading and Transportation Inc. (Oxnard).*
10.8(b)	Oil Sales Contract dated July 5, 1995 between Geo Petroleum, Inc. and Unocal Corp. (Rosecrans field).*
10.9	Oil Sales Contract between Geo Petroleum, Inc. and Kern Oil & Refining Co., dated July 10th, 1995 (Orcutt field).*
10.10	Oil and Gas Lease between Gene Careaga, et al and Central California Oil Co., (our predecessor in interest) (Orcutt Field) dated October 3, 1972.*
10.11	Letter Agreement dated December 22, 1989 between Geo Petroleum, Inc. and Gerald T. Raydon and Notice of Conversion pursuant thereto dated January 2, 1990 (Vaca Tar Sand net profits interest)**
10.12	Agreement and Assignment among Gerald T. Raydon and Alyda L. Raydon, as assignors, and Geo Petroleum, Inc., as assignee, dated April 1, 1994, conveyance of interests in East Los Angeles and Vaca Tar Sands properties, retaining a 5% net profits interest in Vaca properties.**
10.13	Water Disposal Agreement between J.W. Hansen and Geo Petroleum, Inc. dated May 14, 1992.*.
10.14	Water Disposal Agreement between Geo Petroleum, Inc. and Capitan Resources, Inc. dated June 1, 1990.*
10.15	Services and Drilling Master Contract (water disposal) between Unocal Corporation and Geo Petroleum, Inc. dated February 3, 1993.*

25

Exhibit Number	Description
10.16	Term Loan Agreement, as amended and extended to June 15, 1996, dated June 6, 1994, between First Los Angeles Bank (now City National Bank) and Geo Petroleum, Inc.*.
10.17	Letter Agreement between Geo Petroleum, Inc. and William Rich III, as attorney in fact, (Harriman interests) dated September 6, 1990.*.
10.18	Assignment and Bill of Sale, Rosecrans Area Leases, by and between Kelt California, Inc., and Geo Petroleum, Inc., dated December 1, 1994.*
10.19	Consulting Agreement between Geo Petroleum, Inc. and Gerald T. Raydon, dated October 1999.
10.20	Office Lease between TD & Associates and Geo Petroleum, Inc. dated January 1, 2000
10.21	Agreement between Geo Petroleum, Inc. and Bud Antle, dated October 24, 2000, releasing certain lands in the Oxnard Field and order of the Bankruptcy Court authorizing execution thereof.
16.2	Agreement for Assignment of Leases dated December 31, 1996 by and between Geo Petroleum, Inc. as Assignor and Saba Petroleum, Inc. as Assignee with respect to our oil properties in the Oxnard Field, Ventura County, California
16.3	Agreement and Assignment of Leases dated November 1, 1997, between Geo Petroleum, Inc. and Saba Petroleum, Inc. covering a reassignment of the former’s interest in the Oxnard Field, California.
16.4	Amendment to Water Disposal Lease dated February 28, 2000 between Geo Petroleum, Inc. and William Lennox (Water disposal facility lease)
21.1	List of Subsidiaries**
23.1	Consent of Stan Brown, Petroleum Engineer.**
23.2	Consent of Krummrich Engineering.**
27	Financial Data Schedule

______________

   *   Filed as an exhibit to Registrant’s Form 10 Registration Statement dated June 6, 1996 and incorporated herein by reference thereto.

   **   To be filed by Amendment

26

SIGNATURES

             In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		GEO PETROLEUM INC.
Dated: November 22 , 2000	By:	/S/ Dennis Timpe
		Dennis Timpe Chairman of the Board and President

             Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

Signatures and dates of directors.

November 22, 2000	/S/ Dennis Timpe
	Dennis Timpe Chairman/C.E.O.

November 22, 2000	/S/ Lori Timpe- Long
	Lori Timpe-Long Secretary/Treasurer/Director Principal Financial and Accounting Officer

November 22, 2000	/S/ Christian Dillon
	Christian Dillon Director

27

GEO PETROLEUM, INC.
INDEX TO THE FINANCIAL STATEMENTS
As of December 31, 1999 and 1998 and
For Each of the Two Years in the Period Ended December 31, 1999

	Page
Report of Independent Auditors	F-2
Financial Statements of Geo Petroleum, Inc.:
Balance Sheets, December 31, 1999 and 1998	F-3
Statements of Operations for Each of the Two Years in the Period    Ended December 31, 1999	F-4
Statements of Shareholders’ Equity (Deficit) for Each of the Two Years in the    Period Ended December 31, 1999	F-5
Statements of Cash Flows for Each of the Two Years in the Period    Ended December 31, 1999	F-6
Notes to the Financial Statements	F-8

F-1

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Geo Petroleum, Inc.

             We have audited the accompanying balance sheets of Geo Petroleum, Inc. as of December 31, 1999 and 1998, and the related statements of operations, shareholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 1999. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

             We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

             In our opinion, the 1999 and 1998 financial statements referred to above present fairly, in all material respects, the financial position of Geo Petroleum, Inc. as of December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.

             The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations, has negative working capital, filed in November 1998 for relief under the federal bankruptcy laws from which it emerged in December 1999, needs to attain positive cash flow from operations, and to obtain additional funds to commence operations and development of its oil and gas properties. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are partially described in Note 3. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Kelly & Company
Newport Beach, California
November 2, 2000

F-2

GEO PETROLEUM, INC.
BALANCE SHEETS
December 31, 1999 and 1998

	1999			1998
ASSETS
Current assets:
Cash and equivalents	$	436,916		$	6,861
Accounts receivable:
Accrued oil and gas revenues, net of allowance for doubtful accounts of         $29,944 in 1999 and 1998		4,069			—
Joint interest and other, net of allowance for doubtful accounts of $131,508 in         1999 and 1998		70,000			—
Prepaid expenses		3,634			—
Note receivable		45,000			—
Total current assets		559,619			6,861
Receivable from Capitan Resources Inc., net of allowance for doubtful accounts of    $500,000 in 1998		—			556,503
Account receivable		—			70,000
Deposits		160,592			160,592
Note receivable		—			45,000
Property and equipment:
Oil and gas properties		—			—
Vehicles		20,884			88,125
Office furniture and equipment		—			71,375
		20,884			159,500
Less: accumulated depreciation and depletion		(11,199	)		(84,728	)
		9,685			74,772
Total assets	$	729,896		$	913,728
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable:
Trade and other	$	29,912			—
Related party		14,149			—
Accrued expenses		220,408		$	41,091
Income tax payable		3,039			—
Installment obligation		48,000			—
Other liabilities		255,046			—
Liabilities subject to compromise		—			2,478,094
Note payable—other		26,404			—
Total current liabilities		596,958			2,519,185
Installment obligation		96,000			—
Note payable—other		28,596			—
Total liabilities		721,554			2,519,185
Shareholders’ equity (deficit):
Preferred stock; no par value; 100,000 shares authorized; no shares issued and       outstanding at December 31, 1999 and 1998, respectively		—			—
Common stock; no par value; 50,000,000 shares authorized; 15,215,995 and       8,815,995 shares issued and outstanding at December 31, 1999 and 1998,       respectively		9,918,974			7,276,413
Accumulated deficit		(9,910,632	)		(8,881,870	)
Total shareholders’ equity (deficit)		8,342			(1,605,457	)
Total liabilities and shareholders’ equity (deficit)	$	729,896		$	913,728

The accompanying notes are an integral part of the financial statements.

F-3

GEO PETROLEUM, INC.
STATEMENTS OF OPERATIONS
For Each of the Two Years in the Period Ended December 31, 1999

	1999			1998
Revenues:
Oil and gas sales	$	872		$	135,298
Waste water disposal services, related party		157,529			446,446
Other revenue		4,000			23,953
Total revenues		162,401			605,697
Expenses:
Lease operating expenses		204,336			482,167
Lease environmental remediation expenses		42,832			589,521
Depletion and depreciation		23,194			116,313
Write-off of costs of oil and gas properties in excess of “cost ceiling”		—			1,188,752
General and administrative		199,769			705,386
Loss on sale of oil property		—			3,702,481
Total expenses		470,131			6,784,620
Loss from operations		(307,730	)		(6,178,923	)
Reorganization items:
Loss on disposal of equipment		(5,228	)		—
Professional fees		(226,883	)		(36,000	)
Capitan and other settlements		(648,248	)		—
Total reorganization items		(880,359	)		(36,000	)
Other income (expense):
Interest income		5,225			8,944
Interest expense(contractual interest of $75,883 in 1999)		(865	)		(102,760	)
Total other income (expense)		4,360			(93,816	)
Loss before provision for income taxes and extraordinary item		(1,183,729	)		(6,308,739	)
Provision for income taxes		(800	)		(800	)
Loss before extraordinary item		(1,184,529	)		(6,309,539	)
Extraordinary gain from claims discharged in bankruptcy, net of applicable    income taxes of $0		155,767			—
Net loss	$	(1,028,762	)	$	(6,309,539	)
Net loss per share, basic and diluted	$	(0.11	)	$	(0.74	)

The accompanying notes are an integral part of the financial statements.

F-4

GEO PETROLEUM, INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY (Deficit)
For Each of the Two Years in the Period Ended December 31, 1999

		Common Shares			Common Stock		Accumulated Deficit			Total
Balance, December 31, 1997			7,900,432		$	7,049,399	$	(2,572,331	)	$	4,477,068
Common shares issued as additional    consideration in connection with private    placement			180,000			—		—			—
Common shares issued for services			46,672			17,890		—			17,890
Common shares issued to employees as    compensation			35,700			26,174		—			26,174
Common shares issued for commissions on    debt financing			48,200			19,700		—			19,700
Common shares issued in lieu of registration    of shares issued in private placement			347,991			—		—			—
Common shares issued for cash			133,000			116,500		—			116,500
Common shares issued for royalty interest			100,000			28,000		—			28,000
Common shares issued in connection with note    extension	6		25,000			18,750		—			18,750
Cancellation of common shares issued in error			(1,000	)		—		—			—
Net loss			—			—		(6,309,539	)		(6,309,539	)
Balance, December 31, 1998			8,815,995			7,276,413		(8,881,870	)		(1,605,457	)
Common shares issued to unsecured creditors    pursuant to the confirmed plan of    reorganization			1,900,000			2,142,561		—			2,142,561
Common shares issued for cash			4,500,000			500,000		—			500,000
Net loss			—			—		(1,028,762	)		(1,028,762	)
Balance, December 31, 1999			15,215,995		$	9,918,974	$	(9,910,632	)	$	8,342

The accompanying notes are an integral part of the financial statements.

F-5

GEO PETROLEUM, INC.
STATEMENTS OF CASH FLOWS
For Each of the Two Years in the Period Ended December 31, 1999

	1999			1998
Cash flows from operating activities:
Net loss	$	(1,028,762	)	$	(6,309,539	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depletion		—			84,413
Depreciation		23,194			31,900
Write-off of oil and gas properties		—			1,188,752
Issuance of common stock for services and other		—			82,514
Provision for uncollectible accounts receivable		—			101,559
Loss on sale of oil and gas property		—			3,702,481
Loss on settlement with Capitan Resources Inc.		503,248			—
Extraordinary gain from claims discharged in bankruptcy		(155,767	)		—
Loss on disposal of equipment		5,228			—
Decrease (increase) in assets:
Accounts receivable		(4,069	)		21,454
Due from Capitan Resources, Inc., net		53,255			(314,958	)
Prepaid expenses		(3,634	)		127,718
Deposits		—			(592	)
Increase (decrease) in liabilities:
Accounts payable—trade		29,912			(61,557	)
Accounts payable—related party		14,149			—
Accrued royalties		—			(361,326	)
Accrued expenses		268,816			(98,412	)
Income tax payable		3,039			—
Other liabilities		221,446			—
Notes payable to bank		—			(650,978	)
Capital lease obligations		—			(16,514	)
Notes payable to officers		—			(215,270	)
Notes payable—others		—			(36,964	)
Convertible debentures		—			(39,400	)
Liabilities subject to compromise		—			2,478,094
Net cash used in operating activities	$	(69,945	)	$	(286,625	)

The accompanying notes are an integral part of the financial statements.

F-6

GEO PETROLEUM, INC.
STATEMENTS OF CASH FLOWS
For Each of the Two Years in the Period Ended December 31, 1999

	1999			1998
Cash flows provided by (used in) investing activities:
Purchases of property and equipment		—		$	(237,440	)
Proceeds from the sale of property		—			140,208
Net cash used in investing activities		—			(97,232	)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of a note payable		—			95,713
Repayments on notes payable		—			(79,888	)
Net proceeds from the issuance of common stock	$	500,000			116,500
Cash provided by financing activities		500,000			132,325
Net increase (decrease) in cash		430,055			(251,532	)
Cash and equivalents at beginning of year		6,861			258,393
Cash and equivalents at end of year	$	436,916		$	6,861
Supplemental Disclosures of Cash Flow Information
Interest paid		—		$	25,160
Income taxes paid		—		$	800
Supplemental Schedule of Non-Cash Investing and Financing    Activities
Satisfaction of federal bankruptcy proceedings allowed claims through issuance    of common stock:
Allowed claims satisfied	$	2,142,561			—
Shares issued	$	(2,142,561	)		—

The accompanying notes are an integral part of the financial statements.

F-7

GEO PETROLEUM, INC.
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1999 and 1998 and
For Each of the Two Years in the Period Ended December 31, 1999

1.      Description of the Company’s Business

             Geo Petroleum, Inc. (the “Company”) is an oil and gas production company founded in 1986 and incorporated in the State of California. The Company engages in the development, production and management of oil and gas properties located in California. Certain of the wells on one of the Company’s oil properties are used for waste water disposal services. These disposal operations were conducted by a related party (see Note 13), and the Company had a 75% revenue interest in such operations.

             During June 1998, the Company decided to shut-in its oil and gas production at all of its property locations except for certain oil wells and the waste water disposal wells on the Vaca Tar Sands property, and the , Rosecrans gas production.

2.      Petition for Relief Under Federal Bankruptcy Laws

             On November 16, 1998, Geo Petroleum, Inc. (the “Debtor”) filed a petition for relief under the federal bankruptcy laws in the United States Bankruptcy Court for the Central District of California, Santa Barbara Division (the “bankruptcy court”). Under federal bankruptcy laws, certain claims against the Debtor in existence prior to the filing of the petition for relief were stayed while the Debtor continued business operations as the Debtor-in-Possession. These pre-bankruptcy petition claims are reflected in the December 31, 1998 balance sheet as “liabilities subject to compromise.” Additional claims (liabilities subject to compromise) arose subsequent to the filing date resulting from rejection of executory contracts, including leases, and from the determination by the bankruptcy court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts. Claims secured against the Debtor’s assets (“secured claims”) were also stayed, although the holders of such claims had the right to request the bankruptcy court for relief from the stay. Secured claims were collateralized primarily by liens on the Debtor’s oil and gas properties, equipment and the pledge of specific assets of certain shareholders as collateral for the note payable to the bank (see Note 5).

             The Debtor received approval from the bankruptcy court to pay or otherwise honor certain of its prepetition obligations, including employee wages when the Company’s Third Amended Plan of Reorganization (the “Plan”) was approved. The Debtor determined that there was insufficient collateral to cover the interest portion of scheduled payments on its prepetition debt obligations. Contractual interest on those obligations amounted to $75,883, which is $75,018 in excess of reported interest expense; therefore, the debtor has discontinued accruing interest on these obligations. Refer to Note 7 for a discussion of credit arrangements entered into subsequent to the federal bankruptcy petition filing.

3.      Summary of Significant Accounting Policies

Basis of Presentation

             The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $1,028,762 and $6,309,539 and negative cash flows from operations of $69,945 and $286,625 for the years ended December 31, 1999 and 1998, respectively. At December 31, 1999 the Company had an accumulated deficit of $9,910,632, and its current liabilities exceed its current assets by $37,339. In June 1998, the Company decided to shut-in its oil and gas production at all of its property locations except certain of the oil wells and the waste water disposal wells on the Vaca Tar Sands property, and the Rosecrans Field gas production. It planned to focus its resources on the development of the Vaca Tar Sands property. In November 1998, the Company filed for protection under the federal bankruptcy laws. Effectively, the Company curtailed its oil and gas production in 1999, and substantially reduced its waste water disposal operations. In December 1999, the bankruptcy court confirmed the Plan (see Note 7) and the Company received $500,000 from the sale of 4,500,000 shares of its common stock and emerged from bankruptcy.

F-8

             The Company’s continuation as a going concern is dependent upon its ability to commence production from its oil and gas properties, generate sufficient cash flow to meet its current obligations on a timely basis, to obtain additional financing, and ultimately to attain profitable oil and gas and waste water disposal operations. Management is continuing its efforts to obtain additional funds so that the Company can meet its obligations, commence operations and develop its oil and gas properties. These potential alternatives include, among other things, private placement of debt and/or equity securities, bank loans using oil and gas properties as collateral and/or the sale of the interests in its oil and gas properties. There can be no assurance that any of these potential alternatives will materialize. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates

             The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect amounts reported in the financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the financial statements.

Property and Equipment

             The Company follows the full-cost method of accounting for oil and gas properties. Accordingly, all costs associated with the acquisition, exploration and development of oil and gas reserves are capitalized as incurred. The Company has not capitalized any interest or any of its internal costs related to its oil and gas properties.

             In addition, the capitalized costs are subject to a “ceiling test,” which basically limits such costs to the aggregate of the “estimated present value” of future net revenues from proved reserves, discounted at a 10-percent interest rate, based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties. Any unamortized costs capitalized in the cost center in excess of the cost center ceiling are charged to expense in the period in which the excess occurs.

             Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income. Abandonments of properties are accounted for as adjustments of capitalized costs with no loss recognized.

             All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized over the estimated useful lives of the properties by application of the unit-of-production method using only estimated proved oil and gas reserves, excluding future estimated costs and related oil reserves at the Vaca Tar Sands property, which relate to a significant development project involving an enhanced recovery process. Evaluations of the oil and gas reserves for the Company’s Rosecrans, LA/Bandini, and Vaca Tar Sands property were prepared by independent petroleum engineers.

             Substantially all additions to oil and gas properties in 1998 relate to recompletions of existing producing or previously producing wells. There were no additions in 1999. The Company sold its LA/Bandini properties in 1998, which represented a significant portion of its developed oil and gas reserve interests.

             The Company’s oil and gas producing properties are estimated by the Company’s independent petroleum engineers to have remaining producing lives ranging from 6 to 30 years. The Company’s policy for accruing site restoration and environmental exit costs related to its oil and gas production is that such costs are accounted for in the Company’s calculation of depletion expense.

             Depreciation of office furniture and equipment, and vehicles, is computed using the straight-line method, with depreciation rates based upon estimated useful lives of five years.

Revenue Recognition

             Revenue from oil and gas sales is recognized upon delivery of the oil and gas to the Company’s customer. Such revenue is recorded net of royalties and certain other costs that the Company incurs to bring the oil and gas into salable condition.

F-9

             All of the Company’s revenue from waste water disposal services and a portion of its gas revenues arose from operating and sales agreements with a related party (see Note 13), which operated the Company’s waste water disposal well and sold gas produced from wells owned by the Company. The Company accrued its share of waste water disposal revenues when payment for services were received by the related party. As described in Note 7, under the Plan the rights to the operation and sales agreements were transferred to the Company.

Long-Lived Assets

             Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When circumstances indicate that the carrying amount of a long-lived asset, other than oil and gas properties, is not recoverable, as demonstrated by the projected undiscounted cash flows, an impairment loss is recognized.

             The Company accounts for its oil and gas properties under the full cost method and evaluates these assets separately in accordance with applicable cost ceiling limitations. The Company’s management has determined that there was no impairment of long-lived assets, other than its oil and gas properties that exceeded cost ceiling limitations in 1998.

Income Taxes

             The Company uses the asset and liability method to account for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities for accounting purposes, and their respective tax bases. Deferred income tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in statutory tax rates is recognized in net income in the year of change. A valuation allowance is recorded for those deferred income tax assets whose recoverability is not sufficiently likely.

Earnings (Loss) per Common Share

             Basic earnings (loss) per common share is computed by dividing net earnings (loss) applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options and warrants. In periods where losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

Environmental Costs

             Costs related to environmental remediation are charged to expense. Other environmental costs are also charged to expense unless they increase the value of the property and/or provide future economic benefits, in which event they are capitalized. Liabilities are recognized when the expenditures are considered probable and can be reasonably estimated. Measurement of liabilities is based on currently enacted laws and regulations, existing technology, and undiscounted site-specific costs. Generally, such recognition coincides with the Company’s commitment to a formal plan of action.

             Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, or if an amount is likely to fall within a range and no amount within that range can be determined to be the better estimate, the minimum amount of the range is recorded. Accruals for environmental matters exclude claims for recoveries from insurance carriers and other third parties until it is probable that such recoveries will be realized.

F-10

4.      Deposits

             The Company has deposits with the State of California, the County of Ventura and the City of Los Angeles that are required by these governmental agencies in connection with the Company’s oil and gas operations. The deposits with the State of California and Ventura County are in certificates of deposit that are subject to withdrawal restrictions imposed by these agencies. The deposit with the City of Los Angeles is in the form of a noninterest bearing cash deposit. The amounts of these deposits at December 31, 1999 and 1998 are as follows:

State of California	$	100,387
County of Ventura		10,205
City of Los Angeles		50,000
Total deposits	$	160,592

5.      Notes Payable

Note Payable to Bank

             At December 31, 1997, the Company had a $622,500 note payable to a bank with an interest rate at the bank’s prime rate plus 3.00% (an effective rate of 10.50% at December 31, 1997). Note payments were due monthly, and the bank had extended the maturity date of the note to January 1998. In October 1997, the bank agreed to reduce the monthly payments from $20,000 to $7,500.

             In January 1998, the Company signed an extension agreement with the bank that extended the due date of the note to either June 30, 1998, if the Company received certain investment capital, or December 1998 if the Company did not receive the anticipated investment capital. The extension agreement required the Company to make monthly payments of $10,000 starting February 1, 1998 through May 1, 1998, and a lump-sum principal paydown of 30% of the net of any investment capital proceeds received by the Company as of June 30, 1998.

             The entire obligation did not become due and payable on June 30, 1998 as the anticipated investment capital was not received, and the remaining principal balance was to then be repaid in six equal monthly installments starting in July 1998.

             As compensation for their cooperation in obtaining the extension of this note payable, the Company issued 25,000 shares of its common stock to the owners of the collateral provided as security for the bank debt and recognized $18,750 of compensation expense based on the quoted market price of the shares at the date they were issued. As part of the note payable extension agreement, the bank released 27,500 shares of the Union Pacific Corp. common stock used as collateral, and reducing the collateral to 7,500 shares of the Union Pacific Corp. common stock . In addition to the 7,500 shares of common stock, the loan was also secured by 7,642 shares of Union Pacific Resource common stock which was spun-off from Union Pacific Corp. and $328,260 in cumulative dividends.

             The Company defaulted on the note payable in 1998 prior to filing a petition for relief under the federal bankruptcy laws in November 1998. The parties who had provided the collateral, satisfied the note payable with the bank in 1999, and filed a proof of claim in bankruptcy to obtain reimbursement from the Company. Under the terms of the Plan, as described in Note 7, these parties, who were shareholders at the time of the bankruptcy filing, received $25,000 in cash, a $55,000 note as a secured creditor and an approved claim of $584,990 as a general unsecured creditor.

F-11

Other Notes Payable

	December 31,
	1999			1998
Collateralized:
Notes payable to a relative of a former officer and major shareholder with interest at    10% per annum, collateralized by an interest in all of the Company’s Vaca Tar    Sands leases, originally due at various times during 1997		—		$	40,769	(1)
Note payable to Drake Energy Corp., with an interest rate of 10% per annum,    originally due in 1998 and collateralized by all of the Company’s assets		—			16,500	(1)
Note payable to a bank with an interest rate of 9.5% per annum, principal and interest    payable in monthly installments of $312 through March 2002, collateralized by an    automobile		—			10,464	(1)
Note payable to shareholders, with an interest rate of 8% per annum, payable in    monthly installments of principal and interest of $2,487, due in December 2001,    and collateralized by 33% net revenue interest in the Company’s Vaca Tar Sands    oil and gas properties (see Note 5, Notes Payable to Bank)	$	55,000			—
Uncollateralized:
Note payable to a former officer with an interest rate of 8.25% per annum with    principal and interest originally due on demand		—			45,000	(1)
Note payable to a former officer and major shareholder with an interest rate of    10.25% per annum, with accrued interest payments due monthly commencing    January 1, 1998, and principal and unpaid interest originally due on or before July    1, 1998		—			140,000	(1)
Convertible Debentures:
10% convertible debentures, convertible into shares of the Company’s common stock    at a 10% discount from the stock closing price at the date of the stock issuance,    with interest payable monthly, originally due in July 2000		—		$	39,400	(1)
Total notes payable	$	55,000			292,133
Less: current portion		(26,404	)		(292,133	)
Long-term portion of notes payable	$	28,596			—

______________

   (1)   Upon filing for relief under the federal bankruptcy laws, all of the notes payable outstanding at that time became liabilities subject to compromise and were included in the $2,478,094 liabilities subject to compromise at December 31, 1998, as described in Note 6.

             Future maturities of long-term debt are as follows at December 31, 1999:

	Note Payable		Installment Obligation (Notes 7 and 10)		Total
2000	$	26,404	$	48,000	$	74,404
2001		28,596		48,000		76,596
2002		—		48,000		48,000
Total maturities of long-term debt	$	55,000	$	144,000	$	199,000

F-12

6.      Liabilities Subject to Compromise

             Certain obligations of the Company, which were in existence as of the bankruptcy petition filing date, were stayed under the federal bankruptcy laws and were not paid while the Company operated as a debtor-in-possession. These claims are reflected in the accompanying balance sheet as of December 31, 1998 as “liabilities subject to compromise.” In December 1999, these liabilities subject to compromise were satisfied through confirmation of the Plan and converted to equity through the issuance of the Company’s common stock.

	December 31,
	1999		1998
Note payable to bank, with an interest rate at the bank’s prime plus 3.00%,    collateralized by certain of the Company’s individual shareholders’ common    stock of Union Pacific Corp. and Union Pacific Resources and related cumulative    dividends earned on these stocks		—	$	615,000
Priority payroll claims		—		8,600
Auto loans and capitalized lease obligations, collateralized by autos and equipment		—		26,978
Notes payable to officers		—		185,000
Advances from officers		—		35,478
Collateralized notes payable		—		57,269
Convertible debentures		—		39,400
Trade and other miscellaneous claims		—		1,510,369
Total liabilities subject to compromise		—	$	2,478,094

7.      Plan of Reorganization

             On December 15, 1999, the bankruptcy court confirmed the Plan. The principal elements of the Plan provided, among other matters, for the following:

Stock Purchase and Sale Agreement

             On or before the effective date of the Plan, that the Company consummate a stock purchase and sale agreement with an investor, to sell 4,500,000 shares of the Company’s common stock for $500,000 in cash. Of this amount, $300,000 was used to fund the payments required under the Plan and the balance is to be used for working capital.

Matter with Capitan Resources, Inc. and Related Parties

             Confirmation of the Plan settled certain controversies and provided for (a) Capitan Resources, Inc. (“Capitan”), a related party (see Note 13) to transfer to the Company all of its rights under its operating and sales agreements with the Company and the withdrawal of any and all claims it may have had against the Company, (b) the release of the rights of a former officer and major shareholder of the Company to reimbursement for his stock sold by a creditor to satisfy a debt incurred for the benefit of the Company and to his stock incentive compensation totaling 1,390,000 shares of the Company’s common stock and for him to serve only as consultant to the Company at the discretion of new management on a fee for service basis, (c) all deeds of trust held by the former officer and major shareholder, the former Secretary/Treasurer, who is the wife of the former officer and major shareholder, and other insiders of the Company on the East L.A./Bandini properties were assigned to the Company and all deeds of trust held by insiders on property of the Company were released and (d) the Company released and waived all claims and other causes of action it may have had against Capitan Resources, Inc., the former officer and major shareholder and the former Secretary/Treasurer, who is the wife of the former officer and major shareholder.

Note Payable to Bank

             The note payable to the bank was satisfied in 1999 by a group of shareholders who were guarantors of the loan. These shareholders who provided the collateral and paid off the $615,000 bank loan filed proofs of claims in bankruptcy and sought payment by the Company. The bankruptcy court allowed these claims, and the Plan provided for the payment of $25,000 in cash at confirmation date, a $55,000 note and a general unsecured claim of $584,990 that is satisfied through a pro rata distribution of the Company’s common stock and a pro rata share of the total cash

F-13

installment payments in the amount of $195,000 to be made to all unsecured creditors as further described in this note.

Priority Payroll Claims

             Payroll claims of $8,600 were paid in full on the effective date of the Plan.

Auto Loans and Capitalized Lease Obligations

             Auto loans and capitalized lease obligations totaled $26,978. The vehicles collateralizing these obligations were repossessed. A general unsecured claim of $4,813 was allowed and satisfied through a pro rata distribution of the Company’s common stock as further described in this note.

Notes Payable to Officers

             Of the $185,000 in notes payable to two former officers, one of whom is a major shareholder, upon the closing of the stock purchase and sale agreement with the investor, the claimant for $140,000 waived his claims against the estate of the Company, and caused the release of certain liens upon the property of the Company’s estate. The remaining $45,000 due to a former officer was allowed as a general unsecured claim that was satisfied through a pro rata distribution of the Company’s common stock and a pro rata share of the total cash installment payments in the amount of $195,000 to be made to all unsecured creditors as further described in this note.

Advances from Officers

             The former officer and major shareholder ($3,555 advance) and another former officer who is the son of the former officer and major shareholder ($31,923 advance) with advances to the Company totaling $35,478, were allowed as general unsecured claims that were satisfied through a pro rata distribution of the Company’s common stock and a pro rata share of the total cash installment payments in the amount of $195,000 to be made to all unsecured creditors as further described in this note.

Collateralized Notes Payable

             The holders of $57,269 of collateralized notes payable received, as general unsecured creditors, claims that were satisfied through a pro rata distribution of the Company’s common stock and a pro rata share of the total cash installment payments in the amount of $195,000 to be made to all unsecured creditors as further described in this note.

Convertible Debentures

             The holders of $39,400 in convertible debentures received, as general unsecured creditors, claims that were satisfied through a pro rata distribution of the Company’s common stock and a pro rata share of the total cash installment payments in the amount of $195,000 to be made to all unsecured creditors as further described in this note.

Trade and Other Miscellaneous Claims

             The holders of trade and other miscellaneous claims of approximately $1,510,369 received, as general unsecured creditors, claims that were satisfied through a pro rata distribution of the Company’s common stock and a pro rata share of the total cash installment payments in the amount of $195,000 to be made to all unsecured creditors as further described in this note.

Pro Rata Distribution to the General Unsecured Creditors

             The Plan provided for the general unsecured claims to be satisfied through pro rata distributions of:

             (1) the remaining balance, if any, of $300,000 in cash available after the payments of:

             (a) allowed administrative, tax and priority payroll claims

             (b) the cash portion of Class 2 Claims

F-14

             (c) Executory Contract Cure Amounts of approximately $39,000

             (2) the sum of $195,000 less any amounts necessary to pay any remaining balance of (1) above. The remaining amount is to be paid quarterly over approximately 12 quarters, with payments of not less than $12,000 and up to 30% of quarterly net income (as defined), and

             (3) 1,900,000 shares of the Company’s common stock.

Assumption of Executory Contracts and Unexpired Leases

             Under the terms of the Plan, the Company assumed certain executory contracts and unexpired leases. Unless timely objection to these contracts and leases were filed by the non-debtor parties, the “cure amounts” were forever binding on the non-debtor parties to these contracts and leases.

             The monetary defaults under each executory contract and unexpired lease assumed was satisfied on the effective date of the Plan by the payment of the “Executory Contract Cure Amounts” totaling $39,004. The executory contracts and unexpired leases consist of the following:

• Leases at the Rosecrans oil field in Los Angeles County representing 28 oil and gas wells

• 5 oil and gas leases at the Vaca Tar Sands unit of the Oxnard field in Ventura County

• 1 oil and gas lease at the Orcutt/Careaga oil field in Santa Barbara County

• 2 oil and gas leases in the Somis field in Ventura County

• Newgate oil and gas leases in Los Angeles County

• Waste water disposal agreement dated May 14, 1992

• Vaca Tar Sands farm-out agreement with Saba Petroleum, Inc.

• Operating contract for waste water disposal with Capitan Resources, Inc. This agreement is also included as part of the settlement with Capitan Resources, Inc. described above.

Fresh-Start Reporting

             Because the holders of existing voting shares immediately before confirmation of the Plan maintain more than 50% of the voting shares of the reorganized Company, the Company has not adopted “Fresh-start” reporting upon its emergence from the federal bankruptcy proceeding. Accordingly, the historical cost basis of accounting has been continued by the Company.

8.      Disputes Related to the Third Amended Plan of Reorganization

             Certain creditors’ claims submitted during the pendency of the bankruptcy were objected to by the Company. All claims as of the date of this report have been resolved.

             The pro rata distribution of the 1,900,000 shares of the Company’s common stock in satisfaction of the identified portion of the general unsecured creditors claims can now be finalized as the last remaining claim was resolved on October 27, 2000. The total amount of the allowable claims of the general unsecured creditors had not been determined at December 31, 1999. As an interim step, a pro rata distribution of 803,674 of the 1,900,000 common shares of the Company’s common stock were issued to general unsecured creditors whose claims were not being disputed by the Company in partial satisfaction of the amounts due these creditors pursuant to the Plan. As the bankruptcy court confirmed the Plan and it became effective in December 1999, all of the 1,900,000 shares are reflected as issued and outstanding in satisfaction of $2,142,561 in liabilities subject to compromise.

F-15

9.      Income Taxes

             The components of the provision for income taxes are as follows:

	December 31,
	1999		1998
Current tax expense:
Federal		—		—
State	$	800	$	800
		800		800
Deferred tax expense:
Federal		—		—
State		—		—
		—		—
Total provision	$	800	$	800

             Significant components of the Company’s deferred income tax assets and liabilities at December 31, 1999 and 1998 are as follows:

	December 31,
	1999			1998
Deferred income tax assets:
Net operating loss carryforward	$	3,177,626		$	2,591,528
Allowance for doubtful accounts		67,403			281,602
Differences between book and tax basis of property		63,230			83,250
Other		272			272
Net deferred income tax asset		3,308,531			2,956,652
Deferred income tax liability:
Differences between book and tax basis of property		—			—
Total deferred income tax liability		—			—
Net		3,308,531			2,956,652
Valuation allowance		(3,308,531	)		(2,956,652	)
Net deferred income taxes		—			—

             The Company, based upon its recent history of losses and management’s assessment of when operations are anticipated to generate taxable income, has concluded that it is more likely than not that none of the net deferred income tax assets will be realized through future taxable earnings and has established a valuation allowance for them.

             Reconciliation of the effective tax rate to the U.S. statutory rate is as follows:

	December 31,
	1999			1998
Tax expense at U.S. statutory rate		(34.0	)%		(34.0	)%
State tax provision		0.1			—
Other		0.1			—
Change in valuation allowance		33.9			34.0
Effective income tax rate		0.1	%		—

F-16
6

             At December 31, 1999, the Company has available unused net operating loss carryforwards that expire as follows:

Year of Expiration	Federal Net Operating Loss Carryforwards		State Net Operating Loss Carryforwards
2000		—		—
2001		—	$	310,900
2002	$	109,562		510,370
2003		154,627		844,218
2004		129,349		809,696
Thereafter up to 2019		8,308,872		—
Total	$	8,702,410	$	2,475,184

             The Company has determined that there will be significant limitations on the future utilization of the net operating loss carryforwards due to ownership changes in the Company.

10.      Commitments and Contingencies

Litigation

             Prior to the federal bankruptcy proceeding, the Company was involved in litigation in which a judgment was awarded against the Company requiring it to clean up and abandon two idle wells or pay $300,000 in damages to the plaintiff. The Company filed an appeal with respect to the damages awarded the plaintiff. Upon the filing by the Company for relief under the federal bankruptcy laws, the plaintiff filed a claim for $352,000, which included the court awarded damages. The Plan provided for $352,000 as an unsecured claim to be satisfied by the pro rata distributions of the Company’s common stock as described in Note 7.

Contingent Payments

             The Plan provides for payment of up to $195,000 on a pro rata basis to the unsecured creditors. The payment of this amount is to be made quarterly over 12 quarters or less commencing 90 days after the effective date of the Plan. The amounts to be paid are essentially the greater of 30% of the Company’s quarterly net income as defined in the Plan or $12,000. As a result, the Company’s obligation to make payments in excess of $12,000 per quarter is contingent upon the Company’s quarterly net income exceeding $40,000.

Concentration of Credit Risk

             Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high quality financial institutions. Exposure to losses on accounts receivable is principally dependent on the individual customer’s financial condition, as credit sales are not collateralized. The Company monitors its exposure to credit loss and reserves those accounts receivable that it deems to be uncollectible. The Company had one significant customer for its oil and gas production in 1998 that accounted for approximately 81% of gross oil and gas sales.

Cash in Excess of Federal Deposit Insurance Corporation Insured Limits

             The Company maintains its cash in bank depository accounts, which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000. At December 31, 1999, the Company had approximately $325,775 in excess of FDIC insured limits. The Company has not experienced any losses in such accounts.

Risks of the Industry in Which the Company Operates

             The Company participates in an industry that is characterized by competitive pressure, changes in the prices of oil and gas on a world-wide basis, federal, state, and local regulations governing production and development of its oil and gas reserves and compliance with various environmental laws and regulations. The Company’s results of operations are affected by a wide variety of factors, including world events, general economic conditions, changes in average selling prices over the productive life of oil and gas reserves, the timing of production from new and

F-17

existing proved developed and undeveloped reserves by the Company, its competitors, and others, the ability to produce sufficient quantities of oil and gas reserves in a timely manner, and the timely implementation of new and alternative reserve recovery process technologies. Based on the factors noted herein, the Company may experience substantial period-to-period fluctuations in future operating results.

             The Company does not have any commitments for future minimum lease payments at December 31, 1999. Rental expense recorded for the years ended December 31, 1999 and 1998 was $6,667 and $31,207, respectively.

11.      Disclosures about Fair Values of Financial Instruments

             The Company’s financial instruments are cash and cash equivalents, accounts receivable, notes receivable, accounts payable, and notes payable. The recorded values of cash and cash equivalents, accounts receivable, notes receivable, accounts payable, and notes payable approximate their fair values based on their short-term nature. The recorded values of notes receivable and notes payable approximate their fair values, as interest approximates market value.

12.      Farm-Out of Vaca Tar Sands Property

             In December 1996, the Company entered into an agreement with Saba Petroleum, Inc. (“Saba”) to farm-out two-thirds (2/3) of the Company’s rights and interests in the Vaca Tar Sands property in exchange for Saba to expend a minimum of $10,000,000 in operating and developing the property over a two-year period from the date of the agreement. Saba had the right to receive all revenues from the properties until its costs were recouped. Subsequent thereto, the Company was to participate as to its one-third (1/3) interest in the property and co-operate the property with Saba. Ownership interest at that time in the recorded net revenue from the properties was to be two-thirds (2/3) and one-third (1/3) for Saba and the Company, respectively.

             On November 1, 1997, the contract agreement with Saba was renegotiated and modified so that the Company’s interest would increase from one-third (1/3) to two-thirds (2/3) as Saba did not make the required operating and development expenditures. The modification required Saba to pay for one-half (1/2) of the operating and development costs until they expend $5,000,000. At that point, Saba will have earned a one-third (1/3) interest and the Company will retain a two-thirds (2/3) interest in the property and these two parties will share in the costs and revenues based on their respective interests. Assignments for the changes in the net revenue interests based on this modification of the agreement have been executed and have been recorded. Development of this property’s oil and gas reserves has not commenced. This agreement was assumed as an executory contract under the Plan as described in Note 7.

13.      Related Party Transactions

Capitan Resources, Inc.

             The Company had certain agreements with Capitan to sell gas produced from wells owned by the Company and to offer waste water disposal services on sites owned by the Company. A former officer and major shareholder of the Company is also the principal officer and shareholder of Capitan. Under the agreements, the Company was to receive 70% of Capitan’s net revenues from gas sales and 75% of Capitan’s net revenues from waste water disposal services.

             The account receivable due from Capitan for the years ended December 31, 1999 and 1998 is as follows:

	For the Years Ended December 31,
	1999			1998
Balance at beginning of year	$	1,056,503		$	713,545
Company’s portion of Capitan’s net revenues		3,800			475,442
Other advances to Capitan		—			285,295
Less: payments received from Capitan		(141,600	)		(417,779	)
Write off of receivable due to settlement (see Note 7)		(918,703	)		—
		—			1,056,503
Less: allowance for doubtful accounts		—			(500,000	)
Balance at end of year		—		$	556,503

F-18

             As of December 31, 1997, Capitan did not have sufficient liquidity to pay the entire amounts due the Company in the foreseeable future. Although the Company’s management believed that the fair market value of Capitan’s net assets, which consisted primarily of Capitan’s revenue interests in the Company’s properties, exceeded amounts owed to the Company, the Company recorded a valuation allowance of $500,000 during the year ended December 31, 1997, to reduce the carrying value of the accounts receivable due from Capitan. In November 1998, when the Company sought relief under the federal bankruptcy laws, it also filed various claims against Capitan, the former officer and major shareholder of the Company and others. Subsequently, the Plan settled these controversies and the Company recognized a settlement loss of $418,703, which is included in the $648,248 Reorganization Settlement Loss recorded in the year ended December 31, 1999.

Other

             At December 31, 1998, liabilities subject to compromise included amounts due relatives of a former officer and major shareholder totaling approximately $91,000.

             The Company’s former officer and major shareholder previously held a net profit interest of 25% in the LA/Bandini and Vaca Tar Sands oil and gas properties. In 1994, the Company acquired the 25% net profit interest in the LA/Bandini property and 20% of the net profit interest in the Vaca Tar Sands property from the former officer and major shareholder. In exchange for these interests, the Company issued 1,148,054 shares of common stock valued at $103,421, which was the approximate cost of the properties to the former officer and major shareholder. At the date of the acquisition of the net profit interest in 1994, the former officer and major shareholder owed the Company $31,516, which amount was forgiven as part of the purchase consideration.

14.      Loss Per Share

             Basic and diluted loss per common share have been computed by dividing the loss available to common shareholders by the weighted-average number of common shares for the period.

             The computations of basic and diluted loss per common share are as follows:

	For the Years Ended December 31,
	1999			1998
Numerator:
Loss before extraordinary item	$	(1,184,529	)	$	(6,309,539	)
Extraordinary item		155,767			—
Net loss and the numerator for basic and diluted loss per common share	$	(1,028,762	)	$	(6,309,539	)
Denominator:
Weighted-average shares basic and diluted		9,034,899			8,514,084
Basic and diluted loss per common share:
Loss before extraordinary item	$	(0.13	)	$	(0.74	)
Extraordinary gain from debt discharged in bankruptcy		0.02			—
Net loss per common share	$	(0.11	)	$	(0.74	)

             The potentially dilutive securities that were outstanding during 1999 and 1998 were not included in the computation of diluted loss per share, because to do so would have been antidilutive for the periods presented.

	For the Years Ended December 31,
	1999		1998
Shares of common stock issuable under:
Warrants		856,821		1,449,352
Total		856,821		1,449,352

F-19

15.      Stock and Warrant Transactions

Shares Issued as Additional Consideration

             In February 1998, the Company issued 180,000 shares of its common stock as additional consideration for the decline in the price of its stock to the purchasers of units of the Company’s 1997 private placement offering. The issuance of these shares has been reflected as an increase in the number of shares with no additional value received.

Shares Issued for Services

             During the year ended December 31, 1998, the Company issued a total of 46,672 shares of its common stock for services. Accordingly, $17,890 was recorded as an expense based on the quoted market price of the common stock on the date of issuance.

Shares Issued for Employee Compensation

             In February and April 1998, the Company issued a total of 35,700 shares of its common stock as compensation to employees. Accordingly, $26,174 was recorded as compensation expense based on the quoted market price of the common stock on the date of issuance.

Shares Issued for Commissions

             In March and May 1998, the Company issued a total of 48,200 shares of its common stock for commissions in connection with obtaining debt financing in prior years. Accordingly, $19,700 of debt issue costs was recorded in interest expense and is based on the quoted market price of the common stock on the date of issuance.

Shares Issued for Cash

             During the year ended December 31, 1998, the Company issued a total of 133,000 shares of its common stock for cash consideration of $116,500.

Shares Issued in Exchange for Royalties

             In June 1998, the Company issued 100,000 shares of its common stock in consideration of the assignment to the Company of an overriding royalty interest and all other interests in the Vaca Tar Sands waste water disposal wells, cancellation of Capitan’s promissory note, a related party and the related pledge agreement between Capitan and the seller, and cancellation of the guaranty of the note payable by the Company’s former officer and major shareholder and the former Secretary/Treasurer, who is the wife of the former officer and major shareholder. The value of the overriding royalty interest was $28,000 based on the quoted market value of the common stock on the date of issuance. This was recorded as an addition in the amount due from Capitan and included as part of the settlement with Capitan provided for under the Plan.

Shares Issued in Connection with a Private Placement

             In June 1998, the Company issued 347,991units, each unit consisting of one share of common stock and one warrant to purchase one share of common stock that is exercisable for three years at $2.50 per share, as additional value in lieu of the registration of shares issued in connection with a private placement of the Company’s equity securities that commenced in December 1996. The value of the shares issued was $85,258, which was based on the quoted market price of the Company’s common stock on the date the shares were issued. The fair value of the warrants issued of $52,050 was determined using the Black-Scholes Option Pricing Model. The issuance of these shares and warrants has been treated as a cost of the original private placement.

Placement Agent Warrant

             In July 1998, the Company issued a warrant to a placement agent of the Company’s 1996 and 1997 private placements of units of its common stock and warrants. The placement agent warrant is exercisable for a period of five years into 52,000 units at $2.65 per unit. Each unit consists of one share of common stock and a warrant to purchase one share of common stock at a purchase price of $2.625 with that warrant concurrently exercisable for the

F-20

same five year period as the July 1998 granting warrant. The issuance of this warrant has been treated as a cost of the original private placement.

Common Stock Reserved for Future Issuance

             At December 31, 1999 and 1998, the Company has reserved the following numbers of shares of its authorized but unissued common stock for possible future issuance in connection with the following:

	1999		1998
Exercise of stock warrants		856,821		1,449,352
Total		856,821		1,449,352

Warrants Activity for the Period and Summary of Outstanding Warrants

             A summary of warrant activity for the years ending December 31, 1999 and 1998 is as follows:

	Number of Warrants			Weighted Average Exercise Price		Warrants Exercisable		Weighted Average Exercise Price
Outstanding, December 31, 1997		997,361		$	3.00		997,361	$	3.00
Granted		451,991		$	2.52
Exercised		—
Canceled		(592,531	)	$	3.00
Repriced		592,531		$	2.50
Outstanding, December 31, 1998		1,449,352		$	2.65		1,449,352	$	2.65
Granted		—
Exercised		—
Expired		(592,531	)	$	2.50
Outstanding, December 31, 1999		856,821		$	2.52		856,821	$	2.52

             At December 31, 1999, warrants had exercise prices ranging from $2.50 to $2.63 and a weighted average remaining contractual life of 1.16 years.

16.      Oil and Gas Operations (Unaudited)

             At December 31, 1999, the Company had all of its interests in oil and gas properties located in California.

Costs Incurred in Oil and Gas Producing Activities

             Costs incurred in oil and gas producing activities were as follows:

	For the Years Ended December 31,
	1999		1998
	(unaudited)
Property acquisition costs:
Proved properties		—		—
Exploration costs		—	$	218,122
Development costs		—		30,740
Total costs		—	$	248,862

Estimated Quantities of Proved Oil and Gas Reserves

             Reserve information presented herein is based upon reports prepared by the Company’s independent petroleum engineers. Reserve estimates are inherently imprecise and estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available.

F-21

             Proved oil and gas reserves are the estimated quantities of crude oil, natural gas and natural gas liquids, which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.

             Proved developed oil and gas reserves are those expected to be recovered through existing wells with existing equipment and operating methods.

             Net quantities of crude oil and natural gas for the Company as of the beginning and the end of the years ended December 31, 1999 and 1998, as well as the changes in proved reserves during such years, are set forth in the following tables:

	For the Year Ended December 31, 1999
	(unaudited)
	Oil Bbls			Gas MCF
Proved developed reserves, net:
January 1, 1999		—			—
Revisions of previous estimates		827,000			464,000
Purchase of reserves in place		—			—
Production		—			—
Sale of reserves in place		—			—
December 31, 1999		827,000			464,000
Proved undeveloped reserves, net:
January 1, 1999		—			—
Revisions of previous estimates		25,513,000			—
Purchase of reserves in place		—			—
Sale of reserves in place		—			—
December 31, 1999		25,513,000			—
	For the Year Ended December 31, 1998
	(unaudited)
	Oil Bbls			Gas MCF
Proved developed reserves, net:
January 1, 1998		2,918,000			5,738,000
Revisions of previous estimates		(968,000	)		(863,000	)
Purchase of reserves in place		—			—
Production		(36,000	)		(17,000	)
Sale of reserves in place		(1,914,000	)		(4,858,000	)
December 31, 1998		—			—
Proved undeveloped reserves, net:
January 1, 1998		26,761,000			864,000
Revisions of previous estimates		(26,091,000	)		—
Purchase of reserves in place		—			—
Sale of reserves in place		(670,000	)		(864,000	)
December 31, 1998		—			—

F-22

The decrease in reserves during 1998 is primarily due to a decline in oil prices and the sale of reserves. The increase in reserves at December 31, 1999 is primarily the result of an increase in oil prices.

             With respect to the proved undeveloped reserves, which consists principally of the Vaca Tar Sands property, the Company has permits for the drilling of 120 wells on two tracts of the Vaca Tar Sand Unit, and for sufficient wells to develop the remaining tracts. Because of the approximately $28,400,000 capital expenditure required to develop the Vaca Tar Sands property fully, management decided to obtain a partner who could provide the funds required to at least commence development. In December 1996, the Company entered into a farm-out agreement with Saba to provide at least $10,000,000 for the operation and development of the property, for which Saba would

F-23

earn a two-thirds interest in the property. The development method envisioned by the Company provided for the drilling of one or more horizontal wells extending as much as 2,600 feet horizontally. Each well was to be twinned by a parallel borehole above it into which steam will be injected continuously. The heated, thinned oil was to flow from the lower borehole. Alternatively, one horizontal well would be drilled and used for both steam injection and oil production. In 1997, the farm-out agreement was modified with Saba so that the Company’s interest increased from one-third to two-thirds. The modification requires Saba to pay for one-half of the operating and development costs until they expend $5,000,000. At that point, Saba will have earned a one-third interest and the Company will retain a two-thirds interest in the property and these two parties will share in the costs and revenues based on their respective interests.

             The cost allocated to the Vaca Tar Sands undeveloped reserves was insignificant, and the estimated volume of reserves allocated to the property has been excluded from the calculation of the Company’s depletion expense in the years ended December 31, 1999 and 1998. The costs related to the Vaca Tar Sands reserves, including future development costs, will be included in the Company’s calculations of depletion expense when production of those reserves commence.

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves

             The following tables set forth the computation of the standardized measure of discounted future net cash flows relating to the Company’s proved reserves at December 31, 1999 and 1998, respectively. The standardized measure is the estimated future cash inflows from proved reserves less estimated future production and development costs and estimated future income taxes. Future cash inflows represent expected revenues from the production of proved reserves based on prices and any fixed determinable future escalation provided by contractual arrangements in existence at fiscal year-end.

             Escalation based on inflation, federal regulatory changes and supply and demand is not considered. Estimated future production and development costs related to future production of reserves are based on historical costs.

             Such costs include, but are not limited to, drilling development wells and installation of production facilities. Inflation and other anticipatory costs are not considered until the actual cost change takes effect. Estimated future income tax expenses are computed using the appropriate year-end statutory tax rates. Consideration is given to the effects of permanent differences, tax credits and allowances. A discount rate of 10% is applied to the annual future net cash flows after income taxes.

             The methodology and assumptions used in calculating the standardized measure are those required by FASB Statement No. 69. It is not intended to be representative of the fair market value of proved reserves. The valuations of revenues and costs do not necessarily reflect the amounts to be received or expended by the Company. In addition to the valuations used, numerous other factors are considered in evaluating known and prospective oil and gas reserves.

F-24

             The standardized measure of discounted future net cash flows relating to proved developed and undeveloped oil and gas reserves at December 31, 1999 and 1998 are summarized below:

	For the Years Ended December 31,
	1999			1998
Future cash inflows	$	577,474,000			—
Future production and development costs		(332,855,000	)		—
Future income tax expenses		(97,848,000	)		—
Future net cash flows		146,771,000			—
10% annual discount for estimated timing of cash flows		(65,535,000	)		—
Standardized measure of discounted future net cash flows	$	81,236,000			—

             For the calculations in the preceding table, estimated future cash inflows from estimated future production of proved reserves were computed using average year-end oil and gas prices. The average oil price, primarily based on posted prices, was $23.73 per barrel and $7.00 per barrel at December 31, 1999 and 1998, respectively, and the average natural gas price, a combination of spot gas prices and contract prices, was $0.62 per thousand cubic feet and $1.94 per thousand cubic feet at December 31, 1999 and 1998, respectively.

F-25

Changes in Standardized Measure of Discounted Future Net Cash Flows

             The changes in standardized measure for discounted future net cash flows relating to proved reserves for each of the two years ended December 31, 1999 and 1998 is set forth below:

	For the Years Ended December 31,
	1999			1998
Sales of oil and gas produced, net of production costs		—		$	(45,000	)
Net changes in sales prices and production costs related to future production	$	244,619,000			(2,240,000	)
Changes in estimated future development costs		—			—
Development costs incurred during the period, which were previously estimated		—			31,000
Revisions of previous quantity estimates		—			—
Sale of reserves in place		—			(14,158,000	)
Accretion of discount		(65,535,000	)		573,000
Net change in income taxes		(97,848,000	)		635,000
Other, principally changes in timing of estimated production		—			—
Net (decrease) increase		81,236,000			(15,204,000	)
Beginning of year		—			15,204,000
End of year	$	81,236,000			—

17.      Subsequent Events

Settlements

             Subsequent to year end, all of the unresolved disputed bankruptcy claims have been settled. These settlements pertained primarily to two of the leases associated with the Company’s oil and gas production and to two waste water disposal agreements. In general, these settlements resulted in obligations for payments by the Company, which were accrued at year end. On one oil and gas lease, the royalty was increased from 12.5% to 16.67%, and was increased by 1.04% on a second lease. The settlements provided for a decrease in disposal royalties on solid wastes from 12.5% to 10%. The Company agreed to pay minimum royalties totaling approximately $36,000 annually. Royalties paid during the course of operations will be credited against the minimum payments. One of these settlements also resulted in the termination of the Company’s oil and gas lease rights representing approximately 8.87% of the Vaca Tar Sands property oil and gas reserves.

Stock Issuances

             Subsequent to year end, the Company sold a total of 1,550,600 shares of its common stock at $.30 per share for additional working capital and issued 402,967 common shares in satisfaction of amounts due for federal bankruptcy proceeding professional services totaling $169,246 based on the fair value of the professional services provided.

Stock Options

             In October 2000, the Company adopted a stock option plan and granted its president options to purchase 4,000,000 shares of the Company’s common stock at an exercise price of $.56 per share. The options are exercisable at anytime and expire in September 2005.

F-26

EX-2.4

EXHIBIT 2.4

MARTIN J. BRILL (State Bar No. 53220)
ROBINSON, DIAMANT & BRILL
A Professional Corporation
1888 Century Park East, Suite 1500
Los Angeles, California 90067
Telephone: (310) 277-7400
Telecopier: (310) 277-758 4
Attorneys for Debtor and Debtor in Possession

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

SANTA BARBARA DIVISION

In re	Bk. No. ND 98-15477-RR
GEO PETROLEUM, INC.,	In a Case Under Chapter 11 of the Bankruptcy Code (11 U.S.C. § 1101 et seq.)
Debtor.	DISCLOSURE STATEMENT DESCRIBING DEBTOR’S THIRD AMENDED PLAN OF REORGANIZATION

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES iii

I.	INTRODUCTION	2
	A. Purpose of This Document	2
	B. Definitions	3
	C. Deadlines for Voting and Objecting; Date of Plan Confirmation Hearing	3
	1. Time and Place of the Confirmation Hearing	3
	2. Deadline For Voting For or Against the Plan	3
	3. Deadline For Objecting to the Confirmation of the Plan	3
	4. Identity of Person to Contact for More Information Regarding the Plan	3
	D. Disclaimer	4
II.	BACKGROUND	4
	A. Description and History of the Debtor’s Business	4
	B. Principals/Affiliates of Debtor’s Business	4
	C. Management of the Debtor Before and After the Bankruptcy	4
	D. Events Leading to Chapter 11 Filing	4
	E. Sale of East L.A./Bandini to Bentley-Simonson, Inc.	5
	F. Significant Events During the Bankruptcy	5
	1. Bankruptcy Proceedings	5
	2. Legal Proceedings	8
	3. Actual and Projected Recovery of Preferential or Fraudulent Transfers	8
	4. Procedures Implemented to Resolve Financial Problems	9
	5. Current and Historical Financial Conditions	9
III.	SUMMARY OF THE PLAN OF REORGANIZATION	10
	A. What Creditors and Interest Holders Will Receive Under the Proposed Plan	10
	B. Unclassified Claims	10
	1. Administrative Expenses	10
	2. Priority Tax Claims	11
	C. Classified Claims and Interests	11
	1. Classes of Priority Unsecured Claims	11
	2. Classes of Secured Claims	12
	3. Classes of General Unsecured Claims	13
	4. Class(es) of Interest Holders	14
	D. Means of Effectuating the Plan	15
	1. Funding for the Plan	15
	2. Compromise of Controversies	15
	3. Revesting of Property	16
	4. Disbursing Agent	16
	5. Post-Confirmation Management	16
	6. Exemption From Registration Under Section 1145 Of The Code	16
	7. Post-Confirmation U.S. Trustee Fees	17
	E. Other Provisions of the Plan	17
	1. Disputed Claims	17
	2. Amendment to Articles of Incorporation	17
	3. Unclaimed Property	17
	4. Treatment of Executory Contracts and Unexpired Leases	17
	a. Assumption	17
	b. Cure Payments	18
	c. Rejection	18
	5. Changes in Rates Subject to Regulatory Commission Approval	19
	6. Jurisdiction of the Bankruptcy Court	19

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		Page
	F. Tax Consequences of Plan	20
	1. Tax Consequences To Holders Of Claims	21
	2. Tax Consequences To Holder Of Interests	22
	3. Backup Withholding	22
	G. Status and Resale of Securities to be Issued Pursuant to Plan	22
IV.	CONFIRMATION REQUIREMENTS AND PROCEDURES	23
	A. Who May Vote or Object	23
	1. Who May Object to Confirmation of the Plan	23
	2. Who May Vote to Accept/Reject the Plan	23
	3. Who Is Not Entitled to Vote	24
	4. Who Can Vote in More Than One Class	25
	5. Votes Necessary to Confirm the Plan	25
	6. Votes Necessary for a Class to Accept the Plan	25
	7. Treatment of Non-Accepting Classes	25
	8. Request for Confirmation Despite Non-Acceptance by Impaired Class (es)	25
	B. Liquidation Analysis	26
	C. Feasibility	23
V.	STATEMENT RE TD & ASSOCIATES	30
	A. Management Of The Company	30
VI.	EFFECT OF CONFIRMATION OF PLAN	31
	A. Discharge	31
	B. Revesting of Property in the Debtor	31
	C. Modification of Plan	31
	D. Post-Confirmation Status Report	31
	E. Post-Confirmation Conversion/Dismissal	31
	F. Final Decree	32
VII.	SUPPORTING DECLARATION OF GERALD T. RAYDON	33

EXHIBIT “1”— PRO FORMA CASH FLOWS	34
EXHIBIT “2” — STOCK PURCHASE AND SALE AGREEMENT	43
EXHIBIT “3” — SCHEDULE OF EXECUTORY CONTRACTS AND  UNEXPIRED LEASES TO BE ASSUMED	66
EXHIBIT “4” — SCHEDULE OF EXECUTORY CONTRACTS AND  UNEXPIRED LEASES TO BE REJECTED	68

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TABLE OF AUTHORITIES

STATUTES

Page

11 U.S.C. section 101	2
11 U.S.C. section 1123 (a) (6)	17
11 U.S.C. section 1129 (a) (8)	25
11 U.S.C. section 1129 (b)	25
11 U.S.C. section 365	18
11 U.S.C. section 365 (b) (1)	18
11 U.S.C. section 507 (a) (1)	10, 13,24
11 U.S.C. section 507 (a) (2)	24
11 U.S.C. section 507 (a) (3)	11, 12
11 U.S.C. section 507 (a) (4)	12
11 U.S.C. section 507 (a) (5)	12
11 U.S.C. section 507 (a) (6)	12
11 U.S.C. section 507 (a) (7)	12, 24
11 U.S.C. section 507 (a) (8)	11, 24

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I. INTRODUCTION

        Geo Petroleum, Inc., a California corporation (hereinafter the “Debtor”), is the Debtor in a Chapter 11 bankruptcy case. On November 16, 1998, the Debtor commenced a bankruptcy case by filing a voluntary Chapter 11 petition under the United States Bankruptcy Code (“Code”), 11 U.S.C . § 101 et seq. Chapter 11 allows the Debtor, and under some circumstances, Creditors and other parties in interest, to propose a plan of reorganization (“Plan”). The Plan may provide for the Debtor to reorganize by continuing to operate, to liquidate by selling assets of the Estate, or a combination of both. The Debtor is the party proposing the Plan sent to you in the same envelope as this document. THE DOCUMENT YOU ARE READING IS THE DISCLOSURE STATEMENT FOR THE ENCLOSED PLAN.

        This is a reorganizing Plan. In other words, the Debtor seeks to accomplish payments under the Plan by making payments from an infusion of equity capital and from its continued operations. The Effective Date of the proposed Plan is defined in the Plan as the eleventh day after Confirmation, which the Debtor estimates to be on or about December 15, 1999.

A.  Purpose of This Document

        This Disclosure Statement summarizes what is in the Plan, and tells you certain information relating to the Plan and the process The Court follows in determining whether or not to confirm the Plan.

        READ THIS DISCLOSURE STATEMENT CAREFULLY IF YOU WANT TO KNOW ABOUT:

        (1)  WHO CAN VOTE OR OBJECT,

(2)  WHAT THE TREATMENT OF YOUR CLAIM IS, (i.e., what your claim will receive if the Plan is confirmed) AND HOW THIS TREATMENT COMPARES TO WHAT YOUR CLAIM WOULD RECEIVE IN LIQUIDATION,

(3)  THE HISTORY OF THE DEBTOR AND SIGNIFICANT EVENTS DURING THE BANKRUPTCY,

(4)  WHAT THINGS THE COURT WILL LOOK AT TO DECIDE WHETHER OR NOT TO CONFIRM THE PLAN,

        (5)  WHAT IS THE EFFECT OF CONFIRMATION, AND

        (6)  WHETHER THIS PLAN IS FEASIBLE.

        This Disclosure Statement cannot tell you everything about your rights. You should consider consulting your own lawyer to obtain more specific advice on how this Plan will affect you and what is the best course of action for you.

        Be sure to read the Plan as well as the Disclosure Statement. If there are any inconsistencies between the Plan and the Disclosure Statement, the Plan provisions will govern.

        The Code requires a Disclosure Statement to contain “adequate information” concerning the Plan. The Bankruptcy Court (“Court”) has approved this document as an adequate Disclosure Statement, containing enough information to enable parties affected by the Plan to make an informed judgment about the Plan. Any party can now solicit votes for or against the Plan.

B.   Definitions

        All capitalized terms used and not otherwise defined herein have the meanings assigned to them in Article I of the Plan.

C.   Deadlines for Voting and Objecting; Date of Plan Confirmation Hearing

        THE COURT HAS NOT YET CONFIRMED THE PLAN DESCRIBED IN THIS DISCLOSURE STATEMENT. IN OTHER WORDS, THE TERMS OF THE PLAN ARE NOT YET BINDING ON ANYONE. HOWEVER, IF THE COURT LATER CONFIRMS THE PLAN, THEN THE PLAN WILL BE BINDING ON ALL CREDITORS AND INTEREST HOLDERS IN THIS CASE.

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        1.   Time and Place of the Confirmation Hearing

        The hearing where the Court will determine whether or not to confirm the Plan will take place on December 15, 1999, at 11:00 a.m., in Courtroom 201, 1415 State Street, Santa Barbara, California 93101.

        2.   Deadline For Voting For or Against the Plan

        If you are entitled to vote, it is in your best interest to timely vote on the enclosed ballot and return the ballot in the enclosed envelope to Martin J. Brill, Esq., Robinson, Diamant & Brill, a Professional Corporation, 1888 Century Park East, Suite 1500, Los Angeles, CA 90067.

        Your ballot must be received by December 3, 1999 or it will not be counted.

        3.  Deadline For Objecting to the Confirmation of the Plan

        Objections to the Confirmation of the Plan must be filed with the Court and served upon Martin J. Brill, counsel for the Debtor, by December 3, 1999, at 5:00 p.m.

        4.   Identity of Person to Contact for More Information Regarding the Plan

        Any interested party desiring further information about the Plan should contact counsel for the Debtor, Martin J. Brill, Esq. of Robinson, Diamant & Brill, a Professional Corporation, 1888 Century Park East, Suite 1500, Los Angeles, CA 90067, at (310) 277-7400.

D.  Disclaimer

        The financial data relied upon in formulating the Plan is based on the Debtor’s books and records as well as financial statements and projections prepared by the Debtor and Capco. The Debtor represents that everything stated in the Disclosure Statement is true to the Debtor’s best knowledge. The Court has not yet determined whether or not the Plan is confirmable and makes no recommendation as to whether or not you should support or oppose the Plan.

II. BACKGROUND

A.  Description and History of the Debtor’s Business

        The Debtor is a California corporation which was founded in 1986. The stock of the company is publicly held by approximately 390 entities and individuals. The Debtor is an oil and gas production company. The Debtor engages in the development, production and management of oil and gas properties located in California. A well on one of the Debtor’s oil properties is used for waste disposal services. The waste disposal operations are conducted by a related party, Capitan Resources, Inc. thereafter “Capitan”). The Debtor has a 75% revenue interest in such operations, with Capitan retaining a 25% revenue interest.

B.  Principals/Affiliates of Debtor’s Business

        Gerald T. and Alyda L. Raydon own 46% of the stock of the Debtor and are Directors of the company, along with George William Corcoran. Mr. Raydon is the President and Chief Executive Officer of the Debtor. The Raydons own 100% of the stock of Capitan. As mentioned above, Capitan conducts the waste disposal operations for the Debtor.

C.  Management of the Debtor Before and After the Bankruptcy

        Gerald T. Raydon has served as the Chief Executive Officer of the Debtor since its incorporation in 1986. Alyda L. Raydon served as the Debtor’s Secretary/Treasurer prior to the chapter 11 case. She resigned as Secretary/Treasurer prior to the Petition Date. Larry R. Burroughs served as President of the Debtor until November 1, 1998. Mr. Raydon has served as President of the Debtor since that date. Eric Raydon, the son of the Raydons, served as Vice President of the Debtor until resignation prior to the Chapter 11 filing.

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D.  Events Leading to Chapter 11 Filing

        Here is a brief summary of the circumstances that led to the filing of this Chapter 11 case:

        For the six months ended June 30, 1998, on revenues of $413,265, the Debtor lost $231,070. This is compared to a loss of $233,087 for the six months ended June 30, 1997, based on $708,072 in revenues. In June 1998, the Debtor decided to shut in its oil and gas production at all of its property locations except for the Vaca Tar Sand Property in Oxnard, California. This decision was based primarily on the fact that the average oil prices decreased to $13.44 per barrel in the 1998 period from approximately $22.05 per barrel in the 1997 period. As a result of the shutdown of certain of its oil and gas properties, two Creditors obtained judgments against the Debtor relating to the cleanup and abandonment of wells. As a result of these two judgments for in excess of $425,000, plus the notice of default by its major lender, City National Bank, on its unsecured indebtedness, the Debtor was forced to file this Chapter 11 case.

E.   Sale of East L.A./Bandini to Bentley-Simonson, Inc.

        In May, 1998, negotiations commenced between the Debtor and Bentley-Simonson, Inc. (“BSI”) for the sale of all of the Debtor’s oil and gas producing properties and related personal property known as the East Los Angeles/Bandini Oil Fields. On July 31, 1998, the Debtor and BSI entered into a Purchase And Sale Agreement (“PSA”) concerning the sale of the East L.A./Bandini assets to BSI. The PSA provided for the payment by BSI of $141,000 in cash in installments through February 1999 and a $75,000 note requiring installment payments tied to performance of the assets acquired by BSI commencing December 1, 1999. BSI also assumed the Debtor’s obligations and compliance requirements relating to the East L.A./Bandini properties, such as permits, royalties, real property taxes, etc., totaling between approximately $643,600 and $973,600. The sale closed on or about October 29, 1998. By Assignment and Assumption of Purchase and Sale Agreement, BSI assigned its rights and obligations under the PSA to Commerce Natural Resources, LLC (“Commerce”) while remaining bound by the contract to the Debtor. At the time of closing, by letter agreement dated October 29, 1998 the Debtor and Commerce agreed to close the sale of the assets with certain deeds of trust which had been recorded against the East L.A./Bandini properties by Mr. Gerald Raydon, Mr. Eric Raydon and Ms. Ruth Cartwright to remain on title to be reconveyed upon receipt by the Debtor of the balance of the purchase price to be paid by BSI/Commerce. As of the date hereof, BSI/Commerce has made all installment payments due except for an installment payment of $40,000 due February 6, 1999. BSI/Commerce has refused to pay the $40,000 payment due in February, 1999 on account of alleged offsets claimed under the PSA. The Debtor disputes that BSI/Commerce is entitled to any offsets. The Debtor does not believe that the assumption by BSI of cert ain debts of the Debtor relating to the East L.A./Bandini properties are preferential transfers avoidable by the Estate since those obligations would have had to be assumed by the Debtor if sold during the bankruptcy case.

F.  Significant Events During the Bankruptcy

        1.  Bankruptcy Proceedings

        The following is a chronological list of significant events which have occurred during this Case:

              (a)  The Debtor filed a Voluntary Petition under Chapter 11 of Title 11 of the United States Code on November 16, 1998.

              (b)  Subsequent to the Petition Date, the Northrop Group paid off City National Bank on its guaranty of the Debtor’s indebtedness to City National Bank and was subrogated to the rights of City National Bank against the Debtor. Since the guaranty of the Northrop Group was secured by a one-third interest in the Vaca Tar Sand Unit in Oxnard, California, the Northrop Group became a secured Creditor of the Debtor for its indebtedness of in excess of $650,000.

              (c)  On December 17, 1998, the Bankruptcy Court approved the employment of Robinson, Diamant & Brill as counsel for the Debtor.

              (d)  On January 6, 1999, the Debtor attended an Initial Chapter 11 Status Conference Hearing before the Bankruptcy Court.

              (e)  On January 15, 1999, the Debtor filed its Motion for: (1) Extension of Time to Assume or Reject Executory Leases of Non-Residential Real Property; and (2) Order Authorizing Debtor to Limit Notice of

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Motion to Lessors. On March 11, 1999, the Bankruptcy Court entered its order on the Debtor’s motion for extension of time to assume or reject executory leases of nonresidential real property. The Court extended the deadline for the Debtor to move to assume or reject its executory leases of nonresidential real property to and including June 14, 1999. The Court denied the Debtor’s request to limit notice and required that it serve notice of its Order on all oil and gas property lessors who were not previously served with the motion. By notice of ruling dated April 1, 1999, the Debtor served upon over 7,000 lessors notice of the Court’s ruling concerning its request to extend the time within which to assume or reject its executory leases. No objection to the motion was received by the Debtor.

              (f)  On February 24, 1999, the Debtor filed a motion for order establishing a bar date for filing proofs of claim. By order entered March 29, 1999, the Bankruptcy Court established June 30, 1999 as the last date to file proofs of claim in this Case.

              (g)  On March 10, 1999, the Office of the United States Trustee appointed an Official Committee of Creditors Holding Unsecured Claims (the “Committee”). The Committee is composed of the following Creditors:

              Mark Degenhart of Torrance Petroleum, Inc./Kelt Energy, Inc.

              Henry Himmelfarb on behalf of Russell Family Trust

              William R. Schnee of Oil Field Tracking & Transportation

              John R. Reed, III of Victory Tankers, Inc.

              Raja M. Perera on behalf of Jay Woodford Hansen

              Rodney C. Hill

              (h)  By Order entered March 10, 1999, the employment of Seror & Levine as attorneys for the Committee was approved.

              (i)   On or about March 17, 1999, the Debtor filed its Motion for Order extending exclusivity periods wherein the Debtor sought to extend the exclusive right to file a Plan or Reorganization up to and including July 12, 1999, and the right to solicit acceptances of its plan up to and including September 10, 1999. By Opposition filed April 1, 1999, the Committee objected to the extension of the exclusivity periods. By stipulation filed with the Bankruptcy Court on April 30, 1999, the Committee and the Debtor stipulated that the Debtor would have the exclusive time within which to file its plan of reorganization to and including May 31, 1999.

              (j)  By Motion filed on March 17, 1999 for approval of stipulation for relief from the automatic stay, the Debtor and Ford Motor Credit Company stipulated that Ford Motor Credit Company may take possession of and sell a certain 1998 Ford F150 pickup truck which the Debtor is no longer using in its operations. By order entered April 15, 1999, the Bankruptcy Court approved the stipulation with Ford Motor Credit Company.

              (k)  Pursuant to a Motion for Examination Under 2004 filed by the Committee on April 8, 1999, the Bankruptcy Court entered its Order on April 15, 1999 authorizing the examination of the Debtor and requiring the Debtor to produce documents. The examination of the Debtor took place on July 7, 1999.

              (1)  In or about the first of May, 1999, the Division of Oil & Gas for the State of California notified the Debtor that its operation of its waste disposal well must cease until certain repairs are made to that well. As a result, the Debtor was forced to close down the well. As of the date hereof, the well is still not operational. In addition to loss of income resulting from this shutdown, the Debtor will be forced to expend approximately $25,000 - $50,000 for repair of the well. Unless the Debtor is able to borrow the money necessary to repair the well prior to Confirmation, the well will remain nonoperational until after the Effective Date, at which time the corrective action will be taken.

              (m)  On June 14, 1999, the Debtor filed its motion for second extension of time to assume or reject executory leases of nonresidential real property. An objection to the motion was filed by J. Woodford Hansen and a hearing was scheduled for July 21, 1999. At the hearing on July 21, 1999, the Debtor’s motion was granted and the time within which the Debtor has to assume or reject its executory leases was extended to October 14, 1999. The Debtor was also ordered to pay J. Woodford Hansen approximately $2,000 for post-petition royalties which were unpaid. To date, the Debtor has not paid Hanson the $2,000 or an alleged minimum royalty for the second

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quarter in the sum of $4,500. The Debtor intends to seek a further extension of the time to assume or reject executory leases prior to October 14, 1999.

              (n)  On or about July 7, 1999, Ford Motor Credit Company filed a motion to compel the Debtor to assume or reject an unexpired lease for a Ford Explorer. By stipulation entered into between the Debtor and Ford Motor Company, the Debtor stipulated to the rejection of the lease with Ford Motor Credit Company and the return of the Ford Explorer.

              (o)  On September 1, 1999 a hearing was held on the Debtor’s Disclosure Statement Describing Debtor’s First Amended Plan of Reorganization. The hearing was continued to September 14, 1999 at which time the Court approved the disclosure statement. Prior to mailing the approved disclosure statement and other Plan materials to creditors, the Debtor on September 23, 1999, received an offer from T.D. & Associates, Inc. (“TD”) which the Debtor believed to be superior to the offer by Capco Resource Corporation (“Capco”) which was the basis of the Second Amended Plan of Reorganization. The Debtor advised the Committee of the TD offer. The Committee then solicited offers from both TD and Capco. On October 6, 1999, the Committee advised the Debtor that it believed the TD offer was better for creditors and requested the Debtor to substitute TD’s offer in place o f Capco’s to form the basis of the Third Amended Plan of Reorganization. The Third Amended Plan of Reorganization is the result of such negotiations and request. The Committee supports the Third Amended Plan of Reorganization.

        2.  Legal Proceedings

              (a)  On or about July 21, 1999, J. Woodford Hansen, William Lenox and Anne Snodgrass filed a complaint with the Bankruptcy Court against the Debtor wherein those parties are seeking a declaration that the Pooling Agreement, Waste Water Agreement and underlying oil and gas leases have been terminated pre-petition and therefore cannot be assumed by the Debtor. The Debtor disputes Plaintiffs’ contentions and intends to vigorously defend the action. A preliminary hearing was held on September 21, 1999 and the matter was set for pre-trial in March, 2000.

              (b)  On or about August 6, 1999, the Debtor filed its notice of removal of a state court action which was filed on May 5, 1999 in the Los Angeles Superior Court by Lee Roy Shelwick, Eileen Shelwick, Helen Hoylman and R.P. Vossler, through their counsel of record, Henry Himmelfarb naming the Debtor and other parties. The Debtor contends that the filing of the lawsuit violates the automatic stay and subjects Plaintiffs to damages for such alleged violation. Plaintiff’s counsel, Henry Himmelfarb, is the Chairman of the Committee. A status conference is scheduled for December 7, 1999.

              (c)  The Debtor has filed a number of objections to Claims. The Debtor may file additional objections to Claims. If the Debtor is successful in objecting to Claims, the total dollar amount of the general unsecured Creditor pool will be decreased.

        3.  Actual and Projected Recovery of Preferential or Fraudulent Transfers

        The Debtor has not yet analyzed potential fraudulent and preferential transfers. The Debtor does not believe that there are significant fraudulent or preferential transfer actions. Possible preferential transfer actions may exist against Gerald T. Raydon, Eric Raydon and Ruth Cartwright relating to the recording of deeds of trust against property of the Debtor within 90 days of the Petition Date. On September 3, 1998, the Debtor recorded deeds of trust with the Los Angeles County Recorder’s Office in favor of these parties to secure obligations incurred in 1997 and 1998 totaling approximately $280,000.

        In addition, Mr. Gerald Raydon recorded the same deed of trust recorded in Los Angeles County with the Ventura County Recorder’s office. The Plan provides that upon Confirmation these liens will be released against property of the Estate and the liens against non-estate property will be assigned to the Reorganized Debtor. Any remaining proceeds of the sale to BSI/Commerce of the East Los Angeles/Bandini properties will be paid only to the Reorganized Debtor, and will not be subject to the liens of the deeds of trust.

        The Debtor reserves the right to pursue any preferential or fraudulent transfers after Confirmation.

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        4.  Procedures Implemented to Resolve Financial Problems

        To attempt to fix the problems that led to the bankruptcy filing, the Debtor has implemented the following procedures:

        Prior to bankruptcy, the Debtor shut in its oil and gas production at all of its property locations except for the Vaca Tar Sand Property and the waste disposal property located near Oxnard, California. Due to the extremely low price of oil, the Debtor decided to focus its resources on its Vaca Tar Sand Unit and waste disposal projects.

        The Debtor determined that in order to maintain its operations, it needed to attract additional capital. Accordingly, the Debtor sought and eventually found a party interested in making a capital contribution in the Debtor. On or about April 30, 1999, the Debtor entered into an agreement subject to Bankruptcy Court approval, with Capco Resource Corporation, to sell 9,380,000 shares of its capital stock to Capco for the sum of $400,000. It is this transaction which formed the basis of the Second Amended Plan. It was proposed in that Plan that the sum of $225,000 would be used to fund the initial payments required under the Plan. The balance of $175,000 would be working capital used to improve operations of the Debtor. After approval of the Second Amended Disclosure Statement at a hearing held on September 14, 1999, the Debtor received an offer from TD to acquire 4,500,000 shares for $450,000. Thereafter, the Committee solicited offers from both TD and Capco. On. October 6, 1999, the Committee selected the offer of TD as being the better offer for creditors. The Third Amended Plan of Reorganization described herein incorporates the final TD offer. See Section V hereof for a description of TD.

        5.  Current and Historical Financial Conditions

        The Debtor believes that the changes outlined above as well as the infusion of $200,000 in new capital from TD will allow its operations to return to profitability. Projected financial statements for the Reorganized Debtor for the three years after Confirmation are attached hereto as Exhibit “1”. Interested Parties are directed to the Debtor’s Form 10-KSB filings with the SEC for historical financial information which may be obtained over the internet.

III. SUMMARY OF THE PLAN OF REORGANIZATION

A.  What Creditors and Interest Holders Will Receive Under The Proposed Plan

        As required by the Bankruptcy Code, the Plan classifies Claims and Interests in various Classes according to their right to priority. The Plan states whether each Class of Claims or Interests is impaired or unimpaired. The Plan provides the treatment each Class will receive.

B.  Unclassified Claims

        Certain types of Claims are not placed into voting Classes; instead they are unclassified. They are not considered impaired and they do not vote on the Plan because they are automatically entitled to specific treatment provided for them in the Bankruptcy Code. As such, the Debtor has not placed the following Claims in a Class.

        1.  Administrative Expenses

        Administrative expenses are Claims for costs or expenses of administering the Debtor’s Chapter 11 Case which are allowed under Code section 507(a)(1). The Code requires that all Administrative Claims be paid on the Effective Date of the Plan, unless a particular claimant agrees to a different treatment.

        The following chart lists all of the Debtor’s § 507(a)(1) Administrative Claims and their treatment under the Plan:

Name	Amount Owed			Treatment
Robinson, Diamant & Brill    Attorneys for Debtor	$	120,000	(est.)	Paid in full on Effective Date
Seror & Levine    Attorneys for Committee		50,000	(est.)	Paid in full on Effective Date
Clerk’s Office Fees		250	(est.)	Paid in full on Effective Date
Office of the U.S. Trustee Fees		750	(est.)	Paid in full on Effective Date
TOTAL	$	171,000

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        Court Approval of Fees Required:

        The Court must rule on all fees listed in this chart before the fees will be owed. For all fees except Clerk’s Office fees and U.S. Trustee’s fees, the professional in question must file and serve a properly noticed fee application and the Court must rule on the application. Only the amount of fees allowed by the Court will be owed and required to be paid under this Plan. .

        As indicated above, the Debtor will need to pay $171,000 in Administrative Claims on the Effective Date of the Plan unless the claimant has agreed to be paid later or the Court has not yet ruled on the claim. As indicated elsewhere in this Disclosure Statement, Debtor will have $300,000 cash on hand on the Effective Date of the Plan. The source of these funds will be a portion of the TD Cash Payment.

        2.  Priority Tax Claims

        Priority Tax Claims include certain unsecured income, employment and other taxes described by Code Section 507(a)(8). The Code requires that each holder of such a Section 507(a)(8) priority Tax Claim receive the present value of such Claim in deferred Cash payments, over a period not exceeding six years from the date of the assessment of such tax.

        The following chart lists all of the Debtor’s Section 507(a)(8) priority Tax Claims and their treatment under the Plan:

Description	Amount Owed	Treatment
Name = Colusa County Tax Collector Type of tax = Property Taxes Date tax assessed = 1997	$939.00	Paid in full in Cash on Effective Date
Name = Franchise Tax Board Type of tax = Income Taxes Date tax assessed = 1998	$3,678.09	Paid in full in Cash on Effective Date
Name = Gary L. Feramisco, Santa Barbara County Tax Collector Type of tax = Property Taxes Date tax assessed = 1998	$1,827.55	Paid in full in Cash on Effective Date
Name = Internal Revenue Service Type of tax = Income Date tax assessed = 1999	$25,000.00 (Disputed)	Debtor intends to object to these Claims since they are based upon its failure to file the returns and not upon a tax owing. The Debtor believes its net operating losses will eliminate any alleged tax liability for income taxes. If, however, a claim in favor of the IRS is allowed, the Debtor will either pay the Claim in full in Cash or pay the Clam over a period not exceeding six years from date of assessment pursuant to Section 1129(a)(9)(a) of the Code

C.  Classified Claims and Interests

        1.  Classes of Priority Unsecured Claims

        Certain priority Claims that are referred to in Code Sections 507(a)(3), (4), (5), (6), and (7) are required to be placed in Classes. These types of Claims are entitled to priority treatment as follows: the Code requires that each insider of such a Claim receive Cash on the Effective Date equal to the allowed amount of such Claim. However, a Class of unsecured priority shareholders may vote to accept deferred cash payments of a value, as of the Effective Date, equal to the allowed amount of such Claim.

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        The following chart lists all Classes containing Debtor’s 507(a)(3) , (a)(4) , (a)(5) , (a)(6) , and (a)(7) priority unsecured Claims and their treatment under the Plan.

Class #	Description	Impaired (YIN)	Treatment
1	Priority unsecured claims pursuant to 11 U.S.C. I 507(a)(3)	Not Impaired.	Paid in full in Cash on Effective Date
	Claimants: Gerald T. Raydon - $4,300                   Alyda L. Raydon - $4,300
	Total amt. of unpaid claims = $8,600

        2.  Classes of Secured Claims

        Secured Claims are Claims secured by liens on property of the Estate. The following chart lists all Classes containing Debtor’s Secured Claims and their treatment under the Plan:

Class #	Description	Insiders (Y/N)	Impaired (Y/N)	Treatment
2	Secured Claim of:    Name = Northrop Group Collateral description = One-third interest in Vaca Tar Sand Unit Collateral value = $80,000 Priority of security int. = First Total Claim amount = approximately $664,990	No	Impaired; Claims in this Class may vote on Plan	By agreement between the Debtor and the Class 2 Claimant, the Class 2 Claim shall be satisfied as follows: (a) On the Effective Date, the sum of $25,000 shall be paid to the Class 2 claimants in Cash. (b) The Debtor shall issue its note for the balance of the Northrop Group’s Allowed Class2 Claim in the sum of $55,000 (the “Restructured Northrop Group Note”) which shall contain the following terms: Principal Amount: The Restructured Northrop Group Note shall be in the principal amount of $55,000. Interest: The Restructured Northrop Group Note shall bear interest at the rate of eight percent (8%) per annum. Amortization: The Restructured Northrop Group Note shall be payable in full by Reorganized Debtor commencing at the end of the first full month after the Effective Date, in twenty-four (24) equal monthly installments of principal and interest. Collateral: The Restructured Northro p Group Note shall be secured by a first priority lien on a one-third Interest in the Vaca Tar Sand Unit of the Oxnard Field. Prepayment: The Restructured Northrop Group Note shall be pre-payable in whole or in part at any time, without penalty. Documentation: The obligations arising under the Northrop Group Restructured Note shall be evidenced by the Northrop Group Restructured Note and the existing trust deed recorded against the Vaca Tar Sand Unit of the Oxnard Field. (c) The balance of the Allowed Class 2 Claim in the approximate sum of $584,990 will be treated as a Class 4 Claim.

Class #	Description	Insiders (Y/N)	Impaired (Y/N)	Treatment
3	Secured claim of: All Other Allowed Secured Claims (The Debtor does not believe there are any Creditors in this Class)	No	Not impaired; Claims in this class are not entitled to vote on the Plan	If and to the extent there are Claims in this Class each Class 3 Claim shall be treated as a separate subclass. Each holder of an Allowed Other Secured Claim shall receive, in full and final satisfaction of such Allowed Secured Claim: (a) return of such Claimant’s collateral; or (b) payment(s) in accordance with the terms and conditions of applicable agreements or law; or (c) such other treatment as the holder may consent to accept in writing. Any defaults on such Claims shall be deemed cured upon the Effective Date.

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        3.  Classes of General Unsecured Claims

        General unsecured Claims are unsecured Claims not entitled to priority under Code section 507(a). The following chart identifies the Plan’s treatment of the Classes containing all of Debtor’s general unsecured Claims:

Class #	Description	Impaired (Y/N)	Treatment
4	General unsecured claims Total amt of claims = approximately $1.6 million per Debtor’s Bankruptcy Schedules	Impaired; Claims in this Class are entitled to vote on the Plan	Class 4 Claims are impaired. Each Class 4 Claimant shall receive in full and final satisfaction of its Allowed Class 4 Claim the following: (a) A Pro Rata distribution as soon as practicable sixty (60) days after the Effective Date, of the balance remaining of $300,000 of the TD Cash Deposit available after payment of Allowed Administrative Claims, Allowed Tax Claims. Class 1 Claims, the Cash portion of the Class 2 Claim, Class 3 Claims, if any, and Executory Contract Cure Amounts (the “Priority Payments”)—estimated to be approximately $69,000 (1); and (b) A Pro Rata distribution of an amount equal to $195,000 less the shortfall, if any, in cash necessary to pay the Priority Payments, payable quarterly from thirty percent (30%) of Net Income from the previous quarter, beginning on the first day of the first full month ninety (90) days after the Effective Date, for approximately 12 quarters. Net Income shall mean income after deduction o f all operating and overhead expenses. Notwithstanding the foregoing, quarterly payments of not less than $12,000, less the monthly payments to the Class 2 Claimant of $2,488, shall be made to Class 4 Claimants. (c) A Pro Rata distribution as soon as practicable sixty (160) days after the Effective Date of 1,900,000 shares of common stock of the Reorganized Debtor which will represent approximately 12.5% of the issued and outstanding common stock of the Reorganized Debtor.

Class #	Description	Impaired (Y/N)	Treatment
5	General unsecured Claims of insiders Gerald T. Raydon and Alyda Raydon Total amt of claims = $327.847	Impaired; Claims in this Class are entitled to vote on the Plan.	On the Effective Date, and conditioned upon the closing of the Stock Purchase and Sale Agreement with TD, the Class 5 claimants shall waive their Class 5 Claims against the Estate. In addition, on the Effective Date, the Class 5 claimants shall release their liens and cause to be released the liens of other insiders upon property of the Estate.

        4.  Class(es) of Interest Holders

        Interest holders are the parties who hold ownership interest (i.e., equity interest) in the Debtor. Since the Debtor is a corporation, entities holding preferred or common stock in the Debtor are Interest holders. The following chart identifies the Plan’s treatment of the Class of Interest holders:

Class #	Description	Impaired (Y/N)	Treatment
6	Interest holders	Impaired: Claims in this Class are entitled to vote on Plan.	Retain stock ownership in Debtor subject to dilution by stock issued to TD and to Class 4 Claimants pursuant to the Plan.

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   (1)   Assumes executory contract cure payment to J. Woodford Hansen of $32,000 and administrative claims as estimated above. If these amounts are greater than estimated, the initial cash distribution will be smaller, or possibly non-existent. A dispute exists with Hansen as to the amount necessary to cure. It is possible that the Plan is not confirmable if Hansen’s cure amount is too great and the Debtor is unable to work out a payment program with Hansen.

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D.  Means of Effectuating the Plan

        1.  Funding for the Plan

        On or before the Effective Date of the Plan, the Reorganized Debtor and TD shall consummate the Stock Purchase and Sale Agreement. Pursuant to that agreement, TD shall acquire 4,500,000 shares of the common stock of the Reorganized Debtor for the sum of $300,000. Of this amount, the sum of $500,000 shall be used to fund the payments required under this Plan and the balance shall be used for working capital for the Reorganized Debtor’s continued operations.

        2.  Compromise of Controversies

        Confirmation of the Plan shall effectuate a settlement of disputes by and between the Debtor, on the one hand, and Capitan, Gerald T. and Alyda Raydon, on the other hand. The Committee contends that Capitan and the Raydons are liable to the Estate for various actions, including breach of fiduciary duty, preferential and fraudulent transfers and possible other avoiding actions. The Raydons and Capitan have denied the allegations. In order to compromise the various disputes, however, the parties have agreed to settle on the following basis, subject to Confirmation of the Plan.

        a.  Gerald T. Raydon shall release his right to receive pursuant to Section 2.2 of the Consulting Agreement (the “Consulting Agreement”) attached as Exhibit “A” to the Stock Purchase and Sale Agreement, a copy of which is attached hereto a Exhibit “2”, his “Incentive Compensation” totaling 1,390,000 shares of common stock of the Reorganized Debtor in favor of a distribution of those shares to Class 4 creditors.

        b.  Gerald T. Raydon and Alyda Raydon shall allow their claims against the Estate for loans and rejection of their employment agreements to be treated as Class 5 Claims under the Plan.

        c.  Gerald T. Raydon shall not serve as a director of the Reorganized Debtor pursuant to the Consulting Agreement. Rather, he shall serve solely as a consultant to the Reorganized Debtor at the discretion of new management of the Reorganized Debtor.

        d.  Capitan shall transfer to the Debtor all of its rights under its revenue sharing agreements with the Debtor (the Operating Contract for waste disposal and the Tank Bottoms Agreement). Capitan shall withdraw any and all Claims it may have against the Debtor.

        e.  A11 deeds of trust held by Gerald T. Raydon, Alyda Raydon and other Insiders of the Debtor upon the East L.A./Bandini properties shall be assigned to the Reorganized Debtor. All deeds of trust held by Insiders on property of the Estate will be released to the Reorganized Debtor.

        f.  On Confirmation, the Estate shall release and waive all claims and other causes of action which it may have or assert against Capitan, Gerald T. Raydon and Alyda Raydon, as well as to the extent applicable, their officers, directors, shareholders, agents, attorneys, predecessors-in-interest and successors-in-interest.

        3.  Revesting of Property

        On the Effective Date all property of the Estate shall be vested in the Reorganized Debtor, and the Reorganized Debtor shall retain such property free and clear of all claims, liens, encumbrances and other interests of Creditors and holders of Interests, except as provided by this Plan. From and after the Effective Date, the Reorganized Debtor may operate its business without supervision by the Bankruptcy Court and free of any restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those restrictions expressly imposed by the Plan and the Confirmation Order.

        4.  Disbursing Agent

        The Reorganized Debtor shall serve as the Disbursing Agent to make all distributions provided for under this Plan. The Reorganized Debtor may employ or contract with an entity, such as a transfer agent, to assist in or perform the distribution of property to be distributed. The Disbursing Agent shall serve without bond and shall receive no compensation for distribution services rendered and expenses incurred pursuant to the Plan.

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        5.  Post-Confirmation Management

        Dennis Timpe will be the President and Chief Executive Officer of the Reorganized Debtor. Lori Long will serve as Secretary/Treasurer of the Reorganized Debtor. Mr. Timpe shall serve without salary for at least one (1) year after the Effective Date. Ms. Long shall receive a monthly salary of $1,500.00. The Board of Directors for the Reorganized Debtor shall consist of Dennis Timpe, Lori Long and Christian Dillon. See Section V hereof for biographical information for Messrs. Timpe and Dillon and Ms. Long. Additionally, TD may elect up to two additional “outside” directors at a later date. Gerald T. Raydon shall also enter into a consulting agreement on the terms and conditions set forth in Exhibit “A” to the Stock Purchase and Sale Agreement, a copy of which is attached hereto and marked Exhibit “2”.

        6.  Exemption From Registration Under Section 1145 Of The Code

        The shares of common stock of Reorganized Debtor issued pursuant to the Plan to Class 4 claimants shall be issued pursuant to the exemption contained in Section 1145 of the Code from the requirements of Section 5 of the Securities Act of 1933, and any other applicable federal, sate or local law requiring registration.

        7.  Post-Confirmation U.S. Trustee Fees

        The Reorganized Debtor shall be responsible for timely payment of fees incurred pursuant to 28 U.S.C. § 1930(a)(6).

E.  Other Provisions of the Plan

        1.  Disputed Claims

        Pending resolution of all Disputed Claims in a particular Class, all Cash to be distributed to the holders of Disputed Claims in such Class, but for the fact that some of the Claims in such Class remain as Disputed Claims, shall be placed in a segregated bank account at a federally insured financial institution and maintained by the Disbursing Agent until distribution to the holders of such Claims under the Plan. The amount of cash required to be segregated shall be based upon the dollar amount asserted by the holder of the Disputed Claim, subject to the right of the Debtor to request upon notice and hearing that the Bankruptcy Court estimate the Disputed Claim in a lesser amount for reserve purposes. Cash held in the Disputed Claims reserves shall be deposited in a segregated bank account in the name of the Disbursing Agent for the benefit of the potential claimants against such funds, and shall be accounted for separately. Distribut ion shall be made from the Disputed Claims reserve only at such time as a particular Claim is determined to be an Allowed Claim.

        2.  Amendment to Articles of Incorporation

        In accordance with section 1123(a)(6) of the Code, the Reorganized Debtor shall adopt an amendment to its Articles of Incorporation that shall contain provisions that prohibit the issuance of nonvoting equity securities.

        3.  Unclaimed Property

        Any property to be distributed to Creditors under the Plan shall be redistributed Pro Rata among all Allowed Claims of Creditors within the Class if it is not claimed by the entity entitled to it before the later of one (1) year after Confirmation of the Plan or sixty (60) days after an order allowing the Claim of that entity becomes a Final Order. The redistributions shall take place on the first scheduled distribution to occur after such date.

        4.  Treatment of Executory Contracts and Unexpired Leases

        a.  Assumption.

        Each executory contract or unexpired lease of the Debtor that has not expired by its own terms before the effective Date or previously been rejected by the Debtor in Possession, that is either: (1) listed on the “Schedule of Executory Contracts and Unexpired Leases be Assumed”, attached hereto as Exhibit “3”, or (2) is not rejected, is assumed as of the Effective Date, pursuant to Bankruptcy Code section 365. Nothing in the Plan, any exhibit to the Plan, or any document executed or delivered in connection with the Plan or any such exhibit creates any obligation or liability on the part of the Debtor, the Reorganized Debtor, or any other person or entity that is not currently liable for such obligation, with respect to any executory contract or unexpired lease except as otherwise provided in the Plan.

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        b.  Cure Payments.

        Any monetary defaults under each executory contract and unexpired lease to be assumed under the Plan shall be satisfied by the Reorganized Debtor, under section 365(b)(1) of the Bankruptcy Code, either by payment of the Executory Contract Cure Amount (if any), in Cash, on the Effective Date, such other terms as agreed to by the Reorganized Debtor and the non-Debtor party to the executory contract or unexpired lease, or ordered by the Bankruptcy Court. UNLESS THE NON-DEBTOR PARTY TO ANY EXECUTORY CONTRACT OR UNEXPIRED LEASE TO BE ASSUMED FILES AND SERVES ON THE DEBTOR AND ITS COUNSEL AN OBJECTION TO THE “CURE AMOUNT” SPECIFIED ON THE SCHEDULE OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO BE ASSUMED, ATTACHED AS EXHIBIT “3”, ON OR BEFORE THE LAST DATE ESTABLISHED BY THE BANKRUPTCY COURT TO FILE AND SERVE OBJECTIONS TO CONFIRMATION OF THE PLAN, SUCH “CURE AMOUNT” SHALL BE FOREVER BINDING ON SUCH NON-DEBT OR PARTY TO SAID EXECUTORY CONTRACT OR UNEXPIRED LEASE. In the event of a timely Filed and served objection regarding (1) the amount of any cure payments, (2) the ability of the Reorganized Debtor to provide adequate assurance of future performance under the contract or lease to be assumed, or (3) any other matter pertaining to assumption, any cure payment required by section 365(b)(1) of the Bankruptcy Code shall be made following the entry of a Final Order resolving the dispute and approving the assumption.

        c.  Rejection

        Effective immediately before the Effective Date, each executory contract or unexpired lease of the Debtor listed on the “Schedule of Executory Contracts and Unexpired Leases to be Rejected”, attached hereto as Exhibit “4”, is rejected, to the extent, if any, each constitutes an executory contract or unexpired lease, and without conceding that each constitutes an executory contract or unexpired lease or that the Debtor has any liability under each. Listing a contract or lease on the Schedule of Executory Contracts and Unexpired Leases To Be Rejected is not deemed an admission by the Debtor or Reorganized Debtor that such contract is an executory contract or unexpired lease or that the Debtor or Reorganized Debtor has any liability thereunder. The Debtor reserves the right at any time before Confirmation to amend Exhibit “4” to: (a) delete any executory contract or unexpired lease listed on Exhibit “4& #148; and provide for its assumption or (b) add any executory contract or unexpired lease to Exhibit “4”, thus providing for its rejection under this section. The Debtor shall provide notice of any amendment of Exhibit “4” to the party to the affected executory contract and unexpired lease, counsel for the Committee, and the Office of the U.S. Trustee.

        The Confirmation Order shall constitute an order of the Bankruptcy Court approving all such rejections as of the Effective Date. Any Claims for damages arising from the rejection under the Plan of an executory contract or unexpired lease must be Filed within thirty (30) days after the mailing of notice of Confirmation or be forever barred and unenforceable against the Debtor, Reorganized Debtor, and its properties and barred from receiving any distribution under the Plan.

        5.  Changes in Rates Subject to Regulatory Commission Approval

        This Debtor is not subject to governmental regulatory commission approval of its rates.

        6.  Jurisdiction of the Bankruptcy Court

        After Confirmation of the Plan and occurrence of the Effective Date, in addition to jurisdiction which exists in any other court, the Court will retain such jurisdiction as is legally permissible including for the following purposes:

        a.  To resolve any and all disputes regarding the operation and interpretation of the Plan and the Confirmation Order;

        b.  To determine the allowability, classification, or priority of Claims and Interests upon objection by the Debtor, or by other parties in interest with standing to bring such objection or proceeding;

        c.  To determine the extent, validity and priority of any lien asserted against property of the Reorganized Debtor or property of the Estate,

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        d.  To construe and take any action to enforce the Plan, the Confirmation Order, and any other order of the Court, issue such orders as may be necessary for the implementation, execution, performance, and consummation of the Plan, the Confirmation Order, and all matters referred to in the Plan, the Confirmation Order, and to determine all matters that may be pending before the Court in this Case on or before the Effective Date with respect to any Person or entity;

        e.  To determine (to the extent necessary) any and all applications for allowance of compensation and reimbursement of expenses of professionals for the period on or before the Effective Date;

        To determine any request for payment of Administrative Expenses;

        g.  To resolve any dispute regarding the implementation, execution, performance, consummation, or interpretation of the Plan or the Confirmation Order;

        h.  To determine motions for the rejection, assumption, or assignment of executory contracts or unexpired leases filed before the Effective Date and the allowance of any Claims, resulting therefrom;

        i.  To determine all applications, motions, adversary proceedings, contested matters, and any other litigated matters instituted during the Case whether before, on, or after the Effective Date;

        j.  To determine such other matters and for such other purposes as may be provided in the Confirmation Order;

        k.  To modify the Plan under Section 1127 of the Bankruptcy Code in order to remedy any apparent defect or omission in the Plan or to reconcile any inconsistency in the Plan so as to carry out its intent and purpose;

        1.  Except as otherwise provided in the Plan or the Confirmation order, to issue injunctions to take such other actions or make such other orders as may be necessary or appropriate to restrain interference with the Plan or the Confirmation Order, or the execution or implementation by any person or entity of the Plan or the Confirmation Order;

        m.  To issue such orders in aid of consummation of the Plan or the Confirmation Order, notwithstanding any otherwise applicable nonbankruptcy law, with respect to any person or entity, to the fullest extent authorized by the Bankruptcy Code or Bankruptcy Rules; and

        n.  To enter a final decree closing this Chapter 11 Case.

F.  Tax Consequences of Plan

        THE FOLLOWING DISCUSSION IS A SUMMARY OF CERTAIN MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO THE DEBTOR AND TO HOLDERS OF CLAIMS AND INTERESTS IN THE DEBTOR, BUT IS NOT A COMPLETE DISCUSSION OF ALL SUCH CONSEQUENCES. CERTAIN OF THE CONSEQUENCES DESCRIBED BELOW ARE SUBJECT TO SUBSTANTIAL UNCERTAINTY DUE TO THE UNSETTLED STATE OF THE TAX LAW GOVERNING BANKRUPTCY REORGANIZATIONS. NO RULINGS HAVE BEEN OR WILL BE REQUESTED FROM THE INTERNAL REVENUE SERVICE (THE “IRS”) WITH RESPECT TO ANY OF THE TAX ASPECTS OF THE PLAN. FURTHER, THE TAX CONSEQUENCES OF THE PLAN TO THE HOLDERS OF CLAIMS AND INTERESTS MAY VARY BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER, AND MAY BE AFFECTED BY MATTERS NOT DISCUSSED BELOW, SUCH AS THE SPECIAL RULES APPLICABLE TO CERTAIN TYPES OF HOLDERS (INCLUDING PERSONS SUBJECT TO SPECIAL RULES, SUCH AS, FOR EXAMPLE, NONRESIDENT ALIENS, LIFE INSURANCE COMPANIES AND TAX-EXEMPT ORGANIZATIONS). IN ADDITION, THERE MAY BE STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE PLAN APPLICABLE TO THE DEBTOR AND TO PARTICULAR HOLDERS OF CLAIMS OR INTERESTS, NONE OF WHICH ARE DISCUSSED BELOW. THEREFORE, THE FOLLOWING SUMMARY IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER OF A CLAIM OR INTEREST, AND EACH HOLDER OF A CLAIM OR INTEREST IN THE DEBTOR IS URGED TO CONSULT HIS, HER OR ITS TAX ADVISORS CONCERNING THE INDIVIDUAL TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THE PLAN, INCLUDING STATE, LOCAL AND FOREIGN TAX CONSEQUENCES.

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        1.  Tax Consequences To Holders Of Claims.

        A portion of the consideration received pursuant to the Plan in payment of a Claim may be allocated to unpaid interest, and the remainder of the consideration will be allocated to the principal amount of the Claim. The tax consequences of the consideration allocable to the portion of a Claim related to interest differ from the tax consequences of the consideration allocable to the portion of a Claim related to principal.

        a.  Consideration Allocable To Interest.

        Holders of Claims will recognize ordinary income to the extent that any consideration received pursuant to the Plan is allocable to interest, and such income has not already been included in such Holder’s taxable income. The determination as to what portion of the consideration received will be allocated to interest is unclear, and may be affected by, among other things, rules in the Internal Revenue Code (the “Tax Code”) relating to original issue discount and accrued market discount. Holders of Claims should consult their own tax advisors as to the amount of any consideration received under the Plan that will be allocated to interest.

        In the event amounts allocable to interest are less than amounts previously included in the Holder’s taxable income, the difference will result in a loss. Any amount not allocable to interest will be allocated to the principal amount of the Claim paid and discharged pursuant to the Plan, and will be treated as discussed below.

        b.  Holders Of Claims Receiving Only Cash.

        Holders of Claims receiving only cash generally will recognize gain or loss on the exchange equal to the difference between the Holder’s basis in the Claim and the amount of cash received that is not allocable to interest. The character of any recognized gain or loss will depend upon the status of the Holder, the nature of the Claim in its hands and the holding period of such Claim.

        If a Holder of a Claim has treated a Claim as wholly or partially worthless and been allowed a bad debt deduction, the Holder will include the amount of cash received in income to the extent such cash exceeds the Holder’s remaining tax basis in the Claim.

        Holders of Claims may be entitled to installment sales treatment or other deferral with respect to the distribution they receive subsequent, to the Effective Date. Holders of Claims may already have claimed partial bad debt deductions with respect to their Claims. The Internal Revenue Service may take the position that Holders of Allowed Claims cannot claim an otherwise allowable further loss in the year in which their Claim is allowed because such claimants could receive further distributions. Thus, a Claim could be prevented from recognizing a loss until the time when its Claim has been liquidated and distributions have been completed. If a Holder of a Claim is permitted to recognize a loss in the year of the Effective Date by treating the transaction as a “closed transaction” at such time, such Holder may recognize income on any subsequent distribution.

        c.  Secured Claims.

        The tax consequences in respect to treatment of Class 2 and 3 Claims are not described herein.

        2.  Tax Consequences To Holder Of Interests.

        Whether any Holder of an Interest will recognize a gain or a loss as a result of the treatment of such Interest under the Plan may be dependent on factors including whether such treatment constitutes a recognizable event, the basis in the stock, the status of the Holder, the nature of the Interest in his hands and the holding period of such stock.

        3.  Backup Withholding.

        Interest, dividends and other “reportable payments” made to a Holder of a Claim or an Interest may, under certain circumstances, be subject to “backup withholding” at a 31% rate. The backup withholding tax is not an additional tax, and is creditable against the Holder’s federal income tax liability. In addition, certain other payments to non-U.S. persons may be subject to withholding at a 30% rate.

        PERSONS CONCERNED WITH THE TAX CONSEQUENCES OF THIS PLAN SHOULD CONSULT THEIR OWN ACCOUNTANTS, ATTORNEYS AND/OR ADVISORS. THE DEBTOR MAKES THE AFOREMENTIONED DISCLOSURE OF POSSIBLE TAX CONSEQUENCES FOR THE SOLE PURPOSE OF

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ALERTING READERS OF TAX ISSUES THEY MAY WISH TO CONSIDER. THE DEBTOR CANNOT AND DOES NOT REPRESENT THAT THE TAX CONSEQUENCES MENTIONED ABOVE ARE COMPLETELY ACCURATE BECAUSE THE TAX LAW EMBODIES MANY COMPLICATED RULES, WHICH MAKE IT DIFFICULT TO ACCURATELY STATE WHAT THE TAX IMPLICATIONS OF ANY ACTION MIGHT BE.

G.  Status and Resale of Securities to be Issued Pursuant to Plan

        Under Bankruptcy Code section 1145, the original issuance of the Reorganized Debtor’s securities (hereinafter “Securities”) under the Plan will be exempt from the registration requirements of the Securities Act of 1933 and applicable state laws requiring registration of securities. Resale of Securities by a Creditor receiving them directly under the Plan will also be exempt provided the Creditor is not an underwriter. Generally, a Creditor will not be deemed to be an underwriter if it: (1) has not become a Creditor of the Debtor with a view to distribution of any securities to be received in exchange Claims under the Plan; (b) has not offered to sell the securities for others; (c) has not offered to buy the securities from others where the offer is with a view to their distribution, and under an agreement in connection with the Plan; (d) is not an issuer as that term is used in the Securities Act of 1933. The determinat ion of whether a particular Creditor would be deemed to be an underwriter is necessarily an individual one, and any Creditor considering reselling securities under the Plan should consult with its securities advisor to determine whether it would be an underwriter, and therefore, ineligible for the exemption described above.

        A creditor who is deemed to be an underwriter may be able to sell securities without registration pursuant to the provisions of Rule 144 under the Securities Act of 1933, which fact may permit the public sale of Securities received pursuant to the Plan by underwriters subject to volume limitations and certain other conditions. Creditors who believe they may be underwriters are advised to consult their own counsel with respect to the availability of the exemptions provided by Rule 144.

        THE ABOVE DISCUSSION IS INTENDED AS GENERAL INFORMATION ONLY, AND ANY ENTITY DESIRING TO RESELL ANY SECURITIES RECEIVED BY IT PURSUANT TO THE PLAN IS URGED TO CONSULT ITS SECURITIES ADVISOR REGARDING THE AVAILABILITY OF ANY REGISTRATION EXEMPTION.

IV. CONFIRMATION REQUIREMENTS AND PROCEDURES

        PERSONS OR ENTITIES CONCERNED WITH CONFIRMATION OF THIS PLAN SHOULD CONSULT WITH THEIR OWN ATTORNEYS BECAUSE THE LAW ON CONFIRMING A PLAN OF REORGANIZATION IS VERY COMPLEX. The following discussion is intended solely for the purpose of alerting readers about basic Confirmation issues, which they may wish to consider, as well as certain deadlines for filing claims. The Proponent CANNOT and DOES NOT represent that the discussion contained below is a complete summary of the law on this topic.

        Many requirements must be met before the Court can confirm a Plan. Some of the requirements include that the Plan must be proposed in good faith, acceptance of the Plan, whether the Plan pays Creditors at least as much as Creditors would receive in a Chapter 7 liquidation, and whether the Plan is feasible. These requirements are not the only requirements for Confirmation.

A.  Who May Vote or Object

        1.  Who May Object to Confirmation of the Plan

        Any party in interest may object to the Confirmation of the Plan, but as explained below not everyone is entitled to vote to accept or reject the Plan.

        2.  Who May Vote to Accept/Reject the Plan

        A Creditor or Interest holder has a right to vote for or against the Plan if that Creditor or interest holder has a Claim which is both (1) allowed or allowed for voting purposes and (2) classified in an impaired Class.

        a.  What Is an Allowed Claim/Interest

        As noted above, a Creditor or Interest holder must first have an Allowed Claim or Interest to have the right to vote. Generally, any proof of Claim or Interest will be allowed, unless a party in interest brings a motion objecting

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to the Claim. When an objection to a Claim or interest is filed, the Creditor or Interest holder holding the Claim or Interest cannot vote unless the Bankruptcy Court, after notice and hearing, either overrules the objection or allows the Claim or Interest for voting purposes.

        THE BAR DATE FOR FILING A PROOF OF CLAIM IN THIS CASE WAS JUNE 30, 1999. A Creditor or Interest holder may have an Allowed Claim or Interest even if a proof of Claim or Interest was not timely filed. A Claim is deemed allowed if (1) it is scheduled on the Debtor’s Schedules and such Claim is not scheduled as disputed, contingent, or unliquidated, and (2) no party in interest has objected to the Claim. An Interest is deemed allowed if it is scheduled and no party in Interest has objected to the Interest.

        b.  What Is an Impaired Claim/Interest

        As noted above, an Allowed Claim or Interest only has the right to vote if it is in a Class that is impaired under the Plan. A Class is impaired if the Plan alters the legal, equitable, or contractual rights of the members of that Class. For example, a Class comprised of general unsecured Claims is impaired if the Plan fails to pay the members of that Class 100% of what they are owed.

        In this Case, the Debtor believes that Classes 2, 4, 5 and 6 are impaired and that holders of Claims in each of these Classes are therefore entitled to vote to accept or reject the Plan. The Proponent believes that Classes 1 and 3 are unimpaired and that holders of Claims in each of these Classes therefore do not have the right to vote to accept or reject the Plan. Parties who dispute the Debtor’s characterization of their Claim or Interest as being impaired or unimpaired may file an objection to the Plan contending that the Debtor has incorrectly characterized the Class.

        3.  Who Is Not Entitled to Vote

        The following four types of Claims are not entitled to vote: (1) Claims that have been disallowed; (2) Claims in unimpaired Classes; (3) Claims entitled to priority pursuant to Code sections 507(a)(1), (a)(2), and (a)(8); and (4) Claims in Classes that do not receive or retain any value under the Plan. Claims in unimpaired Classes are not entitled to vote because such Classes are deemed to have accepted the Plan. Claims entitled to priority pursuant to Code sections 507(a)(1), (a)(2), and (a)(7) are not entitled to vote because such Claims are not placed in Classes and they are required to receive certain treatment specified by the Code. Claims in Classes that do not receive or retain any value under the Plan do not vote because such Classes are deemed to have rejected the Plan. EVEN IF YOUR CLAIM IS OF THE TYPE DESCRIBED ABOVE, YOU MAY STILL HAVE A RIGHT TO OBJECT TO THE CONFIRMATION OF THE PLAN.

        4.  Who Can Vote in More Than One Class

        A Creditor whose Claim has been allowed in part as a Secured Claim and in part as an unsecured Claim is entitled to accept or reject a plan in both capacities by casting one ballot for the secured part of the Claim and another ballot for the unsecured Claim.

        5.  Votes Necessary to Confirm the Plan

        If impaired Classes exist, the Court cannot confirm the Plan unless (1) at least one impaired Class has accepted the Plan without counting the votes of any insiders within that Class, and (2) all impaired Classes have voted to accept the Plan, unless the Plan is eligible to be confirmed by “cramdown” on non-accepting Classes, as discussed later in Section IV.A.8. hereof.

        6.  Votes Necessary for a Class to Accept the Plan

        A Class of Claims is considered to have accepted the Plan when more than one-half (1/2) in number and at least two-thirds (2/3) in dollar amount of the Claims which actually voted, voted in favor of the Plan. A Class of Interests is considered to have “accepted” the Plan when at least two-thirds (2/3) in amount of the Interest-holders of such Class which actually voted, voted to accept the Plan.

        7.  Treatment of Non-Accepting Classes

        As noted above, even if all impaired Classes do not accept the proposed Plan, the Court may nonetheless confirm the Plan if the nonaccepting Classes are treated in the manner required by the Code. The process by which non-accepting Classes are forced to be bound by the terms of a Plan is commonly referred to as “cramdown.” The Code allows the Plan to be “crammed down” on non-accepting Classes of Claims or Interests if it meets all

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consensual requirements except the voting requirements of 1129(a)(8) of the Code and if the Plan does not “discriminate unfairly” and is “fair and equitable” toward each impaired Class that has not voted to accept the Plan as referred to in 11 U.S.C. § 1129(b) and applicable case law.

        8.  Request for Confirmation Despite Non-Acceptance by Impaired Class(es)

        The Debtor will ask the Court to confirm this Plan by cramdown on impaired Class 6 if that Class does not vote to accept the Plan.

        Please note that the proposed Plan treatment described by this Disclosure Statement cannot be crammed down on Classes 4 and 5. AS A RESULT, IF THESE CLASSES DO NOT VOTE TO ACCEPT THE PLAN, THE PLAN WILL NOT BE CONFIRMED.

B.  Liquidation Analysis

        Another Confirmation requirement is the “Best Interest Test”, which requires a liquidation analysis. Under the Best Interest Test, if a Claimant or Interest holder is in an impaired Class and that Claimant or interest holder does not vote to accept the Plan, then that Claimant or Interest holder must receive or retain under the Plan property of a value not less than the amount that such holder would receive or retain if the Debtor were liquidated under Chapter 7 of the Bankruptcy Code.

        In a Chapter 7 case, the Debtor’s assets are usually sold by a Chapter 7 trustee. Secured Creditors are paid first from the sales proceeds of assets on which the secured Creditor has a lien. Administrative Claims are paid next. Next, unsecured Creditors are paid from any remaining sales proceeds, according to their rights to priority. Unsecured Creditors with the same priority share in proportion to the amount of their Allowed Claim in relationship to the amount of total Allowed Unsecured Claims. Finally, Interest holders receive the balance that remains after all Creditors are paid, if any.

        For the Court to be able to confirm this Plan, the Court must find that all Creditors and Interest holders who do not accept the Plan will receive at least as much under the Plan as such holders would receive under a Chapter 7 liquidation. The Debtor maintains that this requirement is met here for the following reasons:

        a.  The liquidation value of the Debtor’s assets is significantly less than the fair market value of the Debtor’s operations. Upon a liquidation, the Debtor’s oil and gas properties would be worth less than on a going concern basis. It is unlikely that a trustee could sell any of the Debtor’s oil and gas properties as a going concern due to their present condition and minimal production. If the Debtor’s oil and gas leases are rejected, there would be significant claims by lessors for rejection of the leases and abandonment costs. These claims would total millions of dollars. The Debtor assumes that only its waste disposal operation and wells could be sold in a liquidation. In addition, the governmental agencies which have cash deposits to secure cleanup of the wells would exhaust those deposits. Also, it is unlikely that a trustee would collect more on the claims which the Debtor has against third pa rties than the Debtor.

        b.  In a Chapter 7 case, a trustee is appointed and entitled to compensation from the bankruptcy estate in an amount not to exceed 25% of the first $5,000 of all fees disbursed, 10% on any amount over $55,000, but less than $50,000, 5% on any amount over $50,000, but not in excess of $1,000,000, and 3% on all amounts over $1,000,000. In this Case, the trustee’s compensation is estimated to equal $15,750, assuming the trustee liquidates all assets including the waste disposal well property, but excluding the rest of the Debtor’s oil and gas properties. The Debtor estimates that the Chapter 7 trustee would employ accountants and counsel to assist in the liquidation and collection of the Debtor’s assets. The Debtor has estimated that fees and costs for such professionals in a chapter 7 case would be at least $50,000, primarily relating to litigation collecting obligations owed to the Debtor.

        Below is a demonstration, in balance sheet format, that all Creditors and Interest holders will receive at least as much under the Plan as such Creditor or Interest holder would receive under a Chapter 7 liquidation.

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Assets valued at liquidation values:

CURRENT ASSETS
a. Cash on hand	$	0
b. Accounts receivable (uncollectible)	$	0
c. Inventories	$	0
d. Due from Bentley-Simonson (disputed)(2)	$	40,000
e. Contingent Claims (est. 25% collectible)	$	20,000
TOTAL CURRENT ASSETS	$	60,000
FIXED ASSETS
a. Waste disposal project and wells (Oxnard Field only) and related equipment(3)	$	115,000
b. Automobiles	$	12,000
TOTAL FIXED ASSETS	$	127,000
OTHER ASSETS
a. Cash Bonds Posted (would be taken by authorities)	$	0
TOTAL OTHER ASSETS	$	0
Total Assets at Liquidation Value	$	187,000
Less:    Secured creditor’s recovery	$	0
Less:    Chapter 7 trustee fees and expenses	$	65,750
Less:    Chapter 11 administrative expenses	$	170,000
Less:    Priority claims, excluding administrative expense claims	$	45,045

______________

   (2)   Assumes obligations of $40,000 payable in full and all of $75,000 note uncollectible.

   (3)   Assumes only waste disposal facility and associated wells saleable by a trustee. Value based upon capitalization of expected profit stream, less $35,000 to cure lease payments and $50,000 to repair waste disposal well.

(1) Balance for unsecured claims	$	0
(2) Total amt of unsecured claims per schedules (includes claim of insider of $165,847)	$	1,965,897
Plus rejection and cleanup claims for 58 oil and gas leases (estimated)	$	5,800,000
	$	7,765,897

19

% Of their claims which unsecured creditors would receive or retain in a ch. 7 liquidation: = 0%

        Below is a demonstration, in tabular format, that all Creditors and Interest holders will receive at least as much under the Plan as such Creditor or Interest holder would receive under a Chapter 7 liquidation.

Claims & Classes	Payout Percentage Under the Plan	Payout Percentage in Chapter 7 Liquidation
Administrative Claims (Ch. 11)	100%	100%
Priority Tax Claims	100%	100%
Class 1 - Priority Wages	100%	100%
Class 2 - Northrop Group	100% of secured portion	0%
Class 3 - Other Secured Claims	100%	0%
Class 4 - General Unsecured Creditors	Approximately 14% cash plus Pro Rata Distribution of 1,900.000 shares of common stock of Reorganized Debtor	0%
Class 5 - Insider Claims	Claims Waived	0%
Class 6 - Equity	Retain Interests	0%

C.  Feasibility

        Another requirement for Confirmation involves the feasibility of the Plan, which means that Confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtor or any successor to the Debtor under the Plan, unless such liquidation or reorganization is proposed in the Plan.

        There are at least two important aspects of a feasibility analysis. The first aspect considers whether the Debtor will have enough cash on hand on the Effective Date of the Plan to pay all the Claims and expenses which are entitled to be paid on such date. The Debtor maintains that this aspect of feasibility is satisfied as illustrated here:

Cash Debtor will have on hand by Effective Date	$	300,000
To Pay: Administrative claims		-170,000
To Pay: Statutory costs & charges		-1,000
To Pay: Other Plan Payments due on Effective Date (Incls. Executory Contract Cure    Amounts, priority tax and wage claims and Class 2 payments)		-94,100
Balance after paying these amounts	$	34,900

             The source of the cash Debtor will have on hand by the Effective Date, as shown above is from a portion of the TD Cash Payment required to be paid by TD pursuant to the Stock Purchase and Sale Agreement.

        The second aspect considers whether the Debtor will have enough cash over the life of the Plan to make the required Plan payments.

        The Debtor has provided financial statements which show projected financial information for the three years following Confirmation. Please refer to Exhibit 1 for the relevant financial statements. YOU ARE ADVISED TO CONSULT WITH YOUR ACCOUNTANT OR FINANCIAL ADVISOR IF YOU HAVE ANY QUESTIONS PERTAINING TO THESE FINANCIAL STATEMENTS.

        In summary, the Plan proposes to pay a small cash distribution and a Pro Rata distribution of 1,900,000 shares of common stock of the Reorganized Debtor to each Allowed Class 4 claimant 60 days after the Effective Date and thereafter cash payments totaling approximately 11% to Class 4 general unsecured Creditors over not more than 12 quarters. As Debtor’s financial projections demonstrate, Debtor will have sufficient cash flow after paying operating expenses to make the minimum payment of $12,000 per quarter. The final Plan payment is expected to be

20

paid by March of year 2002. The Debtor contends that its financial projections are feasible based upon the additional equity contribution of $200,000 by TD to be used for the Debtor’s continued operations. The capital to be obtained from TD will enable the Reorganized Debtor to increase the volume of its business at its disposal site and thus enhance an already profitable operation. Since obtaining a permit to dispose of various oil field sludges and solids, for which a higher price per barrel is charged than for waste water, the proportion of solids to water has shown an increasing trend. The Debtor has installed the equipment necessary to treat the solids efficiently, and has broadened its customer base. The capital to be obtained from TD will enable the Reorganized Debtor to install additional equipment in order to increase the volume of wastes it can process. The recent rapid increase in the price of oil is leading to increased operations by oil producers, and there fore more waste products to dispose of at the Debtor’s facility. The TD funds will be employed to increase the number oil wells on production at the Vaca Tar Sand Unit, and to resume thermal stimulation operations. The result will be much-increased production. This, coupled with the increase in the price of Vaca oil from the 1998 low of $6.50 to the present level of $17.00, will result in sharply higher revenues. Whereas gas produced from the Rosecrans Field had to be given away previously, a new contract provides for payment for this gas. About seven wells can be promptly restored to gas and oil production after the Effective Date. The high-quality Rosecrans oil sells now for $23.25 per barrel, as compared to $9.50 in 1998. The reduction in unsecured and secured debt will increase the cash available to the Reorganized Debtor for putting additional wells on production and improving the profitability of operations.

V. STATEMENT RE TD & ASSOCIATES

        TD & Associates, was formed on July 1, 1986. TD is an oil and gas company with investments and expertise in exploration, development, production and financing activities. TD has obtained financing from private sources amounting to an average $2,000,000 per year over the past five years. It intends to allocate all of the proceeds of future fundings to the development of Geo’s projects, excepting only the funds necessary to complete operations on projects currently comprising TD’s business. TD owns its own 5,000 square foot office building. in Yorba Linda, California, and other assets in the form of real estate.

A.  Management Of The Company.

        Dennis Tim —President and Chairman of the Board. Mr. Timpe entered the oil and gas industry in the late 1970’s as a marketing representative for the financing department of Gold Star Petroleum, later becoming its Director of Marketing. In 1983, he became Manager of Marketing for Sage Petroleum. He also participated in Sage’s production control and field development activities. He founded TD & Associates, Inc. in October, 1986 and has continuously operated it since that time as president and Chairman of the Board.

        Lori Timpe Long, Secretary—Treasurer and Director. Mrs. Long, daughter of Dennis Timpe, has served a TD’s Treasurer since 1980, after having been employed by the Wells Fargo Bank. As Treasurer, she has been responsible for the accounting and related administrative operations of TD and of the general partnerships it has formed in order to conduct its business. Her educational background includes a Bachelor of Arts degree from California State University, Long Beach and a Master of Arts degree in Psychology from California Graduate Institute.

        Christian Dillon—Director. Mr. Dillon is a practicing attorney in private practice emphasizing bankruptcy matters. He is TD’s legal counsel. Mr. Dillon obtained his law degree from Western State University, College of Law in 1979 and his undergraduate degree from Marquette University in Milwaukee, Wisconsin.VI.

VI. EFFECT OF CONFIRMATION OF PLAN

A.   Discharge

        This Plan provides that upon entry of a final decree closing the Case, Debtor shall be discharged of liability for payment of debts incurred before Confirmation of the Plan to the extent specified in 11 U.S.C. § 1141. However, the discharge will not discharge any liability imposed by the Plan.

B.   Revesting of Property in the Debtor

        Except as provided in Section VI.E., and except as provided elsewhere in the Plan, the Confirmation of the Plan revests all of the property of the Estate in the Reorganized Debtor.

21

C.   Modification of Plan

        The Debtor, as the proponent of the Plan, may modify the Plan at any time before Confirmation. However, the Court may require a new disclosure statement and/or revoting on the Plan.

        The Debtor may also seek to modify the Plan at any time after Confirmation only if (1) the Plan has not been substantially consummated and (2) the Court authorizes the proposed modifications after notice and a hearing.

D.   Post-Confirmation Status Report

        Within 120 days of the entry of the order confirming the Plan, the Debtor shall file a status report with the Court explaining what progress has been made toward consummation of the confirmed Plan. The status report shall be served on the United States Trustee, the Committee and its counsel, and those parties who have requested special notice. Further status reports shall be filed every 120 days and served on the same entities.

E.   Post-Confirmation Conversion/Dismissal

        A Creditor or party in interest may bring a motion to convert or dismiss the Case under § 1112(b), after the Plan is confirmed, if there is a default in performing the Plan. If the Court orders the Case converted to Chapter 7 after the Plan is confirmed, then all property that had been property of the Chapter 11 Estate, and that has not been disbursed pursuant to the Plan, will revest in the Chapter 7, estate. The automatic stay will be reimposed upon the revested property, but only to the extent that relief from stay was not previously authorized by the Court during this Case.

        The Confirmation Order may also be revoked under very limited circumstances. The Court may revoke the order if the Confirmation Order was procured by fraud and if a party in interest brings an adversary proceeding to revoke Confirmation within 180 days after the entry of the Confirmation Order.

F.   Final Decree

        Once the Estate has been substantially consummated, the Debtor, or such other party as the Court shall designate in the Confirmation Order, shall file a motion with the Court to obtain a final decree to close the case.

		GEO PETROLEUM, INC. a California corporation, Debtor and Debtor in Possession
Date: October 12, 1999	By:	/s/ Gerald T. Raydon
	Its:	President

Submitted by:
ROBINSON, DIAMANT & BRILL
A Professional Corporation

By: /s/ Martin J. Brill

Martin J. Brill
Attorneys for Debtor and Debtor in Possession
GEO PETROLEUM, INC.

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VII. SUPPORTING DECLARATION OF GERALD T. RAYDON

        I, Gerald T. Raydon, declare as follows:

              1. I am President and Chief Executive Officer of Geo Petroleum, Inc. (the “Debtor”). I have been the Chief Executive Officer of the Debtor for since in or about 1986. As such, I am authorized to make this declaration on the Debtor’s behalf and I have personal knowledge of all the facts set forth below. If called to testify, I could and would competently testify thereto.

              2. A voluntary petition for relief under chapter 11 of Title 11 of the United States Code was filed by the Debtor on November 16, 1998. The Debtor filed this chapter 11 Case to provide it an opportunity to propose and confirm a reorganization plan. The Debtor is in the business of development, production and management of oil and gas properties located in California.

              3. Martin J. Brill of Robinson, Diamant & Brill, a Professional Corporation (counsel for the Debtor) and myself are the individuals responsible for preparing this document.

              4. The Debtor’s books and records are the source of all financial data contained in this document.

              5. All facts and representations in the Plan and Disclosure Statement are true to the best of my knowledge.

              6. To the best of my knowledge and belief no fact material to a claimant or equity security holder voting to accept or reject the proposed Plan has been omitted.

              7. The accounting methods used to prepare the financial documents contained in the Disclosure Statement, are consistent with the Debtor’s historical practice.

        I declare under the penalty of perjury under the laws of the United States of America that the foregoing is true and correct and that this Declaration was executed this 18th day of October, 1999, at Los Angeles, California.

/s/ Gerald T. Raydon

Gerald T. Raydon

23

EXHIBIT “1”

Geo Petroleum, Inc.
Proforma Cash Flows

	Jan			Feb			Mar			1Q-00			Apr			May			Jun			2Q-00
Production:
Quantities:
Bbl					792			1,747			2,539			1,747			1,792			1,792			5,331
Mcf.
BOE					792			1,747			2,539			1,747			1,792			1,792			5,331
Price/BOE		18.00			18.00			18.00			18.00			18.00			18.00			18.00			18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50			6.50			6.50
Disposal:
Bbls.		5,115			5,217			5,322			15,654			5,481			5,645			5,815			16,941
Disposal       rev/Bbl.		6.00			6.00			6.00			6.00			6.00			6.00			6.00			6.00
Disposal       cost/Bbl.		3.50			3.50			3.50			3.50			3.45			3.45			3.45			3.45
Daily:
Oil       Production (BOE)					26			58						58			60			60
Disposal       (Bbls)		171			174			177						183			188			194
O&G Revenues					14,256			31,442			45,695			31,442			32,254			32,254			95,951
Disposal Revenues		30,690			31,304			31,931			93,925			32,888			33,871			34,888			101,647
Total		30,690			45,560			63,373			139,623			64,330			66,125			67,142			197,597
Operating    Expenses		16,275			21,280			27,255			64,810			27,513			28,294			28,824			84,631
G&A		9,300			10,926			12,852			33,078			13,142			13,522			13,830			40,494
Other
Total		25,575			32,206			40,107			97,888			40,655			41,816			42,654			125,125
Cash from    operations		5,115			13,354			23,266			41,735			23,675			24,309			24,488			72,472
Other proceeds		200,000									200,000
Capital/remedial    expenses		(100,000	)		(80,000	)					(180,000	)		(3,501	)					(4,038	)		(7,539	)
C-11 debt service
Secured       payments		(2,488	)		(2,488	)		(2,488	)		(7,464	)		(2,488	)		(2,488	)		(2,488	)		(7,464	)
Unsecured       reserve**		(1,512	)		(1,518	)		(4,492	)		(7,522	)		(4,615	)		(4,805	)		(4,858	)		(14,278	)
Total		(4,000	)		(4,006	)		(6,980	)		(14,986	)		(7,103	)		(7,293	)		(7,346	)		(21,742	)
Cash BOP					101,115			30,463						46,749			59,821			76,837
Cash EOP		101,115			30,483			46,749			48,749			59,821			76,837			89,941			89,941
C-11 Pmnt    Cumulative:
Secured		2,488			4,976			7,464						9,952			12,440			14,928
Unsecured**		1,512			3,030			7,522						12,137			16,941			21,800
Total		4,000			8,006			14,966						22,089			29,381			36,728

______________

   *   The $18.00 per barrel sales price of crude oil reflects August-October 1999 average oil prices. Costs are from the evaluation report of Sherwin Yoslin, independent petroleum engineer, dated as of January 1, 1996. These prices and costs are held constant throughout in accordance with standard evaluation practices. Current crude oil prices paid by the purchaser are about $19.00 per barrel.

   **   Actual payments to the unsecured creditors will be made in the following quarters.

24

Geo Petroleum, Inc.
Proforma Cash Flows

	Jul			Aug			Sep			3Q-00			Oct			Nov			Dec			4Q-00
Production:
Quantities:
Bbl.		1,845			1,845			1,909			5,596			1,909			1,988			2,030			5,926
Mcf.		73									73
BOE		1,845			1,849			1,909			5,596			1,909			1,988			2,030			5,926
Price/BOE*		18.00			18.00			18.00			18.00			18.00			18.00			18.00			18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50			6.50			6.50
Disposal:
Bbls.		6,048			8,290			8,542			18,879			6,802			7,075			7,358			21,236
Disposal       rev./Bbl.		6.00			8.00			6.00			6.00			6.00			6.00			6.00			6.00
Disposal       cost/Bbl		3.45			3.45			3.45			3.45			3.45			3.45			3.45			3.45
Daily:
Oil       Production (BOE)		61			61			64						64			68			68
Disposal       (Bbls)		202			210			218						227			236			245
O&G Revenues		33,205			33,205			34,353			100,762			34,353			35,779			36,531			106,863
Disposal Revenues		36,287			37,739			39,250			113,276			40,814			42,451			44,147			127,413
Total		69,491			70,943			73,603			214,038			75,167			78,230			80,678			234,078
Operating    Expenses		29,948			30,628			31,795			92,371			32,616			33,936			35,073			101,625
G&A		14,374			14,790			15,364			44,528			15,840			18,478			17,068			49,388
Other
Total		44,322			45,418			47,159			136,899			48,456			50,414			52,141			151,011
Cash from    operations		25,169			25,525			26,444			77,139			26,711			27,816			28,537			83,065
Other proceeds
Capital/retrieval    expenses					(4,862	)					(4,862	)		(5,772	)		(3,211	)		(3,669	)		(12,652	)
C-11 debt service
Secured       payments		(2,488	)		(2,488	)		(2,488	)		(7,484	)		(2,488	)		(2,488	)		(2,488	)		(7,464	)
Unsecured       reserve**		(5,063	)		(5,170	)		(5,445	)		(15,878	)		(5,525	)		(5,857	)		(6,073	)		(17,455	)
Total		(7,551	)		(7,658	)		(7,933	)		(23,142	)		(8,013	)		(8,345	)		(8,561	)		(24,919	)
Cash BOP		89,941			107,559			120,565						139,076			152,002			168,262
Cash EOP		107,559			120,585			138,076			139,076			152,002			168,262			184,569			184,569
C-11 pmnt.    Cumulative
Secured		17,416			19,904			22,392						24,880			27,368			29,856
Unsecured**		28,863			32,032			37,477						43,003			48,860			54,933
Total		44,279			51,936			59,869						67,883			76,226			84,789

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Geo Petroleum, Inc.
Proforma Cash Flows

	Jan			Feb			Mar			1Q-01			Apr			May			Jun			2Q-01
Production:
Quantities:
Bbl.		2,080			2,133			2,192			6,405			2,258			2,319			2,393			6,967
Mcf.
BOE		2,080			2,133			2,192			6,405			2,258			2,319			2,393			6,967
Price/BOE*		18.00			18.00			18.00			18.00			18.00			18.00			18.00			18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50			6.50			6.50
Disposal:
Bbls		7,653			7,959			8,276			23,888			8,608			8,952			9,310			26,870
Disposal       rev./Bbl		6.00			6.00			6.00			6.00			6.00			6.00			6.00			6.00
Disposal       cost/Bbl		3.45			3.45			3.45			3.45			3.45			3.45			3.45			3.45
Daily
Oil       Production (BOE)		69			71			73						75			77			80
Disposal       (Bbls)		255			265			276						287			296			310
O&G Revenues		37,442			38,392			39,461			115,295			40,610			41,738			43,065			125,413
Disposal Revenues		45,916			47,751			49,658			143,326			51,645			53,711			55,862			161,218
Total		83,358			86,143			89,120			258,621			92,255			95,449			98,927			286,631
Operating    Expenses		36,292			37,562			38,911			112,766			40,328			41,780			43,338			125,446
G&A		17,695			18,347			19,034			55,075			19,752			20,493			21,278			61,523
Other
Total		53,987			55,909			57,945			167,841			80,080			62,273			64,616			186,969
Cash from    operations		29,371			30,234			31,175			90,780			32,175			33,176			34,311			99,662
Other proceeds
Capital/remedial    expenses		(3,984	)		(4,336	)		(4,704	)		(13,024	)		(5,105	)		(5,413	)		(5,585	)		(16,103	)
C-11 debt service
Secured       payments		(2,488	)		(2,488	)		(2,488	)		(7,484	)		(2,488	)		(2,488	)		(2,488	)		(7,464	)
Unsecured       reserve**		(6,323	)		(6,582	)		(6,864	)		(19,770	)		(7,164	)		(7,465	)		(7,805	)		(22,435	)
Total		(8,811	)		(9,070	)		(9,352	)		(27,234	)		(9,652	)		(9,953	)		(10,293	)		(29,899	)
Cash BOP		184,569			201,145			217,973						235,091			252,509			270,319
Cash EOP		201,145			217,973			235,091			235,091			252,509			270,319			288,752			288,752
C-11 Pmnt.    Cumulative
Secured		32,344			34,832			37,320						39,806			42,296			44,784
Unsecured**		61,256			67,838			74,703						81,867			89,332			97,138
Total		93,600			102,670			112,023						121,675			131,628			141,922

26

Geo Petroleum, Inc.
Proforma Cash Flows

	July			Aug			Sep			3Q-01			Oct			Nov			Dec			4Q-01
Production:
Quanitites:
Bbl		2,466			2,545			2,625			7,636			2,706			2,795			2,882			8,386
Mcf.
BOE		2,466			2,545			2,625			7,636			2,706			2,795			2,882			8,385
Price/BOE*		18.00			18.00			18.00			18.00			18.00			18.00			18.00			18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50			6.50			6.50
Disposal:
Bbls.		9,682			10,069			10,473			30,225			10,473			10,473			10,473			31,419
Disposal       rev./Bbl.		6.00			6.00			6.00			6.00			6.00			6.00			6.00			6.00
Disposal       cost/Bbl.		3.45			3.45			3.45			3.45			3.45			3.45			3.45			3.45
Daily
Oil       Production (BOE)		82			85			87						90			93			96
Disposal       (Bbls)		323			336			349						349			349			349
O&G Revenues		44,392			45,817			47,243			137,452			48,748			50,312			51,876			150,935
Disposal Revenues		58,093			60,416			62,839			181,348			62,839			62,839			62,839			188,516
Total		102,485			106,234			110,081			318,800			111,568			113,150			114,715			339,451
Operating    Expenses		44,943			45,622			48,352			138,917			48,850			49,365			49,874			148,089
G&A		22,089			22,937			23,812			68,838			23,965			24,124			24,281			72,370
Other
Total		67,032			68,559			72,164			207,758			72,815			73,489			74,155			220,459
Cash from         operations		35,453			37,675			37,917			111,045			38,771			39,661			40,560			118,992
Other Proceeds
Capital/remedial    expenses		(5,777	)		(5,973	)		(6,179	)		(17,929	)		(6,388	)		(6,526	)		(6,669	)		(19,583	)
C-11 debt service
Secured       payments		(2,488	)		(2,488	)		(2,488	)		(7,464	)		(2,488	)		(2,488	)		(2,476	)		(7,452	)
Unsecured       reserve**		(8,148	)		(8,814	)		(8,887	)		(33,313	)		(9,143	)		(9,410	)		(9,692	)		(28,246	)
Total		(10,636	)		(11,302	)		(11,375	)		(33,313	)		(11,631	)		(11,898	)		(12,168	)		(35,698	)
Cash BOP		288,752			307,792			328,191						348,554			369,306			390,543
Cash EOP		307,792			328,191			348,554			348,564			389,306			390,543			412,268			412,268
C-11 Pmmt.    Cumulative
Secured		47,272			49,760			52,248						54,736			57,224			59,700
Unsecured**		105,285			114,100			122,967						132,130			141,541			151,233
Total		152,557			163,860			175,235						186,866			196,785			210,933

27

Geo Petroleum, Inc.
Proforma Cash Flows

	Jan			Feb			Mar			1Q-02			Apr			May			Jun			2Q-02
Production:
Quantities:
Bbl.		2,972			3,062			3,157			9,192			3,255			3,344			3,445			10,044
Mcf.
BOE		2,972			3,062			3,157			9,192			3,255			3,344			3,445			10,044
Price/BOE*		18.00			18.00			18.00			18.00			18.00			18.00			18.00			18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50			6.50			6.50
Disposal:
Obis.		10,473			10,473			10,473			31,419			10,473			10,473			10,473			31,419
Disposal       rev/Bbl		6.00			6.00			6.00			6.00			6.00			6.00			6.00			6.00
Disposal       cost/Bbl		3.45			3.45			3.45			3.45			3.45			3.45			3.45			3.45
Daily
Oil       Production (BOE)		99			102			105						106			111			115
Disposal       (Bbls)		349			349			349						349			349			349
O&G Revenues		53,500			55,123			56,826			165,449			58,588			60,192			62,014			180,794
Disposal Revenues		62,839			62,839			62,839			188,516			62,839			62,839			62,839			188,516
Total		116,338			117,962			119,655			353,965			121,427			123,031			124,852			369,310
Operating    Expanses		50,412			50,942			51,504			152,858			52,076			52,605			53,203			157,884
G&A		24,446			24,609			24,782			73,837			24,958			25,121			25,305			75,384
Other
Total		74, 858			75,551			76,286			226,696			77,034			77,726			78,508			233,268
Cash from         operations		41,480			42,411			43,379			127,270			44,393			45,305			46,344			136,042
Other proceeds
Capital/remedial    expanses		(6,810	)		(6,959	)		(7,106	)		(20,875	)		(7,261	)		(7,420	)		(7,566	)		(22,247	)
C-11 debt service
Secured       payments											0
Unsecured       reserve**		(12,444	)		(12,723	)		(13,014	)		(38,181	)		(5,598	)		—			—			(5,598	)
Total		(12,444	)		(12,723	)		(13,014	)		(38,181	)		(5,598	)								(5,598	)
Cash BOP		412,266			434,492			457,220						480,480			512,013			549,896
Cash EOP		434,492			457,220			480,480			480,480			512,013			549,898			588,676			588,678
C-11 Pmnt.    Cumulative
Secured		59,700			59,700			59,700						59,700			59,700			59,700
Unsecured**		163,677			176,400			189,414						195,012			195,000			195,000
Total		223,377			236,100			249,114						254,712			254,700			254,700

28

Geo Petroleum, Inc.

Proforma Cash Flows

	Jul			Aug			Sep			3Q-02			Oct			Nov			Dec			4Q-02
Production:
Quantities:
BbL		3,545			3,861			3,754			10,951			3,864			3,977			4,088			11,928
Mef.
BOE		3,545			3,861			3,754			10,951			3,864			3,977			4,088			11,928
Price/BOE*		18.00			18.00			18.00			18.00			18.00			18.00			18.00			18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50			6.50			6.50
Disposal:					.
Bbls		10,473			10,473			10,473			31,418			10,473			10,473			10,473			31,418
Disposal       ref/Bbl		8.00			8.00			8.00			6.00			6.00			6.00			6.00			6.00
Disposal       cost/Bbl		3.45			3.45			3.45			3.45			3.45			3.45			3.45			3.45
Daily
Oil       Production (BOE)		118			122			125						129			133			136
Disposal (Bbis)		349			349			349						349			349			349
O&G Revenues		63,815			66,716			67,577			197,108			69,557			71,577			73,577			214,711
Disposal Revenues		62,839			62,839			82,839			188,516			62,839			62,839			62,839			188,516
Total		126,654			128,555			130,416			385,625			132,396			134,416			136,415			403,227
Operating Expenses		53,794			54,416			55,032			163,242			55,682			56,346			57,004			169,032
G&A		25,486			25,878			25,868			77,032			26,068			26,272			26,474			78,814
Other
Total		79,280			80,094			80,900			240,274			81,750			82,618			83,478			247,848
Cash from         operations		47,374			48,461			49,516			145,351			50,646			51,798			52,937			155,381
Other Proceeds
Capital/remedial    expenses		(7,732	)		(7,895	)		(8,068	)		(23,695	)		(8,238	)		(8,418	)		(8,602	)		(25,258	)
C-11 debt service
Secured       payments											0												0
Unsecured       reserve**		—			—			—			—			—			—			—			—
Total											—												—
Cash BOP		588,678			628,318			668,884						710,332			752,740			796,120
Cash EOP		628,318			668,884			710,332			710,332			752,740			796,120			840,455			840,455
C-11 Pmnt.    Cumulative
Secured		59,700			59,700			59,700						59,700			59,700			59,700
Unsecured**		195,000			195,000			195,000						195,000			195,000			195,000
Total		254,700			254,700			254,700						254,700			254,700			254,700

29

Geo* Petroleum, Inc.

Proforma Cash Flows

	Jan			Feb			Mar			10-03			Apr			May			Jun			IC-43
Quantities:
Production:
Bbl		4,205			4,322			4,444			12,971			4,589			4,884			4,815			14,068
Mcf..
BOE		4,205			4,322			4,444			12,971			4,589			4,684			4,815			14,068
Price/BOE*		18.00			18.00			18.00			18.00			18.00			18.00			18.00			18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50			6.50			6.50
Disposal:
Bbis.		10,473			10,473			10,473			31,419			10,473			10,473			10,473			31,419
Disposal       rev/Bbl		6.00			6.00			6.00			6.00			6.00			6.00			6.00			6.00
Disposal       cost/Bbl		3.45			3.45			3.45			3.45			3.45			3.45			3.45			3.45
Daily
Oil Production       (DOE)		140			144			148						152			158			160
Disposal       (Bbis)		340			349			349						349			349			349
O&G Revenues		75,695			77,794			79,992			233,482			82,249			84,308			86,865			253,222
Disposal Revenues		62,839			62,839			62,839			188,515			62,839			62,839			62,839			188,516
Total		138,534			140,633			142,831			421,997			145,088			147,147			149,503			441,738
Operating    Expenses		57,696			58,382			59,105			175,183			59,844			80,526			61,297			181,667
G&A		26,687			26,898			27,122			80,707			27,348			27,558			27,796			82,702
Other
Total		84,383			85,280			86,227			255,890			87,192			88,084			89,093			264,369
Cash from         operations		54,151			55,353			56,604			186,107			57,896			59,063			60,410			177,369
Other proceeds
Capital/remedial    expenses		(8,784	)		(8,976	)		(9,166	)		(26,926	)		(9,366	)		(9,571	)		(14,675	)		(33,612	)
C-11 debt service
Secured       payments											0												0
Unsecured       reserve**		—			—			—			—			—			—			—			0
Total											—												0
Cash BOP		840,455			885,822			932,199						979,636			1,028,166			1,077,658
Cash EOP		885,822			932,199			979,636			979,836			1,028,166			1,077,658			1,123,393			1,123,393
C-11 Pmnt.    Cumulative
Secured		59,700			59,700			59,700						59,700			59,700			59,700
Unsecured		195,000			195,000			195,000						195,000			195,000			195,000
Total		254,700			254,700			254,700						254,700			254,700			254,700

30

Geo Petroleum, Inc.

Proforma Cash Flows

	Jul			Aug			SOP			3Q-03			Oct			Nov		Dec
Production:
Quantities:
Bbl		5,008			5,348			5,688			16,045			6,058			6,447		8,843
Mcf.
BOE		5,008			5,348			5,688			16,045			6,058			6,447		6,843
Price/BOE*		18.00			18.00			18.00			18.00			18.00			18.00		18.00
Lifting       cost/BOE*		6.50			6.50			6.50			6.50			6.50			6.50		6.50
Disposal:
Bbls.		10,473			10,473			10,473			31,419			10,473			10,473		10,473
Disposal       rev./Bbl.		6.00			6.00			6.00			6.00			6.00			6.00		6.00
Disposal       cost/Bbl		3.45			3.45			3.45			3.45			3.45			3.45		3.45
Daily
Oil       Production (BOE)		167			178			190						202			215		228
Disposal       (Bbls)		349			349			349						349			349		349
O&G Revenues		90,149			96,268			102,386			288,803			109,038			116,048		123,176
Disposal Revenues		62,839			62,839			62,839			188,516			62,839			62,839		62,839
Total		152,988			159,106			165,224			477,319			171,877			178,886		186,014
Operating    Expenses		62,442			64,451			66,458			193,351			68,644			70,941		73,283
G&A		28,148			28,766			29,383			86,297			30,058			30,763		31,483
Other
Total		90,590			93,217			95,841			279,648			96,700			101,704		104,766
Cash from         operations		62,396			65,889			69,383			197,671			73,177			77,182		81,248
Other proceeds
Capital/remedial    expenses		(24,933	)		(25,726	)		(27,117	)		(77,775	)		(28,506	)		(30,019)		(31,610)
C-11 debt service											0
Secured       payments											0
Unsecured       reserve**		—			—			—			0			—			—		—
Total
Cash BOP		1,123,393			1,160,858			1,201,022						1,243,288			1,287,959		1,335,123
Cash EOP		1,160,858			1,201,022			1,243,288						1,287,959			1,335,123		1,384,761
C-11 Pmnt.    Cumulative
Secured		59,700			59,700			59,700						59,700			59,700		59,700
Unsecured		195,000			195,000			195,000						195,000			195,000		195,000
Total		254,700			254,700			254,700						254,700			254,700		254,700

31

Geo Petroleum, Inc.

Proforma Cash Flows

	4Q-03			2000		2001		2002			2003
Production:
Quantities:
Bbl		19,348			19,393		29,394		42,115			62,432
Mcf.					73
BOE		19,348			19,393		29,394		42,115			62,432
Price/BOE*		18.00			18		18		18			18
Lifting cost/BOE*		6.50
Disposal
Bbls.		31,419			72,710		112,401		125,677			125,677
Disposal rev./Bbl.		6.00			6.00		6.00		6.00			6.00
Disposal cost/Bbl		3.45
Daily
Oil Production (BOE)
Disposal (Bbis)
O&G Revenues		348,262			349,074		529,096		758,063			1,123,769
Disposal Revenues		188,516			436,260		674,406		754,063			754,063
Total		538,778			785,334		1,203,503		1,512,126			1,877,832
Operating Expanses		212,868			343,437		525,217		643,016			763,069
G&A		92,302			167,486		257,807		305,067			342,006
Other
Total		305,170			510,923		783,024		948,083			1,105,077
Cash from operations		231,608			274,411		420,479		564,043			772,755
Other proceeds
Capital/remedial axes		(90,135	)		(205,053)		(66,639)		(92,075	)		(228,449)
C-11 debt service
Secured payments		0
Unsecured reserve**		0
Total		0
Cash BOP
Cash EOP		1,384,761
C-11 Pmnt. Cumulative
Secured
Unsecured**
Total

32

EXHIBIT “2”

STOCK PURCHASE AND SALE AGREEMENT

             This STOCK PURCHASE AND SALE AGREEMENT (the “Agreement”) is made this 1st day of October, 1999 by and between TD Associates, Inc. (“ TD”), a California corporation, and GEO PETROLEUM, INC. (“Geo”), a California corporation.

RECITALS

        1.  TD is a corporation duly organized and existing under the laws of the State of California.

        2.  Geo is a corporation duly organized under the laws of the State of California with authorized capital stock consisting of 50,000,000 shares of voting common stock, no par value, of which 8,800,338 shares are issued and outstanding (“Geo Common Stock”).

        3.  Geo filed a Voluntary Petition for protection under Chapter 11 of the U.S. Bankruptcy laws in the U.S. Bankruptcy Court (the “Court”) for the Central District of California on November 16, 1998. Geo is a debtor-in-possession during the pendency of such proceeding. Upon the terms and conditions contained herein, and subject to the Court’s confirmation of Geo’s Plan of Reorganization (the “ Plan”) to be filed with the Court as the Third Amended Plan, TD desires to purchase 4,500,000 newly issued shares of Geo Common Stock for five hundred thousand dollars ($500,000.00), as the basis for Geo’s Plan to be submitted to the Court.

AGREEMENT

        In consideration of the mutual agreements, conditions and covenants herein contained including the recitals, the parties hereto agree as follows:

ARTICLE 1

1.  Consideration

        1.1   CONSIDERATION. Subject to all of the terms and conditions of this Agreement TD agrees to purchase from Geo and Geo agrees to sell to TD four million five hundred thousand newly issued shares of Geo Common Stock (the “New Shares”) at a price aggregating five hundred thousand dollars ($500,000.00) (the “Purchase Price”) as part of Geo’s Plan to be submitted to the Court. The New Shares, when issued, will represent approximately 30% of the issued and outstanding shares of Geo Common Stock provided for upon full implementation of the Plan. For purposes of Section 368 (a), et seq, of the Internal Revenue Code, it is deemed and intended that such issuance shall not constitute a change of control of Geo. The Common Stock will be the only class of stock issued or outstanding at the Closing.

        1.2   GEO SHARES EXEMPT FROM REGISTRATION. The parties hereto intend that the Geo Shares to be issued to TD at the Closing shall be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”), pursuant to Section 4(2) of the Act and the rules and regulations promulgated thereunder.

        1.3   ADDITIONAL CONSIDERATION.

              A.   Geo shall cause an application to be filed with the Court, authorizing at the earliest possible time a loan and deposit of $100,000 by TD for the benefit of Geo. Upon receipt of authorization, TD will within one day deposit such funds with the firm of Robinson, Diamant & Brill, representing an amount equal to 20% of the Purchase Price. Such deposit shall be secured by a first security interest in the assets and income of Geo’s Oxnard Field Disposal Project. The Deposit shall be repaid to TD if the Plan is not confirmed for any reason not the fault of TD. If the Plan is not confirmed due to TD’s default or inability to perform its obligations hereunder, the Deposit shall be paid to Geo as liquidated damages.

              B.   Geo shall prepare the Plan, with TD’s approval, providing that (i) except for any security interests still vested in secured creditors at Closing there shall be no remaining security interests of any kind in

33

respect of the assets of Geo reducing any of its assets and all Geo assets shall be free and clear from any liens, liabilities and encumbrances, and (ii) the said proceeds of the Purchase Price shall be used as follows:

        l.   Geo shall utilize the first $300,000 of the proceeds of the Purchase Price to pay approved creditors’ claims, priority claims, costs of administration, and other costs pursuant to the terms of the Plan.

        2.   The amount of $200,000, less any deposit allocated for the same purpose, shall be provided to Geo for the sole purpose of improving Geo’s oil, gas and disposal properties. Such funding will be made with the specific intent of increasing Geo’s revenues and its ability to pay an additional sum of $200,000 to its secured and unsecured creditors over a period of approximately 3-4 years from confirmation of the Plan in quarterly installments equal to 30% of net revenues generated in the preceding quarter, but in no event less than $12,000 per quarter.

              C.   After consultation with TD, and within the time allowed for rejection of executory contracts, Geo may reject certain other executory contracts including selected oil and gas leases in the Rosecrans field and other fields, retaining only those that it deems worthy of further investment and operations.

              D.   TD agrees that all of its fund-raising activities will be conducted in order to provide capital for Geo’s ongoing operations and for acquisitions, new drilling, reworking wells, and related activities, except for those funds required by TD to continue to develop and operate its existing properties. The terms of providing the capital shall be based on arms-length transactions consistent with good oil industry practice.

              E.   Geo shall notice a special directors’ meeting to be held the first day after Closing and shall propose the following persons be elected as directors of Geo: Dennis Timpe as Chairman, Lori Timpe Long, and Christian Dillon. The Board is authorized to elect two additional outside directors at a later date to bring the total number of directors to five. At the first meeting, Gerald T. Raydon, William Corcoran and Alyda Raydon shall resign from the Geo Board of Directors, with the corporation’s thanks for their services. TD shall propose that the new Board of Directors elect new management of the corporation, nominating Dennis Timpe as President, Lori Timpe Long as Secretary/Treasurer. TD shall enter into a consulting agreement with Gerald T. Raydon on the terms and conditions set forth in Exhibit A attached hereto.

ARTICLE 2

2.   Representations And Warranties

        2.1   MUTUAL REPRESENTATIONS AND WARRANTIES. Except as disclosed in the Disclosure Schedule dated as of the date of this Agreement and delivered to the other party concurrently herewith (by specific reference to the section hereof pursuant to which the disclosure is being made) TD and Geo represent and warrant, with respect to each other as follows, that as of the Closing.

              (a)  Organization. It is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has full power and authority to conduct its business as it is now being conducted and to own and lease its properties and assets, and it is duly qualified to do business as a foreign corporation in good standing in every jurisdiction in which the conduct of its business or ownership or leasing of its properties requires such qualification. If in any jurisdiction it is not so qualified, such will not have any material adverse effect on its “business, prospects, assets, income or financial condition, hereinafter “Financial Condition”.

              (b)  Authority. It has full power and authority to enter into this Agreement and to carry out the transactions contemplated herein. The execution and delivery of this Agreement and the consummation of the transactions contemplated herein have been duly and validly authorized and approved by its Board of Directors and no other corporate proceedings on its part are necessary to authorize this Agreement, or the consummation of the transactions contemplated herein. This Agreement has been duly and validly executed and delivered by it and constitutes its valid and binding agreement enforceable against it in accordance with the terms hereof.

              (c)  Conflict: Approvals. Neither the execution and delivery of this Agreement by it, nor compliance by it with the terms of this Agreement will (1) violate or conflict with or result in a breach or default of any of the terms, or conditions of its Articles of Incorporation or Bylaws, (2) violate any applicable law, statute,

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rule, regulation or order promulgated by any governmental authority, or (3) conflict with or result in a material breach, acceleration or material default or under any of the terms, conditions of (A) any judgment, order, decree, or ruling to which it is a party, or any injunction to which it is subject, or any court or governmental authority, domestic or foreign or (B) any agreement, contract or commitment to which it is a party, or (4) require the consent or approval of, or declaration, filing or registration with, any non-governmental third party or, to the best of its knowledge, any governmental authority, or stock exchange in the United States, provided, however, that this Agreement may not become effective, except as to the Deposit provided for above, until it has been approved by the Court as part of the initial Plan and adopted at Confirmation of the Plan.

              (d)  Affiliates. Except as set forth in Item 2.1(d) of the Disclosure Schedule, no person owns of record or to its best knowledge, owns beneficially five percent (5%) or more of any class of its issued and outstanding voting securities. In Schedule 2.1 attached hereto, Geo lists its stock outstanding. A current Geo shareholder list will be ordered by Geo at Closing and delivered to TD when received from the transfer agent. Geo has no subsidiaries.

              (e)  Litigation. Except as set forth in Item 2.1(e) of the Disclosure Schedule, (1) there is no action, suit, proceeding, claim or investigation, pending or, to its knowledge, threatened, by or against or otherwise affecting it, which might have a material adverse effect on its Financial Condition; and it knows of no basis or grounds for any such action, suit, proceeding, claim or investigation, and (2) there is no outstanding order, writ, injunction or decree of any court government or governmental agency, or any arbitration award, against it which might have a material adverse effect on its Financial condition.

              (f)  Taxes. Except as set forth in Section 2.1(f) of the Disclosure Schedule, all tax returns and reports required by law to be filed by it have been duly filed, all taxes, assessments, fees and other governmental charges (collectively “Taxes”) upon it or upon any of its respective properties, assets, interests or income which are due and payable have been paid or adequate reserves therefor have been provided for on its books and financial statements. Geo has been delinquent in filing tax returns but has been duly advised that no taxes are due because of its federal tax loss carry forwards of $5,400,000 and state carry forwards of $3,400,000 at year end 1997. Any franchise or other taxes due to California will be paid as priority claims upon Closing.

              (g)  Title. To the best of its knowledge and belief, except as set forth in Item 2.1(g) of the Disclosure Schedule, it has good and marketable title to all of the properties and assets, real and personal which it purports to own, free and clear of all liens, claims, charges encumbrances and restrictions of whatsoever nature (“Encumbrances”).

              (h)  Securities Compliance. To the best of its knowledge and belief during the five (5) year period prior to execution of this Agreement, no director or officer of it has been involved in any of the events set forth in Rule 401(f) of Regulation S-K of the Act. It has never been subject to any claim or proceeding brought by any shareholder of it under either state or federal securities laws.

              (i)  Loans. Except as set forth in Item 2.1(i) of the Disclosure Schedule it has not received any notices of default regarding any of its loans or other credit facilities.

              (j)  Conduct of Business. Since November 16, 1998, except as set forth in Item 2.1 of the Disclosure Schedule, it has not:

        1.  Directly or indirectly redeemed, purchased or otherwise acquired or recapitalized or reclassified any of its capital stock or liquidated in whole or in part;

        2.  Merged or consolidated with any other corporation;

        3.  Mortgaged, pledged or otherwise encumbered any of its assets;

        4.  Altered or amended its certificate of incorporation or bylaws;

        5.  Entered into, materially amended or terminated any material contract, agreement, franchise, permit or license; and

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        6.  Except in the normal course of business, made any material increase in compensation payable or to become payable by it to its directors, officers, or employees, or any increase in benefits or benefit plan costs, or any increase in any bonus, insurance, pension, compensation or other benefit plan covering any directors or officers.

        2.2   SPECIAL REPRESENTATIONS AND WARRANTIES OF TD

              A.   INVESTMENT INTENT. TD understands that the Geo Shares to be issued to it at the Closing Date, as defined hereafter, are being issued and delivered in reliance upon the exemption provided in Section 4(2) of the Securities Act of 1933 (the “Securities Act”) for non-public offerings or upon the exception provided for in Section 3(a)(10) of the Securities Act and TD further understands that it will be required to make the following representations and warranties with the intent that the same may be relied upon by Geo in determining the availability of such exemption.

        (1)   The Geo Shares are being acquired solely for the account of TD, for investment purposes only, and not with a view to, or for sale in connection with any distribution thereof and with no present intention of distributing or reselling any part of the Geo Shares, except any resale made in conformity with the Securities Act.

        (2)   TD agrees not to dispose of its Geo Shares or any portion thereof unless and until counsel for Geo shall have determined that the intended disposition is permissible and does not violate the Securities Act or any applicable state securities laws, or the rules and regulations thereunder.

              B.   RESTRICTIVE LEGEND. TD agrees that the certificates evidencing the Geo Shares acquired pursuant to this Agreement will have a legend placed thereon stating that the securities have not been registered under the Act or any State or federal securities laws and setting forth or referring to the restrictions on transferability and sales of the Geo Shares.

        2.3   SPECIAL REPRESENTATIONS AND WARRANTIES OF GEO. Except as disclosed (by specific reference to the section hereof pursuant to which the disclosure is being made) in the Disclosure Schedule dated as of the date of this Agreement and delivered to the other party concurrently herewith, Geo represents and warrants to TD as follows:

              (a)  Capital. Its authorized capital stock consists of 50,000,000 common voting shares, no par value of which 8,800,368 shares are issued and outstanding. All of such issued and outstanding shares are validly issued, fully paid and non-assessable. Geo has authorized but has not issued 100,000 shares of preferred stock with a par value of $1,000 per share.

              (b)  Financials. Attached hereto as Exhibit B are true and correct copies of (1) an unaudited balance sheet of Geo as of September 30, 1998; and (2) the audited balance sheet of Geo as of December 31, 1997, all of which are incorporated herein by this reference (such balance sheets and dates hereinafter referred to as the “Geo Balance Sheets” and “Geo Balance Sheet Dates,” respectively). The Geo Balance Sheets and the notes thereto fairly present the assets, liabilities and financial condition of Geo as of the respective dates thereof, and such statements of operations, stockholders equity and changes in financial position and the notes thereto fairly present the results of operations and financial position of Geo for the periods therein referred to, and have been prepared in accordance with generally accepted United States accounting principles as applied on a consiste nt basis throughout the periods involved except, in the case of unaudited statements, for normally recurring year-end adjustments, which adjustments, individually or in the aggregate, will not be material. Except as set forth in Item 2.3(b) of the Disclosure Schedule, there has not been any material adverse change in the Financial Condition, results of operations or business of Geo since September 30, 1998, and no event or condition his occurred or exists which will result in a material adverse change other than changes resulting from general economic conditions.

              (c)  Issuance of Geo Shares. Subject to the approval of the Court, all other approvals, permits, consents, orders and authorizations have been obtained and necessary documents have been filed under all applicable laws of the United States to qualify the issuance, exchange and distribution of the New Shares to be issued to the Shareholders pursuant to this Agreement.

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              (d)  Consultant Obligations. Except as set forth in Item 2.3(d) of the Disclosure Schedule, at closing, Geo will have no obligation to its officers, directors or employees as a result of employment agreements, stock options, unpaid bonuses, or any form of employee benefits or compensation other than salary and wages.

              (e)  No Liabilities. Except as set forth in Item 2.3(e) of the Disclosure Schedule, and except for those liabilities created under the initial Plan, at Closing, after confirmation of the Plan by the Court, there shall be no liabilities reflected on Geo’s balance sheet.

              (f)  Environmental matters Except as set forth in Item 2.3(f) of the disclosure Schedule, at Closing there shall be no threatened or outstanding environmental claims, orders or other proceedings of any type.

ARTICLE 3

3.   Covenants

        3.1   INVESTIGATIVE RIGHTS. From the date of this Agreement until the Closing Date, the parties shall cooperate for the sole purpose of accomplishing a due diligence investigation within the scope of the Transaction. Each party shall furnish the other party with all information concerning each party’s affairs as the other party may reasonably request. If the Transaction contemplated hereby is not completed, all documents received by each party and/or its attorneys and accountants, auditors or other authorized representatives shall be returned to the other party who provided same upon request. The parties hereto, their directors, employees, agents and representatives shall not disclose any of the information described above unless such information is already disclosed to the public, without the prior written consent of the patty to which the confidential information pertains. Each party shall take such steps as are reaso nably necessary to prevent disclosure of such information to unauthorized third parties.

        3.2   INDEMNIFICATION OF TD. Geo agrees to defend and hold TD and its officers, directors and agents harmless against and in respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities, damages, recoveries and deficiencies, including interest, penalties, and reasonable attorney fees, that it shall incur or suffer should Geo fail to perform any of its respective representations, warranties, covenants and agreements in this Agreement or in any Disclosure Schedule, exhibit or other instruments furnished or to be furnished by Geo under this Agreement.

        3.3   LEGAL OPINIONS. Each party shall supply legal opinions substantially as set forth in subparagraphs 6.2(d) and 6.3(d). TD and Geo agree to use all reasonable efforts to deliver all exhibits and schedules required by this Agreement within ten (10) business days of the date of execution of this Agreement by all parties.

ARTICLE 4

4.  Conditions Precedent To Td’s Performance

        4.1   CONDITIONS. TD’s obligations hereunder shall be subject to the satisfaction at or before the Closing, of all the conditions so forth in Article 5. TD may waive any or all of these conditions in whole or in part without prior notice, so long as such waiver is in writing; and provided, however, that no such waiver of a condition shall constitute a waiver by TD of any other condition or any of TD’s other rights or remedies at law or in equity, if Geo shall be in default of any of its representations, warranties, or covenants under this Agreement.

        4.2   ACCURACY OF REPRESENTATION. Except as otherwise permitted by this Agreement, all representations and warranties by Geo in this Agreement or in any written statement that shall be delivered to TD by Geo under this Agreement shall be true and accurate in all material respects and as of the Closing Date as though made at that time.

         4.3   PERFORMANCE. Geo shall have performed, satisfied, and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it, on or before the Closing Dates. If Geo has not performed, TD may give Geo written notice prior to Closing, including particulars known to it and the Closing shall be delayed and Geo shall have ten (10) days to perform or comply.

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        4.4   ABSENCE OF LITIGATION. No action, suit or proceeding before any court or any governmental body or authority, pertaining to the transaction contemplated by this Agreement or to its consummation, shall have been instituted against Geo on the Closing Date.

        4.5   CORPORATE PROCEEDINGS. All corporate and other necessary proceedings contemplated herein and all documents necessary thereto shall be reasonably satisfactory in form and substance to the parties hereto and their counsel.

              (a)  Statutory Regulations. All statutory requirements for the valid consummation of the transactions contemplated by this Agreement shall have been fulfilled, all authorization, consents and approvals of all non-governmental third parties, and all governmental authorities, required to be obtained in order to permit consummation of the transactions contemplated by this Agreement, and to permit the business currently carried on by it to continue unimpaired immediately following the Closing Date shall have been obtained.

              (b)  Plan confirmation. The transactions contemplated by this Agreement shall have been approved in the Plan and the Plan has been confirmed by the Bankruptcy Court, and all other corporate action required by law with respect to the Transaction shall have been taken.

        4.6   OFFICER’S CERTIFICATE. Geo shall have delivered to TD a certificate, dated the Closing Date, and signed by its President, certifying that the conditions specified in Section 4.2 and 4.5 hereof have been fulfilled. (See “Officer’s Certificate” attached hereto as Schedule 4.6.).

ARTICLE 5

5.   Conditions Precedent To Geo Performance

        5.1   CONDITIONS. Geo’s obligations hereunder shall be subject to the satisfaction, at or before the Closing Date, of all the conditions set forth in this Section 6 of the Agreement, and, upon finalization and execution of all documentation. Geo shall have a period of thirty (30) days to have the transaction and documentation reviewed and approved by securities counsel. Failure to obtain such approval will void this Agreement. Geo may waive any or all of these conditions in whole or in part without prior notice, so long as such waiver is in writing; and provided, however, that no such waiver of a condition shall constitute a waiver by Geo of any other condition or any of Geo’s rights or remedies, at law or in equity, if TD shall be in default of any of its representations, warranties, or covenants under this Agreement.

        5.2   ACCURACY OF REPRESENTATIONS. Except as otherwise permitted by this Agreement, all representations and warranties by TD in this Agreement or in any written statement that shall be delivered to Geo by TD under this Agreement shall be true and accurate in all material respects and as of the Closing Date as though made at that time.

        5.3   PERFORMANCE. TD shall have performed, satisfied, and complied with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by it, on or before the Closing Date. If TD has not performed, Geo may give TD written notice, prior to Closing, including particulars known to it and the Closing shall be delayed and TD shall have ten (10) days to perform or comply.

        5.4   CORPORATE PROCEEDINGS. All corporate and other necessary proceedings contemplated herein and all documents necessary thereto shall be reasonable satisfactory in for and substance to the parties hereto and their counsel.

        5.5   OFFICERS’ CERTIFICATE. TD shall have delivered to Geo a certificate, dated the Closing Date, and signed by the President of TD, certifying that the conditions specified in Section 5.2 and 5.4 hereof have been fulfilled (see “Officers Certificate” attached hereto as Schedule 5.6).

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ARTICLE 6

6.   Closing

        6.1   CLOSING. The Closing shall take place within 24 hours of the entry of an order of the Court confirming the Plan at the offices of Robinson, Diamant & Brill, A Professional Corporation 1888 Century Park East, Suite 1500, Los Angeles, California 90067, at 10:30 a.m. PDT or such other date and place as the parties may mutually agree upon (the “Closing Date”).

        6.2   TD’S DELIVERIES TO GEO. At Closing, TD, or a merger subsidiary created by TD, shall deliver to Geo the following instruments and documents against delivery of the items specified in paragraph 7.3:

              (a)  Cash in the amount of five hundred thousand dollars ($500,000), to be allocated by Geo to the immediate payment of $300,000 for payments to Creditors, for priority claims, and for administrative claims under the Plan as confirmed by the Bankruptcy Court. The sum of $200,000, less any amounts previously advanced or deposited by TD, shall be paid to Geo for working capital;

              (b)  Certified resolutions of TD’s Board of Directors, in a form satisfactory to counsel for Geo, authorizing the execution and performance of this Agreement and all actions to be taken by TD under this Agreement;

              (c)  A certificate executed by the president and the secretary of TD certifying that all of TD’s representations and warranties under this Agreement are true as of the Closing, as though each of those representations and warranties have been made on the date of Closing; and

              (d)  TD shall deliver the opinion of its counsel dated the Closing Date, in form and substance satisfactory to counsel for Geo to the effect that:

        (1)  TD is a corporation duly organized, validly existing and in good standing under the laws of State of __________, and is duly qualified to do business and is in good standing in each State where its business requires qualification.

        (2)  The execution and consummation of this Agreement have been duly authorized and approved by TD’s Board of Directors. To the best of counsel’s knowledge and belief, after reasonable inquiry, the making and performance of this Agreement by TD will not violate any laws, rules, regulations, decrees, orders or judgments, known to such counsel or TD’s certificate of incorporation or bylaws and wil l not result in the breach, or violation of, or constitute a default under, any contractual agreement of TD.

        (3)  Counsel has no knowledge of any litigation, proceeding or investigation of the type described in Section 2.1(e) hereof.

        6.3   GEO’S DELIVERIES TO TD. At Closing, Geo shall deliver to TD the following instruments and documents against delivery of the items specified in paragraph 6.2:

              (a)  Certificates representing 4,500,000 shares of the restricted Common Stock of Geo, no par value.

              (b)  Certified resolutions of Geo’s Board of Directors, in a form satisfactory to counsel for TD, authorizing the execution and performance of this Agreement and all actions to be taken by Geo under this Agreement.

              (c)  A certificate executed by the president or vice president and the secretary of Geo certifying that all of Geo’s representations and warranties under this Agreement are true as of the Closing, as though each of those representations and warranties had been made on the date of Closing.

              (d)  Geo shall deliver the opinion of its counsel, dated the Closing Date, in form and substance satisfactory to counsel for TD to the effect that:

        (1)  Geo is a corporation duly organized, validly existing and in good standing under the laws of the State of California, and is duly qualified to do business and is good standing in each State when its business requires qualification.

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        (2)  Geo’s authorized capital stock is as set forth in Section 2.3(a) hereof.

        (3)  The execution and consummation of this Agreement have been duly authorized and approved by Geo’s Board of Directors. To the best of counsel’s knowledge and belief, after reasonable inquiry, the making and performance of this Agreement by Geo and TD will not violate any laws, rules, regulations, decrees, orders or judgments known to such counsel or Geo’s certificate of incorporation or bylaws and will not result in the breach or violation of, or constitute a default under, any contractual agreement of Geo.

        (4)  Counsel has no knowledge of any litigation, proceeding or investigation of the type described in Section 2.1(c) hereof.

        (5)  The shares of Geo Common Stock to be issued and delivered to TD pursuant to this Agreement are duly and validly authorized and issued, and are fully paid and non-assessable.

        (6)  All approvals, permits, consents, orders and authorizations have been obtained and necessary documents have been filed under all applicable laws of the United States to qualify the issuance and delivery of Geo Common Stock pursuant to this Agreement and except for filing of requisite notices or other documentation with any applicable governmental authority or stock exchange in the United States no other regulatory action is required in connection with the issuance and delivery of the Geo Common Stock.

ARTICLE 7

7.  Miscellaneous

        7.1   CAPTIONS AND HEADINGS. The Article and paragraph headings throughout this Agreement are for convenience and reference only and shall in no way be deemed to define, limit, or add to the meaning of this Agreement or any part thereof.

        7.2   NO ORAL CHANGE. This Agreement and any provision hereof, may not be waived. changed, modified, or discharged orally, but it can be changed by any agreement in writing signed by the party against whom enforcement of any waiver, change modification or discharge is sought.

        7.3   NON-WAIVER. Except as otherwise expressly provided herein, no waiver of any covenant, condition, or provision of this Agreement shall be deemed to have been made unless expressly in writing and signed by the party against whom such waiver is charged, and (i) the failure of any party to insist in any one or more cases upon the performance of any of the provisions, covenants, or conditions of this Agreement or to exercise any option herein contained shall not be construed as a waiver or relinquishment for the future of any such provision, covenant, or condition, (ii) the acceptance of performance of anything required by this Agreement to be performed with knowledge of the breach or failure of a covenant, condition, provision, hereof shall not be deemed a waiver of such breach of failure; and (iii) no waiver by any party of one breach by another party shall be construed as a waiver with respect to any other or subsequent breach.

        7.4  TIME OF ESSENCE. Time is of the essence in this Agreement and of each and every provision hereof.

        7.5  ENTIRE AGREEMENT. This Agreement and its Exhibits contain the entire Agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings.

        7.6  CHOICE OF LAW. This Agreement and its application shall be governed by the laws of the State of California.

        7.7  COUNTERPARTS. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but of which together shall constitute one and the same instrument.

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        7.8  NOTICES. All notices, request, demands, and other communications under, this Agreement shall be in writing and shall be deemed to have been duly given, or on the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed as follows:

To TD: Mr. Dennis Timpe
TD & Associates, Inc.
18281 Lemon Drive
Yorba Linda, CA 92886

To Geo: Gerald T. Raydon
7318 Berry Hill Drive
Rancho Palos Verdes, CA 90275

With a copy to: Martin J. Brill, Esq.
Robinson, Diamant and Brill
1888 Century Park East, Suite 1500
Los Angeles, CA 90067

        7.9  BINDING EFFECT. This Agreement shall inure to and be binding upon the heirs, executors, personal representatives, successors and assigns of each of the parties to this Agreement.

        7.10  MUTUAL COOPERATION. The parties hereto shall cooperate with each other to achieve the purpose of this Agreement, and shall execute such other and further documents and take such other and further actions as may be reasonable and necessary or convenient to effect the transaction described herein.

        7.11  BROKERS. Each of the parties hereto shall indemnify and hold the other harmless against any and all claims, losses, liabilities or expenses which may be asserted against it as a result of its dealings, arrangements or agreements with any broker, finder or person claiming to have a right to compensation for bringing the parties into agreement.

        7. l2  ANNOUNCEMENTS. TD and Geo will consult and cooperate with each other as to the timing and content of any announcements of the transactions contemplated hereby to the general public or to employees, customers or suppliers.

        7.13  EXPENSES. TD will pay all legal, accounting and any other out-of-pocket expenses reasonably incurred in connection with the Transaction, whether or not the Transaction contemplated hereby is consummated.

        7.14  SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations, warranties, covenants and agreements of the parties set forth in this Agreement or in any instrument, certificate, opinion, or other writing providing for in it, shall survive for a period of twenty-four (24) months after Closing irrespective of any investigation made by or on behalf of any party.

        7.15  EXHIBITS. As of the execution hereof, the parties hereto have provided each other with the Exhibits and a Disclosure Schedule provided for herein above, including any items referenced therein or required to be attached thereto. Any material changes to the Exhibits and Disclosure Schedule shall be immediately disclosed to the other party. All such Exhibits or Schedules are incorporated herein and made a part of this Agreement.

		TD & ASSOCIATES, INC
Dated:   October     , 1999	By:	/s/Dennis Timpe
		Dennis Timpe President

By:	/s/Lori Timpe-Long
	Lori Timpe-Long Secretary

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		GEO PETROLEUM, INC.
Dated: October    , 1999	By:	/s/
		Gerald T. Raydon President

By:	/s/
	Alyda L. Raydon Secretary

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DISCLOSURE SCHEDULE
TD & ASSOCIATES, INC. AND GEO PETROLEUM, INC.

        2.1

              (d)  Holders of 5% or more of Geo common stock are:

Shareholder	Shares owned
Gerald T. and Alyda L Raydon		3,693,000, 43	%
Drake Capital Corporation. principals and affiliates:		689,000 (7.8	%)
Additional shares up to 500,000 may still be held in street name.

              (e)  All pre-petition lawsuits, proceedings and claims against Geo are expected to be discharged or paid by the time Geo is discharged from bankruptcy, except with respect to the Harriman Group/City National Bank loan matter, except for undetermined claims of the SCAQMD, Ventura Air Pollution District, and fees asserted by Los Angeles County. There is also pending in the Bankruptcy Court an adversary action initiated by Lenox, Snodgrass and Hanson for declaratory relief that the Pooling Agreement and their leases have been terminated. Trial is scheduled for March, 2000 in the Bankruptcy Court.

              (f)  State franchise taxes will be paid out of administrative funds. State and Federal tax returns for the years 1994-1998 have not yet been filed. Because of the bankruptcy and Geo’s tax loss carry-forwards, the IRS should not require penalties for failure to file the returns in a timely fashion, provided that they are diligently prepared and tiled following Geo’s discharge from bankruptcy and obtaining of funds necessary for preparing the return. Geo believes that no taxes will be due for those years because of Geo’s State and federal tax loss carry-forwards.

              (g)  The Vaca Tar Sand Unit, not including the company’s disposal facilities, is subject to a Deed of Trust covering a one-third undivided interest in favor of Richard Dixon, et al. sometimes referred to as the “Harriman Group.” The Unit is subject to a Deed of Trust covering a two-thirds interest in favor of Gerald T. Raydon, securing a Promissory Note dated September 1, 1997 for $200,000. The Raydon Deed of Trust will be discharged in the Bankruptcy and reconveyed to Geo at the Closing.

              William E. Lenox, one of two lessors of an 80 acre-parcel in the Vaca Tar Sand Unit, has filed a notice requesting that he be released from the Unit and has tiled a claim in the bankruptcy case for $500,000 to clean up his property. Geo has advised him that his notice was untimely and invalid, and that the Pooling Agreement and the Commingling Agreement would in any case prevent the giving up of any rights of use of the land by Geo. Geo expects that the claim in bankruptcy will be denied. His sister, a Mrs. Snodgrass, lessor of a 39-acre parcel in the Unit, and another party, who is the holder of a less than one percent interest in the Unit, have filed similar claims with respect to the same alleged clean-up requirement, which are also expected to be denied. A majority of the parties subject to the Pooling Agreement signed ratifications of the leases in 1998.

              Two idle wells and the related Athens and Perkins leases in the Rosecrans Field are the subject of the Russell v. Geo action in which plaintiff was awarded attorney’s fees and damages for clean-up of the sites. The action has been appealed by Geo. In the Torgerson v. Geo lawsuit, plaintiff and cross-complainant won attorney’s fees and cleanup costs. The well on the property has been abandoned and the site cleaned up. Geo has appealed the judgment.

              Both suits are expected to be discharged at the time Geo is discharged, unless Geo is still prosecuting its appeals. Geo expects to abandon its appeal as to any of said suits, which are discharged.

              (i)  Geo received a notice of default on September 20, 1998, regarding its loan from City National Bank in the amount of $615,000, plus interest, and did not cure the default. The loan was subsequently paid and discharged by the Harriman Group, which has received an assignment of the loan from the bank and has filed a Proof of Claim against in the bankruptcy proceeding.

              (j)  No exceptions.

        2.2  Geo’s audited financial statements for the period ending December 31, 1997, and its audited statements for the period ending September 30, 1999, have been given to TD.

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        2.3  Geo transferred its oil and gas properties in East Los Angeles and Bandini Fields, Los Angeles County, to Commerce Natural Resources, Inc., an affiliate of Bentley-Simonson, Inc. on, October 29, 1998. Commerce has asserted it is entitled to offset its obligations to make a $40,000 payment to Geo and to commence installment payments on November 1, 1999, on a $75,000 note. Payments on the note are contingent on production from the properties exceeding 7500 BOE per month. The alleged offset is based on Commerce’s claim that some additional equipment should have been included in the assets transferred to Commerce. Geo asserts that they are not entitled to any part of such offset.

        2.4   On November 16, 1998, Geo filed a Petition under Chapter 11 of the U. S. Code the United States Bankruptcy Court, Central District of California, Case No. ND 99-15477-RR.

        2.5  Geo has no obligation as to the types of contracts described in this section, except for salaries and wages, but has obligations to Gerald T. Raydon and Eric J. Raydon with respect to monies loaned by them to the corporation pursuant to the terms of notes and agreements between the parties. These obligations will be discharged in the bankruptcy and any security reconveyed to Geo.

        2.6  Geo will propose to pay the sum of $200,000 on an installment basis to the secured and unsecured creditors pursuant to the Plan of Reorganization. This obligation is expected to appear on Geo’s balance sheet.

        2.7  Prior to the filing of the Petition, the South Coast Air Quality Management District notified Geo of some claimed Violations with respect to some of the Rosecrans wells, but has advised Geo’s counsel that such notices will be dismissed in the bankruptcy, provided Geo complies with District rules in further operations. Commerce Natural Resources, Inc. has assumed Geo’s other obligations to the SCAQMD and has agreed to make monthly payments until the obligation is discharged.

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CONSULTING AGREEMENT

        THIS CONSULTING AGREEMENT (the “Agreement”), is made and entered into on October _, 1999 by and between GEO PETROLEUM, INC. (hereinafter referred to as “Geo” or as the “Company”) and GERALD T. RAYDON (“Raydon” or “Consultant”) and shall be effective (the “Effective Date”) immediately after the Closing (the “Closing”) of that Stock Purchase and Sale Agreement dated October, 1999, by and between TD & ASSOCIATES, INC. (“TD”) and GEO.

Recitals:

        The accompanying Stock Purchase and Sale Agreement provides for the purchase by TD of a major shareholding interest in the Company. The parties intend that TD shall elect new management after the Closing, while retaining Geo’s founder as a consultant to assist in an effective transition of the present Company into the Reorganized Geo under new management.

        NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.  Position As Consultant, Term

        At the Company’s Board Meeting which is scheduled to be held within 24 hours after the Closing, Raydon shall resign as an executive officer and Chairman of the Board of Geo and this Agreement shall take effect and provide for services assisting the new management in taking control of the Company. Subject to the other terms, conditions and provisions of this Agreement, the Company and Raydon agree that he shall provide those consulting services to the extent and in the manner requested by new management for a period of one year, commencing on the Effective Date.

2.  Compensation And Duties

        2.1  ANNUAL COMPENSATION. The Company shall be obligated to pay to Consultant for his services hereunder as requested by the management of the Reorganized Geo, with no obligatory minimum or fixed amount due. The requested services shall be compensated at the rate of $60 per hour, payable bi-weekly, without the benefits payable under his existing employment agreement with the Company.

        2.2  INCENTIVE COMPENSATION. As an incentive to Consultant and in consideration for Consultant waiving his monetary claims for loans to Geo which are secured by an interest in the Vaca Tar Sand project in the Oxnard Oil Field and by an interest in Geo’s previously-owned East Los Angeles/Bandini Oil Fields, for waiving any monetary compensation due to him and to Mrs. Raydon pursuant to their Employment Contracts, and for agreeing to provide services hereunder, the Company agrees to pay and reimburse Consultant upon Closing in the amount of 690,000 shares of Geo stock (representing his stock sold prior to April 1, 1999 in order to satisfy a debt incurred on the Company’s behalf). In this connection, Geo adopts and reaffirms its pre-bankruptcy agreement with Consultant to reimburse Consultant for any shares of Geo common stock owned by Consultant and pledged to Prudential Securities Incorporated (“Pru dential”) which has been sold or otherwise liquidated by Prudential on and after April 1, 1999 on account of Consultant’s loan from Prudential. Consultant loaned the proceeds of said loan to Geo on September 1, 1997. For every share of common stock so sold by Prudential, Geo shall reimburse Consultant by the issuance to him of one share of Geo common stock.

        2.3  SHARES ISSUED TO CREDITORS. In order to provide to Creditors an incentive to adopt Geo’s Plan, Consultant agrees that 1,390,000 Geo shares owed to him hereby pursuant to the terms of Section 2.2 shall be waived by him and instead issued and paid to Creditors as part of the Plan. Geo shall issue an additional 510,000 shares to the Creditors out of its unissued shares, making a total of 1,900,000 shares to be issued to Creditors in order to accomplish the Plan. As a result of such issuance, and after the issuance of all other shares provided for hereunder, the Creditors shall own 12.5% of the common stock equity in the Company (1,900,000 shares out of 15,200,000).

        2.4  In the event the employment of Consultant is terminated by Geo for any reason prior to the end of the said one-year term, with or without cause, all of Consultant’s rights under the said agreement shall be deemed vested and the accrued consideration due to Consultant shall become payable within thirty days.

45

        2.5  SERVICES AND DUTIES OF CONSULTANT

              A.  No Service as Director

        Consultant will not serve as a Director of the Company.

              B.  Reimbursement for out-of-pocket Expenses

        The Company shall monthly reimburse Consultant with respect to all out-of-pocket expenses which were incurred by Consultant in the course of and/or in the conduct of the Company’s business by Consultant, provided Consultant follows and complies with the Company’s reporting and receipts submission procedures.

              C.  Other Benefits

                     In addition to the foregoing, Consultant shall also be provided any other benefits or programs involving issuance of stock, stock options, SAR’s and comparable programs which may, from time to time, be adopted or provided by Geo and otherwise made available by Geo to Consultants of the Company under substantially the same restrictions and limitations, if any, as applicable.

              D.  Relocation

                     Consultant will not be required to relocate his office, but will travel to the offices of the Company or to other places where Geo conducts its business as reasonably required.

        2.6  GENERAL DUTIES OF CONSULTANT.

              Consultant agrees that he will at all times loyally and conscientiously perform all of the following duties, responsibilities, and obligations:

              A.  Those duties and responsibilities expressly or implicitly contained in the Agreement;

              B.  Those duties and responsibilities customarily incident to or required of such positions Consultant may, hold with the Company.

              C.  Subject to the advice and consent of TD’s President or other officer designated by the President, Consultant shall serve as the representative of the Reorganized Debtor (Geo) pursuant to the confirmed Plan of Reorganization for purposes of prosecuting objections to claims, assisting the Reorganized Debtor as Disbursing Agent under the Plan and performing such other duties as are required by the Reorganized Debtor prior to the entry of a final decree closing the bankruptcy case.

              D.  Such additional duties, responsibilities and obligations and such other services, acts, and things as, from time to time, may be designated by the Board of Directors of Geo, consistent with this Agreement.

              E.  Consultant agrees to provide consulting services for the Company not to exceed 100 hours in any one month.

              F.  Provided that his activities do not directly conflict or compete with the business of Geo, Consultant may actively engage in other business endeavors or pursuits, including, without limitation, the rendition of any services of a business, commercial, or professional nature to any other person or organization.

3.  Confidentiality And Trade Secrets

        Consultant acknowledges and agrees that Consultant has or will, during the term of employment, have access to proprietary information (“Trade Secrets”) which are owned or developed, compiled, organized or invented by the Company, the Consultant in the course of his services, or by the Company’s employees. Consultant agrees that he shall not disclose any of the Trade Secrets, directly or indirectly; use them in any way which competes or conflicts with the Company’s business, or claim a proprietary ownership interest therein at any time, except as required in the performance of Consultant’s duties hereunder.

46

4.  Termination

        4.1  Events of Termination. This Agreement shall terminate immediately upon the occurrence of any of the following events during any extended term beginning after one year from the commencement of this Agreement:

              A.  Whenever the Company and Consultant shall mutually agree in writing to terminate this Agreement.

              B.  Whenever the Company delivers written notice to Consultant terminating the Agreement for “cause” including, among other things, Consultant’s material gross negligence or intentional misconduct under the terms of this Agreement.

              C.  Upon the death of Consultant.

              D.  Upon the permanent incapacity of Consultant because of illness, physical injury, other physical or mental disability, or any reason such that it reasonably appears that Consultant will be unable to perform or complete Consultant’s duties and responsibilities under this Agreement.

        4.2  Post-Termination Duties and Obligations

              Upon termination for any of the foregoing Events:

              A.  Consultant or the representative of Consultant’s estate, in the event of the death of the Consultant, shall be entitled to receive that compensation earned by Consultant up to the date of termination.

              B.  The representative of Consultant’s estate, in the event of the death of the consultant shall deliver to the Company all records, reports, files, schedules, lists, and any other property in his possession or under his control belonging to the Company.

5.  Company’s Authority

        The Company has the right to adopt and promulgate from time to time Company Policies. Consultant agrees at all times to observe and comply with the Company’s Policies, as stated by the Board of Directors, provided that the same are not in conflict with any term hereof.

6.  Paid Vacation And Sick Leave

        6.1  Paid Vacation

              Consultant shall not be entitled to a paid vacation each year or sick leave benefits.

7.  Indemnification

        The Company shall indemnify the Consultant and hold him harmless for and with respect to all costs and expenses incurred by Consultant resulting from any acts or decisions made by him in good faith while performing services for the Company within the scope of his position and authority hereunder.

8.  Non-Transferabilty

        This Agreement is personal to Consultant and the services to be provided by Consultant are personal to and uniquely capable of performance by Consultant. Neither this Agreement nor any right, duties, or obligations hereunder, or interests herein, shall be transferred, assigned, conveyed or delegated, in whole or in part, voluntarily or involuntarily, by operation of law or otherwise, except with respect to rights existing under the said Promissory Note and Deed of Trust. Any attempted transfer, assignment or delegation shall be null and void.

9.  Notices

        All notices provided in or permitted pursuant to this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the Company at their principal office address and to Consultant at Consultant’s residence address. Each party shall promptly provide the other with a notice regarding any change of address.

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10.  Validity

        The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

11.  Construction

        This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party drafting a document. It shall be construed neither for nor against any party, but each provision shall be given reasonable interpretation in accordance with the plain meaning of its terms and the expressed intent of the parties.

12.  Entire Agreement

        This Agreement supersedes all prior agreements between the parties thereto, if any, whether oral or written, with respect to the employment of Consultant by the Company and contains all of the covenants, conditions, and agreements between the parties with respect to the rendition of such services as therein contemplated or to be performed hereunder.

13.  Attorney’s Fees

        In the event of any dispute or disagreement under this Agreement, the prevailing party shall be reimbursed for all costs and expenses, including, without limitation, reasonable attorneys’ fees. Such right of reimbursement shall be in addition to any other relief to which that party may be entitled.

14  Governing Law And Venue

        This Agreement will be governed by and construed in accordance with the laws of the State of California. The venue of any and all such actions brought under or pursuant to this Agreement shall be Los Angeles County, California.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.

COMPANY		GEO PETROLEUM, INC.
	By:	/s/Dennis Timpe
		Dennis Timpe President

CONSULTANT
	By:	/s/
		Gerald T. Raydon

The undersigned hereby joins in, ratifies, and confirms the foregoing agreement, and agrees that it shall be deemed executed now to take effect on the Effective Date.

	TD & ASSOCIATES, INC
By:	/s/Dennis Timpe
	Dennis Timpe President

48

EXHIBIT “3”

SCHEDULE OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
TO BE ASSUMED

Leases/Contracts	Cure Amounts	Methods of Cure
Description = 28 oil and gas leases at Rosecrans Oil Field, Los Angeles Country Lessor’s name = Various Lessee’s name = Debtor	Default amt = $4,500	Methods of curing default & loss = Payment of Cash on Effective Date Means of assuring future performance = Continued Operations of Reorganized Debtor
Description = 5 oil and gas leases at Vaca Tar Sand Unit, Oxnard Field, Ventura County Lessor’s name = Various Lessee’s name = Debtor	Default amt = None	Method of curing default & loss = N/A Means of assuring future performance = Continued operations of Reorganized Debtor
Description = 1 oil and gas lease – Orcutt/Careaga Oil Field, Santa Barbara County Lessor’s name = various Lessee’s name = Debtor	Default amt = None	Method of curing default & loss = N/A Means of assuring future performance = Continued operations of Reorganized Debtor
Description = 2 oil and gas leases in Somis, California, Somis Oil Field Lessor’s name = Kaiser Aetna, Southern Pacific Transportation and Southern California Petroleum Corp. Lessee’s name = Debtor	Default amt = $1,000	Method of curing default & loss = Payment in cash on Effective Date Means of assuring future performance = Continued operations of Reorganized Debtor
Description = Newgate oil and gas leases in Los Angeles County Lessor’s name = Various Lessee’s name = Debtor	Default amt = $1,503.56	Method of curing default & loss = Payment of Cash on Effective Date Means of assuring future performance = Continued operations of Reorganized Debtor
Description = One oil and gas well at West Grimes Field, Colusa County Lessor’s name = Strain Ranches, Inc. Lessee’s name = Debtor	Default amt = $15,000	Methods of curing default & loss = Payment of Cash on Effective Date Means of assuring future performance = Continued Operations of Reorganized Debtor
Description = Water Disposal Agreement dated May 14, 1992 Parties to Contract:      J. Woodford Hanson      Debtor	Default amt = $32,000	Methods of curing default & loss = Payment of Cash on Effective Date Means of assuring future performance = Continued Operations of Reorganized Debtor
Description = Vaca Tar Sand Farmout Agreement Parties to Contract:      Saba Petroleum, Inc.      Debtor	Default amt = None	Methods of curing default & loss = N/A Means of assuring future performance = Continued Operations of Reorganized Debtor
Description = Operating Contract for waste disposal Parties to Contract:      Capitan Resources, Inc.      Debtor	Default amt = $0	Methods of curing default & loss = N/A Means of assuring future performance = Continued Operations of Reorganized Debtor

49

EXHIBIT “4”

SCHEDULE OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES


TO BE REJECTED

None.

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EX-10.7

EXHIBIT 10.7

SETTLEMENT AGREEMENT AND GENERAL RELEASE

        This Settlement Agreement and General Release (the “ Agreement”) is made by and between Anne Snodgrass, a married woman dealing with her separate property (“ Snodgrass”), Hester McColm, a single person (“McColm”), and William E. Lenox, a single man (“Lenox”), on the one hand, and Geo Petroleum, Inc., a California corporation (“Geo”), or the other, as follows:

1.  RECITALS

        A.  Lenox, Snodgrass and McColm (“Owners”) are the owners of real property located in Oxnard, California described in Exhibit “1” attached hereto (the “Subject Property”).

        B.  The Subject Property consists of (1) the tract owned by Lenox and McColm which is subject to an oil and gas lease (the “E. E. Lenox Lease”) dated April 24, 1934, recorded in Book 426, p. 241, O.R., entered into by E. E. Lenox, as the Lessor, arid Ralph P. Trimble, as the Lessee, and (2) the tract owned by Snodgrass and subject to the oil and gas lease (the “C.V. Lenox Lease”) from Ernest B. Lenox and John Hollis Lenox to Vaca Oil Exploration, Inc. and Exeter Oil Company, dated June 4, 1946, recorded January 28, 1947, in Book 777, p. 232, O.R. Lenox and McColm are now the successor Lessors under the E.  E. Lenox Lease, and Snodgrass is the successor Lessor of the C.V. Lenox Lease. Geo is the successor Lessee under both Leases. Lenox represents the interests, if any, of McColm, in the Lease, as her attorney in fact.

        C.  On or about January 1, 1987, Sun Operating Limited Partnership (“Sun”) entered into a Pooling Agreement with various royalty owners (the “Pooling Agreement”). The Pooling Agreement created the Vaca Tar Sand Unit (“VTSU”), which consists of tracts of land, including the Subject Properly, located in Oxnard, California.

        D.  VTSU was created to promote conservation and increase recovery of oil and gas production by unitizing the interests of owners of tracts of land subject to the Pooling Agreement.

        E.  Under the Pooling Agreement, each royalty owner agreed that the terms of the Pooling Agreement amended the terms of any lease, mineral deed, royalty dead or other contracts regarding the production of oil and gas on their tracts of land, which includes the Subject Property.

        F.  Geo is the successor and assignee of Sun’s interest in the Pooling Agreement, and Owners are the successors to certain of the royalty owners under the Pooling Agreement.

        G.  On November 16, 1998, Geo filed a voluntary petition under chapter 11 of Title 11 of the United States Code, bearing Case No. ND 98-15477-RR (the “Bankruptcy Case”).

        H.  On or about July 21, 1999, Lenox, Snodgrass and J. Woodford Hansen (“Hansen”) filed a complaint in the United States Bankruptcy Court seeking a determination that the Lease and the Pooling Agreement terminated pre-petition as a result of cessation of oil and gas production on the Subject Property of more than ninety (90) days (the “Adversary Proceeding”). Lenox further objected to Geo’s assumption of the Lease and the Pooling Agreement based on his belief that the terms of the Lease and the Pooling Agreement had expired as a result of cessation of oil and gas production pre-petition.

        I.  On or about September 1, 1999, Geo filed its Answer to Lenox’s complaint denying the allegations therein. Geo asserts that the Leases and the Pooling Agreement are unexpired leases and an executory contract assumable under 11 U.S.C. § 365 in the Bankruptcy Case.

        J.  On October 13, 1999 Geo filed its Third Amended Plan of Reorganization (“Plan”) wherein it sought to assume the Lease and the Pooling Agreement as an executory lease and an executor contract. On December 15, 1999 the Bankruptcy Court confirmed the Plan, but reserved for resolution in the adversary with Lenox Geo’s right to assume the Lease and the Pooling Agreement.

        K.  The parties now desire, without any admission of liability, to settle all claims asserted by the parties against each other, including, without limitation, all issues raised in the Adversary Proceeding, in exchange for the consideration set forth in Paragraph 2 herein and for such other valuable consideration and the releases hereinafter set forth.

2.  TERMS OF THE SETTLEMENT

        A.  Dismissal of the adversary Proceeding. Upon the execution of the Agreement and the order approving the Agreement becoming final and non-appealable, Owners and all other plaintiffs shall dismiss the Adversary Proceeding against Geo with prejudice. An order approving the Agreement shall be final on the first business day which is eleven (11) days after the entry of the order, provided no appeal has been filed.

        B.  Assumption of the Leases and the Pooling Agreement. Owners agree to Geo’s assumption of the Leases and the Pooling Agreement as unexpired leases and an executory contract pursuant to 11 U.S.C. § 365(a).

        C.  Continued Production. Geo shall be authorized to continue oil and gas production on the Subject Property pursuant to the terms of the Leases and the Pooling Agreement-as modified herein.

        D.  Production Royalty. The aggregate royalties due to Lenox and McColm for production of, oil and gas under the Lease shall be increased to one-sixth (1/6). Any contrary Lease terms or formula based on a one-eighth royalty shall be read as though “one-eighth” has been replaced by “one-sixth.”

        E.  Allowance of Claim in the Bankruptcy Case. Lenox and Snodgrass shall be entitled to a single allowed general unsecured claim in Geo’s Bankruptcy Case in the sum of $65,000 (the “Claim”), as a full and final payment to cure any monetary default, including attorney’s fees and costs, which may have existed under the Lease and the Pooling Agreement. Pursuant to the terms of the Plan, the Claim will share pro rata with other Class 4 claims in the distributions to be made to that class.

        F.  Property, Maintenance and Upkeep. Geo shall keep the Subject Property free of all abandoned, unused, inoperative, unnecessary equipment. Geo shall remove from the Subject Property all abandoned, unused, inoperative or unnecessary equipment. Geo shall not store on the Subject Property abandoned, unused, inoperative or unnecessary equipment. Geo is obligated to clean-up the Subject Property every thirty (30) days and to keep the Subject property free of graffiti and debris. Geo shall determine what constitutes abandoned, unused, inoperative or unnecessary equipment in compliance with all regulatory requirements.

        G.  Use of Agricultural Land. Geo shall give Lenox and Snodgrass thirty (30) days notice of Geo’s intent to begin drilling a new well site on the Subject Property. Geo shall not interfere with existing irrigation system for agricultural use on the Subject Property. Geo shall not interfere or hinder Lenox’s and Snodgrass’ ability to irrigate the portion of the Subject Property used for agricultural use. Geo shall, at its own expense, correct or remedy any interference with Lenox’s and Snodgrass’ irrigation which may result from operation of new well sites by Geo on the Subject Property.

        H.  Operative Lease. Upon the execution of the Agreement, Lenox and Geo shall enter into an Amended Lease, which shall modify the terms of the Lease to conform with the terms of the latest version of the C.V. Lenox Lease. The parties, however, agree that the terms of the Pooling Agreement amend the Lease or any amendments thereto.

        I.  Surface Use Compensation. Geo shall compensate Lenox and Snodgrass for all lands in Tracts 3 and 4 taken out of agricultural production for use by Geo by payment of a minimum royalty. Geo shall pay $12,000 to Lenox and $6,000 to Snodgrass annually as a minimum royalty on oil and gas production, due at the end of each year of the term, beginning February 28, 2001 for the year ending January 31, 2001. The minimum royalty shall be adjusted each year by the COLA published by the U.S. Commerce Department. As to additional lands taken out of cultivation for oil or wastewater disposal purposes, the minimum royalty will be adjusted by the addition of the annual loss of income per acre lost as determined by fair market value. Lenox will provide Geo proof of market value if land is returned to agriculture so that the acreage used by oil operations is less than 10 acres on the Lenox property and 5 acres on the Snodgrass property, or if acreage used by Geo is increased from such levels, the royalty payments to Lenox and Snodgrass shall proportionately increase or decrease, and shall be adjusted proportionately if the increase or decrease is for a period shorter than one year. Geo shall give written notice to Lenox that property has been returned to Owner’s use no later than seven (7) days after Geo has returned the property to Owner’s use.

        J.  Abandonment of Wells. By January 31, 2002, Geo will provide Lenox with Geo’s plan for wells which it will continue to operate, wells to be abandoned, and areas which it will release for agricultural use, with a schedule for abandonment.

        K.  Waste Disposal. Concurrently with the execution of this Agreement, Lenox shall execute a four (4) year waste disposal agreement with a 12.5% royalty on produced water, and 10% on “solids”. A copy of the proposed wastewater disposal agreement with Lenox is attached hereto as Exhibit “2”. Under the waste water disposal agreement, Geo will agree to pay Lenox a minimum royalty of $1,500 per month commencing thirty (30) days after this Agreement is approved by the United States Bankruptcy Court and payable after ninety (90) days or after the first month Geo receives disposal fees, whichever occurs first.

        L.  Site Modifications. Geo shall obtain a report from consulting engineers to determine the minimum acreage need by Geo for its oil and gas operation on the Subject Property. To the extent possible, Geo shall take all reasonable steps to remove the site for oil well number 3-67 and the access road to this well so that the land can be returned for agricultural use. Based on the recommendation by the consulting engineers, Geo shall take all reasonable steps to re-align the access roads to oil well numbers 3-2 and 3-49 and remove unused equipment.

        M.  Termination of the Lease. The provisions of the Lease and the Pooling Agreement governing termination shall continue to apply, except for the following modification: (1) the Lease shall be in default if Geo fails to allow inspection of records or fails to provide specific records within sixty (60) days after receipt of a written request from Lenox or Snodgrass.

3.  RELEASE

        A.  Except for the rights, duties and obligations created or preserved in this Agreement, upon the order approving the Agreement becoming final and non-appealable, Lenox, McColm, and Snodgrass fully and completely release, relinquish and waive all claims they or each now have or may have at the time of execution of this Agreement, whether known or unknown, including without limitation, all matters alleged or which could have been alleged against Geo, as well as, to the extent applicable, its respective heirs, assigns, officers, directors, shareholders, agents, attorneys, other representatives, predecessors-in-interest and successors-in-interest.

        B.  Except for the rights, duties and obligations created or preserved in this Agreement, upon the Order approving the Agreement becoming final and non-appealable, Geo fully and completely releases, relinquishes and waives all claims and causes of action it now has, whether known or unknown, against Snodgrass, McColm and Lenox, as well as, to the extent applicable, their respective heirs, assigns, officers, directors, shareholders, agents, attorneys, other representatives, predecessors-in-interest and successors-in-interest.

4.  WAIVER OF CALIFORNIA CIVIL CODE SECTION 1542

        In consideration of the terms and provisions recited herein, the parties acknowledge and expressly waive all rights and benefits afforded by California Civil Code section 1542 and any similar provisions or rule of law in any other jurisdiction. California Civil Code section 1542 provides as follows:

        A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

5.  ASSIGNMENT OF CLAIMS

        No party hereto has assigned, transferred, or granted, or purported to assign, transfer or grant, any of the clams and causes of action disposed of by this Agreement.

6.  NO ADMISSION

        This Agreement represents a compromise of claims and shall not be construed as an admission by any party of any liability or of any contention or allegation made by any other party.

7.  GENERAL PROVISION

        Unless otherwise modified by this Agreement or subsequent written agreements between Geo and Lenox or Snodgrass, the terms of the Lease and the Pooling Agreements shall govern the operation of the oil and gas wells on the Subject Property.

3

8.  GOVERNING LAW

        This Agreement shall be governed by and construed in accordance with the laws of the State of California.

9.  ENTIRE AGREEMENT

        This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This Agreement may be amended only by an agreement in writing executed by Geo, Snodgrass and Lenox.

10.  CONSENT

        The parties hereto acknowledge that they were represented by attorneys of their own choosing in the negotiations for and preparation of this Agreement, including, without limitation, the releases in Paragraphs 3 and 4, that they have read this Agreement, that they are fully aware of its contents and of its legal effect by virtue of discussions with their attorneys, and that they have freely and voluntarily entered into the settlement set forth in this Agreement.

11.  HEADINGS

        Paragraph headings in this Agreement are solely for the convenience of the parties, are not a part of this Agreement, and shall not be used for the interpretation or determination of the validity of this Agreement or any portion thereof.

12.  EXECUTION IN COUNTERPARTS: FACSIMILE SIGNATURES

        This Agreement may be executed in any number of counterparts, each of which shall constitute one and the same instrument. Facsimile signatures shall be treated as originals.

13.  AUTHORITY TO EXECUTE AGREEMENT

        Each party or responsible officer or partner thereof executing this Agreement is duly authorized to enter into and execute this Agreement in such capacity.

14.  INVALID, VOID OR UNENFORCEABLE TERMS

        If any of the provisions of this Agreement are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, the remaining provisions shall nonetheless continue in full force and effect without being impaired or invalidated in any way.

15.  ATTORNEY’S FEES PROVISION

        If either Geo, on the one hand or Lenox or Snodgrass or McColm, on the other hand, shall commence any legal proceedings against the other with respect to any of the terms and conditions of this Agreement, the non-prevailing party shall pay to the prevailing party all expenses incurred in connection therewith, including reasonable attorney fees as may be fixed by the court having jurisdiction over the matter.

DATED: February ___, 2000	Anne Snodgrass
	ANNE SNODGRASS

DATED: February 14, 2000	/s/  William Lenox
	William E. Lenox

4

	By:	HESTER MCCOLM
DATED: February ___, 2000	By:
		Attorney-In-Fact

		GEO PETROLEUM, INC., a California corporation
DATED: February __, 2000	By:	/s/  Dennis Timpe
		Dennis Timpe President

APPROVED AS TO FORM AND CONTENT:		ROBINSON, DIAMANT & BRILL, A Professional Corporation
DATED: February ___, 2000	By:
		MARTIN J. BRILL Attorneys for Geo Petroleum, Inc., a California corporation

	LAW OFFICES OF DAVID E. EDSALL
DATED: February 14, 2000	/s/  Timothy S. Camarena
	Timothy S. Camarena Attorneys for William E. Lenox

5

EXHIBIT 2

WASTE WATER DISPOSAL AGREEMENT

6

AGREEMENT

        THIS AGREEMENT is made and entered into on February ___, 2000, by and between William E. Lenox, a single man, called “Lenox”, acting on his own behalf and on behalf of Hester McColm, (collectively, “Owner”), and Geo Petroleum, Inc., a California corporation called “Geo” or “Operator” herein.

RECITALS

        1.  The property (the “Lands”) described in Exhibit A, attached hereto and incorporated herein, is owned by Lenox and McColm, and is subject to an oil and gas lease (the “Lease”) of which Lenox and McColm are the lessors and Geo is the lessee. Lenox represents the interests, if any, of Hester McColm, in the subject matter of this Agreement.

        2.  Geo desires to use its VTSU 3-1 well, located on the Lands to dispose of “Class II” waste materials which may be disposed of in wells in the Oxnard Oil Field pursuant to GEO’s Commercial Class II permit (the “Permit”) from the California Division of Oil, Gas, and Geothermal Resources (“DOG”) a copy of which is attached hereto as Exhibit B. Geo also desires to use the said well to dispose of non-hazardous materials pursuant to a Class I permit, at such time as it is obtained from the Environmental Protection Agency (“EPA”). Under the terms of the Lease and the Vaca Tar Sand Pooling Agreement (“PA’s, Geo presently has the right to dispose of waste materials generated on the lands subject to the PA without charge, but not those materials produced on lands other than those subject to the Lease and the PA.

        3.  For purposes of calculating royalties, there shall be two categories of waste materials (collectively, “Wastes”):

        a.  “Produced Waters”, defined as waste water separated from oil and gas production and other oil held processes as described in paragraph 5, sub-paragraphs a-g of Exhibit B.

        b.  “Other Wastes”, consisting of all materials in a mixed solid and liquid state other than Produced Waters, which are qualified for disposal pursuant to Permit subsections 5 h-j or pursuant to a permit issued by the EPA.

        NOW, THEREFORE, fox good and valuable consideration, the receipt and adequacy of which are hereby mutually acknowledged, the parties hereto agree as follows:

        1.  Owner hereby grants to Geo the right to redrill, rework-, and operate the “VTSU” 3-1 well as a commercial disposal well (the “Disposal Well”) on the Lands. The Disposal Well shall be used for the purpose of disposing of Wastes produced from lands outside the area subject to the PA, as well as Wastes produced from the lands subject to the PA under existing agreements. The Wastes shall conform with the requirements established from time to time by the DOG or by the EPA, with respect to what is designated as a Commercial Class II or Class I Disposal Project. The terms “Produced Water” and “Other Wastes” do not include those wastes produced by Geo and which it has the right under the Lease and the PA to dispose of in wells on the Lands without payment of royalties or other compensation to Owner. All Wastes shall be disposed of into the Monterey Formation or other zones lying entirely below and separate from the Vaca Tar Sand and any fresh water zones. All wells shall be maintained and operated so as to prevent Wastes from entering any zone besides the approved injection zones.

        2.  Operator will conduct its operations hereunder solely on lands used in connection with oil operations under the Lease and PA. Owner hereby grants to Geo easements and rights of way, using only existing roads and lands in use for oil operations, over, on, in and across the Lands from Del Norte Road and Sturgis Road to and around the well or wells, for the installation and use of facilities for the transportation of wastes to the disposal wells on the Lands by vehicles or pipelines, together with the right of ingress and egress from the Lands or any part of them as necessary or useful to Geo in the exercise of its rights hereunder.

        3.  a.  As rental for the rights granted to it herein, Geo shall pay to Owner a royalty of 12.5 (twelve and one-half) percent of the gross fees collected by Geo in each month (the “Royalty Month”) for disposal of Produced Water into a Disposal Well, and a royalty of 10 (ten) percent of the gross fees collected by Geo in the Royalty Month for disposal of Other Wastes; provided that Geo shall pay a minimum of $1500 per Royalty Month,

7

even if the royalty percentage on fees collected in such month would result otherwise in the payment of less than $1500 in royalties. The royalty percentages payable shall be 8.33% to Lenox and 4.17% to McColm with respect to Produced Water arid 6.67% to Lenox and 3.33% to McColm with respect to Other Wastes. Said minimum royalty will commence and apply to the first month commencing thirty days after the date hereof.

        b.  In calculating royalties, no deduction shall be made from the gross fees for any of Geo’s costs. Fees charged by Geo for special services other than for disposal, such as truck wash-outs required by customers, shall not be subject to royalties. (All materials resulting from wash-outs consist of water and wastes as to which Geo has already calculated waste volumes and on which it shall collect disposal fees and pay royalties as provided herein.)

        c.  Royalty statements, including a statement of gross sales, and payments shall be sent to Owner within 20 days after the end of the Royalty Month, accompanied by copies of ail invoices issued by Geo with respect to fees collected and a monthly summary in the form attached hereto. Such invoices shall set forth information designating whether the disposed materials consist of Produced Water or of Other Wastes. Geo shall provide with the invoices copies of truck manifests showing the volume and types of wastes delivered to Geo for disposal. Together with the statements Geo will provide Owner with photocopies of checks received from its customers so that the amounts can be compared to the invoiced amounts. Owner shall have the right, upon one business day’s notice, to inspect and audit Geo’s books covering all fees and money collected by Geo.

        d.  Owner shall be entitled to a royalty on all fees uncollected due to an offset or credit provided to Geo, a related individual or entity, against a debt owed by Geo, a related individual or entity, in exchange for the disposal fee due.

        4.  The rights herein granted to Geo shall be for a term of four years from the date hereof. Sixty days prior to the end of the term, Geo shall provide Lenox a written notice that this Agreement will terminate at the end of said term. Geo may terminate this agreement at any time upon 30 days’ prior written notice to Owner; provided that in the event of such termination, Owner shall not be required to refund to Geo any rentals theretofore paid by Geo.

        5.  Upon termination of Geo’s rights to use a disposal well as a commercial disposal well, and if Geo is not using the disposal well for disposal of wastes generated under the PA, Geo will then promptly proceed to remove all disposal equipment and facilities not used in connection with its disposal of wastes generated upon the area subject to the PA and restore the surface of the Lands in accordance with the terms of paragraph 7. Such termination shall not affect Geo’s right to conduct oil and gas operations and maintain equipment pursuant to the terms of the Lease and the PA. All rental and royalty payments to lessor hereunder shall terminate upon the termination of Geo’s disposal rights, except for any accrued royalties or payments. Geo shall have the sole and exclusive right to dispose of waste in wells on the Lands during the term hereof. Upon termination of Geo’s rights to use a disposal well as a commercial disposal well, Geo shall cease the disposal in well 3-1 of waste from lands outside the area subject to the PA.

        6.  The VTSU 3-1 well is located within a fenced and gated area, which shall be maintained in a secure and safe manner and kept locked by Geo. Geo will post and advise Owner of the hours of disposal operations, now expected to be from 7:00 A.M. to 6:00 P.M. each day. The company will construct and operate its disposal facilities with suitable locks and hard piping such that no unauthorized party will be able to dispose of any substance whatsoever into the tanks and Disposal Well.

        7.  a.  If Geo elects to abandon the Disposal Well, Owner shall have the option to take it over and undertake to convert it to a fresh water source well. Before abandoning the well, Geo shall provide Owner with ninety days’ notice of the abandonment date. If Owner decides to attempt to take over and convert said well, it shall notify Geo of said decision within forty-five days of receipt of Geo’s notice. All operations in said well thereafter, including abandonment costs, shall be at Owner’s sole cost and risk. In the absence of such notice from Owner, Geo may proceed with the permanent abandonment of said well. In the event that Owner gives notice of its intent to convert, Geo shall cooperate with Owner’s attempts to obtain the appropriate governmental authorization for such conversion. If such authorization is not obtained, then Geo, upon receipt of Owner’s demand for permanent closure of said well, shall proceed to abandon said well. Notwithstanding anything to the contrary contained in this Paragraph 7, Geo shall have the right to remove pumping, tubing and other equipment, except surface casing, prior to abandoning any such injection well or turning same over to Owner for conversion into a water well.

8

        b.  If Geo elects to terminate this Agreement, it shall gave Owner written notice at least 60 days in advance of the termination date.

        8.  Geo shall pay all taxes levied upon or assessed against its improvements, fixtures and personal property used in connection with its disposal operations.

        9.  a.  Geo, at its sole expense, shall comply with all federal, state and local government laws, regulations, ordinances, rules, permit conditions or other requirements relating to Geo’s use of the Lands and shall defend and hold Owner harmless from all liability, including any fine, penalty, cost, fee, or assessment incurred or levied pursuant to such governmental requirements.

        b.  Except as otherwise provided pursuant to Section 7 of this agreement, upon abandonment of the Disposal Well, Geo, at its sole expense, shall comply with all governmental requirements relating to the abandonment of injection wells and the closure of its related disposal operations. Geo shall defend and hold Owner harmless from all liability including any fine, penalty, cost, fee, or assessment incurred or levied pursuant to such governmental requirements.

        c.  After ceasing use of the Lands and terminating this agreement, Geo, at its sole expense, shall remain liable for all costs associated with any abandoned site rules or postclosure requirements relating to Geo’s use of Lands for waste disposal as established by any governmental entity and shall defend and hold Owner harmless from all liability including any fine, penalty, cost, fee, or assessment incurred or levied pursuant to such governmental requirements.

        d.  Geo shall defend and hold Owner harmless from any and all liability for personal injuries, property damage or loss of life or property resulting from or in any way connected with Geo’s use hereunder of the Lands. Geo shall at all times carry liability insurance covering its operations with loss limits of not less than $3,000,000, shall have Owner included as a named insured, and shall instruct the insurance carrier to notify Owner if the coverage lapses, and provide Owner with a copy of such insurance policy. If such insurance coverage should lapse, Owner may terminate this agreement unless Geo obtains new coverage in the same amount within 5 days of notice by Owner. Geo shall also require that truck operators and any others entering the Lands for water disposal operations provide Certificates of Insurance for liability insurance with loss limits of $1,000,000.

        e.  Geo shall maintain during the term of this Agreement a bond (currently a cash bond in the amount of $100,000) with the DOG, with Ventura County (presently in the amount of $10,000), and, as required, with the EPA, to ensure compliance with all permit terms and regulations.

        f.  Geo shall not cause or permit the creation of any sump or pond or any other disposal of wastes on the surface of the Lands and, at its sole expense, shall promptly and completely remove any waste material deposited on the surface of the Lands.

        g.  It is expressly agreed that the only substances the Geo shall inject into any Disposal Well shall be in compliance with the permit requirements of the DOG or other governmental agencies.

        h.  Geo shall defend, indemnify and hold Owner harmless from any and all mechanics’ liens or other lien claims against the Land resulting from or in any way connected with Geo’s use hereunder of the Lands. Geo shall give Owner seven (7) days advance notice of any work of improvement to be commenced upon the Land by anyone entitled to a mechanic’s lien under California Civil Code section  3110; and immediate notice if seven (7) days advance notice is not possible. “Work of improvement” is defined as set forth in Civil Code section 3106.

        10.  Subject to the provisions of Paragraph 5 hereof, upon the abandonment of the Disposal Well, Geo shall remove the disposal equipment and facilities installed and used by it in connection with such well and shall restore the surface thereof as provided in the Lease, and otherwise restore the land so that it is fully suitable for farming.

        11.  Each year, Geo shall provide a copy of its audited annual financial statements; including an audit of the sales and royalties hereunder, to Owner within five days after Geo’s auditors complete and deliver them to Geo.

9

Upon written request, Geo will provide additional supporting schedules and other information available to Geo, which reasonably relates to the disposal fees stated on its financials.

        12.  In the event of default of any of the terms hereof, the Owner shall provide a written notice to Geo, specifying the default claimed. Geo shall have a period of thirty days after receipt of notice to remedy or cure the default. If Geo fails to remedy or cure the default, the Owner shall have the election to terminate this Agreement.

        13.  All notices and payments due hereunder shall be made to the parties as follows:

OPERATOR: Geo Petroleum, Inc.
18281 Lemon Drive
Yorba Linda, CA 92886

OWNER: William E. Lenox
3582 Sturgis Road
Oxnard, CA 93030

        14.  The terms and provisions hereof shall be binding upon and shall inure to the benefit of the heirs, personal representatives, successors and assigns of the respective parties hereto.

        IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and effective as of February ___, 2000.

	OWNER
By	/s/ William E. Lenoxend
	William E. Lenoxend

	GEO PETROLEUM, INC.
By:	/s/ Dennis Timpe
	Dennis Timpe President

	HESTER MCCOLM
By:
	Attorney-in-Fact

10

EXHIBIT B

State of California—The Resources Agency   Pete Wilson
Department of Conservation

DIVISION OF OIL, GAS AND GEOTHERMAL RESOURCES 1000 South Hill Road, Suite 116 Ventura California 93003-4458 (805) 654-4761 Telefax (805) 654-4765

September 6, 1996

Gerald T. Raydon GEO PETROLEUM INC. 15660 Crenshaw Blvd. Suite 201 Torrance, CA 90505

Dear Mr. Raydon

CLASS II COMMERCIAL WATER DISPOSAL PROJECT
Monterey & Topanga/Conejo Volcanics
Oxnard Oil Field

        The Division periodically upgrades and Issues new injection project approval letters. The project approval letter dated May 22, 1991 is being updated. As a result, continue commercial Class II water disposal operations are approved provided that:

        1.  Form OG1105 or Form OG107 is used whenever a new well is to be drilled for use as an injection well, or whenever an existing well is to be converted to an injection well, even if no work is required. (Specific requirements will by outlined in our answer to your notice.)

        2.  This office is notified of any anticipated changes in the project that will alter any of the conditions as originally approved, such as changes in injection-fluid constituents; a significance increase in volume; an increase in injection pressure; or change in injection interval. Such changes shall not be carried out without Division approval.

        3.  A monthly injection report is filed with the Division on Form OG1108, or by electronic or magnetic media approved by the Division, on or before the last day of each month, for the preceding month, showing the amount of fluid injected, surface pressure required and source of fluid.

        4.  A chemical analysis of the fluid to be injected is made and filed with the Division whenever the source of injection fluid is changed, or as requested by this office.

        5.  All fluids must conform to the definition of a Class II fluid. The following are classified as Class II fluids and can be injected into this project:

        a.  Fluids that are brought to the surface in connection with conventional oil or natural gas production. The fluids may be commingled with waste-water from gas plants unless the waste water is classified as. a hazardous waste at the time of injection.

        b.  Waste-water (regardless of their source) from gas plants unlace the waste water is classified. a hazardous waste at the time of injection.

        c.  Brines or other fluids, as described in Item b that prior to injection have been:

        1.  Used on-site for purposes associated integrally with oil and gas production or,

        2.  chemically treated or altered to the extent necessary to make then usable for purposes related integrally to oil and gas .production, or

1

        3.  commingled with fluid wastes resulting from the treatment in c (2).

        d.  Fresh water from groundwater or surface sources, added to or substituted for the brine, as long as the only use of the water; is for purposes associated integrally with oil and gas production.

        e.  Nonhazardous Diatomaceous earth filter backwash from activities that originated from oilfield activities.

        f.  Thermally enhanced oil recovery regeneration plant fluid.

        g.  Water-softener regeneration brines that originated from oilfield activities.

        h.  mud and drilling mud filtrate

        i.  Tank bottoms

        j.  Oil contaminated soil in which the spilled oil cans directly from an oil and gas producing facility.

        k.  Any fluid that the State Oil and Gas supervisor has made a determination that a particular fluid fits the above categories and makes a determination on a case-by-case or generic basis for a type of fluid.

        6.  All fluid sampling and analysis required by this Division are done in accordance with the provision of the Division’s Quality Assurance Program. Please refer to the Division: “Notice to oil and gas operators” dated April 15, 1987.

        7.  A list of all sources of the waste-water and a current chemical analysis from each source are to be tiled with the Division. The Division must be notified when there is any change in the waste-water source and must be furnished with a chemical analysis of the new source(s) Division approval must be obtained before new source-Water can be injected.

        8.  An accurate, operating pressure gauge or pressure recording device shall be available at all times, and all injection wells shall be equipped for installation and operation of such gauge or device. Any gauge or device permanently affixed to the well or any part of the injection system, must be calibrated at least every six months. Portable gauges shall be calibrated at least every two months. Evidence of such calibration must be made available to the Division upon request.

        9.  All injection wells shall, be equipped with tubing and packer set immediately above the approved zone of injection.

        10.  All injection piping valves and facilities meet or exceed design standards for the maximum anticipated injection pressure and are maintained in a safe and leak free condition.

        11.  Precautions are taken to prevent corrosion from occurring in meter runs, wellheads, wellhead valves, casing, tubing, and packers. This Division shall be furnished with a report detailing what measures will be taken to prevent corrosion.

        12.  The maximum allowable injection pressure gradient is limited to 0.4 psi per foot of true vertical depth as measured at the sand face. Prior to any sustained injection above this gradient, step-rate tests shall be made. The test shall begin at the hydrostatic gradient of the injection water to be used and shall continue until either the intended maximum injection pressure is reached or until the formation fractures, whichever occurs first. The results of these test shall be submitted to this Division for approval.

        13.  Mechanical integrity tests (MIT) are run and the results are filed with the Division vi within three (3) months after injection has commenced, at least once; every year thereafter, after any significant anomalous rate or pressure change, or as requested by this office to confirm that the injection fluid is confined to the permitted zones. This monitoring schedule may be modified by the district deputy. The Division must be notified of any scheduled MIT’s, as the tests may be witnessed by a Division representative.

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        The casing of any new well or well converted to injection must be pressure-tested prior to commencing injection once every five (5) years thereafter, of as requested by the Division. The Division must be notified before such tests are made, as the tests may be witnessed by a Division representative. The results of all tests must be submitted to the Division for approval.

        14.  Injection-zone pressure, as determined by annual pressure-fall off surveys does not exceed hydrostatic pressure in the general area of the project. This will not be a requirement until injection pressure is observed.

        15.  The Division is notified within 24 hours if there is evidence that a well has lost mechanical integrity.

        16.  Injection is discontinued if any evidence of damage is observed or upon written notice from this Division.

        17.  Any remedial work to the project area on idle, abandoned, or deeper-zone wells needed to protect oil, gas, or, freshwater (USDW) zones will be the responsibility of the project operator.

        18.  Neither the handling nor discharge of wastes shall cause a condition of pollution or nuisance.

        19.  The injection fluid shall be held in impervious containers prior to injection and shall not be permitted to flow upon the surface of the ground or to enter water course or ditches.

        20.  The lease and all injection facilities are maintained in a safe manner, consistent with established oilfield practices.

        21.  An authorized representative of GEO Petroleum, Inc. is present when deliveries of approved wastes are made. Record of such deliveries must clearly state the volume of waste and the original source of waste. When an authorized representative is not present. The facilities must be locked as such to prevent delivery of any wastes.

        22.  A sign, clearly indicating the operator, type of operation, normal operating hours, and a telephone number shall be posted at all injection facilities covered by this permit.

        23.  A project review meeting shall be conducted with Division personnel as requested.

        24.  Wastes shall be discharged only at sites covered by this permit and only on property owned or controlled by GEO Petroleum, Inc.

        25.  Additional data are supplied to the Division upon its request.

        26.  The Division is notified immediately if the project is terminated.

Sincerely,

/s/  Patrick J. Kinnear

Patrick J. Kinnear
Deputy Supervisor

PJK:SAF:saf

cc:  California Regional Quality Control Board   Ventura County Environmental Health

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GROSS SALES SUMMARY—Month

Inv. Date

Customer Name

Inv.#

Type of Prod.

0%

10%

12.5%

Total

Qty. $

Qty. $

Qty. $

Monthly Total:

Qty. $

PAID SALES—Month

Inv. Date

Customer Name

Inv.#

Type of Prod.

0%

10%

12.5%

Total

Qty. $

Qty. $

Qty. $

Monthly Total:

Qty. $

CUSTOMER AGING SUMMARY—As of ____________

Customer Name	Inv.#	Amt.
			Customer Total:

SST SUMMARY—Month

Date

Truck Lic.#

Cust. Name

Manifest #

Type of Prod

0%

10%

12.5%

Total

Qty. $

Qty. $

Qty. $

Monthly Total:

Qty. $

MONTHLY SUMMARY FORM

EX-10.19

EXHIBIT 10.19

CONSULTING AGREEMENT

        THIS CONSULTING AGREEMENT (the “Agreement”), is made and entered into on October, __, 1999 by and between GEO PETROLEUM, INC. (hereinafter referred to as “Geo” or as the “Company”) and GERALD T. RAYDON (“Raydon” or “Consultant”) and shall be effective (the “Effective Date”) immediately after the Closing (the “Closing”) of that Stock Purchase and Sale Agreement dated October, 1999, by and between TD & ASSOCIATES, INC. (“ TD”) and GEO.

RECITALS

        The accompanying Stock Purchase and Sale Agreement provides for the purchase by TD of a major shareholding interest in the Company. The parties intend that TD shall elect new management after the Closing, while retaining Geo’s founder as a consultant to assist in an effective transition of the present Company into the Reorganized GEO under new management.

        NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged the parties agree as follows:

1.  Position as Consultant Term

        At the Company’s Board Meaning which is scheduled to be held within 24 hours after the Closing, Raydon shall resign as an executive officer and Chairman of the Board of Geo and this Agreement shall take effect and provide for services assisting the new management in taking control of the Company. Subject to the other terms, conditions and provisions of this Agreement, the Company and Raydon agree that he shall provide those consulting services to the extent and in the manner requested by new management for a period of one year, commencing on the Effective Date.

2.  Compensation and Duties

        2.1.  Annual Compensation

              The Company shall be obligated to pay to Consultant for his services hereunder as requested by the management of the Reorganized Geo, with no obligatory minimum or fixed amount due. The requested services shall be compensated at the rate of $60 per heart payable biweekly, without the benefits payable inner hit aboard employment agreement with the Company.

        2.2.  Incentive Compensation

              As an incentive to Consultant and in consideration for Consultant waiving his monetary claims for loans to Geo which are secured by an interest in the Vaca Tar Sand project in the Oxnard Oil Field and by an interest in Geo’s previously-owned East Los Angeles/Bandini Oil Fields, for waiving any monetary compensation due to him and to Mrs. Raydon pursuant to their Employment Contracts, and for agreeing to provide services hereunder, the Company agrees to pay and reimburse Consultant upon Closing an the amount of 690,000 shares of Geo stock (representing his stock gold poor to April 1, 1999 in order to satisfy a debt incurred on the Company’s behalf). In this connection, Geo adopts and reaffirms its pre-bankruptcy agreement with Consultant to reimburse Consultant for any shares of Geo common stock owned by Consultant and pledged to Prudential Securities Incorporated (“ Prudential 8;) which has been sold or otherwise liquidated by Prudential on and after April 1, 1959 on account of Consultant’s loan from Prudential. Consultant loaned the proceeds of said loan to Geo or September 1, 1997. For every share of common stock so sold by Prudential, Geo shall reimburse Consultant by the issuance to him of one share of the Geo common stock.

        2.3.  Shares Issued to Creditors

              In order to provide to Creditors an incentive to adapt Geo’s Plan, Consultant agrees that 1,390,000 Geo shares owed to him hereby shall be waived by him and instead issued and paid to Creditors part of the Plan. Geo shall issue an additional 510,000 shares to the Creditors out of its unissued shares, making a total of 1,900,000 shares to be issued to Creditors in order to accomplish the Plan. As a result of such issuance, and after the issuance

of all other shares provided of hereunder, the Creditors shall own 12.5% of the common stock equity in the Company (1,900,000 shares out of 15,200,000).

        2.4.  In the event the employment of Consultant is terminated by Geo for any reason prior to the end of the said one-year term, with or without cause, all of Consultant’s rights under the said agreement shall be deemed vested and the accrued consideration due to Consultant shall become payable within thirty days.

        2.5.  Services and Duties of Consultant

              A.  No Service as Director

              Consultant will not serve as a Director of the Company.

              B.  Reimbursement for Out-of-Pocket Expenses

              The Company shall monthly reimburse Consultant with respect to all out-of-pocket expenses which were incurred by the Consultant in the course of and/or in the conduct of the company’s business by Consultant, provided Consultant follows and complies with the Company’s reporting and receipts submission procedures.

              C.  Other Benefits

              In addition to the foregoing, Consultant shall also be provided any other benefits or programs involving issuance of stock, stock options, SAR’s, and comparable programs which may, from time to time, be adopted or provided by Geo and otherwise made available by Geo to Consultants of the Company under substantially the same restrictions and limitations, if any, as applicable.

              D.  Relocation

                     Consultant will not be required to relocate his office, but will travel to the offices of the Company or to other places where Geo conducts its business as reasonably required.

        2.6  General Duties of Consultant

              Consultant agrees that he will at all times loyally and conscientiously perform all of the following duties, responsibilities, and obligations:

              A.  Those duties and responsibilities expressly or implicitly contained in the Agreement;

              B.  Those duties and responsibilities customarily incident to or required of such positions, as Consultant may, hold with the Company;

              C.  Subject to the advice and consent of TD’s President or other officer designated by the President, Consultant shall serve as the representative of the Reorganized Debtor (Geo) pursuant to the confirmed Plan of Reorganization for purposes of protecting objections to claims, assisting the Reorganized Debtor as Disbursing Agent under the Plan and performing such other duties as are required by the Reorganized Debtor prior to the entry of a final decree closing the bankruptcy case;

              D.  Such additional duties, responsibilities and obligations and such other service, acts, and things as, from time to time, may be designated by the Board of Directors of Geo, consistent with this agreement;

              E.  Consultant agrees to provide consulting services for the Company not to exceed 100 hours a month.

                     Provided that his activities do not directly conflict or compete with the business of Geo, Consultant may actively engage in other business endeavors or pursuits, including, without limitation, the rendition of any services of a business, commercial, or professional nature to any other person or organization.

3.  Confidentiality and Trade Secrets

        Consultant acknowledges and agrees that Consultant has or will, during the term of employment, have access to proprietary information (“Trade Secrets”) which are owned or developed, compiled, organized, or invented by the Company, the Consultant in the course of his services, or by the Company’s employees. Consultant agrees

2

that he shall not disclose any of the Trade Secrets directly or indirectly, use them in any way which competes or conflicts with, the Company’s business, or claim a proprietary ownership interest therein at anytime, except as required in the performance of Consultant’s duties hereunder.

4.  Termination

        4.1.  Events of Termination

              This Agreement shall terminate immediately upon the occurrence of any of the following events during any extended term beginning after one year from the commencement of this Agreement:

              A.  Whenever the Company and Consultant shall mutually agree in writing to terminate this Agreement.

              B.  Whenever the Company delivers written notice to Consultant terminating the Agreement for “cause” including, among other things, Consultant’s material gross negligence or intentional misconduct under the terms of this Agreement.

              C.  Upon the death of Consultant.

              D.  Upon the permanent incapacity of Consultant because of illness, physical injury, other physical or mortal disability, or any such that it reasonable appears that Consultant will be unable to perform or complete Consultant’s duties and responsibilities under this agreement.

        4.2.  Post-Termination Duties and Obligations

              Upon termination for any of the foregoing Events:

              A.  Consultant or the representative of Consultant’s estate, in the event of the death of the Consultant, shall be entitled to receive that compensation earned by Consultant up to the date of termination.

              B.  The representative of Consultant’s estate, in the event of the death of the Consultant shall deliver to the Company all records, reports, files, schedules lists, and any other property in his possession or under his control belonging to the Company

5.  Company’s Authority

        The Company has the right to adopt and promulgate from time to time Company Policies. Consultant agrees at all times to observe and comply with the Company’s Policies, as stated by the Board of Directors, provided that the same are not in conflict with any term hereof.

6.  Paid Vacation and Sick Leave

        6.1.  Paid Vacation

              Consultant shall not be entitled to a paid vacation each year or sick leave benefits.

7.  Indemnification

        The Company shall indemnify the Consultant and hold him harmless for and with respect to all costs and expenses incurred by Consultant resulting from any acts or decisions made by him in good faith while performing services for the Company within the scope of his position and authority hereunder.

8.  Non-Transferability

        This Agreement is personal to Consultant and the services to be provided by Consultant are personal to and uniquely capable of performance by Consultant. Neither this Agreement nor any right, duties, or obligations hereunder, or interests herein, shall be transferred, assigned, conveyed or delegated, in whole or in part, voluntarily or involuntarily by operation of law or otherwise, except with respect to rights existing under the said Promissory Note and Deed of Trust. Any attempted transfer, assignment or delegation shall be null and cold

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9.  Notices

        All notices provided in or permitted pursuant to this Agreement shall be in writing shall be deemed to have been duly go given when delivered or mailed United States certified mail, return receipt requested, postage prepaid, addressed to the Company at their principal office address and to Consultant at Consultant’s residence address. Each party shall promptly provide the other with a notice regarding any change of address.

10.  Validity

        The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

11.  Construction

        This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party drafting a document. It shall be construed neither for nor against any party, but each provision shall be given reasonable interpretation in accordance with the plain meaning of its terms and the expressed intent of the parties.

12.  Entire Agreement

        This Agreement supersedes all prior agreements between the parties thereto, if any, whether oral or written, with respect to the employment of Consultant by the Company and contains all of the covenants, conditions, and agreements between the parties with respect to the rendition of such services as therein contemplated or to be performed hereunder.

13.  Attorney’s Fees

        In the event of any dispute or disagreement under this Agreement, the prevailing party shall be reimbursed for all costs and expenses, including, without limitation reasonable attorneys’ fees. Such right of reimbursement shall be in addition to any other relief to which that party may be entitled.

14.  Governing Law and Venue

        Thus Agreement will be governed by and construed in accordance with the laws of the State of California. The venue of any and all such actions brought under or pursuant to this Agreement shall be Los Angeles County, California.

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        IN WITNESS WHEREOF the parties have executed this Agreement as of the Effective Date.

COMPANY
GEO PETROLEUM, Inc.

/s/  Dennis Timpe

Dennis Timpe
President

CONSULTANT

/s/  Gerald T. Raydon

Gerald T. Raydon

        The undersigned hereby joins in, ratifies, and confirms the foregoing agreement, and agrees that it shall be deemed executed now to take effect on the Effective Date.

T D & ASSOCIATES, INC.

/s/  Dennis Timpe

Dennis Timpe
President

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EX-10.20

EXHIBIT 10.20

SUBLEASE—BUSINESS PREMISES

        WHEREAS, T.D. AND ASSOCIATES is the leasee of certain premises located at 18281 Lemon drive, Yorba Linda Ca. 92886; and, WHEREAS, GEO PETROLEUM, INC. is desirous of subleasing a certain portion of the premises and obtaining secretarial, phone and storage services from T.D. and Associates;

        IT IS UNDERSTOOD AND AGREED THAT;

1.  That T.D. and Associates will provide the following services;

        A.  All office space and furniture necessary for Geo Petroleum to conduct its corporate and day to day office business;

        B.  Total access to the T.D. and Associates telephone system and no charges for any monthly services or actual usage, payment for said telephone service being part of the standard monthly fee.

        C.  Full secretarial and phone answering services.

2.  That Geo Petroleum shall pay the sum of $5,000 per month for the services and space provided, payable in advance on the first day of each month commencing 1/1/00.

3.  That the sublease has been approved by the landlord.

4.  That the tenancy shall be for month to month, cancellation or termination of tenancy subject to thirty days written notice, by either party.

5.  This sublease is in the form of providing executive suite service and T.D. and Associates will be responsible for maintaining fire, theft, liability and related coverage on the building, along with all phone, utility and taxes due on the building or incurred by tenant or sub tenant in line with the use of the premises.

		GEO PETROLEUM, INC.
Dated: 1/1/00	By:	/s/  Dennis Timpe
		Dennis Timpe, President

		T.D. AND ASSOCIATES
Dated: 1/1/00	By:	/s/  Lori Timpe-Long
		Lori Timpe-Long, Secretary—Treasurer

EX-10.21

EXHIBIT 10.21

EVAN M. JONES (S.B. #115827)
BRIAN M. METCALF (S.B. #205809)
O’MELVENY & MYERS LLP

400 South Hope Street
Los Angeles, California 90071-2899
Telephone: (213) 430-6000
Facsimile: (213) 430-6407
Attorneys for Bud Antle, Inc.

UNITED STATES BANKRUPTCY COURT FOR

THE CENTRAL DISTRICT OF CALIFORNIA

NORTHERN DIVISION

In re	CASE NO. 98-15477-RR
GEO PETROLEUM, INC, a California	STIPULATION SETTLING
Corporation,	ADVERSARY PROCEEDING
	REGARDING CLAIM AND
Debtor.	CONTRACT WITH BUD ANTLE, INC.:
	[PROPOSED] ORDER THEREON
GEO PETROLEUM, INC, a California
Corporation,
	[NO HEARING REQUIRED]
Defendant,
	Pre trial Conference:
v.	Date: October 24, 7000
BUD ANTLE, INC.,	Time: 11:00 a. m.
Plaintiff.

        Geo Petroleum, Inc., debtor, debtor in possession and reorganized debtor in the above-captioned bankruptcy case (the “Debtor” or “Geo”) and Bud Antle, Inc. (“Antle”) make this Stipulation Settling Adversary Proceeding Regarding Claim and Contract With Bud Antle, Inc. (the “Stipulation”), with reference to the following facts:

RECITALS

        A.  Geo was the debtor and debtor in possession in bankruptcy case no. 98-15477-RR, United States Bankruptcy Court, Central District of California, Northern Division (“Bankruptcy Case”). Antle filed a proof of claim in the Bankruptcy Case on May 17, 1999 in the sum of $435,000.00. The proof of claim was assigned claim number 54 (the “Claim”). Geo filed an objection to Antle’s claim on August 27, 1999.

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        B.   Geo has filed a Third Amended Plan of Reorganization (the “Plan”). The Plan provides for the issuance of stock in the reorganized Debtor to creditors such as Antle.

        C.  Antle owns certain real property located in Ventura County, California, a description of which is attached as Exhibit “A” and incorporated herein by this reference (“Antle Property”), subject to an oil and gas lease dated as of August 26, 1934 (“Lease”), a copy of which is attached as Exhibit “B” and incorporated herein by this reference. Antle holds the lessor’s interest under the Lease. Geo purports to hold the lessee’s interest under the Lease and to have an access right and oil and gas production rights in the Antle Property pursuant to the terms of the Lease.

        D.  Geo proposed to assume the Lease in its Plan. Antle objected to Geo’s assumption of the Lease on the grounds that an incurable default existed under the Lease because Geo had ceased production of oil pursuant to the Lease, and that certain curable defaults existed pursuant to the Lease. Geo contended that the Lease was superceded by a pooling agreement entered into by various parties in 1987, a copy of which is attached as Exhibit “C” and incorporated herein by this reference (“Pooling Agreement”), that oil production had occurred pursuant to the Pooling Agreement, and that Antle could not assert a claim, oppose assumption, or demand cure of alleged defaults without the consent and joinder of the parties to the Pooling Agreement.

        E.   An adversary proceeding was commenced to address these disputes. The bankruptcy Court entered an order on February 17, 2000 to bifurcate the issues of the adversary proceeding so that the applicability of the Pooling Agreement to the Lease would be resolved first.

        F.   The parties have now reached agreement as to a settlement by which the adversary proceeding is to be resolved, in the manner hereinafter provided, conditioned on approval by the Bankruptcy Court. To evidence the settlement, the parties are entering into the following Stipulation.

STIPULATION

             Now, therefore, with reference to the foregoing recitals, which are incorporated herein by this reference, the parties hereto stipulate and agree as follows:

I.

        1.  Thus Stipulation is subject to the approval of the Bankruptcy Court.

        2.  The Claim of Antle is allowed as a general unsecured claim to the amount of $435,000.00

        3.  The Debtor, its successors, assigns, predecessors-in-interest, or any other party shall have no, and renounce any, rights of access to the Antle Property pursuant to the Lease or Pooling Agreement, except as otherwise provided to perform the cleanup obligations described herein; shall have no, and renounce any, rights to produce oil and gas from the Antle Property pursuant to the Lease or Pooling Agreement; and shall have no, and renounce any, rights to a minerals located on or within the Antle Property pursuant to the Lease or Pooling Agreement.

        4.  The parties hereto hereby stipulate that on the 60th day following entry of an order approving this Stipulation that the Debtor shall pay $40,000 to Antle in full satisfaction of any and all claims, debts, liabilities, obligations and causes of action currently pending or arising out of, or connected with, either directly or indirectly, any term, provision, matter, fact, event or occurrence arising out of or related to the Claim of Antle in the Bankruptcy Case. While Debtor intends to sell stock otherwise issuable to Antle under the Plan to make such payment, the Debtor’s obligation to make such payment shall in no way be conditioned upon or limited by such sale. Antle hereby assigns its Claim to the Debtor in lieu of a distribution under the Plan of cash and receiving shares of stock in the reorganized Debtor. Antle shall in no way be deemed a recipient or seller of such shares of stock in the reorganized Debtor.< /font>

        5.  The Debtor, its successors, assigns or predecessors-in-interest releases and quitclaims in recordable form, pursuant to the release hereby attached as Exhibit “ D” and incorporated herein by this reference, any and all claims, interest, rights in the Antle Property to Antle, including without limitation any claims of Debtor, its successors, assigns or predecessors- in-interest to rights of access to the Antle Property pursuant to the Lease or Pooling Agreement, any other agreement, or pursuant to any other claim or interest or right, except as otherwise provided herein; any claims to rights to produce oil and gas from the Antle Property pursuant to the Lease or Pooling

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Agreement, any other agreement, or pursuant to any other claim or interest or right; and any claims to rights to the minerals located in or within the Antle Property pursuant to the Lease or Pooling Agreement, any other agreement, or pursuant to any other claim or interest or right, subject to the approval of this Stipulation by the Bankruptcy Court.

        6.  Antle shall release, pursuant to the release hereby attached as Exhibit “E” and incorporated herein by this reference and upon payment of the sum described in Paragraph 3 of this Stipulation, any and all claims, debts, liabilities, obligations and causes of action currently pending or arising out of, or connected with, either directly or indirectly, any term, provision, matter, fact, event or occurrence arising out of or related to the Claim of Antle in the Bankruptcy Case, subject to the approval of this Stipulation by the Bankruptcy Court.

Dated: October 11, 2000

By	/s/Evan M Jones
	Attorneys for Bud Antle, Inc.

Dated: October 16, 2000

	MARTIN J BRILL LEVENE, NEALE, BENDER, RANKIN & BRILL LLP
By	/s/Martin J. Brill
	Attorneys for Geo Petroleum, Inc.

EVAN M. JONES
BRIAN M. METCALF
O’MELVENY & MYERS LLP

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ORDER

        Based on the foregoing Stipulation, no notice of which is required and good cause appearing therefore, IT IS ORDERED that:

        1.  The foregoing Stipulation is approved.

        2.  Claim No. 54 filed by Bud Antle, Inc. is allowed as a general unsecured claim in the sum $435,000.00 and is hereby assigned to the Debtor

        3.  Neither the Debtor, its successors, assigns, predecessors-in-interest nor any other party have any rights of access to the Antle Property pursuant to the Lease or Pooling Agreement; have any rights to produce oil and gas from the Antle Property pursuant to the Lease or Pooling Agreement; or have any rights to the minerals located on within the Antle Property pursuant to the Lease or Pooling Agreement.

        4.  The Debtor is authorized and ordered to perform according to the terms thereof.

Dated:
	THE HONORABLE ROBIN L. RIBLET UNITED STATES BANKRUPTCY JUDGE

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EX-16.2

EXHIBIT 16.2

AGREEMENT FOR
ASSIGNMENT OF LEASES

        That, Geo Petroleum, Inc. 25660 Crenshaw Blvd, Suite 201, Torrance, California 90505, hereinafter referred to as “Geo,” for Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms, reservations, limitations and provisions hereinafter set forth, without warranty of any kind either express or implied, does hereby agree to assign, transfer and convey subject to Geo’s retained power of termination, unto Saba Petroleum, Inc., 201 North Salsipuedes, Suite 104, Santa Barbara, California 93103, hereinafter referred to as “Saba,” two thirds (2/3) of Geo’s right, title and interest in, to and under the oil, gas and mineral leases as set forth in Exhibit “A” attached hereto and made part thereof.

        A.  The interests to be assigned to Saba hereunder, include all of Geo’s interests in all presently existing and valid oil, gas or mineral leasehold interests, unitization, pooling, operating and communitization agreements, declarations and orders, and in and to the properties covered and the units created thereby, which are appurtenant to the Leases or lands assigned, as described in Exhibit “A”.

        B.  The interests to be assigned to Saba hereunder, shall include all of Geo’s interests in all presently existing and valid oil and gas sales, purchase, exchange and processing agreements, joint venture agreements, partnership agreements, right-of-way easements, permits and surface leases and other contracts, agreements and instruments, including emission credits, insofar as the same are appurtenant to the Leases or lands assigned.

        C.  The interests to be assigned to Saba hereunder, shall include all of Geo’s interests in all wells, equipment, fixtures and personal property located on the lands described in Exhibit “A”, which are appurtenant to the Leases or lands assigned, said wells being more specifically described in Exhibit A-1 attached hereto subject to the exclusion of certain wells as also cited in said Exhibit A-1.

        All of the foregoing leases, interests, rights and properties described in the first paragraph and paragraphs A through C above, are herein called the “Properties”, located in Ventura County, California.

        To have and to hold the properties forever, subject to and on the terms, conditions and limitations contained in the following:

1.   Royalty Purchases

        Saba shall attempt to acquire interests in land, royalty, overriding royalty and mineral interests in the properties subject hereto. Said interests will be acquired for Saba’s account at Saba’s sole risk cost and expense. Geo has the right to participate as to a one-third (1/3) interest in such acquisitions by reimbursing Saba one-third (1/3) of the cost of acquisition. Upon receipt of written notification of acquisition, Geo shall have fifteen days to elect to join in or decline participation in the acquisition. Should Saba finance the funding for the acquisition of the said interests from a source other than Saba’s primary bank or an affiliate, Geo shall have the right to join in with Saba as a co-borrower as to its one-third (1/3) interest.

2.   Operations

        On or before one hundred eighty (180) days from the date hereof or within thirty (30) days after Saba terminates its attempt to acquire the interests identified in paragraph (1) above, whichever shall first occur, Saba shall commence operations upon said properties to produce oil, gas and/or other hydrocarbon substances from the properties by drilling, re-drilling, re-working and/or re-entry operations of existing wells and in new wells utilizing primary or secondary technologies or methods of oil and gas recovery, hereinafter referred to as “operations.” Geo shall continue to operate the properties for its own account until such time as Saba commences operations. Subsequent thereto, Saba shall be entitled to one-hundred percent (100%) of all revenue generated from the properties and shall maintain and operate the properties at its sole cost and expense subject to and in accordance with paragraph (4) hereof. Saba shall conduct continuous operations on the properties with no cessation of operations for more than a ninety (90) consecutive day period.

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3.   Expenditures

        Saba agrees to expend a minimum sum of ten million dollars ($10,000,000) in the conduct of its operations pursuant to paragraph two (2) above. Said amount shall be expended over a two (2) year period from and after the date hereof.

4.   Payout

        From and after the date on which Saba commences operations, Saba shall be entitled to all revenue generated from the properties except for Geo’s share of any royalty, overriding royalty or mineral interest acquired pursuant to paragraph one (1) of this agreement. Saba shall have the continued right to all revenue generated from the properties until such time as Saba has recovered one-hundred percent (100%) of the total dollars expended on the operations cited in paragraph two (2) above, except that revenues from wells in which Geo has participated shall be shared with Geo in proportion to its participation. Notwithstanding the two (2) year term referred to in paragraph (3), said right to recover costs of operations shall continue so long as the properties are capable of production and have not terminated for any reason. On and after the date Saba commences operations hereunder, Saba shall furnish Geo, monthly statements of the costs of operations, revenue, and all other information required by Geo to calculate the payout status of Saba’s operations as conducted on the property.

5.   Term and Interest

        Subject to the terms hereof, this agreement shall remain in full force and effect for a term of two (2) years from and after the date hereof or until such time as Saba has expended the total sum often million dollars ($10,000,000) whichever shall first occur. Subsequent to Saba having expended the ten million dollars on operations and having recovered the full cost of such operations out of production from the properties, Geo shall participate as to its one-third (1/3) interest therein and the parties hereto shall jointly operate the properties pursuant to the Operating Agreement attached hereto as Exhibit “B.” Notwithstanding certain wells being in a payout status, subsequent to Saba’s expenditure of the ($10,000,000), any and all operations on existing wells or new wells not previously re-entered or drilled shall be jointly conducted by Saba and Geo pursuant to the Operating Agreement. Should Saba fail to a) expend the agreed sum often million dollars ($10,000,000) within the two (2) year term, or b) diligently conduct operations with no more then ninety (90) days cessation of such operations, subject to the terms hereof, this agreement shall terminate and Saba shall re-assign all interest in the properties to Geo save and except for, (1) any of the interests acquired pursuant to paragraph one (1) hereof and (b), a spacing unit around each well that Saba wishes to retain, in which Saba has conducted operations as more fully described herein and in paragraph (6). Should Saba fail to earn its interest in the entire properties and consequently retains only its interest in a spacing unit or units, if Saba retained three (3) or less wells, Geo shall operate said spacing unit well or wells on Saba’s behalf pursuant to the Operating Agreement attached regardless of whether any well or wells is in a payout status. Upon reaching payout of all costs of operations incurred by Saba prior to the termination, Geo shall be entitled to its one-third(1/3) working interest in each well and spacing unit retained by Saba subject to the operating agreement identified herein. Thereafter, the facilities located outside any retained spacing unit, being utilized by Saba for its continuing producing operations shall be owned, maintained and operated at a cost equal to the ratio of dollars expended by Saba to the ten million dollars ($10,000,000.00), originally anticipated, times two-thirds (2/3).

6.   Spacing Unit

        To qualify as a well to be selected by Saba as a “spacing unit well”, Saba shall have expended a minimum of seventy-five thousand dollars ($75,000) on said well in an attempt to enhance production. The spacing unit identified in paragraph five (5) shall be in the form of a rectangle from the surface down to all depths, the exterior boundaries of which would be a distance of one hundred and fifty feet (150') on either side and from each end of the perforated liner of each spacing unit well selected.

        Should the surface well site and/or portions of the well bore lie outside the confines of any spacing unit created for a well, the well site and well bore shall be considered as part of the spacing unit retained by Saba. Geo shall not conduct any drilling or production operations within the area of any spacing unit created except for Geo’s right to directionally drill a well or wells through a spacing unit (pass thru) to bottom or complete a wells outside the area of a spacing unit.

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7.   Environmental Condition of the Assets

        Within thirty (30) days after the execution of this agreement, Saba shall conduct a phase I environmental survey of the properties. If said survey results in the discovery of any concentrations of hazardous substances on the properties or on adjoining properties which were caused by operations on the properties, Saba shall notify Geo in writing as to the exact location, nature and extent of the hazardous substance, and Geo shall forever retain full responsibility for any remediation, abatement, liability and costs associated with the identified property. Geo further shall retain full responsibility for any adverse environment problem, which arose or occurred prior to the date of this agreement until such time as Saba has expended its obligatory ten million dollars. Thereafter, Saba and Geo shall equally be responsible for the cost of remediation or abatement operations. Saba shall remain one hundred percent (100%) liable for any adverse environmental problems caused on occasion by its operations on the properties until such time as the parties enter into an operating agreement for the joint ownership of a spacing unit or the properties in their entirety.

8.   Title Defects

        Geo shall, at its sole cost, attempt to correct any title defects and/or conflicting adverse right(s), title and/or interests which are discovered by Saba through investigation and review of Geo’s records or during the conduct of operations hereunder. For the purpose of this Agreement, a (“Title Defect”) shall mean a material deficiency in one or more following respects only:

        (a)  Seller’s title at the Effective Date, as to one or more of the properties, is subject to an outstanding mortgage, deed of trust, lien or encumbrance or other adverse claim.

        (b)  Seller owns more or less than the interest in the property and wells thereon shown on Exhibit “A”.

        (c)  Seller’s rights and interests are subject to being reduced by virtue of the exercise by a third party of a reversionary, back-in or similar right of which Purchaser is either not aware or which is not reflected herein;

        (d)  Seller is in default under some material provision of a lease, farmout agreement, joint operating agreement, gas balancing agreement, gas sales contract or other contract or agreement affecting the assets.

9.   Default

        Notwithstanding any other provision hereof, should Saba fail to comply with any of the material terms and conditions hereof, Geo shall notify Saba in writing of such non-compliance. Upon receipt of such notice from Geo, Saba shall have forty five (45) days to remedy the default or non-compliance. Should Saba fail to remedy said default within said forty five (45) day period, except as to a) any interest acquired pursuant to paragraph (1) hereof; b) any spacing unit to be created and retained which was not the subject of said default and c), any other properties or portions of properties which were not in default, Geo shall have the option to terminate this agreement by giving Saba written notice of termination and Saba shall re-assign its interests to Geo as to the defaulted portion of said property.

10.   Arbitration

        Except as otherwise provided in this Agreement, any controversy between the parties arising out of this Agreement shall be submitted to the American Arbitration Association for arbitration in Los Angeles, Los Angeles County, California. The costs of the arbitration, including any American Arbitration Association administration fee, the arbitrator’s fee, and costs for the use of facilities during the hearings, shall be borne equally by the parties to the arbitration. Attorneys’ fees may be awarded to the prevailing or most prevailing party at the discretion of the arbitrator. The provisions of Sections 1282.6, 1283, and 1283.05 of the California Code of Civil Procedure apply to the arbitration. The arbitrator shall not have any power to alter, amend, modify or change any of the terms of this Agreement nor to grant any remedy which is either prohibited by the terms of this Agreement, or not available in a court of law. The arbitrator’s jurisdiction shall be limited such that the arbitrator shall, in all instances, accept the following as true: i) the initial capital accounts of the parties as set forth in this agreement, ii) that unless Saba has fully and strictly

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             complied with its obligations under paragraphs (2) and (5) of this agreement, Saba’s interest in the properties shall be limited to that set forth in paragraph 6 of this agreement.

11.   Force Majeure

        Saba shall be excused from the performance of any of its obligations hereunder from time to time at any time (except for obligations to make payment of money), but only so long as it is prevented from performance by act of God, inclement weather, accident, breakdown, fire, strike, lock-out, labor shortage, inability to obtain equipment, materials or supplies in the open market and at reasonable prices, compliance with any law, rule order or regulation which has not been declared by a court of competent jurisdiction to be invalid, or any other cause beyond the reasonable control of such party whether similar or dissimilar.

12.   Well Information

        Saba shall notify Geo prior to commencement-of operations on any well to be drilled, reworked, recompleted or re-entered on the properties. Prior to commencement of operations, Saba shall furnish Geo with programs and/or prognosis describing the operation to be conducted. While conducting such Operations, Saba shall promptly furnish Geo with copies of all logs, surveys, core analysis, test charts and tests run in subject well along with daily reports of operations. Geo shall be furnished copies of all forms and/or notices filed with city, county, state or federal agencies as such reports pertain to its well operations.

13.   Insurance Requirements

        Saba shall secure and thereafter carry insurance in the amounts hereinafter prescribed, and to keep such coverage in force as long as operations are continued under this agreement.

        (a)  Statutory Worker’s Compensation and Employer’s Liability Insurance with limits of at least $1,000,000 per occurrence to comply with the laws of the State having jurisdiction.

        (b)  Comprehensive General Liability Insurance (including Owners and Contractors Protective Liability and Contractual Liability) with Bodily Injury Liability limits of not less than $1,000,000 per occurrence and Property Damage Liability limits of not less than $1,000,000 per occurrence; $1,000,000 aggregate.

        (c)  Automobile Bodily Injury and Property Damage Liability Insurance (including all owned, non-owned and hired cars) in amounts of not less than $1,000,000 for injuries to one person, $1,000,000 for all bodily injuries in one accident, and not less than $1,000,000 for property damage.

14.   Compliance with Laws and Regulations

        All work hereunder shall be performed in compliance with all applicable federal, state and local laws, orders, rules and regulations. And to comply with all of their terms and provisions contained in the oil and gas leases described in Exhibit “A” hereto.

15.   Relationship of Parties

        It is not intended by this agreement to create nor shall this agreement be construed as creating any relationship between the parties hereto of master and servant or employer and employee, or any partnership, mining partnership or association or corporation between the parties hereto, and the liability of the parties hereto shall be several and not joint or collective and each party hereto shall be responsible only for its proportionate share of the costs, expenses, debts, obligations and liabilities incurred hereunder as herein provided. This Agreement and the  /s/ GTR   Relationships of the parties are governed by and subject ***cont.

16.   Entire Agreement

        This agreement and its annexures constitute the entire agreement between the parties and supersedes any prior agreements, statements or representation, oral or written.

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17.   Governing Law

        This agreement shall be governed exclusively by and construed according to the laws of the State of California as applied to contracts between California residents entered into and to be performed entirely within California.

18.   Counterpart Execution

        This agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute but one and the same agreement. Only one such counterpart needs to be produced to evidence the existence of this agreement.

19.   Notice

        All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (i) upon receipt if delivered by facsimile transmittal to the party to whom such communication was directed (confirmed by the sender and receiver facsimile machines) and followed by a hard copy mailed in accordance with subparagraph (iii) below, or (ii) upon delivery if delivered by hand to the party to whom such communication was directed, or (iii) upon written acknowledgment of receipt if mailed by certified mail with postage prepaid addressed or delivered to the followed:

***cont. to the terms of Exhibit G, attached hereto and incorporated herein.

/s/ GTR

GEO Petroleum, Inc.
Attn: Gerald T. Raydon
25660 Crenshaw Blvd, Suite 201
Torrance, California 90505
Tele: (310) 539-8191
Fax: (310) 539-0101

Saba Petroleum, Inc.
Attn: Larry Burroughs
201 North Salsipuedes, Suite 104
Santa Barbara, California 93103
Tele: (805) 884-0661
Fax: (805) 884-0672

or to such other address as a Party may designate from time to time.

20.   Successors and Assigns

        The terms of this agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto.

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        IN WITNESS WHEREOF, the parties hereto have executed this agreement, this 23rd day of December, 1996.

GEO PETROLEUM, INC.

/s/ Gerald T. Raydon

Gerald T. Raydon

SABA PETROLEUM, INC.,
a California Corporation

/s/ Larry Burroughs

Larry Burroughs, President

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Exhibit “A”

Attached to and Made Part of
Agreement for Assignment of Leases Dated, December ___, 1996
Ventura County, California

Lessor:	Lessee:	Date;	Recording Data:	Description of Property:
Vaca Tar Sand Unit Leases
E.E. Lenox, Single Man	Raleigh P. Trimble	04-24-34	Book: 426 Page: 241	Part of the Rancho el Rio a la Colonia known as the west 80 acres of the 119.24 acres in subdivisions numbered 53 and 54, lying between the Sturgis Road, the Railroad and the Wolff Road, containing 80 acres.
John Hollis Lenox and Alice Lenox	Exeter Oil Company Ltd. and Vaca Oil Company	06-04-46	Book 777 Page: 232	39 acres, more or less, out of subdivision 53 of Rancho el Rio de Santa Clara o la Colonia.
W.R. Livingston	Raleigh P. Trimble	04-26-34	Book: 461 Page: 267	159.5 acres, more or less out of subdivision 53 of Rancho el Rio de Santa Clara o la Colonia
Robert S. Livingston and Mayrie Daily Livingston, his wife	Raleigh P. Trimble	04-26-34	Book: 460 Page: 478	Insofar and only insofar as lease covers 149.10 acres, more or less out of subdivision 53 and 55 of Rancho el Rio de Santa Clara o la Colonia.
Non-Unit Lease
Clarence W. Hunsucker, J. Thomas Hunsucker and Evelyn Hunsucker AKA Evelyn N. Hunsucker, AKA Eva Newman Hunsucker Trustees of the Thomas O. Hunsucker Family Trust; and Clarence W. Hunsucker as Executor of the Estate of Thomas O. Hunsucker deceased	Sun Operating Limited Partnership	04-02-86	86-128442	Parcels B, C & D of Subdivision 55 of the Rancho El Rio De Santa Clara O’La Colonia in the County of Ventura, Stag of California, according to the map recorded in Book 3, page 112 of maps, in the office of the County Recorder of said county. Together with those portions of Sturgis Road, Pleasant Valley Road, and Wood Road as said roads are shown on said map lying northerly, northwesterly, and westerly respectively of the centerline of said roads. EXCEPT that portion of said land lying northerly of the following described line: Beginning at a point in the centerline of Wood Road, distant thereon South 0° 23’ 58” West 1182.96 feet from the intersection thereof with the westerly prolongation of the northerly line of subdivision 58 of said Rancho; thence, 1st: North 88° 48’ 34” West 3376.48 feet more or less to a point in the westerly line of said Subdivision 55.

7

EXHIBIT “A-1”

        Attached to and made a part of that certain agreement for assignment of leases dated December ____, 1996 by and between Saba Petroleum, Inc. as Assignee and Geo Petroleum, Inc. Assignor.

Well Schedule

Well Names                      API Numbers

“Vaca Tar Sand Unit 4” 1 (111-01041)
“Vaca Tar Sand Unit 4” 2 (111-01042)
“Vaca Tar Sand Unit 4” 3 (111-01043)
“Vaca Tar Sand Unit 4” 75 (111-20989)
“Vaca Tar Sand Unit 4” 76 (111-20993 )
“Vaca Tar Sand Unit 4” 77 (111-21032)
“Vaca Tar Sand Unit 4” 78 (111-21033)
“Vaca Tar Sand Unit 4” 79 (111-21034)
“Vaca Tar Sand Unit 4” 80 (111-21356)
“Vaca Tar Sand Unit 4” 81 (111-21385)
“Vaca Tar Sand Unit 4” 82 (111-21386)
“Vaca Tar Sand Unit 4” 83 (111-21396)
“Vaca Tar Sand Unit 1” 1 (111-01044) Water Disposal -- Tract 1, north of Sturgis
“Vaca Tar Sand Unit 1” 2 (111-01045)
“Vaca Tar Sand Unit 1” 3 (111-01046)
“Vaca Tar Sand Unit 3” 1 (111-01039) Water Disposal, tank farm
“Vaca Tar Sand Unit 3” 29 (111-20992)
“Vaca Tar Sand Unit 3” 49 (111-20990)
“Vaca Tar Sand Unit 3” 60 (111-21304)
“Vaca Tar Sand Unit 3” 61 (111-21355)
“Vaca Tar Sand Unit 3” 62 (111-21382)
“Vaca Tar Sand Unit 3” 63 (111-21383)
“Vaca Tar Sand Unit 3” 64 (111-21384)
“Vaca Tar Sand Unit 3” 67 (111-21082)
“Vaca Tar Sand Unit 3” 68 (111-21083)
“Vaca Tar Sand Unit 3” 69 (111-21084)

        Excluded from the Agreement for Assignment of Leases and Operating Agreement are the agreements, easements and access rights, production and disposal facilities, tanks, and all rights and interests pertaining to the Livingston 2, 2-1, and 1-A wells which are completed in zones below the Vaca Tar Sand. The wells are operated pursuant to (a) that sub-lease dated March 26, 1955, by and between RS. Diedrich as lessor and Texaco, Inc. as lessee, recorded March 26, 1955, in book 1338, page 393, Official Records of Ventura County, California, and (b) other agreements for surface and other use which do not grant leasehold or other rights in the Vaca Tar Sand. The 2-1 well is in operation as a commercial water disposal well which does not dispose of water produced from the Vaca Tar Sand. Geo shall retain said wells and associated rights and Saba shall have full rights of access over and across the surface areas which are subject to such agreements, easements, and access rights.

8

EXHIBIT “B”

A.A.P.L. FORM 610-1982
MODEL FORM OPERATING AGREEMENT

        Attached to and made a part of that certain agreement for assignment of leases dated December , 1996, by and between Saba Petroleum, Inc. as Assignee and Geo Petroleum, Inc. Assignor.

OPERATING AGREEMENT
DATED
12/___ , 199,

OPERATOR   Saba Petroleum. Inc.

CONTRACT AREA   (See Exhibit “A”)

COUNTY   Ventura   STATE OF California

COPYRIGHT 1982 - ALL RIGHTS RESERVED
AMERICAN ASSOCIATION OF PETROLEUM
LANDMEN, 4100 FOSSIL CREEK BLVD.
FORT WORTH, TEXAS 76137, APPROVED FORM.
A.A.P.L. NO. 610 – 1982 REVISED

9

A.A.P.L. FORM 610—MODEL FORM OPERATING AGREEMENT—1982
TABLE OF CONTENTS

Article	Title	Page
I.		I
II.	EXHIBITS	I
III.	INTERESTS OF PARTIES	2
	A. Oil and gas interests	2
	B. Interests of parties in costs and production	2
	C. Excess royalties, overriding royalties and other payments	2
	D. Subsequently created interests	2
IV.	TITLES	2
	A. Title examination	2-3
	B. Loss of title	3
	1. Failure of Title	3
	2. Loss by Non-Payment or Erroneous Payment of Amount Due	3
	3. Other Losses	3
V.	OPERATOR	4
	A. Designation and responsibilities of operator	4
	B. Resignation or removal of operator and selection of successor	4
	1. Resignation or Removal of Operator	4
	2. Selection of Successor Operator	4
	C. Employees	4
	D. Drilling contracts	4
VI.	DRILLING AND DEVELOPMENT	4
	A. Initial well	4-5
	B. Subsequent operations	5
	1. Proposed Operations	5
	2. Operations by Less than All Parties	5-6_7
	3. Stand-By Time	7
	4. Sidetracking	7
	C. Taking production in kind	7
	D. Access to contract area and information	8
	E. Abandonment of wells	8
	1. Abandonment of Dry Holes	8
	2. Abandonment of Wells that have Produced	8-9
	3. Abandonment of Non-Consent Operations	9
VII.	EXPENDITURES AND LIABILITY OF PARTIES	9
	A. Liability of parties	9
	B. Liens and payment defaults	9
	C. Payments and accounting	9
	D. Limitation of expenditures	9-10
	1. Drill or Deepen	9-10
	2. Rework or Plug Back	10
	3. Other Operations	10
	E. Rentals, shut-in well payments and minimum royalties	10
	F. Taxes	10
	G. Insurance	11
VIII.	ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST	11
	A. Surrender of leases
	B. Renewal or extension of leases	11
	C. Acreage or cash contributions	11-12
	D. Maintenance of uniform interest	12
	E. Waiver of rights to partition	12

See Exhibit. “G” 12

X.	CLAIMS AND LAWSUITS	13
XI.	FORCE MAJEURE	13
XII.	NOTICES	13
XIV	COMPLIANCE WITH LAWS AND REGULATIONS	14
	A. Laws, regulations and orders	14
	B. Governing law	14
	C. Regulatory agencies	14
XV.	OTHER PROVISIONIS	14
XVI.	MISCELLANEOUS	15

II

A.A.P.L. FORM 610—I MODEL FORM OPERATING AGREEMENT 1982

1	OPERATING AGREEMENT
2
3	THIS AGREEMENT, entered into by and between Saba Petroleum, Inc. ,
4	hereinafter designated and
5	referred to as “Operator”, and the signatory party or parties other than Operator, sometimes hereinafter referred to individually herein
6	as “Non-Operator”, and collectively as “Non-Operators”.
7
8	WITNESSETH:
9
10	WHEREAS, the parties to this agreement are owners of oil and gas leases and/or oil and gas interests in the land identified in
11	Exhibit “A”, and the parties hereto have reached an agreement to explore and develop these leases and/or oil and gas interests for the
12	production of oil and gas to the extent and as hereinafter provided,
13
14	NOW, THEREFORE, it is agreed as follows:
	ARTICLE 1.
17	DEFINITIONS
18
19	As used in this agreement, the following words and terms shall have the meanings here ascribed to them:
20	A. The term “oil and gas” shall mean oil, gas, casinghead gas, gas condensate, and all other liquid or gaseous hydrocarbons
21	and other marketable substances produced therewith, unless an intent to limit the inclusiveness of this term is specifically stated.
22	B. The terms “oil and gas lease”, “lease” and “leasehold” shall mean the oil and gas leases covering tracts of land
23	lying within the Contract Area which are owned by the parties to this agreement.
24	C. The term “oil and gas interests” shall mean unleased fee and mineral interests in tracts of land lying within the
25	Contract Area which are owned by parties to this agreement.
26	D. The term “Contract Area” shall mean all of the lands, oil and gas leasehold interests and oil and gas interests intended to be
27	developed and operated for oil and gas purposes under this agreement. Such lands, oil and gas leasehold interests and oil and gas interests
28	are described in Exhibit “A “.
29	E. The term “drilling unit” shall mean the area fixed for the drilling of one well by order or rule of any state or
30	federal body having authority. If a drilling unit is not fixed by any such rule or order, a drilling unit shall be the drilling unit as establish-
31	ed by the pattern of drilling in the Contract Area or as fixed by express agreement of the Drilling Parties.
32	F. The term “drillsite” shall mean the oil and gas lease or interest on which a proposed well is to be located.
33	G. The terms “Drilling Party” and “Consenting Party” shall mean a party who agrees to join in and pay its share of the cost of
34	any operation conducted under the provisions of this agreement.
35	H. The terms “Non-Drilling Party” and “Non-Consenting Party” shall mean a party who elects not to participate
36	in a proposed operation.
37
38	Unless the context otherwise clearly indicates, words used in the singular include the plural, the plural includes the
39	singular, and the neuter gender includes the masculine and the feminine.
40
41	ARTICLE II.
42	EXHIBITS
43
44	The following exhibits, as indicated below and attached hereto, are incorporated in and made a part hereof:
45	__ A. Exhibit “A”, shall include the following information:
46	(1) Identification of lands subject to this agreement,
47	(2) Restrictions, if any, as to depths, formations, or substances,
48	(3) Percentages or fractional interests of parties to this agreement,
49	(4) Oil and gas leases and/or oil and gas interests subject to this agreement,
50	(5) Addresses of parties for notice purposes.
51	__B. Exhibit “B”, Form of Lease
52	__C. Exhibit “C”, Accounting Procedure.
53	__D. Exhibit “D”, Insurance.
54	__ E. Exhibit “E”, Gas Balancing Agreement,
55	__ F. Exhibit “F”, Non-Discrimination and Certification of Non-Segregated Facilities.
56	__G. Exhibit “G”, Tax Partnership.
57	If any provision of any exhibit, except Exhibits “E” and “G”, is inconsistent with any provision contained in the body
58	of this agreement, the provisions in the body of this agreement shall prevail.

1

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT –1982

1	ARTICLE III.
2	INTERESTS OF PARTIES
3
4	A. Oil and Gas Interests:
5
6	If any party owns an oil and gas interest in the Contract Area, that interest shall be treated for all purposes of this agreement
7	and during the term hereof as if it were covered by the form of oil and gas lease attached hereto as Exhibit “B”, and the owner thereof
8	shall be deemed to own both the royalty interest reserved in such lease and the interest of the lessee thereunder.
9
10	B. Interests of Parties in Costs and Production:
11
12	Unless changed by other provisions, all costs and liabilities incurred in operations under this agreement shall be borne and
13	paid, and all equipment and materials acquired in operations on the Contract Area shall be owned, by the parties as their interests are set
14	forth in Exhibit “A”. In the same manner, the parties shall also own all production of oil and gas from the Contract Area subject to the
15	payment of royalties to the extent of as provided for in the leases subject hereto which shall be borne as hereinafter set forth.
16
17	Regardless of which party has contributed the lease(s) and/or oil and gas interest(s) hereto on which royalty is due and
18	payable, each party entitled to receive a share of production of oil and gas from the Contract Area shall bear and shall pay or deliver, or
19	cause to be paid or delivered, to the extent of its interest in such production, the royalty amount stipulated hereinabove and shall hold the
20	other parties free from any liability therefore. No party shall ever be responsible, however, on a price basis higher than the price received
21	by such party, to any other party’s lessor or royalty owner, and if any such other party’s lessor or royalty owner should demand and
22	receive settlement on a higher price basis, the party contributing the affected lease shall bear the additional royalty burden attributable to
23	such higher price.
24
25	Nothing contained in this Article III.B. shall be deemed an assignment or cross-assignment of interests covered hereby.
26
27	C. Excess Royalties, Overriding Royalties and Other Payments:
28
29	Unless changed by other provisions, if the interest of any party in any lease covered hereby is subject to any royalty,
30	overriding royalty, production payment or other burden on production in excess of the amount stipulated in Article III.B., such party so
31	burdened shall assume and alone bear all such excess obligations and shall indemnify and hold the other parties hereto harmless from any
32	and all claims and demands for payment asserted by owners of such excess burden.
33
34	D. Subsequently Created Interests:
35
36	If any party should hereafter create an overriding royalty, production payment or other burden payable out of production
37	attributable to its working interest hereunder, or if such a burden existed prior to this agreement and is not set forth in Exhibit “A”, or
38	was not disclosed in writing to all other parties prior to the execution of this agreement by all parties, or is not a jointly acknowledged and
39	accepted obligation of all parties (any such interest being hereinafter referred to as “subsequently created interest” irrespective of the
40	timing of its creation and the party out of whose working interest the subsequently created interest is derived being hereinafter referred
41	to as “burdened party”), and:
42
43	1. If the burdened party is required under this agreement to assign or relinquish to any other party, or parties, all or a portion
44	of its working interest and/or the production attributable thereto, said other party, or parties, shall receive said assignment and/or
45	production free and clear of said subsequently created interest and the burdened party shall indemnify and save said other party,
46	or parties, harmless from any and all claims and demands for payment asserted by owners of the subsequently created interest;
47	and,
48
49	2. If the burdened party fails to pay, when due, its share of expenses chargeable hereunder, all provisions of Article VII.B shall be
50	enforceable against the subsequently created interest in the same manner as they are enforceable against the working interest of
51	the burdened party.
52
53	ARTICLE IV.
54	TITLES
55
56	A. Title Examination:
57
58	Title examination shall be made on the drillsite of any proposed well prior to commencement of drilling operations or, if
59	The Drilling Parties so request, title examination shall be made on the leases and/or oil and gas interests included, or planned to be include-
60	Ed, in the drilling unit around such well. The opinion will include the ownership of the working interest, minerals, royalty, overriding
61	Royalty and production payments under the applicable leases. At the time a well is proposed, each party contributing leases and/or oil and
62	Gas interests to the drillsite, or to be included in such drilling unit, shall furnish to Operator all abstracts (including federal lease status
63	Reports), title opinions, title papers and curative material in its possession free of charge. All such information not in the possession of or
64	Made available to Operator by the parties, but necessary for the examination of the title, shall be obtained by Operator. Operator shall
65	Cause title to be examined by attorneys on its staff or by outside attorneys. Copies of all title opinions shall be furnished to each party
66	hereto. The cost incurred by Operator in this title program shall be borne as follows:
67
68	___Options No. 1: Costs incurred by Operator in procuring abstracts and title examination (including preliminary, supplemental,
69	shut-in gas royalty opinions and division order title opinions) shall be a part of the administrative overhead as provided in Exhibit “C”
70	and shall not be a direct charge, whether performed by Operator’s staff attorneys or by outside attorneys.

2

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982
ARTICLE IV
Continued

1	___ Option No. 2: Costs incurred by Operator in procuring abstracts and fees paid outside attorneys for title examination
2	(including preliminary, supplemental, shut-in gas royalty opinions and division order title opinions) shall be borne by the Drilling Parties
3	in the proportion that the interest of each Drilling Party bears to the total interest of all Drilling Parties as such interests appear in Ex-
4	hibit “A”. Operator shall make no charge for services rendered by its staff attorneys or other personnel in the performance of the above
5	functions.
6
7	Each party shall be responsible for securing curative matter and pooling amendments or agreements required in connection
8	with leases or oil and gas interests contributed by such party. Operator shall be responsible for the preparation and recording of pooling
9	designations or declarations as well as the conduct of hearings before governmental agencies for the securing of spacing or pooling orders.
10	This shall not prevent any party from appearing on its own behalf at any such hearing.
11
12	No well shall be drilled on the Contract Area until after (1) the title to the drillsite or drilling unit has been examined as above
13	provided, and (2) the title has been approved by the examining attorney or title has been accepted by all of the parties who are to par-
14	ticipate in the drilling of the well.
15
16	B. Loss of Title:
17
18	1. Failure-of-Title. Should any oil and gas interest or lease, or interest therein be lost through failure of title, which loss results in a, which
19	reduction of interest from that shown on Exhibit “A”, the party contributing the affected lease or interest shall have ninety (90) d s
20	from final determination of title failure to acquire a new lease or other instrument curing the entirety of the title failure, which acquisi-
21	tion will not be subject to Article VIII.B., and failing to do so, this agreement, nevertheless, shall continue in force as to all re ping oil
22	and gas leases and interests: and,
23	(a) The party whose oil and gas lease or interest is affected by the title failure shall bear alone the entire loss an a shall not be
24	entitled to recover from Operator or the other parties any development or operating costs which it may have theretofor paid or incurred,
25	but there shall be no additional liability or. its part to the other parties hereto by reason of such title failure;
26	(b) There shall be no retroactive adjustment of expenses incurred or revenues received from the operation the interest which has
27	been lost, but the interests of the parties shall be revised on an acreage basis, as of the time it is determined fully that title failure has oc-
28	curred, so that the interest of the party whose lease or interest is affected by the title failure will thereafter be reduced in the Contract
29	Area by the amount of the interest lost;
30	(c) If the proportionate interest of the other parties hereto in any producing well thereto re drilled on the Contract Area is
31	increased by reason of the title failure, the party whose title has failed shall receive the proceeds attributable to the increase in such in-
32	terest (less costs and burdens attributable thereto) until it has been reimbursed for unrecovered costs paid by it in connection with such
33	well;
34	(d) Should any person not a party to this agreement, who is determined to b e owner of any interest in the title which has
35	failed, pay in any manner any part of the cost of operation, development, or equipment,such amount shall be paid to the party or parties
36	who bore the costs which are so refunded;
37	(e) Any liability to account to a third party for prior production of oil and gas which arises by reason of title failure shall be
38	borne by the party or parties whose title failed in the same proportion m which they shared in such prior production; and,
39	(f) No charge shall be made to the joint account for legal expenses, fees or salaries, in connection with the defense of the interest
40	claimed by any party hereto, it being the intention of the parties hereto that each shall defend title to its interest and bear all expenses in
41	connection therewith.
42
43	2. Loss by Non-Payment or Erroneous Payment Amount Due: If, through mistake or oversight, any rental, shut-in well
44	payment, minimum royalty or royalty payment, is n paid or is erroneously paid, and as a result a lease or interest therein terminates,
45	there shall be no monetary liability against the par who failed to make such payment. Unless the party who failed to make the required
46	payment secures a new lease covering the same interest within ninety (90) days from the discovery of the failure to make proper payment,
47	which acquisition will not be subject to Art’ a VIII.B., the interests of the parties shall be revised on an acreage basis, effective as of the
48	date of termination of the lease involved and the party who failed to make proper payment will no longer be credited with an interest in
49	the Contract Area on account of ownership of the lease or interest which has terminated. In the event the party who failed to make the
50	required payment shall not have b n fully reimbursed, at the time of the loss, from the proceeds of the sale of oil and gas attributable to
51	the lost interest, calculated on acreage basis, for the development and operating costs theretofore paid on account of such interest, it
52	shall be reimbursed for unrecovered actual costs theretofore paid by it (but not for its share of the cost of any dry hole previously drilled
53	or wells previously abandoned) from so much of the following as is necessary to effect reimbursement:
54	(a) Proceeds of oil and gas, less operating expenses, theretofore accrued to the credit of the lost interest, on an acreage basis,
55	up to the amount unrecovered costs;
56	(b) Proceeds, less operating expenses, thereafter accrued attributable to the lost interest on an acreage basis, of that portion of
57	oil and gas thereafter produced and marketed (excluding production from any wells thereafter drilled) which, in the absence of such lease
58	termination, would be attributable to the lost interest on an acreage basis, up to the amount of unrecovered costs, the proceeds of said
59	portion of the oil and gas to be contributed by the other parties in proportion to their respective interests; and,-,5,
60	(c) Any monies, up to the amount of unrecovered costs, that may be paid by any party who is, or becomes, the owner of the interest
61	lost, for the privilege of participating in the Contract Area or becoming a party to this agreement.
62
63	3. Other losses: All losses incurred, other than those set forth in Articles IV.B.1. and Iv.B.2. above; shall be joint losses
64	and shall be borne by all parties in proportion to their interests. There shall be no readjustment of interests in the remaining portion of
65	The Contract Area.

3

1.	A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982
2.	ARTICLE V
3.
4.	A. Designation and Responsibilities of Operator:
5
6	Saba Petroleum, Inc. shall be the
7	Operator of the Contract Area, and shall conduct and direct and have full control of all operations n the Contract Area as permitted and
8	required by, and within the limits of this agreement. It shall conduct all such operations in a good and workmanlike manner, but it shall
9	have no liability as Operator to the other parties for losses sustained or liabilities incurred, except such as may result from gross
10	negligence or willful misconduct.
11
12	B. Resignation or Removal of Operator and Selection of Successor:
13
14	1. Resignation or Removal of Operator: Operator may resign at any time by giving written notice hereof to Non-Operators.
15	If Operator terminates its legal existence, no longer owns an interest hereunder in the Contract Area, or is no longer capable of serving as
16	Operator, Operator shall be deemed to have resigned without any action by Non-Operators, except the selection of a successor. Operator
17	may be removed if it fails or refuses to carry out its duties hereunder, or becomes insolvent, bankrupt or is placed in receivership, by the
18	affirmative vote of two (2) or more Non-Operators owning a majority interest based on ownership as shown on Exhibit “A” remaining
19	after excluding the voting interest of Operator. Such resignation or removal shall not become effective until 7:00 o’clock A.M. on the
20	first day of the calendar month following the expiration of ninety (90) days after the giving of notice of resignation by Operator or action
21	by the Non-Operators to remove Operator, unless a successor Operator has been selected and assumes the duties of Operator at an earlier
22	date. Operator, after effective date of resignation or removal, shall be bound by the terms hereof as a Non-Operator. A change of a cor-
23	porate name or structure of Operator or transfer of Operator’s interest to any single subsidiary, parent or successor corporation shall not
24	be the basis for removal of Operator.
25
26	2. Selection of Successor Operator: Upon the resignation or removal of Operator, a successor Operator shall be selected by
27	the parties. The successor Operator shall be selected from the parties owning an interest in the Contract Area at the time such successor
28	Operator is selected. The successor Operator shall be selected by the affirmative vote of two (2) or more parties owning a majority interest
29	based on ownership as shown on Exhibit “A”; provided, however, if an Operator which has been removed fails to vote or votes only to
30	succeed itself, the successor Operator shall be selected by the affirmative vote of two (2) or more parties owning a majority interest based
31	on ownership as shown on Exhibit “A” remaining after excluding the voting interest of the Operator that was removed.
32
33	C. Employees:
34
35	The number of employees used by Operator in conducting operations hereunder, their selection, and the hours of labor and the
36	compensation for services performed shall be determined by Operator, and all such employees shall be the employees of Operator.
38	D. Drilling Contracts:
39
40	All wells drilled on the Contract Area shall be drilled on a competitive contract basis at the usual rates prevailing in the area. If it so
41	desires, Operator may employ its own tools and equipment in the drilling of wells, but its charges therefore shall not exceed the prevailing
42	rates in the area and the rate of such charges shall be agreed upon by the parties in writing before drilling operations are commenced, and
43	such work shall be performed by Operator under the same terms and conditions as are customary and usual in the area in contracts of in
44	dependent contractors who are doing work of a similar nature.
45
46
47
48
49	ARTICLE VI.
50	DRILLING AND DEVELOPMENT
51
52	A. Initial Well: See agreement dated December ____, 1996
53
54	On or before the ___ day of ________, 19____, Operator shall commence the drilling of a well for
55	oil and gas at the following location:
56
57	_.                                                                                                                                                         _
58
59
60	and shall thereafter continue the drilling of the well with due diligence to
61
62
63
64
65	unless granite or other practically impenetrable substance or condition in the hole, which renders further drilling impractical, is en-
66	countered at a lesser depth, or unless all parties agree to complete or abandon the well at a lesser depth.
67
68	Operator shall make reasonable tests of all formations encountered during drilling which give indication of containing oil and
69	gas in quantities sufficient to test, unless this agreement shall be limited in its application to a specific formation or formations, in which
70	event Operator shall be required to test only the formation or formations to which this agreement may apply.

4

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VI
continued

1	If, in Operator’s judgment, the well will not produce oil or gas in paying quantities, and it wishes to plug and abandon the
2	Well as a dry hole, the provisions of Article VI.E.1 shall thereafter apply.
3
4
5
6	B. Subsequent Operations:
7
8	1. Proposed Operations: Should any party hereto desire to drill any well on the Contract Area other than the well provided
9	for in Article VI.A., or to rework, deepen or plug back a dry hole drilled at the joint expense of all parties or a well jointly owned by all
10	the parties and not then producing in paying quantities, the party desiring to drill, rework, deepen or plug back such a well shall give the
11	other parties written notice of the proposed operation, specifying the work to be performed, the location, proposed depth, objective forma
12	lion and the estimated cost of the operation. The parties receiving such a notice shall have thirty (30) days after receipt of the notice
13	within which to notify the party wishing to do the work whether they elect to participate in the cost of the proposed operation. If a drill-
14	ing rig is on location notice of 2 proposal to rework, plug back or drill deeper may be given by telephone and the response period shall be
15	limited to forty-eight (48) twenty-four (24) exclusive of Saturday, Sunday and legal holidays. Failure of a party receiving such notice to reply within
16	the period above fixed shall constitute an election by that party not to participate in the cost of the proposed operation. Any notice or
17	response given by telephone shall be promptly confirmed in writing.
18
19
20
21	If all parties elect to participate in such a proposed operation, Operator shall within ninety days after expiration of the notice
22	period of thirty (30) days (or as promptly as possible after the forty-eight (48) twenty-four hour period when a drilling rig is on loca-
23	tion, as the case may be), actually commence the proposed operation and complete it with due diligence at the risk and expense of all par
24	ties hereto; provided, however, said commencement date may be extended upon written notice of same by Operator to the other parties,
25	for a period of up to thirty (30) additional days if, in the sole opinion of Operator, such additional time is reasonably necessary to obtain
26	permits from governmental authorities, surface rights (including rights-of-way) or appropriate drilling equipment, or to complete title ex-
27	amination or curative matter required for title approval or acceptance. Notwithstanding the force majeure provisions of Article XI, if the
28	actual operation has not been commenced within the time provided (including any extension thereof as specifically permitted herein) and
29	if any party hereto still desires to conduct said operation, written notice proposing same must be resubmitted to the other parties in accor-
30	dance with the provisions hereof as if no prior proposal had been made.
31
32
33
34	2. Operations by Less than All Parties: If any party receiving such notice as provided in Article VI.B.1. or VII.D.1. (Option
35	No. 2) elects not to participate in the proposed operation, then, in order to be entitled to the benefits of this Article, the party or parties
36	giving the notice and such other parties as shall elect to participate in the operation shall within ninety (90) days after the expiration of
37	the notice period of thirty (30) days (or as promptly as possible after the expiration of the forty-eight (48) twenty-four (24) hour period when a drilling rig is
38	on location, as the case may be) actually commence the proposed operation and complete it with due diligence. Operator shall perform all
39	work for the account of the Consenting Parties; provided, however, if no drilling rig or other equipment is on location, and if Operator is
40	a Non-Consenting Party, the Consenting Parties shall either: (a) request Operator to perform the work required by such proposed opera-
41	tion for the account of the Consenting Parties, or (b) designate one (1) of the Consenting Parties as Operator to perform such work. Con-
42	senting Parties, when conducting operations on the Contract Area pursuant to this Article VI.B.2., shall comply with all terms and con-
43	ditions of this agreement.
44
45
46
47	If less than all parties approve any proposed operation, the proposing party, immediately after the expiration of the applicable
48	notice period, shall advise the Consenting Parties of the total interest of the parties approving such operation and its recommendation as
49	to whether the Consenting Parties should proceed with the operation as proposed. Each Consenting Party, within forty-eight (48) hours
50	(exclusive of Saturday, Sunday and legal holidays) after receipt of such notice, shall advise the proposing party of its desire to (a) limit par-
51	ticipation to such party’s interest as shown on Exhibit “A” or (b) carry its proportionate part of Non-Consenting Parties’ interests, and
52	failure to advise the proposing party shall be deemed an election under (a). In the event a drilling rig is on location, the time permitted for
53	such a response shall not exceed a total of forty eight (48) twenty-four (24) hours (inclusive of Saturday, Sunday and legal holidays). The proposing party,
54	at its election, may withdraw such proposal if there is insufficient participation and shall promptly notify all parties of such decision.
55
56
57
58	The entire cost and risk of conducting such operations shall be borne by the Consenting Parties in the proportions they have
59	elected to bear same under the terms of the preceding paragraph. Consenting Parties shall keep the leasehold estates involved in such
60	operations free and clear of all liens and encumbrances of every kind created by or arising from the operations of the Consenting Parties.
61	If such an operation results in a dry hole, the Consenting Parties shall plug and abandon the well and restore the surface location at their
62	sole cost, risk and expense. If any well drilled, reworked, deepened or plugged back under the provisions of this Article results in a pro-
63	ducer of oil and/or gas in paying quantities, the Consenting Parties shall complete and equip the well to produce at their sole cost and risk,

5

A.A.P.L. FORM 610—MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VI
Continued

1	and the well shall then be turned over to Operator and shall be operated by it at the expense and for the account of the Consenting Par
2	ties. Upon commencement of operations for the drilling, reworking, deepening or plugging back of any such well by Consenting Parties
3	in accordance with the provisions of this Article, each Non-Consenting Party shall be deemed to have relinquished to Consenting Parties,
4	and the Consenting Parties shall own and be entitled to receive, in proportion to their respective interests, all of such Non-Consenting
5	Party’s interest in the well and share of production therefrom until the proceeds of the sale of such share, calculated at the well, or
6	market value thereof if such share is not sold, (after deducting production taxes, excise taxes, royalty, overriding royalty and other in-
7	terests not excepted by Article III.D. payable out of or measured by the production from such well accruing with respect to such interest
8	until it reverts) shall equal the total of the following:
9
10
11
12	(a) 100% of each such Non-Consenting Party’s share of the cost of any newly acquired surface equipment beyond the wellhead
13	connections (including, but not limited to, stock tanks, separators, treaters, pumping equipment and piping), plus 100% of each such
14	Non-Consenting Party’s share of the cost of operation of the well commencing with first production and continuing until each such Non
15	Consenting Party’s relinquished interest shall revert to it under other provisions of this Article, it being agreed that each Non
16	Consenting Party’s share of such costs and equipment will be that interest which would have been chargeable to such Non-Consenting
17	Party had it participated in the well from the beginning of the operations; and
18
19
20
21	(b)300% of that portion of the costs and expenses of drilling, reworking, deepening, plugging back, testing and completing,
22	after deducting any cash contributions received under Article VIII.C., and 300 % of that portion of the cost of newly acquired equip-
23	ment in the well (to and including the wellhead connections), which would have been chargeable to such Non-Consenting Party if it had
24	participated therein.
25
26
27
28	An election not to participate in the drilling or the deepening of a well shall be deemed an election not to participate in any re
29	working or plugging back operation proposed in such a well, or portion thereof, to which the initial Non-Consent election applied that is
30	conducted at any time prior to full recovery by the Consenting Parties of the Non-Consenting Party’s recoupment account. Any such
31	reworking or plugging back operation conducted during the recoupment period shall be deemed part of the cost of operation of said well
32	and there shall be added to the sums to be recouped by the Consenting Parties one hundred percent (100%) of that portion of the costs of
33	the reworking or plugging back operation which would have been chargeable to such Non-Consenting Party had it participated therein. If
34	such a reworking or plugging back operation is proposed during such recoupment period, the provisions of this Article VI.B. shall be ap-
35	plicable as between said Consenting Parties in said well.
36
37
38
39	During the period of time Consenting Parties are entitled to receive Non-Consenting Party’s share of production, or the
40	proceeds therefrom, Consenting Parties shall he responsible for the payment of all production, severance, excise, gathering and other
41	taxes, and all royalty, overriding royalty and other burdens applicable to Non-Consenting Party’s share of production not excepted by Ar-
42	ticle III.D.
43
44
45
46	In the case of any reworking, plugging back or deeper drilling operation, the Consenting Parties shall be permitted to use, free
47	of cost, all casing, tubing and other equipment in the well, but the ownership of all such equipment shall remain unchanged; and upon
48	abandonment of a well after such reworking, plugging back or deeper drilling, the Consenting Parties shall account for all such equip-
49	ment to the owners thereof, with each party receiving its proportionate part in kind or in value, less cost of salvage.
50
51
52
53	Within sixty (60) days after the completion of any operation under this Article, the party conducting the operations for the
54	Consenting Parties shall furnish each Non-Consenting Party with an inventory of the equipment in and connected to the well, and an
55	itemized statement of the cost of drilling, deepening, plugging back, testing, completing, and equipping the well for production; or, at its
56	option, the operating party, in lieu of an itemized statement of such costs of operation, may submit a detailed statement of monthly bill-
57	ings. Each month thereafter, during the time the Consenting Parties are being reimbursed as provided above, the party conducting the
58	operations for the Consenting Parties shall furnish the Non-Consenting Parties with an itemized statement of all costs and liabilities in-
59	curred in the operation of the well, together with a statement of the quantity of oil and gas produced from it and the amount of-proceeds
60	realized from the sale of the well’s working interest production during the preceding month. In determining the quantity of oil and gas
61	during - month Consenting Parties shall use industry accented methods such as. but not limited to- metering or periodic
62	well tests. Any amount realized from the sale of other disposition of equipment newly acquired in connection with any such operation
63	which would have been owned by a Non-Consenting Party had it participated therein shall be credited against the total unreturned costs
64	of the work done and of the equipment purchased in determining when the interest of such Non-Consenting Party shall revert to it as
65	above provided; and if there is a credit balance, it shall be paid to such Non-Consenting Party.

6

A.A.P.L. FORM 610—MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VI
Continued

1	If and when the Consenting Parties recover from Non-Consenting Party’s relinquished interest the amounts provided for above,
2	the relinquished interests of such Non-Consenting Party shall automatically revert to it, and, from and after such reversion, such Non
3	Consenting Party shall own the same interest in such well, the material and equipment in or pertaining thereto, and the production
4	therefrom as such Non-Consenting Party would have been entitled to had it participated in the drilling, reworking, deepening or plugging
5	back of said well. Thereafter, such Non-Consenting Party shall be charged with and shall pay its proportionate part of the further costs of
6	the operation of said well in accordance with the terms of this agreement and the Accounting Procedure attached hereto.
7
8
9
10	Notwithstanding the provisions of this Article VI.B.2., it is agreed that without the mutual consent of all parties, no wells shall
11	be completed in or produced from a source of supply from which a well located elsewhere on the Contract Area is producing, unless such
12	well conforms to the then-existing well spacing pattern for such source of supply.
13
14
15
16	The provisions of this Article shall have no application whatsoever to the drilling of the initial well described in Article VI.A.
17	except (a) as to Article VII.D.1. (Option No. 2), if selected, or (b) as to the reworking, deepening and plugging back of such initial well
18	after it has been drilled to the depth specified in Article VI.A. if it shall thereafter prove to be a dry hole or, if initially completed for pro-
19	duction, ceases to produce in paying quantities.
20
21
22
23	3. Stand-By Time: When a well which has been drilled or deepened has reached its authorized depth and all tests have been
24	completed, and the results thereof furnished to the parties, stand-by costs incurred pending response to a party’s notice proposing a
25	reworking, deepening, plugging back or completing operation in such a well shall be charged and borne as part of the drilling or deepen-
26	ing operation just completed. Stand-by costs subsequent to all parties responding, or expiration of the response time permitted, whichever
27	first occurs, and prior to agreement as to the participating interests of all Consenting Parties pursuant to the terms of the second gram-
28	matical paragraph of Article VI.B.2, shall be charged to and borne as part of the proposed operation, but if the proposal is subsequently
29	withdrawn because of insufficient participation, such stand-by costs shall be allocated between the Consenting Parties in the proportion
30	each Consenting Party’s interest as shown on Exhibit “A” bears to the total interest as shown on Exhibit “A” of all Consenting Par-
31	ties.
32
33
34
35	4. Sidetracking: Except as hereinafter provided, those provisions of this agreement applicable to a “deepening” operation shall
36	also be applicable to any proposal to directionally control and intentionally deviate a well from vertical so as to change the bottom hole
37	location (herein called “sidetracking”), unless done to straighten the hole or to drill around junk in the hole or because of other
38	mechanical difficulties. Any party having the right to participate in a proposed sidetracking operation that does not own an interest in the
39	affected well bore at the time of the notice shall, upon electing to participate, tender to the well bore owners its proportionate share (equal
40	to its interest in the sidetracking operation) of the value of that portion of the existing well bore to be utilized as follows:
41
42
43
44	(a) If the proposal is for sidetracking an existing dry hole, reimbursement shall be on the basis of the actual costs incurred in
45	the initial drilling of the well down to the depth at which the sidetracking operation is initiated.
46
47
48
49	(b) If the proposal is for sidetracking a well which has previously produced, reimbursement shall be on the basis of the well’s
50	salvable materials and equipment down to the depth at which the sidetracking operation is initiated, determined in accordance with the
51	provisions of Exhibit “C”, less the estimated cost of salvaging and the estimated cost of plugging and abandoning.
52
53
54
55	In the event that notice for a sidetracking operation is given while the drilling rig to be utilized is on location, the response period
56	shall be forty-eight (48) twenty-four (24) hours, exclusive of Saturday, Sunday and legal holidays; provided, however, any party may request and
57	receive up to eight (8) additional days after expiration of the forty-eight (48) twenty-four (24) hours within which to respond by paying for all stand-by time
58	incurred during such extended response period. If more than one party elects to take such additional time to respond to the notice, stand
59	by costs shall be allocated between the parties taking additional time to respond on a day-to-day basis in the proportion each eating par-
60	ty’s interest as shown on Exhibit “A” bears to the total interest as shown on Exhibit “A” of all the electing parties. In all other in-
61	stances the response period t(1 a proposal for sidetracking shall be limited to thirty (30) days.
62
63
64
65	C. TAKING PRODUCTION IN KIND:
66
67	Each party shall have the option, but not the obligation to take in kind or separately dispose of its proportionate share of all oil and gas produced from the Contract Area
68	Exclusive of production which may be used in development and producing operations and in preparing and treating oil and gas for
69	Marketing purposes and production unavoidably lost. Any extra expenditure incurred in the taking in kind or separate disposition by any
70	Party of its proportionate share of the production shall be borne by such party. Any party taking its share of production in kind shall be
71

7

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VI
Continued

1	required to pay for only its proportionate share of such part of Operator’s surface facilities which it uses.
2
3	Each party shall execute such division orders and contracts as may be necessary for the sale of its interest in production from
4	the Contract Area, and, except as provided in Article VII.B., shall be entitled to receive payment directly from the purchaser thereof for
5	its share of all production.
6
7	In the event any party shall fail to make the arrangements necessary to take in kind or separately dispose of its proportionate share of
8	the oil produced from the Contract Area, Operator shall have the right, subject to the revocation at will by the party owning it, but not
9	the obligation to purchase such oil or sell it to others at any time and from time to time, for the account of the non-taking party at the
10	best price reasonably obtainable under the circumstances obtainable in the area such production. Any such purchase sale by Operator shall be subject always to the right of the
11	owner of the production to exercise at any time its right to take in kind, or separately dispose of, its share of all oil not previously
12	delivered to a purchaser. Any purchase or sale by Operator of any other party’s share of oil shall be only for such reasonable periods of
13	time as are consistent with the minimum needs of the industry under the particular circumstances, but in no event for a period in excess
14	of one (1) year.
15
16	In the event one or more parties’ separate disposition of its share of the gas causes split-stream deliveries to separate pipelines and/or
17	deliveries which on a day-to-day basis for any reason are not exactly equal to a party’s respective proportionate share of total gas sales to
18	be allocated to it, the balancing or accounting between the respective accounts of the parties shall be in accordance with any gas balancing
19	agreement between the parties hereto, whether such an agreement is attached as Exhibit “E”, or is a separate agreement.
20
21	D. Access to Contract Area and Information:
22
23	Each party shall have access to the Contract Area at all reasonable times, at its sole cost and risk to inspect or observe operations,
24	and shall have access at reasonable times to information pertaining to the development or operation thereof, including Operator’s books
25	and records relating thereto. Operator, upon request, shall furnish each of the other parties with copies of all forms or reports filed with
26	governmental agencies, daily drilling reports, well logs, tank tables, daily gauge and run tickets and reports of stock on hand at the first of
27	each month, and shall make available samples of any cores or cuttings taken from any well drilled on the Contract Area. The cost of
28	gathering and furnishing information to Non-Operator, other than that specified above, shall be charged to the Non-Operator that re
29	quests the information.
30
31	E. Abandonment of Wells:
32
33	1. Abandonment of Dry Holes: Except for any well drilled or deepened pursuant to Article VI.B.2., any well which has been
34	drilled or deepened under the terms of this agreement and is proposed to be completed as a dry hole shall not be plugged and abandoned
35	without the consent of all parties. Should Operator, after diligent effort, be unable to contact any party, or should any party fail to reply
36	within forty-eight (48) twenty-four (24) hours (exclusive of Saturday, Sunday and legal holidays) after receipt of notice of the proposal to plug and abandon
37	such well, such party shall be deemed to have consented to the proposed abandonment. All such wells shall be plugged and abandoned in
38	accordance with applicable regulations and at the cost, risk and expense of the parties who participated in the cost of drilling or deepening
39	such well. Any party who objects to plugging and abandoning such well shall have the right to take over the well and conduct further
40	operations in search of oil and/or gas subject to the provisions of Article VI.B.
41
42	2. Abandonment of Wells that have Produced: Except for any well in which a Non-Consent operation has been conducted
43	hereunder for which the Consenting Parties have not been fully reimbursed as herein provided, any well which has been completed as a
44	producer shall not be plugged and abandoned without the consent of all parties. If all parties consent to such abandonment, the well shall
45	be plugged and abandoned in accordance with applicable regulations and at the cost, risk and expense of all the parties hereto. If, within
46	thirty (30) days after receipt of notice of the proposed abandonment of any well, all parties do not agree to the abandonment of such well,
47	those wishing to continue its operation from the interval(s) of the formation(s) then open to production shall tender to each of the other
48	parties its proportionate share of the value of the well’s salvable material and equipment, determined in accordance with the provisions of
49	Exhibit “C”, less the estimated cost of salvaging and the estimated cost of plugging and abandoning. Each abandoning party shall assign
50	the non-abandoning parties, without warranty, express or implied, as to title or as to quantity, or fitness for use of the equipment and
51	material, all of its interest in the well and related equipment, together with its interest in the leasehold estate as to, but only as to, the in-
52	terval or intervals of the formation or formations then open to production. If the interest of the abandoning party is or includes an oil and
53	gas interest, such party shall execute and deliver to the non-abandoning party or parties an oil and gas lease, limited to the interval or in-
54	tervals of the formation or formations then open to production, for a term of one (1) year and so long thereafter as oil and/or gas is pro
55	duced from the interval or intervals of the formation or formations covered thereby, such lease to be on the form attached as Exhibit
56
57
58
59
60

8

A.A.P.L. FORM 610—MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VI
Continued

1	“B”. The assignments or leases so limited shall encompass the “drilling unit” upon which the well is located. The payments by, and the
2	assignments or leases to, the assignees shall be in a ratio based upon the relationship of their respective percentage of participation in the
3	Contract Area to the aggregate of the percentages of participation in the Contract Area of all assignees. There shall be no readjustment of
4	interests in the remaining portion of the Contract Area.
5
6	Thereafter, abandoning parties shall have no further responsibility, liability, or interest in the operation of or production from
7	the well in the interval or intervals then open other than the royalties retained in any lease made under the terms of this Article. Upon re
8	quest, Operator shall continue to operate the assigned well for the account of the non-abandoning parties at the rates and charges con-
9	templated by this agreement, plus any additional cost and charges which may arise as the result of the separate ownership of the assigned
10	well. Upon proposed abandonment of the producing interval(s) assigned or leased, the assignor or lessor shall then have the option to
11	repurchase its prior interest in the well (using the same valuation formula) and participate in further operations therein subject to the pro-
12	visions hereof.
13
14	3. Abandonment of Non-Consent Operations: The provisions of Article VI.E.I. or VI.E.2. above shall be applicable as between
15	Consenting Parties in the event of the proposed abandonment of any well excepted from said Articles; provided, however, no well shall be
16	permanently plugged and abandoned unless and until all parties having the right to conduct further operations therein have been notified
17	of the proposed abandonment and afforded the opportunity to elect to take over the well in accordance with the provisions of this Article
18	VI.E.
19
20	ARTICLE VII.
21	EXPENDITURES AND LIABILITY OF PARTIES
22
23	A. Liability of Parties:
24
25	The liability of the parties shall be several, not joint or collective. Each party shall be responsible only for its obligations, and
26	shall be liable only for its proportionate share of the costs of developing and operating the Contract Area. Accordingly, the liens granted
27	among the parties in Article VII.B. are given to secure only the debts of each severally. It is not the intention of the parties to create, nor
28	shall this agreement be construed as creating, a mining or other partnership or association, or to render the parties liable as partners.
29
30	B. Liens and Payment Defaults:
31
32	Each Non-Operator grants to Operator a lien upon its oil and gas rights in the Contract Area, and a security interest in its share
33	of oil and/or gas when extracted and its interest in all equipment, to secure payment of its share of expense, together with interest thereon
34	at the rate provided in Exhibit “C”. To the extent that Operator has a security interest under the Uniform Commercial Code of the
35	state, Operator shall be entitled to exercise the rights and remedies of a secured party under the Code. The bringing of a suit and the ob-
36	taining of judgment by Operator for the secured indebtedness shall not be deemed an election of remedies or otherwise affect the lien
37	rights or security interest as security for the payment thereof. In addition, upon default by any Non-Operator in the payment of its share
38	of expense, Operator shall have the right, without prejudice to other rights or remedies, to collect from the purchaser the proceeds from
39	the sale of such Non Operator’s share of oil and/or gas until the amount owed by such Non-Operator, plus interest, has been paid. Each
40	purchaser shall be entitled to rely upon Operator’s written statement concerning the amount of any default. Operator grants a like lien
41	and security interest to the Non-Operators to secure payment of Operator’s proportionate share of expense.
42
43	If any party fails or is unable to pay its share of expense within sixty (60) days after rendition of a statement therefore by
44	Operator, the non-defaulting parties, including Operator, shall, upon request by Operator, pay the unpaid amount in the proportion that
45	the interest of each such party bears to the interest of all such parties. Each party so paying its share of the unpaid amount shall, to obtain
46	reimbursement thereof, be subrogated to the security rights described in the foregoing paragraph.
47
48	C.Payments and Accounting:
49
50	Except as herein otherwise specifically provided, Operator shall promptly pay and discharge expenses incurred in the development
51	and operation of the Contract Area pursuant to this agreement and shall charge each of the parties hereto with their respective propor-
52	tionate shares upon the expense basis provided in Exhibit “C”. Operator shall keep an accurate record of the joint account hereunder,
53	showing expenses incurred and charges and credits made and received.
54
55	Operator, at its election, shall have the right from time to time to demand and receive from the other parties payment in advance
56	of their respective shares of the estimated amount of the expense to be incurred in operations hereunder during the next succeeding
57	month, which right may be exercised only by submission to each such party or an itemized statement of such estimated expense, together
58	with an invoice for its share thereof. Each such statement and invoice for the payment in advance of estimated expense shall be submitted
59	on or before the 20th day of the next preceding month. Each party shall pay to Operator its proportionate share of such estimate within
60	fifteen (15) days after such estimate and invoice is received. If any party fails to pay its share of said estimate within said time, the amount
61	due shall bear interest as provided in Exhibit “C” until paid. Proper adjustment shall be made monthly between advances and actual ex-
62	pense to the end that each party shall bear and pay its proportionate share of actual expenses incurred, and no more.
63
64	D. Limitation of Expenditures:
65
66	1.Drill or Deepen: Without the consent of all parties, no well shall be drilled or deepened, except any well drilled or deepened
67	pursuant to the provisions of Article VI.B.2. of this agreement. Consent to the drilling or deepening shall include:

9

A.A.P.L. FORM 610—MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VII
Continued

1	___ Option No. 1: All necessary expenditures for the drilling or deepening, testing, completing and equipping of the well, including
2	necessary tankage and/or surface facilities.
3
4	___ Option No. 2: All necessary expenditures for the drilling or deepening and testing of the well. When such well has reached its
5	authorized depth, and all tests have been completed, and the results thereof furnished to the parties, Operator shall give immediate notice
6	to the Non-Operators who have the right to participate in the completion costs. The parties receiving such notice shall have forty-eight
7	(48) twenty-four (24) hours (exclusive of Saturday, Sunday and legal holidays) in which to elect to participate in the setting of casing and the completion at
8	tempt. Such election, when made, shall include consent to all necessary expenditures for the completing and equipping of such well, in-
9	cluding necessary tankage and/or surface facilities. Failure of any party receiving such notice to reply within the period above fixed shall
10	constitute an election by that party not to participate in the cost of the completion attempt. If one or more, but less than all of the parties,
11	elect to set pipe and to attempt a completion, the provisions of Article VI.B.2. hereof (the phrase “reworking, deepening or plugging
12	back” as contained in Article VI.B.2. shall be deemed to include “completing “) shall apply to the operations thereafter conducted by less
13	than all parties.
14
15	2. Rework or Plug Back: Without the consent of all parties, no well shall be reworked or plugged back except a well reworked or
16	plugged back pursuant to the provisions of Article VI.B.2. of this agreement. Consent to the reworking or plugging back of a well shall
17	include all necessary expenditures in conducting such operations and completing and equipping of said well, including necessary tankage
18	and/or surface facilities.
19
20	3. Other Operations: Without the consent of all parties, Operator shall not undertake any single project reasonably estimated
21	to require an expenditure in excess of thirty thousand Dollars ($ 30,000. 00)
22	except in connection with a well, the drilling, reworking, deepening, completing, recompleting, or plugging back of which has been
23	previously authorized by or pursuant to this agreement; provided, however, that, in case of explosion, fire, flood or other sudden
24	emergency, whether of the same or different nature, Operator may take such steps and incur such expenses as in its opinion are required
25	to deal with the emergency to safeguard life and property but Operator, as promptly as possible, shall report the emergency to the other
26	parties. If Operator prepares an authority for expenditure (AFE) for its own use, Operator shall furnish any Non-Operator so requesting
27	an information copy thereof for any single project costing in excess of thirty thousand
28	Dollars ($30,000.00) but less than the amount first set forth above in this paragraph.
29
30	E.Rentals, Shut-in Well Payments and Minimum Royalties:
31
32	Rentals, shut-in well payments and minimum royalties which may be required under the terms of any lease shall be paid by the
33	party or parties who subjected such lease to this agreement at its or their expense. In the event two or more parties own and have con-
34	tributed interests in the same lease to this agreement, such parties may designate one of such parties to make said payments for and on
35	behalf of all such parties. Any party may request, and shall be entitled to receive, proper evidence of all such payments. In the event of
36	failure to make proper payment of any rental, shut-in well payment or minimum royalty through mistake or oversight where such pay-
37	ment is required to continue the lease in force, any loss which results from such non-payment shall be borne in accordance with the pro-
38	visions of Article IV.B.2.
39
40	Operator shall notify Non-Operate of the anticipated completion of a shut-in gas well, or the shutting in or return to production
41	of a producing gas well, at least five (5) days (excluding Saturday, Sunday and legal holidays), or at the earliest opportunity permitted by
42	circumstances, prior to taking such action, but assumes no liability for failure to do so. In the event of failure by Operator to so notify
43	Non-Operator, the loss of any lease contributed hereto by Non-Operator for failure to make timely payments of any shut-in well payment
44	shall be borne jointly by the parties hereto under the provisions of Article IV.B.3.
45
46	F. Taxes:
47
48	Beginning with the first calendar year after the effective date hereof, Operator shall render for ad valorem taxation all property,
49	subject to this agreement which by law should be rendered for such taxes, and it shall pay all such taxes assessed thereon before they
50	become delinquent. Prior to the rendition date, each Non-Operator shall furnish Operator information as to burdens (to include, but not
51	be limited to, royalties, overriding royalties and production payments) on leases and oil and gas interests contributed by such Non
52	Operator. If the assessed valuation of any leasehold estate is reduced by reason of its being subject to outstanding excess royalties, over
53	riding royalties or production payments, the reduction in ad valorem taxes resulting therefrom shall inure to the benefit of the owner or
54	owners of such leasehold estate, and Operator shall adjust the charge to such owner or owners so as to reflect the benefit of such reduc-
55	tion. If the ad valorem taxes are based in whole or in part upon separate valuations of each party’s working interest, then notwithstanding
56	anything to the contrary herein, charges to the joint account shall be made and paid by the parties hereto in accordance with the tax
57	value generated by each party’s working interest. Operator shall bill the other parties for their proportionate shares of all tax payments in
58	the manner provided in Exhibit “C”.
59
60	If Operator considers any tax assessment improper, Operator may, at its discretion, protest within the time and manner
61	prescribed by law, and prosecute the protest to a final determination, unless all parties agree to abandon the protest prior to final deter-
62	mination. During the pendancy of administrative or judicial proceedings, Operator may elect to pay, under protest, all such taxes and any
63	interest and penalty. When any such protested assessment shall have been finally determined, Operator shall pay the tax for the joint ac-
64	count, together with any interest and penalty accrued, and the total cost shall then be assessed against the parties, and be paid by them, as
65	provided in Exhibit “C”.
66
67	Each party shall pay or cause to be paid all production, severance, excise, gathering and other taxes imposed upon or with respect to
68	the production or handling of such party’s share of oil and/or gas produced under the terms of this agreement.

10

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VII
Continued

1	G. Insurance:
2
3	At all times while operations are conducted hereunder, Operator shall comply with the workmen’s compensation law of
4	the state where the operations are being conducted; provided, however, that Operator may be a self-insurer for liability under said com-
5	pensation laws in which event the only charge that shall be made to the joint account shall be as provided in Exhibit “C”. Operator shall
6	also carry or provide insurance for the benefit of the joint account of the parties as outlined in Exhibit “D”, attached to and made a part
7	hereof. Operator shall require all contractors engaged in work on or for the Contract Area to comply with the workmen’s compensation
8	law of the state where the operations are being conducted and to maintain such other insurance as Operator may require.
9
10	In the event automobile public liability insurance is specified in said Exhibit “D”, or subsequently receives the approval of the
11	parties, no direct charge shall be made by Operator for premiums paid for such insurance for Operators automotive equipment.
12
13	ARTICLE VIII.
14	ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST
15
16	A. Surrender of Leases:
17
18	The leases covered by this agreement, insofar as they embrace acreage in the Contract Area, shall not be surrendered in whole
19	or in part unless all parties consent thereto.
20
21	However, should any party desire to surrender its interest in any lease or in any portion thereof, and the other parties do not
22	agree or consent thereto, the party desiring to surrender shall assign, without express or implied warranty of title, all of its interest in
23	such lease, or portion thereof, and any well, material and equipment which may be located thereon and any rights in production
24	thereafter secured, to the parties not consenting to such surrender. If the interest of the assigning party is or includes an oil and gas in-
25	terest, the assigning party shall execute and deliver to the party or parties not consenting to such surrender an oil and gas lease covering
26	such oil and gas interest for a term of one 91) year and so long thereafter as oil and/or gas is produced from the land covered thereby, such
27	lease to be on the form attached hereto as Exhibit “B”. Upon such assignment or lease, the assigning party shall be relieved from all
28	obligations thereafter accruing, but not theretofore accrued, with respect to the interest assigned or leased and the operation of any well
29	attributable thereto, and the assigning party shall have no further interest in the assigned or leased premises and its equipment and pro
30	duction other than the royalties retained in any lease made under the terms of this Article. The party assignee or lessee shall pay to the
31	party assignor or lessor the reasonable salvage value of the latter’s interest in any wells and equipment attributable to the assigned or-leas-
32	ed acreage. The value of all material shall be determined in accordance with the provisions of Exhibit “C”, less the estimated cost of
33	salvaging and the estimated cost of plugging and abandoning. If the assignment or lease is in favor of more than one party, the interest
34	shall be shared by such parties in the proportions that the interest of each bears to the total interest of all such parties.
35
36	Any assignment,lease or surrender made under this provision shall not reduce or change the assignor’s, lessor’s surrendering
37	party’s interest as it was immediately before the assignment, lease or surrender in the balance of the Contract Area; and the acreage
38	assigned, leased or surrendered, and subsequent operations thereon, shall not thereafter be subject to the terms and provisions of this
39	agreement.
40
41	B. Renewal or Extension of Leases:
42
43	If any party secures a renewal of any oil and gas lease subject to this agreement, all other parties shall be notified promptly, and
44	shall have the right for a period of thirty (i0) days following receipt of such notice in which to elect to participate in the ownership of the
45	renewal lease, insofar as such lease affects lands within the Contract Area, by paying to the party who acquired it their several proper pro-
46	portionate shares of the acquisition cost allocated to that part of such lease within the Contract Area, which shall be in proportion to the
47	interests held at that time by the parties in the Contract Area.
48
49	If some, but less than all, of the parties elect to participate in the purchase of a renewal lease, it shall be owned by the parties
50	who elect to participate therein, in a ratio based upon the relationship of their respective percentage of participation in the Contract Area
51	to the aggregate of the percentages of participation in the Contract Area of all parties participating in the purchase of such renewal lease.
52	Any renewal lease in which less than all parties elect to participate shall not be subject to this agreement.
53
54	Each party who participates in the purchase of a renewal lease shall be given an assignment of its proportionate interest therein
55	by the acquiring party.
56
57	The provisions of this Article shall apply to renewal leases whether they are for the entire interest covered by the expiring lease
58	or cover only a portion of its area or an interest therein. Any renewal lease taken before the expiration of its predecessor lease, or taken or
59	contracted for within six (6) months after the expiration of the existing lease shall be subject to this provision; but any lease taken or con-
60	tracted for more than six (6) months after the expiration of an existing lease shall not be deemed a renewal lease and shall not be” subject to
61	the provisions of this agreement.
62
63	The provisions in this Article shall also be applicable to extensions of oil and gas leases.
64
65	C. Acreage or Cash Contributions:
66
67	While this agreement is in force, if any party contracts for a contribution of cash towards the drilling of a well or any other
68	operation on the Contract Area, such contribution shall be paid to the party who conducted the drilling or other operation and shall be
69	applied by it against the cost of such drilling or other operation. If the contribution be in the form of acreage, the party to whom the con-
70	tribution is made shall promptly tender an assignment of the acreage, without warranty of title, to the Drilling Parties in the proportions

11

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982
ARTICLE VIII
(Continued)

1	said Drilling Parties shared the cost of drilling the well. Such acreage shall become a separate Contract Area and, to the extent possible, be
2	governed by provisions identical to this agreement. Each party shall promptly notify all other parties of any acreage or cash contributions
3	it may obtain in support of any well or any other operation on the Contract Area. The above provisions shall also be applicable to op-
4	tional rights to earn acreage outside the Contract Area which are in support of a well drilled inside the Contract Area.
5
6	If any party contracts for any consideration relating to disposition of such party’s share of substances produced hereunder, such
7	consideration shall not be deemed a contribution as contemplated in this Article VIII.C.
8
9	D. Maintenance of Uniform Interest:
10
11	For the purpose of maintaining uniformity of ownership in the oil and gas leasehold interests covered by this agreement, no
12	party shall sell, encumber, transfer or make other disposition of its interest in the leases embraced within the Contract Area and in wells,
13	equipment and production unless such disposition covers either:
14
15	1. the entire interest of the party in all leases and equipment and production; or
16
17	2. an equal undivided interest in all leases and equipment and production in the Contract Area.
18
19	Every such sale, encumbrance, transfer or other disposition made by any party shall be made expressly subject to this agreement
20	and shall be made without prejudice to the right of the other parties.
21
22	If, at any time the interest of any party is divided among and owned by four or more co-owners, Operator, at its discretion, may
23	require such co-owners to appoint a single trustee or agent with full authority to receive notices, approve expenditures, receive billings for
24	and approve and pay such party’s share of the joint expenses, and to deal generally with, and with power to bind, the co-owners of such
25	party’s interest within the scope of the operations embraced in this agreement; however, all such co-owners shall have the right to enter
26	into and execute all contracts or agreements for the disposition of their respective shares of the oil and gas produced from the Contract
27	Area and they shall have the right to receive, separately, payment of the sale proceeds thereof.
28
29	E. Waiver of Rights to Partition:
30
31	If permitted by the laws of the state or states in which the property covered hereby is located, each party hereto owning an
32	undivided interest in the Contract Area waives any and all rights it may have to partition and have set aside to it in severalty its undivided
33	interest therein.
34
35	F. Preferential Right to Purchase:
36
37	Should any party desire to sell all or any part of its interests under this agreement, or its rights and interests in the Contract /s/ GTR
38	Area, it shall promptly give written notice to the other parties, with full information concerning its proposed sale, which shall include the
39	name and address of the prospective purchaser (who must be ready, willing and able to purchase), the purchase price, and all other terms
40	of the offer. The other parties shall then have an optional prior right, for a period of ten (10) days after receipt of the notice, to purchase
41	on the same terms and conditions the interest which the other party proposes to sell; and, if this optional right is exercised, the purchas-
42	ing parties shall share the purchased interest in the proportions that the interest of each bears to the total interest of all purchasing par
43	ties. However, there shall be no preferential right to purchase in those cases where any party wishes to mortgage its interests, or to
44	dispose of its by merger, reorganization, consolidation, or sale of all or substantially all of its assets to a subsidiary or parent com-
45	pany or to a subsidiary of a parent company, or to any company in which any one party owns a majority of the stock..
46
47	ARTICLE IX.
48	INTERNAL REVENUE CODE ELECTION
49
50	This agreement is not intended to create, and shall not be construed to create, a relationship of partnership or an association
51	for profit between or among the parties hereto. Notwithstanding any provision herein that the rights and liabilities hereunder are several
52	and not joint or collective, or that this agreement and operations hereunder shall not constitute a partnership, if, for federal income tax
53	purposes, this agreement and the operations hereunder are regarded as a partnership, each party hereby affected elects to be excluded
54	from the application of all of the provisions of Subchapter “K”, Chapter 1, Subtitle “A”, of the In a Revenue Code of 1954, as per
55	mined and authorized by Section 761 of the Code and the regulations promulgated thereunder. Operator is authorized and directed to ex-
56	ecute on behalf of each party hereby affected such evidence of this election as may be required by the Secretary of the Treasury of the
57	United States or the Federal Internal Revenue Service, including specifically, but not by way of limitation, all of the returns, statements,
58	and the data required by Federal Regulations 1.761. Should there be any requirement that each party hereby affected give further
59	evidence of this election, each such party shall execute such documents and furnish such other evidence as may be required by the
60	Federal Internal Revenue Service or as may be necessary to evidence this election. No such party shall give any notices or take any other
61	action inconsistent with the election mad r hereby. If any present or future income tax laws of the state or states in which the Contract
62	Area is located or any future income tax laws of the United States contain provisions similar to those in Subchapter “K”, Chapter 1,
63	Subtitle “A”, of the Internal Revenue Code of 1954, under which an election similar to that provided by Section 761 of the Code is per-
64	mitted, each party hereby affected shall make such election as may be permitted or required by such laws. In making the foregoing elec
65	tion, each such party states that the income derived by such party from operations hereunder can be adequately determined without the
66	computation of partnership taxable income.

12

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982

1	ARTICLE X.
2	CLAIMS AND LAWSUITS
3
4	Operator may settle any single uninsured third party damage claim or suit arising from operations hereunder if the expenditure
5	does not exceed twenty thousand Dollars
6	($20,000.00) and if the payment is in complete settlement of such claim or suit. If the amount required for settlement ex-
7	ceeds the above amount, the parties hereto shall assume and take over the further handling of the claim or suit, unless such authority is
8	delegated to Operator. All costs and expenses of handling, settling, or otherwise discharging such claim or suit shall be at the joint ex-
9	pense of the parties participating in the operation from which the claim or suit arises. If a claim is made against any party or if any party is
10	sued on account of any matter arising from operations hereunder over which such individual has no control because of the rights given
11	Operator by this agreement, such party shall immediately notify all other parties, and the claim or suit shall be treated as any other claim
12	or suit involving operations hereunder.
13
14	ARTICLE XI.
15	FORCE MAJEURE
16
17	If any party is rendered unable, wholly or in part, by force majeure to carry out its obligations under this agreement, other than
18	the obligation to make money payments, that party shall give to all other parties prompt written notice of the force majeure with
19	reasonably full particulars concerning it; thereupon, the obligations of the party giving the notice, so far as they are affected by the force
20	majeure, shall be suspended during, but no longer than, the continuance of the force majeure. The affected party shall use all reasonable
21	diligence to remove the force majeure situation as quickly as practicable.
22
23	The requirement that any force majeure shall be remedied with all reasonable dispatch shall not require the settlement of strikes,
24	lockouts, or other labor difficulty by the party involved, contrary to its wishes; how all such difficulties shall be handled shall be entirely
25	within the discretion of the party concerned.
26
27	The term “force majeure”, as here employed, shall mean an act of God, strike, lockout, or other industrial disturbance, act of
28	the public enemy, war, blockade, public riot, lightning, fire, storm, flood, explosion, governmental action, governmental delay, restraint
29	or inaction, unavailability of equipment, and any other cause, whether of the kind specifically enumerated above or otherwise, which is
30	not reasonably within the control of the party claiming suspension.
31
32	ARTICLE XII.
33	NOTICES
34
35	All notices authorized or required between the parties and required by any of the provisions of this agreement, unless otherwise
36	specifically provided, shall be given in writing by mail or telegram, postage or charges prepaid, or by telex or telecopier and addressed to
37	the parties to whom the notice is given at the addresses listed on Exhibit “A”. The originating notice given under any provision hereof
38	shall be deemed given only when received by the party to whom such notice is directed, and the time for such party to give any notice in
39	response thereto shall run from the date the originating notice is received. The second or any responsive notice shall be deemed given
40	when deposited in the mail or with the telegraph company, with postage or charges prepaid, or sent by telex or telecopier. Each party
41	shall have the right to change its address at any time, and from time to time, by giving written notice thereof to all other parties.
42
43	ARTICLE XIII.
44	TERM OF AGREEMENT
45
46	This agreement shall remain in full force and effect as to the oil and gas leases and/or oil and gas interests subject hereto for the
47	period of time selected below; provided, however, no party hereto shall ever be construed as having any right, title or interest in or to any
48	lease or oil and gas interest contributed by any other party beyond the term of this agreement.
49
50	X Option No. 1: So long as any of the oil and gas leases subject to this agreement remain or are continued in force as to any part
51	of the Contract Area, whether by production, extension, renewal or otherwise.
52
53	__Option No. 2: In the event the well described in Article VI..A., or any subsequent well drilled under any provision of this
54	agreement, results in production of oil and/or gas in paying quantities, this agreement shall continue in force so long as any such well or
55	wells produce, or are capable of production, and for an additional period of days from cessation of all production; provided,
56	however, if, prior to the expiration of such additional period, one or more of the parties hereto are engaged in drilling, reworking, deepen
57	ing, plugging back, testing or attempting to complete a well or wells hereunder, this agreement shall continue in force until such opera-
58	tions have been completed and if production results therefrom, this agreement shall continue in force as provided herein. In the event the
59	well described in Article VI..A.., or any subsequent well drilled hereunder, results in a dry hole, and no other well is producing, or capable
60	of producing oil and/or gas from the Contract Area, this agreement shall terminate unless drilling, deepening, plugging back or rework-
61	ing operations are commenced with ____ days from the date of abandonment of said well.
62
63	It is agree, however, that the termination of this agreement shall not relieve any party hereto from any liability which
64	has accrued or attached prior to the date of such termination

      .

13

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982

1	ARTICLE XIV.
2	COMPLIANCE WITH LAWS AND REGULATIONS
3
4	A. Laws, Regulations and Orders:
5
6	This agreement shall be subject to the conservation laws of the state in which the Contract Area is located, to the valid rules,
7	regulations, and orders of any duly constituted regulatory body of said state; and to all other applicable federal, state, and local laws, or-
8	dinances, rules, regulations, and orders.
9
10	B. Governing Law:
11
12	This agreement and all matters pertaining hereto, including, but not limited to, matters of performance, non-performance, breach,
13	remedies, procedures, rights, duties and interpretation or construction, shall be governed and determined by the law of the state in which
14	the Contract Area is located. If the Contract Area is in two or more states, the law of the state of California
15	shall govern.
16
17	C. Regulatory Agencies:
18
19	Nothing herein contained shall grant, or be construed to grant, Operator the right or authority to waive or release any rights,
20	privileges, or obligations which Non-Operators may have under federal or state laws or under rules, regulations or orders promulgated
21	under such laws in reference to oil, gas and mineral operations, including the location, operation, or production of wells, on tracts offset-
22	ting or adjacent to the Contract Area.
23
24	With respect to operations hereunder, Non-Operators agree to release Operator from any and all losses, damages, injuries, claims
25	and causes of action arising out of, incident to or resulting directly or indirectly from Operator’s interpretation or application of rules,
26	rulings, regulations or orders of the Department of Energy or predecessor or successor agencies to the extent such interpretation or ap-
27	plication was made in good faith. Each Non-Operator further agrees to reimburse Operator for any amounts applicable to such Non-
28	Operator’s share of production that Operator may be required to refund, rebate or pay as a result of such an incorrect interpretation or
29	application, together with interest and penalties thereon owing by Operator as a result of such incorrect interpretation or application.
30
31	Non-Operators authorize Operator to prepare and submit such documents as may be required to be submitted to the purchaser
32	of any crude oil sold hereunder or to any other person or entity pursuant to the requirements of the “Crude Oil Windfall Profit Tax Act
33	of 1980”, as same may be amended from time to time (“Act”), and any valid regulations or rules which may be issued by the Treasury
34	Department from time to time pursuant to said Act. Each party hereto agrees to furnish any and all certifications or other information
35	which is required to be furnished by said Act in a timely manner and in sufficient detail to permit compliance with said Act.
36
37	ARTICLE XV.
38	OTHER PROVISIONS
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60

14

Article XV

Other Provisions

A.  Failure to Take Gas Production In-Kind:

        Notwithstanding the provisions of Article VI.C., in the event any party shall fail to make the arrangements necessary to take in-kind or separately dispose of its share of gas production from the Contract Area, the non-taking party shall have the right to request that the Operator purchase or sell to others such gas production for the account of the non-taking party at the best price reasonably obtainable under the circumstances in the area for such production, and the Operator shall have the right, but not the obligation to do so. Such requests shall be revocable at will by the party owning such gas production and the owner of such production may, at any time, exercise its right to revoke such request and to take in-kind or separately dispose of its share of gas production from the Contract Area, or to elect to be an “underproduced party”. Any purchase or sale by Operator of any party’s share of gas shall be only for such reasonable periods of time as are consistent with the minimum needs of the industry under the particular circumstances, but in no event for a period in excess of one (1) year.

B.  Insurance:

        Except as provided in Exhibit “D”, all damage or injury to the Contract Area and property thereon shall be borne by the parties hereto in proportion to their interest therein. The liability, if any, of the parties hereto in damages for claims growing out of personal injury to or death of third parties or injury to or destruction of property of third parties resulting from operations conducted hereunder shall be borne in proportion to their interests in the Contract Area, and each party individually may acquire such insurance as it deems proper to protect itself against such claims.

C.  Taxes:

        If Operator is required hereunder to pay ad valorem taxes based in whole or in part upon separate valuations of each party’s working interest, then notwithstanding anything to the contrary herein, charges to the joint account shall be made and paid by the parties herein in accordance with the percentage of tax value generated by each party’s working interest.

15

A.A.P.L. FORM 610 - MODEL FORM OPERATING AGREEMENT 1982

1	ARTICLE XVI.
2	MISCELLANEOUS
3
4	This agreement shall be binding upon and shall inure to the benefit of the parties hereto and to their respective heirs, devisees,
5	legal representatives, successors and assigns.
6
7	This instrument may be executed in any number of counterparts, each of which shall be considered an original for all purposes.
8
9	IN WITNESS WHEREOF, this agreement shall be effective as of___________day of__________, 1996.
10
11
12	OPERATOR
13
14
15	Saba Petroleum, Inc.
16
17	By: /s/ Larry Burroughs
18	Title: President
19
20
21
22	NON-OPERATORS
23
24
25
26	Geo Petroleum, Inc.
27
28	By:
29	Gerald T. Raydon
30	President
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59

16

EXHIBIT A

Attached to and made a part of that certain Operating Agreement dated December ___,1996, by and between Saba Petroleum, Inc., as “Operator”, and Geo Petroleum, Inc., as “Non-Operator”.

1.	Identification of Lands subject to this Agreement:
	Portions of projected Sections 31 and 32 T2N, R23W and Sections 5 and
	6, TIN, R23W, S.B.B.& M. Ventura County, CA
2.	Percentage Interest of Parties:
	Working Interests
	Before Payout                    After Payout
	Saba Petroleum, Inc. 100%     66.67%
	Geo Petroleum, Inc. 0%          33.33%
3.	Addresses of Parties:
	Saba Petroleum, Inc.
	201 N. Salsipuedes St., Suite 104
	Santa Barbara, CA 93103
4.	See Attached

Exhibit “A”
Attached to and Made Part of
Agreement for Assignment of Leases Dated, December ___, 1996
Ventura County, California

Lessor:	Lessee:	Date:	Recording Data:	Description of Property:
Vaca Tar Sand Unit Leases
E.E. Lenox, Single Man	Raleigh P. Trimble	04-24-34	Book: 426 Page: 241	Part of the Rancho el Rio a la Colonia known as the west 80 acres of the 119.24
				acres in subdivisions numbered 53 and 54, lying between the Sturgis Road, the
				Railroad and the Wolff Road, containing 80 acres.
John Hollis Lenox and	Exeter Oil Company	06-04-46	Book: 777 Page: 232	39 acres, more or less, out of subdivision 53 of Rancho el Rio de Santa Clara o la
Alice Lenox	Ltd. and Vaca Oil Company			Colonia.
W.R. Livingston	Raleigh P. Trimble	04-26-34	Book: 461 Page: 267	159.5 acres, more or less out of subdivision 53 of Rancho el Rio de Santa Clara o
				la Colonia.
Robert S. Livingston	Raleigh P. Trimble	04-26-34	Book: 460 Page: 478	Insofar and only insofar as lease covers 149.10 acres, more or less out of
and Mayrie Daily				subdivision 53 and 55 of Rancho el Rio de Santa Clara o la Colonia.
Livingston, his wife

Exhibit “A”
Attached to and Made Part of
Agreement for Assignment of Leases Dated, December, 1996
Ventura County, California
(Continued)

Lessor:	Lessee:	Date:	Recording Data:	Description of Property:
Non-Unit Lease
Clarence W. Hunsucker,	Sun Operating Limited	04-02-86	86-128442	Parcels B, C & D of Subdivision 55 of the Rancho El Rio De Santa Clara O’La
J. Thomas Hunsucker	Partnership			Colonia in the County of Ventura, Stag of California, according to the map
and Evelyn Hunsucker				recorded in Book 3, page 112 of maps, in the office of the County Recorder of
AKA Evelyn N. Hunsucker,				said county. Together with those portions of Sturgis Road, Pleasant Valley
AKA Eva Newman Hunsucker				Road, and Wood Road as said roads are shown on said map lying northerly,
Trustees of the Thomas O.				northwesterly, and westerly respectively of the centerline of said roads.
Hunsucker Family Trust;				EXCEPT that portion of said land lying northerly of the following described
and Clarence W. Hunsucker				line: Beginning at a point in the centerline of Wood Road, distant thereon South
as Executor of the Estate				0° 23’ 58” West 1182.96 feet from the intersection thereof with the westerly
of Thomas O. Hunsucker				prolongation of the northerly line of subdivision 58 of said Rancho; thence, 1st:
deceased				North 88° 48’ 34” West 3376.48 feet more or less to a point in the westerly line
				of said Subdivision 55.

EXHIBIT “C”

1	Attached to and made a part of Operating Agreement dated _______________1996, by
2	and between Saba Petroleum, Inc., as Operator and Geo Petroleum, Inc.
3	as Non-operator .
4
5
6
7
8	ACCOUNTING PROCEDURE
9
10	JOINT OPERATIONS
11
12	I. GENERAL PROVISIONS
13
14	1. Definitions
15
16	“Joint Property” shall mean the real and personal property subject to the agreement to which this Accounting Procedure
17	is attached.
18	“Joint Operations” shall mean all operations necessary or proper for the development, operation, protection and
19	maintenance of the Joint Property.
20	“Joint Account” shall mean the account showing the charges paid and credits received in the conduct of the Joint
21	Operations and which are to be shared by the Parties.
22	“Operator” shall mean the party designated to conduct the Joint Operations.
23	“Non-Operators” shall mean the Parties to this agreement other than the Operator.
24	“Parties” shall mean Operator and Non-Operators.
25	“First Level Supervisors” shall mean those employees whose primary function in Joint Operations is the direct
26	supervision of other employees and/or contract labor directly employed on the Joint Property in a field operating
27	capacity.
28	“Technical Employees” shall mean those employees having special and specific engineering, geological or other
29	professional skills, and whose primary function in Joint Operations is the handling of specific operating conditions and
30	problems for the benefit of the Joint Property.
31	“Personal Expenses” shall mean travel and other reasonable reimbursable expenses of Operator’s employees.
32	“Material” shall mean personal property, equipment or supplies acquired or held for use on the Joint Property.
33	“Controllable Material” shall mean Material which at the time is so classified in the Material Classification Manual as
34	most recently recommended by the Council of Petroleum Accountants Societies.
35
36	2.     Statement and Billings
37
38	Operator shall bill Non-Operators on or before the last day of each month for their proportionate share of the Joint
39	Account for the preceding month. Such bills will be accompanied by statements which identify the authority for
40	expenditure, lease or facility, and all charges and credits summarized by appropriate classifications of investment and
41	expense except that items of Controllable Material and unusual charges and credits shall be separately identified and
42	fully described in detail.
43
44	3.      Advances and Payments by Non-Operators
45
46	A.     Unless otherwise provided for in the agreement, the Operator may require the Non-Operators to advance their
47	share of estimated cash outlay for the succeeding month’s operation within fifteen (15) days after receipt of the
48	billing or by the first day of the month for which the advance is required, whichever is later. Operator shall adjust
49	each monthly billing to reflect advances received from the Non-Operators.
50
51	B.     Each Non-Operator shall pay its proportion of all bills within fifteen (15) days after receipt. If payment is not made
52	within such time, the unpaid balance shall bear interest monthly at the prime rate in effect at Citibank
53	New York on the first day of the month in which delinquency occurs plus 1% or the
54	maximum contract rate permitted by the applicable usury laws in the state in which the Joint Property is located,
55	whichever is the lesser, plus attorney’s fees, court costs, and other costs in connection with the collection of unpaid
56	amounts.
57
58	4.     Adjustments
59
60	Payment of any such bills shall not prejudice the right of any Non-Operator to protest or question the correctness thereof;
61	provided, however, all bills and statements rendered to Non-Operations by Operator during any calendar year shall
62	conclusively be presumed to be true and correct after twenty-four (24) months following the end of any such calendar
63	year, unless within the said twenty-four (24) month period a Non-Operator takes written exception thereto and makes
64	claim on Operator for adjustment. No adjustment favorable to Operator shall be made unless it is made within the same
65	prescribed period. The provisions of this paragraph shall not prevent adjustments resulting from a physical inventory of
66	Controllable Material as provided for in Section V.
67
68
69	Copyright © 1985 by Council of Petroleum Accountants Societies.

1

1	5.          Audits
2
3	A.     A Non-Operator, upon notice in writing to Operator and all other Non-Operators, shall have the right to audit
4	Operator’s accounts and records relating to the Joint Account for any calendar year within the twenty-four
5	(24) month period following the end of such calendar year; provided, however, the making of an audit shall not
6	extend the time for the taking of written exception to and the adjustments of accounts as provided for in
7	Paragraph 4 of this Section 1. Where there are two or more Non-Operators, the Non-Operators shall make
8	every reasonable effort to conduct a joint audit in a manner which will result in a minimum of inconvenience
9	to the Operator. Operator shall bear no portion of the Non-Operators’ audit cost incurred under this
10	paragraph unless agreed to by the Operator. The audits shall not be conducted more than once each year
11	without prior approval of Operator, except upon the resignation or removal of the Operator, and shall be made
12	at the expense of those Non-Operators approving such audit.
13
14	B.     The Operator shall reply in writing to an audit report within 180 days after receipt of such report.
15
16	6.           Approval By Non-Operators
17
18	Where an approval or other agreement of the Parties or Non-Operators is expressly required under other sections of
19	this Accounting Procedure and if the agreement to which this Accounting Procedure is attached contains no
20	contrary provisions in regard thereto, Operator shall notify all Non-Operators of the Operator’s proposal, and the
-21	agreement or approval of a majority in interest of the Non-Operators shall be controlling on all Non-Operators.
22
23
24	II. DIRECT CHARGES
,25
26	Operator shall charge the Joint Account with the following items:
27
28	1.  Ecological and Environmental
29
30	Costs incurred for the benefit of the Joint Property as a result of governmental or regulatory requirements to satisfy
31	environmental considerations applicable to the Joint Operations. Such costs may include surveys of an ecological or
32	archaeological nature and pollution control procedures as required by applicable laws and regulations.
33
34	2.  Rentals and Royalties
35
36	Lease rentals and royalties paid by Operator for the Joint Operations.
37
38	3.  Labor
39
40	A.  (1) Salaries and wages of Operator’s field employees directly employed on the Joint Property in the conduct of
41	Joint Operations.
42
43	(2) Salaries of First Level Supervisors in the field.
44
45	(3) Salaries and wages of Technical Employees directly employed on the Joint Property if such charges are
46	excluded from the overhead rates.
47
48	(4) Salaries and wages of Technical Employees either temporarily or permanently assigned to and directly
49	employed in the operation of the Joint Property if such charges are excluded from the overhead rates.
50
51	B.     Operator’s cost of holiday, vacation, sickness and disability benefits and other customary allowances paid to
52	employees whose salaries and wages are chargeable to the Joint Account under Paragraph 3A of this Section II.
53	Such costs under this Paragraph 313 may be charged on a “when and as paid basis” or by “percentage assessment”
54	on the amount of salaries and wages chargeable to the Joint Account under Paragraph 3A of this Section II. If
55	percentage assessment is used, the rate shall be based on the Operator’s cost experience.
56
57	C.     Expenditures or contributions made pursuant to assessments imposed by governmental authority which are
58	applicable to Operator’s costs chargeable to the Joint Account under Paragraphs 3A and 313 of this Section II.
59
60	D.     Personal Expenses of those employees whose salaries and wages are chargeable to the Joint Account under
61	Paragraph 3A of this Section II.
62
63	4.  Employee Benefits
64
65	Operator’s current costs of established plans for employees’ group life insurance, hospitalization, pension, retirement,
66	stock purchase, thrift, bonus, and other benefit plans of a like nature, applicable to Operator’s labor cost chargeable to the
67	Joint Account under Paragraphs 3A and 3B of this Section II shall be Operator’s actual cost not to exceed the percent
68	Most recently recommended by the Council of Petroleum Accountants Societies.

2

1	12. Insurance
2
3	Net premiums paid for insurance required to be carried for the Joint Operations for the protection of the Parties. In the
4	Event Joint Operations are conducted in a state in which Operator may act as self-insurer for Worker’s Compensation
5	and/or Employers Liability under the respective state’s laws, Operator may, at its election, include the risk under its self
6	insurance program and in that event, Operator shall include a charge at Operator’s cost not to exceed manual rates.
7
8	13. Abandonment and Reclamation
9
10	Costs incurred for abandonment of the Joint Property, including costs required by governmental or other regulatory
11	authority.
12
13	14. Communications
14
15	Cost of acquiring, leasing, installing, operating, repairing and maintaining communication systems, including radio and
16	microwave facilities directly serving the Joint Property. In the event communication facilities/systems serving the Joint
17	Property are Operator owned, charges to the Joint Account shall be made as provided in Paragraph 8 of this Section II.
18
19	15. Other Expenditures
20
21	Any other expenditure not covered or dealt with in the foregoing provisions of this Section 11, or in Section III and which
22	is of direct benefit to the Joint Property and is incurred by the Operator in the necessary and proper conduct of the Joint
23	Operations.
24
25
26	III. OVERHEAD
27
28	1. Overhead—Drilling and Producing Operations
29
30	i.     As compensation for administrative, supervision, office services and warehousing costs, Operator shall charge
31	drilling and producing operations on either:
32
33	(X) Fixed Rate Basis, Paragraph 1A, or
34	(   ) Percentage Basis, Paragraph 1 B
35
36	Unless otherwise agreed to by the Parties, such charge shall be in lieu of costs and expenses of all offices and
37	salaries or wages plus applicable burdens and expenses of all personnel, except those directly chargeable under
38	Paragraph 3A, Section 11. The cost and expense of services from outside sources in connection with matters of
39	taxation, traffic, accounting or matters before or involving governmental agencies shall be considered as included in
40	the overhead rates provided for in the above selected Paragraph of this Section III unless such cost and expense are
41	agreed to by the Parties as a direct charge to the Joint Account.
42
43	ii.    The salaries, wages and Personal Expenses of Technical Employees and/or the cost of professional consultant
44	services and contract services of technical personnel directly employed on the Joint Property:
45
46	(   ) shall be covered by the overhead rates, or
47	(X) shall not be covered by the overhead rates.
48
49	iii.   The salaries, wages and Personal Expenses of Technical Employees and/or costs of professional consultant services
50	and contract services of technical personnel either temporarily or permanently assigned to and directly employed in
51	the operation of the Joint Property:
52
53	(   ) shall be covered by the overhead rates, or
54	(X) shall not be covered by the overhead rates.
55
56	A.   Overhead—Fixed Rate Basis
57
58	(1)   Operator shall charge the Joint Account at the following rates per well per month:
59
60	Drilling Well Rate $5,500.00
61	(Prorated for less than a full month)
62
63	Producing Well Rate $550,00
64
65	(2)   Application of Overhead – Fixed Rate Basis
66
67	(a)  Drilling Well Rate
68
69	(1)      Changes for drilling wells shall begin on the date the well is spudded and terminate on the date
70	The drilling rig, completion rig, or other units used in completion of the well is released, whichever

3

1	is later, except that no charge shall be made during suspension of drilling or completion operations
2	for fifteen (15) or more consecutive calendar days.
3
4	(2)     Charges for wells undergoing any type of workover or recompletion for a period of five (5)
5	consecutive work days or more shall be made at the drilling well rate. Such charges shall be
6	applied for the period from date workover operations, with rig or other units used in workover,
7	commence through date of rig or other unit release, except that no charge shall be made during
8	suspension of operations for fifteen (15) or more consecutive calendar days.
9
10	(b)  Producing Well Rates
11
12	(1)     An active well either produced or injected into for any portion of the month shall be considered as
13	a one-well charge for the entire month.
14
15	(2)     Each active completion in a multi-completed well in which production is not commingled down
16	hole shall be considered as a one-well charge providing each completion is considered a separate
17	well by the governing regulatory authority.
18
19	(3)     An inactive gas well shut in because of overproduction or failure of purchaser to take the
20	production shall be considered as a one-well charge providing the gas well is directly connected to
21	a permanent sales outlet.
22
23	(4)     A one-well charge shall be made for the month in which plugging and abandonment operations
24	are completed on any well. This one-well charge shall be made whether. or not the well has
25	produced except when drilling well rate applies.
26
27	(5)     All other inactive wells (including but not limited to inactive wells covered by unit allowable, lease
28	allowable, transferred allowable, etc.) shall not qualify for an overhead charge.
29
30	(3)   The well rates shall be adjusted as of the first day of April each year following the effective date of the
31	agreement to which this Accounting Procedure is attached. The adjustment shall be computed by multiplying
32	the rate currently in use by the percentage increase or decrease in the average weekly earnings of Crude
33	Petroleum and Gas Production Workers for the last calendar year compared to the calendar year preceding as
34	shown by the index of average weekly earnings of Crude Petroleum and Gas Production Workers as published
35	by the United States Department of Labor, Bureau of Labor Statistics, or the equivalent Canadian index as
36	published by Statistics Canada, as applicable. The adjusted rates shall be the rates currently in use, plus or
3?	minus the computed adjustment.
38
39	B.        Overhead       Percentage Basis
40
42
43	(a)     Development
44
45	Percent (           %) of the cost of development of the Joint Property exclusive of costs
46	provided under Paragraph 10 of Section II and all salvage credits.
47
48	(b)     Operating
49
50	Percent (             %) of the cost of operating the Joint Property exclusive of costs provided
51	under Paragraphs 2 and 10 of Section II, all salvage credits, the value of injected substances purchased
52	for secondary recovery and all taxes and assessments which are levied, assessed and paid upon the
53	mineral interest in and to the Joint Property.
54
55	(2)   Application of Overhead – Percentage Basis shall be as follows:
56
57	For the purpose of deter mining charges on a percentage basis under Paragraph 113 of this Section III,
58	development shall include all costs in connection with drilling, redrilling, deepening, or any remedial
59	operations on y or all wells involving the use of drilling rig and crew capable of drilling to the producing
60	on the Joint Property; also preliminary expenditures necessary in preparation for drilling and
61	expenditures incurred in abandoning when the well is not completed as a producer, and original cost of
62	construction or installation of fixed assets, the expansion of fixed assets and any other project clearly
63	discernible as a fixed asset, except Major Construction as defined in Paragraph 2 of this Section III. All other
64	costs shall be considered as operating.
65
66	2. Overhead—Major Construction
67
68	To compensate Operator for overhead costs incurred in the construction and installation of fixed assets, the expansion of
69	fixed assets, and any other project clearly discernible as a fixed asset required for the development and operation of the
70	Joint Property, Operator shall either negotiate a rate prior to the beginning of construction, or shall charge the Joint

4

1	Account for overhead based on the following rates for any Major Construction project in excess of $
2
3	A.               5                   % of first $100,000 or total cost ii less, plus
4
5	B.               3                   % of costs in excess of $100,000 but less than $1,000,000, plus
6
7	C.               1                   % of costs in excess of $1,000,000.
8
9	Total cost shall mean the gross cost of any one project. For the purpose of this paragraph, the component parts of a single
10	project shall not be treated separately and the cost of drilling and workover wells and artificial lift equipment shall be
11	excluded.
12
13	3.   Catastrophe Overhead
14
15	7b compensate Operator for overhead costs incurred in the event of expenditures resulting from a single occurrence due
16	to oil spill, blowout, explosion, fire, storm, hurricane, or other catastrophes as agreed to by the Parties, which are
17	necessary to restore the Joint Property to the equivalent condition that existed prior to the event causing the
18	expenditures, Operator shall either negotiate a rate prior to charging the Joint Account or shall charge the Joint Account
19	for overhead based on the following rates:
20
21	A.              5                  % of total costs through $100,000; plus
22
23	B.              3                  % of total costs in excess of $100,000 but less than $1,000,000; plus
24
25	C.              1                  % of total costs in excess of $1,000,000.
26
27	Expenditures subject to the overheads above will not be reduced by insurance recoveries, and no other overhead
28	provisions of this Section III shall apply.
29
30	4.   Amendment of Rates
31
32	The overhead rates provided for in this Section III may be amended from time to time only by mutual agreement
33	between the Parties hereto if, in practice, the rates are found to be insufficient or excessive.
34
35
36	IV. PRICING OF JOINT ACCOUNT MATERIAL PURCHASES, TRANSFERS AND DISPOSITIONS
37
38	Operator is responsible for Joint Account Material and shall make proper and timely charges and credits for all Material
39	movements affecting the Joint Property. Operator shall provide all Material for use on the Joint Property; however, at
40	Operator’s option, such Material may be supplied by the Non-Operator. Operator shall make timely disposition of idle and/or
41	surplus Material, such disposal being made either through sale to Operator or Non-Operator, division in kind, or sale to
42	outsiders. Operator may purchase, but shall be under no obligation to purchase, interest of Non-Operators in surplus condition
43	A or B Material. The disposal of surplus Controllable Material not purchased by the Operator shall be agreed to by the Parties.
44
45	1.  Purchases
46
47	Material purchased shall be charged at the price paid by Operator after deduction of all discounts received. In case of
48	Material found to be defective or returned to vendor for any other reasons, credit shall be passed to the Joint Account
19	when adjustment has been received by the Operator.
50
51	2.  Transfers and Dispositions
52
53	Material furnished to the Joint Property and Material transferred from the Joint Property or disposed of by the Operator,
54	unless otherwise agreed to by the Parties, shall be priced on the following basis exclusive of cash discounts:
55
56	A.    New Material (Condition A)
57
58	(1) Tubular Goods Other than Line Pipe
59
60	(a)    Tubular good, sized 2 3/8 inches OD and larger, except line pipe, shall be priced at Eastern mil
61	published carload base prices effective as of date of movement plus transportation cost using the 80,000
62	pound carload weight basis to the railway receiving point nearest the Joint Property for which
63	published rail rates for tubular goods exist. If the 80c000 pound rail rate is not offered, the 70,000 pound
64	or 90,000 pound rail rate may be used. Freight charges for tubing will be calculated from Lorain, Ohio
65	and casing from Youngstown, Ohio.
66	(b)    For grades which are special to one mill only, prices shall be computed at the mill base of that mill plus
66	transportation cost from that mill to the railway receiving point nearest the Joint Property as provided
67	above in Paragraph 2.A.(1)(a). For transportation cost from points other than Eastern mills, the 30,000

5

              pound Oil Field Haulers Association interstate truck rate shall be used.

              (c)  Special end finish tubular goods shall be priced at the lowest published out-of-stock price, f.o.b. Houston, Texas, plus transportation cost, using Oil Field Haulers Association interstate 30,000 pound truck rate, to the railway receiving point nearest the Joint Property.

              (d)  Macaroni tubing (size less than 2 3/8 inch OD) shall be priced at the lowest published out-of-stock prices f.o.b. the supplier plus transportation costs, using the Oil Field Haulers Association interstate truck rate per weight of tubing transferred, to the railway receiving point nearest the Joint Property.

        (2)  Line Pipe

              (a)  Line pipe movements (except size 24 inch OD and larger with walls 3/ inch and over) 30,000 pounds or more shall be priced under provisions of tubular goods pricing in Paragraph A.(1)(a) as provided above. Freight charges shall be calculated from Lorain, Ohio.

              (b)  Line pipe movements (except size 24 inch OD and larger with walls 3/, inch and over) less than 30,000 pounds shall be priced at Eastern mill published carload base prices effective as of date of shipment, plus 20 percent, plus transportation costs based on freight rates as set forth under provisions of tubular goods pricing in Paragraph A.(1)(a) as provided above. Freight charges shall be calculated from Lorain, Ohio.

              (c)  Line pipe 24 inch OD and over and 3/, inch wall and larger shall be priced f.o.b. the point of manufacture at current new published prices plus transportation cost to the railway receiving point nearest the Joint Property.

              (d)  Line pipe, including fabricated line pipe, drive pipe and conduit not listed on published price lists shall be priced at quoted prices plus freight to the railway receiving point nearest the Joint Property or at prices agreed to by the Parties.

        (3)  Other Material shall be priced at the current new price, in effect at date of movement, as listed by a reliable supply store nearest the Joint Property, or point of manufacture, plus transportation costs, if applicable, to the railway receiving point nearest the Joint Property.

        (4)  Unused new Material, except tubular goods, moved from the Joint Property shall be priced at the current new price, in effect on date of movement, as listed by a reliable supply store nearest the Joint Property, or point of manufacture, plus transportation costs, if applicable, to the railway receiving point nearest the Joint Property. Unused new tubulars will be priced as provided above in Paragraph 2.A.(1) and (2).

              B.  Good Used Material (Condition B)

        Material in sound and serviceable condition and suitable for reuse without reconditioning:

        (1)  Material moved to the Joint Property

              At seventy-five percent (75%) of current new price, as determined by Paragraph A.

        (2)  Material used on and moved from the Joint Property

              (a)  At seventy-five percent (75%) of current new price, as determined by Paragraph A, if Material was originally charged to the Joint Account as new Material or

              (b)  At sixty-five percent (65%) of current new price, as determined by Paragraph A, if Material was originally charged to the Joint Account as used Material.

6

        (3)  Material not used on and moved from the Joint Property

              (a)  At seventy-five percent (75%) of current new price as determined by Paragraph A, if Material was originally charge to the Joint Account as new Material or

              The cost of reconditioning, if any, shall be absorbed by the transferring property.

              C.  Other Used Material

        (1)  Condition C

              Material which is not in sound and serviceable condition and not suitable for its original function until after reconditioning shall be priced at fifty percent (50%) of current new price as determined by Paragraph A. The cost of reconditioning shall be charged to the receiving property, provided Condition C value plus cost of reconditioning does not exceed Condition B value.

        (2)  Condition D

              Material, excluding junk, no longer suitable for its original purpose, but usable for some other purpose shall be priced on a basis commensurate with its use. Operator may dispose of Condition D Material under procedures normally used by Operator without prior approval of Non-Operators.

              (a)  Casing, tubing, or drill pipe used as line pipe shall be priced as Grade A and B seamless line pipe of comparable size and weight. Used casing, tubing or drill pipe utilized as line pipe shall be priced at used line pipe prices.

              (b)  Casing, tubing or drill pipe used as higher pressure service lines than standard line pipe, e.g. power oil lines, shall be priced under normal pricing procedures for casing, tubing, or drill pipe. Upset tubular goods shall be priced on a non upset basis.

        (3)  Condition E

              Junk shall be priced at prevailing prices. Operator may dispose of Condition E Material under procedures normally utilized by Operator without prior approval of Non-Operators.

              D.  Obsolete Material

        Material which is serviceable and usable for its original function but condition and/or value of such Material is not equivalent to that which would justify a price as provided above may be specially priced as agreed to by the Parties. Such price should result in the Joint Account being charged with the value of the service rendered by such Material.

              E.  Pricing Conditions

        (1)  Loading or unloading costs may be charged to the Joint Account at the rate of twenty-five cents (25e) per hundred weight on all tubular goods movements, in lieu of actual loading or unloading costs sustained at the stocking point. The above rate shall be adjusted as of the first day of April each year following January 1, 1985 by the same percentage increase or decrease used to adjust overhead rates in Section III, Paragraph 1.A.(3). Each year, the rate calculated shall be rounded to the nearest cent and shall be the rate in effect until the first day of April next year. Such rate shall be published each year by the Council of Petroleum Accountants Societies.

        (2)  Material involving erection costs shall be charged at applicable percentage of the current knocked-down price of new Material.

7

3.  Premium Prices

             Whenever Material is not readily obtainable at published or listed prices because of national emergencies, strikes or other unusual causes over which the Operator has no control, the Operator may charge the Joint Account for the required Material at the Operator’s actual cost incurred in providing such Material, in making it suitable for use, and in moving it to the Joint Property; provided notice in writing is furnished to Non-Operators of the proposed charge prior to billing Non-Operators for such Material. Each Non-Operator shall have the right, by so electing and notifying Operator within, ten days after receiving notice from Operator, to furnish in kind all or part of his share of such Material suitable for use and acceptable to Operator.

4.  Warranty of Material Furnished By Operator

             Operator does not warrant the Material furnished. In case of defective Material, credit shall not be passed to the Joint Account until adjustment has been received by Operator from the manufacturers or their agents.

V. INVENTORIES

The Operator shall maintain detailed records of Controllable Material.

1.  Periodic Inventories, Notice and Representation

             At reasonable intervals, inventories shall be taken by Operator of the Joint Account Controllable Material. Written notice of intention to take inventory shall be given by Operator at least thirty (30) days before any inventory is to begin so that Non-Operators may be represented when any inventory is taken. Failure of Non-Operators to be represented at an inventory shall bind Non-Operator to accept the inventory taken by Operator..

2.  Reconciliation and Adjustment of Inventories

             Adjustments to the Joint Account resulting from the reconciliation of a physical inventory shall be made within six month following the taking of the inventory. Inventory adjustments shall be made by Operator to the Joint Account for

8

Exhibit F

FEDERAL CONTRACT REQUIREMENTS

These Federal Contract Requirements are attached to and made a part
of that certain Operating Agreement dated _________, 1996,
between certain parties named therein,
Including Saba Pet. , Inc., hereinafter called “Contractor”

A.  Equal Opportunity Clause 141 CFR 60-1.41

        During the performance of this Contract, Contractor agrees as follows:

        (1)  Contractor will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. Contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color, religion, sex or national origin. Such action shall include, but not be limited to, the following: Employment, upgrading, demotion, or transfer, recruitment or recruitment advertising; layoff or termination, rates of pay or other forms of compensation; and selection for training, Including apprenticeship. Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officer setting forth the provisions of this nondiscrimination clause.

        (2)  Contractor will, In all solicitations or advertisements for employees placed by or on behalf of Contractor, slate that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex or national origin.

        (3)  Contractor will send to each labor union or representative of workers with which Contractor has a collective bargaining agreement or other contract or understanding, a notice to be provided by the agency contracting officer advising the labor union of workers’ representative of Contractor’s commitments under section 202 of Executive Order 11246 of September 24, 1965 and shall post copies of the notice In conspicuous places available to employees and applicants for employment.

        (4)  Contractor will comply with all provisions of Executive Order 11246 of September 24, 1965 and of the rules, regulations, and relevant orders of the Secretary of Labor.

        (5)  Contractor will furnish all information and reports required by Executive Order 11246 of September 24, 1965 and by the rules, regulations, and orders of the Secretary of Labor, or pursuant thereto, and will permit access to his books, records, and accounts by the contracting agency and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations, and orders.

        (6)  In the event of Contractor’s noncompliance with the nondiscrimination clauses of this contract or with any of such rules, regulations, or orders, this contract may be cancelled, terminated or suspended in whole or in part and Contractor may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order 11246 of September 24, 1965, and such other sanctions may be imposed and remedies invoked as provided In Executive Order 11246 of September 24, 1965, or by rule, regulation, or order of the Secretary of Labor, or as otherwise provided by law.

        (7)  Contractor will include the provisions of paragraphs (1) through (7) In every subcontract or purchase order unless exempted by rules, regulations, or orders of the Secretary of Labor issued pursuant to section 204 of Executive Order 11246 of September 24, 1965, so that such provisions will be binding upon each subcontractor or vendor. Contractor will take such action with respect to any subcontract or purchase order as the contracting agency may direct as a means of enforcing such provisions including sanctions for noncompliance; provided, however, that in the event Contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction by the contracting agency, Contractor may request the United States to enter into such litigation to protect the interests of the United States.

1

B.  Employee Information Reports (41 CFR 60-1-7)

             If the value of this contract is $50,000 or more and if Contractor has 50 or more employees, Contractor agrees to file timely, complete and accurate reports on Standard Form 100 (EEO-1) with the appropriate federal agency.

C.  Affirmative Action Program (41 CFR 60-1.40)

             If the value of this contract is $50,000 or more and Contractor has 50 or more employees, Contractor agrees to develop a written affirmative action compliance program as required by law.

D.  Certification of Nonsegregated Facilities (41 CFR 60-1.8)

             Contractor certifies that it does not and will not maintain or provide for its employees any segregated facilities at any of its establishments, and that it does not and will not permit its employees to perform their services at any location under its control, where segregated facilities are maintained. Contractor agrees that a breach of this certification is a violation of the Equal Opportunity Clause in this contract. As used In this the term “segregated facilities” means any waiting rooms, work areas, rest rooms and wash rooms, restaurants and other eating areas, time clocks, locker rooms and other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment areas, transportation, and housing facilities provided for employees which are segregated by explicit directive or are in fact segregated on the basis of race, creed, color, or national origin, because of habit, local custom or otherwise. It further agrees that (except where it has obtained identical certifications from proposed subcontractors for specific time periods) it will obtain identical certifications from proposed subcontractors prior to the award of subcontracts exceeding $10,000 which are not exempt from the provisions of Equal Opportunity Clause; that it will retain such certification in its files; and that it will forward the following notice to such proposed subcontractors (except where the proposed subcontractors have submitted identical certifications for specific time periods): NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR CERTIFICATIONS OF NONSEGREGATED FACILITIES. A Certification of Nonsegregated Facilities, as required by the May 9, 1967 order on Elimination of Segregated Facilities, by the Secretary of Labor (32 Fed.Reg.7439, May 19, 1967) must be submitted prior to the award of subcontract exceeding $10,000 which is not exempt from the provisions of the Equal Opportunity Clause. The certification may be submitted either for each subcontract or for all subcontracts during a period (i.e., quarterly, semiannually, or annually). (Note: The penalty for making false statements in offers is prescribed in 18 U.S.C. 1001.)

E.  Minority Business Enterprises (91 CFR 1-1,1310-2)

        1.  Utilization,

              (a)  It is the policy of the Government that minority business enterprises shall have the maximum practicable opportunity to participate in the performance of Government contracts.

              (b)  The Contractor agrees to use his best efforts to carry out this policy in the award of his subcontracts to the fullest extent consistent with the efficient performance of this contract. As used in this contract, the term “minority business enterprise” means a business, at least 50 percent of which is owned by minority group members or, in case of publicly owned businesses, at least 51 percent of the stock of which is owned by minority group members. For the purposes of this definition, minority group members are Negroes, Spanish-speaking American persons, American-Orientals, American-Indians, American-Eskimos, and American Aleuts. Contractors may rely on written representations by subcontractors regarding their status as minority business enterprises in lieu of an independent investigation.

        2.  Subcontracting Program.

              (a)  The Contractor agrees to establish and conduct a program which will enable minority business enterprises (as defined in the clause entitled “Utilization of Minority Business Enterprises”) to be considered fairly as subcontractors and suppliers under this contract. In this connection, the Contractor shall:

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        (1)  — Designate a liaison officer who will administer the Contractor’s minority business enterprises program,

        (2)  Provide adequate and timely consideration of the potentialities of known business enterprises in all “make-or-buy” decisions.

        (3)  Assure that known minority business enterprises will have an equitable opportunity to compete for subcontracts, particularly by arranging solicitations, time for the preparation of bids, quantities, specifications, and delivery schedules so as to facilitate the participation of minority business enterprises.

        (4)  Maintain records showing (i) procedures which have been adopted to comply with the policies set forth in the clause, including the establishment of a source list of minority business enterprises, (ii) awards to minority business enterprises on the source list, and (iii) specific efforts to identify and award contracts to minority business enterprises.

        (5)  Include the Utilization of Minority Business Enterprises clause in subcontracts which offer substantial minority business enterprises subcontracting opportunities.

        (6)  Cooperate with the Contracting Officer in any studies and surveys of the Contractor’s minority business enterprises procedures and practices that the Contracting Office may from time to time conduct.

        (7)  Submit periodic reports of subcontracting to known minority business enterprises with respect to the records referred to in subparagraph (4) above, in such form and manner and at such time (not more often than quarterly) as the Contracting Officer may prescribe.

              (b)  The Contractor further agrees to insert, in any subcontract hereunder which may exceed $500,000, provisions which shall conform substantially to the language of this clause, including this paragraph (b), and to notify the Contracting Officer of the names of such subcontractors.

F.  Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era ( CFR 6(Z 2501

             The regulations in this part apply to all government contracts and subcontracts for the furnishing of supplies or services or for the use of real or personal property (including construction) for $10,000 or more.

              (a)  The Contractor will not discriminate against any employee or applicant for employment because he or she is a disabled veteran or veteran of the Vietnam Era in regard to any position for which the employee or applicant for employment is qualified. The Contractor agrees to take affirmative action to employ, advance in employment, and otherwise treat qualified disabled veterans and veterans of the Vietnam Era without discrimination based upon their disability or veteran’s status in all employment practices such as the following: employment upgrading, demotion or transfer, recruitment, advertising, layoff or termination, rates of pay or other forms or compensation, and selection for training, including apprenticeship.

              (b)  The Contractor agrees that all suitable employment openings of the Contractor which exist at the time of the execution of this contract and those which occur during the performance of this contract, including those not generated by this contract and including those at an establishment of the Contractor other than the one wherein the contract is being performed but excluding those of independently operated corporate affiliates, shall be listed at an appropriate local office of the State employment service system wherein the opening occurs. The Contractor further agrees to provide such reports to such local office regarding employment openings and hires as may be required.

             State and local government agencies holding Federal contracts of $10,000 or more shall also list all their suitable openings with the appropriate office of the State employment service, but are not required to provide those reports set forth in paragraphs (d) and (e).

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              (c)  Listing of employment openings with the employment service system pursuant to this clause shall be made at least concurrently with the use of any other recruitment source or effort and shall involve the normal obligations which attach to the placing of a bona fide job order, including the acceptance of referrals of veterans and nonveterans. The listing of employment openings does not require the hiring of any particular job applicant or from any particular group of job applicants, and nothing herein is intended to relieve the Contractor from any requirements in Executive Orders or regulations regarding nondiscrimination in employment.

              (d)  The reports required by paragraph (b) of this clause shall include, but not be limited to, periodic reports which shall be filed at least quarterly with the appropriate local office or, where the Contractor has more than one hiring location in a State, with the central office of that State employment service. Such reports shall indicate for each hiring location (1) the number of individuals hired during the reporting period, (2) the number of nondisabled veterans of the Vietnam Era hired, (3) the number of disabled veterans of the Vietnam Era hired, and (4) the total number of disabled veterans hired. The reports should include covered veterans hired for on-the-job training under 38 U.S.C. 1787. The Contractor shall submit a report within 30 days after the end of each reporting period wherein any performance is made on this Contract identifying data for each hiring location. The Contractor shall maintain at each hiring location copies of the reports submitted until the expiration of one year after final payment under the Contract, during which time these reports and related documentation shall be made available, upon request, for examination by any authorized representatives of the Contracting Officer or of the Secretary of Labor. Documentation would include personnel records respecting job openings, recruitment, and placement.

              (e)  Whenever the Contractor becomes contractually bound to the listing provisions of this clause, it shall advise the employment service system in each State where it has establishments of the name and location of each hiring location in the State. As long as the Contractor is contractually bound to these provisions and has so advised the State system, there is no need to advise the State system of subsequent contracts. The Contractor may advise the State system when it is no longer bound by this contract clause.

              (f)  This clause does not apply to the listing of employment openings which occur and area filled outside of the 50 states, the District of Columbia, Puerto Rico, Guam, and the Virgin Islands.

              (g)  The provisions of paragraphs (b), (c), (d), and (e) of this clause do not apply to openings which the Contractor proposes to fill from within his own organization or to fill pursuant to a customary and traditional employer-union hiring arrangement. This exclusion does not apply to a particular opening once an employer decides to consider applicants outside of his own organization or employer-union arrangements for that opening.

              (h)  As used in this clause:

                     (1)  “All suitable employment openings” includes, but is not limited to, openings which occur in the following job categories: production and non-production; plant and office; laborers and mechanics; supervisory and non-supervisory’ technical’ and executive, administrative, and professional openings as are compensated on a salary basis of less than $25,000 per year. This term includes full-time employment, temporary employment of more than three day’s duration, and part-time employment. It does no include openings which the Contractor proposes to fill from within his own organization or to fill pursuant to a customary and traditional employer-union hiring arrangement no openings in an educational institution which are restricted to students of that institution. Under the most compelling circumstances, an employment opening may not be suitable for listing, including such situations where the needs of the Government cannot reasonably be otherwise supplied, where listing would be contrary to national security, or where the requirement of listing would otherwise not be for the best interest of the Government.

                     (2)  “Appropriate office of the State employment service system” means the local office of the Federal State national system of public employment offices with assigned responsibility for serving the area where the employment opening is to be filled, including the District of Columbia, Guam, Puerto Rico, and the Virgin Islands.

                     (3)  “Openings which the Contractor proposes to fill from within his own organization” means employment openings for which no consideration will be given to persons outside the Contractor’s organization (including any affiliates, subsidiaries and the parent companies) and includes any openings which the Contractor proposes to fill from regularly established “recall” lists.

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                     (4)  “Openings which the Contractor proposes to fill pursuant to a customary and traditional employer-union hiring arrangement” means employment openings which the Contractor proposes to fill from union halls, which is part of the customary and traditional hiring relationship which exists between the Contractor and representatives of his employees.

              (i)  The Contractor agrees to comply with the rules, regulations, and relevant orders of the Secretary of Labor issued pursuant to the Act.

              (j)  In the event of the Contractor’s noncompliance with the requirements of this clause, actions for noncompliance may be taken in accordance with the rules, regulations, relevant orders of the Secretary of Labor issued pursuant to the Act.

              (k)  The Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices in a form to be prescribed by the Director, provided by or through the Contracting Officer. Such notice shall state the Contractor’s obligation under the law to take affirmative action to employ and advance in employment qualified disabled veterans and veterans of the Vietnam Era for employment, and the rights of applicants and employees.

              (l)  The Contractor will notify each labor union or representative of workers with which it has a collective bargaining agreement or other contract understanding, that the Contractor is bound by the terms of the Vietnam Era Veterans Readjustment Assistance Act, and is committed to take affirmative action to employ and advance in employment qualified disabled veterans and veterans of the Vietnam Era.

              (m)  The Contractor will include the provisions of this clause in every subcontract or purchase order of $10,000 or more unless exempted by rules, regulations, or orders of the Secretary issued pursuant to the Act, so that such provisions will be binding upon each subcontractor or vendor. The Contractor will take such action with respect to any subcontract or purchase order as the Director of the Office of Federal Contract Compliance Programs may direct to enforce such provisions, including action for noncompliance.

G.  Employment of the Handicapped(20 CFR 741.3)

        This provision applies to all nonexempt contracts and subcontracts which exceed $2,500 as follows: (1) Part A applies to contracts and subcontracts which provide for performance in less than 90 days, (2) Parts A and B apply to contracts and subcontracts which provide for performance in 90 days or more and the amount of the contract or subcontract is less than $500,000, and (3) Parts A, B, and C apply to contracts and subcontracts which provide for performance in 90 days or more and the amount of the contract or subcontract is $500,000 or more.

PART A

              (a)  The Contractor will not discriminate against any employee or applicant for employment because of physical or mental handicap in regard to any position for which the employee or applicant for employment is qualified. The Contractor agrees to take affirmative action to employ, advance in employment, and otherwise-,Feat qualified handicapped individuals without discrimination based upon their physical or mental handicap in all employment practices such as the following: employment, upgrading, demotion or transfer, recruitment or recruitment advertising , layoff or termination, rates of pay or other forms of compensation, and selection for training, including apprenticeship.

              (b)  The Contractor agrees that, if a handicapped individual files a complaint with the Contractor that he is not complying with the requirements of the Act, he will (1) investigate the complaint and take appropriate action consistent with the requirements of 20 CFR 741.29, and (2) maintain on file for three years the record regarding the complaint and the actions taken.

              (c)  The Contractor agrees that, if a handicapped individual files a complaint with the Department of Labor that he has not complied with the requirements of the Act, (1) he will cooperate with the Department in its investigation of the complaint, and (2) he will provide all pertinent information regarding his employment practices with respect to the handicapped.

              (d)  The Contractor agrees to comply with the rules and regulations of the Secretary of Labor in 20 CFR Ch.VI, Page 741.

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              (e)  In the event of the Contractor’s noncompliance with the requirements of this clause, the Contract may be terminated or suspended in whole or in part.

              (f)   The clause shall be included in all subcontracts over $2,500.

PART B

              (g)  The Contractor agrees (1) to establish an affirmative action program, Including appropriate procedures consistent with the guidelines and the rules of the Secretary of Labor, which will provide the affirmative action regarding the employment and advancement of the handicapped required by P.L. 93-112, (2) to publish the program in his employee’s or personnel handbook or otherwise distribute a copy to all personnel, (3) to review his program on or before March 31 of each year and to make such changes as may be appropriate, and (4) to designate one of his principal officials to be responsible for the establishment and operation of the program.

              (h)  The Contractor agrees to permit the examination by appropriate contracting agency officials or the Assistant Secretary for Employment Standards or his designee, of pertinent books, documents, papers and records concerning his employment and advancement of the handicapped.

              (i)  The Contractor agrees to post in conspicuous places, available to employees and applicants for employment, notices in a form to be prescribed by the Assistant Secretary for Employment Standards, provided by the Contracting Officer, stating Contractors obligation under the law to take affirmative action to employ and advance in employment qualified handicapped employees and applicants for employment and the rights and remedies available.

              (j)  The Contractor will notify each labor union or representative of workers with which he has collective bargaining agreement or other contract understanding, that the Contractor is bound by the terms of the Section 503 of the Rehabilitation Act, and is committed to take affirmative action to employ and advance in employment physically and mentally handicapped individuals.

              (k)  The Contractor agrees to submit a copy of his affirmative action program to the Assistant Secretary for Employment Standards within 90 days after the award to him of a contract or subcontract.

              (l)  The Contractor agrees to submit a summary report to the Assistant Secretary for Employment Standards, by March 31 of each year during performance of the Contract, and by March 31 of the year following completion of the Contract, in the form prescribed by the Assistant Secretary, covering employment and complaint experience, accommodations made and all steps taken to effectuate and carry out the commitments set forth in the affirmative action program.

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EXHIBIT F

Attached to and made a part of that certain Operating
Agreement dated _______________ , 1996, by and between
Saba Petroleum, Inc., as “Operator,”
and Geo Petroleum, Inc., as “Non-Operator”

SCHEDULE OF INSURANCE

Operator shall, at all times, carry for the benefit and protection of the Non-Operators, insurance as follows:

        (a)  Statutory Worker’s Compensation and Employer’s Liability Insurance with limits of at least $1,000,000 per occurrence to comply with the laws of the State having jurisdiction.

        (b)  Comprehensive General Liability Insurance (including Owners and Contractors Protective Liability and Contractual Liability) with Bodily Injury Liability limits of not less than $1,000,000 per occurrence and Property Damage Liability limits of not less than $1,000,000 per occurrence; $1,000,000 aggregate.

        (c)  Automobile Bodily Injury and Property Damage Liability Insurance (including all owned, non-owned and hired cars) in amounts of not less than $1,000,000 for injuries to one person, $1,000,000 for all bodily injuries in one accident, and not less than $1,000,000 for property damage.

EXHIBIT G

Attached to and made a part of Agreement for Assignment of Leases Operating Agreement dated December ______________ , 1996, by and between Saba Petroleum, Inc., “Operator” and Geo Petroleum, Inc., “Non-Operator”.

        1.  Tax Partnership Status. Notwithstanding the provisions hereof, the Working Interest Owners intend and agree that, both for federal and state income tax purposes, a tax partnership under that certain VTSU Operating Agreement (“OA”) dated December _____ 1996 is created hereby. The name of the tax partnership is the VTSU Partnership (the “Partnership“). The Partnership’s federal tax identification number is ___________________ Working Interest Owners agree not to elect to be, or have the arrangement evidenced by this Agreement, excluded from the application of all or any part of Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code of 1954, as amended or any successor provisions thereto (the “code”), and/or any similar provisions of applicable state laws.

        2.  Priority of Provisions. In the event of a conflict or inconsistency, between the terms and conditions of this Exhibit G and the other terms and conditions of this agreement, this Exhibit G will govern and control.

        3.  Contributions to Partnership. Unless expressly provided otherwise in this Exhibit G, for all purposes of this Section and the Partnership:

              a)  Property and cash which under any of the provisions of this Exhibit G are deemed contributed to the Partnership will be treated and referred to in this Exhibit G as though actually contributed to, held and owned by the Partnership, regardless of the manner in which title and ownership are held for any purpose other than the purposes of this Exhibit G and the Partnership;

              b)  The entire interest of each Working Interest Owner in the unit Area or any other property subject to this Agreement will be deemed contributed to the Partnership on the earlier of the date that interest becomes subject to this Agreement or the OA;

              c)  Subject to Paragraph (d) below, a Working Interest Owner will be deemed to contribute cash to the Partnership if that Working Interest Owner pays or incurs a fixed obligation to pay a cost, expense or other liability to any person, if that payment or obligation is on behalf of or in furtherance of the Partnership operations or is otherwise pursuant to an obligation under this Agreement;

              d)  Where a Working Interest Owner contributes (or would be deemed to contribute) cash to the Partnership which is used to acquire property, the property will be treated as having been purchased by that Working Interest Owner and then contributed to the Partnership at the time the Partnership acquires that property, but the amount of cash otherwise deemed contributed by that Working Interest Owner under Paragraph (c) above will be reduced by the cost of that property to avoid a double credit to that Working Interest Owner and the Working Interest Owners intend that each Working Interest Owner’s respective contributions to the Partnership (i) will be strictly traced to, identified with, and maintained in each item of Partnership property and of Partnership expense directly related to that Working Interest Owner’s contributions and (ii) will not be affected, with respect to any item of Partnership property and of Partnership expense, by the respective contributions made by other Working Interest Owners to effectuate equalization and/or other adjustments, if any, made pursuant to this Agreement.

        4.   Partnership Capital Accounts. A separate fair market value (FMV) capital account will be established and maintained for each Working Interest Owner and will be, from time to time, increased and decreased as follows:

              a)  The FMV capital accounts shall be increased by: (i) the amount of money and the fair market value of any property contributed by each Working Interest Owner, respectively, to the Partnership (net of liabilities assumed by the Partnership or to which the contributed property is subject); (ii) that Working Interest Owner’s allocated share of Partnership income and gain or items thereof under Paragraph 5; (iii) any basis increases required by Code sections 48 (q) and 1016 (a) (24); and, (iv) that Working Interest Owner’s share of Code section 705 (a) (1) (B) and (C) items.

              b)  The FMV capital accounts shall be decreased by: (i) the amount of money and the fair market value of property distributed to each Working Interest Owner (net of liabilities assumed by such Working Interest Owner or to which the property is subject); (ii) that Working Interest Owner’s allocated share of Partnership

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loss and deductions, or items thereof under paragraph 5; any basis decreases required by Code sections 48 (q) and 1016 (a) (24); and, (iv) that Working Interest Owner’s share of Code section 705 (a) (2) (B) items and Code section 709 nondeductible and nonamortizable items.

        5.  FMV Capital Account Allocations. Each item of income, gain, loss or deduction shall be allocated to each Working Interest Owner as follows:

              a)  Actual or deemed income from the sale, exchange, distribution or other disposition of production shall be allocated to the Working Interest Owner entitled to such production or the proceeds from the sale of such production. In the event that deemed income arising from the in-kind distribution of production equals the fair market value of the production distributed to a Working Interest Owner, the Working Interest Owners recognize that the corresponding adjustments would be a net zero adjustment and, accordingly may be omitted from the FMV capital accounts;

              b)  Exploration cost, IDC, and operating and maintenance cost shall be allocated to each Working Interest Owner in accordance with its respective contribution to such cost;

              c)  Depreciation shall be allocated to each party in accordance with its contribution to the FMV capital account adjusted basis of the underlying asset;

              d)  Simulated depletion shall be allocated to each Working Interest Owner in accordance with its FMV capital account adjusted basis in each oil and gas, property;

              e)  Loss (or simulated loss) upon the sale, exchange, distribution, abandonment or other disposition of depreciable or depletable property, shall be allocated to the Working Interest Owners in the same ratio as their respective FMV capital account adjusted basis in the depreciable or depletable property;

              f)  Gain (or simulated gain) upon the sale, exchange, distribution, or other disposition of depreciable or depletable property shall be allocated to the Working Interest Owners so that the FMV capital account balances of the Working Interest. Owners with respect to such property will most closely reflect their respective interests under the Agreement;

              g)  Costs or expenses of any other kind shall be allocated to and accounted to and accounted for by each Working Interest Owner in accordance with its respective contributions to such costs or expenses; and

              h)  Any other income item shall be allocated to the Working Interest Owners in accordance with the allocation of the realization.

        6.  Returns Section.

        6.1  Intent of the Parties. The Working Interest Owners intend that the allocation of income, gain, losses, and deductions be given full effect for federal and state income tax purposes, and, in keeping with that intent, that the economic benefit or burden or each allocation be realized or borne by the Working Interest Owner or Working Interest Owners to whom allocated. In furtherance of that objective, the Working Interest Owners intend and agree that all those allocations will be reflected in the Working Interest Owner’s respective FMV capital accounts established pursuant to paragraph 4, and that, upon termination of the Partnership, each Working Interest Owner will receive a bona fide, economic interest (including) equitable ownership and title) in all remaining Partnership property and cash which is proportionate to the amount of such Working Interest Owner’s FMV capital account relative to the FMV capital accounts of other Working Interest Owners.

              (a)  Unless otherwise expressly provided herein the allocations of Partnership items of income, gain, loss or deduction for tax return and tax basis capital account purposes shall be the same as those contained in Paragraph 4;

              (b)  The Working Interest Owners recognize that under Code section 613A (c) (7) (D), the depletion allowance is to be computed separately by each Working Interest Owner. For this purpose, each Working Interest Owner’s share of the adjusted tax basis of each oil and gas property shall be equal to its contribution to the adjusted tax basis of such property;

              (c)  The Working Interest Owners recognize that under Code section 613A (c) (7) (D) the computation of gain or loss on the taxable disposition of an oil or gas property is to be computed separately by each

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Working Interest Owner. For this purpose the portion of the total amount realized by the Partnership that represents a recovery of simulated adjusted basis in an oil and gas property will be allocated to the Working Interest Owners in the same ratio that simulated depletion is allocated to them under Paragraph 5 (d). Any additional amount realized will be allocated in accordance with the ratio of simulated gain allocation for such property under Paragraph 5 (f).

              (d)  Depreciation shall be allocated to each Working Interest Owner in accordance with its contribution to the adjusted tax basis of the depreciable asset;

              (e)  Any recapture of depreciation, IDC, and any other item of deduction or credit shall, to the extent possible, be allocated among the Working Interest Owners in accordance with their share of the depreciation, IDC or other item of deduction or credit which is recaptured;

              (f)  The qualified investment for investment tax credit purposes with respect to any property shall be allocated among the Working Interest Owners in accordance with their respective contributions to the qualified investment (as defined in the code) in such property; and

              (g)  For Partnership property which has a value in the FMV capital accounts which differs from the adjusted tax basis of such property, any tax items relating to such property will be allocated to the Working Interest Owners in a manner which takes into account the variation between the adjusted tax basis of such property and its FMV capital account value under Code section 704(c).

        6.2  Fair Market Value Capital Account. For purposes of establishing a fair market value capital account, Geo shall be credited with the fair market value of assets contributed by it to the tax partnership. The value is $20,000,000, and consists of Geo’s interests in the leases, the wells, the production facilities, and the reserves. Saba shall be credited with all its investments made to obtain this agreement and to develop the properties.

        7.  Partnership Accounting.

        7.1  Method. For purposes of reporting on both federal and state partnership returns, the Partnership will keep its accounts on the accrual method of accounting.

        7.2  Taxable Year. The taxable year of the Partnership for purposes of reporting on both federal and state partnership returns will be the calendar year.

        7.3  Tax Returns. Federal and state partnership income tax returns will be prepared and filed by the Unit Operator covering the operations reportable by the Partnership. The Unit Operator agrees to use its best efforts in the preparation and filing of these tax returns, acting on behalf of itself and the other Working Interest Owners, but in doing so, the Unit Operator will incur no liability to the Working Interest Owners with regard to those returns or elections relating to those tax returns. The Unit Operator shall establish and maintain FMV capital accounts and tax basis capital accounts for each Working Interest Owner. Unit Operator shall submit to each Working Interest Owner along with a copy of any proposed Partnership income tax return an accounting of its respective capital accounts as of the period ending with such return. Each Working Interest Owner agrees to timely furnish to Unit Operator such information relating to the operations conducted under this Agreement as may be required for the proper preparation of such returns and capital accounts. The Unit Operator will submit a draft of all federal and state income tax returns for the Partnership to all Working Interest Owners for their review no later than 30 days prior to the filing of any tax return. Any and all correspondence relating to the preparation and/or filing of those returns should be mailed to the Unit Operator at the following address, or to any other address as the Unit Operator will direct:

Saba Petroleum, Inc.
201 N. Salsipuedes St., Suite 104
Santa Barbara, CA 93103

        7.4  Elections. The Unit Operator, on behalf of the Partnership, has made or will make the following elections:

              (a)  To deduct expenses and intangible drilling and development costs in accordance with Section 263 (c) of the Code and/or comparable provisions of state law;

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              (b)  To compute depreciation and/or capital cost recovery allowances with respect to all depreciable property using the most accelerated method and the shortest depreciable useful life authorized by the Code and/or comparable provisions of state law, consistent with the maximization of the deductions and credits allowed under the Code and state law;

              (c)  To deduct as expenses all research and experimental expenditures in accordance with Section 174 (a) of the Code and/or comparable provisions of state law;

              (d)  To amortize over 60 months all startup costs in accordance with Section 195 (b) of the Code;

              (e)  To elect to reduce basis under Section 48 (q) of the Code and take full investment tax credit;

              (f)  Solely for FMV capital account purposes, depletion shall be calculated by using simulated percentage depletion within the meaning of Treasury Regulations section 1.704-1(b) (2); and

              (g)  Any other Partnership elections that may be approved by a 90% vote of the Working Interest Owners.

        7.5  Transfers.

              (a)  Each Working Interest Owner agrees that if it makes a sale or assignment of all or any portion of its interest in the Partnership, such sale or assignment will be structured, if possible so as not to cause a termination under Section 708 (b) (1) (B), of the Code. Any Working Interest Owner transferring all or any portion of its interest in the Partnership shall promptly notify the Unit Operator of such transfer.

              (b)  If any Working Interest Owner transfers all or any portion of its interest in the Partnership, both the Working Interest Owner’s and the transferee’s distributive shares of Partnership items income, gain, loss, deduction and credit will be precisely computed by an interim closing of Partnership books as of the date of transfer in accordance with Section 706 of the Code, the income tax regulations promulgated under the Code and/or comparable provisions of state law. If there is a transfer by a Working Interest Owner of any or all of its interest in the Unit Area whether an entire interest, a fractional undivided interest or otherwise that transfer will be treated for federal and state income tax purposes as a sale by the transferor of an interest in the Partnership.

        7.6  Designation of Tax Matters Partner. The Unit Operator is designated tax matters partner (“TMP”) as defined in Section 6231 (a) (7) of the Code. In the event of any change in TMP, the Working Interest Owner serving as TMP for a given taxable year will continue as TMP with respect to all matters concerning that year. The TMP and other Working Interest Owners will use their best efforts to comply with the responsibilities outlined in this Paragraph and in Sections 6222 through 6232 of the Code (including any Treasury regulations promulgated under the Code) and in doing so will incur no liability to any other Working Interest Owner. Notwithstanding TMP’s obligation to use its best efforts in the fulfillment of its responsibilities, TMP will not be required to incur any expenses for the preparation for or pursuance of administrative or judicial proceedings unless the Working Interest Owners agree on a method for sharing those expenses.

        7.7  Notice. The Working Interest Owners will furnish TMP within two weeks from the receipt of the request with such information (including information specified in Sections 6230 (e) and 6050K of the Code) as it may reasonably request to permit it to provide the Internal Revenue Service with sufficient information to allow proper notice to the Working Interest Owners in accordance with Sections 6223 and 6050K of the Code.

        7.8  Termination. Termination shall occur on the earlier of termination of the Partnership under Code section 708 (b) (1) or the date upon which the Partnership ceases to be a going concern. Upon termination the business shall be wound-up and concluded, and the assets shall be distributed to the Working Interest Owners as described below by the end of such calendar year (or, if later, within 90 days after the date of such termination). All assets shall be distributed to the Working Interest Owners as provided in Paragraph 7.9 through 7.11.

        7.9  Reversion. First, all money representing unexpended contributions by any Working Interest Owner shall be returned to the contributor.

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        7.10  Balancing. Second, the FMV capital accounts of the Working Interest Owners shall be determined under this Paragraph 7.10. The Unit Operator shall take the actions specified under this Paragraph 7.10 in order to cause the ratio of the Working Interest Owners’ FMV capital accounts to reflect as closely as possible their interests under this Agreement. The ratio of a Working Interest Owner’s FMV capital account is represented by a fraction, the numerator of which is the Working Interest Owner’s FMV capital account balance and the denominator of which is the sum of all Working Interest Owner’s FMV capital account balances. Such actions are hereafter referred to as “balancing the FMV capital account,” and when completed, the FMV capital accounts of the Working Interest Owners shall be referred to as being “balanced.” The manner in which the FMV capital accounts of the Working Interest Owners are to balanced under this Paragraph 7.10 shall be determined as follows:

              (a)  The fair market value of all Partnership properties shall be determined and the gain or loss for each property which would have resulted if a sale thereof at such fair market value had occurred shall be allocated in accordance with Paragraph 4. If thereafter any Working Interest Owner has a negative FMV capital account balance, that is, a balance less than zero, such Working Interest Owner shall contribute an amount of money to the Partnership sufficient to achieve a zero balance FMV capital account. Any Working Interest Owner may contribute an amount of money to the Partnership to facilitate the balancing of the FMV capital accounts. If FMV capital accounts are not balanced, Paragraphs 7.10 (b) or (c) shall apply;

              (b)  If all the Working Interest Owners consent, any money or an undivided interest in certain selected properties shall be distributed to one or more Working Interest Owners as necessary for the purpose of balancing the FMV capital accounts;

              (c)  Unless (b) above applies, an undivided interest in each and every property shall be distributed to one or more Working Interest Owners in accordance with the ratios of their FMV capital accounts; and

              (d)  If a property is to be valued under (a) above or distributed pursuant to (b) or (c) above, the fair market value of the property shall be agreed to by the Working Interest Owners. In the event all of the Working interest Owners do not reach agreement as to the fair market value of the property, the Unit Operator shall cause a nationally recognized independent engineering firm to prepare an evaluation of fair market value of such property.

        7.11  Final Distribution. Third, after the FMV capital accounts of the Working Interest Owners have been adjusted, pursuant to Paragraph 7.10 above, all other or remaining properties and interests then held by the Partnership shall be distributed to the Working Interest Owners in accordance with their FMV capital account balances.

        7.12  Effect of Distribution. The Working Interest Owners specifically intend and agree that any distribution made under either Paragraphs 7.10 or 7.11 will confer upon the distributee the actual economic ownership and equitable title to all those properties distributed in respect of such distributee’s Partnership capital account. If the title or form of ownership by which any Partnership property is held under the Agreement, or for purposes other than Partnership purposes, is different from that necessary to fully accomplish the foregoing intent, then all Working interest Owners agree to execute and deliver such deeds, bills of sale and other documents, and to take those other steps, as may be necessary or appropriate to secure to each Working Interest Owner the full economic ownership and title in that property to which that Working Interest Owner is entitled.

        8.  Ad Valorem Taxes.

        8.1  Compliance Responsibility. The unit Operator will make and file with proper taxing authorities all necessary ad valorem tax renditions and returns and will settle all valuations and pay all taxes arising from those returns before they become delinquent.

        8.2  Information and Appeals. Each Working Interest Owner will promptly furnish the Unit Operator with copies of notices, assessments, levies or tax statements received by the Working Interest Owner pertaining to the taxes to be paid by the Unit Operator. If the Unit Operator considers any tax assessment improper, it may, at its sole discretion, protest within the time and manner prescribed by law and pursue the protest to a final determination.

        8.3  Allocation of Taxes. All ad valorem taxes accruing after the Effective Date will be Unit Expense. Ad valorem taxes on Unit Equipment will be allocated to each item of Unit equipment in proportion to the taxing authorities’ basis for assessment against each item. Taxes allocated to each item will be further allocated per their

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relative percentages of ownership in that item. Except as may be otherwise provided in this Agreement, ad valorem taxes will be allocated to the Working Interest Owners of a Participating Area on the same basis as Unit Expense.

        8.4  Taxes Imposed on Production. Each Working Interest Owner receiving in kind or separately disposing of all or part of the Unitized Substances allocated to any Tract will pay or cause to be paid all production, excise, and other taxes imposed upon or with respect to the production or handling of those Unitized Substances and will indemnify all Working Interest Owners, including the Unit Operator, against any liability for that payment.

        8.5  Amendment of Tax Provisions. The Working Interest Owners agree that certain amendments in this Exhibit G may be necessary and will perform all acts required to effectuate those amendments for the Partnership to conform this Exhibit G to the requirements of final regulations to be issued under Section 704 (c) of the Code.

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EXHIBIT “D”

Attached to and made a part of that certain Operating
Agreement dated _______________ , 1996, by and between
Saba petroleum, Inc., as “Operator,”
and Geo Petroleum, Inc., as “Non-Operator”

SCHEDULE OF INSURANCE

Operator shall, at all times, carry for the benefit and protection of the Non-Operators, insurance as follows:

        (a)  Statutory Worker’s Compensation and Employer’s Liability Insurance with limits of at least $1,000,000 per occurrence to comply with the laws of the State having jurisdiction.

        (b)  Comprehensive General Liability Insurance (including Owners and Contractors Protective Liability and Contractual Liability) with Bodily Injury Liability limits of not less than $1,000,000 per occurrence and Property Damage Liability limits of not less than $1,000,000 per occurrence; $1,000,000 aggregate.

        (c)  Automobile Bodily Injury and Property Damage Liability Insurance (including all owned, non-owned and hired cars) in amounts of not less than $1,000,000 for injuries to one person, $1,000,000 for all bodily injuries in one accident, and not less than $1,000,000 for property damage.

EX-16.3

Exhibit 16.3

AMENDMENT TO AGREEMENT FOR
ASSIGNMENT OF LEASES

             THIS INSTRUMENT (the “Amendment”) is nude and entered into as of November 1, 1997, by and between GEO PETROLEUM, INC. (“GEO” ) and SABA PETROLEUM, INC. (“SABA”) with respect to the matters set forth herein

RECITALS.

        1.  Pursuant to that “Agreement for Assignment of Leases” (the “Agreement”) by and between the parties dated December 19, 1996, Geo agreed to assign to Saba an undivided two-thirds interest in the “Properties” as defined in the Agreement, consisting of oil and gas leases, the wells, equipment, and fixtures located thereon, and appurtenant interests, contracts, and rights. Pursuant to that Assignment dated December 20, 1996, and recorded April 23, 1997, as document 97-450381, in the Official Records of Ventura County, California, Geo assigned said two-thirds interest in the Properties to Saba. By letter agreement (the “Extension”) dated August 23, 1997, the parties agreed that Saba could extend the period for commencement of drilling operations to no later than November 30, 1997.

        2.  In order to provide for the orderly and timely development of the Properties, the parties desire that Saba reduce its interest in the Properties to one-third, that Geo’s interest be increased to two-thirds, and that the parties continue with performance under the Agreement, as amended hereby. Saba’s financial involvement will be reduced in proportion to the reduction of its ownership interest.

AGREEMENT:

             For and in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

        1.  The Agreement is hereby deemed amended by the terms and provisions of this Amendment.

        2.  At page 1 of the Agreement, the first, unnumbered paragraph and paragraphs A, B, and C are mended to provide that the ownership of the Properties shall be and is hereby vested one-third in Saba and two-thirds in Geo, provided that as to Saba’s interest Saba shall be required to perform the provisions hereof in order to earn and retain such interest Saba agrees to assign to Geo an undivided one-third interest in the Properties upon the execution of this Agreement. As a result, the Agreement is hereby deemed modified such that wherever Saba’s interest, shares in costs lend revenues, and ownership are stated as “two-thirds” (“2/3”), such shall now be deemed to be “one-third” (“1/3”). In the same manner, Geo’s interest, shares in costs and revenues, and ownership shall be deemed to be “two-thirds” (“ 2/3”) throughout the Agreement and this Amendment.< /font>

        3.  “Paragraph 1. Royalty Purchases” of the Agreement and Paragraph 3 of the Extension are replaced in their entirety by the following: Saba has purchased certain overriding royalty and landowners’ royalty interests and paid the cost thereof. Geo shall have the option to acquire a two-thirds interest in the royalties described in Exhibit “A” of the Agreement which option shall be exercised only by Geo delivering to Saba a written notice of exercise accompanied by a check representing good funds in an amount equivalent to two-thirds of Saba’s total cost of acquisition of the royalties by April 1, 1998. If not so exercised, the option will expire on April 1, 1998. The interests of the parties shall be two-thirds to Geo and one-third to Saba with respect to further acquisitions of land, royalties, and mineral interests in the area of mutual interest. Geo shall be the party responsible for tusking further acquisitions and notifications of acquisitions.

        4.  Paragraph 2. “Operations” of the Agreement and paragraphs 2, 4, and 5 of the Extension are replaced in their entirety by the following: Geo shall be the “Operator” under the Agreement, as amended, and the Operating Agreement Saba shall promptly transfer to Geo all pending applications before all agencies with respect to drilling and operations on the Properties. Geo shall diligently pursue the obtaining of all permits and approvals prerequisite to drilling, obtain a drilling rig and equipment, and prepare for the drilling of the first well. The first well shall be drilled and completed as a SAGD well in the Vaca Tar Sand and commenced, if practicable in the judgment of Geo, no later than March 31, 1998. Geo shall give Saba not less than 30 days written notice prior to the commencement of drilling operations.

        5.  (a)  Paragraphs 3, 4 and 5 of the Agreement are deleted and the following terms shall apply: Commencing November 1, 1997, each party shall be entitled to receive 50% of the revenues from the Properties and shall pay 50% of the costs, subject to the further provisions hereof. If Saba spends a minimum amount of $5,000,000 with respect to its 50% interest in the conduct of operations on the properties, pursuant to the Operating Agreement, within five years from November 1, 1997, only then shall Saba earn and retain its one-third interest in the Properties. Geo shall, in its judgment as a prudent Operator, drill SAGD wells with approximately six months between the completion of one and the commencement of operations for the next well. Geo shall bear and pay 50% of the costs during the period that Saba is responsible for 50% of the costs. If and when Saba has spent said $5,000,000, then the panics shall bear and pay the costs of further drilling and the related operations on the basis of two-thirds by Geo and one-third by Saba. As to the wells paid for, in part, by Saba’s $5,000,000 expenditure, the parties shall each receive 50% of the total revenues derived from all such wells combined and pay 50% of the costs thereof until their costs have been recovered (“Payout”) and thereafter Saba shall own a one-third interest in the Properties and Geo shall own two-thirds. Geo shall furnish Saba with monthly statements of costs of operation, revenue, and all other information required to calculate the Payout status.

              (b)  Should (a) Saba fail to expend said sum of $5,000,000 within five years from November 1, 1997, or (b) prior to the time it has expended said $5,000,000 sum fail to participate for its full interest in a well actually drilled by Geo in accordance with the provisions of paragraphs 4 or 5 hereof, this agreement shall terminate and Saba shall re-assign to Geo all its interests hereunder save and except for (a) the interests acquired by Saba pursuant to paragraph 3 hereof, insofar only as such interests affect and burden the wells in which Saba shall retain its interests, and (b) its interests in the wells and the spacing unit around each well for which Saba has paid its share of drilling and completion costs; said reassignment to Geo conditioned upon Saba’s recovery and receipt from Geo of the actual amount of Saba’s expenditures on wells in which Saba participated but fail ed to fully acquire. The production facilities located outside any spacing unit retained by Saba which are used in connection with the operation of the wells retained by Saba shall be owned, maintained and operated by the parties at a cost equal to the ratio of dollars actually expended by Saba to the sum of $5,000,000, times one-third. Saba shall not retain any interests in any well located outside the retained spacing units and Geo shall be responsible for the operation and/or abandonment of the same.

              (c)  Should Geo fail to participate in a well actually drilled by Geo in accordance with the provisions of paragraphs 4 or 5 hereof, the terms of the Operating Agreement shall apply.

        6.  Spacing Unit. Paragraph 6 of the Agreement is deleted and replaced by the following:

        To qualify as a spacing unit well, the well trust have been designated by Geo as a well to be reworked, recompleted, or drilled, and Saba shall have expended a minimum of $75,000 thereon. The spacing unit shall be in the form of a rectangle from the surface down to all depths, the exterior boundaries of which shall be a distance of one hundred and fifty feet on either side measured from each end of the perforated liner of the spacing unit well.

        Should the surface well site and/or portions of the well bore lie outside the confines of any spacing unit created for a well, the well site and well bore shall be considered as part of the spacing unit in which Saba has retained an interest.

        7.  Paragraph 7 of the Agreement is deleted and replaced by the following:

        Geo and Saba shall be equally responsible for any “pollution liability”, consisting of remediation, “anon, liability, and costs associated with hazardous substances on the Properties until Saba shall have completed the expenditure of its $5,000,000 condition or has terminated its continuing interest in the Properties provided that the parties shall continue to share equally thereafter as to pollution liability incurred through joint operations before such completion. As to pollution liability arising after such completion, Geo shall be responsible for two-thirds and Saba for one-third of such obligation. If Saba has not completed such expenditure, then the obligation shall be borne 100% by Geo as to the areas not retained by Saba, and equally by the parties as to the retained areas until Saba has achieved payout with respect to the same, and by Geo as to two-thirds and Saba as to one-third when payout has been achieved with respect to such areas.

        8.  Paragraph 8 of the Agreement is deleted and replaced by the following:

        Mickelson Land Services, Inc. has prepared and delivered to the parties a detailed title report on the lands and leases comprising the Properties. The parties have examined such description and have determined that there are no title defects as defined in the Agreement or otherwise.

        9.  Paragraphs 9 through 20 of the Agreement are not amended hereby, except that the address for notice of the parties shall be changed to provide:

Geo Petroleum, Inc. Attn.: Larry R. Burroughs
President and Chief Operating Officer 501 Deep Valley Drive, Suite 300 Rolling Hills Estates, CA 90214 Telephone: 310-265-0721, Fax: 310-265-9452	Also to 4204 South Summit Place Sand Springs, OK 74063 Telephone: 918-241-8587 Fax: 918-241-4825

Saba Petroleum, Inc.
Attn: Ilyas Chaudhary
Chief Executive Officer
3201 Airpark Drive, No. 201
Santa Maria, CA 93455
Telephone: 805-347-8700
Fax: 805-347-1072

        10.  The terms and provisions of the Extension are deemed superseded by this Amendment and canceled, except for any obligations which may have accrued in favor of Geo pursuant to paragraph 6 thereof. The period for accrual of losses shall end as of October 31, 1997.

        11.  By executing this Amendment, each of the parties intends to and does hereby extinguish the obligations heretofore existing between them under the Agreement and Extension, as amended hereby. Each of the parties on behalf of itself, its successors, assigns, parent and subsidiary organizations, affiliates, partners, agents, stockholders, employees and representatives hereby fully releases and discharges the other party and that party’s successors, assigns, parent and subsidiary organizations, affiliates, partners, agents, stockholders, employees, and representatives from all rights, claims, and actions which each party and the above-named successors now have against the other party and the above-named successors, stemming from the Agreement and Extension.

        12.  (a)  In Exhibit A-1 to the Agreement, it is provided that certain wells completed in zones below the Vaca Tar Sand are excluded from the Agreement and are deemed owned and retained entirely by Geo in connection with a disposal project operated by Geo. It is agreed that as to certain wells completed in zones below the Vaca Tar Sand, namely the VTSU 1-3, 4-1, 4-2, and 4-3, if Geo reasonably deems that any of the same is not suitable for completion or re-drilling into the Vaca Tar Sand, and so notifies Saba with a period of 30 days for a response from Saba, then Geo may elect to take said well over at its sole cost, risk, and expense for disposal or other operations not involving production from the Vaca Tar Sand. In such case, Geo shall assume the complete cost and risk of abandoning the well.

              (b)  As to arty lands or leases acquired within the area of mutual interest, Geo shall have the sale right to take over any injection wells not needed for injection of waters produced on the joint lands, and use them in connection with its disposal project, and the sole right to operate commercial disposal operations on the acquired lands.

        13.  As modified and amended hereby, the Agreement shall be deemed in full force and effect in accordance with its terms.

        14.  The terms of this agreement shall be binding upon and insure to the benefit of the successors and assigns of the parties hereto.

        In Witness Whereof, the parties have executed this agreement effective the date first written above.

	GEO PETROLEUM, INC., a California corporation
By:
	Larry R. Burroughs, President

	SABA PETROLEUM, INC., a California corporation
By:
	Ilyas Chaudhary, Chief Executive Officer

Saba Petroleum Inc.
32111 Airpark Dr. Suite 201
Santa Maria, California 93454
Tel: (805) 347-8700
Fax: (805) 347-1072

August 25, 1997
Geo Petroleum, Inc.
Attn: Gerald T. Raydon, President
501 Deep Valley Drive, Suite 300
Rolling Hills Estates, CA 90274

RE:   Vacca Tar Sand Unit Farmout
   Oxnard Field, Ventura Co., CA
   Amendment to Farmout Agreement

Gentlemen:

        Reference is made to Vacca Tar Sand Unit Farmout Agreement dated December 23, 1996, by and between Geo Petroleum, Inc. (Geo) and Saba Petroleum, Inc. (Saba). Notwithstanding the terms and conditions as contained in the Farmout Agreement, between the parties hereto, said Agreement is hereby amended as follows:

1.  Recitals

        The parties desire that the “test well” be commenced as soon as practicable, by September 30, 1997. Saba will file a drilling permit and transfer of operations notice to the Division of Oil, Gas, and Geothermal Resources, together with land use by August 31, 1997. Saba has a pending application with the Ventura County Air Pollution Control District with respect to the drilling rig and other facilities.

        Saba has determined that when production has risen above about 1000 barrels per day, the highest value for oil production from the VTSU will be obtained from the operation of an asphalt plant. In order to plan for and construct such plant, Saba believes that it will be necessary to extend the time within which Saba is to complete the expenditure of the $10,000,000 provided for in the Agreement.

2. Operations (extension)

        Under Paragraph (2) entitled “Operations” of the Agreement, delete the first sentence and insert the following in lieu thereof, “On or before one hundred eighty (180) day, from May 30, 1997, Saba shall commence operations upon said properties to produce oil, gas and/or other hydrocarbon substances from the properties by drilling, redrilling, re-working and/or re-entry operations of existing wells and in new wells utilizing primary or secondary technologies or methods of oil and gas recovery, hereinafter referred to as “operations”.

        In no event shall the commencement of drilling be deferred past November 30, 1997. 1f Saba has not commenced drilling by such date, its rights shall thereupon without the right of notice under the Agreement shall terminate.”

3. Royalty Purchase

        Under paragraph (I) entitled “Royalty Purchase” delete the third sentence and insert “Geo has the right to participate as to a one-third (1/3) interest in such acquisition by reimbursing Saba one-third (1/3) of the cost of acquisition by May 31, 1998, or at such time the Agreement terminates, whichever first occurs.” With respect to such acquisitions, the parties establish an “Area of Mutual Interest” (AMI) surrounding Geo’s Oil and Gas Leases in the Oxnard Field. Such AMI shall extend a distance of one mile from and at right angles to the exterior boundaries of said Leases. The effective date of the AMI is December 23, 1996.

4. Expenditures

        Under Paragraph (3) entitled “Expenditures” delete the paragraph and insert “Saba agrees to expend a minimum sum of ten million dollars ($10,000,000) in the conduct of its operations pursuant to paragraph two (2) above. Said amount shall be expended over a two (2) year period from the date Saba commences operations hereunder.”

5.  Term and Interest

        Under Paragraph (5) entitled “Term and Interest”, please delete the first sentence and insert, “Subject to the terms hereof; this agreement shall remain in full force and effect for a term of two (2) years from the date Saba commences operations hereunder or until such time as Saba has expended the total sum of ten million dollars ($10,000,000) whichever first occurs.”

6. Saba agrees to reimburse Geo up to $10,000 for any losses in operating the VTSU during the extension period, commencing July 1, 1997, and ending when Saba commences operations.

7. The terms and provisions hereof shall be binding upon and insure to the benefit of the successors and assigns of the respective parties hereto.

Please indicate your acceptance of the foregoing by signing and returning a copy of this letter.
Very truly yours,

/s/ Grant Rodges

Land Manager

Accepted and Agreed to on 25th day of August 1997.

	GEO PETROLEUM INC.
By:	/s/ Gerald T. Raydon
	Gerald T. Raydon

	SABA PETROLEUM, INC.
By:	/s/ Herb Miller
	H Miller, President

EX-16.4

EXHIBIT 16.4

AGREEMENT

        THIS AGREEMENT is made and entered into on February 28, 2000, by and between William E. Lenox, a single man, called “Lenox”, acting on his own behalf and on behalf of Hester McColm, (collectively, “Owner”), and Geo Petroleum, Inc., a California corporation, called “Geo” or “Operator” herein.

        RECITALS

        1.  The property (the “Lands”) described in Exhibit A, attached hereto and incorporated herein, is owned by Lenox and McColm, and is subject to an oil and gas lease (the “Lease”) of which Lenox and McColm are the lessors and Geo is the lessee. Lenox represents the interests, if any, of Hester McColm, in the subject matter of this Agreement.

        2.  Geo desires to use its VTSU 3-1 well, located on the Lands, to dispose of “Class II” waste materials which may be disposed of in wells in the Oxnard Oil Field pursuant to GEO’s Commercial Class II permit (the “Permit”) from the California Division of Oil, Gas and Geothermal Resources (“DOG”), a copy of which is attached hereto as Exhibit B. Geo also desires to use the said well to dispose of non-hazardous materials pursuant to a Class I permit, at such time as it is obtained from the Environmental Protection Agency (“EPA”). Under the terms of the Lease and the Vaca Tar Sand Pooling Agreement (“PA”), Geo presently has the right to dispose of waste materials generated on the lands subject to the PA without charge, but not those materials produced on lands other than those subject to the Lease and the PA.

        3.  For purposes of calculating royalties, there shall be two categories of waste materials (collectively, “Wastes”):

              a. “Produced Waters”, defined as waste water separated from oil and gas production and other oil field processes as described in paragraph 5, sub-paragraphs a-g of Exhibit B.

              b. “Other Wastes”, consisting of all materials in a mixed solid and liquid state other than Produced Waters, which are qualified for disposal pursuant to Permit sub-sections 5 h-j or pursuant to a permit issued by the EPA.

        NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby mutually acknowledged, the parties hereto agree as follows:

        1.  Owner hereby grants to Geo the right to redrill, rework, and operate the “VTSU” 3-1 well as a commercial disposal well (the “Disposal Well”) on the Lands. The Disposal Well shall be used for the purpose of disposing of Wastes produced from lands outside the area subject to the PA, as well as Wastes produced from the lands subject to the PA under existing agreements. The Wastes shall conform with the requirements established from time to time by the DOG or by the EPA, with respect to what is designated as a Commercial Class II or Class I Disposal Project. The terms “Produced Water” and “Other Wastes” do not include those wastes produced by Geo and which it has the right under the Lease and the PA to dispose of in wells on the Lands without payment of royalties or other compensation to Owner. All Wastes shall be disposed of into the Monterey Formation or other zones lying entirely be low and separate from the Vaca Tar Sand and any fresh water zones. All wells shall be maintained and operated so as to prevent Wastes from entering any zone besides the approved injection zones.

        2.  Operator will conduct its operations hereunder solely on lands used in connection with oil operations under the Lease and PA. Owner hereby grants to Geo easements and rights of way, using only existing roads and lands in use for oil operations, over, on, in and across the Lands from Del Norte Road and Sturgis Road to and around the well or wells, for the installation and use of facilities for the transportation of wastes to the disposal wells on the Lands by vehicles or pipelines, together with the right of ingress and egress from the Lands or any part of them as necessary or useful to Geo in the exercise of its rights hereunder.

        3.   a.  As rental for the rights granted to it herein, Geo shall pay to Owner a royalty of 12.5 (twelve and one-half) percent of the gross fees collected by Geo in each month (the “Royalty Month”) for disposal of Produced Water into a Disposal Well, and a royalty of 10 (ten) percent of the gross fees collected by Geo in the Royalty Month for disposal of Other Wastes; provided that Geo shall pay a minimum of $1500 per Royalty Month, even if the royalty percentage on fees collected in such month would result otherwise in the payment of less than

$1500 in royalties. The royalty percentages payable shall be 8.33% to Lenox and 4.17% to McColm with respect to Produced Water and 6.67% to Lenox and 3.33% to McColm with respect to Other Wastes. Said minimum royalty will commence and apply to the first month commencing thirty, days after the date hereof.

              b.  In calculating royalties, no deduction shall be made from the gross fees for any of Geo’s costs. Fees charged by Geo for special services other than for disposal, such as truck wash-outs required by customers, shall not be subject to royalties. (All materials resulting from wash-outs consist of water and wastes as to which Geo has already calculated waste volumes and on which it shall collect disposal fees and pay royalties as provided herein.)

              c.  Royalty statements, including a statement of gross sales, and payments shall be sent to Owner with in 20 days after the end of the Royalty Month, accompanied by copies of all invoices issued by Geo with respect to fees collected and a monthly summary, in the form attached hereto. Such invoices shall set forth information designating whether the disposed materials consist of Produced Water or of Other Wastes. Geo shall provide with the invoices copies of truck manifests showing the volume and types of wastes delivered to Geo for disposal. Together with the statements Geo will provide Owner with photocopies of checks received from its customers so that the amounts can be compared to the invoiced amounts. Owner shall have the right, upon one business day’s notice, to inspect and audit Geo’s books covering all fees and money, collected by Geo.

              d.  Owner shall be entitled to a royalty on all fees uncollected due to an offset or credit provided to Geo, a related individual or entity, against a debt owed by Geo, a related individual or entity, in exchange for the disputed fee due.

        4.  The rights herein granted to Geo shall be for a term of four years from the date hereof. Sixty days prior to the end of the term, Geo shall provide Lenox a written notice that this Agreement will terminate at the end of said term. Geo may terminate this agreement at any time upon 30 days’ prior written notice to Owner; provided that in the event of such termination, Owner shall not be required to refund to Geo any rentals theretofore paid by Geo.

        5.  Upon termination of Geo’s rights to use a disposal well as a commercial disposal well, and if Geo is not using the disposal well for disposal of wastes generated under the PA, Geo will then promptly proceed to remove all disposal equipment and facilities not used in connection with its disposal of wastes generated upon the area subject to the PA and restore the surface of to Lands in accordance with the terms of paragraph 7. Such termination shall not affect Geo’s right to conduct oil and gas operations and maintain equipment pursuant to the terms of the Lease and the PA. All rental and royalty payments to lessor hereunder shall terminate upon the termination of Geo’s disposal rights, except for any accrued royalties or payments. Geo shall have the sole and exclusive right to dispose of waste in wells on the Lands during the term hereof. Upon termination of Geo’s rights to use a disposal well as a com mercial disposal well, Geo shall cease the disposal in well 3-1 of waste from lands outside the area subject to the PA.

        6.  The VTSU 3-1 well is located within a fenced and gated area, which shall be maintained in a secure and safe manner and kept locked by Geo. Geo will post and advise Owner of the hours of disposal operations, now expected to be from 7:00 A.M. to 6:00 P.M. each day. The company will construct and operate its disposal facilities with suitable locks and hard piping such that no unauthorized party will be able to dispose of any substance whatsoever into the tanks and Disposal Well.

        7.  a.  If Geo elects to abandon the Disposal Well, Owner shall have the option to take it over and undertake to convert it to a fresh water source well. Before abandoning the well, Geo shall provide Owner with ninety days’ notice of the abandonment date. If Owner decides to attempt to take over and convert said will, it shall notify Geo of said decision within forty-five days of receipt of Geo’s notice. All operations in said well thereafter, including abandonment costs, shall be at Owner’s sole cost and risk. In the absence of such notice from Owner, Geo may proceed with the permanent abandonment of said well. In the event that Owner gives notice of its intent to convert, Geo shall cooperate with Owner’s attempts to obtain the appropriate governmental authorization for such conversion. If such authorization is not obtained, then Geo, upon receipt of Owner’s demand for permanent closure of said well, shall proceed to abandon said well. Notwithstanding anything to the contrary contained in this Paragraph 7, Geo shall have the right to remove pumping, tubing and other equipment, except surface casing, prior to abandoning any such injection well or turning same over to Owner for conversion into a water well.

              b.  If Geo elects to terminate this Agreement, it shall give Owner written notice at least 60 days in advance of the termination date.

        8.  Geo shall pay all taxes levied upon or assessed against its improvements, fixtures and personal property used in connection with its disposal operations.

        9.  a.  Geo, at its sole expense, shall comply with all federal, state and local government laws, regulations, ordinances, rules permit conditions or other requirements relating to Geo’s use of the Lands and shall defend and hold Owner harmless from all liability, including any fine, penalty, cost, fee, or assessment incurred or levied pursuant to such governmental requirements.

              b.  Except as otherwise provided pursuant to Section 7 of this agreement, upon abandonment of the Disposal Well, Geo, at its sole expense, shall comply with all governmental requirements relating to the abandonment of injection wells and the closure of its related disposal operations. Geo shall defend and hold Owner harmless from all liability including any fine, penalty, cost, fee, or assessment incurred or levied pursuant to such governmental requirements.

              c.  After ceasing use of the Lands and terminating this agreement, Geo, at its sole expense, shall remain liable for all costs associated with any abandoned site rules or postclosure requirements relating to Geo’s use of Lands for waste disposal as established by any governmental entity and shall defend and hold Owner harmless from all liability including any fine, penalty, cost, fee, or assessment incurred or levied pursuant to such governmental requirements.

              d.  Geo shall defend and hold Owner harmless from any and all liability for personal injuries, property damage or loss of life or property resulting from or in any way connected with Geo’s use hereunder of the Lands. Geo shall at all times carry liability insurance covering its operations with loss limits of not less than $3,000,000, shall have Owner included as a named insured, and shall instruct the insurance carrier to notify Owner if the coverage lapses, and provide Owner with a copy of such insurance policy. If such insurance coverage should lapse, Owner may terminate this agreement unless Geo obtains new coverage in the same amount within 5 days of notice by Owner. Geo shall also require that truck operators and any others entering the Lands for water disposal operations provide Certificates of Insurance for liability insurance with loss limits of $1,000,000.

              e.  Geo shall maintain during the term of this Agreement a bond (currently a cash bond in the amount of $100,000) with the DOG, with Ventura County (presently in the amount of $10,000), and, as required, with the EPA, to ensure compliance with all permit terms and regulations.

              f.  Geo shall not cause or permit the creation of any sump or pond or any other disposal of wastes on the surface of the Lands and, at its sole expense, shall promptly and completely remove any waste material deposited on the surface of the Lands.

              g.  It is expressly agreed that the only substances the Geo shall inject into any Disposal Well shall be in compliance with the permit requirements of the DOG or other governmental agencies.

              h.  Geo shall defend, indemnify and hold Owner harmless from any and all mechanics’ liens or other lien claims against the Land resulting from or in any way connected with Geo’s use hereunder of the Lands. Geo shall give Owner seven (7) days advance notice of any work of improvement to be commenced upon the Land by anyone entitled to a mechanic’s lien under California Civil Code section 3110, and immediate notice if seven (7) days advance notice is not possible. “Work of improvement” is defined as set forth in Civil Code section 3106.

        10.  Subject to the provisions of Paragraph 5 hereof, upon the abandonment of the Disposal Well, Geo shall remove the disposal equipment and facilities installed and used by it in connection with such well and shall restore the surface thereof as provided in the Lease, and otherwise restore the land so that it is fully suitable for farming.

        11.  Each year, Geo shall provide a copy of its audited annual financial statements, including an audit of the sales and royalties hereunder, to Owner within five days after Geo’s auditors complete and deliver them to Geo. Upon written request, Geo will provide additional supporting schedules and other information available to Geo, which reasonably relates to the disposal fees stated on its financials.

        12.  In the event of default of any of the terms hereof, the Owner shall provide a written notice to Geo, specifying the default claimed. Geo shall have a period of thirty days after receipt of notice to remedy or cure the default. If Geo fails to remedy or cure the default, the Owner shall have the election to terminate this Agreement.

        13.  All notices and payments due hereunder shall be made to the parties as follows:

Operator	Owner
Geo Petroleum, Inc.	William E. Lenox
18281 Lemon Drive	3582 Sturgis Road
Yorba Linda, CA 92886	Oxnard, CA 93030

        14.  The terms and provisions hereof shall be binding upon and shall inure to the benefit of the heirs, personal representatives, successors and assigns of the respective parties hereto.

        IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and effective as of February ___, 2000.

Owner		GEO PETROLEUM, INC.
/s/ William Lenox	By:	/s/ Dennis Timpe
William E. Lenox		Dennis Timpe President

/s/ Hester McColm

Hester McColm
By:  L. E.  McColm-Trask, Attorney-in-Fact

EXHIBIT “B”

State of California
Department of Conservation
Division of Oil Gas and Geothermal Resources
1099 South Hill Road, Suite 116
Ventura, California 93003-4459
Tel- ??
Fax- ??

Gerald T. Raydon                                                                                      September 6, 1996
GEO PETROLEUM, INC.
15660 Crenshaw Blvd. Suite 201
Torrance, CA 90505

Dear Mr. Raydon:

CLASS II COMMERCIAL WATER DISPOSAL PROJECT
Monterey & Topanga/Conejo Volcanics
Oxnard Oil Field

             The Division periodically upgrades and issues new injection project approval letters. The project approval letter dated May 22, 1991 is being updated. As a result, continue Commercial Class II water disposal operations are approved provided that:

1.   Form OG105 or Form OG107 is used whenever a new well is to be drilled for use as an injection well, or whenever an existing well is to be converted to an injection well, even if no work is required. (Specific requirements will be outlined in our answer to your notice.)

2.   This office is notified of any anticipated changes in the project that will alter any of the conditions as originally approved, such as: changes in injection-fluid constituents; a significance increase in volume; an increase in injection pressure; or change in injection interval. Such changes shall not be carried out without Division approval.

3.   A monthly injection report is filed with the Division on Form OG110B, or by electronic or magnetic media approved or the Division, on or before the last day of each month, for the preceding month, showing the amount of fluid injected, surface pressure required and source of fluid.

4.   A chemical analysis of the fluid to be injected is made and filed with the Division whenever the source of injection fluid is changed, or as requested by this office.

GEO Petroleum, Inc.
September 6, 1996
Page 2

5.   All fluids must conform to the definition of a Class II fluid. The following are classified as Class II fluids and can be injected into this project:

        a.  Fluids that are brought to the surface in connection with conventional oil or natural gas production. The fluids may be commingled with waste-water from gas plants unless the waste water is classified as a hazardous waste at the time of injection.

        b.  Waste-water (regardless of their source) from gas plants unless the waste water is classified as a hazardous waste at the time of injection.

        c.  Brines or other fluids, as described in Item b that prior to injection have been:

              1.  Used on-site for purposes associated integrally with oil and gas production or

              2.  Chemically treated or altered to the extent necessary to make them usable for purposes related integrally to oil and gas production, or

              3.  Commingled with fluid wastes resulting from the treatment in c(2).

        d.  Fresh water from groundwater or surface sources, added to or substituted for the brine, as long as the only use of the water is for purposes associated integrally with oil and gas production.

        e.  Nonhazardous Diatomaceous earth filter backwash from activities that originated from oilfield activities.

        f.  Thermally enhanced oil recovery regeneration plant fluid.

        g.  Water-softener regeneration brines that originated from oilfield activities.

        h.  Drilling mud and drilling mud filtrate.

        i.  Tank bottoms.

        j.  Oil contaminated soil in which the spilled oil came directly from an oil and gas producing facility.

        k.  Any fluid that the State Oil and Gas supervisor has made a determination that a particular fluid fits the above categories and makes a determination on a case-by-case or generic basis for a type of fluid.

6.   All fluid sampling and analysis required by this Division are done in accordance with the provision of the Division’s Quality Assurance Program. Please refer to the Division’s “Notice to Oil and Gas Operators” dated April 15, 1987.

7.   A list of all sources of the waste-water and a current chemical analysis from each source are to be filed with the Division. The Division must be notified when there is any change in the waste-water source and must be furnished with a chemical analysis of the new source(s). Division approval must be obtained before new source-water can be injected.

8.   An accurate, operating pressure gauge or pressure recording device shall be available at all times, and all injection wells shall be equipped for installation and operation of such gauge or device. Any gauge or device permanently affixed to the well or any part of the injection system, must be calibrated at least every six months. Portable gauges shall be calibrated at least every two months. Evidence of such calibration must be made available to the Division upon request.

9.   All injection wells shall be equipped with tubing and packer set immediately above the approved zone of injection.

GEO Petroleum, Inc.
September 6, 1996
Page 3

10.   All injection piping, valves and facilities meet or exceed design standards for the maximum anticipated injection pressure and are maintained in a safe and leak free condition.

11.   Precautions are taken to prevent corrosion from occurring in meter runs, wellheads, wellhead valves, casing, tubing, and packers. This Division shall be furnished with a report detailing what measures will be taken to prevent corrosion.

12.   The maximum allowable injection pressure gradient is limited to 0.8 psi per foot for true vertical depth as measured at the sand face. Prior to any sustained injection above this gradient, step-rate tests shall be made. The test shall begin at the hydrostatic gradient of the injection water to be used and shall continue until either the intended maximum injection pressure is reached or until the formation fractures, whichever occurs first. The results of these tests shall be submitted to this Division for approval.

13.   Mechanical integrity tests (MIT) are run and the results are filed with the Division within three (3) months after injection has commenced, at least once every year thereafter, after any significant anomalous rate or pressure change, or as requested by this office to confirm that the injection fluid is confined to the permitted zones. This monitoring schedule may be modified by the district deputy. The Division must be notified of any scheduled MIT’s, as the tests may be witnessed by a Division representative.

   The casing of any new well or well converted to injection must be pressure-tested prior to commencing injection, once every five (5) years thereafter, or as requested by the Division. The Division must be notified before such tests are made, as the tests may be witnessed by a Division representative. The results of all tests must be submitted to the Division for approval.

14.   Injection-zone pressure, as determined by annual    pressure-fall off surveys, does not exceed hydrostatic pressure in the general area of the project. This will not be a requirement until injection pressure is observed.

15.   The Division is notified within 24 hours if there is evidence that a well has lost mechanical integrity.

16.   Injection is discontinued if any evidence of damage is observed or upon written notice from this Division.

17.   Any remedial work in the project area on idle, abandoned, or deeper-zone wells needed to protect oil, gas, or freshwater (USDW) zones will be the responsibility of the project operator.

18.   Neither the handling nor discharge of wastes shall cause a condition of pollution or nuisance.

19.   The injection fluid shall be held in impervious containers prior to injection and shall not be permitted to flow upon the surface of the ground or to enter water courses or ditches.

20.   The lease and all injection facilities are maintained in safe manner, consistent with established oilfield practices.

21.   An authorized representative of GEO Petroleum, Inc. is present when deliveries of approved wastes are made. Record of such deliveries must clearly state the volume of waste and the original source of waste. When an authorized representative is not present, the facilities must be locked as such to prevent delivery of any wastes.

22.   A sign, clearly indicating the operator, type of operation, normal operating hours, and a telephone number shall be posted at all injection facilities covered by this permit.

23.   A project review meeting shall be conducted with Division personnel as requested.

24.   Wastes shall be discharged only at sites covered by this permit and only on property owned or controlled by GEO Petroleum, Inc.

25.   Additional data are supplied to the Division upon its request.

GEO Petroleum, Inc.
September 6, 1996
Page 4

26.   The Division is notified immediately if the project is terminated.

Sincerely,

/s/ Patrick J. Kinnear

Patrick J. Kinnear
Deputy Supervisor

PJK:SAF:saf

cc:       California Regional Quality Control Board
            Ventura County Environmental Health

GROSS SALES SUMMARY—MONTH

Inv. Date	Customer Name	inv.#	inv.#	Type of Prod.	0%	10%	12.5%	Total
					Qty$	Qty $	Qty $
				Monthly Total:	—	—	—	Qty $

PAID SALES SUMMARY—MONTH

Inv. Date	Customer Name	inv.#	Type of Prod.	0%	10%	12.5%	Total
				Qty$	Qty $	Qty $
			Monthly Total:	—	—	—	Qty $

CUSTOMER AGING SUMMARY—AS OF_________

Customer Name	inv.#	Amt.
	Customer Total

MANIFEST SUMMARY—MONTH

Date	Truck Lic.#	Customer Name	Manifest #	Type of Prod.	0%	10%	12.5%	Total
					Qty$	Qty $	Qty $
				Monthly Total:	—	—	—	Qty $

Monthly Summary Form