This Employment Agreement, dated as of September 1, 1992, is by and between Key Production Company, Inc., a Delaware corporation (hereinafter called the "Employer"), and Francis H. Merelli (hereinafter called the "Employee").

The Employer has determined that it is in the best interests of the Employer and its stockholders to employ the Employee as President and Chief Executive Officer of the Employer to direct the operations of the Employer, and the Employee is willing to accept such employment on the terms and conditions described below.

NOW, THEREFORE, in consideration of and subject to the agreements, terms and conditions contained herein, the parties hereto agree as follows:

Section 1.1. Employment of the Employee. The Employer hereby employs the Employee, and the Employee hereby accepts employment by the Employer, upon the terms and conditions hereinafter set forth. The term "Period of Employment" as used herein shall mean the period from the date of this Agreement until the date of Employee's termination as provided herein.

Section 1.2. Directorship. As soon as practicable after the date of this Agreement, the Employee shall be appointed as a director of Employer. At each annual meeting of stockholders of the Employer held during the Period of Employment, the Employee shall be nominated by management to be a director of the Employer.

Section 2.1. Duties. During the Period of Employment, the Employee shall, subject to the authority of the Employer's Board of Directors (the "Board"), be employed as President and Chief Executive Officer of the Employer, with such duties, responsibilities and authority as are consistent with such offices, and with such additional responsibilities and duties as may be reasonably assigned to him by the Board, which in each case he shall faithfully and diligently perform. Subject to the authority of the Board, the Employee shall have executive and operational authority over the business and affairs of the Employer.

Section 2.2. Time to be Devoted to Employment; Etc. Except for vacations, which in no event shall be less than four weeks each year, and absences due to temporary illness or disability, the Employee shall devote his full time, attention and energies on a full-time basis to the business of the Employer. Nothing in this Agreement, however, shall preclude the Employee from devoting reasonable periods to (a) engaging in charitable and community activities or (b) managing his personal investments.

Section 3.1. Base Salary. The Employer shall pay to the Employee a base monthly salary equal to $12,500 (the "Base Salary"), payable bi-monthly in arrears. The Base Salary may be adjusted as

determined by the Board, but shall not be decreased below the Base Salary in existence immediately prior to such adjustment.

Section 3.2. Annual Incentive Bonuses. The Employee shall be eligible for incentive bonuses under any incentive program for executives of the Employer which is adopted by the Board.

Section 3.3. Reimbursement for Expenses. The Employer shall reimburse the Employee for all reasonable and necessary travel expenses and other reasonable disbursements made by him for or on behalf of the Employer in the performance of his duties hereunder on the Employer's business, upon presentation by the Employee to the Employer of appropriate vouchers.

Section 3.4. Incidental Benefits. The Employer shall provide life insurance coverage for the Employee in the face amount of $500,000, dues for an appropriate club and a covered parking space.

Section 3.5. Employee Benefit Plans. During the Period of Employment, the Employee and his immediate family shall be entitled to participate, on terms no less favorable than those available to any other senior executive officer of the Employer and his family, in all employee benefit plans adopted by the Employer to which senior executive officers and their immediate families are entitled to participate. The Employer shall establish, and the Employee shall be eligible to participate in, a health and dental plan and a long-term disability plan.

Section 3.6. Option Grant. The Board shall grant to the Employee a stock option in the form attached as Exhibit A.

Section 4.1. Disability. If the Employee is incapacitated or disabled by accident, sickness or otherwise so as to render him mentally or physically incapable of performing the services required to be performed by him under this Agreement for a period of 90 consecutive days or for a total of 120 days in any twelve-month period, the Employer may, at its option, if payments to the Employee have commenced under the Employer's long-term disability plan, at that time or any time thereafter, terminate the Period of Employment immediately (provided that both such disability and payments under the Employer's long-term disability plan shall have continued to the time of termination) upon giving him notice to that effect. Until the Employer shall have terminated the Employee's employment in accordance with the foregoing, the Employee shall be entitled to receive his compensation, pursuant to Article III notwithstanding any such physical or mental disability. Nothing herein shall limit the Employee's right to receive any amounts to be paid to the Employee under any disability or employee benefit plan of the Employer, if any, or under any other disability insurance policy or plan covering the Employee.

Section 4.2. Death. If the Employee dies during the Period of Employment, his employment hereunder and the Period of Employment shall terminate on the date of his death.

The Employer may, by summary notice in writing, terminate the Period of Employment for cause. For the purposes of this Agreement, the term "cause" shall mean:

Section 6.1. Employer Termination. The Employer may terminate the Period of Employment without cause at any time by giving the Employee 30 days' prior written notice. Upon the expiration of such 30-day period, the Period of Employment shall terminate.

Section 6.2. Employee Termination. For purposes of this Agreement, the Period of Employment shall be deemed to have been terminated without cause if the Employee resigns under any of the following conditions:

Section 7.1. Termination for Cause or Voluntarily. Upon termination of the Period of Employment pursuant to Article V, or by the Employee (except under the conditions set forth in Section 6.2), neither the Employee nor his beneficiaries or estate shall have any further rights or claims against the Employer under this Agreement except to receive:

Section 7.2. Termination for Death, Disability or Without Cause. Upon the termination of the Period of Employment pursuant to Articles IV or VI, neither the Employee nor his beneficiaries or estate shall have any further rights or claims against the Employer under this Agreement except to receive:

Section 7.3. Other Employer Obligations. The provisions of this Article VII shall in no way limit any rights or claims which the Employee may have by virtue of any other agreements entered into with the Employer.

The Employee has entered into a Stock Purchase Agreement dated September 1, 1992 with Apache Corporation ("Apache") pursuant to which the Employee has acquired 70,000 shares of the Employer's common stock, and the commitment by Apache to pay the Employer's out-of-pocket expenses for a registration statement on Form S-3 (or any successor form) covering the sale of such stock under certain circumstances. The Employer agrees to prepare and file one such registration statement (subject to approval by a majority of the independent members of the Board as to the timing of filing of the registration statement) upon receipt of (i) assurances from Apache satisfactory to the Employer that such expenses will be paid, and (ii) customary covenants and agreements of the Employee and any underwriter with respect to registration of such stock.

The Employee shall not make use of or otherwise reveal any trade secret or confidence of the Employer, including any information about the Employer or its business which is not generally available to the public including, but not limited to, any such information involving planning, analysis or strategy, or any investor, financial, legal, geological, geophysical or other proprietary information. Upon termination of employment, the Employee shall promptly surrender all documents, maps, records, data and other information representing, reflecting or containing trade secrets or confidences. The provisions of this Article IX shall survive for a period of three years after the end of the Period of Employment.

The Employer shall indemnify the Employee to the maximum extent possible under applicable Delaware laws covering the indemnification of officers and directors and shall provide officer and director liability insurance with coverages deemed reasonable and appropriate by the Board.

Section 11.1. Arbitration. If a dispute arises between the Employer and the Employee as to the interpretation of this Agreement, the Employer and the Employee agree to submit the matter to binding arbitration in accordance with the Center for Public Resources Rules for Non-Administered Arbitration of Business Disputes, as modified herein, by a sole arbitrator, in Denver, Colorado, selected in accordance with the provisions of Section 11.2. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. Section 1-16, and judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction thereof.

Section 11.2. Selection of Arbitrator. The parties shall have 10 days from the date when written notice is provided to either party by the other party of a request for arbitration to agree upon a mutually acceptable neutral person not affiliated with either of the parties to act as arbitrator. If no arbitrator has been selected within such time, the parties agree jointly to request the Center for Public Resources or another mutually agreed-upon organization to supply within 10 days a list of potential arbitrators with qualifications as specified by the parties in the joint request. Within five days of receipt of the list, the parties shall independently rank the proposed candidates, shall simultaneously exchange rankings, and shall select as the arbitrator the individual receiving the highest combined ranking who is available to serve.

Section 11.3. Cost of Arbitration. The costs of arbitration shall be apportioned between the Employer and the Employee as determined by the arbitrator in such manner as the arbitrator deems reasonable taking into account the circumstances of the case, the conduct of the parties during the proceeding and the result of the arbitration.

Section 12.1. Necessary Acts. All parties to this Agreement shall perform any and all acts as well as execute any and all documents that may be reasonably necessary to fully carry out the provisions and intent of this Agreement.

Section 12.2. Notices. All notices, demands, requests or other communications required or permitted by this Agreement or by law to be served on, given to or delivered to any party hereto by any other party to this Agreement shall be in writing and shall be deemed duly served, given, received and delivered (a) on the date of service if served personally on the party to whom notice is given, (b) on the day of transmission if sent via facsimile transmission to the facsimile number given below, provided telephonic confirmation of receipt is obtained promptly after completion of transmission, (c) on the business day after delivery to an overnight courier service or the Express Mail service maintained by the United States postal service, provided receipt of delivery has been confirmed or

(d) five days after being sent by registered or certified mail, provided receipt of delivery is confirmed, first-class postage prepaid, properly addressed to the respective parties as follows:

If to the Employee:		One Norwest Center 20th Floor 1700 Lincoln Denver, CO 80203
with a copy to:		Thomas A. Richardson Holme Roberts & Owen 1700 Lincoln, Suite 4100 Denver, CO 80203 Facsimile No. (303) 866-0200
If to the Employer:		Key Production Company One Norwest Center 20th Floor 1700 Lincoln Denver, CO 80203
with a copy to:		Alan Rafte Bracewell & Patterson 2900 South Tower Pennzoil Place Houston, Texas 77002 Facsimile No. 713-221-1212

or to such other address as may be designated by any such addressees by a notice given in conformity herewith.

Section 12.3. Binding on Successors. This Agreement shall inure to the benefit of and be binding on the parties hereto and on each of their respective heirs, executors, administrators, personal representatives, successors and assignees.

Section 12.4. Choice of Law and Forum. This Agreement shall be construed and governed by the laws, commercial usages and customs of the State of Colorado, without giving effect to the principles of conflict of laws thereof. In the event that any dispute, action, proceeding or litigation arises between the parties based on or arising out of this Agreement, or any agreement or instrument delivered pursuant to this Agreement, subject to the arbitration provisions of Article XI the parties agree to submit themselves to and irrevocably consent to the jurisdiction of the courts of the State of Colorado, and any federal court located in the State of Colorado.

Section 12.5. Headings. The headings of the articles and sections of this Agreement have been inserted solely for convenience of reference and shall in no way restrict or modify any of the terms or provisions hereof.

Section 12.6. Sole and Only Agreement. This Agreement and the agreements referred to herein constitute the only agreements of the parties hereto relating to the subject matter hereof. Any prior agreements, promises, negotiations or representations concerning the subject matter of this Agreement not expressly set forth in this Agreement shall have no force or effect.

Section 12.7. Amendment and Extension. This Agreement may not be amended or extended except by an instrument in writing signed on behalf of each of the parties hereto.

Section 12.8. Severability. Should any provision or portion of this Agreement be held unenforceable or invalid for any reason, the remaining provisions and portions of this Agreement shall

be unaffected by such holding, unless to do so would alter substantially the intended effect of this Agreement or cause a substantial hardship for any party hereto.

Section 12.9. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same agreement.

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

		KEY PRODUCTION COMPANY, INC.
		By:	/s/ RAYMOND PLANK
			Raymond Plank Chairman of the Board and Chief Executive Officer
		EMPLOYEE:
		/s/ FRANCIS H. MERELLI FRANCIS H. MERELLI