10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

ý Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934

For the quarterly period ended September 30, 2005 or

o Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from            to           

Commission file number 1-7792

POGO PRODUCING COMPANY

(Exact Name of Registrant as Specified in Its Charter)

Delaware	74-1659398
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
5 Greenway Plaza, Suite 2700
Houston, Texas	77046-0504
(Address of principal executive offices)	(Zip Code)

(713) 297-5000

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2):  Yes ý No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes o No ý

Registrant’s number of common shares outstanding as of October 31, 2005:  59,908,047

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

POGO PRODUCING COMPANY AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005			2004			2005			2004
	(Expressed in thousands,
	except per share amounts)
Revenues:
Oil and gas	$	275,359		$	259,590		$	803,465		$	744,720
Other	7,816			121			21,426			821
Total	283,175			259,711			824,891			745,541
Operating Costs and Expenses:
Lease operating	31,345			24,536			93,530			70,869
General and administrative	23,173			17,866			60,218			47,709
Exploration	7,566			4,097			22,064			17,387
Dry hole and impairment	5,254			14,177			59,111			21,600
Depreciation, depletion and amortization	67,498			65,183			205,879			194,392
Production and other taxes	13,806			13,847			39,172			31,606
Transportation and other	5,506			5,123			15,754			14,765
Total	154,148			144,829			495,728			398,328
Operating Income	129,027			114,882			329,163			347,213
Interest:
Charges	(16,831		)	(6,044		)	(40,892		)	(22,115		)
Income	5,507			108			7,693			312
Capitalized	2,525			3,441			7,435			11,457
Commodity derivative expense	(18,739		)	—			(18,739		)	—
Loss on debt extinguishment	—			—			—			(10,893		)
Foreign Currency Transaction Gain (Loss)	(1		)	—			1			(3		)
Income From Continuing Operations Before Taxes	101,488			112,387			284,661			325,971
Income Tax Expense	(39,585		)	(43,383		)	(109,271		)	(123,186		)
Income From Continuing Operations	61,903			69,004			175,390			202,785
Income from Discontinued Operations, net of tax	411,625			17,608			460,813			20,656
Net Income	$	473,528		$	86,612		$	636,203		$	223,441
Earnings per Common Share:
Basic
Income from continuing operations	$	1.04		$	1.08		$	2.87		$	3.18
Income from discontinued operations, net of tax	6.92			0.28			7.53			0.32
Net income	$	7.96		$	1.36		$	10.40		$	3.50
Diluted
Income from continuing operations	$	1.03		$	1.07		$	2.84		$	3.15
Income from discontinued operations, net of tax	6.86			0.28			7.47			0.32
Net income	$	7.89		$	1.35		$	10.31		$	3.47
Dividends per Common Share	$	0.0625		$	0.05		$	0.1875		$	0.15

See accompanying notes to consolidated financial statements.

POGO PRODUCING COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

	September 30,			December 31,
	2005			2004
	(Expressed in thousands,
	except share amounts)
Assets
Current Assets:
Cash and cash equivalents	$	58,025		$	86,456
Accounts receivable	145,502			120,466
Other receivables	20,129			20,875
Federal income tax receivable	3,004			10,708
Deferred tax asset	22,387			—
Inventories - product	6,492			—
Inventories - tubulars	19,840			9,112
Price hedge contracts	—			6,722
Assets from discontinued operations	—			187,084
Other	6,148			3,987
Total current assets	281,527			445,410
Property and Equipment:
Oil and gas, on the basis of successful efforts accounting
Proved properties	5,962,592			4,003,332
Unevaluated properties	847,395			76,890
Other, at cost	39,287			28,656
	6,849,274			4,108,878
Accumulated depreciation, depletion and amortization
Oil and gas	(1,752,618		)	(1,551,502		)
Other	(22,625		)	(19,194		)
	(1,775,243		)	(1,570,696		)
Property and equipment, net	5,074,031			2,538,182
Other Assets:
Assets from discontinued operations	—			480,097
Other	34,657			17,420
	34,657			497,517
	$	5,390,215		$	3,481,109

See accompanying notes to consolidated financial statements.

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	September 30,			December 31,
	2005			2004
	(Expressed in thousands,
	except share amounts)
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable - operating activities	$	130,246		$	62,156
Accounts payable - investing activities	113,238			86,582
Income taxes payable	11,059			131
Accrued interest payable	10,421			4,550
Accrued payroll and related benefits	3,814			3,566
Price hedge contracts	97,817			—
Deferred income tax	—			4,919
Liabilities from discontinued operations	—			109,928
Other	13,307			8,187
Total current liabilities	379,902			280,019
Long-Term Debt	1,538,402			755,000
Deferred Income Tax	1,211,474			536,823
Price Hedge Contracts	47,943			2,119
Asset Retirement Obligation	110,780			74,046
Other Liabilities and Deferred Credits	35,200			19,248
Liabilities from Discontinued Operations	—			85,959
Total liabilities	3,323,701			1,753,214
Commitments and Contingencies	—			—
Shareholders’ Equity:
Preferred stock, $1 par; 4,000,000 shares authorized	—			—
Common stock, $1 par; 200,000,000 shares authorized, 65,266,406 and 64,580,639 shares issued, respectively	65,266			64,581
Additional capital	978,467			943,690
Retained earnings	1,353,380			728,723
Deferred compensation	(19,211		)	(9,954		)
Accumulated other comprehensive income (loss)	(56,239		)	2,565
Treasury stock (5,365,359 and 55,359 shares, respectively), at cost	(255,149		)	(1,710		)
Total shareholders’ equity	2,066,514			1,727,895
	$	5,390,215		$	3,481,109

See accompanying notes to consolidated financial statements.

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POGO PRODUCING COMPANY AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	September 30,
	2005			2004
	(Expressed in thousands)
Cash Flows from Operating Activities:
Cash received from customers	$	887,850		$	763,834
Operating, exploration, and general and administrative expenses paid	(222,355		)	(171,218		)
Interest paid	(33,924		)	(22,935		)
Income taxes paid	(134,803		)	(117,178		)
Other	10,879			6,970
Cash provided by continuing operations	507,647			459,473
Cash provided by discontinued operations	144,736			113,376
Net cash provided by operating activities	652,383			572,849
Cash Flows from Investing Activities:
Capital expenditures	(276,418		)	(212,452		)
Purchase of corporations (net of $36,637 cash on hand) and properties	(1,761,026		)	(148,242		)
Sale of current investments	122,250			—
Purchase of current investments	(16,750		)	—
Proceeds from the sale of corporations (net of $51,529 cash on hand) and properties	777,746			1,305
Cash used in continuing operations	(1,154,198		)	(359,389		)
Cash used in discontinued operations	(57,816		)	(149,869		)
Net cash used in investing activities	(1,212,014		)	(509,258		)
Cash Flows from Financing Activities:
Borrowings under senior debt agreements	3,310,000			945,000
Payments under senior debt agreements	(3,324,000		)	(883,000		)
Proceeds from 2015 and 2017 Notes	797,303			—
Purchase of Company stock	(235,664		)	—
Redemption of 2009 Notes	—			(157,782		)
Payments of cash dividends on common stock	(11,546		)	(9,581		)
Payments from (to) discontinued operations	137,982			(28,905		)
Payment of debt issue costs	(13,688		)	—
Proceeds from exercise of stock options	10,701			8,623
Cash provided by (used in) continuing operations	671,088			(125,645		)
Cash provided by (used in) discontinued operations	(139,630		)	28,905
Net cash provided by (used in) financing activities	531,458			(96,740		)
Effect of exchange rate changes on cash	(258		)	2,282
Net decrease in cash and cash equivalents	(28,431		)	(30,867		)
Cash and cash equivalents from continuing operations, beginning of the year	33,488			55,759
Cash and cash equivalents from discontinued operations, beginning of the year	52,968			48,715
Cash and cash equivalents at the end of the period	$	58,025		$	73,607
Reconciliation of net income to net cash provided by operating activities:
Net income	$	636,203		$	223,441
Adjustments to reconcile net income to net cash provided by operating activities -
Income from discontinued operations, net of tax	(460,813		)	(20,656		)
(Gains) losses from the sales of properties	(227		)	73
Depreciation, depletion and amortization	205,879			194,392
Dry hole and impairment	59,111			21,600
Interest capitalized	(7,435		)	(11,457		)
Price hedge contracts	21,147			372
Other	6,998			17,635
Deferred income taxes	(11,521		)	8,963
Change in operating assets and liabilities	58,305			25,110
Net cash provided by continuing operating activities	507,647			459,473
Net cash provided by discontinued operating activities	144,736			113,376
Net cash provided by operating activities	$	652,383		$	572,849

See accompanying notes to consolidated financial statements.

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POGO PRODUCING COMPANY AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity (Unaudited)

	For the Nine Months Ended September 30,
	2005					2004
	Shareholders’					Shareholders’
	Equity					Equity
	Shares		Amount			Shares		Amount
	(Expressed in thousands, except share amounts)
Common Stock:
$1.00 par-200,000,000 shares authorized
Balance at beginning of year	64,580,639		$	64,581		63,813,283		$	63,813
Stock option activity and other	350,267		350			346,486		347
Shares issued as compensation	335,500		335			298,919		299
Issued at end of period	65,266,406		65,266			64,458,688		64,459
Additional Capital:
Balance at beginning of year			943,690					914,492
Stock option activity and other			16,345					12,335
Shares issued as compensation			18,432					12,184
Balance at end of period			978,467					939,011
Retained Earnings:
Balance at beginning of year			728,723					480,576
Net income			636,203					223,441
Dividends ($0.1875 and $0.15 per common share, respectively)			(11,546		)			(9,581		)
Balance at end of period			1,353,380					694,436
Accumulated Other Comprehensive Income (Loss):
Balance at beginning of year			2,565					—
Cumulative foreign currency translation adjustment			23,308					—
Change in fair value of price hedge contracts			(96,975		)			(2,371		)
Reclassification adjustment for losses included in net income			14,863					241
Balance at end of period			(56,239		)			(2,130		)
Deferred Compensation
Balance at beginning of year			(9,954		)			(3,518		)
Activity during the period			(9,257		)			(7,104		)
Balance at end of period			(19,211		)			(10,622		)
Treasury Stock:
Balance at beginning of year	(55,359	)	(1,710		)	(55,359	)	(1,710		)
Activity during the period	(5,310,000	)	(253,439		)	—		—
Balance at end of period	(5,365,359	)	(255,149		)	(55,359	)	(1,710		)
Common Stock Outstanding, at the End of the Period	59,901,047					64,403,329
Total Shareholders’ Equity			$	2,066,514				$	1,683,444

See accompanying notes to consolidated financial statements.

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POGO PRODUCING COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

(1) GENERAL INFORMATION -

The consolidated financial statements included herein have been prepared by Pogo Producing Company (the “Company”) without audit and include all adjustments (of a normal and recurring nature), which are, in the opinion of management, necessary for the fair presentation of interim results.  The interim results are not necessarily indicative of results for the entire year.  The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Current Report on Form 8-K filed on August 25, 2005.

The Company’s results for all periods presented reflect its oil and gas exploration, development and production activities in the Kingdom of Thailand and in Hungary as discontinued operations.  Except where noted and for pro forma earnings per share, the discussions in the following notes relate to the Company’s continuing activities only.

(2) ACQUISITIONS –

On September 27, 2005, the Company completed the acquisition of Northrock Resources Ltd. (“Northrock”), a Canadian company and an indirect wholly owned subsidiary of Unocal Corporation (“Unocal”), for approximately $1.7 billion.  The Company purchased all of the outstanding shares of Northrock pursuant to a share purchase agreement that was entered into on July 8, 2005 with Unocal and certain of its affiliates.  As of June 30, 2005, Northrock owned approximately 300,000 net producing acres, plus approximately 1.1 million net acres of undeveloped leasehold.  Northrock’s exploitation and development activities are concentrated in Saskatchewan and Alberta with key exploration plays in Canada’s Northwest Territories, British Columbia and the Alberta Foothills. The Company acquired Northrock primarily to strengthen its position in North American exploration and development properties.  The Northrock operations did not have a material effect on the Company’s results of operations in the third quarter of 2005 but will become a reporting segment of the Company in the fourth quarter of 2005.  The following is a calculation and allocation of purchase price to the acquired assets and liabilities based on their relative fair values:

CALCULATION OF PURCHASE PRICE (IN THOUSANDS)
Cash paid, including transaction costs	$	1,734,036
Plus fair market value of liabilites assumed:
Other liabilites	103,837
Asset retirement obligation	38,810
Deferred income taxes	706,153
Total purchase price for assets acquired	$	2,582,836
ALLOCATION OF PURCHASE PRICE (IN THOUSANDS)
Proved oil and gas properties	$	1,724,377
Unproved oil and gas properties	734,361
Other assets	124,098
Total	$	2,582,836

The purchase price allocation noted above is subject to change based on the Company’s final analysis of the oil and gas properties it has acquired.

In December 2004, the Company completed the acquisition of two privately held corporations for approximately $282.5 million in cash and a deferred payment of $26.4 million made in 2005 to the former owner of one of the corporations. The corporations have subsequently been named Pogo Producing (San Juan) Company and Pogo Producing (Texas Panhandle) Company (the “corporations”).  The transactions included properties located primarily in the San Juan basin of New Mexico and the Texas Panhandle. The Company acquired the corporations primarily to strengthen its position in domestic natural gas properties.  The Company recorded the estimated fair values of the assets acquired and the liabilities assumed at the closing date of the transactions, which primarily consisted of oil and gas properties of $423.7 million, long-term debt of $50.1 million and deferred tax liabilities of $67.4 million.  No goodwill was recorded for the transactions.

In 2004, the Company also completed six other producing property acquisitions for cash consideration totaling approximately $186 million.

Pro Forma Information

The following summary presents unaudited pro forma consolidated results of operations for the three and nine months ended September 30, 2005 and 2004 for the Company’s continuing operations as if the acquisitions of Northrock and the corporations had each

6

occurred as of January 1, 2004.  The pro forma results are for illustrative purposes only and include adjustments in addition to the pre-acquisition historical results of Northrock and the corporations, such as increased depreciation, depletion and amortization expense resulting from the allocation of fair value to oil and gas properties acquired, increased interest expense on acquisition debt and the related tax effect of these adjustments. The unaudited pro forma information (presented in thousands of dollars, except per share amounts) is not necessarily indicative of the operating results that would have occurred had the acquisitions been consummated at that date, nor are they necessarily indicative of future operating results.

Pro Forma:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
Revenues	$	392,024	$	363,202	$	1,124,852	$	1,040,082
Income from continuing operations	87,863		77,498		214,868		217,555
Earnings per share:
Basic -	$	1.48	$	1.21	$	3.51	$	3.41
Diluted -	$	1.46	$	1.20	$	3.48	$	3.38

 (3) DISCONTINUED OPERATIONS –

Under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company classifies assets to be disposed of as held for sale or, if appropriate, discontinued operations when they have received appropriate approvals by the Company’s management or Board of Directors and when they meet other criteria.  As of September 30, 2005, the Company had completed the sale of the assets discussed below.

Thaipo Ltd. and B8/32 Partners Ltd.—

On August 17, 2005, the Company completed the sale of its wholly owned subsidiary Thaipo Ltd. and its 46.34% interest in B8/32 Partners Ltd.  (collectively referred to as the “Thailand Entities”) for a purchase price of $820 million.  The Company recognized an after tax gain of approximately $403 million on the sale of the Thailand Entities.

Pogo Hungary Ltd.—

On June 7, 2005, the Company completed the sale of its wholly owned subsidiary Pogo Hungary, Ltd. (“Pogo Hungary”) for a purchase price of $9 million.  The Company recognized an after tax gain of approximately $5 million on the sale of Pogo Hungary.

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The Thailand Entities and Pogo Hungary are classified as discontinued operations in the Company’s financial statements for all periods presented. The summarized financial results and financial position data of the discontinued operations were as follows (amounts expressed in 000’s):

Operating Results Data

	Three months ended							Nine months ended
	September 30,							September 30,
	2005				2004			2005			2004
Revenues	$		38,308		$	104,486		$	252,840		$	253,431
Costs and expenses	(14,124			)	(64,340		)	(126,496		)	(176,308		)
Other income	831				766			4,962			2,612
Income before income taxes	25,015				40,912			131,306			79,735
Income taxes	(16,159			)	(23,304		)	(78,456		)	(59,079		)
Income before gain from discontinued operations, net of tax	8,856				17,608			52,850			20,656
Gain on sale, net of tax of $9,736	402,769				—			407,963			—
Income from discontinued operations, net of tax	$	411,625			$	17,608		$	460,813		$	20,656

Financial Position Data

	December 31,
	2004
Assets of Discontinued Operations
Current investments	$	135,000
Accounts receivable	36,876
Inventories	13,800
Other current assets	1,408
Total current assets	187,084
Property, plant and equipments, net	471,012
Other long-term assets	9,085
Total assets	$	667,181
Liabilities of Discontinued Operations
Accounts payable	$	51,565
Income taxes payable	34,645
Other current liabilities	23,718
Total current liabilities	109,928
Deferred income tax	64,865
Asset retirement obligation	21,094
Total liabilities	$	195,887

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(4) EARNINGS PER SHARE -

Earnings per common share (basic earnings per share) are based on the weighted average number of shares of common stock outstanding during the periods. Earnings per share and potential common shares (diluted earnings per share) consider the effect of dilutive securities as set out below. This disclosure reflects net income from both continuing and discontinued operations.  Amounts are expressed in thousands, except per share amounts.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
Income (numerator):
Income from continuing operations	$	61,903	$	69,004	$	175,390	$	202,785
Income from discontinued operations, net of tax	411,625		17,608		460,813		20,656
Net Income - basic and diluted	$	473,528	$	86,612	$	636,203	$	223,441
Weighted average shares (denominator):
Weighted average shares - basic	59,512		63,846		61,176		63,780
Shares assumed issued from the exercise of options to purchase common shares and unvested restricted stock, net of treasury shares assumed purchased from the proceeds, at the average market price for the period	521		488		550		543
Weighted average shares - diluted	60,033		64,334		61,726		64,323
Earnings per share:
Basic:
Income from continuing operations	$	1.04	$	1.08	$	2.87	$	3.18
Income from discontinued operations	6.92		0.28		7.53		0.32
Basic earnings per share	$	7.96	$	1.36	$	10.40	$	3.50
Diluted:
Income from continuing operations	$	1.03	$	1.07	$	2.84	$	3.15
Income from discontinued operations	6.86		0.28		7.47		0.32
Diluted earnings per share	$	7.89	$	1.35	$	10.31	$	3.47
Antidilutive securities;
Shares assumed not issued from options to purchase common shares as the exercise prices are above the average market price for the period or the effect of the assumed exercise would be antidilutive	—		30		—		30
Average price	$	—	$	48.50	$	—	$	48.50

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(5) LONG-TERM DEBT –

Long-term debt at September 30, 2005 and December 31, 2004, consists of the following (dollars expressed in thousands):

	September 30,			December 31,
	2005			2004
Senior debt -
Bank revolving credit agreement:
LIBOR based loans, borrowings at September 30, 2005 and December 31, 2004 at interest rates of 5.389% and 3.665%, respectively	$	501,000		$	515,000
LIBOR Rate Advances, borrowings at September 30, 2005 and December 31, 2004 at interest rates of 4.8541% and 3.5275%, respectively	40,000			40,000
Total senior debt	541,000			555,000
Subordinated debt -
8 1/4% Senior subordinated notes, due 2011	200,000			200,000
6 5/8% Senior subordinated notes, due 2015	300,000			—
6 7/8% Senior subordinated notes, due 2017	500,000			—
Total subordinated debt	1,000,000			200,000
Unamortized discount on 2015 Notes	(2,598		)	—
Total debt	1,538,402			755,000
Amount due within one year	—			—
Long-term debt	$	1,538,402		$	755,000

On September 23, 2005, the Company issued $500,000,000 principal amount of 2017 Notes. The proceeds from the sale of the 2017 Notes were used to fund a portion of the Northrock acquisition.  The 2017 Notes bear interest at a rate of 6 7/8%, payable

semi-annually in arrears on April 1 and October 1 of each year. The 2017 Notes are general unsecured senior subordinated obligations

of the Company, and are subordinated in right of payment to the Company’s senior indebtedness, which includes the Company’s obligations under the bank revolving credit agreement and LIBOR rate advances.  The Company, at its option, may redeem the 2017 Notes in whole or in part, at any time on or after October 1, 2010, at a redemption price of 103.438% of their principal value and decreasing percentages thereafter. The Company may also redeem a portion of the 2017 Notes prior to October 1, 2008 and some or all of the Notes prior to October 1, 2010, in each case by paying specified premiums.  The indenture governing the 2017 Notes also imposes certain covenants on the Company including covenants limiting: incurrence of indebtedness including senior indebtedness; restricted payments; the issuance and sales of restricted subsidiary capital stock; transactions with affiliates; liens; disposition of proceeds of assets sales; non-guarantor restricted subsidiaries; dividends and other payment restrictions affecting restricted subsidiaries; and merger, consolidations and the sale of assets.

On March 29, 2005, the Company issued $300,000,000 principal amount of 2015 Notes at 99.101%. The proceeds from the sale of the 2015 Notes were used to pay down obligations under the Company’s bank credit facility.  The 2015 Notes bear interest at a rate of 6 5/8%, payable semi-annually in arrears on March 15 and September 15 of each year. The 2015 Notes are general unsecured senior subordinated obligations of the Company, and are subordinated in right of payment to the Company’s senior indebtedness, which includes the Company’s obligations under the bank revolving credit agreement and LIBOR rate advances.  The Company, at its option, may redeem the 2015 Notes in whole or in part, at any time on or after March 15, 2010, at a redemption price of 103.3125% of their principal value and decreasing percentages thereafter. The Company may also redeem a portion of the 2015 Notes prior to March 15, 2008 and some or all of the Notes prior to March 15, 2010, in each case by paying specified premiums.  The indenture governing the 2015 Notes also imposes certain covenants on the Company including covenants limiting: incurrence of indebtedness including senior indebtedness; restricted payments; the issuance and sales of restricted subsidiary capital stock; transactions with affiliates; liens; disposition of proceeds of assets sales; non-guarantor restricted subsidiaries; dividends and other payment restrictions affecting restricted subsidiaries; and merger, consolidations and the sale of assets.

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(6) INCOME TAXES –

On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the “Act”).  The Act provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010.  The Act also created a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations.  The U.S. Treasury department recently released guidance interpreting numerous limitations under the Act and the Company completed its analysis and elected to adopt a Domestic Reinvestment Plan that qualifies for the temporary incentive. Based on that decision, the Company repatriated  $497 million in extraordinary dividends, as defined in the Act, during September 2005. The Company also repatriated an additional $315 million that did not qualify for the temporary incentive. As a result of the repatriation of $812 million, the Company has recorded an additional U.S. tax liability of $14.3 million as of September 30, 2005.

No deferred U.S. income tax liability has been recognized on the remaining undistributed earnings of certain foreign subsidiaries as they have been deemed permanently invested outside the U.S., and it is not practicable to estimate the deferred tax liability related to such undistributed earnings.

(7) ASSET RETIREMENT OBLIGATION –

The Company’s liability for expected future costs associated with site reclamation, facilities dismantlement, and plugging and abandonment of wells for the nine-month period ended September 30, 2005 is as follows (in thousands):

	2005
ARO as of January 1,	$	74,046
Liabilities incurred during the nine months ended September 30,	42,011		(a)
Liabilities settled during the nine months ended September 30,	(5,737		)
Accretion expense	4,129
Balance of ARO as of September 30,	$	114,449
Less: current portion of ARO	(3,669		)
Long-term ARO as of September 30,	$	110,780

(a) Includes $38,810 related to the Northrock acquisition.

For the three months ended September 30, 2005 and 2004 the Company recognized depreciation expense related to its Asset Retirement Cost (“ARC”) of $660,000 and $698,000, respectively.  For the nine months ended September30, 2005 and 2004 the Company recognized depreciation expense related to its ARC of $2,570,000 and $2,823,000, respectively.

(8) COMMODITY DERIVATIVES AND HEDGING ACTIVITIES -

As of September 30, 2005, the Company held various derivative instruments.  During 2004 and 2005, the Company entered into natural gas and crude oil option agreements referred to as “collars”.  Collars are designed to establish floor and ceiling prices on anticipated future natural gas and crude oil production. The Company has designated these contracts as cash flow hedges designed to achieve a more predictable cash flow, as well as to reduce its exposure to price volatility. While the use of these derivative instruments limits the downside risk of adverse price movements, they may also limit future revenues from favorable price movements. The use of derivatives also involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts.  Currently, the Company does not expect losses due to creditworthiness of its counterparties.

During both the three-month and nine-month periods ended September 30, 2005, the Company recognized $3,143,000 of losses related to settled contracts in its oil and gas revenues from its price hedge contracts.  The Company also recognized pre-tax losses of $531,000 and $1,524,000 due to ineffectiveness on these hedge contracts during the third quarter and first nine months of 2005, respectively.  During the three-month and nine-month periods ended September 30, 2004, the Company did not recognize any gains or losses from the settlement of price hedge contracts.  However, the Company recognized a pre-tax loss of $372,000 due to ineffectiveness on its hedge contracts during the third quarter and first nine months of 2004.   Unrealized losses on derivative instruments of $79,547,000, net of deferred taxes of $45,724,000, have been reflected as a component of other comprehensive income at September 30, 2005.  Based on the fair market value of the hedge contracts as of September 30, 2005, the Company would reclassify additional pre-tax losses of approximately $78,394,000 (approximately $49,780,000 after taxes) from accumulated other comprehensive income (shareholders’ equity) to net income during the next twelve months.

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The gas derivative contracts are generally settled based upon the average of the reported settlement prices on the NYMEX for the last three trading days of a particular contract month.  The oil derivative transactions are generally settled based on the average of the reporting settlement prices for West Texas Intermediate on the NYMEX for each trading day of a particular calendar month.  For any particular collar transaction, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the floor price for such transaction, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the ceiling price of such transaction.

The estimated fair value of these transactions is based upon various factors that include closing exchange prices on the NYMEX, volatility and the time value of options.  Further details related to the Company’s hedging activities as of September 30, 2005 are as follows:

		NYMEX
		Contract				Fair Value
Contract Period and		Price				of
Type of Contract	Volume	Floor		Ceiling		Asset/(Liability)
Natural Gas Contracts (MMBtu) (a)
Collar Contracts:
November 2005 - December 2005	615	$	5.50	$	8.00	$	(3,861,000	)
November 2005 - December 2008	610	$	6.00	$	9.25	$	(3,014,000	)
October 2005 - December 2005	460	$	6.00	$	10.25	$	(1,650,000	)
October 2005 - December 2005	920	$	6.00	$	10.30	$	(3,260,000	)
January 2006 - December 2006	5,475	$	5.00	$	7.50	$	(23,136,000	)
January 2006 - December 2006	1,825	$	5.50	$	8.25	$	(6,139,000	)
January 2006 - December 2006	3,650	$	5.75	$	8.27	$	(13,173,000	)
January 2006 - December 2006	10,950	$	6.00	$	13.50	$	(11,724,000	)
January 2006 - December 2006	1,825	$	6.00	$	13.55	$	(1,930,000	)
January 2006 - December 2006	3,650	$	6.00	$	13.60	$	(3,812,000	)
January 2006 - December 2006	10,950	$	6.00	$	14.00	$	(10,354,000	)
January 2007 - December 2007	5,475	$	6.00	$	12.00	$	(3,956,000	)
January 2007 - December 2007	9,125	$	6.00	$	12.15	$	(6,307,000	)
January 2007 - December 2007	3,650	$	6.00	$	12.20	$	(2,485,000	)
January 2007 - December 2007	9,125	$	6.00	$	12.50	$	(5,677,000	)
Crude Oil Contracts (Barrels)
Collar Contracts:
October 2005 - December 2005	567,500	$	40.00	$	62.50	$	(3,793,000	)
December 2005	15,500	$	43.50	$	72.00	$	(47,000	)
December 2005	62,000	$	43.50	$	72.50	$	(179,000	)
January 2006 - December 2006	1,460,000	$	50.00	$	78.00	$	(3,616,000	)
January 2006 - December 2006	365,000	$	50.00	$	79.00	$	(819,000	)
January 2006 - December 2006	1,460,000	$	50.00	$	81.00	$	(2,654,000	)
January 2006 - December 2006	365,000	$	50.00	$	81.04	$	(660,000	)
January 2006 - December 2006	1,825,000	$	50.00	$	82.00	$	(2,960,000	)
January 2007 - December 2007	1,460,000	$	50.00	$	75.00	$	(4,029,000	)
January 2007 - December 2007	365,000	$	50.00	$	75.25	$	(984,000	)
January 2007 - December 2007	3,650,000	$	50.00	$	77.50	$	(6,804,000	)

(a) MMBtu means million British Thermal Units.

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The forecasted shut-in hydrocarbon production from the Company’s Gulf of Mexico properties (resulting primarily from hurricane activity during the third quarter of 2005) caused certain of the gas and crude oil collar contracts to lose their qualification for hedge accounting under SFAS 133.  As a result, in September 2005 the Company recorded as an expense $18,739,000 of losses previously deferred in accumulated other comprehensive income. The Company will now recognize all future changes in the fair value of these collar contracts in the consolidated statement of income for the period in which the change occurs under the caption “Commodity derivative expense.”

As of September 30, 2005, the Company had the following collar contracts that no longer qualify for hedge accounting.  The details are as follows:

		NYMEX
		Contract				Fair Value
Contract Period and		Price				of
Type of Contract	Volume	Floor		Ceiling		Asset/(Liability)
Natural Gas Contracts (MMBtu)
Collar Contracts:
October 2005 - November 2005	765	$	5.50	$	8.00	$	(4,096,000	)
October 2005 - December 2005	460	$	6.00	$	9.30	$	(2,066,000	)
October 2005 - December 2005	770	$	6.00	$	9.25	$	(3,251,000	)
January 2006 - November 2006	1,825	$	5.50	$	8.25	$	(7,121,000	)
Crude Oil Contracts (Barrels)
Collar Contracts:
October 2005 - November 2005	352,500	$	40.00	$	62.50	$	(1,968,000	)
October 2005 - November 2005	30,500	$	43.50	$	72.00	$	(50,000	)
October 2005 - November 2005	122,000	$	43.50	$	72.50	$	(185,000	)

(9) EMPLOYEE BENEFIT PLANS -

The Company has adopted a trusteed retirement plan for its U.S. salaried employees. The benefits are based on years of service and the employee’s average compensation for five consecutive years within the final ten years of service that produce the highest average compensation. The Company did not make a contribution to the plan during the first nine months of 2005 and does not expect to make a contribution during the remainder of 2005.

Although the Company has no obligation to do so, the Company currently provides full medical benefits to its retired U.S. employees and dependents. For current employees, the Company assumes all or a portion of post-retirement medical and term life insurance costs based on the employee’s age and length of service with the Company. The post-retirement medical plan has no assets and is currently funded by the Company on a pay-as-you-go basis.

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The Company’s net periodic benefit cost for its benefit plans is comprised of the following components (in thousands of dollars):

	Retirement Plan
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2005				2004			2005			2004
Service cost	$		891		$	719		$	2,545		$	1,973
Interest cost	482				459			1,552			1,313
Expected return on plan assets	(634			)	(653		)	(1,944		)	(1,979		)
Amortization of prior service cost	21				10			65			34
Amortization of net loss	264				238			898			542
	$	1,024			$	773		$	3,116		$	1,883

	Post-Retirement Medical Plan
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2005				2004		2005		2004
Service cost	$		181		$	351	$	1,029	$	1,039
Interest cost	146				241		778		783
Amortization of transition obligation	46				76		228		228
Amortization of net loss	(161			)	31		23		143
	$	212			$	699	$	2,058	$	2,193

The assumptions used in the valuation of the Company’s employee benefit plans and the target investment allocations have remained the same as those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

In December 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D), as well as a nontaxable federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May 2004, the FASB issued Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003” (FSP No. 106-2), which addresses the accounting and disclosure requirements associated with the effects of the Act.

In 2004, the Company elected not to reflect changes in the Act in its financials since the Company concluded that the effects of the Act were not a significant event that called for remeasurement under SFAS 106.  At this time the Company has not remeasured the effects of the Act.

 (10) ACCOUNTING FOR STOCK-BASED COMPENSATION -

The Company’s incentive plans authorize awards granted wholly or partly in common stock (including rights or options which may be exercised for or settled in common stock) to key employees and non-employee directors (collectively, “Stock Awards”).  Effective January 1, 2003, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock Based Compensation” (“SFAS 123”) and the prospective method transition provisions of Statement of Financial Accounting Standards No. 148, “Accounting for Stock Based Compensation—Transition and Disclosure—an amendment of FAS No. 123” (“SFAS 148”) for all Stock Awards granted, modified or settled after January 1, 2003.

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The following table illustrates the effect on the Company’s net income and earnings per share if the fair value recognition provisions of SFAS 123 for employee stock-based compensation had been applied to all Stock Awards outstanding during the three-month and nine-month periods ended September 30, 2005 and 2004 (in thousands of dollars, except per share amounts):

			Three Months Ended						Nine Months Ended
			September 30 ,						September 30 ,
			2005			2004			2005			2004
Net income, as reported			$	473,528		$	86,612		$	636,203		$	223,441
Add:	Employee stock-based compensation expense, net of related tax effects, included in net income, as reported		1,541			855			3,564			1,979
Deduct:	Total employee stock-based compensation expense, determined under fair value method for all awards, net of related tax effects		(1,754		)	(1,665		)	(5,091		)	(4,975		)
Net income, pro forma			$	473,315		$	85,802		$	634,676		$	220,445
Earnings per share:
		Basic - as reported	$	7.96		$	1.36		$	10.40		$	3.50
		Basic - pro forma	$	7.95		$	1.34		$	10.37		$	3.46
		Diluted - as reported	$	7.89		$	1.35		$	10.31		$	3.47
		Diluted - pro forma	$	7.88		$	1.33		$	10.28		$	3.43

(11) COMPREHENSIVE INCOME –

As of the indicated dates, the Company’s comprehensive income consisted of the following (in thousands):

	Three Months Ended						Nine Months Ended
	September 30 ,						September 30 ,
	2005			2004			2005			2004
Net income	$	473,528		$	86,612		$	636,203		$	223,441
Foreign currency translation adjustment, net of tax	23,308			—			23,308			—
Change in fair value of price hedge contracts, net of tax	(84,549		)	(2,371		)	(96,975		)	(2,371		)
Reclassification adjustment for hedge contract losses included in net income, net of tax	15,494			241			14,863			241
Comprehensive income	$	427,781		$	84,482		$	577,399		$	221,311

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ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Current Report on Form 8-K filed on August 25, 2005.  The Thailand Entities and Pogo Hungary are classified as discontinued operations in the Company’s financial statements for all periods presented.  Except where noted, discussions in this report relate to the Company’s continuing operations.  Some of the statements in the discussion are “Forward Looking Statements” and are thus prospective.   As further discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.

Executive Overview

Acquisition of Northrock Resources

On September 27, 2005, the Company completed the acquisition of Northrock Resources Ltd., a Canadian company and an indirect wholly owned subsidiary of Unocal Corporation (“Unocal”), for approximately $1.7 billion.  The purchase price of Northrock was funded using available cash on hand, the net proceeds from the Company’s offering of $500 million of senior subordinated notes and additional borrowings under the credit facility.

As of June 30, 2005, Northrock owned 604 Bcfe of estimated proven reserves on approximately 300,000 net acres, plus approximately 1.1 million net acres of undeveloped leasehold.  Northrock’s exploitation and development activities are concentrated in Saskatchewan and Alberta with key exploration plays in Canada’s Northwest Territories, British Columbia and the Alberta Foothills. The purchase of Northrock is expected to have a significant impact on the Company’s future results of operations but, due to the transaction closing late in the 3^rd quarter of 2005, it did not materially affect the Company’s results of operations for the three and nine-month periods ended September 30, 2005.

Sale of Thailand

On August 17, 2005, the Company closed the sale to PTTEP Offshore Investment Company Limited and Mitsui Oil Exploration Co., Ltd. of its wholly owned subsidiary Thaipo Ltd. and its 46.34% interest in B8/32 Partners Ltd. for a purchase price of $820 million.  The company recognized an after-tax gain from discontinued operations of approximately $403 million on the transaction.

Hurricanes Katrina and Rita Update

On August 29, 2005, after passing through the Gulf of Mexico, Hurricane Katrina made landfall near New Orleans, Louisiana and caused one of the worst natural disasters in U.S. history.  On September 24, 2005, Hurricane Rita, one of the strongest measured hurricanes to have entered the Gulf of Mexico, made landfall between Sabine Pass, Texas and Johnson’s Bayou, Louisiana.

As of October 25, 2005, approximately 13,000 barrels of oil and 45 million cubic feet of natural gas of the Company’s net daily production is shut-in as a result of the storms.  Based on inspections to date, only one Company-operated platform, located in Main Pass Block 123, appears to have sustained major damage.  Significant damage to platforms and pipelines operated by others has also occurred, including facilities that are located in Viosca Knoll Block 823, Eugene Island Block 330, and South Marsh Island Block 128.  Also, damage to processing plants and other onshore infrastructure owned and operated by others will likely delay some of the Company’s shut-in production from coming back “on-line.” The full extent of damage from the hurricanes to the Company’s facilities and to those owned by others is still not completely known.

The Company maintains business interruption insurance on some of its blocks in the Gulf of Mexico.  Coverage commences 60 days after the blocks are shut-in and will continue for a period of one year unless the production is fully restored earlier.  The daily indemnity amount the Company expects to be paid is approximately $800,000, which will be reduced as production is partially restored.

Derivatives Hedging Charge

Although all of the Company’s collars are effective as economic hedges, the forecasted shut-in hydrocarbon production from the Company’s Gulf of Mexico properties (resulting primarily from the hurricane activity described above) caused certain of the gas and crude oil collar contracts to lose their qualification for hedge accounting.  The Company recognized an $18.8 million non-cash charge related to these contracts in the third quarter of 2005.

Senior Subordinated Notes Issuance

On September 23, 2005, the Company issued and sold $500 million aggregate principal amount of 6.875% Senior Subordinated Notes due 2017 (the “2017 Notes”).  The 2017 Notes were issued in a private placement pursuant to an Indenture, dated as of September 23, 2005, between the Company and The Bank of New York Trust Company, N.A., as trustee.

16

Share Repurchase

During the first quarter of 2005, the Company announced a share repurchase plan.  The Company announced that it expected to expend not less than $275 million nor more than $375 million dollars to effect the repurchases.  The repurchase could represent approximately 9% to 12% of the shares outstanding at December 31, 2004.  As of October 27, 2005, 6.4 million shares of company stock have been repurchased for approximately $316 million.

Third Quarter Results

Total revenue for the third quarter of 2005 was $283 million and net income from continuing operations totaled $61.9 million, or $1.04 per share.  Cash provided by continuing operations totaled $508 million.  As of September 30, 2005, long-term debt was $1,541 million, increasing from the second quarter by $658 million due primarily to debt issued in connection with the Northrock acquisition.

Production Outlook Update

The Company currently expects its production volumes to average approximately 76,000 barrels of oil equivalent per day (“Boepd”) during the fourth quarter of 2005 and expects a 2005 exit rate of approximately 87,000 Boepd.  In addition, the Company currently expects its production volumes to average approximately 100,000 Boepd during 2006.  The Company’s updated guidance for the fourth quarter of 2005 and 2006 reflect the deferral of production from recent hurricane damage and is based on the assumption, among others, that approximately 10,000 Boepd of the Company’s Gulf of Mexico production will remain shut-in until late 2006.  These estimates are subject to change, and actual results could differ materially, depending upon the amount of Gulf of Mexico production that remains shut-in, the timing of any such production coming back on-line, acquisitions, divestitures and many other factors that are beyond the Company’s control.  Please read “Forward-Looking Statements” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

2005 Capital Budget

The Company has established a $525 million exploration and development budget (excluding acquisitions).  The Company expects to spend approximately $258 million on exploration and $267 million on development activities.  The capital budget calls for the drilling of approximately 350 wells during 2005, including wells in the United States, Canada and the Kingdom of Thailand.

During the third quarter of 2005, the Company spent $119 million on its exploratory and development activities related to continuing operations and, as of September 30, 2005, had spent approximately 75% of its $525 million 2005 capital budget (including discontinued operations).  During the third quarter of 2005, in the Company’s continuing operations, 43 wells were drilled with 42 successfully completed, a 98% success rate.

Results of Operations

Oil and Gas Revenues

The Company’s oil and gas revenues for the third quarter of 2005 were $275,359,000, an increase of approximately 6% from oil and gas revenues of $259,590,000 for the third quarter of 2004.  The Company’s oil and gas revenues for the first nine months of 2005 were $803,465,000, an increase of approximately 8% from oil and gas revenues of $744,720,000 for the first nine months of 2004.  The following table reflects an analysis of variances in the Company’s oil and gas revenues (expressed in thousands) between 2005 and 2004.

	3rd Qtr. 2005			1st 9 Mos. 2005
	Compared to			Compared to
	3rd Qtr. 2004			1st 9 Mos. 2004
Increase (decrease) in oil and gas revenues resulting from variances in:
Natural gas -
Price	$	57,303		$	77,561
Production	(24,551		)	(1,945		)
	32,752			75,616
Crude oil and condensate -
Price	35,304			94,572
Production	(55,153		)	(116,210		)
	(19,849		)	(21,638		)
Natural gas liquids	2,866			4,767
Increase in oil and gas revenues	$	15,769		$	58,745

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The increase in the Company’s oil and gas revenues in the third quarter and first nine months of 2005, compared to the third quarter and first nine months of 2004, is related to increases in the average prices that the Company received for its natural gas, crude oil and condensate, partially offset by a decrease in the Company’s hydrocarbon production volumes. The most significant causes for the reduction in hydrocarbon production were the shut-in of all of the Company’s offshore fields due to the infrastructure damage caused by Hurricanes Katrina and Rita in the third quarter of 2005, the shut-in of several of the Company’s offshore fields due to the infrastructure damage caused by Hurricane Ivan in mid-September of 2004 (the majority of fields that were shut-in as a result of Hurricane Ivan were brought back online late in the first quarter of 2005) and, to a lesser extent, natural production declines.

					% Change						% Change
Comparison of Increases in:	3rd Quarter				2005 to		1st Nine Months				2005 to
Natural Gas —	2005		2004		2004		2005		2004		2004
Average prices (a)	$	7.95	$	5.52	44	%	$	6.75	$	5.60	21	%
Average daily production volumes (MMcf per day) (a):	222.5		256.0		(13	)%	245.1		245.3		(0	)%

(a)Price hedging activity reduced the average price of the Company’s natural gas production during the third quarter and first nine months of 2005 by $0.07 per Mcf and $0.02 per Mcf, respectively.  The Company had no price hedging activity during the third quarter or first nine months of 2004 related to 2004 production.   “MMcf” is an abbreviation for million cubic feet.

					% Change						% Change
Comparison of Increases (Decreases) in:	3rd Quarter				2005 to		1st Nine Months				2005 to
Crude Oil and Condensate —	2005		2004		2004		2005		2004		2004
Average prices (a)	$	58.11	$	44.85	30	%	$	48.60	$	37.96	28	%
Average daily production volumes (Bbls per day) (a):	18,630		28,951		(36	)%	23,813		32,454		(27	)%
Total Liquid Hydrocarbons —
Company-wide average daily production (Bbls per day)	22,831		32,671		(30	)%	27,930		36,755		(24	)%

(a)Price hedging activity reduced the average price of the Company’s crude oil and condensate production during the third quarter and first nine months of 2005 by $0.97 per barrel and $0.26 per barrel, respectively.  The Company had no price hedging activity during the third quarter and first nine months of 2004 related to 2004 production.  “Bbls” is an abbreviation for barrels.

Natural Gas Production

The decrease in the Company’s natural gas production during the third quarter of 2005, compared to the comparable 2004 period, was primarily related to shut-in offshore production caused by Hurricanes Katrina and Rita and natural production declines, partially offset by the addition of production from fields purchased by the Company subsequent to the third quarter of 2004.  The decrease in the Company’s natural gas production during the first nine months of 2005, compared to the comparable 2004 period, was primarily related to shut-in offshore production caused by Hurricanes Ivan, Katrina and Rita and natural production declines, partially offset by the addition of production from fields purchased by the Company subsequent to the third quarter of 2004.

Crude Oil and Condensate Production

The decrease in the Company’s crude oil and condensate production during the third quarter 2005, compared to the third quarter of 2004, resulted primarily from shut-in offshore production caused by Hurricanes Katrina and Rita and natural production declines.  The decrease in the Company’s crude oil and condensate production during the first nine months of 2005, compared to the first nine months of 2004, resulted primarily from the shut-in of Gulf of Mexico platforms due to the effects of Hurricanes Ivan, Katrina and Rita (including Main Pass Block 61/62) during 2005 and, to a lesser extent, natural production declines.

Other Revenues

Other revenue is derived from sources other than the current production of hydrocarbons.  This revenue includes, among other items, insurance proceeds (excluding those related to operating expenses, which are credited against the appropriate expense category),

18

pipeline imbalance settlements and revenue from salt water disposal activities.  The increase in the Company’s other revenues in the third quarter and first nine months of 2005, compared to the comparable 2004 periods, is related primarily to $7.4 million and $18.8 million of business interruption insurance recorded in the third quarter and first nine months of 2005, respectively, with no comparable insurance claims in 2004.  The business interruption insurance claim relates to the shut-in of a significant portion of the Company’s Gulf of Mexico production during the fourth quarter of 2004 and first quarter of 2005 as a result of the infrastructure damage caused by Hurricane Ivan in 2004.  The Company currently anticipates that it will have additional business interruption claims to file related to shut-in production resulting from Hurricanes Katrina and Rita, but is not currently in a position to quantify the magnitude of the potential claims.

Costs and Expenses

	3rd Quarter						% Change		1st Nine Months						% Change
Comparison of Increases (Decreases) in:	2005			2004			2005 to 2004		2005			2004			2005 to 2004
Lease Operating Expenses	$	31,345,000		$	24,536,000		28	%	$	93,530,000		$	70,869,000		32	%
General and Administrative Expenses	$	23,173,000		$	17,866,000		30	%	$	60,218,000		$	47,709,000		26	%
Exploration Expenses	$	7,566,000		$	4,097,000		85	%	$	22,064,000		$	17,387,000		27	%
Dry Hole and Impairment Expenses	$	5,254,000		$	14,177,000		(63	)%	$	59,111,000		$	21,600,000		174	%
Depreciation, Depletion and Amortization (DD&A) Expenses	$	67,948,000		$	65,183,000		4	%	$	205,879,000		$	194,392,000		6	%
DD&A rate	$	2.05		$	1.57		31	%	$	1.83		$	1.52		20	%
Mcfe produced (a)	33,068,506			41,584,406			(20	)%	112,671,957			127,636,013			(12	)%
Production and Other Taxes	$	13,806,000		$	13,847,000		(0	)%	$	39,172,000		$	31,606,000		24	%
Transportation and Other	$	5,506,000		$	5,123,000		7	%	$	15,754,000		$	14,765,000		7	%
Interest—
Charges	$	(16,831,000	)	$	(6,044,000	)	178	%	$	(40,892,000	)	$	(22,115,000	)	85	%
Interest Income	$	5,507,000		$	108,000		N/M		$	7,693,000		$	312,000		N/M
Capitalized Interest	$	2,525,000		$	3,441,000		(27	)%	$	7,435,000		$	11,457,000		(35	)%
Commodity Derivative Expense	$	(18,739,000	)	$	—		N/M		$	(18,739,000	)	$	—		N/M
Income Tax Expense	$	(39,585,000	)	$	(43,383,000	)	(9	)%	$	(109,271,000	)	$	(123,186,000	)	(11	)%

(a) “Mcfe” stands for thousands of cubic feet equivalent

Lease Operating Expenses

The increase in lease operating expenses for the third quarter of 2005, compared to the third quarter 2004, is related to increased expenses incurred related to onshore properties acquired by the Company after the third quarter of 2004, in addition to higher costs being charged by service companies in 2005.  The increase in lease operating expenses for the first nine months of 2005, compared to the first nine months of 2004, is related primarily to increased maintenance expenses on several of the Company’s significant offshore properties due to damage from Hurricane Ivan (which were only partially offset by insurance recoveries), increased expenses incurred related to onshore properties acquired by the Company after the third quarter of 2004 and also to higher costs being charged by service companies in 2005.  The Company currently expects lease operating expenses to increase in future periods with the addition of Northrock related expenses for an entire reporting period.

On a per unit of production basis, the Company’s total lease operating expenses have increased from an average of $0.59 and $0.56 per Mcfe for the third quarter and first nine months of 2004, respectively, to $0.95 and $0.83 per Mcfe for the third quarter and first nine months of 2005, respectively.  These increases in unit costs are related to the reduced hydrocarbon production described above, while costs on the Company’s offshore production platforms (such as crew costs, compressor rentals and helicopter and marine transportation) have not decreased proportionately as repair work is being performed.

General and Administrative Expenses

The increase in general and administrative expenses for the third quarter and first nine months of 2005, compared with the respective 2004 periods, is related primarily to increases in the size of the Company’s workforce due to acquisitions over the preceding year, increased benefit expenses and normal increases in compensation.  The Company currently expects general and administrative expenses to increase in future periods with the addition of Northrock related expenses for an entire reporting period.  On a per unit of production basis, the Company’s general and administrative expenses increased to $0.70 and $0.53 per Mcfe in the third quarter and first nine months of 2005, respectively, from $0.43 and $0.37 per Mcfe in the third quarter and first nine months of 2004, respectively.  In addition to the overall increase in general and administrative expenses, unit costs increased due to the reductions in hydrocarbon production discussed above.

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Exploration Expenses

Exploration expenses consist primarily of rental payments required under oil and gas leases to hold non-producing properties (“delay rentals”) and exploratory geological and geophysical costs that are expensed as incurred.  Exploration expenses for the third quarter of 2005 resulted primarily from $6.1 million of seismic activity in the Company’s Gulf Coast division and delay rentals in the United States.  The increase in the Company’s exploration expense for the first nine months of 2005 compared to the same period of 2004 is primarily related to approximately $9.4 million of exploration expenses in New Zealand incurred during the first nine months of 2005.  No comparable exploration activities occurred in New Zealand during the third quarter or first nine months of 2004.  Exploration expenses for the third quarter and first nine months of 2004 consisted of $4.0 million and $15.2 million, respectively, primarily from 3-D seismic activity in the Company’s Gulf of Mexico and Gulf Coast divisions and delay rentals in the United States.

Dry Hole and Impairment Expenses

Dry hole and impairment expenses relate to costs of unsuccessful exploratory wells drilled and impairment of oil and gas properties.  The decrease in dry hole and impairment expense for the third quarter of 2005, compared to the third quarter of 2004, was primarily the result of approximately $8.9 million of exploratory dry hole costs incurred during the 2004 period compared to approximately $1.2 million incurred in the 2005 period.  The increase in dry hole and impairment expense for the first nine months of 2005, compared to the first nine months of 2004, was primarily the result of costs incurred in the first quarter of 2005 related to unsuccessful domestic exploratory wells located primarily in the Gulf of Mexico, totaling approximately $52.3 million.  Generally accepted accounting principles also require that if the expected future cash flow of the Company’s reserves on a property fall below the cost that is recorded on the Company’s books, these properties must be impaired and written down to the property’s fair value.  Depending on market conditions, including the prices for oil and natural gas, and the Company’s results of operations, a similar test may be conducted at any time to determine whether impairments are appropriate. Depending on the results of this test, impairment could be required on some of the Company’s properties and this impairment could have a material negative non-cash impact on the Company’s earnings and balance sheet.  During the third quarter and first nine months of both 2005 and 2004, the Company recognized miscellaneous impairments on various non-producing prospects and leases.

Depreciation, Depletion and Amortization Expenses

The Company’s provision for DD&A expense is based on its capitalized costs and is determined on a cost center by cost center basis using the units of production method. The Company generally creates cost centers on a field-by-field basis for oil and gas activities in the Gulf of Mexico. Generally, the Company establishes cost centers on the basis of an oil or gas trend or play for its onshore oil and gas activities. The increase in the Company’s DD&A expenses for the third quarter and first nine months of 2005 compared to the respective 2004 period resulted from an increase in the Company’s composite DD&A rate, which was only partially offset by a decrease in the Company’s equivalent hydrocarbon sales.

The increase in the composite DD&A rate for all of the Company’s producing fields for the third quarter and first nine months of 2005, compared to the respective 2004 period, resulted primarily from a decrease in the percentage of the Company’s production coming from fields that have DD&A rates that are lower than the Company’s recent historical composite DD&A rate (principally Main Pass Block 61/62 which was shut-in due to hurricane downtime) and a corresponding increase in the percentage of the Company’s production coming from fields that have DD&A rates that are higher than the Company’s recent historical composite rate (principally increased production from domestic onshore properties acquired over the last 12 months).

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Production and Other Taxes

The increase in production and other taxes during the first nine months of 2005, compared to the respective 2004 period, relates primarily to increased severance, property and franchise taxes resulting from the higher product prices received by the Company and increased production from the Company’s onshore properties.

Transportation and Other

Transportation and other expense includes the Company’s cost to move its products to market (transportation costs), accretion expense related to Company asset retirement obligations, ineffectiveness on hedge contracts, allowances for uncollectible accounts and various other operating expenses none of which represents more than 5% of this expense category in either the third quarter and first nine months of 2005 or the third quarter and first nine months of 2004.  The increase in other expense for third quarter and first nine months of 2005, compared to the third quarter and first nine months of 2004, relates to approximately $0.5 million and $1.5 million of hedge ineffectiveness incurred in the third quarter and first nine months of 2005, respectively, compared to $0.4 million in each of the corresponding 2004 periods.  This was partially offset by a reduction in the Company’s transportation expenses between the comparative periods. The Company incurred transportation expense of $3,314,000 and $9,150,000 in the third quarter and first nine months of 2005, respectively, and $3,402,000 and $9,515,000 in the third quarter and first nine months of 2004, respectively.

Interest

Interest Charges.     The increase in the Company’s interest charges for the third quarter of 2005, compared to the third quarter of 2004, resulted from an increase in the average amount of the Company’s outstanding debt.   For the first nine months of 2005, compared to the first nine months of 2004, the increase in the Company’s interest charges were the result of an increase in the average amount of the Company’s debt that was partially offset by a reduction in the Company’s weighted average interest rate.  See “-Liquidity and Capital Resources” below.

Interest Income.    The increase in the Company’s interest income for the third quarter and first nine months of 2005, compared to the comparable 2004 periods, resulted from an increase in the amount of cash and cash equivalents temporarily invested. The cash and cash equivalents invested during the 2005 periods increased primarily due to the sales proceeds from the sale of the Thailand Entities.  These proceeds were subsequently used to fund a portion of the Northrock Resources purchase.

Capitalized Interest.     Interest costs related to financing major oil and gas projects in progress are capitalized until the projects are substantially complete and ready for their intended use if projects are evaluated as successful. The decrease in capitalized interest for the third quarter and first nine months of 2005, compared to the comparable 2004 period, resulted primarily from a decrease in the amount of oil and gas projects in progress subject to interest capitalization during the third quarter and first nine months of 2005 (approximately $177,000,000 and $174,000,000, respectively), compared to the third quarter and first nine months of 2004 (approximately $219,000,000 and $216,000,000, respectively).

Commodity Derivative Expense

Commodity derivative expense for the third quarter and first nine months of 2005 represents unrealized losses on derivative contracts that no longer qualify for hedge accounting treatment.  Although all of the Company’s collars are effective as economic hedges, the forecasted shut-in hydrocarbon production from the Company’s Gulf of Mexico properties (resulting primarily from hurricane activity during the third quarter of 2005) caused certain of the gas and crude oil collar contracts to lose their qualification for hedge accounting under SFAS 133.  As a result, in September of 2005 the Company recorded as an expense $18,739,000 of losses previously deferred in accumulated other comprehensive income.  No such expense was incurred during the third quarter and first nine months of 2004, as all of the Company’s derivative cont racts qualified for hedge accounting at that time.  The forecasted hydrocarbon production used to identify those derivative contracts that qualify for hedge accounting is subject to change based on the condition of third party infrastructure including pipelines and onshore facilities and many other factors.  If hydrocarbon production is deferred beyond the currently forecast schedule, additional contracts may lose their qualification for hedge accounting and further adjustments may be necessary.

Income Tax Expense

Changes in the Company’s income tax expense are a function of the Company’s consolidated effective tax rate and its pre-tax income.  The decrease in the Company’s tax expense for the third quarter and first nine months of 2005, compared to the third quarter and first nine months of 2004, resulted from decreased pre-tax income during the 2005 periods. The Company’s consolidated effective tax rate was 39% and 38% for the third quarter and first nine months of 2005, respectively, and 39% and 38% for the third quarter and first nine months of 2004, respectively.

Discontinued Operations-

The Thailand Entities (sold August 17, 2005) and Pogo Hungary (sold June 7, 2005) are classified as discontinued operations in the Company’s financial statements. The summarized financial results of the discontinued operations were as follows (amounts expressed in 000’s):

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Operating Results Data

	Three months ended							Nine months ended
	September 30,							September 30,
	2005				2004			2005			2004
Revenues	$		38,308		$	104,486		$	252,840		$	253,431
Costs and expenses	(14,124			)	(64,340		)	(126,496		)	(176,308		)
Other income	831				766			4,962			2,612
Income before income taxes	25,015				40,912			131,306			79,735
Income taxes	(16,159			)	(23,304		)	(78,456		)	(59,079		)
Income before gain from discontinued operations, net of tax	8,856				17,608			52,850			20,656
Gain on sale of , net of tax of $9,736	402,769				—			407,963			—
Income from discontinued operations, net of tax	$	411,625			$	17,608		$	460,813		$	20,656

No meaningful comparison of the three months ended September 30,2005 compared to the three months ended September 30, 2004 is practicable due to the sale of the Thailand Entities in August 2005.  The decrease in costs and expenses for the first nine months of 2005 compared with the respective 2004 period is primarily related to $33 million of dry hole and impairment costs (incurred primarily in Hungary) during the first nine months of 2004, respectively, for which no comparable expenses were incurred in 2005.  The Company recognized no tax benefit for the costs in Hungary, resulting in a high effective tax rate for the 2004 period.

Liquidity and Capital Resources

The Company’s primary needs for cash are for exploration, development, acquisition and production of oil and gas properties, repayment of principal and interest on outstanding debt and payment of income taxes. The Company funds its exploration and development activities primarily through internally generated cash flows and budgets capital expenditures based on projected cash flows. The Company adjusts capital expenditures in response to changes in oil and natural gas prices, drilling and acquisition results, and cash flow. The Company has historically utilized net cash provided by operating activities, available cash, debt, and equity as capital resources to obtain necessary funding for all other cash needs.

The Company’s cash flow provided by operating activities for the first nine months of 2005 was $652,383,000 compared to cash flow from operating activities of $572,849,000 in the first nine months of 2004.  The increase is attributable primarily to higher oil and gas prices, partially offset by higher expenses and decreased production volumes discussed under “Results of Operations” above.  Cash flow from operating activities during the first nine months of 2005 was more than adequate to fund $397,861,000 in cash expenditures ($340,045,000 for continuing operations and $57,816,000 for discontinued operations) for capital and exploration projects and property acquisitions, excluding the Northrock transaction.  The Northrock transaction was funded using available cash on hand, proceeds from the sale of the company’s Thailand Entities, the net proceeds from the Company’s offering of the 2017 Notes and additional borrowings under the revolving credit facility.  During the first nine months of 2005, the Company issued $300,000,000 principal amount of 2015 Notes and $500,000,000 principal amount 2017 Notes (see descriptions below) and repaid other debt obligations using cash of approximately $14,000,000 (net of borrowings).  During the first nine months of 2005 the Company also paid for the repurchase of $235,664,000 of its common stock and paid $11,546,000 of common stock dividends.  As of September 30, 2005, the Company had cash and cash equivalents of $58,025,000 and long-term debt obligations of $1,541,000,000 (excluding debt discount) with no repayment obligations until 2009.  The Company may determine to repurchase outstanding debt in the future, including in market transactions, privately negotiated transactions or otherwise, depending on market conditions, liquidity requirements, contractual restrictions and other factors.

Effective September 27, 2005, the Company’s lenders redetermined the borrowing base under its Credit Agreement at $1,100,000,000. As of October 27, 2005, the Company had an outstanding balance of $583,000,000 under its Credit Agreement.  As such, the available borrowing capacity under the Credit Agreement is currently $417,000,000.

Purchase of Northrock Resources Ltd.

On September 27, 2005, the Company completed the acquisition of Northrock Resources Ltd. (“Northrock”), a Canadian company and an indirect wholly owned subsidiary of Unocal Corporation, for approximately $1.7 billion.  Pogo Canada, ULC, a Canadian company and wholly owned subsidiary of the Company, purchased all of the outstanding shares of Northrock pursuant to a share purchase agreement that was entered into on July 8, 2005 with Unocal and certain of its affiliates.  As of June 30, 2005, Northrock owned 604 billion cubic feet of gas equivalent (Bcfe) of estimated proven reserves on approximately 300,000 net acres, plus approximately 1.1 million net acres of undeveloped leasehold.  Northrock’s exploitation and development activities are concentrated in Saskatchewan and Alberta with key exploration plays in Canada’s Northwest Territories, British Columbia and the Alberta Foothills. The Company acquired Northrock primarily to strengthen its position in North American exploration and development properties.

2017 Notes

On September 23, 2005, the Company issued $500,000,000 principal amount of 2017 Notes. The proceeds from the sale of the 2017 Notes were used to fund a portion of the Northrock acquisition.  The 2017 Notes bear interest at a rate of 6 ⁷/₈%, payable semi-annually in

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arrears on April 1 and October 1 of each year. The 2017 Notes are general unsecured senior subordinated obligations of the Company, and are subordinated in right of payment to the Company’s senior indebtedness, which includes the Company’s obligations under the bank revolving credit agreement and LIBOR rate advances.  The Company, at its option, may redeem the 2017 Notes in whole or in part, at any time on or after October 1, 2010, at a redemption price of 103.438% of their principal value and decreasing percentages thereafter. The Company may also redeem a portion of the 2017 Notes prior to October 1, 2008 and some or all of the Notes prior to October 1, 2010, in each case by paying specified premiums.  The indenture governing the 2017 Notes also imposes certain covenants on the Company including covenants limiting: incurrence of indebtedness including senior indebtedness; restricted payments; the issuance and sales of restricted subsidiary capital stock; transactions with affiliates; liens; disposition of proceeds of assets sales; non-guarantor restricted subsidiaries; dividends and other payment restrictions affecting restricted subsidiaries; and merger, consolidations and the sale of assets.

2015 Notes

On March 29, 2005, the Company issued $300,000,000 principal amount of 2015 Notes at 99.101%. The proceeds from the sale of the 2015 Notes were used to pay down obligations under the Company’s bank credit facility.  The 2015 Notes bear interest at a rate of 6 ⁵/₈%, payable semi-annually in arrears on March 15 and September 15 of each year. The 2015 Notes are general unsecured senior subordinated obligations of the Company, and are subordinated in right of payment to the Company’s senior indebtedness, which includes the Company’s obligations under the Credit Facility and LIBOR advances.  The Company, at its option, may redeem the 2015 Notes in whole or in part, at any time on or after March 15, 2010, at a redemption price of 103.3125% of their principal value and decreasing percentages thereafter. The Company may also redeem a portion of the 2015 Notes prior to March 15, 2008 and some or all of the Notes prior to March 15, 2010, in each case by paying specified premiums.  The indenture governing the 2015 Notes also imposes certain covenants on the Company including covenants limiting: incurrence of indebtedness including senior indebtedness; restricted payments; the issuance and sales of restricted subsidiary capital stock; transactions with affiliates; liens; disposition of proceeds of assets sales; non-guarantor restricted subsidiaries; dividends and other payment restrictions affecting restricted subsidiaries; and merger, consolidations and the sale of assets.

LIBOR Rate Advances

Under separate Promissory Note Agreements dated May 8, 2004 and September 13, 2004, two of the Company’s lenders make available to the Company LIBOR rate advances on an uncommitted basis up to $50,000,000.  Advances drawn under these agreements are reflected as long-term debt on the Company’s balance sheet because the Company currently has the ability and intent to reborrow such amounts under its Credit Agreement.  The Company’s 2011 Notes, 2015 Notes and 2017 Notes may restrict all or a portion of the amounts that may be borrowed under the Promissory Note Agreements as senior debt.  The Promissory Note Agreements permit either party to terminate the letter agreements at any time upon three-business days notice.  As of October 27, 2005, there was $40,000,000 outstanding under these agreements.

American Jobs Creation Act of 2004

On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the “Act”).  The Act provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010.  The Company currently expects the net effect of the phase in of this new deduction to result in a decrease in the effective tax rate for fiscal years 2005 and 2006 of approximately 1 to 2 percentage-points, based on current earnings levels.

The Act also created a temporary incentive for U.S. corporations to repatriate accumulated income earned abroad by providing an 85 percent dividends received deduction for certain dividends from controlled foreign corporations.  The U.S. Treasury department recently released guidance interpreting numerous limitations under the Act and the Company completed its analysis and elected to adopt a Domestic Reinvestment Plan that qualifies for the temporary incentive. Based on that decision, the Company repatriated $497 million in extraordinary dividends, as defined in the Act, during September 2005. The Company also repatriated an additional $315 million that did not qualify for the temporary incentive. As a result of the repatriation of $812 million, the Company recorded an additional U.S. tax liability of $14.3 million as of September 31, 2005.

Future Capital and Other Expenditure Requirements

The Company’s capital and exploration budget for 2005, which does not include any amounts that may be expended for acquisitions or any interest which may be capitalized resulting from projects in progress, was increased by the Company’s Board of Directors in July 2005 to $525 million, of which approximately $393.6 million was incurred in the nine months ended September 30, 2005.  The Company has included 350 gross wells in its 2005 capital and exploration budget (209 of which were drilled in the first nine months of 2005), including wells in the United States, Canada and the Kingdom of Thailand

The Company currently anticipates that its available cash and cash investments, cash provided by operating activities and funds available under its Credit Agreement will be sufficient to fund the Company’s ongoing operating, interest and general and administrative expenses, capital expenditures, and dividend payments at current levels for the foreseeable future. The declaration and amount of future dividends on the Company’s common stock will depend upon, among other things, the Company’s future earnings and financial condition, liquidity and capital requirements, its ability to pay dividends and other payments under covenants contained in its debt instruments, the

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general economic and regulatory climate and other factors deemed relevant by the Company’s Board of Directors.  See “Purchase of Northrock Resources Ltd.” above.

Share Repurchase

On January 25, 2005, the Company announced a plan to repurchase, through open market or privately negotiated transactions, not less than $275 million nor more than $375 million of its common stock.  As of October 27, 2005, the Company had completed the purchase of 6,420,000 shares at a total cost of $315.5 million.

The table in Item 2, Part II sets forth certain information with respect to repurchases of the Company’s equity securities during the three months ended September 30, 2005.

ITEM 3.     Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to market risk, including adverse changes in commodity prices, interest rates and foreign currency exchange rates as discussed below.

Commodity Price Risk

The Company produces and sells natural gas, crude oil, condensate and NGLs. As a result, the Company’s financial results can be significantly affected as these commodity prices fluctuate widely in response to changing market forces.  The Company makes use of a variety of derivative financial instruments only for non-trading purposes as a hedging strategy to manage commodity prices associated with oil and gas sales and to reduce the impact of commodity price fluctuations.

Current Hedging Activity

As of September 30, 2005, the Company held various derivative instruments.  The Company has entered into natural gas and crude oil option agreements referred to as “collars”.  Collars are designed to establish floor and ceiling prices on anticipated future natural gas and crude oil production. The Company has designated a significant portion of these contracts as cash flow hedges designed to achieve a more predictable cash flow, as well as to reduce its exposure to price volatility. While the use of these derivative instruments limits the downside risk of adverse price movements, they may also limit future revenues from favorable price movements. The use of derivatives also involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts.  Currently, the Company does not expect losses due to creditworthiness of its counterparties.

The gas derivative transactions are generally settled based upon the average of the reporting settlement prices on the NYMEX for the last three trading days of a particular contract month.  The oil derivative transactions are generally settled based on the average of the reporting settlement prices for West Texas Intermediate on the NYMEX for each trading day of a particular calendar month.  For any particular collar transaction, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the floor price for such transaction, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the ceiling price of such transaction.

The estimated fair value of these transactions is based upon various factors that include closing exchange prices on the NYMEX, volatility and the time value of options.  Further details related to the Company’s hedging activities as of September 30, 2005 are as follows:

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		NYMEX
		Contract				Fair Value
Contract Period and		Price				of
Type of Contract	Volume	Floor		Ceiling		Asset/(Liability)
Natural Gas Contracts (MMBtu) (a)
Collar Contracts:
November 2005 - December 2005	615	$	5.50	$	8.00	$	(3,861,000	)
November 2005 - December 2008	610	$	6.00	$	9.25	$	(3,014,000	)
October 2005 - December 2005	460	$	6.00	$	10.25	$	(1,650,000	)
October 2005 - December 2005	920	$	6.00	$	10.30	$	(3,260,000	)
January 2006 - December 2006	5,475	$	5.00	$	7.50	$	(23,136,000	)
January 2006 - December 2006	1,825	$	5.50	$	8.25	$	(6,139,000	)
January 2006 - December 2006	3,650	$	5.75	$	8.27	$	(13,173,000	)
January 2006 - December 2006	10,950	$	6.00	$	13.50	$	(11,724,000	)
January 2006 - December 2006	1,825	$	6.00	$	13.55	$	(1,930,000	)
January 2006 - December 2006	3,650	$	6.00	$	13.60	$	(3,812,000	)
January 2006 - December 2006	10,950	$	6.00	$	14.00	$	(10,354,000	)
January 2007 - December 2007	5,475	$	6.00	$	12.00	$	(3,956,000	)
January 2007 - December 2007	9,125	$	6.00	$	12.15	$	(6,307,000	)
January 2007 - December 2007	3,650	$	6.00	$	12.20	$	(2,485,000	)
January 2007 - December 2007	9,125	$	6.00	$	12.50	$	(5,677,000	)
Crude Oil Contracts (Barrels)
Collar Contracts:
October 2005 - December 2005	567,500	$	40.00	$	62.50	$	(3,793,000	)
December 2005	15,500	$	43.50	$	72.00	$	(47,000	)
December 2005	62,000	$	43.50	$	72.50	$	(179,000	)
January 2006 - December 2006	1,460,000	$	50.00	$	78.00	$	(3,616,000	)
January 2006 - December 2006	365,000	$	50.00	$	79.00	$	(819,000	)
January 2006 - December 2006	1,460,000	$	50.00	$	81.00	$	(2,654,000	)
January 2006 - December 2006	365,000	$	50.00	$	81.04	$	(660,000	)
January 2006 - December 2006	1,825,000	$	50.00	$	82.00	$	(2,960,000	)
January 2007 - December 2007	1,460,000	$	50.00	$	75.00	$	(4,029,000	)
January 2007 - December 2007	365,000	$	50.00	$	75.25	$	(984,000	)
January 2007 - December 2007	3,650,000	$	50.00	$	77.50	$	(6,804,000	)

(a) MMBtu means million British Thermal Units.

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Although all of the Company’s collars are effective as economic hedges, the forecasted shut-in hydrocarbon production from the Company’s Gulf of Mexico properties (resulting primarily from hurricane activity during the third quarter of 2005) caused certain of the gas and crude oil collar contracts to lose their qualification for hedge accounting under SFAS 133.  The Company will now recognize all future changes in the fair value of these collar contracts in the consolidated statement of income for the period in which the change occurs under the caption “Commodity derivative expense.”

As of September 30, 2005, the Company had the following collar contracts that no longer qualify for hedge accounting.  The details are as follows:

		NYMEX
		Contract				Fair Value
Contract Period and		Price				of
Type of Contract	Volume	Floor		Ceiling		Asset/(Liability)
Natural Gas Contracts (MMBtu)
Collar Contracts:
October 2005 - November 2005	765	$	5.50	$	8.00	$	(4,096,000	)
October 2005 - December 2005	460	$	6.00	$	9.30	$	(2,066,000	)
October 2005 - December 2005	770	$	6.00	$	9.25	$	(3,251,000	)
January 2006 - November 2006	1,825	$	5.50	$	8.25	$	(7,121,000	)
Crude Oil Contracts (Barrels)
Collar Contracts:
October 2005 - November 2005	352,500	$	40.00	$	62.50	$	(1,968,000	)
October 2005 - November 2005	30,500	$	43.50	$	72.00	$	(50,000	)
October 2005 - November 2005	122,000	$	43.50	$	72.50	$	(185,000	)

Interest Rate Risk

From time to time, the Company has entered into various financial instruments, such as interest rate swaps, to manage the impact of changes in interest rates. As of October 27, 2005, the Company has no open interest rate swap or interest rate lock agreements. Therefore, the Company’s exposure to changes in interest rates primarily results from its short-term and long-term debt with both fixed and floating interest rates. The following table presents principal or notional amounts (stated in thousands) and related average interest rates by year of maturity for the Company’s debt obligations and their indicated fair market value at September 30, 2005:

	2005		2006		2007		2008		2009			Thereafter			Total			Fair Value
Long-Term Debt:
Variable Rate	$	0	$	0	$	0	$	0	$	541,000		$	0		$	541,000		$	541,000
Average Interest Rate	—		—		—		—		5.35		%	—			5.35		%	—
Fixed Rate	$	0	$	0	$	0	$	0	$	0		$	1,000,000		$	1,000,000		$	1,023,250
Average Interest Rate	—		—		—		—		—			7.08		%	7.08		%	—

ITEM 4.  Controls and Procedures.

The Company has established disclosure controls and procedures to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors.

Based on their evaluation as of the end of the period covered by this quarterly report, the Company’s Chairman, President and Chief Executive Officer and its Senior Vice President and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

There were no changes in the Company’s internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II.  Other Information

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth certain information with respect to repurchases of the Company’s equity securities during the three months ended September 30, 2005.

				Maximum Dollar Value
	Total Number	Average		of Shares that May
	of Shares	Price Paid		Yet Be Purchased
Period	Purchased (a)	per Share		Under the Plan
July 1-31 2005	257,100	$	54.37	$	139,336,025
August 1-31 2005	—	$	—	$	139,336,025
September 1-30 2005	300,000	$	59.21	$	121,560,605
Total	557,100

(a) All of these shares were purchased under the plan announced on January 25, 2005.

ITEM 6.  Exhibits

*2.1	Share Purchase Agreement dated July 8, 2005 among Unocal Canada Limited, Unocal Canada Alberta Hub Limited, Unocal Corporation, Pogo Canada, ULC and Pogo Producing Company (a copy of any omitted schedule will be furnished supplementally to the Commission upon request)(Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 12, 2005, File No. 1-7792).
*3.1	Restated Certificate of Incorporation of Pogo Producing Company, as filed on April 28, 2004 (Exhibit 3.1, Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, File No. 1-7796).
*3.2	Bylaws of Pogo Producing Company, as amended and restated through July 16, 2002 (Exhibit 4.1, Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 1-7792).
*4.1	Indenture dated as of September 23, 2005 between Pogo Producing Company and The Bank of New York Trust Company N.A. (Exhibit 4.1 of the Company’s Current Report on Form 8-K filed September 23, 2005, File No. 1-7792).
*4.2	Registration Rights Agreement dated as of September 23, 2005 among Pogo Producing Company and the initial purchasers named therein (Exhibit 4.2 of the Company’s Current Report on Form 8-K filed September 23, 2005, File No. 1-7792).
*4.3	First Amendment to Credit Agreement dated as of August 31, 2005 but effective as of September 27, 2005, among Pogo Producing Company, the various financial institutions which are or may become parties to the Credit Agreement, as amended thereby (collectively, the “Lenders”), Bank of Montreal, as administrative agent for the Lenders, Bank of America N.A., Toronto Dominion (Texas) LLC and BNP Paribas, as Co-Syndication Agents for the Lenders, Wachovia Bank, National Association, as Documentation Agent for the Lenders, and Citibank N.A., and Bank of Nova Scotia, as managing agents for the Lenders (Exhibit 4.3 of the Company’s Current Report on Form 8-K filed September 23, 2005, File No. 1-7792).
10.1	Purchase Agreement dated September 21, 2005, by and between Pogo Producing Company and Goldman, Sachs & Co. and the other initial purchasers named therein.
10.2	Commitment Letter dated July 5, 2005, by and between Pogo Producing Company and Goldman Sachs Credit Partners L.P.
*10.3	Form of Restricted Stock Award Agreement Under Incentive Plans (Exhibit 10.2 of the Company’s Current Report on Form 8-K filed August 1, 2005, File No. 1-7792).
10.4	Pogo Producing Company Retention Incentive Plan effective September 27, 2005.
12.1	Statement showing computation of ratios of earnings to fixed charges.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer.
32.3	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.

* Asterisk indicates an exhibit incorporated by reference as shown.

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Signatures

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

	Pogo Producing Company
	(Registrant)
	/s/ Thomas E. Hart
	Thomas E. Hart
	Vice President and Chief
	Accounting Officer
	/s/ James P. Ulm, II
	James P. Ulm, II
	Senior Vice President and Chief
	Financial Officer
Date: November 2, 2005

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EX-10.1

Exhibit 10.1

Pogo Producing Company

6.875% Senior Subordinated Notes due 2017

Purchase Agreement

September 21, 2005

Goldman, Sachs & Co.,

As representative of the several Purchasers

named in Schedule I hereto,

c/o Goldman, Sachs & Co.,

85 Broad Street,

New York, New York 10004

Ladies and Gentlemen:

Pogo Producing Company, a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated herein, to issue and sell to the Purchasers named in Schedule I hereto (the “Purchasers”) an aggregate of $500,000,000 principal amount of the notes specified above (the “Notes”).  The Notes will be issued under the Indenture to be dated as of September 23, 2005 (the “Indenture”) between the Company and The Bank of New York Trust Company, N.A., as trustee (the “Trustee”).

The Company also proposes to use the net proceeds from its sale of the Notes pursuant to this Purchase Agreement (this “Agreement”) as indicated in the Offering Circular (as defined below), one of the potential uses being to finance part of the costs of its acquisition of Northrock Resources Ltd., an Alberta corporation (“Northrock”) and an indirect wholly-owned subsidiary of Unocal Corporation, a Delaware corporation (“Unocal”), pursuant to the Share Purchase Agreement (herein so called) dated as of July 8, 2005 among Unocal Canada Limited, Unocal Canada Alberta Hub Limited, Unocal, Pogo Canada, ULC and the Company. Unless otherwise expressly stated, references in this Agreement to the transactions “contemplated” herein or hereby and other references of similar import shall not include the pending acquisition of Northrock pursuant to the Share Purchase Agreement.

1.The Company represents and warrants to, and agrees with, each of the Purchasers that:

(a)A preliminary offering circular, dated September 20, 2005 (the “Preliminary Offering Circular”) has been prepared, and an offering circular, to be dated today (the “Offering Circular”), is being prepared, in connection with the offering of the Notes.  Any reference to the Preliminary Offering Circular or the Offering Circular shall be deemed to refer to and include each of the Company’s Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and its Current Reports on Form 8-K (excluding information therein that was furnished to (and not filed with) the United States Securities and Exchange Commission (the “Commission”)) that is specifically incorporated by reference therein as indicated therein under “Available Information,”

and any reference to the Preliminary Offering Circular or the Offering Circular, as the case may be, as amended or supplemented, as of any specified date, shall be deemed to include (i) any

documents filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) after the date of the Preliminary Offering Circular or the Offering Circular, as the case may be, and prior to such specified date (excluding information therein that was furnished to (and not filed with) the Commission) and (ii) any Additional Issuer Information (as defined in Section 5(e)) furnished by the Company prior to the completion of the distribution by the Purchasers of the Notes; and all documents filed under the Exchange Act and so deemed to be included in the Preliminary Offering Circular or the Offering Circular, as the case may be, or any amendment or supplement thereto are hereinafter called the “Exchange Act Reports.”  The Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder.  The Preliminary Offering Circular or the Offering Circular and any amendments or supplements thereto and the Exchange Act Reports did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a Purchaser through Goldman, Sachs & Co. expressly for use therein;

(b)Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Offering Circular any material loss or material interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Circular; and, since the respective dates as of which information is given in the Offering Circular, there has not been any change in the capital stock (other than regular quarterly dividends on the Company’s common stock or pursuant to employee benefit plans or arrangements described in the Exchange Act Reports and in effect on the date hereof) or long-term debt (other than under the Company’s bank credit agreement or uncommitted money market lines of credit in effect on the date hereof) of the Company or any of its subsidiaries, or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, shareholders’ equity or results of operations of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Offering Circular;

(c)The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware and has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Circular and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”);

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(d)Each “significant subsidiary” (as such term is defined in Rule 1-02 of Regulation S-X under the Exchange Act) of the Company as of the date hereof (each a “Designated Subsidiary” and, collectively, the “Designated Subsidiaries”) is identified on Schedule II hereto, has been duly formed or incorporated and is validly existing as a corporation or other business entity in good standing under the laws of the jurisdiction of its formation or incorporation, has the corporate, partnership or company power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Circular and is duly qualified as a foreign corporation or other business entity to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; all of the issued and outstanding capital stock or equivalent equity interests of each Designated Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable and (except for directors’ qualifying shares or shares representing an immaterial equity interest that are required under the laws of any foreign jurisdiction to be owned by others, and except as set forth in the Offering Circular) are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim; and none of the outstanding shares of capital stock or equivalent equity interests of the Designated Subsidiaries were issued in violation of any preemptive or similar rights arising by operation of law, or under the charter, by-laws or other comparable organizational documents of any Designated Subsidiary or under any agreement to which the Company or any Designated Subsidiary is a party;

(e)Each of the Company and its subsidiaries has (i) generally satisfactory title to its oil and gas properties, title investigations having been carried out by the Company or its subsidiaries in accordance with the practice in the oil and gas industry in the areas in which the Company and its subsidiaries operate, (ii) good and marketable title to all other real property owned by it to the extent necessary to carry on its business and (iii) good and marketable title to all personal property owned by it, in each case free and clear of all liens, encumbrances and defects except such as are described in the Offering Circular or such as do not materially affect the value of the properties of the Company and its subsidiaries, considered as one enterprise, and do not interfere with the use made and proposed to be made of such properties, by the Company and its subsidiaries, considered as one enterprise; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the Offering Circular, are in full force and effect, and neither the Company nor any of its subsidiaries has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or its subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or any subsidiary thereof to the continued possession of the leased or subleased premises under any such lease or sublease;

(f)The authorized, issued and outstanding capital stock of the Company is as set forth in the Offering Circular in the column entitled “Actual” under the caption “Capitalization” (except as indicated in the notes thereto with respect to any subsequent issuances pursuant to employee or director benefit plans referred to in the Offering Circular or pursuant to the exercise of convertible securities or options referred to in the Offering Circular); and the shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable, and none of the outstanding shares of capital

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stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company;

(g)The Notes, and notes having terms substantially identical to the Notes other than the payment of additional interest (the “Exchange Notes”) issuable in exchange for the Notes in an exchange offer (the “Exchange Offer”) pursuant to the Registration Rights Agreement (as defined in Section 1(h) below), have been duly authorized and, when issued and delivered pursuant to this Agreement (in the case of the Notes) or, if and when issued and delivered pursuant to the Registration Rights Agreement (in the case of the Exchange Notes) and duly authenticated pursuant to the Indenture, will have been duly executed, authenticated, issued and delivered and will constitute valid and legally binding obligations of the Company entitled to the benefits provided by the Indenture; the Indenture has been duly authorized by the Company and upon execution and delivery by the parties thereto will (assuming the due authorization, execution and delivery by the Trustee) constitute a valid and legally binding instrument of the Company, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent transfer, reorganization and other similar laws of general application affecting the rights and remedies of creditors and by general equity principles (regardless of whether enforceability is considered in a proceeding in equity or at law);

(h)This Agreement has been duly authorized, executed and delivered by the Company, and the exchange and registration rights agreement (the “Registration Rights Agreement”), to be dated as of the Time of Delivery (as defined below), has been duly authorized by the Company and, when duly executed and delivered by the Company and the other parties thereto (assuming the due authorization, execution and delivery by each party thereto other than the Company), will be the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent transfer, reorganization and other similar laws of general application affecting the rights and remedies of creditors and by general equity principles (regardless of whether enforceability is considered in a proceeding in equity or at law) and, as to rights of indemnification and contribution, subject to principles of public policy or federal or state securities laws relating thereto;

(i)None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Notes) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations T, U, and X of the Board of Governors of the Federal Reserve System;

(j)Prior to the date of this Agreement, neither the Company nor any of its affiliates has taken any action which is designed to or which has constituted or which reasonably might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Notes;

(k)Neither the Company nor any of its subsidiaries is in violation of its charter, by-laws or other governing documents, as applicable, or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or its subsidiaries is a party or by which any of them may be bound, or to which any of the property or assets of the Company or its subsidiaries is subject

5

(collectively, “Agreements and Instruments”) except for such violations or defaults that have not resulted or would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement, the Indenture and the Notes and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby or in the Offering Circular (including the Registration Rights Agreement) and the consummation of the transactions contemplated herein and therein and in the Offering Circular (including the issuance and sale of the Notes and the use of the proceeds from the sale of the Notes as described in the Offering Circular under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or a Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or its subsidiaries pursuant to, the Agreements and Instruments (including, without limitation, Section 13.2(d) of the Share Purchase Agreement), except for such conflicts, breaches, Repayment Events, defaults, liens, charges or encumbrances that, singly or in the aggregate, have not resulted or would not result in a Material Adverse Effect, nor will such action result in any violation of the provisions of any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or its subsidiaries or any of their assets or properties, except for such violations that, singly or in the aggregate, have not resulted or would not result in a Material Adverse Effect, or any violation of the provisions of the charter or by-laws of the Company or the charter, by-laws or other comparable organizational documents of any of its subsidiaries; as used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or its subsidiaries;

(l)No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Notes or the consummation by the Company of the transactions contemplated by this Agreement or the Indenture, except for the filing and effectiveness of one or more registration statements by the Company with the Commission pursuant to the United States Securities Act of 1933, as amended (the “Act”) pursuant to the Registration Rights Agreement, the qualification of the Indenture under the Trust Indenture Act of 1939 (“Trust Indenture Act”) and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Notes by the Purchasers;

(m)The statements set forth in the Offering Circular under the caption “Description of the Notes”, insofar as they purport to constitute a summary of the terms of the Notes, under the caption “Certain United States Federal Income Tax Considerations” insofar as they purport to describe the provisions of the laws and documents referred to therein and under the caption “Underwriting”, insofar as they purport to describe the provisions of this Agreement referred to therein, are accurate and fair in all material respects;

(n)Except as disclosed in the Offering Circular, there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any subsidiary thereof which might reasonably be expected to result in a Material Adverse Effect, or

6

which might reasonably be expected to materially and adversely affect the consummation of the transactions contemplated by this Agreement (including the transactions contemplated by the Registration Rights Agreement) or the performance by the Company of its obligations hereunder;

(o)When the Notes are issued and delivered pursuant to this Agreement, no Notes will be of the same class (within the meaning of Rule 144A under the Act) as securities which are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system;

(p)The Company is subject to Section 13 or 15(d) of the Exchange Act;

(q)The Company is not, and after giving effect to the offering and sale of the Notes, will not be an “investment company” or an entity “controlled” by an “investment company,” as such terms are defined in the United States Investment Company Act of 1940, as amended (the “Investment Company Act”);

(r)Neither the Company nor any person acting on its behalf (other than the Purchasers, for whom the Company makes no representation) has offered or sold the Notes by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act or, with respect to Notes sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act, and the Company, any affiliate of the Company and any person acting on its or their behalf (other than the Purchasers, for whom the Company makes no representation) have complied with and will implement the “offering restrictions” within the meaning of such Rule 902 to the extent applicable to them;

(s)Within the preceding six months, neither the Company nor any other person acting on its behalf has offered or sold to any person any Notes, or any securities of the Company of the same or a similar class as the Notes, other than Notes offered or sold to the Purchasers hereunder and the 2015 Notes (as defined in the Offering Circular); and the Company will take reasonable precautions designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Act) of any Notes or any substantially similar security issued by the Company, within six months subsequent to the date on which the distribution of the Notes has been completed (as notified to the Company by Goldman, Sachs & Co. or, in the absence of any such notification, such date shall be deemed to be 20 days after the Time of Delivery), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Notes in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Act (it being acknowledged that the Company may conduct an exchange offer with respect to, or otherwise cause to be registered with the Commission for resale by the holders, the 2015 Notes in accordance with the exchange and registration rights agreement relating thereto);

(t)PricewaterhouseCoopers LLP, who have audited certain financial statements of the Company and its subsidiaries and have audited the Company’s internal control over financial reporting and management’s assessment thereof as of December 31, 2004 and who have audited certain financial statements of Northrock and its subsidiaries, are an independent registered public accounting firm with respect to each of the Company and Northrock within the

7

meaning of the Act and the rules and regulations thereunder adopted by the Commission and the Public Accounting Oversight Board (United States);

(u)The Company maintains a system of internal control over financial reporting (as such term is defined in Rule
13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and based on the Company’s evaluation of its internal control over financial reporting under the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, the Company’s management concluded that its internal control over financial reporting was effective as of December 31, 2004;

(v)Since December 31, 2004, the date of the latest audited financial statements of the Company incorporated by reference in the Offering Circular, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;

(w)The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act) that comply with the requirements of the Exchange Act, such disclosure controls and procedures have been designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company’s principal executive officer and principal financial officer by others within those entities and such disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Commission rules and forms;

(x)The historical financial statements of the Company, together with the related schedules and notes, included in the Offering Circular present fairly the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statements of operations, shareholders’ equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; and said financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis throughout the periods involved, except as noted therein;

(y)To the knowledge of the Company, (i) the historical financial statements of Northrock, together with the related schedules and notes, included in the Offering Circular present fairly the financial position of Northrock and its consolidated subsidiaries at the dates indicated and the statements of operations, shareholders’ equity and cash flows of Northrock and its consolidated subsidiaries for the periods specified and (ii) said financial statements have been prepared in conformity with GAAP applied on a consistent basis throughout the periods involved, except as noted therein;

(z)The pro forma financial information included in the Offering Circular has been prepared on a basis consistent with the historical financial statements from which it has been derived, includes all material adjustments to the historical financial information required by Rule 11-02 of Regulation S-X under the Act and the Exchange Act to reflect the transactions

8

described in the Offering Circular, gives effect to assumptions made on a reasonable basis and fairly presents the transactions described in the Offering Circular;

(aa)The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them, except where the failure to possess such Governmental Licenses, would not, singly or in the aggregate, have a Material Adverse Effect; the Company and its subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would reasonably be expected to result in a Material Adverse Effect;

(bb)The Company and its subsidiaries have filed all necessary federal, state and foreign income and franchise tax returns or have timely requested extensions thereof and have paid all taxes shown as due thereon or made adequate reserve or provision therefor; and other than tax deficiencies which the Company or any subsidiary is contesting in good faith and for which the Company or such subsidiary has provided adequate reserves, there is no tax deficiency that has been asserted against the Company or any subsidiary that would individually or in the aggregate have a Material Adverse Effect;

(cc)Except as described in the Offering Circular and except for such matters as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or, to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or Environmental Laws;

9

(dd)No labor dispute with the employees of the Company or its subsidiaries exists or, to the knowledge of the Company, is imminent, which, in either case, may reasonably be expected to result in a Material Adverse Effect; and

(ee)Subject to compliance by the Purchasers with the representations, warranties and agreements set forth in Section 3 and Annex I, it is not necessary in connection with the offer, sale and delivery of the Notes to the Purchasers and the Purchasers’ subsequent sales to QIBs (as defined below) or pursuant to Annex I in the manner contemplated by this Agreement and the Offering Circular to register the Notes under the Act or to qualify the Indenture under the Trust Indenture Act.

2.Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to each of the Purchasers, and each of the Purchasers agrees, severally and not jointly, to purchase from the Company, at a purchase price of 98.125% of the principal amount thereof, plus accrued interest, if any, from September 23, 2005 to the Time of Delivery hereunder, the principal amount of Notes set forth opposite the name of such Purchaser in Schedule I hereto.

3.Upon the authorization by you of the release of the Notes, the several Purchasers propose to offer the Notes for sale upon the terms and conditions set forth in this Agreement and the Offering Circular and each Purchaser hereby represents and warrants to, and agrees with the Company that:

(a)It will offer and sell the Notes only to:  (i) persons who it reasonably believes are “qualified institutional buyers” (“QIBs”) within the meaning of Rule 144A under the Act in transactions meeting the requirements of Rule 144A or (ii) upon the terms and conditions set forth in Annex I to this Agreement;

(b)It is an institutional “accredited investor” within the meaning of Rule 501 under the Act; and

(c)It will not offer or sell the Notes by any form of general solicitation or general advertising, including but not limited to the methods described in Rule 502(c) under the Act.

4.(a)  The Notes to be purchased by each Purchaser hereunder will be represented by one or more definitive global Notes in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company (“DTC”) or its designated custodian.  The Company will deliver the Notes to Goldman, Sachs & Co., for the account of each Purchaser, against payment by or on behalf of such Purchaser of the purchase price therefor by wire transfer to the account of the Company of same day funds, by causing DTC to credit the Notes to the account of Goldman, Sachs & Co. at DTC.  The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on September 23, 2005 or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing.  Such time and date are herein called the “Time of Delivery”.

(b)The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Notes and any additional documents requested by the Purchasers pursuant to Section 7(j) hereof, will be delivered at such time and date at the offices of Baker Botts L.L.P., 910 Louisiana, Houston, Texas 77002 (the “Closing Location”), and the Notes will be delivered to the Trustee as

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custodian for DTC, all at the Time of Delivery.  A meeting will be held at the Closing Location at 5:00 p.m., Houston time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto.  For the purposes of this Section 4, “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close.

5.The Company agrees with each of the Purchasers:

(a)To prepare the Offering Circular in a form approved by you; to make no amendment or any supplement to the Offering Circular which shall be reasonably disapproved by you promptly after reasonable notice thereof; and to furnish you with copies thereof;

(b)Promptly from time to time to take such action as you may reasonably request to qualify the Notes for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for so long as may be necessary to complete the distribution of the Notes, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction or to qualify as a dealer in securities in any U.S. jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject;

(c)To furnish the Purchasers with copies of each amendment or supplement to the Offering Circular and additional writtenand electronic copies of the Offering Circular and such amendments or supplements in such quantities as you may from time to time reasonably request, and if, at any time prior to the earlier of the effectiveness of a registration statement filed in accordance with the Registration Rights Agreement or the expiration of nine months after the date of the Offering Circular, any event shall have occurred as a result of which the Offering Circular as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Offering Circular is delivered, not misleading, or, if for any other reason it shall be necessary or desirable during such same period to amend or supplement the Offering Circular, to notify you and upon your request to prepare and furnish without charge to each Purchaser and to any dealer in Notes as many writtenand electronic copies as you may from time to time reasonably request of an amended Offering Circular or a supplement to the Offering Circular which will correct such statement or omission or effect such compliance;

(d)During the period beginning from the date hereof and continuing for 90 days thereafter, the Company will not, and will not permit any of its subsidiaries or other “affiliates” (as defined in Rule 405 under the Act) over which it exercises management or voting control or any person acting on its behalf, to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, any securities that are substantially similar to the Notes (other than as provided for in the Registration Rights Agreement), without the prior written consent of Goldman, Sachs & Co.;

(e)At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of Notes, to furnish at its expense,

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upon request, to holders of Notes and prospective purchasers of Notes, information (the “Additional Issuer Information”) satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act, unless all the Notes are no longer “restricted securities” within the meaning of Rule 144(a)(3) under the Act or may be sold under Rule 144(k) under the Act;

(f)To execute and deliver the Registration Rights Agreement in the form previously agreed upon and, if conducted, to comply with all applicable federal and state securities laws in connection with the Exchange Offer;

(g)To use its reasonable best efforts to cause the Notes to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc.;

(h)During the period of five years after the Time of Delivery, the Company will furnish or will make generally available via the EDGAR System to Goldman, Sachs & Co. and, upon request, to each of the other Purchasers, promptly upon their becoming available, copies of (i) all reports or other publicly available information that the Company shall mail or otherwise make available to its public stockholders and (ii) all reports, financial statements and proxy or information statements filed by the Company with the Commission or any national securities exchange and such other publicly available information concerning the Company and its subsidiaries including, without limitation, press releases, as the Purchasers may reasonably request;

(i)During the period of two years after the Time of Delivery, the Company will not, and will not permit any of its “affiliates” (as defined in Rule 144 under the Act) to, resell any of the Noteswhich constitute “restricted securities” under Rule 144 that have been reacquired by any of them;

(j)To comply with all agreements set forth in the representation letter of the Company to DTC relating to the approval of the Notes by DTC for “book-entry” transfer;

(k)To advise the Purchasers promptly, and, if requested by the Purchasers, confirm such advice in writing, of the issuance by any state securities commission of any stop order suspending the qualification or exemption of any of the Notes for offering or sale in any jurisdiction, or the initiation of any proceeding for such purpose by any state securities commission or other regulatory authority, and to use its reasonable best efforts to prevent the issuance of any stop order or order suspending the qualification or exemption of any of the Notes under any state securities or Blue Sky laws, and if, at any time, any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption of any of the Notes under any state securities or Blue Sky laws, to use its reasonable best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; and

(l)To use the net proceeds received by it from the sale of the Notes pursuant to this Agreement in the manner specified in the Offering Circular under the caption “Use of Proceeds”.

6.The Company covenants and agrees with the several Purchasers that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company’s counsel and accountants in connection with the issue of the Notes, and the Exchange Notes and all other expenses in connection with the preparation, printing and filing of

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the Preliminary Offering Circular and the Offering Circular and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Purchasers and dealers; (ii) the cost of printing or producing any Agreement among Purchasers, this Agreement, the Indenture, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Notes; (iii) all expenses in connection with the qualification of the Notesfor offering and sale under state securities laws as provided in Section 5(b) hereof; (iv) any fees charged by securities rating services for rating the Notes; (v) the cost of preparing and delivering the Notes and the Exchange Notes; (vi) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture, the Notes and the Exchange Notes; (vii) any cost incurred in connection with the designation of the Notes for trading in PORTAL and (viii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section.  It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Purchasers will pay all of their own costs and expenses, including the fees, disbursements and expenses of their counsel, transfer taxes on resale of any of the Notesby them, and any advertising expenses connected with any offers they may make.

7.The obligations of the Purchasers hereunder shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company as set forth herein are, at and as of the Time of Delivery, true and correct, the condition that the Company shall have performed all of its obligations hereunder theretofore to be performed, and the following additional conditions:

(a)Vinson & Elkins L.L.P., counsel for the Purchasers, shall have furnished to you such opinion or opinions, dated the Time of Delivery, with respect to the matters covered in paragraphs (i), (iii), (iv), (v), (vi) and (viii) of Exhibit A-1 hereto as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters;

(b)(i) Baker Botts L.L.P., counsel for the Company, shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance reasonably satisfactory to you, to the effect set forth in Exhibit A-1 hereto and (ii) Michael J. Killelea, Vice President and General Counsel of the Company, shall have furnished to you his written opinion, dated the Time of Delivery, in form and substance reasonably satisfactory to you, to the effect set forth in Exhibit A-2 hereto;

(c)(i) On the date of the Offering Circular prior to the execution of this Agreement, PricewaterhouseCoopers LLP shall have furnished to you a letter or letters, dated the date of delivery thereof, in form and substance reasonably satisfactory to you, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to initial purchasers with respect to the financial statements of both the Company and Northrock and certain other financial information contained in the Offering Circular and (ii) at the Time of Delivery, PricewaterhouseCoopers LLP shall have furnished to you a letter or letters, dated the date of delivery thereof, to the effect that they reaffirm the statements made in their letter or letters furnished pursuant to the preceding clause (i), except that the specified date referred to shall be a date not more than three business days prior to the Time of Delivery;

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(d)At the Time of Delivery, Ryder Scott Company, L.P. shall have furnished to you a letter or letters regarding certain information with respect to oil and natural gas reserves associated with the oil and natural gas properties of each of the Company and Northrock, such letter or letters to be dated the date of delivery thereof and in the form and substance reasonably satisfactory to you;

(e)At the Time of Delivery, Miller and Lents, Ltd. shall have furnished to you a letter regarding certain information with respect to oil and natural gas reserves associated with the Company’s oil and natural gas properties dated the date of delivery thereof in the form and substance reasonably satisfactory to you;

(f)(i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Offering Circular any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Circular and (ii) since the respective dates as of which information is given in the Offering Circular, there shall not have been any change in the capital stock (other than regular quarterly dividends on the Company’s common stock or pursuant to employee benefit plans or arrangements described in the Exchange Act Reports and in effect on the date hereof) or long-term debt (other than under the Company’s bank credit agreement or uncommitted money market lines of credit in effect on the date hereof) of the Company or any of its subsidiaries, or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, shareholders’ equity or results of operations of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Offering Circular, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Purchasers so material and adverse as to make it impracticable or inadvisable to proceed with the offering or the delivery of the Notes on the terms and in the manner contemplated in this Agreement and in the Offering Circular;

(g)On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities;

(h)On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange (“NYSE”); (ii) a suspension or material limitation in trading in the Company’s common stock on the NYSE; (iii) a general moratorium on commercial banking activities declared by either Federal or New York or Texas State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (v) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iv) or (v) in the judgment of the Purchasers makes it impracticable or inadvisable to proceed with the offering or the delivery of the Notes on the terms and in the manner contemplated in the Offering Circular;

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(i)The Notes shall have been designated for trading on PORTAL; and

(j)The Company shall have furnished or caused to be furnished to you at the Time of Delivery certificates of officers of the Company reasonably satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of the Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to the Time of Delivery, as to the matters set forth in subsections (f) and (g) of this Section 7 and as to such other matters as you may reasonably request.

8.(a) The Company will indemnify and hold harmless each Purchaser against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Circular or the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and will reimburse each Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Offering Circular or the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Purchaser through Goldman, Sachs & Co. expressly for use therein.

(b)Each Purchaser will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Circular or the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Circular or the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Purchaser through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred.

(c)Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection.  In case any such action

15

shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with a single counsel (in addition to any local counsel) reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation.  No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party.

(d)If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Purchasers on the other from the offering of the Notes.  If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Purchasers, in each case as set forth in the Offering Circular or herein.  The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Purchasers on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.  The Company and the Purchasers agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Purchasers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d).  The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action

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or claim.  Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Notes underwritten by it and distributed to investors were offered to investors exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

(e)The obligations of the Company under this Section 8 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Act; and the obligations of the Purchasers under this Section 8 shall be in addition to any liability which the respective Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act.

9.(a) If any Purchaser shall default in its obligation to purchase the Notes which it has agreed to purchase hereunder, you may in your discretion arrange for you or another party or other parties to purchase such Notes on the terms contained herein.  If within thirty-six hours after such default by any Purchaser you do not arrange for the purchase of such Notes, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Notes on such terms.  In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Notes, or the Company notifies you that it has so arranged for the purchase of such Notes, you or the Company shall have the right to postpone the Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Offering Circular, or in any other documents or arrangements, and the Company agrees to prepare promptly any amendments to the Offering Circular which in your opinion may thereby be made necessary.  The term “Purchaser” as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Notes.

(b)If, after giving effect to any arrangements for the purchase of the Notes of a defaulting Purchaser or Purchasers by you and the Company as provided in subsection (a) above, the aggregate principal amount of such Notes which remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the Notes, then the Company shall have the right to require each non-defaulting Purchaser to purchase the principal amount of Notes which such Purchaser agreed to purchase hereunder and, in addition, to require each non-defaulting Purchaser to purchase its pro rata share (based on the principal amount of Notes which such Purchaser agreed to purchase hereunder) of the Notes of such defaulting Purchaser or Purchasers for which such arrangements have not been made; but nothing herein shall relieve a defaulting Purchaser from liability for its default.

(c)If, after giving effect to any arrangements for the purchase of the Notes of a defaulting Purchaser or Purchasers by you and the Company as provided in subsection (a) above, the aggregate principal amount of Notes which remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Notes, or if the Company shall not

17

exercise the right described in subsection (b) above to require non-defaulting Purchasers to purchase Notes of a defaulting Purchaser or Purchasers, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Purchaser or the Company, except for the expenses to be borne by the Company and the Purchasers as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Purchaser from liability for its default.

10.The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Purchasers, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Purchaser or any controlling person of any Purchaser, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Notes.

11.If this Agreement shall be terminated pursuant to Section 9 hereof, the Company shall not then be under any liability to any Purchaser except as provided in Sections 6 and 8 hereof; but, if for any other reason, the Notes are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Purchasers through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Purchasers in making preparations for the purchase, sale and delivery of the Notes, but the Company shall then be under no further liability to any Purchaser except as provided in Sections 6 and 8 hereof.

12.In all dealings hereunder, you shall act on behalf of each of the Purchasers, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Purchaser made or given by youjointly or by Goldman, Sachs & Co. on behalf of you as the Purchasers.

All statements, requests, notices and agreements hereunder shall be in writing, and if to the Purchasers shall be delivered or sent by mail, telex or facsimile transmission to you as the Purchasers in care of Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company shall be delivered or sent by mail or facsimile transmission to the address of the Company set forth in the Offering Circular, Attention: Secretary; provided, however, that any notice to a Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Purchaser at its address set forth in its Purchasers’ Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request.  Any such statements, requests, notices or agreements shall take effect upon receipt thereof.

13.This Agreement shall be binding upon, and inure solely to the benefit of, the Purchasers, the Company, and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company, or any Purchaser, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Notes from any Purchaser shall be deemed a successor or assign by reason merely of such purchase.

14.Time shall be of the essence of this Agreement.

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

16.The Company acknowledges and agrees that (i) the purchase and sale of the Notes pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the several Purchasers, on the other, (ii) in connection therewith and with the process leading to such transaction each Purchaser is acting solely as a principal and not the agent or fiduciary of the Company, (iii) no Purchaser has assumed an advisory or fiduciary responsibility in favor of the Company with respect to the offering contemplated hereby or the process leading thereto (irrespective of whether such Purchaser has advised or is currently advising the Company on other matters) or any other obligation to the Company except the obligations expressly set forth in this Agreement and (iv) the Company has consulted its own legal and financial advisors to the extent it deemed appropriate.  The Company agrees that it will not claim that the Purchasers, or any of them, has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.

17.This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Purchasers, or any of them, with respect to the subject matter hereof.

18.The Company and each of the Purchasers hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

19.Notwithstanding anything herein to the contrary, the Company (and the Company’s employees, representatives, and other agents) are authorized to disclose to any and all persons, the tax treatment and tax structure of the potential transaction and all materials of any kind (including tax opinions and other tax analyses) provided to the Company relating to that treatment and structure, without the Purchasers’ imposing any limitation of any kind. However, any information relating to the tax treatment and tax structure shall remain confidential (and the foregoing sentence shall not apply) to the extent necessary to enable any person to comply with securities laws. For this purpose, “tax treatment” means U.S. federal and state income tax treatment, and “tax structure” is limited to any facts that may be relevant to that treatment.

20.This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument.

[Signature page follows.]

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If the foregoing is in accordance with your understanding, please sign and return to us one for the Company and each of you plus one for each counsel counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Purchasers, this letter and such acceptance hereof shall constitute a binding agreement between each of the Purchasers and the Company.  It is understood that your acceptance of this letter on behalf of each of the Purchasers is pursuant to the authority set forth in a form of Agreement among Purchasers, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof.

	Very truly yours,
	Pogo Producing Company
	By:	/s/ James P. Ulm, II
		James P. Ulm, II
		Senior Vice President and
		Chief Financial Officer
Accepted as of the date hereof:
Goldman, Sachs & Co.
As representative of the several Purchasers
named in Schedule I hereto,
/s/ Goldman, Sachs & Co.
(Goldman, Sachs & Co.)

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SCHEDULE I

Purchaser	Principal Amount of Notes to be Purchased
Goldman, Sachs & Co.	$	250,000,000
Banc of America Securities LLC	50,000,000
Citigroup Global Markets Inc.	50,000,000
Harris Nesbitt Corp.	50,000,000
BNP Paribas Securities Corp.	25,000,000
Scotia Capital (USA) Inc.	25,000,000
TD Securities (USA) LLC	25,000,000
Wachovia Capital Markets, LLC	25,000,000
Total	$	500,000,000

SCHEDULE II

Name of Designated Subsidiary	Jurisdiction of Its Organization
North Central Oil Corporation	Delaware
Pogo Panhandle 2004, L.P.	Texas
Pogo Producing (Texas Panhandle) Company	Texas
Pogo Energy, Inc.	Texas

ANNEX I

(1)The Notes have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act.  Each Purchaser represents and agrees that it has offered and sold the Notes, and will offer and sell the Notes (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Time of Delivery (the “restricted period”), only in accordance with Rule 903 of Regulation S or Rule 144A under the Act.  Accordingly, each Purchaser agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Notes, and it and they have complied and will comply with the offering restriction requirements of Regulation S.  Each Purchaser agrees that, at or prior to confirmation of sale of Notes (other than a sale pursuant to Rule 144A), it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Notes from it during the restricted period a confirmation or notice to substantially the following effect:

“The Notes covered hereby have not been registered under the U.S. Securities Act of 1933 (the “Securities Act”) and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act.  Terms used above have the meaning given to them by Regulation S.”

Terms used in this paragraph have the meanings given to them by Regulation S.

Each Purchaser further agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Notes, except with its affiliates or with the prior written consent of the Company.

In addition,

(A)except to the extent permitted under U.S. Treas. Reg. § 1.163-5(c)(2)(i)(D) (the “D Rules”), (i) each Purchaser agrees that it has not offered or sold, and during the restricted period will not offer or sell, Notes in bearer form to a person who is within the United States or its possessions or to a U.S. person, and (ii) it has not delivered and will not deliver within the United States or its possessions definitive Notes in bearer form that are sold during the restricted period;

(B)each Purchaser represents and agrees that it has, and throughout the restricted period will have, in effect procedures reasonably designed to ensure that its employees or agents who are directly engaged in selling Notes in bearer form are aware that such Notes may not be offered or sold during the restricted period to a person who is within the United States or its possessions or to a United States person, except as permitted by the D Rules;

(C)if it is a United States person, each such Purchaser represents that it is acquiring the Notes in bearer form for purposes of resale in connection with their original

I-1

issuance and if it retains Notes in bearer form for its own account, it will only do so in accordance with the requirements of U.S. Treas. Reg. § 1.163-5(c)(2)(i)(D)(6); and

(D)with respect to each affiliate that acquires from it Notes in bearer form for the purpose of offering or selling such Notes during the restricted period, such Purchaser either (i) repeats and confirms the representations and agreements contained in clauses (A), (B) and (C) on its behalf or (ii) agrees that it will obtain from such affiliate for the Company’s benefit the representations and agreements contained in clauses (A), (B) and (C).

Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code and regulations thereunder, including the D Rules.

(2)Notwithstanding the foregoing, Notes in registered form may be offered, sold and delivered by the Purchasers in the United States and to U.S. persons pursuant to Section 3 of this Agreement without delivery of the written statement required by paragraph (1) above.

(3)Each Purchaser represents, warrants and agrees that: (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”)) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Company; and (ii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

(4)In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), each Purchaser represents, warrants and agrees that with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the “Relevant Implementation Date”) it has not made and will not make an offer of Notes to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Notes which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from and including the Relevant Implementation Date, make an offer of Notes to the public in that Relevant Member State at any time:

(a)to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;

(b)to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; or

(c)in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive.

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For the purposes of this provision, the expression an “offer of Notes to the public” in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

(5)Each Purchaser agrees that it will not offer, sell or deliver any of the Notes in Hong Kong, Singapore, Japan or any other jurisdiction outside the United States except under circumstances (including those described in the “Underwriting” section of the Offering Circular in relation to Hong Kong, Singapore and Japan) that will result in compliance with the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Notes in such jurisdictions.  Each Purchaser understands that no action has been taken to permit a public offering in any jurisdiction outside the United States where action would be required for such purpose.  Each Purchaser agrees not to cause any advertisement of the Notes to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Notes, except in any such case with Goldman, Sachs & Co.’s express written consent and then only at its own risk and expense.

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Exhibit A-1

FORM OF OPINION OF BAKER BOTTS L.L.P.
TO BE DELIVERED PURSUANT TO
SECTION 7(b)(i)

(i)The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware.

(ii)The Company has corporate power and authority to own its properties and to conduct its business as described in the Offering Circular and to enter into and perform its obligations under the Purchase Agreement and the Registration Rights Agreement.

(iii)The Purchase Agreement and the Registration Rights Agreement have been duly authorized, executed and delivered by the Company.

(iv)The Indenture has been duly authorized, executed and delivered by the Company and (assuming the due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

(v)The Notes have been duly authorized by the Company, each global certificate representing the Notes is in the form contemplated by the Indenture and has been duly executed by the Company and, when such global certificate has been authenticated by the Trustee in the manner provided in the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee) and the Notes have been delivered through the facilities of DTC against payment of the purchase price therefor, the Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws relating to or affecting enforcement of creditors’ rights generally, or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be entitled to the benefits of the Indenture.

(vi)The Notes, the Indenture and the Registration Rights Agreement conform, as to legal matters, in all material respects to the descriptions thereof contained in the Offering Circular, and the statements set forth in the Offering Circular under the caption “Certain United States Federal Income Tax Considerations” insofar as they purport to describe the provisions of the law referred to therein are complete, accurate and fair in all material respects.

(vii)No authorization, approval, consent or order of any court or governmental authority or agency other than such as have been obtained or made or as may be required under the applicable securities laws of the various jurisdictions in which the Notes will be offered or sold (as to which we express no opinion) is required to be obtained by the Company in connection with the due authorization, execution and delivery of the Purchase Agreement or the due execution, delivery or performance of the Indenture by the Company or for the offering, issuance, sale or delivery of the Notes to the Purchasers or the initial resale of the Notes by the Purchasers in accordance with the Purchase Agreement.

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(viii)Assuming the accuracy of the representations and warranties of the Company and the Purchasers as to matters of fact contained in the Purchase Agreement, the performance by them of the agreements contained therein and compliance with the related procedures set forth in the Offering Circular, it is not necessary in connection with the offer, sale and initial resale of the Notes in the manner contemplated by the Purchase Agreement and the Offering Circular to register the Notes under the Act or to qualify the Indenture under the Trust Indenture Act.

(ix)The Company is not an “investment company,” as such term is defined in the 1940 Act.

We have participated in conferences with certain officers and representatives of the Company, representatives of the Purchasers, counsel to the Purchasers and representatives of the independent public accountants of the Company at which the contents of the Offering Circular and related matters were discussed.  Although we have not undertaken to determine independently, are not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained or incorporated by reference in the Offering Circular, we advise you that, on the basis of the foregoing, no facts have come to our attention that have caused us to believe that the Offering Circular (other than the reserve information, financial statements (including the notes and schedules thereto and auditors’ reports thereon), and other financial data included or incorporated by reference in the Offering Circular and the exhibits to the documents incorporated by reference therein, as to which we have not been asked to comment), as of its date or as of the date hereof, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

The opinions set forth above are limited in all respects to matters of the laws of the State of Texas, the General Corporation Law of the State of Delaware, the contract law of the State of New York and the applicable federal laws of the United States, each as in effect on the date hereof.

In rendering such opinion, such counsel may rely as to matters of fact (but not as to legal conclusions), to the extent they deem proper, on certificates of responsible officers of the Company and public officials. Such opinion may include a statement that any tax advice embodied therein is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer, that it was written to support the promotion or marketing of the Notes, and that any affected taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).

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Exhibit A-2

FORM OF OPINION OF MICHAEL J. KILLELEA
TO BE DELIVERED PURSUANT TO
SECTION 7(b)(ii)

(i)The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.

(ii)The shares of issued and outstanding capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable, and none of the outstanding shares of capital stock of the Company was issued in violation of the preemptive or other similar rights of any securityholder of the Company.

(iii)Each Designated Subsidiary has been duly formed or incorporated and is validly existing as a corporation or other business entity in good standing under the laws of the jurisdiction of its formation or incorporation, has corporate, partnership or company power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Circular and is duly qualified as a foreign corporation or other business entity to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; and all of the issued and outstanding capital stock or equivalent equity interests of each Designated Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable and (except for directors’ qualifying shares or shares representing an immaterial equity interest that are required under the laws of any foreign jurisdiction to be owned by others, and except as set forth in the Offering Circular) are owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim.

(iv)The documents filed with the Commission pursuant to the Exchange Act that are incorporated by reference in the Offering Circular (other than the financial statements, including the notes thereto and auditors’ reports thereon, other financial information and reserve information and supporting schedules therein, as to which I express no opinion), when filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission thereunder.

(v)There is not pending or, to my knowledge, threatened any action, suit, proceeding, inquiry or investigation, to which the Company or any subsidiary is a party, or to which the property of the Company or any subsidiary thereof is subject, before or brought by any court or governmental agency or body, which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the ability of the Company to consummate the transactions contemplated in the Purchase Agreement or the performance by the Company of its obligations thereunder or the transactions contemplated by the Offering Circular.

(vi)The execution, delivery and performance of the Purchase Agreement, the Indenture, the Registration Rights Agreement and the Notes and the consummation of the transactions contemplated in the Purchase Agreement, the Registration Rights Agreement and in the Offering Circular (including the use of the proceeds from the sale of the Notes as

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described in the Offering Circular under the caption “Use of Proceeds”) and compliance by the Company with its obligations under the Purchase Agreement, the Registration Rights Agreement, the Indenture and the Notes will not, whether with or without the giving of notice or lapse of time or both, conflict with or constitute a breach of, or default or Repayment Event under or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any subsidiary thereof pursuant to any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to me, to which the Company or its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any subsidiary thereof is subject (except for such conflicts, breaches, Repayment Events, defaults, liens, charges or encumbrances that would not have a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter, by-laws or other governing document, as applicable, of the Company or its subsidiaries, or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to me (other than federal and state securities or blue sky laws, as to which I express no opinion), of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations.

In addition, I have participated in conferences with certain officers and representatives of the Company, representatives of the Purchasers, counsel to the Purchasers and representatives of the independent public accountants of the Company at which the contents of the Offering Circular and related matters were discussed. Although I have not undertaken to determine independently, am not passing upon and do not assume any responsibility for the accuracy, completeness or fairness of the statements contained or incorporated by reference in the Offering Circular, I advise you that, on the basis of the foregoing, no facts have come to my attention that have caused me to believe that the Offering Circular (other than the reserve information, financial statements (including the notes and schedules thereto and auditors’ reports thereon), other financial data included or incorporated by reference in the Offering Circular and the exhibits to the documents incorporated by reference therein, as to which I have not been asked to comment), as of its date or as of the date hereof, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

The opinions set forth above are limited in all respects to matters of the laws of the State of Texas, the General Corporation Law of the State of Delaware and the applicable federal laws of the United States, each as in effect on the date hereof.

In rendering such opinion, such counsel may rely as to matters of fact (but not as to legal conclusions), to the extent he deems proper, on certificates of responsible officers of the Company and public officials.  Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991).

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EX-10.2

Exhibit 10.2

Execution Version

Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York  10004

COMMITMENT LETTER

PERSONAL AND CONFIDENTIAL

July 5, 2005

Pogo Producing Company
5 Greenway Plaza
P.O. Box 2504
Houston, Texas  77252-2504

Attention:	James P. Ulm, II
	Senior Vice President and Chief Financial Officer

Ladies and Gentlemen:

We are pleased to confirm the arrangements under which Goldman Sachs Credit Partners L.P. (“GSCP” or the “Administrative Agent”) is exclusively authorized by Pogo Producing Company (the “Company”) to act as sole lead arranger, sole bookrunner, sole syndication agent and administrative agent in connection with the bridge loans described herein, and, together with any other lenders set forth on Schedule I hereto and any entities that become lenders in accordance with the syndication arrangements set forth below (collectively with GSCP, the “Lenders”), commits to provide the bridge loans described herein, in each case, on the terms and subject to the conditions set forth in this letter, the attached Annex A and Annex B (collectively, the “Commitment Letter”) and the Fee Letter (as defined below).

You have informed GSCP that the Company, a Delaware corporation, intends to sign an agreement (the “Acquisition Agreement”) to acquire (the “Acquisition”) certain of the Canadian assets of a public company code-named Ulysses (the “Seller”), as specified in the Acquisition Agreement (the “Acquired Business”).  You have also informed us that the total purchase price for the Acquisition (including the refinancing of certain debt of the Acquired Business, but excluding the payment of fees, commissions and expenses in connection with the Acquisition) will be approximately $1.8 billion and that the Acquisition will be financed with (i) the issuance by the Company of up to $1.0 billion in aggregate principal amount of debt, equity or equity-linked securities (the “Permanent Securities”) or, in the event the Permanent Securities are not issued at the time the Acquisition is consummated, borrowings by the Company of up to $1.0 billion under senior subordinated increasing rate bridge loans (the “Bridge Loans”) having the terms of set forth in Annex B and (ii) the sale of certain of the Company’s assets located in Thailand, as previously identified to GSCP, for cash of at least $800.0 million (the “Asset Sale”) or, in the event the Asset Sale is not consummated at or before the time the Acquisition is consummated, borrowings by the Company of up to an additional $800.0 million under the Bridge Loans.  On the Closing Date (as defined), neither the Company nor any of its subsidiaries will have any debt for borrowed money or equity outstanding, except for (i) debt and equity outstanding as of the date hereof (including exchange notes issued in connection with the Company’s exchange offer for its existing 6.625% Senior Subordinated Notes due 2015 (the “2005 Notes”)), (ii) borrowings not to exceed an amount to be agreed upon under the Company’s existing credit agreement, dated as of December 16, 2004, among the Company, as borrower, certain commercial lending institutions, as the lenders, Bank of Montreal, acting

through its Chicago, Illinois branch, as the administrative agent (the “Credit Facility”), (iii) equity issued to management and employees of the Company pursuant to existing equity compensation plans or (iv) as described in this paragraph.  In addition, the Acquired Business will have permanently repaid all of its indebtedness on or before the Closing Date.

1.Commitment.GSCP is pleased to confirm its commitment to act as sole lead arranger and sole bookrunner to provide the Company with structuring advice in connection with the Bridge Loans, to act as sole syndication agent to provide the Company with syndication advice in connection with the Bridge Loans and to act as administrative agent for the Bridge Loans.Each of the Lenders is pleased to confirm its commitment (each, a “Commitment” and, collectively, the “Commitments”), severally and not jointly, to provide the Bridge Loans having the terms set forth on Annex B, in each case, on the terms and subject to the conditions contained in this Commitment Letter and the Fee Letter.  The Commitment of each Lender individually is set forth opposite its name on Schedule 1 hereto; all of the Commitments together equal up to $1.8 billion; provided, that if the Asset Sale is consummated at or prior to the time of the consummation of the Acquisition, the aggregate Commitments will equal up to $1.0 billion.  The Company agrees that the Lenders will have the exclusive right during the term of this Commitment Letter to provide any bridge or interim financing utilized by the Company or any of its affiliates to finance any portion of the Acquisition.

Each Lender’s commitment is subject, in its discretion, to the conditions set forth in Annex B hereto and the following conditions: (i) there shall not have been any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders’ equity or results of operations of the Company or the Acquired Business and their respective subsidiaries since December 31, 2004 and December 31, 2004, respectively (the dates of the most recent audited financial statements for the Company and unaudited financial statements for the Acquired Business, respectively, furnished by the Company to GSCP); and (ii) the Bridge Loans being assigned and maintaining a credit rating by Moody’s Investor Services, Inc. (“Moody’s”) and Standard & Poor’s Ratings Group, a division of The McGraw Hill Corporation (“S&P”).  Each Lender’s commitment is also subject, in its discretion, to the satisfactory negotiation, execution and delivery of appropriate definitive documentation relating to the Bridge Loans, including, without limitation, a bridge loan agreement (the “Bridge Loan Agreement”), to be based upon and substantially consistent with the terms set forth in this Commitment Letter.  Our commitment is also conditioned upon and made subject to our not becoming aware after the date hereof of any new or inconsistent information or other matter not previously disclosed to us relating to the Company, the Acquired Business or the Acquisition or the transactions contemplated by this Commitment Letter, which GSCP, in its reasonable judgment, deems material and adverse relative to the information or other matters disclosed to us prior to the date hereof.

2.Fees and Expenses.The fees for these services are set forth in a separate letter (the “Fee Letter”), dated as of the date hereof, entered into by the Lenders and the Company.  In addition, pursuant to an engagement letter (the “Engagement Letter”), dated as of the date hereof, between the Company and Goldman, Sachs & Co. (“Goldman Sachs”), the Company has, among other things, offered Goldman Sachs the right to act as the sole placement agent, sole purchaser or sole underwriter in connection with the sale of the Permanent Securities.

3.Syndication.GSCP intends and reserves the right to syndicate the Commitments and/or the Bridge Loans to other Lenders.  GSCP will select the Lenders after consultation with

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the Company.  GSCP will lead the syndication, including determining the timing of all offers to potential Lenders and the acceptance of Commitments, any title of agent or similar designations or roles awarded to Lenders, the amounts offered and the compensation provided to each Lender from the amounts to be paid to GSCP pursuant to the terms of this Commitment Letter and the Fee Letter.  GSCP will determine the final Commitment allocations and will notify the Company of such determinations.  The Company agrees to use all commercially reasonable efforts to ensure that GSCP’s syndication efforts benefit from the existing lending relationships of the Company.  To facilitate an orderly and successful syndication of the Bridge Loans, you agree that, until the later of the termination of the syndication as determined by GSCP and 120 days following the date of initial funding under the Bridge Loans (the “Closing Date”), the Company will not, and will use commercially reasonable efforts to cause the Acquired Business to agree that it will not, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or debt or preferred equity security of the Company or any of its affiliates (other than the Bridge Loans and other indebtedness contemplated hereby), including any renewals or refinancings of any existing debt facility or debt or preferred equity security, without the prior written consent of GSCP.

4.Cooperation.The Company agrees to cooperate with GSCP, and to use commercially reasonable efforts to cause the Acquired Business to cooperate with GSCP, in connection with (i) the preparation of an information package regarding the business, operations, financial projections and prospects of the Company and the Acquired Business, including, without limitation, the delivery of all information relating to the transactions contemplated hereunder prepared by or on behalf of the Company or the Acquired Business deemed reasonably necessary by GSCP to complete the syndication of the Commitments and/or the Bridge Loans (including, without limitation, obtaining the credit ratings from S&P and Moody’s described above) and (ii) the presentation of an information package acceptable in format and content to GSCP in meetings and other communications with prospective Lenders in connection with the syndication of the Commitments and/or the Bridge Loans (including, without limitation, direct contact between senior management and representatives of the Company with prospective Lenders and participation of such persons in meetings).  The Company further agrees that each Lender’s Commitment hereunder is conditioned upon the Company’s satisfaction of the requirements of the foregoing provisions of this paragraph by a date sufficient to permit the syndication of the Commitments and/or the Bridge Loans to be completed prior to the Closing Date, as determined in the reasonable discretion of GSCP.  The Company will be solely responsible for the contents of any such information package and presentation and acknowledge that GSCP will be using and relying upon the information contained in such information package and presentation without independent verification thereof.  The Company agrees that information regarding the Bridge Loans and information provided by the Company, the Acquired Business or their respective representatives to GSCP in connection with the Bridge Loans (including, without limitation, draft and execution versions of the Loan Documents, publicly filed financial statements, and draft or final offering materials relating to contemporaneous or prior securities issuances by the Company or the Acquired Business) may be disseminated to potential Lenders and other persons through one or more internet sites (including an IntraLinks workspace) created for purposes of syndicating the Bridge Loans or otherwise, in accordance with GSCP’s standard syndication practices (including hard copy and via electronic transmissions).  Without limiting the foregoing, the Company authorizes the use of its logos in connection with any such dissemination.

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At the request of GSCP, the Company agrees to prepare a version of the information package and presentation that does not contain material non-public information concerning the Company or the Acquired Business, their respective affiliates or their securities.  In addition, the Company agrees that unless specifically labeled “Private—Contains Non-Public Information,” no information, documentation or other data disseminated to prospective Lenders in connection with the syndication of the Bridge Loans, whether through an internet site (including, without limitation, an IntraLinks workspace), electronically, in presentations at meetings or otherwise, will contain any material non-public information concerning the Company or the Acquired Business, their respective affiliates or their securities.

The Company represents and covenants that (i) all information (other than projections) provided directly or indirectly by the Company to GSCP or the Lenders in connection with the transactions contemplated hereunder is and will be, when taken as a whole, complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not misleading and (ii) the projections that have been or will be made available to GSCP or the Lenders by the Acquired Business or the Company have been and will be prepared in good faith based upon assumptions that are believed by the preparer thereof to be reasonable at the time made.  You agree that if at any time prior to the Closing Date, any of the representations in the preceding sentence would be incorrect in any material respect if the information and projections were being furnished, and such representations were being made, at such time, then you will promptly supplement, or cause to be supplemented, the information and projections so that such representations will be correct in all material respects under those circumstances.

5.Annex A.In connection with arrangements such as this, it is our firm’s policy to receive indemnification.  The Company agrees to the provisions with respect to our indemnity and other matters set forth in Annex A, which is incorporated by reference into this Commitment Letter.

This Commitment Letter may not be assigned by you without the prior written consent of GSCP (and any purported assignment without such consent will be null and void), is intended to be solely for the benefit of the parties hereto and is not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto.  GSCP may assign its Commitment hereunder, in whole or in part, to any of its affiliates or to any Lender, and upon such assignment, GSCP will be released from the portion of its Commitment hereunder that has been assigned.  This Commitment Letter (including the Annexes hereto) may not be amended or any term or provision hereof or thereof waived or modified, except by an instrument in writing signed by each of the parties hereto, and any term or provision hereof or thereof may be amended or waived only by a written agreement executed and delivered by all parties hereto.

GSCP hereby notifies the Company and the Acquired Business that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) it and each Lender may be required to obtain, verify and record information that identifies the Company and the Acquired Business, which information includes the name and address of the Company and the Acquired Business and other information that will allow GSCP and each Lender to identify the Company and the Acquired Business in accordance with the Act.  This notice is given in accordance with the requirements of the Act and is effective for GSCP and each Lender.

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6.Confidentiality.Please note that this Commitment Letter, the Fee Letter and any written or oral advice provided by GSCP in connection with this arrangement are exclusively for the information of the Company and may not be disclosed to any third party or circulated or referred to publicly without our prior written consent, except, after providing written notice to GSCP, pursuant to a subpoena or order issued by a court of competent jurisdiction or by a judicial, administrative or legislative body or committee.  In addition, we hereby consent to your disclosure of (i) this Commitment Letter, the Fee Letter and such advice to the Company’s officers, directors, agents and advisors who are directly involved in the consideration of the Bridge Loans to the extent such persons agree to hold the same in confidence, (ii) this Commitment Letter or the information contained herein (but not the Fee Letter or the information contained therein) to the Acquired Business and the Seller to the extent you notify such persons of their obligations to keep such material confidential, and to the Acquired Business’s and the Seller’s respective officers, directors, agents and advisors who are directly involved in the consideration of the Bridge Loans; provided, that you use commercially reasonable efforts to cause such persons to agree to hold the same in confidence, (iii) this Commitment Letter and the Fee Letter as required by applicable law or compulsory legal process (in which case you agree to inform us promptly thereof) and (iv) the information contained in this Commitment Letter in any prospectus or other offering memorandum relating to the Permanent Securities.  The provisions of this paragraph shall survive any termination or completion of the arrangement provided by this Commitment Letter.

7.Additional Matters.As you know, GSCP may from time to time effect transactions, for its own account or the account of customers, and hold positions in loans or options on loans of the Company, the Acquired Business and other companies that may be the subject of this arrangement.  In addition, Goldman Sachs is a full service securities firm and as such may from time to time effect transactions, for its own account or the account of customers, and hold positions in securities or options on securities of the Company, the Acquired Business and other companies that may be the subject of this arrangement.  In addition, GSCP may employ the services of its affiliates in providing certain services hereunder and may exchange with such affiliates information concerning the Company, the Acquired Business and other companies that may be the subject of this arrangement, and such affiliates shall be entitled to the benefits afforded to GSCP hereunder.

The Commitments hereunder will terminate upon the first to occur of (i) the consummation of the Acquisition, (ii) the abandonment or termination of the Acquisition Agreement, (iii) a material breach by the Company under this Commitment Letter, the Fee Letter or the Engagement Letter and (iv) December 31, 2005, unless the closing of the Bridge Loans, on the terms and subject to the conditions contained herein, shall have been consummated prior to such date.  In addition, the Commitment hereunder will terminate upon the closing of the later of the sale of $1.0 billion of Permanent Securities (in escrow or otherwise) and the Asset Sale.

In addition, please note that GSCP, Goldman Sachs and their affiliates do not provide accounting, tax or legal advice.  Notwithstanding anything herein to the contrary, the Company (and each employee, representative or other agent of the Company) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the offering and all materials of any kind (including opinions or other tax analyses) that are provided to the Company relating to such tax treatment and tax structure.  However, any information relating to the tax treatment or tax structure shall remain subject to the confidentiality provisions hereof (and the foregoing sentence shall not apply) to the extent reasonably necessary to enable the

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parties hereto, their respective affiliates, and their and their respective affiliates’ directors and employees to comply with applicable securities laws.  For this purpose, “tax treatment” means US federal or state income tax treatment, and “tax structure” is limited to any facts relevant to the US federal income tax treatment of the transactions contemplated by this Commitment Letter but does not include information relating to the identity of the parties hereto or any of their respective affiliates.

All payments under this Commitment Letter (including Annex A and Annex B) and the Fee Letter will be made in U.S. dollars and without withholding or deduction of any tax, assessment or other governmental charge (collectively, “Tax”) unless required by law; and if the Company will be required to deduct or withhold any Tax, or if any Tax is required to be paid by any Lender solely on account of services performed hereunder or under the Fee Letter, the Company will pay to such Lender such additional amounts as will be required so that the net amount received by such Lender from the Company after such deduction, withholding or payment will equal the amounts otherwise due to such Lender hereunder or under the Fee Letter, as applicable.

If any Canadian Goods and Services Tax (“GST”)/Value Added Tax (“VAT”)/consumption tax is payable in respect of amounts paid or payable to any Lender for services rendered in connection with this letter (or any portion thereof), such Lender will add the GST/VAT/consumption tax to its invoices and the Company will pay to such Lender such GST/VAT/consumption tax as set forth in such invoices.  Each Lender agrees to use commercially reasonable efforts to reduce any GST/VAT/consumption tax payable by the Company resulting from such Lender’s jurisdiction of incorporation; provided, that such Lender is not negatively impacted.

This Commitment Letter may be executed in any number of counterparts, each of which when executed will be an original, and all of which, when taken together, will constitute one agreement.  Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission will be effective as delivery of a manually executed counterpart hereof.  This Commitment Letter, the Fee Letter and the Engagement Letter are the only agreements that have been entered into among the parties hereto with respect to the Bridge Loans and set forth the entire understanding of the parties with respect thereto and supersede any prior written or oral agreements among the parties hereto with respect to the Bridge Loans.

[Remainder of page intentionally left blank]

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Please confirm that the foregoing is in accordance with your understanding by signing and returning to GSCP the enclosed copies of this Commitment Letter, together, if not previously executed and delivered, with the Fee Letter and the Engagement Letter on or before the close of business on July 5, 2005, whereupon this Commitment Letter, the Fee Letter and the Engagement Letter shall become binding agreements between us.  If not signed and returned by that time, this offer will terminate at that time.  We look forward to working with you on this transaction.

Very truly yours,
GOLDMAN SACHS CREDIT PARTNERS L.P.
By:	/s/ Walter A. Jackson
	Authorized Signatory
		Confirmed as of the date above:
		POGO PRODUCING COMPANY
		By:	/s/ James P. Ulm, II
			Name:		James P. Ulm, II
			Title:	Senior Vice President and Chief Financial Officer

SCHEDULE 1

(in millions)

Lender	Commitment
Goldman Sachs Credit Partners L.P.	$	1,800.0
Total	$	1,800.0

Annex A

In the event that any of the Lenders or the Administrative Agent (each, an “Indemnified Party”)becomes involved in any capacity in any action, proceeding or investigation brought by or against any person, including stockholders, partners or other equity holders of the Company or the Acquired Business, in connection with or as a result of either this arrangement or any matter referred to in this Commitment Letter or the Fee Letter (together, the “Letters”), the Company periodically will reimburse such Indemnified Party for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith.  The Company also will indemnify and hold each Indemnified Party harmless against any and all losses, claims, damages or liabilities to any such person in connection with or as a result of either this arrangement or any matter referred to in the Letters and without regard to the exclusive or contributory negligence of any of the Indemnified Parties, except to the extent that such have been found by a final, non-appealable judgment of a court that any such loss, claim, damage or liability results from the gross negligence, willful misconduct or bad faith of such Indemnified Party in performing the services that are the subject of the Letters.  If for any reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient to hold it harmless, then the Company shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative economic interests of the Company and the Acquired Business and their respective affiliates, stockholders, partners or other equity holders, on the one hand, and such Indemnified Party, on the other hand, in the matters contemplated by the Letters as well as the relative fault of the Company and the Acquired Business and their respective affiliates, stockholders, partners or other equity holders, on the one hand, and such Indemnified Party, on the other hand, with respect to such loss, claim, damage or liability and any other relevant equitable considerations.  The reimbursement, indemnity and contribution obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliate of any Indemnified Party and the partners, directors, agents, employees and controlling persons (if any), as the case may be, of such Indemnified Party and any such affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, such Indemnified Party, any such affiliate and any such person.  The Company also agrees that neither any Indemnified Party nor any of such affiliates, partners, directors, agents, employees or controlling persons shall have any liability based on its or their exclusive or contributory negligence or otherwiseto the Company, the Acquired Business or any person asserting claims on behalf of or in right of the Company, the Acquired Business or any other person in connection with or as a result of either this arrangement or any matter referred to in the Letters, except in the case of the Company, to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company or its affiliates, stockholders, partners or other equity holders have resulted from the gross negligence, willful misconduct or bad faith of such Indemnified Party in performing the services that are the subject of the Letters; provided, however, that in no event shall such Indemnified Party or such other parties have any liability for any indirect, consequential or punitive damages in connection with or as a result of such Indemnified Party’s or such other parties’ activities related to the Letters.  Any right to trial by jury with respect to any action or proceeding arising in connection with or as a result of either this arrangement or any matter referred to in the Letters is hereby waived by the parties hereto.  The Company agrees that any suit or proceeding arising in respect to this agreement or our engagement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in the City of New York, and the Company agrees to submit to the jurisdiction of, and to venue in, such courts.  The provisions of this Annex A shall

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survive any termination or completion of the arrangement provided by the Letters, and this Commitment Letter shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.

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Annex B

Pogo Producing Company
Summary of Terms and Conditions of the Bridge Loans

This Summary of Terms and Conditions outlines certain terms of the Bridge Loans and the Bridge Loan Agreement referred to in the Commitment Letter, of which this Annex B is a part.  Certain capitalized terms used herein are defined in the Commitment Letter.

Borrower	The Company.
Guarantors	Each of the Guarantors (if any) under the Credit Facility (collectively, the “Guarantors”) will guarantee (the “Guarantee”) all obligations under the Bridge Loans, which guarantee will be subordinated to the Credit Facility as set forth below. The Bridge Loans and the Guarantee will rank pari passu with all other indebtedness and guarantees of indebtedness of the Company and its subsidiaries (including, without limitation, the Acquired Business), if any.
Sole Lead Arranger, Sole Bookrunner, Sole Syndication Agent and Administrative Agent	Goldman Sachs Credit Partners L.P. (“GSCP”; in its capacities as Sole Lead Arranger, Sole Bookrunner and Sole Syndication Agent, the “Arranger”; and, in its capacity as Administrative Agent, the “Administrative Agent”).
Lenders	GSCP and/or other financial institutions selected by GSCP (each, a “Lender” and, collectively, the “Lenders”).
Loans	Up to $1.8 billion in aggregate principal amount of Senior Subordinated Increasing Rate Loans due 2006 (the “Bridge Loans”); provided, that if the Asset Sale is consummated at or prior to the time of the consummation of the Acquisition, the aggregate principal amount of the Bridge Loans will be up to $1.0 billion; and provided further that the aggregate principal amount of the Bridge Loanswill be reduced in an amount equal to the aggregate principal amount of any Permanent Securities sold on or before the date on which the Bridge Loans are made (in escrow or otherwise).
Subordination	The Bridge Loans, the Guarantee and all obligations with respect thereto will be unsecured and subordinated in right of payment to the payment in full of all obligations of the Company under the Credit Facility pursuant to subordination terms substantially identical to those contained in the indenture governing the 2005 Notes (the

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	“2005 Indenture”). The Company will not be permitted to incur any other indebtedness that is subordinated to the borrowings under the Credit Facility and senior to the Bridge Loans. Nothing in these subordination provisions will prevent any holder of Bridge Loans from receiving and retaining any proceeds originally received by the Company, a parent holding company of the Company or any subsidiary of the Company that were used to redeem Bridge Loans to the extent required under the Mandatory Repayment provision described below.
Maturity	One year from the date of the making of the Bridge Loans (the “Maturity Date”). If, upon the Maturity Date, any Bridge Loan has not been previously repaid in full, and provided that no Conversion Default (as defined below) has occurred and is continuing, such Bridge Loan shall be automatically converted into a Term Loan (each a “Term Loan”) due on the six-year anniversary of the Closing Date. At any time on or after the Maturity Date, at the option of the applicable Lender, the Term Loans may be exchanged in whole or in part for Senior Subordinated Exchange Notes due 2011 (the “Exchange Notes”) having an equal principal amount.
	“Conversion Default” means any event of default under the Bridge Loan Agreement, any payment default under the Credit Facility or any other material indebtedness, any bankruptcy default (as defined) or any material default under the Engagement Letter or the Fee Letter.
	The Term Loans will be governed by the provisions of the Bridge Loan Agreement and will have the same terms as the Bridge Loans, except as expressly set forth on Exhibit 1 to this Annex B. The Exchange Notes will be issued pursuant to an Indenture that will have the terms set forth on Exhibit 1 to this Annex B.
Interest	The Bridge Loans will initially bear interest at a rate per annum equal to the sum of (a) the greater of (i) 6.5% or (ii) the reserve adjusted Eurodollar Rate, reset monthly, in either case calculated on the basis of the actual number of days elapsed in a year of 360 days, plus (b) a spread (the “Spread”) equal to (i) 0 basis points in the case of clause (a)(i) above; and (ii) 300 basis points in the case of clause (a)(ii) above. The interest rate in effect on the Bridge Loans will be reduced by 75 basis points upon the occurrence of either (i) the consummation of the Asset Sale prior to the Closing Date and the application of proceeds therefrom (or a combination of such proceeds and other cash) to fund no less than $800.0 million of the purchase price for the Acquisition or (ii) the consummation

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	of the Asset Sale after the Closing Date and the application of proceeds therefrom (or a combination of such proceeds and other cash) to repay no less than $800.0 million of the Bridge Loans. If the Bridge Loans are not repaid in whole within three months following the Closing Date, the Spread will increase by 50 basis points at the end of such three-month period and will increase by an additional 50 basis points at the end of each three-month period thereafter. Notwithstanding the foregoing, at no time will the interest rate in effect on the Bridge Loans be less than the rate in effect on the Credit Facility or exceed a per annum rate equal to the yield then in effect on United States Treasury Notes with a maturity of 10 years plus 600 basis points.
	Interest will be payable at the end of each interest period in arrears and on the date of any prepayment of the Bridge Loans.
	As used herein, the term “reserve adjusted Eurodollar Rate” shall have the meaning customary and appropriate for financings of this type, and the basis for calculating accrued interest and the interest periods for loans bearing interest at the reserve adjusted Eurodollar Rate shall be customary and appropriate for financings of this type. Interest on amounts not paid when due will accrue at a rate equal to the applicable rate set forth above, plus an additional two percentage points (2.00%) per annum and will be payable on demand.
Mandatory Repayment	The net proceeds to the Company, any parent holding company of the Company or any subsidiary of the Company (including, without limitation, the Acquired Business following the Closing Date) from (i) any direct or indirect public offering or private placement of any debt or equity securities (other than issuances pursuant to employee stock plans), (ii) any future bank borrowings other than under the Credit Facility (including the increase of commitments permitted thereunder) as in effect on the Closing Date and (iii) subject to certain ordinary course exceptions (including any required pro rata prepayment of pari passu debt pursuant to the “asset sale” covenant contained in the indentures governing the Company’s existing senior subordinated notes), any future asset sales, including the Asset Sale, or receipt of insurance proceeds will be used to redeem the Bridge Loans subject, in the case of clauses (ii) and (iii) (other than with respect to the Asset Sale), to the required prior repayment of any amount outstanding under the Credit Facility, in each case, at 100% of the principal amount of the Bridge Loans

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	redeemed plus accrued interest to the date of the redemption.
Change of Control	Each holder of Bridge Loans will be entitled to require the Company, and the Company must offer, to repay the Bridge Loans held by such holder at a price of 100% of principal amount, plus accrued interest, upon the occurrence of a Change of Control (as defined in the 2005 Indenture). Prior to making the repayment offer, the Company will, within 30 days of the Change of Control, repay all obligations under the Credit Facility or obtain any required consent of the lenders under the Credit Facility to make such repayment of the Bridge Loans.
Optional Repayment	The Bridge Loans may be prepaid, in whole or in part, at the option of the Company at any time upon three business days’ written notice at a price equal to 100% of the principal amount thereof plus accrued interest to the date of redemption.
Payments	Payments by the Company will be made by wire transfer of immediately available funds.
Representations and Warranties	The Bridge Loan Agreement will contain such representations and warranties by the Company (with respect to the Company and the Acquired Business) as are usual and customary for financings of this kind or as are otherwise deemed appropriate by the Arranger for this transaction in particular (in its sole discretion).
Covenants	The Bridge Loan Agreement will contain such covenants by the Company (with respect to the Company and its subsidiaries) as are usual and customary for financings of this kind or as are otherwise deemed appropriate by the Arranger for this transaction in particular (in its sole discretion), based upon (and substantially identical to) the covenants in the 2005 Indenture. In addition, the Bridge Loan Agreement will contain covenants that prohibit the Company from (i) consummating any acquisition of assets or businesses for a purchase price that, individually or in the aggregate, exceeds $50.0 million and (ii) issuing additional indebtedness that would cause the Company’s aggregate outstanding indebtedness to exceed at any time $3.0 billion.
Events of Default	The Bridge Loan Agreement will include such events of default (and, as appropriate, grace periods) as are usual

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	and customary for financings of this kind or as are otherwise deemed appropriate by the Arranger for this transaction in particular (in its sole discretion), based upon (and substantially identical to) the events of default in the 2005 Indenture.
Conditions Precedent	The several obligations of the Lenders to make, or cause one of their respective affiliates to make, the Bridge Loans will be subject to closing conditions deemed appropriate by the Arranger for financings of this kind generally and for this transaction in particular, including, without limitation, the following closing conditions:
	1.Concurrent Transactions.  The Acquisition shall have been consummated pursuant to the Acquisition Agreement and all conditions precedent to the consummation of the Acquisition shall have been satisfied or, with the prior approval of the Arranger, waived.  The terms of the Acquisition Agreement and the Bridge Loan Agreement shall be satisfactory in all respects to the Arranger and its counsel.  The pro forma capitalization of the Company shall be as described in the Commitment Letter.  There shall not exist (pro forma for the Acquisition and the financing thereof) any default or event of default under the Credit Facility, the Bridge Loans, the Bridge Loan Agreement or any of the other Loan Documents (as defined), or under any other material indebtedness of the Company or its subsidiaries.
	2.Confirmatory Due Diligence.  The Arranger shall not have become aware of any information relating to conditions or events not previously described to the Arranger or constituting new information or additional developments concerning conditions or events previously disclosed to the Arranger which it, in its judgment, believe may have a material adverse effect on the condition (financial or otherwise), assets, liabilities (contingent or otherwise), properties, solvency, business, management or prospects of the Company or the Acquired Business.
	3.Financial Statements.  At least 25 days prior to the Closing Date, the Arranger shall have received (i) audited financial statements of the Company for each of the three fiscal years immediately preceding the Acquisition and any appropriate unaudited financial statements for any interim

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period or periods of the Company and all other recent, probable or pending acquisitions and (ii) pro forma financial statements of the Company for the year ended December 31, 2004 and as of and for the appropriate interim period or periods reflecting the completion of the Acquisition and all other recent, probable or pending acquisitions and divestitures (including, if required by Regulation S-X, the Asset Sale), in each case, all meeting the requirements of Regulation S-X and all such financial statements shall be satisfactory in form and substance to the Arranger.  Such financial statements shall show pro forma consolidated EBITDA of the Company after giving effect to the Acquisition and the Asset Sale (calculated in accordance with Regulation S-X and including only those adjustments that the Arranger agrees are appropriate) for the twelve-month period ended March 31, 2005, and for the latest twelve-month period for which financial statements are available, of not less than an amount to be agreed upon; provided, that if the Asset Sale is not required to be reflected in the Company’s pro forma financial statements pursuant to the requirements of Regulation S-X, then such financial statements shall show pro forma consolidated EBITDA of the Company after giving effect to the Acquisition (calculated in accordance with Regulation S-X and including only those adjustments that the Arranger agrees are appropriate) for the twelve-month period ended March 31, 2005, and for the latest twelve-month period for which financial statements are available, of not less than an amount to be agreed upon.

4.Approvals and Consents.  All necessary governmental, shareholder and third-party approvals and consents necessary or desirable in connection with the Acquisition and the financing thereof and the transactions contemplated thereby and otherwise referred to herein shall have been received and shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken by any applicable authority.  The Arranger, in its sole discretion, shall be satisfied that the borrowings under the Bridge Loans and the performance by the Company of the transactions contemplated by the Commitment Letter, the Fee Letter and the Engagement Letter, including, but not limited to, the issuance of the Permanent Securities and the repayment of the

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Bridge Loans at maturity or upon a mandatory repayment event, will not conflict with, result in a breach or violation of any of the terms or provisions of, require a waiver or amendment to, or constitute a default under the Credit Facility, the indentures governing the Company’s senior subordinated notes or any other agreement governing material indebtedness of the Company or its subsidiaries.

5.Litigation, etc.  There shall not exist any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental authority that, in the opinion of the Arranger, materially affects the Acquisition, the financing thereof or any of the other transactions contemplated hereby, or that has had or could have a material adverse effect on the Company or the Acquired Business or their respective subsidiaries, the Acquisition, the financing thereof, or any of the transactions contemplated hereby.

6.Availability under Credit Facility.  After giving effect to the consummation of the Acquisition, the Company shall have availability under the Credit Facility in an amount to be agreed upon.

7.Performance of Obligations.  All costs, fees, expenses (including, without limitation, legal fees and expenses) and other compensation contemplated by the Commitment Letter, the Fee Letter and the Engagement Letter payable to GSCP, Goldman Sachs, the Arranger, the Administrative Agent or the Lenders shall have been paid to the extent due and the Company shall have complied in all material respects with all of its other obligations under the Commitment Letter, the Fee Letter and the Engagement Letter.

8.Funding Notice. The Lenders shall have received not less than three business days’ prior written notice of the Closing Date.

9.Corporate Structure; Organizational Documents.  All agreements relating to, and the corporate structure and management of, the Company and its subsidiaries (including, without limitation, the Acquired Business), and all organizational documents of such entities, shall be satisfactory to the Arranger.

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	10.Environmental Matters.  The Lenders shall have received reports and other information in form, scope and substance satisfactory to the Arranger concerning any environmental liabilities.
	11.Customary Closing Documents.  All documents required to be delivered under the definitive financing documents, including customary legal opinions, corporate records and documents from public officials and officers’ certificates shall have been delivered.  The Arranger shall have received all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the U.S.A. Patriot Act.
	12.Solvency.  The Lenders shall have received a certificate from the chief financial officer of the Company, in form and substance satisfactory to the Arranger, supporting the conclusions that after giving effect to the Acquisition and the related transactions contemplated hereby, the Company will not be insolvent or be rendered insolvent by the indebtedness incurred in connection therewith, or be left with unreasonably small capital with which to engage in its businesses, or have incurred debts beyond its ability to pay such debts as they mature.
	13.Satisfactory Documentation.  The definitive documentation evidencing the Bridge Loans shall be prepared by counsel to the Arranger and shall be in form and substance satisfactory to the Arranger and the Lenders.
	14.Prior Marketing of Permanent Securities.  The Arranger shall be satisfied that the Company has used all commercially reasonable efforts to cause the Permanent Securities (as such term is defined in the Engagement Letter) to be issued and sold on or prior to the Closing Date, which efforts shall include, without limitation, the preparation of a preliminary prospectus or preliminary offering memorandum or preliminary private placement memorandum suitable for use in connection with customary offering practices and the participation of senior management of the Company in connection therewith.
Transferability and Participations	Each of the Lenders will be free to sell or transfer all or any part of or any participation in any of the Bridge Loans to

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	any third party with the consent of the Arranger and to pledge any or all of the Bridge Loans to any commercial bank or other institutional lender, to the extent permitted by law.
Modification of the Bridge Loans	Modification of the Bridge Loans may be made with the consent of Lenders holding greater than 50% of the Bridge Loans then outstanding, except that no modification or change may extend the maturity of any Bridge Loan or change the time of payment of interest on any Bridge Loan, reduce the rate of interest or the principal amount of any Bridge Loan, alter the redemption provisions of any Bridge Loan, change the subordination provisions in a manner that would adversely affect the holders of the Bridge Loans or reduce the percentage of holders necessary to modify or change the Bridge Loans, without the consent of Lenders holding 100% of the Bridge Loans affected thereby.
Cost and Yield Protection	The Lenders will receive cost and yield protection customary for facilities and transactions of this type, including, but not limited to, compensation in respect of prepayments, taxes (including but not limited to gross-up provisions for withholding taxes imposed by any governmental authority and income taxes associated with all gross-up payments), changes in capital requirements, guidelines or policies or their interpretation or application, illegality, change in circumstances, reserves and other provisions deemed necessary by the Lenders to provide customary protection for U.S. and non-U.S. financial institutions.
Taxes, Reserve Requirements and Indemnities	The Bridge Loan Agreement will provide that all payments will be made free and clear of any taxes (other than franchise taxes and taxes on overall net income), imposts, assessments, withholdings or other deductions whatsoever. Any foreign lenders will be required to furnish to the Arranger appropriate certificates or other evidence of exemption from U.S. federal tax withholding.
	The Company will indemnify the Lenders against all increased costs of capital resulting from reserve requirements or otherwise imposed, in each case subject to customary increased costs, capital adequacy and similar provisions to the extent not taken into account in the calculation of the Base Rate or the reserve adjusted Eurodollar Rate.

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Indemnity	The Bridge Loan Agreement will contain customary and appropriate provisions relating to indemnity and related matters in a form reasonably satisfactory to the Arranger.
Governing Law and Jurisdiction	The Bridge Loan Agreement will provide that the Company will submit to the non-exclusive jurisdiction and venue of the federal and state courts of the State of New York and will waive any right to trial by jury. New York law will govern the Loan Documents.
Counsel to the Arranger and Administrative Agent	Latham & Watkins LLP.

The foregoing is intended to summarize certain basic terms of the Bridge Loans.  It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Bridge Loans.

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Exhibit 1 to Annex B

Summary of Terms and Conditions of Term Loans and Exchange Notes

This Summary of Terms and Conditions of Term Loans and Exchange Notes outlines certain terms of the Term Loans and Exchange Notes referred to in Annex B to the Commitment Letter, of which this Exhibit 1 is a part.  Capitalized terms used herein have the meanings assigned to them in Annex B to the Commitment Letter.

Term Loans

On the Maturity Date, so long as no Conversion Default has occurred and is continuing, the outstanding Bridge Loans will be automatically converted into Term Loans.  The Term Loans will be governed by the provisions of the Bridge Loan Agreement and, except as expressly set forth below, will have the same terms as the Bridge Loans.

Maturity	The Term Loans will mature on the sixth anniversary of the Closing Date.
Interest Rate	The Term Loans will bear interest at a floating rate per annum (the “Interest Rate”) equal to the sum of the Conversion Rate, reset quarterly, plus the Conversion Spread (each determined as set forth below); provided, that at no time will the Interest Rate be less than the rate in effect on the Credit Facility or exceed a per annum rate equal to the yield then in effect on United States Treasury Notes with a maturity of 10 years plus 600 basis points.
	“Conversion Rate” with respect to any Term Loan for any interest period means the per annum rate equal to the greater of (i) the three-month reserve adjusted Eurodollar Rate, reset monthly, plus 500 basis points and (ii) the current rate on the Bridge Loans at the Maturity Date, all as determined two business days prior to the commencement of such interest period.
	“Conversion Spread” with respect to any Term Loans means zero basis points during the three-month period commencing on the Maturity Date and shall increase by 50 basis points per annum at the beginning of each subsequent three-month period.
	Notwithstanding the foregoing, after the occurrence and during the continuance of any payment default, interest will accrue on all past due amounts of Term Loans at the then-applicable rate plus 200 basis points per annum. Interest will be payable in arrears at the end of each interest period and on the maturity date of the Term Loans.

1

Exchange Notes

At any time on or after the Maturity Date, upon five or more business days prior notice, the Term Loans may, at the option of a Lender, be exchanged for a principal amount of Exchange Notes equal to 100% of the aggregate principal amount of the Term Loans so exchanged.  No Exchange Notes will be issued until the Company receives requests to issue at least $50.0 million in aggregate principal amount of Exchange Notes.  The Company will issue Exchange Notes under an indenture (the “Indenture”) that complies with the Trust Indenture Act of 1939, as amended.  The Company will appoint a trustee reasonably acceptable to the Lenders.

Maturity	The Exchange Notes will mature on the sixth anniversary of the Closing Date.
Interest Rate	Each Exchange Note will bear interest at a fixed rate equal to the interest rate on the Term Loan surrendered in exchange for such Exchange Note as of the date of such exchange. Interest will be payable in arrears at the end of each fiscal quarter of the Company.
Optional Redemption	Exchange Notes will be non-callable until the fourth anniversary of the Closing Date. Thereafter, each Exchange Note will be callable at par plus accrued interest plus a premium equal to (i) one half of the coupon on such Exchange Note commencing on the fourth anniversary of the Closing Date and (ii) one quarter of the coupon on such Exchange Note commencing on the fifth anniversary of the Closing Date. In addition, prior to the third anniversary of the Closing Date, up to 35% of the original principal amount of each series of the Exchange Notes may be redeemed from the proceeds of a qualifying equity offer by the Company at a redemption price equal to par plus the coupon and accrued interest.
Defeasance Provisions of Exchange Notes	Customary.
Modification	Customary.
Change of Control	Customary at 101%.
Registration Rights	The Company will file within 30 days after the Maturity Date and will use its best efforts to cause to become effective as soon thereafter as practicable, a shelf registration statement with respect to the Exchange Notes (a “Shelf Registration Statement”). If a Shelf Registration Statement is filed, the Company will keep such registration statement effective and available (subject to customary exceptions) until it is no longer needed to

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	permit unrestricted resales of all of the Exchange Notes. If within 90 days from the Maturity Date (the “Effectiveness Date”) a Shelf Registration Statement for the Exchange Notes has not been declared effective, then the Company will pay liquidated damages in the form of increased interest of 50 basis points per annum on the principal amount of Exchange Notes and Term Loans outstanding to holders of such Exchange Notes and Term Loans who are unable freely to transfer Exchange Notes from and including the 91st day after the Maturity Date to but excluding the effective date of such Shelf Registration Statement. On the 90th day after the Effectiveness Date, the liquidated damages shall increase by 50 basis points per annum, and on each 90 day anniversary of the Effectiveness Date thereafter, shall increase by 50 basis points per annum, to a maximum increase in interest of 200 basis points per annum. The Company will also pay such liquidated damages for any period of time (subject to customary exceptions) following the effectiveness of a Shelf Registration Statement that such Shelf Registration Statement is not available for sales thereunder. All accrued liquidated damages will be paid on each quarterly interest payment date.
Covenants	The indenture relating to the Exchange Notes will contain covenants substantially identical to those contained in the 2005 Indenture.
Events of Default	The indenture relating to the Exchange Notes will provide for Events of Default substantially identical to those contained in the 2005 Indenture.

The foregoing is intended to summarize certain basic terms of the Term Loans and Exchange Notes.  It is not intended to be a definitive list of all of the requirements of the Lenders in connection with the Term Loans and Exchange Notes.

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EX-10.4

Exhibit 10.4

POGO PRODUCING COMPANY RETENTION INCENTIVE PLAN

In connection with the acquisition by Pogo Producing Company (the “Company”) of all the issued and outstanding shares of Northrock Resources Ltd. (the “Subsidiary”), the companies agree that there is a need to retain full time employees of Northrock Resources Ltd. during the period of change.  Effective as of the “Closing Date” as that term is defined in the Share Purchase Agreement dated July 8, 2005 by and among Unocal Canada Limited, Unocal Canada Alberta Hub Limited, Unocal Corporation, Pogo Canada ULC, and Pogo Producing Company (the “Closing Date”), the Company establishes the Pogo Producing Company Retention Incentive Plan (the “Plan”) as set forth in this document.

1.Definitions

(a)“Base Salary” means the actual annual base salary rate of a Participant as of the date a payment is due under this Plan.

(b)“Cause” means (i) the willful failure or refusal by the Participant to perform his or her assigned duties with the Company or Subsidiary (other than any such failure resulting from his or her physical or mental incapacity); (ii) the willful engaging by the Participant in conduct which is contrary to the Company’s or Subsidiary’s best interests; or (iii) any just cause at common law.

(c)“Date of Termination” means (i) if the Participant’s employment is terminated by the Participant or by the Company or Subsidiary without Cause, the date the Company or Subsidiary notifies the Participant of such termination or any later date specified by the Company or Subsidiary, as the case may be, (ii) if the Participant’s employment is terminated by the Company or Subsidiary for Cause, the date on which the Company or Subsidiary notifies the Participant of such termination.

(d)“Disability” means the absence of the Participant from the Participant’s duties with the Company or Subsidiary on a full-time basis for 180 consecutive calendar days as a result of incapacity due to mental or physical illness.

(e)“Employee” means each permanent full-time employee of Northrock Resources Ltd.  The term “Employee” does not include any part-time or temporary employees or consultants.

(f)“Participant” means an Employee who meets the eligibility requirements specified in Section 2 hereof.

(g)“Retention Period” means the period commencing on the “Closing Date” and ending on the first anniversary of such date.

2.Eligibility.  Employees are eligible to become Participants in the Plan if they are Employees on the first day of the Retention Period.

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3.Retention Bonus.  Upon the expiration of the Retention Period, and provided the Participant remains an Employee in good standing until the expiry of the Retention Period, a Participant will be entitled to a one-time payment equal to one times their annual Base Salary, subject to delivery by the Participant to the Company or Subsidiary of an executed full and final Waiver and Release in favor of the Company and Subsidiary.

4.Certain Effects of Employment Termination.

(a)By Company or Subsidiary Without Cause.  If, during the Retention Period, the Company or Subsidiary terminates a Participant’s employment other than for Cause, the Company shall pay to the Participant, on receipt of an executed Waiver and Release, a Retention Bonus less any amounts received as termination pay or pay in lieu of notice in the form of a cash lump sum within 60 days after the Date of Termination, or, if later, as soon as administratively practicable following the Company’s or Subsidiary’s receipt from the Participant of an executed full and final Waiver and Release in favor of the Company and Subsidiary.

(b)By Company or Subsidiary with Cause; By the Participant for any Reason.  If a Participant’s employment is terminated during the Retention Period by the Company or Subsidiary for Cause or by the Participant for any reason, the Participant will no longer be eligible for a Retention Bonus and no Retention Bonus will be paid.

(c)Death or Disability.  No Retention Bonus will be paid upon a Participant’s termination due to death or Disability.

5.Miscellaneous.

The responsibility for the administration and operation of the Plan rests with the Compensation Committee of the Board of Directors of the Company (the “Committee”).  The Committee shall have the authority to issue and implement such rules as they deem appropriate to administer the Plan.  The Committee shall also have the authority to interpret Plan provisions and make factual determinations under the Plan including the power to determine eligibility for benefits, and the right to remedy ambiguities, inconsistencies or omissions in Plan provisions.  Any decision by the Committee hereunder or with respect hereto shall be final, binding and conclusive on all persons and parties concerned.  The Committee shall appoint or designate such person or persons they deem necessary or advisable to carry out administrative duties under the Plan.

(a)This Plan does not constitute a contract of employment or impose on the Company or Subsidiary any obligation to retain any Participant as an employee or to change any employment policies of the Company or Subsidiary.

(b)The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

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6.Notices.  All notices and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by registered or certified mail (return receipt requested and with postage prepaid thereon) or by facsimile transmission to the respective parties.

7.Amendment.  The Plan may be modified or amended in any respect by decision of the Committee in its sole discretion.

8.Governing Law.  This Plan shall be governed by and construed in accordance with the laws of the State of Delaware (except that no effect shall be given to any conflicts of law principles thereof that would require the application of the laws of another jurisdiction).

9.Headings.  The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

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EX-12.1

EXHIBIT 12.1

POGO PRODUCING COMPANY & SUBSIDIARIES

RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in Thousands)

	Nine Months
	ended
	September 30,						For the year ended December 31,
	2005			2004			2004			2003			2002			2001			2000
EARNINGS:
Income from continuing operations before taxes, minority interest, and accounting change	$	284,661		$	325,971		$	397,901		$	372,606		$	116,325		$	91,762		$	82,717
Add —
Fixed charges	43,093			24,278			32,118			48,687			63,164			67,316			44,812
Less —
Preferred dividend requirement of consolidated subsidiary	—			—			—			—			(4,140		)	(9,999		)	(9,965		)
Capitalized interest	(7,435		)	(11,457		)	(14,216		)	(16,531		)	(24,033		)	(33,242		)	(20,918		)
Total earnings	$	320,319		$	338,792		$	415,803		$	404,762		$	151,316		$	115,837		$	96,646
FIXED CHARGES:
Interest expense	$	40,892		$	22,115		$	29,333		$	46,360		$	57,450		$	56,259		$	34,064
Preferred dividend requirement of consolidated subsidiary	—			—			—			—			4,140			9,999			9,965
Portion of rental expense representing interest	2,201			2,163			2,785			2,327			1,574			1,058			783
Total fixed charges	$	43,093		$	24,278		$	32,118		$	48,687		$	63,164		$	67,316		$	44,812
RATIO OF EARNINGS TO FIXED CHARGES	7.4		x	14.0		x	12.9		x	8.3		x	2.4		x	1.7		x	2.2		x
Rent expense
Office space	$	2,365		$	2,365		$	2,859		$	2,739		$	2,700		$	2,520		$	1,850
Other equipment	4,239			4,123			5,497			4,241			2,022			654			500
Total rent expense	$	6,604		$	6,488		$	8,356		$	6,980		$	4,722		$	3,174		$	2,350
Percent assumed to be interest	33		%	33		%	33		%	33		%	33		%	33		%	33		%
	$	2,201		$	2,163		$	2,785		$	2,327		$	1,574		$	1,058		$	783

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I,Paul G. Van Wagenen, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Pogo Producing Company,

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2005

 /s/ Paul G. Van Wagenen

Paul G. Van Wagenen

Chairman, President and Chief

 Executive Officer

EX-31.2

EXHIBIT 31.2

I,James P. Ulm, II, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Pogo Producing Company,

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 2, 2005

 /s/ James P. Ulm, II

James P. Ulm, II

Senior Vice President and Chief

Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Pogo Producing Company (the “Company”) on Form 10-Q for the period ended September 30, 2005 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Paul G. Van Wagenen, Chairman, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.     The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Paul G. Van Wagenen

Paul G. Van Wagenen

Chairman, President and Chief Executive Officer

November 2, 2005

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Pogo Producing Company (the “Company”) on Form 10-Q for the period ended September 30, 2005 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, James P. Ulm II, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

1.     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.     The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ James P. Ulm II

James P. Ulm II

Senior Vice President and Chief Financial Officer

November 2, 2005