8-K

                SECURITIES AND EXCHANGE COMMISSION

                         Washington, D.C.



                             FORM 8-K

                          CURRENT REPORT



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




         Date of Report (Date of earliest event reported)
                           May 26, 1995




                       ENSERCH Corporation
      (Exact name of Registrant as specified in its charter)




     Texas                  1-3183                 75-0399066
(State or other          (Commission           (I.R.S. Employer
 jurisdiction of         File Number)         Identification No.)
 incorporation)




ENSERCH Center, 300 S. St. Paul, Dallas, Texas            75201
 (Address of principal executive offices)              (Zip Code)



Registrant's telephone number, including Area Code:  214-651-8700




ITEM 5.   Other Events

     The Corporation has previously announced that its subsidiary,
Enserch Exploration, Inc. (99.2% owned), has entered into a
definitive agreement for the purchase of DALEN Corporation.  The
purchase price is $340 million plus the assumption or refinancing
of $115 million of bank debt.  The acquisition is expected to close
on June 8, 1995.  Historical and pro forma financial information in
respect of DALEN are included as exhibits to this Form 8-K.

ITEM 7.   Financial Statements and Exhibits

(c) Exhibits

     Exhibit 10     Stock Purchase Agreement dated as of April 12,
                    1995, By and Between PG&E Enterprises, as
                    Seller, and Enserch Exploration, Inc., as
                    Buyer.

     Exhibit 15     Consent of Arthur Andersen L.L.P.

     Exhibit 99.1   DALEN Corporation Consolidated Financial
                    Statements as of December 31, 1994 and 1993,
                    Together with Auditor's Report.

     Exhibit 99.2   DALEN Corporation Condensed Consolidated
                    Financial Statements (Unaudited) for the
                    Periods Ended March 31, 1995 and 1994.

     Exhibit 99.3   ENSERCH Corporation and Subsidiary Companies
                    Condensed Pro Forma Consolidated Financial
                    Statements (Unaudited) for the Periods Ended
                    December 31, 1994 and March 31, 1995.






                            SIGNATURE

     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.

                              ENSERCH Corporation



Date: May 26, 1995         By:      /s/ J. W. Pinkerton
                                          J. W. Pinkerton,
                                   Vice President and Controller,
                                     Chief Accounting Officer

EX-10

                                                                 EXHIBIT 10

                                                        
                     STOCK PURCHASE AGREEMENT


                    Dated as of April 12, 1995

                          By and Between

                        PG&E ENTERPRISES,
                            as Seller

                               and

                    ENSERCH EXPLORATION, INC.,
                             as Buyer






                        TABLE OF CONTENTS

Article                                                      Page
                                                          
I   DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . .  1
    1.1   Certain Defined Terms. . . . . . . . . . . . . . . .  1
    1.2   Accounting Terms . . . . . . . . . . . . . . . . . .  9
    1.3   References to Instruments. . . . . . . . . . . . . .  9
    1.4   Singular and Plural. . . . . . . . . . . . . . . . .  9
    1.5   Certain Terms. . . . . . . . . . . . . . . . . . . .  9

II  SALE OF STOCK. . . . . . . . . . . . . . . . . . . . . . .  9
    2.1   Sale and Purchase. . . . . . . . . . . . . . . . . .  9
    2.2   Excluded Assets. . . . . . . . . . . . . . . . . . . 10
    2.3   Resolution of Intercompany Obligations and Bank
          Credit Agreement . . . . . . . . . . . . . . . . . . 10

III PURCHASE PRICE AND PAYMENT . . . . . . . . . . . . . . . . 11
    3.1   Purchase Price . . . . . . . . . . . . . . . . . . . 11
    3.2   Stipulated Value Allocations . . . . . . . . . . . . 11

IV  SELLER'S REPRESENTATIONS . . . . . . . . . . . . . . . . . 12
    4.1   Ownership of the Stock.. . . . . . . . . . . . . . . 12
    4.2   Organization and Good Standing; Qualification. . . . 12
    4.3   Capitalization.. . . . . . . . . . . . . . . . . . . 12
    4.4   Authorization and Validity.. . . . . . . . . . . . . 12
    4.5   Subsidiaries and Joint Ventures. . . . . . . . . . . 13
    4.6   Consents.. . . . . . . . . . . . . . . . . . . . . . 13
    4.7   Financial Statements.. . . . . . . . . . . . . . . . 13
    4.8   No Violation.. . . . . . . . . . . . . . . . . . . . 13
    4.9   Finder's Fee.. . . . . . . . . . . . . . . . . . . . 13
    4.10  Representations True at Closing. . . . . . . . . . . 14

V   BUYER'S REPRESENTATIONS. . . . . . . . . . . . . . . . . . 14
    5.1   Organization and Good Standing.. . . . . . . . . . . 14
    5.2   Authorization and Validity.. . . . . . . . . . . . . 14
    5.3   No Violation.. . . . . . . . . . . . . . . . . . . . 14
    5.4   Finder's Fee.. . . . . . . . . . . . . . . . . . . . 14
    5.5   Absence of Bankruptcy Proceedings. . . . . . . . . . 15
    5.6   Experienced Investor, Etc. . . . . . . . . . . . . . 15

VI  ACCESS TO INFORMATION AND INSPECTION; DUE DILIGENCE. . . . 15
    6.1   Records and Files. . . . . . . . . . . . . . . . . . 15
    6.2   Other Files. . . . . . . . . . . . . . . . . . . . . 15



    6.3   Environmental Assessment and Inspection. . . . . . . 15
    6.4   Confidentiality Agreement. . . . . . . . . . . . . . 16
    6.5   Geophysical Data . . . . . . . . . . . . . . . . . . 16
    6.6   Due Diligence Defect . . . . . . . . . . . . . . . . 16
    6.6.1 No Violation . . . . . . . . . . . . . . . . . . . . 17
    6.6.2 Gas Imbalances . . . . . . . . . . . . . . . . . . . 17
    6.6.3 Assets, Liabilities and Obligations. . . . . . . . . 17
    6.6.4 Employee Matters . . . . . . . . . . . . . . . . . . 18
    6.6.5 Employee Benefit Plans . . . . . . . . . . . . . . . 18
    6.6.6 Conduct of Business. . . . . . . . . . . . . . . . . 19
    6.6.7 Commitments. . . . . . . . . . . . . . . . . . . . . 20
    6.6.8 Insurance. . . . . . . . . . . . . . . . . . . . . . 20
    6.6.9 Compliance with Laws . . . . . . . . . . . . . . . . 20
    6.6.10Litigation . . . . . . . . . . . . . . . . . . . . . 20
    6.6.11Books of Account . . . . . . . . . . . . . . . . . . 21
    6.6.12No Affiliate Transactions. . . . . . . . . . . . . . 21
    6.6.13Payout Balances. . . . . . . . . . . . . . . . . . . 21
    6.6.14Derivatives. . . . . . . . . . . . . . . . . . . . . 21
    6.6.15Hydrocarbon Sale Contracts . . . . . . . . . . . . . 21
    6.6.16Consents . . . . . . . . . . . . . . . . . . . . . . 21
    6.6.17Taxes. . . . . . . . . . . . . . . . . . . . . . . . 22
    6.6.18Accuracy of Records Furnished. . . . . . . . . . . . 23
    6.7   Special Matters Regarding Due Diligence Defects. . . 23
    6.7.1 Threshold Amount . . . . . . . . . . . . . . . . . . 23
    6.7.2 Due Diligence Defect Amount. . . . . . . . . . . . . 23
    6.7.3 Additional Due Diligence Defect. . . . . . . . . . . 23
    6.8   Section 29 Tax Credits.. . . . . . . . . . . . . . . 24
    6.8.1 Section 29 Tax Credit Defects. . . . . . . . . . . . 24
    6.8.2 Threshold Amount . . . . . . . . . . . . . . . . . . 24
    6.8.3 Section 29 Tax Credit Defect Amount. . . . . . . . . 24
    6.8.4 Notice of Section 29 Tax Credit Defects. . . . . . . 24
    6.8.5 Section 29 Tax Credit Notice Requirements. . . . . . 24
    6.9   Representation and Covenant Matters. . . . . . . . . 24
    6.9.1 Representation and Covenant Defects. . . . . . . . . 25
    6.9.2 Threshold Amount . . . . . . . . . . . . . . . . . . 25
    6.9.3 Representation and Covenant Defect Amount. . . . . . 25
    6.10  Pre-Closing Defect Amount. . . . . . . . . . . . . . 25
    6.11  Right to Cure. . . . . . . . . . . . . . . . . . . . 26
    6.12  Limitation on Multiple Types of Defects. . . . . . . 26
    6.13  Positive Adjustments . . . . . . . . . . . . . . . . 26
    6.14  Statements Regarding Representation of Financial
          Condition. . . . . . . . . . . . . . . . . . . . . . 26

VII TITLE, ENVIRONMENTAL AND OTHER MATTERS . . . . . . . . . . 26
    7.1   No Warranty or Representation Regarding
          Environmental Laws or Title. . . . . . . . . . . . . 26

                               (ii)


    7.2   Buyer's Title and Environmental Review . . . . . . . 27
    7.2.1 Title Review . . . . . . . . . . . . . . . . . . . . 27
    7.2.2 Environmental Review . . . . . . . . . . . . . . . . 30
    7.3   Material Defects . . . . . . . . . . . . . . . . . . 31
    7.4   Title Defects. . . . . . . . . . . . . . . . . . . . 32
    7.5   Preferential Rights to Purchase and Consents . . . . 33
    7.6   Purchase Price Adjustment; Limitation. . . . . . . . 34
    7.6.1 Reimbursement Amount . . . . . . . . . . . . . . . . 34
    7.6.2 Limitations; Payment . . . . . . . . . . . . . . . . 35
    7.7   Arbitration. . . . . . . . . . . . . . . . . . . . . 35

VIII      OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . 36
    8.1   Covenants of Seller Pending Closing. . . . . . . . . 36
    8.2   Limitations on Seller's Covenants Pending Closing. . 40
    8.3   No Solicitation. . . . . . . . . . . . . . . . . . . 41
    8.4   Company Employees; Severance Costs . . . . . . . . . 41
    8.5   Tax Matters. . . . . . . . . . . . . . . . . . . . . 42
    8.6   Expenses . . . . . . . . . . . . . . . . . . . . . . 46

IX  CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . 47
    9.1   Seller's Closing Conditions. . . . . . . . . . . . . 47
    9.2   Buyer's Closing Conditions . . . . . . . . . . . . . 47

X   CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . 48
    10.1  Closing. . . . . . . . . . . . . . . . . . . . . . . 48
    10.2  Seller's Closing Obligations . . . . . . . . . . . . 48
    10.3  Buyer's Closing Obligations. . . . . . . . . . . . . 50
    10.4  Distribution of Properties . . . . . . . . . . . . . 51
    10.5  Change of Corporate Name . . . . . . . . . . . . . . 51
    10.6  Company's Employee Benefit Plans . . . . . . . . . . 51
    10.7  Taking of Necessary Action . . . . . . . . . . . . . 52

XI  LIMITATIONS ON WARRANTIES AND REMEDIES; INDEMNIFICATION. . 52
    11.1  Limitations. . . . . . . . . . . . . . . . . . . . . 52
    11.2  Survival; Time Limit for Claims. . . . . . . . . . . 53
    11.3  Indemnification by Buyer . . . . . . . . . . . . . . 53
    11.4  Indemnification by Seller; Limitations on Liability. 54
    11.5  Indemnification Procedure. . . . . . . . . . . . . . 54

XII DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . 55
    12.1  Remedies . . . . . . . . . . . . . . . . . . . . . . 55
    12.2  Termination by Lapse of Time . . . . . . . . . . . . 55
    12.3  Other Remedies . . . . . . . . . . . . . . . . . . . 55

                              (iii)


    12.4  Specific Performance . . . . . . . . . . . . . . . . 56
    12.5  Seller's Net Worth Covenant. . . . . . . . . . . . . 56
    12.6  Buyer's Net Worth Covenant.. . . . . . . . . . . . . 56

XIII      MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 56
    13.1  Antitrust Laws . . . . . . . . . . . . . . . . . . . 56
    13.2  Confidentiality of Proprietary Information.. . . . . 57
    13.3  Public Announcements . . . . . . . . . . . . . . . . 57
    13.4  Delivery of Records. . . . . . . . . . . . . . . . . 57
    13.5  Further Assurances and Records . . . . . . . . . . . 57
    13.6  Notices. . . . . . . . . . . . . . . . . . . . . . . 58
    13.7  Incidental Expenses. . . . . . . . . . . . . . . . . 59
    13.8  Assumption of Risk . . . . . . . . . . . . . . . . . 59
    13.9  Entire Agreement . . . . . . . . . . . . . . . . . . 59
    13.10 Governing Law. . . . . . . . . . . . . . . . . . . . 60
    13.11 Counterparts . . . . . . . . . . . . . . . . . . . . 60
    13.12 Waiver . . . . . . . . . . . . . . . . . . . . . . . 60
    13.13 Binding Effect; Assignment . . . . . . . . . . . . . 60
    13.14 No Recordation . . . . . . . . . . . . . . . . . . . 60
    13.15 Time Periods . . . . . . . . . . . . . . . . . . . . 60
    13.16 Construction . . . . . . . . . . . . . . . . . . . . 60





                               (iv)



                             EXHIBITS
     
A-1 -   Arbitration Procedures
A-2 -   Subject Interests
B   -   Financial Statements
C   -   Production Payments
D   -   Reserve Reports
E   -   Form of Indemnity Agreement for NGCC matters
F   -   Form of Release
G   -   Opinion of Seller's Special Counsel
H   -   Opinion of Seller's Chief Counsel
I   -   Opinion of Buyer's Special Counsel
J   -   Indemnity Agreement





                            SCHEDULES

        
4.5(a)  -  Subsidiaries
4.5     -  Subsidiaries and Joint Ventures
6.6.1   -  Violations
6.6.2   -  Scheduled (Negative) Imbalances and Scheduled (Positive)
           Imbalances
6.6.3   -  Assets, Liabilities and Obligations
6.6.4   -  Employee Matters
6.6.5   -  Employee Benefit Plans
6.6.5(g)-  Disability Benefits
6.6.6   -  Conduct of Business
6.6.10  -  Litigation
6.6.13  -  Payout Balances
6.6.14  -  Derivatives
6.6.15  -  Hydrocarbon Sale Contracts
6.6.17(c)- Tax Deficiencies
6.6.17(g)- Partnerships
6.8.1   -  Well Locations
11.3    -  Indemnification





                               (v)


                     STOCK PURCHASE AGREEMENT


     THIS AGREEMENT, dated as of the 12th day of April 1995, is by
and between PG&E ENTERPRISES, a California corporation ("Seller"),
and ENSERCH EXPLORATION, INC., a Texas corporation ("Buyer").

                       W I T N E S S E T H:

     WHEREAS, Buyer desires to purchase from Seller, and Seller
desires to sell to Buyer, all of the issued and outstanding capital
stock of DALEN CORPORATION, a Delaware corporation (the "Company"),
a wholly owned subsidiary of Seller, upon the terms and subject to
the conditions set forth in this Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties set forth in this
Agreement, the parties to this Agreement hereby agree as follows:

                            ARTICLE I

                           DEFINITIONS

     1.1  Certain Defined Terms.  The following terms, as used in
this Agreement, have the following meanings:

          "Aggregate Stipulated Value" means $400,500,000.

          "Agreement" means this Stock Purchase Agreement between
Seller and Buyer.

          "Arbitration Procedures" means the arbitration procedures
set forth in Exhibit A-1.

          "Assets" means all of the assets and properties of the
Company and the Subsidiaries, tangible and intangible, real,
personal and mixed, excluding only such assets and properties to be
conveyed or distributed to Seller or Seller's designee or otherwise
excluded from the definition of "Assets" as provided in Sections
2.2, 2.3(c) and 10.4 and Article VII.  Without limiting the
generality of the foregoing, "Assets" will include, without
limitation, the Subject Interests, except to the extent
constituting assets or properties conveyed or distributed to Seller
or Seller's designee or otherwise excluded from the definition of
"Assets" as provided in Sections 2.2, 2.3(c) and 10.4 and
Article VII.

          "Balance Sheet Date" is defined in Section 2.3.

          "Bank Credit Agreement" is defined in Section 2.3.

          "Closing" is defined in Section 10.1.

          "Closing Date" is defined in Section 10.1.


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

          "Confidentiality Agreement" is defined in Section 6.4.

          "Defect Amounts" means, collectively, the Representation
and Covenant Defect Amounts, the Due Diligence Defect Amounts, the
Section 29 Tax Credit Defect Amounts, the Title Defect Amounts and
the Environmental Defect Amounts.

          "Defect" means, collectively, a Representation and
Covenant Defect, a Due Diligence Defect, a Section 29 Tax Credit
Defect, a Title Defect and an Environmental Defect.

          "Defect Deductible" is defined in Section 7.3(a).

          "Defensible Title" means, with respect to any Subject
Interest, such title to such Subject Interest that, subject to and
except for Permitted Encumbrances, (i) entitles the Company or any
Subsidiary to receive not less than the net revenue interest of the
Company or such Subsidiary for such Subject Interest as set forth
in Exhibit A-2 of all oil and gas produced, saved and marketed from
or attributable to such Subject Interest, (ii) obligates the
Company or any Subsidiary to bear the costs and expenses relating
to the maintenance, development and operation of such Subject
Interest in an amount not greater than the working interest of the
Company or such Subsidiary for such Subject Interest as set forth
in Exhibit A-2 and (iii) is free and clear of all liens, security
interests, collateral assignments, encumbrances, irregularities and
defects.  It is specifically understood and agreed that the
existence of Permitted Encumbrances affecting any property will not
form the basis for a claim that the Company or any Subsidiary does
not have Defensible Title to such property.

          "Deferred Adjustment Claim" is defined in Section 7.7(b).

          "Delivery Date" is defined in Section 6.10.

          "Deferred Matters Date" is defined in Section 7.7(b).

          "Disposition Liabilities" is defined in Section 11.3.

          "Due Diligence Benchmark" is defined in Section 6.6.

          "Due Diligence Defect" is defined in Section 6.6.

          "Due Diligence Defect Amount" is defined in Section
6.7.2.

          "Due Diligence Defect Claim" is defined in Section
7.7(a).

          "Environmental Defect" means a condition existing at the
Closing Date, whether known or unknown, with respect to the air,
land, soil, surface, subsurface strata, surface water,

                               -2-


ground water or sediments that causes an Asset to be subject to
remediation under, or not in compliance with, any Environmental
Law.  Notwithstanding the foregoing, no Environmental Defect will
exist as to any Asset unless the aggregate Environmental Defect
Amounts in respect of such Asset, when added to the aggregate Title
Defect Amounts in respect of such Asset, if any, exceed $35,000.
If an Environmental Defect exists pursuant to the preceding
sentence, the Environmental Defect Amount for such Environmental
Defect will include the entirety of such Environmental Defect
Amount, including the portion below such threshold amount.

          "Environmental Defect Amount" is defined in Section
7.2.2(c)

          "Environmental Defect Property" is defined in Section
7.2.2.(e).

          "Environmental Laws" means all Laws relating to (a) the
control of any hazardous substance, contaminant, pollutant or
potential pollutant, (b) protection of the air, water, land or the
environment, (c) solid, gaseous or liquid waste generation,
handling, treatment, storage, disposal, transportation or
remediation, or (d) exposure to hazardous, toxic or other
substances alleged to be harmful, including but not limited to
asbestos, radon and polychlorinated biphenyls.  "Environmental
Laws" will include, but not be limited to, the Clean Air Act, 42
U.S.C. Sec. 7401 et seq., the Clean Water Act, 33 U.S.C. Sec. 1251 et
seq., the Resource Conservation Recovery Act, 42 U.S.C. Sec. 6901 et
seq., the Superfund Amendments and Reauthorization Act, 42 U.S.C.
Sec. 11001 et seq., the Water Pollution Control Act, 33 U.S.C. Sec. 1251
et seq., the Safe Drinking Water Act, 42 U.S.C. Sec. 300f et seq., the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Sec. 9601 et seq., the Toxic Substance Control Act, 15
U.S.C. Sec. 2601 et seq., and the Oil Pollution Act of 1990, 33 U.S.C.
Sec. 2701 et seq., as such laws have been amended or supplemented from
time to time through the Closing Date and the regulations
promulgated pursuant thereto through the Closing Date.
"Environmental Laws" shall not include the Occupational Safety and
Health Act, 29 U.S.C. Sec. 651 et seq., and other Laws relating to the
protection of workers or the control and regulation of working
conditions.

          "Financial Statements" means the 1994 Audited
Consolidated Financial Statements of the Company set forth in
Exhibit B.

          "Form" is defined in Section 8.5.

          "GAAP" means generally accepted accounting principles, as
set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements
of the Financial Accounting Standards Board or in such opinions and
statements of such other entities as may be approved by a
significant segment of the accounting profession in the United
States of America.

          "Governmental Authority" means (i) the United States of
America, (ii) any state, county or other governmental subdivision
within the United States of America and (iii) any court or any
governmental department, commission, board, bureau, agency or other
instrumentality of

                               -3-


the United States of America or of any state, county or other
governmental subdivision within the United States of America.

          "Hart-Scott Act" is defined in Section 13.1.

          "Hydrocarbons" means crude oil, natural gas, casinghead
gas, condensate, sulphur, natural gas liquids and other liquid or
gaseous hydrocarbons (including CO2), and also refers to all other
minerals of every kind and character that may be covered by or
included in the Subject Interests.

          "Income Taxes" is defined in Section 8.5.

          "Indemnity Agreement" means the Indemnity Agreement dated
as of the Closing Date between Buyer and Seller, the form of which
is attached as Exhibit E.

          "Interest Amount" means, in respect of the period from
the Balance Sheet Date through the day prior to the Closing Date,
all interest earned on net cash balances of the Company.

          "Joint Venture" means any partnership, joint venture or
joint exploration arrangement with third parties (other than
operating, exploration or similar arrangements entered into in the
ordinary course of business) in which the Company or any Subsidiary
is a partner, venturer or participant and which is operated or
managed by the Company or any Subsidiary.

          "Law" means any applicable statute, law, ordinance,
regulation, rule, ruling, order, restriction, requirement, writ,
injunction, decree or other official act of or by any Governmental
Authority.

          "Losses and Obligations" is defined in Section 11.3.

          "Material Defect Properties" is defined in Section 7.3.

          "NGCC Indemnity" means the indemnity obligations of
Natural Gas Corporation of California under Section 10.3 of each of
the two Purchase and Sale Agreements, dated March 23, 1987 between
Natural Gas Corporation of California and PG&E Gas Supply
Corporation (a predecessor in interest to the Company).

          "Non-Material Defect Properties" is defined in
Section 7.3.

          "Permitted Encumbrances" means any of the following
matters:

          (a)  the terms, conditions, restrictions, exceptions,
     reservations, limitations and other matters contained in the
     agreements, instruments and documents (x) that create or
     reserve to the Company or any Subsidiary its interests in any
     of the Subject Interests or

                               -4-


     (y) that are listed in this Agreement or in any schedule or
     exhibit to this Agreement, to the extent such terms, conditions,
     restrictions, exceptions, reservations, limitations or other
     matters (i) do not reduce (or effectively reduce, as in the case of
     a net profits interest or production payment) the net revenue or
     royalty interest of the Company or any Subsidiary in the Subject
     Interests or increase the working interest of the Company or any
     Subsidiary in the Subject Interests from that specified on Exhibit
     A-2 and (ii) do not create liens on the Subject Interests other
     than those permitted under the following provisions of this
     definition;

          (b)  any (i) inchoate liens or inchoate charges
     constituting or securing the payment of expenses that were
     incurred incidental to maintenance, development, production,
     or operation of the Assets for the purpose of developing,
     producing or processing Hydrocarbons therefrom or therein and
     (ii) materialman's, mechanics', repairman's, employees',
     contractors', operators' or other similar liens or charges for
     liquidated amounts arising in the ordinary course of business
     for obligations that are not delinquent or, if delinquent,
     that are being contested in good faith by appropriate action;

          (c)  any liens in respect of Taxes and assessments for
     Taxes not yet delinquent;

          (d)  any liens or security interests created by Law
     (including without limitation any Environmental Laws) or
     reserved in oil and gas leases for bonus or rental or for
     compliance with the terms under which the Subject Interests
     are held, securing obligations that are not delinquent or, if
     delinquent, that are being contested in good faith by
     appropriate action;

          (e)  any obligations or duties affecting the Subject
     Interests to any municipality or public authority with respect
     to any franchise, grant, license, or permit, and all
     applicable laws, rules and orders of Governmental Authority;

          (f)  (i) easements, rights-of-way, servitudes, permits,
     surface leases and other rights in respect of surface
     operations, pipelines, grazing, hunting, fishing, logging,
     canals, ditches, reservoirs or the like or (ii) easements for
     streets, alleys, highways, pipelines, telephone lines, power
     lines, railways and other similar rights-of-way, on, over or
     in respect of property owned or leased by the Company or any
     Subsidiary or over which the Company or any Subsidiary owns
     rights-of-way, easements, permits, or licenses, to the extent
     such matters, individually or in the aggregate, do not
     interfere materially with oil and gas operations on the
     applicable Subject Interest;

          (g)  all production payments, mortgages, liens and
     pledges in favor of lenders (including those under the Bank
     Credit Agreement) or other parties set forth in Exhibit C;

          (h)  all lessor's royalties, overriding royalties, net
     profits interests, carried interests, reversionary interests
     and other burdens if the net cumulative effect of such burdens
     does not operate to reduce the net revenue or royalty interest
     or increase the

                               -5-


     working interest of the Company or any Subsidiary in the
     Subject Interests as reflected in Exhibit A-2;

          (i)  preferential rights to purchase and similar
     agreements;

          (j)  required third party consents to assignments and
     similar agreements (not including preferential rights to
     purchase and similar agreements, which are covered by (i)
     above) so long as not triggered by the transactions
     contemplated hereby or, if triggered by the transactions
     contemplated hereby, with respect to which waivers or consents
     are obtained or the appropriate time period for asserting such
     rights has expired without an exercise of such rights;

          (k)  all rights to consent by, required notices to,
     filings with, or other actions by governmental entities in
     connection with the sale or conveyance of oil and gas leases
     or interests therein if the same are customarily obtained
     contemporaneously with or subsequent to such sale or
     conveyance;

          (l)  production sale contracts, division orders,
     contracts for sale, purchase, exchange, or processing of
     Hydrocarbons (including obligations to the Municipal Gas
     Authority of Georgia), unitization and pooling designations,
     declarations, orders and agreements, operating agreements,
     agreements of development, area of mutual interest agreements,
     gas balancing or deferred production agreements, processing
     agreements, plant agreements, pipeline, gathering and
     transportation agreements, injection, repressuring and
     recycling agreements, carbon dioxide purchase or sale
     agreements, salt water or other disposal agreements, seismic
     or geophysical permits or agreements, and other agreements
     that are customary in the oil, gas and other mineral
     exploration and development business or in the business of
     processing of gas and gas condensate production for the
     extraction of products therefrom, in each case, that
     individually or in the aggregate are not such as to interfere
     materially with the value of any Subject Interest, and do not
     prevent the Company or any Subsidiary, as the case may be,
     from receiving the proceeds of production from such Subject
     Interest; and, provided that such agreements do not create
     liens on the Subject Interests other than those permitted
     under other provisions of this definition;

          (m)  all other liens, charges, encumbrances, contracts,
     agreements, instruments, obligations, defects and
     irregularities affecting any Subject Interest that
     individually or in the aggregate are not such as to interfere
     with the operation, value or use of such Subject Interest, and
     do not prevent the Company or any Subsidiary, as the case may
     be, from receiving the proceeds of production from such
     Subject Interest;

          (n)  any encumbrance, title defect or other matter
     (whether or not constituting a Title Defect) waived or deemed
     waived by Buyer pursuant to Section 7.2; and

                               -6-



          (o)  any agreement, contract, lease, instrument, permit,
     amendment or extension entered into by the Company or any
     Subsidiary in accordance with Section  8.1 or 8.2.

          "Post-Closing Periods" is defined in Section 8.5(a).

          "Pre-Closing Defect" is defined in Section 6.10.

          "Pre-Closing Defect Amount" is defined in Section 6.10.

          "Pre-Closing Defect Claim" is defined in Section 7.7(a).

          "Pre-Closing Periods" is defined in Section 8.5.

          "Producing Properties" means those Subject Interests that
are identified and set forth in Part One of Exhibit A-2.

          "Purchase Price" is defined in Section 3.1.

          "Refund Limit" is defined in Section 7.6.2.

          "Reimbursement Amount" is defined in Section 7.6.1.

          "Remaining Deductible" is defined in Section 7.3(a).

          "Remediation" means actions taken to correct an
Environmental Defect and implement the terms of a written plan that
sets forth the actions to be taken to effect any remediation
necessary to bring an Asset into compliance with applicable
Environmental Laws.

          "Reports" means the reserve and/or property reports or
schedules identified in Exhibit D as well as any schedules included
in Exhibit D.

          "Representation and Covenant Defect" is defined in
Section 6.9.1.

          "Representation and Covenant Defect Amount" is defined in
Section 6.9.3.

          "Scheduled (Negative) Imbalances" means, with respect to
the Producing Properties to which the Subject Interests are
attributable and without duplication, the sum (expressed in Mcfs)
of (i) the aggregate make-up, prepaid or other volumes of
Hydrocarbons, that the Company or any Subsidiary was obligated as
of the Balance Sheet Date, on account of prepayment, advance
payment, take-or-pay, gas balancing or similar obligations, to
deliver from the Subject Interests after the Balance Sheet Date
without then or thereafter being entitled to receive full payment
therefor and (ii) to the extent same are not covered by clause (i)
above, the aggregate pipeline or processing plant imbalances or
overdeliveries for which the Company or any Subsidiary was
obligated as of the Balance Sheet Date to deliver or pay
Hydrocarbons or cash to any pipeline,

                               -7-


gatherer, transporter, processor, co-owner or purchaser in
connection with any Hydrocarbons attributable to the Subject
Interests.

          "Scheduled (Positive) Imbalances" means, with respect to
the Producing Properties to which the Subject Interests are
attributable and without duplication, the sum (expressed in Mcfs)
of (i) the aggregate make-up, prepaid or other volumes of
Hydrocarbons, that the Company or any Subsidiary was entitled as of
the Balance Sheet Date, on account of prepayment, advance payment,
take-or-pay, gas balancing or similar obligations, to receive from
the Subject Interests after the Balance Sheet Date without then or
thereafter being obligated to make any payment therefor and (ii) to
the extent same are not covered by clause (i) above, the aggregate
pipeline or processing plant imbalances or underdeliveries for
which the Company or any Subsidiary was entitled as of the Balance
Sheet Date to receive Hydrocarbons or cash from any pipeline,
gatherer, transporter, processor, co-owner or purchaser in
connection with any Hydrocarbons attributable to the Subject
Interests.

          "Section 29 Tax Credit Defect" is defined in Section 6.8.

          "Section 29 Tax Credit Defect Amount" is defined in
Section 6.8.

          "Seller Parent Company" means Pacific Gas and Electric
Company and any subsidiary or affiliate thereof, other than Seller,
the Company and the Subsidiaries.

          "Stipulated Value" means the value of each Subject
Interest set forth in Exhibit A-2, which value is stipulated solely
for purposes of calculating any adjustment to the Purchase Price in
accordance with Article VII and not for any other purpose
including, but not limited to, any purchase price allocation
requirements of Section 338 of the Code.

          "Stock" is defined in Section 2.1.

          "Subject Interests" means all interests presently owned
by the Company or any Subsidiary by instruments recorded in the
Counties or Parishes set forth in Exhibit A-2 and in federal leases
described in Exhibit A-2, or which the Company or any Subsidiary is
entitled to receive by reason of any participation, joint  venture,
farm-in, farmout, operating or other agreement, in and to the oil,
gas and/or mineral leases, lands, permits, licenses, concessions,
leasehold estates, fee, royalty and overriding royalty interests
described in Exhibit A-2.  With respect to Exhibit A-2, Part Two-1
through -5, the Subject Interests include only acres described
under the column "Our Undev Net Acres."

          "Subsidiary" means any corporation at least a majority of
the voting shares (i.e., shares entitled to vote for the election
of directors, but excluding shares entitled so to vote only upon
the happening of some contingency unless such contingency will have
occurred) of which are owned directly or indirectly by the Company.

                               -8-


          "Subsidiary Stock" means the issued and outstanding
shares of capital stock of each Subsidiary.

          "Tax" or "Taxes" means any federal, state, local, foreign
and other taxes, assessments, fees and other governmental charges,
including without limitation taxes relating to income, gross
receipts, net proceeds, alternative or add-on minimum, ad valorem,
value added, turnover, sales, use, property (tangible and
intangible), stamp, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, fuel, excess profits,
occupational, interest equalization, windfall profit, severance and
other similar governmental charges (including any interest thereon
and any penalties, additions to tax or additional amounts
applicable thereto).

          "Tax Claim" is defined in Section 8.5.

          "Tax Returns" is defined in Section 6.6.17.

          "Title Defect" is defined in Section 7.4.

          "Title Defect Amount" is defined in Section 7.2.1(d).

          "Title Defect Properties" is defined in Section 7.2.1(c).

     1.2  Accounting Terms.  For the purposes of this Agreement,
all accounting terms not otherwise defined in this Agreement will
have the meanings assigned to such terms in accordance with GAAP.

     1.3  References to Instruments.  Unless the context otherwise
indicates, references in this Agreement to a particular section,
exhibit or schedule are to the corresponding section of, or the
corresponding exhibit or schedule to, this Agreement.

     1.4  Singular and Plural.  The definitions contained in
Section 1.1 are equally applicable to both the singular and plural
form of the terms defined in such Section.

     1.5  Certain Terms.  As used in this Agreement, the term
"knowledge" means actual knowledge (without any requirement for
independent investigation or verification) of any fact,
circumstance or condition by the Designated Persons (as defined
below) of the party involved, and does not include (i) knowledge
imputed to the party involved by reason of knowledge of or notice
to any person, firm or corporation other than the Designated
Persons for such party or (ii) knowledge deemed to have been
constructively given by reason of any filing, registration or
recording of any document or instrument in any public record or
with any Governmental Authority.  In the case of Seller, the
Company or the Subsidiaries, "Designated Persons" means any of the
following individuals:  James D. Shiffer, Tony F. DiStefano, Stuart
W. Booth, Marilyn D. Johnson, Richard C. Jones, Michael J.
Donnelly, Joseph T. Williams, Kent E. Johnson, Don W. Moore, J.
Richard Moore, Lonnie T. Samford, Randall B. Wilson, Linda J.
Gould, William M. Middleton, C. Byron Behrens, Dennis R. Coe, Jim
L. Buron, Harvey J. Dupuy, Jr.,

                               -9-


Charles L. Newell and Bruce R. Baum.  In the case of Buyer,
"Designated Persons" means any of the executive officers of Buyer.
As used in this Agreement, the term "day" means any calendar day.
As used in this Agreement, all references to "dollars" or the
symbol "$" refer to lawful currency of the United States of
America.


                            ARTICLE II

                          SALE OF STOCK

     2.1  Sale and Purchase.  Subject to the terms and conditions
set forth in this Agreement, at the Closing Buyer will purchase and
acquire, and Seller will sell, assign, transfer, convey and deliver
to Buyer, in exchange for the Purchase Price, all of the issued and
outstanding shares of capital stock of the Company (the "Stock")
free and clear of all security interests, liens, adverse claims,
proxies, options, stockholders' agreements and other encumbrances.
The certificates representing the Stock will be duly endorsed in
blank by Seller or accompanied by stock powers duly executed in
blank.  Seller agrees to cure any deficiencies with respect to the
endorsements of the certificates representing the Stock or  with
respect to the stock powers accompanying any such certificates.  At
the Closing, Buyer will pay the Purchase Price determined in
accordance with Article III.

     2.2  Excluded Assets.  At or before Closing Seller will cause
the Company and the Subsidiaries to take all actions necessary to
convey or distribute to Seller the following rights, interests,
assets and properties:

     all right, title and interest of the Company or any Subsidiary
     in and to the name "Pacific Gas and Electric" or "PG&E", any
     name that includes the words "Pacific Gas and Electric" or
     "PG&E" and any logo, service mark, copyright, trade name or
     trademark associated with the name "Pacific Gas and Electric"
     or "PG&E" or any variant of any of the above reasonably
     related thereto or derived therefrom.

The foregoing rights, interests, assets and properties will not be
included in the term "Assets" and are expressly excluded from this
Agreement.  At Closing and thereafter Seller and Buyer will take
all actions necessary to remove the name "PG&E" from the corporate
name of any of the Subsidiaries in which it appears and to change
such names to such names as Buyer will select by written notice to
Seller at least seven days prior to Closing.  As soon as reasonably
possible after Closing, Buyer will cause the name "PG&E" and any
logo, service mark or trademark excluded under this Agreement to be
painted over or removed from the Assets.

     2.3  Resolution of Intercompany Obligations and Bank Credit
Agreement.

          (a)  As reflected on the audited consolidated balance
     sheet (the "Balance Sheet") of the Company as of December 31,
     1994 (the "Balance Sheet Date"), contained in the Financial
     Statements, certain intercompany receivables and intercompany
     payables existed

                               -10-


     between the Company and certain Subsidiaries on the one hand
     and Seller or Seller Parent Company on the other hand as of
     the Balance Sheet Date.  In the ordinary course of the
     Company's business following the Balance Sheet Date and to the
     Closing Date, changes have occurred and will occur in the
     amounts of intercompany receivables and intercompany payables.
     Except as otherwise set forth in this Agreement, all of such
     intercompany payables and intercompany receivables that exist
     at the Closing Date will be paid by the Company and the
     Subsidiaries on the one hand, and the Seller and Seller Parent
     Companies on the other hand, (a) at Closing, to the extent
     practicable, and (b) in the ordinary course consistent with
     past practice, to the extent payment at Closing is not
     practicable.  To the extent practicable, payment may be made
     by offsetting payables and receivables, with a final net
     payment by the Company or Seller as applicable.  To the extent
     Seller assumes or pays accrued liabilities reflected in the
     books of the Company and the Subsidiaries as of the Balance
     Sheet Date, the amount of such liabilities reflected in the
     books and assumed or paid shall be treated as a payable from
     the Company to the Seller generated in the ordinary course of
     business consistent with past practice.  To the extent the
     Company or any Subsidiary assumes or pays accrued liabilities
     reflected in the books of Seller as of the Balance Sheet Date,
     the amount of such liabilities reflected in the books and
     assumed or paid shall be treated as a payable from Seller to
     the Company generated in the ordinary course of business
     consistent with past practice.  Except as otherwise
     specifically set forth in this Agreement, all other
     intercompany obligations and commitments (including without
     limitation all past, present and future liabilities under the
     NGCC Indemnity) shall be released at Closing pursuant to the
     releases contemplated by Sections 10.2(o) and 10.3(k).

          (b)  At the Closing, a wholly owned subsidiary of the
     Company is anticipated to be a party to an Amended and
     Restated Credit Agreement dated as of February 22, 1995 with
     Bank of America National Trust and Savings Association
     ("BOA"), as agent (the "Bank Credit Agreement").  On the
     Closing Date, Buyer will cause all unpaid principal and all
     accrued and unpaid interest and fees outstanding under the
     Bank Credit Agreement to be repaid; provided that such amounts
     need not be repaid on the Closing Date if, prior to or at the
     Closing, Buyer, at its sole expense, obtains and delivers
     releases, executed by BOA, as agent, fully releasing Seller
     and Seller Parent Company of all liability under or with
     respect to the Bank Credit Agreement, such releases to be in
     form and substance reasonably acceptable to Seller.

          (c)  At or before Closing Seller will cause the Company
     to convey or distribute to Seller an amount equal to the
     Interest Amount.  The Interest Amount will not be included in
     the term "Assets" and it is expressly excluded from this
     Agreement.

                           ARTICLE III

                    PURCHASE PRICE AND PAYMENT


                               -11-     


3.1  Purchase Price.  The purchase price that will be payable by
Buyer to Seller for the Stock (the "Purchase Price") will be
$340,000,000.  The Purchase Price, subject to such closing
adjustments, if any, as are expressly provided for in this
Agreement, will be paid by Buyer to Seller at Closing by means of
a completed federal funds transfer to the account of Seller at
Wells Fargo Bank, N.A., San Francisco, California, the account
number of which will be given to Buyer by Seller at least 48 hours
before the Closing (or such other account of Seller in the United
States as may be designated in writing by Seller to Buyer at least
48 hours before the Closing).

     3.2  Stipulated Value Allocations.

          (a)  The Aggregate Stipulated Value is allocated to the
     various Subject Interests in the manner and in accordance with
     the Stipulated Values set forth in Exhibit A-2.  Seller and
     Buyer acknowledge that this is a proper allocation of the
     Aggregate Stipulated Value solely for purposes of any
     adjustments to or refunds of the Purchase Price as provided
     for in this Agreement and not for any other purpose, including
     without limitation any purchase price allocation requirements
     of Section 338 of the Code.

          (b)  To the extent that matters giving rise to an
     adjustment to or refund of the Purchase Price affect only an
     undivided interest in a Subject Interest, such undivided
     interest shall be deemed to have a stipulated value that is
     proportionate to the stipulated value allocated to the
     entirety of such Subject Interest.


                            ARTICLE IV

                     SELLER'S REPRESENTATIONS

     Seller hereby represents to Buyer that:

     4.1  Ownership of the Stock.  Seller owns, beneficially and of
record, good and marketable title to the Stock, which constitutes
all of the issued and outstanding capital stock of the Company,
free and clear of all security interests, liens, adverse claims,
proxies, options, stockholders' agreements and other encumbrances.
At the Closing, subject to the terms and conditions of this
Agreement, Seller will convey to Buyer good and marketable title to
all of the Stock, free and clear of all security interests, liens,
adverse claims, proxies, options, stockholders' agreements and
other encumbrances.  There exist no options, warrants,
subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, capital stock of the Company.

     4.2  Organization and Good Standing; Qualification.

          (a)  The Seller is a corporation duly organized, validly
     existing and in good standing under the laws of its state of
     incorporation, with all requisite corporate power and

                               -12-


     authority to carry on the business in which it is engaged, to
     own the properties it owns, to execute and deliver this
     Agreement and to consummate the transactions contemplated
     hereby.

          (b)  The Company and each Subsidiary is a corporation
     duly organized, validly existing and in good standing under
     the laws of its state of incorporation, with all requisite
     corporate power and authority to carry on the business in
     which it is engaged and to own the properties it owns.  The
     Company and each Subsidiary is duly qualified to do business
     and is in good standing in all jurisdictions where the nature
     of its business makes such qualification necessary.

     4.3  Capitalization.  The authorized capital stock of the
Company consists of 1,000 shares of common stock, par value $.01
per share, of which 100 shares are issued and outstanding, and no
shares of such capital stock are held in the treasury of the
Company.  All of the issued and outstanding shares of capital stock
of the Company are duly authorized, validly issued, fully paid and
nonassessable.

     4.4  Authorization and Validity.  The execution, delivery and
performance by Seller of this Agreement and the other agreements
contemplated hereby to which Seller is or will be a party, and the
consummation by Seller of the transactions contemplated hereby and
thereby, have been duly authorized by Seller.  This Agreement has
been, and each other agreement contemplated hereby to which Seller
is or will be a party will as of the Closing Date be, duly executed
and delivered by Seller and constitutes or will constitute the
legal, valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and subject to principles of equity and
public policy that affect enforceability of agreements generally.

     4.5  Subsidiaries and Joint Ventures.

          (a)  The Company does not own, directly or indirectly,
     any Subsidiary except as listed in Schedule 4.5(a).  All
     issued and outstanding shares of Subsidiary Stock are duly
     authorized and validly issued and outstanding, fully paid and
     nonassessable and are owned by the Company free and clear of
     all security interests, liens, adverse claims, proxies,
     options, stockholders' agreements and other encumbrances.
     There are in existence no options, warrants or similar rights
     granted by any Subsidiary, or any agreements to which any
     Subsidiary is a party, for the issuance or sale by it of any
     securities except to the Company.

          (b)  Except as listed on Schedule 4.5(b), neither the
     Company nor any Subsidiary owns, directly or indirectly, any
     interest in any Joint Venture.

     4.6  Consents.  Except for filings and approvals required
under the Hart-Scott Act, no consent, authorization, exemption,
franchise, approval, permit or license of, or filing with, any

                               -13-


Governmental Authority is required for Seller to sell the Stock to
Buyer as contemplated by this Agreement.

     4.7  Financial Statements.  The Company has furnished to Buyer
the Financial Statements.  The Financial Statements fairly present,
in accordance with GAAP applied on a basis consistent with prior
periods, the consolidated financial position and results of
operations and cash flows of the Company and the Subsidiaries as of
the dates and for the periods indicated.

     4.8  No Violation.  Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated
hereby nor the consummation of the transactions contemplated hereby
or thereby will (i) conflict with, or result in a violation or
breach of the terms, conditions and provisions of, or constitute a
default under, the Articles of Incorporation or Bylaws of Seller or
any material agreement, indenture or other instrument under which
Seller is bound or (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any Governmental
Authority having jurisdiction over Seller or the properties or
assets of Seller.

     4.9  Finder's Fee.  None of Seller, the Company or any
Subsidiary has incurred any obligation for any finder's, broker's
or agent's fee in connection with the transactions contemplated
hereby, except that Seller will pay Goldman, Sachs & Co. a fee in
consideration for advice with respect to the sale of the Stock.

     4.10 Representations True at Closing.  All representations
made by Seller in this Article IV will be true on the Closing Date.


                            ARTICLE V

                     BUYER'S REPRESENTATIONS

     Buyer represents to Seller that:

     5.1  Organization and Good Standing.  Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Texas, with all requisite corporate power and
authority to carry on the business in which it is engaged, to own
the properties it owns, to execute and deliver this Agreement and
to consummate the transactions contemplated hereby.

     5.2  Authorization and Validity.  The execution, delivery and
performance by Buyer of this Agreement and the other agreements
contemplated hereby to which Buyer is or will be a party, and the
consummation of the transactions contemplated hereby and thereby,
have been duly authorized by Buyer.  This Agreement has been, and
each other agreement contemplated hereby to which Buyer is or will
be a party will as of the Closing Date be, duly executed and
delivered by Buyer and constitutes or will constitute legal, valid
and binding obligations of Buyer, enforceable against Buyer in
accordance with their respective terms, except as may be limited by

                               -14-


applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and subject to principles of equity and
public policy that affect enforceability of agreements generally.

     5.3  No Violation.  Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated
hereby nor the consummation of the transactions contemplated hereby
or thereby will (i) conflict with, or result in a violation or
breach of the terms, conditions and provisions of, or constitute a
default under, the Articles of Incorporation or Bylaws of Buyer or
any material agreement, indenture or other instrument under which
Buyer is bound or (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any Governmental
Authority having jurisdiction over Buyer or the properties or
assets of Buyer.

     5.4  Finder's Fee.  Buyer has not incurred any obligation for
any finder's, broker's or agent's fee in connection with the
transactions contemplated hereby, except that Buyer has engaged
Morgan Stanley & Co. Incorporated to render a fairness opinion in
connection therewith.

     5.5  Absence of Bankruptcy Proceedings.  There are no
bankruptcy, reorganization or arrangement proceedings pending
against, being contemplated by, or to Buyer's knowledge threatened
against, Buyer.

     5.6  Experienced Investor, Etc.  Buyer is an experienced and
knowledgeable investor in the oil and gas business and is an
"accredited investor" as defined in Regulation D promulgated under
the Securities Act of 1933, as amended.  Prior to entering into
this Agreement, Buyer was advised by and has relied solely on its
own legal, tax and other professional counsel concerning this
Agreement and the Company and the value of the Stock.  Buyer is
acquiring the Stock for its own account and not for distribution or
resale.  Buyer acknowledges that it understands that (i) the sale
of the Stock has not been registered under any federal or state
securities laws, (ii) the Stock is being sold hereunder in reliance
on exemptions from such registration based in part on the
representations of Buyer set forth herein and (iii) the Stock
cannot be resold by Buyer unless such resale is registered under
applicable federal and state securities laws or exemptions from
such registration are available.


                            ARTICLE VI

       ACCESS TO INFORMATION AND INSPECTION; DUE DILIGENCE

     6.1  Records and Files.  From the date hereof until the Closing
Date, Seller will give or cause to be given to Buyer and its
representatives at reasonable times during normal business hours
reasonable (i) access to examine, at their actual location, all
Assets and all books, records, abstracts of title, title opinions,
title files, ownership maps, lease files, assignments, division
orders and agreements pertaining to the Company, any Subsidiary and
the Assets insofar as the same may now be in existence and in the
possession or control of Seller, the Company or any Subsidiary,
except for items covered by Section 6.2 and (ii) opportunity to
interview the

                               -15-


employees and representatives of Seller, the Company and the
Subsidiaries regarding the Assets and the business of the Company
and the Subsidiaries.

     6.2  Other Files.  Prior to Closing, Seller will make
available to Buyer for inspection by Buyer at reasonable times
during normal business hours at their actual location, all
geological, seismic, geophysical, production and engineering books,
records and data in possession or control of Seller, the Company or
any Subsidiary pertaining to the Company, any Subsidiary or the
Assets, except for records or data that Seller, the Company or any
Subsidiary is prevented by contractual obligations with third
parties from disclosing to Buyer.

     6.3  Environmental Assessment and Inspection.  From the date
hereof until 180 days after the Closing Date, Buyer shall have the
right (subject to third party operator approval, which Seller will
use reasonable efforts to obtain) to make an environmental
assessment of the Assets.  Buyer and its agents shall have the
right (subject to third party operator approval, which Seller will
use reasonable efforts to obtain) to enter upon the Assets and all
facilities thereon at reasonable times and at Buyer's sole risk,
cost and expense, for the purpose of conducting reasonable
inspections of the same, conduct soil and water tests and borings,
and generally conduct such tests, examinations, investigations and
studies as may be necessary or appropriate for the preparation of
appropriate engineering and other reports in relation to the
Assets, their environmental condition and the presence of hazardous
substances; provided, however, Buyer shall repair any damage to the
Assets resulting from such inspections or tests and Buyer does
hereby indemnify and hold harmless Seller, the Company and the
Subsidiaries from and against any and all losses, costs, damages,
obligations, claims, liabilities, expenses or causes of action
arising from Buyer's inspection of the Assets or tests, including,
without limitation, claims for personal injuries, property damage
and reasonable attorney fees (except to the extent caused by the
gross negligence or willful misconduct of the Company or the
Subsidiaries).  During Seller's investigation of an asserted
Environmental Defect pursuant to Section 7.2.2(d), Seller shall
have the right (subject to third party operator approval, which
Buyer will use reasonable efforts to obtain) to make an
environmental assessment of the Assets subject to asserted
Environmental Defects.  Seller and its agents shall have the right
(subject to third party operator approval, which Buyer will use
reasonable efforts to obtain) to enter upon the Assets subject to
asserted Environmental Defects and all facilities thereon at
reasonable times and at Seller's sole risk, cost and expense, for
the purpose of conducting reasonable inspections of the same,
conduct soil and water tests and borings, and generally conduct
such tests, examinations, investigations and studies as may be
necessary or appropriate for the preparation of appropriate
engineering and other reports in relation to the Assets subject to
asserted Environmental Defects, their environmental condition and
the presence of hazardous substances; provided, however, Seller
shall repair any damage to the Assets subject to asserted
Environmental Defects resulting from such inspections or tests and
Seller does hereby indemnify and hold harmless Buyer, the Company
and the Subsidiaries from and against any and all losses, costs,
damages, obligations, claims, liabilities, expenses or causes of
action arising from Seller's inspection of the Assets subject to
asserted Environmental Defects or tests, including, without
limitation, claims for personal injuries, property damage and
reasonable attorney fees (except to the extent caused by the gross
negligence or willful misconduct of Buyer, the Company or the
Subsidiaries).

                               -16-


     6.4  Confidentiality Agreement.  All information made
available to Buyer pursuant to this Agreement will be maintained
confidential by Buyer as provided in that certain letter agreement
regarding confidentiality dated March 10, 1995, between the Company
and Buyer (the "Confidentiality Agreement"), the terms of which are
incorporated into this Agreement by reference and made a part
hereof as if the term "DALEN" and references to "we" and "us" used
therein included Seller within the meaning of such terms.  Buyer
will further take whatever steps may be necessary to ensure that
Buyer's employees, consultants and agents comply with the
provisions of this Article VI and the provisions of the
Confidentiality Agreement.

     6.5  Geophysical Data.  For purposes of this Article VI,
seismic and geophysical records and data will include (to the
extent in existence and in the possession or control of the Company
or any Subsidiary), but not be limited to, basic field seismic
tapes, observer's logs, surveyor's notes, base maps showing shot
point locations and all other information necessary to allow
complete reprocessing thereof, subject to the limitations referred
to in Section 6.2 as to contractual obligations with third parties.

     6.6  Due Diligence Defect.  The parties acknowledge that for
purposes of this Agreement it is necessary to establish a list of
due diligence benchmarks against which the results of the due
diligence to be completed by Buyer prior to the Closing Date can be
assessed.  The sole purpose of these due diligence benchmarks is
for use in determining Due Diligence Defect Amounts, if any, which
will be utilized to determine whether Buyer is entitled to a refund
of a portion of the Purchase Price (subject to the Refund Limit)
and whether Buyer's condition to its obligations set forth in
Section 9.2(c) has been satisfied.  The following subsections of
this Section 6.6 (the "Due Diligence Benchmarks") are not intended
to be, and shall not be construed as, statements, representations
or warranties of Seller or any other party (and Seller specifically
does not represent that all of the Due Diligence Benchmarks are
true).  Rather, the Due Diligence Benchmarks shall serve only as
benchmarks for purposes of determining Due Diligence Defect Amounts
and whether such condition to Closing has been satisfied, and
Seller shall have no liability for any untrue statement expressed
in the Due Diligence Benchmarks except as a result of a refund of
a portion of the Purchase Price pursuant to Section 7.6 (subject to
the Refund Limit).  For the purposes of this Agreement, "Due
Diligence Defect" means a fact or circumstance that causes any one
or more of the following Due Diligence Benchmarks to be untrue with
respect to the Company or any Subsidiary, as the case may be, as of
the date hereof:

          6.6.1     No Violation.  Except as set forth on Schedule
     6.6.1, neither the execution, delivery or performance of this
     Agreement or the other agreements contemplated hereby nor the
     consummation of the transactions contemplated hereby or
     thereby will (i) conflict with, or result in a violation or
     breach of the terms, conditions or provisions of, or
     constitute a default under, the Certificate of Incorporation
     or Bylaws of the Company or any agreement, indenture or other
     instrument under which the Company is bound or to which the
     Stock or any of the Assets are subject (other than the Bank
     Credit Agreement), or result in the creation or imposition of
     any security interest, lien, adverse claim or encumbrance upon
     the Stock or any of the Assets, or (ii) violate or conflict
     with any judgment, decree, order, statute, rule or regulation
     of any court or any Governmental

                               -17-


     Authority having jurisdiction over the Company, the Stock or
     the Assets.  Except as set forth on Schedule 6.6.1, none of
     the Assets (other than Subject Interests) are subject to a
     preferential purchase right, third party consent to assignment
     requirement or similar right or restriction that will be
     triggered upon the execution and delivery of this Agreement or
     the other agreements contemplated hereby or the consummation
     of the transactions contemplated hereby or thereby.

          6.6.2     Gas Imbalances.  Schedule 6.6.2 contains an
     accurate list of all Scheduled (Negative) Imbalances and all
     Scheduled (Positive) Imbalances as of the Balance Sheet Date.

          6.6.3     Assets, Liabilities and Obligations.  Except as
     set forth in Schedule 6.6.3, the Financial Statements reflect
     all assets and liabilities of the Company and the Subsidiaries
     as of the Balance Sheet Date, accrued, contingent or
     otherwise, arising out of transactions effected or events
     occurring on or prior to the Balance Sheet Date.  Except as
     set forth in the Financial Statements, neither the Company nor
     any Subsidiary is liable upon or with respect to, or obligated
     in any other way to provide funds in respect of or to
     guarantee, any debt, obligation or dividend of any person,
     corporation, association, partnership, joint venture, trust or
     other entity, except as may have occurred in the ordinary
     course of business.

          6.6.4     Employee Matters.

          (a)  Employee Policies and Procedures.  Subject to
     applicable Law, all employee manuals, policies, procedures and
     work-related rules that apply to employees of the Company or
     any Subsidiary (excluding each of those items referred to in
     Subsection 6.6.5) ("Employee Policies and Procedures") can be
     amended or terminated at will by the Company or the
     appropriate Subsidiary as the case may be.

          (b)  Discrimination.  Except for matters described on
     Schedule 6.6.4 or 6.6.10, neither the Company nor any
     Subsidiary has received any written claim of any unfair labor
     practice or illegal discrimination on the basis of race,
     color, religion, sex, national origin, age or handicap in its
     employment conditions or practices.  Except as otherwise
     ultimately may be determined with respect to the matters
     described on Schedule 6.6.4 or 6.6.10, neither the Company nor
     any Subsidiary has engaged in any unfair labor practice or
     illegal discrimination on the basis of race, color, religion,
     sex, national origin, age or handicap in its employment
     conditions or practices.

          (c)  Labor Disputes and Charges.  Except as set forth on
     Schedule 6.6.4 or 6.6.10, there are no existing or, to
     Seller's knowledge, threatened labor strikes, disputes,
     grievances, controversies or other labor troubles affecting
     the Company or any Subsidiary.

          6.6.5     Employee Benefit Plans.


                               -18-


          (a)  Identification.  Schedule 6.6.5 contains a complete
     and accurate list of all employee benefit plans (the "Employee
     Benefit Plans") (within the meaning of Section 3(3) of the
     Employee Retirement Income Security Act of 1974, as amended
     ("ERISA")) (i) sponsored by the Company or any Subsidiary,
     (ii) to which the Company or any Subsidiary contributes on
     behalf of its employees, (iii) with respect to which the
     Company or any Subsidiary participates on behalf of their
     employees or (iv) previously sponsored or contributed to by
     the Company or any Subsidiary on behalf of its employees
     within the three years preceding the date hereof.  Except as
     set forth in Schedule 6.6.5, each of the Employee Benefit
     Plans can be terminated or amended at will by the Company or
     the appropriate Subsidiary, as the case may be, with no
     unfunded liability to the Company or any Subsidiary.  No
     unwritten amendment exists with respect to any Employee
     Benefit Plan.

          (b)  Compliance.  Each Employee Benefit Plan has been
     administered and maintained in compliance with all Laws.  No
     Employee Benefit Plan is currently the subject of an audit,
     investigation, enforcement action or other similar proceeding
     conducted by any Governmental Authority.  No prohibited
     transactions (within the meaning of Section 4975 of the Code)
     have occurred with respect to any Employee Benefit Plan.  No
     pending or, to the knowledge of Seller, threatened claims,
     suits or other proceedings exist with respect to any Employee
     Benefit Plan other than normal benefit claims filed by
     participants or beneficiaries.

          (c)  Qualification.  A favorable determination letter or
     ruling has been received from the Internal Revenue Service as
     to the current qualified status of each Employee Benefit Plan
     intended to be qualified within the meaning of Section 401(a)
     of the Code and/or tax-exempt within the meaning of
     Section 501(a) of the Code.  No proceedings exist or, to
     Seller's knowledge, have been threatened against the Company
     or any Subsidiary that would result in the revocation of any
     such favorable determination letter or ruling.

          (d)  Funding Status.  No accumulated funding deficiency
     (within the meaning of Section 412 of the Code), whether
     waived or unwaived, exists with respect to any Employee
     Benefit Plan.  With respect to each Employee Benefit Plan
     subject to Title IV of ERISA, the assets of each such plan are
     at least equal to the liabilities that result if all employees
     were fully vested and terminated employment and the plan is
     terminated as of the Closing Date.  With respect to each
     Employee Benefit Plan described in Section 501(c)(9) of the
     Code, the assets of such plan are at least equal in value to
     the present value of accrued benefits under such plan as of
     the date hereof.

          (e)  Multiemployer Plans.  Neither the Company nor any
     Subsidiary is or ever has been obligated to contribute to a
     multiemployer plan within the meaning of Section 3(37) of
     ERISA.

                               -19-


          (f)  PBGC.  No facts or circumstances exist that would
     result in the imposition of liability against Buyer by the
     Pension Benefit Guaranty Corporation as a result of any act or
     omission by the Company or any Subsidiary.  No reportable
     event (within the meaning of Section 4043 of ERISA) for which
     the notice requirement has not been waived has occurred with
     respect to any Employee Benefit Plan subject to the
     requirements of Title IV of ERISA.

          (g)  Retirees.  Except as set forth on Schedule 6.6.5(g)
     and except as required by Law, neither the Company nor any
     Subsidiary has any obligation or commitment to provide
     medical, dental or life insurance benefits to or on behalf of
     any of its employees who may retire or any of its former
     employees who have retired from employment with the Company or
     any Subsidiary, including those receiving disability benefits.

          6.6.6     Conduct of Business.  Except as set forth in
     Schedule 6.6.6, since the Balance Sheet Date, the business of
     the Company and the Subsidiaries has been conducted in a
     manner consistent with past practices of the Company or the
     Subsidiary, as appropriate, and in the ordinary course of
     business.  In addition, except as set forth in Schedule 6.6.6,
     since the Balance Sheet Date, neither the Company nor any
     Subsidiary has

          (a)  incurred any indebtedness for borrowed money or
     issued or sold any debt securities;

          (b)  suffered any damage or destruction to or loss of any
     Assets, including by fire, explosion, accident, earthquake,
     act of public enemy, act of God or similar casualty event,
     (whether or not covered by insurance) that could materially
     and adversely affect the subject Asset;

          (c)  formed, or acquired or disposed of any interest in,
     any corporation or other entity that is characterized as a
     partnership under the Code;

          (d)  sold, granted or otherwise disposed of, directly or
     indirectly, any of its capital stock or securities or any
     rights to acquire such capital stock or securities, or agreed
     to change the terms and conditions of such rights; or

          (e)  with respect to the Company only, paid or declared
     any distribution, payment or dividend of any kind on capital
     stock of the Company.

          6.6.7     Commitments.  Neither the Company nor any
     Subsidiary is in default under, nor has any event occurred
     that with the giving of notice or lapse of time or both would
     constitute a default by the Company or any Subsidiary under,
     any contract or arrangement that involves the payment of
     money.

          6.6.8     Insurance.  The Company and the Subsidiaries
     carry property, liability, workers' compensation and such
     other types of insurance as is customary in the industry

                               -20-


     of the insured.  All of the policies under which such
     insurance is provided are valid and enforceable policies,
     issued by insurers of recognized responsibility in amounts and
     against such risks and losses as is customary in the industry
     of the insured.  Such insurance will be outstanding and duly
     in force without interruption up to the Closing Date.

          6.6.9     Compliance with Laws.  The Company and each of
     the Subsidiaries has complied with all Laws and has filed with
     the proper authorities all necessary statements and reports.
     There are no existing violations by the Company, any
     Subsidiaries or Seller of any Law that would adversely affect
     the property or business of the Company or any Subsidiary.
     The Company and each of the Subsidiaries possesses all
     necessary licenses, franchises, permits and governmental
     authorizations, in full force and effect, to conduct its
     business as now conducted (collectively, "Governmental
     Authorizations").  Neither the Company nor any Subsidiary is
     in violation of any Governmental Authorization.  No proceeding
     is pending, or to the knowledge of Seller, the Company, or any
     Subsidiary, threatened, which purports to challenge, revoke or
     limit any Governmental Authorization.

          6.6.10    Litigation.  Except as described in Schedule
     6.6.10, there are no legal actions (including arbitration) or
     administrative proceedings or investigations instituted
     (including without limitation expropriation or forfeiture
     proceedings), or to the knowledge of Seller, the Company or
     any Subsidiary threatened, against or affecting, or that
     reasonably could affect, the Company, any Subsidiary, any of
     the Stock, any of the Assets or the business of the Company or
     any Subsidiary.  None of Seller, the Company or any Subsidiary
     has knowledge of any set of facts or situation that is
     reasonably likely to give rise to any such action, proceeding
     or investigation that is reasonably likely to result in an
     uninsured liability of the Company and/or the Subsidiaries in
     excess of $1,000,000.  None of Seller, the Company or any
     Subsidiary is (i) subject to any continuing court or
     administrative order, writ, injunction or decree applicable
     specifically to the Company or any Subsidiary or to its
     respective business, Assets, operations or employees or (ii)
     in default with respect to any such order, writ, injunction or
     decree.

          6.6.11    Books of Account.  The books of account of the
     Company and the Subsidiaries have been kept accurately in the
     ordinary course of business, the transactions entered therein
     represent bona fide transactions and the revenues, expenses,
     assets and liabilities of the Company and the Subsidiaries
     have been properly recorded in such books, all in conformity
     with GAAP.

          6.6.12    No Affiliate Transactions.  Between the Balance
     Sheet Date and the Closing Date, neither the Company nor any
     Subsidiary has sold or otherwise conveyed, and will not sell
     or otherwise convey, any Assets reflected on the Balance Sheet
     to Seller or Seller Parent Company other than in a manner
     consistent with past practices of the Company or the
     Subsidiary, as appropriate, and in the ordinary course of
     business (except as provided in Sections 2.2, 2.3 and 10.4).

                               -21-


          6.6.13    Payout Balances.  The payout balances with
     respect to any of the Assets that are subject to future change
     on account of reversionary interests, non-consent penalties or
     similar agreements or arrangements set forth on Schedule
     6.6.13 are correct as of the dates shown on such statements.

          6.6.14    Derivatives.  Except as set forth in Schedule
     6.6.14, neither the Company nor any Subsidiary is, or has been
     since the Balance Sheet Date, a party to any oil and gas swap,
     collar, futures, hedging or similar agreement.

          6.6.15    Hydrocarbon Sale Contracts.  Except as set
     forth on Schedule 6.6.15, the Assets are not subject to any
     contract for the sale of Hydrocarbons, except those contracts
     for the sale of Hydrocarbons that are terminable within 90
     days or less.  Except as set forth in Schedule 6.6.15, as of
     the Balance Sheet Date, there existed no claims that have been
     asserted against the Company or any Subsidiary by oil or gas
     purchasers for any refund with respect to proceeds from the
     sale of Hydrocarbons produced from the Assets.  Except as set
     forth in Schedule 6.6.15, the Company and the Subsidiaries are
     currently receiving, with respect to Hydrocarbons produced
     from all of the Assets, the prices provided for under the
     applicable contract governing the purchase of the
     Hydrocarbons.  Except as set forth in Schedule 6.6.15, no
     person has any call upon, option to purchase, or other right
     with respect to the Company's or any Subsidiary's share of
     production from the Assets, whether upon the transfer of any
     of the Assets or otherwise.

          6.6.16    Consents.  Except for filings and approvals
     required under the Hart-Scott Act, no consent, authorization,
     exemption, franchise, approval, permit or license of, or
     filing with, any Governmental Authority is required to
     authorize, or is required in connection with, the execution,
     delivery and performance of this Agreement or the other
     agreements contemplated hereby or the performance of the
     obligations contemplated hereby or thereby by or on the part
     of the Company.

          6.6.17    Taxes.

          (a)  Filing of Tax Returns.  The Company and each
     Subsidiary have duly and timely filed or will duly and timely
     file (in accordance with any extensions duly granted by the
     appropriate governmental agency, if applicable) with the
     appropriate governmental agencies all returns (including
     information returns) and reports, including all schedules or
     attachments thereto, required by the United States or any
     state or any political subdivision thereof or any foreign
     jurisdiction to be filed on or before the Closing Date by the
     Company and each Subsidiary in connection with any Tax ("Tax
     Returns").  All such Tax Returns are, or will be, complete and
     accurate and properly reflect the Taxes of the Company and
     each Subsidiary for the periods covered hereby.  Seller and
     Seller Parent Company have duly and timely filed or will duly
     and timely file (in accordance with any extensions duly
     granted by the appropriate governmental agency, if applicable)
     all consolidated and combined unitary Tax Returns required to
     be filed for each taxable period through and including the
     Closing Date which Tax Returns were required to include the

                               -22-


     Company or any of the Subsidiaries.  All such Tax Returns are,
     or will be, complete and accurate and properly reflect the
     Taxes of the Seller and Seller Parent Company for the periods
     covered thereby.

          (b)  Payment of Taxes.  Seller, Seller Parent Company,
     the Company and each Subsidiary have paid or accrued all Taxes
     that have become due with respect to any Tax Returns that they
     have filed.

          (c)  No Pending Deficiencies, Delinquencies, Assessments
     or Audits.  Except as described in Schedule 6.6.17(c), no Tax
     deficiency or delinquency has been asserted against the
     Company or any Subsidiary; there is no unpaid assessment,
     proposal for additional Taxes, deficiency or delinquency in
     the payment of any of the Taxes of the Company or any
     Subsidiary that, to the knowledge of Seller,  could be
     asserted by any Tax authority; there is no Tax authority audit
     of the Company or any Subsidiary pending and the results of
     any completed audits are properly reflected in the Financial
     Statements; neither the Company nor any Subsidiary has
     violated any federal, state, local or foreign Tax law, except
     where such violation would not have a material adverse effect;
     and there are no pending claims for refund of Taxes filed by
     the Company or any Subsidiary.

          (d)  Tax Liens.  There are no liens for Taxes upon any
     assets of the Company or any Subsidiary other than statutory
     liens for Taxes not yet delinquent.

          (e)  All Withholding Requirements Satisfied.  All monies
     required to be withheld by the Company and each Subsidiary and
     paid to governmental agencies for all Taxes (including any
     amounts required to be withheld pursuant to Sections 1441
     through 1446 of the Code) have been (i) collected or withheld
     and either paid to the respective governmental agencies or set
     aside in accounts for such purpose or (ii) properly reflected
     in the Financial Statements.

          (f)  Request for Rulings.  There are no outstanding
     requests for rulings with any Tax or revenue authority that
     would have a material adverse effect on the operations of the
     Company and its Subsidiaries.

          (g)  Partnerships.  Except as set forth in Schedule
     6.6.17(g), neither the Company nor any Subsidiary owns any
     interest in any entity that is characterized as a partnership
     under the Code.

          6.6.18    Accuracy of Records Furnished.  The production
     and lease operating expense records furnished to Buyer by the
     Company in connection with the transactions contemplated
     hereby, as well as the "Top Fields Marketing Arrangements
     Summary - March 22, 1995" furnished to Buyer by the Company,
     are materially accurate.

     6.7  Special Matters Regarding Due Diligence Defects.


                               -23-     


          6.7.1     Threshold Amount.  Notwithstanding the
     foregoing, no Due Diligence Defect will exist as to any fact
     or circumstance that causes a Due Diligence Benchmark to be
     untrue unless the sum of the Due Diligence Defect Amounts in
     respect of such fact or circumstance exceeds $35,000.  If a
     Due Diligence Defect exists pursuant to the preceding
     sentence, the Due Diligence Defect Amount for such Due
     Diligence Defect will include the entirety of such Due
     Diligence Defect Amount, including the portion below such
     threshold amount.

          6.7.2     Due Diligence Defect Amount.  With respect to
     each Due Diligence Defect, "Due Diligence Defect Amount" means
     the amount of the loss, liability or diminution in value of
     Assets (other than Subject Interests) that is directly
     attributable to such Due Diligence Defect; provided however
     that to the extent a Due Diligence Defect relates to an Asset
     or liability reflected in the Financial Statements, the Due
     Diligence Defect Amount with respect thereto shall mean only
     the diminution in value of the Asset, or the increase in the
     amount of the liability, from that reflected in the Financial
     Statements.

          6.7.3     Additional Due Diligence Defect.  In addition
     to the matters set forth above, it shall be a Due Diligence
     Defect if the likely aggregate liability of the Company
     (including interest) with respect to the matters covered by
     clause (d) of Section 1 of the Indemnity Agreement (the
     "Indemnity Agreement") to be entered into in substantially the
     form of Exhibit E hereto (the "Likely Liability") exceeds
     $1,500,000.  The Due Diligence Defect Amount with respect to
     such Due Diligence Defect shall be the amount of the Likely
     Liability in excess of $1,500,000.  Notwithstanding the
     foregoing, the Due Diligence Defect Amount with respect to
     such Due Diligence Defect shall be reduced by the amount by
     which Seller, at its option, increases the indemnity amount
     applicable to clause (d) of Section 1 of the Indemnity
     Agreement above $1,500,000.  Any disputes regarding the Likely
     Liability will be determined in accordance with the provisions
     of Section 7.7.  Seller will use its reasonable efforts to
     assist Buyer in locating all the, and in determining what,
     data and information that it needs to make the determinations
     required by this Section 6.7.3.

     6.8  Section 29 Tax Credits.

          6.8.1     Section 29 Tax Credit Defects.  For purposes of
     this Agreement, "Section 29 Tax Credit Defect" means a fact or
     circumstance that causes the following sentence to be untrue.
     Each well of the Company and each Subsidiary set forth on
     Schedule 6.8.1 is qualified for tax credits under Section 29
     of the Code.

          6.8.2     Threshold Amount.  Notwithstanding the
     foregoing, no Section 29 Tax Credit Defect will exist unless
     the Section 29 Tax Credit Defect Amount exceeds $35,000.  If
     a Section 29 Tax Credit Defect exists pursuant to the
     preceding sentence, the Section 29 Tax Credit Defect Amount
     for such Section 29 Tax Credit Defect will include the
     entirety of such Section 29 Tax Credit Defect Amount,
     including the portion below such threshold amount.

                               -24-


          6.8.3     Section 29 Tax Credit Defect Amount.  Set forth
     on Schedule 6.8.1 with respect to each well is the "Present
     Value" of the tax credits under Section 29 of the Code for
     purposes of this Agreement (in each case, the "Attributed Tax
     Value"), which Attributed Tax Values total $14,687,000.
     "Section 29 Tax Credit Defect Amount" means the aggregate
     Attributed Tax Value of all wells set forth on Schedule 6.8.1
     that are not qualified for tax credits under Section 29 of the
     Code.

          6.8.4     Notice of Section 29 Tax Credit Defects.
     Within a reasonable time after discovery by Buyer, but in no
     event later than 180 days after the Closing Date, Buyer will
     notify Seller in writing of any matters that, in Buyer's
     reasonable opinion, constitute Section 29 Tax Credit Defects.
     For all purposes of this Agreement, Buyer will be deemed to
     have waived any Section 29 Tax Credit Defects that Buyer fails
     to assert as Section 29 Tax Credit Defects by written notice
     given to Seller on or before 180 days after the Closing Date.

          6.8.5     Section 29 Tax Credit Notice Requirements.  To
     be effective, Buyer's written notice of a Section 29 Tax
     Credit Defect must (i) identify the specific Subject Interest
     (or portion thereof) affected by the asserted Section 29 Tax
     Credit Defect, (ii) describe the material facts that establish
     the existence of a Section 29 Tax Credit Defect and the extent
     of such Section 29 Tax Credit Defect, and (iii) calculate the
     Section 29 Tax Credit Defect Amount that Buyer asserts is
     attributable to such Section 29 Tax Credit Defect.

     6.9  Representation and Covenant Matters.

          6.9.1     Representation and Covenant Defects.  For
     purposes of this Agreement, "Representation and Covenant
     Defect" means a fact or circumstance that constitutes a breach
     of a representation of Seller set forth in Article IV or a
     breach of a covenant of Seller set forth in Article VIII.

          6.9.2     Threshold Amount.  Notwithstanding the
     foregoing, no Representation and Covenant Defect will exist as
     to any fact or circumstance that constitutes a breach as
     described in Section 6.9.1 unless the sum of the
     Representation and Covenant Defect Amounts in respect of such
     fact or circumstance exceeds $35,000.  If a Representation and
     Covenant Defect exists pursuant to the preceding sentence, the
     Representation and Covenant Defect Amount for such
     Representation and Covenant Defect will include the entirety
     of such Representation and Covenant Defect Amount, including
     the portion below such threshold amount.

          6.9.3     Representation and Covenant Defect Amount.
     With respect to each Representation and Covenant Defect,
     "Representation and Covenant Defect Amount" means (i) with
     respect to facts or circumstances that constitute a breach of
     a representation of Seller set forth in Article IV (except a
     breach of Section 4.7), the amount of loss, liability or
     diminution in value that is directly attributable to such
     Representation and

                               -25-


     Covenant Defect and (ii) with respect to facts or
     circumstances that constitute a breach of a covenant of Seller
     set forth in Article VIII or a breach of the representation of
     Seller in Section 4.7, the amount of loss, liability or
     diminution in value that is directly attributable to such
     Representation and Covenant Defect; provided however that to
     the extent such Representation and Covenant Defect relates to
     an Asset or liability reflected in the Financial Statements,
     the Representation and Covenant Defect Amount with respect
     thereto shall mean only the diminution in value of the Asset,
     or the increase in the amount of the liability, from that
     reflected in the Financial Statements.

     6.10 Pre-Closing Defect Amount.  Seven days prior to the
Closing Date (the "Delivery Date"), Buyer will notify Seller in
writing of all matters Buyer has discovered during its due
diligence review that in Buyer's reasonable opinion constitute (a)
Representation and Covenant Defects, (b) Due Diligence Defects, (c)
Title Defects, (d) Environmental Defects and (e) Section 29 Tax
Credit Defects (collectively, "Pre-Closing Defects").  To be
effective, such notice must also state the specific Defect Amount
that Buyer attaches to each individual Pre-Closing Defect, a brief
description of the matter constituting the asserted Pre-Closing
Defect, appropriate supporting documents that are reasonably
available to Buyer to verify the existence of such asserted Pre-
Closing Defect, and any other information that would be required by
Sections 6.8.5, 7.2.1(b) or 7.2.2(b) with respect to such asserted
Pre-Closing Defect.  The existence of all Pre-Closing Defects
(including the attempted cure thereof by Seller) and the final
aggregate amount of all Defect Amounts with respect to uncured 
Pre-Closing Defects (the "Pre-Closing Defect Amount") will be
determined by agreement of Buyer and Seller, or, if disputes exist,
in accordance with the provisions of Section 7.7.  Notwithstanding
the foregoing, Buyer will have the right to supplement its
notification pursuant to this Section prior to Closing to add any
Representation and Covenant Defects or Due Diligence Defects that
relate to events occurring between the Delivery Date and the
Closing Date (but will not have the right to supplement its
notification with respect to any events that occurred prior to the
Delivery Date).

     6.11 Right to Cure.  Seller will have the right, but not the
obligation, to cure any Pre-Closing Defects.  If the Pre-Closing
Defect Amount timely asserted by Buyer pursuant to and in
accordance with Section 6.10 exceeds $12,000,000, and Buyer does
not waive the condition stated in Section 9.2(c), the parties agree
that, at the election of Seller, the Closing may be delayed for a
period of up to thirty (30) days to allow Seller the opportunity to
cure any Pre-Closing Defects to the extent necessary to satisfy
such condition, after which cure period the final Pre-Closing
Defect Amount shall be determined as set forth in Section 6.10.

     6.12 Limitation on Multiple Types of Defects.  Notwithstanding
any other provisions of this Agreement, in the event that a fact or
circumstance does or could constitute more than one type of Defect
under this Agreement, the fact or circumstance will be deemed to
constitute only one type of Defect as selected by Buyer in the
applicable notice to Seller setting forth such fact or circumstance
as a Defect.

     6.13 Positive Adjustments.  To the extent any representation
of Seller contained in Article IV or any covenant of Seller set
forth in Article VIII is discovered to be incorrect in a

                               -26-


manner that results in a monetary benefit to the Company or any
Subsidiary in excess of $35,000, the amount of such benefit
(including the amount below such threshold) shall be offset against
all Pre-Closing Defects in calculating the Pre-Closing Defect
Amount.  In addition, to the extent any Due Diligence Benchmark, or
any statement set forth in the second sentence of Section 6.8.1
(dealing with Section 29 Tax Credits), is untrue in a manner that
results in a monetary benefit to the Company or any Subsidiary in
excess of $35,000, the amount of such benefit (including the amount
below such threshold) shall be offset against all Pre-Closing
Defects in calculating the Pre-Closing Defect Amount.

     6.14 Statements Regarding Representation of Financial
Condition.  Notwithstanding anything in this Agreement to the
contrary, except as set forth in Section 4.7, Seller makes no
warranty or representation, express or implied, with respect to the
financial condition or results of operations, or the assets or
liabilities of the Company or any Subsidiary.  Nothing in this
Agreement, however, will be construed to limit or otherwise qualify
the effectiveness of the representations made in Section 4.7.


                           ARTICLE VII

              TITLE, ENVIRONMENTAL AND OTHER MATTERS

     7.1  No Warranty or Representation Regarding Environmental
Laws or Title.  Notwithstanding anything in this Agreement to the
contrary, Seller makes no warranty or representation, express or
implied, with respect to Environmental Laws, the Company's or any
Subsidiary's title to the Assets, or the accuracy or completeness
of the information, records and data now, heretofore or hereafter
made available to Buyer in connection with this Agreement
(including, without limitation, any description of the Assets,
pricing assumptions, potential for production of Hydrocarbons from
the Subject Interests or other matters contained in the Reports or
in any other material furnished to Buyer by Seller, the Company or
any Subsidiary or by any agent or representative of any of them).
Additionally, without limiting in any way the provisions of
Subsection 6.6.2, the parties recognize that there may be over or
under imbalances with respect to gas production or processing
attributable to certain Subject Interests and hereby agree that the
existence of such imbalances will not be deemed a Title Defect and
that no representation or warranty is made by Seller with respect
to such matters.

     7.2  Buyer's Title and Environmental Review.

          7.2.1     Title Review.

          (a)  Notice of Title Defects.  Not later than 90 days
     after the Closing Date, Buyer will notify Seller in writing of
     any matters that, in Buyer's reasonable opinion, constitute
     Title Defects with respect to the Company's or any
     Subsidiary's title to all or any portion of the Subject
     Interests.  For all purposes of this Agreement, Buyer will be

                               -27-


     deemed to have waived any Title Defects that Buyer fails to
     assert as Title Defects by written notice given to Seller on
     or before 90 days after the Closing Date.

          (b)  Title Notice Requirements.  To be effective, Buyer's
     written notice of a Title Defect must include (i) the specific
     Subject Interest (or portion thereof) affected by the asserted
     Title Defect, (ii) a brief description of the matter
     constituting the asserted Title Defect, (iii) the claimed
     Title Defect Amount attributable thereto and (iv) supporting
     documents reasonably available to Buyer that are reasonably
     necessary for Seller (or a title attorney or examiner hired by
     Seller) to verify the existence of such asserted Title Defect.

          (c)  Seller's Right to Cure Title Defects and Effect of
     Failure to Cure.  Seller will have until 180 days after the
     Closing Date, at its cost and expense, if it so elects, but
     without obligation, to cure all or a portion of asserted Title
     Defects.  If asserted Title Defects are waived by Buyer or
     cured within such time, any such waived or cured Title Defects
     will be deemed "Permitted Encumbrances".  If Seller within
     such time fails or refuses to cure any Title Defect of which
     Buyer has given timely written notice as required above and
     that Buyer has not waived, each portion of an undivided
     interest in a Subject Interest affected by such uncured and
     unwaived Title Defect will be a "Title Defect Property" and
     all such portions will collectively be "Title Defect
     Properties".  Buyer no later than 270 days after the Closing
     Date will elect by written notice to Seller, as Buyer's sole
     and exclusive remedy, either to (x) waive such Title Defects,
     which will then be deemed "Permitted Encumbrances" or
     (y) subject to Section 7.3, cause the Company or any
     Subsidiary to convey to Seller or Seller's designee those
     portions of the Title Defect Properties that constitute
     Material Defect Properties (together with all rights, titles
     and interests attributable thereto), and subject to Section
     7.6.2 (including, but not limited to, the Refund Limit set
     forth therein) obtain a refund from Seller of a portion of the
     Purchase Price equal to the aggregate amount of the Stipulated
     Values of such Material Defect Properties.  Notwithstanding
     the foregoing, in the event Buyer elects to cause the Company
     or such Subsidiary to convey Material Defect Properties to
     Seller or Seller's designee as aforesaid, Seller, at its sole
     option, may nevertheless elect, within 20 days after the
     expiration of the 270-day period, that any such Material
     Defect Properties not be conveyed to Seller or Seller's
     designee, but be retained by the Company or such Subsidiary as
     part of the Assets, in which case Seller, subject to Section
     7.6.2 (including, but not limited to, the Refund Limit set
     forth therein), will refund a portion of the Purchase Price
     equal to the aggregate amount of Title Defect Amounts with
     respect to such Material Defect Properties.  Failure by Buyer
     to make an election with respect to any Title Defect within
     the aforesaid time period will be deemed an election to waive
     such Title Defect.  Failure of Seller to make an election to
     refuse reconveyance of any Material Defect Property within the
     aforesaid time period will be deemed an election to accept
     such reconveyance.  Buyer will not have the right to reduce,
     or receive a refund of any portion of, the Purchase Price on
     account of any Non-Material Defect Properties.

          (d)  Method of Determining Title Defect Amounts.  The
     "Title Defect Amount" means, with respect to each Title Defect
     affecting a Title Defect Property, the amount by

                               -28-


     which the value of such Title Defect Property is impaired as
     a result of the existence of such Title Defect, which amount
     will be determined as follows:

               (i)  If the Title Defect relates to failure of title
          to the entirety of the Company's or any Subsidiary's
          interest in an Asset, the Title Defect Amount will be the
          entire Stipulated Value of such Asset.

               (ii) If the Title Defect relates to an undivided
          interest in an Asset, the Title Defect Amount shall be an
          amount that is proportionate to the Stipulated Value of
          such Asset.

               (iii)     If the Title Defect results from a lien,
          security interest, pledge or collateral assignment upon
          one or more Assets (or a portion thereof) that is
          liquidated in amount, then the Title Defect Amount will
          be the amount necessary to remove such lien, security
          interest, pledge or collateral assignment from the
          Company's or any Subsidiary's title to such one or more
          Assets (or a portion thereof).

               (iv) If the Title Defect results from the Company or
          any Subsidiary having a lesser net revenue interest in an
          Asset than the net revenue interest specified therefor in
          Exhibit A-2, the Title Defect Amount will be equal to the
          product obtained by multiplying the Stipulated Value for
          that Asset in Exhibit A-2 by a fraction, the numerator of
          which is the reduction in the net revenue interest and
          the denominator of which is the net revenue interest
          specified for such Asset in Exhibit A-2.

               (v)  If the Title Defect results from the Company or
          any Subsidiary having a greater working interest in an
          Asset than the working interest specified therefor in
          Exhibit A-2, the Title Defect Amount will be equal to the
          present value (discounted at 10% compounded annually) of
          the increase in the costs and expenses forecasted in the
          Reports with respect to such Asset for the period from
          and after the Balance Sheet Date that is attributable to
          such increase in working interest.

               (vi) If the Title Defect results from any matter not
          described in paragraphs (i), (ii), (iii), (iv) or (v)
          above, then the Title Defect Amount will be a portion of
          the Stipulated Value set forth for that Asset in Exhibit
          A-2, such portion to be equal to the difference between
          the value of the Company's or such Subsidiary's title to
          such Asset without such Title Defect and with such Title
          Defect (assuming the value without such Title Defect to
          be the Stipulated Value of such Asset set forth in
          Exhibit A-2); provided that if such Title Defect is
          reasonably susceptible of being cured, the Title Defect
          Amount will be the reasonable cost and expense of curing
          such Title Defect, if less.


                               -29-


               (vii)     If a Title Defect is not effective or does
          not affect a Title Defect Property throughout the entire
          productive life of such Title Defect Property, such fact
          will be taken into account in determining the Title
          Defect Amount.

               (viii)    Each Title Defect Amount will be
          determined without duplication of costs or losses, or any
          other Title Defect Amount.  For example, but without
          limitation, if a lien affects more than one Title Defect
          Property or the curative work with respect to one Title
          Defect results (or is reasonably expected to result) in
          the curing of any other Title Defect affecting the same
          or another Title Defect Property, the amount necessary to
          discharge such lien or the cost and expense of such
          curative work will only be included in the Title Defect
          Amount for one Title Defect Property and only once as a
          Title Defect Amount.

               (ix) If a Title Defect affects only a portion of an
          Asset (as contrasted with an undivided interest in the
          entirety of such Asset) and a portion of the Purchase
          Price has not been allocated specifically to such portion
          of an Asset in Exhibit A-2, then for purposes of
          computing the Title Defect Amount, the Purchase Price
          allocated to such Asset will be further allocated among
          the portions of such Asset in a fair and reasonable
          manner, taking into account the Stipulated Values set
          forth in Exhibit A-2.

               (x)  No Title Defect Amount will be allowed on
          account of and to the extent that an increase in the
          Company's or any Subsidiary's working interest in a
          property has the effect of proportionately increasing the
          Company's or any Subsidiary's net revenue interest in
          such property.

     Notwithstanding anything in this Agreement to the contrary,
     the aggregate Title Defect Amounts attributable to Title
     Defects relating to a Subject Interest for which Buyer
     receives a refund of a portion of the Purchase Price will
     never exceed the Stipulated Value of that Subject Interest as
     set forth in Exhibit A-2.  Any disputes between Buyer and
     Seller concerning the existence of a Title Defect and/or the
     Title Defect Amount shall be subject to arbitration, as set
     forth in Section 7.7 below, unless Buyer elects to waive such
     Title Defect.

          7.2.2     Environmental Review.

          (a)  Notice of Environmental Defects.  Not later than 180
     days after the Closing Date, Buyer will notify Seller in
     writing of any matters that, in Buyer's reasonable opinion,
     constitute Environmental Defects with respect to all or any
     portion of the Assets.  For all purposes of this Agreement,
     Buyer will be deemed to have waived any Environmental Defects
     that Buyer fails to assert as Environmental Defects by written
     notice given to Seller on or before 180 days after the Closing
     Date.

                               -30-


          (b)  Environmental Notice Requirements.  To be effective,
     Buyer's written notice of an Environmental Defect must (i)
     identify the specific Asset (or portion thereof) affected by
     the asserted Environmental Defect, (ii) describe the material
     facts, including the results of soil and/or groundwater
     sampling or other analytical testing, which establish the
     existence of an Environmental Defect and the extent of such
     Environmental Defect, and (iii) calculate the Environmental
     Defect Amount that Buyer asserts is attributable to such
     Environmental Defect.

          (c)  Method of Determining Environmental Defect Amounts.
     The "Environmental Defect Amount" means, with respect to any
     Environmental Defect, the present value as of the Closing Date
     of the most cost effective Remediation of the Environmental
     Defect.  Buyer's calculation of the Environmental Defect
     Amount must describe the Remediation proposed for each
     condition that contributes to the asserted Environmental
     Defect, identify all assumptions used by the Buyer in
     calculating the Environmental Defect Amount, including the
     standards the Buyer asserts must be met to comply with
     Environmental Laws existing as of the Closing Date, and
     discount all costs to be incurred in connection with the
     Remediation at an annual discount rate of 10%.

          (d)  Seller's Response to Environmental Notice.  Seller
     shall have a period of sixty (60) days following the receipt
     of Buyer's notice of an asserted Environmental Defect in which
     to investigate the material facts that Buyer has identified as
     establishing the existence of the Environmental Defect.
     During such sixty (60) day period, Buyer shall give or cause
     to be given to Seller and its representatives at reasonable
     times during normal business hours reasonable (i) access to
     examine the Assets identified in the notice and to conduct
     such soil and groundwater sampling and other testing as Seller
     deems necessary, (ii) access to all information relied on by
     Buyer in preparing such notice, and (iii) opportunity to
     examine the employees or other representatives of Buyer with
     knowledge related to the material facts set forth in the
     notice.  Prior to the expiration of the sixty (60) day period,
     Seller shall notify Buyer in writing if it contests the
     existence of the asserted Environmental Defect and/or Buyer's
     calculation of the Environmental Defect Amount.  Seller's
     notice to Buyer shall identify the material facts listed in
     Buyer's notice with which Seller disagrees, Seller's basis for
     its disagreement, and Seller's calculation of the
     Environmental Defect Amount attributable to the asserted
     Environmental Defect.

          (e)  Procedures for Resolving a Contested Environmental
     Notice.  Buyer shall have thirty (30) days after receipt of
     Seller's notice in which to investigate the matters and/or
     calculations set forth in Seller's notice and to attempt to
     resolve any disagreements it has with Seller regarding such
     matters and/or calculations.  Prior to the expiration of such
     thirty (30) day period, Buyer shall notify Seller in writing
     of the matters and calculations set forth in Seller's notice
     with which it disagrees.  If Buyer and Seller agree on the
     existence of an Environmental Defect and the Environmental
     Defect Amount attributable to such Environmental Defect, such
     Environmental Defect Amount shall be an Environmental Defect
     Amount for which Buyer may be entitled to a refund of the
     Purchase Price, subject to the remaining provisions of this
     Article VII (including, but not

                               -31-


     limited to, Section 7.6.2 and the Refund Limit set forth
     therein).  Each portion of an Asset affected by such agreed
     Environmental Defect will be an "Environmental Defect
     Property" and such portions collectively will be
     "Environmental Defect Properties".  Any disputes between Buyer
     and Seller concerning the existence of an Environmental Defect
     and/or the Environmental Defect Amount shall be subject to
     arbitration, as set forth in Section 7.7 below, unless Buyer
     elects to waive such Environmental Defect.

          (f)  Contribution.  If Buyer, the Company or any
     Subsidiary have any claim for or right of contribution,
     reimbursement or other similar action against any third party
     with respect to an Environmental Defect that causes Seller to
     be required to refund a portion of the Purchase Price to
     Buyer, then Buyer, the Company or any Subsidiary shall assign
     a pro rata portion of such right to Seller (based upon the
     ultimate liability paid by each of Buyer and Seller with
     respect to such Environmental Defect) and will assist Seller
     in pursuing such claim against the third party; provided that
     Buyer will not be obligated to bear any out-of-pocket third-party 
     costs in respect of such claim.

     7.3  Material Defects.

          (a)  General.  All or such part of the Title Defect
     Properties and the Environmental Defect Properties with
     respect to which the aggregate Title Defect Amounts and
     Environmental Defect Amounts are equal to or less than
     $7,000,000 (the "Defect Deductible") will be "Non-Material
     Defect Properties."  If the aggregate Title Defect Amounts and
     Environmental Defect Amounts with respect to all Title Defect
     Properties and Environmental Defect Properties is less than
     the Defect Deductible, the excess of the Defect Deductible
     over the aggregate of such Title Defect Amounts and
     Environmental Defect Amounts is referred to in this Agreement
     as the "Remaining Deductible".   If the sum of the Title
     Defect Amounts and Environmental Defect Amounts with respect
     to all Title Defect Properties and Environmental Defect
     Properties is greater than the Defect Deductible, then all
     Title Defect Properties and Environmental Defect Properties
     that are not Non-Material Defect Properties will be "Material
     Defect Properties." If Title Defect Properties and
     Environmental Defect Properties include both Non-Material
     Defect Properties and Material Defect Properties, Buyer may
     select the Title Defect Properties and Environmental Defect
     Properties to be included in the Non-Material Defect
     Properties by written notice given to Seller not later than
     270 days after the Closing Date.  If by such deadline Buyer
     fails to make such selection or fails to select Title Defect
     Properties and Environmental Defect Properties with respect to
     which the sum of the Title Defect Amounts and Environmental
     Defect Amounts is at least equal to the Defect Deductible,
     Seller will have the right to make such selections or such
     additional selections as may be necessary to meet the Defect
     Deductible.

          (b)  Offsets to Purchase Price
     Reductions.  Notwithstanding any other provisions of this
     Article VII to the contrary, all net increases in the
     Company's or any Subsidiary's net revenue interest in any
     lease, well or unit included in the Assets over and above the
     Company's or such Subsidiary's net revenue interest reflected
     in Exhibit A-2 and all net

                               -32-


     decreases in costs resulting from decreases in any of the
     Company's or any Subsidiary's working interest in any lease,
     well or unit included in the Assets below the Company's or
     such Subsidiary's working interest reflected in Exhibit A-2
     will be taken into account as an offset to any Title Defect
     Amounts and Environmental Defect Amounts.  The value of an
     offsetting interest will be proportionate to the value of the
     related Subject Interest as determined pursuant to
     Section 3.2.  For example, if a particular Subject Interest in
     a well is valued at $500,000 pursuant to Section 3.2 and the
     actual net revenue interest owned by the Company in such well
     is 25% greater than the net revenue interest for such well as
     set forth in Exhibit A-2, then Seller will be entitled to an
     offset against Title Defect Amounts and Environmental Defect
     Amounts of $125,000.  Buyer will promptly furnish Seller with
     written notice of any offsetting interest that is discovered
     by any of Buyer's employees or representatives while
     conducting Buyer's title review, due diligence or
     investigation with respect to the Subject Interests.
     Notwithstanding the foregoing, no net increase in net revenue
     interest or decrease in costs in respect of any Subject
     Interest will be taken into account as an offset against any
     Title Defect Amounts and Environmental Defect Amounts if the
     value thereof is less than $35,000.

     7.4  Title Defects.  For the purposes of this Agreement, a
portion of the Subject Interests will be deemed to have a "Title
Defect" if any one or more of the following statements is untrue
with respect to such portion of the Subject Interests as of the
Balance Sheet Date and as of the Closing Date:

          (a)  The Company or any Subsidiary has Defensible Title
     thereto; provided that the Company and such Subsidiary will
     not be deemed to lack Defensible Title for failure to pay
     royalties, rentals or other payments with respect to a Subject
     Interest or by reason of default under any lease, farmout
     agreement or other contract or agreement with respect to a
     Subject Interest, except to the extent the same would be a
     Title Defect under paragraphs (b) or (c) below.

          (b)  All royalties, rentals, Pugh clause payments, shut-in 
     gas payments and other payments due with respect to such
     portion of the Subject Interests have been properly and timely
     paid, except for payments held in suspense for title or other
     reasons that are customary in the industry and that will not
     result in grounds for cancellation of the Company's or any
     Subsidiary's rights in such portion of the Subject Interests.

          (c)  Neither the Company nor any Subsidiary is in default
     under the terms of any leases, farmout agreements or other
     contracts or agreements respecting such portion of the Subject
     Interests that could (1) interfere with the operation, value
     or use thereof, (2) prevent the Company or such Subsidiary
     from receiving the proceeds of production or other revenues
     attributable to the Company's or such Subsidiary's interest
     therein or (3) result in cancellation of the Company's or such
     Subsidiary's interest therein.

                               -33-


Notwithstanding the foregoing:

               (i)  No Title Defect will exist as to a Subject
          Interest unless the sum of the Title Defect Amounts in
          respect thereof, when added to the aggregate
          Environmental Defect Amounts in respect thereof, if any,
          exceed $35,000.  If a Title Defect exists pursuant to the
          preceding sentence, the Title Defect Amount for such
          Title Defect will include the entirety of such Title
          Defect Amount, including the portion below such threshold
          amount.

               (ii) Loss of any Asset or portion thereof following
          the date of this Agreement due to (A) any election or
          decision made by Seller in accordance with Article VIII
          or (B) expiration of the primary or secondary term of a
          lease, will not constitute a Title Defect.

     7.5  Preferential Rights to Purchase and Consents.

          (a)  In the event Buyer identifies any preferential
     purchase rights or consents to assignment that would be
     triggered by the transactions contemplated hereby, Buyer will
     furnish to Seller a list of the same together with reference
     to the instruments Buyer has identified evidencing such
     rights.  Seller will request from the parties so identified,
     in accordance with the instruments creating such rights,
     waivers of the preferential rights to purchase and
     requirements that consent to assignment be obtained that were
     so identified.

          (b)  If a party from whom a waiver of a preferential
     right to purchase is requested fails or refuses to give such
     waiver, Seller may send to the holder of such right (with a
     copy to Buyer) a notice offering to sell to such holder, in
     accordance with the contractual provisions applicable to such
     right, those Assets covered by such right on substantially the
     same terms as those contained in this Agreement and for the
     portion of the Purchase Price allocated to such Assets as
     provided in this Agreement, subject to adjustments in price in
     the same manner that the Purchase Price may be adjusted
     pursuant to this Agreement.

          (c)  If, prior to Closing, any holder of a preferential
     right notifies Seller of such holder's election to purchase
     the Assets to which its preferential purchase right applies,
     then the Company or Subsidiary, as applicable, will (i)
     satisfy all such preferential purchase right obligations and
     (ii) receive all proceeds received from such holders in
     connection with such preferential purchase rights.  All Assets
     for which a preferential purchase right has not been exercised
     prior to the Closing by the holder of such right will be
     included in the Assets owned by the Company or any Subsidiary
     at the Closing.  If one or more of the holders of such
     preferential purchase rights notifies Seller subsequent to the
     Closing of such holder's election to purchase, Seller will
     give notice thereof to Buyer, whereupon the Company or
     Subsidiary, as applicable, will (i) satisfy all such
     preferential purchase right obligations of Seller to such
     holders and (ii) receive all proceeds received from such
     holders in connection with such preferential purchase rights.
     In the event the

                               -34-


     Company or any Subsidiary, as applicable, is obligated to
     satisfy any such preferential purchase right obligation at
     less than the Stipulated Value of such Assets, then the
     difference between (i) the Stipulated Value for such Assets
     and (ii) the proceeds received from such holders in connection
     with such preferential purchase rights, will be deemed to be
     a Title Defect Amount; provided that such difference will not
     be deemed to be a Title Defect unless it exceeds $35,000, but
     once it exceeds $35,000, all of such difference shall
     constitute a Title Defect Amount.  In the event the Company or
     any Subsidiary, as applicable, is obligated to satisfy any
     such preferential purchase right obligation at more than the
     Stipulated Value of such Assets, then the difference between
     (i) the proceeds received from such holders in connection with
     such preferential purchase rights and (ii) the Stipulated
     Value for such Assets, will be an offset against the Title
     Defect Amounts; provided that such difference will not be
     offset against the Title Defect Amounts unless it exceeds
     $35,000, but once it exceeds $35,000, all of such difference
     will be an offset against the Title Defect Amounts.  Seller
     will deliver promptly to Buyer copies of all notices, or other
     correspondence relating to Buyer's acquisition of the Stock,
     received at any time from the date of this Agreement to the
     Closing Date from any person purporting to hold and to
     exercise or waive any preferential purchase right pertaining
     to any of the Assets.

     7.6  Purchase Price Adjustment; Limitation.

          7.6.1     Reimbursement Amount.  Within twenty-five (25)
     days after the expiration of the 270-day period referred to in
     subsection 7.2.1(c), Seller and Buyer will execute and deliver
     an agreement evidencing the refund, if any, to Buyer of the
     Purchase Price required by this Section 7.6 (the
     "Reimbursement Amount").  Subject to the Refund Limit set
     forth in Section 7.6.2, the Reimbursement Amount shall be
     calculated as follows:

          (i)  If Material Defect Properties exist, the sum of (A)
     the aggregate Title Defect Amounts and Environmental Defect
     Amounts with respect to all Material Defect Properties that
     are not conveyed to Seller or Seller's designee pursuant to
     Section 7.2.1(c), (B) the aggregate Stipulated Values of all
     Material Defect Properties that are conveyed to Seller or
     Seller's designee pursuant to Section 7.2.1(c), (C) the
     Section 29 Tax Credit Defect Amounts, (D) the Representation
     and Covenant Defect Amounts with respect to Representation and
     Covenant Defects that constitute Pre-Closing Defects, and (E)
     the Due Diligence Defect Amounts with respect to Due Diligence
     Defects that constitute Pre-Closing Defects.

          (ii) If Material Defect Properties do not exist, the
     result of (A) the sum of (1) the Section 29 Tax Credit Defect
     Amounts, (2) the Representation and Covenant Defect Amounts
     with respect to Representation and Covenant Defects that
     constitute Pre-Closing Defects and (3) the Due Diligence
     Defects that constitute Pre-Closing Defects, minus (B) the
     Remaining Deductible.

                               -35-


          7.6.2     Limitations; Payment.  Notwithstanding any
     other provisions of this Agreement, including, but not limited
     to the calculations set forth in Section 7.6.1, the
     Reimbursement Amount will in no event exceed $5,000,000 (the
     "Refund Limit").  Seller agrees to pay to Buyer the
     Reimbursement Amount, plus interest thereon from the Closing
     Date to the date of payment at a rate of six percent (6%) per
     annum, within 10 days following the final determination
     thereof.

     7.7  Arbitration.

          (a)  If the Pre-Closing Defect Amount timely asserted by
     Buyer pursuant to and in accordance with Section 6.10 exceeds
     $12,000,000 (a "Pre-Closing Defect Claim"), and Buyer does not
     waive the condition stated in Section 9.2(c), and if Seller
     disputes such assertion by Buyer, such dispute and any dispute
     regarding attempted cure by Seller shall be settled pursuant
     to this Section 7.7 and the Closing shall be delayed until
     10:00 a.m., Dallas, Texas time on the fifth business day
     immediately following the earliest of (i) the date, if any, on
     which such dispute is resolved in favor of Seller in
     accordance with the Arbitration Procedures, (ii) the date on
     which Seller and Buyer cause such condition stated in Section
     9.2(c) to be satisfied pursuant to the next sentence of this
     Section 7.7(a), or (iii) the date on which Seller causes such
     condition stated in Section 9.2(c) to be satisfied pursuant to
     Section 6.11; provided that if prior to the earliest of the
     dates described in clauses (i), (ii) and (iii) above Seller
     terminates all then unresolved disputes at a time when the
     condition stated in Section 9.2(c) is not satisfied (whether
     before or after arbitration has begun) then this Agreement
     shall then terminate as a result of the failure of the
     condition set forth in Section 9.2(c).  Buyer and Seller shall
     each deliver to the other a written notice describing the
     amount in dispute and a statement setting forth the facts and
     circumstances that support such party's position with respect
     to such dispute, and Buyer and Seller shall attempt in good
     faith to reach agreement in respect of the Pre-Closing Defect
     Claim.  Any such dispute that is not resolved by the scheduled
     Closing Date (as it may be delayed by Seller pursuant to
     Section 6.11) shall be submitted to final and binding
     arbitration in accordance with the Arbitration Procedures.

          (b)  If after Closing Buyer and Seller have not agreed
     upon the existence of one or more Defects, the effect of any
     attempted cure by Seller or the amount of one or more
     adjustments, credits or offsets related to the calculation of
     Defect Amounts claimed by Buyer or Seller pursuant to and in
     accordance with the requirements of this Agreement, any such
     claim (a "Deferred Adjustment Claim") shall be settled
     pursuant to this Section 7.7.  With respect to each potential
     Deferred Adjustment Claim, Buyer and Seller shall deliver to
     the other a written notice describing each such potential
     Deferred Adjustment Claim, the amount in dispute and a
     statement setting forth the facts and circumstances that
     support such party's position with respect to such Deferred
     Adjustment Claim.  On or prior to the 285th consecutive
     calendar day following the Closing Date (the "Deferred Matters
     Date"), Seller and Buyer shall attempt in good faith to reach
     agreement on the Deferred Adjustment Claims and, ultimately,
     to resolve by written agreement all disputes regarding the
     Deferred Adjustment Claims.  Any Deferred Adjustment Claims

                               -36-


     that are not so resolved on or before the Deferred Matters
     Date shall be submitted to final and binding arbitration in
     accordance with the Arbitration Procedures; provided, however,
     that Seller may elect at any time to resolve any and all
     disputes relating to the Deferred Adjustment Claims by
     refunding to Buyer the portion of the Purchase Price that
     would be refundable on account of the Defects that constitute
     Deferred Adjustment Claims if same did not constitute Deferred
     Adjustment Claims.  Notwithstanding anything herein provided
     to the contrary, including Sections 7.2.1(c) and 7.2.2(d),
     Seller shall be entitled to cure any Defect that constitutes
     a Deferred Adjustment Claim at any time prior to the point in
     time when a final and binding written decision of the
     applicable arbitrator(s) is made with respect thereto in
     accordance with the Arbitration Procedures.  The amount of any
     refund of a portion of the Purchase Price (but in no event
     greater than the Refund Limit) to which Buyer becomes entitled
     under the final and binding written decision of the applicable
     arbitrator(s) shall be promptly refunded by Seller to Buyer.

          (c)  Buyer and Seller will each use their reasonable
     efforts to cause the completion of any Arbitration Procedures
     within 90 days after the appointment of arbitrator in
     accordance with the Arbitration Procedures.  Either Buyer or
     Seller may unilaterally terminate this Agreement prior to the
     Closing if any arbitration proceeding instituted prior to the
     Closing is not concluded within 180 days after the appointment
     of arbitrators in accordance with the Arbitration Procedures.


                           ARTICLE VIII

                         OTHER AGREEMENTS

     8.1  Covenants of Seller Pending Closing.  From and after the
date of this Agreement and until the Closing, except as
contemplated by this Agreement or as otherwise consented to by
Buyer in writing, and subject to Section 8.2 below and the
constraints of applicable operating and other agreements, Seller
will cause the Company and the Subsidiaries to conduct their
businesses in the ordinary course consistent with past practices.
In addition, from and after the date of this Agreement and until
the Closing, except as contemplated by this Agreement or otherwise
consented to by Buyer in writing, and subject to Section 8.2 below
and the constraints of applicable operating and other agreements:

          (a)  Capital Expenditures.  Seller will use reasonable
     efforts to prevent the Company from making any capital
     expenditures (with respect to the Company's net working
     interest) relating to the Company's and the Subsidiaries'
     business and within the Company's current capital budget as
     provided to Buyer that, singly or in the aggregate with
     respect to any single project, exceed $500,000, except in
     connection with the performance by Seller, the Company or any
     Subsidiary of an obligation or agreement existing on the date
     of this Agreement or pursuant to this Agreement.

                               -37-


          (b)  Business Operations.  Seller will use reasonable
     efforts to cause the Subject Interests to be developed,
     maintained and/or operated in a manner consistent with past
     practices of the Company or the Subsidiary, as appropriate,
     and in the ordinary course of business.  Seller will use
     reasonable efforts to cause the Company and the Subsidiaries
     to continue the marketing of Hydrocarbons from the Assets
     consistent with past practices.  Seller will use reasonable
     efforts not to, and will use reasonable efforts to cause the
     Company and the Subsidiaries not to, take or fail to take any
     action (except at the instruction of Buyer or as required by
     Section 8.1) that would cause or permit any of the
     representations made in Article IV or any of the Due Diligence
     Benchmarks set forth in Sections 6.6.1, 6.6.3 (second sentence
     only), 6.6.4, 6.6.5, 6.6.6, 6.6.7, 6.6.8, 6.6.9, 6.6.10,
     6.6.11, 6.6.12, 6.6.14, 6.6.15 (except for the second
     sentence), 6.6.16, 6.6.17 and 6.6.18 to be inaccurate at the
     time of Closing.  Seller will use reasonable efforts to cause
     the Company to provide Buyer, as soon as reasonably
     practicable following receipt by the Company, with copies of
     all written proposals for drilling or other operations
     proposed in writing by third parties with respect to proposals
     involving the expenditure of more than $250,000 net to the
     Company's interest per proposal, and provide Buyer with such
     proposals made by the Company at the time they are sent to
     third persons, except to the extent any such proposals may be
     restricted from disclosure by contractual obligations with
     third parties.  Seller will use reasonable efforts to cause
     the Company and the Subsidiaries to timely pay all costs and
     expenses incurred in connection with the Assets, except to the
     extent contested in good faith utilizing appropriate action,
     and otherwise to keep the Assets free of liens (except for
     Permitted Encumbrances).

          (c)  Material Change.  Seller will promptly inform Buyer
     in writing of any material adverse change in the financial
     condition, operations, Assets, liabilities (contingent or
     otherwise), business or prospects of the Company or any
     Subsidiary.  Notwithstanding the disclosure to Buyer of any
     such material adverse change, Seller will not be relieved of
     any liability for, nor will the providing of such information
     by Seller to Buyer be deemed a waiver by Buyer of, the breach,
     if any, of any representation or warranty of Seller contained
     in this Agreement.

          (d)  Approvals of Third Parties.  Seller will use
     reasonable efforts to secure, as soon as practicable after the
     date hereof, all necessary approvals and consents of third
     parties to the consummation of the sale of the Stock.

          (e)  Employee Matters.  Seller will use reasonable
     efforts to cause the Company and the Subsidiaries not to,
     without the prior written approval of Buyer, except as
     required by law:

               (i)  increase the cash compensation of any employee
          of the Company or any Subsidiary;

               (ii) adopt, amend or terminate any compensation plan
          or employment agreement;

                               -38-


               (iii)     except for readoption and amendment of the
          Employee Severance Pay Plan as attached as Exhibit J,
          adopt, amend or terminate any Employee Policies and
          Procedures, including severance plans;

               (iv) enter into, modify, amend or terminate any
          agreement with any union, labor organization or
          collective bargaining unit; or

               (v)  take or fail to take any action with respect to
          any past or present employee of the Company or any
          Subsidiary that would materially adversely affect the
          business of the Company or any Subsidiary.

          (f)  Employee Benefit Plans.  Except as contemplated by
     clause (e)(iii) above, Seller will use reasonable efforts to
     insure that neither the Company nor any Subsidiary, without
     the prior written approval of Buyer, except as required by
     Law:

               (i)  adopts, amends or terminates any Employee
          Benefit Plan;

               (ii) takes any action that would deplete the assets
          of any Employee Benefit Plan, other than payment of
          benefits in the ordinary course to participants and
          beneficiaries;

               (iii)     fails to pay any premium or contribution
          due with respect to any Employee Benefit Plan;

               (iv) fails to file any return or report with respect
          to any Employee Benefit Plan; or

               (v)  takes or fails to take any action that would
          materially adversely affect any Employee Benefit Plan.

          (g)  Contracts.  Seller will use reasonable efforts to
     cause the Company and the Subsidiaries to perform all material
     obligations of the Company or any Subsidiary under any
     material contract.  Seller will use reasonable efforts to
     insure that neither the Company nor any Subsidiary will waive
     any material right or cancel any material contract, debt or
     claim or assume or enter into any material contract, lease,
     license, obligation, indebtedness, commitment, purchase or
     sale except in a manner consistent with past practices of the
     Company or the Subsidiary, as appropriate, and in the ordinary
     course of business.  Seller will use reasonable efforts to
     cause the Company and the Subsidiaries to maintain in full
     force and effect all insurance policies.

          (h)  Capital Assets; Payments of Liabilities.  Seller
     will use reasonable efforts to insure that neither the Company
     nor any Subsidiary, (i) acquires or disposes of any material
     capital asset or (ii) discharges or satisfies any material
     lien or encumbrance or pays or performs any material
     obligation or liability other than (A) liabilities and

                               -39-


     obligations reflected in the Financial Statements, only as
     required by the express terms of the agreement or other
     instrument pursuant to which the liability or obligation was
     incurred or (B) current liabilities and obligations incurred
     in a manner consistent with past practices of the Company or
     the Subsidiary, as appropriate, and in the ordinary course of
     business since the Balance Sheet Date; provided that written
     approval of Buyer will not be required in respect of any
     action taken in a manner consistent with past practices of the
     Company or the Subsidiary, as appropriate, and in the ordinary
     course of business.

          (i)  Mortgages, Liens and Guaranties.  Seller will use
     reasonable efforts to insure that neither the Company nor any
     Subsidiary makes any material capital contribution or
     investment in any corporation, business or other person,
     enters into or assumes any mortgage, pledge, conditional sale
     or other title retention agreement, permits any security
     interest, lien, encumbrance or claim of any kind (other than
     Permitted Encumbrances) to attach to any of the Assets,
     whether now owned or hereafter acquired, or guarantees or
     otherwise becomes contingently liable for any obligation of
     another, except obligations arising by reason of endorsement
     for collection and other similar transactions in a manner
     consistent with past practices of the Company or the
     Subsidiary, as appropriate, and in the ordinary course of
     business.

          (j)  Distributions and Repurchases.  Seller will insure
     that no distribution, payment or dividend of any kind is
     declared or paid by the Company or any Subsidiary, and no
     repurchase of any Stock or Subsidiary Stock is approved or
     effected.

          (k)  Notices.  Seller will use reasonable efforts to
     cause the Company and the Subsidiaries to promptly notify
     Buyer of any notice or threatened notice of which Seller, the
     Company or any Subsidiary becomes aware relating to any
     default, inquiry into any possible default or action to alter,
     terminate, rescind or procure a judicial reformation of any
     material lease or other material contract or any provision
     thereof.  The Seller will use reasonable efforts to cause the
     Company and the Subsidiaries to notify promptly Buyer of any
     new suits, actions or other proceedings before any court,
     arbitrator or governmental agency and any causes of action
     involving the Assets and that would materially impair the
     value of the Assets.

          (l)  Production Declines.  Prior to the Closing, Seller
     will promptly notify Buyer if Seller, the Company or any
     Subsidiary determines, in its good faith judgment, that any
     well producing more than 1,000 Mcfe per day net to the
     Company's or Subsidiary's interest as of the date hereof has
     experienced a material adverse change in its production
     characteristics that is reasonably anticipated to be
     permanent, based upon normal and customary petroleum
     engineering practices, including without limitation a decline
     in the rate of Hydrocarbon production from such well to a
     level materially below the historical levels of decline for
     such well.

          (m)  Casualty and Condemnation.  Seller will use
     reasonable efforts to cause the Company and the Subsidiaries
     to promptly notify Buyer of any material loss or destruction

                               -40-


     by fire, explosion, accident, earthquake, act of the public
     enemy, act of God or other similar casualty affecting any of
     the Assets of which Seller, the Company or any Subsidiary
     becomes aware.

Notwithstanding the other provisions of this Article VIII, (i)
Seller, the Company and the Subsidiaries may take (or not take, as
the case may be) any of the foregoing actions if reasonably
necessary under emergency circumstances and provided Buyer is
notified as soon thereafter as possible, and (ii) neither Seller,
the Company nor any Subsidiary shall have liability to Buyer for
the incorrect payment of delay rentals, royalties, shut-in
royalties or similar payments or for any failure to pay any such
payments through mistake or oversight (INCLUDING, WITHOUT
LIMITATION, THE NEGLIGENCE OF SELLER, THE COMPANY OR ANY
SUBSIDIARY) unless caused by Seller's gross negligence or willful
misconduct.  Any consent requested of Buyer with respect to the
matters covered by this Article VIII will not be unreasonably
withheld or action with respect thereto unduly delayed.  Failure to
give any notice provided for in this Section 8.1 shall not be a
basis for any claim with respect to Pre-Closing Defects or
otherwise impose any liability on Seller with respect thereto and
the information contained in the notice shall not be a basis for
any claim with respect to a Pre-Closing Defect unless the
information otherwise would cause a Pre-Closing Defect under other
provisions of this Agreement.

     8.2  Limitations on Seller's Covenants Pending Closing.

          (a)  To the extent Seller, the Company or any Subsidiary
     is not the operator of any of the Assets, the obligations of
     Seller, the Company or any Subsidiary in Section 8.1 above,
     which have reference to operations or activities that normally
     or pursuant to existing contracts are carried out or performed
     by the operator, will be construed to require only that
     Seller, the Company or such Subsidiary, as the case may be,
     use reasonable efforts (without being obligated to incur any
     expense or institute any cause of action) to cause the
     operator of such Assets to take such actions or render such
     performance within the constraints of the applicable operating
     agreements and other applicable agreements.

          (b)  Notwithstanding anything to the contrary in this
     Article VIII, should Seller or the Company conclude that the
     Company or any Subsidiary should not pay any lease rental or
     other payment or not participate in any reworking, deepening,
     drilling, completion, equipping or other operation on or with
     respect to any well or other Asset that may otherwise be
     required by Section 8.1 above, Seller will cause the Company
     or such Subsidiary to give Buyer written or oral notice
     thereof as soon as reasonably practicable after Seller, the
     Company or such Subsidiary receives written notice thereof
     from the operator of such property and the Company and such
     Subsidiary will not be obligated (nor will Seller be obligated
     to cause the Company or such Subsidiary) to make any such
     payment or to elect to participate in any such operation that
     Seller or the Company has concluded should not be made or
     participated in unless the Company receives from Buyer, within
     a reasonable time prior to the date when such payment or
     election is required to be made by the Company or such
     Subsidiary, (i) the written election and agreement of Buyer

                               -41-


     to require the Company or such Subsidiary to take such action
     and to indemnify Seller, the Company and such Subsidiary
     therefrom and (ii) all funds necessary for such action.
     Notwithstanding the foregoing, Seller will not be obligated to
     cause the Company or any Subsidiary to pay any lease rental or
     other payment or to elect to participate in any operation if
     the operator of the property involved recommends that such
     action not be taken.  If Buyer advances any funds pursuant to
     this Section 8.2(b) and the Assets to which such payments
     relate are conveyed to Seller or Seller's designee, pursuant
     to Article VII, and Seller does not reimburse Buyer for all
     advances made by Buyer with respect to such Assets pursuant to
     this Section 8.2(b) within 30 days after the Asset is conveyed
     to Seller or Seller's designee, then (i) Buyer will own and be
     entitled to any right of Seller, the Company or such
     Subsidiary that would have lapsed but for such payment and
     (ii) in the case of operations, Buyer will be entitled to
     receive the penalty that Seller, the Company or such
     Subsidiary, as nonconsenting party, would have suffered under
     the applicable operating agreement with respect to such
     operations as if Buyer were a consenting party thereunder.

     8.3  No Solicitation.  From and after the date of this
Agreement until June 15, 1995, Seller will not, and will not permit
any of its affiliates to, participate in any discussions with,
solicit offers from, or negotiate with, any party other than Buyer
for the purpose of selling any of the Stock or all or substantially
all of the Assets or merging the Company or any of the
Subsidiaries.

     8.4  Company Employees; Severance Costs.

          (a)  With respect to persons who are employees of the
     Company or a Subsidiary at any time between the date of this
     Agreement and the Closing Date ("Employees") and are
     terminated (the "Terminated Employees") by the Company or any
     Subsidiary during the period beginning on the date of this
     Agreement and ending 180 days after the Closing (the
     "Transition Period"), Seller will reimburse the Company or
     Subsidiary, as appropriate, for up to $4,000,000 of Severance
     Costs (as defined below) paid by the Company or the Subsidiary
     to the Terminated Employees.

          (b)  During the Transition Period, Buyer will cause the
     Company and the Subsidiaries to maintain in effect the
     severance policies that affect Employees as described in
     Section 10.6 and Buyer shall not permit the Company or any
     Subsidiary to decrease the cash compensation or materially
     change other benefits of any Employees until termination.
     Buyer will cause the Company and the Subsidiaries to maintain
     in effect the severance policies that affect the executives of
     the Company as described in Section 10.6 for a period of two
     years after the Closing Date.

          (c)  "Severance Costs" will mean the amounts paid in
     accordance with the Company's and the Subsidiaries' severance
     plans as in effect on the Closing Date that are calculated
     based on a period of time multiplied by base salary, plus the
     costs of outplacement services and post-termination "COBRA"
     (as defined in such severance plans)

                               -42-


     benefits, but will not include salary, vacation and pro rata
     bonuses under the Company's and the Subsidiaries' incentive
     pay plans or other benefits owing to employees through the
     Closing Date.

          (d)  In the event the Company, any Subsidiary, Buyer or
     any of their affiliates hires a Terminated Employee as a
     employee or consultant (or in any similar capacity) at any
     time within nine months after the Closing Date (except
     pursuant to the last sentence of (e) below), Buyer will repay
     to Seller all Severance Costs that Seller reimbursed to
     Company, any Subsidiary, Buyer or any of their affiliates with
     respect to such Terminated Employee.  Notwithstanding the
     foregoing, Buyer may contract to use a Terminated Employee's
     services for up to 3 months or for a total compensation of
     $20,000, whichever occurs first, without repaying such
     severance costs to Seller.

          (e)  After Closing Buyer shall cause the employees of the
     Company to cooperate with Seller as provided in Section 8.5
     and to cooperate in the preparation of final financial
     statements for periods prior to Closing.  To the extent that
     the Company does not have sufficient employees to cooperate to
     Seller's satisfaction, Seller may elect to cause the Buyer to
     hire, at Seller's expense, part-time employees to perform such
     services.

          (f)  Payments under this Section 8.4 will be made
     promptly and without reference to the procedures and
     limitations set forth in Article XI.  Buyer will not permit
     the Company or any Subsidiary to pay any Severance Costs to
     any Terminated Employee who has not executed a release
     substantially in the form of Exhibit F.

     8.5  Tax Matters.

          (a)  Preparation and Filing of Certain Tax Returns.  At
     the appropriate time (taking into account all extensions of
     time relating to any filing) after the Closing Date, Seller
     shall prepare and file, or cause Seller Parent Company to
     prepare and file, all appropriate consolidated and combined
     unitary Tax Returns for all Tax periods which include, on a
     consolidated or combined unitary basis, the business and
     operations of the Company and its Subsidiaries (the
     "Operations") through the end of business on the Closing Date
     (the "Pre-Closing Periods").  Seller shall have no
     responsibility for filing Tax Returns for the Company and its
     Subsidiaries for taxable periods beginning after the Closing
     Date (the "Post Closing Periods") and the Buyer shall prepare
     and file such returns.  Seller or the Seller Parent Company
     will include the income of the Company and its Subsidiaries
     (including any gain or loss recognized as a result of the
     election pursuant to Section 338 of the Code or similar state
     statute) for all Pre-Closing Periods on Seller's or Seller
     Parent Company's consolidated and combined unitary Tax Returns
     and pay all Taxes attributable thereto.  The income of the
     Company and its Subsidiaries shall be apportioned among the
     Pre-Closing Periods and the Post-Closing Periods by closing
     the books of the Company and its Subsidiaries as of the end of
     the Closing Date.

                               -43-


          (b)  Payment and Indemnity of Taxes Described in Section
     8.5(a).  Seller shall pay or cause to be paid all Income Taxes
     due with respect to the consolidated and combined unitary Tax
     Returns described in the first sentence of Section 8.5(a)
     (including any gain or loss recognized as a result of the
     election pursuant to Section 338 of the Code or similar state
     statute) with respect to any income earned or recognized in
     taxable years which include, on a consolidated or combined
     unitary basis, the Operations during the Pre-Closing Periods.
     The term "Income Taxes" as used herein means any Taxes which
     are determined by reference to the net income from the
     business and operations of an entity, irrespective of whether
     such Taxes are referred to as Income Taxes or by some other
     designation.  Seller shall indemnify, defend and hold harmless
     Buyer and its affiliates from and against any liability for
     any Income Taxes of Seller, Seller Parent Company, or the
     Company and its Subsidiaries described in the preceding
     sentence, including, but not limited to, any liability arising
     (i) under Treasury Regulation Section 1.1502-6 (or similar
     provision of state, local, or foreign law); (ii) as a
     transferee or successor; (iii) by contract or (iv) otherwise,
     and Seller shall be entitled to all refunds of such Taxes.
     Buyer shall be liable for, and shall indemnify, defend and
     hold harmless Seller and its affiliates from and against any
     Taxes of the Company and its Subsidiaries described in the
     second sentence of Section 8.5(a) and Buyer shall be entitled
     to all refunds of such Taxes.

          (c)  Preparation and Filing of Other Tax Returns.  In the
     case of those jurisdictions which require a short period Tax
     Return (other than a Tax Return covered by Section 8.5(a))
     ending on or before the Closing Date, as soon as practicable
     after the Closing Date, Seller shall prepare and file or cause
     Seller Parent Company to prepare and file all appropriate
     returns required to be filed on a consolidated, combined
     unitary or any other basis with respect to Taxes attributable
     to the Operations and the properties of the Company and its
     Subsidiaries for the Pre-Closing Periods (including any gain
     or loss recognized as a result of the election pursuant to
     Section 338 of the Code or similar state statue).  In the case
     of any other Tax Returns which include both Pre-Closing
     Periods and Post-Closing Periods and are required to be filed
     after the Closing Date, Buyer shall prepare and file such
     returns and timely provide copies of any such returns to
     Seller.

          (d)  Payment and Indemnity of Other Taxes.  Seller shall
     pay or cause to be paid, and shall indemnify, defend and hold
     harmless Buyer and its affiliates from and against, all Income
     Taxes due with respect to Tax Returns described in the first
     sentence of Section 8.5(c) that include the Operations and the
     properties of the Company and its Subsidiaries for the
     Pre-Closing Periods (including any gain or loss recognized as
     a result of the election pursuant to Section 338 of the Code
     or similar state statute).  Except as set forth in Section
     8.5(f), Buyer shall pay or cause to be paid, and shall
     indemnify, defend and hold harmless Seller and its affiliates
     from and against, all other Taxes due with respect to Tax
     Returns described in the first sentence of Section 8.5(c) that
     include the Operations and properties of the Company and its
     Subsidiaries for the Pre-Closing Periods.  In the case of
     those returns described in the second sentence of Section
     8.5(c), Seller shall pay or cause to be paid, and shall
     indemnify, defend and hold harmless Buyer and its affiliates
     from and against, all Income Taxes attributable to the
     Operations and the

                               -44-


     properties of the Company and its Subsidiaries for Pre-Closing
     Periods (including any gain or loss recognized as a result of
     the election pursuant to Section 338 of the Code or similar
     state statute) and shall be entitled to all refunds of such
     Taxes; and Buyer shall pay or cause to be paid, and shall
     indemnify, defend and hold harmless Seller and its affiliates
     from and against, (i) all other Taxes attributable to the
     Operations and the properties of the Company and its
     Subsidiaries for Pre-Closing Periods, and (ii) all Taxes
     attributable to the Operations and the properties of the
     Company and its Subsidiaries for Post-Closing Periods and
     shall be entitled to all refunds of such Taxes.

          (e)  Refund or Credit.  If and to the extent that Buyer
     or the Company or its Subsidiaries shall become entitled to a
     refund or credit of Income Taxes of the Company or any of its
     Subsidiaries for any Pre-Closing Period, Buyer shall promptly
     pay to Seller the amount of such refund or credit.  If any
     refund or credit of Income Taxes for which a payment has been
     made pursuant to this Section 8.5(e) is subsequently reduced
     or disallowed, Seller shall indemnify, defend and hold
     harmless Buyer for any liability for Income Taxes assessed
     against Buyer or the Company and its Subsidiaries by reason of
     the reduction or disallowance.

          (f)  State and Local Sales or Use Tax.  Buyer and Seller
     shall each be responsible for one-half of any state and local
     sales or use Taxes that may arise from the consummation of the
     transactions contemplated by this agreement.

          (g)  Termination of Tax Sharing Agreements.  Effective as
     of midnight, December 31, 1994, all liabilities and
     obligations between Seller, Seller Parent Company and any of
     the Company and its Subsidiaries under any tax allocation
     agreement or arrangement in effect shall be extinguished in
     full, and any liabilities or rights existing under any such
     agreement or arrangement shall cease to exist and shall no
     longer be enforceable, except for amounts reflected in the
     Financial Statements.  Accordingly, neither Seller nor Seller
     Parent Company shall make any payments to Buyer or the Company
     or its Subsidiaries in the event that Seller, Seller Parent
     Company or any of their affiliates other than the Company and
     its Subsidiaries realizes a reduction in Taxes as a result of
     the inclusion of the Company and its Subsidiaries in a
     consolidated or combined unitary Tax Return of Seller or
     Seller Parent Company for any taxable year or period ending on
     or before the Closing Date.

          (h)  Section 338 Election.  Seller and Buyer agree to
     make valid elections under Section 338(h)(10) and Section
     338(g) of the Code, and any similar state law tax election in
     all applicable states with respect to the Company, except that
     no such state law tax election shall be made in California.
     Seller and Buyer shall exchange completed and executed copies
     of Form 8023-A and required schedules thereto (the "Form") and
     Seller and Buyer agree to take all other action and file all
     other necessary reports to elect validly pursuant to Section
     338(h)(10) of the Code to treat the transaction as a sale of
     assets as opposed to a sale of stock.  Buyer and Seller shall
     each file a copy of the Form in a timely manner and shall
     provide assurance to the other party that it has done so.
     Buyer and Seller

                               -45-


     agree to confer as to the allocation of the Purchase Price for
     Tax purposes.  However, in the event that Seller and Buyer do
     not reach an agreement as to any such allocation, then Seller
     and Buyer shall not be bound by any partial or preceding
     agreement.  Nothing in this paragraph shall be construed as
     requiring that either Seller or Buyer hire appraisers or
     otherwise incur out-of-pocket expenses in order to reach
     agreement as to any of the allocations described above.

          (i)  Cooperation.  After the Closing Date, Buyer, Seller,
     and Seller Parent Company shall, and shall cause their
     respective subsidiaries to, cooperate in the preparation of
     all Tax Returns (including any statements, reports or returns
     required as a result of the elections made under Section 338
     of the Code) and responses to Tax audits and shall preserve
     and provide, or cause to be provided, to the requesting party
     any records or other information requested by such party in
     connection therewith as well as access to, and the cooperation
     with, the auditors of Buyer and Seller.  Each of Seller and
     Buyer shall provide notice within 25 days in writing to the
     other of any pending Tax audits, assessments or proceedings
     that it becomes aware of related to Taxes of the Company and
     the Subsidiaries for which it is indemnified by the other
     party hereunder.  Seller shall retain the originals of all Tax
     records, including asset records, presently existing with
     respect to the Company and the Subsidiaries, and Seller shall
     make such records available to Buyer and its representatives
     upon reasonable request by Buyer.  Seller shall also retain
     copies of all other records pertaining to the Company and the
     Subsidiaries for Pre-Closing Periods which Seller deems
     necessary or desirable to have for use in connection with Tax
     matters.  The originals of all records of the Company and the
     Subsidiaries that are not retained by Seller shall be retained
     by the Company and the Subsidiaries, made available to Seller
     and its representatives upon reasonable request by Seller and
     shall not be destroyed without Buyer first giving Seller 60
     days prior written notice of the intention to destroy any such
     original records.  In addition, Seller shall use its
     reasonable efforts to cause any partnership or Tax partnership
     in which the Company is a partner to make an election under
     Section 754 of the Code to adjust the basis of the assets of
     such partnership.

          (j)  Notice.  If a claim shall be made by any Tax
     authority against Buyer or the Company and its Subsidiaries or
     the Seller which, if successful, would result in the
     indemnification of Buyer by Seller or of Seller by Buyer
     pursuant to this Section 8.5 (a "Tax Claim"), or if an audit
     is commenced by any taxing authority with respect to any Tax
     that could give rise to a Tax Claim, Buyer or Seller, as the
     case may be, shall notify the other party in writing within 25
     days of such claim or commencement of such audit.  If such
     notice is not given in reasonable detail to apprise the party
     receiving the notice of the nature of the Tax Claim or audit,
     the party receiving the notice shall not be liable to the
     party giving the notice to the extent that the position of the
     party receiving the notice is prejudiced as a result thereof.
     In the event that either Seller or Buyer receives a request
     for information or documents from any Tax authority and any
     such information or documents is in the possession or control
     of the other party, then such other party shall make such
     information or documents available within 45 days of the date
     so requested to

                               -46-


     do so.  If, following any such request for information or
     documents, (i) the party in possession of the requested
     information or documents fails or refuses to comply with the
     request therefor, and (ii) said failure or refusal is a
     proximate cause of any assessment of any Tax by the Tax
     authority referenced in the preceding sentence, then,
     notwithstanding any other provision of this Agreement, the
     party in possession of the requested information or documents
     shall assume exclusive liability for the defense of any such
     assessment and the payment of any such Tax and the other party
     shall be indemnified, defended and held harmless by the party
     in possession of the requested information or documents.

          (k)  Control of Proceedings.  (i) Seller shall have the
     right upon timely notice to Buyer, to assume and control the
     conduct of any audit and the defense of any suit, action or
     proceeding with respect to any Tax Claim for Income Taxes
     resulting from a Pre-Closing Period at its own expense and
     with its own counsel.  If Seller elects to assume the defense
     of any audit or Tax Claim, notwithstanding anything to the
     contrary contained herein, (A) Seller shall not agree to any
     settlement thereof without the written consent of Buyer if the
     effect of such settlement would be to increase the liability
     of Buyer or its affiliates (including the Company and its
     Subsidiaries) for any Tax for any Post-Closing Period unless
     Seller agrees to pay to Buyer the full amount of the increase
     in liability, (B) Buyer shall not be required to pay for or
     otherwise indemnify Seller against any attorneys' fees of
     Seller in connection with such audit or Tax Claim if Seller
     elects to assume the defense of such audit or Tax Claim as
     provided herein, and (C) Seller shall keep Buyer informed of
     all material developments and events relating to such audit or
     Tax Claim.  Except as provided above, Seller will either
     pursue or forego any and all administrative appeals,
     proceedings, hearings and conferences with the Tax authority
     with respect to any audit or Tax Claim and may, in its sole
     option, either pay the Income Tax claimed and sue for a refund
     where applicable law permits such refund suits or may contest
     the Tax Claim in any permissible manner, and prosecute such
     contest to an initial determination in a court of initial
     jurisdiction, and to a final determination in an appellate
     court.

          (ii) Except as otherwise provided in Section 8.5 (k)(i),
     Buyer shall have the right upon timely notice to Seller, to
     assume and control the conduct of any audit and the defense of
     any suit, action or proceeding with respect to any Tax Claim,
     whether resulting from a Pre-Closing Period or a Post-Closing
     Period, at its own expense and with its own counsel.  If Buyer
     elects to assume the defense of any audit or Tax Claim,
     notwithstanding anything to the contrary contained herein, (A)
     Buyer shall not agree to any settlement thereof without the
     written consent of Seller if the effect of such settlement
     would be to increase the liability of Seller or its affiliates
     for any Tax for any Pre-Closing Period unless Buyer agrees to
     pay to Seller the full amount of the increase in liability,
     (B) Seller shall not be required to pay for or otherwise
     indemnify Buyer against any attorneys' fees of Buyer in
     connection with such audit or Tax Claim if Buyer elects to
     assume the defense of such audit or Tax Claim as provided
     herein, and (C) Buyer shall keep Seller informed of all
     material developments and events relating to such audit or Tax
     Claim.  Except as provided above, Buyer will  either pursue or
     forego any and all administrative appeals, proceedings,
     hearings and conferences with the Tax authority with respect
     to any audit or

                               -47-


     Tax Claim and may, in its sole option, either pay the Tax
     claimed and sue for a refund where applicable law permits such
     refund suits or may contest the Tax Claim in any permissible
     manner, and prosecute such contest to an initial determination
     in a court of initial jurisdiction, and to a final
     determination in an appellate court.

     8.6  Expenses.  Except as provided in Section 13.7, Buyer will
bear its own expenses, and Seller will bear its own expenses and
the expenses of the Company and the Subsidiaries, in connection the
Closing, including the fees and disbursements of its counsel,
petroleum engineers, accountants, financial advisors and other
representatives, whether or not the transactions contemplated
hereby are consummated.


                            ARTICLE IX

                        CLOSING CONDITIONS

     9.1  Seller's Closing Conditions.  The obligations of Seller
under this Agreement are subject, at the option of Seller, to the
satisfaction at or prior to the Closing of the following
conditions:

          (a)  All representations of Buyer contained in Article V
     will be true in all material respects at and as of the Closing
     as if such representations were made at and as of the Closing,
     and Buyer will have performed and satisfied all agreements
     required by this Agreement to be performed and satisfied by
     Buyer at or prior to the Closing;

          (b)  All necessary consents of and filings with third
     parties (including the Federal Trade Commission and the
     Department of Justice) necessary for Seller's sale of Stock
     will have been obtained, accomplished or waived and all
     applicable waiting periods under the Hart-Scott Act will have
     expired or been terminated;

          (c)  As of the Closing Date, no suit, action or other
     proceeding (excluding any such matter initiated by Seller or
     the Company) will be pending or threatened before any
     Governmental Authority seeking to restrain Seller or prohibit
     the Closing or seeking damages against Seller, the Company or
     any Subsidiary as a result of the consummation of this
     Agreement;

          (d)  Seller will have received all documents, duly
     executed in form reasonably satisfactory to Seller and its
     counsel, referred to in Section 10.3.

     9.2  Buyer's Closing Conditions.  The obligations of Buyer
under this Agreement are subject, at the option of Buyer, to the
satisfaction at or prior to the Closing of the following
conditions:

                               -48-


          (a)  All necessary consents of and filings with third
     parties (including the Federal Trade Commission and the
     Department of Justice) necessary for Seller's sale of the
     Stock will have been obtained, accomplished or waived and all
     applicable waiting periods under the Hart-Scott Act will have
     expired or been terminated;

          (b)  As of the Closing Date, no suit, action or other
     proceeding (excluding any such matter initiated by Buyer) will
     be pending or threatened before any Governmental Authority
     seeking to restrain Buyer or prohibit the Closing or seeking
     damages against Buyer as a result of the consummation of this
     Agreement;

          (c)  The Pre-Closing Defect Amount will not have exceeded
     $12,000,000;

          (d)  Buyer will have received all documents, duly
     executed in form reasonably satisfactory to Buyer and its
     counsel, referred to in Section 10.2; and

          (e)  Buyer will have received satisfactory evidence that
     all expenses of the Company and the Subsidiaries in respect of
     the transactions contemplated hereby have either been
     reimbursed by Seller or adequate provision for such
     reimbursement after the Closing Date has been made.


                            ARTICLE X

                             CLOSING

     10.1 Closing.  The closing of the transactions contemplated by
this Agreement (the "Closing") will be held at 10:00 a.m., Dallas,
Texas time, at the offices of Jackson & Walker, L.L.P., 901 Main,
Suite 6000, Dallas, Texas, on June 8, 1995, or as soon thereafter
as practicable, or at such other date or place as the parties may
agree in writing (the "Closing Date").

     10.2 Seller's Closing Obligations.  At Closing, Seller will
deliver to Buyer the following:

          (a)  Certificates representing all of the Stock, duly
     endorsed and in proper form for transfer to Buyer by delivery
     under applicable law, or accompanied by duly executed
     instruments of transfer in blank;

          (b)  A copy of resolutions of the Board of Directors of
     Seller authorizing the execution, delivery and performance of
     this Agreement and all related documents and agreements,
     certified by the Secretary of Seller as being true and correct
     copies of the originals thereof subject to no modifications or
     amendments;

          (c)  A certificate of an executive officer of Seller,
     dated the Closing Date, setting forth the status of Seller's
     performance and compliance with the covenants of Seller

                               -49-


     contained in Article VIII, which shall be utilized solely for
     purposes of determining whether a Representation and Covenant
     Defect exists;

          (d)  A certificate of an executive officer of Seller,
     dated the Closing Date (i) as to the truth and correctness of
     the representations of Seller under Article IV as of the
     Closing Date, (ii) as to the performance of and compliance by
     Seller with the covenants of Seller (other than those set
     forth in Article VIII) contained herein on and as of the
     Closing Date and (iii) certifying that all conditions
     precedent of Seller to the Closing have been satisfied or are
     waived;

          (e)  A certificate of the Secretary of Seller certifying
     as to the incumbency of the directors and officers of Seller
     and as to the signatures of all directors and officers who
     have executed documents delivered at the Closing on behalf of
     Seller;

          (f)  Certificates, dated within five business days prior
     to the Closing Date, of the Secretary of State of the states
     of incorporation of Seller, the Company and each of the
     Subsidiaries establishing that Seller, the Company and each of
     the Subsidiaries is in existence, has paid all franchise taxes
     and otherwise is in good standing to transact business in its
     state of incorporation;

          (g)  Certificates, dated within five business days prior
     to the Closing Date, of the Secretaries of State of the states
     in which the Company and each of the Subsidiaries is qualified
     to do business, to the effect that the Company and each of the
     Subsidiaries is qualified to do business and is in good
     standing as a foreign corporation in each of such states;

          (h)  An opinion of Fulbright & Jaworski L.L.P., special
     counsel to Seller, reasonably acceptable to Buyer, dated as of
     the Closing Date, with respect to the matters set forth in
     Exhibit G;

          (i)  An opinion of Richard C. Jones, Chief Counsel of
     Seller, as to opinions involving Seller, and an opinion of
     Randall B.  Wilson, General Counsel of the Company, as to
     opinions involving the Company, in each case reasonably
     acceptable to Buyer, dated as of the Closing Date, with
     respect to matters set forth in Exhibit H;

          (j)  All authorizations, consents, approvals, permits and
     licenses required by Section 4.6;

          (k)  Evidence of Seller's compliance with the Hart-Scott
     Act;

          (l)  Resignations or terminations of the directors and
     officers of the Company and the Subsidiaries effective as of
     the Closing Date that are requested by Buyer;

                               -50-


          (m)  An Indemnity Agreement dated as of the Closing Date
     executed on behalf of Seller, substantially in the form
     attached as Exhibit E;

          (n)  A nonforeign affidavit, as such affidavit is
     referred to in Section 1445(b)(2) of the Code, in form
     reasonably acceptable to Buyer, of Seller and Pacific Gas and
     Electric Company, signed under penalty of perjury and dated as
     of the Closing Date, to the effect that such persons are
     United States citizens (and thus not foreign persons) and
     providing such persons' United States taxpayer identification
     numbers;

          (o)  Duly executed documents in form reasonably
     satisfactory to Buyer pursuant to which Seller, except as set
     forth in the proviso below, releases, relinquishes and waives
     any and all claims, demands, causes of action, suits,
     judgments or controversies of any kind whatsoever, whether
     known or unknown, that Seller may have against the Company
     and/or the Subsidiaries as of the Closing Date, for any reason
     whatsoever, including without limitation claims by Seller
     against the Company the Subsidiaries with respect to
     dividends, repayment of loans, violation of preemptive rights,
     or payment of salaries or other compensation, provided that
     Seller shall not release the intercompany receivables that are
     to be paid, or are payable, in accordance with Section 2.3 or
     subleases of (a) the lease covering certain office space in
     Two Corporate Centre in Concord, California and (b) the lease
     covering certain office space in Four Embarcadero Center in
     San Francisco, California; and

          (p)  Such other instrument or instruments of transfer as
     will be necessary or appropriate, as Buyer or its counsel
     reasonably requests, to vest in Buyer good and marketable
     title to the Stock.

     10.3 Buyer's Closing Obligations.  At Closing, Buyer will
deliver to Seller the following:

          (a)  The Purchase Price in immediately available funds;

          (b)  Any unpaid portion of the Interest Payment;

          (c)  A copy of the resolutions of the Board of Directors
     of Buyer authorizing the execution, delivery and performance
     of this Agreement and all related documents and agreements,
     each certified by Buyer's Secretary as being true and correct
     copies of the originals thereof subject to no modifications or
     amendments;

          (d)  A certificate of the President of Buyer, dated the
     Closing Date (i) as to the truth and correctness of the
     representations of Buyer under Article V on and as of the
     Closing Date, (ii) as to the performance of and compliance by
     Buyer with all covenants contained herein on and as of the
     Closing Date and (iii) certifying that all conditions
     precedent of Buyer to the Closing have been satisfied or are
     waived;

                               -51-


          (e)  A certificate of the Secretary of Buyer certifying
     as to the incumbency of the directors and officers of Buyer
     and as to the signatures of all directors and officers who
     have executed documents delivered at the Closing on behalf of
     Buyer;

          (f)  A certificate, dated within five business days prior
     to the Closing Date, of the Secretary of State of the State of
     Texas establishing that Buyer is in existence, has paid all
     state taxes and otherwise is in good standing to transact
     business in such state;

          (g)  An opinion of Jackson & Walker, L.L.P., special
     counsel to Buyer, reasonably acceptable to Seller, dated as of
     the Closing Date, with respect to the matters set forth in
     Exhibit I;

          (h)  Evidence of Buyer's compliance with the Hart-Scott
     Act;

          (i)  Effective releases regarding, or evidence of payment
     of indebtedness under, the Bank Credit Agreement contemplated
     by Section 2.3; and

          (j)  Duly executed documents in form satisfactory to
     Seller pursuant to which the Company and the Subsidiaries,
     except as set forth in the proviso below, release, relinquish
     and waive any and all claims, demands, causes of action,
     suits, judgments or controversies of any kind whatsoever,
     whether known or unknown, that the Company and the
     Subsidiaries, or any of them, may have against Seller as of
     the Closing Date, for any reason whatsoever, including without
     limitation claims with respect to intercompany payables and
     receivables (including without limitation the NGCC Indemnity)
     that are not settled pursuant to Section 2.3, provided that
     the Company and the Subsidiaries shall not release the
     intercompany receivables that are to be paid, or payable, in
     accordance with Section 2.3 or subleases of (a) the lease
     covering certain office space in Two Corporate Centre in
     Concord, California and (b) the lease covering certain office
     space in Four Embarcadero Center in San Francisco, California.

     10.4 Distribution of Properties.  To the extent not conveyed
or distributed to Seller or Seller's designee prior to the Closing
Date, at Closing, Seller will cause the Company to cause to be
conveyed or distributed to Seller or Seller's designee the rights,
interests, properties and assets excluded from the Assets under
Sections 2.2 and 2.3(c) and Article VII.

     10.5 Change of Corporate Name.  Seller, the Company, the
Subsidiaries and Buyer will execute such documents at Closing as
may be necessary to change the corporate names of certain
Subsidiaries as provided in Section 2.2.

     10.6 Company's Employee Benefit Plans.

          (a)  Buyer expressly acknowledges that the Company has
     adopted an Employee Severance Pay Plan (the "ESPP") and an
     Executive Severance Pay Plan (the "ExSPP") and that the ExSPP
     will continue in effect for two (2) years and the ESPP will
     continue in

                               -52-


     effect for a period of 180 days after the Closing as
     obligations of the Company subject to the Seller reimbursement
     provisions of Section 8.4.  Buyer hereby guarantees prompt
     payment and performance of the Company's obligations under the
     ESPP and an ExSPP.  The parties hereby expressly agree that
     the Employees (as defined in Section 8.4) will be intended
     third party beneficiaries of the obligations and guaranty set
     forth in this Section 10.6(a), with the right to enforce such
     obligations and guaranty for their benefit, and such
     obligations and guaranty may not be rescinded, modified or
     amended in any manner (except as provided below) that is
     adverse to any such Employee without such Employee's prior
     written consent (whether or not any such Employee will have
     been notified of the provisions of this Section 10.6(a) or
     materially changed his position in reliance thereon).  As of
     the close of business on the 180th day following Closing, the
     ESPP may be terminated and the employees of the Company will
     be eligible for severance pay under Buyer's plan, if any.  As
     of the close of business on the second anniversary of the
     Closing, the ExSPP may be terminated and the executives of the
     Company will be eligible for severance pay under Buyer's plan,
     if any.  Seller will reimburse the Company for any liability
     incurred in connection with the termination of the ESPP and
     the ExSPP pursuant to their terms in existence on the Closing
     Date.  Prior to the 90th day following the Closing Date, Buyer
     will notify each Employee of any plans it has to terminate
     that Employee within 180 days following the Closing Date.

          (b)  After the Closing, to the extent that (i) the
     Company is authorized or required to seek a release from any
     officer or employee under either the ESPP or the ExSPP, or
     (ii) the execution of a release by an officer or employee is
     a condition to the receipt of benefits under either the ESPP
     or the ExSPP, Buyer will cause the Company to seek, and such
     officer or employee to execute, a release substantially in the
     form of Exhibit F.

          (c)  With respect to the right of the Committee (as
     defined in the ExSPP) to reduce the severance benefits of an
     executive under the ExSPP if the executive accepts a position
     that is not a Comparable Position (as defined in the ExSPP),
     for a period of 210 days after Closing, Buyer will cause the
     Company to require the Committee to exercise such right in
     accordance with the instructions of Seller.

     10.7 Taking of Necessary Action.  Subject to the terms and conditions of
this Agreement and to applicable Law, each of the parties to this
Agreement will use all reasonable efforts promptly to take or cause
to be taken all action and promptly to do or cause to be done all
things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by this
Agreement.  Without limiting the foregoing, each of the parties to
this Agreement will, and will cause each of its subsidiaries to,
use reasonable efforts to obtain and make all consents, approvals,
assurances or filings of or with third parties and Governmental
Authorities necessary or, in the opinion of Seller, advisable for
the consummation of the transactions contemplated hereby.  Each
party will cooperate with the other in good faith to help the other
satisfy its obligations in this Section 10.7.

                               -53-


                            ARTICLE XI

     LIMITATIONS ON WARRANTIES AND REMEDIES; INDEMNIFICATION

     11.1 Limitations.  The representations of Seller contained in
this Agreement are exclusive and are in lieu of all other
representations and warranties, express, implied or statutory,
including without limitation any representation or warranty with
respect to the quality, quantity or volume of the reserves of oil,
gas or other Hydrocarbons in or under the Subject Interests.  The
items of personal property, equipment, fixtures and appurtenances
included as part of the Assets are accepted by Buyer "AS IS, WHERE
IS" and no warranties or representations of any kind or character,
express or implied, including any warranty of quality,
merchantability, fitness for a particular purpose or condition, are
given by or on behalf of Seller.  THE WARRANTIES OF SELLER AND
BUYER CONTAINED IN THIS AGREEMENT ARE EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED, AND BUYER AND SELLER HEREBY
WAIVE ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR CONDITION.  To the maximum extent permitted
by Law, Seller and Buyer waive all provisions of the Texas
Deceptive Trade Practices Act, Chapter 17, Texas Business and
Commerce Code (other than Section 17.555 thereof), insofar as the
provisions of such Act may be applicable to this Agreement or the
transactions contemplated hereby.  To evidence its ability to grant
such waiver, Buyer hereby represents and warrants to Seller
(A) that Buyer (i) is seeking or acquiring, by purchase or lease,
goods or services for commercial or business use, (ii) has assets
of $5,000,000 or more according to its most recent financial
statement prepared in accordance with GAAP, (iii) has knowledge and
experience in financial and business matters that enable it to
evaluate the merits and risks of the transaction contemplated
hereby and (iv) is not in a significantly disparate bargaining
position and (B) that (i) Buyer has assets of $25,000,000 or more
or (ii) is owned or controlled by a corporation or entity with
assets of $25,000,000 or more.  Similarly, Buyer, on its own behalf
and on behalf of the Company, hereby releases, acquits and forever
discharges Seller from any claim, demand or cause of action Buyer
or the Company may have against Seller for contribution or
reimbursement provided under Environmental Law, except for a
Purchase Price refund (subject to the Refund Limit as provided in
this Agreement and indemnity for Disposition Liabilities).

     11.2 Survival; Time Limit for Claims.  No representation,
warranty, covenant or agreement made in this Agreement will survive
the Closing except as provided in this Section 11.2.  It is
expressly agreed that the terms and provisions of Articles I, II,
III, VII, XI, XII and XIII and Sections 4.1, 5.6, 6.3, 6.4, 6.6,
6.7, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 8.1, 8.2, 8.4, 8.5,
8.6, 10.4, 10.5 and 10.6 will survive the Closing until the
expiration of the relevant statute of limitations period; provided
that Seller shall have no liability (whether for indemnity or
otherwise) with respect to the provisions of Articles VI or VIII
except through the return of Purchase Price procedure of Section
7.6.  In addition, the definitions set forth in this Agreement that
are used in the provisions that survive the Closing pursuant to
this Section 11.2 shall survive the Closing to the extent necessary
to give operative effect to such surviving

                               -54-


provisions.  No claim for liability with respect to any provision
of this Agreement, whether through indemnity or otherwise, may be
made after the survival period for such provision. Notwithstanding
the foregoing, nothing contained herein shall be deemed to limit
Buyer's or Seller's right to assert a claim based on fraud in
connection with the transactions contemplated hereby.  As set forth
in Section 11.4, notwithstanding any other provisions of this
Agreement, Seller will have no liability under this Agreement
(whether for indemnity or otherwise), and will not be required in
any circumstances to pay to Buyer any amounts in the aggregate, in
excess of the Purchase Price.

     11.3 Indemnification by Buyer.  From and after the Closing,
Buyer agrees to indemnify, defend and hold harmless Seller and
Seller Parent Company and their past, present and future officers,
directors, employees, consultants and agents and the past, present
and future (through the Closing Date) officers, directors,
employees, consultants and agents of the Company from and against
any and all liabilities, losses, damages, claims (whether or not
ultimately successful), costs, expenses (including without
limitation reasonable legal costs and expenses) and obligations
("Losses and Obligations") of the Company and the Subsidiaries
(specifically including the employee claims described on Schedule
6.6.5(g), but excluding liabilities associated with assets that
were owned by the Company and the Subsidiaries and disposed of
prior to the Closing Date to the extent such liabilities have not
been specifically listed on Schedules to this Agreement
("Disposition Liabilities") and excluding the Severance Costs to be
reimbursed by Seller to the Company pursuant to Section 8.4
("Reimbursed Severance Costs")) and any and all Losses and
Obligations related to the Assets, including without limitation
Losses and Obligations under Environmental Laws (except to the
extent of any refund of a portion of the Purchase Price on account
of Environmental Defects under Article VII), Losses and Obligations
with respect to employee compensation, welfare or benefit plans
(other than Reimbursed Severance Costs) and Losses and Obligations
ARISING FROM THE NEGLIGENCE OF ANY INDEMNIFIED PARTY.

     11.4 Indemnification by Seller; Limitations on
Liability.  Seller agrees to indemnify, defend and hold harmless
Buyer and its past, present and future officers, directors,
employees, consultants and agents from and against any Losses and
Obligations relating to (i) breach of the representations of Seller
set forth in Section 4.1 or covenants of Seller set forth in
Section 8.1(j) or (ii) Disposition Liabilities.  In addition, the
parties will enter into an Indemnity Agreement on the Closing Date,
substantially in the form attached as Exhibit E, which relates to
those matters covered by the NGCC Indemnity at the date hereof.
Notwithstanding any other provisions of this Agreement, Seller will
have no liability under this Agreement (whether for indemnity or
otherwise), and will not be required in any circumstances to pay to
Buyer any amounts in the aggregate, in excess of the Purchase
Price.

     11.5 Indemnification Procedure.

          (a)  For the purposes of this Section 11.5, the term
     "Indemnitee" will refer to the person or persons indemnified
     or entitled (or claiming to be entitled) to be indemnified

                               -55-


     pursuant to the provisions of this Agreement; and the term
     "Indemnitor" will refer to the person having the obligation to
     indemnify pursuant to such provision.

          (b)  An Indemnitee will promptly give the Indemnitor
     notice of any matter that an Indemnitee has determined has
     given or could give rise to a right of indemnification under
     this Agreement, stating the amount of the Losses and
     Obligations, if known, and method of computation thereof, all
     with reasonable particularity, and stating with particularity
     the nature of such matter.  Failure to provide such notice
     will not affect the right of the Indemnitee to indemnification
     except to the extent such failure will have resulted in
     liability to the Indemnitor that could have been avoided had
     such notice been provided promptly.

          (c)  The obligations and liabilities of an Indemnitor
     under this Article XI with respect to Losses and Obligations
     arising from claims of any third party that are subject to the
     indemnification provided for in this Article XI ("Third Party
     Claims") will be governed by and contingent upon the following
     additional terms and conditions: if an Indemnitee receives
     notice of any Third Party Claim, the Indemnitee will give the
     Indemnitor notice of such Third Party Claim pursuant to
     clause (b) above, and the Indemnitor may, at its option,
     assume and control the defense of such Third Party Claim at
     the Indemnitor's expense and through counsel of the
     Indemnitor's choice that is reasonably acceptable to the
     Indemnitee.  In the event the Indemnitor assumes the defense
     against any such Third Party Claim as provided above, the
     Indemnitee will have the right to participate at its own
     expense in the defense of such asserted liability, will
     cooperate with the Indemnitor in such defense and make
     available on a reasonable basis to the Indemnitor all
     witnesses, pertinent records, materials and information in its
     possession or under its control relating thereto as is
     reasonably required by the Indemnitor.  In the event the
     Indemnitor does not elect to assume the defense against any
     such Third Party Claim, the Indemnitor will pay all reasonable
     costs and expenses of such defense as incurred and will
     cooperate with the Indemnitee (and be entitled to participate)
     in such defense and make available on a reasonable basis all
     such witnesses, records, materials and information in its
     possession or under its control relating thereto as is
     reasonably required by the Indemnitee.  Except for the
     settlement of a Third Party Claim that involves the payment of
     money only and for which the Indemnitee is totally indemnified
     by the Indemnitor, no Third Party Claim may be settled without
     the prior written consent of the Indemnitee, which consent
     will not unreasonably be withheld or action with respect
     thereto unduly delayed.

          (d)  The amount that an Indemnitee will be entitled to
     receive from an Indemnitor with respect to any indemnifiable
     Losses and Obligations under this Agreement will be net of any
     insurance recovery by the Indemnitee on account of such Losses
     and Obligations from an unaffiliated party.  Each Indemnitee
     will be required to pursue recovery from applicable insurance
     carriers, to the fullest reasonable extent, before asserting
     a claim for indemnification for Losses and Obligations
     hereunder.

                               -56-


                           ARTICLE XII

                       DEFAULT AND REMEDIES

     12.1 Remedies.  Upon failure of either party to comply with
this Agreement by the Closing Date, as it may be extended in
accordance with this Agreement, the other party will be entitled to
pursue, exercise and enforce any and all remedies, rights, powers
and privileges available at law or in equity, provided that, as set
forth in Section 11.4 and notwithstanding any other provisions of
this Agreement, Seller will have no liability under this Agreement
(whether for indemnity or otherwise), and will not be required in
any circumstances to pay to Buyer any amounts in the aggregate, in
excess of the Purchase Price.

     12.2 Termination by Lapse of Time.  This Agreement may be
terminated by either party by providing written notice to the other
party if the Closing is not completed before 5:00 p.m., Dallas,
Texas, time, on June 15, 1995 (or such later date provided for in
Section 6.11), unless the circumstances resulting in the failure to
consummate the Closing before that time are the result of a breach
of any of the terms of this Agreement by the party seeking to
exercise its right to terminate under this Section 12.2.

     12.3 Other Remedies.  In addition to the foregoing,
termination of this Agreement will not prejudice or impair Seller's
or Buyer's obligations under Sections 6.4 (and the Confidentiality
Agreement referenced in Section 6.4) and 8.2(b) and such other
portions of this Agreement as are necessary to the enforcement and
construction of Sections 6.4 and 8.2(b).  The prevailing party in
any legal proceeding brought under or to enforce this Agreement
will be additionally entitled to recover court costs and reasonable
attorney's fees from the non-prevailing party.

     12.4 Specific Performance.  Buyer and Seller understand and
agree that the covenants and undertakings on each of their parts
contained in this Agreement are uniquely related to the desire of
Buyer and Seller to consummate the transactions contemplated by
this Agreement, and that the sale of the Stock to Buyer is a unique
business opportunity for Buyer and Seller, and that monetary
damages would not be an adequate remedy therefor.  Accordingly,
Buyer and Seller agree that Buyer will be entitled to obtain
specific performance from Seller of each and every covenant and
undertaking contained in this Agreement to be observed or performed
by Seller and that Seller will be entitled to obtain specific
performance from Buyer of each and every covenant and undertaking
contained in this Agreement to be observed or performed by Buyer.
The election by Buyer or Seller to exercise its right to obtain
specific performance shall be in lieu of any right to damages as
provided in Section 12.1; provided, however, if specific
performance is not available to the terminating party pursuant to
this Section 12.4, such party shall be entitled to receive damages
as provided in Section 12.1 in lieu of such specific performance.

     12.5 Seller's Net Worth Covenant.  Prior to the second
anniversary of the date of this Agreement, Seller will not declare
or pay a distribution on any of its capital stock that (after
taking into account such distribution) would cause its net worth to
be less than $200,000,000, unless Seller's liabilities to Buyer
under this Agreement are assumed by an entity under common

                               -57-


control with Seller that (i) has a net worth not less than
$200,000,000 and (ii) agrees in writing with Buyer that it will
not, prior to the second anniversary of the date of this Agreement,
declare or pay a distribution on any of its capital stock that
(after taking into account such distribution) would cause its net
worth to be less than $200,000,000.

     12.6 Buyer's Net Worth Covenant.  Prior to the second
anniversary of the date of this Agreement, Buyer will not declare
or pay a distribution on any of its capital stock that (after
taking into account such distribution) would cause its net worth to
be less than $200,000,000, unless Buyer's liabilities to Seller
under this Agreement are assumed by an entity under common control
with Buyer that (i) has a net worth not less than $200,000,000 and
(ii) agrees in writing with Seller that it will not, prior to the
second anniversary of the date of this Agreement, declare or pay a
distribution on any of its capital stock that (after taking into
account such distribution) would cause its net worth to be less
than $200,000,000.


                           ARTICLE XIII

                          MISCELLANEOUS

     13.1 Antitrust Laws.  This Agreement is subject in all
respects to and conditioned upon compliance by the parties with
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "Hart-Scott Act"), and rules and regulations promulgated
pursuant thereto, to the extent that such Act, rules and
regulations are applicable to the transactions contemplated hereby.
Buyer and Seller agree to make such filings with and provide such
information to the Federal Trade Commission and the Department of
Justice with respect to the transactions contemplated hereby as are
required in connection with the Hart-Scott Act sufficiently in
advance of the Closing Date to permit the lapse of the normal
waiting periods prescribed in connection with the Hart-Scott Act
prior to the Closing Date and to join each others' requests for
early termination.  Buyer and Seller agree to use reasonable
efforts to obtain all governmental approvals required to consummate
the transactions contemplated hereby and to cause early termination
of the waiting period under the Hart-Scott Act.

     13.2 Confidentiality of Proprietary Information.  Subsequent
to the execution of this Agreement, neither Seller nor any of its
affiliates will for itself or on behalf of any corporation, person,
firm, partnership, association, or other entity (whether as an
individual, agent, servant, employee, employer, director, officer,
shareholder, investor, principal, consultant or in any other
capacity) disclose to any person or entity any of the confidential
seismic and other oil and gas information, trade secrets,
exploratory data, methods, systems, procedures, data bases or
software programs or applications or processes of, or utilized by,
the Company; provided that (after reasonable measures have been
taken to maintain the confidentiality and after giving reasonable
notice to Buyer specifying the information involved and the manner
and extent of the proposed disclosure thereof) (i) any disclosure
of such information may be made to the extent required by
applicable Law or judicial or regulatory process, (ii) such
information may be used as evidence in or in connection with any
pending or threatened litigation relating to this Agreement or any

                               -58-


transaction contemplated hereby, (iii) any disclosure of such
information may be made to the extent that such information is in
the public domain (other than by or through Seller), and (iv) any
disclosure of such information may be made to the extent required
by any agreement or agreements under which Seller, the Company or
any Subsidiary is bound or to which the Stock or any of the Assets
are subject.

     13.3 Public Announcements.  Except as set forth in the
following sentence, the parties to this Agreement agree that prior
to making any public announcement or statement with respect to the
transactions contemplated by this Agreement, the party desiring to
make such public announcement or statement will consult with the
other party and exercise reasonable efforts to (i) agree upon the
text of a joint public announcement or statement to be made by both
of such parties or (ii) obtain approval of the other party to the
text of a public announcement or statement to be made solely by
Seller or Buyer, as the case may be.  Nothing contained in this
Section will be construed to require either party to obtain
approval of the other party to disclose information, or to submit
any such disclosed information for review by the other party, with
respect to any disclosure (i) required by applicable Law or
(ii) necessary to comply with disclosure requirements of any
applicable stock exchange.

     13.4 Delivery of Records.  Except as otherwise provided in
Section 8.5(i), Seller will deliver to Buyer as soon after the
Closing Date as is practicable all files, data, books (including
corporate minute books) and records (including stock transfer
records) of the Company and the Subsidiaries.

     13.5 Further Assurances and Records.

          (a)  After the Closing each of the parties will execute,
     acknowledge and deliver to the other such further instruments,
     and take such other action, as may be reasonably requested in
     order to more effectively assure to such party all of the
     respective properties, rights, titles, interests, estates, and
     privileges intended to be assigned or delivered to, or to
     inure to the benefit of, such party in consummation of the
     transactions contemplated hereby.

          (b)  Buyer agrees to maintain the files and records of
     the Company and the Subsidiaries that are acquired pursuant to
     this Agreement until December 31, 2005 (or for such longer
     period of time as Seller will advise Buyer is necessary in
     order to have records available with respect to open years for
     Tax audit purposes), or, if any of such records pertain to any
     claim or dispute pending at December 31, 2005, Buyer will
     maintain any of such records designated by Seller until such
     claim or dispute is finally resolved and the time for all
     appeals has been exhausted.  Buyer will provide Seller and its
     representatives reasonable access to and the right to copy
     such files and records for the purposes of (i) preparing and
     delivering any accounting provided for under this Agreement
     and adjusting, prorating and settling the charges and credits
     provided for in this Agreement, (ii) complying with any Law
     affecting Seller's interest in the Stock or the Company's or
     any Subsidiary's interest in the Assets prior to the Closing
     Date, (iii) preparing any audit

                               -59-


     of the books and records of any third party relating to
     Seller's interest in the Stock or the Company's or any
     Subsidiary's interest in the Assets prior to the Closing Date,
     or responding to any audit prepared by such third parties,
     (iv) preparing Tax Returns, (v) responding to or disputing any
     Tax audit or (vi) asserting, defending or otherwise dealing
     with any claim or dispute under this Agreement or with respect
     to the Company, the Subsidiaries or the Assets.  In no event
     will Buyer destroy any such files and records without giving
     Seller 60 days advance written notice thereof and the
     opportunity, at Seller's expense, to obtain such files and
     records prior to their destruction.

     13.6 Notices.  Except as otherwise expressly provided in this
Agreement, all communications required or permitted under this
Agreement will be in writing and any such communication or delivery
will be deemed to have been duly given and received when actually
delivered to the address set forth below of the party to be
notified personally (by a recognized commercial courier or delivery
service that provides a receipt) or by telecopier (confirmed in
writing by a personal delivery as set forth above), addressed as
follows:

         If to Seller:  PG&E Enterprises
                        444 Market Street, Suite 1900
                        San Francisco, CA  94111
                        Attention: Vice President--Finance
                        Fax: (415) 291-6496

                        With a copy to:

                        PG&E Enterprises
                        444 Market Street, Suite 1900
                        San Francisco, CA  94111
                        Attention: Chief Counsel
                        Fax: (415) 291-6498

         If to Buyer:   Enserch Exploration, Inc.
                        c/o ENSERCH Corporation
                        300 S. St. Paul
                        Dallas, TX  75201
                        Attention: Michael G. Fortado, Esq.
                        Fax: (214) 670-2097


                               -60-


                        With a copy to:

                        Jackson & Walker, L.L.P.
                        901 Main Street, Suite 6000
                        Dallas, TX  75202-3797
                        Attention: Fred W. Fulton, Esq.
                        Fax: (214) 953-6115

Any party may, by written notice so delivered to the other, change
the address to which delivery will thereafter be made.

     13.7 Incidental Expenses.  Buyer will bear and pay (i) all
transfer or documentary taxes incident to the transfer of Stock to
Buyer and (ii) all filing, recording or registration fees for any
assignment or conveyance delivered under this Agreement.

     13.8 Assumption of Risk.  Effective if and only if the Closing
occurs, Buyer shall assume all risk of diminution in the value of
the Stock due to a change in the condition of the Assets or the
business of the Company and the Subsidiaries from the Balance Sheet
Date until Closing (INCLUDING, WITHOUT LIMITATION, ANY SUCH
DIMINUTION OR CHANGE ATTRIBUTABLE TO THE NEGLIGENCE OF SELLER, THE
COMPANY OR ANY SUBSIDIARY), except (i) to the extent any change of
condition is attributable to the willful misconduct or gross
negligence of Seller or (ii) to the extent a breach by Seller of
its covenants in Section 8.1 gives rise to a refund of the Purchase
Price pursuant to Section 7.6.

     13.9 Entire Agreement.  Except for the Confidentiality
Agreement, this Agreement embodies the entire agreement between the
parties with respect to the subject matter of this Agreement
(superseding all prior agreements, arrangements, understandings and
solicitations of interest or offers related to the subject matter
of this Agreement), and may be supplemented, altered, amended,
modified or revoked by writing only, signed by both of the parties
to this Agreement.  The headings in this Agreement are for
convenience only and will have no significance in the
interpretation of any term or provision of this Agreement.

     13.10     Governing Law.  This Agreement will be governed and
construed and enforced in accordance with the laws of the State of
Texas, without regard to rules concerning conflicts of laws.

     13.11     Counterparts.  This Agreement may be executed in any
number of counterparts, and each and every counterpart will be
deemed for all purposes one agreement.

     13.12     Waiver.  Any of the terms, provisions, covenants,
representations or conditions contained in this Agreement may be
waived only by a written instrument executed by the party waiving
compliance.  The failure of any party at any time or times to
require performance of any provision of this Agreement will in no
manner affect such party's right to enforce the same.  No waiver by
any party of any condition, or of the breach of any term,
provision, covenant or

                               -61-


representation contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, will be deemed to be or
construed as a further  or continuing waiver of any such condition
or breach or a waiver of any other condition or of the breach of
any other term, provision, covenant or representation.

     13.13     Binding Effect; Assignment.  All the terms,
provisions, covenants, representations and conditions of this
Agreement will be binding upon and inure to the benefit of and be
enforceable by the parties to this Agreement and their respective
successors and assigns; but this Agreement and the rights and
obligations hereunder will not be assignable or delegable by any
party without the prior written consent of the non-assigning or
non-delegating parties, which may be withheld at the sole
discretion of such parties.

     13.14     No Recordation.  Buyer and Seller expressly covenant
and agree not to record or place of record this Agreement or any
copy or memorandum thereof in any real property records.

     13.15     Time Periods.  Time is of the essence in the
performance of this Agreement.

     13.16     Construction.  Each party hereby acknowledges and
agrees that such party has consulted legal counsel in connection
with the negotiation of this Agreement and that such party has
bargaining power equal to that of the other party in connection
with the negotiation and execution of this Agreement.  Accordingly,
the parties agree the rule of contract construction to the effect
that an agreement will be construed against the draftsman will have
no application in the construction or interpretation of this
Agreement.

        [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]




                               -62-


     IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their duly authorized officers as of the date first
above written.

ATTEST:                       PG&E ENTERPRISES



                              By      /s/ Stuart W. Booth
                              Name:
                              Title:  Vice President - Finance and
                                      Treasurer



ATTEST:                       ENSERCH EXPLORATION, INC.



                              By      /s/ David W. Biegler
                              Name:
                              Title:  Chairman and Chief Executive
                                      Officer


                           EXHIBIT A-1

                      ARBITRATION PROCEDURES


    The arbitration procedures (the "Arbitration Procedures")
referred to in the Stock Purchase Agreement (the "Agreement") to
which this Exhibit A-1 is attached shall be as follows:

1.  Capitalized terms used herein, and not otherwise herein
    defined, shall have the meaning ascribed to such terms in the
    Agreement.

2.       (a)  If a disagreement regarding a Pre-Closing Defect
    Claim or any other matter for which arbitration is available
    under the Agreement is submitted to arbitration, such
    disagreement will constitute a "Disputed Issue" to be resolved
    by the binding arbitration provided for herein.

         (b)  With respect to unresolved Deferred Adjustment
    Claims, on or before the Deferred Matters Date, Seller and
    Buyer shall each submit to the other the list of what such
    party considers to comprise the remaining unresolved Deferred
    Adjustment Claims.  The two lists shall together comprise the
    "Disputed Issues" relating to Deferred Adjustment Claims which
    shall be resolved by the binding arbitration provided for
    herein.

3.  Seller and Buyer, each being duly authorized by all necessary
    corporate proceedings, shall submit the Disputed Issues to
    binding arbitration by an arbitrator selected as follows:
    Buyer and Seller shall use reasonable efforts to select a
    mutually acceptable arbitrator.  If the parties fail to agree
    on an arbitrator within fifteen (15) days, either party may
    follow the procedures specified below and request judicial
    appointment of an arbitrator.  Either party may request the
    judge of the United States District Court for the Northern
    District of Texas having greatest tenure, but not yet on
    retired or senior status, to appoint an arbitrator.  If that
    judge fails to do so within thirty (30) days, either party may
    request the judge of that court next senior to name the
    arbitrator, and if that judge fails to do so after ten (10)
    days, either party may make the request of the judge of that
    court next senior, and so on, until the arbitrator is
    appointed.  Each arbitrator shall be knowledgeable about
    matters affecting the Disputed Issue(s) for which such
    arbitrator is appointed.  In addition, the arbitrator shall be
    required to meet the qualification requirements of the
    Commercial Arbitration Rules of the American Arbitration
    Association (the "AAA Rules").  If prior to rendering a
    decision an arbitrator resigns or becomes unable to serve, the
    arbitrator will be replaced using the mechanism set forth in
    this Section 3.

4.  No party subject to these Arbitration Procedures will commence
    or prosecute any suit or action against another party subject
    to these Arbitration Procedures relating to the Disputed
    Issues, other than as may be necessary to compel arbitration
    under these Arbitration Procedures or to enforce the award of
    an arbitrator.

                              A-1-1


5.  In fulfilling his duties hereunder with respect to Disputed
    Issues, any arbitrator shall be bound by the applicable
    provisions of the Agreement that relate to Defects.  Except as
    set forth in Section 7.6.2 of the Agreement, the arbitrator
    shall not add any interest factor reflecting the time value of
    money to any amount awarded.

6.  No matters whatsoever, other than the Disputed Issues, are
    subject to the agreement to arbitrate embodied in these
    Arbitration Procedures.  The arbitrator shall be empowered
    hereunder solely to resolve the Disputed Issues.  The
    arbitrator shall not have any authority to award
    consequential, exemplary or punitive damages.  The sole forum
    for the arbitration shall be Dallas County, Texas and all
    hearings shall be conducted in Dallas  County, Texas.

7.  The decision of the arbitrator shall be rendered in writing
    and shall be final and binding upon the parties as to the
    Disputed Issues.  The expenses of arbitration, including
    compensation to the arbitrator, shall be borne equally by the
    parties.  Each party shall bear the compensation and expenses
    of its own counsel, witnesses and employees.  If the testimony
    of a witness is obtained by both parties, the costs associated
    with obtaining such testimony shall be borne equally between
    the parties.

8.  Matters not specifically provided for in these Arbitration
    Procedures shall be governed by the AAA Rules.














                              A-1-2

EX-15

                                                       EXHIBIT 15




            CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS



     As independent public accountants, we hereby consent to the
incorporation by reference in ENSERCH Corporation's registration
statements on Form S-3 (File No. 33-52525), as amended, and
Form S-8 (File No. 33-57715), of our report on the financial
statements of Dalen Corporation as of December 31, 1994 and 1993,
and for the three years in the period ended December 31, 1994,
dated February 24, 1995, included in this Form 8-K, and to all
references to our firm included in these registration statements.






                                   ARTHUR ANDERSEN LLP

Dallas, Texas
May 26, 1995

EX-99.1

                                                        EXHIBIT 99.1





DALEN CORPORATION

Consolidated Financial Statements
As Of December 31, 1994 And 1993
Together With Auditor's Report








                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors of
DALEN Corporation:


We have audited the accompanying consolidated balance sheets of DALEN
Corporation (formerly DALEN Resources Corp.) and subsidiaries as of December
31, 1994 and 1993 (as restated, see note 1), and the related consolidated
statements of operations, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1994.  These financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DALEN Corporation and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting
principles.

As explained in Note 2 to the financial statements, effective January 1, 1993,
DALEN Corporation and subsidiaries adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."  Prior year financial
statements have not been restated.




                                    ARTHUR ANDERSEN LLP

Dallas, Texas
February 24, 1995





                       DALEN CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Operations
              For the years ended December 31, 1994, 1993 and 1992
                        (stated in thousands of dollars)


                                             1994         1993         1992
                                                            
REVENUES:
  Natural gas                              $115,593     $152,488     $111,779
  Oil and gas liquids                        51,054       73,852       82,003
  Other                                       2,341        5,144        5,822
                                           --------     --------     --------
                                            168,988      231,484      199,604
                                           --------     --------     --------
OPERATING EXPENSES:
  Lease operating                            43,533       56,367       52,389
  General and administrative                 18,057       17,783       18,788
  Depreciation, depletion and amortization  101,151      128,364      109,294
  Exploration                                24,886       19,453       25,278
                                           --------     --------     --------
                                            187,627      221,967      205,749
                                           --------     --------     --------
OPERATING INCOME (LOSS)                     (18,639)       9,517       (6,145)
                                           --------     --------     --------
OTHER INCOME (EXPENSE):
  Interest income                             3,656        1,360        1,848
  Interest expense                           (6,002)      (7,255)      (6,885)
  Other, net                                  2,845           85        1,105
                                           --------     --------     --------
                                                499       (5,810)      (3,932)
                                           --------     --------     --------
EARNINGS (LOSS) BEFORE INCOME TAXES AND
  CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE                      (18,140)       3,707      (10,077)

INCOME TAX BENEFIT (EXPENSE):
  Current                                    21,859       18,997       25,656
  Deferred                                   (6,653)     (13,153)     (22,125)
                                           --------     --------     --------
                                             15,206        5,844        3,531
                                           --------     --------     --------
NET EARNINGS (LOSS) BEFORE CUMULATIVE
  EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE                                  (2,934)       9,551       (6,546)

CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE                                     7,958
                                           --------     --------     --------
NET EARNINGS (LOSS)                        $ (2,934)    $ 17,509     $ (6,546)
                                           ========     ========     ========



See accompanying notes to consolidated financial statements.





                       DALEN CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets
                           December 31, 1994 and 1993
                        (stated in thousands of dollars)

                                                          1994         1993
                                                        --------     --------
                     ASSETS
                                                               
CURRENT ASSETS:
  Cash and cash equivalents                             $ 10,888     $ 48,117
  Accounts receivable:
    Oil and gas                                           20,009       29,934
    Trade                                                  6,030        5,537
    Affiliates                                             7,616       11,154
  Inventories                                              2,125        3,802
  Prepaid expenses                                         3,635        6,310
                                                        --------     --------
      Total current assets                                50,303      104,854
                                                        --------     --------
PROPERTY AND EQUIPMENT:
  Oil and gas properties, based on successful
    efforts method                                       787,579      916,354
  Other property and equipment                             6,671        5,808
                                                        --------     --------
                                                         794,250      922,162
  Less: Accumulated depreciation, depletion
    and amortization                                    (362,548)    (353,455)
                                                        --------     --------
      Net property and equipment                         431,702      568,707
                                                        --------     --------
OTHER ASSETS                                                 655        1,745
                                                        --------     --------
TOTAL ASSETS                                            $482,660     $675,306
                                                        ========     ========
           LIABILITIES AND STOCKHOLDER'S EQUITY

CURRENT LIABILITIES:
  Accounts payable                                      $ 15,394     $ 25,641
  Interest payable                                            67          954
  Accrued liabilities                                     10,998       12,937
                                                        --------     --------
      Total current liabilities                           26,459       39,532
                                                        --------     --------
DEFERRED INCOME TAXES                                     72,529       65,876

ABANDONMENT, DISMANTLEMENT AND OTHER LIABILITIES          13,864       15,156

LONG-TERM DEBT                                           115,000      130,000

STOCKHOLDER'S EQUITY:
  Common stock, $0.01 par value, 1,000 shares
    authorized; 100 shares issued and outstanding              1            1
  Additional paid-in capital                             335,470      502,470
  Accumulated deficit                                    (80,663)     (77,729)
                                                        --------     --------
      Total stockholder's equity                         254,808      424,742
                                                        --------     --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY              $482,660     $675,306
                                                        ========     ========

See accompanying notes to consolidated financial statements.




                       DALEN CORPORATION AND SUBSIDIARIES
                 Consolidated Statements of Stockholder's Equity
              For the years ended December 31, 1994, 1993, and 1992
             (stated in thousands of dollars, except common shares)


                                            Additional
                             Common Stock     Paid-In   Accumulated
                            Shares  Amount    Capital     Deficit     Totals
                            ------  ------   --------   -----------  --------
                                                      
BALANCE AT JANUARY 1, 1992    100     $1     $637,470     $(88,692)  $548,779

  Dividends to Parent                        (135,000)               (135,000)

  Net loss                                                  (6,546)    (6,546)
                              ---     --     --------     --------   --------
BALANCE AT DECEMBER 31, 1992  100      1      502,470      (95,238)   407,233

  Net earnings                                              17,509     17,509
                              ---     --     --------     --------   --------
BALANCE AT DECEMBER 31, 1993  100      1      502,470      (77,729)   424,742

  Dividends to Parent                        (167,000)               (167,000)

  Net loss                                                  (2,934)    (2,934)
                              ---     --     --------     --------   --------
BALANCE AT DECEMBER 31, 1994  100     $1     $335,470     $(80,663)  $254,808
                              ===     ==     ========     ========   ========


See accompanying notes to consolidated financial statements.




                            DALEN CORPORATION AND SUBSIDIARIES
                           Consolidated Statements of Cash Flows
                   For the years ended December 31, 1994, 1993 and 1992
                             (stated in thousands of dollars)

                                                         1994         1993         1992
                                                       --------     --------     --------
                                                                        
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings (loss)                                  $ (2,934)    $ 17,509     $ (6,546)
  Adjustments to reconcile net loss to
    net cash provided by operating activities:
      Depreciation, depletion and amortization          101,151      128,364      109,424
      Surrendered leases and impairments                  9,461        9,344       12,983
      Dry hole expense                                    9,352        4,143        7,482
      Deferred income taxes                               6,653       13,153       22,125
      Loss (gain) on sale of assets                      (2,509)         146         (365)
      Cumulative effect of change in
        accounting principle                                          (7,958)        -
      Other                                                (769)      (2,630)        (737)
                                                       --------     --------     --------
                                                        120,405      162,071      144,366
                                                       --------     --------     --------
Changes in operating assets and liabilities:
  Decrease (increase) in accounts receivable              8,563       34,869      (13,141)
  Decrease (increase) in prepaid expenses                 2,534           54       (1,461)
  Decrease in accounts payable                           (9,842)     (11,985)     (22,279)
  Increase (decrease) in interest payable                  (887)        (529)         556
  Decrease in accrued liabilities and other              (3,629)        (544)      (4,183)
                                                       --------     --------     --------
      Net cash provided by operating activities         117,144      183,936      103,858
                                                       --------     --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                  (108,105)     (94,442)     (89,892)
  Proceeds from sales of property and equipment         135,732        1,540        1,907
  Receivable related to acquisition                                                 5,573
                                                       --------     --------     --------
    Net cash provided by (used in) investing
      activities                                         27,627      (92,902)     (82,412)
                                                       --------     --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends to Parent                                  (167,000)                 (135,000)
  Long-term debt borrowing                               15,000                   111,000
  Repayment of long-term debt                           (30,000)     (60,007)          (6)
                                                       --------     --------     --------
    Net cash used in financing activities              (182,000)     (60,007)     (24,006)
                                                       --------     --------     --------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                           (37,229)      31,027       (2,560)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR             48,117       17,090       19,650
                                                       --------     --------     --------
CASH AND CASH EQUIVALENTS, END OF YEAR                 $ 10,888     $ 48,117     $ 17,090
                                                       ========     ========     ========


See accompanying notes to consolidated financial statements.




                     DALEN CORPORATION AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         DECEMBER 31, 1994 AND 1993


1.    ORGANIZATION:

      The accompanying consolidated financial statements have been prepared
      in accordance with generally accepted accounting principles and include
      the accounts of DALEN Corporation (formerly DALEN Resources Corp.) and
      its wholly-owned subsidiaries (the "Company").  All significant
      intercompany balances and transactions are eliminated in consolidation.
      The Company is a wholly-owned subsidiary of PG&E Enterprises ("Parent"),
      which is 100% owned by Pacific Gas and Electric Company ("PG&E").  The
      Company's primary business activity is the exploration, development and
      production of natural gas and crude oil reserves in the continental
      United States.

      During 1994, the Parent determined that the Company did not fit within
      its long-term corporate strategy.  As a result, the Parent intends to
      sell its 100% ownership interest in the Company through an initial
      public offering of the Company's common stock or by other means.  A
      registration statement was filed on Form S-1 with the Securities and
      Exchange Commission during 1994 to effect the disposition.  The
      accompanying prior year financial statements were restated in connection
      with the filing of the Form S-1, resulting in an increase in 1993 net
      earnings and stockholder's equity of $24.2 million.


2.    ACCOUNTING POLICIES:

      Property and Equipment

      The Company uses the successful efforts method of accounting for oil and
      gas properties.  Under the successful efforts method, lease acquisition
      costs are capitalized when incurred.  Unproved leasehold costs are
      periodically assessed on a property-by-property basis, and a loss is
      recognized when assessment indicates a permanent impairment in value has
      occurred.  Any remaining unproved leasehold costs are charged to expense
      upon abandonment of the respective leases.

      Exploratory costs, excluding successful exploratory wells, are charged
      to expense as incurred.  Costs of drilling exploratory wells are
      initially capitalized pending determination of whether the wells have
      found proved reserves which justify commercial development.  If proved
      reserves are not found, the drilling costs are charged to expense.
      Costs applicable to productive wells and development dry holes are
      capitalized and amortized on the units-of-production method based on
      estimated proved reserve quantities.

      The Company periodically reviews the carrying value of its proved oil
      and gas properties for impairment in value on a company-wide basis by
      comparing capitalized costs of proved oil and gas properties with
      undiscounted future net cash flows, after income taxes.  Under this
      policy, no impairment in carrying value has been required during 1994,
      1993, or 1992.  However, in November 1993 the Financial Accounting
      Standards Board issued an exposure draft "Accounting for the Impairment
      of Long-Lived Assets."  Under this proposed standard, an assessment of
      fair value of oil and gas properties will be required to be performed
      using certain groupings of property costs.  Fair value is to be measured
      by market value, if an active market exists.  If the market value is not
      readily determinable, discounted future net cash flows, after income


      taxes, are to be used to estimate fair value.  The impact of adoption
      of this proposed statement on the consolidated financial statements of
      the Company has not been determined.

      Other property and equipment are depreciated on a straight-line basis
      over their estimated useful lives ranging from 5 to 20 years.  Major
      renewals and betterments, which improve or extend the life of the asset,
      are capitalized.  The costs of repairs and maintenance are charged to
      expense as incurred.

      Abandonment and Dismantlement Costs

      Estimated abandonment and dismantlement costs of offshore wells and
      platforms are accrued as liabilities on the units-of-production method
      based on estimated proved reserves of the property.  At December 31,
      1994, total estimated future abandonment and dismantlement costs
      associated with proved developed properties were $11.3 million, of which
      $6.2 million was accrued.

      Inventories

      Inventories, consisting principally of equipment and oil field supplies,
      are recorded at cost which approximates market value.

      Gas Balancing Arrangements

      The Company only recognizes revenue associated with volumes sold to
      which it is entitled under respective property divisions of interest.
      Proceeds received for natural gas volumes in excess of entitlements are
      deferred and recognized as revenue when the gas is made up to the other
      interest owners.  Accounts receivable and payable resulting from gas
      balancing arrangements were not significant at December 31, 1994 or
      1993.

      Hedging Transactions

      The Company periodically enters into oil and natural gas hedging
      transactions to minimize the risk of price decreases.  Such hedging
      transactions also limit revenues which might result from potential price
      increases.  Under the hedging transactions, the Company receives or
      makes payments based on the differential between a specified price and
      the actual quote market price of oil and natural gas.  The Company does
      not use derivative financial instruments for trading purposes.

      Gains and losses resulting from hedging activities are recognized in the
      same period that revenues on hedged volumes are recorded.  Net gains
      (losses) of $2.4 million, ($8.9) million and ($12.8) million resulting
      from such transactions are included in oil and natural gas revenues for
      the years ended December 31, 1994, 1993 and 1992, respectively.  The
      Company had no open hedging positions at December 31, 1994.

      Income Taxes

      The operations of the Company are ultimately included in the
      consolidated tax return of PG&E.  A tax-sharing agreement between PG&E
      and the Parent provides that the Parent pay its proportionate share of
      state and federal income taxes and that PG&E reimburse the Parent for
      related tax benefits to the extent realized in the consolidated tax
      return.  The Parent then allocates its proportionate share of income


      taxes to the Company based on its contribution to the consolidated tax
      liability or benefit.

      Effective January 1, 1993, the Company adopted Statement of Financial
      Accounting Standards No. 109, "Accounting for Income Taxes"
      ("SFAS No. 109"), which requires recognition of deferred tax liabilities
      and assets for the expected future tax consequences of events that have
      been included in the financial statement or tax returns.  Under this
      method, deferred tax liabilities and assets are determined based on the
      difference between the financial statement and tax basis of assets and
      liabilities using enacted tax rates.  The cumulative effect of adopting
      SFAS No. 109 at January 1, 1993 resulted in an increase in oil and gas
      properties and deferred income taxes of $22.0 million and $14.0 million,
      respectively, and a cumulative gain of $8.0 million.  The financial
      statements for 1992 have not been restated.

      Prior to 1993, the provision for income taxes was based on income and
      expenses included in the consolidated statements of operations.
      Differences between taxes computed on financial earnings and taxes
      currently payable under applicable state and federal statutes and
      regulations were classified as deferred taxes.

      Fair Value of Financial Instruments

      Statement of Financial Accounting Standards No. 107, "Disclosure about
      Fair Value of Financial Instruments",  defines the fair value of a
      financial instrument as the amount at which the instrument could be
      exchanged in a current transaction between willing parties.  The
      Company's financial instruments are comprised of short-term investments,
      accounts receivable, accounts payable and long-term debt.  The carrying
      amount of the Company's financial instruments approximate fair value
      because of the short maturity of the instruments or because the interest
      rates of the instruments are based on current market rates.

      Statements of Cash Flows

      For purposes of the statements of cash flows, the Company considers all
      highly liquid cash investments with an original maturity of three months
      or less to be cash equivalents.

      Supplemental cash flow information is as follows (stated in thousands
      of dollars):


                                             Year Ended December 31,
                                           1994        1993        1992
                                         -------     -------     -------
                                                        
Cash paid for interest during the year   $ 6,889     $ 7,656     $ 6,329
                                         =======     =======     =======
Cash received from Parent for income
  tax benefit                            $25,196     $25,041     $14,433
                                         =======     =======     =======


3.  RELATED PARTY TRANSACTIONS:

    The Company sells natural gas to PG&E and to other affiliates. These sales
    were made on terms approximating spot market prices at the time of the
    transactions.  During 1994, 1993 and 1992, such sales totaled
    approximately $1.2 million, $1.7 million and $2.8 million, respectively.


    The Company's employee benefit plans and insurance programs are
    administered or combined with affiliated companies under the Parent's
    control.  The Company has paid its proportionate share of related costs
    (administration fees to third parties and premiums) which approximates the
    cost of obtaining such programs for non-affiliates.

    PG&E and the Parent perform certain other administrative functions,
    including cash management services, for the Company.  Costs associated
    with such services for 1994, 1993 and 1992 were not significant.  At
    December 31, 1994 and 1993, $8.9 million and $46.1 million, respectively,
    of the Company's cash was held by PG&E, at the Company's option, for cash
    management purposes.  The average interest rate received by the Company on
    such cash investments was 4.9% in 1994 and 3.8% in 1993, which
    approximates market rates.

    Accounts receivable from affiliates at December 31, 1994 and 1993 result
    primarily from income tax benefits due from the Parent, and are liquidated
    upon the filing of the annual consolidated tax return of PG&E.  Other
    accounts receivable and payable to affiliates resulting from the above
    activities are liquidated by receipts and payments in the normal course of
    business.


4.  LONG-TERM DEBT:

    The Company's credit agreement (the "Agreement"), as amended February 22,
    1995, provides for a two-year revolving loan (expiring February 1997),
    which is convertible at the Company's option, to a five year term loan.
    The revolving loan may be extended annually by consent of the banks.  The
    Agreement has a maximum commitment from the banks of $200 million, with
    actual commitment amounts potentially limited by the periodic
    determination of a "Borrowing Base" (determined based on discount future
    net revenues expected from the Company's proved oil and gas reserves,
    using various parameters set forth in the Agreement).  The Borrowing Base
    at December 31, 1994, was approximately $168.5 million, of which
    $115 million in loans was outstanding.

    The Agreement, at the request of the banks, shall be secured by the
    Company's interest in the Borrowing Base assets, including all related
    property and equipment.

    Interest on loans outstanding is based on the Agent Bank's Reference Rate,
    as defined, or on the Agent Bank's CD Rate, or an adjusted Offshore Rate,
    and is payable quarterly.  At December 31, 1994, the interest rate in
    effect was 7.0%.  The Company is also required to pay certain fees in
    connection with the facility, as well as comply with various covenants set
    forth in the Agreement.


    The aggregate maturities of long-term debt outstanding as of December 31,
    1994 are as follows (stated in thousands of dollars):


                      Year Ending
                      December 31,                   Amount
                      ------------                  --------
                         1995                       $
                         1996
                         1997                         23,000
                         1998                         23,000
                         1999                         23,000
                       Thereafter                     46,000
                                                    --------
                                                    $115,000
                                                    ========



5.  INCOME TAXES:

    The components of the income tax benefit (expense), before cumulative
    effect of change in accounting principle, are as follows (stated in
    thousands of dollars):


                                               Year Ended December 31,
                                             1994        1993        1992
                                          -------      -------     -------
                                                          
    Current income taxes:
       Federal                            $19,368      $17,216     $21,982
       State                                2,491        1,781       3,674
                                          -------      -------     -------
                                           21,859       18,997      25,656
                                          -------      -------     -------
    Deferred income taxes:
       Federal                             (5,455)     (11,176)    (18,619)
       State                               (1,198)      (1,977)     (3,506)
                                          -------      -------     -------
                                           (6,653)     (13,153)    (22,125)
                                          -------      -------     -------
    Total income tax benefit              $15,206      $ 5,844     $ 3,531
                                          =======      =======     =======

    A reconciliation of income tax benefit computed by applying the federal
    statutory income tax rate to earnings (loss) before income taxes is as
    follows (stated in thousands of dollars):


                                               Year Ended December 31,
                                             1994        1993        1992
                                          -------      -------     -------
                                                          
    Expected federal tax benefit (expense)
      at statutory rate                   $ 6,349      $(1,297)    $ 3,426
    State tax benefit (expense)             1,097         (224)        619
    Section 29 tight sands gas
        tax credits                         6,112        7,434       2,128
    Permanent differences arising from
      acquisitions and other                1,648          (69)     (2,642)
                                          -------      -------     -------
    Total income tax benefit              $15,206      $ 5,844     $ 3,531
                                          =======      =======     =======



    The sources of deferred tax benefit (expense) and their tax effect are as
    follows (stated in thousands of dollars):


                                              Year Ended December 31,
                                            1994      1993        1992
                                         -------    --------   --------

                                                      
    Sale of oil and gas properties       $16,498    $          $
    Oil and gas property impairments       4,782       2,250      5,694
    Depreciation, depletion and
      amortization                         1,779      13,079      1,392
    Intangible drilling costs            (29,712)    (28,482)   (29,211)
                                         -------    --------   --------
    Total deferred income tax expense    $(6,653)   $(13,153)  $(22,125)
                                         =======    ========   ========

    The net deferred tax liability reflected in the Company's consolidated
    balance sheet at December 31, 1994 and 1993 results primarily from
    temporary differences in the treatment of costs of oil and gas properties
    for financial and income tax reporting purposes.


6.  OVERRIDING ROYALTY INTEREST:

    The Company's interest in certain gas properties acquired in 1991 is
    subject to a previously existing undivided overriding royalty interest
    ("ORRI") held by an unaffiliated party.  The ORRI entitles the holder to
    receive natural gas production (aggregating 4.0 Bcf at December 31, 1994)
    through March 1996, subject to various daily and annual limitations.
    Shortfalls in production from the wells subject to the ORRI must be made
    up by the Company with production from other properties or through
    purchases on the spot market.  At December 31, 1994, $1.6 million in
    accrued liabilities has been provided for future lease operating expenses
    on the subject properties and for potential production shortfalls.

7.  EMPLOYEE BENEFIT PLAN:

    The Company participates in a 401(k) savings plan ("Plan") sponsored by
    the Parent.  Under the Plan, eligible employees are permitted to defer
    receipt of up to 7% of their compensation (subject to certain limitations
    by the Internal Revenue Code of 1986, as amended).  After one year of
    service, the Company will contribute an amount equal to 5% of an
    employee's salary into the Plan, and the Company will match employee
    contributions on a 100% basis, up to 5% of the employee's salary.  Amounts
    held under the Plan are invested among various investment funds at the
    direction of the individual employee.  Employee contributions are 100%
    vested at the date of contribution.  Company contributions are vested 100%
    after five years of employment.  For the years ended December 31, 1994,
    1993 and 1992, the Company expensed $1.1 million, $1.2 million and $1.2
    million, respectively, for contributions made under the Plan.



8.  MAJOR CUSTOMERS:

    The Company markets its oil and gas production to numerous purchasers
    under a combination of short and long-term contracts.  One customer
    accounted for 11.1% of the Company's consolidated revenues in 1993.  There
    were no individual customers which accounted for more than 10% of total
    revenues in 1994 or 1992.  Management believes that the loss of any major
    customers would not have a material adverse effect on the Company due to
    the availability of other purchasers for the Company's production.

9.  COMMITMENTS AND CONTINGENCIES:

    The Company leases office space under noncancelable leases, which extend
    through 2002.  In addition, certain office space no longer in use is being
    subleased.

    The future minimum rental payments required under the leases, net of
    sublease income, are as follows (stated in thousands of dollars):

                      Year Ending
                      December 31,              Amount
                      -----------               -------
                         1995                   $ 1,990
                         1996                     2,075
                         1997                     1,998
                         1998                     1,703
                         1999                     1,479
                       Thereafter                 3,822
                                                -------
                                                $13,067
                                                =======


    The Company has established a $1.9 million reserve as of December 31, 1994
    for rent payments on office space no longer in use.  The reserve is net of
    expected sublease proceeds of $2.5 million under sublease agreements
    currently in effect.

    The Company has sublet certain of the unused office space to PG&E for
    which payments received aggregated $.4 million for each of the three years
    in the period ended December 31, 1994.  As of December 31, 1994, future
    sublease payments from PG&E are expected to aggregate $1.5 million through
    1998.

    The Company has entered into an agreement to acquire 3-D seismic data in
    1995 and 1996 for payments aggregating $3.9 million.

    The Company's revenues are derived principally from uncollateralized sales
    to customers in the oil and gas industry.  The concentration of credit
    risk in a single industry affects the Company's overall exposure to credit
    risk because customers may be similarly affected by changes in economic
    and other conditions.  The Company has not experienced significant credit
    losses on such receivables.

    The Company is directly or indirectly involved in various pending lawsuits
    and claims.  Reserves for lawsuits and claims are provided for when a loss
    is determined to be probable and the amount can be reasonably estimated.
    In the opinion of management, the ultimate outcome of such claims will not
    have a material impact on the results of operations of the Company.



10. OIL AND GAS PROPERTIES:

    The following table sets forth certain information with respect to costs
    incurred in connection with the Company's oil and gas producing activities
    (stated in thousands of dollars):


                                            Year Ended December 31,
                                          1994        1993       1992
                                        --------    -------   --------
                                                     
    Property acquisitions:
       Proved                           $ 14,119    $ 1,001   $ 14,308
       Unproved                           23,477      4,944      3,665
    Development costs                     49,050     76,099     70,771
    Exploratory costs                     26,921      9,653     11,263
                                        --------    -------   --------
                                        $113,567    $91,697   $100,007
                                        ========    =======   ========

    Capitalized costs for oil and gas properties are as follows (stated in
    thousands of dollars):


                                                        December 31,
                                                       1994       1993
                                                    ---------  ---------
                                                         
    Oil and gas properties:
       Proved                                       $ 739,361  $ 880,198
       Unproved                                        48,218     36,156
                                                    ---------  ---------
                                                      787,579    916,354

    Accumulated depreciation, depletion
       and amortization                              (359,331)  (351,105)
                                                    ---------  ---------
                                                    $ 428,248  $ 565,249
                                                    =========  =========

    In the third quarter of 1994, the Company sold certain oil and gas
    properties (the "Non-Strategic Properties") that did not fit within the
    Company's current business strategy.  The Company sold the Non-Strategic
    Properties, which had a net book value of $131.7 million, to unrelated
    third parties for $134.0 million in cash, resulting in a pre-tax gain of
    $2.3 million, which is included in other income in the accompanying
    consolidated statement of operations.

    In October and November 1994, the Company acquired producing and non-
    producing oil and gas properties located in Louisiana, Texas and offshore
    Gulf of Mexico for approximately $28.1 million in cash.

11. SUPPLEMENTAL OIL AND GAS RESERVE INFORMATION (UNAUDITED):

    The estimates of proved oil and gas reserves utilized in the preparation
    of the consolidated financial statements were prepared by independent
    petroleum engineers at December 31, 1994.  Such estimates are in
    accordance with guidelines established by the Securities and Exchange
    Commission and the Financial Accounting Standards Board, which require


    that reserve reports be prepared under existing economic and operating
    conditions with no provision for price and cost escalations except by
    contractual arrangements.  All of the Company's reserves are located in
    the United States.

    The Company emphasizes that reserve estimates are inherently imprecise.
    Accordingly, the estimates are expected to change as more current
    information becomes available.  In addition, a portion of the Company's
    proved reserves is undeveloped, which increases the imprecision inherent
    in estimating reserves which may ultimately be produced.

    Proved oil and gas reserve information, together with the changes therein,
    are as follows (oil in MBbls, gas in MMcf):


                                        Year Ended December 31,
                           ------------------------------------------------
                                 1994             1993             1992
                           ---------------  ---------------  --------------
                             Oil     Gas      Oil     Gas      Oil    Gas
                           ------  -------  ------  -------  ------ -------
                                                  
    Proved reserves:
       Beginning of year   20,074  364,181  23,861  414,099  23,255 406,332
       Revisions              (25) (27,253)   (740) (15,631)  3,257 (11,110)
       Extensions and
         discoveries        3,960   80,850   1,582   39,644   1,633  71,300
       Purchases and
         minerals-in-place    557   12,529      74    2,656     433  16,900
       Sales of
         minerals-in-place (9,346) (62,722)
       Production          (3,525) (60,223) (4,703) (76,587) (4,717)(69,323)
                           ------  -------  ------  -------  ------ -------
       End of year         11,695  307,362  20,074  364,181  23,861 414,099
                           ======  =======  ======  =======  ====== =======
    Proved developed
      reserves:
       Beginning of year   17,508  335,476  21,670  390,830  19,944 352,285
                           ======  =======  ======  =======  ====== =======
       End of year         11,134  262,819  17,508  335,476  21,670 390,830
                           ======  =======  ======  =======  ====== =======



    The standardized measure of discounted future net cash flows relating to
    proved reserves is as follows (stated in thousands of dollars):


                                           Year Ended December 31,
                                       1994         1993          1992
                                     ---------   ----------   ----------
                                                     
    Future cash inflows              $ 651,143   $1,073,395   $1,322,489
    Future costs:
       Production                    (185,726)     (313,606)    (335,634)
       Development                    (45,437)      (42,604)     (41,961)
       Income taxes                   (74,250)     (111,229)    (186,259)
                                     ---------   ----------   ----------
    Future net cash flows             345,730       605,956      758,635
    10% discount factor               (83,691)     (156,009)    (204,473)
                                     ---------   ----------   ----------
    Standardized measure of
       discounted future net
         cash flows                 $ 262,039    $  449,947   $  554,162
                                    =========    ==========   ==========



    Changes in the standardized measure of discounted future net cash flows
    relating to proved reserves are as follows (stated in thousands of
    dollars):


                                               Year Ended December 31,
                                           1994          1993        1992
                                        ---------    ---------    ---------
                                                         
    Standardized measure,
       beginning of year                $ 449,947    $ 554,162    $ 531,868
    Net changes in sales prices,
         net of production costs         (105,808)     (64,251)      59,647
    Revisions of quantity estimates       (22,467)     (21,132)      10,585
    Changes in future development
       costs, including development
       costs incurred                      12,722        8,155       15,504
    Accretion of discount                  47,490       62,254       56,310
    Extension and discoveries              69,331       44,267       91,800
    Purchases of minerals-in-place         12,848        1,814       19,695
    Sales of minerals-in-place            (82,300)
    Sales, net of production costs       (121,457)    (180,775)    (156,480)
    Net change in income taxes                679       43,429      (37,149)
    Changes in timing and other             1,054        2,024      (37,618)
                                        ---------    ---------    ---------
    Standardized measure, end of year   $ 262,039    $ 449,947    $ 554,162
                                        =========    =========    =========

EX-99.2

                                                                 EXHIBIT 99.2


                      DALEN CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Operations
                                  (Unaudited)
                       (stated in thousands of dollars)

                                                             Three Months
                                                            Ended March 31
                                                        ----------------------
                                                          1995          1994
                                                        --------      --------
                                                               
REVENUES:
  Natural gas                                          $ 19,140      $ 38,516
  Oil and gas liquids                                     9,658        13,611
  Other                                                      69           885
                                                       --------      --------
                                                         28,867        53,012
                                                       --------      --------
OPERATING EXPENSES:
  Lease operating                                         8,536        13,689
  General and administrative                              4,280         4,761
  Depreciation, depletion and amortization               19,603        28,889
  Exploration                                             2,695         3,770
                                                       --------      --------
                                                         35,114        51,109
                                                       --------      --------
OPERATING INCOME (LOSS)                                  (6,247)        1,903
                                                       --------      --------
OTHER INCOME (EXPENSE)
  Interest expense                                       (2,119)       (1,392)
  Interest income                                           155           525
  Other, net                                                144           140
                                                       --------      --------
                                                         (1,820)         (727)
                                                       --------      --------
EARNINGS (LOSS) BEFORE TAXES                             (8,067)        1,176

INCOME TAX BENEFIT (EXPENSE):
  Current                                                 5,727         5,439
  Deferred                                               (1,316)       (4,574)
                                                       --------      --------
                                                          4,411           865
                                                       --------      --------
NET EARNINGS (LOSS)                                    $ (3,656)     $  2,041
                                                       ========      ========




                      DALEN CORPORATION AND SUBSIDIARIES
                          Consolidated Balance Sheets
                                  (Unaudited)
                       (stated in thousands of dollars)

                                                       March 31    December 31
                                                         1995          1994
                                                       --------    -----------
                                    ASSETS
                                    ------
                                                              
CURRENT ASSETS:
 Cash and cash equivalents                            $   5,653     $  10,888
 Accounts receivable
   Oil and gas                                           11,875        20,009
   Trade                                                  6,798         6,030
   Affiliates                                            14,708         7,616
 Inventories                                              1,876         2,125
 Prepaid expenses                                         2,437         3,635
                                                      ---------     ---------
    Total current assets                                 43,347        50,303
                                                      ---------     ---------
PROPERTY AND EQUIPMENT
  Oil and gas properties,
    based on successful efforts method                  802,337       787,579
  Other property and equipment                            6,700         6,671
                                                      ---------     ---------
                                                        809,037       794,250
 Less: Accumulated depreciation,
   depletion and amortization                          (381,754)     (362,548)
                                                      ---------     ---------
    Net property and equipment                          427,283       431,702
                                                      ---------     ---------
OTHER ASSETS                                                540           655
                                                      ---------     ---------
TOTAL ASSETS                                          $ 471,170     $ 482,660
                                                      =========     =========

                     LIABILITIES AND STOCKHOLDER'S EQUITY
                     ------------------------------------
CURRENT LIABILITIES:
  Accounts payable                                    $  11,954     $  15,394
  Interest payable                                           65            67
  Accrued liabilities                                    10,190        10,998
                                                      ---------     ---------
     Total current liabilities                           22,209        26,459
                                                      ---------     ---------

DEFERRED INCOME TAXES                                    73,845        72,529

ABANDONMENT, DISMANTLEMENT AND OTHER LIABILITIES          8,964        13,864

LONG-TERM DEBT                                          115,000       115,000

STOCKHOLDER'S EQUITY
  Common stock                                                1             1
  Additional paid-in capital                            335,470       335,470
  Accumulated deficit                                   (84,319)      (80,663)
                                                      ---------     ---------
     Total stockholder's equity                         251,152       254,808
                                                      ---------     ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY            $ 471,170     $ 482,660
                                                      =========     =========





                      DALEN CORPORATION AND SUBSIDIARIES
                     Consolidated Statements of Cash Flows
                                  (Unaudited)
                         (stated in thousands dollars)

                                                             Three Months
                                                            Ended March 31
                                                        ---------------------
                                                          1995          1994
                                                        --------      -------
                                                               
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings (loss)                                  $ (3,656)     $  2,041
  Adjustments to reconcile net loss to net cash
   provided by operating activities:
    Depreciation, depletion and amortization             19,603        28,889
    Deferred income taxes                                 1,316         4,574
    Dry hole expense                                        933           952
    Surrendered leases and other impairments                584         1,381
    Loss (gain) on sale of assets                            (3)          (10)
    Other                                                (1,309)         (532)
                                                       --------      --------
                                                         17,468        37,295

 Changes in operating assets and liabilities:
    Decrease (increase) in accounts receivable           (3,540)        5,211
    Decrease in prepaid expenses                          1,198           798
    Increase (decrease) in accounts payable              (3,413)          170
    Decrease in interest payable                             (2)          (30)
    Decrease in accrued liabilities and other              (559)       (4,360)
                                                       --------      --------
      Net cash provided by operating activities          11,152        39,084
                                                       --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                   (16,350)      (12,358)
  Decrease in drilling well accrual                         (60)       (1,576)
  Proceeds from sale of property and equipment               23           207
                                                       --------      --------
     Net cash used in investing activities              (16,387)      (13,727)
                                                       --------      --------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                            (5,235)       25,357
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD           10,888        48,117
                                                       --------      --------
CASH AND CASH EQUIVALENTS, END OF PERIOD               $  5,653      $ 73,474
                                                       ========      ========





                     DALEN CORPORATION AND SUBSIDIARIES
                        Notes to Financial Statements




1.   The accompanying consolidated financial statement of DALEN Corporation
     and Subsidiaries (the "Company") have not been audited by independent
     public accountants.  In the opinion of management, all adjustments
     (consisting only of normal recurring accruals) necessary for a fair
     presentation of the results of operations for the interim periods
     included herein have been made.  Certain information and footnote
     disclosures normally included in the consolidated financial statements
     have been omitted.  These consolidated financial statements should be
     read in conjunction with the audited consolidated financial statements
     and notes thereto included elsewhere in this Form 8-K.

2.   In April 1995, Enserch Exploration, Inc., 99.2% owned by ENSERCH
     Corporation, entered into a definitive agreement to acquire 100% of the
     capital stock of the Company for $340 million plus the assumption of $115
     million of bank debt.

3.   In the third quarter of 1994, the Company sold certain oil and gas
     properties that did not fit within the Company's current business
     strategy.  The Company sold the properties, which had a net book value
     of $131.7 million, to unrelated third parties for $134.0 million in cash,
     resulting in a pre-tax gain of $2.3 million.  As a result of the sale,
     operating results for the three months ended March 31, 1995 are not
     comparable to the three months ended March 31, 1994.

EX-99.3

                                                               EXH. 99.3


                ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
            CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                TO REFLECT THE PURCHASE OF DALEN CORPORATION
                                 (Unaudited)

     The condensed pro forma consolidated financial statements give effect as
of March 31, 1995 to the probable acquisition in early June 1995 by Enserch
Exploration, Inc. (EEX), 99.2% owned by ENSERCH, of 100% of the capital stock
of DALEN Corporation (DALEN) for $340 million cash and the refinancing of
DALEN's $115 million of bank debt.  DALEN is a wholly-owned subsidiary of PG&E
Enterprises, which is 100% owned by Pacific Gas & Electric Company.  The
condensed pro forma consolidated financial statements for the year ended
December 31, 1994 and for the three months ended March 31, 1995 have been
prepared from the historical financial statements of ENSERCH and DALEN after
adjustments as described below.

     ENSERCH and EEX will account for the acquisition of DALEN as a purchase.
All acquired assets, consisting principally of gas and oil properties, will
be evaluated following the acquisition for purposes of assigning the excess
of the purchase price over DALEN's book value.  It is anticipated that
essentially all of the valuation adjustment will be assigned to gas and oil
properties, and the pro forma financial statements of the combined entities
have been prepared on that basis.

     EEX will initially fund the purchase through borrowings of $340 million
under existing bank lines.  EEX intends to issue common stock in a public
offering later this year with proceeds used to repay all or a portion of the
EEX bank line financing used to make the acquisition.  The common stock issue
is expected to increase the public ownership in EEX from less than 1% to
approximately 20%.  A $150 million bridge loan will be used to refinance
DALEN's $115 million bank debt and reduce advances from ENSERCH.  The bridge
loan is expected to be paid later in the year with the proceeds of a
$150 million long-term financing.  For purposes of presenting pro forma
financial statements of the combined entities, DALEN's interest income
and interest expense have been eliminated and interest expense, based on
the initial funding through EEX bank lines and the bridge loan, has been
added.  The current interest rate on such debt of approximately 6.5% has
been assumed.

     DALEN follows the successful efforts method of accounting for gas and oil
properties, whereby exploratory costs, excluding the costs of successful
exploratory wells, are charged to expense as incurred.  Costs applicable to
productive wells and development dry holes are capitalized and amortized on
the units-of-production method based on estimated proved reserve quantities.
ENSERCH and EEX follow the full-cost method of accounting for gas and oil
properties, whereby all exploratory costs, including costs of both successful
and unsuccessful exploratory wells, are capitalized and amortized on the
units-of-production method based on estimated proved reserve quantities.  For
purposes of presenting pro forma financial statements of the combined
entities, DALEN's statements of operations have been converted to the full-
cost method of accounting.


     In the third quarter of 1994, DALEN sold certain gas and oil properties.
The properties, which had a net book value of $131.7 million, were sold to
unrelated third parties for $134.0 million in cash, resulting in a pre-tax
gain of $2.3 million, which is included in other income in DALEN's historical
consolidated statement of operations.  For purposes of the pro forma statement
of income of the combined entities, the gain on the sale, as well as revenues
and expenses attributable to the sold properties during the periods presented,
have been eliminated.




                       ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
                      CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
                    TO REFLECT THE PURCHASE OF DALEN CORPORATION AS OF
                                      March 31, 1995
                                      (in thousands)



                                           ENSERCH        DALEN
                                         Corporation   Corporation  Adjustments(a) Proforma
                                         ------------  -----------  -----------    --------
                                                                     
ASSETS
Current Assets
  Cash and equivalents                   $    3,446    $   5,653     $           $    9,099
  Accounts receivable                       155,944       33,381                    189,325
  Gas stored underground                     85,475                                  85,475
  Advances and prepayments for gas           22,433                                  22,433
  Gas-purchase settlements recoverable
   from customers                            15,349                                  15,349
  Other                                      71,774        4,313                     76,087
                                         ----------    ---------     ---------   ----------
   Total current assets                     354,421       43,347                    397,768
                                         ----------    ---------     ---------   ----------
Investments                                  55,119                                  55,119
                                         ----------    ---------     ---------   ----------
Net Property, Plant and Equipment
  (full-cost method for gas and
   oil properties)                        2,282,913      427,283        15,003    2,725,199
                                         ----------    ---------      --------   ----------
Other Assets                                 44,586          540                     45,126
                                         ----------    ---------      --------   ----------
          Total                          $2,737,039    $ 471,170      $ 15,003   $3,223,212
                                         ==========    =========      ========   ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Commercial paper                       $  112,600    $              $(35,000)  $   77,600
  Current maturities of senior               10,600                                  10,600
    long-term debt
  Accounts payable and other                309,564       22,209                    331,773
    accrued liabilities
  Accrued interest                           12,439                                  12,439
  Other                                      39,636                                  39,636
                                         ----------    ---------      --------   ----------
   Total current liabilities                484,839       22,209       (35,000)     472,048
                                         ----------    ---------      --------   ----------
Senior Long-term Debt                       714,376      115,000       375,000    1,204,376
                                         ----------    ---------      --------   ----------
Convertible Subordinated Debentures          90,750                                  90,750
                                         ----------    ---------      --------   ----------
Deferred Income Taxes                       299,922       73,845       (73,845)     299,922
                                         ----------    ---------      --------   ----------
Other Liabilities                           221,580        8,964                    230,544
                                         ----------    ---------      --------   ----------
Shareholders' Equity
  Adjustable rate preferred stock           175,000                                 175,000
  Common shareholders' equity               750,572      251,152      (251,152)     750,572
                                         ----------    ---------      --------   ----------
        Shareholders' equity                925,572      251,152      (251,152)     925,572
                                         ----------    ---------      --------   ----------
          Total                          $2,737,039    $ 471,170      $ 15,003   $3,223,212
                                         ==========    =========      ========   ==========




                                   ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
                               CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                               TO REFLECT THE PURCHASE OF DALEN CORPORATION FOR THE
                                           Year Ended December 31, 1994
                                                  (In thousands)



                                                 ENSERCH          DALEN      Property                      December 31
                                               Corporation     Corporation   Divested         Pro Forma       1994
                                               As Reported     As Reported   in 1994 (d)     Adjustments    Pro Forma
                                               -----------     -----------   --------        -----------   -----------
                                                                                            
Revenues
 Natural gas transmission and distribution     $1,689,024                                                  $1,689,024
 Natural gas and oil exploration
  and production                                  179,140       $168,988     $ (25,592)       $               322,536
 Natural gas liquids processing                    87,446                                                      87,446
 Power                                             45,499                                                      45,499
 Less intercompany revenues                      (143,678)                                                   (143,678)
                                               ----------       --------     ---------        --------     ----------
                                                1,857,431        168,988       (25,592)                     2,000,827
                                               ----------       --------     ---------        --------     ----------
Cost and Expenses
 Gas purchase                                   1,208,147                                                   1,208,147
 Operating expenses                               435,102         86,476       (12,193)        (24,864)(c)    484,521
 Depreciation and amortization                    126,733        101,151       (14,826)         (9,511)(c)    203,547
                                               ----------       --------     ---------        --------     ----------
   Total                                        1,769,982        187,627       (27,019)        (34,375)     1,896,215
                                               ----------       --------     ---------        --------     ----------
Operating Income (Loss)                            87,449        (18,639)        1,427          34,375        104,612
Other Income (Expense) - Net                       (6,506)         6,501        (2,280)         (3,656)(b)     (5,941)
Interest Expense                                  (68,242)        (6,002)                      (23,573)(b)    (97,817)
                                               ----------       --------     ---------        --------     ----------
Income (Loss) Before Income Taxes                  12,701        (18,140)         (853)          7,146            854
Income Tax Expense (Benefit)                      (68,974)       (15,206)         (298)          2,501(e)     (81,977)
                                               ----------       --------     ---------        --------     ----------
Income (Loss) from Continuing Operations           81,675         (2,934)         (555)          4,645         82,831
Income from Discontinued Operations                20,642                                                      20,642
                                               ----------       --------     ---------       ---------     ----------
Net Income (Loss)                                 102,317         (2,934)         (555)          4,645        103,473
Provision for Dividends on Preferred Stock         11,619                                                      11,619
                                               ----------       --------     ---------       ---------     ----------
Earnings (Loss) Applicable to Common Stock     $   90,698       $ (2,934)    $    (555)     $   4,645      $   91,854
                                               ==========       ========     =========       =========     ==========
Earnings per Share:
 Income from Continuing Operations
  after provision for dividends on
   preferred stock                             $     1.05                                                  $     1.07
Average Common and Dilutive Common             ==========                                                  ==========
 Equivalent Shares Outstanding                     66,845                                                      66,845
                                               ==========                                                  ==========






                                   ENSERCH CORPORATION AND SUBSIDIARY COMPANIES
                               CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
                               TO REFLECT THE PURCHASE OF DALEN CORPORATION FOR THE
                                         Three Months Ended March 31, 1995


                                                ENSERCH           DALEN                      March 31
                                              Corporation     Corporation       Pro Forma      1995
                                              As Reported     As Reported      Adjustments   Pro Forma
                                              -----------     -----------     -----------    ---------
                                                                                  
Revenues
 Natural gas transmission and distribution       $504,805       $               $             $504,805
 Natural gas and oil exploration
  and production                                   41,661        28,867                         70,528
 Natural gas liquids processing                    21,679                                       21,679
 Power                                              8,591                                        8,591
 Less intercompany revenues                       (28,835)                                     (28,835)
                                                 --------       -------         -------       --------
                                                  547,901        28,867                        576,768
                                                 --------       -------         -------       --------
Costs and Expenses
 Gas purchase                                     336,946                                      336,946
 Operating costs and expenses                     113,255        15,511          (2,695)(c)    126,071
 Depreciation and amortization                     31,158        19,603          (2,195)(c)      48,566
                                                 --------       -------         -------       --------
   Total                                          481,359        35,114          (4,890)       511,583
                                                 --------       -------         -------       --------
Operating Income (Loss)                            66,542        (6,247)          4,890         65,185
Other Income (Expense) - Net                       (1,003)          299            (155)(b)       (859)
Interest Expense                                  (17,315)       (2,119)         (5,275)(b)    (24,709)
                                                 --------       -------         -------       --------
Income Before Income Taxes                         48,224        (8,067)           (540)        39,617
Income Tax Expense (Benefit)                       17,838        (4,411)           (189)(e)     13,238
                                                 --------       -------         -------       --------
Income from Continuing Operations                  30,386        (3,656)           (351)        26,379
Provision for Dividends on Preferred Stock          3,036                                        3,036
                                                 --------       -------         -------       --------
Earnings Applicable to Common Stock               $27,350       $(3,656)        $  (351)       $23,343
                                                 ========       =======         =======       ========
Earnings per Share                                  $0.41                                        $0.35
                                                 ========                                     ========
Average Common and Dilutive Common
 Equivalent Shares Outstanding                     66,936                                       66,936
                                                 ========                                     ========





NOTES TO CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Adjustments to the combined historical financial statements of ENSERCH and
DALEN consist of the following:

(a) Adjust the DALEN balance sheet to include in gas and oil  properties the
    purchase price in excess of book value, eliminate shareholders' equity
    and include the borrowings to finance the transaction.

                 Borrowing under bank line    $ 340,000
                 Bridge loan                    150,000
                 Repay DALEN bank debt         (115,000)
                                              ---------
                                                375,000
                 Required for acquisition      (340,000)
                                              ---------
                 Excess used to reduce
                    commercial paper          $  35,000
                                              =========


    The acquisition will be recorded based on the balance sheet as of the
    closing date.  It is anticipated that essentially all of the valuation
    adjustment will be assigned to gas and oil properties, and the pro forma
    financial statements have been prepared on that basis.

(b) Adjust interest income and interest expense to reflect EEX's financing of
    purchase cost and refinancing of debt assumed in purchase transaction.

(c) Adjust the DALEN statements of operations from the successful efforts to
    the full-cost method of accounting for gas and oil properties by
    eliminating DALEN's exploration costs from Operating Expenses and
    adjusting depreciation and amortization as follows:


                                                 Twelve Months Three Months
                                                    Ended          Ended
                                                   12/31/94       3/31/95
                                                            
                Eliminate successful effort
                 depreciation and
                 amortization                      $(86,325)      $(19,603)
                Add full-cost amortization           76,814         17,408
                                                   --------       --------
                     Net                           $ (9,511)      $ (2,195)
                                                   ========       ========


(d) Eliminate revenues, expenses and a gain of $2.3 million in other income,
    attributable to properties sold by DALEN in the third quarter of 1994.

(e) Provide income taxes on pro forma adjustments to income before income
    taxes at the applicable statutory federal rate of 35%.