8-K

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                    FORM 8-K

                                 CURRENT REPORT

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

                Date of Report (Date of earliest event reported)
                      December 10, 2001 (November 29, 2001)

                     ST. MARY LAND & EXPLORATION COMPANY
             (Exact name of registrant as specified in its charter)

          Delaware                      000-20872               41-0518430
(State or other jurisdiction           (Commission            (I.R.S Employer
      of incorporation)               File Number)           Identification No.)


             1776 Lincoln Street, Suite 1100, Denver, Colorado 80203
               (Address of principal executive offices) (Zip Code)


       Registrant's telephone number, including area code: (303) 861-8140


                                 Not applicable
         (Former name or former address, if changed since last report.)







Item 2.  Acquisition or Disposition of Assets.

          On November 29, 2001, St. Mary Land & Exploration Company (the
     "Company"), through its wholly-owned subsidiary Nance Petroleum
     Corporation, acquired certain producing and nonproducing oil and gas
     properties in Montana, North Dakota, Wyoming and Colorado from Choctaw II
     Oil & Gas, LTD ("Choctaw") for a purchase price of $40.6 million in
     cash after normal purchase price adjustments. The Company utilized cash on
     hand and a portion of its existing credit facility with Bank of America to
     fund the acquisition. The transaction was consummated pursuant to Purchase
     and Sale Agreement dated September 28, 2001, effective as of September 1,
     2001.


Item 7.  Financial Statements and Exhibits.

     (a) Financial statements of businesses acquired.

         Financial statements for the acquired properties are not required to
         be filed with this report.

     (b) Pro forma financial information.

         Pro forma financial statements, which give effect to the acquisition
         of the acquired properties, are not required to be filed with this
         report.

     (c) Exhibits.

         The following exhibits are furnished as part of this report:

         Exhibit 10.1* Purchase and Sale Agreement dated September 28, 2001,
                       effective as of September 1, 2001; between Choctaw II
                       Oil & Gas, LTD and Nance Petroleum Corporation

         Exhibit 3.1** Amendments to St. Mary Land & Exploration Company
                       By-Laws adopted July 19, 2001

     ---------------
     *   Filed herewith.
     **  Filed herewith. Such amendments are reflected in the complete Restated
     By-Laws of St. Mary  Land &  Exploration  Company, as amended July 19,
     2001, filed as  Exhibit 3.1  to the registrant's Quarterly Report on Form
     10-Q (File No. 000-20872) for the quarter ended September 30, 2001.





                                   SIGNATURES

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


                                    ST. MARY LAND & EXPLORATION COMPANY

Date: December 10, 2001             /s/ MARK A. HELLERSTEIN
                                    -----------------------
                                    Mark A. Hellerstein
                                    President and Chief Executive Officer

Date: December 10, 2001             /s/ RICHARD C. NORRIS
                                    ---------------------

                                    Richard C. Norris
                                    Vice President - Finance,
                                    Treasurer and Secretary

EX-10

                          PURCHASE AND SALE AGREEMENT
                          ---------------------------

     This Purchase and Sale  Agreement  ("Agreement")  dated as of September 28,
2001,  is by and  between  CHOCTAW  II OIL  &  GAS,  LTD.,  a Texas  limited
partnership ("Seller"),  and NANCE PETROLEUM CORPORATION ("Buyer"),  relative to
the "Interests" (as hereinafter defined).

     In consideration of the mutual promises  contained herein,  the benefits to
be derived by each party  hereunder  and other good and valuable  consideration,
the receipt and sufficiency of which are hereby  acknowledged,  Buyer and Seller
agree as follows:

                                    ARTICLE I
                                    ---------
                                PURCHASE AND SALE
                                -----------------

     1.01  Purchase and Sale.  Seller agrees to sell and convey and Buyer agrees
           -----------------
to purchase and pay for the  Interests  subject to the terms and  conditions  of
this Agreement.

     1.02  Interests.  All of the following  (except for the  "Excluded  Assets"
           ---------
defined below) shall be referred to as the "Interests":

          (a) All of Seller's interests, in and to the entire estates created by
the leases, licenses, permits and other agreements described in Exhibit "A" (the
"Leases") and the lands  described in Exhibit "A" (the  "Lands"),  and including
all of Seller's  interests in and to its oil and gas assets within the states of
Montana, North Dakota,  Wyoming, and Colorado whether correctly described herein
unless specifically  included within the Excluded Assets,  together with (i) all
rights, privileges,  benefits and powers conferred upon the holder of the Leases
with respect to the use and  occupation  of the surface of the Lands that may be
necessary,  convenient  or  incidental  to the  possession  and enjoyment of the
Leases,  (ii) all rights in  respect of any  pooled,  communtized,  or  unitized
acreage  located in whole or in part  within the Lands by virtue of the  Leases,
including  rights  to  production  from the  pool,  communitized  area,  or unit
allocated  to any  Lease  being  a part  thereof,  regardless  of  whether  such
production is from the Lands, (iii) all rights, options, titles and interests of
Seller granting Seller the right to obtain,  or otherwise earn interests  within
the  Lands no matter  how  earned,  and (iv) all  tenements,  hereditaments  and
appurtenances belonging to any of the foregoing;

          (b) The  undivided  interests  in and to all of the oil and gas wells,
saltwater  disposal  wells and  injection  wells (the  "Wells")  as set forth in
Exhibit A together with all hydrocarbons  produced from the Wells and Leases and
all  of  the  personal  property,  fixtures  and  improvements  now or as of the
Effective  Time (as  defined in Section  1.04  below) on the Lands,  appurtenant
thereto or used in connection therewith or with the production,  treatment, sale
or disposal of hydrocarbons or water produced therefrom or attributable  thereto
and all other  appurtenances  thereunto  belonging including without limitation,
all pipe,  fittings and other equipment located in the Sydney,  Montana yard and
any other Williston Basin yards;

          (c) The contracts and contractual  rights,  obligations and interests,
including  all  farmout  agreements,  farmin  agreements,   drilling  contracts,
operating agreements, sales contracts,  saltwater disposal agreements,  division
orders and  transfer  orders  and other  contracts  or  agreements  covering  or
affecting any or all of the Leases and/or Lands (the "Contracts"); and

          (d) The easements, licenses,  authorizations,  permits, rights of way,
servitudes,  surface  leases,  the building lease for the Sydney,  Montana field
office and similar rights and interests applicable to the ownership or operation
of the Wells; and

          (e) Insofar as such pertain to the Leases,  Lands, Wells and the other
equipment,  personal property, Contracts and other matters described herein, all
books,   records,   reports,   manuals,   files,   title  documents,   including
correspondence,  records of production  maintenance,  revenue,  sales, expenses,
warranties,   lease  files,  land  files,  well  files,  division  order  files,
abstracts,  title opinions,  assignments,  reports,  and other written  material
relating  to  the  Interests  and  in  Seller's  possession,  including  without
limitation,  property records,  contract files,  operations files, copies of tax
and accounting  records (but  excluding  Federal income tax returns and records)
and files,  maps, core data,  hydrocarbon  analyses,  well logs, mud logs, field
studies,  together  with other  files,  contracts,  and other  records and data,
including all geologic and  geophysical  data and seismic of Seller  relating to
the  Interests  (the  "Records");  however,  Seller shall have no  obligation to
furnish  Buyer any data or  information  which  Seller  cannot  provide to Buyer
because of third party restrictions.

     1.03 Excluded Assets. As used herein, "Excluded Assets" means (a) all trade
          ---------------
credits and all accounts, instruments and general intangibles (as such terms are
defined in the Texas Uniform Commercial Code) attributable to the Interests with
respect to any period of time prior to the  Effective  Time;  (b) all claims and
causes of action of Seller (i) arising from acts, omissions or events, or damage
to or  destruction  of property,  occurring  prior to the Effective  Time,  (ii)
arising under or with respect to any contracts that are  attributable to periods
of time  prior to the  Effective  Time  (including  claims  for  adjustments  or
refunds),  or (iii) with respect to any of the Excluded  Assets;  (c) all rights
and  interests  of Seller  (i) under any policy or  agreement  of  insurance  or
indemnity,  (ii)  under  any bond,  or (iii) to any  insurance  or  condemnation
proceeds or awards  arising,  in each case, from acts,  omissions or events,  or
damage to or destruction of property, occurring prior to the Effective Time; (d)
all  substances  produced and sold from the Lands and Leases with respect to all
periods prior to the Effective Time,  together with all proceeds from or of such
substances;  (e) claims of Seller for  refunds  of or loss carry  forwards  with
respect to (i) production or any other taxes attributable to any period prior to
the  Effective  Time,  (ii)  income  or  franchise  taxes,  or (iii)  any  taxes

                                   -2-

attributable to the Excluded Assets; (f) all amounts due or payable to Seller as
adjustments to insurance  premiums  related to the Interests with respect to any
periods prior to the Effective  Time; (g) all proceeds,  income or revenues (and
any security or other deposits made)  attributable  to (i) the Interests for any
period  prior to the  Effective  Time,  or (ii)  any  Excluded  Assets;  (h) all
personal  computers  and  associated  peripherals  and all radio  and  telephone
equipment  except  that  which is  located  on the  Wells;  (i) all of  Seller's
proprietary  computer  software,  patents,  trade  secrets,  copyrights,  names,
trademarks,  logos and other  intellectual  property;  (j) Seller's interests in
Blaine,  Chocteau and Hill Counties,  Montana,  which collectively  comprise the
Bearpaw  Prospect;  (k) all  documents  and  instruments  of Seller  that may be
protected by an attorney-client  privilege; (l) data that cannot be disclosed or
assigned to Buyer as a result of  confidentiality  arrangements under agreements
with persons  unaffiliated  with Seller;  (m) all audit rights arising under any
contracts or otherwise with respect to any period prior to the Effective Time or
to any of the Excluded Assets; and (n) all of Seller's rolling stock, including,
without  limitation,  nine (9) pickup  trucks;  and (o) all (i)  agreements  and
correspondence between Seller and its representatives and any affiliates thereof
relating  to the  transactions  contemplated  in this  Agreement,  (ii) lists of
prospective   purchasers  for  such  transactions  compiled  by  Seller  or  its
representatives,  (iii) bids  submitted by other  prospective  purchasers of the
Interests,  (iv) analyses by Seller or its representatives of any bids submitted
by any prospective purchaser,  (v) correspondence between or among Seller or its
representatives,  or  either  of  their  respective  representatives,   and  any
prospective  purchaser other than Buyer, and (vi) correspondence  between Seller
or its representatives,  or any of their respective representatives with respect
to any of the bids, the prospective purchasers,  the engagement or activities of
its representatives or the transactions contemplated in this Agreement.

     1.04  Effective  Time.  The  purchase  and sale of the  Interests  shall be
           ---------------
effective for all purposes as of September 1, 2001, at 12:01a.m., local time at
the location of the Interests (the "Effective Time").

                                   ARTICLE II
                                   ----------
                                 PURCHASE PRICE
                                 --------------

     2.01  Purchase  Price.  The  purchase  price  for the  Interests  shall  be
           ---------------
Forty-One Million and No/100 Dollars  ($41,000,000.00)  (the "Purchase  Price"),
which shall be adjusted as set forth in Section 2.03 below.

     2.02 Deposit.  To bind this transaction,  Buyer concurrent with the date of
          -------
execution of this Agreement has deposited with Seller, either by cashier's check
or wire  transfer,  the sum of Four  Million  One  Hundred  Thousand  and No/100
Dollars  ($4,100,000.00)  (the  "Deposit"),  which  shall be either (a)  applied
toward a reduction in the Purchase  Price at the Closing  Date,  (b) returned by

                                      -3-

Seller to Buyer, or (c) forfeited by Buyer to Seller,  all as otherwise provided
in this Agreement.

     2.03 Adjustments to Purchase Price. The Purchase Price shall be adjusted as
          -----------------------------
follows and the resulting amount shall be referred to as the "Adjusted  Purchase
Price":

          (a) The Purchase Price shall be adjusted upward as follows:

               (i) The value of all oil and gas in  storage or in  pipelines  or
the tanks and above the pipeline connection or upstream of the sales meter as of
the  Effective  Time which is  credited to the  Interests,  such value to be the
market value or, if applicable, the contract price in effect as of the Effective
Time, less taxes and deductions by the purchaser; provided however, Seller shall
remain  responsible  for the  payment  of any taxes on this  production  and all
royalty,  overriding royalty,  and other non-cost bearing burdens affecting this
production;

               (ii) The amount of all verifiable  expenditures  under applicable
operating  agreements or other similar  arrangements  or agreements  and, in the
absence  of such  agreements,  such  expenses  of the  sort  customarily  billed
thereunder,  paid by Seller in  connection  with the  Interests  for the  period
subsequent to the Effective Time;

               (iii) An amount equal to all prepaid expenses attributable to the
Interests  that are paid by  Seller  or any  affiliate  of  Seller  prior to the
Closing Date that inure to the benefit of Buyer and that are, in accordance with
generally accepted accounting  principles,  attributable to the period after the
Effective Time,  including  without  limitation,  prepaid ad valorem,  property,
production,  severance and similar taxes (but not including  income taxes) based
upon or measured by the ownership of property or the production of  hydrocarbons
or the receipt of proceeds therefrom;

               (iv) An amount  equal to $1.00 per Mcf of the  underproduced  gas
imbalance with respect to any gas production,  pipeline,  storage, processing or
other gas imbalance attributable to the Interests as of the Effective Time; and

               (v) Any other amount agreed upon by Seller and Buyer.

          (b) The Purchase Price shall be adjusted downward by the following:

               (i) The value of  proceeds  received  by Seller  from the sale of
oil, gas or other  hydrocarbons  attributable  to the  Interests and relating to
production after the Effective Time, less all applicable taxes not reimbursed to
Seller by a purchaser;  and less all royalties,  overriding  royalties and other
non-cost bearing burdens affecting this production;

                                      -4-

            (ii)  An  amount  equal  to  all  unpaid  ad  valorem,  property,
production,  severance  and similar  taxes and  assessments  (but not  including
income  taxes)  based upon or  measured  by the  ownership  of  property  or the
production of hydrocarbons or the receipt of proceeds  therefrom accruing to the
Interests prior to the Effective Time;

               (iii) The amount of all authorized  and  verifiable  expenditures
paid by Buyer  for work  actually  done and  performed  in  connection  with the
Interests for the period prior to the Effective Time;

               (iv) An  amount  equal to $1.00 per Mcf of the  overproduced  gas
imbalance with respect to any gas production,  pipeline,  storage, processing or
other gas imbalance attributable to the Interests as of the Effective Time;

               (v) The amount of all proceeds from  production  attributable  to
the  Interests  which are  currently  held in suspense,  if any, for which Buyer
shall assume responsibility;

               (vi) The amount of the Deposit; and

               (vii) Any other amount agreed upon by Seller and Buyer.

     2.04  Allocation of Purchase  Price.  The Purchase Price shall be allocated
           -----------------------------
("Allocated  Value") among the Interests  including the specifically  identified
proved  undeveloped  locations  and behind  pipe  intervals  all as set forth in
Exhibit "B" hereto and which is subject to Seller's approval.

                                   ARTICLE III
                                   -----------
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

     3.01  Representations  and  Warranties  of Seller.  Seller  represents  and
           -------------------------------------------
warrants to Buyer as follows:

          (a) Seller is a Texas limited  partnership,  duly  organized,  validly
existing and in good standing under the laws of its state of  organization,  and
is duly  qualified to carry on its business in each of the states  identified in
Exhibit "A".

          (b)  Seller  has the  requisite  power and  authority  to carry on its
business  as  presently  conducted,  to enter into this  Agreement,  to sell the
Interests  on  the  terms  described  in  this  Agreement  and  to  perform  its
obligations   under  this  Agreement.   The  consummation  of  the  transactions
contemplated  by this Agreement  will not violate,  nor be in conflict with, any

                                      -5-

provision of Seller's  governing  documents,  or any  agreement or instrument to
which Seller is a party or is bound, or any judgment,  decree,  order,  statute,
rule or regulation applicable to Seller.

          (c) The execution,  delivery and performance of this Agreement and the
transactions  contemplated  hereby have been duly and validly  authorized by all
requisite action on the part of Seller.

          (d) This  Agreement  has been duly executed and delivered on behalf of
Seller,  and at the Closing all documents and instruments  required hereunder to
be executed and delivered by Seller shall have been duly executed and delivered.
This Agreement does, and such documents and instruments shall,  constitute legal
and valid obligations of Seller.

          (e) Seller has incurred no liability,  contingent  or  otherwise,  for
brokers' or finders'  fees  relating to the  transactions  contemplated  by this
Agreement for which Buyer shall have any responsibility whatsoever.

          (f)  No  claim,  demand,   filing,   hearing,   notice  of  violation,
proceeding, notice or demand letter,  investigation,  administrative proceeding,
civil,  criminal or other action,  suit or other legal proceeding is pending or,
to the best of Seller's  knowledge,  threatened,  against  Seller  relating  to,
resulting from or affecting the ownership or operation of the Interests.

          (g) To the best of Seller's knowledge and subject to the provisions of
this  paragraph,  (i) the  production and expense data  heretofore  furnished or
caused  to be  furnished  by  Seller  to  Buyer  (the  "Information"),  and  any
supplement  thereto,  was  substantially  complete and correct as of the date of
such delivery,  and (ii) the Information,  as of its respective dates and of the
respective  dates of its delivery,  did not contain a material  misstatement  of
fact regarding the matters  described herein and did not omit it state therein a
material fact necessary to make the statements therein not misleading,  in light
of the  circumstances  under  which they were made.  Except as set forth in this
Section 3.01(g),  no representation or warranty of any kind is made by Seller as
to the  Information  or with respect to the  Interests to which the  Information
relates and Buyer expressly agrees that any conclusions drawn therefrom shall be
the result of its own  independent  review  and  judgment.  The  representations
contained in this  paragraph  shall apply only to matters of fact, and shall not
apply  to  any  information,  data,  printouts,   extrapolations,   projections,
documentation,  maps, graphs, charts, or tables which reflect,  depict, present,
portray,  or represent,  or which are based upon or derived from, in whole or in
part,  interpretation of the Information including,  but not limited to, matters
of geological, geophysical, engineering, or scientific interpretation.

          (h) The  transfer  of the  Interests  to Buyer  does not  violate  any
covenants  or  restrictions  imposed  on Seller  by any bank or other  financial
institution  in  connection  with a mortgage or other  instrument,  and will not

                                      -6-

result in the creation or imposition of a lien on any portion of the Interests.

          (i) Except as disclosed by Seller in writing,  to the best of Seller's
knowledge,  it is in compliance with all laws, rules,  regulations,  ordinances,
codes, orders, licenses, concessions and permits pertaining to the Interests.

          (j) To the  best  of  Seller's  knowledge,  Seller  has  all  material
governmental  licenses and permits and has properly  made all material  filings,
necessary or appropriate to obtain those licenses and permits to own and operate
the  Interests,  and such  licenses,  permits  and filings are in full force and
effect,  and no  material  violations  exist in  respect  of any such  licenses,
permits  or  filings,  no  proceeding  is  pending  or to the  best of  Seller's
knowledge is threatened looking toward the challenging, revocation or limitation
of any such licenses, permits or filings.

          (k) To the best of Seller's  knowledge,  (i) the material terms of all
Leases, operating agreements, production sales contracts, farmout agreements and
other  contracts or agreements  respecting  the Interests can be found either of
record in the counties in which the  Interests  are located or are  reflected or
referenced in Seller's files, and (ii) the Contracts are currently in full force
and effect in accordance with their applicable terms.

          (l) Seller has received no notice of termination of any of the Leases.

          (m) To the best of Seller's knowledge,  (i) Seller is not obligated by
virtue  of any  prepayment  arrangement  under  any  contract  for  the  sale of
hydrocarbons,  including  "take or pay"  obligation,  hedging  or  forward  sale
agreements,  or  similar  provisions  or  a  production  payment  or  any  other
arrangement  to deliver  hydrocarbons  from the  Interests  at some  future time
without then or thereafter  receiving full payment  therefor,  (ii) there are no
production sales  agreements  currently in effect that cannot be terminated with
sixty (60) days prior written notice, and (iii) there are no calls on production
affecting the Interests.

          (n) To the best of Seller's knowledge,  information,  and belief there
are no surface use or access agreements currently in force and effect that would
materially interfere with oil and gas operations on the Leases.

          (o) To best of Seller's  knowledge,  none of the Wells included within
the Interests has been  represented by its operator,  either in a pending AFE or
other written  proposal,  to other well  participants  as being in need of being
plugged and abandoned.

          (p) All ad valorem, property, production,  severance and similar taxes
and  assessments  based on or  measured  by the  ownership  of  property  or the
production of hydrocarbons or the receipt of proceeds  therefrom with respect to
the Interests  for all periods  prior to the  Effective  Time have been properly
paid and all such taxes and assessments  which must be paid prior to the Closing
shall have been properly paid by Seller.

                                      -7-

          (q) certain of the  representations set forth in this Section 3.01 are
limited to the best of Seller's  knowledge to avoid the creation of an automatic
breach as a result of Seller's  possible  lack of knowledge of certain  facts or
circumstances  covered by such  representations at the time such representations
are made or are deemed to have been made.  "Seller's  knowledge"  is defined for
this Section 3.01 as the knowledge of only the following  individuals:  Blake T.
Liedtke,  W. Russell Brown, Jr., Karl H. Herkert,  John N. Black, Greg J. Fox or
Tim C. Lechner.

     3.02 Representations and Warranties of Buyer. Buyer represents and warrants
          ---------------------------------------
to Seller as follows:

          (a) Buyer is a Montana  corporation  duly organized,  validly existing
and in good  standing  under the laws of its state of  organization  and is duly
qualified to carry on its business in each of the states  identified  in Exhibit
"A".

          (b)  Buyer  has all  requisite  power  and  authority  to carry on its
business as presently conducted,  to enter into this Agreement,  to purchase the
Interests  on the terms  described  in this  Agreement  and to perform its other
obligations   under  this  Agreement.   The  consummation  of  the  transactions
contemplated  by this Agreement  will not violate,  nor be in conflict with, any
provision of Buyer's  governing  documents,  or any  agreement or  instrument to
which Buyer is a party or is bound,  or any judgment,  decree,  order,  statute,
rule or regulation applicable to Buyer.

          (c) The execution,  delivery and performance of this Agreement and the
transactions  contemplated  hereby have been duly and validly  authorized by all
requisite action on the part of Buyer.

          (d) This  Agreement  has been duly executed and delivered on behalf of
Buyer, and at the Closing all documents and instruments required hereunder to be
executed  and  delivered by Buyer shall have been duly  executed and  delivered.
This Agreement does, and such documents and instruments shall,  constitute legal
and valid obligations of Buyer.

          (e) Buyer has incurred no  liability,  contingent  or  otherwise,  for
brokers' or finders'  fees  relating to the  transactions  contemplated  by this
Agreement for which Seller shall have any responsibility whatsoever.

          (f) In entering  into this  Agreement,  Buyer has relied solely on the
express  representations  and  covenants  of  Seller  in  this  Agreement,   its
independent  investigation  of, and judgment  with respect to, the Interests and
the  advice  of  its  own  legal,  tax,  economic,  environmental,  engineering,

                                      -8-

geological and geophysical advisors and not on any comments or statements of any
representatives  of,  or  consultants  or  advisors  engaged  by  Seller  or its
representatives.

          (g) Prior to the  Closing,  Buyer  intends to satisfy  all bonding and
regulatory  requirements  of all state and federal  governmental  authorities so
that  Buyer  is  qualified  to  own  the  Interests.  The  consummation  of  the
transactions  contemplated  hereby will not cause Buyer to be disqualified as an
owner of state or federal oil, gas and mineral leases,  or to exceed any acreage
limitation imposed by any law, statute, rule or regulation.

          (h) Buyer is an experienced and knowledgeable investor and operator in
the oil and gas  business.  Buyer is acquiring the Interests for its own account
and  not  with a  view  to,  or for  offer  of  resale  in  connection  with,  a
distribution  thereof,  within the  meaning of the  Securities  Act of 1933,  15
U.S.C.ss.77a  et seq., and any other rules,  regulations  and laws pertaining to
the distribution of securities.

          (i)  Buyer  has  arranged  to  have  available  by  the  Closing  Date
sufficient  funds to  enable  the  payment  to Seller  by wire  transfer  of the
Adjusted  Purchase Price in accordance with Section 7.03 hereof and to otherwise
perform Buyer's obligations under this Agreement.

                                   ARTICLE IV
                                   ----------
                                    COVENANTS
                                   ----------
     4.01 Covenants of Seller.  Seller covenants and agrees with Buyer that from
          -------------------
the date hereof to the Closing  Date,  except (i) as  provided  herein,  (ii) as
required by any obligation,  agreement,  lease, contract or instrument affecting
the Interests,  or (iii) as otherwise  consented to in writing by Buyer,  Seller
shall:

          (a) Give  Buyer and its  representatives  access  to, and the right to
copy, at Buyer's  expense,  all  information in its  possession  relating to the
Interests unless  specifically  precluded by a third party agreement which shall
include, without limitation,  title opinions,  abstracts of title, land records,
accounting records, production records, operating expense records,  engineering,
geological and geophysical data,  development  plans and permits,  and any other
information  of whatsoever  kind relating to the production and operation of the
Interests.  All such information shall be open to inspection and photocopying at
Seller's  offices at any reasonable time during the term of this Agreement,  but
until  subsequent  to the Closing  shall  remain  confidential  and shall not be
disclosed to any third party other than Buyer's employees and agents.

                                      -9-

          (b) Not, except as set forth in Schedule  4.01(b)attached  hereto, (i)
enter into any new agreements or commitments with respect to the Interests which
terms would  extend  beyond the  Closing,  (ii)  conduct  any single  capital or
workover  project with respect to the Interests in excess of Twenty Thousand and
No/100  Dollars  ($20,000.00),  (iii) abandon any Well located on the Leases nor
release  or abandon  all or any  portion of any of the  Leases,  (iv)  modify or
terminate any of the existing  agreements  and (v)  encumber,  sell or otherwise
dispose of any of the Interests other than personal property that is replaced by
equivalent property or consumed in the normal operation of the Interests.

          (c) Take or cause to be taken all such  actions as may be necessary or
advisable to  consummate  and make  effective  the sale of the Interests and the
transactions contemplated by this Agreement and to assure that as of the Closing
Date it will not be under  any  material  organizational,  legal or  contractual
restriction  that  would  prohibit  or delay  the  timely  consummation  of such
transactions.

          (d) Cause all the  representations  and warranties of Seller contained
in this Agreement to be true and correct on and as of the Closing Date.

          (e)  Promptly  notify Buyer (i) if any  representation  or warranty of
Seller  contained in this  Agreement is discovered to be or becomes  untrue,  or
(ii) if  Seller  fails to  perform  or comply  with any  covenant  or  agreement
contained in this Agreement or it is reasonably  anticipated that Seller will be
unable to perform or comply with any  covenant or  agreement  contained  in this
Agreement.

          (f) Keep and  maintain  all  policies  of  insurance  relating  to the
Interests in full force and effect through Closing.

          (g)  Cooperate  with  Buyer  in the  notification  of  all  applicable
governmental regulatory authorities of the transactions  contemplated hereby and
cooperate  with Buyer in obtaining  the issuance by each such  authority of such
permits,  licenses and  authorizations  as may be necessary for Buyer to own and
operate  the  Interests   following  the   consummation   of  the   transactions
contemplated by this Agreement.

          (h)  Exercise  all  due  diligence  in   safe-guarding   and  securely
maintaining all engineering,  geological and geophysical data, reports and maps,
all other  confidential  information,  in any medium or form whatsoever,  in the
possession of Seller relating to the Interests.

     4.02 Covenants of Buyer.  Buyer  covenants and agrees with Seller that from
          ------------------
the date hereof to the Closing Date,  except (i) as provided herein,  or (ii) as
otherwise consented to in writing by Seller, Buyer shall:

                                      -10-

          (a) Take or cause to be taken all such  actions as may be necessary or
advisable to consummate and make effective the purchase of the Interests and the
transactions contemplated by this Agreement and to assure that as of the Closing
Date it will not be under  any  material  organizational,  legal or  contractual
restriction  that  would  prohibit  or delay  the  timely  consummation  of such
transactions.

          (b) Cause all the representations and warranties of Buyer contained in
this Agreement to be true and correct on and as of the Closing Date.

          (c) Promptly  notify Seller (i) if any  representation  or warranty of
Buyer contained in this Agreement is discovered to be or becomes untrue, or (ii)
if Buyer fails to perform or comply with any covenant or agreement  contained in
this  Agreement  or it is  reasonably  anticipated  that Buyer will be unable to
perform or comply with any covenant or agreement contained in this Agreement.

                                    ARTICLE V
                                    ---------
                      TITLE MATTERS, ENVIRONMENTAL MATTERS,
                      -------------------------------------
                          CASUALTY LOSS AND ABANDONMENT
                          -----------------------------

     5.01 Seller's Title.  Seller represents to Buyer that Seller's title to the
          --------------
Interests  as of the  Effective  Time  is  (and  as of  the  Closing  shall  be)
"Marketable Title" as defined in Section 5.02 hereinbelow.

     5.02 Definition of Marketable  Title.  As used in this Agreement,  the term
          -------------------------------
"Marketable Title" shall mean, as to each of the Interests  including the proved
undeveloped  locations  and behind pipe  intervals  specifically  identified  on
Exhibit B, that the title acquired by Buyer:

          (a) Will  entitle  Buyer to  receive  not  less  than the Net  Revenue
Interests  set  forth  in  Exhibit  "A"  and a like  share  of all  hydrocarbons
produced,  saved and marketed from the Interests  throughout the productive life
of the Interests.

          (b) Will obligate  Buyer to bear not more than that  percentage of the
costs and expenses  related to the  maintenance and development of and operation
of  the  Working  Interests  as set  forth  on  Exhibit  "A"  and a  like  share
attributable thereto throughout the productive life of the Interests.

          (c) Is free and clear of all liens, security interests,  encumbrances,
burdens and claims of any kind, except for Permitted Encumbrances.

                                      -11-

     5.03  Definition  of  Permitted  Encumbrances.  As used  herein,  the  term
           ---------------------------------------
"Permitted Encumbrances" shall mean:

          (a) Lessors' royalties,  overriding royalties,  reversionary interests
and similar  burdens,  whether  recorded or  unrecorded,  that do not operate to
reduce the Net Revenue Interests set forth in Exhibit "A".

          (b) Division  orders and sales  contracts  terminable  without penalty
upon no more than thirty (30) days' notice to the purchaser.

          (c) Except as provided in Section 5.06 below,  preferential  rights to
purchase and required  third-party  consents and similar agreements with respect
to which  waivers or consents are  obtained  under this  Agreement  prior to the
Closing  from  the  appropriate  parties  or the  appropriate  time  period  for
asserting the right has expired prior to the Closing without an exercise of such
right.

          (d) Encumbrances  relating to the Interests that arise under operating
agreements to secure payment of amounts not yet delinquent and are of a type and
nature customary in the oil and gas industry.

          (e)  Encumbrances  relating  to the  Interests  securing  payments  to
mechanics  and  materialmen  and  encumbrances  securing  payment  of  taxes  or
assessments that are, in either case, not yet delinquent or, if delinquent,  are
being  contested in good faith in the normal course of business and Seller shall
have agreed to remain  responsible  therefore if such arose before the Effective
Time.

          (f) 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 they are  customarily  obtained
subsequent to the sale or conveyance.

          (g) Conventional rights of reassignment  obligating Seller to reassign
its  interest in any portion of the  Interests  to a third party in the event it
intends to release or abandon  such  Interests  prior to the  expiration  of the
primary term or other termination of such Interests.

          (h) Easements,  rights of way,  servitudes,  permits,  surface leases,
surface use  restrictions  and other surface uses and impediments on, over or in
respect  to any of the  Interests  that do not,  taken  as a  whole,  materially
interfere with the operation, value or use of the Interests.

          (i) All rights reserved to or vested in any governmental, statutory or
public authority to control or regulate any of the Interests in any manner,  and
all applicable  laws, rules and orders of governmental  authority  provided that

                                      -12-

Seller's ownership or operation of the Interests is not in violation thereof.

          (j) The terms and conditions of all Leases and all agreements to which
the  Interests  are subject  provided that such do not operate to reduce the Net
Revenue Interests attributable to the Interests.

          (k) Such Title Defects  affecting  the Interests  which Buyer fails to
deliver to Seller in writing as provided in Section 5.05(b) below.

          (l) Liens in favor of Compass Bank if released at Closing.

          (m) All revesionary  interests set forth in Schedule  5.03(m) attached
hereto.

     5.04 Definition of Title Defect. As used in this Agreement, the term "Title
          --------------------------
Defect"  shall mean any defect which  renders  title to an  Interest,  as herein
defined, less than Marketable Title.

     5.05 Title Procedure.
          ---------------

          (a) As used herein,  "Title Defect Amount" shall mean, with respect to
any  reduction of the Net Revenue  Interest set forth on Exhibit "A" hereto,  an
amount  calculated by multiplying  the reduction in the Net Revenue  Interest by
the Allocated Value for such affected Interests; with respect to any increase in
the  Working   Interest  set  forth  on  Exhibit  "A"  hereto  and  assuming  no
corresponding  increase  in  Net  Revenue  Interest,  an  amount  calculated  by
multiplying the increase in the Working Interest by the Allocated Value for such
affected Interests; and with respect to any Title Defect that does not cause the
Net Revenue  Interest  set forth on Exhibit "A" to decrease or cause the Working
Interest  set  forth  on  Exhibit  "A" to  increase,  an  amount  determined  by
evaluating the portion of the Interests affected by such Title Defect, the legal
effect of the  Title  Defect,  and the  potential  economic  effect of the Title
Defect over the life of the affected  Interests.  The Title Defect  Amount as to
any  particular  Interest,  however,  shall  never  exceed the  Allocated  Value
therefor.  Furthermore,  in the  event it is  determined  that  the Net  Revenue
Interests  for any  affected  Interest is greater  than set forth on Exhibit "A"
hereto or the Working  Interests  for any  affected  Interest is less  without a
corresponding  decrease  in Net Revenue  Interest  than set forth on Exhibit "A"
hereto,  the  Purchase  Price  shall  be  proportionately   adjusted  upward  by
multiplying the increase in the Net Revenue  Interest by the Allocated Value for
such affected  Interest or multiplying  the decrease in the Working  Interest by
the Allocated  Value for such affected  Interest.  Increases or decreases in the
Working Interest without a corresponding increase or decrease in the Net Revenue
Interest shall be evaluated by rerunning the economics for the affected Interest
to determine  the impact on the  Allocated  Value for such  affected  Interests.
Notwithstanding  any terms  contained  in this  Agreement  to the  contrary,  no

                                      -13-

adjustment  to the Purchase  Price for Title Defects and  Environmental  Defects
shall be made  unless the sum of such Title  Defect  Amounts  and  Environmental
Defect  Amounts is more than Two  Hundred  Fifty  Thousand  and  No/100  Dollars
($250,000.00).  This  $250,000.00 sum is a threshold,  not a deductible,  and if
this  threshold is exceeded,  the Purchase  Price shall be adjusted by the total
sum  of  these  defects.   In  addition,   this  threshold  amount  shall  apply
independently  to increases  in the Purchase  Price for the reasons set forth in
this Section 5.05(a),  and the amounts  attributable to such increases shall not
be netted  against the downward  adjustments  to the Purchase Price to determine
whether or not a Purchase Price adjustment should be made.  Notwithstanding  any
terms  contained  in this  Agreement to the  contrary,  no Title Defect shall be
asserted by Buyer unless the Title Defect Amount is at least Twenty Thousand and
No/100 Dollars  ($20,000.00).  This $20,000.00 threshold shall likewise apply to
any upward adjustment sought by Seller under this Section 5.05(a).

          (b) If Buyer  discovers  any Title  Defect,  Buyer  shall give  Seller
notice of such Title Defect no later than fifteen (15) days prior to the Closing
Date. Such notice shall be in writing and shall include (i) a description of the
Title Defect and (ii) the Title Defect Amount therefor. Buyer shall be deemed to
have  waived all Title  Defects to which  Buyer has not given  timely  notice to
Seller thereof.

          (c) Seller  shall  notify Buyer in writing no later than five (5) days
before the Closing Date whether it elects to cure the alleged Title  Defect.  If
Seller has elected to cure the Title Defect,  then the Interests  subject to the
Title  Defect  shall  not be  assigned  at the  Closing  and  Seller  shall  use
commercially reasonable efforts to cure such Title Defect during a period ending
sixty (60) days after Closing.  Notwithstanding  the foregoing,  Seller shall be
under no obligation to cure any Title Defect unless Seller  otherwise  expressly
agrees in writing to cure such Title Defect.

          (d) With respect to any Title  Defect that Seller  elects not to cure,
Seller shall have the option to:

               (i) Exclude the Interest,  including pipelines and other personal
property  necessary  to operate  the  particular  Interest  subject to the Title
Defect,  in which event the  Purchase  Price  shall be reduced by the  Allocated
Value of the excluded Interest; or

               (ii) If Buyer nad Seller so agree,  sell the Interest  subject to
such Title Defect to Buyer and the Purchase  Price shall be reduced by the Title
Defect Amount.

          (e)  Notwithstanding  any terms  contained  in this  Agreement  to the
contrary,  in the event the  aggregate  amount of (i) the Title Defects and (ii)
the Environmental Defect Amounts and which Seller does not timely agree to cure,
excluding exercised preferential rights to purchase exceeds twenty percent (20%)
of the Purchase Price, either Seller or

                                      -14-

Buyer may elect to terminate  this  Agreement  and Buyer shall be entitled to an
immediate refund of the Deposit.

     5.06 Consents and Preferential Rights.
          --------------------------------

          (a) If any  third  party  consent  to the  sale  and  transfer  of the
Interests  is not  obtained  prior to the  Closing,  Buyer  shall not treat that
portion of the Interests  subject to such consent  requirement as a Title Defect
if such consent is  customarily  secured  after the Closing or such consent does
not materially  affect the value of the affected  Interests if such consent were
withheld.

          (b) If any of the  Interests  are subject to a  preferential  right to
purchase,  Seller shall in a good faith,  prior to the Closing Date,  attempt to
notify each third party which holds a  preferential  right to purchase  covering
that portion of the Interests  subject  thereto.  If the notice period under any
preferential  right to purchase has not expired prior to the Closing Date, Buyer
shall nevertheless  purchase that portion of the Interests which may be affected
by the exercise of such  preferential  right but the  Interests  subject to such
unexpired  preferential  right shall not be treated as a Title Defect.  If after
the  Closing  any  party  holding a  preferential  right to  purchase  elects to
exercise same,  Buyer shall then  coordinate  with Seller in connection with the
execution by such third party of a purchase and sale agreement  substantially in
the form hereof.  Buyer shall be due any consideration  paid by such third party
upon the exercise of such  preferential  right to purchase in exchange for Buyer
delivering  such third party an  assignment  for that  portion of the  Interests
affected by the exercise of such preferential right.

     5.07 Environmental Procedure.
          -----------------------

          (a) Prior to the Closing Date, Buyer may conduct a field inspection of
the Interests and Buyer may further secure,  at its sole risk, cost and expense,
an environmental audit of all or any of the Interests. If obtained,  Buyer shall
immediately  furnish  a copy of  such  environmental  audit  to  Seller  and the
contents of such environmental  audit shall remain  confidential unless required
to be disclosed by any rule, order or governmental proceeding.

          (b) As used  herein,  "Environmental  Defect"  shall mean any material
environmental  defect  relating to the Interests in the nature of  environmental
pollution or contamination, including pollution of the soil, ground water or the
air,  and  which  is a  violation  of  environmental  or land use  laws,  rules,
regulations, or orders of appropriate state or federal regulatory agencies.

          (c) As used herein,  "Environmental  Defect  Amount" means the cost to
remediate such Environmental Defect in accordance with applicable  environmental
laws.  Notwithstanding any terms contained in this Agreement to the contrary, no
adjustment  to the  Purchase  Price  shall be made  unless the sum of such Title

                                      -15-

Defect Amounts and  Environmental  Defect Amounts is more than Two Hundred Fifty
Thousand and NO/100 Dollars ($250,000.00).  This $250,000.00 sum is a threshold,
not a deductible, and if this threshold is exceeded, the Purchase Price shall be
adjusted by the total sum of these defects.  In addition,  this threshold amount
shall apply independently to increases in the Purchase Price for the reasons set
forth in this Section  5.07(a),  and the amounts  attributable to such increases
shall not be netted  against the downward  adjustments  to the Purchase Price to
determine   whether  or  not  a  Purchase  Price  adjustment   should  be  made.
Notwithstanding  any terms  contained  in this  Agreement  to the  contrary,  no
Environmental  Defect shall be asserted by Buyer unless the Environmental Defect
Amount is at least Twenty Thousand and No/100 Dollars ($20,000.00).

          (d) If Buyer  discovers  any  Environmental  Defect,  Buyer shall give
Seller notice of such Environmental Defect no later than fifteen (15) days prior
to the Closing  Date.  Such notice  shall be in writing and shall  include (i) a
description of the Environmental Defect and (ii) the Environmental Defect Amount
therefor.  Buyer  shall be deemed to have  waived all  Environmental  Defects to
which Buyer has not given timely notice to Seller thereof.

          (e) Seller  shall  notify Buyer in writing no later than five (5) days
before the  Closing  Date  whether it elects to cure the  alleged  Environmental
Defect.  If  Seller  has  elected  to cure the  Environmental  Defect,  then the
Interest  subject  to the  Environmental  Defect  shall not be  assigned  at the
Closing  and  Seller  shall use  commercially  reasonable  efforts  to cure such
Environmental  Defect during a period ending one hundred eighty (180) days after
Closing.  Notwithstanding the foregoing,  Seller shall be under no obligation to
cure any  Environmental  Defect  unless  Seller  otherwise  expressly  agrees in
writing to cure such Environmental Defect.

          (f) With respect to any Environmental Defect that Seller elects not to
cure, Seller shall have the option to:

               (i) Exclude the Interest,  including pipelines and other personal
property   necessary  to  operate  the  particular   Interest   subject  to  the
Environmental  Defect, in which event the Purchase Price shall be reduced by the
Allocated Value of the excluded Interest; or

               (ii) If Buyer  and  Seller  shall  so  agree,  sell the  Interest
subject to the  Environmental  Defect to Buyer and the  Purchase  Price shall be
reduced by the  Environmental  Defect Amount.  Notwithstanding  any terms in the
Section 5.07 to the contrary,  with respect to the Watt No. 2 well and the Tveit
Saltwater  Disposal  System  ("Tveit  et al  Properties"),  if Buyer  asserts an
Environmental Defect on the Tveit it al Properties, Buyer shall have the option,
but not the obligation to accept an indemnity from Seller which is acceptable to
Buyer

                                      -16-

          (g)  Notwithstanding  any terms  contained  in this  Agreement  to the
contrary,  in the event the  aggregate  amount of (i) the  Environmental  Defect
Amounts and (ii) the Title Defect Amounts set forth in Section 5.05 hereinabove,
and which Seller does not timely agree to cure,  exceeds twenty percent (20%) of
the Purchase Price, either Seller or Buyer may elect to terminate this Agreement
and Buyer shall be entitled to an immediate refund of the Deposit.

     5.08  Casualty  Loss.  If, prior to the Closing,  all or any portion of the
           --------------
Interests shall be destroyed by fire or other casualty, or if any portion of the
Interests  shall be taken in  condemnation or under the right of eminent domain,
or if proceedings for such purposes shall be pending or threatened (collectively
"Casualty  Losses"),  except as provided  below,  this Agreement shall remain in
full force and effect notwithstanding any such destruction or taking, and Seller
shall at  Closing  pay to Buyer  all  sums  paid to  Seller  by  reason  of such
destruction or taking. In addition,  Seller shall assign,  transfer and set over
unto Buyer all of the right,  title and  interest of Seller in and to any unpaid
awards or other payments arising out of such destruction or taking. Seller shall
not  voluntarily  compromise,  settle or adjust any amounts payable by reason of
such destruction or taking without first obtaining the written consent of Buyer.
Notwithstanding  the foregoing,  in the event the total value of Casualty Losses
exceeds twenty percent (20%) of the Purchase  Price,  either Buyer or Seller may
elect to terminate  this  Agreement  and Buyer shall be entitled to an immediate
refund of the Deposit.  In addition,  the Purchase Price shall be reduced by the
amount of Seller's  deductible under any applicable policy of insurance or other
sums not covered by Seller's  insurance or any  shortfall  in the unpaid  awards
insofar as the same pertain to payments arising out of the destruction or taking
of the affected Interests.

     5.09  Plugging and  Abandonment.  Upon  Closing,  Buyer shall assume all of
           -------------------------
Seller's plugging,  replugging,  abandonment,  removal, disposal and restoration
obligations  associated with the Interests acquired hereunder.  Such obligations
being  assumed  shall  include,  but not be limited to, all necessary and proper
plugging  and  abandonment  and/or  removal  and  disposal  of all of the Wells,
whether pre-existing or drilled by Seller, and all structures, personal property
and equipment located on or associated with the Leases, the necessary and proper
capping and burying of all associated flow lines, and any necessary  disposal of
naturally occurring radioactive material (NORM) or asbestos except those matters
which are  asserted as  Environmental  Defects  and which  remain  uncured.  All
plugging, replugging,  abandonment, removal, disposal and restoration operations
shall be in compliance with applicable laws, rules and regulations and conducted
in a good and workmanlike manner.

     5.10 Disclaimer of Warranties.  THE EXPRESS  REPRESENTATIONS AND WARRANTIES
          ------------------------
OF SELLER  CONTAINED  IN THIS  AGREEMENT  (OR IN THE  ASSIGNMENT  TO BE EXECUTED
PURSUANT  TO  THIS  AGREEMENT)  ARE  EXCLUSIVE  AND  ARE IN  LIEU  OF ALL  OTHER

                                      -17-

REPRESENTATIONS AND WARRANTIES,  EXPRESS, IMPLIED,  STATUTORY, OR OTHERWISE, AND
SELLER  EXPRESSLY   DISCLAIMS  ANY  AND  ALL  SUCH  OTHER   REPRESENTATIONS  AND
WARRANTIES,  EXCEPT THAT SELLER WARRANTS TITLE TO THE INTERESTS BY, THROUGH, AND
UNDER  SELLER,  BUT NOT  OTHERWISE.  WITHOUT  LIMITATION OF THE  FOREGOING,  THE
INTERESTS   SHALL  BE  CONVEYED   PURSUANT   HERETO   WITHOUT  ANY  WARRANTY  OR
REPRESENTATION,  WHETHER EXPRESS,  IMPLIED,  STATUTORY, OR OTHERWISE RELATING TO
THE CONDITION,  QUANTITY,  QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY
TO THE MODELS OR SAMPLES OF MATERIALS,  OR  MERCHANTABILITY  OF ANY EQUIPMENT OR
ITS FITNESS FOR ANY PURPOSE, AND WITHOUT ANY OTHER EXPRESS, IMPLIED,  STATUTORY,
OR OTHER WARRANTY OR REPRESENTATION  WHATSOEVER.  BUYER SHALL HAVE INSPECTED, OR
WAIVED (AND UPON  CLOSING  SHALL BE DEEMED TO HAVE  WAIVED) ITS RIGHT TO INSPECT
THE  INTERESTS FOR ALL PURPOSES AND  SATISFIED  ITSELF AS TO THEIR  PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING, BUT NOT LIMITED
TO, CONDITIONS  SPECIFICALLY  RELATED TO THE PRESENCE,  RELEASE,  OR DISPOSAL OF
HAZARDOUS  SUBSTANCES,  SOLID  WASTES,  ASBESTOS  OR  OTHER  MANMADE  FIBERS  OR
NATURALLY  OCCURRING  RADIOACTIVE  MATERIALS  ("NORM")  IN,  ON,  OR  UNDER  THE
INTERESTS. BUYER IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE INTERESTS, AND
BUYER SHALL, EXCEPT AS PROVIDED OTHERWISE HEREIN, ACCEPT ALL OF THE SAME "AS IS,
WHERE IS".  WITHOUT  LIMITATION  OF THE  FOREGOING,  SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS  OF  ANY  DATA,  REPORTS,  RECORDS,  PROJECTIONS,  INFORMATION,  OR
MATERIALS NOW HERETOFORE,  OR HEREAFTER  FURNISHED OR MADE AVAILABLE TO BUYER IN
CONNECTION  WITH  THIS  AGREEMENT,   INCLUDING,   WITHOUT  LIMITATION,   PRICING
ASSUMPTIONS OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE
TO THE  INTERESTS  OR THE  ABILITY  OR  POTENTIAL  OF THE  INTERESTS  TO PRODUCE
HYDROCARBONS  OR THE  ENVIRONMENTAL  CONDITION  OF THE  INTERESTS  OR ANY  OTHER
MATERIALS  FURNISHED OR MADE AVAILABLE TO BUYER BY SELLER, OR BY SELLER'S AGENTS
OR  REPRESENTATIVES.  ANY AND ALL  SUCH  DATA,  RECORDS,  REPORTS,  PROJECTIONS,
INFORMATION,  AND  OTHER  MATERIALS  (WRITTEN  OR ORAL)  FURNISHED  BY SELLER OR
OTHERWISE  MADE  AVAILABLE  OR  DISCLOSED  TO BUYER ARE  PROVIDED  TO BUYER AS A
CONVENIENCE  AND SHALL NOT  CREATE OR GIVE RISE TO ANY  LIABILITY  OF OR AGAINST
SELLER,  AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT BUYER'S SOLE RISK TO
THE MAXIMUM EXTENT PERMITTED BY LAW.

                                      -18-

                                   ARTICLE VI
                                   ----------
                              CONDITIONS TO CLOSING
                              ---------------------

     6.01  Conditions to  Obligations  of Seller.  The  obligations of Seller to
           -------------------------------------
consummate the  transactions  contemplated  by this Agreement are subject to the
satisfaction, or waiver by Seller, of the condition that all representations and
warranties of Buyer  contained in this  Agreement  shall be true in all material
respects at and as of the Closing as if such representations and warranties were
made at and as of the Closing,  and Buyer shall have performed and satisfied all
covenants  and  agreements  required  by  this  Agreement  to be  performed  and
satisfied by Buyer at or prior to the Closing.

     6.02  Conditions  to  Obligations  of Buyer.  The  obligations  of Buyer to
           -------------------------------------
consummate the  transactions  contemplated  by this Agreement are subject to the
satisfaction,  or waiver by Buyer, of the condition that all representations and
warranties of Seller  contained in this Agreement  shall be true in all material
respects at and as of the Closing as if such representations and warranties were
made at and as of the Closing, and Seller shall have performed and satisfied all
covenants  and  agreements  required  by  this  Agreement  to be  performed  and
satisfied by Seller at or prior to the Closing.

                                   ARTICLE VII
                                   -----------
                                     CLOSING
                                     -------

     7.01 Date of Closing.  Subject to the conditions  stated in this Agreement,
          ---------------
the  consummation  of the  transactions  contemplated  by  this  Agreement  (the
"Closing")  shall be held on November 29, 2001,  at 10:00 a.m.,  or such earlier
date as the parties  shall  agree in writing.  Said date shall be referred to as
the "Closing Date".

     7.02 Place of Closing.  The Closing shall be held at the offices of Seller,
          ----------------
or at such other place as Buyer and Seller may agree upon in writing.

     7.03 Closing Obligations. At the Closing, the following events shall occur,
          -------------------
each being a  condition  precedent  to the others and each being  deemed to have
occurred simultaneously with the others:

          (a) Seller  shall  execute,  acknowledge  and deliver  (in  sufficient
counterparts  to facilitate  recording) the  Assignment,  Conveyance and Bill of
Sale  ("Assignment")  conveying the Interests to Buyer in substantially the form
attached as Exhibit "C"  hereto.  As  appropriate,  Seller  shall also  execute,
acknowledge  and deliver  separate  assignments  of the  Interests on officially

                                      -19-

approved forms, in sufficient counterparts,  to satisfy applicable statutory and
regulatory requirements.

          (b)  Seller  and Buyer  shall  execute  a  settlement  statement  (the
"Preliminary  Settlement Statement") prepared by Seller that shall set forth the
Preliminary  Amount  (as  hereinafter  defined)  and  each  adjustment  and  the
calculation  of such  adjustments  used  to  determine  such  amount.  The  term
"Preliminary  Amount"  shall mean the  Purchase  Price  adjusted  as provided in
Section 2.03 using for such adjustments the best information then available.

          (c) Buyer shall  deliver to Seller a cashier's  check or wire transfer
for the Preliminary Amount.

          (d)  Seller  shall  deliver  to  Buyer  exclusive  possession  of  the
Interests.

          (e)  Seller  shall  prepare  and  both  it and  Buyer  shall  execute,
acknowledge and deliver transfer orders or letters in lieu thereof directing all
purchasers of production to make payment of proceeds  attributable to production
from the Interests after the Effective Time to Buyer.

          (f) Seller shall deliver to Buyer the original Records.  Buyer agrees
to furnish Seller at Seller's cost after the Closing with a copy of any of the
Records upon written request by Seller.

          (g) If Seller is the  operator  of any of the  Interests,  Seller  and
Buyer shall execute the appropriate  regulatory forms transferring  operatorship
of the  Interests  to Buyer and  Seller  shall  file such  forms  subject to the
provisions of Article X. hereinbelow.

          (h) Seller shall provide to Buyer a listing  showing all proceeds from
production  attributable  to the Interests  which are currently held in suspense
for any reason and Buyer shall receive a credit in the amount of such  suspended
funds in  connection  with the final  closing  statement as provided  hereunder.
Buyer  shall be  responsible  for  proper  distribution  of all  such  suspended
proceeds to the parties lawfully entitled to them, and indemnify and hold Seller
harmless  against  any claim,  action or  liability  (including  court costs and
attorney's  fees)  associated  with claims against such suspended funds based on
Buyer's  actions or inactions in connection  with such funds as of and after the
Closing Date.  Seller shall indemnify and hold Buyer harmless against any claim,
action or liability  (including court costs and attorneys' fees) associated with
any claims against such suspended  funds based on Seller actions or inactions in
connection with such funds prior to the Closing Date.

                                      -20-

                                  ARTICLE VIII
                                  ------------
                            OBLIGATIONS AFTER CLOSING
                            -------------------------

     8.01 Post-Closing  Adjustments.  After the Closing,  Seller and Buyer shall
          -------------------------
make  available to each other all  accounting  records  necessary  for Seller to
prepare  within  120 days of  Closing,  in  accordance  with this  Agreement,  a
statement (the "Final  Settlement  Statement")  setting forth each adjustment or
payment  which was not  finally  determined  as of the  Closing  and showing the
calculation of such  adjustments.  As soon as  practicable  after receipt of the
Final  Settlement  Statement,  Buyer  shall  deliver to Seller a written  report
containing  any  changes  which Buyer  proposes be made to the Final  Settlement
Statement.  The parties shall undertake to agree with respect to the amounts due
pursuant to such  post-closing  adjustment no later than one hundred fifty (150)
days after the Closing.  If such post-closing  adjustment has not been agreed to
within one hundred fifty (150) days after the Closing,  either party may seek to
enforce any rights it claims  hereunder.  The date upon which such  agreement is
reached or upon  which the  Adjusted  Purchase  Price is  established,  shall be
referred to as the "Final  Settlement  Date." In the event that (i) the Adjusted
Purchase  Price is more than the  Preliminary  Amount,  Buyer  shall  deliver to
Seller or to  Seller's  account  the amount of such  difference  in  immediately
available  funds,  or  (ii)  the  Adjusted  Purchase  Price  is  less  than  the
Preliminary  Amount,  Seller  shall  deliver to Buyer or to Buyer's  account the
amount of such difference in immediately  available  funds.  Payment by Buyer or
Seller shall be made within five (5) days after the Final  Settlement  Date.  To
the extent not accounted for in the computation of the Adjusted  Purchase Price,
all uncollected accounts receivable attributable to the Interests accruing on or
after the Effective Time shall be assigned to Buyer.

     8.02  Sales  Taxes and  Recording  Fees.  Buyer  shall pay all sales  taxes
occasioned by the sale of the Interests. Buyer shall pay all documentary, filing
and recording fees required in connection with the filing and recording of all
assignments.

     8.03 Indemnification.  After the Closing,  Buyer and Seller shall indemnify
          ---------------
each other as follows:

          (a) Including any "Environmental  Claim" as defined in Section 8.03(c)
hereinbelow,  Buyer shall defend,  indemnify  and save and hold harmless  Seller
against  any and all costs,  expenses,  claims,  demands and causes of action of
whatsoever kind or character, including court costs and attorneys' fees, arising
out of any operations conducted,  commitment made or any action taken or omitted
with respect to the Interests,  which accrue or relate to times on and after the
Effective Time.

          (b)  Excluding  (i) any  "Environmental  Claim" as  defined in Section
8.03(c) hereinbelow,  Seller shall defend,  indemnify and save and hold harmless

                                      -21-

Buyer against any and all costs, expenses,  claims, demands and causes of action
of whatsoever  kind or character,  including  court costs and  attorneys'  fees,
arising out of any operations conducted,  commitment made or any action taken or
omitted with respect to the Interests,  which accrue or relate to times prior to
the Effective Time.

          (c)  Notwithstanding  any terms contained in Sections  8.03(a) and (b)
above,  but in furtherance of same, Buyer expressly agrees to fully and promptly
pay, perform and discharge,  defend, indemnify and hold Seller harmless from and
against any and all costs,  expenses,  claims,  demands and causes of action of
whatsoever  kind or  character,  including  court  costs  and  attorneys'  fees,
resulting from any "Environmental  Claim" as hereinafter  defined arising out of
any operations conducted,  commitment made or any action taken or omitted at any
time,  whether  accruing or  relating  to times prior to or after the  Effective
Time,  with  respect to the  Interests  operated by Buyer.  For purposes of this
paragraph  "Environmental Claim" shall mean any claim, demand or cause of action
asserted by any governmental  agency or any person,  corporation or other entity
for personal injury (including sickness,  disease or death),  property damage or
damage  to the  environment  resulting  from the  discharge  or  release  of any
chemical, material or emission into one or more of the environmental media at or
in the vicinity of the Interests.

          (d)  Notwithstanding  the provisions of Section 8.03(c),  if after the
Closing,  but in no event  later than one (1) year after the Closing  Date,  any
third party other than Buyer asserts an Environmental Claim which occurred prior
to the  Effective  Time  and the  cost to  remiediate  same in  accordance  with
applicable  environmental  laws  exceeds  Twenty  Thousaand  and No/100  Dollars
($20,000.00) ("Retained  Environmental  Liability"),  Buyer may notify Seller in
writing to assume such claim relating to the Retained Environmental Liability in
accordance  with the terms of this section  8.03(d).  Such written  notice shall
describe  the  details  known to Buyer of the  claim  relating  to the  Retained
Environmental  Liability  and Buyer  shall  concurrently  furnish  to Seller all
information  available to Buyer relating to such claim. If Buyer timely notifies
Seller of such claim relating to a Retained Environmental Liability on or before
one (1) year after the Closing Date, Seller shall retain the risk, cost, expense
and liability  related to such Retained  Environmental  Liability.  It is agreed
that  Seller and Buyer will  cooperate  with each other in  connection  with the
dispositon of the Retained  Environmental  Liability  which shall require either
(i)remediation,  (ii)reacquisition  of the affected  Interests by Seller (taking
into  consideration  the  Allocated  Value  therefor  less net  profits  owed or
recieved by Buyer and the value added by subsequent  development or operations),
or (iii)  such  other  dispostion  as Seller  and Buyer  shall  mutually  agree.
However,  for Interests  which were operated by Seller as of the Effecitve Time,
if Seller  and Buyer are  unable to agree upon the  dispostion  of the  Retained
Environmental Liability,  Seller shall be required to remediate same at its sole
risk,  cost,  expense and liability in accordance with applicable  environmental
law and for non-operated Interests opereated by Seller as of the Effective Time,
Seller shall pay to Buyer the share of costs  required to remediate the Retained
Environmental  Liability.  Notwithstanding the foregoing,  if the parties cannot
agree on the cost to remediate a Retained  Environmental  Liability,  such issue
shall be submitted  to binding  arbitration  in  accordance  with Section  11.12
herein.

          (e) THE  INDEMNIFICATION,  RELEASE AND ASSUMPTION  PROVISIONS PROVIDED
FOR IN THIS  AGREEMENT  SHALL BE  APPLICABLE  WHETHER OR NOT THE LOSSES,  COSTS,
EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE,
PASSIVE OR CONCURRENT NEGLIGENCE, OR OTHER FAULT OF ANY INDEMNIFIED PARTY. BUYER
AND SELLER  ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE
RULE AND IS CONSPICUOUS.

                                      -22-

     8.04 Further  Assurances.  Seller and Buyer shall execute,  acknowledge and
          -------------------
deliver or cause to be executed, acknowledged and delivered such instruments and
take such  other  action as may be  necessary  or  advisable  to carry out their
obligations under this Agreement and under any exhibit, document, certificate or
other instrument delivered pursuant hereto.

     8.05 Survival. The representations,  warranties,  covenants, agreements and
          --------
indemnities  contained in this Agreement  shall  terminate at the Closing except
for the provisions of Section 5.09, Section 5.10 and all of Article VIII., X.
and XI.

     8.06 Limitation on Seller's Liability.  After the Closing, any assertion by
          --------------------------------
Buyer that Seller is liable under this  Agreement (a) for the  inaccuracy of any
representation  or warranty,  (b) for breach of any covenant,  (c) for indemnity
under the terms of this  Agreement,  or (d)  otherwise  in  connection  with the
transactions  contemplated in this  Agreement,  must be made by Buyer in writing
and must be given to Seller on or prior to the last  business day  preceding the
first anniversary of the Closing Date. The notice shall state the facts known to
Buyer  that give rise to such  notice in  sufficient  detail to allow  Seller to
evaluate the assertion of Buyer.

     8.07 Devon  Underporduced  Imbalance.  Seller is periodically paid revenues
          -------------------------------
that relate to an underproduced gas imbalance of approximately 390,000 MCF owned
by Devon SFS Operating,  Inc.("Devon") relating to certain wells in the Standard
Draw  Field of  Wyoming  and  which  underproduced  positon  is owned by  Devon,
Seller's predecessor in title ("Devon Underproduced Imbalance"). Seller forwards
these revenues received and attributable to the Devon Underproduced Imbalance to
Devon. The Devon  Underproduced  Imbalance is not an underproduced gas imbalance
owned by Seller nor does it affect the Interests. If Closing occurs, Buyer shall
forward  any  payments  it  recieves  that  relate  to the  Devon  Underproduced
Imbalance to Devon, or its successors and assigns.

                                   ARTICLE IX
                                   ----------
                            TERMINATION OF AGREEMENT
                            ------------------------

                                      -23-

     9.01 Termination.  This Agreement and the transactions  contemplated hereby
          -----------
may be terminated in the following instances:

          (a) By Buyer if any  condition  set forth in Section  6.02 above shall
not be  satisfied  on or  before  the  Closing,  or Buyer  otherwise  elects  to
terminate  this  Agreement  pursuant  to  Sections  5.05(e)  or  5.07(g) of this
Agreement.

          (b) By Seller if any  condition  set forth in Section 6.01 above shall
not be  satisfied  on or  before  the  Closing  or  Seller  otherwise  elects to
terminate  this  Agreement  pursuant  to  Sections  5.05(e)  or  5.07(g) of this
Agreement.

          (c) By the mutual written agreement of Buyer and Seller.

     9.02 Return or  Forfeiture of Deposit.  If this  Agreement is terminated by
          --------------------------------
Buyer in  accordance  with  Section  6.02  above and Buyer is not in a  material
breach of any terms of this Agreement,  Seller shall immediately refund to Buyer
the Deposit  whereupon this Agreement shall terminate and be of no further force
and  effect.  Alternatively,  if this  Agreement  is  terminated  by  Seller  in
accordance with Section 6.01 above and Seller is not in a material breach of any
terms of this Agreement, Buyer shall forfeit the Deposit to Seller as liquidated
damages,  and not as a penalty,  whereupon this Agreement shall terminate except
for Section  9.03  below.

     9.03 Return of  Information.  If this Agreement is terminated,  Buyer shall
          ----------------------
return to Seller  all  information  and  material  delivered  to Buyer by Seller
pursuant to the terms of this Agreement.

     9.04 Liabilities upon Termination.  If this Agreement is terminated for any
          ----------------------------
reason or is breached,  Seller's or Buyer's legal or equitable remedies shall be
limited to actual  damages  for the  breach or  failure  of any  representation,
warranty,  covenant or agreement contained herein which shall in no event exceed
the  Purchase  Price and which  shall  exclude  all  consequential  or  punitive
damages.  Seller and Buyer shall also each retain the right to enforce  specific
performance of this Agreement.

                                    ARTICLE X
                                    ---------
                               INTERIM OPERATIONS
                               ------------------

     If Seller is the  operator  of the  Interests,  Seller  shall  continue  to
operate the Interests during the period between the Effective Time and 7:00 a.m.
on the first day of the month following the Closing Date (the "Interim Period"),
but Seller  shall not have any  obligation  to operate the  Interests  after the
Interim Period.  Seller shall operate the Interests during the Interim Period in

                                      -24-

a prudent manner  consistent  with  generally  accepted  industry  practices and
standards,  applicable laws and regulations,  and all applicable lease and other
agreement terms, but shall not be liable to Buyer except for gross negligence or
willful  misconduct.  Seller  shall be  entitled  (i) to charge  Buyer the COPAS
overhead rates under existing operating agreements,  or where none exist, a rate
of $800.00  per well during the Interim  Period  proportionately  reduced to the
affected  Interests  and (ii) to retain any  overhead  fees owing or paid by any
third party  non-operators  attributable  to the  operations  during the Interim
Period.  Seller  makes no  representation  or  warranty  that Buyer will  become
operator of any portion of the  Interests,  as that matter is  controlled by the
applicable operating agreements and governmental regulatory requirements.

                                   ARTICLE XI
                                   ----------
                                  MISCELLANEOUS
                                  -------------

     11.01  Like Kind  Exchange.  The  parties  shall  each  have the  option to
            -------------------
complete all or a portion of the sale and purchase of the Interests as part of a
tax-deferred  exchange under Section 1031 of the Internal  Revenue Code of 1986,
as amended.  The parties agree to cooperate in documenting  and completing  such
exchange, including, without limitation, consenting to an assignment of all or a
portion of a party's rights, title, interest,  duties, or obligations under this
Agreement to a third party accommodator or Qualified  Intermediary (as such term
is defined in Section 1031).  Notwithstanding  the  foregoing,  Buyer shall take
title to the Interests directly from Seller pursuant to the Assignment and shall
pay Seller the Purchase Price  therefor,  and each party shall remain liable for
its obligations to the other party hereunder.

     11.02  Expenses.   Except  as  otherwise   specifically  provided  in  this
            --------
Agreement,  all  fees,  costs  and  expenses  incurred  by  Buyer or  Seller  in
negotiating this Agreement or in consummating  the transactions  contemplated by
this Agreement shall be paid by the party incurring the same,  including without
limitation, legal and accounting fees, costs and expenses.

     11.03 Notices.  All notices and communications  required or permitted under
           -------
this Agreement  shall be in writing and shall be effective when receive by mail,
telecopy or hand delivery as follows:

          If to Seller:
          ------------
                     Choctaw II Oil & Gas, Ltd.
                     808 Travis, Suite 1700
                     Houston, Texas 77002

                                      -25-

                     Attn:  Mr. W. Russell Brown, Jr., President
                     Telephone: 713-632-0222
                     Telecopy:  713-227-1007

          If to Buyer:
          -----------
                     Nance Petroleum Corporation
                     550 North 31st Street, Suite 500
                     Billings, MT 59011
                     Attn:  Ron Santi, Vice President, Land
                     Telephone:  406-245-6248
                     Telecopy:  406-245-9106

                     With a copy to:
                     St. Mary Land & Exploration Company
                     1776 Lincoln St., Suite 1100
                     Denver, Colorado 80203
                     Attn: Randy Pharo, Vice President, Land & Legal
                     Telephone: 303-863-4313
                     Telecopy:  303-863-1040

Either party may, by written notice so delivered to the other, change the
address to which notice shall thereafter be made.

     11.04  Amendment.  This  Agreement  may not be altered or amended,  nor any
            ---------
rights  hereunder be waived,  except by an instrument in writing executed by the
party or parties to be charged with such  amendment or waiver.  No waiver of any
term,  provision or condition of this  Agreement,  in any one or more instances,
shall be deemed to be, or construed  as, a further or  continuing  waiver of any
other term, provision or condition of this Agreement.

     11.05  Assignment.  Neither  Seller nor Buyer may assign any portion of its
            ----------
rights or delegate any portion of its duties or obligations under this Agreement
without the prior written consent of the other party.

     11.06  Announcements.  Prior to Closing Seller and Buyer shall consult with
            -------------
each other with regard to all press releases and other announcements  concerning
this  Agreement or the  transaction  contemplated  hereby and,  except as may be
required by applicable laws or regulations of any governmental  agency,  neither
Buyer  nor  Seller  shall  issue  any  such  press  release  or make  any  other
announcement without the prior written consent of the other party.

     11.07  Generality of Provisions.  The  specificity  of any  representation,
            ------------------------
warranty,  covenant,  agreement  or  indemnity  included  or  provided  in  this
Agreement,  or  in  any  exhibit,  document,  certificate  or  other  instrument

                                      -26-

delivered  pursuant  hereto,  shall in no way limit the  generality of any other
representation,  warranty, covenant, agreement or indemnity included or provided
in this Agreement, or in any exhibit, document,  certificate or other instrument
delivered pursuant hereto.

     11.08 Headings. The headings of the articles and sections of this Agreement
           --------
are for  guidance  and  convenience  of  reference  only and  shall not limit or
otherwise affect any of the terms or provisions of this Agreement.

     11.09  Counterparts.  This Agreement may be executed by Buyer and Seller in
            ------------
any number of  counterparts  and shall be binding upon each party executing same
whether or not executed by all parties. Each of the counterparts shall be deemed
an original  instrument,  but all of which together shall constitute but one and
the same instrument.

     11.10  References.  References made in this  Agreement,  including use of a
            ----------
pronoun,  shall be deemed to  include  where  applicable,  masculine,  feminine,
singular or plural, individuals,  partnerships or corporations.  As used in this
Agreement,  "person" shall mean any natural  person,  corporation,  partnership,
trust,  estate or other  entity.  As used in this  Agreement,  "affiliate"  of a
person shall mean any partnership, joint venture, corporation or other entity in
which such person has an  interest or which  controls,  is  controlled  by or is
under common control of such person.

     11.11  Governing Law. This  Agreement,  and the  transactions  contemplated
            -------------
hereby,  shall be construed in accordance with, and governed by, the laws of the
State of Texas and venue shall be in Harris County, Texas.

     11.12 Binding Arbitration. On the request of any party hereto, whether made
           -------------------
before or after the institution of any legal  proceeding,  any action,  dispute,
claim or controversy of any kind, now existing or hereafter arising, between any
of the parties hereto in any way arising out of,  pertaining to or in connection
with this  Agreement (a "Dispute")  shall be resolved by binding  arbitration in
accordance with the terms hereof. Any party may, by summary  proceedings,  bring
an action in court to compel  arbitration of any Dispute.  Any arbitration shall
be  administered  by  the  American  Arbitration   Association  (the  "AAA")  in
accordance with the terms of this section,  the Commercial  Arbitration Rules of
the AAA and, to the maximum  extent  applicable,  the Federal  Arbitration  Act.
Judgment on any award  rendered by the  arbitrators  may be entered in any court
having  jurisdiction.   Any  arbitration  shall  be  conducted  before  one  (1)
arbitrator  selected by Buyer and Seller.  The arbitrator shall be knowledgeable
in the  subject  matter  of the  Dispute.  If the  parties  cannot  agree on the
arbitrator  within thirty (30) days after the request for an  arbitration,  then
three (3)  arbitrators  shall be  requred to conduct  the  arbitration  with one
(1)arbitrator  selected by Buyer, one (1) arbitrator selected by Seller, and the
two (2) arbitrators selecting the third arbitrator. The arbitrator(s) may engage
engineers,  accountants or other consultants that the arbitrator deems necessary
to render a conclusion  in the  arbitration  proceeding.  To the maximum  extent
practicable,  an arbitration  proceeding hereunder shall be concluded within one
hundred eighty (180) days of the filing of the Dispute with the AAA. Arbitration
proceedings  shall be conducted in Houston,  Texas. The  arbitrator(s)  shall be
empowered  to  impose   sanctions   and  to  take  such  other  actions  as  the
arbitrator(s)  deems necessary to the same extent a judge could impose sanctions
or take such other actions  pursuant to the Federal Rules of Civil Procedure and
applicable   law.  At  the  conclusion  of  any  arbitration   proceeding,   the
arbitrator(s)  shall make specific  written  findings of fact and conclusions of
law and such shall be final and not appealable. The arbitrator(s) shall have the
power to award  recovery  of all costs and fees to the  prevailing  party.  Each
party  agrees  to  keep  all  Disputes  and  arbitration   proceedings  strictly
confidential  except for disclosure of information  required by applicable  law.
All fees of the arbitrator(s)  and any engineer,  accountant or other consultant
engaged by the  arbitrator(s)  shall be paid by Buyer and Seller  equally unless
otherwise awarded by the arbitrator(s).

     11.13 Entire  Agreement.  This Agreement  (including  the exhibits  hereto)
           -----------------
constitutes  the entire  understanding  between the parties  with respect to the
subject matter hereof and supersedes all  negotiations,  prior  discussions  and
prior agreements and understandings relating to such subject matter. No material
representation, warranty, covenant, agreement, promise, inducement or statement,
whether oral or written, has been made by Seller or Buyer and relied upon by the
other that is not set forth in this Agreement or in the instruments  referred to
herein, and neither Seller nor Buyer shall be bound by or liable for any alleged
representation,  warranty, covenant, agreement, promise, inducement or statement
not so set forth.

     11.14  Severability.  If any term or provision of this  Agreement  shall be
            ------------
determined  to be illegal or  unenforceable,  all other terms and  provisions of
this Agreement shall nevertheless  remain effective and shall be enforced to the
fullest extent permitted by applicable law.

     11.15 Parties in Interest.  This Agreement shall be binding upon, and shall
           -------------------
inure to the benefit of, the parties hereto and their respective  successors and
assigns. Nothing contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights or remedies.

     EXECUTED as of the date first above mentioned.

                                      -28-

SELLER:

     CHOCTAW II OIL & GAS, LTD.

     By: Choctaw Corporation,
          its General Partner

          By: /S/ W. RUSSELL BROWN, JR.
              -------------------------
              W. Russell Brown, Jr.,
              President




BUYER:

         NANCE PETROLEUM CORPORATION

         By: /S/ RON SANTI
             -------------
         Name: Ronald B. Santi
         Title: Vice President, Land

                                      -29-

EX-3.(II)

                                                                     EXHIBIT 3.1

Amendments to St. Mary By-Laws Adopted July 19, 2001:
- ----------------------------------------------------


         Section 4(b) of the By-Laws is amended to read as follows:

                              (b) Special meetings of the Stockholders  shall be
                    held at the place prescribed for the annual meetings, unless
                    otherwise  ordered  by the  Board of  Directors,  and may be
                    called by the Chairman of the Board and the  President or on
                    the written  request of any four  Directors  who may include
                    the Chairman of Board or the President.

         Section 4(e) of the By-Laws is amended to read as follows:

                              (e) Notice of the  meetings and the conduct of the
                    same  shall be as  prescribed  by the  Board  of  Directors,
                    subject  to  applicable  law and  the  provisions  of  these
                    By-Laws.

         The following subsections (g) and (h) shall be added to Section 4 of
the By-Laws:

                              (g) At an annual meeting of the Stockholders, only
                    such business shall be conducted as shall have been properly
                    brought before the meeting. To be properly brought before an
                    annual meeting, business must be (i) specified in the notice
                    of meeting (or any  supplement  thereto)  given by or at the
                    direction of the Board of Directors (or any duly  authorized
                    committee  thereof),  (ii) otherwise properly brought before
                    the annual  meeting by or at the  direction  of the Board of
                    Directors (or any duly  authorized  committee  thereof),  or
                    (iii) otherwise  properly  brought before the annual meeting
                    by  any   Stockholder  of  the  Corporation  (A)  who  is  a
                    Stockholder  of record  on the date of the  giving of notice
                    provided for in this  subsection  (g) and on the record date
                    for the  determination  of Stockholders  entitled to vote at
                    such  annual  meeting and (B) who  complies  with the notice
                    procedures set forth in this subsection (g).

                              In addition to any other applicable  requirements,
                    for business to be properly brought before an annual meeting
                    by a Stockholder,  such  Stockholder  must have given timely
                    notice  thereof in proper  written form to the  Secretary of
                    the Corporation.

                              To  be  timely,  a  Stockholder's  notice  to  the
                    Secretary  must be delivered  to, or mailed and received at,
                    the principal  executive offices of the Corporation not less
                    than  seventy-five  (75) days nor more than one hundred five
                    (105)  days  prior  to the  first  anniversary  date  of the
                    immediately  preceding  annual meeting of the  Stockholders,
                    provided, however, that if the date of the annual meeting is
                    called for a date that is not within twenty (20) days before
                    or after such anniversary date, in order to be timely notice
                    by the  Stockholder  must be so  delivered  or received  not
                    later  than the close of  business  on the tenth  (10th) day
                    following the day on which public  disclosure of the date of
                    the annual meeting is first made.

                              To be in  proper  written  form,  a  Stockholder's
                    notice to the Secretary must set forth as to each matter the
                    Stockholder  proposes to bring before the annual meeting (i)
                    a brief  description  of the proposal  desired to be brought
                    before the annual  meeting and the  reasons  for  conducting
                    such  business  at the  annual  meeting,  (ii)  the name and
                    address,  as they appear on the Corporation's  books, of the
                    Stockholder   proposing   such   business   and  any   other
                    Stockholders known by such Stockholder to be supporting such
                    proposal,  (iii)  the  class  and  number  of  shares of the
                    Corporation's capital stock which are owned beneficially and
                    of record by the Stockholder on the date of such Stockholder
                    notice  and  by  any  other   Stockholders   known  by  such
                    Stockholder  to be  supporting  such proposal on the date of
                    such   Stockholder   notice,   (iv)  a  description  of  all
                    arrangements or understandings  between such Stockholder and
                    any  other  person or  persons  (including  their  names) in
                    connection  with  the  proposal  of  such  business  by such
                    Stockholder and any material interest of such Stockholder in
                    such proposal and (v) a representation that such Stockholder
                    intends  to  appear  in  person  or by proxy  at the  annual
                    meeting to bring such business before the meeting.

                              No  business  shall  be  conducted  at  an  annual
                    meeting of the  Stockholders  except business brought before
                    the annual  meeting in accordance  with the  procedures  set
                    forth in this subsection (g), provided,  however,  that once
                    business has been properly brought before the annual meeting
                    in  accordance  with  such   procedures,   nothing  in  this
                    subsection (g) shall be deemed to preclude discussion by any
                    Stockholder  of any such  business.  If the  Chairman  of an
                    annual  meeting  determines  that  business was not properly
                    brought  before the annual  meeting in  accordance  with the
                    foregoing  procedures,  the  Chairman  shall  declare to the
                    meeting that the business  was not properly  brought  before
                    the meeting and such business shall not be transacted.

                              (h) Only persons who are  nominated in  accordance
                    with the  following  procedures  shall be  eligible  for the
                    election as Directors  of the  Corporation.  Nominations  of
                    persons for election to the Board of  Directors  may be made
                    at any annual meeting of the Stockholders, or at any special
                    meeting  of the  Stockholders  called  for  the  purpose  of
                    electing  Directors  (i) by or at the direction of the Board
                    of Directors (or any duly authorized committee thereof),  or
                    (ii)  by any  Stockholder  of the  Corporation  (A) who is a
                    Stockholder  of  record  on the  date of the  giving  of the
                    notice provided for in this subsection (h) and on the record
                    date for the determination of Stockholders  entitled to vote
                    for the  election of  Directors  at such meeting and (B) who
                    complies  with  the  notice  procedures  set  forth  in this
                    subsection (h).

                              In addition to any other applicable  requirements,
                    for  a  nomination  to  be  made  by  a   Stockholder   such
                    Stockholder  must have given timely notice thereof in proper
                    written form to the Secretary of the Corporation.

                              To  be  timely,  a  Stockholder's  notice  to  the
                    Secretary  must be delivered  to, or mailed and received at,
                    the principal  executive  offices of the  Corporation (i) in
                    the case of an annual meeting of the Stockholders,  not less
                    than  seventy-five  (75) days nor more than one hundred five
                    (105)  days  prior  to the  first  anniversary  date  of the
                    immediately  preceding  annual meeting of the  Stockholders,
                    provided, however, that if the date of the annual meeting is
                    called for a date that is not within twenty (20) days before
                    or after such anniversary date, in order to be timely notice
                    by the  Stockholder  must be so  delivered  or received  not
                    later  than the close of  business  on the tenth  (10th) day
                    following the day on which public  disclosure of the date of
                    the annual  meeting is first made, and (ii) in the case of a
                    special meeting of the  Stockholders  called for the purpose
                    of electing Directors,  not later than the close of business
                    on the tenth  (10th) day  following  the day on which public
                    disclosure of the date of such meeting is first made.

                              To be in  proper  written  form,  a  Stockholder's
                    notice to the Secretary must set forth (i) as to each person
                    whom the Stockholder  proposes to nominate for election as a
                    Director,  (A) the name, age, business address and residence
                    address  of the  person,  (B) the  principal  occupation  or
                    employment of the person, (C) the class and number of shares
                    of  capital  stock  of  the   Corporation   that  are  owned
                    beneficially and of record by the person,  and (D) any other
                    information relating to the person that would be required to
                    be disclosed in a proxy statement or other filings  required
                    to be made in connection with  solicitations  of proxies for
                    election  of  directors   pursuant  to  Section  14  of  the
                    Securities  Exchange Act of 1934, as amended (the  "Exchange
                    Act"), and the rules and regulations promulgated thereunder,
                    and (ii) as to the  Stockholder  giving the notice,  (A) the
                    name and address, as they appear on the Corporation's books,
                    of such  Stockholder,  (B) the class and number of shares of
                    the Corporation's capital stock which are owned beneficially
                    and of  record  by  such  Stockholder  on the  date  of such
                    Stockholder notice, (C) a description of all arrangements or
                    understandings  between such  Stockholder  and each proposed
                    nominee  and any other  person or persons  (including  their
                    names) pursuant to which the nomination(s) are to be made by
                    such Stockholder, (D) a representation that such Stockholder
                    intends  to appear in person or by proxy at the  meeting  to
                    nominate  the persons  named in the notice and (E) any other
                    information  relating  to such  Stockholder  that  would  be
                    required  to be  disclosed  in a proxy  statement  or  other
                    filings required to be made in connection with solicitations
                    of proxies for election of directors  pursuant to Section 14
                    of  the   Exchange   Act  and  the  rules  and   regulations
                    promulgated thereunder. Such notice must be accompanied by a
                    written consent of each proposed nominee to being named as a
                    nominee and to serve as a Director if elected.

                              No person  shall be  eligible  for  election  as a
                    Director of the Corporation  unless  nominated in accordance
                    with the procedures set forth in this subsection (h). If the
                    Chairman of the meeting of the Stockholders  determines that
                    a nomination  was not made in accordance  with the foregoing
                    procedures,  the Chairman  shall declare to the meeting that
                    the nomination  was defective and such defective  nomination
                    shall be disregarded.

         Section 5(g) of the By-Laws is amended to read as follows:

                              (g) In  case  of any  increase  in the  number  of
                    Directors, or of any vacancy in the Board of Directors,  the
                    additional  Director or Directors  shall be elected,  or, as
                    the case may be, the vacancy or vacancies shall be filled by
                    the Board of  Directors  at any  meeting by the  affirmative
                    vote   of   a   majority   of   the   remaining   Directors,
                    notwithstanding  that the  remaining  Directors  may be less
                    than  a  quorum,  or by the  sole  remaining  Director.  The
                    Directors  so chosen shall hold office until the next annual
                    meeting  of  Stockholders  and until  their  successors  are
                    elected and qualify or until their  earlier  resignation  or
                    removal.

         Section 5 of the By-Laws is amended by the addition of paragraph (l)
thereto to read as follows:

                              (l) A Director  of the Company may be removed by a
                    vote of the  Stockholders  for cause,  as  determined by the
                    written opinion of independent counsel of the Company.