Exhibit 2.1

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN

POGO PRODUCING COMPANY,

AS SELLER,

AND

ENERGY XXI GOM, LLC,

AS BUYER

TABLE OF CONTENTS

i

ii

iii

iv

EXHIBITS AND SCHEDULES

v

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “Agreement”) is made as of April 24, 2007, by and among Pogo Producing Company, a Delaware corporation (“Seller”), and Energy XXI GOM, LLC, a Delaware limited liability company (“Buyer”).

RECITALS

Seller desires to sell, and Buyer desires to purchase, all of Seller’s undivided interests in certain oil, gas, and mineral properties and related assets and contracts, for the consideration and on the terms set forth in this Agreement.

AGREEMENT

For and in consideration of the promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS

For purposes of this Agreement, in addition to other capitalized terms defined in this Agreement, the following terms have the meanings specified or referred to in this Article 1 when capitalized:

“AAA” – as defined in Section 12.15.

“AFE” – an “Authority for Expenditure” as customarily used in the oil and gas industry.

“Affiliate” – any Person directly or indirectly controlled by, controlling, or under common control with, Buyer or Seller, including any subsidiary of Buyer or Seller and any “affiliate” of Buyer or Seller within the meaning of Reg. §240.12b-2 of the Securities Exchange Act of 1934, as amended, with “control,” as used in this definition, meaning possession, directly or indirectly, of the power to direct or cause the direction of management,

1

policies or action through ownership of voting securities, contract, voting trust, or membership in management or in the group appointing or electing management or otherwise through formal or informal arrangements or business relationships.

“Aggregate Environmental Defect Value” – as defined in Section 11.14.

“Aggregate Title Defect Value” – as defined in Section 11.08.

“Agreed Interest Rate” – LIBOR plus two percent (2%) per annum.

“Allocated Values” – the values assigned among the Assets as set forth on Schedule 2.02.

“Assets” – all of (A) Seller’s Record Title interests, Operating Rights, working interests, net revenue interests, overriding royalty interests, net profits interests, carried interests, rights and interests under non-consent or non-participation provisions of operating or similar agreements, post-payout interests, and any other interests of a similar nature attributable to the following, except to the extent constituting Excluded Assets:  (i) the Leases, (ii) the Equipment, (iii) Hydrocarbons produced after the Effective Time, (iv) the Contracts, (v) the Claims, (vi) the Surface Rights, (vii) the Suspense Funds; and (vii) the Asset Records; (B) the Sea Robin condensate removal facilities operated by Devon, (C) the South Pass 49 oil pipeline system, (D) the Bonito oil pipeline system, and (E) the High Island oil pipeline system.

“Asset Records” – All lease files, land files, well files, gas and oil sales contract files, gas processing files, division order files, abstracts, title opinions, land surveys, cores, logs, geological and geophysical information, maps, hazard surveys, engineering data and reports, production records, reserve studies and evaluations (insofar as they cover and exist within the boundaries of the Assets), and other books, records, data, files, maps and accounting records, in each case to the extent related to the Assets, or used or held for use in connection with the ownership, use, maintenance, or operation thereof.

“Assumed Liabilities” – as defined in Section 2.06.

“Breach” – a “Breach” of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement shall be

2

deemed to have occurred if there is or has been any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision.

“Business Day” – any day other than a Saturday, Sunday, or any other day on which commercial banks in the United States of America are authorized or required by law or executive order to close.

“Buyer’s Closing Documents” – as defined in Section 4.02(a).

“Buyer’s Disclosure Schedule” – the disclosure schedule attached as Exhibit E.

“Buyer Group” – as defined in Section 10.02.

“Buyer’s Parent” – Energy XXI (Bermuda) Limited, a Bermuda company.

“Casualty Loss” –  any loss, damage or destruction of the Assets that occurs during the period between the date of this Agreement and Closing for any reason, including any act of God, fire, explosion, collision, earthquake, windstorm, flood or other casualty, but excluding any loss, damage or destruction as a result of depreciation, ordinary wear and tear and any change in condition of the Assets for production of Hydrocarbons through normal depletion (which exclusion shall include the watering-out of any Well, collapsed casing or sand infiltration of any Well).

“Claims” – All of Seller’s right, title and interest in and to any claims, demands, causes of action, rights of recovery, rights of set-off, rights to refunds and similar rights against third parties (including, without limitation, (i) claims against insurers under the insurance policies required to be maintained until Closing pursuant to Section 5.03, and (ii) claims for indemnification and contribution) to the extent related to (a) the ownership, use, construction, maintenance or operation of the Assets after the Effective Time,  (b) any damage to the Assets not repaired or replaced prior to the Effective Time, (c) the Assumed Liabilities, or any portion thereof, if any, including any claims for refunds, prepayments, offsets, recoupment, judgments and the like, whether received as payment or credit against future liabilities, in each case to the extent related to the matters covered by clauses (a), (b), or (c) above; provided, however, that the term “Claims” shall not include (1) any claims or causes of action against Seller or any Affiliate of Seller, (2) any claims or rights against

3

insurers or other third parties for Retained Liabilities for which Seller is responsible under this Agreement, and (3) any claims or rights against insurers, other than (I) claims or rights under the insurance policies required to be maintained until Closing pursuant to Section 5.03 (except for Retained Liabilities), (II) claims or rights with respect to the matters referenced in (c) above, and (III) claims or rights referenced in Section 11.16.

“Closing” – as defined in Section 2.03.

“Closing Date” – as defined in Section 2.03.

“Commission” – the Securities and Exchange Commission.

“Confidentiality Agreement” – that certain Confidentiality Agreement between Buyer and Seller dated March 7, 2007.

“Consent” – any approval, consent, ratification, waiver, or other authorization (including any Governmental Authorization) from any Person which is required to be obtained in connection with the execution or delivery of this Agreement or the consummation of the Contemplated Transactions.

“Contemplated Transactions” – all of the transactions contemplated by this Agreement, including, but not limited to:

(a)                                                the sale of the Assets by Seller to Buyer;

(b)                                               the execution, delivery, and performance of the Instruments of Conveyance and all other instruments and documents required under this Agreement;

(c)                                                the performance by Buyer and Seller of their respective covenants and obligations under this Agreement; and

(d)                                               Buyer’s acquisition, ownership, and exercise of control over the Assets.

“Contract” – any valid and subsisting contract, agreement, or instrument by which any of the Assets are bound, or that directly relates to or is otherwise directly applicable to any of the Assets, only to the extent applicable to the Assets rather than Seller’s other properties, including but not limited to, operating agreements, unitization, pooling and

4

communitization agreements, declarations and orders, joint venture agreements, farmin and farmout agreements, water rights agreements, platform agreements, production handling agreements, exploration agreements, participation agreements, exchange agreements, transportation or gathering agreements, agreements for the sale and purchase of Hydrocarbons or processing agreements to the extent applicable to the Assets or the production of Hydrocarbons from the Assets, including, without limitation, those listed on Exhibit B that are valid and subsisting and directly relate to or are otherwise directly applicable to any of the Assets.

“Covered Liabilities” – as defined in Section 2.06.

“Cure” – as defined in Section 11.06.

“Cure Notice” – as defined in Section 11.06.

“DTPA” – as defined in Section 12.14.

“Damages” – as defined in Section 10.02.

“Defect Value” – as defined in Section 11.05.

“Defensible Title” – as defined in Section 11.04.

“De Minimis Environmental Defect Cost” – as defined in Section 11.14.

“De Minimis Title Defect Cost” – as defined in Section 11.08.

“Deposit” – the Deposit Shares and $2,027,000 cash.

 “Deposit Shares” – 3,980,000 common shares, par value $.001, of Buyer’s Parent.

“Effective Time” – April 1, 2007, at 7:00 a.m., Central Time.

“Encumbrance” – any charge, equitable interest, privilege, lien, mortgage, deed of trust, production payment, option, pledge, collateral assignment, security interest, right of first refusal, restriction, encroachment, defect, or irregularity of any kind.

5

“Environment” – soil, land, surface or subsurface strata, surface waters (including navigable waters, ocean waters, seabed, streams, ponds, drainage basins, and wetlands), groundwater, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.

“Environmental Claim Date” – as defined in Section 11.11.

“Environmental Condition” –  any event occurring or condition existing prior to the Closing Date with respect to the Assets, the Environment, or Hazardous Materials Released on or from the Assets, which causes an Asset to be subject to liability or Remediation under, or not in compliance with, an Environmental Law.

“Environmental Defect” – an Environmental Condition discovered by Buyer as a result of any Buyer’s Environmental Assessment conducted by or on behalf of Buyer pursuant to Section 11.11 of this Agreement.

“Environmental Defect Notice” – as defined in Section 11.12.

“Environmental Defect Value” – as defined in Section 11.12.

“Environmental Law” – any applicable Legal Requirement that requires or relates to:

(a)                                                advising appropriate authorities, employees, or the public of Releases or threatened Releases to the Environment;

(b)                                               preventing or reducing to acceptable levels the Release of Hazardous Materials to the Environment;

(c)                                                reducing the quantities, preventing the Release, or minimizing the hazardous characteristics of Hazardous Materials that are generated;

(d)                                               protecting natural resources, species, or ecological amenities;

(e)                                                reducing to acceptable levels the risks inherent in the transportation of Hazardous Materials;

6

(f)                                                  cleaning up Hazardous Materials that have been Released, preventing the threat of Release, or paying the costs of such clean up or prevention;

(g)                                               making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets; or

(h)                                               protecting human health, safety and the Environment.

“Environmental Liabilities” – any cost, Damage, expense, liability, obligation, or other responsibility arising from or under either an Environmental Law or third party claims relating to the Environment, Environmental Conditions, or the Release, handling, or use of Hazardous Materials, and which relates to the Assets or the ownership or operation of the same.

“Environmental Material Adverse Effect” – any Environmental Liabilities that are reasonably expected to result in Damages to Seller or Buyer in an amount exceeding $250,000 per occurrence, or $1,000,000 in the aggregate.

“Environmental Rejection Notice” – as defined in Section 11.13(b).

“Equipment” – any and all wells, equipment, and facilities located on or used in connection with the Leases, including, but not limited to, the Wells, pumps, platforms, well equipment (surface and subsurface), saltwater disposal wells, water wells, lines and facilities, sulfur recovery facilities, processing facilities, compressors, compressor stations, dehydration facilities, treatment facilities, pipeline gathering lines, flow lines, transportation lines, valves, meters, separators, tanks, tank batteries, and other fixtures.

“Escrow Agent” – Wells Fargo Bank, National Association, in its capacity as Escrow Agent under the Escrow Agreement.

“Escrow Agreement” – the Escrow Agreement dated as of the Closing Date among the Escrow Agent, Buyer and Seller.

“Exchange Act” – the Securities Exchange Act of 1934, as amended.

7

“Excluded Assets” – the following assets, which are not covered by the transaction contemplated by this Agreement:

(a)                                  (i) all trade credits, accounts receivable, notes receivable. and other receivables attributable to the Assets with respect to any period of time prior to the Effective Time, (ii) all deposits, cash, checks in process of collection, cash equivalents, and funds attributable to the Assets with respect to any period of time prior to the Effective Time, and (iii) funds attributable to third parties for production of Hydrocarbons prior to the Effective Time but suspended or impounded by Seller;

(b)                                 all corporate, financial, and tax records of Seller, subject to Section 12.01 below;

(c)                                  all claims and causes of action of Seller (other than the Claims) (i) arising from acts, omissions, or events, or damage to or destruction of property occurring prior to the Effective Time, and (ii) affecting any of the other Excluded Assets;

(d)                                 all rights, titles, claims, and interests of Seller arising prior to the Effective Time (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance proceeds or awards, except in each case the Claims;

(e)                                all Hydrocarbons produced from or attributable to the Assets with respect to all periods prior to the Effective Time, excluding all rights and interests with respect to Imbalances as of the Effective Time, together with all proceeds from or attributable to such Hydrocarbons;

(f)                                  claims of Seller for refund of, or loss carry forwards with respect to (i) production, ad valorem, or any other taxes attributable to any period prior to the Effective Time, or (ii) income or franchise taxes or any other taxes attributable to any of the other Excluded Assets;

(g)                                 all amounts due or payable to Seller as adjustments or refunds under any Contracts, with respect to periods prior to the Effective Time, specifically including, without limitation, (i) credits, adjustments, or refunds under the Deep Water Royalty Relief Act or any other act, statute, rule, law, or regulation, and (ii) amounts recoverable

8

from audits under operating agreements, but excluding all rights and interests with respect to Imbalances as of the Effective Time;

(h)                                 all amounts due or payable to Seller as adjustments to insurance premiums related to any period prior to the Effective Time;

(i)                                     all proceeds, benefits, income, or revenues accruing (and any security or other deposits made) with respect to (i) the Assets prior to the Effective Time, but excluding all rights and interests with respect to Imbalances as of the Effective Time; and (ii) any of the other Excluded Assets;

(j)                                     all legal files; attorney-client communications or attorney work product; records and documents subject to legal privilege; and auditor’s reports; provided, however, that Buyer shall be entitled to receive copies of title abstracts and title opinions with respect to the Assets and these copies (but not the originals) will be included in the Assets, with the understanding that Seller makes no representation regarding the accuracy of any such title abstracts or title opinions;

(k)                                  any seismic, geochemical, and geophysical information and data licensed by unaffiliated third parties to Seller;

(l)                                     all of Seller’s and its Affiliates’ intellectual property, including but not limited to proprietary computer software, patents, trade secrets, copyrights, names, marks, and logos, but not including proprietary seismic, geochemical, and geophysical information and data;

(m)                               any pipelines, fixtures, tanks, or equipment located on the Assets that belong to third parties (other than Affiliates of Seller), such as lessors or purchasers of Hydrocarbons as listed on Exhibit G;

(n)                                 any Contract the transfer of which to Buyer is prohibited by any bona fide third party restriction or Legal Requirement and the necessary consents to transfer are not obtained as contemplated by Section 11.03; and

9

(o)                                 any Surface Rights the transfer of which to Buyer is restricted by any Legal Requirement and the necessary authorizations or consents to transfer under such Legal Requirement are not obtained.

“Final Amount” – as defined in Section 2.05(c).

“Final Settlement Date” – as defined in Section 2.05(c).

“Final Settlement Statement” – as defined in Section 2.05(c).

“Future Delivery/Payment Obligation” – any obligation of Seller (i) under any contract or agreement for the sale of gas from the Assets containing a take-or-pay, advance payment, prepayment, or similar provision, or under any gathering, transmission, or any other contract or agreement with respect to any of the Assets, to gather, deliver, process, or transport any gas without then or thereafter receiving full payment therefor, (ii) to deliver any quantities of gas or to pay any penalties or other amounts, in connection with the violation of any of the terms of any gas contract or other agreement with shippers with respect to the Assets, or (iii) to pay any penalties or other payments under any gas transportation or other agreement as a result of the delivery of quantities of gas from the Wells in excess of the contract requirements; provided that Future Delivery/Payment Obligations shall not include any Imbalances.

 “Governmental Authorization” – any approval, consent, license, permit, registration, variance, exemption, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

“Governmental Body” – any:

(a)                                                nation, state, county, city, town, village, district, or other jurisdiction of any nature;

(b)                                               federal, state, local, municipal, foreign, or other government;

(c)                                                governmental or quasi-governmental authority of any nature (including any

10

governmental agency, branch, department, official, or entity and any court or other tribunal);

(d)                                               multi-national organization or body; or

(e)                                                body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

“Hazardous Materials” – any (i) chemical, constituents, material, pollutant, contaminant, substance or waste that is regulated by any Governmental Body or may form the basis of liability under any Environmental Law; (ii) asbestos containing material, lead-based paint, polychlorinated biphenyls, or radon; and (iii) petroleum, Hydrocarbons, or petroleum products.

“Hurricane Costs” – all costs for the restoration, repair, and/or replacement of all physical damage to the Equipment and other tangible property included in the Assets to the extent such damage is attributable to hurricanes.

“Hydrocarbons” – oil, gas, minerals, and other gaseous and liquid hydrocarbons or any combination of the foregoing, produced from and attributable to the Leases.

“Imbalances” – over-production or under-production or over-deliveries or under-deliveries with respect to Hydrocarbons produced from or allocated to the Assets, regardless of whether such over-production or under-production or over-deliveries or under-deliveries arise at the platform, wellhead, pipeline, gathering system, transportation system, processing plant or other location, including, without limitation, any imbalances under gas balancing or similar agreements, platform imbalances under production handling agreements, imbalances under processing agreements and imbalances under gathering or transportation agreements.

“Instruments of Conveyance” – the instruments of conveyance transferring title to the Assets.  For each OCS Lease, Seller and Buyer shall execute, acknowledge, and deliver five (5) originals of an Assignment and Bill of Sale substantially in the form of Exhibit “C-1,” where Seller owns Record Title, or Exhibit “C-2,” where Seller owns only Operating Rights.  For all State Leases, Seller and Buyer shall execute, acknowledge, and deliver five (5) originals of an Assignment and Bill of Sale substantially in the form of Exhibit “C-3,” along

11

with such counterpart instruments as may be required by the relevant Governmental Body, prepared on the form promulgated by such Governmental Body.  In addition, Seller and Buyer shall execute, acknowledge, and deliver a general assignment, bill of sale and conveyance covering all Assets, in a form to be mutually and reasonably agreed to by Buyer and Seller, and such other instruments as may be necessary to convey all of the Assets (including but not limited to Assignments of Overriding Royalty) in forms that are mutually acceptable to the parties.  The foregoing Instruments of Conveyance shall contain a special warranty of title pursuant to which Seller warrants Defensible Title to the Assets unto Buyer, its successors and assigns with respect thereto, against every Person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Seller or any Affiliate of Seller.

“Interest Addition” – as defined in Section 11.09.

“Interest Addition Notice” – as defined in Section 11.09.

“Interest Addition Rejection Notice” – as defined in Section 11.09.

“Interest Addition Value” – as defined in Section 11.09.

“IRC” – the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

“IRS” – the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

“Knowledge” – an individual will be deemed to have “Knowledge” of a particular fact or other matter if such individual is actually aware of such fact or other matter.  A Person (other than an individual) will be deemed to have “Knowledge” of a particular fact or other matter if any individual who is serving as an officer or director (other than an officer or director holding a management position set forth below with respect to such management position) of such Person has, or at any relevant time had, Knowledge of such fact or other matter.  Seller will also be deemed to have “Knowledge” of a particular fact or other matter if any of the individuals who on the date of this Agreement or the Closing Date hold the following management positions, after due inquiry, has, or at any relevant time had, knowledge of such fact or other matter:  Executive Vice President–Operations; Senior

12

Operations Manager; Manager of Environmental, Safety & Health; or Manager of Revenue Accounting.

“Leases” – the oil, gas, and mineral leases described on Exhibit B, together with all interest derived from such leases in or to any pools or units which include any lands covered by any such leases or all or a part of any such leases or include any Wells, including those pools or units shown on Exhibit B, and all tenements, hereditaments, and appurtenances belonging to such leases and such pooled areas or units.

“Legal Requirement” – any federal, state, local, municipal, foreign, international, or multinational law, Order, constitution, ordinance, or rule, including rules of common law, regulation, statute, treaty, or other legally enforceable directive or requirement.

“LIBOR” – for the day in question or the previous banking day if the day in question is not a banking day, the interest rate per annum (rounded upward to the nearest whole multiple of 1/16 of 1% per annum if such rate is not such a multiple) equal to the rate per annum at which six (6) months deposits in U.S. Dollars are offered by the principal office of Barclays Bank in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) on such day.

“MMS” – the United States Department of the Interior Minerals Management Service.

“MitEnergy Retained Liability” – Seller’s contractual liability to pay for Hurricane Costs attributable to the interests in the Assets of MitEnergy Upstream LLC, pursuant to a contract between Seller and MitEnergy Upstream LLC.

“Net Revenue Interest” – for any Well or Lease (or the specified zone(s) therein), Seller’s share of the Hydrocarbons produced, saved, and marketed therefrom (after satisfaction of all royalties, overriding royalties, nonparticipating royalties, net profits interests, or other similar burdens on or measured by production of Hydrocarbons).

“Non-Operated Assets” – Assets operated by any Person other than Seller or an Affiliate of Seller.

13

“OCS Lease” – a Lease of submerged lands under the Outer Continental Shelf Lands Act, issued by the MMS.

“Operating Rights” – with respect to an OCS Lease, a leasehold interest that is classified by the MMS as an “operating rights” interest under its rules and regulations and entitles the holder to conduct drilling and related operations, but the holder of which does not have a contractual relationship with the MMS, and cannot relinquish or terminate the OCS Lease.

“Order” – any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator.

“Organizational Documents” – (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) the articles of organization and regulations of a limited liability company; (c) the certificate of limited partnership and limited partnership agreement of a limited partnership; and (d) any amendment to any of the foregoing.

“Parent Registration Statement” – as defined in Section 4.10(b).

“Permitted Encumbrance” – any of the following:  (a) any obligations or duties reserved to or vested in any municipality or other Governmental Body to regulate any Asset in any manner including all applicable Legal Requirements, except to the extent any of the same have been applied or exercised, individually or in the aggregate, in a manner which operates to reduce Seller’s Net Revenue Interest in a Well below that shown in Exhibit A or increase Seller’s Working Interest in a Well above that shown in Exhibit A without a proportionate increase in the Net Revenue Interest; (b) the terms and conditions of  all leases, options, servitudes, contracts for sale, purchase, exchange, refining or processing of Hydrocarbons, operating agreements, construction agreements, construction and operation agreements, participation agreements, shoot-to-earn agreements, exploration agreements, partnership agreements, processing agreements, plant agreements, pipeline, gathering, exchange, and transportation agreements, disposal agreements, permits, licenses, and any other agreements affecting the Assets, including those set forth as Contracts on Exhibit B attached hereto, but only to the extent that they do not, individually or in the aggregate, (i) operate to reduce Seller’s Net Revenue Interest in a Well below that shown in Exhibit A or

14

increase Seller’s Working Interest in a Well above that shown in Exhibit A without a proportionate increase in the Net Revenue Interest or (ii) except in the case of Contracts listed on Exhibit B, adversely affect the ownership and/or operation of the affected Assets (as currently used or owned) in any material respect; (c) the Consents identified in Part 3.11 of Seller’s Disclosure Schedule with respect to which prior to Closing (i) waivers or consents have been obtained from the appropriate Person, (ii) the applicable period of time for asserting such rights has expired without any exercise of such rights, or (iii) mutually agreed upon arrangements have been made by the parties to allow Buyer to receive substantially the same economic benefits as if all such waivers and consents had been obtained;(d) easements, rights-of-way, servitudes, permits, surface leases, and other similar rights on, over, or in respect of any of the Assets, as long as any such encumbrances, individually or in the aggregate, do not interfere in any material respect with the exploration, development, or operation of the Assets burdened thereby; (e) lessor’s royalties, overriding royalties, production payments, net profits interests, reversionary interests, and similar burdens with respect to a Well if the net cumulative effect of such burdens does not operate to reduce Seller’s Net Revenue Interest in such Well below that shown in Exhibit A or increase Seller’s Working Interest in such Well above that shown in Exhibit A without a proportionate increase in the Net Revenue Interest, (f) such other defects or irregularities of title or Encumbrances as Buyer may have waived in writing or which Buyer shall be deemed to have waived pursuant to the provisions of Section 11.05 hereof; and (g) conventional rights of reassignment obligating Seller to reassign its interests in any portion of the Leases to a third party in the event Buyer intends to release or abandon such interest prior to the expiration of the primary term or other termination of such interest.

“Person” – any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or Governmental Body.

“Post-Closing Amount” – as defined in Section 2.05(c).

“Post-Closing Date” – as defined in Section 2.05(c).

“Preferential Purchase Right” – any right or agreement that enables any Person to purchase or acquire any Asset or any interest therein or portion thereof as a result of or in

15

connection with the execution or delivery of this Agreement or the consummation of the Contemplated Transactions.

“Preliminary Amount” – as defined in Section 2.05(a).

“Proceeding” – any action, arbitration, audit, hearing, investigation, request for information, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Property Costs” – as defined in Section 2.05(a).

“Purchase Price” – as defined in Section 2.02.

“Record Title” – with respect to an OCS Lease, an ownership interest in the OCS Lease that is classified as a “record title” interest under the rules and regulations of the MMS and which includes the right to explore for and develop oil, gas, or sulphur resources, as well as responsibilities for all lease liabilities created or established during tenure of ownership, and which also includes the right to relinquish the OCS Lease.

“Registration Rights Agreement” – the Registration Rights Agreement of even date herewith between Buyer’s Parent and Seller.

“Rejection Notice” – as defined in Section 11.07.

“Release” – any pouring, pumping, seeping, spilling, migrating, leaking, placing, discarding, emptying, abandoning, injecting, discharging, emitting, dumping, burying or disposing into the Environment of any Hazardous Materials.

 “Remediate” or “Remediation” – any action or work taken to remove or otherwise remedy an Environmental Condition, including (i) any survey, site assessment, audit, investigation, inspection, sampling, analysis, removal, excavation, pump and treat, cleanup, abatement, corrective action, remediation, disposal, storage, handling, or treatment and (ii) any action required to bring any Asset or operating practice or similar course of conduct by Seller or its Affiliates into compliance with applicable Environmental Laws.

16

“Representative” – with respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

“Reserve Report” – the reserve report dated December 31, 2006, of Ryder Scott with respect to the Leases and Wells.

“Retained Assets” – Any rights, titles, interests, assets and properties that are originally included in the Assets under the terms of this Agreement, but that are subsequently excluded from the Assets or sale under this Agreement pursuant to the terms of this Agreement at any time before or after Closing.

“Retained Liabilities” – as defined in Section 2.07.

“Seller’s Closing Documents” – as defined in Section 3.02 (a).

“Seller’s Disclosure Schedule” – the disclosure schedule attached as Exhibit D.

“Seller Group” – as defined in Section 10.03.

“State Lease” – a Lease from any state of the United States of America, or from a Governmental Body of any state of the United States of America.

“Seller Operated Assets” – Assets operated by Seller or an Affiliate of Seller.

“Surface Rights” – All easements, permits, licenses, servitudes, rights-of-way, surface or seabed leases, and other surface or seabed rights appurtenant to, and used or held for use in connection with the Assets.

“Suspense Funds” – Proceeds of production and associated penalties and interest in respect of any of the Assets that are payable to third parties and are being held in suspense by Seller as the operator of such Assets.

“Tax” – any tax (including any income tax, capital gains tax, value-added tax, sales tax, property tax, severance tax, gift tax, or estate tax), levy, assess­ment, tariff, duty (including any customs duty), deficiency, or other fee, and any related charge or amount (including any fine, penalty, interest, or addition to tax), imposed, assessed, or collected by or

17

under the authority of any Governmental Body or payable pursuant to any tax-sharing agreement or any other contract relating to the shar­ing or payment of any such tax, levy, assessment, tariff, duty, defi­ciency, or fee.

“Tax Return” – any return (including any information return), report, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation, or enforcement of or compliance with any Legal Requirement relating to any Tax.

“Threatened” – a claim, Proceeding, dispute, action, or other matter will be deemed to have been “Threatened” if any demand or statement has been made (orally or in writing) to a party or any of its officers, directors, or employees that would lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter is likely to be asserted, commenced, taken, or otherwise pursued in the future.

“Title Claim Date” – as defined in Section 11.05.

“Title Defect” – any matter affecting the Assets that, in the opinion of Buyer, would not give Buyer Defensible Title, in accordance with Section 11.04 hereof.

“Title Defect Notice(s)” – as defined in Section 11.05.

“Violation of Environmental Laws” – a violation of, or the failure to perform any obligation imposed by, an Environmental Law.

“Wells” – oil and gas wells located on the Leases, and more particularly described on Exhibit A, which Exhibit A may also include possible well locations and exploratory prospects.

“Working Interest” – for any Well (or the specified zone(s) therein) or Lease, that share of costs and expenses associated with the exploration, maintenance, development and operation of such Well or Lease that Seller is required to bear and pay.

18

ARTICLE 2

SALE AND TRANSFER OF ASSETS; CLOSING

2.01.                                                Assets.  Subject to the terms and conditions of this Agreement, at the Closing, Seller shall sell and transfer the Assets to Buyer.

2.02.                                                Purchase Price.  Subject to any adjustments that may be made under Section 2.05, the purchase price (the “Purchase Price”) for the Assets will be Four Hundred Nineteen Million Five Hundred Thousand Dollars ($419,500,000).  The Purchase Price for the Assets shall be allocated among the Assets as set forth in Schedule 2.02 hereto.  The amount so allocated to a part of the Assets shall constitute the Allocated Values for such part of the Assets.  Seller and Buyer agree to be bound by the allocation set forth in Schedule 2.02 for purposes of Article 11 hereof.  Contemporaneously herewith, (i) Buyer, Buyer’s Parent and Seller have executed and delivered the Escrow Agreement, (ii) Buyer’s Parent and Seller have executed and delivered the Registration Rights Agreement; and (iii) Buyer has delivered to the Escrow Agent the cash portion of the Deposit and a scanned copy of the certificate representing the Deposit Shares issued in the name of Seller, to Seller a certified copy of resolutions adopted by the Board of Directors of Buyer’s Parent authorizing Buyer’s Parent’s issuance and delivery of the Deposit Shares, and to Seller an opinion of Appleby, Hunter Bailhache regarding Buyer’s Parent and the Deposit Shares.  This Agreement shall not be deemed effective until the actions described in the immediately preceding sentence have occurred.  Within two (2) Business Days after the date of execution of this Agreement, Buyer shall deliver to the Escrow Agent the certificate representing the Deposit Shares issued in the name of Seller.  If the Closing timely occurs, Buyer and Seller shall direct the Escrow Agent to return the Deposit to Buyer at Closing.  If the Closing does not timely occur as a result of the Breach by Buyer of the terms of this Agreement and there has been no Breach by Seller of the terms of this Agreement, Buyer and Seller shall direct the Escrow Agent to deliver the Deposit to Seller as its sole and exclusive remedy and as liquidated damages (and not as a penalty), subject to Seller’s additional recourse against Buyer and Buyer’s Parent for any Breach of Section 4.10, the Escrow Agreement, or the Registration Rights Agreement, and the right to recover attorneys’ fees, costs, and expenses pursuant to Section 12.15 in enforcing Seller’s rights in respect of the Deposit and such other provisions and agreements.  If the Closing does not timely occur for any other reason, Buyer and Seller shall direct the Escrow Agent to return the Deposit to Buyer.  Any interest or other earnings on the Deposit minus any fees and expenses of the Escrow Agent shall be delivered to the party to whom the Deposit is delivered to pursuant to the terms set forth herein.  If the Closing does not timely occur as a result of the Breach by Seller of the

19

terms of this Agreement and there has been no Breach by Buyer of the terms of the Agreement, Buyer at its option may (a) terminate this Agreement and Seller shall be liable to Buyer for all Damages incurred by Buyer arising out of such Breach and termination not to exceed the actual costs, expenses, and fees incurred by Buyer in evaluating, negotiating, entering into, terminating, and enforcing this Agreement, plus Two Million Dollars ($2,000,000), or (b) enforce specific performance of the duties and obligations of Seller under this Agreement.

2.03.                                                Closing.  The purchase and sale (the “Closing”) provided for in this Agreement shall take place at the offices of Seller, at 10:00 a.m. (local time) on or before June 1, 2007, or such other time as the parties may agree upon (the “Closing Date”).  Subject to the provisions of Articles 9, 10, and 11, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 2.03 shall not result in the termination of this Agreement and shall not relieve any party of any obligation under this Agreement.  Ten (10) Business Days prior to the Closing Date, Seller will deliver to Buyer a statement setting forth in reasonable detail Seller’s determination of the Preliminary Amount based upon the best information available at the time of Closing.

2.04.                                                Closing Obligations.  At the Closing:

(a)                                                Seller shall deliver (and execute, as appropriate), or cause to be delivered (and executed, as appropriate), to Buyer:

(i)                                     the Instruments of Conveyance;

(ii)                                  possession of the Assets(except the Suspense Funds, which shall be conveyed to Buyer by way of a downward adjustment to the Purchase Price as provided in Section 2.05(b)(ii)(E));

(iii)                               a certificate, in substantially the form set forth in Exhibit F, executed by Seller (a) representing and warranting to Buyer that each of Seller’s representations and warranties in this Agreement is true and correct in all material respects (or, with respect to representations and warranties qualified by materiality, in all respects) as of the Closing Date as if made

20

on the Closing Date (except to the extent any such representation or warranty is stated to relate to an earlier date in which case such representation and warranty was true and correct on and as of such earlier date) and (b) representing and warranting to Buyer that Seller has performed and complied in all material respects with each of the Seller’s covenants and conditions in this Agreement prior to or as of the Closing Date;

(iv)                              a certificate executed by the secretary or assistant secretary of Seller certifying as to and attaching the following: (a) true, correct and complete copies the Seller’s organizational documents (together with any and all amendments), (b) true, correct, and complete copies of resolutions of Seller’s board of directors or other managing authority, as appropriate, authorizing and approving the execution, delivery, and performance of the Agreement, the Instruments of Conveyance, or other documents delivered pursuant to this Agreement and (c) the incumbency for each officer of Seller executing this Agreement, the Instruments of Conveyance, or other documents delivered pursuant to this Agreement;

(v)                                 such documents as Buyer or counsel for Buyer may reasonably request, including but not limited to letters-in-lieu of transfer order to purchasers of production from the Wells;

(vi)                              the financial information described in Article 12.19; and

(vii)                           instructions directing the Escrow Agent to deliver the Deposit to Buyer.  The Escrow Agent’s delivery and Buyer’s acceptance of the certificates of the Deposit Shares shall constitute the Buyer’s Parent’s repurchase of the Deposit Shares from Seller, without payment by Buyer’s Parent and without recourse or warranty whatsoever against Seller.

21

(b)                                               Buyer shall deliver (and execute, as appropriate) to Seller:

(i)                                     the Preliminary Amount by wire transfer to the account(s) specified by Seller in written notice given by Seller to Buyer at least ten (10) Business Days prior to the Closing Date;

(ii)                                  the Instruments of Conveyance;

(iii)                               a certificate, in substantially the form set forth in Exhibit F, executed by Buyer (a) representing and warranting to Seller that each of Buyer’s representations and warranties in this Agreement is true and correct in all material respects as of the Closing Date as if made on the Closing Date (except to the extent any such representation or warranty is stated to relate to an earlier date in which case such representation and warranty was true and correct on and as of such earlier date) and (b) representing and warranting to Seller that Buyer has performed and complied in all material respects with each of the Buyer’s covenants and conditions in this Agreement prior to or as of the Closing Date;

(iv)                              a certificate executed by the secretary or assistant secretary of Buyer certifying as to and attaching the following: (a) true, correct and complete copies the Buyer’s organizational documents (together with any and all amendments), (b) true, correct and complete copies of resolutions of Buyer’s board of directors or other managing authority, as appropriate, authorizing and approving the execution, delivery, and performance of the Agreement, the Instruments of Conveyance, or other documents delivered pursuant to this Agreement and (c) the incumbency for each officer of Buyer executing this Agreement, the Instruments of Conveyance, or other documents delivered pursuant to this Agreement;

(v)                                 such other documents as Seller or counsel for Seller may

22

reasonably request.

2.05.                     Allocations and Adjustments. If the Closing occurs:

(a)                                                Notwithstanding the effective time of the Instruments of Conveyance, Buyer shall be entitled to all revenues, production, proceeds, income, and products from or attributable to the Assets on and after the Effective Time, and to all other income, proceeds, receipts and credits earned with respect to the Assets on or after the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Costs attributable to the Assets and incurred on and after the Effective Time.  Seller shall be entitled to all revenues, production, proceeds, income, accounts receivable, and products from or attributable to the Assets prior to the Effective Time, and shall be responsible for (and entitled to any refunds with respect to) all Property Costs attributable to the Assets and incurred on or prior to the Effective Time. “Earned” and “incurred,” as used in this Agreement, shall be interpreted in accordance with generally accepted accounting principles and Council of Petroleum Accountants Society (COPAS) standards.  “Property Costs” shall mean all amounts attributable to the operation and ownership of the Assets reasonably incurred in the ordinary course of business and not in Breach of this Agreement, but excludes any Damages arising out of or resulting from an Environmental Defect identified by or on behalf of Buyer pursuant to Article 11, which Environmental Defect commenced prior to the Effective Time and for which Environmental Defect Buyer does not receive a reduction of the Purchase Price equal to the Environmental Defect Value.  For purposes of allocating revenues, production, proceeds, income, accounts receivable, and products under this Section, (i) liquid hydrocarbons produced into storage facilities will be deemed to be “from or attributable to” the Wells when they pass through the pipeline connecting into the storage facilities into which they are run, and (ii) gaseous hydrocarbons and liquid hydrocarbons produced into pipelines will be deemed to be “from or attributable to” the Wells when they pass through the delivery point sales meters on the pipelines through which they are transported.  In order to accomplish the foregoing allocation of

23

production, the parties shall rely upon gauging, metering, and strapping procedures conducted by Seller, with prior notice to Buyer and right of Buyer to witness such procedures, on or about the Effective Time to the extent possible and, unless demonstrated to be inaccurate, shall utilize reasonable interpolating procedures to arrive at an allocation of production when exact gauging, metering, and strapping data is not available on hand as of the Effective Time.  Ad valorem taxes for 2007 shall be prorated on a daily basis, with Buyer liable for the portion allocated to the period on and after the Effective Time and Seller liable for the portion allocated to the period before the Effective Time.  If the amount of such taxes for part, or all, of the Assets is not available on the Closing Date, proration of taxes shall be made on the basis of taxes assessed in the previous year, with a subsequent cash adjustment of such proration to be made between Seller and Buyer when actual tax figures are available.  Property Costs shall not include any amounts which constitute or relate to Retained Liabilities.  The “Preliminary Amount” shall be the Purchase Price, adjusted as provided in Section 2.05(b), based upon the best information available at time of the Closing.

(b)                                               The Purchase Price shall be, without duplication,

(i)                                     increased by the following amounts:

(A)                                            the aggregate amount of all non-reimbursed Property Costs which are attributable to the period from and after the Effective Time and which have been incurred and paid by Seller with respect to the Wells and Leases;

(B)                                              the aggregate amount of all upward adjustments pursuant to Article 11;

(C)                                              any other upward adjustment mutually agreed upon by the parties; and

(D)                                             the amount Seller is underproduced as set forth in Part

24

3.12(a) of Seller’s Disclosure Schedule times $7.00 per MMBtu (or, with respect to oil Imbalances, $60.00 per barrel).

(ii)                                  decreased by the following amounts:

(A)                                            the aggregate amount of (i) proceeds received by Seller from the sale of Hydrocarbons produced from and attributable to the Assets from and after the Effective Time for which Buyer is entitled under Section 2.05(a) and (ii) other proceeds received with respect to the Assets for which Buyer would otherwise be entitled under Section 2.05(a);

(B)                                              the amount of any downward adjustment relating to Title Defects as set forth in Article 11;

(C)                                              the aggregate amount of all downward adjustments pursuant to Article 11;

(D)                                             Seller’s share of estimated ad valorem taxes through the Effective Time;

(E)                                               the amount of the Suspense Funds;

(F)                                               the amount of any other downward adjustment mutually agreed upon by the parties;

(G)                                              the amount Seller is overproduced as set forth in Part 3.12(a) of Seller’s Disclosure Schedule times $7.00 per MMBtu (or, with respect to oil Imbalances, $60.00 per barrel); and

(H)                                             the value of Seller’s total Future/Delivery Payment Obligations as set forth in Part 3.12(c) of Seller’s Disclosure Schedule.

(c)                                                Subject to the arbitration provisions of Article 12.15 as to adjustments under Section 2.05(b)(ii)(B) and (c), as soon as practicable after Closing, but no

25

later than one hundred eighty (180) days following the Closing Date, Seller shall prepare and submit to Buyer, a statement (the “Final Settlement Statement”) setting forth each adjustment or payment which was not finally determined as of the Closing Date and showing the values used to determine such adjustments to reflect the final adjusted Purchase Price.  On or before sixty (60) days after receipt of the Final Settlement Statement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes be made to the Final Settlement Statement. During this sixty (60) day period, Buyer shall be given reasonable access to Seller’s books and records relating to the matters required to be accounted for in the Final Settlement Statement, permitted to review the working papers of Seller relating to the Final Settlement Statement, and given reasonable access to the employees of Seller primarily responsible for the preparation of the Final Settlement Statement.  Seller and Buyer shall undertake to agree with respect to the amounts due pursuant to the post-closing adjustment no later than one hundred eighty (180) days after the Closing Date (the “Post-Closing Date”).  If Seller and Buyer are unable to agree by the Post-Closing Date as to adjustment matters not subject to arbitration in accordance with this Agreement, Seller and Buyer shall nevertheless adjust the Purchase Price to take into account all agreed-upon adjustments at that time.  The Purchase Price, as adjusted on the Post-Closing Date, shall be called the “Post-Closing Amount.”  If (a) the Post-Closing Amount is more than the Preliminary Amount, Buyer shall pay to Seller the amount of the difference; or (b) the Post-Closing Amount is less than the Preliminary Amount, Seller shall pay to Buyer the amount of the difference.  Such payment, together with interest at the Agreed Interest Rate, shall be made within five (5) Business Days after the Post-Closing Date by wire transfer to accounts specified by Seller or Buyer, as appropriate.  For those adjustment matters not subject to arbitration in accordance with this Agreement, and as to which Seller and Buyer are unable to reach agreement by the Post-Closing Date, Seller shall select an independent accounting firm in Houston, Texas, from a list of two such firms provided by Buyer (neither of which shall be the independent accounting firm regularly used by Buyer or Seller), which

26

firm shall determine the Purchase Price adjustment or payment amount in accordance with the terms and conditions set forth in this Agreement.  The decision of such independent accounting firm shall be binding on Seller and Buyer, and the fees and expenses of such independent accounting firm shall be borne one-half (1/2) by Seller and one-half (1/2) by Buyer.  The date upon which the Purchase Price is established, as provided in the preceding sentence, shall be called the “Final Settlement Date,” and the final adjusted Purchase Price shall be called the “Final Amount.”  If (a) the Final Amount is more than the Post-Closing Amount, Buyer shall pay to Seller the amount of the difference; or (b) the Final Amount is less than the Post-Closing Amount, Seller shall pay to Buyer the amount of the difference.  Such payment, together with interest at the Agreed Interest Rate, shall be made within five (5) Business Days of the Final Settlement Date by wire transfer to accounts specified by Seller or Buyer, as appropriate.

2.06.                                                Assumption.  If the Closing occurs, from and after the Closing Date, Buyer shall assume, pay, and discharge the following liabilities insofar as allocable to the Assets (“Assumed Liabilities”):

Any and all duties, claims, damages, expenses, fines, penalties, costs (including attorneys’ fees and expenses), liabilities, and obligations (“Covered Liabilities”) (i) attributable to or resulting from the ownership or operation of the Assets from and after the Effective Time under any Contract, Governmental Authorization, or Lease (except for the Retained Liabilities); (ii) imposed by any Legal Requirement relating to the Assets, other than any violations of any Legal Requirement prior to the Closing Date, (iii) for plugging, abandonment, and surface restoration of the oil, gas, injection, water, or other wells located on the lands covered by the Leases, (iv) from any act, omission, event, condition, or occurrence accruing subsequent to the Effective Time relating to the Assets (except for the Retained Liabilities), (v) under the AFE’s listed in Part 3.26 of the Seller’s Disclosure Schedule related to Hurricane Costs, but only to the extent pertaining to the interest in the Assets being acquired by Buyer (that is, exclusive of the MitEnergy Retained Liability),  (vi) attributable to the Suspense Funds; and (vii) attributable to all Environmental Liabilities relating to the Assets; provided, however, the provisions of this Section 2.06 shall not relieve Seller

27

from (i) liability resulting from a material Breach, if any, of its representations, warranties, or covenants under this Agreement, as provided in Article 10 or (ii) those obligations of Seller under Article 11 that continue after the Closing Date.

Liabilities which constitute liabilities attributable to the Excluded Assets and/or Retained Assets, as well as Assumed Liabilities attributable to the Assets, shall be reasonably and fairly apportioned between Assumed Liabilities for which Buyer is responsible and liabilities with respect to the Excluded Assets and/or Retained Assets for which Seller is responsible.  The Assumed Liabilities shall not include any Retained Liabilities.

2.07.                                                Retained Liabilities.  Seller shall retain, perform, pay, and discharge the following (collectively “Retained Liabilities”):

(a)                                  all Covered Liabilities attributable to or resulting from any claim for personal injury or death or property damage occurring between the Effective Time and the Closing Date to the extent Seller has liability for such claim and such claim arises out of or is attributable to Seller’s use, ownership, or operation of the Assets; provided, however, that, Seller’s obligations under this clause (a) shall not exceed the aggregate amount of Seller’s insurance coverage with respect to such claims under the insurance policies required to be maintained until Closing pursuant to Section 5.03;

(b)                                 any liability arising prior to the Effective Time with respect to gas pipeline Imbalances;

(c)                                  any liability arising out of the Proceedings listed in Part 2.07(c) of Seller’s Disclosure Schedule;

(d)                                 the MitEnergy Retained Liability; and

(e)                                  any demand, claim, liability, obligation, responsibility, cost (including cost of remediation), expenses, fine, penalty, judgment, or settlement attributable to or arising out of any actual or threatened Release of Hazardous Materials at or from real properties offsite of the Assets where Seller or any of its Affiliates

28

transported, disposed, or arranged for the transportation or disposal of Hazardous Materials resulting from operation of the Assets.

2.08.                                                Imbalances and Future Delivery/Payment Obligations.  Should either party discover any inaccuracy in Parts 3.12(a), 3.12(c), or 3.12(d) of Seller’s Disclosure Schedule prior to six (6) months after the Closing, it shall promptly give the other party notice of such inaccuracy.  Either party may assert one or more claims for an adjustment under this Section by delivering a written notice of each such claim to the other party prior to six (6) months after the Closing or, in the case of Buyer, within five (5) Business Days after Buyer’s receipt of notice of such inaccuracy from Seller as required by this Section 2.08, if later.  If it is determined that there is an inaccuracy in the Imbalances set forth in Part 3.12(a) of Seller’s Disclosure Schedule or in the Future Delivery/Payment Obligations set forth in Part 3.12(c) of Seller’s Disclosure Schedule, then (i) if such claim is made before Closing, an adjustment to the Purchase Price will be made as set forth below or (ii) if such claim is made after Closing, a post-Closing adjustment to the Purchase Price will be made as set forth below (and in the case of a post-Closing adjustment, the payor will also pay the payee interest at the Agreed Interest Rate on the amount of the adjustment from the date of Closing to the date of payment):

(a)          Imbalances.

(i)                                     If Seller’s total net Imbalance reflects that Seller is more overproduced or less underproduced than as set forth in Part 3.12(a) of Seller’s Disclosure Schedule, then the Purchase Price shall be reduced by the net change in the total Imbalance times $7.00 per MMBtu (or, with respect to oil Imbalances, $60.00 per barrel); or

(ii)                                  If Seller’s total net Imbalance reflects that Seller is more underproduced or less overproduced than as set forth in Part 3.12(a) of Seller’s Disclosure Schedule, then the Purchase Price shall be increased by the net change in the total Imbalance times $7.00 per MMBtu (or, with respect to oil Imbalances, $60.00  per barrel).

(b)         Future Delivery/Payment Obligations.

29

(i)            If the value of Seller’s total Future Delivery/Payment Obligations is greater than the value of Seller’s total Future Delivery/Payment Obligations as set forth in Part 3.12(c) of Seller’s Disclosure Schedule (with gas delivery obligations being valued at the rate of $7.00  per MMBtu, oil delivery obligations being valued at $60.00 per barrel, and penalty payment obligations being valued at the dollar amount thereof), then the Purchase Price shall be reduced by the net change in the value of Seller’s total Future Delivery/Payment Obligations; or

(ii)           If the value of Seller’s total Future Delivery/Payment Obligations is less than the value of Seller’s total Future Delivery/Payment Obligations as set forth in Part 3.12(c) of Seller’s Disclosure Schedule (with gas delivery obligations being valued at the rate of $7.00  per MMBtu, oil delivery obligations being valued at $60.00 per barrel, and penalty payment obligations being valued at the dollar amount thereof), then the Purchase Price shall be increased by the net change in the value of Seller’s total Future Delivery/Payment Obligations.

This Section 2.08 provides the exclusive remedy for any inaccuracies in Parts 3.12(a) or 3.12(c) of Seller’s Disclosure Schedule.  With respect to any claims made before Closing, an adjustment to the Purchase Price will be made at Closing in the manner provided above.  With respect to any claims made after Closing, post-Closing adjustments to the Purchase Price will be made in the manner provided above.  If the Purchase Price is reduced as a result of any such post-Closing adjustment, Seller will pay to Buyer the amount of such adjustment, plus interest at the Agreed Interest Rate on the amount of the adjustment from the date of Closing to the date of payment by Seller.  If the Purchase Price is increased as a result of any such post-Closing adjustment, Buyer will pay to Seller the amount of such adjustment, plus interest at the Agreed Interest Rate on the amount of the adjustment from the date of Closing to the date of payment by Buyer.  If one or more claims are made under this Section 2.08 post-Closing, the amount owing with respect to any post-Closing claim will take into account the other adjustments to the Purchase Price (at Closing and post-Closing) made

30

pursuant to this Section 2.08.  No deductible or limitation of liability elsewhere in this Agreement shall be applied to reduce Seller’s and Buyer’s respective obligations under this Section 2.08.  Notwithstanding anything to the contrary contained in this Section 2.08, no adjustment to the Purchase Price will be required (i) under Section 2.08(a) if it is determined that the actual total net Imbalance volumes are within 2% above or below those shown in Part 3.12(a) of Seller’s Disclosure Schedule or (ii) under Section 2.08(b) if it is determined that actual value of Seller’s total Future Delivery/Payment Obligations are within 2% above or below the value shown in Part 3.12(c) of Seller’s Disclosure Schedule.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to Buyer, as of the date of this Agreement, as follows:

3.01.                Organization and Good Standing. Seller is a Delaware corporation, duly organized, validly existing, and in good standing under the laws of the state of Delaware and every state in which it is qualified to do business, and in each jurisdiction in which the Assets are located, with full corporate power and authority to conduct its business as it is now being conducted, and to own or use the properties and assets that it purports to own or use.  Seller is not a “foreign person” for purposes of Section 1445 or Section 7701 of the IRC.

3.02.                Authority; No Conflict.

(a)                The execution, delivery, and performance of this Agreement and the Contemplated Transactions have been duly and validly authorized by all necessary corporate action on the part of Seller.  This Agreement has been duly executed and delivered by Seller and at the Closing all instruments executed and delivered by Seller at or in connection with the Closing shall have been duly executed and delivered by Seller.  This Agreement constitutes the legal, valid, and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a

31

proceeding in equity or at law).  Upon the execution and delivery by Seller of the Instruments of Conveyance at the Closing, such Instruments of Conveyance shall constitute legal, valid, and binding transfers and conveyances of the Assets.  Upon the execution and delivery by Seller of any other documents at the Closing (collectively with the Instruments of Conveyance, the “Seller’s Closing Documents”), Seller’s Closing Documents shall constitute the legal, valid, and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).  Except as set forth in Part 3.02 of Seller’s Disclosure Schedule, Seller has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and Seller’s Closing Documents, and to perform its obligations under this Agreement and Seller’s Closing Documents.

(b)                Except as set forth in Part 3.02 of Seller’s Disclosure Schedule, neither the execution and delivery of this Agreement by Seller nor the consummation or performance of any of the Contemplated Transactions by Seller shall, directly or indirectly (with or without notice or lapse of time):

(i)            contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of Seller, or (B) any resolution adopted by the board of directors or the stockholders of Seller;

(ii)           contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any Contract or agreement or any Legal Requirement or Order to which Seller, or any of the Assets, may be subject;

32

(iii)          contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that relates to the Assets;

(iv)          result in the imposition or creation of any Encumbrance upon or with respect to any of the Assets.

3.03.                Bankruptcy. There are no bankruptcy, reorganization, or arrangement proceedings being contemplated by Seller or, to the Knowledge of Seller, pending or Threatened against Seller.

3.04.                Taxes. Seller has filed or caused to be filed all Tax Returns that it has been or was required to file, either separately or as a member of a consolidated group, pursuant to applicable Legal Requirements.  All Tax Returns filed by (or that include on a consolidated basis) Seller are true, correct, and complete.  Seller has paid all Taxes that have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by Seller, to the extent not being contested in good faith without, to the Knowledge of Seller, any lien for Taxes having been filed or recorded against any of the Assets.  Seller does not have any Knowledge of any Threatened Tax assessment against it except as disclosed in Part 3.04 of Seller’s Disclosure Schedule.  To the Knowledge of Seller, except as disclosed in Part 3.04 of Seller’s Disclosure Schedule, none of the Assets were bound as of the Effective Time and/or will be bound following the Closing by any tax partnership agreement of or binding upon Seller or its assigns affecting any of the Assets.

3.05.                Legal Proceedings; Orders.

(a)                Except as set forth in Part 3.05 of Seller’s Disclosure Schedule, there is no pending Proceeding against Seller or any of its Affiliates:

(i)            that relates to or may affect any of the Assets; or

(ii)           that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions.

(b)                Except as set forth in Part 3.05 of Seller’s Disclosure Schedule, to Seller’s

33

Knowledge: (1) no Proceeding of the type referenced in Section 3.05 (a) has been Threatened, (2) no event has occurred nor does any circumstance exist that may give rise to or serve as a basis for the commencement of any such Proceeding, and (3) no basis exists for any claim by any employee of Seller or any other person under any Legal Requirement for which Buyer could become liable as a successor or otherwise.

(c)                Except as set forth in Part 3.05 of Seller’s Disclosure Schedule, there is no Order adversely affecting the use or ownership of the Seller Operated Assets, and to Seller’s Knowledge, the Non-Operated Assets, to which Seller, or any of the Assets, is subject.

(d)                Except as set forth in Part 3.05 of Seller’s Disclosure Schedule, there is no Order or Proceeding restraining, enjoining, or otherwise prohibiting or making illegal the consummation of the Contemplated Transactions or which, if determined adversely to Seller, could result in a material diminution of the benefits contemplated by this Agreement or the Contemplated Transactions.

3.06.                Environmental.

(a)                To the Knowledge of Seller, except as set forth in Part 3.06 of Seller’s Disclosure Schedule, or except as would not have an Environmental Material Adverse Effect, there are no Violations of Environmental Laws that arise from events occurring at or conditions existing on the Assets during the period Seller owned the affected Assets, which have not been corrected or Remediated and all applicable fines or penalties paid in full under the requirements of any Governmental Body having jurisdiction.

(b)                To the Knowledge of Seller, except as set forth in Part 3.06 of Seller’s Disclosure Schedule, there are no Environmental Liabilities that arise from events occurring at or conditions existing on the Assets during the period Seller owned the affected Assets, except as would not have an Environmental Material Adverse Effect.

34

(c)                Except as set forth in Part 3.06 of Seller’s Disclosure Schedule or except as would not have an Environmental Material Adverse Effect, all Governmental Authorizations required under applicable Environmental Laws that are necessary to the operation of the Seller Operated Assets or, to the Knowledge of Seller, any other Assets, have been obtained and are in full force and effect, and Seller has operated the Seller Operated Assets in compliance with such Permits.

(d)                Except as set forth in Part 3.06 of Seller’s Disclosure Schedule, or except as would not have an Environmental Material Adverse Effect, neither Seller nor any of its Affiliates has received any notifications of any Proceedings pending or, to the Knowledge of the Seller, threatened against Seller or the Assets and alleging that Seller or the Assets are in violation of or otherwise subject to liability under applicable Environmental Law.

(e)                Except as would not have an Environmental Material Adverse Effect, there has been no claim asserting liability for exposure of any Person or property to Hazardous Materials in connection with the Assets.

(f)                 Seller either has made, or will, immediately after the execution of this Agreement, make available to Buyer all environmental assessment, investigatory, and audit reports, studies, analyses, and correspondence (other than correspondence that exists solely in electronic form) relating to the Assets that are in the possession or control of Seller or any of its Affiliates and addressing Releases or threatened Releases, Remediations, Environmental Liabilities, Environmental Conditions, or Violations of Environmental Laws.

3.07.                Equipment and Personal Property.

(a)                Except as set forth in Part 3.07(a) of the Seller’s Disclosure Statement, all Equipment (i) is in an operable state of repair adequate to maintain normal operations and (ii) is suitable for the purposes for which such Equipment is being used. Seller has all material easements, rights of way, licenses, and

35

Governmental Authorizations necessary to access, construct, operate, maintain, and repair the Equipment in material compliance with all Legal Requirements.  Except to the extent included in the Assets, neither Seller nor any Affiliate of Seller owns any gathering systems, downstream transportation systems, or gas processing facilities in or through which any Hydrocarbons are gathered, transported, or processed.

(b)                Subject to and without limiting Section 3.07(a), to the extent the Assets constitute personal property or fixtures, Seller expressly disclaims and negates (a) any implied or express warranty of merchantability, (b) any implied or express warranty of fitness for a particular purpose, (c) any implied or express warranty of conformity to models or samples of materials, and (d) any other warranty of any nature, express or implied, except as expressly provided herein, and all such Assets are to be conveyed “As Is” and “Where Is,” with all faults.

3.08.                Title to Properties. On the Closing Date, Seller shall convey to Buyer Defensible Title to the Assets.  Seller has delivered or made available to Buyer all items in its possession that would be relevant in the determination as to whether Seller has the ability to convey Defensible Title to the Assets.

3.09.                Brokers. Seller has not incurred any obligation or liability, contingent or otherwise, for broker’s or finder’s fees with respect to the transactions contemplated by this Agreement other than obligations that are the sole responsibility of Seller.

3.10.                Tax Sharing Agreements. There are no tax sharing agreements or any other contract relating to the sharing or payment of any Tax for which Buyer will have any liability in connection with the Contemplated Transactions.

3.11.                Consents and Preferential Purchase Rights. Except with respect to the MMS approvals, Part 3.11 of Seller’s Disclosure Schedule sets forth all Consents and Preferential Purchase Rights.

3.12.                Imbalances and Future Delivery/Payment Obligations. Except as set forth in Part 3.12(a) of Seller’s Disclosure Schedule, there are no Imbalances as of the Effective Time.  To Seller’s

36

Knowledge, the current status of Imbalances is as set forth in Part 3.12(b) of Seller’s Disclosure Schedule.  Except as set forth in Part 3.12(c) of Seller’s Disclosure Schedule, there are no Future Delivery/Payment Obligations as of the Effective Time.  Except as set forth in Part 3.12(d) of Seller’s Disclosure Schedule, no Future Delivery/Payment Obligations are attributable to the period after the Effective Time.  Notwithstanding anything to the contrary contained in this Agreement, Seller makes no representation or warranty with respect to gas pipeline Imbalances, which, pursuant to Section 2.07, constitute Retained Liabilities.

3.13.                Status of Leases. (i) To Seller’s Knowledge, the Leases have been maintained according to their terms, in compliance with the agreements to which the Leases are subject; (ii) all royalties (other than royalties held in suspense), delay rentals, and other payments due under the Leases which are Seller Operated Assets (and to Seller’s Knowledge with respect to the other Leases) have been properly and timely paid and all conditions necessary to keep the Leases in force have been fully performed by Seller and each other Person that is a party thereto; (iii) to Seller’s Knowledge, except as shown on the Exhibits hereto, and without expanding or enlarging any warranty of title given elsewhere herein, the Leases are presently in force and effect as to all water bottoms and depths; and (iv) neither Seller nor, to Seller’s Knowledge, any other party to any Lease has received notice or threat of any claim or action seeking to terminate, cancel, rescind, or procure a judicial reformation of any Lease or any provisions thereof or seeking the release of any Lease (or portion thereof).  Each Lease is a legal, valid and binding agreement, enforceable in accordance with its terms, of Seller and of each other Person that is a party thereto, and, except as set forth in Part 3.13 of Seller’s Disclosure Schedule, there is no, and Seller has not received notice of any, breach or default (nor is it aware of any condition or event which, after notice or lapse of time or both, would constitute a breach or default) thereunder.

3.14.                Contracts.

(a)                Set forth on Part 3.14 of Seller’s Disclosure Schedule (and segregated in Part 3.14 among the below categories) is a true, complete, and correct description of each contract, agreement, lease, or similar arrangement which is included in the Assets (or by which any of the Assets is bound) and which:

(i)            is between Seller and any Affiliate of Seller;

37

(ii)           is a contract for the sale, purchase, processing, or transportation of any Hydrocarbons or any other Assets, except those Hydrocarbon sales, purchase, processing or transportation agreements which can be terminated by Seller and its assigns upon not more than forty-five (45) days notice without penalty or detriment to Seller and its assigns;

(iii)          creates a purchase option, right of first refusal, call, or preferential purchase right on any Hydrocarbons;

(iv)          creates any area of mutual interest or similar provision with respect to the acquisition by Seller or its assigns of any interest in any Hydrocarbons, land or asset, or contains any restrictions on the ability of Seller or its assigns to compete with any other Person;

(v)           is a participation, partnership, joint venture, farmout, farmin, or similar agreement;

(vi)          creates or evidences any Preferential Purchase Right or Consent;

(vii)         evidences an obligation in excess of $250,000.00 to pay a deferred purchase price of property, except accounts payable arising in the ordinary course of business;

(viii)        evidences a lease or rental of any land, building or other improvements or portion thereof, excluding Leases; or

(ix)           is necessary to own and operate the Assets in the manner that they were owned and operated on the date of this Agreement or that creates any material obligation related to the Assets.

(b)                Seller has made available to Buyer true, complete, and correct copies of all Contracts and Leases (together with all amendments and supplements to

38

such Contracts and Leases and all waivers of any terms thereof) listed on Exhibit B and/or Part 3.14 of Seller’s Disclosure Schedule.

(c)                Except as set forth on Parts 3.02 and 3.14 of Seller’s Disclosure Schedule, and except where the failure would not have a material adverse effect on the operations or value of the Assets, taken as a whole, (1) each Contract is in full force and effect and constitutes a legal, valid, and binding agreement, enforceable in accordance with its terms, of each party thereto; (2) there are no violations or breaches of any Contract or existing facts or circumstances which upon notice or the passage of time or both will constitute a violation or breach thereof; (3) no notice of the exercise or attempted exercise of premature termination, price reduction, market-out or curtailment of any Contract has been received by Seller or any Affiliate of Seller nor, to the Knowledge of Seller, any other party to such Contract; (4) no notice has been received by Seller or any Affiliate of Seller nor, to the Knowledge of Seller, any other party to such Contract, that any party thereto intends not to honor its obligations under any Contract; and (5) Seller nor, to the Knowledge of Seller, any other party to such Contract, is not participating in any discussions or negotiations regarding modification of any Contract.

(d)                Except as set forth in Part 3.11 of Seller’s Disclosure Schedule, the Contracts are freely assignable without the Consent of third parties.

3.15.                Laws and Regulations. Except as set forth in Part 3.15 of Seller’s Disclosure Schedule, (a) the Seller Operated Assets are, and the operation of the Seller Operated Assets is, and to the Knowledge of Seller, the Non-Operated Assets are, and the operation of the Non-Operated Assets is, in compliance in all material respects with the provisions and requirements of all Legal Requirements (other than requirements of Environmental Laws which are governed by Section 3.06 rather than this Section); and (b) Seller has in effect all Governmental Authorizations necessary for it to own, lease, or operate the Assets and to carry on its business with respect to the Assets, and there has occurred no default under any such Governmental Authorization.  Seller has not received any notice that it, its Affiliates or any such operator is, in default (or with the giving of notice or lapse of time or both, would be in default) under any such Governmental Authorization.

3.16.                Non-Consent Operations. Seller has not elected not to participate in any operation or

39

activity proposed with respect to the Assets which could result in any of Seller’s interest in any Assets becoming subject to a penalty or forfeiture as a result of such election not to participate in such operation or activity, except to the extent reflected in the Net Revenue Interests and Working Interests set forth in Exhibit A.

3.17.                Wells. To the Knowledge of Seller, all Wells have been drilled and completed within the limits permitted by all applicable Leases, contracts, and pooling or unit agreements, and by Legal Requirements.  To the Knowledge of Seller, no Well is subject to penalties on allowables after the Effective Time because of any overproduction or any other violation of Legal Requirements.  Except as set forth in Part 3.17 of Seller’s Disclosure Schedule, there are no wells, platforms, or other Equipment located on the Seller Operated Assets, and to the Knowledge of Seller, on the Non-Operated Assets, that:  (i) Seller is currently obligated by any Legal Requirement or contract to currently plug and abandon; (ii) are subject to exceptions to a requirement to plug and abandon issued by a Governmental Body; or (iii) have been plugged and abandoned in a manner that does not comply in all material respects with Legal Requirements.

3.18.                Outstanding Capital Commitments. To Seller’s Knowledge, as of the Effective Time and as of the date of this Agreement, there were and are no outstanding AFEs or other commitments to make capital expenditures which are binding on Seller or the Assets and which Seller reasonably anticipates will individually require expenditures by the owner of the Assets after the Effective Time in excess of $250,000.00, other than those shown on Part 3.18 of Seller’s Disclosure Schedule.

3.19.                Operation of Assets Since Effective Time. From the Effective Time until the date of this Agreement, Seller (a) has conducted the business with respect to the Assets only in the ordinary course of business, (b) has conducted such business in the manner required under Section 5.02(a)(i) through (iv) had such provisions been applicable during such period, and (c) has not taken any action for which consent or waiver by Buyer would have been required under Section 5.02(b)(ii), (v), (vi), (vii) or (viii) had such provisions been applicable during such period.

3.20.                No Pooling, Unitization, Communitization or Spacing Orders.

Seller represents and warrants that no pooling, unitization, communitization, or spacing orders or agreements have been entered or promulgated after the Effective Time, and Seller has not received

40

any notice of any proposed pooling, unitization, communitization or spacing orders or agreements, with respect to the Assets that would cause any change to Seller’s Net Revenue Interests or Working Interests as set forth in Exhibit A hereto.

3.21.                Material Factor.

Seller acknowledges that Seller’s representations under this Article are a material inducement to Buyer to enter into this Agreement and close the Contemplated Transactions with Seller.

3.22.                No Encumbrances.

Except as set forth in Part 3.22 of the Seller’s Disclosure Schedule, there are no Encumbrances affecting the interests of Seller in the Assets.

3.23.                Assets.

The Assets include all of the interests of Seller and its Affiliates in the properties included in the Assets.

3.24.                No Orders.

Except as set forth in Part 3.24 of the Seller’s Disclosure Schedule, neither Seller, its Affiliates, nor, to the Knowledge of Seller, the operator of any Asset is subject to any Order with respect to any Asset other than Orders that are generally applicable to offshore oil and gas operators or that would not have an Environmental Material Adverse Effect.

3.25.                Insurance Claims.

Part 3.25 of the Seller’s Disclosure Schedule sets forth a complete list of all claims made by Seller under insurance policies during the five (5) year period preceding the execution of this Agreement with respect to operations of, or damage or destruction to, the Assets.

3.26.                Hurricane Costs.

All physical damage to the Equipment and other tangible property included in the Seller Operated

41

Assets has been restored, repaired, and replaced.  Part 3.26(a) of the Seller’s Disclosure Schedule sets forth a complete list of all outstanding AFE’s for Hurricane Costs.  To Seller’s Knowledge, there are no cost overruns expected with respect to such AFE’s except as set forth on Part 3.26(b) of the Seller’s Disclosure Schedule.

3.27.                Legal Privilege Documents.

Part 3.27 of the Seller’s Disclosure Schedule sets forth a complete list of all records, documents, and other materials regarding the Assets that were not provided to Buyer as a result of being subject to legal privilege or which constitute Excluded Assets by virtue of being subject to legal privilege.

3.28.                Investment Representations.

(a)                Seller has (i) the ability to bear the economic risks of ownership of the Deposit Shares which may be delivered to Seller under the terms of the Agreement and (ii) the knowledge and experience in financial and business matters necessary for evaluating the merits and risks of investing in Deposit Shares;

(b)                Seller has had such opportunity as it has deemed appropriate to ask questions of and receive answers from persons acting on behalf of Buyer’s Parent and Buyer concerning Buyer’s Parent, Buyer and the Contemplated Transactions in order to make an informed investment decision with respect to the Deposit Shares;

(c)                Seller would not be acquiring the Deposit Shares under the terms and conditions of the Escrow Agreement as a result of or after any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or meeting;

(d)                Seller is an “accredited investor” as such term is defined in Rule 501 promulgated under the Securities Act of 1933, as amended (the “Securities Act”);

42

(e)                Seller would be acquiring the Deposit Shares upon the terms and conditions set forth in the Escrow Agreement for investment and for Seller’s own account and not with the current view to, or for resale in connection with, any distribution;

(f)                 Seller understands that the Deposit Shares have not been registered under the Securities Act or under any state securities or blue sky laws, and, as a result, are subject to substantial restrictions on transfer subject, however, to the provisions of the Registration Rights Agreement;

(g)                Seller acknowledges that appropriate legends will be placed on the certificates representing the Deposit Shares indicating the restrictions on transfer of the Deposit Shares, but such legends shall be subject to removal upon registration under the circumstances described in the Registration Rights Agreement or as otherwise provided by law; and

(h)                Seller acknowledges that the Deposit Shares must be held indefinitely unless subsequently registered under the Securities Act and any applicable state securities or blue sky laws, whether pursuant to the Registration Rights Agreement or otherwise, or sold or otherwise transferred pursuant to exemptions from registration under the Securities Act and/or such state securities laws.

3.29.        Acknowledgments Regarding MMS Letter. Buyer acknowledges the disclosure by Seller of that certain letter dated February 5, 2007, from Chris Oynes, Regional Director of the MMS, to Seller, pertaining to Seller’s compliance performance.  The Parties acknowledge that such letter could be interpreted to be applicable to several of the representations and warranties contained in this Article 3.  Buyer agrees that the disclosure of such letter in Part 3.15 of the Disclosure Schedule constitutes adequate disclosure in connection with any other representation and warranty in this Article 3 to which such letter might be interpreted to be applicable.

43

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller, as of the date of this Agreement, as follows:

4.01.                Organization and Good Standing. Buyer is duly organized, validly existing, and in good standing under the laws of Delaware and in every state in which it is qualified to do business, and in each jurisdiction in which the Assets are located.

4.02.                Authority; No Conflict.

(a)                This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).  Upon the execution and delivery by Buyer of the Instruments of Conveyance and any other documents executed and delivered by Buyer at the Closing (collectively, the “Buyer’s Closing Documents”), the Buyer’s Closing Documents shall constitute the legal, valid, and binding obligations of Buyer enforceable against Buyer in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy or other similar laws affecting the rights and remedies of creditors generally and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).  Buyer has the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Buyer’s Closing Documents, and to perform its obligations under this Agreement and the Buyer’s Closing Documents.

(b)                Except as disclosed to Seller on Part 4.02 of Buyer’s Disclosure Schedule, neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer shall give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions.

(c)                Except with respect to the MMS Approvals, or as disclosed to Seller on Part 4.02 of Buyer’s Disclosure Schedule, Buyer is not and shall not be required

44

to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions.

4.03.                Certain Proceedings.   There is no pending Proceeding that has been commenced against Buyer that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions.  To Buyer’s Knowledge, no such Proceeding has been Threatened.

4.04.                Knowledgeable Investor.   Buyer is an experienced and knowledgeable investor in the oil and gas business.  Prior to entering into this Agreement, Buyer was advised by its own legal, tax, and other professional counsel concerning this Agreement, the Contemplated Transactions, the Assets, and their value, and it has relied solely thereon and on the representations and obligations of Seller in this Agreement and the documents to be executed by Seller in connection with this Agreement at Closing.  Buyer is acquiring the Assets for its own account and not for distribution.

4.05.                Securities Laws.   The solicitation of offers and the sale of the Assets by Seller have not been registered under any securities laws.  Buyer represents that at no time has it been presented with or solicited by or through any public promotion or any form of advertising in connection with this transaction.  Buyer represents that it intends to acquire the Assets for its own benefit and account and that it is not acquiring the Assets with the intent of distributing fractional, undivided interests that would be subject to regulation by federal or state securities laws, and that if it sells, transfers, or otherwise disposes of the Assets or fractional undivided interests therein, it shall do so in compliance with applicable federal and state securities laws.

4.06.                Due Diligence.   Without limiting or impairing any representation, warranty, covenant, or agreement of Seller contained in this Agreement and the Seller’s Closing Documents, or Buyer’s right to rely thereon, Buyer represents that it has performed, or shall perform before the Closing, such review and due diligence with respect to the Assets, which includes reviewing well data and other files in performing necessary evaluations, assessments, and other tasks involved in evaluating the Assets as it deems necessary to enable it to make an informed decision to acquire the Assets under the terms of this Agreement.

4.07.                Basis of Buyer’s Decision.   Buyer represents that by reason of its knowledge and experience in the evaluation, acquisition, and operation of oil and gas properties, Buyer has evaluated

45

the merits and the risks of purchasing the Assets from Seller, and has formed an opinion based solely on Buyer’s knowledge and experience, Buyer’s due diligence and Seller’s representations, warranties, covenants and agreements contained in this Agreement and Seller’s Closing Documents, and not on any other representations or warranties by Seller.  Buyer represents that it has not relied and shall not rely on any statements by Seller or its representatives (other than those representations, warranties, covenants and agreements of Seller contained in this Agreement and Seller’s Closing Documents) in making its decision to enter into this Agreement or to close this transaction.

4.08.                Material Factor.   Buyer acknowledges that Buyer’s representations under this Article are a material inducement to Seller to enter into this Agreement and close the Contemplated Transactions with Buyer.

4.09.                Brokers.   Buyer has not incurred any obligation or liability, contingent or otherwise, for broker’s or finder’s fees with respect to the transactions contemplated by this Agreement other than obligations that are the sole responsibility of Buyer.

4.10.                Buyer’s Parent.   With respect to Buyer’s Parent:

(a)                Buyer’s Parent is a company duly organized, validly existing and in good standing under the laws of Bermuda and every state in which it is qualified to do business, with full power and authority to conduct its business as it is now being conducted and to own or use the properties and assets that it purports to own or use.

(b)                The authorized, issued and outstanding capital of Buyer’s Parent is as described in Buyer’s Parent’s registration statement on Form S-1 (File No. 333-140916), declared effective by the Commission on or about April 6, 2007 (the “Parent Registration Statement”).  Parent has no options, warrants or other securities convertible into or exchangeable for or with any of Parent’s common shares or other securities except as described in the Parent Registration Statement.  The forms of memorandum of association and bye-laws attached as exhibits to the Parent Registration Statement and provided to counsel for Seller reflect the true and complete copies of such instruments, including all amendments and as in effect on the date hereof.

46

(c)                The Deposit Shares have been duly and validly issued to Seller for valid consideration, and the Deposit Shares are fully paid, non-assessable common shares of Buyer’s Parent.  The Deposit Shares have been duly registered in the name of Seller, with no stop orders or other restrictions on transfer, except for the terms of the Escrow Agreement.

(d)                Buyer’s Parent has the absolute and unrestricted right, power, authority, and capacity to issue the Deposit Shares to Seller.  Buyer’s Parent has obtained all necessary consents, including without limitation the consent of its board of directors, required for the issuance and delivery of the Deposit Shares to Seller, and no consent of any shareholders or other third parties is required for such issuance or delivery.  Buyer’s Parent’s issuance and delivery of the Deposit Shares and execution, delivery and performance of the Registration Rights Agreement will not contravene, conflict with, or result in a violation of any provision of its memorandum of association or bye-laws, or any resolution adopted by the board of directors or the shareholders of Buyer’s Parent; or contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge such issuance and delivery, to terminate, accelerate, or modify any terms of, or to exercise any remedy or obtain any relief under, any material Contract or agreement or any Legal Requirement or Order to which Buyer’s Parent may be subject.  Without limiting the generality of the foregoing, the “Termination Date” under Bye-Law 49 of Buyer’s Parent’s Bye-Laws has occurred and there are, as of the date of this Agreement, no restrictions on Buyer’s Parent nor rights of shareholders or other Persons arising under such Bye-Law 49.

(e)                Buyer, on behalf of Buyer’s Parent, acknowledges the issuance of the Deposit Shares, agrees that Seller shall not be required to give the notice described in Bye-Law 50.1, and further agrees that Seller shall not be deemed in default as described in Bye-Law 50.3 as a result of Seller’s holdings of the Deposit Shares.

(f)                 The Registration Statement on Form S-1 (File No. 333-140916), including the exhibits thereto, declared effective by the Commission on or about

47

April 6, 2007 (the “Registration Statement”), at the time the Registration Statement was declared effective by the Commission, did not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

ARTICLE 5

COVENANTS OF SELLER

5.01.                Access and Investigation.   Between the date of this Agreement and the Closing Date, Seller shall (a) afford Buyer and its Representatives full and complete access during normal business hours to Seller’s personnel, properties, contracts, books and records, and other documents and data, (b) furnish promptly Buyer and its Representatives with copies of all such contracts, books and records, and other existing documents and data as Buyer and its Representatives may reasonably request (and upon Buyer’s request use reasonable efforts to obtain the consent of third party operators to give Buyer and its Representatives reasonable access to similar information with respect to Assets not operated by Seller or an Affiliate of Seller), (c) make available to Buyer immediately after the date of this Agreement all environmental assessment, investigatory, and audit reports, studies, analyses, and correspondence (other than correspondence that exists solely in electronic form) relating to the Assets that are in the possession or control of Seller or any of its Affiliates, addressing Releases or threatened Releases, Remediations, Environmental Liabilities, Environmental Conditions, or Violations of Environmental Laws, and (d) furnish promptly to Buyer and its Representatives with such additional financial, operating, and other data and information as Buyer may reasonably request;  PROVIDED THAT, EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND IN THE SELLER’S CLOSING DOCUMENTS, SELLER MAKES NO WARRANTY, AND EXPRESSLY DISCLAIMS ALL WARRANTIES AS TO THE ACCURACY OR COMPLETENESS OF THE DOCUMENTS, INFORMATION, BOOKS, RECORDS, FILES, AND OTHER PERTINENT DATA THAT IT MAY PROVIDE TO BUYER.