- ' ^

SECTION 1

E

i

M i n e r a l s Management S e r v i c e , USDI G u l f o f Mex ico OCS R e g i o n R e g i o n a l D i r e c t o r 1201 Elmwood Park B o u l e v a r d New O r l e a n s , L o u i s i a n a VOI23-2394

W a s t e . * . . : o f Mex ico O i l ancl I t * Mtase S?tle 122 August i i9£9

O i l and Gas B i d

The f o l l o w i n g b i d j i b m i t t e d f o r an o i l and gas lease on t h e map a r e a a r d b l o c k o f t h e Outer O n t i n e n t a l S h e l f s p e c i f i e d be low:

Map Name ft Numte: Texas Map No. 3A

Arsa Mustang I s l a n d ,

Fas t A d d i t i o n

T o t a l Amount B id

$ 1 4 5 , 0 0 0 . 0 0

Amjunt Per A c r e

$25.17

' .noun t o f Cash Bonus i i i o m i t t e d w i t h B i d

^^9,000.00

N.O.Misc. No. 967

Proportionate Interest Of Company(ies) Submitting Bid

100%

Name and Address o f B i d d i n g Company

A t l a n t i c R i c h f i e l d Company P. 0 . Box 2819 D a l l a s , Texap 75221

ATLANTIC RICHFIELD C'V4PA«V

Sansbury Attorney-i n-Fact

4

United States Departtiient of the Interior MINERALS MANAGEMENT SERVICE

GULF OF MEXICO OCS REC ION 1201 E L M W CD PARK BOUI EV ARD

NEW O R L E ^ S. LOUISIANA /0123-2S94

August 29f 1989 HECEIVED

AUG 3 0 1989

ACC: - u*;: osp-I have received the following ^ N lease(s) for execution. Tha laase (s) must be returned and ? . t h i s o f l i c e not l a t e r than the time and date identified i n the tranmrittal f o r execution.

QC?-G No..

11216 31217 IA. '1

-; 1125^ 11251 11252 ,£1254 11353

Area/Block

MI MI MI MI MIE MIE MIE MIE HI

764 765 787 808 A-81 A- 91 A-9 2 A-116 95

Fleaiie sign and d^ t * [the date b-s'ng ACTO.'4' aate of RECEIPT of leaso(o)] and returr. the origin a l copy of thiw i attar f o r our records.

L ( Signatui-*;

Atlantic Righfi^id Company (Conpany)

vo :_j7i (Date;

R k C EIY E D.

SEr* 1

Miiunls Msnagemcrft Service Lea'iinii & Envircnmer.t

United States Depsmrent of the Interior MINERALS MANAC.^ NT SERVICE

GULT OF MEXiCO OCS REGION 1201 ELMWOOD PARK BOULEVARD

NEW ORLEANS, LOUISIANA 70123-S

OCS-G 11254 Offering Date Map Area and dUxk N W r t 08/23/89 MIE - A-116

DECISION Rccal S17^ JX00

Bailee of Bonus

Name

Atlanfc RidifiaU Coinpany Post Office Box t819 Dallas, Tens 75221

LEASE FORMS TRANSMITTED FOR EXEC . I O N

p ^ r . . m to Section 8 of the Outer Continental Shelf Lends Act (67 Scat 462; 43 \3S.C. 1337) as emended suu. and the regulations pertaining thereto (30 CFR. 236), your Md fbr the above block is accepted,

.icvwdlngly, iu order to perfect your righu hereunder, the following actions mast be taken:

1. ^ecuf - and retain the three copies of attached lesse. (If Uase is exited by ant JU, evidence must befiimish.rt ofogertt's authorization.)

2. ay tfc : balance of bonus nnd the first year's rental indicated abo"« in accordance with the attached Indirections for Eiectronic Transfer. Payment most be re ived by the Federal Reserve Bank of New York no later than noon, eastern standard time, on toe llth business day after receipt of this decision (30 CFR 25647). That days ££p j g

a. Comply with bonding requirements according to 30 CFR 256 Subpart L

| ) b. Conply with the affirmative, action compUance prograin requirements of 41 CFR Section 601.40 wiihin 120 days of rhe <:ffcaive date of tha lease.

ConpJiauce . 'h re ujements 1,2. and 3a abow most be made njt later than tbe llth business oay after receipt o» thii deri. > raihire to comply with above requirement* wil'. result in foffdtore of the 1/5 bonus deposit and your rights toa •I-AZ the lease.

IMPORT/^'1": xtefar. rutins As maeku • t.//'te CORPORATE SEAL to aU leases exeatttd by corporccon*

(Ori: St;,.) J. ROGERS FEARCl

/ute Attachmenu

Form MMS-2U05 i ci V/Sb) (Snpemides Wj-TL ' t August 1982)

UNITED 5 1 ATES DEPARTMEfn* O f r H t I H T E R t ' j R

M I N E R A L S M A N A O e ' . ^ N T SFRVIO?

OIL AND GAS L E A d OF SUBMERGED LANDS k NDER lUlF

OUTER CONTINENTAL SUELF LAND i ACT

Thii form does not constitutr. an i •formation coileaion as defined by 44 U.S.C 3502 and therefore does not itquire

approval by the Office of Management and Budget

Office

New Orleans, LA

Cashtaous

$145,000.00

Minimum royalty rate per acre, hectare or fracdpo thereof $3.00 per acre

Serial number OCS-G 11254

Rental ra.' e per acre, hectare or t.-*aion thereof

$3.00 per acr*

Royalty rate

16 2/3 percent

Profit share rate

This lease is effective ss of OCT 1 1989 (hereinafter called the 'Effective Date') and shaD continue for an initial period of five yean (hereinafter called the" Initial Pr.iod") by and between the United states of America (hereii.tfter called the "Le wr) . by the Regional Director, Gulf of Mexico OCS RagkM. Minerals f Management Sen ice, its authorized officer, and

Atlantic Richfield Company 100%

(hereinafter called tie lesaee*). In consideration of any cash payment tei etofore made by the Lesaee to the Lessor and in censideratiou ol •!•< promises, tcr^s, condi uns, zn* roveaan »c jntained herein, including the Stipulation(s) numbered 1 aad 3 attached hereto, the L : *«e snd Lessor agree as follows:

Sec. 1. Statutes md r.emiabf^ Titu lease is sued pursuant to the atet Coniinental Shelf Lands Act ' J August 7, 1953:67 Stat 462; U USC ' J l • .-t seq., as amended (92 Stat 629), (hereinafter called he "Acf). The lease is issued subject tc the Act; aU rejaJ^d: JS 'iaoed pursuant to the Aa and in existence upon the Etfective Date of this lease; all regulations issued pursuant to the statute in the future which provide for the prevention of waste and conservation of the nature! resources of the Oucer Continental Sbelf and the protection of correlative rights therein; and all other applicable statutes and regulations.

Sec. 2. Rights of Lessee. The Lessor hereby grants and leases to the Lessee the exriusive right and privilege to drili for, develop, and produce oil and gas resources, except helium gas, in the submerged lends of the Outer ConiT^tal Shelf contaxiing aj»proximavc!y S7^u.00 acre1 hectares (nereinafter referred io a* rhe "leased area"), dest-..*-:; us follows:

AU o f Block A-116, Mustang Island Area, East A d d i t i o JCS Leasing Map, Texas Map No. 3A

E C E f V E D

SEP 1 ] :02J

M h r ^ i KJO-JC; jent Service I ^ r^ironmenl

am

i.J

These righu indude: (a) the nonexclusive right to conduct wiihin the leased srea geological

and geophysical explorations in accordance with appiicabie regulations; (b) tbe nonexclusive right to drill water wells within the leased area,

unleu the water ts pan u l geopressured-geoihcrmal and assodated resources, and to use tbe water produced therefrom for operations pursuani to the Act free o f cost, on the condition that the dri l l ing is conducted in accord­ance wi th procedures approved by Ibe Direaor of the Minerals Manage­ment S:.-v,cc or (he Dirtctoi'sdelegate (hercuufier called the "Director"); •r.J

(c) ihe right to construct or erect and to mainlain withm the leased area artificial islands, installations, and otha devices permanenily or temporarily aitached to the seabed and other works and structures nc aas** to the full enjoyment o f the Irase. subject to compliance with applicable 'rws and regulations.

Sec. 3. T e w . This lease shall ennt i— from ihe Effective Date of the lease for the Ini t ia l Period and su 1-. thereafter as oi l or gas is produced from the leased area in paying quamiiies, or dril l ing or well reworking opera­tions, a* approved by the Lessor, are conducted thereon, or as otherwise provided by rcyulaiion

Sec. 4. Rem Js. T> _tj*ee ths 11 pay ihe Lessor, on or before the first oay of each lease y r j r which comniem.^ prior io a discovery in paying quan-uues of o i l o* gas on the leasei area, a rental as shown oo the face hereof.

Sec. 5. Min imnm Ro) i l i ) . The Lessee i -u i l pay the Lessor, al the ex pi ra1 icn of each EES i ear which commences afier a discovery of oil and gas ir paying quantities, a minimum royally as shown on Ihe face hereof or, i f there is p roou i ion , the difference between ihe actual royally requirea to b ! paid wi lh res pet. >o such lease year and the prescribed minimum royi l ty i f the actual royak) paid is less than the minimum royalty.

Sec, 6. Koyalty oa ProtoeUoa. (a) The Lessee shall pay a fixed ro/aliy as shown on the face hereof

in amount o r value of production saved, i -moved. or sold from Ihe leased area. Cas (except helium) and oil of all kinds are subjea to royalty. Any Lessee i s 1 abV ft-r "-yahy payments on oi l o- gas lost or wasted from a lease site w>c, >uch loss or waste is due to neg'igence on the part of thc operator of t. . 'sue. r : due to ihe failure to coropty with any rule or regula­t ion, order . ation iuued under the Federal Oi l and C u Royalty Manageraeui A " i f I9B2 C: thc Act The Lessor shtl l determine whether produaion royai>, shall be paid in amount or valu*.

(bl The value of pi .-<d uet ton for purposes of comp v i n g royally on pro­duaion f rom this lease ihall never be less than the f a r marfcei valtfet of the p rodua ion . The value cf produaion shall be the estimaied reasomble value of the produaion u determined by the Lessor, cue consideration bang given to the highest price paid for a pan or for a na iy of pro­duaion of l ike quality in the same field or area, to the |ru<. received by the Lesiec. to posted prices, to regulated prices, and to o th r relevant mai­lers. Except when the Lessor, in its discretion, determiner, not to consider special pricing relief from otherwise apnlicablc Federal regulatory re­quirements, tbe value of produaion for IjH ourposes of co npuling royalty shall not be deemed to be less thanthe ( n x . - r t ' accnun t to the Lessee from the sale thereof. In the ab»cncco' j od . ' " ' - i to i h i contrary, value

compuied on the basis of the highest price paid or o f fned at tbe lime of produaion in a fair and open market for the major ponion of like-quality products produced and sold from the field or area where the leased area is situated wil l be considered to bc a reasonable value.

(c) When paid in value, royalties on produaion shall be due and payable monthly on the lar* day of the month next following the month in which the produaion is ained, unless the Lessor designaies a l a i n time. When paid in am—int, >jch royalties shall be delivered at pipeline connections or in tanks provided by the Lessee. Such deliveries shall be made at reasonable times and imervais and, u the Lessor's option, shaU be effected euher ( i) on or immediately adjacent to the leased area, without cost to the Lessor, or (ii) at a more convenient point closer io shore or on shore, in which event the Lessee shall be entitled to reimbursemeni for the reasonable cost of tr-nsponing ihe royalty subsiance to such delivery point.

Sac. 7. f a j l i s . Tbe Lessee shall make all payments (rentals, royalties and any other payments required by this lease) to the Lessor by ekcuonic iransier of funds, check, dralt on a solvent bank, or moncs o r d a unle» otherwise provided by regulations or by direction ol the Lessor. Rentals, royalties, and aay other payments required by this lease shall be made payable to the Minerals Management Service aad tendered to the Direc­tor. Determinations made by the Lessor as to the amount of payment due shall be presumed to be correa and paid as due.

Sec. I . Beads- Thc Lessee shall maintain at all times the boodfsi quired by regulation prior to the issuance of thc lease aad shall furnish such addi­tional security as may bc required by the Lessor i f . after operations have begun, thc Lessor deems such additional security to be necessary.

Sec. 9. n a m . Thc Leuee shall condua ail operatioos oo the leaaed a m in accordaoce with approved exploratioo plans aad approved development aod production plans as are required by regulations. The Lessee may depan from an approved plan only as provided by applicable reguiatioas.

Sac. I t . f a i t a r n i — w . Thc Lessee thall comply with all regulations and Orders. Afier due noiice in writing, the Leucc sball dri l l sucb weils aad produce at such rates as the Lessor may require ia order that the leased aiea or aay pan thereof may be properly aad timely developed aad pro­duced in accordance with sound operating principles.

Sac. 11. D lwrUBMl D i l f c g . A direaional well drilled under tbe leased area from u surface locaiion on nearby lai>d aot covered by this lease shall bc deemed to have tbe same effea for all p- poses of thc lease as a weil driUed from a surface locatioa on the leased area. Ia tb . e circumstances, drilling shall be considered to have been commenced on the leased area when dril l ing is ' • " T T T T ' W ' ~ < on the nearby land for thc purpose of direc­tionally dri l l ing under the leased area, and produaion of oi l or gas from thc leased area through aay directional weU surfaced oa nearby land or dril l iag or reworking of any such directional well shall be coosidered pro­duction or drilling or reworking operatioos oo the leased area for all pur­poacs of thc lease. Nothing coataiaed in this Seaion shall be construed as granting to the Lessee any interest, Ucense, easement, or other right in any nearby land.

Page 2

UNITED STATES DEPARTMENT OP THE INTERIOR MINERALS MANAGEMENT SERVICE

outer Contlnantal Shalf, Western Gulf of Mexico Oil and Gaa Lease Sale 122

OCS^J 11254

Stipulation WO. 1—Protection of Areheeolooieal tteeoureee.

(a) "Archaeological resource" neana any prehistoric or historic dis tr ict , s i t e , building, structure, or object (including ahipwrecks); such tem includes art i facts , records, and remains vhich are related to such a d i s tr ic t , s i te , building, structure, or object (16 U.S.C. 470v(5)). "Operations" means any dr i l l ing , mining, or construction or placeaent of any structure for axploration, development, or production of the lease.

(b) I f thc Regional Director (RD) believes an archaeological resource nay exist in the lease area, the RD v i l l notify the lessee in vrit ing. The lessee shall then comply vith subparagraphs (1) through (3).

(1) Prior to commencing any operations, the lessee sha l l prepare a report, as specified by the RO, to determine the potential existence of any archaeological resource that may be affected by operations. The report, prepared by an archaeologist and a geophysicist, shal l be based on an assessment of data from remote sensing surveys and of other pertinent archaeological and environmental inforaation. The lessee shal l submit this report to the RD for reviev.

(2) I f the evidence suggests that an archaeological resource may be present, the lessee shal l either:

(i) Locate the site of any operation so as not to adversely affect the area where the archaeological resource may be; or

( i i ) Establish to the satisfaction of the RO that an archaeological resource does not exist or v i l l not be adversely affeeted by operations. This shall be done by further archaeological investigation, conducted by an archaeologist and a gecphyaicist; using survey equipnent and techniques deemed necessary by the RO. A report on the investigation shall be subr tted to the RO for reviev.

(3) Zf thm RD detennines that an archaeological resource is likely to be present in the lease area and nay be adversely affected by operations, the RD will notify the lessee inznediately. The lessee shall take no action that nay adversely aff set the archaeological resource until the RD has told the lessse hov to protect i t .

(e) Zf the lessse discovers any archaeological rssourcs while conducting operations on ths lssss srss, ths Isssss shsll rsport ths dlscovsry innediately to ths RO. Ths Isssss shsll sake svsry reasonable effort to prsssrvs ths archaeological rssourcs until ths RD hss told ths Isssss hov to protsct i t .

StlDuUtion MB. 3-mHtarv Waminq Area (W-228).

(a) Hold and Save Harmless

Whether compensation for such danags or injury alght be due under a theory cf s t r ic t or absolute l iabil i ty or otherwise, the lessee assumes all risks of damage or injury to persons or property, which occur in, on, or ebove the Outer Continental Shelf (OCS), to any persons or to any property of any person or persons who are agents, employees, or invitees of the lessee, its agents, independent contractors, or subcontractors doing business with the lessee in connection with any activities being perforaed by the lessee in, on. or above the OCS. if such injury or damage to such person or property occurs by reason of the activities of any Agency of the U. S. Govemment; Hs contractors or subcontractors, or any of their officers, agents, or eapioyees being conducted as a part of. or in connection with, the programs and activities of the command headquarters listed in the following table.

Notwithstanding any limitation of the lessee's liability in section 14 of the lease, the lessee assumes this risk whether such injury or damage is caused in whole or in part by any act or omission, regardless of negligence or fault, of the United States; its contractors or subcontractors, or any of its officers, agents, or eapioyees. The lessee further agrees to indemnify and save harmless the United States against all claims for loss, danage, or injury sustained by the lessee, and to indeanify and save harmless the United States against all clalas for loss, damage, or injury sustained by the agents, employees, or invitees of the lessee, its agents, or any Independent contractors or subcontractors doing business with the lessee in connection with the prograns and activities of the aforementioned military installation, whether the same be caused in whole or in part by the negligence or fault of the United States; its contractors, or subcontractors; or any of its officers, agents, or employees and whether such clains might be sustained under a theory of str ict or absolute l iabi l i ty or otherwise.

(b) Electromagnetic Emissions

The lessee agrees to control its own electromagnetic emissions and those of i t s agents, employees. Invitees, independent contractors or subcontractors emanating from individual designated defense waming areas in accordance with requirements specified by the coaaander of the conrnand headquarters listed in the following table to the degree necessary to prevent damage to, or unacceptable Interferenca with. Department of Oefense flight, testing or operational activities conducted within individual designated warnino areas. Necessary monitoring control and coordination with the lessee, its agents, employees, invitees, independent contractors, or subcontractors wid b* effected by the commander «f the appropriate onshore ml. .tiiy fr.sr lUtion conducting operations in the particular waming area, pmv'itA: however, that control of such electromagnetic emissions shall '<i no instance prohibit all manner of electromagnetic communication dur'ng ai.j period of time between a lessee, its agents, employees, invitees, independent contractors, or subcontractors and onshore facil i t ies.

(c) Operational

The lessee, when operating or causing to be operated on its behalf, boat or aircraft traffic in the individual designated waming areas, shall enter into an agreement with the consaander of the individual coamand headquarters listed in tne following table, upon utilizing tn Individual designated warning area prior to coaroencing such traffic. Such an agreeaent will provide for positive control of boats and aircraft operating in the waming amas at all tines.

Waming Areas' Comand Headquarters

Warning AfM? Command Headquarters

W-228 Chief, Naval Air Training Naval Air Station ATTN: Lt. Commander Araitage or Major Danuser Corpus Christi, Texas 78419-5100

Telephone: (512) 939-3927/3902

S K . 12. Swfrty Requlreif u. The Lessee shall: (a) maintain all places of employment wiihin the leased area in com­

pliance with occupational safety and health stand?j-ds and, in addition, free from recogni/ed hazards to employees of the Lessee or of any con­tractor or subcontractor operating wiihin thc lease area;

(b, maintain all operalions within the leased area in compliance with regulations or orders intended to protect persons, property, and the en­vironment on the Outer Continental Shelf: and

(c) allow prompt access, at the site of any operation subject to safety regulations, to any authorized Federal inspector and shall provide any documents and records which are pertinent to occupational or public health, safety, or environmental protection as may be requested.

Sec. 13. t m g t m l m and Canceflatkm. (a) The Lessor may suspend or cancel this lease pursuant to section S

of the Act, and compensation shall be paid when provided by the Act. (b) The Lessor may, upon recommendation of the Secretary of Defense,

during a sute of war or national emergency declared by Congress or the President of the United States, suspend operations under the lease, as pro­vided in section 12(c) of the Aa, and just compensation shall be paid to the Lessee for such suspension.

See. 14. ladewiaifkatioti. Thc Lessee shall indemnify the Lessor for. and hold it harmless from, any claim, including claims for loss or damage to property or injury to persons caused by or resulting from any operation on ibe leased area cooducted by or on behalf of the Lessee. However, the Lesaee shall not be held responsible to the Lessor under ihis seaion for any loss, damage, or injury caused by or resulting from:

(a) negligence of tbe Lessor other than the commission or omission of a discretionary function or duty on the pan of a Fcucral Agency whaher or not the discretion involved is abused; or

(b) the Lessee's compliance with an order or directive of the Lessor against which an administrative appeal by the Lessee is filed before the cauae of action for tbe claim arises and is pursued diligently thereafler.

Sac IS. DUftUmm ot Pradactkw. (a) As provided in seaion 27(aK2) of th: Aa . the Lessoi shall have

lhe right to purchase not mon than 16 2/3 percent by volume of the oil and gas produced pursuant to tne lease ai the regulated price or. if no regulated price applies, at the fair market value at the wellhead of the oil and g u aaved, removed, or sold, except that any oi' or gas obtained by the Lessor as royalty or na profit share shall be credited against tbe amount that may bs purchased unda this i-'bseaion.

(b) Punuant to section 27(b) and (c) of the Aa , the Lessor nuy of fa and sell certain oil and gas obtained or purchased pursuant to a lease. As provided in seaion 27(d) of the Aa, the Lessee shall take any Federal oil or gas for whkh no acceptable bids are recei' -d. as determined by ihe Lessor, and which is not transferred to « Federal Agency pursuant io sec­tioa 27(a)(3) of the Aa, and shall pay to the Lessor a cash amount equal to the regulated price or. if no reculatcd price applies, the fair marka value of the oil or gas so obtained.

(c) As provided in seaion 8(b)(7) of the Aa, the Lessee shall o f fa 20 percent of the crude oil, condensate, and natural gas liquids produced on the lease, at the marka value and point of delivery as provided by regula­tions applicable to Federal royalty oil, to small or independent refiners as defined in the Emergency Petroleum Allocation Aa of 1973.

(d) In time of war or when the preMdeni of the United States shall so prescribe, the Lessor shall have the right of first refusal lo purchase at the marka price all or any ponion of the oil or gas produced from the leased area, as provided in seaion 12(b) of the Aa.

Sec. 16. UaHiaatloa. FooBag, sad DrllliBg AgreeaieBta Wiihin such time aa tbe Lessor may prescribe, the Lessee shall subscribe to and operate unda a unit, pooliiig, or drilling agreement embracing all or pan of the lands subjea to this lease as the Lessor may determine to be appropriate or necessary. Wlure any provision of a unit, pooling, or drilling agreement, approved by the Lessor, is inconsisten: with a provision of this lease, the provision of the agreement shall govern.

Sec. 17. Eqaal Oppoi tunity Clause. During ihe performance of this leaw, the Lessee shall fully comply wiih paragraphs (1) ihrough (7) of seaion 202 of Executive Order 11246, as amended (reprinted in 41 CFR 60-1.4(a)), and the implementing regulation^ which are for ihe purpose of prevenling employment discrimination against persons on the basis of race, color, religion, sex, or national origin. Paragraphs (1) ihrough (7) of seaion 202 of Executive Order 11246. as amended, are incorporated in this lease by refaence.

See. 18. Certi Ora lion of Noasegf %Ut4 FacUities. By entering inlo this lease, the Lessee cenifia, as ipwIIWl in 41 CFR 60-1.8, that it does nol and will not maimain or provide for iu employees any segregated facililies at any of its establishments and thai it iocs not and wiU nol permit its employees to perform their services at any i xation unda iu conlrol where segregated fadUties are maintained. As used n this cenification, the term "segregated faciUties" means, but is not United to, any waiting rooms, work areas, test rooms and washrooms, rai airants ami otha eating areas, timeclocks, locker rooms and otha storar - or dressing areas, parking lots, drinking fountains, reaeation or entertainment areas, transponation, and housing facilities provided for employees which are segregated by explicit directive or are in faa segregaled on the basis o>' race, color, religion, or national origin, because of habit, lo' ->' custom, or otherwise. The Lessee funha agrees that it will obtain identifi certifications from proposed con­tractors and subcomrators prior to award of contracts or subcontracts unless they are exempt unda 41 CFR 60-l.S.

Sec. 19. Reservations to Lessor. All righls in the leased area oot expressly granted to the Lessee by the Aa, ihe regulations, or this lease are hereby reserved to the Lessor. Without limiting the generality of the foregoing, reserved rights included:

(a) the right to authorize geological and geophysical exploralion in the lease area which does not unreasonably intafae witb or endanger actual operations unda the lease, and the right to grant such easements or rights-of-way upon, through, or in the leased area as may be necessary or ap-propriate to the working of otha lands or to the trta.me.-<t and shipment of producu thereof by or under authority of the Lessor;

(b) the right to grant leases for any minerals otha than oil and gas within the leased area, except thai operalions unda such leases shall not unreasonably interfere with or endanger operations unda this lease;

(c) the right, as pro ied in seaion 12(d) of ihe Aa. to restria opaa­tions in the leased area or any pan thereof which may be designated by the Secreury of Defense, with approval of the Presidenl, as being within an area needed for national deft nse and. so long as such designation re­mains in effea. no operations may ue conducted on the aurface of the leased area or the pan thereof included within the designation except with the concurrence of the Secretary of Defense. If operations or produaion unda this lease within any designated area are suspended pursuant to lhis paragraph, any payments of rentals and royalty prescribed by this lease likewise shall be suspended dunng such period of suspension of operations and produclion. the term of this lease shall bc extended by adding 'hereto any such suspension period, and the Lessor shall be liable to the Lessee for such compensation as is required lo be paid unda ihe Constitution of the United States.

Sec. 20. Transfer of Leaae. The Lessee shall file for approval with the appropriate field o f f i c of the Minerals Management Service any instru­ment of assignment or otha transfer of this lease, oi any interest therein, in accordance with appUcable reguUtions.

See. 21. Sarrender of Lease. The Lessee may surrender Ihis entire lease or any officially designated subdivision of the leased area by filing wiih ih_ appropriate fidd office of the Minerals Managemeni Service a wrillen reUn-quishmeni, in triplicate, which shall be effeaive as of the date of filing. No surrender of this lease or of any portion of the leased area shall relieve the Lessee or its surety of the obUgation to pay all accrued rentals, royallia, and other financial obligations or to abandon all welli on the area to be surrendered in a manner satisfactory to ihe Direaor.

(Continued on reverse)

Page 3

Set. J2. Wetrovai of Propcn) on Ttrrn'maon of Leaie. Wiihin a period of I year afler lermina MJ of this lease"in whole or in part, lhe Lessee shall remove d l devices, nn-i i ., and struaures from 'he premises no longer subjea tc he least ir » .rdance with applicable regulations and Orders of Ihe Direaoi. Ho v ., the Lessee may, with the approval of the Direc­tor, continue to nuuu^un devices, works, and struaures on the leased aiea for drilling or producing on otha leases.

Sec. 23. Rc»cdlci ta Case of Defarti. (a) Wheneva the Lessee fails to comply with any of the provisior. of

thc A a , Ihe regulations issued pursuani to the Aa, or the terms of this lease, the lease shall be subjea lo cancellation in accordance with the pro­visions of section 5(c) and (d) of tbe Aa and the Lessor may exercise any otha remedies which the Lessor may have, including the penalty provi­sion* of seaion 24 of the Aa. Furthermore, pursuant to seaion gfo) of the A a , tbe Lessor may cancel the lease if it is obtained by fraud or misrepresentation.

(b) Nonenforcement by the Lessor of a rcn«>> for any panicular viola­tion uf the provisions of the Aa, the regukuioa issued pursuant to the Ac!, or the terms of this lease shall not prevent the cancellation of this lease or the exercise of any other remedies unda paragraph (a) of »his sec­tion foi any otha violation or for the same violation occurring at any otha time.

Sec. 24. U•lawful iaterest. No memb:t of, ui Deiegaie io. Congress, or Resideni Commissioner, after election or appointment, or cither before or after ihey have qualified and during Iheir continuance in office, and no offica, agent, or employee of the Depanment of the Intoior, except as provided in 43 CFR Pan 20, shall bc admitted to any share or pan in this lease or derive any henefit that may arise therefrom. The provision' of Seaion 3741 of the Revised Sututes, as amended, 41 U.S.C, 22. aad the A a of June 25. 1948, f . Sut. 702, as amended, 18 U.S.C. 431-433. relating to contracts nude o. entered into, or accepted by or on behalf of the United States, form a pan of this lease insofa. as they may bc applicable.

ATLANTIC RICHFTKLD COMPANY (Lessee)

X , (Signature of Authorized Officei X

J . A. SANSBURY (Name of Signatory)

A t t o r n e y - i n - F a c t CTitle)

THE UNITED STATES OF AMERICA. Lessor

(Signature or Authorized f (Signatu

Chris Oynes

Officer)

Acting (Name of Signatory)

Regional Director Gulf of Mexico OCS Region M i n f t r a l a M a n a g p m p n l - S B C g i C B

(TiileT

ATTEST: lQV>ra??^4 r

A. 0. Hoppe (Ji Aaaic*—nt Seer

r r 1419% (Date)

P. O. Box 2819,Dallas (Addres >f Lessee,

If this lease is executed by a corporalion, il must bear the corporate seal.

Page 4

United States Depaitment of the Interior MINERALS MANAGEMENT SERVICE

GULF OF MEXICO OCS REGION 1201 ELMWOOD PARK BOULEVARD

NEW ORLEANS. LOUISIANA 70125-2394

RECEIPT CONFIRMATION REPORT GULF OF MEXICO LEAS SALE #122 DCN: 091489-07

OCS# QUALf COMPANY AMOUNT DATE PAID

1.G11216 967 ATLANTIC RICHFIELD $ 932, 880.00 9-14 -89 2.G11217 967 ATLANTIC RICHFIELD 2, 502, 880.00 9-14 -89 3.G11221 967 ATLANTIC RICHFIELD 1, 898, 880.00 9-14 -89 4.G11224 967 ATLANTIC RICHFIL 251, 280.00 9-14 -89 5.G11250 967 ATLANTIC RICHFIELD 171, 680.00 9-14 -89 6.G11251 967 ATLANTIC RICHFIELD 211, 680.00 9-14 -89 7.611252 967 ATLANTIC RICHFIELD 133, 280.00 9-14 -89

967 ATLANTIC RICHFIELD 133, 280.00 9-14 -89 9.G11353 967 ATLANTIC RICHFIELD 395, 680.00 9-14 -89 10.G11242 582 CORPUS CHRISTI EXPL 155, 750.40 9-14 -CS 11.G11238 035 KERR MCGEE CORP 178, 560.00 9-14 -89 12.G11259 1254 PILGRIM EXPL CO 123, 706.04 9-14 -89 13.G11233 185 SAMEDAN OIL CORP 720, 480.00 9-14 -89 14.G1.222 784 SANTA FE INTL. CORP 241, 280.00 9-14 -89 15.511^.23 784 SANTA FE INTL. CORP 241, 280.00 9-14 -89 16.G11267 784 SANTA FE INTL. CORP 2, 082, 880.00 9-14 -89 1? . -11310 784 SANTA FE INTL. CORP 398, 880.00 9-14 -89 18.G11272 672 SEAGULL ENERGY CORP 28, 400.00 9-14 -89 19.G11308 672 SEAGULL ENERGY CORP 183, 501.60 9-14 -89 20.G11311 672 SEAGULL ENERGY CORP 133, 674.60 9-14 -89 21.G11322 672 SEAGULL ENERGY CORP 271, 501.60 9-14 -89 22.G11212 774 TAYLOR ENERGY CO 657, 792.00 9-14 -89 23.G11394 1374 TRANSCO EXPL PROD 1, 119, 680.00 9-14 -89 24.G11273 730 WALTER OIL & GAS CORP 191, 988.80 9-14 -89

TOTAL $13,411,275.04

THE LEASES

Verified Correct

D ABOVE HAVE BEEN PAID IN FULI..

/ 9 - 1 4 - 8 9

RECEIVED

SEP 14 1989

Minerals Management Service Leasing & Envirwiment

B i

In Reply Refer To:

United States Department of the Interior MINERALS MANAGEMENT SERVICE

GULF OF MEXICO OCS REGION 1201 ELMWOOD PARK BOULEVARD

NEW ORLEANS. LOUISIANA 7012S 2994 OCS-G 11254 September 24, W32

ACTION

Atlantic Richfield Company O i l a td Gaa

Relinquishment Accepted Lft&fifiL-CADfifiilAd

On September 23, 1992, tho aubject lesaee f i led in thia office relinquishment of a l l i ts right, t i t l e and intereat in the above-numbered o i l and gaa lease covering a l l of Blocic A-116, Mustang Island Area, East Addition.

Therefore, the lease is hereby cancelled in i ta entirety effective aa of September 23, 1992, the date the relinquishment was f i led in this Office (30 CFR 256.76).

t *

J. Rogers Pearcy Regional Director

cc: Leasee case F i l e

RBMAgg OF PIIi MP gii LB APE

UNITED STATES OF AMERICA

GULP OF MEXICO ^ SEP 2 3199?,

MINERALS MANAGEMENT JtRVlCE LEASING It ENVIRONMENI KNOW ALL MEN BY THESE PRESENTS: THAT

ATLANTIC RICHFIELO COMPANV, a Delaware corporation, (vhose

acdresa is P. 0. Box 1346, Houston, Texas 77251), does hereby

release, remise, relinquish, quitclaim and surrender unto the

United Statea of America as Lessor, a l l of ita right, title

and interest in and to the toll^utvi described oil and gas

leasei

i <

ocs-c 11254, dated effective October 1, 1989, between the Unitec States of America, as Leasor, and Atlantic Richfield Company, as Lessee, covering and affecting lands described as al l of Block A-116, Mustang Island Area, Bast Addition, 008 Leaaing Map, Texas Map No. 3A, covering 5760.00 acres, more or less.

IN WITNESS THEREOF this Release is executed in the presence of

the undersigned witnesses this /^^dav of September, 1992.

WITNESSES

ATLANTIC RICHFIS

By: gfo ^Sj IC RICHFIELD COMPANY

THB STATB Of TEXAS

COUNTY OF HARRIS

This instrument was acknowledged before me on this j l r ^ day of September, 1992, by Wtrynw P . . Attomey-in-Fact of Atlantic Richfield Company, a Delaware corporation, on behalf of said corporation.

® LUCINOABLOM

My Covaission Expires Public J in and for State of Texas

ARCO'S TX-76417

Effective Oate SEP * » M

BJIB