PURCHASE AGREEMENT

EXHIBIT 1.1

$250,000,000

PLAINS EXPLORATION & PRODUCTION COMPANY

7  ¹ / 8 % Senior Notes due 2014

PURCHASE AGREEMENT

June 18, 2004

L EHMAN B ROTHERS I NC .

J.P. M ORGAN S ECURITIES I NC .

B ANC O F A MERICA S ECURITIES LLC

BNP P ARIBAS S ECURITIES C ORP .

H ARRIS N ESBITT C ORP .

c/o Lehman Brothers Inc.

745 Seventh Avenue, Third Floor

New York, New York 10019

Dear Ladies and Gentlemen:

Plains Exploration & Production Company, a Delaware corporation (the “ Issuer ”), proposes, upon the terms and considerations set forth herein, to issue and sell to Lehman Brothers Inc., J.P. Morgan Securities Inc. (together, the “ Representatives ”), Banc of America Securities LLC, BNP Paribas Securities Corp. and Harris Nesbitt Corp. (collectively, and including the Representatives, the “ Initial Purchasers ”), $250,000,000 in aggregate principal amount of its 7  ¹ / 8 % Senior Notes due 2014 (the “ Securities ”). The Securities will have terms and provisions that are summarized in the Offering Memorandum (as defined below) and will be unconditionally guaranteed on a senior basis (the “ Guarantees ”) by all of the Issuer’s existing domestic restricted subsidiaries, other than The Congo Holding Company, a Texas corporation, and The Nuevo Congo Company, a Delaware corporation (together, the “ Congo Guarantors ”), and by its future domestic restricted subsidiaries, each as described in the Offering Memorandum (the “ Guarantors ”). The Congo Guarantors will guarantee the Securities 45 days after the Closing Date (as defined below), if certain conditions as described in the Indenture (as defined below) and Offering Memorandum are met. This is to confirm the agreement concerning the purchase of the Securities from the Issuer by the Initial Purchasers.

The Securities and Guarantees are to be issued pursuant to an Indenture (the “ Indenture ”) to be dated as of June 30, 2004 (the “ Closing Date ”), among the Issuer, the Guarantors and Wells Fargo Bank, N.A., as trustee (the “ Trustee ”). As part of transactions described under the captions “Recent Developments—Recapitalization Transactions” and “Recent Developments—Consent Solicitation for Our 8  ³ / 4 % Senior Subordinated Notes” in the Offering Memorandum, the Issuer and/or Nuevo Energy Company, a Delaware company and a wholly-owned subsidiary of the Issuer (“ Nuevo ”), as the case may be, have entered or will enter into the following transactions, collectively referred to as the “Transactions”, which are expected to be consummated on or prior to the Closing Date: (i) Nuevo’s cash tender offer for any and all of its 9  ³ / 8 % Senior Subordinated Notes due 2010 (the “ Nuevo Notes ”) and solicitation of consents from the holders of the Nuevo Notes to amend certain provisions of the indenture under which the Nuevo Notes were issued; (ii) Nuevo’s redemption of any and all of its outstanding 5.75% Convertible Subordinated Debentures due December 15, 2026, the proceeds of which will be used by Nuevo’s wholly-controlled financing trust to redeem all of the trust’s outstanding $2.875 Term Convertible Securities, Series A and all of the $2.875 common securities held by Nuevo; (iii) the Issuer’s termination of Nuevo’s $400 million existing credit facility (the “ Nuevo Credit Agreement ”); (iv) the Issuer’s amendment of its senior secured credit facility (the “ Senior Secured Credit Agreement ”); and (v) the Issuer’s solicitation of consents from the holders of its outstanding 8  ³ / 4 % Senior Subordinated Notes due 2012 (the “ 8  ³ / 4 % Notes ”) to amend certain provisions of the indenture under which the 8  ³ / 4 % Notes were issued (the “ 8  ³ / 4 % Notes Consent Solicitation”) .

This Agreement, the Indenture, the Securities, the Guarantees, the Exchange Securities (as defined below), the Exchange Guarantees (as defined below) and the Registration Rights Agreement (as defined below) are referred to in this Agreement collectively as the “ Operative Documents ”. The Nuevo Credit Agreement, Senior Secured Credit Agreement, security instruments (as discussed therein), the First Supplemental Indenture, dated as of May 27, 2004 to the indenture governing the Nuevo Notes and the Amended and Restated Indenture, dated June 18, 2004, amending and restating the indenture relating to the 8  ³ / 4 % Notes are referred to in this Agreement together as the “ Transaction Agreements ”. The Operative Documents and the Transaction Agreements are referred to in this Agreement collectively as the “ Transaction Documents ”.

The Securities will be sold to the Initial Purchasers without registration under the Securities Act of 1933, as amended (the “ Securities Act ”), in reliance on exemptions under the Securities Act. The Issuer has prepared a preliminary offering memorandum, dated June 14, 2004 (the “ Preliminary Offering Memorandum ”), and an offering memorandum, dated the date hereof (the “ Offering Memorandum ”), setting forth, and incorporating by reference, information regarding the Issuer and the Guarantors, the Congo Guarantors, the Securities and the Exchange Securities. Any references herein to the Preliminary Offering Memorandum and the Offering Memorandum will be deemed to include all amendments and supplements thereto. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the Issuer to the Initial Purchaser pursuant to the terms of this Agreement. The Issuer hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in the manner contemplated by this Agreement.

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Holders (including subsequent transferees) of the Securities will have the registration rights set forth in the registration rights agreement (the “ Registration Rights Agreement ”), among the Issuer, the Guarantors and the Initial Purchasers, to be dated the Closing Date, for so long as such Securities constitute Transfer Restricted Securities (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Issuer, the Guarantors and the Congo Guarantors (if applicable) will agree to file with the U.S. Securities and Exchange Commission (the “ Commission ”) under the circumstances set forth therein (i) a registration statement under the Securities Act (the “ Exchange Offer Registration Statement ”) relating to the Issuer’s 7  ¹ / 8 % Senior Notes due 2014 (the “ Exchange Securities ”) and the Guarantors’ guarantees (and the Congo Guarantors’ guarantees, if the Congo Guarantors are guarantors under the Indenture) thereof (the “ Exchange Guarantees ”) to be offered in exchange for the Securities and the Guarantees (such offer to exchange being referred to as the “ Exchange Offer ”) and (ii) a shelf registration statement pursuant to Rule 415 under the Securities Act (the “ Shelf Registration Statement ”; together with the Exchange Offer Registration Statement, the “ Registration Statements ”) relating to the resale by certain holders of the Securities, and to use their reasonable best efforts to cause such Registration Statements to be declared effective.

The Issuer hereby confirms its agreement with the several Initial Purchasers concerning the purchase and resale of the Securities, as follows:

1. Purchase and Resale of the Securities . (a) The Issuer agrees to issue and sell the Securities to the several Initial Purchasers as provided in this Agreement, and each Initial Purchaser, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, agrees, severally and not jointly, to purchase from the Issuer the respective principal amount of Securities set forth opposite such Initial Purchaser’s name in Schedule I hereto at a price equal to 97.478% of the principal amount thereof plus accrued interest, if any, from June 30, 2004 to the Closing Date. The Issuer will not be obligated to deliver any of the Securities except upon payment for all the Securities to be purchased as provided herein.

(b) The Issuer understands that the Initial Purchasers intend to offer the Securities for resale on the terms set forth in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that:

(i) it is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act (a “ QIB ”) and an accredited investor within the meaning of Rule 501(a) under the Securities Act;

(ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act (“ Regulation D ”) or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and

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(iii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities as part of their initial offering except:

A. within the United States to persons whom it reasonably believes to be QIBs in transactions pursuant to Rule 144A under the Securities Act (“ Rule 144A ”) and in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of the Securities is aware that such sale is being made in reliance on Rule 144A; or

B. in accordance with the restrictions set forth in Annex A hereto.

(c) Each Initial Purchaser acknowledges and agrees that the Issuer and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 5(g) and 5(h), counsel for the Issuer and the Guarantors and counsel for the Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers, and compliance by the Initial Purchasers with their agreements, contained in paragraph (b) above (including Annex A hereto), and each Initial Purchaser hereby consents to such reliance.

(d) The Issuer acknowledges and agrees that the Initial Purchasers may offer and sell Securities to or through any affiliate of an Initial Purchaser and that any such affiliate may offer and sell Securities purchased by it to or through any Initial Purchaser.

2. Payment and Delivery . (a) Payment for and delivery of the Securities will be made at the offices of Akin Gump Strauss Hauer & Feld LLP at 8:00 A.M., Texas time, on June 30, 2004, or at such other time or place on the same or such other date, not later than the fifth business day thereafter, as the Representatives and the Issuer may agree upon in writing. The time and date of such payment and delivery is referred to herein as the “Closing Date”.

(b) Payment for the Securities shall be made by wire transfer in immediately available funds to the account(s) specified by the Issuer to the Representatives against delivery to the nominee of The Depository Trust Company (“ DTC ”), for the account of the Initial Purchasers, of one or more global notes representing the Securities (collectively, the “ Global Note ”), with any transfer taxes payable in connection with the sale of the Securities duly paid by the Issuer. The Global Note will be made available for inspection by the Representatives not later than 1:00 P.M., New York City time, on the business day prior to the Closing Date.

3. Representations and Warranties of the Issuer and the Guarantors. The Issuer and the Guarantors, jointly and severally, represent and warrant to each Initial Purchaser that:

(a) The Preliminary Offering Memorandum, as of its date, did not, and the Offering Memorandum, in the form first used by the Initial Purchasers to confirm sales of the Securities and as of the Closing Date, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Issuer and the Guarantors make no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Initial Purchaser furnished to the Issuer in writing by such Initial Purchaser through the Representatives expressly for use in the Preliminary Offering Memorandum and the Offering Memorandum.

(b) The documents incorporated by reference in the Offering Memorandum, when they became effective or were filed with the Commission, as the case may be, conformed

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in all material respects to the requirements of the Exchange Act, as applicable, and none of such documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Offering Memorandum, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.

(c) The financial statements and the related notes thereto included in the Preliminary Offering Memorandum and the Offering Memorandum present fairly the combined financial position of the Issuer and its subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby; and the other financial information included in the Preliminary Offering Memorandum and the Offering Memorandum has been derived from the accounting records of the Issuer and its subsidiaries and presents fairly the information shown thereby; and the pro forma financial information and the related notes thereto included in the Preliminary Offering Memorandum and the Offering Memorandum have been prepared in accordance with the Commission’s rules and guidance with respect to pro forma financial information, and the assumptions underlying such pro forma financial information are reasonable and are set forth in the Preliminary Offering Memorandum and the Offering Memorandum.

(d) Since the date of the most recent audited financial statements of the Issuer and its subsidiaries included in the Preliminary Offering Memorandum and the Offering Memorandum, (i) there has not been any change in the capital stock or long-term debt (other than ordinary course draw downs on revolving credit facilities) of the Issuer or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Issuer on any class of capital stock, or any material adverse change, or any development involving a prospective material adverse change, in or affecting the business, properties, management, financial position or results of operations of the Issuer and its subsidiaries taken as a whole; (ii) neither the Issuer nor any of its subsidiaries has entered into any transaction or agreement that is material to the Issuer and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Issuer and its subsidiaries taken as a whole; and (iii) neither the Issuer nor any of its subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Preliminary Offering Memorandum and the Offering Memorandum.

(e) The Issuer and each of its subsidiaries have been duly incorporated or organized, as the case may be, and are validly existing as a corporation or other applicable legal entity, as the case may be, and in good standing under the laws of their respective jurisdictions of incorporation or organization, as the case may be, are duly qualified to do business and are

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in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to be so qualified or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the business, properties, management, financial position, results of operations or prospects of the Issuer and its subsidiaries taken as a whole or on the performance by the Issuer and the Guarantors of their obligations under the Securities and the Guarantees (a “ Material Adverse Effect ”). The Issuer does not own or control, directly or indirectly, any corporation, association or other entity other than (i) the subsidiaries listed in Schedule II to this Agreement and (ii) the general partner interests of Arguello Inc. in the entities owning and operating the Point Arguello unit.

(f) The Issuer has an authorized capitalization as set forth in the Preliminary Offering Memorandum and the Offering Memorandum under the heading “Capitalization”; and all the outstanding shares of capital stock or other equity interests of each subsidiary of the Issuer have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Issuer, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party, except for such pledges in favor of the lenders under the Senior Secured Credit Agreement.

(g) The Issuer and each of the Guarantors have the corporate or partnership power and authority, as the case may be, to execute and deliver this Agreement, the Securities, the Indenture (including the Guarantees set forth therein), the Exchange Securities, the Exchange Guarantees, the Registration Rights Agreement and the other Transaction Documents to which such entities are party and to perform their respective obligations hereunder and thereunder; and all action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby has been duly and validly taken.

(h) The Indenture has been duly authorized by the Issuer and each of the Guarantors and, when executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Issuer and each of the Guarantors enforceable against the Issuer and each of the Guarantors in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, fraudulent transfer and conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, (ii) general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity), (iii) commercial reasonableness and unconscionability and an implied covenant of good faith and fair dealing, (iv) the power of the courts to award damages in lieu of equitable remedies, and (v) securities laws and public policy underlying such laws with respect to rights to indemnification and contribution (collectively, the “ Enforceability Exceptions ”); and on the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act of 1939, as amended (the “ Trust Indenture Act ”), and the rules and regulations of the Commission applicable to an indenture that is qualified thereunder.

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(i) The Securities have been duly authorized by the Issuer and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Issuer enforceable against the Issuer in accordance with their terms, subject to the Enforceability Exceptions, and will be entitled to the benefits of the Indenture; and the Guarantees have been duly authorized by each of the Guarantors and, when the Securities have been duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be a valid and legally binding obligation of each of the Guarantors, enforceable against each of the Guarantors in accordance with their terms, subject to the Enforceability Exceptions, and will be entitled to the benefits of the Indenture.

(j) On the Closing Date, the Exchange Securities (including the related guarantees) will have been duly authorized by the Issuer and each of the Guarantors, and, when duly executed, authenticated, issued and delivered as contemplated by the Registration Rights Agreement, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Issuer, as issuer, and each of the Guarantors, as guarantor, enforceable against the Issuer and each of the Guarantors in accordance with their terms, subject to the Enforceability Exceptions, and will be entitled to the benefits of the Indenture.

(k) This Agreement has been duly authorized, executed and delivered by the Issuer and each of the Guarantors; and the Registration Rights Agreement has been duly authorized by the Issuer and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Issuer and each of the Guarantors enforceable against the Issuer and each of the Guarantors in accordance with its terms, subject to the Enforceability Exceptions, and except that rights to indemnity and contribution thereunder may be limited by applicable law and public policy.

(l) The Transaction Documents have been duly authorized, executed and delivered by the Issuer and the Guarantors, as applicable, and constitute valid and legally binding agreements of the Issuer and the Guarantors, as applicable, enforceable against the Issuer and the Guarantors in accordance with their terms, subject to the Enforceability Exceptions.

(m) Each Transaction Document conforms in all material respects to the description thereof contained in the Preliminary Offering Memorandum and the Offering Memorandum and, if applicable, the documents incorporated by reference therein.

(n) Neither the Issuer nor any of its subsidiaries is (i) in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries is bound or to which any of the property or assets of the Issuer or any of its subsidiaries is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

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(o) The execution, delivery and performance by the Issuer and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance and sale of the Securities (including the Guarantees) and compliance by the Issuer and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, including the use of the initial borrowings made on the Closing Date under the Senior Secured Credit Agreement and the proceeds of the Securities will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Issuer or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Issuer or any of its subsidiaries is a party or by which the Issuer or any of its subsidiaries is bound or to which any of the property or assets of the Issuer or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws or similar organizational documents of the Issuer or any of its subsidiaries or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (i) and (iii) above, for any such conflict, breach or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

(p) No consent, approval, authorization, order, registration or qualification of or with any court or arbitrator or governmental or regulatory authority is required for the execution, delivery and performance by the Issuer and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance and sale of the Securities (including the Guarantees), the entering into and making initial borrowings on the Closing Date under the Senior Secured Credit Agreement and compliance by the Issuer and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, orders and registrations or qualifications (i) as may be required under applicable state securities laws in connection with the purchase and resale of the Securities by the Initial Purchasers, (ii) as may be required with respect to the Exchange Securities (including the related guarantees) under the federal and applicable state securities laws as contemplated by the Registration Rights Agreement, (iii) as have been obtained or made and (iv) filings to establish liens under the Senior Secured Credit Agreement.

(q) Except as described in the Preliminary Offering Memorandum and the Offering Memorandum, there are no legal, governmental or regulatory investigations, actions, suits or proceedings pending to which the Issuer or any of its subsidiaries is or may be a party or to which any property of the Issuer or any of its subsidiaries is or may be the subject that, individually or in the aggregate, if determined adversely to the Issuer or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect; and no such investigations, actions, suits or proceedings are threatened or, to the best knowledge of the Issuer and each of the Guarantors, contemplated by any governmental or regulatory authority or threatened by others.

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(r) PricewaterhouseCoopers LLP and KPMG LLP, who have each certified certain financial statements of the Issuer and its subsidiaries, as the case may be, are independent public accountants with respect to the Issuer and its subsidiaries, as applicable, within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants and its interpretations and rulings thereunder.

(s) Except as disclosed in the Offering Memorandum, the Issuer and its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property that are material to the respective businesses of the Issuer and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except those that (i) do not materially interfere with the use made and proposed to be made of such property by the Issuer and its subsidiaries; (ii) could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect; or (iii) are created under the Senior Secured Credit Agreement.

(t) The Issuer and its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses, except where the failure to own or possess such rights would not, individually or in the aggregate, have a Material Adverse Effect; and the conduct of their respective businesses will not conflict in any material respect with any such rights of others, and the Issuer and its subsidiaries have not received any notice of any claim of infringement of or conflict with any such rights of others, except where such notice, claim or conflict would not, individually or in the aggregate, have a Material Adverse Effect.

(u) Neither the Issuer nor any of its subsidiaries is, and after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Offering Memorandum none of them will be, an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, “ Investment Company Act ”).

(v) The Issuer and its subsidiaries have paid all federal, state, local and foreign taxes and filed all tax returns required to be paid or filed through the date hereof, except where the failure to make such payments or filings would not, individually or in the aggregate, have a Material Adverse Effect; and except as otherwise disclosed in the Preliminary Offering Memorandum and the Offering Memorandum, there is no tax deficiency that has been, or could reasonably be expected to be, asserted against the Issuer or any of its subsidiaries or any of their respective properties or assets, except where such deficiency would not, individually or in the aggregate, have a Material Adverse Effect.

(w) The Issuer and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary or desirable for the ownership or lease of their respective properties or the conduct of their respective businesses as described in the Preliminary Offering Memorandum and the Offering Memorandum,

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except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect; and except as described in the Preliminary Offering Memorandum and the Offering Memorandum, neither the Issuer nor any of its subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course, except where the failure to receive such renewal would not, individually or in the aggregate, have a Material Adverse Effect.

(x) No labor disturbance by or dispute with employees of the Issuer or any of its subsidiaries exists or, to the best knowledge of the Issuer and each of the Guarantors, is contemplated or threatened.

(y) The Issuer and its subsidiaries (i) are, and at all times prior to the date hereof have been, in compliance with any and all applicable federal, state, local and foreign laws, rules, regulations, decisions and orders relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “ Environmental Laws ”); (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (iii) have not received notice of any actual or potential liability for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except in any such case for any such failure to comply with, or failure to receive required permits, licenses or approvals, or liability, as would not, individually or in the aggregate, have a Material Adverse Effect.

(z) There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic wastes or hazardous substances, including, but not limited to, any naturally occurring radioactive materials, brine, drilling mud, crude oil, natural gas liquids and other petroleum materials, by, due to or caused by the Issuer or any of its subsidiaries (or, to the best of the Issuer’s knowledge, any other entity (including any predecessor) for whose acts or omissions the Issuer or any of its subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Issuer or any of its subsidiaries, or upon any other property, in violation of any Environmental Laws or in a manner or to a location that could reasonably be expected to give rise to any liability under any Environmental Laws, except for any violation or liability which could not reasonably be expected to have, individually or in the aggregate with all such violations and liabilities, a Material Adverse Effect.

(aa) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), that is maintained, administered or contributed to by the Issuer or any of its affiliates for employees or former employees of the Issuer and its affiliates has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended (the “ Code ”); no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption; and for each such plan that is subject to the funding rules

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of Section 412 of the Code or Section 302 of ERISA, no “accumulated funding deficiency” as defined in Section 412 of the Code has been incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeds the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions.

(bb) The Issuer and its subsidiaries maintain systems of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(cc) Except as disclosed in the Offering Memorandum, the Issuer and its subsidiaries have insurance covering the properties, operations, personnel and businesses of the Issuer and its subsidiaries, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as are customary in the oil and gas industry; and neither the Issuer nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

(dd) Neither the Issuer nor any of its subsidiaries nor, to the best knowledge of the Issuer and each of the Guarantors, any director, officer, agent, employee