This CARRY AND EARNING AGREEMENT (this "Agreement"), dated the 13th day of July, 2007 (the "Effective Date"), is by and between ENCANA OIL& GAS (USA) INC., a Delaware corporation ("EnCana") and APPROACH OIL& GAS INC., a Delaware corporation ("Approach"). EnCana and Approach may each also be referred to herein as a "Party" or collectively as the "Parties."

BACKGROUND

1. EnCana is the current owner and holder of the oil, gas and mineral leases described on Exhibit A, attached hereto, and the leasehold interest in the lands covered thereby (individually, a "Lease" and collectively, the "Leases," as identified by name and EnCana lease number on Exhibit A).

2. The Parties desire to enter into this Agreement in order to provide the terms and conditions under which Approach will acquire an interest in the Properties (as hereafter defined) through the drilling of wells, as further provided herein.

3. Capitalized terms used herein will have the meaning given to such terms herein. A list of the capitalized terms is set forth in the Schedule of Definitions attached hereto.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the Parties agree as follows:

ARTICLE I 
PROPERTIES SUBJECT TO AGREEMENT

1.01 Description of Properties. Subject to the Excluded Assets (as hereafter defined), the following properties (collectively, the "Properties") are subject to this Agreement:

All interests related to the Leases, including, but not limited to, all oil and gas leasehold interests, including working, royalty, overriding royalty, production.......

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