June 14, 2000 Panther Resources Corporation Fredrick R. McCord/MRA 1021 Main
St., Suite 1290 1021 Main Street, Suite 140 Houston, TX 77002 Houston, TX 77002
Attn: James E. Smitherman Attn: Fredrick R. McCord Revere Corporation Beta Oil
"&"Gas, Inc. 1200 17th Street, Suite 2650 6120 South Yale, Suite 813 Denver, CO
80202 Tulsa, OK 74136 Attn: Paul Calaway Attn: Steve Antry Re: Participation
Agreement Mushroom Project Austin and Waller Counties, Texas Gentlemen: This
Participation Agreement ("Agreement") is made and entered into between Prime
Natural Resources, Inc. ("Operator") and Beta Oil "&" Gas, Inc., Revere
Corporation, Fredrick R. McCord/MRA and Panther Resources Corporation
("Non-Operators") relative to operations in the subject area. 1. OPERATING
AGREEMENT

        1.1 Concurrently with the execution of this Agreement, Operator, and
Non-Operators (“Parties”) are executing the Operating Agreement attached to this
Agreement as Exhibit “A” (“Operating Agreement”) and a Model Form Recording
Supplement to Operating Agreement and Financing Statement.

        1.2 The Operating Agreement designates Prime Natural Resources, Inc. as
Operator and will control all operations on the “Contract Area” described
therein, including the “Leases” and “Initial Well” described below; provided,
however, in the event of a conflict between this Agreement and the Operating
Agreement, then the provisions of this Agreement shall prevail.

1.3 The Model Form Recording Supplement to Operating Agreement and Financing
Statement will be recorded in the Official Public Records of Austin and Waller
Counties, Texas. 2. LEASES AND LEASE BURDENS

        2.1 Prime represents that it is the sole owner and holder of the Oil,
Gas and Mineral Leases described in Exhibit “A” to the Operating Agreement
(“Leases”), except for the acreage described in Article 9.2.

2.2 Prime further represents that the Leases are subject only to the following
burdens: a) All leases within the Mushroom Project Area of Mutual Interest
(AMI), hereinafter as described in Article 9, are burdened by a one (1) percent
of 8/8ths overriding royalty interest (ORRI) to James J. Hohler.

        b) Robert A. Potosky and W. David Willig in proportions of 50% each own
a sliding scale ORRI in all leases within the Mushroom Project Area of Mutual
Interest (AMI), hereinafter described in Article 9. Such ORRI as indicated below
shall be calculated after adding the 1% ORRI in 2.2a) above to the Lease Royalty
column below:

Lease Royalty Percent ORRI ------------- ------------ 20% or less 4% of 8/8ths
Greater than 20% up to 3% of 8/8ths and including 25% Greater than 25% 2% of
8/8ths (including farm-ins) Therefore, for example, the total ORRI on leases
containing the royalties below will be as follows: Lease Royalty Hohler ORRI
Potosky "&" Willig Total ------------- ----------- ---------------- ----- 3/16
1.00% 4.00% 5.00% 1/5 1.00% 3.00% 4.00% 1/4 1.00% 2.00% 3.00%

        c) The five (5) leases described on page 8 of Exhibit “A” of the
Operating Agreement which is attached hereto as Exhibit “A” are burdened with an
ORRI or 8.33333% of 8/8ths in favor of Lyndel Exploration, Inc.

        2.3 Prime represents that the overriding royalty interest as described
herein shall be proportionately reduced in the event any leasehold acreage
described in this Agreement covers less than 100% of the mineral estate.

3. PROJECT ACQUISITION FEE

        3.1 Contemporaneously with the execution of this Agreement,
Non-Operators will pay to Operator the following amounts as set forth on
Operator’s invoice provided herewith:

                                                         Mushroom         W. Mushroom          Total
           Brokerage "&" Lease Bonus                  $370,915.52         $94,917.10       $465.832.62
           NEG Acreage Acquisition                        $100,000.00                          $100,000.00
           Hohler 2% Royalty Purchase                      $30,000.00                           $30,000.00
           Potosky "&" Willig Consultant Fee           $75,000.00                           $75,000.00
           Prospect Fee                                   $100,000.00                          $100,000.00
           Geological "&" Geophysical                  $56,185.27             188.36        $56,373.63
                                                           ----------             ------        ----------
                                                          $732,100.79         $95,100.79       $827,206.25

Each of the parties proportionate share of the above costs are as follows:

                                                                                           Costs

                    Beta Oil "&" Gas, Inc.                              25.00%           $206,801.62
                    Beta Oil "&" Gas, Inc.                               6.25%             51,700.39
                    Revere Corporation                                      18.75%            155,101.17
                    Fredrick R. McCord/MRA                                   6.25%             51,700.39
                    Panther Resources Corporation                            6.25%             51,700.39
                                                                                               ---------

                                                                                              517,003.90

        3.2 The Non-Operators further agree to pay their proportionate share of
any additional acreage acquisition costs and expenses, including farmout acreage
(hereinafter, the “After-Acquired Acreage”) incurred by Operator for acreage in
which the Non-Operator shall have a right to acquire an interest not otherwise
described herein including any brokerage and transaction costs and expenses. It
is further agreed that other costs and expenses incurred by Operator relating to
the After-Acquired Acreage (including, but not limited to, regulatory
compliance, well permitting and title examination including curative) shall be
borne by each of the Parties in proportion to its interest as defined and set
forth in Article 4 hereof.

4. ASSIGNMENT

        4.1 Prime, subject to obtaining required lease assignment consents, will
within fifteen (15) business days following receipt of the Project Acquisition
Fee, execute and deliver to Non-Operators, assignments as set forth below in the
Leases on the forms attached as Exhibit “B” & “C” (Assignments), to the end that
the Leases shall be owned as follows:

                                                              Before Project Payout   After Project Payout
                                                              ----------------------- ---------------------
                                                              ----------------------- ---------------------

                                                                                               18.7500%
                  Beta Oil "&" Gas, Inc.                                25.00%
                  Beta Oil "&" Gas, Inc.                                6.25%                 4.6875%
                  Revere Corporation                                  18.75%                    14.0625%
                  Fredrick R. McCord/MRA                               6.25%                      4.6875%
                  Panther Resources Corporation                        6.25%                      4.6875%
                  Prime Natural Resources, Inc.                       37.50%                    53.1250%
                                                                      ------          --------- --------

                                                                     100.00%                     100.0000%

4.2 Non-Operators will assume and bear the Lease Burdens and ORRI as their
interest appears in Article 4.1.

        4.3 “Project Payout” is defined and will occur at 7:00 am. on the first
day following the date on which each respective Assignee’s “Project Revenue”
equals each respective Assignee’s “Project Cost”, as hereinafter defined.

A. Each Non-Operator's "Project Revenue" will be the total of:

        (a) the gross proceeds actually received by each Non-Operator in an
arm’s length sale of production of oil, gas and other minerals from all wells
drilled within the Contract Area for that certain Operating Agreement dated June
14, 2000 between Prime Natural Resources, Inc. as Operator, and Beta Oil & Gas,
Inc., et al as Non-Operators, including Substitute Well(s), if any, each well
re-entered and deepened and/or sidetracked and completed, hereinafter referred
to as “Wells”, or in the absence of an arm’s length sale, the prevailing market
value in the field of the production of oil, gas and other minerals,

(b) the salvage value received by each Non-Operator of any personal property,
fixtures or equipment located on the Wells or used or obtained in connection
therewith and sold,

        (c) cash received by each Non-Operator toward the drilling of Wells in
the form of dry hole contribution and bottom hole contribution (but not bottom
hole purchase),

(d) liquidated damages received by each Non-Operator in consequence of any gas
purchaser's failure to purchase gas or to pay the agreed to price under a gas
contract, (e) payments received by each Non-Operator by virtue of judicial
resolution, arbitration or settlement of a dispute over a gas contract, (f)
payments received by each Non-Operator by virtue of "take or pay" or similar
provisions of a gas contract, (g) proceeds by each Non-Operator from the sale of
the Wells and associated equipment and the oil, gas and other mineral reserves
attributable thereto, (h) the proceeds by each Non-Operator from any insurance
claim or settlement, less (i) the lessor's royalties and, (ii) 1. the overriding
royalty created by Assignment of Overriding Royalty dated ____________, 2000
from Prime Natural Resources, Inc., as Assignor, to James J. Hohler, as
Assignee, recorded under File No. _____________ of the Official Public Records
of Austin County, Texas, 2. the overriding royalty created by Assignment of
Overriding Royalty dated ____________, 2000 from Prime Natural Resources, Inc.,
as Assignor, to James J. Hohler, as Assignee, recorded under Entry No.
______________in Volume __________ at Page No. __________of the Official Public
Records of Waller County, Texas, 3. the overriding royalties created by
Assignment of Overriding Royalties dated ____________, 2000 from Prime Natural
Resources, Inc., as Assignor, to Robert A. Potosky and W. David Willig, as
Assignees, recorded under Entry No. _____________ in Volume _______ at Page No.
_____________of the Official Public Records of Waller County, Texas, 4. the
overriding royalties created by Assignment of Overriding Royalties dated
____________, 2000 from Prime Natural Resources, Inc., as Assignor, to Robert A.
Potosky and W. David Willig, as Assignees, recorded under Entry No.
_____________ in Volume _______ at Page No. _____________of the Official Public
Records of Waller County, Texas, 5. the overriding royalties created by
Assignment of Overriding Royalties dated ____________, 2000 from Prime Natural
Resources, Inc., as Assignor, to Robert A. Potosky and W. David Willig, as
Assignees, recorded under Entry No. _____________ in Volume _______ at Page No.
_____________of the Official Public Records of Waller County, Texas, 6. the
overriding royalties created by Assignment of Overriding Royalties dated
____________, 2000 from Prime Natural Resources, Inc., as Assignor, to Robert A.
Potosky and W. David Willig, as Assignees, recorded under File No. _____________
of the Official Public Records of Austin County, Texas, 7. the overriding
royalties created by Assignment of Overriding Royalties dated ____________, 2000
from Prime Natural Resources, Inc., as Assignor, to Robert A. Potosky and W.
David Willig, as Assignees, recorded under File No. _____________ of the
Official Public Records of Austin County, Texas, 8. the overriding royalties
created by Assignment of Oil, Gas and Mineral Leases dated March 29, 2000 from
Lyndel Exploration, Inc., as Assignor, to Prime Natural Resources, Inc. as
Assignee, recorded under File No. 001917 of the Official Public Records of
Austin County, Texas. (iii) applicable production, severance, and other
applicable taxes, except income taxes. B. Each Non-Operator's "Project Cost"
shall mean all actual and direct, not reimbursed, cost incurred by each
Non-Operator to:

        (a) acquire and maintain the Leases, including bonuses, geophysical
option selection bonuses, rentals, legal fees, brokerage costs, title
examination, title curative, and recording cost,

        (b) explore, drill, complete, evaluate, test, equip and operate all
Wells, including all dry hole costs of wells plugged and abandoned, including
restoration and clean up cost,

(c) evaluate the Contract Area by the acquisition, processing and evaluation of
seismic, (d) construction of pipelines necessary to deliver production to
market, and (e) construction of production facilities, including operations
thereof, (f) separating, gathering, dehydration, compression, transportation,
trucking, processing, treatment, storage, or marketing oil and gas. calculated
according to the Accounting Procedure for the applicable Operating Agreement.

        4.4 Project Payout will occur as to the interest of each Non-Operator at
such time as each Non-Operator’s respective Project Revenue equals such
Non-Operator’s Project Cost, separately and independent of Project Payout of the
other Non-Operators, and the status of Project Payout as to each separate
Non-Operator shall have no bearing on the status of Project Payout of the other
Non-Operators.

        4.5 Prime will maintain an accurate record of all charges and credits
connected with the Leases and Wells and will furnish Non-Operators a quarterly
statement of Project Revenue and Project Cost so that the then current Project
Payout status can be readily determined. Non-Operators will have the right to
audit Prime’s accounts and records relating to the quarterly statements in
accordance with the Accounting Procedure for the applicable Operating Agreement.

5. INITIAL WELL

        5.1 Operator will furnish to Non-Operators Authority For Expenditure
(AFE) to drill and complete the Initial Well. The amount of the AFE will be an
estimate only, and Non-Operators shall pay their respective share of the actual
cost and expense of drilling, evaluating, completing and equipping and/or
plugging and abandonment and restoration of the Initial Well under the terms of
this Agreement and the Operating Agreement. No more than thirty (30) days before
commencing operations to drill the Initial Well, Operator will cash call each
Non-Operator for its share of the amount of the AFE. Non-Operators will pay the
amount specified within ten (10) days following receipt of the AFE.
Non-Operators will not be obligated to forward the AFE costs associated with the
completing and equipping of the Initial Well until the well has been drilled and
evaluated and the decision to complete the well as a producer is made.

        5.2 Upon the receipt of all Non-Operators cash call funds, and subject
to the approval of title to the drillsite tract, rig availability, approval by
all environmental regulatory agencies and the issuance of a drilling permit by
the proper regulatory authority, Operator will commence operations for drilling
of the Initial Well on or before September 1, 2000 at a location approximately
4050’ FSL and 4300’ FSEL of J. McFarland Survey, A-46.

  Operator will thereafter drill said well with due diligence and in a
workmanlike manner to the lesser of the following depths, hereinafter referred
to as the “Objective Depth”:

(a) A total vertical depth of 7,400 feet below the surface, or to (b) A depth
sufficient to drill through and fully evaluate the stratigraphic equivalent of
that certain sand or formation encountered between the depths of 6,475 feet
(M.D.) and 7,555 feet (M.D.) in the electrical log of the Texaco #1 Donigan Well
in the Wm. Cooper Survey, Abstract 20, Waller County, Texas.

        5.3 Operator will run a Dual Induction or other equivalent open hole
electrical logs from the total depth drilled to the bottom of the surface casing
in the Initial Well, and will employ such other methods and tools of evaluation
(including VSP’s) that, in the opinion of Operator, will ensure a proper
evaluation of the productive possibilities of all formations in the well
indicating hydrocarbons, if under the then existing conditions, such methods of
evaluation are prudent.

        5.4 Subject to the other provisions of this Agreement and the Operating
Agreement, the cost, risk and liability of drilling, completing, equipping, and
operating the Initial Well before Project Payout will be shared as follows:

                             Beta Oil "&" Gas, Inc.                                  25.00%
                             Beta Oil "&" Gas, Inc.                                   6.25%
                             Revere Corporation                                          18.75%
                             Fredrick R. McCord/MRA                                       6.25%
                             Panther Resources Corporation                                6.25%
                             Prime Natural Resources, Inc.                               37.50%
                                                                                         ------

                                                                                        100.00%

  In the event a decision is made to plug and abandon the Initial Well after the
Objective Depth is reached, the entire cost, risk and expense of such operation
including restoration and clean-up shall be borne in the above proportions by
the parties.

        5.5 In the event a Non-Operator fails to timely pay its share of the AFE
(“Defaulting Party”), the “second” notice provision of Article XVI.G shall apply
and upon expiration of said notice the Defaulting Party’s rights in this
Agreement will ipso facto terminate. Such defaulting party shall immediately
assign to the Operator all of its rights, title and interest in the Leases and
operating interest covering all depths owned by such party in the Mushroom
Project Leases. Operator will advise the other Parties (“Non-Defaulting
Parties”) of the amount of interest of the Defaulting Party (“Available
Interest-Initial Well”). The Non-Defaulting Parties will, within 48 hours after
receipt of such notice, advise Operator of their election to (a) limit
participation to such party’s original interest, or (b) carry their share, or
more, of the Available Interest-Initial Well. Failure to advise Operator will
constitute an election to limit participation to such party’s original interest.
If the Non-Defaulting Parties do not acquire all of the Available Interest –
Initial Well, Prime will use its best efforts to obtain a new participant for
the Available Interest-Initial Well on terms and conditions of Prime’s choice,
and Prime may accept the new participant on terms different than the terms under
which the Non-Defaulting Parties acquired their interest. Project Acquisition
Fee paid by the Defaulting Party will not be returned.

        5.6 After the Initial Well has been drilled to the objective depth
(“Casing Point”, as described in Article V1.C.1 of the Operating Agreement) if
less than all of the parties to this agreement elect to complete said Initial
Well as a producer in paying quantities, the non-participating party shall be
deemed to have relinquished and shall promptly assign to the other participating
party(ies) all of its right, title and interest in and to said well, the oil,
gas and mineral leasehold interest and operating rights in and to the zone,
horizon and/or formation in which a completion operation is planned to be
attempted and actually conducted to which such non-participating party does not
desire to participate. The interests of the parties to be relinquished are set
forth in Article 5.4 hereof. The acreage to be assigned and relinquished by the
non-participating party shall be limited to a 640 acre area surrounding said
Initial Well as in nearly the form of a square or rectangle as practical,
whereas the length of any one side does not exceed twice the width of any one
side, for the zone, horizon and/or formation in which a completion attempt is
planned and attempted in said Initial Well.

  If the Operator is not successful with its first completion attempt and
recommends a completion attempt in another zone in said Initial Well, then any
previous non-participating party shall be entitled to notice and the option to
participate regardless of their election on a previous completion attempt;
however, to have such option, such party must have participated in all drilling
operations leading up to the initial completion attempt. Said party shall pay
its share of the cost of the casing string or strings required to complete the
well to the depth necessary for said completion attempt. This option to
participate in the Initial Well on a zone-by-zone basis by the parties is a
recurring right.

  If less than all parties hereto elect to participate in any completion attempt
made pursuant to the provisions of this Agreement and such attempt(s) is
unsuccessful, then the Initial Well shall be plugged and abandoned with each
party paying its share of plugging costs including restoration and clean-up in
accordance with the interest of the parties as set forth in Article 5.4 hereof.

6. SUBSTITUTE WELL

        6.1 In the event the Initial Well is not drilled to the Objective Depth
for any valid reason, Operator may, at its option, within sixty (60) days after
plugging and abandoning the Initial Well, or completing said well at a lesser
depth as described in Article 6.4 hereof, propose another well (“Substitute
Well”) in an effort to reach the Objective Depth. Non-Operators will, within 45
days after receipt of the Substitute Well proposal, notify Operator:

(a) that Non-Operators, or any of them ("Participating Parties") will
participate in the Substitute Well; or

        (b) that Non-Operators, or any of them, will not participate in the
Substitute Well (“Non-Participating Parties”) and will relinquish and assign to
the Participating Parties all rights, title and interest in and to the Leases
and operating interests in the Mushroom Prospect as more fully described in
Article 6.4.

  Failure by a Non-Operator to notify Operator that they will participate in the
Substitute Well shall constitute an election to be a Non-Participating Party and
assign the Leases under Article 6.1 (b) above.

        6.2 The Substitute Well will be drilled at a location mutually
acceptable to the Participating Parties, in a like manner and under the same
terms and conditions specified for the Initial Well, and the term “Initial Well”
as used in this Agreement will be construed to include the Substitute Well. The
right to participate in the Substitute Well will be several and not joint so
that each Non-Operator will have the separate right to participate in the
Substitute Well and the provisions of Article 6.4 below will apply in the event
less than all Parties participate in the Substitute Well.

        6.3 In the event the Substitute Well is drilled and completed as an oil
and/or gas well or plugged and abandoned as a dry hole after reaching the
Objective Depth, no further drilling is required in order for the Participating
Parties to maintain their interests in the Leases as provided in Article 5
hereof.

        6.4 In the event a Non-Operator elects not to participate in the
Substitute Well, the Non-Participating Party’s rights hereunder will terminate
ipso facto without notice to the Operator, and the Non-Operator shall
immediately as to all depths, assign all of its right, title and interest in the
leases and operating interest in the entire Mushroom Project unless the Initial
Well is completed as an oil and/or gas well, at a depth shallower than the
Objective Depth, then the Parties that joined in and paid their share of the
cost to complete said Initial Well shall reserve all their rights, title and
interests in and to said well, the equipment therein and thereon and the
production from said well and the Leases within the unit for said well, but only
above the total depth logged in said well. Operator will advise the
Participating Parties of the amount of interest of the Non-Participating Party
(“Available Interest-Substitute Well”). The Participating Parties will, within
48 hours after receipt of such notice, advise Operator of their election to (a)
limit participation to such party’s original interest, or (b) carry their share,
or more, of the Available Interest-Substitute Well. Failure to advise Operator
will constitute an election to limit participation to the Participating Party’s
original interest. If the Participating Parties do not acquire all of the
Available Interest-Substitute Well, Prime will use its best efforts to obtain a
new participant for the Available Interest-Substitute Well on terms and
conditions of Prime’s choice and Prime may accept the new participant on terms
different than the terms under which the Participating Parties acquired their
interest. Project Acquisition Fee paid by the Non-Participating Party will not
be returned.

        6.5 Assignments made under Article 6.4 above will be effective as of the
date the Non-Participating Party elects not to participate in the Substitute
Well or the 60th consecutive day after the Initial Well is abandoned, whichever
occurs first.

        6.6 Notwithstanding any provision of this Agreement to the contrary,
where, under the terms of this Agreement, a party hereto is required to assign
to one or more of the other parties its interest in one or more leases or
portion or part thereof, such assignment shall be made free and clear of all
overriding royalties, production payments, net profits interests, mortgages,
liens or other burdens placed thereon by the assigning party or otherwise
resulting from its ownership and operation of such lease or interest on and
after the date of this instrument, except such burdens as mentioned in Article 2
of this Agreement or such burdens with which the lease or interest was
encumbered when acquired by the party. Such assignment shall be made without
warranty, express or implied, except against those parties claiming by, through
and under the Assignor but not otherwise and Assignee shall have the right of
subrogation as to any warranties to which it may be entitled.

7. SECOND WELL

        7.1 Should any party elect to non-consent the drilling of a second well
(“Second Test Well”), which is proposed by one or more of the parties hereto for
the testing and evaluation of a different geological prospect idea at depths and
formations similar or identical to the initial well within the Project Area
after the Initial Well, or its substitute, has been drilled to the Objective
Depth and has been either plugged and abandoned as a dry hole or completed as a
well capable of producing oil and/or gas, said party electing not to participate
in such drilling operations shall promptly assign to the party(ies) conducting
such drilling operations all of its right, title and interest in and to the
Leases and operating interest as to all depths within a 640 acre area
surrounding said second well (exclusive of any acreage placed within a producing
unit as a result of drilling the initial test well) as such area is described in
Article 5.6 above. The entire cost, risk and expense of drilling such second
well (assuming Project Payout has not occurred) shall be borne in the following
proportions:

      Beta Oil "&" Gas, Inc.                                  25.00%
      Beta Oil "&" Gas, Inc.                                   6.25%
      Revere Corporation                                          18.75%
      Fredrick R. McCord/MRA                                       6.25%
      Panther Resources Corporation                                6.25%
      Prime Natural Resources, Inc.                               37.50%
                                                                  ------

                                                                 100.00%

  In the event a decision is made to plug and abandon the Initial Well after the
Objective Depth is reached, the entire cost, risk and expense of such operation
including restoration and clean-up shall be borne in the above proportions by
the parties.

8. SHALLOW WELL(S) EXPLORATION PROGRAM

        8.1 On or before twelve (12) months from the date of this Agreement, the
parties hereto agree to initiate a shallow well exploration program involving
the drilling of one (1) or more wells for the purpose of evaluating the
Miocene/Frio formations within the Mushroom Project. The location(s) and depths
of such well or wells shall be mutually determined by the parties to this
Agreement, however, the depth(s) shall not exceed 4,500’ or 500’ below the top
of the caprock formation, whichever is the lesser depth.

        8.2 It is agreed and understood that all penalties for non-consent
elections in connection with the Shallow Well Exploration Program shall be
identical to the penalties contained in Articles 5., 6. and 7. hereof, except
that where a relinquishment of 640 acres is required in said Articles, the
acreage penalty for the Shallow Well Exploration Program shall be 160 acres and
shall be limited to a depth not to exceed 4,500’ or 500’ below the top of the
caprock formation, whichever is the lesser depth.

9. AREA OF MUTUAL INTEREST

        9.1 An Area of Mutual Interest is described in Article XVI and
identified in Exhibit “A-1” of the attached Operating Agreement. It is agreed by
the Parties hereto that any lease or farmout, including producing property
acquisition acquired under the provisions of said AMI shall be burdened with
overrides in accordance with Article 2 hereof.

        9.2 The Non-Operators hereto recognize and acknowledge that Prime has
entered into an Operating Agreement, as Operator, with John M. Hall, as
Non-Operator, dated February 7, 2000 being described as the West Mushroom
Prospect. The Contract Area and Area of Mutual Interest comprises 446.777 acres
located in the M. Allen Survey, Abstract No. 1 and portions of the Stephen F.
Austin Survey, Abstract Nos. 7 and 8 of Austin County, Texas. The working
interest and leasehold ownership in the West Mushroom Prospect is Prime 87.50%
and Hall 12.50%. It is Prime’s intent and purpose hereof that upon the execution
of this Agreement by all of the Non-Operators hereto that the leases and
leasehold mineral interests situated in the West Mushroom Prospect, as described
above, shall vest in the Non-Operators and Prime in the percentages set forth
opposite the name of each below:

                                  Party                    Before Project Payout    After Project Payout
                                  -----                                  -------                 -------

                 Beta Oil "&" Gas, Inc.                             21.87500%             16.4062500%
                 Beta Oil "&" Gas, Inc.                             5.46875%              4.1015625%
                 Revere Corporation                                     16.40625%             12.3046875%
                 Fredrick McCord/MRA                                     5.46875%              4.1015625%
                 Panther Resources Corporation                           5.46875%              4.1015625%
                 Prime Natural Resources, Inc.                          32.81250%             46.4843750%
                                                                        ---------             -----------

                 TOTAL                                                  87.50000%             87.5000000%

  Parties will assume and bear their proportionate share of the Lease Burdens
and ORRI as described in Article 2.2 hereof.

10. INSURANCE 10.1 Operator will insure that the Certificates of Insurance for
the coverage

  described in Exhibit “D” to the Operating Agreement provide that Non-Operators
are named as “additional insured” and that such insurance may not be canceled
without first giving Non-Operators thirty (30) days written notice. Insurance
premiums will be included in the AFE.

10.2 Any Non-Operator may elect to not be covered by Operator’s insurance,
provided such non-operator furnishes a certificate to Operator proving that such
Non-Operator has the insurance coverage and in the amounts specified in the
Operating Agreement, that Prime is named as “additional insured” and that such
insurance may not be canceled without first giving Operator 30 days written
notice.

11. DRILLING INFORMATION

        11.1 During all operations on the Initial Well, Operator will insure
that all Parties have access to said well at all times, including freedom of the
derrick floor, at their sole risk and expense, and fully advise all Parties of
the depth and condition of the wells at all times. In the event of evaluation,
Operator will notify all Parties in sufficient time so that representatives can
be present.

11.2 Operator will promptly furnish all Parties with a copy of the location
plat, permit to drill, all logs, core analysis and each form required by each
regulatory body for the Initial Well, and from the time operations for drilling
are commenced, until the well is completed, with daily drilling progress reports
by facsimile and U. S. Mail. 12. DEVELOPMENT

        12.1 After completion of the Initial Well or Substitute Well as an oil
or gas well or as a dry hole, Non-Operators will develop the Contract Area, as
would reasonably prudent operators under the same or similar circumstances.

13. RIGHT OF RE-ASSIGNMENT

        13.1 If any Non-Operator elects to release, surrender or otherwise let
the Leases or any interest therein expire, such party will first give notice to
the other Parties, sixty (60) days in advance of the date on which the Lease or
interest therein is to be surrendered and the other Parties will have the right
to receive an immediate assignment of said Lease, or interest therein, at no
cost. In the event the Leases or an interest therein to be surrendered is not
accepted by the remaining Non-Operators, such Lease or Interest shall be
tendered to Prime if Prime so desires.

        13.2 Re-assignment will be made without warranty except as against the
acts of the assignor, and free and clear of any overriding royalty or other
similar burden against the Leases, except the Lease Burdens as described herein.

MISCELLANEOUS

13.3 This Agreement will extend to and be binding upon the Parties, their
representatives, successors and assigns forever.

        13.4 This Agreement may be signed in counterpart but shall not be
binding upon any party until all Parties have signed a counterpart, each of
which shall be considered an original.

        13.5 This Agreement may not be assigned, in whole or in part without the
written consent of Prime being first obtained, which written consent will not be
unreasonably withheld.

If the foregoing correctly reflects your understanding of our Agreement, kindly
sign this Agreement, including the Operating Agreement, and return one signed
and notarized Operating Agreement, one signed and notarized Model Form Recording
Supplement to Operating Agreement and Financing Statement and your check for the
Project Acquisition Fee set forth in Article 3.1. If this Agreement is not
timely executed and returned with the Project Acquisition Fee, this Agreement
may not thereafter be accepted without Prime’s written consent.

Very truly yours,

PRIME NATURAL RESOURCES, INC.

John L. Moran Executive Vice-President ACCEPTED AND AGREED TO THIS _______ DAY
OF __________________, 2000. PANTHER RESOURCES CORPORATION FREDRICK R.
McCORD/MRA By: By: ------------------------------------------------
---------------------------------------- James E. Smitherman Fredrick R. McCord
REVERE CORPORATION BETA OIL "&" GAS, INC. By: By:
------------------------------------------------
---------------------------------------- Paul Calaway Steve Antry

Signature page to that certain Participation Agreement between Prime and Beta
Oil & Gas, Inc. et al relative to operations at Mushroom Project in Waller and
Austin Counties, Texas.