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EXHIBIT 10.104

FIRST AMENDMENT TO THE
CANO PETROLEUM, INC.
NONQUALIFIED STOCK OPTION AGREEMENT

        This FIRST AMENDMENT (the "Amendment") to the Nonqualified Stock Option
Agreement (the "Agreement") dated December 28, 2006, is hereby made and entered
as of the 28th day of June, 2007 by and between Cano Petroleum, Inc., a Delaware
corporation (the "Company") and James Dale Underwood (the "Participant"). Terms
used in this Amendment with initial capital letters that are not otherwise
defined herein shall have the meanings ascribed to such terms in the Agreement.

        WHEREAS, Section 24 of the Agreement provides that the parties to the
Agreement may change or modify the Agreement in a writing signed by the parties;
and

        WHEREAS, the parties desire to amend the Agreement's vesting provisions
to reflect changes made by the Compensation Committee of Cano Petroleum, Inc.
and the Board of Directors, on June 28, 2007 and the Participant's resignation
as a director in good standing from the Board of Directors on June 28, 2007.

        NOW THEREFORE, pursuant to Section 24 of the Agreement, in consideration
of the mutual promises, conditions and covenants contained herein and in the
Agreement, and other good and valuable consideration, the adequacy of which is
hereby acknowledged, the parties agree as follows:

1.Sections 3 and 4 of the Agreement shall be amended in their entirety to read
as follows:

3.and 4. Vesting; Time of Exercise. 100% of the total Optioned Shares vested
immediately upon the Participant's resignation and the Stock Option is
exercisable for an extended period of Twenty-Four (24) months from the date of
resignation with the exercise period ending at 5 p.m. on June 28, 2009.

2.Section 27.a. of the Agreement shall be amended to read as follows:

a.Notice to the Company shall be addressed and delivered as follows:

Cano Petroleum, Inc.
Burnett Plaza
801 Cherry Street
Suite 3200, Unit 25
Fort Worth, TX 76102
Attn: Corporate Secretary

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        IN WITNESS WHEREOF, the parties hereto have executed this Amendment the
day and year first above written.

 
 
CANO PETROLEUM, INC.

 
By:
 
/s/  MORRIS B. SMITH      

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    Name:   Morris B. Smith     Title:   Senior Vice President and Chief
Financial Officer
 
 
 
 
 
 
 

PARTICIPANT

 
By:
 
/s/  JAMES DALE UNDERWOOD      

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    Name:   JAMES DALE UNDERWOOD

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FIRST AMENDMENT TO THE CANO PETROLEUM, INC. NONQUALIFIED STOCK OPTION AGREEMENT