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DRAGON ENERGY CORPORATION
650 POYDRAS STREET, SUITE 2828
NEW ORLEANS, LOUISIANA 70130-6155

FAX
 
TELEPHONE
(504) 586-0017
 
(504) 586-1717

 
September 30, 2005
 
 
Argyle Energy, Inc.
10777 Westheimer, Suite 170
Houston, Texas 77042
 
Attention: Mr. Harry J. Peters

 
Re:
FIRST AMENDMENT OF FARMOUT AGREEMENT

   
Barnett Crossroads Prospect (Prospect No. 20)

   
Escambia County

                                                        A L A B A M
A                                                                                                                                
 

Gentlemen:

By Ferment Agreement dated August 23, 2004 ("Agreement"), between DRAGON ENERGY
CORPORATION ("Dragon") and ARGYLE ENERGY, INC. ("Argyle"), Argyle among other
things agreed to commence on or before September 30, 2005, a test well (the
"Test Well") in search of oil and/or gas on the Barnett Crossroads Prospect,
Escambia County, Alabama.

Dragon and Argyle now desire to amend the Agreement to provide for a later
commencement date of the Test Well, and, therefore, in consideration of the
covenants, obligations, and undertakings set forth in the Agreement, as herein
amended, Dragon and Argyle hereby agree as follows:

2.

AMENDED TEST WELL COMMENCEMENT DATE

Provision 3.1 of the Agreement is deleted in its entirety and the following is
substituted in lieu thereof:
 
On or before March 31, 2006, Argyle agrees to cause to be commenced, the
spudding and actual drilling of a well, utilizing a drilling rig capable of
drilling and completing a well to a depth of 14,850 feet TVD, in search of oil
or gas at a Mutually acceptable legal location in Section 19, Township 3 North,
Range 8 East, Escambia County, Alabama (the "Test Well"). This drilling
commencement date will not be extended or delayed for any reason. Such drilling
operations to be prosecuted continuously, with diligence and in a workmanlike
manner consistent with the practices of a prudent operator, until the Test
Well shallhave been drilled to a depth of (a) 14,850 feet TVD below the surface
of the earth, or (b) a depth sufficient to test adequately and conclusively the
stratigraphic equivalent of the Smackover Formation as seen in the interval
between 13,684 feet and 14,016 feet in the Dragon Energy Cotporation-AT1C 23-4
#1 well located in Section 23, Township 3 North, Range 8 East, Escambia County,
Alabama, whichever is the shallower depth (the "Objective Depth"), or to such
other depth as the parties hereto may agree, as provided hereinafter.

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Argyle Energy, Inc.
Attention: Mr. Harry J. Peters
September 30, 2005
Page 2
 
Dragon and Argyle hereby ratify and confirm that the Agreement, as amended, is
in full force and effect.

Please indicate your acceptance of this FIRST AMENDMENT OF FARMOUT AGREEMENT by
dating, signing and thereafter returning to the undersigned the enclosed
duplicate copy. The remaining counterpart should be retained for your files. If
this FIRST AMENDMENT OF FARMOUT AGREEMENT is circulated and executed by
facsimile transmission, the signatures of the Dragon and Argyle shall be
considered as original and self-proving for all purposes under the law. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed to be an original, binding and enforceable document, but all of which
shall constitute one and the same instrument.

   
Very truly yours,
         
DRAGON ENERGY CORPORATION
             
By: 
/s/ McLain J. Forman    
McLAIN J. FORMAN
   
PRESIDENT

MJF:rs
 
Attachment
     
AGREED TO AND ACCEPTED
 
THIS 30TH DAY OF SEPTEMBER 2005.
 

 
ARGYLE ENERGY, INC.
             
BY: 
/s/ Harry J. Peters
   
HARRY J. PETERS
   
SENIOR VICE-PRESIDENT
 

 

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