EXHIBIT “B”

A.A.P.L. FORM 610-1982

MODEL FORM OPERATING AGREEMENT

OPERATING AGREEMENT

DATED

April 12 , 2004 ,
                 year

OPERATOR PARTY

CONTRACT AREA See Exhibit "A"

COUNTY OR PARISH OF Parker         STATE OF Texas

COPYRIGHT 1982 – ALL RIGHTS RESERVED
AMERICAN ASSOCIATION OF PETROLEUM
LANDMEN, 4100 FOSSIL CREEK BLVD., FORT
WORTH, TEXAS, 76137-2791, APPROVED
FORM. A.A.P.L. NO. 610 – 1982 REVISED

A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

TABLE OF CONTENTS

TABLE OF CONTENTS

Article                                         Title

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Page

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   I. DEFINITIONS 1    II. EXHIBITS 1   III. INTERESTS OF PARTIES 2         A.
OIL AND GAS INTERESTS 2         B. INTERESTS OF PARTIES IN COSTS AND PRODUCTION
2         C. EXCESS ROYALTIES, OVERRIDING ROYALTIES AND OTHER PAYMENTS 2 
       D. SUBSEQUENTLY CREATED INTERESTS 2    IV. TITLES 2         A. TITLE
EXAMINATION 2-3        B. LOSS OF TITLE 3            1. Failure of Title 3 
          2. Loss by Non-Payment or Erroneous Payment of Amount Due 3 
          3. Other Losses 3     V. OPERATOR 4         A. DESIGNATION AND
RESPONSIBILITIES OF OPERATOR 4         B. RESIGNATION OR REMOVAL OF OPERATOR AND
SELECTION OF SUCCESSOR 4            1. Resignation or Removal of Operator 4 
          2. Selection of Successor Operator 4         C. EMPLOYEES 4         D.
DRILLING CONTRACTS 4    VI. DRILLING AND DEVELOPMENT 4         A. INITIAL WELL
4-5        B. SUBSEQUENT OPERATIONS 5            1. Proposed Operations 5 
          2. Operations by Less than All Parties 5-6-7           3. Stand-By
Time 7            4. Sidetracking 7         C. TAKING PRODUCTION IN KIND 7 
       D. ACCESS TO CONTRACT AREA AND INFORMATION 8         E. ABANDONMENT OF
WELLS 8            1. Abandonment of Dry Holes 8            2. Abandonment of
Wells that have Produced 8-9           3. Abandonment of Non-Consent Operations
9   VII. EXPENDITURES AND LIABILITY OF PARTIES 9         A. LIABILITY OF PARTIES
9         B. LIENS AND PAYMENT DEFAULTS 9         C. PAYMENTS AND ACCOUNTING 9 
       D. LIMITATION OF EXPENDITURES 9-10           1. Drill or Deepen 9-10
          2. Rework or Plug Back 10            3. Other Operations 10         E.
RENTALS, SHUT-IN WELL PAYMENTS AND MINIMUM ROYALTIES 10         F. TAXES 10 
       G. INSURANCE 11  VIII. ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST
11         A. SURRENDER OF LEASES 11         B. RENEWAL OR EXTENSION OF LEASES
11         C. ACREAGE OR CASH CONTRIBUTIONS 11-12        D. MAINTENANCE OF
UNIFORM INTEREST 12         E. WAIVER OF RIGHTS TO PARTITION 12    12    IX.
INTERNAL REVENUE CODE ELECTION 12     X. CLAIMS AND LAWSUITS 13    XI. FORCE
MAJEURE 13   XII. NOTICES 13  XIII. TERM OF AGREEMENT 13   XIV. COMPLIANCE WITH
LAWS AND REGULATIONS 14         A. LAWS, REGULATIONS AND ORDERS 14         B.
GOVERNING LAW 14         C. REGULATORY AGENCIES 14    XV. OTHER PROVISIONS 14 
 XVI. MISCELLANEOUS 15 

A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

OPERATING AGREEMENT

        THIS AGREEMENT, entered into by and between PARTY, hereinafter
designated and referred to as "Operator", and the signatory party or parties
other than Operator, sometimes hereinafter referred to individually herein as
“Non-Operator”, and collectively as “Non-Operators”.

WITNESSETH:

        WHEREAS, the parties to this agreement are owners of oil and gas leases
and/or oil and gas interests in the land identified in Exhibit “A”, and the
parties hereto have reached an agreement to explore and develop these leases
and/or oil and gas interests for the production of oil and gas to the extent and
as hereinafter provided,

        NOW, THEREFORE, it is agreed as follows:

ARTICLE I.

DEFINITIONS

              As used in this agreement, the following words and terms shall
have the meanings here ascribed to them:

      A.        The term “oil and gas” shall mean oil, gas, casinghead gas, gas
condensate, and all other liquid or gaseous hydrocarbons and other marketable
substances produced therewith, unless an intent to limit the inclusiveness of
this term is specifically stated.

    B.        The terms “oil and gas lease”, “lease” and “leasehold” shall mean
the oil and gas leases covering tracts of land lying within the Contract Area
which are owned by the parties to this agreement.

    C.        The term “oil and gas interests” shall mean unleased fee and
mineral interests in tracts of land lying within the Contract Area which are
owned by parties to this agreement.

    D.        The term “Contract Area” shall mean all of the lands, oil and gas
leasehold interests and oil and gas interests intended to be developed and
operated for oil and gas purposes under this agreement. Such lands, oil and gas
leasehold interests and oil and gas interests are described in Exhibit “A”.

    E.        The term “drilling unit” shall mean the area fixed for the
drilling of one well by order or rule of any state or federal body having
authority. If a drilling unit is not fixed by any such rule or order, a drilling
unit shall be the drilling unit as establish-ed by the pattern of drilling in
the Contract Area or as fixed by express agreement of the Drilling Parties.

    F.        The term “drillsite” shall mean the oil and gas lease or interest
on which a proposed well is to be located.

    G.        The terms “Drilling Party” and “Consenting Party” shall mean a
party who agrees to join in and pay its share of the cost of any operation
conducted under the provisions of this agreement.

    H.        The terms “Non-Drilling Party” and “Non-Consenting Party” shall
mean a party who elects not to participate in a proposed operation.

                Unless the context otherwise clearly indicates, words used in
the singular include the plural, the plural includes the singular, and the
neuter gender includes the masculine and the feminine.

ARTICLE II.

EXHIBITS

          The following exhibits, as indicated below and attached hereto, are
incorporated in and made a part hereof:

        |X| A. Exhibit “A”, shall include the following information:

          (1)        Identification of lands subject to this agreement,

          (2)        Restrictions, if any, as to depths, formations, or
substances,

          (3)        Percentages or fractional interests of parties to this
agreement,

          (4)        Oil and gas leases and/or oil and gas interests subject to
this agreement,

          (5)        Addresses of parties for notice purposes.

        |_| B. Exhibit "B", Form of Lease.

        |X| C. Exhibit "C", Accounting Procedure.

        |X| D. Exhibit “D”, Insurance.

        |X| E. Exhibit "E", Gas Balancing Agreement.

        |X| F. Exhibit “F”, Non-Discrimination and Certification of
Non-Segregated Facilities.

        |X| G. Exhibit "G", Tax Partnership.

          If any provision of any exhibit, except Exhibits “E” and “G”, is
inconsistent with any provision contained in the body of this agreement, the
provisions in the body of this agreement shall prevail.

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A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE III.

INTERESTS OF PARTIES

      A. Oil and Gas Interests:

          If any party owns an oil and gas interest in the Contract Area, that
interest shall be treated for all purposes of this agreement and during the term
hereof as if it were covered by the form of oil and gas lease attached hereto as
Exhibit “B”, and the owner thereof shall be deemed to own both the royalty
interest reserved in such lease and the interest of the lessee thereunder.

    B.        Interests of Parties in Costs and Production:

          Unless changed by other provisions, all costs and liabilities incurred
in operations under this agreement shall be borne and paid, and all equipment
and materials acquired in operations on the Contract Area shall be owned, by the
parties as their interests are set forth in Exhibit “A”. In the same manner, the
parties shall also own all production of oil and gas from the Contract Area
subject to the payment of royalties to the extent of one-eighth (1/8) which
shall be borne as hereinafter set forth.

          Regardless of which party has contributed the lease(s) and/or oil and
gas interest(s) hereto on which royalty is due and payable, each party entitled
to receive a share of production of oil and gas from the Contract Area shall
bear and shall pay or deliver, or cause to be paid or delivered, to the extent
of its interest in such production, the royalty amount stipulated hereinabove
and shall hold the other parties free from any liability therefor. No party
shall ever be responsible, however, on a price basis higher than the price
received by such party, to any other party’s lessor or royalty owner, and if any
such other party’s lessor or royalty owner should demand and receive settlement
on a higher price basis, the party contributing the affected lease shall bear
the additional royalty burden attributable to such higher price.

          Nothing contained in this Article III.B. shall be deemed an assignment
or cross-assignment of interests covered hereby.

      C. Excess Royalties, Overriding Royalties and Other Payments:

          Unless changed by other provisions, if the interest of any party in
any lease covered hereby is subject to any royalty, overriding royalty,
production payment or other burden on production in excess of the amount
stipulated in Article III.B., such party so burdened shall assume and alone bear
all such excess obligations and shall indemnify and hold the other parties
hereto harmless from any and all claims and demands for payment asserted by
owners of such excess burden.

      D. Subsequently Created Interests:

     after the date hereof
        If any party should / create an overriding royalty, production payment
or other burden payable out of production attributable to its working interest
hereunder, (any such interest being hereinafter referred to as “subsequently
created interest” irrespective of the timing of its creation and the party out
of whose working interest the subsequently created interest is derived being
hereinafter referred to as “burdened party”), and:

  1.      If the burdened party is required under this agreement to assign or
relinquish to any other party, or parties, all or a portion of its working
interest and/or the production attributable thereto, said other party, or
parties, shall receive said assignment and/or production free and clear of said
subsequently created interest and the burdened party shall indemnify and save
said other party, or parties, harmless from any and all claims and demands for
payment asserted by owners of the subsequently created interest; and,

  2.       If the burdened party fails to pay, when due, its share of expenses
chargeable hereunder, all provisions of Article VII.B. shall be enforceable
against the subsequently created interest in the same manner as they are
enforceable against the working interest of the burdened party.

ARTICLE IV.

TITLES

      A. Title Examination:

        Title examination shall be made on the drill site of any proposed well
prior to commencement of drilling operations or, if
  majority of
the / Drilling Parties so request, title examination shall be made on the leases
and/or oil and gas interests included, or planned to be includ-ed, in the
drilling unit around such well. The opinion will include the ownership of the
working interest, minerals, royalty, overriding royalty and production payments
under the applicable leases. At the time a well is proposed, each party
contributing leases and/or oil and gas interests to the drillsite, or to be
included in such drilling unit, shall furnish to Operator all abstracts
(including federal lease status reports), title opinions, title papers and
curative material in its possession free of charge. All such information not in
the possession of or made available to Operator by the parties, but necessary
for the examination of the title, shall be obtained by Operator. Operator shall
cause title to be examined by attorneys on its staff or by outside attorneys.
Copies of all title opinions shall be furnished to each party hereto. The cost
incurred by Operator in this title program shall be borne as follows:

  |_| Option No. 1: Costs incurred by Operator in procuring abstracts and title
examination (including preliminary, supplemental, shut-in gas royalty opinions
and division order title opinions) shall be a part of the administrative
overhead as provided in Exhibit “C”, and shall not be a direct charge, whether
performed by Operator’s staff attorneys or by outside attorneys.

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A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE IV

CONTINUED

  |X| Option No. 2: Costs incurred by Operator in procuring abstracts and fees
paid outside attorneys for title examination (including preliminary,
supplemental, shut-in gas royalty opinions and division order title opinions)
shall be borne by the Drilling Parties in the proportion that the interest of
each Drilling Party bears to the total interest of all Drilling Parties as such
interests appear in Ex-hibit “A”. Operator shall make no charge for services
rendered by its staff attorneys or other personnel in the performance of the
above functions.

          Each party shall be responsible for securing curative matter and
pooling amendments or agreements required in connection with leases or oil and
gas interests contributed by such party. Operator shall be responsible for the
preparation and recording of pooling designations or declarations as well as the
conduct of hearings before governmental agencies for the securing of spacing or
pooling orders. This shall not prevent any party from appearing on its own
behalf at any such hearing.

          No well shall be drilled on the Contract Area until after (1) the
title to the drillsite or drilling unit has been examined as above provided, and
(2) the title has been approved by the examining attorney or title has been
accepted by all of the parties who are to par-ticipate in the drilling of the
well.

      B. Loss of Title:

                                    of title
    3.        Other Losses: All losses / incurred, , shall be joint losses and
shall be borne by all parties in proportion to their interests. There shall be
no readjustment of interests in the remaining portion of the Contract Area.

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A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE V.

OPERATOR

      A. Designation and Responsibilities of Operator:

          PARTY shall be the Operator of the Contract Area, and shall conduct
and direct and have full control of all operations on the Contract Area as
permitted and required by, and within the limits of this agreement. It shall
conduct all such operations in a good and workmanlike manner, but it shall have
no liability as Operator to the other parties for losses sustained or
liabilities incurred, except such as may result from gross negligence or willful
misconduct.

    B.        Resignation or Removal of Operator and Selection of Successor:

    1.        Resignation or Removal of Operator: Operator may resign at any
time by giving written notice thereof to Non-Operators. If Operator terminates
its legal existence, no longer owns an interest hereunder in the Contract Area,
or is no longer capable of serving as Operator, Operator shall be deemed to have
resigned without any action by Non-Operators, except the selection of a
successor. Operator may be removed if it fails or refuses to carry out its
duties hereunder, or becomes insolvent, bankrupt or is placed in receivership,
by the affirmative vote of two (2) or more Non-Operators owning a majority
interest based on ownership as shown on Exhibit “A” remaining after excluding
the voting interest of Operator. Such resignation or removal shall not become
effective until 7:00 o’clock A.M. on the first day of the calendar month
following the expiration of ninety (90) days after the giving of notice of
resignation by Operator or action by the Non-Operators to remove Operator,
unless a successor Operator has been selected and assumes the duties of Operator
at an earlier date. Operator, after effective date of resignation or removal,
shall be bound by the terms hereof as a Non-Operator. A change of a cor-porate
name or structure of Operator or transfer of Operator’s interest to any single
subsidiary, parent or successor corporation shall not be the basis for removal
of Operator.

    2.              Selection of Successor Operator: Upon the resignation or
removal of Operator, a successor Operator shall be selected by the parties. The
successor Operator shall be selected from the parties owning an interest in the
Contract Area at the time such successor Operator is selected. The successor
Operator shall be selected by the affirmative vote of two (2) or more parties
owning a majority interest based on ownership as shown on Exhibit “A”; provided,
however, if an Operator which has been removed fails to vote or votes only to
succeed itself, the successor Operator shall be selected by the affirmative vote
of two (2) or more parties owning a majority interest based on ownership as
shown on Exhibit “A” remaining after excluding the voting interest of the
Operator that was removed.

      C. Employees:

                                                           or contractors
        The number of employees used / by Operator in conducting operations
hereunder, their selection, and the hours of labor and the compensation for
services performed shall be determined by Operator, and all
              or contractors                  or contractors
such employees / shall be the employees / of Operator.

      D. Drilling Contracts:

          All wells drilled on the Contract Area shall be drilled on a
competitive contract basis at the usual rates prevailing in the area. If it so
desires, Operator may employ its own tools and equipment in the drilling of
wells, but its charges therefor shall not exceed the prevailing rates in the
area and the rate of such charges shall be agreed upon by the parties in writing
before drilling operations are commenced, and such work shall be performed by
Operator under the same terms and conditions as are customary and usual in the
area in contracts of in-dependent contractors who are doing work of a similar
nature.

ARTICLE VI.

DRILLING AND DEVELOPMENT

      A. Initial Well:

        On or before the ____________day of __________________ ,
(year)___________ , Operator shall commence the drilling of a well foroil and
gas at the following location:

and shall thereafter continue the drilling of the well with due diligence to
a depth sufficient to test the Barnett Shale Formation

unless granite or other practically impenetrable substance or condition in the
hole, which renders furtherdrilling impractical, is en- countered at a lesser
depth, or unless all parties agree to complete or abandon the well at a lesser
depth.

        Operator shall make reasonable tests of all formations encountered
during drilling which give indication of containing oil and gas in quantities
sufficient to test, unless this agreement shall be limited in its application to
a specific formation or formations, in which event Operator shall be required to
test only the formation or formations to which this agreement may apply.

 

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A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE VI

CONTINUED

          If, in Operator’s judgment, the well will not produce oil or gas in
paying quantities, and it wishes to plug and abandon the well as a dry hole, the
provisions of Article VI.E.1. shall thereafter apply.

      B. Subsequent Operations:

    1.        Proposed Operations: Should any party hereto desire to drill any
well on the Contract Area
                                                                            
                                                                            on
the contract area
other than the well provided for in Article VI.A., or to rework, deepen or plug
back a * dry hole drilled / or
    on the contract area
a well / and not then producing in paying quantities, the party desiring to
drill, rework, deepen or plug back such a well shall give the other parties
written notice of the proposed operation, specifying the work to be performed,
the location, proposed depth, objective forma-tion and the estimated cost of the
operation. The parties receiving such a notice shall have thirty (30) days after
receipt of the notice within which to notify the party wishing to do the work
whether they elect to participate in the cost of the proposed operation. If a
drill-ing rig is on location, notice of a proposal to rework, plug back or drill
deeper may be given by telephone and the response period shall be limited to
forty-eight (48) hours, exclusive of Saturday, Sunday, and legal holidays.
Failure of a party receiving such notice to reply within the period above fixed
shall constitute an election by that party not to participate in the cost of the
proposed operation. Any notice or response given by telephone shall be promptly
confirmed in writing.

        * well producing in paying quantities or

          If all parties elect to participate in such a proposed operation,
Operator shall, within ninety (90) days after expiration of the notice period of
thirty (30) days (or as promptly as possible after the expiration of the
forty-eight (48) hour period when a drilling rig is on loca-tion, as the case
may be), actually commence the proposed operation and complete it with due
diligence at the risk and expense of all par-ties hereto; provided, however,
said commencement date may be extended upon written notice of same by Operator
to the other parties, for a period of up to thirty (30) additional days if, in
the sole opinion of Operator, such additional time is reasonably necessary to
obtain permits from governmental authorities, surface rights (including
rights-of-way) or appropriate drilling equipment, or to complete title ex-
amination or curative matter required for title approval or acceptance.
Notwithstanding the force majeure provisions of Article XI, if the actual
operation has not been commenced within the time provided (including any
extension thereof as specifically permitted herein) and if any party hereto
still desires to conduct said operation, written notice proposing same must be
resubmitted to the other parties in accor-dance with the provisions hereof as if
no prior proposal had been made.

    2.              Operations by Less than All Parties: If any party receiving
such notice as provided in Article VI.B.1. or VII.D.1. (Option No. 2) elects not
to participate in the proposed operation, then, in order to be entitled to the
benefits of this Article, the party or parties giving the notice and such other
parties as shall elect to participate in the operation shall, within ninety (90)
days after the expiration of the notice period of thirty (30) days (or as
promptly as possible after the expiration of the forty-eight (48) hour period
when a drilling rig is on location, as the case may be) actually commence the
proposed operation and complete it with due diligence. Operator shall perform
all work for the account of the Consenting Parties; provided, however, if no
drilling rig or other equipment is on location, and if Operator is a
Non-Consenting Party, the Consenting Parties shall either: (a) request Operator
to perform the work required by such proposed opera-tion for the account of the
Consenting Parties, or (b) designate one (1) of the Consenting Parties as
Operator to perform such work. Con-senting Parties, when conducting operations
on the Contract Area pursuant to this Article VI.B.2., shall comply with all
terms and con-ditions of this agreement.

          If less than all parties approve any proposed operation, the proposing
party, immediately after the
                                         all
expiration of the applicable / notice period, shall advise / Parties of the
total interest of the parties approving such operation and its recommendation as
to whether the Consenting Parties should proceed with the operation as proposed.
Each Consenting Party, within forty-eight (48) hours (exclusive of Saturday,
Sunday and legal holidays) after receipt of such notice, shall advise the
proposing party of its desire to (a) limit par-ticipation to such party’s
interest as shown on Exhibit “A” or (b) carry its proportionate part of
Non-Consenting Parties’ interests, / failure to advise the proposing party shall
be deemed an election under (a). In the event a drilling rig is on location, the
time permitted for
                                                                        
                                        exclusive
such a response shall not exceed a total of forty-eight (48) hours / (of
Saturday, Sunday and legal holidays). The proposing party, at its election, may
withdraw such proposal if there is insufficient participation and shall promptly
notify all parties of such decision.

          The entire cost and risk of conducting such operations shall be borne
by the Consenting Parties in the proportions they have elected to bear same
under the terms of the preceding paragraph. Consenting Parties shall keep the
leasehold estates involved in such operations free and clear of all liens and
encumbrances of every kind created by or arising from the operations of the
Consenting Parties.

          If such an operation results in a dry hole, the Consenting Parties
shall plug and abandon the well and restore the surface location at their sole
cost, risk and expense. If any well drilled, reworked, deepened or plugged back
under the provisions of this Article results in a pro-ducer of oil and/or gas in
paying quantities, the Consenting Parties shall complete and equip the well to
produce at their sole cost and risk, * or (c) carry its proportionate part
(determined as provided in (b)) of Non-Consenting Parties’ interests together
with all or a portion of its proportionate part of any Non-Consenting Parties’
interests that any Consenting Party did not elect to take. Any interests of
Non-Consenting Parties that is not carried by a Consenting Party shall be deemed
to be carried by the Party proposing the operation if such party does not
withdraw its proposal.

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  and the well shall then be turned over to Operator and shall be operated by it
at the expense and for the account of the Consenting Par-ties. Upon commencement
of operations for the drilling, reworking, deepening or plugging back of any
such well by Consenting Parties in accordance with the provisions of this
Article, each Non-Consenting Party shall be deemed to have relinquished to
Consenting Parties, and the Consenting Parties shall own and be entitled to
receive, in proportion to their respective interests, all of such Non-Consenting
Party’s interest in the well and share of production therefrom until the
proceeds of the sale of such share, calculated at the well, or market value
thereof if such share is not sold,
      *                           windfall profit taxes,
(after deducting /, royalty, / overriding royalty and other in- terests not
excepted by Article III.D. payable out of or measured by the production from
such well accruing with respect to such interest until it reverts) shall equal
the total of the following:
* applicable advalorem taxes, production taxes, severance taxes, excise taxes,
and gathering fees,

    (a)        200% of each such Non-Consenting Party’s share of the cost of any
newly acquired surface equipment beyond the wellhead connections (including, but
not limited to, stock tanks, separators, treaters, pumping equipment and
piping), plus 100% of each such Non-Consenting Party’s share of the cost of
operation of the well commencing with first production and continuing until each
such Non- Consenting Party’s relinquished interest shall revert to it under
other provisions of this Article, it being agreed that each Non- Consenting
Party’s share of such costs and equipment will be that interest which would have
been chargeable to such Non-Consenting Party had it participated in the well
from the beginning of the operations; and

    (b)        400 % of that portion of the costs and expenses of drilling,
reworking, deepening, plugging back, testing and completing, after deducting any
cash contributions received under Article VIII.C., and 400 % of that portion of
the cost of newly acquired equip- ment in the well (to and including the
wellhead connections), which would have been chargeable to such Non-Consenting
Party if it had participated therein.

          An election not to participate in the drilling or the deepening of a
well shall be deemed an election not to participate in any re-working or
plugging back operation proposed in such a well, or portion thereof, to which
the initial Non-Consent election applied that is conducted at any time prior to
full recovery by the Consenting Parties of the Non-Consenting Party’s recoupment
account. Any such reworking or plugging back operation conducted during the
recoupment period shall be deemed part of the cost of operation of said well and
there shall be added to the sums to be recouped by the Consenting Parties one
hundred percent (100%) of that portion of the costs of the reworking or plugging
back operation which would have been chargeable to such Non-Consenting Party had
it participated therein. If such a reworking or plugging back operation is
proposed during such recoupment period, the provisions of this Article VI.B.
shall be ap-plicable as between said Consenting Parties in said well.

          During the period of time Consenting Parties are entitled to receive
Non-Consenting Party's share of production, or the proceeds therefrom,
Consenting Parties shall be responsible for the payment of all
                           windfall profit taxes,
production, severance, excise, / gathering and other taxes, and all royalty,
overriding royalty and other burdens applicable to Non-Consenting Party’s share
of production not excepted by Ar-ticle III.D.

          In the case of any reworking, plugging back or deeper drilling
operation, the Consenting Parties shall be permitted to use, free of cost, all
casing, tubing and other equipment in the well, but the ownership of all such
equipment shall remain unchanged; and upon abandonment of a well after such
reworking, plugging back or deeper drilling, the Consenting Parties shall
account for all such equip-ment to the owners thereof, with each party receiving
its proportionate part in kind or in value, less cost of salvage, and the
proportionate share of plugging and abandonment costs each party would have paid
if the well had been plugged at a time each party last participated in an
operation on the well.

                                                           successful
        Within sixty (60) days after the / completion of any operation under
this Article, the party conducting the operations for the Consenting Parties
shall furnish each Non-Consenting Party with an inventory of the equipment in
and connected to the well, and an itemized statement of the cost of drilling,
deepening, plugging back, testing, completing, and equipping the well for
production; or, at its option, the operating party, in lieu of an itemized
statement of such costs of operation, may submit a detailed statement of monthly
bill-ings. Each month thereafter, during the time the Consenting Parties are
being reimbursed as provided above, the party conducting the operations for the
Consenting Parties shall furnish the Non-Consenting Parties with an itemized
statement of all costs and liabilities in-curred in the operation of the well,
together with a statement of the quantity of oil and gas produced from it and
the amount of proceeds realized from the sale of the well’s working interest
production during the preceding month. In determining the quantity of oil and
gas produced during any month, Consenting Parties shall use industry accepted
methods such as, but not limited to, metering or periodic well tests. Any amount
realized from the sale or other disposition of equipment newly acquired in
connection with any such operation which would have been owned by a
Non-Consenting Party had it participated therein shall be credited against the
total unreturned costs of the work done and of the equipment purchased in
determining when the interest of such Non-Consenting Party shall revert to it as
above provided; and if there is a credit balance, it shall be paid to such
Non-Consenting Party.

- 6 -

          If and when the Consenting Parties recover from a Non-Consenting
Party's relinquished interest the amounts provided for above, the relinquished
interests of such Non-Consenting Party shall automatically revert to it, and,
from and after such reversion, such Non-Consenting Party shall own the same
interest in such well, the material and equipment in or pertaining thereto, and
the production therefrom as such Non-Consenting Party would have been entitled
to had it participated in the drilling, reworking, deepening or plugging back of
said well. Thereafter, such Non-Consenting Party shall be charged with and shall
pay its proportionate part of the further costs of the operation of said well in
accordance with the terms of this agreement and the Accounting Procedure
attached hereto.

          Notwithstanding the provisions of this Article VI.B.2., it is agreed
that without the mutual consent of all parties, no wells shall be completed in
or produced from a source of supply from which a well located elsewhere on the
Contract Area is producing, unless such well conforms to the then-existing well
spacing pattern for such source of supply.

          The provisions of this Article shall have no application whatsoever to
the drilling of the initial well described in Article VI.A. except (a) as to
Article VII.D.1. (Option No. 2), if selected, or (b) as to the reworking,
deepening and plugging back of such initial well after if has been drilled to
the depth specified in Article VI.A. if it shall thereafter prove to be a dry
hole or, if initially completed for pro-duction, ceases to produce in paying
quantities.

    3.        Stand-By Time: When a well which has been drilled or deepened has
reached its authorized depth and all tests have been completed, and the results
thereof furnished to the parties, stand-by costs incurred pending response to a
party’s notice proposing a reworking, deepening, plugging back or completing
operation in such a well shall be charged and borne as part of the drilling or
deepen-ing operation just completed. Stand-by costs subsequent to all parties
responding, or expiration of the response time permitted, whichever first
occurs, and prior to agreement as to the participating interests of all
Consenting Parties pursuant to the terms of the second gram-matical paragraph of
Article VI.B.2., shall be charged to and borne as part of the proposed
operation, but if the proposal is subsequently withdrawn because of insufficient
participation, such stand-by costs shall be allocated between the Consenting
Parties in the proportion each Consenting Party’s interest as shown on Exhibit
“A” bears to the total interest as shown on Exhibit “A” of all Consenting
Par-ties.

    4.        Sidetracking: Except as hereinafter provided, those provisions of
this agreement applicable to a “deepening” operation shall also be applicable to
any proposal to directionally control and intentionally
      except the first horizontal borehole of the first well
deviate a well from vertical / so as to change the bottom hole location (herein
call “sidetracking”), unless done to straighten the hole or to drill around junk
in the hole or because of other mechanical difficulties. Any party having the
right to participate in a proposed sidetracking operation that does not own an
interest in the affected well bore at the time of the notice shall, upon
electing to participate, tender to the well bore owners its proportionate share
(equal to its interest in the sidetracking operation) of the value of that
portion of the existing well bore to be utilized as follows:

    (a)        If the proposal is for sidetracking an existing dry hole,
reimbursement shall be on the basis of the actual costs incurred in the initial
drilling of the well down to the depth at which the sidetracking operation is
initiated.

    (b)        If the proposal is for sidetracking a well which has previously
produced, reimbursement shall                                                   
                                     remaining in the hole
be on the basis of the well’s salvable materials and equipment / down to the
depth at which the
                                                            *
sidetracking operation is initiated, / determined in accordance with the
provisions of Exhibit "C", less the estimated cost of salvaging and the
estimated cost of plugging and abandoning.
* and salvable surface equipment used in connection with such well

          In the event that notice for a sidetracking operation is given while
the drilling rig to be utilized is on location, the response period shall be
limited to forty-eight (48) hours, exclusive of Saturday, Sunday and legal
holidays; provided, however, any party may request and receive up to eight (8)
additional days after expiration of the forty-eight (48) hours within which to
respond by paying for all stand-by time incurred during such extended response
period. If more than one party elects to take such additional time to respond to
the notice, stand by costs shall be allocated between the parties taking
additional time to respond on a day-to-day basis in the proportion each electing
par-ty’s interest as shown on Exhibit “A” bears to the total interest as shown
on Exhibit “A” of all the electing parties. In all other in-stances the response
period to a proposal for sidetracking shall be limited to thirty (30) days. The
provisions of this subparagraph VI.B.4 will not apply to wells drilled as
horizontal wellbores.

      C. TAKING PRODUCTION IN KIND:

          Each party shall take in kind or separately dispose of its
proportionate share of all oil and gas produced from the Contract Area,
exclusive of production which may be used in development and producing
operations and in preparing and treating oil and gas for marketing purposes and
production unavoidably lost. Any extra expenditure incurred in the taking in
kind or separate disposition by any party of its proportionate share of the
production shall be borne by such party. Any party taking its share of
production in kind shall be

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ARTICLE VI

CONTINUED

          required to pay for only its proportionate share of such part of
Operator’s surface facilities which it uses.

          Each party shall execute such division orders and contracts as may be
necessary for the sale of its interest in production from the Contract Area,
and, except as provided in Article VII.B., shall be entitled to receive payment
directly from the purchaser thereof for its share of all production.

          In the event any party shall fail to make the arrangements necessary
to take in kind or separately dispose of its proportionate share of the oil
produced from the Contract Area, Operator shall have the right, subject to the
revocation at will by the party owning it, but not the obligation, to purchase
such oil or sell it
                                                                               
                     reasonably obtainable under the circumstances
to others at any time and from time to time, for the account of the non-taking
party at the best price / in the area for such production. Any such purchase or
sale by Operator shall be subject always to the right of the                
           upon thirty days written notice
owner of the production to exercise / its right to take in kind, or separately
dispose of, its share of all oil not previously delivered to a purchaser. Any
purchase or sale by Operator of any other party’s share of oil shall be only for
such reasonable periods of time as are consistent with the minimum needs of the
industry under the particular circumstances, but in no event for a period in
excess of one (1) year.

          In the event one or more parties' separate disposition of its share of
the gas causes split-stream deliveries to separate pipelines and/or deliveries
which on a day-to-day basis for any reason are not exactly equal to a party’s
respective proportionate share of total gas sales to be allocated to it, the
balancing or accounting between the respective accounts of the parties shall be
in accordance with any gas balancing agreement between the parties hereto,
whether such an agreement is attached as Exhibit “E”, or is a separate
agreement.

      D. Access to Contract Area and Information:

          Each party shall have access to the Contract Area at all reasonable
times, at its sole cost and risk to inspect or observe operations, and shall
have access at reasonable times to information pertaining to the development or
operation thereof, including Operator’s books and records relating thereto.
Operator, upon request, shall furnish each of the other parties with copies of
all forms or reports filed with governmental agencies, daily drilling reports,
well logs, tank tables, daily gauge and run tickets and reports of stock on hand
at the first of each month, and shall make available samples of any cores or
cuttings taken from any well drilled on the Contract Area. The cost of gathering
and furnishing information to Non-Operator, other than that specified above,
shall be charged to the Non-Operator that re-quests the Information.

      E. Abandonment of Wells:

      1.        Abandonment of Dry Holes: Except for any well drilled or
deepened pursuant to Article VI.B.2., any well which has been drilled or
deepened under the terms of this agreement and is proposed to be completed as a
dry hole shall not be plugged and abandoned without the consent of all parties.
Should Operator, after diligent effort, be unable to contact any party, or
should any party fail to reply within forty-eight (48) hours (exclusive of
Saturday, Sunday and legal holidays) after receipt of notice of the proposal to
plug and abandon such well, such party shall be deemed to have consented to the
proposed abandonment. All such wells shall be plugged and abandoned in
accordance with applicable regulations and at the cost, risk and expense of the
parties who participated in the cost of drilling or deepening such well. Any
party who objects to plugging and abandoning such well shall take over the well
and conduct further operations in search of oil and/or gas subject to the
provisions of Article VI.B.

    2.        Abandonment of Wells that have Produced: Except for any well in
which a Non-Consent operation has been conducted hereunder for which the
Consenting Parties have not been fully reimbursed as herein provided, any well
which has been completed as a producer shall not be plugged and abandoned
without the consent of all parties. If all parties consent to such abandonment,
the well shall be plugged and abandoned in accordance with applicable
regulations and at the cost, risk and expense of all the parties hereto. If,
within thirty (30) days after receipt of notice of the proposed abandonment of
any well, all parties do not agree to the abandonment of such well, those
wishing to continue its operation from the interval(s) of the formation(s) then
open to production shall tender to each of the other parties its proportionate
share of the value of the well’s salvable material and equipment, determined **
/ ***, less the estimated cost of salvaging and the estimated cost of plugging
and abandoning. / Each abandoning party shall assign the non-abandoning parties,
without warranty, express or implied, as to title or as to quantity, or fitness
for use of the equipment and material, all of its interest in the well and
related equipment, together with its interest in the leasehold estate as to, but
only as to, the in-terval or intervals of the formation or formations then open
to production. If the interest of the abandoning party is or includes an oil and
gas interest, such party shall execute and deliver to the non-abandoning party
or parties an oil and gas lease, limited to the interval or in-tervals of the
formation or formations then open to production, for a term of one (1) year and
so long thereafter as oil and/or gas is pro-duced from the interval or intervals
of the formation or formations covered thereby, such lease to be on the form
attached as Exhibit

        ** By a reasonable appraisal of its current fair market value.
        *** Failure of any party to respond within the said thirty (30) day
period shall be deemed consent to the proposed abandonment.

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ARTICLE VI

CONTINUED

          required to pay for only its proportionate share of such part of
Operator’s surface facilities which it uses.

          Each party shall execute such division orders and contracts as may be
necessary for the sale of its interest in production from the Contract Area,
and, except as provided in Article VII.B., shall be entitled to receive payment
directly from the purchaser thereof for its share of all production.

        In the event any party shall fail to make the arrangements necessary to
take in kind or separately

  dispose of its proportionate share of the oil and gas produced from the
Contract Area, Operator shall have the right, subject to the revocation at will
by the party owning it, but not the obligation, to purchase such oil and gas or
sell it to others at any time and from time to time, for the account of the
non-taking party at the best price obtainable in the area for such production.
Any such purchase or sale by Operator shall be subject always to the right of
the owner of the production to exercise at any time its right to take in kind,
or separately dispose of, its share of all oil and gas not previously delivered
to a purchaser. Any purchase or sale by Operator of any other party’s share of
oil and gas shall be only for such reasonable periods of time as are consistent
with the minimum needs of the industry under the particular circumstances, but
in no event for a period in excess of one (1) year. Notwithstanding the
foregoing, Operator shall not make a sale, including one into interstate
com-merce, of any other party’s share of gas production without first giving
such other party thirty (30) days notice of such intended sale.

      D. Access to Contract Area and Information:

          Each party shall have access to the Contract Area at all reasonable
times, at its sole cost and risk to inspect or observe operations, and shall
have access at reasonable times to information pertaining to the development or
operation thereof, including Operator’s books and records relating thereto.
Operator, upon request, shall furnish each of the other parties with copies of
all forms or reports filed with governmental agencies, daily drilling reports,
well logs, tank tables, daily gauge and run tickets and reports of stock on hand
at the first of each month, and shall make available samples of any cores or
cuttings taken from any well drilled on the Contract Area. The cost of gathering
and furnishing information to Non-Operator, other than that specified above,
shall be charged to the Non-Operator that re-quests the Information.

      E. Abandonment of Wells:

    1.        Abandonment of Dry Holes: Except for any well drilled or deepened
pursuant to Article VI.B.2., any well which has been drilled or deepened under
the terms of this agreement and is proposed to be completed as a dry hole shall
not be plugged and abandoned without the consent of all parties. Should
Operator, after diligent effort, be unable to contact any party, or should any
party fail to reply within forty-eight (48) hours (exclusive of Saturday, Sunday
and legal holidays) after receipt of notice of the proposal to plug and abandon
such well, such party shall be deemed to have consented to the proposed
abandonment. All such wells shall be plugged and abandoned in accordance with
applicable regulations and at the cost, risk and expense of the parties who
participated in the cost of drilling or deepening such well. Any party who
objects to plugging and abandoning such well shall have the right to take over
the well and conduct further operations in search of oil and/or gas subject to
the provisions of Article VI.B.

    2.        Abandonment of Wells that have Produced: Except for any well in
which a Non-Consent operation has been conducted hereunder for which the
Consenting Parties have not been fully reimbursed as herein provided, any well
which has been completed as a producer shall not be plugged and abandoned
without the consent of all parties. If all parties consent to such abandonment,
the well shall be plugged and abandoned in accordance with applicable
regulations and at the cost, risk and expense of all the parties hereto. If,
within thirty (30) days after receipt of notice of the proposed abandonment of
any well, all parties do not agree to the abandonment of such well, those
wishing to continue its operation from the interval(s) of the formation(s) then
open to production shall tender to each of the other parties its proportionate
share of the value of the well’s salvable material and equipment, determined in
accordance with the provisions of Exhibit “C”, less the estimated cost of
salvaging and the estimated cost of plugging and abandoning. Each abandoning
party shall assign the non-abandoning parties, without warranty, express or
implied, as to title or as to quantity, or fitness for use of the equipment and
material, all of its interest in the well and related equipment, together with
its interest in the leasehold estate as to, but only as to, the in-terval or
intervals of the formation or formations then open to production. If the
interest of the abandoning party is or includes an oil and gas interest, such
party shall execute and deliver to the non-abandoning party or parties an oil
and gas lease, limited to the interval or in-tervals of the formation or
formations then open to production, for a term of one (1) year and so long
thereafter as oil and/or gas is pro-duced from the interval or intervals of the
formation or formations covered thereby, such lease to be on the form attached
as Exhibit

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A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE VI

CONTINUED

  “B”. The assignments or leases so limited shall encompass the “drilling unit”
upon which the well is located.The payments by, and the assignments or leases
to, the assignees shall be in a ratio based upon the relationship of their
respective percentage of participation in the Contract Area to the aggregate of
the percentages of participation in the Contract Area of all assignees. There
shall be no readjustment of interests in the remaining portion of the Contract
Area.

          Thereafter, abandoning parties shall have no further responsibility,
liability, or interest in the operation of or production from the well in the
interval or intervals then open other than the royalties retained in any lease
made under the terms of this Article. Upon re-quest, Operator shall continue to
operate the assigned well for the account of the non-abandoning parties at the
rates and charges con-templated by this agreement, plus any additional cost and
charges which may arise as the result of the separate ownership of the assigned
well. Upon proposed abandonment of the producing interval(s) assigned or leased,
the assignor or lessor shall then have the option to repurchase its prior
interest in the well (using the same valuation formula) and participate in
further operations therein subject to the pro-visions hereof.

      3.        Abandonment of Non-Consent Operations: The provisions of Article
VI.E.1. or VI.E.2 above shall be applicable as between Consenting Parties in the
event of the proposed abandonment of any well excepted from said Articles;
provided, however, no well shall be permanently plugged and abandoned unless and
until all parties having the right to conduct further operations therein have
been notified of the proposed abandonment and afforded the opportunity to elect
to take over the well in accordance with the provisions of this Article VI.E.

ARTICLE VII.

EXPENDITURES AND LIABILITY OF PARTIES

      A. Liability of Parties:

          The liability of the parties shall be several, not joint or
collective. Each party shall be responsible only for its obligations, and shall
be liable only for its proportionate share of the costs of developing and
operating the Contract Area. Accordingly, the liens granted among the parties in
Article VII.B. are given to secure only the debts of each severally. It is not
the intention of the parties to create, nor shall this agreement be construed as
creating, a mining or other partnership or association, or to render the parties
liable as partners. *

      B. Liens and Payment Defaults:

          Each Non-Operator grants to Operator a lien upon its oil and gas
rights in the Contract Area, and a security interest in its share of oil and/or
gas when extracted and its interest in all equipment, to secure payment of its
share of expense, together with interest thereon at the rate provided in Exhibit
“C”. To the extent that Operator has a security interest under the Uniform
Commercial Code of the state, Operator shall be entitled to exercise the rights
and remedies of a secured party under the Code. The bringing of a suit and the
ob-taining of judgment by Operator for the secured indebtedness shall not be
deemed an election of remedies or otherwise affect the lien rights or security
interest as security for the payment thereof. In addition, upon default by any
Non-Operator in the payment of its share of expense, Operator shall have the
right, without prejudice to other rights or remedies, to collect from the
purchaser the proceeds from the sale of such Non-Operator’s share of oil and/or
gas until the amount owed by such Non-Operator, plus interest, has been paid.
Each purchaser shall be entitled to rely upon Operator’s written statement
concerning the amount of any default. Operator grants a like lien and security
interest to the Non-Operators to secure payment of Operator’s proportionate
share of expense.

          If any party fails or is unable to pay its share of expense within
sixty (60) days after rendition of a statement therefor by Operator, the
non-defaulting parties, including Operator, shall, upon request by Operator, pay
the unpaid amount in the proportion that the interest of each such party bears
to the interest of all such parties. Each party so paying its share of the
unpaid amount shall, to obtain reimbursement thereof, be subrogated to the
security rights described in the foregoing paragraph.

      C. Payments and Accounting:

          Except as herein otherwise specifically provided, Operator shall
promptly pay and discharge expenses incurred in the development and operation of
the Contract Area pursuant to this agreement and shall charge each of the
parties hereto with their respective propor-tionate shares upon the expense
basis provided in Exhibit “C”. Operator shall keep an accurate record of the
joint account hereunder, showing expenses incurred and charges and credits made
and received.

          Operator, at its election, shall have the right from time to time to
demand and receive from the other parties payment in advance of their respective
shares of the estimated amount of the expense to be incurred in operations
hereunder during the next succeeding month, which right may be exercised only by
submission to each such party of an itemized statement of such estimated
expense, together with an invoice for its share thereof. Each such statement and
invoice for the payment in advance of estimated expense shall be submitted on or
before the 20th day of the next preceding month. Each party shall pay to
Operator its proportionate share of such estimate within fifteen (15) days after
such estimate and invoice is received. If any party fails to pay its share of
said estimate within said time, the amount due shall bear interest as provided
in Exhibit “C” until paid. Proper adjustment shall be made monthly between
advances and actual ex-pense to the end that each party shall bear and pay its
proportionate share of actual expenses incurred, and no more.

      D. Limitation of Expenditures:

    1.        Drill or Deepen: Without the consent of all parties, no well shall
be drilled or deepened, except any well drilled or deepened pursuant to the
provisions of Article VI.B.2. of this agreement. Consent to the drilling or
deepening shall include:

  *It is not the intention of the parties that this contract is made for or
intended for the benefit of any third person. Nothing herein shall be deemed to
create nor shall it create any fiduciary or trust relationship between Operator
and Non-Operator.

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ARTICLE VII

CONTINUED

  |X| Option No. 1: All necessary expenditures for the drilling or deepening,
testing, completing and equipping of the well, including necessary tankage
and/or surface facilities.

  |_| Option No. 2: All necessary expenditures for the drilling or deepening and
testing of the well. When such well has reached its authorized depth, and all
tests have been completed, and the results thereof furnished to the parties,
Operator shall give immediate notice to the Non-Operators who have the right to
participate in the completion costs. The parties receiving such notice shall
have forty-eight (48) hours (exclusive of Saturday, Sunday and legal holidays)
in which to elect to participate in the setting of casing and the completion
at-tempt. Such election, when made, shall include consent to all necessary
expenditures for the completing and equipping of such well, in-cluding necessary
tankage and/or surface facilities. Failure of any party receiving such notice to
reply within the period above fixed shall constitute an election by that party
not to participate in the cost of the completion attempt. If one or more, but
less than all of the parties, elect to set pipe and to attempt a completion, the
provisions of Article VI.B.2. hereof (the phrase “reworking, deepening or
plugging back” as contained in Article VI.B.2. shall be deemed to include
“completing”) shall apply to the operations thereafter conducted by less than
all parties.

      2.        Rework or Plug Back: Without the consent of all parties, no well
shall be reworked or plugged back except a well reworked or plugged back
pursuant to the provisions of Article VI.B.2. of this agreement. Consent to the
reworking or plugging back of a well shall include all necessary expenditures in
conducting such operations and completing and equipping of said well, including
necessary tankage and/or surface facilities.

    3.        Other Operations: Without the consent of all parties, Operator
shall not undertake any single project reasonably estimated to require an
expenditure in excess of $25,000.00 Dollars ($Twenty-five thousand) except in
connection with a well, the drilling, reworking, deepening, completing,
recompleting, or plugging back of which has been previously authorized by or
pursuant to this agreement; provided, however, that, in case of explosion, fire,
flood or other sudden emergency, whether of the same or different nature,
Operator may take such steps and incur such expenses as in its opinion are
required to deal with the emergency to safeguard life and property but Operator,
as promptly as possible, shall report the emergency to the other parties. If
Operator prepares an authority for expenditure (AFE) for its own use, Operator
shall furnish any Non-Operator so requesting an information copy thereof for any
single project costing in excess of Twenty-five thousand Dollars ($ 25,000.00 )
but less than the amount first set forth above in this paragraph.

      E. Rentals, Shut-in Well Payments and Minimum Royalties:

          Rentals, shut-in well payments and minimum royalties which may be
required under the terms of any lease shall be paid by the party or parties who
subjected such lease to this agreement at its or their expense. In the event two
or more parties own and have con-tributed interests in the same lease to this
agreement, such parties may designate one of such parties to make said payments
for and on behalf of all such parties. Any party may request, and shall be
entitled to receive, proper evidence of all such payments. In the event of
failure to make proper payment of any rental, shut-in well payment or minimum
royalty through mistake or oversight where such pay-ment is required to continue
the lease in force, any loss which results from such non-payment shall be borne
in accordance with the pro-visions of Article IV.B.2.

          Operator shall notify Non-Operator of the anticipated completion of a
shut-in gas well, or the shutting in or return to production of a producing gas
well, at least five (5) days (excluding Saturday, Sunday and legal holidays), or
at the earliest opportunity permitted by circumstances, prior to taking such
action, but assumes no liability for failure to do so. In the event of failure
by Operator to so notify Non-Operator, the loss of any lease contributed hereto
by Non-Operator for failure to make timely payments of any shut-in well payment
shall be borne jointly by the parties hereto under the provisions of Article
IV.B.3.

      F. Taxes:

          Beginning with the first calendar year after the effective date
hereof, Operator shall render for ad valorem taxation all property subject to
this agreement which by law should be rendered for such taxes, and it shall pay
all such taxes assessed thereon before they become delinquent. Prior to the
rendition date, each Non-Operator shall furnish Operator information as to
burdens (to include, but not be limited to, royalties, overriding royalties and
production payments) on leases and oil and gas interests contributed by such
Non-Operator. If the assessed valuation of any leasehold estate is reduced by
reason of its being subject to outstanding excess royalties, over-riding
royalties or production payments, the reduction in ad valorem taxes resulting
therefrom shall inure to the benefit of the owner or owners of such leasehold
estate, and Operator shall adjust the charge to such owner or owners so as to
reflect the benefit of such reduc-tion. If the ad valorem taxes are based in
whole or in part upon separate valuations of each party’s working interest, then
notwithstanding anything to the contrary herein, charges to the joint account
shall be made and paid by the parties hereto in accordance with the tax value
generated by each party’s working interest. Operator shall bill the other
parties for their proportionate shares of all tax payments in the manner
provided in Exhibit “C”.

          If Operator considers any tax assessment improper, Operator may, at
its discretion, protest within the time and manner prescribed by law, and
prosecute the protest to a final determination, unless all parties agree to
abandon the protest prior to final deter-mination. During the pendency of
administrative or judicial proceedings, Operator may elect to pay, under
protest, all such taxes and any interest and penalty. When any such protested
assessment shall have been finally determined, Operator shall pay the tax for
the joint ac-count, together with any interest and penalty accrued, and the
total cost shall then be assessed against the parties, and be paid by them, as
provided in Exhibit “C”.

          Each party shall pay or cause to be paid all production, severance,
excise, gathering and other taxes imposed upon or with respect to the production
or handling of such party’s share of oil and/or gas produced under the terms of
this agreement.

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ARTICLE VII

CONTINUED

      G. Insurance:

          At all times while operations are conducted hereunder, Operator shall
comply with the workmen's compensation law of the state where the operations are
being conducted; provided, however, that Operator may be a self-insurer for
liability under said com-pensation laws in which event the only charge that
shall be made to the joint account shall be as provided in Exhibit “C”. Operator
shall also carry or provide insurance for the benefit of the joint account of
the parties as outlined in Exhibit “D”, attached to and made a part hereof.
Operator shall require all contractors engaged in work on or for the Contract
Area to comply with the workmen’s compensation law of the state where the
operations are being conducted and to maintain such other insurance as Operator
may require.

          In the event automobile public liability insurance is specified in
said Exhibit "D", or subsequently receives the approval of the parties, no
direct charge shall be made by Operator for premiums paid for such insurance for
Operator’s automotive equipment.

ARTICLE VIII.

ACQUISITION, MAINTENANCE OR TRANSFER OF INTEREST

      A. Surrender of Leases:

          The leases covered by this agreement, insofar as they embrace acreage
in the Contract Area, shall not be surrendered in whole or in part unless all
parties consent thereto.

          However, should any party desire to surrender its interest in any
lease or in any portion thereof, andthe other parties do not agree or consent
thereto, the party desiring to surrender shall assign, without express or
implied warranty of title, all of its interest in such lease, or portion
thereof, and any well, material and equipment which may be located thereon and
any rights in production thereafter secured, to the parties not consenting to
such surrender. If the interest of the assigning party is or includes an oil and
gas in-terest, the assigning party shall execute and deliver to the party or
parties not consenting to such surrender an oil and gas lease covering such oil
and gas interest for a term of one (1) year and so long thereafter as oil and/or
gas is produced from the land covered thereby, such lease to be on the form
attached hereto as Exhibit “B”. Upon such assignment or lease, the assigning
party shall be relieved from all obligations thereafter accruing, but not
theretofore accrued, with respect to the interest assigned or leased and the
operation of any well attributable thereto, and the assigning party shall have
no further interest in the assigned or leased premises and its equipment and
pro-duction other than the royalties retained in any lease made under the terms
of this Article. The party assignee or lessee shall pay to the party assignor or
lessor the reasonable salvage value of the latter’s interest in any wells and
equipment attributable to the assigned or leas-ed acreage. The value of all
material shall be determined / , less the estimated cost of salvaging and the
estimated cost of plugging and abandoning. If the assignment or lease is in
favor of more than one party, the interest shall be shared by such parties in
the proportions that the interest of each bears to the total interest of all
such parties.

          * by a reasonable appraisal of its current Fair Market Value

          Any assignment, lease or surrender made under this provision shall not
reduce or change the assignor’s, lessor’s or surrendering party’s interest as it
was immediately before the assignment, lease or surrender in the balance of the
Contract Area; and the acreage assigned, leased or surrendered, and subsequent
operations thereon, shall not thereafter be subject to the terms and provisions
of this agreement.

      B. Renewal or Extension of Leases:

          If any party secures a renewal of any oil and gas lease subject to
this agreement, all other parties shall be notified promptly, and shall have the
right for a period of thirty (30) days following receipt of such notice in which
to elect to participate in the ownership of the renewal lease, insofar as such
lease affects lands within the Contract Area, by paying to the party who
acquired it their several proper pro- portionate shares of the acquisition cost
allocated to that part of such lease within the Contract Area, which shall be in
proportion to the interests held at that time by the parties in the Contract
Area.

          If some, but less than all, of the parties elect to participate in the
purchase of a renewal lease, it shall be owned by the parties who elect to
participate therein, in a ratio based upon the relationship of their respective
percentage of participation in the Contract Area to the aggregate of the
percentages of participation in the Contract Area of all parties participating
in the purchase of such renewal lease. Any renewal lease in which less than all
parties elect to participate shall not be subject to this agreement.

          Each party who participates in the purchase of a renewal lease shall
be given an assignment of its proportionate interest therein by the acquiring
party.

          The provisions of this Article shall apply to renewal leases whether
they are for the entire interest covered by the expiring lease or cover only a
portion of its area or an interest therein. Any renewal lease taken before the
expiration of its predecessor lease, or taken or contracted for within six (6)
months after the expiration of the existing lease shall be subject to this
provision; but any lease taken or con-tracted for more than six (6) months after
the expiration of an existing lease shall not be deemed a renewal lease and
shall not be subject to the provisions of this agreement.

          The provisions in this Article shall also be applicable to extensions
of oil and gas leases.

      C. Acreage or Cash Contributions:

          While this agreement is in force, if any party contracts for a
contribution of cash towards the drilling of a well or any other operation on
the Contract Area, such contribution shall be paid to the party who conducted
the drilling or other operation and shall be applied by it against the cost of
such drilling or other operation. If the contribution be in the form of acreage,
the party to whom the con-tribution is made shall promptly tender an assignment
of the acreage, without warranty of title, to the Drilling Parties in the
proportions

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A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE VIII

CONTINUED

  said Drilling Parties shared the cost of drilling the well. Such acreage shall
become a separate Contract Area and, to the extent possible, be governed by
provisions identical to this agreement. Each party shall promptly notify all
other parties of any acreage or cash contributions it may obtain in support of
any well or any other operation on the Contract Area. The above provisions shall
also be applicable to op-tional rights to earn acreage outside the Contract Area
which are in support of a well drilled inside the Contract Area.

          If any party contracts for any consideration relating to disposition
of such party’s share of substances produced hereunder, such consideration shall
not be deemed a contribution as contemplated in this Article VIII.C.

      D. Maintenance of Uniform Interests:

          For the purpose of maintaining uniformity of ownership in the oil and
gas leasehold interests covered by this agreement, no party shall sell,
encumber, transfer or make other disposition of its interest in the leases
embraced within the Contract Area and in wells, equipment and production unless
such disposition covers either:

    1.               the entire interest of the party in all leases and
equipment and production; or

    2.               an equal undivided interest in all leases and equipment and
production in the Contract Area.

          Every such sale, encumbrance, transfer or other disposition made by
any party shall be made expressly subject to this agreement and shall be made
without prejudice to the right of the other parties.

          If, at any time the interest of any party is divided among and owned
by four or more co-owners, Operator, at its discretion, may require such
co-owners to appoint a single trustee or agent with full authority to receive
notices, approve expenditures, receive billings for and approve and pay such
party’s share of the joint expenses, and to deal generally with, and with power
to bind, the co-owners of such party’s interest within the scope of the
operations embraced in this agreement; however, all such co-owners shall have
the right to enter into and execute all contracts or agreements for the
disposition of their respective shares of the oil and gas produced from the
Contract Area and they shall have the right to receive, separately, payment of
the sale proceeds thereof.

      E. Waiver of Rights to Partition:

          If permitted by the laws of the state or states in which the property
covered hereby is located, each party hereto owning an undivided interest in the
Contract Area waives any and all rights it may have to partition and have set
aside to it in severalty its undivided interest therein.

ARTICLE IX.

INTERNAL REVENUE CODE ELECTION

          This agreement is not intended to create, and shall not be construed
to create, a relationship of partnership or an association for profit between or
among the parties hereto. Notwithstanding any provision herein that the rights
and liabilities hereunder are several and not joint or collective, or that this
agreement and operations hereunder shall not constitute a partnership, if, for
federal income tax purposes, this agreement and the operations hereunder are
regarded as a partnership, each party hereby affected elects to be excluded from
the application of all of the provisions of Subchapter “K”, Chapter 1, Subtitle
“A”, of the Internal Revenue Code of 1954, as per-mitted and authorized by
Section 761 of the Code and the regulations promulgated thereunder. Operator is
authorized and directed to ex-ecute on behalf of each party hereby affected such
evidence of this election as may be required by the Secretary of the Treasury of
the United States or the Federal Internal Revenue Service, including
specifically, but not by way of limitation, all of the returns, statements, and
the data required by Federal Regulations 1.761. Should there be any requirement
that each party hereby affected give further evidence of this election, each
such party shall execute such documents and furnish such other evidence as may
be required by the Federal Internal Revenue Service or as may be necessary to
evidence this election. No such party shall give any notices or take any other
action inconsistent with the election made hereby. If any present or future
income tax laws of the state or states in which the Contract Area is located or
any future income tax laws of the United States contain provisions similar to
those in Subchapter “K”, Chapter 1, Subtitle “A”, of the Internal Revenue Code
of 1954, under which an election similar to that provided by Section 761 of the
Code is per-mitted, each party hereby affected shall make such election as may
be permitted or required by such laws. In making the foregoing elec-tion, each
such party states that the income derived by such party from operations
hereunder can be adequately determined without the computation of partnership
taxable income.

- 12 -

A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE X.

CLAIMS AND LAWSUITS

          Operator may settle any single uninsured third party damage claim or
suit arising from operations hereunder if the expenditure does not exceed
Twenty-five thousand and no/100 — — — — — — — — — Dollars ($ 25,000.00 ) and if
the payment is in complete settlement of such claim or suit. If the amount
required for settlement ex-ceeds the above amount, the parties hereto shall
assume and take over the further handling of the claim or suit, unless such
authority is delegated to Operator. All costs and expenses of handling,
settling, or otherwise discharging such claim or suit shall be at the joint
ex-pense of the parties participating in the operation from which the claim or
suit arises. If a claim is made against any party or if any party is sued on
account of any matter arising from operations hereunder over which such
individual has no control because of the rights given Operator by this
agreement, such party shall immediately notify all other parties, and the claim
or suit shall be treated as any other claim or suit involving operations
hereunder. All claims or suits involving title to the oil and gas leases or
interests described on Exhibit “A” shall be treated as a claim on suit against
all parties hereto.

ARTICLE XI.

FORCE MAJEURE

          If any party is rendered unable, wholly or in part, by force majeure
to carry out its obligations under this agreement, other than the obligation to
make money payments, that party shall give to all other parties prompt written
notice of the force majeure with reasonably full particulars concerning it;
thereupon, the obligations of the party giving the notice, so far as they are
affected by the force majeure, shall be suspending during, but no longer than,
the continuance of the force majeure. The affected party shall use all
reasonable diligence to remove the force majeure situation as quickly as
practicable.

          The requirement that any force majeure shall be remedied with all
reasonable dispatch shall not require the settlement of strikes, lockouts, or
other labor difficulty by the party involved, contrary to its wishes; how all
such difficulties shall be handled shall be entirely within the discretion of
the party concerned.

          The term “force majeure”, as here employed, shall mean an act of God,
strike, lockout, or other industrial disturbance, act of the public enemy, war,
blockade, public riot, lightning, fire, storm, flood, explosion, governmental
action, governmental delay, restraint or inaction, unavailability of equipment,
and any other cause, whether of the kind specifically enumerated above or
otherwise, which is not reasonably within the control of the party claiming
suspension.

ARTICLE XII.

NOTICES

          All notices authorized or required between the parties and required by
any of the provisions of this agreement, unless otherwise specifically provided,
shall be given in writing by mail or telegram, postage or charges prepaid, or by
telex or telecopier and addressed to the parties to whom the notice is given at
the addresses listed on Exhibit “A”. The originating notice given under any
provision hereof shall be deemed given only when received by the party to whom
such notice is directed, and the time for such party to give any notice in
response thereto shall run from the date the originating notice is received. The
second or any responsive notice shall be deemed given when deposited in the mail
or with the telegraph company, with postage or charges prepaid, or sent by telex
or telecopier. Each party shall have the right to change its address at any
time, and from time to time, by giving written notice thereof to all other
parties.

ARTICLE XIII.

TERM OF AGREEMENT

          This agreement shall remain in full force and effect as to the oil and
gas leases and/or oil and gas interests subject hereto for the period of time
selected below; provided, however, no party hereto shall ever be construed as
having any right, title or interest in or to any lease or oil and gas interest
contributed by any other party beyond the term of this agreement.

  |_| Option No. 1: So long as any of the oil and gas leases subject to this
agreement remain or are continued in force as to any part of the Contract Area,
whether by production, extension, renewal, or otherwise.

  |X| Option No. 2: In the event the well described in Article VI.A., or any
subsequent well drilled under any provision of this agreement, results in
production of oil and/or gas in paying quantities, this agreement shall continue
in force so long as any such well or wells produce, or are capable of
production, and for an additional period of 90 days from cessation of all
production; provided, however, if, prior to the expiration of such additional
period, one or more of the parties hereto are engaged in drilling, reworking,
deepen-ing, plugging back, testing or attempting to complete a well or wells
hereunder, this agreement shall continue in force until such opera-tions have
been completed and if production results therefrom, this agreement shall
continue in force as provided herein. In the event the well described in Article
VI.A., or any subsequent well drilled hereunder, results in a dry hole, and no
other well is producing, or capable of producing oil and/or gas from the
Contract Area, this agreement shall terminate unless drilling, deepening,
plugging back or rework-ing operations are commenced within 90 days from the
date of abandonment of said well.

          It is agreed, however, that the termination of this agreement shall
not relieve any party hereto from any liability which has accrued or attached
prior to the date of such termination.

- 13 -

A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE XIV.

COMPLIANCE WITH LAWS AND REGULATIONS

      A. Laws, Regulations and Orders:

          This agreement shall be subject to the conservation laws of the state
in which the Contract Area is located, to the valid rules, regulations, and
orders of any duly constituted regulatory body of said state; and to all other
applicable federal, state, and local laws, or-dinances, rules, regulations, and
orders.

      B. Governing Law:

          This agreement and all matters pertaining hereto, including, but not
limited to, matters of performance, non-performance, breach, remedies,
procedures, rights, duties, and interpretation or construction, shall be
governed and determined by the law of the state in which the Contract Area is
located. If the Contract Area is in two or more states, the law of the state of
Texas shall govern.

      C. Regulatory Agencies:

          Nothing herein contained shall grant, or be construed to grant,
Operator the right or authority to waive or release any rights, privileges, or
obligations which Non-Operators may have under federal or state laws or under
rules, regulations or orders promulgated under such laws in reference to oil,
gas and mineral operations, including the location, operation, or production of
wells, on tracts offset- ting or adjacent to the Contract Area.

          With respect to operations hereunder, Non-Operators agree to release
Operator from any and all losses, damages, injuries, claims and causes of action
arising out of, incident to or resulting directly or indirectly from Operator’s
interpretation or application of rules, rulings, regulations or orders of the
Department of Energy or predecessor or successor agencies to the extent such
interpretation or ap-was made in good faith. Each Non-Operator further agrees to
reimburse Operator for any amounts applicable to such Non- Operator’s share of
production that Operator may be required to refund, rebate or pay as a result of
such an incorrect interpretation or application, together with interest and
penalties thereon owing by Operator as a result of such incorrect interpretation
or application.

          Non-Operators authorize Operator to prepare and submit such documents
as may be required to be submitted to the purchaser of any crude oil sold
hereunder or to any other person or entity pursuant to the requirements of the
“Crude Oil Windfall Profit Tax Act of 1980", as same may be amended from time to
time (“Act”), and any valid regulations or rules which may be issued by the
Treasury Department from time to time pursuant to said Act. Each party hereto
agrees to furnish any and all certifications or other information which is
required to be furnished by said Act in a timely manner and in sufficient detail
to permit compliance with said Act.

ARTICLE XV.

OTHER PROVISIONS

SEE ATTACHED OTHER PROVISIONS

- 14 -

A.A.P.L.     FORM 610 — MODEL FORM OPERATING AGREEMENT — 1982

ARTICLE XVI.

MISCELLANEOUS

          This agreement shall be binding upon and shall inure to the benefit of
the parties hereto and to their respective heirs, devisees, legal
representatives, successors and assigns.

          This instrument may be executed in any number of counterparts, each of
which shall be considered an original for all purposes.

          IN WITNESS WHEREOF, this agreement shall be effective as of 12th day
of April , (year) 2004 . _____________, who has prepared and circulated this
form for execution, represents and warrants that the form was printed from and
with the exception listed below, is identical to the AAPL Form 610-1982 Model
Form Operating Agreement, as published in diskette form by Forms On-A-Disk, Inc.
No changes, alterations, or modifications, other than those in Articles III, IV,
V, VII, XV , have been made to the form.

O P E R A T O R

          PARTY

_______________________________________        
________________________________________
      
      

N O N — O P E R A T O R S

        NESS ENERGY INTERNATIONAL, INC.

_______________________________________        
________________________________________
      Sha Stephens
      President, C.E.O.