EXHIBIT 10.2

CREDIT

AGREEMENT

Dated as of

April 14, 2004

Between

ARENA RESOURCES, INC.,

a Nevada corporation

"Borrower"

and

MIDFIRST BANK

"Bank"

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT, dated effective as of April 14, 2004, is made and entered
into between ARENA RESOURCES, INC., a Nevada corporation (the "Borrower"), and
MIDFIRST BANK (the "Bank").

WITNESSETH:

WHEREAS, the Borrower has requested the Bank to establish a (A) revolving line
of credit in favor of the Borrower in the maximum principal amount not in excess
of the least of (i) FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00), (ii)
the Line Commitment (as herein defined), or (iii) the Collateral Borrowing Base
(as herein defined, established and redetermined from time to time), to be
evidenced by the Borrower's promissory note payable to the order of the Bank and
dated as of even date herewith (the "Line Note") for the purposes of financing
(x) the Borrower's acquisition of Proved Developed Producing Reserves (as
hereinafter defined) from time to time on acquisitions approved for financing by
the Bank, including without limitation, the East Hobbs Acquisition and (y) the
issuance of certain standby letters of credit in the operation of the Borrower's
oil and gas business, and (B) a short term bridge loan in favor of the Borrower
in the maximum principal amount not in excess of $2,000,000.00 (the "Bridge
Commitment") for the sole purpose of enabling the Borrower to close the East
Hobbs Acquisition and to be evidenced by the Borrower's promissory note payable
to the order of the Bank and dated as of even date herewith (the "Bridge Note")
(the "Line Commitment and the Bridge Commitment, collectively, the
"Commitments"); and

WHEREAS, the Bank is willing to establish the Commitments in favor of the
Borrower upon the terms and conditions herein set forth and upon the Borrower's
granting in favor of the Bank a continuing and continuous first and prior
mortgage lien, pledge of and security interest in certain oil and gas leasehold,
mineral and mining interests, all as more particularly described and defined in
the Mortgage (as hereinafter defined), as collateral and security for all
indebted­ness incurred pursuant to the Commitments;

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, receipt of which is
acknowledged by the parties hereto, the parties agree, as follows:

ARTICLE I

CERTAIN DEFINITIONS

When used herein, the following terms shall have the follow­ing meanings:

"Adjusted Gross Proceeds" shall mean (i) all proceeds received by the Borrower
during the applicable period, whether directly or indirectly, from purchasers of
Hydrocarbons produced from the Mortgaged Property, plus (ii) all amounts which
the Borrower was entitled to receive during such period but which were offset by
the purchaser of production or an intermediary against obligations (other than
ordinary operating expenses) owing by the Borrower; less the amount of all
gathering, severance and windfall profits taxes required to be paid by the
Borrower with respect to said proceeds and all royalty and overriding royalty
payments to third parties and all ordinary and necessary operating expenses paid
by the Borrower with respect to the Mortgaged Property.

"Advances" shall mean any and all Line Advances and Bridge Advances.

"Applicable Rate" shall mean the LIBOR-Rate plus the Margin unless the Base Rate
is deemed applicable in accordance with the provisions of Section 2.6 hereof.
 Any changes in the Applicable Rate shall be effective as of the date of the
change.

"Authorized Signatory(ies)" shall mean Stanley McCabe and/or any other person(s)
authorized in writing thereby or pursuant to corporate resolutions duly adopted
by the Borrower's board of directors to request Advances hereunder or direct
voluntary prepayment(s) of the Notes as permitted hereby.

"Base Rate" shall mean the variable annual rate of interest announced from time
to time by JPMorgan Chase Bank, N. A., New York, New York, or such other
financial institution that is the primary banking subsidiary of JPMorgan Chase &
Company ("Chase"), from time to time as its prime or base rate, which rate shall
be the rate used by Chase as a base or standard for pricing purposes and which
shall not necessarily be its "best" or lowest rate) as its prime or base lending
rate of interest.  Should Chase cease to announce a prime or base rate or should
it be merged, consolidated, liquidated or dissolved in such a manner that it
loses its separate corporate identity, then the Base Rate shall be the Prime
Rate published by The Wall Street Journal (Southwest Edition) in its "Money
Rates" column or a similar rate if such rate ceases to be published.

"Bridge Commitment" shall mean the agreement of the Bank to make the Bridge Loan
under Section 2.1.2 of this Agreement in the maximum principal amount of
$2,000,000.00 for the sole purpose of financing the Borrower's East Hobbs
Acquisition.

"Bridge Loan" shall have the meaning ascribed to it in Section 2.1.2 of this
Agreement.

 

"Bridge Note" shall mean the promissory note from the Borrower payable to the
order of the Bank and evidencing the Bridge Loan as more particularly described
in Section 2.2.2 of this Agreement.

"Business Day" shall mean a day other than a Saturday, Sunday or a day upon
which banks in the State of Oklahoma are closed to business generally.

"Capital Lease" shall mean, with respect to any Person, any lease of (or other
agreement conveying the right to use) any real or personal property by such
Person that, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of such Person.

"CERCLA" shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, together with all regulations and rulings
promulgated with respect thereto.

"Closing Date" shall mean the date the Loan Documents are executed and delivered
to the Bank.

"Collateral" shall have the meaning assigned to that term in Article IV of this
Agreement.

"Current Assets" shall mean the value of the Borrower's current assets
determined in accordance with GAAP plus, as of any date, the current unused
availability on the Commitments.

"Current Liabilities" shall mean the amount of the Borrower's current
liabilities as determined in accordance with GAAP, excluding therefrom current
maturities due on the Loans.

"Current Ratio" shall mean the ratio of Current Assets to Current Liabilities.

"Default Rate" shall mean the Applicable Rate plus five percentage points (5%)
per annum.

"Dollar," "Dollars," and the symbol "$" shall mean lawful money of the United
States of America.

"East Hobbs Acquisition" shall mean the acquisition by the Borrower of the
Proved Developed Producing Reserve oil and gas wells and twelve (12) leasehold
properties situated in the East Hobbs San Andres unit of Lea County, New Mexico,
from CrownQuest Operating, LLC (the "Seller"), as more particularly described in
that certain term sheet delivered by the Borrower to the Bank.

"EBIT" shall mean, for any period, Net Income for such period plus, to the
extent deducted in determining such Net Income, Interest Expense and income tax
expense for such period.

"Environmental Laws" shall mean Laws, including without limitation federal,
state or local Laws, ordinances, rules, regulations, interpretations and orders
of courts or administra­tive agencies or authorities relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, groundwater, land surface and subsurface strata), including
without limitation CERCLA, SARA, RCRA, HSWA, OPA, HMTA, TSCA and other Laws
relating to (i) Polluting Substances or (ii) the manufacture, processing,
distribution, use, treatment, handling, storage, disposal or transportation of
Polluting Substances.

"Event of Default" shall mean any of the events specified in Section 8.1 of this
Agreement, and "Default" shall mean any event, which together with any lapse of
time or giving of any notice, or both, would constitute an Event of Default.

"GAAP" shall mean generally accepted accounting principles applied on a
consistent basis in all material respects to those applied in the preceding
period.  Unless otherwise indicated herein, all accounting terms will be defined
according to GAAP.

"Guaranties" shall mean the guaranty instruments executed and delivered to the
Bank by the Guarantors.  "Guaranty" shall mean any one of the Guaranties.

"Guarantors" shall mean each of Stanley M. McCabe, Lloyd T. Rochford, and the
trustees of the Lloyd Rochford Living Trust (the "Rochford Trust"), on a joint
and several liability basis.

"hereby," "herein," "hereof," "hereunder" and similar such terms shall mean and
refer to this Agreement as a whole and not merely to the specific section,
paragraph or clause in which the respective word appears.

"HMTA"  shall mean the Hazardous Materials Transporta­tion Act, as amended,
together with all regu­lations and rulings promulgated with respect thereto.

"HSWA" shall mean the Hazardous and Solid Waste Amend­ments of 1984, as amended,
together with all regu­lations and rulings promulgated with respect thereto.

"Hydrocarbons" shall have the meaning assigned to that term in the Mortgage.

"Indebtedness" shall mean and include any and all: (i) indebtedness, obligations
and liabilities of the Borrower to the Bank incurred or which may be incurred or
pur­portedly incurred hereafter pursuant to the terms of this Agree­ment or any
of the other Loan Documents, and any extensions, renewals, substitutions,
amendments and increases in amount thereof, including such amounts as may be
evidenced by the Notes and all lawful interest, letters of credit fees and other
charges, and all reason­able costs and expenses incurred in connection with the
prepara­tion, filing and recording of any amendment or modification of the Loan
Documents, including attorneys fees; (ii) all reasonable costs and expenses,
including attorneys' fees, paid or incurred by the Bank in enforc­ing or
attempting to enforce collec­tion of any Indebtedness and in enforcing or
realizing upon or attempting to enforce or realize upon any collateral or
security for any Indebtedness and in protecting and preserving the Bank's
interest in the Indebtedness or any collateral or security for any Indebted­ness
in any bank­ruptcy or reorganization proceeding, including interest on all sums
so expended by the Bank accruing from the date upon which such expenditures are
made until paid, at an annual rate equal to the Default Rate; (iii) sums
expended by the Bank in curing any Event of Default or Default of the Borrower
under the terms of this Agreement, the other Loan Documents or any other
security agreement or other writing evi­dencing or securing the payment of the
Notes together with interest on all sums so expended by the Bank accruing from
the date upon which such expenditures are made until paid, at an annual rate
equal to the Default Rate; and (iv) all "Indebted­ness" or "Secured
Indebtedness" as said terms are defined in each of the Loan Documents.

"Initial Engineering Report" shall mean the engineering report evaluating the
Borrower's proven producing oil and gas reserves prepared by Lee Keeling and
Associates dated January 1, 2004.

"Interest Coverage Ratio" shall mean the ratio of (a) EBIT for such period to
(b) Interest Expense for such period.

 "Interest Expense" shall mean for any period the consolidated interest expense
of the Borrower for such period (including all imputed interest on Capital
Leases).

"ISDA Agreement" shall means the International Swap Dealers Association
agreement, as amended, modified, replaced or supplemented from time to time,
together with exhibits, schedules, addenda and annexes attached thereto from
time to time.

"Laws" shall mean all statutes, laws, ordinances, regulations, orders, writs,
injunctions, or decrees of the United States, any state or commonwealth, any
municipality, any foreign country, any territory or possession, or any Tribunal.

"LIBOR-Rate" shall mean the rate of interest quoted for the "London Interbank
Offered Rates (LIBOR)" category of the "Money Rates" column in The Wall Street
Journal (Southwest Edition) on the date of the Borrower's Request (or, if The
Wall Street Journal is not published on such day, the next previous publication
date thereof) as the average of quotations at major money center banks for the
applicable LIBOR-Rate Funding Periods available hereunder three (3) London
Business Days prior to the first day of such applicable LIBOR-Rate Funding
Period.  The LIBOR-Rate established on the date of the Request for a LIBOR-Rate
Funding Period shall be the interest rate basis used for each day in the
applicable LIBOR-Rate Funding Period as so determined or adjusted, which
determination or adjustment shall be conclusive if made in good faith.  If The
Wall Street Journal shall cease to publish such LIBOR-Rate quotations, the Bank
shall determine such rate as the average of such LIBOR-Rate quotations of three
(3) major New York money center banks of whom the Bank shall inquire.  

"LIBOR-Rate Funding Period" shall mean the applicable funding period quotation
for the LIBOR-Rate as described in Section 2.5(a) of this Agreement.

"LIBOR-Rate Option" shall have the meaning ascribed to that term in Section
2.4(a) of this Agreement.

"Lien" shall mean any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement or other similar form of public notice under the Laws of any
juris­diction).

"Lien Notice" shall mean notice received or obtained by the Bank or knowledge
obtained by the Bank of any Lien being claimed (whether valid or not) by any
Person, other than the Bank or a trustee on behalf of the Bank, with respect to
the Mortgaged Property.

"Line Advance" shall have the meaning ascribed to such term in Section 2.1.1 of
this Agreement.

"Line Commitment" shall mean the agreement of the Bank to make the (A) Line Loan
under Section 2.1.1 of this Agreement in such maximum outstanding principal
amount as may be established by the Bank in writing from time to time (initially
limited to a maximum Line Commitment amount and a Collateral Borrowing Base
amount of $10,400,000 each notwithstanding the stated face amount of the Line
Note), for the limited purposes of financing (i) the Borrower's acquisition of
Proved Developed Producing Reserves and (ii) the issuance of standby letters of
credit in the operation of the Borrower's oil and gas business.

"Line Loan" shall have the meaning ascribed to it in Section 2.1.1 of this
Agreement.

"Line Note" shall mean the promissory note from the Borrower payable to the
order of the Bank and evidencing the Line Loan as more particularly described in
Section 2.2.2 of this Agreement.

"Loan Documents" shall mean this Agreement, the Notes, the Security Instruments,
the Guaranties and all other documents, instruments, title reports, title
opinions and certificates executed and delivered to the Bank by the Borrower
pursuant to the terms of this Agreement.

"Loans" shall mean the Bridge Loan and the Line Loan, collectively.

"London Business Day" shall mean a day for dealing in deposits in Dollars by and
among banks in the London, England interbank market that is also a Business Day.

"Margin" shall mean two hundred twenty five basis points (2.25%).

"Month", with respect to a LIBOR-Rate Funding Period, shall mean the interval
between the Fixed Dates in consecutive calendar months as to such LIBOR-Rate
Funding Period.  The "Fixed Date" shall mean the first day of such LIBOR-Rate
Funding Period and in a succeeding calendar month as to such LIBOR-Rate Funding
Period shall mean the day in such calendar month numerically corresponding to
such first day except (a) if there is no such numerically corresponding day in a
succeeding calendar month the "Fixed Date" for such calendar month shall mean
the last London Business Day of such calendar month, (b) if such first day is
the last day of a calendar month the "Fixed Date" for any succeeding calendar
month shall mean the last London Business Day of such calendar month and (c)
otherwise, if a numerically corresponding day in a succeeding calendar month is
not a London Business Day, the "Fixed Date" for such calendar month shall mean
the next following day that is a London Business Day.

"Mortgage" shall have the meaning assigned to that term in Section 4.1 of this
Agreement.

"Mortgaged Property" shall have the meaning assigned to that term in the
Mortgage.

"Net Income" shall mean, with respect to the Borrower for any period, the net
income (or loss) of the Borrower for such period, excluding (i) any
extraordinary gains or any extraordinary non-cash losses, (ii) any gains or
non-cash losses from the disposition of assets, and (iii) other non-cash losses;
provided that in any of the foregoing cases, any non-cash losses shall not be
excluded to the extent that any such non-cash losses will require a cash payment
in a future period.

"Notes" shall mean the Line Note and the Bridge Note, together with any and all
extensions, renewals, modifications, replacements, consolidations, exchanges,
substitutions and restatements of either thereof.  "Note" shall mean either of
the Line Note or the Bridge Note.

"OPA" shall mean the Oil Pollution Act of 1990, as amended, together with all
regulations and rulings promulgated with respect thereto.

"Person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, and a government or any department, agency or political
subdivision thereof.

"Polluting Substances" shall mean all pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes and shall include, without
limitation, any flammable explosives, radioactive materials, oil, hazardous
materials, hazardous or solid wastes, hazardous or toxic sub­stances or related
materials defined in CERCLA/SARA, RCRA/HSWA and in the HMTA; provided, in the
event either CERCLA/SARA, RCRA/HSWA or HMTA is amended so as to broaden the
meaning of any term defined thereby, such broader meaning shall apply subsequent
to the effective date of such amendment and, provided further, to the extent
that the Laws of any State or other Tribunal establish a meaning for "hazardous
substance," "hazardous waste," "hazardous RCRA/HSWA material," "solid waste" or
"toxic substance" which is broader than that specified in CERCLA/SARA or HMTA,
such broader meaning shall apply.

"Prohibited Hedge Transactions" shall mean the obligations by the Borrower
entering into (i) both physical and financial hedging transactions effective at
concurrent or overlapping periods of time on the same volumes of production or
(ii) hedging transactions for more than seventy percent (75%) of the Borrower's
aggregate monthly production.

"Proved Developed Producing Reserves" shall mean Proved Developed Reserves to be
produced from completion intervals open to production in existing wells.

"Proved Developed Reserves" shall mean Proved Reserves to be recoverable through
existing equipment and with existing facilities.

"Proved Reserves" shall mean the quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in the future from known oil and gas
reservoirs under existing economic and operating conditions, representing
strictly technical judgments and not knowingly influenced by attitudes of
conservatism or optimism.

"RCRA" shall mean the Resource Conservation and Recovery Act of 1976, as
amended, together with all regulations and rulings promulgated with respect
thereto.

"Request" shall have the meaning ascribed to that term in Section 2.3 of this
Agreement.

"SARA" shall mean the Superfund Amendments and Reauthorization Act of 1987, as
amended, together with all regu­lations and rulings promulgated with respect
thereto.

"Security Instruments" shall mean the Mortgage and all other financing
statements, deeds of trust, assignments, security agreements, documents or
writings and any and all amendments and supplements thereto, granting,
conveying, assigning, transferring or in any manner providing the Bank with a
security interest, mortgage lien or deed of trust lien in any property as
security for the repayment of all or any part of the Indebtedness.

"Tangible Net Worth"  shall mean Net Worth minus all assets that would be
classified as intangible assets under GAAP, including (without limitation) good
will, patents, franchises, organization costs, research and development costs,
covenants not to compete and other deferred charges excluding intangible
development costs.  "Net Worth" shall mean, on any date as of which the amount
thereof is to be determined, the sum of the following determined in accordance
with GAAP; (a) the amount of stated capital plus (b) the amount of surplus and
retained earnings (or, in the case of surplus or retained earnings deficit,
minus the amount of such deficit).  

"Taxes" shall mean all taxes, assessments, fees, or other charges or levies from
time to time or at any time imposed by any Laws or by any Tribunal.

"Tribunal" shall mean any municipal, state, commonwealth, Federal, foreign,
territorial or other sovereign, governmental entity, governmental department,
court, commission, board, bureau, agency or instrumentality.

"TSCA" shall mean the Toxic Substances Control Act, as amended, together with
all regu­lations and rulings promulgated with respect thereto.

ARTICLE II

LOANS

2.1

Commitments.

2.1.1

Line Commitment.  The Bank agrees, upon the terms and subject to the conditions
hereinafter set forth, to establish a revolving line of credit (the "Line Loan")
in favor of the Borrower pursuant to which the Bank will lend to the Borrower
such amounts as the Borrower may from time to time request (such advances to the
Borrower on the Line Loan are collec­tive­ly herein referred to as "Line
Advances") until April 13, 2007; provided that no Line Advance shall be made
available at any time when the aggregate outstanding principal balance of all
unpaid Line Advances made by the Bank to the Borrower hereunder exceeds the
least of $15,000,000, the Collateral Borrowing Base (initially stipulated to be
$10,400,000) or the then applicable Line Commitment amount (initially stipulated
to be $10,400,000.00), or such requested Line Advance would cause the same to
exceed the least of $15,000,000, the Line Commitment amount (currently
$10,400,000), or the then applicable Collateral Borrowing Base (as determined
and adjusted from time to time in accordance with the provisions of Section 3.1
hereof).  Subject to such limitations and conditions, the Borrower may borrow,
repay and reborrow under the Line Loan, subject to the terms hereof.  The
maximum Line Commitment amount (currently stipulated to be $10,400,000) shall
not be increased without the Bank’s express written consent thereto.  Such Line
Commitment may be terminated, canceled and extinguished by the Borrower upon
written notice to the Bank thereof only if and to the extent no Line Loan is
outstanding and unpaid and no unexpired Letters of Credit remain outstanding and
in effect.

2.1.2

Bridge Commitment.  The Bank agrees, upon the terms and subject to the
conditions hereinafter set forth, to establish a non-revolving line of credit
(the "Bridge Loan") in favor of the Borrower pursuant to which the Bank will
lend to the Borrower such amounts as the Borrower may from time to time request
(such advances to the Borrower are collectively herein referred to as "Bridge
Advances") until June 30, 2004, only for the purpose of financing the Borrower's
East Hobbs Acquisition.  Subject to such limitations and conditions, the
Borrower may not reborrow under the Bridge Loan following payment or prepayment
thereof.  Such Bridge Commitment may be terminated, canceled and extinguished by
the Borrower upon written notice to the Bank thereof only if and to the extent
no Bridge Loan is outstanding and unpaid.

2.2

Notes.

2.2.1

Line Note.  The Borrower's obligation to repay all Line Advances made by the
Bank under the Line Loan, together with interest accruing thereon shall be
evidenced by the Borrower's promissory note of even date herewith payable to the
order of the Bank in the original principal amount of $15,000,000.00 (the "Line
Note").  A copy of the Line Note is attached hereto as Exhibit A-1.  The Line
Note shall accrue interest on unpaid balances of principal, and on any past due
interest, at a variable annual rate equal from day to day to the Applicable
Rate, due monthly on the last day of each calendar month, commencing April 30,
2004, with the outstanding principal balance thereof and all accrued but unpaid
interest on the Line Note due and payable at final maturity on April 13, 2007.
 The Bank's Line Commitment on the Line Loan shall automatically extinguish on
such final maturity date.  After maturity (whether by acceleration or otherwise)
the Line Note shall bear interest at the Default Rate payable on demand.
 Notwithstanding the face amount of the Line Note, the maximum outstanding
amount available in Line Advances from time to time shall in no event exceed the
lesser of the Collateral Borrowing Base (initially stipulated to be $10,400,000)
or the current applicable Commitment amount (presently stipulated to be
$10,400,000).

2.2.2

Bridge Note.  The Borrower's obligation to repay all Bridge Advances made by the
Bank under the Bridge Loan, together with interest accruing thereon shall be
evidenced by the Borrower's promissory note of even date herewith payable to the
order of the Bank in the original principal amount of $2,000,000.00 (the "Bridge
Note").  A copy of the Bridge Note is attached hereto as Exhibit A-2.  The
Bridge Note shall accrue interest on unpaid balances of principal, and on any
past due interest, at a variable annual rate equal from day to day to the
Applicable Rate, due monthly on the last day of each calendar month, commencing
April 30, 2004, with the outstanding principal balance thereof and all accrued
but unpaid interest on the Bridge Note due and payable at final maturity on June
30, 2004.  The Bank's Bridge Commitment on the Bridge Loan shall automatically
extinguish on such final maturity date.  After maturity (whether by acceleration
or otherwise) the Bridge Note shall bear interest at the Default Rate payable on
demand.  

2.3

Revolving Credit Advances, Payments and Voluntary Prepayment.  Each Line Loan
and Bridge Loan requested by the Borrower from the Bank (a "Request") shall (i)
be requested in writing (facsimile is satisfactory) by the Borrower no later
than 12:00 noon (applicable current time in Tulsa, Oklahoma) on the date upon
which the advance is to be made, or alternatively, requested telephonically
before 12:00 noon (applicable current time in Tulsa, Oklahoma) on the date such
advance is to be made (such telephonic request to be promptly confirmed by a
written request in accordance herewith), and if by written request, such writing
shall be executed by an Authorized Signatory on a form of loan advance request;
(ii) be in the amount of $10,000 or an integral multiple thereof (unless the
amount then available to borrow is less than $10,000, in which event an advance
may be made in the amount available); (iii) be advanced by the Bank on the
applicable date, provided the request is timely made in accordance with Section
2.3(i) hereof and all other conditions of funding are met; and (iv) with respect
to Line Loans requested by the Borrower, not cause the aggregate outstanding and
unpaid principal amount of the Line Note to exceed the Collateral Borrowing
Base.  All Advances made by the Bank shall, for mutual conven­ience, be
deposited into the Borrower's account at the Bank, and the Bank shall have no
responsibi­lity to monitor the distribution or disbursement of such Advances in
any other respect.  In consideration of the Bank's permitting the Borrower to
make requests for Advances by telephone, the Borrower states that it is fully
aware of the risks attendant thereto, and agrees to accept all such risks and to
hold the Bank and its officers, directors, agents and employees harmless from
any and all loss which the Borrower may incur by reason of any such non-written
loan advance requests, other than such losses as result solely from the Bank’s
gross negligence of wanton disregard.

Subject to Section 2.5 hereof, the Borrower may from time to time make
prepayments of princi­pal without premium or penalty.  The Borrower may reborrow
under the Line Commitment subject to the limitations and conditions for the Line
Loan con­tained herein.  All advances made by the Bank on the Notes and all
pay­ments or prepayments of principal and interest thereon made by the Borrower
shall be recorded by the Bank in its records, and the aggregate unpaid principal
amount so recorded shall be conclus­ive evidence of the principal amount owing
and unpaid on the Line Note and the Bridge Note, respectively.  The failure to
so record shall not, how­ever, limit or otherwise affect the obligations of the
Borrower hereunder or under the Notes to repay the principal amount of the Loans
together with all interest accrued thereon.  If additional lines or blanks shall
be needed for the purpose of recording advances or payments on the schedule, one
or more additional schedules may be annexed to the Line Note or the Bridge Note,
as applicable, and shall become a part thereof.  All payments and prepayments
shall be made in lawful money of the United States of America.  Any payments or
prepayments on the either Note received by the Bank after 12:00 noon (applicable
current time in Tulsa, Oklahoma) shall be deemed to have been made on the next
succeeding Business Day.  All outstanding principal of and accrued interest on
the Line Note not previously paid hereunder shall be due and payable at the
final maturity date on April 13, 2007, unless such maturity date shall be
extended by the Bank in writing or accelerated pursuant to the terms hereof.
 All outstanding principal of and accrued interest on the Bridge Note not
previously paid hereunder shall be due and payable at the final maturity date on
June 30, 2004, unless such maturity date shall be extended by the Bank in
writing or accelerated pursuant to the terms hereof.

2.4

Interest Rates.

(a)

Interest Rate.  Subject to the provisions hereof, the Borrower shall select the
LIBOR-Rate Option for Advances hereunder. Advances outstanding from time to time
on the Notes shall accrue interest at one of the LIBOR-Rate Funding Periods;
provided that the minimum Advance to which a LIBOR-Rate Option election is
available shall be $500,000.00 or in $100,000.00 increments in excess thereof.
 The "LIBOR-Rate Option" is a rate of interest per annum (based on a year of 360
days and actual days elapsed) equal to the LIBOR-Rate plus the Margin.

(b)

Interest Rate After Maturity.  After the principal amount of the Notes shall
have become past due (by acceleration or past the stated maturity date except as
renewed pursuant to Section 2.5(a) hereof), the Notes shall bear interest for
each day until paid (before and after judgment) at the Default Rate.

2.5

LIBOR-Rate Funding Periods.

(a)

At any time when the Borrower shall select or renew the LIBOR-Rate Option, the
Borrower shall fix either a thirty (30) day (One Month), sixty (60) day (Two
Months), or ninety (90) day (Three Months) period during which such LIBOR-Rate
shall apply (a "LIBOR-Rate Funding Period"); provided, that each such LIBOR-Rate
Funding Period shall begin on a London Business Day.

(b)

At the end of each applicable LIBOR-Rate Funding Period, the Borrower may either
(i) repay all outstanding balances of principal and interest for which the
LIBOR-Rate Option has been selected in accordance herewith or (ii) select the
same or different LIBOR-Rate Funding Period to apply to not less than
$500,000.00 (or in $100,000.00 increments in excess thereof) of the outstanding
principal balance of the applicable Note.  

(c)

During any applicable LIBOR-Rate Funding Period, unless otherwise provided by
the terms and provisions of this Agreement, the Borrower may not prepay (in part
or in whole) the outstanding principal balance of the applicable Note evidenced
by such LIBOR-Rate Funding Period amount, and the LIBOR-Rate Funding Period
shall continue until the end of the applicable LIBOR-Rate Funding Period.  At
any one time during the term of the Commitments, not more than three (3)
tranches of LIBOR-Rate Funding Periods may be in effect.

2.6

LIBOR-Rate Unascertainable; Impracticability. If

(a)

on any date on which a LIBOR-Rate would otherwise be set, the Bank shall have in
good faith determined (which determination shall be conclusive) that:

(i)

adequate and reasonable means do not exist for ascertaining such LIBOR-Rate, or

(ii)

the effective cost to the Bank for funding a LIBOR-Rate Funding Period shall
exceed the LIBOR-Rate applicable to such LIBOR-Rate Funding Period, or

(b)

at any time the Bank shall have determined in good faith (which determination
shall be conclusive) that the making, maintenance or funding of the LIBOR-Rate
has been made unlawful by compliance by the Bank in good faith with any Law or
guideline or interpretation or administration thereof by any Tribunal charged
with the interpretation or administration thereof or with any request or
directive of any such Tribunal (whether or not having the force of law);

then, and in any such event, the Bank shall notify the Borrower of such
determination.  Upon the effective date as shall be specified in such notice
(which shall not be earlier than the date such notice is given), the obligation
of the Bank to allow the Borrower to select, convert to or renew the LIBOR-Rate
Option, as the case may be, shall be suspended until the Bank shall have
subsequently notified the Borrower of the Bank's determination in good faith
(which determination shall be conclusive) that the circumstances giving rise to
such previous determination no longer exists.  At the time the Bank makes a
determination under of this Section 2.6(b), such notification by the Bank to the
Borrower shall be deemed to provide for conver­sion of then existing LIBOR-Rate
Option amounts to the Base Rate on the effective date specified in such
notification.  Commencing on such effective date, the Bank shall utilize the
Base Rate.  If the Borrower has previously notified the Bank of the selection of
one or more LIBOR-Rate Funding Periods that have not yet gone into effect as of
the foregoing notification date, such notification shall be deemed to provide
for conversion to the Base Rate instead of the LIBOR-Rate Option.

 

2.7

Optional Conversion or Renewal.

(a)

LIBOR-Rate Option.  If the LIBOR-Rate Option is in effect, then, with at least
two (2) Business Days' notice to the Bank prior to the expiration of any
LIBOR-Rate Funding Period, the Borrower may renew the LIBOR-Rate (for the same
or to a different LIBOR-Rate Funding Period).  Whenever the Borrower desires to
convert or renew any LIBOR-Rate Funding Period, the Borrower shall provide the
Bank, at least two (2) Business Days prior to the date of the proposed
conversion or renewal, with the following information:

(i)

the date, which shall be a Business Day, on which the proposed conversion or
renewal is to be made;

(ii)

the then-applicable LIBOR-Rate Funding Period selected; and

(iii)

a fully completed LIBOR Option Rate Sheet, in the form of Exhibit B attached
hereto, duly executed by an Authorized Signatory.

Notice having been so provided, after the date specified in such notice
(telephonic or where applicable, in writing) interest shall be calculated upon
the entire principal amount of the Loan as so converted or renewed.  Interest on
the principal amount of the Loan converted or renewed (automatically or
otherwise) shall be due and payable in accordance with the provisions of the
applicable Note.

(b)

Failure to Renew.  Absent due notice from the Borrower of renewal in the
circumstances described in Section 2.7(a) hereof, the LIBOR-Rate Funding Period
for which such notice is not received shall be automatically renewed to the
LIBOR-Rate Option applicable to the applicable Note on the last day of the
applicable expiring LIBOR-Rate Funding Period in accordance with the terms and
provisions hereof for the same LIBOR-Rate Funding Period.

2.8

Proceeds of Sale of Mortgaged Property.  In the event any interest of the
Borrower in any of the Mortgaged Property is sold, the sales proceeds of any
such sale shall be applied initially to the outstand­ing principal balance of
the Bridge Note, then to the outstanding principal balance of the Line Note,
then to accrued interest under the Bridge Note, then to accrued interest under
the Line Note; provided, however, no such sale shall occur without the prior
written consent of the Bank.

2.9

Letters of Credit.  Upon the Borrower's application from time to time by use of
the Bank's standard form Letter of Credit Application Agreement and subject to
the terms and provisions therein and herein set forth, the Bank agrees to issue
standby letters of credit ("Letters of Credit") on behalf of the Borrower under
the Line Commitment; provided that (i) any Letters of Credit issued on behalf of
or on the account of the Borrower with an expiry date later than March 31, 2007,
will, at the Bank's sole option, be fully secured and collateralized by cash or
cash equivalent acceptable to the Bank in its sole discretion and held thereby
from and after maturity on March 31, 2007, until expiration or cancellation of
such Letter(s) of Credit or payment of all draws thereon on demand of the Bank,
(ii) no Letter of Credit will be issued on behalf of or for the account of the
Borrower if at the time of issuance the outstanding amount of all unpaid Line
Loans (including the aggregate outstanding and unfunded amount of unexpired
Letters of Credit then existing) under the Line Commitment as evidenced by the
Line Note plus the maximum amount of such Letter of Credit then being requested
would exceed the Collateral Borrowing Base, (iii) the amount of all issued and
outstanding Letters of Credit on behalf of or for the account of the Borrower
shall not exceed, at any time, $1,000,000 in the aggregate, and (iv) each Letter
of Credit issued on the Borrower's behalf shall contain language acceptable to
the Bank pertaining to automatic cancellation/reduction, as applicable.  If any
Letter of Credit is drawn upon at any time, each amount drawn, whether a full or
partial draw thereon, shall be paid by wire transfer and reflected by the Bank
as an advance on the Line Note effective as of the date of the Bank's honoring
the sight draft and such Letter of Credit shall be canceled immediately upon
such wire transfer.  In consideration of the Bank's agreement to issue Letters
of Credit hereunder, the Borrower agrees to pay to the Bank letter of credit
fees equal to one-half of one percent (0.50%) per annum on the face amount of
each Letter of Credit plus normal processing fees (subject to a minimum fee of
$250.00 for each Letter of Credit), which such fees shall be due and payable to
the Bank at the time of issuance of each applicable Letter of Credit and shall
be paid by debit in such amount to the Borrower's deposit account with the Bank,
not sooner than three (3) days following the mailing by regular mail of notice
of such intended debit.  

2.10

Unused Fees.  The Borrower shall pay to the Bank on the Line Loan a non-usage
fee in an amount equal to one-eighth of one percent (12.50 basis points) per
annum of the amount by which the lesser of (i) the then applicable Collateral
Borrowing Base (initially $7,000,000) or (ii) the then applicable and effective
Line Commitment amount (currently set at $7,000,000) exceeds the sum of the
average daily amount of the outstanding principal balance of the Line Note from
the Closing Date (including the aggregate unfunded amount of all outstanding
Letters of Credit issued hereunder).  Such non-usage fee shall be due quarterly
in arrears as the same accrues payable promptly upon receipt by the Borrower of
notice from the Bank of the amount thereof.

2.11

Use of Advances.  Each Line Advance requested by the Borrower from the Bank
shall be used by the Borrower solely for the limited purpose of financing (i)
the Borrower's acquisition of Proved Developed Producing Reserves and/or (ii)
the issuance of standby letters of credit in the operation of the Borrower's oil
and gas business.  The Bridge Advance requested by the Borrower from the Bank
shall be used by the Borrower solely for the limited purpose of financing the
East Hobbs Acquisition and may not be reborrowed after payment or prepayment
thereof.

2.12

Bridge Note Mandatory Prepayment.  Within twenty (20) days of the Borrower's
successful closing and funding of its equity public offering  (Form SB-2
registration statement as filed with the Securities and Exchange Commission on
March 18, 2004), the Borrower shall prepay in its entirety the outstanding
principal balance of the Bridge Note.

 

ARTICLE III

COLLATERAL BORROWING BASE

3.1

Semiannual Engineering Reports.

(a)

The Borrower shall deliver to the Bank at the Borrower's cost by each February
28 and August 31, commencing August 31, 2004, an oil and gas reserve/reserve
economics report in form, substance and scope acceptable to the Bank (each an
"Engineering Report") as is necessary or appropriate for the Bank's engineers or
any other independent petroleum engineer acceptable to the Bank to compile and
prepare by each March 31 and September 30 (commencing September 30, 2004) an
engineering report in form and substance satisfactory to the Bank, evaluating
the proven producing oil and gas reserves attributable to the Borrower's
aggregate interest in the Mortgaged Property (as defined in subsection (b)
below), together with the expenses attributable thereto.  Each Engineering
Report delivered by the Borrower to the Bank by February 28 of each year shall
be prepared by an independent petroleum engineer selected by the Borrower and
acceptable to the Bank and in form, scope and substance acceptable to the Bank,
the cost of which shall be borne solely by the Borrower.  Each Engineering
Report delivered by the Borrower to the Bank by August 31 of each year may, at
the Borrower's election, be prepared internally from data furnished by the
Borrower.  Each Engineering Report furnished to the Bank by or on behalf of the
Borrower shall be accompanied by such other information as shall be requested by
the Bank in order for it to make its independent determination of the Collateral
Borrowing Base, and by a certificate of the Borrower certifying that the
Borrower has good and indefeasible title to the Mortgaged Property valued and
that payments are being received from purchasers of production with respect to
said interests except for payments suspended for valid reasons.  At any time
after thirty (30) days of the receipt of such Engineering Report and in no event
later than each March 31 and September 30 (commencing September 30, 2004,) (each
being a "Redetermination Date") and such other time or times as the Bank, at the
Borrower's written request, may agree in writing, in its sole option and
discretion, the Bank shall (i) make a determination of the present worth
pursuant to the Bank's independent engineering analysis, using such pricing and
discount factors (calculated on the basis of PW10 [present worth, discounted ten
percent per annum]) as it deems appropriate pursuant to the Bank's then
applicable energy lending policies, procedures and pricing parameters, of the
future net revenue estimated by the Bank to be received by the Borrower from
production from the Mortgaged Property so evaluated in accordance with the
Bank's then applicable lending criteria; and (ii) establish and report such
evaluation by the Bank of such evaluated oil and gas properties after the most
recent Redetermination Date to the then current date as the "Collateral
Borrowing Base."  The good faith determinations of Bank in such respects shall
be conclusive.  From the Closing Date until the September 30, 2004,
Redetermination Date, the Collateral Borrowing Base, shall be limited to
$10,400,000.00, unless otherwise agreed to in writing by the Bank in accordance
with the redetermination provisions hereof.  "PW10", as used herein, shall mean
the discounted present worth factor of ten percent (10%) per annum utilized in
determining the present worth value of the Mortgaged Property pursuant to this
Section 3.1(a).

(b)

The term "Mortgaged Property" shall refer only to such properties covered by the
Mortgage (or a supplemental mortgage or deed of trust, duly executed,
acknowledged and delivered by the Borrower to the Bank in form satisfactory to
counsel for the Bank) and which properties are, at the time:

(i)

particularly and adequately described under the Mortgage or other supplemental
mortgage or deed of trust;

(ii)

completed or developed (in the case of oil and gas leases) to the extent that
value is being assigned to them by the Bank in connection with such evaluation
and the Bank has determined that such properties are capable of producing oil or
gas in commercial quantities; and

(iii)

approved as to title to the satisfaction of the Bank.

(c)

The Borrower agrees that the Bank shall be entitled at all times to have the
"Mortgaged Property," as encumbered by the Mortgage or supplemental mortgages,
or deeds of trust constitute an aggregate value equal to a percentage
(determined from time to time by the Bank in its discretion and initially set at
eighty percent (80%)) of the aggregate value of the Borrower's Proved Developed
Producing Reserves.  For the purpose of determining the Collateral Borrowing
Base and compliance herewith, the term "Proved Developed Producing Reserves" (as
defined in Article I hereof), in addition to properties that qualify as
"Mortgaged Property" pursuant to the criteria hereof and of subsection 3.1(b)
above, shall refer only to such other oil and gas mining, mineral and/or
leasehold working interests of the Borrower, if any, that satisfy the criteria
of clause (iii) of subsection 3.1(b) above in all respects.

(d)

The initial Collateral Borrowing Base ($10,400,000.00) shall remain in effect
until otherwise changed by written agreement between the Borrower and the Bank
or as adjusted by the Bank pursuant to the redetermination procedures
established herein.  

(f)

The Borrower agrees that the Bank may, in its sole discretion and in connection
with any Collateral Borrower Base redetermination, modify, amend, add or delete
any financial covenant(s) effective as of such Redetermination Date.

3.2

Additional Engineering Reports.  In connection with any Line Advance requested
by the Borrower from the Bank used or to be used for the acquisition of
substantial Proved Developed Producing Reserves, the Bank, in its sole
discretion, may require the Borrower to deliver to the Bank, at the Borrower's
expense, an Engineering Report prepared by an independent petroleum engineer
selected by the Borrower and acceptable to the Bank, which such Engineering
Report shall be in form, scope and substance acceptable to the Bank with the
cost thereof being borne solely by the Borrower.

3.3

Collateral Deficiency.  Should the aggregate amount of all Line Advances made
and unfunded Letters of Credit issued under the Line Commitment at any time
prior to maturity of the Line Note be greater than the Collateral Borrowing Base
in effect at such time, the Bank may notify the Borrower in writing of the
deficiency and, at the Bank's election, require the Borrower to:

(a)

Make a prepayment upon the Line Note in an amount sufficient to reduce the
aggregate amount of all Line Advances made under the Line Commitment to an
amount equal to or less than the amount of the Collateral Borrowing Base; or

(b)

Make mandatory equal monthly principal prepayments on the Line Note due on the
next six (6) successive monthly interest installment due dates on the Line Note
equal in an aggregate amount that will reduce the outstanding principal balance
of the Line Note to the projected Collateral Borrowing Base as of the next
immediate semi-annual redetermination thereof in accordance with the provisions
of Section 3.1(a) hereof; or

(c)

Execute and deliver to the Bank one or more supplemental mortgages, deeds of
trust, security agreements or pledges encumbering other properties or assets in
form and substance satisfactory to the Bank and its counsel as additional
security for the Line Note (and all other Indebtedness) to the extent such
properties are acceptable to the Bank and of such value, as determined by the
Bank, that the aggregate amount of all Line Advances made under the Line Note
will not exceed the Collateral Borrowing Base in conformance with the Bank's
then applicable energy lending and engineering/evaluation policies and
procedures.

If the Bank shall have elected to require a prepayment on the Line Note under
Section 3.3(a) hereof, such prepayment shall be due within fifteen (15) days
after the Bank shall have notified the Borrower of such election, and the
prepayment shall be applied at the Bank's option, to the principal payments of
the Line Note in inverse order of maturity.  If the Bank shall elect to require
execution and delivery one or more supplemental oil and gas mortgages and deeds
of trust to the Bank under Section 3.3(c) hereof, the Borrower shall provide the
Bank with descriptions of the addi­tional properties to be mortgaged (together
with any title opinions, current valuations and engineer­ing reports applicable
thereto which may be requested by the Bank) at the time of the Borrower's notice
of such election and shall execute, acknowl­edge and deliver to the Bank the
appropriate supplemental mortgages and deeds of trust within ten (10) days after
such collateral documents shall be tendered to the Borrower by the Bank for
execution thereby, all in compliance with the provisions of clauses (i), (ii)
and (iii) of subsection 3.1(b) above.

ARTICLE IV

SECURITY

4.1

Collateral.  The repayment of the Indebtedness shall be secured by a first and
prior mortgage lien and security interest in and to the Mortgaged Property,
pursuant to the terms of that certain Mortgage, Deed of Trust, Security
Agreement, Financing Statement and Assignment (with Power of Sale) dated as of
even date herewith (the "Mortgage"), together with all proceeds and products of
the items or types of collateral described in this Article IV including without
limitation, general intangibles, payment intangibles, supporting obligations,
insurance proceeds and all cash, money, certificates of deposit, deposits and
deposit or demand accounts of the Borrower at any time in the posses­sion or
control of the Bank (the collateral described herein and in the Security
Instruments being referred to as the "Collateral").

4.2

Additional Properties.  In order to satisfy the Bank's minimum percentage of
Proved Developed Producing Reserves policy described in subsection 3.1(c) above
(initially 80%), the Bank has the right, in its sole discretion, to elect to
encumber such minimum percentage of the Borrower's oil and gas reserves as
Collateral for the Indebtedness pursuant to such supplemental or additional
mortgages, deeds of trusts or security agreements covering such additional
properties in form and substance satisfactory to the Bank and its counsel and in
full compliance with the criteria of clauses (i), (ii) and (iii) of subsection
3.1(b) above as additional security for the Line Note and the Indebtedness.  In
any event, Bank shall have the right to a first mortgage lien position on any
and all producing oil and/or gas well(s) or properties of whatever type of the
Borrower that have been evaluated for purposes of determining the Collateral
Borrowing Base, even though such well(s) or properties do not constitute
Collateral or Proved Developed Producing Reserves as of the date of this
Agreement.  Such first mortgage lien in favor of the Bank against any such
future producing well shall comply with the provisions of Section 3.1(b) hereof.
 All of such additional properties will be deemed part and parcel of the
Collateral constituting security for the repayment of the Indebtedness.

ARTICLE V

CONDITIONS PRECEDENT TO LOANS

5.1

Conditions Precedent.  The obligation of the Bank to make the Loans is subject
to the satisfaction of all of the following conditions (in addition to the other
terms and conditions set forth herein):

(a)

No Default.  There shall exist no Event of Default or Default on the Closing
Date.

(b)

Representations and Warranties.  The representations, warranties and covenants
set forth in Article VII shall be true and correct on and as of the Closing Date
and the Closing Date, respectively, with the same effect as though made on and
as of the Closing Date and the Closing Date, respectively.

(c)

Certificates.  The Borrower shall have delivered to the Bank a Certificate,
dated as of the Closing Date, and signed by the Secretary or Treasurer and Chief
Financial Officer of the Borrower certifying (i) to the matters covered by the
conditions specified in subsections (a) and (b) of this Section 5.1, (ii) that
the Borrower has performed and complied with all agreements and conditions
required to be performed or complied with by it prior to or on the Closing Date,
(iii) to the name and signature of the officers of the Borrower authorized to
execute and deliver the Loan Documents and any other documents, certificates or
writings and to borrow under this Agreement, and (iv) to such other matters in
connection with this Agreement which the Bank shall determine to be advisable.
The trustees of the Rochford Trust shall have delivered to the Bank such trust
closing certificate as deemed necessary or appropriate by the Bank in connection
with its issuance of its instrument of Guaranty. The Bank may conclusively rely
on such Certificates until it receives notice in writ­ing to the contrary.

(d)

Proceedings.  On or before the Closing Date, all corporate proceedings of the
Borrower shall be taken in connection with the transactions contemplated by the
Loan Documents and shall be satisfactory in form and substance to the Bank and
its counsel.  The Bank shall have received certified copies, in form and
substance satisfactory to the Bank and its counsel, of the Articles of
Incorporation and Bylaws of the Borrower, and a certificate of the Borrower
authorizing the execution and delivery of the Loan Documents, the borrowings
under this Agreement, and the granting of the security interests in the
Collateral pursuant to the Security Instruments, to secure the payment of the
Indebtedness.

(e)

Loan Documents/Security Instruments.  The Borrower shall have delivered to the
Bank this Agreement and the Mortgage, each appropri­ately executed by the
appropriate parties and, where applicable, acknowledged to the satis­faction of
the Bank and dated as of the Closing Date, together with such financing
statements, transfer orders, letters in lieu and other documents as shall be
necessary and appropriate to perfect the Bank's mortgage liens and security
interests in the Collateral covered by said Security Instruments.  The Borrower
shall have caused the holders of debt evidenced by the Subordinate Notes and the
liens securing such debt, if any, required by Section 6.25 hereof to be
subordinated to the Indebtedness and the Security Instruments to have delivered
to the Bank such subordination agreements and other instruments deemed necessary
or appropriate by the Bank to effect such debt and lien subordination acceptable
to the Bank as required by Section 6.25 hereof.

(f)

Notes.  The Borrower shall have delivered each of the Notes to the order of
Bank, appropriately executed.

(g)

Guaranties.  Each of the Guarantors shall have delivered to the Bank his
absolute and unconditional guarantee of payment of the Bridge Loan as evidenced
by the Bridge Note in form, scope and substance acceptable to the Bank.

(h)

East Hobbs Acquisition. The Borrower shall have delivered to the Bank such
documentation as available thereto in connection with the East Hobbs Acquisition
from the Seller.  Upon execution of the Purchase and Sale Agreement pertaining
thereto with the Seller, the Borrower shall promptly deliver to the Bank a full
and complete copy thereof, including all schedules, exhibits and addenda
thereto, together with all ancillary or corollary documents executed or
delivered in connection therewith. Upon consummation of the closing of such East
Hobbs Acquisition, the Borrower shall promptly execute and deliver to the Bank
(and the trustee therefore, as applicable) such supplemental and amending
mortgage instruments, financing statements or amendments to existing financing
statements, letters in lieu, authorization letters and other loan documents,
certificates, title or property reports, title opinions and title updates as
deemed necessary or appropriate by the Bank and its legal counsel.

 

(i)

Due Diligence/Post Closing Title.  The Borrower shall have provided the Bank
with due diligence information and data concerning Borrower's title to the
Mortgaged Property, including (without limitation) current landman's title
reports issued and rendered to the Bank from a reputable landman acceptable to
the Bank, reasonably current title opinions (unitization data, division orders,
division order title opinions, supplemental or updated title reports or title
opinions or otherwise) and evidence payment history on wells from the purchasers
of production from the Mortgaged Property in form, scope, coverage and substance
as reasonably deemed necessary or appropriate by the Bank, and such other
prudent title searches, data and information, including without limitation, UCC
searches, tax, judgment lien and other property searches or assurances as
reasonably deemed appropriate by the Bank and otherwise in compliance with
customary and prudent industry standards and practices.  The Bank may elect, in
its discretion, to permit Borrower to satisfy all or designated portions of the
due diligence and title requirements of this clause (i) on a post closing basis
(in which event the Bank's funding obligations shall be limited to $1,400,000
until full satisfaction of this clause (i) and provided that the failure of
Borrower to satisfy such due diligence and title requirements in a manner
acceptable to the Bank in its sole discretion within 30 days after the Closing
Date shall constitute, without further notice from the Bank to the Borrower, an
Event of Default pursuant to which the indebtedness evidenced by the Note shall
be accelerated and automatically due and payable to the Bank and otherwise
authorizing the Bank to exercise any and all rights and remedies available
thereto under the Loan Documents (including without limitation, the Security
Instruments) and at law or equity.

(j)

Other Information.  The Bank shall have received such other information,
certificates, ratifications, consents, resolutions, documents and assurances as
shall be reasonably requested by the Bank.

ARTICLE VI

COVENANTS

The Borrower covenants and agrees with the Bank that from the date hereof and so
long as this Agreement is in effect (by extension, amendment or otherwise) and
until payment in full of all Indebtedness and the performance of all other
obligations of the Borrower under this Agreement, unless the Bank shall
otherwise consent in writing:

6.1

Payment of Taxes and Claims.  The Borrower will pay and discharge or cause to be
paid and discharged all Taxes imposed upon the income or profits of the Borrower
or upon the property, real, personal or mixed, or upon any part thereof,
belonging to the Borrower before the same shall be in default, and all law­ful
claims for labor, rentals, materials and supplies which, if unpaid, might become
a Lien upon its property or any part there­of; provided however, that the
Borrower shall not be required to pay and discharge or cause to be paid or
discharged any such Tax, assess­ment or claim so long as the validity thereof
shall be contested in good faith by appropriate proceedings, and adequate book
reserves shall be established with respect thereto, and the Borrower shall pay
such Tax, charge or claim before any property subject thereto shall become
subject to execution.

6.2

Maintenance of Existence.  The Borrower will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence in good
standing as a Nevada corporation and will continue to conduct and operate the
Borrower's business substantially as being conducted and operated presently.
 The Borrower will become and remain qualified to conduct business in each
jurisdiction where the nature of the business or ownership of property by the
Borrower may require such qualification.

6.3

Preservation of Property.  The Borrower will at all times maintain, preserve and
protect (or use its best efforts to cause the operator to maintain, preserve and
protect properties not operated by the Borrower) all of the Borrower's
properties which are used or useful in the conduct of the Borrower's business
whether owned in fee or otherwise, or leased, in good repair and operat­ing
condi­tion; from time to time make, or cause to be made, all needful and proper
repairs, renewals, replacements, better­ments and improve­ments thereto so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; and comply with all material leases to
which it is a party or under which it occupies property so as to prevent any
material loss or forfeiture thereunder.

6.4

Casualty Insurance.  The Borrower will keep or cause to be kept (whether the
Borrower or, if applicable, the operator of such properties), adequately insured
by financially sound and reputable insurers, the Borrower's property of a
character usually insured by businesses engaged in the same or similar
businesses, including the Collateral.  Upon demand by the Bank any insurance
policies covering the Collateral shall be endorsed to provide for payment of
losses to the Bank as its interest may appear, to provide that such policies may
not be canceled, reduced or affected in any manner for any reason without thirty
(30) days prior notice to the Bank, and to provide for any other matters which
the Bank may reasonably require; and such insurance shall be against fire,
casualty and any other hazards normally insured against and shall be in the
amount of the full value (less a reasonable deductible not to exceed amounts
customary in the industry for similarly situated busi­nesses and properties) of
the property insured.  The Borrower shall at all times maintain or, where
applicable, cause the operators of such properties to maintain adequate
insurance, by finan­cially sound and reputable insurers, including without
limita­tion, the following coverages: (i) insurance against damage to persons
and property, including comprehensive general liability, worker's compensation
and automobile liability, and (ii) insurance against sudden and accidental
environmental and pollution hazards and accidents that may occur on the
Mortgaged Property.

6.5

Compliance with Applicable Laws.  The Borrower will comply with the
require­ments of all applicable Laws and orders of any Tribunal and obtain any
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of the Borrower's properties or to the conduct of the Borrower's
business.

6.6

Environmental Covenants.  Upon its receipt, the Borrower will immediately notify
the Bank of and provide the Bank with copies of any notifications of discharges
or releases or threatened releases or discharges of a Polluting Substance on,
upon, into or from the Collateral which are given or required to be given by or
on behalf of the Borrower to any federal, state or local Tribunal if any of the
foregoing may materially and adversely affect the Borrower or any part of the
Collateral, and such copies of notifications shall be delivered to the Bank at
the same time as they are delivered to the Tribunal.  The Borrower further
agrees promptly to use its best efforts to require the operator to undertake and
diligently pursue to completion any appropriate and legally required or
authorized remedial containment and cleanup action in the event of any release
or discharge or threatened release or discharge of a Polluting Substance on,
upon, into or from the Collateral.  At all times while owning and operating the
Collater­al, the Borrower will maintain and retain complete and accurate records
of all releases, discharges or other disposal of Polluting Substances on, onto,
into or from the Collateral, including, without limitation, records of the
quantity and type of any Polluting Substances disposed of on or off the
Collateral.  

6.7

Environmental Indemnities.  The Borrower hereby agrees to indemnify, defend and
hold harmless the Bank and each of its officers, directors, employees, agents,
consultants, attorneys, contractors and each of its affiliates, successors or
assigns, or transferees from and against, and reimburse said Persons in full
with respect to, any and all loss, liability, damage, fines, penalties, costs
and expenses, of every kind and character, including reasonable attorneys' fees
and court costs, known or unknown, fixed or contingent, occasioned by or
associated with any claims, demands, causes of action, suits and/or enforcement
actions, including any administrative or judicial proceedings, and any remedial,
removal or response actions ever asserted, threatened, instituted or requested
by any Persons, including any Tribunal, arising out of or related to:  (a) the
breach of any representation or warranty of the Borrower contained in Section
7.6 set forth herein; (b) the failure of the Borrower to perform any of its
covenants contained in Section 6.5 or 6.6 hereunder; (c) the ownership,
construction, occupancy, operation, use of the Collateral prior to the earlier
of the date on which (i) the Indebtedness and obligations secured hereby have
been paid and performed in full and the Security Instruments have been released,
or (ii) the Collateral has been sold by the Bank following the Bank's ownership
of the Collateral by way of foreclosure of the Liens granted pursuant hereto,
deed in lieu of such foreclosure or otherwise (the "Release Date"); provided,
however, this indemnity shall not apply with respect to matters caused by or
arising solely from the Bank's activities during any period of time the Bank
acquires ownership of the Collateral.

The indemnities contained in this Section 6.7 apply, without limitation, to any
violation on or before the Release Date of any Environmental Laws and any
liability or obligation relating to the environmental conditions on, under or
about the Collateral on or prior to the Release Date (including, without
limitation:  (a) the presence on, upon or in the Collateral or release,
discharge or threatened release on, upon or from the Collateral of any Polluting
Substances generated, used, stored, treated, disposed of or otherwise released
prior to the Release Date, and (b) any and all damage to real or personal
property or natural resources and/or harm or injury including wrongful death, to
persons alleged to have resulted from such release of any Polluting Substances
regardless of whether the act, omission, event or circumstances constituted a
violation of any Environmen­tal Law at the time of its existence or occurrence).
 The term "release" shall have the meaning specified in CERCLA/SARA and the
terms "stored," "treated" and "disposed" shall have the meanings specified in
RCRA/HSWA; provided, however, any broader meanings of such terms provided by
applicable laws of the State of Oklaho­ma shall apply.

The provisions of this Section 6.7 shall be in addition to any other obligations
and liabilities the Borrower may have to the Bank at common law and shall
survive the Release Date and shall continue thereafter in full force and effect.

The Bank agrees that in the event that such claim, suit or enforcement action is
asserted or threatened in writing or instituted against it or any of its
officers, employers, agents or contractors or any such remedial, removal or
response action is requested of it or any of its officers, employees, agents or
contractors for which the Bank may desire indemnity or defense hereunder, the
Bank shall give written notification thereof to the Borrower.

Notwithstanding anything to the contrary stated herein, the indemnities created
by this Section 6.7 shall only apply to losses, liabilities, damages, fines,
penalties, costs and expens­es actually incurred by the Bank as a result of
claims, demands, actions, suits or proceedings brought by Persons who are not
the beneficiaries of any such indemnity.  The Bank shall act as the exclusive
agent for all indemnified Persons under this Section 6.7.  With respect to any
claims or demands made by such indemni­fied Persons, the Bank shall notify the
Borrower within thirty (30) days after the Bank's receipt of a writing advising
the Bank of such claim or demand.  Such notice shall identify (i) when such
claim or demand was first made, (ii) the identity of the Person making it, (iii)
the indemnified Person and (iv) the substance of such claim or demand.  Failure
by the Bank to so notify the Borrower within said thirty (30) day period shall
reduce the amount of the Borrower's obliga­tions and liabilities under this
Section 6.7 by an amount equal to any damages or losses suffered by the Borrower
resulting from any prejudice caused the Borrower by such delay in notification
from the Bank.  Upon receipt of such notice, the Borrower shall have the
exclu­sive right and obligation to contest, defend, negotiate or settle any such
claim or demand through counsel of its own selection (but reasonably
satisfactory to the Bank) and solely at the Borrower's own cost, risk and
expense; provided, that the Bank, at its own cost and expense shall have the
right to participate in any such contest, defense, negotiations or settlement.
 The settlement of any claim or demand hereunder by the Borrower may be made
only upon the prior approval of the Bank of the terms of the settlement, which
approval shall not be unreasonably with­held.

6.8

Financial Statements and Reports.

(a)

Quarterly Operating Statements.  The Borrower shall maintain a standard system
of ac­counting and shall furnish to the Bank as soon as practicable after the
end of each calendar quar­ter, commencing with the quarter ending March 31,
2004, and in any event within sixty (60) days after the end of each said
calen­dar quar­ter, operat­ing statements for the Borrower certified, on the
Borrower's behalf, by the chief finan­cial officer of the Borrower to have been
prepared on a GAAP basis consistent­ly ap­plied and to fairly present the
financial condi­tion of the Borrower for such quarter period, and shall include
at least a balance sheet as of the end of such fiscal quarter period, and a
statement of income and a statement of cash flows for such fiscal quarter
peri­od, all in reasonable de­tail, setting forth, in each case, the
compara­tive figures for the corresponding date or period from the operating
statements for the immediately preced­ing fiscal quarter.

(b)

Annual Financial Statements.  As soon as practicable after the end of each
fiscal year and in any event within one hundred twenty (120) days there­after,
the Borrower shall furnish to Bank the following financial statements:

 

(i)

a balance sheet of the Borrower at the end of such fiscal year,

(ii)

a statement of income of the Borrower for such fiscal year, and

(iii)

a statement of cash flows of the Borrower for such fiscal year,

setting forth in each case in comparative form the figures for the previous
fiscal year, if applic­able, all in reason­able detail, prepared in accordance
with GAAP, and accompanied by an auditor's letter from a firm of independent,
certified public accountants acceptable to the Bank.  Upon receipt thereof, the
Borrower shall also deliver to the Bank a copy of each audit report submitted to
the Borrower by independent accountants in connection with any annual, special
or other review or report made by them.

(c)

Annual Engineering Report.  In connection with each of the Collateral Borrowing
Base semi-annual valuation and redeterminations made as of each March 31
(commencing March 31, 2005), the Borrower shall have furnished to the Bank a
comprehensive engineering report of the Mortgaged Property encumbered by the
Mortgage, prepared by a bona fide and reputable outside engineering firm
reasonably acceptable to the Bank, which such report shall be effective as of a
date no earlier than January 1 of such applicable calendar year in which it is
to be submitted to the Bank.  Such report shall be furnished in full to the Bank
no later than February 28 of such applicable calendar year, commencing with
February 28, 2005.

(d)

No Material Misstatments/Financial Statement Reporting References to Credit
Agreement.  None of the information contained in any reports, financial
statements (audited or otherwise), exhibits or schedules, taken as a whole,
furnished by or on behalf of the Borrower will contain any material misstatement
of fact or omit to state any material fact necessary to make the statement
therein, in light of the circumstances under which they were, are or will be
made, not materially misleading. Without limiting the foregoing, each financial
statement and other reports (public or otherwise) referring to revolving line of
credit facility established by this Credit Agreement shall accurately reflect
that the Borrower's right to borrower under the Line Commitment is limited to an
outstanding and unpaid principal amount not in excess of the maximum Line
Commitment then available unless the Bank otherwise consents in writing to
increase such Line Commitment.  The current Line Commitment amount and current
stipulated Collateral Borrowing Base amount is $10,400,000.00, subject to the
Collateral Borrowing Base redetermination provisions of Article III hereof.

6.9

Notice of Default.  Immediately upon the happening of any condition or event
which constitutes an Event of Default or Default or any default or event of
default under any other loan, mortgage, deed of trust, financing or security
agreement, the Borrower will give the Bank a written notice thereof specifying
the nature and period of existence thereof and what actions, if any, the
Borrower is taking and proposes to take with respect thereto.

6.10

Notice of Litigation.  Immediately upon becoming aware of the existence of any
action, suit or proceeding at law or in equity before any Tribunal, an adverse
outcome in which would (i) materially impair the ability of the Borrower to
carry on its business substantially as now conducted, (ii) materially and
adversely affect the condition (financial or otherwise) of the Borrower, or
(iii) result in monetary damages in excess of $100,000, the Borrower will give
the Bank a written notice specifying the nature thereof and what actions, if
any, the Borrower is taking and proposes to take with respect thereto.

6.11

Notice of Claimed Default.  Immediately upon becoming aware that the holder of
any note or any evidence of indebtedness or other security of the Borrower has
given notice or taken any action with respect to a claimed default or event of
default thereunder, the Borrower will give the Bank a written notice specifying
the notice given or action taken by such holder and the nature of the claimed
default or event of default thereunder and what actions, if any, the Borrower is
taking and proposes to take with respect thereto.

6.12

Requested Information.  With reasonable promptness, the Borrower will give the
Bank such other data and information as from time to time may be reasonably
requested by the Bank.

 

6.13

Inspection.  The Borrower will keep complete and accurate books and records with
respect to the Collateral and its other properties, business and operations and
will permit employees and representatives of the Bank, upon reasonable notice,
to audit, inspect and examine the same and to make copies thereof and extracts
therefrom during normal business hours.  All such records shall be at all times
kept and maintained at the principal offices of the Borrower in Tulsa, Oklahoma.
 Upon any Default or Event of Default of the Borrower, it will surrender all of
such records relating to the Collateral to the Bank upon receipt of any request
therefor from the Bank.

6.14

Limitation on Liens.  The Borrower will not create or suffer to exist any Lien
upon any of its property or assets except (i) Liens in favor of the Bank
securing the Indebtedness; (ii) Liens arising in the ordinary course of business
for sums not due or sums being contested in good faith and by appropriate
proceedings and not involving any deposits, advances, borrowed money or the
deferred purchase price of property or services; and (iii) Liens expressly
permitted to exist under the terms, conditions and limitations of this Agreement
and any of the Security Instru­ments.

6.15

Disposition/Negative Pledge re Encumbrance of Collateral and Other Assets.  The
Borrower will not sell, mortgage, pledge or otherwise encumber any minerals,
mineral interests or leaseholds subject to or covered by the Initial Engineering
Report or any subsequent engineering report (whether in connection with the
semi-annual borrowing base redeterminations pursuant to Section 3.1 or
otherwise) without first obtaining the Bank's written consent thereto.  The
Borrower will provide the Bank with written notice of the sale, lease, transfer
or other disposition of or mortgage, pledge, granting of a security interest in
or encum­brance against any of the Borrower's tangible personal property or
assets, subject, however, to the Borrower's right to sell up to $100,000 worth
in the aggregate of its tangible personal properties or assets not constituting
mineral, mineral interests or leaseholds subject to or covered by the Initial
Engineering Report in the ordinary course of business during any calendar year
without prior notice to the Bank.  In no event shall the Borrower cause or
permit the voluntary or involuntary pledge, mortgage or other encumbrance,
attachment or levy of or against any of the properties or assets of whatsoever
nature or type to any Person (financial institution or otherwise) without first
obtaining the Bank's express written consent thereto.   The Borrower shall have
caused the Guarantors to covenant in favor of the Bank that none thereof will
sell, transfer, assign, pledge, mortgage, grant a security interest in or
otherwise encumber any of their respective shares of capital stock in the
Borrower for so long and until the Bridge Loan is fully paid and the Bridge
Commitment expires or is otherwise terminated or extinguished.

6.16

Other Agreements.  The Borrower will not enter into or permit to exist any
agreement (i) which would cause an Event of Default or a Default hereunder, or
(ii) which contains any provision which would be violated or breached by the
performance of the Borrower's obligations hereunder or under any of the other
Loan Documents.

6.17

Limitation on Other Indebtedness.  The Borrower will not create, incur, assume,
become or be liable in any manner in respect of, or suffer to exist, any
indebtedness whether evidenced by a note, bond, debenture, agreement, letter of
credit or similar or other obligation, or accept any deposits or advances of any
kind in excess of $100,000 in the aggregate during any fiscal year of the
Borrower, except (i) trade payables and current indebtedness (other than for
borrowed money) incurred in, and deposits and advances accepted in, the ordinary
course of the Borrower's existing business, or (ii) the Indebtedness.

6.18

Articles of Incorporation/Bylaws and Assumed Names.  The Borrower will not
amend, alter, modify or restate its Articles of Incorporation or Bylaws in any
way which would (i) change its legal name, re-incorporate in another
jurisdiction, reorganize as a different legal entity or adopt a trade name for
the Borrower; or (ii) in any manner adversely affect the Borrower's obligations
or covenants to the Bank hereunder.  

6.19

Ownership and Management.  The Borrower shall not permit any material change in
ownership or senior management thereof or any changes in any officer holding the
office of President, Secretary or Treasurer of the Borrower.

6.20

Merger, Consolidation, Acquisition.  The Borrower will not merge or consolidate
with or into any other Person; or permit any other Person to consolidate with or
merge into the Borrower; or adopt or effect any plan of reorganization,
recapitalization, liquidation or dissolution; or acquire any properties or
assets, other than in the ordinary course of business.

6.21

Contingent Liabilities; Advances.  The Borrower will not, either directly or
indirectly, (i) guarantee, become surety for, discount, endorse, agree
(contingently or otherwise) to purchase, repurchase or otherwise acquire or
supply or advance funds in respect of, or otherwise become or be contingently
liable upon the indebtedness, obligation or liability of any Person, (ii)
guarantee the payment of any dividends or other distributions, (iii) discount or
sell with recourse or for less than the face value thereof, any of its notes
receivable, accounts receivable or chattel paper; (iv) loan, agree to loan, or
advance money to any Person in an aggregate amount of $50,000 or more at any
time; or (v) enter into any agreement for the purchase or other acquisition of
any goods, products, materials or supplies, or for the making of any shipments
or for the payment of services, if in any such case payment therefor is to be
made regardless of the non-delivery of such goods, products, materials or
supplies or the non-furnishing of the transportation of services; provided,
however that the foregoing shall not be applicable to endorsement of negotiable
instruments presented to or deposited with a bank for collection or deposit in
the ordinary course of business.

6.22

Current Ratio.  The Borrower at all times will maintain a Current Ratio of not
less than 1.0:1.0, calculated as of the last day of each fiscal quarter of the
Borrower, commencing as of the last day of the fiscal quarter ending June 30,
2004.

6.23

Minimum Tangible Net Worth.  The Borrower at all times will maintain a minimum
Tangible Net Worth of $6,000,000, calculated as of the last day of each fiscal
quarter of the Borrower, commencing as of the last day of the fiscal quarter
ending June 30, 2004.

6.24

Minimum Interest Coverage Ratio.  The Borrower at all times will maintain a
minimum Interest Coverage Ratio of not less than 5.0:1.0, calculated as of the
last day of each fiscal quarter of the Borrower, commencing as of the last day
of the fiscal quarter ending June 30, 2004.

6.25

Subordination.  Repayment of all loans or monetary advances made by any
shareholder of the Borrower or any Person to the Borrower, whether evidenced by
promissory notes or otherwise (including without limitation those certain
promissory notes from the Borrower payable to the order of Stanley McCabe and
Rochford Living Trust [collectively, the "Subordinate Notes"]), shall be
expressly subordinated in all respects to the repayment of the indebtedness for
so long as the Loans remain outstanding, such subordination being in form and
content acceptable to the Bank and its legal counsel; provided, however, that so
long as no Default or Event of Default shall have occurred hereunder, the
Borrower may pay interest only as accrued on the Subordinate Notes.

6.26

Deposit Accounts.  Within thirty (30) days of the Closing Date, the Borrower
shall have opened a deposit account with the Bank to be maintained until the
later of (i) any balance remains outstanding under the Notes or unexpired
Letters of Credit remain outstanding or (ii) the termination of the Commitments.

6.27

Hedging.  If and to the extent the Borrower elects to institute risk management,
hedging or other similar forms of price protection for crude oil and natural gas
volumes, such devices shall include a "price floor" or comparable financial
hedge or risk management agreement acceptable to the Bank in all respects
(including, without limitation, price and term), covering a maximum of 75% of
the Borrower's aggregate existing oil and gas monthly production (as forecast in
the Bank's most recent semiannual engineering valuation pursuant to Article III
hereof) for not more than two (2) years, and otherwise in form, content and
substance acceptable to the Bank.  The Bank, at its sole discretion, may require
the Borrower to hedge a specified percentage of the Borrower's monthly
production for a specified period of time, all as determined by the Bank in its
good faith discretion.  The Borrower shall not enter into any Prohibited Hedge
Transaction, including, without limitation, any financial and physical hedge
transactions affecting or covering the same volume of production for concurrent
or overlapping periods of time.  The applicable counterparty to any ISDA
Agreement shall be acceptable to the Bank and approved thereby in writing.

6.28

Distributions.

For so long as the Bridge Loan is outstanding and the Bridge Commitment remains
in effect, the Borrower shall not declare or pay any dividend (cash, stock , in
kind or otherwise) or other distributions to any direct or indirect beneficial
owner (or affiliate thereof) of any interest in the Borrower; or purchase,
redeem, retire or otherwise acquire for value any of the capital stock of the
Borrower or equitable interests now or hereafter outstanding or make any
distribution of assets to its shareholders as such whether in cash, assets or in
obligations of the Borrower; or allocate or otherwise set apart any sum for the
payment of any distribution on, for the purchase, redemption or retirement of
any capital stock or equitable ownership interests.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

To induce the Bank to enter into this Agreement and to make the Loans to the
Borrower under the provi­sions hereof, and in consideration thereof, the
Borrower repre­sents, warrants and covenants as follows:

7.1

Organization and Qualification.  The Borrower is duly organized, validly
existing, and in good standing under the Laws of the State of Nevada as a
corporation and is qualified to conduct business in each jurisdiction where the
nature of its business or ownership of property by the Borrower requires such
qualification.

7.2

Litigation.  There is no action, suit, investi­gation or proceeding threatened
or pending before any Tribunal against or affecting the Borrower or any
properties or rights of the Borrower, which, if adversely determined, would
result in a liability of greater than $100,000 or would otherwise result in any
material adverse change in the business or condition, financial or other­wise,
of the Borrower.  The Borrower is not in default with respect to any judg­ment,
order, writ, injunction, decree, rule or regulation of any Tribunal.

7.3

Conflicting Agreements and Other Matters.  The Borrower is not in default in the
performance of any obligation, covenant, or condition in any agreement to which
it is a party or by which it is bound.  The Borrower is not a party to any
contract or agreement or subject to any charter or other restriction which
materially and adversely affects its business, property or assets, or financial
condition.  The Borrower is not a party to or otherwise subject to any contract
or agreement which restricts or otherwise affects the right or ability of the
Borrower to execute the Loan Documents or the performance of any of their
respective terms.  Neither the execution nor delivery of any of the Loan
Documents, nor fulfill­ment of nor compliance with their respective terms and
provisions will conflict with, or result in a breach of the terms, condi­tions
or provisions of, or constitute a default under, or result in any violation of,
or result in the creation of any Lien (except those created by the Loan
Documents) upon any of the properties or assets of the Borrower pursuant to, or
require any consent, approval or other action by or any notice to or filing with
any Tribunal pursuant to any award of any arbitrator, or any agreement,
instrument or Law to which the Borrower is sub­ject.

7.4

Financial Statements.  The financial statements of the Borrower furnished to the
Bank have been prepared on an accrual basis in accordance with GAAP, show all
material liabilities, direct and contingent, and fairly present the financial
condition of the Borrower and the results of its operations for the periods then
ended, and since such date there has been no materi­al adverse change in the
business, financial condition or opera­tions of the Borrower.

7.5

Title to Properties; Authority.  The Borrower has full power, authority and
legal right to own and operate the proper­ties which it now owns and operates,
and to carry on the lines of business in which it is now engaged, and has good
and marketable title to the Mortgaged Property subject to no Lien of any kind
except Liens permitted by this Agreement.  The Borrower has full power,
authority and legal right to execute and deliver and to perform and observe the
provisions of this Agreement and the other Loan Documents.  The Borrower further
represents to the Bank that any and all after acquired interest in any one or
more of the Mortgaged Property being concurrently or subsequently assigned of
record to the Borrower is and shall be deemed encumbered by the Mortgage in all
respects.  Stanley McCabe, as Secretary and Treasurer of the Borrower, has all
necessary authority and consent of the board of directors of the Borrower to
execute and deliver this Agreement and the other Loan Documents and the Security
Instruments to the Bank.

7.6

Environmental Representations.  To the best of the Borrower's knowledge:

(a)

The Borrower is not subject to any liability or obligation relating to (i) the
environmental conditions on, under or about the Collateral, including, without
limitation, the soil and ground water conditions at the location of any of the
Borrower's properties, or (ii) the use, management, handling, transport,
treatment, generation, storage, disposal, release or discharge of any Polluting
Substance;

(b)

The Borrower has not obtained and is not required to obtain or make application
for any permits, licenses or similar authorizations to construct, occupy,
operate or use any buildings, improvements, facilities, fixtures and equipment
forming a part of the Collateral by reason of any Environmental Laws;

(c)

The Borrower has taken all steps necessary to determine and has determined that
no Polluting Substances have been disposed of or otherwise released on, onto,
into, or from the Collateral (the term "release" shall have the meanings
specified in CERCLA/SARA, and the term "disposal" or "disposed" shall have the
meanings specified in RCRA/HSWA; provided, in the event either CERCLA/SARA or
RCRA/HSWA is amended so as to broaden the meaning of any term defined thereby,
such broader meaning shall apply subsequent to the effective date of such
amendment and provided further, to the extent that the laws of any State or
Tribunal establish a meaning for "release," "disposal" or "disposed" which is
broader than that specified in CERCLA/SARA, RCRA/HSWA or other Environmental
Laws, such broader meaning shall apply);

(d)

There are no PCB's or asbestos-containing materials, whether in the nature of
thermal insulation products such as pipe boiler or breech coverings, wraps or
blankets or sprayed-on or troweled-on products in, on or upon the Collateral;
and

(e)

There is no urea formaldehyde foam insu­lation ("UFFI") in, on or upon the
Collateral.

7.7

Oil and Gas Contracts.  To the best of the Borrower's knowledge, all contracts,
agreements and leases related to any of the oil and gas mining, mineral or
leasehold properties and all contracts, agreements, instruments and leases to
which the Borrower is a party, are valid and effective in accordance with their
respective terms, and all agreements included in the oil and gas mining, mineral
or leasehold properties in the nature of oil and/or gas purchase agreements, and
oil and/or gas sale agreements are in full force and effect and are valid and
legally binding obligations of the parties thereto and all payments due
thereunder have been made, except for those suspended for reasonable cause in
the ordinary course of business; and, there is not under any such contract,
agreement or lease any existing default by any party thereto or any event which,
with notice or lapse of time, or both, would constitute such default, other than
minor defaults which, in the aggregate, would not result in losses or damages of
more than $50,000 to the Borrower.

7.8

Natural Gas Policy Act and Natural Gas Act Compliance.  To the best of the
Borrower's knowledge, all material filings and approvals under the Natural Gas
Policy Act of 1978, as amended, and the Natural Gas Act, as amended, or with the
Federal Energy Regulatory Commission (the "FERC") or required under any rules or
regulations adopted by the FERC which are necessary for the operation of the
Borrower's business or the Collateral in the manner in which they are presently
being operated have been made and the terms of the agreements and contractual
rights included in the Borrower's business or the Collateral do not conflict
with or contravene any such Law, rule or regulation.

7.9

Take-or-Pay Obligations, Prepayments, BTU Adjustments and Balancing Problems.
 To the best of the Borrower's knowledge, after diligent inquiry, the Borrower
has no take-or-pay obligation under any gas purchase agreement which would have
a material adverse effect on the Borrower.  The Borrower is not a party to any
fixed price contract or nonmarket contract for the sale of oil or gas which
would have a material adverse effect on the Borrower.  Neither the Borrower nor
the Collateral is subject to requirements to make BTU adjustments or effect gas
balancing in favor of third parties which would have a material adverse effect
on the Borrower.

7.10

 Purposes.  The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of any
borrowing hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.  If requested by the Bank, the Borrower will furnish to the Bank a
statement in conformity with the requirements of Federal Reserve Form U-1,
referred to in Regulation U, to the foregoing effect.  Neither the Borrower nor
any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Line Note to violate any regulation of the Board of
Governors of the Federal Reserve System (including Regulations G, T, U and X) or
to violate any Securities Laws, state or federal, in each case as in effect now
or as the same may hereafter be in effect.

7.11

Compliance with Applicable Laws.  The Borrower is in compliance with all Laws,
ordinances, rules, regulations and other legal requirements applicable to it and
the business conducted thereby, the violation of which could or would have a
material adverse effect on its business condition, financial or otherwise.

7.12

Possession of Franchises, Licenses.  The Borrower possesses all franchises,
certificates, licenses, permits and other authorizations from governmental
political subdivisions or regulatory authorities, free from burdensome
restrictions, that are necessary in any material respect for the ownership,
maintenance and operation of its properties and assets, and the Borrower is not
in violation of any thereof in any material respect.

7.13

Leases, Easements and Rights of Way.  The Borrower enjoys peaceful and
undisturbed possession of all leases, easements and rights of way necessary in
any material respect for the operation of its properties and assets, none of
which contains any unusual or burdensome provisions which might materially
affect or impair the operation of such properties and assets.  All such leases,
easements and rights of way are valid and subsisting and are in full force and
effect.

7.14

Taxes.  The Borrower has filed all Federal, state and other income tax returns
which are required to be filed and has paid all Taxes, as shown on said returns,
and all Taxes due or payable without returns and all assessments received to the
extent that such Taxes or assessments have become due.  All Tax liabilities of
the Borrower are adequately provided for on the books of the Borrower, including
any interest or penalties.  No income tax liability of a material nature has
been asserted by taxing authorities for Taxes in excess of those already paid.

7.15

Disclosure.  Neither this Agreement nor any other Loan Document or writing
furnished to the Bank by or on behalf of the Borrower in connection herewith
contains any untrue statement of a material fact nor do such Loan Documents and
writings, taken as a whole, omit to state a material fact necessary in order to
make the statements contained herein and therein not misleading.  There is no
fact known to the Borrower and not reflected in the financial statements
provided to the Bank which materially adversely affects its assets or in the
future may materially adversely affect the business, property, assets or
financial condition of the Borrower which has not been set forth in this
Agreement, in the Loan Documents or in other documents furnished to the Bank by
or on behalf of the Borrower prior to the date hereof in connection with the
transactions contemplated hereby.

7.16

Ownership of Mortgaged Property.  The Borrower hereby represents, warrants and
covenants that as of the Closing Date the Borrower will own the working
interests, royalty interests and net revenue interests in the oil and gas
leasehold estate for the Mortgaged Property covered by the Mortgage or as listed
in the Initial Engineering Report, or both, as represented in writing to the
Bank.

ARTICLE VIII

EVENTS OF DEFAULT

8.1

Events of Default.  The occurrence of any one or more of the following events
shall constitute an Event of Default (whether such occurrence shall be voluntary
or involuntary or come about or be effected by operation of Law or otherwise):

(a)

The Borrower shall fail to make any monthly payment due on either Note, or fail
to pay either Note within five (5) days after the same shall become due and
payable (whether by extension, renewal, acceleration, maturity or otherwise); or

(b)

Any representation or warranty of the Borrower made herein or in any writing
furnished in connection with or pursuant to any of the Loan Documents shall have
been false or misleading in any material respect on the date when made; or

(c)

The Borrower shall fail to duly observe, perform or comply with any covenant,
agreement or term (other than payment provisions which are governed by Section
8.1(a) hereof) contained in this Agreement or any of the Loan Documents and such
default or breach shall have not been cured or remedied within the earlier of
thirty (30) days after the Borrower shall know (or should have known) of its
occurrence or twenty (20) days following receipt of notice thereof from the
Bank; or

(d)

The Borrower shall default in the payment of principal or of interest on any
other obligation for money borrowed or received as an advance (or any obligation
under any conditional sale or other title retention agreement, or any obligation
issued or assumed as full or partial payment for property whether or not secured
by purchase money Lien, or any obligation under notes payable or drafts accepted
representing extensions of credit for amounts greater than $100,000) beyond any
grace period provided with respect thereto, or shall default in the performance
of any other material agreement, term or condi­tion contained in any agreement
under which such monetary obligation is created (or if any other default under
any such agreement shall occur and be continuing beyond any period of grace
provided with respect thereto) if the effect of such default is to cause, or to
permit the holder or holders of such obligation (or a trustee on behalf of such
holder or holders) to cause such obligation to become due prior to its date of
maturity; or

(e)

Any of the following: (i) the Borrower or either Guarantor shall be unable to
pay its debts as they mature, or shall make an assignment for the benefit of
creditors or admit in writing its inability to pay its debts generally as they
become due or fail generally to pay its debts as they mature; or (ii) an order,
judgment or decree is entered adjudicating the Borrower or either Guarantor
insolvent or an order for relief under the United States Bankruptcy Code is
entered with respect to the Borrower or either Guarantor or (iii) the Borrower
or either Guarantor shall petition or apply to any Tribunal for the appointment
of a trustee, receiver, custodian or liquidator of the Borrower or either
Guarantor or of any substantial part of the assets of the Borrower or either
Guarantor or shall commence any proceedings relating to the Borrower or either
Guarantor under any bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debts, dissolution, or liquidation Law of any
jurisdiction, whether now or hereafter in effect; or (iv) any such petition or
application shall be filed, or any such proceedings shall be commenced, against
the Borrower or either Guarantor and the Borrower or either Guarantor by any act
shall indicate its approval thereof, consent thereto or acquiescence therein, or
an order, judgment or decree shall be entered appointing any such trustee,
receiver, custodian or liquidator, or approving the petition in any such
proceedings, and such order, judgment or decree shall remain unstayed and in
effect for more than thirty (30) days; or (vi) the Borrower shall fail to make
timely payment or deposit of any amount of tax required to be withheld by the
Borrower and paid to or deposited to or to the credit of the United States of
America pursuant to the provisions of the Internal Revenue Code of 1986, as
amended, in respect of any and all wages and salaries paid to employees of the
Borrower; or

(f)

Any final judgment on the merits for the payment of money in an amount in excess
of $100,000 shall be outstanding against the Borrower or either Guarantor and
such judgment shall remain unst­ayed and in effect and unpaid for more than
thirty (30) days.

8.2

Remedies.  Upon the occurrence of any Event of Default referred to in Section
8.1(e) the Commitments shall immediately and automatically terminate, and the
Notes and all other Indebtedness shall be immediately due and payable, without
notice of any kind.  Upon the occurrence of any other Event of Default, and
without prejudice to any right or remedy of the Bank under this Agreement or the
Loan Documents or under applicable Law of under any other instrument or document
delivered in connection herewith, the Bank may (i) declare the Commitments
terminated or (ii) declare the Commitments terminated and declare the Notes and
the other Indebtedness, or any part thereof, to be forthwith due and payable,
whereupon the Notes and the other Indebtedness, or such portion as is designated
by the Bank shall forthwith become due and payable, without presentment, demand,
notice or protest of any kind, all of which are hereby expressly waived by the
Borrower.  No delay or omission on the part of the Bank in exercising any power
or right hereunder or under the Notes, the Loan Documents or under applicable
law shall impair such right or power or be construed to be a waiver of any
default or any acquiescence therein, nor shall any single or partial exercise by
the Bank of any such power or right preclude other or further exercise thereof
or the exercise of any other such power or right by the Bank.  In the event that
all or part of the Indebtedness becomes or is declared to be forthwith due and
payable as herein provided, the Bank shall have the right to set off the amount
of all the Indebtedness of the Borrower owing to the Bank against, and shall
have a lien upon and security interest in, all property of the Borrower in the
Bank's possession at or subsequent to such default, regardless of the capacity
in which the Bank possesses such property, including but not limited to any
balance or share of any deposit, demand, collection or agency account.  At any
time after the occurrence of any Event of Default, the Bank may, at its option,
cause an audit of any and/or all of the books, records and documents of the
Borrower to be made by auditors satisfactory to the Bank at the expense of the
Borrower.  The Bank also shall have, and may exercise, each and every right and
remedy granted to it for default under the terms of the other Loan Documents.

ARTICLE IX

MISCELLANEOUS

9.1

Notices.  Unless otherwise provided herein, all notic­es, requests, consents and
demands shall be in writing and shall be either hand-delivered (by courier or
otherwise) or mailed by certified mail, postage prepaid, to the respective
addresses specified below, or, as to any party, to such other address as may be
designated by it in written notice to the other parties:

If to the Borrower, to:

Arena Resources, Inc.

4920 South Lewis, Suite 107

Tulsa, Oklahoma 74105

Attention:  Mr. Stanley McCabe

      Secretary/Treasurer

If to the Bank, to:

MidFirst Bank

321 South Boston Avenue, Suite 104

Tulsa, Oklahoma 74103

Attention:  Mr. Christopher Cardoni

      Assistant Vice President

All notices, requests, consents and demands hereunder will be effective when
hand-delivered by the Bank to the applicable notice address of the Borrower or
when mailed by certified mail, postage prepaid, addressed as aforesaid by either
party hereto.  

9.2

Place of Payment.  All sums payable hereunder shall be paid in immediately
available funds to the Bank, at its main Tulsa, Oklahoma banking offices at 321
South Boston Avenue, Suite 104, Tulsa, Oklahoma 74103, or at such other place as
the Bank shall notify the Borrower in writing.  If any interest, principal or
other payment falls due on a date other than a Business Day, then (unless
otherwise provided herein) such due date shall be extended to the next
succeeding Business Day, and such exten­sion of time will in such case be
included in computing interest, if any, in connection with such payment.

9.3

Survival of Agreements.  All covenants, agreements, representations and
warranties made herein shall survive the execution and the delivery of Loan
Documents.  All statements contained in any certificate or other instrument
delivered by the Borrower hereunder shall be deemed to constitute
representations and warranties by the Borrower.

9.4

Parties in Interest.  All covenants, agreements and obliga­tions contained in
this Agreement shall bind and inure to the benefit of the respective successors
and assigns of the parties hereto, except that the Borrower may not assign its
rights or obligations hereunder without the prior written consent of the Bank.

9.5

Governing Law.  This Agreement, the Notes and the Security Instruments shall be
deemed to have been made or in­curred under the Laws of the State of Oklahoma
and shall be construed and enforced in accordance with and governed by the Laws
of Oklahoma.  

9.6

SUBMISSION TO JURISDICTION.  THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF
ANY OF THE LOCAL, STATE, AND FEDERAL COURTS LOCATED WITHIN TULSA COUNTY,
OKLAHOMA AND WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE BASED ON IMPROPER
VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT
AND WAIVES PERSONAL SERVICE OR ANY AND ALL PROCESS UPON IT, AND CONSENTS THAT
ALL SUCH SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE
ADDRESS SET FORTH IN SUBSECTION 9.1 HEREOF AND THAT SERVICE SO MADE SHALL BE
DEEMED TO BE COM­PLETED UPON THE EARLIER OF ACTUAL RECEIPT OR THREE (3) BUSINESS
DAYS AFTER MAILED OR DELIVERED BY MESSENGER.  NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE BANK OR ANY HOLDER OF THE LINE NOTE TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION.

9.7

Maximum Interest Rate.  Regardless of any provision herein, the Bank shall never
be entitled to receive, collect or apply, as interest on the Indebtedness any
amount in excess of the maximum rate of interest permitted to be charged by the
Bank by applicable Law, and, in the event the Bank shall ever receive, collect
or apply, as interest, any such excess, such amount which would be excessive
interest shall be applied to other Indebtedness and then to the reduction of
principal; and, if the other Indebtedness and principal are paid in full, then
any remaining excess shall forthwith be paid to the Borrower.

9.8

No Waiver; Cumulative Remedies.  No failure to exercise, and no delay in
exercising, on the part of the Bank, any right, power or privilege hereunder or
under any other Loan Document or applicable Law shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
of the Bank.  The rights and remedies herein provided are cumulative and not
exclusive of any other rights or remedies provided by any other instrument or by
law.  No amendment, modification or waiver of any provision of this Agreement or
any other Loan Document shall be effective unless the same shall be in writing
and signed by the Bank.  No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other or further notice or demand in similar
or other circumstances.

9.9

Costs.  The Borrower agrees to promptly pay to the Bank on demand all recording
fees and filing costs and all reasonable attorneys fees and legal expenses
incurred or accrued by the Bank in connection with the preparation, negotiation,
closing, administration of any amendment, waiver, consent or modifica­tion to
and of the Loan Documents and the filing and recording of any amendment or
modification to and of the Security Instruments.  In any action to enforce or
construe the provisions of this Agreement or any of the Loan Documents, the
prevailing party shall be entitled to recover its reasonable attorneys' fees and
all costs and expenses related thereto.

9.10

Headings.  The article and section headings of this Agreement are for
convenience of reference only and shall not constitute a part of the text hereof
nor alter or otherwise affect the meaning hereof.

9.11

Severability.  The unenforceability or invalidity as determined by a Tribunal of
competent jurisdiction, of any provision or provisions of this Agreement shall
not render un­enforceable or invalid any other provision or provisions hereof.

9.12

Exceptions to Covenants.  The Borrower shall not be deemed to be permitted to
take any action or fail to take any action which is permitted as an exception to
any of the covenants contained herein or which is within the permissible limits
of any of the covenants contained herein if such action or omission would result
in the breach of any other covenant contained herein.

9.13

NO ORAL AGREEMENTS.  THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND
UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND
THEREOF, THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.

  

9.14

WAIVER OF JURY TRIAL.  THE BORROWER FULLY, VOLUNTARILY, IRREVOCABLY,
UNCONDITIONALLY AND EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY REGARDLESS OF
THE PARTICULAR COURT OR FORUM WITH RESPECT TO ANY CLAIM, ACTION, COUNTERCLAIM OR
DEFENSE WHATSOEVER OF THE BANK OR THE BORROWER, WHETHER OR NOT SUCH CLAIM,
ACTION, COUNTERCLAIM OR DEFENSE RELATES OR PERTAINS TO THE NOTES, THE
COMMITMENTS, THE MORTGAGE OR THIS LOAN AGREEMENT.  THE BORROWER AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

9.15

Counterparts.  This Agreement may be executed in any number of counterparts, all
of which taken together shall consti­tute one and the same instrument.  Any of
the parties hereto may execute this Agreement by signing any such counterpart.
 Delivery of an executed counterpart of a signature page to this Agreement by
telecopier shall be as effective as delivery of a manually executed counterpart
of this Agreement.  

9.16

USA PATRIOT Act Notice.  IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A
NEW ACCOUNT.  To help the government fight the funding of terrorism and money
laundering activities, federal law requires all financial institutions to
obtain, verify, and record information that identifies each person or entity
that opens an account, including any deposit account, treasury management
account, loan, other extension of credit, or other financial services product.
 What this means for the Borrower: When a borrower opens an account, the Bank
will ask for the borrower's name, residential address, tax identification
number, and other information that will allow the Bank to identify the borrower,
including the borrower's date of birth if the borrower is an individual.  The
Bank may also ask, if the borrower is an individual, to see the borrower's
driver's license or other identifying documents, and, if the borrower is not an
individual, to see the borrower's legal organizational documents or other
identifying documents.  The Bank will verify and record the information the Bank
obtains from the borrower pursuant to the USA PATRIOT Act, and will maintain and
retain that record in accordance with the regulations promulgated under the USA
PATRIOT Act.

IN WITNESS WHEREOF, the Borrower has caused this Agree­ment to be executed and
delivered to the Bank in Tulsa, Oklahoma as of the day and year first above
written by the undersigned duly authorized officer and manager thereof.

ARENA RESOURCES, INC.

a Nevada corporation

By_________________________________

Stanley McCabe,

Secretary and Treasurer

"Borrower"

1343090.6

--------------------------------------------------------------------------------

MIDFIRST BANK

By_________________________________

Christopher Cardoni,

Assistant Vice President

"Bank"

13430906

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EXHIBIT A

Line Note

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EXHIBIT B

LIBOR Option Rate Sheet