**Exhibit10.1**

 

## **ALPINE EXPLORATION CO.’S, INC.**

**4310 Buena Vista, No. 6, Dallas, TX. 75205**

**P O Box 600013, Dallas, TX. 75360-0013**

**Main (214) 692-0072 Fax (214) 692-0071**

#### **TimWashington**timwashington@sbcglobal.net

#### **alpine@airmail.net**

 

August 26, 2003

 

### Reef Global Energy II, LP

Att. Mr. H. Walt Dunagin, V. P. Land

1901 N. Central Expressway, Suite 300

Richardson, TX. 75080

 
| **Re:** | **Participation  Offer**                      |
|---------|-----------------------------------------------|
|    | Barataria South, Cris I Development  Prospect |
|    | Jefferson Ph., Louisiana                      |

 

Dear Mr. Dunagin:

 

Alpine Exploration Co.’s,Inc. (“Alpine”) hereby offers Reef Global Energy II, LP (“Reef”) theopportunity to participate in drilling one or more test wells on leases ownedby Alpine in its Barataria South Cris I Development Prospect (the “Leases”) toearn an interest therein upon the terms and conditions set forth below:

 

1.                                       Reef shallparticipate for 12.00% of 8/8ths working interest in drilling, orcausing to be drilled, the Initial Test Well, provided actual drillingoperations for such Well are commenced prior to December 31, 2003, fromand to a mutually acceptable location on the Leases to an objective depth of11,800’ TVD to test the Upper Cris I Sands, or a depth sufficient to encounterabnormal pressure (“Initial Test Well”), whichever depth is lesser, paying12.00% of Initial Test Well expenses through the tanks to earn a 10.50% workinginterest in the 40 acres surrounding the well bore and in all units created forthe production of the well. This Earned working interest shall be reduced to9.00% after all investments in the prospect have been paid out.  Alpine’s carried 12.50% working interest inthis Initial Test Well shall increase to 25.00% at payout of the well.

 

2.                                       Alpine representsthat the net revenue interest in the approximately 560 acres of Leases subjectto this agreement and to be conveyed pursuant hereto shall averageapproximately 72.00% of 8/8ths.  However, the Net Revenue Interest may vary depending upon theacreage contribution in a geological unit. In addition, the net revenue interest “After Payout” shall averageapproximately 71.00% of 8/8ths as a result of Stone Energyincreasing its Overriding Royalty position an additional 2% of 8/8ths pursuantto the terms and conditions of that certain Farmout Agreement datedFebruary 7, 2003.  Each party shallbear its proportionate share of the presently existing lease burdens as to thelands and Leases in which Reef earns an interest.  An outline of the 560 acre tract, Area of Mutual Interest (AMI),is attached as Exhibit “A”.  A list ofleases and farmout description on the South Barataria Prospect is attached asExhibit “B”.  A breakdown of theestimated, before and after payout, net revenue interests for the 11,500 “E”Sand is attached as Exhibit “C”.

 

3.                                       Within five (5)days of the execution of this agreement Reef shall pay $18,000 (being Reef’sproportionate share of 50% of the $300,000 Prospect Fee) to Alpine and withinfive (5) days after its execution of a mutually acceptable ExplorationAgreement, Reef shall pay to Alpine the sum of $18,000 (being Reef’s proportionateshare of 50% of the

 

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$300,000 Prospect Fee) aspurchase price consideration for Reef’s proportionate interest in the prospectand leases over the Prospect.  If within30 days a formal agreement has not been signed, then either party has the rightto terminate the agreement and the monies paid to date will be immediatelyreturned.  Alpine will have no furtherobligation to Reef and Alpine will have the right to resell the interestpertaining to this agreement.

 

4.                                       Within180 days after completing the Initial Test Well, either as capable ofcommercial production or as a dry hole, Reef shall have the right, but not theobligation, to commit to drill, or cause to be drilled, an additional well withAlpine by paying 9.00% of 8/8ths working interest in drilling suchadditional well (with actual drilling operations commencing within 270 daysafter completing the Initial Test Well) from and to mutually acceptablelocations on the Leases to a minimum depth of 11,800’ TVD or a depth sufficientto encounter abnormal pressure (“Second Test Well”), whichever depth is lesser,by paying 9.00% of Second Test Well expenses through the tanks to earn a 9.00%working interest in the remainder of the Prospect and Leases.  However, the existing producing wellbore andfacilities on the prospect area, the Alpine Exploration, Bodenger No. 1 isexcluded from this earning event.  TheSecond Test well could be targeted for either the secondary, shallower ordeeper horizons that were originally targeted in the Initial Test Well or foran exploratory test on the west side of the block.

 

5.                                       An accelerationwell, drilled within the confines of a geological unit formed in the Chris Isands, as a result of the successful completion of the Initial Test Well, shallbe drilled on a ground floor basis in the percentages of Reef 9.00% and Alpine25%.

 

6.                                       If any subsequentwell(s) are proposed to be drilled on the jointly owned Leases or lands pooledtherewith, all costs, risks and expenses associated therewith shall be borne ona ground floor basis in the percentages of Reef 9.00% and Alpine 25%.

 

7.                                       In the event thatAlpine acquires less than 100% of 8/8ths of all working interest inand to the subject Leases or in the event any of the Leases cover less than100% of the mineral interest in the lands described therein, the cash paymentsand presently existing overriding royalty interest to which Alpine is entitledshall be proportionately reduced as to the lands, Leases and rights soaffected.

 

8.                                       Prior to drillingthe Initial Test Well, Reef and Alpine shall enter into a mutually acceptableExploration Agreement (“EA”).  The EAshall name a mutually acceptable operator (“Operator”). Alpine represents thatproduction from the Leases is not dedicated under or committed to any salesagreement.

 

9.                                       All terms andconditions are subject to the “Favored Nations Clause” and Reef shall benefitproportionately in the event Alpine accepts lesser terms and conditions from abuyer for more than 50% of 8/8ths of the Initial Prospect Well.  A revised agreement will be forwardedstating the terms and conditions.

 

10.                                 This offer issubject to Reef’s review and acceptance of all geological and geophysical data,leases, agreements, and any existing contracts, confirmation of the landlocation and any other discovery of information during due diligence whichcould effect the economics of the prospect. Should Alpine have any obligation(s) which Reef may become subject to,Reef must be made aware of and approve said obligation(s) as a condition toclosing.

 

11.                                 Due Dilligencewill begin within 10 days of acceptance of this letter.

 

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To summarize above:

 

Alpine will be paid $300,000 for costs and fees andwill be carried 12.5% (CWI) through the tanks and 12.5% (BIAPO) after pay outon first well.  On the second well, andany subsequent wells, all parties shall participate on a “heads-up” basis.

 

**Ifthese general terms and conditions are acceptable to Reef, kindly have theproper party execute in the space provided below and return one to theundersigned, on or before August 29, 2003, or this offer shall expire.**

 

 
|                                                   | Sincerely,                          |
|--------------------------------------------------------|-------------------------------------|
|                                                   |                                |
|                                                   | ALPINE EXPLORATION CO.’S, INC. |
|                                                   |                                |
|                                                   | /s/ Tim Washington                  |   |
|                                                   |                                |
|                                                   | **Tim Washington, President**       |
|                                                   |                                |
|                                                   |                                |
| AGREED TO AND ACCEPTED THIS 26th  Day of August, 2003. |
|                                                   |                                |
| REEF GLOBAL ENERGY II, LP                              |                                |
|                                                   |                                |
|                                                   |                                |
| By:                                                    | /s/ Michael J. Mauceli              |   |   |
|                                                   |                                |   |
| Its:                                                   | Managing Member                     |   |
|                                                        |                                     |  |  |  |  |

 

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**EXHIBIT “A”**

 

# **AREAOF MUTUAL INTEREST**

 

Attached to and made a part of that certainParticipation Agreement dated as of August 20, 2003, by and between **Alpine Exploration Companies, Inc.**, as Seller,and **Reef Global Energy II, LP**, asBuyer, covering the South Barataria Development Prospect in Jefferson Parish,Louisiana.

 

 

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**EXHIBIT “B”**

 

#### **LEGALDESCRIPTIONS-OIL, GAS AND MINERAL LEASES**

 

Attached to and made a part of that certainParticipation Agreement dated as of August 20, 2003, by and between **Alpine Exploration Companies, Inc.**, asSeller, and **Reef Global Energy II, LP**,as Buyer, covering the South Barataria Development Prospect in JeffersonParish, Louisiana.

 

JEFFERSON PARISH

 

**BARATARIA**

 

Oil, Gas and MineralLease dated May 22, 1981, between CHARLES KAHN BODENGER, ET UX, as Lessorand AVATAR EXPLORATION, INC., as Lessee, recorded in Conveyance Book 37, Folio887, Entry Number 1000060 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated August 26, 1944, between DOROTHY VAN SANT, as Lessor, and THECALIFORNIA COMPANY, as Lessee, recorded in Conveyance Book 206, Folio 13 of therecords of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated August 09, 1944, between TRINITY PETROLEUM CORP., as Lessor,and THE CALIFORNIA COMPANY, as Lessee, recorded in Conveyance Book 206, Folio362 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated December 28, 2001, between DOUGLAS R. FLEMING, JR., ET. AL.,as Lessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded inConveyance Book 137, Folio 795, Entry No. 10174164of the records of JeffersonParish, Louisiana.

 

Oil, Gas and MineralLease dated December 28, 2001, between ELODIE D. FLEMING, ET. AL., asLessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in ConveyanceBook 138, Folio 4, Entry No. 10235964 of the records of Jefferson Parish,Louisiana.

 

Oil, Gas and MineralLease dated February 25, 2002, between JOHN BURCHMAN BURGUIERES, asLessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in ConveyanceBook 137, Folio 893, Entry No. 10220174 of the records of Jefferson Parish,Louisiana.

 

Oil, Gas and MineralLease dated February 25, 2002, between FLEMING PLANTATION GROUP IV,L.L.C., as Lessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded inConveyance Book 137, Folio 891, Entry No. 10220173 of the records of JeffersonParish, Louisiana.

 

Oil, Gas and MineralLease dated February 25, 2002, between GEORGIA ROSE PROPERTIES, L.L.C., asLessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in ConveyanceBook 137, Folio 889, Entry No. 10220170 of the records of Jefferson Parish,Louisiana.

 

Oil, Gas and MineralLease dated February 25, 2002, between DOUGLAS R. FLEMING, JR., ET. AL.,as Lessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded inConveyance Book 137, Folio 890, Entry No. 10220171 of the records of JeffersonParish, Louisiana.

 

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**EXHIBIT “B”**

**PART II**

 

#### **LEGALDESCRIPTIONS-OIL, GAS AND MINERAL LEASES**

 

Attached to and made a part of that certainParticipation Agreement dated as of August 20, 2003, by and between **Alpine Exploration Companies, Inc.**, asSeller, and **Reef Global Energy II, LP**,as Buyer, covering the South Barataria Development Prospect in JeffersonParish, Louisiana.

 

JEFFERSON PARISH

 

**BARATARIA**

 

Oil, Gas and MineralLease dated March 13, 2002, between KIMBERLY ZAR GINGELL, as Lessor, andALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 137,Folio 945, Entry No. 10234065 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between KEITH B. CLARK, as Lessor, and ALPINEEXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 137, Folio 947,Entry No. 10234067 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between MILDRED MARTIN DESPAUX, ET. AL., asLessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in ConveyanceBook 138, Folio 1, Entry No. 10234071 of the records of Jefferson Parish,Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between KERRY DESPAUX, as Lessor, and ALPINEEXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 138, Folio 2,Entry No. 10234535 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between MARY LOIS BOUDREAUX MARTIN, ET. AL.,as Lessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded inConveyance Book 137, Folio 950, Entry No. 10234070 of the records of JeffersonParish, Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between CHRISTOPHER D. VICTORIANO, ET. UX., asLessor, and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in ConveyanceBook 137, Folio 949, Entry No. 10234069 of the records of Jefferson Parish,Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between DWAYNE T. WISEMAN, as Lessor, andALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 137,Folio 943, Entry No. 10234063 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between AVERY GEORGE MARTIN, as Lessor, andALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 137,Folio 944, Entry No. 10234064 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between MARY LOIS BOUDREAUX MARTIN, as Lessor,and ALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 137,Folio 946, Entry No. 10234066 of the records of Jefferson Parish, Louisiana.

 

Oil, Gas and MineralLease dated March 13, 2002, between JANE HARVEY RIMMER, as Lessor, andALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 138,Folio 5, Entry No. 10235965 of the records of Jefferson Parish, Louisiana.

 

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**EXHIBIT “B”**

**PART III**

 

#### **LEGALDESCRIPTIONS-OIL, GAS AND MINERAL LEASES**

 

Attached to and made a part of that certainParticipation Agreement dated as of August 20, 2003, by and between **Alpine Exploration Companies, Inc.**, asSeller, and **Reef Global Energy II, LP**,as Buyer, covering the South Barataria Development Prospect in JeffersonParish, Louisiana.

 

JEFFERSON PARISH

 

**BARATARIA**

 

Oil, Gas and MineralLease dated March 13, 2002, between ERNEST J. WEISMAN, as Lessor, andALPINE EXPLORATION CO.’S, INC., as Lessee, recorded in Conveyance Book 137,Folio 942, Entry No. 10234062 of the records of Jefferson Parish, Louisiana.

 

State Oil, Gas andMineral Leases No. 35244 & 35269 (f.k.a State Lease 391) datedJanuary 8, 2003, between THE STATE OF LOUISINA MINERAL BOARD, as Lessor,and ALPINE EXPLORATION CO.’S, INC., as Lessee, unrecorded pending LouisianaState Mineral Board delivery.

 

Farm Out Agreement datedFebruary 7, 2003, between STONE ENERGY CORPORATION, as Lessor, and ALPINEEXPLORATION CO.’S, INC., as Lessee, unrecorded in the Parish records.

 

1.                                       Test well drilledby May 1, 2003 to 11,800’. Extension filed for period of 180 days.

2.                                       Substitute wellwithin 60 days of failure of the Initial Test Well.

3.                                       Stone earnsdifference between Twenty-eight percent (28%) of all oil and gas that may beproduced from the Test Well and the presently effective royalties, overridingroyalties, production payments and other like interests in production,burdening the subject lease, lands and depths, proportionately reduced to theinterest in said well which the Lease contributes (“BPO -ORR**”**).

4.                                       At “Payout” (ashereinafter defined), Stone shall have the option to i.) terminate its BPO-ORRand convert it to a Thirty percent of eight-eighths (30% of 8/8ths) workinginterest proportionately reduced to the interest in said well which the Leasecontributes, as hereinafter provided or ii.) increase its BPO-ORR by anadditional two percent of eight-eighths (2% of 8/8ths) (“APO-ORR**”**).

5.                                       Joint OperatingAgreement (JOA), providing for a Gas Balancing Agreement and a 300-300% penaltyfor non-consent operations.

6.                                       As of theeffective date hereof, Operator shall be responsible to Stone for all rentals,shut-ins and other lease payments made by Stone on behalf of Operator.

7.                                       Operator agrees tocarry insurance and indemnification in not less that the amounts set out below:

a.                                       As of theeffective date hereof, Operator shall be responsible to Stone for all rentals,shut-ins and other lease payments made by Stone on behalf of Operator.

b.                                      Workmen’sCompensation and Employer’s Liability Insurance covering employees of theOperator engaged in operations on the Farmout Area in compliance with allapplicable State and Federal Laws.  TheWorkmen’s Compensation policy shall provide for a limit of liability of notless than $1,000,000 per accident.

 

Pipeline Right-of-Waydated March 23, 1983 and recorded March 24, 1983, under Entry No.83-10560 of the records of Jefferson Parish, Louisiana, entered into by CHARLESKAHN BODENGER,

 

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husband of, and JOHNNIEJAN BODENGER, as Grantor, and granted to and executed in favor of FLORIDAEXPLORATION COMPANY, as Grantee.

 

Surface Lease datedMarch 23, 1983 and recorded March 24, 1983, under Entry No. 83-10561of the records of Jefferson Parish, Louisiana, entered into by CHARLES KAHNBODENGER, husband of, and JOHNNIE JAN BODENGER, as Grantor, and granted to andexecuted in favor of FLORIDA EXPLORATION COMPANY, as Grantee.

 

**EXHIBIT “B”**

**PART IV**

 

#### **LEGALDESCRIPTIONS-OIL, GAS AND MINERAL LEASES**

 

Attached to and made a part of that certainParticipation Agreement dated as of August 20, 2003, by and between **Alpine Exploration Companies, Inc.**, asSeller, and **Reef Global Energy II, LP**,as Buyer, covering the South Barataria Development Prospect in Jefferson Parish,Louisiana.

 

JEFFERSON PARISH

 

**BARATARIA**

 

c.                                       General Liabilityand Property Damage Insurance endorsed to include offshore operations andnon-owned watercraft liability, covering operation of the Subject Interestswith a combined single limit each occurrence of $1,000,000 for bodily injuryand property damage.

d.                                      CommercialAutomobile Liability Insurance covering owned, non-owned and hired automobileswith a combined single limit of $1,000,000 per occurrence for bodily injury andproperty damage.

e.                                       Excess LiabilityInsurance, including pollution liability, with a limit of $10,000,000.00.

f.                                         Insurance forControl of Well, Redrilling and Restoration due to blowout and/or crateringabove or below surface, and Seepage and Pollution Liability coverage includingcleanup and containment with a minimum limit of $15,000,000 peroccurrence.  Coverage shall also includeCare Custody and Control Insurance with a minimum limit of  $2,000,000 per occurrence.

 

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**EXHIBIT “C”**

 

#### **ESTIMATEOF NET REVENUE INTERESTS BEFORE AND AFTER PAYOUT IN THE 11,500 “E” SAND UNITBASED UPON PRE-HEARING GEOLGICAL INFORMATION AND SUCCESSFUL STATE APPROVAL OFTHE GEOLOGICAL UNIT.**

 

Attached to and made a part of that certainParticipation Agreement dated as of August 20, 2003, by and between **Alpine Exploration Companies, Inc.**, asSeller, and **Reef Global Energy II, LP**,as Buyer, covering the South Barataria Development Prospect in JeffersonParish, Louisiana

 

***BEFORE PAYOUT***

 
| **Alpine  Bodenger  NRI** |   | **Alpine  Marie Court  NRI** |       | **Stone  Bodenger  NRI** |       | **Stone  Trinity/VS  NRI** |       | **State  Leases  NRI** |       | **Barnett  OPEN  NRI** |       | **Marie Court  OPEN  NRI** |       | **Total  NRI’s Per  Unit  Sand** |       |
|---------------------------|--------|------------------------------|------------|--------------------------|------------|----------------------------|------------|------------------------|------------|------------------------|------------|----------------------------|------------|---------------------------------------|------------|
|                      |   |                         |       |                     |       |                       |       |                   |       |                   |       |                       |       |                                  |       |
| **0.7389586**             |   | **0.7500000**                | ** ** | **0.7200000**            | ** ** | **0.7200000**              | ** ** | **0.7750000**          | ** ** | **0.7500000**          | ** ** | **0.7500000**              | ** ** |                                  | ** ** |
| **0.0200000**             |   | **0.0200000**                | ** ** | **0.0200000**            | ** ** | **0.0150000**              | ** ** | **0.0200000**          | ** ** | **0.0200000**          | ** ** | **0.0200000**              | ** ** |                                  | ** ** |
|                      |   |                         | ** ** |                     | ** ** |                       | ** ** |                   | ** ** |                   | ** ** |                       | ** ** |                                  | ** ** |
| **0.048594**              |   | **0.021990**                 | ** ** | **0.295602**             | ** ** | **0.093273**               | ** ** | **0.257605**           | ** ** | **0.012264**           | ** ** | **0.012052**               | ** ** | **0.741381**                          | ** ** |
| **0.001364**              |   | **0.000608**                 | ** ** | **0.008517**             | ** ** | **0.001943**               | ** ** | **0.006895**           | ** ** | **0.000339**           | ** ** | **0.000333**               | ** ** | **0.020000**                          | ** ** |
| **0.047230**              |   | **0.021382**                 | ** ** | **0.287085**             | ** ** | **0.091330**               | ** ** | **0.250710**           | ** ** | **0.011925**           | ** ** | **0.011719**               | ** ** | **0.721381**                          | ** ** |

 

***AFTER PAYOUT******(STONE ELECTS TO CONVERT TO ORRI)***

 
| **Alpine  Bodenger  NRI** |   | **Alpine  Fleming  NRI** |       | **Stone  Bodenger  NRI** |       | **Stone  Trinity/VS  NRI** |       | **State  NRI** |       | **Barnett  NRI** |       | **OPEN  NRI** |       | **Total  NRI’s Per  Unit  Sand** |       |
|---------------------------|--------|--------------------------|------------|--------------------------|------------|----------------------------|------------|----------------|------------|------------------|------------|---------------|------------|---------------------------------------|------------|
|                      |   |                     |       |                     |       |                       |       |           |       |             |       |          |       |                                  |       |
| **0.7389586**             |   | **0.7500000**            | ** ** | **0.7000000**            | ** ** | **0.7000000**              | ** ** | **0.7750000**  | ** ** | **0.7500000**    | ** ** | **0.7500000** | ** ** |                                  | ** ** |
| **0.0200000**             |   | **0.0200000**            | ** ** | **0.0200000**            | ** ** | **0.0150000**              | ** ** | **0.0200000**  | ** ** | **0.0200000**    | ** ** | **0.0200000** | ** ** |                                  | ** ** |
|                      |   |                     | ** ** |                     | ** ** |                       | ** ** |           | ** ** |             | ** ** |          | ** ** |                                  | ** ** |
| **0.048594**              |   | **0.021990**             | ** ** | **0.287391**             | ** ** | **0.090682**               | ** ** | **0.257605**   | ** ** | **0.012264**     | ** ** | **0.012052**  | ** ** | **0.730579**                          | ** ** |
| **0.001364**              |   | **0.000608**             | ** ** | **0.008517**             | ** ** | **0.001943**               | ** ** | **0.006895**   | ** ** | **0.000339**     | ** ** | **0.000333**  | ** ** | **0.020000**                          | ** ** |
| **0.047230**              |   | **0.021382**             | ** ** | **0.278874**             | ** ** | **0.088739**               | ** ** | **0.250710**   | ** ** | **0.011925**     | ** ** | **0.011719**  | ** ** | **0.710579**                          | ** ** |

 

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