DEREK RESOURCES CORPORATION
               Suite 1730 - 355 Burrard Street
                       Vancouver, B.C.
                           V6C 2G8


October 30, 2001

Mr. Dave Aldrich
Western Industrial, Inc.
P.O. Box 40139
Grand Junction, CO 81504
Tel. 719-784-3191
                                Two Pages By Fax: 505-632-0487

Dear Mr. Aldrich:

Re       LAK Ranch Project, Wyoming, U.S.A.

When  countersigned by each of the parties, the following will
set  forth  the terms and conditions pursuant to  which  Derek
Resources  Corporation ("Derek") and Western Industrial,  Inc.
("Western") have mutually agreed to defer payment  of  amounts
currently owing by Derek to Western:

1.                   Western  will agree to defer  payment  of
     US$89,838.35 (the "Debt") in amounts currently payable by
     Derek  to  Western  until August 31, 2002.   Any  amounts
     incurred by Derek for work by Western in excess  of  this
     amount  (US$89,838.35) will be due  and  payable  in  the
     normal course of business.

2.                   Western will receive, and Derek will pay,
     interest  on the principal amount deferred at a  rate  of
     ten per cent (10%) per annum, such interest to be accrued
     commencing August 1, 2001.

3.                    There  are  no  fixed  repayment  terms;
     however  all  interest and principal  is  fully  due  and
     payable by no later than August 31, 2002.  Derek may make
     interim  payments of principal and interest at any  time,
     and  may  repay  all  amounts due at  any  time,  without
     penalty   for   early  repayment.   Subsequent   interest
     calculations will then be made on the remaining principal
     outstanding.  Payments by Derek will be made by certified
     cheque  and will be considered effective at the date  and
     time   upon   which  Derek  completes  the  certification
     process.

4.                  In addition to the above detailed interest
     payments  and  in  consideration for the deferral,  Derek
     will  grant a permanent, gross overriding royalty on  the
     LAK   Ranch   Property  to  Western  in  the  amount   of
     US$0.0089838  per barrel of oil produced net  to  Derek's
     interest.

                             -2-

5.                  As security for the amount deferred, Derek
     will  grant  a  lien in favour of Western, first  on  the
     surface  equipment  owned by Derek  and  located  on  the
     property  and,  secondly, if required to satisfy  amounts
     outstanding, on the property itself.

6.                  Derek agrees that it will endeavour to pay
     off  all  amounts  due to Western and any  other  debtors
     before   committing  any  available  capital   to   plant
     expansion,    new    projects   or   other    unnecessary
     expenditures.

7.                   Derek agrees that it will not enter  into
     any  agreement  or  arrangement with  any  other  of  its
     creditors  on terms more favourable than those set  forth
     in  this agreement with Western. However, Derek may  make
     subsequent  financial arrangements as they  see  fit,  so
     long   as  the  proceeds  of  any  significant  financial
     arrangements  result in the payment  to  Western  of  all
     principal and interest amounts due.

8.                   Western may at any time and from time  to
     time convert, in whole or in part, the amounts payable to
     Western  by Derek into common shares of Derek at a  price
     of  Cdn$0.75 per share. In order to exercise the right of
     conversion,  Western shall deliver to Derek,  at  Derek's
     address  shown above, notice of the amount  of  the  Debt
     being convened. Derek will deliver to Western within five
     business   days   thereafter  a  share   certificate   or
     certificates  representing  the  number  of   shares   so
     converted. The right to convert the Debt to shares  shall
     expire on the earlier of the date that the Debt is repaid
     or August 31, 2002 unless extended by the parties.  It is
     acknowledged  that any shares, which  may  be  issued  on
     conversion  of  the Debt, will be subject  to  applicable
     hold periods in accordance with the rules of the Canadian
     Venture Exchange.

9.                   This  Agreement will be  subject  to  the
     prior approval of the Canadian Venture Exchange.

If  you are in agreement with the foregoing, please sign  this
letter where indicated below and return same to us and we will
instruct  our  solicitors  to make the  required  filings  for
Canadian Venture Exchange approval.

Yours truly,

DEREK RESOURCES CORPORATION

PER:    /s/ Frank Hallam
            ---------------
            Frank R. Hallam


                 ACKNOWLEDGED AND AGREED BY
                  WESTERN INDUSTRIAL, INC.


PER:    /s/ Dave Aldrich
            ------------
            Dave Aldrich