Loan Agreement

                             As of September 9, 1999

                                     Between
BORROWER

EQUITY OIL COMPANY
10 West 300 South, Suite 806
Salt Lake City, Utah 84101

BANK

BANK ONE, TEXAS, N.A.
TXI 2448
1717 Main Street
Dallas, Texas  75201


         In  consideration  of the creation of the reducing  revolving  facility
described below and the mutual covenants and agreements  contained  herein,  and
intending to be legally bound hereby, Bank and Borrower agree as follows:


         1.0 Certain Definitions. In addition to any other terms defined herein,
the following terms shall have the meaning set forth with respect thereto:

                  "Acceptable Hedging Agreement" means a Hedging Agreement meet-
         ing all of the following criteria:

                           (a) the  quantity of  hydrocarbons  owned by Borrower
                  subject to Hedging Agreements shall not be greater than 75% of
                  the  monthly  production  of  all  of  Borrower's  proved  and
                  producing  oil  and  gas   properties,   including   Mortgaged
                  Properties,   forecast  in  Bank's  most  recent   engineering
                  evaluation for the period covered by the Hedging Agreement;

                           (b) the "strike  prices" under the Hedging  Agreement
                  shall not be less than the lowest  prices  utilized  in Bank's
                  most recent base case  evaluation of the Mortgaged  Properties
                  as reported to Borrower;

                           (c) the  Hedging  Agreement  must have a maturity  of
                  eighteen (18) months or less;

                           (d) Bank must have given its  written  consent to the
                  counterparties under the Hedging Agreement; and

                           (e)  Bank  shall  have   received   first  and  prior
                  perfected security  interests pursuant to security  agreements
                  in  form  and  substance  satisfactory  to  Bank in and to the
                  Hedging Agreement.

                  "Affected Loans":  See Section 4.4.

                  "Affidavit of Payment of Trade Bills":  See Section 6.3.


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                  "Agreement" means this Loan Agreement and all subsequent modi-
         fications and amendments hereto.

                  "Borrowing Base":  See Section 5.0.

                  "Borrowing Request":  See Section 2.0.

                  "Business  Day" means the normal  banking hours during any day
         (other  than  Saturdays  or Sundays or legal  holidays)  that banks are
         legally open for business in Dallas, Texas.

                  "Canadian  Collateral  Security  Documents"  mean  all  of the
         following  collateral  security  documents  executed for the purpose of
         creating a lien in  Borrower's  Mineral  Interests  in those  Mortgaged
         Properties  listed on Schedule I which are located in Canada:  (a) Deed
         of Trust and Mortgage  between  Borrower and Montreal  Trust Company of
         Canada ("Montreal  Trust") dated March 21, 1995; (b) First Supplemental
         Trust Deed between Borrower and Montreal Trust dated September 9, 1999;
         (c) Demand Debenture No. 1 in the principal amount of U.S.  $30,000,000
         issued by Borrower dated September 9, 1999; (d) Demand Debenture No. 2.
         in the principal amount of U.S. $70,000,000 issued by Borrower dated as
         of September 9, 1999; (e) Debenture Pledge Agreement  providing for the
         pledge of a Secured  Demand  Debenture in the principal  amount of U.S.
         $30,000,000  to Bank  executed  by  Borrower  September  9,  1999;  (f)
         Debenture Pledge Agreement providing for the pledge of a Secured Demand
         Debenture in the principal amount of U.S.  $70,000,000 to Bank executed
         by  Borrower as of  September  9, 1999;  and (g) all other  debentures,
         debenture  transfer   agreements,   debenture  pledges,   trust  deeds,
         supplemental   trust   deeds,    assignments,    requests,    receipts,
         registrations, and security notices executed in connection therewith.

                  "Commitment"  means the  obligation  of Bank,  subject  to the
         terms and  conditions  of this  Agreement to make Loans which shall not
         exceed at any one time  outstanding the lesser of (a)  $50,000,000,  or
         (b) the Borrowing Base.

                  "Contested  in Good  Faith"  means,  as to any  payment,  tax,
         assessment,  charge, levy, lien,  encumbrance or claim,  contesting the
         amount,  applicability or validity thereof in good faith by appropriate
         proceedings  or  other  appropriate   actions  promptly  initiated  and
         diligently  conducted in a manner satisfactory to Bank, provided (a) in
         the case of a contested tax only, a deposit of funds or other  security
         satisfactory  to Bank in the full amount of such contested tax has been
         provided for in a manner  satisfactory to Bank, and (b) the enforcement
         of  the  contested  payment,  tax,  assessment,   charge,  levy,  lien,
         encumbrance or claim is stayed in a manner satisfactory to Bank pending
         the resolution of such contest.

                  "Current  Assets"  mean the total of  Borrower's  consolidated
         current  assets  determined  in  accordance  with GAAP,  including  the
         undrawn  amount  available  to be borrowed  under this  Agreement,  and
         excluding intercompany receivables due from affiliates.

                  "Current   Liabilities"   mean   the   total   of   Borrower's
         consolidated current obligations as determined in accordance with GAAP,
         excluding therefrom (i) current maturities due on the Obligations,  and
         (ii) intercompany payables due to affiliates.

                  "Determination Date":  See Section 5.1.

                  "EBITDA"  means,  as of the last day of any fiscal quarter for
         the period of four consecutive  fiscal quarters ending on such day, Net
         Income for such period, (i) plus, without duplication and to the extent
         deducted  from  revenues  in  determining  Net  Income,  the sum of (a)
         Interest Expense for such period, (b) the aggregate amount of Letter of
         Credit fees paid during


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         such period,  (c) the  aggregate  amount of income tax expense for such
         period,  (d) all amounts  attributable to depreciation and amortization
         for such period, (e) exploration  costs, and (f) expenditures  relating
         to  Symskaya   Exploration,   Inc.,  to  the  extent  included  in  the
         computation of Net Income.

                  "Engineered Value":  see Section 10.3.

                  "ERISA" means the Employee  Retirement  Income Security Act of
         1974, as amended,  and the regulations  promulgated  thereunder,  as in
         effect as of the date hereof and any  subsequent  provisions  which are
         amendatory thereof,  supplemental thereto or substituted  therefor.  In
         addition, the terms "Commonly Controlled Entity," "Multiemployer Plan,"
         "PBGC," "Plan,"  "Prohibited  Transaction," and "Reportable Event" have
         the same meanings as provided therefor in ERISA.

                  "Eurocurrency  Reserve  Requirement"  means,  at any time, the
         maximum rate at which  reserves  (including,  without  limitation,  any
         marginal, special,  supplemental or emergency reserves) are required to
         be maintained under  regulations  issued from time to time by the Board
         of Governors of the Federal Reserve System (or any successor) by member
         banks of the Federal Reserve System against "Eurocurrency  liabilities"
         (as such term is used in Regulation D). Without  limiting the effect of
         the foregoing,  the Eurocurrency  Reserve Requirement shall reflect any
         other  reserves  required to be  maintained  by such member  banks with
         respect to (i) any category of liabilities  which includes  deposits by
         reference to which the Eurodollar Rate is to be determined, or (ii) any
         category  of  extensions  of  credit  or  other  assets  which  include
         Eurodollar  Loans. The Eurodollar Rate shall be adjusted  automatically
         on and as of the  effective  date  of any  change  in the  Eurocurrency
         Reserve Requirement.

                  "Eurodollar  Business  Day"  means  a  Business  Day on  which
         dealings  in U.S.  Dollar  deposits  are  carried on in the  Eurodollar
         market.

                  "Eurodollar Interest Period" means, with respect to any Euro-
         dollar Loan:

                           (i) initially, the period commencing on the date such
                  Eurodollar   Loan  is  made  and  ending  on  the  numerically
                  corresponding day in the calendar month that is one month, two
                  months or three  months  thereafter,  as selected by Borrower,
                  and

                           (ii)  thereafter,  each period  commencing on the day
                  following the last day of the next preceding  Interest  Period
                  applicable to such Eurodollar  Loan and ending one month,  two
                  months or three months thereafter, as selected by Borrower;

         provided,  however,  that (A) if any Eurodollar  Interest  Period would
         otherwise  expire on a day that is not a Eurodollar  Business Day, such
         Interest Period shall expire on the next succeeding Eurodollar Business
         Day, and (B) any Eurodollar  Interest Period that commences on the last
         Eurodollar  Business  Day of a  calendar  month  (or on a day for which
         there is no numerically corresponding day in the last calendar month of
         such  Eurodollar  Interest  Period)  shall  end on the last  Eurodollar
         Business Day of the last  calendar  month of such  Eurodollar  Interest
         Period,  and (C) any Eurodollar  Interest  Period that would  otherwise
         expire after the Maturity Date shall end on the Maturity Date.

                  "Eurodollar Loan" means any Loan that bears interest at the
         Eurodollar Rate.

                  "Eurodollar Margin" means one of the following:

                           (i) two and  one-quarter  percent  (2.25%) per annum,
                  whenever the Principal Debt is equal to or greater than 75% of
                  the Commitment in effect at the time in question;


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                           (ii) two  percent  (2.00%)  per annum,  whenever  the
                  Principal  Debt is equal to or greater than 50%, but less than
                  75%, of the Commitment in effect at the time in question; or

                           (iii)  one  and  three-quarter  percent  (1.75%)  per
                  annum,  whenever  the  Principal  Debt is less than 50% of the
                  Commitment in effect at the time in question.

                  "Eurodollar Rate" means, with respect to each Eurodollar Loan,
         a rate per annum (rounded upward, if necessary,  to the nearest 1/10 of
         1%) determined by Bank as follows:

                           Interbank Market Rate          +  Eurodollar Margin
                   -----------------------------------
                   1 - Eurocurrency Reserve Requirement

                  "Event of Default":  See Section 11.0.

                  "Funding Date":  See Section 7.0.

                  "GAAP" means generally  accepted  accounting  principles as in
         effect  from time to time,  applied on a basis  consistent  (except for
         changes approved by Borrower's  independent public accountant) with the
         most recent financial statements of Borrower delivered to Bank.

                  "Hazardous   Materials"   include  all  materials  defined  as
         hazardous  materials or  substances  under any local,  state or federal
         environmental  laws,  rules or  regulations,  and petroleum,  petroleum
         products, oil and asbestos.

                  "Hedging  Agreement"  means  any  transaction   (including  an
         agreement with respect thereto) now existing or hereafter  entered into
         which is a rate swap, basis swap,  forward rate transaction,  commodity
         swap,  commodity option,  equity or equity index swap, equity or equity
         index  option,  bond option,  interest  rate option,  foreign  exchange
         transaction, cap transaction,  forward transaction, collar transaction,
         forward  transaction,  currency swap transaction,  cross-currency  rate
         swap  transaction,  currency  option or any other  similar  transaction
         (including any option with respect to any of these transactions) or any
         combination  thereof,  whether  linked to one or more  interest  rates,
         foreign currencies,  commodity prices, equity prices or other financial
         measures.

                  "Incremental Portion" means any amount which is $1,000,000 or
         greater.

                  "Interbank Market Rate" means, for any Eurodollar Loan for the
         relevant Eurodollar Interest Period therefor,  the rate of interest per
         annum  (rounded  upward,  if necessary,  to the nearest  1/100th of 1%)
         appearing on Telerate Page 3750 (or any  successor  page) as the London
         interbank  offered rate for deposits in dollars at approximately  11:00
         a.m., London time, two (2) Eurodollar  Business Days prior to the first
         day of such Eurodollar  Interest Period,  for a term comparable to such
         Eurodollar  Interest  Period.  If  for  any  reason  such  rate  is not
         available,  the  term  "Interbank  Market  Rate"  shall  mean,  for any
         Eurodollar Loan for any Eurodollar  Interest Period therefor,  the rate
         per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
         appearing on Reuters Screen FRBD as the London  interbank  offered rate
         for deposits in dollars at approximately  11:00 a.m.,  London time, two
         (2) Eurodollar  Business Days prior to the first day of such Eurodollar
         Interest  Period  for a term  comparable  to such  Eurodollar  Interest
         Period; provided however, if more than one rate is specified on Reuters
         Screen FRBD,  the applicable  rate shall be the arithmetic  mean of all
         such rates (rounded  upwards,  if necessary,  to the nearest 1/100th of
         1%).

                  "Interest  Coverage Ratio" means the ratio of (a) EBITDA minus
         Permitted Symskaya Investments beginning after January 1, 2000, and
         minus the greater of:


<PAGE>



                             (i) $210,000, or

                            (ii) the actual amount of fixed exploration overhead
                  as determined by Borrower,

         in each case for the  fiscal  quarter  ending as of the last day of the
         fiscal  quarter  for  which  the  Interest   Coverage  Ratio  is  being
         calculated,  to (b) Interest Expense,  as of the last day of the fiscal
         quarter for which the Interest Coverage Ratio is being calculated,  for
         the period of four consecutive fiscal quarters ending on such day.

                  "Interest   Expense"  means,  for  any  period,  the  interest
         expense,   both  expensed  and  capitalized   (including  the  interest
         component in respect of capital lease obligations),  accrued or paid by
         Borrower during such period, and Letter of Credit fees paid by Borrower
         during such period,  determined on a  consolidated  basis in accordance
         with GAAP.

                  "Interest  Period"  means any Prime  Rate  Interest  Period or
         Eurodollar Interest Period, as is applicable.

                  "Letter of Credit":  See Section 2.6.

                  "Loan":  See Section 2.0.

                  "Loan Documents"  means this Agreement,  the Note, the Oil and
         Gas   Mortgages,   the  UCC-1   financing   statements,   the  Property
         Certificates,  the  Affidavit of Payment of Trade Bills,  the Officer's
         Certificate, the Section 26.02 Notice, the Canadian Collateral Security
         Documents, and all other documents,  instruments,  guarantees, security
         agreements,  deeds  of  trust,  pledge  agreements,   certificates  and
         agreements  executed and/or delivered by Borrower,  or any guarantor or
         third party in connection with any Loan.

                  "Maturity Date" means September 9, 2002.

                  "Maximum  Rate"  means the  lesser of Prime  Rate plus 4% from
         time to time and in  effect on the date for  which a  determination  of
         interest  accrued  hereunder is made, or the maximum rate  permitted by
         applicable law.

                  "Midland"  means  HSBC  Investment  Bank  plc,  which  is  the
         successor in interest to Midland Bank plc, New York Branch.

                  "Mineral Interests" means (a) all present and future interests
         and  estates  existing  under an oil and gas  lease  including  without
         limitation  working  interests,   royalties,   over-riding   royalties,
         production  payments  and net  profits  interests,  (b) all present and
         future rights in mineral fee interests  and rights  therein,  including
         without  limitation,  any  reversionary or carried  interests  relating
         thereto,  (c) all rights,  titles and  interests  created by or arising
         under the terms of all present and future unitization, communitization,
         and pooling  arrangements (and all properties covered and units created
         thereby)  whether  arising by contract or operation of law which now or
         hereafter include all or any part of the foregoing, and (d) all rights,
         remedies, powers and privileges with respect to all of the foregoing.

                  "Monthly Reduction Amount": See Section 5.5.

                  "Mortgaged  Properties"  means all present and future  Mineral
         Interests  of Borrower  in those oil and gas  properties  described  on
         Schedule  I and in all other  properties  in which  Borrower  hereafter
         grants to Bank a mortgage or lien.


<PAGE>



                  "Net Income" means, for any period,  net income or loss (after
         income taxes) of Borrower for such period  determined on a consolidated
         basis in accordance  with GAAP,  provided,  there shall be excluded (a)
         extraordinary  gains,  (b) gains due to sale or writeup of assets,  (c)
         earnings of any entity newly acquired,  if earned prior to acquisition,
         (d) gains due to acquisitions of any securities of any entity,  (e) all
         other non-cash  revenue and charges,  and (f) gains or losses from sale
         of assets.

                  "No  Cure  Period  Covenants"  mean  any  term,   covenant  or
         agreement set forth in Section 5.5,  Section 5.6,  Sections 8.1 through
         8.4, Sections 9.1 through 9.16, Section 14.0 and Section 15.8 hereof.

                  "Note"  means that  certain  promissory  note made by Borrower
         payable  to  the  order  of  Bank  in  the  original  principal  sum of
         $50,000,000  dated  September 9, 1999,  and all  renewals,  extensions,
         modifications and amendments thereto, and substitutions therefor.

                  "Obligations" means the obligations of Borrower:

                           (a) to  pay  all  indebtedness  arising  out of  this
                  Agreement,  any future advances under this Agreement,  and all
                  renewals, extensions or amendments of such indebtedness or any
                  part thereof or any such future advances;

                           (b) to pay the  principal of and interest on the Note
                  in  accordance  with  the  terms  thereof,  and all  renewals,
                  extensions,  modifications  and amendments of such Note or any
                  part thereof, and any future advances made pursuant thereto;

                           (c) to  repay to Bank all  amounts  advanced  by Bank
                  hereunder  or under  the  other  Loan  Documents  on behalf of
                  Borrower,   including,   without   limitation,   advances  for
                  principal  or  interest  payments  to prior  secured  parties,
                  mortgagees, or lienors, or for taxes, levies, insurance, rent,
                  repairs to or maintenance or storage of any of the collateral;

                           (d) to pay any and all other indebtedness of Borrower
                  to Bank of every  kind,  nature  and  description,  direct  or
                  indirect,   primary  or   secondary,   secured  or   unsecured
                  (including   overdrafts),   joint  or  several,   absolute  or
                  contingent,  due or to become due,  now  existing or hereafter
                  arising,  regardless  of how it  may be  evidenced,  including
                  without  limitation  all  future  advances,   whether  or  not
                  presently contemplated by the parties hereto;

                           (e) to pay  any and all  obligations,  contingent  or
                  otherwise,  whether  now  existing  or  hereafter  arising  of
                  Borrower  to Bank  arising  under  or in  connection  with any
                  Hedging  Agreement  which  Borrower may have with Bank, or any
                  affiliate of Bank;

                           (f) to perform fully all of the terms and  provisions
                  of each of the  instruments  constituting  the Loan Documents;
                  and

                           (g) to reimburse  Bank, on demand,  for all of Bank's
                  expenses  and  costs,  which  Borrower  is  obligated  to  pay
                  pursuant to the terms of the Loan Documents.

                  "Officer's Certificate": See Section 6.7.

                  "Oil and Gas Mortgage":  See Section 2.4.

                  "Other Taxes":  See Section 4.6.

                  "Permitted  Liens" mean (a) liens in favor of Bank,  and liens
         in favor of the Canadian trustee under the Canadian Collateral Security
         Documents, (b) liens for taxes, assessments or


<PAGE>



         similar  charges,  incurred in the ordinary course of business that are
         not  yet  due  and  payable,  (c)  liens  of  mechanics,   materialmen,
         warehousemen,   carriers,  operators  and  other  like  liens  securing
         obligations  incurred in the ordinary  course of business  that are not
         yet due and payable,  (d) landlord's  liens for rentals not yet due and
         payable, (e) royalties,  overriding royalties,  reversionary interests,
         production  payments and similar burdens,  (f) sales contracts or other
         arrangements  for the  sale  of  hydrocarbons  which  would  not  (when
         considered  cumulatively  with the  matters  discussed  in  clause  (e)
         immediately  preceding)  deprive  Borrower  of any  material  right  in
         respect of Borrower's assets or properties,  (g) liens permitted by the
         Oil and Gas  Mortgages,  and (h)  purchase-money  mortgages,  liens  or
         security interests on any property hereafter acquired.

                  "Permitted  Symskaya  Investments"  mean  investments  in,  or
         capital  expenditures  or  distributions  of any  nature  to,  Symskaya
         Exploration,  Inc.,  which  may be  made  by  Borrower  subject  to the
         following limitations:

                           (a) no such payments may be made at any time an Event
                  of  Default  then  exists or will  occur as the result of such
                  payment; and

                           (b) the  aggregate  amount  of such  payments  in any
                  fiscal year may not exceed  $200,000,  without  prior  written
                  consent of Bank.

                  "Plan" means, at any time, any employee  benefit plan which is
         covered  by ERISA and in  respect  of which  Borrower  or any  Commonly
         Controlled  Entity is (or, if such plan were  terminated  at such time,
         would under ERISA be deemed to be) an "employer" as defined in ERISA.

                  "Potential  Default" means any condition,  event or act, which
         with  the  giving  of  notice  or the  lapse of  time,  or  both,  will
         constitute an Event of Default hereunder.

                  "Prime  Rate" means the  variable  rate of interest  per annum
         established  from time to time by Bank as its Prime Rate (which rate of
         interest  may or may not be the lowest rate or best  charged by Bank on
         similar loans,  and Bank may make various  commercial or other loans at
         rates of interest having no relationship to such rate).  Each change in
         the Prime Rate shall become effective  without prior notice to Borrower
         automatically  as of the opening of business on the date of such change
         in the Prime Rate.

                  "Prime Rate Interest Period" means,  with respect to any Prime
         Rate Loan,  the period ending on the last day of each month;  provided,
         however,  that (i) if any Prime Rate Interest Period would end on a day
         that is not a Business Day, such Interest  Period shall end on the next
         succeeding  Business  Day, and (ii) if any Prime Rate  Interest  Period
         would otherwise end after the Maturity Date, such Interest Period shall
         end on the Maturity Date.

                  "Prime  Rate Loan"  means any Loan that bears  interest at the
Prime Rate.

                  "Principal Debt":  See Section 2.2.

                  "Property Certificates":  See Section 6.4.

                  "Regulation D" means Regulation D of the Board of Governors of
         the  Federal  Reserve  System as amended or  supplemented  from time to
         time.

                  "Reserve   Report"  means  a  report  in  form  and  substance
         satisfactory  to Bank  prepared by  Borrower's  in-house  engineers and
         audited by an independent  petroleum consulting firm acceptable to Bank
         evaluating  the  oil  and  gas  reserves  attributable  to the  Mineral
         Interests of Borrower in all of its oil and gas  properties  as of each
         January 1 and which shall, among other things, (a) identify


<PAGE>



         the wells covered  thereby,  (b) specify such engineers'  opinions with
         respect to the total volume of reserves (the  "available  reserves") of
         hydrocarbons (using the terms or categories "proved developed producing
         reserves,"  "proved  developed   nonproducing   reserves"  and  "proved
         undeveloped  reserves")  which Borrower has advised such engineers that
         the  Borrower  has the right to produce  for its own  account,  (c) set
         forth such  engineers'  opinions with respect to the  projected  future
         cash proceeds from the available reserves, discounted for present value
         at a rate acceptable to Bank, for each calendar year or portion thereof
         after the date of such findings and data, (d) set forth such engineers'
         opinions with respect to the projected future rate of production of the
         available reserves,  (e) contain such other information as requested by
         Bank with respect to the projected rate of production,  gross revenues,
         operating  expenses,  taxes,  capital  costs,  net revenues and present
         value  of  future  net  revenues  attributable  to  such  reserves  and
         production  therefrom,  and (f)  contain a  statement  of the price and
         escalation  parameters,  procedures  and  assumptions  upon  which such
         determinations were based.

                  "Section 26.02 Notice":  See Section 6.8.

                  "Tangible  Net  Worth"  means  the sum of the  excess of total
         assets over total liabilities,  total assets and total liabilities each
         being  determined  on a  consolidated  basis in  accordance  with  GAAP
         consistent  with those  applied  in the  preparation  of the  financial
         statements  previously furnished to Bank,  excluding however,  from the
         determination  of total assets all assets which would be  classified as
         intangible  assets  under  tax  basis  principles,   including  without
         limitation,  good will, patents,  trademarks,  trade names, copyrights,
         and franchises.

                  "Year 2000 Problem":  See Section 10.14.

         2.0 Loan. Bank agrees,  subject to the terms and conditions  hereof, to
lend  Borrower at any time and from time to time on or before the Maturity  Date
sums (each herein  called a "Loan" and  collectively  the "Loans")  which may be
repaid and reborrowed pursuant to the terms hereof and which shall not exceed at
any one time outstanding the amount of the Commitment. Whenever Borrower desires
a Loan  hereunder,  Borrower  shall give Bank  notice in the form of Exhibit "A"
attached hereto (a "Borrowing  Request") specifying (a) the date (which shall be
a Business Day in the case of a Prime Rate Loan or a Eurodollar  Business Day in
the case of a Eurodollar Loan) of the proposed  borrowing,  (b) the amount to be
borrowed, (c) the portion of the borrowing constituting a Prime Rate Loan and/or
a Eurodollar Loan (which  Eurodollar Loan may only be in Incremental  Portions),
and (d) if any portion of the proposed borrowing  constitutes a Eurodollar Loan,
the initial  Eurodollar  Interest  Period  selected by Borrower (one month,  two
months or three months).  Such notice shall be given by 10 a.m.  (Dallas,  Texas
time) on the date of the  proposed  borrowing  in the case of a Prime Rate Loan,
and by 10 a.m.  (Dallas,  Texas time) two (2) Business Days prior to the date of
the proposed borrowing in the case of a Eurodollar Loan. The notice required may
be given  telephonically  by Borrower to Bank,  but upon giving such  telephonic
notice  Borrower  shall  immediately  thereafter  provide  Bank with the written
notice  attached hereto as Exhibit "A". All notices given under this Section 2.0
shall be irrevocable. Not later than 12 noon (Dallas, Texas time) on the date of
the proposed borrowing and upon fulfillment of all other conditions  required by
this Agreement,  Bank will make such Loan available to Borrower by crediting the
amount  thereof to  Borrower's  account with Bank or otherwise  disbursing it as
Borrower  shall request in writing.  No Loans may be obtained after the Maturity
Date.

                  2.1 Use of Proceeds.  The proceeds of Loans may be used solely
         (a) for refinancing of existing  indebtedness,  (b) for the acquisition
         and  development of oil and gas properties,  (c) for general  corporate
         purposes, including exploration, and (d) for the issuance of Letters of
         Credit.

                  2.2  Promissory  Note. The obligation of Borrower to repay the
         aggregate  principal balance of all Loans hereunder  outstanding at any
         one time (the  "Principal  Debt")  shall be evidenced by the Note which
         (a) shall be payable on or before the Maturity Date for the amount of


<PAGE>



         $50,000,000, or the Principal Debt then outstanding, whichever is less,
         (b) bear  interest  from  the date  thereof  until  paid in the  manner
         provided in Section 3.0 hereof, (c) be entitled to the benefits of this
         Agreement in the security provided for herein,  and (d) be in such form
         as is acceptable to Bank.

                  2.3 Amortization.  Interest on the unpaid principal balance of
         the Note shall be due and  payable as  provided  in Section 3.0 hereof.
         The Principal Debt then  outstanding,  plus accrued but unpaid interest
         then  outstanding,  plus  accrued  but unpaid  interest  to the date of
         payment,  shall be due and payable on the Maturity  Date.  In addition,
         principal  payments may be required from to time in accordance with the
         Borrowing Base reduction schedule set forth in Section 5.5 hereof.

                  2.4  Collateral.  The payment and  performance of the Note and
         all of the other  Obligations  hereunder  and under the Loan  Documents
         shall be  secured  by a first and  superior  lien  against  the  entire
         Mineral  Interest of Borrower in the Mortgaged  Properties  pursuant to
         the  terms  of one or  more  deeds  of  trust  (each  an  "Oil  and Gas
         Mortgage"), which shall be in form and substance satisfactory to Bank.

                  2.5  Unused  Commitment  Fee.  Borrower  agrees to pay Bank an
         unused  commitment fee for the period  commencing with the date of this
         Agreement to the Maturity Date, computed at the rate of one-half of one
         percent  (0.50%) per annum on the average  daily unused  portion of the
         Commitment.  The phrase "unused  portion of the  Commitment" as used in
         the preceding sentence means the difference between (a) the Commitment,
         and (b) the Principal  Debt.  The  commitment fee shall be payable upon
         receipt of billing from Bank.

                  2.6 Letter of Credit  Subfeature.  As a  subfeature  under the
         revolving credit facility created by this Agreement, Bank may from time
         to time up to and  including  seven  days prior to the  Maturity  Date,
         issue Letters of Credit for the account of Borrower  (each a "Letter of
         Credit" and  collectively,  the "Letters of Credit");  provided however
         that (a) the form and  substance  of each  Letter  of  Credit  shall be
         subject  to  approval  by  Bank  in its  sole  discretion,  and (b) the
         aggregate undrawn amount of all outstanding Letters of Credit shall not
         at any time  exceed  $1,000,000.  No  Letter of  Credit  shall  have an
         expiration  date subsequent to the Maturity Date. The undrawn amount of
         all  Letters  of  Credit  plus  any  and  all  amounts  paid by Bank in
         connection  with drawings under any Letter of Credit for which Bank has
         not been  reimbursed  shall be  reserved  under  the  revolving  credit
         facility and shall not be available  for Loans  thereunder.  Each draft
         paid by Bank under a Letter of Credit  shall be deemed a Loan and shall
         be repaid in  accordance  with the  terms of this  Agreement;  provided
         however,  that if a Loan is not available for any reason  whatsoever at
         the time any draft is paid by Bank, or, if Loans are not then available
         in such amount due to any  limitation  on  borrowing  set forth in this
         Agreement,  then the full amount of such draft shall immediately be due
         and payable,  together with interest thereon, from the date such amount
         is paid by Bank to the date such amount is fully repaid by Borrower, at
         the rate of interest applicable to Loans under the Note. In such event,
         Borrower  agrees  that  Bank,  at  Bank's  sole  discretion,  may debit
         Borrower's  deposit  account  with Bank for the  amount of such  draft.
         Borrower shall pay Bank  commissions  for issuing the Letters of Credit
         (calculated separately for each Letter of Credit) in an amount equal to
         the  greater  of (i) two  percent  (2%) per annum on the  maximum  face
         amount of the Letter of Credit, or (ii) $400. Such commissions shall be
         payable  prior to the issuance of each Letter of Credit and  thereafter
         on each  anniversary  date of such issuance while such Letter of Credit
         is  outstanding.  Borrower  shall pay Bank a $60  amendment fee for the
         amendment  of any  Letter of  Credit  which is  payable  at the time of
         amendment.

         3.0 Interest Rates. The interest rate options available to Borrower for
Revolving  Loans  hereunder  shall be for Prime  Rate  Loans and for  Eurodollar
Loans. No more than four (4) different  Eurodollar Loans and one Prime Rate Loan
may be outstanding at any one time, unless otherwise agreed.



<PAGE>



                  3.1  Prime  Rate  Loans.   Borrower  agrees  to  pay  interest
         (calculated  on  the  basis  of  the  actual  days  elapsed  in a  year
         consisting of 360 days) with respect to the unpaid  principal amount of
         each  Prime  Rate  Loan  from the date the  proceeds  thereof  are made
         available  to  Borrower  until  maturity  (whether by  acceleration  or
         otherwise)  at a varying  rate per annum equal to the lesser of (i) the
         Maximum  Rate or (ii) the Prime Rate.  The  interest in respect of each
         Prime  Rate Loan  shall be  payable  on the last day of each Prime Rate
         Interest Period.

                  3.2  Eurodollar   Loans.   Borrower  agrees  to  pay  interest
         (calculated on the basis of actual days elapsed in a year consisting of
         360  days)  with  respect  to  the  unpaid  principal  amount  of  each
         Eurodollar  Loan from the date the proceeds  thereof are made available
         to Borrower until maturity  (whether by acceleration or otherwise) at a
         rate per annum equal to the lesser of (i) the Maximum  Rate or (ii) the
         Eurodollar  Rate  applicable to such  Eurodollar  Loan.  Subject to the
         provisions of this Agreement as to prepayment, interest with respect to
         each  Eurodollar  Loan  shall  be  payable  on the  last  day  of  each
         Eurodollar Interest Period. Subject to the provisions of this Agreement
         as to prepayment,  the principal of each  Eurodollar Loan shall be paid
         or  renewed  on the last  day of each  applicable  Eurodollar  Interest
         Period or shall  automatically be converted to a Prime Rate Loan on the
         last day of such Eurodollar Interest Period as hereinafter provided. If
         no  Event  of  Default  exists  and  Borrower  desires  to  renew  such
         Eurodollar  Loan and the  amount  thereof  is at  least an  Incremental
         Portion,  Borrower  shall  deliver  the notice  required in Section 2.0
         hereof and designate whether the Eurodollar Interest Period to commence
         on the expiration date of the prior Eurodollar Interest Period shall be
         a one month, two month or three month period.  If Bank has not received
         timely  permissible  notice of designation of such Eurodollar  Interest
         Period as herein provided,  Borrower shall be deemed to have elected to
         convert such maturing Eurodollar Loan to a Prime Rate Loan.

                  3.3 Interest Rate  Determination.  Bank shall  determine  each
         interest  rate  applicable  hereunder  and shall give prompt  notice to
         Borrower of each rate of interest so determined.

                  3.4 Conversion  Option:  Prime Rate Loans to Eurodollar Loans.
         Borrower may convert its Prime Rate Loans to Eurodollar Loans by giving
         Bank  irrevocable  written  notice  of such  election  at least two (2)
         Eurodollar  Business Days prior to the proposed  conversion  date.  The
         notice of conversion to a Eurodollar  Loan shall include (1) the amount
         of the Prime Rate Loan to be  converted  (which  must be  converted  in
         Incremental Portions),  and (2) the duration of the Eurodollar Interest
         Period selected (one month, two months or three months). If no Event of
         Default  exists  hereunder,  such  conversion  shall  be  made  on  the
         requested  conversion date or, if such requested conversion date is not
         a Eurodollar  Business Day, on the next succeeding  Eurodollar Business
         Day, but if an Event of Default  exists  hereunder,  no conversion  may
         occur.

                  3.5 Conversion  Option:  Eurodollar Loans to Prime Rate Loans.
         Borrower may convert all or any part of its  Eurodollar  Loans to Prime
         Rate Loans by giving Bank  irrevocable  written notice of such election
         prior to 10 a.m.  (Dallas,  Texas time) on the conversion date, if such
         conversion  date is the last day of a Eurodollar  Interest  Period with
         respect  thereto,  or at least two (2)  Eurodollar  Business Days prior
         written notice if the conversion  date is a day other than the last day
         of the Eurodollar Interest Period with respect thereto. Such conversion
         shall be made on the requested  conversion  date or, if such  requested
         conversion date is not a Business Day, on the next succeeding  Business
         Day. A conversion  of a  Eurodollar  Loan to a Prime Rate Loan on a day
         other  than the  last day of the  Eurodollar  Interest  Period  for the
         Eurodollar  Loan in question  shall  constitute a prepayment  which may
         require  the  payment of the  breakage  fee  described  in Section  4.6
         hereof. All conversion notices given hereunder shall be irrevocable.

                  3.6  Prepayment  of Loans.  Borrower  may at any time and from
         time to time  prepay any Prime Rate Loan,  in whole or in part  without
         premium  or  penalty.  Borrower  may at any time and from  time to time
         prepay  any  Eurodollar  Loan in whole or in part,  without  premium or
         penalty


<PAGE>



         except as provided in Section 4.6 hereof,  provided that Borrower first
         complies with the conditions hereinafter set forth. Borrower shall give
         Bank at least two (2) Eurodollar  Business Days prior written notice of
         (i) its  intent  to  prepay  a  Eurodollar  Loan,  (ii) the  amount  of
         principal  which  will be  prepaid,  and  (iii)  the date on which  the
         prepayment  will be made.  Each prepayment of principal of a Eurodollar
         Loan  shall  be in a  minimum  amount  of  $100,000  (or the  aggregate
         principal amount outstanding, if less) plus accrued interest thereon to
         the date of  prepayment.  Borrower may also be required to pay Bank the
         breakage fee  described  in Section 4.6 hereof  because such payment is
         made on a date  other  than the last day of the  applicable  Eurodollar
         Interest Period.

                  3.7 Interest Act (Canada).  The parties  acknowledge that some
         of the Mortgaged  Properties are located in Canada. For purposes of the
         Interest Act (Canada), the annual rates of interest applicable to Prime
         Rate  Loans  and  Eurodollar  Loans,  respectively,  are the  rates  as
         determined  hereunder  multiplied  by the  actual  number  of days in a
         period of one year  commencing on the first day of the period for which
         such interest is payable and divided by 360.

         4.0 Change of  Circumstances.  The following  provisions shall apply to
all Eurodollar Loans under this Agreement.

                  4.1 Increased Cost and Reduced Return.  (a) If, after the date
         hereof, the adoption of any applicable law, rule, or regulation, or any
         change in any applicable law, rule, or regulation, or any change in the
         interpretation or administration thereof by any governmental authority,
         central bank, or comparable  agency charged with the  interpretation or
         administration  thereof,  or  compliance  by Bank with any  request  or
         directive  (whether  or not  having  the  force  of  law)  of any  such
         governmental authority, central bank, or comparable agency:

                           (i) shall  subject  Bank to any tax,  duty,  or other
                  charge  with  respect to any  Eurodollar  Loan,  the Note,  or
                  Bank's  obligation  to make  Eurodollar  Loans,  or change the
                  basis of taxation  of any  amounts  payable to Bank under this
                  Agreement or the Note in respect of any Eurodollar Loan (other
                  than taxes  imposed on the  overall  net income of Bank by the
                  jurisdiction  in which  Bank has its  principal  office or its
                  applicable lending office);

                           (ii) shall impose,  modify,  or deem  applicable  any
                  reserve, special deposit,  assessment,  or similar requirement
                  (other than the Eurocurrency  Reserve Requirement  utilized in
                  the  determination  of the  Eurodollar  Rate)  relating to any
                  extensions  of credit or other assets of, or any deposits with
                  or other  liabilities or commitments  of, Bank,  including the
                  commitment of Bank hereunder; or

                           (iii) shall impose on Bank or on the London interbank
                  market any other  condition  affecting  this  Agreement or the
                  Note or any of such  extensions  of credit or  liabilities  or
                  commitments;

         and the result of any of the  foregoing is to increase the cost to Bank
         of making,  converting into, continuing,  or maintaining any Eurodollar
         Loan or to reduce any sum  received  or  receivable  by Bank under this
         Agreement  or the  Note  with  respect  to any  Eurodollar  Loan,  then
         Borrower  shall pay to Bank on demand  such  amount or  amounts as will
         compensate Bank for such increased cost or reduction.  If Bank requests
         compensation  by Borrower  under this  Section  4.1,  Borrower  may, by
         notice to Bank,  suspend  the  obligation  of Bank to make or  continue
         Eurodollar  Loans or to convert Prime Rate Loans into Eurodollar  Loans
         until the event or condition  giving rise to such request  ceases to be
         in  effect  (in  which  case the  provisions  of  Section  4.4 shall be
         applicable);  provided that such suspension  shall not affect the right
         of Bank to receive the compensation so requested.



<PAGE>



                  (b) If, after the date hereof, Bank shall have determined that
         the adoption of any  applicable  law,  rule,  or  regulation  regarding
         capital  adequacy  or any change  therein or in the  interpretation  or
         administration thereof by any governmental authority,  central bank, or
         comparable  agency charged with the  interpretation  or  administration
         thereof,  or  any  request  or  directive  regarding  capital  adequacy
         (whether  or not  having  the  force of law) of any  such  governmental
         authority,  central bank, or comparable  agency,  has or would have the
         effect of  reducing  the rate of return on the  capital  of Bank or any
         corporation  controlling  Bank as a consequence  of Bank's  obligations
         hereunder  to a level below that which Bank or  corporation  could have
         achieved but for such adoption,  change,  request, or directive (taking
         into consideration its policies with respect to capital adequacy), then
         from  time to time  upon  demand  the  Borrower  shall pay to Bank such
         additional   amount  or  amounts  as  will  compensate  Bank  for  such
         reduction.

                  (c) Bank shall promptly  notify Borrower of any event of which
         it has knowledge,  occurring after the date hereof,  which will entitle
         Bank to  compensation  pursuant to this  Section  and will  designate a
         different  applicable lending office if such designation will avoid the
         need for, or reduce the amount of, such  compensation  and will not, in
         the judgment of Bank,  be otherwise  disadvantageous  to it. Bank shall
         furnish to Borrower a statement  setting forth the additional amount or
         amounts to be paid to it  hereunder  which shall be  conclusive  in the
         absence of manifest error. In determining such amount, Bank may use any
         reasonable averaging and attribution methods.

                  (d) The  obligations  of Borrower under this Section 4.1 shall
         survive  termination  of this Agreement and payment in full of the Note
         for a period of two (2) years thereafter.

                  4.2      Limitation on Eurodollar Loans. If on or prior to the
         first day of any Eurodollar Interest Period for any Eurodollar Loan:

                           (i) Bank  determines  (which  determination  shall be
                  conclusive)  that by reason  of  circumstances  affecting  the
                  relevant  market,  adequate and reasonable  means do not exist
                  for  ascertaining  the  Eurodollar  Rate for  such  Eurodollar
                  Interest Period (based upon factors which affect all of Bank's
                  customers engaging in Eurodollar transactions); or

                           (ii) Bank determines  (which  determination  shall be
                  conclusive)  that the Eurodollar  Rate will not adequately and
                  fairly  reflect  the cost to the Banks of  funding  Eurodollar
                  Loans for such Eurodollar  Interest Period (based upon factors
                  which affect all of Bank's  customers  engaging in  Eurodollar
                  transactions);

         then Bank shall give Borrower  prompt  notice  thereof  specifying  the
         relevant  amounts  or  periods  as is  applicable,  and so long as such
         condition remains in effect,  Bank shall be under no obligation to make
         additional  Eurodollar Loans,  continue Eurodollar Loans, or to convert
         Prime Rate Loans into Eurodollar Loans, and Borrower shall, on the last
         day(s)  of the  then  current  Eurodollar  Interest  Period(s)  for the
         outstanding  Eurodollar  Loans,  either prepay such Eurodollar Loans or
         convert such Eurodollar  Loans into Prime Rate Loans in accordance with
         the terms of this Agreement.

                  4.3  Illegality.  Notwithstanding  any other provision of this
         Agreement,  in the event that it becomes unlawful for Bank to maintain,
         or fund Eurodollar  Loans hereunder,  then Bank shall,  promptly notify
         Borrower thereof and Bank's  obligation to make or continue  Eurodollar
         Loans and to convert  Prime Rate Loans into  Eurodollar  Loans shall be
         suspended  until such time as Bank may again make,  maintain,  and fund
         Eurodollar  Loans (in which case the provisions of Section 4.4 shall be
         applicable).

                  4.4      Treatment of Affected Loans.  If the obligation of
         Bank to make Eurodollar Loans or to continue Eurodollar Loans or to
         convert Prime Rate Loans into Eurodollar Loans shall


<PAGE>



         be  suspended  pursuant  to  Section  4.1 or Section  4.3  hereof  (the
         "Affected Loans"), the Affected Loans shall be automatically  converted
         into Prime Rate Loans on the last day(s) of the then current Eurodollar
         Interest  Period(s) for Affected Loans (or, in the case of a conversion
         required  by  Section  4.3  hereof,  on such  earlier  date as Bank may
         specify  to  Borrower)  and,  unless  and until  Bank  gives  notice as
         provided  below that the  circumstances  specified  in  Section  4.1 or
         Section 4.3 hereof that gave rise to such conversion no longer exist:

                           (i) to the extent that the  Affected  Loans have been
                  so converted,  all payments and  prepayments of principal that
                  would  otherwise  be applied to the  Affected  Loans  shall be
                  applied instead to Prime Rate Loans; and

                           (ii)  all  Loans  that  would  otherwise  be  made or
                  continued  by  Bank  as  Eurodollar  Loans  shall  be  made or
                  continued  instead as Prime Rate Loans,  and all Loans of Bank
                  that would otherwise be converted into Eurodollar  Loans shall
                  be  converted  instead  into (or shall  remain  as) Prime Rate
                  Loans.

                  4.5 Taxes.  (a) Any and all payments by Borrower to or for the
         account of Bank  hereunder  or under any other Loan  Document  shall be
         made free and clear of and without deduction for any and all present or
         future  taxes,  duties,  levies,   imposts,   deductions,   charges  or
         withholdings,  and all liabilities with respect thereto,  excluding, in
         the case of Bank  taxes  imposed on its  income,  and  franchise  taxes
         imposed on it, by the jurisdiction under the laws of which Bank (or its
         applicable  lending  office) is organized or any political  subdivision
         thereof  (all  such  non-  excluded  taxes,  duties,  levies,  imposts,
         deductions,  charges,  withholdings,  and liabilities being hereinafter
         referred to as "Taxes"). If Borrower shall be required by law to deduct
         any Taxes from or in respect of any sum payable under this Agreement or
         any other Loan  Document to Bank (i) the sum payable shall be increased
         as necessary so that after  making all required  deductions  (including
         deductions  applicable  to  additional  sums payable under this Section
         4.5) Bank  receives an amount  equal to the sum it would have  received
         had no such  deductions  been  made,  (ii)  Borrower  shall  make  such
         deductions,  (iii) Borrower  shall pay the full amount  deducted to the
         relevant  taxation  authority  or other  authority in  accordance  with
         applicable law, and (iv) Borrower shall furnish to Bank the original or
         a  certified  copy  of  a  receipt  evidencing  payment  thereof.   The
         obligations   of  Borrower   under  this  Section  4.5  shall   survive
         termination  of this  Agreement  and  payment in full of the Note for a
         period of two (2) years thereafter.

                  4.6 Compensation. Upon the request of Bank, Borrower shall pay
         to  Bank  such  amount  or  amounts  as  shall  be  sufficient  (in the
         reasonable  opinion of Bank) to  compensate  it for any loss,  cost, or
         expense  (including  loss of anticipated  profits)  incurred by it as a
         result of:

                           (i)  any  payment,  prepayment,  or  conversion  of a
                  Eurodollar Loan for any reason (including, without limitation,
                  the  acceleration  of the Loans pursuant to Section 11.0) on a
                  date other than the last day of the Eurodollar Interest Period
                  for such Eurodollar Loan; or

                           (ii)  any   failure  by   Borrower   for  any  reason
                  (including,  without limitation,  the failure of any condition
                  precedent specified in Section 7.0 to be satisfied) to borrow,
                  convert, continue, or prepay a Eurodollar Loan on the date for
                  such  borrowing,   conversion,   continuation,  or  prepayment
                  specified in the  relevant  notice of  borrowing,  prepayment,
                  continuation, or conversion under this Agreement.

                  (a) In addition, Borrower agrees to pay any and all present or
         future  stamp or  documentary  taxes and any other  excise or  property
         taxes or charges or similar  levies  which arise from any payment  made
         under this Agreement or any other Loan Document or from the execution


<PAGE>



         or delivery  of, or otherwise  with  respect to, this  Agreement or any
         other Loan Document (hereinafter referred to as "Other Taxes").

                  (b) The Borrower  agrees to indemnify Bank for the full amount
         of Taxes and Other Taxes (including,  without limitation,  any Taxes or
         Other Taxes imposed or asserted by any  jurisdiction on amounts payable
         under  this  Section  4.6)  paid by Bank and any  liability  (including
         penalties,  interest,  and expenses)  arising therefrom or with respect
         thereto.

                  (c) If the Borrower is required to pay  additional  amounts to
         or for the account of Bank pursuant to this Section 4.6, then Bank will
         agree to use  reasonable  efforts  to change  the  jurisdiction  of its
         applicable  lending  office  so as to  eliminate  or  reduce  any  such
         additional  payment which may thereafter  accrue if such change, in the
         judgment of Bank, is not otherwise disadvantageous to Bank.

                  (d) Within  thirty  (30) days after the date of any payment of
         Taxes,  Borrower shall furnish to Bank the original or a certified copy
         of a receipt evidencing such payment.

                  (e) Without  prejudice to the survival of any other  agreement
         of Borrower  hereunder,  the agreements and obligations of the Borrower
         contained  in this  Section 4.6 shall  survive the  termination  of the
         Commitment  and the payment in full of the Note for a period of two (2)
         years thereafter.

         5.0 Borrowing Base. The term "Borrowing  Base" means, as of the date of
determination  thereof,  an amount as  determined  by Bank in its  discretion in
accordance with then-current  practices,  economic and pricing  parameters,  and
customary procedures and standards established by Bank from time to time for its
petroleum  industry  customers  including without  limitation (a) an analysis of
such  reserve  and  production  data with  respect to the Mineral  Interests  of
Borrower  in all  of  its  oil  and  gas  properties,  including  the  Mortgaged
Properties,  as is provided to Bank in accordance herewith,  and (b) an analysis
of  the  assets,  liabilities,  cash  flow,  business,  properties,   prospects,
management  and ownership of Borrower and its  affiliates  and such other credit
factors consistently applied as Bank customarily considers in evaluating similar
oil and gas credits. The Borrowing Base shall initially be $17,000,000.

                  5.1 Periodic  Determinations  of Borrowing Base. The Borrowing
         Base shall be  redetermined  by Bank as of November 1 and May 1 of each
         year (each a "Determination Date") until maturity,  commencing November
         1, 1999. The Borrowing  Base, as  redetermined,  shall remain in effect
         until the next Determination  Date,  provided the Borrowing Base may be
         redetermined between Determination Dates in accordance with Section 5.3
         hereof.

                  5.2      Engineering Data to be Provided Prior to Scheduled
         Determination Dates.

                  (a) On or before  March 15 of each year for the  Determination
         Date of May 1, Borrower  shall deliver to Bank a Reserve Report and the
         other data  specified in Section 8.4 hereof.  Bank shall then determine
         the Borrowing Base for the six (6) month period commencing May 1.

                  (b)  On  or  before   September   15  of  each  year  for  the
         Determination Date of November 1 (commencing on September 15, 1999, for
         the Determination Date of November 1, 1999),  Borrower shall deliver to
         Bank such information, reports and data pertaining to Mineral Interests
         of Borrower in all of its oil and gas  properties,  including those oil
         and gas properties which constitute the Mortgaged  Properties,  as Bank
         may  reasonably  request.  Such  information  shall  (i) set  forth the
         historical production data of the oil and gas reserves included in such
         properties,  (ii) set  forth  for each  property  prices  received  for
         production,  lease  operating  expenses,  capital  expenditures,  gross
         revenues,  net revenues,  taxes and such other  information as Bank may
         deem


<PAGE>



         necessary or appropriate, (iii) set forth for each property any changes
         since the date of most recent  Reserve  Report,  if any, in its working
         interest or net revenue interest therein,  and (iv) be accompanied by a
         certification  of  Borrower  to the  effect  that no  material  adverse
         changes have occurred  since the date of the last Reserve Report except
         those which have  previously  been  disclosed to Bank in writing.  Bank
         shall  then  determine  the  Borrowing  Base for the next six (6) month
         period.

                  (c) On March 15 and September 15 of each year,  Borrower shall
         pay  Bank  an  engineering   fee  of  $5,000  for  the  next  following
         determination of the Borrowing Base pursuant hereto.

                  5.3  Special   Determinations   of  Borrowing  Base.   Special
         determinations of the Borrowing Base may be requested by Borrower or by
         Bank at any time during the term hereof.  If any special  determination
         is requested by Borrower,  it shall be accompanied by engineering  data
         described  in  Section  5.2(b)  and a $5,000  fee  deposit  for  Bank's
         engineering  fees (which  shall be in addition to the  engineering  fee
         described in Section 5.2(c) hereof).  If any special  determination  is
         requested by Bank,  Borrower  will  provide  Bank with the  information
         specified in Section  5.2(b) hereof as soon as is  reasonably  possible
         following  the  request.  The  determination  whether  to  increase  or
         decrease  the  Borrowing  Base  shall  then be made by Bank in its sole
         discretion  in  accordance  with the standards set forth in Section 5.0
         hereof. In the event of any special determination of the Borrowing Base
         pursuant to this Section,  Bank in the exercise of its  discretion  may
         suspend the next  regularly  scheduled  determination  of the Borrowing
         Base.

                  5.4 Borrowing Base Deficiency.  If by reason of any adjustment
         to the Borrowing Base, the Principal Debt then outstanding  exceeds the
         amount of the Borrowing  Base,  then Bank shall notify  Borrower of the
         same, and Borrower  shall within thirty (30) days following  receipt of
         such notice elect whether to (i) prepay an amount which will reduce the
         Principal Debt to the amount of the Borrowing Base, or (ii) execute and
         deliver to Bank  instruments  mortgaging  such other  collateral  as is
         acceptable to Bank,  pursuant to security documents  acceptable to Bank
         having present values which, in the opinion of Bank,  based upon Bank's
         evaluation of the engineering  data provided it, taken in the aggregate
         are  sufficient  to increase the  Borrowing  Base to an amount at least
         equal  to  the  Principal  Debt  then  outstanding,  or  (iii)  do  any
         combination  of the  foregoing as is acceptable to Bank. If Borrower so
         elects to mortgage additional oil and gas properties,  then clause (ii)
         above shall be  accomplished  within  forty-five  (45) days from Bank's
         date of  notification.  If  Borrower  fails to make an  election  among
         clauses (i) through  (iii)  above  within  thirty (30) days from Bank's
         notification,  then  Borrower  shall be  deemed  to have  selected  the
         payment option specified in clause (i) thereof.

                  5.5 Monthly  Borrowing Base  Reduction.  The Borrowing Base in
         effect from time to time shall reduce  automatically  each month in the
         amount (the "Monthly Reduction  Amount")  determined in accordance with
         this Section.  Initially,  the Monthly  Reduction Amount shall be zero.
         Upon any  determination  of the Borrowing Base, Bank reserves the right
         to revise  the  Monthly  Reduction  Amount as it deems  appropriate  in
         accordance  with  then  current  practices,  customary  procedures  and
         standards used by Bank for its petroleum customers  generally.  If Bank
         establishes  a Monthly  Reduction  Amount,  the  reduction  shall occur
         automatically  on the first day of each month  commencing  on the first
         day of the month next  following the  Determination  Date for which the
         Monthly Reduction Amount was established. If by reason of the reduction
         of the Borrowing  Base pursuant to this Section 5.5 the Principal  Debt
         then outstanding  exceeds the Borrowing Base as reduced,  then Borrower
         shall  promptly pay an amount which will reduce the Principal Debt then
         outstanding to an amount equal to or less than the Borrowing Base as so
         reduced.

                  5.6      Borrowing Base Increase Fee.  A fee shall be paid for
         each incremental increase in the new Borrowing Base over the previously
         existing Borrowing Base.  The amount of each such


<PAGE>



         fee  shall  be  one-half  of one  percent  (0.50%)  of the  incremental
         increase.  There shall be no obligation imposed upon Borrower to accept
         an  increase  of the  Borrowing  Base  proposed  by Bank.  However,  if
         Borrower  accepts the increase in the Borrowing  Base, the fee shall be
         due and payable  immediately and without regard as to whether  Borrower
         ever borrows the increased  amount  available  under such new Borrowing
         Base.  Determinations  of when a fee is due  shall  be made by Bank and
         shall be conclusive and binding on the parties absent manifest error.

         6.0  Conditions  Precedent to Closing.  The  obligations of Bank as set
forth herein are subject to the  satisfaction  (in the opinion of Bank),  unless
waived in writing by Bank, of each of the following conditions:

                  6.1 Loan Origination Fee. Borrower shall have paid Bank a loan
         origination fee of $127,500.

                  6.2      Effectiveness of Loan Documents.  Each of the Loan
         Documents shall be in full force and effect.

                  6.3 Affidavit of Payment of Trade Bills.  Borrower  shall have
         delivered to Bank an affidavit in the form of Exhibit C attached hereto
         (the "Affidavit of Payment of Trade Bills")  containing the information
         as provided therein, which shall be satisfactory to Bank.

                  6.4 Property  Certificates.  Borrower  shall have delivered to
         Bank  certificates  (whether one or more, the "Property  Certificates")
         for each  producing oil and gas lease,  well or unit,  as  appropriate,
         relating  to the  oil and gas  properties  described  in an Oil and Gas
         Mortgage, which Property Certificates shall be in the form of Exhibit D
         attached hereto containing the information as provided  therein,  which
         shall be satisfactory to Bank.

                  6.5  Title.  Borrower  shall  have  delivered  to  Bank  title
         opinions  and other  title  information  and data  acceptable  to Bank,
         covering  not less than 90% of the  Engineered  Value of the  Mortgaged
         Properties,  reflecting  title to the Mineral  Interests of Borrower in
         the Mortgaged Properties which is acceptable to Bank.

                  6.6  Credit  Opinion.   There  shall  have  been  delivered  a
         favorable  credit  opinion of Messrs.  Gustin & Christian,  counsel for
         Borrower, covering those matters described in Sections 10.5, 10.6, 10.7
         and 10.9  hereof,  as well as such other  matters  incident to the Loan
         Documents, if any, as Bank may reasonably request.

                  6.7  Documentation   and  Proceedings.   Borrower  shall  have
         delivered a certificate (the "Officer's  Certificate")  having attached
         thereto   resolutions  of  its  board  of  directors   authorizing  its
         execution,  delivery and  performance of the Loan Documents to which it
         is a party.

                  6.8  Section  26.02  Notice.  Borrower  shall have  executed a
         notice in compliance  with the provisions of Section 26.02 of the Texas
         Business and Commerce Code (the "Section 26.02 Notice").

                  6.9  Payoff  of  Prior   Lender.   Bank  shall  have  received
         satisfactory  evidence  of (a)  the  amount  necessary  to  payoff  all
         indebtedness of Borrower to Midland, and (b) upon such payoff,  Midland
         will  execute  and  deliver to Bank  endorsements  and  assignments  of
         Borrower's  indebtedness  to Midland  and  Midland's  lien  against the
         Mortgaged Properties as are acceptable to Bank.



<PAGE>



                  6.10  Representations and Warranties.  All representations and
         warranties  contained herein or in the documents  referred to herein or
         otherwise made in writing in connection  herewith or therewith shall be
         true  and  correct  with the same  force  and  effect  as  though  such
         representations and warranties have been made on and as of this date.

                  6.11  Expenses.   Borrower  shall  have  paid  all  reasonable
         expenses  of  Bank in  connection  with  the  preparation  of the  Loan
         Documents and the making of the Loan, including but not limited to, the
         fees and expenses of counsel for Bank.

         7.0 Conditions Precedent to Subsequent Loans. The obligation of Bank to
make subsequent Loans to Borrower is subject, at the time of the funding of each
such Loan (the "Funding  Date"),  to the  satisfaction (in the opinion of Bank),
unless waived in writing by Bank, of each of the following conditions:

                  7.1 Borrowing Request.  Borrower shall have delivered to Bank,
         within the time frame  specified  in Section  2.0  hereof,  a Borrowing
         Request appropriately completed in compliance herewith.

                  7.2  Availability of Commitment.  The then Principal Debt plus
         the  amount of the  requested  Loan  shall be equal to or less than the
         Commitment then in effect.

                  7.3 Expenses. Borrower shall have paid all reasonable expenses
         of Bank in connection with the making of the Loan.

                  7.4  Representations  and Warranties.  All representations and
         warranties contained herein and in the Loan Documents shall be true and
         correct in all  material  respects as though such  representations  and
         warranties have been made on and as of the Funding Date.

                  7.5      No Default.  There shall exist no Event of Default or
         Potential Default  hereunder.

                  7.6  Change  in  Condition.  No  material  adverse  change  in
         condition (financial or otherwise) of Borrower or any other event shall
         have  occurred  which creates a  possibility  of  materially  adversely
         effecting  (a) the  condition  (financial or otherwise) of Borrower (b)
         the validity or enforceability of any of the Loan Documents, or (c) the
         ability of  Borrower  to meet and carry out its  obligations  under the
         Loan  Documents  or perform  the  transactions  contemplated  hereby or
         thereby.

         8.0  Affirmative  Covenants.  Until full payment and performance of all
Obligations of Borrower  under the Loan  Documents,  Borrower will,  unless Bank
consents otherwise in writing (and without limiting any requirement of any other
Loan Document):

                  8.1 Financial  Statements  and Other  Information.  Deliver or
         cause  to  be  delivered  to  Bank  (a)  quarterly   consolidated   and
         consolidating  financial  statements of Borrower within forty-five (45)
         days after the end of the first  three  fiscal  quarters of each fiscal
         year,  and annual  audited  consolidated  and  consolidating  financial
         statements  of Borrower  within  ninety (90) days after the end of each
         fiscal year,  in each  instance to include a balance  sheet,  an income
         statement,  a cash flow statement and such other  financial  statements
         and supporting schedules or documentation required by Bank, prepared in
         accordance with generally accepted accounting  principles  consistently
         applied and presented in a format acceptable to Bank, by an independent
         accounting   firm   acceptable  to  Bank,   and  (b)  such   additional
         information,  reports  and  statements  with  respect  to the  business
         operations  and financial  condition of Borrower as Bank may reasonably
         request  from time to time,  and (c) within  ninety (90) days after the
         end of each fiscal year, and within  forty-five (45) days after the end
         of the first three fiscal quarters of each fiscal year, a compliance


<PAGE>



         certificate  in the form of  Exhibit B  attached  hereto and (d) within
         fifteen (15) days after the filing thereof, copies of any report, proxy
         statement,  financial statement,  or other filing made by such borrower
         with the  Securities  and  Exchange  Commission,  any state  securities
         agency,  or any  national  stock  exchange or  quotation  service,  and
         promptly upon receipt thereof,  copies of any notices received from the
         Securities  and  Exchange  Commission  or any state  securities  agency
         relating to any order, rule, statute, or other laws or information that
         could have a material  adverse  effect  upon the  financial  condition,
         properties, or operations of Borrower.

                  8.2  Adverse  Conditions  or Events.  Promptly  advise Bank in
         writing of (i) any condition, event or act which comes to its attention
         that would or might materially adversely affect the financial condition
         or operations of Borrower,  the  collateral  from time to time securing
         the Loan, or Bank's rights under the Loan  Documents,  or the rights of
         the Canadian trustee under the Canadian  Collateral Security Documents,
         (ii) any litigation filed by or against Borrower in which the amount in
         controversy  exceeds  $50,000,  (iii)  the  occurrence  of any Event of
         Default,  or of any  Potential  Default,  or the failure of Borrower to
         observe  any of its  undertakings  hereunder  or under any of the other
         Loan Documents,  (iv) any uninsured or partially uninsured loss through
         fire, theft,  liability or property damage in excess of an aggregate of
         $100,000,  (v) any  actual,  proposed  or  threatened  testing or other
         investigation  of a material  nature by any  governmental  authority or
         other person or entity  concerning the  environmental  condition of, or
         relating  to, any of the  Mortgaged  Properties  which is of a material
         nature or the release of a material quantity of Hazardous  Materials by
         or  from,  affecting  or  related  to any of the  Mortgaged  Properties
         (except  such  releases  as are  made  in  accordance  with  applicable
         environmental laws), and (vi) any circumstances that constitute grounds
         entitling the PBGC to institute proceedings to terminate a Plan subject
         to ERISA,  and the receipt of any notice to  Borrower  or any  Commonly
         Controlled  Entity that the PBGC intends to  terminate a Plan,  and the
         receipt of notice concerning the imposition of withdrawal  liability in
         excess of $50,000 with  respect to Borrower or any Commonly  Controlled
         Entity.

                  8.3 Monthly  Production  Reports.  Within  thirty (30) days of
         request  from Bank,  deliver  to Bank  internally  prepared  production
         reports  showing on a monthly  basis for each  month  covered by Bank's
         request all  production  of oil, gas and other  hydrocarbons  therefrom
         during the subject  month,  all  proceeds  received  during the subject
         month from the sale of production  from such  properties,  all expenses
         incurred  during the subject  month  attributed to such  properties,  a
         description  of all material  operations  conducted on such  properties
         since the last monthly  report and such other  information  as Bank may
         reasonably request.

                  8.4 Reserve  Report.  Deliver to Bank on or before March 15 of
         each year (i) a Reserve Report,  and (ii) a schedule  comparing the net
         revenue interests of each well or lease of the Mortgaged  Properties as
         reflected  in each Oil and Gas  Mortgage  after  giving  effect  to all
         encumbrances  listed  thereon,  to the net revenue  interests  for such
         properties reflected in the Reserve Report along with an explanation as
         to any  material  discrepancies  between the two net  revenue  interest
         disclosures.

                  8.5  Engineering   Expenses.   Pay  all  engineering  expenses
         incurred by Bank (a) for a special  determination of the Borrowing Base
         requested  by Borrower  pursuant to Section 5.3 hereof,  and (b) should
         Bank engage an engineer in connection with Bank's administration of the
         credit facility evidenced by this Agreement following the occurrence of
         an Event of Default hereunder.

                  8.6 Taxes and Other Obligations.  Pay all of Borrower's taxes,
         assessments and other obligations,  including, but not limited to taxes
         and assessments and lawful claims which, if unpaid, might by law become
         a lien  against  the  assets of  Borrower,  as the same  become due and
         payable,  except to the  extent  the same are being  Contested  in Good
         Faith.


<PAGE>



                  8.7  Insurance.  Keep its  properties  of an insurable  nature
         insured at all times  against  such  risks and to the extent  that like
         properties are customarily  insured by other  companies  engaged in the
         same or similar businesses  similarly  situated,  maintain insurance of
         the types and in the coverage  amounts and with reasonable  deductibles
         as are usual and customary.

                  8.8 Compliance with Laws. Comply in all material respects with
         all applicable laws (including  environmental laws), rules, regulations
         and orders of any governmental authority.

                  8.9 Compliance  with  Agreements.  Comply in all respects with
         all existing and future agreements, indentures, mortgages, or documents
         which are binding upon it or affect any of its properties or business.

                  8.10  Maintenance  of  Records.  Keep at all  times  books and
         records of  account in  accordance  with GAAP in which  full,  true and
         correct  entries  will be  made  of all  dealings  or  transactions  in
         relation to the  business and affairs of  Borrower,  and Borrower  will
         provide  adequate  protection  against  loss or damage to such books of
         record and account.

                  8.11 Inspection of Books and Records. Allow any representative
         of Bank to visit and inspect the Mortgaged  Properties,  to examine its
         books of record and account and to discuss its  affairs,  finances  and
         accounts with any of its officers, directors, employees and agents, all
         at such reasonable times and as often as Bank may request.

                  8.12  Existence and  Qualification.  Preserve and maintain its
         existence  and good standing in the state of its  incorporation  and in
         each other jurisdiction in which qualification is required.

                  8.13 Hedging  Agreement.  Within one hundred twenty (120) days
         after the date hereof,  enter into an Acceptable Hedging Agreement with
         a  counterparty  acceptable  to Bank (a)  covering  at least 50% of the
         monthly  production  of all of  Borrower's  proved  and  producing  oil
         properties,  (b) for an average  price  greater than or equal to $16.50
         per barrel  (NYMEX),  and (c) having a maturity of not less than twelve
         (12) months nor greater than eighteen (18) months.

                  8.14 Further Assurances. Make, execute or endorse, acknowledge
         and  deliver or file or cause the same to be done,  all such  vouchers,
         invoices,   notices,    certifications   and   additional   agreements,
         undertakings,  conveyances,  deeds of  trust,  mortgages,  assignments,
         financing  statements  or other  assurances,  and take any and all such
         other  action  as  Bank  may  from  time  to  time  deem  necessary  or
         appropriate in connection  with this Agreement or any of the other Loan
         Documents  (a) to  cure  any  defects  in  the  creation  of  the  Loan
         Documents,  or (ii) to  evidence  further  or more fully  describe  the
         collateral  intended as security,  or (iii) to correct any omissions in
         the Loan  Documents,  or (iv) to state more fully the  security for the
         Obligations,  or (v) to perfect, protect or preserve any liens pursuant
         to  any of  the  Loan  Documents,  or  (vi)  for  better  assuring  and
         confirming  unto  Bank  all  or  any  part  of the  security  for  such
         Obligations.

         9.0  Negative  Covenants.  Until full  payment and  performance  of all
Obligations of Borrower under the Loan Documents, Borrower will not, without the
prior written consent of Bank (and without limiting any requirement of any other
Loan Documents):

                  9.1 Current Ratio.  Permit at any fiscal quarter end the ratio
         of its  Current  Assets to Current  Liabilities  to be less than 1.0 to
         1.0.



<PAGE>



                  9.2  Tangible Net Worth.  Permit as of any fiscal  quarter end
         beginning  with the fiscal  quarter  ending  September  30,  1999,  its
         Tangible Net Worth to be less than the sum of the following:

                           (a)      $22,000,000; plus

                           (b) 75% of Borrower's Net Income for which Net Income
                  is a positive  number  measured  cumulatively  for each fiscal
                  quarter  beginning with the fiscal quarter starting January 1,
                  1999; plus

                           (c) 100% of the net  proceeds of any  offering of any
                  equity securities consummated after the date hereof; plus

                           (d)  100%  of  any  capital   contributions  made  to
                  Borrower after the date hereof.

                  9.3      Minimum Interest Coverage Ratio.  Permit at any fis-
         cal quarter end its Interest Coverage Ratio to be less than 2.75 to 1.0

                  9.4      Negative Pledge.  Grant, suffer or permit, any con-
         tractual or noncontractual lien on or security interest in its assets,
         except for Permitted Liens.

                  9.5 Sale of Assets.  Directly  or  indirectly  sell,  lease or
         otherwise dispose of, (by farmout or otherwise) any of its assets other
         than (a) sales of hydrocarbons in the ordinary course of business,  and
         (b) any  compulsory  pooling or  unitization  ordered by a governmental
         body with jurisdiction over the Mineral Interests, and (c) other assets
         sold in the ordinary course of Borrower's  business  provided that such
         sales do not  exceed  $250,000  in the  aggregate  in any six (6) month
         period commencing on a Determination Date.

                  9.6 Sale or Discount  of  Receivables.  Sell with  recourse or
         discount,  or sell for less than the  greater  of face or market  value
         thereof, any of its accounts receivable.

                  9.7  Merger,  Etc.  Enter  into any  merger or  consolidation,
         except that  Borrower may merge with another  entity if Borrower is the
         surviving entity in such merger and if, after giving effect thereto, no
         Event of Default  or  Potential  Default  shall  have  occurred  and be
         continuing.

                  9.8  Extensions  of  Credit.  Make any loan or  advance to any
         individual, partnership, corporation or other entity without consent of
         Bank,  except (a) loans and intercompany  adjustments  between Borrower
         and its subsidiaries  occurring in the ordinary course of business, and
         (b)  advances  made to employees of Borrower for the payment by them of
         items for which an expense  report or  voucher  will be filed and which
         items will  constitute  ordinary  and  necessary  business  expenses of
         Borrower,  and (c) loans to employees  of Borrower  which do not exceed
         $50,000 in the aggregate to all employees at any one time outstanding.

                  9.9 Borrowings.  Create, incur, assume or become liable in any
         manner for any indebtedness  (for borrowed money,  deferred payment for
         the purchase of assets, lease payments,  as surety or guarantor for the
         debt for another, or by way of stock purchase or capital  contribution,
         direct or contingent,  or otherwise) other than to Bank, except for (a)
         normal  trade  debts  incurred  in the  ordinary  course of  Borrower's
         business;  (b) existing  indebtedness  disclosed to Bank in writing and
         acknowledged by Bank prior to the date of this Agreement; (c) leases of
         personal  property  which  are not  "capital  leases"  under  generally
         accepted accounting  principles and for which the lessor's remedy for a
         breach by the lessee  thereunder  is limited  to  recovery  of the item
         leased;  and (d)  indebtedness  of Borrower  secured by  purchase-money
         liens and  security  interests  which does not exceed  $250,000  in the
         aggregate at any one time outstanding.


<PAGE>



                  9.10   Dividends  and   Distributions.   Declare  or  pay  any
         dividends;  or purchase,  redeem,  retire or otherwise acquire for full
         value any of its capital  stock now or hereafter  outstanding;  or make
         any  distribution  of assets to its  shareholders  as such,  whether in
         cash,  assets, or in obligations of Borrower;  or allocate or otherwise
         set apart any sum for the payment of any dividend or  distribution  on,
         or for the  purchase,  redemption,  or  retirement of any shares of its
         capital stock;  or make any other  distribution by reduction of capital
         or  otherwise in respect of any shares of its capital  stock;  provided
         that Borrower may make  distributions  to its  shareholders of not more
         than  $100,000 in the  aggregate in any fiscal year for the purchase or
         redemption of its capital stock.

                  9.11     Principal Debt not to Exceed Commitment.  Permit at
         any time the Principal Debt to exceed the Commitment then in effect.

                  9.12     Hedging Transactions.  Enter into any Hedging Agree-
         ment, other than an Acceptable  Hedging Agreement.

                  9.13  Investments.  Invest  in  (by  capital  contribution  or
         otherwise),  or acquire or purchase or make any  commitment to purchase
         the  obligations  or  stock  of,  any  entity,   except  (i)  temporary
         investments in securities of the United States having maturities not in
         excess of one (1) year,  (ii)  certificates  of deposit issued by Bank,
         (iii)  readily  marketable  commercial  paper rated "A-1" by Standard &
         Poor's Corporation (or similar rating by any similar organization which
         rates commercial paper),  (iv) readily marketable direct obligations of
         any state of the United States of America or any political  subdivision
         of any such state given on the date of such  investment a credit rating
         of at least AA by  Standard  & Poor's  Corporation  due within one year
         from the acquisition thereof, (v) repurchase agreements with respect to
         the investments  referred to in the preceding  clauses with any bank or
         trust company  organized under the laws of the United States of America
         or any state thereof and having combined capital, surplus and undivided
         profits  of not  less  than  $500,000,000  (as of the  date of its most
         recent financial statements) and having deposits that have received one
         of  the  two  highest   ratings   obtainable  from  Standard  &  Poor's
         Corporation,  (vi) Eurodollar time accounts or Eurodollar  certificates
         of deposit each with banker's  acceptances of any bank or trust company
         organized  under the laws of the United  States of America or any state
         thereof having combined  capital,  surplus and undivided profits of not
         less than  $500,000,000  (as of the date of its most  recent  financial
         statements)  and  having  deposits  that have  received  one of the two
         highest ratings  obtainable from Standard & Poor's  Corporation,  (vii)
         Permitted  Symskaya  Investments,  and (viii) such other investments as
         may be approved by Bank.

                  9.14  Change of  Control  of  Borrower.  Permit  the change of
         control of  Borrower.  "Change  of  control"  as used in the  preceding
         sentence means (a) the  acquisition of more than fifty percent (50%) of
         the  outstanding  voting  stock of  Borrower by any person or entity or
         group of persons or entities acting in concert,  or (b) the acquisition
         of more  than ten  percent  (10%) of the  outstanding  voting  stock of
         Borrower by any person or entity or group of persons or entities acting
         in concert if at any time  following  such  acquisition  of ten percent
         (10%) or more of  Borrower's  outstanding  voting stock more than fifty
         percent  (50%) of the  persons  serving  on the board of  directors  of
         Borrower are persons proposed  directly or indirectly by the persons or
         entities  or group of persons or  entities  acting in concert  who have
         acquired  such  ten  percent  (10%) or more of  Borrower's  outstanding
         voting stock.

                  9.15 Change in Nature of Business.  Conduct any business other
         than,  or make any  material  change in the nature of, its  business as
         carried on as of the date hereof.

                  9.16 Arm's Length Transactions.  Enter into a transaction with
         any  affiliate,  except  a  transaction  upon  terms  that are not less
         favorable to it than would be obtained in a  transaction  negotiated at
         arm's length with an unrelated third party.


<PAGE>



         10.0  Representations  and Warranties.  Borrower hereby  represents and
warrants to Bank as follows:

                  10.1 No Liens.  Borrower has good and defensible  title to all
         of the  Mineral  Interests  in and to the  oil  and  gas  leases  which
         constitute the Mortgaged Properties, and none of such Mineral Interests
         are subject to any security interest,  mortgage, deed of trust, pledge,
         lien, title retention document or encumbrance of any character,  except
         for Permitted Liens.

                  10.2 Gas Imbalances.  Except for those imbalances set forth on
         Schedule 10.2 and other imbalances and prepayments  which  individually
         and in the  aggregate are not  material,  there are no gas  imbalances,
         take or pay or other  prepayments  with  respect  to any of the  leases
         described  in the Oil and  Gas  Mortgages  for  which  Borrower  is the
         operator which would require the delivery of hydrocarbons produced from
         such  leases  at some time in the  future  without  then or  thereafter
         receiving full payment therefor.

                  10.3  Concerning  the  Mortgaged  Properties.   The  Mortgaged
         Properties  are  described  in and covered by the  engineering  reports
         which have  previously  been  delivered  to and relied  upon by Bank in
         connection with this Agreement,  and Borrower owns at least the decimal
         percentage  Mineral  Interests in such  properties  as are specified in
         such engineering  reports.  The Mortgaged Properties represent not less
         than  90% of the  Engineered  Value  of all of  Borrower's  oil and gas
         properties.  "Engineered Value" as used in the preceding sentence means
         future net revenues  discounted  at the discount rate being used by the
         Bank as of the date of any such  determination  utilizing  the  pricing
         parameters  used in the  most  recent  Reserve  Report  furnished  Bank
         pursuant hereto.

                  10.4  Financial   Statements.   The  financial  statements  of
         Borrower heretofore  delivered to Bank have been prepared in accordance
         with GAAP and fairly present Borrower's  financial  condition as of the
         date or dates thereof,  and there have been no material adverse changes
         in Borrower's  financial condition or operation since the date or dates
         thereof.

                  10.5 Good Standing. Borrower is a corporation, duly organized,
         validly  existing and in good  standing  under the laws of Colorado and
         has the power and  authority  to own its  property  and to carry on its
         business in Texas and in each other jurisdiction in which Borrower does
         business.

                  10.6  Authority.  Borrower  has full  power and  authority  to
         execute,  deliver  and  perform  the Loan  Documents  and to incur  and
         perform the obligations provided for therein. No consent or approval of
         any public authority or other third party is required as a condition to
         the validity or performance of any Loan Document.

                  10.7 Binding  Agreements.  This  Agreement  and the other Loan
         Documents  executed by Borrower  constitute  valid and legally  binding
         obligations of Borrower,  enforceable  in accordance  with their terms,
         except (a) as may otherwise be limited by the  foreclosure  laws of the
         various  jurisdictions where the Mortgaged  Properties are located, and
         (b) with  respect to various  provisions  in the Loan  Documents  which
         purport to indemnify a person or entity from the consequences of his or
         its negligence, and (c) as limited by bankruptcy,  insolvency, or other
         laws of general  application  relating to the enforcement of creditors'
         rights.

                  10.8  Litigation.  There is no proceeding  involving  Borrower
         pending or, to the knowledge of Borrower,  threatened  before any court
         or governmental authority,  agency or arbitration authority, except (a)
         as disclosed to Bank in writing and  acknowledged  by Bank prior to the
         date of this  Agreement,  or (b) for those  matters where the amount in
         controversy does not exceed $100,000.


<PAGE>



                  10.9 No Conflicting  Agreements.  There is no charter,  bylaw,
         stock provision,  partnership agreement or other document pertaining to
         the power or  authority  of Borrower  and no  provision of any existing
         agreement,  mortgage,  indenture  or  contract  binding on  Borrower or
         affecting any property of Borrower, which would conflict with or in any
         way prevent  the  execution,  delivery or carrying  out of the terms of
         this Agreement and the other Loan Documents.

                  10.10  Taxes.  All taxes and  assessments  due and  payable by
         Borrower has been paid or are being  Contested  in Good Faith,  and the
         Borrower has filed all tax returns which it is required to file.

                  10.11  Accuracy  of  Information.  To the  best of  Borrower's
         knowledge, all factual information furnished to Bank in connection with
         this Agreement and the other Loan Documents is and will be accurate and
         complete on the date as of which such  information is delivered to Bank
         and is not and will not be  incomplete  by the omission of any material
         fact necessary to make such information not misleading.

                  10.12  ERISA.  Borrower  is  in  compliance  in  all  material
         respects with all applicable  provisions of ERISA. Neither a Reportable
         Event nor a Prohibited  Transaction has occurred and is continuing with
         respect to any Plan;  no notice of intent to  terminate a Plan has been
         filed,  nor has any Plan  been  terminated;  neither  Borrower  nor any
         Commonly Controlled Entity has completely or partially withdrawn from a
         Multiemployer  Plan; and Borrower and each Commonly  Controlled  Entity
         have met their minimum funding requirements under ERISA with respect to
         all of their Plans.

                  10.13  Environmental.   The  conduct  of  Borrower's  business
         operations  and the  condition  of  Borrower's  properties  operated or
         managed by  Borrower  does not and will not,  and to the  knowledge  of
         Borrower the condition of Borrower's  properties  which are operated or
         managed by others  does not and will not,  violate  any  federal  laws,
         rules or ordinances for environmental protection, or regulations of the
         Environmental  Protection Agency, or any applicable local or state law,
         rule, regulation or rule of common law, or any judicial  interpretation
         thereof relating primarily to the environment or Hazardous Materials.

                  10.14 Year 2000  Compliance.  Borrower has made inquiry of its
         own  business and of each  business  entity in which  Borrower  holds a
         material interest with respect to the "Year 2000 Problem" (that is, the
         risk that  computer  applications  may not be able to perform  properly
         date-  sensitive  functions  after  December 31,  1999).  Based on this
         inquiry,  Borrower  does not believe  that the Year 2000  Problem  will
         cause it or any business  entity in which it holds a material  interest
         to  suffer  a  material  adverse  change  in  its  business   condition
         (financial or otherwise), operations, properties or prospects or affect
         its ability to repay the Obligations.  For purposes of this section,  a
         business  entity in which a Borrower holds a "material  interest" means
         any business  entity that is of material  importance  to the  financial
         well-being of such Borrower.

                  10.15  Compliance With Laws.  Borrower is in compliance in all
         material respects with all applicable laws to which Borrower, or any of
         its assets or properties,  are subject,  provided that this warranty is
         made to Borrower's  knowledge  with respect to its assets or properties
         which are operated or managed by others.

                  10.16 Not a Utility.  Borrower  is not engaged in the State of
         Texas in the (i) generation,  transmission, or distribution and sale of
         electric power,  (ii)  transportation,  distribution and sale through a
         local  distribution  system  of  natural  or  other  gas for  domestic,
         commercial,  industrial,  or other use, (iii) provision of telephone or
         telegraph  service  to  others,  (iv)  production,   transmission,   or
         distribution  and sale of steam or water,  (v) operation of a railroad,
         or (vi) provision of sewer service to others.


<PAGE>



                  10.17 Public Utility  Holding  Company Act.  Borrower is not a
         "holding  company," or "subsidiary  company" of a "holding company," or
         an affiliate of a "holding  company" or of a "subsidiary  company" of a
         "holding  company,"  or a "public  utility"  within the  meaning of the
         Public Utility Holding Act of 1935, as amended.

                  10.18  Subsidiaries.  Borrower has no subsidiaries  other than
         Symskaya Exploration, Inc.

                  10.19  Continuation of  Representations  and  Warranties.  All
         representations  and  warranties  made  under this  Agreement  shall be
         deemed  to be made at and as of the  date  hereof  and at and as of the
         date of any future Loan and in all instances shall be true and correct.

         11.0 Default.  Any of the following shall constitute  events of default
(each an "Event of Default"):

                  11.1  Nonpayment.  (a) Borrower  shall  default in the due and
         punctual  payment of any principal or interest of the Note when due and
         payable,  whether at  maturity  or  otherwise,  or (b)  Borrower  shall
         default in the due and punctual payment of any of the other Obligations
         when due and payable.

                  11.2  Representations  and  Warranties.   Any  representation,
         warranty or statement  made by Borrower  herein or otherwise in writing
         in  connection  herewith  or in  connection  with any of the other Loan
         Documents  and the  agreements  referred to herein or therein or in any
         financial statement,  certificate or statement signed by any officer or
         employee of Borrower  and  furnished  pursuant to any  provision of the
         Loan  Documents  shall  be  breached,  or shall  be  materially  false,
         incorrect or incomplete when made.

                  11.3 Default in Covenants Under Agreement.  (a) Borrower shall
         default  in the  due  performance  or  observance  by it of  any  term,
         covenant or agreement set forth in any of the No Cure Period Covenants;
         or, (b) Borrower shall default in the due  performance or observance of
         any term,  covenant or agreement contained in this Agreement other than
         those  specified  in the No Cure  Period  Covenants,  and such  default
         continues  unremedied  for a period of thirty  (30) days  after  notice
         thereof  from Bank or Bank is notified  of such  default or should have
         been so  notified  pursuant  to the  provisions  of Section 8.2 hereof,
         whichever is earlier.

                  11.4 Default in Other Loan  Documents.  Borrower shall default
         in the due  performance  of or  observance  of any  term,  covenant  or
         agreement on such person's  part to be performed  pursuant to the terms
         of any of the other  Loan  Documents  and the  default  shall  continue
         unremedied beyond any grace or cure period therein provided.

                  11.5  Default in Other Debt.  An event of default  shall occur
         under the provisions of any instrument  (other than the Loan Documents)
         evidencing  indebtedness  of Borrower for the payment of borrowed money
         or of any agreement relating thereto  (including  capital leases),  the
         effect of which is to permit the  holder or holders of such  instrument
         to cause the  indebtedness  evidenced by such  instrument to become due
         and  payable  prior to its stated  maturity  (whether or not the holder
         actually exercises such option).

                  11.6  Validity of Loan  Documents.  Any of the Loan  Documents
         shall  cease to be a legal,  valid and  binding  agreement  enforceable
         against any party  executing the same in accordance with the respective
         terms  thereof,  or shall in any way be  terminated,  or  become  or be
         declared  ineffective  or  inoperative,  or shall in any way whatsoever
         cease to give or provide the respective  rights,  remedies,  powers and
         privileges  intended to be created thereby;  provided that it shall not
         be


<PAGE>



         an Event of Default under this Section 11.6 if a court  determines that
         a particular Loan Document is not enforceable as a matter of law.

                  11.7  Bankruptcy.  Borrower shall suspend or  discontinue  its
         business  operations,  or shall generally fail to pay its debts as they
         mature, or shall file a petition commencing a voluntary case concerning
         Borrower under any chapter of the United States Bankruptcy Code; or any
         involuntary  case shall be commenced  against Borrower under the United
         States  Bankruptcy Code; or Borrower shall become insolvent  (howsoever
         such insolvency may be evidenced).

                  11.8  Judgments  and  Decrees.  Borrower  shall suffer a final
         judgment  for the  payment  of money and shall not  discharge  the same
         within  a  period  of  thirty  (30)  days   unless,   pending   further
         proceedings,  execution has not been commenced,  or, if commenced,  has
         been effectively stayed. Any order, judgment or decree shall be entered
         in any proceeding  against Borrower  decreeing the dissolution or split
         up of such entity and such order shall remain  undischarged or unstayed
         for a period in excess of thirty (30) days.

                  11.9 ERISA.  Any of the following  events shall occur or exist
         with respect to Borrower and any Commonly Controlled Entity under ERISA
         and the regulations promulgated thereunder:

                           (a)      any Reportable Event shall occur;

                           (b)   complete   or  partial   withdrawal   from  any
                  Multiemployer Plan shall take place;

                           (c)      any Prohibited Transaction shall occur;

                           (d) a notice of intent to  terminate  a Plan shall be
                  filed, or a Plan shall be terminated; or

                           (e)   circumstances   shall  exist  which  constitute
                  grounds  entitling  the  PBGC  to  institute   proceedings  to
                  terminate   a  Plan,   or  the  PBGC  shall   institute   such
                  proceedings;

         and in each case  above,  such event or  condition,  together  with all
         other events or conditions,  if any, could subject Borrower to any tax,
         penalty or other liability which in the aggregate may exceed $250,000.

                  11.10 Hedging  Agreement.  The  occurrence or existence of any
         default,  event of default or other similar condition or event (however
         described) with respect to any Hedging  Agreement  between Borrower and
         Bank.

                  11.11 Change in Executive Management. Paul M. Dougan shall for
         any reason cease being the  President  and Chief  Executive  Officer of
         Borrower,  and a successor  or  successors  acceptable  to Bank are not
         appointed within ninety (90) days thereof.

         12.0 Remedies.  Upon the occurrence of an Event of Default described in
Section 11.7 hereof,  the entire  principal of and accrued  interest on the Note
shall  forthwith be due and payable  without  demand,  presentment  for payment,
notice  of  nonpayment,   protest,  notice  of  protest,  notice  of  intent  to
accelerate,  notice of acceleration and all other notices and further actions of
any kind,  all of which are hereby  expressly  waived by Borrower.  In the event
that any other  Event of  Default  occur and be  continuing,  Bank may,  without
demand or notice of its election  terminate its obligation to make further Loans
hereunder  and/or  declare the entire  unpaid  balance of the Note and all other
indebtedness  of  Borrower to Bank,  or any part  thereof,  immediately  due and
payable,  whereupon the principal of and accrued interest on such Note and other
indebtedness shall be forthwith due and payable without demand,  presentment for
payment,


<PAGE>



notice  of  nonpayment,   protest,  notice  of  protest,  notice  of  intent  to
accelerate,  notice of acceleration and all other notices and further actions of
any kind,  all of which  are  hereby  expressly  waived  by  Borrower.  Upon the
occurrence  and during the  continuance  of any Event of  Default,  Bank may (a)
exercise any and all rights under or pursuant to any of the Loan Documents,  (b)
exercise  any and all rights  afforded to Bank by the laws of the State of Texas
or any other applicable jurisdiction or in equity or otherwise, as Bank may deem
appropriate, and (c) terminate the Commitment.

         13.0  Notices.  All  notices,  requests  or demands  which any party is
required or may desire to give to any other party  under any  provision  of this
Agreement  must  be in  writing  (including  telegraphic,  telex  and  facsimile
transmission)  delivered  to the other party at the  addresses  set forth on the
first page of this Agreement or to such other address as any party may designate
by written notice to the other party. Each such notice, request and demand shall
be deemed given or made (whether  actually received or not) (a) if sent by mail,
upon the  earlier of the date of  receipt or five (5) days after  deposit in the
U.S. Mail, first class postage prepaid, and (b) if sent by any other means, upon
delivery. Unless otherwise changed by notice given pursuant to this Section, the
facsimile  transmission  number for Borrower  shall be (801) 521- 3534,  and the
facsimile transmission number for Bank shall be (214) 290-2332.

         14.0 Costs,  Expenses and Attorneys'  Fees.  Borrower shall pay to Bank
immediately  upon  demand the full amount of all costs and  expenses,  including
reasonable  attorneys'  fees,  incurred  by  Bank  in  connection  with  (a) the
syndication, negotiation, preparation and delivery of this Agreement and each of
the Loan Documents, and all other costs and attorneys' fees incurred by Bank for
which  Borrower is  obligated  to pay in  accordance  with the terms of the Loan
Documents,  and (b)  any  modifications  of or  consents  or  waivers  under  or
amendments to or interpretations of this Agreement,  the Note, or the other Loan
Documents.  Borrower  further  agrees to pay on demand all costs and expenses of
Bank,  if any  (including  without  limitation  reasonable  attorneys'  fees and
expenses and the cost of internal  counsel),  in connection with the enforcement
(whether  through  negotiations,  legal  proceedings  or  otherwise) of the Loan
Documents.  Borrower  further  agrees to indemnify  Bank and its  employees  and
agents,  from and hold them  harmless  against any and all losses,  liabilities,
claims,  damages or expenses  which any of them suffers or incurs as a result of
Bank's entering into this Agreement and the Loan Documents,  or the consummation
of the  transactions  contemplated by this Agreement and the Loan Documents,  or
the use or contemplated  use of the proceeds of the Loan, or due to a release or
alleged release of Hazardous Materials,  including, without limitation, the fees
and  disbursements  of  counsel  incurred  in  connection  with any  litigation,
arbitration  or  other  proceeding  arising  out of or by  reason  of any of the
aforesaid.  IT IS THE  INTENTION OF THE PARTIES THAT THE  FOREGOING  INDEMNITIES
SHALL APPLY TO LOSSES,  LIABILITIES,  CLAIMS, DAMAGES OR EXPENSES WHICH IN WHOLE
OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF AN INDEMNIFIED PARTY.
No such indemnified party, however,  shall be entitled to be indemnified for its
or  his  own  gross  negligence  or  willful  misconduct.  In  the  case  of  an
investigation,  litigation  or other  proceeding  to which the indemnity in this
Section  applies,  such  indemnities  shall  be  effective  whether  or not such
investigation,  litigation or proceeding is brought by Borrower,  its directors,
shareholders  or creditors,  or by an  indemnified  party and whether or not the
transactions  hereby are consummated.  Borrower shall defend any claim for which
an  indemnified  party is entitled to seek  indemnity  pursuant to the preceding
sentence,  and the  indemnified  party shall  cooperate  with the  defense.  The
indemnified party may have separate counsel,  and Borrower will pay the expenses
and reasonable  fees of such separate  counsel if either counsel for Borrower or
counsel for the indemnified  party shall advise the  indemnified  party that the
interests of both Borrower and the indemnified  party with respect to such claim
are or with  reasonable  certainty  will  become  adverse.  The  agreements  and
obligations of Borrower  contained in this Section shall survive payment in full
of the Obligations.

         15.0  Miscellaneous.  Borrower and Bank  further  covenant and agree as
follows, without limiting any requirement of any other Loan Document:



<PAGE>



                  15.1  Cumulative  Rights and No Waiver.  Each and every  right
         granted to Bank under any Loan Document, or allowed it by law or equity
         shall be  cumulative  of each other and may be exercised in addition to
         any and all other rights of Bank,  and no delay in exercising any right
         shall  operate  as a waiver  thereof,  nor shall any  single or partial
         exercise  by Bank of any right  preclude  any other or future  exercise
         thereof or the exercise of any other right.  Borrower  expressly waives
         any presentment, demand, protest or other notice of any kind, including
         but not  limited  to  notice  of intent  to  accelerate  and  notice of
         acceleration.  No notice to or demand on Borrower in any case shall, of
         itself,  entitle  Borrower  to any other or future  notice or demand in
         similar or other circumstances.

                  15.2  Choice of Law and  Venue.  (a) THIS  AGREEMENT  SHALL BE
         CONSTRUED  IN  ACCORDANCE  WITH AND  GOVERNED  BY THE LAWS (BUT NOT THE
         RULES  GOVERNING  CONFLICTS OF LAWS) OF THE STATE OF TEXAS AND SHALL BE
         PERFORMABLE IN DALLAS  COUNTY,  TEXAS.  The parties hereto  irrevocably
         submit  themselves to the  jurisdiction of any Texas state court or any
         United  States court located in the state of Texas (or any court having
         jurisdiction  over  appeals  from any  such  court)  in any  proceeding
         between or among them  arising  out of or in any way  relating  to this
         Agreement or the Loan Documents  whether  arising in contract,  tort or
         otherwise.  Any suit, action or proceeding may be brought in the courts
         of the  State of Texas,  County  of  Dallas,  or in the  United  States
         District Court for the Northern District of Texas, Dallas Division. All
         parties  hereto  irrevocably  consent to the  service of process in any
         suit,  action or  proceeding in said court by the mailing  thereof,  by
         registered  or  certified  mail,  postage  prepaid,  to its address for
         notices set forth in this Agreement.  Service shall be deemed effective
         five (5) days after such  mailing.  If requested to do so by any party,
         each party hereto agrees to waive service of process and to execute any
         and all documents necessary to implement such waiver in accordance with
         the Texas  Rules of Civil  Procedure.  All parties  hereto  irrevocably
         waive any objections which any may now or hereafter have (including any
         based on the grounds of forum non conveniens) to the laying of venue of
         any suit,  action or  proceeding  arising  out of or  relating  to this
         Agreement or the Loan  Documents  brought in the courts  located in the
         State of Texas,  County of Dallas.  Nothing herein impairs the right to
         bring proceedings in the courts of any other  jurisdiction or to effect
         service of process in any other manner permitted.

                  (b) The  parties  recognize  that  courts  outside  of  Dallas
         County,  Texas,  may also have  jurisdiction  over  suits,  actions  or
         proceedings  arising  out of this  Agreement  and the  Loan  Documents.
         Except for proceedings brought by Bank in those jurisdictions where the
         Mortgaged  Properties  are  located,  in  the  event  any  party  shall
         institute a proceeding  involving  this Agreement or the Loan Documents
         in a jurisdiction  outside Dallas County,  Texas, the party instituting
         such  litigation  shall  indemnify the other parties for any losses and
         expenses that may result from the breach of the  foregoing  covenant to
         institute  such  proceeding  only in a state or federal court in Dallas
         County,  Texas,  including without  limitation any additional  expenses
         incurred as the result of litigating in another  jurisdiction,  such as
         the  expenses  and  reasonable  fees of local  counsel  and  travel and
         lodging expenses of the indemnified parties, its witnesses, experts and
         support personnel.

                  15.3 Amendment. No modification,  consent, amendment or waiver
         of any  provision of this  Agreement,  nor consent to any  departure by
         Borrower  therefrom,  shall be  effective  unless  the same shall be in
         writing and signed by an officer of Bank,  and then shall be  effective
         only in the  specified  instance  and for the purpose for which  given.
         This  Agreement is binding upon  Borrower,  its successors and assigns,
         and inures to the benefit of Bank, its successors and assigns; however,
         no assignment or other  transfer of  Borrower's  rights or  obligations
         hereunder  shall be made or be effective  without  Bank's prior written
         consent,  nor shall it relieve  Borrower of any obligations  hereunder.
         There is no third party beneficiary of this Agreement.



<PAGE>



                  15.4 Documents.  All documents,  certificates  and other items
         required under this Agreement to be executed  and/or  delivered to Bank
         shall be in form and content satisfactory to Bank and its counsel.

                  15.5 Partial Invalidity. The unenforceability or invalidity of
         any provision of this Agreement shall not affect the  enforceability or
         validity  of  any  other   provision   herein  and  the  invalidity  or
         unenforceability of any provision of any Loan Document to any person or
         circumstance  shall not affect the  enforceability  or validity of such
         provision as it may apply to other persons or circumstances.

                  15.6 Survivability. All covenants, agreements, representations
         and warranties made herein or in the other Loan Documents shall survive
         the making of the  initial  Loan and shall  continue  in full force and
         effect so long as the Obligations are outstanding or the Commitment has
         not expired.

                  15.7 Accounting Terms.  Unless specified elsewhere herein, all
         accounting  terms used  herein  shall be  interpreted,  all  accounting
         determinations hereunder shall be made, and all financial statements to
         be delivered hereunder shall be prepared in accordance with GAAP.

                  15.8 Environmental.  Borrower shall immediately notify Bank of
         any  remedial  action of a  material  nature  taken by  Borrower  under
         environmental  laws with  respect to  Borrower's  business  operations.
         Borrower  will not use or permit any other  party to use any  Hazardous
         Materials  at any of  Borrower's  places  of  business  or at any other
         property  owned by Borrower  except such materials as are incidental to
         Borrower's normal course of business, maintenance and repairs and which
         are  handled in  compliance  with all  applicable  environmental  laws.
         Borrower  agrees to permit Bank, its agents,  contractors and employees
         to enter and inspect any of Borrower's  places of business or any other
         property of Borrower at any reasonable  times upon three (3) days prior
         notice for the purposes of  conducting an  environmental  investigation
         and audit (including  taking physical  samples) to insure that Borrower
         is complying  with this covenant and Borrower  shall  reimburse Bank on
         demand for the costs of any such environmental investigation and audit.
         Borrower  shall provide Bank,  its agents,  contractors,  employees and
         representatives  with  access  to and  copies  of any and all  data and
         documents  relating to or dealing with any  Hazardous  Materials  used,
         generated,  manufactured,  stored or disposed of by Borrower's business
         operations within five (5) days of the request therefore.

         16.0  Agreement  Controlling.  In the event of a conflict  between  the
terms and  provisions of this  Agreement and the terms and  provisions of any of
the other Loan  Documents,  the terms and  provisions  of this  Agreement  shall
control.  This  Agreement  replaces and  supersedes in its entirety that certain
commitment  letter  between the parties  dated as of June 21, 1999  (accepted by
Borrower on June 22, 1999).

         17.0 Notice of Final Agreement.  THIS WRITTEN AGREEMENT  REPRESENTS 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.

         18.0  Waiver of Jury  Trial.  BORROWER  HEREBY  WAIVES,  TO THE FULLEST
EXTENT  PERMITTED BY  APPLICABLE  LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.



<PAGE>


         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
date and year first above written.



         EQUITY OIL COMPANY



By   /s/ Paul M. Dougan
      Paul M. Dougan
      President



         BANK ONE, TEXAS, N.A.



By  /s/ Reed V. Thompson
     Reed V. Thompson
     Vice President