<PAGE>   1
                                                                     EXHIBIT 4.5


                          DEBENTURE PURCHASE AGREEMENT


                                     BETWEEN


                    SOUTH TEXAS DRILLING & EXPLORATION, INC.


                                       AND


                          WEDGE ENERGY SERVICES, L.L.C.





<PAGE>   2


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                             Page
<S>           <C>                                                                            <C>
ARTICLE I     PURCHASE OF CONVERTIBLE DEBENTURE................................................1
   1.1    Purchase by WEDGE....................................................................1
   1.2    Letter of Credit.....................................................................1
   1.3    Definitions..........................................................................1

ARTICLE II    ADDITIONAL AGREEMENTS............................................................2
   2.1    Grant of Preemptive Rights...........................................................2
   2.2    Material Adverse Effect..............................................................3
   2.3    Company Right of First Offer.........................................................3
   2.4    The Closing..........................................................................4

ARTICLE III   REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND WEDGE..........................4
   3.1    The Company hereby acknowledges and expressly reconfirms all warranties and
          representations contained in Article IV of the Debenture.............................4
   3.2    WEDGE represents and warrants that:..................................................4

ARTICLE IV    REGISTRATION RIGHTS..............................................................5
   4.1    Registration Rights..................................................................5

ARTICLE V     AFFIRMATIVE COVENANTS............................................................5
   5.1    Conditions to Obligations of WEDGE...................................................5
   5.2    Deliveries...........................................................................6
   5.3    Acquisition and Financing Transactions...............................................6

ARTICLE VI    NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES............................6
   6.1    Nature of Statements.................................................................6
   6.2    Survival of Representations and Warranties...........................................6
   6.3    Indemnity by the Company.............................................................6
   6.4    Indemnity by WEDGE...................................................................6
   6.5    Limitation of Liability..............................................................7

ARTICLE VII   AFFIRMATIVE COVENANTS............................................................7
   7.1    Approval of Shareholders.............................................................7
   7.2    Board Seats..........................................................................7
   7.3    Inspection of Property, Books and Records............................................7
</TABLE>

                                       -i-

<PAGE>   3


<TABLE>


<S>        <C>                                                                               <C>
ARTICLE VIII  NEGATIVE COVENANTS...............................................................8
   8.1    Reorganization, Stock Dividends, Reclassification,
          Subdivision or Stock Issuances.......................................................8

ARTICLE IX    DEFAULT..........................................................................8
   9.1    Event of Default.....................................................................8
   9.2    Default Remedies.....................................................................8

ARTICLE X     MISCELLANEOUS....................................................................8
   10.1   Conflict of Agreement................................................................8
   10.2   Counterparts.........................................................................8
   10.3   Amendments...........................................................................8
   10.4   Governing Law........................................................................8
   10.5   Severability.........................................................................8
   10.6   Injunctive Relief....................................................................9
   10.7   Term.................................................................................9
   10.8   Notices..............................................................................9
   10.9   Headings............................................................................10
   10.10  Arbitration.........................................................................10
</TABLE>

                                      -ii-
<PAGE>   4


                          DEBENTURE PURCHASE AGREEMENT

         THIS DEBENTURE PURCHASE AGREEMENT (the "Agreement"), is entered into
this 30th day of March, 2001, among SOUTH TEXAS DRILLING & EXPLORATION, INC.
(the "Company"), a corporation incorporated under the laws of the State of
Texas, whose principal place of business is at 9310 Broadway, Building I, San
Antonio, Texas 78217 and WEDGE ENERGY SERVICES, L.L.C., a limited liability
company organized under the laws of the State of Delaware, whose principal place
of business is at 1415 Louisiana, Suite 3000, Houston, Texas 77002 ("WEDGE").

                                    RECITALS

         WHEREAS, on the date hereof, the Company will enter into the Debenture
Agreement of even date herewith in the form attached hereto as Exhibit A ( the
"Debenture") pursuant to the payment of $9,000,000 cash by WEDGE to the Company;

         WHEREAS, WEDGE has previously acquired 4,841,007 shares of common stock
of the Company; and

         WHEREAS, in connection with the issuance of the Debenture, the parties
have agreed, among other things, that WEDGE will have the right to convert the
Debenture as provided therein and certain preemptive rights to participate in
all future debt or equity offerings in the Company;

         NOW, THEREFORE, the parties agree as follows:

                                    ARTICLE I
                        PURCHASE OF CONVERTIBLE DEBENTURE

         1.1 Purchase by WEDGE. The Company hereby agrees to sell, and WEDGE
agrees to purchase, the 4.86% Convertible Subordinated Debenture, Series A, due
March 29, 2002, for the aggregate amount of $9,000,000 payable upon WEDGE
tendering to the Company, by wire transfer, the cash sum of $9,000,000. Attached
hereto as Exhibit "A" is the form of Debenture which sets forth all rights of
WEDGE, as a holder of such Debenture, and all duties and obligations of the
Company, as the issuer of same. The Company and WEDGE hereby expressly
incorporate all terms and conditions of the Debenture as if it were set out in
their entirety in this Section 1. 1.

         1.2 Letter of Credit. As further consideration for tendering the
Debenture, WEDGE agrees to cause to be issued that certain letter of credit in
the amount of $6,000,000 on behalf of the Company as a credit enhancement on
behalf of the Frost National Bank.

         1.3 Definitions. All capitalized terms, not otherwise defined herein,
shall have the meaning ascribed to them in the Debenture.


<PAGE>   5


                                   ARTICLE II
                              ADDITIONAL AGREEMENTS

         2.1 Grant of Preemptive Rights. The Company hereby grants to WEDGE the
preemptive right to acquire a percentage of any additional capital stock of any
class or series, or debt convertible into capital stock, ("Preemptive Right
Securities") the Company may issue equal to the percentage of the Company's
outstanding common stock (assuming the conversion of all outstanding convertible
preferred stock or debt) held by WEDGE immediately preceding any such issuance
of common stock. This preemptive right shall terminate in the event WEDGE holds
less than 10% of the outstanding common stock of the Company. This preemptive
right shall also terminate four (4) years from the date hereof.

                  (a) Issuances for Cash. WEDGE'S preemptive rights occasioned
         by the issuance by the Company of Preemptive Right Securities in
         exchange for cash shall include the right to purchase such Preemptive
         Right Securities at the same purchase price and other terms as the
         other purchasers of such Preemptive Right Securities, except in the
         case of an underwritten public offering of securities registered under
         the Securities Act of 1933, as amended, in which case WEDGE's purchase
         price shall be the price at which the Preemptive Right Securities are
         offered to the public. Upon receipt of written notice from the Company
         of its preemptive right to purchase Preemptive Right Securities offered
         for cash WEDGE shall provide notice of its intent to exercise or not to
         exercise its rights to the Company in writing, within 10 days of its
         receipt of such notice from the Company and failure to provide notice
         within such 10 days shall be deemed to be a waiver of such rights. Any
         issuance of Preemptive Right Securities for cash not completed within
         60 days of the date notice is provided by the Company to WEDGE as
         provided in the previous sentence hereof shall be deemed to be a new
         issuance of Preemptive Rights Securities to which this subparagraph
         applies. This preemptive right shall not apply to the issuance of
         capital stock issued pursuant to warrants, options, or other rights to
         acquire capital stock currently outstanding or which may be granted by
         the Company to any employee, consultant or director as incentive for
         any such employee, consultant or director to become or remain
         associated with the Company or to provide services to the Company which
         has been or will be issued under the Company's 1995 Stock Option Plan
         or its 1999 Stock Option Plan for shares of common stock which may be
         issued under such 1999 Option Plan up to 1,500,000, or any other option
         plan, option, warrant or other rights to acquire capital stock which is
         or has been approved by the shareholders of the Company.

                  (b) Issuances for Other than Cash. WEDGE's preemptive rights
         occasioned by the issuance by the Company of Preemptive Right
         Securities in exchange for assets other than cash shall include the
         right to purchase such Preemptive Right Securities at a cash price per
         share (or other security unit) equal to the value per share (or other
         security unit) received by the Company as consideration for the
         issuance of the Preemptive Right Securities giving rise to WEDGE's
         rights as reflected on the regularly prepared financial statements of
         the Company. Provided, however, that if such Preemptive Right
         Securities are regularly traded, or are convertible into securities
         which are regularly traded, then the purchase price per share (or other
         security unit) shall be no less than the average of the average daily
         trading price of actual trades of such Preemptive Right Securities (or



                                      -2-
<PAGE>   6


         regularly trading securities into which such Preemptive Right
         Securities may be converted) for the 30 trading days preceding the date
         on which written notice of WEDGE's preemptive rights is delivered to
         WEDGE according to the following sentence. Upon receipt of written
         notice from the Company of its preemptive right to purchase Preemptive
         Right Securities offered for other than cash WEDGE shall provide notice
         of its intent to exercise or not to exercise its rights to the Company
         in writing within 10 days of its receipt of such notice from the
         Company and failure to provide notice within such 10 days shall be
         deemed to be a waiver of such rights. Any issuance of Preemptive Right
         Securities for other than cash not completed within 120 days of the
         date notice is provided by the Company to WEDGE as provided in the
         previous sentence hereof shall be deemed to be a new issuance of
         Preemptive Rights Securities to which this subparagraph applies. All
         else notwithstanding, WEDGE shall have no preemptive rights incident to
         a merger, plan of exchange or other combination involving the Company
         requiring the approval of the shareholders of the Company and regarding
         which such approval is obtained.

         2.2 Material Adverse Effect. For purposes of this Agreement, the term
"Material Adverse Effect" shall mean an event, circumstance, loss, development
or effect (individually or in the aggregate) when considered in light of the
total operations of the Company, would prohibit the Company from engaging in any
material aspect of its business or result in a material adverse change in the
business, operations, properties, prospects or assets of the Company, or if
measured monetarily, would exceed $100,000.

         2.3 Company Right of First Offer. WEDGE agrees that it will not sell,
transfer or otherwise make a disposition of any common stock of the Company
other than into the public trading market under Rule 144 or incident to any
registration right granted by the Company to WEDGE without first offering the
stock WEDGE desires to transfer (the "Disposition Stock") to the Company in
writing (the "Disposition Notice") at the price and other terms (the
"Disposition Terms") under which WEDGE desires to transfer the Disposition
Stock. Upon receipt of any Disposition Notice the Company shall have the
assignable right to acquire the Disposition Stock from WEDGE under the
Disposition Terms at any time within 45 days following the Company's receipt of
the Disposition Notice (the "Company Disposition Period") so long as the Company
shall provide WEDGE with an affirmative written acknowledgment of its intent to
acquire the Disposition Stock within 10 days from the Disposition Notice. If the
Company or its assignee does not tender to WEDGE everything required to purchase
the Disposition Stock under the Disposition Terms within the Company Disposition
Period, WEDGE may complete a disposition of the Disposition Stock to any third
party in a matter conforming to applicable securities laws during the 45 day
period following the end of the Company Disposition Period, but not thereafter
unless the procedures of this paragraph are again complied with. The
requirements of this paragraph shall not apply to the pledge or gift of the
Company's common stock by WEDGE or a disposition to an affiliate of WEDGE or to
a disposition approved by the Board of Directors of the Company. Provided,
however, any affiliate transferee or donee of the common stock shall first be
required to agree in writing to be bound by the terms of this paragraph. WEDGE
agrees that certificates representing the common stock of the Company subject to
this paragraph may be legended in order to provide notice of the application of
this paragraph to third parties.


                                      -3-
<PAGE>   7


         2.4 The Closing. The closing of the transactions provided for in
Section 1 of this Agreement (herein called the "Closing") shall take place at
the offices of Matthews & Branscomb, P.C., 112 East Pecan St., Suite 1100, San
Antonio, Texas, on or before March 30,2001 (the "Closing Date").

                                   ARTICLE III
             REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND WEDGE

         3.1 The Company hereby acknowledges and expressly reconfirms all
warranties and representations contained in Article IV of the Debenture.

         3.2 WEDGE represents and warrants that:

                  (a) Experience. WEDGE is an "accredited investor" within the
         meaning of Regulation D promulgated by the Securities and Exchange
         Commission under the Act, and (by virtue of its experience in
         evaluating and investing in private placement transactions of
         securities in companies similar to the Company) it is capable of
         evaluating the merits and risks of its investment in the Company. WEDGE
         acknowledges that it had the opportunity to ask questions of the
         officers of the Company. In reaching the conclusion that it desires to
         acquire the Debenture and the Stock upon conversion, WEDGE has
         evaluated its financial resources and investment position and the risks
         associated with this investment and acknowledges that it is able to
         bear the economic risks of this investment.

                  (b) Restricted Securities. As of the date hereof, WEDGE
         represents, warrants and agrees that it is acquiring the Debenture, and
         upon conversion the Stock, solely for its own account, for investment,
         and not with a view to the distribution or resale thereof. WEDGE
         further represents that its present financial condition is such that it
         is not under any present necessity or constraint to dispose of such
         Debenture or the Stock into which it is convertible to satisfy any
         existing or contemplated debt or undertaking and that the investment is
         suitable for WEDGE upon the basis of WEDGE's other security holdings,
         financial situation and needs. WEDGE acknowledges and understands that
         it must bear the economic risk of this investment for an indefinite
         period of time because the Stock must be held indefinitely unless
         subsequently registered under the Act and applicable state and other
         securities laws or unless an exemption from such registration is
         available.

                  (c) Unregistered Stock. WEDGE is aware that the Debenture and
         the Stock have not been registered under the Act, and that,
         accordingly, the Stock must be held unless it is subsequently
         registered under said Act or unless, in the opinion of counsel
         reasonably satisfactory to the Company, a sale or transfer may be made
         without registration thereunder. WEDGE agrees that any certificates
         evidencing the Stock must bear a standard legend restricting the
         transfer thereof consistent with the foregoing and that a notice may be
         made in the records of the Company or its transfer agent restricting
         the transfer of the Stock in a manner consistent with the foregoing.


                                      -4-
<PAGE>   8


                                   ARTICLE IV
                               REGISTRATION RIGHTS

         4.1 Registration Rights. Upon conversion of the Debenture into
common stock as provided in Article VII of the Debenture, the Company and the
Holder shall agree to abide by and honor the terms of that certain Registration
Rights Agreement executed simultaneously herewith and attached hereto as Exhibit
"B".

                                    ARTICLE V
                              AFFIRMATIVE COVENANTS

         5.1 Conditions to Obligations of WEDGE. The obligations of WEDGE under
this Agreement shall, except as may be waived in writing by WEDGE, be subject to
the following conditions:

                  (a) Company's Representations and Warranties True at Closing.
         WEDGE shall not have discovered any material error, misstatement or
         omission in the representations and warranties made by the Company in
         Article III above which such error, misstatement or omission remains
         uncured; and the Company shall have performed and complied with in all
         material respects all agreements and conditions required by this
         Agreement to be performed or complied with by it at or prior to the
         Closing.

                  (b) Opinion of Counsel for the Company. Attached hereto as
         Exhibit "C" is a true and correct copy of the Opinion of Counsel to be
         delivered by Matthews and Branscomb, P.C., attorneys for the Company,
         as approved by counsel for WEDGE.

                  (c) Absence of Restraint. No order to restrain, enjoin or
         otherwise prevent the consummation of this Agreement or the
         transactions contemplated hereby shall have been entered; and, on the
         Closing Date, there shall not be any pending or threatened litigation
         in any court, or any proceeding by or before any governmental
         commission, board or agency, with a view to seeking to restrain or
         prohibit consummation of this Agreement or the .transactions
         contemplated hereby or in which divestiture, rescission or significant
         damages are sought in connection with this Agreement or the
         transactions contemplated hereby, and no investigation by any
         governmental agency shall be pending or threatened which might result
         in any such litigation or other proceeding.

                  (d) Company Officers' Certificate. WEDGE shall have received a
         certificate, dated the Closing Date, of the president, executive vice
         president and financial officers of the Company (the "Officers'
         Certificate") to the effect that the representations and warranties
         relating to the Company or its business, financial condition,
         properties or assets are true in all material respects at and as of the
         Closing Date or, to the extent such representations and warranties are
         made at and as of a specific date, such representations and warranties
         were true in all material respects, and as of such date.

                  (e) No Material Adverse Effect. No Material Adverse Effect in
         the results of operations, financial condition or business of the
         Company taken as a whole shall have occurred, and the Company shall not
         have suffered any material loss or damages to any


                                      -5-
<PAGE>   9




         of its properties or assets which change, loss or damage materially
         affects or impairs the ability of the Company to conduct its respective
         businesses.

                  (f) Consents and Other Approvals. WEDGE shall have received
         all consents and other approvals which are necessary or required, if
         any, to consummate this Agreement.

         5.2 Deliveries. WEDGE shall have received (a) Debenture certificates,
(b) a fully executed Registration Rights Agreement, and (c) any other documents
which WEDGE may reasonably request to consummate this Agreement and the
transactions contemplated hereby.

         5.3 Acquisition and Financing Transactions. The Company shall have
closed the acquisition of Mustang Drilling and a debt financing package with The
Frost National Bank in an amount of not less than twelve million dollars
($12,000,000).

                                   ARTICLE VI
              NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES

         6.1 Nature of Statements. All statements contained in any Exhibit or
schedule hereto, including the Debenture, or in any certificate or other
instrument delivered by or on behalf of the Company pursuant to this Agreement
shall be deemed representations and warranties by the Company.

         6.2 Survival of Representations and Warranties. All covenants,
agreements, representations and warranties made hereunder or pursuant hereto or
in connection with the transactions contemplated hereby shall survive the
Closing. Generally, all covenants, representations and warranties shall remain
effective for a period of 24 months from the date of closing. The
representations and warranties of the Company with respect to litigation, ERISA
and environmental matters shall remain effective for a period of 48 months from
the Closing Date. The representations and warranties of the Company with respect
to taxes and title to Stock shall survive for the applicable limitations period
established by law. Notwithstanding the foregoing, any bona fide claim which
shall have been asserted during any such survival period and the obligation to
indemnify for such claim shall continue in effect until such time as such claim
shall have been resolve or settled.

         6.3 Indemnity by the Company. The Company shall indemnify and hold
harmless WEDGE and the officers, directors, managers, agents, affiliates and
representatives of WEDGE or any of them (the "WEDGE Indemnitees") from and
against, and shall reimburse the WEDGE Indemnitees from any loss, liability,
damage or expense, including reasonable attorneys' fees and costs of
investigation incurred as a result thereof, that the WEDGE Indemnitees shall
incur or suffer (collectively, the "WEDGE Recoverable Losses"), arising out of
or resulting from (a) any misrepresentation by the Company, or (b) breach by the
Company of any (i) representation or warranty contained in Article III hereof,
(ii) agreement or covenant under or pursuant to this Agreement, including the
Registration Rights Agreement, or (iii) document, certificate, schedule or
instrument delivered by or on behalf of the Company pursuant hereto.

         6.4 Indemnity by WEDGE. WEDGE shall indemnify and hold harmless the
Company and the officers, directors, agents, affiliates and representatives of
the Company or any of them


                                       -6-
<PAGE>   10

(the "Company Indemnitees") from and against, and shall reimburse the Company
Indemnitees for any loss, liability, damage or expense, including reasonable
attorneys' fees and cost of investigation incurred as a result thereof, that the
Company Indemnitees shall incur or suffer (collectively, the "Company's
Recoverable Losses") resulting from (a) any misrepresentation by WEDGE, or (b)
breach by WEDGE of any (i) representation or warranty contained in Article III
hereof, (ii) agreement or covenant under or pursuant to this Agreement, or (iii)
document, certificate, schedule or instrument delivered by or on behalf of WEDGE
in connection herewith.

         6.5 Limitation of Liability. Notwithstanding any liability which the
Company or WEDGE may incur in Sections 7.3 and 7.4, respectively, above, the
Company shall not be obligated for a WEDGE's Recoverable Loss, and WEDGE shall
not be obligated for a Company's Recoverable Loss, unless and until such loss,
individually, or in the aggregate, shall have exceed $100,000, in which case
such liability shall be for all amounts in excess thereof.

                                   ARTICLE VII
                              AFFIRMATIVE COVENANTS

         7.1 Approval of Shareholders. The Company agrees to immediately, but
not later than seven (7) days from the execution hereof, commence preparation
and procedures for a special meeting of its Shareholders be held no later than
June 30, 2001, for the purpose of causing the Shareholders of the Company to
approve the conversion of the Debenture into the Stock.

         7.2 Board Seats. So long as WEDGE shall own at least 10% of the capital
stock of the Company, the Board of Directors agrees to support and cause to be
placed on the ballot at each election of Directors not less than one name which
shall be provided by WEDGE and which shall be a WEDGE nominee to the Board of
Directors of the Company (the "WEDGE Board Nominee"). So long as WEDGE shall own
at least 25% of the capital stock of the Company, the Board of Directors agrees
to support and cause to be placed on the ballot at each election of Directors
not less than two names which shall be provided by WEDGE and which shall be
nominees to the Board of Directors of the Company. The Company shall take all
necessary steps to cause the immediate appointment of a second WEDGE Board
Nominee to the Board of Directors of the Company within fifteen (15) days from
the Closing Date. Additionally, at least one WEDGE Board Nominee shall be
appointed to serve on the audit committee and compensation committee of the
Board of Directors.

         7.3 Inspection of Property, Books and Records. The Company shall (a)
keep proper books of record and account in which full, true and correct entries
in conformity with generally accepted accounting principles shall be made of all
dealings and transactions in relation to its business activity, (b) permit
representatives of WEDGE to visit and inspect any of its properties and to
examine and make abstracts from any of its books and records at their customary
location during normal business hours or at such other times as WEDGE may
reasonably request, and as often as may be reasonably desired for use by WEDGE,
and to discuss the business, operations, properties and financial and other
condition of the Company with the Company's officers and employees.
Additionally, the Company will adhere to the requirements of Section 3.01 of the
Debenture by providing all financial and business information and statements
required therein within the time frames provided.


                                      -7-
<PAGE>   11


                                  ARTICLE VIII
                               NEGATIVE COVENANTS

         8.1 Reorganization, Stock Dividends, Reclassification, Subdivision or
Stock Issuances. The Company will not (a) enter into a reorganization,
consolidation, merger, lease or sale with another entity in connection with the
sale, transfer or conveyance of its Common Stock or assets, (b) subdivide or
reclassify the outstanding Common Stock into a greater or lesser number of
shares, or (c) issue any additional shares of its capital stock, unless it shall
have given WEDGE at least fifteen (15) days' advance written notice.

                                   ARTICLE IX
                                     DEFAULT

         9.1 Event of Default. As used in this Agreement, the term "Event of
Default" shall mean any of the following:


                  (a) any default of any kind or nature under Section 8.01 of
         the Debenture;

                  (b) any breach of any representation or warranty contained in
         Article III herein in any material respect as of the date of issuance
         or making thereof; or

                  (c) any default in the observance of any affirmative covenant
         set forth in Article VI herein which is not remedied within 30 days
         after written notice thereof to the Company by WEDGE.

         9.2 Default Remedies. Upon the occurrence of an Event of Default, WEDGE
shall be entitled to enforce all rights and remedies provided in Section 8.02 of
the Debenture, in addition to all other rights and remedies it may be entitled
to at equity or under law.

                                    ARTICLE X
                                  MISCELLANEOUS

         10.1 Conflict of Agreement. The parties agree that in the event that
any of the terms or conditions of this Agreement shall conflict with the terms
or conditions of the Debenture, the Debenture shall govern.

         10.2 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which together shall
constitute one agreement.

         10.3 Amendments. This Agreement may be amended, modified or terminated
only by a written instrument signed by the parties hereto.

         10.4 Governing Law. This Agreement shall in all respects be governed by
and shall be construed in accordance with the laws of the State of Texas.

         10.5 Severability. If any provision or part thereof of this Agreement
is found to be prohibited, unenforceable or invalid under the laws of any
jurisdiction, the provision or part thereof shall be ineffective only to the
extent of such prohibition, unenforceability or invalidity


                                      -8-
<PAGE>   12


under the applicable law without effecting the enforceability or validity of
such provision in any other jurisdiction and without invalidating the remainder
of such provision or other provisions in this Agreement.

         10.6 Injunctive Relief. The Company acknowledges that a breach of any
of the provisions hereof would cause irreparable harm to WEDGE and agrees that
in the event of any such threatened breach WEDGE shall be entitled to injunctive
relief and that it shall not be required to post any bond in excess of $1,000.

         10.7 Term. Defined terms not defined herein shall have the meaning
ascribed thereto in the Debenture.

         10.8 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered or mailed, first-class postage prepaid, by certified mail, return
receipt requested.

                  If to WEDGE:

                                    WEDGE Energy Services, L.L.C.
                                    1415 Louisiana
                                    Suite 3000
                                    Houston, Texas 77002
                                    Attention: President

                  with a copy to:

                                    WEDGE Services, L.L.C.
                                    1415 Louisiana
                                    Suite 3000
                                    Houston, Texas 77002
                                    Attention: General Counsel

                  with a copy to:

                                    Darryl M. Burman, Esq.
                                    DiCecco, Fant & Burman
                                    1900 West Loop South
                                    Suite 1100
                                    Houston, Texas 77027

                  If to the Company:

                                    South Texas Drilling & Exploration, Inc.
                                    9310 Broadway, Building I
                                    San Antonio, Texas 78217


                                      -9-
<PAGE>   13


                  with a copy to:

                                    John D. Fisch
                                    Matthews and Branscomb
                                    112 East Pecan Street
                                    Suite 1100
                                    San Antonio, Texas 78205

         10.9 Headings. The headings of the sections of this Agreement have been
inserted for convenience or reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof.

         10.10 Arbitration.


Negotiation Period. Any dispute, controversy or claim arising out of or relating
to this Agreement, or any alleged breach hereof, will be subject to binding
arbitration in accordance with this Section 10.10. If such a dispute,
controversy or claim exists, the parties shall attempt for a 30-day period (the
"Negotiation Period") from the date any party gives any one or more of the other
parties notice (a "Dispute Notice") pursuant to this Section, to negotiate in
good faith, a resolution of the dispute. The Dispute Notice shall set forth with
specificity the basis of the dispute. During the Negotiation Period,
representatives of each party involved in the dispute who have authority to
settle the dispute shall meet at mutually convenient times and places and use
their best efforts to resolve the dispute.

Commencement of Arbitration. If a resolution is not reached by the parties prior
to the end of the Negotiation Period, either party may provide a written request
to the American Arbitration Association within ten (10) days from the end of
such period requesting the selection of three (3) arbitrators (the "Panel") to
arbitrate the parties' respective rights and obligations with respect to the
matters set forth in the Dispute Notice. Each arbitrator on the Panel shall be
experienced in the arbitration of complex commercial disputes. Discovery. Each
party to an arbitration shall be entitled to such discovery as the Panel shall
determine is appropriate.

Expenses of Arbitration. The expenses of the Panel shall be paid by the party
that does not substantially prevail on the merits in the arbitration (as
determined by the award of the Panel).

Location of Arbitration. The arbitration shall take place in Houston, Texas.

AAA Rules. Except as expressly provided in this Section 10.10, the Arbitration
shall be conducted in accordance with the Commercial Rules of the America
Arbitration Association as then in effect.

Attorneys' Fees and Expenses. The party that substantially prevails on the
merits of the arbitration (as defined by the Panel) shall be entitled to
reasonable attorneys' fees, costs, expenses, and necessary disbursements in
addition to any other relief to which such party may be entitled.



                                      -10-
<PAGE>   14


         IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first set forth above.

SOUTH TEXAS DRILLING                             WEDGE ENERGY SERVICES, L.L.C.
 & EXPLORATION, INC.


By: /s/ William Stacy Locke                      By: /s/ Richard E. Blohm, Jr.
   -------------------------                        ---------------------------

Name:                                            Name:
      ----------------------                          ------------------------

Title:
       ---------------------                     -----------------------------




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