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                                                                     EXHIBIT 4.3


                                 LOAN AGREEMENT

                                    Between

PIONEER DRILLING CO., LTD.            and               THE FROST NATIONAL BANK
9310 Broadway, Building 1                               100 W. Houston Street
San Antonio, Texas 78217                                San Antonio, Texas 78205

                                 March 30, 2001

         THIS LOAN AGREEMENT (the "Loan Agreement") will serve to set forth the
terms of the financing transactions by and between PIONEER DRILLING CO., LTD., a
Texas limited partnership ("Borrower"), and THE FROST NATIONAL BANK, a national
banking association ("Lender"):

         1. Credit Facilities. Subject to the terms and conditions set forth in
this Loan Agreement and the other agreements, instruments and documents
evidencing, securing, governing, guaranteeing and/or pertaining to the Loans, as
hereinafter defined (collectively, together with the Loan Agreement, referred to
hereinafter as the "Loan Documents"), Lender hereby agrees to provide to
Borrower the credit facility or facilities hereinbelow (whether one or more, the
"Credit Facilities"):

                  (a) Advance Facility. Subject to the terms and conditions set
         forth herein, Lender agrees to lend to Borrower, on a non-revolving
         basis from time to time during the period commencing on the date hereof
         and continuing through the maturity date of the promissory note
         evidencing this Credit Facility from time to time, an aggregate amount
         not to exceed $12,000,000.00 in multiple advances, as may be requested
         by Borrower from time to time (the "Advance Facility"). Borrower shall
         not be allowed to reborrow under the Advance Facility after a
         repayment. All sums advanced under the Advance Facility shall be used
         for the purchase of drilling rigs. Lender's obligation to make advances
         under the Advance Facility shall also be subject to the following
         additional conditions precedent:

         1. Advances on the Advance Facility shall be for the purpose of (i)
         financing the purchase of four (4) drilling rigs from Mustang Drilling,
         Ltd., and two (2) drilling rigs which have been ordered by the Borrower
         from IRI, and (ii) general working capital (in an amount not to exceed
         $500,000.00 of the total sums funded).

         2. Borrower will provide evidence of successful completion of a
         subordinated debt financing of not less than $9,000,000.00 (the
         "Subordinated Debt"), which upon the approval of a majority of the
         holders of common stock of South Texas Drilling & Exploration, Inc., a
         Texas corporation (hereinafter, "South Texas Drilling") , shall be
         converted into common stock of South Texas Drilling, which conversion
         shall occur within ninety (90) days after the shareholder approval
         described above. Borrower shall provide Lender with executed copies of
         the Subordination Agreement attached as Exhibit A, signed by the holder
         of the note or notes evidencing the Subordinated Debt.


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         3. Prior to the initial advance hereunder, Lender shall have received
         and approved in its sole discretion an original Letter of Credit in the
         amount of $6,000,000.00, showing Lender as Beneficiary and in all
         respects satisfactory to Lender in its sole discretion.

         4. No advances in excess of $6,000,000.00 shall be made unless and
         until Lender shall have received first and prior security interests in
         all drilling rigs previously purchased or refinanced with the proceeds
         of the Loan and unless Lender shall, simultaneously with such advance
         in excess of $6,000,000.00, receive a first and prior security interest
         in each drilling rig purchased with such advance(s).

         5. Borrower shall have paid to Lender the following Facility Fees on
         the dates shown below:

                  (a) An Origination Fee (payable upon execution of this Loan
         Agreement) in the amount of $30,000.00; and

                  (b) A Facility Maintenance Fee in amount equal to .25% of the
         principal balance of the Facility outstanding on September 30, 2001,
         payable on October 1, 2001.

All advances under the Credit Facilities shall be collectively called the
"Loans". Lender reserves the right to require Borrower to give Lender not less
than one (1) business day prior notice of each requested advance under the
Credit Facilities, specifying (i) the aggregate amount of such requested
advance, (ii) the requested date of such advance, and (iii) the purpose for such
advance, with such advances to be requested in a form satisfactory to Lender.

         2. Promissory Notes. The Loans shall be evidenced by one or more
promissory notes or an Application (whether one or more, together with any
renewals, extensions and increases thereof, the "Notes") duly executed by
Borrower and payable to the order of Lender, in form and substance acceptable
to Lender. Interest on the Notes shall accrue at the rate set forth therein.
The principal of and interest on the Notes shall be due and payable in
accordance with the terms and conditions set forth in the Notes and in this
Loan Agreement.

         3. Collateral. As collateral and security for the indebtedness
evidenced by the Notes and any and all other indebtedness or obligations from
time to time owing by Borrower to Lender, Borrower shall grant, and hereby
grants, to Lender, its successors and assigns, a first and prior lien and
security interest in and to the property described hereinbelow, together with
any and all PRODUCTS AND PROCEEDS thereof (the "Collateral"):

         The equipment, fixtures and inventory (if any) consisting of the
         following drilling rigs and related equipment:

                  (a) the Drilling Rigs and related equipment designated by
         Borrower as Rigs 3 (formerly known as No. 17) (National 110-UE), 5
         (Gardner-Denver 500), 6 (Skytop Brewster DH-14610), 9, (Wiess W-45), 10
         (formerly known as No. 4) (Skytop Brewster N-46), 11 (Skytop Brewster
         N-46), 12 (formerly known as No. 1) (Cabot 900), 14 (Skytop Brewster
         N-46), 15 (formerly known as No. 2) (Cabot 750) all as more
         particularly described on Exhibit A attached hereto and incorporated
         herein; and


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                  (b) the Drilling Rigs and related equipment designated by
         Borrower as Rigs 17 (Ideco H-725), 18 (Brewster N-75), 19 (Brewster
         N-75) and 20 (BDW 800). In addition, at such time that the Borrower
         receives title to the Rigs designated as Rigs 7 (IRI 1700 E) and 8(IRI
         1700 E), such rigs shall also be included as Collateral;

         together with all replacements, accessories, additions, substitutions
         and accessions to all of the foregoing, all records relating in any way
         to the foregoing (including, without limitation, any computer software,
         whether on tape, disk, card, strip, cartridge or any other form).

The term "Collateral" shall also include all records and data relating to any of
the foregoing (including, without limitation, any computer software on which
such records and data may be located). Borrower agrees to execute such security
agreements, assignments, deeds of trust and other agreements and documents as
Lender shall deem appropriate and otherwise require from time to time to more
fully create and perfect Lender's lien and security interests in the Collateral.

         4. Intentionally Omitted.

         5. Representations and Warranties. Borrower hereby represents and
warrants, and upon each request for an advance under the Credit Facilities
further represents and warrants, to Lender as follows:

                  (a) Existence. Borrower is a limited partnership duly
         organized, validly existing and in good standing under the laws of the
         State of Texas and all other states where it is doing business, and has
         all requisite power and authority to execute and deliver the Loan
         Documents.

                  (b) Binding Obligations. The execution, delivery, and
         performance of this Loan Agreement and all of the other Loan Documents
         by Borrower have been duly authorized by all necessary action by
         Borrower, and constitute legal, valid and binding obligations of
         Borrower, enforceable in accordance with their respective terms, except
         as limited by Bankruptcy, insolvency or similar laws of general
         application relating to the enforcement of creditors' rights and except
         to the extent specific remedies may generally be limited by equitable
         principles.

                  (c) No Consent. The execution, delivery and performance of
         this Loan Agreement and the other Loan Documents, and the consummation
         of the transactions contemplated hereby and thereby, do not (i)
         conflict with, result in a violation of, or constitute a default under
         (A) any provision of its partnership agreement, any provision of the
         articles or certificate of incorporation or bylaws of Borrower's
         general or limited partner, or any agreement or other instrument
         binding upon Borrower, its general or limited partner, or (B) any law,
         governmental regulation, court decree or order applicable to Borrower,
         or (ii) require the consent, approval or authorization of any third
         party.

                  (d) Financial Condition. Each financial statement of Borrower
         supplied to the Lender truly discloses and fairly presents Borrower's
         financial condition as of the date of each such statement. There has
         been no material adverse change in such financial


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         condition or results of operations of Borrower subsequent to the date
         of the most recent financial statement supplied to Lender.

                  (e) Litigation. Except as set forth in the Securities and
         Exchange Commission filings of South Texas Drilling, copies of which
         have been made available to the Lender, there are no actions, suits or
         proceedings, pending or, to the knowledge of Borrower, threatened
         against or affecting Borrower or the properties of Borrower, before any
         court or governmental department, commission or board, which, if
         determined adversely to Borrower, would have a material adverse effect
         on the financial condition, properties, or operations of Borrower.

                  (f) Taxes; Governmental Charges. Borrower has filed all
         federal, state and local tax reports and returns required by any law or
         regulation to be filed by it and has either duly paid all taxes, duties
         and charges indicated due on the basis of such returns and reports, or
         made adequate provision for the payment thereof, and the assessment of
         any material amount of additional taxes in excess of those paid and
         reported is not reasonably expected.

         6. Conditions Precedent to Advances. Lender's obligation to make any
advance under this Loan Agreement and the other Loan Documents shall be subject
to the conditions precedent that, as of the date of such advance and after
giving effect thereto (i) all representations and warranties made to Lender in
this Loan Agreement and the other Loan Documents shall be true and correct, as
of and as if made on such date, (ii) no material adverse change in the financial
condition of Borrower since the effective date of the most recent financial
statements furnished to Lender by Borrower shall have occurred and be
continuing, (iii) no event has occurred and is continuing, or would result from
the requested advance, which with notice or lapse of time, or both, would
constitute an Event of Default (as hereinafter defined), and (iv) Lender's
receipt of all Loan Documents appropriately executed by Borrower and all other
proper parties.

         7. Affirmative Covenants. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, Borrower agrees and covenants that it will, unless
Lender shall otherwise consent in writing:

                  (a) Accounts and Records. Maintain its books and records in
         accordance with generally accepted accounting principles.

                  (b) Right of Inspection. Permit Lender to visit its properties
         and installations and to examine, audit and make and take away copies
         or reproductions of Borrower's books and records, at all reasonable
         times.

                  (c) Right to Additional Information. Furnish Lender with such
         additional information and statements, lists of assets and liabilities,
         tax returns, and other reports with respect to Borrower's financial
         condition and business operations as Lender may request from time to
         time.


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                  (d) Compliance with Laws. Conduct its business in an orderly
         and efficient manner consistent with good business practices, and
         perform and comply in all material respects with all statutes, rules,
         regulations and/or ordinances imposed by any governmental unit upon
         Borrower and its businesses, operations and properties (including
         without limitation, all applicable environmental statutes, rules,
         regulations and ordinances).

                  (e) Taxes. Pay and discharge when due all of its indebtedness
         and obligations, including without limitation, all assessments, taxes,
         governmental charges, levies and liens, of every kind and nature,
         imposed upon Borrower or its properties, income, or profits, prior to
         the date on which penalties would attach, and all lawful claims that,
         if unpaid, might become a lien or charge upon any of Borrower's
         properties, income, or profits; provided, however, Borrower will not be
         required to pay and discharge any such assessment, tax, charge, levy,
         lien or claim so long as (i) the legality of the same shall be
         contested in good faith by appropriate judicial, administrative or
         other legal proceedings, and (ii) Borrower shall have established on
         its books adequate reserves with respect to such contested assessment,
         tax, charge, levy, lien or claim in accordance with generally accepted
         accounting principles, consistently applied.

                  (f) Insurance. Maintain insurance, including but not limited
         to, fire insurance, comprehensive property damage, public liability,
         worker's compensation and other insurance deemed necessary or otherwise
         required by Lender.

                  (g) Notice of Indebtedness. Promptly inform Lender of the
         creation, incurrence or assumption by Borrower of any actual or
         contingent liabilities not permitted under this Loan Agreement.

                  (h) Notice of Litigation. Promptly after the commencement
         thereof, notify Lender of all actions, suits and proceedings before any
         court or any governmental department, commission or board affecting
         Borrower or any of its properties which, if determined adversely to
         Borrower, would have a material adverse effect on the financial
         condition, properties, or operations of Borrower.

                  (i) Notice of Material Adverse Change. Promptly inform Lender
         of (i) any and all material adverse changes in Borrower's financial
         condition, and (ii) all claims made against Borrower which could
         materially affect the financial condition of Borrower.

                  (j) Additional Documentation. Execute and deliver, or cause to
         be executed and delivered, any and all other agreements, instruments or
         documents which Lender may reasonably request in order to give effect
         to the transactions contemplated under this Loan Agreement and the
         other Loan Documents.

         8. Negative Covenants. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, neither Borrower nor South Texas Drilling will ,
without the prior written consent of Lender:


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                  (a) Nature of Business. Make any material change in the nature
         of its business as carried on as of the date hereof.

                  (b) Liquidations, Mergers, Consolidations. Liquidate, merge or
         consolidate with or into any other entity.

                  (c) Sale of Assets. Sell, transfer or otherwise dispose of (1)
         any of the Collateral, or (2) any of its assets or property, other than
         any asset of property valued not more than $500,000.00 and disposed of
         in the ordinary course of business.

                  (d) Liens. Create or incur any lien or encumbrance on any of
         its assets, other than (i) liens and security interests securing
         indebtedness owing to Lender, (ii) liens for taxes, assessments or
         similar charges that are (1) not yet due or (2) being contested in good
         faith by appropriate proceedings and for which such entity has
         established adequate reserves, (iii) liens and security interests
         existing as of the date hereof which have been disclosed to and
         approved by Lender in writing, and (iv) liens or encumbrances securing
         indebtedness which would not otherwise violate the terms of this Loan
         Agreement.

                  (e) Indebtedness. Create, incur or assume any indebtedness for
         borrowed money or issue or assume any other note, debenture, bond or
         other evidences of indebtedness, or guarantee any such indebtedness or
         such evidences of indebtedness of others, other than (i) borrowings
         from Lender, (ii) borrowings from lenders other than Lender, except
         that during the term of the Loan, Borrower shall be permitted to incur
         or have outstanding indebtedness to other lenders provided that the
         aggregate principal balance of all such debt outstanding at any time
         shall not exceed $5,000,000.00 (exclusive of the subordinated debt
         described in 1(a)2. above) and (iii) the subordinated debt described in
         1.(a)2. above (whether or not such subordinated debt is prohibited by
         other currently existing agreements between Lender and South Texas
         Drilling or Borrower).

                  (f) Transfer of Ownership. Permit the sale, pledge or other
         transfer of any of the ownership interests in Borrower (except at
         described in 1. (a)2. above).

                  (g) Change in Management. Permit a change in the senior
         management of South Texas Drilling (as used herein, "a change in senior
         management" shall mean that Michael E. Little shall have ceased to hold
         the titles of Chairman and Chief Executive Officer or William Stacey
         Locke shall have ceased to hold the titles of Chief Financial Officer
         and President); provided, however, should Michael E. Little or William
         Stacey Locke die, become disabled or be terminated for cause (an
         "Involuntary Change of Management"), Borrower shall not be in default
         hereunder if and only if South Texas Drilling shall (i) immediately,
         but in no event more than thirty days following such Involuntary Change
         of Management, name a replacement reasonably acceptable to Lender to
         exercise the duties and hold the office(s) and positions held by
         Michael E. Little and William Stacey Locke on an interim basis; and
         (ii) as soon as practical, but in no event more than (270) days
         following such Involuntary Change of Management, name a replacement
         acceptable to Lender in it reasonable discretion to exercise the duties
         and hold the office(s) and positions held by Michael E. Little and
         William Stacey Locke.


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                  (h) Loans. Make any loans to any person or entity, other than,
         in the loans made in the ordinary course of business to entities
         affiliated with Borrower or South Texas Drilling and not exceeding
         $250,000.00 principal outstanding to all borrowers in the aggregate at
         any time.

                  (i) Transactions with Affiliates. Enter into any transaction,
         including, without limitation, the purchase, sale or exchange of
         property or the rendering of any service, with any Affiliate (as
         hereinafter defined) of Borrower or South Texas Drilling, except in the
         ordinary course of and pursuant to the reasonable requirements of the
         business of either of them and upon fair and reasonable terms no less
         favorable to Borrower and/or South Texas Drilling as the case may be
         than would be obtained in a comparable arm's-length transaction with a
         person or entity not an Affiliate of Borrower or South Texas Drilling.
         As used herein, the term "Affiliate" means any individual or entity
         directly or indirectly controlling, controlled by, or under common
         control with, another individual or entity.

                  (j) Distributions. Borrower agrees not to declare or pay any
         distributions on any of Borrower's partnership interests, make any
         other distributions with respect to any payment on account of the
         purchase, redemption, or other acquisition or retirement of any of
         Borrower's partnership interests, or make any other distribution, sale,
         transfer or lease of any of Borrower's assets other than in the
         ordinary course of business, unless any such amounts are directly
         utilized for the payment of principal or interest on indebtedness and
         obligations owing from time to time by Borrower to Lender. The above
         notwithstanding, the Borrower may make distributions with respect to
         Borrower's partnership interests, for the purposes of (i) providing
         funds to pay taxes (including federal income taxes and franchise taxes)
         of the partners of Borrower attributable to ownership of an interest in
         Borrower, (ii) providing operating capital to South Texas Drilling in
         an amount not exceeding $250,000.00 distributed in any one fiscal year,
         and (iii) providing sufficient funds for the retirement of term bank
         debt owed by South Texas Drilling to American Bank.

                  (k) Dividends. South Texas Drilling agrees not to declare or
         pay any dividends on any shares of its capital stock, make any other
         distributions with respect to any payment on account of the purchase,
         redemption, or other acquisition or retirement of any shares of it
         capital stock, or make any other distribution, sale, transfer or lease
         of any of it assets other than in the ordinary course of business,
         unless any such amounts are directly utilized for the payment of
         principal or interest on indebtedness and obligations owing from time
         to time by it to Lender and other than Preferred Dividends which South
         Texas Drilling is contractually obligated to pay pursuant to agreements
         in existence on the date hereof.

         9. Financial Covenants. Until (i) the Notes and all other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan
Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, Borrower will maintain the following financial
covenants (on a consolidated basis with South Texas Drilling):


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                  (a) LEVERAGE RATIO. Beginning with the fiscal year ending on
         March 31, 2002, Borrower will maintain, a Leverage Ratio not to exceed
         3.0 to 1.0, to be tested annually during the term of Loan. Defined as:

                                Funded Bank Debt
           -----------------------------------------------------------
           Net Income + Interest + Taxes + Depreciation + Amortization

         As used herein, "Funded Bank Debt" shall mean: all outstanding
principal due to Lender and other non-equity lenders.

         Compliance with the foregoing covenant shall begin with the fiscal year
ending on March 31, 2002 notwithstanding the terms of any Loan Agreement
previously executed between Lender and Borrower or South Texas Drilling.

                  (b) CASH FLOW COVERAGE RATIO. Beginning with the fiscal year
         ending on March 31, 2002, Borrower will maintain, as of the end of each
         fiscal year, a cash flow coverage ratio of not less than 1.25 to
         1.0--defined as:

         Net Income + Interest + Taxes + Depreciation + Amortization -
           Distributions or Dividends-Maintenance Capital Expenditures
           -----------------------------------------------------------
              Current Portion of Long-Term Debt + Interest Expense

         As used herein, "Maintenance Capital Expenditures" shall mean: Amounts
actually paid for the routine maintenance of the equipment serving as collateral
for the Loans to the extent such maintenance is required to keep that equipment
in operating condition.

         Compliance with the foregoing covenant shall begin with the fiscal year
ending on March 31, 2002 notwithstanding the terms of any Loan Agreement
previously executed between Lender and Borrower or South Texas Drilling.

                  (c) DEBT TO WORTH RATIO. Borrower will maintain, at all times,
         to be tested quarterly on the last day of each fiscal quarter of
         Borrower, a ratio of (a) total liabilities (excluding any Subordinated
         Debt), to (b) Tangible Net Worth of not greater than 1.75 to 1.0.

         As used herein, the term "Tangible Net Worth" means, as of any date,
Borrower's total assets excluding all intangible assets, less total liabilities
excluding any Subordinated Debt. As used herein, the term "Subordinated Debt"
means any indebtedness owing by Borrower which has been subordinated by written
agreement to all indebtedness now or hereafter owing by Borrower to Lender, such
agreement to be in form and substance acceptable to Lender.

         10. Reporting Requirements. Until (i) the Notes and all other
obligations and liabilities of Borrower under this Loan Agreement and the other
Loan Documents are fully paid and satisfied, and (ii) the Lender has no further
commitment to lend hereunder, Borrower will, unless Lender shall otherwise
consent in writing, furnish to Lender (all on a consolidated basis with South
Texas Drilling):


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                  (a) Interim Financial Statements. As soon as available, and in
         any event within forty-five (45) days after the end of each month of
         each fiscal year of Borrower, (i) a balance sheet, income statement and
         statement of cash flows of Borrower as of the end of such fiscal month;
         (ii) an accounts receivable aging report; (iii) a Borrowing Base
         Certificate; and (iv) a Rig Schedule/Utilization Report; each in form
         and substance and in reasonable detail satisfactory to Lender and duly
         certified (as to item (i), subject to year-end review adjustments) by
         the President and/or Chief Financial Officer of Borrower and/or Chief
         Accounting Officer (A) as being true and correct in all material
         aspects to the best of his or her knowledge and (B) (as to item (i)
         only), as having been prepared in accordance with generally accepted
         accounting principles, consistently applied.

                  (b) Quarterly Statements. Within sixty (60) days after the end
         of each quarter of each fiscal year of Borrower, a copy of the 10-Q
         Report of South Texas Drilling, as filed with the Securities Exchange
         Commission.

                  (c) Annual Reporting. As soon as available and in any event
         within one hundred twenty days (120) days after the end of each fiscal
         year of Borrower, (i) a copy of the 10-K Report of South Texas Drilling
         , as filed with the Securities Exchange Commission, together with (ii)
         a certificate signed by the President and/or Chief Financial Officer of
         Borrower and/or Chief Accounting Officer, stating that Borrower is in
         full compliance with all of its obligations under this Loan Agreement
         and all other Loan Documents and is not in default of any term or
         provisions hereof or thereof, and demonstrating compliance with all
         financial ratios and covenants set forth in this Loan Agreement.

         11. Events of Default. Each of the following shall constitute an "Event
of Default" under this Loan Agreement:

                  (a) The failure, refusal or neglect of Borrower to pay when
         due any part of the principal of, or interest on, the Notes or any
         other indebtedness or obligations owing to Lender by Borrower from time
         to time, from time to time, which default remains uncured for a period
         of ten (10) days after notice to Borrowers from Lender, given in
         accordance with the terms hereof.

                  (b) The failure of Borrower or any Obligated Party (as defined
         below) to timely and properly observe, keep or perform any covenant,
         agreement, warranty or condition required herein or in any of the other
         Loan Documents and the failure of Borrower or any Obligated Party to
         cure such default within 30 days after written notice from Lender
         specifying such default, provided that if such default or violation is
         susceptible of being remedied, but such remedy can not reasonably be
         accomplished within the initial 30-day cure period, no Event of Default
         shall be deemed to have occurred so long as Borrower or the appropriate
         Obligated Party is diligently pursuing such remedy and is successful in
         curing the default or violation to the reasonable satisfaction of
         Lender within such additional period of time as may be necessary to
         effect the remedy, not to exceed in any event an additional 60 days
         following the end of the initial cure period.


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                  (c) The occurrence of an event of default under any of the
         other Loan Documents or under any other agreement now existing or
         hereafter arising between Lender and Borrower after the giving of any
         required notice and expiration of any applicable cure period.

                  (d) Any representation contained herein or in any of the other
         Loan Documents made by Borrower or any Obligated Party is false or
         misleading in any material respect.

                  (e) The occurrence of any event which permits the acceleration
         of the maturity of any indebtedness in excess of $100,000.00 owing by
         Borrower to any third party under any agreement or understanding and
         such default continues after the giving of written notice to Borrower
         and the passage of the cure period specified in (b) above.

                  (f) If Borrower or any Obligated Party: (i) becomes insolvent,
         or makes a transfer in fraud of creditors, or makes an assignment for
         the benefit of creditors, or admits in writing its inability to pay its
         debts as they become due; (ii) generally is not paying its debts as
         such debts become due; (iii) has a receiver, trustee or custodian
         appointed for, or take possession of, all or substantially all of the
         assets of such party, either in a proceeding brought by such party or
         in a proceeding brought against such party and such appointment is not
         discharged or such possession is not terminated within sixty (60) days
         after the effective date thereof or such party consents to or
         acquiesces in such appointment or possession; (iv) files a petition for
         relief under the United States Bankruptcy Code or any other present or
         future federal or state insolvency, bankruptcy or similar laws (all of
         the foregoing hereinafter collectively called "Applicable Bankruptcy
         Law") or an involuntary petition for relief is filed against such party
         under any Applicable Bankruptcy Law and such involuntary petition is
         not dismissed within sixty (60) days after the filing thereof, or an
         order for relief naming such party is entered under any Applicable
         Bankruptcy Law, or any composition, rearrangement, extension,
         reorganization or other relief of debtors now or hereafter existing is
         requested or consented to by such party; (v) fails to have discharged
         within a period of thirty (30) days any attachment, sequestration or
         similar writ levied upon any property of such party; or (vi) falls to
         pay within thirty (30) days any final money judgment against such
         party.

                  (g) If Borrower or any Obligated Party is an entity, the
         liquidation, dissolution, merger or consolidation of any such entity
         (provided that an Event of Default shall not occur upon the merger or
         consolidation of Credit Suisse) or, if Borrower or any Obligated Party
         is an individual, the death or legal incapacity of any such individual.

                  (h) The entry of any judgment against Borrower or the issuance
         or entry of any attachment or other lien against any of the property of
         Borrower for an amount in excess of $500,000.00, if undischarged,
         unbonded or undismissed within thirty (30) days after such entry.

Nothing contained in this Loan Agreement shall be construed to limit the events
of default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative. The term "Obligated Party", as used herein, shall
mean any party other than


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Borrower who secures, guarantees and/or is otherwise obligated to pay all or any
portion of the indebtedness evidenced by the Notes.

         12. Remedies. Upon the occurrence of any one or more of the foregoing
Events of Default, (a) the entire unpaid balance of principal of the Notes,
together with all accrued but unpaid interest thereon, and all other
indebtedness owing to Lender by Borrower at such time shall, at the option of
Lender, become immediately due and payable without further notice, demand,
presentation, notice of dishonor, notice of intent to accelerate, notice of
acceleration, protest or notice of protest of any kind, all of which are
expressly waived by Borrower, and (b) Lender may, at its option, cease further
advances under any of the Notes. All rights and remedies of Lender set forth in
this Loan Agreement and in any of the other Loan Documents may also be exercised
by Lender, at its option to be exercised in its sole discretion, upon the
occurrence of an Event of Default.

         13. Rights Cumulative. All rights of Lender under the terms of this
Loan Agreement shall be cumulative of, and in addition to, the rights of Lender
under any and all other agreements between Borrower and Lender (including, but
not limited to, the other Loan Documents), and not in substitution or diminution
of any rights now or hereafter held by Lender under the terms of any other
agreement.

         14. Waiver and Agreement. Neither the failure nor any delay on the part
of Lender to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Loan Agreement or in any of the other Loan
Documents and no departure by Borrower therefrom shall be effective unless the
same shall be in writing and signed by Lender, and then shall be effective only
in the specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Loan Agreement
or to any of the other Loan Documents shall be valid or effective unless the
same is signed by the party against whom it is sought to be enforced.

         15. Benefits. This Loan Agreement shall be binding upon and inure to
the benefit of Lender and Borrower, and their respective successors and assigns,
provided, however, that Borrower may not, without the prior written consent of
Lender, assign any rights, powers, duties or obligations under this Loan
Agreement or any of the other Loan Documents.

         16. Notices. All notices, requests, demands or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and given by (i) personal delivery, (ii) expedited delivery service with proof
of delivery, or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended addressee at the
address set forth on the first page hereof and shall be deemed to have been
received either, in the case of personal delivery, as of the time of personal
delivery, in the case of expedited delivery service, as of the date of first
attempted delivery at the address and in the manner provided herein, or in the
case of mail, upon deposit in a depository receptacle under the care and custody
of the United States Postal Service. Either party shall have the right to change
its address for notice hereunder to any other location within the continental
United States by


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notice to the other party of such new address at least thirty (30) days prior to
the effective date of such new address.

         17. Construction. This Loan Agreement and the other Loan Documents have
been executed and delivered in the State of Texas, shall be governed by and
construed in accordance with the laws of the State of Texas, and shall be
performable by the parties hereto in the county in Texas where the Lender's
address set forth on the first page hereof is located.

         18. Invalid Provisions. If any provision of this Loan Agreement or any
of the other Loan Documents is held to be illegal, invalid or unenforceable
under present or future laws, such provision shall be fully severable and the
remaining provisions of this Loan Agreement or any of the other Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.

         19. Expense. Borrower shall pay all costs and expenses (including,
without limitation, reasonable attorneys' fees) in connection with (i) any
action required in the course of administration of the indebtedness and
obligations evidenced by the Loan Documents, and (ii) any action in the
enforcement of Lender's rights upon the occurrence of Event of Default.

         20. Participation of the Loans. Borrower agrees that Lender may, at its
option, sell interests in the Loans and its rights under this Loan Agreement to
a financial institution or institutions and, in connection with each such sale,
Lender may disclose any financial and other information available to Lender
concerning Borrower to each prospective purchaser.

         21. Conflicts. In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the other Loan Documents,
the terms and provisions contained in this Loan Agreement shall be controlling.

         22. Counterparts. This Loan Agreement may be separately executed in any
number of counterparts, each of which shall be an original, but all of which,
taken together, shall be deemed to constitute one and the same instrument.

         23. Facsimile Documents and Signatures. For purposes of negotiating and
finalizing this Loan Agreement, if this document or any document executed in
connection with it is transmitted by facsimile machine ("fax"), it shall be
treated for all purposes as an original document. Additionally, the signature of
any party on this document transmitted by way of a facsimile machine shall be
considered for all purposes as an original signature. Any such faxed document
shall be considered to have the same binding legal effect as an original
document. At the request of any party, any faxed document shall be re-executed
by each signatory party in an original form.

         If the foregoing correctly sets forth our mutual agreement, please so
acknowledge by signing and returning this Loan Agreement to the undersigned.


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<PAGE>   13


                         NOTICE TO COMPLY WITH STATE LAW

         For the purpose of this Notice, the term "WRITTEN AGREEMENT" shall
include the document set forth above, together with each and every other
document relating to and/or securing the same loan transaction, regardless of
the date of execution.

         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.

BORROWER:                                    LENDER:

PIONEER DRILLING CO., LTD.,                  THE FROST NATIONAL BANK
a Texas limited.  partnership                a national banking association



By:  SOTEX Exploration Company, a            By:  /s/ Wm. Casey Shaeffer
     Texas corporation, General Partner         -----------------------------
                                             Printed Name: Wm. Casey Shaeffer
                                             Title: Asst. Vice President

         By: /s/ Michael E. Little
             -----------------------------
         Printed Name: Michael E. Little
         Title: Chairman CEO


SOUTH TEXAS DRILLING & EXPLORATION, INC.,
a Texas corporation (executing for purposes
of joining in certain specific provisions,
as noted above)



By: /s/Michael E. Little
   ---------------------------------------
Printed Name: Michael E. Little
Title: Chairman CEO


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