Exhibit 10.5


                          REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is entered into as of
March 5, 2007 by and  between  Cubic  Energy,  Inc.,  a Texas  corporation  (the
"Company"),  and Wells Fargo  Energy  Capital,  Inc., a Texas  corporation  (the
"Holder").

     WHEREAS, concurrently with the execution of this Agreement, (a) the Company
is entering into that certain Credit Agreement (the "Credit Agreement") with the
Holder pursuant to which the Holder will make loans, including a "Term Loan" (as
defined in the Credit  Agreement) to the Company that is convertible into shares
of the common stock, par value $0.05 per share (the "Common  Stock"),  issued by
the  Company as provided in Section  2.15 of the Credit  Agreement,  and (b) the
Company is issuing to the Holder  that  certain  Warrant To  Purchase  Shares of
Common Stock of Cubic Energy,  Inc. (the "Warrant") to purchase shares of Common
Stock as provided therein;

     WHEREAS, Section 2.12(a) of the Credit Agreement provides for the Company's
issuance  of the  Supplemental  Warrant to the Holder as and when  described  in
Section 2.12(a);

     WHEREAS,  this  Agreement  provides  a method for the  registration  of the
shares of Common  Stock to be issued  pursuant  to  Section  2.15 of the  Credit
Agreement and upon exercise of the Warrant or the  Supplemental  Warrant or both
(the "Shares"); and

     WHEREAS,  the Credit  Agreement  requires the  simultaneous  execution  and
delivery of this  Agreement as a condition  precedent to the Closing (as defined
in the Credit Agreement).

     NOW, THEREFORE, in consideration of the foregoing,  the mutual promises and
agreements set forth herein, and other valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     1. Certain Definitions.

     As used in this  Agreement,  in addition to the other terms defined herein,
the following capitalized defined terms shall have the following meanings:

     "Additional  Shares" means shares or other securities issued by the Company
with respect to the Common Stock in connection  with any stock  dividend,  stock
distribution, stock split or similar issuance.

     "Affiliate" shall mean, with respect to any Person, a Person that directly,
or indirectly though one or more intermediaries,  controls, is controlled by, or
is under common control with the first mentioned Person.

     "Agreement"  shall  have the  meaning  set  forth in the  preamble  to this
Agreement.

     "Business Day" means any day other than a day on which the SEC is closed.

     "Common  Stock"  shall have the meaning  set forth in the  recitals to this
Agreement.

     "Company" shall mean Cubic Energy, Inc., a Texas corporation.



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     "Credit Agreement" shall have the meaning set forth in the recitals to this
Agreement.

     "Effective  Time"  means each of the three (3) dates the Holder  shall have
given the Registration Notice.

     "End of Suspension Notice" shall have the meaning set forth in Section 3(b)
hereof.

     "Exchange Act" shall mean the Securities  Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

     "Holder"  has the meaning  assigned in the  preamble  and any other  lawful
assignee of the rights in this Agreement.

     "Indemnitee" shall have the meaning set forth in Section 9 hereof.

     "NASD" shall mean the National Association of Securities Dealers, Inc.

     "OTCBB" means the OTC Bulletin Board quotation system.

     "Person"  shall mean an individual,  partnership,  corporation,  trust,  or
unincorporated organization,  or a government or agency or political subdivision
thereof.

     "Prospectus"   shall  mean  the  prospectus   included  in  a  Registration
Statement,  including any preliminary prospectus,  as amended or supplemented by
any  prospectus  supplement  with  respect to the terms of the  offering  of any
portion of the Registrable Shares covered by such Registration Statement, and by
all  other   amendments   and   supplements   to  such   prospectus,   including
post-effective  amendments, and in each case including all material incorporated
by reference therein.

     "Registrable  Shares" shall mean all Shares  issued upon  conversion of the
Term Loan as provided in Section 2.15 of the Credit  Agreement and upon exercise
of the Warrant,  the Supplemental Warrant or either of them, or other securities
issued or issuable in respect of the Common Stock by way of  spin-off,  dividend
or stock split or in connection with a combination of shares,  reclassification,
merger,  consolidation or reorganization;  provided,  however, that "Registrable
Shares"  shall not include (i) Common Stock for which a  Registration  Statement
relating to the sale thereof shall have become  effective  under the  Securities
Act and which have been  disposed  of, as  applicable,  under such  Registration
Statement, (ii) Common Stock sold pursuant to Rule 144, (iii) Common Stock which
otherwise have been transferred by Holder, for which the Company has delivered a
new certificate not bearing a legend restricting further transfer (or registered
such Common  Stock in an  uncertificated  registration  without  restriction  on
further  transfers)  and such  Common  Stock  may be resold  without  subsequent
registration  under the  Securities  Act or (iv) Common Stock  eligible for sale
pursuant to Rule 144(k) (or any successor provision) by the Holder.

     "Registration  Expenses"  shall mean any and all  expenses  incident to the
performance of or compliance with this Agreement,  including without limitation:
(a) all registration and filing fees; (b) all fees and expenses  associated with
a required  listing of the Registrable  Shares on any securities  exchange;  (c)
fees and expenses  with respect to filings  required to be made with an exchange
or the NASD; (d) fees and expenses of compliance  with  securities or "blue sky"



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laws  (including   reasonable  fees  and   disbursements   of  counsel  for  the
underwriters or holders of securities in connection with blue sky qualifications
of the securities and  determination  of their  eligibility for investment under
the laws of such jurisdictions); (e) printing, messenger, telephone and delivery
expenses of the Company;  (f) fees and  disbursements of counsel for the Company
and customary fees and expenses for  independent  certified  public  accountants
retained by the Company (including the expenses of any comfort letters, or costs
associated with the delivery by independent  certified  public  accountants of a
comfort letter or comfort letters,  if such comfort letter or comfort letters is
required by the managing underwriter);  (g) securities acts liability insurance,
if the Company so desires;  (h) all internal expenses of the Company (including,
without  limitation,  all salaries  and  expenses of its officers and  employees
performing legal or accounting duties); (i) the expense of any annual audit; (j)
the fees and expenses of any Person, including special experts,  retained by the
Company; and (k) the reasonable out-of-pocket expenses of one legal counsel (who
shall be  reasonably  acceptable  to the Company) for the Holders in  connection
with providing the  information  with respect to the Holders that is required to
be included in the Registration Statements filed by the Company pursuant to this
Agreement and the review of that information in the Registration  Statement,  in
an amount not to exceed Five Thousand Dollars  ($5,000.00) for each Registration
Statement filed provided, however, that Registration Expenses shall not include,
and the Company  shall not have any  obligation to pay, any  underwriting  fees,
discounts or commissions attributable to the sale of such Registrable Shares, or
any legal fees and  expenses  of counsel to any Holder  (except as  specifically
provided above).

     "Registration  Notice"  shall have the  meaning  set forth in Section  2(a)
hereof.

     "Registration  Statement"  shall  mean any  registration  statement  of the
Company  that covers the sale or resale of any of the  Registrable  Shares under
the Securities Act on an appropriate form, and all amendments and supplements to
such registration statement,  including post-effective  amendments, in each case
including  the  Prospectus  contained  therein,  all  exhibits  thereto  and all
materials incorporated by reference therein.

     "Resale  Shelf  Registration  Expiration  Date"  shall have the meaning set
forth in Section 2(b) hereof.

     "Resale Shelf  Registration  Statement" shall have the meaning set forth in
Section 2(b) hereof.

     "Rule  144"  means  Rule 144 under  the  Securities  Act (or any  successor
provision).

     "SEC" shall mean the Securities and Exchange Commission.

     "Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

     "Shares"  shall  have  the  meaning  set  forth  in the  recitals  of  this
Agreement.

     "Subsequent Shelf Registration  Statement" shall have the meaning set forth
in Section 3(d) hereof.



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<PAGE>


     "Supplemental  Warrant"  shall  have the  meaning  assigned  in the  Credit
Agreement.

     "Suspension Event" shall have the meaning set forth in Section 3(a) hereof.

     "Suspension  Notice"  shall  have the  meaning  set forth in  Section  3(b)
hereof.

     "Term  Loan"  shall  have the  meaning  assigned  in the  recitals  of this
Agreement.

     "Warrant"  shall  have  the  meaning  assigned  in  the  recitals  of  this
Agreement.

     2. Resale Registration Rights.

     (a)  Registration  Notice.  At any time that the  Holder  is the  holder of
Registrable  Shares,  the Holder may give a notice (the  "Registration  Notice")
stating that the Holder is exercising  the right granted in Section 2(b) of this
Agreement and stating the number of Registrable  Shares to be registered,  which
shall be no less than (i) in the case of the first and  second  exercises  under
this  Section 2, One  Million  (1,000,000)  Shares,  and (ii) in the case of the
third  exercise,  the  lesser of One  Million  (1,000,000)  Shares or all of the
Registrable Shares then held by the Holder.

     (b) Registration  Statement Covering Resale of Registrable  Shares. As soon
as  practicable,  but in no event more than  forty-five  (45)  days,  after each
Effective Time, the Company shall (i) file with the SEC, or (ii) have filed with
the SEC prior to the Effective Time a shelf Registration  Statement (the "Resale
Shelf  Registration  Statement")  pursuant to Rule 415 under the  Securities Act
pursuant  to which  all of the  Registrable  Shares  to be  registered  shall be
included (on the initial  filing or by supplement  thereto) to enable the public
resale  on a  delayed  or  continuous  basis of such  Registrable  Shares by the
Holder. The Company shall file the Resale Shelf  Registration  Statement on such
form as the  Company  may then  utilize  under  the rules of the SEC and use its
commercially  reasonable efforts to have the Resale Shelf Registration Statement
declared effective under the Securities Act as soon as practicable.  The Company
agrees to use its commercially  reasonable efforts to maintain the effectiveness
of the Resale Shelf  Registration  Statement,  including by filing any necessary
post-effective  amendments and prospectus  supplements,  or,  alternatively,  by
filing  new  registration  statements  relating  to the  Registrable  Shares  as
required by Rule 415 under the Securities Act,  continuously until the date (the
"Resale Shelf Registration  Expiration Date") that is the earlier of (i) two (2)
years  following  the date of  effectiveness  of the Resale  Shelf  Registration
Statement or (ii) the date on which the Holder no longer  holds any  Registrable
Shares covered by such Resale Shelf  Registration  Statement.  The Company shall
not be  obligated  to  file  more  than  three  (3)  Resale  Shelf  Registration
Statements pursuant to this Section 2(b).

     (c) Notification  and  Distribution of Materials.  The Company shall notify
the Holder of the effectiveness of any Registration  Statement applicable to the
Registrable Shares and shall furnish to the Holders, without charge, such number
of copies of the Registration  Statement (including any amendments,  supplements
and exhibits),  the Prospectus  contained  therein  (including each  preliminary
prospectus  and all  related  amendments  and  supplements)  and  any  documents
incorporated by reference in the Registration  Statement or such other documents
as the Holder may  reasonably  request  in order to  facilitate  the sale of the
Registrable Shares in the manner described in the Registration Statement.



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<PAGE>


     (d) Amendments and Supplements. Subject to Section 3, (i) the Company shall
promptly  prepare  and file with the SEC from time to time such  amendments  and
supplements to each  Registration  Statement and  Prospectus  used in connection
therewith as may be necessary to keep that Registration  Statement effective and
to  comply  with  the  provisions  of the  Securities  Act with  respect  to the
disposition of all the Registrable  Shares so registered  until the Resale Shelf
Registration  Expiration Date and (ii) upon five (5) Business Days' notice,  the
Company  shall  file  any   supplement  or   post-effective   amendment  to  the
Registration  Statement with respect to the plan of distribution or the Holder's
ownership  interests in his, her or its  Registrable  Shares that is  reasonably
necessary to permit the sale of the Holder's  Registrable Shares pursuant to the
Registration  Statement.  Notwithstanding  anything herein to the contrary,  any
period  of time  during  which  any  Resale  Shelf  Registration  Statement  and
Prospectus  is not  available  for use by the  Holders  because of action  taken
pursuant to clause (ii) of the preceding  sentence shall not be considered  with
respect to the calculation of any other period of time referred to herein.

(e) Notice of Certain Events. The Company shall promptly and in any event within
three (3)  Business  Days notify the  Holders  of, and  confirm in writing,  any
request by the SEC for any amendment or supplement to, or additional information
in connection with, any Registration Statement required to be prepared and filed
hereunder (or Prospectus  relating  thereto).  The Company shall promptly and in
any event within  three (3) Business  Days notify each Holder of, and confirm in
writing, the filing of the Registration  Statement or any Prospectus,  amendment
or  supplement   related  thereto  or  any   post-effective   amendment  to  the
Registration Statement and the effectiveness of any post-effective amendment.

     (f) Stop Orders. During the period referred to in Section 2(b), the Company
shall use its  commercially  reasonable  efforts to avoid the issuance of, or if
issued,  to obtain the withdrawal of, any order  enjoining or suspending the use
or effectiveness of a Registration Statement or suspending the qualification (or
exemption from  qualification) of any of the Registrable  Shares for sale in any
jurisdiction, as promptly as practicable.

     (g)  Eligibility  for Form S-3,  SB-2 or S-1;  Conversion  to Form S-3. The
Company  represents and warrants that it meets the  requirements  for the use of
SEC Form S-3, SB-2 or S-1 for the registration of the sale by the Holders of the
Registrable  Shares. The Company agrees to file all reports required to be filed
by the  Company  with the SEC in a timely  manner  so as to remain  eligible  or
become eligible, as the case may be, and thereafter to maintain its eligibility,
for the use of Form S-3.  If the  Company is not  currently  eligible to use SEC
Form S-3,  not later than five (5) business  days after the Company  first meets
the  registration  eligibility and transaction  requirements for the use of Form
S-3 (or any  successor  form)  for  registration  of the  offer  and sale by the
Holders  of the  Registrable  Shares,  the  Company  shall  file a  Registration
Statement on Form S-3 (or such successor  form) with respect to the  Registrable
Shares covered by the Registration Statement on Form SB-2 or Form S-1, whichever
is  applicable,   filed  pursuant  to  this  Section  2  (and  include  in  such
Registration  Statement on Form S-3 the  information  required by Rule 429 under
the Securities Act) or convert the  Registration  Statement on Form SB-2 or Form
S-1,  whichever is  applicable,  filed  pursuant to this Section 2 to a Form S-3
pursuant  to Rule 429  under the  Securities  Act and  cause  such  Registration
Statement (or such amendment) to be declared effective no later than thirty (30)
days after filing.



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     (h) Underwriter. In the event Holders holding a majority-in-interest of the
Registrable  Shares  being  registered  determine  to engage the  services of an
underwriter,  the  Company  agrees  to enter  into  and  perform  the  Company's
obligations under an underwriting  agreement in the usual and customary form for
secondary  offerings at the time of execution,  including,  without  limitation,
indemnification  and contribution  obligations  customary for issuers,  and take
such other actions as are reasonably required in order to expedite or facilitate
the  disposition  of  the  Registrable   Shares  included  in  the  registration
statement.

     3. Suspension of Registration Requirement; Restriction on Sales.

     (a) As promptly as  practicable  after  becoming  aware of such event,  the
Company  shall notify each Holder of the  happening of any event (a  "Suspension
Event"), of which the Company has knowledge, as a result of which the prospectus
included in any Resale Shelf Registration Statement, as then in effect, includes
an untrue  statement  of a material  fact or omission  to state a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading,  and use its best  efforts  promptly  to  prepare  a  supplement  or
amendment to any  Registration  Statement  to correct  such untrue  statement or
omission,  and deliver such number of copies of such  supplement or amendment to
each Holder as such Holder may reasonably request; provided,  however, that, for
not more than fifteen (15) consecutive trading days (or a total of not more than
thirty (30) trading days in any twelve (12) month period), the Company may delay
the  disclosure of material  non-public  information  concerning the Company (as
well  as  prospectus  or  Resale  Shelf  Registration  Statement  updating)  the
disclosure  of which  at the  time is not,  in the  good  faith  opinion  of the
Company, in the best interests of the Company;  provided,  further, that, if the
Resale Shelf  Registration  Statement  was not filed on Form S-3, such number of
days shall not include the fifteen (15)  calendar  days  following the filing of
any Form 8-K, Form 10-QSB or Form 10-KSB, or other comparable form, for purposes
of filing a post-effective amendment to the Resale Shelf Registration Statement.

     (b) Upon a  Suspension  Event,  the Company  shall give  written  notice (a
"Suspension  Notice") to each Holder to suspend sales of the Registrable Shares,
and such notice shall state that such suspension shall continue only for so long
as the Suspension  Event or its effect is continuing and the Company is pursuing
with  reasonable  diligence  the  completion  of the matter  giving  rise to the
Suspension   Event  or  otherwise  taking  all  reasonable  steps  to  terminate
suspension of the effectiveness or use of the Registration  Statement within the
time  limits  contemplated  pursuant  to  Section  3(a).  In no event  shall the
Company,  without the prior written consent of a Holder,  disclose to the Holder
any of the facts or  circumstances  giving  rise to the  Suspension  Event.  The
Holder  shall not effect any sales of the  Registrable  Shares  pursuant to such
Registration  Statement  (or such  filings) at any time after it has  received a
Suspension  Notice  and prior to  receipt of an End of  Suspension  Notice.  The
Holder  may  resume  effecting  sales  of  the  Registrable   Shares  under  the
Registration Statement (or such filings) following further notice to such effect
(an "End of Suspension Notice") from the Company.  This End of Suspension Notice
shall be given by the  Company  to the  Holder  in the  manner  described  above
promptly following the conclusion of any Suspension Event and its effect.

     (c)  Notwithstanding  any provision herein to the contrary,  if the Company
gives a Suspension  Notice pursuant to this Section 3 with respect to the Resale
Shelf Registration  Statement,  the Company shall extend the period during which



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such Resale Shelf  Registration  Statement  shall be maintained  effective under
this  Agreement  by the number of days  during  the period  from the date of the
giving of the  Suspension  Notice to and  including  the date when Holders shall
have received the End of  Suspension  Notice and copies of the  supplemented  or
amended Prospectus necessary to resume sales; provided,  however, such period of
time  shall  not be  extended  beyond  the date  that the  Shares  are no longer
Registrable Shares.

     (d) If any Additional  Shares are issued or distributed to the Holder after
the later of (i) the effectiveness of the Resale Shelf Registration Statement or
(ii) the Effective Time, or such  Additional  Shares were otherwise not included
in  a  prior  Registration  Statement,   then  the  Company  shall  as  soon  as
practicable, at the option of the Company and subject to compliance with Section
2(b) with respect to the Holder of the Registrable  Shares with respect to which
such  Additional  Shares  are  issued,  either  (A)  file  an  additional  shelf
Registration Statement (including the Prospectus,  amendments and supplements to
such  Registration  Statement or Prospectus,  including pre- and  post-effective
amendments,  all exhibits thereto and all material  incorporated by reference or
deemed to be incorporated by reference,  if any, in such registration statement,
a "Subsequent Shelf Registration  Statement") covering such Additional Shares on
behalf of the  Holders  thereof  in the same  manner,  and  subject  to the same
provisions in this Agreement as the Resale Shelf  Registration  Statement or (B)
file a supplement to the Resale Shelf Registration  Statement to include therein
and cover such Additional Shares on behalf of the Holders.

     4.  Holder's  Obligations.  In  connection  with  the  registration  of the
Registrible Securities, each Holder shall have the following obligations:

     (a) It shall be a condition  precedent to the obligations of the Company to
complete  each  registration  pursuant  to this  Agreement  with  respect to the
Registrable  Shares that each Holder  shall have  furnished  to the Company such
information regarding itself, the Registrable Shares held by it and the intended
method  of  disposition  of  the  Registrable  Shares  held  by it as  shall  be
reasonably  required to effect the registration of such  Registrable  Shares and
shall execute such questionnaires  addressing these matters in connection with a
registration as the Company may reasonably  request.  At least five (5) Business
Days prior to the first  anticipated  filing date of any Registration  Statement
(and any other  amendments)  hereunder,  the Company shall notify each Holder of
the information the Company requires from each such Holder.

     (b) Each Holder agrees that,  upon receipt of any Suspension  Notice,  such
Holder will immediately  discontinue  disposition of Registrable Shares pursuant
to the  Registration  Statement  covering  such  Registrable  Shares  until such
Holder's  receipt of the End of  Suspension  Notice  and,  if so directed by the
Company,  such  Holder  shall  deliver  to the  Company  (at the  expense of the
Company) or destroy all copies in such Holder's  possession,  of the  prospectus
covering  such  Registrable  Shares  current  at  the  time  of  receipt  of the
Suspension Notice.

     (c)  In  the  event  Holder(s)  holding  a   majority-in-interest   of  the
Registrable  Shares  being  registered  determine  to engage the  services of an
underwriter,  each  Holder  agrees  to enter  into  and  perform  such  Holder's
obligations  under an  underwriting  agreement,  in usual and customary form for
secondary offerings,  at the time of execution,  including,  without limitation,



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indemnification  and  contribution  obligations  customary for selling  security
holders,  and take such other  actions as are  reasonably  required  in order to
expedite or facilitate the  disposition of the Registrable  Shares,  unless such
Holder has notified the Company in writing of such Holder's  election to exclude
all of such Holder's Registrable Shares from such Registration Statement.

     (d) No Holder may participate in any  underwritten  registration  hereunder
unless such Holder (i) agrees to sell such  Holder's  Registrable  Shares on the
basis provided in any underwriting  arrangements entered into by the Company, in
usual and customary form, (ii) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements,  and (iii) agrees to
pay its pro rata share of all  underwriting  discounts and  commissions  and any
expenses in excess of those payable by the Company pursuant to Section 8 below.

     5. Rule 144 Reporting and Other Covenants. The Company covenants and agrees
with each Holder, that:

          (a) Exchange Act  Filings.  For so long as a Holder holds  Registrable
     Shares and may not sell those shares  pursuant to Rule 144(k),  the Company
     agrees:

               (i) to make and keep public information available, as those terms
          are understood and defined in Rule 144(c);

               (ii) to use its commercially  reasonable efforts to file with the
          SEC in a timely manner all reports and other documents  required to be
          filed by the Company under the Exchange Act so long as the Company has
          a class of securities  outstanding  that is  registered  under Section
          12(b) or 12(g) of the Exchange Act and the filing of reports and other
          documents is required for the provisions of Rule 144 applicable to the
          Holder's sale of the Shares; and

               (iii) to furnish to any Holder  promptly  upon  request a written
          statement by the Company as to its compliance in all material respects
          with the reporting  requirements  of Rule 144 and of the Exchange Act,
          furnish  or make  available  to any  Holder a copy of the most  recent
          annual or quarterly report of the Company,  and such other reports and
          documents of the Company,  and take such  reasonable  further  actions
          consistent with this Section 5, as a Holder may reasonably  request in
          availing itself of any rule or regulation of the SEC allowing a Holder
          to  sell  any  such   Registrable   Shares   under  Rule  144  without
          registration.

          (b) Other Financial Information.  If at any time after the date hereof
     the  Company is not subject to the  requirements  of Section 13 or 15(d) of
     the Exchange Act and the Holder holds Registrable Shares, the Company shall
     provide or cause to be provided to the Holder all of the following, in form
     and detail satisfactory to the Holder:

               (i) not later than 90 days after and as of the end of each fiscal
          year,  an audited  financial  statement of the Company,  audited by an
          independent  accounting firm, to include  consolidated  balance sheets
          and  consolidated  statements  of income,  retained  earnings and cash



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          flow, in accordance  with generally  accepted  accounting  principles,
          together with an opinion of such auditors on the financial statements;

               (ii)  not  later  than  45 days  after  and as of the end of each
          calendar quarter,  a financial  statement of the Company,  prepared by
          the Company, to include  consolidated  balance sheets and consolidated
          statements of income,  retained  earnings and cash flow, in accordance
          with generally accepted accounting  principles,  certified by a senior
          financial officer; and

               (iii) from time to time such other  information as the holder may
          reasonably request.

          (c)  Transactions  with  Affiliates.  For so  long as the  Warrant  is
     outstanding,  the  Company  shall  not,  and  shall not  permit  any of its
     Subsidiaries  to,  (i)  enter  into  any  transaction,   including  without
     limitation,  any  purchase,  sale,  lease or  exchange  of  property or the
     rendering of any  service,  with any  Affiliate of the Company  unless such
     transactions  are in the  ordinary  course of its business or are upon fair
     and reasonable  terms no less favorable to it than the Company would obtain
     in a comparable arm's-length transaction with a person not an Affiliate, or
     (ii) other than issuances  pursuant to the Plan,  issue, or agree to issue,
     any shares of capital  stock  (including  rights or warrants  with  respect
     thereto) or stock appreciation  rights,  stock benefit plans, phantom stock
     rights or plans or any similar plans or rights or other rights  measured by
     earnings,  profits,  or revenues of the Company or its  Subsidiaries to any
     Affiliate  including   shareholders,   directors  and  officers  and  their
     respective Affiliates, unless such transaction is fair to the Company. If a
     transaction  referred to in subsection  (i) or (ii) hereof is approved by a
     majority of  Independent  Directors  (for example,  if the Company has four
     directors - two of whom are Independent Directors and two of whom are not -
     and a transaction is approved by a majority of the directors including both
     Independent Directors,  that approval constitutes a majority of Independent
     Directors),   that  approval  shall  be  presumptive   evidence  that  such
     transaction  complies with the provisions of this Section.  As used herein,
     an  Independent  Director  shall  mean  any  director  who does not have an
     economic  interest in the  proposed  transaction  and who is not related by
     blood or  marriage  to any person  who has an  economic  interest.  As used
     herein,  "Affiliate" means any person  controlled by,  controlling or under
     common control with another person;  provided  however,  the Holder and its
     direct and indirect wholly-owned subsidiaries and the Persons that directly
     or indirectly own the Holder shall not be deemed Affiliates of the Company.

          (d) Restrictions on Dividend  Payments.  For so long as the Warrant is
     outstanding,  the Company shall not pay any  dividends  with respect to its
     Common Stock (other than  dividends  payable in shares of its Common Stock)
     out of its surplus or otherwise  or return any capital to its  stockholders
     as such or authorize or make any other distribution, payment or delivery of
     property or cash to its holders of Common Stock as such, or redeem, retire,
     purchase or otherwise acquire, directly or indirectly,  for a consideration
     (otherwise than in exchange for, or from the proceeds of the  substantially
     concurrent  sale of, other  shares of capital  stock of the  Company),  any
     shares of any class of its Common Stock now or hereafter outstanding.

     6.  State  Securities  Laws.  Subject to the  conditions  set forth in this
Agreement,  the Company shall, in connection with the filing of any Registration
Statement  hereunder,  file such  documents  as may be  necessary to register or
qualify the Registrable Shares under the securities or "blue



                                       9
<PAGE>

sky" laws of such  states as the Holders may  reasonably  request in  connection
with the offer and sale of Registrable  Shares pursuant to the intended  methods
of  disposition  by the  Holders  as set  forth in the  applicable  Registration
Statement,  and the Company  shall use its  commercially  reasonable  efforts to
cause such filings to become  effective in a timely manner;  provided,  however,
that the Company shall not be required in connection therewith or as a condition
thereto to (a)  qualify to do business  in any  jurisdiction  where it would not
otherwise be required to qualify but for this  Section 6, (b) subject  itself to
general taxation in any such jurisdiction, (c) file a general consent to service
of process in any such jurisdiction (other than customary consents to service of
process   filed  with  state   securities   administrators),   (d)  provide  any
undertakings  that are not customary in similar  registrations of securities and
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws,  which in each case the Board of Directors of the Company  determines
to be contrary to the best interests of the Company and its  shareholders.  Once
effective,  the Company shall use its  commercially  reasonable  efforts to keep
such  filings  effective  until  the  earlier  of (x)  such  time  as all of the
Registrable  Shares so registered  have been disposed of in accordance  with the
intended  methods of  disposition  by the Holders as set forth in the applicable
Registration  Statement,  (y) in the case of a particular  state, the applicable
Holders  have  notified  the Company  that they no longer  require an  effective
filing in such state in accordance with their original request for filing or (z)
the date on which the applicable Registration Statement ceases to be effective.

     7. Listing.  The Company's Common Stock is not currently listed for trading
on any  national  exchanges  or markets,  but trades are  reported on the OTCBB.
Should  the  Common  Stock be  listed or  otherwise  eligible  for full  trading
privileges on the New York Stock  Exchange or the NASDAQ Global Market or NASDAQ
Capital Market,  the Company shall,  not later than ten (10) Business Days after
the date on which  the  Registrable  Shares  are  issued by the  Company  to the
Holder,  cause the Registrable Shares to be listed for trading. The Company will
use its  commercially  reasonable  efforts to  continue  the  listing or trading
privilege for all Registrable  Shares on any such exchange or market for so long
as such  listing or trading  privileges  are  generally  available to the Common
Stock.  The Company  will as promptly as  practicable  notify the Holder of, and
confirm in  writing,  the  delisting  of the Common  Stock by such  exchange  or
market.

     8. Expenses.  The Company shall bear all Registration  Expenses incurred in
connection  with the  registration  of the  Registrable  Shares pursuant to this
Agreement and the Company's performance of its other obligations under the terms
of this Agreement.  The Holder shall bear all  underwriting  fees,  discounts or
commissions  attributable to the sale of securities by the Holder,  or any legal
fees and expenses of counsel to the Holder  (except those  expenses  included in
Registration  Expenses and as otherwise  specifically  provided  herein) and all
other expenses  incurred by the Holder in connection with the performance by the
Holder of its obligations,  and exercise of its rights,  under the terms of this
Agreement.

     9.  Indemnification  by the Company.  The Company  agrees to indemnify  the
Holder  and, if a Holder is a Person  other than an  individual,  such  Holder's
officers, directors, employees, agents, representatives and Affiliates, and each
Person, if any, that controls a Holder within the meaning of the Securities Act,
and each other Person,  if any, subject to liability  because of his, her or its
connection  with a Holder (each, an  "Indemnitee"),  against any and all losses,
claims,  damages,  actions,  liabilities,  costs and expenses (including without
limitation  reasonable fees,  expenses and  disbursements of attorneys and other



                                       10
<PAGE>

professionals),  joint or several, arising out of or based upon any violation by
the  Company of any rule or  regulation  promulgated  under the  Securities  Act
applicable  to the  Company and  relating to action or inaction  required of the
Company under the terms of this Agreement or in connection with any Registration
Statement  or  Prospectus,  or upon any untrue or alleged  untrue  statement  of
material fact contained in any Registration Statement or any Prospectus,  or any
omission or alleged  omission to state  therein a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances  under which they were made, not  misleading;  provided,  however,
that the  Company  shall not be  liable to such  Indemnitee  or any  Person  who
participates as an underwriter in the offering or sale of Registrable  Shares or
any other Person,  if any, who controls such  underwriter  within the meaning of
the  Securities  Act, in any such case to the extent that any such loss,  claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue  statement  or  alleged  untrue  statement  or
omission or alleged omission (a) made in such  Registration  Statement or in any
such  Prospectus in reliance upon and in conformity with  information  regarding
such  Indemnitee or its plan of  distribution  or ownership  interests which was
furnished  in writing to the Company  pursuant to an investor  questionnaire  or
otherwise  expressly for use in connection with such  Registration  Statement or
the Prospectus contained therein by such Indemnitee; (b) made in any preliminary
prospectus  if the  Holder  failed to deliver  or make  available  a copy of the
Prospectus with or prior to delivery of written  confirmation of the sale by the
Holder to the party asserting the claim and such Prospectus would have corrected
such untrue statement or admission;  or (c) made in any Prospectus if any untrue
statement or omission  was  corrected  in an  amendment  or  supplement  to such
Prospectus  delivered to the Holder prior to the sale of Registrable  Shares and
the Holder  failed to deliver or make  available  such  amendment or  supplement
prior to or  concurrently  with  the sale of  Registrable  Shares  to the  party
asserting  the claim.  The  indemnity  provided  for herein shall remain in full
force and effect  regardless  of any  investigation  made by or on behalf of any
Indemnitee.

     10. Covenants of Holder. The Holder hereby agrees (a) to cooperate with the
Company and to furnish to the Company all such information  (including customary
investor  questionnaires)  concerning  its plan of  distribution  and  ownership
interests  with  respect  to its  Registrable  Shares  in  connection  with  the
preparation  of  each  Registration  Statement  with  respect  to  the  Holder's
Registrable Shares and any filings with any state securities  commissions as the
Company may  reasonably  request,  (b) to indemnify  the Company,  its officers,
directors,  employees, agents,  representatives and Affiliates, and each Person,
if any, who controls the Company within the meaning of the  Securities  Act, and
each other  Person,  if any,  subject to  liability  because of his,  her or its
connection  with the  Company,  against  any and all  losses,  claims,  damages,
actions,   liabilities,   costs  and  expenses   (including  without  limitation
reasonable   fees,   expenses  and   disbursements   of   attorneys   and  other
professionals),  joint  or  several,  arising  out of or based  upon any  untrue
statement or alleged  untrue  statement of material  fact  contained in any such
Registration  Statement or the Prospectus  contained therein, or any omission or
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which  they were  made,  not  misleading,  if and only to the  extent  that such
statement or omission  occurs from reliance upon and in conformity  with written
information  regarding the Holder,  his, her or its plan of distribution or his,
her or its ownership interests,  that was furnished to the Company in writing by
the Holder pursuant to an investor  questionnaire or otherwise expressly for use



                                       11
<PAGE>

therein  unless such  statement  or  omission  was  corrected  in writing to the
Company prior to the date one day prior to the date of the final  Prospectus (as
supplemented or amended, as the case may be).

     11.  Indemnification  Procedures.  Any Person  entitled to  indemnification
under this Agreement shall notify promptly the indemnifying  party in writing of
the  commencement  of any action or proceeding with respect to which a claim for
indemnification may be made hereunder,  but the failure of any indemnified party
to  provide  such  notice  shall  not  relieve  the  indemnifying  party  of its
obligations hereunder, except to the extent the indemnifying party is materially
prejudiced  thereby  and shall  not  relieve  the  indemnifying  party  from any
liability which it may have to any  indemnified  party otherwise than hereunder.
In case any action or proceeding is brought against an indemnified  party and it
shall  notify  the  indemnifying   party  of  the  commencement   thereof,   the
indemnifying  party shall be entitled to participate  therein and, unless in the
reasonable  opinion of outside  counsel to the  indemnified  party a conflict of
interest between such indemnified and indemnifying  parties may exist in respect
of such claim,  to assume the defense  thereof  (alone or jointly with any other
indemnifying  party  similarly  notified),  to the extent that it chooses,  with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying  party to such indemnified  party that it so chooses  (provided
that in connection  with such  assumption the  indemnifying  parties provide the
indemnified  parties a full release of any costs or other expenses in connection
therewith), the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses  subsequently incurred by such indemnified party
in  connection  with the defense  thereof;  provided,  however,  that (a) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the action or proceeding within twenty (20) Business Days after receiving notice
from such indemnified party that the indemnified party believes it has failed to
do so; or (b) if such  indemnified  party who is a  defendant  in any  action or
proceeding  that is also  brought  against  the  indemnifying  party  shall have
reasonably  concluded,  based on the advice of counsel, that there may be one or
more legal defenses  available to such indemnified party which are not available
to the indemnifying  party; or (c) if representation of both parties by the same
counsel is otherwise  inappropriate  under applicable  standards of professional
conduct,  then, in any such case, the indemnified  party shall have the right to
assume or continue its own defense as set forth above (but with no more than one
firm of  counsel  for all  indemnified  parties  in each  jurisdiction)  and the
indemnifying  party shall be liable for any expenses  therefor.  No indemnifying
party shall,  without the written consent of the indemnified  party (which shall
not be  unreasonably  withheld),  effect the  settlement  or  compromise  of, or
consent to the entry of any  judgment  with  respect  to, any pending or (to the
knowledge of the indemnifying  party)  threatened  action or claim in respect of
which  indemnification  or contribution may be sought hereunder  (whether or not
the  indemnified  party is an actual or potential party to such action or claim)
unless such  settlement,  compromise  or judgment (x) includes an  unconditional
release of the indemnified  party from all liability  arising out of such action
or claim,  (y) does not  include a  statement  as to or an  admission  of fault,
culpability  or a failure to act, by or on behalf of any  indemnified  party and
(z) does not and is not likely to materially  adversely  affect the  indemnified
party.

     12. Limitations on Subsequent  Registration Rights. From and after the date
of this Agreement,  the Company shall not,  without the prior written consent of
the Holder enter into any agreement with any holder or prospective holder of any
securities of the Company that would allow such holder or prospective  holder to
include  such  securities  in the  Resale  Shelf  Registration  Statement  filed
pursuant to the terms  hereof,  unless under the terms of such  agreement,  such



                                       12
<PAGE>

holder  or  prospective   holder  may  include  such   securities  in  any  such
registration  only to the extent that the inclusion of his  securities  will not
reduce the amount of Registrable Shares of the Holders that is included.

     13. Contribution.

          (a) If the indemnification  provided for in Section 9 or Section 10 is
     unavailable  to an  indemnified  party with respect to any losses,  claims,
     damages, actions, liabilities,  costs or expenses referred to therein or is
     insufficient  to  hold  the  indemnified  party  harmless  as  contemplated
     therein,  then  the  indemnifying  party,  in  lieu  of  indemnifying  such
     indemnified  party,  shall contribute to the amount paid or payable by such
     indemnified  party as a result of such losses,  claims,  damages,  actions,
     liabilities,  costs or expenses in such  proportion  as is  appropriate  to
     reflect the relative fault of the indemnifying  party, on the one hand, and
     the indemnified party, on the other hand, in connection with the statements
     or omissions  which  resulted in such  losses,  claims,  damages,  actions,
     liabilities,  costs or  expenses  as well as any other  relevant  equitable
     considerations.  The relative fault of the  indemnifying  party, on the one
     hand, and of the indemnified  party, on the other hand, shall be determined
     by reference to, among other factors,  whether the untrue or alleged untrue
     statement of a material  fact or omission to state a material  fact relates
     to information  supplied by the  indemnifying  party or by the  indemnified
     party and the parties'  relative intent,  knowledge,  access to information
     and opportunity to correct or prevent such statement or omission; provided,
     however, that in no event shall the obligation of any indemnifying party to
     contribute  under this Section 13 exceed the amount that such  indemnifying
     party would have been  obligated  to pay by way of  indemnification  if the
     indemnification  provided for under Section 9 or Section 10 hereof had been
     available under the circumstances.

          (b) The Company  and the  Holders  agree that it would not be just and
     equitable if  contribution  pursuant to this Section 13 were  determined by
     pro rata allocation or by any other method of allocation that does not take
     account of the  equitable  considerations  referred  to in the  immediately
     preceding paragraph.

          (c)  Notwithstanding  the  provisions  of this  Section 13, the Holder
     shall not be required to  contribute  any amount in excess of the amount by
     which the gross  proceeds from the sale of  Registrable  Shares exceeds the
     amount of any damages that the Holder has otherwise been required to pay by
     reason  of  such  untrue  or  alleged  untrue  statement  or  omission.  No
     indemnified party that has made a fraudulent  misrepresentation (within the
     meaning of  Section  11(f) of the  Securities  Act)  shall be  entitled  to
     contribution  from  any  indemnifying  party  who  was not  guilty  of such
     fraudulent misrepresentation.

     14.  Amendments  and Waivers.  The  provisions of this Agreement may not be
amended,  modified,  or supplemented or waived without the prior written consent
of the Company and the Holders.

     15.  Notices.  Any notice  required  or  permitted  to be given under or in
connection with this Agreement or any of the other Loan Documents (except as may
otherwise be expressly required therein) shall be in writing and shall be mailed
by certified mail, return receipt requested,  postage prepaid, or sent by telex,
telegram, telecopy, facsimile, electronically by e-mail or other similar form of
rapid  transmission  confirmed by mailing (by  certified  mail,  return  receipt



                                       13
<PAGE>

requested,  postage prepaid) written confirmation at substantially the same time
as such  rapid  transmission,  or  personally  delivered  to an  officer  of the
receiving party. All such communications shall be mailed, sent, delivered, faxed
or e-mailed,

                  (a) if to the Company to:

                                            Cubic Energy, Inc.
                                            9870 Plano Road
                                            Dallas, Texas 75238
                                            Attn: James L. Busby
                                            Telephone: (972) 681-8047
                                            Fax: (972) 681-9687
                                            e-mail: jay@cubicenergyinc.com

or to such other address or to such  individual's or  department's  attention as
the Borrower may have furnished the Lender in writing; and

                  (b) if to the Holder to:

                                            Wells Fargo Energy Capital, Inc.
                                            1000 Louisiana
                                            9th Floor
                                            MAC T5002-090
                                            Houston, Texas 77002
                                            Attn: Gary Milavec
                                            Telephone: (713) 319-1612
                                            Fax:  (713) 652-5874
                                            e-mail:  milavega@wellsfargo.com



or to such other address or to such  individual's or  department's  attention as
the Lender may have furnished the Borrower in writing.

     16. Successors and Assigns; Third Party Beneficiaries. Neither the Company,
or Holder  shall be  entitled to assign any of its rights or  obligations  under
this Agreement without, in the case of the Company, the consent of a majority of
the aggregate  number of the outstanding  Registrable  Shares or, in the case of
the Holder,  upon the prior written  consent of the Company  (which  consent the
Company may withhold in its sole discretion);  provided, however, the Holder may
assign its rights hereunder pro rata to any subsequent transferee of Registrable
Shares.  This  Agreement  shall inure to the benefit of and be binding  upon the
successors  and permitted  assigns of each of the parties hereto and shall inure
to  the  benefit  of  each  Holder.   The   Indemnities   shall  be  third-party
beneficiaries of Section 9, Section 10, Section 11, Section 12 and Section 13 of
this  Agreement,  but no other  Person not a party  hereto shall have any rights
under this Agreement.

     17.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts and by the parties hereto in separate  counterparts,  each of which



                                       14
<PAGE>

when so  executed  shall be  deemed  to be an  original  and all of which  taken
together shall constitute one and the same agreement.

     18.  Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the laws of the State of Texas  applicable to contracts made and
to be performed wholly within said State.

     19.  Severability.  In the  event  that  any one or more of the  provisions
contained  herein,  or the  application  thereof in any  circumstances,  is held
invalid,  illegal or unenforceable in any respect for any reason,  the validity,
legality and  enforceability of any such provision in every other respect and of
the  remaining  provisions  contained  herein  shall not be in any way  impaired
thereby,  it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.

     20. Entire Agreement.  This Agreement is intended by the parties as a final
expression  of their  agreement  and intended to be the  complete and  exclusive
statement of the agreement and understanding of the parties hereto in respect of
the  subject  matter  contained  herein.  There are no  restrictions,  promises,
warranties  or  undertakings,  other than those set forth or referred to herein,
with  respect  to such  subject  matter.  This  Agreement  supersedes  all prior
agreements and  understandings  between the parties with respect to such subject
matter.

     21.  Survival.  The  indemnification  and  contribution  obligations  under
Section 9, Section 10 and Section 13 shall survive the completion or termination
of the Company's obligations under Section 2.









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                                       15
<PAGE>




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

                                                CUBIC ENERGY, INC.

                                                By:/s/ Calvin A. Wallen III
                                                Name: Calvin A. Wallen III
                                                Title: President

                                                WELLS FARGO ENERGY CAPITAL, INC.

                                                By:/s/ Gary Milavec
                                                Name: Gary Milavec
                                                Title: Senior Vice President







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<PAGE>