Exhibit 10.3


    
      

    

    DRAGON
      ENERGY
      CORPORATION

    650
      POYDRAS
      STREET,
      SUITE
      2828

    NEW
      ORLEANS,
      LOUISIANA
      70130-6155

    


    
      	
              FAX

            	 	
              TELEPHONE

            
	
              (504)
                586-0017

            	 	
              (504)
                586-1717

            


    

    


    September
      30, 2005

     

     

    Argyle
      Energy, Inc.

    10777
      Westheimer, Suite 170

    Houston,
      Texas 77042

    


    Attention:   
       Mr. Harry J. Peters

    


    
      	 	
              Re:

            	
              Side
                Letter to First Amendment of Farmout
                Agreement

            


    

    
      	 	 	
              Barnett
                Crossroads Prospect (Prospect No.
                20)

            


    

    
      	 	 	
              Escambia
                County

            


    

                                                           
      A L A B A M
      A                                                                                                                   


    


    Gentlemen:

    


    The
      First
Amendment
      of Farmout Agreement dated September 30, 2005 ("Amendment") between DRAGON
      ENERGY CORPORATION ("Dragon")
      and ARGYLE
      ENERGY, INC. ("Argyle"),
      executed concurrently with this Side Letter to First Amendment of Farmout
      Agreement ("Side Letter") provides for an extension of the Test Well
      commencement date. The Amendment is subject to and contingent upon the following
      additional terms and consideration:

    


    
      	
            	
              1.

            	
              Notwithstanding
                anything in the Farmout Agreement or the Amendment to the contrary,
                Dragon
                is hereby appointed operator of the Test Well and Operator under
                the
                Operating Agreement unless and until Dragon, at its sole discretion,
                elects to resign. Dragon will make a good faith effort to perform
                the
                pre-drilling functions of Operator as
                follows:

            


    

    


    
      	 	
              a.

            	
              Renew
                the Bobbie G. Bonner, et ux lease, the Amyrillis E. Davis lease and
                the
                Cecil E. Ellis, et ux lease, all dated January 26, 2004, and recited
                on
                Exhibit "A" to the Farmout Agreement, for a one year primary term
                (which
                leases have already been renewed), and pay all applicable delay rentals
                for all of the remaining leases listed on the Exhibit "A" to the
                Farmout
                Agreement up to March 31, 2006.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      Argyle
        Energy, Inc.

      Attention:
        Mr. Harry Peters

      September
        30, 2005

      Page
        2

    

    
       

    

    
      	 	
              b.

            	
              Form,
                or cause to be formed, a 160 acre drilling unit covering the SW/4
                of the
                SW/4 of Section 17, the SE/4 of the SE/4 of Section 18, the NE/4
                of the
                NE/4 of Section 19, and the NW/4 of the NW/4 of Section 20, Township
                3
                North, Range 8 East, Escambia County, Alabama, or, alternatively,
                a
                suitable 240 acre drilling unit covering the prospective
                reservoir.

            


    

    


    
      	 	
              c.

            	
              Obtain
                supplemental abstracts; mineral title opinions, supplemental title
                opinions, and perform necessary title curative work covering the
                240 acres
                subject to the Leases.

            


    

    


    
      	 	
              d.

            	
              Obtain
                appropriate surface leases and surface damage releases for the Test
                Well.

            


    

    


    
      	 	
              e.

            	
              Obtain
                all required governmental and environmental permits for drilling
                the Test
                Well.

            


    

    


    
      	 	
              f.

            	
              Prepare
                an AFE for drilling of the Test
                Well

            


    

    


    
      	 	
              g.

            	
              Make
                arrangements to secure a drilling rig and negotiate a drilling rig
                contract. Argyle shall advance any necessary deposit and be responsible
                for any penalties which may be incurred as a result of cancellation
                of the
                rig contract.

            


    

     

    
      	
            	
              2.

            	
              In
                consideration for the Amendment and the services of Dragon described
                herein, Argyle has advanced the sum of Thirty Thousand and 00/100
                Dollars
                ($30,000.00) in cash to Dragon as a deposit for the cost of lease
                renewals
                and delay rentals described above, and agrees to pay Dragon the sum
                of
                $10,000 per month plus third party costs for management services.
                In
                addition, Argyle agrees to advance to Dragon 100% of all other estimated
                pre-spud costs, by wire transfer, within fifteen (15) days of Argyle's
                receipt of a written AFE and invoice. Dragon will account to Argyle
                for
                expenditure of these advances.

            


    

    


    
      	
            	
              3.

            	
              In
                the event that Dragon elects to operate the drilling of the Test
                Well,
                Argyle shall wire transfer dry hole costs as required for drilling
                the
                Test Well on or before March 31,
                2006.

            


    

    


    
      	
            	
              4.

            	
              This
                Side Letter may be extended by mutual consent of the parties, provided
                that Argyle has fully funded, as required, the drilling of the Test
                Well
                prior to March 31, 2006.

            


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

      Argyle
        Energy, Inc.

      Attention:
        Mr. Harry Peters

      September
        30, 2005

      Page
        3

    

    
       

      Please
        indicate your acceptance of this Side Letter by dating, signing and thereafter
        returning to the undersigned the enclosed duplicate copy. The remaining
        counterpart should be retained far your files. If this SIDE
        LETTER TO FIRST AMENDMENT OF FARMOUT AGREEMENT is circulated
        and executed by facsimile transmission, the signatures of the Dragon and
        Argyle
        shall be considered as
        original
        and self-proving for all purposes under the law. This Side Letter may be
        executed in
        multiple
        counterparts, each of which shall be deemed to be an original, binding, and
        enforceable document, all of which shall constitute one and the same
        instrument.

    

     

    
      	 	 	
              Very
                truly yours,

            
	 	 	 
	 	 	
              DRAGON
                ENERGY CORPORATION

            
	 	 	 
	 	 	 
	 	
              By: 
                

            	
              /s/
                McLain J. Forman

            
	 	 	
              McLAIN
                J. FORMAN

            
	 	 	
              PRESIDENT

            


    

    


    
      	
              MJF:rs

            	 
	
              Attachment

            	 
	 	 
	
              AGREED
                TO AND ACCEPTED

            	 
	
              THIS
                30TH DAY OF SEPTEMBER 2005.

            	 


    

    


    
      	 	
              ARGYLE
                ENERGY, INC.

            	 
	 	 	 
	 	 	 
	
              BY: 
                

            	
              /s/
                Harry J. Peters

            	 
	 	
              HARRY
                J. PETERS

            	 
	 	
              SENIOR
                VICE-PRESIDENT