10-KSB 12/31/03                   Exhibit 10.5            Arete Industries, Inc.

                             JOINT VENTURE AGREEMENT
                             -----------------------
                         24 Well Texas Re-Entry Project
                         ------------------------------

     This Agreement is entered into by the Parties named below in their personal
and  representative  capacities,  effective February 27, 2004 for the purpose of
setting forth the  respective  obligations  and rights of the Parties in a joint
venture  to  re-enter  and  develop  up to twenty  four (24) oil and gas  leases
located in Lavaca and DeWitt  Counties,  Texas,  brought forward by promoter and
operator,  Clear Fork Energy, LLC. (hereinafter the "24 Well Project" and/or the
"Joint  Venture".) This Agreement shall stand as the understanding and agreement
among  the  Parties  to form and  finance  four (4)  limited  liability  limited
partnerships  (LLLP's) to pursue re-entry and development of 6 wells each out of
the 24 wells proposed for the 24 Well Project.

                                 I. THE PARTIES

A.   Arete  Industries,  Inc. (Arete) is a publicly held,  Colorado  corporation
     involved in organization and  capitalization of traditional and alternative
     and renewable  energy  ventures,  and has engaged with the other Parties to
     this  Agreement  to  provide  general  management,  direction  and  capital
     formation  support for the Joint Venture through a wholly owned  subsidiary
     to be  formed to  perform  as  corporate  general  partner  for each of the
     contemplated  limited liability  limited  partnerships in consideration for
     the  ownership   interest,   compensation  and  reimbursement  of  expenses
     described herein.

B.   James Black  (Black) of West Palm Beach,  Fl., has  organized the principal
     Parties to this  Agreement  by  introducing  Parties  that will  contribute
     contracts  providing  the Joint  Venture  with  access to the Leases and to
     capital through referrals to investors, investment bankers and professional
     services  including  legal and  accounting  support  for  organization  and
     financing the Project,  and desires to engage with the other Parties in the
     24 Well Project directly or through a nominee  corporate  entity,  entitled
     Knight  Group,  Inc.  to act as a Special  Limited  Partner  in each of the
     LLLC's formed pursuant to this Joint Venture.

C.   Brian  Herrtage  of London,  England,  has  provided  and will  continue to
     provide referrals of prospective investors,  investment bankers,  attorneys
     and other support professionals to the Joint Venture, and desires to engage
     with the other Parties in the 24 Well Project directly or through a nominee
     corporate  entity,  the details of which will be submitted at a later date,
     to act as a Special  Limited  Partner in each of the LLLC's formed pursuant
     to this Joint Venture.

D.   Ron Van Hooser,  (Van Hooser) of Plano,  Texas,  will provide access to the
     Leases for the 24 Well Project  through his contact and  contract  with the
     Operator, Clear Fork Energy, LLC and its principals, J. O. Monica and Scott
     D. Tatum  (hereafter,  CFE, Monica and Tatum,  respectively) and desires to
     engage with the other Parties in the 24 Well Project  directly or through a
     nominee corporate entity, entitled North Energy Corporation, Inc. to act as
     a Special  Limited  Partner in each of the LLLC's  formed  pursuant to this
     Joint Venture.

E.   Thomas P. Raabe (Raabe) of Niwot,  Colorado, has served as organizer of the
     Project on behalf of the Parties,  also serves as CEO of Arete  Industries,
     Inc., and has brought the 24 Well Project to Arete for its participation in
     the Joint Venture as corporate  General Partner for each of the four LLLP's
     and will act  individually  to act as a Special  Limited Partner in each of
     the LLLC's formed  pursuant to this Joint Venture and as Managing  Director
     of the  proposed  General  Partner  of each  LLLC on  behalf  of the  Joint
     Venture.

F.   Robert P.  Selden,  (Selden)  of  Beverly  Hills,  California,  serves as a
     consultant to Arete, and has introduced the other Parties to each other and
     desires to act as a Special  Limited  Partner in each of the LLLC's  formed
     pursuant to this Joint Venture.

G.   Arete Energy  Development  Group, Inc.  (hereinafter  referred to as "Arete
     Energy" or the "General  Partner") is to be incorporated  upon execution of
     this Agreement as a "C" Corporation,  formed and initially  capitalized and
     wholly owned by Arete to serve as the corporate  general partner of each of
     the LLLC's formed under the terms hereof.

          II. RECITATIONS, GENERAL TERMS AND AGREEMENTS OF THE PARTIES

A.   NEC has an agreement with CFE which,  in turn,  controls  leasing rights to
     develop 24 oil and gas leases in Lavaca and DeWitt Counties and has engaged
     with Black and  Herrtage  for  funding of the 24 Well  Project.  Selden has
     introduced  Raabe and Arete to Black and  Herrtage and Raabe has set up the
     structure  for funding of the 24 Well Project  through  private  placements
     conducted by a corporate  entity,  serving as the corporate general partner
     of four  separate  LLLP's of $5 Million USD each,  to develop six of the 24
     Leases in each LLLP. The Parties  desire to jointly  pursue  development of
     the 24 Well  Project  and to set  forth the  terms  and  conditions  of the
     funding,  structure  and  operation  of the 24 Well Project and each of the
     four LLLP's that will be employed to finance the 24 Well Project.

                          Please sign below your name.

Thomas P. Raabe      Ron Van Hooser      Robert Selden      James Black
-------------------  ------------------  -----------------  ----------------
/s/ Thomas P. Raabe  /s/ Ron Van Hooser  /s/ Robert Selden  /s/ James Black
-------------------  ------------------  -----------------  ----------------

 Brian Herrtage
 ------------------
 /s/ Brian Herrtage
 ------------------

                                        1
<PAGE>


B.   The Parties agree to act jointly through four individual  LLLP's in which a
     private  offering  will be  conducted in the amount of $5 Million USD each,
     and to act  individually  or  corporately  in their  capacities  of special
     expertise as Special  Limited  Partner,  and Arete Energy as the  corporate
     General  Partner for each of the LLLP's,  and as sponsor of each $5 Million
     private placement of LLLP, Limited Liability Partner Interests.

C.   The Parties have agreed to terms with CFE that CFE shall earn a 50% Working
     Interest  (WI)  (of a 75% Net  Revenue  Interest  (NRI))  in  each  well as
     operator  which begins as a 25% WI in each well until the specific  LLLP is
     paid $500,000 from its 75% WI in each well and  thereafter CFE and the LLLP
     will  each earn a 50% WI.  Depending  on the  percentage  of WI paid to the
     LLLP,  that is either 75% or 50% as  determined  by the  operator's  payout
     formula per the previous sentence,  the LLLP's Working Interest will pay an
     estimated  Lease  Operating  Expense (LOE) of 2.25% (for 75%WI or 1.5% (for
     50%WI) of Total  Revenue  from  Production  of each  Well.  The LOE will be
     shared pro-rata among the entire Partnership Interests of each LLLP.

D.   The  Parties  have  agreed  that the  LLLP's  50% WI will be split  equally
     between the General Partner and the LLLP Limited Partner  Interests on each
     well after the LLLP Limited  Partnership  Interests  have  received 100% of
     their total  investment  in that LLLP from  Partnership  Revenue.  Prior to
     payout to the LLLP Limited  Partner  Interests'  original  investment,  the
     Parties have agreed that the LLLP Limited Partner  Interests will be paid a
     50% WI, (of the 75% NRI) and the General  Partner will retain any remainder
     over and above the 50% WI. After  payout of 100% of the initial  investment
     of the LLLP Limited Partner Interests,  the General Partner "backs-in" to a
     25% WI.

E.   The Parties have agreed that of the General Partner Interest earned in each
     of the LLLP's,  net of the General  Partner's direct expenses and overhead,
     that Arete Energy will receive a carried  interest  equal to 10% of the net
     revenue and the five other Special Limited Partners will divide the balance
     equally between them, or a carried interest of 20% of the balance each. The
     Parties have projected that the General  Partner's  overhead  expenses on a
     monthly basis for the entire 24 Well Project or all four LLLP's together is
     $26,000 per month and that amount will be divided equally between each LLLP
     that is formed,  funded and commences  production,  and will be paid to the
     General  Partner out of first revenues from oil and gas production  paid to
     the  General   Partnership   Interest   of  each  such  LLLP,   before  any
     distributions  of income to the General  Partner  and the  Special  Limited
     Partners as described above. This provision has the effect that the $26,000
     overhead  charge  will be  charged  and  paid in  full on a  monthly  basis
     regardless  of  whether  1,  2,  3 or  4  LLLP's  are  formed  and  funded.
     Additionally,  during the first months in which  re-working  operations are
     begun but before revenue to the particular LLLP has been established and/or
     paid from  sales of  production,  the  pro-rata  overhead  charge  owed the
     General Partner will be paid out of the Reserve Proceeds,  described in the
     next paragraph,  to ensure that the General  Partner has operating  capital
     from the first date of  operations  after the  funding  has closed for each
     LLLP.

F.   The Parties  have agreed that the 24 Well  Program  will be funded  through
     private placements of a total of $20 Million through four LLLP's to develop
     six (6) wells each,  offering units of Limited  Partnership  Interests,  of
     $50,000 per Unit,  $50,000  minimum  investment  per  investor to qualified
     investors that will be entitled to the Working Interest percentages set out
     in the previous  paragraph.  Each $5 Million Limited  Partnership  Interest
     offering  will  provide  for  escrow  of gross  offering  proceeds  until a
     $2,500,000 minimum  subscription has been achieved,  at which time proceeds
     in escrow  will be  released  to the LLLP and the  offering  will  continue
     without an escrow until the first to occur of  acceptance  of a total of $5
     Million USD in subscriptions from qualified investors,  or 90 days from the
     commencement  date of the  offering or the date of the  offering  document,
     whichever  is  earlier,  subject to  extension,  in the  discretion  of the
     General Partner for an additional 90 days. In the event that an offering is
     terminated  prior to achievement of the $5 Million  maximum  offering,  the
     General  Partner or any Party may  purchase  the balance of unsold  Limited
     Partner  Interests,  necessary to close the offering The Parties agree that
     the target  funding of $5  Million  for each LLLP has taken into  account a
     maximum sales commission of 7% to licensed broker/dealers and/or investment
     advisors;  $100,000 in offering  costs  including  legal and accounting per
     LLLP,  and a  reserve  of  approximately  9% for  contingencies  that  will
     reserved out of net offering  proceeds for each LLLP and be replaced out of
     Limited  Partner  Revenues  at the rate of  $50,000  per month  and,  as so
     replaced,  will be retained by the General Partner as a management fee that
     will be paid out to it and the Special  Limited  Partners  according to the
     carried interest sharing percentages set forth in the previous paragraph.

G.   Black,  Herrtage  and to a lesser  degree,  Selden will  undertake  primary
     responsibility  to designate and refer to the General Partner  professional
     fund  raisers and  professional  investors  to fund the LLLP's in series to
     match the approximate timing of well completion projected by Van Hooser and
     NEC in conjunction with its negotiations with the operator, CFE. Raabe will
     support  these  efforts  through  his  contacts  as well,  and the  General
     Partner,  Arete  Energy  will  formally  negotiate  with and  engage  these
     professionals on behalf of the individual LLLP's.  Neither Black, Herrtage,
     Selden or Raabe are  being  paid  commissions  or  referral  fees for these
     introductions,  but in the event that Arete  Energy  and/or  Raabe  funds a
     principal amount of any one or more of the LLLP's through their personal or
     professional  contacts,   then  the  Parties  agree  that  their  share  of
     Partnership income from the particular LLLP so effected, may be adjusted in
     some mutually  agreeable  proportion to reflect the value of providing such
     funding.

H.   Arete Energy will undertake  primary  responsibility  to retain lawyers and
     accountants  to conduct  due  diligence  and  prepare  offering  documents;
     provide bookkeeping  services to track revenues;  make distributions to the
     General,  Special  Limited  and  Limited  Partners;  conduct the day to day
     business of each LLLP  including  technical  and financial  evaluation  for
     selection of Leases proposed by the Operator and  undertaking  oversight of
     the re-working  operations and subsequent  production  (with the assistance
     and support of NEC).


                          Please sign below your name.

Thomas P. Raabe      Ron Van Hooser      Robert Selden      James Black
-------------------  ------------------  -----------------  ----------------
/s/ Thomas P. Raabe  /s/ Ron Van Hooser  /s/ Robert Selden  /s/ James Black
-------------------  ------------------  -----------------  ----------------

                                        2
<PAGE>

 Brian Herrtage
 ------------------
 /s/ Brian Herrtage
 ------------------

I.   All Parties will jointly  participate  in making major  economic and policy
     decisions of the General  Partner  regarding  the approval of  subscription
     offers  by  potential  investors,  underwriting  or sales  agreements  with
     broker/dealers,  selection or replacement of principal accounting firms and
     law firms for the private placements and matters concerning substitution or
     replacement of the General Partner,  the Special Limited  Partners,  and/or
     the Limited Partners;  matters relating to the liquidation and dissolution,
     recapitalization,  reorganization,  merger,  acquisition,  sale  of  all or
     substantially  all of the assets of, any LLLP,  or any other  material LLLP
     action;  and will  have  such  authority  set  forth in the  organizational
     documents of each LLLP. Notwithstanding this provision, neither the General
     Partner nor any Special Limited Partner may withdraw, resign or be replaced
     or substituted without the unanimous approval,  not unreasonably  withheld,
     of the other non-withdrawing or non-resigning Parties, or otherwise in such
     a manner as would cause the  termination  or dissolution of such LLLP under
     the terms of the LLLP Operating Agreement, statutory law or the common law.

                             III. SPECIAL PROVISIONS

A.   The terms and conditions of this Agreement will be reflected in Articles of
     Organization and/or the Limited Liability Limited Partnership  Agreement to
     be used in each LLLP designated in this Agreement and associated  contracts
     and  agreements.  Forms  of such  LLLP  Agreements  will be  generated  and
     submitted  for  approval  to the  Parties  within a  reasonable  time after
     execution  of this  Agreement  and the  approved  version  attached to this
     Agreement as an Exhibit and incorporated herein by reference.

B.   This Agreement will be deemed a  Pre-formation  Agreement for the series of
     LLLP's  described in this Agreement.  The Joint Venture will be consummated
     on the formation,  funding and  commencement of operations of each LLLP, as
     to that entity, and will close upon formation,  funding and commencement of
     operations  of the final  LLLP under the 24 Well  Program.  Notwithstanding
     this provision,  it is contemplated that the number of Leases available for
     the 24 Well  Program  could  conceivably  be  increased up to a total of 60
     wells,  and in such event will remain in full force and effect and apply to
     the  formation  of any  additional  LLLP's  to pursue  development  of such
     additional Leases. Increasing the number of Leases proposed to be developed
     over the  original  24 Leases,  may be made via a written  addendum to this
     Agreement  setting  forth terms and  conditions  to develop the  additional
     Leases as are mutually agreed to by each Party in writing.

C.   The Parties  designated below will undertake the following  specific duties
     and  obligations:

     1.   NEC will  assign  its  agreement  with  CFE to the  Joint  Venture  on
          execution of this Agreement by all Parties. Leases acquired under such
          agreement  will  be  assigned  to  the  particular  LLLP  funding  the
          development of such Lease. An operating  agreement between CFE and the
          applicable  LLLP will also be generated  and signed upon  formation of
          the LLLP and covering each Lease assigned to that LLLP. Choice of each
          Lease  to  be  attached  to a  particular  LLLP  will  be  made  after
          evaluation by NEC, Arete Energy and CFE.

     2.   Operation and  Development  of each Lease  acquired  under the 24 Well
          Program will be conducted by CFE under the supervision of Arete Energy
          pursuant to an A.A.P.L.  standard form operating  agreement,  with the
          assistance  and  guidance  of  NEC.  The  operator  will  perform  all
          drilling, development and production operations on the Leases accepted
          by  the  Joint  Venture  in  a  prudent  and  workmanlike  manner,  in
          accordance with accepted industry practices. NEC and CFE shall provide
          Arete  Energy  with a  development  plan for the  Leases  prepared  in
          conjunction  with such  operator and with the advice of qualified  and
          experienced   petroleum   professionals,   including   geologists  and
          engineers.  Arete Energy shall  disburse all drilling and  development
          funds in accordance with such plans as are mutually approved,  from an
          escrow account formed for such purpose.

     3.   NEC will assure that Arete  Energy  receives  timely  reports from the
          operator of status and results of drilling and development operations.
          CFE will be required to prepare and transmit to Arete Energy,  a joint
          interest  billing,  together  with any net  revenues  from the Leases,
          segregated by LLLP, on a monthly  basis.  CFE will also be required to
          prepare  and  transmit to Arete  Energy an annual  summary of pro-rata
          share  of  leasehold,  equipment,   development  and  lease  operating
          expenses,  and  revenues,  for tax  purposes no later than March 15 of
          each year.  NEC will also  provide or arrange  that Arete  Energy have
          access to  information,  literature,  status  updates,  field reports,
          summaries  and  reports,  or  anything  else  which may be  reasonably
          requested by Arete Energy from time to time, upon  reasonable  notice.
          This will include  arranging  field visits by Arete (or its investors)
          upon  reasonable  notice  for the  purpose of  visiting  the Leases or
          viewing operations.

     4.   Arete Energy will be delegated the  responsibility of coordinating and
          managing  financing  efforts  including legal matters,  due diligence,
          hiring  and  retaining  accountants,  lawyers,  engaging  fundraisers,
          managing offerings,  escrowing offering proceeds, issuing instructions
          to escrow  agents,  and  providing  financial  projections  and making
          investment  representations  to  prospective  investors,  as  well  as
          qualifying,  accepting and rejecting  subscription  offers.  Each LLLP
          will be the offeror of the  Limited  Partnership  Interests  under the
          heading of the General Partner.  All Parties will fully cooperate with
          Arete Energy in the legal and  accounting due diligence and disclosure
          process to ensure  minimization  of risk to the Parties for securities
          fraud  liability.  Financing  the Joint Venture will be conducted on a
          best efforts basis,  with no Party  guaranteeing a successful  funding
          for any or all of the proposed LLLP's.

                          Please sign below your name.

Thomas P. Raabe      Ron Van Hooser      Robert Selden      James Black
-------------------  ------------------  -----------------  ----------------
/s/ Thomas P. Raabe  /s/ Ron Van Hooser  /s/ Robert Selden  /s/ James Black
-------------------  ------------------  -----------------  ----------------

 Brian Herrtage
 ------------------
 /s/ Brian Herrtage
 ------------------

                                        3
<PAGE>

     5.   Arete Energy will be delegated responsibility to manage the day to day
          operations of each LLLP.  Each of the Parties taking  Special  Limited
          Partnership  Interests,  are  contributing  their  special  expertise,
          contacts and  opportunities  as stated herein,  to each LLLP, and will
          obtain to general  partner  liability  only as to performance of those
          duties,   and   contribution   of  those   contacts,   expertise   and
          opportunities.

D.   Neither the execution and delivery of this Agreement nor the performance by
     either  party of any  provision  hereof  shall  constitute  or be deemed or
     construed to  constitute  either of the Parties  hereto an owner,  partner,
     parent, subsidiary,  division, or employee of the other. It is acknowledged
     that each Party is in full  control of their  business and  operations  and
     shall  conduct such business and  operations  in accordance  with their own
     respective judgment and discretion,  in accordance with applicable laws and
     the  provisions  of this  Agreement.  Neither Party shall have the right to
     bind or obligate each other to any debts, liabilities or obligations of the
     other, including hiring of personnel. Each Party alone shall be responsible
     for the payment of all costs,  expenses and taxes in connection  with their
     business and operations.  Each Party and their  successors shall indemnify,
     defend and hold the other  harmless  from and  against  any and all claims,
     liability,  costs,  fees of legal counsel and any and all other expenses of
     every kind and nature  arising out of or in connection  with the conduct by
     each Party of its business and operations, including any act or omission of
     its agents, whether arising from this Agreement,  the offering contemplated
     hereby, or otherwise.

E.   The  activities  of the Joint  Venture  shall be accounted for according to
     best  practices  of  partnership  accounting  for  oil  and  gas  ventures.
     Financial statements prepared for the Joint Venture shall be reviewed by an
     accounting  firm to be retained by the Joint  Venture to be paid for out of
     revenues of the Joint Venture or  contributions  by the Parties on an equal
     basis.  The Parties shall mutually agree whether to elect  partnership  tax
     status,  and how to  allocate  tax  credits or  benefits  among the various
     Parties and Limited Partner Interests.

F.   The Joint Venture  shall be treated as a legal entity  pursuant to the laws
     of the State of Colorado for such  entities.  Parties shall be deemed equal
     partners in the Joint Venture subject to the rights,  privileges and duties
     of Joint  Venture  Partners  according to the  provisions  of such laws and
     further subject to the allocations set forth in the previous section

                      IV. TERMINATION, DEFAULT AND REMEDIES

A.   Termination. This Agreement shall terminate on the first to occur of:

     1.   February 28, 2005,  unless  earlier  terminated  or extended by mutual
          agreement of a majority of the Parties.

     2.   Achievement of formation, funding and commencing operations on each of
          the four (4) LLLP's,  which may be increased from time to time, unless
          the Parties  determine not to pursue  development of additional Leases
          over and above the original 24 Leases.


     3.   An event of Default, including:

          a.   The  non-terminating  Party shall commit a material breach of any
               of its obligations  hereunder and such breach shall not have been
               remedied  within  thirty (30) days  following  receipt of written
               notification of such breach,  except when both Parties  otherwise
               agree in writing to modify the terms of the Agreement.

          b.   The  other  Party  shall  commit  a  corroborated  act of  fraud,
               misrepresentation   or   concealment   of  material   information
               materially injurious to the other; or

          c.   The other Party  shall be  adjudicated  bankrupt,  shall file for
               reorganization  under any law relating to creditors rights, shall
               have a receiver  appointed  for all or any  material  part of its
               property,  or  shall  commit  any  act  of  bankruptcy,   whether
               voluntary or involuntary.

     4.   The operating  terms of this Agreement  shall survive any  termination
          hereunder  with  regard  to  effective  Leases  conveyed  to the Joint
          Venture and funded under the terms hereof,  and no  termination  shall
          serve to sever or defeat any rights of the  terminating  or terminated
          Party nor serve as an act of partition with respect thereto.

                                V. MISCELLANEOUS

A.        Each of the Parties  hereto  shall  execute and deliver such other and
          further  documents  and  instruments,  and take such other and further
          actions, as may be reasonably requested of them for the implementation
          and  consummation  of  this  Agreement  and  the  transactions  herein
          contemplated.

                          Please sign below your name.

Thomas P. Raabe      Ron Van Hooser      Robert Selden      James Black
-------------------  ------------------  -----------------  ----------------
/s/ Thomas P. Raabe  /s/ Ron Van Hooser  /s/ Robert Selden  /s/ James Black
-------------------  ------------------  -----------------  ----------------

 Brian Herrtage
 ------------------
 /s/ Brian Herrtage
 ------------------

                                        4
<PAGE>


B.   Unless an assignment or transfer is made by or on behalf of a Party through
     a court decree, decree of dissolution of marriage, or by a Party to a legal
     entity over which it has at least  majority  ownership  and  control,  this
     Agreement  may not be assigned in whole or in part by any Party without the
     express  written  consent of the other Parties,  which consent shall not be
     unreasonably withheld.

C.   This  Agreement  is made and shall be governed in all  respects,  including
     validity, interpretation and effect, by the laws of the State of Colorado.

D.   All notices, requests or demands and other communications hereunder must be
     in  writing  and shall be  deemed  to have  been  duly  made if  personally
     delivered  or mailed,  postage  prepaid,  or by  facsimile,  with  original
     confirmation delivered contemporaneously by mail or courier, to the Parties
     at their addresses listed below with attendant proof of delivery, effective
     on the date  posted Any Party  hereto  may  change  its  address by written
     notice to the other Parties given in accordance with this Section.

E.   This  Agreement  contains  the entire  agreement  between the Parties  with
     respect to the subject matter hereof and  supersedes all prior  agreements,
     understandings and writings between the Parties with respect to the subject
     matter  hereof.  Each Party hereto  acknowledges  that no  representations,
     inducements,  promises or agreements,  oral or otherwise, have been made by
     any Party,  or anyone acting with  authority on behalf of any Party,  which
     are not  embodied  herein  or in an  exhibit  hereto,  and  that  no  other
     agreement,  statement  or promise  may be relied  upon or shall be valid or
     binding. Neither this Agreement nor any term hereof may be changed, waived,
     discharged or terminated orally.  This Agreement may be amended or any term
     hereof  may  be  changed,  waived,  discharged  or  terminated  only  by an
     agreement in writing signed by all Parties.

F.   In the event that any provision of this Agreement shall be unenforceable or
     inoperative  as a matter of law, the remaining  provisions  shall remain in
     full force and effect.

G.   No waiver of any breach or default of this  Agreement  by any Party  hereto
     shall be considered  to be a waiver of any prior,  concurrent or subsequent
     breach or default of this Agreement.

H.   All claims,  disputes or deadlocks  arising out of this  Agreement,  or the
     breach thereof,  shall be decided by binding arbitration in accordance with
     the Rules of the American Arbitration Association then obtained, unless the
     Parties shall mutually agree  otherwise.  Notice of demand for  arbitration
     shall be filed in  writing  by each  Party  with the  American  Arbitration
     Association  and  shall be made  within a  reasonable  time  after a claim,
     dispute or deadlock has arisen.  Each Party shall bear their own legal fees
     and  expenses  of an  arbitration  including  a  pro-rata  portion  of  the
     arbitrator's  fees and costs. The decision of the arbitrator may include an
     award for  monetary  and/or  exemplary  damages  and shall be  binding  and
     conclusive on the Parties. The exclusive venue for such arbitration, or for
     any  dispute  arising  out of this  Agreement,  shall  be  Boulder  County,
     Colorado.

I.   This  Agreement  may be  executed in  counterparts,  each of which shall be
     deemed an original but all of which taken together shall constitute but one
     and the same document.

J.   The Parties shall periodically, but no less frequently than weekly, consult
     with  each  other  as to  the  manner  of  performance  of  the  continuing
     obligations  contemplated hereby and shall fully cooperate with one another
     in efforts to accomplish their common objectives.


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

ARETE INDUSTRIES, INC.                      NORTH ENERGY COMPANY
A Colorado corporation                      a Texas corporation

By: /s/ Thomas P. Raabe                     By: /s/ Ron Van Hooser
   --------------------------------             --------------------------------
   Thomas P. Raabe, CEO                         Ron Van Hooser, President
   (Phone:                        )         (Phone:                            )
           ------------------------                 ----------------------------
Address:                                    Address:
         --------------------------                 ----------------------------

KNIGHT GROUP, INC                           ARETE ENERGY DEVELOPMENT GROUP, INC
A Florida corporation                       a corporation to be formed


By: /s/ James Black                         By: /s/ Thomas P. Raabe
   --------------------------------             --------------------------------
   James Black, President                       Thomas P. Raabe, Organizer
   (Phone:                        )         (Phone:                            )
           ------------------------                 ----------------------------
Address:                                    Address:
         --------------------------                 ----------------------------


..INDIVIDUALLY:

By:  /s/ Robert P. Selden                   Phone:
     ------------------------------                -----------------------------
     Robert P. Selden                       Address
                                                   -----------------------------


By:  /s/ Brian Herrtage                     Phone:
     ------------------------------                -----------------------------
     Brian Herrtage                         Address:
                                                   -----------------------------


By:  /s/ Thomas P. Raabe                    Phone:
     ------------------------------                -----------------------------
     Thomas P. Raabe                        Address:
                                                   -----------------------------