##### 



CREDIT AGREEMENT
 BETWEEN
 PRIME
OFFSHORE L.L.C. AND
 GUARANTY BANK, FSB, AS AGENT
AND A LENDER
 JUNE 29, 2006
 
 REVOLVING LINE OF CREDIT OF UP TO $200,000,000




---



##### 



TABLE OF CONTENTS
 PageARTICLE I DEFINITIONS AND INTERPRETATION
    
    
    11.1
    
    Terms Defined Above
    
    
    11.2
    
    Additional Defined Terms
    
    
    11.3
    
    Undefined Financial Accounting Terms
    
    
    151.4
    
    References
    
    
    151.5
    
    Articles and Sections
    
    
    151.6
    
    Number and Gender
    
    
    151.7
    
    Incorporation of Exhibits
    
    
    15ARTICLE II TERMS OF FACILITY
    
    
    152.1
    
    Revolving Line of Credit
    
    
    152.1A.
    
    Facility A and B Revolving Line of Credit
    
    
    152.1B.
    
    Facility C Revolving Line of Credit
    
    
    162.2
    
    Letter of Credit Facility
    
    
    162.3
    
    Use of Loan Proceeds and Letters of Credit
    
    
    182.4
    
    Interest
    
    
    182.5
    
    Repayment of Loans and Interest
    
    
    192.6
    
    Outstanding Amounts
    
    
    192.7
    
    Time, Place, and Method of Payments
    
    
    192.8
    
    Pro Rata Treatment; Adjustments
    
    
    192.9
    
    Borrowing Base Determinations
    
    
    202.10
    
    Mandatory Prepayments
    
    
    212.11
    
    Voluntary Prepayments and Conversions of Loans
    
    
    222.12
    
    Commitment Fee
    
    
    222.13
    
    Facility Fee
    
    
    222.14
    
    Letter of Credit Fee
    
    
    222.15
    
    Loans to Satisfy Obligations of Borrower
    
    
    222.16
    
    Security Interest in Accounts; Right of Offset
    
    
    232.17
    
    General Provisions Relating to Interest
    
    
    232.18
    
    Yield Protection
    
    
    242.19
    
    Limitation on Types of Loans
    
    
    262.20
    
    Illegality
    
    
    262.21
    
    Regulatory Change
    
    
    272.22
    
    Limitations on Interest Periods
    
    
    272.23
    
    Letters in Lieu of Transfer Orders
    
    
    272.24
    
    Power of Attorney
    
    
    27ARTICLE III CONDITIONS
    
    
    283.1
    
    Receipt of Loan Documents and Other Items
    
    
    283.2
    
    Each Loan and Letter of Credit
    
    
    30ARTICLE IV REPRESENTATIONS AND WARRANTIES
    
    
    324.1
    
    Due Authorization
    
    
    32
 - i -




---



##### 



Page4.2
    
    Limited Liability Company Existence
    
    
    324.3
    
    Valid and Binding Obligations
    
    
    324.4
    
    Security Instruments
    
    
    334.5
    
    Title to Assets
    
    
    334.6
    
    No Material Misstatements
    
    
    334.7
    
    Liabilities, Litigation, and Restrictions
    
    
    334.8
    
    Authorizations; Consents
    
    
    334.9
    
    Compliance with Laws
    
    
    334.10
    
    ERISA
    
    
    344.11
    
    Environmental Laws
    
    
    344.12
    
    Compliance with Federal Reserve Regulations
    
    
    354.13
    
    Investment Company Act Compliance
    
    
    354.14
    
    Public Utility Holding Company Act Compliance
    
    
    354.15
    
    Proper Filing of Tax Returns; Payment of Taxes Due
    
    
    354.16
    
    Refunds
    
    
    354.17
    
    Gas Contracts
    
    
    354.18
    
    Intellectual Property
    
    
    354.19
    
    Casualties or Taking of Property
    
    
    364.20
    
    Locations of Borrower
    
    
    364.21
    
    Subsidiaries
    
    
    36ARTICLE V AFFIRMATIVE COVENANTS
    
    
    365.1
    
    Maintenance and Access to Records
    
    
    365.2
    
    Quarterly Financial Statements; Compliance Certificates
    
    
    365.3
    
    Ryder Scott Company Reserve Evaluation
    
    
    365.4
    
    Status of Shareholder Loans
    
    
    375.5
    
    Log Sections, Maps and Test Dates
    
    
    375.6
    
    Annual Financial Statements
    
    
    375.7
    
    Oil and Gas Reserve Reports
    
    
    375.8
    
    Title Opinions; Title Defects and Mortgages
    
    
    375.9
    
    Notices of Certain Events
    
    
    375.10
    
    Letters in Lieu of Transfer Orders; Division Orders
    
    
    395.11
    
    Additional Information
    
    
    395.12
    
    Compliance with Laws
    
    
    395.13
    
    Payment of Assessments and Charges
    
    
    395.14
    
    Maintenance of Limited Liability Company Existence andGood Standing
    
    
    395.15
    
    Payment of Notes; Performance of Obligations
    
    
    405.16
    
    Further Assurances
    
    
    405.17
    
    Initial Fees and Expenses of Counsel to Agent
    
    
    405.18
    
    Subsequent Fees and Expenses of Agent
    
    
    405.19
    
    Operation of Oil and Gas Properties
    
    
    405.20
    
    Maintenance and Inspection of Properties
    
    
    405.21
    
    Maintenance of Insurance
    
    
    415.22
    
    INDEMNIFICATION
    
    
    415.23
    
    Future Subsidiaries
    
    
    425.24
    
    Hedging
    
    
    425.25
    
    Flow Line Permit
    
    
    42
 - ii -




---



##### 



PageARTICLE VI NEGATIVE COVENANTS
    
    
    426.1
    
    Indebtedness
    
    
    426.2
    
    Contingent Obligations
    
    
    436.3
    
    Liens
    
    
    436.4
    
    Sales of Assets
    
    
    436.5
    
    Leasebacks
    
    
    436.6
    
    Loans or Advances
    
    
    436.7
    
    Investments
    
    
    436.8
    
    Dividends and Distributions
    
    
    446.9
    
    Issuance of Stock; Changes in Limited Liability Structure
    
    
    446.10
    
    Transactions with Affiliates
    
    
    446.11
    
    Lines of Business
    
    
    446.12
    
    ERISA Compliance
    
    
    446.13
    
    FWOE Partners L.P
    
    
    446.14
    
    Interest Coverage Ratio
    
    
    446.15
    
    Tangible Net Worth
    
    
    456.16
    
    General and Administrative Expenses
    
    
    456.17
    
    Minimum Liquidity
    
    
    456.18
    
    Put Right Agreement
    
    
    45ARTICLE VII EVENTS OF DEFAULT
    
    
    457.1
    
    Enumeration of Events of Default
    
    
    457.2
    
    Remedies
    
    
    47ARTICLE VIII THE AGENT
    
    
    488.1
    
    Appointment
    
    
    488.2
    
    Waivers, Amendments
    
    
    488.3
    
    Delegation of Duties
    
    
    488.4
    
    Exculpatory Provisions
    
    
    498.5
    
    Reliance by Agent
    
    
    498.6
    
    Notice of Default
    
    
    498.7
    
    Non-Reliance on Agent and Other Lenders
    
    
    508.8
    
    Indemnification
    
    
    508.9
    
    Restitution
    
    
    518.10
    
    Agent in Its Individual Capacity
    
    
    518.11
    
    Successor Agent
    
    
    518.12
    
    Applicable Parties
    
    
    52ARTICLE IX MISCELLANEOUS
    
    
    529.1
    
    Transfers; Participations
    
    
    529.2
    
    Survival of Representations, Warranties, and Covenants
    
    
    539.3
    
    Notices and Other Communications
    
    
    549.4
    
    Parties in Interest
    
    
    549.5
    
    Rights of Third Parties
    
    
    549.6
    
    Renewals; Extensions
    
    
    549.7
    
    No Waiver; Rights Cumulative
    
    
    55
 - iii -




---



##### 



Page9.8
    
    Survival Upon Unenforceability
    
    
    559.9
    
    Amendments; Waivers
    
    
    559.10
    
    Controlling Agreement
    
    
    559.11
    
    Disposition of Collateral
    
    
    559.12
    
    USA Patriot Act Notice
    
    
    559.13
    
    GOVERNING LAW
    
    
    559.14
    
    JURISDICTION AND VENUE
    
    
    569.15
    
    WAIVER OF RIGHTS TO JURY TRIAL
    
    
    569.16
    
    ENTIRE AGREEMENT
    
    
    569.17
    
    Counterparts
    
    
    56
 LIST OF EXHIBITS
 Exhibit I
    
    -
    
    Form of NoteExhibit I(A)
    
    -
    
    Form of NoteExhibit II
    
    -
    
    Form of Borrowing RequestExhibit III
    
    -
    
    Form of Compliance CertificateExhibit IV
    
    -
    
    Form of Opinion of CounselExhibit V
    
    -
    
    Facility AmountsExhibit VI
    
    -
    
    Form of Assignment Agreement
 - iv -




---



##### 



CREDIT AGREEMENT
 CREDIT AGREEMENT th Borrower Lender Lenders GUARANTY BANK, FSB Agent
 WITNESSETH :
  ARTICLE I
 DEFINITIONS AND INTERPRETATION
 Terms Defined Above. Agent Borrower Lender
 Additional Defined Terms
 Additional Costs
 Adjusted LIBO Rate




---



##### 



Affiliate
 Agreement
 Applicable Lending Office
 Applicable Margin
 Assessment Rate
 Assignment Agreement
 Available Commitment
 Base Rate
 - 2 -




---



##### 



Benefited Lender
 Borrowing Base
 Borrowing Request
      Business Day
 Casualty Event
 Closing Date
 Code
 - 3 -




---



##### 



Collateral
 Commitment
 Commitment Fee
 Commitment Period
 Commitment Termination Date
 Commodity Hedge Agreement
 Commonly Controlled Entity
 Completion Commitment
 Compliance Certificate
 Contingent Obligation primary
obligation
 - 4 -




---



##### 



Default
 Default Rate
 Dollars $
 EBITDAX
 Environmental Complaint
 Environmental Laws
 - 6 -




---



##### 



ERISA
 Event of Default
 Facility Amount Exhibit V Section 9.1
 Facility Fee
 Final Maturity
 Financial Statements
 Fixed Rate Loan
 Floating Rate
 Floating Rate Loan
 - 6 -




---



##### 



GAAP
 Governmental Authority
 Hazardous Substances
 Highest Lawful Rate
 Indebtedness
 - 7 -




---



##### 



Insolvency Proceeding
 Intellectual Property
 Interest Expense
 Interest Period
 Investment
 L/C Exposure
 Letter of Credit
 Letter of Credit Application
 Letter of Credit Fee
 LIBO Rate
 - 8 -




---



##### 



LIBO Rate Loan
 Lien
 Limitation Period
 - 9 -




---



##### 



Liquidity Agreement
 Loan
 Loan Balance
 Loan Documents
 Material Adverse Effect
 Mortgaged Properties
 Multiemployer Plan
 Net Income
 Notes Exhibit I Exhibit 1(A)
 - 10 -




---



##### 



Obligations
 Oil and Gas Properties
 PBGC
 Percentage Share Exhibit V.
 Permitted Liens
 - 11 -




---



##### 



Person
 Plan
 Principal Office
 Prohibited Transaction
 Project Fields
 Property
 Rate Management Transaction
 - 12 -




---



##### 



Regulation D
 Regulatory Change
 Reimbursement Obligation
 Release of Hazardous Substances
 Reorganization
 Reportable Event
 Required Lenders
 Requirement of Law
 - 13 -




---



##### 



Reserve Report
 Responsible Officer
 Security Instruments
 Single Employer Plan
 Subordinated Debt
 Subordination Agreement
 Subsidiary
 Superfund Site
 Tangible Net Worth
 Transferee
 - 14 -




---



##### 



UCC
 Undefined Financial Accounting Terms.
 References.
 Articles and Sections.
 Number and Gender.
 Incorporation of Exhibits
 ARTICLE II
 TERMS OF FACILITY
 Revolving Line of Credit.
 Facility A and B Revolving Line of Credit,
 - 15 -




---



##### 



Facility C Revolving Line of Credit
  Letter of Credit Facility
 - 16 -




---



##### 



Exhibit
1(A).
   EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE AGENT, AS THE ISSUER OF EACH LETTER OF
CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE
AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWER AND WITHOUT LIMITING THE OBLIGATION OF
THE BORROWER TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF
ISSUANCE OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES,
 - 17 -




---



##### 



PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER
WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND
PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON, INCURRED BY
OR ASSERTED AGAINST THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING
OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT AS THE
ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING,
WITHOUT LIMITATION, ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF
THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT
NO LENDER (OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR THE
PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS NEGLIGENCE WHETHER
SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF THE AGENT AS THE ISSUER OF A LETTER OF CREDIT. THE
AGREEMENTS IN THIS SECTION 2.2(d) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND
THE TERMINATION OF THIS AGREEMENT.
 Use of Loan Proceeds and Letters of Credit.
  Interest.
 - 18 -




---



##### 



Repayment of Loans and Interest.
 Outstanding Amounts.
 Time, Place, and Method of Payments.
 Pro Rata Treatment: Adjustments.
 - 19 -




---



##### 



Benefitted Lender Section 7.1(f) Section 7.1(g),
 Borrowing Base Determinations.
 - 20 -




---



##### 



Mandatory Prepayments.
 - 21 -




---



##### 



Voluntary Prepayments and Conversions of Loans.
 Commitment Fee.
 Facility Fee.
 Letter of Credit Fee.
 Loans to Satisfy Obligations of Borrower.
 - 22 -




---



##### 



Security Interest in Accounts; Right of Offset.
 General Provisions Relating to Interest.
   - 23 -




---



##### 



Yield Protection.
   - 24 -




---



##### 



- 25 -




---



##### 



Limitation on Types of Loans.
    Illegality.
 - 26 -




---



##### 



Regulatory Change.
 Limitations on Interest Periods.
 Letters in Lieu of Transfer Orders.
 Power of Attorney.
 - 27 -




---



##### 



ARTICLE III
 CONDITIONS
  Receipt of Loan Documents and Other Items.
      - 28 -




---



##### 



- 29 -




---



##### 



Each Loan and Letter of Credit.
  - 30 -




---



##### 



- 31 -




---



##### 



ARTICLE IV
 REPRESENTATIONS AND WARRANTIES
  Due Authorization.
 Limited Liability Company Existence.
 Valid and Binding Obligations.
 - 32 -




---



##### 



Security Instruments.
 Title to Assets.
 No Material Misstatements.
 Liabilities, Litigation, and Restrictions.
 Authorizations; Consents.
 Compliance with Laws.
 - 33 -




---



##### 



ERISA.
 Environmental Laws.
     - 34 -




---



##### 



Compliance with Federal Reserve Regulations.
 Investment Company Act Compliance.
 Public Utility Holding Company Act Compliance.
 Proper Filing of Tax Returns; Payment of Taxes Due.
 Refunds.
 Gas Contracts.
 Intellectual Property.
 - 35 -




---



##### 



Casualties or Taking of Property.
 Locations of Borrower.
 Subsidiaries.
 ARTICLE V
 AFFIRMATIVE COVENANTS
  Maintenance and Access to Records.
 Quarterly Financial Statements: Compliance Certificates.
 Ryder Scott Company Reserve Evaluation.
 - 36 -




---



##### 



Status of Shareholder Loans.
 Log Sections, Maps and Test Dates.
 Annual Financial Statements. th
 Oil and Gas Reserve Reports,
   Title Opinions; Title Defects and Mortgages.
 Notices of Certain Events.
 - 37 -




---



##### 



- 38 -




---



##### 



Letters in Lieu of Transfer Orders; Division Orders.
 Additional Information.
 Compliance with Laws.
 Payment of Assessments and Charges.
 Maintenance of Limited Liability Company Existence and Good Standing.
 - 39 -




---



##### 



Payment of Notes; Performance of Obligations.
 Further Assurances.
 Initial Fees and Expenses of Counsel to Agent.
 Subsequent Fees and Expenses of Agent.
 Operation of Oil and Gas Properties.
 Maintenance and Inspection of Properties.
 - 40 -




---



##### 



Maintenance of Insurance.
 INDEMNIFICATION.
 - 41 -




---



##### 



Future Subsidiaries.
 Hedging.
 Flow Line Permit.
 ARTICLE VI
 NEGATIVE COVENANTS
  Indebtedness.
 - 42 -




---



##### 



Contingent Obligations.
 Liens.
 Sales of Assets. provided, however,
 Leasebacks.
 Loans or Advances.
 Investments.
 - 43 -




---



##### 



Dividends and Distributions.
 Issuance of Stock; Changes in Limited Liability Structure.
 Transactions with Affiliates.
 Lines of Business.
 ERISA Compliance.
 FWOE Partners L.P.
 Interest Coverage Ratio.
 - 44 -




---



##### 



Tangible Net Worth.
 General and Administrative Expenses.
 Minimum Liquidity.
 Put Right Agreement.
 ARTICLE VII
 EVENTS OF DEFAULT
 Enumeration of Events of Default.
    - 45 -




---



##### 



et seq
 - 46 -




---



##### 



Remedies.
  - 47 -




---



##### 



ARTICLE VIII
 THE AGENT
 Appointment.
 Waivers, Amendments.
 Delegation of Duties.
 - 48 -




---



##### 



Exculpatory Provisions.
 Reliance by Agent.
 Notice of Default. provided Section 7.2
 - 49 -




---



##### 



Non-Reliance on Agent and Other Lenders.
 Indemnification. Each Lender agrees to indemnify the Agent and its officers,
directors, employees, agents, attorneys-in-fact and affiliates (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so), ratably according to the
Percentage Share of such Lender, from and against any and all liabilities, claims, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind whatsoever which may at any time (including any time following the payment and performance of
all obligations and the termination of this Agreement) be imposed on, incurred by or asserted
against the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates in any way relating to or arising out of this Agreement or any other Loan Document, or
any other document contemplated or referred to herein or the transactions contemplated hereby or
any action taken or omitted by the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates under or in connection with any of the foregoing, including any
liabilities, claims, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements imposed, incurred or asserted as a result of the negligence, whether
sole or concurrent, of the Agent or any of its officers, directors, employees, agents,
attorneys-in-
 - 50 -




---



##### 



fact or affiliates; provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. The agreements
in this Section shall survive the payment and performance of all obligations and the termination
of this Agreement.
 Restitution.
 Agent in Its Individual Capacity.
 Successor Agent. Article VIII Section 5.17, Section 5.18 Section 5.22
 - 51 -




---



##### 



Applicable Parties.
 ARTICLE IX
 MISCELLANEOUS
 Transfers; Participations.
 Assignments.
     - 52 -




---



##### 



Participations. Participant
 Survival of Representations, Warranties, and Covenants.
 - 53 -




---



##### 



Notices and Other Communications.
 (a)
    
    if to the Agent and Lender, to:
 
 (b)
    
    if to the Borrower, to:
 
  Parties in Interest.
 Rights of Third Parties.
 Renewals; Extensions.
 - 54 -




---



##### 



No Waiver; Rights Cumulative.
 Survival Upon Unenforceability.
 Amendments; Waivers.
 Controlling Agreement.
 Disposition of Collateral.
 USA Patriot Act Notice. Act
 9.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO BE CONTRACTS MADE
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS
WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT
CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT
 - 55 -




---



##### 



LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY
OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS
HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF
ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVES
ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER, AGENT AND THE LENDERS HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR
OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF
THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE
PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.
FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
 Counterparts.
 - 56 -




---



##### 



IN WITNESS WHEREOF,
 BORROWER: PRIME OFFSHORE L.L.C.By:
    /s/ Jim R. BrockJim R. BrockPresident and Chief Financial Officer - 57 -




---



##### 



AGENT AND LENDER:GUARANTY BANK, FSBBy:
    /s/ Kelly L. Elmore, IIIKelly L. Elmore, IIISenior Vice President - 58 -




---



##### 



EXHIBIT I
 [FORM OF NOTE]
 PROMISSORY NOTE
 $200,000,000
    Houston, Texas
    June 29, 2006
 Maker GUARANTY BANK, FSB Payee Credit Agreement
    THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
 PRIME OFFSHORE L.L.C.By:Jim R. BrockPresident and Chief Financial Officer I-i




---



##### 



EXHIBIT I(A)
 [FORM OF NOTE]
 PROMISSORY NOTE
 $5,000,000
    Houston, Texas
    June 29, 2006
 Maker GUARANTY BANK, FSB Payee Credit Agreement
    THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT
GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER
345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
 PRIME OFFSHORE L.L.C.By:Jim R. BrockPresident and Chief Financial Officer I(A)-i




---



##### 



EXHIBIT II
 [FORM OF BORROWING REQUEST]
 
 Re:
    
    Credit Agreement dated as of June 29, 2006, by and between PRIME
OFFSHORE L.L.C. and GUARANTY BANK, FSB, as Agent, and the Lenders signatory
thereto from time to time (as amended, restated, or supplemented from time to
time, the Credit Agreement)
   1.
    
    Loans(a)
    
    Amount of new Loan: $(b)
    
    Requested funding date: , 20.(c)
    
    $  of such Loan is to be a Floating Rate Loan;$  of such Loan is to be a LIBO Rate Loan.
 
 2.
    
    Continuation or conversion of LIBO Rate Loan maturing on :(a)
    
    Amount to be continued as a LIBO Rate Loan is $ , with an InterestPeriod of  months;(b)
    
    Amount to be converted to a Floating Rate Loan is $  ; and3.
    
    Conversion of Floating Rate Loan:(a)
    
    Requested conversion date: , 20  .(b)
    
    Amount to be converted to a LIBO Rate Loan is $ , with an Interest
Period of  months.
 
 II-i




---



##### 



PRIME OFFSHORE L.L.C.By:Jim R. BrockPresident and Chief Financial Officer II-ii




---



##### 



EXHIBIT III
 [FORM OF COMPLIANCE CERTIFICATE]
 , 2004
 
 Re:
    
    Credit Agreement dated as of June 29, 2006, by and between PRIME
OFFSHORE L.L.C. and Guaranty Bank, FSB, as Agent, and the Lenders signatory
thereto from time to time (as amended, restated, or supplemented from time to
time, the Credit Agreement)
      (a)
    
    Section 6.14: Interest Coverage Ratio. Permit as of
the close of any fiscal quarter, the ratio of (a) EBITDAX to (b)
Interest Expense, measured on a rolling four-quarter basis, to be less
than 3.00 to 1.00 for the fiscal quarters ending June 30, 2006 and
September 30, 2006 and 4.00 to 1.00 for the fiscal quarter ending
December 31, 2006 and each fiscal quarter thereafter.
 Actual
 
 (b)
    
    Section 6.15: Tangible Net Worth. Permit Tangible Net
Worth, as adjusted for exploration costs as of the close of any fiscal
quarter beginning June 30, 2006, to be less than 90% of the Tangible Net
 III-i




---



##### 



Worth at March 31, 2006, plus 75% of positive quarterly net income
thereafter.
 Required Actual
 (c)
    
    Section 6.16: General and Administrative Expenses. Permit, as of the
close of any fiscal quarter, general and administrative expenses to be more
than $350,000 per quarter beginning with the period ending June 30, 2006.
 Actual
 (e)
    
    Section 6.17: Minimum Liquidity. Permit, subsequent to Project
Completion as defined in the Completion and Liquidity Maintenance Agreement,
the sum of the Available Commitment plus unrestricted cash plus cash
equivalent to be less than $1,000,000 at any time.
 Required Actual
 
 III-ii




---



##### 



Very truly yours,PRIME OFFSHORE L.L.C.By:Jim R. BrockPresident and Chief Financial Officer III-iii




---



##### 



EXHIBIT IV
 [FORM OF OPINION OF COUNSEL]
 [Closing Date]
 
 Re:
    
    Credit Agreement dated as of June 29, 2006, by and between PRIME
OFFSHORE L.L.C. and Guaranty Bank, FSB, as Agent, and the Lenders signatory
thereto from time to time (as amended, restated, or supplemented from time to
time, the Credit Agreement)
  Borrower




---



##### 








---



##### 








---



##### 








---



##### 








---



##### 



EXHIBIT V
 FACILITY AMOUNTS
 Revolving Line of CreditName of Lender
    
    Facility Amount
    
    
    Percentage ShareGuaranty Bank, FSB
    
    $
    200,000,000
    
    

    100
    %Total
    
    $
    200,000,000
    
    

    100
    %




---



##### 



EXHIBIT VI
 [FORM OF ASSIGNMENT AGREEMENT]   ASSIGNMENT AGREEMENT
 Agreement    Assignor  Assignee
 RECITALS
 Credit Agreement Borrower Lender Lenders Agent
 [all] [a portion]
  ARTICLE I
 DEFINITIONS AND INTERPRETATION
 Definitions from Credit Agreement
 Additional Defined Terms
 Assigned Interest [all of] [the portion of the]    Loan
Balance




---



##### 



Assignment
Date
 References
 Articles and Sections
 Number and Gender
 Negotiated Transaction
 ARTICLE II
 SALE AND ASSIGNMENT
 Sale and Assignment.




---



##### 



Assumption of Obligations
 Consent by Agent
 ARTICLE III
 PAYMENTS
 Payments. Section 2.1,
 Allocation of Payments
 Delivery of Notes Section 3.1




---



##### 



Further Assurances
 ARTICLE IV
 CONDITIONS PRECEDENT
   Section 3.1;
 Section 2.3.
 ARTICLE V
 REPRESENTATIONS AND WARRANTIES
 Representations and Warranties of Assignor




---



##### 



Disclaimer Section 5.1
 Representations and Warranties of Assignee




---



##### 



ARTICLE VI
 MISCELLANEOUS
 Notices
 Amendment, Modification or Waiver
 Successors and Assigns
 Assignments
 Counterparts
 Governing Law
 Expenses
 Waiver of Jury Trial




---



##### 



ASSIGNORBy:Name:Title:Address for Notices:Telecopier No.:Telephone No.:Attention:ASSIGNEEBy:Name:Title:Address for Notices:Telecopier No.:Telephone No.:Attention:
 ACKNOWLEDGED AND CONSENTED TO:GUARANTY BANK, FSB as AgentBy:Name:Title: