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                                                                 EXHIBIT 10.26.1

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                               SECURITY AGREEMENT

                                     BETWEEN

                           F-W OIL EXPLORATION L.L.C.

                                       AND

                               GUARANTY BANK, FSB
                                 (SECURED PARTY)

                                DECEMBER 28, 2004

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                                TABLE OF CONTENTS

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ARTICLE I     DEFINITIONS AND INTERPRETATION..............................................................  1
         1.1  Terms Defined Above.........................................................................  1
         1.2  Terms Defined in Credit Agreement...........................................................  1
         1.3  Additional Defined Terms....................................................................  1
         1.4  Undefined Financial Accounting Terms........................................................  3
         1.5  References..................................................................................  3
         1.6  Articles and Sections.......................................................................  3
         1.7  Number and Gender...........................................................................  3

ARTICLE II    GRANT OF SECURITY INTEREST..................................................................  4

ARTICLE III   REPRESENTATIONS AND WARRANTIES..............................................................  4
         3.1  Validity, Perfection and Priority...........................................................  4
         3.2  No Liens; Other Financing Statements........................................................  4
         3.3  Location of Debtor and Collateral...........................................................  5
         3.4  Accounts....................................................................................  5
         3.5  Tradenames; Prior Names.....................................................................  5

ARTICLE IV    COVENANTS...................................................................................  5
         4.1  Further Assurances..........................................................................  5
         4.2  Change of Chief Executive Office............................................................  6
         4.3  Change of Name or Corporate Structure.......................................................  6
         4.4  Maintain Records and Accounts...............................................................  6
         4.5  Right of Inspection.........................................................................  6
         4.6  Possession of Collateral....................................................................  7
         4.7  Financing Statement Filings; Notifications..................................................  7

ARTICLE V     ACCOUNTS....................................................................................  7
         5.1  Debtor Remains Liable under Accounts........................................................  7
         5.2  Collections on Accounts.....................................................................  7

ARTICLE VI    POWER OF ATTORNEY...........................................................................  8
         6.1  Appointment as Attorney-in-Fact.............................................................  8
         6.2  No Duty on the Part of Secured Party........................................................  9

ARTICLE VII   REMEDIES; RIGHTS UPON DEFAULT...............................................................  9
         7.1  Rights and Remedies Generally...............................................................  9
         7.2  Proceeds.................................................................................... 10
         7.3  Collection of Accounts...................................................................... 10
         7.4  Disposition of Collateral................................................................... 10
         7.5  Debtor's Accounts........................................................................... 11
         7.6  Possession of Collateral.................................................................... 11
         7.7  Disposition of the Collateral............................................................... 11
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<S>                                                                                                        <C>
         7.8  Recourse.................................................................................... 12
         7.9  Expenses; Attorneys' Fees................................................................... 12
         7.10 Application of Proceeds..................................................................... 12
         7.11 Limitation on Duties Regarding Preservation of Collateral................................... 12
         7.12 Waiver of Claims............................................................................ 13
         7.13 Discontinuance of Proceedings............................................................... 13

ARTICLE VIII  INDEMNITY................................................................................... 13
         8.1  INDEMNITY................................................................................... 13
         8.2  Indemnity Obligations Secured by Collateral; Survival....................................... 14

ARTICLE IX    MISCELLANEOUS............................................................................... 15
         9.1  No Waiver; Remedies Cumulative.............................................................. 15
         9.2  Termination; Release........................................................................ 15
         9.3  Counterparts................................................................................ 15
         9.4  Marshalling................................................................................. 15
         9.5  Severability................................................................................ 15
         9.6  Financing Statement Filing.................................................................. 15
         9.7  Notices and Other Communications............................................................ 15
         9.8  Parties in Interest......................................................................... 16
         9.9  Amendments.................................................................................. 16
         9.10 ENTIRE AGREEMENT............................................................................ 16
         9.11 GOVERNING LAW............................................................................... 16
         9.12 JURISDICTION AND VENUE...................................................................... 16
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                               SECURITY AGREEMENT

      This SECURITY AGREEMENT (this "Agreement"), dated as of December 28, 2004,
is by and between F-W OIL EXPLORATION L.L.C., (the "Debtor"), and GUARANTY BANK,
FSB, a federal savings bank ("Secured Party").

                              W I T N E S S E T H:

      WHEREAS, pursuant to the terms and conditions of the Credit Agreement
dated December __, 2004, by and among the Debtor and the Secured Party (as
amended, restated, or supplemented from time to time, the "Credit Agreement"),
and

      WHEREAS, pursuant to the Credit Agreement and as an inducement to the
Secured Party to extend credit to or for the benefit of the Borrower pursuant to
the Credit Agreement, Debtor has agreed to execute this Agreement in favor of
the Secured Party;

      NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                   ARTICLE I

                         DEFINITIONS AND INTERPRETATION

      1.1 Terms Defined Above. As used herein, each of the terms "Agreement,"
"Borrower," "Credit Agreement," "Debtor," and "Secured Party" shall have the
meaning assigned to such term hereinabove.

      1.2 Terms Defined in Credit Agreement. Each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Credit
Agreement.

      1.3 Additional Defined Terms. As used herein, each of the following terms
shall have the following meanings:

            "Accounts" shall mean all accounts receivable, book debts, notes,
      drafts, instruments, documents, acceptances, and other forms of
      obligations now owned or hereafter received or acquired by or belonging or
      owing to Debtor (including, without limitation, under any trade names,
      styles, or divisions thereto), whether arising from the sale or lease of
      goods or the rendition of services or any other transaction (including,
      without limitation, any such obligation which might be characterized as an
      account, general intangible, other than contract rights under contracts
      containing prohibitions against assignment of or the granting of a
      security interest in the rights of a party thereunder, or chattel paper
      under the Uniform Commercial Code in effect in any jurisdiction), and all
      rights of Debtor in, to, and under all purchase orders now owned or
      hereafter received or acquired by it for goods or services, and all rights
      of Debtor to any goods the sale or lease of which gave rise to any of the
      foregoing (including, without limitation, returned or repossessed goods
      and rights of unpaid sellers), and all moneys due or to

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become due to Debtor under all contracts for the sale or lease of goods or the
performance of services (whether or not earned by performance) or in connection
with any other transaction, now in existence or hereafter arising, including,
without limitation, all collateral security and guarantees of any kind given by
any Person with respect to any of the foregoing.

            "Account Debtor" shall mean each Person obligated on an Account,
      Chattel Paper, or General Intangible.

            "Account Records" shall mean (a) all original copies of all
      documents, instruments, or other writings evidencing the Accounts, (b) all
      books, correspondence, credit or other files, records, ledger sheets or
      cards, invoices, and other papers relating to the Accounts, including,
      without limitation, all tapes, cards, computer tapes, computer discs,
      computer runs, record keeping systems, and other papers and documents
      relating to the Accounts, whether in the possession or under the control
      of Debtor or any computer bureau or agent from time to time acting for or
      on behalf of Debtor or otherwise, (c) all evidences of the filing of
      financing statements and the registration of other instruments in
      connection therewith and amendments, supplements, or other modifications
      thereto, notices to other creditors or secured parties, and certificates,
      acknowledgements, or other writings, including, without limitation, lien
      search reports, from filing or other registration offices, (d) all credit
      information, reports, and memoranda relating thereto, and (e) all other
      written or non-written forms of information related in any way to the
      foregoing or any Account.

            "Chattel Paper" shall mean all chattel paper (as such term is
      defined in Section 9-102(a)(11) of the UCC) of the Debtor.

            "Collateral" shall have the meaning assigned to it in Article II.

            "Commodity Hedge Agreement" shall mean any agreement, device or
      arrangement entered into by one Person with another Person providing for
      payments which are related to fluctuations in the price of petroleum (or
      any fraction thereof), natural gas, or natural gas liquids (including, but
      not limited to, swaps, caps, collars, options, puts, calls, futures and
      forward contracts).

            "General Intangibles" shall mean all general intangibles (as such
      term is defined in Section 9-102(a)(42) of the UCC) of Debtor, including,
      without limitation, rights to the payment of money (other than Accounts),
      net profit interests, contracts, farmout agreements, licenses, and
      franchises (excluding licenses and franchises which prohibit the
      assignment or grant of a security interest by Debtor), federal income tax
      refunds, trade names, distributions on certificated securities (as defined
      in Section 8-102(a)(4) of the UCC) and uncertificated securities (as
      defined in ss.8-102(a)(14) of the UCC), computer programs and other
      computer software, inventions, designs, trade secrets, goodwill,
      proprietary rights, customer lists, supplier contracts, sale orders,
      correspondence, advertising materials, payments due in connection with any
      requisition, confiscation, condemnation, seizure or forfeiture of any
      property, reversionary interests in

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      pension and profit-sharing plans and reversionary, beneficial and residual
      interests in trusts, credits with and other claims against any Person,
      together with any collateral for any of the foregoing and the rights under
      any security agreement granting a security interest in such collateral.

            "Indemnitees" shall mean the Secured Party and its shareholders,
      officers, directors, employees, agents, attorneys-in-fact, and affiliates.

            "Proceeds" shall mean proceeds (as such term is defined in Section
      9-102(65) of the UCC).

            "Rate Management Transaction" shall mean any transaction (including
      an agreement with respect thereto) now existing or hereafter entered into
      between Debtor and Secured Party which is a rate swap, basis swap, forward
      rate transaction, commodity swap, commodity option, equity or equity index
      swap, equity or equity index option, bond option, interest rate option,
      foreign exchange transaction, cap transaction, floor transaction, collar
      transaction, forward transaction, currency swap transaction,
      cross-currency rate swap transaction, currency option or any other similar
      transaction (including any option with respect to any of these
      transactions) or any combination thereof, whether linked to on or more
      interest rates, foreign currencies, commodity prices, equity prices or
      other financial measures.

            "Secured Obligations" shall mean the Obligations.

            "UCC" shall mean the Uniform Commercial Code as in effect from time
      to time in the State of Texas.

      1.4 Undefined Financial Accounting Terms. Undefined financial accounting
terms used in this Agreement shall have the meanings assigned to such terms
according to GAAP.

      1.5 References. The words "hereby," "herein," "hereinabove,"
"hereinafter," "hereinbelow," "hereof," "hereunder," and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular Article, Section, or provision of this Agreement. References in
this Agreement to Articles, Sections, or Exhibits are to such Articles,
Sections, or Exhibits of this Agreement unless otherwise specified.

      1.6 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.

      1.7 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Words denoting
sex shall be construed to include the masculine, feminine and neuter, when such
construction is appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative. Definitions of terms defined

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in the singular or plural shall be equally applicable to the plural or singular,
as the case may be, unless otherwise indicated.

                                   ARTICLE II

                           GRANT OF SECURITY INTEREST

      As security for the prompt and complete payment and performance in full of
all Secured Obligations, Debtor hereby assigns and transfers for the purpose of
security and pledges to the Secured Party and grants to the Secured Party a
security interest in and continuing lien on all right, title, and interest of
Debtor in, to, and under the following, in each case, whether now owned or
existing or hereafter acquired or arising, and wherever located (all of which is
herein collectively called the "Collateral"):

      (a)   all Accounts;

      (b)   all Account Records;

      (c)   all Chattel Paper;

      (d)   all General Intangibles;

      (e)   all Commodity Hedge Agreements;

      (f)   all Rate Management Transactions; and

      (g)   all accessions and additions to any or all of the foregoing, all
            substitutions and replacements for any or all of the foregoing, and
            all Proceeds and products of any or all of the foregoing.

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

      Debtor, to the extent that such Debtor is the owner of such collateral,
hereby represents and warrants to the Secured Party, which representations and
warranties shall survive execution and delivery of this Agreement, as follows:

      3.1 Validity, Perfection and Priority. The security interests in the
Collateral granted to the Secured Party hereunder constitute valid and
continuing security interests in Collateral. Assuming the accomplishment of
recording and filing financing statements, in accordance with applicable laws
prior to the intervention of rights of other Persons, (such financing
statements) naming Debtor as "debtor" and the Secured Party as "secured party"
and describing the Collateral, the security interests granted to the Secured
Party hereunder will constitute valid first-priority perfected security
interests in all Collateral with respect to which a security interest can be
perfected by the filing of a financing statement, subject only to Permitted
Liens.

      3.2 No Liens; Other Financing Statements. (a) Except for the Lien granted
to the Secured Party hereunder and Permitted Liens, Debtor owns each item of the
Collateral free and

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clear of any and all Liens, rights, or claims of all other Persons, and Debtor
shall defend the Collateral against all claims and demands of all Persons at any
time claiming the same or any interest therein adverse to the Secured Party.

            (b) No financing statement or other evidence of Lien covering or
purporting to cover any of the Collateral is on file in any public office other
than (i) financing statements in favor of the Secured Party, (ii) financing
statements for which proper termination statements have been delivered to the
Secured Party for filing, and (iii) financing statements filed in connection
with Permitted Liens.

      3.3 Location of Debtor and Collateral. The chief executive office of the
Debtor is 9821 Katy Freeway, Suite 1050, Houston, Texas 77024. The primary
copies of the Account Records are located at, and all Accounts and General
Intangibles are maintained at, and controlled and directed (including, without
limitation, for general accounting purposes) from, such chief executive office.

      3.4 Accounts. (a) Each Account (i) is and will be, in all material
respects, the genuine, legal, valid, and binding obligation of the Account
Debtor in respect thereof, representing an unsatisfied obligation of such
Account Debtor, (ii) is and will be, in all material respects, enforceable in
accordance with its terms, (iii) is not and will not be subject to any setoffs,
defenses, taxes, counterclaims (except (A) with respect to refunds, returns, and
allowances in the ordinary course of business, and (B) to the extent that such
Account may not yet have been earned by performance), and (iv) is and will be,
in all material respects, in compliance with all applicable laws, whether
federal, state, local, or foreign.

            (b) No Accounts which are evidenced by Chattel Paper require the
consent of the Account Debtor in respect thereof in connection with their
assignment hereunder.

      3.5 Tradenames; Prior Names. Debtor has not conducted business under any
name other than its current name during the last five years.

                                   ARTICLE IV

                                    COVENANTS

      Debtor covenants and agrees with the Secured Party that from and after the
date of this Agreement:

      4.1 Further Assurances. At any time and from time to time, upon the
request of the Secured Party, and at the sole expense of Debtor, Debtor will
promptly and duly execute and deliver any and all such further instruments,
endorsements, powers of attorney, and other documents, make such filings, give
such notices, and take such further action as the Secured Party may reasonably
deem desirable in obtaining the full benefits of this Agreement and the rights,
remedies, and powers herein granted, including, without limitation, the
following:

            (a) the filing of financing statements, in form acceptable to the
      Secured Party under the Uniform Commercial Code in effect in any
      jurisdiction with respect to the liens and security interests granted
      hereby;

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            (b) the performance of all searches of public records deemed
      necessary by the Secured Party to establish and determine the priority of
      the security interests of the Secured Party or to determine the presence
      or priority of other secured parties; and

            (c) the furnishing to the Secured Party from time to time of reports
      and schedules in connection with the Collateral as required pursuant to
      the Credit Agreement, all in reasonable detail and in form reasonably
      satisfactory to the Secured Party.

      4.2 Change of Chief Executive Office. Debtor will not move its chief
executive office except to such new location as Debtor may establish in
accordance with the last sentence of this Section. The originals of all Account
Records and General Intangibles will be kept at such chief executive office or
at the locations referred to in Section 3.3, or at such new locations as Debtor
may establish in accordance with the last sentence of this Section. All
Accounts, Account Records, and General Intangibles of Debtor will be maintained
at and controlled and directed (including, without limitation, for general
accounting purposes) from the locations referred to in Section 3.3 or such new
locations as the Debtor may establish in accordance with the last sentence of
this Section. With respect to any new location, promptly upon the request of the
Secured Party, Debtor shall take all such action as the Secured Party may
request to maintain the security interest of the Secured Party in the Collateral
granted hereby at all times fully perfected with the same or better priority and
in full force and effect. Debtor shall not establish a new location for its
chief executive office or such activities (or move any such activities from the
locations referred to in Section 3.3) until it shall have given to the Secured
Party not less than ten days' prior written notice of its intention to do so,
clearly describing such new location and providing such other information in
connection therewith as the Secured Party may reasonably request.

      4.3 Change of Name or Limited Partnership Structure. Debtor shall not
change its name or limited partnership structure or conduct business under any
name other than its current name without giving notice thereof to the Secured
Party within ten days thereafter, clearly describing such new name, or limited
liability company structure or such new tradename and providing such other
information in connection therewith as the Secured Party may reasonably request.
With respect to such new name, limited partnership company structure, or
tradename, promptly upon the request of the Secured Party, Debtor shall take all
such action as the Secured Party may reasonably request to maintain the security
interest of the Secured Party in the Collateral granted hereby at all times
fully perfected with the same or better priority and in full force and effect.

      4.4 Maintain Records and Accounts. Debtor will keep and maintain, or cause
to be kept and maintained, at its own cost and expense satisfactory and complete
records of the Collateral, including, but not limited to, the originals of all
documentation with respect to all Accounts and General Intangibles and records
of all payments received and all credits granted on the Accounts, all
merchandise returned, and all other dealings therewith.

      4.5 Right of Inspection. The Secured Party shall upon reasonable notice to
Debtor have full and free access during normal business hours of Debtor to all
the books,

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correspondence, and records of Debtor; and the Secured Party and its
representatives may examine the same, take extracts therefrom, and make
photocopies thereof.

      4.6 Possession of Collateral. The Secured Party shall be deemed to have
possession of any of the Collateral in transit to it or set apart for it.
Otherwise the Collateral shall remain in Debtor's constructive possession and
control at all times, at Debtor's risk of loss, and shall (except for sales
permitted by Section 6.4 of the Credit Agreement) be kept at the locations
represented in Section 3.3.

      4.7 Financing Statement Filings; Notifications. Debtor recognizes that
financing statements pertaining to the Collateral have been or will be filed
with the offices of the Secretary of State for the States listed in Exhibit A
hereto. Debtor will immediately notify the Secured Party of any condition or
event that may change the proper location for the filing of any financing
statement or other public notice or recording for the purpose of perfecting a
security interest in the Collateral. Without limiting the generality of the
foregoing, Debtor will (a) ten days prior to taking such action, notify the
Secured Party of any change to a jurisdiction other than as represented in
Section 3.3 hereof, (i) in the location of Debtor's chief place of business,
(ii) in the location of the office where Debtor keeps its records concerning the
Accounts and the General Intangibles and the original of all the Accounts
Records, or (iii) in the "location" of Debtor within the meaning of Section
9-307 of the UCC, and (b) within ten days after taking such action, notify
Secured Party of any change in Debtor's name. In any notice furnished pursuant
to this Section, Debtor will expressly state that the notice is required by this
Agreement and contains facts that will or may require additional filings of
financing statements or other notices for the purpose of continuing perfection
of the Secured Party's security interest in the Collateral.

                                   ARTICLE V

                                    ACCOUNTS

      5.1 Debtor Remains Liable under Accounts. Anything herein to the contrary
notwithstanding (including, without limitation, the grant of any rights to the
Secured Party), Debtor shall remain liable under each of the Accounts to observe
and perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with the terms of any agreement giving rise to
each such Account. The Secured Party shall have no obligation or liability under
any Account (or any agreement giving rise thereto) by reason of or arising out
of this Agreement or the receipt by the Secured Party of any payment relating to
such Account pursuant hereto, nor shall the Secured Party be obligated in any
manner to perform any of the obligations of Debtor under or pursuant to any
Account (or any agreement giving rise thereto), to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto), to present or file any claim, to take any action
to enforce any performance, or to collect the payment of any amounts which may
have been assigned to it or to which it may be entitled at any time or times.

      5.2 Collections on Accounts. Prior to the occurrence of an Event of
Default, the Secured Party hereby authorizes Debtor to collect the Accounts. At
any time following and during the continuance of any Event of Default, the
Secured Party may curtail or terminate said

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authority at any time and itself, or by its agents, collect all Accounts, and
any payments of Accounts collected by Debtor shall be held by Debtor in trust
for the Secured Party, segregated from other funds of Debtor. All Proceeds,
while held by the Secured Party (or by Debtor in trust for the Secured Party)
shall continue to be Collateral securing all of the Secured Obligations and
shall not constitute payment thereof until applied as hereinafter provided.

                                   ARTICLE VI

                                POWER OF ATTORNEY

      6.1 Appointment as Attorney-in-Fact. Debtor hereby irrevocably constitutes
and appoints the Secured Party and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact, with full irrevocable
power and authority in the place and stead of Debtor and in the name of Debtor
or in its own name, from time to time in the discretion of the Secured Party,
for the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, Debtor hereby gives the
Secured Party the power and right, on behalf of Debtor, without notice to or
assent by the Debtor, to do the following:

            (a) in the case of any Account, at any time when the authority of
      Debtor to collect the Accounts has been curtailed or terminated pursuant
      hereto, or in the case of any other Collateral, at any time when any Event
      of Default shall have occurred and be continuing, in the name of Debtor or
      its own name, or otherwise, to take possession of and indorse and collect
      any checks, drafts, notes, acceptances, or other instruments for the
      payment of moneys due under, or with respect to, any Collateral; in the
      name of Debtor or otherwise to direct any party liable for any payment
      under any of the Collateral to make payment of any and all moneys due or
      to become due thereunder directly to the Secured Party or as the Secured
      Party shall direct; to ask or demand for, collect, receive payment of, and
      receipt for, any and all moneys, claims, and other amounts due or to
      become due at any time in respect of or arising out of any Collateral;

            (b) at any time when an Event of Default shall have occurred and be
      continuing, to prepare, sign, and file financing statements and amendments
      thereto in the name of Debtor;

            (c) at any time when an Event of Default shall have occurred and be
      continuing, to take or cause to be taken all actions necessary to perform
      or comply or cause performance or compliance with the terms of this
      Agreement, including, without limitation, actions to pay or discharge
      taxes and Liens levied or placed on or threatened against the Collateral,
      to effect any repairs or obtain any insurance called for by the terms of
      this Agreement, and to pay all or any part of the premiums therefor and
      the costs thereof;

            (d) upon the occurrence and during the continuance of any Event of
      Default, (i) to sign and indorse any invoices, freight or express bills,
      bills of lading, storage or warehouse receipts, drafts against debtor,
      assignments,

                                     -8-
<PAGE>

      verifications, notices, and other documents in connection with any of the
      Collateral, (ii) to commence and prosecute any suits, actions, or
      proceedings at law or in equity in any court of competent jurisdiction to
      collect the Collateral or any portion thereof and to enforce any other
      right in respect of any Collateral, (iii) to defend any suit, action, or
      proceeding brought against Debtor with respect to any Collateral, (iv) to
      settle, compromise, or adjust any suit, action, or proceeding described in
      the preceding clause and, in connection therewith, to give such discharges
      or releases as the Secured Party may deem appropriate, and (v) generally,
      to sell or transfer and make any agreement with respect to or otherwise
      deal with any of the Collateral as fully and completely as though the
      Secured Party were the absolute owner thereof for all purposes, and to do,
      at the option of the Secured Party and the expense of Debtor, at any time,
      or from time to time, all acts and things which the Secured Party deems
      necessary to protect, preserve, or realize upon the Collateral and the
      Liens of the Secured Party thereon and to effect the intent of this
      Agreement, all as fully and effectively as Debtor might do; and

            (e) at any time when an Event of Default shall have occurred and be
      continuing, to execute, in connection with any foreclosure, any
      endorsements, assignments, or other instruments of conveyance or transfer
      with respect to the Collateral.

      Debtor hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable so long as any Obligation remains outstanding
or any Commitment exists. Debtor hereby acknowledges and agrees that in acting
pursuant to this power-of-attorney the Secured Party shall be acting in its own
interest and shall have no fiduciary duties to the Debtor, and Debtor hereby
waives any claims to the rights of a beneficiary of a fiduciary relationship
hereunder.

      6.2 No Duty on the Part of Secured Party. The powers conferred on the
Secured Party hereunder are solely to protect the interests of the Secured Party
in the Collateral and shall not impose any duty upon the Secured Party to
exercise any such powers. The Secured Party shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers,
and, except for its own gross negligence, neither it nor any of its officers,
directors, employees, or agents shall be responsible to the Debtor for any act
or failure to act hereunder.

                                  ARTICLE VII

                          REMEDIES; RIGHTS UPON DEFAULT

      7.1 Rights and Remedies Generally. If an Event of Default shall occur and
be continuing, then and in every such case, the Secured Party shall have all the
rights of a secured party under the UCC, all rights now or hereafter existing
under all other applicable laws, and, subject to any mandatory requirements of
applicable law then in effect, all rights set forth in this Agreement and the
other Loan Documents. No enumeration of rights in this Section or elsewhere in
this Agreement or in any other Loan Document or other agreement shall be deemed
to in any way limit the rights of the Secured Party as described in this
Section.

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      7.2 Proceeds. If an Event of Default shall occur and be continuing, in
addition to the rights of the Secured Party specified with respect to the
payment of Accounts, (a) all Proceeds received by Debtor consisting of cash,
checks, and other near-cash items shall be held by Debtor in trust for the
Secured Party, segregated from other funds of Debtor, and shall forthwith upon
receipt by Debtor, be turned over to the Secured Party, in the same form
received by Debtor (appropriately indorsed or assigned by the Debtor to the
order of the Secured Party or in such other manner as shall be satisfactory to
the Secured Party), and (b) any and all such Proceeds received by the Secured
Party (whether from Debtor or otherwise), or any part thereof, shall be applied
by the Secured Party as provided in Section 7.10 hereof.

      7.3 Collection of Accounts. If an Event of Default shall occur and be
continuing:

            (a) the Secured Party may instruct the obligor or obligors on any
      obligation owing or purporting to be owed to Debtor constituting the
      Collateral (including, without limitation, the Accounts) to make any
      payment required by the terms of such obligation directly to the Secured
      Party;

            (b) the Secured Party shall have the right from time to time to
      modify (including, without limitation, to extend the time for payment or
      arrange for payment in installments) or waive rights under any such
      obligation and to compromise or settle counterclaims or setoffs with the
      obligor under any such obligation; and

            (c) any and all of such proceeds of such collections paid to the
      Secured Party, or any part thereof, (after deduction of the Secured
      Party's expenses of collection, including, without limitation, reasonable
      attorneys' fees and disbursements), shall be applied by the Secured Party
      as provided in Section 7.10 hereof.

      7.4 Disposition of Collateral. If an Event of Default shall occur and be
continuing:

            (a) the Secured Party may direct Debtor to sell, assign, or
      otherwise liquidate or dispose of all or from time to time any portion of
      the Collateral, and Debtor shall do so, and the Secured Party may take
      possession of the Proceeds of such Collateral. The Secured Party may
      direct Debtor to direct that all Proceeds of such Collateral be paid
      directly to the Secured Party or may permit the Proceeds of such
      Collateral to be paid to Debtor and all such Proceeds consisting of cash,
      checks, or near-cash items shall be held by Debtor in trust for the
      Secured Party, segregated from other funds of Debtor in a separate deposit
      account containing only Proceeds and shall forthwith upon receipt by
      Debtor, be turned over to the Secured Party, in the same form received by
      Debtor (appropriately indorsed or assigned by Debtor to the order of the
      Secured Party or in such other manner as shall be satisfactory to the
      Secured Party); and

            (b) any and all such Proceeds received by the Secured Party (whether
      from Debtor or otherwise), shall be applied by the Secured Party as
      provided in Section 7.10 hereof.

                                     -10-
<PAGE>

      7.5 Debtor's Accounts. If an Event of Default shall occur and be
continuing, the Secured Party may liquidate any securities held in any accounts
of Debtor and apply the proceeds thereof and any other amounts held in any
accounts of Debtor as provided in Section 7.10 hereof.

      7.6 Possession of Collateral. If an Event of Default shall occur and be
continuing, (a) the Secured Party may, personally or by agents or attorneys,
immediately retake possession of the Collateral (including the originals of all
or any Accounts and Account Records) or any part thereof, from Debtor or any
other Person which then has possession of any part thereof with or without
notice or judicial process, and for that purpose may enter upon Debtor's
premises where any of the Collateral is located and remove the same and may make
reasonable use in connection with such removal of any and all services,
supplies, aids, and other facilities of Debtor, and (b) upon three days' notice
to Debtor, Debtor shall, at its own expense, assemble the Collateral, including,
without limitation, the originals of all Account Records (or from time to time
any portion thereof) and make it available to the Secured Party by delivery to
the Secured Party at any location designated by the Secured Party which is
reasonably convenient to both parties, whether at the premises of Debtor or the
Secured Party or elsewhere. Debtor shall, at its sole expense, store and keep
any Collateral so assembled at such place or places pending further action by
the Secured Party and while the Collateral shall be so stored and kept, provide
such guards and maintenance services as shall be reasonably necessary to protect
the same and to preserve and maintain the Collateral in good condition. Debtor's
obligation to so assemble and deliver the Collateral is of the essence of this
Agreement and, accordingly, upon application to a court of equity having
jurisdiction, the Secured Party shall be entitled to a decree requiring specific
performance by the Debtor of such obligation.

      7.7 Disposition of the Collateral. If an Event of Default shall occur and
be continuing, the Secured Party may sell, assign, lease, give an option or
options to purchase, or otherwise dispose of the Collateral (or contract to do
any of the foregoing) under one or more contracts or as an entirety, and, to the
extent permitted by applicable law, without the necessity of gathering at the
place of sale the property to be sold, at public or private sale or sales,
conducted by any officer, nominee or agent of, or auctioneer or attorney for the
Secured Party at any location of any third party conducting or otherwise
involved in such sale or any office of the Secured Party or elsewhere and in
general in such manner, at such time or times and upon such terms and conditions
and at such price as may be commercially reasonable, for cash or on credit or
for future delivery without assumption of any credit risk. Any of the Collateral
may be sold, leased, assigned, or options or contracts entered to do so, or
otherwise disposed of, in the condition in which the same existed when taken by
the Secured Party or after any overhaul or repair which may be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceeding shall be made upon not less than ten days' written notice to Debtor
specifying the time after which such disposition is to be made and the intended
sale price or other consideration therefor. Any such disposition which shall be
a public sale shall be made upon not less than ten days' written notice to
Debtor (which Debtor agrees to be commercially reasonable) specifying the time
and place of such sale and, in the absence of applicable requirements of law to
the contrary, shall be by public auction (which may, at the option or the
Secured Party, be subject to reserve), after publication of commercially
reasonable notice of such auction. To the extent permitted by applicable law,
the Secured Party may bid for and become the purchaser of the Collateral or any
item thereof, offered for sale in accordance with this

                                     -11-
<PAGE>

Section without accountability to Debtor (except to the extent of surplus money
received) as provided below. In the payment of the purchase price of the
Collateral, the purchaser shall be entitled to have credit on account of the
purchase price thereof of amounts owing to such purchaser on account of any of
the Secured Obligations and any such purchaser may deliver notes, claims for
interest, or claims for other payment with respect to such Secured Obligations
in lieu of cash up to the amount which would, upon distribution of the net
proceeds of such sale, be payable thereon. Such notes, if the amount payable
hereunder shall be less than the amount due thereon, shall be returned to the
holder thereof after being appropriately stamped to show partial payment.
Notwithstanding the foregoing, if the Collateral or any portion thereof is
perishable or threatens to decline speedily in value or is of a type customarily
sold in a recognized market only such notice as shall be reasonably practicable
shall be required.

      7.8 Recourse. Debtor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
satisfy the Secured Obligations. Debtor shall also be liable for all reasonable
expenses of the Secured Party incurred in connection with collecting such
deficiency, including, without limitation, the reasonable fees and disbursements
of any attorneys employed by the Secured Party to collect such deficiency.

      7.9 Expenses; Attorneys' Fees. Debtor shall reimburse the Secured Party
for all its reasonable expenses in connection with the exercise of its rights
and remedies hereunder, including, without limitation, reasonable attorneys'
fees and legal expenses incurred by the Secured Party.

      7.10 Application of Proceeds. The proceeds of any disposition of
Collateral shall be applied as follows:

            (a) to the payment of any and all reasonable expenses and fees
      (including attorneys' fees and disbursements) incurred by the Secured
      Party in connection with the exercise of its rights and remedies
      hereunder, including, without limitation, reasonable expenses and fees in
      connection with obtaining, taking possession of, removing, holding,
      insuring, repairing, preparing for sale or lease, storing and disposing of
      Collateral;

            (b) to the satisfaction of the Secured Obligations in such order as
      the Secured Party may elect; and

            (c) after the indefeasible payment in full in cash of all Secured
      Obligations, to Debtor or to whomever may lawfully be entitled to receive
      the same or as a court of competent jurisdiction may direct.

      7.11 Limitation on Duties Regarding Preservation of Collateral. The
Secured Party's sole duty with respect to the custody, safekeeping, and physical
preservation of the Collateral in its possession, under Section 9.207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Secured Party
deals with similar property for its own account. The Secured Party shall have no
obligation to take any steps to preserve rights against prior parties to any
Collateral. Except for matters constituting gross negligence, neither the
Secured Party nor any of its directors, officers, employees, or agents shall be
liable for failure to demand, collect, or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any

                                     -12-
<PAGE>

obligation to sell or otherwise dispose of any Collateral upon the request of
the Debtor or otherwise.

      7.12 Waiver of Claims. Except as otherwise provided in this Agreement,
Debtor hereby waives, to the extent permitted by applicable law, notice of and
judicial hearing in connection with the Secured Party's taking possession or the
Secured Party's disposition of any of the Collateral in accordance herewith,
including, without limitation, any and all prior notice and hearing for any
prejudgment remedy or remedies and any such right which the Debtor would
otherwise have under the constitution or any statute of the United States or any
state, and Debtor hereby further waives, to the extent permitted by law:

            (a) all damages occasioned by such taking of possession except any
      damages which are the direct result of the gross negligence of the Secured
      Party;

            (b) all other requirements as to the time, place, and terms of sale
      or other requirements with respect to the enforcement of the rights of the
      Secured Party hereunder;

            (c) demand of performance or other demand, notice of intent to
      demand or accelerate, notice of acceleration, presentment, protest,
      advertisement, or notice of any kind to or upon Debtor or any other
      Person, except as may be required by the Credit Agreement; and

            (d) all rights of redemption, appraisement, valuation, diligence,
      stay, extension, or moratorium now or hereafter in force under any
      applicable law in order to stay or delay the enforcement of this
      Agreement, including the absolute sale of the Collateral or any portion
      thereof, and Debtor, for itself and all who may claim under it, insofar as
      it or they now or hereafter lawfully may, hereby waives the benefit of all
      such laws.

      7.13 Discontinuance of Proceedings. In case the Secured Party shall have
instituted any proceeding to enforce any right, power, or remedy under this
Agreement by foreclosure, sale, entry, or otherwise, and such proceeding shall
have been discontinued or abandoned for any reason, then and in every such case,
Debtor and the Secured Party shall be returned to their former positions and
rights hereunder with respect to the Collateral subject to the security interest
created under this Agreement, and all rights, remedies, and powers of the
Secured Party shall continue as if no such proceeding had been instituted.

                                  ARTICLE VIII

                                    INDEMNITY

      8.1 INDEMNITY. (a) DEBTOR AGREES TO INDEMNIFY, REIMBURSE, AND HOLD THE
INDEMNITEES HARMLESS FROM ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, CLAIMS, ACTIONS, JUDGMENTS, SUITS, REASONABLE COSTS, REASONABLE
EXPENSES, OR REASONABLE DISBURSEMENTS (INCLUDING REASONABLE ATTORNEYS' FEES AND
EXPENSES) (FOR THE PURPOSES OF THIS SECTION ALL OF THE

                                     -13-
<PAGE>

FOREGOING ARE COLLECTIVELY CALLED "EXPENSES") OF WHATSOEVER KIND OR NATURE WHICH
MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY ANY OF SUCH INDEMNITEES IN
ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE DOCUMENTS EXECUTED
IN CONNECTION HEREWITH OR IN ANY OTHER WAY CONNECTED WITH THE ADMINISTRATION OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ENFORCEMENT OF ANY OF THE TERMS OF
OR THE PRESERVATION OF ANY RIGHTS HEREUNDER, INCLUDING, WITHOUT LIMITATION,
THOSE ARISING FROM THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF ANY
INDEMNITEE; PROVIDED THAT NO SUCH INDEMNITEE SHALL BE INDEMNIFIED PURSUANT TO
THIS SECTION FOR EXPENSES TO THE EXTENT ARISING FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE.

            (b) Debtor agrees that upon written notice by any such Indemnitee of
any assertion that could give rise to an Expense, Debtor shall assume full
responsibility for the defense thereof. Without limiting the application of part
(a) of this Section, Debtor agrees to pay or reimburse such Indemnitee on demand
for any and all reasonable fees, costs, and expenses of whatever kind or nature
incurred in connection with the creation, preservation, or protection of the
Secured Party's Liens on, and security interests in, the Collateral, including,
without limitation, all reasonable fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment, or
discharge of any taxes or Liens or security interests upon or in respect of the
Collateral, premiums for insurance with respect to the Collateral, all
reasonable expenses incurred in the custody, preservation, use, or operation of
the Collateral when Collateral is in the Secured Party's possession, and all
other reasonable fees, costs, and expenses in connection with protecting,
maintaining, or preserving the Collateral and the Secured Party's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits, or proceedings arising out of or relating to the
Collateral.

            (c) Without limiting the application of parts (a) or (b) of this
Section, Debtor agrees to pay, indemnify, and hold each Indemnitee harmless from
and against any Expenses which such Indemnitee may suffer, expend, or incur in
consequence of or growing out of any misrepresentation by any Debtor in this
Agreement or in any statement or writing contemplated by or made or delivered
pursuant to or in connection with this Agreement.

            (d) If and to the extent that the obligations of Debtor under this
Section are unenforceable for any reason, Debtor hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations which
is permissible under applicable law.

      8.2 Indemnity Obligations Secured by Collateral; Survival. Any amounts
paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Secured Obligations secured by the Collateral.
The indemnity obligations of the Debtor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment and
performance of the Secured Obligations and the termination of this Agreement.

                                     -14-
<PAGE>

                                   ARTICLE IX

                                  MISCELLANEOUS

      9.1 No Waiver; Remedies Cumulative. No failure or delay on the part of the
Secured Party in exercising any right, power, or privilege hereunder and no
course of dealing between any Debtor and the Secured Party shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. A waiver by the Secured Party
of any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Secured Party would otherwise have on any
future occasion. The rights and remedies herein expressly provided are
cumulative, may be exercised singly or concurrently and as often and in such
order as the Secured Party deems expedient, and are not exclusive of any rights
or remedies which the Secured Party would otherwise have whether by agreement or
now or hereafter existing under applicable law. No notice to or demand on Debtor
in any case shall entitle Debtor to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Secured Party to any other or further action in any circumstances without notice
or demand.

      9.2 Termination; Release. When the Secured Obligations have been
indefeasibly paid and performed in full and the Commitment has terminated, this
Agreement shall terminate, and the Secured Party, at the request and sole
expense of Debtor, will execute and deliver to Debtor the proper instruments
(including Uniform Commercial Code termination statements) acknowledging the
termination of this Agreement, and will duly assign, transfer, and deliver to
Debtor, without recourse, representation, or warranty of any kind whatsoever,
such of the Collateral as may be in possession of the Secured Party and has not
theretofore been disposed of, applied, or released.

      9.3 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.

      9.4 Marshalling. The Secured Party shall not be under any obligation to
marshall any assets in favor of Debtor or any other Person or against or in
payment of any or all of the Secured Obligations.

      9.5 Severability. In case any provision in or obligation under this
Agreement or the Secured Obligations shall be invalid, illegal, or unenforceable
in any jurisdiction, the validity, legality, and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.

      9.6 Financing Statement Filing. A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in lieu
of the original to the extent permitted by applicable law.

      9.7 Notices and Other Communications. Except as to oral notices expressly
authorized herein, all notices, requests, and communications under this
Agreement shall be in

                                     -15-
<PAGE>

writing (including by telecopy). Unless otherwise expressly provided herein, any
such notice, request, or communication shall be deemed to have been duly given
or made when provided in accordance with the terms of the Credit Agreement.

      9.8 Parties in Interest. This Agreement shall be binding upon and inure to
the benefit of Debtor, the Secured Party, and their respective legal
representatives, successors, and assigns. No other Person shall have any right,
benefit, priority, or interest hereunder or as a result hereof or have standing
to require satisfaction of provisions hereof in accordance with their terms, and
any or all of such provisions may be freely waived in whole or in part by the
Secured Party at any time if the Secured Party in its sole discretion deems it
advisable to do so.

      9.9 Amendments. Neither this Agreement nor any provision hereof may be
amended, supplemented, modified, discharged, or terminated orally, but only by
an instrument in writing signed by the party against whom enforcement of the
amendment, supplement, modification, discharge, or termination is sought.

      9.10 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL
SUPERSEDE ANY PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, BETWEEN THE PARTIES
HERETO 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.

      9.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAWS).

      9.12 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 TO WHICH ANY DEBTOR IS A PARTY MAY BE
LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE SECURED PARTY, IN COURTS
HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. DEBTOR 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 SECURED
PARTY IN ACCORDANCE WITH THIS SECTION.

                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

                                     -16-
<PAGE>

      IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.

                                           DEBTOR:

                                           F-W OIL EXPLORATION L.L.C.

                                           By: Jim R. Brock
                                               ----------------------
                                               Jim R. Brock
                                               President and CFO

                                     -17-
<PAGE>

                                           SECURED PARTY:

                                           GUARANTY BANK, FSB

                                           By: Arthur R. Gralla
                                               ----------------------
                                               Arthur R. Gralla, Jr.
                                               Managing Director

                                     -18-
<PAGE>

                                    EXHIBIT A

Section 3.1: FILING LOCATIONS

             Secretary of State of Delaware

                                       A-i