**Exhibit 10.13**

 
| **Cano Petroleum, Inc.**  The Oil & Gas Commerce Building  309 West Seventh Street, Suite 1600  Fort Worth, TX 76102 |       |       |                                   |
|--------------------------------------------------------------------------------------------------------------------------|------------|------------|-----------------------------------|
| Phone (US) 817-698-0900                                                                                                  | ** ** | ** ** | **producing oil****&****gas** |
| Toll Free 1-877-698-0900                                                                                                 | ** ** | ** ** | **in the USA**                    |
| Fax 817-698-0796                                                                                                         | ** ** |       | **for the USA**                   |

 

February 14, 2006

 

Union Bank of California, N.A.Lincoln Plaza500 N. Akard Street, Suite 4200Dallas, Texas 75201Attention: Ali AhmedFacsimile: (214) 922-4209

 

Dear Mr. Ahmed:

 

Reference is made to that certain Credit Agreement (the ***“Credit Agreement”***) dated as ofNovember 29, 2005, by and among Cano Petroleum, Inc. (the **“*Borrower*”**), certain leaders named therein (the **“*Lenders*”**), and Union Bank ofCalifornia, N. A. (**“*Union Bank*”**),as Administrative Agent and leasing Lender. Capitalized terms used hereinshall, unless otherwise indicated, have the respective meanings set forth inthe Credit Agreement.

 

Borrower hereby notifies Union Bank, as Administrative Agent andLender, that Borrower may not be able to comply with the covenant set forth in ***Section 5.01*** of the CreditAgreement, which requires that Borrower comply in all material respects withall material Legal Requirements. In connection with Borrower’s acquisition ofW.O. Energy of Nevada, Inc. (***“W.O.”***),Borrower is required to file the financial statements of W.O. and the pro formafinancial information required by Item 9.01(a-b) of Form 8-K by amendment (the **“*Amendment*”**) to the 8-Kpreviously filed with the Securities and Exchange Commission on December 5,2005 (the **“*8-K*”**).The required financial statements and pro forma financial information involveall of W.O.’s prior activities, including non-oil & gas activities thatwere specifically excluded from Borrower’s acquisition of W.O. (e.g. anairplane company and a hotel company). Additionally, Borrower and Borrower’sindependent auditor have received no cooperation or support from W.O.’s externalaccountant in this matter. Such Amendment is required to be filed within 71days after the date the initial 8-K was required to be filed (December 5,2005), but Borrower will be unable to file the Amendment in a timely manner.Borrower intends to file the Amendment as soon as possible, but no later than10 calendar days from the date hereof. As a result, Borrower is requesting thatUnion Bank, as Majority Lender, waive, for a period not to exceed ten (10)calendar days from the date hereof, the requirements of ***Section5.01*** of the Credit Agreement, insofar and only insofar as suchrequirements pertain to the timely filing of the Amendment (the **“*Covenant*”**). By execution ofthis letter in the space provided below, Union Bank, as Major Lender, herebywaives the Covenant according to the terms set forth herein.

 

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| Warmest regards,                 |
|----------------------------------|
|                             |
| /s/ Mike Ricketts                |   |
| Mike Ricketts                    |
| Chief Financial Officer          |
| Telephone Number: (817) 412-1349 |
| Fax Number: (817) 334-0222       |

 

 
|   | Accepted and Agreed to:            |
|--------|------------------------------------|
|   |                               |
|   | **UNION BANK OF CALIFORNIA, N.A.** |
|   |                               |
|   | By:                                | /s/ Ali  Ahmed |   |
|   | Name:                              | Ali Ahmed |   |
|   | Title:                             | Vice  President |   |
|        |                                    |  |  |  |  |

 

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