EMPLOYMENT AGREEMENT

     THIS  AGREEMENT,  is effective as of November 2, 2000, by and between Pease
Oil and Gas Company, a Nevada corporation ("Corporation"), and Patrick J. Duncan
("Employee").  This  Agreement is intended to replace the  Employment  Agreement
dated  effective  December  27,  1994 as  confirmed  and  modified  by a  letter
agreement dated January 11, 1999,  which shall be deemed to be canceled upon the
effective date of this Agreement.

     The Corporation  desires to employ the Employee and the Employee desires to
be employed by the  Corporation  upon the terms and conditions set forth in this
Agreement.

     The Parties hereby enter into this Agreement (i) setting forth their mutual
promises and  understandings  and (ii)  Mutually  acknowledging  the receipt and
sufficiency  of  consideration  to enter  into  this  Agreement  and the  mutual
promises, conditions and understandings set forth below.



<PAGE>
                                   I ARTICLE
                     EMPLOYMENT DUTIES AND RESPONSIBILITIES

Section 1.1.  Employment.  The  Corporation  hereby  employs the Employee as the
President and Treasurer of the Corporation.  The Employee accepts the employment
and shall be subject to the Corporation~s Articles of Incorporation,  Bylaws and
direction from the Board of Directors of the Corporation.

Section 1.2.  Duties and  Responsibilities.  The Employee shall be the principal
executive officer of the Corporation responsible for the business and affairs of
the Corporation and for implementing decisions of the Board of Directors.

Section  1.3.  Working  Facilities.  The  Employee  shall be based in the  Grand
Junction,  Colorado  metropolitan  area  where  the  Corporation  shall  provide
reasonable  office  facilities.  The  Employee  agrees to  travel to the  extent
necessary  to perform  his duties  hereunder,  including  travel to the  various
properties and field offices of the Corporation.  The Corporation  shall provide
reasonable transportation to perform these duties.

Section 1.4. Vacations.  The Employee shall be entitled to vacations totaling at
least three weeks per year. Any vacation for longer than 10 consecutive business
days  shall  approved  by the Board of  Directors  or an  appropriate  committee
thereof.  If the business of the Corporation  precludes the Employee from taking
all  vacation  earned  during a year,  then,  with the  consent  of the Board of
Directors,  the  vacation  shall be  accrued  and  available  to be taken by the
Employee in subsequent years. If the Board of Directors does not consent to such
accrual of vacation time, the Corporation shall pay the Employee an amount equal
to the number of days of unused vacation times the Employee's  equivalent  daily
compensation. Employee may accrue a maximum of 20 unused vacation days per year.


Section 1.5. Expenses.

A.   Employee Reimbursed for Expenses.  During the period of employment pursuant
     to this Agreement,  the Employee will be reimbursed for reasonable expenses
     incurred for the benefit of the  Corporation in accordance with the general
     policy of the Corporation as adopted from time to time by the Corporation's
     Board of Directors, and any other expenses specifically approved beforehand
     by the Board of Directors.  Those reimbursable  expenses shall include, but
     shall  not  be  limited  to,   entertainment   and  promotional   expenses,
     transportation  expenses,  and the expenses of  membership in certain civic
     groups and business organizations. Any other reimbursable expenses shall be
     as set forth on Exhibit A.

B.   Employee  Shall  Account for Expenses to  Corporation.  With respect to any
     expenses which are to be reimbursed by the Corporation to the Employee, the
     Employee  agrees to make an itemized  accounting to the Corporation (i) for
     proper  accounting  by the  Corporation  and (ii) in detail  sufficient  to
     entitle  the  Corporation  to an income  tax  deduction  for paid  items if
     deductible.

                                   II ARTICLE
                                  COMPENSATION

Section 2.1.  Salary.  The  Corporation  shall pay an initial base salary to the
Employee  at an  annual  rate of  Ninety-Seven  Thousand  Five  Hundred  Dollars
($97,500),  payable bi-weekly,  in arrears.  The Board of Directors shall review
the salary of  Employee at least  annually  and may  increase  the salary if the
Board  of  Directors  determines  that an  increase  would  be  appropriate.  In
addition,  on the  later of the date (i) that  this  Agreement  is signed by the
Corporation,  or (ii) the date on which all  shareholders  of the  Corporation~s
Series B 5% PIK  Convertible  Preferred  Stock have formally agreed to exchanged
for other  securities of the  Corporation or surrendered for  cancellation,  the
Corporation shall pay to the Employee a cash bonus of $50,000.

Section  2.2.  Death During  Employment.  In the event of the  Employee's  death
during the term of this  Agreement the  Corporation  shall pay to the Employee's
surviving souse or, if there is no surviving spouse, to Employee's children on a
pro-rata basis to each child, bi-weekly,  the compensation which otherwise would
be payable to the Employee for a six month period following the Employee's death
at the rate of compensation then being paid to Employee.

Section 2.3. Benefits. In addition to all other compensation, the Employee shall
be entitled to participate in any pension plans,  profit sharing plans,  medical
or dental reimbursement plans, group term or other life insurance plans, medical
or  hospitalization  insurance  plans and any other group employee  benefit plan
which may be  established by the  Corporation.  Such  participation  shall be in
accordance with the terms of any such plan. The  Corporation  shall pay premiums
for and shall  include the  Employee,  his spouse,  and  dependents in any major
medical or  hospitalization  insurance  program  established  or utilized by the
Corporation  on  behalf  of its  executive  officers  if  requested  to do so by
Employee.

Section 2.4. Life and Disability  Insurance.  The Corporation may obtain for its
own benefit such amounts of key executive term life insurance on the life of the
Employee as it may deem necessary or advisable. The proceeds of this may be used
to pay Corporation  obligations under Sections 2.2 and 3.6 of this contract; but
the Corporation's obligations thereunder shall be absolute.

Section  2.5.  Automobile  Allowance.  The  Corporation  shall pay, or reimburse
Employee for, an automobile allowance equal to $1,000 per month.  Alternatively,
with the approval of the Board of  Directors,  the  Corporation  may purchase or
lease an  automobile  for the  exclusive  use of the  Employee  at a cost not to
exceed $12,000 annually.

Section  2.6.  Stock Based  Compensation.  On the later of the date by which (i)
that this Agreement is signed by the Corporation,  or (ii) the date on which all
shareholders of the  Corporation~s  Series B 5% PIK Convertible  Preferred Stock
have formally  agreed to exchanged for other  securities of the  Corporation  or
surrendered for  cancellation,  the  Corporation  shall issue and deliver to the
Employee the following securities.

A.   150,000  shares of the  Corporation~s  common  stock,  par value  $0.10 per
     share. The shares shall, at the election of the Corporation,  be subject to
     forfeiture and shall be returned to the Corporation for cancellation if the
     Employee  terminates  the  employment  for reasons  other than set forth in
     Sections  3.2,  3.5, 3.6 or 3.7 below before one year from the date of this
     Agreement.

B.   The Corporation~s  common stock purchase warrants entitling the Employee to
     purchase up to a total of 600,000 shares of the Corporation~s common stock,
     par value  $0.10 per share at a purchase  price of $0.50 per share,  having
     the terms,  conditions,  rights and  preferences  set forth on the warrants
     which are attached hereto as Exhibits SP-1 and SP-2.

     In the event that at the time the Warrants become exercisable in accordance
with  their  terms  (and  the  Warrants  are  surrendered  for  exercise),   the
Corporation then has insufficient authorized but unissued common stock to permit
the  Warrant(s)  to be  exercised  in full,  the  Corporation  shall  pay to the
Employee,  upon  surrender  of the  Warrant(s),  an amount of cash  equal to the
difference  between (a) the  exercise  price of the Warrants and (b) the average
closing sales price of the  Corporation~s  common stock in the public market for
the five trading days before the date of surrender, multiplied by (c) the number
of  shares  represented  by  the  Warrant(s)  surrendered  less  the  number  of
authorized but unissued shares of common stock of the Corporation on the date of
surrender.

                                  III ARTICLE

                       TERM OF EMPLOYMENT AND TERMINATION

Section  3.1.  Term.  This  Agreement  shall be in effect  for a three year term
subject to termination in accordance with this Article III (the "Term").

Section  3.2.  Termination  by the  Corporation  Without  Cause.  The  Board  of
Directors,  without cause, may terminate this Agreement at any time upon 30 days
written notice to the Employee. In such event, the Employee, if requested by the
Board of Directors,  shall  continue to render the services  required under this
Agreement  for 30  days.  Within  five  business  days  after  the  last  day of
Employment,  the  Corporation  shall pay to  Employee,  a  severance  payment of
$150,000.

Section 3.3.  Termination by the Employee Without Cause.  The Employee,  without
cause,  may  terminate  this  Agreement  upon  90  days  written  notice  to the
Corporation. In such event, the Employee shall, if requested by the Corporation,
continue  to render  the  services  required  under this  Agreement  to the date
identified in the Employee's  written notice.  The Employee shall continue to be
paid  compensation  at the rate set forth in Exhibit B of this  Agreement for at
least 30 days and thereafter  through the earlier of (i) the date  identified in
the  Employee's  written  notice or (ii) the date  through  which  the  Employee
furnishes  services at the request of the  Corporation,  and no further payments
shall be made by the Corporation unless agreed to by the Board of Directors.

Section 3.4.  Termination by the  Corporation  With Cause.  The  Corporation may
terminate the  Employee's  employment  for cause,  which shall be limited to the
following:  (a) the Employee's knowing and willful or reckless  commission of an
act of gross misconduct which the Employee knows or reasonably should have known
at the time would be injurious to the  Corporation,  and did in fact  materially
injure the Corporation;  or (b) the Employee's  refusal to devote  substantially
all his time and efforts to his duties under this  Agreement  after the Board of
Directors has notified the Employee in writing of his noncompliance;  or (c) the
Employee's  continued refusal,  after written notice from the Board of Directors
to follow  the  specific  instructions  of the Board of  Directors,  unless  the
instructions  would cause the Employee or the  Corporation to be in violation of
the law or applicable  regulations  or would not be in the best interests of the
Corporation or its stockholders.  Termination  pursuant to this subsection shall
result in no further compensation being due or payable to the Employee hereunder
from and as of the date of such termination.

Section 3.5. Termination Upon Death of Employee.  Subject to Section 2.2 of this
Agreement,  this  Agreement  shall be terminated in the event of the  Employee's
death.

Section 3.6.  Termination  Upon  Disability  of Employee.  The  Corporation  may
terminate the Employee's  employment  if, during the Term, the Employee  becomes
physically  or mentally  disabled,  whether  totally or  partially,  so that the
Employee is unable  substantially  to perform his services  under this Agreement
(i) for a period  of  three  consecutive  months  or (ii)  for  shorter  periods
aggregating four months during any twelve month period, by written notice to the
Employee. Notwithstanding any such disability, the Corporation shall continue to
pay the Employee the greater of (a) his full salary up to and including the date
of such termination and for six months thereafter, or (b) any amounts payable to
Employee under any disability or similar insurance.

Section 3.7. Termination Upon Change of Control.  Notwithstanding the provisions
of Section 3.2, if the Employee is terminated as a direct or indirect  result of
either (i) actions taken by the Board of Directors  following the replacement of
more than 50% of the members of the Board of  Directors  in any 15 month  period
which were opposed by a majority of the directors before the replacement or (ii)
a  shareholder  or group  of  shareholders  or a  person  acting  on  behalf  of
shareholders  increasing his, hers, their or its ownership of the  Corporation's
outstanding  stock by more than 20%  within a 12 month  period,  or if  Employee
voluntarily  terminates his employment within six months following the time when
either (i) or (ii) above occur,  then the  Employee  shall be paid a lump sum of
$150,000 as a severance  payment as of the date of the termination.  Upon such a
change of control,  as defined in this Section 3.7, at  Employee's  option,  the
Corporation  shall  immediately   repurchase  any  outstanding   shares  of  the
Corporation's  stock  which are held by Employee at the per share price equal to
the greater of (a) the price paid per share by Employee when  Employee  acquired
the shares, or (b) the fair market value of the stock repurchased at the date of
termination.  If the  Corporation  does  not pay the  amount  specified  by this
Section 3.7 on a timely  basis,  the unpaid  amount  shall bear  interest at the
greater  of 10% per  annum or the  prime  rate at Wells  Fargo  Bank in  Denver,
Colorado,  on the date of such termination  until paid and the Corporation shall
pay all costs and expenses,  including attorney's fees, incurred by the Employee
in  collecting  all amounts  owed under this  Section  3.7.  Any cash payment to
Employee under this Section 3.7 shall not be paid if the  Corporation has made a
severance payment to Employee under Section 3.2 above. <PAGE>
                                   IV ARTICLE

                            DISCLOSURE OF INFORMATION

Section 4.1.  Definitions.  As used herein,  the term "proprietary  information"
shall mean technical  information and know-how  concerning the Corporation's oil
and gas  exploration,  development,  production  and servicing  business and its
related  equipment,  books,  maps and records developed by or otherwise owned or
controlled by the Corporation.

4.0.2. As used  herein,  the term  "trade  secrets"  shall mean any  proprietary
     information and any other  non-public  information used by the Corporation,
     including  such  matters as  geologic  records,  maps,  surveys,  documents
     evidencing interests in real property,  patented or unpatented  technology,
     supplier information,  books,  processes,  concepts,  methods,  formulae or
     technique know-how,  customer or vendor lists or information or development
     plans or strategy,  owned or  controlled  by the  Corporation  or otherwise
     subject to an  obligation  or intent of the  Corporation  to  maintain  the
     confidentiality  thereof  which is of a  proprietary  or secret  nature and
     which is or may be applicable to, or related to the business,  equipment or
     services,  present  or  future,  of the  Corporation  or the  oil  and  gas
     exploration and development business of the Corporation, or the contractual
     relationships of the Corporation with customers or clients.

4.0.3. As used herein,  the term "document" shall mean any data, notes,  drafts,
     manuals,  blueprints,  maps,  notebooks,  reports,  photographs,  drawings,
     sketches  or  other  records,  in any  tangible  form  whatsoever,  whether
     originals,  copies,  reproductions,  or excerpts, produced or obtained from
     the  Corporation  by  the  Employee  or  any  other  representative  of the
     Corporation which relates to trade secrets of the Corporation.

4.0.4.  As  used  herein,  the  term  "Corporation  invention"  shall  mean  any
invention,  discovery,  improvement,  or trade secret, whether patentable or not
and whether or not reduced to  practice,  conceived  or learned by the  Employee
either alone or Jointly with others,  while employed by the  Corporation,  which
relates to or results from the actual or  anticipated  investigation,  research,
development,  or production of the  Corporation,  or which results to any extent
from use of the Corporation's facilities.

4.0.5.  As  used  herein,  the  term  "Corporation"  shall  mean  not  only  the
     Corporation as first defined above, but also the Corporation's subsidiaries
     and all affiliates of the Corporation.



<PAGE>

Section  4.2.  Employee  Shall Not  Disclose  Proprietary  Information  or Trade
Secrets.  The Employee recognizes that the trade secrets of the Corporation,  as
they may exist from time to time,  are a valuable,  special and unique  asset of
the  Corporation.  The  Employee  will not,  during or for a period of 24 months
after  termination  of  the  Employee's   employment   relationship  under  this
Agreement,  disclose  or confirm  the  Corporation's  trade  secrets or any part
thereof to any person,  firm,  corporation,  association or other entity for any
reason or purpose whatsoever,  without the prior written  authorization to do so
from the Corporation.

     Further,  all  documents  shall  be  property  of the  Corporation  and the
Employee shall not remove these  documents upon  termination of employment  with
the Corporation except pursuant to a specific  authorization in writing from the
Board of Directors  of the  Corporation.  The Employee  agrees that any document
produced or obtained by the Employee while employed by the Corporation  shall be
the sole and  exclusive  property of the  Corporation.  The  Employee  agrees to
return any such document to the  Corporation  immediately  upon  termination  of
employment with the Corporation, or upon request of the Corporation.

     In no event shall the Employee  copy or remove any documents of any person,
company or  association  with whom the Employee  did not directly  work while an
Employee of the Corporation.

     The Employee  recognizes and acknowledges  that much of the information and
knowledge which he has received or will receive by virtue of his employment with
the  Corporation is or will be proprietary  information  and trade secrets which
have unique,  special  value to the  successful  operation of the  Corporation's
business.  The Employee  agrees not to disclose any  proprietary  information or
trade  secrets  to any  other  person  for any  purpose,  for his own  direct or
indirect  benefit or the benefit of any other  employer or affiliate  during the
term of this Agreement or for a period of 24 months thereafter without the prior
written consent of the Corporation.

     The  aforesaid  noncompetition  covenant  shall remain in any effect at all
times while the Employee is in the employ of the Corporation and for a period of
24 months after termination of the Employee's  relationship with the Corporation
in  any  capacity  whatsoever,  regardless  of the  reason  for  termination  or
cessation of the Employee's relationship.  The aforesaid covenant is intended to
be a  reasonable  restriction  on the  Employee.  If all,  or any portion of the
covenant is held unreasonable or unenforceable by a court or agency having valid
Jurisdiction,  the Employee  expressly agrees to be bound by any lesser covenant
subsumed  within  the terms of such  covenant  that  imposes  the  maximum  duty
permitted by law, as if the  resulting  covenant were  separately  stated in and
made apart of this Article IV.

Section 4.3. Duty of Loyalty; Conflicts of Interest. The Employee agrees that he
will  not,  while  employed  by the  Corporation  and for a period  of 12 months
thereafter,  unless  employment is terminated  under any of Sections 3.2, 3.3 or
3.7 above, be an employee or consultant,  or assist in any way, or work directly
or  indirectly  on behalf  of, any  person,  corporation,  firm or other  entity
engaged in, or proposing to engage in, a line of business  which would  directly
compete or conflict with the Corporation's  business,  without the prior express
written consent of the Corporation.  Notwithstanding the foregoing, however, the
Corporation  and the Employee  acknowledge  that where the Board of Directors is
fully  informed about and approves of the  Employee's  individual  interest in a
business or an  opportunity  of the  Corporation,  it shall not be  considered a
violation of this  Section  4.3.  The  Employee  agrees that he will not use any
assets of the Corporation  for his own individual  projects and that he will not
use any  proprietary  information to the  disadvantage of the  Corporation.  The
Employee  agrees that he will not interfere with the right of the Corporation to
do business with any person, corporation, firm or other entity.

Section 4.4. Enforcement.  The Employee acknowledges that monetary damages would
not  adequately or fairly  compensate the  Corporation  for breach of any of the
obligations  of the Employee  under Article IV of this Agreement and agrees that
in the  event of any  breach  or  threatened  breach  the  Corporation  shall be
entitled  to  seek  appropriate  injunctive  relief  from a court  of  competent
jurisdiction, in addition to any other relief or damages which may be available.

                                   V ARTICLE

                                  MISCELLANEOUS

Section 5.1. Governing Law and Jurisdictions. It is the intention of the parties
hereto  that this  Agreement  and its  performance  hereunder  be  construed  in
accordance  with and pursuant to the laws of the state of Colorado and that,  in
any action, special proceedings, or other proceeding that may be brought arising
out of, in connection with, or by reason of this Agreement, the law of the state
of Colorado  shall be applicable and shall govern to the exclusion of any forum,
without regard to the Jurisdiction in which any action or special proceeding may
be  instituted.  The courts and  authorities of the state of Colorado shall have
sole jurisdiction and venue over all controversies  which may arise with respect
to this Agreement.

Section 5.2. No Waiver.  No provision of this  Agreement may be waived except by
an agreement  in writing  signed by the waiving  party.  A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.

Section 5.3. Amendment. This Agreement may be amended, altered or revoked at any
time,  in whole or in part, by filing with this  Agreement a written  instrument
setting forth such changes, signed by all of the parties.

Section 5.4.  Successors.  This Agreement shall be binding upon and inure to the
benefit of the  Corporation,  its  successors  and assigns  (including,  without
limitation,  any  company  into or with  which  the  Corporation  may  merge  or
consolidate).  The Corporation  agrees that it will not effect the sale or other
disposition  of all or  substantially  all of its assets  unless  either (i) the
person or entity  acquiring  the assets or a  substantial  portion of the assets
shall  expressly  assumes by an instrument in writing all duties and obligations
of the Corporation  under this Agreement or (ii) the Corporation  shall provide,
through the  establishment  of a separate reserve for the payment in full of all
amounts which are or may  reasonably  be expected to become  payable to Employee
under this Agreement.

Section 5.5. Construction.  Throughout this Agreement the singular shall include
the plural, the plural shall include the singular,  and the masculine and neuter
shall include the feminine, wherever the context so requires.

Section 5.6. Text to Control. The headings of articles and sections are included
solely for convenience or reference.  If any conflicts  between any headings and
the text of this Agreement exists, the text shall control.

Section 5.7. Severability. If any provision of this Agreement is declared by any
court of competent  jurisdiction  to be invalid for any reason,  such invalidity
shall not affect the  remaining  provisions.  On the  contrary,  such  remaining
provisions shall be fully  severable,  and this Agreement shall be construed and
enforced as if such invalid provisions never had been inserted in the Agreement.

Section 5.8. Entire  Agreement.  This instrument  contains the entire  agreement
concerning the employment  arrangement  between the parties and shall, as of the
effective date hereof,  supersedes all other employment  agreements  between the
parties;  provided,  however,  that nothing in this Agreement  shall prevent the
Corporation  from  granting  additional or special  compensation  or benefits to
Employee after the date of execution of this  Agreement.  This Agreement may not
be amended except by an agreement in writing signed by both parties.

This Agreement is effective as of the date first above written.

EMPLOYEE                        APPROVED ON BEHALF OF
                                PEASE OIL AND GAS COMPANY,
                                a Nevada corporation

By: /s/ Patrick J. Duncan       By the following Directors:
-------------------------
Patrick J. Duncan
                                By: /s/ Steve A. Antry
                                -------------------------------------
                                Steve A. Antry

                                By: /s/ Stephen L. Fischer
                                -------------------------------------
                                Stephen L. Fischer

                                By: /s/ Homer C. Osborne
                                -------------------------------------
                                Homer C. Osborne

                                By: /s/ James C. Ruane
                                -------------------------------------
                                James C. Ruane

                                By: /s/ Clemons F. Walker
                                -------------------------------------
                                Clemons F. Walker

<PAGE>

                                    EXHIBIT A

                        ADDITIONAL REIMBURSABLE EXPENSES

1.     40 hours of continuing professional education per year
2.     Professional Association dues (AICPA and CSCPA)
3.     Bookcliff Country Club Monthly Dues
4.     Other expenses as determined from time to time by the Board of Directors