SP-1                                                             300,000
----------                                                      ----------------
WARRANT NO.                                                     Number of Shares



     THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT
     OF  1933,  AS  AMENDED,  AND MAY NOT BE  SOLD,  HYPOTHECATED  OR  OTHERWISE
     TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS
       AN        EXEMPTION  FROM  THE   REQUIREMENT  OF  SUCH   REGISTRATION  IS
                 AVAILABLE UNDER THE CIRCUMSTANCES AT THE TIME OBTAINING.

                     Void After 5:00 P.M. December 31, 2005


                            PEASE OIL AND GAS COMPANY
                          Common Stock Purchase Warrant

     PEASE OIL AND GAS COMPANY, a NEVADA corporation ("Pease" or the "Company"),
hereby  certifies that,  Patrick J. Duncan,  with an address of P. O. Box 60219,
Grand Junction,  Colorado  81506-8758,  or his permitted  assigns,  for valuable
consideration received, is entitled,  subject to the terms and conditions herein
set  forth,  to  purchase  from  the  Company  up  to  300,000  fully  paid  and
non-assessable  shares of Common  Stock,  $0.10  par  value  per  share,  of the
Company,  at the per share  purchase  price of $0.50 per  share  (the  "Purchase
Price"),  from time to time after the earlier of: (a)  December  31, 2004 or (b)
either of: (i) the Company's  reported  closing sales price for its common stock
in the public  market is at least $1.50 for at least 80% of trading  days in any
consecutive 30 day period before the Expiration  Date described  below,  or (ii)
the  Company  completes a  reorganization  or merger  transaction,  or a sale of
substantially all of its assets,  and the reasonable or deemed value received by
common  stockholders is at least $1.50 per share in which event this Warrant may
be exercised  immediately before the effective date of the event, and up to 5:00
p.m.  December 31, 2005 (the  "Expiration  Date") . The number and  character of
such shares of Common Stock are subject to adjustment as provided herein.

1.   Definitions.  As used herein,  unless the context otherwise  requires,  the
     following terms have the following respective meanings:

(a) "Act" shall mean the Securities Act of 1933, as amended.

(b)  "Additional  Shares of  Common  Stock"  shall  mean all  shares  (including
     treasury  shares) of Common Stock  issued or sold (or,  pursuant to Section
     3.7  hereof,  deemed to be issued) by the  Company  after the date  hereof,
     whether or not  subsequently  reacquired  or retired by the Company,  other
     than shares of Common Stock issuable pursuant to this Warrant.

(c)  "Adjusted  Exercise Price" shall have the meaning  specified in Section 3.2
     hereof. -----------------------

(d)  "Company"  means Pease Oil and Gas Company or any  corporation  which shall
     succeed  to or  assume  the  obligations  of  Pease  Oil  and  Gas  Company
     hereunder.



<PAGE>

(e)  "Common Stock" shall mean the Common Stock,  par value $0.10 per share,  of
     the  Company  and any stock into which such  common  stock  shall have been
     changed or any stock  resulting  from any  reclassification  of such common
     stock, and shall include all other stock of any class (however  designated)
     of the Company the holders of which have the right,  without  limitation as
     to amount,  either to all or to a share of the balance of current dividends
     and liquidating  dividends after the payment of dividends and distributions
     of any shares entitled to preference.

(f)  "Convertible  Securities" shall mean any evidences of indebtedness,  shares
     of stock  (other  than  Common  Stock)  or  other  securities  directly  or
     indirectly  convertible into or exchangeable  for Common Stock,  other than
     any securities issuable pursuant to this Warrant.

(g)  "Market  Price",  as used  with  reference  to any  share  of  stock on any
     specified date, shall mean: ------------

(i)  if such stock is listed and registered on any national  securities exchange
     or traded on The Nasdaq Stock Market  ("Nasdaq") or the OTC Bulletin  Board
     ("OTCBB"),  (A) the last  reported sale price on such exchange or Nasdaq or
     OTCBB of such stock on the business day immediately preceding the specified
     date,  or (B) if there shall have been no such  reported sale price of such
     stock on the business day  immediately  preceding the specified  date,  the
     average of the last  reported  sale price on such  exchange or on Nasdaq or
     the OTCBB on (x) the day next  preceding the specified date for which there
     was a reported  sale price and (y) the day next  succeeding  the  specified
     date for which there was a reported sale price; or

(ii) if such stock is not at the time  listed on any such  exchange or traded on
     Nasdaq  or the  OTCBB  but is  traded  on the  over-the-counter  market  as
     reported by the National Quotation Bureau or other comparable service,  (A)
     the  average  of the  closing  bid and asked  prices  for such stock on the
     business day  immediately  preceding  the  specified  date, or (B) if there
     shall have been no such reported bid and asked prices for such stock on the
     business day  immediately  preceding the specified date, the average of the
     last bid and asked prices on (x) the day next  preceding the specified date
     for which such information is available and (y) the day next succeeding the
     specified date for which such information is available; or

(iii)if clauses (i) and (ii) above are not applicable,  the fair value per share
     of such stock as determined in good faith and on a reasonable  basis by the
     Board of  Directors  of the  Company  and,  if  requested,  set  forth in a
     certificate  delivered  to the  holder of this  Warrant  upon the  exercise
     hereof.

(h)  "Options" shall mean rights, options or warrants to subscribe for, purchase
     or otherwise acquire either Common Stock or Convertible Securities.

(i)  "Other Securities" shall mean any stock and other securities of the Company
     or any other  person  (corporate  or  otherwise)  which the holders of this
     Warrant at any time shall be entitled to receive,  or shall have  received,
     upon the exercise of this Warrant,  in lieu of or in addition to the Common
     Stock,  or which at any time shall be issuable or shall have been issued to
     holders  of  the  Common  Stock  in  exchange  for,  in  addition  to or in
     replacement of the Common Stock or Other Securities pursuant to Section 3.5
     or otherwise.

(j)  "Purchase  Price"  shall  mean $0.50 per share,  subject to  adjustment  as
     provided herein. --------------

2.   Exercise of Warrant.

2.1. Manner of Exercise.

(a)  This  Warrant may be exercised  by the holder  hereof,  in whole or in part
     (but not as to fewer than 10,000 shares of the Common Stock unless,  at the
     time of exercise,  this Warrant  entitles the holder to purchase fewer than
     10,000  shares of the Common  Stock),  on any  business day on or after the
     date hereof and before the  Expiration  Date, by surrender of this Warrant,
     with the form of subscription at the end hereof (or a reasonable  facsimile
     thereof)  duly  executed  by such  holder,  to the Company at its office in
     Grand  Junction,  Colorado,  and,  except as otherwise  provided in Section
     2.1(b), accompanied by payment, by certified or official bank check payable
     to the order of the Company,  in the amount obtained by multiplying (x) the
     number  of  shares  of the  Common  Stock  (without  giving  effect  to any
     adjustment  therein) --  designated in such form of  subscription  (or such
     reasonable  facsimile)  by (y) the Purchase - Price,  and such holder shall
     thereupon  be entitled to receive the number of shares of the Common  Stock
     determined as provided hereunder.

(b)  The  exercise  price of this  warrant may be paid,  at the  election of the
     holder in accordance with Section 2.1(a) by delivering to the Company fully
     paid shares of the  Company's  common  stock,  which shall be valued at the
     Market Price on the day  preceding the delivery and the value of the shares
     delivered  may be used for the  exercise  of this  Warrant at the  Purchase
     Price.

2.2. When Exercise  Effective.  Each exercise of this Warrant shall be deemed to
have been  effected  immediately  prior to the close of business on the business
day on which this Warrant shall have been surrendered to the Company as provided
in Section 2.1, and the person(s) in whose name(s) the certificate(s) for shares
of the  Common  Stock (or  Other  Securities)  that are to be  issued  upon such
exercise in accordance  with Section 2.3 shall be deemed the holder(s) of record
thereof at such time.

2.3.  Delivery  of Stock  Certificates,  etc. As soon as  practicable  after the
exercise of this Warrant in full or in part in accordance  herewith the Company,
at its expense (including the payment by it of any applicable issue taxes), will
cause to be issued in the name of and delivered to the holder hereof, or as such
holder  (upon  payment  by such  holder of any  applicable  transfer  taxes) may
direct,

(a)  a certificate or certificates,  marked with an appropriate legend referring
     to the terms of this Warrant and any applicable restrictions on such shares
     imposed by the Federal or any state securities laws, for the number of full
     shares of the Common Stock (or Other Securities) to which such holder shall
     be entitled upon such exercise  plus,  in lieu of any  fractional  share to
     which such holder would  otherwise be entitled,  cash in an amount equal to
     the same  fraction  of the  Market  Price of one full  share of the  Common
     Preferred  Stock  on the  business  day  next  preceding  the  date of such
     exercise, and

(b)  in case such  exercise  is in part only,  a new Warrant or Warrants of like
     tenor, calling in the aggregate on the face or faces thereof for the number
     of  shares  of  the  Common  Stock  equal  (without  giving  effect  to any
     adjustment  therein) to the number of such shares called for on the face of
     this Warrant minus the number of shares  designated by the holder upon such
     exercise as provided in Section 2.1.

3.   Common Stock Issuable Upon Exercise.

3.1. General.  The number of shares of the Common Stock which the holder of this
Warrant shall be entitled to receive upon the exercise  hereof or, if securities
or other  property in addition to or in lieu of the Common Stock shall by reason
of the  operation  of the  provisions  of this  Section  be  issuable  upon such
exercise,  the amount and kind of such  securities or other  property,  shall be
adjusted or determined as provided in this Section 3.

3.2. Adjusted Exercise Price. The number of shares of the Common Stock which the
holder of this Warrant  shall be entitled to receive  upon the  exercise  hereof
shall be  determined  by  multiplying  the number of shares of the Common  Stock
which,  but for the  provisions  of this Section 3, would  otherwise be issuable
upon such exercise,  as designated by the holder hereof pursuant to Section 2.1,
by the fraction of which the numerator is the per share  Purchase  Price and the
denominator  is the per share  Adjusted  Exercise  Price (as herein  defined) in
effect on the date of such exercise.  The per share  Adjusted  Exercise Price of
the Common Stock shall initially be the Purchase Price (as defined in Section 1)
and shall be  adjusted  and  readjusted  from time to time as  provided  in this
Section 3 (and,  as so adjusted or  readjusted,  shall  remain in effect until a
further adjustment or readjustment thereof is required by this Section 3).

3.3. Stock Dividends, Stock Splits, etc. In case the Company at any time or from
time to time after the date  hereof  shall  declare or pay any  dividend  on the
Common Stock payable in Common Stock, or effect a subdivision of the outstanding
shares of the Common  Stock into a greater  number of shares of the Common Stock
(by  reclassification  or  otherwise  than by payment of a dividend in shares of
Common Stock),  then, in any such event,  the per share Adjusted  Exercise Price
per share  shall be  adjusted  effective  as of the close of business on (i) the
record date for the  determination  of  shareholders  entitled  to receive  such
dividend if such dividend is in fact paid, or (ii) the day immediately preceding
the day upon which such subdivision shall become effective (any such day, as the
case may be, shall be referred to herein as the "Subdivision  Effective  Date"),
by multiplying the per share Adjusted Exercise Price in effect immediately prior
to the  Subdivision  Effective  Date by the fraction of which (x) the  numerator
shall be the number of shares of the Common Stock outstanding  immediately prior
to the Subdivision Effective Date and (y) the denominator shall be the number of
shares of the Common  Stock  outstanding  immediately  prior to the  Subdivision
Effective  Date plus the number of shares of the Common Stock  issuable upon the
payment of such dividend or the  consummation of such  subdivision,  as the case
may be.

3.4.  Adjustments for Combinations,  etc. In case the outstanding  shares of the
Common  Stock  shall  be  combined  or  consolidated,   by  reclassification  or
otherwise, into a lesser number of shares of Common Stock, the Adjusted Exercise
Price  shall be  adjusted,  effective  as of the  close of  business  on the day
immediately  preceding the day upon which such  combination or  consolidation is
effective (the  "Combination  Effective  Date"),  by  multiplying  the per share
Adjusted Exercise Price in effect immediately prior to the Combination Effective
Date by the fraction of which (x) the numerator shall be the number of shares of
the Common Stock outstanding immediately prior to the Combination Effective Date
and (y) the  denominator  shall be the  number  of shares  of the  Common  Stock
outstanding  immediately after the Combination  Effective Date. 3.5. Adjustments
for  Consolidation,  Merger,  Sale of Assets,  Reorganization,  etc. In case the
Company,  after the date hereof,  (a) shall  consolidate  with or merge into any
other person and shall not be the  continuing or surviving  corporation  of such
consolidation  or merger,  or (b) shall permit any other  person to  consolidate
with or merge  into the  Company  and the  Company  shall be the  continuing  or
surviving  person but, in  connection  with such  consolidation  or merger,  the
Common Stock shall be changed into or exchanged for stock or other securities or
property of any other person,  or (c) shall effect a capital  reorganization  or
reclassification  of the Common Stock (other than a reclassification  subject to
Sections 3.3 or 3.4),  then, and in each such case,  proper  provision  shall be
made so that the holder of this  Warrant,  upon the exercise  hereof at any time
after  the  consummation  of  such  consolidation,   merger,  reorganization  or
reclassification,  shall be entitled to receive, in lieu of the Common Stock (or
Other Securities)  issuable upon such exercise prior to such  consummation,  the
stock and other  securities  and  property to which such holder  would have been
entitled  upon such  consummation  if such holder had so exercised  this Warrant
immediately prior thereto,  subject to adjustments (subsequent to such corporate
action) as nearly equivalent as possible to the adjustments provided for in this
Section 3.

4. No Dilution or Impairment. The Company will not, by amendment of its articles
of   organization   or  through   any   reorganization,   transfer   of  assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this  Warrant,  but will at all times in good  faith  assist in the
carrying  out of all such terms and in the  taking of all such  action as may be
necessary  or  appropriate  in order to protect the rights of the holder of this
Warrant against dilution or other impairment.

5.   Notices of Record Date, etc. In the event of

(a)  any  taking  by the  Company  of a record  of the  holders  of any class of
     securities  for the  purpose of  determining  the  holders  thereof who are
     entitled to receive any  dividend  or other  distribution,  or any right to
     subscribe  for,  purchase or  otherwise  acquire any shares of stock of any
     class or any other  securities or property,  or to receive any other right,
     or

(b)  any  capital   reorganization  of  the  Company,  any  reclassification  or
     recapitalization of the capital stock of the Company or any transfer of all
     or  substantially  all the assets of the Company to any other person or any
     consolidation or merger involving the Company and any other person, or

(c)  any voluntary or involuntary dissolution,  liquidation or winding-up of the
     Company,

the Company will give to the holder of this Warrant a notice  specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend,  distribution  or right,  and stating the amount and character of
such  dividend,  distribution  or right,  and (ii) the date or expected  date on
which any such  reorganization,  reclassification,  recapitalization,  transfer,
consolidation,  merger, dissolution,  liquidation or winding-up is to take place
and the time, if any such time is to be fixed, as of which the holders of record
of the Common Stock (or Other  Securities)  shall be entitled to exchange  their
shares of the  Common  Stock  (or  Other  Securities)  for  securities  or other
property    deliverable    upon    such    reorganization,     reclassification,
recapitalization,  transfer, consolidation,  merger, dissolution, liquidation or
winding-up.  Unless  otherwise  required by law to be given sooner,  such notice
shall be mailed within a reasonable time prior to the date therein specified.

6.  Reservation  of Stock,  etc. The Company will at all times  reserve and keep
available out of its authorized but unissued  Common Stock,  solely for issuance
and  delivery  upon the exercise of this  Warrant,  the full number of shares of
Common  Stock (or Other  Securities)  then  issuable  upon the  exercise of this
Warrant.  All shares of the Common  Stock  issuable  upon the  exercise  of this
Warrant shall be duly authorized,  and when issued and paid for in full, validly
issued,  fully  paid and  non-assessable  with no  liability  on the part of the
holders thereof.

7.   Registration Rights.

(a) Definitions.  For purposes of this Section 7, the following terms shall have
the following respective meanings:

(i) "Commission" shall mean the United States Securities and Exchange Commission
or any other Federal agency at the time administering the Act.

(ii) The term "holder or holders of Registrable Stock" shall mean the holders of
Common Stock or Other Securities issued pursuant to this Warrant.

(iii)  The  terms  "register,"   "registered"  and  "registration"  refer  to  a
registration  effected  by  preparing  and filing a  registration  statement  or
similar  document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document by the Commission.

(iv) The term "Registration Period" shall mean the period commencing on the date
hereof and ending (a) if this Warrant shall expire without having been exercised
in whole or in part, the Expiration  Date or (b) if this Warrant shall have been
exercised in whole or in part, at such time as all shares of  Registrable  Stock
have  been  sold  by  the  initial  holder  or  can  be  sold  publicly  without
registration under the Act.

(v) The term "Registrable  Stock" means (a) the shares of Common Stock issued or
issuable upon the exercise of this Warrant,  and (b) any Other Securities issued
or  issuable  pursuant  to this  Warrant;  provided,  however,  that  shares  of
Registrable  Stock  shall  cease  to be  Registrable  Stock  if they are sold or
transferred  pursuant to a registered public offering or other transaction which
does not result in  restrictions  on resale  being  imposed on the  transfer  by
virtue  of  Federal  or  state   securities  laws;  and  provided  further  that
Registrable  Stock shall cease to be Registrable  Stock if the holder could sell
or transfer such securities held by him in one or more transactions  pursuant to
Rule 144 promulgated under the Act.

(b)  Registration.

(i) The  Company  shall use its best  commercial  efforts to file,  by April 15,
2000, and shall use its best commercial  efforts to cause to become effective as
soon as practicable, a registration statement on Form S-3, or if Form S-3 is not
then available,  another  appropriate  form,  covering all the Registrable Stock
(the "Initial Registration").  In the event such registration is not so declared
effective or does not include all  Registrable  Stock,  a holder of  Registrable
Stock  shall have the right to require  by notice in  writing  that the  Company
register all or any part of the Registrable  Stock held by such holder (a Demand
Registration")  and the Company  shall  thereupon  effect such  registration  in
accordance  herewith  (which may include adding such shares to an existing shelf
registration). The parties agree that if the holder of Registrable Stock demands
registration  of less than all of the  Registrable  Stock,  the Company,  at its
option,  may  nevertheless  file a  registration  statement  covering all of the
Registrable  Stock. If such  registration  statement is declared  effective with
respect  to all  Registrable  Stock and the  Company is in  compliance  with its
obligations under Subsection (c) hereof, the demand  registration rights granted
pursuant to this Subsection (b) shall cease. If such  registration  statement is
not  declared  effective  with  respect  to all  Registrable  Stock  the  demand
registration   rights   described  herein  shall  remain  in  effect  until  all
Registrable  Stock have been registered under the Act. The Company shall provide
holders  of  Registrable  Stock  reasonable   opportunity  to  review  any  such
registration  statement or amendment or  supplement  thereto prior to the filing
thereof,  but in no event  shall  such  period  exceed  seven (7)  days.  If the
Registrable  Stock is  registered  initially  on a form other than Form S-3, the
Company shall register the Registrable  Stock on Form S-3 as soon as use of such
form is permissible.

(ii) The Company  shall not be obligated  to effect  Demand  Registration  under
Subsection  (b)(i)  if  all of the  Registrable  Stock  held  by the  holder  of
Registrable  Stock which are  demanded to be covered by the Demand  Registration
are, at the time of such demand, included in an effective registration statement
and the Company is in  compliance  with its  obligations  under  Subsection  (c)
hereof.

(iii)  The  Company  may  suspend  the  effectiveness  of any such  registration
effected  pursuant to this  Subsection (b) in the event,  and for such period of
time as,  such a  suspension  is required  by the rules and  regulations  of the
Securities  and  Exchange  Commission  ("SEC').  The  Company  will use its best
efforts to cause such suspension to terminate at the earliest possible date.

(c) Covenants of the Company with Respect to  Registration.  In connection  with
any registration under this Section 7, the Company shall, as expeditiously as is
reasonably possible:

(i) Prepare and file with the Commission a  registration  statement with respect
to the  Participating  Holders'  Registrable  Stock and use its best  reasonable
efforts to cause such registration statement to become effective.

(ii) Prepare and file with the Commission  such  amendments  and  supplements to
such  registration  statement  and  prospectus  used  in  connection  with  such
registration  statement as may be necessary to comply with the provisions of the
Act  with  respect  to  the  disposition  of  all  securities  covered  by  such
registration statement.

(iii)  Furnish  to  the  Participating  Holders  such  numbers  of  copies  of a
prospectus,  including, if applicable,  a preliminary prospectus,  in conformity
with the  requirements  of the Act,  and such  other  documents  as the  selling
shareholders  may reasonably  request in order to facilitate the  disposition of
Registrable Stock owned by the Participating Holders.

(iv) Use its best  reasonable  efforts to register  and  qualify the  securities
covered by such  registration  statement under such other securities or blue sky
laws of such  jurisdictions  within  the  United  States as shall be  reasonably
requested by the  Participating  Holders;  provided,  however,  that the Company
shall not be  required in  connection  therewith  or as a  condition  thereto to
qualify to do business or to file a general consent to service of process in any
such states or jurisdictions.

(v) In the event of any underwritten public offering, enter into and perform its
obligations under an underwriting  agreement,  in usual and customary form, with
the managing underwriter of such offering.  The Participating Holders shall also
enter into and perform their obligations under such an agreement.

(vi) Notify the Participating Holders, at any time when a prospectus relating to
Registrable  Stock  covered by such  registration  statement  is  required to be
delivered  under the Act, of the happening of any event as a result of which the
prospectus included in such registration  statement, as then in effect, includes
an  untrue  statement  of a  material  fact or omits to  state a  material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading in the light of the circumstances then existing.

(vii)  Furnish  to  the  Participating  Holders,  on the  date  that  shares  of
Registrable  Stock are delivered to the underwriters for sale in connection with
a registration  pursuant to this Section 7, if such securities are being sold by
underwriters,  or, on the date that the  registration  statement with respect to
such  securities  becomes  effective,  (i) an opinion as to matters of law only,
dated such date,  of counsel  representing  the Company for the purposes of such
registration,  in form and substance as is customarily  given to underwriters in
an underwritten public offering,  addressed to the underwriters,  if any, and to
the  Participating  Holders  and  (ii)  a  letter  dated  such  date,  from  the
independent  certified public accountants of the Company,  in form and substance
as  is  customarily  given  by  independent   certified  public  accountants  to
underwriters in an underwritten public offering,  addressed to the underwriters,
and to the Participating Holders.

(d) Costs and Expenses.  The Company  shall pay all costs,  fees and expenses in
connection  with  all  registration   statements  filed  under  this  Section  7
including, without limitation, the Company's legal and accounting fees, printing
expenses and blue sky fees and expenses, but not including the fees and expenses
of counsel for the Participating  Holders in connection with such  registration.
However,  the Company shall not pay for  underwriting  discounts and commissions
and underwriters'  expenses  allocable to the Registrable Stock being registered
or state transfer taxes.

(e)  Indemnification.

(i) The Company shall indemnify each Participating  Holder under this Agreement,
its officers and directors and any person  controlling  it within the meaning of
Section 15 of the Act or Section  20(a) of the Exchange  Act,  against any loss,
claim,  damage,  expense or liability (including without limitation all expenses
reasonably incurred in investigating,  preparing, or defending against any claim
whatsoever,  such expenses to be reimbursed by the Company as they are incurred)
to which it may become  subject  under the Act, the  Exchange Act or  otherwise,
arising  out of or  based  upon  (i) any  untrue  statement  or  alleged  untrue
statement  of a  material  fact  contained  in  any  registration  statement  or
prospectus or any amendments or supplements  thereto in which  Registrable Stock
is included or in any  application,  statement  or other  document  filed by the
Company with the Commission or any securities exchange or in any jurisdiction in
connection with  qualifying  such shares under the securities  laws thereof,  or
(ii) the omission or alleged  omission  therefrom of a material fact required to
be stated  therein or necessary to make the statements  therein not  misleading,
unless such  statement  or omission is made in reliance  upon and in  conformity
with  written  information  furnished  to the  Company  by or on  behalf of such
Participating   Holder  or  an  underwriter   expressly  for  use  in  any  such
registration statement or other document.

(ii) Each  Participating  Holder shall,  as a condition to such  registration of
Registrable  Stock,  agree to indemnify the Company,  its officers and directors
and any person  controlling  the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange  Act,  against any loss,  claim,  damage or
expense or liability  (including  without  limitation  all  expenses  reasonably
incurred in investigating,  preparing or defending against any claim whatsoever,
such expenses to be reimbursed by the undersigned as they are incurred) to which
they may become  subject under the Act, the Exchange Act or  otherwise,  arising
out of or based upon (i) any untrue  statement or alleged untrue  statement of a
material  fact  contained in any  registration  statement or  prospectus  or any
amendments or supplements  thereto in which  Registrable Stock is included or in
any  application,  statement  or other  document  filed by the Company  with the
Commission or any securities  exchange or in any jurisdiction in connection with
qualifying such shares under the securities  laws thereof,  or (ii) the omission
or alleged  omission  therefrom of a material fact required to be stated therein
or necessary to make the  statements  therein not  misleading,  provided in each
case that such  statement or omission is made in reliance upon and in conformity
with  written  information  furnished  to the  Company  by or on  behalf of such
Participating  Holder  expressly for use in any such  registration  statement or
other  document,  or  (iii)  any  misuse  by  the  Participating  Holder  of any
prospectus included in the registration statement or any violation of the Act by
the  Participating  Holder in connection with the sale or distribution of his or
her Registrable Stock under the registration statement.

(iii)  Promptly upon receipt by a party  claiming  indemnification  hereunder of
notice of the  commencement  of any action  involving a claim referred to above,
such indemnified party will, if a claim in respect thereof is to be made against
a party which may be required to indemnify  such party  hereunder,  give written
notice to the latter of the commencement of such action. In case any such action
is  brought  against an  indemnified  party,  the  indemnifying  party  shall be
entitled  to  participate  in and to assume the defense of such  action,  to the
extent  that  it  may  wish,  with  counsel  reasonably   satisfactory  to  such
indemnified  party.  Except as set forth herein,  the indemnified  party and any
party  cooperating  in the defense of such claim shall not settle or  compromise
any such claim or admit  liability  without the express  written  consent of the
indemnifying party. The indemnified party shall have the right to be represented
by an advisory counsel and accountants,  at its own expense, and the indemnified
party shall be kept fully  informed of such action,  suit or  proceeding  at all
stages thereof whether or not the indemnified  party is so represented.  After a
period of thirty days  following  the date the written  notice of such claim was
given to the indemnifying  party the indemnified party may settle any such claim
(and the  amount of any such  settlement  shall be  subject  to  indemnification
hereunder)  unless within such thirty-day  period the  indemnifying  party shall
have provided the indemnified  party with notice and evidence to the indemnified
party's  satisfaction that the indemnifying party reasonably disputes such claim
and has the financial ability to meet its indemnification obligations hereunder.
Notwithstanding the foregoing, the indemnified party may immediately cause to be
paid or  discharged  any asserted  claim the  nonpayment  of which would have an
immediate  substantial  adverse  impact on the  indemnified  party and any claim
which the  indemnifying  party has not disputed  within thirty days of notice as
provided above.

(iv) If the indemnification  provided for in this Section 7(e) is unavailable or
insufficient  to hold  harmless an  indemnified  party under such  subsection in
respect  of any  losses,  claims,  damages or  liabilities  or action in respect
thereof or referred to therein,  then each  indemnifying  party shall in lieu of
indemnifying  such indemnified party contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,  liabilities
or actions in such proportion as is appropriate to reflect the relative fault of
the Company,  on the one hand, and the Participating  Holders,  on the other, in
connection  with the  statements  or  omissions  which  resulted in such losses,
claims, damages,  liabilities or actions as well as any other relevant equitable
considerations,  including  the failure to give the notice  required  under such
subsections. The relative fault shall be determined by reference to, among other
things,  whether  the  untrue or alleged  untrue  statement  of a material  fact
relates  to  information  supplied  by the  Company  on  the  one  hand,  or the
Participating  Holders,  on the other hand,  and the parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or omission.  The Company and the Participating  Holders agree that it
would  not be just  and  equitable  if  contribution  pursuant  to this  Section
7(e)(iv)  were  determined  by pro rata  allocation  or by any  other  method of
allocation which did not take account of the equitable  considerations  referred
to above in this subsection.  No person guilty of fraudulent  misrepresentations
(within the meaning of Section 11(f) of the Securities  Act),  shall be entitled
to  contribution   from  any  person  who  is  not  guilty  of  such  fraudulent
misrepresentations.

(v) The  obligations  of the Company and the  Participating  Holders  under this
Section 7(e) shall survive the completion of any offering of  Registrable  Stock
in a registration statement under this Section 7.

(vi) The  rights of  indemnification  contained  in this  Section 7 shall not be
deemed to be the exclusive remedy of the parties hereto and such rights shall be
in addition to any other  rights or remedies  which any party hereto may have at
law or equity.

(f) Assignment of Registration  Rights.  The  undersigned's  rights set forth in
this  Section 7 shall  automatically  be deemed  assigned to any  transferee  or
assignee of this Warrant or shares of Common Stock or Other Securities  issuable
hereunder,  provided  that  immediately  following  such  transfer  the  further
disposition of such securities by the transferee or assignee is restricted under
the Act;  provided  however,  that, the  termination of  registration  rights in
respect of any shares of Registrable  Stock shall be binding upon any transferee
of such shares. Upon the request of any such holder, the Company will confirm in
writing to any  transferee  of such  holder's  Registrable  Stock the  Company's
continuing  obligation to afford such  transferee  the benefits of the Company's
agreements contained in this Section 7, but no failure of the Company to confirm
such  obligations  shall in any way impair such  transferee's  rights under this
Section 7.

8.   Substitution of Warrants.

8.1. Exchange of Warrants. Subject to the provisions appearing at the top of the
first  page  of  this  Warrant  concerning,  inter  alia,  the  sale,  transfer,
encumbrance or other disposition of this Warrant,  upon surrender or exchange of
this Warrant, properly endorsed, to the Company, the Company at its expense will
issue and  deliver to or upon the order of the holder  thereof a new  Warrant or
Warrants  of like  tenor,  in the name of such  holder or as such  holder  (upon
payment by such holder of any applicable transfer taxes) may direct,  calling in
the  aggregate  on the face or faces  thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.

8.2. Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to
the Company of the loss,  theft,  destruction or mutilation of this Warrant and,
in the  case of any  such  loss,  theft  or  destruction,  upon  delivery  of an
indemnity agreement  reasonably  satisfactory to the Company, or, in the case of
any such  mutilation,  upon  surrender and  cancellation  of such  Warrant,  the
Company at its expense will execute and deliver,  in lieu thereof, a new Warrant
of like tenor.

9.  Ownership of Warrant.  Until this Warrant is transferred on the books of the
Company,  the Company may treat the person in whose name this  Warrant is issued
as the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary,  except that, if and when this Warrant is properly  assigned in blank,
the Company may (but shall not be obligated  to) treat the bearer  hereof as the
absolute owner of this Warrant for all purposes,  notwithstanding  any notice to
the contrary.  A Warrant,  if properly assigned,  may be exercised to the extent
provided herein by a new holder without first having a new Warrant issued.

10. Notices,  etc. All notices and other  communications from the Company to the
holder of this  Warrant or from the holder of this  Warrant  shall be  delivered
personally,  by facsimile  (if confirmed and followed by delivery by first class
mail),  reputable overnight courier service, or mailed by first class registered
or certified mail,  postage prepaid,  to the Company at 751 Horizon Court, Suite
203, P. O. Box 60219, Grand Junction,  Colorado 81506-8758,  Attn: President, or
to the  holder at such  address  as may have been  furnished  to the  Company in
writing by such  holder,  or,  until an address is so  furnished,  to and at the
address of the last holder of this  Warrant who has so  furnished  an address to
the  Company.  Any such notice shall be deemed to have been given on the date of
personal delivery,  facsimile, delivery to a reputable overnight courier service
or deposit in the mail.

11. Warrant  Holder Not a  Shareholder.  Holder shall not, by virtue of anything
contained in this Agreement or otherwise,  prior to exercise of this Warrant, be
entitled to any right  whatsoever,  either in law or equity, of a shareholder of
the Company,  including without limitation, the right to receive dividends or to
vote or to  consent  or to  receive  notice as a  shareholder  in respect of the
meetings of  shareholders  or the  election of  directors  of the Company or any
other matter;  provided however that all holders of Warrants will be entitled to
notice if: (a) the Company grants holders of its Common Stock rights to purchase
any shares of capital stock or any other rights, or (b) the Company authorizes a
reclassification,  capital  reorganization,  consolidation,  merger  or  sale of
substantially all of its assets.

12.  Nontransferable.  This Warrant is nontransferable without the prior consent
of the Company.  Any such transfer shall be made in accordance  with Section 8.1
above.

13.  Miscellaneous.  The Company may from time to time  supplement or amend this
Warrant  without the approval of the holder in order to cure any ambiguity or to
be correct or supplement any provision  contained  herein which may be defective
or inconsistent  with any other  provision,  or to make any other  provisions in
regard to matters or questions  herein arising  hereunder  which the Company may
deem necessary or desirable and which shall not materially  adversely affect the
interest  of the  holder.  This  Warrant  and any term  hereof  may be  amended,
changed,  waived,  discharged  or  terminated  only by an  instrument in writing
signed by the Company and consented to in writing by the holder of this Warrant.
If for any reason any provision, paragraph or term of this Warrant is held to be
invalid or unenforceable, all other valid provisions herein shall remain in full
force and effect and all terms,  provisions and paragraphs of this Warrant shall
be deemed to be  severable.  This  Warrant  shall be  construed  and enforced in
accordance with and governed by the laws of the state of Colorado  applicable to
contracts  made and to be  performed  entirely  therein.  The  headings  in this
Warrant are for reference  purposes only and shall not limit or otherwise affect
the meaning hereof.

Dated as of:      November 2, 2000.

                             PEASE OIL AND GAS COMPANY



                             By: _________________________________
                             Patrick J.  Duncan, President
ATTEST:


---------------------------
Marilyn L. Adams, Secretary




<PAGE>

                              FORM OF SUBSCRIPTION

                [To be signed only upon exercise of the Warrant]

To:  PEASE OIL AND GAS COMPANY

     The  undersigned,  the holder of the  within  Warrant,  hereby  irrevocably
elects to exercise the purchase  right  represented  by such Warrant for, and to
purchase  thereunder,  ___________*  shares of the Common Stock of PEASE OIL AND
GAS COMPANY and herewith  makes  payment of $ therefor,  and  requests  that the
certificates  for such  shares  be  issued  in the name of,  and  delivered  to,
_________________, whose address is ------------------------ --------------.

Dated:






                           (Signature must conform in all
                           respects to the name of the holder
                           as specified on the face of the
                           Warrant)



                                       (Address)




*        Insert the number of shares  called for on the face of the Warrant (or,
         in the case of a partial exercise,  the portion thereof as to which the
         Warrant  is  being  exercised),  in  either  case  without  making  any
         adjustment  for  additional  Common  Stock or any other  stock or other
         securities  or  property  or cash  which,  pursuant  to the  adjustment
         provisions of the Warrant, may be deliverable upon exercise.



<PAGE>




                               FORM OF ASSIGNMENT

                [To be signed only upon transfer of the Warrant]

     For value  received,  the undersigned  hereby sells,  assigns and transfers
unto the right  represented  by the  within  Warrant to  purchase  shares of the
Common Stock of PEASE OIL AND GAS COMPANY to which the within  Warrant  relates,
and appoints  Attorney to transfer  such right on the books of PEASE OIL AND GAS
COMPANY, with full power of substitution in the premises.

Dated:






                                    (Signature must conform in all
                                    respects to the name of the holder
                                    as specified on the face of the
                                    Warrant)



                                                (Address)


Signed in the presence of: