# AGREEMENT

THIS
AGREEMENT (Agreement) is made effective this 1st day of December
2001 by FANCHER RESOURCES, LLC,a Colorado limited liability
company (Fancher) and FAN ENERGY INC.,a Nevada corporation
(Fan) and is made with reference to the following agreed facts.

# RECITALS

A.
    Fancher is owned and controlled by George H. Fancher
Jr., who is, a director and a substantial stockholder of Fan.

B.
    Fan has been engaged in the oil and natural gas
business, including acquiring interests in oil and gas properties, exploring and
drilling exploratory and development wells and other related activities. Fan
acquired its interest in its various oil and gas properties in transactions
approved by the Board of Directors of Fan from an entity controlled by Fancher.

C.
    Fan has determined to pursue other areas of business and
to leave the oil and natural gas business. Fancher is engaged on his own behalf
in the oil and natural gas business and has offered to acquire from Fan all of
its right, title and interest in and to all of its oil and gas properties and
related assets which are located in the states of California and Wyoming. The
parties intend to set forth the terms pursuant to which Fan shall transfer all
of its interests in its various oil and gas properties to Fancher.

NOW,
THEREFORE,in consideration of the matters recited above and other good
and valuable consideration, including the payments and undertakings set forth in
this agreement, the receipt and sufficiency of which is mutually acknowledged,
Fan and Fancher hereby agree as follows:

1.
    Identity of Fans Oil and Gas Properties. The
identity and description of each property in which Fan holds an ownership
interest is set forth on Exhibit A attached hereto and incorporated
herein by reference (hereafter the Fan Oil and Gas Properties).

2.
    Agreement to Sell. Fan hereby agrees to sell, and
Fancher agrees to purchase the Fan Oil and Gas Properties for the considered
described in this Agreement.

3.
    Acquisition Price. As consideration for the
acquisition of the Fan Oil and Gas Properties, Fancher agrees as
follows:

| | (a)
    George H. Fancher Jr. Shall surrender and return to Fan a total of restricted
378,885 shares of the common stock of Fan (the Shares). The Shares
shall be delivered to Fan fully endorsed and Fan shall be authorized to
surrender the certificate representing the Shares to the transfer agent of Fan
with directions to surrender and cancel the Shares after which time they shall
no longer be issued nor outstanding.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

| | (b)
    Fancher shall assume all obligations of Fan heretofore or hereafter incurred in
connection  with  the Fan Oil and Gas  Properties,  specifically  including  all
obligations to pay operating expenses, expenses to plug an abandoned oil and gas
well leasehold expenses,  exploration expenses,  taxes, or any other expenses or
obligations  whatsoever,  specifically  including any environmental  remediation
expenses which might be deemed to have been incurred or to exist relating to the
operation or ownership of any interests in the Fan Oil and Gas  Properties.  The
parties intend that, in addition to other unknown  obligations,  the obligations
to be assumed by Fancher shall include the obligations and liabilities summarized
on   Exhibit   B   attached   hereto   and    incorporated    herein   by
reference.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.
    Effective Date of Transfer. The parties agree that
the Fan Oil and Gas Properties shall be deemed to have been assigned and
transferred to Fancher effective as of December 1, 2001. Fan and Fancher shall
account to one another regarding any revenue deemed to have been generated by
production from the Fan Oil and Gas Properties prior to the effective date,
obligations to pay operating expenses and other liabilities and costs incurred
in connection with operation or ownership of the Fan Oil and Gas Properties
consistent with the intentions of this paragraph, it being the intention of the
parties that all revenue generated by the Fan Oil and Gas Properties prior to
the effective date of the transfer shall be retained by the operator of the
properties and applied toward outstanding obligations owed by Fan to such
operator, and Fancier shall be obligated to the operator to pay to the operator
all amounts remaining unpaid by Fan as of the effective date.

5.
    Representations of Fan. Fan represents to Fancher
that it has good and valid title to the Fan Oil and Gas Properties as described
on Exhibit A and that it is authorized to transfer and assign its
interest in the Fan Oil and Gas Properties to Fancher in accordance with this
Agreement.

6.
    Fancher Representations to Fan. Fancher represents to Fan that all
information concerning the Fan Oil and Gas Properties and all other properties
in which Fan may be deemed to hold or have earned an ownership interest has been
disclosed to the Board of Directors of Fan, that Fancher is not aware of any
unknown discovery or other value attributable to the Fan Oil and Gas Properties
not previously disclosed and that Fancher is authorized and empowered to acquire
the Fan Oil and Gas Properties in accordance with the terms of this Agreement.

7.
    Closing. The transaction shall be deemed to have been completed effective
December 1, 2001, subject to Closing. In order to close the transaction George
H. Fancher Jr. shall deliver one or more certificates representing 378,885
shares. At such time, Fancher shall also deliver to Fan, an assignment, in a
form acceptable to Fancher, pursuant to which 100% of Fans right, title
and interest in and to the Fan Oil and Gas Properties shall be transferred from
Fan to Fancher.

8.
    Further Assurances. The parties agree that, upon the
reasonable written request of the other party, such documents as reasonably be
required to effectuate the intentions of the parties with respect to assignment
and transfer of the Fan Oil and Gas Properties to Fancher and payment of
Fans obligations and liabilities with respect thereto by Fancher, shall be
signed and delivered.

---

9.
    Governing Law. This Agreement shall be governed by
and construed according to the laws of the state of Colorado.

IN
WITNESS WHEREOF these presents are executed as of the day and year first
above written.

| | FAN
ENERGY INC.
By _________________________________
       Authorized OfficerFANCHER RESOURCES, LLC,
a Colorado limited liability company
By _________________________________
       George H. Fancher Jr., Manager
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Agreed to and accepted:
__________________________________
George H. Fancher Jr.

---