<PAGE> 1





                      FIRST AMENDED AND RESTATED LOAN AGREEMENT


               This First Amended and Restated Loan  Agreement, dated as of
          May 26, 1998, is made by and between TMBR/SHARP DRILLING, INC., a
          Texas corporation (the "Borrower"), and NORWEST BANK TEXAS, N.A.,
          a national banking association (the "Bank").


                                       RECITALS


               WHEREAS,  the  Borrower and  the  Bank are  parties  to that
          certain  Loan Agreement, dated as of  January 16, 1996, providing
          for the loans and the other matters set forth therein (the "Prior
          Loan Agreement").

               WHEREAS, the Borrower has issued  and delivered to the  Bank
          (i) that certain Revolving Line of Credit Promissory Note,  dated
          January 16,  1996, in the original principal amount of $3,000,000
          and having a  maturity date of  January 16,  1998, and (ii)  that
          certain Promissory Note, dated  August 15, 1996, in  the original
          principal amount  of $2,000,000 and  having a  maturity date,  as
          extended, of April 15, 1998 (collectively, the "Prior Notes").

               WHEREAS,  the  payment  and  performance of  the  Borrower s
          obligations  under the Prior  Loan Agreement and  the Prior Notes
          are  secured  by that  certain  Security Agreement,  dated  as of
          January  16,  1996, between  the Borrower  and  the Bank  and the
          related financing statements filed with the Secretary of State of
          Texas  and the  Secretary  of State  of  New Mexico  (the  "Prior
          Security Instruments").

               WHEREAS,  the  Prior  Notes  have matured  and  all  amounts
          outstanding thereunder have been repaid in their entirety.

               WHEREAS, the Borrower has requested that the Bank (i)  renew
          and reinstate the lending commitments of the Bank under the Prior
          Loan  Agreement, (ii)  renew,  extend and  consolidate the  Prior
          Notes and (iii) make additional loans to the Borrower.

               WHEREAS, the  Bank is  agreeable to the  Borrower's requests
          but only upon and  subject to the terms and provisions  which are
          hereinafter specified.

               NOW,  THEREFORE, in  consideration of  the premises  and the
          mutual  covenants  herein contained,  the  parties  hereto hereby
          agree as follows:

                                      ARTICLE 1




<PAGE> 2
                                     DEFINITIONS





               Section 1.01   Certain  Definitions.     As  used  in   this
          Agreement, terms  defined in the preamble and recitals shall have
          the meanings set forth therein and the following terms shall have
          the following meanings:

                    "Affiliate" as to any Person, shall mean any other
               Person (other  than  a Subsidiary)  which, directly  or
               indirectly, is in "control" of, is controlled by, or is
               under common  control with, such Person.   For purposes
               of  this definition,   control  of  a Person  means the
               power, directly  or indirectly, either to  (i) vote 10%
               or more of the  securities having ordinary voting power
               for the election  of directors of  such Person or  (ii)
               direct  or cause  the direction  of the  management and
               policies  of  such  Person,   whether  by  contract  or
               otherwise.

                    "Agreement"  shall  mean  this  First  Amended and
               Restated  Loan Agreement,  as amended,  supplemented or
               otherwise modified from time to time.

                    "Base  Rate"  shall  mean that  variable  rate  of
               interest per annum established by the Bank from time to
               time as  its "base rate".  Such rate is set by the Bank
               as a  general reference  rate of interest,  taking into
               account such factors as  the Bank may deem appropriate,
               it being understood that  many of the Bank s commercial
               or  other loans  are priced in  relation to  such rate,
               that it  is not  necessarily the  lowest  or best  rate
               actually charged to any customer  and that the Bank may
               make  various commercial  or  other loans  at rates  of
               interest having no relationship to such rate.

                    "Borrowing Base  Amount" shall  mean at any  date,
               the  amount determined pursuant  to Section  2.04 under
               this Agreement at such date.

                    "Borrowing Base Assets"  shall mean the Borrower's
               accounts receivable, drilling  in progress,  inventory,
               equipment,   drill  pipe,  drilling  rigs  and  related
               equipment which  is subject  to the Liens,  privileges,
               priorities and security interests existing and to exist
               under the  terms of  the Security Instruments  from the
               Borrower  or any  other Person  to or  in favor  of the
               Bank.

                    "Borrowing Base Report" shall have the meaning set
               forth in Section 2.04(b).

                    "Borrowing  Date"  shall  mean  any  Business  Day
               specified in  a notice  pursuant to Section  2.03 as  a

                                       -2-
<PAGE> 3                                  





               date on which  the Borrower requests  the Bank to  make
               Revolving Credit Loans hereunder.

                    "Business  Day"  shall mean  a  day  other than  a
               Saturday, Sunday or legal holiday  for commercial banks
               under the laws of the State of Texas.

                    "EBITDA" shall mean, with respect to any period of
               calculation thereof, the sum of (i) the  net income (or
               loss)  from  continuing operations  of  Borrower during
               such   period   (excluding  extraordinary   income  but
               including extraordinary expenses),  plus (ii)  interest
               expense,  income  taxes,  depreciation,  depletion  and
               amortization expenses of Borrower during such period.

                    "Change  in Control"  shall  mean  the  occurrence
               after the date of this Agreement of any circumstance or
               event  in which (i) a Person shall cause or bring about
               (through  solicitation of  proxies  or  otherwise)  the
               removal or  resignation of a majority of the members of
               the Board of Directors of  the Borrower serving in such
               capacity  on  the date  of this  Agreement or  a Person
               causes or brings about (through solicitation of proxies
               or otherwise) an  increase in the size of  the existing
               Board  of  Directors  of  the Borrower  such  that  the
               existing members of  the Board of Directors  thereafter
               represent  a minority  of the  total number  of persons
               comprising   the  entire  Board;   or  (ii)  a  Person,
               including a  "group" as defined in  Section 13(d)(3) of
               the  Securities  Exchange  Act  of  1934,  becomes  the
               beneficial owner of shares of any class of stock of the
               Borrower  having twenty  percent (20%)  or more  of the
               total number of votes that may be cast for the election
               of directors of the Borrower.

                    "Closing Date"  shall mean  the date on  which the
               conditions precedent set forth in Section 7.01 shall be
               satisfied.

                    "Commitment" shall mean the obligation of the Bank
               to  make  Revolving  Credit   Loans  to  the   Borrower
               hereunder in  an aggregate principal amount  at any one
               time outstanding not to  exceed the amount provided for
               in accordance  with the provisions  of this  Agreement,
               including, without  limitation,  Section 2.01  of  this
               Agreement.

                    "Commitment Period" shall mean the period from and
               including  the date  hereof  to but  not including  the
               Termination  Date or  such  earlier date  on which  the
               Commitments shall terminate as provided herein.

                                       -3-
                                       
<PAGE> 4




                    "Contractual  Obligation"  shall mean,  as  to any
               Person, any  provision of  any security issued  by such
               Person  or  of  any   agreement,  instrument  or  other
               undertaking to which such Person is a party or by which
               it or any of its property is bound.

                    "Current Ratio"  shall mean  the ratio of  (i) the
               sum of the current  assets of Borrower to (ii)  the sum
               of the current liabilities (excluding, however, current
               liabilities attributable to the Note) of Borrower.

                    "Debt to Worth Ratio" shall  mean the ratio of (i)
               the sum of  the total  liabilities of  the Borrower  to
               (ii) the sum of the Borrower's Net Worth.

                    "Environmental   Laws"  shall  mean  any  and  all
               foreign,  Federal,  state,  local  or  municipal  laws,
               rules,   orders,  regulations,   statutes,  ordinances,
               codes,  decrees,  requirements   of  any   Governmental
               Authority  or  other  Requirements  of  Law  (including
               common   law)  regulating,  relating   to  or  imposing
               liability or standards of conduct concerning protection
               of  human health or the  environment, as now  or may at
               any time hereafter be in effect.

                    "Environmental Complaint" shall  mean any  written
               complaint, order,  citation,  notice or  other  written
               communication  from  any  Person  with  respect to  the
               existence or  alleged existence  of a violation  of any
               Environmental Law in connection with or with respect to
               any  air emission,  water  discharge,  noise  emission,
               asbestos,    hazardous    substance   or    any   other
               environmental matter regulated under Environmental Laws
               at, upon, under  or within any  of the property  owned,
               leased or used by the Borrower.

                    "Event of  Default" shall mean  the occurrence  of
               any of the events specified in Section 6.01 hereof.

                    "Excepted Liens" shall  mean (i) Liens for  taxes,
               assessments or other governmental charges or levies not
               yet due or which  are being contested in good  faith by
               appropriate   proceedings,   provided   that   adequate
               reserves  with respect  thereto  are maintained  on the
               books of Borrower in conformity with GAAP; (ii) pledges
               or deposits in  connection with workers'  compensation,
               unemployment   insurance   or  other   social  security
               legislation,  old  age  pension  or   public  liability
               obligations; (iii) vendors', carriers', warehousemen's,
               repairmen's,  mechanics',  workmen's, materialmen's  or
               other  like Liens  arising  in the  ordinary course  of
               business which  are not  overdue for  a period of  more

                                       -4-

<PAGE> 5



               than 60 days or which are being contested in good faith
               by  appropriate proceedings;  (iv) Liens  arising under
               customary oil and gas operating agreements entered into
               in  the ordinary  course  of business  with respect  to
               obligations which are not overdue for a period  of more
               than 60 days or which are being contested in good faith
               by    appropriate   proceedings;    (v)   restrictions,
               easements,  reservations,   exceptions,  encroachments,
               rights-of-way, and other similar  encumbrances incurred
               in the  ordinary course  of business and  other similar
               irregularities  in title  which, in the  aggregate, are
               not  substantial in amount and which do not in any case
               materially  detract from  the  value  of  the  property
               subject  thereto  or   materially  interfere  with  the
               conduct of the business  of Borrower; and (vi) deposits
               to  secure the  performance  of bids,  trade  contracts
               (other  than  for  borrowed money),  leases,  statutory
               obligations, surety and appeal bonds, performance bonds
               and other obligations of a like nature incurred in  the
               ordinary course of business.

                    "GAAP"  shall  mean generally  accepted accounting
               principles in  the United  States of America  in effect
               from time to time.

                    "Governmental Authority" shall  mean any nation or
               government,  any state  or other  political subdivision
               thereof   and   any   entity    exercising   executive,
               legislative,  judicial,  regulatory  or  administrative
               functions of or pertaining to government.

                    "Highest  Lawful  Rate"  shall  mean  the  maximum
               nonusurious  interest rate, if any, that at any time or
               from  time  to  time  may  be  contracted  for,  taken,
               reserved, charged or  received on the Note  or on other
               Indebtedness  owing to the  Bank, as  the case  may be,
               under laws applicable to the Note or other Indebtedness
               owing  to the Bank which are presently in effect or, to
               the  extent  allowed  by  applicable  law,  under  such
               applicable laws  which may  hereafter be in  effect and
               which allow  a higher maximum nonusurious interest rate
               than applicable laws now allow.  

                    "Indebtedness"  of any  Person  at any  date shall
               mean (i) all obligations, liabilities  and indebtedness
               of such  Person for borrowed money or  for the deferred
               purchase  price  of property  or  services  (other than
               current  trade  liabilities  incurred  in  the ordinary
               course  of business and which  are not in  excess of 90
               days  past the invoice or billing  date) for which such
               Person   is  liable,  contingently   or  otherwise,  as
               obligor, guarantor, surety or  otherwise, or in respect

                                       -5-


<PAGE> 6


               of  which  such  Person otherwise  assures  a  creditor
               against  loss;  (ii)  any  other  indebtedness  of such
               Person which is evidenced by a note, bond, debenture or
               similar  instrument;  (iii) all  obligations   of  such
               Person under  leases which  shall have been,  or should
               have been, in accordance with GAAP, recorded as capital
               leases for which such Person is liable, contingently or
               otherwise, as  obligor, guarantor  or otherwise,  or in
               respect  of  which  such  Person  otherwise  assures  a
               creditor  against  loss;   and  (iv)  unfunded   vested
               benefits under each employee benefit plan.

                    "Intangible Assets" shall mean  all assets of  the
               Borrower that would be classified as intangible assets,
               but  in any  event including,  without limitation,  (i)
               deferred  assets,  other  than  prepaid  insurance  and
               prepaid  taxes;  (ii) patents,  copyrights, trademarks,
               tradenames, franchises, goodwill, experimental expenses
               and other  similar assets which would  be classified as
               intangible assets  on a  balance sheet of  such Person;
               (iii)  unamortized debt discount  and expense; and (iv)
               assets  located, and  notes  and  receivables due  from
               obligors domiciled, outside of the United States.

                    "Lien"  shall  mean  any   mortgage,  encumbrance,
               pledge,  hypothecation,  assignment,  charge,  security
               agreement,   lien   (statutory   or   other),   deposit
               agreement,  conditional  sale  or  trust  receipt or  a
               lease, consignment  or bailment for  security purposes,
               and reservations, exceptions, encroachments, easements,
               rights-of-way,  covenants,  conditions,   restrictions,
               leases  and  other  title exceptions  and  encumbrances
               affecting property.   For purposes  of this  Agreement,
               Borrower  shall  be deemed  to  be  the  owner  of  any
               property which  it has acquired  or holds subject  to a
               conditional  sale agreement,  financing lease  or other
               arrangement pursuant to which title to the property has
               been  retained by  or vested  in some other  Person for
               security purposes.

                    "Loan  Documents"  shall mean,  collectively, this
               Agreement, the Note, the Security Instruments,  and all
               other agreements, documents, certificates,  letters and
               instruments  of  whatever   nature  ever  delivered  or
               executed  pursuant  to,  or in  connection  with,  this
               Agreement, whether  existing  on  the  date  hereof  or
               thereafter created, as any of the same may hereafter be
               amended, supplemented, extended or restated.

                    "Material  Adverse Effect"  shall mean  a material
               adverse   effect  on  (i)   the  business,  operations,
               property, condition (financial  or otherwise),  results

        

                                       -6-

<PAGE> 7

               of operations, assets, liabilities  or prospects of the
               Borrower, (ii)  the ability of the  Borrower to perform
               any  of its  obligations  under the  Loan Documents  or
               (iii) the validity or enforceability of  this or any of
               the  other Loan Documents or the  rights or remedies of
               the Bank hereunder or thereunder.

                    "Material  Environmental  Amount"  shall  mean  an
               amount not  otherwise covered by  insurance payable  by
               the  Borrower  in  excess of  $75,000.00  for  remedial
               costs, compliance costs, compensatory damages, punitive
               damages, fines, penalties or any combination thereof.

                    "Materials  of  Environmental Concern"  shall mean
               any hazardous or toxic substances, materials or wastes,
               defined  or   regulated  as   such  in  or   under  any
               Environmental   Law,  including,   without  limitation,
               petroleum  and  its  derivatives   and  polychlorinated
               biphenyls.

                    "Net  Worth"   shall  mean  as  of   the  date  of
               determination all amounts included  under stockholders'
               equity on a balance sheet of the Borrower at such date.

                    "Note" shall have the meaning set forth in Section
               2.02.

                    "Person" shall mean  any individual,  corporation,
               partnership,  joint  venture,   joint  stock   company,
               business  trust,   trust,  unincorporated  association,
               Governmental Authority, or any  other form of entity of
               whatever nature.

                    "Properties" shall have the  meaning set forth  in
               Section 3.11(a).

                    "Requirement of Law" shall mean, as to any Person,
               the certificate or articles of incorporation and bylaws
               or  other organizational or governing documents of such
               Person, and any  law, statute, code, ordinance,  order,
               treaty,  rule,   regulation  or  determination   of  an
               arbitrator or a court or other  Governmental Authority,
               in each case  applicable to or binding upon such Person
               or  any of its property or  to which such Person or any
               of its property is subject.

                    "Revolving  Credit  Loan"  or   "Revolving  Credit
               Loans"  shall have  the  meaning set  forth in  Section
               2.01.

                    "Security   Instruments"   shall   mean,   without
               limitation,  the agreements or instruments described or

        

                                       -7-


<PAGE> 8
               referenced in  Section 7.01(a) hereof  and any  and all
               other instruments heretofore, now or hereafter executed
               and delivered  by the Borrower  or any other  Person to
               secure or  guarantee the payment or  performance of the
               Note  or  this  Agreement,  as any  such  agreement  or
               instrument may be amended  or supplemented from time to
               time.

                    "Subsidiary"  shall  mean,  as  to  any  Person, a
               corporation,  partnership  or  other  entity  of  which
               shares of  stock or  other  ownership interests  having
               ordinary voting  power (other than stock  or such other
               ownership interests having such power only by reason of
               the happening of a contingency) to elect a  majority of
               the  board  of  directors  or other  managers  of  such
               corporation,  partnership or  other  entity are  at the
               time  owned, or  the management  of which  is otherwise
               controlled, directly or indirectly, through one or more
               intermediaries,  or  both,  by  such  Person.    Unless
               otherwise qualified, all  references to "Subsidiary" or
               to "Subsidiaries"  in this  Agreement shall refer  to a
               Subsidiary or Subsidiaries of Borrower.

                    "Tangible Net  Worth" shall  mean at  a particular
               date  (i)  the  sum  of  the  stockholders'  equity  of
               Borrower, less (ii) the sum of the aggregate book value
               of the Intangible Assets of Borrower.

                    "Termination Date" shall mean May 26, 2000.

               Section 1.02   Other Definitional Provisions.   (a)   Unless
          otherwise specified therein, all  terms defined in this Agreement
          shall have  the defined meanings  when used  in the  Note or  the
          Security Instruments  or any  certificate or other  Loan Document
          made or delivered pursuant hereto.

                    (b)  As  used   herein  and   in  the  Note,   and  any
          certificate or other document  made or delivered pursuant hereto,
          accounting terms relating to the  Borrower not defined in Section
          1.01  and accounting terms partly defined in Section 1.01, to the
          extent  not defined, shall have the  respective meanings given to
          them under GAAP.

                    (c)  The words  "hereof", "herein" and  "hereunder" and
          words of similar import  when used in this Agreement  shall refer
          to this  Agreement as a whole and not to any particular provision
          of this Agreement, and  Section, subsection, Schedule and Exhibit
          references are to this Agreement unless otherwise specified.

                    (d)  The meanings  given to terms defined  herein shall
          be  equally applicable to both  the singular and  plural forms of
          such terms.

                                       

                                       -8-



<PAGE> 9
               Section 1.03   Accounting Principles.   Where the  character
          or amount of any asset or  liability or item of income or expense
          is  required  to be  determined  or  any consolidation  or  other
          accounting computation is required to be made for the purposes of
          this Agreement, such  determination, consolidation or computation
          shall  be  made in  accordance  with  GAAP consistently  applied,
          except  where   such   principles  are   inconsistent  with   the
          requirements of this Agreement.


                                      ARTICLE 2

                           AMOUNT AND TERMS OF COMMITMENTS

               Section 2.01   Revolving Credit Loans.  Subject to the terms
          and  conditions hereof, the Bank  agrees to make revolving credit
          loans (individually, a "Revolving Credit Loan"; collectively, the
          "Revolving Credit  Loans")  to the  Borrower  from time  to  time
          during the Commitment Period in an aggregate principal amount  at
          any  one time  outstanding  not  to  exceed  the  lesser  of  (i)
          $5,000,000.00  or  (ii) one-third  (1/3)  of  the Borrowing  Base
          Amount.  During the  Commitment Period, the Borrower may  use the
          Commitment by borrowing, prepaying  the Revolving Credit Loans in
          whole or in  part, and  reborrowing, all in  accordance with  the
          terms and conditions hereof.

               Section 2.02   Revolving Credit Note.  The  Revolving Credit
          Loans made by the Bank shall be evidenced by a promissory note of
          the  Borrower, substantially  in  the  form  of  Exhibit  A  (the
          "Note").   The Bank shall  maintain in accordance  with its usual
          practice an  account or other record  evidencing the Indebtedness
          of  the Borrower to the Bank resulting from each Revolving Credit
          Loan made by the Bank from time to time, including the amounts of
          principal and interest payable and paid to the Bank from time  to
          time under this Agreement and the Note.  The entries made in such
          account or record of  the Bank shall be  prima facie evidence  of
          the existence  and amounts  of  the obligations  of the  Borrower
          therein recorded; provided, however, that the failure of the Bank
          to maintain any  such account  or record, or  any error  therein,
          shall not in  any manner  affect the  absolute and  unconditional
          obligation of  the Borrower  to repay (with  applicable interest)
          the Revolving  Credit Loans  made to the  Borrower in  accordance
          with the  terms of this Agreement.   The Note shall  (x) be dated
          the Closing  Date, (y) be  stated to  mature two  years from  the
          Closing Date and (z) bear interest on the unpaid principal amount
          thereof from time to time outstanding at the applicable  interest
          rate per  annum as provided  in the Note.   Interest on  the Note
          shall be payable on the dates specified in the Note.

               Section 2.03   Procedure  for  Revolving  Credit  Borrowing.
          The  Borrower   may  borrow  under  the   Commitment  during  the
          Commitment Period on any Business Day, provided that the Borrower

                                       -9-





<PAGE> 10
          shall give the Bank irrevocable notice specifying (A) the  amount
          to be  borrowed and (B)  the requested Borrowing  Date; provided,
          that  such notice shall be waived by the Bank in the case of, and
          only in  the case of, the  initial Revolving Credit Loan  made on
          the  Closing Date.    Each borrowing  pursuant to  the Commitment
          shall be in  an aggregate principal  amount of the lesser  of (i)
          $50,000.00  or  a  whole  multiple  thereof,  or  (ii)  the  then
          remaining unadvanced portion of the available Commitment.

               Section 2.04   Borrowing  Base Amount.   The  Borrowing Base
          Amount shall be determined as follows:

                    (a)  Initial Borrowing Base Amount.  The Borrowing Base
          Amount  shall be  $25,445,743  during the  period  from the  date
          hereof to the  date on which the Borrower receives  notice of the
          first  determination of  the Borrowing  Base Amount  by  the Bank
          pursuant  to Section  2.04(b) and  thereafter the  Borrowing Base
          Amount  shall   be  the  Borrowing  Base   Amount  most  recently
          determined pursuant to Section 2.04(b).

                    (b)  Determinations of the Borrowing Base Amount.   (i)
          No later than 45 days after the end of each fiscal quarter of the
          Borrower throughout the Commitment Period, the Borrower shall, at
          its  own expense,  furnish to  the Bank  a borrowing  base report
          ("Borrowing Base Report"), in the form attached hereto as Exhibit
          B, which  Borrowing Base Report shall  be dated as of  the end of
          each such quarter and shall set forth, by category, the Borrowing
          Base Assets and the Borrowing Base Amount as therein provided.

                         (ii) Within   15  days  after   it  receives  each
          Borrowing Base Report, the Bank shall make a determination of the
          Borrowing Base Amount, and  shall notify the Borrower of  the new
          Borrowing  Base Amount, if any;  provided, that if  the Bank does
          not so notify  the Borrower of a new  Borrowing Base Amount, then
          the  Borrowing Base Amount set forth in the Borrowing Base Report
          furnished  to  the  Bank  by  the  Borrower pursuant  to  Section
          2.04(b)(i)  shall be deemed to be the Borrowing Base Amount until
          a new Borrowing Base Amount is determined by  the Bank and notice
          of such new Borrowing Base Amount is given to the Borrower.  Each
          determination of the Borrowing  Base Amount shall be made  by the
          Bank  in the exercise of  its sole discretion  in accordance with
          the  then current standards and practices of the Bank for similar
          oil  and  gas/contract  drilling  equipment  loans,  taking  into
          account such factors as the Bank may deem appropriate, including,
          without  limitation  the  nature  and extent  of  the  Borrower's
          interest in the Borrowing Base Assets and the anticipated  timing
          and extent of net  operating income therefrom.   The Bank may  in
          its  sole discretion  discount the  value of  any Borrowing  Base
          Asset  set forth in  a Borrowing Base Report  by the same factors
          utilized  by it in discounting the  value of comparable borrowing
          base assets in comparable transactions for comparable borrowers.


         

                                       -10-



<PAGE> 11
                         (iii)     The  Borrower agrees to pay or reimburse
          the  Bank for  all  reasonable out-of-pocket  costs and  expenses
          incurred  by the Bank in  connection with (a)  the examination of
          each Borrowing Base Report furnished to the Bank by the Borrower,
          (b)  any redetermination by the Bank of the Borrowing Base Amount
          pursuant  to such  Borrowing Base  Report  (including independent
          appraisals of the Borrowing  Base Assets which the Bank  may, but
          shall  not  be  required  to,   obtain  in  connection  with  any
          redetermination  of the Borrowing  Base Amount by  the Bank), and
          (c)  the  notification  of  the  Borrower  of  such  redetermined
          Borrowing Base Amount.

                         (iv) Each delivery by the  Borrower to the Bank of
          a  Borrowing  Base  Report  shall  be  deemed  to   constitute  a
          representation  and warranty by the Borrower to the Bank that the
          Borrower  has good  and marketable  title to  the  Borrowing Base
          Assets and  any other property  rights or interests  described in
          such report, and that none of such Borrowing Base Assets or other
          property rights or interests is subject to any Lien other than as
          permitted by Section 5.02.

               Section 2.05   Optional and Mandatory Prepayments.  (a)  The
          Borrower  may  at  any time  and  from time  to  time  prepay the
          Revolving Credit Loans, in  whole or in part, without  premium or
          penalty, upon at  least four Business Days' irrevocable notice to
          the Bank, specifying  the date and amount of prepayment.   If any
          such notice is given,  the amount specified in such  notice shall
          be  due and  payable  on the  date  specified therein.    Partial
          prepayments  shall  be  in   an  aggregate  principal  amount  of
          $50,000.00 or a whole multiple thereof.

                    (b)  If  the aggregate  unpaid principal amount  of the
          Revolving Credit Loans  shall at any time exceed  one-third (1/3)
          of the  Borrowing Base  Amount at such  time, the  Bank shall  so
          notify the Borrower, and the Borrower shall, within 30 days after
          such notification,  prepay the principal of  the Revolving Credit
          Loans  in  an aggregate  amount at  least  equal to  such excess,
          together  with accrued interest on the amount prepaid to the date
          of such prepayment.

               Section 2.06   Payment   Procedure.      All  payments   and
          prepayments made by the Borrower under the Note or this Agreement
          shall be made without  setoff or counterclaim to the Bank  at its
          office at 500 West Texas Avenue, Midland, Texas  79701, and shall
          be made  in  immediately available  funds,  prior to  1:00  p.m.,
          Midland, Texas time, on the date that such payment is required or
          permitted to be  made.   Any payment received  by the Bank  after
          1:00  p.m. on  any  date shall  be  considered for  all  purposes
          (including the  calculation of interest, to  the extent permitted
          by  applicable law)  as having  been made  on the  next following
          Business Day.   If the date  of any payment or  prepayment of the
          Note  falls on a  day which is  not a Business  Day, then for all

                                 


                                       -11-


<PAGE> 12
          purposes of the Note and this Agreement such date shall be deemed
          to  have  fallen on  the next  following  Business Day,  and such
          extension  of  time  shall  in  such  case  be  included  in  the
          computation of payment of interest.

          
                                      ARTICLE 3

                            REPRESENTATIONS AND WARRANTIES

               To induce the Bank to enter into this  Agreement and to make
          the Revolving  Credit Loans,  the Borrower hereby  represents and
          warrants to  the Bank (which representations  and warranties will
          survive the delivery  of the Note and the making of the Revolving
          Credit Loans hereunder) that:

               Section 3.01   Corporate  Existence;  Compliance  with  Law.
          Borrower  (i) is  duly organized,  validly existing  and in  good
          standing under the laws of the  jurisdiction of its organization,
          (ii)  has the corporate power and authority, and the legal right,
          to own  and operate its property  (including, without limitation,
          the  Borrowing Base Assets), to lease the property it operates as
          lessee  and  to conduct  the business  in  which it  is currently
          engaged,  (iii) is duly qualified as a foreign corporation and in
          good  standing  under the  laws  of each  jurisdiction  where its
          ownership, lease or operation  of property or the conduct  of its
          business requires  such qualification  and (iv) is  in compliance
          with  all Requirements  of  Law except  to  the extent  that  the
          failure  to  comply  therewith   could  not,  in  the  aggregate,
          reasonably be expected to have a Material Adverse Effect.

               Section 3.02   Corporate  Power; Authorization;  Enforceable
          Obligations.  Borrower has the corporate power and authority, and
          the  legal right, to make, deliver and perform the Loan Documents
          to  which it is a party and to borrow hereunder and has taken all
          necessary  corporate action  to authorize  the borrowings  on the
          terms  and conditions  of  this Agreement  and  the Note  and  to
          authorize  the execution,  delivery and  performance of  the Loan
          Documents to  which it is  a party.  No  consent or authorization
          of, filing with, notice to or other act by or in respect of,  any
          Governmental  Authority  or  any  other  Person  is  required  in
          connection with  the borrowings hereunder or  with the execution,
          delivery,  performance, validity  or  enforceability of  the Loan
          Documents to which the Borrower  is a party.  This Agreement  has
          been, and  each other Loan Document  to which it is  a party will
          be,  duly executed and delivered on behalf of the Borrower.  This
          Agreement  constitutes, and each other Loan  Document to which it
          is  a party when executed and delivered will constitute, a legal,
          valid  and binding  obligation  of  Borrower enforceable  against
          Borrower  in accordance with its terms, subject to the effects of
          bankruptcy,  insolvency,  fraudulent conveyance,  reorganization,
          moratorium  and  other  similar  laws relating  to  or  affecting
          creditors'   rights   generally,  general   equitable  principles
          (whether considered in  a proceeding in equity or at  law) and an
          implied covenant of good faith and fair dealing.

               
                                       -12-
               
<PAGE> 13      
               Section 3.03   No Legal  Bar.  The  execution, delivery  and
          performance  of the  Loan Documents  to which  the Borrower  is a
          party,  the  borrowings hereunder  and  the use  of  the proceeds
          thereof will  not violate any  Requirement of Law  or Contractual
          Obligation  of the Borrower and  will not result  in, or require,
          the creation or imposition  of any Lien (other than  as permitted
          hereby)  on any of Borrower's properties  or revenues pursuant to
          any such Requirement of Law or Contractual Obligation.

               Section 3.04   No Default.  Borrower is not in default under
          or  with respect  to any  of its  Contractual Obligations  in any
          respect which could have a Material Adverse  Effect.  No Event of
          Default has occurred and is continuing.

               Section 3.05   Ownership of Property;  Liens.  Borrower  has
          good record and  marketable title  in fee simple  to, or a  valid
          leasehold interest in, all  its real property and good  title to,
          or  a  valid  leasehold  interest  in,  all  its  other  property
          (including, without  limitation, the Borrowing Base  Assets), and
          none  of such property is subject to any Lien except as permitted
          by Section 5.02.

               Section 3.06   No Burdensome Restrictions.   No  Requirement
          of Law or Contractual Obligation of  Borrower could reasonably be
          expected to have a Material Adverse Effect.

               Section 3.07   Taxes.   Borrower has  filed or caused  to be
          filed  all tax returns which,  to the knowledge  of the Borrower,
          are  required to be filed and has  paid all taxes shown to be due
          and payable on said returns or on any assessments made against it
          or any of its property and all other taxes, fees or other charges
          imposed  on it  or  any  of  its  property  by  any  Governmental
          Authority (other than  any the  amount or validity  of which  are
          currently  being   contested  in   good   faith  by   appropriate
          proceedings and with respect to which reserves in conformity with
          GAAP  have been provided  on the books  of the Borrower);  no tax
          Lien has  been filed, and, to  the knowledge of  the Borrower, no
          claim is being  asserted, with  respect to any  such tax, fee  or
          other charge.

               Section 3.08   Federal Regulations.  No part of the proceeds
          of any Revolving  Credit Loan  will be used  for "purchasing"  or
          "carrying" any  "margin stock" within the  respective meanings of
          each of  the quoted terms under  Regulation G or Regulation  U of
          the Board of Governors  of the Federal Reserve System as  now and
          from time to time hereafter in effect.  If requested by the Bank,
          the  Borrower will  furnish  to  the  Bank  a  statement  to  the
          foregoing effect  in conformity with the requirements  of FR Form
          G-1 or FR Form U-1 referred to in said Regulation G or Regulation
          U, as the case may be.

               Section 3.09   Investment   Company   Act;  Public   Utility
          Holding Company Act; Other  Regulations.  Borrower is not  (a) an
          "investment company", or a company "controlled" by an "investment

          
                                       -13-


<PAGE> 14

          company",  within the  meaning of the  Investment Company  Act of
          1940,  as amended  or (b) a  "holding company" as  defined in, or
          otherwise subject to regulation under, the Public Utility Holding
          Company Act of  1935.  Borrower  has not made  an election to  be
          treated as a utility (as defined in subdivision (2) of subsection
          (a) of Section  35.01 of  the Texas Business  and Commerce  Code.
          Borrower is not primarily engaged in the transmission of goods or
          gas by  pipeline, and does not  hold itself out to  the public as
          having  facilities  for  the  transmission  of  goods or  gas  by
          pipeline which are available for hire by the general public.

               Section 3.10   Purpose  of  Loan.    The   proceeds  of  the
          Revolving  Credit Loans shall be used by the Borrower to purchase
          drill pipe  and related equipment  necessary for the  drilling of
          oil and gas wells, for purchases of undeveloped and developed oil
          and gas properties and for general corporate purposes.

               Section 3.11   Environmental    Matters.       Except    for
          environmental  matters  which,   in  the  aggregate,  could   not
          reasonably be expected to  either (i) result in the  existence of
          an unsatisfied  liability in  excess of a  Material Environmental
          Amount or (ii) have a Material Adverse Effect:

                    (a)  to  the  best  of the  Borrower's  knowledge,  the
               facilities and properties  (real or personal)  owned, leased
               or  operated  by  the  Borrower (the  "Properties")  do  not
               contain, and have not previously contained, any Materials of
               Environmental Concern in amounts or concentrations which (i)
               constitute or constituted a violation of, or (ii) could give
               rise to liability under, any Environmental Law;

                    (b)  to the  best  of  the  Borrower's  knowledge,  the
               Properties  and  all operations  at  the  Properties are  in
               compliance,  and  have  in  the  last  five  years  been  in
               compliance,  with  all  applicable Environmental  Laws,  and
               there is no contamination at, under or  about the Properties
               or violation of  any Environmental Law  with respect to  the
               Properties or the business operated by Borrower;

                    (c)  Borrower has not received any notice of violation,
               alleged  violation,  non-compliance, liability  or potential
               liability regarding environmental matters or compliance with
               Environmental  Laws with regard to  any of the Properties or
               the business  of the  Borrower, nor  does the  Borrower have
               knowledge  or reason to believe that any such notice will be
               received or is being threatened;

                    (d)  to the best of the Borrower's knowledge, materials
               of  Environmental  Concern  have  not  been  transported  or
               disposed of from  the Properties  in violation of,  or in  a
               manner or to  a location which could reasonably  be expected
               to give rise  to liability under, any Environmental Law, nor

         

                                       -14-


<PAGE> 15
               have any Materials of  Environmental Concern been generated,
               treated, stored  or disposed of at,  on or under  any of the
               Properties in violation of,  or in a manner that  could give
               rise to liability under, any applicable Environmental Law;

                    (e)  no   judicial   proceeding   or  governmental   or
               administrative action is pending or, to the knowledge of the
               Borrower, threatened,  under any Environmental Law  to which
               Borrower is  or will be named as a party with respect to the
               Properties or the  business of Borrower,  nor are there  any
               consent   decrees   or   other  decrees,   consent   orders,
               administrative   orders   or   other   orders,    or   other
               administrative  or  judicial requirements  outstanding under
               any Environmental Law with respect to the Properties  or the
               business of Borrower; and

                    (f)  to the best of the Borrower's knowledge, there has
               been  no  release  or  threat  of  release of  Materials  of
               Environmental Concern at or  from the Properties, or arising
               from  or related  to  the  operations  of  the  Borrower  in
               connection  with the Properties  or otherwise  in connection
               with the business  of the  Borrower, in violation  of or  in
               amounts or in  a manner  that could give  rise to  liability
               under Environmental Laws.

               Section 3.12   Insurance.    The  Borrower   maintains  with
          financially sound  and reputable insurance companies insurance in
          at  least such  amounts  and against  at  least such  risks  (but
          including in any event  public liability) as are usually  insured
          against in the same general area by companies engaged in the same
          or  a  similar  business  and  such  insurance  is  otherwise  in
          compliance with the Loan Documents.

               Section 3.13   Financial  Condition.   The balance  sheet of
          the Borrower as of  December 31, 1997 and the  related statements
          of income and of cash flows for the nine-month period then ended,
          copies of  which have been  delivered to  the Bank, are  true and
          correct in all material respects and present fairly the financial
          condition  of Borrower  as at such  date and  the results  of its
          operations  and  cash flows  for the  periods stated  (subject to
          normal year-end  audit adjustments).   Borrower did not  have, at
          the date of the most recent  balance sheet referred to above, any
          guaranty obligation, contingent liability or liability for taxes,
          or  any   long-term  lease   or  unusual  forward   or  long-term
          commitment,  which is  not reflected  in the  foregoing financial
          statements  or  in the  notes thereto.    During the  period from
          December 31, 1997 to and including the date hereof there has been
          no  sale,  transfer  or  other disposition  by  Borrower  of  any
          material  part of  its business  or property  and no  purchase or
          other  acquisition of  any  business or  property (including  any
          capital  stock of any other  Person) material in  relation to the
          financial  condition of  Borrower at  December 31,  1997.   Since

                                       


                                       -15


<PAGE> 16
          December 31,  1997,  no change,  either  in any  case  or in  the
          aggregate, has occurred in the condition, financial or otherwise,
          of Borrower which would have a Material Adverse Effect.  

               Section 3.14   Investments and Guaranties.   At the date  of
          this Agreement,  Borrower has  not made any  material investments
          in, advances to or guaranties of the obligations of any Person.

               Section 3.15   No  Litigation.    There  is  no  litigation,
          legal,  administrative or  arbitral proceeding,  investigation or
          other action  of any nature  pending or, to the  knowledge of the
          Borrower, threatened against or affecting Borrower which involves
          the possibility of any judgment or liability not fully covered by
          insurance,  and which would have a  Material Adverse Effect; and,
          to the  best of  Borrower's knowledge, since  December 31,  1997,
          Borrower has not committed any act, or failed to take any action,
          in connection with the conduct of its business or with respect to
          any Contractual  Obligation  which is  likely  to result  in  the
          assertion  of any adverse claim  of any nature  whatsoever by any
          Person against Borrower or its properties, revenues or assets.

               Section 3.16   Licenses  and  Permits.    Borrower  has  not
          failed  to  obtain  any   license,  permit,  franchise  or  other
          governmental authorization  necessary to the ownership  of any of
          its properties or the conduct of its business, which violation or
          failure would have (in  the event that such violation  or failure
          were  asserted  by  any  Person  through  appropriate  action)  a
          Material Adverse Effect.

               Section 3.17   ERISA.    Each  employee  benefit  plan which
          Borrower has sponsored, maintained or contributed to has complied
          in all  material respects with  the applicable provisions  of the
          Employee  Retirement Income Security Act of 1974, as amended, and
          the Internal Revenue Code of 1986, as amended.

               Section 3.18   No Material Misstatements.   No  information,
          exhibit, schedule or report furnished to the Bank by the Borrower
          in connection  with this Agreement contains  any untrue statement
          of a  material fact or omits to state any material fact necessary
          to make the statements contained therein not misleading.


                                      ARTICLE 4

                                AFFIRMATIVE COVENANTS

               The Borrower hereby agrees  that, so long as the  Commitment
          remains  in effect  or  any Indebtedness  is  owing to  the  Bank
          hereunder  or  under the  Note or  any  other Loan  Document, the
          Borrower shall:

               Section 4.01   Financial Statements and Reports.  Furnish or
          cause to  be furnished  to the  Bank from time  to time  (i) such
          information  regarding the  business  and  affairs and  financial
          condition of the Borrower as the Bank may reasonably request, and
          (ii) without request, the following:

                                       -16-

<PAGE> 17

                    (a)  Annual Financial Statements -  promptly after
               becoming  available, but  in any  event within  90 days
               after March 31  of  each year,  a copy  of the  audited
               balance sheet of  the Borrower  as at the  end of  such
               year, and the related statements of income and retained
               earnings and  of cash  flows of  the Borrower  for such
               year, setting  forth in  each case in  comparative form
               the  corresponding  figures  for  the  preceding  year,
               accompanied by the report of the Borrower's independent
               certified public accountants;

                    (b)  Quarterly  Financial  Statements  -  promptly
               after becoming  available, but  in any event  within 45
               days  after the end of  each of the  first three fiscal
               quarters  of the Borrower,  the unaudited balance sheet
               of the Borrower as at the end of such  quarter, and the
               related  unaudited statements  of  income and  retained
               earnings and  of cash  flows of the  Borrower for  such
               quarter and for  the period from  the beginning of  the
               most recent  fiscal year  to the  end of  such quarter,
               setting  forth in  each  case in  comparative form  the
               corresponding figures for  the corresponding period  of
               the preceding  year, accompanied  by the report  of the
               principal  financial  officer  of  the  Borrower, which
               report shall be to the effect  that such statements are
               true and correct in all material respects necessary for
               a   fair  presentation  (subject   to  normal  year-end
               adjustments);

                    (c)  Accounts Receivable Reports -  promptly after
               becoming  available, but  in any  event within  45 days
               after the end of each fiscal quarter of the Borrower, a
               list of  accounts receivable of Borrower,  and an aging
               of all such  receivables on the  basis of 30-60-90  and
               over 90 days from date of invoice;

                    (d)  Calculation  of  Ratios   -  promptly   after
               becoming  available, but  in any  event within  45 days
               after the end of each  fiscal quarter of the  Borrower,
               the  calculations of Current Ratio, Tangible Net Worth,
               Interest  Expense  Coverage  and  Debt to  Worth  Ratio
               pursuant  to   Sections  5.16,  5.17,  5.18  and  5.19,
               respectively, hereof; and

                    (e)  Shareholder     Communications;    Regulatory
               Filings - promptly after their availability, but in any



                                       -17-








<PAGE> 18
               event  within five  Business  Days after  the same  are
               sent, copies  of all financial  statements, reports and
               other  communications  furnished  by  Borrower  to  its
               shareholders, and within  five Business Days  after the
               same are filed, copies of all forms, reports  and other
               filings made  by the  Borrower with the  Securities and
               Exchange Commission.

               Section 4.02   Certificates  of  Compliance.    Concurrently
          with the  furnishing of the annual  financial statements pursuant
          to  Section 4.01(a)  hereof  and the  calculation  of the  ratios
          pursuant  to  Section 4.01(d)  hereof,  furnish  or cause  to  be
          furnished to the Bank certificates in the form attached hereto as
          Exhibit C  and Exhibit D,  respectively, signed by  the principal
          financial officer of the Borrower to the effect (i) that a review
          of  the activities  of  the Borrower  has  been made  under  such
          officer's  supervision with  a  view to  determining whether  the
          Borrower  has  fulfilled  all   of  its  obligations  under  this
          Agreement, the  Note and the Security Instruments;  (ii) that the
          Borrower has fulfilled its obligations under such instruments and
          that all  representations made herein  or therein continue  to be
          true and correct  in all  material respects  except as  otherwise
          stated therein,  or if  there is then  in existence  an Event  of
          Default,  specifying such  Event of  Default  and the  nature and
          status  thereof; and (iii) to  the extent requested  from time to
          time  by  the  Bank,  specifically affirming  compliance  by  the
          Borrower with any covenants under this Agreement  or any Security
          Instrument and  accompanied by  such financial or  other details,
          information and  material as the  Bank may reasonably  request to
          evidence such compliance.

               Section 4.03   Payment of Taxes and  Other Charges.  Pay and
          discharge  or cause to be paid and discharged promptly all taxes,
          assessments and  governmental charges  or levies, other  than any
          the  amount or validity of which are currently being contested in
          good faith by appropriate proceedings  and with respect to  which
          reserves  in conformity with GAAP have been provided on the books
          of the Borrower.

               Section 4.04   Maintenance   of    Existence;   Conduct   of
          Business.  (i) Maintain  its separate corporate existence, rights
          and  franchises; (ii) observe and comply (to the extent necessary
          so that any  failure would  not have a  Material Adverse  Effect)
          with all  Contractual Obligations and Requirements  of Law; (iii)
          maintain  its properties in  good and  workable condition  at all
          times  and make all repairs, replacements, additions, betterments
          and improvements to its  properties as are needful and  proper so
          that  the business  carried  on in  connection  therewith may  be
          conducted properly and  efficiently at all  times; and (iv)  take
          all  reasonable action  to  maintain all  rights, privileges  and
          franchises necessary  or desirable  in the normal  course of  its
          business.

                                       -18-





<PAGE> 19
               Section 4.05   Further  Assurances.     Cure  promptly   any
          defects  in the  creation  and  issuance  of  the  Note  and  the
          execution and delivery of this Agreement, any Security Instrument
          or other  Loan Document  to which  the Borrower  is a  party, and
          promptly  execute and deliver to  the Bank upon  request all such
          other  and  further  documents,  agreements  and  instruments  in
          compliance with or accomplishment of the covenants and agreements
          of the Borrower in this Agreement and the Security Instruments or
          to  further  evidence  and  more fully  describe  the  collateral
          intended as security for the Note, or to correct any omissions in
          any Security  Instrument, or  more fully  to  state the  security
          obligations set out herein  or in any Security Instrument,  or to
          perfect, protect or  preserve any Liens  created pursuant to  any
          Security  Instrument, or  to  make any  recordings,  to file  any
          notices,  or  obtain any  consents, all  as  may be  necessary or
          appropriate in connection therewith as determined by the Bank.

               Section 4.06   Performance  of  Obligations.   Perform every
          act and discharge all of its obligations provided to be performed
          and  discharged by it under this Agreement and under the Security
          Instruments and other Loan Documents at the  time or times and in
          the manner specified.  

               Section 4.07   Reimbursement   of   Expenses.      Pay   all
          reasonable legal fees and  out-of-pocket expenses incurred by the
          Bank  in  connection   with  the  negotiation,  preparation   and
          administration  of  this  Agreement,   the  Note,  the   Security
          Instruments and  any and all other Loan  Documents (including any
          amendments hereto  or thereto or consents or waivers hereunder or
          thereunder) and  all reasonable  fees, charges  or taxes  for the
          recording  or filing  of the  Security Instruments,  and promptly
          reimburse the Bank for all amounts expended, advanced or incurred
          by the Bank to satisfy any obligation of the  Borrower under this
          Agreement  or any other Person  under any Security Instrument, or
          to collect the  Note, or to enforce the rights  of the Bank under
          this  Agreement or  any Security  Instrument, which  amounts will
          include all  court costs, reasonable  attorneys' fees (including,
          without  limitation, for  trial,  appeal  or other  proceedings),
          reasonable  fees of  auditors and accountants,  and investigation
          expenses reasonably incurred in connection with any such matters.

               Section 4.08   Insurance.  Maintain  with financially  sound
          and   reputable  insurance   companies  insurance   against  such
          liabilities,  casualties, risks  and  contingencies and  in  such
          types and amounts as is customary in the case of Persons  engaged
          in  the same  or similar businesses  and similarly  situated; and
          furnish or cause to  be furnished to the Bank, upon request, full
          information as to the insurance  carried, including copies of the
          applicable policies; and apply the proceeds  of such policies, if
          any,  to the  prepayment of  the Indebtedness  then owing  to the
          Bank.   Notwithstanding  anything in  this  Section 4.08  to  the


                                                                   


                                       -19-


<PAGE> 20
          contrary, Borrower shall not be required to maintain insurance on
          its drilling rigs.

               Section 4.09   Accounts and Records.   Keep proper  books of
          record and account in  which full, true and correct  entries will
          be  made of  all  dealings or  transactions  in relation  to  its
          business and activities.  

               Section 4.10   Right of  Inspection.   Permit  any  officer,
          employee,  agent or  representative  of  the  Bank to  visit  and
          inspect  any of the properties of the Borrower, examine its books
          of record and  accounts, take copies and  extracts therefrom, and
          to  discuss the  business, operations,  properties,  finances and
          accounts of the Borrower with the Borrower's officers, employees,
          engineers, accountants and auditors, all at such reasonable times
          and as often as the Bank may reasonably desire.

               Section 4.11   Notice  of Certain  Events.   Promptly notify
          the Bank of  the occurrence of (i) any event which constitutes an
          Event of Default, together with a detailed statement by the Chief
          Executive Officer of  the Borrower  of the steps  being taken  to
          cure such Event of Default; (ii) the receipt of  any notice from,
          or  the  taking  of  any  other  action  by,  the  holder  of any
          promissory note, debenture or other evidence of indebtedness with
          respect to a  claimed default, together with a detailed statement
          specifying  the notice given or other action taken by such holder
          and  the  nature  of the  claimed  default  and  what action  the
          Borrower is  taking or  proposes  to take  with respect  thereto;
          (iii)  any legal,  judicial or  regulatory proceedings  affecting
          Borrower or any of its properties in which the amount involved is
          material and is not  covered by insurance or which,  if adversely
          determined,  would  have  a  Material Adverse  Effect;  (iv)  any
          dispute between  the Borrower  and any Governmental  Authority or
          any other  Person which,  if adversely  determined, would have  a
          Material  Adverse Effect;  (v) any  event or  condition having  a
          Material Adverse Effect; and (vi) each Environmental Complaint.  

               Section 4.12   Borrowing  Base Reports.    Provide the  Bank
          with Borrowing  Base Reports required  by and in  accordance with
          Section 2.04(b)(i) of this Agreement.

               Section 4.13.  Pledge   of   Additional   Collateral.     If
          Revolving Credit Loans in  excess of $500,000.00 are used  by the
          Borrower for the purpose of acquiring oil and gas properties, and
          interests therein, whether developed  or undeveloped, and whether
          in one  transaction or  a  series of  transactions, the  Borrower
          shall,  upon written  request by  the Bank, promptly  execute and
          deliver to the Bank such  deeds of trust, mortgages, assignments,
          security  agreements, financing  statements  and  other  security
          documents and instruments  as may  be requested by  the Bank,  in
          form  and  substance  satisfactory  to  the  Bank,  granting  and
          conveying  to the  Bank first  and prior  security  interests and

                                                                   


                                       -20-


<PAGE> 21
          Liens  in and  to all  oil  and gas  properties purchased  by the
          Borrower with proceeds of Revolving Credit Loans.


                                      ARTICLE 5

                                  NEGATIVE COVENANTS

               The Borrower hereby agrees that,  so long as the  Commitment
          remains  in effect  or  any Indebtedness  is  owing to  the  Bank
          hereunder  or  under the  Note or  any  other Loan  Document, the
          Borrower shall not, directly or indirectly:

               Section 5.01   Limitation on Indebtedness.   Incur,  create,
          assume or suffer to exist any Indebtedness, except:

                    (a)  Indebtedness of the Borrower to the Bank;

                    (b)  Indebtedness  existing  on the  date  of this
               Agreement  which   is  set   forth  in  the   financial
               statements   referred  to  in   Section  3.13  of  this
               Agreement, but not any increases thereof;

                    (c)  obligations for  the payment of rent  or hire
               of  property  under leases  or  lease agreements  which
               would not  cause the  aggregate amount of  all payments
               made by the Borrower pursuant  to such leases or  lease
               agreements  to  exceed  $250,000.00  during  the  terms
               thereof; and

                    (d)  additional Indebtedness of  the Borrower  not
               to  exceed $250,000.00 in aggregate principal amount at
               any one time outstanding.

               Section 5.02   Limitation on  Liens.  Create,  incur, assume
          or  permit to exist  any Lien on  any of its  property, assets or
          revenues, whether now owned or hereafter acquired, except for:

                    (a)  Liens   securing   the    payment   of    any
               Indebtedness of the Borrower to the Bank; and

                    (b)  Excepted Liens.

               Section 5.03   Limitation   on  Investments,   Acquisitions,
          Loans  and Advances.  Make any loan, advance, extension of credit
          or capital contribution to, or purchase any stock, bonds,  notes,
          debentures or  other securities of  or any assets  constituting a
          business unit of, or  make any other investments in,  any Person,
          except:

                    (a)  the   outstanding   investments,   loans   or
               advances set forth in the financial statements referred

                                                                    


                                       -21-


<PAGE> 22
               to  in  Section 3.13  of  this Agreement,  but  not any
               increases thereof;

                    (b)  investments  in (i) direct obligations of the
               United States  of America  or any agency  thereof; (ii)
               certificates of deposit of  the Bank of maturities less
               than  one year, or issued by  other commercial banks in
               the United States of America having capital and surplus
               in excess of $50,000,000;  or (iii) commercial paper of
               maturities  less  than six  months  if at  the  time of
               purchase  such paper  is  rated in  either  of the  two
               highest  rating   categories   of  Standard   &   Poors
               Corporation,  Moody's  Investors Service,  Inc.  or any
               other rating agency satisfactory to the Bank;

                    (c)  extensions  of trade  credit in  the ordinary
               course of business;

                    (d)  investments  in and  acquisitions of  oil and
               gas properties and related  assets, provided that  such
               investments  or acquisitions are  made in  the ordinary
               course  of  Borrower's   business  and  not   otherwise
               prohibited by this Agreement;

                    (e)  other  investments,  capital   contributions,
               loans or advances not to exceed the aggregate amount of
               $250,000.00 at any one time outstanding; and

                    (f)  loans  and  advances   to  employees  of  the
               Borrower for travel, entertainment and similar expenses
               in the ordinary course of business.

               Section 5.04   Limitation  on  Dividends, Distributions  and
          Redemptions.   Declare or pay  any dividend (other than dividends
          payable  solely in common stock of the Borrower) on, or purchase,
          redeem,  retire or otherwise acquire for value, any shares of any
          class of  Borrower's capital stock now  or hereafter outstanding,
          or  return any  capital to  its shareholders,  or make  any other
          distribution in respect  thereof, whether in cash  or property on
          in obligations of the Borrower or any Subsidiary.

               Section 5.05   Limitation  on Sales  and Leasebacks.   Enter
          into any arrangement  with any  Person whereby it  shall sell  or
          transfer any  property, whether now owned  or hereafter acquired,
          and whereby it  shall then or thereafter rent  or lease as lessee
          such  property or  any part  thereof or  other property  which it
          intends  to use for substantially the same purpose or purposes as
          the property sold or transferred.

               Section 5.06   Limitation  on  Fundamental  Changes.   Enter
          into  any merger,  consolidation  or amalgamation,  or liquidate,
          wind  up  or  dissolve  itself  (or  suffer  any  liquidation  or

                                                                   


                                       -22-


<PAGE> 23
          dissolution),  or  convey,  sell,   lease,  assign,  transfer  or
          otherwise dispose of (whether  in one transaction or in  a series
          of  related  transactions),  all  or  substantially  all  of  its
          property,  business or  assets  (whether now  owned or  hereafter
          acquired), or make any  material change in its present  method of
          conducting business.

               Section 5.07   Limitation on Leases.   Create, incur, assume
          or suffer to exist any obligation for the payment of rent or hire
          of property  of any  kind  whatsoever (real  or personal),  under
          leases or lease agreements (other than leases or lease agreements
          which constitute Indebtedness and  which are permitted by Section
          5.01(c) of this  Agreement, or  oil and gas  leases) which  would
          cause the aggregate amount  of all payments made by  the Borrower
          pursuant  to such leases or lease agreements to exceed $75,000 in
          any period of twelve consecutive calendar months.

               Section 5.08   Limitation on Negative Pledge Clauses.  Enter
          into with any Person any agreement, other than (a) this Agreement
          and (b) the Loan Documents, which prohibits or limits the ability
          of the Borrower to  create, incur, assume or suffer to  exist any
          Lien  upon any of its  property, assets or  revenues, whether now
          owned or hereafter acquired.

               Section 5.09   Limitation  on Use  of Proceeds.   Permit the
          proceeds of  the Note to  be used for  any purpose other  than as
          permitted by Section 3.10 hereof.

               Section 5.10   Limitation on Lines of  Business.  Enter into
          any business,  either directly or through  any Subsidiary, except
          for those businesses in which the Borrower is engaged on the date
          of this Agreement or which are directly related thereto.

               Section 5.11   Limitation on  Sale of Assets.  Convey, sell,
          lease,  assign,  transfer or  otherwise  dispose  of any  of  its
          property,  business  or  assets  (including,  without limitation,
          receivables  and  leasehold  interests),  whether  now  owned  or
          hereafter acquired, except:

                    (a)  obsolete, worn out, depleted  or "uneconomic"
               property  disposed  of  in   the  ordinary  course   of
               business;

                    (b)  the  sale   of  petroleum  produced   by  the
               Borrower in the ordinary course of Borrower's business;

                    (c)  undeveloped, undrilled leasehold acreage held
               in inventory, provided  that in any fiscal  year of the
               Borrower  the  gross  proceeds  of  such   property  so
               disposed of shall not exceed $250,000.00; and



                                       -23-





<PAGE> 24
                    (d)  the sale of any other assets or properties of
               the Borrower, provided that  in any fiscal year of  the
               Borrower  the  gross  proceeds   of  such  property  so
               disposed of shall not exceed $250,000.00.

               Section 5.12   Limitation on Changes in Fiscal Year.  Permit
          its fiscal year to end on a day other than March 31.

               Section 5.13   Limitation  on Transactions  with Affiliates.
          Enter into  any transaction,  including, without  limitation, any
          purchase, sale, lease or exchange of property or the rendering of
          any service,  with any Affiliate  unless such transaction  is (a)
          not  otherwise  prohibited  under  this  Agreement,  (b)  in  the
          ordinary  course of  business  and (c)  upon fair  and reasonable
          terms no less favorable to the Borrower than it could obtain in a
          comparable arm's length transaction with a Person which is not an
          Affiliate.

               Section 5.14   No Change  in Control.  Permit  any Change in
          Control of Borrower.

               Section 5.15   Limitation on  Issuance of  Stock.   Issue or
          sell any shares of capital stock or other equity security (or any
          options,   warrants,  rights  or   other  convertible  securities
          entitling the holder thereof to acquire any such capital stock or
          equity security) of any kind or class, except:

                    (a)  the issuance  and  sale of  capital stock  or
               other equity  security, the  proceeds of which  will be
               used to repay the Note in its entirety, and

                    (b)  the  issuance  and   sale  of  capital  stock
               pursuant to the Borrower's stock option plans and stock
               options in existence on the date of this Agreement.

               Section 5.16   Current Ratio.  Permit  the Current Ratio, as
          defined herein and calculated pursuant to Exhibit E hereto, to be
          less than  .80 to  1.0 at the  end of any  fiscal quarter  of the
          Borrower.

               Section 5.17   Tangible Net  Worth.  Permit the Tangible Net
          Worth, as  defined herein  and calculated pursuant  to Exhibit  F
          hereto,  to  be less  than $4,500,000.00  as of  the end  of each
          fiscal quarter of the Borrower.

               Section 5.18   Interest  Expense Coverage.   Permit  for any
          fiscal quarter the ratio of (i) EBITDA (as calculated pursuant to
          Exhibit  G hereto) to (ii) total interest expense paid or accrued
          on all Indebtedness to be less than 3.00 to 1.00.

               Section 5.19   Debt  to Worth  Ratio.   Permit  the Debt  to
          Worth Ratio, as defined herein and calculated pursuant to Exhibit

                                                                    


                                       -24-


<PAGE> 25
          H hereto, to be greater than 2.0 to 1.0 at the end of  any fiscal
          quarter of the Borrower.  


                                      ARTICLE 6

                                  EVENTS OF DEFAULT

               Section 6.01   Events.   Any of the  following events  shall
          constitute and be considered  an "Event of Default" as  that term
          is used herein:

                    (a)  Payments  - default  shall  be  made  in  the
               payment  when due  of any  installment of  principal or
               interest on the Note or any other Indebtedness owing by
               the Borrower to the Bank; or

                    (b)  Representations   and    Warranties   -   any
               representation or warranty made by the Borrower herein,
               or  by the Borrower or any other Person in any Security
               Instrument, or in any  other Loan Document furnished to
               the  Bank  pursuant to  or  under  this Agreement,  any
               Security Instrument or any other Loan Document,  proves
               to  have been incorrect  in any material  respect as of
               the date when  made or deemed  made and shall  continue
               unremedied for a period of 30 days after the earlier of
               (i) the Borrower becoming aware of such default or (ii)
               the Bank giving notice thereof to the Borrower; or

                    (c)  Loan  Agreement Covenants -  default shall be
               made  by   the  Borrower  in  the   due  observance  or
               performance of  any  of  the  covenants  or  agreements
               contained in Articles 4 and 5 of this Agreement, and in
               the  case  of  default  under Article  4  such  default
               continues unremedied for a period  of 30 days after the
               earlier  of (i)  the  Borrower becoming  aware of  such
               default or  (ii) the Bank giving notice  thereof to the
               Borrower; or

                    (d)  Security  Instrument  Covenants -  default is
               made in  the due observance or  performance by Borrower
               of  any covenant, condition  or agreement  contained in
               any  Security  Instrument, and  such  default continues
               unremedied  beyond  the  expiration of  any  applicable
               grace period which may  be expressly allowed under such
               Security Instrument; or

                    (e)  Involuntary Bankruptcy or Other Proceedings -
               an  involuntary  case  or  other  proceeding  shall  be
               commenced  against  Borrower  which seeks  liquidation,
               reorganization or  other relief  with respect to  it or
               its debts  or other  liabilities under  any bankruptcy,

                                                                   


                                       -25-


<PAGE> 26
               insolvency  or other  similar law  now or  hereafter in
               effect  or  seeking  the  appointment  of  a   trustee,
               receiver,  liquidator,  custodian   or  other   similar
               official of it or any substantial part of its property,
               and  such  involuntary case  or other  proceeding shall
               remain undismissed or unstayed for a period of 60 days;
               or  an  order  for  relief against  Borrower  shall  be
               entered in  any such case under  the Federal Bankruptcy
               Code; or

                    (f)  Voluntary  Petitions,  Etc. -  Borrower shall
               commence a voluntary  case or other proceeding  seeking
               liquidation,  reorganization  or   other  relief   with
               respect  to itself  or its  debts or  other liabilities
               under any  bankruptcy, insolvency or other  similar law
               now or  hereafter in effect or  seeking the appointment
               of a trustee, receiver,  liquidator, custodian or other
               similar official of it or  any substantial part of  its
               property, or shall consent to any such relief or to the
               appointment  of   or  taking  possession  by  any  such
               official in  an  involuntary case  or other  proceeding
               commenced  against   it,  or   shall  make   a  general
               assignment for the benefit  of creditors, or shall fail
               generally to,  or shall admit in  writing its inability
               to pay its debts generally as they become due, or shall
               take any corporate action to authorize or effect any of
               the foregoing; or

                    (g)  Discontinuance   of   Business   -   Borrower
               discontinues its usual business; or

                    (h)  Default  on  Other  Indebtedness  -  Borrower
               shall  default  in  any  payment  of  principal  of  or
               interest on  any Indebtedness (other than  to the Bank)
               in  excess  of  $250,000.00  in  outstanding  principal
               amount beyond any period of grace provided with respect
               thereto, or in the  performance of any other agreement,
               term  or  condition  contained   in  any  agreement  or
               instrument under  or by which any  such Indebtedness is
               created,  evidenced or  secured if  the effect  of such
               default  is  to cause  such  obligation  to become  due
               before its  stated maturity or to  permit the holder(s)
               of  such obligation  or the  trustee(s) under  any such
               agreement  or instrument  to  cause such  obligation to
               become due prior to its stated maturity, whether or not
               such default or failure to perform should be waived  by
               the holder(s) of such obligation or such trustee(s); or

                    (i)  Undischarged Judgments - Borrower  shall fail
               within  30 days  after date  of entry  to pay,  bond or
               otherwise  discharge  any  judgment  or  order  for the
               payment  of money in excess  of $250,000.00 that is not

                                                                   


                                       -26-


<PAGE> 27
               otherwise being satisfied in  accordance with its terms
               and  is  not  stayed   on  appeal  or  otherwise  being
               appropriately contested in good faith; or

                    (j)  Security    Instruments   -    any   Security
               Instrument after  delivery thereof shall for any reason
               cease to be in full force and effect and valid, binding
               and enforceable in accordance  with its terms, or cease
               to  create a valid  and perfected Lien  of the priority
               required thereby on any  of the collateral purported to
               be covered thereby, or Borrower or any other Person who
               may have granted or purported  to grant such Lien shall
               so state in writing; or

                    (k)  Material  Adverse Effect -  the occurrence of
               any  change  or  event  which has  a  Material  Adverse
               Effect.

               Section 6.02   Remedies.   (a)   Upon the occurrence  of any
          Event of Default described  in Subsection 6.01(e) or (f)  hereof,
          the lending  obligations of the Bank  hereunder shall immediately
          terminate, and  the entire  principal amount of  all Indebtedness
          then outstanding  and owing to  the Bank  together with  interest
          then  accrued and unpaid thereon shall become immediately due and
          payable, all  without demand and presentment  for payment, notice
          of nonpayment,  protest, notice  of protest, notice  of dishonor,
          notice  of   intention  to  accelerate  maturity   or  notice  of
          acceleration of maturity, or  any other notice of default  of any
          kind, all of which are hereby expressly waived by the Borrower.

                    (b)  Upon  the occurrence  and at  any time  during the
          continuance of  any other Event  of Default specified  in Section
          6.01 hereof, the Bank may, by written notice to the Borrower, (i)
          declare  the entire  principal  amount of  all Indebtedness  then
          outstanding and  owing to  the Bank  together with  interest then
          accrued and  unpaid  thereon to  be immediately  due and  payable
          without demand and presentment for payment, notice of nonpayment,
          protest,  notice  of  protest,  notice  of  dishonor,  notice  of
          intention  to accelerate  maturity or  notice of  acceleration of
          maturity,  or any  other notice  of default of  any kind,  all of
          which are  hereby expressly waived  by the Borrower,  and/or (ii)
          terminate the  lending obligations  of the Bank  hereunder unless
          and until the Bank shall reinstate same in writing.

               Section 6.03   Right  of Setoff.   Upon  the occurrence  and
          during  the continuance of any  Event of Default,  or if Borrower
          becomes  insolvent,  however   evidenced,  the  Bank  is   hereby
          authorized  at  any time  and from  time  to time,  without prior
          notice to the Borrower (any such notice being expressly waived by
          the  Borrower), to setoff and apply any and all deposits (general
          or special, time  or demand,  provisional or final)  at any  time
          held  and other Indebtedness at any time  owing by the Bank to or

                                                                   


                                       -27-


<PAGE> 28
          for the credit or the account of Borrower against any  and all of
          the Indebtedness  owing to the  Bank, irrespective of  whether or
          not  the Bank shall have made any  demand under this Agreement or
          the Note and  although such  obligations may be  unmatured.   The
          Bank agrees promptly to notify the Borrower after any such setoff
          and  application, provided that  the failure to  give such notice
          shall not  affect the  validity of  such setoff and  application.
          The rights of the Bank under this Section 6.03 are in addition to
          other rights  and remedies (including,  without limitation, other
          rights of setoff) which the Bank may have.


                                      ARTICLE 7

                                 CONDITIONS PRECEDENT

               Section 7.01   Conditions to Initial Revolving  Credit Loan.
          The obligation of the  Bank to make the initial  Revolving Credit
          Loan  is subject  to the satisfaction,  prior to  or concurrently
          with  the making  of such  Revolving Credit  Loan on  the Closing
          Date, of the following conditions precedent.

                    (a)  Loan Documents - the Bank shall have received
               this Agreement,  the Note and the  Security Instruments
               described in Schedule 7.01,  in each case duly executed
               and  delivered  by a  duly  authorized  officer of  the
               Borrower.

                    (b)  Closing  Certificate -  the  Bank shall  have
               received a certificate of the  Chairman of the Board of
               Directors   of  Borrower,   dated  the   Closing  Date,
               substantially  in   the  form   of   Exhibit  I,   with
               appropriate insertions and attachments.

                    (c)  Corporate Proceedings  of the Borrower  - the
               Bank shall have received a copy of  the resolutions, in
               form  and substance  satisfactory to  the Bank,  of the
               Board of Directors of  the Borrower authorizing (i) the
               execution,  delivery and performance  of this Agreement
               and the other Loan Documents to which it is a party and
               (ii) the borrowings  contemplated hereunder,  certified
               by the Chairman  of the Board of Directors  of Borrower
               as  of the Closing Date,  which certificate shall be in
               form and  substance satisfactory to the  Bank and shall
               state that  the resolutions thereby certified  have not
               been amended, modified, revoked or rescinded.

                    (d)  Borrower  Incumbency  Certificate -  the Bank
               shall have  received  a certificate  of  the  Borrower,
               dated  the  Closing  Date,  as to  the  incumbency  and
               signature of the officers of the Borrower executing any
               Loan Document  in substantially the form  of Exhibit J,

                                                                   


                                       -28-


<PAGE> 29
               executed by the Chairman of the Board of Directors  and
               the  Secretary  or  any  Assistant  Secretary  of   the
               Borrower.

                    (e)  Corporate  Documents -  the  Bank shall  have
               received true  and complete  copies of the  articles of
               incorporation and bylaws of the Borrower,  certified as
               of  the Closing  Date  as complete  and correct  copies
               thereof  by the Chairman  of the Board  of Directors of
               the Borrower.

                    (f)  Consents,  Licenses and Approvals  - the Bank
               shall have  received a  certificate of the  Chairman of
               the  Board of Directors  of the  Borrower (i) attaching
               copies  of  all  consents,  authorizations  and filings
               referred to in Section 3.02, and (ii) stating that such
               consents, licenses  and filings  are in full  force and
               effect, and  such certificate  and  each such  consent,
               authorization and filing shall be in form and substance
               satisfactory to the Bank. 

                    (g)  Other  - the  Bank shall  have received  such
               other documents as it  may reasonably have requested at
               any  time at or  prior to the  Closing Date, including,
               without  limitation,  a   schedule  of  all   insurance
               presently maintained by  the Borrower and an  appraisal
               of the Borrower's drilling  rigs and related  equipment
               prepared by an independent appraiser acceptable  to the
               Bank and  being in  form and substance  satisfactory to
               the Bank.

               Section 7.02   Conditions  to  Each  Revolving Credit  Loan.
          The  obligation of  the Bank  to make  any Revolving  Credit Loan
          requested  to be made by Borrower on any date (including, without
          limitation, its initial Revolving Credit  Loan) is subject to the
          satisfaction of the following conditions precedent:

                    (a)  Representations and Warranties.   Each of the
               representations  and warranties made by the Borrower in
               or pursuant to  the Loan  Documents shall  be true  and
               correct in all material respects on and as of such date
               as if made on and as of such date.

                    (b)  No  Event of  Default.   No Event  of Default
               shall have occurred and be  continuing on such date  or
               after giving  effect  to  the  Revolving  Credit  Loans
               requested to be made on such date.

                    (c)  Maintenance      of      Borrowing      Base.
               Notwithstanding Section 2.05(b), after giving effect to
               the  Revolving Credit Loans requested to be made on any
               date, the  aggregate principal amount of  the Revolving

                                                                   


                                       -29-


<PAGE> 30
               Credit  Loans then  outstanding  shall  not exceed  the
               lesser of (i) $5,000,000.00  or (ii) one-third (1/3) of
               the Borrowing Base Amount then in effect.

                    (d)  No  Material  Litigation.     No  litigation,
               investigation or proceeding of or before any arbitrator
               or Governmental  Authority shall be pending  or, to the
               knowledge of the Borrower, threatened by or against the
               Borrower  or the Bank with  respect to any  of the Loan
               Documents  or  any  of  the  transactions  contemplated
               hereby or thereby.

                    (e)  Borrowing Base  Reports.  The Bank shall have
               received all  Borrowing  Base Reports  required  to  be
               delivered by Borrower pursuant to Section 2.04(b).

                    (f)  Additional Matters.   All corporate and other
               proceedings,  and all documents,  instruments and other
               legal  matters  in  connection  with  the  transactions
               contemplated  by this  Agreement  and  the  other  Loan
               Documents  shall be satisfactory  in form and substance
               to  the  Bank, and  the Bank  shall have  received such
               other documents  and legal  opinions in respect  of any
               aspect or consequence of the  transactions contemplated
               hereby or thereby as it shall reasonably request.

               Each borrowing by the  Borrower hereunder shall constitute a
          representation  and warranty  by  the  Borrower  as of  the  date
          thereof  that the  conditions contained  in this  subsection have
          been satisfied.


                                      ARTICLE 8

                                    MISCELLANEOUS

               Section 8.01   Notices.  Any notice required or permitted to
          be given under or in connection with this  Agreement, the Note or
          the Security  Instruments (except  as may otherwise  be expressly
          required  herein or  therein) shall  be in  writing and  shall be
          mailed by first class  or express mail, postage prepaid,  or sent
          by telex,  telegram,  telecopy or  other  similar form  of  rapid
          transmission  confirmed by  mailing  (by first  class or  express
          mail, postage prepaid) written confirmation at substantially  the
          same time as such rapid transmission, or  personally delivered to
          any officer  of the  receiving  party.   All such  communications
          shall be mailed, sent or delivered, 

               (a)  if to the Borrower: TMBR/Sharp Drilling, Inc.
                                        4607 West Industrial Blvd.
                                        Midland, Texas  79703

               (b)  if to the Bank:     Norwest Bank Texas, N.A.
                                        500 W. Texas, Suite 400
                                        Midland, Texas  79701


                                       -30-

<PAGE> 31
          or  to  such  other   address  or  individual's  or  department's
          attention as  a party may furnish to  the other party in writing.
          Any communication so addressed  and mailed shall be deemed  to be
          given when so mailed.  Any  notice so sent by rapid  transmission
          shall be deemed to be given  when receipt of such transmission is
          acknowledged.  Any communication so delivered in person shall  be
          deemed  to be given when  receipted for by,  or actually received
          by,  an authorized officer  of the Borrower  or the Bank,  as the
          case may be.

               Section 8.02   Amendments and  Waivers.   Any  provision  of
          this  Agreement, the Note, the  Security Instruments or the other
          Loan Documents may  be amended or  waived if, but  only if,  such
          amendment  or waiver is in  writing and is  signed by each Person
          which  is a  party to  the Loan  Document being amended  (or with
          respect to which a waiver is being obtained) and the Bank.

               Section 8.03   Indemnity by Borrower.   The Borrower  agrees
          to indemnify, save and hold harmless the Bank and its Affiliates,
          directors,    officers,    agents,   attorneys    and   employees
          (collectively, the  "Indemnitees") from and against:  (a) any and
          all  claims,  demands,  actions  or causes  of  action  that  are
          asserted  against any Indemnitee  by any  Person (other  than the
          Borrower)  if  the  claim,  demand,  action  or  cause  of action
          directly or  indirectly relates  to a  claim,  demand, action  or
          cause  of action that such  Person asserts or  may assert against
          the  Borrower,  any Affiliate  of  the Borrower  or  any officer,
          director  or shareholder of the Borrower; (b) any and all claims,
          demands,  actions or causes  of action that  are asserted against
          any Indemnitee by  any Person  (other than the  Borrower) if  the
          claim, demand, action or cause of action arises out of or relates
          to the Revolving  Credit Loans,  the use or  contemplated use  of
          proceeds of the Revolving Credit Loans or the relationship of the
          Borrower   and   the  Bank   under   this   Agreement;  (c)   any
          administrative  or investigative  proceeding by  any Governmental
          Authority arising out of or related to a claim, demand, action or
          cause of action  described in clauses (a)  or (b) above;  and (d)
          any  and all  liabilities, losses,  costs or  expenses (including
          reasonable attorneys' fees and disbursements) that any Indemnitee
          suffers or incurs as a result of any of  the foregoing; provided,
          that no Indemnitee shall be  entitled to indemnification for  any
          liability,  loss,  cost  or  expense  caused  by  its  own  gross
          negligence or willful misconduct.   If any claim, demand,  action
          or  cause of action is  asserted against any  Indemnitee and such
          Indemnitee intends  to  claim indemnification  from the  Borrower
          under this  Section 8.03,  such Indemnitee shall  promptly notify
          the  Borrower, but the failure to so promptly notify the Borrower
          shall  not  affect the  obligations  of the  Borrower  under this

                                                                   



                                       -31-





<PAGE> 32
          Section  8.03  unless  such  failure  materially  prejudices  the
          Borrower's  right to  participate, or  the Borrower's  rights, if
          any, in the  contest of  such claim, demand,  action or cause  of
          action, as hereinafter  provided.   Each Indemnitee  may, and  if
          requested by the Borrower in writing shall, in good faith contest
          the  validity, applicability  and amount  of such  claim, demand,
          action  or  cause   of  action  with  counsel  selected  by  such
          Indemnitee and  reasonably acceptable to the  Borrower, and shall
          permit  the  Borrower  to  participate  in  such  contest.    Any
          Indemnitee  that proposes  to settle or  compromise any  claim or
          proceeding  for which the Borrower  may be liable  for payment of
          indemnity hereunder shall give the Borrower written notice of the
          terms  of such  proposed settlement  or compromise  reasonably in
          advance of settling or compromising such claim or  proceeding and
          shall obtain the Borrower's  prior written consent, which consent
          shall  not  be unreasonably  withheld.   In  connection  with any
          claim,  demand, action or cause of action covered by this Section
          8.03 against more than one Indemnitee, all such Indemnitees shall
          be  represented  by  the  same  legal  counsel  selected  by  the
          Indemnitees and  reasonably acceptable to the Borrower; provided,
          that if such legal  counsel determines in good faith  and advises
          the Borrower  in writing  that representing all  such Indemnitees
          would  or  could result  in a  conflict  of interest  under legal
          requirements  or  ethical  principles applicable  to  such  legal
          counsel  or that  a defense  or counterclaim  is available  to an
          Indemnitee that is not available to all such Indemnitees, then to
          the extent  reasonably  necessary to  avoid  such a  conflict  of
          interest  or to permit unqualified assertion of such a defense or
          counterclaim,  each  Indemnitee  shall be  entitled  to  separate
          representation by  legal counsel selected by  that Indemnitee and
          reasonably  acceptable  to  the  Borrower.    Any  obligation  or
          liability of  the Borrower to  any Indemnitee under  this Section
          8.03  shall  survive  the   expiration  or  termination  of  this
          Agreement and the repayment of the Revolving Credit Loans and the
          payment  of  all other  Indebtedness owing  to  the Bank  for the
          statute  of  limitations  period  applicable  to  such  claim  or
          contest.

               Section 8.04  Invalidity.  In the event that any one or more
          of  the  provisions contained  in this  Agreement, the  Note, any
          Security Instrument  or any other  Loan Document  shall, for  any
          reason, be held invalid, illegal or unenforceable in any respect,
          such invalidity, illegality or  unenforceability shall not affect
          any other provisions of this Agreement, the Note or such Security
          Instrument or other Loan Document.

               Section 8.05   Survival of Agreements.   All representations
          and  warranties  of  the  Borrower  herein  or  in  the  Security
          Instruments, and  all covenants and agreements  herein or therein
          not  fully performed before the  effective date or  dates of this
          Agreement  and of  the Security  Instruments, shall  survive such
          date or dates.

                                                                   


                                       -32-


<PAGE> 33
               Section 8.06   Successors  and Assigns.   All  covenants and
          agreements  contained by  or on  behalf of  the Borrower  in this
          Agreement, the Note  and the Security Instruments  and other Loan
          Documents shall bind its  successors and assigns and  shall inure
          to  the benefit  of  the Bank  and  its successors  and  assigns.
          Borrower  shall not, however, have the right to assign its rights
          hereunder  or  any interest  herein,  without  the prior  written
          consent  of  the  Bank.    In  the  event  that  the  Bank  sells
          participations in or assigns the Note or other Indebtedness owing
          to the Bank to other lenders (which the Bank may  undertake to do
          in  its sole discretion), each  of such other  lenders shall have
          the rights to setoff against such Indebtedness and similar rights
          or Liens to the same extent as may be available to the Bank.

               Section 8.07   Renewal,  Extension  or  Rearrangement.   All
          provisions of this  Agreement and of  any Security Instrument  or
          other Loan  Document relating to  the Note or  other Indebtedness
          owing to the Bank shall apply with equal force and effect to each
          and all  promissory notes hereinafter executed which  in whole or
          in part represent a  renewal, extension for any period,  increase
          or  rearrangement  of any  part  of  the Indebtedness  originally
          represented   by  the  Note  or   of  any  part   of  such  other
          Indebtedness.

               Section 8.08   Waivers.  No course of dealing on the part of
          the Bank, its officers, employees, consultants or agents, nor any
          failure  or  delay by  the Bank  with  respect to  exercising any
          right, power or privilege  of the Bank under this  Agreement, the
          Note or  any Security  Instrument or  other  Loan Document  shall
          operate  as a  waiver thereof,  except as  otherwise provided  in
          Section 8.02 hereof.

               Section 8.09   Cumulative  Rights.   Rights and  remedies of
          the  Bank  under  this  Agreement,  the  Note  and  the  Security
          Instruments and the other Loan Documents shall be cumulative, and
          the  exercise or  partial exercise  of any  such right  or remedy
          shall not preclude the exercise of any other right or remedy.

               Section 8.10   Construction.   THIS  AGREEMENT IS,  AND  THE
          NOTE WILL  BE, A CONTRACT  MADE UNDER AND  SHALL BE CONSTRUED  IN
          ACCORDANCE WITH AND  GOVERNED BY THE LAWS OF THE UNITED STATES OF
          AMERICA AND  THE STATE OF TEXAS,  AS SUCH LAWS ARE  NOW IN EFFECT
          AND, WITH RESPECT TO  USURY LAWS, IF ANY, APPLICABLE TO  THE BANK
          AND TO THE EXTENT ALLOWED THEREBY, AS SUCH LAWS  MAY HEREAFTER BE
          IN EFFECT WHICH ALLOW A HIGHER MAXIMUM  NONUSURIOUS INTEREST RATE
          THAN SUCH LAWS NOW ALLOW.

               Section 8.11   Taxes,  Etc.    Any  taxes  (excluding income
          taxes) payable or ruled payable by  any Governmental Authority in
          respect  of this Agreement, the Note,  any Security Instrument or
          any other Loan Document  shall be paid by the  Borrower, together
          with interest and penalties, if any.

                                                                   


                                       -33-


<PAGE> 34
               Section 8.12   Governmental Regulation.  Anything  contained
          herein to  the contrary notwithstanding,  the Bank  shall not  be
          obligated  to extend  credit  to the  Borrower  in an  amount  in
          violation  of  any  limitation  or prohibition  provided  by  any
          applicable statute or regulation.

               Section 8.13   Counterparts.  This Agreement may be executed
          in  one or more counterparts, and it  shall not be necessary that
          the  signatures of  all parties  hereto be  contained on  any one
          counterpart  hereof.    Each   counterpart  shall  be  deemed  an
          original, but all counterparts  together shall constitute one and
          the same instrument.

               Section 8.14   Conflicts.    If  there  is ever  a  conflict
          between  the terms,  conditions, representations,  warranties and
          covenants contained in this  Agreement and the terms, conditions,
          representations, warranties or covenants in any of the other Loan
          Documents  executed  by  the  Borrower, the  provisions  of  this
          Agreement  shall control;  provided, however,  the fact  that any
          term, condition,  representation, warranty or  covenant contained
          in such other Loan Document is not contained herein shall not be,
          or be deemed to be, a conflict.

               Section 8.15   Exhibits.      The   exhibits,  annexes   and
          schedules attached to this  Agreement are incorporated herein and
          shall be considered  a part  of this Agreement  for the  purposes
          stated herein, except that  in the event of any  conflict between
          any of the provisions of such exhibits, annexes and schedules and
          the  provisions  of  this   Agreement,  the  provisions  of  this
          Agreement shall prevail.

               Section 8.16   Acknowledgment  by Borrower.   As  a material
          inducement  to the Bank to execute and deliver this Agreement and
          to  make   the  Revolving  Credit  Loans,   the  Borrower  hereby
          acknowledges, agrees  and represents that (i) the Prior Notes are
          renewed, extended and consolidated,  but not extinguished, by the
          Note; (ii) the Liens,  security interests and assignments created
          and   evidenced   by   the  Prior   Security   Instruments   are,
          respectively, valid and subsisting Liens, security interests  and
          assignments of the respective dignity and priority recited in the
          Prior Security Instruments; (iii) there  are no claims or offsets
          against, or defenses or counterclaims to, the terms or provisions
          of  the Prior  Security  Instruments, and  the other  obligations
          created  or evidenced  by  the Prior  Security Instruments;  (iv)
          Borrower  has  no  claims,  offsets,  defenses  or  counterclaims
          arising from any  of the Bank s acts or omissions with respect to
          any  collateral, the  Prior  Security Instruments  or the  Bank s
          performance  under the  Prior Security  Instruments; and  (v) the
          Bank is not in default and no event has occurred  which, with the
          passage  of time, giving of  notice, or both,  would constitute a
          default  by the  Bank  of its  obligations  under the  terms  and
          provisions of the Prior Security Instruments. 



                                                                   
                                       -34-


<PAGE> 35


               Section 8.17   Titles of Articles, Sections and Subsections.
          All  titles or  headings  to articles,  sections, subsections  or
          other divisions of  this Agreement or the  exhibits and schedules
          hereto are only for the convenience  of the parties and shall not
          be  construed to have  any effect or meaning  with respect to the
          other content  of such  articles, sections, subsections  or other
          divisions,  such  other  content  being  controlling  as  to  the
          agreement between the parties hereto.

               Section 8.18   Entire  Agreement.  THIS AGREEMENT, THE NOTE,
          THE SECURITY INSTRUMENTS AND  THE OTHER LOAN DOCUMENTS CONSTITUTE
          A  "LOAN AGREEMENT" AS DEFINED  IN SECTION 26.02(a)  OF THE TEXAS
          BUSINESS  AND COMMERCE  CODE  AND REPRESENT  THE FINAL  AGREEMENT
          BETWEEN  THE PARTIES AND MAY  NOT BE CONTRADICTED  BY EVIDENCE OF
          PRIOR,  CONTEMPORANEOUS, OR  SUBSEQUENT  ORAL  AGREEMENTS OF  THE
          PARTIES.  THERE ARE  NO UNWRITTEN OR ORAL AGREEMENTS  BETWEEN THE
          PARTIES.


               IN  WITNESS WHEREOF,  the  parties hereto  have caused  this
          instrument  to  be  duly executed  as  of  the  date first  above
          written.


                                   TMBR/SHARP DRILLING, INC.


                                   By:__________________________________
                                        Thomas C. Brown, Chairman of the
                                        Board of Directors and Chief
                                        Executive Officer


                                   NORWEST BANK TEXAS, N.A.


                                   By:__________________________________
                                        Mark   D.  McKinney,   Senior  Vice
                                        President















                                       -35-


<PAGE> 36
                                     EXHIBIT A

                       REVOLVING LINE OF CREDIT PROMISSORY NOTE


          $5,000,000.00                                        May 26, 1998


               FOR VALUE RECEIVED, in  the manner, on the dates and  in the
          amounts  herein stipulated,  TMBR/SHARP DRILLING,  INC.,  a Texas
          corporation (the "Borrower"),  promises and agrees to  pay to the
          order of Norwest Bank Texas, N.A., a national banking association
          (the "Bank"),  in Midland,  Midland County, Texas,  the principal
          sum  of Five  Million and  No/100 Dollars ($5,000,000.00)  or, if
          less, the aggregate unpaid balance  of all advances hereunder, in
          lawful  money of  the United  States of  America, which  shall be
          legal  tender  in  payment of  all  debts  and  dues, public  and
          private, at the time of payment, and to pay interest thereon from
          the date  of advance  until maturity  at a  rate per  annum which
          shall from day to day be equal to the lesser of (a) the Base Rate
          in effect from day to day (calculated on the basis of actual days
          elapsed, but computed as  if each calendar year consisted  of 360
          days) or (b) the Highest Lawful Rate.  Each change in the rate of
          interest charged  under this Revolving Line  of Credit Promissory
          Note (this "Note")  shall, subject  to the  terms hereof,  become
          effective,  without notice  to the  Borrower, upon  the effective
          date of  each change in the Base Rate or the Highest Lawful Rate,
          as the  case may be.   Notwithstanding the  foregoing, if at  any
          time the Base Rate exceeds the  Highest Lawful Rate, the rate  of
          interest  on this  Note shall  be limited  to the  Highest Lawful
          Rate,  but any subsequent reductions  in the Base  Rate shall not
          reduce  the rate of interest hereon below the Highest Lawful Rate
          until the  total amount of interest  accrued hereon approximately
          equals  the amount of interest which would have accrued hereon if
          the Base Rate had at all times been in effect.  In the event that
          at maturity (stated or  by acceleration), or at final  payment of
          this Note, the total amount of interest paid or accrued hereon is
          less than the amount of interest which would have accrued  if the
          Base Rate had at all times been in effect, then, at such time and
          to the extent permitted by applicable laws, Borrower shall pay to
          the Bank an amount equal to the difference between (a) the lesser
          of the amount  of interest which would  have accrued if the  Base
          Rate had  at all times been  in effect or the  amount of interest
          which would have accrued  if the Highest  Lawful Rate had at  all
          times been in  effect, and  (b) the amount  of interest  actually
          paid or  accrued on this Note.  All of the past due principal and
          accrued interest hereunder shall, at the option of the Bank, bear
          interest from maturity (stated or by acceleration)  until paid at
          a  rate per  annum equal to  the Highest  Lawful Rate.   Interest
          calculations  may   be  made  ten  days  prior  to  any  interest
          installment due date under this Note, in which event, if there is
          an adjustment in the  interest rate in accordance with  the terms
          hereof  during  such  ten-day  period, then  the  Borrower  shall
          subsequently, on demand, pay to the Bank any underpayment, or the


                                       -36-


<PAGE> 37
          Bank shall  pay to the Borrower, any overpayment, as the case may
          be, as a result of any adjustment during such ten-day period.

               This  Note (a) is the Revolving Line of Credit Note referred
          to in the First Amended and Restated Loan Agreement, dated  as of
          the  date hereof  (as the  same may  be amended,  supplemented or
          otherwise  modified from  time  to time,  the "Loan  Agreement"),
          between the  Borrower and the Bank,  (b) is subject to  the terms
          and  conditions  thereof, and  (c)  is  subject  to optional  and
          mandatory prepayments in whole or in part as provided in the Loan
          Agreement.  Reference is made to the Loan Agreement for a further
          statement of the rights,  remedies, powers, privileges, benefits,
          duties and obligations  of the  Borrower and the  Bank under  the
          Loan Agreement  and this  Note.   Capitalized  terms used  herein
          which are defined in  the Loan Agreement shall have  such defined
          meanings unless otherwise defined herein.

               This   Note   represents   the   renewal,   extension,   and
          consolidation, but not the extinguishment, of the Prior Notes.

               This Note is secured  as provided in the Loan  Agreement and
          in  the other Loan Documents,  to which reference  is hereby made
          for a  description of the properties  and assets in  which a Lien
          and  security interest has been granted, the nature and extent of
          the security, the terms  and conditions upon which the  Liens and
          security interests were granted  and the rights of the  holder of
          this Note with respect thereto.

               Each  borrowing under  this  Note shall  be  in the  minimum
          amount of $50,000.00 (or the unadvanced portion hereof, whichever
          is less) and shall be made only in accordance with the provisions
          of the  Loan Agreement.  Subject  to the terms hereof  and of the
          Loan Agreement,  Borrower may borrow,  repay and reborrow  at any
          time and from time to time under this Note.

               Interest on  the outstanding principal balance  of this Note
          shall  be due and  payable monthly on  the fifteenth  day of each
          month, commencing  June 15, 1998. The  then outstanding principal
          balance of this Note and all accrued and unpaid interest shall be
          due and payable on May 26, 2000.

               Time is of the essence of this Note.  Upon the occurrence of
          any one  or more of the  Events of Default specified  in the Loan
          Agreement,  all amounts then remaining unpaid  on this Note shall
          become,  or may be declared  to be, immediately  due and payable,
          all as provided therein.  

               It  is the intention  of the Borrower and  the Bank that the
          Bank  shall  conform strictly  to  usury laws  applicable  to it.
          Accordingly,   if  the  transactions  contemplated  by  the  Loan
          Agreement and this  Note would be usurious  as to the  Bank under
          laws applicable to it (including the laws of the United States of
          America  and the State of  Texas or any  other jurisdiction whose
          laws may  be mandatorily  applicable to the  Bank notwithstanding
          the  other provisions of the Loan Agreement and this Note), then,

                                       -37-


<PAGE> 38
          in that  event, notwithstanding anything to the  contrary in this
          Note,  the Loan  Agreement or  any other  Loan Document  or other
          agreement entered into in connection with or as security for this
          Note, (i) the aggregate of all  consideration which is contracted
          for,  taken, reserved, charged or received by the Bank under this
          Note,  the Loan Agreement or any other Loan Document or agreement
          entered  into in  connection with  or as  security for  this Note
          shall under no circumstances exceed the maximum amount allowed by
          such applicable law, and any excess shall be credited by the Bank
          on the principal amount  of the Indebtedness to the Bank  (or, to
          the extent  that the principal  amount of the  Indebtedness shall
          have been  or would thereby be paid in full, refunded by the Bank
          to the Borrower); and (ii) in the event that the maturity of this
          Note is accelerated by  reason of an Event  of Default under  the
          Loan Agreement or otherwise,  or in the event of  any prepayment,
          then  such  consideration  that  constitutes  interest  under law
          applicable  to the Bank may  never include more  than the maximum
          amount  allowed by such  applicable law, and  excess interest, if
          any, provided for in  this Note, the Loan Agreement  or otherwise
          shall be  canceled automatically by  the Bank  as of the  date of
          such acceleration  of prepayment and, if  theretofore paid, shall
          be   credited  by  the  Bank  on  the  principal  amount  of  the
          Indebtedness (or, to the extent that the principal amount of such
          Indebtedness  shall have been or  would thereby be  paid in full,
          refunded by the Bank to the Borrower).

               To  the extent that  Texas Finance Code  Section 303.201, as
          supplemented by  Article 5069-ID.002  of the Texas  Revised Civil
          Statutes  (Texas Credit Title), is  relevant to the  Bank for the
          purposes of  determining the Highest Lawful  Rate, the applicable
          rate ceiling under  such provisions  shall be  determined by  the
          indicated  (weekly) rate  ceiling  from time  to time  in effect,
          subject to the Bank's right subsequently to change such method in
          accordance with applicable law.

               All  parties now or  hereafter liable  with respect  to this
          Note, whether  maker, principal, surety,  guarantor, endorser  or
          otherwise,  hereby waive  presentment,  demand,  protest and  all
          other notices of any kind.

               THIS NOTE  IS  PERFORMABLE  AND  PAYABLE IN  THE  COUNTY  OF
          MIDLAND, STATE  OF TEXAS,  AND SHALL BE  CONSTRUED IN  ACCORDANCE
          WITH, AND GOVERNED BY, THE LAWS OF  THE STATE OF TEXAS; PROVIDED,
          HOWEVER, THAT THE LAWS PERTAINING  TO ALLOWABLE RATES OF INTEREST
          MAY,  FROM TIME TO  TIME, BE GOVERNED  BY THE LAWS  OF THE UNITED
          STATES OF AMERICA.


                                   TMBR/SHARP DRILLING, INC.


                                   By:__________________________________
                                        Thomas C. Brown, Chairman of the
                                        Board of Directors and Chief
                                        Executive Officer

                                       -38-