January
    3rd, 2017


 


Houston
American Energy Corp.


Attn:
Mr. John P. Boylan, President


801
Travis, Suite 1425


Houston,
TX 77002


Sent
via-email: jpb@houstonamerican.com


 


	 	RE:	Participation
    Agreement
	 	 	WolfBone
    Prospect, Johnson & O’Brien Leases
	 	 	Reeves
    County, Texas, containing 800 acres, more or less


 


Gentlemen:


 


This
Letter Agreement (“Agreement”) dated January 3rd, 2017, but effective as of the date executed by all parties (the
“Effective Date”), is made by and between Founders Oil & Gas III, LLC, a Delaware limited liability corporation,
whose address is 113 Corporate Drive, Midland, TX 79705, (“Founders”) and Houston American Energy Corp., a
Delaware corporation, whose address is 801 Travis, Suite 1425, Houston, TX 77002, (“Houston American”). Founders and
Houston American are referred to herein individually as a “Party” or collectively as “Parties”. This Agreement
shall evidence the agreement between the Parties concerning the acquisition of interests in certain oil and gas leases in and
to the captioned land, the drilling of the initial test well (the “ITW”) and any subsequent well or wells (“Well”)
on said lands and the operating and development as more particularly set forth herein.


 


Founders
is the owner of the oil and gas leases identified on Exhibit A (the “Leases”) and lying within the boundaries
of the lands identified on Exhibit A-1, (the “Prospect”) and Houston American desires to participate in the
exploration, development and production of oil and gas from the Prospect.


 


NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties do hereby agree that the exploration and development
of the Prospect, the drilling of the ITW, and any exploration and development within the Prospect shall be governed by the terms
of this Agreement and by a Joint Operating Agreement (“JOA”) entered into between the Parties in accordance with the
terms of this Agreement.


 




    	 	 	 



     

    



 


January
3rd 2017


 


	1.	Subject
    to the terms of this Agreement and upon receipt of the Lease Bonus amount of $5,500.00 per mineral acre x 25.00% interest,
    to be paid no later than February 28, 2017, Founders shall assign to Houston American an undivided Twenty-Five percent (25.00%)
    of 8/8th interest in the Leases (Houston American’s “WI”), subject to proportionate reduction
    language. The assignment to Houston American (“Assignment”) shall be in the form attached hereto as Exhibit
    B, and shall be subject to the terms and provisions of the Leases, the terms of this Agreement and its attachments,
    any subsequent JOA executed by the Parties, and shall be made with no warranty of title, except by, through and under Founders.
    The Assignment shall deliver at least a Seventy-Five percent (75.00%) net revenue interest in the Leases. In the event that
    any of the Leases require consent of the Lessor prior to any assignment of said Lease to a third party and such consent has
    not been acquired by February 28, 2017, the Parties agree that the assignment from Founders to Houston American shall be executed
    as soon as possible after obtaining Lessor’s consent to assign. In the event the consenting Lessor requires information
    about Houston American prior to consenting to assign the Lease, Houston American agrees to cooperate and provide all information
    necessary to Founders to assist in obtaining the Lessor’s consent.
	 	 
	2.	On
    or before February 28, 2017, the Parties shall execute a JOA in substantially the form of Exhibit C attached hereto,
    naming Founders or its sister entity, Founders Oil and Gas Operating, LLC, as operator (“Operator”) and Houston
    American as non-operator and governing the operations for each well within the Prospect. On or before July 1, 2017, unless
    otherwise agreed to by the Parties, the Operator shall commence actual drilling for the ITW on the Prospect as further set
    forth in the JOA. The JOA shall be construed with and constitute an integral part of this Agreement and shall govern the operation
    of the oil and gas leases and all operations within the Prospect. In the event the terms of the JOA shall be in conflict with
    this Agreement, the terms of the JOA shall control. The Parties agree to execute a Memorandum of Operating Agreement (“Memorandum”)
    in the form attached hereto as Exhibit D. The Memorandum shall be filed in clerk’s official public records in
    Reeves County, Texas. 
	 	 
	3.	Houston
    American shall bear and pay based on its WI all costs of drilling the ITW and all subsequent wells drilled in the Prospect
    in accordance with the terms of the JOA. Notwithstanding anything else contained herein to the contrary, the Parties acknowledge
    that the Prospect is subject to a 5% working interest back-in after payout to Greg McCabe, or his designee (the “McCabe
    Back-In”), and the details of such back-in shall be set out in detail by separate agreement as well as the JOA. The
    Parties shall bear their proportionate share of the McCabe Back-in.


 




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January
3rd 2017


 


	4.	If
    the Leases cover less than the entire fee mineral interest in the lands covered by the Lease or if Founders owns less than
    the full leasehold estate in the Lease, the respective interest in the Leases of Founders and Houston American shall be proportionately
    reduced. Additionally, in the event of the pooling of the Leases in accordance with the terms of the Leases by the Operator,
    in accordance with the terms of the JOA, the interest of the Parties shall be computed and paid in proportion that the surface
    of the Leases included in such pooled unit bears to the total surface area included in such pooled unit.
	 	 
	5.	Once
    final lease acquisition has been completed, drill site or drilling unit title approved, and a drilling rig scheduled, Operator
    shall forward an Authority for Expenditure (“AFE”) for the drilling of the ITW along with a generalized well procedure
    as set out in the JOA. The JOA shall govern all operations conducted on the Prospect. The costs of drilling ITW and each subsequent
    Well to casing point shall include, but not be limited to the following:
	 	 
	 	a.	Obtaining
    Title Opinion and costs for obtaining all necessary curative materials;
	 	 
	 	b.	Staking
    and building location and road;
	 	 
	 	c.	Drilling
    the ITW and subsequent Wells to the objective depth in accordance with the JOA;
	 	 
	 	d.	Insurance
    and permit fees; and
	 	 
	 	e.	All
    logging, coring, testing and other open-hole evaluations.
	 	 
	6.
    	Subject
    to the terms set forth in the JOA, any notice required hereunder shall be in writing and shall be delivered via US Mail, courier
    facsimile or overnight private mail service. Notice shall be deemed given when received by the Party to whom it is addressed.
    The address at which a Party hereto is to receive notice may be changed from time to time by such Party by giving written
    notice of the new address to the other Party.


 


	 	Notices
    shall be delivered to:	 
	 	 	 
	 	Houston
    American Energy Corp.	Founders
    Oil & Gas, Inc.
	 	801
    Travis, Suite 1425	113
    Corporate Drive
	 	Houston,
    TX 77002	Midland,
    TX 79705
	 	Attention:
    John P. Boylan	Attention:
    Brian M. Sirgo
	 	Email:
    jpb@houstonamerican.com	Email:bmsirgo@foundersoilandgas.com
	 	Facsimile:
    713-222-0345	Facsimile:
    432-684-7777


 






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January
3rd 2017


 


	7.	The
    rights and liabilities herein of Parties shall be individual and several and not joint or collective. The Parties do not intend
    to create a mining partnership or other partnership or association between themselves or to render themselves liable as partners
    or associates. Nothing herein shall be construed as an authorization of one party hereto to act as general agent for the other
    party or to permit either party to act for or on behalf of the other party outside the terms of this Agreement and the JOA.
	 	 
	8.	This
    Agreement shall be binding upon and shall inure to the benefit of the Parties and, except as otherwise prohibited, their respective
    successors and assigns, provided that nothing contained in this Agreement, or implied herein, is intended to confer upon any
    other person or entity any benefits, rights or remedies. This Agreement may not be assigned by either Party, in whole or in
    part, without the express written consent of the other Party, which consent shall not be unreasonably withheld, conditioned
    or delayed. Any subsequent assignment that has been approved by the other Party hereunder shall contain a provision indicating
    that the assignment is made subject to this Agreement and the JOA and the assignee shall agree to be bound by the terms and
    conditions hereof. 
	 	 
	9.	This
    Agreement, together with the Exhibits hereto, represents the entire agreement between the Parties with respect to the subject
    matter hereof and replaces all previous agreements, oral or written, made and entered into between the Parties. This Agreement
    may not be amended nor any rights hereunder waived except by an instrument in writing signed by the Parties hereto.
	 	 
	10.	This
    Agreement and the transactions contemplated hereby shall be construed in accordance with, and governed by, the laws of the
    State of Texas, without reference to its conflict of law provisions. Should any provision of this Agreement be declared unenforceable
    by operation of law or by reason of ambiguity, the remaining provisions of this Agreement shall nonetheless remain in full
    force and effect and the unenforceable provision shall be modified so as to conform to the intent of the Parties with respect
    to such provision.


 




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January
3rd 2017


 


	11.	This
    Agreement is subject to approval by Houston American’s board of directors. And, as the amount of capital required to
    commit to this project is subject to Houston American’s ability to raise this amount in the public markets, this offer
    is made subject to suitable financing. A resulting capital raise of this size in the public markets may subject Houston American
    to Securities and Exchange rules requiring a favorable vote by a majority of Houston American’s shareholders. Therefore,
    this Agreement could be subject to a shareholder vote for final approval.
	 	 
	12.	This
    Agreement may be executed in counterpart and each counterpart shall be deemed an original for all purposes and shall be binding
    upon each Party executing the same, whether or not executed by all Parties hereto.
	 	 
	13.	This
    Agreement shall be effective as of the Effective Date and shall remain in full force and effect until such time as the first
    of the following occurs: (i) Founder does not receive an executed copy of this Agreement, or (ii) Founders has not received
    from Houston American the Lease Bonus amount as provided by Paragraph 2 above on or before February 28, 2017, or (iii) Houston
    American has executed the JOA and received the assignment of its interest in the Leases from Founders as provided for herein
    fulfilling the obligations set forth on this Agreement. Upon termination of this Agreement, any and all ongoing relationship
    between the Parties will be governed by the JOA.
	 	 
		If
the foregoing correctly sets forth your understanding of our agreement, please indicate your acceptance by your execution as set
forth below and return a fully executed copy of this Agreement.


 


	 	Founders Oil and Gas III, LLC
	 	 	 
	 	By:
    	/s/
    Brian M. Sirgo
	 	 	Brian
    M. Sirgo, President


 




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January
3rd 2017


 


Agreed
to and accepted this 4th day of January, 2017.


 


	 	Houston American Energy Corp. 
	 	 	 
	 	By:
    	/s/
    John P. Boylan
	 	 	John
    P. Boylan, President


 






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