Exhibit 10.1
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      P R I M A
      OIL & GAS COMPANY
      Trinity Place
      1801 Broadway, Suite 500
      Denver, Colorado  80202
      303-297-2300


Exhibit 10.1
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November 7, 1996

Unioil
P.O. Box 310
Evans, Colorado 80620

Re:  Farmout/Farmout Option
     Weld County, Colorado


Gentlemen:

Pursuant to our discussions, Prima Oil & Gas Company (Prima) and Unioil hereby
agree as follows:

1.     Unioil's Contribution. Unioil is the owner of certain potential
       drillsites as described on Exhibit A.1. attached to and made a part
       hereof (hereinafter sometimes referred to as the "Unioil Drillsites").
       Unioil is desirous of having oil and gas wells drilled on such
       drillsites. Prima is willing to drill wells on the Unioil Drillsites
       subject to the terms and conditions herein contained. Accordingly, Unioil
       hereby contributes the Unioil Drillsites to the "Drillsite Pool" as
       further defined in this agreement subject to the terms and conditions of
       this agreement.

       Unioil is also the owner of certain oil and gas wells (as set forth on
       Exhibit A.1.b.) identified as potential recompletion candidates. Unioil
       is desirous of having such oil and gas wells recompleted subject to the
       terms and conditions of this agreement. Accordingly, Unioil hereby
       contributes the recompletion candidates to this agreement.

2.     Prima's Contribution. Prima is the owner of certain potential drillsites
       as described on Exhibit A.2. attached to and made a part hereof
       (hereinafter sometimes referred to as the "Prima Drillsites"). Prima is
       willing to drill wells on the Prima Drillsites subject to the terms and
       conditions herein contained. Accordingly, Prima hereby contributes the
       Prima Drillsites to the "Drillsite Pool" as further defined in this
       agreement, subject to the terms and conditions of this agreement.

3.     Drillsite Pool. The Drillsite Pool shall be defined as the total of all
       potential locations contributed to this agreement by both Unioil and
       Prima and from which will be drawn locations to be drilled pursuant to
       this agreement. All lands contributed to the Drillsite Pool will be
       delivered subject to total drillsite burdens of 25% (the intent being to
       deliver a 75% net revenue working interest, assuming such is available)
       with the difference between current burdens which may be of record as of
       the date of this agreement and a total leasehold burden of 25% being
       reserved to the contributing party in the form of an overriding royalty.



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3.1.   Inadequate Leasehold Net revenue Interest. In the event the available
       leasehold net revenue interest in a given location contributed to the
       Drillsite pool is less than 75%, then the contributing party shall notify
       the noncontributing party of the actual leasehold net revenue interest
       available to the location. The noncontributing party shall then have the
       option, for a period of 5 days, to accept the location at the leasehold
       net revenue available or to reject the location. Should the location be
       accepted, then Prima shall proceed to drill the location in the normal
       course of a proposed drilling program. However, should the location be
       rejected, the contributing party shall have the option, for a period of
       10 days, to propose a substitute location within a three mile radius of
       the location in question or to simply withdraw the location. Should the
       contributing party propose a substitute location, the non-contributing
       party shall have the option, for a period of 10 days, of either accepting
       or rejecting the substitute location. Should the non-contributing party
       elect to reject the substitute location, then the location shall be
       deemed to be withdrawn. Upon withdrawal of a location as described above,
       within 5 days, the non-contributing party shall likewise withdraw one
       location within a three mile radius of the rejected location.

3.2.   Title Failure. In like manner, in the event, after review by a title
       attorney, it should be determined that a location contributed to the
       drillsite pool does NOT have drillable title (drillable title shall mean:
       title of a quality adequate to enable a prudent operator to drill an oil
       anchor gas well on a given location while assuming only reasonably
       minimal business risks), then the contributing party shall have 15 days
       in which to cure whatever title defects are rendering the location
       un-drillable. Should both parties agree that the title defects have been
       or can be cured within the 15 day period, then Prima shall proceed to
       drill the location as planned. However, should the defects not prove to
       be curable within the 15 day time frame, the location may at the option
       of the non-contributing party he rejected. Should a location be rejected,
       then the same procedure as described above concerning locations with
       inadequate leasehold net revenue interest shall be followed.

4.     Recompletion Potential. In addition to those lands contributed to the
       Drillsite Pool, Unioil also owns and operates certain wells identified as
       leaving "Recompletion Potential." Recompletion Potential shall be defined
       as any well(s) which in Prima's opinion, after scientific, engineering
       and economic review, is determined or believed to have the potential,
       upon recompletion, to produce a rate of return and an over all return on
       investment sufficient to justify the expenditure of the funds necessary
       to perform the recompletion(s). Prima will perform all such recompletions
       pursuant to this agreement at its sole expense, bearing all costs
       associated with the operations through and including returning the well
       to production. Unioil specifically recognizes that there are certain
       risks associated with such recompletions and there is no guarantee that
       the recompleted well(s) will out perform the well as it presently is
       configured and that further there is a risk that the well could be lost
       permanently or that there will be no further production from such well.
       Unioil expressly agrees that Prima will hear no liability to Unioil or it
       shareholders in such case and Prima's only liability will be that of any
       operator pursuant to the Joint Operating Agreement (JOA) described below.


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       Although it will bear none of the costs associated with the recomple-
       tions, commencing with the first sales following the recompletion, Unioil
       will receive a 27.5% working interest subject to its proportionate share
       of the leasehold burdens in existence as of the date of this agreement.
       Further, Unioil will continue to receive 100% of the Net Revenue Working
       Interest from the wells with Recompletion Potential until such time as
       the recompletion is performed. ("Net Revenue Working Interest" shall be
       defined as the working interest or cost bearing interest owned by a given
       party reduced by the leasehold burdens allocable to that percentage of
       working interest. For example: Unioil's Net Revenue Working Interest on a
       tract with leasehold burdens totaling 25% would be 20.625%, or 27.5%
       working interest times 75% leasehold net revenue interest equals 20.625%
       Net Revenue Working Interest) It is the intent of both parties that the
       recompletions be performed as soon as reasonably possible. Prima
       presently recognizes probable Recompletion Potential in approximately six
       wells among those shown on Exhibit A.1. However, the parties recognize
       that there are two additional wells identified on Exhibit A.1.c. which,
       as of the date of this agreement are not recognized to have Recompletion
       Potential. However, following further study such wells may in fact prove
       to have such potential. Accordingly, Prima is hereby granted an option,
       during the term of this agreement, to recomplete such additional wells
       under the same terms and conditions as set forth in this agreement.

5.     Oil and Gas Contracts. Unioil agrees that Prima shall have the right to
       negotiate or renegotiate any dedication and or oil and gas purchase
       agreements on the recompletion wells as well as any lands and locations
       contributed to the Drillsite Pool. For this purpose and to the extent
       necessary Unioil agrees to appoint Prima as its agent or otherwise
       empower Prima to act on Unioil's behalf in discussions with potential gas
       purchaser's or markets.

6.     Operations. Prima will be the Operator of all of the Recompletions and
       all of the wells drawn from the Drillsite Pool and drilled pursuant to
       this agreement. Prima shall be responsible for selecting the wells to be
       drilled from the Drillsite Pool and for the conduct of all operations,
       including but not limited to clearing title to the locations, obtaining
       permits, drilling, completing and equipping the wells and obtaining
       access to a market for the production from the well. All operations
       conducted pursuant to this agreement will be conducted pursuant to an
       AAPL model from JOA (1989) as is commonly used in the area.

7.     Drilling Packages/Payout. For purposes of this agreement all wells
       selected from the Drillsite Pool shall be divided into packages of not
       less than two and not more than eight wells hereinafter referred to as a
       Drilling Package. On all Drilling Packages drilled pursuant to this
       agreement, Prima agrees to pay 100% of the costs associated with
       drilling, completing, equipping and operating the wells included in such
       packages until Payout. Likewise. Prima shall be entitled to receive 100%
       of the Net Revenue Working Interest until Payout on each Drilling Package
       drilled pursuant to this agreement. After Payout, Unioil shall be
       entitled to receive a 27.5% working interest subject to its proportionate
       share of leasehold burdens and shall be responsible for paying its share
       of the costs of all further operations on that Drilling Package. Payout
       shall be determined on Drilling Package basis, meaning on the basis of


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       all expenses and revenues attributable to all wells identified as and
       included in a given Drilling Package. Payout shall be defined as follows:

       Payout shall be deemed to have occurred at such time as Prima shall have
       recovered 100% of the actual costs and expenses of Prima, as Operator, in
       drilling, completing, equipping and operating the well, including but not
       limited to all costs associated with plugging back, recompleting,
       reworking, and testing well(s) in a given Drilling Package, plus an
       amount, computed on a monthly basis, equal to the remaining balance to be
       recovered times the prime interest rate (as quoted in the Wall Street
       Journal on the first business day of each month) plus one percent. Such
       costs and expenses shall be reduced by deducting 100% of the proceeds of
       production for a given month from all wells in a Drilling Package, after
       having deducted the lessor's royalty, any overriding royalties (including
       any reserved to the party contributing the location as described above)
       and any similar burdens on production, with which the leasehold is
       burdened and which may be of record as of the date of this agreement, as
       well as all severance, ad valorem and other similar taxes attributable to
       the before payout interest.

       Payout shall be deemed to occur and Unioil's after Payout interest shall
       be deemed to vest in Unioil as of the first day of the month following
       the point at which Payout occurs. On leases and lands contributed to the
       Drillsite Pool by Prima, Prima agrees to promptly make assignment to
       Unioil of its 27.5% working interest in each well in a given drilling
       package effective as of the date each well is spud. However, Unioil's
       working interest share of revenue shall be deemed to be relinquished to
       Prima until each drilling package has reached payout. Prima agrees to
       provide to Unioil statements, no less frequently than quarterly (although
       individual statements may be requested more frequently if Unioil needs
       such from time to time), showing the Payout status of the various
       Drilling Packages.

8.     Commencement. The parties agree that Prima shall commence actual drilling
       operations on the first Drilling Package no later than thirty days
       following receipt of title clearance on the wells in that Drilling
       Package. The target date for commencing the first well subject hereto
       will he November 30, 1996. Prima's right to drill wells pursuant to this
       agreement shall terminate upon the drilling of the last location included
       in the Drillsite Pool or December 31, 1999, whichever comes first. In the
       event that Prima should fail to complete the drilling of all such
       locations within the time allowed, then the following procedure shall be
       employed. The parties hereto will conduct a "Draft" with each party
       selecting one location at a time until all locations have been selected.
       The parties shall then assign 100% of the working interest, subject to
       the same leasehold burdens as described in paragraph 3 above to the party
       selecting each given location in the "Draft". That party shall then own
       such location and with regard to such location have the full right to
       drill and otherwise operate on such location {subject to the terms of the
       underlying lease and any pertinent existing agreements). As regards such
       undrilled locations, upon assignment to the respective parties, the JOA
       shall terminate effective as of the date of the assignment.



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9.     Notice and Assignments. Prima shall notify Unioil of its intent to drill
       certain locations from the Drillsite Pool prior to submitting
       applications for permits to drill to the Colorado Oil and Gas
       Conservation Commission. In the case of locations contributed to the
       Drillsite Pool by Unioil, at any time following the commencement of
       actual drilling operations on a given location, Prima may request an
       assignment from Unioil of Prima's working interest share of the oil and
       gas lease(s) covering that location. Within ten days of receipt of such
       request. Unioil shall assign 72.5% of its right title and interest in and
       to those Unioil Locations for which request for assignment is made,
       subject to the reservation of an overriding royalty (ORR) equal to the
       difference between all land owner royalties, overriding royalties and
       other similar burdens on production and a total leasehold burden of 25%.
       All ORR's reserved pursuant to this agreement shall be proportionately
       reduced to the extent the ORR holder owns less than 100% of the leasehold
       covering the Subject Lands and to the extent the burdened leasehold
       covers less than 100% of the mineral ownership of the Subject Lands and
       further to the extent the burdened interests represent less than 100% of
       any pooled unit or spacing unit. In addition, Unioil shall be deemed to
       have relinquished its 27.5% working interest per well on each package
       (subject to the same ORR's described above) to Prima until Payout as
       described in paragraph 7 above. At Payout, Unioil's relinquished working
       interests will revert to Unioil without any further action by either
       party in the time and manner described above.

       The parties recognize that as of the date of this agreement, the Unioil
       Drillsites and Recompletion Candidates are encumbered by two mortgages.
       The first such mortgage is to First National Bank of Greeley, and the
       second is to Joseph Associates of Greeley, Inc. Unioil agrees that prior
       to making assignments pursuant to this agreement, it will secure the
       release of such mortgages insofar as such mortgages encumber the interest
       to be assigned.

10.    Confidentiality. It is agreed that Prima has developed certain knowledge
       and techniques for drilling and completing and operating wells in the
       vicinity of the locations contributed to the Drillsite Pool. It is
       further agreed that such knowledge and techniques have been developed at
       great expense to Prima and that such knowledge and techniques are not
       generally known to the majority of operators in the vicinity of the
       locations such knowledge, techniques and associated information shall
       hereinafter he referred to as the "Proprietary Data". Prima agrees that
       it will share with Unioil, that portion of the Proprietary Data, relevant
       to the Drillsite Pool and the Recompletion Candidates. Accordingly,
       Unioil agrees that during the term of this agreement, and except as
       required by law or governmental regulation, Unioil shall not reveal or
       disseminate any information it may acquire regarding the technical,
       geologic or engineering techniques employed by Prima in the conduct of
       its operations pursuant to this agreement. Unioil may use the Proprietary
       Data on its own wells and locations during the term of this agreement,
       however, for a period of two (2) years from the date hereof, Unioil
       specifically agrees not to compete with Prima regarding the acquisition
       of additional lands, leases, locations or wells with the intent of
       employing the Proprietary Data on such without first making available to
       Prima the opportunity to participate in such acquisition for a 50%
       working interest.


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11.    Requisite Authority. Both parties represent that they have the full and
       requisite authority to bind their respective corporations to the terms of
       this agreement, and that this agreement shall he binding upon each such
       party their respective heirs, successors and assigns and that by the
       signature of the party set forth below do hereby evidence the same.

       Should the foregoing be in accord with your understanding of our
       agreement please so signify by signing and returning one copy of this
       agreement as soon as possible.

Sincerely,
PRIMA OIL & GAS COMPANY


/s/ G. Walter Lunsford


G. Walter Lunsford
Vice President, Land



Agreed to and accepted this   8th   day of November, 1996.
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UNIOIL




By:  /s/ Charles ?
   -----------------------------------


Its:   CEO & Chairman
    ----------------------------------















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                                   Exhibit "A"

                                  (Page 1 of 2)

Attached  to and  made a part  of that  certain  Farmout/Farmout  Option  letter
agreement  dated  November 7, 1996,  by and  between  Unioil and Prima Oil & Gas
Company.

1.a.   Drilling locations contributed by Unioil "Union Drillsites"

       Township 5 North, Range 65 West
       -------------------------------
       Section 22: SWNE
       Section 26: NENW
       Section 27: NESW, SWSE
       Section 32: NESW

       Township 5 North, Range 66 West
       -------------------------------
       Section 17: SW
       Section 19: N/2NW, SENW

       Township 5 North, Range 67 West
       -------------------------------
       Section 13: NENW, S/2NW, SW/4
       Section 23: SW/4, N/2 SE, SWSE

1.b.   Location of wells identified as possible  reccompletion  candidates as of
       the date of this agreement. Note: It is not the intent of this exhibit to
                                   -----
       in  any  way  limit  the  wells  to  be  recompleted  to  strictly  those
       hereinbelow described.

       Township 5 North, Range 65 West
       -------------------------------
       Section 22: SENE (River #1)
       Section 27: SESE (Bunting #1)
       Section 32: NWSW (Ewing #1)

       Township 5 North, Range 66 West
       -------------------------------
       Sections 19: SWNW (Sheep Draw North #1)

       Township 5 North, Range 67 West
       -------------------------------
       Section 13: NWNW (Sheep Draw #1)
       Section 23: SESE (Sheep Draw South #1)

1.c.   Locations of Wells NOT identified as having recompletion  potential as of
       the date of this  agreement.  Prima  shall  have an option to  recomplete
       these wells should  additional  review indicate that they do in fact have
       such potential.

       Township 5 North, Range 65 West
       -------------------------------
       Section 26: NWNW (HL 26-1)
       Section 27: NWSW (Sitzman #1)




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                                   Exhibit "A"

                                  (Page 2 of 2)

Attached  to and  made a part  of that  certain  Farmout/Farmout  Option  letter
agreement  dated  November 7, 1996,  by and  between  Unioil and Prima Oil & Gas
Company.

2.     Drilling locations contributed by Prima "Prima Drillsites"

       Township 5 North, Range 65 West
       -------------------------------
       Section 14: SWSE
       Section 23: SWNE, NESW, SWSE
       Section 24: SWNW

       Township 5 North, Range 67 West
       -------------------------------
       Section 11: SE/4, E/2SW, NWSW
       Section 12: SW/4
       Section 22: E/2SE, NWSE, W/2NE, SENE
       Section 24: SENW, E/2SW, NWSW



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                                    EXHIBIT B
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         Attached in and made a part of that certain Farmout and Farmout
        Option Agreement between Unioil and Prima Oil & Gas Company dated
                                November 7, 1996














         (Map showing locations of Prima Farmout Acreage, Unioil Farmout
        Acreage, Proposed Recompletions and Proposed Wells in Township 5
                       North, Ranges 65, 66 and 67 West.)