EXPLORATION AGREEMENT
                                 Texana Project
                              Jackson County, Texas

         This Exploration Agreement (the "Agreement") is entered into as of July
15,  1997,  by and between  TAC  Resources,  Inc.  ("TAC"),  Parallel  Petroleum
Corporation ("Parallel"),  Unit Petroleum Company ("Unit"), Beta Oil & Gas, Inc.
("Beta") and Pease Oil and Gas Company  ("Pease") all  hereinafter  collectively
referred to as (the "Parties").

         WITNESSETH:

         WHEREAS, TAC has acquired seismic and lease options, oil and gas leases
and seismic permits  covering an area of  approximately  25,000 acres located in
Jackson County, Texas, as depicted on the plat attached hereto as Exhibit "A".

         WHEREAS,  Parallel,  Unit, Beta and Pease propose to acquire  undivided
interests in and to the rights granted by such agreements, and to participate in
conducting a 3-D seismic program upon the lands covered thereby.

         NOW, THEREFORE, in consideration of the premises, the mutual agreements
and  obligations  set forth  herein,  and the  mutual  benefits  to be  received
hereunder, the Parties agree as follows:


ARTICLE 1. DEFINITIONS


         For the purpose of this  Agreement,  the following terms shall have the
meanings designated below:

         1.1 Area of Mutual  Interest "AMI" means the lands outlined on the plat
attached hereto as Exhibit "A".

         1.2  "AMI  Interests"  means  any  interest  in the  oil,  gas or other
minerals in and under the AMI, including  leasehold  interests under oil and gas
leases,  oil and gas  lease  options,  interests  of the  farmee  under  farmout
agreement,  and other such  interests or rights  similar or  dissimilar to those
mentioned,  including,  but not limited to, seismic  permits.  AMI Interest does
not, however, include nonpossessory interests in the oil, gas and other minerals
in and under the AMI, such as royalty  interests,  overriding royalty interests,
net profits interests,  or other such interests whether similar or dissimilar to
those mentioned.

         1.3 "Existing AMI Interests"  means the Seismic and Lease Options,  Oil
and Gas Leases and Seismic  Permits which have been acquired by TAC as of August
1, 1997.

         1.4  "Subsequently  Acquired  AMI  Interests"  means all AMI  Interests
acquired after August 1, 1997.

         1.5  "Contract  Lands"  means  lands  located  within the AMI which are
covered by AMI Interests.

         1.6  "Initial  Interest"  means a Party's  ownership  in  Existing  AMI
Interests,  and the  amount  of  interest  a party is  entitled  to  acquire  in
Subsequently Acquired AMI Interests, subject to the provisions hereof.

         1.7  "Jointly  Owned AMI  Interest"  means an AMI Interest in which the
Parties own an interest pursuant to the terms of this Agreement.


<PAGE>



     1.8 "Lease  Burden" means any royalty,  overriding  royalty  interest,  net
profits interest,  production payment,  carried interest,  reversionary  working
interest or other charges upon a leasehold interest or the production therefrom.

     1.9  "Losses"  means  any and all  losses,  liabilities,  claims,  demands,
penalties, fines, settlements, damages, actions, or suits of whatsoever kind and
nature (but expressly excluding consequential  damages),  whether or not subject
to litigation, including without limitation (i) claims or penalties arising from
products  liability,   negligence,  statutory  liability  or  violation  of  any
applicable  law or in tort (strict,  absolute or otherwise)  and (ii) loss of or
damage to any property, and all reasonabl out-of-pocket costs, disbursements and
expenses  (including,  without  limitation,  legal,  accounting,  consulting and
investigation expenses and litigation costs) imposed on, incurred by or asserted
against an indemnified Party in connection therewith.

     1.10  "Operator"  shall have the  meaning  as it is given in the  Operating
Agreement in the form attached hereto as Exhibit "B".

     1.11 "Party" or "Parties" means TAC, Parallel, Unit, Beta and Pease and any
other person or entity,  singularly  or as a group,  which  hereafter  becomes a
party hereto or is otherwise subject to the terms hereof.

     1.12 "Pre-Existing Data" means such data which includes, but is not limited
to: seismic records and related seismic data, electronic and mud logs, cores and
core  analyses,  field studies (less and except any  proprietary  methodology or
process  used by any  Party in such  studies),  production  tests,  engineering,
geological,  geophysical,  paleontological  data,  interpretive  data  and  maps
prepared by any Party in existence as of the date of this Agreement.

     1.13 "Proportionate  Share" except as otherwise provided for herein,  shall
be  calculated  by dividing a Party's  Initial  Interest by the aggregate of the
Initial  Interests of all Parties who are to share an interest or an  obligation
pursuant to the terms hereof. In circumstances  where one or more Parties do not
participate  in such an interest or obligation,  "Proportionate  Share" shall be
determined by dividing a Party's Initial Interest by the total Initial Interests
of all Party's participating therein.

     1.14  "Prospect"  means an area  within  the AMI which is  designated  as a
Prospect  pursuant to Article  4.1 hereof and within  which there is expected to
occur, based on information  developed as a result of 3-D Seismic Operations,  a
commercial   accumulation  of  oil  and/or  gas  in  a  specific  structural  or
stratigraphic trap.

     1.15 "Subsequently Created Burden" means a lease burden which is created by
a party  subsequent to its  acquisition  of the interest which is subject to the
burden,  except the  overriding  royalty  interest  provided  for in Article 2.5
hereof. 

     1.16 "Costs  Prior to  Leasehold  Acquisition"  means all costs of any type
whatsoever  which pertain to this  project,  covering  lands  located  within or
outside the AMI, including, but not limited to costs of seismic permits, seismic
and lease options,  oil and gas leases,  and renewals  thereof,  land brokerage,
legal costs, surface damages, surveying, seismic acquisition and interpretation,
etc.,  which are incurred  prior to Leasehold  Acquisition  conducted  under the
provisions of Article 4 hereof.
               

    1.17 Other terms are defined elsewhere in this Agreement.



     ARTICLE 2.  INTERESTS  AND SHARE OF COSTS OF THE PARTIES 
     
     2.1 Area of Mutual Interest. The Parties hereby establish an Area of Mutual
Interest  "AMI",  same to be  comprised  of the area  outlined  on the  attached
Exhibit "A", and which shall cover AMI Interests located therein. This AMI shall
continue for a term of three (3) years,  or the  expiration  of the last Jointly
Owned AMI Interest, whichever is earlier. e 2.2 "Interests and Share of Costs of
the Parties" The Parties  hereby agree to own, as their  Initial  Interest;  and
agree to bear the costs set out below, as follows:

<TABLE>

Party        Initial Interest       Share of Costs           Share of Costs for
                                  Prior to Leasehold      Leasehold Acquisition
                                     Acquisition       and Subsequent Operations


<S>           <C>                     <C>                         <C>     
TAC           .2500000                .0625000                    .2500000

Parallel      .1750000                .21875                      .1750000

Unit          .2500000                .31250                      .2500000

Beta          .2000000                .2500000                    .2000000

Pease         .1250000                .1562500                    .1250000
</TABLE>


TAC has acquired and now owns the Existing AMI Interests.  Parallel,  Unit, Beta
and Pease agree that their costs in the Existing AMI Interests shall be based on
$75.00 per net mineral acre on seismic and lease  options,  and cost plus 25% on
oil and gas leases and seismic permits. The Existing AMI Interests are presently
comprised of  approximately  23,183.908 net mineral acres covered by seismic and
lease option,  and 300.5 net mineral acres covered by seismic  permit where cost
was $25.00/net  mineral acre. Based on the foregoing,  the current total cost of
Existing AMI  Interests is One million seven  hundred  forty-eight  thousand one
hundred eighty-three and 73/100 Dollars  ($1,748,183.73).  Parallel,  Unit, Beta
and Pease agree to pay TAC their portion of such cost, as referenced  above,  in
the Existing AMI Interests upon  execution of this  Agreement.  Parallel,  Unit,
Beta and Pease hereby agree that TAC shall have the  exclusive  right to acquire
AMI  Interests  through  August 1,  1997,  and that same  shall be treated i all
respects as Existing AMI Interests.  Parallel,  Unit,  Beta and Pease agree that
they shall be obligated to accept such interests in the same percentages and pay
TAC for such  interests  at the  same  terms  stated  herein.  Payment  for such
interests  shall be due within fifteen (15) days after receipt of written notice
as set out in Article 2.4.  Interests  available to TAC which costs exceed those
stated  above  shall be offered to the other  Parties as per the  procedure  set
forth in Article 2.4 below.

     2.3  Recording.  TAC agrees to file for record in the office of the Jackson
County Clerk, all Memorandums of Seismic and Lease Options covering the Existing
AMI Interests within fifteen (15) days of the date this Agreement is executed by
all Parties.


     2.4 Subsequently Acquired AMI Interests. Any Party acquiring a Subsequently
Acquired AMI Interest,  directly or  indirectly,  shall notify the other Parties
hereto.  Such notice shall set forth (i) a description of the interest acquired,
(ii)  the  total  cost of the  interest,  including  all land  and  legal  costs
associated with the acquisition  thereof,  (iii) the Proportionate  Share of the
notified Party and its cost therein,  and (iv) any other pertinent terms of such
acquisition,  including,  but not  limited  to,  copies  of the  instruments  of
conveyance,  copies  of  leases,  assignments,   subleases,  farmout  and  other
contracts affecting the AMI Interests, copies of paid drafts or checks, itemized
invoices of actual costs  incurred by the  acquiring  Party.  Parties shall have
fifteen (15) days from the receipt of this notice to acquire their Proportionate
Share of the Subsequently  Acquired AMI Interest.  A Party's election to acquire
shall be given in writing and  accompanied by Party's  payment of its total cost
for such  interest.  If a Party's  election and payment are not received  within
such fifteen (15) day period, it shall be conclusively  presumed that such Party
has elected not to acquire its Proportionate Share of the Subsequently  Acquired
AMI Interest and has forfeited its right thereto.  A Party's failure to exercise
its option as to any particular  notice shall not constitute a waiver or release
of its  right  to  acquire  any  interest  described  in any  subsequent  notice
delivered hereunder.

     2.5 Existing Burdens. Each Party's interest under this agreement in the AMI
Interests,  and oil and gas leases  which may be acquired  thereunder,  shall be
subject to and burdened by its  proportionate  share of all  existing  operating
agreements,  existing  and  pending  pooling  and  spacing  orders and all Lease
Burdens other than Subsequently  Created Burdens. TAC represents that, except as
hereinafter provided, it has not burdened the Existing AMI Interests acquired or
to be acquired with any liens or Subsequently Created Burdens. Each Party agrees
to perform its  Proportionate  Share of the obligations  under the AMI Interests
acquired pursuant to this Agreement and the other obligations  described in this
Article,  but  only  to  the  extent  that  such  obligations  arise  after  the
acquisition of such AMI Interests by such Party.  Notwithstanding the foregoing,
the  Parties  agree  that  they  shall  bear,  their  Proportionate  Share of an
overriding royalty interest to be owned by Bayou Black Royalty Company,  Inc. on
all oil and gas leases  acquired  pursuant to this Agreement  (including  leases
acquired by exercising  lease options in which the Parties own an interest,  and
in extensions and renewals  thereof ) equal to two percent (2%) of eight-eighths
(8/8ths), provided that such overriding royalty interest shall be reduced in the
proportion that the undivided  mineral  interest covered by any such lease bears
to the entire mineral interest in the lands covered by such lease.

     2.6 Expiring Options. If any lease options covered hereby will expire prior
to completion of the Seismic Operations  contemplated herein, Operator shall use
its best  efforts  to renew  such  option  for a  sufficient  period  of time to
complete  the  proposed  3-D Seismic  Operations  thereon and exercise the lease
option  thereunder.  The  acquisition of such renewal shall be handled under the
acquisition, notice and election provisions of Article 2.4.
         

     2.7  Assignments.  Upon  receipt of payment  for AMI  Interests,  TAC shall
assign to the Parties hereto their Initial  Interest in and to all right,  title
and  interest  owned  by TAC in such AMI  Interests.  Such  assignment  shall be
recordable  in form,  shall be  subject to this  agreement,  shall  provide  for
warranty by, through and under TAC, but not  otherwise,  and shall be subject to
the terms and provisions of the AMI Interests assigned.

     2.8 AMI Interests Located In and Out of Existing AMI. If an AMI Interest is
found to cover lands  located  both within and outside  the  existing  AMI,  the
entirety of such AMI Interest  shall be offered to the other  Parties  under the
acquisition,  notice and election provisions of Article 2.3 and Article 2.4, and
if the other  Parties  elect to  participate  in the  acquisition  thereof,  the
description  of the lands  comprising  the AMI shall be deemed to be  amended to
extend and cover all of the lands  covered by such  interest.  The option of the
Parties to participate in the  acquisition of such interests shall be limited to
the entirety of the interest acquired.

ARTICLE 3. SEISMIC OPERATIONS

        3.1 Existing  Seismic,  Geologic and Other Subsurface  Data.  Except as
prohibited by law or by agreements with third parties,  upon request, each Party
owning  existing  seismic data  pertaining to lands located within the AMI shall
furnish copies of all such data to the other Parties, together with any geologic
or other subsurface data that could be useful in the interpretation thereof. The
Party receiving such data shall bear the expense of copying it. The Party owning
any seismic or other data which may not be copied,  due to legal prohibitions or
by agreements with third parties,  shall, upon request, make such data available
to the Party requesting such data during normal business hours.

         3.2 Ownership of Pre-Existing Data.  Ownership of the Pre-Existing Data
and all  reprocessed  Pre-Existing  Data shall at all times remain vested in the
Party who  contributes  the  Pre-Existing  Data for use by the Parties,  and the
Parties agree to acknowledge such ownership,  including, but not limited to, the
filing with any appropriate  governmental authority of such acknowledgment.  The
Parties expressly reserve the right to sell,  license, or trade the Pre-Existing
Data which it  contributes  hereunder,  to the extent  that it has such right to
sell,  license or trade the  Pre-Existing  Data,  through  its own  efforts,  or
through the efforts of others duly authorized by such Party and the benefits and
advantages,  including  monetary  consideration,  which such Party receives as a
result of such activities shall be the sole property of such Party.

         3.3   Management  of  the  3-D  Seismic   Operations.   Operator  shall
exclusively manage and conduct the 3-D Seismic Operations contemplated hereunder
and all  operations  incident  thereto,  including,  but  not  limited  to,  the
acquisition  of all  geoscientific  data,  the  performance  of all 3-D  seismic
surveys and other  geoscientific  work  incident  thereto  (other than  analysis
and/or interpretation),  and, subject to the Operating Agreements,  the drilling
of all wells on the  Prospects.  Operator  shall  perform all such work  through
employees, representatives, and contractors of its selection, and Operator shall
and does hereby agree to utilize  reasonable  prudence and economic  judgment in
contracting with third party  contractors or  subcontractors.  As manager of 3-D
Seismic  Operations,  Operator  shall  devote  such of its time,  attention  and
efforts to the conduct  thereof as it shall in good faith  determine  reasonably
necessary, but shall otherwise be free to engage in and pursue all other current
and future business projects, programs,  prospects,  opportunities,  investments
and  activities  without  obligation  of any kind to or  right of  participation
therein  by the other  Parties  hereto.  In  performing  its  duties  under this
Agreement, Operator shall serve as an independent contractor and not as an agent
or employee of the other  Parties  hereto.  Operator  shall  utilize  reasonable
prudence and economic judgment in incurring costs, and shall further conduct the
3-D Seismic  Operations  and perform all of its duties under this Agreement as a
reasonable,  prudent  operator,  in a  good  and  workmanlike  manner  with  due
diligence  and  dispatch,  in  accordance  with good  oilfield  and  exploratory
practice, and in compliance with all applicable laws and regulations,  BUT SHALL
HAVE NO  LIABILITY TO THE OTHER  PARTIES  HERETO OR ANY OTHER OWNER OF RIGHTS OR
INTERESTS UNDER THIS AGREEMENT FOR ANY LOSSES SUSTAINED OR LIABILITIES  INCURRED
IN  CONNECTION  WITH  THE 3-D  SEISMIC  OPERATIONS  AND/OR  THE  CONDUCT  OF ANY
ACTIVITIES  UNDER OR CONTEMPLATED  BY THIS AGREEMENT,  SAVE AND EXCEPT AS MAY BE
OCCASIONED BY THE GROSS  NEGLIGENCE OR WILLFUL  MISCONDUCT OF OPERATOR.  EACH OF
THE OTHER  PARTIES  HERETO  ACKNOWLEDGES  THAT (A) IT HAS READ AND AGREED TO THE
FOREGOING  EXCULPATION  OF OPERATOR AS A NEGOTIATED  AND BARGAINED FOR ASPECT OF
THIS TRANSACTION, (B) THIS EXCULPATION PROVISION IS CONSPICUOUS.

         3.4 Ongoing and Future Seismic Operations. The Parties agree to conduct
such operations on all or  substantially  all of the Contract Lands. The Parties
may, subject to the unanimous written consent of all Parties, agree to reduce or
increase the acreage on which such  operations will be conducted when technical,
legal or operational  considerations indicate that such reduction or increase is
warranted. In any event, the Parties agree to pay their respective shares of the
total costs of the 3-D Seismic  Operations  conducted on all land covered by AMI
Interests as set forth in Article 2.2 hereof.  Operator  shall furnish the other
Parties  hereto with copies of all  applicable  contracts and other  information
pertaining to all 3-D Seismic Operations conducted hereunder.  The Parties shall
own their  Proportionate Share of the geophysical data obtained by and resulting
from the 3-D Seismic Operations conducted on the Contract Lands, including,  but
not limited to all tapes,  seismic sections and any and all other data generated
by such 3-D  Seismic  Operations.  Each Party shall have access to such data and
shall receive copies thereof.  The Parties agree to work together in a spirit of
cooperation and in good faith in planning and causing the 3-D Seismic Operations
to be conducted as contemplated  herein as well as in sharing the data collected
therefrom and the interpretations  thereof. Such interpretations,  by any Party,
shall  in no way be  deemed  a  representation  to any  other  Party  that  such
interpretations  are accurate or correct.  Such  interpretations  shall be given
merely as a means of sharing such  Party's  analysis  and ideas  regarding  such
data.

         3.5  Confidentiality  of Seismic Data.  Except as provided below,  each
Party  agrees  to keep  all  seismic  data  obtained  pursuant  to  Article  3.3
confidential  for a period of five (5)  years  from the date  hereof.  After the
expiration of five (5) years from the date hereof any Party may sell the data it
acquired  pursuant to Article  3.2.  Each Party  owning an interest in such data
shall receive its Proportionate Share of the proceeds of any such sale. Any data
acquired  from  another  Party  pursuant  to Article  3.1 shall  forever be kept
confidential by the Parties;  provided,  however,  that the Party who originally
contributed  such data may share,  sell or  otherwise  dispose of such data that
does not pertain to a Prospect to a third party after the  expiration of one (1)
year from the date hereof,  and the other  Parties shall have no interest in the
proceeds from such sale.  Notwithstanding  the  foregoing,  a Party may disclose
seismic data to (A) a prospective  purchaser or farmee of such Party's interest,
provided (i) such disclosure is limited to the Prospect under  consideration for
sale or farmout,  (ii) the prospective purchaser or farmee must review such data
in the affected Party's offices and may not copy such data until such time as it
has  acquired  or earned an  interest  in the  Contract  Lands,  and (iii)  such
prospective  purchaser  or farmee must  execute a  confidentiality  agreement to
prevent  further  disclosure and  unauthorized  use of such data; or (B) a third
party who is entitled thereto pursuant to the terms of a lease,  lease option or
seismic  permit.  Any  Party  may  disclose  such  data  to its  agents,  staff,
representatives and consultants in the normal conduct of its business.

         3.6 Review of Seismic  Data.  The Parties  agree to  cooperate  in good
faith in reviewing  the seismic  data  acquired  hereunder.  Such data should be
reviewed by the Parties as soon as  practicable  after the data is  available so
that the Parties can make decisions regarding the exercise of lease options.


ARTICLE 4. LEASEHOLD ACQUISITION


         4.1 Designation of Prospects. As soon as practicable after the data has
been processed and  interpreted,  Operator shall establish  Prospects within the
AMI. Operator shall designate such Prospects on a map which reflects the outline
of  the  lands  to  be  included  within  each  such  Prospect.  Promptly  after
designating  such Prospects,  Operator shall furnish the other Parties with such
maps which reflect the designated Prospects,  together with a description of the
seismic data, prospective feature and any interpretative data or other maps upon
which such  Prospect is based.  The other  Parties  shall have fifteen (15) days
after  receipt of such  notice in which to elect in writing  whether or not they
will  participate  in the  designated  Prospects.  If a Party  fails to  furnish
Operator with its written  election to participate  within such fifteen (15) day
period, it shall be conclusively  presumed to have elected not to participate in
the  Prospect or  Prospects  so  designated.  Any Party not  participating  in a
Prospect  shall  promptly  assign all of its  interest in the lands lying within
such Prospect to the Parties  participating in such Prospect. A Party's election
hereunder  may be on a Prospect  by  Prospect  basis,  and a Party's  failure to
participate in any or all Prospects contained in any particular notice shall not
constitute  a waiver or release  of the right to  participate  in a Prospect  or
Prospects described in any subsequent notice delivered hereunder.

         4.2 Acquisition of Leases Within Prospects.  The Parties  participating
in a Prospect will acquire and pay their Proportionate Share for leases covering
each Prospect upon the terms  provided in the  applicable  lease options or upon
such other terms as the Parties may mutually agree upon if some lands within the
Prospect  are unleased  and not covered by a lease  option.  As soon as possible
after  designating  Prospects,  Operator  shall  provide  written  notice to the
Parties  participating  in such Prospects of the leases to be acquired  therein,
which notice shall set forth (i) a description  of the lands and interests to be
acquired,  (ii) the total cost of such  interests,  including all land and legal
costs associated with the acquisition thereof,  (iii) the Proportionate Share of
the notified Party and its cost therein,  and (iv) any other  pertinent terms of
such acquisition,  including,  but not limited to, copies of the instruments and
other  contracts  affecting  same.  Payment for such leases  shall be due within
fifteen (15) days after receipt of the above notice.

         4.3 Minimum Acreage Obligation. In the event the lease options covering
a Prospect  require minimum acreage  selection in excess of the acreage included
within the  boundaries of the Prospect,  then each Party  participating  in such
Prospect must acquire and pay its Proportionate Share of the cost of the acreage
necessary to fulfill such minimum acreage selection requirements.


ARTICLE 5. SALE, FARMOUT OR OTHER DISPOSITION OF AMI INTERESTS TO A THIRD PARTY


         Any Party may sell, assign,  farmout or otherwise dispose of all or any
portion  of  its  interest  acquired  pursuant  to or in  connection  with  this
Agreement without consent of any other Party.


ARTICLE 6. SUBSEQUENT OPERATIONS


     6.1  Operator.  Operator  shall  have the  right,  subject to the terms and
provisions  of the  attached  Operating  Agreement,  to be the  Operator for all
operations  conducted  within the AMI,  and the Parties  hereby agree to execute
separate Operating Agreements designating Operator, as Operator, as required.
        

     6.2  Operating  Agreement.   Except  as  provided  herein,  all  operations
conducted  within the AMI shall be conducted in accordance  with the terms of an
Operating Agreement  substantially in the form attached hereto as Exhibit "B". A
separate Operating Agreement shall be executed for each Prospect, with the first
well drilled in such Prospect to be designated as the "Initial Well".  The share
of costs  which  each  Party  must bear and the  interest  of each  Party in the
production from each well drilled under the Prospect Operating Agreement will be
determined  on a  well-by-well  basis in  accordance  with the  terms  hereof as
modified  by the terms of the  Operating  Agreement.  In the  event of  conflict
between the terms and  provisions  hereof and those  contained in the  Operating
Agreement, the terms and provisions hereof shall prevail.

     6.3 Limitation on Number of Wells  Drilling.  Not more than three (3) wells
shall be drilling on the  Contract  Lands at any time unless it is  necessary to
commence a well in order to perpetuate a lease or otherwise satisfy the terms of
a continuous drilling obligation. 

     6.4  Non-Consent  Election  on  Initial  Well.  If a  Party  elects  not to
participate in the drilling of the Initial Well in a Prospect  established under
Article 4.1 hereof,  such Party shall relinquish all of its rights and interests
in that  Prospect to the Parties  participating  in the drilling of such well. A
Party  so  relinquishing  its  interest  shall  promptly  execute  a  recordable
assignment of its  relinquished  interest to the Parties entitled  thereto.  The
interest so assigned shall be free of any Subsequently Created Burdens.


 ARTICLE 7. MISCELLANEOUS


         7.1  Indemnification  with  Regard to Existing  Matters.  TAC agrees to
fully  indemnify,  defend and hold harmless all other Parties to this  Agreement
against all Losses arising out of, in connection with, or relating to TAC's sole
ownership or operation of the Existing AMI prior to the date of this  Agreement,
including, but not limited to, breach of contract or monetary damage, regardless
of fault or strict liability imposed by statute, rule or regulation, so long and
only in the event that all actions, activities and/or conduct giving rise to the
claim for such Losses relate to  activities of TAC which  occurred in the period
prior to the date of this Agreement.

         7.2 Legal  Relationship.  This agreement is not intended to create, and
shall not be construed to create,  a partnership or other  relationship  whereby
one  party  is  liable  for the  actions  or debts of  another  party;  it being
understood and agreed that the rights and liabilities of all parties are several
and not joint or collective.

         7.3 Entire Agreement.  This agreement  constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof,  superseding
any and all prior  agreements,  understandings,  discussions,  negotiations  and
commitments of any kind.

         7.4  Amendment.  The  provisions  of  this  agreement  may be  amended,
supplemented, or waived only if in writing signed by all parties hereto.

         7.5  Construction.  The parties to this agreement all  acknowledge  and
agree that this agreement was drafted  jointly by them, and that in the event of
any ambiguity,  this agreement shall not be construed against any of them on the
basis of the fact or presumption  that one party had a greater or lesser hand in
the drafting of the agreement than another party,  but rather the terms shall be
given a reasonable interpretation.

         7.6 Governing Law. Except to the extent  preempted by federal law, this
agreement is to be construed and  interpreted  in accordance  with, and governed
by, the laws of the State of Texas.

         7.7  Binding  Agreement.  This  agreement  shall  bind and inure to the
benefit of the parties  hereto and their  respective  heirs,  successors,  legal
representatives and assigns.

         7.8  Section  and  Subsection  Headings.   The  article,   section  and
subsection  headings  contained  in  this  agreement  are  for  the  purpose  of
convenience  only and are not intended to define or limit the contents hereof or
otherwise be considered in construing and enforcing this agreement.

         7.9 Waivers.  Any failure by any party hereto to comply with any of its
obligations, agreements or conditions herein contained may be waived in writing,
but not in any other  manner,  by the party to whom such  compliance is owed. No
waiver of, or consent to a change in, any provision of this  agreement  shall be
deemed to be, or shall  constitute,  a waiver of or  consent  to a change in the
provisions  hereof (whether or not similar),  nor shall such waiver constitute a
continuing waiver unless expressly provided.

         7.10 Further  Assurances.  The parties hereto agree to deliver or cause
to be delivered to each other at all such times as shall be reasonably required,
all such additional instruments, agreements, and other documents, and to perform
all such  actions,  as any of them may  reasonably  request  for the  purpose of
performing  any  provision of this  agreement  or  evidencing  the  transactions
contemplated by this agreement.

         7.11  Severability.  If any term or provision of this  agreement or any
application of this agreement is held invalid or unenforceable, the remainder of
this  agreement and any other  application  of the terms and  provisions of this
agreement  shall  not be  affected  by that  holding,  but  shall be  valid  and
enforceable.

         7.12  Exhibits.  All  exhibits  attached  hereto or referred to in this
agreement are incorporated herein and made a part of this agreement.

         7.13 Term. The term of this agreement shall be three (3) years from the
date hereof or until the last  expiration of the last Jointly Owned AMI Interest
acquired   hereunder,   whichever  is  earlier,   with  the   exception  of  the
confidentiality  requirements of Article 3.5 which shall survive and extend past
that period.

     7.14 Notices.  All notices,  consents and other  communications  under this
Agreement  shall be in  writing  and shall be deemed to have been duly given (a)
when  delivered by hand,  (b) when sent by facsimile  (with receipt  confirmed),
provided  that a copy is  promptly  mailed  thereafter  by first  class  postage
prepaid  registered  or  certified  mail,  return  receipt  requested,  (c) when
received by the  addressee,  if sent by Express  Mail,  Federal  Express,  other
express  delivery  service  (receipt  requested)  or by such other  means as the
Parties named below may agree from time to time or (d) five (5) days after being
mailed in the USA, by first class postage prepaid  registered or certified mail,
return receipt requested; in each case to the appropriate address and telecopier
number set forth below (or to such other address or telecopier number as a Party
may designate as to itself by notice to the other Parties).

         TAC Resources, Inc.
         P. O. Box 206
         Victoria, TX 77902
         Attn: Bill Bishop
         Telephone Number: (512)573-4969
         Telecopier Number: (512)573-9840

         Parallel Petroleum Corporation
         110 N. Marienfield, Suite 465
         Midland, TX 79701
         Attn: Larry Oldham
         Telephone Number: (915)684-3727
         Telecopier Number: (915)684-3905

         Unit Petroleum Company
         24 Greenway Plaza, Suite 501
         Houston, TX 77046
         Attn: Jim Kahlden
         Telephone Number: (713)960-8870
         Telecopier Number: (713)960-8801

         Beta Oil & Gas, Inc.
         901 Dove Street, Suite 230
         Newport Beach, CA 92660
         Attn: Steve Antry
         Telephone Number: (714)752-5212
         Telecopier Number: (714)752-5757

         Pease Oil and Gas Company
         751 Horizon Court, Suite 203
         P. O. Box 60219
         Grand Junction, CO 81506-8758
         Attn: Willard Pease, Jr.
         Telephone Number: (970)245-5917
         Telecopier Number: (970)243-8840

Each Party  shall  have the right upon  giving  thirty  (30) days prior  written
notice to the other  Parties,  in the  manner  herein  provided,  to change  its
address and telecopier number for the purpose of notice.

         7.15 Transfers Subject to this Agreement. Any sale, agreement, transfer
or other disposition of an interest in the Contract Lands, however accomplished,
either voluntarily or involuntarily, by operations of law or otherwise, shall be
subject  to the  terms of this  Agreement.  Any  instruments  which  convey  any
interest in the Contract Lands shall be made expressly subject to the Agreement.

         7.16   Counterparts.   This  agreement  may  be  executed  in  multiple
counterparts, all of which when taken together shall constitute one and the same
agreement.

         7.17  Public  Announcements.  Each Party  hereto  agrees  that prior to
making any public  announcement  or statement  with  respect to the  transaction
contemplated  in  this  Agreement,  the  Party  desiring  to  make  such  public
announcement  or  statement  shall  consult  with the other  Parties  hereto and
exercise  their  best  efforts  to (i)  agree  upon the  text of a joint  public
announcement or statement to be made by the Parties, (ii) obtain approval of the
other Parties hereto to the extent of a public  announcement  or statement to be
made  solely  by one of the  Parties,  as the  case  may be.  Approval  shall be
requested  pursuant  to  Article  7.14  hereof,  and any  such  announcement  or
statement  shall be deemed  approved  if no reply to the  contrary  is  received
within  twenty-four  (24) hours  (Saturdays,  Sundays and federal legal holidays
excluded) after receipt of such request by the other Parties.  Nothing contained
in this paragraph  shall be construed to require any Party to obtain approval of
the other Parties hereto to disclose information with respect to the transaction
contemplated by this Agreement to any  governmental  body to the extent required
by applicable law or by any applicable rules.

         7.18  Expenses.  Except as  specified  herein  and as the  Parties  may
otherwise  agree,  each  Party  shall be  solely  responsible  for all  expenses
incurred by it in connection with any and all transactions that are contemplated
by this Agreement.

         7.19 Force Majeure.  Should any Party be prevented,  wholly or in part,
from complying with any express or implied  obligation of this Agreement  (other
than the  obligation to make money  payments),  from  conducting  any operations
provided  for under this  Agreement,  including by way of  illustration  but not
limitation,  the conducting of the 3-D Seismic  Operations by reason of scarcity
of or inability to obtain or to use labor, water,  equipment or materials in the
open  market or  transportation  thereof fro any cause  (other  than  financial)
beyond the control of such Party, or operation of "Force  Majeure,  any State or
Federal law or any order, ruling or regulation of governmental  authority,  then
while so prevented,  such Party's  obligation  to comply with such  provision or
obligation shall be suspended,  and such Party shall not be liable in damages or
otherwise to the other  Parties for failure to comply  therewith,  provided that
the Party claiming  suspension shall give written notice and full particulars of
the reason of such  inability to perform its  obligations  to the other  Parties
within thirty (30) days after the occurrence of the cause relied on by the Party
claiming suspension.

         7.20  Arbitration.  The Parties agree that any and all disputes arising
under or relating to this Agreement shall be referred to arbitration pursuant to
the commercial  rules of arbitration  of the American  Arbitration  Association.
Venue for such arbitration shall be Houston, Texas USA.


IN WITNESS WHEREOF, this agreement is executed on the date first above written.


                                           TAC Resources, Inc.



                                            By:________________________________
                                                  Bill Bishop, President





                                            Parallel Petroleum Corporation


                                             By:_______________________________
                                                  Larry C. Oldham, President



                                             Unit Petroleum Company



                                             By:_______________________________
                                      Phillip M. Keeley, Sr., Sr. Vice-President



                                             Beta Oil & Gas, Inc.


                                            By:________________________________
                                                 Steve Antry, President



                                             Pease Oil and Gas Company



                                            By:________________________________
                                                  Willard Pease, Jr., President