EMPLOYMENT AGREEMENT

         THIS  AGREEMENT is  effective  as of December 27, 1994,  by and between
Pease Oil and Gas Company, a Nevada corporation ("Corporation"),  and Patrick J.
Duncan ("Employee").

         The Corporation desires to employ the Employee and the Employee desires
to be employed by the  Corporation  upon the terms and  conditions  set forth in
this Agreement.

         The Parties  hereby enter into this  Agreement  (i) setting forth their
mutual promises and understandings  and (ii) Mutually  acknowledging the receipt
and  sufficiency  of  consideration  to enter into this Agreement and the mutual
promises, conditions and understandings set forth below.

                                    ARTICLE I

                     EMPLOYMENT DUTIES AND RESPONSIBILITIES

     Section 1.1.  Employment.  The  Corporation  hereby employs the Employee as
Chief  Financial  Officer.  The Employee  accepts such  employment and agrees to
abide by the  Articles of  Incorporation,  Bylaws and  decisions of the Board of
Directors of the Corporation.

         Section  1.2.  Duties and  Responsibilities.  The  Employee is employed
pursuant to the terms of this Agreement and agrees to render full-time  services
to the Corporation under this Agreement.  The Employee shall perform such duties
as (i) are specified by the Bylaws of the Corporation and (ii) may be determined
and  assigned  to him  from  time to  time  by the  Board  of  Directors  of the
Corporation.  Initially,  Employee shall perform the duties set forth on Exhibit
A~ The Employee may not pursue any other material business activities on his own
behalf  unless the Board of Directors in a formal  written  statement  expressly
authorizes the Employee to do so,  provided that Employee shall be authorized to
continue to manage and operate various  personal and family assets  unrelated to
the business of the Corporation.

         Section 1.3.  Working  Facilities,  The Employee  shall be based in the
Grand Junction,  Colorado  metropolitan area where the Corporation shall provide
reasonable  office  facilities.  The  Employee  agrees to  travel to the  extent
necessary  to perform  his duties  hereunder,  including  travel to the  various
properties and field offices of the Corporation.  The Corporation  shall provide
reasonable  transportation  to  perform  these  duties.  Corporation  agrees  to
provide, at Corporation's cost, adequate  transportation for Employee to perform
his duties in the field and to reimburse Employee for such costs,  subject to an
accounting of such costs by Employee.

         Section 1.4.  Vacations.  The  Employee  shall be entitled to vacations
totaling  at least  three weeks per year.  Each  vacation  shall be taken by the
Employee  over a period  meeting  with the approval of the Board of Directors of
the  Corporation  and no  one  vacation  shall  be so  long  as to  disturb  the
operations of the Corporation.  Should the business of the Corporation  preclude
the  Employee  from taking all vacation  earned  during a year,  then,  with the
consent of the Board of Directors,  the vacation  shall be accrued and available
to be taken by the Employee in subsequent  years. If the Board of Directors does
not consent to such accrual of vacation time,


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the Corporation  shall pay the Employee an amount equal to the number of days of
unused vacation times the Employee's equivalent daily compensation. Employee may
accrue a maximum of 20 unused vacation days per year.

Section 1.5. Expenses.

          A. Employee  Reimbursed for Expenses.  During the period of employment
pursuant to this  Agreement,  the Employee  will be  reimbursed  for  reasonable
expenses  incurred for the benefit of the  Corporation  in  accordance  with the
general  policy  of  the  Corporation  as  adopted  from  time  to  time  by the
Corporation's  Board of Directors,  and specifically  approved beforehand by the
Board of Directors.  Those reimbursable expenses shall include, but shall not be
limited to, entertainment and promotional expenses, transportation expenses, and
the expenses of membership  in certain civic groups and business  organizations.
Any other reimbursable expenses shall be set forth on Exhibit B.

          B. Additional Expenses. In addition to such reimbursable expenses, the
Employee may incur in the course of the  employment by the  Corporation  certain
other necessary  expenses of the business which the Employee will be required to
pay  personally  but  which  the  Corporation  shall be under no  obligation  to
reimburse or otherwise compensate the Employee,  including,  but not limited to,
the cost of  maintaining  office  facilities in the  Employee's  home or similar
items of reasonable and necessary expense incurred by the Employee in the course
of employment.  However,  nothing in this Section shall prevent the  Corporation
from  assuming to pay or  reimbursing  the  Employee for any such expense if the
Board of Directors so determines.

          C. Employee Shall Account for Expenses to Corporation. With respect to
any expenses which are to be reimbursed by the Corporation to the Employee,  the
Employee agrees to make an itemized accounting to the Corporation (1) for proper
accounting  by the  Corporation  and (ii) in detail  sufficient  to entitle  the
Corporation to an income tax deduction for paid items if deductible.

     Section 1.6. Review of Work. The Employee's  performance shall at all times
be subject to review by the Board of Directors, in its sole discretion.

                                   ARTICLE 11

                                  COMPENSATION

     Section  2.1.  Salary.  The  Corporation  shall  pay a base  salary  to the
Employee  during the term of this  Agreement  as  described on Exhibit C of this
Agreement.

          Section 2.2. Death During  Employment.  In the event of the Employee's
death  during  the  term of this  Agreement  the  Corporation  shall  pay to the
Employee's  surviving souse or, if there is no surviving  spouse,  to Employee's
children on a pro-rata basis to each child,  bi~weekly,  the compensation  which
otherwise would be payable to the Employee for a six month period  following the
Employee's death at the rate of compensation described in Exhibit C.

     Section 2.3. Benefits. In addition to all other compensation,  the Employee
shall be entitled to  participate  in any pension  plans,  profit sharing plans,
medical or dental reimbursement


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plans,  group term Or other life  insurance  plans,  medical or  hospitalization
insurance  plans  and  any  other  group  employee  benefit  plan  which  may be
established by the Corporation.  Such participation  shall be in accordance with
the terms of any such plan.  The  Corporation  shall pay  premiums for and shall
include  the  Employee,  his  spouse,  and  dependents  in any major  medical or
hospitalization  insurance program established or utilized by the Corporation on
behalf of its executive officers if requested to do so by Employee.

          Section 2.4. Life and Disability Insurance. The Corporation may obtain
for its own benefit such  amounts of key  executive  term life  insurance on the
life of the Employee as it may deem necessary or advisable. The proceeds of this
may be used to pay  Corporation  obligations  under Sections 2.2 and 3.6 of this
contract; but the Corporation's obligations thereunder shall be absolute.

                                   ARTICLE III

                       TERM OF EMPLOYMENT AND TERMINATION

     Section 3.1.  Term.  This  Agreement  shall be in effect for a period until
termination in accordance with this Article III (the "Term").

          Section 3.2.  Termination by the Corporation  Without Cause. The Board
of Directors,  without  cause,  may terminate this Agreement at any time upon 30
days written  notice to the Employee,  unless  Section 3.7 applies in which case
this  Section  3.2  shall be  inapplicable.  In such  event,  the  Employee,  if
requested  by the Board of  Directors,  shall  continue  to render the  services
required under this Agreement for 30 days. Upon  termination  under this Section
3.2,  except as provided in Section 3.7, the Employee  shall continue to be paid
compensation  as set forth in Exhibit C of this  Agreement up to a date which is
12 months after the Employee  receives  written notice of termination,  plus all
outstanding  stock  options  will be extended for a period of two years from the
date of termination.

          Section 3.3.  Termination by the Employee Without Cause. The Employee,
without  cause,  may terminate this Agreement upon 90 days written notice to the
Corporation. In such event, the Employee shall, if requested by the Corporation,
continue  to render  the  services  required  under this  Agreement  to the date
identified in the Employee's  written notice.  The Employee shall continue to be
paid  compensation  at the rate set forth in Exhibit C of this  Agreement for at
least 30 days and thereafter  through the earlier of (i) the date  identified in
the  Employee's  written  notice or (ii) the date  through  which  the  Employee
furnishes  services at the request of the  Corporation,  and no further payments
shall be made by the Corporation unless agreed to by the Board of Directors.

          Section  3.4.   Termination  by  the  Corporation   With  Cause.   The
Corporation  may terminate the Employee's  employment for cause,  which shall be
limited to the  following:  (a) the  Employee's  knowing and willful or reckless
commission of an act of gross  misconduct which the Employee knows or reasonably
should have known at the time would be injurious to the Corporation;  or (b) the
Employee's  refusal  to devote  substantially  all his time and  efforts  to his
duties  under this  Agreement  after the Board of  Directors  has  notified  the
Employee in writing of


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his noncompliance; or (c) the Employee's continued refusal, after written notice
from the Board of Directors to follow the specific  instructions of the Board of
Directors.  Termination  pursuant to this subsection  shall result in no further
compensation  being due or payable to the Employee  hereunder from and as of the
date of such termination.

     Section 3.5.  Termination Upon Death of Employee.   Subject to Section 2.2
of this  Agreement,  this  Agreement  shall be  terminated  in the  event of the
Employee's death.

          Section 3.6. Termination Upon Disability of Employee.  The Corporation
may  terminate  the  Employee's  employment  if,  during the Term,  the Employee
becomes physically or mentally disabled,  whether totally or partially,  so that
the  Employee  is unable  substantially  to  perform  his  services  under  this
Agreement (i) for a period of two consecutive months or (ii) for shorter periods
aggregating four months during any twelve month period, by written notice to the
Employee. Notwithstanding any such disability, the Corporation shall continue to
pay the Employee the greater of (a) his full salary up to and including the date
of such termination and for six months thereafter, or (b) any amounts payable to
Employee under any disability or similar insurance.

          Section 3.7.  Termination Upon Change of Control.  Notwithstanding the
provisions of Section 3.2, if the Employee is terminated as a direct or indirect
result of either  (i)  actions  taken by the Board of  Directors  following  the
replacement  of at least  40% of the  members  of the  Board of  Directors  with
persons who are not also  employees  of the  Corporation  in any 15 month period
which were opposed by a majority of the directors before the replacement or (ii)
a  shareholder  or group  of  shareholders  or a  person  acting  on  behalf  of
shareholders  increasing his, hers, their or its ownership of the  Corporation's
outstanding  stock  by  more  than  10%  within  24  months  of  the  Employee's
termination,  then the Employee shall, as of the date of termination, be paid in
a lump sum an amount  equal to two  years  annual  compensation  at the rate set
forth in  Exhibit C of this  Agreement  as then in effect,  and all  outstanding
options will be extended for a period of two years from the date of termination.
Upon  such  a  change  of  control,  at  Employee's  option,  Corporation  shall
immediately  repurchase any outstanding shares of the Corporation's  stock which
are held by  Employee  at the per share  price equal to the greater of the price
paid per share by Employee or the fair market  value of the stock at the date of
termination.  If the  Corporation  does  not pay the  amount  specified  by this
Section 3.7 on a timely  basis,  the unpaid  amount  shall bear  interest at the
greater of 10% per annum or the prime rate at Colorado National Bank on the date
of such  termination  until  paid and the  Corporation  shall  pay all costs and
expenses,  including attorney's fees, incurred by the Employee in collecting all
amounts owed under this Section 3.7.

                                   ARTICLE IV

                            DISCLOSURE OF INFORMATION

          Section 4.1. Definitions.

     4. 1. 1. As used  herein,  the term  "proprietary  information"  shall mean
technical  information  and know-how  concerning the  Corporation's  oil and gas
exploration,  development,  production  and  servicing  business and its related
equipment, books, maps and records developed


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by or otherwise owned or controlled by the Corporation.

         4.1.2.  As used  herein,  the  term  "trade  secrets"  shall  mean  any
proprietary  information  and  any  other  non-public  information  used  by the
Corporation,   including  such  matters  as  geologic  records,  maps,  surveys,
documents  evidencing  interests  in  real  property,   patented  or  unpatented
technology,  supplier information, books, processes, concepts, methods, formulae
or technique  know-how,  customer or vendor lists or  information or development
plans or strategy,  owned or controlled by the Corporation or otherwise  subject
to an obligation or intent of the  Corporation  to maintain the  confidentiality
thereof  which is of a  proprietary  or  secret  nature  and  which is or may be
applicable  to, or related to the  business,  equipment or services,  present or
future,  of the  Corporation  or the  oil and gas  exploration  and  development
business of the Corporation, or the contractual relationships of the Corporation
with customers or clients.

         4.1.3. As used herein,  the term "document" shall mean any data, notes,
drafts, manuals, blueprints, maps, notebooks,  reports,  photographs,  drawings,
sketches or other records,  in any tangible form whatsoever,  whether originals,
copies, reproductions, or excerpts, produced or obtained from the Corporation by
the Employee or any other  representative  of the  Corporation  which relates to
trade secrets of the Corporation.

         4.1.4. As used herein, the term "Corporation  invention" shall mean any
invention,  discovery,  improvement,  or trade secret, whether patentable or not
and whether or not reduced to  practice,  conceived  or learned by the  Employee
either alone or Jointly with others,  while employed by the  Corporation,  which
relates to or results from the actual or  anticipated  investigation,  research,
development,  or production of the  Corporation,  or which results to any extent
from use of the Corporation's facilities.

         4.1.5. As used herein, the term  "Corporation"  shall mean not only the
Corporation as first defined above, but also the Corporation's  subsidiaries and
all affiliates of the Corporation.

          Section 4.2.  Employee Shall Not Disclose  Proprietary  Information or
Trade  Secrets.   The  Employee   recognizes  that  the  trade  secrets  of  the
Corporation,  as they may exist from time to time,  are a valuable,  special and
unique asset of the  Corporation.  The Employee will not, during or for a period
of 24 months after termination of the Employee's  employment  relationship under
this Agreement,  disclose or confirm the Corporation's trade secrets or any part
thereof to any person,  firm,  corporation,  association or other entity for any
reason or purpose whatsoever,  without the prior written  authorization to do so
from the Corporation.

          Further,  all documents  shall be property of the  Corporation and the
Employee shall not remove these  documents upon  termination of employment  with
the Corporation except pursuant to a specific  authorization in writing from the
Board of Directors  of the  Corporation.  The Employee  agrees that any document
produced or obtained by the Employee while employed by the Corporation  shall be
the sole and  exclusive  property of the  Corporation.  The  Employee  agrees to
return any such document to the  Corporation  immediately  upon  termination  of
employment with the Corporation, or upon request of the Corporation.

     In no event shall the Employee  copy or remove any documents of any person,
company or


<PAGE>



association  with whom the Employee  did not directly  work while an Employee of
the Corpora tion.

          The Employee  recognizes and acknowledges that much of the information
and knowledge  which he has received or will receive by virtue of his employment
with the  Corporation  is or will be proprietary  information  and trade secrets
which  have  unique,   special  value  to  the   successful   operation  of  the
Corporation's  business.  The Employee  agrees not to disclose  any  proprietary
information  or trade  secrets to any other person for any purpose,  for his own
direct or  indirect  benefit or the benefit of any other  employer or  affiliate
during  the term of this  Agreement  or for a  period  of 24  months  thereafter
without the prior written consent of the Corporation.

          The aforesaid  noncompetition  covenant  shall remain in any effect at
all times  while the  Employee  is in the  employ of the  Corporation  and for a
period of 24 months after  termination of the Employee's  relationship  with the
Corporation in any capacity whatsoever, regardless of the reason for termination
or cessation of the Employee's relationship.  The aforesaid covenant is intended
to be a reasonable  restriction  on the Employee.  If all, or any portion of the
covenant is held unreasonable or unenforceable by a court or agency having valid
Jurisdiction,  the Employee  expressly agrees to be bound by any lesser covenant
subsumed  within  the terms of such  covenant  that  imposes  the  maximum  duty
permitted by law, as if the  resulting  covenant were  separately  stated in and
made apart of this Article IV.

          Section 4.3.  Duty of Loyalty;  Conflicts of Interest.  'The  Employee
agrees that he will not, while employed by the  Corporation  and for a period of
24 months  thereafter,  be an employee or  consultant,  or assist in any way, or
work directly or indirectly on behalf of, any person, corporation, firm or other
entity  engaged in, or  proposing  to engage in, a line of business  which would
directly compete or conflict with the Corporation's business,  without the prior
express  written  consent of the  Corporation.  Notwithstanding  the  foregoing,
however,  the Corporation and the Employee acknowledge that at the present time,
the  Employee  individually  owns  various  interests  in  certain  oil  and gas
properties  in which  the  Corporation  also  owns  interests  and/or  which are
operated by the Corporation;  and the parties agree that in such  circumstances,
where  the Board of  Directors  is fully  informed  about  and  approves  of the
Employee's individual interest in a business opportunity of the Corporation,  it
shall not be  considered a violation  of this  Section 4.3. The Employee  agrees
that  he will  not use any  assets  of the  Corporation  for his own  individual
projects  and  that  he  will  not  use  any  proprietary   information  to  the
disadvantage of the Corporation.  The Employee agrees that he will not interfere
with the right of the  Corporation to do business with any person,  corporation,
firm or other entity.

          Section 4.4.  Enforcement.  The Employee  acknowledges  that  monetary
damages would not adequately or fairly  compensate the Corporation for breach of
any of the  obligations  of the Employee  under Article IV of this Agreement and
agrees  that in the event of any breach or  threatened  breach  the  Corporation
shall  be  entitled  to seek  appropriate  injunctive  relief  from a  court  of
competent jurisdiction,  in addition to any other relief or damages which may be
available.






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                                    ARTICLE V

                                  MISCELLANEOUS

          Section 5.1.  Colorado Law. It is the intention of the parties  hereto
that this  Agreement  and its  performance  hereunder be construed in accordance
with and pursuant to the laws of the state of Colorado and that,  in any action,
special proceedings,  or other proceeding that may be brought arising out of, in
connection  with,  or by  reason  of this  Agreement,  the law of the  state  of
Colorado  shall be  applicable  and shall govern to the  exclusion of any forum,
without regard to the Jurisdiction in which any action or special proceeding may
be instituted.

     Section 5.2. No Waiver. No provision of this Agreement may be waived except
by an agreement in writing  signed by the waiving party. A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.

          Section 5.3.  Amendment.  This  Agreement  may be amended,  altered or
revoked  at any time,  in whole or in part,  by filing  with  this  Agreement  a
written instrument setting forth such changes, signed by all of the parties.

          Section 5.4. Effect of Agreement. The terms of this Agreement shall be
binding upon and inure to the benefit of the Employee  and the  Corporation  and
their heirs,  personal  representa  tives,  successors and assigns to the extent
that any such  benefits  survive  or may be  assigned  under  the  terms of this
Agreement.

          Section 5.5.  Construction.  Throughout  this  Agreement  the singular
shall  include the  plural,  the plural  shall  include  the  singular,  and the
masculine  and neuter  shall  include  the  feminine,  wherever  the  context so
requires.

     Section  5.6.  Text to Control.  The  headings of articles and sections are
included  solely for  convenience  or reference.  ff any  conflicts  between any
headings and the text of this Agreement exists, the text shall control.

         Section  5.7.  Severability.  If any  provision  of this  Agreement  is
declared by any court of  competent  jurisdiction  to be invalid for any reason,
such invalidity shall not affect the remaining provisions. On the contrary, such
remaining  provisions  shall be fully  severable,  and this  Agreement  shall be
construed and enforced as if such invalid  provisions never had been inserted in
the Agreement.

         Section 5.8. Complete  Agreement.  This Agreement contains the complete
agreement  concerning the employment  arrangement between the parties and shall,
as of the  effective  date hereto,  supersede all other  agreements  between the
parties,  whether oral or written.  The parties acknowledge that neither of them
has  made  any  representations  with  respect  to the  subject  matter  of this
Agreement,   including   the  execution   and  delivery   hereof,   except  such
representations  as are specifically  set forth herein,  and each of the parties
hereto  acknowledges  that he or it has  relied  on his or its own  judgment  in
entering into this Agreement.  The parties hereto further  acknowledge  that any
statement or representation that may have heretofore been made by either of them
to the


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other are of no effect and that neither of them has relied thereon in connection
with his or its dealings with the other.

This Agreement is effective as of the date first above written.

   BOARD OF DIRECTORS:             PEASE OIL AND GAS COMPANY,
                                   a Nevada corporation
                                   By:
   EMPLOYEE:

                                       Patrick J. Duncan




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EXHIBIT A

OUTLINE OF DUTIES

Position Title:                  Chief Financial Officer
Reports to:                      President and Board of Directors
Duties of Employee:              As determined from time to time by the
                                 President and/or Board of Directors

EXHIBIT B

                   ADDITIONAL REIMBURSABLE EXPENSES

1.       40 hours of continuing professional education per year
2.       P ro f e s s i o nal Association dues (AICPA and CSCPA)
3.       Bookcliff Country Club Monthly Dues
4.       Other expenses as determined from time to time by the President  and/or
         the Board of Directors

EXHIBIT C

OUTLINE OF COMPENSATION

The Corporation  shall pay the Employee a base salary of not less than Sixty-Two
Thousand  Dollars  ($62,000)  per year or such larger amount as is determined by
the Compensation Committee of the Board of Directors, payable bi-weekly.