EXHIBIT 10.8



                               EXCHANGE AGREEMENT

                                 by and between

                               EXTERRA ENERGY INC.
                                    as Buyer

                                       and

                          ROYALCO OIL & GAS CORPORATION
                                    as Seller


                              Dated: March 13, 2009

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                               EXCHANGE AGREEMENT

         THIS EXCHANGE  AGREEMENT  (this  "Agreement")  is made this 13th day of
March,  2009 (the "Effective  Date"),  by and between  EXTERRA  ENERGY,  INC., a
Nevada  corporation  ("Exterra"),  and  ROYALCO OIL & GAS  CORPORATION,  a Texas
corporation ("Royalco").

                                    Recitals:

         WHEREAS,  Exterra  is an  oil  and  gas  acquisition,  exploration  and
development company in the central and northern areas of Texas;

         WHEREAS, Royalco is an oil and gas company focusing on the acquisition,
development and operation of various oil and gas wells the majority of which are
in central Texas and the surrounding areas (the "Business");

         WHEREAS,  in 2007,  Stockhome Trading Corporation leased to Triad Rovan
Services LP ("TRS"),  under a 99 year lease (the  "Lease"),  the rights to drill
and maintain a saltwater  disposal well (the "Well") on  approximately  thirteen
(13) acres of land situated in Johnson County, Texas (the "Property"),  in order
to dispose of salt water  through the Well,  and to reproduce  or process  fresh
water for resale;

         WHEREAS, in 2008, TRS conveyed 50% of all of its rights and interest in
the Lease to Royalco under that certain  Service  Agreement dated April 18, 2008
(the "Services Agreement") and Royalco began operation of the Well; and

         WHEREAS, Exterra and Royalco now desire to exchange with each other, on
the terms and  conditions  set forth in this  Agreement,  the Shares (as defined
herein), on one hand, with the right to receive consideration from Royalco in an
amount equivalent to 25% of the operating revenues actually received by Royalco,
as determined on the cash basis of accounting, in connection with the Lease (the
"Profits Interest"), on the other hand.

                                    Agreement

         NOW  THEREFORE,  In  consideration  of the  foregoing  recitals and the
respective  covenants,  agreements,  representations  and  warranties  contained
herein, the parties, intending to be legally bound, agree as follows:

                                   ARTICLE I.
                          EXCHANGE OF PROFITS INTEREST
                                   AND SHARES

         1.1 Exchange.  Subject to the terms and  conditions of this  Agreement,
and in reliance upon the  representations,  warranties  and covenants  contained
herein,  Royalco and Exterra hereby exchange the Profits Interest for the Shares
on the Effective  Date, such that Royalco hereby sells and transfers the Profits
Interests  to Exterra  and  Exterra  hereby  sells and  transfers  the Shares to
Royalco and each hereby acquires and accepts the other (the "Transaction").  For
purposes of this Agreement,  the term "Shares" means,  44,343,451  shares of its
common  stock,  $0.001 par value per share of  Exterra  (the  "Shares").  On the
Effective  Date,  Exterra  will  deliver  to  Royalco  original  executed  stock
certificate(s)  representing the Shares, and such other documents as Royalco may
reasonably  request in order to consummate the  Transaction.  Similarly,  on the
Effective Date, Royalco will deliver, or cause to be delivered,  to Exterra such

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documents as Exterra may reasonably  request to evidence  Exterra's right to the
Profits Interest.  Exterra acknowledges and agrees that no interests,  rights or
otherwise in or to the Services Agreement, the Lease or the Well are transferred
by this  Section  1.1 and that the sole right  acquired  by  Exterra  under this
Section 1.1 is the Profits Interests.

         1.2 Option. Beginning on the Settlement Date, and continuing thereafter
for a period of one-hundred eighty days (180) (the "Option Period"), Exterra has
the right (the "Option"), but not the obligation,  to purchase from Royalco, and
Royalco (if  exercised  by  Exterra),  has the  obligation  to sell,  assign and
transfer,  upon  delivery of a written  notice by Exterra to Royalco  during the
Option Period, stating its intent to exercise the Option (the "Notice"),  25% of
all of Royalco's  right,  title and interest in and to the Lease,  including but
not limited to those rights of Royalco under the Services Agreement (the "Option
Rights").  The "Settlement Date" is the date on which Royalco fully and finally,
including all potential  appeals,  settles its current litigation styled Royalco
Oil & Gas Corporation v. Stockhome  Trading  Corporation,  including all counter
claims,   cross  claims  and  derivative  claims  (collectively  the  "Stockhome
Dispute"),  such that the settlement  provides that Royalco retain or be awarded
ongoing  development or management rights, or both, with respect to the Well and
the Lease.  Royalco must provide  written notice to Exterra within five (5) days
of the  Settlement  Date that such  matter is fully  and  finally  settled.  The
purchase  price  payable by Exterra to Royalco for the Option  Rights is $100.00
cash,  payable at the time the Notice is delivered  to Royalco.  Royalco may not
voluntarily transfer or assign all or any portion of the Option Rights until the
date  next  following  the end of the  Option  Period.  In the  event  that  the
Stockhome  Dispute does not result in Royalco retaining or being awarded ongoing
development and management  rights in and to the Lease and Well, then the Option
Rights  will be replaced  with  alternative  assets of  Royalco,  having a value
approximately  equivalent  to the value of the  Option  Rights,  as is  mutually
agreeable between Exterra and Royalco.

         1.3 Other  Actions.  Each of the parties  hereto will their  respective
commercially  reasonable efforts to (a) take, or cause to be taken, all actions,
(b) do, or cause to be done,  all  things,  and (c) execute and deliver all such
documents;  instruments  and other  papers,  as in each  case may be  necessary,
proper or advisable under applicable laws, or reasonably required to in order to
carry out the terms and  provisions of this Agreement and to consummate and make
effective the Transaction.

         1.4 Payments and Reports.  Following the Effective  Date,  Royalco will
deliver Profits Interest payments to Exterra on a quarterly basis, within twenty
(20) days  following  the last day of each calendar  quarter,  beginning for the
quarter  ending March 31, 2009.  Each payment will be  accompanied  by a written
report showing the prior quarter's  receipts and expenses in connection with the
Lease and the Well, paid or incurred by Royalco.

                                  ARTICLE II.
                    REPRESENTATIONS AND WARRANTIES BY ROYALCO

         Royalco  hereby  represents and warrants to Exterra as of the Effective
Date, the following:

         2.1  Organization of Royalco.  Royalco is a corporation duly organized,
validly  existing and in good standing  under the laws of the state of Texas and
is duly qualified or licensed to do business in each  jurisdiction  in which the
nature and scope of the Business  requires such  qualification.  Royalco has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on the Business as it is now being  conducted.

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         2.2  Authorization;  Validity of  Agreement.  Royalco has the requisite
capacity and  authority to execute,  delivery and perform this  Agreement and to
consummate the  Transaction.  This Agreement has been duly executed,  authorized
and  delivered  by Royalco  and is a valid and  binding  obligation  of Royalco,
enforceable  against  Royalco  in  accordance  with its  terms,  except  as such
enforceability   may  be  subject  to  or  limited  by  applicable   bankruptcy,
insolvency,  reorganization  or other similar laws affecting the  enforcement of
creditors'  rights  generally.  Until such time as Exterra  exercise the Option,
Exterra  disclaims  any direct  interest in the Lease or the Well,  and its sole
rights will be to receive payment of the Profits Interest.

         2.3 Independent  Investigation.  Royalco hereby represents and warrants
to  Exterra  that:  (a)  Royalco  has had an  opportunity  to  review  all  such
information  about Exterra and the Shares as it desires and to ask questions and
receive  answers  about  Exterra,  and that (b) except as set forth  herein,  no
warranties  or  representations  have been made by Exterra  with  respect to the
value of the Shares, and the actual value of the Shares may be more or less than
the Profits  Interest and Option being  transferred to Exterra  pursuant to this
Agreement.

         2.4  Litigation.  To  Royalco's  Knowledge,  other than as set forth on
Schedule 2.4,  there is no action,  suit,  investigation  or  proceeding  filed,
initiated or pending,  involving Royalco,  that in any way may affect Royalco or
the Transaction,  by or before any Governmental  Entity or arbitration  panel or
any other Person.

         2.5 Taxes.  Royalco,  to its  Knowledge,  has (a) duly and timely filed
with the  Internal  Revenue  Service  or other  applicable  Governmental  Entity
(collectively, "Taxing Authorities") all Tax Returns (as defined below) that are
required  to be filed by it or that  include or relate to  Royalco,  its income,
assets or business,  which Tax Returns are true,  correct and complete,  and (b)
duly and timely paid in full,  or recorded a provision  for such  payment on the
books and records of Royalco,  as applicable,  for the payment of, all Taxes (as
defined below) for which Royalco is or may be liable. There is no Lien for Taxes
upon any property of Royalco.

         2.6 No Brokers.  Exterra will not incur any liability for any financial
advisory fees, brokerage fees, commissions or finders' fees due or claimed to be
due to any broker, finder, agent, representative,  consultant, or similar person
retained by or whose claims arise from contact with Royalco or any affiliates of
Royalco, as a result of the Transaction.

                                  ARTICLE III.
                    REPRESENTATIONS AND WARRANTIES OF EXTERRA

         Exterra  represents  and warrants to Royalco as of the Effective  Date,
the following:

         3.1  Organization of Exterra.  Exterra is a corporation duly organized,
validly  existing and in good standing under the laws of the state of Nevada and
is duly qualified or licensed to do business in each  jurisdiction  in which the
nature and scope of the business  requires such  qualification.  Exterra has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted.

         3.2  Authorization;  Validity of  Agreement.  Exterra has the requisite
corporate power and authority to execute, deliver and perform this Agreement and
to  consummate  the  transactions  contemplated  hereby.  No other  proceedings,
consents  or actions on the part of  Exterra  are  necessary  to  authorize  the
execution,  delivery  and  performance  of this  Agreement  by  Exterra  and the
consummation  of the  Transaction.  This  Agreement  has been duly  executed and
delivered by Exterra and, assuming due authorization,  execution and delivery of

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this  Agreement  by  Royalco,  is a valid  and  binding  obligation  of  Exterra
enforceable  against  Exterra  in  accordance  with its  terms,  except  as such
enforceability   may  be  subject  to  or  limited  by  applicable   bankruptcy,
insolvency,  reorganization,  or other similar laws, now or hereafter in effect,
affecting the enforcement of creditors' rights generally.

         3.3 No Violations;  Consents and Approvals. The execution, delivery and
performance  of this  Agreement  by Exterra does not,  and the  consummation  by
Exterra of the  transactions  contemplated  hereby  will not,  (a)  violate  any
provision of the certificated of formation or bylaws of Exterra, (b) result in a
violation  or breach of, or  constitute  (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination,  cancellation
or  acceleration)  under,  any of the terms,  conditions  or  provisions  of any
material  note,  bond,  mortgage,   indenture,   guarantee,  other  evidence  of
indebtedness,  license, contract, agreement or other instrument to which Exterra
is a party or by which  Exterra or any of its  properties or assets may be bound
or otherwise  subject,  or (c) violate any order,  writ,  judgment,  injunction,
decree,  law, statute,  rule or regulation  applicable to Exterra, or any of its
properties or assets.

         3.4 Well and Lease.  Exterra  acknowledges  and agrees  that  except as
expressly stated in this Agreement,  the Profits Interests and Option Rights are
being sold and transferred to Exterra "as-is" and "with all faults," and Royalco
makes no  representations,  warranties or covenants  regarding the operations or
conditions of the Well, the Lease, the Property;  the Stockhome Dispute,  or the
Profits Interests. Exterra has had an opportunity to review all such information
about Royalco as it desires and to ask questions and receive  answers of Royalco
and is satisfied with its responses. Exterra has had an opportunity discuss this
Agreement   with  an  attorney  of  Exterra's   selection.   No   warranties  or
representations have been made by Royalco with respect to the value of the Well,
the Lease or the Profits  Interests and the actual value of the Profits Interest
and  the  Option  may be more  or  less  than  the  value  of the  Shares  being
transferred to Royalco pursuant to this Agreement. Exterra is relying on its own
evaluation of the value of the Profits Interests, as well as the underlying Well
and  Lease,  and the costs of  completion  of each.  Specifically,  Exterra  has
relying on that certain  third-party  correspondence  of  Caruthers  Consulting,
attached to this  Agreement  as Exhibit A (the  "Caruthers  Estimate").  Exterra
acknowledges and agrees that Royalco has made no  representations  regarding the
accuracy of the  Caruthers  Estimate and that any weight placed on the relevance
and value of the Caruthers  Estimate is  undertaken  at Exterra's  sole risk and
discretion.

         3.5  Capitalization.  The authorized capital stock of buyer consists of
75,000,000 shares of common stock .001 par value per share (the "Common Stock"),
of which 30,656,549  shares of Common Stock are issued and outstanding  prior to
giving  effect to the  Transaction.  There are no options,  warrants,  preferred
shares or another other securities convertible into Common Stock granted, issued
or promised.  All of the outstanding shares of Common Stock of Exterra have been
validly  issued,  and are fully paid and  nonassessable  and free of  preemptive
rights.  No shares of capital  stock of Exterra  were issued in violation of any
preemptive  rights,  rights of first  refusal  or  similar  rights.  None of the
outstanding  equity  securities  or other  securities  of Exterra  was issued in
violation of the Securities Act.

         3.6 Shares. When the Transaction is consummated  according to the terms
and conditions described in this Agreement, all right, title and interest in and
to the Shares will vest in ROYALCO and ROYALCO will receive good and  marketable
title to the Shares without lien,  claim or encumbrance,  except as set forth in
the Securities Act and under  applicable  state or federal  securities laws, and
the  Shares  will  be  duly   authorized,   validly   issued,   fully  paid  and
nonassessable.  Exterra will file, on a timely basis, all required  Exchange Act
reports,  and comply with the  reporting  requirements  of Section 13 or Section
15(d) of the Exchange Act or Exterra will maintain current public information at
all times as is required under Rule 144(c) of the Securities Act.

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         3.7  Public  Filings / Absence  of  Certain  Changes.  All  information
contained in those reports and filings made by Exterra with the  Securities  and
Exchange  Commission  were true and  correct  when made.  Except as set forth on
Schedule  3.7 hereto,  since May 31,  2008,  Exterra has not:  (a)  suffered any
Material  Adverse  Effect in its financial  condition,  assets,  liabilities  or
business;  (b)  contracted  for or paid any  capital  expenditure  in  excess of
$50,000 or contracted for or paid more than $50,000 for all capital expenditures
to any Person or any Affiliate of any such Person; (c) incurred any indebtedness
for borrowed money, issued or sold any debt securities,  or maintained the aging
of its accounts  payable other than (i) in the ordinary  course of it's business
consistent  with prior  practices,  (ii) in  connection  with the  purchase of a
capital asset for which all of the proceeds of such borrowed money were applied,
or (iii) agreed to do any of the foregoing; (d) mortgaged,  pledged or subjected
to any Lien,  lease, or other charge or encumbrance any of Exterra's  properties
or assets  or agreed to do any of the  foregoing;  (e)  suffered  any  damage or
destruction to or loss of any assets  (whether or not covered by insurance) that
could or does  materially  and adversely  affect its  business;  (f) acquired or
disposed of any assets or incurred any  liabilities  or obligations or agreed to
do any of the  foregoing,  except in the ordinary  course of Exterra's  business
consistent with prior practice;  (g) accelerated any item of income or gain into
the period prior to the Effective  Date, or deferred any item of expense or loss
into the period after the Effective  Date, and such  acceleration or deferral is
not made in the ordinary course of Exterra's business  consistent with Exterra's
treatment of such items in prior  periods;  (h) lost or terminated any full-time
employees,  consultants,  agents,  representatives,  customers or suppliers that
could or does  materially  and  adversely  affect its  business  or assets;  (i)
increased  or agreed to increase  the  compensation  of any  consultant,  agent,
representative  or  employee,  except in the  ordinary  course  of the  business
consistent  with prior  practice;  (j) formed or  acquired  or  disposed  of any
interest in any  corporation,  partnership,  joint venture or other Person;  (k)
entered into any employment,  compensation,  consulting or collective bargaining
agreement with any Person or group, or modified or amended the terms of any such
existing  agreement or agreed to do any of the  foregoing;  or (l) been notified
that it is a responsible  party or potentially  responsible  party in connection
with any federal or state  "Superfund" site or with respect to any environmental
law, liable or responsible (or potentially  liable or responsible) for clean up,
capping, or remediation of an environmental matters.

         3.8 Litigation.  There is no action, suit, or proceeding pending or, to
the  Knowledge  of  Exterra,  threatened,  which in any way  involves or affects
Exterra, by or before any court, governmental entity or arbitration panel or any
other Person.

         3.9 Ability to  Evaluate  Investment.  Exterra is able to evaluate  the
merits and risks of an investment  in the Profits  Interest and the Option Right
by reason of Exterra's  knowledge and  experience in similar  business  matters.
Exterra  acknowledges receipt of (1) a copy of Plaintiff's Original Petition and
Application for Temporary  Injunction,  and related pleadings in connection with
that certain disputed matter styled:  Royalco Oil & Gas Corporation v. Stockhome
Trading  Corporation;  and (2) a copy of a letter addressed to Mr. Robert Royal,
in his status as the CEO of Royalco,  from K. Lawson Pedigo, of Miller,  Keffer,
Bullock,  Pedigo,  LLC,  evaluating  Royalco's  legal  position in the Stockhome
Dispute.  Exterra  acknowledges and agrees that Royalco makes no representations
or warranties  regarding the likely outcome of the Stockhome Dispute and that an
unfavorable  result  could  have a material  adverse  effect on the value of the
Profits Interests and the Option Rights.

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         3.10 Broker or Finders  Fees.  Royalco will not incur any liability for
any financial advisory fees, brokerage fees, commissions or finders' fees due or
claimed to be due to any broker, finder, agent,  representative,  consultant, or
similar person retained by or whose claims arise from contact with a Exterra, or
any affiliates of Exterra, as a result of the closing of the Transaction.

                                  ARTICLE IV.
                            INDEMNIFICATION; REMEDIES

         4.1   Survival;   Right  to   Indemnification.   All   representations,
warranties, covenants and obligations of the parties contained in this Agreement
and in any document or instrument  executed and delivered in connection herewith
will survive the Effective  Date,  regardless of any  investigation  made by the
parties hereto.  This Section 4.1 shall have no effect upon any other obligation
of the parties  hereto,  whether to be performed  before or after the  Effective
Date.  The right to  indemnification,  payment of Damages (as defined in Section
4.2),  or  other  remedy  based on any  representation,  warranty,  covenant  or
obligation  of a  party  hereunder  are  not be  affected  by any  investigation
conducted  with  respect  to, or any  knowledge  acquired  (or  capable of being
acquired) at any time,  whether before or after the Effective Date, with respect
to the accuracy or inaccuracy of or compliance  with,  any such  representation,
warranty, covenant or obligation.

         4.2  Indemnification  by Royalco.  Royalco hereby indemnifies and holds
harmless Exterra and its successors, heirs, assigns, officers, owners, employees
and representatives  (collectively,  the "Exterra Indemnified Persons") for, and
will pay to Exterra  Indemnified  Persons,  the amount of, any loss,  liability,
claim,  damage  (including,  without  limitation,  incidental and  consequential
damages),  cost, expense (including;  without limitation,  interest,  penalties,
costs of  investigation  and defense  and the  reasonable  fees and  expenses of
attorneys and other professional experts) or diminution of value, whether or not
involving a third-party claim (collectively,  "Damages"), directly or indirectly
arising from,  attributable to or in connection with the Stockhome Dispute,  any
representation  or warranty made by Royalco in this Agreement that is, as of the
Effective Date, false or inaccurate, or any breach of, or misrepresentation with
respect to, any such representation or warranty, or any breach by Royalco of any
covenant, agreement or obligation of Royalco contained in this Agreement.

         4.3  Indemnification  by Exterra.  Exterra hereby indemnifies and holds
harmless Royalco and its successors, heirs, assigns, officers, owners, employees
and representatives  (collectively,  the "Royalco Indemnified Persons") for, and
will pay to Royalco Indemnified Persons the amount of, any Damages,  directly or
indirectly   arising  from,   attributable   to  or  in   connection   with  any
representation  or warranty made by Exterra in this Agreement that is, as of the
Effective Date, false or inaccurate, or any breach of, or misrepresentation with
respect to, any such representation or warranty, or any breach by Exterra of any
covenant, agreement or obligation of Exterra contained in this Agreement.

         4.4  Time   Limitations.   Royalco   shall   have  no   liability   for
indemnification  with respect to any  representation  or warranty unless,  on or
before the first (1st) anniversary date of the Effective Date,  Exterra notifies
Royalco of a claim  specifying  the basis  thereof in  reasonable  detail to the
extent then known by Exterra.

         4.5  Limitations  on  Amount.  Royalco  shall  have  no  liability  for
indemnification  with respect to the matters  described in Section 4.2 until the
total  of all  Damages  with  respect  to  such  matters  exceeds  $50,000  (the

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"Deductible  Amount"),  and then only to the  extent  such  indemnified  Damages
exceed  the  Deductible  Amount.  Anything  to  the  contrary   notwithstanding,
Royalco's aggregate liability with respect to Damages may not exceed $500,000.

         4.6 Procedure for Indemnification--Third Party Claims.

             (a) Promptly  after receipt by an  indemnified  party under Section
4.2 or 4.3 of written notice (the "Notice of Claim") of the  commencement of any
action,  suit  or  proceeding  against  it,  or  written  threat  thereof,  such
indemnified  party will, if a claim is to be made against an indemnifying  party
under either of said sections,  as applicable,  give notice to the  indemnifying
party of the  commencement of such action,  suit or proceeding.  The indemnified
party  shall  furnish  to the  indemnifying  party  in  reasonable  detail  such
information   as  the   indemnified   party  may  have  with   respect  to  such
indemnification  claims  (including  copies of any  summons,  complaint or other
pleading  which  may have  been  served  on it and any  written  claim,  demand,
invoice, billing or other document evidencing or assenting the same). Subject to
the limitations set forth in Section 4.4, no failure or delay by the indemnified
party in the performance of the foregoing  shall reduce or otherwise  affect the
obligation of the indemnifying party to indemnify and hold the indemnified party
harmless  except to the extent that such failure or delay shall have  materially
and  adversely  affected the  indemnifying  party's  ability to defend  against,
settle  or  satisfy  any  action,  suit or  proceeding  the  claim for which the
indemnified party is entitled to indemnification hereunder.

             (b) If the claim or demand set forth in the  Notice of Claim  given
by the  indemnified  party is a claim or demand  asserted by a third party,  the
indemnifying  party has  thirty  (30) days  after the Date of Notice of Claim to
notify the  indemnified  party in writing of its  election  to defend such third
party claim or demand on behalf of the indemnified party (the "Notice Period ");
provided,  however, that the indemnified party is authorized to file any motion,
answer or other pleading which it deems  necessary or appropriate to protect its
interests during the Notice Period.  If the indemnifying  party elects to defend
such third party claim or demand,  the indemnified party shall make available to
the indemnifying party and its agents and  representatives all records and other
materials which are reasonably required in the defense of such third party claim
or demand and shall  otherwise  cooperate  (at the sole cost and  expense of the
indemnifying  party)  with,  and  assist  (at the sole cost and  expense  of the
indemnifying  party) the indemnifying  party in the defense of, such third party
claim or demand, and so long as the indemnifying  party is diligently  defending
such third  party  claim in good  faith,  the  indemnified  party shall not pay,
settle or compromise such third party claim or demand. The indemnified party has
the right to employ counsel  separate from counsel  employed by the indemnifying
party in any such action and to participate  therein,  but the fees and expenses
of such counsel will be at the indemnified  party's own expense,  unless (a) the
employment thereof has been specifically  authorized by the indemnifying  party,
(b) such  indemnified  party  will  have  been  advised  by  counsel  reasonably
satisfactory  to the  indemnifying  party  that  there may be one or more  legal
defenses  available  to it that  are  different  from  or  additional  to  those
available  to the  indemnifying  party and in the  reasonable  judgment  of such
counsel it is advisable for such Indemnified  Party to employ separate  counsel,
or (c) the  indemnifying  party has failed to assume the  defense of such action
and employ counsel  reasonably  satisfactory to the indemnified  party, in which
case the fees will be paid by the indemnifying  party. If the indemnifying party
assumed the defense of any claim or proceeding  in accordance  with this Section
4.6, the indemnifying party will be authorized to consent to a settlement of, or
the entry of any judgment  arising from, any such claim or proceeding,  with the
prior  written  consent  of  such  indemnified  party,  not  to be  unreasonably
withheld;  provided,  however,  that the indemnifying party is not authorized to
encumber  any  of the  assets  of  any  indemnified  party  or to  agree  to any
restriction  that  would  apply to any  indemnified  party or to its  conduct of
business;  and provided  further,  that a condition to any such  settlement is a

Exchange Agreenment                                                       Page 7
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<PAGE>


complete  release  of such  indemnified  party  and its  affiliates,  directors,
officers,  employees  and agents  with  respect  to such  claim,  including  any
reasonably foreseeable collateral consequences thereof.

             If the indemnifying party does not elect to defend such third party
claim or demand or does not  defend  such  third  party  claim or demand in good
faith,  the  indemnified  party  shall have the right,  in addition to any other
right or remedy it may have hereunder at the indemnifying  party's  expense,  to
defend such third party claim or demand. The failure of the indemnified party to
notify  the  indemnifying   party  as  provided  herein  will  not  relieve  the
indemnifying  party of its obligations  hereunder  except to the extent that the
indemnifying party is actually prejudiced by such failure to notify.

             (c) The term  "Date of  Notice of  Claim"  shall  mean the date the
Notice of Claim is effective pursuant to Section 4.4 of this Agreement.

         4.7  Procedure   for   Indemnification--Other   Claims.   A  claim  for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.

         4.8  Exclusive  Remedies.  Notwithstanding  anything  to  the  contrary
contained  herein,  the remedies  provided in this Article IV are the  exclusive
remedies of the  parties to this  Agreement  for breach of any  representations,
warranties,  covenants  or  agreement  in this  Agreement  and  limit  any other
remedies that may be available to any indemnified party.

                                   ARTICLE V.
                                  MISCELLANEOUS

         5.1 Dispute  Resolution.  In the case of any  dispute,  controversy  or
claim between or among the parties to this Agreement or the Transaction,  except
for  disputes   related  to  obtaining  the   equitable   remedies  of  specific
performance,  an injunction or a restraining  order (a  "Dispute"),  the parties
will use the  procedures  set  forth  in this  Article  V, in lieu of any  party
pursuing  other  available  remedies  and as the sole  remedy,  to  resolve  the
Dispute.  Any Dispute will be settled by  arbitration  before three  arbitrators
(unless the parties agree to a smaller  number) in accordance  with the rules of
the American  Arbitration  Association ("AAA") then in effect and as modified by
this Article V or by further  agreement  of the parties.  In addition to what is
allowed by the rules of the AAA,  discovery  may be  conducted  according to the
Federal Rules of Civil  Procedure,  to be enforced by the AAA, and if necessary,
by a court having jurisdiction. Any such arbitration will be conducted in Parker
county, Texas, unless otherwise agreed by the parties. The arbitrators will have
no authority to award punitive  damages or any other damages not measured by the
prevailing  party's actual  damages and may not, in any event,  make any ruling,
finding  or award  that does not  conform  to the terms and  conditions  of this
Agreement.  The  arbitrators  will have the authority to award to the prevailing
party its attorneys' fees and costs incurred in any arbitration. Absent any such
award,  each party will bear its own costs incurred in the  arbitration.  If any
party  hereto  refuses  to submit to  arbitration  any  Dispute  required  to be
submitted to arbitration pursuant to this Section 5.1, and instead commences any
other  proceeding,  including,  without  limitation,  litigation  (except to the
extent otherwise expressly provided in this Agreement), then the party who seeks
enforcement  of the  obligation to arbitrate  will be entitled to its attorneys'
fees and costs incurred in any such proceeding.

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<PAGE>


         5.2 Certain Definitions:

         "Affiliate"  means,  with  respect to any Person,  any other  Person or
group of  affiliated  Persons  directly  or  indirectly  controlling  (including
without  limitation  all  directors  and  executive  officers  of such  Person),
controlled by or under direct or indirect common control with such Person.

         "Exchange  Act"  means  the  Securities  Exchange  Act of  1934  or any
successor  law, and  regulations  and rules  issued  pursuant to that Act or any
successor law, or any other legal requirement.

         "Governmental Entity" means any legislature,  agency,  bureau,  branch,
department,  division, commission, court, tribunal,  magistrate,  justice, multi
national  organization,  quasi  governmental  body, or other similar  recognized
organization or body of any federal, state, county, municipal, local, or foreign
government or other similar  recognized  organization or body exercising similar
powers or authority.

         "Knowledge"  whether  capitalized or not, means the actual awareness of
such fact or matter of a Person,  without  investigation or inquiry.  A business
entity will have  knowledge  of a  particular  fact or other  matter if any duly
elected  officer  or  other  individual  person  changed  with  monitoring  such
particular  facts, of such business entity has actual  awareness of such fact or
matter.

         "Lien"  means any  mortgage,  lien,  pledge,  claim,  charge,  security
interest or encumbrance or any kind,  including without  limitation the interest
of a vendor or lessor  under  any  conditional  sale  agreement,  capital  lease
obligation  or other title  retention  agreement,  or any agreement to create or
grant any of the foregoing.

         "Material Adverse Change (or Effect)" means, taken in the aggregate,  a
material  adverse change (or effect) on the Shares or the results of operations,
financial condition, or reasonable prospects of the business of Exterra.

         "Person" means an individual,  a trust,  an estate,  a partnership,  an
association,  a company,  a limited  liability  company,  a corporation,  a sole
proprietorship,  a professional  corporation,  a professional association or any
other entity.

         "Securities Act" means the Securities Act of 1933 or any successor law,
and  regulations  and rules issued pursuant to that Act or any successor law, or
any other legal requirement.

         "Tax"  means any tax  (including  any income  tax,  capital  gains tax,
value-added  tax,  sales tax,  property  tax,  gift tax, or estate  tax),  levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount  (including  any fine,  penalty,  interest,  or
addition to tax), imposed,  assessed,  or collected by or under the authority of
any governmental  body or payable  pursuant to any tax-sharing  agreement or any
other  contract  relating  to the  sharing  or  payment  of any such tax,  levy,
assessment, tariff, duty, deficiency, or fee.

         "Tax  Return"  means any return  (including  any  information  return),
report,  statement,  schedule,  notice,  form, or other  document or information
filed with or submitted  to, or required to be filed with or  submitted  to, any

Exchange Agreenment                                                       Page 9
-------------------                                                       ------

<PAGE>


governmental body in connection with the determination,  assessment, collection,
or payment of any Tax or in connection with the administration,  implementation,
or enforcement of or compliance with any legal requirement relating to any Tax.

         5.3  Fees  and  Expenses.  Except  as  otherwise  contemplated  by,  or
expressly  provided for in, this Agreement,  all costs and expenses  incurred in
connection  with  this  Agreement  and  the  consummation  of  the  transactions
contemplated  hereby shall be paid by the party  incurring  such  expenses.  The
prevailing party in any arbitration or other legal proceeding hereunder or under
any agreement executed pursuant hereto will, however, be entitled to recover its
reasonable attorneys' fees and expenses.

         5.4 Post Closing Covenants.

             (a) Books and Records. For a period of four (4) years following the
Effective Date, Exterra shall provide Royalco and its representatives reasonable
access  during  normal  business  hours and upon three (3) days'  prior  written
notice to Exterra to those books and records of Royalco relating to the Well and
the Lease,  solely for the purpose of allowing and assisting  Royalco to prepare
its tax returns and respond to litigation and other disputes involving the Well,
the Lease or the Profits Interests.  In addition,  Exterra will, upon reasonable
request of Royalco, furnish to Royalco copies of any such books or records.

             (b)  Assistance.  Following  the  Effective  Date,  upon  Exterra's
reasonable request and at Exterra's expense,  Royalco will provide assistance to
Exterra and Exterra's representatives in connection with the Stockhome Dispute.

         5.5  Amendments.  This  Agreement  can  be  amended,   supplemented  or
modified,  any  provision  hereof  may be waived,  only by a written  instrument
making specific reference to this Agreement signed by the party against whom the
same is sought to be enforced.

         5.6 Notices. All notices and other communications hereunder shall be in
writing  and shall be deemed  given  upon (a)  transmitter's  confirmation  of a
receipt  of a  facsimile  transmission,  (b)  confirmed  delivery  by a standard
overnight  carrier  or when  delivered  by hand  or (c) the  expiration  of five
business  days after the day when mailed in the United  States by  certified  or
registered mail,  postage prepaid,  addressed at the following  addresses (or at
such other address for a party as shall be specified by like notice)

             (a) if to Royalco, to:

                 RoyalCo Oil & Gas Corporation
                 Attn: Robert Royal, CEO_____
                 4906 Mineral Wells Hwy
                 Weatherford, Texas  76088
                 Facsimile:  (817-599-5756)W

Exchange Agreenment                                                      Page 10
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<PAGE>




                 With a copy to:

                 K. Lawson Pedigo
                 Miller Keffer Bullock Pedigo, LLC
                 8401 N. Central Expressway
                 Suite 630
                 Dallas, Texas  75225
                 Facsimile:  (214) 696-2482


             (b) if to Exterra, to:

                 Exterra Energy Inc.
                 Attn: Robert Royal, CEO
                 1717 St. James Place
                 Houston, Texas  77056
                 with copies to:
                 866-537-6910
                 _________________________
                 _________________________
                 _________________________

         5.7  Headings.  The  headings  contained  in  this  Agreement  are  for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

         5.8  Counterparts.  This  Agreement  may be  executed  in  two or  more
counterparts,  each of which shall be deemed an original  but all of which shall
be considered one and the same Agreement.  A photocopy or facsimile signature of
a party  hereto has the same force and effect as an original  signature  of such
party.

         5.9 Entire Agreement.  This Agreement  (together with the Schedules and
Exhibits  hereto) and the  agreements and documents  delivered  pursuant to this
Agreement,  constitute  the entire  agreement of the parties with respect to the
subject  matter  hereof,   and   collectively   supersede  all  other  prior  or
contemporaneous   negotiations,   commitments,   agreements  and  understandings
(whether  written or oral),  between  the  parties  with  respect to the subject
matter hereof.

         5.10 Severability.  If any term, provision,  covenant or restriction of
this Agreement is held by a court of competent  jurisdiction  or other authority
to be  invalid,  void,  unenforceable  or against  its  regulatory  policy,  the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected,  impaired
or invalidated.

         5.11 Binding Effect.  This Agreement will be binding upon, inure to the
benefit of and be enforceable  by, the parties and their  respective  successors
and assigns.

         5.12 Governing  Law. This Agreement  shall be governed by and construed
in accordance with the laws of the state of Texas  applicable to agreements made
and to be performed entirely in that state,  without giving effect to any choice
or conflict of law provision or rule (whether of the State of Texas or any other
jurisdiction)  that would cause the application of the laws of any  jurisdiction
other than the State of Texas.

         5.13  Jurisdiction.  The  parties  agree  to  submit  to the  exclusive
jurisdiction of the State Courts of Texas in Parker County regarding any dispute
arising under this Agreement.

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<PAGE>


         5.14 Multiple  Counterparts.  This  Agreement may be executed in one or
more counterparts,  each of which shall be deemed an original,  but all of which
together shall constitute a single agreement.



                      [THIS SPACE INTENTIONALLY LEFT BLANK]

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<PAGE>



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

                                            BUYER:

                                            EXTERRA ENERGY, INC.
                                            a Nevada corporation



                                            By:  /s/  Robert Royal
                                               --------------------------------
                                                      Robert Royal, CEO

                                            SELLER:

                                            ROYALCO OIL & GAS CORPORATION
                                            a Texas corporation



                                            By:  /s/  Robert Royal
                                               --------------------------------
                                                      Robert Royal, CEO

Exchange Agreenment                                                      Page 13
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<PAGE>


                                    EXHIBIT A
                                    ---------

                               Caruthers Estimate





                                    Exhibit A
                                    ---------

<PAGE>


                                  SCHEDULE 2.4
                                  ------------

                               Royalco Litigation

Royalco  Oil & Gas  Corporation  v.  Stockhome  Trading  Corporation,  cause no.
C2008-00586,  filed  October 20, 2008 in the District  Court of Johnson  County,
Texas 249th Judicial District.



                                  Schedule 2.4
                                  ------------

<PAGE>


                                  SCHEDULE 3.7
                                  ------------

                               Absence of Changes



                                  Schedule 3.7
                                  ------------