Exhibit 10.1

                 Operating Agreement of Hilton Petroleum Greater
                       San Joaquin Basin Joint Venture LLC



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                               OPERATING AGREEMENT
                                       OF
                                HILTON PETROLEUM
                            GREATER SAN JOAQUIN BASIN
                                JOINT VENTURE LLC


THIS  AGREEMENT  is made and  entered  into this 6th day of July,  1999,  by and
between HILTON PETROLEUM GREATER SAN JOAQUIN BASIN JOINT VENTURE LLC, a Colorado
limited  liability  company (the "Company") and those persons whose names appear
on Schedule A attached hereto, hereinafter referred to as "Members."

                                    RECITALS:

The Company has the right to acquire a 3% participating  interest in the Greater
San Joaquin  Joint Venture (the "Joint  Venture"),  which is a consortium of oil
companies headed by Berkley  Petroleum Ltd. as the joint venture  operator.  The
working  interest  and net revenue  interest  of the  Company  for a  particular
prospect  will  vary  depending  upon the  terms  of the  lease  related  to the
prospect.  The Company shall be bound by the Joint Venture operating  agreement.
Hilton Petroleum Ltd., a Yukon corporation  ("Hilton Petroleum") is appointed as
the permanent Manager of the Company.

The cost of this interest is $1,550,000  and the agreement of the Company to pay
its share of all costs  associated  with the Joint Venture.  These costs include
but may not be limited to  drilling  costs  associated  with each well;  acreage
costs for any  additional  acreage  acquired  in  addition  to the 20,000  acres
already leased by the Joint Venture;  and operating expenses associated with any
commercially  developed  well(s).  The Company shall pay 4% of all costs to earn
its  working  interest  in the first three wells and 3% of all costs to earn its
working  interest in wells  four,  five,  and six.  The  Company's  share of the
estimated cost for the first well is $400,000. Accordingly, the Company is to be
capitalized initially with $1,950,000 by selling 20 Units of Membership interest
in the Company at $97,500 per Unit.  Each Unit shall  represent a 5% interest in
the Company.

The  Company's  share  of the  estimated  costs  for the  first  three  wells is
$1,200,000.  The estimated cost of drilling any future wells will be based on an
Authority for Expenditure provided by the well's operator.  Calls for additional
capital  contributions  are typically due within 10 days of  notification by the
operator as described in the Joint Venture operating agreement.

For its services as Manager of the  Company,  Hilton  Petroleum  shall be paid a
monthly management fee following the completion of the sixth well of $5,000 plus
actual costs.

IT IS AGREED,  in consideration  of the promises,  covenants,  performance,  and
mutual consideration herein as follows:


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                                        I
                              FORMATION OF COMPANY

1.1.     ARTICLES OF  ORGANIZATION.  This Company is  organized  pursuant to the
         provisions  of the  Limited  Liability  Company  Laws of the  State  of
         Colorado  and  pursuant  to  Articles  of  Organization  filed with the
         Secretary of State on June __, 1999. The rights and  obligations of the
         Company  and  the  Members   shall  be  provided  in  the  Articles  of
         Organization and this Operating  Agreement of Hilton Petroleum  Greater
         San Joaquin Basin Joint Venture LLC.

1.2.     CONFLICT BETWEEN ARTICLES OF ORGANIZATION AND THIS AGREEMENT.  If there
         is any conflict  between the provisions of the Articles of Organization
         and this Operating Agreement, the terms of the Articles of Organization
         shall control.

1.3      RECITALS  PART OF THIS  AGREEMENT.  The  recitals  set forth  above are
         incorporated  in this  Agreement by this reference and shall be used as
         necessary to interpret the meaning of this Agreement.

                                       II
                              CAPITAL CONTRIBUTIONS

2.1      CONTRIBUTIONS.  The minimum capital contribution to be made by a Member
         is $97,500  for one Unit or 5%  interest  in the  Company.  The capital
         contributions  to be made by the  Members  and with  which the  Company
         shall begin business are set forth on Schedule A attached hereto:

2.2.     ADDITIONAL CAPITAL CONTRIBUTIONS. In the event that the operator of the
         Joint  Venture  notifies  the Company that a cash call is due or in the
         event that the cash funds of the Company are  insufficient  to meet its
         operating  expenses,  the Manager shall notify each of the Members,  by
         registered mail or overnight delivery service, of its share of the cash
         required and the Members shall make additional  capital  contributions,
         in the proportion of their capital  contributions within 10 days of the
         Member's receipt of the notification from the Manager.

2.3      FAILURE TO PAY  ADDITIONAL  CAPITAL  CONTRIBUTION.  In the event that a
         Member fails to pay its additional  capital  contribution,  on the 11th
         day after having received  notification  pursuant to Section 2.2 above,
         with no right to cure such failure,  that defaulting  Member's interest
         in the  Company  shall be  deemed  to have  been  purchased  by  Hilton
         Petroleum  for shares of common  stock of Hilton  Petroleum or shall be
         designated as "nonparticipatory" as set forth below:

         2.3.1    If such failure  should occur within the first 12 months after
                  the defaulting Member's initial capital  contribution,  Hilton
                  Petroleum  shall  pay the  defaulting  Member's  share  of the
                  additional  capital  contribution,  but the  shares  of Hilton
                  Petroleum shall not be

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                  issued  until  12-month  anniversary  of the  initial  capital
                  contribution.  The value of the  shares  shall be based on the
                  30-day  average  closing  price of the shares on the Vancouver
                  Stock Exchange  immediately prior to the 12-month  anniversary
                  date. The amount of the defaulting Member's investment divided
                  by the average  price shall be the number of shares issued for
                  the defaulting Member's interest in the Company.

         2.3.2    If such  failure  should  occur  after the first 12 months but
                  within  the first 24  months  after  the  defaulting  Member's
                  initial capital  contribution,  Hilton Petroleum shall pay the
                  defaulting   Member's   share   of  the   additional   capital
                  contribution,  and the value of the shares shall be determined
                  by using the 30-day average closing price of the shares on the
                  Vancouver  Stock  Exchange  immediately  prior  to the date of
                  default.

         2.3.3    If such  failure  should occur after the first 24 months after
                  the defaulting Member's initial capital  contribution,  Hilton
                  Petroleum  shall  pay the  defaulting  Member's  share  of the
                  additional capital  contribution,  and the defaulting Member's
                  interest shall be designated as "nonparticipatory"  until that
                  Member's share of cash flow, if any, from an ongoing operation
                  has paid  Hilton  Petroleum  300% of the  defaulted  cash call
                  amount(s).  If no cash flow can be  credited  to the  Member's
                  interest from ongoing production for a period of 120 days from
                  the date of default,  the  defaulting  Member's  interest will
                  default to Hilton Petroleum.

2.4.     LOANS.  In lieu of voting an  additional  assessment of capital to meet
         operating  expenses or to finance new investments,  the Company may, as
         determined by the Manager, borrow money from one or any of the Manager,
         Members, or third persons.  However,  the Company may only borrow funds
         for expenses or investments relating to the Joint Venture. In the event
         that a loan agreement is negotiated with a Manager or Member, he or she
         shall be entitled to receive  interest at a rate and upon such terms to
         be  determined  by the  Manager,  and said loan  shall be repaid to the
         Manager or Member, with unpaid interest, if any, as soon as the affairs
         of the Company will permit. The loan shall be evidenced by a promissory
         note obligating the assets of the Company.  Such interest and repayment
         of the amounts so loaned are to be entitled to priority of payment over
         the division and distribution of capital contributions and profit among
         Members.

                                       III
                        MEMBERS' ACCOUNTS; ALLOCATION OF
                         PROFIT AND LOSS; DISTRIBUTIONS

3.1.     CAPITAL  ACCOUNTS.  A separate  capital account shall be maintained for
         each  Member.  The  capital  accounts of each  Member  shall  initially
         reflect the amounts  specified in Section 2.1. No Member shall withdraw
         any part of his or her capital account, except upon the approval of the
         Manager. If the capital account of a Member becomes impaired,  or if he
         or she withdraws said capital account with approval of the Manager, his
         or her share of subsequent

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         Company  profits shall be credited first to his or her capital  account
         until that account has been restored,  before such profits are credited
         to his or her income  account.  If,  during the period  when a Member's
         capital  account is impaired or he or she has withdrawn funds therefrom
         as hereinbefore provided, an additional contribution is required of the
         Member for the purposes  specified in Section 2.2, then the Member with
         such  withdrawn  or  impaired  capital  account  shall be  required  to
         contribute his or her  proportionate  share of the  additional  capital
         contribution  and the  deficiency  then  existing in his or her capital
         account,  so as to return the  capital  account to the same  proportion
         existing  as of the date of the  additional  contribution.  No interest
         shall be paid on any capital contributions to the Company.

3.2.     INCOME ACCOUNTS. A separate income account shall be maintained for each
         Member. Company profits, losses, gains,  deductions,  and credits shall
         be charged or credited to the separate income accounts  annually unless
         a Member has no credit balance in his or her income  account,  in which
         event losses shall be charged to his or her capital account,  except as
         provided in Section 3.1. The profits,  losses, gains,  deductions,  and
         credits of the Company shall be  distributed  or charged to the Members
         as  provided in Section  3.3.  No interest  shall be paid on any credit
         balance in an income account.

3.3.     ALLOCATIONS  AMONG MEMBERS.  The profits and gains of the Company shall
         be divided and the losses, deductions, and credits of the Company shall
         be borne in the proportion of their capital contributions.

3.4.     DISPROPORTIONATE CAPITAL ACCOUNTS. No interest or additional allocation
         profits,  losses,  gains,  deductions,  and credits  shall inure to any
         Member by reason of his or her capital account being proportionately in
         excess of the capital accounts of the other Members.

3.5.     DISTRIBUTIONS OF ASSETS.

         3.5.1.   All  distributions  of assets of the Company,  including cash,
                  shall  be  made  in the  same  allocations  among  Members  as
                  described in Section 3.3.

         3.5.2.   Within  30  days  from  the end of each  fiscal  quarter,  the
                  Manager shall make a distribution  to the Members that portion
                  of the net revenues of the Company, or any other assets, which
                  the  Manager  determines,  in its  sole  discretion,  are  not
                  necessary for the  Company's  on-going  operations;  provided,
                  however,  that  no  distribution  of  assets  may be made to a
                  Member  if,  after  giving  effect  to the  distribution,  all
                  liabilities of the Company,  other than liabilities to Members
                  on account of their capital and income accounts,  would exceed
                  the fair value of the Company assets.

         3.5.3.   A Member has no right to demand and receive  any  distribution
                  from the Company in any form other than cash.


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                                       IV
                          RULES RELATING TO THE MEMBERS

4.1.     ADMISSION OF NEW MEMBERS.  Additional  Members (i.e. those who purchase
         their  interests  directly  from the Company) may be admitted  upon the
         unanimous written consent of all Members.

4.2.     VOTING OF MEMBERS. A Member shall be entitled to vote the percentage of
         ownership  interest held by that Member on any matter for which Members
         are  required  to vote.  A member may vote in person or by proxy at any
         meeting of  Members.  All  decisions  of the  Members  shall be made by
         Members  holding a majority  in  interest  of the Company at a properly
         called  meeting  of the  Members  at which a quorum is  present,  or by
         unanimous written consent of the Members.

4.3.     MEETINGS OF MEMBERS.

         4.3.1.   Meetings of Members may be held at such time and place, either
                  within or without the State of Colorado,  as may be determined
                  by the Manager or the person or persons calling the meeting.

         4.3.2.   An annual  meeting of the  Members  shall be held at such time
                  and  place as  shall  be  determined  by a  resolution  of the
                  Manager  during each fiscal year of the Company.  A Member may
                  petition any court of competent  jurisdiction  in the State of
                  Colorado  to order that an annual  meeting  of the  Members be
                  held if an annual  meeting  is not held  within six (6) months
                  after the end of the  Company's  fiscal  year or fifteen  (15)
                  months after the Company's last annual  meeting,  whichever is
                  earlier.

         4.3.3.   A special  meeting of the Members may be called by the Manager
                  or by at least  one-tenth  of all of the  Members  entitled to
                  vote at the meeting.

         4.3.4.   Written notice stating the place, day, and hour of the meeting
                  and, in the case of a special  meeting,  the purpose for which
                  the meeting is called,  shall be  delivered  not less than ten
                  (10) days nor more than fifty (50) days before the date of the
                  meeting,  either personally or by mail, by or at the direction
                  of the Manager or any other  person  calling the  meeting,  to
                  each  Member of record  entitled  to vote at such  meeting.  A
                  waiver of notice in writing,  signed by the Member before, at,
                  or after the time of the meeting stated in the notice shall be
                  equivalent to the giving of such notice.

         4.3.5.   By attending a meeting,  a Member waives objection to the lack
                  of  notice or  defective  notice  unless  the  Member,  at the
                  beginning  of  the  meeting,  objects  to the  holding  of the
                  meeting or the  transacting  of  business  at the  meeting.  A
                  Member who attends a

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                  meeting also waives objection to consideration at such meeting
                  of a particular matter not within the purpose described in the
                  notice  unless the Member  objects to  considering  the matter
                  when it is presented.

4.4.     QUORUM AND  ADJOURNMENT.  Members holding a majority in interest of the
         Company  entitled to vote shall  constitute  a quorum at the meeting of
         Members.  If a quorum is not represented at any meeting of the Members,
         such  meeting may be  adjourned  for a period not to exceed  sixty (60)
         days at any one adjournment; provided, however, that if the adjournment
         is for more than thirty (30) days,  a notice of the  adjourned  meeting
         shall be given to each Member entitled to vote at the meeting.

4.5      SALE OF INTEREST IN JOINT VENTURE OR OTHER  ASSETS.  The Members of the
         Company may vote to sell the Company's interest in the Joint Venture or
         other assets of the Company so long as Members  holding at least 60% of
         the interest in the Company vote in favor of this action and so long as
         Hilton Petroleum remains as the Manager of the Company.

                                        V
                           RULES RELATING TO MANAGERS

5.1.     GENERAL  POWERS.  Management  and the  conduct of the  business  of the
         Company shall be vested in the Manager,  Hilton Petroleum.  The Manager
         may adopt  resolutions to govern its activities and the manner in which
         it shall perform its duties to the Company.

5.2.     DUTIES OF MANAGER.

         5.2.1.   The  Manager  shall have the duties  and  responsibilities  as
                  described in the Colorado  Limited  Liability  Company Act, as
                  amended from time to time.

         5.2.2.   The  Manager  shall  execute  any   instruments  or  documents
                  providing for the acquisition, mortgage, or disposition of the
                  property of the Company.

         5.2.3.   Any debt contracted or liability incurred by the Company shall
                  be  authorized  only by a resolution  of the Manager,  and any
                  instruments  or  documents  required  to be  executed  by  the
                  Company shall be signed by the Manager.

         5.2.4.   The  Manager   may   delegate  an  employee  or  agent  to  be
                  responsible  for the daily and  continuing  operations  of the
                  business affairs of the Company.  All decisions  affecting the
                  policy and  management of the Company,  including the control,
                  employment,  compensation,  and  discharge of  employees;  the
                  employment of contractors and subcontractors;  and the control
                  and  operation  of the premises and  property,  including  the
                  improvement, rental, lease, maintenance, and all other matters
                  pertaining  to the  operation  of the property of the business
                  shall be made by the Manager.

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         5.2.5.   Any  Manager  may draw  checks  upon the bank  accounts of the
                  Company  and  may  make,  deliver,   accept,  or  endorse  any
                  commercial  paper in connection  with the business  affairs of
                  the Company.

5.3.     DEVOTION TO DUTY. At all times during the term of Manager,  the Manager
         shall give reasonable time, attention, and attendance to, and shall use
         reasonable  efforts in the business of the said  Company;  shall,  with
         reasonable shall and power, exert itself for the interest, benefit, and
         advantage of said Company;  and shall truly and  diligently  pursue the
         Company objectives.

5.4.     INDEMNIFICATION.  The  Manager,  employees,  and agents of the  Company
         shall be  entitled  to be  indemnified  by the  Company  to the  extent
         provided in the Colorado Limited Liability Company Act, as amended from
         time to time,  and  shall  be  entitled  to the  advance  of  expenses,
         including  attorneys'  fees, in the defense or  prosecution  of a claim
         against it, him or her in the capacity of Manager, employee, or agent.

                                       VI
                                      BOOKS

6.1.     LOCATION OF RECORDS.  The books of the Company  shall be  maintained at
         the registered office of the Company.

6.2.     ACCESS TO RECORDS AND  ACCOUNTING.  Each Member shall at all times have
         access to the books and  records  of the  Company  for  inspection  and
         copying. Each Member shall also be entitled:

         6.2.1.   To obtain  from the  Manager  upon  reasonable  demand for any
                  purpose such  information  reasonably  related to the Member's
                  Membership Interest in the Company;

         6.2.2.   To have true and full  information  regarding the state of the
                  business and  financial  condition  and any other  information
                  regarding the affairs of the Company;

         6.2.3.   To have a copy of the  Company's  federal,  state,  and  local
                  income  tax  returns  for each year  promptly  after  they are
                  available to the Company; and

         6.2.4.   To have a formal  accounting of the Company  affairs  whenever
                  circumstances render an accounting just and reasonable.

6.3.     ACCOUNTING  RULES.  The books shall be maintained on a cash basis.  The
         fiscal year of the Company shall be the calendar year. Distributions to
         income  accounts shall be made annually by the 15th of March  following
         the end of the fiscal  year.  The books shall be closed and balanced at
         the end of each calendar year and, if an audit is determined to be

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         necessary by vote or consent of the Manager, it shall be made as of the
         closing date.  The Manager may authorize  the  preparation  of year-end
         profit-and-loss statements,  balance sheet, and tax returns by a public
         accountant.  Any tax forms  required to be sent to the Members shall be
         sent no later than the 15th of March following the fiscal year end.

                                       VII
                                   DISSOLUTION

7.1.     CAUSES  OF  DISSOLUTION.  The  Company  shall  be  dissolved  upon  the
         occurrence of any of the following events:

         7.1.1. At any time by unanimous agreement of the Members;

         7.1.2.   Upon the termination of the Joint Venture; or

         7.1.3.   Upon the dissolution of the Manager.

7.2.     DISTRIBUTION  OF ASSETS IF BUSINESS UPON  DISSOLUTION.  In the event of
         dissolution of the Company,  the Manager shall proceed with  reasonable
         promptness to sell the real and personal  property owned by the Company
         and to liquidate  the business of the Company.  Upon  dissolution,  the
         assets of the Company  business  shall be used and  distributed  in the
         following order:

         7.2.1.   Any liabilities  and liquidating  expenses of the Company will
                  first be paid;

         7.2.2.   The  reasonable  compensation  and  expenses of the Manager in
                  liquidation shall be paid;

         7.2.3.   The amount then  remaining  shall be paid to and divided among
                  the  Members  in  accordance  with the  statutory  scheme  for
                  distribution and liquidation of the Company under the Colorado
                  Limited Liability Company Act, as amended from time to time.

                                      VIII
                              EXPULSION OF A MEMBER

8.1.     CAUSES OF EXPULSION. A Member may be expelled from the Company upon the
         occurrence of any of the following events:

         8.1.1.   If a  Member  shall  violate  any of the  provisions  of  this
                  Agreement; or


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         8.1.2.   If a  Member's  Membership  Interest  shall  be  subject  to a
                  charging order or tax lien, which is not dismissed or resolved
                  to the  satisfaction  of the  Manager  of the  Company  within
                  thirty (30) days after assessment or attachment.

8.2.     NOTICE OF  EXPULSION.  Upon the  occurrence  of an event  described  in
         Section  8.1,  written  notice  of  expulsion  shall  be  given  to the
         violating Member either by serving the same by personal  delivery or by
         mailing  the same by  certified  mail to his or her last known place of
         residence,  as shown on the books of said Company.  Upon the receipt of
         personal  notice,  or the date of the postmark for certified  mail, the
         violating  Member  shall be  considered  expelled,  and  shall  have no
         further rights as a Member of the Company, except to receive the amount
         described in Section 8.3 below.

8.3      PAYMENT FOR MEMBERSHIP INTEREST. The violating Member shall be entitled
         to the  amount  of  his  or her  capital  account  as of  the  date  of
         expulsion,  plus his or her  income  account as of the end of the prior
         fiscal  year,  decreased  by his or her  share of the  Company  losses,
         deductions,  and  credits  to  the  Company  computed  to the  date  of
         expulsion, and decreased by withdrawals such as would have been charged
         to his or her income  account  during the  present  year to the date of
         expulsion. This amount is subject to setoff for any damages incurred as
         the result of the violating Member's actions.

                                       IX
                             BANKRUPTCY OF A MEMBER

9.1.     BANKRUPTCY DEFINED. A Member shall be considered bankrupt if the Member
         files  a  petition  in  bankruptcy  (or  an  involuntary   petition  in
         bankruptcy  is  filed  against  the  Member  and  the  petition  is not
         dismissed  within  sixty  (60)  days) or makes  an  assignment  for the
         benefit of creditors or otherwise  takes any  proceeding or enters into
         any  agreement  for  compounding  his or her  debts  other  than by the
         payment of them in the full amount thereof, or is otherwise regarded as
         insolvent under any Colorado insolvency act.

9.2.     EFFECTIVE  DATE  FOR  BANKRUPTCY.  The  Effective  Date  of a  Member's
         bankruptcy  shall be the date that the Manager,  having  learned of the
         Member's bankruptcy, gives notice in writing stating that the Member is
         regarded as  bankrupt  under this  Agreement,  such notice to be served
         personally  or by  leaving  the same at the  place of  business  of the
         Company.  As of the Effective  Date, the bankrupt  Member shall have no
         further  rights  as a Member of the  Company,  except  to  receive  the
         amounts to which he or she is entitled under Section 8.3.



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                                        X
                      RETIREMENT OR RESIGNATION OF A MEMBER

10.1.    RIGHT TO RETIRE OR RESIGN.  A Member shall have the right, at any time,
         to retire or resign  as a Member  of the  Company  by giving  three (3)
         months' notice to the Company at the Company's place of business.

10.2.    CONSEQUENCES  OF  RETIREMENT OR  RESIGNATION.  Upon giving notice of an
         intention  to retire or  resign,  the  Withdrawn  Member  shall only be
         entitled to the payments provided in Section 8.3.

                                       XI
                                DEATH OF A MEMBER

11.1.    DEATH OF A MEMBER.  Upon the death of a Member,  the deceased  Member's
         rights as Member of the  Company  shall cease and  terminate  except as
         provided in this Article XI.

11.2.    CONSEQUENCES  OF DEATH.  The  Company  shall  purchase  the  Membership
         Interest of the  deceased  Member as provided in Section  8.3,  and the
         closing of such purchase shall be within thirty (30) days of the notice
         of such election, except in the event the Company has life insurance on
         the  decedent,  in which event the amount and method of payment for the
         Membership  Interest  of the  deceased  Member  will be as  provided in
         Section 11.3.

11.3.    INSURANCE.  The Company may, but is not obligated to, contract for life
         insurance  on the  lives  of each  of the  Members,  or any  individual
         Member,  in any  amount  not  disproportionate  to the  value  of  each
         Member's  Membership  Interest.  In the  event of  death  of a  Member,
         insurance  proceeds  paid to the Company  will be used to purchase  the
         Membership Interest of the deceased Member. The purchase price shall be
         the greater of the amount determined under Section 8.3 or the amount of
         insurance proceeds received by the Company. The payment of the purchase
         price to the decedent's  representatives  or heirs shall be made within
         thirty (30) days  following  receipt of the  insurance  proceeds by the
         Company.

                                       XII
                           SALE OF A MEMBER'S INTEREST

12.1.    PROVISIONS RESTRICTING SALE OF MEMBERSHIP INTERESTS.  In the event that
         a Member  desires to sell,  assign,  or  otherwise  transfer his or her
         Membership  Interest in the Company and has  obtained a bona fide offer
         for the sale thereof made by some person not a member of this  Company,
         he or she shall first offer to sell,  assign, or otherwise transfer the
         Membership  Interest to the other  Members at the price and on the same
         terms as  previously  offered him or her, and each of the other Members
         shall have the right to purchase his or her proportionate  share of the
         selling Member's Membership Interest. The selling Member shall

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         notify the other Members of such offer by registered  mail or overnight
         delivery  within 10 days of the receipt of the offer.  Any Member which
         desires to purchase  his or her  proportionate  interest in the selling
         Member's  Membership  Interest  shall  notify  the  selling  Member  in
         writing,  by registered mail or overnight  delivery,  within 30 days of
         receipt of the offer from the  selling  Member.  If any Member does not
         desire to  purchase  the  Membership  Interest on such terms or at such
         price and the entire Membership  Interest is not purchased by the other
         Members,  no other  Member  may  purchase  any  part of the  Membership
         Interest,  and the selling Member may then sell,  assign,  or otherwise
         transfer  his or her entire  Membership  Interest in the Company to the
         person making the said offer at the price  offered.  The intent of this
         provision is to require that the entire Membership Interest of a Member
         be sold intact, without fractionalization.  A purchaser of a Membership
         Interest  of the  Company  shall  not  become a Member  and  shall  not
         participate  in the  management  of the Company,  without the unanimous
         consent of the  non-selling  Members,  but shall be entitled to receive
         the  share  of  profits,  gains,  losses,   deductions,   credits,  and
         distributions to which the selling Member would be entitled.

12.2     SALE OF MEMBERSHIP  INTEREST TO HILTON  PETROLEUM.  After 12 months but
         before 25 months after a Member's  initial  capital  contribution,  the
         Member may sell the interest to Hilton Petroleum in exchange for shares
         of Hilton  Petroleum  common  stock.  The  value of the stock  shall be
         determined by the average  closing price for the stock on the Vancouver
         Stock Exchange for the 30 days  immediately  after Hilton Petroleum has
         received notification in writing of a Member's desire to sell to Hilton
         Petroleum.  The number of shares issued to the selling  Member shall be
         the 30-day  average  closing  price  divided into the selling  Member's
         total investment amount.

                                      XIII
                               MEMBERS' COVENANTS

13.1.    MEMBER'S PERSONAL DEBTS. In order to protect the property and assets of
         the Company from any claim  against any Member for personal  debts owed
         by such Member,  each Member shall  promptly pay all debts owing by him
         or her and shall  indemnify  the  Company  from any claim that might be
         made to the  detriment of the Company by any personal  creditor of such
         Member.

13.2.    ALIENATION OF MEMBERSHIP INTEREST.  No Member shall, except as provided
         in Article XII, sell,  assign,  mortgage,  or otherwise encumber his or
         her  Membership  Interest in the  Company or in its  capital  assets or
         property;  or enter into any  agreement of any kind that will result in
         any person, firm, or other organization becoming interested with him or
         her in the Company;  or do any act detrimental to the best interests of
         the Company.


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                          Operating Agreement - Page 11

<PAGE>



                                       XIV
                                   ARBITRATION

14.1.    ARBITRATION.  Any  dispute,  claim,  or  controversy  arising out of or
         relating to this  Agreement or the breach  thereof  shall be settled by
         arbitration in accordance with the rules then obtaining of the American
         Arbitration  Association.  Judgment  upon the  award  rendered  by said
         arbitration  may be entered in any court having  jurisdiction  thereof.
         Costs of arbitration shall be paid by the loser. If one Member notifies
         the other Member in writing of a dispute,  claim, or controversy within
         six (6) months of the arising of such dispute,  claim,  or  controversy
         and requests that the same be  arbitrated,  no legal action may then be
         commenced thereon, except to obtain judgment on the arbitration award.

                                       XV
                            MISCELLANEOUS PROVISIONS

15.1.    INUREMENT.  This Agreement shall be binding upon the parties hereto and
         their respective  heirs,  executors,  administrators,  successors,  and
         assigns, and each person entering into this Agreement acknowledges that
         this Agreement constitutes the sole and complete representation made to
         him or her regarding the Company, its purpose and business, and that no
         oral or written  representations  or  warranties  of any kind or nature
         have been made  regarding the proposed  investments,  nor any promises,
         guarantees, or representations regarding income or profit to be derived
         from any future investment.

15.2.    MODIFICATION.  This  Agreement  may be  modified  from  time to time as
         necessary only by the written agreement of the Company,  acting through
         the vote or consent of its Managers, and the Members.

15.3.    SEVERABILITY.  The  provisions  of this  Agreement  are  severable  and
         separate,  and if one or more is voidable or void by statute or rule of
         law, the  remaining  provisions  shall be severed  therefrom  and shall
         remain in full force and effect.

15.4.    GOVERNING  LAW.  This  Agreement  and  its  terms  are to be  construed
         according to the laws of the State of Colorado.

15.5.    COUNTERPARTS. This Agreement has been executed in counterparts and each
         such  counterpart  shall be deemed an original of the Agreement for all
         purposes.


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                          Operating Agreement - Page 12

<PAGE>



IN  WITNESS  WHEREOF, we  have hereunto set our hands and seals on the day first
written above, in _______________________.

                              HILTON PETROLEUM GREATER SAN
                              JOAQUIN BASIN JOINT VENTURE LLC


                              By:    /s/ Donald Busby
                                 -------------------------------------------
                                 Authorized officer of Hilton
                                 Petroleum Ltd., Manager

                              Members:


                              By: /s/ Nick DeMare
                                 -----------------------------------------
                                 Authorized officer of Hilton
                                 Petroleum Ltd., attorney-in-fact for the
                                 Members

          Hilton Petroleum Greater San Joaquin Basin Joint Venture LLC
                          Operating Agreement - Page 13

<PAGE>


                                   SCHEDULE A

Members                         Contribution                 Units of Interest










          Hilton Petroleum Greater San Joaquin Basin Joint Venture LLC
                          Operating Agreement - Page 14