PETRO UNION, INC.
                        123 Main Street, Suite 300
                           Evansville, IN  47708
                              (812) 424-6745
                            Fax: (812) 424-3576





February 8, 1997

Mr. Jack Piedmonte, President
NEWSTAR ENERGY USA, INC.
104 West Front Street
Monroe, Michigan  48161

          Re:  Letter Agreement
               Horizontal Drilling Services

Dear Jack:

          This letter will serve as a agreement between Petro
Union as a service contractor and Newstar as the Operator whereby
Petro will provide its short radius horizontal drilling services
on a limited turnkey basis.  Newstar agrees to contract such
services for a quantity of twenty (20) wells in the Dundee Oil
Field located in Michigan in accordance with the terms and
conditions below.

          A.   Petro shall provide equipment, technology and
services necessary to operate its system with the operation of
the horizontal drilling equipment exclusively by Petro.  Petro's
equipment shall include the angle building assemblies, lateral
assemblies, control house with single conductor cable on
hydraulic reel, flexible curve and lateral drill pipe, anti-whirl
bi-center PDC bits, survey equipment and other such equipment as
identified on Exhibit "A".

          B.   Newstar shall provide drilling/support equipment
and third party services as identified on Exhibit "B" to
facilitate the horizontal drilling operations.  Newstar as
operator shall obtain all necessary drilling permits and provide
the necessary ingress and egress to the well locations with roads
and sites suitable for highway equipped vehicles.  Newstar shall
furnish Petro all necessary information to plan and executed safe
drilling activities and shall use all reasonable means to provide
equipment and well conditions for safe and efficient operations.

          C.   This agreement shall remain in force and effect
for a period of one (1) year or until the horizontal drilling
operations are completed on the twenty (20) wells, whichever
occurs first.

               2.   The balance of the fees, expenses, and
charges herein provided are due and payable to Petro upon
completion of each well.

          L.   Each well will be deemed completed; when
horizontal drilling activities have been performed in accordance
with the proposed well plan; if Petro and Newstar mutually agree
to stop work; or Newstar elects to halt operations.

          M.   In the event that Petro terminates the work after
commencement of operations but before all operation have been
completed according to the proposed well plan because Petro
acting in good faith and reasonable, determines there is
unacceptable danger to the tools and equipment in the hole, and
unsurmountable technical problem encountered or
geological/geophysical condition, whether unforeseen or not,
Petro shall be entitled to fifty percent (50%) of the rates,
charges, and expenses that Petro would have earned under this
agreement for that well.

          N.   If either party is rendered unable wholly or in
material part, by reason of Force Majeure to carry out any of its
obligations hereunder, other than obligations to pay money, then
on such party giving notice and particulars in writing to the
other party within a reasonable time after the occurrence of the
cause relied upon, such obligations shall be suspended.  Force
Majeure shall include acts of God, laws and regulations,
government action, war, civil disturbances, strikes, lightening,
fire, flood, washout storm, breakage or accident to equipment or
machinery, and any other causes that are not reasonably within
the control of the party so affected.

          O.   It is understood that Petro is an independent
contractor with the authority to control and direct the
performance of the details of the work.

          P.   Failure by Newstar to use Petro's services on
twenty (20) wells within one (1) year shall cause Newstar to
forfeit any right for credit or claim upon Petro for funds
advanced to Petro according to paragraph E that remain
outstanding at that time.

          Q.   Newstar will have a representative on location to
supervise well preparation services and available for onsultation
throughout the horizontal drilling operations.

          R.   Any disputes and controversies between the parties
arising out of or in connection with this Agreement shall be
submitted to arbitration in accordance with the rules of the
American Arbitration Association.  

          S.   At the expiration of this Agreement it is the
intent of Newstar and Petro to enter into good faith negotiations
for an ongoing alliance, joint venture, or formal relationship
for the mutual benefit through the use of Petro's horizontal
drilling technology. 

          T.   Neither party may assign this Agreement without
the prior written consent of the other party and prompt notice of
any such intent shall be given to the other party. 

          U.   This Agreement and attached Exhibits constitutes
the sole understanding of the parties and supersedes any previous
agreements or understanding with respect to the subject matter
hereof.  No amendments, modifications or alterations of the
agreement shall be binding unless done in writing and duly
executed by both parties.

          V.   The terms and provisions of this Agreement shall
be construed under the laws of the State of Indiana. 

          We trust that you find the terms and conditions are
acceptable and this Agreement is the beginning of a long and
mutually profitable relationship.

Respectfully submitted,


/s/ Richard W. Wedel
Richard W. Wedel, President
Petro Union, Inc.



Accepted this the 8th day of February, 1997



                                   
Jack Piedmont, President
NEWSTAR ENERGY USA, INC.