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                                    LOAN AGREEMENT


               This Loan Agreement, dated  as of January 16, 1996,  is made
          by  and between  TMBR/SHARP DRILLING,  INC., a  Texas corporation
          (the  "Borrower"),  and  NORWEST  BANK TEXAS,  MIDLAND,  N.A.,  a
          national banking association (the "Bank").


                                       RECITALS

               WHEREAS,  Borrower  is currently  indebted  to  the Bank  as
          evidenced by  that certain Promissory  Note dated  July 14,  1995
          (the  "Prior   Note")  in   the  original  principal   amount  of
          $1,000,000.00;

               WHEREAS, the outstanding principal balance of the Prior Note
          on the date hereof is $500,000.00;

               WHEREAS,  the Borrower  has requested  that the  Bank renew,
          extend and increase the principal amount of the Prior Note;

               WHEREAS, the  Bank is  agreeable to the  Borrower's requests
          but  only upon and subject to the  terms and provisions which are
          hereinafter specified.

               NOW,  THEREFORE, in  consideration of  the premises  and the
          mutual  covenants herein  contained,  the  parties hereto  hereby
          agree as follows:

                                      ARTICLE 1

                                     DEFINITIONS

               Section 1.01   Certain   Definitions.    As   used  in  this
          Agreement, terms defined in the preamble and recitals shall  have
          the meanings set forth therein and the following terms shall have
          the following meanings:

                    "Affiliate" as to any Person, shall mean any other
               Person (other  than  a Subsidiary)  which, directly  or
               indirectly,  is in control of,  is controlled by, or is
               under common  control with, such Person.   For purposes
               of  this definition,  "control" of  a Person  means the
               power, directly  or indirectly, either to  (i) vote 10%
               or more of the  securities having ordinary voting power
               for the  election of directors  of such Person  or (ii)
               direct  or cause  the direction  of the  management and
               policies  of  such  Person,   whether  by  contract  or
               otherwise.



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                    "Agreement"  shall  mean this  Loan  Agreement, as
               amended, supplemented  or otherwise modified  from time
               to time.

                    "Base  Rate"  shall  mean  that variable  rate  of
               interest   per  annum  established   by  Norwest  Bank,
               Minnesota, National  Association ("Norwest Minnesota"),
               from time to time as its "base rate."  Such rate is set
               by  Norwest Minnesota  as a  general reference  rate of
               interest, taking  into account such factors  as Norwest
               Minnesota  may deem  appropriate,  it being  understood
               that many of  Norwest Minnesota's  commercial or  other
               loans are priced in  relation to such rate, that  it is
               not  necessarily  the  lowest  or  best  rate  actually
               charged to any customer  and that Norwest Minnesota may
               make  various commercial  or  other loans  at rates  of
               interest having no relationship to such rate.

                    "Borrowing Base Amount"  shall mean  at any  date,
               the  amount determined  pursuant to  Section 2.04(a)(i)
               under this Agreement at such date.

                    "Borrowing Base Assets"  shall mean the Borrower's
               accounts receivable, drilling  in progress,  inventory,
               equipment,   drill  pipe,  drilling  rigs  and  related
               equipment   and   which  is   subject  to   the  Liens,
               privileges, priorities and security  interests existing
               and  to   exist  under   the  terms  of   the  Security
               Instruments from the Borrower or any other Person to or
               in favor of the Bank.

                    "Borrowing Base Report" shall have the meaning set
               forth in Section 2.04(b).

                    "Borrowing  Date"  shall  mean  any  Business  Day
               specified  in a notice  pursuant to  Section 2.03  as a
               date on which  the Borrower requests  the Bank to  make
               Revolving Credit Loans hereunder.

                    "Business  Day"  shall mean  a  day  other than  a
               Saturday, Sunday  or legal holiday for commercial banks
               under the laws of the State of Texas.

                    "Cash Flow" shall mean, with respect to any period
               of calculation thereof, the sum  of (i) the net  income
               (or loss) from continuing operations of Borrower during
               such   period   (excluding  extraordinary   income  but
               including    extraordinary    expenses),   plus    (ii)
               depreciation, deple-tion and  amortization expenses  of
               Borrower during such period.



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                    "Change  in Control"  shall  mean  the  occurrence
               after the date of this Agreement of any circumstance or
               event  in which (i) a Person shall cause or bring about
               (through  solicitation of  proxies  or  otherwise)  the
               removal or resignation of a majority of the  members of
               the  Board of Directors of the Borrower serving in such
               capacity  on the  date of  this Agreement  or  a Person
               causes or brings about (through solicitation of proxies
               or otherwise) an increase in  the size of the  existing
               Board  of  Directors  of  the Borrower  such  that  the
               existing members of  the Board of  Directors thereafter
               represent  a minority  of the  total number  of persons
               comprising  the  entire  Board;   or  (ii)  a   Person,
               including a  "group" as defined in  Section 13(d)(3) of
               the  Securities  Exchange  Act  of  1934,  becomes  the
               beneficial owner of shares of any class of stock of the
               Borrower  having twenty  percent (20%)  or more  of the
               total number of votes that may be cast for the election
               of directors of the Borrower.

                    "Closing Date"  shall mean  the date on  which the
               conditions precedent set forth in Section 7.01 shall be
               satisfied.

                    "Commitment" shall mean the obligation of the Bank
               to  make  Revolving   Credit  Loans  to  the   Borrower
               hereunder in  an aggregate principal amount  at any one
               time out-standing not to exceed the amount provided for
               in accor-dance  with the provisions of  this Agreement,
               including, without  limitation,  Section 2.01  of  this
               Agreement.

                    "Commitment Period" shall mean the period from and
               including  the date  hereof  to but  not including  the
               Termination  Date or  such  earlier date  on which  the
               Commitments shall terminate as provided herein.

                    "Contractual  Obligation" shall  mean,  as to  any
               Person, any  provision of  any security issued  by such
               Person  or  of  any  agreement,   instrument  or  other
               undertaking to which such Person is a party or by which
               it or any of its property is bound.

                    "Current Ratio"  shall mean  the ratio of  (i) the
               sum  of the current assets of Borrower, to (ii) the sum
               of the current liabilities (excluding, however, current
               liabilities attributable to the Note) of Borrower.

                    "Debt to Worth Ratio" shall mean  the ratio of (i)
               the sum  of the total  liabilities of  the Borrower  to
               (ii) the sum of the Borrower's Net Worth.


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                    "Environmental   Laws"  shall  mean  any  and  all
               foreign,  Federal,  state,  local  or  municipal  laws,
               rules,   orders,  regulations,   statutes,  ordinances,
               codes,  decrees,  requirements   of  any   Governmental
               Authority  or  other  Requirements  of  Law  (including
               common   law)  regulating,  relating   to  or  imposing
               liability or standards of conduct concerning protection
               of  human health or the  environment, as now  or may at
               any time hereafter be in effect.

                    "Environmental Complaint" shall  mean any  written
               complaint, order,  citation,  notice or  other  written
               communication  from  any  Person with  respect  to  the
               existence or alleged  existence of a  violation of  any
               Environmental Law in connection with or with respect to
               any  air emission,  water  discharge,  noise  emission,
               asbestos,    hazardous    substance   or    any   other
               environmental matter regulated under Environmental Laws
               at, upon, under  or within any  of the property  owned,
               leased or used by the Borrower.

                    "Event of  Default" shall  mean the  occurrence of
               any of the events specified in Section 6.01 hereof.

                    "Excepted Liens" shall  mean (i) Liens for  taxes,
               assessments or other governmental charges or levies not
               yet due or which  are being contested in good  faith by
               appropriate   proceedings,   provided   that   adequate
               reserves  with respect  thereto are  maintained on  the
               books of Borrower in conformity with GAAP; (ii) pledges
               or deposits in  connection with workers'  compensation,
               unemployment insurance or  other social security legis-
               lation, old  age  pension or  public liability  obliga-
               tions;   (iii)  vendors',   carriers',  warehousemen's,
               repairmen's,  mechanics',  workmen's, materialmen's  or
               other like  Liens arising  in  the ordinary  course  of
               business which are  not overdue  for a  period of  more
               than 60 days or which are being contested in good faith
               by  appropriate proceedings;  (iv) Liens  arising under
               customary oil and gas operating agreements entered into
               in the  ordinary course  of  business with  respect  to
               obligations which are not overdue for a  period of more
               than 60 days or which are being contested in good faith
               by    appropriate   proceedings;    (v)   restrictions,
               easements,  reservations,   exceptions,  encroachments,
               rights-of-way, and other similar  encumbrances incurred
               in the ordinary  course of business  and other  similar
               irregularities in  title which,  in the  aggregate, are
               not  substantial in amount and which do not in any case
               materially  detract  from  the value  of  the  property
               subject  thereto  or  materially  interfere   with  the
               conduct of the business of Borrower; and (vi)  deposits
               to  secure  the  performance of  bids,  trade contracts
               (other  than  for  borrowed  money),  leases, statutory
               obligations, surety and appeal bonds, performance bonds



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<PAGE> 5


               and other obligations of a like  nature incurred in the
               ordinary course of business.

                    "GAAP"  shall  mean generally  accepted accounting
               principles in the  United States of  America in  effect
               from time to time.

                    "Governmental Authority" shall  mean any nation or
               government,  any state  or other  political subdivision
               thereof   and   any   entity    exercising   executive,
               legislative,  judicial,  regulatory  or  administrative
               functions of or pertaining to government.

                    "Highest  Lawful  Rate"  shall  mean  the  maximum
               nonusurious interest rate, if any, that at  any time or
               from  time to  time may be  contracted for,  taken, re-
               served,  charged or  received on  the Note or  on other
               Indebtedness owing  to the  Bank, as  the case  may be,
               under laws applicable to the Note or other Indebtedness
               owing  to the Bank which are presently in effect or, to
               the  extent  allowed  by  applicable  law,  under  such
               applicable laws which  may hereafter be  in effect  and
               which  allow a higher maximum nonusurious interest rate
               than applicable laws now allow.  

                    "Indebtedness" of  any  Person at  any date  shall
               mean (i) all obligations, liabilities  and indebtedness
               of such Person for  borrowed money or for  the deferred
               purchase  price of  property  or  services (other  than
               current  trade  liabilities  incurred  in  the ordinary
               course  of business and which  are not in  excess of 90
               days past the  invoice or billing date)  for which such
               Person   is  liable,  contingently   or  otherwise,  as
               obligor, guarantor, surety or  otherwise, or in respect
               of  which  such  Person  otherwise  assures  a creditor
               against  loss;  (ii)  any other  indebtedness  of  such
               Person which is evidenced by a note, bond, debenture or
               similar  instrument;  (iii) all  obligations   of  such
               Person under leases  which shall have  been, or  should
               have been, in accordance with GAAP, recorded as capital
               leases for  which such Person is  liable, con-tingently
               or otherwise, as obligor, guarantor or otherwise, or in
               respect  of  which  such  Person  otherwise  assures  a
               creditor  against   loss;  and  (iv)   unfunded  vested
               benefits under each employee benefit plan.

                    "Intangible  Assets" shall mean  all assets of the
               Borrower that would be classified as intangible assets,
               but  in any  event  including, without  limitation, (i)
               deferred  assets,  other  than  prepaid  insurance  and
               prepaid  taxes;  (ii) patents,  copyrights, trademarks,
               tradenames, franchises, goodwill, experimental expenses
               and other  similar assets which would  be classified as
               intangible assets on  a balance sheet  of such  Person;
               (iii) unamortized  debt discount and expense;  and (iv)

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               assets  located, and  notes  and  receivables due  from
               obligors domiciled, outside of the United States.

                    "Lien"  shall  mean  any   mortgage,  encumbrance,
               pledge,  hypothecation,  assignment,  charge,  security
               agreement,   lien   (statutory   or   other),   deposit
               agreement,  conditional  sale  or  trust  receipt or  a
               lease, consignment  or bailment for  security purposes,
               and reservations, exceptions, encroachments, easements,
               rights-of-way,  covenants,  conditions,   restrictions,
               leases  and  other  title exceptions  and  encumbrances
               affecting property.   For purposes  of this  Agreement,
               Borrower  shall  be  deemed  to  be the  owner  of  any
               property which  it has acquired  or holds subject  to a
               conditional  sale agreement,  financing lease  or other
               arrangement pursuant to which title to the property has
               been retained  by or  vested in  some other  Person for
               security purposes.

                    "Loan  Documents"  shall mean,  collectively, this
               Agreement, the Note, the Security Instruments,  and all
               other agreements, documents, certificates,  letters and
               instruments  of  whatever   nature  ever  delivered  or
               executed  pursuant  to,  or in  connection  with,  this
               Agreement, whether  existing  on  the  date  hereof  or
               thereafter created, as any of the same may hereafter be
               amended, supplemented, extended or restated.

                    "Material  Adverse Effect"  shall mean  a material
               adverse   effect  on  (i)   the  business,  operations,
               property, condition (financial  or otherwise),  results
               of  operations, assets, liabilities or prospects of the
               Borrower, (ii)  the ability of the  Borrower to perform
               any  of its  obligations  under the  Loan Documents  or
               (iii) the validity or enforceability  of this or any of
               the other Loan Documents or  the rights or remedies  of
               the Bank hereunder or thereunder.

                    "Material  Environmental  Amount"  shall  mean  an
               amount not otherwise  covered by  insurance payable  by
               the  Borrower in  excess  of  $75,000.00  for  remedial
               costs, compliance costs, compensatory damages, punitive
               damages, fines, penalties or any combination thereof.

                    "Materials  of  Environmental Concern"  shall mean
               any hazardous or toxic substances, materials or wastes,
               defined  or   regulated  as   such  in  or   under  any
               Environmental   Law,  including,   without  limitation,
               petroleum  and  its  derivatives   and  polychlorinated
               biphenyls.



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<PAGE> 7



                    "Net Worth" shall mean as of the date of  determi-
               nation all amounts  included under stockholders' equity
               on a balance sheet of the Borrower at such date.

                    "Note" shall have the meaning set forth in Section
               2.02.

                    "Person" shall mean  any individual,  corporation,
               partnership,  joint  venture,   joint  stock   company,
               business  trust,   trust,  unincorporated  association,
               Governmental Authority, or any  other form of entity of
               whatever nature.

                    "Properties"  shall have the  meaning set forth in
               Section 3.11(a).

                    "Requirement of Law" shall mean, as to any Person,
               the certificate or articles of incorporation and bylaws
               or other organizational or governing  documents of such
               Person, and any law,  statute, code, ordinance,  order,
               treaty,   rule,  regulation  or   determination  of  an
               arbitrator or a court  or other Governmental Authority,
               in each case applicable to or binding upon  such Person
               or any of its property  or to which such Person  or any
               of its property is subject.

                    "Revolving  Credit  Loan"  or   "Revolving  Credit
               Loans"  shall have  the  meaning set  forth in  Section
               2.01.

                    "Security Instruments" shall mean, without limita-
               tion,  the  agreements   or  instruments  described  in
               Subsection 7.01(a)   hereof  and  any   and  all  other
               instruments heretofore, now  or hereafter executed  and
               delivered by the Borrower or any other Person to secure
               or guarantee the payment or performance of  the Note or
               this Agreement, as any such agreement or instrument may
               be amended or supplemented from time to time.

                    "Subsidiary"  shall  mean,  as  to any  Person,  a
               corporation,  partnership  or  other  entity  of  which
               shares of  stock  or other  ownership interests  having
               ordinary voting  power (other than stock  or such other
               ownership interests having such power only by reason of
               the happening of a contingency) to elect  a majority of
               the  board  of  directors  or other  managers  of  such
               corporation,  partnership  or other  entity are  at the
               time  owned, or  the management  of which  is otherwise
               controlled, directly or indirectly, through one or more
               intermediaries,  or  both,  by  such  Person.    Unless
               otherwise qualified, all references to  "Subsidiary" or


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<PAGE> 8


               to "Subsidiaries"  in this  Agreement shall refer  to a
               Subsidiary or Subsidiaries of Borrower.

                    "Tangible  Net Worth"  shall mean at  a particular
               date  (i)  the  sum  of  the  stockholders'  equity  of
               Borrower, less (ii) the sum of the aggregate book value
               of the Intangible Assets of Borrower.

                    "Termination   Date"   shall   mean   the   second
               anniversary of the Closing Date.

               Section 1.02   Other  Definitional Provisions.   (i)  Unless
          otherwise specified therein, all  terms defined in this Agreement
          shall have  the defined  meanings when  used in  the Note or  the
          Security Instruments  or any  certificate or other  Loan Document
          made or delivered pursuant hereto.

                    (ii) As  used   herein  and   in  the  Note,   and  any
          certificate or other document  made or delivered pursuant hereto,
          accounting terms  relating to the Borrower not defined in Section
          1.01  and accounting terms partly defined in Section 1.01, to the
          extent not defined, shall  have the respective meanings  given to
          them under GAAP.

                    (iii)  The words "hereof", "herein" and "hereunder" and
          words of similar import  when used in this Agreement  shall refer
          to this Agreement as a whole and not  to any particular provision
          of this Agreement, and  Section, subsection, Schedule and Exhibit
          references are to this Agreement unless otherwise specified.

                    (iv) The meanings  given to terms defined  herein shall
          be  equally applicable to both  the singular and  plural forms of
          such terms.

               Section 1.03   Accounting Principles.   Where the  character
          or amount  of any asset or liability or item of income or expense
          is  required to  be  determined  or  any consolidation  or  other
          accounting computation is required to be made for the purposes of
          this Agreement, such determination, consolidation  or computation
          shall  be  made in  accordance  with  GAAP consistently  applied,
          except   where  such   principles  are   inconsistent   with  the
          requirements of this Agreement.

                                      ARTICLE 2

                           AMOUNT AND TERMS OF COMMITMENTS

               Section 2.01   Revolving Credit Loans.  Subject to the terms
          and conditions hereof, the  Bank agrees to make  revolving credit
          loans (individually, a "Revolving Credit Loan"; collectively, the
          "Revolving Credit  Loans")  to the  Borrower  from time  to  time
          during the Commitment  Period in an aggregate principal amount at

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<PAGE> 9

          any  one time  outstanding  not  to  exceed  the  lesser  of  (i)
          $3,000,000.00  or  (ii) one-third  (1/3)  of  the Borrowing  Base
          Amount.  During the  Commitment Period, the Borrower may  use the
          Commitment by borrowing, prepaying  the Revolving Credit Loans in
          whole or in  part, and  reborrowing, all in  accordance with  the
          terms and conditions hereof.

               Section 2.02   Revolving Credit Note.   The Revolving Credit
          Loans made by the Bank shall be evidenced by a promissory note of
          the  Borrower,  substantially  in  the  form  of  Exhibit  A (the
          "Note").   The Bank shall  maintain in accordance  with its usual
          practice an  account or other record  evidencing the Indebtedness
          of  the Borrower to the Bank resulting from each Revolving Credit
          Loan made by the Bank from time to time, including the amounts of
          principal and interest payable and paid  to the Bank from time to
          time under this Agreement and the Note.  The entries made in such
          account or record  of the Bank  shall be prima facie  evidence of
          the existence  and  amounts of  the obligations  of the  Borrower
          therein recorded; provided, however, that the failure of the Bank
          to maintain any  such account  or record, or  any error  therein,
          shall not  in any  manner affect  the absolute  and unconditional
          obligation of  the Borrower  to repay (with  applicable interest)
          the Revolving  Credit Loans made  to the  Borrower in  accordance
          with the  terms of this Agreement.   The Note shall  (x) be dated
          the Closing  Date, (y)  be stated  to mature  two years from  the
          Closing Date and (z) bear interest on the unpaid principal amount
          thereof from time to time outstanding at  the applicable interest
          rate per annum  as provided in  the Note.   Interest on the  Note
          shall be payable on the dates specified in the Note.

               Section 2.03   Procedure  for  Revolving  Credit  Borrowing.
          The  Borrower   may  borrow  under  the   Commitment  during  the
          Commitment Period on any Business Day, provided that the Borrower
          shall give the  Bank irrevocable notice specifying (A) the amount
          to be  borrowed and (B)  the requested Borrowing  Date; provided,
          that such notice shall be waived by the Bank in  the case of, and
          only in the case of, the initial Revolving Credit Loan to be made
          on  the Closing Date.   Each borrowing pursuant  to the Revolving
          Commitment  shall be  in  an aggregate  principal  amount of  the
          lesser of (i) $50,000.00 or a whole multiple thereof, or (ii) the
          then remaining unadvanced portion of the available Commitment.

               Section 2.04   Borrowing  Base Amount.   The  Borrowing Base
          Amount shall be determined as follows:

                    (a)  Initial Borrowing Base Amount.  (i) The  Borrowing
          Base Amount  shall be $10,163,400.00  during the period  from the
          date hereof to the date on  which the Borrower receives notice of
          the  first determination of the Borrowing Base Amount by the Bank
          pursuant  to Section  2.04(b) and  thereafter the  Borrowing Base
          Amount  shall   be  the  Borrowing  Base   Amount  most  recently
          determined pursuant to Section 2.04(b).

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<PAGE> 10
                    (b)  Determinations of the Borrowing Base Amount.   (i)
          No later than 45 days after  the end of each month throughout the
          Commitment  Period,  the  Borrower  shall, at  its  own  expense,
          furnish  to  the Bank  a borrowing  base report  ("Borrowing Base
          Report"),  in the form attached hereto as Exhibit B, which report
          shall  be dated as of  the end of  each such month  and shall set
          forth,  by category, the Borrowing  Base Assets and the Borrowing
          Base Amount as therein provided.

                   (ii)  Within 15  days after  it receives  each Borrowing
          Base Report, the Bank shall make a determination of the Borrowing
          Base Amount, and shall  notify the Borrower of the  new Borrowing
          Base  Amount, if  any; provided,  that if  the  Bank does  not so
          notify  the Borrower  of a  new Borrowing  Base Amount,  then the
          Borrowing  Base Amount  set forth  in  the Borrowing  Base Report
          furnished  to  the Bank  by  the  Borrower  pursuant  to  Section
          2.04(b)(i)  shall be deemed to be the Borrowing Base Amount until
          a  new Borrowing Base Amount is determined by the Bank and notice
          of such new Borrowing Base Amount is given to the Borrower.  Each
          determination of the Borrowing  Base Amount shall be made  by the
          Bank  in the exercise of  its sole discretion  in accordance with
          the  then current standards and practices of the Bank for similar
          oil  and  gas/contract  drilling  equipment  loans,  taking  into
          account such factors as the Bank may deem appropriate, including,
          without  limitation  the  nature  and extent  of  the  Borrower's
          interest in the Borrowing Base  Assets and the anticipated timing
          and  extent of net  operating income therefrom.   The Bank may in
          its sole  discretion discount  the  value of  any Borrowing  Base
          Asset  set forth in a  Borrowing Base Report  by the same factors
          utilized by it  in discounting the value  of comparable borrowing
          base assets in comparable transactions for comparable borrowers.

                  (iii)  The Borrower  agrees to pay or  reimburse the Bank
          for all  reasonable out-of-pocket costs and  expenses incurred by
          the Bank in connection with (a) the examination of each Borrowing
          Base  Report furnished  to  the Bank  by  the Borrower,  (b)  any
          redetermi-nation  by  the  Bank  of  the  Borrowing  Base  Amount
          pursuant  to such  Borrowing Base  Report (including  independent
          appraisals of the Borrowing  Base Assets which the Bank  may, but
          shall  not  be  required  to,  obtain   in  connection  with  any
          redetermination of  the Borrowing Base  Amount by the  Bank), and
          (c)  the  notification  of  the  Borrower  of  such  redetermined
          Borrowing Base Amount.

                   (iv)  Each  delivery by the  Borrower to  the Bank  of a
          Borrowing   Base  Report   shall  be   deemed  to   constitute  a
          representation  and warranty by the Borrower to the Bank that the
          Borrower  has good  and marketable  title to  the Borrowing  Base
          Assets and any  other property rights  or interests described  in
          such report, and that none of such Borrowing Base Assets or other
          property rights or interests is subject to any Lien other than as
          permitted by Section 5.02.

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<PAGE> 11
               Section 2.05   Optional and Mandatory Prepayments.  (i)  The
          Borrower  may at  any  time and  from  time  to time  prepay  the
          Revolving Credit Loans, in  whole or in part, without  premium or
          penalty, upon at least four Business  Days' irrevocable notice to
          the  Bank, specifying the date and amount  of prepayment.  If any
          such notice is given,  the amount specified in such  notice shall
          be  due and  payable  on the  date  specified therein.    Partial
          prepayments  shall  be  in  an  aggregate  principal  amount   of
          $50,000.00 or a whole multiple thereof.

                    (ii)  If the  aggregate unpaid principal amount of  the
          Revolving Credit Loans  shall at any time  exceed one-third (1/3)
          of the  Borrowing Base Amount  at such  time, the  Bank shall  so
          notify the Borrower, and the Borrower shall, within 30 days after
          such notification,  prepay the principal of  the Revolving Credit
          Loans,  in an  aggregate amount  at least  equal to  such excess,
          together  with accrued interest on the amount prepaid to the date
          of such prepayment.

               Section 2.06   Payment Procedure.   All payments and prepay-
          ments made by the Borrower under the Note or this Agreement shall
          be made without setoff or counterclaim  to the Bank at its office
          at 500 West  Texas Avenue, Midland,  Texas   79701, and shall  be
          made in immediately available funds, prior to 1:00 p.m., Midland,
          Texas  time, on  the  date  that  such  payment  is  required  or
          permitted  to be  made.  Any  payment received by  the Bank after
          1:00  p.m. on  any  date shall  be  considered for  all  purposes
          (including the  calculation of interest, to  the extent permitted
          by  applicable law)  as having  been made  on the  next following
          Business Day.   If the date  of any payment or  prepayment of the
          Note falls  on a day  which is not  a Business Day,  then for all
          purposes of the Note and this Agreement such date shall be deemed
          to  have  fallen on  the next  following  Business Day,  and such
          extension  of  time  shall  in  such  case  be  included  in  the
          computation of payment of interest.

                                      ARTICLE 3

                            REPRESENTATIONS AND WARRANTIES

               To induce the Bank to enter into this Agreement and  to make
          the Revolving Credit  Loans, the Borrower  hereby represents  and
          warrants to  the Bank (which representations  and warranties will
          survive the delivery of the Note  and the making of the Revolving
          Credit Loans hereunder) that:

               Section 3.01   Corporate  Existence;  Compliance  with  Law.
          Borrower  (i) is  duly organized,  validly existing  and in  good
          standing under the laws of the  jurisdiction of its organization,
          (ii)  has the corporate power and authority, and the legal right,
          to own  and operate its property  (including, without limitation,
          the  Borrowing Base Assets), to lease the property it operates as
          lessee  and  to conduct  the business  in  which it  is currently
          engaged,  (iii) is duly qualified as a foreign corporation and in
          good  standing  under the  laws  of each  jurisdiction  where its

                                          11


<PAGE> 12


          ownership, lease or operation  of property or the conduct  of its
          business requires  such qualification  and (iv) is  in compliance
          with  all Requirements  of  Law except  to  the extent  that  the
          failure  to  comply  therewith   could  not,  in  the  aggregate,
          reasonably be expected to have a Material Adverse Effect.

               Section 3.02   Corporate  Power;  Authorization; Enforceable
          Obligations.  Borrower has the corporate power and authority, and
          the  legal right, to make, deliver and perform the Loan Documents
          to which it is a party and to borrow hereunder  and has taken all
          necessary  corporate action  to authorize  the borrowings  on the
          terms  and conditions  of  this Agreement  and  the Note  and  to
          authorize  the execution,  delivery and  performance of  the Loan
          Documents to which it  is a party.   No consent or  authorization
          of, filing with, notice to or other act by  or in respect of, any
          Governmental  Authority  or  any  other  Person  is  required  in
          connection with  the borrowings hereunder or  with the execution,
          delivery, performance,  validity or  enforceability  of the  Loan
          Documents to which the Borrower is  a party.  This Agreement  has
          been, and  each other Loan Document  to which it is  a party will
          be, duly executed and delivered on behalf  of the Borrower.  This
          Agreement constitutes, and each  other Loan Document to  which it
          is  a party when executed and delivered will constitute, a legal,
          valid  and binding  obligation  of  Borrower enforceable  against
          Borrower  in accordance with its terms, subject to the effects of
          bankruptcy,  insolvency,  fraudulent conveyance,  reorganization,
          moratorium  and  other  similar  laws relating  to  or  affecting
          creditors'   rights   generally,  general   equitable  principles
          (whether considered in a  proceeding in equity or at  law) and an
          implied covenant of good faith and fair dealing.

               Section 3.03   No  Legal Bar.   The execution,  delivery and
          performance  of the  Loan Documents  to which  the Borrower  is a
          party,  the  borrowings hereunder  and  the use  of  the proceeds
          thereof will  not violate any  Requirement of Law  or Contractual
          Obligation  of the Borrower and  will not result  in, or require,
          the creation or imposition  of any Lien (other than  as permitted
          hereby) on any of  Borrower's properties or revenues pursuant  to
          any such Requirement of Law or Contractual Obligation.

               Section 3.04   No Default.  Borrower is not in default under
          or  with respect  to any  of its  Contractual Obligations  in any
          respect which could have a Material Adverse  Effect.  No Event of
          Default has occurred and is continuing.

               Section 3.05   Ownership of Property;  Liens.  Borrower  has
          good record and  marketable title  in fee simple  to, or a  valid
          leasehold interest in, all  its real property (including, without
          limitation, the Borrowing Base  Assets), and good title to,  or a
          valid  leasehold interest in, all its other property, and none of
          such  property  is subject  to any  Lien  except as  permitted by
          Section 5.02.

                                          12



<PAGE> 13

               Section 3.06   No  Burdensome  Restrictions.     Except   as
          described in  Schedule 3.06, no Requirement of Law or Contractual
          Obligation of  Borrower could  reasonably be  expected to  have a
          Material Adverse Effect.

               Section 3.07   Taxes.   Borrower has  filed or caused  to be
          filed  all tax returns which,  to the knowledge  of the Borrower,
          are required to  be filed and has paid all taxes  shown to be due
          and payable on said returns or on any assessments made against it
          or any of its property and all other taxes, fees or other charges
          imposed  on it  or  any  of  its  property  by  any  Governmental
          Authority (other than  any the  amount or validity  of which  are
          currently   being  contested   in  good   faith   by  appropriate
          proceedings and with respect to which reserves in conformity with
          GAAP have  been provided on  the books  of the Borrower);  no tax
          Lien  has been filed,  and, to the knowledge  of the Borrower, no
          claim is being  asserted, with respect  to any such  tax, fee  or
          other charge.

               Section 3.08   Federal Regulations.  No part of the proceeds
          of any Revolving  Credit Loan  will be used  for "purchasing"  or
          "carrying" any  "margin stock" within the  respective meanings of
          each of the quoted  terms under Regulation  G or Regulation U  of
          the Board of Governors of  the Federal Reserve System as  now and
          from time to time hereafter in effect.  If requested by the Bank,
          the  Borrower will  furnish  to  the  Bank  a  statement  to  the
          foregoing effect in conformity with  the requirements of FR  Form
          G-1 or FR Form U-1 referred to in said Regulation G or Regulation
          U, as the case may be.

               Section 3.09   Investment   Company   Act;  Public   Utility
          Holding Company Act; Other  Regulations.  Borrower is not  (a) an
          "investment company", or a company "controlled" by an "investment
          company", within  the meaning  of the  Investment Company Act  of
          1940,  as amended  or (b) a  "holding company" as  defined in, or
          otherwise subject to regulation under, the Public Utility Holding
          Company Act of  1935.  Borrower  has not made  an election to  be
          treated as a utility (as defined in subdivision (2) of subsection
          (a) of Section  35.01 of  the Texas Business  and Commerce  Code.
          Borrower is not primarily engaged in the transmission of goods or
          gas by  pipeline, and does not  hold itself out to  the public as
          having facilities for the  transmission of goods or gas  by pipe-
          line which are available for hire by the general public.

               Section 3.10   Purpose  of  Loan.     The  proceeds  of  the
          Revolving  Credit Loans shall be used by the Borrower to purchase
          drill pipe  and related equipment  necessary for the  drilling of
          oil and gas wells, and for general corporate purposes.

               Section 3.11   Environmental Matters.   Except for  environ-
          mental matters which,  in the aggregate, could not  reasonably be
          expected  to either (i) result in the existence of an unsatisfied

                                          13




<PAGE> 14
          liability in excess  of a Material  Environmental Amount or  (ii)
          have a Material Adverse Effect:

                    (a)    to the  best  of the  Borrower's  knowledge, the
               facilities and properties  (real or personal) owned,  leased
               or  operated  by  the  Borrower (the  "Properties")  do  not
               contain, and have not previously contained, any Materials of
               Environmental Concern in amounts or concentrations which (i)
               constitute or constituted a violation of, or (ii) could give
               rise to liability under, any Environmental Law;

                    (b)   to  the  best of  the  Borrower's knowledge,  the
               Properties  and  all operations  at  the  Properties are  in
               compliance,  and  have  in  the  last  five  years  been  in
               compliance,  with  all  applicable  Environmental  Laws, and
               there is no  contamination at, under or about the Properties
               or violation  of any Environmental  Law with respect  to the
               Properties or the business operated by Borrower;

                    (c)  Borrower has not received any notice of violation,
               alleged  violation,  non-compliance, liability  or potential
               liability regarding environmental matters or compliance with
               Environmental  Laws with regard to any  of the Properties or
               the business  of the  Borrower, nor does  the Borrower  have
               knowledge  or reason to believe that any such notice will be
               received or is being threatened;

                    (d)  to the best of the Borrower's knowledge, materials
               of  Environmental  Concern  have  not  been  transported  or
               disposed of from  the Properties  in violation of,  or in  a
               manner or to a  location which could reasonably  be expected
               to give rise to liability under, any Environmental  Law, nor
               have any Materials of Environmental  Concern been generated,
               treated, stored or disposed  of at, on  or under any of  the
               Properties in violation of,  or in a manner that  could give
               rise to liability under, any applicable Environmental Law;

                    (e)     no  judicial  proceeding  or   governmental  or
               administrative action is pending or, to the knowledge of the
               Borrower, threatened, under  any Environmental Law to  which
               Borrower is or will be named  as a party with respect to the
               Properties  or the business  of Borrower, nor  are there any
               consent   decrees  or   other   decrees,   consent   orders,
               administra-tive   orders   or   other   orders,   or   other
               administrative  or  judicial requirements  outstanding under
               any Environmental Law with respect to the Properties or  the
               business of Borrower; and

                    (f)  to the best of the Borrower's knowledge, there has
               been  no  release  or  threat  of  release  of Materials  of
               Environmental Concern at or  from the Properties, or arising
               from  or  related to  the  operations  of  the  Borrower  in

                                          14





<PAGE> 15
               connection with  the Properties  or otherwise  in connection
               with the business  of the  Borrower, in violation  of or  in
               amounts or in  a manner  that could give  rise to  liability
               under Environmental Laws.

               Section 3.12   Insurance.    The  Borrower   maintains  with
          financially sound and reputable insurance companies  insurance in
          at  least such  amounts  and against  at  least such  risks  (but
          including in any event public  liability) as are usually  insured
          against in the same general area by companies engaged in the same
          or  a  similar  business  and  such  insurance  is  otherwise  in
          compliance with the  Loan Documents; provided, however,  Borrower
          does not maintain insurance on its drilling rigs.

               Section 3.13   Financial  Condition.   The balance  sheet of
          the  Borrower as of September 30, 1995 and the related statements
          of income and of cash flows for the six-month period  then ended,
          copies of  which have been  delivered to the  Bank, are true  and
          correct in all material respects and present fairly the financial
          condition of  Borrower as  at such  date and  the results  of its
          operations  and cash  flows for  the periods  stated (subject  to
          normal year-end audit  adjustments).  Borrower  did not have,  at
          the date of the most recent balance sheet referred to above,  any
          guaranty obligation, contingent liability or liability for taxes,
          or  any   long-term  lease   or  unusual  forward   or  long-term
          commitment,  which is  not reflected  in the  foregoing financial
          statements  or  in the  notes thereto.    During the  period from
          September 30, 1995  to and  including the date  hereof there  has
          been  no sale, transfer or  other disposition by  Borrower of any
          material  part of  its business  or property  and no  purchase or
          other  acquisition of  any  business or  property (including  any
          capital  stock of any other  Person) material in  relation to the
          financial condition  of Borrower  at September 30,  1995.   Since
          September  30, 1995,  no change,  either  in any  case or  in the
          aggregate, has occurred in the condition, financial or otherwise,
          of Borrower which would have a Material Adverse Effect.  
               
               Section 3.14   Investments and  Guaranties.  At  the date of
          this Agreement,  Borrower has  not made any  material investments
          in, advances to or guaranties of the obligations of any Person.

               Section 3.15   No  Litigation.    Except  as  set  forth  in
          Schedule 3.06,  there is no litigation,  legal, administrative or
          arbitral proceeding, investigation or  other action of any nature
          pending or, to the knowledge  of the Borrower, threatened against
          or  affecting  Borrower which  involves  the  possibility of  any
          judgment or  liability not fully covered by  insurance, and which
          would  have  a  Material Adverse  Effect;  and,  to  the best  of
          Borrower's knowledge, since September  30, 1995, Borrower has not
          committed  any act, or failed  to take any  action, in connection
          with  the  conduct  of  its  business  or  with  respect  to  any
          Contractual Obligation which is likely to result in the assertion


                                          15




<PAGE> 16
          of  any  adverse claim  of any  nature  whatsoever by  any Person
          against Borrower or its properties, revenues or assets.

               Section 3.16   Licenses  and  Permits.    Borrower  has  not
          failed  to  obtain  any   license,  permit,  franchise  or  other
          governmental authorization  necessary to the ownership  of any of
          its properties or the conduct of its business, which violation or
          failure would have (in  the event that such violation  or failure
          were  asserted  by  any  Person  through  appropriate  action)  a
          Material Adverse Effect.

               Section 3.17   ERISA.    Each  employee  benefit  plan which
          Borrower has sponsored, maintained or contributed to has complied
          in all  material respects with  the applicable provisions  of the
          Employee  Retirement Income Security Act of 1974, as amended, and
          the Internal Revenue Code of 1986, as amended.

               Section 3.18   No Material Misstatements.   No  information,
          exhibit, schedule or report furnished to the Bank by the Borrower
          in connection  with this Agreement contains  any untrue statement
          of a  material fact or omits to state any material fact necessary
          to make the statements contained therein not misleading.

                                      ARTICLE 4

                                AFFIRMATIVE COVENANTS

               The Borrower  hereby agrees that, so long  as the Commitment
          remains  in effect  or  any Indebtedness  is  owing to  the  Bank
          hereunder  or  under the  Note or  any  other Loan  Document, the
          Borrower shall:

               Section 4.01   Financial Statements and Reports.  Furnish or
          cause  to be  furnished to the  Bank from  time to  time (i) such
          information regarding  the  business and  affairs  and  financial
          condition of the Borrower as the Bank may reasonably request, and
          (ii) without request, the following:

                    (a)  Annual Financial Statements -  promptly after
               becoming  available, but  in any  event within  90 days
               after  March 31 of  each  year, a  copy of  the audited
               balance sheet of  the Borrower  as at the  end of  such
               year, and the related statements of income and retained
               earnings and  of cash  flows of  the Borrower  for such
               year, setting  forth in  each case in  comparative form
               the  corresponding  figures  for  the  preceding  year,
               accompanied by the report of the Borrower's independent
               certified public accountants;

                    (b)  Monthly Financial Statements - promptly after
               becoming  available, but  in any  event within  45 days
               after  the end  of  each month,  the unaudited  balance
               sheet of the Borrower as at  the end of such month, and

                                          16




<PAGE> 17
               the related unaudited statements of income and retained
               earnings  and of  cash flows  of the Borrower  for such
               month and for the period from the beginning of the most
               recent fiscal year  to the end  of such month,  setting
               forth   in   each   case   in  comparative   form   the
               corresponding  figures for the  corresponding period of
               the preceding  year, accompanied  by the report  of the
               Principal  Financial  Officer  of the  Borrower,  which
               report shall be to the effect that  such statements are
               true and correct in all material respects necessary for
               a  fair   presentation  (subject  to   normal  year-end
               adjustments);

                    (c)  Accounts Receivable Reports -  promptly after
               becoming  available, but  in any  event within  45 days
               after  the  end of  each  month,  a  list  of  accounts
               receivable  of  Borrower,  and  an aging  of  all  such
               receivables on the basis of  30-60-90 and over 90  days
               from date of invoice;

                    (d)  Calculation  of  Ratios   -  promptly   after
               becoming  available, but  in any  event within  45 days
               after  the  end  of  each month,  the  calculations  of
               Current Ratio,  Tangible Net Worth, Cash  Flow and Debt
               to Worth  Ratio pursuant  to Sections 5.16,  5.17, 5.18
               and 5.19, respectively, hereof; and

                    (e)  Shareholder     Communications;    Regulatory
               Filings - promptly after their availability, but in any
               event  within five  Business  Days after  the same  are
               sent, copies  of all financial statements,  reports and
               other  communica-tions  furnished  by Borrower  to  its
               shareholders, and within  five Business Days after  the
               same are filed,  copies of all forms, reports and other
               filings made  by the  Borrower with the  Securities and
               Exchange Commission.

               Section 4.02   Certificates  of  Compliance.    Concurrently
          with the  furnishing of the annual  financial statements pursuant
          to Subsection 4.01(a)  hereof and the  calculation of the  ratios
          pursuant to  Subsection 4.01(d) hereof,  furnish or  cause to  be
          furnished to the Bank  a certificate in the form  attached hereto
          as Exhibit C and Exhibit D, respectively, signed by the principal
          financial officer of the Borrower to the effect (i) that a review
          of  the activities  of  the Borrower  has  been made  under  such
          officer's  supervision with  a  view to  determining whether  the
          Borrower  has  fulfilled  all   of  its  obligations  under  this
          Agreement, the Note  and the Security Instruments;  (ii) that the
          Borrower has fulfilled its obligations under such instruments and
          that all  representations made herein  or therein continue  to be
          true and  correct in  all material respects  except as  otherwise
          stated  therein, or  if there  is then  in existence an  Event of

                                          17





<PAGE> 18
          Default, specifying  such Event  of  Default and  the nature  and
          status  thereof; and (iii) to  the extent requested  from time to
          time  by  the  Bank,  specifically affirming  compliance  by  the
          Borrower with any covenants under this  Agreement or any Security
          Instrument and  accompanied by  such financial or  other details,
          information  and material as  the Bank may  reasonably request to
          evidence such compliance.

               Section 4.03   Payment of Taxes and  Other Charges.  Pay and
          discharge  or cause to be paid and discharged promptly all taxes,
          assessments and  governmental charges  or levies, other  than any
          the  amount or validity of which are currently being contested in
          good faith by appropriate  proceedings and with respect  to which
          reserves  in conformity with GAAP have been provided on the books
          of the Borrower.

               Section 4.04   Maintenance   of    Existence;   Conduct   of
          Business.  (i) Maintain  its separate corporate existence, rights
          and franchises; (ii) observe and comply (to the extent  necessary
          so that any  failure would  not have a  Material Adverse  Effect)
          with all  Contractual Obligations and Requirements  of Law; (iii)
          maintain its properties  in good  and workable  condition at  all
          times and make all repairs, replacements, additions,  betterments
          and improvements to its  properties as are needful and  proper so
          that  the  business carried  on  in connection  therewith  may be
          conducted properly  and efficiently at  all times; and  (iv) take
          all  reasonable action  to  maintain all  rights, privileges  and
          franchises  necessary or  desirable in the  normal course  of its
          business.

               Section 4.05   Further  Assurances.     Cure  promptly   any
          defects  in the  creation  and  issuance  of  the  Note  and  the
          execution and delivery of this Agreement, any Security Instrument
          or other  Loan Document  to which the  Borrower is  a party,  and
          promptly  execute and deliver to  the Bank upon  request all such
          other  and  further  documents,  agreements  and  instruments  in
          compliance with or accomplishment of the covenants and agreements
          of the Borrower in this Agreement and the Security Instruments or
          to  further  evidence  and  more fully  describe  the  collateral
          intended as security for the Note, or to correct any omissions in
          any  Security Instrument,  or  more fully  to state  the security
          obligations set out herein  or in any Security Instrument,  or to
          perfect, protect or  preserve any Liens  created pursuant to  any
          Security  Instrument, or  to  make any  recordings,  to file  any
          notices,  or  obtain any  consents, all  as  may be  necessary or
          appropriate in connection therewith as determined by the Bank.

               Section 4.06   Performance  of  Obligations.   Perform every
          act and discharge all of its obligations provided to be performed
          and  discharged by it under this Agreement and under the Security
          Instruments  and other Loan Documents at the time or times and in
          the manner specified.  

                                          18





<PAGE> 19
               Section 4.07   Reimbursement   of   Expenses.      Pay   all
          reasonable legal fees and  out-of-pocket expenses incurred by the
          Bank  in   connection  with  the  negotiation,   preparation  and
          administration  of  this   Agreement,  the  Note,   the  Security
          Instruments  and any and all other  Loan Documents (including any
          amendments  hereto or thereto or consents or waivers hereunder or
          thereunder) and all reasonable fees, charges or taxes for the re-
          cording  or  filing of  the  Security  Instruments, and  promptly
          reimburse the Bank for all amounts expended, advanced or incurred
          by the Bank to satisfy any obligation  of the Borrower under this
          Agreement or any other  Person under any Security Instrument,  or
          to collect the Note, or  to enforce the rights of the  Bank under
          this  Agreement or  any Security  Instrument, which  amounts will
          include  all court costs,  reasonable attorneys' fees (including,
          without  limitation, for  trial,  appeal  or other  proceedings),
          reasonable fees  of auditors and  accountants, and  investigation
          expenses reasonably incurred in connection with any such matters.

               Section 4.08   Insurance.  Maintain  with financially  sound
          and   reputable  insurance   companies  insurance   against  such
          liabilities, casualties,  risks  and contingencies  and  in  such
          types and amounts as is customary in the case  of Persons engaged
          in the  same or similar  businesses and  similarly situated;  and
          furnish or  cause to be furnished to the Bank, upon request, full
          information as to  the insurance carried, including copies of the
          applicable policies; and apply the  proceeds of such policies, if
          any,  to the  prepayment of  the Indebtedness  then owing  to the
          Bank.    Notwithstanding anything  in  this Section  4.08  to the
          contrary, Borrower shall not be required to maintain insurance on
          its drilling rigs.

               Section 4.09   Accounts and Records.   Keep proper  books of
          record and account in  which full, true and correct  entries will
          be  made of  all  dealings or  transactions  in relation  to  its
          business and activities.  

               Section 4.10   Right  of  Inspection.   Permit  any officer,
          employee,  agent  or  representative of  the  Bank  to  visit and
          inspect  any of the properties of the Borrower, examine its books
          of record and accounts,  take copies and extracts  therefrom, and
          to discuss the business, operations, properties, finances and ac-
          counts of  the Borrower with the  Borrower's officers, employees,
          engineers, accountants and auditors, all at such reasonable times
          and as often as the Bank may reasonably desire.

               Section 4.11   Notice  of Certain  Events.   Promptly notify
          the Bank of the  occurrence of (i) any event which constitutes an
          Event of Default, together with a detailed statement by the Chief
          Executive Officer of  the Borrower  of the steps  being taken  to
          cure such Event of Default; (ii) the receipt of any  notice from,
          or the  taking  of  any  other  action  by,  the  holder  of  any
          promissory note, debenture or other evidence of indebtedness with

                                          19





<PAGE> 20
          respect to a claimed default, together with a detailed  statement
          specifying  the notice given or other action taken by such holder
          and  the  nature  of the  claimed  default  and  what action  the
          Borrower  is  taking or  proposes to  take with  respect thereto;
          (iii)  any  legal, judicial  or regulatory  proceedings affecting
          Borrower or any of its properties in which the amount involved is
          material and is not  covered by insurance or which,  if adversely
          determined,  would  have  a  Material Adverse  Effect;  (iv)  any
          dispute between  the Borrower  and any Governmental  Authority or
          any  other Person  which, if adversely  determined, would  have a
          Material Adverse  Effect; (v)  any event  or  condition having  a
          Material Adverse Effect; and (vi) each Environmental Complaint.  

               Section 4.12   Borrowing  Base Reports.    Provide the  Bank
          with  Borrowing Base Reports  required by and  in accordance with
          Section 2.04(b)(i) of this Agreement.

                                      ARTICLE 5

                                  NEGATIVE COVENANTS

               The Borrower hereby agrees  that, so long as  the Commitment
          remains  in effect  or  any Indebtedness  is  owing to  the  Bank
          hereunder  or  under the  Note or  any  other Loan  Document, the
          Borrower shall not, directly or indirectly:

               Section 5.01   Limitation on Indebtedness.   Incur,  create,
          assume or suffer to exist any Indebtedness, except:

                    (a)  Indebtedness  of  the  Borrower   under  this
               Agreement;

                    (b)  Indebtedness existing  on  the date  of  this
               Agreement  which   is  set   forth  in  the   financial
               statements   referred  to  in   Section  3.13  of  this
               Agreement, but not any increases thereof;

                    (c)  obligations for  the payment of rent  or hire
               of  property  under leases  or  lease agreements  which
               would not  cause the  aggregate amount of  all payments
               made  by the Borrower pursuant to  such leases or lease
               agreements  to  exceed  $250,000.00  during  the  terms
               thereof; and

                    (d)  additional Indebtedness of  the Borrower  not
               to  exceed $250,000.00 in aggregate principal amount at
               any one time outstanding.

               Section 5.02   Limitation on Liens.   Create, incur,  assume
          or permit  to exist any  Lien on any  of its property,  assets or
          revenues, whether now owned or hereafter acquired, except for:


                                          20





<PAGE> 21
                    (a)  Liens   securing   the    payment   of    any
               Indebtedness of the Borrower under this Agreement; and

                    (b)  Excepted Liens.

               Section 5.03   Limitation   on  Investments,   Acquisitions,
          Loans  and Advances.  Make any loan, advance, extension of credit
          or capital contribution to, or  purchase any stock, bonds, notes,
          debentures  or other securities  of or any  assets constituting a
          business unit of, or  make any other investments in,  any Person,
          except:

                    (a)  the   outstanding   investments,   loans   or
               advances set forth in the financial statements referred
               to in  Section  3.13 of  this  Agreement, but  not  any
               increases thereof;

                    (b)  investments in (i) direct obligations  of the
               United States  of America  or any agency  thereof; (ii)
               certificates of deposit of  the Bank of maturities less
               than  one year, or issued by  other commercial banks in
               the United States of America having capital and surplus
               in excess of $50,000,000;  or (iii) commercial paper of
               maturities less  than  six months  if  at the  time  of
               purchase  such  paper is  rated  in either  of  the two
               highest   rating  categories   of   Standard  &   Poors
               Corporation, Moody's  Investors  Service, Inc.  or  any
               other rating agency satisfactory to the Bank;

                    (c)  extensions  of trade  credit in  the ordinary
               course of business;

                    (d)   investments in  and acquisitions of  oil and
               gas properties and related  assets, provided that  such
               investments  or acquisitions are  made in  the ordinary
               course   of  Borrower's  business   and  not  otherwise
               prohibited by this Agreement;

                    (e)  other  investments,   capital  contributions,
               loans or advances not to exceed the aggregate amount of
               $250,000.00 at any one time outstanding; and

                    (f)  loans   and  advances  to  employees  of  the
               Borrower for travel, entertainment and similar expenses
               in the ordinary course of business.

               Section 5.04   Limitation  on  Dividends, Distributions  and
          Redemptions.  Declare  or pay any dividend  (other than dividends
          payable  solely in common stock of the Borrower) on, or purchase,
          redeem,  retire or otherwise acquire for value, any shares of any
          class of  Borrower's capital stock now  or hereafter outstanding,
          or  return any  capital to  its shareholders,  or make  any other

                                          21





<PAGE> 22
          distribution in  respect thereof, whether in cash  or property on
          in obligations of the Borrower or any Subsidiary.

               Section 5.05   Limitation  on Sales  and Leasebacks.   Enter
          into any arrangement  with any  Person whereby it  shall sell  or
          transfer any  property, whether now owned  or hereafter acquired,
          and whereby it shall  then or thereafter rent or  lease as lessee
          such  property or  any part  thereof or  other property  which it
          intends  to use for substantially the same purpose or purposes as
          the property sold or transferred.

               Section 5.06   Limitation  on  Fundamental  Changes.   Enter
          into  any merger,  consolidation or  amalgamation,  or liquidate,
          wind  up  or  dissolve  itself  (or  suffer  any  liquidation  or
          dissolution),  or  convey,  sell,   lease,  assign,  transfer  or
          otherwise dispose of (whether  in one transaction or in  a series
          of  related  transactions),  all  or  substantially  all  of  its
          property,  business or  assets  (whether now  owned or  hereafter
          acquired), or make any  material change in its present  method of
          conducting business.

               Section 5.07   Limitation  on Leases.  Create, incur, assume
          or suffer to exist any obligation for the payment of rent or hire
          of  property of  any kind  whatsoever  (real or  personal), under
          leases or lease agreements (other than leases or lease agreements
          which constitute Indebtedness and  which are permitted by Section
          5.01(c) of this  Agreement, or  oil and gas  leases) which  would
          cause the aggregate amount  of all payments made by  the Borrower
          pursuant  to such leases or lease agreements to exceed $75,000 in
          any period of twelve consecutive calendar months.

               Section 5.08   Limitation on Negative Pledge Clauses.  Enter
          into with any Person any agreement, other than (a) this Agreement
          and (b) the Loan Documents, which prohibits or limits the ability
          of the Borrower to create,  incur, assume or suffer to  exist any
          Lien  upon any of its  property, assets or  revenues, whether now
          owned or hereafter acquired.

               Section 5.09   Limitation  on Use  of Proceeds.   Permit the
          proceeds of the  Note to be  used for any  purpose other than  as
          permitted by Section 3.10 hereof.

               Section 5.10   Limitation on Lines of  Business.  Enter into
          any business,  either directly or through  any Subsidiary, except
          for those businesses in which the Borrower is engaged on the date
          of this Agreement or which are directly related thereto.

               Section 5.11   Limitation on  Sale of Assets.  Convey, sell,
          lease,  assign,  transfer  or otherwise  dispose  of  any of  its
          property,  business  or  assets (including,  without  limitation,
          receivables  and  leasehold  interests),  whether  now  owned  or
          hereafter acquired, except:


                                          22




<PAGE> 23
                    (a)  obsolete, worn out, depleted  or "uneconomic"
               property  disposed   of  in  the   ordinary  course  of
               business;

                    (b)  the  sale   of  petroleum  produced   by  the
               Borrower in the ordinary course of Borrower's business;

                    (c)  undeveloped, undrilled leasehold acreage held
               in inventory, provided that in  any fiscal year of  the
               Borrower  the  gross  proceeds   of  such  property  so
               disposed of shall not exceed $100,000.00; and

                    (d)  the sale of any other assets or properties of
               the  Borrower, provided that in any  fiscal year of the
               Borrower  the  gross  proceeds   of  such  property  so
               disposed of shall not exceed $150,000.00.

               Section 5.12   Limitation on Changes in Fiscal Year.  Permit
          its fiscal year to end on a day other than March 31.

               Section 5.13   Limitation  on Transactions  with Affiliates.
          Enter into  any transaction,  including, without  limitation, any
          purchase, sale, lease or exchange of property or the rendering of
          any  service, with any  Affiliate unless such  transaction is (a)
          not  otherwise  prohibited  under  this  Agreement,  (b)  in  the
          ordinary  course of  business and  (c) upon  fair and  reasonable
          terms no less favorable to the Borrower than it could obtain in a
          comparable arm's length transaction with a Person which is not an
          Affiliate.

               Section 5.14   No Change  in Control.  Permit  any Change in
          Control of Borrower.

               Section 5.15   Limitation on  Issuance of  Stock.  Issue  or
          sell any shares of capital stock or other equity security (or any
          options,   warrants,  rights  or   other  convertible  securities
          entitling the holder thereof to acquire any such capital stock or
          equity security) of any kind or class, except:

                    (a)  the issuance  and  sale of  capital stock  or
               other equity  security, the  proceeds of which  will be
               used to repay the Note in its entirety, and

                    (b)  the  issuance  and  sale  of  capital   stock
               pursuant to the Borrower's stock option plans and stock
               options in existence on the date of this Agreement.

               Section 5.16   Current Ratio.   Permit the Current Ratio, as
          defined herein and  calculated pursuant to  Exhibit E hereto,  to
          be: (i) less than .65  to 1.0 at any time during the  period from
          the date hereof until March  31, 1996; (ii) less than .75  to 1.0
          at  any time  during the period  from April  1, 1996  to June 30,

                                          23





<PAGE> 24
          1996; or (iii) less  than .80 to 1.0  at any time from and  after
          July 1, 1996.

               Section 5.17   Tangible  Net Worth.  Permit the Tangible Net
          Worth, as  defined herein and  calculated pursuant  to Exhibit  F
          hereto, to  be less  than  $6,250,000.00 as  of the  end of  each
          month.

               Section 5.18   Cash Flow.  Permit  the Cash Flow, as defined
          herein and calculated pursuant to Exhibit G hereto, to  aggregate
          less than $300,000.00 for each moving four-month period ending on
          the date the  Cash Flow calculation is made,  with the first such
          calculation to be made as of February 28, 1996 for the four-month
          period then ended, followed  by a similar calculation at  the end
          of each succeeding month.  As  an example, for the calculation to
          be  made for the four-month  period ended February  28, 1996, the
          cumulative  aggregate  Cash  Flow  for the  months  of  November,
          December, January and February shall not be less than $300,000.00
          for such  four-month period;  the cumulative aggregate  Cash Flow
          for the four-month period ended March  31, 1996 shall not be less
          than $300,000.00  for the  months of December,  January, February
          and March; and so forth.

               Section 5.19   Debt  to Worth  Ratio.   Permit  the Debt  to
          Worth Ratio, as defined herein and calculated pursuant to Exhibit
          H hereto, to be greater than 1.5 to 1.0.


                                      ARTICLE 6

                                  EVENTS OF DEFAULT

               Section 6.01   Events.  Any  of the  following events  shall
          constitute and be considered  an "Event of Default" as  that term
          is used herein:

                    (a)  Payments  -  default  shall  be  made  in the
               payment  when due  of any  installment of  principal or
               interest on the Note or any other Indebtedness owing by
               the Borrower to the Bank; or

                    (b)  Representations and Warranties  - any  repre-
               sentation or  warranty made by the  Borrower herein, or
               by the  Borrower or  any other  Person in  any Security
               Instrument, or in any  other Loan Document furnished to
               the  Bank  pursuant to  or  under  this Agreement,  any
               Security Instrument or any other  Loan Document, proves
               to have  been incorrect in  any material respect  as of
               the date when  made or deemed  made and shall  continue
               unremedied for a period of 30 days after the earlier of
               (i) the Borrower becoming aware of such default or (ii)
               the Bank giving notice thereof to the Borrower; or

                                          24





<PAGE> 25
                    (c)  Loan Agreement Covenants  - default shall  be
               made  by   the  Borrower  in  the   due  observance  or
               performance  of  any  of the  covenants  or  agreements
               contained in Articles 4 and 5 of this Agreement, and in
               the  case  of  default  under Article  4  such  default
               continues  unremedied for a period of 30 days after the
               earlier  of (i)  the  Borrower becoming  aware of  such
               default or (ii)  the Bank giving notice  thereof to the
               Borrower; or

                    (d)  Security  Instrument  Covenants -  default is
               made in  the due observance or  performance by Borrower
               of any  covenant, condition  or agreement contained  in
               any Security Instrument, and such default continues un-
               remedied beyond the expiration  of any applicable grace
               period  which  may  be  expressly  allowed  under  such
               Security Instrument; or

                    (e)  Involuntary Bankruptcy or Other Proceedings -
               an  involuntary  case  or  other  proceeding  shall  be
               commenced  against  Borrower  which seeks  liquidation,
               reorganization or  other relief  with respect to  it or
               its debts  or other liabilities  under any  bankruptcy,
               insol-vency or  other similar  law now or  hereafter in
               effect or seeking the appointment of a trustee, receiv-
               er, liquidator, custodian or other  similar official of
               it  or any substantial  part of its  property, and such
               involuntary  case or other  proceeding shall remain un-
               dismissed  or unstayed for a  period of 60  days; or an
               order for  relief against Borrower shall  be entered in
               any such case under the Federal Bankruptcy Code; or

                    (f)  Voluntary  Petitions,  Etc. -  Borrower shall
               commence a voluntary case  or other proceeding  seeking
               liquidation,  reorganization  or   other  relief   with
               respect  to itself  or its  debts or  other liabilities
               under any  bankruptcy, insolvency or  other similar law
               now or  hereafter in effect or  seeking the appointment
               of  a trustee, receiver, liquidator, custodian or other
               similar official of it  or any substantial part  of its
               property, or shall consent to any such relief or to the
               appointment  of  or  taking  possession  by   any  such
               official  in an  involuntary case  or other  proceeding
               commenced against  it, or shall make  a general assign-
               ment  for  the  benefit  of creditors,  or  shall  fail
               generally to,  or shall admit in  writing its inability
               to pay its debts generally as they become due, or shall
               take any corporate action to authorize or effect any of
               the foregoing; or

                    (g)  Discontinuance  of  Business -  Borrower dis-
               continues its usual business; or

                                          25





<PAGE> 26
                    (h)  Default  on  Other  Indebtedness  -  Borrower
               shall  default  in  any  payment  of  principal  of  or
               interest on  any Indebtedness (other than  to the Bank)
               in  excess  of  $250,000.00  in  outstanding  principal
               amount beyond any period of grace provided with respect
               thereto, or in the  performance of any other agreement,
               term  or  condition  contained  in  any   agreement  or
               instrument under  or by which any  such Indebtedness is
               created,  evidenced or  secured if  the effect  of such
               default is  to cause such obligation to  become due be-
               fore its  stated maturity or to permit the holder(s) of
               such obligation or the trustee(s) under any such agree-
               ment or  instrument to cause such  obligation to become
               due  prior to its stated maturity,  whether or not such
               default or failure  to perform should be waived  by the
               holder(s) of such obligation or such trustee(s); or

                    (i)  Undischarged Judgments - Borrower  shall fail
               within  30 days  after date  of entry  to pay,  bond or
               otherwise discharge any judgment  or order for the pay-
               ment  of money  in excess  of $250,000.00  that is  not
               otherwise being satisfied in  accordance with its terms
               and  is  not  stayed   on  appeal  or  otherwise  being
               appropriately contested in good faith; or

                    (j)  Security Instruments -  any Security  Instru-
               ment after delivery thereof  shall for any reason cease
               to be in full  force and effect and valid,  binding and
               enforceable in  accordance with its terms,  or cease to
               create  a  valid and  perfected  Lien  of the  priority
               required thereby on any  of the collateral purported to
               be covered thereby, or Borrower or any other Person who
               may  have granted or purported to grant such Lien shall
               so state in writing; or

                    (k)  Material  Adverse Effect -  the occurrence of
               any  change  or  event  which has  a  Material  Adverse
               Effect.

               Section 6.02   Remedies.

                    (a)  Upon  the occurrence of  any Event of Default
               described  in Subsection  6.01(e)  or  (f) hereof,  the
               lending  obligations   of  the  Bank   hereunder  shall
               immediately terminate, and the entire  principal amount
               of all  Indebtedness then outstanding and  owing to the
               Bank  together  with interest  then accrued  and unpaid
               thereon shall become immediately  due and payable,  all
               without  demand and presentment  for payment, notice of
               nonpayment, protest, notice of  protest, notice of dis-
               honor, notice  of intention to  accelerate maturity  or
               notice of acceleration of maturity, or any other notice

                                          26





<PAGE> 27
               of default of  any kind,  all of which  are hereby  ex-
               pressly waived by the Borrower.

                    (b)  Upon  the occurrence  and at any  time during
               the continuance of any other Event of Default specified
               in Section 6.01 hereof, the Bank may, by written notice
               to  the  Borrower,  (i)  declare  the entire  principal
               amount of  all Indebtedness then outstanding  and owing
               to  the Bank  together with  interest then  accrued and
               unpaid  thereon  to  be  immediately  due  and  payable
               without demand and  presentment for payment,  notice of
               nonpayment,  protest,  notice  of  protest,  notice  of
               dishonor, notice of intention to accelerate maturity or
               notice of acceleration of maturity, or any other notice
               of default  of  any  kind,  all  of  which  are  hereby
               expressly waived by the Borrower, and/or (ii) terminate
               the lending  obligations of  the Bank  hereunder unless
               and until the Bank shall reinstate same in writing.

               Section 6.03   Right  of Setoff.   Upon  the  occurrence and
          during  the continuance of any  Event of Default,  or if Borrower
          becomes  insolvent,   however  evidenced,  the  Bank   is  hereby
          authorized  at  any time  and from  time  to time,  without prior
          notice to the Borrower (any such notice being expressly waived by
          the  Borrower), to setoff and apply any and all deposits (general
          or special, time  or demand,  provisional or final)  at any  time
          held and other Indebtedness at  any time owing by the Bank  to or
          for the credit or the account of Borrower against any  and all of
          the Indebtedness  owing to the  Bank, irrespective of  whether or
          not the Bank shall have made  any demand under this Agreement  or
          the Note and  although such  obligations may be  unmatured.   The
          Bank agrees promptly to notify the Borrower after any such setoff
          and  application, provided that  the failure to  give such notice
          shall not  affect the  validity of  such setoff and  application.
          The rights of the Bank under this Section 6.03 are in addition to
          other rights  and remedies (including, without  limitation, other
          rights of setoff) which the Bank may have.

                                      ARTICLE 7

                                 CONDITIONS PRECEDENT

               Section 7.01   Conditions to Initial Revolving  Credit Loan.
          The obligation of the  Bank to make the initial  Revolving Credit
          Loan  is subject to  the satisfaction,  prior to  or concurrently
          with  the making  of such  Revolving Credit  Loan on  the Closing
          Date, of the following conditions precedent.

                    (a)  Loan Documents - the Bank shall have received
               this Agreement,  the Note and the  Security Instruments
               described in Schedule 7.01,  in each case duly executed


                                          27





<PAGE> 28
               and  delivered  by a  duly  authorized  officer of  the
               Borrower.

                    (b)  Closing  Certificate  - the  Bank  shall have
               received a certificate of the Chairman of the  Board of
               Directors  of Borrower,  dated the  Closing  Date, sub-
               stantially in  the form of Exhibit  I, with appropriate
               insertions and attachments.

                    (c)  Corporate Proceedings of  the Borrower -  the
               Bank shall  have received a copy of the resolutions, in
               form  and substance  satisfactory to  the Bank,  of the
               Board of Directors of  the Borrower authorizing (i) the
               execu-tion, delivery and  performance of this Agreement
               and the other Loan Documents to which it is a party and
               (ii) the borrowings  contemplated hereunder,  certified
               by the Chairman  of the Board of  Directors of Borrower
               as of the Closing Date,  which certificate shall be  in
               form and  substance satisfactory to the  Bank and shall
               state that the resolutions  thereby certified have  not
               been amended, modified, revoked or rescinded.

                    (d)  Borrower  Incumbency  Certificate -  the Bank
               shall  have received  a  certificate  of the  Borrower,
               dated  the  Closing  Date,  as to  the  incumbency  and
               signature of the officers of the Borrower executing any
               Loan Document  in substantially the form  of Exhibit J,
               executed by the Chairman of the Board of Directors  and
               the  Secretary  or  any   Assistant  Secretary  of  the
               Borrower.

                    (e)  Corporate  Documents -  the  Bank shall  have
               received true  and complete  copies of the  articles of
               incorporation and  bylaws of the Borrower, certified as
               of  the Closing  Date  as complete  and correct  copies
               thereof  by the Chairman  of the Board  of Directors of
               the Borrower.

                    (f)  Consents,  Licenses and Approvals  - the Bank
               shall have  received a  certificate of the  Chairman of
               the Board  of Directors  of the Borrower  (i) attaching
               copies  of  all  consents,  authorizations  and filings
               referred to  in subsection 3.02, and  (ii) stating that
               such consents,  licenses and filings are  in full force
               and effect, and such certificate and each such consent,
               authorization and filing shall be in form and substance
               satisfactory to the Bank. 

                    (g)  Other -  the  Bank shall  have received  such
               other documents as it  may reasonably have requested at
               any  time at or  prior to the  Closing Date, including,
               without  limitation,  a   schedule  of  all   insurance

                                          28





<PAGE> 29
               presently maintained  by the  Borrower and an appraisal
               of the  Borrower's drilling rigs  and related equipment
               prepared by an independent  appraiser acceptable to the
               Bank and  being in  form and substance  satisfactory to
               the Bank.

               Section 7.02   Conditions  to  Each  Revolving Credit  Loan.
          The  obligation of  the Bank  to make  any Revolving  Credit Loan
          requested  to be made by Borrower on any date (including, without
          limitation, its initial Revolving Credit Loan) is subject to  the
          satisfaction of the following conditions precedent:

                    (a)  Representations  and Warranties.  Each of the
               representations and warranties made by the  Borrower in
               or pursuant  to the  Loan Documents shall  be true  and
               correct in all material respects on and as of such date
               as if made on and as of such date.

                    (b)  No  Event of  Default.   No Event  of Default
               shall have occurred and  be continuing on such date  or
               after  giving  effect  to  the  Revolving Credit  Loans
               requested to be made on such date.

                    (c)  Maintenance      of      Borrowing      Base.
               Notwithstanding Section 2.05(ii),  after giving  effect
               to the Revolving  Credit Loans requested to  be made on
               any  date,   the  aggregate  principal  amount  of  the
               Revolving  Credit  Loans  then  outstanding  shall  not
               exceed  the lesser  of (i)  $3,000,000.00 or  (ii) one-
               third  (1/3)  of  the  Borrowing Base  Amount  then  in
               effect.

                    (d)  No  Material  Litigation.     No  litigation,
               investigation or proceeding of or before any arbitrator
               or Governmental  Authority shall be pending  or, to the
               knowledge of the Borrower, threatened by or against the
               Borrower  or the Bank with  respect to any  of the Loan
               Documents  or  any  of  the  transactions  contemplated
               hereby or thereby.

                    (e)  Borrowing Base  Reports.  The Bank shall have
               received all  Borrowing  Base Reports  required  to  be
               delivered by Borrower pursuant to Section 2.04(b).

                    (f)  Additional Matters.  All corporate  and other
               proceedings, and all  documents, instruments and  other
               legal  matters  in  connection  with  the  transactions
               contemplated  by this  Agreement  and  the  other  Loan
               Documents  shall be satisfactory  in form and substance
               to  the Bank,  and  the Bank  shall have  received such
               other documents  and legal  opinions in respect  of any


                                          29





<PAGE> 30
               aspect  or consequence of the transactions contemplated
               hereby or thereby as it shall reasonably request.

          Each  borrowing  by the  Borrower  hereunder  shall constitute  a
          representation  and  warranty  by the  Borrower  as  of  the date
          thereof  that the  conditions contained  in this  subsection have
          been satisfied.

                                      ARTICLE 8

                                    MISCELLANEOUS

               Section  8.01  Notices.  Any notice required or permitted to
          be given under or in connection  with this Agreement, the Note or
          the Security  Instruments (except  as may otherwise  be expressly
          required  therein) shall  be in  writing and  shall be  mailed by
          first class or express  mail, postage prepaid, or sent  by telex,
          telegram, telecopy  or other  similar form of  rapid transmission
          confirmed by  mailing (by  first class  or express mail,  postage
          prepaid) written  confirmation at substantially the  same time as
          such rapid  transmission, or personally delivered  to any officer
          of the receiving party.  All such communications shall be mailed,
          sent or delivered, 

               (a)  if to the Borrower: TMBR/Sharp Drilling, Inc.
                                        4607 West Industrial Blvd.
                                        Midland, Texas  79703

               (b)  if to the Bank:     Norwest Bank Texas, Midland, N.A.
                                        500 W. Texas, Suite 400
                                        Midland, Texas  79701

          or  to  such  other   address  or  individual's  or  department's
          attention as a party may  furnish to the other party  in writing.
          Any communication so addressed  and mailed shall be deemed  to be
          given when so  mailed.  Any notice so sent  by rapid transmission
          shall be deemed to be given when receipt  of such transmission is
          acknowledged.  Any communication so  delivered in person shall be
          deemed  to be given when  receipted for by,  or actually received
          by, an  authorized officer  of the Borrower  or the Bank,  as the
          case may be.

               Section 8.02  Amendments and Waivers.  Any provision of this
          Agreement,  the Note, the Security Instruments  or the other Loan
          Documents  may be  amended  or  waived  if,  but  only  if,  such
          amendment or waiver is  in writing and is  signed by each  Person
          which is  a party  to the  Loan Document  being amended  (or with
          respect to which a waiver is being obtained) and the Bank.

               Section 8.03   Indemnity by  Borrower.  The  Borrower agrees
          to indemnify, save and hold harmless the Bank and its Affiliates,
          directors,    officers,    agents,   attorneys    and   employees
          (collectively, the  "Indemnitees") from and against:  (a) any and
          all claims,  demands,  actions  or  causes  of  action  that  are


                                          30


<PAGE> 31


          asserted  against any  Indemnitee by any  Person (other  than the
          Borrower)  if the  claim,  demand,  action  or  cause  of  action
          directly  or indirectly  relates to  a claim,  demand, action  or
          cause  of action that such  Person asserts or  may assert against
          the  Borrower, any  Affiliate  of the  Borrower  or any  officer,
          director  or shareholder of the Borrower; (b) any and all claims,
          demands, actions or  causes of action  that are asserted  against
          any Indemnitee by  any Person  (other than the  Borrower) if  the
          claim, demand, action or cause of action arises out of or relates
          to the Revolving  Credit Loans,  the use or  contemplated use  of
          proceeds of the Revolving Credit Loans or the relationship of the
          Borrower   and   the  Bank   under   this   Agreement;  (c)   any
          administrative  or investigative  proceeding by  any Governmental
          Authority arising out of or related to a claim, demand, action or
          cause of  action described in clauses  (a) or (b) above;  and (d)
          any  and all  liabilities, losses,  costs or  expenses (including
          reasonable attorneys' fees and disbursements) that any Indemnitee
          suffers  or incurs as a result of any of the foregoing; provided,
          that no  Indemnitee shall be entitled to  indemnification for any
          liability,  loss,  cost  or  expense  caused  by  its  own  gross
          negligence or willful  misconduct.  If any  claim, demand, action
          or  cause of action is  asserted against any  Indemnitee and such
          Indemnitee  intends to  claim  indemnification from  the Borrower
          under this  Section 8.03,  such Indemnitee shall  promptly notify
          the  Borrower, but the failure to so promptly notify the Borrower
          shall  not affect  the  obligations of  the  Borrower under  this
          Section  8.03  unless  such  failure  materially  prejudices  the
          Borrower's  right to  participate, or  the Borrower's  rights, if
          any, in  the contest of  such claim, demand,  action or cause  of
          action, as  hereinafter provided.   Each  Indemnitee may,  and if
          requested by the Borrower in writing shall, in good faith contest
          the  validity, applicability  and amount  of such  claim, demand,
          action   or  cause  of  action  with  counsel  selected  by  such
          Indemnitee and  reasonably acceptable to the  Borrower, and shall
          permit  the  Borrower  to  participate  in  such  contest.    Any
          Indemnitee  that proposes to  settle or  compromise any  claim or
          proceeding  for which the Borrower  may be liable  for payment of
          indemnity hereunder shall give the Borrower written notice of the
          terms  of such  proposed settlement  or compromise  reasonably in
          advance of settling or compromising such  claim or proceeding and
          shall obtain the Borrower's  prior written consent, which consent
          shall not  be  unreasonably withheld.    In connection  with  any
          claim,  demand, action or cause of action covered by this Section
          8.03 against more than one Indemnitee, all such Indemnitees shall
          be  represented  by  the  same  legal  counsel  selected  by  the
          Indemnitees  and reasonably acceptable to the Borrower; provided,
          that if such legal  counsel determines in good faith  and advises
          the Borrower  in writing  that representing all  such Indemnitees
          would  or  could result  in a  conflict  of interest  under legal
          requirements  or  ethical  principles applicable  to  such  legal
          counsel  or that  a defense  or counterclaim  is available  to an
          Indemnitee that is not available to all such Indemnitees, then to

                                          31



<PAGE> 32

          the  extent  reasonably necessary  to  avoid such  a  conflict of
          interest  or to permit unqualified assertion of such a defense or
          counterclaim,  each  Indemnitee  shall be  entitled  to  separate
          representation by  legal counsel selected by  that Indemnitee and
          reasonably  acceptable  to  the  Borrower.    Any  obligation  or
          liability  of the Borrower  to any Indemnitee  under this Section
          8.03  shall  survive  the   expiration  or  termination  of  this
          Agreement and the repayment of the Revolving Credit Loans and the
          payment  of  all other  Indebtedness owing  to  the Bank  for the
          statute  of  limitations  period  applicable  to  such  claim  or
          contest.

               Section 8.04  Invalidity.  In the event that any one or more
          of  the provisions  contained  in this  Agreement, the  Note, any
          Security Instrument  or any  other Loan Document  shall, for  any
          reason, be held invalid, illegal or unenforceable in any respect,
          such invalidity, illegality or  unenforceability shall not affect
          any other provisions of this Agreement, the Note or such Security
          Instrument or other Loan Document.

               Section 8.05   Survival of Agreements.   All representations
          and  warranties  of  the  Borrower  herein  or  in  the  Security
          Instruments, and  all covenants and agreements  herein or therein
          not  fully performed before the  effective date or  dates of this
          Agreement  and of  the Security  Instruments, shall  survive such
          date or dates.

               Section  8.06   Successors and Assigns.   All  covenants and
          agreements  contained by  or on  behalf of  the Borrower  in this
          Agreement, the Note  and the Security Instruments  and other Loan
          Documents shall bind its  successors and assigns and  shall inure
          to  the benefit  of  the Bank  and  its successors  and  assigns.
          Borrower  shall not, however, have the right to assign its rights
          hereunder  or  any interest  herein,  without  the prior  written
          consent  of  the  Bank.    In  the  event  that  the  Bank  sells
          participations in or assigns the Note or other Indebtedness owing
          to the Bank to other lenders (which the Bank may  undertake to do
          in  its sole discretion), each  of such other  lenders shall have
          the rights to setoff against such Indebtedness and similar rights
          or Liens to the same extent as may be available to the Bank.

               Section 8.07  Renewal, Extension or Rearrangement.  All pro-
          visions of this Agreement and of any Security Instrument or other
          Loan Document relating to the Note or other Indebtedness owing to
          the Bank  shall apply with equal force and effect to each and all
          promissory notes  hereinafter executed which in whole  or in part
          represent  a  renewal,  extension  for any  period,  increase  or
          rearrangement  of  any  part   of  the  Indebtedness   originally
          represented   by  the  Note  or   of  any  part   of  such  other
          Indebtedness.



                                          32




<PAGE> 33
               Section 8.08  Waivers.  No course of dealing on  the part of
          the Bank, its officers, employees, consultants or agents, nor any
          failure  or  delay by  the Bank  with  respect to  exercising any
          right, power or privilege  of the Bank under this  Agreement, the
          Note  or any  Security  Instrument or  other Loan  Document shall
          operate  as a  waiver thereof,  except  as otherwise  provided in
          Section 8.02 hereof.

               Section 8.09  Cumulative Rights.  Rights and remedies of the
          Bank under this Agreement, the Note and the Security  Instruments
          and  the other  Loan  Documents  shall  be  cumulative,  and  the
          exercise  or partial exercise of  any such right  or remedy shall
          not preclude the exercise of any other right or remedy.

               Section 8.10  Construction.  THIS AGREEMENT IS, AND THE NOTE
          WILL  BE, A  CONTRACT  MADE  UNDER  AND  SHALL  BE  CONSTRUED  IN
          ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED  STATES OF
          AMERICA AND  THE STATE OF TEXAS,  AS SUCH LAWS ARE  NOW IN EFFECT
          AND, WITH RESPECT TO USURY LAWS,  IF ANY, APPLICABLE TO THE  BANK
          AND TO THE EXTENT ALLOWED THEREBY,  AS SUCH LAWS MAY HEREAFTER BE
          IN EFFECT WHICH ALLOW A  HIGHER MAXIMUM NONUSURIOUS INTEREST RATE
          THAN SUCH LAWS NOW ALLOW.

               Section 8.11    Taxes, Etc.    Any taxes  (excluding  income
          taxes) payable or  ruled payable by any Governmental Authority in
          respect of this  Agreement, the Note, any  Security Instrument or
          any other Loan Document  shall be paid by the  Borrower, together
          with interest and penalties, if any.

               Section  8.12  Governmental Regulation.   Anything contained
          herein to the  contrary notwithstanding,  the Bank  shall not  be
          obligated  to extend  credit  to the  Borrower  in an  amount  in
          violation  of  any  limitation  or prohibition  provided  by  any
          applicable statute or regulation.

               Section 8.13  Counterparts.  This Agreement  may be executed
          in one or  more counterparts, and it shall not  be necessary that
          the  signatures of  all parties  hereto be  contained on  any one
          counter-part  hereof.    Each  counterpart  shall  be  deemed  an
          original, but all counterparts  together shall constitute one and
          the same instrument.

               Section  8.14   Conflicts.   If  there  is ever  a  conflict
          between  the terms,  conditions, representations,  warranties and
          covenants contained in this  Agreement and the terms, conditions,
          representa-tions,  warranties or  covenants in  any of  the other
          Loan Documents executed by  the Borrower, the provisions of  this
          Agreement  shall control;  provided, however,  the fact  that any
          term, condition, representation,  warranty or covenant  contained
          in such other Loan Document is not contained herein shall not be,
          or be deemed to be, a conflict.


                                          33





<PAGE> 34
               Section 8.15  Exhibits.  The exhibits, annexes and schedules
          attached to this Agreement  are incorporated herein and shall  be
          considered  a part  of  this Agreement  for  the purposes  stated
          herein, except that  in the event of any conflict  between any of
          the provisions  of such exhibits,  annexes and schedules  and the
          provisions of  this Agreement,  the provisions of  this Agreement
          shall prevail.

               Section 8.16   Titles of Articles, Sections and Subsections.
          All  titles or  headings  to articles,  sections, subsections  or
          other divisions of this  Agreement or the exhibits and  schedules
          hereto are only for the convenience of the parties and shall  not
          be construed  to have any effect  or meaning with  respect to the
          other content  of such  articles, sections, subsections  or other
          divisions,  such  other  content  being  controlling  as  to  the
          agreement between the parties hereto.

               Section 8.17  Entire Agreement.   THIS AGREEMENT, THE  NOTE,
          THE SECURITY INSTRUMENTS AND  THE OTHER LOAN DOCUMENTS CONSTITUTE
          A  "LOAN AGREEMENT" AS DEFINED  IN SECTION 26.02(a)  OF THE TEXAS
          BUSINESS  AND COMMERCE  CODE  AND REPRESENT  THE FINAL  AGREEMENT
          BETWEEN  THE PARTIES AND MAY  NOT BE CONTRADICTED  BY EVIDENCE OF
          PRIOR,  CONTEMPORANEOUS, OR  SUBSEQUENT  ORAL AGREEMENTS  OF  THE
          PARTIES.  THERE ARE  NO UNWRITTEN OR ORAL AGREEMENTS  BETWEEN THE
          PARTIES.

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


                                        TMBR/SHARP DRILLING, INC.


                                        By:  /s/ Thomas C. Brown           
                                           --------------------------------
                                           Thomas C. Brown, Chairman of the
                                           Board of Directors and Chief
                                           Executive Officer


                                        NORWEST BANK TEXAS, MIDLAND, N.A.


                                        By:  /s/ Scott A. Lovett           
                                           -------------------------------
                                           Scott A. Lovett, Executive Vice
                                           President








                                          
                                      34

<PAGE> 35


                                      EXHIBIT A

                       REVOLVING LINE OF CREDIT PROMISSORY NOTE


          $3,000,000.00                                    January 16, 1996


               FOR VALUE RECEIVED,  in the manner, on the dates  and in the
          amounts  herein stipulated,  TMBR/SHARP DRILLING,  INC., a  Texas
          corporation (the "Borrower"), promises  and agrees to pay to  the
          order of  Norwest Bank Texas,  Midland, N.A., a  national banking
          association (the "Bank"), in  Midland, Midland County, Texas, the
          principal sum of Three Million and No/100 Dollars ($3,000,000.00)
          or, if less, the  aggregate unpaid balance of all  advances here-
          under, in lawful  money of  the United States  of America,  which
          shall be legal  tender in payment  of all debts and  dues, public
          and  private, at the time of payment, and to pay interest thereon
          from the date of advance until maturity at a rate per annum which
          shall from day to day be equal to the lesser of (a) the Base Rate
          in effect from day to day (calculated on the basis of actual days
          elapsed, but computed as  if each calendar year consisted  of 360
          days) or (b) the Highest Lawful Rate.  Each change in the rate of
          interest charged  under this Revolving Line  of Credit Promissory
          Note (this  "Note") shall,  subject to  the terms hereof,  become
          effective,  without notice  to the  Borrower, upon  the effective
          date of  each change in the Base Rate or the Highest Lawful Rate,
          as the case  may be.   Notwithstanding the foregoing,  if at  any
          time the Base Rate  exceeds the Highest Lawful Rate,  the rate of
          interest  on this  Note shall  be limited  to the  Highest Lawful
          Rate,  but any subsequent reductions  in the Base  Rate shall not
          reduce  the rate of interest hereon below the Highest Lawful Rate
          until the  total amount of interest  accrued hereon approximately
          equals  the amount of interest which would have accrued hereon if
          the Base Rate had at all times been in effect.  In the event that
          at maturity (stated or  by acceleration), or at final  payment of
          this Note, the total amount of interest paid or accrued hereon is
          less than the amount of interest which would  have accrued if the
          Base Rate had at all times been in effect, then, at such time and
          to the extent permitted by applicable laws, Borrower shall pay to
          the Bank an amount equal to the difference between (a) the lesser
          of the  amount of interest which  would have accrued if  the Base
          Rate had  at all times been  in effect or the  amount of interest
          which would  have accrued if  the Highest Lawful Rate  had at all
          times been in  effect, and  (b) the amount  of interest  actually
          paid or accrued on this Note.  All of the  past-due principal and
          accrued interest hereunder shall, at the option of the Bank, bear
          interest from maturity (stated or  by acceleration) until paid at
          a  rate per annum  equal to  the Highest  Lawful Rate.   Interest
          calculations  may  be  made  ten  days  prior  to   any  interest
          installment due date under this Note, in which event, if there is
          an adjustment in the  interest rate in accordance with  the terms
          hereof  during  such  ten-day  period, then  the  Borrower  shall
          subsequently, on demand, pay to the Bank any underpayment, or the

                                        35

<PAGE> 36

          
          Bank shall pay to the Borrower, any overpayment, as the case  may
          be, as a result of any adjustment during such ten-day period.

               This  Note (a) is the Revolving Line of Credit Note referred
          to in  the Loan Agreement,  dated as of  the date hereof  (as the
          same may be amended, supplemented or otherwise modified from time
          to  time, the  "Loan Agreement"),  between the  Borrower  and the
          Bank, (b) is subject to the terms and conditions thereof, and (c)
          is subject to optional  and mandatory prepayments in whole  or in
          part as provided in the Loan Agreement.  Reference is made to the
          Loan Agreement for a  further statement of the rights,  remedies,
          powers,  privileges,  benefits,  duties  and obligations  of  the
          Borrower and the  Bank under  the Loan Agreement  and this  Note.
          Capitalized  terms used  herein  which are  defined  in the  Loan
          Agreement  shall  have  such defined  meanings  unless  otherwise
          defined herein.

               This Note represents the renewal and extension, and increase
          in  principal  amounts,  but   not  the  extinguishment,  of  the
          principal amount outstanding on the Prior Note.

               This Note is secured  as provided in the Loan  Agreement and
          in  the other Loan Documents,  to which reference  is hereby made
          for a  description of the properties  and assets in  which a Lien
          and  security interest has been granted, the nature and extent of
          the security, the terms  and conditions upon which the  Liens and
          security  interest were granted and  the rights of  the holder of
          this Note with respect thereto.

               Each  borrowing under  this  Note shall  be  in the  minimum
          amount of $50,000.00 (or the unadvanced portion hereof, whichever
          is less) and shall be made only in accordance with the provisions
          of the  Loan Agreement.  Subject  to the terms hereof  and of the
          Loan Agreement, Borrower  may borrow, repay  and reborrow at  any
          time and from time to time under this Note.

               Interest on  the outstanding principal balance  of this Note
          shall  be due and  payable monthly on  the fifteenth  day of each
          month,   commencing  February  15,  1996.  The  then  outstanding
          principal  balance  of  this  Note  and all  accrued  and  unpaid
          interest shall be due and payable on January 15, 1998.

               Time is of the essence of this Note.  Upon the occurrence of
          any one  or more of the  Events of Default specified  in the Loan
          Agreement, all amounts then remaining  unpaid on this Note  shall
          become,  or may be declared  to be, immediately  due and payable,
          all as provided therein.  

               It  is the intention  of the Borrower and  the Bank that the
          Bank  shall conform  strictly  to usury  laws  applicable to  it.
          Accordingly,  if  the  transactions  contemplated  by  the   Loan
          Agreement and this  Note would be usurious  as to the  Bank under
          laws applicable to it (including the laws of the United States of
          America  and the State of  Texas or any  other jurisdiction whose

                                          36

<PAGE> 37
          laws may  be mandatorily  applicable to the  Bank notwithstanding
          the  other provisions of the Loan Agreement and this Note), then,
          in that event,  notwithstanding anything to the  contrary in this
          Note,  the Loan  Agreement or  any other  Loan Document  or other
          agreement entered into in connection with or as security for this
          Note,  (i) the aggregate of all consideration which is contracted
          for,  taken, reserved, charged or received by the Bank under this
          Note,  the Loan Agreement or any other Loan Document or agreement
          entered  into in  connection with  or as  security for  this Note
          shall under no circumstances exceed the maximum amount allowed by
          such applicable law, and any excess shall be credited by the Bank
          on the principal  amount of the Indebtedness to  the Bank (or, to
          the extent that  the principal amount  of the Indebtedness  shall
          have been or would thereby be  paid in full, refunded by the Bank
          to the Borrower); and (ii) in the event that the maturity of this
          Note  is accelerated by  reason of an Event  of Default under the
          Loan Agreement or otherwise,  or in the event of  any prepayment,
          then such  consideration  that  constitutes  interest  under  law
          applicable  to the Bank may  never include more  than the maximum
          amount allowed  by such applicable  law, and excess  interest, if
          any, provided for in  this Note, the Loan Agreement  or otherwise
          shall be  cancelled automatically by  the Bank as of  the date of
          such acceleration  of prepayment and, if  theretofore paid, shall
          be   credited  by  the  Bank  on  the  principal  amount  of  the
          Indebtedness (or, to the extent that the principal amount of such
          Indebtedness  shall have been or  would thereby be  paid in full,
          refunded by the Bank to the Borrower).

               To the  extent that Article  5069-1.04 of the  Texas Revised
          Civil  Statutes  is  relevant to  the  Bank  for  the purpose  of
          determining the Highest Lawful  Rate, the applicable rate ceiling
          under such Article shall be determined by the  indicated (weekly)
          rate  ceiling from time to time  in effect, subject to the Bank's
          right  subsequently  to change  such  method  in accordance  with
          applicable law.

               All  parties now  or hereafter liable  with respect  to this
          Note, whether  maker, principal,  surety, guarantor,  endorser or
          otherwise,  hereby  waive presentment,  demand,  protest and  all
          other notices of any kind.

               THIS  NOTE  IS PERFORMABLE  AND  PAYABLE  IN  THE COUNTY  OF
          MIDLAND, STATE  OF TEXAS,  AND SHALL  BE CONSTRUED IN  ACCORDANCE
          WITH, AND GOVERNED BY, THE LAWS OF THE STATE  OF TEXAS; PROVIDED,
          HOWEVER, THAT THE LAWS PERTAINING TO ALLOWABLE  RATES OF INTEREST
          MAY, FROM TIME  TO TIME, BE  GOVERNED BY THE  LAWS OF THE  UNITED
          STATES OF AMERICA.

                                        TMBR/SHARP DRILLING, INC.


                                        By:  /s/ Thomas C. Brown
                                           --------------------------------
                                           Thomas C. Brown, Chairman of the
                                           Board of Directors and Chief
                                           Executive Officer

                                          37