SECURITY AGREEMENT

     (Accounts,  Equipment,  Inventory,
     General  Intangibles  and  Instruments)

     THIS  SECURITY  AGREEMENT  made  and  entered  into  as of this 28th day of
September,  2007, by Colony Energy, Inc., a Delaware corporation, with its chief
place  of  business  and  its  chief  executive office located at 2100 West Loop
South,  Suite  900, Houston, Texas 77027 (hereinafter called "Debtor"), in favor
of  CEI  Ventures,  LLC,  a  Texas  limited  liability  company,  with its chief
executive  office  located  at  2100  West Loop South, Suite 900, Houston, Texas
77027  (hereinafter  called  "Secured  Party").

     ARTICLE  I
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     GENERAL  TERMS
     --------------

     Section  1.01 Terms Defined Above.  As used in this Security Agreement, the
                   -------------------
terms  "Debtor"  and  "Secured  Party"  shall have the meanings indicated above.

     Section  1.02 Certain Definitions.  As used in this Security Agreement, the
                   --------------------
following  terms shall have the following meanings, unless the context otherwise
requires:

     "Accounts"  shall  have the meaning indicated in Subsection 2.01(a) hereof.

     "Code"  shall  mean  the  Texas  Business  and  Commercial  Code.

     "Collateral"  shall mean all property, including without limitation cash or
other  proceeds,  in which Secured Party shall have a security interest pursuant
to  Section  2.01  of  this  Security  Agreement.

     "Default"  shall  mean  the  occurrence  of  any of the events specified in
Section  4.01 hereof, whether or not any requirement for notice or lapse of time
or  other  condition  precedent  has  been  satisfied.

     "Equipment"  shall have the meaning indicated in Subsection 2.01(b) hereof.

     "Event of Default" shall mean the occurrence of any of the events specified
in  Section  4.01  hereof,  provided that any requirement for notice or lapse of
time  or  other  condition  precedent  has  been  satisfied.

     "General  Intangibles"  shall  have  the  meaning  indicated  in Subsection
2.01(d)  hereof.

     "Inventory"  shall have the meaning indicated in Subsection 2.01(c) hereof.

     "Instruments"  shall  have  the  meaning  indicated  in  Subsection 2.01(e)
hereof.

     "Obligations"  shall  have  the  meaning  indicated in Section 2.02 hereof.

     "Other Liable Party" shall mean any person, other than Debtor, primarily or
secondarily  liable for any of the Obligations or one who grants Secured Party a
lien  on  any  property  as  security  for  the  Obligations.

     "Related  Rights"  shall mean all chattel papers, documents and instruments
relating  to  the  Accounts  or  the  General  Intangibles and all rights now or
hereafter  existing  in  and  to  all  security  agreements,  leases,  and other
contracts  securing or otherwise relating to any Accounts or General Intangibles
or  any  such  chattel  papers,  documents  and  instruments.

     "Security  Agreement"  shall  mean this Security Agreement, as the same may
from  time  to  time  be  amended  or  supplemented.

     Section  1.03  Terms  Defined  in  Code.  All  terms  used herein which are
                    ------------------------
defined  in  the  Code  shall  have  the  same meaning herein unless the context
otherwise  requires.

     ARTICLE  II
     -----------
     SECURITY  INTEREST
     ------------------

     Section  2.01  Grant of Security Interest.  Debtor hereby grants to Secured
                    --------------------------
Party  a  security  interest  in and a general lien upon the following described
property:

     (a)     all  of  Debtor's  accounts  of  any  kind  whether now existing or
hereafter  arising (herein called the "Accounts"); all chattel papers, documents
and  instruments  relating  to  the  Accounts;  and  all rights now or hereafter
existing in and to all security agreements, leases, and other contracts securing
or  otherwise relating to any Accounts or any such chattel papers, documents and
instruments;  and

     (b)     all of Debtor's equipment in all of its forms, whether now owned or
hereafter  acquired  and  wherever  located;  and  all  parts  thereof  and  all
accessions  or  additions  thereto, whether now owned or hereafter acquired (any
and  all  such  equipment,  parts,  accessions  and  additions herein called the
"Equipment");  and

     (c)     all of Debtor's inventory in all of its forms, whether now owned or
hereafter  acquired  and  wherever  located,  and  all  accessions  or additions
hereafter  acquired  (any  and  all  such  inventory,  accessions, additions and
products  herein  called  the  "Inventory");  and

     (d)     all  of  Debtor's  general  intangibles  of  any  kind  whether now
existing  or  hereafter  arising  (herein called the "General Intangibles"); all
chattel  papers,  documents and instruments relating to the General Intangibles;
and  all  rights  now  or  hereafter existing in and to all security agreements,
leases,  and  other  contracts  securing  or  otherwise  relating to any General
Intangibles  or  any  such  chattel  papers,  documents  and  instruments;  and

     (e)     all  of  Debtor's  "instruments",  "chattel  paper"  or "letters of
credit"  (as  each  is  defined in the Code), including, but not limited to, all
promissory  notes,  security  agreements, deeds of trust, leases, contracts, and
other  rights  drafts,  bills  of  exchange  and trade acceptances, now owned or
hereafter  acquired  by  any  Debtor and other rights (except those constituting
Accounts)  to  receive  payments  of  money  or  the  ownership or possession of
property,  including further, but not limited to, that certain "grid" promissory
note dated August 29, 2007 made payable by Enexco, Inc., a Texas corporation, to
the order of Debtor in an unspecified principal amount, which promissory note is
secured  by  liens,  mortgages and security interests granted by Enexco, Inc. to
Debtor  pursuant  to  that  certain  Deed  of  Trust,  Assignment of Proceeds of
Production,  Security  Agreement  and Financing Statement of even date therewith
(herein  called  the  "Instruments");  and

     (f)     any  additional  properties  from  time  to  time  delivered  to or
deposited  with  Secured  Party  as  security  for  the Obligations or otherwise
pursuant  to  the  terms  of  this  Security  Agreement;  and

     (g)     the  proceeds,  products,  additions  to,  substitutions  for  and
accessions  of  any  and  all  of  the  above.

     Section  2.02  Obligations  Secured.  The security interest in, and general
                    --------------------
lien  upon, the Collateral is granted to secure the following (herein called the
"Obligations"):  (a)  the  payment  of all the indebtedness of Debtor to Secured
Party  now  or  hereafter  existing, including, without limitation, that certain
promissory  notes  of  even date herewith made payable by Debtor to the order of
Secured  Party  in the principal amount of $322,531.73, and all other promissory
notes  hereafter  made  payable by Debtor to the order of Secured Party, and (b)
the  performance  of  all  obligations  of Debtor under this Security Agreement.

     ARTICLE  III
     ------------
     COVENANTS  AND  AGREEMENTS
     --------------------------

     A  deviation from the provisions of this Article III shall not constitute a
Default  under  this  Security  Agreement  if  such deviation is consented to in
writing  by  Secured Party.  Without the prior written consent of Secured Party,
Debtor  will  at  all  times comply with the covenants contained in this Article
III,  from  the  date  hereof  and  for so long as any indebtedness of Debtor to
Secured  Party  is  outstanding.

     Section  3.01  Title;  Prohibited  Liens  and  Filings.  Debtor  agrees  to
                    ---------------------------------------
protect  the  title  to  the  Collateral.  Debtor  will  not  pledge,  mortgage,
otherwise  encumber,  create  or suffer a lien to exist on any of the Collateral
(other than in favor of Secured Party) or sell, assign or otherwise transfer any
of  the  Collateral  (other  than Inventory as permitted by Section 3.13 of this
Security  Agreement)  to  or  in  favor  of any person other than Secured Party.
Debtor  will  not file or permit to be filed or recorded any financing statement
or  other security instrument with respect to the Collateral other than in favor
of  Secured  Party.

     Section  3.02  Existence;  Laws;  Obligations.  Debtor  shall  maintain its
                    ------------------------------
corporate  existence  and  comply  in  all  respects  material  to its financial
condition,  businesses  and  properties with all applicable laws and regulations
and pay all taxes, assessments, governmental charges and other obligations which
if  unpaid  might  become  a  lien  against  the  property  of the Debtor except
liabilities  being  contested  in  good  faith by appropriate proceedings and in
connection  with which the enforcement of all liens has been effectively stayed.

     Section  3.03  Possession  of Collateral.  Secured Party shall be deemed to
                    -------------------------
have  possession  of any of the Collateral in transit to it or set apart for it.
Otherwise  the  Collateral shall remain in Debtor's possession or control at all
times  at  Debtor's  risk  of  loss  and  shall  (except  for  temporary removal
consistent  with its normal use) be kept at Debtor's chief place of business and
any  other  location(s)  specified  in  writing  to  Secured  Party.

     Section  3.04  Inspection  of  Collateral.  Secured Party may from to time,
                    --------------------------
upon  request,  inspect Debtor's records concerning the Accounts and the General
Intangibles,  the  originals of the Related Rights, the Equipment, the Inventory
and  other  Collateral.

     Section  3.05  Further  Assurances.  Debtor  will  from  time to time sign,
                    -------------------
execute,  deliver  and  file,  alone  or  with  Secured  Party,  any  financing
statements,  security  agreements or other documents; procure any instruments or
documents as may be requested by Secured Party; and take all further action that
may  be  necessary  or desirable, or that Secured Party may request, to conform,
perfect,  preserve  and  protect  the  security interests intended to be granted
hereby,  and  in addition, Debtor hereby authorizes Secured Party to execute and
deliver  on  behalf  of  Debtor  and to file such financing statements, security
agreements and other documents without the signature of Debtor either in Secured
Party's  name  or  in  the  name of Debtor and as agent and attorney-in-fact for
Debtor.  Debtor  shall  do  all such additional and further acts or things, give
such  assurances  and  execute  such  documents  or instruments as Secured Party
requires to vest more completely in and assure to Secured Party its rights under
this  Security  Agreement,  including,  without  limiting  the generality of the
foregoing,  marking  conspicuously each chattel paper included in the Collateral
with  a  legend  in form and substance satisfactory to Secured Party and, at the
request  of Secured Party, each of its records pertaining to the Collateral with
a  legend,  in form and substance satisfactory to Secured Party, indicating that
such  Account,  General  Intangible  or  Related  Right  is evidenced by a note,
chattel  paper  or  other instrument, transferring, delivering, and assigning to
Secured  Party  such  note,  chattel paper or other instrument duly endorsed and
accompanied by duly executed instruments of transfer and assignment, all in form
and  substance  satisfactory  to  Secured  Party, to be held by Secured Party as
Collateral  under  this  Security  Agreement.

     Section  3.06  Filing  Reproductions.  At  the  option  of Secured Party, a
                    ---------------------
carbon,  photographic  or  other reproduction of this Security Agreement or of a
financing  statement  covering the Collateral shall be sufficient as a financing
statement  and  may  be  filed  as  a  financing  statement.

     Section  3.07  Delivery  of  Information.  Debtor  will transmit to Secured
                    -------------------------
Party  promptly  all information that Debtor may have or receive with respect to
(i)  the  Collateral  or  (ii)  account  debtors  or  obligors in respect of the
Accounts,  the General Intangibles and the Related Rights which might in any way
affect  the  value  of the Collateral or Secured Party's rights or remedies with
respect  thereto.  Debtor  will  promptly notify Secured Party in writing of any
action,  suit  or proceeding, pending or, to the knowledge of Debtor, threatened
before  any  governmental  authority  which,  if  adversely  determined,  would
materially  impair  the  ability  of  the  Debtor  to  carry  on  its  business
substantially  as  now being conducted and would materially and adversely affect
the  financial  condition,  business,  operations  or  properties of the Debtor,
giving  full particulars with respect thereto.  Debtor will promptly, and in any
event  within five business days, after Debtor obtains knowledge of a default by
Debtor regarding any obligation that it is under or any agreement to which it is
a  party,  a  certificate  specifying  the nature of such default, the period of
existence  thereof,  and  what action Debtor has taken and proposes to take with
respect  thereto.

     Section  3.08  Compromise of Collateral.  Debtor will not adjust, settle or
                    ------------------------
compromise  any  of  the Accounts, the General Intangibles or the Related Rights
without  the  prior  written  consent  of  Secured  Party.

     Section  3.09  Expenses.  Debtor  agrees  to  pay  to  Secured  Party  all
                    --------
advances,  charges,  costs  and  expenses  (including  attorneys' fees and legal
expenses)  incurred by Secured Party in connection with protecting Secured Party
against  the  claims  or  interests of any person against the Collateral, and in
exercising any right, power or remedy conferred by this Security Agreement or by
law  or  in  equity  (including,  but  not limited to, attorneys' fees and legal
expenses  incurred  by  Secured Party in the collection of instruments deposited
with  or  purchased by Secured Party and amounts incurred in connection with the
operation,  maintenance  or  foreclosure  of any or all of the Collateral).  The
amount  of  all  such  advances,  charges,  costs  and expenses shall be due and
payable  by  Debtor  to  Secured  Party  upon  demand.

     Section  3.10  Financing  Statement  Filings;  Notifications.  Debtor
                    ---------------------------------------------
recognizes  that financing statements pertaining to the Collateral will be filed
with  the offices of the Secretary of State for the State of Texas.  Debtor will
immediately  notify  Secured Party of any condition or event that may change the
proper  location  for  the  filing  of  any financing statements or other public
notice  or  recordings  for the purpose of perfecting a security interest in the
Collateral.  Without  limiting  the generality of the foregoing, Debtor will (a)
immediately  notify  Secured  Party  of  any change to a jurisdiction (i) in the
location  of Debtor's chief executive office or chief place of business; (ii) in
the  location  of the Inventory; (iii) in the location of the Equipment; (iv) in
the  location  of  the  office  where  Debtor  keeps  its records concerning the
Accounts, or (v) in the "location" of Debtor within the meaning of the Code; and
(b) immediately notify Secured Party of any change in Debtor's name, identity or
corporate structure.  In any notice furnished pursuant to this paragraph, Debtor
will  expressly state that the notice is required by this Security Agreement and
contains  facts  that  will  or  may  require  additional  filings  of financing
statements  or  other  notices  for  the purpose of continuing perfection of the
Secured  Party's  security  interest  in  the  Collateral.

     Section  3.11  Maintenance  of  Collateral Generally.  Debtor will maintain
                    -------------------------------------
all  the  Collateral  in  good  condition,  repair,  and  working  order, and in
accordance  with  any  manufacturer's  manual.  Debtor  will  not misuse, abuse,
waste,  destroy,  endanger  or allow the Collateral to deteriorate, except, with
respect to the Equipment only, for ordinary wear and tear from its intended use.
Debtor  will  forthwith,  or  in  the  case  of  any loss or damage to any goods
included  in the Collateral as soon as practicable, make or cause to be made all
repairs,  replacements  or other improvements to the Collateral as are necessary
or desirable to accomplish the foregoing.  Debtor will not use any Collateral in
violation  of  any  law,  statute, ordinance or regulation or suffer it to be so
used.


<PAGE>
     Section  3.12  Account  Obligations.  The Debtor will duly perform or cause
                    --------------------
to be performed all obligations of Debtor with respect to the goods or services,
the  sale  or  lease  or  rendition of which gave rise or will give rise to each
Account.

     Section  3.13  Use  of  Inventory.  Until  Default,  Debtor  may  use  its
                    ------------------
Inventory in any lawful manner not inconsistent with this Security Agreement and
with  the terms of insurance thereon and may sell, lease or otherwise dispose of
its Inventory in the ordinary course of business.  Debtor will not and shall not
be  permitted  to  use  any  item of Inventory in a manner inconsistent with the
holding  thereof  for  sale,  lease  or  disposition  in  the ordinary course of
business  or  in  contravention of the terms of any agreement.  A sale, lease or
disposition  in the ordinary course of business does not include the exchange of
items  of  Inventory  for  goods  in  kind or otherwise or transfers of items of
Inventory  made  in  satisfaction  of  present  or  future  indebtedness.

     Section  3.14  Insurance.  Debtor shall have and maintain, with financially
                    ---------
sound  and reputable insurers, insurance satisfactory in all respects to Secured
Party  covering the goods included in the Collateral against risk of fire, theft
and  such  other risks as Secured Party may require, including standard extended
coverage, in an amount at least equal to the value thereof.  Policies evidencing
any  such  property  insurance  shall contain a standard mortgagee's endorsement
providing  for  payment  of  any  loss  to Secured Party and shall provide for a
minimum  of  ten  (10)  days'  prior  written  notice  to  Secured  Party of any
cancellation.  Debtor  shall  furnish  Secured  Party with certificates or other
evidence  of  compliance with the foregoing insurance provisions.  Secured Party
may  act  as  attorney for Debtor and Debtor hereby irrevocably appoints Secured
Party as Debtor's true and lawful attorney and agent-in-fact, with full power of
substitution,  in  Secured  Party's  name  or Debtor's name or otherwise, but at
Debtor's  cost and expense and without notice to Debtor, to obtain, adjust, sell
and  cancel  such insurance and endorse any draft drawn by insurers of the goods
included in the Collateral.  If any insurance policy covering the goods included
in  the  Collateral  expires or is canceled before the indebtedness of Debtor to
Secured  Party  is  paid  in  full, at Secured Party's option, Secured Party may
obtain  replacement  insurance  which  may,  but  need  not,  be single interest
insurance  in  favor  of  Secured  Party  and Secured Party may pay the premiums
thereunder.

     Section  3.15  Collateral  not to be Fixture or Accession.  Debtor will not
                    ------------------------------------------
permit  any  Collateral to become so related to any particular real estate so as
to  become  a  fixture  on  such real estate or to be installed in or affixed to
other  goods  so as to become an accession to such other goods unless such other
goods  are  included  in  the Collateral; in the event that any Collateral is to
become  so  related  to any particular real estate or so installed or affixed to
other goods, prior thereto Debtor will Secured Party furnish written consents to
Secured  Party's  security  interest  and  disclaimers  of  any interest in such
Collateral  signed  by any person having an interest in such real estate or such
other  goods.

     ARTICLE  IV
     -----------
     RIGHTS,  REMEDIES  AND  DEFAULT
     -------------------------------

     Section 4.01.  With Respect to Collateral.  After the happening of an Event
                    --------------------------
of  Default, Secured Party is hereby fully authorized and empowered (without the
necessity  of any further consent or authorization from Debtor) and the right is
expressly  granted to Secured Party, and Debtor hereby constitutes, appoints and
makes Secured Party, and/or Secured Party's duly authorized and acting officers,
agents,  attorneys,  and  representatives,  as  Debtor's  true  and  lawful
attorney-in-fact and agent for Debtor and in Debtor's name, place and stead with
full  power  of  substitution,  in  Secured  Party's  name  or  Debtor's name or
otherwise,  for  Secured  Party's  sole  use  and  benefit, to exercise, without
notice,  all  or  any of the following powers at any time with respect to all or
any  of  the  Collateral:

          (a)     notify  the  issuers, debtors or obligors on the Collateral to
make  and  deliver  payment  to  Secured  Party;

          (b)     to  demand, sue for, collect, receive and give acquittance for
any  and  all  monies  due or to become due by virtue thereof and otherwise deal
with  Proceeds;

          (c)     to  receive,  take,  endorse,  assign  and deliver any and all
checks,  notes,  drafts,  documents  and  other  negotiable  and  non-negotiable
instruments,  documents  and chattel paper taken or received by Secured Party in
connection  therewith;

          (d)     to  settle,  compromise,  compound,  prosecute  or  defend any
action  or  proceeding  with  respect  thereto;

          (e)     to  sell,  transfer,  assign  or otherwise deal in or with the
same  or  the  Proceeds  or  avails  thereof or the relative goods, as fully and
effectively  as  if  Secured  Party  were  the  absolute  owner  thereof;

          (f)     to  extend  the  time  of payment of any or all thereof and to
grant waivers and make any allowance or other adjustment with reference thereto;

          (g)     to  surrender for payment and obtain payment of any portion of
the  Collateral,  whether  such  have matured or whether the exercise of Secured
Party's  rights results in loss of interest or principal or other penalty on the
Collateral,  and,  in connection therewith, cause payment to be made directly to
Secured  Party;  and

          (h)     to do any other acts, in the name of Debtor or otherwise, that
Secured Party may deem necessary or desirable exercising, perfecting or securing
its  rights  and  benefits  under  this  Agreement;

provided,  however,  Secured  Party shall not be under any obligation or duty to
exercise  any  of  the  powers  hereby  conferred  upon  it and shall be without
liability for any act or failure to act in connection with the collection of, or
the  preservation  of  any  rights  under,  any  Collateral.

     Section  4.02.  Application  of  Cash  Sums.  Prior to the happening of any
                     ---------------------------
Event  of  Default  specified  in Section 4.03 hereof, all cash sums paid to and
received  by  Secured  Party  on  account of the Collateral (i) shall be applied
within five (5) business days by Secured Party on the Obligations whether or not
such  Obligations  shall have by their terms become due, payable or performable;
provided,  however,  Secured  Party  need  not apply or give credit for any item
(other  than  cash) included in such sums until Secured Party has received final
payment  thereof  and  provided, further, however, Secured Party's failure to so
apply  any  such sums shall not be a waiver of Secured Party's right to so apply
such sums or any other sums at any time, or (ii) at the option of Secured Party,
shall  be  released  to  Debtor  for  use  in  Debtor's  business.

     Section  4.03.  Events  of  Default.  Any  of the following events shall be
                     -------------------
considered  an  Event  of  Default  under  this  Agreement:

          (a)     Failure  to Obligation Timely - Debtor's default in the timely
payment  of  any  Obligation  when  due;  or

          (b)     Representations  and  Warranties  -  Any  representation  or
warranty  made  by  Debtor  herein  or in any other document or agreement now or
hereafter  executed  in  connection  with or as security for the Obligations, or
made  by  Debtor, in any certificate or statement furnished under this Agreement
proves to have been incorrect in any material respect as of the date thereof and
is  not  cured  or  corrected  within  thirty (30) days after receipt of written
notice  thereof  to  Debtor;  or

          (c)     Covenants  -  Any  breach,  default  or  failure to perform or
observe  by  Debtor of any of the covenants or agreements contained herein or in
any  other document or agreement now or hereafter executed in connection with or
as  security  for  the  Obligations, and failure to cure or correct such breach,
default  or  failure  within  thirty  (30)  days after receipt of written notice
thereof  to  the  Debtor, or the occurrence of any Event of Default hereunder or
under  any  other  document or agreement now or hereafter executed in connection
with  or  as  security  for  the  Obligations,  other  than  this  Agreement; or

          (d)     Collateral  Transfer - Any sale, assignment, or other transfer
or  disposition of any of the Collateral to or in favor of any person other than
Secured  Party;  or

          (e)  Liens  on  Collateral  -  Any  creation of any Lien on any of the
Collateral  to  or  in  favor  of  any  person  other  than  Secured  Party;  or

          (f)  Status  of  Obligor - Debtor or any Other Liable Party shall die,
dissolve,  or  otherwise  terminate  its  existence  in  its form as of the date
hereof, or Debtor or any Other Liable Party shall (i) become insolvent or suffer
a  business  failure,  (ii)  have  a  custodian, receiver, or agent appointed or
authorized  to  take  charge  of  its property, (iii) make an assignment for the
benefit  of  creditors  or  call  a  meeting of creditors for the composition of
debts, or (iv) be subject to the commencement of any proceeding in bankruptcy or
under  other  insolvency  laws.

     Section  4.04.  Default  Remedies.  Upon  the  happening  of  any  Event of
                     -----------------
Default  specified  in  Section 4.03 hereof and before the cure thereof, Secured
Party  may  declare  all or any part of the Obligations immediately due, payable
and  performable,  without  demand, notice of intention to accelerate, notice of
acceleration, notice of nonpayment, presentment, protest, notice of dishonor, or
any  other  notice whatsoever, all of which are waived by Debtor, and apply, set
off,  collect, sell in one or more sales, lease, or otherwise dispose of, any or
all  of  the  Collateral,  in  its  then condition or following any commercially
reasonable  preparation or processing, in such order as Secured Party may elect,
and  any  such sale may be made either at public or private sale at its place of
business  or  elsewhere, or at any brokers' board or securities exchange, either
for  cash  or upon credit or for future delivery, at such price as Secured Party
may  deem  fair, and Secured Party may be the purchaser of any or all Collateral
so sold and may hold the same thereafter in its own right free from any claim of
Debtor  or right of redemption.  Such purchase or holding by Secured Party shall
be  deemed  a  retention  by  Secured  Party in satisfaction of the Obligations.
Secured  Party  may enter upon Debtor's premises to take possession of, assemble
and  collect  the Collateral and/or Secured Party may require Debtor to assemble
the  Collateral  and make it available to Secured Party at a place designated by
Secured  Party  which is reasonably convenient to Secured Party and Debtor.  All
demands, notices and advertisements, and the presentment of property at sale are
hereby  waived.  If,  notwithstanding  the  foregoing provisions, any applicable
provision  of  the  Code  or other law requires Secured Party to give reasonable
notice  of  any  such  sale or disposition or other action, Debtor hereby agrees
five  days'  prior  written notice shall constitute reasonable notice.  Any sale
hereunder  may  be conducted by an auctioneer or any officer or agent of Secured
Party  and  it shall not be necessary that the Collateral or any part thereof be
present  at  the  location  of such sale.  In addition to the foregoing, Secured
Party  may,  upon the occurrence of any Event of Default, exercise any rights or
remedies  permitted  under  the Code or as may otherwise be available to Secured
Party  under  any  applicable  law  or  in  equity.

     Section  4.05     Right  of  Setoff.  Upon  the  happening  of any Event of
                       -----------------
Default  specified in Section 4.03 hereof, Secured Party is hereby authorized to
then,  or at any time thereafter and from time to time, without notice to Debtor
(any  such  notice  being expressly waived by Debtor), apply and set off (i) any
and  all  deposits (general or special, time or demand, provisional or final) of
Debtor  at  any time held by Secured Party; (ii) any and all money, instruments,
securities,  documents,  chattel  paper,  credits,  claims,  demands  and  other
property,  rights  or  interests of Debtor which at any time shall come into the
possession  or  custody  or under the control of Secured Party, for any purpose;
and (iii) the Proceeds of any of the foregoing property, against the Obligations
as  if  the  same  were  included in the Collateral, and Debtor hereby grants to
Secured Party a security interest in, a general Lien upon, and a right of setoff
against  the  foregoing  described  property  as  security  for the Obligations.
Secured Party shall have the right to so set off and apply such property against
the  Obligations  regardless of whether or not Secured Party shall have made any
demand  for  payment  or  performance  of any Obligation or shall have given any
other  notice.  Secured  Party  agrees  to promptly notify Debtor after any such
setoff  and application, provided, however, the failure of Secured Party to give
any  such  notice  shall not affect the validity of such setoff and application.
The  rights  of  Secured  Party under this Section 4.05 are in addition to other
rights  and  remedies  at law or in equity (including, without limitation, other
rights  of  setoff)  which  Secured  Party  may  have.

     Section  4.06.  Proceeds.  After  the  happening  of  any  Event of Default
                     --------
specified  in Section 4.03 hereof, the proceeds of any sale or other disposition
of the Collateral and all sums received or collected by Secured Party from or on
account  of  the  Collateral shall be applied by Secured Party in the manner set
forth  in  Section  9.615  of  the  Code.

     Section  4.07.  Recourse  Obligation.  Notwithstanding  anything  else
                     --------------------
contained  herein,  the  Obligations  secured  by  the  Collateral are with full
recourse.

     Section  4.08.  Secured  Party's Duties.  The powers conferred upon Secured
                     -----------------------
Party  by this Agreement are solely to protect their interests in the Collateral
and  shall  not  impose any duty upon Secured Party to exercise any such powers.
Secured Party shall be under no duty whatsoever to make or give any presentment,
demand  for  performance,  notice of nonperformance, protest, notice of protest,
notice  of dishonor, or other notice or demand in connection with any Collateral
or  the  Obligations,  or  to  take  any  steps necessary to preserve any rights
against  prior  parties.

     Section 4.09.  Secured Party's Actions.  Debtor waives any right to require
                    -----------------------
Secured Party to proceed against any person, exhaust any Collateral, or have any
Other Liable Party joined with Debtor in any suit arising out of the Obligations
or  this  Agreement  or pursue any other remedy in Secured Party's power; waives
any and all notice of acceptance of this Agreement or of creation, modification,
rearrangement,  renewal  or  extension  for any period of any of the Obligations
from time to time; and waives any defense arising by reason of any disability or
other  defense of any Other Liable Party, or by reason of the cessation from any
cause  whatsoever  of  the  liability  of  any Other Liable Party.  All dealings
between  Debtor  and  Secured Party, whether or not resulting in the creation of
the Obligations, shall conclusively be presumed to have been held or consummated
in  reliance  upon  this  Agreement.  Upon the happening of any Event of Default
specified  in Section 4.03 hereof and before the cure thereof, Debtor authorizes
Secured  Party,  without  notice or demand and without any reservation of rights
against  Debtor  and  without  affecting  Debtor's liability hereunder or on the
Obligations,  from  time  to  time  to  (i)  take and hold any other property as
collateral,  other  than  the  Collateral,  as  security  for  any or all of the
Obligations,  and  exchange,  enforce,  waive  and  release  any  or  all of the
Collateral  or  such  other  property;  (ii)  apply the Collateral or such other
property  and direct the order or manner of sale thereof as Secured Party in its
discretion  may  determine;  (iii)  renew,  extend  for  any period, accelerate,
modify,  compromise,  settle or release the obligation of any Other Liable Party
with  respect  to  any  or  all  of  the  Obligations or Collateral; (iv) waive,
enforce,  modify,  amend  or  supplement  any  of  the provisions of any note or
instrument  evidencing any of the Obligations; and (v) release or substitute any
Other  Liable  Party.  In the event any sale or lease of Collateral hereunder is
not  completed  or  is  defective  in the opinion of Secured Party, such sale or
lease shall not exhaust the rights of Secured Party hereunder, and Secured Party
shall  have  the  right  to cause a subsequent sale or sales or lease to be made
hereunder.  Any and all statements of fact or other recitals made in any bill of
sale or assignment or other instrument evidencing any foreclosure sale hereunder
as to the nonpayment or nonperformance of any Obligation or as to the occurrence
of any default, or as to Secured Party's having declared all of such Obligations
to  be due and payable, or as to notice of time, place and terms of sale and the
properties  to  be  sold  having  been  duly given, as to any other act or thing
having  been  duly done by Secured Party, shall be taken as prima facie evidence
of  the  truth  of  the  facts  so  stated  and  recited.

     Section  4.10.  Transfer  of Obligations and Collateral.  Secured Party may
                     ---------------------------------------
transfer,  convey  or  assign  any  or all of the Obligations, and upon any such
transfer,  conveyance or assignment, Secured Party may likewise transfer, convey
or assign any or all of the Collateral and/or the security interest thereon, and
the  transferee  shall be vested with all rights, powers and remedies of Secured
Party hereunder with respect to Collateral so transferred, conveyed or assigned;
but  with  respect  to  any  Collateral  or security interest not so transferred
Secured Party shall retain all rights, powers and remedies hereby given.  In the
event  of such assignment, Debtor shall not assert any claims or defenses it may
have  against  the  assignee  except  those expressly granted in this Agreement.
Secured  Party  may  at  any time deliver any or all of the Collateral to Debtor
whose  receipt  shall  be  a complete and full acquittance for the Collateral so
delivered,  and  Secured Party shall thereafter be discharged from any liability
therefor.

      Section  4.11.  Protection  of  Collateral.  Secured  Party  shall  not be
                      --------------------------
liable  for  failure to collect or realize upon any or all of the Obligations or
Collateral,  or  for any delay in so doing, nor shall Secured Party be under any
duty to take any action whatsoever with regard thereto.  Secured Party shall use
reasonable  care  in  the  custody  and  preservation  of  any Collateral in its
possession  but  need  not  take  any steps to keep the Collateral identifiable.
Secured  Party  shall not have any duty to comply with any recording, filing, or
other  legal  requirements  necessary  to  establish  or  maintain the validity,
priority  or  enforceability  of, or Secured Party's rights in or to, any of the
Collateral.  The risk of accidental loss or damage to, or diminution of value of
the  Collateral  shall  be  on  Debtor,  and  Secured  Party  shall not have any
liability  whatsoever  for  failure  to  obtain  or  maintain  insurance, nor to
determine  whether any insurance ever in force is adequate as to amount or as to
risk insured.  Secured Party, at its option, whether before or after an Event of
Default,  but  without  any  obligation  whatsoever  to do so, may (i) discharge
taxes,  claims,  charges,  Liens,  security  interests,  assessments  or  other
encumbrances  resulting  from  the action or inaction of Debtor of any and every
nature  whatsoever  at  any  time  levied,  placed  upon or asserted against the
Collateral;  (ii)  place  and  pay  for  insurance  on the Collateral, including
insurance  that  only  protects  Secured Party's interest; (iii) pay any filing,
recording,  registration,  licensing  or  certification  fees  or other fees and
charges related to the Collateral; or (iv) take any other action to preserve and
protect  the  Collateral  and  Secured  Party's  rights  and remedies under this
Agreement  as  Secured  Party  may deem necessary or appropriate.  Debtor agrees
that  Secured Party shall not have any duty or obligation whatsoever to take any
of  the  foregoing  actions.  Debtor  agrees to promptly reimburse Secured Party
upon demand for any payment made or any reasonable, actual and necessary expense
incurred  by  Secured  Party pursuant to this authorization.  These payments and
expenditures,  together  with interest thereon from the date incurred until paid
by  Debtor  at  the  maximum  rate permitted by law, which Debtor agrees to pay,
shall  constitute additional Obligations and shall be secured by and entitled to
the  benefits  of  this  Agreement.

     Section  4.12.  Cumulative  Security.  The  execution  and delivery of this
                     --------------------
Agreement shall in no manner impair or affect any other security (by endorsement
or otherwise) heretofore or hereafter existing for the Obligations.  No security
taken  hereafter  as  security for the Obligations shall impair in any manner or
affect this Agreement.  All such present and future additional security is to be
considered  as  cumulative  security.

     Section  4.13.  Continuing  Agreement.  This  is a continuing Agreement and
                     ---------------------
the grant of a security interest hereunder shall remain in full force and effect
and  all  the  rights,  powers  and  remedies  of  Secured Party hereunder shall
continue  to  exist  until  all Obligations are satisfied or paid in full as the
same becomes due and until Secured Party, upon request of Debtor, has executed a
written  termination  statement,  reassigning  to  Debtor, without recourse, the
Collateral  and  all  rights  conveyed  hereby  and  returned  possession of the
Collateral  to  Debtor.  Otherwise this Agreement shall continue irrespective of
the  fact  that  the  liability  of  any  Other Liable Party may have ceased, or
irrespective  of  the  validity or enforceability of any security instruments to
which  any  Other  Liable  Party  may  be  a  party,  and  notwithstanding  the
reorganization,  death,  incapacity or bankruptcy of any Other Liable Party, and
notwithstanding  the  reorganization or bankruptcy of Debtor, or any other event
or  proceeding  affecting  Debtor  or  any Other Liable Party.  Unless otherwise
required  by  applicable law, Secured Party shall not be under any obligation to
issue a termination statement or similar document unless Debtor requests same in
writing and until all Obligations have been repaid and/or discharged in full and
there  are no further commitments on the part of Secured Party to make advances,
incur  Obligations  or otherwise give value.  To the extent that any payments on
the  Obligations  or  proceeds  of  the Collateral received by Secured Party are
subsequently  invalidated,  declared to be fraudulent or preferential, set aside
or  required  to  be  repaid to a trustee, debtor in possession, receiver or any
party  under bankruptcy law, common law or equitable cause, then to such extent,
the Obligations so satisfied shall be revived and continue as if such payment or
proceeds  had  not  been  received by Secured Party and Secured Party's security
interest, rights, powers and remedies hereunder shall continue in full force and
effect.

     Section  4.14.  Cumulative  Rights.  The  rights,  powers  and  remedies of
                     ------------------
Secured  Party hereunder shall be in addition to all rights, powers and remedies
given  by statute or rule of law and are cumulative.  The exercise of any one or
more  of  the rights, powers and remedies provided herein shall not be construed
as  a  waiver  of  any  other  rights,  powers  and  remedies  of Secured Party.
Furthermore,  regardless  of  whether  or  not the Uniform Commercial Code is in
effect  in the jurisdiction where such rights, powers and remedies are asserted,
Secured  Party  shall  have  the  rights, powers and remedies of a secured party
under  the  Code.

     Section  4.15.  Exercise  of Rights, Etc.  Time shall be of the essence for
                     ------------------------
the  performance  of any of the Obligations by Debtor or Other Liable Party, but
neither  Secured  Party's  acceptance  of partial or delinquent payments nor any
forbearance, failure or delay by Secured Party in exercising any right, power or
remedy  shall  be deemed a waiver of any obligation of Debtor or of Other Liable
Party or of any right, power or remedy of Secured Party or preclude any other or
further  exercise thereof; and no single or partial exercise of any right, power
or  remedy shall preclude any other or further exercise thereof, or the exercise
of  any  other  right,  power  or  remedy.

     Section  4.16.  Remedy  and  Waiver.  Secured Party may remedy any Event of
                     -------------------
Default  and may waive any Event of Default without waiving the Event of Default
remedied  or  waiving  any  prior  or  subsequent  Event  of  Default.

     Section 4.17.  Non-Judicial Remedies.  Secured Party may enforce its rights
                    ---------------------
hereunder  without  prior  judicial  process  or  judicial  hearing,  and Debtor
expressly  waives, renounces and knowingly relinquishes any and all legal rights
which  might  otherwise  require Secured Party to enforce its rights by judicial
process.  In  so  providing  for  non-judicial  remedies,  Debtor recognizes and
concedes  that  such  remedies  are  consistent with the usage of the trade, are
responsive  to  commercial  necessity,  and  are  the result of bargain at arm's
length.  Nothing  herein  is  intended  to  prevent Secured Party or Debtor from
resorting  to  judicial  process  at  either  party's  option.

     Section  4.18.  Appraisement,  Etc.  To  the  full extent Debtor may do so,
                     ------------------
Debtor  agrees  that  Debtor  shall not at any time insist upon, plead, claim or
take the benefit or advantage of any law now or hereafter in force providing for
any  appraisement,  valuation,  stay,  extension  or redemption, and Debtor, for
Debtor,  Debtor's  heirs,  devisees,  representatives,  receivers,  trustees,
successors  and  assigns, and for any and all persons ever claiming any interest
in  the  Collateral,  to the extent permitted by law, hereby waives and releases
all  rights  of  redemption, valuation, appraisement, stay of execution, and all
rights to a marshalling of the assets of Debtor, including the Collateral, or to
a  sale  in  inverse  order  of  alienation  in  the event of foreclosure of the
security  interest  hereby  created.

                                   ARTICLE V
                                   ---------
                                 MISCELLANEOUS
                                 -------------

     Section  5.01.  Preservation  of Liability.  Neither this Agreement nor the
                     --------------------------
exercise  by  Secured Party of (or the  failure to so exercise) any right, power
or  remedy conferred herein or by law shall be construed as relieving any person
liable  on  the  Obligations  from  liability  on  the  Obligations  and for any
deficiency  thereon.

     Section 5.02.     Notices.  Any notice or demand under this Agreement or in
                       -------
connection with this Agreement may be given, and shall be deemed to be given and
received  upon  the  deposit thereof, in writing in the U.S. Mail by first class
mail,  postage  prepaid  to  the addresses shown beneath such person's signature
below,  or  to  such  other  address  or  to  such  individual's or department's
attention as Debtor or Secured Party may have furnished to the other in writing,
but  actual  notice,  however  given  or  received,  shall  always be effective.

     Section  5.03.  Governing  Law.  THIS  AGREEMENT  HAS  BEEN MADE IN AND THE
                     --------------
SECURITY INTEREST GRANTED HEREBY IS GRANTED IN AND SHALL BE GOVERNED BY THE LAWS
OF  THE  STATE  OF  TEXAS  (EXCEPT  TO  THE  EXTENT  THAT  THE LAWS OF ANY OTHER
JURISDICTION GOVERN THE PERFECTION AND PRIORITY OF THE SECURITY INTEREST GRANTED
HEREBY)  AND  OF  THE  UNITED STATES OF AMERICA, AS APPLICABLE, IN ALL RESPECTS,
INCLUDING  MATTERS  OF  CONSTRUCTION,  VALIDITY,  ENFORCEMENT  AND  PERFORMANCE.
Debtor  hereby  consents to and submits to in personam jurisdiction and venue in
the  state,  district,  and  county  courts  of Harris County, Texas, and in the
federal  district courts of the Southern District of Texas.  The Obligations are
payable and performable in Harris County, Texas.  Debtor waives any objection to
in  personam  jurisdiction  in  the  aforementioned  courts  on  the  grounds of
insufficient  minimum  contacts,  waives  any objection to venue, and waives any
plea  of  forum  non conveniens.  This consent to and submission to jurisdiction
is  in  regard  to  any  action related to this Agreement, regardless of whether
Debtor's actions took place in Texas, elsewhere in the United States, or abroad.
Debtor  waives  service  of  process, both inside and outside Texas, and abroad,
provided,  however,  that  Secured  Party  shall attempt to notify Debtor of any
action  by  certified  or  registered  mail.  If  Debtor  cannot  be  reached by
certified  or registered mail, or if the state or nation in which Debtor resides
or  is  domiciled  does  not permit service under its own rules by registered or
certified mail, or if such notice is otherwise impracticable, Secured Party will
employ  whatever  method  is  reasonably  calculated  to  give  notice under the
circumstances.  This  submission  to jurisdiction is non-exclusive, and does not
preclude Secured Party from obtaining jurisdiction over Debtor or the Collateral
in  any  court  otherwise  having  jurisdiction.

     Section  5.04.  Amendment and Waiver.  This Agreement may not be amended or
                     --------------------
in  any  way  modified  (nor may any of its terms be waived) except in a writing
duly  executed  by Debtor and Secured Party affected thereby.  This provision is
specifically  intended  to  render  invalid  and  void any alleged amendments or
modifications  to this Agreement based on usage of trade or agreements course of
performance  or  course of dealing of the parties hereto which have not been set
forth  in  a  writing  signed  by  Debtor  and  Secured  Party affected thereby.

     Section  5.05.  Severability.  If  a  court of competent jurisdiction shall
                     ------------
adjudge  to  be invalid any clause, sentence, subparagraph, paragraph or section
of this Agreement, such judgment or decree shall not affect, impact, invalidate,
or  nullify  the  remainder  of  this Agreement, but the effect thereof shall be
confined to the clause, sentence, subparagraph, paragraph or section so adjudged
to  be invalid.  Similarly, if a court of competent jurisdiction shall hold that
all  or  any  part of this Agreement is unenforceable as to any one Debtor, such
judgment  or decree shall have no affect on the enforceability of this Agreement
against  any  other  Debtor  or  Other  Liable  Party.

     Section  5.06.  Survival of Agreements.  All representations and warranties
                     ----------------------
of  Debtor  herein,  and all covenants and agreements herein not fully performed
before  the  effective  date  of  this  Agreement,  shall  survive  such  date.

     Section  6.07.  Successors  and  Assigns.  The  covenants,  and  agreements
                     ------------------------
herein contained by or on behalf of Debtor shall bind Debtor, and Debtor's legal
representatives,  successors  and  assigns  and  shall  inure  to the benefit of
Secured  Party,  and  its  successors  and  assigns.

     Section  5.8.  Titles of Articles, Sections and Subsections.  All titles or
                    --------------------------------------------
headings to articles, sections, subsections or other divisions of this Agreement
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 5.9.  Number, Gender.  Whenever the singular number is used in this
                   --------------
Agreement, the same shall include the plural number, where appropriate, and vice
versa,  and  words  of  any  gender  shall  include  each  other  gender  where
appropriate.

     Section  5.10.  Entire  Agreement.  This  Agreement  embodies  the  entire
                     -----------------
agreement  and  understanding  between  Debtor  and  Secured Party and any other
person  with  respect  to  the  subject  matter  hereof and supersedes all prior
agreement  and understandings between such parties concerning the subject matter
hereof.

     [SIGNATURES  TO  FOLLOW]

<PAGE>
     IN WITNESS HEREOF, Debtor has caused this instrument to be duly executed as
of  the  date  first  above  written.

                              "DEBTOR"

                              COLONY  ENERGY,  INC.
                              a  Delaware  corporation


                              By:_____________________________
                                   Kent  E.  Lovelace,  Jr.,
                                   President

     The  Secured  Party  joins herein for the limited purposes of accepting its
rights,  remedies  and  benefits  under  this  Agreement.

                              "SECURED  PARTY"

                              CEI  VENTURES,  LLC,
                              a  Texas  limited  liability  company


                              By:_____________________________
                                   Jimmy  D.  Wright
                                   Sole  Manager