Exhibit 10.1
                     SETTLEMENT AGREEMENT AND MUTUAL RELEASE

         This Settlement Agreement And Mutual Release  ("Agreement") is made and
entered into as of the 23rd day of December,  2003 by and between  Trans Energy,
Inc. ("TEI"), a Nevada Corporation,  George Woodburn and Loren Bagley on the one
hand and Baker  Hughes  Oilfield  Operations,  Inc.  d/b/a Baker  Hughes  Inteq,
Western Geophysical, a division of Western Atlas International,  Inc. and any of
their  subsidiaries,  affiliates or related  entities  (collectively  the "Baker
Entities") on the other hand.


                                   1. RECITALS
                                      --------

         A. The Baker Entities  obtained a judgment against TEI in the amount of
$600,665.36 plus post-judgment interest at the rate of 10% per annum by entry of
an Agreed Final Judgment (the "Agreed  Judgment") in the 189th Judicial District
Court of  Harris  County,  Texas,  Cause No.  1998-  48248.  The Baker  Entities
obtained an additional  judgment  against TEI in the amount of  $41,142.00  plus
post-judgment interest at the rate of 10% per annum by entry of a Final Judgment
(the "Judgment") in the 152nd Judicial  District Court of Harris County,  Texas,
Cause No.  1998-8777.  Collectively both judgments are herein referred to as the
"Judgments."

         B. The Baker Entities and TEI entered into a Settlement Agreement dated
February 2, 2001 (the "February Agreement")  concerning the terms of the payment
for  the  obligations  owed by TEI to the  Baker  Entities  for  the  Judgments.
Pursuant to the  February  Agreement,  TEI agreed to pay the Baker  Entities the
amount  of  $759,664.31,  plus  interest  thereon  at 10%  from  the date of the
"Initial Payment as defined in the February Agreement and in accordance with the
payment  schedule  contained  in  the  February  Agreement.   As  part  of  such
settlement,  Mr.  Woodburn (the  "Woodburn  Pledge") and Mr. Bagley (the "Bagley
Pledge") each delivered their Security  Agreement/Pledge  dated February 1, 2001
and TEI delivered to the Baker  Entities a Deed Of Trust dated February 1, 2001,
and recorded  February 14, 2001, in Book 1646 at Page 478 - 479 in the Office of
the County Clerk, Campbell County, Wyoming (the "Deed of Trust").  Subsequently,
TEI assigned to the Baker Entities TEI's' right to certain  production  payments
by agreement  dated February 28, 2002, and recorded March 15, 2002, in Book 1140
of Photos at Pages 346-349 in the Office of the County Clerk,  Campbell  County,
Wyoming (the "Production Assignment").

         C. TEI admits  that it is in default of its payment  obligations  under
the  February  Agreement  and the  Judgments  and that  the  unpaid  balance  of
$577,702.01  (representing principle and accrued interest through July 14, 2003)
is now past due and owing (the "Claims").



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<PAGE>


         D. The Baker Entities, Mr. Woodburn, Mr. Bagley and TEI enter into this
Agreement to resolve fully and finally all TEI obligations to the Baker Entities
arising  from  TEI's  default  of  the  February  Agreement,  the  Judgments  or
otherwise.

                                  II. AGREEMENT
                                      ---------

         In  consideration  of the covenants and agreements  herein,  and of the
payment of $350,000 in cash or by cashier(s) check made payable to Baker Hughes,
Inc.  by Loren  Bagley to the Baker  Entities,  and for other good and  valuable
consideration,  the  receipt  and  sufficiency  of  which  is  hereby  expressly
acknowledged by TEI, TEI, Mr. Bagley, Mr. Woodburn and the Baker Entities hereby
agree as follows:

         A.       Payment to the Baker Entities from Trans Energy. Inc.
                  -----------------------------------------------------
         Mr. Bagley, for the benefit of TEI agrees to pay the Baker Entities the
amount of $350,000 in cash or by cahier's  check made  payable to Baker  Hughes,
Inc.,  contemporaneously  with the delivery to the parties.  (i) this Agreement,
(ii) the Release and Reassignment of Production Payment and Deed of Trust, (iii)
documents  releasing any judgment  liens against TEI by the Baker Entities filed
in West Virginia and/or Texas,  (iv) a UCC Termination  Statement to be filed in
West  Virginia,  (v)  cancelled  originals  of the Deed of Trust and the  pledge
agreements  of Mr.  Woodburn  and  Mr.  Bagley  and  (vi)  the  original.  stock
certificates and cancelled,  blank stock powers certificates  delivered with the
pledge agreements (collectively the "Settlement Documents").

         B.       Prior payments and production payments
                  --------------------------------------
         The Baker Entities will retain all prior payments received from TEI, or
on its behalf, in addition to all payments  heretofore  received or which may be
or become  due under the  Production  Assignment  on or before  the date of this
Agreement.  Any such payments  received by TEI shall be immediately  paid to the
Baker Entities.

         C.       Delivery of the Settlement Documents
                  ------------------------------------
         Contemporaneously  with the  delivery  of the  $350,000.  by TEI to the
Baker  Entities,  the Baker  Entities  shall deliver the  Settlement  Documents,
appropriately  executed and notarized (as may be required).  TEI shall be solely
responsible for filing any of the Settlement Documents with any state,  federal,
county  or  other  government  entity,  department  or  agency,  as TEI may deem
appropriate, at TEI's sole cost and expense.


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<PAGE>



                        III. RELEASE AND INDEMNIFICATION

         A.       TEI's Release of the Baker Entities
                  ----------------------------------
         For and in  consideration  of the covenants and agreements of the Baker
Entities in this  Agreement,  each of TEI, Mr. Woodburn and Mr. Bagley (the "TEI
Releasors") hereby RELEASES,  DISCHARGES,  AND ACQUITS the Baker Entities, their
employees,   agents,   representatives,   directors,   shareholders,   officers,
affiliates, subsidiaries, heirs, executors,  administrators,  insurers, assigns,
attorneys and legal  representatives,  and each of them (the "Baker  Releasees")
from any and all judgments and claims of any kind whatsoever,  including without
limitation,  demands, debts, dues, liens, or causes of action at law, in equity,
in contract, or in tort, under the common law or a statute,  regulation,  or law
of the State of Texas or any other state or jurisdiction,  or the United States,
as  well as  claims  for  damages  of any  kind  whatsoever,  including  without
limitation,  lost profits, loss of income, any other economic losses or damages,
punitive, exemplary,  consequential,  treble, or additional damages of any kind,
attorneys fees, court costs,  prejudgment interest,  post-judgment interest, and
any other damages, that the TEI Releasors, or any of them, have or might have or
have incurred or might incur,  irrespective of when or how any such arose or may
have arisen, whether now or in the future, including without limitation,  in any
way arising from or related to the Claims, the Judgments, or either of them, the
collection and enforcement of the Judgments or either of them, the filing of the
2003 Bankruptcy and/or any involuntary  bankruptcy  petition and/or the entry of
any order for relief in any such bankruptcy case,  including without  limitation
claims related to venue or any other matter,  whether now known or unknown,  and
irrespective  of whether any such could have,  with the  exercise of  reasonable
diligence been discovered,  it being the specific intention of the TEI Releasors
by this Agreement to release and discharge the Baker  Releasees from any and all
claims the TEI Releasor's, or any of them, have or may have, arising, or alleged
to have arisen, as a result of any conduct of any sort, of any person or entity,
including without  limitation the Baker Releasees,  or any of them, on or before
the  date of this  Agreement  or in  connection  with  the  filing  of the  2003
Bankruptcy, the Judgments or the February Agreement, or otherwise, and excepting
from this  release  only  claims  for the breach of this  Agreement.  As further
consideration for this Agreement,  TEI hereby stipulates that the Baker Entities
properly and timely  served the  Involuntary  Petition and the Summons on TEI in
the 2003 Bankruptcy.

         B.       TEI's Indemnification of the Baker Entities
                  -------------------------------------------
         FOR THE SAME  CONSIDERATION AS HEREINABOVE GIVEN BY THE BAKER ENTITIES,
THE TEI  RELEASORS,  AND  EACH  OF  THEM,  EXPRESSLY  AGREE  TO  FULL Y  DEFEND,
INDEMNIFY,  AND HOLD  HARMLESS  THE  BAKER  RELEASEES  FROM ANY  CLAIM,  DEMAND,
LIABILITY,  COST,  OR  EXPENSE  OF ANY  KIND OR  CHARACTER,  INCLUDING,  WITHOUT
LIMITATION,  FOR ATTORNEY'S FEES INCURRED,  WHICH MAY ARISE,  ARISE,  AND/OR ARE
ALLEGED TO HAVE ARISEN AS A RESULT OF CLAIMS


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<PAGE>

AND/OR  ALLEGATIONS  MADE BY ANY PERSON OR ENTITY ARISING BY, THROUGH,  OR UNDER
THE TEI  RELEASORS,  OR ANY OF THEM,  IN  CONNECTION  WITH ANY  MATTER  RELEASED
HEREUNDER,  REGARDLESS  OF  WHETHER  SAID  LIABILITY  BE  DIRECT  OR BY  WAY  OF
INDEMNITY, CONTRIBUTION, OR SUBROGATION.

         C.       The Baker Entities' Release of TEI. Woodburn and Bagley
                  -------------------------------------------------------
         For and in consideration of the covenants and agreements of TEI in this
Agreement,  The Baker Entities  hereby RELEASE,  DISCHARGE,  AND ACQUIT TEI, its
employees,   agents,   representatives,   directors,   shareholders,   officers,
affiliates, subsidiaries, heirs, executors,  administrators,  insurers, assigns,
attorneys and 1egal  representatives,  Mr. Bagley and Mr. Woodburn,  and each of
them,  (the "TEI  Releasees")  from any and all judgments and claims of any kind
whatsoever, including without limitation, demands, debts, dues, liens, or causes
of action at law, in equity, in contract,  or in tort, under the common law or a
statute,  regulation,  or law of the  State  of  Texas  or any  other  state  or
jurisdiction,  or the United  States,  as well as claims for damages of any kind
whatsoever,  including without  limitation,  lost profits,  loss of income,  any
other economic losses or damages, punitive, exemplary, consequential, treble, or
additional  damages  of any  kind,  attorneys  fees,  court  costs,  prejudgment
interest,  post-judgment  interest,  and  any  other  damages,  that  the  Baker
Entities,  or any of  them,  have or  might  have or have  incurred,  in any way
arising at any time prior to the effective date of this Agreement,  irrespective
of how any such arose or may have arisen,  including without limitation,  in any
way arising from or related to the Claims, the Judgments,  or either of them, or
any other matter,  whether now known or unknown, and irrespective of whether any
such could have, with the exercise of reasonable diligence been discovered prior
to the execution of this Agreement, it being the specific intention of the Baker
Entities by this  Agreement to release and discharge the TEI Releasees  from any
and all  claims  which  could or may be made or  brought by through or under the
Baker Entities,  or any of them, arising, or alleged to have arisen, as a result
of any conduct of any sort, of the TEI Releasees,  or any of them,  occurring on
or before the date of this Agreement,  including without  limitation all matters
in any way related to the Judgments and excepting  from this release only claims
for the breach of this Agreement.  The Deed of Trust, the Woodburn  Pledge,  the
Bagley  Pledge  and  the  Production  Assignment  are  hereby,  in  all  things,
cancelled. The Judgments are hereby RELEASED.

         D.       Final Release.
                  -------------
         1. It is the mutual intent of the Parties hereto that this Agreement is
and shall be final, conclusive,  binding,  enforceable and non-terminable as of,
from and after the Effective Date of this Agreement, and
         2.  Regardless  of any  change  in the law  (statutory,  decisional  or
otherwise) at any time after the date of this  Agreement;  and/or whether any of
the  facts  with  respect  to or  otherwise  on the basis of which any Party has
entered into and/or executed this Agreement, is at  any time after  the date  of


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<PAGE>

this Agreement found or proven to be different in any manner whatsoever from the
facts now  believed by any Party to be true as of the date of the  execution  of
this Agreement; and/or
         3. The discovery after the date of the execution of this Agreement,  of
any additional claims which any Party to this Agreement may have had against any
other Party and all related facts and circumstances.

         E.       Further Documents - No Liability
                  --------------------------------
         Upon the  reasonable  request  of TEI to the  Baker  Entities,  and the
delivery to the Baker  Entities by TEI of the  appropriate  document,  the Baker
Entities  shall  execute and  deliver to TEI for filing,  such other and further
releases as may be necessary to fully  effectuate the intent of this  Agreement.
All  costs  of  preparation  and  filing  shall  be  paid  by  TEI.  Absent  the
unreasonable  failure  of  the  Baker  Entities  to  execute  and  deliver  such
documents,  if any,  within a reasonable  time,  which in no event shall be less
than sixty (60) days from the date the Baker Entities receive the document,  TEI
agrees that the Baker Entities shall have no liability whatsoever to TEI for any
damages incurred by TEI with respect to any release  delivered  pursuant to this
paragraph.


                          IV. THE BANKRUPTCY DISMISSAL
                              ------------------------

         A.       Motion to Dismiss the Bankruptcy Case.
                  -------------------------------------
         After the execution and delivery of this Agreement,  the Baker Entities
agree to submit to the Bankruptcy  Court a Motion to Dismiss the Bankruptcy Case
(the "Motion to Dismiss").  The motion to Dismiss shall provide, in part, that a
basis for the dismissal  includes the settlement of the Claims.  The parties may
also submit a request for  expedited  hearing on the Motion to Dismiss,  and the
parties  hereto  shall  consent  to  expedited  consideration  of the  Motion to
Dismiss.

         B.       Payment  of  Bankruptcy Costs,  Fees, Administrative Expenses,
                  Trustee's Fees and Trustee's Attorney's Fees
                  --------------------------------------------------------------
         Contemporaneously  with the dismissal of the Bankruptcy Case, TEI shall
pay all costs,  fees,  administrative  expenses,  Trustee's  fees and  Trustee's
attorney's fees incurred in connection with the Bankruptcy  Case,  excluding the
attorneys' fees of the Baker Entities.

                                 V. ARBITRATION
                                   ------------

         Any dispute  between the parties  arising by virtue of this  Agreement,
the Judgments,  or otherwise,  concerning any matter, at law, or in equity shall
be finally  determined by  arbitration  before an  arbitrator  from the American
Arbitration   Association,   in  accordance  with  the  rules  of  the  American
arbitration  Association as  promulgated  from time to time. A party may request
three


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<PAGE>

arbitrators  in which  event TEI and the Baker  Entities  shall each  choose one
arbitrator who shall together  choose a third,  but the party  requesting  three
arbitrators  shall pay for two of them in advance.  The cost of arbitration  and
attorneys fees incurred shall be paid by the  non-prevailing  party, which shall
be  determined by the  arbitrator.  Any such  arbitration  shall be conducted in
Houston,  Texas and the award shall.  not be  appealable in any state or federal
court and may be entered in any state or federal  court as a final  judgment  of
said court.


                          VI. MISCELLANEOUS PROVISIONS
                              ------------------------

         A. The Baker  Entities and TEI expressly  warrant and represent as part
of the  consideration  for  the  execution  of this  Agreement  that  they  have
consulted  with an attorney or advisor of their choosing prior to executing this
Agreement.  The Parties,  each for him or itself,  further warrant that they are
fully  competent to execute this  Agreement and that this  Agreement is executed
voluntarily and without reliance on any  representation of any kind or character
not expressly herein set forth.

         B. The  Parties  expressly  understand  and agree  that the  agreements
herein  contained and the  consideration  transferred is to compromise  disputed
claims,  avoid further litigation,  and buy peace, and that no payments made nor
releases or other  consideration  given shall be  construed  as an  admission of
liability, all liability being expressly denied.

         C. The Baker Entities,  TEI, Mr. Woodburn and Mr. Bagley each expressly
warrant and  represent  that each for himself or itself,  respectively,  has not
assigned,  pledged, or otherwise, in any manner whatsoever,  sold or transferred
any right, title,  interest, or claim which they have or may have,  individually
or  collectively,  in  connection  with,  related  to,  or  arising  out  of the
Settlement Documents,  Claims, the Judgments and/or the matters released by this
Agreement.

         D. The terms of this Agreement are contractual and not mere recitals.

         E. This Agreement may be executed in one or more  counterparts,  all of
which together shall constitute one instrument.

         F. This Agreement constitutes the entire agreement between the parties.
Unless  specifically set forth in this Agreement there are no  understandings or
representations  of any sort upon which any party hereto relies as an inducement
to execute this Agreement.

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<PAGE>



         G. No provisions of this Agreement shall be amended, modified or waived
except  by an  express  writing  duly  signed  by the  party  against  whom such
amendment, modification or waiver is asserted.

         H. THIS AGREEMENT  SHALL BE CONSTRUED  UNDER AND IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS  WITHOUT  GIVING ANY EFFECT TO ANY LAWS OR PROVISIONS
CONCERNING CONFLICTS OR CHOICES OF LAWS.

         I. All notices, requests,  demands, and other communications under this
Agreement  shall be deemed to have been duly  given on the date of  service  and
served  personally  on the party to whom notice is to be given,  or on the third
day after mailing if mailed to the party to whom notice is to be given, by first
class mail, registered or certified,  postage prepaid, and properly addressed as
follows:

         To:      Western Geophysical, a division
                  of Western Atlas International, Inc. and
                  Baker Hughes Oilfield Operations, Inc.
                  d/b/a Baker Hughes Inteq
                  c/o Michael A. Lam, P .C.
                  2000 Smith St.
                  Houston, Texas 77002

         To:      Trans Energy, Inc.
                  c/o Loren Bagley
                  210 Second Street
                  P.O. Box 393
                  St. Marys, West Virginia 26170

         J. The subject  headings in this Agreement are included for purposes of
convenience only and shall not affect the construction or  interpretation of any
of its provisions.

         K. No  consent  or waiver  expressed  or  implied  by any Party to this
Agreement to or of any breach or default by any other Party to this Agreement in
the performance by such other Party of its or his obligations hereunder shall be
deemed or  construed to be a consent or waiver to or of any breach or default of
any other Party of the same or any subsequent obligations hereunder.  Failure on
the part of any Party to this Agreement to complain of any act or failure to act
of any Party to this Agreement or to declare such Party in default, irrespective
of how long  such  failure  continues,  shall  not  constitute  a waiver  by the
non-defaulting Parties of their rights hereunder.



                                       7
<PAGE>


         L. If any provision of this  Agreement is held to be unlawful,  invalid
or unenforceable  under present or future laws effective during the term hereof,
such provision shall be fully  severable,  and this Agreement shall be construed
and enforced  without giving effect to such unlawful,  invalid or  unenforceable
provision.

         IN WITNESS WHEREOF, the parties sign this Agreement effective as of the
23rd day of December 2003.

                                       BAKER HUGHES OILFIELD OPERATIONS,
                                       INC. d/b/a BAKER HUGHES INTEQ and
                                       WESTERN GEOPHYSICAL, a division of
                                       WESTERN ATLAS INTERNATIONAL, INC.

                                       BY:  /s/ Christopher Ryan
                                           --------------------------------
                                            Christopher Ryan
                                       ITS: Manager of Collections,
                                            Authorized Agent


                                       TRANS ENERGY, INC.

                                       BY:  /s/ Loren Bagley
                                            --------------------------------
                                            Loren Bagley
                                       ITS: Vice President


                                                /s/ Loren Bagley
                                                --------------------------------
                                                Loren Bagley, Individually


                                                /s/ William Woodburn
                                                --------------------------------
                                                William Woodburn, Individually




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