EXHIBIT 10.4


                            SARATOGA RESOURCES, INC.
                           2304 Hancock Drive, Suite 5
                            Austin, Texas 78756-2540
                            Telephone: (512) 371-1171
                            Facsimile: (512) 371-3383

                                 January 3, 2001


Via Telefax

Mr. Mike Mount
Trek Oil and Gas, Inc. ("Trek")
811 Dallas, Suite 819
Houston, Texas 77002

              RE:   Trek Settlement Agreement
                    Adcock Farms No. 1 Well ("Well")
                    Adcock Farms Prospect ("Prospect")
                    Dawson County, Texas

Dear Mike:

         Pursuant to your  acceptance  of Saratoga  Resources,  Inc. and Ivy Oil
Company,  L.L.C.  (the "Parties") offer of settlement with regard to terminating
Trek's  participation in the above Adcock Farms Prospect,  the Parties offer the
following.

         The  Parties  will  tender  payment  to Trek  in the  total  amount  of
$12,055.35.  In  consideration  of this  amount  and  other  good  and  valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, Trek
hereby grants,  sells,  conveys and assigns,  equally to the Parties, all of its
right,  title and interest,  including  any and all real and personal  property,
contract rights,  claims,  causes of action and other rights associated with the
"Lands" described below.

         The following  property shall  collectively be described  herein as the
"Lands":

         (i)   all lands located  within a one and one-half  statute mile radius
               of the wellbore for the well,  currently located in the southwest
               quarter of Block 35, Section 30 in the Holloway  Survey in Dawson
               County, Texas (the "Land");

         (ii)  all current leasehold  interest in any of the Lands including the
               exclusive  right,  during the three year term of the  non-compete
               agreement  set forth below,  to negotiate and acquire any and all
               leasehold,  mineral,  royalty,  production payment, or other such
               interest in the Land;



<PAGE>

         The Parties,  for the above referenced  consideration,  hereby agree to
accept any and all liability  attaching to Trek to plug or abandon the Well. The
Parties or their successors in interest shall be solely liable for all costs and
expenses associated with plugging and abandoning the Well.

         As  further  consideration,  Trek  acknowledges  the  confidential  and
proprietary   nature  of  the  business   dealings,   data  and  all  associated
documentation  and  information,  associated with the Prospect and agrees not to
disclose or provide access to any such  documentation or information  related to
the Prospect for a period of three years from date. In addition, Trek agrees not
to deal with or compete in any manner, with regard to the lands located within a
one and one-half  statute mile radius of the Adcock Farms  wellbore for a period
of three years from date.

         The  Parties  propose  that we close vie U.S.  Express  Mail.  Once the
Parties have endorsed the agreed  payment to Trek, a copy of the endorsed  check
shall be faxed to Trek for Trek's  review.  Once Trek approves the check and has
properly executed this Settlement Agreement,  Trek shall fax a copy of the fully
executed  Settlement  Agreement  to the  Parties at (512)  371-3383.  Trek shall
thereafter  compile  the  documents  and  data  comprising  all of the  Prospect
materials in Treks possession,  including the original of this properly executed
Settlement  Agreement,  and shall prepare them for overnight  U.S.  Express Mail
delivery  to the  Parties  at the  address on the above  letterhead.  Trek shall
advise  Saratoga and Ivy of the day Trek will forward the Prospect  materials to
the Parties and Saratoga and Ivy agree to promptly forward the endorsed check to
Trek the day by  overnight  U.S.  Express  Mail.  By executing  this  Settlement
Agreement Trek agrees to all of the terms,  and provisions set forth above which
the Parties also covenant and agree to.

         Agreed to and accepted by Trek this 29th day of December 2000.

                                                     Trek Oil & Gas, Inc.


                                                     Mike Mount, President




                                        2
<PAGE>