<PAGE>

                                                                   EXHIBIT 10.39

                              EMPLOYMENT AGREEMENT


     THIS EMPLOYMENT AGREEMENT is entered into by and between INLAND RESOURCES
INC. (hereinafter referred to as "Employer") and MICHAEL J. STEVENS (hereinafter
referred to as "Employee").

     WHEREAS, Employer has employed Employee as its Secretary and Treasurer; and

     WHEREAS, Employer desires to retain Employee as its Secretary and Treasurer
and Employee desires to accept such employment.

     NOW, THEREFORE, in consideration of the mutual promises herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Employer and Employee agree as follows:

     1.   EMPLOYMENT.  Employer hereby employs Employee to serve as Secretary
and Treasurer of Employer.

     2.   DUTIES.  During his employment, Employee shall devote all of his
working time, energies and skills to the management of Employer's business.
Employee agrees to serve Employer diligently and to the best of his ability.
Employee shall render services consistent with those of a person in his position
and shall perform all duties incident to such office and all such further
similar duties that may, from time to time, be assigned to him by Employer.
Employee's duties include finding further business opportunities for Employer
and Employee agrees to bring to Employer for acceptance or rejection all
business opportunities located by or made available to Employee.

     3.   COMPENSATION.  Employee's compensation for services performed under
this Agreement shall be as follows:

          (a) BASE SALARY.  Employer shall pay Employee a base salary ("Base
     Salary") of Eighty-Five Thousand Eight Hundred and No/100 Dollars
     ($85,800.00) per year.  In addition, the Compensation Committee of the
     Board of Directors of Employer (the "Committee") shall, in good faith,
     consider granting increases in such salary based upon such factors as
     Employee's performance and the growth and/or profitability of Employer, but
     it shall have no obligation to grant any such

                                      -1-
<PAGE>

     increases in compensation. Such Base Salary shall be payable in equal semi-
     monthly installments on the fifteenth day and the last working day of the
     month, or at such other times and in such installments as may be agreed
     upon between Employer and Employee. All payments shall be subject to the
     deduction of payroll taxes and similar assessments as required by law.

          (b) BONUS.  In addition to the Base Salary, Employee shall be eligible
     to receive bonus compensation in such amounts and at such times as the
     Committee shall, from time to time, determine.

     4.   EXPENSES AND BENEFITS.  Employee is authorized to incur reasonable
expenses in connection with the business of Employer, including expenses for
entertainment, travel and similar matters.  Employer will reimburse Employee for
such expenses upon presentation by Employee of such accounts and  records as
Employer shall, from time to time, require.  Employer also agrees to provide
Employee with the following benefits:

          (a) EMPLOYEE BENEFIT PLANS.  Employee shall be entitled to participate
     in employee benefit plans or programs of Employer, if any, to the extent
     that his position, tenure, salary, age, health and other qualifications
     make him eligible to participate, subject to the rules and regulations
     applicable thereto.  Such additional benefits shall include, subject to the
     approval of the Committee, full medical, dental and disability income
     insurance.

          (b) OTHER.  Such items and benefits as Employer shall, from time to
     time, consider necessary or appropriate to assist Employee in the
     performance of his duties.

          (c) VACATIONS.  Employee shall be entitled (in addition to the usual
     public holidays) to a paid vacation for a period in each calendar year not
     exceeding three (3) weeks, to be taken at such times as may be approved by
     Employer.

     5.   TERM.   The term of this Agreement shall be for one (1) year,
beginning from the effective date hereof, and shall be automatically renewed for
successive one (1) years terms.  In addition, this Agreement shall terminate as
provided for in Section 7 or upon the death of Employee.

     6.   DISABILITY.  In the event that Employee becomes Permanently Disabled
(as hereafter defined) during the term of this Agreement and while engaged in
the scope of his employment by Employer, Employee shall continue in the employ
of Employer but his compensation hereunder shall be reduced to one-half ( 1/2)
of the Base Salary then in effect, as set forth in Section 3(a) hereof,
commencing upon the determination of Employee's Permanent Disability and
continuing thereafter until the first to occur of (a) twelve (12) months or (b)
the death of Employee or (c) the

                                      -2-
<PAGE>

expiration of the term of this Agreement; and during such period of time,
Employee shall not be entitled to payment of expenses or benefits specified in
Section 4 hereof (except for reimbursement of expenses incurred by Employee
prior to becoming Permanently Disabled), except that Employer shall continue to
provide Employee with the insurance benefits specified in Section 4(a) hereof.
In addition, any compensation payable to Employee by Employer shall be reduced
by any amount which Employee is eligible to receive from workers compensation,
social security or disability insurance provided by Employer. If Employee
becomes Permanently Disabled while not engaged in the scope of his employment by
Employer, such disability may be cause for termination for "Cause" under Section
7 hereof.

          (a) DEFINITION OF DISABILITY.  For purposes of this Agreement, the
     terms "Permanent Disability" or "Permanently Disabled" shall mean three (3)
     months of substantially continuous disability.  Disability shall be deemed
     "substantially continuous" if, as a practical matter, Employee, by reason
     of his mental or physical health, is unable to sustain reasonably long
     periods of substantial performance of his duties.  Frequent long illnesses,
     though different from the preceding illness and though separated by
     relatively short periods of performance, shall be deemed to be
     "substantially continuous".  Disability shall be determined in good faith
     by the Board of Directors whose decision shall be final and binding upon
     Employee. Employee hereby consents to medical examinations by such
     physicians and medical consultants as Employer shall, from time to time,
     require.

     7.   TERMINATION BY EMPLOYER.  Employer shall have the right to terminate
Employee's employment as hereinafter provided.

          (a) TERMINATION BY EMPLOYER FOR CAUSE.  The Board of Directors shall
     have the right to terminate Employee's employment under this Agreement for
     Cause, in which event no compensation shall be paid or other benefits
     furnished to Employee after termination for Cause.  Termination for Cause
     shall be effective immediately upon notice sent or given to Employee.

               (i) DEFINITION OF CAUSE.  For purposes of this Agreement, the
          term "Cause" shall mean and be strictly limited to: (1) conviction of
          a crime constituting a felony under state or federal law; (2)
          determination by the Board of Directors that Employee has committed
          any material act of dishonesty against Employer; (3) gross negligence
          by Employee in carrying out his duties; (4) material breach of this
          Agreement by Employee; (5) gross misconduct by Employee, such as
          intoxication on the job, use of drugs on the job for non-medical
          purposes or other misconduct which has a substantial adverse effect on
          the business of Employer;

                                      -3-
<PAGE>

          or (6) Employee becoming Permanently Disabled while not engaged in the
          scope of his employment by Employer.

          (b) TERMINATION BY EMPLOYER WITHOUT CAUSE.  The Board of Directors
     shall have the right to terminate Employee's employment under this
     Agreement without Cause at any time, by giving written notice of
     termination to Employee. In such event, Employer will continue to pay
     Employee such Employee's full Base Salary that was in effect for the six
     (6) months immediately preceding the date of such notice together with a
     prorated bonus in an amount equal to the most recent annual bonus, if any,
     paid to Employee divided by two (2).

     8.   NON-COMPETITION AND CONFIDENTIALITY.

          (a) NON-COMPETITION.  Employee recognizes and understands that in
     performing the responsibilities of his employment, he will occupy a
     position of fiduciary trust and confidence, pursuant to which he will
     develop and acquire experience and knowledge with respect to Employer's
     business.  It is the expressed intent and agreement of Employee and
     Employer that such knowledge and experience shall be used exclusively in
     the furtherance of the interests of Employer and not in any manner which
     would be detrimental to Employer's interests. Employee further understands
     and agrees that Employer conducts its business within a specialized market
     segment in its geographic region, and that it would be detrimental to the
     interests of Employer if Employee used the knowledge and experience which
     he currently possesses or which he acquires pursuant to his employment
     hereunder for the purpose of directly or indirectly competing with
     Employer, or for the purpose of aiding other persons or entities in so
     competing with Employer, anywhere in such region.  Employee therefore
     agrees that so long as he is employed by Employer, unless Employee first
     secures the written consent of Employer, Employee will not directly or
     indirectly invest, engage or participate in or become employed by any
     entity in direct or indirect competition with Employer's business.
     Employee further agrees upon termination of Employee's employment either
     (i) by Employer with or without cause or (ii) by Employee, unless Employee
     first secures the written consent of Employer, Employee will not for a
     period of six (6) months after such termination directly or indirectly
     invest, engage or participate in or become employed by any entity in direct
     or indirect competition with Employer in any mine or oil or gas property
     located anywhere within a 100 mile radius of any mine or oil or gas
     property owned or operated (wholly or partially) by Employer at the time of
     termination of Employee's employment hereunder.  This non-competition
     provision is not to be construed to prohibit Employee from being employed
     in the mining or oil or gas industry, but rather to permit him to be so
     employed so long as such employment does not involve Employee's direct or
     indirect participation in a property within such 100

                                      -4-




<PAGE>
     mile radius. In the event that the provisions of this Section 8 should ever
     be deemed to exceed the time or geographic limitations permitted by
     applicable laws, then such provisions shall be reformed to the maximum time
     or geographic limitations permitted by applicable laws.

          (b) REMEDIES.  Employee acknowledges that the restrictions contained
     in Section 8(a), in view of the nature of the business in which Employer is
     engaged, are reasonable and necessary to protect the legitimate interests
     of Employer.  Employee understands that the remedies at law for his
     violations of any of the covenants or provisions of Section 8(a) will be
     inadequate, that such violation will cause irreparable injury within a
     short period of time, and that Employer shall be entitled to preliminary
     injunctive relief and other injunctive relief against such violation.  Such
     injunctive relief shall be in addition to, and in no way in limitation of,
     any and all other remedies Employer shall have in law and equity for the
     enforcement of those covenants and provisions.


     9.   GENERAL PROVISIONS.

          (a) NOTICES.  Any notices to be given hereunder by either party to the
     other may be effected by personal delivery, in writing or by mail,
     registered or certified, postage prepaid with return receipt requested.
     Mailed notices shall be addressed to the parties at the addresses set forth
     below, but each party may change his or its address by written notice in
     accordance with this Section 9(a).  Notices delivered personally shall be
     deemed communicated as of the actual receipt; mailed notices shall be
     deemed communicated as of three (3) days after mailing.


                    If to Employee:
                    ---------------


                    Inland Resources Inc.
                    475 17th Street, Suite 1500
                    Denver, Colorado  80202



                    If to  Employer:
                    ----------------


                    Board of Directors
                    Inland Resources Inc.
                    475 17th Street, Suite 1500
                    Denver, Colorado  80202

          (b) PARTIAL INVALIDITY.  If any provision in this Agreement is held by
     a court of competent jurisdiction to be invalid, void, or unenforceable,
     the remaining

                                      -5-


<PAGE>
     provisions shall, nevertheless, continue in full force without being
     impaired or invalidated in any way.

          (c) LAW GOVERNING AGREEMENT.  This Agreement shall be governed by and
     construed in accordance with the laws of the State of Washington.

          (d) ATTORNEYS' FEES AND COSTS.  If any action at law or in equity is
     necessary to enforce or interpret the terms of this Agreement, the
     prevailing party shall be entitled to reasonable attorneys' fees, costs and
     necessary disbursements in addition to any other relief to which he or it
     may be entitled.

          (e) ASSIGNMENT.  This Agreement shall inure to the benefit of and
     bind the parties hereto and their respective legal representatives,
     successors and assigns.

          (f) ENTIRE AGREEMENT.  This Agreement supersedes any and all other
     agreements, either oral or in writing, between the parties hereto with
     respect to the employment of Employee by Employer and contain all of the
     covenants and agreements between the parties with respect to such
     employment.  Each party to this Agreement acknowledges that no
     representations, inducements, or agreements, oral or otherwise, have been
     made by any party, or anyone acting on behalf of any party, which are not
     embodied herein, and no other agreement, statement or promise not contained
     in this Agreement shall be valid or binding.  Any modification of  this
     Agreement will be effected only if it is in writing signed by the party to
     be charged.


     IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective the 1st day of May, 1997.

                                    EMPLOYER:


                                    INLAND RESOURCES INC.


                                    By:    /s/ Kyle R. Miller
                                        ---------------------------------
                                         Kyle R. Miller, President
                                         and Chief Executive Officer

                                      -6-

<PAGE>
                                    EMPLOYEE:



                                           /s/ Michael J. Stevens
                                        ---------------------------------
                                         Michael J. Stevens



                                     -7-