Code
of Business Conduct and Ethics
















South
Texas Oil Company





Code
of Business Conduct for South Texas Oil Company and its
subsidiaries





1.           Purpose





The South
Texas Oil Company (the "Company") Code of Business Conduct and Ethics (the
"Code") is a guide to ethical decision-making. While the standards in the Code
are mainly based on laws to which we are all subject, in some cases they go
beyond legal obligations. In this respect, the Code reflects the values that
define the Company and the principle that we must strive to avoid any
circumstances that may give rise to even an appearance of impropriety. The
standards in this Code may be further explained or implemented through corporate
policies or other compliance manuals, including those relating to specific areas
of our business. This Code is available to all Company personnel in the
corporate offices, and related memoranda and manuals are available from the
Company’s Legal Counsel.





Each of
us is personally responsible for making sure that our business decisions and
actions comply at all times with this Code. Given the pace of changes in our
industry, no set of standards should be considered the final word in all
circumstances. When you have doubts about the application of a standard or where
we have not addressed a situation that presents an ethical issue, you should
seek guidance from your immediate supervisor or from the Company's Legal
Counsel. In addition, each of us has a duty to report behavior on the part of
others that appears to violate this Code or any other compliance policy or
procedure of the Company.





All
supervisory and management personnel, including all officers and directors of
the Company, have a special responsibility to lead, according to the standards
of this Code, in both words and action. Our supervisory and management personnel
are also expected to adhere to and promote our "open door" policy. This means
that they are available to anyone with ethical concerns, questions, or
complaints. All concerns, questions, and complaints will be taken seriously and
handled promptly, confidentially, and professionally. No retaliatory action will
be taken against any employee for raising concerns, questions, or complaints in
good faith.





The
following standards of conduct will be enforced at all organizational levels.
Anyone who violates them will be subject to prompt disciplinary action, up to
and including dismissal.





2.           Covered
Persons





This Code
applies to all officers, directors, and employees of the Company, its
affiliates, or of any contractor performing work for the Company.





Wherever
we do business, we are required to comply with all applicable laws, rules and
regulations. We are also responsible for complying with requirements of
contracts that we have entered into with other parties, such as joint operating
agreements, seismic and other intellectual property licenses, confidentiality
agreements, leases, and other agreements. The standards in this Code must, of
course, be interpreted in light of applicable law and industry practices in the
areas where we operate as well as good common sense. Any suspected or actual
violation of any applicable law, rule, or regulation or our contractual
undertakings should be reported immediately to your immediate supervisor or to
the Company’s Legal Counsel.





3.           Conflicts
of Interest





A
conflict of interest occurs whenever our private interests interfere with the
interests of the Company as a whole. In order for the Company to carry out its
business effectively, it must be assured of the loyalty of each of its officers,
directors and employees. We must therefore refrain from entering into
relationships that might impair our judgment as to what is best for the Company.
Even relationships that give the appearance of a conflict of interest should be
avoided. You cannot avoid these standards by acting through someone else, such
as a friend or family member.




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There are
many different ways in which conflicts of interest arise. For example, personal
financial interests, obligations to another company or governmental entity, or
the desire to help a relative or friend through a transaction or a business
relationship with the Company are all factors that might divide our loyalties
and therefore create conflicts of interests. To clarify what we mean, we have
set out below our policies about the most common types of conflict of
interest.





If you
believe it is not possible to avoid a conflict of interest, you must bring this
to the attention of, and make full written disclosure of the surrounding
circumstances to, your immediate supervisor, who should in appropriate
circumstances bring it to the attention of the Company's Legal Counsel. If your
immediate supervisor is unavailable, you should bring the matter to the
attention of the Company’s Legal Counsel.





A.
Outside Employment and Directorships





Executive
officers and members of the Board of Directors (the "Board") of the Company may
not work for or receive compensation for services from any competitor, customer,
distributor, or supplier of the Company, without the approval of the Board or
the Company’s legal counsel. In addition, executive officers and members of the
Board may not serve on the board of directors of another company or of a
governmental agency without the advance approval of the Board.





Most of
these situations are likely to present conflicts of interest. Even where
approval is granted, you must take appropriate steps to separate Company and
non-Company activities. The Company’s Legal Counsel will assist you in
determining what steps are appropriate.





B.
Investments





You or
any member of your immediate family (your spouse or your children living with
you) may not have financial interests in any competitor, customer, distributor
or supplier where this would influence, or appear to influence, their actions on
behalf of the Company. Generally speaking, mere ownership of the common stock of
a public company constituting less than 5.0% of the outstanding common stock of
a publicly trading would not constitute a conflict of interest in the absence of
special circumstances where such investment could present the appearance of a
potential conflict of interest or could make you susceptible to potential
influence on actions you might otherwise perform for the Company. If there is
any doubt about how an investment might be perceived, you should discuss such
potential investment in advance with your immediate supervisor or the Legal
Counsel.





C. Using
the Company's Time and Assets for Personal Benefit





You may
not, directly or indirectly, perform non-Company work or solicit that work on
the Company's premises or while working on the Company's time, including any
paid leave you are granted by the Company. Also, you are not permitted to use
Company assets (including equipment, telephones, materials, resources or
proprietary information) for any outside work.





D. Loans
to Employees





Loans to,
and guarantees of obligations of, employees, officers or directors incurred for
personal reasons can also present conflicts of interest. Company loans are
prohibited by law in the case of the Company's officers and
directors.





E.
Acceptance of Gifts and Entertainment





The
acceptance of gifts and entertainment by you or members of your family may
present a conflict of interest. While you are permitted to accept reasonable
gifts of nominal value, such as unsolicited promotional items or holiday gifts,
you are prohibited from accepting or soliciting anything that might reasonably
be deemed to affect, or appear to affect, your judgment, or that is accompanied
by any express or implied understanding that you are in any way obligated do to
something in exchange for the gift. Similarly, you may accept business meals or
entertainment, but only if and to the extent such acceptance is reasonable in
the context of the business at hand and as it facilitates the Company's business
interests. You are strictly prohibited from soliciting gifts, gratuities or
business courtesies for yourself or for the benefit of any family member or
friend.




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F. Family
Members and Close Personal Relationships





The
Company's standards of conduct are not intended to intrude on our personal
lives. Situations may arise, however, where our relationships with family
members and friends create conflicts of interest. Generally, you are prohibited
from being in the position of supervising, reviewing, or having any influence on
the job evaluation or salary of your relatives or friends. If you have family
members or friends that work for businesses seeking to provide goods or services
to the Company, you may not use your personal influence to affect negotiations
with respect to a proposed or potential transaction and, if you are an officer
or director of the Company, you must notify the Company’s Legal Counsel, who
will review the proposed transaction and notify the Audit Committee of the
Company’s Board of Directors for review and action as the Board sees fit,
including, if necessary, approval or rejection by the Company’s Board of
Directors. If you have relatives or friends that work for competitors, you
should bring this fact to the attention of your immediate supervisor and discuss
any difficulties that might arise and appropriate steps to minimize any
potential conflict of interest.





G. Public
Service





We
encourage you to be active in the political and civic life of your community,
including charitable or educational activities. When making any public
communication in the course of such charitable or educational activities, you
should clarify that your views are yours individually and are not being
expressed as an employee of the Company. Your participation in or service to the
community may also at times place you in a situation in which a conflict of
interest with the Company could arise. This could occur, for example, where the
community is engaged in negotiations with the Company for goods or services or
with respect to some other matter. The law may require or permit you to abstain
from any decisions where these circumstances exist, depending on your position
within the Company and other factors. Before participating in such a decision,
you should seek advice from the Company’s Legal Counsel and you should in any
event make it clear to the responsible persons that you are an employee of the
Company. If you do abstain, you should make it clear that your action is taken
to avoid a potential conflict of interest or the appearance of a potential
conflict of interests. You may not engage in any type of solicitation or other
business activities not relating to the business of the Company on Company
premises without the approval of your immediate supervisor.





You may
not make any political contribution in your role as a representative of the
Company. You must also avoid lobbying activities or even the appearance of
lobbying any governmental body or public official as a representative of the
Company, without the prior express approval of the Company’s Legal
Counsel.





H.
Corporate Opportunities





You may
not appropriate to yourself, or to any other person or organization, the benefit
of any business venture, opportunity, or potential opportunity that you learn
about in the course of your employment and that is in the Company's line of
business without first obtaining the Company's consent. It is never permissible
for you to compete against the Company, either directly or indirectly.
Employees, officers and directors owe a duty to the Company to advance its
legitimate interests when the opportunity to do so arises.





4.           Electronic
Media and Software





All
electronic media and communications systems, such as voice mail, e-mail,
commercial software and access to the Internet through Microsoft Internet
Explorer or any other Internet service providers, are the property of the
Company. Communications on these systems are not private communications, but
rather are business records that may be monitored by the Company or subpoenaed
by a court of law, and you should have no privacy expectations with respect to
communications sent over these systems.





These
systems should not be used to knowingly, recklessly or maliciously post, store,
transmit, download or distribute any threatening, abusive, libelous, defamatory
or obscene materials of any kind constituting a criminal offense, giving rise to
civil liability, or otherwise violating any laws.





The
Company's policy against sexual harassment and discrimination applies fully to
the use of e-mail and other electronic media by you.





5.           Shareholder
and Media Relations





We will
provide accurate, appropriate and timely material information to the public,
including our shareholders and the media, to keep them informed of matters which
affect our organization. To assure consistency and accuracy in these
communications and to prevent the inadvertent disclosure of confidential
information, you should not give statements to shareholders or the media without
first securing the permission of the Company’s CEO or President.  If
you are contacted by a shareholder, the request should be immediately forwarded
to the Company's CEO or President. If you are contacted by the media, the
request should be forwarded to the CEO President or, if regarding a legal
matter, the Company's Legal Counsel.




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6.           Securities
Laws and Insider Trading





In the
course of your duties, you may be exposed to information about the Company or
other companies that is not available to the general public. The use of such
non-public or "inside" information for securities trading purposes is strictly
forbidden, whether by you, by any of your family members, or by any other person
to whom you may have communicated the information. Such use of "inside"
information is not only unethical, but also illegal and could expose you to
civil and criminal penalties. U.S. law prohibits anyone who possesses "material"
non-public information about a company to trade in its stock or other
securities. "Material" information is usually defined as any information that
might influence a reasonable investor to buy, sell, or hold
stock.  Common examples include financial results, financial
forecasts, possible mergers, acquisitions or divestitures, significant product
developments, and major changes in business direction. U.S. law also prohibits
anyone who possesses material, non-public information from using it to tip
anyone else who might trade on it.





Violation
of the law may result in civil and criminal penalties, including fines or jail
sentences. If you are uncertain about the legal rules governing purchases and
sales of securities you wish to make, you should review the Company's
"Securities Trading Policy" and, if questions persist, consult the Company’s
Legal Counsel before trading. If you engage in insider trading you will be
subject to prompt disciplinary action, up to and including
dismissal.





7.           Confidential
and Proprietary Information





Information
is a valuable asset. Each of us has a duty to safeguard confidential and
proprietary information about the Company and information that our suppliers and
customers have entrusted to us. Generally speaking, confidential and proprietary
information is information that has not been disclosed to the general public or
that gives our business an advantage over our competitors or could expose us to
harm or liability if released prematurely or inappropriately. Common examples
include trademarks and trade secrets, as well as financial information,
corporate strategy and information about relationships with our customers and
suppliers. If you are unsure about whether information should be treated as
confidential or proprietary, you must consult with your immediate supervisor or
the Legal Counsel.





You must
remain conscious at all times of your duty to protect confidential and
proprietary information. For example, confidential and proprietary information
should never be discussed in public places such as elevators, airplanes or
restaurants. In no event should confidential or proprietary information be
disclosed to third parties, including family members, without the express
written consent of the Company’s Legal Counsel, unless this is otherwise legally
required. The duty to preserve the Company's confidential and proprietary
information is not limited to your period of employment, but continues even
after you have left the Company.





8.           Avoidance
of Unlawful Restraints of Competition





In the
United States and in many states, there are laws that govern the ways in which
the Company may compete. The purpose of these laws (sometimes known as
"competition" or "antitrust" laws) is to prevent interference with a competitive
market system. Under these laws, companies or individuals may not enter into
formal or informal agreements with other companies or individuals, or engage in
certain other activities, that unreasonably restrict competition. Illegal
practices can include, among others, price fixing, allocating customers or
territories, or unlawfully abusing a dominant market position.





In
contact with competitors, you are generally prohibited from discussing
competitively sensitive information, such as prices, pricing policies, contract
terms, costs, inventories, marketing and product plans, market surveys, business
plans, plans with respect to renovation or acquisition of property, and other
proprietary or confidential information. Such discussions or any collaboration
with a competitor about competitively sensitive matters can be illegal.
Particular care should be taken when attending or participating in meetings of
trade associations and similar industry organizations.





While
certain discussions of some sensitive information may, under certain
circumstances, be permissible, no such discussions with competitors should take
place without prior approval of the Company’s Legal Counsel. You are required to
report promptly to the Company’s Legal Counsel any instance in which a
competitor has suggested that you collaborate with them.




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9.           Protection
and Proper Use of Company Assets and Property





The
Company's success requires a commitment on the part of all of us to the proper
allocation and use of its assets, tangible and intangible. For these purposes,
the Company's assets include Company funds in cash, receivables, or any other
form, equipment, contracts or agreements, supplies, real estate, tools,
inventory, computer and information systems and equipment, computer software,
computer data, customer lists, vehicles, records or reports, intellectual
property or other sensitive or non-public information or materials, and
telephone, voice mail or e-mail communications.  We have an
affirmative duty to protect the Company's assets from loss, damage, misuse,
theft or sabotage. We must also ensure the efficient use of the Company's
assets. The Company's assets are to be used for business purposes
only.  Management must approve any use of Company assets or services
that is not solely for the Company's benefit.





10.           Accurate
Books and Records





U.S. law
requires the Company to make sure that its books and records accurately and
fairly represent transactions and dispositions of our assets in reasonable
detail. In all of our operations, it is a violation of Company policy, and
illegal under certain circumstances, for any of us to cause our books and
records to be inaccurate in any way. You must never create or participate in the
creation of records that are misleading or artificial.  If you are
asked to falsify the accounting records in any manner or are aware of
falsification by anyone else in the Company, you should immediately notify your
supervisor, the Company’s CEO or President, or the Company’s Legal Counsel.
Senior financial officers of the Company will be required to certify that they
will adhere to additional principles and responsibilities as outlined in the
Code of Ethics for Senior Financial Officers.





You are
expected to cooperate fully with our internal and independent auditors. In
particular, the following requirements must be strictly respected by all of
us:





A.           Access
to Company Assets, Transactions on Management's Authorization





Access to
Company assets is permitted only in accordance with senior management's general
or specific authorization and transactions must be executed only in accordance
with management's general or specific authorizations. Transactions involving the
Company must be recorded to permit preparation of our financial statements in
conformity with generally accepted accounting principles and related
requirements and to maintain accountability for the Company's
assets.





B.           Accurate
Books





All
Company books and records must be true and complete. False or misleading entries
are strictly prohibited, and the Company will not condone any undisclosed
liabilities or unrecorded bank accounts or assets established for any
purpose.





C.           Proper
Payments





You may
not authorize payment of Company funds knowing that any part of the payment will
be used for any purpose other than the purpose described in the documents
supporting the payment.





D.           Appropriate
Controls





Administrative
and accounting controls must be implemented to provide reasonable assurance that
the Company is in the compliance with the above requirements and that financial
and other reports are accurately and reliably prepared, and fully and fairly
disclose all required or otherwise material information.





E.           Report
Noncompliance





You must
immediately inform your supervisor or the Company’s Legal Counsel of any non
compliance with respect to the matters set forth in this section.




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11.           Complete,
Accurate and Timely Disclosure





The
Company is owned by the public and its shares are listed for trading on one or
more exchanges. As a result, the Company is obligated to make various
disclosures to the public.  The Company is committed to full
compliance with all requirements applicable to its public disclosures. The
Company has implemented disclosure controls and procedures to assure that its
public disclosures are timely, compliant and otherwise full, fair, accurate and
understandable.  All employees, officers and directors responsible for
the preparation of the Company's public disclosures, or who provide information
as part of that process, have a responsibility to assure that such disclosures
and information are complete, accurate and in compliance with the Company's
disclosure controls and procedures.





12.           Discrimination
or Harassment





The
Company is committed to providing a work environment that is free from any form
of discrimination on the basis of race, ethnicity, gender, creed, religion, age,
disability or sexual preference. It is our policy to provide equal opportunity
to all employees with regard to hiring, pay rates, training and development,
promotions and other terms of employment. Employment decisions will comply with
all applicable employment laws.





The
Company will not tolerate harassment, including sexual harassment, in any form.
This includes verbal or physical conduct that demeans or threatens any employee,
creates a hostile work environment, unreasonably interferes with an individual's
work performance, or otherwise adversely affects an individual's
employment.





13.           Payments
to Government Personnel





Practices
that are considered acceptable in the commercial business environment, such as
providing meals, transportation, entertainment or other things of value, may
violate certain local, state, federal or foreign laws when we are dealing with
governmental officials or agents. You must not give anything of value to
governmental officials if this could be interpreted as an attempt to curry favor
on behalf of the Company.  Consult the Company’s Legal Counsel if
there is any uncertainty about permitted interactions with governmental
agents.





The U.S.
Foreign Corrupt Practices Act ("FCPA") generally prohibits giving money or
anything of value to foreign government officials, foreign political parties or
candidates for foreign political office for the purpose of influencing a foreign
government in order to assist in obtaining or retaining business, or directing
business to any person. This includes making any payments through
intermediaries, such as sales representatives or consultants. Before making any
payment or giving anything of value to a foreign official, employees should
consult with the Company’s Legal Counsel. Violations of the FCPA can result in
stiff civil and criminal penalties for both the Company and the individuals
involved.





Commercial
bribery of any nature is a violation of Company policy and is illegal under U.S.
law. You are strictly prohibited from offering any form of bribe, kickback or
inducement to any person, whether a private person or governmental
official.





14.           Whistleblower
Policy





No
officer, director or employee of the Company may discharge, demote, suspend,
threaten, harass or in any manner discriminate against an employee in the terms
and conditions of employment because of any lawful act done by the employee to
disclose information about fraudulent activity within the company or to
cooperate with fraud-related investigations or legal proceedings conducted by
the company enforcement agency, to any member or committee of congress or to any
person with supervisory authority over the employee or the authority to
investigate misconduct within the Company. Further, the Company will not
retaliate against an officer, director or employee who participates in a
proceeding concerning securities fraud.




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15.           Charitable
Contributions





We
realize that there are many worthy organizations to which financial and
non-financial contributions can be made by the Company. You are encouraged to
support community and charitable organizations as individuals in order to
improve your community. Our Company will consider and make financial
contributions on a case-by-case basis to organizations which are in the
communities where we have a facility. Preference is given to organizations
related to education.





All
requests for contributions must be submitted in writing. Upon receipt of a
request on the soliciting organization's letterhead, the CEO or President of
your operating company may approve contributions of up to
$250.00.  The Company’s Board of Directors must authorize
Contributions greater than $250.00.





16.           Waivers
of the Code of Business Conduct and Ethics





Any
request for a waiver of any standard in this Code may be granted only by the
Company’s Board of Directors or the Company’s Legal Counsel. Only the Board or a
designated committee of the Board may grant waivers involving any of the
Company's executive officers or directors, and all waivers granted to executive
officers and directors must be disclosed to the Company's shareholders. All
personnel should be aware that the Company generally will not grant such waivers
and will do so only when good cause is shown for doing so.





17.           Audits;
Investigations; Disciplinary Action





The
Company will conduct periodic audits of compliance with this Code. Allegations
of potential wrongdoing will be investigated by the proper corporate or
departmental personnel and, upon the advice of Company’s Legal Counsel, will be
reported to the Company’s Board of Directors (or an appropriate committee
thereof) and to the relevant authorities. Knowingly making false accusations of
misconduct will be subject to disciplinary action. You are required to cooperate
fully with any internal or external investigation. You must also maintain the
confidentiality of any investigation and related documentation, unless
specifically authorized by Company’s Legal Counsel to disclose such
information.





Appropriate
disciplinary penalties for violations of this Code may include counseling,
reprimands, warnings, suspensions with or without pay, demotions, salary
reductions, dismissals, and restitution.  Disciplinary action may also
extend to a violator's supervisor insofar as the Company determines that the
violation involved the participation of the supervisor or reflected the
supervisor's lack of diligence in causing compliance with the
Code.  Any person who takes any action whatsoever in retaliation
against the employee who has in good faith raised any question or concern about
compliance with this Code will be subject to serious sanctions, which may
include dismissal for cause.





You are
reminded that the Company's document retention policies strictly prohibit the
destruction or alteration of documentation undertaken with the intent to
obstruct any pending or threatened investigation or proceeding of any nature or
in contemplation of a proceeding.





18.           Where
to Turn for Advice





If you
have questions about this Code, you should turn to your immediate supervisor in
the first instance. The Company's "open door" policy gives you the freedom to
approach any member of management with ethical questions or concerns without
fear of retaliation. The Company has also established a whistleblower reporting
procedure to enhance our commitment to conducting business ethically and to give
you a confidential option to report your concerns.  If, for any
reason, you do not feel comfortable speaking with your supervisor and would
prefer to remain anonymous, you may call the Company’s Legal Counsel. All
employee communications made in good faith will be treated promptly and
professionally and without risk of retribution.





You also
have the option to confidentially and anonymously submit any concerns regarding
questionable accounting or auditing matters to a member of the Audit Committee
of the Board. These concerns may be communicated through the Company’s Legal
Counsel as outlined in the prior paragraph.




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