WHEN RECORDED RETURN TO:

Katten Muchin Rosenman LLP
525 W. Monroe Street
Chicago, Illinois 60661
Attn: Mark D. Wood Esq.

EXHIBIT 10.31






NOTICE  OF CONFIDENTIALITY RIGHTS:  IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE
OR STRIKE  ANY  OF  THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS
FILED FOR RECORD IN THE  PUBLIC  RECORDS:   YOUR SOCIAL SECURITY NUMBER OR YOUR
DRIVER'S LICENSE NUMBER.

                         DEED OF TRUST, ASSIGNMENT OF
    PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT

                                     FROM

                            SOUTH TEXAS OIL COMPANY

                                      TO

        THE PUBLIC TRUSTEE OF THE COUNTY WHERE THE PROPERTY IS LOCATED

                              FOR THE BENEFIT OF

                         VIKING ASSET MANAGEMENT, LLC,
                              AS COLLATERAL AGENT

A CARBON, PHOTOGRAPHIC, FACSIMILE OR OTHER REPRODUCTION  OF  THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT.

A  POWER  OF  SALE HAS BEEN GRANTED IN THIS INSTRUMENT.  IN CERTAIN  STATES,  A
POWER OF SALE MAY ALLOW THE TRUSTEE OR THE BENEFICIARY TO TAKE THE PROPERTY AND
SELL IT WITHOUT  GOING  TO  COURT  IN  A FORECLOSURE ACTION UPON DEFAULT BY THE
GRANTOR UNDER THIS INSTRUMENT.

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.

THIS INSTRUMENT COVERS PROCEEDS OF PROPERTY.

THIS INSTRUMENT COVERS AS EXTRACTED COLLATERAL,  MINERALS  AND OTHER SUBSTANCES
OF  VALUE  WHICH MAY BE EXTRACTED FROM THE EARTH (INCLUDING WITHOUT  LIMITATION
OIL AND GAS)  AND  ACCOUNTS  RESULTING FROM THE SALE OF AS EXTRACTED COLLATERAL
AND WHICH WILL BE FINANCED AT THE WELLHEADS OF THE WELL OR WELLS LOCATED ON THE
PROPERTIES DESCRIBED IN EXHIBIT  A  HERETO.   THIS FINANCING STATEMENT IS TO BE
FILED OR FILED FOR RECORD, AMONG OTHER PLACES,  IN  THE  REAL ESTATE RECORDS OR
SIMILAR  RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES LISTED  ON  EXHIBIT  A
HERETO.  THE  GRANTOR  HAS  AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED,
WHICH INTEREST IS DESCRIBED IN EXHIBIT A ATTACHED HERETO.

PORTIONS OF THE PROPERTY ARE  GOODS  WHICH  ARE  OR ARE TO BECOME AFFIXED TO OR
FIXTURES ON THE LAND DESCRIBED IN OR REFERRED TO IN  EXHIBIT  A  HERETO.   THIS
FINANCING  STATEMENT IS TO BE FILED FOR RECORD OR RECORDED, AMONG OTHER PLACES,
IN THE REAL ESTATE RECORDS OR SIMILAR RECORDS OF EACH COUNTY IN WHICH SAID LAND
OR ANY PORTION THEREOF IS LOCATED.  THE GRANTOR IS THE OWNER OF RECORD INTEREST
IN THE REAL  ESTATE  CONCERNED.   THIS  INSTRUMENT IS ALSO TO BE INDEXED IN THE
INDEX OF FINANCING STATEMENTS.




<PAGE>




                               TABLE OF CONTENTS


ARTICLE I



Grant of Lien and Indebtedness Secured
      Section 1.01 Grant of Liens.............................................1
      Section 1.02 Grant of Security Interest.................................4
      Section 1.03 Indebtedness Secured.......................................5
      Section 1.04 Fixture Filing, Etc........................................5
      Section 1.05 Defined Terms..............................................5

ARTICLE II



Assignment of Production, Accounts and Proceeds
      Section 2.01 Assignment.................................................6
      Section 2.02 Rights Under Certain Lien Statutes.........................6
      Section 2.03 No Modification of Payment Obligations.....................7
      Section 2.04 Effectuating Payment of Production Proceeds to
            Beneficiary.......................................................7
      Section 2.05 Application of Production Proceeds.........................7
      Section 2.06 Release from Liability; Indemnification....................7

ARTICLE III



Representations, Warranties and Covenants
      Section 3.01 Title......................................................8
      Section 3.02 Defend Title...............................................9
      Section 3.03 Not a Foreign Person.......................................9
      Section 3.04 Rentals Paid; Leases in Effect.............................9
      Section 3.05 Operation By Third Parties.................................9
      Section 3.06 Failure to Perform.........................................9
      Section 3.07 Sale, Encumbrance or Removal..............................10
      Section 3.08 Sale of Production........................................10
      Section 3.09 Operation of Property.....................................11
      Section 3.10 Suits and Claims..........................................12
      Section 3.11 Environmental.............................................12
      Section 3.12 Not Abandon Wells; Participate in Operations..............13
      Section 3.13 Condemnation Awards.......................................14
      Section 3.14 Insurance.................................................14
      Section 3.15 Compliance with Leases....................................14
      Section 3.16 Further Assurance.........................................15
      Section 3.17 Name and Place of Business................................15
      Section 3.18 Compliance with Laws and Agreements.......................15
      Section 3.19 Inspection; Management....................................16

ARTICLE IV



Rights and Remedies
      Section 4.01 Event of Default..........................................16
      Section 4.02 Foreclosure and Sale......................................16
      Section 4.03 Agents....................................................18
      Section 4.04 Judicial Foreclosure; Receivership........................18
      Section 4.05 Foreclosure for Installments..............................18
      Section 4.06 Separate Sales............................................19
      Section 4.07 Possession of Property....................................19
      Section 4.08 Occupancy After Foreclosure...............................19
      Section 4.09 Remedies Cumulative, Concurrent and
            Nonexclusive19.....................................................
      Section 4.10 No Release of Obligations.................................19
      Section 4.11 Release of and Resort to Collateral.......................20
      Section 4.12 Waiver of Redemption, Notice and Marshalling of
            Assets, Etc......................................................20
      Section 4.13 Discontinuance of Proceedings.............................20
      Section 4.14 Application of Proceeds...................................20
      Section 4.15 Resignation of Operator...................................21
      Section 4.16 Indemnity.................................................21

ARTICLE V



Trustee
      Section 5.01 Duties, Rights, and Powers of Trustee.....................22
      Section 5.02 Successor Trustee.........................................22
      Section 5.03 Retention of Moneys.......................................22

ARTICLE VI



Miscellaneous
      Section 6.01 Instrument Construed as Deed of Trust, Etc................22
      Section 6.02 Release of Deed of Trust..................................22
      Section 6.03 Severability..............................................23
      Section 6.04 Successors and Assigns of Parties.........................23
      Section 6.05 Satisfaction of Prior Encumbrance.........................23
      Section 6.06 Subrogation of Trustee....................................23
      Section 6.07 Nature of Covenants.......................................23
      Section 6.08 Notices...................................................23
      Section 6.09 Counterparts..............................................23
      Section 6.10 Effective as a Financing Statement........................24
      Section 6.11 No Impairment of Security.................................24
      Section 6.12 Acts Not Constituting Waiver..............................24
      Section 6.13 Grantor's Successors......................................24
      Section 6.14 Certain Consents..........................................25
      Section 6.15 Governing Law.............................................25
      Section 6.16 Exculpation Provisions....................................25
      Section 6.17 FINAL AGREEMENT...........................................25
      Section 6.18 Prior Deeds of Trust......................................25




                                       #

<PAGE>
                         DEED OF TRUST, ASSIGNMENT OF

    PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT

      This DEED OF TRUST, ASSIGNMENT OF PRODUCTION, SECURITY AGREEMENT, FIXTURE
FILING AND FINANCING STATEMENT (this "Deed of Trust") is entered into as of the
Effective Date (as hereinafter defined) by  SOUTH  TEXAS  OIL COMPANY, a Nevada
corporation, 769 Highway 95 N, Bastrop, Texas 78602 ("Grantor"),  to the Public
Trustee  of  the  County  where  the  Property  is located within the State  of
Colorado  ("Trustee"),  for  the  benefit of VIKING ASSET  MANAGEMENT,  LLC,  a
California  limited  liability  company,   whose  address  for  notice  is  600
Montgomery Street, 44th Floor, San Francisco,  California  94111, acting in its
capacity as Collateral Agent  (together with its successors and assigns in such
capacity,  the  "Beneficiary")  on  behalf  of  the Buyers (as defined  in  the
Purchase Agreement referred to below).

                               R E C I T A L S:

      A.    Pursuant to that certain Securities Purchase  Agreement dated as of
April  1, 2008 (as amended, restated, supplemented or otherwise  modified  from
time to time, the "Purchase Agreement"), by and among Grantor, and the "Buyers"
party thereto,  Grantor has, among other things, agreed to issue to Buyers, and
Buyers have agreed  to  purchase  from  Grantor,  the  Notes (as defined in the
Purchase Agreement), subject in each case to the terms and conditions set forth
in the Purchase Agreement.

      B.    Grantor  has  agreed that all of the Indebtedness  (as  defined  in
Section 1.03 hereof) is intended  to  be  secured in part by this Deed of Trust
and recorded in those jurisdictions as set  forth  on Exhibit A of this Deed of
Trust.

      C.    The entering into of the Purchase Agreement  by  the Buyers and the
satisfaction  of  their  obligations  thereunder  were  conditioned   upon  the
execution and delivery by Grantor of this Deed of Trust, and Grantor has agreed
to enter into this Deed of Trust.

      THEREFORE,  in  order  to  comply  with  the  terms and conditions of the
Purchase Agreement and for other good and valuable consideration,  the  receipt
and  sufficiency  of  which are hereby acknowledged, Grantor hereby agrees with
Trustee and Beneficiary as follows:



                                   ARTICLE I



                    Grant of Lien and Indebtedness Secured

      Section 1.1 Grant  of  Liens.   To secure payment of the Indebtedness and
the performance of the covenants and obligations herein contained and contained
in the Purchase Agreement, the Notes and  any  other  Loan Document (as defined
below)  to  which  Grantor  is a party, Grantor does by these  presents  hereby
GRANT, BARGAIN, SELL, ASSIGN,  PLEDGE,  HYPOTHECATE,  TRANSFER  and CONVEY unto
Trustee  and  Trustee's successors and substitutes in trust hereunder,  WITH  A
POWER OF SALE,  for  the  use  and benefit of Beneficiary (on its behalf and on
behalf  of  the  Buyers),  the real  and  personal  property,  rights,  titles,
interests and estates described  in  the  following  paragraphs (a) through (g)
(collectively called the "Property"):

      (a)   All rights, titles, interests and estates  now  owned  or hereafter
acquired by Grantor in and to the oil and gas leases and/or oil, gas  and other
mineral  leases,  other  mineral  properties, mineral servitudes and/or mineral
rights, "as extracted collateral" as  defined in the Applicable UCC (as defined
in Section 1.02) and other interests and  estates  and  the  lands and premises
covered  or  affected  thereby which are described on Exhibit A hereto  without
regard to any limitations  as to specific lands or depths that may be set forth
in  Exhibit  A  (collectively  called  the  "Hydrocarbon  Property")  or  which
Hydrocarbon Property is otherwise  referred  to  herein,  and specifically, but
without  limitation,  the  undivided  interests  of  Grantor  which   are  more
particularly described on attached Exhibit A.

      (b)   All  rights,  titles,  interests and estates now owned or hereafter
acquired by Grantor in and to (i) the  properties  now  or  hereafter pooled or
unitized with any Hydrocarbon Property; (ii) all presently existing  or  future
unitization,  communitization,  pooling agreements and designations, orders  or
declarations of pooled units and  the units created thereby (including, without
limitation,  all  units  created under  orders,  regulations,  rules  or  other
official acts of any Federal, State or other governmental body or agency having
jurisdiction  and  any units  created  solely  among  working  interest  owners
pursuant to operating  agreements  or  otherwise)  which  may affect all or any
portion of the Hydrocarbon Property including, without limitation,  those units
which  may  be  described  or  referred  to  on  attached  Exhibit A; (iii) all
operating   agreements,   production   sales  or  other  contracts,  processing
agreements,  transportation  agreements,  gas   balancing  agreements,  farmout
agreements, farm-in agreements, salt water disposal  agreements, area of mutual
interest  agreements,  equipment  leases  and  other  agreements  described  or
referred  to in this Deed of Trust or which relate to any  of  the  Hydrocarbon
Property or  interests  in  the  Hydrocarbon  Property described or referred to
herein or on attached Exhibit A or to the production, sale, purchase, exchange,
processing, handling, storage, transporting or  marketing  of  the Hydrocarbons
(as defined in Section 1.01(c) hereof) from or attributable to such Hydrocarbon
Property   or   interests;   (iv)  all  geological,  geophysical,  engineering,
accounting, title, legal, and  other  technical or business data concerning the
Hydrocarbon  Property, the Hydrocarbons,  or  any  other  item  of  Hydrocarbon
Property which  are  in  the  possession  of  Grantor  or  in which Grantor can
otherwise  grant  a security interest, and all books, files, records,  magnetic
media, computer records,  and  other  forms of recording or obtaining access to
such data; and (v) the Hydrocarbon Property described on attached Exhibit A and
covered  by  this  Deed of Trust even though  Grantor's  interests  therein  be
incorrectly described  or  a  description  of a part or all of such Hydrocarbon
Property  or  Grantor's  interests therein be omitted;  it  being  intended  by
Grantor and Beneficiary herein  to  cover and affect hereby all interests which
Grantor may now own or may hereafter acquire in and to the Hydrocarbon Property
notwithstanding that the interests as  specified on Exhibit A may be limited to
particular lands, specified depths or particular types of property interests.

      (c)   All rights, titles, interests  and  estates  now owned or hereafter
acquired  by  Grantor  in  and  to  all  oil, gas, casinghead gas,  condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons  and all products refined
therefrom  and all other minerals (collectively called the  "Hydrocarbons")  in
and under and  which  may  be  produced  and  saved from or attributable to the
Hydrocarbon  Property,  the lands pooled or unitized  therewith  and  Grantor's
interests therein, including  all  oil in tanks and all rents, issues, profits,
proceeds, products, revenues and other  income  from  or  attributable  to  the
Hydrocarbons,  the Hydrocarbon Property, the lands pooled or unitized therewith
and Grantor's interests therein.

      (d)   All  tenements,  hereditaments,  appurtenances  and  properties  in
anywise  appertaining,  belonging,  affixed  or  incidental  to the Hydrocarbon
Property,  and any and all rights, titles, interests and estates  described  or
referred to  in  paragraphs (a) and (b) above, which are now owned or which may
hereafter be acquired  by  Grantor,  including, without limitation, any and all
property, real or personal, now owned  or hereafter acquired and situated upon,
used,  held  for  use, or useful in connection  with  the  operating,  working,
extraction, treatment, marketing, gathering, transmission or development of any
of  such Hydrocarbon  Property  or  the  lands  pooled  or  unitized  therewith
(excluding  drilling  rigs,  trucks,  automotive  equipment  or  other personal
property which may be taken to the premises for the purpose of drilling  a well
or  for other similar temporary uses) and including any and all oil wells,  gas
wells, injection wells or other wells, buildings, structures, field separators,
liquid  extraction  plants, plant compressors, pumps, pumping units, pipelines,
sales and flow lines,  gathering  systems,  field gathering systems, salt water
disposal  facilities,  tanks and tank batteries,  fixtures,  valves,  fittings,
machinery and parts, engines,  boilers,  meters,  apparatus,  goods, inventory,
equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
and  rods, surface leases, rights-of-way, easements, servitudes,  licenses  and
other surface and subsurface rights together with all additions, substitutions,
replacements,  accessions  and  attachments  to  any  and  all of the foregoing
properties.

      (e)   Any property that may from time to time hereafter,  by  delivery or
by  writing of any kind, be subjected to the lien and security interest  hereof
by Grantor  or  by  anyone  on  Grantor's behalf; and Trustee or Beneficiary is
hereby authorized to receive the  same  at  any  time  as  additional  security
hereunder.

      (f)   All  of the rights, titles and interests of every nature whatsoever
now owned or hereafter  acquired  by Grantor in and to the Hydrocarbon Property
rights,  titles, interests and estates  and  every  part  and  parcel  thereof,
including,   without  limitation,  the  Hydrocarbon  Property  rights,  titles,
interests and  estates  as  the  same  may  be enlarged by the discharge of any
payments out of production or by the removal  of any charges or encumbrances to
which any of the Hydrocarbon Property rights, titles,  interests or estates are
subject,  or otherwise; all rights of Grantor to liens and  security  interests
securing payment  of  proceeds  from  the sale of production from the Property,
including, but not limited to, those liens  and  security interests provided in
{section}9.319 of the Applicable UCC, as amended from  time  to time, any other
statute  enacted  in  the  jurisdiction  in  which the Hydrocarbon Property  is
located or statute made applicable to the Hydrocarbon  Property  under  federal
law  (or some combination of federal and state law); together with any and  all
renewals  and  extensions  of  any  of the Hydrocarbon Property rights, titles,
interests  or  estates;  all  contracts  and   agreements  supplemental  to  or
amendatory of or in substitution for the contracts  and agreements described or
mentioned above; and any and all additional interests  of  any  kind  hereafter
acquired  by  Grantor  in  and  to  the  Hydrocarbon  Property  rights, titles,
interests or estates.

      (g)   All  accounts, contract rights, inventory, choses in action  (i.e.,
rights to enforce  contracts  or  to  bring claims thereunder), commercial tort
claims,  general  intangibles,  insurance   contracts  and  insurance  proceeds
(regardless of whether the same arose, and/or the events which gave rise to the
same occurred, on or before or after the date  hereof)  and  all  proceeds  and
products  of all such portions of the Hydrocarbon Property and payments in lieu
of production,  whether  such proceeds or payments are goods, money, documents,
instruments,  chattel  paper,   securities,   accounts,   general  intangibles,
fixtures,  real  property,  or  other  assets  and regardless of  whether  such
payments accrued, and/or the events which gave rise  to such payments occurred,
on or before or after the date hereof, including, without  limitation, "take or
pay"  payments  and  similar  payments, payments received in settlement  of  or
pursuant  to a judgment rendered  with  respect  to  take  or  pay  or  similar
obligations  or  other  obligations under a production sales contract, payments
received  in buyout or buydown  or  other  settlement  of  a  production  sales
contract, and payments received under a gas balancing or similar agreement as a
result of (or  received  otherwise  in  settlement  of  or pursuant to judgment
rendered with respect to) rights held by Grantor as a result of Grantor (and/or
its predecessors in title) taking or having taken less gas  from  lands covered
by  a  Hydrocarbon  Property  (or lands pooled or unitized therewith) than  its
ownership of such Hydrocarbon Property would entitle it to receive.

      (h)   Without limitation  of  the generality of the foregoing, any rights
and interests of Grantor under any present  or future hedge or swap agreements,
caps,  floors,  collars,  exchanges,  forwards or  other  hedge  or  protection
agreements  or  transactions  relating to  crude  oil,  natural  gas  or  other
Hydrocarbons, or any option with  respect  to any such agreement or transaction
now existing or hereafter entered into by or on behalf of Grantor.

      (i)   All  licenses,  permits  and other  regulatory  approvals  held  by
Grantor relating to the Property.

      (j)   All proceeds of all of the  rights, titles and interests of Grantor
described in the foregoing paragraphs (a)  through  (i),  regardless of whether
such  proceeds  or  payments are goods, money, documents, instruments,  chattel
paper,  securities,  accounts,   payment   intangibles,   general  intangibles,
fixtures, real/immovable property, personal/movable property or other assets.

      (k)   In addition to the rights granted to Trustee and/or  Beneficiary in
Section 1.01(f)  of this Deed of Trust, any and all liens, security  interests,
financing statements  or  similar  interests  of  Grantor  attributable  to its
interest  in  the Hydrocarbons and proceeds of runs therefrom arising under  or
created by any statutory provision, judicial decision or otherwise.

      (l)   All of Grantor's rights and interests pursuant to the provisions of
any state or local  jurisdiction  statute  providing  for  statutory  liens  or
security interests in any state wherein the Property is located, hereby vesting
in  Trustee  and/or Beneficiary all of Grantor's rights as an interest owner to
the continuing  security  interest  in  and liens upon the property affected by
such lien or security interest.

      Any fractions or percentages specified on attached Exhibit A in referring
to  Grantor's  interests are solely for purposes  of  the  warranties  made  by
Grantor pursuant  to Sections 3.01 and 3.05 hereof and shall in no manner limit
the quantum of interest  affected  by  this  Section 1.01  with  respect to any
Hydrocarbon  Property  or with respect to any unit or well identified  on  said
Exhibit A.

      TO HAVE AND TO HOLD  the  Property unto Trustee and to his successors and
assigns forever to secure the payment  of  the  Indebtedness  and to secure the
performance  of  the  covenants, agreements, and obligations of Grantor  herein
contained.

      Section 1.2 Grant   of   Security   Interest.    To  further  secure  the
Indebtedness, Grantor hereby grants to Beneficiary a security  interest  in and
to  the  Property  (whether  now  or  hereafter acquired by operation of law or
otherwise) insofar as the Property consists  of  equipment,  accounts, contract
rights,   general   intangibles,   insurance   contracts,  insurance  proceeds,
inventory, Hydrocarbons, fixtures and any and all  other  personal  property of
any  kind or character defined in and subject to the provisions of the  Uniform
Commercial  Code  presently in effect in the jurisdiction in which the Property
is situated ("Applicable  UCC"),  including  the proceeds and products from any
and all of such personal property.  Upon the happening  of any of the Events of
Default (as defined in Section 4.01), Beneficiary is and  shall  be entitled to
all  of  the  rights,  powers  and  remedies  afforded  a secured party by  the
Applicable UCC with reference to the personal property and  fixtures  in  which
Beneficiary  has  been  granted  a  security  interest  herein,  or  Trustee or
Beneficiary  may  proceed  as  to  both  the real and personal property covered
hereby in accordance with the rights and remedies  granted  under  this Deed of
Trust in respect of the real property covered hereby.  Such rights,  powers and
remedies  shall  be  cumulative and in addition to those granted to Trustee  or
Beneficiary under any  other provision of this Deed of Trust or under any other
security instrument.  Written  notice  mailed  to Grantor as provided herein at
least five (5) Business Days (as defined in the  Notes)  prior  to  the date of
public  sale of any part of the Property which is personal property subject  to
the provisions  of the Applicable UCC, or prior to the date after which private
sale of any such part of the Property will be made, shall constitute reasonable
notice.  Except as  otherwise  expressly  provided  in  this Deed of Trust, all
terms  in  this Deed of Trust relating to the Property and  the  grant  of  the
foregoing security  interest which are defined in the Applicable UCC shall have
the meanings assigned to them in Article 9 (or, absent definition in Article 9,
in any other Article)  of the Applicable UCC, as those meanings may be amended,
revised or replaced from  time  to  time.   Notwithstanding  the foregoing, the
parties intend that the terms used herein which are defined in  the  Applicable
UCC have, at all times, the broadest and most inclusive meanings possible.

      Section 1.3 Indebtedness  Secured.   This  Deed of Trust is executed  and
delivered by Grantor to secure and enforce the following (the "Indebtedness"):

      (a)   Payment of and performance of any and  all "Obligations" as defined
in that certain  Amended and Restated Security Agreement  dated  as of April 1,
2008  (as  amended, restated, supplemented or otherwise modified from  time  to
time, the "Security Agreement") by and among Grantor, the other "Debtors" party
thereto, Beneficiary  and,  for  the  limited  purposes  set forth therein, the
Buyers.

      (b)   Payment  of  and  performance  of  any and all other  indebtedness,
obligations and liabilities of Grantor and any direct or indirect subsidiary of
Grantor (collectively, the "Grantor Parties" and each, individually, a "Grantor
Party") under, evidenced by or pursuant to the Purchase Agreement, the Notes or
any other Transaction Document (as defined in the  Purchase  Agreement) and all
of  the  other agreements, documents and instruments contemplated  thereby  and
executed  in   connection   therewith  (collectively,  the  "Loan  Documents"),
including, without limitation,  (i)  principal  and interest (including without
limitation, interest accruing subsequent to the filing  of  a petition or other
action  concerning bankruptcy or other similar proceeding, whether  or  not  an
allowed claim)  on  the Notes, (ii) reimbursement obligations under any letters
of credit, (iii) obligations  under  any hedging agreements with Beneficiary or
its affiliates, and (iv) obligations owing  under  any other Loan Document; and
all renewals, extensions, rearrangements and/or other  modifications  of any of
the  foregoing.   For  purposes  hereof,  South  Texas  Oil  Company,  a Nevada
corporation, shall be deemed to be a "Mortgagor Party."

      (c)   Any  sums  which  may be advanced or paid by Beneficiary or Trustee
under the terms hereof or under  any  other  Loan  Document  on  account of the
failure  of  Grantor  or  any  other Grantor Party to comply with the covenants
contained herein or in any other Loan Document.

      (d)   Without limiting the generality of the foregoing, all post-petition
interest,  expenses  and  other  duties   and   liabilities   with  respect  to
indebtedness, liabilities or other obligations described above  in this Section
1.03, which would be owed but for the fact that they are unenforceable  or  not
allowable  due  to  the  existence  of  a bankruptcy, reorganization or similar
proceeding.

      Section 1.4 Fixture Filing, Etc.  Without  in  any  manner  limiting  the
generality  of  any  of  the  other  provisions of this Deed of Trust: (i) some
portions of the goods described or to which reference is made herein are or are
to become fixtures on the land described  or  to which reference is made herein
or  on  attached Exhibit A; (ii) the security interests  created  hereby  under
applicable  provisions  of  the  Applicable  UCC  will  attach  to Hydrocarbons
(minerals  including  oil  and  gas),  as extracted collateral or the  accounts
resulting from the sale thereof at the wellhead or minehead located on the land
described or to which reference is made  herein; (iii) this Deed of Trust is to
be filed of record in the real estate records  as  a  financing  statement, and
(iv)  Grantor is the record owner of the real estate or interests in  the  real
estate comprised of the Property.

      Section 1.5 Defined  Terms.   Any  capitalized  term used in this Deed of
Trust and not defined in this Deed of Trust shall have  the meaning assigned to
such term in the Purchase Agreement.



                                  ARTICLE II



                Assignment of Production, Accounts and Proceeds

      Section 2.1 Assignment.   Grantor  has  absolutely  and   unconditionally
assigned,   transferred,   and   conveyed,   and  does  hereby  absolutely  and
unconditionally assign, transfer and convey unto  Beneficiary,  its  successors
and  assigns,  all  of  the Hydrocarbons and all products obtained or processed
therefrom, and the revenues  and proceeds now and hereafter attributable to the
Hydrocarbons  and said products  and  all  accounts  arising  therefrom  or  in
connection therewith and all payments in lieu of the Hydrocarbons such as "take
or  pay" payments  or  settlements  (all  of  the  foregoing,  the  "Production
Proceeds"),  together  with  the  immediate and continuing right to collect and
receive such Production Proceeds.   The  Hydrocarbons  and  products  are to be
delivered  into  pipe  lines  connected  with the Property, or to the purchaser
thereof, to the credit of Beneficiary (to  the extent of the Grantor's interest
therein); and all such Production Proceeds shall  be paid directly to a deposit
account subject to a deposit account control agreement,  in  form and substance
acceptable  to  Beneficiary,  among  Grantor,  Beneficiary  and the  applicable
financial institution where the deposit account is maintained,  with no duty or
obligation  of  any  party  paying  the  same  to  inquire  into the rights  of
Beneficiary to receive the same, what application is made thereof, or as to any
other  matter.   Grantor  directs and instructs any and all purchasers  of  any
Hydrocarbons to pay to such  deposit  accounts  all  of the Production Proceeds
accruing  to Grantor's interest until such time as such  purchasers  have  been
furnished with evidence that all Indebtedness has been paid in full in cash and
that this Deed  of  Trust has been released.  Grantor agrees that no purchasers
of the Hydrocarbons shall  have  any  responsibility for the application of any
funds paid to Beneficiary.  Grantor agrees  to  perform  all  such acts, and to
execute all such further assignments, transfer orders and division  orders, and
other instruments as may be required or desired by Beneficiary or any  party in
order to have the Production Proceeds paid to Beneficiary.  Upon the occurrence
and  during  the  continuance  of  an  Event  of  Default, Beneficiary is fully
authorized to receive and receipt for the Production  Proceeds;  to endorse and
cash  any  and  all  checks  and  drafts  payable  to  the order of Grantor  or
Beneficiary for the account of Grantor received from or  in connection with the
Production Proceeds and to hold the Production Proceeds in  a  bank  account as
additional  collateral  securing the Indebtedness; and to execute transfer  and
division orders in the name  of  Grantor, or otherwise, with warranties binding
Grantor.  All Production Proceeds  received  by  Beneficiary  pursuant  to this
assignment   shall  be  applied  as  provided  in  the  other  Loan  Documents.
Beneficiary shall  not  be  liable  for any delay, neglect or failure to effect
collection of any Production Proceeds or to take any other action in connection
therewith or hereunder; but Beneficiary  shall  have  the right, exercisable at
its  election  at  any  time  after  an Event of Default has  occurred  and  is
continuing, in the name of Grantor or  otherwise,  to  prosecute and defend any
and all actions or legal proceedings deemed advisable by  Beneficiary  in order
to  collect  such  funds  and  to  protect  the interests of Beneficiary and/or
Grantor, with all costs, expenses and attorneys'  fees  incurred  in connection
therewith  being  paid  by  Grantor  and  until  so  paid  being  a part of the
Indebtedness secured by this Deed of Trust.  Grantor agrees to perform all such
acts, and to execute all such further assignments, transfer orders and division
orders,  and other instruments as may be required or desired by Beneficiary  or
any party in order to effectuate the provisions contained in this Section 2.01.
Grantor hereby  appoints  Beneficiary as its attorney-in-fact to pursue any and
all rights of Grantor to liens  on  and  security interests in the Hydrocarbons
securing payment of proceeds of runs attributable to the Hydrocarbons, provided
Beneficiary shall only be permitted to exercise  such power of attorney granted
pursuant to this sentence after the occurrence and during the continuance of an
Event of Default.  The power of attorney granted to Beneficiary in this Section
2.01,  being  coupled with an interest, shall be irrevocable  so  long  as  the
Indebtedness or any part thereof remains unpaid.

      Section 2.2 [Reserved].

      Section 2.3 No  Modification  of  Payment  Obligations.   Nothing  herein
contained  shall  modify  or  otherwise  alter,  limit  or  modify the absolute
obligation of Grantor and the other Grantor Parties to make prompt  payment  of
all principal, interest and other amounts owing on the Indebtedness when and as
the  same  become  due  regardless  of  whether  the  Production  Proceeds  are
sufficient  to  pay  the  same  and  the rights provided in accordance with the
foregoing assignment provision shall be cumulative of all other security of any
and  every  character  now  or hereafter existing  to  secure  payment  of  the
Indebtedness.

      Section 2.4 Effectuating  Payment  of Production Proceeds to Beneficiary.
If under any existing sales agreements, other  than division orders or transfer
orders, any Production Proceeds are required to  be  paid  by  the purchaser to
Grantor so that under such existing agreements payment cannot be  made  of such
Production  Proceeds  to  Beneficiary,  Grantor's  interest  in  all Production
Proceeds under such sales agreements and in all other Production Proceeds which
for  any  reason  may  be  paid  to  Grantor  shall,  when received by Grantor,
constitute trust funds in Grantor's hands and shall be immediately paid over to
Beneficiary.   Without  limitation  upon any of the foregoing,  Grantor  hereby
constitutes  and appoints Beneficiary  as  Grantor's  special  attorney-in-fact
(with full power  of  substitution,  either  generally  or  for such periods or
purposes as Beneficiary may from time to time prescribe) in the name, place and
stead of Grantor to do any and every act and exercise any and  every power that
Grantor  might  or  could  do  or  exercise  personally  with  respect  to  all
Hydrocarbons  and Production Proceeds expressly inclusive, but not limited  to,
giving and granting  unto  said attorney-in-fact full power and authority to do
and perform any and every act  and  thing whatsoever necessary and requisite to
be done as fully and to all intents and  purposes, as Grantor might or could do
if personally present (provided such power of attorney granted pursuant to this
sentence  shall  only be exercisable by Beneficiary  upon  the  occurrence  and
during the continuance  of  an  Event  of  Default); and Grantor shall be bound
thereby  as  fully  and  effectively  as if Grantor  had  personally  executed,
acknowledged and delivered any of the foregoing certificates or documents.  The
powers and authorities herein conferred  upon  Beneficiary  may be exercised by
Beneficiary  through  any  person  who,  at  the time of the execution  of  the
particular instrument, is an officer of Beneficiary.   The  power  of  attorney
herein  conferred  is  granted  for valuable consideration and hence is coupled
with an interest and is irrevocable  so  long  as the Indebtedness, or any part
thereof,  shall  remain unpaid or any commitment to  lend  under  the  Purchase
Agreement remains  outstanding.   All  persons  dealing with Beneficiary or any
substitute  shall  be fully protected in treating the  powers  and  authorities
conferred by this paragraph  as  continuing  in  full  force  and  effect until
advised  by  Beneficiary  that all the Indebtedness is fully and totally  paid.
Beneficiary  may, but shall  not  be  obligated  to,  in  accordance  with  the
provisions of  Section  2.01 above, take such action as it deems appropriate in
an  effort to collect the  Production  Proceeds  and  any  reasonable  expenses
(including  reasonable  attorney's  fees) so incurred by Beneficiary shall be a
demand obligation of Grantor and shall  be  part of the Indebtedness, and shall
bear  interest each day, from the date of such  expenditure  or  payment  until
paid, at  a  per annum rate equal to the default rate of interest charged under
the Notes plus 2%.

      Section 2.5 Application  of Production Proceeds.  The Production Proceeds
received by Beneficiary during each  calendar month shall be paid directly into
a deposit account in accordance with Section  2.01  hereof.   After an Event of
Default hereunder has occurred, all Production Proceeds from time  to  time  in
the hands of Beneficiary shall be applied to the payment of the Indebtedness at
such  times  and  in  such  manner  and  order  as  Beneficiary  determines  in
Beneficiary's sole and absolute discretion.

      Section 2.6 Release from Liability; Indemnification.  Beneficiary and its
successors  and assigns are hereby released and absolved from all liability for
failure to enforce  collection  of  the  Production Proceeds and from all other
responsibility in connection therewith, except the responsibility to account to
Grantor for funds actually received.  Grantor  agrees  to  indemnify  and  hold
harmless  Beneficiary  (for  purposes of this paragraph, the term "Beneficiary"
shall  include  the directors, officers,  partners,  employees  and  agents  of
Beneficiary and any  persons  or  entities owned or controlled by or affiliated
with Beneficiary and any other Indemnified  Party  as  defined  in Section 4.16
hereof)  from  and  against  all claims, demands, liabilities, losses,  damages
(including  without  limitation   consequential  damages),  causes  of  action,
judgments,  penalties,  costs  and  expenses   (including   without  limitation
reasonable  attorneys'  fees  and expenses) imposed upon, asserted  against  or
incurred or paid by Beneficiary  by  reason  of  the assertion that Beneficiary
received,  either before or after payment in full of  the  Indebtedness,  funds
from the production  of  oil, gas, other hydrocarbons or other minerals claimed
by third persons (and/or funds  attributable  to sales of production which were
made  in  violation of laws, rules, regulations and/or  orders  governing  such
sales), and  Beneficiary shall have the right to defend against any such claims
or actions, employing attorneys of its own selection, and if not furnished with
indemnity satisfactory  to  it,  Beneficiary shall have the right to compromise
and adjust any such claims, actions  and  judgments,  and  in  addition  to the
rights to be indemnified as herein provided, all amounts paid by Beneficiary in
compromise,  satisfaction  or  discharge of any such claim, action or judgment,
and all court costs, reasonable  attorneys'  fees  and  other expenses of every
character expended by Beneficiary pursuant to the provisions  of  this  section
shall  be  a  demand  obligation  (which  obligation  Grantor  hereby expressly
promises to pay) owing by Grantor to Beneficiary and shall bear  interest, from
the date expended until paid, at a per annum rate equal to the default  rate of
interest charged under the Notes plus 2%.  The foregoing indemnities shall  not
terminate  upon  the  release, foreclosure or other termination of this Deed of
Trust but will survive  the  release,  foreclosure  of  this  Deed  of Trust or
conveyance  in  lieu of foreclosure, and the repayment of the Indebtedness  and
the discharge and  release  of  this  Deed  of  Trust  and  the other documents
evidencing  and/or securing the Indebtedness.  WITHOUT LIMITATION,  IT  IS  THE
INTENTION OF  GRANTOR  AND  GRANTOR  AGREES  THAT  THE  FOREGOING  RELEASES AND
INDEMNITIES  SHALL APPLY TO EACH INDEMNIFIED PARTY WITH RESPECT TO ALL  CLAIMS,
DEMANDS,   LIABILITIES,   LOSSES,   DAMAGES   (INCLUDING   WITHOUT   LIMITATION
CONSEQUENTIAL  DAMAGES),  CAUSES  OF  ACTION,  JUDGMENTS,  PENALTIES, COSTS AND
EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEYS' FEES AND EXPENSES)
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE  NEGLIGENCE OF SUCH
(AND/OR  ANY  OTHER)  INDEMNIFIED PARTY.  However, such indemnities  shall  not
apply to any particular  indemnified  party  (but  shall  apply  to  the  other
indemnified parties) to the extent the subject of the indemnification is caused
by  or  arises  out  of  the  gross  negligence  or  willful misconduct of such
particular indemnified party.



                                  ARTICLE III



                   Representations, Warranties and Covenants

      Grantor hereby represents, warrants and covenants as follows:

      Section 3.1 Title.  Grantor owns an undivided working  interest  in  each
well  included  in the Property of not more than the working interest set forth
in Exhibit A attached  hereto  (to  the  extent  the  interest  of Grantor is a
working  interest  as  opposed to an orverriding royalty interest) and  Grantor
owns an undivided net revenue  interest  or overriding royalty interest in each
well included in the Property of not less  than  the  net  revenue  interest or
overriding  royalty  interest  set  forth  in Exhibit A attached hereto.   With
respect to the Property, Grantor represents  and  warrants that (i) Grantor has
good,  marketable  and  indefeasible  title  in  fee  simple  to  all  Property
constituting real property owned (rather than leased) by  it, in each case free
and  clear  of  all Liens other than Permitted Liens, except as  set  forth  in
Exhibit A, (ii) Grantor  has  good and valid title to all Property constituting
personal property owned by it that  is material to the business of the Grantor,
free and clear of all Liens other than  Permitted  Liens,  (iii) Grantor is the
legal and equitable owner of a leasehold interest in all of the leased Property
that is producing oil, gas, minerals and/or other Hydrocarbons,  and  possesses
good,  marketable  and  defensible  title  thereto, free and clear of all Liens
(other  than  Permitted  Liens)  and  other matters  affecting  title  to  such
leasehold that could impair the ability  of the Grantor to realize the benefits
of  the  rights  provided to it under any lease  pertaining  thereto  and  (iv)
Grantor is the legal  and equitable owner of a leasehold interest in all of the
leased  Property  that  is  not  producing  oil,  gas,  minerals  and/or  other
Hydrocarbons and possesses  good, marketable and defensible title thereto, free
and clear of all Liens (other than Permitted Liens) and other matters affecting
title to such leasehold that could impair the ability of Grantor to realize the
benefits of the rights provided to it under any lease pertaining thereto.

      Section 3.2 Defend Title.  This Deed of Trust is, and always will be kept
as, a direct first lien and security interest upon the Property subject only to
Permitted Liens and Grantor will  not  create or suffer to be created or permit
to exist any lien, security interest or  charge  prior  or  junior  to  or on a
parity  with  the  lien  and  security  interest of this Deed of Trust upon the
Property or any part thereof or upon the  rents,  issues, revenues, profits and
other  income  therefrom.  Grantor will warrant and defend  the  title  to  the
Property against  the  claims  and  demands of all other persons whomsoever and
will maintain and preserve the lien created  hereby  so  long  as  any  of  the
Indebtedness  secured  hereby  remains unpaid.  Should an adverse claim be made
against or a cloud develop upon  the title to any part of the Property, Grantor
agrees  it  will  immediately  defend   against  such  adverse  claim  or  take
appropriate action to remove such cloud at  Grantor's  cost  and  expense,  and
Grantor  further  agrees  that  Trustee  and/or Beneficiary may take such other
action as they deem advisable to protect and  preserve  their  interests in the
Property,  and  in  such  event  Grantor will indemnify Trustee and Beneficiary
against any and all costs, attorney's  fees  and  other expenses which they may
incur in defending against any such adverse claim or  taking  action  to remove
any such cloud.

      Section 3.3 Not  a  Foreign  Person.   Grantor  is not a "foreign person"
within  the  meaning  of  the  Internal  Revenue  Code  of  1986,   as  amended
(hereinafter called the "Code"), Sections 1445 and 7701 (i.e. Grantor  is not a
non-resident alien, foreign corporation, foreign partnership, foreign trust  or
foreign  estate  as  those  terms  are  defined in the Code and any regulations
promulgated thereunder).

      Section 3.4 Rentals, Taxes, Insurance  and  Fees Paid;  Leases in Effect.
All rentals and royalties due and payable in accordance  with  the terms of any
leases  or  subleases  comprising  a part of the Hydrocarbon Property  and  all
severance and production taxes payable with respect to the production therefrom
have been duly paid or provided for  and  all  leases or subleases comprising a
part of the Hydrocarbon Property are in full force  and effect.  In addition to
the foregoing, Grantor shall pay or shall cause to be paid when due, all taxes,
permits, licenses, insurance premiums and other similar amounts with respect to
the Property, the Hydrocarbon Property and the Hydrocarbons.

      Section 3.5 Operation By Third Parties.   As to  any part of the Property
which  is  not a working interest (if any), Grantor agrees  to  take  all  such
action and to  exercise  all rights and remedies as are available to Grantor to
cause the owner or owners  of the working interest in such properties to comply
with the covenants and agreements  contained  herein; and as to any part of the
Property which is a working interest operated by  a  party  other than Grantor,
Grantor agrees to take all such action and to exercise all rights  and remedies
as  are  reasonably  available  to Grantor (including, but not limited to,  all
rights under any operating agreement) to cause the operator of such property to
comply with the covenants and agreements contained herein.

      Section 3.6 Failure to Perform.   Grantor agrees that if Grantor fails to
perform any act or to take any action which  Grantor  is required to perform or
take  hereunder or pay any money which Grantor is required  to  pay  hereunder,
each of Beneficiary and Trustee in Grantor's name or its or their own name may,
but shall  not  be  obligated  to, perform or cause to be performed such act or
take such action or pay such money,  and  any expenses so incurred by either of
them and any money so paid by either of them shall be a demand obligation owing
by  Grantor  to  Beneficiary  or Trustee, as the  case  may  be,  and  each  of
Beneficiary and Trustee, upon making  such  payment, shall be subrogated to all
of the rights of the person or entity receiving  such payment.  Each amount due
and owing by Grantor to each of Beneficiary and Trustee  pursuant  to this Deed
of  Trust  shall bear interest from the date of such expenditure or payment  or
other occurrence  which  gives  rise  to  such amount being owed to such Person
until paid at a rate per annum equal to the  default  rate  of interest charged
under  the  Notes  plus  2%,  and all such amounts together with such  interest
thereon shall be a part of the Indebtedness described in Section 1.03 hereof.

      Section 3.7 Sale, Encumbrance or Removal.   Grantor  will not at any time
during  the  existence hereof, sell, assign, transfer, mortgage,  encumber,  or
otherwise dispose  of  any  Property,  except  (i) sales of Hydrocarbons in the
ordinary course of business and only then in compliance  with the terms of this
Deed  of  Trust,  (ii) the sale of obsolete or worn out equipment  or  personal
property in the ordinary  course  of  business, and Grantor shall not remove or
permit to be removed, any personal or other  removable  property  at  any  time
covered  hereby  from  the  premises upon which the same may be situated unless
moved to other portions of the  Property  or  replaced  with  property of equal
value in which Beneficiary has a first priority perfected security interest and
(iii)  the  sale  of  Hydrocarbon  Property  if  and to the extent all  of  the
following conditions are satisfied:  (A) such Hydrocarbon  Property  to be sold
does  not  constitute  a  material  portion  of  the  collateral  securing  the
Indebtedness,  is  not  currently  producing  Hydrocarbons and such Hydrocarbon
Property has not been proven, consistent with prudent  customs and practices in
the industry in which Grantor operates, to contain Hydrocarbons  which  may  be
extracted in the ordinary course of Grantor's business, (B) such sale occurs in
the ordinary course of Grantor's business in connection with the disposition of
non-producing  and non-proven Hydrocarbon Property, (C) no Event of Default has
occurred and is  continuing at the time of such sale or would arise as a result
thereof and no event has occurred which, with the passing of time or the giving
of notice, would constitute  an  Event of Default, (D) such sale is to a third-
party not affiliated with the Grantor  and  on  an  arms-length  basis,  (E) if
Grantor  or  any  other  Grantor  Party  is  the  operator with respect to such
Hydrocarbon  Property,  such Grantor Party remains the  operator  with  respect
thereto, and (F) Beneficiary  has given its prior written consent to such sale,
such consent not to be unreasonably withheld.

      Section 3.8 Sale of Production.  No Property is or will become subject to
any contractual or other arrangement  (a)  whereby payment for production is or
can  be  deferred  for  a substantial period after  the  month  in  which  such
production is delivered (i.e.,  in the case of oil, not in excess of sixty (60)
days, and in the case of gas, not in excess of ninety (90) days) or (b) whereby
payments  are made to Grantor other  than  by  checks,  drafts,  wire  transfer
advises or  other  similar  writings,  instruments  or  communications  for the
immediate  payment of money.  Except for transportation, gathering, processing,
compression  or  dehydration  agreements  (or  other agreements relating to the
marketing  of  Hydrocarbons)  from  time to time disclosed  to  Beneficiary  in
writing (in connection with the Property  to  which  they  relate),  and,  with
respect to the immediately succeeding clause (i), except for agreements entered
into  by  Grantor  in  the  ordinary course of business consistent with prudent
customs  and  practices in the  industry  in  which  Grantor  operates,  (i) no
Property is or  will become subject to any contractual or other arrangement for
the sale, processing  or  transportation of production (or otherwise related to
the marketing of Hydrocarbons)  which  cannot be cancelled on ninety (90) days'
(or less) notice and (ii) all contractual  or  other arrangements for the sale,
processing  or  transportation of Hydrocarbons (or  otherwise  related  to  the
marketing of Hydrocarbons)  shall  be  bona  fide arm's length transactions and
shall be at generally prevailing market prices.  Grantor is presently receiving
a price for all production from (or attributable to) each Property covered by a
production sales contract disclosed in writing  to  Beneficiary  as computed in
accordance  with  the  terms of such contract, and is not having deliveries  of
production from such Property  curtailed  substantially  below  such property's
delivery capacity.  Neither Grantor, nor any of its predecessors  in title, has
received prepayments (including, but not limited to, payments for gas not taken
pursuant  to  "take or pay" or other similar arrangements) for any Hydrocarbons
produced or to be produced from the Property after the date hereof, and Grantor
hereby covenants  not to enter into any such advance or prepayment arrangements
whereby  it accepts  consideration  for  Hydrocarbons  not  yet  produced.   No
Property is  or  will  become  subject  to  any  "take or pay" or other similar
arrangement (y) which can be satisfied in whole or in part by the production or
transportation  of  gas  from other properties or (z)  as  a  result  of  which
production from the Property  may  be  required  to be delivered to one or more
third parties without payment (or without full payment) therefor as a result of
payments made, or other actions taken, with respect to other properties.  There
is  no Property with respect to which Grantor, or its  predecessors  in  title,
has,   prior   to  the  date  hereof,  taken  more  ("overproduced"),  or  less
("underproduced"),  gas  from  the lands covered thereby (or pooled or unitized
therewith) than its ownership interest  in  such  Property  would entitle it to
take,  and  Grantor  will  not after the date hereof become "overproduced"  (as
above defined) with respect  to  any  well  on  the Property (or on any unit in
which the Property participate), in an amount in  excess  of Grantor's share of
gas produced from such well, except for insignificant volumes  of  overproduced
or  underproduced  gas  that  may  occasionally occur from time to time in  the
ordinary course of business and consistent  with  prudent customs and practices
in  the  industry in which Grantor operates.  No Property  is  or  will  become
subject to  a  gas  balancing arrangement under which one or more third parties
may take a portion of  the  production  attributable  to  such Property without
payment  (or  without  full payment) therefor as a result of production  having
been taken from, or as a  result of other actions or inactions with respect to,
other properties, except for any such gas balancing arrangement entered into in
the ordinary course of business  consistent  with prudent customs and practices
in  the industry in which Grantor operates.  No  Property  is  subject  at  the
present  time to any regulatory refund obligation and, to the best of Grantor's
knowledge, no facts exist which might cause the same to be imposed.

      Section 3.9 Operation  of  Property.   The  Grantor will promptly pay and
discharge  or  cause  to  be  paid and discharged all rentals,  delay  rentals,
royalties and indebtedness accruing under, and perform or cause to be performed
each  and  every  act,  matter or thing  required  by,  each  and  all  of  the
assignments,  deeds,  subject  leases,  sub-leases,  contracts  and  agreements
described or referred to  herein  or  affecting  the Grantor's interests in the
Property and will do or cause to be done all other  things reasonably necessary
to keep unimpaired the Grantor's rights with respect  thereto  and  prevent any
intentional  forfeiture thereof or default with respect thereto, other  than  a
default which  might  occur  as a result of cessation of production thereunder.
Each Property (and properties  unitized therewith) is being (and, to the extent
the same could adversely affect  the  ownership  or  operation of such Property
after  the  date  hereof,  have  in  the  past  been), and hereafter  will  be,
maintained,  operated  and  developed  in  a good and  workmanlike  manner,  in
accordance  with  prudent  industry  standards  and   in  conformity  with  all
applicable laws and all rules, regulations and orders of  all  duly constituted
authorities having jurisdiction and in substantial conformity with all oil, gas
and/or other mineral leases and other contracts and agreements forming  a  part
of  the  Property  and  in conformity with all Permitted Liens; specifically in
this connection, (i) no Property  is  subject  to  having  allowable production
after  the date hereof reduced below the full and regular allowable  (including
the maximum  permissible  tolerance)  because of any overproduction (whether or
not the same was permissible at the time)  prior  to  the  date hereof and (ii)
none  of  the wells located on the Property (or properties unitized  therewith)
are or will  be  deviated  from the vertical more than the maximum permitted by
applicable laws, regulations,  rules  and  orders, and such wells are, and will
remain, bottomed under and producing from, with  the  well bores wholly within,
the  Property  (or,  in  the  case  of  wells  located  on properties  unitized
therewith, such unitized properties).  With respect to any  Property  in  which
Grantor  is  the  operator  or in which Grantor has a majority working interest
(and to the best of Grantor's  knowledge  with respect to any Property in which
Grantor has a minority working interest and  is  not  an operator in connection
therewith), there are no dry holes, or otherwise inactive wells, located on any
Property or on lands pooled or unitized therewith, except  for  wells that have
been  properly  plugged  and  abandoned  or  inactive  and being maintained  in
accordance with local, state and federal law.  Except as  disclosed  under  the
Purchase  Agreement,  the  Grantor  has,  and  will  in the future, possess all
certificates, authorizations, approvals, licenses and  permits  issued  by  the
appropriate  federal,  state  or  foreign regulatory authorities (collectively,
"Permits") necessary to produce, extract,  transport  and  sell  the  oil, gas,
minerals  and/or  other  Hydrocarbons  in that portion of the Property that  is
producing oil, gas, minerals and/or other  Hydrocarbons.   Except  as disclosed
under the Purchase Agreement, Grantor has no reason to believe that it will not
be  able  to  obtain  Permits  as  and when necessary to enable the Grantor  to
produce,  extract,  transport  and  sell  the  oil,  gas,  minerals  and  other
Hydrocarbons  in  the  Property.   Grantor  has  not  received  notice  of  any
violations  in  respect  of  any such licenses  or  permits  described  in  the
foregoing provisions of this Section  3.09,  except  for  notices of violations
received  prior  to  the date hereof that have been remedied by  Grantor.   The
Grantor will operate the  Property,  or cause the Property to be operated, in a
careful and efficient manner in accordance  with  the practices of the industry
and in material compliance with all applicable contracts  and agreements and in
material  compliance  with all applicable spacing, proration  and  conservation
laws of the jurisdiction  in which the Property is situated, and all applicable
laws, rules and regulations  of  every  other agency and authority from time to
time constituted to regulate the development  and operation of the Property and
the production and sale of Hydrocarbons and other  minerals produced therefrom.
The  Grantor  will  do  or  cause  to  be done, or shall participate  in,  such
development work as may be reasonably necessary  to  the prudent and economical
operation of the Property in accordance with the approved  practices of prudent
operators in the industry, including, without limitation, all  work  to be done
that  may be appropriate to protect from diminution the productive capacity  of
the Property  and  each producing well thereon.  Upon the reasonable request of
the Beneficiary, and  at  reasonable  times and intervals, the Grantor will (a)
permit the Beneficiary and its respective  designated  representatives to enter
upon any part of the Property under the control of the Grantor,  and  (b) cause
the  operator  of any part of the Property not under the control of the Grantor
to permit the Beneficiary  and its designated representatives to enter upon the
same (to the extent and subject  to  the conditions under which the Grantor may
so enter), for the purposes of inspecting the condition and operation thereof.

      Section 3.10Suits and Claims.  Except  to  the extent disclosed under the
Purchase  Agreement,  there  are  no  suits,  actions, claims,  investigations,
inquiries,  proceedings  or  demands  pending  (or,   to  Grantor's  knowledge,
threatened) which affect the Property (including, without limitation, any which
challenge  or  otherwise  pertain to Grantor's title to the  Property)  and  no
judicial or administrative  actions,  suits  or  proceedings  pending  (or,  to
Grantor's knowledge, threatened) against Grantor.

      Section 3.11Environmental.

      (a)   Current  Status.   The Property and Grantor are not in violation of
Applicable Environmental Laws (as  hereinafter  defined),  or  subject  to  any
existing,   pending   or,   to   the  best  knowledge  of  Grantor,  threatened
investigation or inquiry by any governmental  authority  or  any  other  person
under  or  with  respect  to  Applicable  Environmental Laws, or subject to any
remedial obligations under Applicable Environmental Laws, and are in compliance
with  all permits and licenses required under  Applicable  Environmental  Laws,
and, to  the best knowledge of Grantor, this representation will continue to be
true  and  correct   following   disclosure   to  the  applicable  governmental
authorities  of  all  relevant  facts, conditions and  circumstances,  if  any,
pertaining to the Property and Grantor.   "Applicable Environmental Laws" shall
mean any applicable laws, orders, rules, or  regulations  pertaining to safety,
health or the environment, as such laws, orders, rules or regulations now exist
or  are  hereafter  enacted  and/or amended (including without  limitation  the
Comprehensive Environmental Response,  Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and  Reauthorization  Act  of  1986  (as
amended,  hereinafter  called "CERCLA"), the Resource Conservation and Recovery
Act of 1976, as amended  by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of  1980,  and the Hazardous and Solid Waste Amendments
of 1984 (as amended, hereinafter called  "RCRA") and applicable state and local
law).   Grantor  undertook, at the time of acquisition  of  the  Property,  all
appropriate inquiry  into  the  previous  ownership  and  uses  of the Property
consistent  with  good  commercial  or  customary practice.  Grantor has  taken
reasonable steps necessary, consistent with  customary practice in the industry
in which it operates its business, to determine  and  has  determined  that  no
hazardous  substances  or  solid  wastes  have  been  disposed  of or otherwise
released  at,  into,  upon  or  under  the Property, except in accordance  with
Applicable Environmental Laws.  The use which Grantor makes and intends to make
of the Property will not result in the use,  treatment,  storage or disposal or
other release of any hazardous substance or solid waste at, into, upon or under
the  Property,  except  such  usage, and temporary storage in  anticipation  of
usage,  as  is  in the ordinary course  of  business  and  in  compliance  with
Applicable Environmental  Laws.   The terms "hazardous substance" and "release"
as used in this Deed of Trust shall  have the meanings specified in CERCLA, and
the terms "solid waste" and "disposal"  (or "disposed") shall have the meanings
specified in RCRA; provided, in the event  either  CERCLA or RCRA is amended so
as  to broaden the meaning of any term defined thereby,  such  broader  meaning
shall  apply  subsequent  to  the effective date of such amendment and provided
further, to the extent that the  laws  of  the  states in which the Property is
located  establish  a  meaning  for  "hazardous substance,"  "release,"  "solid
waste," or "disposal" which is broader  than that specified in either CERCLA or
RCRA, such broader meaning shall apply.   The  "Associated  Property"  (as such
term   is   hereinafter   defined)  is  not  in  violation  of  any  Applicable
Environmental Laws for which  Grantor  or  its  predecessors  in  title  to the
Property  would be responsible (to the best of Grantor's knowledge with respect
to Associated Property not owned or operated by Grantor).  The term "Associated
Property" as used in this Deed of Trust shall mean any and all interests in and
to (and/or  carved  out  of)  the  lands  which are described or referred to in
Exhibit A hereto, or which are otherwise described  in  any  of  the  oil,  gas
and/or  mineral leases or other instruments described in or referred to in such
Exhibit A, whether or not such property interests are owned by Grantor.

      (b)   Future  Performance.  Grantor will not cause or permit the Property
or Grantor to be in violation  of, or do anything or permit anything to be done
which will subject the Property to any remedial obligations under, or result in
noncompliance  with  applicable permits  and  licenses  under,  any  Applicable
Environmental  Laws,  assuming   disclosure   to  the  applicable  governmental
authorities  of  all  relevant  facts, conditions and  circumstances,  if  any,
pertaining to the Property and Grantor  will  promptly  notify  Beneficiary  in
writing  of  any  existing,  pending  or,  to  the  best  knowledge of Grantor,
threatened investigation, claim, suit or inquiry by any governmental  authority
or  any  person  in connection with any Applicable Environmental Laws.  Grantor
will take steps necessary  to  determine  that no hazardous substances or solid
wastes  have been disposed of or otherwise released  on  or  to  the  Property.
Grantor will not cause or permit the disposal or other release of any hazardous
substance or solid waste at, into, upon or under the Property and covenants and
agrees to keep or cause the Property to be kept free of any hazardous substance
or solid  waste (except such use, and temporary storage in anticipation of use,
as is required in the ordinary course of business, all while in compliance with
Applicable  Environmental  Laws),  and  to  remove  the  same (or if removal is
prohibited by law, to take whatever action is required by  law),  promptly upon
discovery at its sole expense.  Upon Beneficiary's reasonable request,  at  any
time  and from time to time during the existence of this Deed of Trust, but not
more often  than  once  every calendar year (so long as no Event of Default has
occurred), Grantor will provide  at  Grantor's  sole  expense  an inspection or
audit  of  the  Property  from  an  engineering or consulting firm approved  by
Beneficiary, indicating the presence  or  absence  of  hazardous substances and
solid waste on the Property and compliance with Applicable Environmental Laws.

      Section 3.12Not Abandon Wells; Participate in Operations.   Grantor  will
not,  without  prior written consent of Beneficiary, abandon, or consent to the
abandonment of,  any  well  producing from the Property (or properties unitized
therewith) so long as such well is capable (or is subject to being made capable
through drilling, reworking or  other operations which it would be commercially
feasible to conduct) of producing  oil,  gas,  or  other  Hydrocarbons or other
minerals in commercial quantities (as determined without considering the effect
of  this  Deed of Trust).  Grantor will not, without prior written  consent  of
Beneficiary,  which consent shall not be unreasonably conditioned, withheld, or
delayed, elect not to participate in a proposed operation on the Property where
the effect of such  election  would  be the forfeiture either temporarily (i.e.
until a certain sum of money is received  out  of  the  forfeited  interest) or
permanently  of any interest in the Property.  All or portions of the  Property
may be comprised  of  interests  in the Hydrocarbon Property or lands pooled or
unitized therewith which are other  than  working  interests  or  which  may be
operated  by a party or parties other than the Grantor and with respect to  all
such portions  of  the  Property,  the  Grantor's  covenants  and agreements as
expressed in this Article III are modified to require that the  Grantor use its
commercially  reasonable  efforts  to cause compliance with such covenants  and
agreements by the working interest owners  or the operator or operators of such
Hydrocarbon Properties.

      Section 3.13Condemnation Awards.  If at  any  time  all or any portion of
the Property shall be taken or damaged under the power of eminent  domain,  the
award  received  by  condemnation  proceedings for any property so taken or any
payment  received  in  lieu  of such condemnation  proceedings  shall  be  paid
directly to Beneficiary as agent  for  Grantor  and  all or any portion of such
award  or  payment,  at  the option of Beneficiary, shall  be  applied  to  the
Indebtedness or paid over,  wholly  or  in  part, to Grantor for any purpose or
object satisfactory to Beneficiary; provided  that  Beneficiary  shall  not  be
obligated  to  see  to  the  application  of  any  amount paid over to Grantor.
Grantor  immediately  upon  obtaining  knowledge  of  the  institution  of  any
proceedings  or  negotiations  for  the condemnation of the  Property,  or  any
portion thereof, will notify Beneficiary  of  the pendency of such negotiations
or  proceedings.   Beneficiary  may participate in  any  such  negotiations  or
proceedings,  and  Grantor from time  to  time  will  execute  and  deliver  to
Beneficiary  all  instruments   requested   by   Beneficiary   to  permit  such
participation.

      Section 3.14Insurance.  Grantor will maintain, with financially sound and
reputable insurance companies, insurance on all its property in  at  least such
amounts  and  against  at  least such risks (but including in any event general
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business and in any case no less comprehensive
in scope than that maintained  by  the  Grantor  as of the date hereof.  In the
event  of  any  loss  under  any  insurance  policies so  carried  by  Grantor,
Beneficiary shall have the right (but not the obligation) to make proof of loss
and  collect  the same, and all amounts so received  shall  be  applied  toward
costs, charges  and  expenses  (including  reasonable attorneys' fees), if any,
incurred  in  the  collection  thereof,  then to  the  payment,  in  the  order
determined by Beneficiary in its own discretion,  of  the Indebtedness, and any
balance  remaining  shall be subject to the order of Grantor.   Beneficiary  is
hereby authorized but  not  obligated  to enforce in its name or in the name of
Grantor payment of any or all of said policies  or  settle  or  compromise  any
claim  in  respect  thereof,  and to collect and make receipts for the proceeds
thereof and Beneficiary is hereby  appointed  Grantor's  agent and attorney-in-
fact to endorse any check or draft payable to Grantor in order  to  collect the
proceeds  of insurance (provided Beneficiary shall only be entitled to  enforce
the power of attorney provided in this sentence after the occurrence and during
the continuance  of  an Event of Default).  In the event of foreclosure of this
Deed of Trust, or other  transfer of title to the Property in extinguishment in
whole or in part of the Indebtedness,  all right, title and interest of Grantor
in and to such policies then in force concerning  the Property and all proceeds
payable thereunder shall thereupon vest in the purchaser at such foreclosure or
other transferee in the event of such other transfer of title.

      Section 3.15Compliance with Leases.  Grantor will observe and comply with
all  of  the terms and provisions, express or implied,  of  the  oil,  gas  and
mineral leases  covered  by  this  Deed  of  Trust, and any other agreements or
instruments applicable thereto; and, except with  the  prior written consent of
Beneficiary, will not amend (in any manner adverse to Grantor,  Beneficiary, or
Grantor's or Beneficiary's interest in the Property) or terminate  any  of such
agreements  or surrender, abandon or release any of such leases in whole or  in
part so long  as  any  well situated thereon, or located on any unit containing
all or any part of such  leases,  is  capable of producing oil, gas, casinghead
gas  or  other  hydrocarbons  in paying quantities.   Grantor  will  cause  all
obligations to the holders of royalty  interests and all other interests in the
Property to be promptly discharged and all covenants and conditions, express or
implied, imposed upon the original lessee  or  his  assigns by every such lease
and every other agreement relative thereto to be fully  and  promptly performed
and  to  cause  all  acts  necessary or proper to accomplish the foregoing  and
prevent the breach or forfeiture  of  any  such  lease to be fully and promptly
performed.  Grantor will furnish to Beneficiary ten  (10)  day  advance written
notice  of  any  intention  not  to  pay  (or immediately at such time that  it
anticipates that it will be unable to pay)  any  delay  rentals on the due date
thereof under any such lease.

      Section 3.16Further Assurance.  Grantor will, on request  of Beneficiary,
(i)  promptly correct any defect, error or omission which may be discovered  in
the contents  of  this  Deed  of  Trust, or in any other document or instrument
executed in connection with any of  the  Loan Documents, or in the execution or
acknowledgment  of  this Deed of Trust or any  other  document;  (ii)  execute,
acknowledge,  deliver   and   record   and/or  file  such  further  instruments
(including, without limitation, further  deeds  of  trust,  mortgages, security
agreements, financing statements, continuation statements, and  assignments  of
production,   accounts,   funds,  contract  rights,  general  intangibles,  and
proceeds) and do such further  acts as may be necessary, desirable or proper to
carry out more effectively the purposes of this Deed of Trust and to more fully
identify and subject to the liens  and  security  interests hereof any property
intended to be covered hereby, including specifically,  but without limitation,
any renewals, additions, substitutions, replacements, or  appurtenances  to the
Property;  and (iii) execute, acknowledge, deliver, and file and/or record  any
document or instrument (including specifically any financing statement) desired
by Beneficiary  to  protect the lien or the security interest hereunder against
the  rights or interests  of  third  persons.   Grantor  shall  pay  all  costs
connected with any of the foregoing.

      Section 3.17Name  and  Place of Business.  Except as disclosed in writing
to Beneficiary, Grantor has not  during the preceding five (5) years been known
by  or  used any other corporate or  partnership,  trade  or  fictitious  name.
Grantor will  not  cause or permit any change to be made in its name, identity,
state of formation or  corporate  or  partnership  structure,  or  its  federal
employer  identification  number unless Grantor shall have notified Beneficiary
of such change at least thirty  (30)  days  prior to the effective date of such
change, and shall have first taken all action  required  by Beneficiary for the
purpose of further perfecting or protecting the liens and security interests in
the Property created hereby.  Grantor's exact name is the  name  set  forth  in
this  Deed  of  Trust.  Grantor is a registered organization which is organized
under the laws of  one  of  the  states  comprising  the  United  States  (e.g.
corporation,  limited partnership, registered limited liability partnership  or
limited liability  company).  Grantor is located (as determined pursuant to the
UCC) in the state under  which  it  is  organized, which is as set forth in the
preamble to this Deed of Trust.  Grantor's  principal  place  of  business  and
chief executive office, and the place where Grantor keeps its books and records
concerning  the  Property (including, particularly, the records with respect to
Production Proceeds from the Property) has for the preceding four months, been,
and will continue  to  be (unless Grantor notifies Beneficiary of any change in
writing at least thirty  (30)  days  prior  to  the  date  of such change), the
address set forth on the signature page of this Deed of Trust.

      Section 3.18Compliance   with  Laws  and  Agreements.   Grantor   is   in
compliance with all governmental requirements applicable to it or its property,
including, without limitation, all  FERC  regulations  and the USA Patriot Act,
and all indentures, agreements and other instruments binding  upon  it  or  its
property.   The  execution  and performance of the Loan Documents, this Deed of
Trust and the other documents  and  instruments contemplated hereby and thereby
will not violate the Trading with the Enemy Act, as amended, any of the foreign
assets control regulations of the United  States  Treasury  Department (31 CFR,
Subtitle  B,  Chapter V, as amended) or any enabling legislation  or  executive
order relating  thereto,  the  Executive  Order  referred  to  in the following
sentence  or  the U.S. Bank Secrecy Act (31 U.S.C. {section}{section}  5311  et
seq.).  Grantor is not a Person described by section 1 of Executive Order 13224
of September 24,  2001  entitled Blocking Property and Prohibiting Transactions
With Persons Who Commit,  Threaten to Commit or Support Terrorism, 66 Fed. Reg.
49,079 (2001), as amended,  and  Grantor does not engage in any transactions or
dealings, or is otherwise associated  with  any  such  Persons.  Grantor is not
bound by any agreement, document, instrument, judgment, decree, order, statute,
law, rule or regulation that limits or could reasonably  be  expected  to limit
its performance under the Loan Documents or this Deed of Trust.

      Section 3.19Inspection; Management.     Beneficiary   and   any   persons
authorized  by  Beneficiary  shall have the right  to  enter  and  inspect  the
Property at all reasonable times.  If, at any time after an Event of Default by
Grantor,  the  management or maintenance  of  the  Property  is  determined  by
Beneficiary to be  unsatisfactory  and is not corrected within thirty (30) days
after notice to Grantor, Grantor will,  to the extent Grantor is entitled under
third party agreements affecting the same,  employ,  for  the  duration of such
Event of Default, as managing agent of the Property, any person  from  time  to
time designated or approved by Beneficiary.



                                  ARTICLE IV



                              Rights and Remedies

      Section 4.1 Event  of  Default.  As used in this Deed of Trust, an "Event
of Default" means (i) the failure  by  Grantor  to  comply  with  any covenant,
agreement, warranty or condition herein or in any Transaction Document required
to be observed, kept or performed by it and such failure to comply is not cured
or waived within five (5) days from the date Grantor knew or should  have known
of  such failure to comply and (ii) the occurrence of an "Event of Default"  as
defined under the Notes.

      Section 4.2 Foreclosure and Sale.

      (a)   If  an  Event of Default shall occur and be continuing, Beneficiary
shall have the right  and  option  to  proceed  with  foreclosure  by directing
Trustee, or his successors or substitutes in trust, to proceed with foreclosure
and to sell, to the extent permitted by law, all or any portion of the Property
at one or more sales, as an entirety or in parcels, at such place or  places in
otherwise  such  manner and upon such notice as may be required by law, or,  in
the absence of any  such  requirement, as Beneficiary may deem appropriate, and
to make conveyance to the purchaser  or  purchasers.   Where  the  Property  is
situated  in  more  than  one  jurisdiction,  notice as above provided shall be
posted and filed in all such jurisdictions (if  such  notices  are  required by
law), and all such Property may be sold in any such jurisdiction and  any  such
notice  shall  designate  the  jurisdiction  where such Property is to be sold.
Nothing contained in this Section 4.02 shall be construed so as to limit in any
way Trustee's rights to sell the Property, or  any  portion thereof, by private
sale if, and to the extent that, such private sale is  permitted under the laws
of the applicable jurisdiction or by public or private sale  after  entry  of a
judgment  by  any  court of competent jurisdiction so ordering.  Grantor hereby
irrevocably appoints  Trustee to be the attorney of Grantor and in the name and
on behalf of Grantor to  execute and deliver any deeds, transfers, conveyances,
assignments, assurances and  notices which Grantor ought to execute and deliver
and do and perform any and all  such  acts and things which Grantor ought to do
and perform under the covenants herein contained and generally, to use the name
of Grantor in the exercise of all or any  of  the  powers  hereby  conferred on
Trustee.   At any such sale: (i) whether made under the power herein  contained
or any other  legal  enactment, or by virtue of any judicial proceedings or any
other legal right, remedy or recourse, it shall not be necessary for Trustee to
have physically present,  or  to  have constructive possession of, the Property
(Grantor hereby covenanting and agreeing  to  deliver to Trustee any portion of
the Property not actually or constructively possessed  by  Trustee  immediately
upon  demand  by Trustee) and the title to and right of possession of any  such
property shall  pass  to the purchaser thereof as completely as if the same had
been actually present and  delivered  to  purchaser  at  such  sale,  (ii) each
instrument  of  conveyance executed by Trustee shall contain a general warranty
of title, binding  upon  Grantor and its successors and assigns, (iii) each and
every recital contained in  any  instrument of conveyance made by Trustee shall
conclusively establish the truth and  accuracy  of the matters recited therein,
including,  without limitation, nonpayment of the  Indebtedness,  advertisement
and conduct of such sale in the manner provided herein and otherwise by law and
appointment of  any successor Trustee hereunder, (iv) any and all prerequisites
to the validity thereof  shall be conclusively presumed to have been performed,
(v) the receipt of Trustee  or  of  such other party or officer making the sale
shall be a sufficient discharge to the purchaser or purchasers for its purchase
money  and  no  such  purchaser  or purchasers,  or  its  assigns  or  personal
representatives, shall thereafter  be  obligated  to  see to the application of
such purchase money, or be in any way answerable for any  loss,  misapplication
or nonapplication thereof, (vi) to the fullest extent permitted by law, Grantor
shall be completely and irrevocably divested of all of its right, title, inter-
est,  claim  and demand whatsoever, either at law or in equity, in and  to  the
property sold  and such sale shall be a perpetual bar both at law and in equity
against Grantor, and against any and all other persons claiming or to claim the
property sold or  any  part thereof, by, through or under Grantor, and (vii) to
the extent and under such  circumstances  as  are permitted by law, Beneficiary
may be a purchaser at any such sale, and shall  have the right, after paying or
accounting for all costs of said sale or sales, to credit the amount of the bid
upon the amount of the Indebtedness (in the order  of  priority  set  forth  in
Section 4.14 hereof) in lieu of cash payment.

      (b)   With  respect  to that portion, if any, of the Property situated in
the State of Texas, this instrument may be foreclosed by advertisement and sale
as provided by applicable Texas statutes.

      (c)   Cumulative of the  foregoing  and  the  other  provisions  of  this
Section  4.02  as  to  any  portion  of  the  Property  located in the State of
Colorado, such sales of all or any part of such Property  shall be conducted at
the courthouse of any county in the State of Colorado in which any part of such
Property is situated, at public venue to the highest bidder  for  cash  between
the hours of ten o'clock a.m. and four o'clock p.m. on the first Tuesday in any
month or at such other place, time and date as provided by the statutes of  the
State  of  Colorado  then  in force governing sales of real estate under powers
conferred  by  deed of trust,  after  having  given  notice  of  such  sale  in
accordance with such statutes.

      (d)   Upon  the  occurrence  of  an  Event  of  Default,  Beneficiary may
exercise  its  rights of enforcement with respect to the Property or  any  part
thereof under the Applicable UCC of any State where any portion of the Property
are located or under  any other statute in force in any state to the extent the
same is applicable law.   Cumulative  of the foregoing and the other provisions
of this Section 4.02: (i) to the extent  permitted  by law, upon the occurrence
and during the continuance of an Event of Default Beneficiary  may  enter  upon
the  Property  or  otherwise  upon  Grantor's  premises  to take possession of,
assemble and collect the personal property portion of the Property or to render
it unusable; (ii) upon the occurrence and during the continuance of an Event of
Default, Beneficiary may require Grantor to assemble the personal  property and
make  it  available  at  a  place  Beneficiary  designates  which  is  mutually
convenient  to  allow Beneficiary to take possession or dispose of the personal
property; (iii)   written  notice mailed to Grantor as provided herein at least
five (5) days prior to the date  of  public  sale  of  the personal property or
prior  to the date after which private sale of the personal  property  will  be
made shall  constitute reasonable notice; (iv) in the event of a foreclosure of
the liens, privileges  and/or security interests evidenced hereby, the personal
property, or any part thereof,  and  the Property, or any part thereof, may, at
the  option of Beneficiary, be sold, as  a  whole  or  in  parts,  together  or
separately  (including,  without limitation, where a portion of the Property is
sold,  the  personal  property  related  thereto  may  be  sold  in  connection
therewith); (v)  upon the  occurrence and during the continuance of an Event of
Default,  Beneficiary  or the  Trustee  may,  to  the  extent  permitted  under
applicable law, elect to  treat the fixtures included in the Property either as
real property or as personal  property,  or  both, and proceed to exercise such
rights as apply thereto; and (vi) with respect  to  any  sale  of real property
included  in  the  Property  made  under the powers of sale herein granted  and
conferred,  Beneficiary  or  the  Trustee  may,  to  the  extent  permitted  by
applicable  law,  include  in such sale  any  personal  property  and  fixtures
included in the Property and relating to such real property.

      Section 4.3 Agents.  Trustee  or  his successor or substitute may appoint
or  delegate  any one or more persons as agent  to  perform  any  act  or  acts
necessary or incident  to  any  sale  held by Trustee, including the posting of
notices and the conduct of sale, but in  the name and on behalf of Trustee, his
successor or substitute.  If Trustee or his  successor or substitute shall have
given notice of sale hereunder, any successor  or substitute trustee thereafter
appointed may complete the sale and the conveyance  of  the  property  pursuant
thereto as if such notice had been given by the successor or substitute trustee
conducting the sale.

      Section 4.4 Judicial   Foreclosure;   Receivership.    If   any   of  the
Indebtedness  shall  become  due  and  payable  and shall not be promptly paid,
Trustee or Beneficiary shall have the right and power  to  proceed by a suit or
suits in equity or at law, whether for the specific performance of any covenant
or agreement herein contained or in aid of the execution of  any  power  herein
granted, or for any foreclosure hereunder or for the sale of the Property under
the judgment or decree of any court or courts of competent jurisdiction or  for
the  enforcement  of  any  other  appropriate  legal  or  equitable remedy.  In
addition to all other remedies herein provided for, Grantor  agrees  that, upon
the occurrence of an Event of Default or any event or circumstance which,  with
the  lapse  of time or the giving of notice, or both, would constitute an Event
of Default hereunder, Beneficiary shall as a matter of right be entitled to the
appointment of  a  receiver  or  receivers for all or any part of the Property,
whether such receivership be incident  to  a  proposed  sale (or sales) of such
property or otherwise, and without regard to the value of  the  Property or the
solvency  of  any  person or persons liable for the payment of the Indebtedness
secured hereby, and  Grantor  does  hereby  consent  to the appointment of such
receiver or receivers, waives any and all defenses to  such appointment, agrees
not  to oppose any application therefor by Beneficiary, and  agrees  that  such
appointment shall in no manner impair, prejudice or otherwise affect the rights
of Beneficiary  under  Article II hereof.  Grantor expressly waives notice of a
hearing for appointment  of  a  receiver  and  the  necessity  for  bond  or an
accounting  by  the  receiver.   Nothing  herein  is to be construed to deprive
Beneficiary of any other right, remedy or privilege  it  may  now  or hereafter
have under the law to have a receiver appointed.  Any money advanced by Trustee
and/or Beneficiary in connection with any such receivership shall be  a  demand
obligation (which obligation Grantor hereby expressly promises to pay) included
in  the  Indebtedness  owing  by  Grantor to the Trustee and/or Beneficiary and
shall bear interest from the date of  making  such  advance  by  Trustee and/or
Beneficiary  until  paid at the then applicable interest rate under  the  Notes
(the "Applicable Rate").

      Section 4.5 Foreclosure  for  Installments.   Beneficiary shall also have
the option to proceed with foreclosure in satisfaction  of  any installments of
the Indebtedness which have not been paid when due either through the courts or
by directing Trustee or his successors in trust to proceed with  foreclosure in
satisfaction of the matured but unpaid portion of the Indebtedness  as if under
a  full  foreclosure,  conducting  the  sale  as  herein  provided  and without
declaring the entire principal balance and accrued interest due; such  sale may
be made subject to the unmatured portion of the Indebtedness, and any such sale
shall  not in any manner affect the unmatured portion of the Indebtedness,  but
as to such  unmatured  portion  of  the  Indebtedness  this Deed of Trust shall
remain in full force and effect just as though no sale had been made hereunder.
It  is  further  agreed  that  several  sales  may  be  made hereunder  without
exhausting  the  right of sale for any unmatured part of the  Indebtedness,  it
being the purpose  hereof to provide for a foreclosure and sale of the security
for any matured portion  of  the  Indebtedness  without exhausting the power to
foreclose and sell the Property for any subsequently  maturing  portion  of the
Indebtedness.

      Section 4.6 Separate  Sales.   The  Property  may  be sold in one or more
parcels  and in such manner and order as Beneficiary, in its  sole  discretion,
may elect,  it  being  expressly  understood  and agreed that the right of sale
arising out of any Event of Default shall not be  exhausted  by any one or more
sales.

      Section 4.7 Possession  of Property.  Grantor agrees to the  full  extent
that it lawfully may agree, that,  in case one or more of the Events of Default
shall have occurred and shall not have  been  remedied, then, and in every such
case, Trustee or Beneficiary shall have the right  and  power to enter into and
upon and take possession of all or any part of the Property  in  the possession
of Grantor, its successors or assigns, or its or their agents or servants,  and
may  exclude Grantor, its successors or assigns, and all persons claiming under
Grantor,  and  its or their agents or servants wholly or partly therefrom; and,
holding the same,  Trustee may use, administer, manage, operate and control the
Property and conduct  the  business  thereof to the same extent as Grantor, its
successors or assigns, might at the time  do  and  may  exercise all rights and
powers  of Grantor, in the name, place and stead of Grantor,  or  otherwise  as
Trustee shall  deem  best.   All  costs,  expenses  and  liabilities  of  every
character  incurred  by  Trustee and/or Beneficiary in administering, managing,
operating, and controlling  the  Property  shall constitute a demand obligation
(which obligation Grantor hereby expressly promises to pay) owing by Grantor to
Trustee and/or Beneficiary and shall bear interest  from  date  of  expenditure
until  paid at the Applicable Rate, all of which shall constitute a portion  of
the Indebtedness  and  shall  be  secured  by  this Deed of Trust and all other
security instruments.

      Section 4.8 Occupancy  After  Foreclosure.   In  the  event  there  is  a
foreclosure sale hereunder and at the  time  of such sale Grantor, or Grantor's
representatives,  successors  or  assigns  or any  other  person  claiming  any
interest in the Property by, through or under  Grantor,  are occupying or using
the  Property  or any part thereof, each and all shall immediately  become  the
tenant of the purchaser at such sale, which tenancy shall be a tenancy from day
to day, terminable  at  the  will  of  either  the  landlord or tenant, or at a
reasonable rental per day based upon the value of the  property  occupied, such
rental to be due daily to the purchaser; to the extent permitted by  applicable
law,  the  purchaser  at  such  sale shall, notwithstanding any language herein
apparently to the contrary, have the sole option to demand immediate possession
following the sale or to permit the occupants to remain as tenants at will.  In
the  event  the tenant fails to surrender  possession  of  said  property  upon
demand, the purchaser  shall  be  entitled  to institute and maintain a summary
action for possession of the Property (such as an action for forcible entry and
detainer) in any court having jurisdiction.

      Section 4.9 Remedies  Cumulative,  Concurrent  and  Nonexclusive.   Every
right,  power  and  remedy  herein given to Trustee  or  Beneficiary  shall  be
cumulative and, in addition to  every  other  right,  power  and  remedy herein
specifically given or now or hereafter existing in equity, at law or by statute
(including  specifically  those  granted  by  the Applicable UCC in effect  and
applicable to the Property or any portion thereof), each and every right, power
and  remedy  whether specifically herein given or  otherwise  existing  may  be
exercised from  time  to  time  and so often and in such order as may be deemed
expedient by Trustee or Beneficiary,  and the exercise, or the beginning of the
exercise, of any such right, power or remedy  shall  not  be deemed a waiver of
the right to exercise, at the same time or thereafter any other right, power or
remedy.  No delay or omission by Trustee or Beneficiary in  the exercise of any
right, power or remedy shall impair any such right, power or  remedy or operate
as a waiver thereof or of any other right, power or remedy then  or  thereafter
existing.

      Section 4.10No  Release  of  Obligations.   None  of  Grantor,  any other
Grantor Party, any guarantor of the Indebtedness or any other person or  entity
hereafter obligated for payment of all or any part of the Indebtedness shall be
relieved  of  such obligation by reason of (a) the failure of Trustee to comply
with any request of Grantor, any other Grantor Party, any such guarantor or any
such other person  or entity so obligated to foreclose the lien of this Deed of
Trust or to enforce any provision hereunder or under any of the Loan Documents;
(b) the release, regardless  of  consideration,  of the Property or any portion
thereof  or  interest  therein or the addition of any  other  property  to  the
Property; (c) any agreement  or stipulation between any subsequent owner of the
Property and Beneficiary extending,  renewing,  rearranging or in any other way
modifying the terms of this Deed of Trust without  first  having  obtained  the
consent  of,  given  notice  to or paid any consideration to Grantor, any other
Grantor Party, any such guarantor  or  such other person or entity, and in such
event Grantor, the Grantor Parties, such  guarantor  and all such other persons
and entities shall continue to be liable to make payment according to the terms
of any such extension or modification agreement unless  expressly  released and
discharged  in  writing  by  Beneficiary; or (d) by any other act or occurrence
save and except the complete payment  of  the  Indebtedness  and  the  complete
fulfillment of all obligations hereunder or under the Loan Documents.

      Section 4.11Release   of  and  Resort  to  Collateral.   Beneficiary  may
release, regardless of consideration,  any  part of the Property without, as to
the remainder, in any way impairing, affecting,  subordinating or releasing the
lien or security interest created in or evidenced  by this Deed of Trust or its
stature as a first and prior lien and security interest in and to the Property,
and without in any way releasing or diminishing the  liability of any person or
entity  liable  for  the repayment of the Indebtedness.   For  payment  of  the
Indebtedness, Beneficiary  may  resort  to  any other security therefor held by
Beneficiary or Trustee in such order and manner as Beneficiary may elect.

      Section 4.12Waiver of Redemption, Notice  and Marshalling of Assets, Etc.
To  the  fullest  extent  permitted  by  law,  Grantor hereby  irrevocably  and
unconditionally  waives  and releases (a) all benefits  that  might  accrue  to
Grantor  by  virtue of any present  or  future  moratorium  law  or  other  law
exempting the  Property from attachment, levy or sale on execution or providing
for any appraisement,  valuation,  stay  of  execution,  exemption  from  civil
process,  redemption  or extension of time for payment; provided, however, that
if the laws of any state  do not permit the redemption period to be waived, the
redemption  period is specifically  reduced  to  the  minimum  amount  of  time
allowable  by  statute;  (b)  all  notices  of  any  Event  of  Default  or  of
Beneficiary's  intention  to  accelerate  maturity  of  the  Indebtedness or of
Trustee's election to exercise or his actual exercise of any right,  remedy  or
recourse  provided for hereunder or under the Loan Documents; and (c) any right
to a marshalling  of  assets  or a sale in inverse order of alienation.  If any
law referred to in this Deed of Trust and now in force, of which Grantor or its
successor or successors might take  advantage  despite  the  provisions hereof,
shall hereafter be repealed or cease to be in force, such law  shall thereafter
be  deemed  not to constitute any part of the contract herein contained  or  to
preclude the operation or application of the provisions hereof.

      Section 4.13Discontinuance  of  Proceedings.   In  case Beneficiary shall
have proceeded to invoke any right, remedy or recourse permitted  hereunder  or
under  the  Loan Documents and shall thereafter elect to discontinue or abandon
same for any reason, Beneficiary shall have the unqualified right to do so and,
in such an event,  Grantor  and  Beneficiary  shall be restored to their former
positions  with  respect to the Indebtedness, this  Deed  of  Trust,  the  Loan
Documents, the Property  and otherwise, and the rights, remedies, recourses and
powers of Beneficiary shall continue as if same had never been invoked.

      Section 4.14Application  of  Proceeds.   The  proceeds of any sale of the
Property  or  any  part  thereof and all other monies received  by  Trustee  or
Beneficiary in any proceedings  for  the enforcement hereof or otherwise, whose
application has not elsewhere herein been  specifically  provided for, shall be
applied:

      (a)   first, to the payment of all costs and expenses incurred by Trustee
or  Beneficiary  incident to the enforcement of this Deed of  Trust,  the  Loan
Documents  or  any  of   the  Indebtedness  (including,  without  limiting  the
generality of the foregoing,  expenses of any entry or taking of possession, of
any  sale, of advertisement thereof,  and  of  conveyances,  and  court  costs,
compensation of agents and employees, legal fees and a reasonable commission to
Trustee  acting in connection herewith or hereunder), and to the payment of all
other charges,  expenses,  liabilities and advances incurred or made by Trustee
or Beneficiary under this Deed  of  Trust  or  in  executing any trust or power
hereunder;

      (b)   second, to payment of the Indebtedness in  such order and manner as
Beneficiary may elect in Beneficiary's sole discretion; and

      (c)   third, to Grantor or such other persons as may  be entitled thereto
by law or as otherwise required by any court of competent jurisdiction.

      Section 4.15Resignation  of  Operator.   In  addition to all  rights  and
remedies  under  this  Deed of Trust, at law and in equity,  if  any  Event  of
Default shall occur and  Trustee  or  Beneficiary  shall  exercise any remedies
under  this  Deed  of  Trust  with respect to any portion of the  Property  (or
Grantor shall transfer any Property  "in  lieu of" foreclosure), Beneficiary or
Trustee shall have the right to request that any operator of any Property which
is either Grantor or any affiliate of Grantor  to  resign as operator under the
joint operating agreement applicable thereto, and no  later  than 60 days after
receipt  by  Grantor of any such request, Grantor shall resign (or  cause  such
other party to resign) as operator of such Property.

      Section 4.16INDEMNITY.   IN  CONNECTION  WITH ANY ACTION TAKEN BY TRUSTEE
AND/OR BENEFICIARY PURSUANT TO THIS DEED OF TRUST,  TRUSTEE  AND/OR BENEFICIARY
AND  THEIR  OFFICERS, DIRECTORS, PARTNERS, MEMBERS, INVESTORS, EQUITY  HOLDERS,
EMPLOYEES,  REPRESENTATIVES,   AGENTS,  ADVISORS,  ATTORNEYS,  ACCOUNTANTS  AND
EXPERTS  AND  ANY  PERSONS OR ENTITIES  OWNED  OR  CONTROLLED  BY  TRUSTEE,  OR
BENEFICIARY OR ANY SUCH  OTHER  PERSON  OR ENTITY ("INDEMNIFIED PARTIES") SHALL
NOT BE LIABLE FOR ANY LOSS SUSTAINED BY GRANTOR  RESULTING  FROM  AN  ASSERTION
THAT BENEFICIARY HAS RECEIVED FUNDS FROM THE PRODUCTION OF HYDROCARBONS CLAIMED
BY  THIRD  PERSONS  OR  ANY  ACT  OR  OMISSION  OF  ANY  INDEMNIFIED  PARTY  IN
ADMINISTERING,  MANAGING, OPERATING OR CONTROLLING THE PROPERTY, INCLUDING SUCH
LOSS WHICH MAY RESULT  FROM  THE  ORDINARY  NEGLIGENCE OF AN INDEMNIFIED PARTY,
UNLESS SUCH LOSS IS CAUSED BY THE GROSS NEGLIGENCE  OR WILLFUL MISCONDUCT OF AN
INDEMNIFIED PARTY, NOR SHALL TRUSTEE AND/OR BENEFICIARY BE OBLIGATED TO PERFORM
OR DISCHARGE ANY OBLIGATION, DUTY OR LIABILITY OF GRANTOR.  GRANTOR  SHALL  AND
DOES  HEREBY  AGREE  TO  INDEMNIFY EACH INDEMNIFIED PARTY FOR, AND TO HOLD EACH
INDEMNIFIED PARTY HARMLESS  FROM,  ANY  AND ALL LIABILITY, LOSS OR DAMAGE WHICH
MAY OR MIGHT BE INCURRED BY ANY INDEMNIFIED  PARTY  BY  REASON  OF THIS DEED OF
TRUST  OR  THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER; SHOULD TRUSTEE  AND/OR
BENEFICIARY  MAKE  ANY  EXPENDITURE  ON  ACCOUNT OF ANY SUCH LIABILITY, LOSS OR
DAMAGE, THE AMOUNT THEREOF, INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS'
FEES, SHALL BE A DEMAND OBLIGATION (WHICH  OBLIGATION  GRANTOR HEREBY EXPRESSLY
PROMISES TO PAY) OWING BY GRANTOR TO TRUSTEE AND/OR BENEFICIARY  AND SHALL BEAR
INTEREST  FROM  THE DATE EXPENDED UNTIL PAID AT A RATE PER ANNUM EQUAL  TO  THE
DEFAULT RATE OF INTEREST  CHARGED  UNDER  THE NOTES PLUS 2%, SHALL BE A PART OF
THE INDEBTEDNESS AND SHALL BE SECURED BY THIS  DEED OF TRUST AND ANY OTHER LOAN
DOCUMENT PURSUANT TO WHICH GRANTOR HAS GRANTED ANY  LIENS OR SECURITY INTERESTS
TO  BENEFICIARY  AS COLLATERAL SECURITY FOR THE INDEBTEDNESS.   GRANTOR  HEREBY
ASSENTS TO, RATIFIES  AND  CONFIRMS  ANY  AND  ALL  ACTIONS  OF  TRUSTEE AND/OR
BENEFICIARY WITH RESPECT TO THE PROPERTY TAKEN UNDER THIS DEED OF  TRUST.   THE
LIABILITIES  OF  GRANTOR  AS  SET  FORTH IN THIS SECTION 4.16 SHALL SURVIVE THE
TERMINATION OF THIS DEED OF TRUST.



                                   ARTICLE V



                                    Trustee

      Section 5.1 Duties, Rights, and  Powers  of Trustee.  It shall be no part
of the duty of Trustee to see to any recording,  filing or registration of this
Deed of Trust or any other instrument in addition  or  supplemental thereto, or
to give any notice thereof, or to see to the payment of or be under any duty in
respect  of  any tax or assessment or other governmental charge  which  may  be
levied or assessed on the Property, or any part thereof, or against Grantor, or
to see to the  performance or observance by Grantor of any of the covenants and
agreements  contained  herein.   Trustee  shall  not  be  responsible  for  the
execution, acknowledgment  or  validity  of  this  Deed  of  Trust  or  of  any
instrument  in  addition  or  supplemental hereto or for the sufficiency of the
security purported to be created hereby, and makes no representation in respect
thereof or in respect of the rights  of  Beneficiary.   Trustee  shall have the
right to seek advice with counsel upon any matters arising hereunder  and shall
be  fully  protected  in  relying as to legal matters on the advice of counsel.
Trustee shall not incur any  personal  liability hereunder except for Trustee's
own  willful misconduct; and Trustee shall  have  the  right  to  rely  on  any
instrument, document or signature authorizing or supporting any action taken or
proposed  to  be  taken  by  him hereunder, believed by him in good faith to be
genuine.

      Section 5.2 Successor Trustee.   Trustee  may  resign  by  written notice
addressed to Beneficiary or be removed at any time with or without  cause by an
instrument in writing duly executed on behalf of Beneficiary.  In case  of  the
death,  resignation or removal of Trustee, a successor trustee may be appointed
by Beneficiary  by  instrument  of  substitution  complying with any applicable
requirements of law, or, in the absence of any such  requirement, without other
formality than appointment and designation in writing.   Written notice of such
appointment and designation shall be given by Beneficiary  to  Grantor, but the
validity of any such appointment shall not be impaired or affected  by  failure
to give such notice or by any defect therein.  Such appointment and designation
shall  be full evidence of the right and authority to make the same and of  all
the facts  therein  recited,  and,  upon the making of any such appointment and
designation, this Deed of Trust shall  vest  in  the  successor trustee all the
estate and title in and to all of the Property, and the successor trustee shall
thereupon  succeed  to  all of the rights, powers, privileges,  immunities  and
duties hereby conferred upon Trustee named herein, and one such appointment and
designation shall not exhaust  the  right  to appoint and designate a successor
trustee hereunder but such right may be exercised  repeatedly  as  long  as any
Indebtedness remains unpaid hereunder.  To facilitate the administration of the
duties  hereunder,  Beneficiary  may appoint multiple trustees to serve in such
capacity or in such jurisdictions as Beneficiary may designate.

      Section 5.3 Retention of Moneys.   All  moneys received by Trustee shall,
until used or applied as herein provided, be held in trust for the purposes for
which they were received, but need not be segregated  in  any  manner  from any
other moneys (except to the extent required by law), and Trustee shall be under
no liability for interest on any moneys received by him hereunder.



                                  ARTICLE VI



                                 Miscellaneous

      Section 6.1 Instrument  Construed  as  Deed of Trust, Etc.  This Deed  of
Trust  may  be  construed  as  a deed of trust, chattel  mortgage,  conveyance,
assignment, security agreement,  pledge,  financing statement, hypothecation or
contract, or any one or more of them, in order  fully  to  effectuate  the lien
hereof and the purposes and agreements herein set forth.

      Section 6.2 Release of Deed of Trust.  If all Indebtedness secured hereby
shall  be  paid  in full in cash and all Loan Documents terminated, Beneficiary
shall forthwith cause  satisfaction  and  discharge of this Deed of Trust to be
entered upon the record at the expense of Grantor and shall execute and deliver
or  cause to be executed and delivered such  instruments  of  satisfaction  and
reassignment as may be appropriate.  Otherwise, this Deed of Trust shall remain
and continue in full force and effect.

      Section 6.3 Severability.    If   any  provision  hereof  is  invalid  or
unenforceable in any jurisdiction, the other  provisions hereof shall remain in
full force and effect in such jurisdiction and  the remaining provisions hereof
shall be liberally construed in favor of Trustee  and  Beneficiary  in order to
effectuate the provisions hereof, and the invalidity or unenforceability of any
provision  hereof  in  any  jurisdiction  shall  not  affect  the  validity  or
enforceability of any such provision in any other jurisdiction.

      Section 6.4 Successors and Assigns of Parties.  The term "Beneficiary" as
used herein shall mean and include any legal owner, holder, assignee or pledgee
of  any  of  the  Indebtedness  secured  hereby.   The  terms used to designate
Trustee,  Beneficiary  and  Grantor shall be deemed to include  the  respective
heirs, legal representatives, successors and assigns of such parties.

      Section 6.5 Satisfaction  of  Prior  Encumbrance.   To  the  extent  that
proceeds  of  the Notes are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Property, such
proceeds  have  been   advanced   by  Beneficiary  at  Grantor's  request,  and
Beneficiary shall be subrogated to  any  and all rights, security interests and
liens  owned  by  any  owner  or  holder of such  outstanding  liens,  security
interests,  charges  or  encumbrances,  irrespective  of  whether  said  liens,
security interests, charges  or  encumbrances are released, and it is expressly
understood that, in consideration  of the payment of such other indebtedness by
Beneficiary, Grantor hereby waives and  releases  all  demands  and  causes  of
action  for  offsets  and  payments  to,  upon  and in connection with the said
indebtedness.

      Section 6.6 Subrogation of Trustee.  This Deed of Trust is made with full
substitution and subrogation of Trustee and his successors  in  this  trust and
his  and  their  assigns  in  and  to  all  covenants  and warranties by others
heretofore given or made in respect of the Property or any part thereof.

      Section 6.7 Nature  of  Covenants.  The covenants and  agreements  herein
contained  shall constitute covenants  running  with  the  land  and  interests
covered  or affected  hereby  and  shall  be  binding  upon  the  heirs,  legal
representatives, successors and assigns of the parties hereto.

      Section 6.8 Notices.   All notices, requests, consents, demands and other
communications required or permitted  hereunder  shall be given or furnished in
accordance with the terms of the Purchase Agreement  relating  to the giving of
notices.

      Section 6.9 Counterparts.   This  Deed  of  Trust  is  being executed  in
several  counterparts,  all of which are identical, except that  to  facilitate
recordation,  if the Property  is  situated  in  more  than  one  jurisdiction,
descriptions  of   only   those  portions  of  the  Property  located  in,  and
descriptions  of  the  Prior Deeds  of  Trust  (as  defined  herein)  for,  the
jurisdiction in which a particular counterpart is recorded shall be attached as
Exhibit A thereto.  An Exhibit  A  containing  a  description  of  all Property
wheresoever  situated  will  be  attached  to  that  certain counterpart to  be
attached  to  a Financing Statement and filed with the Secretary  of  State  of
Colorado in the  Uniform  Commercial  Code  Records.  Each of such counterparts
shall for all purposes be deemed to be an original  and  all  such counterparts
shall  together  constitute  but one and the same instrument, provided  that  a
facsimile signature shall be considered due execution and shall be binding upon
the signatory thereto with the  same  force and effect as if the signature were
an original, not a facsimile signature.

      Section 6.10Effective as a Financing  Statement.   This  Deed  of  Trust,
among  other  things,  covers  goods which are or are to become fixtures on the
real property described herein and  covers  as-extracted  collateral related to
the  real/immovable  property described herein.  This Deed of  Trust  shall  be
effective as a financing  statement  (i) filed as a fixture filing with respect
to  all  fixtures  included  within the Property,  (ii)  covering  as-extracted
collateral with respect to all  as-extracted  collateral  included  within  the
Property (including, without limitation, all oil, gas, other minerals and other
substances  of  value  which may be extracted from the earth at the wellhead or
minehead) and (iii) covering  all  other Property.  This Deed of Trust is to be
filed for record in the real/immovable  property  records  of  each  county  or
parish  where any part of the Property is situated and may also be filed in the
offices of  the Bureau of Land Management or the Minerals Management Service or
any relevant  state agency (or any successor agencies).  The mailing address of
Grantor is the  address  of  Grantor set forth at the end of this Deed of Trust
and the address of Beneficiary  from  which information concerning the security
interests hereunder may be obtained is  the address of Beneficiary set forth at
the end of this Deed of Trust.  Nothing contained  in  this  paragraph shall be
construed to limit the scope of this Deed of Trust nor its effectiveness  as  a
financing  statement  covering  any  type of property.  A carbon, photographic,
facsimile or other reproduction of this  Deed  of  Trust  or  of  any financing
statement  relating  to  this  Deed of Trust shall be sufficient as a financing
statement for any of the purposes  referred  to this Section.  Without limiting
any other provision herein, Grantor hereby authorizes  Beneficiary  to file, in
any  filing  or  recording  office,  one  or more financing statements and  any
renewal or continuation statements thereof.

      Section 6.11No  Impairment  of  Security.    To  the  extent  allowed  by
applicable  law,  the  lien, privilege, security interest  and  other  security
rights hereunder shall not be impaired by any indulgence, moratorium or release
which may be granted including,  but  not limited to, any renewal, extension or
modification which may be granted with  respect  to any secured obligations, or
any   surrender,   compromise,   release,  renewal,  extension,   exchange   or
substitution which may be granted in respect of the Property (including without
limitation Production Proceeds), or  any  part thereof or any interest therein,
or any release or indulgence granted to any  borrower,  endorser,  guarantor or
surety of any Indebtedness.

      Section 6.12Acts  Not Constituting Waiver.  Any Event of Default  may  be
waived without waiving any  other  prior  or  subsequent Event of Default.  Any
Event of Default may be remedied without waiving the Event of Default remedied.
Neither  failure  to exercise, nor delay in exercising,  any  right,  power  or
remedy upon any Event  of  Default shall be construed as a waiver of such Event
of Default or as a waiver of  the  right  to  exercise any such right, power or
remedy at a later date.  No single or partial exercise  of  any right, power or
remedy hereunder shall exhaust the same or shall preclude any  other or further
exercise  thereof,  and  every  such  right, power or remedy hereunder  may  be
exercised at any time and from time to  time.  No modification or waiver of any
provision hereof nor consent to any departure by Grantor therefrom shall in any
event  be  effective  unless  the  same shall  be  in  writing  and  signed  by
Beneficiary and then such waiver or  consent  shall  be  effective  only in the
specific  instances, for the purpose for which given and to the extent  therein
specified.  No notice nor demand on Grantor in any case shall of itself entitle
Grantor to  any  other  or  further  notice  or  demand  in  similar  or  other
circumstances.   Acceptance  of  any  payment in an amount less than the amount
then due on any Indebtedness shall be deemed  an acceptance on account only and
shall not in any way excuse the existence of an Event of Default hereunder.

      Section 6.13Grantor's Successors.  In the  event  the  ownership  of  any
Property  or  any  part  thereof becomes vested in a person other than Grantor,
then, without notice to Grantor,  such  successor or successors in interest may
be dealt with, with reference to this Deed  of  Trust  and  to  the obligations
secured  hereby,  in  the  same  manner  as  with  Grantor, without in any  way
vitiating or discharging Grantor's liability hereunder  or  for  the payment of
the Indebtedness or performance of the obligations secured hereby.  No transfer
of any Property, no forbearance, and no extension of the time for  the  payment
of  any  Indebtedness  secured  hereby,  shall  operate  to release, discharge,
modify,  change  or  affect,  in  whole  or in part, the liability  of  Grantor
hereunder  or  for  the  payment  of the Indebtedness  or  performance  of  the
obligations secured hereby, or the  liability  of any other person hereunder or
for the payment of the Indebtedness.

      Section 6.14Certain Consents.  Except where  otherwise expressly provided
herein, in any instance hereunder where the approval,  consent  or the exercise
of judgment of Beneficiary is required, the granting or denial of such approval
or  consent  and  the  exercise  of  such  judgment  shall  be within the  sole
discretion of Beneficiary, and Beneficiary shall not, for any  reason or to any
extent, be required to grant such approval or consent or exercise such judgment
in  any  particular  manner,  regardless  of  the reasonableness of either  the
request or the judgment of such party.

      Section 6.15GOVERNING LAW.  WITHOUT REGARD  TO PRINCIPLES OF CONFLICTS OF
LAW, THIS DEED OF TRUST SHALL BE CONSTRUED AND ENFORCED  IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO  CONTRACTS MADE AND
TO BE PERFORMED ENTIRELY WITHIN SUCH STATE AND THE LAWS OF THE UNITED STATES OF
AMERICA, EXCEPT THAT TO THE EXTENT THAT THE LAW OF A STATE IN  WHICH  A PORTION
OF  THE  PROPERTY IS LOCATED (OR WHICH IS OTHERWISE APPLICABLE TO A PORTION  OF
THE PROPERTY)  NECESSARILY  OR,  IN  THE  SOLE  DISCRETION  OF THE BENEFICIARY,
APPROPRIATELY  GOVERNS  WITH  RESPECT  TO  PROCEDURAL  AND SUBSTANTIVE  MATTERS
RELATING TO THE CREATION, PERFECTION AND ENFORCEMENT OF  THE LIENS, PRIVILEGES,
SECURITY INTERESTS AND OTHER RIGHTS AND REMEDIES OF THE TRUSTEE  OR BENEFICIARY
GRANTED  HEREIN,  THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION  OF  THE
PROPERTY LOCATED IN (OR WHICH IS OTHERWISE SUBJECT TO THE LAWS OF) SUCH STATE.

      Section 6.16EXCULPATION   PROVISIONS.    EACH   OF   THE  PARTIES  HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS DEED OF  TRUST;  AND AGREES
THAT  IT  IS  CHARGED  WITH  NOTICE AND KNOWLEDGE OF THE TERMS OF THIS DEED  OF
TRUST; THAT IT HAS IN FACT READ  THIS  DEED  OF TRUST AND IS FULLY INFORMED AND
HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS DEED
OF  TRUST; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT  LEGAL  COUNSEL  OF  ITS
CHOICE  THROUGHOUT  THE  NEGOTIATIONS  PRECEDING  ITS EXECUTION OF THIS DEED OF
TRUST; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY  IN  ENTERING INTO THIS DEED
OF TRUST AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS DEED OF TRUST
RESULT  IN  ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME  ASPECTS  OF  THE
TRANSACTION AND  RELIEVING  THE  OTHER  PARTY  OF  ITS  RESPONSIBILITY FOR SUCH
LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF  THIS  DEED OF TRUST
ON  THE  BASIS  THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION  OR
THAT THE PROVISION IS NOT "CONSPICUOUS."

      Section 6.17FINAL  AGREEMENT.     THE  LOAN DOCUMENTS, THIS DEED OF TRUST
AND THE OTHER WRITTEN DOCUMENTS EXECUTED IN CONNECTION  THEREWITH REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED  BY EVIDENCE OR
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

      Section 6.18Subrogation;  Prior  Deeds  of  Trust.   To  the extent  that
proceeds  of  the  Indebtedness  are  used  to pay obligations secured  by  any
outstanding lien, privilege, security interest,  charge  or  prior  encumbrance
against any Property ("Prior Deeds of Trust"), such proceeds have been advanced
at Grantor's request, and the Trustee for the benefit of the Beneficiary or the
Beneficiary  as  agent  for  the  party or parties advancing the same shall  be
subrogated to any and all rights, security  interests  and  liens  owned by any
owner  or  holder of such Prior Deeds of Trust, privileges, security interests,
charges  or encumbrances,  irrespective  of  whether  said  liens,  privileges,
security interests,  charges  or encumbrances are released, and it is expressly
understood that, in consideration  of  the payment of such obligations, Grantor
hereby waives and releases all demands and  causes  of  action  for offsets and
payments  to,  upon  and in connection with the said obligations.  Grantor  and
Beneficiary  acknowledge   that   this  Deed  of  Trust  amends,  restates  and
consolidates the Prior Deeds of Trust,  and  all liens, claims, rights, titles,
interests and benefits created and granted by  the  Prior  Deeds of Trust shall
continue  to  exist,  remain  valid  and subsisting, shall not be  impaired  or
released hereby, shall remain in full  force and effect and are hereby renewed,
extended, carried forward and conveyed as security for the Indebtedness.

      Section 6.19Compliance with Usury  Laws.   It  is  the intent of Grantor,
Beneficiary and all other parties to the Transaction Documents  to  contract in
strict  compliance  with applicable usury law from time to time in effect.   In
furtherance thereof,  it  is  stipulated  and agreed that none of the terms and
provisions contained herein or in the other Transaction Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the maximum amount  of  interest  permitted  to be
collected,  charged,  taken  or received by applicable law from time to time in
effect.

      Section 6.20Certain Obligations  of  Grantor.  Without limiting Grantor's
obligations  hereunder,  Grantor's  liability  hereunder  and  the  obligations
secured hereby shall extend to and include all post petition interest, expenses
and  other  duties  and  liabilities  with  respect  to  Grantor's  obligations
hereunder  which  would  be  owed  but  for  the  fact  that the  same  may  be
unenforceable due to the existence of a bankruptcy, reorganization  or  similar
proceeding.

      Section 6.21Authority  of  Beneficiary.   The holders of the Indebtedness
secured  hereby  may, by agreement among them, provide  for  and  regulate  the
exercise of rights  and  remedies  hereunder, but, unless and until modified to
the contrary in writing signed by all  such  persons  and  recorded in the same
counties as this Deed of Trust is recorded, (i) all persons  other than Grantor
and  its  affiliates  shall  be  entitled  to  rely  on the releases,  waivers,
consents,   approvals,   notifications  and  other  acts  (including,   without
limitation, or the appointment  or  substitution  of trustees hereunder and the
bidding  in of all or any part of the Indebtedness held  by  any  one  or  more
persons,  whether  the  same  be  conducted  under  the  provisions  hereof  or
otherwise)  of  Beneficiary,  without  inquiry  into any such agreements or the
existence of required consent or approval of any  holders  of  Indebtedness and
without  the  joinder  of  any  party other than Beneficiary in such  releases,
waivers, consents, approvals, notifications or other acts and (ii) all notices,
requests, consents, demands and other  communications  required or permitted to
be given hereunder may be given to Beneficiary.

           [rest of page intentionally left blank; signature page follows]







                                       #

<PAGE>
      WITNESS  THE  EXECUTION  HEREOF,  this  1st  day of April,  2008,  to  be
effective as of said date (the "Effective Date").


GRANTOR:

SOUTH TEXAS OIL COMPANY
By:
   Name:
   Title:

The name and address of the Debtor/Grantor is:

South Texas Oil Company
      769 Highway 95 N
      Bastrop, TX 78602


The name and address of the Secured Party/Beneficiary is:



Viking Asset Management, LLC

600 Montgomery Street, 44th Floor

San Francisco, CA  94111







60632680

<PAGE>


STATE OF TEXAS	 )
                 )
COUNTY OF BASTROP)





      The foregoing instrument was acknowledged before  me  this  ____  day  of
      April,  2008,  by J. Scott Zimmerman, as President and CEO of South Texas
      Oil Company, a Nevada corporation, on behalf of said corporation.



      Witness my hand and official seal.

      My Commission Expires:  _______________________________


Notary Public















60632680

<PAGE>


                                   EXHIBIT A

                             Property Descriptions

                                 SEE ATTACHED.