Exhibit 10.30


WHEN RECORDED RETURN TO:


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








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.

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

                                     FROM

                              STO PROPERTIES LLC

                                      TO

                       WALTER H. WALNE, III, AS TRUSTEE

                              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 MORTGAGEE TO TAKE THE MORTGAGED
PROPERTY  AND  SELL  IT WITHOUT GOING TO COURT IN  A  FORECLOSURE  ACTION  UPON
DEFAULT BY THE MORTGAGOR UNDER THIS INSTRUMENT.

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.

THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES.

THIS INSTRUMENT COVERS PROCEEDS OF MORTGAGED 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 MORTGAGOR HAS AN INTEREST OF RECORD  IN THE REAL ESTATE CONCERNED,
WHICH INTEREST IS DESCRIBED IN EXHIBIT A ATTACHED HERETO.

PORTIONS OF THE MORTGAGED 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  MORTGAGOR  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..............................................6

ARTICLE II



Assignment of Production, Accounts and Proceeds
      Section 2.01 Assignment.................................................6
      Section 2.02 Rights Under Certain Lien Statutes.........................7
      Section 2.03 No Modification of Payment Obligations.....................7
      Section 2.04 Effectuating Payment of Production Proceeds to
            Mortgagee.........................................................7
      Section 2.05 Application of Production Proceeds.........................7
      Section 2.06 Release from Liability; Indemnification....................8

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........................................10
      Section 3.07 Sale, Encumbrance or Removal..............................10
      Section 3.08 Sale of Production........................................10
      Section 3.09 Operation of Mortgaged Property...........................11
      Section 3.10 Suits and Claims..........................................12
      Section 3.11 Environmental.............................................13
      Section 3.12 Not Abandon Wells; Participate in Operations..............14
      Section 3.13 Condemnation Awards.......................................14
      Section 3.14 Insurance.................................................14
      Section 3.15 Compliance with Leases....................................15
      Section 3.16 Further Assurance.........................................15
      Section 3.17 Name and Place of Business................................15
      Section 3.18 Compliance with Laws and Agreements.......................16
      Section 3.19 Inspection; Management....................................16

ARTICLE IV



Rights and Remedies
      Section 4.01 Event of Default..........................................16
      Section 4.02 Foreclosure and Sale......................................17
      Section 4.03 Agents....................................................18
      Section 4.04 Judicial Foreclosure; Receivership........................18
      Section 4.05 Foreclosure for Installments..............................19
      Section 4.06 Separate Sales............................................19
      Section 4.07 Possession of Mortgaged Property..........................19
      Section 4.08 Occupancy After Foreclosure...............................20
      Section 4.09 Remedies Cumulative, Concurrent and
            Nonexclusive20.....................................................
      Section 4.10 No Release of Obligations.................................20
      Section 4.11 Release of and Resort to Collateral.......................21
      Section 4.12 Waiver of Redemption, Notice and Marshalling of
            Assets, Etc......................................................21
      Section 4.13 Discontinuance of Proceedings.............................21
      Section 4.14 Application of Proceeds...................................21
      Section 4.15 Resignation of Operator...................................22
      Section 4.16 Indemnity.................................................22

ARTICLE V



Trustee
      Section 5.01 Duties, Rights, and Powers of Trustee.....................22
      Section 5.02 Successor Trustee.........................................23
      Section 5.03 Retention of Moneys.......................................23

ARTICLE VI



Miscellaneous
      Section 6.01 Instrument Construed as Mortgage, Etc.....................23
      Section 6.02 Release of Mortgage.......................................23
      Section 6.03 Severability..............................................24
      Section 6.04 Successors and Assigns of Parties.........................24
      Section 6.05 Satisfaction of Prior Encumbrance.........................24
      Section 6.06 Subrogation of Trustee....................................24
      Section 6.07 Nature of Covenants.......................................24
      Section 6.08 Notices...................................................24
      Section 6.09 Counterparts..............................................24
      Section 6.10 Effective as a Financing Statement........................24
      Section 6.11 No Impairment of Security.................................25
      Section 6.12 Acts Not Constituting Waiver..............................25
      Section 6.13 Mortgagor's Successors....................................25
      Section 6.14 Certain Consents..........................................26
      Section 6.15 Governing Law.............................................26
      Section 6.16 Exculpation Provisions....................................26
      Section 6.17 FINAL AGREEMENT...........................................26
      Section 6.18 Prior Mortgages...........................................26




                                       #

<PAGE>
                    MORTGAGE, DEED OF TRUST, ASSIGNMENT OF

    PRODUCTION, SECURITY AGREEMENT, FIXTURE FILING AND FINANCING STATEMENT

      This   MORTGAGE,  DEED  OF  TRUST,  ASSIGNMENT  OF  PRODUCTION,  SECURITY
AGREEMENT, FIXTURE  FILING AND FINANCING STATEMENT (this "Mortgage") is entered
into as of the Effective Date (as hereinafter defined) by STO PROPERTIES LLC, a
Texas  limited  liability   company,  769  Highway  95  N,  Bastrop,  TX  78602
("Mortgagor"),  to WALTER H. WALNE,  III,  an  individual,  as  Trustee,  whose
address for notice is c/o Walne & Timby, LLP, 17 South Briar Hollow Lane, Suite
208,  Houston, Texas  77027  ("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 "Mortgagee") 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 South Texas Oil Company,
a Nevada corporation  ("Borrower"),  and  the  "Buyers" party thereto, Borrower
has, among other things, agreed to issue to Buyers,  and  Buyers have agreed to
purchase  from  Borrower,  the  Notes  (as defined in the Purchase  Agreement),
subject in each case to the terms and conditions  set  forth  in  the  Purchase
Agreement.

      B.    Mortgagor  and  the  other "Guarantors" party thereto have executed
and delivered to Mortgagee that certain  Guaranty  dated  as of the date hereof
(as amended, restated, supplemented or otherwise modified from  time  to  time,
the  "Guaranty"),  pursuant  to  which Mortgagor has guaranteed the payment and
performance of all of the "Obligations" under (and as defined in) the Guaranty,
which  includes,  without  limitation,   all   obligations,   liabilities   and
indebtedness of Borrower under the Purchase Agreement and the Notes.

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

      D.    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 Mortgagor of this Mortgage, and Mortgagor has agreed
to enter into this Mortgage.

      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, Mortgagor hereby agrees  with
Trustee and Mortgagee 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  Guaranty  and any other Loan Document  (as  defined  below)  to  which
Mortgagor is a party,  Mortgagor  does by these presents hereby GRANT, BARGAIN,
SELL, ASSIGN, MORTGAGE, 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 Mortgagee (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
"Mortgaged Property"):

      (a)   All  rights,  titles,  interests and estates now owned or hereafter
acquired by Mortgagor 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 Mortgagor which are more
particularly described on attached Exhibit A.

      (b)   All rights, titles, interests and estates  now  owned  or hereafter
acquired by Mortgagor 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 Mortgage 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 Mortgagor or in which Mortgagor  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  Mortgage  even  though  Mortgagor's   interests  therein  be  incorrectly
described or a description of a part or all of  such  Hydrocarbon  Property  or
Mortgagor's  interests  therein  be omitted; it being intended by Mortgagor and
Mortgagee herein to cover and affect  hereby  all interests which Mortgagor 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 Mortgagor  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  Mortgagor'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 Mortgagor'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 Mortgagor, 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 Mortgagor  or  by  anyone on Mortgagor's behalf; and Trustee or Mortgagee 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 Mortgagor 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 Mortgagor  to liens and security interests
securing  payment of proceeds from the sale of production  from  the  Mortgaged
Property, including,  but  not  limited  to, those liens and security interests
provided in {section}9.343 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  Mortgagor  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 Mortgagor as a result  of  Mortgagor
(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  Mortgagor  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
Mortgagor.

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

      (j)   All  proceeds  of  all  of  the  rights, titles  and  interests  of
Mortgagor 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 Mortgagee in
Section 1.01(f)  of  this  Mortgage,  any  and all liens,  security  interests,
financing  statements or similar interests of  Mortgagor  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 Mortgagor's rights  and interests pursuant to the provisions
of {section} 9.343 of the Applicable UCC  and  of  any  similar  state or local
jurisdiction  statute  in any state wherein the Mortgaged Property is  located,
hereby vesting in Trustee  and/or  Mortgagee  all  of  Mortgagor's rights as an
interest  owner  to  the  continuing security interest in and  liens  upon  the
Mortgaged Property.

      Any fractions or percentages specified on attached Exhibit A in referring
to Mortgagor's interests are  solely  for  purposes  of  the warranties made by
Mortgagor  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 Mortgaged 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
Mortgagor herein contained.

      Section 1.2 Grant   of   Security   Interest.    To  further  secure  the
Indebtedness, Mortgagor hereby grants to Mortgagee a security  interest  in and
to  the  Mortgaged Property (whether now or hereafter acquired by operation  of
law or otherwise)  insofar  as  the  Mortgaged  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 Mortgaged 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), Mortgagee 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  Mortgagee  has been granted a security interest herein, or
Trustee or Mortgagee may proceed  as  to  both  the  real and personal property
covered hereby in accordance with the rights and remedies  granted  under  this
Mortgage  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
Mortgagee under  any  other  provision  of  this  Mortgage  or  under any other
security instrument.  Written notice mailed to Mortgagor 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 Mortgaged 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 Mortgaged Property  will  be  made,
shall constitute  reasonable notice.  Except as otherwise expressly provided in
this Mortgage, all  terms  in  this Mortgage relating to the Mortgaged 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   Mortgage  is  executed  and
delivered   by   Mortgagor   to   secure   and   enforce  the  following   (the
"Indebtedness"):

      (a)   Payment of and performance of any and all indebtedness, obligations
and   liabilities  of  Mortgagor  pursuant  to  the  Guaranty   including   the
"Obligations" under and as defined in such Guaranty

      (b)   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 Mortgagor, the other "Debtors"
party thereto, Mortgagee and, for the  limited  purposes set forth therein, the
Buyers.

      (c)   Payment  of  and  performance of any and  all  other  indebtedness,
obligations and liabilities of  Mortgagor,  Borrower and any direct or indirect
subsidiary  of  Borrower  (collectively,  the  "Mortgagor  Parties"  and  each,
individually,  a "Mortgagor 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 Mortgagee 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, STO Properties LLC, a Texas limited  liability  company, shall
be deemed to be a "Mortgagor Party".

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

      (e)   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 Mortgage:  (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 Mortgage is to be
filed of record in the real estate records as  a  financing statement, and (iv)
Mortgagor  is  the record owner of the real estate or  interests  in  the  real
estate comprised of the Mortgaged Property.

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



                                  ARTICLE II



                Assignment of Production, Accounts and Proceeds

      Section 2.1 Assignment.   Mortgagor  has absolutely  and  unconditionally
assigned,   transferred,  and  conveyed,  and  does   hereby   absolutely   and
unconditionally  assign, transfer and convey unto Mortgagee, 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 Mortgaged Property, or to  the
purchaser thereof, to the credit of Mortgagee (to the extent of the Mortgagor'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  Mortgagee,  among  Mortgagor,  Mortgagee  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 Mortgagee to receive the same, what application  is  made  thereof, or as to
any  other matter.  Mortgagor directs and instructs any and all  purchasers  of
any Hydrocarbons to pay to such deposit accounts all of the Production Proceeds
accruing  to  Mortgagor'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 Mortgage  has  been released.  Mortgagor agrees that no purchasers of
the Hydrocarbons shall have any responsibility for the application of any funds
paid to Mortgagee.  Mortgagor  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 Mortgagee or any party in order to
have the Production Proceeds paid to Mortgagee.  Upon the occurrence and during
the  continuance  of  an  Event  of  Default, Mortgagee 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 Mortgagor  or  Mortgagee  for the
account  of  Mortgagor  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  Mortgagor,  or  otherwise, with  warranties  binding
Mortgagor.  All Production Proceeds received  by  Mortgagee  pursuant  to  this
assignment shall be applied as provided in the other Loan Documents.  Mortgagee
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 Mortgagee  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 Mortgagor or otherwise, to prosecute and defend any and all actions or legal
proceedings deemed advisable by Mortgagee in order to collect such funds and to
protect the interests of Mortgagee and/or  Mortgagor,  with all costs, expenses
and attorneys' fees incurred in connection therewith being  paid  by  Mortgagor
and  until  so  paid being a part of the Indebtedness secured by this Mortgage.
Mortgagor 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 Mortgagee or any party in  order  to  effectuate  the
provisions contained in this Section 2.01.  Mortgagor hereby appoints Mortgagee
as  its  attorney-in-fact to pursue any and all rights of Mortgagor to liens on
and security interests in the Hydrocarbons securing payment of proceeds of runs
attributable to the Hydrocarbons, provided Mortgagee 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  Mortgagee 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 Mortgagor and the other Mortgagor 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 Mortgagee.
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
Mortgagor so that under such existing agreements payment cannot be made of such
Production Proceeds  to  Mortgagee,  Mortgagor's  interest  in  all  Production
Proceeds under such sales agreements and in all other Production Proceeds which
for  any  reason  may  be  paid to Mortgagor shall, when received by Mortgagor,
constitute trust funds in Mortgagor's  hands and shall be immediately paid over
to Mortgagee.  Without limitation upon any  of  the foregoing, Mortgagor hereby
constitutes  and  appoints  Mortgagee as Mortgagor's  special  attorney-in-fact
(with full power of substitution,  either  generally  or  for  such  periods or
purposes  as Mortgagee may from time to time prescribe) in the name, place  and
stead of Mortgagor  to  do  any  and every act and exercise any and every power
that Mortgagor 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 Mortgagor might or could
do if personally present (provided  such  power of attorney granted pursuant to
this sentence shall only be exercisable by  Mortgagee  upon  the occurrence and
during the continuance of an Event of Default); and Mortgagor  shall  be  bound
thereby  as  fully  and  effectively  as  if Mortgagor had personally executed,
acknowledged and delivered any of the foregoing certificates or documents.  The
powers and authorities herein conferred upon  Mortgagee  may  be  exercised  by
Mortgagee  through  any  person  who,  at  the  time  of  the  execution of the
particular  instrument,  is  an  officer  of Mortgagee.  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  Mortgagee  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  Mortgagee that all the Indebtedness is  fully  and  totally  paid.
Mortgagee 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  Mortgagee  shall  be  a  demand
obligation of  Mortgagor  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 Mortgagee 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 Mortgagee shall  be  applied to the payment of the Indebtedness at
such times and in such manner and order  as Mortgagee determines in Mortgagee's
sole and absolute discretion.

      Section 2.6 Release from Liability;  Indemnification.   Mortgagee 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
Mortgagor for funds actually  received.  Mortgagor agrees to indemnify and hold
harmless Mortgagee (for purposes  of this paragraph, the term "Mortgagee" shall
include the directors, officers, partners,  employees  and  agents of Mortgagee
and any persons or entities owned or controlled by or affiliated with Mortgagee
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 Mortgagee  by
reason of the assertion that Mortgagee 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  Mortgagee  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, Mortgagee 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 Mortgagee 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  Mortgagee  pursuant  to the provisions of this section shall be a
demand obligation (which obligation Mortgagor hereby expressly promises to pay)
owing by Mortgagor to Mortgagee 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 Mortgage but will survive
the release, foreclosure of this Mortgage or conveyance in lieu of foreclosure,
and  the  repayment of the Indebtedness and the discharge and release  of  this
Mortgage and  the  other documents evidencing and/or securing the Indebtedness.
WITHOUT LIMITATION,  IT IS THE INTENTION OF MORTGAGOR AND MORTGAGOR 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

      Mortgagor hereby represents, warrants and covenants as follows:

      Section 3.1 Title.   Mortgagor owns an undivided working interest in each
well included in the Mortgaged  Property  of not more than the working interest
set forth in Exhibit A attached hereto (to the extent the interest of Mortgagor
is  a  working  interest  as  opposed to an overriding  royalty  interest)  and
Mortgagor owns an undivided net revenue interest or overriding royalty interest
in each well included in the Mortgaged  Property  of  not  less  than  the  net
revenue interest or overriding royalty interest set forth in Exhibit A attached
hereto.   With  respect  to  the  Mortgaged  Property, Mortgagor represents and
warrants that (i) Mortgagor has good, marketable  and indefeasible title in fee
simple to all Mortgaged 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) Mortgagor has good and valid
title to all Mortgaged Property constituting personal property owned by it that
is material to the business of the Mortgagor, free and clear of all Liens other
than Permitted Liens, (iii) Mortgagor  is  the  legal  and equitable owner of a
leasehold interest in all of the leased Mortgaged 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 Mortgagor to realize the benefits  of the rights provided to
it  under  any lease pertaining thereto and (iv) Mortgagor  is  the  legal  and
equitable owner of a leasehold interest in all of the leased Mortgaged 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 Mortgagor to realize the benefits of
the rights provided to it under any lease pertaining thereto.

      Section 3.2 Defend Title.   This Mortgage is, and always will be kept as,
a direct first lien and security interest  upon  the Mortgaged Property subject
only to Permitted Liens and Mortgagor 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 Mortgage  upon  the
Mortgaged Property or  any  part  thereof  or upon the rents, issues, revenues,
profits and other income therefrom.  Mortgagor  will  warrant  and  defend  the
title  to  the  Mortgaged  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 Mortgaged Property,  Mortgagor  agrees  it  will immediately defend against
such  adverse  claim  or  take  appropriate  action to  remove  such  cloud  at
Mortgagor's cost and expense, and Mortgagor further  agrees that Trustee and/or
Mortgagee  may  take such other action as they deem advisable  to  protect  and
preserve their interests in the Mortgaged Property, and in such event Mortgagor
will indemnify Trustee and Mortgagee 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.   Mortgagor  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., Mortgagor 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, Mortgagor shall pay or shall cause  to  be  paid  when  due, all
taxes,  permits,  licenses,  insurance  premiums and other similar amounts with
respect  to  the  Mortgaged  Property,  the  Hydrocarbon   Property   and   the
Hydrocarbons.

      Section 3.5 Operation By Third Parties.   As to any part of the Mortgaged
Property which is not a working interest (if any), Mortgagor agrees to take all
such  action  and  to  exercise  all  rights  and  remedies as are available to
Mortgagor  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 Mortgaged Property which is a working interest operated by a
party other than Mortgagor, Mortgagor agrees  to  take  all  such action and to
exercise  all  rights  and  remedies  as are reasonably available to  Mortgagor
(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.  Mortgagor agrees that if Mortgagor fails
to perform any act or to take any action which Mortgagor is required to perform
or  take  hereunder  or  pay  any  money  which  Mortgagor is required  to  pay
hereunder, each of Mortgagee and Trustee in Mortgagor'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 Mortgagor to Mortgagee  or Trustee, as the case may be, and
each of Mortgagee 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 Mortgagor to each of Mortgagee and Trustee  pursuant  to  this
Mortgage  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.  Mortgagor will not at any time
during the existence hereof, sell, assign,  transfer,  mortgage,  encumber,  or
otherwise  dispose  of any Mortgaged Property, except (i) sales of Hydrocarbons
in the ordinary course  of  business and only then in compliance with the terms
of this Mortgage, (ii) the sale  of  obsolete or worn out equipment or personal
property in the ordinary course of business,  and Mortgagor 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 Mortgaged  Property or replaced with property of
equal value in which Mortgagee 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 Mortgagor operates, to contain Hydrocarbons  which may be
extracted in the ordinary course of Mortgagor's business, (B) such sale  occurs
in  the  ordinary  course  of  Mortgagor'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 Mortgagor and  on  an  arms-
length basis,  (E)  if  Mortgagor  or any other Mortgagor Party is the operator
with respect to such Hydrocarbon Property,  such  Mortgagor  Party  remains the
operator  with  respect thereto, and (F) Mortgagee has given its prior  written
consent to such sale, such consent not to be unreasonably withheld.

      Section 3.8 Sale  of Production.  No Mortgaged 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  Mortgagor 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 Mortgagee  in
writing  (in connection with the Mortgaged Property to which they relate), and,
with respect  to  the  immediately succeeding clause (i), except for agreements
entered into by Mortgagor  in  the  ordinary course of business consistent with
prudent customs and practices in the  industry  in  which  Mortgagor  operates,
(i) no Mortgaged 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.
Mortgagor  is  presently   receiving  a  price  for  all  production  from  (or
attributable to) each Mortgaged Property covered by a production sales contract
disclosed in writing to Mortgagee  as  computed in accordance with the terms of
such contract, and is not having deliveries  of  production from such Mortgaged
Property  curtailed  substantially  below  such property's  delivery  capacity.
Neither  Mortgagor,  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 Mortgaged Properties after the  date  hereof,  and
Mortgagor  hereby  covenants  not  to enter into any such advance or prepayment
arrangements  whereby  it  accepts  consideration   for  Hydrocarbons  not  yet
produced.  No Mortgaged 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 Mortgaged Properties 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 Mortgaged Property with respect to
which Mortgagor, 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 Mortgaged Property  would  entitle  it  to take, and Mortgagor will not
after the date hereof become "overproduced" (as above  defined) with respect to
any  well  on  the  Mortgaged Property (or on any unit in which  the  Mortgaged
Property participate),  in  an  amount  in  excess  of Mortgagor'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 Mortgagor  operates.  No Mortgaged 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  Mortgaged  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  Mortgagor  operates.  No Mortgaged
Property  is  subject at the present time to any regulatory  refund  obligation
and, to the best of Mortgagor's knowledge, no facts exist which might cause the
same to be imposed.

      Section 3.9 Operation of Mortgaged Property.  The Mortgagor 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 Mortgagor's interests  in  the
Mortgaged  Property and will do or cause to be done all other things reasonably
necessary to  keep  unimpaired  the Mortgagor'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  Mortgaged  Property (and properties unitized therewith)  is
being (and, to the extent the same  could  adversely  affect  the  ownership or
operation  of such Mortgaged 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 Mortgaged  Property and in conformity with
all Permitted Liens; specifically in this connection, (i) no Mortgaged 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
Mortgaged  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  Mortgaged
Property  (or,  in  the case of wells located on properties unitized therewith,
such unitized properties).   With  respect  to  any Mortgaged Property in which
Mortgagor is the operator or in which Mortgagor has a majority working interest
(and  to  the  best  of  Mortgagor's knowledge with respect  to  any  Mortgaged
Property in which Mortgagor  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  Mortgaged  Property or on lands  pooled  or
unitized therewith (including, without limitation,  any  wells  which would, if
located  in Texas, require compliance with Railroad Commission Rule  14(b)(2)),
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  Mortgagor  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 Mortgaged  Property  that  is  producing  oil,  gas,  minerals and/or other
Hydrocarbons.  Except as disclosed under the Purchase Agreement,  Mortgagor has
no  reason  to believe that it will not be able to obtain Permits as  and  when
necessary to  enable  the Mortgagor to produce, extract, transport and sell the
oil, gas, minerals and other Hydrocarbons in the Mortgaged Property.  Mortgagor
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 Mortgagor.  The Mortgagor will operate  the Mortgaged Property, or cause the
Mortgaged  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 Mortgaged 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 Mortgaged Property  and  the
production and sale of Hydrocarbons and other minerals produced therefrom.  The
Mortgagor 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 Mortgaged  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 Mortgaged Property and each producing well thereon.  Upon the
reasonable request of the Mortgagee, and at reasonable times and intervals, the
Mortgagor  will   (a)  permit  the  Mortgagee  and  its  respective  designated
representatives to  enter  upon  any  part  of the Mortgaged Property under the
control  of  the  Mortgagor, and (b) cause the operator  of  any  part  of  the
Mortgaged Property  not  under  the  control  of  the  Mortgagor  to permit the
Mortgagee  and  its designated representatives to enter upon the same  (to  the
extent and subject  to  the conditions under which the Mortgagor 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  Mortgagor's  knowledge,
threatened) which affect the Mortgaged Property (including, without limitation,
any which challenge or otherwise  pertain to Mortgagor's title to the Mortgaged
Property)  and  no judicial or administrative  actions,  suits  or  proceedings
pending (or, to Mortgagor's knowledge, threatened) against Mortgagor.

      Section 3.11Environmental.

      (a)   Current  Status.   The  Mortgaged Property and Mortgagor are not in
violation of Applicable Environmental Laws (as hereinafter defined), or subject
to any existing, pending or, to the best  knowledge  of  Mortgagor,  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 Mortgagor,  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 Mortgaged Property and  Mortgagor.  "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).  Mortgagor  undertook, at the time
of  acquisition  of the Mortgaged Property, all appropriate  inquiry  into  the
previous ownership  and  uses  of  the  Mortgaged Property consistent with good
commercial  or  customary  practice.   Mortgagor  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  Mortgaged  Property,  except  in  accordance  with
Applicable Environmental  Laws.   The  use which Mortgagor makes and intends to
make of the Mortgaged 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 Mortgaged 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  Mortgage  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 Mortgaged Properties are 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 Mortgagor or its predecessors in
title  to  the  Mortgaged  Property  would  be  responsible  (to  the  best  of
Mortgagor's knowledge with respect to Associated Property not owned or operated
by Mortgagor).  The term "Associated Property" as  used  in this Mortgage 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 Mortgagor.

      (b)   Future  Performance.   Mortgagor  will  not  cause  or  permit  the
Mortgaged Property or Mortgagor to be in violation of, or do anything or permit
anything  to  be done which will subject the Mortgaged 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 Mortgaged Property  and Mortgagor will
promptly notify Mortgagee in writing of any existing, pending  or,  to the best
knowledge of Mortgagor, threatened investigation, claim, suit or inquiry by any
governmental  authority  or  any  person  in  connection  with  any  Applicable
Environmental Laws.  Mortgagor will take steps necessary to determine  that  no
hazardous  substances  or  solid  wastes  have  been  disposed  of or otherwise
released on or to the Mortgaged Property.  Mortgagor will not cause  or  permit
the  disposal  or  other  release of any hazardous substance or solid waste at,
into, upon or under the Mortgaged  Property and covenants and agrees to keep or
cause the Mortgaged 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 Mortgagee's reasonable request, at any
time and from time to time  during the existence of this Mortgage, but not more
often than once every calendar  year  (so  long  as  no  Event  of  Default has
occurred), Mortgagor will provide at Mortgagor's sole expense an inspection  or
audit of the Mortgaged Property from an engineering or consulting firm approved
by  Mortgagee,  indicating  the presence or absence of hazardous substances and
solid  waste  on  the  Mortgaged   Property   and  compliance  with  Applicable
Environmental Laws.

      Section 3.12Not Abandon Wells; Participate in Operations.  Mortgagor will
not, without prior written consent of Mortgagee,  abandon,  or  consent  to the
abandonment  of,  any well producing from the Mortgaged 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  Mortgage).   Mortgagor  will  not, without prior written
consent  of  Mortgagee,  which  consent shall not be unreasonably  conditioned,
withheld, or delayed, elect not to  participate  in a proposed operation on the
Mortgaged Properties 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 Mortgaged Properties.
All or portions of the Mortgaged 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
Mortgagor  and with respect to all such portions of the Mortgaged Property, the
Mortgagor's  covenants  and  agreements  as  expressed  in this Article III are
modified to require that the Mortgagor 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 Mortgaged 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 Mortgagee  as  agent  for  Mortgagor and all or any portion of
such award or payment, at the option of Mortgagee,  shall  be  applied  to  the
Indebtedness  or  paid over, wholly or in part, to Mortgagor for any purpose or
object  satisfactory  to  Mortgagee;  provided  that  Mortgagee  shall  not  be
obligated  to  see  to  the  application  of any amount paid over to Mortgagor.
Mortgagor  immediately  upon obtaining knowledge  of  the  institution  of  any
proceedings or negotiations  for the condemnation of the Mortgaged Property, or
any portion thereof, will notify Mortgagee of the pendency of such negotiations
or  proceedings.   Mortgagee  may  participate  in  any  such  negotiations  or
proceedings, and Mortgagor from  time  to  time  will  execute  and  deliver to
Mortgagee all instruments requested by Mortgagee to permit such participation.

      Section 3.14Insurance.   Mortgagor 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 Mortgager as of the  date
hereof.  In the event of any  loss  under  any insurance policies so carried by
Mortgagor, Mortgagee 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 Mortgagee  in  its own discretion, of the Indebtedness, and
any balance remaining shall be subject to the order of Mortgagor.  Mortgagee is
hereby authorized but not obligated  to  enforce  in its name or in the name of
Mortgagor 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 Mortgagee  is  hereby  appointed Mortgagor's agent and attorney-in-
fact to endorse any check or draft payable to Mortgagor in order to collect the
proceeds of insurance (provided Mortgagee 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
Mortgage,   or   other   transfer   of  title  to  the  Mortgaged  Property  in
extinguishment in whole or in part of  the  Indebtedness,  all right, title and
interest  of  Mortgagor  in and to such policies then in force  concerning  the
Mortgaged 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.  Mortgagor will observe  and  comply
with all of the terms and provisions,  express  or implied, of the oil, gas and
mineral  leases  covered  by  this  Mortgage,  and  any   other  agreements  or
instruments applicable thereto; and, except with the prior  written  consent of
Mortgagee,  will  not amend (in any manner adverse to Mortgagor, Mortgagee,  or
Mortgagor's or Mortgagee's interest in the Mortgaged 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.  Mortgagor will
cause  all  obligations  to  the  holders of royalty interests  and  all  other
interests  in  the Mortgaged Properties  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.  Mortgagor  will  furnish  to Mortgagee 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.  Mortgagor will, on request of Mortgagee,
(i) promptly correct any defect,  error  or omission which may be discovered in
the contents of this Mortgage, or in any other  document or instrument executed
in  connection  with  any  of  the  Loan  Documents, or  in  the  execution  or
acknowledgment  of  this  Mortgage  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  Mortgage 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
Mortgaged Property; and (iii)  execute,  acknowledge,  deliver, and file and/or
record  any  document  or  instrument  (including  specifically  any  financing
statement) desired by Mortgagee to protect the lien  or  the  security interest
hereunder  against  the rights or interests of third persons.  Mortgagor  shall
pay all costs connected with any of the foregoing.

      Section 3.17Name  and  Place of Business.  Except as disclosed in writing
to Mortgagee, Mortgagor has not  during the preceding five (5) years been known
by  or  used any other corporate or  partnership,  trade  or  fictitious  name.
Mortgagor 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 Mortgagor shall have notified  Mortgagee
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 Mortgagee for the
purpose of further perfecting or protecting the liens and security interests in
the Mortgaged Property created hereby.  Mortgagor's  exact name is the name set
forth  in  this  Mortgage.   Mortgagor  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).  Mortgagor 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  Mortgage.   Mortgagor's  principal place of
business  and chief executive office, and the place where Mortgagor  keeps  its
books and records  concerning  the Mortgaged Property (including, particularly,
the records with respect to Production  Proceeds  from  the Mortgaged Property)
has  for  the  preceding  four months, been, and will continue  to  be  (unless
Mortgagor notifies Mortgagee 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 Mortgage.

      Section 3.18Compliance  with  Laws   and  Agreements.   Mortgagor  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 Mortgage
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.).  Mortgagor 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 Mortgagor does not engage in any
transactions or dealings, or is otherwise  associated  with  any  such Persons.
Mortgagor  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 Mortgage.

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



                                  ARTICLE IV



                              Rights and Remedies

      Section 4.1 Event of Default.  As used  in  this  Mortgage,  an "Event of
Default"  means  (i)  the  failure  by  Mortgagor  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 Mortgagor  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,  Mortgagee
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
Mortgaged 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 Mortgagee may
deem appropriate, and to make conveyance to the purchaser or purchasers.  Where
the Mortgaged 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 Mortgaged Property may be sold in
any  such jurisdiction and any such notice  shall  designate  the  jurisdiction
where such Mortgaged 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
Mortgaged 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.   Mortgagor  hereby  irrevocably
appoints Trustee to be the attorney of Mortgagor and in the name and  on behalf
of  Mortgagor  to  execute  and  deliver  any  deeds,  transfers,  conveyances,
assignments,  assurances  and  notices  which  Mortgagor  ought to execute  and
deliver  and  do and perform any and all such acts and things  which  Mortgagor
ought to do and  perform under the covenants herein contained and generally, to
use the name of Mortgagor  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  Mortgaged  Property  (Mortgagor  hereby  covenanting  and
agreeing  to  deliver  to Trustee any portion of  the  Mortgaged  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 Mortgagor 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,
Mortgagor shall be completely and irrevocably  divested  of  all  of its right,
title,  interest,  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 Mortgagor,  and against any and all other persons claiming or
to claim the property sold or any part thereof, by, through or under Mortgagor,
and (vii) to the extent and under  such  circumstances as are permitted by law,
Mortgagee 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 Mortgaged 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 Mortgaged Properties located in the State
of Texas (or within the offshore area  over  which the United States of America
asserts jurisdiction and to which the laws of  such  State  are applicable with
respect  to  this  Mortgage  and/or  the  liens  or security interests  created
hereby), such sales of all or any part of such Mortgaged  Properties  shall  be
conducted at the courthouse of any county (whether or not the counties in which
such  Mortgaged Properties are located are contiguous) in the State of Texas in
which any part of such Mortgaged Properties is situated or which lies shoreward
of any  Mortgaged Property (i.e., to the extent a particular Mortgaged Property
lies offshore within the reasonable projected seaward extension of the relevant
county boundary),  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  Texas  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, Mortgagee may exercise
its rights of enforcement with respect  to the Mortgaged Properties or any part
thereof located in the State of Texas under  the  Texas  Business  and Commerce
Code,  as  amended, under the Applicable UCC of any State where any portion  of
the Mortgaged Properties 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,
Mortgagee may enter upon the Mortgaged Properties or otherwise upon Mortgagor's
premises  to  take  possession  of, assemble and collect the personal  property
portion of the Mortgaged Properties  or  to  render  it unusable; (ii) upon the
occurrence  and  during  the continuance of an Event of Default  Mortgagee  may
require Mortgagor to assemble  the personal property and make it available at a
place Mortgagee designates which  is  mutually convenient to allow Mortgagee to
take  possession or dispose of the personal  property;  (iii)   written  notice
mailed to Mortgagor 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 Mortgaged Properties, or any part thereof, may, at the option
of Mortgagee, be  sold,  as  a  whole  or  in  parts,  together  or  separately
(including, without limitation, where a portion of the Mortgaged Properties  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, Mortgagee or the Trustee may, to the extent permitted under applicable
law, elect to treat the fixtures included in the Mortgaged Properties 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 Mortgaged Properties made under  the  powers  of  sale  herein
granted and conferred, Mortgagee or the Trustee may, to the extent permitted by
applicable  law,  include  in  such  sale  any  personal  property and fixtures
included in the Mortgaged Properties 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 Mortgagee 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 Mortgaged
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,  Mortgagor
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, Mortgagee shall as a matter  of
right  be entitled to the appointment of a receiver or receivers for all or any
part of  the  Mortgaged  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 Mortgaged Property or the solvency of any person  or  persons
liable  for  the payment of the Indebtedness secured hereby, and Mortgagor 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 Mortgagee,  and  agrees  that  such  appointment  shall in no manner impair,
prejudice or otherwise affect the rights of Mortgagee  under Article II hereof.
Mortgagor 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 Mortgagee 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  Mortgagee  in  connection  with  any  such
receivership shall be  a  demand  obligation (which obligation Mortgagor hereby
expressly promises to pay) included  in  the Indebtedness owing by Mortgagor to
the Trustee and/or Mortgagee and shall bear  interest  from  the date of making
such  advance  by  Trustee  and/or Mortgagee until paid at the then  applicable
interest rate under the Notes (the "Applicable Rate").

      Section 4.5 Foreclosure  for Installments.  Mortgagee 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 Mortgage 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   Mortgaged  Property  for  any  subsequently  maturing  portion   of   the
Indebtedness.

      Section 4.6 Separate Sales.  The Mortgaged Property may be sold in one or
more parcels and in such manner and order as Mortgagee, 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 Mortgaged Property.  Mortgagor  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 Mortgagee shall have the right and power to enter
into and upon  and take possession of all or any part of the Mortgaged Property
in the possession  of  Mortgagor,  its  successors  or assigns, or its or their
agents or servants, and may exclude Mortgagor, its successors  or  assigns, and
all  persons  claiming  under  Mortgagor,  and  its or their agents or servants
wholly or partly therefrom; and, holding the same, Trustee may use, administer,
manage, operate and control the Mortgaged Property  and  conduct  the  business
thereof  to  the same extent as Mortgagor, its successors or assigns, might  at
the time do and  may  exercise all rights and powers of Mortgagor, in the name,
place and stead of Mortgagor,  or  otherwise  as  Trustee shall deem best.  All
costs, expenses and liabilities of every character  incurred  by Trustee and/or
Mortgagee in administering, managing, operating, and controlling  the Mortgaged
Property  shall  constitute  a  demand  obligation  (which obligation Mortgagor
hereby  expressly  promises  to  pay)  owing  by Mortgagor  to  Trustee  and/or
Mortgagee 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 Mortgage 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  Mortgagor, or
Mortgagor's representatives, successors or assigns or any other person claiming
any  interest  in  the  Mortgaged Property by, through or under Mortgagor,  are
occupying or using the Mortgaged  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
Mortgaged 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  Mortgagee  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 Mortgaged 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 Mortgagee, 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 Mortgagee 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 Mortgagor,  any  other
Mortgagor 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  Mortgagor,  any  other  Mortgagor  Party, any such
guarantor or any such other person or entity so obligated to foreclose the lien
of this Mortgage or to enforce any provision hereunder or under any of the Loan
Documents;  (b)  the  release,  regardless  of  consideration, of the Mortgaged
Property or any portion thereof or interest therein  or  the  addition  of  any
other  property  to  the  Mortgaged  Property; (c) any agreement or stipulation
between any subsequent owner of the Mortgaged Property and Mortgagee extending,
renewing, rearranging or in any other  way modifying the terms of this Mortgage
without first having obtained the consent  of,  given  notice  to  or  paid any
consideration  to  Mortgagor, any other Mortgagor Party, any such guarantor  or
such other person or  entity,  and  in  such  event  Mortgagor,  the  Mortgagor
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
Mortgagee; 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.  Mortgagee may release,
regardless of consideration,  any part of the Mortgaged 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  Mortgage  or  its
stature as a first and prior lien and security interest in and to the Mortgaged
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, Mortgagee  may  resort to any other security therefor held by
Mortgagee or Trustee in such order and manner as Mortgagee may elect.

      Section 4.12Waiver of Redemption,  Notice and Marshalling of Assets, Etc.
To  the  fullest  extent  permitted by law, Mortgagor  hereby  irrevocably  and
unconditionally waives and  releases  (a)  all  benefits  that  might accrue to
Mortgagor  by  virtue  of  any  present  or future moratorium law or other  law
exempting the Mortgaged 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 Mortgagee'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 Mortgage and now  in  force,  of  which  Mortgagor  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 Mortgagee  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,  Mortgagee  shall  have  the unqualified right to do so and, in
such  an  event, Mortgagor and Mortgagee shall  be  restored  to  their  former
positions with  respect to the Indebtedness, this Mortgage, the Loan Documents,
the Mortgaged Property  and  otherwise, and the rights, remedies, recourses and
powers of Mortgagee shall continue as if same had never been invoked.

      Section 4.14Application  of  Proceeds.   The  proceeds of any sale of the
Mortgaged Property or any part thereof and all other monies received by Trustee
or Mortgagee 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  Mortgagee  incident to the enforcement of this Mortgage, 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 Mortgagee
under this Mortgage or in executing any trust or power hereunder;

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

      (c)   third,  to  Mortgagor  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 Mortgage, at law and in equity,  if  any  Event  of Default
shall  occur  and  Trustee or Mortgagee shall exercise any remedies under  this
Mortgage with respect  to  any  portion of the Mortgaged Property (or Mortgagor
shall transfer any Mortgaged Property  "in  lieu of" foreclosure), Mortgagee or
Trustee shall have the right to request that  any  operator  of  any  Mortgaged
Property  which is either Mortgagor or any affiliate of Mortgagor to resign  as
operator under  the  joint operating agreement applicable thereto, and no later
than 60 days after receipt  by  Mortgagor  of any such request, Mortgagor shall
resign (or cause such other party to resign)  as  operator  of  such  Mortgaged
Property.

      Section 4.16INDEMNITY.   IN  CONNECTION  WITH ANY ACTION TAKEN BY TRUSTEE
AND/OR MORTGAGEE PURSUANT TO THIS MORTGAGE, TRUSTEE  AND/OR MORTGAGEE 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 MORTGAGEE OR ANY SUCH
OTHER PERSON OR ENTITY ("INDEMNIFIED PARTIES") SHALL NOT BE LIABLE FOR ANY LOSS
SUSTAINED BY MORTGAGOR RESULTING  FROM AN ASSERTION THAT MORTGAGEE 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 MORTGAGED 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 MORTGAGEE BE OBLIGATED TO PERFORM  OR  DISCHARGE ANY OBLIGATION,
DUTY  OR  LIABILITY  OF  MORTGAGOR. MORTGAGOR 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 MORTGAGE OR THE EXERCISE OF
RIGHTS  OR  REMEDIES  HEREUNDER;  SHOULD  TRUSTEE  AND/OR  MORTGAGEE  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 MORTGAGOR HEREBY EXPRESSLY PROMISES TO PAY)
OWING BY MORTGAGOR TO TRUSTEE AND/OR MORTGAGEE 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 MORTGAGE AND ANY  OTHER  LOAN DOCUMENT PURSUANT TO
WHICH  MORTGAGOR HAS GRANTED ANY LIENS OR SECURITY INTERESTS  TO  MORTGAGEE  AS
COLLATERAL  SECURITY  FOR  THE  INDEBTEDNESS.   MORTGAGOR  HEREBY  ASSENTS  TO,
RATIFIES  AND  CONFIRMS  ANY  AND  ALL ACTIONS OF TRUSTEE AND/OR MORTGAGEE WITH
RESPECT TO THE MORTGAGED PROPERTY TAKEN  UNDER  THIS MORTGAGE.  THE LIABILITIES
OF MORTGAGOR AS SET FORTH IN THIS SECTION 4.16 SHALL SURVIVE THE TERMINATION OF
THIS MORTGAGE.



                                   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
Mortgage  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 Mortgaged Property, or any part thereof, or against
Mortgagor, or  to  see  to the performance or observance by Mortgagor of any of
the  covenants  and  agreements   contained   herein.   Trustee  shall  not  be
responsible for the execution, acknowledgment or  validity  of this Mortgage 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 Mortgagee.  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 Mortgagee or be removed at any time with or without  cause  by  an
instrument  in  writing  duly  executed on behalf of Mortgagee.  In case of the
death, resignation or removal of  Trustee, a successor trustee may be appointed
by  Mortgagee  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 Mortgagee to Mortgagor, 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  Mortgage shall vest in the successor trustee all the estate
and title in and to all  of  the  Mortgaged 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, Mortgagee may appoint multiple trustees  to  serve  in
such capacity or in such jurisdictions as Mortgagee 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 Mortgage, Etc.   With  respect to any
portions  of  the Mortgaged Property located in any state or other jurisdiction
the laws of which  do not provide for the use or enforcement of a deed of trust
or the office, rights  and authority of Trustee as herein provided, the general
language of conveyance hereof  to  Trustee  is  intended  and the same shall be
construed as words of mortgage unto and in favor of Mortgagee  and  the  rights
and  authority  granted  to  Trustee  herein  may  be  enforced and asserted by
Mortgagee in accordance with the laws of the jurisdiction in which such portion
of  the  Mortgaged Property is located and the same may be  foreclosed  at  the
option of Mortgagee as to any or all such portions of the Mortgaged Property in
any manner  permitted by the laws of the jurisdiction in which such portions of
the Mortgaged  Property  is  situated.   This  Mortgage  may  be construed as a
mortgage,  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  Mortgage.   If all Indebtedness  secured  hereby
shall  be  paid  in full in cash and all Loan Documents  terminated,  Mortgagee
shall forthwith cause satisfaction and discharge of this Mortgage to be entered
upon the record at  the  expense  of Mortgagor and shall execute and deliver or
cause  to  be  executed and delivered  such  instruments  of  satisfaction  and
reassignment as  may be appropriate.  Otherwise, this Mortgage 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  Mortgagee  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 "Mortgagee" 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, Mortgagee  and  Mortgagor  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  Mortgaged
Property, such proceeds have been advanced by Mortgagee at Mortgagor's request,
and Mortgagee 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
Mortgagee, Mortgagor 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 Mortgage  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  Mortgaged  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  (it  being agreed to and understood that delivery to Borrower  of  any
such notice, request,  consent,  demand  or other communication shall be deemed
delivery to Mortgagor).

      Section 6.9 Counterparts.  This Mortgage  is  being  executed  in several
counterparts,   all   of   which  are  identical,  except  that  to  facilitate
recordation,  if  the  Mortgaged   Property   is  situated  in  more  than  one
jurisdiction, descriptions of only those portions  of  the  Mortgaged  Property
located  in,  and descriptions of the Prior Mortgages (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
Mortgaged 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 Texas 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  Mortgage,  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 Mortgage shall be effective as
a financing statement  (i)  filed  as  a  fixture  filing  with  respect to all
fixtures  included  within  the  Mortgaged Property, (ii) covering as-extracted
collateral  with respect to all as-extracted  collateral  included  within  the
Mortgaged 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  Mortgaged  Property.   This
Mortgage  is  to  be filed for record in the real/immovable property records of
each county or parish  where any part of the Mortgaged 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 Mortgagor  is  the  address of Mortgagor set
forth  at  the  end  of this Mortgage and the address of Mortgagee  from  which
information concerning  the security interests hereunder may be obtained is the
address of Mortgagee set  forth at the end of this Mortgage.  Nothing contained
in this paragraph shall be  construed  to  limit the scope of this Mortgage nor
its effectiveness as a financing statement covering  any  type  of property.  A
carbon,  photographic, facsimile or other reproduction of this Mortgage  or  of
any financing  statement  relating  to  this  Mortgage shall be sufficient as a
financing statement for any of the purposes referred  to this Section.  Without
limiting any other provision herein, Mortgagor hereby authorizes  Mortgagee  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  Mortgaged 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  Mortgagor therefrom shall in
any  event  be  effective  unless the same shall be in writing  and  signed  by
Mortgagee 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  Mortgagor  in  any  case shall of itself
entitle Mortgagor 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 6.13Mortgagor's Successors.   In  the  event the ownership of any
Mortgaged Property or any part thereof becomes vested  in  a  person other than
Mortgagor, then, without notice to Mortgagor, such successor or  successors  in
interest  may  be  dealt  with,  with  reference  to  this  Mortgage and to the
obligations  secured hereby, in the same manner as with Mortgagor,  without  in
any way vitiating  or  discharging  Mortgagor's  liability hereunder or for the
payment of the Indebtedness or performance of the  obligations  secured hereby.
No transfer of any Mortgaged 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  Mortgagor  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 Mortgagee is required, the granting or denial of such  approval
or consent  and  the  exercise  of  such  judgment  shall  be  within  the sole
discretion  of  Mortgagee,  and  Mortgagee  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 MORTGAGE 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 MORTGAGED PROPERTY  IS  LOCATED  (OR  WHICH IS OTHERWISE APPLICABLE TO A
PORTION OF THE MORTGAGED PROPERTY) NECESSARILY  OR,  IN  THE SOLE DISCRETION OF
THE MORTGAGEE, 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
MORTGAGEE GRANTED HEREIN,  THE LAW OF SUCH STATE SHALL APPLY AS TO THAT PORTION
OF THE MORTGAGED 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 MORTGAGE;  AND  AGREES THAT
IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS MORTGAGE;  THAT IT
HAS  IN  FACT READ THIS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE  AND
KNOWLEDGE  OF  THE  TERMS, CONDITIONS AND EFFECTS OF THIS MORTGAGE; THAT IT HAS
BEEN REPRESENTED BY INDEPENDENT  LEGAL  COUNSEL  OF  ITS  CHOICE THROUGHOUT THE
NEGOTIATIONS  PRECEDING  ITS  EXECUTION OF THIS MORTGAGE AND HAS  RECEIVED  THE
ADVICE OF ITS ATTORNEY IN ENTERING  INTO  THIS MORTGAGE; AND THAT IT RECOGNIZES
THAT CERTAIN OF THE TERMS OF THIS MORTGAGE  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 MORTGAGE 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 MORTGAGE 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 Mortgages.  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 Mortgaged
Property ("Prior Mortgages"), such proceeds have been advanced  at  Mortgagor's
request,  and the Trustee for the benefit of the Mortgagee or the Mortgagee  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 Mortgages, 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,  Mortgagor hereby waives and
releases all demands and causes of action for offsets and payments to, upon and
in connection with the said obligations.  Mortgagor and  Mortgagee  acknowledge
that  this Mortgage amends, restates and consolidates the Prior Mortgages,  and
all liens,  claims,  rights, titles, interests and benefits created and granted
by the Prior Mortgages  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 Mortgagor,
Mortgagee  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   Mortgagor.    Without   limiting
Mortgagor's obligations hereunder,  Mortgagor'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 Mortgagor'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  Mortgagee.   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 Mortgage is recorded, (i) all persons other than Mortgagor 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 Mortgagee, 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   Mortgagee  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 Mortgagee.

           [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").


MORTGAGOR:
STO PROPERTIES LLC
By:
   Name:
   Title:

The name and address of the Debtor/Mortgagor is:

STO Properties LLC
      c/o South Texas Oil Company
      769 Highway 95 N
      Bastrop, TX 78602


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



Viking Asset Management, LLC

600 Montgomery Street, 44th Floor

San Francisco, CA  94111







60636482

<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 STO
Properties  LLC,  a  Texas  limited  liability company, on behalf of said
limited liability company.



      Witness my hand and official seal.

      My Commission Expires:  _______________________________


Notary Public




60636482

<PAGE>


                                   EXHIBIT A

                             Property Descriptions

                                 SEE ATTACHED