<PAGE>   1
                                  Exhibit 10.7

                         Deferred Compensation Agreement
                       and Promissory Notes (C.E. Justice)



<PAGE>   2



DEFFERED COMPENSATION AGREEMENT


         This Agreement is entered into by and between Lone Star International
Energy, Inc., hereinafter referred to as "Employer", and C. E. Justice, 103
Meadow Creek, Weatherford, TX 76086, hereinafter referred to as "Employee", to
be effective as of January 7, 1997.

         WHEREAS, effective January 1, 1997, Employee commenced employment with
Employer pursuant to an Employment Contract, the terms of which are incorporated
herein by this reference; and,

         WHEREAS, the Parties agree that said Employment Contract provides for a
compensation level for Employee in the amount of $350,000.00 per annum; and,

         WHEREAS, the Parties agree that Employer is unable to meet the full
compensation level provided in the Employment Contract, and Employee
acknowledges that this fact was know and accepted by Employee at the time said
contract was negotiated and entered into; and,

         WHEREAS, the Parties wish to define the actual cash compensation that
will be paid to Employee, and to provide the terms for the deferral of a portion
of the compensation required under the Employment Contract.

         NOW THEREFORE, the Parties hereto agree as follows:

Employer agrees to pay and Employee agrees to accept as the cash portion of the
compensation, the total of $16,472.88 annually, to be paid over the course of
the year as funds are available. Said payments are to made in arrears, in
accordance with Employer's normal and customary payroll periods of the 1st and
15th of each month, commencing in January 1997.

The balance of the compensation required under the Employment Contract, being a
total of $333,527.12 shall be deferred by Employee, with the obligation of
Employer being evidenced by a Note, the form and substance of which is attached
hereto as Exhibit "A". The Note covering such deferred compensation shall be
issued to Employee at the end of each calendar year, representing the total
amount deferred during the Employer's annual accounting period.

It is understood by the Parties, that at such time, and in the event Employer is
able to pay the total compensation required under the Employment Contract, the
cash compensation may be increased in order to comply with such agreement. The
Employee may, however, with the consent of Employer elect to continue the
deferral of all or any portion of the required compensation, and to continue to
accept a Note Payable by Employer as described herein.
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This Agreement shall be deemed an addendum to the Employment Contract between
the Parties, and shall be incorporated therein by this reference. This Agreement
may also be amended from time to time to reflect increases in the cash portion
of the compensation as may be agreed by the parties.

The laws of the State of Texas shall govern this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement to become effective
as herein above first mentioned.

                                       EMPLOYER

                                       Lone Star International Energy, Inc.


                                       -----------------------------------------
                                       Michael D. Herrington, CFO


                                            EMPLOYEE


                                            ------------------------------------
                                            C. E. Justice




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ADDENDUM TO DEFERRED COMPENSATION AGREEMENT


         This Addendum is being entered into between Lone Star International
Energy, Inc. ("Employer") and C. E. Justice ("Employee"), to be effective for
all purposes as of January 1, 1998.

RECITALS

         WHEREAS, the parties hereto entered into a Deferred Compensation
Agreement effective as of January 1, 1997, whereby the Employee agreed to defer
a portion of the compensation due pursuant to an Employment Contract with
Employer; and,

         WHEREAS, the Deferred Compensation Agreement referenced herein covered
the compensation period of 1997, and the Parties wish to amend the Agreement so
as to provide for the deferred amounts for the 1998 compensation period of the
Employment Contract.

         NOW THEREFORE, the Parties hereby agree as follows:

Commencing January 1, 1998 and continuing on a month to month basis until
further amended by mutual agreement of the parties, Employee agrees to accept a
total of $1,000.00 per month payable in equal payments on the 1st and 15th of
each month, and to defer the balance of $32,333.33 per month as required under
the subject Employment Contract.

As required by the referenced Deferred Compensation Agreement, the deferred
compensation as stipulated in paragraph 1 shall be evidenced by a Note Payable
with interest, to be executed by the Employer in favor of the Employee on a
quarterly basis.

All other terms and provisions of the subject Deferred Compensation Agreement
shall remain in full force and effect.

This Addendum shall be attached to and become a part of the Deferred
Compensation Agreement upon execution by the Parties.

IN WITNESS WHEREOF, the parties have executed this Addendum to become effective
as of January 1, 1998.

Lone Star International Energy, Inc.                       Employee:


------------------------------                             ---------------------
Don R. Pyles                                               C. E. Justice
General Counsel, Director



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                                 PROMISSORY NOTE


WEATHERFORD, TEXAS                                         DECEMBER 31, 1997


         For value received, the undersigned, LONE STAR INTERNATIONAL ENERGY,
INC., 200 Palo Pinto, Suite 108, Weatherford, Texas 76086, hereinafter referred
to as "Maker", promises to pay Cecil E. Justice, hereinafter referred to as
"Holder", the sum of Three Hundred Thirty three Thousand, Five Hundred and
Twenty Seven Dollars ($333,527.00), in lawful and legal tender of the United
States of America, payable as stated hereinbelow:

1.       Payment is due and payable on or before December 30, 1998, unless
         extended by Holder. Any such extension to be evidenced in writing and
         executed by Holder.

2.       This Promissory Note shall bear interest at the rate of Eight and One
         Quarter Percent (8 1/4%) per annum.

3.       There shall be no prepayment penalty should Maker elect to discharge
         this note prior to maturity.

4.       Holder has the exclusive option to elect to take (a) cash payment in
         full (b) restricted common stock of Maker in lieu of cash, or (c) a
         combination of cash and restricted common stock as satisfaction of this
         note. In the event Holder elects to take all or partial payment in
         restricted common stock of Maker, said stock shall be valued for
         purposes of this note, at fifty percent (50%) of the closing bid price
         for such shares, as quoted on the publicly traded market for which said
         shares are listed.

         IN WITNESS WHEREOF, the undersigned has executed this note to be
effective as of the date first above written.

                                       Lone Star International Energy, Inc.



                                       /s/ Michael D. Herrington
                                       Chief Financial Officer




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                                 PROMISSORY NOTE



MINERAL WELLS, TEXAS                                       MARCH 31, 1998



For value received, the undersigned, LONE STAR INTERNATIONAL ENERGY, INC., 528
Grant Road, Mineral Wells, Texas 76067, hereinafter referred to as "Maker",
promises to pay C.E. Justice, hereinafter referred to as "Holder", the sum of
Ninety Seven Thousand Dollars ($97,000.00), in lawful and legal tender of the
United States of America, payable as stated hereinbelow:

1.       Payment is due and payable on or before December 30, 1998, unless
         extended by holder. Any such extension to be evidenced in writing and
         executed by Holder.

2.       This Promissory Note shall bear interest at the rate of Eight and One
         Quarter Percent (8 1/4%) per annum.

3.       There shall be no prepayment penalty should Maker elect to discharge
         this note prior to maturity.

4.       Holder has the exclusive option to elect to take (a) cash payment in
         full (b) restricted common stock of the Maker in lieu of cash, or (c) a
         combination of cash and restricted common stock as satisfaction of this
         note. In the event Holder elects to take all or partial payment in
         restricted common stock of Maker, said stock shall be valued for
         purposes of this note, at fifty percent (50%) of the closing bid price
         for such shares, as quoted on the publicly traded market for which said
         shares are listed.

         IN WITNESS WHEREOF, the undersigned has executed this note to be
effective as of the date first above written.

                                       Lone Star International Energy, Inc.


                                       /s/ Michael D. Herrington
                                       Chief Financial Officer