<PAGE>


                                                                   Exhibit 10.12


                                 PROMISSORY NOTE


$285,000                                                           July 30, 2001

         After date, without grace, for value received, HOUSTON AMERICAN ENERGY
CORP., a Delaware corporation having its principal office and place of business
in Harris County, Texas (the "Maker") hereby promises to pay to the order of
JOHN F. TERWILLIGER, an individual having his principal office and place of
business in Harris County, Texas (the "Payee"), the original principal amount of
TWO HUNDRED EIGHTY-FIVE THOUSAND DOLLARS ($285,000), together with interest, as
hereinafter described. This Note is payable in lawful money of the United States
of America at 801 Travis, Suite 1425, Houston, Harris County, Texas 77002, or
such other place as the Payee may designate in writing to the Maker.

         This Note may be assigned at any time without prior notice to Maker.

         This Note shall be due and payable on demand as to both principal and
interest. Interest at a rate of ten percent (10%) per annum shall accrue on the
unpaid principal balance of this Note. If this Note is not paid at maturity,
however maturity may be brought about, all principal due on the date of such
maturity shall bear interest from the date of such maturity at the maximum
contract rate of interest which the Payee may charge the Maker under applicable
law. Interest on this Note shall be computed for the actual number of days
elapsed and on the basis of a year consisting of 360 days.

         If, for any reason whatever, the interest paid on this Note shall
exceed the maximum non-usurious amount permitted by law, the Payee shall refund
to the Maker such portion of said interest as may be necessary to cause the
interest paid on this Note to equal the maximum non-usurious amount permitted by
law, and no more. All sums paid or agreed to be paid to the Payee for the use,
forbearance or detention of the indebtedness evidenced hereby shall to the
extent permitted by applicable law be amortized, prorated, allocated and spread
throughout the full term of this Note until payment in full.

         The Maker shall be entitled to prepay this Note in whole or in part at
any time without the payment of a prepayment premium.

         In the event of default in the payment of this Note or under any
instrument executed in connection with this Note, the Maker agrees to pay on
demand all costs incurred by the Payee (i) in the collection of any sums,
including, but not limited to, principal, interest, expenses, and reimbursements
due and payable on this Note, and (ii) in the enforcement of the other terms and
provisions of this Note, whether such collection or enforcement be accomplished
by suit or otherwise, including the Payee's reasonable attorney's fees.

         Except as otherwise provided for herein, each maker, surety, guarantor
and endorser of this Note expressly waives all notices, including, but not
limited to, all demands for payment, presentations for payment, notice of
opportunity to cure default, notice of intention to accelerate the maturity,
notice of protest and notice of acceleration of the maturity, notice of protest
and notice of acceleration of the maturity of this Note, and consents that this
Note may be renewed and the time of payment extended without notice and without
releasing any of the parties.

         Any check, draft, money order or other instrument given in payment of
all or any portion of this Note may be accepted by the Payee or any other holder
hereof and handled in collection in the customary manner, but the same shall not
constitute payment hereunder or diminish any rights of the Payee or any other
holder hereof, except to the extent that actual cash proceeds of such instrument
are unconditionally received by the Payee or any other holder hereof and applied
to the indebtedness as herein provided.

                                       1

<PAGE>


     This Note shall be governed by and construed in accordance with the laws of
the State of Texas and applicable federal law.

                                         HOUSTON AMERICAN ENERGY CORP.



                                         By /s/ John F. Terwilliger
                                           ----------------------------------
                                           John F. Terwilliger, President


                                       2