Document:

Exhibit 10.2

                            JOINT OPERATING CONTRACT
                            ------------------------

THIS  MEMORANDUM OF AGREEMENT made and entered into this --9TH day of--- JULY, ,
2006, TIDELANDS EXPLORATION AND PRODUCTION, INC., 1862 W.BITTERS - BLDG. #1, SAN
ANTONIO, TEXAS 78248 hereinafter called Non - Operator and REGENCY ENERGY, INC.,
2242 SO HWY #83,  CRYSTAL CITY,  TEXAS 78839  (hereinafter  called  Non-Operator
whether one or more and (hereinafter called Operator).

                                   WITNESSETH:
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     WHEREAS, Operator and Non-operators respectively are the owners of the oil,
gas and mineral lease or leases, or of the undivided interest therein, described
in Exhibit "A" hereto  attached and made a part hereof for all purposes  insofar
as such lease or leases cover the land described in Exhibit "A" hereto attached,
which  lease or leases  insofar as the  described  land is covered  thereby  are
hereinafter  refereed to as "Joint Leases";  and it is the desire of the parties
hereto that Operator  shall be in charge of  development  operations  under said
Joint Leases in accordance with agreements and provisions hereinafter contained:

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:

     1.   GENERAL DUTIES OF OPERATOR: Operator shall have, subject to the terms,
          provisions and limitations  hereinafter  expressed,  exclusive charge,
          control  and  supervision  of  all  operations  of  every  kind  to be
          conducted on the Joint Leases for the development, minerals there from
          as well as the  payment  of all  rentals,  royalties,  taxes and other
          charges  which may arise or become due or payable in  connection  with
          such operations.

     2.   CHARGES TO JOINT ACCOUNT: Operator shall charge the Joint Account with
          all costs and expenses  incurred in  connection  with the operation of
          the  Joint  Leases  as  herein  contemplated,  charges  to be  made in
          accordance with the "Accounting  Procedure" hereto attached as Exhibit
          "B" and made a part hereof for all  purposes.  The charges made to the
          Joint Account as provided  herein shall be borne by the parties hereto
          in the  proportion  that the  interest  of each of the  parties in the
          Joint Leases  bears to the total of the  interests in the Joint Leases
          of the parties hereto.

     3.   RECORDS:  Operator shall keep an accurate  record of the Joint Account
          hereunder  showing the cost and expenses incurred and charges made and
          all credits and  returns  made and  received,  which  record  shall be
          available at all reasonable times for the  consideration,  examination
          and  inspection  of each of  Non-operators  and  its  duly  authorized
          representatives.

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     4.   YEARLY  STATEMENTS:  On or before the last day of  January  each year,
          Operator  shall  furnish  to  each  of the  Non-operators  a  detailed
          statement of investments made and costs and expenses  incurred against
          and credits  and  receipts  made and  received  for the Joint  Account
          during the preceding calendar year. Said statement to properly reflect
          all items of tangible and  intangible  nature.  Any  exceptions to the
          statement as rendered by Operator must be made by Non-operators within
          one (1) month from receipt thereof, and if no exception is made within
          that time, the statement shall be conclusively  considered as correct;
          but this provision shall not prevent  adjustments of physical property
          to inventory as provided  for in Exhibit  "B".  Each of  Non-operators
          agrees to pay to Operator at P.O. Box 271086,  Corpus  Christi,  Texas
          78427-1086,  its  proportionate  part of all expenditures made for the
          Joint Account by Operator in connection with investments on account of
          said Joint Leases hereunder,  based upon such  Non-operators  interest
          from  time to time in the  leases  described  in  Exhibit  "A"  hereto
          attached.  Currently  within  fifteen  (15) days after  receipt of the
          yearly  statements  herein  provided to be  rendered by Operator  each
          Non-operator agrees to pay its proportionate part of any unpaid amount
          due  Operator  as  shown  by  such  statements.  The  amount  properly
          chargeable  in each  statement  and due to  Operator  shall be due and
          payable at the  expiration  of fifteen  (15) days from receipt of each
          statement and shall bear interest thereafter until paid at the rate of
          ten percent (10%) per annum,  which interest on its delinquencies each
          Non-operator  hereto  severally  agrees to pay  Operator  at the place
          above designated.  Each Non-operator  grants to Operator a lien on its
          interest  in the  Joint  Leases,  the  production  there  from and all
          fixtures,  improvements and personal property now or hereafter located
          thereon  to  secure  the  payment  of its  proportionate  part  of all
          investments  made for and costs and expenses against the Joint Account
          hereunder  developing  the Joint  Leases  hereunder  which lien may be
          enforced as any other mortgage lien.  Should any Non-operator  fail to
          pay its proportionate  part of any statement  rendered by us as herein
          provided  within  the  fifteen  (15)  days  herein  above  stipulated,
          Operator  shall  have the  right at  foreclosure  said  lien  upon the
          interests of the Non-operator in default.

     5.   DRILLING AND DEVELOPMENT OF LEASES: Operator is authorized to drill at
          the expense of the Joint Account any well on the Joint Leases required
          to meet the offset and  reasonable  development  obligations,  and all
          express  obligations under the Joint Leases, and any well necessary in
          order to prevent the  expiration  of any Joint  Lease,  without  first
          securing the authority and approval of Non-operators.

          Operator  shall secure the written  approval of  Non-operators  before
          incurring  against the Joint  Account any item of expense,  which item
          itself is in excess of $10,000.00,  except in the drilling,  equipping
          and completion of a well covered by the preceding  paragraph or in the
          drilling,  equipping  and  completion of a well as to which notice has

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          been  given as  provided  in the next  succeeding  paragraph  and with
          respect to which well no  Non-Operator  has given  notice that it does
          not  desire to  participate  in the cost and  expense of  drilling  or
          reworking.

          Before Operator commences  operations at the cost of the Joint Account
          for the drilling  and/or  reworking of any well on the Joint Leases it
          shall  give  30 days  written  notice  of its  intention  to  commence
          operations for the drilling  and/or  reworking of the well for each of
          the Non-operators and furnish with said notice a statement  reflecting
          the  total  estimated  cost to be  incurred  for the  drilling  and/or
          reworking,  evaluating,  completion  and  equipping  said  well.  Said
          statement  shall  reflect  the amount due from each  Non-operator  for
          their  proportionate  interest of ownership  and after receipt of said
          notice and estimated cost Non-operator  shall have Twenty (20) days to
          elect to  participate  or not to  participate  in the drilling  and/or
          reworking of said well. If Non-operator  desires to participate in the
          drilling  and/or  reworking  of  said  well he or  they  shall  notify
          Operator of that desire and remit the  requested  amount  representing
          their  proportionate  share within the time period of Twenty (20) days
          after  receipt  of  notification.   If  Non-operator   elects  not  to
          participate in the drilling  and/or  reworking of said well then he or
          they shall make that desire  known to Operator  within the time period
          of Twenty (20) days after receipt of notification of Operators  intent
          to commence drilling and/or reworking operations. If after being given
          notice  any  Non-operator  notifies  Operator,  that it or they do not
          desire to  participate  in the cost and  expense  of  drilling  and/or
          reworking said well, the costs and expenses  thereof shall be borne by
          the  Operator  and  Non-operator,  if any,  not giving  consent to the
          notice,  each  bearing  that portion of the cost which its interest in
          the  Joint  Leases  bears to the  total  of the  interest  therein  of
          Operator and Non-operators participating the drilling and/or reworking
          of said well; and if all Non-Operators give such notice,  Operator may
          drill and rework said well at Operator's  cost and expense;  provided,
          however,  before any Non-Operator who elects not to participate in the
          drilling  and/or  reworking  of said well shall be entitled to receive
          any  portion  of  the  production  revenue  there  from  Operator  and
          Non-operators,  if any, who have  participated in the cost of drilling
          and/or  reworking said well shall have the right to receive out of the
          net proceeds from the sale of the portion of the production  from said
          well  belonging to each Non- operator who does not  participate in the
          cost and expense of drilling and/or reworking said well five (5) times
          the amount (500%) the amount of that portion of costs which would have
          been borne by the non-participating Non-operator, under the provisions
          hereof, had it participated in such cost and expense.  The proceeds of
          the sale of the specified portion of the production shall be allocated
          between  Operator and  NonOperators,  if any, who  participate  in the
          drilling  of the well in  proportion  to their  interest  in the Joint
          Leases. The cost of operating such well or of the reworking same shall
          be borne by the Joint Account. If the well is a dry hole and reworking
          operations are not  successful,  the salvage there from shall be owned

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          by Operator and Non-operator and Non-operators,  if any, participating
          in the  drilling  and/or  reworking  thereof  in  proportion  to their
          several interest in the Joint Leases.

          All work performed by Operator shall be "at cost" plus fifteen percent
          (15%) to the Joint Account and a full and complete detailed  statement
          of such cost shall be furnished each  Non-operator upon conclusion and
          completing of the drilling and/or reworking of each well or wells. Any
          funds  remaining  from the amounts paid by  Non-operator  based on the
          estimated  cost  originally  submitted will be refunded or credited to
          that Non-operators account. Any funds expended in excess of the amount
          originally paid by Non-operator shall be chargeable to each

          Non-operator  in proportion to their  interest as it appears and shall
          be due and payable to Operator  upon  receipt by  Non-operator  of the
          statement reflecting such amount due. Each of the Non-operators agrees
          to pay to Operator at 2242 South  Highway 83,  Crystal City, TX 78839,
          its proportionate share as reflected by statement. The amount properly
          chargeable  in each  statement  and due to  Operator  shall be due and
          payable on or before  fifteen (15) days from receipt of each statement
          and shall bear interest  thereafter  until paid at the rate of ten per
          cent  (10%)  per  annum,  which  interest  on its  delinquencies  each
          Non-operator  hereto  severally agrees to pay to Operator at the place
          above designated.

          Each  Non-operator  grants to  Operator a lien on its  interest in the
          Joint Leases, the production there from and all fixtures, improvements
          and personal property now or hereinafter located thereon to secure the
          payment of its proportionate part of all investments made for and cost
          and expenses  against the Joint Account  hereunder in  developing  and
          operating  the Joint  Leases.  This lien may be  enforced as any other
          mortgage lien.  Should any Non-operator  fail to pay its proportionate
          part of all statements rendered as herein provided within fifteen (15)
          days herein  above  stipulated,  Operator  shall have the right at any
          time thereafter, such default continuing, to withhold all revenues due
          Non-operator  who is in default and apply such  proceeds to the unpaid
          amounts and past due interest or at Operators option to foreclose said
          lien upon the interest of the Non-operator in default.

          Operator shall bear the right itself to drill any or all wells drilled
          at the expense of the Joint Account, or to let the drilling thereof to
          a  responsible  contractor.  Should  Operator  elect to drill any well
          itself, it may either charge the Joint Account with the actual cost of
          drilling and equipping the well, in accordance  with the provisions of
          Exhibit  "B", or may itself pay the actual  cost of drilling  the well
          and charge to the Joint  Account,  as the cost of drilling,  an amount
          equal to the  contract  price per foot and for work for  drilling  the
          well on the  basis  of the  contract  price  per foot and for work for
          drilling the well on the basis of the contract  price per foot and for
          the day  work  prevailing  in the  immediate  area,  or  which  may be
          obtained from a responsible drilling contractor,  at the time the well

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          shall be on the  basis  provided  in  Exhibit  "B",  hereto  attached.
          Operator shall notify Non-operators,  in writing prior to commencement
          of operations on any well drilled at the expense of the Joint Account,
          which Operator  drills itself,  as to whether  Operator will drill the
          well on the basis of actual cost or on a contract  basis,  and if on a
          contract basis,  the notice shall state the price per foot and for day
          work.  If the Non  operators  do not object in writing to the Operator
          within five (5) days of the notice, it will be conclusively considered
          that the  price  per foot and for day work  stated  in the  notice  is
          satisfactory.  Should Non-operators, or any of them, object in writing
          within  (5) days to such  price  per foot and for day work,  then,  if
          Operator  and  Non-operators  cannot agree upon a price to be charged,
          such price shall be determined by arbitration  in accordance  with the
          provisions  of  Section 15  hereof.  When cost of the well  drilled by
          Operator is charged on the contract basis,  Operator  assumes all risk
          in connection with the drilling of the well which would customarily be
          assumed by an independent contractor had the drilling of the well been
          let to an independent contractor, except the Operator shall not assume
          any loss,  risk,  damage or liability  resulting from the well blowing
          out, cratering, or running wild, except injury to Operator's equipment
          and to Operator's agents, servants and employees;  but all loss, risk,
          damage or  liability  not  assumed by  Operator  shall be borne by the
          Joint  Account.  Where the cost of the well drilled by Operator is not
          charged  on a  contract  basis,  but on their  basis of  actual  cost,
          Operator  assumes  none of the  risks  shall  be  borne  by the  Joint
          Account.

     6.   MARKETING OF PRODUCTS - MONTHLY  STATEMENTS:  Subject to the provision
          of Section 7 hereof,  Operator is given  authority  to market all oil,
          gas and other minerals  produced from the Joint Leases and accruing to
          the  parties  hereto;  and,  upon the sale of gross  proceeds  of such
          sales,  and Operator is to hold  purchaser  harmless  from any and all
          claims of Operator and Non-operators relating to final distribution of
          the proceeds to royalty owners,  production  payments,  severance tax,
          and any and all other parties having an interest  and/or claim in such
          proceeds,  Operator shall pay all charges for operations,  maintaining
          and  managing  the Joint  Leases  within a minimum of ten (10)days and
          furnish to Non-operators a detailed statement  reflecting gross sales,
          gross value,  royalty  interest,  overriding  royalty interest and all
          charges including  charges of operation,  maintaining and managing the
          lease or leases for the Joint  Account for that  particular  month and
          remit a check for the net funds after all  deductions  as reflected by
          said  statement of each  Non-operator  in  proportion  of his or their
          interest as it appears,  provided,  however,  should any  Non-operator
          hereunder  be in  arrears  in  its  payments  to  Operator  as  herein
          provided,  for drill,  workover,  and/or capital cost,  Operator shall
          have the right to withhold any amounts due such  Non-operator  for his
          or its portion of the  proceeds,  and apply the proceeds on amounts in
          arrears. In this connection,  it is specifically  understood that each
          of the parties hereto will sign the usual customary  division order or

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          orders   covering  its  respective   portion  of  the  production  and
          warranting its title  thereto.  Subject to the provisions of Section 7
          hereof,  Operator,  if it desires to do so, but without any obligation
          to do so, may take all the oil, gas and other  minerals  produced from
          the  Joint  Leases  and in such  event  it  shall  credit  or pay each
          Non-operator for its interest therein as follows:

          a)   On oil, the current posted field price of Operator, per barrel of
               42 U.S.  gallons  each,  for crude oil of like grade and  quality
               prevailing for the field where produced on the date of respective
               runs to pipe line; provided,  however, should Operator not post a
               price for oil  produced  in said  field,  then the average of the
               current barrel,  of 42 U.S. gallons each, posted for crude oil of
               like  grade  and  quality  for  said  field   prevailing  on  the
               respective  dates  on  which  runs  are  made  to the  designated
               purchaser or their successors,  or such ones of said companies or
               their  successors as may be purchasing oil in the field where the
               premises are located and posting field prices therefore.

          b)   For natural gas or other gaseous or vaporous  substance  produced
               from the Joint Leases and used by Operator for the  extraction of
               gasoline or other products, the current market value at the wells
               of such Non-operator's interest therein, the natural gas or other
               gaseous or vaporous substance to be measured and the market value
               to be determined in a manner then prevailing in the industry.

          c)   For gas of any kind when not used for the  extraction of gasoline
               or other product by Operator,  each Non-operator's  proportionate
               part of the market value thereof at the well.

          d)   For other minerals, each Non-operator's proportionate part of the
               reasonable market value thereof at the well or mine.

          Operator may apply the proceeds  accruing to any Non-operator from the
          sale of its  interest in the  production  from the Joint Leases on its
          indebtedness to Operator incurred under the provisions hereof

     7.   TAKING  PRODUCTS IN KIND:  Despite the  provision  of Section 6 above,
          each  Non-operator,  at its election,  after giving  Operator  written
          notice of its  intention to do so, shall have the right and  privilege
          of receiving at any time in kind its portion of the oil, gas and other
          minerals  produced and saved from the Joint  Leases.  Such  production
          shall be delivered to the Non-operator  involved into the pipe line or
          lines to which the well or wells on the Joint  Leases may be connected
          or into storage tanks furnished by the Non-operator. Each Non-operator
          shall bear any extra  expense  incurred by Operator in  delivering  in
          kind Non-operator's portion of the production from the Joint Leases.

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     8.   INSURANCE-COMPLIANCE  WITH LAWS AND REGULATIONS:  Operator shall carry
          Workmen's Compensation Insurance on its employees engaged in the joint
          operations,  and in conducting  operations hereunder shall comply with
          Fair Labor  Standards Act and all other  applicable  Federal and State
          Laws,  and  applicable  rules and  regulations  of  Federal  and State
          agencies having jurisdiction.

     9.   NON-OPERATORS' RIGHTS AND PRIVILEGES: Each Non-operator shall have the
          following specified rights and privileges:

          a)   Access to the Joint Leases at all reasonable times to inspect the
               operations hereunder.

          b)   The right to inspect the logs, samples, and cuttings from any and
               all wells drilled hereunder and to receive copies of the logs.

          c)   The  right to  inspect  and  audit at all  reasonable  times  the
               Operator's books,  records and invoices  pertaining to any matter
               of accounting arising hereunder.

     10.  LIABILITY OF PARTIES: The Joint Leases shall not be operated hereunder
          as a partnership  venture,  and the liability of the parties hereunder
          shall be several  and not joint or  collective.  Each  party  shall be
          responsible  only for its  obligations  as set out herein and shall be
          liable  only for its  proportionate  share  of the  cost of  operation
          hereunder.  Nothing  herein  shall be construed  as an  assignment  or
          transfer of the leases or an  interest  therein as between the parties
          hereto.  Operator  shall use  reasonable  diligence to pay all rentals
          payable under the leases which  Operator is required to pay hereunder,
          but  Operator  shall not be liable in  damages  to  Non-operators  for
          failure to pay promptly and  properly  any rental  payable  under such
          leases.

     11.  RIGHT OF PARTIES TO WITHDRAW OR ASSIGN:  Any party  hereto  shall have
          the right,  at any time when it is not  indebted  in any amount to the
          Operator under the provisions hereof and when there is not existing to
          any lessor or lessors or their  successors in interest any  obligation
          to do any further  drilling upon the leases affected by this contract,
          to be relieved of all  unaccrued  obligation  under this  agreement by
          assigning to the other parties hereto in proportion to the interest of
          the party  desiring to be relieved of unaccrued  obligations in and to
          the Joint  Leases,  free and clear of all liens and  encumbrances  and
          relinquishing  all of its rights  hereunder.  Should the other parties
          desire  not to accept an  assignment,  they  shall join with the party
          desiring to relieve itself of unaccrued  obligations in release of the
          Joint  Leases.  If the other parties  desire to accept an  assignment,
          they shall have the right at their election either to:
                    a) Purchase  the  interest of the  withdrawing  party in all
               casing,  material,  equipment,  fixtures  and  personal  property

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               belonging to the Joint Account at its fair secondhand value, less
               the cost of salvaging same; or
                    b) Retain such  casing,  material,  equipment,  fixtures and
               personal  property and pay to the  withdrawing  party ten percent
               (10%) per annum on the value of the casing, material,  equipment,
               fixtures  & personal  property,  which  shall be the  depreciated
               value from year to year,  less the  estimated  cost of recovering
               the casing,  material,  equipment,  fixtures & personal property,
               and  when  the  leases  are  finally  abandoned,  deliver  to the
               withdrawing  party its part of the material,  casing,  equipment,
               fixtures & personal property; or
                    c)  Deliver  to the  withdrawing  party an amount of casing,
               material, equipment, fixtures & personal property of like kind as
               that  retained and of a value  equivalent  to the interest of the
               withdrawing party in the casing,  material,  equipment & personal
               property involved less the cost of salvaging them.

          Each party  hereto  owning an  undivided  interest in the Joint Leases
          waives any and all rights it may have to  partition  the Joint  Leases
          and have set aside to it in severalty its undivided interest therein.

     12.  RESIGNATION OF OPERATOR & APPOINTMENT OF SUCCESSOR: Should Operator or
          any successor Operator hereunder dissolve,  liquidate or terminate its
          corporate  existence or sell or  otherwise  dispose of its interest in
          the Joint Lease it shall  thereupon  cease to be Operator  here under.
          Operator or any  successor  Operator may resign its duties as Operator
          hereunder  without the  majority  in  interest of the parties  hereto.
          Should  Operator or any  successor  Operator for any cause cease to be
          Operator  hereunder,  the parties  hereto  (including the successor or
          successors  in  interest  of  Operator)  by  vote of the  majority  in
          interest of the parties  shall elect and  designate  another  Operator
          from among the parties hereto to act as Operator  hereunder,  provided
          if there are only two parties to this contract and their interests are
          equal the  Non-Operator  shall  have the  right  and  option to become
          Operator.  Should Operator or any successor  Operator hereunder resign
          as Operator, its rights, titles and interests in the Joint Lease shall
          be  unaffected  by such  resignation  and that party  shall  thereupon
          become one of the  Non-Operators  hereunder and shall  thenceforth  be
          bound by the terms and provisions  hereof as a NonOperator.  Any party
          hereto  designated  as Operator to succeed the  Operator  herein named
          shall thereupon succeed to all the duties, powers, obligations, rights
          and authority  given to the Operator  herein named with respect to all
          operations of ever kind  thereafter  conducted on the Joint Leases for
          developing and managing the leases and producing,  treating,  handling
          and  market of oil,  gas and other  minerals  there  from,  as well as
          payment of rentals, royalties, taxes and other charges which may arise
          or become due in connection with operations.

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     13.  FORCE MAJEURE: In the event of any party hereto being rendered unable,
          wholly or in part, by force majeure to carry out its obligations under
          this  contract,  other than the obligation to make payments of amounts
          due  hereunder,  it is agreed that upon such party's giving notice and
          reasonably  full  particulars  of  force  majeure  in  writing  or  by
          telegraph to the other parties  hereto within a reasonable  time after
          the occurrence of the cause relied upon, then obligations of the party
          giving the notice,  so far as they are affected by force majeure shall
          be suspended  during the  continuance of nay inability so caused,  but
          for no longer period;  and the cause of the force majeure shall so far
          as possible be remedied with all reasonable dispatch.  The term "force
          majeure" as employed herein shall mean acts of God, strikes,  lockouts
          or other  industrial  disturbances,  acts of the public  enemy,  wars,
          blockades,  insurrections,  riots, epidemics, landslides,  lightening,
          earthquakes, fires, storms, floods, washouts, arrests and restrains of
          government and people,  civil disturbances,  explosions,  breakage and
          accident to machinery or lines of pipe,  freezing of wells or lines of
          pipe,  partial or entire  failure  of natural  gas wells and any other
          causes,   whether  the  kind  herein  enumerated  or  otherwise,   not
          reasonably  within the control of the party claiming  suspension.  The
          tem shall  likewise  include  (a) in those  instances  where any party
          hereto is required to obtain servitudes,  right of way grants, permits
          or license  to enable it to fulfill  its  obligations  hereunder,  the
          inability  of the party to  acquire  or the  delays on the part of the
          party in  acquiring,  at  reasonable  cost and after the  exercise  of
          reasonable diligence, the servitudes,  right of way grants, permits or
          licenses;  and (b) in  those  instances  where  any  party  hereto  is
          required  to  furnish  materials  and  supplies  for  the  purpose  of
          construction or maintaining  facilities to enable the party to fulfill
          its obligations  hereunder,  the inability of the party to acquire, or
          the delays on the part of the party in acquiring,  at reasonable  cost
          and after the exercising of reasonable diligence,  permission from any
          governmental  agency to use materials and supplies which the party may
          have in its possession.

          It is  understood  and  agreed  that the  settlement  of  strikes  and
          lockouts  shall be entirely  within the discretion of the party having
          the  difficulty,  and that the above  mentioned  requirement  that any
          force majeure shall be remedied with all reasonable dispatch shall not
          require  the  settlement  of strikes or  lockouts  by  acceding to the
          demands of the opposing  party when such course is  inadvisable in the
          discretion of the party having the difficulty.

     14.  NOTICES:  All notices  herein  provided for shall be mailed or sent to
          Operator  at 2242 South  Highway  83,  Crystal  City,  TX 78839 and to
          Nonoperators as follows:

               1862 W. Bitters - Bldg. No. 1, San Antonio, Texas 78248
               -------------------------------------------------------

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     15.  ARBITRATION:  In cases of  disagreement  as to any matter  relating to
          operations hereunder which cannot be settled amicable, then, upon five
          (5) days written  notice  given by one or more  parties  hereto to the
          others,  the matter in  disagreement  shall be submitted to a board of
          three arbitrators. Non-operators agree to appoint one arbitrator. Such
          appointments  shall be made  within  ten (10) days after the notice is
          given.  Shall  either  operator  or  non-operators  fail or  refuse to
          appoint an arbitrator within the time specified,  the party or parties
          hereto  appointing an arbitrator,  upon (5) days written notice to the
          party or parties  failing or  refusing to appoint an  arbitrator,  may
          apply to the  person  who is the  judge  then  senior in office of the
          District Court of the United States of America having jurisdiction for
          the appointment of such second arbitrator, and in such case the person
          so appointed shall act as a second  arbitrator.  The third  arbitrator
          shall  be  chosen  promptly  by  the  two  so  appointed.   All  three
          arbitrators shall be disinterested practical oil operators.  Pending a
          decision of the board of arbitrators,  the parties hereto shall remain
          bound by the express terms hereof Any and all decisions  rendered by a
          majority of the board of  arbitrators  shall by final and binding upon
          the parties hereto,  and adjustments  shall be made in conformity with
          their award.

     16.  TERM:  Unless  terminated  by  agreement of all parties  hereto,  this
          contract  shall  continue  in force  and  effect  as long as the Joint
          Leases, or any of them, remain in force and effect.

     17.  PARTIES  BOUND:  This  contract  shall be binding upon the parties and
          their heirs,  successors and assigns.  All parties hereto are referred
          to in the neuter gender.

                                       10
<PAGE>

EXECUTED in duplicate originals this the 9th day of July, 2006 A.D.

TIDELANDS EXPLORATION AND PRODUCTION, INC.

         BY: /S/ Michael Ward
            ---------------------
         Michael Ward - President
         NON-OPERATOR

REGENCY ENERGY, INC.

         BY: /S/ Royis Ward
            ---------------------
         Royis Ward - President
         OPERATOR

                                       11Exhibit 10.3

                      AIRCRAFT PREPAID LEASE/USE AGREEMENT

     THIS AIRCRAFT LEASE/USE AGREEMENT (this "Lease") is made and entered on the
29th day of January,  2004 by and between Tidelands Oil and Gas Corporation it's
successors  and or assigns  having an address of 1862 W.  Bitters - Bldg No. 1 -
San Antonio,  Texas 78248 (hereinafter referred to as "Lessee"),  and Royis Ward
an individual having principal offices at 2242 So. Hwy. #83, Crystal City, Texas
78839  (hereinafter  referred to as  "Lessor"),  with  respect to the  following
facts:

     A.   Lessor is the owner of the following described aircraft and

               engine(s): MAKE & MODEL: BEECHCRAFT
                                        ----------

               KING AIR AIRCRAFT SERIAL NO.: LJ 369
               --------                      ------

               ENGINE TYPE AND SIZE: PRATT/WHITNEY
                                     -------------

               PT6A-20 REGISTRATION NO.: N20LA
               -------                   -----

together with the manufacturer's specified equipment and the equipment described
in  Exhibit  "A"  attached  hereto  and  made a part by  reference  (hereinafter
referred to collectively as the "Aircraft").

     B. Lessor  wishes to lease make use to Lessee,  and Lessee  wishes to lease
and make use from Lessor on an  exclusive  basis,  the  Aircraft  subject to the
terms and conditions, and for the consideration set forth herein.

     NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, the parties hereto agree as follows:

                                    ARTICLE I

     1. Agreement to Lease and Term.

         (a)  Lessor  hereby  agrees  to lease and make use of the  Aircraft  to
Lessee  and  Lessee  hereby  agrees to lease and make use of the  Aircraft  from
Lessor on an exclusive basis,  for the Term (as hereinafter  defined) and on the
other terms and conditions set forth in this Lease.  Lessee acknowledges that it
has inspected the Aircraft and is fully  satisfied with and accepts the Aircraft
in its current condition.

         (b) The  terms  of  this  Lease/use  agreement  shall  be for a  period
commencing  on January  29,  2004,  and ending on a date to be  determined  (the

<PAGE>

"Term")  based upon the time the Lessee has flown an  accumulated  total time of
600 hours.

     2. Prepaid Rent

         1.  Lessee has paid in  advance  the sum of  $300,000.00  to Lessee and
Lessee has agreed  that this sum  represent  to Lessor a base  hourly rent of US
$500.00 per hour in ADVANCE for the exclusive lease/use of the aircraft.

         2.  Delivery.  The Aircraft  will be delivered to Lessee at location in
the State of Texas of their choice upon at least 12 hours notice to Lessor.  The
Aircraft  will be  delivered  duly  certified  as  airworthy,  will  include  an
unexpired  airworthiness  certificate  and shall  have all  systems,  equipment,
radios and appliances in working order.

         3. Return. Lessee shall return the Aircraft to Lessor at the same point
of pickup in Texas on the date set for termination of Lessee usage of aircraft..
Lessee agrees that it will return the Aircraft to Lessor in the same and as good
a condition  as when  accepted by Lessee,  normal  wear  excepted.  In the event
Lessee does not return the  Aircraft  in such  condition,  Lessor  will  provide
written notice to Lessee of reasonable repairs necessary to restore the Aircraft
to such condition in accordance with Article III hereof.

                                   ARTICLE II

     1.  Representations  and  Warranties Of Lessee.  The Lessee  represents and
warrants to Lessor that:

         (a) the  Lessee is a  corporation,  or other form of entity and is duly
organized,   validly   existing  and  in  good  standing   under  its  place  of
incorporation;

         (b) Lessee has all  requisite  power and authority to own its property,
operate its  business,  enter into this Lease and  consummate  the  transactions
herein  contemplated,  and  by  proper  corporate  or  other  action,  has  duly
authorized  the  execution  and  delivery of this  Lease/Use  agreement  and the
consummation of the transactions herein contemplated; and

         (c) this Lease is a valid  obligation  of Lessee  and is  binding  upon
Lessee in accordance  with its terms;  the execution by Lessee of this Lease and
the  consummation by Lessee of the transactions  contemplated  hereby do not and
will not result in a breach of any of the terms or provisions  of, or constitute
a default or a condition  which upon notice or lapse of time or both would ripen
into a default  under any  indenture,  Lease,  instrument or obligation to which
Lessee  is a  party;  and does not and  will  not to the  knowledge  of  Lessor,
constitute a violation of any order, rule or regulation  applicable to Lessee of
any  court  or  of  any  federal  or  state  or  municipal  regulatory  body  or
administrative  agency  or other  governmental  body  having  jurisdiction  over
Lessee.

     2. Representations and Warranties of Lessor.

Lessor represents, covenants and warrants as follows:

<PAGE>

         (a) At the  time of  delivery  to  Lessee,  the  Aircraft  shall  be in
airworthy  condition  with all  systems,  equipment,  radios and  appliances  in
working  order.  Lessor  represents and warrants to Lessee that (i) the Aircraft
has a current,  valid  Certificate of Airworthiness  issued by the United States
Federal Aviation Administration  ("FAA"), (ii) all Airworthiness  Directives and
all Service  Bulletins  designated  as  mandatory  by the  manufacturer,  as are
applicable to the Aircraft, have been complied with, (iii) any existing services
agreements and navigational aids subscriptions  related to the Aircraft,  are in
full  force and effect and will be paid  through  the end of the Term,  (iv) the
Aircraft  is duly  registered  in the name of Lessor  at the FAA Civil  Aviation
Registry,  and  Lessor  shall  not  deregister  the  Aircraft,  and (v) based on
Lessor's current actual  knowledge,  and without having conducted an independent
investigation  of the  truth or  accuracy  of the  statement  entered  by others
contained therein,  the maintenance  records for the Aircraft as are required by
the FAA retained for the Aircraft  accurately reflect the maintenance history of
the Aircraft.

         (b) Prior to delivery Lessor shall provide the following:  -Signed copy
of this Lease

     -The Current Certificate of Airworthiness

     -Original U.S Registration

     -List of Navigation and Emergency Equipment accompanying the Aircraft

         (c) Lessor is the owner of the full legal and  beneficial  title to the
Aircraft  and has full right to lease the  Aircraft  to Lessee  pursuant  to the
terms hereof.

         Lessor is an individual is duly authorized to enter into this Lease/Use
Agreement.

         Lessor  has all  requisite  power and  authority  to own its  property,
operate its business,  enter into this  Lease/Use  agreement and  consummate the
transactions herein  contemplated,  and by proper corporate or other action, has
duly  authorized the execution and delivery of this Lease/Use  agreement and the
consummation of the transactions herein contemplated.

         (d) This Lease is a valid  obligation  of Lessor  and is  binding  upon
Lessor in accordance  with its terms;  the execution by Lessor of this Lease and
the  consummation by Lessor of the transactions  contemplated  hereby do not and
will not result in a breach of any of the terms or provisions  of, or constitute
a default or a condition  which upon notice or lapse of time or both would ripen
into a default  under any  indenture,  lease,  instrument or obligation to which
Lessor  is a  party;  and does not and  will  not to the  knowledge  of  Lessor,
constitute a violation of any order, rule or regulation  applicable to Lessor of

<PAGE>

any  court  or  of  any  federal  or  state  or  municipal  regulatory  body  or
administrative  agency  or other  governmental  body  having  jurisdiction  over
Lessor.

         (e) Lessor  warrants that during the term of this Lease,  if no default
has occurred,  Lessee's quiet enjoyment of the Aircraft shall not be interrupted
by  Lessor  or anyone  claiming  through  or under  Lessor,  including,  without
limitation, any assignee of any of them.

                                   ARTICLE III

     1. Title and Use.

         (a) Title to the Aircraft  shall  remain with Lessor,  and the Aircraft
shall remain under US Registry.

         (b)  Lessee  shall  have  complete  use  of the  Aircraft,  restricted,
however, to the ordinary purposes of Lessee's business and pleasure. Lessee will
not use, operate,  maintain or store the aircraft in violation of this Lease, or
any applicable  law or regulation  federal or state,  or any reasonable  written
instructions  furnished  therefore  by  Lessor.  Furthermore,  Lessee  shall not
operate the Aircraft in any manner, which would contravene the uses and purposes
stipulated in the insurance  policies  discussed herein in Article VIII.  Lessee
will operate,  maintain and use the Aircraft in accordance  with all  applicable
limitations specified in all manufacturer and flight maintenance manuals for the
Aircraft and in accordance with all FAA pronouncements for the Aircraft.  Lessee
shall take all steps necessary to prevent any seizure, confiscation or detention
of the Aircraft by any government authority.  Except for the Aircraft Management
and Operating  Agreement  between BAM Denton  Management  Ventures,  L.L.C.  and
Lessee of even date herewith; nothing herein shall authorize Lessee or any other
person to operate the Aircraft on behalf of Lessor or to incur any  liability or
obligation on behalf of Lessor.

                                   ARTICLE IV

     1. Operation. During the term of this Lease, Lessor will be the operator of
this Aircraft and Lessee is responsible only for the following operating costs:

         (a) Fuel, oil and associated taxes;

     2.  Maintenance.  Lessor covenants and agrees to maintain the Aircraft,  at
Lessor's  cost  and  expense,  in  an  airworthy  condition  with  all  systems,
equipment,  radios,  and appliances in working order, and in compliance with the
manufacturer's   recommended   maintenance  program.  In  the  event  repair  or
maintenance  is  required  during the time when Lessee is in  possession  of the
Aircraft  in  order to keep  the  Aircraft  in the  condition  described  in the

<PAGE>

preceding sentence,  Lessor is entitled to commission the execution of such work
at  Lessor's  expense,  so long as all such  work is  performed  (a) by  persons
licensed to perform  such work by the FAA,  and (b) in  accordance  with FAA and
manufacturers' standards.  Lessee is not entitled to any reimbursement resulting
from Lessee's  improper use of the Aircraft,  from improper  maintenance  of the
Aircraft, or from any breach of this Lease by Lessee. Repairs, replacements, and
rebuilding,  needed due to damage to the Aircraft occurring during the Term, are
the responsibility of Lessor and are governed by Article VIII hereof.  Lessor is
not liable to Lessee for any delays or loss of use of the  Aircraft  as a result
of  downtime  for repair or  maintenance;  Lessor is not  liable to Lessee,  any
sublessee,  or  any  other  person  associated  with  Lessee  for  any  special,
incidental,  or consequential  damages,  including  without  limitation for lost
profits, resulting from unavailability of the Aircraft for use during the Term.

                                    ARTICLE V

     1. Insurance.

         a.  Lessor  shall  secure and  maintain in effect  throughout  the Term
insurance policies with U.S. Aircraft Insurance Group, Global/AAU,  AIG Aviation
Insurance,  or another  insurance  carrier  acceptable  to Lessee,  insuring the
interests of Lessor as follows:

            (i) Full hull coverage,  including all risks, both in flight and not
in flight, and including coverage for war risk, terrorism, and allied perils, in
the  amount of at least  SIX  HUNDRED  THOUSAND  AND  NO/100  U.S.  DOLLARS  (US
$600,000.00)  and naming  Lessor as the sole loss  payee.  In the event that any
damage  to the  Aircraft  occurs  during  the  Term,  Lessor  agrees  to pay the
deductible amount as provided for in such policy;

            (ii) Liability  insurance in the amount of at least ONE MILLION U.S.
DOLLARS  (US  $1,000,000.00)  in coverage  for single  limit  bodily  injury and
property  damage,  including  coverage for passengers and including  contractual
liability  coverage  for  the  liability  and  indemnity   obligations   assumed
hereunder,  and including coverage for war risk,  terrorism,  and allied perils,
and naming Lessor as an additional insured; and

            (iii) Coverage for worldwide limits of geographic operations.

         b. All policies providing insurance required by this Lease must:

            (i) Provide  thirty (30) days' (five (5) days for war risk)  advance
written notice to Lessee,  (x) prior to cancellation of any insurance  coverage,
(y) prior to any material change restricting or reducing existing coverage,  and
(z) prior to any mortgage, pledge,  hypothecation,  sale, assignment or transfer
of Lessee's interests in such insurance coverage;

<PAGE>

            (ii) Provide  that if the insurer  cancels  such  insurance  for any
reason  whatsoever,  then  such  insurer  must  promptly  notify  Lessee of such
cancellation,  and further  providing that such cancellation is not effective as
to Lessee for thirty (30) days after Lessor's receipt of such notice;

            (iii) Provide that the insurers  must promptly  notify Lessor in the
event that any premium or installment of premiums is not paid when due;

            (iv)  Provide  that in the  case of  damage  or  destruction  of the
Aircraft, the insurers may not effect settlement of any claim thereunder without
first obtaining Lessor's prior written consent;

            (v) Provide that Lessor is named on a Breach of Warranty Endorsement
for  physical  damage  coverage  and that  payment  of any claim must be made to
Lessor; and that such Breach of Warranty  Endorsement must provide,  among other
things,  that no act or  omission  of  Lessee or any other  person  affects  the
obligation of the insurer to pay the full amount of any aircraft physical damage
loss the interests of Lessor; and

            (vi) Provide for a Breach of Warranty Endorsement for liability; and
such Breach of Warranty  Endorsement must provide,  among other things,  that no
act or omission Lessee or any other person invalidates any liability coverage of
Lessor.

     2.  Loss.  In the  event of loss or damage to the  Aircraft,  Lessee  shall
immediately  report such loss or damage to Lessor,  to the  insurance  companies
underwriting such risk and to any and all applicable governmental agencies, both
federal and state, and shall furnish such information and execute such documents
as may be required  and  necessary to collect the  proceeds  from the  insurance
policies. In this event, the rights, liabilities, and obligations of the parties
hereto are as follows:

            (i) In the event that the Aircraft is lost,  or  disappears  for any
reason  including  but not  limited  to theft,  or  confiscation  or  seizure or
detention by any  government,  or  embezzlement,  secretion or conversion by any
other person, or is damaged beyond repair,  the proceeds of the insurance policy
or policies must be paid to Lessor. In such event this Lease does not terminate,
and Lessee's  obligation to pay further rent  hereunder  does not end, until the
insurance proceeds or other compensation amounts are paid to Lessor.  Lessor has
no obligation to replace the Aircraft after any such loss or disappearance.

            (ii) In the event that the  Aircraft is  partially  damaged,  Lessor
shall, at his sole cost and expense, fully repair the Aircraft in order that the
Aircraft  is placed in as good as or the same  condition  as it was prior to the
damage and as required  under  applicable  regulations,  including FAR ss.43.13.
Lessor  has the  right to  approve  all  repairs,  which  approval  shall not be

<PAGE>

unreasonably  withheld or delayed.  In the event there are valid and collectible
insurance proceeds available to pay for the partial damage to the Aircraft those
proceeds must be used to pay for such repairs.

            (iii) Lessor is solely entitled to benefits of any payment of monies
by third parties or their insurance carrier for partial damage to or destruction
of the  Aircraft.  Any sums of money from third  persons or their  insurers  for
partial  damage to the  Aircraft is to be payable to Lessor to be used to effect
the repair of the  Aircraft.  In the event the Aircraft is totally  destroyed by
third parties,  Lessor is entitled to any sums of money received from said third
parties or their insurers for the destruction of the Aircraft. Nothing herein is
to be construed to effect or in any way  jeopardize  any right of subrogation of
the Aircraft  insurer to the extent of any payment made by the Aircraft  insurer
under the Aircraft insurance required herein against said third parties or their
insurers.

            (iv) In the event the Aircraft is lost, or disappears for any reason
including  but not limited to theft,  confiscation,  seizure or detention by any
government, or embezzlement, secretion, or conversion by any other person, or if
the Aircraft is totally destroyed or irreparably damaged or permanently rendered
unfit for use from any cause  whatsoever,  and further in the event there exists
no valid and collectible  insurance under any insurance policy, Lessee shall pay
to Lessor,  within forty-five (45) days from the date of the loss or damage, the
sum of money  equivalent to the hull  coverage  requirement  in Section  1(a)(i)
above,  whereupon this Lease  terminates and Lessor has no obligation to replace
the Aircraft.  The insolvency,  bankruptcy,  or failure of any insurance company
issuing the insurance required  hereunder,  the failure of any insurance company
to pay claims accruing,  or any exclusion to or insufficiency of coverage,  does
not affect,  negate, or waive any of the provisions of this Lease. Provided that
Lessee  fully and  promptly  pays,  or causes to be paid,  to Lessor all sums of
money due to Lessor hereunder,  Lessee is not liable to Lessor for any delays or
loss of use of the Aircraft.  Lessee is not liable to Lessor or any other person
associated with Lessor for any special,  incidental,  or consequential  damages,
including without limitation for lost profits.

     3.  Certificate and Policy.  Lessor shall provide Lessee with copies of all
certificates of insurance  respecting the Aircraft subject to this Lease as soon
as the same can be obtained,  but in no case later than the commencement date of
this Lease.  Lessor shall further  provide Lessee a certified copy of the policy
of  insurance  on the  Aircraft as soon as it is  available  from the  insurance
carrier.  If Lessor provides a certificate that does not evidence the coverage's
required  herein,  or that is faulty in any respect,  such does not constitute a
waiver of Lessor's obligations to obtain the proper insurance.

     4.  Waiver of  Subrogation.  Lessee  waives any and all rights of  recovery
against Lessor, his employees,  agents and  representatives,  for any loss of or
damage in connection with the possession,  use or operation of the Aircraft,  to
the  extent  that such loss or damage is  insured  against  under any  insurance
policy in force at the time of such loss or damage.  Lessee  must give notice to

<PAGE>

the appropriate  insurance  carrier that the foregoing  waiver of subrogation is
contained in this Lease must obtain an  endorsement  to its policies  containing
such  waiver  of  subrogation,  and must  provide  to  Lessor a  Certificate  of
Insurance  evidencing  the waiver of subrogation is contained in this lease must
obtain an endorsement to its policies  containing such waiver of subrogation and
must  provide to Lessor a  Certificate  of  Insurance  evidencing  the waiver of
subrogation.

                                   ARTICLE VI

     1.  Default by Lessee.  The  following  events shall  constitute  events of
default by Lessee hereunder:

         (a) Any  representation  or warranty made by Lessee hereunder or in any
document or  certificate  furnished to Lessor by Lessee in  connection  herewith
shall prove to have been false in any material  respect when made or  furnished;
or

         (b) Lessee  ceases  doing  business as a going  concern,  a petition is
filed by or against Lessee under the bankruptcy act or any amendment  thereof, a
receiver is  appointed  for Lessee or its  property,  Lessee  commits any act of
bankruptcy,  makes an assignment for the benefit of its  creditors,  or offers a
composition or extension of any of its indebtedness, or becomes insolvent.

         (c) Lessee fails to perform any of its agreements  contained  herein or
in any other  document  executed  in  connection  herewith,  including,  but not
limited to,  failure to timely pay rent or failure to provide  insurance  on the
Aircraft and to deliver satisfactory evidence of such insurance naming Lessor as
an additional insured and loss-payee as required herein.

     2.  Default by Lessor.  The  following  events shall  constitute  events of
default by Lessor hereunder:

         (a) Any  representation  or warranty made by Lessor hereunder or in any
document or certificate  furnished to Lessee in connection  herewith shall prove
to have been false in any material respect when made or furnished; or

         (b) Lessor  ceases  doing  business as a going  concern,  a petition is
filed by or against Lessor under the bankruptcy act or any amendment  thereof, a
receiver is  appointed  for Lessor or its  property,  Lessor  commits any act of
bankruptcy,  makes an assignment for the benefit of its  creditors,  or offers a
composition or extension of any of its indebtedness, or becomes insolvent.

         (c) Lessor fails to perform any of its agreements  contained  herein or
in any other  document  executed  in  connection  herewith,  including,  but not
limited  to,  failure  to  timely  provide  and pay for all  maintenance  on the
Aircraft, upon five (5) days written notice from Lessor to Lessee.

<PAGE>

                                   ARTICLE VII

     1. Remedies of Lessor. Subject to the cure periods set forth in Article IX,
Section 1, above, upon the occurrence of any incurred event of default by Lessee
and at any time thereafter so long as the same shall be continuing,  Lessor may,
at its option,  declare this Lease to be in default and at any time  thereafter,
so long as Lessee shall not have  remedied all  outstanding  defaults,  have and
exercise  all  remedies  provided  at law  and  in  equity,  including,  without
limitation, the following:

         (a) Declare the entire  amount of rent  hereunder  immediately  due and
payable without notice or demand to Lessee;

         (b) Recover from Lessee an amount  equal to the unpaid  balance due and
to become due during the term of this Lease;

         (c) Cause Lessee, at Lessee's expense, to return the Aircraft to Lessor
at Denton  Air  Center,  Denton,  Texas,  and if Lessee  fails to do so  Lessor,
through its  employees,  agents or attorneys,  may enter upon the premises where
the Aircraft is located and take immediate possession of the same without demand
or legal  process  and free of all  rights of  Lessee,  in which case the Lessee
authorizes  Lessor or its agents to enter upon any  premises  where the Aircraft
may be found for the purpose of repossessing  the same, and Lessee  specifically
waives any right of action it might otherwise have arising out of such entry and
repossession  whereupon all rights of the Lessee in the Aircraft shall terminate
immediately.  No such retaking of possession  shall  constitute a termination of
this Lease unless Lessor so notifies Lessee in writing; and/or

         (d)  Terminate  this Lease and retain  all prior  payments  of rent and
retake possession of the Aircraft as hereinbefore provided.

     2. Remedies of Lessee. Subject to the cure periods set forth in Article IX,
Section 2, above, upon the occurrence of any incurred event of default by Lessor
and at any time thereafter so long as the same shall be continuing,  Lessee may,
at its option,  declare this Lease to be in default and at any time  thereafter,
so long as Lessor shall not have remedied all  outstanding  defaults,  terminate
this Lease by returning the Aircraft to Lessor as required herein,  and have and
exercise all remedies provided at law and in equity.

     3.  Nonexclusive.  Exercise by either party of the rights  specified  above
shall not prejudice  that party's right to pursue any other remedy  available at
law or in equity.  The failure of either party to strictly enforce any provision
of this Lease  shall not be  construed  as a waiver  thereof and shall not later
preclude such party from  demanding  performance  in  accordance  with the terms
hereof.

                                  ARTICLE VIII

     4. Indemnification of Lessor.  Lessee agrees to indemnify and hold harmless
Lessor and its  successors  and  permitted  assigns from and against any and all
loss,  damage,  injury or death  claims,  demands and liability of every nature,

<PAGE>

including  reasonable  attorney's  fees,  arising from or in connection with the
possession, use or operation of the Aircraft by Lessee.

                                   ARTICLE.IX

     5. Pilots.  Lessee  agrees that the  Aircraft  will at all times during the
term of this Lease be operated by duly  qualified  pilots  employed  and paid or
contracted for by Lessor. Lessor warrants that each of the pilots who will pilot
such  Aircraft  shall  be duly  qualified  pilots,  whose  licenses  are in good
standing  and  who  meet  the  requirements  established  and  specified  by the
insurance  policies  required  to be  maintained  pursuant  to the terms of this
Lease.

                                    ARTICLE X

     6. Lessee's Right to Assign.  Each party agrees not to assign this Lease or
any interest  therein without the prior written consent of the other, and Lessee
shall  not part  with  the  possession  of the same  either  by  voluntary  act,
operation of law or otherwise. Lessee may sublease the Aircraft to affiliates of
Lessee so long as Lessee first obtains Lessor's  written consent,  which consent
shall not be unreasonably  withheld. Any such sublease does not excuse Lessee or
its sublessee from complying with all the provisions hereof, and prior to use of
the   Aircraft  by  sublessee   Lessee  must  provide   Lessor  with  a  written
acknowledgment from the insurers providing the coverage's required under Section
VIII that such sublease does not affect,  limit,  or alter the required hull and
liability insurance coverage's.

                                   ARTICLE XI

     7.  Notices.  All notices  provided  for herein shall be deemed to be given
upon delivery of the same in writing,  to the recipient thereof after depositing
in the U.S. mail, postage prepaid,  certified mail, return receipt requested and
addressed  to the party to be served at the  address set forth on the first page
hereof, or to such other address as may be designated by such party in a written
notice to the other party pursuant to the terms of this Section.

                                   ARTICLE XII

     8. Taxes.  During the terms of this Lease,  Lessee shall be responsible for
its  prorated  portion  of taxes  (except  those  measured  by the net income of
Lessor),  fines,  fees or  penalties  arising out of this Lease or the  Lessee's
operation of the aircraft (i.e., in the case of sales and use taxes, Lessee will
be responsible for taxes and assessments levied against, and constituting a lien
against the Aircraft which arise during the term of the Lease).

<PAGE>

                                  ARTICLE XIII

     9. Arbitration.  Any claim arising out of or relating to this Lease, or the
breach thereof,  shall be settled by binding  arbitration in the City of Denton,
State of Texas,  U.S.A. in accordance with the commercial  Arbitration  Rules of
the American Arbitration Association then in effect, and judgment upon the award
entered by the  arbitrator(s)  may be entered in any court  having  jurisdiction
thereof.

There  will  be one  arbitrator,  which  shall  be  appointed  by  the  American
Arbitration  Association.  The arbitrator  will be an individual  skilled in the
legal and business  aspects of the subject  matter of this  Agreement and of the
dispute.  The  arbitrator  will have no power to change any of the provisions of
this Agreement and his  jurisdiction is limited  accordingly.  The arbitrator is
not empowered to award treble, consequential,  incidental,  special, or punitive
damages. Costs of the arbitration will be assessed by the arbitrator against any
or all of the  parties,  and will be paid  promptly  by the party or  parties so
assessed.  Provided,  however,  Lessor is not required to seek  arbitration as a
condition  precedent to taking or retaking  possession of the Aircraft,  with or
without a court order,  or to seeking any  injunctive  relief  against Lessee as
Lessor may deem necessary in order to enforce its rights and remedies under this
Lease.

                                   ARTICLE XIV

     10. Miscellaneous.

         (a) Modification.  Only a written  instrument  executed by both parties
hereto may modify this Lease.

         (b)  Binding  Effect.  This  Lease  shall be binding  upon the  parties
hereto, their successors, permitted assigns and legal representatives.

         (c) Entire Agreement. The terms and conditions of this Lease constitute
the entire  agreement and supersede all previous  negotiations,  representations
and agreements between the parties, whether written or oral.

         (d)  Applicable  Law;   Venue.   This  Lease  shall  be  construed  and
performance  shall be governed under the laws of the State of Texas. Any lawsuit
or other  court  proceeding  between or among  Lessor and Lessee  relating to or
arising out of this Lease or the subject  matter  hereof shall be brought in the
federal or state  courts  located  in  Denton,  Texas.  The  foregoing  does not
prohibit  Lessor  from  pursuing  legal  recourses  in  any  other  court  where
jurisdiction  may be  proper  in  order  to take  or  retake  possession  of the
Aircraft.

         (e) Counterparts.  This Lease may be executed in separate counterparts,
each of which when so executed and delivered shall be an original,  but all such
counterparts shall together constitute one and the same instrument.

<PAGE>

         (f) Survival of Representations and Warranties. All representations and
warranties  contained herein and made by either party to the other shall survive
the execution of this Lease.

         (g) Assignment. This Lease shall inure to the benefit of and be binding
upon each of the parties hereto and their respective successors and assigns.

"Lessor"                                "Lessee"

ROYIS WARD                              TIDELANDS OIL AND GAS CORP

By: /s/ Royis Ward                      By: /s/ Michael Ward
   ---------------------------             ---------------------------

                                        Title: PRESIDENT
                                              -------------------------

                                        Witness: /s/
                                                -----------------------

     1. Truth in Leasing.  (SEE FEDERAL  AVIATION  REGULATION FAR 91.23.) LESSOR
CERTIFIES  THAT  THE  VENDOR  OF  THIS  AIRCRAFT  A  BEECHCRAFT  KING  AIR  B90,
MANUFACTURER'S  SERIAL NO. LJ-369 CURRENTLY REGISTERED WITH THE FEDERAL AVIATION
ADMINISTRATION  AS N20LA HAS  REPRESENTED  TO LESSOR THAT THE  AIRCRAFT HAS BEEN
MAINTAINED AND EFFECTED UNDER FAR 91 FROM THE DATE OF  MANUFACTURE,  TO THE DATE
HEREOF (INCLUDING DURING THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS LEASE.

Witness: /s/
        ---------------------------

<PAGE>

                                   Exhibit "A"
                                Ser. No.: LJ-369

DUAL FLIGHT DIRECTOR 108'S
DUAL HIS/RMI
DUAL TRANSPONDERS
PRIMUS COLOR RADAR WX l0A
APOLLO 618 LORAN
M4-C AUTO PILOT
AIR CONDITIONING (FREON)
CLUB SEATING

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