Document:

Exhibit 10.2

         Consulting and Overriding Royalty Agreement with Davis & Namson

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17
D:\WINWORD\JOANNE\BUSINESS\CONSULTING AND OVERRIDING ROYALTY AGREEMENT.doc
                   CONSULTING AND OVERRIDING ROYALTY AGREEMENT
                            DATED SEPTEMBER 20, 1999

BETWEEN:

           SAN JOAQUIN OIL & GAS LTD., a corporation incorporated under the laws
           of the State of Nevada and  having an office in the City of  Calgary,
           in the Province of Alberta ("San Joaquin")

                                     - and -

           DAVIS &  NAMSON  CONSULTING  GEOLOGISTS,  a  California  Partnership,
           having  an  office  in the  City of San  Fernando,  in the  State  of
           California (the "Consultant")

WHEREAS:

A.       San  Joaquin  wishes to retain the  Consultant  to  provide  geological
         consulting services in locating, evaluating, investigating,  appraising
         and acquiring  hydrocarbon  prospects in the San Joaquin and Sacramento
         basin of California in accordance  with the  directions of San Joaquin;
         and

B.       The  Consultant  has agreed to provide such  services to San Joaquin on
         the terms and subject to the conditions set out herein.

THE PARTIES AGREE AS FOLLOWS:

                           ARTICLE 1 - INTERPRETATION

1.1      DEFINITIONS
In this Agreement,  unless the context otherwise  requires,  the following terms
shall have the following meanings:

         "ACQUIRED  PROSPECTS" means all Prospects set forth in Prospect Letters
         in which an interest is acquired by San Joaquin  within a period of two
         years from the date of acceptance of each applicable  Prospect  Letter,
         including interests obtained by way of lease, purchase, farmin or other
         types of  agreements  and also  including any 50% Interests San Joaquin
         has elected to acquire;

         "CONFIDENTIAL   INFORMATION"   includes:   a)  all   Prospects,   data,
         evaluations,  information and reports prepared as part of the Services;
         b) all  confidential  and  proprietary  information  and trade  secrets
         relating  to  the  Services;  and  c)  techniques,  inventions,  ideas,
         processes  and  procedures,  know-how,  computer  software  and related
         intellectual  property and similar information  concerning the business
         of San Joaquin;

         "CONSULTANT'S  REPRESENTATIVES" means the Partners,  employees, agents,
         officers, directors,  representatives,  consultants, or advisors of the
         Consultant;

         "EFFECTIVE DATE" means September 20, 1999;

         "50% INTEREST" is defined in Subsection 3.3 b);

         "INITIAL  TERM" means the period from the Effective  Date until January
         20, 2000, inclusive;

         "NON-ACQUIRED  PROSPECTS"  means  all  Prospects  other  than  Acquired
         Prospects;

         "NOTICES" is defined in Section 10.1;

         "OVERRIDING ROYALTY" is defined in Schedule "B";

         "PARTIES"  means San Joaquin  and the  Consultant,  and  "PARTY"  means
         either of them;

         "PARTNERS"  means Jay Namson  and Thom Davis or either of them,  as the
         context requires;

         "PERSON" includes a corporation,  an individual, a partnership, a firm,
         an association and a syndicate;

         "PRODUCTS" is defined in Section 5.1;

         "PROHIBITED AREA" shall mean all lands within the Study Areas for which
         Prospects have been generated by Consultant;

         "PROHIBITED  BUSINESS"  means any  business  which may be  directly  or
         indirectly  in  competition  with the  business  of San  Joaquin in the
         Prohibited Area;

         "PROSPECT MAP" is defined in Section 3.1;

         "PROSPECTS"  means all prospects  relating to interests in lands or the
         hydrocarbon  rights thereto  generated by the Consultant as part of the
         Services pursuant to the terms of this Agreement,  and "PROSPECT" means
         a particular one of the Prospects;

         "PROSPECT  LETTER" means a letter in the form of Schedule "C" generated
         by the Consultant with respect to a Prospect;

         "RENEWAL PERIODS" is defined in Section 4.1;

         "ROYALTY LANDS" is defined in the Royalty Procedure;

         "ROYALTY PROCEDURE" means the document attached as Schedule "B";

         "SERVICES" means the geological  consulting  services to be provided by
         the  Consultant  hereunder  as set forth in Schedule "A" and such other
         consulting services as the Parties may agree from time to time;

         "STUDY  AREAS"  means lands and  geological  formations  within the San
         Joaquin and Sacramento Basin area of California;

         "TERM" is defined in Section 4.2;

         "TERMINATION DATE" is defined in Section 4.1;

1.2      INTERPRETATION
a)       The  headings  of the  articles  and  sections  of this  Agreement  are
         inserted for  convenience  of  reference  only and shall not be used in
         construing or interpreting any provisions hereof.
b)       Whenever the singular or masculine or neuter is used in this Agreement,
         the same shall be  construed  as meaning the plural or feminine or body
         politic or corporate  and vice versa as the context or reference to the
         Parties may require.

1.3      SCHEDULES
All Schedules  attached hereto are incorporated  herein by reference as fully as
though contained in the body hereof.  The Schedules are as follows:
         a)       Schedule "A" which sets forth and describes the Services to be
                  performed hereunder;
         b)       Schedule  "B" which is the Royalty  Procedure,  including  all
                  accepted  Prospect  Letters  that are to be  attached  thereto
                  pursuant to the terms of this Agreement; and
         c)       Schedule  "C"  which  is a  form  of  Prospect  Letter  to  be
                  presented  by  the  Consultant.  Should  there  be a  conflict
                  between the  provisions  of the body of this  Agreement  and a
                  Schedule  hereto,  the provisions in the body of the Agreement
                  shall prevail to the extent necessary to resolve the conflict.

                              ARTICLE 2 - RETAINER

2.1      RETAINER
San Joaquin  agrees to retain the  Consultant  to provide  San Joaquin  with the
Services and the Consultant agrees to provide the Services to San Joaquin.

2.2      PROVISION OF SERVICES
a)       The  Services  to be  provided  hereunder  by the  Consultant  shall be
         provided by the  Partners.  The  Partners may from time to time utilize
         the  assistance  of  other  Consultant's   Representatives,   including
         geological  technicians,  as may be  appropriate  to provide  them with
         technical  assistance  in  performing  the  Services.  If an additional
         independent  geologist,  or an  engineer,  landman or  geophysicist  is
         required  by  Consultant  to assist in  providing  the  Services,  such
         additional   independent   geologist  or  such  engineer,   landman  or
         geophysicist may be hired only with the prior approval of San Joaquin.
b)       During the Initial  Term,  the  Consultant  shall  provide  Services of
         Partners for 30 man days per month or 120 days during the Initial Term.
         For each Renewal  Period,  San Joaquin may elect,  with the approval of
         the Consultant, to increase or decrease the foregoing number of days in
         increments of 10 days per month.

                              ARTICLE 3 - PROSPECTS

3.1      PROSPECT LETTERS
The Consultant  shall  generate and present to San Joaquin a Prospect  Letter in
the form of Schedule  "C" for each and every  Prospect  developed as part of the
Services.  Each  Prospect  Letter  shall  describe  the lands and  include a map
outlining the area (the "Prospect Map") covering such Prospect.  San Joaquin may
accept some, none or all of the Prospects described in such Prospect Letters, in
its sole discretion.

3.2      ACCEPTANCE OF PROSPECTS
Each Prospect Letter that is accepted by San Joaquin shall be incorporated  into
this  Agreement  as part of  Schedule  "B" as of the date of  acceptance  of the
applicable  Prospect Letter by San Joaquin.  The lands described therein and the
Prospect  Map  attached  thereto  shall  become  part of the  Royalty  Lands for
purposes of Schedule "B".

3.3      REJECTION OF PROSPECTS BY SAN JOAQUIN
a)       If San Joaquin initially rejects a Prospect Letter, it may nevertheless
         (subject to Subsection  3.3 b) hereof) within twelve (12) months of the
         presentation   of  the  applicable   Prospect   Letter  by  Consultant,
         subsequently  elect to  accept  such  Prospect  Letter  by  sending  an
         amending letter to the  Consultant.  The Consultant  shall  acknowledge
         receipt of such  amending  letter and the  applicable  Prospect  Letter
         shall be incorporated into this Agreement as part of Schedule "B" as of
         the date of such acceptance by San Joaquin.
b)       After  four (4) months  from the date that a  Prospect  Letter has been
         presented  by the  Consultant  to San  Joaquin,  if San Joaquin has not
         accepted the Prospect  Letter,  the Consultant  shall have the right to
         have a third party acquire the applicable  Prospect and any leases with
         respect  thereto.  In such case,  if, during the fifth through  twelfth
         months  (inclusive)  from the date of the  presentation of the Prospect
         Letter,  a third party agrees to acquire such Prospect,  the Consultant
         shall  provide San  Joaquin  with the right to elect to acquire a fifty
         percent (50%)  interest in such Prospect  (the "50%  Interest"),  along
         with the  right to act as  operator  of the  Prospect.  If San  Joaquin
         elects to acquire  such 50%  Interest,  San  Joaquin  shall pay its 50%
         share  of  any  geological,  geophysical  or  lease  acquisition  costs
         relating  thereto.  If San Joaquin elects to acquire such 50% Interest,
         the  applicable   Prospect  Letter  shall  be  incorporated  into  this
         Agreement  as part of Schedule  "B" for the 50% Interest as of the date
         of such election by San Joaquin,  and the lands  described  therein and
         the  Prospect  Map  attached  thereto  shall become part of the Royalty
         Lands for purposes of Schedule "B".
c)       After one year from the date that a Prospect  Letter has been presented
         by the Consultant to San Joaquin,  if San Joaquin has not accepted such
         Prospect  Letter,  the  Consultant  shall be free to have a third party
         acquire the applicable  Prospect with no further  obligation to provide
         an interest to San Joaquin.

3.4      DEVELOPMENT OF PROSPECTS
Nothing  herein  contained or implied  shall  obligate San Joaquin to accept any
Prospect  nor to acquire an interest in or perform any  operations  upon or with
respect to any of the lands contained in any of the Prospects.
                            ARTICLE 4 - COMPENSATION

4.1      REMUNERATION
In consideration for the provision by Consultant of the Services hereunder,  San
Joaquin shall pay to the Consultant the following fees:

         Day Rate for Partners                       U.S. $750/day
         Geological Technicians                      U.S. $275/day
         Travel Day Rate for Partners                U.S. $750/day

It is understood and agreed that:
a)       the Consultant shall be solely responsible for any additional  salaries
         and  wages,  cost  of  holidays,   vacation,  sickness  and  disability
         benefits,  insurance coverage and other customary  allowances which may
         be payable to any of Consultant's Representatives; and that
b)       the  above-referenced  fees cover all office overhead costs and include
         all  engineering,  geological  and  geophysical  data  relating  to the
         Prospects currently in the possession of the Consultant.

Every four weeks during the Term, the Consultant  shall provide  invoices to San
Joaquin  setting forth the fees payable to Consultant  for that four week period
and San Joaquin  shall pay such  invoices by wire  transfer to the  Consultant's
bank account.

4.2      EXPENSES
Consultant  shall be  reimbursed  for all  reasonable  out of  pocket  expenses,
including costs for travel, supplies,  shipping, plotting and new data, actually
and  properly  incurred by the  Consultant  in  connection  with  providing  the
Services  hereunder.  On a monthly  basis,  any expenses in an aggregate  amount
greater  than  $2000.00  shall  require  prior  approval  of  San  Joaquin.  The
Consultant  shall  furnish  statements  and  backup  materials  to  support  all
expenses.

4.3      OVERRIDING ROYALTY
In addition to paying the  remuneration  and  expenses set forth in Sections 4.1
and 4.2, San Joaquin shall also award the Partners  constituting  the Consultant
an Overriding  Royalty on all oil and gas leases obtained within areas indicated
on Prospect  Maps for  Acquired  Prospects  in  accordance  with  Schedule  "B".
Acquisition  by San Joaquin of any oil and gas leases on prospects not generated
by the Consultant  will not be subject to the Overriding  Royalty,  nor will any
Non-Acquired Prospects be subject to the Overriding Royalty.

4.4      NO OTHER INTEREST
Except as provided in Sections  4.1,  4.2 and 4.3, the  Consultant  shall not be
entitled  to any other fees nor any share of the  interest of San Joaquin in any
Acquired  Prospect  and that San Joaquin  alone shall be solely  entitled to the
rights and benefits in respect to the Acquired Prospects.

              ARTICLE 5 - REPRESENTATIONS, WARRANTIES AND COVENANTS

5.1      REPRESENTATION AND WARRANTY BY CONSULTANT
The  Consultant  represents  and warrants to San Joaquin that the Consultant and
all  applicable  Consultant's  Representatives  have  the  required  skills  and
experience to perform the duties and exercise the  responsibilities  required of
the  Consultant  in  performing  the Services  hereunder.  Without  limiting the
generality  of  the   foregoing,   the  Consultant   agrees  that   Consultant's
Representatives  shall  remain  members  in good  standing  in their  respective
professional  associations  and conduct  themselves in accordance with the rules
governing the conduct of the members of the said associations.

5.2      NO DELEGATION OF SERVICES
The Consultant  covenants and agrees with San Joaquin that it shall not delegate
performance of the Services to any person  without the prior written  consent of
San Joaquin.

                          ARTICLE 6 - TERM OF AGREEMENT

6.1      INITIAL TERM AND RENEWAL PERIODS
The Initial Term of this Agreement shall be the period of time commencing on the
Effective Date and ending on January 20, 2000. The Agreement  shall continue for
successive  four  month  periods  (the  "Renewal   Periods")   thereafter  until
terminated  by either Party by written  notice  given at least 45 calendar  days
prior to the end of any such four month period.  The Agreement  shall  thereupon
terminate  on the last day of such four month  period after such notice has been
given (the "Termination Date").

6.2      TERM
The  Term of  this  Agreement  shall  be  from  the  Effective  Date  until  the
Termination Date.

                           ARTICLE 7 - CONFIDENTIALITY

7.1      OWNERSHIP OF PRODUCTS
The  Consultant   acknowledges  and  agrees  that  all  Prospects,   inventions,
improvements,  discoveries, intellectual property or trade secrets (collectively
the  "Products")  made,  conceived,  developed  or  reduced to  practice  in the
performance of the Services  hereunder shall belong  exclusively to San Joaquin.
The Consultant agrees to take all steps to vest in San Joaquin all of the right,
title and interest in and to any of the  Products  and will,  at the request and
expense of San Joaquin,  procure  appropriate  intellectual  property protection
covering the Products. This Section will cease to apply to any Products relating
to  Non-Acquired  Prospects  one year  from the date  that  each the  applicable
Prospect Letter was presented to San Joaquin by the  Consultant,  or in the case
of a 50% Interest  acquired by San Joaquin  pursuant to Subsection  3.3 b), this
Section  will not apply to any  Products  relating  to the  other  50%  interest
acquired by the applicable third party.

7.2      CONFIDENTIAL INFORMATION
a)       Except with the express  written consent of San Joaquin or as otherwise
         herein expressly provided,  the Consultant shall not, either during the
         Term of this Agreement or at any time thereafter,  disclose or cause to
         be disclosed,  either directly or indirectly,  any of the  Confidential
         Information  in any  manner,  to  anyone  other  than to the  officers,
         directors and management of San Joaquin.
b)       The  Confidential  Information  shall only be disclosed to  Consultants
         Representatives on a "need to know" basis. Consultant shall ensure that
         all such Persons having access to the Confidential  Information  comply
         with the provisions of this Agreement.
c)       The confidentiality obligations hereunder shall not apply to any of the
         Confidential   Information  that  the  Consultant  can  demonstrate  is
         available  to the public  other than as a result of  disclosure  by the
         Consultant or Consultant's Representatives.
d)       The confidentiality  obligations  hereunder shall cease to apply to any
         Non-Acquired  Prospects  one year  from the  date  that the  applicable
         Prospect Letter was presented to San Joaquin by the Consultant. Between
         the fifth and twelfth months  (inclusive) from the date that a Prospect
         Letter for a  Non-Aquired  Prospect was  presented to San Joaquin,  the
         Consultant shall be entitled to disclose Confidential  Information to a
         third party in exercising its rights under Subsection 3.3 b).
e)       The Consultant shall be entitled to disclose  Confidential  Information
         to a court of competent  jurisdiction  or to any regulatory body having
         jurisdiction, provided that:
                  (i)      The  Consultant   shall  take  reasonable   steps  to
                           maintain  the  confidentiality  of  the  Confidential
                           Information by the court or regulatory body; and
                  (ii)     The   Consultant   shall  provide  San  Joaquin  with
                           immediate   written   notice  of  any   request   for
                           disclosure.

7.3      LIABILITY AND INDEMNITY
The Consultant shall:
         a)       be liable to San Joaquin  for all loss and damages  whatsoever
                  which San Joaquin may sustain or incur; and, in addition
         b)       indemnify  and hold  harmless San Joaquin from and against all
                  loss and  damages  whatsoever  which  may be  suffered  by San
                  Joaquin  or which it may  sustain  or incur by  reason  of the
                  failure of the Consultant or Consultant's  Representatives  to
                  comply with the obligations  contained in Sections 7.1 and 7.2
                  of this Agreement.

7.4      OTHER REMEDIES
The  Consultant   acknowledges   the  competitive   value  of  the  Confidential
Information.  Accordingly,  the  Consultant  agrees,  that  in  addition  to the
remedies provided in Section 7.3, that injunctive relief,  specific  performance
or other  equitable  relief  are  appropriate  remedies  for any  breach of this
Agreement by the Consultant or Consultant's Representatives.

                           ARTICLE 8 - NON-COMPETITION

8.1      NON-COMPETITION
The  Consultant  agrees  that it will not at any time  during  the Term or for a
period of four (4) months following the Termination  Date of this Agreement:
         a)       individually  or  jointly  with  or  in  association  with  or
                  conjunction with or in partnership with any Person carry on or
                  be engaged in or be  concerned  with the  Prohibited  Business
                  within the Prohibited Area;
         b)       as  agent  for  any  person  or as  an  officer,  director  or
                  shareholder of any corporation be engaged in or concerned with
                  the Prohibited Business within the Prohibited Area; or
         c)       in  any  manner  whatsoever,  carry  on  or be  engaged  in or
                  concerned  with or be  interested in the  Prohibited  Business
                  within the Prohibited Area.

Subject  to  Section  7.2 and the  foregoing  provisions  of this  Section  8.1,
Consultant shall,  however, be allowed to present and submit research papers and
lead geological field trips in the Prohibited Area.

8.2      RESTRICTIONS VALID
The Consultant  acknowledges and agrees that all restrictions  contained in this
Agreement are  reasonable  and valid and all defenses to the strict  enforcement
thereof by the Consultant are hereby waived.

                              ARTICLE 9 - CAPACITY

9.1      INDEPENDENT CONTRACTOR
It is  acknowledged  that the Consultant is being retained by San Joaquin in the
capacity of an independent contractor and not as an employee of San Joaquin. The
Parties agree that this Agreement does not create a partnership or joint venture
between them.

                    ARTICLE 10 - GENERAL CONTRACT PROVISIONS

10.1     NOTICES
All notices, requests, demands or other communications (collectively, "Notices")
by the terms hereof required or permitted to be given by one Party to the other,
or to any other  person,  shall be given in writing by  personal  delivery or by
registered  mail,  postage prepaid,  or by facsimile  transmission to such other
party at the following address:

         a)       To San Joaquin at:        53 STRATFORD PLACE S.W.
                                            CALGARY, ALBERTA T3H 1H7
                                            FAX: (403) 246-5056

b)       To the Consultant at:              301 S. MACLAY STREET
                                            SUITE 201
                                            SAN FERNANDO, CALIFORNIA 91340
                                            FAX: (818) 838-0366

or such other  address as may be given by a Party to the other  Party  hereto in
writing from time to time.

All such  Notices  shall be deemed  to have  been  received  when  delivered  or
transmitted  or, if mailed,  72 hours after 12:01 a.m. on the day  following the
day of the mailing thereof.  If any Notice shall have been mailed and if regular
mail  service  shall be  interrupted  by strikes or other  irregularities,  such
Notice  shall be deemed to have been  received  72 hours after 12:01 a.m. on the
day  following the  resumption of normal mail service,  provided that during the
period that regular mail service is interrupted, all Notices shall be given only
by personal delivery or by facsimile transmission.

10.2     FURTHER ASSURANCES
The Parties shall sign such further and other documents,  cause such meetings to
be held,  resolutions  passed  and  by-laws  enacted,  exercise  their  vote and
influence,  do and perform and cause to be done and  performed  such further and
other acts and things as may be  necessary  or  desirable  in order to give full
effect to this Agreement and every part hereof.

10.3     COUNTERPARTS
This  Agreement  may be  executed  in  several  counterparts,  each of  which so
executed shall be deemed to be an original and such counterparts  together shall
be one and the same instrument.

10.4     TIME OF THE ESSENCE
Time shall be of the essence of this  Agreement  and of every part hereof and no
extension  or  variation  of this  Agreement  shall  operate as a waiver of this
provision.

10.5     ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the Parties with respect
to all the  matters  herein and its  execution  has not been  induced by, nor do
either of the Parties rely upon or regard as material,  any  representations  or
writings whatever not incorporated herein and made a part hereof. This Agreement
may not be amended  or  modified  in any  respect  except by written  instrument
signed by the Parties.  Any schedules referred to herein are incorporated herein
by reference and form part of this Agreement.

10.6     ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their   respective   legal   personal    representatives,    heirs,   executors,
administrators or successors.

10.7     ASSIGNMENT
San Joaquin may assign its rights and  obligations  under this  Agreement.  This
Agreement  may not be assigned  by the  Consultant,  except that the  Overriding
Royalty may be assigned as provided in Schedule "B".

10.8     CURRENCY
Unless  otherwise   specifically  provided  for  herein,  all  monetary  amounts
specified  herein  shall  refer to the  lawful  money of the  United  States  of
America.

10.9     GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of California and each Party irrevocably  attorns to the non-exclusive
jurisdiction of the Courts of such State.

10.10    CALCULATION OF TIME
When  calculating a period of time within which or following which any act is to
be done  or step  taken  pursuant  to this  Agreement,  the  date  which  is the
reference date shall, unless otherwise  specifically  included,  be excluded. If
the last day of a period is not a business day, then the time period in question
shall end on the first business day following such non-business day.

<PAGE>

10.11    SEVERABILITY
If any portion of this  Agreement is determined  to be invalid or  unenforceable
for any reason whatsoever,  that invalidity or unenforceablity  shall not affect
the validity or enforceability of remaining  portions of this Agreement and such
invalid or  unenforceable  portion  shall be severed from the  remainder of this
Agreement.

IN WITNESS  WHEREOF the  Parties  have  executed  this  Agreement  this 3 day of
October, 1999.

SAN JOAQUIN OIL & GAS LTD.                  DAVIS & NAMSON
                                            CONSULTING GEOLOGISTS
PER:   /s/ J. Timothy Bowes                PER:  /s/ Jay S. Namson
    ---------------------------                ----------------------------
J. TIMOTHY BOWES,                           JAY S. NAMSON, PH.D.
PRESIDENT
                                            PER:   /s/ Thomas L. Davis
                                                ---------------------------
                                                 THOMAS L. DAVIS. PH.D.

<PAGE>

                            SCHEDULE "A" - SERVICES

Attached to and made part of an Agreement dated the 20th day of September, 1999,
  between San Joaquin Oil & Gas Ltd. and Davis & Namson Consulting Geologists

"SERVICES"  SHALL  INCLUDE  THE  FOLLOWING  ACTIVITIES  TO BE  PERFORMED  BY THE
CONSULTANT UNDER THE AGREEMENT:

A.       GEOLOGICAL EVALUATION OF STUDY AREAS
         The  Consultant  shall cause to be  conducted a detailed,  thorough and
         complete  geological  study and evaluation of such lands and geological
         formations within the Study Areas as directed by San Joaquin during the
         Term  for  the  purpose  of  locating,  evaluating,  investigating  and
         appraising  hydrocarbon  prospects in the Study Areas.  The  Consultant
         shall have a good faith  obligation to present all Prospects  developed
         during the Term to San Joaquin by  presenting  Prospect  Letters to San
         Joaquin  as  contemplated  in  the  Agreement.   The  Consultant  shall
         recommend which of the Prospects should become Acquired Prospects.  The
         Consultant  shall  assist San Joaquin  from a technical  standpoint  in
         developing  sufficient  technical and strategic expertise regarding the
         Prospects with which to acquire lands that may become available through
         lease,  purchase,  farmin or otherwise.  During the Initial  Term,  the
         Services shall specifically include the following work programs:

         I.       During the period from the Effective  Date until  November 20,
                  1999 ("Phase I"), the  Services  shall  include the  following
                  work program:
                  A.       Review leads in Davis and Namson inventory.
                  B.       Select leads for further work and land evaluation.
                  C.       Begin developing leads into Prospects.
                  D.       Acquire additional  geologic and geophysical data and
                           review  non-proprietary  seismic  data over leads and
                           Prospects.
                  E.       Initiate land review.
                  F.       Review  outside  company  proposals  and  data  rooms
                           (including Enron, Aera, Chevron, Texaco).
                  G.       Recommend lands for leasing.

         II.      During the period from  November 21, 1999,  until  January 20,
                  2000 ("Phase  II"),  the Services  shall include the following
                  work program:
                  A.       Develop  new  Davis  and  Namson  regional  leads and
                           trends.
                  B.       Generate new Davis and Namson prospects.
                  C.       Review outside proposals in light of new prospects.
                  D.       Initiate land review.
                  E.       Recommend lands for leasing.
                  F.       Farm out Davis and  Namson  generated  prospects  and
                           seek partners.

<PAGE>

B.       BUDGETS AND WORK PROGRAMS
At least  thirty (30) days  before the end of the  Initial  Term and before each
Renewal Period, the Consultant shall provide San Joaquin with the following:

         1.       a proposed  work program  setting our a proposed  work program
                  for the next succeeding four (4) month period; and

         2.       a  proposed  budget  for the next  succeeding  four (4)  month
                  period, including the following:

                  A.       Number of days for which Services will be provided by
                           Consultant (to be divided into number of days and the
                           day  rates   for  each   category   of   Consultant's
                           Representatives,    including   Partners,    landmen,
                           geophysicists, geologists, geological technicians and
                           other   technical   aides)
                  B.       Travel Expenses
                  C.       Geological  and  Geophysical   Data   Acquisition
                  D.       Miscellaneous

The Parties will discuss and reach  mutual  agreement  upon any budgets and work
programs to be carried out as part of the Services for each Renewal Period.

<PAGE>

                                  SCHEDULE "B"
                                ROYALTY PROCEDURE

         ATTACHED TO AND MADE PART OF AN AGREEMENT DATED THE 20TH DAY OF
                 SEPTEMBER, 1999, BETWEEN SAN JOAQUIN OIL & GAS
                 LTD. AND DAVIS & NAMSON CONSULTING GEOLOGISTS.

                WHEREAS Davis & Namson Consulting Geologists and San Joaquin Oil
& Gas Ltd. are parties to that Agreement  dated the 20th day of September,  1999
(hereinafter called the "Agreement") to which this Royalty Procedure is attached
as Schedule "B"; and

                WHEREAS  pursuant to the terms and  conditions of the Agreement,
San  Joaquin  Oil & Gas Ltd.  agrees  to  grant  to  Davis &  Namson  Consulting
Geologists a gross overriding royalty as more particularly set forth herein;

                NOW  THEREFORE  in  consideration  of the mutual  covenants  and
agreements herein contained and subject to the terms and conditions  hereinafter
set forth, the parties agree as follows:

 1.00       DEFINITIONS

            In this Royalty  Procedure  including  the recitals and this Clause,
            unless the context  otherwise  requires,  the following  terms shall
            have the meanings hereinafter assigned thereto, namely:

         (a)      AFFILIATE  means,  with  respect to the  relationship  between
                  partnerships or  corporations,  that one of them is controlled
                  by the  other  or both  of them  are  controlled  by the  same
                  person,  corporation  or  partnership;  and for this purpose a
                  corporation  shall be  deemed  controlled  by  those  persons,
                  corporations or partnerships  who own or effectively  control,
                  other than by way of security only,  sufficient  voting shares
                  of the corporation  (whether directly through the ownership of
                  shares of the corporation or indirectly  through the ownership
                  of shares of  another  corporation  which  owns  shares of the
                  corporation)  to elect the majority of its board of directors,
                  and a  partnership  shall be deemed  controlled by any person,
                  corporation or partnership with a beneficial ownership of more
                  than 50% in such partnership.

         (b)      CONDENSATE  means a mixture  mainly of  pentanes  and  heavier
                  hydrocarbons   (whether  or  not  contaminated   with  sulphur
                  compounds)  that is recovered or recoverable at a well from an
                  underground  reservoir  and that may be  gaseous in its virgin
                  reservoir  state but is liquid at the  conditions  under which
                  its volume is measured or estimated.

         (c)      CRUDE OIL  means a mixture  mainly  of  pentanes  and  heavier
                  hydrocarbons   (whether  or  not  contaminated   with  sulphur
                  compounds)  that is recovered or recoverable at a well from an
                  underground  reservoir  and that is liquid  at the  conditions
                  under which its volume is measured or  estimated  and includes
                  all other hydrocarbon mixtures so recovered except Natural Gas
                  and Condensate.

         (d)      CURRENT  MARKET VALUE means the price  received by the Grantor
                  at the  Point  of  Measurement  for  its  share  of  Petroleum
                  Substances produced and marketed from, or pursuant to a scheme
                  of pooling or  unitization  allocated  to, the Royalty  Lands,
                  which  price  shall not be less than  that  which the  Grantor
                  would  have  received  at  the  wellhead  in an  arm's  length
                  transaction if acting as a reasonably  prudent operator having
                  regard to the current market prices,  availability  to market,
                  type  of   transportation   service   available  and  economic
                  conditions of the petroleum industry generally.

         (e)      GRANTOR means San Joaquin Oil & Gas Ltd.

         (f)      NATURAL GAS means Raw Gas or marketable  gas as the context so
                  requires, and as those terms are defined in the Regulations;

         (g)      NET REVENUE INTEREST means the percentage  interest  remaining
                  in any particular  Royalty Lands after all  applicable  lessor
                  royalties and other similar  existing  burdens or encumbrances
                  relating thereto are subtracted from 100%.

         (h)      OVERRIDING  ROYALTY  means  the  applicable  percentage  gross
                  overriding  royalty as reserved in this  Royalty  Procedure in
                  favour of the Royalty Owner,  more  particularly  described in
                  the  Clause  entitled  "Overriding  Royalty"  in this  Royalty
                  Procedure.

         (i)      PETROLEUM   SUBSTANCES  means  all  Crude  Oil,  Natural  Gas,
                  Condensate,  related  hydrocarbons,  sulphur  and every  other
                  substance  an  interest  in which is  granted  under  the Said
                  Leases.

         (j)      POINT OF MEASUREMENT means the production  tankage in the case
                  of Crude  Oil and  Condensate  and  shall  mean  the  point of
                  delivery  in the case of Natural  Gas and all other  Petroleum
                  Substances.

         (k)      PROSPECT LETTERS means any letters in the form of Schedule "C"
                  to the  Agreement  which are attached  hereto  pursuant to the
                  provisions of the Agreement.

         (l)      RAW GAS has the meaning prescribed by the Regulations.

         (m)      REGULATIONS  means  all  statutes,  laws,  rules,  orders  and
                  regulations   in  effect   from  time  to  time  and  made  by
                  governments  or   governmental   boards  or  agencies   having
                  jurisdiction over the Royalty Lands and over the operations to
                  be conducted thereon.

         (n)      ROYALTY  LANDS means the areal,  stratigraphic  and  substance
                  rights for lands within areas  indicated in Prospect  Maps for
                  which leases or other interests are obtained by Grantor within
                  two years of Grantor's  acceptance of each applicable Prospect
                  Letter  attached  hereto  pursuant  to the  provisions  of the
                  Agreement.

         (o)      ROYALTY  OWNER means Thomas L. Davis & Jay S. Namson,  each as
                  to a 50% interest.

         (p)      SAID LEASES means the title documents  relating to the Royalty
                  Lands,   and   any   extensions,   renewals,   variations   or
                  replacements of the title documents  insofar as they relate to
                  the Royalty Lands.

<PAGE>

 2.00       OVERRIDING ROYALTY

 2.01       QUANTIFICATION OF OVERRIDING ROYALTY
            (a)     The Grantor hereby grants to the Royalty Owner an Overriding
                    Royalty,  which shall  comprise an interest in the Petroleum
                    Substances  within,  upon and under the Royalty  Lands.  The
                    gross  volume  of  Petroleum   Substances   comprising   the
                    Overriding  Royalty  shall be  quantified  as the  following
                    applicable  percentage  of the Current  Market  Value of the
                    gross monthly  production of Petroleum  Substances from each
                    well on the Royalty Lands in  accordance  with the following
                    applicable Net Revenue Interest for such Royalty Lands:

<TABLE>
<CAPTION>
                    OVERRIDING ROYALTY PERCENTAGE    IF THE NET REVENUE INTEREST IS:
                    -----------------------------    -------------------------------
<S>                                                  <C>
                            3%                                Greater than 87.5%
                            2.5%                              84% to 87.49%, inclusive
                            2.0%                              81% to 83.99%, inclusive
                            1.5%                              Less than 81%
</TABLE>

            (b)     For  the  purpose  of  determining  the  Overriding  Royalty
                    payable to the  Royalty  Owner for each well on the  Royalty
                    Lands,  the  applicable  Overriding  Royalty  percentage set
                    forth  in   Subsection   (a)  shall  be  multiplied  by  the
                    percentage working (participating) interest in the Petroleum
                    Substances  held by the  Grantor in that well.  Grantor  may
                    agree  to  grant  interests  in the  Royalty  Lands to other
                    parties in exchange for such other parties agreeing to share
                    in the costs of  acquiring  the Royalty  Lands and  drilling
                    wells thereon.  In such case, Grantor shall ensure that each
                    such party shall be responsible for its respective  share of
                    the Overriding  Royalty payable with respect to such Royalty
                    Lands.

            (c)     If any portion of the Royalty Lands is pooled or unitized in
                    accordance   with  the   provisions  of  Articles  8  and  9
                    respectively,  the  Overriding  Royalty  will be  calculated
                    based  on  the  quantity  of  Petroleum  Substances  thereby
                    allocated to the affected Royalty Lands.

            (d)     If  Grantor's  interest  in all or a portion of the  Royalty
                    Lands has been  acquired  by virtue of an option or  farmout
                    agreement,  and the  Grantor's  interest  is  subject  to an
                    overriding royalty,  carried or net profit or other interest
                    which  may be  converted  by the  optionor  or  farmor  to a
                    working  (participating)  interest,  any  assignment  of  an
                    interest to such  optionor  or farmor  upon such  conversion
                    shall not be subject to the Overriding  Royalty.  After such
                    conversion,  the  Overriding  Royalty shall be calculated on
                    the basis of the Grantor's reduced interest.

 2.02       SEPARATE QUANTIFICATION FOR CRUDE OIL

            If the Grantor  completes any well on the Royalty Lands in more than
            one zone producing Crude Oil and production  therefrom is segregated
            and accounted for  separately  in  accordance  with the  appropriate
            regulations,  the Overriding Royalty shall be quantified  separately
            for each  producing zone rather than for the total  production  from
            such well, less only those charges permitted herein.

 3.00       OVERRIDING ROYALTY NOT TAKEN IN KIND

 3.01       PAYMENTS MADE TO ROYALTY OWNER MONTHLY

            When and to the  extent  that the  Royalty  Owner is not  taking its
            share of  Petroleum  Substances  in kind,  every  sale of  Petroleum
            Substances  produced  from the Royalty  Lands by the  Grantor  shall
            include the Royalty Owner's  Overriding  Royalty share thereof.  The
            Grantor shall remit to the Royalty Owner all monies  accruing to the
            Royalty Owner on account of the Overriding  Royalty on or before the
            twenty-fifth  (25th)  working day  following  the calendar  month in
            which such Petroleum  Substances  were sold. The Overriding  Royalty
            shall  be paid  to the  partners  comprising  Royalty  Owner  in the
            following proportions:

                    Jay S. Namson    50%
                    Thomas L. Davis  50%

 3.02       MONTHLY STATEMENTS PROVIDED TO ROYALTY OWNER

            The Grantor shall  enclose with each monthly  payment to the Royalty
Owner the following information:

            (a)     a statement  showing the quantity and kind of the  Petroleum
                    Substances  produced,  saved and sold from the Royalty Lands
                    in the immediately  preceding calendar month and the Current
                    Market Value  thereof,  together with a  calculation  of the
                    Overriding  Royalty for such immediately  preceding calendar
                    month; and

            (b)     if  requested,   a  copy  of  the   Grantor's   governmental
                    production  statement for the month for which the Overriding
                    Royalty is calculated.

 3.03       PERMITTED DEDUCTIONS

            Royalty  Owner  shall be  responsible  for any  taxes  payable  with
            respect to its share of Petroleum Substances. To the extent that the
            Royalty  Owner  does  not  take  its  Overriding  Royalty  share  of
            Petroleum   Substances  in  kind,  as  hereinafter   provided,   the
            Overriding  Royalty shall be paid on the Current Market Value of the
            Petroleum Substances without any deductions except the following:

            (a)     with  respect to Crude Oil and  Condensate,  the  Overriding
                    Royalty will bear a proportionate  share of the actual costs
                    of transportation to market connection,  where sales are not
                    made f.o.b.  the tanks  serving the Royalty  Lands;  and
            (b)     with  respect  to  Natural  Gas,  the  cost  of   gathering,
                    compressing,   treating,  processing  and  transporting  the
                    Overriding  Royalty share of the Natural Gas may be deducted
                    from the Current Market Value of the Natural Gas;

            provided  that such costs may only be  deducted  to the extent  that
            they are actually incurred and are reasonable.

 3.04       PETROLEUM SUBSTANCES SOLD AT LESS THAN CURRENT MARKET VALUE

            If any  Petroleum  Substances  are sold at less than Current  Market
            Value in any transactions  (including those  transactions  which are
            not at arm's length or any  transactions  involving any  arrangement
            from  which  the  Grantor   obtains  a   collateral   advantage   in
            consideration of the reduced price),  the gross proceeds of the sale
            of such Petroleum  Substances shall, for the purposes of calculating
            the Overriding Royalty, not be less than the Current Market Value of
            those Petroleum Substances when produced from the Royalty Lands.

 4.00       OVERRIDING ROYALTY TAKEN IN KIND

 4.01       NOTICE TO GRANTOR

            The  Royalty  Owner shall have the right to take in kind the Royalty
            Owner's share of Petroleum  Substances.  Such right may be exercised
            separately  with respect to Crude Oil, Raw Gas,  individual  Natural
            Gas  liquids,  Condensate,  marketable  gas or any other  individual
            Petroleum Substance.  In the case of Crude Oil and Condensate,  such
            right shall only be exercised on a minimum of  forty-five  (45) days
            notice to the Grantor. In the case of all other Petroleum Substances
            such right shall only be exercised  on six (6) months  notice to the
            Grantor.  If the Royalty  Owner,  however,  signifies in writing its
            consent to the sale of any of the Royalty Owner's share of Petroleum
            Substances  under a contract  made by the  Grantor  providing  for a
            minimum term in excess of the said respective  notice  periods,  the
            Royalty  Owner's  right  to take in kind  any  Petroleum  Substances
            subject to such contract shall be suspended  during the term of such
            contract.  The Royalty Owner may cease to take in kind any Petroleum
            Substances  upon  giving  the  Grantor  the same  minimum  notice as
            required in order to permit the Royalty Owner to take such Petroleum
            Substances  in kind as  aforesaid.  The  right to take in kind or to
            cease to take in kind may be  exercised  from  time to time  subject
            only to the foregoing provisions of this Subclause.

4.02        GRANTOR'S RESPONSIBILITIES

            When the Royalty Owner is taking in kind any of the Royalty  Owner's
            share of Petroleum  Substances other than Raw Gas, the Grantor shall
            in respect to Crude Oil and at no cost to the Royalty Owner,  remove
            basic sediment and water  therefrom in accordance with good oilfield
            practice so that pipeline specifications in that regard will be met,
            and the  Royalty  Owner  shall  also  have the  right to use free of
            charge a  proportionate  share of the  Grantor's  lease  tankage and
            storage  facilities to store a maximum of ten (10) days accumulation
            of the  Royalty  Owner's  share  of such  Petroleum  Substances.  In
            respect to Crude Oil and  Condensate  the Grantor  shall deliver the
            same to the Royalty  Owner,  or its nominee,  at the tank outlets in
            accordance with usual and customary  pipeline and shipping practice,
            free and clear of all  charges  whatsoever.  Grantor  shall  deliver
            Royalty Owner's share of Raw Gas to the Royalty Owner or its nominee
            at the wellhead of the relevant  well,  provided  that to the extent
            the Royalty  Owner so requests on  reasonable  notice to the Grantor
            and the Grantor can reasonably comply with such request, the Grantor
            shall gather, compress,  transport,  treat and process such share of
            Raw Gas with  the  Grantor's  share  of Raw Gas from the  applicable
            wells and deliver to the Royalty Owner at the relevant plant outlet,
            the Royalty Owner's  Overriding  Royalty share of marketable gas and
            other Petroleum  Substances  obtained from such share of Raw Gas. In
            such event, the Royalty Owner shall be responsible for:

            (i)     its   proportionate   share  of  the  costs  of   gathering,
                    compressing,  transporting, treating and processing such Raw
                    Gas where the Grantor or an  Affiliate  thereof does not own
                    such facilities; or

            (ii)    where  the  Grantor  or  an  Affiliate   thereof  owns  such
                    facilities,  such fee as may be agreed  upon by the  Grantor
                    and the Royalty Owner for the use of such facilities and the
                    making of the Royalty  Owner's  Overriding  Royalty share of
                    Raw Gas marketable.

<PAGE>

 5.00       RIGHT TO AUDIT

5.01     EXAMINATION OF RECORDS

            The  Royalty  Owner shall have the right to audit the records of the
            Grantor  insofar as they  relate to any matter or items  required to
            determine the accuracy of any statements or payments with respect to
            the Overriding Royalty.  The books,  records,  vouchers and accounts
            maintained  by the  Grantor  shall  be  open  to  inspection  at all
            reasonable  times  during  business  hours  by  an  officer,  agent,
            employee or other  person  appointed  or  authorized  by the Royalty
            Owner, in writing, to examine the same.

 5.02       DISCREPANCIES

            Any payment  made or  statement  rendered  by the Grantor  hereunder
            which is not disputed by the Royalty Owner on or before the last day
            of the twenty-fourth  (24th) month following the end of the calendar
            year of the month for which such  statement  or payment was rendered
            shall be deemed to have been correct.

 5.03       RIGHT TO VIEW OPERATIONS

            The Royalty  Owner shall also have the right (which may be exercised
            through  servants  or agents)  to enter at its sole  cost,  risk and
            expense  upon the  Royalty  Lands at all  reasonable  times to gauge
            tanks,  check the  quantities  of Petroleum  Substances  in storage,
            witness tests and otherwise view operations on the Royalty Lands.

 5.04       RIGHTS SUSPENDED

            The provisions of Subclauses  5.01 and 5.03 shall be suspended where
            the Grantor is drilling a well to obtain information to assist it in
            bidding  for lands  posted for sale by any  governmental  authority,
            until such sale is completed.

 6.00       RATEABLE PRODUCTION

 6.01       GRANTOR TO MARKET RATEABLY

            The  Grantor  shall,  subject  to the  Clause  entitled  "Overriding
            Royalty Taken In Kind",  make every reasonable  endeavour within its
            legal authority to market any of the Petroleum  Substances  produced
            or capable of being  produced from the Royalty  Lands  rateably with
            any other similar substances produced from any lands within the same
            pool in which the  Grantor  or any  Affiliate  has an  interest  and
            further the Grantor covenants that it will not discriminate  against
            the Petroleum  Substances produced or capable of being produced from
            the Royalty Lands in the production and marketing of the same.

 7.00       RIGHT TO COMMINGLE

 7.01       GRANTOR MAY COMMINGLE PETROLEUM SUBSTANCES

            The Grantor shall have the right to commingle  Petroleum  Substances
            produced from the Royalty Lands with Petroleum  Substances  produced
            from other lands,  provided methods  acceptable to the Royalty Owner
            are used to determine  the proper  measurement  of  individual  well
            production.   Where  governmental   regulations  or  orders  require
            segregated  production  tests of  individual  wells at intervals not
            greater than two months, such tests will be deemed acceptable to the
            Royalty  Owner  under  this  Clause  and no  further  tests  will be
            required.

 8.00       POOLING

 8.01       POOLINGS AUTHORIZED BY ROYALTY OWNER

            The Grantor  shall have the right to pool any portion of the Royalty
            Lands  forming  less  than a  spacing  unit  for the  production  of
            Petroleum  Substances  with lands  other than the  Royalty  Lands in
            order  to  form a  complete  spacing  unit  for  the  production  of
            Petroleum  Substances.  Unless otherwise agreed to in writing by the
            Royalty  Owner or ordered by  governmental  authority,  such pooling
            will be on a surface  acreage  basis;  that is,  the  production  of
            Petroleum  Substances  from the well on the pooled lands  comprising
            the spacing unit shall be divided  between the Royalty Lands and the
            other lands in such spacing unit in the  proportion  that the number
            of acres of the Royalty  Lands in such spacing unit is to the number
            of acres of the other lands in such spacing  unit.  Where,  however,
            the  Overriding  Royalty is a sliding  scale  royalty based upon the
            amount of production from the spacing unit, the rate of such sliding
            scale royalty shall be calculated upon the total production from the
            spacing  unit,  but  such  rate  shall  be  applied  only  upon  the
            production  deemed  produced  from the Royalty  Lands in the spacing
            unit in order to determine the Overriding  Royalty.  If such pooling
            is effected,  the Overriding  Royalty shall thereafter be calculated
            and paid in accordance with the foregoing provisions of this Clause.

 9.00       UNITIZATION

 9.01       ROYALTY OWNER TO CONSENT TO UNITIZATION

            The Grantor  shall not include the Royalty Lands or any part thereof
            in any  voluntary  plan of  unitization  comprising  more  than  one
            spacing unit without the written  consent of the Royalty Owner.  The
            execution  by the Royalty  Owner of the  applicable  unit  agreement
            shall be deemed to be consent to such unitization under this Clause.

10.00       SURRENDER

10.01       GRANTOR TO KEEP LEASES IN GOOD STANDING

            The  Grantor  shall pay all  rentals,  royalties,  taxes and charges
            payable  under the  provisions of the Said Leases or with respect to
            the Royalty Lands and the production  therefrom,  either directly or
            by reimbursing the Royalty Owner,  and shall keep the Said Leases in
            good standing  until  surrender  thereof as herein  provided for and
            shall not allow the Said Leases to  terminate  or become  subject to
            forfeiture.

10.02       NOTICE OBLIGATIONS ON SURRENDER

            The Grantor  shall not  surrender  any portion of the Royalty  Lands
            without  giving  notice  of  such  proposed   surrender  in  writing
            (hereinafter  called "the Surrender Notice") to the Royalty Owner at
            least sixty (60) days before the next  ensuing  anniversary  date of
            the lease  covering the lands or interest  therein which it proposes
            to surrender. Within thirty (30) days after receipt of the Surrender
            Notice,  the  Royalty  Owner may elect in writing  to  acquire  such
            interest  and if it does so the  Grantor  shall,  without  warranty,
            forthwith transfer or assign such interest to the Royalty Owner. The
            Overriding Royalty shall thereafter cease to be payable with respect
            to the  interest so assigned  to the Royalty  Owner.  If the Royalty
            Owner fails to make the election as provided for herein, the Grantor
            may surrender the lands specified in the Surrender Notice.

10.03       SURRENDER SUBJECT TO FORFEITURE

            If the  Grantor  proposes  to  surrender  any portion of the Royalty
            Lands to avoid an  obligation  to drill a well,  the  provision  for
            notice  and  assignment  in the  preceding  Subclause  shall  apply,
            mutatis mutandis,  provided that the assignment, if requested by the
            Royalty Owner,  shall be of the entire  interest which is subject to
            forfeiture  by  reason  of the  failure  to drill  such well and the
            surrender notice shall be given not less than sixty (60) days before
            the well must be commenced to meet the obligation.

10.04       ROYALTY OWNER TO ASSUME RIGHTS AND OBLIGATIONS

            Upon the  Royalty  Owner  electing  to acquire  the  interest  to be
            surrendered as set forth herein,  the Royalty Owner shall assume all
            rights and  obligations  of the Grantor with respect to the interest
            assigned,  including  indemnification of the Grantor,  which rights,
            obligations and indemnification  accrue from and after the effective
            date of such assignment. The effective date of such assignment shall
            be the date upon which  Royalty Owner elected to acquire the subject
            interest as provided herein.

11.00       ASSIGNMENT

11.01    NOMINATION OF ASSIGNEE

            If the Royalty Owner transfers, assigns or otherwise disposes of any
            part of its  interest  hereunder  to more than one  party,  it shall
            ensure  that one of the  parties  to whom such  disposition  is made
            shall be nominated to receive the payment of the Overriding  Royalty
            on  behalf of all such  parties  and  until  written  notice of such
            nomination is received by the Grantor, the Grantor shall be entitled
            to  continue  to make  payments  of the  Overriding  Royalty  to the
            Royalty Owner.

11.02       ASSIGNMENT BY GRANTOR

            If the Grantor disposes,  in any manner whatsoever,  of its interest
            in this Royalty Procedure, the Royalty Lands, the Said Leases or any
            portion or portions  thereof,  it shall at all times  continue to be
            bound by the  provisions  of this Royalty  Procedure as if there had
            been no assignment,  until such time as the Royalty Owner shall have
            been  served  with  a  document  reflecting  the  assignment.   Such
            assignment document shall be accompanied by a written undertaking by
            the Assignee,  directly enforceable by the Royalty Owner, to perform
            and be bound  thereafter  by all of the  provisions  of this Royalty
            Procedure  to the  same  extent  and  degree,  with  respect  to the
            interest which has been assigned to it, as it would have been had it
            been a party to this Royalty Procedure in the place of the Grantor.

12.00       LIABILITY AND INDEMNITY

12.01       GRANTOR'S RESPONSIBILITY

            The Grantor shall:

            (a)     be  liable  to the  Royalty  Owner  for all  losses,  costs,
                    damages and  expenses  whatsoever  (whether  contractual  or
                    tortious) which the Royalty Owner may suffer,  sustain,  pay
                    or incur; and

            (b)     in addition,  indemnify  and hold harmless the Royalty Owner
                    and its directors,  officers,  agents and employees  against
                    all actions, causes of action, proceedings, claims, demands,
                    losses,  costs, damages and expenses whatsoever which may be
                    brought  against  or  suffered  by the  Royalty  Owner,  its
                    directors,  officers, agents and employees or which they may
                    sustain, pay or incur;

            insofar  as  they  are  either  a  direct   result  of  or  directly
            attributable to any act or omission (whether negligent or otherwise)
            of the Grantor with respect to operations or activities conducted by
            it or on behalf of it.

12.02       ROYALTY OWNER'S RESPONSIBILITY

            Where the Royalty  Owner  conducts  operations  or  activities  with
            respect  to the  Royalty  Lands,  the  provisions  of the  preceding
            Subclause shall apply,  mutatis  mutandis,  to determine the Royalty
            Owner's  responsibility  to  the  Grantor  with  respect  to  losses
            attributable to such operations or activities.

13.00       CONFIDENTIAL INFORMATION

13.01       CONFIDENTIALITY REQUIREMENT

            Except as provided  herein,  all data and  information of any nature
            acquired by the parties from any operations pursuant to this Royalty
            Procedure,  or supplied by one party to the other  pursuant  hereto,
            shall be for the sole and  exclusive  use and benefit of the parties
            hereto  unless  the  parties  agree  to the  dissemination  of  such
            information  or  unless a party  hereto  is  required  to give  such
            information to any governmental  department,  body or agency, or any
            recognized association within the petroleum industry, of which it is
            a member,  that  engages  in the  exchange  of  factual  information
            relating  to the type of  operations  contemplated  by this  Royalty
            Procedure.  In no event shall  information  of any type or character
            relating to wells drilled on a confidential  basis to the parties be
            disclosed by a party without  prior  written  agreement of the other
            party.

13.02       DISCLOSURE TO AFFILIATES

            The  provisions  of this Clause  shall not apply to  disclosures  to
            Affiliates  provided that such  Affiliates  agree to be bound by the
            terms of this Clause.

14.00       ABANDONMENT

14.01       NOTICE OF INTENTION TO ABANDON

            If the Grantor  intends to abandon  any well  drilled on the Royalty
            Lands,  it shall give notice to the Royalty Owner of such  intention
            and provide the Royalty  Owner with all available  well  information
            which may be  reasonably  required by the Royalty Owner to determine
            whether it wishes to exercise  its rights  pursuant to this  Clause.
            Following   receipt  of  such  notice  and  of  all  other  required
            information,  the Royalty Owner may, within  forty-eight  (48) hours
            when a drilling  rig is on location  and within  thirty (30) days in
            all other cases,  elect to take over the well at its own cost,  risk
            and expense.

14.02       GRANTOR ABANDONS WELL

            If the  Royalty  Owner  fails  to reply to the  Grantor  within  the
            applicable  aforementioned  time  period  or if  the  Royalty  Owner
            advises the Grantor by notice in writing within said period that the
            Royalty Owner  consents to the proposed  abandonment  of a well, the
            Grantor shall, at its sole cost, risk and expense,  abandon the well
            in accordance with good oilfield practice and the Regulations.

14.03       ROYALTY OWNER ELECTS TO TAKE OVER WELL

            If the  Royalty  Owner  elects to take over a well  within  the time
period aforesaid, then:

            (a)     the entire interest granted under this Royalty  Procedure by
                    the  Royalty  Owner to the  Grantor in the  spacing  unit on
                    which the well is situated  shall be assigned by the Grantor
                    to the Royalty Owner;

            (b)     the Royalty Lands comprising the production spacing unit for
                    such  well  shall  no  longer  be  subject  to this  Royalty
                    Procedure;

            (c)     the Royalty Owner shall thereafter own such spacing unit and
                    well and all material,  equipment and production therein and
                    thereon or relating thereto; and

            (d)     the  Royalty  Owner  shall  reimburse  the  Grantor  for the
                    salvage  value of any material and  equipment on the spacing
                    unit or relating  thereto  which the Royalty Owner wishes to
                    retain,  less the estimated  cost of salvaging such material
                    and equipment.

14.04       OBLIGATIONS AND LIABILITIES UPON ABANDONMENT

            If the Royalty Owner takes over a well pursuant to this Clause,  the
            Royalty Owner shall, effective as of the date of the Royalty Owner's
            election to take over that well,  assume all rights and  obligations
            of the Grantor  with  respect to the  interest  assigned,  including
            indemnification  of the Grantor,  and the Grantor  shall be released
            and discharged from all obligations thereafter accruing with respect
            to the well.  The Grantor shall not be released from any  obligation
            which ought to have been performed by it or any liability  which may
            have accrued prior to takeover of such well by the Royalty Owner.

14.05       PRODUCTION EXCLUDED

            A spacing  unit  surrendered  by the  Grantor to the  Royalty  Owner
            pursuant  to an  abandonment  notice  as  aforesaid,  shall  exclude
            Petroleum  Substances  being  produced  or that are capable of being
            produced from any other well or wells,  the production from which is
            attributable  to any other  horizons or formations  underlying  that
            portion  of the  Royalty  Lands on which  the  well  subject  to the
            abandonment notice is located.

15.00       DEFAULT

15.01       RIGHTS OF ROYALTY OWNER

            If the Grantor  defaults in respect of any  obligations or covenants
            on its part to be  satisfied  and  performed,  the  satisfaction  or
            performance  of which has not been  waived in writing by the Royalty
            Owner,  the  Royalty  Owner may give to the Grantor  written  notice
            requiring it to remedy the default.

15.02       DEFAULT NOT TO APPLY TO PRODUCTION

            Any default  pursuant to the preceding  Subclause shall not apply to
            any  spacing  unit on  which  there is  located  a well  capable  of
            producing  Petroleum  Substances in paying  quantities or on which a
            well is being drilled at the time of cancellation  and  termination,
            unless the default  aforesaid  is in respect of the spacing  unit or
            some  portion  thereof,  either  alone or  together  with any  other
            portion or portions of the Royalty Lands.

15.03       RIGHTS ARE IN ADDITION TO OTHER RIGHTS

            The rights herein  granted to the Royalty Owner shall be in addition
            to and not be in  substitution  for any other right or remedy  which
            the Royalty Owner may have.

16.00       LIEN

16.01       ROYALTY OWNER'S LIEN

            The  Royalty  Owner  shall be entitled to and shall have a first and
            paramount lien upon the Grantor's share of all Petroleum  Substances
            from time to time  produced  from the  Royalty  Lands to secure  the
            payment of the  Overriding  Royalty.  Such lien shall not operate to
            release the Grantor from  personal  liability  for monies due to the
            Royalty Owner.  Such lien shall not attach to the Grantor's share of
            Petroleum  Substances sold or otherwise disposed of from the Royalty
            Lands,  but  immediately  upon  default  occurring in payment by the
            Grantor  of monies  payable  to the  Royalty  Owner  such lien shall
            operate as an assignment  to the Royalty Owner of the  consideration
            thereafter payable to the Royalty Owner for the Petroleum Substances
            sold,  up to the amount owed to the Royalty Owner and not so paid by
            the Grantor.

16.02       SERVICE OF AGREEMENT TO CONSTITUTE AUTHORITY

            Service of a copy of this  agreement upon any purchaser of Petroleum
            Substances together with written notice from the Royalty Owner shall
            constitute written authorization on the part of the Grantor for such
            purchaser  to pay the Royalty  Owner the  proceeds  from any sale or
            sales of the  Grantor's  share of  Petroleum  Substances,  up to the
            amount owed to the Royalty Owner by the Grantor,  and such purchaser
            is authorized to rely solely upon the statement of the Royalty Owner
            as to the amount owed to the Royalty Owner by the Grantor.

16.03       PROOF OF DEFAULT

            The books and  records  kept by the Royalty  Owner shall  constitute
            written  proof  of  the  existence  of  such  default,  although  no
            purchaser  shall be obliged to examine the same  before  acting upon
            such notice of default.

17.0     WELL INFORMATION

17.01       INFORMATION TO ROYALTY OWNER

            The  Grantor  shall,  with  respect  to each well  drilled  or being
            drilled  (or  reworked,  deepened  or plugged  back) on the  Royalty
            Lands:

            (a)     give the Royalty  Owner notice,  not later than  forty-eight
                    (48) hours  before the date of spudding  the well,  that the
                    Grantor  proposes to drill the well,  and promptly  give the
                    Royalty Owner notice when actual  drilling  operations  have
                    commenced on the well;

            (b)     during the drilling of the well,  furnish the Royalty  Owner
                    with daily drilling and geological reports; and

            (c)     provide  the Royalty  Owner  promptly  with all  information
                    relative to mud  samples and drill stem test fluid  samples,
                    copies of all drill stem tests and service reports  thereon,
                    copies of pressure  charts and copies of all logs run in the
                    well,   together  with  a  copy  of  the  completion  report
                    including  the details and results of all  production  tests
                    carried out with respect to the well.

17.02       LIMITS ON USE OF INFORMATION

            Royalty  Owner  may not use any  information  provided  pursuant  to
            Subclause 17.01 to acquire lands or leases or otherwise compete with
            Grantor within the area of the applicable Prospect.

18.00       NOTICES

18.01       SERVICE OF NOTICES

            Whether or not so stipulated herein all notices,  communications and
            statements (herein called "notices") required or permitted hereunder
            shall be in  writing.  Any  notice  to be given  hereunder  shall be
            deemed to be  served  properly  if  served  in any of the  following
            modes:

            (a)     personally, by delivering the notice to the party on whom it
                    is to be served at that party's  address for service,  which
                    notice  shall  be  deemed  received  by the  addressee  when
                    actually delivered as aforesaid,  if such delivery is during
                    normal  business  hours;  provided  that if a notice  is not
                    delivered during the addressee's normal business hours, such
                    notice  shall be deemed to have been  received by such party
                    at  the  commencement  of  the  next  ensuing  business  day
                    following the date of delivery;

            (b)     by  telefacsimile  (or by any other  like  method by which a
                    written and  recorded  message may be sent)  directed to the
                    party on whom it is to be served at that party's address for
                    service,  which  notice  shall  be  deemed  received  by the
                    respective addressees thereof: (i) when actually received by
                    them, if received  within normal  business hours; or (ii) at
                    the  commencement of the next ensuing business day following
                    transmission  thereof, if such notice is not received during
                    such normal business hours; or

            (c)     by mailing it first class (air mail if to or from a location
                    outside Canada) double  registered  post,  postage  prepaid,
                    directed  to the  party on whom it is to be  served  at that
                    party's address for service, which notice shall be deemed to
                    be received by the  addressee  at noon,  local time,  on the
                    earlier  of the actual  date of receipt or the fourth  (4th)
                    day (excluding  Saturdays,  Sundays and statutory  holidays)
                    following  the mailing  thereof;  provided  that,  if postal
                    service is interrupted or operating with unusual or imminent
                    delay,  notice shall not be served by such means during such
                    interruption or period of delay.

            For notice periods of forty-eight (48) hours or less, the applicable
            notice shall be given in  accordance  with  paragraph  (a) or (b) of
            this Subclause.

18.02       ADDRESSES FOR NOTICES

            The address for service of notices  hereunder of each of the parties
shall be as follows:

            The Grantor:             SAN JOAQUIN OIL & GAS LTD.
                                     53 Stratford Place S.W.
                                     Calgary, Alberta  T3H 1H7
                                     Fax: (403) 246-5056

            The Royalty Owner:       DAVIS & NAMSON CONSULTING GEOLOGISTS
                                     301 S. Maclay Street, Suite 201
                                     San Fernando, California  91340
                                     Fax: (818) 838-0366

18.03       RIGHT TO CHANGE ADDRESS

            Any party may change its  address for service by notice to the other
parties.

19.00       MISCELLANEOUS

19.01       DEVELOPMENT OF LANDS

            Nothing in this  Royalty  Procedure is to be construed as an express
            or implied covenant by the Grantor to develop the Royalty Lands.

19.02       PERPETUITIES

            Notwithstanding  anything contained in this Royalty  Procedure,  any
            right  under  this  Royalty  Procedure  of a party  to  acquire  any
            interest  from  another  party  shall  terminate  not later than the
            expiration  of  twenty-one  (21)  years  after the death of the last
            surviving  descendant  now  living of the  Governor  of the State of
            California.

19.03       PARTIES TO DO ALL FURTHER ACTS

            The parties  hereto  shall from time to time and at all times do all
            such further acts and execute and deliver all such further deeds and
            documents as shall be reasonably  required in order fully to perform
            and carry out the terms of this Royalty Procedure.

19.04       NO WAIVER EXCEPT IN WRITING

            No waiver by any party hereto of any breach of any of the covenants,
            conditions  or provisos  herein  contained  shall be effective or be
            binding upon another  party unless the same be expressed in writing,
            and any waiver so expressed shall not limit or affect its right with
            respect to any other or future breach.

19.05       TIME OF ESSENCE

            Time is of the essence of this Royalty Procedure.

19.06       ROYALTY RUNS WITH LANDS

            The obligation of the Grantor to pay the Overriding Royalty shall be
            a covenant  running  with the Royalty  Lands during the term of this
            Royalty Procedure.

<PAGE>

19.07       HEADINGS

            The headings of the Clauses of this Royalty  Procedure  are inserted
            for   convenience  of  reference  only  and  shall  not  affect  the
            construction or interpretation of this Royalty Procedure.

19.08       CONFLICTS

            Wherever any term or condition of this Royalty  Procedure  conflicts
            or is at variance with any term or condition of the  Agreement,  the
            provisions of the Agreement shall prevail.Exhibit 10.3

                            Agreement with Canyon Oil

<PAGE>

                             JOINT VENTURE AGREEMENT
                             DATED DECEMBER 1, 1999

BETWEEN:

           SAN JOAQUIN OIL & GAS LTD., a corporation incorporated under the laws
           of the State of Nevada and  having an office in the City of  Calgary,
           in the Province of Alberta ("San Joaquin")

                                     - and -

           CANYON OIL & GAS , a Limited Liability Company incorporated under the
           laws of the State of  California  and having an office in the City of
           Sacramento, in the State of California ("Canyon")

WHEREAS:

A.       San Joaquin is engaged in the  exploration  and  development of oil and
         gas prospects in the San Joaquin and Sacramento basin of California;

B.       Canyon has agreed to provide San Joaquin with technical information for
         oil and gas  Prospects  that may be  acquired by San Joaquin in the San
         Joaquin and Sacramento basin of California;

C.       San Joaquin has agreed to pay certain overhead costs incurred by Canyon
         in exchange for provision of such technical information; and

D.       The Parties  have  further  agreed that San Joaquin will grant Canyon a
         Carried  Interest on all Acquired  Prospects,  which  Carried  Interest
         shall be a 14%  working  interest  in the  Acquired  Prospects,  all in
         accordance with the terms of this Agreement.

THE PARTIES AGREE AS FOLLOWS:

                           ARTICLE 1 - INTERPRETATION

1.1      DEFINITIONS
In this Agreement,  unless the context otherwise  requires,  the following terms
shall have the following meanings:

         "ACCOUNTING  PROCEDURE"  means the  COPAS - 1984 -  Onshore  Accounting
         Procedure attached as Exhibit C to Schedule "A" hereto;

         "ACQUIRED  PROSPECTS"  means Prospects in which an interest is acquired
         by San Joaquin pursuant to this Agreement;

         "BROCHURE" means written material describing a Prospect, containing the
         information set forth in Section 2.2;

         "CARRIED INTEREST" means the right to acquire a working (participating)
         interest without incurring any of the costs specified in Section 4.2;

         "CONFIDENTIAL  INFORMATION"  means all technical  information and data,
         evaluations,   reports,   proprietary  information  and  trade  secrets
         contained in a Brochure or otherwise provided by Canyon with respect to
         a Prospect;

         "EFFECTIVE DATE" means December 1, 1999;

         "EXCLUSION  AREA" means all lands  included in a Prospect  presented to
         San Joaquin by Canyon pursuant to Section 2.3;

         "FARMOUT AND JOINT OPERATING  AGREEMENT" means an agreement in the form
         attached  hereto as  Schedule  "A",  including  the  Exhibits  attached
         thereto;

         "INITIAL  PERIOD" means the period from the Effective  Date until March
         31, 2000, inclusive;

         "NON-ACQUIRED  PROSPECTS"  means  all  Prospects  other  than  Acquired
         Prospects;

         "NOTICES" is defined in Section 7.1;

         "OPERATING  PROCEDURE"  means the  A.A.P.L.  Form 610 - 1989 Model Form
         Operating Agreement attached as Exhibit 2 to Schedule "A" hereto ;

         "PARTICIPANTS"  means Persons who may  participate  with San Joaquin in
         acquiring and developing a Prospect;

         "PARTIES"  means San Joaquin and Canyon,  and "PARTY"  means  either of
         them;

         "PERIOD" means the Initial Period or one of the Renewal Periods;

         "PERSON"  includes a  corporation  or  limited  liability  company,  an
         individual, a partnership, a firm, an association and a syndicate;

         "PROSPECTS"  means all prospects  relating to interests in lands or the
         hydrocarbon   rights  thereto  acquired  or  generated  by  Canyon  and
         presented to San Joaquin  pursuant to the terms of this Agreement,  and
         "PROSPECT" means one of such Prospects;

         "RENEWAL PERIODS" is defined in Section 5.1;

         "REPRESENTATIVES"  means  employees,   consultants,  agents,  officers,
         directors, subsidiaries or affiliates of a Party;

         "STUDY  AREAS"  means lands and  geological  formations  within the San
         Joaquin and Sacramento Basin area of California;

         "TERM" means the period  commencing on the Effective Date and ending on
         the Termination Date;

         "TERMINATION DATE" is defined in Section 5.1.

1.2      INTERPRETATION
a)       The  headings  of the  articles  and  sections  of this  Agreement  are
         inserted for  convenience  of  reference  only and shall not be used in
         construing or interpreting any provisions hereof.
b)       Whenever the singular or masculine or neuter is used in this Agreement,
         the same shall be  construed  as meaning the plural or feminine or body
         politic or corporate  and vice versa as the context or reference to the
         Parties may require.

1.3      SCHEDULES
All Schedules  attached hereto are incorporated  herein by reference as fully as
though contained in the body hereof.  The Schedules are as follows:

         a)       Schedule "A" which is the form of Farmout and Joint  Operating
                  Agreement   to  be  entered  into  with  respect  to  Acquired
                  Prospects,   including   Exhibit  2  which  is  the  Operating
                  Procedure and other Exhibits attached thereto; and

         b)       Schedule "B" which lists for the Initial Period,  the Acquired
                  Prospects,  along with the  interests  to be  acquired  by San
                  Joaquin  therein.  Should  there  be a  conflict  between  the
                  provisions  of the  body of this  Agreement  and an  agreement
                  entered  into in the form of Schedule  "A",  the latter  shall
                  prevail.

                              ARTICLE 2 - PROSPECTS

2.1      EXCLUSIVE RIGHTS OF SAN JOAQUIN
San Joaquin shall have  exclusive  access to all Prospects  located in the Study
Areas.  San Joaquin  acknowledges,  however,  that the  following  prospects and
activities are specifically excluded from this Agreement:
         Conaway Ranch Gas Field
         Conaway Ranch Extension
         Crossroads Gas Field
         Crossroads Extension
         North San Joaquin Project (Harwood Capital)
         Raisin City Oil Field
         Vemalis Gas Field

<PAGE>

         Vemonia Gas Field (Oregon)
         Winters Gas Field
         Equinax/E&B Natural Resources Acquisition Broker
         Personal Working Interest Investments with Capitol Oil Corporation and
         others
         Prospect Review for several investors/oil companies

2.2      PRESENTATION OF PROSPECT BROCHURES
The  Parties  acknowledge  that a Brochure  has been  provided  with  respect to
Prospects for the Initial  Period,  as outlined in Schedule "B" hereto.  Six (6)
weeks prior to the commencement of each Renewal Period, Canyon shall provide San
Joaquin  with a Brochure  for all  Prospects  to be  initiated  during each such
Renewal Period. Each Brochure shall contain the following information:
         a)       a map outlining the area covered by each Prospect;
         b)       description  of and vintage of seismic data  available for the
                  Prospect;
         c)       proposed  budget  for the  Prospect  including  details of the
                  following costs:
                  (i)      lease acquisition costs;
                  (ii)     seismic data costs;
                  (iii)    geological data costs; and
                  (iv)     well costs; and
         d)       terms of the  Canyon  Carried  Interest  where  the  number of
                  Carried Interest wells in a Prospect is to be greater than one
                  (1).

2.3      PRESENTATION OF PROSPECTS

a)       Within one week of receiving a Brochure,  San Joaquin  shall elect,  by
         written notice to Canyon, to receive additional information with regard
         to any or all of the Prospects contained within the Brochure.  Should a
         Prospect included in a Brochure conflict with or cover the same area as
         prior activities of San Joaquin, San Joaquin shall elect not to acquire
         any additional  information  with respect to such Prospect from Canyon.
         Any  Prospects  for  which  San  Joaquin  does  not  elect  to  receive
         additional  information  shall  not be  subject  to the  provisions  of
         Article 6.
b)       One week after San Joaquin  receives a Brochure  for a Prospect,  or on
         such date as mutually  agreed by the Parties,  Canyon shall provide San
         Joaquin with additional information,  including geological, geophysical
         and engineering description, and ownership of petroleum and natural gas
         leases with respect to all  Prospects for which San Joaquin has elected
         to  receive  such  information.  The  additional  information  shall be
         provided in Sacramento,  California by way of a presentation,  commonly
         called a "show and tell", regarding each such Prospect.
c)       Canyon  shall  provide  San  Joaquin  with  access  to all  geological,
         geophysical, engineering and land data provided in the presentations so
         as to enable San Joaquin to provide all such data to its  Participants.
         In any cases where Canyon is not permitted under its arrangements  with
         other  Persons to allow  such data to be  provided  for review  outside
         Canyon's offices,  Canyon shall provide the Participants with access to
         such data at Canyon's offices.

2.4      ACCEPTANCE OF PROSPECTS
Within  twenty-five  (25) days of  receiving a  presentation  with  respect to a
Prospect,  San  Joaquin  shall  indicate  in  writing  if it intends to accept a
Prospect,  and the interest  that it shall  acquire  therein,  in which case the
Parties shall forthwith  enter into a Farmout and Joint  Operating  Agreement in
the form attached  hereto as Schedule "A" with respect to the lands  included in
such Acquired Prospect.

2.5      PARTICIPATION LEVEL
San  Joaquin  may elect to acquire an interest in a Prospect in any amount up to
100% of the interest in such  Prospect.  The  participation  level may vary from
Prospect to  Prospect.  If San Joaquin  elects to acquire  less than 100% of the
interest in a Prospect,  San Joaquin may attempt to locate other Participants to
acquire the remaining  interest,  which  Participants  would enter into the same
Farmout and Joint Operating Agreement to be entered into by the Parties for that
Prospect and be subject to the same terms and conditions.

2.6      OPERATORSHIP OF PROSPECTS
a)       San Joaquin shall be operator of all Acquired Prospects for purposes of
         drilling, and thereafter operating, each well.
b)       Canyon shall be operator for acquisition of all seismic data.

2.7      REJECTION OF PROSPECTS BY SAN JOAQUIN
Subject  to  Article  6, San  Joaquin  may  reject  any or all  Prospects  after
receiving  a  presentation  with  respect  thereto.  If San  Joaquin  rejects  a
Prospect, Canyon may find another Person or Persons to acquire such Non-Acquired
Prospect without any further obligation to San Joaquin.

                            ARTICLE 3 - COMPENSATION

3.1      OVERHEAD COSTS
In  consideration  for the provision by Canyon of the Prospects  hereunder,  San
Joaquin shall pay for Canyon's  overhead  costs in the amount of $70,000.00  for
the  Initial  Period  and for each  Renewal  Period,  payable  in advance at the
beginning of the Initial Period and of each Renewal Period.  It is intended that
such payments will cover costs for salaries of Canyon's Representatives,  office
costs,  and geological and  geophysical  data in Canyon's  possession,  provided
however that all ownership  rights to such geological and geophysical data shall
remain with Canyon. It is understood and agreed that:

a)       Canyon  shall be solely  responsible  for any  additional  salaries and
         wages, cost of holidays,  vacation,  sickness and disability  benefits,
         insurance coverage and other customary  allowances which may be payable
         to any of Canyon's Representatives; and that
b)       the  above-referenced  fees cover all office overhead costs and include
         all  engineering,  geological  and  geophysical  data  relating  to the
         Prospects currently in the possession of Canyon.

3.2      NO OTHER INTEREST
Except as provided in Section 3.1 and Article 4, Canyon shall not be entitled to
any other fees nor any share of the  interest  of San  Joaquin  in any  Acquired
Prospect  and that San  Joaquin  shall be  solely  entitled  to the  rights  and
benefits in respect to the Acquired  Prospects.  Without limiting the generality
of the foregoing, Canyon shall not be entitled to an overriding royalty interest
on any Acquired  Prospect and any costs passed on from Canyon to San Joaquin and
any of San Joaquin's Participants shall be at Canyon's cost without any markup.

               ARTICLE 4 - CANYON INTERESTS IN ACQUIRED PROSPECTS

4.1      STANDARD TERMS AND CONDITIONS
The provisions of this Article 4 contain the standard terms and conditions  that
shall be included in the Farmout  and Joint  Operating  Agreement  to be entered
into by the Parties for each Acquired Prospect.

4.2      CANYON CARRIED INTEREST
San Joaquin and any  Participants in an Acquired  Prospect shall pay 100% of the
following  costs:  a) costs of acquiring  seismic data to evaluate such Acquired
Prospect for purposes of drilling a test well
                  thereon;
b)       lease acquisition costs for such Acquired Prospect;
c) first year  rental  and bonus  costs for leases  acquired  for such  Acquired
Prospect;  d) acquisition of geological data for the Acquired  Prospect;  e) all
costs  associated  with the test well,  including  drilling to  contract  depth,
testing, logging and
                  abandoning,  or, if San Joaquin and its Participants  elect to
                  complete and equip the test well,  costs to complete and equip
                  the test well; and
f)                in those  exceptional cases where the Parties have agreed that
                  the Carried Interest shall apply to more than the initial well
                  on a Prospect, costs for a second well, only if negotiated and
                  agreed by the  Parties in writing at the time that San Joaquin
                  agrees to acquire an interest in such Acquired Prospect.

4.3      CANYON WORKING INTEREST
Canyon  shall be entitled to a 14% working  interest in the leases and test well
in all Acquired  Prospects and shall  thereupon be  responsible  for its working
interest share of all future costs incurred on the Acquired Prospect,  including
any future well costs relating to the test well.

4.3      PARTICIPANTS WITH SAN JOAQUIN
It is  acknowledged  that San  Joaquin may have  Participants  acting with it in
acquiring an interest in any  Prospect.  The  Participants  will pay 100% of the
costs  listed in Section  4.2 to earn a 75%  working  (participating)  interest.
However, Canyon need only deal with San Joaquin for purposes of this Agreement.

                          ARTICLE 5 - TERM OF AGREEMENT

5.1      RENEWAL PERIODS
This Agreement may be continued  beyond the Initial Period by written  agreement
of the Parties.  If so continued beyond the Initial Period, this Agreement shall
continue in effect for  successive  four month periods (the  "Renewal  Periods")
until  terminated  by  either  Party by  written  notice  given at least two (2)
calendar  months prior to the end of any Period.  The Agreement  shall thereupon
terminate on the last day of the Period in which such notice has been given (the
"Termination Date").

5.2      TERM
The  Term of  this  Agreement  shall  be  from  the  Effective  Date  until  the
Termination Date.

                    ARTICLE 6 - CONFIDENTIALITY AND EXCLUSION

6.1      CONFIDENTIALITY
In consideration of the disclosure of Confidential  Information by Canyon to San
Joaquin,  San Joaquin hereby  agrees,  for a period of one year from the date it
receives  a  Brochure  for a Prospect  to keep  confidential  any and all of the
Confidential Information relating to such Prospect and that it shall only use or
permit the use of the Confidential Information for the purpose of evaluating and
acquiring the Prospects in accordance with this Agreement. San Joaquin shall not
under any circumstances disclose the Confidential  Information,  either directly
or  indirectly,  to any third party or parties or to any of its  Representatives
not  having a need to know for the  purpose of  appraising  the  Prospects.  The
Confidential  Information shall only be disclosed to San Joaquin's  Participants
and Representatives on a "need to know" basis. San Joaquin shall ensure that all
such  Persons  having  access to the  Confidential  Information  comply with the
provisions of this Agreement.

6.2      EXCEPTIONS
San Joaquin's  confidentiality  obligations  hereunder shall not apply to any of
the Confidential  Information that San Joaquin can demonstrate:
         a)       to have been known to San Joaquin  prior to the  disclosure to
                  San Joaquin by Canyon;
         b)       to be in the public domain  through no fault of San Joaquin or
                  any of its Representatives; or
         c)       to have been lawfully  obtained from a source  independent  of
                  Canyon where San Joaquin has made reasonable efforts to ensure
                  that  such   source  is  not  a  party  to  or  bound  by  any
                  confidentiality agreement with Canyon.
         d)       is  required  to  be   disclosed   to  a  court  of  competent
                  jurisdiction  or to any regulatory  body having  jurisdiction,
                  provided that:
                  (i)      San Joaquin shall take  reasonable  steps to maintain
                           the  confidentiality of the Confidential  Information
                           by the court or regulatory body; and
                  (ii)     San  Joaquin  shall  provide  Canyon  with  immediate
                           written notice of any request for disclosure.

6.3      EXCLUSION AREA
a)       San Joaquin  shall not obtain any interest in petroleum and natural gas
         rights  within  the  Exclusion  Area for a period of one year after the
         date that it receives the Brochure  applicable to such Exclusion  Area.
         San Joaquin agrees that if it acquires any right or interest within the
         Exclusion  Area  within  one year after the date that it  receives  the
         Brochure  applicable  to such  Exclusion  Area,  100% of such  right or
         interest  shall  immediately  be offered to Canyon for a like amount of
         the  consideration  expended  by San  Joaquin  for the  said  right  or
         interest, whether such consideration be monetary, incurred obligations,
         or otherwise.  The foregoing provisions shall not apply to any interest
         acquired by San Joaquin from Canyon in accordance  with the  provisions
         of this Agreement.
b)       The Parties  acknowledge  and agree that San Joaquin shall be permitted
         to acquire  prospects and resulting  leases in prospects  outside areas
         covered by the  Prospects  and that San  Joaquin has no  obligation  to
         offer Canyon the right to participate in any such other prospects.

6.4      LIABILITY AND INDEMNITY
San Joaquin shall:
         a)       be liable to Canyon for all loss and damages  whatsoever which
                  Canyon may sustain or incur; and, in addition
         b)       indemnify and hold  harmless  Canyon from and against all loss
                  and  damages  whatsoever  which may be  suffered  by Canyon or
                  which it may  sustain or incur by reason of the failure of San
                  Joaquin or its  Representatives or Participants to comply with
                  the obligations contained in Sections 6.1, 6.2 and 6.3 of this
                  Agreement.

                     ARTICLE 7 - GENERAL CONTRACT PROVISIONS

7.1      NOTICES
All notices, requests, demands or other communications (collectively, "Notices")
by the terms hereof required or permitted to be given by one Party to the other,
or to any other  person,  shall be given in writing by  personal  delivery or by
facsimile transmission to such other Party at the following address:

         To San Joaquin at:                 53 STRATFORD PLACE S.W.
                                            CALGARY, ALBERTA T3H 1H7
                                            FAX: (403) 246-5056

         To Canyon at:                      SUITE 1, 2625 FAIR OAKS BOULEVARD
                                            SACRAMENTO, CA  95864
                                            FAX: (916) 486-9197
or such other  address as may be given by a Party to the other  Party  hereto in
writing from time to time.

All such  Notices  shall be deemed  to have  been  received  when  delivered  or
transmitted, provided that any Notice received after normal business hours or on
a holiday or weekend  shall be deemed to be  received  on the next day  business
day.

7.2      FURTHER ASSURANCES
The Parties shall sign such further and other documents,  cause such meetings to
be held,  resolutions  passed  and  by-laws  enacted,  exercise  their  vote and
influence,  do and perform and cause to be done and  performed  such further and
other acts and things as may be  necessary  or  desirable  in order to give full
effect to this Agreement and every part hereof.

7.3      COUNTERPARTS
This  Agreement  may be  executed  in  several  counterparts,  each of  which so
executed shall be deemed to be an original and such counterparts  together shall
be one and the same instrument.

7.4      TIME OF THE ESSENCE
Time shall be of the essence of this  Agreement  and of every part hereof and no
extension  or  variation  of this  Agreement  shall  operate as a waiver of this
provision.

7.5      ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the Parties with respect
to all the  matters  herein and its  execution  has not been  induced by, nor do
either of the Parties rely upon or regard as material,  any  representations  or
writings whatever not incorporated herein and made a part hereof. This Agreement
may not be amended  or  modified  in any  respect  except by written  instrument
signed by the Parties.  Any schedules referred to herein are incorporated herein
by reference and form part of this Agreement.

7.6      ENUREMENT
This Agreement shall enure to the benefit of and be binding upon the Parties and
their   respective   legal   personal    representatives,    heirs,   executors,
administrators or successors.

7.7      ASSIGNMENT
Neither Party may assign its rights and obligations  under this  Agreement.  The
Parties  acknowledge  that San Joaquin may bring in Participants who will become
parties to Farmout and Joint  Operating  Agreements  entered into in the form of
Schedule "A".  Such  Participants  shall not,  however,  become  parties to this
Agreement.

7.8      CURRENCY
Unless  otherwise   specifically  provided  for  herein,  all  monetary  amounts
specified  herein  shall  refer to the  lawful  money of the  United  States  of
America.

7.9      GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of
the State of California and each Party irrevocably  attorns to the non-exclusive
jurisdiction of the Courts of such State.

7.10     CALCULATION OF TIME
When  calculating a period of time within which or following which any act is to
be done  or step  taken  pursuant  to this  Agreement,  the  date  which  is the
reference date shall, unless otherwise  specifically  included,  be excluded. If
the last day of a period is not a business day, then the time period in question
shall end on the first business day following such non-business day.

7.11     SEVERABILITY
If any portion of this  Agreement is determined  to be invalid or  unenforceable
for any reason whatsoever,  that invalidity or unenforceablity  shall not affect
the validity or enforceability of remaining  portions of this Agreement and such
invalid or  unenforceable  portion  shall be severed from the  remainder of this
Agreement.

IN WITNESS  WHEREOF the Parties have executed  this  Agreement as of the day and
year first above written.

SAN JOAQUIN OIL & GAS LTD.                  CANYON OIL & GAS

PER: /s/ J. Timothy Bowes                   PER: /s/ Monty Doris
     ----------------------------                ---------------------------
J. TIMOTHY BOWES,
PRESIDENT
                                            PER:     ______________________

<PAGE>

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