Document:

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                                                                   Exhibit 10.23

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

          (THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)

            This Mortgage, Deed of Trust, Security Agreement, Financing
Statement, and Assignment of Production (this "Deed of Trust") is executed
pursuant to the Credit Agreement dated as of as of December 19, 2002, by and
among PRIMEENERGY CORPORATION, a Delaware corporation ("Prime"), PRIMEENERGY
MANAGEMENT CORPORATION, a New York corporation ("PEMC") (Prime and PEMC herein
collectively, "Mortgagor"), PRIME OPERATING COMPANY, a Texas corporation
("POC"), EASTERN OIL WELL SERVICE COMPANY, a West Virginia corporation
("Eastern"), and SOUTHWEST OILFIELD CONSTRUCTION COMPANY, an Oklahoma
corporation ("Southwest") (Prime, PEMC, POC, Eastern and Southwest herein
collectively, "Borrowers"), and GUARANTY BANK, FSB, a federal savings bank,
individually as a Lender and as Agent for the lenders signatory thereto from
time to time (the "Lenders") (as amended, restated, or supplemented from time to
time, the "Credit Agreement"). Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in the Credit Agreement.

            Mortgagor, acting herein by and through its proper officers who have
heretofore been duly authorized, and with its principal office in Stamford,
Connecticut, and whose mailing address is One Landmark Square, Suite 1100,
Stamford, Connecticut 06901-2605, hereby agrees as follows:

                                   ARTICLE 1

                                      GRANT

            1.1 Lien. Mortgagor, for valuable consideration, the receipt of
which is hereby acknowledged, and in consideration of the debt and trust
hereinafter mentioned, has granted, bargained, sold, conveyed, transferred and
assigned, and by these presents does grant, bargain, sell, convey, transfer and
assign to Arthur R. Gralla, Jr., Trustee, whose address is c/o Guaranty Bank,
FSB, 333 Clay Street, Suite 4400, Houston, Texas 77002-4103, and his successors
and substitutes in trust, as hereinafter provided (the "Trustee"), for the
benefit of Guaranty Bank, FSB, as Agent for the lenders, with banking quarters
in Houston, Harris County, Texas, the mailing address for which is 333 Clay
Street, Suite 4400, Houston, Texas 77002-4103 ("Mortgagee"), the following
described Property:

            (a) all right, title, and interest, whether now owned and existing
      or hereafter acquired or arising, of Mortgagor in and to the leases,
      rights of way, easements, or other documents described in Exhibit A
      attached hereto and incorporated herein for all purposes or described or
      referred to in the documents described in Exhibit A, without regard to any
      surface acreage and/or depth limitations set forth in Exhibit A, and all
      renewals and extensions thereof and all new leases, rights of way,
      easements, or other documents (i) in which an interest is acquired by
      Mortgagor after the termination or expiration of any lease, right of way,
      easement, or other document described or referred to in Exhibit A, and
      (ii) that covers all or any

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      part of the Property described in and covered by such terminated or
      expired lease, right of way, easement, or other document, to the extent,
      and only to the extent, such new leases, rights of way, easements, or
      other documents may cover such Property (all of the foregoing in this
      subsection (a) being the "Leases");

            (b) all right, title, and interest, whether now owned and existing
      or hereafter acquired or arising, of Mortgagor in and to the lands subject
      to the Leases or otherwise described or referred to in Exhibit A, without
      regard to any surface acreage and/or depth limitations set forth in
      Exhibit A (the "Lands"), including, without limitation, the oil, gas,
      mineral, and leasehold estates in and to the Lands;

            (c) all right, title, and interest, whether now owned and existing
      or hereafter acquired or arising, of Mortgagor in and to any of the oil,
      gas, and minerals in, on, or under the Lands, including, without
      limitation, all contractual rights, fee interests, leasehold interests,
      overriding royalty interests, non-participating royalty interests, mineral
      interests, production payments, net profits interests, or any other
      interest measured by or payable out of production of oil, gas, or other
      minerals from the Leases and/or Lands;

            (d) all of the foregoing interests of Mortgagor as such interests
      may be enlarged by the discharge of any payments out of production or by
      the removal of any charges or encumbrances;

            (e) all right, title, and interest, whether now owned and existing
      or hereafter acquired or arising, of Mortgagor in, to, and under or
      derived from any present or future operating, farmout, bidding, pooling,
      unitization, and communitization agreements, assignments, and subleases,
      whether or not described in Exhibit A, to the extent, and only to the
      extent, that such agreements, assignments, and subleases cover or include
      any right, title, and interest, whether now owned and existing or
      hereafter acquired or arising, of Mortgagor in and to all or any portion
      of the Leases and/or the Lands, and all units created by any such pooling,
      unitization, and communitization agreements and all units formed under
      orders, regulations, rules, or other official acts of any Governmental
      Authority having jurisdiction, to the extent and only to the extent that
      such units cover or include all or any portion of the Leases and/or the
      Lands;

            (f) all right, title, and interest, whether now owned and existing
      or hereafter acquired or arising, of Mortgagor in, to, and under or
      derived from all presently existing and future advance payment agreements,
      oil, casinghead gas, and gas sales, exchange, and processing contracts and
      agreements, including, without limitation, those contracts and agreements
      that are described or referred to in Exhibit A, to the extent, and only to
      the extent, those contracts and agreements cover or include all or any
      portion of the Leases and/or the Lands; and

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            (g) all right, title, and interest, whether now owned and existing
      or hereafter acquired or arising, of Mortgagor in, to, and under or
      derived from all existing and future permits, licenses, easements, and
      similar rights and privileges that relate to or are appurtenant to any of
      the Leases and/or the Lands.

            1.2 Security Interest. Mortgagor, for the same consideration, hereby
grants to Mortgagee a continuing security interest in all improvements and all
personal Property of any kind or character defined in and subject to the
provisions of the Uniform Commercial Code ("UCC"), including, but not limited
to, substitutions and replacements for, accessions to, and the proceeds and
products from any and all of such improvements and personal Property, as well as
any and all "as-extracted collateral" as such term is defined in the UCC,
whether now owned and existing or hereafter acquired or arising, and situated on
any of the Lands, including, but not limited to, pipe, casing, tubing, rods,
storage tanks, boilers, loading racks, pumps, foundations, warehouses, and all
other personal Property and equipment of every kind and character upon,
incident, appurtenant, or belonging to and used in connection with the interest
of Mortgagor, whether now owned and existing or hereafter acquired or arising,
in the Lands and/or the Leases, including all oil, gas, and other minerals
produced or to be produced to the account of Mortgagor from the Lands and all
accounts receivable, general intangibles, and contract rights of Mortgagor in
connection with the Lands and/or the Leases and all proceeds, products,
substitutions, and exchanges thereof (the Lands, the Leases, and the real and
personal Property interests described in this Section being the "Mortgaged
Property").

            1.3 Assignment of Security. Mortgagor, for the same consideration,
hereby grants to Mortgagee any and all rights of Mortgagor to Liens securing
payment of proceeds from the sale of production from the Mortgaged Property.

            1.4 After-Acquired Property. Mortgagor, for the same consideration,
hereby grants, bargains, sells, conveys, transfers, and assigns to the Trustee
or grants to Mortgagee a continuing security interest in, as the case may be,
all additional right, title, or interest which Mortgagor may hereafter acquire
or become entitled to in the interests, Properties, Lands, Leases, and premises
aforesaid, and in the oil, gas, or other minerals in and under or produced from
or attributable to any of the Lands or Leases, which additional right, title,
and interest, when acquired, shall constitute "Mortgaged Property," the same as
if expressly described and conveyed herein.

            1.5 Habendum. TO HAVE AND TO HOLD all and singular the Mortgaged
Property and all other Property which, by the terms hereof, has or may hereafter
become subject to the Liens of this Deed of Trust, together with all rights,
hereditaments, and appurtenances in anywise belonging thereto, to the Trustee or
Mortgagee, as the case may be, or the successors or assigns of either of them
forever.

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                                   ARTICLE 2

                              INDEBTEDNESS SECURED

            This conveyance is made, IN TRUST, HOWEVER, to secure and enforce
the payment of the following indebtedness, obligations, and liabilities:

            2.1 Specific Obligations. The Obligations, including, without
limitation, the indebtedness evidenced by (a) the Credit Agreement, (b) the
Promissory Note dated December 19, 2002, executed by Borrowers to the order of
the Lenders pursuant to the Credit Agreement in the aggregate face amount of up
to $50,000,000, bearing interest and being payable as provided therein or as
provided in the Credit Agreement, with a final maturity of December 19, 2004,
and (c) Promissory Note dated December 19, 2002, executed by Borrowers in the
order of the Lenders pursuant to the Credit Agreement in the face amount of
$4,000,000, bearing interest and being payable as provided therein or as
provided in the Credit Agreement, with a final maturity of December 19, 2004.

            2.2 Additional Indebtedness.

            (a) Payment of and performance of any and all present or future
      obligations of Borrowers under Commodity Hedge Agreements, as defined in
      the Credit Agreement.

            (b) Payment of and performance of any and all present or future
      obligations of Borrowers under any Rate Management Transaction, as defined
      in the Credit Agreement, entered into by and between Borrowers and a
      Lender.

            (c) Payment of and performance of any and all present or future
      obligations of Borrowers under any guaranty in favor of Lenders of any of
      the Borrowers' subsidiary's obligations under Commodity Hedge Agreements
      and Rate Management Transactions and all present or future obligations of
      Borrowers or Borrowers' subsidiaries under Commodity Hedge Agreements and
      Rate Management Transactions.

            2.3 Other and Further Indebtedness. This Deed of Trust is intended
to secure a revolving credit line as set forth in the Credit Agreement. If
intermediate paydowns by Borrowers reduce the outstanding Indebtedness to zero,
it is intended that the Liens created under this Deed of Trust shall remain in
full force and effect as long as any Commitment exists. In addition, it is
contemplated that Borrowers may from time to time borrow additional sums of
money from or otherwise be or become obligated to Lenders. This Deed of Trust is
given to secure any and all indebtedness of Borrowers, present or future, either
direct or indirect, primary or secondary, fixed or contingent, which Borrowers
may now or hereafter owe, or as to which Borrowers may in any manner become
obligated to Lenders for payment, including, without limitation, indebtedness
arising by way of guaranty as to obligations of another to Lenders and
indebtedness originally owed to a party other than Lenders but which becomes
owing to Lenders as the result of Lenders having

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acquired the right to payment thereof. This Deed of Trust shall likewise secure
not only the above described indebtedness, but any and all renewals for any
period, extensions, and rearrangements of all or any portion thereof; and the
Liens under this Deed of Trust shall be cumulative of all other Liens and
security of any and every other kind or character whatsoever securing the
above-described indebtedness. Notwithstanding the foregoing, it is not the
intention of the parties hereto to extend the Liens of this Deed of Trust so as
to violate, or give rise to an allegation of violation of, any provision of any
statute, regulation, rule, ordinance or order of any applicable jurisdiction, or
any agency or subdivision of any of such jurisdictions. In this connection, this
Deed of Trust shall not, solely as to the relevant indebtedness, serve as
security for any indebtedness when for it to do so would violate any provision
of any statute, regulation, rule, ordinance or order of any applicable
jurisdiction, or any agency or subdivision of any of such jurisdictions.

            2.4 Indebtedness. The word "Indebtedness" wherever used in this Deed
of Trust shall refer to all present and future debts, obligations, and
liabilities described or referred to in this Article 2, subject, however, to the
limitations provided hereinabove in this Article 2.

                                   ARTICLE 3

                                   WARRANTIES

            3.1 Warranty of Title. Mortgagor hereby binds itself, its legal
representatives, successors, and assigns, to warrant and forever defend all and
singular the Mortgaged Property to the Trustee and the successors and assigns of
the Trustee forever against every Person whomsoever lawfully claiming or to
claim the same or any part thereof. Notwithstanding that this Deed of Trust
covers all of the right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the Mortgaged Property,
Mortgagor, for itself, its legal representatives, successors, and assigns,
further covenants, represents, and warrants that Mortgagor has good and
indefeasible title to the Mortgaged Property and that the interests of Mortgagor
in and to the Leases and/or Lands described in Exhibit A are not greater than
the working interest nor less than the net revenue interest, overriding royalty
interest, net profit interest, production payment interest, royalty interest, or
other interest payable out of or measured by production set forth in connection
with each oil and gas well described in Exhibit A. In the event Mortgagor owns
any other or greater interest, such additional interest is nonetheless included
in, covered by, and subject to the liens and security interests created by this
Deed of Trust.

            3.2 Additional Warranties. In consideration of the Indebtedness,
Mortgagor, for itself, its legal representatives, successors, and assigns,
covenants, represents, and warrants that:

            (a) Leases in Effect. All of the Leases specifically described or
      referred to in Exhibit A are in full force and effect. All covenants,
      express or implied, in respect of the Leases specifically described or
      referred to in Exhibit A, or of any assignment of any of such Leases,
      which may affect the validity of any of such Leases, have been performed
      insofar as such Leases pertain to the Lands.

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            (b) Interests Free of Liens. The interests of Mortgagor in the
      Mortgaged Property are free and clear of all Liens except for Permitted
      Liens. All gross production taxes and all taxes as to which non-payment
      could result in a Lien against any of the Mortgaged Property have been
      paid.

            (c) Representations and Warranties. As of the date hereof, all
      representations and warranties of Mortgagor set forth in the Credit
      Agreement are true and correct in all material respects, except to the
      extent such representations and warranties relate solely to an earlier
      date, and all such representations and warranties are hereby remade by
      Mortgagor to Mortgagee.

                                   ARTICLE 4

                             COVENANTS OF MORTGAGOR

            In consideration of the Indebtedness, Mortgagor, for itself, its
legal representatives, successors, and assigns, covenants and agrees as follows:

            4.1 Maintenance of Leases. Mortgagor will keep and continue all
Leases, estates, and interests herein described and all contracts and agreements
relating thereto in full force and effect in accordance with the terms thereof
and will not permit the same to lapse or otherwise become impaired for failure
to comply with the obligations thereof, whether express or implied. In this
connection, Mortgagor shall not release any of the Leases without the prior
written consent of Mortgagee.

            4.2 Maintenance of Property. Mortgagor will keep and maintain all
improvements, personal Property, and equipment now or hereafter situated on the
Lands and constituting a portion of the Mortgaged Property and used or obtained
in connection therewith in good repair and condition, ordinary wear and tear
excepted, and will not tear down or remove the same or permit the same to be
torn down or removed without the prior consent of Mortgagee, except in the usual
course of operations as may be required for replacement when otherwise in
compliance with the provisions of this Deed of Trust and the Credit Agreement.

            4.3 Pooling or Unitization. Mortgagor will not, without the prior
written consent of Mortgagee, pool or unitize all or any part of the Mortgaged
Property where the pooling or unitization would result in the diminution of the
net revenue interest of Mortgagor in production from the pooled or unitized
lands attributable to the Mortgaged Property constituting a portion of such
pooled or unitized lands. Immediately after the formation of any pool or unit in
accordance herewith, Mortgagor will furnish to Mortgagee a conformed copy of the
pooling agreement, declaration of pooling, or other instrument creating the pool
or unit. The interest of Mortgagor included in any pool or unit attributable to
the Mortgaged Property or any part thereof shall become a part of the Mortgaged
Property and shall be subject to the Liens hereof in the same manner and with
the same effect as though the pool or unit and the interest of Mortgagor therein
were specifically described in Exhibit A. In the event any proceedings of any
Governmental Authority which could result in pooling

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or unitizing all or any part of the Mortgaged Property are commenced, Mortgagor
shall give immediate written notice thereof to Mortgagee. Any pooling or
unitization of all or any part of the Mortgaged Property in violation of this
Section shall be of no force or effect against the Trustee or Mortgagee.

            4.4 Operation of Mortgaged Property. Mortgagor will operate or, to
the extent that the right of operation is vested in others, will exercise its
best efforts to require the operator to operate the Mortgaged Property and all
wells now or hereafter located thereon continuously and in a prudent and
workmanlike manner in accordance with the best usage of the field and in
accordance with all applicable Requirements of Law. Mortgagor will comply with
all terms and conditions of the Leases and each assignment or contract
obligating Mortgagor in any way with respect to the Mortgaged Property; but
nothing herein shall be construed to empower Mortgagor to bind the Trustee or
Mortgagee to any contract or obligation or render the Trustee or Mortgagee in
any way responsible or liable for bills or obligations incurred by Mortgagor.

            4.5 Compliance with Operating Agreements. Mortgagor agrees to
promptly pay all bills for labor and materials incurred in the operation of the
Mortgaged Property and will promptly pay its share of all costs and expenses
incurred under any joint operating agreement affecting the Mortgaged Property or
any portion thereof; will furnish Mortgagee, as and when requested, full
information as to the status of any joint account maintained with others under
any such operating agreement; will not take any action to incur any liability or
Lien thereunder; and will not enter into any new operating agreement or any
amendment of any existing operating agreement affecting the Mortgaged Property
without the prior written consent of Mortgagee. Furthermore, Mortgagor will not
consent or agree to participate in any proposed operation under any presently
existing operating agreement affecting the Mortgaged Property unless Mortgagor
obtains the prior written consent of Mortgagee and, if requested by Mortgagee,
deposits with the operator or Mortgagee, where Mortgagor is a non-operator, or
with Mortgagee, where Mortgagor is an operator, Mortgagor's share of the
estimated cost of the proposed operation prior to electing to participate in the
operation. To the extent that Mortgagor is unable to consent to any proposed
operation with respect to any of the Mortgaged Property, prior to electing not
to participate in the proposed operation, Mortgagor will use its best efforts,
to the extent practicable and to the extent allowed to do so under the relevant
operating agreement or other applicable contract, to farmout to others
acceptable to Mortgagee, on the best terms obtainable and acceptable to
Mortgagee, the interest or relevant portion of the interest of Mortgagor in the
proposed operation.

            4.6 Access to Mortgaged Property. Mortgagor will permit Mortgagee
and its accredited agents, representatives, attorneys and employees, at the
expense of Mortgagor, at all times to go upon, examine, inspect, conduct
environmental audits and other testing of, and remain on, the Mortgaged
Property, and to go upon the derrick floor of any well at any time drilled or
being drilled thereon, and will furnish Mortgagee, upon request, all pertinent
information regarding the development and operation of the Mortgaged Property.

            4.7 Waivers. Mortgagor hereby expressly waives, to the full extent
permitted by applicable law, any and all rights or privileges of marshalling of
assets, sale in inverse order of alienation, notices, appraisements, redemption,
and any prerequisite in the event of foreclosure of the

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Liens created herein. Mortgagee at all times shall have the right to release any
part of the Mortgaged Property now or hereafter subject to the Liens of this
Deed of Trust, any part of the proceeds of production or other income herein or
hereafter assigned or pledged, or any other security it now has or may hereafter
have securing the Indebtedness, without releasing any other part of the
Mortgaged Property, proceeds, or income, and without affecting the Liens hereof
as to the part or parts of the Mortgaged Property, proceeds, or income not so
released or the right to receive future proceeds and income.

            4.8 Compliance with Laws. Mortgagor will comply with all
Requirements of Law applicable to the Mortgaged Property and the operations
conducted thereon, including, without limitation, the Natural Gas Policy Act of
1978, as amended, and Environmental Laws; and cause all employees, crew members,
agents, contractors, sub-contractors, and future lessees (pursuant to
appropriate lease provisions) of Mortgagor, while such Persons are acting within
the scope of their relationship with Mortgagor, to comply with all such
Requirements of Law as may be necessary or appropriate to enable Mortgagor to so
comply.

            4.9 Hazardous Substances Indemnification. MORTGAGOR HEREBY
INDEMNIFIES AND HOLDS MORTGAGEE AND THE LENDERS AND THEIR RESPECTIVE
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND
AFFILIATES AND THE TRUSTEE HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY MORTGAGED PROPERTY,
WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR
UNDERTAKEN ON OR OFF ANY MORTGAGED PROPERTY, WHETHER PRIOR TO OR DURING THE TERM
HEREOF, AND WHETHER BY MORTGAGOR OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR OR ANY OTHER PERSON AT ANY TIME
OCCUPYING OR PRESENT ON ANY MORTGAGED PROPERTY, IN CONNECTION WITH THE HANDLING,
TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER
SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY MORTGAGED
PROPERTY, (D) ANY CONTAMINATION OF ANY MORTGAGED PROPERTY OR NATURAL RESOURCES
ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE BY MORTGAGOR OR ANY
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR WHILE SUCH PERSONS
ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH MORTGAGOR, IRRESPECTIVE
OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF THIS
DEED OF TRUST OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO THIS
DEED OF TRUST OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, ON THE PART OF MORTGAGEE OR ANY LENDER OR ANY OF
THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, OR AFFILIATES OR THE TRUSTEE; WITH THE FOREGOING INDEMNITY
SURVIVING SATISFACTION OF THE INDEBTEDNESS, THE TERMINATION OF THE CREDIT
AGREEMENT, AND THE RELEASE OF THE LIENS CREATED HEREBY.

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            4.10 Site Assessments. Mortgagee (by its officers, employees and
agents) at any time and from time to time, either prior to or after the
occurrence of an Event of Default, may contract, at the expense of Mortgagor,
for the services of Persons (the "Site Reviewers") to perform environmental site
assessments and other tests ("Site Assessments") on all or any portion of the
Mortgaged Property for the purpose of determining whether any environmental
condition exists on any Mortgaged Property which could reasonably be expected to
result in any liability, cost, or expense to Mortgagee or any owner, occupier,
or operator of such Mortgaged Property. The Site Assessments may be performed at
any time or times, upon reasonable notice, and under reasonable conditions
established by Mortgagor which do not impede the performance of the Site
Assessments. The Site Reviewers are hereby authorized to enter upon all or any
portion of the Mortgaged Property for such purposes. The Site Reviewers are
further authorized to perform both above and below the ground testing for
environmental damage or the presence of Hazardous Substances on the Mortgaged
Property and such other tests on the Mortgaged Property as may be necessary to
conduct the Site Assessments in the reasonable opinion of the Site Reviewers.
Mortgagor will supply to the Site Reviewers such historical and operational
information regarding the Mortgaged Property as may be reasonably requested by
the Site Reviewers to facilitate the Site Assessments and will make available
for meetings with the Site Reviewers appropriate personnel having knowledge of
such matters. On request, Mortgagee shall make the results of such Site
Assessments available to Mortgagor, which, prior to an Event of Default, may at
its election participate under reasonable procedures in the direction of such
Site Assessments and the description of tasks of the Site Reviewers. The cost of
performing all Site Assessments shall be paid by Mortgagor upon demand of
Mortgagee and any such obligations shall be Indebtedness secured by this Deed of
Trust.

            4.11 Uneconomic Wells. Should proceeds from the sale of production
from any oil and/or gas well constituting part of the Mortgaged Property (net of
production, severance and windfall profit taxes and royalties, overriding
royalties and other payments out of or measured by production) not exceed the
expense of operation of such well (including, but not limited to, operator's
overhead, payments to contractors and suppliers, and annual taxes assessed on
the basis of the value of the Property prorated on a monthly basis, but
expressly excluding any portion of the cost of drilling or completing the
relevant well or the cost of non-routine workover or remedial operations) for a
period in excess of three consecutive calendar months, then, upon receipt by
Mortgagor of written notification from Mortgagee, Mortgagor will (a) take all
necessary steps to abandon the relevant well, or (b) provide from sources other
than proceeds from the sale of production attributable to the Mortgaged Property
(i.e., through borrowings or contractual commitments obtained from third parties
not in violation of any provision of this Deed of Trust or any other Loan
Document) the funds required to pay the share of Mortgagor of the expenses
associated with the continuing operation of such well.

            4.12 Performance of Gas Contracts. Mortgagor will perform and
observe in all material respects all of its obligations under each contract
relating to the sale of gas produced from or attributable to the Mortgaged
Property and will not, except in good faith and as the result of arm's length
negotiations and with prior written notice to Mortgagee, change, modify, amend
or waive any of the terms or provisions of any such contract or take any other
action which would release any other party from its obligations or liabilities
under any such contract.

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            4.13 Covenants Running with the Land. All covenants and agreements
herein contained shall constitute covenants running with the Land.

                                   ARTICLE 5

                            DEFEASANCE, FORECLOSURE
                               AND OTHER REMEDIES

            5.1 Defeasance. Should the Indebtedness be paid, then the conveyance
of the Mortgaged Property shall become of no further force and effect, and, at
the request and expense of Mortgagor, the Lien granted hereunder shall be
released, without recourse or warranty; otherwise, it shall remain in full force
and effect.

            5.2 Events of Default. The occurrence of any Event of Default under
the Credit Agreement shall constitute an Event of Default under this Deed of
Trust.

            5.3 Acceleration and Exercise of Power of Sale.

            (a) Upon the occurrence of an Event of Default specified in Sections
      7.1(f) or 7.1(g) of the Credit Agreement, the aggregate principal amount
      of all Indebtedness then outstanding and all interest accrued thereon
      shall automatically become immediately due and payable, without
      presentment, demand, protest, notice of protest, default or dishonor,
      notice of intent to accelerate maturity, notice of acceleration of
      maturity, or other notice of any kind, all of which are hereby expressly
      waived by Mortgagor to the full extent permitted by applicable law. Upon
      the occurrence of any other Event of Default, Mortgagee may declare the
      aggregate principal amount of all Indebtedness then outstanding and all
      interest accrued thereon immediately due and payable, whereupon the same
      shall become immediately due and payable without presentment, demand,
      protest, notice of protest, default or dishonor, notice of intent to
      accelerate maturity, notice of acceleration of maturity, or other notice
      of any kind, all of which are hereby expressly waived by Mortgagor to the
      full extent permitted by applicable law.

            (b) Upon the occurrence of any Event of Default or at any time
      thereafter while the Indebtedness or any part thereof remains unpaid, it
      shall be the duty of the Trustee, on request of Mortgagee (which request
      is hereby presumed), to enforce this Trust and, after advertising the time
      and place of the sale for at least 21 days prior to the day of sale, by
      posting or causing to be posted a written or printed notice thereof at the
      courthouse door and by filing a copy of such notice in the office of the
      county clerk of each county in which the Mortgaged Property or any part
      thereof may be situated, and serving written notice of the proposed sale
      on each debtor obligated to pay the Indebtedness according to the records
      of Mortgagee, by postage prepaid, certified United States mail, at the
      most recent address for such debtor as shown by the records of Mortgagee,
      at least 21 days prior to the day of sale, to sell the

                                       10
<PAGE>

      Mortgaged Property, either as a whole or in parcels, as the Trustee may
      deem proper, at public venue at the courthouse of the county in which the
      Mortgaged Property or any part thereof may be situated (and being the
      county designated in the notice of sale) on the first Tuesday of any month
      between the hours of 10:00 a.m. and 4:00 p.m., to the highest bidder for
      cash, and after such sale to execute and deliver to the purchaser or
      purchasers good and sufficient deeds and assignments, conveying such
      Property so sold to the purchaser or purchasers with general warranty of
      title made on behalf of Mortgagor. The Trustee, or his successor or
      substitute, is hereby authorized and empowered to appoint any one or more
      Persons as his attorneys-in-fact or agents to act as Trustee under him and
      in his name, place and stead, such appointment to be evidenced by a
      written instrument executed by the Trustee, or his successor or
      substitute, to perform any one or more act or acts necessary or incident
      to any sale under the power of sale hereunder, including, without
      limitation, the posting and filing of any notices, the conduct of the sale
      and the execution and delivery of any instruments conveying the Mortgaged
      Property as a result of the sale, but in the name and on behalf of the
      Trustee, or his successor or substitute; and all acts done or performed by
      such attorneys-in-fact or agents shall be valid, lawful and binding as if
      done or performed by the Trustee, or his successor or substitute. No
      single sale or series of sales by the Trustee shall extinguish the Lien or
      exhaust the power of sale hereunder except with respect to the items of
      Property sold, but such Lien and power shall exist for so long as and may
      be exercised in any manner by law or as herein provided as often as the
      circumstances require to give Mortgagee full relief hereunder. The
      purchaser at any such sale shall not assume, nor shall the heirs, legal
      representatives, successors or assigns of such purchaser, be deemed to
      have assumed, by reason of the acquisition of Property or rights mortgaged
      hereunder, any liability or obligation of any lessee or operator of the
      Mortgaged Property, or any part thereof, arising by reason of any
      occurrence taking place prior to such sale. It shall not be necessary to
      have present, or to exhibit at any such sale, any of the personal Property
      subject to the Lien hereof.

            5.4 Rights as Secured Party. Upon the occurrence of any Event of
Default, Mortgagee shall be entitled to all of the rights, powers, and remedies
afforded a secured party by the UCC with respect to the personal Property and
fixtures and as-extracted collateral in which Mortgagee has been granted a
security interest hereby, or Mortgagee may proceed in accordance with the
provisions hereof as to both the real and personal Property covered hereby.

            5.5 Application of Proceeds of Sale. The Trustee is authorized to
receive the proceeds of each sale of Mortgaged Property and apply the same as
follows:

            FIRST: to the payment of all necessary costs and expenses incident
            to the execution of this Deed of Trust, including, but not limited
            to, a fee to the Trustee of 5% of the amount realized at the sale,
            if required by the Trustee;

                                       11
<PAGE>

            SECOND: to any and all Indebtedness then hereby secured, application
            to be made in such order and in such manner as Mortgagee may, in its
            discretion, elect;

            THIRD: the balance, if any, to Mortgagor or its successors or
            assigns, or other Person legally entitled thereto.

            5.6 Substitute Trustee. In the event of the death of the Trustee, or
his removal from the State of Texas, or his failure, refusal, or inability for
any reason to make any such sale or to perform any of the trusts herein
declared, or at any time, whether with or without cause, Mortgagee may appoint,
in writing, a substitute trustee who shall thereupon succeed to all the estates,
rights, powers, and trusts herein granted to and vested in the Trustee. In the
same events as first above stated, and in the same manner, successive substitute
Trustees may thereafter be appointed.

            5.7 Statements by Trustee. It is agreed that in any deed or deeds
given by any Trustee any and all statements of fact or other recitals therein
made as to the identity of the holder or holders of the Indebtedness, or as to
default in the payments thereof or any part thereof, or as to the breach of any
covenants herein contained, or as to the request to sell, notice of sale, time,
place, terms and manner of sale, and receipt, application, and distribution of
the money realized therefrom, or as to the due and proper appointment of a
substitute trustee, and, without being limited by the foregoing, as to any other
or additional act or thing having been done by Mortgagee or the Trustee, shall
be taken by all courts of law and equity as prima facie evidence that the
statements or recitals state facts and are without further question to be so
accepted. Mortgagor does hereby ratify and confirm any and all acts that the
Trustee may lawfully do in the premises by virtue of the terms and conditions of
this Deed of Trust.

            5.8 Suit to Collect and Foreclose. Mortgagee, at its election, or
the Trustee, upon written request of Mortgagee, may proceed by suit or suits, at
law or in equity, to enforce the payment of the Indebtedness in accordance with
the terms hereof and of the notes, guaranties, or other documents evidencing it,
and to foreclose the Lien of this Deed of Trust as against all or any portion of
the Mortgaged Property and to have such Property sold under the judgment or
decree of a court of competent jurisdiction.

            5.9 Mortgagee or Trustee as Purchaser. Mortgagee or the Trustee may
be a purchaser of all or any portion of the Mortgaged Property at any sale
thereof, whether such sale be under the power of sale hereinabove vested in the
Trustee, upon any other foreclosure of the Lien hereof, or otherwise. Mortgagee
or the Trustee so purchasing shall, upon any such purchase, acquire title to the
Mortgaged Property so purchased, free of the Lien of this Deed of Trust and free
of all rights of redemption in Mortgagor.

            5.10 Entry and Operation. Upon the occurrence of any Event of
Default, then in each and every such case and in addition to the other rights
and remedies hereunder, the Trustee or Mortgagee, whether or not the
Indebtedness shall have become due and payable, may, but shall not be obligated
to, enter into and upon and take possession of all or any portion of the
Mortgaged Property and may exclude Mortgagor, its agents and servants wholly
therefrom and have, hold, use, operate,

                                       12
<PAGE>

manage, and control all or any portion of the Mortgaged Property and produce the
oil, gas, and other minerals therefrom and market the same, all at the sole risk
and expense of Mortgagor and at the expense of the Mortgaged Property, applying
the net proceeds so derived, first, to the cost of maintenance and operation of
such Mortgaged Property; second, to the payment of the Indebtedness, application
to be made first to interest and then to principal; and the balance thereof, if
any, shall be paid to Mortgagor. Upon such payment of all such costs and
Indebtedness, the Mortgaged Property shall be returned to Mortgagor in its then
condition, and neither the Trustee nor Mortgagee shall be liable to Mortgagor
for any damage or injury to the Mortgaged Property except such as may be caused
through the fraud or willful misconduct of the Trustee or Mortgagee, as the case
may be.

            5.11 Power of Attorney to Mortgagee. Mortgagor does hereby designate
Mortgagee as the agent of Mortgagor to act in the name, place, and stead of
Mortgagor in the exercise of each and every remedy set forth herein and in
conducting any and all operations and taking any and all action reasonably
necessary to do so, recognizing such agency in favor of Mortgagee to be coupled
with the interests of Mortgagee under this Deed of Trust and, thus, irrevocable
so long as this Deed of Trust is in force and effect.

            5.12 Remedies Cumulative and Non-Exclusive. The rights of entry,
sale, or suit, as hereinabove or hereinafter conferred, are cumulative of all
other rights and remedies herein or by law or in equity provided, and shall not
be deemed to deprive Mortgagee or the Trustee of any such other legal or
equitable rights or remedies, by judicial proceedings or otherwise, appropriate
to enforce the conditions, covenants, and terms of this Deed of Trust and the
other Loan Documents. The employment of any remedy hereunder or otherwise shall
not prevent the concurrent or subsequent employment of any other appropriate
remedy or remedies.

                                   ARTICLE 6

                            ASSIGNMENT OF PRODUCTION

            6.1 Assignment. In addition to the conveyance to the Trustee herein
made, Mortgagor does hereby transfer, assign, deliver and convey unto Mortgagee,
its successors and assigns, all of the oil, gas, and other minerals produced,
saved, or sold from the Mortgaged Property and attributable to the interests of
Mortgagor therein subsequent to 7:00 a.m. on the first day of the month in which
this Deed of Trust is executed, together with the proceeds of any sale thereof.
Mortgagor hereby directs any purchaser now or hereafter taking any production
from the Mortgaged Property to pay to Mortgagee such proceeds derived from the
sale thereof and to continue to make payments directly to Mortgagee until
notified in writing by Mortgagee to discontinue the same. The purchaser of any
such production shall not be required to see to the application of the proceeds
thereof by Mortgagee, and payment made to Mortgagee shall be binding and
conclusive as between such purchaser and Mortgagor. Mortgagor further agrees to
perform all such acts and to execute all such further assignments, transfer and
division orders, and other instruments as may be required or desired by
Mortgagee or any other party to have such proceeds and revenues so paid to
Mortgagee.

                                       13
<PAGE>

            6.2 Postponement of Payment. For its convenience, Mortgagee has
elected not to exercise immediately its right to receive payment to it directly
of the proceeds of any sale of the oil , gas and other minerals produced or sold
from the Mortgaged Property and the purchasers may continue to make such payment
or delivery of the proceeds to Mortgagor until such time as Mortgagor and the
purchasers have received notice that an Event of Default has occurred and is
continuing, and that the purchasers are directed to make payment or delivery of
the proceeds directly to Mortgagee. Such failure by Mortgagee to exercise its
rights immediately shall not in any way waive the right of Mortgagee to receive
any of the proceeds, or to make any such demand, or to affect any such
assignment as to any proceeds not theretofore paid or delivered to Mortgagor. In
this regard, if any of the proceeds are paid or delivered directly to Mortgagee
and then, at the request of Mortgagee, the proceeds are, for a period or periods
of time, paid or delivered to Mortgagor, Mortgagee shall nevertheless have the
right, effective upon written notice, to require that future proceeds be again
paid or delivered directly to it. Mortgagee shall never be required to send any
such notice to all purchasers, and may direct such notice only to those
purchasers as it may, in its discretion, desire. It shall never be necessary for
Mortgagee to institute legal proceedings to enforce the assignment of
hydrocarbons, proceeds, or other rents, profits, or income contained in this
instrument. It shall not be necessary for Mortgagee to obtain possession of the
Mortgaged Property as a prerequisite to Mortgagee's right to collect or receive
any hydrocarbons, other minerals, proceeds, or other rents, profits, or income
assigned to Mortgagee under this instrument. Mortgagor and Mortgagee expressly
agree and it is the express intention of Mortgagor and Mortgagee that in no
event will any reduction in the obligations be measured by the fair market value
of the hydrocarbons, other minerals, proceeds, or other rents, profits, or
income assigned to Mortgagee under this instrument.

            6.3 Change of Purchaser. Should any purchaser taking the production
from the Mortgaged Property fail to make prompt payment to Mortgagee in
accordance with the provisions of Section 6.1, Mortgagee shall have the right,
at the expense of Mortgagor, to demand a change of connection and to designate
another purchaser with whom a new connection may be made, without any liability
on the part of Mortgagee in making such selection, so long as ordinary care is
used in the making thereof. Promptly upon such demand, Mortgagor shall take all
necessary and appropriate action to effect such change of connection.

            6.4 Application of Proceeds. Mortgagor authorizes and empowers
Mortgagee to receive, hold, and collect all sums of money paid to Mortgagee in
accordance with the provisions of Section 6.1, and to apply the same as
hereinafter provided, all without any liability or responsibility on the part of
Mortgagee, save and except as to good faith in so receiving and applying such
sums. Mortgagee may apply all sums received by Mortgagee pursuant to Section 6.1
to the payment of the Indebtedness, application to be made in such manner as
Mortgagee may elect, regardless of whether the application so made shall exceed
the payments of principal and interest then due as provided in the Loan
Documents. After such application has been so made by Mortgagee, the balance of
any such sums shall be paid to Mortgagor.

            6.5 No Postponement of Installments on Indebtedness. It is
understood and agreed that should such payments provided for by Section 6.1 be
less than the sum or sums then due on the Indebtedness, such sum or sums then
due shall nevertheless be paid by Mortgagor in

                                       14
<PAGE>

accordance with the provisions of the Loan Documents, and neither the assignment
made pursuant to Section 6.1 nor any other provisions hereof shall in any manner
be construed to affect the terms and provisions of the Loan Documents. Likewise,
neither the assignment made pursuant to Section 6.1 nor any other provisions
hereof shall in any manner be construed to affect the Liens, rights, title, and
remedies herein granted securing the Indebtedness or the liability of Mortgagor
therefor. The rights under this Article VI are cumulative of all other rights,
remedies, and powers granted under this Deed of Trust and are cumulative of any
other security which Mortgagee now holds or may hereafter hold to secure the
payment of the Indebtedness.

            6.6 Turnover to Mortgagee. Should Mortgagor receive any of the
proceeds of any sale of oil, gas, or other minerals produced, saved, or sold
from the Mortgaged Property, which under the terms hereof should have been
remitted to Mortgagee, Mortgagor will immediately remit same in full to
Mortgagee.

            6.7 Release of Proceeds Upon Payment of Indebtedness. Upon payment
in full of all Indebtedness and the termination of the Commitment, the remainder
of such proceeds held by Mortgagee, if any, shall be paid over to Mortgagor upon
demand, and a release of the interest hereby assigned will be made, without
recourse or warranty, by Mortgagee to Mortgagor at its request and its expense.

            6.8 Duty of Mortgagee. Mortgagee shall not be liable for any failure
to collect, or for any failure to exercise diligence in collecting, any funds
assigned hereunder. Mortgagee shall be accountable only for funds actually
received.

            6.9 Power of Attorney to Mortgagee. Mortgagor does hereby designate
Mortgagee as the agent of Mortgagor to act in the name, place, and stead of
Mortgagor for the purpose of taking any and all actions deemed by Mortgagee
necessary for the realization by Mortgagee of the benefits of the assignment of
production provided herein, recognizing such agency in favor of Mortgagee to be
coupled with the interests of Mortgagee under this Deed of Trust and, thus,
irrevocable so long as this Deed of Trust is in force and effect.

                                   ARTICLE 7

                                  MISCELLANEOUS

            7.1 Further Assurances. Upon request of Mortgagee, Mortgagor will
promptly correct any defects, errors, or omissions in the execution or
acknowledgment of this Deed of Trust or any other Loan Document, and execute,
acknowledge, and deliver such other assurances and instruments as shall, in the
opinion of Mortgagee, be necessary to fulfill the terms of this Deed of Trust.

            7.2 Interest. Any provision in any document that may be executed in
connection herewith to the contrary notwithstanding, Mortgagee shall in no event
be entitled to receive or

                                       15
<PAGE>

collect, nor shall any amounts received hereunder be credited so that Mortgagee
shall be paid, as interest a sum greater than that authorized by law. If any
possible construction of this Deed of Trust or any Loan Document seems to
indicate any possibility of a different power given to Mortgagee or any
authority to ask for, demand, or receive any larger rate of interest, this
clause shall override and control, and proper adjustments shall be made
accordingly.

            7.3 Agreement as Entirety. This Deed of Trust, for convenience only,
has been divided into Articles, Sections, and subsections. The rights, powers,
privileges, duties, and other legal relations of Mortgagor, the Trustee, and
Mortgagee shall be determined from this Deed of Trust as an entirety and without
regard to the aforesaid division into Articles, Sections, and subsections and
without regard to headings affixed to such Articles, Sections, or subsections.

            7.4 Number and Gender. Whenever the context requires, reference
herein made to the single number shall be understood to include the plural, and
the plural shall likewise be understood to include the singular. Words denoting
sex shall be construed to include the masculine, feminine, and neuter when such
construction is appropriate; and specific enumeration shall not exclude the
general, but shall be construed as cumulative.

            7.5 Rights and Remedies Cumulative. All rights, powers, immunities,
remedies, and Liens of Mortgagee existing and to exist hereunder or under any
other instruments or at law or in equity and all other or additional security
shall be cumulative and not exclusive, each of the other. Mortgagee shall, in
addition to the rights and remedies herein expressly provided, be entitled to
such other remedies as may now or hereafter exist at law or in equity for
securing and collecting the Indebtedness, for enforcing the covenants herein,
and for foreclosing the Liens hereof. Resort by Mortgagee to any right or remedy
provided for hereunder or at law or in equity shall not prevent concurrent or
subsequent resort to the same or any other right or remedy. No security
heretofore, herewith, or subsequently taken by Mortgagee shall in any manner
impair or affect the security given by this Deed of Trust or any security by
endorsement or otherwise presently or previously given; and all security shall
be taken, considered, and held as cumulative.

            7.6 Parties in Interest. This Deed of Trust shall be binding upon
the parties and their respective heirs, administrators, legal representatives,
successors, and assigns and shall inure to the benefit of the Mortgagee and its
legal representatives, successors, and assigns. The terms used to designate any
of the parties herein shall be deemed to include the heirs, administrators,
legal representatives, successors, and assigns of such parties. The term
"Mortgagee" shall also include any lawful owner, holder, or pledgee of any
Indebtedness.

            7.7 Supplements. Without in any manner limiting the effect of
Section 1.4 or any other provisions of this Deed of Trust as to the binding
effect of this Deed of Trust on after-acquired rights of Mortgagor, it is
contemplated by the parties hereto that from time to time additional interests
and properties may or will be added to the interests and properties subject to
the Liens, rights, titles, and interests created by this Deed of Trust by means
of supplemental indentures identifying this Deed of Trust and describing such
interests and properties to be so added and included. Upon the execution of any
such supplemental indenture, the Liens, rights, titles, and interests created
herein shall immediately attach to and be effective with respect to any such
interests and properties so

                                       16
<PAGE>

described, the same as if such interests and properties had been specifically
described herein, and such interests and properties being included in the term
"Mortgaged Property," as used herein.

            7.8 Invalidity. In the event that any one or more of the provisions
contained in this Deed of Trust shall for any reason be held invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Deed of Trust or
any other Loan Document.

            7.9 Construction. All titles or headings to Articles, Sections,
subsections, or other divisions of this Deed of Trust or the exhibits hereto are
only for the convenience of the parties and shall not be construed to have any
effect or meaning with respect to the other content of such Articles, Sections,
subsections, or other divisions, such other content being controlling as to the
agreement among the parties hereto. Article, Section, subsection, and Exhibit
references herein are to such Articles, Sections, subsections, and Exhibits of
this Deed of Trust unless otherwise specified. The words "hereby," "herein,"
"hereinabove," "hereinafter," "hereinbelow," "hereof," and "hereunder" when used
in this Deed of Trust shall refer to this Deed of Trust as a whole and not to
any particular Article, Section, subsection, or provision of this Deed of Trust.

            7.10 Fixtures, Minerals and Accounts. Without in any manner limiting
the generality of any of the foregoing hereof, some portions of the personal
Property described hereinabove are or are to become fixtures on the Lands. In
addition, the security interest created hereby under applicable provisions of
the UCC attaches to minerals, including oil and gas, and accounts resulting from
the sale thereof, at the wellhead or minehead located on the Lands.

            7.11 Financing Statement Filings. This Deed of Trust may be filed as
provided in Article 9 of the UCC to assure that the security interests granted
by this Deed of Trust are perfected. In this connection, this Deed of Trust may
be presented to a filing officer under the UCC to be filed in the real estate
records as a Financing Statement covering minerals and fixtures. Further,
Mortgagor authorizes Mortgagee to execute and file at any time and from time to
time any and all Financing Statements and amendments thereto in any UCC
jurisdiction, pursuant to Article 9 of the UCC, as Mortgagee deems necessary in
its sole discretion, in conjunction with this Deed of Trust, and Mortgagor
expressly authorizes execution and filing of such Financing Statements by
Mortgagee without need of signature or execution by Mortgagor.

            7.12 Addresses. For purposes of filing this Deed of Trust as a
financing statement, the addresses for Mortgagor, as the debtor, and Mortgagee,
as the secured party, are as set forth hereinabove.

            7.13 Counterparts. For the convenience of the parties, this Deed of
Trust may be executed in multiple counterparts, each of which for all purposes
shall be deemed, and may be enforced from time to time as, a chattel mortgage,
real estate mortgage, deed of trust, security agreement, assignment or contract,
or as one or more thereof. For recording purposes, various counterparts have
been executed, and there may be attached to each such counterpart an Exhibit A
containing only the description of the Mortgaged Property, or portions thereof,
which relates to the county or state in which the particular counterpart is to
be recorded. A complete, original

                                       17
<PAGE>

counterpart of this Deed of Trust with a complete Exhibit A may be obtained from
Mortgagee. Each of the counterparts hereof so executed shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.

            7.14 No Waiver by Mortgagee. No course of dealing on the part of
Mortgagee, its officers or employees, nor any failure or delay by Mortgagee with
respect to exercising any of its rights or remedies hereunder shall operate as a
waiver thereof nor shall the exercise or partial exercise of any such right or
remedy shall preclude the exercise of any other right or remedy.

            7.15 Amendment of Prior Security Documents This Deed of Trust is
intended, in part, as an amendment and restatement of those security documents
described on Exhibit B hereto or which relate to security documents assigned to
Mortgagee pursuant to the documents described on Exhibit B hereto (collectively,
the "Prior Security Documents"), and the liens and security interests created by
the Prior Security Documents are preserved and carried forward hereby.

            7.16 Governing Agreement. This Deed of Trust is made pursuant and
subject to the terms and provisions of the Credit Agreement. In the event of a
conflict between the terms and provisions of this Deed of Trust and those of the
Credit Agreement, the terms and provisions of the Credit Agreement shall govern
and control. The inclusion in this Deed of Trust of provisions not addressed in
the Credit Agreement shall not be deemed a conflict, and all such additional
provisions contained herein shall be given full force and effect.

            7.17 Special Provisions Applicable to Mortgaged Property in
Oklahoma. The following special provisions shall apply to that portion of the
Mortgaged Property situated in the State of Oklahoma:

            (a) The foreclosure and other remedial provisions of this Deed of
      Trust are subject to the applicable provisions of Oklahoma law.

            (b) Upon the occurrence of an Event of Default, prior to enforcing
      the trust created hereby, notice shall be properly and duly posted as
      required by the laws of the State of Oklahoma, after which the Mortgaged
      Property may be sold at public auction for cash. Accordingly, Mortgagee,
      personally or by its agents or attorneys, shall have the right and power,
      with or without first taking possession, to declare the Indebtedness due
      and payable, and to sell, to the extent permitted by law, at one or more
      sales, as an entirety or in parcels, as it may elect, the Mortgaged
      Property and all of the Mortgagor's estate, right, title and interest,
      claim and demand therein and right of redemption thereof, all at such
      place or places and otherwise in such manner and upon such notice as may
      be required by Title 46 Okla. Stat. Sections 40-48 (Oklahoma Power of Sale
      Mortgage Foreclosure Act) or other applicable law, or, in the absence of
      any such requirement, as Mortgagee may deem appropriate, and to make such
      conveyance to the purchaser or purchasers. Mortgagee may postpone the sale
      of all or any portion of such Property by public announcement at the time
      and place of such sale, and from time to time thereafter may further
      postpone such sale by public announcement made at the time of sale fixed
      by the preceding postponement. The

                                       18
<PAGE>

      right of sale hereunder shall not be exhausted by one or any sale, and
      Mortgagee may make other successive sales until all of the Mortgaged
      Property is legally sold.

            (c) In lieu of or in addition to exercising any power of sale
      hereinabove given, Mortgagee (whether or not the notice provided for in
      Title 46 Okla. Stat. Section 44 has been given by Mortgagee, but after the
      time for cure therein provided if such notice has been given) may proceed
      by a suit or suits in equity or at law, whether for a foreclosure
      hereunder, or for the sale of the Mortgaged Property, or for the specific
      performance of any covenant or agreement herein contained or in aid of the
      execution of any power herein granted, or to enforce the payment of the
      Indebtedness in accordance with the terms hereof and of the notes,
      guaranties, or other documents evidencing it, or for the enforcement of
      any other appropriate legal or equitable remedy. Should Mortgagee elect
      judicial foreclosure of this Deed of Trust in lieu of exercising the power
      of sale hereinabove granted, the Indebtedness shall, at the election of
      Mortgagee, become immediately due and payable without notice. Appraisement
      of the Mortgaged Property is hereby waived, or not waived, at the option
      of Mortgagee, such option to be exercised at or prior to the time judgment
      is rendered in any judicial foreclosure hereof. In case of any sale by
      virtue of judicial proceedings, the Mortgaged Property may be sold in one
      parcel and as an entirety or in such parcels, manner or order as Mortgagee
      in its sole discretion may elect.

            (d) To the full extent that it may be lawfully so agreed, Mortgagor
      for itself and for all who may claim under Mortgagor agrees that it will
      not at any time insist upon, plead, claim, or take the benefit or
      advantage of any stay, extension, or redemption law now or hereafter in
      force, in order to prevent or hinder the enforcement of this Deed of Trust
      or the sale of the Mortgaged Property, or any part thereof, pursuant
      thereto or the possession thereof by any purchaser at any such sale, but
      Mortgagor, for itself and all who may claim under it, insofar as it now or
      hereafter lawfully may, hereby waives the benefit of all such laws.

            (e) The Trustee herein shall be deemed to be a mortgagee acting on
      behalf of Mortgagee. The power of sale herein granted shall apply only to
      the extent permitted by the laws of the State of Oklahoma.

            (f) A POWER OF SALE HAS BEEN GRANTED IN THIS DEED OF TRUST. A POWER
      OF SALE MAY ALLOW THE MORTGAGEE TO TAKE THE MORTGAGED PROPERTY AND SELL IT
      WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE
      MORTGAGOR UNDER THIS DEED OF TRUST.

            7.18 Special Provisions Applicable to Mortgaged Property in
Colorado. The following special provisions shall apply to that portion of the
Mortgaged Property located in the State of Colorado:

                                       19
<PAGE>

            (a) The foreclosure and other remedy provisions of this Deed of
      Trust are subject to the provisions of Colorado law, particularly 1973
      C.R.S. 38-37-101 et seq., as same may be amended or supplemented.

            (b) Any action taken with respect to Mortgaged Property located in
      the State of Colorado shall not require the signature of the Trustee for
      its effectiveness.

            (c) All words of grant and conveyance to the Trustee hereunder shall
      be construed as words of grant and conveyance unto and in favor of
      Mortgagee and the rights and authority granted to the Trustee hereunder
      may be enforced and asserted by Mortgagee in accordance with the laws of
      the State of Colorado and the same may be foreclosed at the option of
      Mortgagee as to any or all such portions of the Mortgaged Property in any
      manner permitted by the laws of the State of Colorado.

            (d) This Deed of Trust is granted and conveyed to secure the maximum
      amount of indebtedness of Mortgagor, which, at any time outstanding, shall
      not exceed $100,000,000.

            7.19 Special Provisions Applicable to Mortgaged Property in
Mississippi. The following special provisions shall apply to that portion of the
Mortgaged Property located in the State of Mississippi:

            (a) In the event any of the provisions of this Deed of Trust are
      contrary to the provisions of the laws of Mississippi, the provisions of
      this Deed of Trust are subject to the laws of Mississippi.

            (b) The non-judicial foreclosure and sale of any part of the
      Mortgaged Property located in the State of Mississippi shall be made at
      public outcry to the highest bidder for cash. Sale shall be made after
      having advertised for three consecutive weeks preceding the sale in a
      newspaper published in the county in which the Mortgaged Property is
      situated or, if none is so published, then in some newspaper having a
      general circulation therein, and by posting a notice for the same time at
      the courthouse of the same county. The Trustee may appoint or delegate any
      one or more Persons as agent to perform any act or acts necessary or
      incident to any sale held by the Trustee, including the posting of notices
      and the conduct of the sale, but in the name of and on behalf of the
      Trustee, his substitute or successor. Mortgagor waives the provisions of
      Section 89-1-55 of the Mississippi Code of 1972, as amended, insofar as
      this section restricts the right of the Trustee to offer at sale more than
      160 acres at a time; and the Trustee may, in his discretion, offer the
      Mortgaged Property as a whole or in such part or parts as he may deem
      desirable regardless of the manner in which it may be described. Any sale
      made by the Trustee hereunder may be adjourned by announcement at the time
      and place appointed for such sale without further notice except as may be
      required by law. If the Mortgaged Property is situated in two or more
      counties, or in two judicial districts of the same county, the Trustee
      shall have full power to select in which county or judicial district

                                       20
<PAGE>

      the sale of the Property is to be made, newspaper advertisement published
      and notice of sale posted, and the Trustee's selection shall be binding
      upon Mortgagor and Mortgagee. Any corporate officer of Mortgagee may
      declare Mortgagor to be in default and may request the Trustee to sell the
      Property.

            (c) The Trustee may not be a purchaser of the Mortgaged Properties.]

            7.20 Special Provision Applicable to Mortgaged Property in Montana.
The following special provision shall apply to that portion of the Mortgaged
Property located in the State of Montana:

            This Deed of Trust is granted and conveyed to secure the maximum
      amount of indebtedness of Mortgagor, which, at any time outstanding, shall
      not be in excess of $100,000,000.

            7.21 Special Provisions Applicable to Mortgaged Property in New
Mexico. The following special provisions shall apply to that portion of the
Mortgaged Property situated in the State of New Mexico:

            (a) All words of grant to the Trustee hereunder shall be construed
      as words creating a Lien in favor of Mortgagee on the Mortgaged Property
      situated in the State of New Mexico.

            (b) The redemption period under New Mexico law is hereby
      specifically shortened to one month in lieu of nine months.

            (c) This Deed of Trust is granted and conveyed to secure the maximum
      amount of indebtedness of Mortgagor, which, at any time outstanding, shall
      not be in excess of $100,000,000.

            7.22 Special Provisions Applicable to Mortgaged Property in North
Dakota. The following special provisions shall apply to that portion of the
Mortgaged Property located in the State of North Dakota:

            (a) The federal tax identification number for Mortgagor is
      84-0637348 and 13-2929065.

            (b) MORTGAGOR AGREES THAT THIS DEED OF TRUST CONSTITUTES A
      COLLATERAL REAL ESTATE MORTGAGE PURSUANT TO NORTH DAKOTA CENTURY CODE,
      CHAPTER 35-03.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       21
<PAGE>

            IN WITNESS WHEREOF, this Deed of Trust is executed on the date of
the acknowledgment below but effective as of the 19th day of December, 2002.

                                   MORTGAGOR AND BORROWERS (DEBTOR):

                                   PRIMEENERGY CORPORATION
                                   PRIMEENERGY MANAGEMENT CORPORATION
                                   PRIME OPERATING COMPANY,
                                   EASTERN OIL WELL SERVICE COMPANY
                                   SOUTHWEST OIL FIELD CONSTRUCTION COMPANY,
                                   each company represented by

                                   _____________________________________________
                                   Beverly A. Cummings
                                   Executive Vice President, Treasurer,
                                   and Chief Financial Officer of each of the
                                   companies listed above

                                       22
<PAGE>

STATE OF TEXAS                  Section
                                Section
COUNTY OF HARRIS                Section

      BEFORE ME, the undersigned authority, on this day personally appeared
BEVERLY A. CUMMINGS, Executive Vice President, Treasurer, and Chief Financial
Officer of each of PRIMEENERGY CORPORATION, a Delaware corporation, PRIMEENERGY
MANAGEMENT CORPORATION, a New York corporation, PRIME OPERATING COMPANY, a Texas
corporation, EASTERN OIL WELL SERVICE COMPANY, a West Virginia corporation, and
SOUTHWEST OILFIELD CONSTRUCTION COMPANY, an Oklahoma corporation, on behalf of
each of said corporations, known to me to be the person whose name is subscribed
to the foregoing instrument, and acknowledged to me that she executed the same
for the purposes and consideration therein expressed, as the act and deed of
each of such corporations, and in the capacity therein stated for each of said
corporations.

      GIVEN UNDER MY HAND AND SEAL OF OFFICE this 19th day of December, 2002.

                                     ___________________________________________
                                     NOTARY PUBLIC in and for the State of Texas

                                       23
<PAGE>

                                    EXHIBIT A
                                       TO
                  MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
                FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION

            The designation "Working Interest" or "WI" when used in this Exhibit
means an interest owned in an oil, gas, and mineral lease that determines the
cost-bearing percentage of the owner of such interest. The designation "Net
Revenue Interest" or "NRI" means that portion of the production attributable to
the owner of a working interest after deduction for all royalty burdens,
overriding royalty burdens or other burdens on production, except severance,
production, and other similar taxes. The designation "Overriding Royalty
Interest" or "ORRI" means an interest in production which is free of any
obligation for the expense of exploration, development, and production, bearing
only its pro rata share of severance, production, and other similar taxes and,
in instances where the document creating the overriding royalty interest so
provides, costs associated with compression, dehydration, other treating or
processing, or transportation of production of oil, gas, or other minerals
relating to the marketing of such production. The designation "Royalty Interest"
or "RI" means an interest in production which results from an ownership in the
mineral fee estate or royalty estate in the relevant land and which is free of
any obligation for the expense of exploration, development, and production,
bearing only its pro rata share of severance, production, and other similar
taxes and, in instances where the document creating the royalty interest so
provides, costs associated with compression, dehydration, other treating or
processing or transportation of production of oil, gas, or other minerals
relating to the marketing of such production.

            Any reference in this Exhibit to wells or units is for warranty of
interest, administrative convenience, and identification and shall not limit or
restrict the right, title, interest, or properties covered by this Deed of
Trust. All right, title, and interest of Mortgagor in the properties described
herein are and shall be subject to this Deed of Trust, regardless of the
presence of any units or wells not described herein.

            The references to book or volume and page herein refer to the
recording location of each respective Mortgaged Property described herein in the
county where the land covered by the Mortgaged

                                       A-i
<PAGE>

                                    EXHIBIT A
                                       TO
                  MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
                FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION

                         OIL, GAS AND MINERAL INTERESTS

                                      A-ii
<PAGE>

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

          (THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS)

                                      FROM

                             PRIMEENERGY CORPORATION
                   Taxpayer Identification Number: 84-0637348
                                       and
                       PRIMEENERGY MANAGEMENT CORPORATION
                   Taxpayer Identification Number: 13-2929065
                             (Mortgagor and Debtor)

                                       TO

                         Arthur R. Gralla, Jr., Trustee
                               for the benefit of

                            GUARANTY BANK, FSB, Agent
                          (Mortgagee and Secured Party)

                           Effective December 19, 2002

For purposes of filing this Deed of Trust as a financing statement, the mailing
address of Mortgagor is One Landmark Square, Suite 1100, Stamford, Connecticut
06901-2605; the mailing address of Mortgagee is 333 Clay Street, Suite 4400,
Houston, Texas 77002-4103.

                          * * * * * * * * * * * * * * *

This instrument, prepared by R. H. Walls, Jackson Walker L.L.P., 1401 McKinney,
Suite 1900, Houston, Texas 77010, 713-752-4200, contains after-acquired property
provisions and covers future advances and proceeds to the fullest extent allowed
by applicable law.

ATTENTION OF RECORDING OFFICER: This instrument is a mortgage of both real and
personal property and is, among other things, a Security Agreement and Financing
Statement under the Uniform Commercial Code. This instrument creates a lien on
rights in or relating to lands of Mortgagor which are described in Exhibit A
hereto or in documents described in Exhibit A.

RECORDED DOCUMENT SHOULD BE RETURNED TO:

                              JACKSON WALKER L.L.P.
                            1401 McKinney, Suite 1900
                              Houston, Texas 77010
                            Attn.: Ms. Lorena Nichols<PAGE>
                                                                   Exhibit 10.24

RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:

Jackson Walker L.L.P.
1401 McKinney, Suite 1900
Houston, Texas  77010
Attention: Ms. Lorena Nichols

ACT OF MORTGAGE AND                Section              UNITED STATES OF AMERICA
SECURITY AGREEMENT                 Section
                                   Section
BY: PRIMEENERGY CORPORATION        Section
                                   Section
                 and               Section                    THE STATE OF TEXAS
                                   Section
PRIMEENERGY MANAGEMENT             Section
      CORPORATION                  Section
                                   Section
TO: GUARANTY BANK, FSB, Agent      Section                      COUNTY OF HARRIS

      BE IT KNOWN, that on the date set forth hereinafter for each, but
effective December 19, 2002, before each of the undersigned Notaries Public,
duly commissioned and qualified in and for the jurisdictions hereinafter
identified, and in the presence of the undersigned competent witnesses,
personally came and appeared the parties to this act (this "Mortgage") who are
hereinafter identified and who declared that they contract as follows:

                              ARTICLE 1 -- PARTIES

1.1   Mortgagor.

      PRIMEENERGY CORPORATION, a Delaware corporation ("Prime"), the Taxpayer
Identification Number for which is 84-0637348, PRIMEENERGY MANAGEMENT
CORPORATION, a New York corporation ("PEMC"), the Taxpayer Identification Number
for which is 13-2929065, (Prime and PEMC herein collectively "Mortgagor"), the
address of Mortgagor for purposes hereof is One Landmark Square, Suite 1100,
Stamford, Connecticut 06901-2605, each represented herein by its undersigned
officer, duly authorized by resolution of its board of directors, a certified
copy of which has been annexed hereto and made a part hereof for all purposes.

1.2   Mortgagee.

      GUARANTY BANK, FSB, a federal savings bank, the address for which for
purposes hereof is 333 Clay Street, Suite 4400, Houston, Texas 77002-4103
("Mortgagee"), represented herein by its undersigned duly authorized officer,
and the Taxpayer Identification Number for which is 74-2511478, in its capacity
as Agent for the Lenders from time to time party to or bound by that certain
Credit Agreement dated December 19, 2002 (the "Lenders"), by and among
Mortgagor, Prime Operating Company, a Texas corporation ("POC"), Eastern Oil
Well Service Company, a West Virginia corporation ("Eastern"), and Southwest Oil
Field Construction Company, an

<PAGE>

Oklahoma corporation ("Southwest") (Prime, PEMC, POC, Eastern and Southwest
herein collectively, "Borrowers"), the Lenders and
Guaranty Bank, FSB, Agent for such Lenders (as amended, restated, or
supplemented from time to time, the "Credit Agreement"). Capitalized terms used
but not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.

                   ARTICLE 2 -- MORTGAGE, PLEDGE, HYPOTHEC AND
                                SECURITY INTEREST

2.1   Mortgaged Property.

      This Mortgage covers the following Property of Mortgagor (such Property,
together with that described in Section 2.3, Section 8.6, and Section 12.13,
being the "Mortgaged Property"):

      A. all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the leases, rights of way,
easements, or other documents described in Exhibit A attached hereto and
incorporated herein for all purposes, without regard to any surface acreage
and/or depth limitations set forth in Exhibit A, and all renewals and extensions
thereof and all new leases, rights of way, easements, or other documents (i) in
which an interest is acquired by Mortgagor after the termination or expiration
of any lease, right of way, easement, or other document described in Exhibit A,
and (ii) that covers all or any part of the Property described in and covered by
such terminated or expired lease, right of way, easement, or other document, to
the extent, and only to the extent, such new leases, rights of way, easements,
or other documents may cover such Property (all of the foregoing in this
paragraph A being the "Leases");

      B. all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the lands subject to the
Leases or otherwise described in Exhibit A (the "Lands") including, without
limitation, the oil, gas, minerals, and leasehold estates in and to the Lands,
without regard to any surface acreage and/or depth limitations set forth in
Exhibit A.

      C. all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to any of the oil, gas, and
minerals in, on, or under the Lands, including, without limitation, all
contractual rights, fee interests, leasehold interests, overriding royalty
interests, non-participating royalty interests, mineral interests, production
payments, net profits interests, or any other interest measured by or payable
out of production of oil, gas, or other minerals from the Leases and/or Lands;

      D. all of the foregoing interests of Mortgagor as such interests may be
enlarged by the discharge of any payments out of production or by the removal of
any charges or encumbrances;

      E. all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived from
any present or future operating, farmout, bidding, pooling, unitization, and
communitization agreements, assignments, and subleases, whether or not described
in Exhibit A, to the extent, and only to the extent, that such agreements,
assignments, and subleases cover or include any right, title, and interest,
whether now owned and existing or hereafter acquired or arising, of Mortgagor in
and to all or any portion of the Leases and/or the Lands, and all units created
by any such pooling, unitization, and communitization

                                       2
<PAGE>

agreements and all units formed under orders, regulations, rules, or other
official acts of any Governmental Authority having jurisdiction, to the extent
and only to the extent that such units cover or include all or any portion of
the Leases and/or the Lands;

      F. all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived from
all presently existing and future advance payment agreements, oil, casinghead
gas, and gas sales, exchange, and processing contracts and agreements,
including, without limitation, those contracts and agreements that are described
in Exhibit A, to the extent, and only to the extent, those contracts and
agreements cover or include all or any portion of the Leases and/or the Lands;

      G. all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived from
all existing and future permits, licenses, easements, and similar rights and
privileges that relate to or are appurtenant to any of the Leases and/or the
Lands; and

      H. all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to all improvements and all
moveable Property of any kind or character defined in and subject to the
provisions of La.R.S. 10:9-101 et seq. (the "UCC") (including, but not limited
to, substitutions and replacements for, accessions to, and the proceeds and
products from any and all of such improvements and moveable Property), whether
now owned and existing or hereafter acquired or arising, and situated on any of
the Lands, including, but not limited to, pipe, casing, tubing, rods, storage
tanks, boilers, loading racks, pumps, foundations, warehouses, and all other
personal Property and equipment of every kind and character upon, incident,
appurtenant, or belonging to and used in connection with the interest of
Mortgagor, whether now owned and existing or hereafter acquired or arising, in
the Lands and/or the Leases, including, but not limited to, goods that are or
are to become fixtures related to such Property and all oil, gas, and other
minerals produced or to be produced to the account of Mortgagor from the Lands
and all accounts receivable, general intangibles, and contract rights of
Mortgagor in connection with the Lands and/or the Leases, including, but not
limited to, oil, gas and other minerals and accounts resulting from the sale
thereof arising at any wellhead or minehead located on the Lands and/or the
Leases.

2.2   Security Granted.

      Mortgagor specially grants to Mortgagee, as security for the Secured
Indebtedness described in Article 3, the following rights in or over the
Mortgaged Property:

      A. a mortgage, hypothec and pledge of the Mortgaged Property described in
clauses A and B of Section 2.1 and such other portions of the Mortgaged Property
as may be susceptible of being so encumbered; and

      B. a security interest in all of the goods, including, without limitation,
all equipment, inventory and fixtures, "as-extracted collateral," and all
intangibles, including, without limitation, all accounts and general
intangibles, now or hereafter comprising a part of the Mortgaged Property and
such other portions of the Mortgaged Property as may be susceptible to being
subjected to a security interest pursuant to the U.C.C.

                                       3
<PAGE>

2.3   After-Acquired Property.

      Mortgagor, for the same consideration, hereby grants to Mortgagee, as
security for the Secured Indebtedness described in Article 3, a mortgage,
hypothec and pledge of or a continuing security interest in, as the case may be,
all additional right, title, or interest which Mortgagor may hereafter acquire
or become entitled to in the interests, Properties, Lands, Leases, and premises
aforesaid, and in the oil, gas, or other minerals in and under or produced from
or attributable to any of the Lands or Leases, which additional right, title,
and interest, when acquired, shall constitute "Mortgaged Property," the same as
if expressly described and conveyed herein.

                        ARTICLE 3 -- SECURED INDEBTEDNESS

3.1   Secured Indebtedness Defined.

      The security described in Article 2 (and the other rights of Mortgagee
herein stipulated) are given to secure the full and punctual payment and
performance of the following (collectively, the "Secured Indebtedness"):

      A. The Obligations, including, without limitation, (i) the indebtedness
evidenced by the Credit Agreement, (ii) the Promissory Note executed by
Borrowers to the order of the Lenders pursuant to the Credit Agreement in the
aggregate face amount of up to $50,000,000, bearing interest and payable as
therein provided or as provided in the Credit Agreement, with a final maturity
date of December 19, 2004, and (iii) the Promissory Note executed by Borrower to
the order of the Lenders pursuant to the Credit Agreement in the aggregate face
amount of up to $4,000,000 bearing interest and being payable as therein
provided or as provided in the Credit Agreement, with a final maturity date of
December 19, 2004..

      B. It is contemplated that Borrower may from time to time borrow
additional sums of money from or otherwise be or become obligated to the
Lenders. This Mortgage is given to secure any and all indebtedness of Borrower,
present or future, either direct or indirect, primary or secondary, fixed or
contingent, which Borrower may now or hereafter owe, or as to which Borrower may
in any manner become obligated to the Lenders for payment, including, without
limitation, indebtedness arising by way of guaranty as to obligations of another
to the Lenders and indebtedness originally owed to a party other than the
Lenders but which becomes owing to the Lenders as the result of the Lenders
having acquired the right to payment thereof. This Mortgage shall likewise
secure not only the indebtedness described above in paragraph A or this
paragraph B, but any and all renewals for any period, extensions, and
rearrangements of all or any portion thereof; and the lien, security interest,
pledge and assignment under this Mortgage shall be cumulative of all other liens
and security of any and every other kind or character whatsoever securing the
above described indebtedness, including, without limitation, the following:

            (a) Payment of and performance of any and all present or future
      obligations of Borrower under Commodity Hedge Agreements, as defined in
      the Credit Agreement.

            (b) Payment of and performance of any and all present or future
      obligations of Borrower under any Rate Management Transaction, as defined
      in the Credit Agreement.

                                       4
<PAGE>

            (c) Payment of and performance of any and all present or future
      obligations of Borrower under any guaranty in favor of Lenders of any of
      the Borrower's subsidiary's obligations under Commodity Hedge Agreements
      and Rate Management Transactions and all present or future obligations of
      Borrower or Borrower's subsidiaries under Commodity Hedge Agreements and
      Rate Management Transactions.

3.2   Limitations Upon Extent of Certain Security

      The obligations described in Section 3.1 are each secured by this Mortgage
to the extent they do not exceed, at any one time, an aggregate amount equal to
ONE HUNDRED MILLION DOLLARS ($100,000,000).

3.3   Security Not Limited.

      Except as provided by Section 3.2 (and then only to the extent such
limitations are required by law), the entire amount of the Secured Indebtedness
is secured hereby without limitation or reduction.

3.4   Continuation in Event of Novation.

      The security granted by and the provisions of this Mortgage shall continue
with respect to any new obligation arising from any novation (subjective or
objective) of the Secured Indebtedness as permitted by Louisiana Civil Code Art.
1884 as well as to any other renewals, modifications, amendments, revisions or
extensions of the Secured Indebtedness.

3.5   Confession of Judgment for Mortgage.

      Mortgagor confesses judgment upon the entire Secured Indebtedness if any
part of the same is not paid at maturity, consenting that executory process
issue thereon to enforce the same.

              ARTICLE 4 -- SECURED INDEBTEDNESS AND CERTAIN OTHER
                                   OBLIGATIONS

4.1   Mortgagor acknowledges that it is indebted to the Lenders in the amount of
      the Secured Indebtedness.

4.2   Transfers and Assignments.

      A. The Lenders may freely transfer all or any part of the Secured
Indebtedness or rights under the terms of this Mortgage.

      B. If less than all of the Secured Indebtedness is transferred, unless the
transferor and transferee otherwise agree in writing, each part of such
indebtedness shall continue to share pro rata in the security and the transferor
shall not be deemed to have warranted or agreed to have subordinated any
remaining or future indebtedness to that transferred.

                                       5
<PAGE>

      C. If the Lenders transfer all of the Secured Indebtedness and all rights
under this Mortgage to any one or more Persons, they may deliver to any such
Person any evidence of the Secured Indebtedness, and shall forthwith be relieved
of any obligation to return or restore the same to Mortgagor, grant releases
hereunder or otherwise have any responsibility to Mortgagor for obligations
accruing or acts or events occurring thereafter.

4.3   Future Holders of Secured Indebtedness as Mortgagees.

      The Mortgage is executed for the benefit of any Person to whom any Lender
assigns any of the evidence of the Secured Indebtedness.

                     ARTICLE 5 -- ADDITIONAL DOCUMENTS AND
                                   ASSURANCES

      Mortgagor, upon request of Mortgagee, shall execute in proper and
customary form, adequate for their purposes, and file or deliver to Mortgagee
for filing or for such other purposes as may be appropriate, any additional acts
or instruments, and shall take any other action that may be required, in
Mortgagee's opinion, to assure or confirm the rights granted Mortgagee
hereunder, to fully perfect Mortgagee's security as between the parties or as to
third persons as required by law and in the manner contemplated and intended to
be created by this Mortgage, and to fully vest Mortgagee with the rights given
by this Mortgage or to fulfill Mortgagor's obligations hereunder. The entire
cost and expense of such actions shall be paid by Mortgagee.

                  ARTICLE 6 -- WARRANTY AND LIMITATION THEREON

6.1   Express Warranty.

      Mortgagor expressly warrants to Mortgagee, subject to, but only to, such
limitations as are expressly mentioned in this Mortgage or as are expressly
described in Exhibit A, that Mortgagor has good and indefeasible title to all of
the material (individually or in the aggregate) Mortgaged Property free and
clear of all Liens, except for Permitted Liens, by, through or under Mortgagor,
but not otherwise.

6.2   Defense and Indemnity.

      A. Mortgagor shall defend and indemnify Mortgagee against any claim or
demand made or asserted by any Person contrary to the warranty made in this or
any other article of this Mortgage, or inconsistent with Mortgagor's obligations
thereunder, and these obligations shall continue, notwithstanding the payment,
release, extinction or termination of the Secured Indebtedness or the security
given herein, or the surrender by any Lender of any evidence of the Secured
Indebtedness and its transfer to another.

      B. Except for Permitted Liens, if any claim, charge, lien or other
encumbrance contrary to the terms hereof exists or arises against Mortgagor on
all or any portion of the Mortgaged Property, whether such claim or encumbrance
is inferior or superior to those created by this Mortgage, Mortgagor shall
promptly satisfy such claim and remove such encumbrance from such Mortgaged
Property.

                                       6
<PAGE>

      C. Mortgagor further represents and warrants that all of the Leases
specifically described in Exhibit A are in full force and effect and all
covenants, express or implied, in respect of the Leases specifically described
in Exhibit A, or of any assignment of any of such Leases, which may affect the
validity of any of such Leases, have been performed insofar as such Leases
pertain to the Land.

                             ARTICLE 7 -- COVENANTS

      In consideration of the Secured Indebtedness, Mortgagor, for itself, its
legal representatives, successors, and assigns, covenants and agrees as follows:

7.1   Maintenance of Leases.

      Mortgagor will use all reasonable efforts to keep and continue all Leases,
estates, and interests herein described and all contracts and agreements
relating thereto in full force and effect in accordance with the terms thereof
and will not permit the same to lapse or otherwise become impaired for failure
to comply with the obligations thereof, whether express or implied. In this
connection, Mortgagor shall not release any of the Leases without the prior
written consent of Mortgagee.

7.2   Maintenance of Property.

      Mortgagor will use all reasonable efforts to keep and maintain all
improvements, personal Property, and equipment now or hereafter situated on the
Lands and constituting a portion of the Mortgaged Property and used or obtained
in connection therewith in good repair and condition, ordinary wear and tear
excepted, and will not tear down or remove the same or permit the same to be
torn down or removed without the prior consent of Mortgagee, except in the usual
course of operations as may be required for replacement when otherwise in
compliance with the provisions of this Mortgage and the Credit Agreement.

7.3   Pooling or Unitization.

      Mortgagor will not, without the prior written consent of Mortgagee, pool
or unitize all or any part of the Mortgaged Property where the pooling or
unitization would result in the diminution of the net revenue interest of
Mortgagor in production from the pooled or unitized lands attributable to the
Mortgaged Property constituting a portion of such pooled or unitized lands.
Immediately after the formation of any pool or unit in accordance herewith,
Mortgagor will furnish to Mortgagee a conformed copy of the pooling agreement,
declaration of pooling, or other instrument creating the pool or unit. The
interest of Mortgagor included in any pool or unit attributable to the Mortgaged
Property or any part thereof shall become a part of the Mortgaged Property and
shall be subject to the Liens hereof in the same manner and with the same effect
as though the pool or unit and the interest of Mortgagor therein were
specifically described in Exhibit A, In the event any proceedings of any
Governmental Authority which could result in pooling or unitizing all or any
part of the Mortgaged Property are commenced, Mortgagor shall give immediate
written notice thereof to Mortgagee. Any pooling or unitization of all or any
part of the Mortgaged Property in violation of this Section shall be of no force
or effect against the Trustee or Mortgagee.

                                       7
<PAGE>

7.4   Operation of Mortgaged Property.

      Mortgagor will operate or, to the extent that the right of operation is
vested in others, will exercise its best efforts to require the operator to
operate the Mortgaged Property and all wells now or hereafter located thereon
continuously and in a prudent and workmanlike manner in accordance with the best
usage of the field and in accordance with all applicable Requirements of Law.
Mortgagor will comply with all material terms and conditions of the Leases and
each assignment or contract obligating Mortgagor in any way with respect to the
Mortgaged Property; but nothing herein shall be construed to empower Mortgagor
to bind Mortgagee to any contract or obligation or render Mortgagee in any way
responsible or liable for bills or obligations incurred by Mortgagor.

7.5   Compliance with Operating Agreements.

      Mortgagor agrees to pay promptly all bills for labor and materials
incurred in the operation of the Mortgaged Property and will promptly pay its
share of all costs and expenses incurred under any joint operating agreement
affecting the Mortgaged Property or any portion thereof; will furnish Mortgagee,
as and when requested, full information as to the status of any joint account
maintained with others under any such operating agreement; will not take any
action to incur any liability or Lien (other than Permitted Liens) thereunder.
and will not enter into any new operating agreement or any amendment of any
existing operating agreement affecting the Mortgaged Property without the prior
written consent of Mortgagee. Furthermore, Mortgagor will not consent or agree
to participate in any proposed operation under any presently existing operating
agreement affecting the Mortgaged Property unless Mortgagor obtains the prior
written consent of Mortgagee and, if requested by Mortgagee, deposits with the
operator or Mortgagee, where Mortgagor is a non-operator, or with Mortgagee,
where Mortgagor is an operator, Mortgagor's share of the estimated cost of the
proposed operation prior to electing to participate in the operation. To the
extent that Mortgagor is unable to consent to any proposed operation with
respect to any of the Mortgaged Property, prior to electing not to participate
in the proposed operation, Mortgagor will use its best efforts, to the extent
practicable and to the extent allowed to do so under the relevant operating
agreement or other applicable contract, to farmout to others acceptable to
Mortgagee, on the best terms obtainable and acceptable to Mortgagee, the
interest or relevant portion of the interest of Mortgagor in the proposed
operation.

                                       8
<PAGE>

7.6   Access to Mortgaged Property.

      Mortgagor will permit Mortgagee and its accredited agents,
representatives, attorneys and employees, at the expense of Mortgagor, at all
reasonable times, to go upon, examine, inspect, conduct environmental audits and
other testing of, and remain on, the Mortgaged Property, and to go upon the
derrick floor of any well at any time drilled or being drilled thereon at
Mortgagee's own risk and subject to safety standards applicable in the industry,
and will furnish Mortgagee, upon request, all pertinent information regarding
the development and operation of the Mortgaged Property.

7.7   Waivers.

      Mortgagor hereby expressly waives, to the full extent permitted by
applicable law, any and all rights or privileges of marshaling of assets, sale
in inverse order of alienation, notices, appraisements, redemption, and any
prerequisite in the event of foreclosure of the Liens created herein. Mortgagee
at all times shall have the right to release any part of the Mortgaged Property
now or hereafter subject to the Liens of this Mortgage, any part of the proceeds
of production or other income herein or hereafter assigned or pledged, or any
other security it now has or may hereafter have securing the Indebtedness,
without releasing any other part of the Mortgaged Property, proceeds, or income,
and without affecting the Liens hereof as to the part or parts of the Mortgaged
Property, proceeds, or income not so released or the right to receive future
proceeds and income.

7.8   Compliance with Laws.

      Mortgagor will comply with all Requirements of Law applicable to the
Mortgaged Property and the operations conducted thereon, including, without
limitation, the Natural Gas Policy Act of 1978, as amended, and Environmental
Laws; and cause all employees, crew members, agents, contractors,
sub-contractors, and future lessees (pursuant to appropriate lease provisions)
of Mortgagor, while such Persons are acting within the scope of their
relationship with Mortgagor, to comply with all such Requirements of Law as may
be necessary or appropriate to enable Mortgagor to so comply.

7.9   Hazardous Substances Indemnification.

      MORTGAGOR HEREBY INDEMNIFIES AND HOLDS MORTGAGEE AND THE LENDERS AND THEIR
RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, AND AFFILIATES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND
JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY MORTGAGED PROPERTY,
WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR
UNDERTAKEN ON OR OFF ANY MORTGAGED PROPERTY, WHETHER PRIOR TO OR DURING THE TERM
HEREOF, AND WHETHER BY MORTGAGOR OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR OR ANY

                                       9
<PAGE>

OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON ANY MORTGAGED PROPERTY, IN
CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION,
CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME
LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON
OR UNDER ANY MORTGAGED PROPERTY, (D) ANY CONTAMINATION OF ANY MORTGAGED PROPERTY
OR NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING,
STORAGE, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE BY MORTGAGOR OR
ANY EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF MORTGAGOR WHILE SUCH
PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH MORTGAGOR,
IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN
ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND
ENFORCEMENT OF THIS MORTGAGE OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR
RELATED TO THIS MORTGAGE OR THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING,
WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF MORTGAGEE OR ANY LENDER
OR ANY OF THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, OR AFFILIATES OR THE TRUSTEE; WITH THE FOREGOING INDEMNITY
SURVIVING SATISFACTION OF THE INDEBTEDNESS, THE TERMINATION OF THE CREDIT
AGREEMENT, AND THE RELEASE OF THE LIENS CREATED HEREBY.

7.10  Site Assessments.

      Mortgagee (by its officers, employees and agents) at any time and from
time to time, either prior to or after the occurrence of an Event of Default,
may contract for the services of Persons (the "Site Reviewers") to perform
environmental site assessments and other tests ("Site Assessments") on all or
any portion of the Mortgaged Property for the purpose of determining whether any
environmental condition exists on any Mortgaged Property which could reasonably
be expected to result in any liability, cost, or expense to Mortgagee or any
owner, occupier, or operator of such Mortgaged Property. The Site Assessments
may be performed at any time or times, upon reasonable notice, and under
reasonable conditions established by Mortgagor which do not impede the
performance of the Site Assessments. The Site Reviewers are hereby authorized to
enter upon all or any portion of the Mortgaged Property for such purposes. The
Site Reviewers are further authorized to perform both above and below the ground
testing for environmental damage or the presence of Hazardous Substances on the
Mortgaged Property and such other tests on the Mortgaged Property as may be
necessary to conduct the Site Assessments in the reasonable opinion of the Site
Reviewers. Mortgagor will supply to the Site Reviewers such historical and
operational information regarding the Mortgaged Property as may be reasonably
requested by the Site Reviewers to facilitate the Site Assessments and will make
available for meetings with the Site Reviewers appropriate personnel having
knowledge of such matters. On request, Mortgagee shall make the results of such
Site Assessments available to Mortgagor, which prior to an event of default, may
at its election participate under reasonable procedures in the direction of such
Site Assessments and the description of tasks of the Site Reviewers. The cost of
performing all Site Assessments shall be paid by Mortgagor upon demand of
Mortgagee and any such obligation shall be Indebtedness secured by this
Mortgage.

                                       10
<PAGE>

7.11  Performance of Gas Contracts.

      Mortgagor will perform and observe in all material respects all of its
obligations under each contract relating to the sale of gas produced from or
attributable to the Mortgaged Property and will not, except in good faith and as
the result of arm's length negotiations and with prior written notice to
Mortgagee, change, modify, amend or waive any of the terms or provisions of any
such contract or take any other action which would release any other party from
its obligations or liabilities under any such contract.

7.12  Covenants Running with Land.

      All covenants and agreements herein contained shall constitute covenants
running with the Land.

                      ARTICLE 8 -- SALE OF PRODUCTION AND
                 COLLECTION OF ASSIGNED ACCOUNTS AND OTHER FUNDS

8.1   Right to Proceeds.

      Mortgagee may collect in its own name or that of Mortgagor all amounts due
to Mortgagor arising from or payable with respect to the Mortgaged Property,
including all amounts derived from or payable after the Effective Date, as
defined in Section 12.12 of this Mortgage, with respect to:

      A. Oil, gas or other minerals produced from the Wells and amounts payable
with respect thereto under oil or gas sales contracts, processing contracts or
other contracts relating to such minerals;

      B. Rents, royalties, overriding royalties and other amounts accruing to
the Wells or receivable by Mortgagor as a consequence thereof;

      C. Amounts due Mortgagor under operating agreements, service contracts or
other contracts for the operation of the Leases; and

      D. Proceeds and any other amount or benefit accruing to Mortgagor by,
under or by virtue of the ownership, use, enjoyment or disposition of the
Mortgaged Property.

      Notwithstanding the foregoing, Mortgagee shall not exercise the rights
herein granted unless Mortgagor is in default.

8.2   Transfer and Division Orders and Other Documents.

      Upon request of Mortgagee, Mortgagor shall execute and deliver to
Mortgagee or such persons as Mortgagee may direct, written transfer or division
orders, notices of assignment, directions to pay Mortgagee, or any other
document and shall take such other steps as may in Mortgagee's judgment be
necessary to cause or permit Mortgagee to receive or enforce payment of any
amounts it is entitled to receive hereunder.

                                       11
<PAGE>

8.3   Representation to Payor.

      To induce the person owing such amounts to make payment directly to
Mortgagee, Mortgagor relieves the payor of any responsibility for seeing to the
proper application thereof or determining Mortgagee's right to receive or to
continue to receive such sums. Mortgagor shall confirm these representations
directly to any person Mortgagee requests.

8.4   Application of Funds.

      All amounts received by Mortgagee under the provisions of this Mortgage
from the Mortgaged Property shall be applied to the Secured Indebtedness, to the
extent the same is due and payable, and any excess shall be released to
Mortgagor promptly.

8.5   Use of Proceeds.

      During periods when Mortgagee does not elect to receive any proceeds or
other amount accruing to the Mortgaged Property, Mortgagor may use such funds
for any purpose that is not inconsistent with this Mortgage.

8.6   Additional Security.

      All deposits or funds from any source or held for any reason from time to
time by Mortgagee and belonging or owed to Mortgagor shall be part of the
Encumbered Property.

8.7   Duty of Mortgagee.

      Mortgagee shall not be required to collect or exercise diligence in
collecting any funds or other amounts which it is entitled to collect, hold or
receive hereunder, nor for improperly applying or crediting the same, whether or
not the obligor of such funds has been notified to pay Mortgagee and shall be
accountable only for such amounts as may actually and finally be paid into
Mortgagee's hands.

8.8   Authority to Act in Name of Mortgagor.

      Mortgagee may act in the name and place of Mortgagor to take any action
necessary or appropriate in Mortgagee's judgment to collect, enforce or
otherwise realize any amounts it is entitled to receive under the provisions of
this Mortgage or to enjoy the benefits of any right or privilege given Mortgagee
hereunder or by law.

                    ARTICLE 9 -- MORTGAGEE'S RIGHT TO REMEDY
                      FAILURE TO COMPLY WITH OBLIGATIONS OR
                               BREACH OF WARRANTY

9.1   Right to Remedy.

      If Mortgagor for any reason fails to promptly make any payment or perform
any obligation required to be paid or performed in accordance with the terms of
this Mortgage, the Credit

                                       12
<PAGE>

Agreement or any other Loan Document, or if Mortgagor performs any act
inconsistent with or contrary to such obligations; or if any representation or
warranty of Mortgagor made hereunder or in the Credit Agreement or any other
Loan Document or in connection herewith is materially incorrect or false,
Mortgagee may pay or perform the same or take such steps as are, in Mortgagee's
judgment necessary or appropriate to remedy the actions of Mortgagor, discharge
such claims of encumbrances, or cause the matter that is the subject of the
representation or warranty to conform to the terms of this Mortgage.

9.2   Rights as to Amount Advanced.

      Any amounts expended by Mortgagee and all costs and expenses incurred by
Mortgagee in exercising the rights granted by Paragraph A immediately above, or
by any other provision of this Mortgage, resulting from the failure of Mortgagor
to perform its obligations hereunder in a timely manner shall be immediately due
and payable by Mortgagor to Mortgagee; become a part of the Secured
Indebtedness; be secured by the security created by this Mortgage as previously
provided and bear interest on such amounts as are accrued or expended by
Mortgagee until they are repaid by Mortgagor at the highest rate permitted by
law, or if no maximum rate is authorized in such cases, at the highest rate of
interest provided in the Credit Agreement. If Mortgagor fails to pay such
amounts when due, Mortgagee shall also recover all costs, expenses and
attorneys' fees incurred by Mortgagee in enforcing the same.

                  ARTICLE 10 -- PREPARATION OF ACT AND USE OF
                                  CERTAIN TERMS

10.1  Drafting of Act.

      Mortgagor and Mortgagee declare that each of them has contributed to the
drafting of this Mortgage and has had it reviewed by its counsel before signing
it. Each agrees that it has been purposefully drawn and correctly reflects its
understanding of the transaction that it contemplates.

10.2  Use of Defined Terms and Other Expressions.

      Mortgagor and Mortgagee particularly agree that those terms that are given
defined meanings in this article and elsewhere in this Mortgage are
intentionally utilized in those places where they are employed and are to be
understood in their defined sense unless such meaning is expressly limited or
qualified.

10.3  Headings and Construction of Agreement as a Whole.

      A. This Mortgage has been divided into articles, subarticles and
paragraphs for convenience only and such subdivisions have been given titles for
ease of reference. The titles to such subdivisions (and to the Exhibits) form no
part of the contract and resort is not to be had to them to aid in the
interpretation of this Mortgage or to limit, modify or restrict its provisions.
The scope and nature of the obligations of the parties is to be determined from
the provisions of this Mortgage as a whole and without regard to its divisions.

                                       13
<PAGE>

      B. "Exhibit A" constitutes a part of this Mortgage, and all modifications,
limitations or waivers of the warranties, covenants and other general provisions
hereof that are contained in Exhibit A and described as pertaining to the
property particularly described therein modify such general provisions to the
extent such Exhibit expressly so provides.

                 ARTICLE 11 -- REMEDIES IN THE EVENT OF DEFAULT
                     OR UPON THE HAPPENING OF CERTAIN EVENTS

11.1  Right to Accelerate Maturity.

      Mortgagee may declare the Secured Indebtedness immediately due and payable
if:

      A. Mortgagor fails to pay when due or defaults in the payment or
performance of any part of the Secured Indebtedness or other amount due under
the terms of this Mortgage or any other obligation owed by Mortgagor to
Mortgagee, or if Mortgagor fails to make any other payment or perform any other
obligation required to be paid or performed by Mortgagor to Mortgagee or any
other person under the terms of the Secured Indebtedness or this Mortgage.

      B. Mortgagor fails to perform or defaults in the performance of any
material covenant, agreement, stipulation or condition or other provision
contained in this Mortgage or required to be kept, observed or performed by
Mortgagor in any Governing Agreement or other document relating to the Secured
Indebtedness;

      C. Mortgagor becomes insolvent, is unable to pay its debts as they mature,
makes an assignment for the benefit of creditors, applies for a respite or to be
adjudicated a bankrupt, or applies for relief under any state or federal statute
for the relief of debtors;

      D. any of the Wells or the Leases are levied upon or seized in execution
of a writ of executory process, attachment or fieri facias or of any other writ
or legal process of court to the extent the same materially impairs the value of
the Mortgagor's Property;

      E. a petition for voluntary or involuntary receivership, bankruptcy,
arrangement or reorganization is filed against Mortgagor under any state or
federal statute; or a trustee, receiver or syndic is appointed for Mortgagor or
its property;

      F. any of the warranties, representations or covenants hereof is not
entirely true and correct in any material respect; or

      G. Mortgagor sells, leases, transfers or otherwise disposes of all or
substantially all of its properties or assets.

Any of the foregoing shall constitute an "Event of Default."

                                       14
<PAGE>

11.2  Additional Rights Upon Default.

      Upon the occurrence of any one or more of an Event of Default described in
Article 11.1, and in addition to any other right or privilege granted to it by
this Mortgage, by law or otherwise, and without prejudice thereto:

      A. Mortgagee may, at its option, without demand, notice of intention to
accelerate, notice of acceleration, notice of nonpayment, presentment, protest,
notice of dishonor, or any other notice to Mortgagor whatsoever, all of which
are hereby waived by Mortgagor to the full extent permitted by applicable law,
declare all Secured Indebtedness immediately due and payable.

      B. Mortgagee may cause the Mortgaged Property to be seized and sold under
executory or other legal process issued by any competent court, without
appraisement (the benefit of all laws relative to appraisement being hereby
expressly waived), as an entirety or in lots or parcels as Mortgagee may
determine, to the highest bidder for cash, or on such terms as the plaintiff in
such proceedings may direct.

      C. In addition to the other rights granted herein to Mortgagee, Mortgagee
as Secured Party shall have and may exercise all of the rights, remedies and
powers of a secured party under La. R.S. 10:9-101 et seq. (the "UCC"),
including, without limitation, the right and power to sell, at one or more
public or private sales, or otherwise dispose of or utilize the Mortgaged
Property or any part thereof in any manner authorized or permitted under the UCC
after a default by a debtor, and to apply the proceeds thereof toward payment of
any reasonable costs and expenses and attorney's fees and legal expenses thereby
incurred by Mortgagee as Secured Party and toward payment of the Secured
Indebtedness in such order or manner as Mortgagee may elect.

      D. Mortgagor hereby expressly waives:

            (1) The benefit of appraisement, as provided in Article 2332, 2723
      and 2724, Louisiana Code of Civil Procedure, and all other laws conferring
      the same;

            (2) The demand and three days' delay afforded by Articles 2639 and
      2721, Louisiana Code of Civil Procedure;

            (3) The three days' delay provided by Article 2331 and 2722,
      Louisiana Code of Civil Procedure; and

            (4) The benefit of the other provisions of Article 2331, 2722 and
      2723, Louisiana Code of Civil Procedure, and any other notices or
      conditions prescribed by law as a prerequisite to the institution of a
      suit or sale of the Mortgaged Property. Mortgagor expressly agrees to the
      immediate seizure of the Mortgaged Property.

      E. Mortgagee may purchase all or any portion of the Mortgaged Property at
any sale made hereunder.

      F. Mortgagee may cause a receiver or keeper to be appointed to take
possession of the Wells, the Leases and the other Mortgaged Property to manage,
administer, operate and conserve the value thereof and collect the rents,
issues, revenues, proceeds and profits thereof. The receiver or

                                       15
<PAGE>

keeper may also take possession of, and for these purposes use any and all
movable property contained in or on the premises and used by Mortgagor in the
operation thereof or any part thereof, whether or not the same is covered by
this Mortgage. After paying costs of collection and any other expenses incurred,
the proceeds shall be applied to the payment of the Secured Indebtedness in such
order as Mortgagee shall elect, and Mortgagee shall not be liable to account to
Mortgagor for any loss, damage or neglect suffered to or by the Wells, the
Leases, the other Mortgaged Property, or Mortgagor as a consequence thereof,
except such as are caused by the willful misconduct or gross negligence of
Mortgagee's own employees or agents.

      G. Mortgagee may designate any Person to be the receiver or keeper of the
Mortgaged Property as provided by La. R.S. 9:5132 and similar statutes.

      H. All rights to the marshaling of assets are expressly waived. Neither
Mortgagor nor any party claiming or asserting any interest in or right over the
Mortgaged Property shall have the right to require their sale in any special
order or a marshaling of assets, appraisement, redemption, stay or extension of
proceedings, or a moratorium on indebtedness with respect thereto or to the
Secured Indebtedness.

      I. Mortgagor shall be fully liable for all costs of retaking, holding,
preparing for sale, lease or other use or disposition, selling, leasing or
otherwise using or disposing of the Mortgaged Property which are incurred or
paid by Mortgagee as authorized or permitted hereunder, including also all
reasonable attorney's fees, legal expenses and costs, all of which expenses and
costs shall constitute a part of the Secured Indebtedness. MORTGAGOR SHALL AND
DOES HEREBY AGREE TO INDEMNIFY MORTGAGEE, THE LENDERS AND THEIR RESPECTIVE
OFFICERS, DIRECTORS, PARTNERS, SHAREHOLDERS, EMPLOYEES AND REPRESENTATIVES, AND
THEIR SUCCESSORS AND ASSIGNS, FOR, AND TO HOLD EACH OF THEM HARMLESS FROM, ANY
AND ALL LIABILITY, LOSS OR DAMAGE WHICH MAY OR MIGHT BE INCURRED BY ANY OF THEM
BY REASON OF THIS MORTGAGE OR THE EXERCISE OF RIGHTS OR REMEDIES HEREUNDER;
SHOULD MORTGAGEE INCUR ANY SUCH LIABILITY, LOSS OR DAMAGE THE AMOUNT THEREOF,
INCLUDING COSTS, EXPENSES AND REASONABLE ATTORNEYS' FEES, SHALL BE A DEMAND
OBLIGATION OWING BY MORTGAGOR TO MORTGAGEE AND SHALL BEAR INTEREST FROM THE DATE
INCURRED UNTIL PAID AT THE RATE PROVIDED FOR IN ARTICLE 9 HEREOF AND SHALL BE A
PART OF THE SECURED INDEBTEDNESS AND SHALL BE SECURED BY THIS MORTGAGE AND ANY
OTHER INSTRUMENT SECURING THE SECURED INDEBTEDNESS. THE INDEMNITY PROVIDED
HEREIN SHALL TERMINATE FIVE YEARS AFTER THE REPAYMENT OF THE SECURED
INDEBTEDNESS. NO PERSON SHALL BE ENTITLED UNDER THIS ARTICLE 11 I. TO RECEIVE
INDEMNIFICATION FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH ARE
CAUSED BY ITS OWN INDIVIDUAL FRAUD, NEGLIGENCE OR WILLFUL MISCONDUCT, AS
DETERMINED IN A FINAL JUDGMENT. Mortgagor hereby assents to, ratifies and
confirms any and all actions of Mortgagee taken with respect to the Mortgaged
Property pursuant to this Section 11.2.

                                       16
<PAGE>

11.3  Rights and Remedies Cumulative.

      All rights, powers, immunities, remedies and liens of Mortgagee existing
and to exist hereunder or under any other instruments or at law or in equity and
all other or additional security shall be cumulative and not exclusive, each of
the other. Mortgagee shall, in addition to the rights and remedies herein
expressly provided, be entitled to such other remedies as may now or hereafter
exist at law or in equity for securing and collecting the Secured Indebtedness,
for enforcing the covenants herein, and for foreclosing the liens hereof. Resort
by Mortgagee to any right or remedy provided for hereunder or at law or in
equity shall not prevent concurrent or subsequent resort to the same or any
other right or remedy. No security heretofore, herewith or subsequently taken by
Mortgagee shall in any manner impair or affect the security given by this
instrument or any security by endorsement or otherwise presently or previously
given; and all security shall be taken, considered and held as cumulative.

                          ARTICLE 12 -- MISCELLANEOUS

12.1  Instrument Filed as Financing Statement.

      Any copy of this Mortgage which is signed by Mortgagor or any carbon,
photographic, facsimile or other reproduction of this Mortgage may also serve as
a financing statement under the UCC by Mortgagor in favor of Mortgagee.

12.2  Fixtures.

      Certain of the Mortgaged Property is or may become "fixtures" (as that
term is defined in the UCC) on the real or immovable property described in
Exhibit A hereto and this instrument shall operate also as a financing statement
upon such of the Mortgaged Property which is or may become fixtures. Mortgagor
has an interest of record in the real estate

12.3  Addresses.

      For purposes of filing this instrument as a financing statement, the
addresses for Mortgagor, as debtor, and Mortgagee, as secured party, are as set
forth in Article 1 of this Mortgage.

12.4  Financing Statement.

      Mortgagee is authorized to file, in jurisdictions where this authorization
will be given effect, a financing statement signed only by Mortgagee covering
the Mortgaged Property. At the request of Mortgagee, Mortgagor will join
Mortgagee in executing one or more financing statements covering the Mortgaged
Property pursuant to the UCC in form satisfactory to Mortgagee. Mortgagee shall
pay the cost of filing or refiling any such financing statement and of filing or
refiling or recording or re-recording this Mortgage, as a financing statement,
in all public offices at any time and from time to time whenever filing or
recording of any financing statement or this Mortgage is deemed by Mortgagee to
be necessary or desirable. Further, Mortgagor authorizes Mortgagee to execute
and file any and all Financing Statements in both the real estate records and
the office of the Secretary of State of Delaware and New York, pursuant to
Article 9 of the Uniform Commercial Code, as Mortgagee deems necessary in its
sole discretion, in conjunction with this Mortgage, and Mortgagor

                                       17
<PAGE>

expressly authorizes execution and filing of such Financing Statements by
Mortgagee without need of signature or execution by Mortgagor.

12.5  Releases.

      In accordance with the provisions of Louisiana Civil Code article 3298, as
amended from time to time, if Mortgagor shall pay in full when due the Secured
Indebtedness and shall duly and timely perform and observe all of the terms,
provisions, covenants and agreements herein and in the Credit Agreement and
other Loan Documents provided to be performed and observed by Mortgagor, and if
neither Mortgagor nor Mortgagee is bound to the other or to any third person to
permit any further obligation to be incurred then or thereafter, then Mortgagor
may give notice to Mortgagee of its intent to terminate this Mortgage and may
request that Mortgagee execute a release of this Mortgage at the expense of
Mortgagor. Such termination shall not become effective, and Mortgagee shall not
be obligated to execute such a release, until thirty (30) days after Mortgagee
has actually received such notice at its address set forth in Section 1.2 of
this Mortgage and until Mortgagee has determined, in good faith, that Mortgagor
is entitled to terminate this Mortgage and obtain such release under the terms
of this Section 12.5.

12.6  Notices.

      All notices, requests, consents, demands and other communications required
or permitted under this Mortgage shall be in writing, unless otherwise
specifically provided herein, and shall be deemed sufficiently given or
furnished if delivered by personal delivery, by telecopy, by delivery service
with proof of delivery, or by registered or certified United States mail,
postage prepaid, to Mortgagor or Mortgagee, as the case may be, at the address
of such party specified in Article 1 of this Mortgage (unless changed by similar
notice in writing given by the particular person whose address is to be
changed).

12.7  Severability.

      A determination that any provision of this Mortgage is unenforceable or
invalid shall not affect the enforceability or validity of any other provision,
and any determination that the application of any provision of this Mortgage to
any Person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to other Persons or
circumstances.

12.8  Recording.

      Mortgagee, or Mortgagor at the request of Mortgagee, will cause this
Mortgage and all amendments and supplements thereto and substitutions therefor
and all financing statements, fixture filings and continuation statements
relating thereto to be recorded, filed, re-recorded and re-filed in such manner
and in such places as Mortgagee shall reasonably request and Mortgagee pay or
reimburse Mortgagor for all such recording, filing, re-recording and re-filing
taxes, fees and other charges.

                                       18
<PAGE>

12.9  Execution in Counterparts.

      This Mortgage is executed in multiple counterparts. For recording
purposes, Exhibit A attached to various counterparts of this Mortgage may
contain a description of the Wells, the Leases, the Lands and other Mortgaged
Property relating only to the jurisdiction in which the relevant counterpart is
to be filed for registry or recordation. Each counterpart shall for all purposes
be deemed to be an original and all such counterparts shall together constitute
but one and the same instrument and juridical act. Complete copies of this
Mortgage containing descriptions of all the Wells, the Leases, the Lands and
other Mortgaged Property have been retained by Mortgagor and Mortgagee.

12.10 Governing Law.

      THE TERMS AND PROVISIONS OF THIS MORTGAGE RELATING TO THE CREATION,
PERFECTION AND ENFORCEMENT OF THE ENCUMBRANCES AND SECURITY INTERESTS CREATED BY
THIS MORTGAGE AND THE REALIZATION BY MORTGAGEE OF ITS RIGHTS AND REMEDIES UNDER
THIS MORTGAGE OR WITH RESPECT TO THE MORTGAGED PROPERTY LOCATED IN OR OFFSHORE
THE STATE OF LOUISIANA, SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF LOUISIANA (WITHOUT GIVING EFFECT TO
THE CONFLICTS-OF-LAW RULES AND PRINCIPLES OF SUCH STATE) AND APPLICABLE LAWS OF
THE UNITED STATES. ALL OTHER TERMS AND PROVISIONS OF THIS MORTGAGE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS
AND APPLICABLE FEDERAL LAW.

12.11 Jurisdiction.

      MORTGAGOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATES OF TEXAS, LOUISIANA
AND EACH OTHER STATE WHERE THE MORTGAGED PROPERTY IS LOCATED AND AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING
RELATING TO THIS MORTGAGE, THE GOVERNING AGREEMENTS OR THE SECURED INDEBTEDNESS
BY SERVING THE SECRETARY OF STATE OF SUCH STATE IN ACCORDANCE WITH ANY PROVISION
OF SUCH STATE'S LAWS GOVERNING SERVICE OF PROCESS UPON FOREIGN CORPORATIONS OR
ENTITIES

12.12 Amendment of Prior Security Documents This Mortgage is intended, in part,
as an amendment and restatement of those security documents described on Exhibit
B hereto or which relate to security documents assigned to Mortgagee pursuant to
the documents described on Exhibit B hereto (collectively, the "Prior Security
Documents"), and the liens and security interests created by the Prior Security
Documents are preserved and carried forward hereby.

                                       19
<PAGE>

12.13 Effective Date.

      This Mortgage is made to be effective as of 7:00 o'clock a.m. local time
on December 19, 2002, in Houston, Harris County, Texas (the "Effective Date").

12.14 Supplements.

      Without in any manner limiting the effect of Section 2.3 or any other
provisions of this Mortgage as to the binding effect of this Mortgage on
after-acquired rights of Mortgagor, it is contemplated by the parties hereto
that from time to time additional interests and properties may or will be added
to the interests and properties subject to the Liens, rights, titles, and
interests created by this Mortgage by means of supplemental indentures
identifying this Mortgage and describing such interests and properties to be so
added and included. Upon the execution of any such supplemental indenture, the
Liens, rights, titles, and interests created herein shall immediately attach to
and be effective with respect to any such interests and properties so described,
the same as if such interests and properties had been specifically described
herein, and such interests and properties being included in the term "Mortgaged
Property," as used herein.

      THUS SIGNED in multiple originals in my office in Houston, Harris County,
Texas, by the person who appears above my signature below in the presence of the
undersigned competent witnesses who have signed their names hereto and me,
Notary, on the _______ day of December, 2002, but effective as above set forth,
after due reading of the whole.

WITNESSES TO ALL SIGNATURES
OF MORTGAGOR AND BORROWER:           MORTGAGOR AND BORROWERS:

                                     PRIMEENERGY CORPORATION
______________________________       PRIMEENERGY MANAGEMENT CORPORATION
(Signature of Witness)               PRIME OPERATING COMPANY
                                     EASTERN OIL WELL SERVICE COMPANY
                                     SOUTHWEST OIL FIELD CONSTRUCTION
______________________________       COMPANY,
(Printed Name of Witness)            EACH COMPANY REPRESENTED BY

______________________________       ___________________________________________
(Signature of Witness)               Beverly A. Cummings
                                     Executive Vice President, Treasurer,
______________________________       and Chief Financial Officer of each of the
(Printed Name of Witness)            companies listed above

                   ___________________________________________
                   Notary Public in and for the State of Texas

                                       20
<PAGE>

      THUS SIGNED in multiple originals in my office in Houston, Harris County,
Texas, by the person who appears above my signature below in the presence of the
undersigned competent witnesses who have signed their names hereto and me,
Notary, on the _______ day of December, 2002, but effective as above set forth,
after due reading of the whole.

                                        MORTGAGEE:

WITNESSES TO SIGNATURE
OF MORTGAGEE:                           GUARANTY BANK, FSB, Agent

________________________________        By: ____________________________________
(Signature of Witness)                      Richard Menchaca
                                            Vice President
________________________________
(Printed Name of Witness)

________________________________
(Signature of Witness)

________________________________
(Printed Name of Witness)

                   ___________________________________________
                   Notary Public in and for the State of Texas

                                       21
<PAGE>

                                    EXHIBIT A
                                       TO
                     ACT OF MORTGAGE AND SECURITY AGREEMENT

      The designation "Working Interest" or "WI" when used in this Exhibit means
an interest owned in an oil, gas, and mineral lease that determines the
cost-bearing percentage of the owner of such interest. The designation "Net
Revenue Interest" or "NRI" means that portion of the production attributable to
the owner of a working interest after deduction for all royalty burdens,
overriding royalty burdens or other burdens on production, except severance,
production, and other similar taxes. The designation "Overriding Royalty
Interest" or "ORRI" means an interest in production which is free of any
obligation for the expense of exploration, development, and production, bearing
only its pro rata share of severance, production, and other similar taxes and,
in instances where the document creating the overriding royalty interest so
provides, costs associated with compression, dehydration, other treating or
processing, or transportation of production of oil, gas, or other minerals
relating to the marketing of such production. The designation "Royalty Interest"
or "RI" means an interest in production which results from an ownership in the
mineral fee estate or royalty estate in the relevant land and which is free of
any obligation for the expense of exploration, development, and production,
bearing only its pro rata share of severance, production, and other similar
taxes and, in instances where the document creating the royalty interest so
provides, costs associated with compression, dehydration, other treating or
processing or transportation of production of oil, gas, or other minerals
relating to the marketing of such production.

      Any reference in this Exhibit to wells or units is for warranty of
interest, administrative convenience, and identification and shall not limit or
restrict the right, title, interest, or properties covered by this Act of
Mortgage. All right, title, and interest of Mortgagor in the properties
described herein are and shall be subject to this Act of Mortgage, regardless of
the presence of any units or wells not described herein.

      The references to book and folio or page herein refer to the recording
location of each respective Mortgaged Property described herein in the parish
where the land covered by the Mortgaged Property is located.

                    [Descriptions of the relevant Leases and
                       the relevant Land are found on the
                        following pages of this Exhibit]

                                       A-i
<PAGE>

                              CORPORATE RESOLUTIONS
                            (PRIMEENERGY CORPORATION)

      I, the undersigned, hereby certify to the below named bank that I am
Secretary of PRIMEENERGY CORPORATION ("Company"), a Delaware corporation; that
the following is an extract of the minutes of a meeting of the Board of
Directors of the Company wherein the following resolutions were adopted by the
Board of Directors of said Company, and that such resolutions have not been
rescinded or modified and are in full force and effect:

      "1. RESOLVED, that the officer of this Company as listed below be and the
      same is hereby authorized and empowered on behalf of the Company, to
      borrow money from Guaranty Bank, FSB, and the other lenders from time to
      time party to or bound by that certain Credit Agreement dated December 19,
      2002, by and among the Company, such lenders, and Guaranty Bank, FSB, in
      its capacity as Agent for such lenders (the "Agent"), and to guarantee
      indebtedness of any party to such lenders and to make, execute and deliver
      promissory notes, guaranty agreements, or other written obligations of the
      Company, in such form, date and maturity and at such rate of interest, all
      as such officer of this Company may approve, and the Secretary or any
      Assistant Secretary is authorized, but not required, to affix the
      corporate seal to any such instrument whenever necessary or required, and
      the execution and delivery by such officer of such instrument or
      instruments shall be conclusive evidence that such officer approves the
      terms of such instruments:

<TABLE>
<CAPTION>
      NAME                         TITLE                                                    SIGNATURE
      ----                         -----                                                    ---------
<S>                                <C>                                        <C>
      Beverly A. Cummings          Executive Vice President,
                                   Treasurer, and
                                   Chief Financial Officer                    _______________________
</TABLE>

      "2. IT IS FURTHER RESOLVED, that all documents authorized to be signed by
      this resolution shall be in such form and contain such terms and
      conditions as the foregoing officer or officers deem necessary or
      appropriate, including, without limitation, confessions of judgment, pacts
      de non alienando, waivers of appraisement, and waivers of notice and
      delay.

      "3. IT IS FURTHER RESOLVED, that the foregoing resolutions shall remain in
      full force and effect until written notice of their amendment or
      rescission shall have been received by the Agent, and that receipt of said
      notice shall not affect any action taken by the Agent prior thereto."

      I, the undersigned, further certify that the officer listed above has been
duly elected to the office set opposite her name, that she continues to hold
such office at the present time, and that the signature appearing hereon is the
genuine original signature of such officer.

                                       - i -
<PAGE>

      IN WITNESS HEREOF, I have hereunto set my hand and seal of this Company
this _______ day of December, 2002.

                                         _______________________________________
                                         Printed Name:__________________________
                                         Secretary

                                     - ii -
<PAGE>

                              CORPORATE RESOLUTIONS
                      (PRIMEENERGY MANAGEMENT CORPORATION)

      I, the undersigned, hereby certify to the below named bank that I am
Secretary of PRIMEENERGY MANAGEMENT CORPORATION ("Company"), a New York
corporation; that the following is an extract of the minutes of a meeting of the
Board of Directors of the Company wherein the following resolutions were adopted
by the Board of Directors of said Company, and that such resolutions have not
been rescinded or modified and are in full force and effect: "

      "1. RESOLVED, that the officer of this Company as listed below be and the
      same is hereby authorized and empowered on behalf of the Company, to
      borrow money from Guaranty Bank, FSB, and the other lenders from time to
      time party to or bound by that certain Credit Agreement dated December 19,
      2002, by and among the Company, such lenders, and Guaranty Bank, FSB in
      its capacity as Agent for such lenders (the "Agent"), and to guarantee
      indebtedness of any party to such lenders and to make, execute and deliver
      promissory notes, guaranty agreements, or other written obligations of the
      Company, in such form, date and maturity and at such rate of interest, all
      as such officer of this Company may approve, and the Secretary or any
      Assistant Secretary is authorized, but not required, to affix the
      corporate seal to any such instrument whenever necessary or required, and
      the execution and delivery by such officer of such instrument or
      instruments shall be conclusive evidence that such officer approves the
      terms of such instruments:

<TABLE>
<CAPTION>
      NAME                         TITLE                                                    SIGNATURE
      ----                         -----                                                    ---------
<S>                                <C>                                        <C>
      Beverly A. Cummings          Executive Vice President,
                                   Treasurer, and
                                   Chief Financial Officer                    _______________________
</TABLE>

      "2. IT IS FURTHER RESOLVED, that all documents authorized to be signed by
      this resolution shall be in such form and contain such terms and
      conditions as the foregoing officer or officers deem necessary or
      appropriate, including, without limitation, confessions of judgment, pacts
      de non alienando, waivers of appraisement, and waivers of notice and
      delay.

      "3. IT IS FURTHER RESOLVED, that the foregoing resolutions shall remain in
      full force and effect until written notice of their amendment or
      rescission shall have been received by the Agent, and that receipt of said
      notice shall not affect any action taken by the Agent prior thereto."

      I, the undersigned, further certify that the officer listed above has been
duly elected to the office set opposite her name, that she continues to hold
such office at the present time, and that the signature appearing hereon is the
genuine original signature of such officer.

                                      - i -
<PAGE>

      IN WITNESS HEREOF, I have hereunto set my hand and seal of this Company
this ______ day of December, 2002.

                                         _______________________________________
                                         Printed Name:__________________________
                                         Secretary

                                     - ii -

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