10QSB

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended June 30, 2002

Commission File No. 0-30689

ROCKY MOUNTAIN ENERGY CORPORATION

(Exact name of registrant as specified in charter)

Nevada	90-0031918
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

333 North Sam Houston Parkway E., Suite 910 Houston, Texas 77060

(Address of principal executive offices) (Postal Code)

Registrant's telephone number, including area code: (281) 448-6500

Emission Control Devices, Inc.

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

As of July 31, 2002 there were 19,957,373 shares of the common stock, $0.001 par value, of the registrant issued and outstanding.

Transitional Small Business Disclosure Format (check one) YES NO X

Documents incorporated by reference: None

FORWARD-LOOKING INFORMATION

THIS FORM 10QSB AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY THE COMPANY OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, 15 U.S.C.A. SECTIONS 77Z-2 AND 78U-5. THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND MEMBERS OF ITS MANAGEMENT TEAM AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED.

PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD_LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD- LOOKING STATEMENTS ARE SET FORTH HEREIN. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying balance sheets of Rocky Mountain Energy Corp. (a development stage company) at June 30, 2002, and the statements of operations for the period from May 10, 2002 to June 30, 2002, and the cash flows for the period from May 10, 2002 to June 30, 2002, have been prepared by the Company's management and they include all information and notes to the financial statements necessary for a complete presentation of the financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

Operating results for the quarter ended June 30, 2002 are not necessarily indicative of the results that can be expected for the year ending December 31, 2002.

ROCKY MOUNTAIN ENERGY CORPORATION

(formerly known as Emissions Control Devices, Inc.)

(A Development Stage Company)

August 16, 2002

INDEX

PART I. FINANCIAL INFORMATION	Page No.
Item 1. Financial Statements	4
Item 2. Management's Discussion and Analysis and Plan of Operation	18
PART II. OTHER INFORMATION	23
SIGNATURES	25

ROCKY MOUNTAIN ENERGY CORPORATION

(formerly known as Emissions Control Devices, Inc.)

(A Development Stage Company)

Condensed Consolidated Balance Sheet

JUNE 30, 2002

(Unaudited)

ASSETS
Current Assets:
Cash and cash equivalents	$ 11,236
Other current assets	16,141
	_________
Total current assets	27,377
	_________
Property and Equipment, (full cost method for oil and gas properties aggregating $1,000) net of accumulated depreciation of $919	55,225
Other Assets:
Deposit for purchase of oil and gas properties	26,060
Deferred financing costs	100,000
Other	26,000
	_________
Total other assets	152,060
	_________
Total assets	$ 234,662
	_________

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable	$ 50,000
Current portion of capital lease obligations	17,447
Accounts payable	34,010
Due to related parties	11,213
Accrued liabilities	40,234
Deposit held for new acquisition	25,000
	_________
Total current liabilities	177,904
	_________
Obligations Under Capital Leases, less current portion	34,667
	_________
Total liabilities	212,571
	_________
Stockholders' Equity:
Common stock, $0.001 par value; 200,000,000 shares authorized; 19,957,373 issued and outstanding	19,957
Additional paid-in capital	2,370,830
Deficit accumulated during the development stage	(118,696)
Deferred compensation	(250,000)
Deferred financing costs	(2,000,000)
	_________
Total stockholders' equity	22,091
	_________
Total liabilities and stockholders' equity	$ 234,662
	_________

The accompanying notes should be read in conjunction with the condensed consolidated financial statements.

ROCKY MOUNTAIN ENERGY CORPORATION

(formerly known as Emissions Control Devices, Inc.)

(A Development Stage Company)

Condensed Consolidated Statement of Operations

For the period from May 10, 2002 (period of inception) to June 30, 2002

(Unaudited)

Oil and Gas Revenues
Cost and Expenses:
Depreciation	$ 919
General and administrative	114,051
	_________
Total cost and expenses	114,970
	_________
Loss From Operations	(114,970)
Other Income (Expense):
Interest expense	(3,726)
	_________
Total other income (expense)	(3,726)
	_________
Net Loss	$ (118,696)
	_________
BASIC LOSS PER COMMON SHARE	$ (0.01)
	_________
Weighted Average Number of Common Shares	12,294,095
	_________

The accompanying notes should be read in conjunction with the condensed consolidated financial statements.

ROCKY MOUNTAIN ENERGY CORPORATION

(formerly known as Emissions Control Devices, Inc.)

(A Development Stage Company)

Condensed Consolidated Statement of Cash Flows

For the period From May 10, 2002 (period of inception) to June 30, 2002

(Unaudited)

Cash Flows from Operating Activities:
Net loss	$ (118,696)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	919
Changes in assets and liabilities:
Increase in other current assets	(3,141)
Increase in deferred financing costs	(100,000)
Increase in accounts payable	34,010
Increase in due to related parties	11,213
Increase in other current liabilities	40,234
	_________
Net cash used in operating activities	(135,461)
Cash Flows From Investing Activities
Purchase of property and equipment	(3,030)
Purchase of subsidiary	(50,000)
Additions to oil and gas properties	(1,000)
Deposit for purchase of oil and gas properties	(26,060)
Deposit held for new acquisition	25,000
	_________
Net cash used in investing activities	(55,090)
Cash Flows From Financing Activities:
Proceeds from sale of common stock	151,787
Short term note payable	50,000
	_________
Net cash provided by financing activities	201,787
	_________
Net Increase in Cash and Cash Equivalents	11,236
Cash and Cash Equivalents, beginning of period	0
	_________
Cash and Cash Equivalents, end of period	$ 11,236
	_________

Supplemental disclosure of cash flow information:

Cash paid during the period for:
Interest	$ 0
	___________
Income Taxes	$ 0
	___________
Supplemental schedule of non-cash investing and financing activities:
Acquisition of equipment in connection with capital lease obligations	$ 52,144
	___________
Common stock issued for services to be rendered pursuant to service contracts	$ 39,000
	___________
Common stock issued for services related to financing held in escrow	$ 2,000,000
	___________
Common stock issued for services	$ 250,000
	___________

The accompanying notes should be read in conjunction with the condensed consolidated financial statements.

ROCKY MOUNTAIN ENERGY CORPORATION

(formerly known as Emissions Control Devices, Inc.)

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD FROM MAY 10, 2002 (DATE OF INCEPTION) TO JUNE 30, 2002

(UNAUDITED)

1. HISTORY

Rocky Mountain Energy Corporation

Rocky Mountain Energy Corporation ("Rocky") was incorporated in the state of Colorado on May 16, 1985 under the name of Mountain Ashe, Inc. with authorized common stock of 100,000,000 shares with a par value of $0.0001. On September 23, 1987 the name was changed to Holographic Systems, Inc., and on February 7, 2000 the domicile was changed to the state of Nevada in connection with a change in par value to $0.001. On January 22, 2001 the name was changed to Emission Control Devices, Inc. as a part of the acquisition of all the outstanding stock of Emission Control Devices, Inc. (a North Carolina corporation).

In connection with the merger on May 29, 2002 as described below, the authorized common stock was increased to 200,000,000 shares. In addition, Rocky completed a one for one thousand reverse stock split. On May 30, 2002 the corporation changed its name to Rocky Mountain Energy Corporation. Rocky had a year-end of December 31, which was changed to September 30 in connection with the merger discussed below.

Cavallo Energy Corporation

Cavallo Energy Corporation ("Cavallo") was incorporated on May 10, 2002 in the state of Texas for the purpose of acquiring and developing oil and gas properties and is in the development stage. Cavallo has a year-end of September 30.

Merger between Rocky and Cavallo

Pursuant to an agreement and plan of reorganization dated May 29, 2002 between, Rocky and Cavallo, Rocky acquired all of the issued and outstanding common stock of Cavallo in exchange for 17,874,590 shares of Rocky's common stock, which represented 99% of the outstanding shares of Rocky's common stock after the issuance. Cavallo became a wholly owned subsidiary of Rocky. Rocky and Cavallo are collectively referred to as the "Company."

The merger of Rocky and Cavallo has been treated as a recapitalization and purchase by Cavallo as the acquirer (reverse acquisition) of Rocky as control rests with the former Cavallo shareholders although prior to the acquisition, Rocky had been the registrant. Therefore, the historical financial statements prior to May 29, 2002 are those of Cavallo. At the time of the merger, Emissions Control Devices, Inc. was a development stage company with a fiscal year end of December 31, however the Company will append to Cavallo's year-end of September 30 for reporting purposes. However, due to its limited life, Cavallo has no historical financial statements prior to May 10, 2002, Cavallo's date of inception. Simultaneously with the merger, Cavallo's former President and Board of Directors were elected as Rocky's President and Board of Directors. As of June 30, 2002, the Company is a development stage company and is devoting most of its efforts to financial planning, raising capital, acquiring oil and gas properties and starting up production.

2. INTERIM RESULTS AND BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB and Items 303 and 310(B) of Regulation S-B.

In the opinion of management, the unaudited consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the consolidated financial position of Rocky Mountain Energy Corporation and subsidiary as of June 30, 2002, and the results of our operations and our cash flows for the period from May 10, 2002 (date of inception) to June 30, 2002. The results for the period are not necessarily indicative of the results to be expected for any subsequent period or quarter or the entire fiscal year ending September 30, 2002.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations.

These unaudited consolidated financial statements and notes thereto, should be read in conjunction with the Registrant's report on Form 8-K filed on May 29, 2002, Form 10-QSB for the quarter ended March 31, 2002 and Form 10-KSB for the year ended December 31, 2001.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES

Consolidation - The accompanying consolidated financial statements include the accounts of Rocky and its wholly owned subsidiary, Cavallo, after elimination of all significant intercompany transactions and accounts.

Cash and Cash Equivalents- The Company maintains cash deposits in accounts, which at times exceed federally insured limits. The Company has not experienced any losses on these accounts.

Accounts Receivable - The Company utilizes the allowance method for recognizing the collectibility of its accounts receivables. The allowance method recognizes bad debt expense based upon a review of the individual accounts outstanding based on the surrounding facts. As of June 30, 2002, no allowance was deemed necessary by management.

Oil and Gas Producing Activities - The Company follows the Full-Cost Method of Accounting for all of its business activities. The Company is in the business of acquiring, developing and producing oil and gas properties. Under the full-cost method, all costs associated with property acquisition, exploration, and development activities are capitalized. Capitalized costs include lease acquisitions, geological and geophysical work, delay rentals, costs of drilling, completing and equipping successful and unsuccessful oil and gas wells and directly related costs. Gains or losses are normally not recognized on the sale or other disposition of oil and gas properties.

The capitalized costs of oil and gas properties, plus estimated future development costs relating to proved reserves and estimated costs of dismantlement and abandonment, net of salvage value, are amortized on a unit-of-production method over the estimated productive life of the proved oil and gas reserves. Unevaluated oil and gas properties are excluded from this calculation.

Capitalized oil and gas property costs are limited to an amount (the ceiling limitation) equal to the sum of the following:

(a) The present value of estimated future net revenues from the projected production of proved oil and gas reserves, calculated at prices in effect as of the balance sheet date (with consideration of price changes only to the extent provided by contractual arrangements) and a discount factor of 10%;

(b) The cost of investments in unproved and unevaluated properties excluded from the costs being amortized; and

(c) The lower of cost or estimated fair value of unproved properties included in the costs being amortized.

Depletion and depreciation of capitalized costs for producing oil and gas properties is provided using the units-of-production method based upon proved reserves. No properties have been acquired as of June 30, 2002, thus there is no production, depletion, depreciation or capital to be reported. The Company has $1,000 of prospect cost recorded as of June 30, 2002. This goes into our full cost pool and is not subject to depreciation, depletion or amortization expense until proved reserves are added to the Company or if a ceiling test results in a write down of this asset.

Property and Equipment - Depreciation of property and equipment, other than oil and gas producing, is provided on the straight-line basis over the estimated useful lives of the assets as follows:

Type of Equipment	Depreciation Term (Years)
Office furniture and equipment	5-10
Transportation and other equipment	5
Leasehold improvements	5

Property and equipment consists of the following at June 30, 2002:

Office furniture and equipment	$ 27,980
Office equipment	24,134
Furniture and fixtures	3,030
	_________
Subtotal	55,144
Less: Accumulated depreciation	(919)
	_________
	$ 54,225
	_________

Deferred Financing Costs - Deferred financing costs represent costs associated with the Marathon Corporation USA line of credit financing described in Note 4 aggregating $2,100,000 at June 30, 2002 ($100,000 paid in cash and $2,000,000 through the issuance of 20,000,000 shares of common stock currently held in escrow subject to completion of the financing) will be amortized by the straight-line method over the terms of the related debt.

Oil and Gas Revenues - The Company recognizes oil and gas revenues as production occurs. As a result, the Company accrues revenue relating to production for which the Company has not received payment. This filing reports no income for oil and gas activities and future filings will record only such income relating to actual date of transfer of title to the asset(s).

Use of Estimates and Certain Significant Estimates - The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates. Significant assumptions are required in the valuation of proved oil and gas reserves, which as described above may affect the amount at which oil and gas properties are recorded. It is at least reasonably possible those estimates could be revised in the near term, and those revisions could be material.

Basic Loss per Common Share - Basic loss per common share is computed pursuant to SFAS No. 128, Earnings per Share. SFAS No. 128 requires dual presentation of basic earnings per share ("EPS") and diluted EPS on the face of all statements of earnings for all entities with complex capital structures. Basic EPS is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock-based compensation including stock options, restricted stock awards, warrants and other convertible securities. Diluted EPS is not presented since the effect would be anti-dilutive.

Income Taxes - Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due, if any, plus net deferred taxes related primarily to differences between the bases of assets and liabilities for financial statement and income tax reporting purposes. Deferred tax assets and liabilities represent the future tax return consequences of these temporary differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets include recognition of net operating losses that are available to offset future taxable income and tax credits that are available to offset future income taxes. Valuation allowances are recognized to limit recognition of deferred tax assets, where appropriate. Such allowances may be reversed when circumstances provide evidence that the deferred tax assets will more likely than not be realized.

Fair Value Disclosure at June 30, 2002 - The carrying value of cash and cash equivalents are a reasonable estimate of their fair value because of the short-term maturity of these instruments. The carrying value of short-term debt closely approximates its fair value based on the instruments' interest rate terms, maturity date, and collateral, if any in comparison to the Company's incremental borrowing rates of similar financial instruments.

4. COMMITMENTS AND CONTINGENCIES

Marathon

On May 16, 2002, the Company and Marathon Holding Corporation and Marathon Corporation USA, its subsidiary ("Marathon"), entered into a term sheet. The terms and conditions of the agreement were as follows:

- Representations regarding the Company's purchase of certain oil and gas properties

- Conditions relating to the merger of Cavallo and Rocky, which the Company has met

- Marathon and the Company will form a strategic alliance for the exploration and development of oil and gas opportunities which shall include drilling new wells and purchase and management of existing properties

- Marathon will make available to the Company a line of credit with the following terms:

* Facility amount of $40 million

* Term of 2 years

* Funds to be used only for acquisitions and development of proved reserves of approved projects

* Commitment fee of 0.25% upon bank confirmation

* Interest rate of LIBOR plus 4% payable on used funds, due quarterly

* Repayment to be negotiated in good faith on project by project basis

* Marathon will receive 20 million shares of common stock for the strategic alliance and the line of credit. Stock will be held in escrow pending verification of credit line. Shares will carry piggyback registration rights and be part of a registration statement filed in connection with the merger of Cavallo and Rocky.

Upon funding by Marathon, the Company expects to file the registration statement. No assurance can be given at this time that such will take place.

- The Company shall have the right to appoint 3 members of the board and Marathon shall have the right to appoint 4 board members

- Within 45 days of the agreement, Marathon shall make available not less than $500 million in certified and proven oil and gas reserves to the Company. The Company retains the right in it sole discretion, to perform due diligence and determine the value and reserve potential of the assets submitted.

- The Company shall have available 130 million registered shares to Marathon providing for the abovementioned $500 million of proved reserves. If there is less than $500 million in reserve value, the 130 million shares will be proportionately reduced.

- All shares with the exception of 250,000 in the public float shall be held with an escrow agent.

In accordance with the term sheet and conditions listed above the Company signed a $40,000,000 line of credit agreement with Marathon on June 20, 2002. The terms of the agreement call for approval by Marathon for each request by Rocky for funding of acquisitions and development of proven oil and gas reserves. As of August 15, 2002, Marathon has approved the potential acquisitions described below which are in escrow, however funding is still pending closing documentation. The Company believes it has met all its obligations under the financing agreement. Should Marathon fail to provide funding as per the agreement, the Company will need to seek alternative funding. No assurance can be given at this time that such funding will occur.

Terms of the line of credit agreement require that the Company pay Marathon $100,000 and is required to issue 20,000,000 of its common shares to Marathon. The $100,000 has been paid and is reflected on the balance sheet at June 30, 2002 as deferred financing costs. The 20,000,000 shares have been issued but are held in escrow subject to Marathon's funding of the Company's projects. The issuance of the 20,000,000 shares has been recorded in stockholders equity as $2,000,000 of deferred financing costs and such shares have been valued at $.10 per share.

Potential Oil and Gas Acquisition Agreements

B,C & D Oil and Gas

On June 28, 2002, the Company entered into an escrow agreement for the acquisition of B, C & D Oil and Gas assets. The purchase calls for $2.5 million in cash to be paid to B, C & D together with 2,000,000 shares of Rocky Mountain common stock. Current production is 400 barrels of oil per day (bopd), however planned well re-completions are expected to add 5,000 cubic feet (5 mcf) per day. No assurance is given as to what actual production may or may not in fact be achieved. The project has not yet funded.

Regent Energy Corporation ("Regent") Horseshoe Gallup and Northeast Hogback

On May 16, 2002 Cavallo executed a term sheet to purchase a portion of the interest in the Horseshoe Gallup Field and Northeast Hogback Unit ("HGU/NEHU") from Regent (a related party, see below) for $4,000,000. The escrow agreement was signed for this acquisition on July 19, 2002, with an effective date of June 1, 2002. The project awaits funding at this time. As of July 31, 2002, escrow closing for this transaction has not occurred. Prior to signing closing documents on July 19, 2002 it was decided that Rocky Mountain would acquire 95% of Regent's interest instead of 80% as was planned earlier. This increase in the interest to be purchased added $1.5 million to the purchase price to total $5.5 million. Additionally, it was agreed that the Company would pay certain expenses incurred by Regent for various field services and equipment in order to facilitate transfer of title. These expenses, some of which were paid by the Company prior to closing, will be reimbursed to the Company at closing of escrow. The total amount paid prior to closing by the Company is $26,060, which has been reflected as a deposit for purchase of oil and gas properties on the consolidated balance sheet.

Regent is a related party in that the Chairman of the Company is a director of Regent, and the President of the Company was the former President/CEO of Regent The Chairman of the Company owns 154,328 shares of Regent stock which represents 0.43% of the common stock of Regent and the President of the Company owns 4,813,112 shares of Regent representing ownership of 13.61% of Regent's common shares.

United States Oil Company Coal Gas Project

On May 21, 2002, the Company executed a contract to purchase the Wyoming gas assets of United States Oil Company for $3,000,000, with an effective date of June 1, 2002. The project is not closed at this time and awaits funding under the Marathon line of credit.

Although management is optimistic that the closings of the above acquisitions will take place, no assurance can be given that any or all of the closings and subsequent transfer of title to the assets will take place. In the event such does not take place, it will have a material adverse affect on company finances.

5. OBLIGATIONS UNDER CAPITAL LEASES

The Company has acquired computer and office equipment, software, and copy machines pursuant to various non-cancelable capital lease agreements. All of the lease agreements are secured by the related equipment.

The monthly payment for the lease of the computer server and related equipment is $904, and the monthly payment for the lease of the office equipment is $595. These amounts remain constant throughout the term of the leases.

At June 30, 2002, the aggregate future minimum lease payments under non-cancelable capital lease agreements were as follows:

Year Ended December 31	Computers	Office Equipment	Total
2002	$ 6,325	$ 4,370	$ 10,695
2003	$ 10,843	$ 7,140	$ 17,983
2004	$ 10,843	$ 7,140	$ 17,983
2005	$ 4,518	$ 5,500	$ 10,018
2006	0	$ 4,680	$ 4,680
2007	0	$ 1,950	$ 1,950
	_________	_________	_________
Total	$ 32,529	$ 30,780	$ 63,309
Less amount representing interest	($ 4,549)	($ 6,646)	($ 11,195)
	_________	_________	_________
Net Present Value of Capital Lease Obligations	$ 27,980	$ 24,134	$ 52,114
	_________	_________	_________
Current Portion			$ 17,447
			_________
Long-Term Portion			$ 34,667
			_________

At June 30, 2002, the gross amount of computer and office equipment, software, and copy machines recorded under capital leases was $52,114, net of accumulated depreciation of $869.

6. COMMITMENTS UNDER OPERATING LEASES

The Company has entered into a lease agreement for its office space to lease 2,982 square feet of office space at a cost of $4,225 per month for 36 months beginning June 1, 2002 and ending May 31, 2005. The lease is guaranteed by the Company's president.

The approximate future minimum rentals under non-cancelable operating lease agreements in effect on June 30, 2002 are as follows:

Year	Office Space
2002	$29,572
2003	$50,694
2004	$50,694
2005	$21,122
2006	N/a
2007	N/a
	_________
Total	$152,082
	_________

7. RELATED PARTY TRANSACTIONS

On May 10, 2002, the Company entered into employment agreements with two key officers/shareholders, the Chairman of the Board of Directors and the Chief Executive Officer ("CEO"). The employment agreements have a term of eight years with annual salaries of $60,000 and $200,000, respectively. Each will receive an incentive bonus equal to 3% of EBITDA payable quarterly, 60 days after the end of each fiscal quarter. In a Board resolution, it was resolved that the CEO will not begin to take salary until August 2002.

On May 17, 2002, the Company entered into an employment agreement with the Chief Financial Officer. The employment term is for five years with an annual salary of $150,000. The contract provides for an incentive bonus equal to 1.5% of EBITDA to be paid quarterly, 60 days after the end of each fiscal quarter.

The Chairman owns 250,000 shares of the Company's stock, which is approximately 1.3% of the total shares outstanding, and the Chief Executive Officer is the beneficiary of a trust, which owns 5,000,000 shares of the Company's stock representing approximately 25.1% of the total shares outstanding.

Concerning the acquisition of the Horseshoe Gallup Field and the Northeast Hogback Unit, Regent is a related party in that the Chairman of the Company is a director of Regent, and the President of the Company was the former President/CEO of Regent The Chairman of the Company owns 154,328 shares of Regent stock which represents 0.43% of the common stock of Regent, while the President of the Company owns 4,813,112 shares of Regent representing ownership of 13.61% of Regents common shares.

8. STOCKHOLDERS' EQUITY

Reverse Stock Split

On May 29, 2002, the Board of Directors resolved to affect a 1,000 for 1 share reverse split, however no shareholder was to be adjusted below 100 shares of common stock. All shares and per share amounts have been retroactively restated as of the beginning of the period, May 10, 2002 (date of inception).

Stock Issued for Consulting Services

On June 11, 2002, the Company entered into several consulting agreements for brokerage support, marketing advisory services, legal and accounting services, corporate general counsel advice and insurance brokerage and rate review services. In exchange for services rendered the consultants received a cumulative total of 390,000 restricted common shares, which were valued at $0.10 per share, or $39,000 total. The fees will be expensed over the term of the contracts, which is 3 years. The Company has recorded to date $1,083 of consulting expense and has a prepaid expense balance of $37,917 at June 30, 2002. The shares issued are restricted pursuant to Rule 144 and all shares are held in escrow until services have been performed.

The table below lists provides more detail on the individuals, services and number of shares of restricted common stock paid for services:

Contractor	Service to be performed	No. Shares Received	Value at $0.10/sh
Richard Lesser	Brokerage Support Marketing Advisory	25,000	$2,500
Matthew Love	Brokerage Support Marketing Advisory	25,000	$2,500
William Okun	Legal and Accounting Corporate General Counsel	100,000	$10,000
Gilbert Manso	Brokerage Support	15,000	$1,500
Howard Kaye	Insurance Brokerage and Review Comparative Insurance Rates	100,000	$10,000
Rita Feinberg	Market Support	25,000	$2,500
Robert Morsch	Market Consultation regarding corporate governance	100,000	$10,000
		_________	_________
TOTALS		$390,000	$39,000
		_________	_________

Deferred Compensation

On June 11, 2002, the Company established a Company Stock Plan, as described in Note 9, wherein 2,500,000 shares of common stock have been provided for certain employees and consultants. The stock is to be issued to nine employees/consultants in the form of performance awards. The awards are considered deferred compensation and will vest to employees/consultants over a one-year period beginning July 1, 2002. The value of the shares awarded is based upon $0.10 per share for a total of $250,000 and will be charged to operations over a one-year period beginning July 1, 2002. As of June 30, 2002, the total award has been recorded as a reduction to stockholders equity.

Stock Provided for the Marathon Line of Credit

On June 20, 2002, the Company entered into an agreement with Marathon Corporation USA for a $40 million line of credit. This credit line is to be used for the acquisition and development of oil and gas properties. The agreement required the Company to pay $100,000 up front as a commitment fee, which has been paid, and to provide 20,000,000 shares of common stock to Marathon. These shares have been issued and are being held in escrow pending Marathon funding the projects that have been presented by the Company. To date, Marathon has not yet funded any projects presented by the Company and the stock remains in escrow. The stock was valued at $0.10 per share, or $2,000,000. The Company has recorded deferred financing costs as a reduction to stockholders equity for $2,000,000 and will amortize this amount over the two year term of the agreement.

ROCKY MOUNTAIN ENERGY CORPORATION

(formerly known as Emissions Control Devices, Inc.)

(A Development Stage Company)

Consolidated Statement OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM MAY 10, 2002 (DATE OF INCEPTION) TO JUNE 30, 2002

(UNAUDITED)

	Common Stock		Additional Paid - in Capital	Deficit Accumulated During the Development Stage	Deferred Compensation	Deferred Financing Costs for Common Stock Issued for Services Related to Financing	Total Stockholders' Equity
	Shares	Amount
Balance at May 10, 2002	17,874,590	$ 1,787	$ -	$ -	$ -	$ -	$ 1,787
Contributions of common shares by founders in connection with recapitalization	(17,874,590)	(1,787)	-	-	-	-	(1,787)
Recapitalization in connection with reverse acquisition of Rocky Mountain Energy Corporation	22,783	23	(23)	-	-	-	-
Issuance of common stock in connection with the reverse acquisition of Rocky Mountain Energy Corporation net of related costs of $50,000	17,874,590	17,874	(66,087)	-	-	-	(48,213)
Issuance of common stock to former officers of Rocky Mountain Energy Corporation for services - on May 29, 2002	170,000	170	(170)	-	-	-	-
Sales of common shares at $.10 per share on May 29, 2002	500,000	500	49,500	-	-	-	50,000
Sales of common shares at $.10 per share on May 30, 2002 -	500,000	500	49,500	-	-	-	50,000
Sales of common shares at $.10 per share on June 11, 2002	500,000	500	49,500	-	-	-	50,000
Issuance of common stock in connection with service contract at $.10 per share on June11, 2002	100,000	100	9,900	-	-	-	10,000

The accompanying notes should be read in conjunction with the condensed consolidated financial statements.

ROCKY MOUNTAIN ENERGY CORPORATION

(formerly known as Emissions Control Devices, Inc.)

(A Development Stage Company)

Consolidated Statement OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM MAY 10, 2002 (DATE OF INCEPTION) TO JUNE 30, 2002

(UNAUDITED)

	Common Stock		Additional Paid - in Capital	Deficit Accumulated During the Development Stage	Deferred Compensation	Deferred Financing Costs for Common Stock Issued for Services Related to Financing	Total Stockholders' Equity
	Shares	Amount
Issuance of common stock in connection with service contract at $.10 per share on June 11, 2002	100,000	100	9,900	-	-	-	10,000
Issuance of common stock in connection with service contract at $.10 per share on June 11, 2002	25,000	25	2,475	-	-	-	2,500
Issuance of common stock in connection with - service contract at $.10 per share on June11, 2002	100,000	100	9,900	-	-	-	10,000
Issuance of common stock in connection with- service contract at $.10 per share on June 11, 2002	15,000	15	1,485	-	-	-	1,500
Issuance of common stock in connection with service contract at $.10 per share on June 11, 2002	25,000	25	2,475	-	-	-	2,500
Issuance of common stock in connection with service contract at $.10 per share on June 11, 2002	25,000	25	2,475	-	-	-	2,500
Awards aggregating 2,500,000 shares of common stock to employees and service providers pursuant to the 2002 Company Stock Plan on June 11, 2002	-	-	250,000	-	(250,000)	-	-
20,000,000 shares of common stock for services related to intended financing on June 12, 2002	-	-	2,000,000	-	-	(2,000,000)	-
Net loss for the period from May 10, 2002 to June 30, 2002	-	-	-	(118,696)	-	-	(118,696)
	_________	_________	_________	_________	_________	_________	_________
Balance at June 30, 2002	19,957,373	$ 19,957	$ 2,370,830	$ (118,696)	$ (250,000)	$ (2,000,000)	$ 22,091
	_________	_________	_________	_________	_________	_________	_________

The accompanying notes should be read in conjunction with the condensed consolidated financial statements.

9. STOCK OWNERSHIP PLAN

A Company Stock Plan was enacted by the Company on June 11, 2002 pursuant to Section 422 of the Internal Revenue Code, as an incentive plan for employees and/or consultants to the company for current and future services to be rendered.

The plan was enacted to compensate employees and consultants engaged by the company to render services and who will be compensated for such services, but which are in no way related to capital raising activities. Stock will be given as an award in accordance with a 12 month vesting period beginning July 1, 2002. Vesting will be prorated for employment less than one year. Only those consultants or employees who are continuously engaged by the company for a period of not less than one year are eligible to participate.

On June 11, 2002 the company filed an S-8 Registration Statement with the SEC and issued 2,500,000 shares attributable to this plan, which are held in escrow. The stock is to be issued to nine employees in the form of performance awards. The awards are to be earned over a one-year period beginning July 1, 2002. The total cost to the Company of $250,000 will be amortized into earnings over a one-year period beginning July 1, 2002. As of June 30, 2002, the total award has been reflected as a reduction to stockholders equity.

Upon termination of a consultant or employee, the company has the right (but not the obligation) to repurchase the stock at the then market value of the stock.

Rule 16.b-3 Stock Purchase Rights to Insiders as defined by Rule 16.b-3 are applicable.

10. SUBSEQUENT EVENTS

On July 2, 2002, the Company formalized a 90-day note with Mathers Associates for $100,000. $50,000 of such note is related to the purchase of Rocky Mountain and is recorded in the financial statements at June 30, 2002. An additional $50,000 of proceeds were received subsequent to June 30, 2002 for general corporate uses, including approximately $25,000 to purchase 2 field vehicles for HGU/NEHU field use. Since this transaction did not occur during the second quarter, the financial statements do not reflect these amounts, but they will be included in the Financial statements included in the Company's Form 10-KSB to be filed in connection with the Company's September 30, 2002 year end.

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

INTRODUCTION

The company was recently formed in June 2002 by the purchase of Cavallo Energy Corporation ("Cavallo") by Emission Control Devices, Inc. ("ECD"). The combined company known as Rocky Mountain Energy Corporation ("Rocky") is a start up in that Cavallo was formed on May 10, 2002 for the express purpose of acquiring and developing proven oil and gas reserves in the core area of the rocky mountain production basins. ECD was a public company, which had no operations at the time, or, what is commonly referred to as a public shell. Cavallo negotiated the acquisition of three separate proven oil and gas properties in the rocky mountain region and arranged for a credit line with Marathon Corporation USA ("Marathon") to fund said acquisitions. The details of the acquisitions and the credit line are set forth below.

As a start up no income can be recognized until the properties are closed and title passes to Rocky. The effective date of the acquisitions is June 1, 2002. Although a credit for production during this period is given Rocky, there will be no recognition of income for the period between June 1, 2002 and the breaking of escrow. Cash flows, (if any) due Rocky from the effective date until closing will serve as a reduction in the basis of the properties. All three projects are currently in escrow.

CORPORATE ORGANIZATION

Rocky Mountain Energy Corporation was formed when a company named Cavallo Energy Corporation (a privately held corporation) merged into Emission Control Devices, Inc. (a publicly traded company), on May 29, 2002. The name of the new corporation was changed to Rocky Mountain Energy Corporation and is listed on the OTCBB with the symbol RMEC.

Cavallo Energy was formed on May 10, 2002 as a special purpose corporation to merge with Emission Control Devices ("EMCD" OTCBB), a public company. On May 29, 2002, Cavallo reverse merged with "EMCD" and formed Rocky Mountain Energy Corporation, a public company.

It is the business plan of Rocky Mountain to acquire and develop the proved reserves by staying focused on the geographic area of the Rocky Mountains. The UBS backed Marathon line of credit will provide the company the funds to implement this business plan on an accelerated basis.

BUSINESS AND PROPERTIES

Business Strategy

Our business strategy is to acquire proved oil and natural gas reserves, including proved undeveloped reserves, and to expand reserves, production and cash flow through development and exploitation of such reserves. Key elements of our strategy are:

Regional Focus. We seek to acquire proved reserves in the geographic core areas in which we maintain operational expertise in the San Juan Basin, New Mexico and Rocky Mountains. We believe that sizable unexploited reserves remain in these regions, based on the results of recent activities in the San Juan Basin of New Mexico and in Rocky Mountain area by the oil and natural gas industry.

Property Mix. We seek to acquire properties that are a combination of producing and non-producing assets. We believe that producing properties will provide immediate net income and cash flow, while non-producing assets will provide us with future development opportunities and, ultimately, reserves at a reduced cost. Proved undeveloped properties are typically sold at a reduced price compared to producing properties. Additionally, we seek properties that have additional development potential for non-proved reserves, such as probable and possible reserves.

Aggressive Management And Exploitation Of Assets. Our goal is, as much as possible, to act as "operator" of the properties that we acquire. As operator, we believe that we can most economically direct critical functions in the exploration and production process. These functions include:

determining the area to develop and explore;

managing production;

managing the permitting and optioning process;

determining seismic survey design;

overseeing data acquisition and processing; and

identifying each prospect and drill site.

Technological Expertise. We have operational expertise in each geographic core area in which our properties are located. We will use these skills, together with 3-D seismic data visualization and interpretation techniques, to develop our oil and gas reserves. We expect to add experienced technical personnel to our current team; however, we can give no assurance that such additional personnel will be hired or that it will be on terms satisfactory to us.

Business Strategy. Our business strategy is to acquire oil and natural gas properties with existing proved reserves of oil and natural gas and to develop proved undeveloped reserves of oil and natural gas. Key elements of our strategy are:

Focus on acquiring additional producing oil and gas properties in areas that we have identified in our geographic core areas the San Juan Basin of New Mexico and the Rocky Mountains;

Acquire properties containing both developed and undeveloped reserves;

Aggressively manage and exploit all properties acquired; and

Use technological expertise to develop reserves.

We have operational expertise in each geographic core area in which our properties are located. We will use these skills, together with 3-D seismic data visualization and interpretation techniques, to develop our oil and gas reserves. We expect to add experienced technical personnel to our current team; however, we can give no assurance that such additional personnel will be hired or that it will be on terms satisfactory to us.

INSURANCE COVERAGE

The Company has secured insurance coverage on its office contents and for mandatory Workers Compensation. Coverage for office contents is for replacement cost for all furniture and equipment. Application for General Liability and Directors and Officers coverage is in process. Other coverage for field operations will be obtained as properties are acquired.

ACQUISITIONS

Though management is optimistic about the possibility of closing the following listed potential acquisitions, we can give no assurance that any or all of these projects will be closed. In the event such does not take place, it will have a material affect on company finances.

B, C & D Oil and Gas

On June 28, 2002, Rocky Mountain closed in escrow all of the B, C & D Oil and Gas Corporation's interest in the Hospah Field in McKinley County, New Mexico. Current production is 400 barrels of oil per day (bopd), (300 bopd net to RMEC's interest), with eleven gas wells slated for completion, which have been tested at rates ranging from 4,000 mcf to 6,000 mcf per day. No assurance can be given as to actual production rates to be achieved. In addition to the oil and gas properties, this acquisition included an extensive fleet of oil field service vehicles and equipment. This will substantially reduce operating and maintenance costs and reduce Rocky Mountain's dependence on outside services. This equipment can also be used on other Rocky Mountain owned properties in the area, thus reducing the operating costs of these properties as well. The purchase price was $4.5 million, with $2.5 million paid in cash and $2.0 million being funded in Rocky common stock. The sale had an effective date of June 1, 2002.

The Company will utilize its $40 million credit line provided by Marathon Corporation USA for this acquisition. Request for funding has been provided to Marathon as per the requirements of the credit agreement, however, Marathon has not yet funded this acquisition. As of August 13, 2002, the acquisition is still in escrow.

Horseshoe Gallup and Northeast Hogback Unit (HGU/NEHU)

On July 19, 2002, Rocky Mountain executed an agreement to purchase 95% of the working interest and the full net revenue interest of Regent Energy Corporation's interest in the Horseshoe Gallup and the Northeast Hogback Units in San Juan County, New Mexico. Rocky Mountain paid $5.5 million for this interest. As of July 31, 2002, escrow closing for this transaction has not occurred. Additionally, it was agreed that the Company would pay certain expenses incurred by Regent for various field services and equipment in order to facilitate transfer of title. These expenses, some of which were paid by the Company prior to closing, will be reimbursed to the Company at closing of escrow. The total amount paid prior to closing by the Company is $26,060, which has been reflected as a deposit for purchase of oil and gas properties on the consolidated balance sheet.

Concerning the acquisition of the Horseshoe Gallup Field and the Northeast Hogback Unit, Regent is a related party in that the Chairman of the Company is as director of Regent, and the president of the Company was the former President/CEO of Regent The Chairman of the Company owns 154,328 shares of Regent stock which represents 0.43% of the common stock of Regent, while the President of the Company owns 4,813,112 shares of Regent representing ownership of 13.61% of Regents common shares.

The HGU/NEHU consists of 24,000 acres located in San Juan County, New Mexico. Production is from the Gallup formation at shallow depths (1,300' - 2,300') in the producing area known as the San Juan Basin. The field is located in the Four Corners region 30 miles NW of Farmington, New Mexico.

The field is currently shut-in and there is no production at present time.

Current production is capable of 400 bopd and 2,000 mcf gas. Current proved reserves are as follows:

PROVED RESERVES

	BOE	Net Undiscounted.	Net PV10%
Proved Developed Producing	594.6	$ 2,229.4	$ 2,175.7
Proved Behind Pipe	1503.0	29,284.9	18,512.0
Proved Undeveloped	6616.3	96,351.0	20,012.0
	_________	__________	________
	8,713.9	$ 127,865.3	$ 60,699.7

Upon acquisition, equipment and development expenditures will be made which are estimated at $3,000,000. Anticipated production upon completion of targeted wells and workovers is 1,000 bopd, up 600 bopd from current capability of 400 bopd.

This property is subject to numerous environmental and operational issues attributable to the former operator, which must be addressed prior to re-start of production. The Bureau of Land Management (BLM), the Environmental Protection Agency (EPA), The Bureau of Indian Affairs (BIA) and the two local tribes, (the Ute and the Navajo) all have presented certain issues for resolution. Costs to remediate the environmental issues are estimated at $300,000 or greater.

WYOMING COAL GAS

On August 9, 2002, Rocky Mountain Energy Corporation placed in escrow the acquisition of the 8,000 acre Ten Mile and Desert Spring Fields in Sweetwater County, Wyoming from United States Oil Co. This acquisition results in Rocky Mountain purchasing the controlling interest in the coal bed methane gas project in Sweetwater County, Wyoming. Net proved reserves to the interest purchased (at a price of $3 million) is estimated to be 56.4 billion cubic feet (Bcf) gas. The proved reserves represented by this acquisition are proved undeveloped and development activities must take place in order to generate cash flow to the company. Development of $3 million is needed to drill shallow wells at approximately 2,300' to the Fort Union and Wasatch coal seams. At August 13, 2002, the escrow remains open.

PROVED RESERVES

(000s Omitted)

	BCF	Net Undiscounted.	Net PV10%
Proved Undeveloped	56.4	$100,333	$51,300

RESULTS OF OPERATIONS

Currently, Rocky Mountain has no field operations, due to awaiting funds from Marathon for closing escrow on the B, C & D, the HGU/NEHU properties and the Wyoming Coal Bed Methane Project. The Company's main office is in Houston, Texas. There are six employees occupying 2,982 square feet of office space at 333 N. Sam Houston Parkway E.

Since the Company has not yet begun producing activities, there are no revenues to report at this time. General and Administrative costs in this report are $114,051. The break down of the major components of G&A cost are as follows: Salaries and taxes are $60,117; employee benefits are $6,625; advertising costs are $8,830; rent expense for the office is $9,182; equipment rental cost is $3,335; office supplies, expenses and postage is $13,847.

The Company has incurred some capital expenditures in setting up its office facility. We have entered into capital lease agreements for computer equipment and software, and copiers. The Company has also purchased used furniture and other office equipment In addition to these costs, the Company has incurred $1,000 in prospect costs, which are capitalized. The following chart shows the values of our hard assets at June 30, 2002:

Capital Item	June 30, 2002
Computer software and equipment	$ 27,980
Office equipment	24,134
Furniture and fixtures	3,030
	_______
Subtotal	55,144
Less: Accumulated Depreciation	(919)
	_______
Net Property and Equipment	$54,225
	_______

Other Current Assets contain prepaid items of which $4,224 is the July rent on the office space and $11,917 represents the current portion of the balance of consultant contracts, wherein several consultants were paid in stock for future services to be rendered over a three year period. The total aggregating $37,917 represents the unused portion of this non-cash transaction.

The other assets category reflects $26,000 that represents the long term portion of consultant contracts discussed above. Deposit for purchase of oil and gas properties aggregating $26,060 reflects costs incurred by the Company for costs paid in order to be able to close the HGU/NEHU acquisition. These costs will be refunded to the Company at closing. Deferred financing costs aggregating $100,000 represents a commitment fee paid to Marathon Corporation USA for a $40 million line of credit.

CAPITAL RESOURCES AND LIQUIDITY

Short Term Note with Mathers Associates

On July 2, 2002, the Company entered into a 90-day note at 9% interest for the sum of $100,000. The note is due and payable on October 2, 2002. Default interest on this note is at a rate of 18%. The note is guaranteed by the Company and personally by the President of the Company.

Marathon

On May 16, 2002, the Company and Marathon Holding Corporation and Marathon Corporation USA, its subsidiary ("Marathon"), entered into a term sheet. The terms and conditions of the agreement were as follows:

- Representations regarding the Company's purchase of certain oil and gas properties

- Conditions relating to the merger of Cavallo and Rocky, which the Company has met

- Marathon and the Company will form a strategic alliance for the exploration and development of oil and gas opportunities which shall include drilling new wells and purchase and management of existing properties

- Marathon will make available to the Company a line of credit with the following terms:

* Facility amount of $40 million

* Term of 2 years

* Funds to be used only for acquisitions and development of proved reserves of approved projects

* Commitment fee of 0.25% upon bank confirmation

* Interest rate of LIBOR plus 4% payable on used funds, due quarterly

* Repayment to be negotiated in good faith on project by project basis

* Marathon will receive 20 million shares of common stock for the strategic alliance and the line of credit. Stock will be held in escrow pending verification of credit line. Shares will carry piggyback registration rights and be part of a registration statement filed in connection with the merger of Cavallo and Rocky.

Upon funding by Marathon, the Company expects to file the registration statement. No assurance can be given at this time that such will take place.

- The Company shall have the right to appoint 3 members of the board and Marathon shall have the right to appoint 4 board members

- Within 45 days of the agreement, Marathon shall make available not less than $500 million in certified and proven oil and gas reserves to the Company. The Company retains the right in it sole discretion, to perform due diligence and determine the value and reserve potential of the assets submitted.

- The Company shall have available 130 million registered shares to Marathon providing for the abovementioned $500 million of proved reserves. If there is less than $500 million in reserve value, the 130 million shares will be proportionately reduced.

- All shares with the exception of 250,000 in the public float shall be held with an escrow agent.

In accordance with the term sheet and conditions listed above the Company signed a $40,000,000 line of credit agreement with Marathon Corporation USA on June 20, 2002. The terms of the agreement call for approval by Marathon for each request by Rocky for funding of acquisitions and development of proven oil and gas reserves. As of August 15, 2002, Marathon has approved the potential acquisitions described above which are in escrow, however funding is still pending closing documentation. The Company believes they have met all its obligations under the financing agreement. Should Marathon fail to provide funding as per the agreement, the Company will need to seek alternative funding. No assurance can be given at this time that such funding will occur.

Terms of the line of credit agreement require that the Company pay Marathon $100,000 and is required to issue 20,000,000 of its common shares to Marathon. The $100,000 has been paid and is reflected on the balance sheet at June 30, 2002 as deferred financing costs. The 20,000,000 shares have been issued but are held in escrow subject to Marathon's funding of the Company's projects. The issuance of the 20,000,000 shares has been recorded in stockholders equity as $2,000,000 of deferred financing costs and such shares have been valued at $.10 per share.

Financing Agreement: Union Bank of Switzerland $40 Million Line of Credit

Pursuant to the agreement with Marathon Corporation USA, (which was signed by both parties on June 20, 2002), Marathon has secured a $40 million line of credit for acquisition and development of proved oil and gas reserves with Union Bank of Switzerland (UBS), a worldwide banking conglomerate. The funds may only be used by Rocky Mountain Energy Corporation for acquisition and development of proved oil and gas reserves.

Terms of the line of credit are as follows:

- 1/4% commitment fee to UBS ($100,000 already paid to Marathon)

- interest rate is LIBOR (currently 2.1%) plus 4%

- quarterly interest

- two year term

The proceeds of this line of credit will be used for acquisition of HGU/NEHU for approximately $6 million, Wyoming gas project for approximately $3 million, B, C & D for approximately $2.5 million and approximately $6 million for development. Total to be used is approximately $17.5 million, leaving approximately $22.5 million for further acquisition and development of proved reserves in our core area.

Marathon will receive 20 million shares as a result of the UBS line, which have been escrowed. The shares will not be transferred to Marathon until the $40.0 million line of credit is funded.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None; not applicable.

ITEM 2. CHANGES IN SECURITIES.

Pursuant to an agreement and plan of reorganization dated May 29, 2002 between, Rocky and Cavallo, Rocky acquired all of the issued and outstanding common stock of Cavallo in exchange for 17,874,590 shares of Rocky's common stock, which represented 99% of the outstanding shares of Rocky's common stock after the issuance. Cavallo became a wholly owned subsidiary of Rocky.

In connection with the merger on May 29, 2002, the authorized common stock was increased to 200,000,000 shares. In addition, Rocky completed a one for one thousand reverse stock split. On May 30, 2002 the corporation changed its name to Rocky Mountain Energy Corporation. Rocky had a year-end of December 31, which was changed to September 30 in connection with the merger.

On June 11, 2002, the Company entered into several consulting agreements for brokerage support, marketing advisory services, legal and accounting services, corporate general counsel advice and insurance brokerage and rate review services. In exchange for services rendered the consultants received a cumulative total of 390,000 restricted common shares, which were valued at $0.10 per share, or $39,000 total. The fees will be expensed over the term of the contracts, which is 3 years. The Company has recorded to date $1,083 of consulting expense and has a prepaid expense balance of $37,917 at June 30, 2002. The shares issued are restricted pursuant to Rule 144 and all shares are held in escrow until services have been performed.

On June 11, 2002 the company filed an S-8 Registration Statement with the SEC and issued 2,500,000 shares attributable to the stock option plan, which are held in escrow. The stock is to be issued to nine employees in the form of performance awards. The awards are to be earned over a one-year period beginning July 1, 2002. The total cost to the Company of $250,000 will be amortized into earnings over a one-year period beginning July 1, 2002. As of June 30, 2002, the total award has been reflected as a reduction to stockholders equity.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None; not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None; not applicable

ITEM 5. OTHER INFORMATION.

Subsequent Events

On July 2, 2002, the Company formalized a 90-day note with Mathers Associates for $100,000. $50,000 of such note is related to the purchase of Rocky Mountain and is recorded in the financial statements at June 30, 2002. An additional $50,000 of proceeds were received subsequent to June 30, 2002 for general corporate uses, including approximately $25,000 to purchase 2 field vehicles for HGU/NEHU field use. Since this transaction did not occur during the second quarter, the financial statements do not reflect these amounts, but they will be included in the Financial statements included in the Company's Form 10-KSB to be filed in connection with the Company's September 30, 2002 year end.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

A report on Form 8-K was filed on June 5, 2002 which stated the terms of the acquisition of Cavallo Energy Corp, the subsequent change in control and provided pro forma financial statements consolidating Rocky Mountain Energy Corp. and Cavallo Energy Corp.'s balance sheets and statements of operations.

A report on Form 8-K was filed on August 12, 2002 reflecting the change of accountants from Anderson, Anderson & Strong, LC to Massella Rubenstein, LLP.

No other reports were filed on Form 8-K.

Exhibit No.	Description
99.1	Credit Agreement with Marathon Corporation USA
99.2	Purchase and Sale Agreement dated June 28, 2002, between Rocky Mountain Energy and B, C & D Oil and Gas for the purchase of B, C & D's interest in the Hospah Field located in McKinley County New Mexico.
99.3	Purchase and Sale agreement dated July 19, 2002 between Rocky Mountain Energy Corporation and Regent Energy Corporation for the purchase of a portion of Regent's interest in the Horseshoe Gallup and Northeast Hogback Fields in San Juan County New Mexico.
99.4	Purchase and Sale Agreement dated August 9, 2002 between Rocky Mountain Energy Corporation and United States Oil Company for the purchase of United States Oil's interest in the Ten Mile and Desert Spring Fields in Sweetwater County Wyoming.
99.5	Promissory Note dated July 2, 2002 between Rocky Mountain Energy Corporation and Mathers Associates for $100,000 due in 90 days.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned thereunto duly authorized.

ROCKY MOUNTAIN ENERGY CORPORATION

(Registrant)

Date: August 19, 2002 By: /s/ John N. Ehrman

John N. Ehrman, President and Chief Executive Officer

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the filing of the Quarterly Report on Form 10-QSB for the Quarter ended June 30, 2002, (the "Report") by Rocky Mountain Energy Corporation ("Registrant"), each of the undersigned hereby certifies that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

/s/ John N. Ehrman

John N. Ehrman

Chief Executive Officer

/s/ Michael A. Pugh

Michael A. Pugh

Chief Financial Officer

EX-99

EXHIBIT 99.1

CREDIT AGREEMENT

PARTIES:

Rocky Mountain Energy Corporation, a Nevada corporation, with its principal office located in Houston, Texas. (Borrower)

And

Marathon Corporation USA, with its office located in Hutchinson, Kansas. (Lender).

RECITALS: Rocky Mountain Energy and Marathon have previously entered into a strategic alliance agreement which among other things provides for Marathon to support that arrangement with a credit line and/or funding as each case may be. This Credit Agreement in support of that arrangement sets forth the terms of such credits.

In consideration of the mutual covenants and agreements herein contained, the Borrower and the Lender hereby agree as follows:

THIS CREDIT AGREEMENT is made and entered into this 20^th day of June, 2002, by and between ROCKY MOUNTAIN ENERGY CORPORATION, a Nevada corporation (the "Borrower"), and MARATHON USA CORPORATION (the 'Lender").

ARTICLE I

DEFINITIONS AND INTERPRETATION

1.1 Terms Defined Above. As used in this Credit Agreement, the terms "Borrower" and "Lender" shall have the meaning assigned to them hereinabove.

1.2 Additional Defined Terms. As used in this Credit Agreement, each of the following terms shall have the meaning assigned thereto in this Section, unless the context otherwise requires:

"Affiliate" shall mean any Person directly or indirectly controlling, or under common control with, the Borrower and includes any Subsidiary of the Borrower and any "affiliate" of the Borrower within the meaning of Reg. ss 240.l2b-2 of the Securities Exchange Act of 1934, as amended, with "control," as used in this definition, meaning possession, directly or indirectly, of the power to direct or cause the direction of management, policies or action through ownership of voting securities, contract, voting trust, or membership in management or in the group appointing or electing management or otherwise through formal or informal arrangements or business relationships.

"Agreement" shall mean this Credit Agreement, as it may be amended, supplemented, or restated from time to time.

"Available Commitment" shall mean, at any time, an amount equal to the remainder, if any, of (a) the Borrowing Base in effect at such time minus (b) the Loan Balance at such time.

"Borrowing Base" shall mean, at any time, the amount determined by the Lender in accordance with Section 2.7 and then in effect.

"Borrowing Request" shall mean each written request, in substantially the form attached hereto as Exhibit II, by the Borrower to the Lender for a borrowing or prepayment pursuant to Sections 21 or 2.9, each of which shall:

(a) be signed by a Responsible Officer of the Borrower;

(b) specify the amount requested or prepaid and the date of the borrowing or prepayment (which shall be a Business Day); and

(c) be delivered to the Lender no later than 11:00a.m., Central Standard or Daylight Savings Time, as the case may be, on the Business Day of the requested borrowing or prepayment.

"Business Day" shall mean a day other than a Saturday, Sunday, legal holiday for commercial banks under the laws of the State of Texas, or any other day when banking is suspended in the State of Texas.

"Closing Date" shall mean the effective date of this Agreement (June 20, 2002).

"Collateral" shall mean the Mortgaged Properties and any other Property now or at any time used or intended as security for the payment or performance of all or any portion of the Obligations.

"Commitment' shall mean the obligation of the Lender, subject to applicable provisions of this Agreement, to make Loans to or for the benefit of the Borrower pursuant to Section 2.1.

"Commitment Fee" shall mean each fee payable to the Lender by the Borrower pursuant to Section 2.10.

"Commitment Period" shall mean the period from and including the Closing Date to but not including the Commitment Termination Date.

"Commitment Termination Date" shall mean June 30, 2004.

"Commodity Hedge Agreement" shall mean any crude oil, natural gas, or other hydrocarbon floor, collar, cap, price protection, or swap agreement, in form and substance with a Person acceptable to the Lender.

"Commonly Controlled Entity" shall mean any Person which is under common control with the Borrower within the meaning of Section 4001 of ERISA.

"Compliance Certificate" shall mean each certificate, substantially in the form attached hereto as Exhibit III, executed by a Responsible Officer of the Borrower and furnished to the Lender from time to time in accordance with Sections 5.2 and 5.3.

"Contingent Obligation" shall mean, as to any Person, any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends, or other obligations of any other Person (for purposes of this definition, a "primary obligation") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, regardless of whether such obligation is contingent, (a) to purchase any primary obligation or any Property constituting direct or indirect security therefore, (b) to advance or supply funds, (I) for the purchase or payment of any primary obligation, or (ii) to maintain working or equity capital of any other Person in respect of any primary obligation, or otherwise to maintain the net worth or solvency of any other Person, (c) to purchase Property, securities or services primarily for the purpose of assuring the owner of any primary obligation of the ability of the Person primarily liable for such primary obligation to make payment thereof, or (d) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof, with the amount of any Contingent Obligation being deemed to be equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith.

"Current Assets" shall mean all assets which would, in accordance with GAAP, be included as current assets on a balance sheet of the Borrower as of the date of calculation, plus unused availability under this facility.

"Current Liabilities" shall mean all liabilities which would, in accordance with GAAP, be included as current liabilities on a balance sheet of the Borrower as of the date of calculation, but excluding the current maturities of long term debt.

"Default" shall mean any event or occurrence which with the lapse of time or the giving of notice or both would become an Event of Default or automatic events of default as set forth in this agreement or any other document executed as required by this agreement.

"Default Rate" shall mean a per annum interest rate equal to the Prime Rate plus five percent (5%), but in no event exceeding the Highest Lawful Rate.

"Dollars" and "$" shall mean dollars in lawful currency of the United States of America.

"EBITDA" shall mean, for any period, net income for such period plus interest expense, federal and state income taxes, depreciation, amortization, and other non-cash expenses, plus scheduled Borrowing Base reductions for such period deducted in the determination of net income for such period.

"Environmental Complaint" shall mean any written or oral complaint, order, directive, claim, citation, notice of environmental report or investigation, or other notice by any Governmental Authority or any other Person with respect to (a) air emissions, (b) spills, releases, or discharges to soils, any improvements located thereon, surface water, groundwater, or the sewer, septic, waste treatment, storage, or disposal systems servicing any Property of the Borrower, (c) solid or liquid waste disposal, (d) the use, generation, storage, transportation, or disposal of any Hazardous Substance, or (e) other environmental, health, or safety matters affecting any Property of the Borrower or the business conducted thereon.

"Environmental Laws" shall mean (a) the following federal laws as they may be cited, referenced, and amended from time to time: the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Endangered Species Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the Hazardous Materials Transportation Act, the Superfund Amendments and Reauthorization Act, and the Toxic Substances Control Act; (b) any and all equivalent environmental statutes of any state in which Property of the Borrower is situated, as they may be cited, referenced and amended from time to time; (c) any rules or regulations promulgated under or adopted pursuant to the above federal and state laws; and (d) any other equivalent federal, state, or local statute or any requirement, rule, regulation, code, ordinance, or order adopted pursuant thereto, including, without limitation, those relating to the generation, transportation, treatment, storage, recycling, disposal, handling, or release of Hazardous Substances.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations there under and interpretations thereof.

"Event of Default" shall mean any of the events specified in Section 7.1.

"Facility Fee" shall mean the fee payable to the Lender by the Borrower pursuant to Section 2.12.

"Final Maturity" shall mean June 30, 2004.

"Financial Statements" shall mean statements of the financial condition of the Borrower as at the point in time and for the period indicated and consisting of at least a balance sheet and related statements of operations, common stock and other stockholders' equity, and cash flows for the Borrower and, when required by applicable provisions of this Agreement to be audited, accompanied by the unqualified certification of a nationally-recognized firm of independent certified public accountants or other independent certified public accountants acceptable to the Lender and footnotes to any of the foregoing, all of which shall be prepared in accordance with GAAP consistently applied and in comparative form with respect to the corresponding period of the preceding fiscal period.

"Floating Rate" shall mean an interest rate per annum equal to the Libor from time to time in effect plus four percent (4%), but in no event exceeding the Highest Lawful Rate.

"GAAP" shall mean generally accepted accounting principles established by the Financial Accounting Standards Board or the American Institute of Certified Public Accountants and in effect in the United States from time to time.

"Governmental Authority" shall mean any nation, country, commonwealth, territory, government, state, county, parish, municipality, or other political subdivision and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government.

"Hazardous Substances" shall mean flammables, explosives, radioactive materials, hazardous wastes, asbestos, or any material containing asbestos, polychlorinated biphenyls (PCBs), toxic substances or related materials, petroleum, petroleum products, associated oil or natural gas exploration, production, and development wastes, or any substances defined as "hazardous substances," "hazardous materials," "hazardous wastes," or "toxic substances" under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Superfund Amendments and Reauthorization Act, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or any other law or regulation now or hereafter enacted or promulgated by any Governmental Authority.

"Highest Lawful Rate" shall mean the maximum non-usurious interest rate, if any (or, if the context so requires, an amount calculated at such rate), that at any time or from time to time may be contracted for, taken, reserved, charged, or received under applicable laws of the State of Texas or the United States of America, whichever authorizes the greater rate, as such laws are presently in effect or, to the extent allowed by applicable law, as such laws may hereafter be in effect and which allow a higher maximum non-usurious interest rate than such laws now allow.

"Indebtedness" shall mean, as to any Person, without duplication, (a) all liabilities (excluding reserves for deferred income taxes, deferred compensation liabilities, and other deferred liabilities and credits) which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet, (b) all obligations of such Person evidenced by bonds, debentures, promissory notes, or similar evidences of indebtedness, (c) all other indebtedness of such Person for borrowed money, and (d) all obligations of others, to the extent any such obligation is secured by a Lien on the assets of such Person (whether or not such Person has assumed or become liable for the obligation secured by such Lien).

"Insolvency Proceeding" shall mean application (whether voluntary or instituted by another Person) for or the consent to the appointment of a receiver, trustee, conservator, custodian, or liquidator of any Person or of all or a substantial part of the Property of such Person, or the filing of a petition (whether voluntary or instituted by another Person) commencing a case under Title 11 of the United States Code, seeking liquidation, reorganization, or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's relief, or other similar law of the United States, the State of Texas, or any other jurisdiction.

"Intellectual Property" shall mean patents, patent applications, trademarks, trade names, copyrights, technology, know-how, and processes.

"Investment" in any Person shall mean any stock, bond, note, or other evidence of indebtedness, or any other security (other than current trade and customer accounts) of, investment or partnership interest in or loan to, such Person.

"Lien" shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of such Property, whether such interest is based on common law, statute, or contract, and including, but not limited to, the lien or security interest arising from a mortgage, ship mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt, or a lease, consignment, or bailment for security purposes (other than true leases or true consignments), liens of mechanics, material men, and artisans, maritime liens and reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Property which secure an obligation owed to, or a claim by, a Person other than the owner of such Property (for the purpose of this Agreement, the Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, financing lease, or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes), and the filing or recording of any financing statement or other security instrument in any public office.

"Limitation Period" shall mean any period while any amount remains owing on the Note and interest on such amount, calculated at the applicable interest rate, plus any fees or other sums payable under any Loan Document and deemed to be interest under applicable law, would exceed the amount of interest which would accrue at the Highest Lawful Rate.

"Loan" shall mean any loan made by the Lender to or for the benefit of the Borrower pursuant to this Agreement.

"Loan Balance" shall mean, at anytime, the outstanding principal balance of the Note at such time.

"Loan Documents" shall mean this Agreement, the Note, the Security Instruments, and all other documents and instruments now or hereafter delivered pursuant to the terms of or in connection with this Agreement, the Note or the Security instruments, and all renewals and extensions of, amendments and supplements to, and restatements of, any or all of the foregoing from time to time in effect.

"Material Adverse Effect" shall mean (a) any adverse effect on the business, operations, properties, condition (financial or otherwise), or prospects of the Borrower, which materially increases the risk that any of the Obligations will not be repaid as and when due, or (b) any material adverse effect upon the Collateral.

"Mortgaged Properties" shall mean all Oil and Gas Properties of the Borrower subject to a perfected first-priority Lien in favor of the Lender, subject only to Permitted Liens, as security for the Obligations.

"Note" shall mean the promissory note of the Borrower, in the form attached hereto as Exhibit I, together with all renewals, extensions for any period, increases, and rearrangements thereof.

"Obligations" shall mean, without duplication, (a) all indebtedness evidenced by the Note, (b) the obligation of the Borrower for the payment of Commitment Fees, Facility Fees, and Engineering Fees, (c) all obligations and liabilities whether now existing or hereafter arising of the Borrower to the Lender in connection with any Commodity Hedge Agreement or Rate Management Transaction, and (d) all other obligations and liabilities of the Borrower to the Lender, now existing or hereafter incurred, under, arising out of or in connection with any Loan Document, and to the extent that any of the foregoing includes or refers to the payment of amounts deemed or constituting interest, only so much thereof as shall have accrued, been earned and which remains unpaid at each relevant time of determination.

"Oil and Gas Properties" shall mean fee, leasehold, or other interests in or under mineral estates or oil, gas, and other liquid or gaseous hydrocarbon leases with respect to Properties situated in the United States or offshore from any State of the United States, including, without limitation, overriding royalty and royalty interests, leasehold estate interests, net profits interests, production payment interests, and mineral fee interests, together with contracts executed in connection therewith and all tenements, hereditaments, appurtenances and Properties appertaining, belonging, affixed, or incidental thereto.

"Permitted Liens" shall mean (a) Liens for taxes, assessments, or other governmental charges or levies not yet due or which (if foreclosure, distraint, sale, or other similar proceedings shall not have been initiated) are being contested in good faith by appropriate proceedings, and such reserve as may be required by GAAP shall have been made therefore, (b) Liens in connection with workers' compensation, unemployment insurance or other social security (other than Liens created by Section 4068 of ERJSA), old-age pension, or public liability obligations which are not yet due or which are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefore, (c) Liens in favor of vendors, carriers, warehousemen, repairmen, mechanics, workmen, material men, construction, or similar Liens arising by operation of law in the ordinary course of business in respect of obligations which are not yet due or which are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefore, (d) Liens in favor of operators and non-operators under joint operating agreements or similar contractual arrangements arising in the ordinary course of the business of the Borrower to secure amounts owing, which amounts are not yet due or are being contested in good faith by appropriate proceedings, if such reserve as may be required by GAAP shall have been made therefore, (e) Liens under production sales agreements, division orders, operating agreements, and other agreements customary in the oil and gas business for processing, producing, and selling hydrocarbons securing obligations not constituting Indebtedness and provided that such Liens do not secure obligations to deliver hydrocarbons at some future date without receiving full payment therefore within 90 days of delivery, (f) easements, rights of way, restrictions, and other similar encumbrances, and minor defects in the chain of title which are customarily accepted in the oil and gas financing industry, none of which interfere with the ordinary conduct of the business of the Borrower or materially detract from the value or use of the Property to which they apply, and (g) Liens in favor of the Lender and other Liens expressly permitted under the Security Instruments.

"Person" shall mean an individual, corporation, partnership, trust, unincorporated organization, government, any agency or political subdivision of any government, or any other form of entity.

"Plan" shall mean, at any time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or any Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

"Prime Rate" shall mean a rate per annum equal to the prime rate of interest as set forth in the Wall Street Journal (SW addition) for the date in question and changing when and as said prime rate changes.

"Principal Office" shall mean the principal office of the Lender presently located at 7 Lake Terrace Dr., Hutchinson, KS 67504.

"Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

"Rate Management Transaction" shall mean any transaction (including an agreement with respect thereto) now existing or hereafter entered into between Borrower and Lenders which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction. forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to on or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

"Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time.

"Regulatory Change" shall mean the passage, adoption, institution, or amendment of any federal, state, local, or foreign Requirement of Law (including, without limitation, Regulation D), or any interpretation, directive, or request (whether or not having the force of law) of any Governmental Authority or monetary authority charged with the enforcement, interpretation, or administration thereof, occurring after the Closing Date and applying to the Lender.

"Release of Hazardous Substances" shall mean any emission, spill, release, disposal, or discharge, except in accordance with a valid permit, license, certificate, or approval of the relevant Governmental Authority, of any Hazardous Substance into or upon (a) the air, (b) soils or any improvements located thereon, (c) surface water or ground water, or (d) the sewer or septic system, or the waste treatment, storage, or disposal system servicing any Property of the Borrower.

"Requirement of Law" shall mean, as to any Person, the certificate or articles of incorporation and by-laws or other organizational or governing documents of such Person, and any applicable law, treaty, ordinance, order, judgment, rule, decree, regulation, or determination of an arbitrator, court, or other Governmental Authority, including, without limitation, rules, regulations, orders, and requirements for permits, licenses, registrations, approvals, or authorizations, in each case as such now exist or may be hereafter amended and are applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

"Reserve Report" shall mean each report delivered to the Lender pursuant to Section 5.4.

"Responsible Officer" shall mean, as to any Person, its President Chief Executive Officer or any Vice President.

"Security Instruments" shall mean the security instruments executed and delivered in satisfaction of the condition set forth in Section 3.1(f), and all other documents and instruments at any time executed as security for all or any portion of the Obligations, as such instruments may be amended, restated, or supplemented from time to time.

"Subsidiary" shall mean, as to any Person, a corporation of which shares of stock having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.

"Superfund Site" shall mean those sites listed on the Environmental Protection Agency National Priority List and eligible for remedial action or any comparable state registries or list in any state of the United States.

'Transferee" shall mean any Person to which the Lender has sold, assigned, transferred, or granted a participation in any of the Obligations, as authorized pursuant to Section 8.1, and any Person acquiring, by purchase, assignment, transfer, or participation, from any such purchaser, assignee, transferee, or participant, any part of such Obligations.

"UCC" shall mean the Uniform Commercial Code as from time to time in effect in the State of Texas.

1.3 Undefined Financial Accounting Terms. Undefined financial accounting terms used in this Agreement shall be defined according to GAAP at the time in effect.

1.4 References. References in this Agreement to Exhibit, Article, or Section numbers shall be to Exhibits, Articles, or Sections of this Agreement, unless expressly stated to the contrary. References in this Agreement to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof," "hereunder" and words of similar import shall be to this Agreement in its entirety and not only to the particular Exhibit, Article, or Section in which such reference appears.

1.5 Articles and Sections. This Agreement, for convenience only, has been divided into Articles and Sections; and it is understood that the rights and other legal relations of the parties hereto shall be determined from this instrument as an entirety and without regard to the aforesaid division into Articles and Sections and without regard to headings prefixed to such Articles or Sections.

1.6 Number and Gender. Whenever the context requires, reference herein made to the single number shall be understood to include the plural; and likewise, the plural shall be understood to include the singular. Definitions of terms defined in the singular or plural shall be equally applicable to the plural or singular, as the case may be, unless otherwise indicated. 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.

1.7 lncorporation of Exhibits. The Exhibits attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for all purposes.

ARTICLE II

TERMS OF FACILITY

2.1 Revolving Line of Credit.

(a) Upon the terms and conditions (including, without limitation, the right of the Lender to decline to make any Loan so long as any Default or Event of Default exists) and relying on the representations and warranties contained in this Agreement, the Lender agrees, during the Commitment Period, to make Loans, in immediately available funds at the Principal Office, to or for the benefit of the Borrower, from time to time on any Business Day designated by the Borrower following receipt by the Lender of a Borrowing Request; provided, however, no Loan shall exceed the then existing Available Commitment.

(b) Subject to the terms of this Agreement, during the Commitment Period, the Borrower may borrow, repay, and reborrow such funds. Except for prepayments made pursuant to Section 2.8, each borrowing and prepayment of principal of Loans shall be in an amount at least equal to $100,000. Each borrowing or prepayment shall be deemed a separate borrowing or prepayment for purposes of the foregoing.

(c) The Loans shall be made and maintained at the Principal Office and shall be evidenced by the Note.

2.2 Use of Loan Proceeds. Proceeds of all Loans shall be used solely to finance acquisition and development of Oil and Gas Properties, and other purposes as agreed by Lender. The initial agreed draw-downs are as follows:

a. Project: BC&D Oil and Gas (McKiney Co., NM)

Amount: $3,000,000

Use and draw-down: $2,350,000 for acquisition capital

$ 650,000 for development capital and completion existing gas wells (11)

_____________

$3,000,000 total budget this project

b. Project: HGU/NEHU (San Juan Co., NM)

Amount: $7,500,000

Use and drawn-down: $4,500, for acquisition capital (at close)

$1,000,000 for development (at close)

$1,000,000 for development (120 days)

$1,000.000 for development (120 days)

___________

$7,500,000 total budget for this project

c. Project: US Oil Company (Sweetwater Co., Wyoming)

Amount: $6,000,000

Use and drawn-down: $3,000,000 for acquisition capital (at close)

$ 750,000 for development (at close)

$ 750,000 for development (at close

$ 750,000 for development (at close)

$ 750,000 for development (at close)

___________

$ 6,000,000 total budget for this project

2.3 Interest. Subject to the terms of this Agreement (including, without limitation, Section 2.15), interest on the Loans shall accrue and be payable at a rate per annum equal to the Floating Rate. Interest on all Loans shall be computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) during the period for which payable. Interest provided for herein shall be calculated on unpaid sums actually advanced and outstanding pursuant to the terms of this Agreement and only for the period from the date or dates of such advances until repayment. Notwithstanding the foregoing, interest on past-due principal and, to the extent permitted by applicable law, past-due interest, shall accrue at the Default Rate, computed on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day) during the period for which payable, and shall be payable upon demand by the Lender at any time as to all or any portion of such interest.

2.4 Repayment of Loans and Interest. Accrued and unpaid interest on the aggregate outstanding Loan Balance shall be due and payable monthly commencing on the first day of June 30, 2002, and continuing on the first day of each calendar month thereafter while any amount of the Loan Balance remains outstanding, the payment in each instance to be the amount of interest which has accrued and remains unpaid in respect of the Loan Balance. The Loan Balance, together with all accrued and unpaid interest thereon, shall be due and payable on the Commitment Termination Date.

2.5. Outstanding Amounts. The outstanding principal balance of the Note reflected by the notations by the Lender on its records shall be deemed rebuttably presumptive evidence of the principal amount owing on the Note. The liability for payment of principal and interest evidenced by the Note shall be limited to principal amounts actually advanced and outstanding pursuant to this Agreement and interest on such amounts calculated in accordance with this Agreement.

2.6 Time, Place, and Method of Payments. All payments required pursuant to this Agreement or the Note shall be made in lawful money of the United States of America and in immediately available funds, shall be deemed received by the Lender on the next Business Day following receipt if such receipt is after 2:00 p.m., Central Standard or Daylight Savings Time, as the case may be, on any Business Day, and shall be made at the Principal Office. Except as provided to the contrary herein, if the due date of any payment hereunder or under the Note would otherwise fall on a day which is not a Business Day, such date shall be extended to the next succeeding Business Day, and interest shall be payable for any principal so extended for the period of such extension.

2.7 Voluntary Prepayments of Loans. Subject to applicable provisions of this Agreement, the Borrower shall have the right at any time or from time to time to prepay Loans without prepayment penalty provided, however, (a) the Borrower shall pay all accrued and unpaid interest on the amounts prepaid, and (b) no such prepayment shall serve to postpone the repayment when due of any Obligation.

2.8 Commitment Fee. In addition to interest on the Note as provided herein and all other fees payable hereunder and to compensate the Lender for maintaining funds available, the Borrower shall pay to the Lender, in immediately available funds, on the first day of June 2002, and on the first day of each third calendar month thereafter during the Commitment Period, a fee in the amount of one-fourth percent (1/4%) per annum, calculated on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed (including the first day but excluding the last day), on the average daily amount of the Available Commitment during the preceding quarterly period.

2.9 Engineering Fee. In addition to interest on the Note as provided herein and all other fees payable hereunder and to compensate the Lender for the costs of evaluating the Mortgaged Properties and reviewing the Reserve Reports, the Borrower shall pay to the Lender, in immediately available funds, on the date of each redetermination of the Borrowing Base, an engineering fee in the amount of $5,000.

2.10 Loans to Satisfy Obligations of Borrower. The Lender may, but shall not be obligated to, make Loans for the benefit of the Borrower and apply proceeds thereof to the satisfaction of any condition, warranty, representation, or covenant of the Borrower contained in this Agreement or any other Loan Document. Any such Loan shall be evidenced by the Note and shall be made at the Floating Rate.

2.11 Security Interest in Accounts: Right of Offset. As security for the payment and performance of the Obligations, the Borrower hereby transfers, assigns, and pledges to the Lender and grants to the Lender a security interest in all funds of the Borrower now or hereafter or from time to time on deposit with the Lender, with such interest of the Lender to be retransferred, reassigned, and/or released by the Lender, as the case may be, at the expense of the Borrower upon payment in full and complete performance by the Borrower of all Obligations. All remedies as secured party or assignee of such funds shall be exercisable by the Lender upon the occurrence of any Event of Default, regardless of whether the exercise of any such remedy would result in any penalty or loss of interest or profit with respect to any withdrawal of funds deposited in a time deposit account prior to the maturity thereof Furthermore, the Borrower hereby grants to the Lender the right, exercisable at such time as any Obligation shall mature, whether by acceleration of maturity or otherwise, of offset or bankers lien against all funds of the Borrower now or hereafter or from time to time on deposit with the Lender, regardless of whether the exercise of any such remedy would result in any penalty or loss of interest or profit with respect to any withdrawal of funds deposited in a time deposit account prior to the maturity thereof.

2.12 General Provisions Relating to Interest.

(a) It is the intention of the parties hereto to comply strictly with the usury laws of the State of Texas and the United States of America. In this connection, there shall never be collected, charged, or received on the sums advanced hereunder interest in excess of that which would accrue at the Highest Lawful Rate. For purposes of Chapter 303 of the Texas Finance Code (Vernon's 1999), the Borrower agrees that the Highest Lawful Rate shall be the "weekly ceiling" as defined in such Section, provided that the Lender may also rely, to the extent permitted by applicable laws of the State of Texas or the United States of America. on alternative maximum rates of interest under other laws of the State of Texas or the United States of America applicable to the Lender, if greater.

(b) Notwithstanding anything herein or in the Note to the contrary, during any Limitation Period, the interest rate to be charged on amounts evidenced by the Note shall be the Highest Lawful Rate, and the obligation, if any, of the Borrower for the payment of fees or other charges deemed to be interest under applicable law shall be suspended. During any period or periods of time following a Limitation Period, to the extent permitted by applicable laws of the State of Texas or the United States of America, the interest rate to be charged hereunder shall remain at the Highest Lawful Rate until such time as there has been paid to the Lender (i) the amount of interest in excess of that accruing at the Highest Lawful Rate that the Lender would have received during the Limitation Period had the interest rate remained at the otherwise applicable rate, and (ii) all interest and fees otherwise payable to the Lender but for the effect of such Limitation Period.

(c) If, under any circumstances, the aggregate amounts paid on the Note or under this Agreement or any other Loan Document include amounts which by law are deemed interest and which would exceed the amount permitted if the Highest Lawful Rate were in effect, the Borrower stipulates that such payment and collection will have been and will be deemed to have been, to the extent permitted by applicable laws of the State of Texas or the United States of America, the result of mathematical error on the part of the Borrower and the Lender; and the Lender shall promptly refund the amount of such excess (to the extent only of such interest payments in excess of that which would have accrued and been payable on the basis of the Highest Lawful Rate) upon discovery of such error by the Lender or notice thereof from the Borrower. In the event that the maturity of any Obligation is accelerated, by reason of an election by the Lender or otherwise, or in the event of any required or permitted prepayment, then the consideration constituting interest under applicable laws may never exceed the Highest Lawful Rate; and excess amounts paid which by law are deemed interest, if any, shall be credited by the Lender on the principal amount of the Obligations, or if the principal amount of the Obligations shall have been paid in full, refunded to the Borrower.

(d) All sums paid, or agreed to be paid, to the Lender for the use, forbearance and detention of the proceeds of any advance hereunder shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full term hereof until paid in full so that the actual rate of interest is uniform but does not exceed the Highest Lawful Rate throughout the full term hereof.

2.13 Letters in Lieu of Transfer Orders. The Lender agrees that none of the letters in lieu of transfer or division orders provided by the Borrower pursuant to Section 3.1(f)(iii) or Section 5.7 will be sent to the addressees thereof prior to the occurrence of an Event of Default, at which time the Lender may, at its option and in addition to the exercise of any of its other rights and remedies, send any or all of such letters.

2.14 Power of Attorney. The Borrower hereby designates the Lender as its agent and attorney-in-fact, to act in its name, place, and stead for the purpose of completing and, upon the occurrence of an Event of Default, delivering any and all of the letters in lieu of transfer orders delivered by the Borrower to the Lender pursuant to Section 3.l (f)(iii) or Section 5.7, including, without limitation, completing any blanks contained in such letters and attaching exhibits thereto describing the relevant Collateral. The Borrower hereby ratifies and confirms all that the Lender shall lawfully do or cause to be done by virtue of this power of attorney and the rights granted with respect to such power of attorney. This power of attorney is coupled with the interests of the Lender in the Collateral, shall commence and be in full force and effect as of the Closing Date and shall remain in full force and effect and shall be irrevocable so long as any Obligation remains outstanding or unpaid or any Commitment exists. The powers conferred on the Lender by this appointment are solely to protect the interests of the Lender under the Loan Documents and shall not impose any duty upon the Lender to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and shall not be responsible to the Borrower or any other Person for any act or failure to act with respect to such powers, except for gross negligence or willful misconduct.

ARTICLE III

CONDITIONS

The obligations of the Lender to enter into this Agreement and to make Loans are subject to the satisfaction of the following conditions precedent:

3.1 Receipt of Loan Documents and Other Items. The Lender shall have no obligation under this Agreement unless and until all matters incident to the consummation of the transactions contemplated herein, including, without limitation, the review by the Lender or its counsel of the title of the Borrower to its Oil and Gas Properties, shall be satisfactory to the Lender, and the Lender shall have received, reviewed, and approved the following documents and other items, appropriately executed when necessary and, where applicable, acknowledged by one or more authorized officers of the Borrower, all in form and substance satisfactory to the Lender and dated, where applicable, of even date herewith or a date prior thereto and acceptable to the Lender:

(a) multiple counterparts of this Agreement, as requested by the Lender;

(b) the Note;

(c) copies of the Articles of Incorporation or Certificate of Incorporation and all amendments thereto and the bylaws and all amendments thereto of the Borrower, accompanied by a certificate issued by the secretary or an assistant secretary of the Borrower, to the effect that each such copy is correct and complete;

(d) certificates of incumbency and signatures of all officers of the Borrower who are authorized to execute Loan Documents on behalf of the Borrower, each such certificate being executed by the secretary or an assistant secretary of the Borrower;

(e) copies of corporate resolutions approving the Loan Documents and authorizing the transactions contemplated herein and therein, duly adopted by the boards of directors of the Borrower, accompanied by certificates of the secretary or an assistant secretary of the Borrower, to the effect that such copies are true and correct copies of resolutions duly adopted at a meeting or by unanimous consent of the board of directors of the Borrower, and that such resolutions constitute all the resolutions adopted with respect to such transactions, have not been amended, modified, or revoked in any respect, and are in full force and effect as of the date of such certificate;

(f) multiple counterparts, as requested by the Lender, of the following Security Instruments creating, evidencing, perfecting, and otherwise establishing Liens in favor of the Lender in and to the Collateral:

(i) Mortgage, Deed of Trust, Indenture, Security Agreement, Assignment of Production, and Financing Statement from the Borrower covering all Oil and Gas Properties of the Borrower and all improvements, personal property, and fixtures related thereto;

(ii) Financing Statements from the Borrower, as debtor, constituent to the instrument described in clause (i) above;

(iii) Security Agreement from the Borrower pledging contracts rights, etc.;

(iv) Financing Statement from the Borrower, as debtor, constituent to the instrument described in (iii) above;

(v) undated letters, in form and substance satisfactory to the Lender, from the Borrower to each purchaser of production and disburser of the proceeds of production from or attributable to the Mortgaged Properties, together with additional letters with the addressees left blank, authorizing and directing the addressees to make future payments attributable to production from the Mortgaged Properties directly to the Lender;

(g) Financial Statements of the Borrower, most current filings;

(h) certificates dated as of a recent date from the Secretary of State or other appropriate Governmental Authority evidencing the existence or qualification and good standing of the Borrower in its jurisdiction of incorporation and in any other jurisdictions where it does business;

(i) results of searches of the UCC Records of the Secretary of State of the State of Texas from a source acceptable to the Lender and reflecting no Liens against any of the Collateral as to which perfection of a Lien is accomplished by the filing of a financing statement other than in favor of the Lender;

(j) confirmation, acceptable to the Lender, of the title of the Borrower to the Mortgaged Properties, free and clear of Liens other than Permitted Liens;

(k) all operating, lease, sublease, royalty, sales, exchange, processing, farmout, bidding, pooling, unitization, communitization, and other agreements relating to the Mortgaged Properties requested by the Lender;

(1) engineering reports covering the Mortgaged Properties;

(m) certificates evidencing the insurance coverage required pursuant to Section 5.18; and

(n) such other agreements, documents, instruments, opinions, certificates, waivers, consents, and evidence as the Lender may reasonably request.

3.2 Each Loan. In addition to the conditions precedent stated elsewhere herein, the Lender shall not be obligated to make any Loan unless:

(a) the Borrower shall have delivered to the Lender a Borrowing Request at least the requisite time prior to the requested date for the relevant Loan and each statement or certification made in such Borrowing Request shall be true and correct in all material respects on the requested date for such Loan;

(b) no Event of Default or Default shall exist or will occur as a result of the making of the requested Loan;

(c) if requested by the Lender, the Borrower shall have delivered evidence satisfactory to the Lender substantiating any of the matters contained in this Agreement which are necessary to enable the Borrower to qualify for such Loan;

(d) the Lender shall have received, reviewed, and approved such additional documents and items as described in Section 3.1 as may be requested by the Lender with respect to such Loan;

(e) no event shall have occurred which, in the reasonable opinion of the Lender, could have a Material Adverse Effect;

(f) each of the representations and warranties contained in this Agreement shall be true and correct and shall be deemed to be repeated by the Borrower as if made on the requested date for such Loan;

(g) all of the Security Instruments shall be in full force and effect and provide to the Lender the security intended thereby;

(h) neither the consummation of the transactions contemplated hereby nor the making of such Loan shall contravene, violate, or conflict with any Requirement of Law;

(i) the Borrower shall hold full legal title to the Collateral and be the sole beneficial owner thereof;

(j) the Lender shall have received the payment of all Engineering Fees, Facility Fees, and other fees payable to the Lender hereunder and reimbursement from the Borrower, or special legal counsel for the Lender shall have received payment from the Borrower, for (1) all reasonable fees and expenses of counsel to the Lender for which the Borrower is responsible pursuant to applicable provisions of this Agreement and for which invoices have been presented as of or prior to the date of the relevant Loan, and (ii) estimated fees charged by filing officers and other public officials incurred or to be incurred in connection with the filing and recordation of any Security Instruments, for which invoices have been presented as of or prior to the date of the requested Loan; and

(k) all matters incident to the consummation of the transactions hereby contemplated shall be satisfactory to the Lender.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

To induce the Lender to enter into this Agreement and to make the Loans, the Borrower represents and warrants to the Lender (which representations and warranties shall survive the delivery of the Note) that:

4.1 Due Authorization. The execution and delivery by the Borrower of this Agreement and the borrowings hereunder, the execution and delivery by the Borrower of the Note, the repayment of the Note and interest and fees provided for in the Note and this Agreement, the execution and delivery of the Security Instruments by the Borrower and the performance of all obligations of the Borrower under the Loan Documents are within the power of the Borrower, have been duly authorized by all necessary corporate action by the Borrower, and do not and will not (a) require the consent of any Governmental Authority, (b) contravene or conflict with any Requirement of Law, (c) contravene or conflict with any indenture, instrument, or other agreement to which the Borrower is a party or by which any Property of the Borrower may be presently bound or encumbered, or (d) result in or require the creation or imposition of any Lien in, upon or of any Property of the Borrower under any such indenture, instrument, or other agreement, other than the Loan Documents.

4.2 Corporate Existence. The Borrower is a corporation duly organized, legally existing, and in good standing under the laws of its state of incorporation and is duly qualified as a foreign corporation and is in good standing in all jurisdictions wherein the ownership of Property or the operation of its business necessitates same, other than those jurisdictions wherein the failure to so qualify will not have a Material Adverse Effect.

4.3 Valid and Binding Obligations. All Loan Documents, when duly executed and delivered by the Borrower, will be the legal, valid, and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.

4.4 Security instruments. The provisions of each Security Instrument are effective to create in favor of the Lender, a legal, valid, and enforceable Lien in all right, title, and interest of the Borrower in the Collateral described therein, which Liens, assuming the accomplishment of recording and filing in accordance with applicable laws prior to the intervention of rights of other Persons, shall constitute fully perfected first-priority Liens on all right, title, and interest of the Borrower in the Collateral described therein.

4.5 Title to Assets. The Borrower has good and indefeasible title to all of its Properties, free and clear of all Liens except Permitted Liens.

4.6 Scope and Accuracy of Financial Statements. The Financial Statements of the Borrower as currently filed, present fairly the financial position and results of operations and cash flows of the Borrower in accordance with GAAP as at the relevant point in time or for the period indicated, as applicable. No event or circumstance has occurred since filings with the SEC, which could reasonably be expected to have a Material Adverse Effect.

4.7 No Material Misstatements. No information, exhibit, statement, or report furnished to the Lender by or at the direction of the Borrower in connection with this Agreement contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statements contained therein not misleading as of the date made or deemed made.

4.8 Liabilities, Litigation and Restrictions. Other than as listed under the heading "Liabilities on Exhibit V attached hereto, the Borrower has no liabilities, direct, or contingent, which may materially and adversely affect its business or operations or its ownership of the Collateral. Except as set forth under the heading "Litigation" on Exhibit V hereto, no litigation or other action of any nature affecting the Borrower is pending before any Governmental Authority or, to the best knowledge of the Borrower, threatened against or affecting the Borrower. No unusual or unduly burdensome restriction, restraint or hazard exists by contract, Requirement of Law, or otherwise relative to the business or operations of the Borrower or the ownership and operation of the Collateral other than such as relate generally to Persons engaged in business activities similar to those conducted by the Borrower.

4.9 Authorizations; Consents. Except as expressly contemplated by this Agreement, no authorization, consent, approval, exemption, franchise, permit, or license of, or filing with, any Governmental Authority or any other Person is required to authorize or is otherwise required in connection with the valid execution and delivery by the Borrower of the Loan Documents or any instrument contemplated hereby, the repayment by the Borrower of the Note and interest and fees provided in the Note and this Agreement, or the performance by the Borrower of the Obligations.

4.10 Compliance with Laws, The Borrower and its Property, including, without limitation, the Mortgaged Property, are in compliance with all applicable Requirements of Law, including, without limitation, Environmental Laws, the Natural Gas Policy Act of 1978, as amended, and ERISA. except to the extent non-compliance with any such Requirements of Law could not reasonably be expected to have a Material Adverse Effect.

4.11 ERISA. The Borrower does not maintain nor has it maintained any Plan. The Borrower does not currently contribute to or have any obligation to contribute to or otherwise have any liability with respect to any Plan.

4.12 Environmental Laws. To the best knowledge and belief of the Borrower, except as would not have a Material Adverse Effect, or as described on Exhibit V under the heading "Environmental Matters:"

(a) no Property of the Borrower is currently on or has ever been on, or is adjacent to any Property which is on or has ever been on, any federal or state list of Superfund Sites;

(b) no Hazardous Substances have been generated, transported, and/or disposed of by the Borrower at a site which was, at the time of such generation, transportation, and/or disposal, or has since become, a Superfund Site;

(c) except in accordance with applicable Requirements of Law or the terms of a valid permit, license, certificate, or approval of the relevant Governmental Authority, no Release of Hazardous Substances by the Borrower or from, affecting, or related to any Property of the Borrower or adjacent to any Property of the Borrower has occurred; and Borrower has occurred; and

(d) no Environmental Complaint has been received by the Borrower.

4.13 Compliance with Federal Reserve Regulations. No transaction contemplated by the Loan Documents is in violation of any regulations promulgated by the Board of Governors of the Federal Reserve System, including, without limitation, Regulations T, U, or X.

4.14 Investment Company Act Compliance. The Borrower is not, nor is the Borrower directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company" or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

4.15 Public Utility Holding Company Act Compliance. The Borrower is not a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended.

4.16 Proper Filing of Tax Returns: Payment of Taxes Due. The Borrower has duly and properly filed its United States income tax return and all other tax returns which are required to be filed and have paid all taxes due except such as are being contested in good faith and as to which adequate provisions and disclosures have been made. The respective charges and reserves on the books of the Borrower with respect to taxes and other governmental charges are adequate.

4.17 Refunds. Except as described on Exhibit V under the heading "Refunds," no orders of, proceedings pending before, or other requirements of, the Federal Energy Regulatory Commission, the Texas Railroad Commission, or any Governmental Authority exist which could result in the Borrower being required to refund any material portion of the proceeds received or to be received from the sale of hydrocarbons constituting part of the Mortgaged Property.

4.18 Intellectual Property. The Borrower owns or is licensed to use all Intellectual Property necessary to conduct all business material to its condition (financial or otherwise), business, or operations as such business is currently conducted. No claim has been asserted or is pending by any Person with the respect to the use of any such Intellectual Property or challenging or questioning the validity or effectiveness of any such Intellectual Property; and the Borrower knows of no valid basis for any such claim. The use of such Intellectual Property by the Borrower does not infringe on the rights of any Person, except for such claims and infringements as do not, in the aggregate, give rise to any material liability on the part of the Borrower.

4.19 Locations of Borrower. The principal place of business and chief executive office of the Borrower is located at the address of the Borrower set forth in Section 8.3 or at such other location as the Borrower may have, by proper written notice hereunder, advised the Lender, provided that such other location is within a state in which appropriate financing statements from the Borrower in favor of the Lender have been filed.

4.20 Subsidiaries. The Borrower has no Subsidiaries except those described on Exhibit V under the heading "Subsidiaries".

ARTICLE V

AFFIRMATIVE COVENANTS

So long as any Obligation remains outstanding or unpaid or any Commitment exists, the Borrower shall:

5.1 Maintenance and Access to Records. Keep adequate records, in accordance with GAAP, of all its transactions so that at any time, and from time to time, its true and complete financial condition may be readily determined, and promptly following the reasonable request of the Lender, make such records available for inspection by the Lender and, at the expense of the Borrower, allow the Lender to make and take away copies thereof.

5.2 Quarterly Financial Statements: Compliance Certificates. Deliver to the Lender, (a) on or before the 45th day after the close of each of the first three quarterly periods of each fiscal year of the Borrower, a copy of the unaudited Financial Statements of the Borrower as at the close of such quarterly period and from the beginning of such fiscal year to the end of such period, such Financial Statements to be certified by a Responsible Officer of the Borrower as having been prepared in accordance with GAAP consistently applied and as a fair presentation of the condition of the Borrower, subject to changes resulting from normal year-end audit adjustments, and (b) on or before the 45th day after the close of each fiscal quarter, with the exception of the last fiscal quarter, a Compliance Certificate.

5.3 Annual Financial Statements. Deliver to the Lender, on or before the 120th day after the close of each fiscal year of the Borrower, a copy of the annual audited Financial Statements of the Borrower and a Compliance Certificate.

5.4 Oil and Gas Reserve Reports.

(a) Deliver to the Lender no later than April 1 of each year during the term of this Agreement, engineering reports in form and substance satisfactory to the Lender certified by any nationally- or regionally-recognized independent consulting petroleum engineers acceptable to the Lender as fairly and accurately setting forth (i) the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves (separately classified as such) attributable to the Mortgaged Properties as of January 1 of the year for which such reserve reports are furnished, (ii) the aggregate present value of the future net income with respect to such Mortgaged Properties, discounted at a stated per annum discount rate of proven and producing reserves, (iii) projections of the annual rate of production, gross income, and net income with respect to such proven and producing reserves, and (iv) information with respect to the "take-or-pay,""prepayment," and gas-balancing liabilities of the Borrower.

(b) Deliver to the Lender no later than October 1 of each year during the term of this Agreement, engineering reports in form and substance satisfactory to the Lender prepared by or under the supervision of the chief petroleum engineer of the Borrower evaluating the Mortgaged Properties as of July 1 of the year for which such reserve reports are furnished and updating the information provided in the reports pursuant to Section 5.4(a).

(c) Each of the reports provided pursuant to this Section shall be submitted to the Lender together with additional data concerning pricing, quantities of production from the Mortgaged Properties, volumes of production sold, purchasers of production, gross revenues, expenses and such other information and engineering and geological data with respect thereto as the Lender may reasonably request.

5.5 Title Opinions: Title Defects. Promptly upon the request of the Lender, furnish to the Lender title opinions, in form and substance and by counsel satisfactory to the Lender, or other confirmation of title acceptable to the Lender, covering Oil and Gas Properties constituting not less than 81% of the value, determined by the Lender in its sole discretion, of the Mortgaged Properties; and promptly, but in any event within 60 days after notice by the Lender of any defect, material in the opinion of the Lender in value, in the title of the Borrower to any of its Oil and Gas Properties, clear such title defects, and, in the event any such title defects are not cured in a timely manner, pay all related costs and fees incurred by the Lender to do so.

5.6 Notices of Certain Events- Deliver to the Lender, immediately upon having knowledge of the occurrence of any of the following events or circumstances, a written statement with respect thereto, signed by a Responsible Officer of the Borrower and setting forth the relevant event or circumstance and the steps being taken by the Borrower with respect to such event or circumstance:

(a) any Default or Event of Default;

(b) any default or event of default under any contractual obligation of the Borrower or any litigation, investigation, or proceeding between the Borrower and any Governmental Authority which, in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

(c) any litigation or proceeding involving the Borrower as a defendant or in which any Property of the Borrower is subject to a claim and in which the amount involved is $200,000 or more and which is not covered by insurance or in which injunctive or similar relief is sought;

(d) the receipt by the Borrower of any Environmental Complaint;

(e) any actual, proposed, or threatened testing or other investigation by any Governmental Authority or other Person concerning the environmental condition of, or relating to, any Property of the Borrower or adjacent to any Property of the Borrower following any allegation of a violation of any Requirement of Law;

(f) any Release of Hazardous Substances by the Borrower or from, affecting, or related to any Property of the Borrower or adjacent to any Property of the Borrower except in accordance with applicable Requirements of Law or the terms of a valid permit, license, certificate, or approval of the relevant Governmental Authority, or the violation of any Environmental Law, or the revocation, suspension, or forfeiture of or failure to renew, any permit, license, registration, approval, or authorization which could reasonably be expected to have a Material Adverse Effect;

(g) the change in identity or address of any Person remitting to the Borrower proceeds from the sale of hydrocarbon production from or attributable to any Mortgaged Property;

(h) any change in the senior management of the Borrower; and

(i) any other event or condition which could reasonably be expected to have a Material Adverse Effect.

5.7 Letters in Lieu of Transfer Orders: Division Orders. Promptly upon request by the Lender at any time and from time to time, and without limitation on the rights of the Lender pursuant to Sections 2.16 and 2.17, execute such letters in lieu of transfer orders, in addition to the letters signed by the Borrower and delivered to the Lender in satisfaction of the condition set forth in Section 3.l (f) (iii) and/or division and/or transfer orders as are necessary or appropriate to transfer and deliver to the Lender proceeds from or attributable to any Mortgaged Property.

5.8 Additional Information. Furnish to the Lender, promptly upon the request of the Lender, such additional financial or other information concerning the assets, liabilities, operations, and transactions of the Borrower as the Lender may from time to time request; and notify the Lender not less than ten Business Days prior to the occurrence of any condition or event that may change the proper location for the filing of any financing statement or other public notice or recording for the purpose of perfecting a Lien in any Collateral, including, without limitation, any change in its name or the location of its principal place of business or chief executive office; and upon the request of the Lender, execute such additional Security Instruments as may be necessary or appropriate in connection therewith.

5.9 Compliance with Laws. Except to the extent the failure to comply or cause compliance would not have a Material Adverse Effect, comply with all applicable Requirements of Law, including, without limitation, (a) the Natural Gas Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d) all permits, licenses, registrations, approvals, and authorizations (i) related to any natural or environmental resource or media located on, above, within, in the vicinity of, related to or affected by any Property of the Borrower, (ii) required for the performance of the operations of the Borrower, or (iii) applicable to the use, generation, handling, storage, treatment, transport, or disposal of any Hazardous Substances; and cause all employees, crew members, agents, contractors, subcontractors, and future lessees (pursuant to appropriate lease provisions) of the Borrower, while such Persons are acting within the scope of their relationship with the Borrower, to comply with all such Requirements of Law as may be necessary or appropriate to enable the Borrower to so comply.

5.10 Payment of Assessments and Charges. Pay all taxes, assessments, governmental charges, rent, and other Indebtedness which, if unpaid, might become a Lien against the Property of the Borrower, except any of the foregoing being contested in good faith and as to which adequate reserve in accordance with GAAP has been established or unless failure to pay would not have a Material Adverse Effect.

4.11 Maintenance of Corporate Existence and Good Standing. Maintain its corporate existence or qualification and good standing in its jurisdictions of incorporation and in all jurisdictions wherein the Property now owned or hereafter acquired or business now or hereafter conducted necessitates same, unless the failure to do so would not have a Material Adverse Effect.

5.12 Payment of Notes: Performance of Obligations. Pay the Note according to the reading, tenor, and effect thereof, as modified hereby, and do and perform every act and discharge all of its other Obligations.

5.13 Further Assurances. Promptly cure any defects in the execution and delivery of any of the Loan Documents and all agreements contemplated thereby, and execute, acknowledge, and deliver such other assurances and instruments as shall, in the opinion of the Lender, be necessary to fulfill the terms of the Loan Documents.

5.14 Subsequent Fees and Expenses of Lender. Upon request by the Lender, promptly reimburse the Lender (to the fullest extent permitted by law) for all amounts reasonably expended, advanced, or incurred by or on behalf of the Lender to satisfy any obligation of the Borrower under any of the Loan Documents; to collect the Obligations; to ratify, amend, restate, or prepare additional Loan Documents, as the case may be; for the filing and recordation of Security Instruments; to enforce the rights of the Lender under any of the Loan Documents; and to protect the Properties or business of the Borrower, including, without limitation, the Collateral, which amounts shall be deemed compensatory in nature and liquidated as to amount upon notice to the Borrower by the Lender and which amounts shall include, but not be limited to (a) all court costs, (b) reasonable attorneys fees, (c) reasonable fees and expenses of auditors and accountants incurred to protect the interests of the Lender, (d) fees and expenses incurred in connection with the participation by the Lender as a member of the creditors' committee in a case commenced under any Insolvency Proceeding, (e) fees and expenses incurred in connection with lifting the automatic stay prescribed in ss362 Title 11 of the United States Code, and (f) fees and expenses incurred in connection with any action pursuant to ss1129 Title 11 of the United States Code all reasonably incurred by the Lender in connection with the collection of any sums due under the Loan Documents, together with interest at the per annum interest rate equal to the Floating Rate, calculated on a basis of a calendar year of 365 or 366 days, as the case may be, counting the actual number of days elapsed, on each such amount from the date of notification that the same was expended, advanced, or incurred by the Lender until the date it is repaid to the Lender, with the obligations under this Section surviving the non-assumption of this Agreement in a case commenced under any Insolvency Proceeding and being binding upon the Borrower and/or a trustee, receiver, custodian, or liquidator of the Borrower appointed in any such case.

5.15 Operation of Oil and Gas Properties. Develop, maintain, and operate its Oil and Gas Properties in a prudent and workmanlike manner in accordance with industry standards.

5.16 Maintenance and Inspection of Properties. Maintain all of its tangible Properties in good repair and condition, ordinary wear and tear excepted; make all necessary replacements thereof and operate such Properties in a good and workmanlike manner; and permit any authorized representative of the Lender to visit and inspect, at the expense of the Borrower, any tangible Property of the Borrower.

5.17 Maintenance of Insurance. Maintain insurance with respect to its Properties and businesses against such liabilities, casualties, risks, and contingencies as is customary in the relevant industry and sufficient to prevent a Material Adverse Effect, all such insurance to be in amounts and from insurers acceptable to the Lender, maintained by Borrower, naming the Lender as loss payee, and, upon any renewal of any such insurance and at other times upon request by the Lender, furnish to the Lender evidence, satisfactory to the Lender, within 30 days of the Closing Date of the maintenance of such insurance. The Lender shall have the right to collect, and the Borrower hereby assigns to the Lender, any and all monies that may become payable under any policies of insurance relating to business interruption or by reason of damage, loss, or destruction of any of the Collateral. In the event of any damage, loss, or destruction for which insurance proceeds relating to business interruption or Collateral exceed $100,000, the Lender may, at its option, apply all such sums or any part thereof received by it toward the payment of the Obligations, whether matured or unmatured, application to be made first to interest and then to principal, and shall deliver to the Borrower the balance, if any, after such application has been made. In the event of any such damage, loss, or destruction for which insurance proceeds are S 100,000 or less, provided that no Default or Event of Default has occurred and is continuing, the Lender shall deliver any such proceeds received by it to the Borrower. In the event the Lender receives insurance proceeds not attributable to Collateral or business interruption, the Lender shall deliver any such proceeds to the Borrower.

5.18 INDEMNIFICATION. INDEMNIFY AND HOLD THE LENDER AND ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT 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 PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH 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 PROPERTY OF THE BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, 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 ANY LOAN DOCUMENT OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE LENDER OR ANY OF ITS SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH OBLIGATIONS HAVE BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWER AND NOT BY WAY OF REALIZATION AGAINST ANY COLLATERAL OR THE CONVEYANCE OF ANY PROPERTY IN LIEU THEREOF, PROVIDED THAT SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY THE LENDER WITH RESPECT TO ANY PROPERTY SUBSEQUENT TO THE LENDER BECOMING THE OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH PROPERTY SUCH CLAN, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER, JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE THERETO BY THE LENDER.

5.19 Headings. Hedge a portion of its proven developed producing Mortgage Property, the amount to be communicated in a letter from Lender to Borrower.

ARTICLE VI

NEGATIVE COVENANTS

So long as any Obligation remains outstanding or unpaid or any Commitment exists, the Borrower will not:

6.1 Indebtedness. Create, incur, assume, or suffer to exist any Indebtedness, whether by way of loan or otherwise; provided, however, the foregoing restriction shall not apply to (a) the Obligations, (b) unsecured accounts payable incurred in the ordinary course of business, which are not unpaid in excess of 60 days beyond invoice date or are being contested in good faith and as to which such reserve as is required by GAAP has been made, (c) crude oil, natural gas, or other hydrocarbon floor, collar, cap, price protection, or swap agreements, in form and substance and with a Person acceptable to the Lender, provided that (i) each commitment issued under such agreement must also be approved by the Lender, (ii) such agreements shall not be entered into with respect to Mortgaged Properties constituting more than 80% of the present value of estimated future net revenues, computed using a discount factor of 10%, of all proved developed producing Mortgaged Properties, and (iii) that the floor prices in such agreements are not less than the prices used by the Lender in its most recent Borrowing Base determination, or (d) Rate Management Transactions, in form and substance and with a Person acceptable to the Lender.

6.2 Contingent Obligations. Create, incur, assume, or suffer to exist any Contingent Obligation; provided, however, the foregoing restriction shall not apply to (a) performance guarantees and performance surety or other bonds provided in the ordinary course of business, or (b) trade credit incurred or operating leases entered into in the ordinary course of business.

6.3 Liens. Create, incur, assume, or suffer to exist any Lien on any of its Oil and Gas Properties or any other Property, whether now owned or hereafter acquired; provided, however, the foregoing restrictions shall not apply to Permitted Liens.

6.4 Leasebacks. Enter into any agreement to sell or transfer any Property and thereafter rent or lease as lessee such Property or other Property intended for the same use or purpose as the Property sold or transferred.

6.5 Investments. Acquire Investments in, or purchase or otherwise acquire all or substantially all of the assets of, any Person; provided, however, the foregoing restriction shall not apply to the purchase or acquisition of (a) Oil and Gas Properties, (b) Investments in the form of (i) debt securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof, with maturities of no more than one year, (ii) commercial paper of a domestic issuer rated at the date of acquisition at least P-2 by Moody's Investor Service, Inc. or A-2 by Standard & Poor's Corporation and with maturities of no more than one year from the date of acquisition, or (iii) repurchase agreements covering debt securities or commercial paper of the type permitted in this Section, certificates of deposit, demand deposits, eurodollar time deposits, overnight bank deposits and bankers' acceptances, with maturities of no more than one year from the date of acquisition, issued by or acquired from or through the Lender or any bank or trust company organized under the laws of the United States or any state thereof and having capital surplus and undivided profits aggregating at least $100,000,000, (c) other short-term Investments similar in nature and degree of risk to those described in clause (b) of this Section, or (d) money-market funds.

6.6 Changes in Corporate Structure. Enter into any transaction of consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or suffer any liquidation or dissolution).

6.7 Transactions with Affiliates. Directly or indirectly, enter into any transaction (including the sale, lease, or exchange of Property or the rendering of service) with any of its Affiliates, other than upon fair and reasonable terms no less favorable than could be obtained in an arm's length transaction with a Person which was not an Affiliate.

6.8 Lines of Business. Expand, on its own or through any Subsidiary, into any line of business other than those in which the Borrower is engaged as of the date hereof.

6.9 Plan Obligations. Assume or otherwise become subject to an obligation to contribute to or maintain any Plan or acquire any Person which has at any time had an obligation to contribute to or maintain any Plan.

6.10 Current Ratio. Permit the ratio of Current Assets to Current Liabilities to be less than 1.00 to 1.00 at any time.

6.11 Debt Coverage Ratio. Permit, as of the close of any fiscal quarter, the ratio of (a) EBITDA to (b) the sum of monthly Borrowing Base reductions plus interest to be less than 1.0 to 1.0.

ARTICLE VII

EVENTS OF DEFAULT

7.1 Enumeration of Events of Default. Any of the following events shall constitute an Event of Default:

(a) default shall be made in the payment when due of any installment of principal or interest under this Agreement or the Note or in the payment when due of any fee or other sum payable under any Loan Document and such default as to interest or fees only shall have continued for three days;

(b) default shall be made by the Borrower in the due observance or performance of any of its obligations under the Loan Documents, and such default shall continue for 30 days after the earlier of notice thereof to the Borrower by the Lender or knowledge thereof by the Borrower;

(c) any representation or warranty made by the Borrower in any of the Loan Documents proves to have been untrue in any material respect or any representation, statement (including Financial Statements), certificate, or data furnished or made to the Lender in connection herewith proves to have been untrue in any material respect as of the date the facts therein set forth were stated or certified;

(d) default shall be made by the Borrower (as principal or guarantor or other surety) in the payment or performance of any bond, debenture, note, Commodity Hedge Agreement or other Indebtedness or under any credit agreement, loan agreement, indenture, promissory' note, or similar agreement or instrument executed in connection with any of the foregoing, and such default shall remain unremedied for in excess of the period of grace, if any, with respect thereto;

(e) the Borrower shall be unable to satisfy any condition or cure any circumstance specified in Article III, the satisfaction or curing of which is precedent to the right of the Borrower to obtain a Loan and such inability shall continue for a period in excess of 30 days;

(f) the Borrower shall (i) apply for or consent to the appointment of a receiver, trustee, or liquidator of it or all or a substantial part of its assets, (ii) file a voluntary' petition commencing an Insolvency Proceeding, (iii) make a general assignment for the benefit of creditors, (iv) be unable, or admit in writing its inability, to pay its debts generally as they become due, or (v) file an answer admitting the material allegations of a petition filed against it in any Insolvency Proceeding;

(g) an order, judgment, or decree shall be entered against the Borrower by any court of competent jurisdiction or by any other duly authorized authority, on the petition of a creditor or otherwise, granting relief in any Insolvency Proceeding or approving a petition seeking reorganization or an arrangement of its debts or appointing a receiver, trustee, conservator, custodian, or liquidator of it or all or any substantial part of its assets, and such order, judgment, or decree shall not be dismissed or stayed within 60 days;

(h) the levy against any significant portion of the Property of the Borrower, or any execution, garnishment, attachment, sequestration, or other writ or similar proceeding which is not permanently dismissed or discharged within 60 days after the levy;

(i) a final and non-appealable order, judgment, or decree shall be entered against the Borrower for money damages and/or Indebtedness due in an amount in excess of $200,000, and such order, judgment, or decree shall not be dismissed or staved within 60 days;

(j) any charges are filed or any other action or proceeding is instituted by any Governmental Authority against the Borrower under the Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. ss 1961 i (e) (a), the result of which could be the forfeiture or transfer of any material Property of the Borrower subject to a Lien in favor of the Lender without (i) satisfaction or provision for satisfaction of such Lien, or (ii) such forfeiture or transfer of such Property being expressly made subject to such Lien.

(k) the Borrower shall have (i) concealed, removed, or diverted, or permitted to be concealed, removed, or diverted, any part of its Property, with intent to hinder, delay, or defraud its creditors or any of them, (ii) made or suffered a transfer of any of its Property which may be fraudulent under any bankruptcy, fraudulent conveyance, or similar law, (iii) made any transfer of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid, or (iv) shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its Property through legal proceedings or distraint which is not vacated within 30 days from the date thereof;

(1) any Security Instrument shall for any reason not, or cease to, create valid and perfected first-priority Liens against the Collateral purportedly covered thereby;

(m) John N. Ehrman ceases to be the chief executive officer of the Borrower

(n) if the issuing bank of the Letter of Credit described in Section 3.1(o) gives notice to the Lender of its intent not to extend such Letter of Credit; or

(o) the occurrence of a Material Adverse Effect and the same shall remain unremedied for in excess of 30 days after notice given by the Lender.

7.2 Remedies. (a) Upon the occurrence of an Event of Default specified in Sections 7.1(1) or 7.1(g), immediately and without notice, (i) all Obligations 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, except as may be provided to the contrary elsewhere herein, all of which are hereby expressly waived by the Borrower; (ii) the Commitment shall immediately cease and terminate unless and until reinstated by the Lender in writing; and (iii) the Lender is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set-off and apply any and all deposits (general or special, time or demand, provisional or final) held by the Lender and any and all other indebtedness at any time owing by the Lender to or for the credit or account of the Borrower against any and all of the Obligations although such Obligations may be unmatured.

(b) Upon the occurrence of any Event of Default other than those specified in Sections 7.1(0 or 7.1(g), (i) the Lender may, by notice to the Borrower, declare all Obligations 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, except as may be provided to the contrary elsewhere herein, all of which are hereby expressly waived by the Borrower; (ii) the Commitment shall immediately cease and terminate unless and until reinstated by the Lender in writing; and (iii) the Lender is hereby authorized at any time and from time to time, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set-off and apply any and all deposits (general or special, time or demand, provisional or final) held by the Lender and any and all other indebtedness at any time owing by the Lender to or for the credit or account of the Borrower against any and all of the Obligations although such Obligations may be unmatured.

(c) Upon the occurrence of any Event of Default, the Lender may, in addition to the foregoing in this Section, exercise any or all of its rights and remedies provided by law or pursuant to the Loan Documents.

ARTICLE VIII

MISCELLANEOUS

8.1 Transfers: Participations. The Lender may, at anytime, sell, transfer, assign, or grant participations in the Obligations or any portion thereof; and the Lender may forward to each Transferee and prospective Transferee all documents and information relating to such Obligations, whether furnished by the Borrower or otherwise obtained, as the Lender determines necessary or desirable. The Borrower agrees that each Transferee, regardless of the nature of any transfer to it, may exercise all rights (including, without limitation, rights of set-off) with respect to the portion of the Obligations held by it as fully as if such Transferee were the direct holder thereof, subject to any agreements between such Transferee and the transferor to such Transferee.

8.2 Survival of Representations, Warranties, and Covenants. All representations and warranties of the Borrower and all covenants and agreements herein made shall survive the execution and delivery of the Note and the Security Instruments and shall remain in force and effect so long as any Obligation is outstanding or any Commitment exists.

8.3 Notices and Other Communications. Except as to verbal notices expressly authorized herein, which verbal notices shall be confirmed in writing, all notices, requests, and communications hereunder shall be in writing (including by telecopy). Unless otherwise expressly provided herein, any such notice, request, demand, or other communication shall be deemed to have been duly given or made when delivered by hand, or, in the case of delivery by mail, when deposited in the mail, certified mail, return receipt requested, postage prepaid, or, in the case of telecopy notice, when receipt thereof is acknowledged orally or by written confirmation report, addressed as follows:

(a) if to the Lender, to:

MARATHON USA CORPORATION

7 Lake Terrace

Hutchinson, KS 67504

Attention: Ron Brooks

Telecopy: (620) 663-5191

(b) if to the Borrower, to:

ROCKY MOUNTAIN ENERGY CORPORATION

333 North Sam Houston Parkway East, Suite 910

Houston, Texas 77060

Attention: John N. Ehrman

Telecopy: (281) 448-6523

Any party may, by proper written notice hereunder to the others, change the individuals or addresses to which such notices to it shall thereafter be sent.

8.4 Parties in Interest. Subject to the restrictions on changes in corporate structure set forth in Section 6.9 and other applicable restrictions contained herein, all covenants and agreements herein contained by or on behalf of the Borrower or the Lender shall be binding upon and inure to the benefit of the Borrower or the Lender, as the case may be, and their respective legal representatives, successors, and assigns.

8.5 Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of the Lender and the Borrower. No other Person shall have any right, benefit, priority, or interest hereunder or as a result hereof or have standing to require satisfaction of provisions hereof in accordance with their terms, and any or all of such provisions maybe freely waived in whole or in part by the Lender at any time if in its sole discretion it deems it advisable to do so.

8.6 Renewals: Extensions, All provisions of this Agreement relating to the Note shall apply with equal force and effect to each promissory note hereafter executed which in whole or in part represents a renewal or extension of any part of the Indebtedness of the Borrower under this Agreement, the Note, or any other Loan Document.

8.7 No Waiver: Rights Cumulative. No course of dealing on the part of the Lender, its officers or employees, nor any failure or delay by the Lender with respect to exercising any of its rights under any Loan Document shall operate as a waiver thereof The rights of the Lender under the Loan Documents shall be cumulative and the exercise or partial exercise of any such right shall not preclude the exercise of any other right. The making of any Loan shall not constitute a waiver of any of the covenants, warranties, or conditions of the Borrower contained herein. In the event the Borrower is unable to satisfy any such covenant, warranty, or condition, the making of any Loan shall not have the effect of precluding the Lender from thereafter declaring such inability to be an Event of Default as hereinabove provided.

8.8 Survival Upon Unenforceability. In the event any one or more of the provisions contained in any of the Loan Documents or in any other instrument referred to herein or executed in connection with the Obligations shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of any Loan Document or of any other instrument referred to herein or executed in connection with such Obligations.

8.9 Amendments: Waivers. Neither this Agreement nor any provision hereof may be amended, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the amendment, waiver, discharge, or termination is sought.

8.10 Controlling Agreement. In the event of a conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control.

8.11 Disposition of Collateral. Notwithstanding any term or provision, express or implied, in any of the Security Instruments, the realization, liquidation, foreclosure, or any other disposition on or of any or all of the Collateral shall be in the order and manner and determined in the sole discretion of the Lender; provided, however, that in no event shall the Lender violate applicable law or exercise rights and remedies other than those provided in such Security Instruments or otherwise existing at law or in equity.

8.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.

8.13 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN HOUSTON, HARRIS COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, HARRIS COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.

8.14 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.

8.15 ENTIRE AGREEMENT. THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF, INCLUDING, WITHOUT LIMITATION, THE CORRESPONDENCE DATED SEPTEMBER 7, 2000, FROM THE LENDER TO THE BORROWER AND THE TERM SHEET ENCLOSED THEREWITH. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

8.16 Counterparts. For the convenience of the parties, this Agreement may be executed in multiple counterparts, each of which for all purposes shall be deemed to be an original, and all such counterparts shall together constitute but one and the same Agreement.

IN WITNESS WHEREOF, this Agreement is deemed executed effective as of the date first above written.

BORROWER:

ROCKY MOUNTAIN ENERGY CORPORATION

By:

John N. Ehrman

President and Chief Executive Officer

LENDER:

MARATHON USA CORPORATION

By:

Ron Brooks

President and Chief Executive Officer

END OF CREDIT AGREEMENT EXCEPT FOR THE ATTACHED EXHIBITS I THROUGH V.

EXHIBIT I

[FORM OF NOTE]

PROMISSORY NOTE

$40,000,000

Houston, Texas

June 20, 2002

FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned ('Maker') promises to pay to the order of MARATHON USA CORPORATION ("Payee"), at its office in Hutchinson, Kansas, or as otherwise designated in writing the sum of FORTY MILLION DOLLARS ($40,000,000), or so much thereof as maybe advanced against this Note pursuant to the Credit Agreement dated of even date herewith by and between Maker and Payee (as amended, restated, or supplemented from time to time, the "Credit Agreement"), together with interest at the rates and calculated as provided in the Credit Agreement.

Reference is hereby made to the Credit Agreement for matters governed thereby, including, without limitation, certain events which will entitle the holder hereof to accelerate the maturity of all amounts due hereunder. Capitalized terms used but not defined in this Note shall have the meanings assigned to such terms in the Credit Agreement.

This Note is issued pursuant to, is the "Note" under, and is payable as provided in the Credit Agreement. Subject to compliance with applicable provisions of the Credit Agreement, Maker may at any time pay the full amount or any part of this Note without the payment of any premium or fee, but such payment shall not, until this Note is fully paid and satisfied, excuse the payment as it becomes due of any payment on this Note provided for in the Credit Agreement.

Without being limited thereto or thereby, this Note is secured by the Security Instruments.

THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT CHAPTER 345 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.

ROCKY MOUNTAIN ENERGY CORPORATION

By:_______________________________

John N. Ehrman

President and Chief Executive Officer

EXHIBIT H

[FORM OF BORROWING REQUEST]

MARATHON USA CORPORATION

7 LAKE TERRACE DRIVE

HUTCHINSON, KS 67504

Re: Credit Agreement dated as of June , 2002, by and between ROCKY MOUNTAIN ENERGY CORPORATION and MARATHON USA CORPORATION (as amended, restated, or supplemented from time to time, the "Credit Agreement")

Ladies and Gentlemen:

Pursuant to the Credit Agreement, the Borrower hereby requests a Loan on the date and in the amount as follows:

Amount: $ ________

Requested funding date: _______, 200

The undersigned certifies that he is the President and CEO of the Borrower, has obtained all consents necessary, and as such he is authorized to execute this request on behalf of the Borrower. The undersigned further certifies, represents, and warrants on behalf of the Borrower that the Borrower is entitled to receive the requested Loan under the terms and conditions of the Credit Agreement.

Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Credit Agreement.

Very truly yours,

ROCKY MOUNTAIN ENERGY CORPORATION

By:

John N. Ehrman

President and Chief Executive Officer

EXHIBIT III

[FORM OF COMPLIANCE CERTIFICATE]

_______ 200

MARATHON USA CORPORATION

7 LAKE TERRACE DRIVE

HUTCHINSON, KS 67504

Re: Credit Agreement dated as of June 20, 2002, by and between ROCKY MOUNTAIN ENERGY CORPORATION and MARATHON USA CORPORATION (as amended, restated, or supplemented from time to time, the "Credit Agreement")

Ladies and Gentlemen:

Pursuant to applicable requirements of the Credit Agreement, the undersigned, as a Responsible Officer of the Borrower, hereby certifies to you the following information as true and correct as of the date hereof or for the period indicated, as the case may be:

[1. To the best of the knowledge of the undersigned, no Default or Event of Default exists as of the date hereof or has occurred since the date of our previous certification to you, if any.

[1. To the best of the knowledge of the undersigned, the following Defaults or Events of Default exist as of the date hereof or have occurred since the date of our previous certification to you, if any, and the actions set forth below are being taken to remedy such circumstances:

2. The compliance of the Borrower with the financial covenants of the Credit Agreement, as of the close of business on , is evidenced by the following:

(a) 6.10 Current Ratio. Permit the ratio of Current Assets to Current Liabilities to be less than 1.00 to 1.00 at any time.

Actual

(b) 6.12 Debt Coverage Ratio. Permit, as of the close of any fiscal quarter, the ratio of (a) EBITDA to (b) the sum of monthly Borrowing Base reductions plus interest to be less than 1.0 to 1.0.

Actual

3. No Material Adverse Effect has occurred since the date of the Financial Statements dated as of.

Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Credit Agreement.

Very truly yours,

ROCKY MOUNTAIN ENERGY CORPORATION

By: John N. Ehrman

President and Chief Executive Officer

EXHIBIT IV*

[FORM OF OPINION OF COUNSEL]

June 20, 2002

MARATHON USA CORPORATION

7 LAKE TERRACE DRIVE

HUTCHINSON, KS 67504

Re: Credit Agreement dated as of June 20, 2002 between ROCKY MOUNTAIN ENERGY CORPORATION and MARATHON USA CORPORATION (as amended, restated, or supplemented from time to time, the ("Credit Agreement")

Ladies and Gentlemen:

We have acted as counsel to ROCKY MOUNTAIN ENERGY CORPORATION (the "Borrower") in connection with the transactions contemplated in the Credit Agreement. This Opinion is delivered pursuant to Section 3.1(m) of the Credit Agreement, and the Lender is hereby authorized to rely upon this Opinion in connection with the transactions contemplated in the Credit Agreement. Each capitalized term used but not defined herein shall have the meaning assigned to such term in the Credit Agreement.

In our representation of the Borrower, we have examined an executed counterpart of each of the following (the 'Loan Documents):

(a) the Credit Agreement;

(b) the Note;

(c) Mortgage, Deed of Trust, Indenture, Security Agreement, Assignment of Production, and Financing Statement dated of even date herewith from the Borrower in favor of the Lender (the "Mortgage"); and

(d) Financing Statements from the Borrower, as debtor, constituent to the Mortgage (the "Financing Statement").

We have also examined the originals, or copies certified to our satisfaction, of such other records of the Borrower, certificates of public officials and officers of the Borrower agreements, instruments, and documents as we have deemed necessary as a basis for the opinions hereinafter expressed.

In making such examinations, we have, with your permission, assumed:

(a) the genuineness of all signatures to the Loan Documents other than those of the Borrower;

(b) the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies;

(c) the Lender is authorized and has the power to enter into and perform its obligations under the Credit Agreement;

(d) the due authorization, execution, and delivery of all Loan Documents by each party thereto other than the Borrower; and

(e) the Borrower has title to all Property covered or affected by the Mortgage.

Based upon the foregoing and subject to the qualifications set forth herein, we are of the opinion that:

1. The Borrower is a corporation duly organized, legally existing, and in good standing under the laws of its state of incorporation and is duly qualified as a foreign corporation and is in good standing in all jurisdictions wherein the ownership of its Property or the operation of its business necessitates same.

2. The execution and delivery by the Borrower of the Credit Agreement and the borrowings there under, the execution and delivery by the Borrower of the other Loan Documents to which the Borrower is a party, and the payment and performance of all Obligations of the Borrower there under are within the power of the Borrower, have been duly authorized by all necessary corporate action, and do not (a) require the consent of any Governmental Authority, (b) contravene or conflict with any Requirement of Law, (c) to our knowledge after due inquiry, contravene or conflict with any indenture, instrument, or other agreement to which the Borrower is a party or by which any Property of the Borrower may be presently bound or encumbered, or (d) result in or require the creation or imposition of any Lien upon any Property of the Borrower other than as contemplated by the Loan Documents.

3. The Loan Documents to which the Borrower is a party constitute legal, valid, and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms.

4. The forms of the Mortgage and the Financing Statement and the description of the Mortgaged Property (as such term is defined in the Mortgage and so used herein) situated in the State of Texas (the 'State') satisfy all applicable Requirements of Law of the State and are legally sufficient under the laws of the State to enable the Lender to realize the practical benefits purported to be afforded by the Mortgage.

5. The Mortgage creates a valid lien upon and security interest in all Mortgaged Property situated in the State to secure the Indebtedness (as such term is defined in the Mortgage and so used herein).

6. The Mortgage and the Financing Statement are in satisfactory form for filing and recording in the offices described below.

7. The filing and/or recording, as the case may be, of (a) the Mortgage in the office of the county clerk of each county in the State in which any portion of the Mortgaged Property is located, and as a financing statement and utility security instrument in the office of the Secretary of State of the State, and (b) the Financing Statement in the Uniform Commercial Code records in each county in the State in which any portion of the Mortgaged Property is located arc the only recordings or filings in the State necessary to perfect the liens and security interests in the Mortgaged Property created by the Mortgage or to permit the Lender to enforce in the State its rights under the Mortgage. No subsequent filing, re-filing, recording, or rerecording will be required in the State in order to continue the perfection of the liens and security interests created by the Mortgage except that (a) a continuation statement must be filed with respect to the Mortgage filed as a financing statement in the office of the Secretary of State of the State and with respect to the Financing Statement in the Uniform Commercial Code records in each county in the State in which any portion of the Mortgaged Property is located, each within six months prior to the expiration of five years from the date of the relevant initial financing statement filing, (b) a subsequent continuation statement must be filed within six months prior to the expiration of each subsequent five-year period from the date of each initial financing statement filing, and (c) amendments or supplements to the Mortgage filed as a financing statement and the Financing Statement and/or additional financing statements may be required to be filed in the event of a change in the name, identity, or structure of the Borrower or in the event the financing statement filing otherwise becomes inaccurate or incomplete.

8. To our knowledge after due inquiry, except as disclosed in Exhibit V to the Credit Agreement, no litigation or other action of any nature affecting the Borrower is pending before any Governmental Authority or threatened against the Borrower. To our knowledge after due inquiry, no unusual or unduly burdensome restriction, restraint, or hazard exists by contract, Requirement of Law, or otherwise relative to the business or operations of the Borrower or the ownership and operation of any Properties of the Borrower other than such as relate generally to Persons engaged in business activities similar to those conducted by the Borrower.

9. No authorization, consent, approval, exemption, franchise, permit or license of, or filing (other than filing of Security Instruments in appropriate filing offices) with, any Governmental Authority or any other Person is required to authorize or is otherwise required in connection with the valid execution and delivery by the Borrower of the Loan Documents or any instrument contemplated thereby, or the payment performance by the Borrower of the Obligations.

10. No transaction contemplated by the Loan Documents is in violation of any regulations promulgated by the Board of Governors of the Federal Reserve System, including, without limitation, Regulations G, T, U, or X.

11. The Borrower is not, nor is the Borrower directly or indirectly controlled by or acting on behalf of any Person which is, an "investment company' or an "affiliated person" of an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

12. The Borrower is not a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended.

The opinions expressed herein are subject to the following qualifications and limitations:

A. We are licensed to practice law only in the State and other jurisdictions whose laws are not applicable to the opinions expressed herein; accordingly, the foregoing opinions are limited solely to the laws of the State, applicable United States federal law, and the corporation laws of the State of Texas.

B. The validity, binding effect, and enforceability of the Loan Documents may be limited or affected by bankruptcy, insolvency, moratorium, reorganization, or other similar lawsaffecting rights of creditors generally, including, without limitation, statutes or rules of law which limit the effect of waivers of rights by a debtor or grantor; provided, however, that the limitations and other effects of such statutes or rules of law upon the validity and binding effect of the Loan Documents should not differ materially from the limitations and other effects of such statutes or rules of law upon the validity and binding effect of credit agreements, promissory notes, and security instruments generally.

C. The enforceability of the respective obligations of the Borrower under the Loan Documents is subject to general principles of equity (whether such enforceability is considered in a suit in equity or at law).

This Opinion is furnished by us solely for the benefit of the Lender in connection with the transactions contemplated by the Loan Documents and is not to be quoted in whole or in part or otherwise referred to or disclosed in any other transaction.

Very truly yours,

Note: Mr. John Ehrman may sign this document as Counsel for Rocky Mountain Energy as he is an attorney licensed to practice in Texas.

EXHIBIT V

DISCLOSURES

Section 4.8 Liabilities

None

Litigation

None

Section 4.12 Environmental Matters

None

Section 4.17 Refunds

None

Section 4.18 Gas Contracts

None

Section 4.20 Casualties

None

Section 4.22 Subsidiaries

None

EX-99

EXHIBIT 99.2

PURCHASE AND SALES AGREEMENT

THIS AGREEMENT, dated as of June 1, 2002, is between BC&D Oil and Gas Corporation ("Seller"), with offices at 2225 NW County road, Hobbs, NM 88240 and Rocky Mountain Energy Corporation ("Buyer") with offices at 333 North Sam Houston Parkway East, Suite 910, Houston, Texas 77060.

Subject to the terms and conditions of this Purchase and Sales Agreement, Seller desires to sell, assign, transfer and convey to Buyer and Buyer desires to purchase from Seller all of Seller's right, title and interest in, to and under or derived from the oil and gas leases, oil, gas and mineral leases and other interests therein referred to in Exhibit "A", attached hereto and made a part hereof for all purposes, insofar and only insofar as said Leases apply to the lands, depths, formations, wellbore rights and/or other rights specified on Exhibit "A" together with identical interests in and to all property and rights incident thereto, including without limitation, all materials, equipment, personal property and fixtures located thereon or used in connection therewith (the "Equipment") as listed on Exhibit "B" and all of Seller's rights in, to and under all agreements, leases, permits, rights-of-way, easements, licenses, options and orders in any way relating thereto as of 7:00 A.M. local time, June 1, 2002 (the "Effective Time"), all of the foregoing properties, rights and interests being hereinafter sometimes called the "Interests".

THEREFORE, In consideration of the above recitals and of the covenants and agreements herein contained, Seller and Buyer agree as follows:

1. SALE AND PURCHASE: Subject to and upon all of the terms and conditions hereinafter set forth, Seller shall sell, transfer, assign, convey and deliver unto Buyer all of Seller's right, title and interest in and to the Interests, and Buyer shall purchase, receive, pay for and accept the Interests from Seller, as of the Effective Time.

2. SALE PRICE: The sale price for the Interests shall be the approximate amount of Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000), subject only to any applicable price adjustment as provided for herein below. At Closing Buyer shall pay and deliver to Seller the total sale price after any applicable price adjustment as provided for herein below as follow, to wit:

(a) The Buyer shall deliver the sum of Two Million Five Hundred and No/100 Dollars ($2,500,000) in cash,

(b) An amount of shares of the common stock of Buyer which will equal the sum of Two Million and No/100 Dollars ($2,000,000) based upon the closing price of such stock at June 10, 2002. These shares shall be Regulation 144 shares but will be subject to "piggy-back' registration rights. Further, an agreement to file a "fairness hearing" under ss701 shall be made to free the shares.

(c) Seller and Buyer agree to the additional contingent payments as calculated in Exhibit "C" to be earned by Seller. The payment shall be made on a basis of production levels achieved and is additional consideration for the purchase of the assets if the assets perform as anticipated.

(d) The Purchase Price shall be adjusted as follows (to the extent such items are known or can be reasonably estimated at Closing), and the resulting amount (the "Closing Amount") shall be paid to Seller.

(i) The Purchase Price shall be decreased by the following amounts:

x. The amount of revenues actually received by Seller for oil, gas, condensate, natural gas liquids and other petroleum product sales attributable to production from the Subject Properties from and after the Effective Date (it being agreed that all oil which was produced from the Subject Properties prior to the Effective Date and which was, on the Effective Date, stored in tanks located on the Subject Lease, or located elsewhere but used by Seller to store oil produced from the Subject Properties prior to delivery to oil Buyer, and above pipeline connections shall be deemed to have been produced before the Effective Date);

(ii) The Purchase Price shall be increased by the following amounts:

x. The amount of all reasonable costs and expenses incurred and paid by Seller in connection with the ownership or operation of the Assets and attributable to the period from and after the Effective Date, including without limitation any lease operating expenses and customary and reasonable overhead charges;

y. An amount equal to all prepaid expenses attributable to the Assets paid by Seller and attributable to the period from and after the Effective Date, including without limitation prepaid ad valorem, property, production and other taxes and payments for insurance coverage accruing to the benefit of Buyer subsequent to the Effective Date.

3. INFORMATION AND ACCESS: Seller shall make a good-faith effort to give Buyer and Buyer's authorized representatives, at any reasonable time(s) before Closing, (i) physical access to the wells and other Equipment included in the Interests, at Buyer's sole risk, cost and expense, for the purpose of inspecting the same, conducting witnessed tests of production from the wells, and (ii) access to all production, engineering and other technical data and records, and to all contract, land and lease records, to the extent such data and records are in Seller's possession and relate to the Interests; provided, however, Seller shall have no obligation to provide Buyer such access to any data or information which Seller considers proprietary or confidential to it or which access Seller cannot legally provide Buyer because of third-party restrictions on Seller.

4. TITLE DEFECTS: For the purpose of this Agreement, a "Title Defect" shall mean a material deficiency in one (or more) of the following respects, to-wit:

(a) Seller's title at the Effective Time, as to one or more properties, is subject to an outstanding mortgage, deed of trust, lien or encumbrance or other adverse claim which would induce a pipeline Buyer to suspend payment of proceeds as to Seller's interest or require the furnishing of security or indemnity. Evidence that Seller is currently receiving its full share of proceeds from a pipeline Buyer or third-party operator (not under a 100% or other division order requiring Seller to further distribute proceeds to third parties) for the Interests shall be considered a presumption that no defect exists with respect to this interest;

(b) Seller owns less than the net revenue interest described on Exhibit "A" or more than the working interest described on Exhibit "A" without a corresponding increase in net revenue interest;

(c) Seller's rights and interests are subject to being reduced by virtue of the exercise by a third party of reversionary, back-in or other similar right not reflected on Exhibit "A"; and,

(d) Seller Is In default under some material provision of a lease, farmout agreement or agreement affecting the Interests.

5. SALE PRICE ADJUSTMENTS: Buyer may, by delivery of written notice to Seller of the existence of a Title Defect, request reduction of the sale price for the property affected. Seller may request an increase in the sale price of a property by delivery to Buyer of written notice that the net revenue interest actually owned by Seller therein is greater than that shown on Exhibit "A".

Any such notice by Buyer or Seller shall include appropriate evidence to substantiate its position and shall be delivered to the other party on or before twenty (20) days after closing. In the event any such notice is not timely delivered, the claimant shall thereafter have no right to claim a Title Defect or different revenue interest.

Upon timely delivery of a notice either by Buyer of a Title Defect or by Seller of an increase or decrease in net revenue interest, Buyer and Seller shall meet and use their best efforts to agree on the validity of the claim and the amount of any required price adjustment based on the following formula:

(i) If both the Working Interest and the Net Revenue Interest for any property are incorrectly stated on Exhibit "A", but the ratio of Net Revenue Interest to Working Interest is correctly stated, then the adjustment to the Purchase Price shall be the product of the value listed on Exhibit "A" multiplied by a fraction, the numerator of which is the Net Revenue Interest increase or decrease and the denominator of which is the Net Revenue Interest listed on Exhibit "A".

(ii) If either the Working Interest or the Net Revenue Interest for any property is incorrectly stated on Exhibit "A" and the ratio of Net Revenue Interest to Working Interest is incorrectly stated, then the Purchase Price shall be adjusted as follows: Buyer shall recalculate the value of the property affected using precisely the same economic model, formula and assumptions used by it in calculating its values shown on Exhibit "A" but inserting the correct Working Interest and Net Revenue Interest percentage for the incorrect percentages. The difference between the recalculated value and the value shown on Exhibit "A" shall be the dollar value of the adjustment to the Purchase Price.

The additional payment due conditioned upon production increases per section 2(c) shall be considered an upward adjustment to the purchase price as and if earned.

6. SELLER REPRESENTATIONS AND WARRANTIES: Seller represents and warrants to that as of the Effective Date and the date Seller executes this Agreement that to the best of Seller's knowledge:

(a) Is duly qualified to carry on its business in the state where the Interests are located, and has all the requisite power and authority to enter into and perform this Agreement.

(b) It has taken all necessary actions pursuant to Its Articles of Incorporation, By-laws and other governing documents to fully authorize it to consummate the transaction contemplated by this Agreement.

(c) This Agreement and the consummation of the transactions contemplated by this Agreement will not violate, constitute a default under, or be in conflict with (i) any provision of Seller's Articles of Incorporation or Bylaws, (ii) any material contract, agreement or instrument to which Seller is a party or by which Seller is bound or, (iii) any judgment, decree, order, statute, rule, permit or regulation applicable to Seller or the Assets.

(d) The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered on behalf of Seller and at Closing all documents and instruments required hereunder to be executed and delivered by Seller shall have been duly executed and delivered. This Agreement and such documents and instruments will constitute legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, subject, however, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors, and to general principles of equity.

(e) SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, REGARDING THE SUBJECT PROPERTIES, FIXTURES, FACILITIES, EQUIPMENT, IMPROVEMENTS, MATERIALS AND OTHER PERSONAL PROPERTY LOCATED ON OR INCLUDED IN THE ASSETS, AND THE SAME ARE TO BE SOLD ON AN "AS IS, WHERE IS" BASIS AND CONDITION.

(f) To the best of Seller's knowledge, all ad valorem, property and similar taxes and assessments based on or measured by the ownership of the Assets or the production of hydrocarbons or the receipt of proceeds there from on account of the Assets for all years prior to 2001 have been properly paid.

(g) To the best of Seller's knowledge , there are no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or to the best of Seller's knowledge threatened against Seller.

(h) Except as expressly set forth in attached Schedule "B", no suit, action or other proceeding (including, without limitation, tax, environmental or development demands proceedings) is pending, or to the best of Seller's knowledge threatened, which might result in impairment or loss of title to any of the Assets or the value thereof. Seller shall promptly notify Buyer of any such proceeding which may arise or be threatened prior to Closing hereunder.

(i) To the best of Seller's knowledge, there exists no adverse claim or claimed default (or any event which, with the giving of notice or the passage of time, or both, would constitute a default) under (i) any of the Subject Agreements or (ii) any order, writ, injunction or decree of any court, commission or administrative agency affecting any of the Assets. Seller shall promptly notify Buyer of any notice hereafter received by Seller of any such claim or default and the occurrence of any such event of which Seller becomes aware prior to Closing.

(j) To the best of Seller's knowledge, there are no unpaid bills or past due charges for any labor or materials incurred by or on behalf of Seller incident to the exploration, development or operation of the Assets which could be the basis for the existence or the filing of any claims against the Assets or any part thereof.

(k) To the best of Seller's knowledge, the Assets have been operated in compliance in all material respects with all valid laws, rules, regulations, ordinances and orders of governmental authorities having jurisdiction (including environmental laws) and in compliance in all material respects with all permits, approvals, contracts and agreements relating to the Assets.

(l) None of the Assets are subject to any preferential rights to purchase or restrictions on assignment that would be applicable to the transactions contemplated hereby, or which have not already expired.

(m) To the best of Seller's knowledge, there are no approvals, consents or filings required to be made or obtained to an assignment or transfer of any of the Assets.

(n) To the best of Seller's knowledge, there are no operations involving any of the Assets to which Seller has become a non-consenting party.

(o) To the best of Seller's knowledge, except as expressly set forth on Schedule "F", there are no prepayments, advance payments, take-or-pay payments or similar payments requiring the delivery of gas from the Assets without then or thereafter receiving payment at current prices.

(p) To the best of Seller's knowledge, all of the Subject Properties have been drilled and completed within the boundaries of the Subject Lease or within the limits otherwise permitted by contract, pooling or unit agreement, and by law; and all drilling and completion of the Subject Properties and all development and operations on the Subject Lease have been conducted in all material respects in compliance with all applicable laws, ordinances, rules, regulations and permits, and judgments, orders and decrees of any court or governmental body or agency, except failures which individually and in the aggregate would not have a material adverse effect on the use, value or operation of the Assets.

(q) To the best of Seller's knowledge, except as expressly set forth in Schedule "G", all proceeds from the sale of hydrocarbons produced from the Subject Properties are currently being paid to Seller and no portion of such proceeds is currently being held in suspense by any Buyer thereof or any other party by whom proceeds are paid except for immaterial amounts.

(r) On the Closing Date, no mortgage lien, security interest or similar lien created by Seller will exist with respect to the Assets.

(s) To the best of Seller's knowledge, the Subject Lease is burdened by no royalty, overriding royalty interests, production payments or other burdens on production in excess of those shown on Exhibit A. Otherwise, the Assignment shall be made without warranty of title, either express or implied, except for acts by, through and under Seller, and shall be subject to all validly existing burdens on production which pertain to the Subject Lease.

(t) SELLER DOES NOT WARRANT, EITHER EXPRESSLY OR IMPLIEDLY, THE RESERVOIR PERFORMANCE OR THE MERCHANTABILITY, SUITABILITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE OF ANY OF THE AFORESAID LEASEHOLD EQUIPMENT, MATERIAL OR PERSONAL PROPERTY, ANY SUCH WARRANTY BEING EXPRESSLY DENIED. BUYER, BY ACCEPTANCE OF THIS AGREEMENT, HEREBY AGREES TO ACCEPT THE SAME "WHERE IS, AS IS" AND WITH ALL FAULTS OR DEFECTS, IF ANY, IN THEIR PRESENT CONDITION AND STATE OF REPAIR. BUYER EXPRESSLY WAIVES ALL OF THE EXPRESS AND IMPLIED WARRANTIES PROVIDED BY NEW MEXICO LAW, INCLUDING PARTICULARLY (BUT NOT LIMITED TO) (1) THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (2) THE WARRANTY AGAINST REDHIBITORY VICES AND (3) ANY RIGHT TO CLAIM RESCISSION OR REDUCTION IN THE PURCHASE PRICE ON ACCOUNT OF ANY DEFECT OR CONDITION OF THE AFORESAID LEASEHOLD EQUIPMENT, MATERIAL OR PERSONAL PROPERTY WHICH MAY NOW OR HEREAFTER EXIST, WHETHER KNOWN OR UNKNOWN ON THIS DATE.

7. Buyer's Representations AND WARRANTIES

Buyer represents and warrants to and with Seller that:

(a) Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada and Buyer is duly qualified to carry on its business in the state in which the Assets lie.

(b) Buyer has all requisite power and authority to carry on its business as presently conducted; to enter into this Agreement; to purchase the Assets on the terms described in this Agreement and to perform its obligations hereunder.

(c) This Agreement and the consummation of the transactions contemplated by this Agreement will not violate, constitute a default under, or be in conflict with, (i) any provision of Buyer's Articles of Incorporation or Bylaws, (ii) any material contract, agreement or instrument to which Buyer is a party or by which Buyer is bound, or (iii) any judgment, decree, order, statute, rule or regulation applicable to Buyer.

(d) The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered on behalf of Buyer and at Closing all documents and instruments required hereunder to be executed and delivered by Buyer shall have been duly executed and delivered. This Agreement and such documents and instruments will constitute legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms, subject, however, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors, and to general principles of equity.

(e) Buyer is now, and hereafter shall continue to be, qualified to own State oil, gas and mineral leases in the State of New Mexico and with all other applicable regulatory bodies.

(f) Buyer is acquiring the Assets for Buyer's own account or investment, and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933, and shall not resell any or all of the Assets except in compliance with all applicable securities laws.

8. Obligations of Seller and Buyer

(a) For purposes of determining adjustments to the Purchase Price under Article 1(d) hereof, Buyer agrees to accept the gas sales and oil and condensate sales meter readings taken in good faith by Seller as of 7:00 o'clock A.M. on the Effective Date hereof.

(b) At the Closing, Buyer shall expressly assume and agree to be bound by the Contracts insofar as they relate to periods of time from and after the Effective Date and will protect, indemnify and hold Seller harmless from and against any claims or demands arising out of the failure of Buyer to do so.

(c) Except as provided for in Articles 8(d), and 9, Seller shall retain all risk and liability of whatsoever nature connected with operations conducted on the Assets prior to the Closing Date and agrees to protect, indemnify, defend and hold Buyer free and harmless from all liabilities, penalties, claims, causes of action, demands, lawsuits and expenses associated with the operations prior to the Closing Date. Buyer shall assume all risk and liability of whatsoever nature connected with operations conducted on the Assets from and after the Closing Date, and agrees to protect, indemnify, defend and hold Seller free and harmless from all liabilities, penalties, claims, causes of action, demands, lawsuits and expenses associated with the Contracts and the operations from and after the Closing Date.

(d) Except as provided for in Article 6 and 9(b) hereof, Buyer assumes full responsibility for, and agrees to protect, indemnify, defend and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless from and against all loss, liability, claims, fines, expenses, costs (including attorney's fees and expenses) and causes of action caused by or arising out of any federal, state or local laws, rules, orders and regulations applicable to any waste material or hazardous substances on or included with the Assets or the presence, disposal, release or threatened release of all waste material or hazardous substance from the Assets into the atmosphere or into or upon land or any water course or body of water, including ground water (collectively, "Environmental Liabilities"), whether or not attributable to Seller's activities or the activities of Seller's agents, directors, officers, shareholders and employees, or to the activities of third parties (regardless of whether or not Seller was or is aware of such activities) prior to, during or after the period of Seller's ownership of the Assets. This indemnification and assumption shall apply to liability for voluntary environmental response actions undertaken pursuant either to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.A. ss 9601, et seq.), as from time to time amended or revised, or to any other federal, state or local law.

(e) Buyer agrees to comply with all laws and governmental regulations with respect to abandonment of wells and/or abandonment of the leasehold property including, where applicable, the plugging of wells, the compliance with law or rules regarding inactive or unplugged wells, including bonding requirements and restoration as specified in the Subject Lease. Buyer agrees to protect, defend, indemnify and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless from and against any and all costs, expenses, claims, demands and causes of action of every kind and character arising out of, incident to, or in connection with the abandonment of wells and/or abandonment of and proper disposition of any leasehold property, including, without limitation, the leases, any structures, materials, land, wells, casing, leasehold equipment and other personal property, plugging requirements or exceptions thereto, including bonding requirements, regardless of whether the liability therefore is based upon some alleged act or omission of Seller, or of the Buyer, or of some other party.

(f) All accounts payable and other costs and expenses with respect to the Seller's interest in the Assets which relate to the period prior to the Effective Date shall be the obligation of and be paid by Seller and those which relate to the period commencing with the Effective Date shall be the obligation of and be paid by Buyer.

(g) All prepaid utility charges applicable to periods following the Effective Date relating to the Assets shall be prorated as of the Effective Date.

(h) Seller shall maintain responsibility and liability for the management, administration and disbursement of suspended funds (including interest accrued thereon, if any) attributable to the interests of third parties and accrued by Seller, for any reason, pursuant to Seller's disbursement of proceeds from the sale of production from the property or the Subject Lease and/or units of which the Assets are a part, to the extent such funds are attributable to production sold prior to the Closing Date (collectively the "Suspended Funds").

Seller shall provide Buyer a listing of all Suspended Funds, setting forth the name, address and tax identification number (if known), of each interest owner, the decimal of interest suspended, the amount suspended for each interest owner, the reason the funds are in suspense, the date the interest was first suspended and the actions, if any, taken by Seller with respect to such funds. Seller shall deliver to Buyer, as soon after the Closing Date as practicable, a copy of Seller's records and files that apply to or are related to the Suspended Funds transferred or assigned to Buyer.

(i) If monies are received by either party hereto which, under the terms of this Article, belong to the other party, the same shall immediately be paid over to the proper party. If an invoice or other evidence of an obligation is received which is applicable to periods both prior to and after the Effective Date and is, thus, under the terms of the preceding paragraphs, partially the obligation of Seller and partially the obligation of Buyer, then the parties shall consult with each other and each shall promptly pay its portion of such obligation to the obligee.

(j) Seller will pay all ad valorem, property taxes and other taxes assessed on, based on, or attributable to production and other equipment that occurred prior to the Effective Date. Buyer will pay all taxes assessed on, based on, or attributable to production that occurred after the Effective Date. It is agreed that whichever party receives said tax statements shall pay such taxes prior to delinquency and the other party hereto agrees to reimburse the paying party its pro rata share thereof promptly upon receipt of an invoice accompanied by evidence of such payment. It is further agreed that, should Seller pay the taxes, then Buyer also shall reimburse Seller for any portion of the aforementioned taxes that are assessable against other working interest and non-working interest owners and Buyer shall recoup from them accordingly. Buyer shall pay all applicable state, parish, municipality or government sales or use taxes on the leasehold, equipment, material or personal property located thereon for periods subsequent to the Effective Date.

(k) Seller and Buyer shall each bear their own costs and expenses, including, but not limited to, attorney's fees incurred in connection with the transactions contemplated in this Agreement.

(l) The sale of the Assets shall be subject to, and Buyer shall assume, pay for and perform, the duties, liabilities and obligations relating to the Assets, including, but not limited to, all applicable and validly recorded and unrecorded agreements, contracts and instruments (including, but not limited to, royalties, overriding royalty interests, production payments, net profits interest, carried working interest or similar burdens), from and after the Effective Date.

9. Environmental Conditions

(a) The Assets which have been identified herein and are the subject of this Agreement have been utilized by Seller and its predecessors-in-title for the purpose of exploration, development and production of oil and gas. Information, to the best of Seller's knowledge, regarding any substantial quantity of crude oil and produced water which may have been spilled or disposed of onsite and the locations thereof, including pit closures, burial, land farming, land spreading and underground injection, will be made available to Buyer as soon as practicable after the execution of this Agreement, but in no event less than thirty (30) days after the Closing Date. Buyer acknowledges that there may have been spills of these materials in the past onto the Assets described herein. In addition, some oil field production equipment may contain asbestos and/or Naturally Occurring Radioactive Material ("NORM"). In this regard, Buyer expressly understands that NORM may affix or attach itself to the inside of wells, materials and equipment as scale, or in other forms, and that said wells, material and equipment located on the property described herein may contain NORM and that NORM-containing material may be buried or otherwise disposed of on the Assets. Buyer also expressly understands that special procedures may be required for the removal and disposal of asbestos and NORM from the equipment and Assets where it may be found and Buyer agrees to assume all liability for such asbestos and NORM and for use of appropriate procedures and activities required to handle and dispose of same.

(b) Promptly after execution of this Agreement by both parties, Buyer shall have the right, at its own cost, risk and expense, to conduct or have conducted an environmental assessment of the Assets. Seller will provide Buyer (or its contractor) as may be requested with reasonable access to the Assets operated by Seller in order to conduct the environmental assessment. Buyer shall release, protect, indemnify, defend and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless against any liability or damage to persons or property arising out of such environmental assessment. Such indemnity shall also apply regardless of whether the liability or damage arises in whole or in part from the negligence of Seller. Buyer shall advise Seller of any material adverse environmental conditions of the Assets which it finds unacceptable ("Unacceptable Environmental Conditions") and provide evidence thereof on or before Closing. For the purpose of this paragraph, such conditions shall be "material" only if they will cost in excess of $250,000 to cure or remedy, and were not specifically disclosed on or before the execution of this Agreement. Within thirty (30) days after receipt of such notice, Seller may either (1) remedy or agree to remedy such Unacceptable Environmental Conditions within a period of time not to exceed 90 days following the receipt of Unacceptable Environmental Conditions Notice; (2) negotiate with Buyer in a good faith effort to agree upon an adjustment to the Purchase Price which adjustment shall reflect Buyer's cost to remedy such conditions ("Buyer's Remediation Costs").

SUBJECT TO THE FOREGOING AND EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, BUYER UNDERSTANDS AND AGREES THAT THIS SALE IS MADE ON AN "WHERE IS, AS IS" BASIS AND BUYER RELEASES SELLER FROM ANY LIABILITY WITH RESPECT THERETO WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE TO SELLER'S NEGLIGENCE EXCEPT AS OTHERWISE EXPRESSLY AGREED UPON IN WRITING BY SELLER AS PROVIDED HEREIN.

(c) From and after the Closing Date, Buyer shall dispose of or discharge any waste from the Assets (including, but not limited to, produced water, drilling fluids and other associated wastes) in accordance with applicable federal, state or local regulations. When and if any lease, an interest in which has been conveyed and assigned hereunder, is terminated, Buyer shall take at its sole expense whatever remedial action on the Assets is necessary to meet any federal, state or local requirements directed at protecting human health and the environment in effect at that time.

(d) Except as provided for in Article 9(b) hereof, Buyer, its successors and assigns, hereby agree to protect, indemnify, defend and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless from and against all claims, demands and causes of action, including any civil fines, penalties, costs of clean-up or plugging liabilities for any and all wells, brought by any and all persons, including (without limitation) Buyer's agents, directors, officers, shareholders and employees and also including (without limitation) any private citizens, persons, organizations and any agency, branch or representative of federal, state or local government, on account of any personal injury or death or damage, destruction or loss of property, contamination of natural resources (including soil, surface water or ground water) resulting from or arising out of any liability caused by or connected with the presence, disposal or release of any material of any kind, including, without limitation, asbestos and/or NORM, in, under or on the Assets at the time the Assets are conveyed and assigned to Buyer, or thereafter caused by acts of Buyer, its agents, directors, officers, shareholders and employees, with regard to its use of the described Assets subsequent to the conveyance and assignment of the described Assets pursuant to this Agreement without regard to whether such liability, injury, death, damage, destruction, loss or contamination is caused in whole or in part by any claimed negligence, active or passive, on the part of Seller or other indemnified party. This indemnification shall be in addition to any other indemnity provisions contained in this Agreement.

10. CONDITIONS OF CLOSING BY BUYER: The obligation of Buyer to close is subject to the satisfaction of the following conditions:

(a) Buyer shall have had reasonable access during normal business hours to all data and records obligated to be provided Buyer in Section 3 hereof.

(b) That all representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects at and as of Closing as if such representations and warranties were made at and as of Closing;

(c) Buyer shall have received Seller's assurance that (i) the consummation of the transaction contemplated hereby will not violate the provisions of Seller's corporate charter and by-laws or any agreement, instrument, order, judgment or law by which it is bound, and (ii) all title documents delivered hereunder are validly executed on behalf of Seller.

(d) Seller shall have obtained and delivered to Buyer (i) all prerequisite waivers of preferential rights of purchase, and (ii) all necessary consents for transfer of the Interests, except those which by their nature cannot be requested or obtained until after Closing, or Buyer and Seller shall have adjusted the sale price in accordance with the provisions of Section 2 and 5.

(e) That all representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects at and as of Closing as if such representations and warranties were made at and as of Closing;

(f) Seller shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by Buyer at or prior to Closing; and

(g) at the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

(h) Since the date of this Agreement, there shall have been no material adverse change in the condition of the Assets, except depreciation of personal property through ordinary wear and tear, depletion resulting from production and economic, political or legal changes affecting the oil and gas industry in general; provided, however, that no change in the conditions of the Assets shall be deemed material unless the aggregate value thereof exceeds five (5%) of the Purchase Price

11. CONDITIONS OF CLOSING BY SELLER: The obligation of Seller to close is subject to:

(a) Seller receiving evidence satisfactory to Seller that Buyer has all requisite corporate, partnership or other power and authority to purchase the Interests on the terms described in this Agreement and to perform its other obligations hereunder and that all corporate, partnership and/or other prerequisites of whatsoever nature have been fulfilled.

(a) That Seller shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by Seller at or prior to Closing;

(b) At the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

12. CLOSING: The Closing shall be held on or before Friday, June 28, 2002, at 10:00 A.M., at the offices of Seller or at such other place as Seller and Buyer may mutually agree in writing. At Closing the following will occur:

(a) Seller and Buyer shall execute, acknowledge and deliver an Assignment and Bill of Sale substantially in the form of Exhibit "D" attached hereto.

(b) Buyer shall deliver to Seller by either wire transfer or certified funds the remaining balance of the total sale price as adjusted hereunder, subject to further adjustment after Closing as provided for herein, and shall cause to be delivered to Seller a certificate representing the shares of Buyer required to be transferred to Seller pursuant to Article 2(b) above.

(c) Seller and Buyer shall execute any necessary forms required by governmental agencies for the transfer of the Interests and Buyer shall file same immediately following Closing.

(d) Seller shall (subject to the terms of any applicable agreements and to the other provisions hereof) deliver to Buyer exclusive possession of the Interests, effective as of the Effective Time.

(e) All books, records and files in the possession of Seller pertaining to the Interests, including, without limitation, all well files, correspondence, geological and engineering information, shall be made available for delivery to Buyer at Seller's offices where currently maintained, within five (5) days after the Closing. Seller shall have the right to retain copies of any or all of such books, records and files and to retain canceled checks and general ledger, purchasing and other general accounting records of Seller. Seller reserves the right to later examine the records and information delivered to Buyer pursuant to this paragraph (e) to the extent such examination is necessary for any relevant business purpose. All information and data shall be furnished as a matter of convenience only to Buyer and Buyer's reliance on same shall be at Buyer's sole risk.

13. RESERVATIONS AND EXCEPTIONS: Sale and purchase of the Interests is made subject to all reservations, exceptions, limitations, contracts and other burdens or instruments which are of record or of which Buyer has actual or constructive notice, including any matter included or referenced in the materials made available by Seller to Buyer.

14. CLOSING ADJUSTMENTS: All ad valorem taxes, real property taxes and similar obligations ("Property Taxes") for the year 2002 shall be prorated and paid by Seller (5/12) and Buyer (7/12).

All proceeds (including proceeds held in suspense or escrow) from the sale of production actually sold and delivered by Seller prior to the Effective Time and attributable to the Interests shall belong to Seller and all proceeds from the sale of production actually sold and delivered after the Effective Time attributable to the Interests shall belong to Buyer. In addition, all oil, condensate or liquid hydrocarbons (hereinafter in this paragraph called "oil") in storage above the pipeline connection shall be gauged and all gas meter charts shall be replaced at the Effective Time. Buyer shall pay Seller for such oil at the highest posted field price prevailing at the Effective Time for oil of like grade and gravity for the particular field.

Except as otherwise specifically provided in this Agreement, all costs, expenses and obligations relating to the Interests which accrue prior to the Effective Time shall be paid and discharged by Seller; and all costs, expenses and obligations relating to the Interests which accrue after the Effective Time shall be paid and discharged by Buyer.

15. POST CLOSING ACCOUNTING:

(a) As soon as practicable after the Closing, Seller shall prepare and deliver to Buyer, in accordance with this Agreement and generally accepted accounting principles, a statement (the "Intermediate Settlement Statement") setting forth each adjustment or payment that was not finally determined as of the Closing and showing the calculation of such adjustments to the sale price including adjustments related to title defects of Article 5, Buyer Remediation costs of Articles 9(b). As soon as practicable after receipt of the Intermediate Settlement Statement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes be made to the Intermediate Settlement Statement. The parties undertake to agree with respect to the Intermediate Settlement Statement no later than 180 days after closing, such agreement constituting and to be embodied in the "Final Settlement Statement" and to establish the "Final Sale Price", and the date upon which the Final Sale Price is established to be the "Final Settlement Date'. However, the "Final Sale Price" shall not include any additional consideration which may be earned upon performance level of the assets reaching stated targets per Exhibit "C", until such time as they are achieved or agreement is reached that they shall not be achieved. Such additional payments are considered additional consideration for the purchase of these assets. In the event Buyer and Seller are unable to mutually agree upon the amount of the Final Settlement Statement, an audit shall be conducted by a mutually agreed upon accounting firm. Buyer and Seller agree to be bound by the findings of such audit, insofar as the Final Settlement Statement amount is concerned, and each shall bear one half of all expenses associated with such audit. In the event that (i) the Final Sale Price is more than the amount paid at Closing, Buyer shall pay to Seller the amount of such difference, or (ii) the Final Sale Price is less than the amount paid at Closing, Seller shall pay Buyer in immediately available funds the amount of such difference within 10 days of noticification. Seller shall be responsible for the settlement of all joint billing audits which relate to accounting periods prior to the Effective Time. Buyer shall be responsible for the settlement of all joint billing audits which relate to accounting periods after the Effective Time. Any credits received by Buyer after the Effective Time Attributable to expenses paid prior to the Effective Time shall be promptly reimbursed to Seller by Buyer.

(b) Any additional consideration earned pursuant to 2(c) connected with production levels achieved shall be considered an upward post closing adjustment regardless of when earned.

16. TAXES: The sale price provided for hereunder excludes any sales taxes or other taxes in connection with the sale of property pursuant to this Agreement because the parties believe that this sale is exempt from sales tax. If a determination is ever made that a sales tax or other transfer tax applies, Buyer shall be liable for such tax as well as any applicable conveyance, transfer and recording fees, and real estate transfer stamps or taxes imposed on any transfer of property pursuant to this Agreement. Buyer shall defend and hold Seller harmless with respect to the payment of all such taxes, if any, including any interest or penalties assessed thereon.

All taxes (other than ad valorem and income taxes) which are imposed on or with respect to the production of oil, natural gas or other hydrocarbons or minerals or equipment or the receipt of proceeds therefrom (including but not limited to severance, production, excise and windfall profit taxes) shall be apportioned between the parties based upon the respective shares of production taken by the parties. Payment or withholding of all such taxes which have accrued prior to the Effective Time and filing of all statements, returns and documents pertinent thereto shall be the responsibility of Seller. Payment or withholding of all such taxes which have accrued from and after the Effective Time and the filing of all statements, returns and documents incident thereto shall be the responsibility of Buyer.

17. EMPLOYMENT CONTRACT: As additional consideration for the transfer of the Interests herein, Buyer agrees to enter into an Employment Contract with Donnie Hill. Such Employment Agreement shall be in substantially the same form as the Employment Agreement attached hereto as Exhibit "E".

18. FURTHER OPERATION OF SELLER-OPERATED INTERESTS: Seller shall, as to the Interests it now operates, continue to operate the same until the Effective Time, when such operation shall be turned over to, and become the responsibility of Buyer. In the event Closing occurs after the Effective Time, however, Seller shall, unless Buyer and Seller otherwise agree, continue the physical operation of such Interests until Closing: such operation from and after the Effective Time shall be conducted by Seller for and on behalf of Buyer; and for any such services performed by Seller from and after the Effective Time, Buyer shall pay Seller for all reasonable and necessary expenses incurred by Seller in such operation, protection or maintenance of the Interests. Such expenses may be recovered by Seller as part of the closing or post-closing adjustments, as appropriate.

In all of its operations after full execution of this Agreement, Seller shall exercise the same standard of care as an ordinary prudent operator under the same or similar circumstances and shall notify Buyer of any material adverse change in the productive capability of any well Included in the Interests.

19. BROKER'S FEE: Seller represents and warrants to Buyer that Seller has incurred no liability, contingent or otherwise, for broker's or finder's fees in respect of this Agreement or the transactions contemplated hereby for which Buyer shall have any responsibility whatsoever; and Buyer represents and warrants to Seller that Buyer has incurred no fees in respect of this Agreement or the transactions contemplated hereby for which Seller shall have any responsibility whatsoever.

20. NOTICES: All communications required or permitted under this Agreement shall be in writing and any communication or delivery hereunder shall be deemed to have been fully made if actually delivered, or if mailed by registered or certified mail, postage prepaid, to the address as set forth below:

SELLER

BC&D Oil & Gas Corporation

2225 NW County Road

Hobbs, NM 88240

Attn: Donnie Hill

BUYER

Rocky Mountain Energy Corporation

333 N. Sam Houston Parkway East, Suite 910

Houston, Texas 77060

Attn: John N. Ehrman

21. FURTHER ASSURANCE: After Closing each of the parties shall execute, acknowledge and deliver to the other such further instruments, and take such other actions as may be reasonably necessary to carry out the provisions of this Agreement. However, Buyer shall assume all responsibility for notifying the Buyer of oil and gas production from the Interests, and such other designated persons who may be responsible for disbursing payments for the purchase of such production, of the change of ownership of the Interests. Buyer shall take all actions necessary to effectuate the transfer of such payments to Buyer as of the Effective Time. Seller shall have no responsibility or liability for the proper distribution of proceeds from and after the Effective Time.

22. PRESS RELEASE: There shall be no press release or public communication concerning this purchase and sale by either party except with the written consent of the party not originating said release or communication, with the exception being those reports reasonably required by applicable state or federal law or regulations.

23. ENTIRE AGREEMENT: This Instrument states the entire agreement between the parties and may be supplemented, altered, amended, modified or revoked by writing only, signed by both parties.

24. SURVIVAL: The representations, warranties and agreements contained in this Purchase and Sales Agreement and in any certificate or other instrument delivered by or on behalf of either party pursuant to this Purchase and Sales Agreement shall survive the Closing and shall be unaffected by any investigation made by the other party.

25. HEADINGS: The headings are for guidance only and shall have no significance in the interpretations of this Agreement.

26. GOVERNING LAW: THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW MEXICO THE PARTIES AGREE THAT ANY LITIGATION RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED BY A COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF NEW MEXICO.

SELLER:

BC&D OIL AND GAS CORPORATION

By:

Donnie Hill, President

BUYER:

ROCKY MOUNTAIN ENERGY CORPORATION

By: John N. Ehrman, President

STATE OF NEW MEXICO

COUNTY OF LEA

BEFORE ME, the undersigned authority, on this day personally appeared Donnie Hill,

known to me to be the person whose name is subscribed to in the foregoing instrument, and

known to me to the President of BC&D Oil and Gas Corporation, a New Mexico corporation,

and acknowledged to me that he executed said instrument for the purposes and consideration

therein express, and as the act of said corporation.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of June 2002.

Notary Public, State of New Mexico

STATE OF TEXAS

COUNTY OF HARRIS

BEFORE ME, the undersigned authority, on this day personally appeared John N. Ehrman, known to me to be the person whose name is subscribed to in the foregoing instrument, and known to me to the President of Rocky Mountain Energy Corporation, a Nevada corporation, and acknowledged to me that he executed said instrument for the purposes and consideration therein express, and as the act of said corporation.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of June 2002.

Notary Public, State of Texas

EX-99

EXHIBIT 99.3

PURCHASE AND SALES AGREEMENT

THIS AGREEMENT, dated as of June 1, 2002, is between Regent Energy Corporation ("Seller"), with offices at 10777 Westheimer, Suite 1100, Houston, Texas 77042 and Rocky Mountain Energy Corporation ("Buyer") with offices at 333 North Sam Houston Parkway East, Suite 910, Houston, Texas 77060.

Subject to the terms and conditions of this Purchase and Sales Agreement, Seller desires to sell, assign, transfer and convey to Buyer and Buyer desires to purchase from Seller all of Seller's right, title and interest in, to and under or derived from the oil and gas leases, oil, gas and mineral leases and other interests therein referred to in Exhibit "A", attached hereto and made a part hereof for all purposes, insofar and only insofar as said Leases apply to the lands, depths, formations, wellbore rights and/or other rights specified on Exhibit "A" together with identical interests in and to all property and rights incident thereto, including without limitation, all materials, equipment, personal property and fixtures located thereon or used in connection therewith (the "Equipment") on the lease and all of Seller's rights in, to and under all agreements, leases, permits, rights-of-way, easements, licenses, options and orders in any way relating thereto as of 7:00 A.M. local time, June 1, 2002 (the "Effective Time"), all of the foregoing properties, rights and interests being hereinafter sometimes called the "Interests".

THEREFORE, In consideration of the above recitals and of the covenants and agreements herein contained, Seller and Buyer agree as follows:

1. SALE AND PURCHASE: Subject to and upon all of the terms and conditions hereinafter set forth, Seller shall sell, transfer, assign, convey and deliver unto Buyer all of Seller's right, title and interest in and to the Interests, and Buyer shall purchase, receive, pay for and accept the Interests from Seller, as of the Effective Time.

2. SALE PRICE: The sale price for the Interests shall be the approximate amount of Five Million Five Hundred Thousand and No/100 Dollars ($5,500,000), subject only to any applicable price adjustment as provided for herein below. At Closing Buyer shall pay and deliver to Seller the total sale price after any applicable price adjustment as provided for herein below as follow, to wit:

(a) The Buyer shall deliver the sum of $5,500,000 paid over at closing.

(b) The Purchase Price shall be adjusted as follows (to the extent such items are known or can be reasonably estimated at Closing), and the resulting amount (the "Closing Amount") shall be paid to Seller.

(i) The Purchase Price shall be decreased by the following amounts:

x. The amount of revenues actually received by Seller for oil, gas, condensate, natural gas liquids and other petroleum product sales attributable to production from the Subject Properties from and after the Effective Date (it being agreed that all oil which was produced from the Subject Properties prior to the Effective Date and which was, on the Effective Date, stored in tanks located on the Subject Lease, or located elsewhere but used by Seller to store oil produced from the Subject Properties prior to delivery to oil Buyer, and above pipeline connections shall be deemed to have been produced before the Effective Date);

y. Notwithstanding the above, any sums expended by Buyer in order to extinguish a debt of Seller in order to facilitate the closing shall be taken as a credit at closing by Buyer.

z. Special Consideration. At closing, seller shall settle the invoices of Jenkens & Gilchrist, attorneys at law, out of sales proceeds.

(ii) The Purchase Price shall be increased by the following amounts:

x. The amount of all reasonable costs and expenses incurred and paid by Seller in connection with the ownership or operation of the Assets and attributable to the period from and after the Effective Date, including without limitation any lease operating expenses and customary and reasonable overhead charges;

y. An amount equal to all prepaid expenses attributable to the Assets paid by Seller and attributable to the period from and after the Effective Date, including without limitation prepaid ad valorem, property, production and other taxes and payments for insurance coverage accruing to the benefit of Buyer subsequent to the Effective Date.

3. INFORMATION AND ACCESS: Seller shall make a good-faith effort to give Buyer and Buyer's authorized representatives, at any reasonable time(s) before Closing, (i) physical access to the wells and other Equipment included in the Interests, at Buyer's sole risk, cost and expense, for the purpose of inspecting the same, conducting witnessed tests of production from the wells, and (ii) access to all production, engineering and other technical data and records, and to all contract, land and lease records, to the extent such data and records are in Seller's possession and relate to the Interests; provided, however, Seller shall have no obligation to provide Buyer such access to any data or information which Seller considers proprietary or confidential to it or which access Seller cannot legally provide Buyer because of third-party restrictions on Seller.

4. TITLE DEFECTS: For the purpose of this Agreement, a "Title Defect" shall mean a material deficiency in one (or more) of the following respects, to-wit:

(a) Seller's title at the Effective Time, as to one or more properties, is subject to an outstanding mortgage, deed of trust, lien or encumbrance or other adverse claim which would induce a pipeline Buyer to suspend payment of proceeds as to Seller's interest or require the furnishing of security or indemnity. Evidence that Seller is currently receiving its full share of proceeds from a pipeline Buyer or third-party operator (not under a 100% or other division order requiring Seller to further distribute proceeds to third parties) for the Interests shall be considered a presumption that no defect exists with respect to this interest;

(b) Seller owns less than the net revenue interest described on Exhibit "A" or more than the working interest described on Exhibit "A" without a corresponding increase in net revenue interest;

(c) Seller's rights and interests are subject to being reduced by virtue of the exercise by a third party of reversionary, back-in or other similar right not reflected on Exhibit "A"; and,

(d) Seller Is In default under some material provision of a lease, farmout agreement or agreement affecting the Interests.

5. SALE PRICE ADJUSTMENTS: Buyer may, by delivery of written notice to Seller of the existence of a Title Defect, request reduction of the sale price for the property affected. Seller may request an increase in the sale price of a property by delivery to Buyer of written notice that the net revenue interest actually owned by Seller therein is greater than that shown on Exhibit "A".

Any such notice by Buyer or Seller shall include appropriate evidence to substantiate its position and shall be delivered to the other party on or before twenty (20) days after closing. In the event any such notice is not timely delivered, the claimant shall thereafter have no right to claim a Title Defect or different revenue interest.

Upon timely delivery of a notice either by Buyer of a Title Defect or by Seller of an increase or decrease in net revenue interest, Buyer and Seller shall meet and use their best efforts to agree on the validity of the claim and the amount of any required price adjustment based on the following formula:

(i) If both the Working Interest and the Net Revenue Interest for any property are incorrectly stated on Exhibit "A", but the ratio of Net Revenue Interest to Working Interest is correctly stated, then the adjustment to the Purchase Price shall be the product of the value listed on Exhibit "A" multiplied by a fraction, the numerator of which is the Net Revenue Interest increase or decrease and the denominator of which is the Net Revenue Interest listed on Exhibit "A".

(ii) If either the Working Interest or the Net Revenue Interest for any property is incorrectly stated on Exhibit "A" and the ratio of Net Revenue Interest to Working Interest is incorrectly stated, then the Purchase Price shall be adjusted as follows: Buyer shall recalculate the value of the property affected using precisely the same economic model, formula and assumptions used by it in calculating its values shown on Exhibit "A" but inserting the correct Working Interest and Net Revenue Interest percentage for the incorrect percentages. The difference between the recalculated value and the value shown on Exhibit "A" shall be the dollar value of the adjustment to the Purchase Price.

6. SELLER REPRESENTATIONS AND WARRANTIES: Seller represents and warrants to that as of the Effective Date and the date Seller executes this Agreement that to the best of Seller's knowledge:

(a) Is duly qualified to carry on its business in the state where the Interests are located, and has all the requisite power and authority to enter into and perform this Agreement.

(b) It has taken all necessary actions pursuant to Its Articles of Incorporation, By-laws and other governing documents to fully authorize it to consummate the transaction contemplated by this Agreement.

(c) This Agreement and the consummation of the transactions contemplated by this Agreement will not violate, constitute a default under, or be in conflict with (i) any provision of Seller's Articles of Incorporation or Bylaws, (ii) any material contract, agreement or instrument to which Seller is a party or by which Seller is bound or, (iii) any judgment, decree, order, statute, rule, permit or regulation applicable to Seller or the Assets.

(d) The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered on behalf of Seller and at Closing all documents and instruments required hereunder to be executed and delivered by Seller shall have been duly executed and delivered. This Agreement and such documents and instruments will constitute legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their terms, subject, however, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors, and to general principles of equity.

(e) SELLER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, REGARDING THE SUBJECT PROPERTIES, FIXTURES, FACILITIES, EQUIPMENT, IMPROVEMENTS, MATERIALS AND OTHER PERSONAL PROPERTY LOCATED ON OR INCLUDED IN THE ASSETS, AND THE SAME ARE TO BE SOLD ON AN "AS IS, WHERE IS" BASIS AND CONDITION. IT IS UNDERSTOOD BETWEEN THE PARTIES THAT SELLER HAS RECORD TITLE SUBJECT TO CLAIMS OF VARIOUS PARTICIPANTS THAT WILL BE SATISFIED OUT OF SELLER'S POSITION IN THE SALE.

(f) To the best of Seller's knowledge, all ad valorem, property and similar taxes and assessments based on or measured by the ownership of the Assets or the production of hydrocarbons or the receipt of proceeds there from on account of the Assets for all years prior to 2001 have been properly paid.

(g) To the best of Seller's knowledge, there are no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or to the best of Seller's knowledge threatened against Seller.

(h) Except as expressly set forth in attached Schedule "B", no suit, M&M lien, action or other proceeding (including, without limitation, tax, environmental or development demands proceedings) is pending, or to the best of Seller's knowledge threatened, which might result in impairment or loss of title to any of the Assets or the value thereof. Seller shall promptly notify Buyer of any such proceeding which may arise or be threatened prior to Closing hereunder.

(i) To the best of Seller's knowledge, there exists no adverse claim or claimed default (or any event which, with the giving of notice or the passage of time, or both, would constitute a default) under (i) any of the Subject Agreements or (ii) any order, writ, injunction or decree of any court, commission or administrative agency affecting any of the Assets. Seller shall promptly notify Buyer of any notice hereafter received by Seller of any such claim or default and the occurrence of any such event of which Seller becomes aware prior to Closing.

(j) To the best of Seller's knowledge, there are no unpaid bills or past due charges for any labor or materials incurred by or on behalf of Seller incident to the exploration, development or operation of the Assets which could be the basis for the existence or the filing of any claims against the Assets or any part thereof, other than as set forth in Exhibit B and Exhibit B-1.

(k) To the best of Seller's knowledge, the Assets have been operated in compliance in all material respects with all valid laws, rules, regulations, ordinances and orders of governmental authorities having jurisdiction (including environmental laws) and in compliance in all material respects with all permits, approvals, contracts and agreements relating to the Assets.

(l) None of the Assets are subject to any preferential rights to purchase or restrictions on assignment that would be applicable to the transactions contemplated hereby, or which have not already expired.

(m) To the best of Seller's knowledge, there are no approvals, consents or filings required to be made or obtained to an assignment or transfer of any of the Assets.

(n) To the best of Seller's knowledge, there are no operations involving any of the Assets to which Seller has become a non-consenting party.

(o) To the best of Seller's knowledge, except as expressly set forth on Schedule "F", there are no prepayments, advance payments, take-or-pay payments or similar payments requiring the delivery of gas from the Assets without then or thereafter receiving payment at current prices.

(p) To the best of Seller's knowledge, all of the Subject Properties have been drilled and completed within the boundaries of the Subject Lease or within the limits otherwise permitted by contract, pooling or unit agreement, and by law; and all drilling and completion of the Subject Properties and all development and operations on the Subject Lease have been conducted in all material respects in compliance with all applicable laws, ordinances, rules, regulations and permits, and judgments, orders and decrees of any court or governmental body or agency, except failures which individually and in the aggregate would not have a material adverse effect on the use, value or operation of the Assets.

(q) To the best of Seller's knowledge, except as expressly set forth in Schedule "G", all proceeds from the sale of hydrocarbons produced from the Subject Properties are currently being paid to Seller and no portion of such proceeds is currently being held in suspense by any Buyer thereof or any other party by whom proceeds are paid except for immaterial amounts.

(r) On the Closing Date, no mortgage lien, security interest or similar lien created by Seller will exist with respect to the Assets.

(s) To the best of Seller's knowledge, the Subject Lease is burdened by no royalty, overriding royalty interests, production payments or other burdens on production in excess of those shown on Exhibit A. Otherwise, the Assignment shall be made without warranty of title, either express or implied, except for acts by, through and under Seller, and shall be subject to all validly existing burdens on production which pertain to the Subject Lease.

(t) SELLER DOES NOT WARRANT, EITHER EXPRESSLY OR IMPLIEDLY, THE RESERVOIR PERFORMANCE OR THE MERCHANTABILITY, SUITABILITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE OF ANY OF THE AFORESAID LEASEHOLD EQUIPMENT, MATERIAL OR PERSONAL PROPERTY, ANY SUCH WARRANTY BEING EXPRESSLY DENIED. BUYER, BY ACCEPTANCE OF THIS AGREEMENT, HEREBY AGREES TO ACCEPT THE SAME "WHERE IS, AS IS" AND WITH ALL FAULTS OR DEFECTS, IF ANY, IN THEIR PRESENT CONDITION AND STATE OF REPAIR. BUYER EXPRESSLY WAIVES ALL OF THE EXPRESS AND IMPLIED WARRANTIES PROVIDED BY NEW MEXICO LAW, INCLUDING PARTICULARLY (BUT NOT LIMITED TO) (1) THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (2) THE WARRANTY AGAINST REDHIBITORY VICES AND (3) ANY RIGHT TO CLAIM RESCISSION OR REDUCTION IN THE PURCHASE PRICE ON ACCOUNT OF ANY DEFECT OR CONDITION OF THE AFORESAID LEASEHOLD EQUIPMENT, MATERIAL OR PERSONAL PROPERTY WHICH MAY NOW OR HEREAFTER EXIST, WHETHER KNOWN OR UNKNOWN ON THIS DATE.

7. Buyer's Representations AND WARRANTIES

Buyer represents and warrants to and with Seller that:

(a) Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada and Buyer is duly qualified to carry on its business in the state in which the Assets lie.

(b) Buyer has all requisite power and authority to carry on its business as presently conducted; to enter into this Agreement; to purchase the Assets on the terms described in this Agreement and to perform its obligations hereunder.

(c) This Agreement and the consummation of the transactions contemplated by this Agreement will not violate, constitute a default under, or be in conflict with, (i) any provision of Buyer's Articles of Incorporation or Bylaws, (ii) any material contract, agreement or instrument to which Buyer is a party or by which Buyer is bound, or (iii) any judgment, decree, order, statute, rule or regulation applicable to Buyer.

(d) The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of Buyer. This Agreement has been duly executed and delivered on behalf of Buyer and at Closing all documents and instruments required hereunder to be executed and delivered by Buyer shall have been duly executed and delivered. This Agreement and such documents and instruments will constitute legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with their terms, subject, however, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors, and to general principles of equity.

(e) Buyer is now, and hereafter shall continue to be, qualified to own State and/or Federal oil, gas and mineral leases in the State of New Mexico and with all other applicable regulatory bodies.

(f) Buyer is acquiring the Assets for Buyer's own account or investment, and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933, and shall not resell any or all of the Assets except in compliance with all applicable securities laws.

8. Obligations of Seller and Buyer

(a) For purposes of determining adjustments to the Purchase Price under Article 1(d) hereof, Buyer agrees to accept the gas sales and oil and condensate sales meter readings taken in good faith by Seller as of 7:00 o'clock A.M. on the Effective Date hereof.

(b) At the Closing, Buyer shall expressly assume and agree to be bound by the Contracts insofar as they relate to periods of time from and after the Effective Date and will protect, indemnify and hold Seller harmless from and against any claims or demands arising out of the failure of Buyer to do so.

(c) Except as provided for in Articles 8(d), and 9, Seller shall retain all risk and liability of whatsoever nature connected with operations conducted on the Assets prior to the Closing Date and agrees to protect, indemnify, defend and hold Buyer free and harmless from all liabilities, penalties, claims, causes of action, demands, lawsuits and expenses associated with the operations prior to the Closing Date. Buyer shall assume all risk and liability of whatsoever nature connected with operations conducted on the Assets from and after the Closing Date, and agrees to protect, indemnify, defend and hold Seller free and harmless from all liabilities, penalties, claims, causes of action, demands, lawsuits and expenses associated with the Contracts and the operations from and after the Closing Date.

(d) Except as provided for in Article 6, 9(b) and (f) hereof, Buyer assumes full responsibility for, and agrees to protect, indemnify, defend and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless from and against all loss, liability, claims, fines, expenses, costs (including attorney's fees and expenses) and causes of action caused by or arising out of any federal, state or local laws, rules, orders and regulations applicable to any waste material or hazardous substances on or included with the Assets or the presence, disposal, release or threatened release of all waste material or hazardous substance from the Assets into the atmosphere or into or upon land or any water course or body of water, including ground water (collectively, "Environmental Liabilities"), whether or not attributable to Seller's activities or the activities of Seller's agents, directors, officers, shareholders and employees, or to the activities of third parties (regardless of whether or not Seller was or is aware of such activities) prior to, during or after the period of Seller's ownership of the Assets. This indemnification and assumption shall apply to liability for voluntary environmental response actions undertaken pursuant either to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.A. ss 9601, et seq.), as from time to time amended or revised, or to any other federal, state or local law.

(e) Buyer agrees to comply with all laws and governmental regulations with respect to abandonment of wells and/or abandonment of the leasehold property including, where applicable, the plugging of wells, the compliance with law or rules regarding inactive or unplugged wells, including bonding requirements and restoration as specified in the Subject Lease. Buyer agrees to protect, defend, indemnify and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless from and against any and all costs, expenses, claims, demands and causes of action of every kind and character arising out of, incident to, or in connection with the abandonment of wells and/or abandonment of and proper disposition of any leasehold property, including, without limitation, the leases, any structures, materials, land, wells, casing, leasehold equipment and other personal property, plugging requirements or exceptions thereto, including bonding requirements, regardless of whether the liability therefore is based upon some alleged act or omission of Seller, or of the Buyer, or of some other party.

(f) All accounts payable and other costs and expenses with respect to the Seller's interest in the Assets which relate to the period prior to the Effective Date shall be the obligation of and be paid by Seller and those which relate to the period commencing with the Effective Date shall be the obligation of and be paid by Buyer.

(g) All prepaid utility charges applicable to periods following the Effective Date relating to the Assets shall be prorated as of the Effective Date.

(h) If monies are received by either party hereto which, under the terms of this Article, belong to the other party, the same shall immediately be paid over to the proper party. If an invoice or other evidence of an obligation is received which is applicable to periods both prior to and after the Effective Date and is, thus, under the terms of the preceding paragraphs, partially the obligation of Seller and partially the obligation of Buyer, then the parties shall consult with each other and each shall promptly pay its portion of such obligation to the obligee.

(i) Seller will pay all ad valorem, property taxes and other taxes assessed on, based on, or attributable to production and other equipment that occurred prior to the Effective Date. Buyer will pay all taxes assessed on, based on, or attributable to production that occurred after the Effective Date. It is agreed that whichever party receives said tax statements shall pay such taxes prior to delinquency and the other party hereto agrees to reimburse the paying party its pro rata share thereof promptly upon receipt of an invoice accompanied by evidence of such payment. It is further agreed that, should Seller pay the taxes, then Buyer also shall reimburse Seller for any portion of the aforementioned taxes that are assessable against other working interest and non-working interest owners and Buyer shall recoup from them accordingly. Buyer shall pay all applicable state, parish, municipality or government sales or use taxes on the leasehold, equipment, material or personal property located thereon for periods subsequent to the Effective Date.

(j) Seller and Buyer shall each bear their own costs and expenses, including, but not limited to, attorney's fees incurred in connection with the transactions contemplated in this Agreement.

(k) The sale of the Assets shall be subject to, and Buyer shall assume, pay for and perform, the duties, liabilities and obligations relating to the Assets, including, but not limited to, all applicable and validly recorded and unrecorded agreements, contracts and instruments (including, but not limited to, royalties, overriding royalty interests, production payments, net profits interest, carried working interest or similar burdens), from and after the Effective Date.

9. Environmental Conditions

(a) The Assets which have been identified herein and are the subject of this Agreement have been utilized by Seller and its predecessors-in-title for the purpose of exploration, development and production of oil and gas. Information, to the best of Seller's knowledge, regarding any substantial quantity of crude oil and produced water which may have been spilled or disposed of onsite and the locations thereof, including pit closures, burial, land farming, land spreading and underground injection, will be made available to Buyer as soon as practicable after the execution of this Agreement, but in no event less than thirty (30) days after the Closing Date. Buyer acknowledges that there may have been spills of these materials in the past onto the Assets described herein. In addition, some oil field production equipment may contain asbestos and/or Naturally Occurring Radioactive Material ("NORM"). In this regard, Buyer expressly understands that NORM may affix or attach itself to the inside of wells, materials and equipment as scale, or in other forms, and that said wells, material and equipment located on the property described herein may contain NORM and that NORM-containing material may be buried or otherwise disposed of on the Assets. Buyer also expressly understands that special procedures may be required for the removal and disposal of asbestos and NORM from the equipment and Assets where it may be found and Buyer agrees to assume all liability for such asbestos and NORM and for use of appropriate procedures and activities required to handle and dispose of same.

(b) Promptly after execution of this Agreement by both parties, Buyer shall have the right, at its own cost, risk and expense, to conduct or have conducted an environmental assessment of the Assets. Seller will provide Buyer (or its contractor) as may be requested with reasonable access to the Assets operated by Seller in order to conduct the environmental assessment. Buyer shall release, protect, indemnify, defend and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless against any liability or damage to persons or property arising out of such environmental assessment. Such indemnity shall also apply regardless of whether the liability or damage arises in whole or in part from the negligence of Seller. Buyer shall advise Seller of any material adverse environmental conditions of the Assets which it finds unacceptable ("Unacceptable Environmental Conditions") and provide evidence thereof on or before Closing. For the purpose of this paragraph, such conditions shall be "material" only if they will cost in excess of $250,000 to cure or remedy, and were not specifically disclosed on or before the execution of this Agreement. Within thirty (30) days after receipt of such notice, Seller may either (1) remedy or agree to remedy such Unacceptable Environmental Conditions within a period of time not to exceed 90 days following the receipt of Unacceptable Environmental Conditions Notice; (2) negotiate with Buyer in a good faith effort to agree upon an adjustment to the Purchase Price which adjustment shall reflect Buyer's cost to remedy such conditions ("Buyer's Remediation Costs") or (3) remove the asset or assets from the Assets being conveyed and assigned and adjust the Purchase Price by the amount of Buyer's Remediation Costs.

SUBJECT TO THE FOREGOING AND EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, BUYER UNDERSTANDS AND AGREES THAT THIS SALE IS MADE ON AN "WHERE IS, AS IS" BASIS AND BUYER RELEASES SELLER FROM ANY LIABILITY WITH RESPECT THERETO WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE TO SELLER'S NEGLIGENCE EXCEPT AS OTHERWISE EXPRESSLY AGREED UPON IN WRITING BY SELLER AS PROVIDED HEREIN.

(c) From and after the Closing Date, Buyer shall dispose of or discharge any waste from the Assets (including, but not limited to, produced water, drilling fluids and other associated wastes) in accordance with applicable federal, state or local regulations. When and if any lease, an interest in which has been conveyed and assigned hereunder, is terminated, Buyer shall take at its sole expense whatever remedial action on the Assets is necessary to meet any federal, state or local requirements directed at protecting human health and the environment in effect at that time.

(d) Except as provided for in Article 9(b) hereof, Buyer, its successors and assigns, hereby agree to protect, indemnify, defend and hold Seller, its agents, directors, officers, shareholders and employees, free and harmless from and against all claims, demands and causes of action, including any civil fines, penalties, costs of clean-up or plugging liabilities for any and all wells, brought by any and all persons, including (without limitation) Buyer's agents, directors, officers, shareholders and employees and also including (without limitation) any private citizens, persons, organizations and any agency, branch or representative of federal, state or local government, on account of any personal injury or death or damage, destruction or loss of property, contamination of natural resources (including soil, surface water or ground water) resulting from or arising out of any liability caused by or connected with the presence, disposal or release of any material of any kind, including, without limitation, asbestos and/or NORM, in, under or on the Assets at the time the Assets are conveyed and assigned to Buyer, or thereafter caused by acts of Buyer, its agents, directors, officers, shareholders and employees, with regard to its use of the described Assets subsequent to the conveyance and assignment of the described Assets pursuant to this Agreement without regard to whether such liability, injury, death, damage, destruction, loss or contamination is caused in whole or in part by any claimed negligence, active or passive, on the part of Seller or other indemnified party. This indemnification shall be in addition to any other indemnity provisions contained in this Agreement.

10. CONDITIONS OF CLOSING BY BUYER: The obligation of Buyer to close is subject to the satisfaction of the following conditions:

(a) Buyer shall have had reasonable access during normal business hours to all data and records obligated to be provided Buyer in Section 3 hereof.

(b) That all representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects at and as of Closing as if such representations and warranties were made at and as of Closing;

(c) Buyer shall have received Seller's assurance that (i) the consummation of the transaction contemplated hereby will not violate the provisions of Seller's corporate charter and by-laws or any agreement, instrument, order, judgment or law by which it is bound, and (ii) all title documents delivered hereunder are validly executed on behalf of Seller.

(d) Seller shall have obtained and delivered to Buyer (i) all prerequisite waivers of preferential rights of purchase, and (ii) all necessary consents for transfer of the Interests, except those which by their nature cannot be requested or obtained until after Closing, or Buyer and Seller shall have adjusted the sale price in accordance with the provisions of Section 2 and 5.

(e) That all representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects at and as of Closing as if such representations and warranties were made at and as of Closing;

(f) Seller shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by Buyer at or prior to Closing; and

(g) at the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

(h) Since the date of this Agreement, there shall have been no material adverse change in the condition of the Assets, except depreciation of personal property through ordinary wear and tear, depletion resulting from production and economic, political or legal changes affecting the oil and gas industry in general; provided, however, that no change in the conditions of the Assets shall be deemed material unless the aggregate value thereof exceeds five (5%) of the Purchase Price

11. CONDITIONS OF CLOSING BY SELLER: The obligation of Seller to close is subject to:

(a) Seller receiving evidence satisfactory to Seller that Buyer has all requisite corporate, partnership or other power and authority to purchase the Interests on the terms described in this Agreement and to perform its other obligations hereunder and that all corporate, partnership and/or other prerequisites of whatsoever nature have been fulfilled.

(a) That Seller shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by Seller at or prior to Closing;

(b) At the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

12. CLOSING: The Closing shall be held on or before July 19, 2002, at 2:00 P.M., at the offices of Buyer or at such other place as Seller and Buyer may mutually agree in writing. At Closing the following will occur:

(a) Seller and Buyer shall execute, acknowledge and deliver an Assignment and Bill of Sale substantially in the form of Exhibit "D" attached hereto.

(b) Buyer shall deliver to Seller by either wire transfer or certified funds the remaining balance of the total sale price as adjusted hereunder, subject to further adjustment after Closing as provided for herein, and shall cause to be delivered to Seller a certificate representing the shares of Buyer required to be transferred to Seller pursuant to Article 2(b) above.

(c) Seller and Buyer shall execute any necessary forms required by governmental agencies for the transfer of the Interests and Buyer shall file same immediately following Closing.

(d) Seller shall (subject to the terms of any applicable agreements and to the other provisions hereof) deliver to Buyer exclusive possession of the Interests, effective as of the Effective Time.

(e) All books, records and files in the possession of Seller pertaining to the Interests, including, without limitation, all well files, correspondence, geological and engineering information, shall be made available for delivery to Buyer at Seller's offices where currently maintained, within five (5) days after the Closing. Seller shall have the right to retain copies of any or all of such books, records and files and to retain canceled checks and general ledger, purchasing and other general accounting records of Seller. Seller reserves the right to later examine the records and information delivered to Buyer pursuant to this paragraph (e) to the extent such examination is necessary for any relevant business purpose. All information and data shall be furnished as a matter of convenience only to Buyer and Buyer's reliance on same shall be at Buyer's sole risk.

13. RESERVATIONS AND EXCEPTIONS: Sale and purchase of the Interests is made subject to all reservations, exceptions, limitations, contracts and other burdens or instruments which are of record or of which Buyer has actual or constructive notice, including any matter included or referenced in the materials made available by Seller to Buyer.

14. CLOSING ADJUSTMENTS: All ad valorem taxes, real property taxes and similar obligations ("Property Taxes") for the year 2002 shall be prorated and paid by Seller (10/12) and Buyer (2/12).

All proceeds (including proceeds held in suspense or escrow) from the sale of production actually sold and delivered by Seller prior to the Effective Time and attributable to the Interests shall belong to Seller and all proceeds from the sale of production actually sold and delivered after the Effective Time attributable to the Interests shall belong to Buyer. In addition, all oil, condensate or liquid hydrocarbons (hereinafter in this paragraph called "oil") in storage above the pipeline connection shall be gauged and all gas meter charts shall be replaced at the Effective Time. Buyer shall pay Seller for such oil at the highest posted field price prevailing at the Effective Time for oil of like grade and gravity for the particular field.

Except as otherwise specifically provided in this Agreement, all costs, expenses and obligations relating to the Interests which accrue prior to the Effective Time shall be paid and discharged by Seller; and all costs, expenses and obligations relating to the Interests which accrue after the Effective Time shall be paid and discharged by Buyer.

Within 5 days prior to closing, Seller will prepare and deliver to Buyer a closing settlement statement that details the adjustments in Articles 2(d), 5, 6, 9 and 14.

15. POST CLOSING ACCOUNTING:

(a) As soon as practicable after the Closing, Seller shall prepare and deliver to Buyer, in accordance with this Agreement and generally accepted accounting principles, a statement (the "Intermediate Settlement Statement") setting forth each adjustment or payment that was not finally determined as of the Closing and showing the calculation of such adjustments to the sale price including adjustments related to title defects of Article 5, Buyer Remediation costs of Articles 9(b), and any adjustments related to Article 15(c). As soon as practicable after receipt of the Intermediate Settlement Statement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes be made to the Intermediate Settlement Statement. The parties undertake to agree with respect to the Intermediate Settlement Statement no later than 180 days after closing, such agreement constituting and to be embodied in the "Final Settlement Statement" and to establish the "Final Sale Price", and the date upon which the Final Sale Price is established to be the "Final Settlement Date'. However, the "Final Sale Price" shall not include any additional consideration which may be earned upon performance level of the assets reaching stated targets per Exhibit "C", until such time as they are achieved or agreement is reached that they shall not be achieved. Such additional payments are considered additional consideration for the purchase of these assets. In the event Buyer and Seller are unable to mutually agree upon the amount of the Final Settlement Statement, an audit shall be conducted by a mutually agreed upon accounting firm. Buyer and Seller agree to be bound by the findings of such audit, insofar as the Final Settlement Statement amount is concerned, and each shall bear one half of all expenses associated with such audit. In the event that (i) the Final Sale Price is more than the amount paid at Closing, Buyer shall pay to Seller the amount of such difference, or (ii) the Final Sale Price is less than the amount paid at Closing, Seller shall pay Buyer in immediately available funds the amount of such difference within 10 days of noticification. Seller shall be responsible for the settlement of all joint billing audits which relate to accounting periods prior to the Effective Time. Buyer shall be responsible for the settlement of all joint billing audits which relate to accounting periods after the Effective Time. Any credits received by Buyer after the Effective Time Attributable to expenses paid prior to the Effective Time shall be promptly reimbursed to Seller by Buyer.

(b) Any additional consideration earned pursuant to 2(c) connected with production levels achieved shall be considered an upward post closing adjustment regardless of when earned.

16. TAXES: The sale price provided for hereunder excludes any sales taxes or other taxes in connection with the sale of property pursuant to this Agreement because the parties believe that this sale is exempt from sales tax. If a determination is ever made that a sales tax or other transfer tax applies, Buyer shall be liable for such tax as well as any applicable conveyance, transfer and recording fees, and real estate transfer stamps or taxes imposed on any transfer of property pursuant to this Agreement. Buyer shall defend and hold Seller harmless with respect to the payment of all such taxes, if any, including any interest or penalties assessed thereon.

All taxes (other than ad valorem and income taxes) which are imposed on or with respect to the production of oil, natural gas or other hydrocarbons or minerals or equipment or the receipt of proceeds therefrom (including but not limited to severance, production, excise and windfall profit taxes) shall be apportioned between the parties based upon the respective shares of production taken by the parties. Payment or withholding of all such taxes which have accrued prior to the Effective Time and filing of all statements, returns and documents pertinent thereto shall be the responsibility of Seller. Payment or withholding of all such taxes which have accrued from and after the Effective Time and the filing of all statements, returns and documents incident thereto shall be the responsibility of Buyer.

17. FURTHER OPERATION OF SELLER-OPERATED INTERESTS: Seller shall, as to the Interests it now operates, continue to operate the same until the Effective Time, when such operation shall be turned over to, and become the responsibility of Buyer. In the event Closing occurs after the Effective Time, however, Seller shall, unless Buyer and Seller otherwise agree, continue the physical operation of such Interests until Closing: such operation from and after the Effective Time shall be conducted by Seller for and on behalf of Buyer; and for any such services performed by Seller from and after the Effective Time, Buyer shall pay Seller for all reasonable and necessary expenses incurred by Seller in such operation, protection or maintenance of the Interests. Such expenses may be recovered by Seller as part of the closing or post-closing adjustments, as appropriate.

In all of its operations after full execution of this Agreement, Seller shall exercise the same standard of care as an ordinary prudent operator under the same or similar circumstances and shall notify Buyer of any material adverse change in the productive capability of any well Included in the Interests. Effective with closing, the revised Operating Agreement with attached Accounting Procedure, Exhibit "G", shall be in effect for the properties.

18. BROKER'S FEE: Seller represents and warrants to Buyer that Seller has incurred no liability, contingent or otherwise, for broker's or finder's fees in respect of this Agreement or the transactions contemplated hereby for which Buyer shall have any responsibility whatsoever; and Buyer represents and warrants to Seller that Buyer has incurred no fees in respect of this Agreement or the transactions contemplated hereby for which Seller shall have any responsibility whatsoever.

19. NOTICES: All communications required or permitted under this Agreement shall be in writing and any communication or delivery hereunder shall be deemed to have been fully made if actually delivered, or if mailed by registered or certified mail, postage prepaid, to the address as set forth below:

SELLER

Regent Energy Corporation

10777 Westheimer, Suite 1100

Houston, TX 77042

Attn: Phil Gennarelli

BUYER

Rocky Mountain Energy Corporation

333 N. Sam Houston Parkway East, Suite 910

Houston, Texas 77060

Attn: John N. Ehrman

20. FURTHER ASSURANCE: After Closing each of the parties shall execute, acknowledge and deliver to the other such further instruments, and take such other actions as may be reasonably necessary to carry out the provisions of this Agreement. Certain forms of the Bureau of Land Management will have to be prepared, executed and filed at a later date. Seller acknowledges that Buyer is making this concession to speed closing. However, Buyer shall assume all responsibility for notifying the Buyer of oil and gas production from the Interests, and such other designated persons who may be responsible for disbursing payments for the purchase of such production, of the change of ownership of the Interests. Buyer shall take all actions necessary to effectuate the transfer of such payments to Buyer as of the Effective Time. Seller shall have no responsibility or liability for the proper distribution of proceeds from and after the Effective Time.

21. PRESS RELEASE: There shall be no press release or public communication concerning this purchase and sale by either party except with the written consent of the party not originating said release or communication, with the exception being those reports reasonably required by applicable state or federal law or regulations.

22. ENTIRE AGREEMENT: This Instrument states the entire agreement between the parties and may be supplemented, altered, amended, modified or revoked by writing only, signed by both parties.

23. SURVIVAL: The representations, warranties and agreements contained in this Purchase and Sales Agreement and in any certificate or other instrument delivered by or on behalf of either party pursuant to this Purchase and Sales Agreement shall survive the Closing and shall be unaffected by any investigation made by the other party.

24. HEADINGS: The headings are for guidance only and shall have no significance in the interpretations of this Agreement.

25. GOVERNING LAW: THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW MEXICO THE PARTIES AGREE THAT ANY LITIGATION RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED BY A COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF NEW MEXICO.

SELLER:

REGENT ENERGY CORPORATION

By: Phil Gennarelli, Chairman

BUYER:

ROCKY MOUNTAIN ENERGY CORPORATION

By: John N. Ehrman, President

STATE OF TEXAS

COUNTY OF HARRIS

BEFORE ME, the undersigned authority, on this day personally appeared Phil Gennarelli,

known to me to be the person whose name is subscribed to in the foregoing instrument, and

known to me to the Chairman of Regent Energy Corporation, a New Mexico corporation,

and acknowledged to me that he executed said instrument for the purposes and consideration

therein express, and as the act of said corporation.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of July 2002.

Notary Public, State of Texas

STATE OF TEXAS

COUNTY OF HARRIS

BEFORE ME, the undersigned authority, on this day personally appeared John N. Ehrman, known to me to be the person whose name is subscribed to in the foregoing instrument, and known to me to the President of Rocky Mountain Energy Corporation, a Nevada corporation, and acknowledged to me that he executed said instrument for the purposes and consideration therein express, and as the act of said corporation.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of July 2002.

Notary Public, State of Texas

EXHIBIT "B"

Lawsuits

Hart Oil & Gas vs. Regent Energy Corporation et al. No. CV 2002-345-3, in the Eleventh Judicial District Court, San Juan County, New Mexico.

Steve Szumlinski vs. Regent Energy Corporation No. CV 2002-373-4, in the Eleventh Judicial District Court, San Juan County, New Mexico.

JP Machine Services, Inc. vs. Regent Energy Corporation No. CV 2002-331-3, in the Eleventh Judicial District Court of San Juan County, New Mexico.

EXHIBIT "F"

Pre-payments

None.

EX-99

EXHIBIT 99.4

ACQUISITION AGREEMENT

THIS AGREEMENT, dated as of , 2002, is between United States Oil Company ("USO") with offices at 161 Glenview Lane, Evergreen, CO 80439 and Rocky Mountain Energy Corporation ("Rocky Mountain") with offices at 333 North Sam Houston Parkway East, Suite 910, Houston, Texas 77060.

Subject to the terms and conditions of this Acquisition Agreement, Rocky Mountain desires to acquire all the issued and outstanding stock of USO in exchange for stock of Rocky Mountain, in a transaction intended to qualify as a tax-free exchange pursuant to section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. The parties intend for this Agreement to represent the terms and conditions of such tax-free reorganization, which Agreement the parties hereby adopt. However, neither party is seeking tax counsel or legal or accounting opinions on whether the transaction qualifies for tax free treatment. As part of this transaction, USO shall assign, transfer and convey to Rocky Mountain and Rocky Mountain desires to acquire from USO all of USO's right, title and interest in, to and under or derived from the oil and gas leases, oil, gas and mineral leases and other interests therein referred to in Exhibit "A", attached hereto and made a part hereof for all purposes, insofar and only insofar as said Leases apply to the lands, depths, formations, wellbore rights and/or other rights specified on Exhibit "A" together with identical interests in and to all property and rights incident thereto, including without limitation, all materials, equipment, personal property and fixtures located thereon or used in connection therewith (the "Equipment") as listed on Exhibit "B" and all of USO's rights in, to and under all agreements, leases, permits, rights-of-way, easements, licenses, options and orders in any way relating thereto as of 7:00 A.M. local time, June 1, 2002 (the "Effective Time"), all of the foregoing properties, rights and interests being hereinafter sometimes called the "Interests," and USO represents that the leases, interests and assets set forth in Exhibits "A" and "B" constitute all of USO's leases, interests and assets.

THEREFORE, In consideration of the above recitals and of the covenants and agreements herein contained, USO and Rocky Mountain agree as follows:

1. ACQUISITION AND PURCHASE: Subject to and upon all of the terms and conditions hereinafter set forth, USO Stockholders shall assign, transfer, and deliver to Rocky Mountain, free and clear of all liens, pledges, encumbrances, charges, restrictions, or claims of any kind, nature, or description, all issued and outstanding shares of common stock of USO (the "USO Shares") held by USO Stockholders which shares shall represent all issued and outstanding shares of USO common stock, and Rocky Mountain agrees to acquire such shares on such date by issuing and delivering in exchange therefor an aggregate of 20,000,800 shares of Rocky Mountain common stock, par value $0.001 per share, (the "Rocky Mountain Common Stock"). Such shares of Rocky Mountain Common Stock shall be issued pro rata based on the number of USO Shares held and as set forth opposite the USO Stockholder's respective names in Exhibit A-1. After giving effect to the transaction contemplated hereby, Rocky Mountain will own all the issued and outstanding shares of USO and USO will be a wholly-owned subsidiary of Rocky Mountain operating under the name USO Oil and Gas Corporation or such other name selected by the shareholders and management of ASI.

2. ACQUISITION PRICE: The acquisition price for the Interests shall be the approximate amount of Twenty Three Million and No/100 Dollars ($23,000,000 being 20,000,800 shares of RMEC plus $3,000,000 cash), subject only to any applicable price adjustment as provided for herein below. At Closing Rocky Mountain shall pay and deliver to USO the total acquisition price after any applicable price adjustment as provided for herein below as follow, to wit:

(a) The Rocky Mountain shall deliver the sum of Three Million and No/100 Dollars ($3,000,000) in cash,

(b) The issuance of 20,000,800 shares as set forth above. These shares shall be Regulation 144 shares but will be subject to "piggy-back' registration rights. Further, a "fairness hearing" shall be held for the issuance of the shares. As of the date of this Agreement, the "ask" price of Rocky Mountain's common stock, as quoted on the Over the Counter Bulletin Board, is approximately $1.00 per share.

(c) The Acquisition Price shall be adjusted as follows (to the extent such items are known or can be reasonably estimated at Closing), and the resulting amount (the "Closing Amount") shall be paid to USO. Any such adjustments shall not affect the number of shares being issued under this Agreement, but only the cash portion of the transaction.

(i) The Acquisition Price shall be decreased by the following amounts:

x. The amount of revenues actually received by USO for oil, gas, condensate, natural gas liquids and other petroleum product sales attributable to production from the Subject Properties from and after the Effective Date (it being agreed that all oil which was produced from the Subject Properties prior to the Effective Date and which was, on the Effective Date, stored in tanks located on the Subject Lease, or located elsewhere but used by USO to store oil produced from the Subject Properties prior to delivery to oil Rocky Mountain, and above pipeline connections shall be deemed to have been produced before the Effective Date);

(ii) The Acquisition Price shall be increased by the following amounts:

x. The amount of all reasonable costs and expenses incurred and paid by USO in connection with the ownership or operation of the Assets and attributable to the period from and after the Effective Date, including without limitation any lease operating expenses and customary and reasonable overhead charges;

y. An amount equal to all prepaid expenses attributable to the Assets paid by USO and attributable to the period from and after the Effective Date, including without limitation prepaid ad valorem, property, production and other taxes and payments for insurance coverage accruing to the benefit of Rocky Mountain subsequent to the Effective Date.

3. INFORMATION AND ACCESS: USO shall make a good-faith effort to give Rocky Mountain and Rocky Mountain's authorized representatives, at any reasonable time(s) before Closing, (i) physical access to the wells and other Equipment included in the Interests, at Rocky Mountain's sole risk, cost and expense, for the purpose of inspecting the same, conducting witnessed tests of production from the wells, (ii) access to all production, engineering and other technical data and records, and to all contract, land and lease records, to the extent such data and records are in USO's possession and relate to the Interests; provided, however, USO shall have no obligation to provide Rocky Mountain such access to any data or information which USO considers proprietary or confidential to it or which access USO cannot legally provide Rocky Mountain because of third-party restrictions on USO; and (iii) access to all books and records of USO.

4. TITLE DEFECTS: For the purpose of this Agreement, a "Title Defect" shall mean a material deficiency in one (or more) of the following respects, to-wit:

(a) USO's title at the Effective Time, as to one or more properties, is subject to an outstanding mortgage, deed of trust, lien or encumbrance or other adverse claim which would induce a pipeline Rocky Mountain to suspend payment of proceeds as to USO's interest or require the furnishing of security or indemnity. Evidence that USO is currently receiving its full share of proceeds from a pipeline Rocky Mountain or third-party operator (not under a 100% or other division order requiring USO to further distribute proceeds to third parties) for the Interests shall be considered a presumption that no defect exists with respect to this interest;

(b) USO owns less than the net revenue interest described on Exhibit "A" or more than the working interest described on Exhibit "A" without a corresponding increase in net revenue interest;

(c) USO's rights and interests are subject to being reduced by virtue of the exercise by a third party of reversionary, back-in or other similar right not reflected on Exhibit "A"; and,

(d) USO Is In default under some material provision of a lease, farmout agreement or agreement affecting the Interests.

5. ACQUISITION PRICE ADJUSTMENTS: Rocky Mountain may, by delivery of written notice to USO of the existence of a Title Defect, request reduction of the acquisition price for the property affected. USO may request an increase in the acquisition price of a property by delivery to Rocky Mountain of written notice that the net revenue interest actually owned by USO therein is greater than that shown on Exhibit "A".

Any such notice by Rocky Mountain or USO shall include appropriate evidence to substantiate its position and shall be delivered to the other party on or before twenty (20) days after closing. In the event any such notice is not timely delivered, the claimant shall thereafter have no right to claim a Title Defect or different revenue interest.

Upon timely delivery of a notice either by Rocky Mountain of a Title Defect or by USO of an increase or decrease in net revenue interest, Rocky Mountain and USO shall meet and use their best efforts to agree on the validity of the claim and the amount of any required price adjustment based on the following formula:

(i) If both the Working Interest and the Net Revenue Interest for any property are incorrectly stated on Exhibit "A", but the ratio of Net Revenue Interest to Working Interest is correctly stated, then the adjustment to the Acquisition Price shall be the product of the value listed on Exhibit "A" multiplied by a fraction, the numerator of which is the Net Revenue Interest increase or decrease and the denominator of which is the Net Revenue Interest listed on Exhibit "A".

(ii) If either the Working Interest or the Net Revenue Interest for any property is incorrectly stated on Exhibit "A" and the ratio of Net Revenue Interest to Working Interest is incorrectly stated, then the Acquisition Price shall be adjusted as follows: Rocky Mountain shall recalculate the value of the property affected using precisely the same economic model, formula and assumptions used by it in calculating its values shown on Exhibit "A" but inserting the correct Working Interest and Net Revenue Interest percentage for the incorrect percentages. The difference between the recalculated value and the value shown on Exhibit "A" shall be the dollar value of the adjustment to the Acquisition Price.

The additional payment due conditioned upon production increases per section 2(c) shall be considered an upward adjustment to the Acquisition price as and if earned.

6. USO REPRESENTATIONS AND WARRANTIES: USO represents and warrants to that as of the Effective Date and the date USO executes this Agreement that to the best of USO's knowledge:

(a) Is duly qualified to carry on its business in the state where the Interests are located, and has all the requisite power and authority to enter into and perform this Agreement.

(b) It has taken all necessary actions pursuant to Its Articles of Incorporation, By-laws and other governing documents to fully authorize it to consummate the transaction contemplated by this Agreement.

(c) This Agreement and the consummation of the transactions contemplated by this Agreement will not violate, constitute a default under, or be in conflict with (i) any provision of USO's Articles of Incorporation or Bylaws, (ii) any material contract, agreement or instrument to which USO is a party or by which USO is bound or, (iii) any judgment, decree, order, statute, rule, permit or regulation applicable to USO or the Assets.

(d) The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of USO. This Agreement has been duly executed and delivered on behalf of USO and at Closing all documents and instruments required hereunder to be executed and delivered by USO shall have been duly executed and delivered. This Agreement and such documents and instruments will constitute legal, valid and binding obligations of USO, enforceable against USO in accordance with their terms, subject, however, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors, and to general principles of equity.

(e) USO MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, REGARDING THE SUBJECT PROPERTIES, FIXTURES, FACILITIES, EQUIPMENT, IMPROVEMENTS, MATERIALS AND OTHER PERSONAL PROPERTY LOCATED ON OR INCLUDED IN THE ASSETS, AND THE SAME ARE TO BE SOLD ON AN "AS IS, WHERE IS" BASIS AND CONDITION.

(f) To the best of USO's knowledge, all ad valorem, property and similar taxes and assessments based on or measured by the ownership of the Assets or the production of hydrocarbons or the receipt of proceeds there from on account of the Assets for all years prior to 2001 have been properly paid.

(g) To the best of USO's knowledge , there are no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or to the best of USO's knowledge threatened against USO.

(h) Except as expressly set forth in attached Schedule "B", no suit, action or other proceeding (including, without limitation, tax, environmental or development demands proceedings) is pending, or to the best of USO's knowledge threatened, which might result in impairment or loss of title to any of the Assets or the value thereof. USO shall promptly notify Rocky Mountain of any such proceeding which may arise or be threatened prior to Closing hereunder.

(i) To the best of USO's knowledge, there exists no adverse claim or claimed default (or any event which, with the giving of notice or the passage of time, or both, would constitute a default) under (i) any of the Subject Agreements or (ii) any order, writ, injunction or decree of any court, commission or administrative agency affecting any of the Assets. USO shall promptly notify Rocky Mountain of any notice hereafter received by USO of any such claim or default and the occurrence of any such event of which USO becomes aware prior to Closing.

(j) To the best of USO's knowledge, there are no unpaid bills or past due charges for any labor or materials incurred by or on behalf of USO incident to the exploration, development or operation of the Assets which could be the basis for the existence or the filing of any claims against the Assets or any part thereof.

(k) To the best of USO's knowledge, the Assets have been operated in compliance in all material respects with all valid laws, rules, regulations, ordinances and orders of governmental authorities having jurisdiction (including environmental laws) and in compliance in all material respects with all permits, approvals, contracts and agreements relating to the Assets.

(l) None of the Assets are subject to any preferential rights to purchase or restrictions on assignment that would be applicable to the transactions contemplated hereby, or which have not already expired.

(m) To the best of USO's knowledge, there are no approvals, consents or filings required to be made or obtained to an assignment or transfer of any of the Assets.

(n) To the best of USO's knowledge, there are no operations involving any of the Assets to which USO has become a non-consenting party.

(o) To the best of USO's knowledge, except as expressly set forth on Schedule "F", there are no prepayments, advance payments, take-or-pay payments or similar payments requiring the delivery of gas from the Assets without then or thereafter receiving payment at current prices.

(p) To the best of USO's knowledge, all of the Subject Properties have been drilled and completed within the boundaries of the Subject Lease or within the limits otherwise permitted by contract, pooling or unit agreement, and by law; and all drilling and completion of the Subject Properties and all development and operations on the Subject Lease have been conducted in all material respects in compliance with all applicable laws, ordinances, rules, regulations and permits, and judgments, orders and decrees of any court or governmental body or agency, except failures which individually and in the aggregate would not have a material adverse effect on the use, value or operation of the Assets.

(q) To the best of USO's knowledge, except as expressly set forth in Schedule "G", all proceeds from the sale of hydrocarbons produced from the Subject Properties are currently being paid to USO and no portion of such proceeds is currently being held in suspense by any Rocky Mountain thereof or any other party by whom proceeds are paid except for immaterial amounts.

(r) On the Closing Date, no mortgage lien, security interest or similar lien created by USO will exist with respect to the Assets.

(s) To the best of USO's knowledge, the Subject Lease is burdened by no royalty, overriding royalty interests, production payments or other burdens on production in excess of those shown on Exhibit A. Otherwise, the Assignment shall be made without warranty of title, either express or implied, except for acts by, through and under USO, and shall be subject to all validly existing burdens on production which pertain to the Subject Lease.

(t) USO DOES NOT WARRANT, EITHER EXPRESSLY OR IMPLIEDLY, THE RESERVOIR PERFORMANCE OR THE MERCHANTABILITY, SUITABILITY, CONDITION OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE OF ANY OF THE AFORESAID LEASEHOLD EQUIPMENT, MATERIAL OR PERSONAL PROPERTY, ANY SUCH WARRANTY BEING EXPRESSLY DENIED. ROCKY MOUNTAIN, BY ACCEPTANCE OF THIS AGREEMENT, HEREBY AGREES TO ACCEPT THE SAME "WHERE IS, AS IS" AND WITH ALL FAULTS OR DEFECTS, IF ANY, IN THEIR PRESENT CONDITION AND STATE OF REPAIR. ROCKY MOUNTAIN EXPRESSLY WAIVES ALL OF THE EXPRESS AND IMPLIED WARRANTIES PROVIDED BY NEW MEXICO LAW, INCLUDING PARTICULARLY (BUT NOT LIMITED TO) (1) THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE; (2) THE WARRANTY AGAINST REDHIBITORY VICES AND (3) ANY RIGHT TO CLAIM RESCISSION OR REDUCTION IN THE ACQUISITION PRICE ON ACCOUNT OF ANY DEFECT OR CONDITION OF THE AFORESAID LEASEHOLD EQUIPMENT, MATERIAL OR PERSONAL PROPERTY WHICH MAY NOW OR HEREAFTER EXIST, WHETHER KNOWN OR UNKNOWN ON THIS DATE.

7. Rocky Mountain's Representations AND WARRANTIES

Rocky Mountain represents and warrants to and with USO that:

(a) Rocky Mountain is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada and Rocky Mountain is duly qualified to carry on its business in the state in which the Assets lie.

(b) Rocky Mountain has all requisite power and authority to carry on its business as presently conducted; to enter into this Agreement; to acquire the Assets on the terms described in this Agreement and to perform its obligations hereunder.

(c) This Agreement and the consummation of the transactions contemplated by this Agreement will not violate, constitute a default under, or be in conflict with, (i) any provision of Rocky Mountain's Articles of Incorporation or Bylaws, (ii) any material contract, agreement or instrument to which Rocky Mountain is a party or by which Rocky Mountain is bound, or (iii) any judgment, decree, order, statute, rule or regulation applicable to Rocky Mountain.

(d) The execution, delivery and performance of this Agreement and the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action on the part of Rocky Mountain. This Agreement has been duly executed and delivered on behalf of Rocky Mountain and at Closing all documents and instruments required hereunder to be executed and delivered by Rocky Mountain shall have been duly executed and delivered. This Agreement and such documents and instruments will constitute legal, valid and binding obligations of Rocky Mountain, enforceable against Rocky Mountain in accordance with their terms, subject, however, to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the rights and remedies of creditors, and to general principles of equity.

(e) Rocky Mountain is now, and hereafter shall continue to be, qualified to own State oil, gas and mineral leases in the State of New Mexico and with all other applicable regulatory bodies.

(f) Rocky Mountain is acquiring the Assets for Rocky Mountain's own account or investment, and not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933, and shall not resell any or all of the Assets except in compliance with all applicable securities laws.

8. Obligations of USO and Rocky Mountain

(a) For purposes of determining adjustments to the Acquisition Price under Article 1(d) hereof, Rocky Mountain agrees to accept the gas sales and oil and condensate sales meter readings taken in good faith by USO as of 7:00 o'clock A.M. on the Effective Date hereof.

(b) At the Closing, Rocky Mountain shall expressly assume and agree to be bound by the Contracts insofar as they relate to periods of time from and after the Effective Date and will protect, indemnify and hold USO harmless from and against any claims or demands arising out of the failure of Rocky Mountain to do so.

(c) Except as provided for in Articles 8(d), and 9, USO shall retain all risk and liability of whatsoever nature connected with operations conducted on the Assets prior to the Closing Date and agrees to protect, indemnify, defend and hold Rocky Mountain free and harmless from all liabilities, penalties, claims, causes of action, demands, lawsuits and expenses associated with the operations prior to the Closing Date. Rocky Mountain shall assume all risk and liability of whatsoever nature connected with operations conducted on the Assets from and after the Closing Date, and agrees to protect, indemnify, defend and hold USO free and harmless from all liabilities, penalties, claims, causes of action, demands, lawsuits and expenses associated with the Contracts and the operations from and after the Closing Date.

(d) Except as provided for in Article 6, 9(b) and (f) hereof, Rocky Mountain assumes full responsibility for, and agrees to protect, indemnify, defend and hold USO, its agents, directors, officers, shareholders and employees, free and harmless from and against all loss, liability, claims, fines, expenses, costs (including attorney's fees and expenses) and causes of action caused by or arising out of any federal, state or local laws, rules, orders and regulations applicable to any waste material or hazardous substances on or included with the Assets or the presence, disposal, release or threatened release of all waste material or hazardous substance from the Assets into the atmosphere or into or upon land or any water course or body of water, including ground water (collectively, "Environmental Liabilities"), whether or not attributable to USO's activities or the activities of USO's agents, directors, officers, shareholders and employees, or to the activities of third parties (regardless of whether or not USO was or is aware of such activities) prior to, during or after the period of USO's ownership of the Assets. This indemnification and assumption shall apply to liability for voluntary environmental response actions undertaken pursuant either to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.A. ss 9601, et seq.), as from time to time amended or revised, or to any other federal, state or local law.

(e) Rocky Mountain agrees to comply with all laws and governmental regulations with respect to abandonment of wells and/or abandonment of the leasehold property including, where applicable, the plugging of wells, the compliance with law or rules regarding inactive or unplugged wells, including bonding requirements and restoration as specified in the Subject Lease. Rocky Mountain agrees to protect, defend, indemnify and hold USO, its agents, directors, officers, shareholders and employees, free and harmless from and against any and all costs, expenses, claims, demands and causes of action of every kind and character arising out of, incident to, or in connection with the abandonment of wells and/or abandonment of and proper disposition of any leasehold property, including, without limitation, the leases, any structures, materials, land, wells, casing, leasehold equipment and other personal property, plugging requirements or exceptions thereto, including bonding requirements, regardless of whether the liability therefore is based upon some alleged act or omission of USO, or of the Rocky Mountain, or of some other party.

(f) All accounts payable and other costs and expenses with respect to the USO's interest in the Assets which relate to the period prior to the Effective Date shall be the obligation of and be paid by USO and those which relate to the period commencing with the Effective Date shall be the obligation of and be paid by Rocky Mountain.

(g) All prepaid utility charges applicable to periods following the Effective Date relating to the Assets shall be prorated as of the Effective Date.

(h) USO shall maintain responsibility and liability for the management, administration and disbursement of suspended funds (including interest accrued thereon, if any) attributable to the interests of third parties and accrued by USO, for any reason, pursuant to USO's disbursement of proceeds from the sale of production from the property or the Subject Lease and/or units of which the Assets are a part, to the extent such funds are attributable to production sold prior to the Closing Date (collectively the "Suspended Funds").

USO shall provide Rocky Mountain a listing of all Suspended Funds, setting forth the name, address and tax identification number (if known), of each interest owner, the decimal of interest suspended, the amount suspended for each interest owner, the reason the funds are in suspense, the date the interest was first suspended and the actions, if any, taken by USO with respect to such funds. USO shall deliver to Rocky Mountain, as soon after the Closing Date as practicable, a copy of USO's records and files that apply to or are related to the Suspended Funds transferred or assigned to Rocky Mountain.

(i) If monies are received by either party hereto which, under the terms of this Article, belong to the other party, the same shall immediately be paid over to the proper party. If an invoice or other evidence of an obligation is received which is applicable to periods both prior to and after the Effective Date and is, thus, under the terms of the preceding paragraphs, partially the obligation of USO and partially the obligation of Rocky Mountain, then the parties shall consult with each other and each shall promptly pay its portion of such obligation to the obligee.

(j) USO will pay all ad valorem, property taxes and other taxes assessed on, based on, or attributable to production and other equipment that occurred prior to the Effective Date. Rocky Mountain will pay all taxes assessed on, based on, or attributable to production that occurred after the Effective Date. It is agreed that whichever party receives said tax statements shall pay such taxes prior to delinquency and the other party hereto agrees to reimburse the paying party its pro rata share thereof promptly upon receipt of an invoice accompanied by evidence of such payment. It is further agreed that, should USO pay the taxes, then Rocky Mountain also shall reimburse USO for any portion of the aforementioned taxes that are assessable against other working interest and non-working interest owners and Rocky Mountain shall recoup from them accordingly. Rocky Mountain shall pay all applicable state, parish, municipality or government sales or use taxes on the leasehold, equipment, material or personal property located thereon for periods subsequent to the Effective Date.

(k) USO and Rocky Mountain shall each bear their own costs and expenses, including, but not limited to, attorney's fees incurred in connection with the transactions contemplated in this Agreement.

(l) The sale of the Assets shall be subject to, and Rocky Mountain shall assume, pay for and perform, the duties, liabilities and obligations relating to the Assets, including, but not limited to, all applicable and validly recorded and unrecorded agreements, contracts and instruments (including, but not limited to, royalties, overriding royalty interests, production payments, net profits interest, carried working interest or similar burdens), from and after the Effective Date.

9. Environmental Conditions

(a) The Assets which have been identified herein and are the subject of this Agreement have been utilized by USO and its predecessors-in-title for the purpose of exploration, development and production of oil and gas. Information, to the best of USO's knowledge, regarding any substantial quantity of crude oil and produced water which may have been spilled or disposed of onsite and the locations thereof, including pit closures, burial, land farming, land spreading and underground injection, will be made available to Rocky Mountain as soon as practicable after the execution of this Agreement, but in no event less than thirty (30) days after the Closing Date. Rocky Mountain acknowledges that there may have been spills of these materials in the past onto the Assets described herein. In addition, some oil field production equipment may contain asbestos and/or Naturally Occurring Radioactive Material ("NORM"). In this regard, Rocky Mountain expressly understands that NORM may affix or attach itself to the inside of wells, materials and equipment as scale, or in other forms, and that said wells, material and equipment located on the property described herein may contain NORM and that NORM-containing material may be buried or otherwise disposed of on the Assets. Rocky Mountain also expressly understands that special procedures may be required for the removal and disposal of asbestos and NORM from the equipment and Assets where it may be found and Rocky Mountain agrees to assume all liability for such asbestos and NORM and for use of appropriate procedures and activities required to handle and dispose of same.

(b) Promptly after execution of this Agreement by both parties, Rocky Mountain shall have the right, at its own cost, risk and expense, to conduct or have conducted an environmental assessment of the Assets. USO will provide Rocky Mountain (or its contractor) as may be requested with reasonable access to the Assets operated by USO in order to conduct the environmental assessment. Rocky Mountain shall release, protect, indemnify, defend and hold USO, its agents, directors, officers, shareholders and employees, free and harmless against any liability or damage to persons or property arising out of such environmental assessment. Such indemnity shall also apply regardless of whether the liability or damage arises in whole or in part from the negligence of USO. Rocky Mountain shall advise USO of any material adverse environmental conditions of the Assets which it finds unacceptable ("Unacceptable Environmental Conditions") and provide evidence thereof on or before Closing. For the purpose of this paragraph, such conditions shall be "material" only if they will cost in excess of $250,000 to cure or remedy, and were not specifically disclosed on or before the execution of this Agreement. Within thirty (30) days after receipt of such notice, USO may either (1) remedy or agree to remedy such Unacceptable Environmental Conditions within a period of time not to exceed 90 days following the receipt of Unacceptable Environmental Conditions Notice; (2) negotiate with Rocky Mountain in a good faith effort to agree upon an adjustment to the Acquisition Price which adjustment shall reflect Rocky Mountain's cost to remedy such conditions ("Rocky Mountain's Remediation Costs") or (3) remove the asset or assets from the Assets being conveyed and assigned and adjust the Acquisition Price by the amount of Rocky Mountain's Remediation Costs.

SUBJECT TO THE FOREGOING AND EXCEPT AS EXPRESSLY PROVIDED FOR IN THIS AGREEMENT, ROCKY MOUNTAIN UNDERSTANDS AND AGREES THAT THIS SALE IS MADE ON AN "WHERE IS, AS IS" BASIS AND ROCKY MOUNTAIN RELEASES USO FROM ANY LIABILITY WITH RESPECT THERETO WHETHER OR NOT CAUSED BY OR ATTRIBUTABLE TO USO'S NEGLIGENCE EXCEPT AS OTHERWISE EXPRESSLY AGREED UPON IN WRITING BY USO AS PROVIDED HEREIN.

(c) From and after the Closing Date, Rocky Mountain shall dispose of or discharge any waste from the Assets (including, but not limited to, produced water, drilling fluids and other associated wastes) in accordance with applicable federal, state or local regulations. When and if any lease, an interest in which has been conveyed and assigned hereunder, is terminated, Rocky Mountain shall take at its sole expense whatever remedial action on the Assets is necessary to meet any federal, state or local requirements directed at protecting human health and the environment in effect at that time.

(d) Except as provided for in Article 9(b) hereof, Rocky Mountain, its successors and assigns, hereby agree to protect, indemnify, defend and hold USO, its agents, directors, officers, shareholders and employees, free and harmless from and against all claims, demands and causes of action, including any civil fines, penalties, costs of clean-up or plugging liabilities for any and all wells, brought by any and all persons, including (without limitation) Rocky Mountain's agents, directors, officers, shareholders and employees and also including (without limitation) any private citizens, persons, organizations and any agency, branch or representative of federal, state or local government, on account of any personal injury or death or damage, destruction or loss of property, contamination of natural resources (including soil, surface water or ground water) resulting from or arising out of any liability caused by or connected with the presence, disposal or release of any material of any kind, including, without limitation, asbestos and/or NORM, in, under or on the Assets at the time the Assets are conveyed and assigned to Rocky Mountain, or thereafter caused by acts of Rocky Mountain, its agents, directors, officers, shareholders and employees, with regard to its use of the described Assets subsequent to the conveyance and assignment of the described Assets pursuant to this Agreement without regard to whether such liability, injury, death, damage, destruction, loss or contamination is caused in whole or in part by any claimed negligence, active or passive, on the part of USO or other indemnified party. This indemnification shall be in addition to any other indemnity provisions contained in this Agreement.

10. CONDITIONS OF CLOSING BY ROCKY MOUNTAIN: The obligation of Rocky Mountain to close is subject to the satisfaction of the following conditions:

(a) Rocky Mountain shall have had reasonable access during normal business hours to all data and records obligated to be provided Rocky Mountain in Section 3 hereof.

(b) That all representations and warranties of USO contained in this Agreement shall be true and correct in all material respects at and as of Closing as if such representations and warranties were made at and as of Closing;

(c) Rocky Mountain shall have received USO's assurance that (i) the consummation of the transaction contemplated hereby will not violate the provisions of USO's corporate charter and by-laws or any agreement, instrument, order, judgment or law by which it is bound, and (ii) all title documents delivered hereunder are validly executed on behalf of USO.

(d) USO shall have obtained and delivered to Rocky Mountain (i) all prerequisite waivers of preferential rights of purchase, and (ii) all necessary consents for transfer of the Interests, except those which by their nature cannot be requested or obtained until after Closing, or Rocky Mountain and USO shall have adjusted the sale price in accordance with the provisions of Section 2 and 5.

(e) That all representations and warranties of USO contained in this Agreement shall be true and correct in all material respects at and as of Closing as if such representations and warranties were made at and as of Closing;

(f) USO shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by Rocky Mountain at or prior to Closing; and

(g) at the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

(h) Since the date of this Agreement, there shall have been no material adverse change in the condition of the Assets, except depreciation of personal property through ordinary wear and tear, depletion resulting from production and economic, political or legal changes affecting the oil and gas industry in general; provided, however, that no change in the conditions of the Assets shall be deemed material unless the aggregate value thereof exceeds five (5%) of the Acquisition Price

11. CONDITIONS OF CLOSING BY USO: The obligation of USO to close is subject to:

(a) USO receiving evidence satisfactory to USO that Rocky Mountain has all requisite corporate, partnership or other power and authority to acquire the Interests on the terms described in this Agreement and to perform its other obligations hereunder and that all corporate, partnership and/or other prerequisites of whatsoever nature have been fulfilled.

(a) That USO shall have performed and satisfied in all material respects all covenants and agreements required by this Agreement to be performed or satisfied by USO at or prior to Closing;

(b) At the Closing Date, no suit, action or other proceeding shall be pending or threatened in which it is sought to restrain or prohibit the performance of or to obtain damages or other relief in connection with this Agreement or the transactions contemplated hereby.

12. CLOSING: The Closing shall be held on or before August 15, 2002, at 10:00 A.M., at the offices of USO or at such other place as USO and Rocky Mountain may mutually agree in writing. At Closing the following will occur:

(a) USO and Rocky Mountain shall execute, acknowledge and deliver an Assignment and Bill of Sale substantially in the form of Exhibit "D" attached hereto.

(b) Rocky Mountain shall deliver to USO by either wire transfer or certified funds the remaining balance of the total sale price as adjusted hereunder, subject to further adjustment after Closing as provided for herein, and shall cause to be delivered to USO a certificate representing the shares of Rocky Mountain required to be transferred to USO pursuant to Article 2(b) above.

(c) USO and Rocky Mountain shall execute any necessary forms required by governmental agencies for the transfer of the Interests and Rocky Mountain shall file same immediately following Closing.

(d) USO shall (subject to the terms of any applicable agreements and to the other provisions hereof) deliver to Rocky Mountain exclusive possession of the Interests, effective as of the Effective Time.

(e) All books, records and files in the possession of USO pertaining to the Interests, including, without limitation, all well files, correspondence, geological and engineering information, shall be made available for delivery to Rocky Mountain at USO's offices where currently maintained, within five (5) days after the Closing. USO shall have the right to retain copies of any or all of such books, records and files and to retain canceled checks and general ledger, purchasing and other general accounting records of USO. USO reserves the right to later examine the records and information delivered to Rocky Mountain pursuant to this paragraph (e) to the extent such examination is necessary for any relevant business purpose. All information and data shall be furnished as a matter of convenience only to Rocky Mountain and Rocky Mountain's reliance on same shall be at Rocky Mountain's sole risk.

13. RESERVATIONS AND EXCEPTIONS: Acquisition of the Interests is made subject to all reservations, exceptions, limitations, contracts and other burdens or instruments which are of record or of which Rocky Mountain has actual or constructive notice, including any matter included or referenced in the materials made available by USO to Rocky Mountain.

14. CLOSING ADJUSTMENTS: All ad valorem taxes, real property taxes and similar obligations ("Property Taxes") for the year 2001 shall be prorated and paid by USO (10/12) and Rocky Mountain (2/12).

All proceeds (including proceeds held in suspense or escrow) from the sale of production actually sold and delivered by USO prior to the Effective Time and attributable to the Interests shall belong to USO and all proceeds from the sale of production actually sold and delivered after the Effective Time attributable to the Interests shall belong to Rocky Mountain. In addition, all oil, condensate or liquid hydrocarbons (hereinafter in this paragraph called "oil") in storage above the pipeline connection shall be gauged and all gas meter charts shall be replaced at the Effective Time. Rocky Mountain shall pay USO for such oil at the highest posted field price prevailing at the Effective Time for oil of like grade and gravity for the particular field.

Except as otherwise specifically provided in this Agreement, all costs, expenses and obligations relating to the Interests which accrue prior to the Effective Time shall be paid and discharged by USO; and all costs, expenses and obligations relating to the Interests which accrue after the Effective Time shall be paid and discharged by Rocky Mountain.

Within 5 days prior to closing, USO will prepare and deliver to Rocky Mountain a closing settlement statement that details the adjustments in Articles 2(d), 5, 6, 9 and 14.

15. POST CLOSING ACCOUNTING:

(a) As soon as practicable after the Closing, USO shall prepare and deliver to Rocky Mountain, in accordance with this Agreement and generally accepted accounting principles, a statement (the "Intermediate Settlement Statement") setting forth each adjustment or payment that was not finally determined as of the Closing and showing the calculation of such adjustments to the sale price including adjustments related to title defects of Article 5, Rocky Mountain Remediation costs of Articles 9(b), and any adjustments related to Article 15(c). As soon as practicable after receipt of the Intermediate Settlement Statement, Rocky Mountain shall deliver to USO a written report containing any changes that Rocky Mountain proposes be made to the Intermediate Settlement Statement. The parties undertake to agree with respect to the Intermediate Settlement Statement no later than 180 days after closing, such agreement constituting and to be embodied in the "Final Settlement Statement" and to establish the "Final Sale Price", and the date upon which the Final Sale Price is established to be the "Final Settlement Date'. However, the "Final Sale Price" shall not include any additional consideration which may be earned upon performance level of the assets reaching stated targets per Exhibit "C", until such time as they are achieved or agreement is reached that they shall not be achieved. Such additional payments are considered additional consideration for the acquisition of these assets. In the event Rocky Mountain and USO are unable to mutually agree upon the amount of the Final Settlement Statement, an audit shall be conducted by a mutually agreed upon accounting firm. Rocky Mountain and USO agree to be bound by the findings of such audit, insofar as the Final Settlement Statement amount is concerned, and each shall bear one half of all expenses associated with such audit. In the event that (i) the Final Sale Price is more than the amount paid at Closing, Rocky Mountain shall pay to USO the amount of such difference, or (ii) the Final Sale Price is less than the amount paid at Closing, USO shall pay Rocky Mountain in immediately available funds the amount of such difference within 10 days of notification. USO shall be responsible for the settlement of all joint billing audits which relate to accounting periods prior to the Effective Time. Rocky Mountain shall be responsible for the settlement of all joint billing audits which relate to accounting periods after the Effective Time. Any credits received by Rocky Mountain after the Effective Time Attributable to expenses paid prior to the Effective Time shall be promptly reimbursed to USO by Rocky Mountain.

(b) Any additional consideration earned pursuant to 2(c) connected with production levels achieved shall be considered an upward post closing adjustment regardless of when earned.

16. TAXES: The sale price provided for hereunder excludes any sales taxes or other taxes in connection with the sale of property pursuant to this Agreement because the parties believe that this sale is exempt from sales tax. If a determination is ever made that a sales tax or other transfer tax applies, Rocky Mountain shall be liable for such tax as well as any applicable conveyance, transfer and recording fees, and real estate transfer stamps or taxes imposed on any transfer of property pursuant to this Agreement. Rocky Mountain shall defend and hold USO harmless with respect to the payment of all such taxes, if any, including any interest or penalties assessed thereon.

All taxes (other than ad valorem and income taxes) which are imposed on or with respect to the production of oil, natural gas or other hydrocarbons or minerals or equipment or the receipt of proceeds therefrom (including but not limited to severance, production, excise and windfall profit taxes) shall be apportioned between the parties based upon the respective shares of production taken by the parties. Payment or withholding of all such taxes which have accrued prior to the Effective Time and filing of all statements, returns and documents pertinent thereto shall be the responsibility of USO. Payment or withholding of all such taxes which have accrued from and after the Effective Time and the filing of all statements, returns and documents incident thereto shall be the responsibility of Rocky Mountain.

17. EMPLOYMENT CONTRACT: As additional consideration for the transfer of the Interests herein, Rocky Mountain agrees to enter into an Employment Contract with Donnie Hill. Such Employment Agreement shall be in substantially the same form as the Employment Agreement attached hereto as Exhibit "E".

18. FURTHER OPERATION OF USO-OPERATED INTERESTS: USO shall, as to the Interests it now operates, continue to operate the same until the Effective Time, when such operation shall be turned over to, and become the responsibility of Rocky Mountain. In the event Closing occurs after the Effective Time, however, USO shall, unless Rocky Mountain and USO otherwise agree, continue the physical operation of such Interests until Closing: such operation from and after the Effective Time shall be conducted by USO for and on behalf of Rocky Mountain; and for any such services performed by USO from and after the Effective Time, Rocky Mountain shall pay USO for all reasonable and necessary expenses incurred by USO in such operation, protection or maintenance of the Interests. Such expenses may be recovered by USO as part of the closing or post-closing adjustments, as appropriate.

In all of its operations after full execution of this Agreement, USO shall exercise the same standard of care as an ordinary prudent operator under the same or similar circumstances and shall notify Rocky Mountain of any material adverse change in the productive capability of any well Included in the Interests.

19. BROKER'S FEE: USO represents and warrants to Rocky Mountain that USO has incurred no liability, contingent or otherwise, for broker's or finder's fees in respect of this Agreement or the transactions contemplated hereby for which Rocky Mountain shall have any responsibility whatsoever; and Rocky Mountain represents and warrants to USO that Rocky Mountain has incurred no fees in respect of this Agreement or the transactions contemplated hereby for which USO shall have any responsibility whatsoever.

20. NOTICES: All communications required or permitted under this Agreement shall be in writing and any communication or delivery hereunder shall be deemed to have been fully made if actually delivered, or if mailed by registered or certified mail, postage prepaid, to the address as set forth below:

USO

United States Oil Company

161 Glenview Lane

Evergreen, CO 80439

Attn: Stephen Lieberman

ROCKY MOUNTAIN

Rocky Mountain Energy Corporation

333 N. Sam Houston Parkway East, Suite 910

Houston, Texas 77060

Attn: John N. Ehrman

21. FURTHER ASSURANCE: After Closing each of the parties shall execute, acknowledge and deliver to the other such further instruments, and take such other actions as may be reasonably necessary to carry out the provisions of this Agreement. However, Rocky Mountain shall assume all responsibility for notifying the Rocky Mountain of oil and gas production from the Interests, and such other designated persons who may be responsible for disbursing payments for the purchase of such production, of the change of ownership of the Interests. Rocky Mountain shall take all actions necessary to effectuate the transfer of such payments to Rocky Mountain as of the Effective Time. USO shall have no responsibility or liability for the proper distribution of proceeds from and after the Effective Time.

22. PRESS RELEASE: There shall be no press release or public communication concerning this acquisition by either party except with the written consent of the party not originating said release or communication, with the exception being those reports reasonably required by applicable state or federal law or regulations.

23. ENTIRE AGREEMENT: This Instrument states the entire agreement between the parties and may be supplemented, altered, amended, modified or revoked by writing only, signed by both parties.

24. SURVIVAL: The representations, warranties and agreements contained in this Acquisition Agreement and in any certificate or other instrument delivered by or on behalf of either party pursuant to this Acquisition Agreement shall survive the Closing and shall be unaffected by any investigation made by the other party.

25. HEADINGS: The headings are for guidance only and shall have no significance in the interpretations of this Agreement.

26. GOVERNING LAW: THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH UNTIL THE FINALIZATION OF THE FAIRNESS HEARING AND ENTRY OF ORDER REFERENCED IN PARAGRAPH 2, ABOVE, AND SAID FAIRNESS HEARING MUST BE BROUGHT AND CONCLUDED IN SALT LAKE COUNTY, STATE OF UTAH; THEREAFTER, THE OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE NEW MEXICO AND THE PARTIES AGREE THAT OTHER THAN AS SET FORTH ABOVE, ANY LITIGATION RELATING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED BY A COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF NEW MEXICO.

USO:

UNITED STATES OIL COMPANY

By: Stephen Lieberman, President

ROCKY MOUNTAIN:

ROCKY MOUNTAIN ENERGY CORPORATION

By: John N. Ehrman, President

STATE OF

COUNTY OF

BEFORE ME, the undersigned authority, on this day personally appeared Stephen Lieberman known to me to be the person whose name is subscribed to in the foregoing instrument, and

known to me to the President of United States Oil Company, a company,

and acknowledged to me that he executed said instrument for the purposes and consideration

therein express, and as the act of said company.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of 2002.

Notary Public, State of

STATE OF TEXAS

COUNTY OF HARRIS

BEFORE ME, the undersigned authority, on this day personally appeared John N. Ehrman, known to me to be the person whose name is subscribed to in the foregoing instrument, and known to me to the President of Rocky Mountain Energy Corporation, a Nevada corporation, and acknowledged to me that he executed said instrument for the purposes and consideration therein express, and as the act of said corporation.

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this _______ day of 2002.

Notary Public, State of Texas

EX-99

EXHIBIT 99.5

P R 0 M I SS 0 R Y N 0 T E

$100,000.00 Ambler, Pennsylvania August 19, 2002

FOR VALUE RECEIVED, ROCKY MOUNTAIN ENERGY CORPORATION, ("Maker", whether one or more), promises to pay to the order of in Ambler, Pennsylvania, the sum of One Hundred Thousand and No/100 dollars ($100,000.00) in lawful money of the United States of America which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, and to pay interest on the unpaid principal balance of this promissory note (the "Note") from time to time outstanding from the date hereof until maturity at a per annum rate of interest equal to the lesser of (i) the "Applicable Rate" or (ii) the "Maximum Rate", as those terms are herein defined;

(i) The term "Applicable Rate" means TWELVE PERCENT (12%) interest per annum.

(ii) The term "Maximum Rate" means the maximum lawful rate of interest permitted to be charged by the holder of this Note to Maker, as a corporation, under the law of the State of Pennsylvania and the United States of America.

Interest shall be computed on a per annum basis of a year of 365 or 366 days, as the case may be.

This Note shall be for a term of ninety (90) days from the date hereof. If not sooner paid, the full principal amount, plus all accrued interest, shall be payable upon maturity to the holder of this Note at 230 Mathers Road, Ambler, Pennsylvania, or at such other address as may be provided in writing to Maker.

This Note may be prepaid in whole or in part at any time and from time to time without prepayment charge or penalty. Simultaneously with any prepayment of principal, there must also be paid all interest accrued on the amount of principal so prepaid and all other sums then due hereunder or under any instrument, document, or other writing now or hereafter securing or pertaining to this Note.

Maker further agrees that all past due principal and accrued interest shall bear interest from the date it is due until paid at the Maximum Rate; and if no Maximum Rate is applicable, then at the rate of eighteen percent (18.00%) per annum; provided, however, nothing herein or in any instrument, document, or other writing now or hereafter securing this Note shall entitle the holder of this Note to contract for, charge, receive, take, or reserve interest hereon in excess of the Maximum Rate. In the event this Note is prepaid in full or in the event the maturity of this Note is accelerated prior to the end of the full stated term hereof, and the interest received prior to such prepayment or acceleration exceeds interest calculated at the Maximum Rate, the then holder of this Note shall credit the amount of such excess against the amounts lawfully owing under this Note or under any instrument, document, or other writing securing this Note as of the date of such prepayment or acceleration, in any order, preference, or manner as the holder hereof may elect, until all sums lawfully owing to the holder hereof are fully and finally paid, and the balance, if any, shall be refunded to the person or entity entitled thereto.

Maker further agrees that, notwithstanding any other provision of this Note, in no event shall the aggregate of (i) all interest which has accrued on this Note from the date hereof through the date of such calculation, and (ii) the sum of all other amounts accrued or paid which, under applicable laws, are considered interest from the date hereof through the date of such calculation, ever exceed interest calculated at the Maximum Rate on the principal balance of this Note from time to time remaining unpaid. In this connection, it is agreed that in the execution, delivery, and acceptance of this Note, Maker and the holder of this Note intend to contract in strict compliance with applicable state and federal laws from time to time in effect. In furtherance thereof, none of the terms of this Note or of any instrument, document, or other writing now or hereafter securing or pertaining to this Note shall ever be construed to create a contract to pay for the use, forbearance, or detention of money any interest at a rate in excess of the Maximum Rate. No person or entity shall ever be liable for interest in excess of the Maximum Rate, and the provisions of this paragraph shall control over all other provisions of this Note or the Security Documents (hereafter defined) which may be in apparent conflict therewith. Specifically, and without limiting the generality of the foregoing, Maker agrees that:

(i) if, under any circumstances, the aggregate amounts paid on this Note prior to and incident to final payment hereof include amounts which by law are considered interest which would exceed the Maximum Rate, Maker agrees that such payment and collection will have been and will be deemed to have been the result of mathematical error on the part both of Maker and the holder of this Note, and the recipient of such excess payments shall promptly refund the amount of such excess (to the extent only of such interest payments above the maximum amount which could lawfully have been collected and retained) upon discovery of such error by the recipient of such payment or upon receipt of notice thereof from the person or entity making such payment; and

(ii) to the fullest extent permitted by applicable law, all sums paid or agreed to be paid to the holder hereof for the use, forbearance, or detention of the indebtedness evidenced hereby shall be amortized, prorated, allocated, and spread throughout the full term of this Note.

Maker further agrees that if any default occurs in the payment of this Note, principal or interest, or in the payment of any other note or indebtedness of Maker, Maker's successors or assigns, to the then holder of this Note, or upon the occurrence of any default under any of the Security Documents, or under any other instrument, document, or other writing then securing this Note or any other indebtedness of Maker, Maker's successors or assigns, to the then holder of this Note, then, in any such event, and at any time thereafter, cumulative of and in addition to all other rights and remedies available to the holder of this Note, at the option of such holder, the entire unpaid principal balance and all accrued interest then owing on this Note shall immediately mature and be due and payable.

Maker further agrees that if the original or a copy of this Note is placed in the hands of an attorney for collection after the occurrence of any default hereunder, or for the purpose of being sued upon or established in any manner in any court, or for any other purpose whatsoever in any manner connected with or pertaining to (i) the extension of credit evidenced hereby, (ii) Maker, Maker's successors or assigns, or (iii) any property, rights, or interests now or hereafter securing this Note, then, in any such event, Maker promises to pay to the then holder of this Note all reasonable attorneys' fees, costs, and expenses theretofore, then, and thereafter paid or incurred by any holder of this Note in any manner connected therewith.

To the maximum extent not prohibited by applicable law, Maker, on behalf of Maker and Maker's successors and assigns, hereby (i) waives grace, demand, notice of default, notice of intent to accelerate maturity, notice that the holder hereof will not or will no longer accept late payments, notice of acceleration of maturity, presentment for acceleration, presentment for payment, protest, notice of protest and of dishonor, and diligence in taking any action with respect to any security or the collection of any sums owing hereon and (ii) consents to any and all renewals, extensions, modifications, and rearrangements hereof and to the release of all or any part of the security herefor or any person or entity liable hereon or herefor under any terms deemed by the holder hereof, in its sole discretion, to be adequate. Any such renewal, extension, modification, or rearrangement, or the release of any such security, person, or entity, may be made without notice to Maker, Maker's successors or assigns, and without affecting any security herefor or the liabilities and obligations of Maker, Maker's successors or assigns, which are not expressly released in writing. Maker further agrees that the exercise of any right or remedy conferred upon any holder hereof in this Note, or in any instrument, document, or other writing now or hereafter securing or otherwise pertaining to this Note, or securing or pertaining to any other indebtedness now or hereafter owing by Maker to any holder hereof, shall be wholly discretionary with the holder of this Note, and the exercise of, or failure to exercise, any such right or remedy shall not in any manner affect, impair, or diminish the obligations and liabilities of Maker, or constitute or be deemed a waiver of any such right or remedy or any other past, present, or future right or remedy of any holder hereof. Maker further agrees that (without limiting the foregoing) the acceptance of late payments or the failure to exercise the option to accelerate the maturity of this Note upon any default hereunder shall not in any manner constitute a waiver of the right to exercise the option to accelerate the maturity of this Note upon the failure to promptly pay any subsequent payment or in the event there exists or thereafter occurs any other or subsequent default, and no waiver shall be enforceable against the holder of this Note unless such waiver is expressly set forth in writing and duly executed by such holder.

WITHOUT LIMITATION OF ANY OTHER PROVISION HEREIN, THE MAKER HEREBY EMPOWERS ANY ATTORNEY OR ANY COURT OF RECORD, AFTER THE OCCURRENCE OF ANY EVENT OF DEFAULT HEREUNDER, TO APPEAR FOR THE MAKER AND, WITH OR WITHOUT COMPLAINT FILED, CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, AGAINST THE MAKER IN FAVOR OF THE HOLDER OF THIS NOTE FOR ALL AMOUNTS DUE HEREUNDER AND ALL ACCRUED INTEREST, TOGETHER WITH COSTS OF SUIT AND AN ATTORNEY'S COMMISSION OF THE GREATER OF 10% OF SUCH PRINCIPAL AND INTEREST OR $1,000 ADDED AS A REASONABLE ATTORNEY'S FEE AND FOR DOING SO THIS NOTE OR A COPY VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THE MAKER HEREBY FOREVER WAIVES AND RELEASES ALL ERRORS IN SAID PROCEEDINGS AND ALL RIGHTS OF APPEAL AND ALL RELIEF FROM ANY AND ALL APPRAISEMENT, STAY OR EXEMPTION LAWS OF ANY STATE NOW IN FORCE OR HEREAFTER ENACTED. NO SINGLE EXERCISE OF THE FOREGOING POWER TO CONFESS JUDGMENT, OR A SERIES OF JUDGMENTS, SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE INVALID, VOIDABLE, OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE HOLDER OF THIS NOTE SHALL ELECT UNTIL SUCH TIME AS THE HOLDER OF THIS NOTE SHALL HAVE RECEIVED PAYMENT IN FULL OR ALL AMOUNTS PAYABLE BY MAKER.

This Note, and all instruments, documents, and other writings evidencing, securing, or pertaining to the indebtedness evidenced hereby have been executed in Harris County, Texas, and shall be construed in accordance with and governed by the applicable laws of the United States of America and the State of Pennsylvania. Maker further agrees and consents to all of the provisions of the Security Documents and of all other instruments, documents, and other writings now or hereafter securing or pertaining to this Note and agrees that all of same are binding on Maker, and on the heirs, successors, legal representatives, and assigns of Maker.

THE MAKER IRREVOCABLY WAIVES ANY AND ALL RIGHT THE MAKER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE MAKER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

The Maker acknowledges that it has read and understood all the provisions of this Note, including the confession of judgment and waiver of jury trial, and has been advised by counsel as necessary or appropriate.

Notwithstanding any provision of this Promissory Note to the contrary, the Holder of this Promissory Note acknowledges that the obligations imposed on Maker by this Promissory Note, and the rights of any and all holders hereof, are subject to and subordinate to the Mortgage, Assignment of Production, Security Agreement and Financing Statement as described in Section VII (p) of the Deed of Trust as amended, renewed and extended that secures the obligations under this Promissory Note.

ROCKY MOUNTAIN ENERGY CORPORATION

By

John N. Ehrman , President