CONTRACT OPERATING AGREEMENT
THIS CONTRACT OPERATING AGREEMENT (this “ Contract Operating Agreement ” or
this “ Agreement ”) is entered into this 8 th day of April, 2008, to be effective as of the 1st day of April, 2008 (“
Effective Date ”), between and among South Texas Oil Company , a Nevada corporation (“ South Texas
”), including its subsidiaries, STO Operating Company , a Texas corporation (“ STO Operating ”); STO
Drilling Company , a Texas corporation (“ STO Drilling ”); Southern Texas Oil Company , a Texas
corporation (“ Southern Texas ”); and STO Properties LLC , a Texas limited liability company (“ STO
Properties ”), any or all of which subsidiaries of South Texas may be referred to as “Subsidiaries” and South
Texas , together with such Subsidiaries, individually or collectively, may be referred to herein as “ STO ”, all of
which collectively constitute the Party of the First Part for which the Services are to be performed, whose
address is 769 Highway 95 N., Bastrop, Texas 78602, and Sonterra Operating, Inc. , a Delaware corporation
(“ Sonterra ”), Party of the Second Part which shall perform the Services, whose address is 300 E. Sonterra
Blvd., Suite 1220, San Antonio, Texas 78258. STO and Sonterra are sometimes herein referred to together as
the “ Parties ”, and individually as a “ Party .”
WHEREAS , from and after various dates prior to the Effective Date of this Contract Operating
Agreement, (i) STO Operating has acquired, is a current owner of, and is the operator of vast majority of the
certain producing, non-producing, and undeveloped oil and gas properties located in the State of Texas owned
by STO Operating and Southern Texas (the “ Texas Properties ”); and (ii) STO Operating has acquired, is a
current owner of, and is a non-operator of the certain producing, non-producing, and undeveloped oil and gas
properties located in the State of Colorado owned by STO Properties (the “ Colorado Properties ”), which
Texas Properties and Colorado Properties are more