This Subscription Agreement (this “ Agreement” ) is made as of September 26, 2007 by
and between HALLADOR PETROLEUM COMPANY, a Colorado corporation (the “ Corporation ”)
and YORKTOWN ENERGY PARTNERS VII, L.P., a Delaware limited liability company (“
Subscriber hereby subscribes for 2,419,355 shares (the “ Shares ”) of the
Corporation’s common stock, par value $0.01 per share (the “ Common Stock ”), at a subscription
price of $3.10 per share (the “ Per Share Subscription Price ”), for a total subscription price of
$7,500,000.50 (the “ Total Subscription Price ”).
The closing of the sale and purchase of the Shares (the “ Closing ”) will take
place in the offices of Morgan, Lewis & Bockius LLP, 300 S. Grand Avenue, Suite 2200, Los
Angeles, California 90071 at 9:00 a.m. local time on October 5, 2007, or such later date and time
as the Corporation and Subscriber agree (the “ Closing Date ”). At the Closing, (i) the Corporation
will deliver to Subscriber a copy of this Agreement countersigned by the Corporation, and
(ii) Subscriber will pay the Total Subscription Price to the Corporation by wire transfer of
immediately available funds to an account designated by the Corporation to Subscriber in writing.
Subject to the Closing, the Corporation shall cause its transfer agent to issue a certificate
representing the Shares in the name of Subscriber and to deliver such certificate to Subscriber at
the address set forth on the signature page hereto, within five (5) business days after the date on
which the Closing occurs.
Acknowledgments . Subscriber hereby acknowledges that Subscriber, either alone
or together with Subscriber’s advisors (if any), has read, understands and agrees with and to the
AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF
RISK; THE CORPORATION MAY NEED ADDITIONAL CAPITAL IN THE FUTURE TO REACH ITS
GROWTH OBJECTIVES OR MEE