PIPELINE CAPACITY LEASE AGREEMENT

THIS Pipeline Capacity Lease Agreement (hereinafter referred to as the "Lease") is made and entered into this 12th day of April, 1999, by and between LaGloria Oil and Gas Company, a Delaware corporation, with a mailing address of 4747 Bellaire Boulevard, Bellaire, Texas 77401 (hereinafter referred to as "LaGloria"), and Scurlock Permian LLC, a Delaware limited liability company, with a mailing address of P. O. Box 4648, Houston, Texas 77210-4648 (hereinafter referred to as "SPLLC").

WHEREAS, SPLLC owns a pipeline system for the transportation of crude oil beginning at the inlet weld connection to SPLLC's ten-inch, 300 pound scraper trap located at LaGloria's Nettleton Station in Gregg County, Texas, proceeding southwesterly a distance of approximately 34.62 miles to a point of termination at SPLLC's Bullard Junction in Tyler, Smith County, Texas (hereinafter referred to as the "Pipeline"). The point of termination is defined as the inlet flange of the downstream ten-inch, 300 pound gate valve at SPLLC's Bullard Junction. The location of the Pipeline is shown generally on Exhibit "A" attached hereto and made a part hereof;

WHEREAS, LaGloria desires to lease the capacity of the Pipeline from SPLLC for transportation of crude oil.

NOW, THEREFORE, LaGloria and SPLLC agree as follows:

1.         TERM

a.         As used in this Lease, the term "Lease Commencement Date" shall mean January 1, 2000; and the term "Lease Year" shall mean the period from January 1 to December 31.

b.         This Lease shall have an initial term of five (5) Lease Years commencing on the Lease Commencement Date (hereinafter referred to as the "Initial Term"), unless sooner terminated as provided in Section 3 below. This Lease may be renewed thereafter on a year-to-year basis by the mutual agreement of the parties.

2.         LEASE OF CAPACITY

a.         Upon and subject to the terms and conditions set forth in this Lease, SPLLC leases all the Pipeline capacity to LaGloria for delivery of crude oil from LaGloria's Nettleton Station to SPLLC Bullard Junction.

b.         Pipeline capacity for LaGloria and other shippers, if any, shall be scheduled and transported rat ably on a month-to-month basis such that volumes actually scheduled for delivery out of the Pipeline in any month may vary.

c.         In addition to the Pipeline, SPLLC shall also provide LaGloria with the use of SPLLC's tank age at Munro Station (tank numbers 992 and 1016), with a shell capacity totaling 140,000 barrels. Nothing contained in this Lease obligates SPLLC to construct, or obtain, new or additional tank age to accommodate or increase the Pipeline capacity. The Pipeline capacity is currently 24,000 barrels of crude oil per day, however, this volume is subject to change and may be reduced due to regulatory, operational or other capacity changes during the Term of this Lease. SPLLC shall give LaGloria notice in writing in the event the Pipeline capacity is reduced.

d.         LaGloria shall deliver crude oil to SPLLC at the inlet weld connection to SPLLC's ten-inch, 300 pound scraper trap at LaGloria's Nettleton Station at 480 pounds maximum delivery pressure.

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