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August 29, 2006

Bill Beard

The Beard Company

Enterprise Plaza, Sutie 320

Oklahoma City, OK 73112

Dear Bill:

This letter will serve to confirm the conversion of $2.8 million of the PinnOak Resources, LLC loan to Beard Pinnacle LLC ("BP") under the promissory note made on or about October 7, 2005 ("Note") into equity in BP as per Section 3 of the August 10, 2006 Subscription Agreement between BP and the Pinnacle Investment Group Parties. This conversion should be effective on September 29, 2006.

Section 3 of the August 10, 2006 Subscription Agreement provides that the Subscription Consideration may be funded by a reduction of the Note. Section 3 further provides that upon the receipt of satisfactory evidence reflecting a reduction in the principal balance of the Note by the amount of the Subscription Consideration, BP will issue a Membership Interest Certificate to each Pinnacle Investment Group Party, evidencing that Pinnacle Investment Group Party's equity interest in BP. Please issue the Membership Interest Certificates to each Pinnacle

Investment Group Party in the amount set forth opposite its name on the Schedule attached

hereto.

Please consider this letter as written evidence to BP of the reduction of the principal balance of the Note by an amount equal to the Subscription Consideration, $2.8 million.

Please confirm your agreement to the contents of this letter below and return one original to me.

PINNOAK RESOURCES, LLC

By                                                                           

Michael F. Nemser

PINNACLE INVESTMENT GROUP PARTIES

By                                                                           

Michael F. Nemser

Acknowledged and agreed

this___day of_______ ,2006 by

By                                                                           

Bill Beard on behalf of Beard Pinnacle LLC

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