Sale Contract for Oil and Gas Leases between Energy Program Accompany, LLC and Penasco Petroleum, Inc., dated August 24, 2006 (regarding the Holt, McKay and Strahan Leases)

1.1     Subject to retention by EPA of the overriding royalty interests defined by Section 1.3 and for the consideration defined by Section 1.2, EPA shall sell to Buyer the property described on Exhibit "A" (hereinafter the "Property"). This sale shall be made without any warranties, either expressed or implied, as to the condition of the wells, Leases, oil, lease structures, roads, and/or equipment, except for those warranties and representations expressly made under Section 5.5.

1.2      The sale price shall be $250,000.00 (Two Hundred Fifty Thousand Dollars) that shall be paid in cash by Buyer to EPA by 2:00 pm Central Standard Time on August 25, 2006, and this cash shall be wired into EPA's account at Comerica Bank in Dallas, Texas.

1.3      EPA shall retain a six and one-quarter percent (6.25 %) overriding royalty interest on both the J.E. Holt A lease (including the #4, #10, #22, and #24 wells and all wells that may be drilled on that lease) and the Strahan lease. EPA shall also retain a one and one-quarter percent (1.25%) overriding royalty interest on the McKay lease. The overriding royalty interest shall be the specified percentage of total production without any regard to lease expenses, except for oil and gas severance taxes.

2.1    Buyer shall be responsible for any and all bills, expenses, fines, or taxes (hereinafter "Expense" or "Expenses") from any supplier, service provider, or government on the Leases that are incurred and/or billed beginning September 1, 2006 (the "Effective Date"). EPA is responsible for Expenses incurred and billed no later than August 31, 2006. Buyer shall be responsible for any property taxes incurred and/or billed after the Effective Date. Buyer shall pay any transfer taxes or fees from the sale of the Leases.

2.2     In the event that EPA receives after the Effective Date of this Agreement an Expense invoice(s) for which Buyer is responsible as governed by Section 2.1, EPA shall fax or mail the invoice to Buyer within three business days. Buyer agrees to pay EPA for the full amount of such invoice within ten days of receipt.

2.3      Buyer shall not use any EPA account established with any supplier, service provider, or government beginning on the Effective Date, except with the expressed written permission of EPA. Buyer shall establish its own accounts with all suppliers, service providers, or governments, and Buyer shall be responsible for changing billing addresses and billing names for any supplier or provider that EPA has used and that Buyer plans to use. Buyer shall also notify all such suppliers and providers that EPA no longer own the Property and are no longer responsible for payment.

2.4      Buyer shall change the billing name and account with Northeast Louisiana Power for the Holt, Mckay, and Strahan leases. Buyer shall place new deposits with Northeast Louisiana Power, and EPA shall have the right to receive back its deposits with Northeast Louisiana Power. Buyer shall have no more than thirty days from the Effective Date to cause this change.

3.1     Under the terms of Section 1.0, EPA shall execute lease assignments, bills of sale, and such other documents as deemed necessary to effectuate the transfers contemplated hereby in the reasonable discretion of Buyer (the "Transfer Documents") and shall send the same to Buyer's attorney within 5 days of the date of execution of this Agreement. The Transfer Documents shall not be recorded and are null and void until EPA is paid in full and all funds have cleared. The Transfer Documents shall be immediately released to Buyer once the above-mentioned condition and Section 3.2 are satisfied.

3.2     Within 5 days of the execution date of this Agreement, EPA and Buyer shall execute all applicable regulatory paperwork, including but not limited to Form MD-10R-AO of the Louisiana Office of Conservation, that shows the transfer of ownership and transfer of all obligations to Buyer of the Property. Buyer and EPA agree to immediately send all regulatory paperwork to the applicable regulatory agency once Buyer is approved to become an operator of record in Louisiana. Until such time as Buyer is approved and the paperwork is sent to the applicable regulatory agency, EPA shall retain possession of the original regulatory paperwork. Transfer Documents shall not be recorded and are null and void until all regulatory paperwork has been sent to the applicable regulatory agency by certified mail, return-receipt requested.

4.1     Unless otherwise requested by Buyer, Buyer shall be responsible for the day-to-day operation of the leases beginning on the Effective Date. Buyer ratifies all operating decisions made by EPA prior to Buyer's assumption of operations. EPA shall not be responsible and/or liable for any operating decisions made after the Effective Date.

4.2     Buyer shall become the operator of record with the Louisiana Office of Conservation for the leases as of the Effective Date and Buyer and EPA agree to promptly take any steps necessary to complete a change of operator with the Louisiana Office of Conservation. Buyer also agrees not to sell oil under EPA's R-4 status with the Louisiana Office of Conservation after the Effective Date. Each party shall have the right to use any means and remedies available at law, including but not limited to regulatory actions, specific performance orders, and any other court orders, to enforce the provisions of this section, and this right is exempt from the provisions of Section 7.0. Each party shall indemnify the other party for any attorney's fees and court costs if a party fails to abide by the provisions of this section.

4.3     EPA shall be responsible for any filings with the Louisiana Office of Conservation and Louisiana Department of Revenue for all time periods prior to and through August 31, 2006. Buyer shall be responsible for all filings with the Louisiana Office of Conservation and Louisiana Department of Revenue beginning September 1,2006.

4.4     Buyer understands that there is a state compliance order currently for the Holt #22 oil well that mandates the plugging and abandoning or re-commencing production of the well by November 13,2006. EPA shall have no liability on this compliance order. EPA represents that it knows of no other unresolved compliance orders, environmental violations, and/or regulatory violations on the leases listed in Exhibit A.

4.5     EPA has filed or caused to be filed all tax returns that it has been or was required to file, either separately or as a member of a consolidated group, pursuant to applicable legal requirements. All tax returns filed by (or that include on a consolidated basis) EPA are true, correct, and complete. EPA has paid all taxes that have become due pursuant to those tax returns or otherwise, or pursuant to any assessment received by EPA, to the extent not being contested in good faith. EPA does not have any knowledge of any threatened tax assessment against it.

5.1     Each party herein shall hold harmless the other party from each of their independent action(s) or transaction(s). Further, the parties herein in this contract are to be construed and interpreted as being absolutely independent entities, persons, or companies.

5.2     Each party acknowledges that both oil and gas projects are high-risk ventures, and each party expressly disclaims any warranty or guarantee, either expressed or implied, made by itself and/or the other party as to the profits or success of any business venture or of the Leases.

5.3     Each party herein expressly acknowledges that all projections, proposals, analyses, information, and/or opinions, either expressed or implied, provided by the other party and/or its management as individuals shall not be construed as legal, financial, or business advice and will not be relied on in determining any course of action of the parties herein. Each party herein expressly acknowledges that all projections, proposals, analyses, information, and/or opinions, expressed or implied, provided by the other party and/or its management as individuals may not be accurate and may not conform to reality. Each party expressly agrees to not rely on any projections, proposals, analyses, information, and/or opinions, expressed or implied, provided by the other party and/or its management as individuals, and each party expressly agrees that the other party shall not be held liable in the event such reliance does occur.

5.4     Any limitation on liability in this Section 5.0 shall not include willful and/or malicious conduct, fraud, material misrepresentation as to a party's intention in signing this Agreement, and gross negligence where one party is found guilty by a court of competent jurisdiction or arbitration panel under Section 7.0 of this Agreement.

5.5      EPA hereby represents the following:

5.6 Buyer hereby represents the following:

6.1     Any revenue or proceeds from oil sold on and/or before September 1, 2006, shal1 be solely the property of EPA. Any revenue or proceeds from oil sold on and/or after September 1, 2006 shall be the property of Buyer.

6.2     This Agreement is an exclusive contract for the purpose(s) as defined herein and neither party herein has the sole right, power, or authority to terminate or assign this Agreement.

6.3      The mutual assent of the parties herein is required to terminate or assign this Agreement, and such mutual assent shall be in writing and executed and notarized by both parties herein. This Agreement shall be terminated only after full settlement of any financial or legal affairs pending by the parties herein.

6.4      The restrictions on assignment contained in Section 6.2 shall not restrict the right of Buyer to solely assign, sell, and convey the leases listed in Exhibit A and any equipment or oil sold under this Agreement.

6.5      The parties' rights and obligations under Sections 5.0 and 7.0 shall survive the mutual assent to terminate or assign this Agreement.

7.1      Except for the exemption defined by Section 4.2, the parties agree that any dispute or unsettled issue shall be settled by arbitration. The decision of an arbitration panel shall be legal, binding, and enforceable upon all parties. Any party at any time may give written notice to the other party placing that other party on notice of the intent to arbitrate a dispute, and the other party shall comply with this notice within ten (10) business days, as defined by this Section 7.0.

7.2      Before the decision of the arbitration panel has been reached, court orders are allowed in equity for injunctions, declaratory relief, specific performance, and any other equitable remedy. Court orders are specifically allowed to compel a party to comply with the terms of this section, including but not limited to, appointment of impartial arbitrators, discovery motions, dates and times for arbitration proceedings, and any other necessary and proper procedural remedies. Except as provided in Section 7.3, each party herein waives its right to federal jurisdiction over any matter regarding this Agreement and hereby acknowledges that only arbitration and courts under the laws of the State of Texas shall have jurisdiction.

7.3      In no way shall this Section 7.0 preclude the entering and enforcement of an arbitration award in a court of competent jurisdiction as necessary to enforce collection on an arbitration judgment. An arbitration judgment may be enforced by any local, state, or federal court of applicable and competent jurisdiction. Moreover, in no way shall this Section 7.0 preclude the entering and enforcement of a collection activity, lien, attachment, specific performance order, or any other court order or award under the terms of 4.2 by any local, state or federal court of applicable and competent jurisdiction.

7.4      The parties herein agree that, in an arbitration dispute, each party shall choose an impartial arbitrator. The impartial arbitrator shall have no financial or business interest in any matter regarding the parties herein and their respective shareholders and management. The two chosen arbitrators shall choose a third impartial arbitrator suitable to both arbitrators, and an Agreement by a majority of the three arbitrators shall be the binding decision. The arbitration panel shall meet and hold proceedings in Dallas, Texas.

7.5      Each party herein specifically waives their legal right to a court review of an arbitration award or decision.

7.6      The laws of the State of Texas and the procedural guidelines of the American Arbitration Association shall govern the rules of the arbitration proceedings. Ifthere is any conflict in these rules, the laws of the State of Texas shall prevail. Upon the mutual assent of both parties herein in writing, an arbitration dispute may be submitted to the American Arbitration Association for resolution under its rules, guidelines, and proceedings.

7.7      The prevailing party in any arbitration decision or court remedy, as provided in this Section 7.0, shall be entitled to indemnification regarding any and all reasonable attorney's fees, costs, salary and expenses of arbitrators, and necessary disbursements in addition to any relief to which such a party may be entitled. Compensatory, expectation, and consequential damages are allowed in all disputes. Punitive damages are allowed only for willful and/or malicious conduct, fraud, and material misrepresentation as to a party's intention in signing this Agreement where one party is found guilty by a court of competent jurisdiction or arbitration panel under this Section 7.0 of this Agreement. A court or arbitration panel is also given power to and is encouraged to award punitive damages in the event that one party uses legal tactics and/or purposeful delays to needlessly prolong the litigation process and/or increase the costs of litigation, and the parties ag ree to expedite, prioritize, and economize any litigation between them. A court or arbitration panel may reduce compensatory. expectation, and consequential awards to a winning party otherwise guilty of prolonging litigation and/or increasing its costs.

The McKay lease (well serial number 179130) located in the S/E 1/4 of the NE 1/4 of Section 7, and the SW 1/4 of the NW 1/4 of Section 8, all in Township 16 North, Range 8 East, containing 80 acres more or less. Book 143 Page 274 and Book 129 Page 476 and Book 198 Page 407.

The BH. Strahan lease (well serial number 054307) located in the S/E 1/4 of the S/W 1/4 of Section 32, Township 17 North, Range 8 East being Humble Oil and Refining Company Contract #8519 insofar and only as said lease covers and affects the Ashland Oil Purchasing Company Lease #1161.