GUARANTY

This GUARANTY (this “ Guaranty ”) is made as of this 19th day of September, 2008, by Southern Texas Oil Company, a Texas corporation, STO Operating Company, a Texas corporation formerly known as Leexus Operating Company, STO Properties LLC, a Texas limited liability company, and STO Drilling Company, a Texas corporation, (each such entity, together with each other entity that becomes a party to this Guaranty, is referred to individually as a “ Guarantor ” and collectively as the “ Guarantors ”) in favor of Viking Asset Management, LLC, a California limited liability company (“ Collateral Agent ”), in its capacity as collateral agent for the benefit of the entities identified on the Schedule of Buyers attached to the Purchase Agreement defined below (together with their successors and assigns, the “ Buyers ”).

A.   WHEREAS, South Texas Oil Company, a Nevada corporation (“ Company ”), and Buyers have entered into that certain Securities Purchase Agreement dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the " Purchase Agreement "), pursuant to which, among other things, the Company is issuing to Buyers the Bridge Notes (as defined in the Purchase Agreement) (the Bridge Notes are referred to herein collectively as the “ Notes ”); 

B.   WHEREAS, pursuant to a Security Agreement of even date herewith (as same may be amended, restated, modified or supplemented and in effect from time to time, the “ Security Agreement ”) among the Company, the Guarantors and Collateral Agent, the Guarantors have granted the Collateral Agent, for the benefit of the Buyers, a first priority security interest in, lien upon and pledge of each of their rights in the Collateral (as defined in the Security Agreement).

C.   WHEREAS, the Guarantors are direct or indirect subsidiaries or affiliates of Company and, as such, will derive substantial benefit and advantage from the funds received from the sale of the Notes, and it will be to each Guarantor’s direct interest and economic benefit to assist the Company in procuring such funds.

NOW, THEREFORE , for and in consideration of the premises and in order to induce Buyers to purchase the Notes, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby agrees as follows:

1.   Definitions : Capitalized terms used herein without definition and defined in the Purchase Agreement are used herein as defined therein. In addition, as used herein:

“Bankruptcy Code” shall mean the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et seq.), as amended and in effect from time to time thereunder.

“Event of Default” shall have the meaning set forth in the Notes.

“Obligations” shall have the meaning set forth in the Security Agreement.

(a)   Each Guarantor, jointly and severally, hereby unconditionally and irrevocably guarantees the full and prompt payment and performance to Collateral Agent, for

the benefit of Buyers, when due, upon demand, at maturity or by reason of acceleration or otherwise and at all times thereafter, of any and all of the Obligations.

(b)   Each Guarantor acknowledges that valuable consideration supports this Guaranty, including, without limitation, the consideration set forth in the recitals above, as well as any commitment to lend, extension of credit or other financial accommodation, whether heretofore or hereafter made by Collateral Agent to the Company; any extension, renewal or replacement of any of the Obligations; any forbearance with respect to any of the Obligations or otherwise; any cancellation of an existing guaranty; any purchase of any of the Company’s assets by the Collateral Agent; or any other valuable consideration.

(c)   Each Guarantor agrees that all payments under this Guaranty shall be made in United States currency and in the same manner as provided for the Obligations.

(d)   Notwithstanding any provision of this Guaranty to the contrary, it is intended that this Guaranty, and any interests, liens and security interests granted by Guarantors as security for this Guaranty, not constitute a “Fraudulent Conveyance” (as defined below) in the event that this Guaranty or such interest is subject to the Bankruptcy Code or any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state. Consequently, Guarantors and Collateral Agent agree that if this Guaranty, or any such interests, liens or security interests securing this Guaranty, would, but for the application of this sentence, constitute a Fraudulent Conveyance, this Guaranty and each such lien and security interest shall be valid and enforceable only to the maximum extent that would not cause this Guaranty or such interest, lien or security interest to constitute a Fraudulent Conveyance, and this Guaranty shall automatically be deemed to have been amended accordingly at all relevant times. For purposes hereof, “ Fraudulent Conveyance ” means a fraudulent conveyance under Section 548 of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the provisions of any applicable fraudulent conveyance or fraudulent transfer law or similar law of any state, as in effect from time to time.

Each Guarantor, jointly and severally, agrees to pay on demand, all costs and expenses of every kind incurred by the Collateral Agent: (a) in enforcing this Guaranty, (b) in collecting any of the Obligations from the Company or any Guarantor, (c) in realizing upon or protecting any collateral for this Guaranty or for payment of any of the Obligations, and (d) in connection with any amendment of, modification to, waiver or forbearance granted under, or enforcement or administration of any Transaction Document or for any other purpose in connection with any Transaction Document to the extent Company or any Guarantor has an obligation to reimburse the Collateral Agent for same pursuant to the terms thereof. The term “ costs and expenses ” as used in the preceding sentence shall include, without limitation, reasonable attorneys’ fees incurred by any Collateral Agent in retaining counsel for advice, suit, appeal, any insolvency or other proceedings under the Bankruptcy Code or otherwise, or for any purpose specified in the preceding sentence.

(b)   For the further security of Collateral Agent and without in any way diminishing the liability of the Guarantors, following the occurrence of an Event of Default, all debts and liabilities, present or future of the Company to the Guarantors and all monies received from the Company or for its account by the Guarantors in respect thereof shall be received in trust for Collateral Agent and forthwith upon receipt shall be paid over to Collateral Agent until all of the Obligations have been paid in full in cash. This assignment and postponement is independent of and severable from this Guaranty and shall remain in full effect whether or not any Guarantor is liable for any amount under this Guaranty.

(c)   This Guaranty is absolute and unconditional and shall not be changed or affected by any representation, oral agreement, act or thing whatsoever, except as herein provided. This Guaranty is intended by the Guarantors to be the final, complete and exclusive expression of the guaranty agreement between the Guarantors and Collateral Agent. No modification or amendment of any provision of this Guaranty shall be effective against any party hereto unless in writing and signed by a duly authorized officer of such party.

(d)   Each Guarantor hereby releases the Company from all, and agrees not to assert or enforce (whether by or in a legal or equitable proceeding or otherwise) any “claims” (as defined in Section 101(5) of the Bankruptcy Code), whether arising under any law, ordinance, rule, regulation, order, policy or other requirement of any domestic or foreign Governmental Authority or any instrumentality or agency thereof, having jurisdiction over the conduct of its business or assets or otherwise, to which the Guarantors are or would at any time be entitled by virtue of its obligations hereunder, any payment made pursuant hereto or the exercise by Collateral Agent of its rights with respect to the Collateral, including any such claims to which such Guarantors may be entitled as a result of any right of subrogation, exoneration or reimbursement.

5.   Certain Rights and Obligations .

(a)   Each Guarantor acknowledges and agrees that Collateral Agent (or, in the case of clause (i) below, Collateral Agent or any Buyer, as applicable) may, without notice, demand or any reservation of rights against such Guarantor and without affecting such Guarantor’s obligations hereunder, from time to time:

(i)   renew, extend, increase, accelerate or otherwise change the time for payment of, the terms of or the interest on the Obligations or any part thereof or grant other indulgences to the Company or others;

(ii)   accept from any person or entity and hold collateral for the payment of the Obligations or any part thereof, and modify, exchange, enforce or refrain from enforcing, or release, compromise, settle, waive, subordinate or surrender, with or without consideration, such collateral or any part thereof;

(iii)   accept and hold any indorsement or guaranty of payment of the Obligations or any part thereof, and discharge, release or substitute any such obligation of any such indorser or guarantor, or discharge, release or compromise any Guarantor, or any other person or entity who has given any security interest in any collateral as security for the payment of the Obligations or any part thereof, or any other person or entity in any way obligated to pay the Obligations or any part thereof, and enforce or refrain from enforcing, or compromise or modify, the terms of any obligation of any such indorser, guarantor, or person or entity;

(iv)   dispose of any and all collateral securing the Obligations in its sole discretion, as it may deem appropriate, and direct the order or manner of such disposition and the enforcement of any and all endorsements and guaranties relating to the Obligations or any part thereof as it in its sole discretion may determine;

(v)   determine the manner, amount and time of application of payments and credits, if any, to be made on all or any part of any component or components of the Obligations (whether principal, interest, fees, costs, and expenses, or otherwise), including, without limitation, the application of payments received from any source to the payment of indebtedness other than the Obligations even though Collateral Agent might lawfully have elected to apply such payments to the Obligations to amounts which are not covered by this Guaranty; and

(vi)   take advantage or refrain from taking advantage of any security or accept or make or refrain from accepting or making any compositions or arrangements when and in such manner as it, in its sole discretion, may deem appropriate;

and generally do or refrain from doing any act or thing which might otherwise, at law or in equity, release the liability of such Guarantor as a guarantor or surety in whole or in part, and in no case shall Collateral Agent be responsible, nor shall any Guarantor be released either in whole or in part for