GUARANTY

This GUARANTY (as amended, restated, supplemented, or otherwise modified and in effect from time to time, this “ Guaranty ”) is made as of this 13th day of November, 2008, jointly and severally, by NORTH TEXAS DRILLING SERVICES, INC. , a Texas corporation (“ North Texas ”), SONTERRA OPERATING, INC. , a Delaware corporation (“ Operating ”), VELOCITY ENERGY LIMITED LLC , a Texas limited liability company (“ Limited ”), VELOCITY ENERGY INC., a Delaware corporation (“ Velocity ”), VELOCITY ENERGY OFFSHORE LP, a Delaware limited partnership (“ Offshore ”), VELOCITY ENERGY PARTNERS LP , a Delaware limited partnership (“ Onshore ”; North Texas, Operating, Limited, Velocity, Offshore and Onshore, together with each other person or entity who becomes a party to this Guaranty by execution of a joinder in the form of Exhibit A attached hereto, is referred to individually as a “ Guarantor ” and collectively as the “ Guarantors ”; provided, that the parties hereto agree that, as of the date hereof, North Texas, Operating, Limited, Velocity, Offshore and Onshore are the only Guarantors) in favor of SUMMERLINE ASSET MANAGEMENT, LLC , a Delaware limited liability company in its capacity as collateral agent (together with its successors and assigns in such capacity, the “ 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 ”).

WHEREAS , as of the date hereof, Buyers have made loans and certain other financial accommodations (collectively, the “ Loans ”) to SONTERRA RESOURCES, INC., a Delaware corporation (the “ Company ”), as evidenced by those certain senior secured notes of even date herewith in an original aggregate principal amount of $8,875,000   (such notes, together with any promissory notes or other securities issued in exchange or substitution therefor or replacement thereof, and as any of the same may be amended, supplemented, restated or modified and in effect from time to time, the “ Notes ”);

WHEREAS , the Notes are being acquired by Buyers pursuant to a Securities Purchase Agreement dated as of even date herewith among the Buyers and the Company (as the same may be amended, restated, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”);

WHEREAS , pursuant to a Pledge Agreement of even date herewith by the Company in favor of the Collateral Agent, the Company has pledged a lien on and security interest in all of the issued and outstanding Capital Stock of North Texas, Limited, Velocity, Onshore, Offshore and Operating owned by the Company;

WHEREAS , pursuant to a Pledge Agreement of even date herewith by Limited in favor of the Collateral Agent, Limited has pledged a lien on and security interest in all of the issued and outstanding Capital Stock of Onshore and Offshore owned by Limited;

WHEREAS , pursuant to a Security Agreement of even date herewith (as the same may be amended, restated, supplemented or otherwise modified and in effect from time to time, the “ Security Agreement ”) by the “Debtors” (as defined therein) in favor of the Collateral Agent, such Debtors have granted the Collateral Agent, for its benefit and 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); and

WHEREAS , the Guarantors are direct or indirect subsidiaries of the Company and, as such, will derive substantial benefit and advantage from the Loans and other financial accommodations available to the Company set forth in the Purchase Agreement, the Notes and the other Transaction Documents, and it will be to each Guarantor’s direct interest and economic benefit to assist the Company in procuring said Loans and other financial accommodations from Buyers.

NOW, THEREFORE , for and in consideration of the premises and in order to induce Buyers to make the Loans, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby jointly and severally 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.

“ Obligations ” shall mean (i) all obligations, liabilities and indebtedness of every nature of the Company from time to time owed or owing to the Buyers and Collateral Agent, including, without limitation, all obligations, liabilities and indebtedness of every nature of the Company under the Security Documents, the Purchase Agreement, the Notes, the Loans, the Warrants, and the other Transaction Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, taxes, indemnities, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable, whether before or after the filing of a bankruptcy, insolvency or similar proceeding under applicable federal, state, foreign or other law and whether or not an allowed claim in any such proceeding, and (ii) all obligations, liabilities and indebtedness of every nature of any subsequent Guarantor from time to time owed or owing to the Buyers and/or Collateral Agent, including, without limitation, all obligations, liabilities and indebtedness of every nature of the Guarantors under or in respect of this Guaranty, the Pledge Agreement, the Security Agreement, the Purchase Agreement, the Notes, the Loans, the Warrants, the other Security Documents and the other Transaction Documents, as the case may be, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, taxes, indemnities, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from time to time hereafter owing, due or payable, whether before or after the filing of a bankruptcy, insolvency or similar proceeding under applicable federal, state, foreign or other law and whether or not an allowed claim in any such proceeding.

(a)   Each Guarantor, jointly and severally, hereby unconditionally and irrevocably guarantees the full and prompt payment and performance to Buyers and Collateral Agent, on behalf of itself and in its capacity as 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 Buyers 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 any Buyer or 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, Collateral Agent and Buyers 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.

3.   Costs and Expenses .   Each Guarantor, jointly and severally, agrees to pay on demand, all costs and expenses of every kind incurred by any Buyer or 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 or preserving 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, in each case, to the extent Buyer or Collateral Agent may take such action pursuant to the terms and conditions of this Agreement. “ Costs and expenses ” as used in the preceding sentence shall include, without limitation, reasonable attorneys’ fees incurred by any Buyer or Collateral Agent in retaining legal 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.

(a)   This Guaranty is and is intended to be a continuing guaranty of payment of the Obligations, and not of collectibility, and is intended to be independent of and in addition to any other guaranty, endorsement, collateral or other agreement held by Buyers or Collateral Agent therefor or with respect thereto, whether or not furnished by a Guarantor. None of Buyers and Collateral Agent shall be required to prosecute collection, enforcement or other remedies against Company, any other Guarantor or guarantor of the Obligations or any other person or entity, or to enforce or resort to any of the Collateral or other rights or remedies pertaining thereto, before calling on a Guarantor for payment. The obligations of each Guarantor to repay the Obligations hereunder shall be unconditional. Guarantor shall have no right to exercise any right of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which it may now or hereafter have against the Company in connection with this Guaranty until the termination of this Guaranty in accordance with Section 8 below, and hereby waives any benefit of, and any right to participate in, any security or collateral given to Buyers to secure payment of the Obligations, and each Guarantor agrees that it will not take any action to enforce any obligations of the Company to such Guarantor prior to the Obligations being finally paid in full in cash, provided that, in the event of the bankruptcy or insolvency of the Company, to the extent the Obligations have not been finally paid in full in cash, Collateral Agent, for the benefit of itself and Buyers, and Buyers shall be entitled notwithstanding the foregoing, to file in the name of any Guarantor or in its own name a claim for any and all indebtedness owing to a Guarantor by the Company (exclusive of this Guaranty), vote such claim and to apply the proceeds of any such claim to the Obligations.

(b)   For the further security of Buyers 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 Buyers and Collateral Agent and promptly following receipt shall be paid over to Collateral Agent, for its benefit and in its capacity as collateral agent for the benefit of Buyers, until all of the Obligations have been paid in full in cash.

(c)   This Guaranty 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 Buyers. 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. This Agreement, together with the other Transaction Documents, supersedes all other prior oral or written agreements between each Buyer, the Guarantors, the Collateral Agent, the Subsidiaries, their Affiliates and Persons acting on their behalf with respect to the matters discussed herein, and this Agreement, together with the other Transaction Documents and the other instruments referenced herein and therein, contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither any Guarantor, the Collateral Agent nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. As of the date of this Agreement, there are no unwritten agreement between the parties with respect to the matters discussed herein. No provision of this Agreement may be amended, modified or supplemented other than by an instrument in writing signed by the parties hereto.

(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 government 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 any Buyer or 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.

(a)   Each Guarantor acknowledges and agrees that Buyers and Collateral Agent, for its benefit and as collateral agent for the benefit of Buyers, 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 endorsement or guaranty of payment of the Obligations or any part thereof, and discharge, release or substitute any such obligation of any such endorser 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 endorser, guarantor, or person or entity;

(iv)   dispose of any and all collateral securing the Obligations in any commercially reasonable manner (to the extent required under applicable law) as the Collateral Agent, in its reasonable discretion, may consider 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 Collateral Agent in its sole discretion may determine;

(v)   subject to the terms of the Notes, 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 Buyers might lawfully have elected to apply such payments to the Obligations or 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 Collateral Agent, 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 Buyers or Collateral Agent be responsible or shall any Guarantor be released either in whole or in part for any act or omission in connection with Buyers or Collateral Agent having sold any security at less than its value; provided any such sale was conducted in a commercially reasonable manner (to the extent required under applicable law).

(b)   Following the occurrence and during the continuance of an Event of Default, and upon demand by Collateral Agent, each Guarantor, jointly and severally, hereby agrees to pay the Obligations to the extent hereinafter provided and to the extent unpaid:

(i)   without deduction by reason of any setoff, defense (other than payment) or counterclaim of the Company or any other Guarantor;

(ii)   without requiring presentment, protest or notice of nonpayment or notice of default to any Guarantor, to the Company or to any other person or entity;

(iii)   without demand for payment or proof of such demand or filing of claims with a court in the event of receivership, bankruptcy or reorganization of the Company or any othe