INTERCREDITOR AGREEMENT

This INTERCREDITOR AGREEMENT (as the same may be amended, restated, supplemented or otherwise modified from time to time, this “ Agreement ”), dated as of June 10, 2009 is among   SOUTH TEXAS OIL COMPANY, a Nevada corporation (the “ Company ”), SOUTHERN TEXAS OIL COMPANY., a Texas corporation (“ Southern Texas ”), STO OPERATING COMPANY, a Texas corporation (“ STO Operating ”), STO PROPERTIES LLC, a Texas limited liability company (“ STO Properties ”), STO DRILLING COMPANY, a Texas corporation (“ STO Drilling ”; each of Company, Southern Texas, STO Operating, STO Properties, STO Drilling and each other Person (as defined below) who guarantees, or grants a Lien (as defined below) on its assets to secure “Note Debt” (as defined below) and/or Convertible Debt (as defined below) is referred to individually as an “ Obligor ” and collectively as the “ Obligors ”), the Convertible Debt Creditors (as defined below), the Buyers (as defined below), and VIKING ASSET MANAGEMENT, LLC, a California limited liability company, in its capacity as collateral agent for itself and for the Buyers (including any successor agent, hereinafter, the “ Collateral Agent ”).

A.           The Company, The Longview Fund, L.P., a California limited partnership (“ Longview ”), and Longview Marquis Master Fund, L.P., a British Virgin Islands limited partnership (“ Marquis ”) entered into that certain Securities Purchase Agreement, dated as of April 1, 2008 (as amended, supplemented, restated or modified and in effect from time to time, the “ April Purchase Agreement ”), pursuant to which, among other things, (i) the Company issued to (a) Longview, among other things, senior secured notes in an aggregate original principal amount of $23,908,013.11 (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 otherwise modified and in effect from time to time, the “ Longview April Notes ”), and (b) Marquis, among other things, senior secured notes in an aggregate original principal amount of $8,469,337.71 (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 otherwise modified and in effect from time to time, the “ Marquis April Notes ”), and (ii) the Warrants (as defined therein) were amended and restated.

B.           Pursuant to that certain Securities Exchange Agreement dated as of February 20, 2009 between the Company and Longview and that certain Asset Purchase and Sale Agreement dated as of February 20, 2009 between the Company and Longview and certain of its affiliates, the Company issued to Longview approximately 1.6 million shares of Series A Convertible Preferred Stock of the Company and sold certain assets of the Company to Longview in exchange for the surrender and cancellation of the Longview April Notes.

C.           The Company and each of the investors listed on the Schedule of Buyers , including Marquis (the “ Initial Bridge Buyers ”) entered into a Securities Purchase Agreement, dated as of September 18, 2008 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “ Bridge Purchase Agreement ” and, together with the April Purchase Agreement, the “ Purchase Agreements ”), pursuant to which, among other things, subject to the terms and conditions set forth therein, the Company sold, and the Initial Bridge Buyers purchased, senior secured notes in the aggregate original principal amount of $7,000,000 (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 otherwise modified and in effect from time to time, the “ Initial Bridge Notes ”).

D.           Pursuant to that certain Assignment and Assumption Agreement, dated as of May 29, 2009, Marquis transferred to Summerview Marquis Fund, L.P. (“ Summerview ”; and together with the Initial Bridge Buyers, the “ Buyers ”), among other things, a portion of the Marquis April Notes in the principal amount of $2,252,994.73 (the “ Summerview Transferred April Notes ”) and a portion of the Initial Bridge Notes in the principal amount of $1,759,556.47 (the “ Summerview Transferred Bridge Notes ”), with the remainder of the Marquis April Notes in the principal amount of $6,710,038.53 (the “ Marquis Remaining April Notes ”; and together with the Summerview Transferred April Notes and 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 otherwise modified and in effect from time to time, the “ April Notes ”), and the remainder of the Marquis Bridge Notes in the principal amount of $5,240,433.53 (the “ Marquis Remaining Bridge Notes ”; and together with the Summerview Transferred Bridge Notes and 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 otherwise modified and in effect from time to time, the “ Bridge Notes ”; the Bridge Notes and the April Notes, hereinafter, collectively the “ Notes ”) continuing to be held by Marquis.

E.           The Company desires to enter into a Securities Purchase Agreement (as amended, restated, supplemented or otherwise modified and in effect from time to time as permitted hereunder, the “ Convertible Debt Purchase Agreement ”), by and among the Company and the investors, each of whom is a signatory to this Agreement pursuant to which, among other things, subject to the terms and conditions set forth therein and in this Agreement, the Company will sell, and the Convertible Debt Creditors will purchase, secured convertible notes in the aggregate original principal amount of up to $5,000,000   (such notes, together with any promissory notes or other securities issued in addition to such notes pursuant to the Convertible Debt Purchase Agreement or in exchange or substitution therefor or replacement thereof, and as any of the same may be amended, supplemented, restated or otherwise modified and in effect from time to time as permitted hereunder, the “ Convertible Notes ”) and warrants to purchase shares of common stock of the Company.

NOW, THEREFORE, in reliance upon this Agreement, to induce the Buyers to consent to the execution by the Company of the Convertible Debt Purchase Agreement and the issuance of the Convertible Notes and to continue to extend the credit accommodations under the Purchase Agreements, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto hereby agree as follows:

1.            Definitions .  All capitalized terms used but not elsewhere defined in this Agreement shall have the respective meanings ascribed to such terms in the Purchase Agreements and the Notes. The following terms shall have the following meanings in this Agreement:

Bankruptcy Code shall mean the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101, et seq.), as amended and in effect from time to time, together with any successor statute thereto, and the regulations issued from time to time thereunder.

Business Day shall mean any day that is not a Saturday, a Sunday or a day on which banks are required or permitted to be closed in the State of New York.

Collateral shall mean, subject to the limitations set forth in Section 11.3, those certain oil and gas properties listed on Exhibit A hereto.

Collateral Proceeds shall mean all proceeds (a) acquired upon the exercise of any Enforcement Action against the Collateral by any Party, (b) acquired upon the voluntary or involuntary sale, exchange or other disposition of any Collateral (including a disposition in a Proceeding), or (c) of insurance policy claims and condemnation awards with respect to any Collateral.

Convertible Debt Creditor   shall   mean each Convertible Debt Creditor which is signatory to this Agreement and any other holder of a Convertible Note or any other Convertible Debt from time to time, together with each such Person’s successors and assigns.

Convertible Debt shall mean all of the obligations and liabilities of Obligors to Convertible Debt Creditors evidenced by the Convertible Notes and all other amounts and other obligations and liabilities now or hereafter owed by Obligors to Convertible Debt Creditors pursuant to the Convertible Debt Documents.

Convertible Debt Documents shall mean the Convertible Notes, Convertible Debt Purchase Agreement and all other documents and instruments evidencing, securing or pertaining to any portion of the Convertible Debt, as amended, supplemented, restated or otherwise modified from time to time to the extent permitted hereunder.

Enforcement Action shall mean (a) the exercise of any rights and remedies with respect to the Collateral in respect of the Note Debt or the Convertible Debt by the applicable holder thereof, (b) any action by any Note Party or any Convertible Debt Creditor to foreclose on the Collateral, (c) any action by any Note Party or any Convertible Debt Creditor to take possession of, sell or otherwise realize (judicially or otherwise) upon the Collateral and/or (d) the commencement by any Note Party or any Convertible Debt Creditor of any legal proceedings against any Obligor or with respect to any Collateral to facilitate the actions described in clauses (a) through (c) above.

Hydrocarbon   shall mean all oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined therefrom and all other minerals in and under and which may be produced and saved from or attributable to the Collateral, the lands pooled or unitized therewith and Note Parties’ and Convertible Debt Creditors’ interests therein.

Lien shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or otherwise) or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under a lease which is not a capital lease.

Note Debt shall mean the obligations, liabilities and other amounts owed under any Purchase Agreement, any Note or any other Transaction Document including all interest, fees, expenses, indemnities and enforcements costs, whether before or after the commencement of a Proceeding and without regard to whether or not an allowed claim, together with any amendments, restatements, modifications, renewals or extensions of any thereof.

Note Default shall mean any “Event of Default” under any Purchase Agreement, any Note, or any other Note Document.

Note Documents shall mean the collective reference to the Purchase Agreements, the Notes, and each of the other agreements to which any Obligor is a party or is bound in connection with the transactions contemplated under the Purchase Agreements and the Notes, as the same may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted hereunder.

Note Parties shall mean any holder of Note Debt, including, without limitation, Collateral Agent and the Buyers.

Obligor shall have the meaning ascribed to such term in the preamble of this Agreement, together with any such Person’s successors and assigns, including a receiver, trustee or debtor-in-possession on behalf of such Person.

Paid in Full or Payment in Full shall mean the indefeasible payment in full in cash of all Note Debt and termination of all commitments to lend under the Note Documents.

Parties   shall mean   the Note   Parties and the Convertible Debt Creditors.

Permitted Convertible Debt Payments   means the following payments in respect of the Convertible Debt, in each instance due and payable on a non-accelerated basis in accordance with the terms of the Convertible Debt Documents as in effect on the date hereof or as modified in accordance with the terms of this Agreement:

(a)           regularly scheduled payments of interest on the Convertible Debt payable in cash at the non-default cash pay rate of interest of fourteen percent (14%) per annum;

(b)           regularly scheduled payments of principal on the Convertible Debt; and

(c)           accrual (and not payment in cash) of default interest.

Person shall mean any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, public benefit corporation or other entity whether governmental (whether federal, state, county, city, municipal, local, foreign, or otherwise, including any instrumentality, division, agency, body or department thereof) or otherwise.

Proceeding shall mean any voluntary or involuntary insolvency, bankruptcy, receivership, custodianship, liquidation, dissolution, reorganization, assignment for the benefit of creditors, appointment of a custodian, receiver, trustee or other officer with similar powers or any other proceeding for the liquidation, dissolution or other winding up of any Obligor or any of its Subsidiaries or any of their respective properties, in each case undertaken under any federal, state, local, foreign or other law, rule, or regulation, including, without limitation, the Bankruptcy Code.

Pro Rata Share means, with respect to any Party, the percentage obtained by dividing (a) the sum of the aggregate outstanding amount of the Note Debt or the Convertible Debt, as applicable, held by such Party, by (b) the sum of the aggregate outstanding amount of the Note Debt and the Convertible Debt held by all Parties.

Requisite Convertible Debt Creditors shall mean at any time Convertible Debt Creditors holding more than fifty percent (50%) of the aggregate outstanding principal balance of the Convertible Debt.

2.            Intercreditor Arrangements .

2.1            Subordination .  Except as expressly set forth in Section 2.5 below, the payment and performance of any and all of the Convertible Debt is hereby expressly subordinated, to the extent and in the manner set forth herein, to the Payment in Full of the Note Debt.  Each holder of the Note Debt, whether now outstanding or hereafter arising, shall be deemed to have acquired Note Debt in reliance upon the provisions contained herein.  The parties hereto intend that this Agreement be enforceable in any Proceeding.

2.2            Restriction on Payments .  Except as expressly set forth in Section 2.5 below, notwithstanding any provision of the Convertible Debt Documents to the contrary and in addition to any other limitations set forth herein or therein, no payment (whether made in cash, securities or other property or by set-off) of principal, interest or any other amount due with respect to the Convertible Debt shall be made or received, and no Convertible Debt Creditor shall exercise any right of set-off or recoupment with respect to any Convertible Debt, until all of the Note Debt is Paid in Full; provided , however , (a) Convertible Debt Creditors may at any time (including, but not limited to, during the existence of a Note Default) convert all or any portion of the Convertible Debt into common stock of the Company pursuant to the terms and conditions of the Convertible Notes and (b) except as provided in the immediately succeeding sentence, Obligors may make and Convertible Debt Creditors may accept Permitted Convertible Debt Payments. Notwithstanding the foregoing, no Obligor may make, and no Convertible Debt Creditor may receive, any payment of principal, interest or any other amount with respect to the Convertible Debt if, at the time of such payment or immediately after giving effect thereto a Note Default exists or would arise from the making of such payment.  Obligors may resume Permitted Convertible Debt Payments (and may make any Permitted Convertible Debt Payments missed due to the application of this Section 2.2) in respect of the Convertible Debt upon the earlier to occur of (i) the waiver (as evidenced by a written waiver from the applicable Note Parties to the applicable Obligors) or cure of such Note Default in accordance with the terms of the applicable Note Documents or (ii) Payment in Full of the Note Debt.

2.3            Acknowledgment of Liens .  The Note Parties and the Convertible Debt Creditors hereby acknowledge that the other Person has been granted Liens upon the Collateral to secure the Note Debt and the Convertible Debt, as the case may be.  Each of the Collateral Agent and the Convertible Debt Creditors shall be solely responsible for perfecting and maintaining the perfection of their respective Liens on the Collateral.  The terms of this Agreement shall continue to govern the relative rights of the Note Parties, on the one hand, and the Convertible Debt Creditors, on the other hand, (a) even if all or any part of the Liens in favor of any Party are subordinated, avoided, disallowed, unperfected, set aside or otherwise invalidated, whether pursuant to a Proceeding, any other judicial proceeding or otherwise, and (b) regardless of the relative rank or priority of the Liens securing the Note Debt and the Convertible Debt.    This Agreement shall constitute a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code and this Agreement constitutes an authenticated notification of a claim by each of the Note Parties and the Convertible Debt Creditors to the other secured creditor of an interest in the Collateral in accordance with the provisions of Sections 9-611 and 9-621 of the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in the State of New York (the “ Code ”).

2.4            Proceedings .  Except as expressly set forth in Section 2.5 below, in the event of a Proceeding: (a) all Note Debt first shall be Paid in Full before any payment (whether made in cash, securities or other property or by set-off, but excluding any conversion of the Convertible Debt into common stock of the Company pursuant to the terms and conditions of the Convertible Notes) of or with respect to the Convertible Debt shall be made; (b) any payment which, but for the terms hereof, otherwise would be payable or deliverable in respect of the Convertible Debt, shall be paid or delivered directly to Collateral Agent (to be held and/or applied by Collateral Agent to the repayment of any and all then outstanding Note Debt in accordance with the terms of the applicable Purchase Agreement) until all Note Debt is Paid in Full, and each Convertible Debt Creditor irrevocably authorizes, empowers and directs all receivers, trustees, liquidators, custodians, conservators and others having authority in the premises to effect all such payments and deliveries, and each Convertible Debt Creditor also irrevocably authorizes, empowers and directs Collateral Agent to demand, sue for, collect and receive every such payment or distribution; (c) each Convertible Debt Creditor agrees to execute and deliver to Collateral Agent or its representative all such further instruments confirming the authorization referred to in the foregoing clause (b); and (d) each Convertible Debt Creditor agrees to execute, verify, deliver and file any proofs of claim in respect of the Convertible Debt requested by Collateral Agent in connection with any such Proceeding and hereby irrevocably authorizes, empowers and appoints Collateral Agent its agent and attorney-in-fact to execute, verify, deliver and file such proofs of claim upon the failure of such Convertible Debt Creditor promptly to do so (and in any event prior to fifteen (15) days before the expiration of the time to file any such proof); provided Collateral Agent shall have no obligation to execute, verify, deliver, and/or file any such proof of claim.

2.5            Pro Rata Payments; Incorrect Payments .

(a)           Notwithstanding any provision of the Convertible Debt Documents or the Note Documents to the contrary and in addition to any other limitations set forth herein or therein, all Collateral Proceeds received by the Note Parties or the Convertible Debt Creditors shall be applied to the Note Debt and the Convertible Debt in accordance with the Pro Rata Share of the Note Parties and the Convertible Debt Creditors.  In the event that any Collateral Proceeds are received by any Party in an amount in excess of its Pro Rata Share thereof (whether pursuant to an Enforcement Action, during a Proceeding, in connection with any insurance policy claim or condemnation award (or deed in lieu of condemnation), from the collection or other sale or disposition of, or realization on, the Collateral, in violation of this Agreement, or otherwise), then such excess Collateral Proceeds shall not be commingled with any of the assets of such Party, shall be received and held in trust for the benefit of the other Party and shall be promptly paid over to the other Party.

(b)           If any payment or distribution (whether made in cash, securities or other property) not permitted under this Agreement is received by any Convertible Debt Creditor on account of the Convertible Debt before all Note Debt is Paid in Full, such payment shall not be commingled with any asset of such Convertible Debt Creditor, shall be held in trust by such Convertible Debt Creditor for the benefit of Note Parties and shall immediately be paid over to Collateral Agent, or its designated representative, for application to the payment of the Note Debt then remaining unpaid, until all of the Note Debt is Paid in Full.

(c)           Each Obligor hereby acknowledges that provisions of this Agreement require the Convertible Debt Creditors to pay over to the Collateral Agent on behalf of the Note Parties any payments received by the Convertible Debt Creditors in contravention of this Agreement, and hereby irrevocably authorizes such payment to the Collateral Agent on behalf of such Note Parties, notwithstanding any instructions to the contrary that such Obligor may deliver to the Convertible Debt Creditors after the date hereof.  Each Obligor hereby acknowledges that no such payment shall reduce the amount or otherwise alter the obligations under the Convertible Debt or the Convertible Debt Documents.

2.6            Sale, Transfer .

(a)           Each Party agrees that it shall be bound by the terms, provisions and conditions of this Agreement, in its capacity as a Note Party or a Convertible Debt Creditor, whether or not such Person has executed a counterpart of this Agreement.

(b)           No Party shall sell, assign, dispose of or otherwise transfer all or any portion of the Note Debt or the Convertible Debt, or the Liens on the Collateral securing same, unless prior to the consummation of any such action, the transferor and transferee thereof shall execute and deliver a joinder to this Agreement in form and substance reasonably acceptable to the Note Parties or the Requisite Convertible Debt Creditors, as applicable, or an agreement substantially identical to this Agreement, in either case providing for the continued effectiveness of all of the rights of the Parties arising under this Agreement.

(c)           Notwithstanding the failure to execute or deliver any such agreement, the terms of this Agreement effected hereby shall survive any sale, assignment, disposition or other transfer of all or any portion of the Note Debt or the Convertible Debt, and the terms of this Agreement shall be binding upon the successors and assigns of each Party as provided in Section 9 below.

2.7            Restriction on Actions .

(a)           Notwithstanding anything contained in the Convertible Debt Documents to the contrary, no Convertible Debt Creditor shall, without the prior written consent of the Note Parties,