SECURITIES PURCHASE AGREEMENT

EXHIBIT 99.1

THIS AGREEMENT AND THE PAYMENT OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THE INTERCREDITOR AGREEMENT TO THE NOTE DEBT (AS DEFINED IN THE INTERCREDITOR AGREEMENT).

This SECURITIES PURCHASE AGREEMENT (the “ Agreement ”), dated as of June   10, 2009, by and among South Texas Oil Company, a Nevada corporation with its principal offices located at 300 E. Sonterra Blvd., Suite 1220, San Antonio, Texas 78258 (the “ Company ”), and each of the investors listed on the Schedule of Buyers attached hereto (each individually, a “ Buyer ,” and collectively, the “ Buyers ”).

WHEREAS , The Company and each of the Buyers are executing and delivering this Agreement and the securities described herein in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D (“ Regulation D ”) as promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended (the “ 1933 Act ”);

WHEREAS , the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Buyers, as provided herein, and the Buyers, in the aggregate, shall purchase Four Hundred Eighty Thousand Dollars ($480,000) (the “ Purchase Price ”) in principal amount of convertible promissory notes of the Company (the “ Notes ”), convertible into shares of the Company’s $0.001 par value common stock (“ Common Stock ”) as provided therein, each in the form attached hereto as Exhibit A , bearing annual interest of 14%, and share purchase warrants (the “ Warrants ”), each in the form attached hereto as Exhibit B , to purchase shares of Common Stock (the “ Warrant Shares ”), and agree that the Company may subsequently issue and sell additional notes, in a form substantially similar to the Notes, and warrants, in a form substantially similar to the Warrants, to other investors (“ Additional Investors ”), pursuant to securities purchase agreements in a form substantially similar to this Agreement;

WHEREAS ,   contemporaneously with the Closing, STO Operating Company and STO Properties, LLC, each a direct or indirect wholly owned subsidiary of the Company (collectively, the “ Applicable Subsidiaries ”)   will execute and deliver to the Buyers one or more mortgages, each in the form attached as Exhibit C , pursuant to which the Applicable Subsidiaries shall grant to the Buyers security interests (the “ Mortgages ”) in certain oil and gas properties in which the Company has an interest, as described therein   (the “ Collateral ”), and in which the Company may grant security interests to Additional Investors;

WHEREAS ,   contemporaneously with the Closing, each of the Applicable Subsidiaries will execute and deliver a Guaranty, in the form attached hereto as Exhibit D (as the same may be amended, supplemented, restated or otherwise modified and in effect from time to time, the “ Subsidiary Guaranty ,” and the guarantees under the Subsidiary Guaranty, the “ Subsidiary Guarantees ”), pursuant to which the Applicable Subsidiaries shall guaranty the Obligations (as defined in the Mortgages);

WHEREAS, contemporaneously with the Closing, each of the Buyers, the Company and the Subsidiaries will execute and deliver to the Existing Senior Buyers and the Bridge Buyers (each as defined below) an intercreditor agreement, substantially in the form attached hereto as Exhibit E (as may be amended, supplemented, restated or otherwise modified and in effect from time to time, the “ Intercreditor Agreement ”), setting forth the rights and obligations of the Buyers and (i) the holders (the “ Existing Senior Buyers ”) of those certain secured notes, issued on April 1, 2008 (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 “ Existing Senior Notes ”), pursuant to that certain Securities Purchase Agreement, dated as of April 1, 2008 (the “ Existing Senior Purchase Agreement ”), among the Company and the investors party thereto, and (ii) the holders (the “ Bridge Buyers ”) of those certain senior secured notes, issued on September 19, 2008 (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 “ Bridge Notes ” and, together with the Existing Senior Notes, the “ Senior Notes ”), pursuant to that certain Securities Purchase Agreement, dated as of September 19, 2008 (the “ Bridge Purchase Agreement ”), among the Company and the investors party thereto; and

WHEREAS , contemporaneously with the Closing, the Company, the Subsidiaries and the Buyers will execute and deliver to the Existing Senior Buyers and the Bridge Buyers a June 2009 Waiver and Amendment Agreement (as may be amended, supplemented, restated or otherwise modified and in effect from time to time, the “ June 2009 Amendment ”), pursuant to which the Company, the Existing Buyers and the Bridge Buyers will amend the Senior Notes and the Existing Buyers and the Bridge Buyers will permit the issuance of the Securities (as defined below), in each case, subject to and upon terms and conditions more specifically set forth therein.

NOW THEREFORE , in consideration of the premises and the agreements, provisions and covenants herein contained, the Buyers and the Company hereby agree as follows:

1.           PURCHASE AND SALE OF NOTES; WARRANTS

a.            Purchase of Notes .  Subject to the satisfaction (or waiver) of the conditions set forth in Sections 8 and 9 below, the Company shall issue and sell to each Buyer, and each Buyer severally agrees to purchase from the Company, a Note in the principal amount set forth opposite such Buyer’s name on the Schedule of Buyers (the “ Closing ”).

b.            Warrants .  Contemporaneous with the Closing, the Company shall issue to each Buyer Warrants to purchase a number of shares of Common Stock equal to one share of Common Stock for each One Dollar ($1.00) in principal amount of the Note being purchased by such Buyer at the Closing.

c.            The Closing Date .  The date and time of the Closing (the “ Closing Date ”) shall be 10:00 a.m., Central Time, on the first day other than Saturday, Sunday or any other day on which commercial banks in the city of New York are authorized or required by law to remain closed (a “ Business Day ”) following that day on which all conditions to Closing set forth in this Agreement in Sections 8 and 9 are satisfied (or such later or earlier date as is mutually agreed to by the Company and the Buyers).

d.           The Closing shall occur on the Closing Date at the offices of South Texas Oil Company, 300 E. Sonterra Blvd., Suite 1220, San Antonio, Texas 78258, or at such other time, date and place as the Company and the Buyers may collectively designate in writing.

e.            Form of Payment .  On the Closing Date, (i) each Buyer shall pay the applicable Purchase Price to the Company for the Note and the Warrants to be issued and sold to such Buyer on the Closing Date, by wire transfer of immediately available funds in accordance with the Company’s written wire instructions (less any amount deducted and paid in accordance with Section 5(h) ), and (ii) the Company shall deliver to each Buyer the Note and the Warrants that such Buyer is purchasing hereunder, duly executed on behalf of the Company and registered in the name of such Buyer or its designee.

2.           MORTGAGES.  As collateral for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the Notes, the Company shall cause each of the Applicable Subsidiaries to deliver to each of the Buyers the Mortgages, each duly and validly executed by each of the Applicable Subsidiaries (as applicable).

3.           BUYERS’ REPRESENTATIONS AND WARRANTIES

c.            Reliance on Exemptions .  Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the securities laws and that the Company is relying in part upon the truth and accuracy of, and Such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.  For purposes hereof,  “ securities laws ” means the securities laws, legislation and regulations of, and the instruments, policies, rules, orders, codes, notices and interpretation notes of, the securities regulatory authorities (including the SEC) of the United States and any applicable states and other jurisdictions.

d.            Information .  Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and the Subsidiaries and materials relating to the offer and sale of the Securities that have been requested by such Buyer.  Such Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained in Section 4 below or contained in any of the other Transaction Documents (as defined below).  Such Buyer understands that its investment in the Securities involves a high degree of risk, and such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.  For purposes hereof, (i) “ Subsidiaries ” means STO Operating Company, STO Drilling Company, STO Properties LLC, Southern Texas Oil Company and all   other   entities in which the Company, STO Operating Company or Southern Texas Oil Company, directly or indirectly, owns Capital Stock or holds equity or similar interests at the time of this Agreement or at any time hereafter; (ii) “ Capital Stock ” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing; and (iii) “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof or any other legal entity.

g.            Legends .  Such Buyer understands that the certificates or other instruments representing the Securities, except as set forth below, shall bear a restrictive legend in the following form (the “ 1933 Act Legend ”) (and a stop-transfer order may be placed against transfer of such certificates):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Upon the written request to the Company of a holder of a certificate or other instrument representing the Securities, the 1933 Act Legend shall be removed and the Company shall issue a certificate without the 1933 Act Legend to the holder of the Securities upon which it is stamped, if (i) such Securities are registered for resale under the 1933 Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act, (iii) such holder provides the Company with reasonable assurances that the Securities can then be sold without restriction pursuant to Rule 144 promulgated under the 1933 Act (or a successor rule thereto) without compliance with Rule 144(c), Rule 144(e) or Rule 144(f) (or successors thereto), or (iv) such holder provides the Company reasonable assurances that the Securities have been or are being sold pursuant to Rule 144.  The Company shall be responsible for the fees of its transfer agent and all of The Depository Trust Company (the “ DTC ”)   fees associated with such issuance.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holders of the Securities.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3(g) will be inadequate and agrees that, in the event of a breach or threatened breach of this Section 3(g) , such holder shall be entitled, in addition to all other available remedies, to an injunctive order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

h.            Authorization; Enforcement; Validity .  Such Buyer is a validly existing corporation, partnership or limited liability company, as applicable, and has the requisite corporate, partnership or limited liability company, as applicable, power and authority to purchase the Securities pursuant to this Agreement.  Each of this Agreement, the Mortgages, the Subsidiary Guaranty, the Intercreditor Agreement and the June 2009 Amendment has been duly and validly authorized, executed and delivered on behalf of such Buyer, and is a valid and binding agreement of such Buyer, enforceable against such Buyer in accordance with its terms.  Each of the other agreements and other documents entered into and executed by such Buyer in connection with the transactions contemplated hereby as of the date hereof will have been duly and validly authorized, executed and delivered on behalf of such Buyer as of the date hereof and will constitute valid and binding agreements of such Buyer, enforceable against such Buyer in accordance with their respective terms.

i.            Residency and Offices .  Such Buyer is a resident of the jurisdiction specified below its address on the Schedule of Buyers .

4.           REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants, as of the date hereof and the Closing Date, to each of the Buyers, that:

a.            Due Incorporation .  Each of the Company and the Subsidiaries is a corporation, limited liability company or other entity duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization and has the requisite corporate, limited liability company or other organizational power and authority to own its properties and to carry on its business as presently conducted.   Schedule 4(a) sets forth a true and correct list of the Subsidiaries and the jurisdiction in which each is organized or incorporated and sets forth the percentage of the outstanding Capital Stock or other equity interests of each entity that is held by the Company.  Other than with respect to the entities listed on Schedule 4(a) , the Company does not directly or indirectly own any security or beneficial interest in any other Person (including through joint venture or partnership agreements) or have any interest in any other Person.   The Company and each Subsidiary is duly qualified as a foreign corporation, or other entity, as applicable, to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect.  For purposes hereof, “ Material Adverse Effect ” means any material adverse effect on (a) the condition, operations, assets, business or prospects of the Company, (b) the Company’s ability to pay the Obligations in accordance with the terms hereof or any of the Transaction Documents, or (c) the practical realization of the benefits of the Buyers’ rights and remedies under this Agreement and the Transaction Documents.

b.            Outstanding Stock .  All issued and outstanding shares of Capital Stock of the Company and each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable.

c.            Authorization; Enforcement; Validity .  Each of the Company and the applicable Subsidiaries has the requisite corporate power and authority to enter into and perform its obligations under each of this Agreement and each of the other agreements to which it is a party or by which it is bound and which is entered into by the parties hereto in connection with the transactions contemplated hereby and thereby (collectively, the “ Transaction Documents ”), and to issue the Securities in accordance with the terms hereof and thereof.  The execution and delivery of the Transaction Documents by the Company and, to the extent applicable, the Subsidiaries and the consummation by the Company and the Subsidiaries of the transactions contemplated hereby and thereby, including the issuance of the Notes, the Warrants and the reservation for issuance and the issuance of any Conversion Shares issuable upon conversion of the Notes and Warrant Shares issuable upon exercise of the Warrants, have been duly authorized by the Company’s and each of the Subsidiaries’ respective boards of directors and no further consent or authorization is required by the Company or any of the Subsidiaries, or any of their respective boards of directors or shareholders.  This Agreement, the Notes, the Warrants, the Conversion Shares, the Warrant Shares and the other Transaction Documents have been duly executed and delivered by the Company and, to the extent applicable, by the Subsidiaries, constitute the valid and binding obligations of each of the Company and the Subsidiaries that are parties thereto, and are enforceable against such parties in accordance with their terms.  Any Transaction Documents dated after the date hereof, when delivered, shall have been duly executed and delivered by the Company and, to the extent applicable, by the Subsidiaries, shall constitute the valid and binding obligations of each of the Company and the Subsidiaries that are parties thereto, and shall be enforceable against such parties in accordance with their terms.

d.            Additional Issuances .  There are no outstanding agreements or preemptive or similar rights affecting the Common Stock or equity and no outstanding rights, warrants or options to acquire, or instruments convertible into or exchangeable for, or agreements or understandings with respect to the sale or issuance of, any shares of common stock or equity of the Company, except as set forth on Schedule 4(d) or as described in the Periodic Reports filed prior to the date hereof. For purposes hereof, “ Periodic Report ” shall mean a current report on Form 8-K, a quarterly report on Form 10-QSB or 10-Q or annual report on Form 10-KSB or 10-K.

e.            Consents .  Except as set forth on Schedule 4(e) , no consent, approval, authorization or order of any court, governmental agency or body or arbitrator having jurisdiction over the Company or any of the Subsidiaries, or any of their respective Affiliates, the Principal Market, the Company’s shareholders or any of the Subsidiaries’ shareholders, is required for the execution by the Company or any Subsidiary of the Transaction Documents or for compliance and performance by the Company or any of the Subsidiaries of its obligations under the Transaction Documents.  As used in this Agreement, “ Affiliate ” means, with respect to any Person, a second Person (A) in which the first Person owns a 5% equity interest, or (B) that, directly or indirectly, (i) has a 5% equity interest in such first Person, (ii) has a common ownership with such first Person, (iii) controls such first Person, (iv) is controlled by such first Person or (v) shares or is under common control with such first Person; and “Control” or “controls” means that a Person has the power, direct or indirect, to conduct or govern the policies of another Person.

f.            No Violation or Conflict .  Except as set forth on Schedule 4(f), t he performance of the obligations of the Company and any of the Subsidiaries under the Transaction Documents do not and will not:

(i)           violate, conflict with, result in a breach of, or constitute a default (or an event which, with the giving of notice or the lapse of time or both, would be reasonably likely to constitute a default) under (a) the Articles of Incorporation of the Company (the “ Articles of Incorporation ”), the bylaws of the Company (the “ Bylaws ”), or the organizational documents of any Subsidiary, (b) to the Company’s knowledge, any decree, judgment, order, law, treaty, rule, regulation or determination applicable to the Company or any of the Subsidiaries of any court, governmental agency or body, or arbitrator having jurisdiction over the Company or any of the Subsidiaries or over the properties or assets of the Company, any of the Subsidiaries or any of their respective Affiliates, including environmental and safety laws, (c) except as set forth in Schedule 4(f) , the terms of any bond, debenture, note or any other evidence of indebtedness, or any agreement, stock option or other similar plan, indenture, lease, mortgage, deed of trust or other instrument to which the Company, any of the Subsidiaries or any of their respective Affiliates is a party, by which the Company, any of the Subsidiaries or any of their respective Affiliates is bound, or to which any of the properties of the Company, any of the Subsidiaries or any of their respective Affiliates is subject, or (d) the terms of any “lock-up” or similar provision of any underwriting or similar agreement to which the Company, any of the Subsidiaries or any of their respective Affiliates is a party; or

(ii)           except as contemplated hereby, result in the creation or imposition of any lien, charge or encumbrance upon any of the assets of the Company, any of the Subsidiaries or any of their respective Affiliates; or

(iii)           result in the acceleration of the due date of any obligation of the Company or any of the Subsidiaries.

Neither the Company nor any of the Subsidiaries is in violation of any term of its certificate or articles of incorporation, certificate or articles of organization, bylaws, operating agreement, partnership agreement or any other governing document, as applicable.  Neither the Company nor any of the Subsidiaries is or has been in violation of any term of or in default under (or with the giving of notice or passage of time or both would be in violation of or default under) any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any Law applicable to the Company or its Subsidiaries, except where such violation or default could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or to result in the acceleration of any Indebtedness (as defined below) or other obligation.  The business of the Company and the Subsidiaries has not been and is not being conducted, in violation of any Law of any Governmental Entity except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The Company and each of the Subsidiaries is, and has at all times been, in compliance in all material respects with all Laws relating to employee benefits and employee benefit plans (as such terms are defined in the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)).

g.            The Securities .  The Securities, upon issuance:

h.            Litigation .  There is no pending or, to the best knowledge of the Company, threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, that would affect the execution by the Company or any of the Subsidiaries of, or the performance by the Company, or any of the Subsidiaries of their respective obligations under, the Transaction Documents. Except as set forth on Schedule 4(h) or as disclosed in the Periodic Reports filed prior to the date hereof, there is no pending or, to the best knowledge of the Company, basis for or threatened action, suit, proceeding or investigation before any court, governmental agency or body, or arbitrator having jurisdiction over the Company, which litigation if adversely determined would have a Material Adverse Effect.

i.            Reporting Company .  The Company is a publicly-held company, subject to the reporting obligation pursuant to Section 13 and/or 15(d) of the 1934 Act, and has a class of common shares reported pursuant to Section 12(b) of the 1934 Act.  Pursuant to the provisions of the 1934 Act, except as set forth on Schedule 4(i) , the Company has timely filed all reports and other materials required to be filed thereunder with the SEC during the preceding twelve (12) months.

j.            Information Concerning Company .  As of their respective dates, Periodic Reports filed by the Company prior to the date this representation is made contained all material information relating to the Company and its operations and financial condition that was required to be disclosed therein. As of their respective dates, the Periodic Reports and other reports, schedules, forms, registration statements and other documents filed by the Company with the SEC prior to the date this representation is made, including the financial statements contained therein, did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances when made.  As of their respective dates, the consolidated financial statements of the Company and the Subsidiaries included in the Periodic Reports filed by the Company prior to the date this representation is made complied as to form in all material respects with applicable accounting requirements and the securities laws with respect thereto, such consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“ GAAP ”), consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may have excluded footnotes or may have been condensed or summary statements) and fairly presented in all material respects the financial position of the Company and the Subsidiaries as of the dates thereof and the results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that were not material individually or in the aggregate).  Since the date of the most recent balance sheet included in the Periodic Reports filed prior to the date hereof (the “ Latest Financial Date ”), there has been no Material Adverse Effect relating to the Company’s business, financial condition or affairs not disclosed in the Periodic Reports filed prior to the date hereof.  The Schedules hereto, individually and in the aggregate, do not contain any material, non-public information with respect to the Company and the Subsidiaries.

k.            Defaults .  The Company is not in violation of the Articles of Incorporation or Bylaws and no Subsidiary is in violation of the organizational documents of such Subsidiary.  The Company, and each Subsidiary, is (a) not in default under or in violation of any other material agreement or instrument to which it is a party or by which it or any of its properties are bound or affected, which default or violation would have a Material Adverse Effect, (b) not in default with respect to any order of any court, arbitrator or governmental body or subject to or party to any order of any court or governmental authority arising out of any action, suit or proceeding under any statute or other law respecting antitrust, monopoly, restraint of trade, unfair competition or similar matters, and (c) to the Company’s knowledge, not in violation of any statute, rule or regulation of any governmental authority, which violation would have a Material Adverse Effect.

l.            Listing .  The Common Stock is currently listed on the NASDAQ Global Market (the “ Principal Market ”; however, if the Common Stock becomes listed on another national securities exchange after the date hereof, the “ Principal Market ” shall mean such exchange) under the symbol “STXX.”  The Company has not received any oral or written notice that the Common Stock is not eligible, nor that it will become ineligible, for listing on the Principal Market nor that the Common Stock does not meet all requirements for the continuation of such listing.  Except as set forth on Schedule 4(l) , the Company satisfies all the requirements for the continued listing of the Common Stock on the Principal Market.

m.            No Undisclosed Liabilities .  The Company has no liabilities or obligations which are material, individually or in the aggregate, (i) that are not disclosed in the Periodic Reports filed prior to the date hereof, other than those incurred in the ordinary course of the Company’s businesses since the Latest Financial Date, or (ii) that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect.

n.            No Undisclosed Events or Circumstances .  Since the Latest Financial Date, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date this representation is made by the Company, but which has not been so publicly announced or disclosed in the Periodic Reports filed prior to the date hereof.

o.            Capitalization .  The authorized and outstanding Capital Stock of the Company as of the date this representation is made is set forth in the Periodic Reports filed prior to the date hereof.  Except as set forth on Schedule 4(o) or in the Periodic Reports filed prior to the date hereof, there are no options, warrants, or rights to subscribe to, securities, rights or obligations convertible into or exchangeable for or giving any right to subscribe for any shares of Capital Stock of the Company or any of the Subsidiaries. All of the outstanding shares of Common Stock have been duly and validly authorized and issued and are fully paid and nonassessable.

p.            No Disagreements with Accountants and Lawyers .  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company, including but not limited to disputes or conflicts over payment owed to such accountants and lawyers, nor have there been any such disagreements during the two years prior to the date this representation is made.

q.            DTC Status .  The Company’s transfer agent is a participant in, and the Common Stock is eligible for transfer pursuant to, the DTC’s Fast Automated Securities Transfer Program.

r.            Investment Company .  The Company is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

t.            No Integrated Offering .  None of the Company, any Subsidiary, or any Person acting on the behalf of any of the foregoing, has, directly or indirectly, made any offers or sales of any security, or solicited any offers to purchase any security, under circumstances that would require registration of any of the Securities under the 1933 Act, nor will the Company, any Subsidiary or any Person acting on behalf of any of the foregoing, take any action or steps that would require registration of the issuance of any of the Securities under the 1933 Act.  The issuance by the Company and the Subsidiaries of the Securities is exempt from registration under the 1933 Act and applicable state securities laws.

u.            Tax Status .  Except as set forth on Schedule 4(u) , the  Company and each of the Subsidiaries (i) has made or filed all material federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all material taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and for which the Company has made appropriate reserves on its books, and (iii) has set aside on its books provisions reasonably adequate for the payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations (referred to in clause (i) above) apply.  There are no material unpaid taxes claimed in writing to be due from the Company or any of its Subsidiaries by the taxing authority of any jurisdiction.  Neither the Company nor any of the Subsidiaries is, or after giving effect to the purchases and the other transactions contemplated by this Agreement and the other Transaction Documents will be, a “United States real property holding corporation” (“ USRPHC ”) as that term is defined in Section 897(c)(2) of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.

v.            Outstanding Indebtedness; Liens .  Payments of principal and other payments due under the outstanding Notes will rank senior to all Indebtedness of the Company outstanding as of the Closing Date (other than the obligations evidenced by the Diversity Note, which will rank senior to the Notes, and the obligations evidenced by the Senior Notes, which will rank senior to the Notes), and the obligations of the Applicable Subsidiaries under the Subsidiary Guaranty will at all times rank senior to all other Indebtedness of the Subsidiaries as of the Closing Date (other than the obligations of the Subsidiaries under the Bridge Guaranty (as defined in the Bridge Purchase Agreement) with respect to Indebtedness under the Bridge Notes and the Subsidiary Guaranty (as defined in the Existing Senior Purchase Agreement), with respect to Indebtedness under the Existing Senior Notes, which will rank senior to the Subsidiary Guaranty) and, by virtue of the secured position of the Subsidiary Guarantees and to the extent of the Collateral, to all trade account payables of any of the Subsidiaries.  Except as set forth on Schedule 4(v) , neither the Company nor any of the Subsidiaries has any, and upon consummation of the transactions contemplated hereby and by the other Transaction Documents will not have any, outstanding Indebtedness, except for the obligations evidenced by the Notes, the Bridge   Notes, the Existing Senior Notes, the Diversity Note and for the Leexus Additional Consideration Obligation and the Leexus Settlement Obligation.  There are no, and upon consummation of the transactions contemplated hereby and by the other Transaction Documents there will not be any, Liens on any of the assets of the Company or the Subsidiaries, except for Permitted Liens (as defined below).  There are no, and upon consummation of the transactions contemplated hereby and by the other Transaction Documents there will not be any, financing statements securing obligations of any amounts filed against the Company or any of the Subsidiaries or any of their respective assets, other than pursuant to the Bridge Security Agreement (as defined in the Bridge Purchase Agreement) and the Amended and Restated Security Agreement (as defined in the Existing Senior Security Agreement).  For purposes hereof, “ Indebtedness ” of any Person means, without duplication: (i) all indebtedness for borrowed money; (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than unsecured account trade payables that are (A) entered into or incurred in the ordinary course of the Company’s and the Subsidiaries’ business, including those that arise under standard industry joint operating agreements, (B) on terms that require full payment within ninety (90) days from the date entered into or incurred and (C) not unpaid in excess of ninety (90) days from the date entered into or incurred, or are being contested in good faith and as to which such reserve as is required by GAAP has been made); (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments; (iv) all obligations evidenced by notes, bonds, debentures, redeemable capital stock or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller, bank or other financing source under such agreement in the event of default are limited to repossession or sale of such property); (vi) all Capital Lease Obligations; (vii) all indebtedness referred to in clauses (i) through (vi) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person that owns such assets or property has not assumed or become liable for the payment of such indebtedness; and (viii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vii) above; “ Capital Lease Obligation ” means, as to any Person, any obligation that is required to be classified and accounted for as a capital lease on a balance sheet of such Person prepared in accordance with GAAP; “ Contingent Obligation ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to any indebtedness, lease, dividend or other obligation of another Person if a primary purpose or intent of the Person incurring such liability, or a primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto; “ Diversity Note” means that certain Promissory Note, dated September 24, 2007, in the principal amount of $1,500,000 (as in effect on the date of its original issuance, without any waiver, amendment, supplement, restatement or other modification thereof after such date), issued by the Company to Diversity Petroleum, L.P. (“ Diversity ”), pursuant to that certain Purchase and Sale Agreement, dated as of September 25, 2007, among STO Properties LLC (“ STO ”), a Texas limited liability company and wholly-owned subsidiary of the Company, Diversity and the other parties thereto (collectively with Diversity, the “ Sellers ”), whereby STO purchased certain assets of the Sellers; “ Diversity Security Interest ” means the first priority security interest granted by STO in favor of the Sellers, pursuant to that certain Deed of Trust, Security Agreement and UCC Financing Statement for Fixture Filing, dated September 25, 2007, between STO and Charles D. Perez, as Trustee for the benefit of the Sellers, in STO’s right title, interest, privileges and options in the real property subject to the leases set forth on Exhibit B to the Deed of Trust, as security for the performance by STO of its obligations under the Diversity Note (as such security interest was in effect on the date of its grant, without any waiver, amendment, supplement, restatement or other modification thereof after such date); “ Leexus Additional Consideration Obligation ”   means the Company’s obligation under that certain Agreement and Plan of Merger, dated as of March 7, 2007 (the “ Leexus Merger Agreement ”), by and among the Company, Leexus Operating Company, Leexus Properties Corp. (“ Leexus ”) and the shareholders of Leexus (the “ Leexus Shareholders ”) (as such agreement was in effect on the original date thereof, without any waiver, amendment, supplement, restatement or other modification after such date other than as set forth in the Leexus Settlement Agreement (as defined below)), to pay Additional Consideration (as defined in the Leexus Merger Agreement) to William Zeltwanger an aggregate of $1,333,334 and deliver up to 666,667 shares of Common Stock pursuant to, and subject to the terms and conditions set forth in, Section IV of the Leexus Merger Agreement; “ Leexus Settlement Obligation ” means the Company’s obligation under that certain Settlement Agreement, dated as of May 15, 2008 (the “ Leexus Settlement Agreement ”), by and among the Company, STO Operating, Murray Conradie, Leexus Oil & Gas, LLP, and certain of the Leexus Shareholders (the “ Leexus Settlement Shareholders ”) (as such agreement was in effect on the original date thereof, without any waiver, amendment, supplement, restatement or other modification after such date), to pay up to an aggregate amount of $2,000,000 to the Leexus Settlement Shareholders pursuant to, and subject to the terms and conditions set forth in, Section 6 of the Leexus Settlement Agreement; and “ Lien ” mean