Page 34 - Petrospex_Elaine Prospect

II. DIRECT CHARGES

Operator shall charge the Owners their pro rata share of the following items:

1. Lease rentals and royalties paid by Operator for the Owners.

2. (a) Salaries and wages of Operator's field employees directly employed
on the property in the conduct of Operations.

(b) Salaries and wages of Technical agents directly employed on the
property.

3. Materials, provided that such Material shall be purchased for or transferred
to the property as may be required for immediate use and which is
reasonably practical and consistent with efficient and economical operations
of the property. The accumulations of surplus stocks shall be avoided.

4. The cost of contract services, equipment and utilities provided by outside
sources. The costs of professional consultant services and contract
services of technical personnel directly engaged on or in connection
therewith on the property.

5. Any other expenditures not covered in the foregoing provisions of this
Section II, or in Section III, and which are incurred by Operator in the
necessary and proper conduct of the operations contemplated by the
parties and governed by the Operating Agreement, provided that
Operator shall not expend more than $10,000.00 for any single item or
operation per well without the express approval of a majority in interest of
the Owners. This also will include insurance premiums.

III. OVERHEAD

1. Overhead Producing Wells

As compensation for administrative, supervision and office services, Operator
shall charge $350.00 per month for each injection or producing well.

Operating Agreement - Page 14 of 15