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Amendment To Stock Agreement - BASELINE OIL & GAS CORP. - 3-31-2006

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Amendment To Stock Agreement - BASELINE OIL & GAS CORP. - 3-31-2006 Powered By Docstoc
					AMENDMENT TO STOCK AGREEMENT THIS AMENDMENT TO STOCK AGREEMENT dated as of the 10th day of March 2006 (the "Amendment"), is made and entered into by and among Baseline Oil & Gas Corp. (f/k/a College Oak Investments, Inc.), a Nevada corporation (the "Company"), Barrie Damson, an individual residing in the State of Connecticut ("Damson"), Alan Gaines, an individual residing in the State of Connecticut ("Gaines") and those individuals listed as "Acquirers" on the signature pages hereof. RECITALS: WHEREAS, the Company, Damson, Gaines and the Acquirers are parties to a Stock Agreement dated as of January 16, 2006 (the "Stock Agreement"), pursuant to which (i) the Company agreed to issue certain shares of its common stock, par value $.001 as contemplated therein and (ii) Gaines and Damson agreed to cancel certain of their stock options as set forth in the Stock Agreement; WHEREAS, the Company, Damson, Gaines and the Acquirers desire to amend the Stock Agreement in certain respects. Capitalized terms used herein that are not defined herein shall have the respective meanings assigned thereto in the Stock Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual agreements contained herein, and the receipt of such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments. The Stock Agreement is hereby amended, effective as of the date hereof, as follows: (a) The third recital of the Stock Agreement is amended by deleting subclause (ii) thereof, and by substituting therefor the following: "(ii) concurrently with the closing of the equity financing with respect to the Closing under the Purchase Agreement, the Company will (A) grant to the Management Acquirers or their designees, stock options to acquire, in the aggregate, up to 3,930,750 shares of the Company's Common Stock and (B) issue, transfer and convey to the Acquirers listed on Exhibit B (which is attached hereto and made a part hereof) (the "Subsequent Acquirers") shares of Common Stock, and such Subsequent Acquirers will purchase such shares of Common Stock, at the same prices and on the same terms as the other investors participating in such financing." (b) Section 1.5 of the Stock Agreement is amended by deleting the first sentence of subparagraph (a) thereof, and by substituting therefor the following: "Damson and Gaines each agree that, upon the Effective Option Cancellation Date (as defined below), each of them shall cancel 3,894,250 shares of Common Stock underlying their respective stock options."

(c) The following words are added to the end of the heading appearing under "ARTICLE 2": "; GRANT OF STOCK OPTIONS". (d) A new Section 2.4 is added to the Stock Agreement as follows: "2.4 Grant of Stock Options to Management Acquirers. Upon the Closing Date, the Company shall grant to the Management Acquirers or their designees (such designees to be designated in writing to the Company at least 10 days prior to the Closing Date), stock options (the "Management Acquirers Options"), exercisable in the aggregate, for up to 3,930,750 shares of the Company's Common Stock. The Management Acquirers Option shall be immediately exercisable at an exercise price per share equal to the price per share paid by investors in the Second Equity Round. The Company shall cause the shares of Common Stock underlying the Management Acquirers Option to be included for sale in the first registration statement filed by the Company following the Closing Date; provided, however, that if requested by the Company's Placement Agent in the Second Equity Round, each recipient of a Management Acquirers Option shall agree to lock-up all of the shares of Common Stock underlying his/its Management Acquirers Option for a period not to exceed one (1) year." 2. Ratification. The Company, Damson, Gaines and the Acquirers do hereby ADOPT, RATIFY and CONFIRM the Stock Agreement and all of its terms and provisions, as amended hereby, and declare the Stock Agreement, as so amended, to be in full force and effect. 3. Counterparts. This Amendment may be executed and delivered (including by facsimile transmission) in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 4. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the Commonwealth of Pennsylvania without giving effect to any choice or conflict of law provision or rule (whether of the Commonwealth of Pennsylvania or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Commonwealth of Pennsylvania. [Signature Pages Follow] -2-

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officer as of the date first written above. BASELINE OIL & GAS CORP.
By: /s/ Carey G. Birmingham ----------------------Name: Carey G. Birmingham Title: President

/s/ Barrie Damson -----------------------------Barrie Damson

/s/ Alan Gaines -----------------------------Alan Gaines

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ACQUIRERS:
/s/ Lance T. Shaner -----------------------------Lance T. Shaner

/s/ Benjamin W. Hulburt -----------------------------Benjamin W. Hulburt

/s/ Thomas F. Shields -----------------------------Thomas F. Shields

/s/ Michael S. Carlson -----------------------------Michael S. Carlson

/s/ Christopher K. Hulburt -----------------------------Christopher K. Hulburt

/s/ Thomas C. Stabley -----------------------------Thomas C. Stabley

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EXHIBIT D MANAGEMENT ACQUIRERS STOCK OPTION AGREEMENT This Stock Option Agreement (this "Agreement") is effective as of ___________ 2006 (the "Option Grant Date") by and between Baseline Oil & Gas Corp., a Nevada corporation (the "Company") and [ ] an individual residing at _______________________ (the "Optionee"). The Optionee and the Company hereby agree as follows: 1. Grant. The Company hereby grants to the Optionee an option (the "Option") to purchase up to an aggregate of __________ shares of the Company's common stock (the "Optioned Shares") at an exercise price of $______ per Optioned Share (the "Exercise Price"). 2. Term. The Option granted hereby shall terminate no later than at the close of business on ____________ 2016 (the "Termination Date"). 3. Exercisability. This Option may be exercised in whole or in part, at any time from and after the Option Grant Date until the Termination Date. 4. Procedure for Exercise. (a) Notice. The Optionee may exercise the Option at any time with respect to all or any part of the number of Optioned Shares by giving the Secretary of the Company written notice of intent to exercise. The notice of exercise shall specify the number of Optioned Shares as to which the Option is to be exercised and the date of exercise thereof, which date shall be at least five days after the giving of such notice unless an earlier time shall have been mutually agreed upon. (b) Payment of Exercise Price. Full payment (in U.S. Dollars) by the Optionee of the Exercise Price for the Optioned Shares purchased shall be made on or before the exercise date specified in the notice of exercise in cash, or, with the prior written consent of the Board, in whole or in part through the surrender of previously acquired shares of common stock (valued at their fair market value on the exercise date). If the Optionee fails to pay for any of the Optioned Shares specified in such notice or fails to accept delivery thereof, the Optionee's right to purchase such Optioned Shares may be terminated by the Company. The date specified in the Optionee's notice as the date of exercise shall be deemed the date of exercise of the Option, provided that payment in full for the Optioned Shares to be purchased upon such exercise shall have been received by such date. In addition to the method of payment set forth above, provided that the Company's common stock is either registered on a national securities exchange or quoted by the NASDAQ at the time of exercise, Optionee shall have the right to exercise this Option in full or in part by delivering written notice to the Company, and Optionee shall receive the number of Optioned Shares equal to the product of (x) the number of Optioned Shares as to which this Option is being exercised, multiplied by (y) a fraction, the numerator of which is the Market Price (defined below) of the Company's common stock minus the Exercise Price of the Optioned Shares and -5-

the denominator of which is the Market Price of the Company's common stock. As used in this Agreement, the phrase "Market Price" at any date shall be deemed to be the last reported sale price, or, in case no such reported sale takes place on such day, the average of the last reported sale prices for the last three (3) trading days, in either case as officially reported by the principal securities exchange on which the Company's common stock is listed or admitted to trading, or, if the common stock is not listed or admitted to trading on any exchange, the average closing sale price as furnished by the NASD through The NASDAQ Stock Market, Inc. ("NASDAQ"). (c) Other Limitations on Exercise. The obligation of the Company to deliver shares of common stock upon the exercise hereof shall be subject to the condition that if at any time the Company's Board of Directors shall determine in its sole discretion that the listing, registration or qualification of the Option or the Optioned Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the grant of this Option or the issuance or purchase of stock hereunder, then this Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Board of Directors. 5. Adjustment of and Changes in Stock of Company. If the Company at any time after the Option Grant Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of shares of Common Stock obtainable upon exercise of this Option will be proportionately increased. If the Company at any time after the Option Grant Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Optioned Shares issuable upon exercise of this Option will be proportionately decreased. Any adjustment under this Section 5 shall become effective at the close of business on the date the subdivision or combination becomes effective. 6. Non-Transferability of Option. During the Optionee's lifetime, this Option shall be exercisable only by the Optionee or any guardian or legal representative of the Optionee, and the Option shall not be transferable except, in case of the death of the Optionee, by will or the laws of descent and distribution, nor shall the Option be subject to attachment, execution or other similar process. In the event of (a) any attempt by the Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of this Option, except as provided for herein, or (b) the levy of any attachment, execution or similar process upon the rights or interest hereby conferred, the Company may terminate the Option by notice to the Optionee and it shall thereupon become null and void. -6-

7. Restrictions on Underlying Stock. The shares of common stock issuable upon exercise of this Option may not be sold, pledged, hypothecated, transferred or assigned in the absence of an effective registration statement for the securities under the applicable federal and state securities laws or an opinion of counsel satisfactory to the Company to the effect that such registration is not required thereunder. 8. "Piggy-Back" Registration Rights. If at any time commencing on the Grant Date and expiring five (5) years hereafter, the Company proposes to register any of its securities under the Securities Act of 1933 (other than in connection with an initial public offering or in connection with a Form S-8), then the Company shall afford the Optionee the opportunity to include for sale in such registration statement, shares of common stock acquired by the Optionee upon the exercise of this Option, provided however, that if the Board of Directors of the Company determines in good faith that the number of shares to be included in such registration is too large, then the Company will include only such number of Optioned Shares as the Board of Directors shall in good faith determine. 9. Nonqualified Option. The Option granted hereby shall be treated as a nonqualified stock option and not as an incentive stock option under the Internal Revenue Code. 10. No Rights as Stockholder. Neither the Optionee nor any personal representatives shall be, or shall have any of the rights and privileges of, a stockholder of the Company with respect to any shares of common stock purchasable or issuable upon the exercise of this Option, in whole or in part, prior to the date of exercise of this Option in accordance with the provisions hereof. 11. Successors and Assigns. This Option shall not be assignable by the Optionee without the prior consent of the Company, which shall not be unreasonably withheld. This Option shall be binding upon the successors and assigns of the Company, and shall be expressly assumed by any successor to the Company pursuant to a merger in which the Company is not the surviving entity. 12. Miscellaneous. This Option and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought. This certificate is deemed to have been delivered in the State of New York and shall be construed and enforced in accordance with and governed by the laws of such State. The headings in this Stock Option Agreement are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized representative and the Optionee has hereunto set his hand as of the Option Grant Date. BASELINE OIL & GAS CORP. By :________________________________ Carey Birmingham, President [Name of Management Acquirer] 2

PURCHASE AND SALE AGREEMENT This Purchase and Sale Agreement (this "Agreement") dated as of the 3rd day of March, 2006, is between SOURCE ROCK RESOURCES, INC. a Delaware corporation with an address at 1301 McKinney, Suite 3175, Houston, Texas 77010 ("Seller") and NEW ALBANY-INDIANA, LLC, a Delaware limited liability company with an address at 1965 Waddle Road, State College, Pennsylvania 16803 ("Buyer"). Seller and Buyer are also referred to herein individually as a "Party" and collectively as the "Parties." In consideration of the mutual promises contained herein, the benefits to be derived by each Party hereunder and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows: ARTICLE 1 PURCHASE AND SALE 1.1 Purchase and Sale. Subject to the terms and conditions of this Agreement, Seller agrees to sell and convey and Buyer agrees to purchase and pay for all of Seller's right, title and interest in and to the Interests (as hereinafter defined). 1.2 Interests. For purposes of this Agreement, the term "Interests" shall be defined as an undivided 45.00% working interest (37.125% net revenue interest) in and to all of the following interests (of whatever kind or character, whether legal or equitable and whether vested or unvested or contingent), less and except for the Reserved Interests (as hereinafter defined): (a) All of Seller's right, title and interest in and to the oil, gas and mineral leases located in Sullivan and Knox Counties, Indiana, as more particularly described on Exhibit "A" attached hereto (collectively, the "Leases"); (b) Originals or copies of all computer tapes and discs, files, records, information, instruments, documents, agreements or data relating to the Interests in the possession of Seller, including, without limitation, title records (including abstracts of title, title opinions, certificate of title and title curative documents), accounting records and files, contracts, correspondence, regulatory reports, seismic and geophysical data, tapes and records, and all related materials, INSOFAR AND ONLY INSOFAR as the foregoing items constitute materials that may be lawfully conveyed to Buyer (i.e., the materials are not subject to an agreement precluding their transfer to Buyer), and, to the extent transferable, all other contract rights, intangible rights, inchoate rights, choses in action, rights under warranties made by prior owners, manufacturers, vendors or other third parties, and rights accruing under applicable statutes of limitation or prescription, attributable to the Interests. 1.3 Reserved Interests. Notwithstanding any provision of this Agreement to the contrary, Seller shall retain following the Closing, a five percent (5.0%) overriding royalty interest attributable to, or associated with, the Leases (the "Reserved Interests"), thus delivering an 82.5% to the 8/8ths revenue interest to Buyer in and to the Leases, proportionately reduced. The Reserved Interests

shall bear its pro-rata share of the actual costs and expenses of all transportation fees, Carbon Dioxide, Hydrogen Sulfide, Nitrogen and any other contaminate removal treatments required for the marketability of production, and production taxes. Buyer hereby acknowledges and agrees that the Reserved Interests shall be retained by Seller following the Closing and shall not be included in the Interests. ARTICLE 2 PURCHASE PRICE 2.1 Purchase Price. In consideration for the purchase of the Interests and in payment of bonuses and leasing fees as of the date hereof, Buyer shall pay to Seller at Closing, to an account designated by Seller, in cash or immediately available funds, the sum of Seven Hundred Thirty Six Thousand Four Hundred Seventy Six Dollars ("$736,476.00") (the "Purchase Price"), calculated in the manner set forth and in the amounts shown on the attached Schedule 2.1. ARTICLE 3 REPRESENTATIONS AND WARRANTIES 3.1 Representations and Warranties of Seller. Seller represents and warrants to Buyer the following: (a) Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller is duly qualified to carry on its business and is in good standing in the State of Indiana and in each other state where the Interests are located. (b) Seller has all requisite power and authority to carry on its business as presently conducted, to enter into this Agreement, and to perform its obligations hereunder. The execution and delivery of this Agreement by Seller does not, and the consummation of the transactions contemplated by this Agreement shall not: (i) violate, conflict with, or require the consent of any person or entity under any provision of Seller's Articles or Certificate of Incorporation, as the case may be, or Bylaws or other governing documents, (ii) conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice or both would constitute a default) or require any consent, authorization or approval under any agreement or instrument to which Seller is a party, (iii) violate any provision of or require any consent, authorization, or approval under any judgment, decree, judicial or administrative order, award, writ, injunction, statute, rule, or regulation applicable to Seller, or (iv) result in the creation of any lien, charge, or encumbrances on any of the Interests. (c) The execution and delivery of this Agreement has been, and the performance of this Agreement and the transactions contemplated by this Agreement shall be at the time required to be performed, duly and validly authorized by all requisite corporate action on the part of Seller. The transactions contemplated by this Agreement do not constitute the sale of all or substantially all of the assets of Seller. (d) This Agreement has been duly executed and delivered on behalf of Seller and constitutes the legal and binding obligation of Seller enforceable in accordance with its terms, except as enforceability may be limited by applicable -2-

bankruptcy, reorganization, or moratorium statutes, equitable principles, or other similar laws affecting the rights of creditors generally ("Equitable Limitations"). At Closing, all documents and instruments required to be executed and delivered by Seller shall be duly executed and delivered and shall constitute legal, valid, enforceable, and binding obligations of Seller, except as enforceability may be limited by Equitable Limitations. (e) Seller has incurred no liability, contingent or otherwise, for broker's or finder's fees or commissions relating to the transactions contemplated by this Agreement for which Buyer shall have any responsibility whatsoever. (f) During the period of Seller's ownership of the Interests, Seller has properly paid all ad valorem, property, production, severance, excise and similar taxes and assessments based on or measured by the ownership of property on the Interests that have become due and payable before the Closing Date. (g) No suit, action or other proceeding is pending or, to the best of Seller's Knowledge, threatened before any court, arbitration panel or governmental agency which relates to the Interests and which might result in a material loss of Seller's title to any portion of the Interests, or a material diminution of the value of any of the Interests, or that might materially hinder or impede the operation of the Interests. No written or oral notice from any governmental agency or any other person has been received by Seller: (i) claiming any violation or repudiation of all or any part of the Interests or any violation of any law or any environmental, conservation or other ordinance, code, rule or regulation or (ii) requiring or calling attention to the need for any work, repairs, construction, alterations, or installations on or in connection with the Interests, with which Seller has not complied. (h) There is no investigation, proceeding, action, suit or other legal proceeding pending, or to the Knowledge of Buyer, threatened to which Seller or any affiliate of Seller is a party which seeks to prevent the consummation by Seller of the transactions contemplated by this Agreement, or which, individually or in the aggregate with other such actions, is reasonably likely to materially impair Seller's ability to perform its obligations under this Agreement. (i) Seller has not provided any information to Buyer with respect to the Interests that Seller knows to be false or inaccurate. To the best of Seller's Knowledge, all information furnished to Buyer by Seller with respect to the Interests has been and will be true and accurate in all material respects. (j) The Interests are not subject to any agreement or arrangement regarding the sale of the production of hydrocarbons from the Interests. (k) To the Knowledge of Seller, the Interests are not subject to (i) any preferential right to purchase, (ii) any requirement that consent to assignment be obtained, or (iii) any farm-out agreement. -3-

(l) To the Knowledge of Seller, all royalties, overriding royalties and other leasehold burdens, if any, have been paid by Seller or other parties and will have been paid by Seller or other parties up to the Closing Date and Seller has no Knowledge of any claims, demands or causes of action asserted by any owners of royalty, overriding royalty or other leasehold burdens affecting the Interests. (m) There are no bankruptcy, reorganization or receivership proceedings pending against, contemplated by, or, to the Knowledge of Seller, threatened against Seller or any affiliate of Seller. Seller is not now insolvent and will not be rendered insolvent by any of the transactions contemplated by this Agreement. The term "insolvent" shall mean that the sum of the debts and other probable liabilities of Seller exceeds the present saleable value of the Seller's assets. (n) No representation or warranty by Seller in this Agreement or any agreement or document delivered by Seller pursuant to this Agreement contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in any representation or warranty, in light of the circumstances under which it was made, not misleading. (o) Seller has engaged the services of PLS, Inc. (the "Broker") as its broker in the contemplated transaction. Seller acknowledges and agrees that any commissions or compensations of any kind due to the broker, if any, shall be the sole expense and obligation of Seller. 3.2 Representations and Warranties of Buyer. Buyer represents and warrants to Seller the following: (a) Buyer is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer is duly qualified to carry on its business and in good standing in the State of Indiana. (b) Buyer has all requisite power and authority to carry on its business as presently conducted and has all requisite power and authority to enter into this Agreement, and to purchase the Interests on the terms described in this Agreement and perform its other obligations under this Agreement. Except as provided in Schedule 3.2, the execution and delivery of this Agreement by Buyer does not, and the consummation of the transactions contemplated by this Agreement will not: (i) violate, conflict with, or require the consent of any person or entity under any provision of Buyer's Certificate of Formation, limited liability company agreement or other governing documents, (ii) conflict with, result in a breach of, constitute a default (or an event that with the lapse of time or notice or both would constitute a default) or require any consent, authorization or approval under any agreement or instrument to which Buyer is a party or (iii) violate any provision of or require any consent, authorization or approval under any agreement, judgment, judicial or administrative order, award, writ, injunction, statute, rule or regulation applicable to Buyer. (c) The execution and delivery of this Agreement has been, and the performance of this Agreement and the transactions contemplated by this Agreement shall be at the time required to be performed, duly and validly authorized by all requisite company action on the part of Buyer. -4-

(d) This Agreement has been duly executed and delivered on behalf of Buyer and constitutes the legal and binding obligation of Buyer enforceable in accordance with its terms, except as enforceability may be limited by Equitable Limitations. At Closing, all documents and instruments required to be executed and delivered by Buyer shall be duly executed and delivered and shall constitute legal, valid, enforceable, and binding obligations of Buyer, except as enforceability may be limited by Equitable Limitations. (e) Buyer has incurred no liability, contingent or otherwise, for broker's or finder's fees or commissions relating to the transactions contemplated by this Agreement for which Seller shall have any responsibility whatsoever. (f) Buyer has sufficient funds, available lines of credit or other sources of immediately available funds sufficient to enable the payment to Seller, by wire transfer, of the Purchase Price at Closing and to otherwise perform Buyer's obligations under this Agreement, the Exploration Agreement and the Joint Operating Agreement executed contemporaneously herewith. (g) There are no bankruptcy, reorganization or receivership proceedings pending against, contemplated by, or, to the Knowledge of Buyer, threatened against Buyer or any affiliate of Buyer. (h) There is no investigation, proceeding, action, suit or other legal proceeding pending, or to the Knowledge of Buyer, threatened to which Buyer or any affiliate of Buyer is a party which seeks to prevent the consummation by Buyer of the transactions contemplated by this Agreement, or which, individually or in the aggregate with other such actions, is reasonably likely to materially impair Buyer's ability to perform its obligations under this Agreement. (i) No representation or warranty by Buyer in this Agreement or any agreement or document delivered by Buyer pursuant to this Agreement contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in any representation or warranty, in light of the circumstances under which it was made, not misleading. ARTICLE 4 CLOSING 4.1 Date of Closing. The purchase and sale of the Interests pursuant to this Agreement (the "Closing") shall occur on the date of the due execution of this Agreement by all Parties hereto (the "Closing Date"). 4.2 Closing Obligations. At the Closing, the following documents shall be delivered and the following events shall occur, each being deemed to have occurred simultaneously with the others: (a) Seller shall execute and deliver: (1) an Assignment and Bill of Sale conveying the Interests to Buyer with covenants of special warranty of title, and free and clear of all liens, security interests and other encumbrances, other than the Permitted Encumbrances, in form and substance reasonably satisfactory to Seller and Buyer (the "Assignment"), a copy of which is attached hereto as Schedule 4.2(a); (2) such other instruments as may be required to fully convey the Interests to Buyer and otherwise effectuate the -5-

transactions contemplated by this Agreement, in form and substance reasonably satisfactory to Seller and Buyer, (3) a certified copy of resolutions of the Board of Directors of Seller authorizing the execution and delivery of this Agreement and the delivery of all instruments or documents contemplated herein, (4) certified copies of good standing certificates of the Seller, issued not earlier than ten (10) days prior to the Closing Date, by the Secretary of State of Delaware and the Secretary of State of Indiana, (5) an incumbency and specimen signature certificate with respect to the officers of Seller executing this Agreement and any instruments or documents contemplated hereby and (6) a closing certificate duly executed by an authorized officer of Seller pursuant to which Seller represents and warrants to Buyer that Seller's representations and warranties to Buyer are true and correct in all material respects as of the Closing Date as if then originally made, that all covenants required by the terms of this Agreement to be performed by Seller on or before the Closing Date, to the extent not waived by Buyer in writing, have been so performed, and that all documents to be executed and delivered by Seller at Closing have been executed by duly authorized officers of Seller. (b) Buyer shall execute and deliver: (1) a certified copy of resolutions of the Manager of Buyer authorizing the execution and delivery of this Agreement and the delivery of all instruments or documents contemplated herein, (2) certified copies of good standing certificates of the Buyer, issued not earlier than ten (10) days prior to the Closing Date, by the Secretary of State of Delaware and by the Secretary of State of Indiana, (3) an incumbency and specimen signature certificate with respect to the officers of Buyer executing this Agreement and any instruments or documents contemplated hereby and (4) a closing certificate duly executed by an authorized officer of Buyer pursuant to which Buyer represents and warrants to Seller that Buyer's representations and warranties to Seller are true and correct in all material respects as of the Closing Date as if then originally made, that all covenants required by the terms of this Agreement to be performed by Buyer on or before the Closing Date, to the extent not waived by Seller in writing, have been so performed, and that all documents to be executed and delivered by Buyer at Closing have been executed by duly authorized officers of Buyer. (c) Buyer shall deliver to Seller or to Seller's account by wire transfer the Purchase Price. (d) Buyer and Seller shall execute and deliver the Exploration Agreement, a copy of which is attached hereto as Exhibit B, and the Joint Operating Agreement, a copy of which is attached hereto as Exhibit C. 4.3 Records. In addition to the obligations set forth under Section 4.2 above, Seller shall deliver within 10 business days of Closing to Buyer originals of land files in its possession or to which it has access with respect to the Interests. Seller shall be entitled to retain copies of all original records affecting the Interests assigned to Buyer pursuant to the terms of this Agreement. ARTICLE 5 POST-CLOSING MATTERS 5.1 Further Assurances. After Closing, Seller and Buyer shall execute, acknowledge and deliver or cause to be executed, acknowledged and delivered such -6-

instruments and take such other action as may be necessary or advisable to carry out their obligations under this Agreement and under any exhibit, document, certificate or other instrument delivered pursuant hereto, and to fully transfer the Interests to the Buyer. ARTICLE 6 INVESTIGATION AND TITLE MATTERS 6.1 Investigation; Access to Title and Other Documents. (a) Prior to Closing, Buyer and each representative of Buyer were given the right to conduct a review of the Interests. In connection with such review, Buyer and each representative of Buyer were granted full access to the records and documents concerning the Interests in the possession or under the control of the Seller. (b) Seller has made available to Buyer and to its representatives (such representatives to include employees, consultants, independent contractors, attorneys and other advisors of Buyer) for Buyer's copying and/or inspection (at Buyer's cost and expense), at Seller's offices such of the following documents as are in Seller's possession or under its control (if any): (i) All abstracts of title, title opinions, title curative materials, ownership reports, bills of sale, other documents evidencing transfers of title, tax receipts, and licenses and registrations pertaining to the Interests. (ii) All of the lease records, lease files, leases, conveyances and assignments of interest in the Interests; contracts; orders of applicable regulatory authorities or administrative agencies; mortgages, deeds of trust, security agreements, and financing statements; and all other contracts, agreements and documents affecting the Interests. (iii) Instruments and documents concerning proper payment of all general and special assessments, ad valorem and property taxes, and similar taxes and assessments based on or measured by the ownership of the Interests for 2005 and years prior for which the applicable statute of limitations has not expired. (iv) All geological maps, geophysical surveys as to which Seller has the right to show Buyer and engineering studies, ownership maps, reserve reports, logs, core studies, and surveys relating to the Interests. (v) All bonds, leases, permits, easements, licenses, orders, saltwater disposal agreements, agreements with pumpers and other agreements in any way relating to the Interests or the operation thereof. (vi) All environmental reports, assessments and studies relating to any of the Interests. -7-

(c) Following the title investigation provided for in Section 6.1(a) and (b) above, Buyer presented to Seller a schedule of Title Defects, and Buyer and Seller have either cured or waived such Title Defects to the satisfaction of Buyer, or have agreed on a reduction in the purchase price, which reduction, if any, is reflected in the Purchase Price set forth in Article 2.1. Title Defects (except for Title Defects created by, through, or under Seller) not presented to Seller shall be deemed to be Permitted Encumbrances. A "Title Defect" shall mean any lien, encumbrance or defect in title that would affect the value of the Interests, or diminish the Buyer's use or enjoyment of the Interests. 6.2 Seller's Special Warranty of Title; The Assignment. (a) Seller represents and warrants that Seller shall convey to Buyer at Closing all of Seller's right, title and interest in and to the Interests, free and clear of all liens, security interests and other encumbrances created by, through or under Seller, but not otherwise, subject only to the Permitted Encumbrances. Seller hereby represents and warrants to Buyer that it has done nothing to encumber title to the Interests and warrants title as against all persons claiming by, through or under Seller, but not otherwise, Seller further agreeing that Buyer shall have the benefit of all prior warranties in the chain of title to the Interests. The Assignment shall provide for a special warranty of title consistent with this Section 6.2. (b) Seller will cooperate with Buyer in requesting approvals, consents and waivers from governmental authorities or third parties having the right to approve the assignment of any Interest covered hereby. 6.3 Permitted Encumbrances. As used in this Agreement, the term "Permitted Encumbrances" shall mean the following, provided that the same shall not operate to reduce the net revenue interest or increase the gross working interest of an Interest beyond that shown on Exhibit "A": (a) Lessors' royalties, non-participating royalties, overriding royalties, division orders, reversionary interests, and similar burdens. (b) Liens for taxes or assessments not yet due or delinquent or, if delinquent, that are being contested in good faith in the normal course of business. (c) All rights to consent by, required notices to, filing with, or other actions by governmental entities in connection with the sale or conveyance of oil and gas leases or interests therein, if the same are customarily obtained subsequent to such sale or conveyance and neither Seller nor Buyer has reason to believe they cannot be obtained. (d) Rights reserved to or vested in any governmental authority. -8-

(e) Easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases and other rights in the Interests for the purpose of surface operations, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, and removal of timber or coal, grazing, logging operations, canals, ditches, reservoirs and other like purposes, or for the joint or common use of real estate, rights-of-way, facilities and equipment which do not materially impair the rights held by Seller or the use and enjoyment of the Interests. (f) Defects, irregularities and deficiencies in title to any rights-of-way, easements, surface lease or other rights which in the aggregate do not materially impair the use of such right-of-way, easements, surface leases or other rights for the purpose of which such rights will be held by Buyer. (g) Zoning, planning and environmental laws and ordinances and municipal regulations. (h) Vendors, carriers, warehousemen, repairmen, mechanics, workmen, materialmen, construction or other like liens arising by operation of law in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations which are not yet due, or which are being contested in good faith by appropriate proceedings by or on behalf of Seller, and not reasonably likely to materially reduce the value of the Interests and for which Seller and Buyer agree at Closing to provide proper credits or escrow of funds for any liability that might arise after Closing. 6.4 Waiver. Except for matters covered by the Special Warranty of Title set forth in Section 6.2 or in the Assignment, and matters arising out of or relating to Seller's breach of any representations or warranties in this Agreement, upon Closing Buyer shall be deemed to have waived all Title Defects or objections that relate to the Interests and shall have no right to seek reimbursement or indemnification from Seller for such Title Defects or objections. ARTICLE 7 INDEMNIFICATION 7.1 Definitions. The following terms contained in this Article 7 shall have for purposes of this Agreement the meaning given to such terms as provided below: (a) "Claims Period" shall mean the period beginning on the Closing Date and ending twelve (12) months following the Closing Date. (b) "Losses" shall mean all losses, liabilities, deficiencies, damages (including without limitation indirect or consequential damages), encumbrances, fines, penalties, claims, costs and expenses (including, without limitation all fines, penalties and other amounts paid pursuant to a judgment, compromise or settlement), court costs and reasonable legal and accounting fees and disbursements. 7.2 Survival of Representations, Warranties, Covenants and Agreements. -9-

(a) All representations and warranties of Seller contained in this Agreement shall survive the Closing Date for the duration of the Claims Period; except that the representations and warranties in Section 6.2 (Title) shall survive the Closing indefinitely. Any claim made by Buyer with respect to the representations and warranties of Seller contained in this Agreement must be initiated by Buyer during the Claims Period by written notice to Seller that is received within the Claims Period, except that there shall be no time limit on when claims may be initiated with respect to the representations and warranties in Section 6.2 (Title). All of the representations and warranties of Seller contained in this Agreement shall in no respect be limited or diminished by any past or future inspection, investigation, examination or possession on the part of Buyer or its Representatives. All covenants and agreements made by Seller contained in this Agreement shall survive the Closing Date until fully performed or discharged. (b) All representations and warranties of Buyer contained in this Agreement shall survive the Closing Date for the duration of the Claims Period. Any claim made by Seller with respect to the representations and warranties of Buyer contained in this Agreement must be initiated during the Claims Period by written notice to Buyer that is received within the Claims Period. All of the representations and warranties of Buyer contained in this Agreement shall in no respect be limited or diminished by any past or future inspection, investigation, examination or possession on the part of Seller or its Representatives. All covenants and agreements made by Buyer contained in this Agreement shall survive the Closing Date until fully performed or discharged. 7.3 Indemnification by Seller. Except as otherwise specifically provided in this Agreement, Seller shall indemnify and hold harmless Buyer and its subsidiaries, affiliates, and parents, and its and their employees, representatives, officers, directors, attorneys and agents from and against: (a) any and all Losses suffered or incurred by any of them by reason of any breached or untrue representation or warranty of Seller contained in this Agreement, but only if a claim is initiated by Buyer by written notice to Seller that is received within the Claims Period, unless the claim is attributable to a breach by Seller of Section 6.2 (Title); (b) any and all Losses suffered or incurred by any of them by reason of the non-fulfillment of any covenant or agreement by Seller contained in this Agreement; and (c) any and all Losses suffered or incurred by any of them resulting from, related to, on account of, and proximately caused by Seller during its ownership, management or control of the Interests prior to the Closing Date. 7.4 Indemnification by Buyer. Except as otherwise specifically provided in this Agreement, Buyer shall indemnify and hold harmless Seller and its subsidiaries, affiliates, and parents, and its and their employees, representatives, officers, directors, attorneys and agents from and against: -10-

(a) any and all Losses suffered or incurred by any of them by reason of any breached or untrue representation or warranty of Buyer contained in this Agreement, but only if a claim is initiated by Seller by written notice to Buyer that is received within the Claims Period; and (b) any and all Losses suffered or incurred by any of them by reason of the non-fulfillment of any covenant or agreement by Buyer contained in this Agreement. 7.5 Notification and Defense of Claims or Actions. (a) As used in this Article 7, any party seeking indemnification pursuant to this Article 7 is referred to as an "indemnified party" and any party from whom indemnification is sought pursuant to this Article 7 is referred to as an "indemnifying party." An indemnified party which proposes to assert the right to be indemnified under this Article 7 shall submit a written demand for indemnification within fifteen (15) business days of becoming aware of such potential claim setting forth in summary form the facts as then known which form the basis for the claim for indemnification; provided, however, that the failure to give such notice will not affect such claim of indemnification except to the extent of actual prejudice to the indemnifying party. With respect to claims based on actions by third parties, an indemnified party shall, within fifteen (15) business days after the receipt of notice of the commencement of any Proceeding against it in respect of which a claim for indemnification is to be made against an indemnifying party, notify the indemnifying party in writing of the commencement of such Proceeding, enclosing a copy of all papers served; provided, however, that the failure to so notify the indemnifying party of any such Proceeding shall not relieve the indemnifying party from any liability which it may have to the indemnified party, except to the extent that the indemnifying party is prejudiced thereby. Thereafter, the indemnified party shall deliver to the indemnifying party, within fifteen (15) days after receipt by the indemnified party, copies of all further notices relating to such claim. (b) If an indemnified party gives notice to the indemnifying party pursuant to Section 7.5(a) of the assertion of a third-party claim, the indemnifying party shall be entitled to participate in the defense of such third-party claim and, to the extent that it wishes, to assume the defense of such third-party claim with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such third-party claim, the indemnifying party shall not, so long as it diligently conducts such defense, be liable to the indemnified party under this Article 7 for any fees of other counsel or any other expenses with respect to the defense of such third-party claim, in each case subsequently incurred by the indemnified party in connection with the defense of such third-party claim, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a third-party claim, (i) such assumption will conclusively establish for purposes of this Agreement that the claims made in that third-party claim are within the scope of and subject to indemnification, and (ii) no compromise or settlement of such third-party claims may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any violation of law or governmental rule or regulation or any violation of the rights of any person or entity; (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (C) the indemnified party shall have no liability with respect to any compromise or settlement of such third-party claims effected without its consent. If notice is given to an indemnifying party of the -11-

assertion of any third-party claim and the indemnifying party does not, within ten (10) days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such third-party claim, the indemnifying party will be bound by any determination made in such third-party claim or any compromise or settlement effected by the indemnified party. Any control of the defense of a third-party claim given to an indemnifying party pursuant to this Section 7.5(b) shall, upon notice from the indemnified party, be reversed and given back to the indemnified party if, at any point during the course of such third-party claim the conditions necessary to have been met to allow such indemnifying party to so control such defense are no longer true whether because all unsatisfied claims increase in amount or because any other factors arise. (c) In the event that any claim for indemnification is made with respect to any third-party claim pursuant to this Article 7, (i) the party assuming primary responsibility for the defense of such claim shall at all times keep the other party reasonably informed as to the status of such claim and (ii) the party not primarily responsible for the defense of such claim shall cooperate fully with the other party in connection with such defense. 7.6 Sole Remedy. The sole remedy of the Parties for any and all claims against the other Party with respect to this Agreement shall be a claim for indemnification under this Article 7 on the terms and subject to the conditions of this Agreement, except for claims of willful or intentional misconduct or fraud. 7.7 General Liability Limitation. Notwithstanding anything contained in this Agreement to the contrary, Seller shall not be required to indemnify or otherwise compensate Buyer for aggregate Losses in excess of the Purchase Price; provided, however, that such limitation of Seller's liability shall not apply to claims resulting from Seller's gross negligence, willful misconduct or fraud. ARTICLE 8 MISCELLANEOUS 8.1 Fees and Taxes. Except as otherwise specifically provided, all fees, costs and expense incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the Party incurring the same, including, without limitation, legal and accounting fees, costs and expenses. All required documentary, filing and recording fees for the assignments, conveyance or other instruments required to convey title to the Interests to Buyer shall be borne by Buyer. In addition, the liability for any sales, use, transfer or similar tax associated with the sale and/or transfer of the Interests shall be the liability of, and for the account of, the Buyer. 8.2 Notices. Unless otherwise provided in this Agreement, any agreement, notice, request, instruction or other communication to be given hereunder by any Party to the other shall be in writing and (i) delivered personally (such delivered notice to be effective on the date it is delivered), (ii) mailed by certified mail, postage prepaid (such mailed notice to be effective four (4) days after the date it is mailed), (iii) deposited with a reputable overnight courier service (such couriered notice to be effective one (1) day after the date it is mailed), or (iv) sent by facsimile transmission (such facsimile notice to be effective on the date that confirmation of such facsimile transmission is received), with a confirmation sent by way of one of the above methods, as follows: -12-

If to Seller addressed to: Source Rock Resources, Inc. 1301 McKinney Suite 3175 Houston, Texas 77010 Attention: Bill Boss Telecopier: (713) 654-1501 If to Buyer, addressed to: New Albany-Indiana, LLC c/o Rex Energy Operating Corp. 1965 Waddle Road State College, Pennsylvania 16803 Attention: Benjamin W. Hulburt Telecopier: (814) 278-7286 Any Party may designate in a writing to any other Party any other address or telecopy number to which, and any other person to whom or which, a copy of any such notice, request, instruction or other communication should be sent. 8.3 Amendments. This Agreement may not be amended except by an instrument in writing signed by Buyer and Seller. 8.4 Preparation of Agreement. Both Seller and Buyer and their respective counsel participated in the preparation of this Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement. 8.5 Headings. The headings of the articles and sections of this Agreement are for guidance and convenience of reference only and shall not limit or otherwise affect any of the terms or provisions of this Agreement. 8.6 Counterparts; Facsimile Signature. This Agreement may be executed by Buyer and Seller in any number of counterparts, each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same instrument. Any Party may execute this Agreement by facsimile signature and the other Party will be entitled to rely on such facsimile signature as evidence that this Agreement has been duly executed by such Party. Any Party executing this Agreement by facsimile signature will promptly forward to the other Party an original signature page by overnight courier. 8.7 References. References made in this Agreement, including use of a pronoun, shall be deemed to include, where applicable, masculine, feminine, singular or plural, individuals or corporations. As used in this Agreement, "person" shall mean any natural person, corporation, partnership, trust, estate or other entity. -13-

8.8 Governing Law. This Agreement and the transactions contemplated hereby shall be construed in accordance with, and governed by, the laws of the State of Indiana without giving effect to the conflicts of law rules thereof. 8.9 Assignment. Neither this Agreement nor the rights and obligations hereunder may be assigned or delegated by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld, and any assignment or delegation made without such consent shall be void; provided, however, Buyer shall have the right to assign this Agreement and to delegate its obligations under this Agreement to any entity that (i) Buyer controls, (ii) controls Buyer or (iii) is under common control with Buyer, subject to the assumption of all obligations by any such entity. In the event of any assignment, this Agreement shall be binding upon said party the same as if it had been the original party hereto. Subject to the foregoing, the terms and conditions of this Agreement shall be binding on the Parties' successors and assigns. 8.10 Entire Agreement. This Agreement (including the Exhibits hereto) constitutes the entire understanding between the Parties with respect to the subject matter hereof, superseding all negotiations, prior discussions and prior agreements and understanding relating to such subject matter. 8.11 Parties in Interest. This Agreement shall be binding upon, and shall inure to the benefit of, the Parties and their respective successors and assigns. 8.12 Further Cooperation. After the Closing, Buyer and Seller shall execute and deliver, or shall caused to be executed and delivered from time to time, such further instruments of conveyance and transfer and shall take such other action as any Party may reasonably request to convey and deliver the Interests to Buyer, to accomplish the orderly transfer of the Interests to Buyer, or to otherwise effectuate the transactions contemplated by this Agreement. If either Party hereto receives monies belonging to the other, such amount shall immediately be paid over to the proper Party. If an invoice or other evidence of an obligation is received by a Party, which is partially an obligation of both Seller and Buyer, then the Parties shall consult with each other and each shall promptly pay its portion of such obligation to the obligee. 8.13 Waiver. No failure of any Party to this Agreement to require, and no delay by any Party to this Agreement in requiring, any other Party to comply with any provision of this Agreement shall constitute a waiver of the right to require such compliance. No failure of any Party to this Agreement to exercise, and no delay by any Party to this Agreement in exercising, any right or remedy under this Agreement shall constitute a waiver of such right or remedy. No waiver by any Party to this Agreement of any right or remedy under this Agreement shall be effective unless made in writing. Any waiver by any Party to this Agreement of any right or remedy under this Agreement shall be limited to the specific instance and shall not constitute a waiver of such right or remedy in the future. 8.14 Press Release. Neither Party shall make any press release or other announcement in connection with the execution of this Agreement without the express written consent of the other Party. Neither Party shall make any press release or other announcement in connection with the Closing of this Agreement without first consulting with the other Party. Following such consultation and -14-

good faith attempt to make reasonable accommodations, either Party may make any announcement or press release regarding the Closing that it believes is either required by applicable law or is advisable in connection with such Party's interest (or the interest of Baseline Oil & Gas Corp., a member of Buyer) in providing public disclosure regarding its activities. This provision shall not apply to any filing with any governmental body or any stock exchange required by law, rule or regulation. 8.15 Invalidity. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability will not affect any other provision of this Agreement or any other such instrument. 8.16 Knowledge. For purposes of this Agreement, "knowledge", "information" or "belief" shall mean (except as otherwise provided in this sentence) the actual knowledge, information or belief, as appropriate to the context of the statement in which the term is used, of any principal shareholder or of any officer or director of the relevant Party, or the knowledge, information or belief which such individual would have after (a) having made a review of documents of a date not more than three (3) years old in files under their immediate personal control and (b) having made reasonable inquiry of those executive, management or supervisory employees under their direct supervision, with respect to the matters which are relevant to the representation, warranty, covenant or agreement being made or given. ARTICLE 9 ARBITRATION 9.1 Selection of Arbitrators. Any controversy between the Parties hereto arising under this Agreement, and not resolved by negotiation and agreement, shall be determined by a board of arbitration upon notice of submission given by either Party to the other, which notice shall name a qualified, independent arbitrator. Within ten (10) days after the receipt of such notice, the other Party shall name a qualified, independent arbitrator, or failing to do so, the Party giving notice shall name the second. The two arbitrators so appointed shall name the third qualified, independent arbitrator. Any board of arbitration called pursuant to this section shall take place in Houston, Texas. 9.2 Determination. The arbitrators selected to act hereunder shall be qualified by education and experience to pass on the particular question in dispute. The arbitrators shall promptly hear and determine (after due notice of hearing and giving the parties a reasonable opportunity to be heard) the questions submitted, and shall render their decision within sixty (60) days after appointment of the third arbitrator. If within said period a decision is not rendered by the board, or majority thereof, new arbitrators may be named and shall act hereunder at the election of either Buyer or Seller in like manner as if none had been previously named. 9.3 Decision Binding. The decision of the arbitrators, or the majority thereof, made in writing shall be final and binding upon the Parties hereto as -15-

to the questions submitted, and Buyer and Seller will abide by and comply with such decision. The prevailing Party shall be entitled to recoup all of the expenses of arbitration, including reasonable compensation to the arbitrators, expenses of counsel, witnesses, and employees. [Remainder of page intentionally left blank. Signatures follow.] -16-

IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first above written. SELLER: SOURCE ROCK RESOURCES, INC.
By: /s/ Michael B. Smith ----------------------------Name: Michael B. Smith Title: President

BUYER: NEW ALBANY-INDIANA, LLC By: REX ENERGY WABASH, LLC, Its Manager
/s/ Benjamin W. Hulburt ----------------------------Name: Benjamin W. Hulburt Title: President By:

EXHIBIT 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, Barrie Damson, Chief Executive Officer of Baseline Oil & Gas Corp. (the "Company"), certify that: 1. I have reviewed this annual report on Form 10-KSB of the Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [intentionally omitted per SEC Release 33-8238]; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially effect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): 1

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 30, 2006 /s/ Barrie Damson -----------------------------Name: Barrie Damson Title: Chief Executive Officer

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EXHIBIT 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002 I, Richard Cohen, Chief Financial Officer of Baseline Oil & Gas Corp. (the "Company"), certify that: 1. I have reviewed this annual report on Form 10-KSB of the Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) [intentionally omitted per SEC Release 33-8238]; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially effect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and 3

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 30, 2006 /s/ Richard Cohen -----------------------------Name: Richard Cohen Title: Chief Financial Officer

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EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Barrie Damson, the Chief Executive Officer of Baseline Oil & Gas Corp. (the "Company") do hereby certify under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 30, 2006 /s/ Barrie Damson ----------------------Barrie Damson Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. 5

EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard Cohen, the Chief Financial Officer of Baseline Oil & Gas Corp. (the "Company") do hereby certify under the standards set forth and solely for the purposes of 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report on Form 10-KSB of the Company for the fiscal year ended December 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: March 30, 2006 /s/ Richard Cohen ----------------------Richard Cohen Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

March 14, 2006 Mr. Benjamin W. Hulburt Rex Energy 1965 Waddle Road State College, Pennsylvania 16803 Dear Mr. Hulburt: In accordance with your request, we have estimated the proved reserves and future revenue, as of December 31, 2005, to the interest of Douglas Oil & Gas LP; Douglas Westmoreland LP; Midland Exploration LP; Penntex Resources Illinois, Inc.; Penntex Resources LP; and Rex Energy Royalties LP (collectively referred to herein as "Rex Energy et al.") in certain oil and gas properties located in the United States, as listed in the accompanying tabulations. This is a revision of our report dated March 8, 2006. The estimates in this report have been revised to reflect the removal of contract wells in Westmoreland County, Pennsylvania. This report has been prepared using constant prices and costs, as discussed in subsequent paragraphs of this letter. The estimates of reserves and future revenue in this report conform to the guidelines of the Securities and Exchange Commission (SEC). As presented in the accompanying summary projections, Tables I through IV, we estimate the net reserves and future net revenue to the Rex Energy et al. interest in these properties, as of December 31, 2005, to be:
Net Reserves -----------------------------Oil Gas (Barrels) (MCF) -----------------4,000,256 337,001 488,754 --------4,826,011 7,898,777 301,192 2,926,867 ---------11,126,836 Future Net Revenue ($) -------------------------------Present Worth Total at 10% --------------------161,661,800 16,007,300 30,478,800 ----------208,147,900 90,232,800 7,089,000 11,563,600 ----------108,885,400

Category Proved Developed Producing Non-Producing Proved Undeveloped Total Proved

The oil reserves shown include crude oil and condensate. Oil volumes are expressed in barrels that are equivalent to 42 United States gallons. Gas volumes are expressed in thousands of cubic feet (MCF) at standard temperature and pressure bases. The estimates shown in this report are for proved developed producing, proved developed non-producing, and proved undeveloped reserves. In accordance with SEC guidelines, our estimates do not include any probable or possible reserves that may exist for these properties. This report does not include any value that could be attributed to interests in undeveloped acreage beyond those tracts for which undeveloped reserves have been estimated. Definitions of all reserve categories are presented immediately following this letter. As shown in the Table of Contents, for each reserve category this report includes a summary projection of reserves and revenue along with one-line summaries of reserves, economics, and basic data by lease. Future gross revenue to the Rex Energy et al. interest is prior to deducting state production taxes and ad valorem taxes. Future net revenue is after deductions for these taxes, future capital costs, and operating expenses but

before consideration of federal income taxes. In accordance with SEC guidelines, the future net revenue has been discounted at an annual rate of 10 percent to determine its "present worth." The present worth is shown to indicate the effect of time on the value of money and should not be construed as being the fair market value of the properties. For the purposes of this report, we did not perform any field inspection of the properties, nor did we examine the mechanical operation or condition of the wells and their related facilities. We have not investigated possible environmental liability related to the properties; therefore, our estimates do not include any costs due to such possible liability. Also, our estimates do not include any salvage value for the lease and well equipment or the cost of abandoning the properties. Oil prices used in this report either are the fixed contract price or are based on a December 31, 2005, West Texas Intermediate posted price of $57.75 per barrel and are adjusted by lease for quality, transportation fees, and regional price differentials. In accordance with the SEC guidelines, the fixed contract prices for properties located in Illinois and Indiana are held constant until contract expiration. At contract expiration, the prices are adjusted to the December 31, 2005, posted price and held constant thereafter. All other oil prices are held constant in accordance with SEC guidelines. Gas prices used in this report are based on a December 31, 2005, Henry Hub spot market price of $10.08 per MMBTU and are adjusted by lease for energy content and regional price differentials. Gas prices are held constant in accordance with SEC guidelines. Lease and well operating costs used in this report are based on operating expense records of Rex Energy et al. For nonoperated properties, these costs include the per-well overhead expenses allowed under joint operating agreements along with estimates of costs to be incurred at and below the district and field levels. As requested, lease and well operating costs for the operated properties include only direct lease- and field-level costs. For all properties, headquarters and general and administrative overhead expenses of Rex Energy et al. are not included. Lease and well operating costs are held constant in accordance with SEC guidelines. Capital costs are included as required for workovers, new development wells, and production equipment. We have made no investigation of potential gas volume and value imbalances resulting from overdelivery or underdelivery to the Rex Energy et al. interest. Therefore, our estimates of reserves and future revenue do not include adjustments for the settlement of any such imbalances; our projections are based on Rex Energy et al. receiving its net revenue interest share of estimated future gross gas production. The reserves shown in this report are estimates only and should not be construed as exact quantities. The reserves may or may not be recovered; if they are recovered, the revenues therefrom and the costs related thereto could be more or less than the estimated amounts. Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing this report. Also, estimates of reserves may increase or decrease as a result of future operations. In evaluating the information at our disposal concerning this report, we have excluded from our consideration all matters as to which the controlling interpretation may be legal or accounting, rather than engineering and geologic. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geologic data; therefore, our conclusions necessarily represent only informed professional judgment. The titles to the properties have not been examined by Netherland, Sewell & Associates, Inc., nor has the actual degree or type of interest owned been independently confirmed. The data used in our estimates were obtained from Rex

Energy, public data sources, and the nonconfidential files of Netherland, Sewell & Associates, Inc. and were accepted as accurate. Supporting geologic, field performance, and work data are on file in our office. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these properties and are not employed on a contingent basis. Very truly yours, NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Frederic D. Sewell, P.E. Frederic D. Sewell, P.E. Chairman and Chief Executive Officer

By: /s/ Matthew T. Brogdon, P.E. Matthew T. Brogdon, P.E. Petroleum Engineer

Date Signed: March 14, 2006 MTB:EKK Please be advised that the digital document you are viewing is provided by Netherland, Sewell & Associates Inc. (NSAI) as a convenience to our clients. The digital document is intended to be substantively the same as the original signed document maintained by NSAI. The digital document is subject to the parameters, limitations, and conditions stated in the original document. In the event of any differences between the digital document and the original document, the original document shall control and supersede the digital document.


				
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