<SEQUENCE>3

<FILENAME>a423151.txt

<DESCRIPTION>TERM LOAN AGREEMENT

<TEXT>

                               TERM LOAN AGREEMENT



      THIS TERM LOAN AGREEMENT, as of November 29, 2001, is by and between

KESTREL ENERGY, INC., a Colorado corporation ("Borrower"), and WELLS FARGO

BANK, N.A., a national banking association ("Wells Fargo").



                                     RECITAL



      A. Borrower and Wells Fargo desire that this Term Loan Agreement be

executed and delivered in order to provide for the terms upon which Wells Fargo

will make a term loan to Borrower and by which such term loan will be governed

and repaid.



      B. The proceeds of the above-described term loan will be used by Borrower

exclusively to pay in full any and all amounts outstanding in connection with

Borrower's existing indebtedness to Wells Fargo (and any and all related costs

and expenses), and, upon such payment in full, the letter agreement dated

February 21, 2000 (the "Prior Credit Agreement") shall be superseded hereby and

terminated.



                                    AGREEMENT



      NOW, THEREFORE, in consideration of the premises and the mutual covenants

and agreements contained herein, the parties hereto agree as follows:



                                   ARTICLE I



                           DEFINITIONS AND REFERENCES



      Section 1.1 DEFINED TERMS. As used in this Agreement, each of the

following terms has the meaning given it in this Section 1.1 or in the sections

and subsections referred to below:



      "AFFILIATE" means, as to any Person, each Person that directly or

indirectly (through one or more intermediaries or otherwise) controls, is

controlled by, or is under common control with, such Person; provided that, for

the purposes of this definition, a Person shall be deemed to control another

entity if the controlling Person possesses, directly or indirectly, the power to

direct or control the direction of the management and policies of such entity,

whether through the ownership of stock, membership interests or other interests

therein, by contract or otherwise, and shall include without limitation any

controlling shareholder, member or owner thereof.



      "AGREEMENT" means this Term Loan Agreement.



      "BORROWER" means Kestrel Energy, Inc., a Colorado corporation.



      "BORROWING BASE" means, at any time prior to the Maturity Date, the

aggregate loan value of all Oil and Gas Interests, as determined by Wells Fargo

in its sole and absolute discretion, using such assumptions as to pricing,

discount factors, discount rates, expenses and other factors as Wells Fargo

customarily uses as to borrowing-base oil and gas loans at the time such

determination is made; provided that the Borrowing Base shall be $1,396,000 for

the time period



<PAGE>



from the date of this Agreement until the first redetermination of the Borrowing

Base pursuant to Section 2.7 below.



      "BORROWING BASE NOTICE" means a written notice sent to Borrower by Wells

Fargo notifying Borrower of the Borrowing Base determined by Wells Fargo for the

upcoming Borrowing Base Period or other period.



      "BORROWING BASE PERIOD" means: (a) the time period from the date of this

Agreement through April 30, 2002; and (b) the time period from May 1, 2002

through the Maturity Date.



      "BUSINESS DAY" means any day which is not a Saturday, a Sunday or a legal

holiday on which commercial banks are authorized or required to be closed in

Denver, Colorado.

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