THIRD AMENDMENT TO LOAN AGREEMENT AND
NOTE MODIFICATION AGREEMENT

        THIS THIRD AMENDMENT TO LOAN AGREEMENT AND NOTE MODIFICATION AGREEMENT (the "Amendment") is entered into as of the 31 day of October, 2002, by and between PIONEER DRILLING COMPANY, a Texas corporation, formerly known as South Texas Drilling & Exploration, Inc. ("Borrower"), and THE FROST NATIONAL BANK, a national banking association ("Lender") and this amendment is joined in by PIONEER DRILLING SERVICES, LTD., a Texas limited partnership, formerly known as Pioneer Drilling Co., Ltd., ("Pioneer" or "Partnership").

R E C I T A L S

        A.    On August 11, 2000, Borrower and Lender entered into that certain Loan Agreement, as amended by that certain First Amendment to Loan Agreement dated effective December 31, 2000 and that certain Second Amendment to Loan Agreement dated as of July 3, 2002 (as amended, the "Agreement") concerning the terms, conditions and covenants of a certain Term Loan (as defined in the Agreement).

        B.    The Term Loan is evidenced by, and Lender is the sole owner and holder of, that one certain Promissory Note (the "Note") dated August 11, 2000, executed by Borrower and payable to the order of Lender in the original principal face amount of NINE MILLION AND NO/100 DOLLARS ($9,000,000.00).

        C.    Borrower and Lender have agreed to extend the maturity date of the Note and to modify certain provisions of the Loan Agreement and Note, all as hereinafter provided, and in consideration thereof Borrower has made certain agreements with Lender as hereinafter more fully set forth.

        D.    All capitalized terms not otherwise defined in this Third Amendment shall have the same meanings as are set forth in the Agreement.

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