PARTIAL RELEASE OF PRODUCTION PAYMENT

          This Partial Release of Production Payment makes reference to that certain Exchange Option Agreement dated May 1, 2009, between O & G Energy Partners, LLC (“O & G”), and San Joaquin Investments, Inc. (“San Joaquin”), as buyers, and Daybreak Oil and Gas, Inc. (“Daybreak”), as Seller, concerning the acquisition of certain interest of Seller by Buyers in the East Slopes Project, San Joaquin Basin, Kern County, California (the “Exchange Option”).

          Pursuant to the terms of the Exchange Option, O & G and San Joaquin executed and delivered to Daybreak that certain Assignment of Production Payment, in which each became obligated to pay Daybreak a portion of the net profits attributable to the oil and gas interests assigned to O & G and San Joaquin pursuant to the Exchange Option until the total sum of $700,000 had been paid; and

          WHEREAS, under the Assignment of Production Payment, (the “Assignment”), O & G Energy Partners, LLC was severely and not jointly liable for 50% of the production payment amount payable pursuant thereto; and

          WHEREAS, O & G, has assigned a portion of its interest in the oil and gas properties which were the subject of the Exchange Option West Coast Partners, LLC (“West Coast”), which has become obligated for a portion of the net profits payable by O & G to Daybreak under the Assignment; and

          WHEREAS, O & G, West Coast and Daybreak have reached an agreement by which the production payment obligation of O & G (and, consequently, West Coast) to Daybreak will be discharged in cash;

          NOW, THEREFOR, for a valuable consideration, the receipt and sufficiency of which are hereby acknowledged, DAYBREAK OIL AND GAS, INC., does hereby RELEASE, REMISE and SURRENDER unto O & G ENERGY PARTNERS, LLC and WEST COAST PARTNERS, LLC, whose address is 3660 Stoneridge Road, Suite A-101, Austin, Texas 78746, their successors and