Attached files

                                                                    Exhibit 10.3

                               Baron Energy, Inc.
                                 392 W. Mill St.
                             New Braunfels, TX 78130
                              Ph/Fax (830) 608-0300

February 28, 2011

SJM Family L.P.
4016 Highlands West Drive
Fort Collins, CO  80526

Re: Debt Settlement

On December 20, 2005,  Esconde  Resources LP  ("Esconde")  executed a promissory
note  (the  "Note')  in  the  amount  of  $5,000  payable  to  SJM  Family  L.P.
("Creditor").  The Note was payable on April 1, 2006,  with interest at the rate
of 4.0% per annum.

As of February 28, 2011, the remaining principal amount plus accrued interest on
the Note is $3,165.

Effective February 22, 2010, Baron Energy,  Inc.  ("Debtor") became successor in
interest  to  Esconde.  Creditor  and Debtor  agree to settle the debt under the
following terms and conditions.

The Creditor and Debtor  agree that the  outstanding  amount owed on the debt is
$3,165.  Both parties  agree that the  Creditor  will accept  45,215  restricted
common  shares of Debtor as payment  in full of all  outstanding  principal  and
interest on the Note.

This agreement shall be binding upon the Creditor,  Debtor, and their successors
and assignees.

Sincerely,


/s/ Lisa P. Hamilton
--------------------------------
Lisa P. Hamilton
Executive Vice President and CFO

Agreed:

SJM Family L.P.                                 Baron Energy, Inc.
by HH, Inc., its General Partner

Signed:                                         Signed:


/s/ Steven J. McGoffin                          /s/ Ronnie L. Steinocher
--------------------------------                --------------------------------
Steven J. McGoffin                              Ronnie L. Steinocher, President
Title:                                          and CEO
Date:                                           Date: