Exploration Company To Increase Reserves

The Exploration Company announced mid-year proved reserves of 2.2 million barrels of oil and 11.8 billion cubic feet (Bcf) of natural gas, or 25.2 Bcf of natural gas equivalents as estimated by TXCO's reserve engineering consultants, Netherland, Sewell & Associates, Inc.

This represents an increase of 98 percent since reporting 2001 year-end reserves. TXCO is currently producing 18 million cubic feet (MMcf) of natural gas equivalents per day, an 89 percent increase since December 2001. The reserve and production growth is primarily attributable to the Glen Rose oil discovery on the Comanche lease in March 2002 and to the acquisition of the Pena Creek Field, which contributed 3.4 Bcfe to TXCO's mid-year reserves.

Year-to-date, TXCO has participated as the operator in drilling or re-entering 13 wells and as non-operator in drilling an additional eight wells. Of the total, 14 are producing and six are in various stages of drilling or completion, resulting in a 93 percent success rate through July 31. In May, TXCO acquired the Pena Creek Field in Dimmit County, Texas and plans to complete a 3-D seismic survey to assess the potential of the Glen Rose interval underlying the field during the third quarter. In addition, the Company closed on the acquisition of the 69-mile Maverick Pipeline System, which gives the Company 35 MMcf per day of pipeline transportation capacity from the Maverick Basin into the interstate pipeline grid. TXCO is also in the final steps of completing the field acquisition phase of a 3-D seismic survey encompassing the remaining half of its 95,000 acre Comanche lease not previously surveyed.