TXCO Resources Reports Record Results for 2007

Business Wire, March 11, 2008

SAN ANTONIO -- TXCO Resources Inc. (Nasdaq:TXCO) today reported results for its year and quarter ended December 31, 2007. The Company set records for:

* Revenues.

* Oil and gas sales.

* Cash flow.

* Total assets.

* Proved reserves.

For the year, total revenues rose to a record $93.9 million, a 30 percent increase from $72.4 million in 2006. Oil and gas sales increased 45 percent from the prior year to $81.8 million. Assets rose to $354.6 million, nearly 150 percent above year-end 2006, including the second-quarter 2007 acquisition of Output Exploration LLC.

The Company reported net income attributable to common stock of $0.9 million, equal to $0.03 per share, compared with $7.2 million, $0.22 per share, in 2006. Operating income, $10.4 million, was essentially flat with the prior year.

Net cash provided by operating activities was $69.4 million, partially reflecting accrued acquisition costs, a 181 percent increase from $24.7 million in 2006. Ebitda - earnings before income taxes, interest expense, depreciation, depletion, amortization, impairment and abandonment expense - was a record $52.9 million, or $1.52 per share, a 42 percent increase from $37.3 million, or $1.12 per share, in 2006. Ebitdax - Ebitda plus exploration expense - also set a record of $54.2 million, or $1.56 per share, compared with $40.3 million, $1.21 per share in the prior year. All per-share amounts are on a diluted basis. See the accompanying table for a reconciliation of non-GAAP financial measures.

Fourth-Quarter Results

For the fourth quarter of 2007, TXCO had net income attributable to common stock of $1.8 million, or $0.05 per share, compared with a net loss of $4.4 million, $0.13 per share, in fourth-quarter 2006. TXCO's revenues for the three months ended December 31, 2007, were more than double the same period in the prior-year period, $32.1 million compared with $15.3 million. Oil and gas sales also were more than double the 2006 quarter, $28.9 million versus $12.1 million. Oil and gas volumes increased to 2.4 bcfe, compared with 1.5 bcfe in fourth-quarter 2006.

Continuing Reserve Growth

Proved reserves increased sharply through both the Output acquisition and drilling. Net proved reserves at the end of 2007 were a record 91.8 bcfe, up from TXCO's estimated proved reserves of 41.4 bcfe at year-end 2006. Combined with record 2007 oil and gas sales of 7.9 bcfe, gross reserve additions were 58.3 bcfe, including 18.5 bcfe via the drillbit, before acquisitions. Overall, TXCO had a 731 percent all-source reserve replacement rate. Estimated, pre-tax future net cash flows discounted at 10 percent (PV-10) for proved reserves at year-end 2007 were $373 million, based on adjusted commodity prices of $92.75 per barrel for crude oil and $6.445 per mmBtu for natural gas. TXCO's year-end 2006 PV-10 stood at $92.7 million.

The Company's reserve life index rose to 11.5 years, compared with seven years at year-end 2006. Its reserve mix at year end consisted of 54 percent oil and 46 percent gas, of which approximately 59 percent was proved developed.

All reserve estimates were prepared by the independent engineering firms of DeGolyer and MacNaughton and William M. Cobb & Associates Inc. in accordance with Securities and Exchange Commission and Financial Accounting Standards Board requirements.

Management Perspective

"We began 2008 as a different company following the landmark changes that followed our acquisition of Output Exploration during 2007," said Chairman and CEO James E. Sigmon. "We continue to build on the valuable assets we gained in the Output transaction. I see more potential than ever before to create greater shareholder value through such exciting projects as the San Miguel oil sands, Pearsall gas resource play, Glen Rose Porosity oil play and Fort Trinidad Glen Rose shoals. I remain confident that we will see stronger continuing growth in production, reserves, profitability and shareholder value in 2008 and going forward."

Conference Call and Webcast

TXCO has scheduled a conference call for 10 a.m. CDT (11 a.m. EDT) Tuesday, March 11, 2008, to discuss 2007 financial results and current operations. The call will be broadcast live via the Company's Web site at http://www.txco.com/concall.html or by telephone at (877) 387-9209 in the U.S. and Canada and (706) 643-3820 for international callers. Passcode is 34954051. A replay will be available through Thursday, March 13, 2008, at (800) 642-1687 (U.S./Canada) and (706) 645-9291 (international) with the same passcode, and for 30 days at http://www.txco.com/concall.html.> Also, the Company will webcast its presentation at this week's Dahlman Rose & Co. Energy Supply Chain Conference in New York and Boston. Mr. Sigmon's New York presentation is scheduled to start at 10:30 a.m. CDT (11:30 a.m. EDT) Wednesday, March 12. The webcast will be available via TXCO's Web site at http://www.txco.com/presentation.html, and will be archived for future reference.

About TXCO Resources

TXCO Resources, formerly The Exploration Company, is an independent oil and gas enterprise with interests in the Maverick Basin, the onshore Gulf Coast region and the Marfa Basin of Texas, and the Midcontinent region of western Oklahoma. It has a consistent record of long-term growth in its proved oil and gas reserves, leasehold acreage position, production and cash flow through its established exploration and development programs. TXCO's business strategy is to build shareholder value by acquiring undeveloped mineral interests and internally developing a multi-year drilling inventory through the use of advanced technologies, such as 3-D seismic and horizontal drilling. It accounts for its oil and gas operations under the successful efforts method of accounting and trades its common stock on Nasdaq's Global Select Market under the symbol "TXCO."