TEL Offshore Trust Announces There Will Be No First Quarter 2009 Distribution

Business Wire, March 25, 2009

AUSTIN, Texas -- TEL OFFSHORE TRUST announced that there will be no trust distribution for the first quarter of 2009 for unitholders of record on March 31, 2009. The financial and operating information included herein for the Trust’s first quarter of 2009 reflects financial and operating information with respect to the royalty properties for the months of November and December 2008 and January 2009 and includes prior period adjustments associated therewith.

Gas revenues recorded by the Working Interest Owners on the royalty properties increased approximately 30% to $827,661 in the first quarter of 2009 from $638,250 in the fourth quarter of 2008. Natural gas volumes during the first quarter of 2009 decreased approximately 23% to 130,986 Mcf from 169,621 Mcf during the fourth quarter of 2008, primarily due to damages caused by Hurricane Ike in September 2008. The average price received for natural gas decreased approximately 34% to $7.14 per Mcf in the first quarter of 2009 as compared to $10.81 per Mcf received in the fourth quarter of 2008. After taking into account prior period pricing adjustments, including adjustments to reflect alternative pricing contracts, the average price received for natural gas for the first quarter of 2009 was effectively $6.32 per Mcf and the average price received for natural gas for the fourth quarter of 2008 was effectively $3.76 per Mcf; thus, gas revenues actually increased quarter to quarter.

Crude oil revenues recorded by the Working Interest Owners on the royalty properties decreased approximately 80% to $1,009,282 in the first quarter of 2009 from $4,939,538 in the fourth quarter of 2008. Oil volumes during the first quarter of 2009 decreased approximately 49% to 18,510 barrels, compared to 36,270 barrels of oil produced in the fourth quarter of 2008. The decrease in revenue was primarily due to decreases in production resulting from damages caused by Hurricane Ike. The average price received for oil decreased to $54.53 per barrel in the first quarter of 2009 from $136.19 per barrel in the fourth quarter of 2008 (after taking into account minor prior period pricing adjustments in both quarters).

The Trust’s share of capital expenditures increased by $166,417 in the first quarter of 2009 to $276,425, as compared to $110,008 in the fourth quarter of 2008. The increase in capital expenditures was primarily due to higher expenditures for Eugene Island 339 that were classified as capital expenditures. The Trust’s share of operating expenses increased by $4,208,634 in the first quarter of 2009 to $5,937,665 as compared to $1,729,031 for the fourth quarter of 2008. The increase in operating expenses was primarily due to expenditures associated with the plugging and abandonment of the existing wells at Eugene Island 339 and related matters.

No funds were released or escrowed from the Trust’s Special Cost Escrow in the first quarter of 2009. The Trust’s Special Cost Escrow balance was $4,305,190 as of the end of the Trust’s first quarter.

On October 7, 2008, the Trust announced that production from the two most significant oil and gas properties associated with the Trust had ceased following damage inflicted by Hurricane Ike in September 2008. The principal asset of the Trust consists of a 99.99% interest in TEL Offshore Trust Partnership. The Partnership owns an overriding royalty interest, equivalent to a 25% net profits interest, in certain oil and gas properties, including the working interest ownership interest of Chevron U.S.A. Inc. in Eugene Island 339 and Ship Shoal 182 and 183.

The platforms and wells on Eugene Island 339 were completely destroyed by Hurricane Ike in September 2008. Crude oil revenues from Eugene Island 339 represented approximately 48% of the crude oil and condensate revenues for the royalty properties in 2007 and approximately 47% of such revenues for the nine months ended September 30, 2008. Eugene Island 339 contributed approximately 12% of the revenues from natural gas sales from the royalty properties in 2007 and approximately 41% of such revenues for the nine months ended September 30, 2008. Based on a prior reserve study of DeGolyer and MacNaughton, independent petroleum engineering consultants, Eugene Island 339 accounted for approximately 34% of the total future net revenues attributable to the Partnership’s interest in the royalty as of October 31, 2007. Chevron is proceeding to plug and abandon the existing wells, to clear debris and otherwise to deal with the remaining infrastructure. In order to restore production, Chevron expects that it would need to redevelop the facility and drill new wells. Chevron is still assessing its alternatives and the economic feasibility for restoring production at the property. At this point in time, there can be no assurance as to how or when, or if at all, production may be restored at Eugene Island 339. Generally, if production ceases from an outer continental shelf lease, like that for Eugene Island 339, production must be restored or drilling operations must commence within 180 days of the cessation (which was in early March 2009), or the lease will be terminated. A lease operator may seek approval from the regional supervisor of the Mineral Management Service to allow additional time to restore production. Chevron has submitted such a request with respect to Eugene Island 339. There can be no assurance that production at Eugene Island 339 will be restored or that such requested extension will be granted.