Mexco Energy Acquires Exploration Rights Along Gulf Coast

Mexco Energy has entered into a joint venture with Falcon Bay Operating, in which Mexco acquired the option to purchase seismic data and leases for a minimum of four prospects over a period of two years. Mexco will own a 50 percent working interest in prospects including seismic data and leasehold acreage located along the Texas and Louisiana coastal transition zone. The prospects will be developed by a group of generating partners, which includes Falcon Bay, utilizing 3-D seismic that will provide increased accuracy and identification of high risk, high potential, primarily natural gas prospects.

In consideration for the option to obtain four prospects, Mexco will initially issue warrants to purchase 107,500 shares of common stock at an exercise price of $5.00 per share. Such warrants will be in effect for a period of two years from date of grant. Additional warrants would be issued covering 322,500 shares upon exercise of the Registrant's right to participate in a total of four prospects. Mexco will have an obligation to pay its share of expenses upon completion of carried interest and would bear the risk of loss in the event that any of these prospects are not sold.

These prospects will involve high risk and reserve potential in the range of 50 to 500 billion cubic feet of natural gas. Falcon Bay and Mexco would retain in equal shares any working or carried interest in these prospects to be drilled generally at depths ranging from 4,500 to 20,000 feet.

Mexco has exercised its option to purchase the acreage and seismic data on the first prospect located in the Galveston Bay transition zone with a well expected to be drilled to a depth of 12,500 feet. Falcon Bay is negotiating to sell this prospect on the basis of a carried interest in the first well and Mexco being responsible for the cost of its share in any subsequent wells.

The coastal transition zone includes shallow state-owned waters, coastal wetlands and onshore property. It is where the US Gulf of Mexico "transitions" into the Texas and Louisiana onshore area.


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