TXCO Resources Signs Exploration Agreement With Anadarko

TXCO Resources Inc. has signed an agreement with Anadarko Petroleum Corporation that gives rights to drill the Pearsall and Eagleford shale gas resource plays on Anadarko's 349,000 gross acres in the Maverick Basin of Southwest Texas. In addition, TXCO has entered into an agreement with St. Mary Land & Exploration Company whereby St. Mary will participate with TXCO in the development of the Anadarko acreage.

Under the joint exploration agreement, TXCO and St. Mary can earn certain interests in Anadarko's lease block by drilling four horizontal wells in the Pearsall and/or Eagleford formations by year-end 2008. TXCO and St. Mary have the option to extend the drilling program through year-end 2013, at which time TXCO and St. Mary could earn as much as a 50 percent working interest in the acreage that will be split equally. After the wells are completed, Anadarko would retain a 50 percent carried working interest and serve as operator. TXCO will operate the drilling and completing of the four proposed 2008 wells, sharing costs equally with St. Mary. TXCO is preparing to spud the first of these wells in April.

Anadarko's leasehold of 349,000 gross acres is located in Maverick, Dimmit, Webb and LaSalle counties, generally south and east of the 708,000 gross acres TXCO holds in Maverick, Dimmit and Zavala counties.

"The Pearsall shale gas resource play is one of our key growth catalysts," said CEO James E. Sigmon. "TXCO's initial results in drilling the Pearsall shale have been encouraging, and we believe this unconventional, tight gas formation has great potential to create new production and reserves for TXCO and our two fine partners in this promising joint venture. The Eagleford shale is a major source for hydrocarbons in the Maverick Basin and has the potential of developing into a large resource play."