The Exploration Company Updates Latest Drilling Results

The Exploration Company reported that the Taylor 132-1 well, a Jurassic exploratory drilling prospect on its Paloma lease in the Maverick Basin, has reached total depth of 22,400 feet with testing and completion to follow immediately.

Logging was completed over the weekend and a 5 1/2-inch liner will be set at total depth. Testing of multiple, potentially productive intervals will utilize the drilling rig currently on location. Originally permitted to 18,500 feet when spudded in March 2003, the well was cased and re-permitted to a lower depth to better delineate the untested Jurassic-age beds encountered. TXCO's partner, Blue Star Oil & Gas Ltd., Dallas, is operator. The Company holds rights to the Jurassic on approximately 300,000 acres of its 480,000-acre Maverick Basin lease block.

Separately, testing has been completed on the Kothman 1-673 (50% WI), the second horizontal well drilled to the Georgetown formation on TXCO's Pena Creek lease. The well tested at the rate of 3.3 million cubic feet of gas and 100 barrels of oil per day (BOPD) through a 20/64-inch choke with a flowing tubing pressure of 2,200 pounds per square inch. TXCO expects to place the well on production by late December following completion of a pipeline connection. The Company employed the same advanced seismic technique used in the successful, Vivian 1-687 Georgetown well (50% WI), placed on production in October. Two additional Georgetown wells are now drilling or in completion, utilizing the same seismic technique.

In TXCO's Glen Rose porosity play, the Comanche 2-2 sidetrack horizontal well (50% WI) began producing water at the end of November after flowing water-free oil since going on production in early October. Current production is approximately 200 BOPD and 300 barrels of water per day, down from initial levels of approximately 750 BOPD and no water. Cumulative oil production by early December had surpassed 42,000 barrels of oil, quickly recouping the well's recompletion cost.

TXCO's technical staff is studying the well to refine the technique used to drill it. The Comanche 2-2 was the first Glen Rose porosity well drilled in which the horizontal lateral was drilled within the producing interval but parallel to potentially water-productive faults instead of intersecting the faults. Unfortunately, the operator was able to drill less than 100 feet of horizontal lateral in the porosity zone due to drilling problems, limiting potential oil production. TXCO believes the technique may allow a higher recovery of oil in place within the challenging, yet lucrative, formation, ultimately leading to significant reserve additions. Additional Glen Rose porosity drilling will start when a hunting moratorium on TXCO's Comanche lease expires in mid January 2004.