South Texas Oil Company Announces Year-end 2007 Financial and Operating Results and Estimated Proved Reserves Quantities

AUSTIN, Texas, April 15 /PRNewswire-FirstCall/ -- South Texas Oil Company (NASDAQ:STXX) today announced year-end 2007 financial and operating results and provided estimated proved reserves quantities.

Highlights:

-- 2007 Total Revenue: $5.7 million, an increase of 929% over 2006

-- 2007 Stockholders' Equity: $31.2 million, an increase of 680% over 2006

-- 2007 Production: 169,711 barrels of oil equivalent (BOE), an increase
of 1,595% over 2006

Full-Year 2007 Results

The Company reported oil and gas sales for 2007 were $5.4 million versus $553,000 in 2006, an increase of 929% over 2006. Total revenues were $5.7 million versus $553,000 in the year-ago period. Drilling services contributed approximately $341,000 to the 2007 total revenues as compared to zero in 2006. The Company reported a net loss for the year-ended December 31, 2007 of $6.6 million, or $0.45 per share, compared with a net loss of $733,000, or $0.09 per share, for the same period in 2006. Included in the 2007 costs and expenses was approximately $4.89 million in depreciation, depletion and amortization (DD&A), as compared to $400,000 in 2006. The increase in DD&A is attributed to higher production volumes and to acquisitions during the 2007 fiscal year. All per-share amounts are presented on a weighted average basis. At December 31, 2007, 14.5 million weighted average shares were outstanding. For the full-year 2007, South Texas Oil posted net cash provided by operating activities of $1.5 million as compared to net cash used by operations in 2006 of $284,000.

Total assets were $63.4 million at year-end 2007, up from $4.5 million in the same period in 2006. Stockholders' equity grew to $31.2 million at December 31, 2007 from $4.0 million at year-end 2006, an increase of 680% over 2006. The Company's cash position at year-end is $2.2 million, and its long-term debt was $25 million.

Production and Operations

For the full-year 2007, South Texas Oil produced 169,711 BOE comprised of 121,096 barrels of crude oil and 292 million cubic feet of natural gas. This compares to 10,010 barrels of oil in 2006 and no natural gas. Oil price realizations were $91.27 per barrel in 2007 as compared to $55.25 in 2006. Gas price realizations were $9.05 per thousand cubic feet of natural gas in 2007. South Texas Oil's 2007 average production base was approximately 71% crude oil.

During 2007, South Texas Oil's total capital expenditures for development and exploration of its leasehold and its drilling division totaled $22.2 million.

2007 Proved Reserves

Total proved reserves were 408,000 BOE, comprised of 388,657 barrels of oil and 1,156 million cubic feet of natural gas. The reserve mix is approximately 95% crude oil. Approximately 83% of the proved reserves are classified as proved developed and 17% are proved undeveloped. This is the first outside-engineered reserve report completed by the Company on the current assets, so it has no year-over-year comparisons for proved reserves. In accordance with SEC guidelines, reserve estimates do not include any probable or possible reserves which may exist for South Texas Oil Company properties.

At December 31, 2007, the Company's estimated, pre-tax future net cash flows discounted at 10% (commonly known as the SEC PV-10 figure) for proved reserves was $18.2 million. In determining the 2007 PV-10 calculation, engineers used net year-end commodity prices of $92.50 per barrel of crude oil at West Texas Intermediate pricing adjusted by lease for quality, transportation fees and regional price differentials. In determining the natural gas quantities, $6.79 per MMBtu of natural gas priced at Henry Hub adjusted by lease for Btu content, transportation fees and regional price differentials. All prices are held constant.

The preponderance of proved reserves are located in the Giddings and Bastrop Fields in the Company's core operating area. Reserve estimates are engineered by independent reservoir engineering consultants, Netherland, Sewell & Associates, Inc. and conform to the definition as set forth in the SEC Regulation S-X Part 210.4-10 (a) as clarified by subsequent Commission Staff Accounting bulletins. The proved reserves are also in accordance with Financial Accounting Standards Board Statement No. 69 requirements.

Reserves Summary at December 31, 2007

Net Reserves Value (M$)
Oil Gas
Category (MBbl) (MMcf) Future Net Revenue SEC PV-10

Proved Developed
Producing 308.4 1,156 $23,741 $16,489
Non-Producing 15.6 - $1,095 $973
Proved
Undeveloped 64.6 - $2,132 $783

Total Proved 388.6 1,156 $26,968 $18,245

Management Comment

Scott Zimmerman, President and CEO, said: "We are pleased to have received our first inclusive third-party reserve analysis from a respected reserve engineering firm. Our proved reserves now provide a benchmark to measure our plans to continue growing production and reserves. Various acquisitions and development-type drilling in 2007 provides us with additional opportunities in 2008 and beyond. We continue to see strong results from our Bastrop area and have allocated the majority of our 2008 capital expenditure to quickly recovering crude oil to capitalize on the high commodity price environment and ensuring strong cash flow."

About South Texas Oil Company

Austin-based South Texas Oil Company acquires, explores and exploits predominantly oil-bearing formations in its core operating areas in south-central and southwest Texas, and in the DJ Basin of northeast Colorado. The Company has a high-working-interest inventory of drillable locations within its operating areas. The Company anticipates investing growth capital in both its Texas assets as well as its DJ Basin properties in Colorado. Two Company-owned rigs will be utilized to help develop the Company's successful Bastrop core operating area as well as other assets in the South Texas portfolio. The Company currently is evaluating existing wellbores in the Giddings Field for re-entry possibilities that can enhance production and estimated ultimate recoveries. The Company is also evaluating infill drilling locations in Kyote and Bigfoot Fields.

Forward-looking Statements

Certain statements made in this press release contain forward-looking statements that involve a number of risks and uncertainties. This forward-looking information is based on certain assumptions, including, among others, presently known physical data concerning size and character of reservoirs and economic recoverability. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, operations involve numerous risks and uncertainties, many of which are beyond South Texas Oil's control, which could result in expectations not being realized or otherwise materially affect the financial condition, results of operation and cash flows. Additional information regarding these and other risks are contained in South Texas Oil's filings with the Securities and Exchange Commission.

First Call Analyst:
FCMN Contact:

Source: South Texas Oil Company

CONTACT: J. Scott Zimmerman, President and CEO of South Texas Oil
Company, +1-512-772-2474, fax, +1-512-263-5046

Web site: http://www.southtexasoil.com/

2008-04-15 23:56:34 0336929 PRNEWSWIRE