Texon Petroleum Limited (ASX:TXN) Quarterly Report For The Period Ending 30 September 2009

Brisbane, Oct 30, 2009 AEST (ABN Newswire) - Texon Petroleum Limited (ASX:TXN) revenues received for the quarter and the year to date before severance tax and lease operating expenses were US$0.92 million and US$2.90 million, respectively. Cash proceeds from gas and oil sales are received two months after production and sales take place, so that the revenue received for the quarter is from production during May, June and July. The average oil and gas market prices during the quarter were about US$65/barrel and US$3.25/mcf, respectively. Increased production from Leightons 3, 4 and 5 since July will result in increased revenue in the December quarter this year and the first quarter of 2010.

LEIGHTON OIL AND GAS PROJECT (Texon 70% WI, 52.5% NRI)

During the period Peeler #1, the first Leighton well, was successfully refracture stimulated resulting in an increased production rate. It is currently producing at 100boepd.

Two additional Leighton wells (making four wells) were drilled and a fifth well commenced drilling on 10 October. Tyler Ranch #2 and Tyler Ranch #3 were spudded on 19 August and 5 September respectively and both intersected oil and gas in the Olmos reservoir and connected to sales gas pipelines and oil tanks.

The initial flow rates of Tyler Ranch #2 and Tyler Ranch #3 were 366 bopd and 500 boepd respectively.

Having two additional wells connected to the sales pipeline and the re-fracture of Peeler #1 has increased gross production at the Leighton project from 415 boepd at the start of the quarter to 621 boepd as of 20 October, 2009.

The fifth Leighton well, Tyler Ranch #4, was recently drilled encountering oil and gas shows in the Olmos Leighton reservoir and in the Eagle Ford Shale. Production casing has been run in preparation for fracture stimulation of the Olmos reservoir in early November after which it will be placed on production.

LEIGHTON / MOSMAN AREA - EAGLE FORD SHALE POTENTIAL

Over the past 12 months there has been an increase in drilling activity in the Eagle Ford Shale. Texon's leases lie within the Eagle Ford Shale trend. An average initial flow rate of 1,500 boepd from 11 wells has been reported by USA based company, Petrohawk, while another large US independent Pioneer Natural Resources recently reported an initial flow rate of 8.3mmcfgpd and 500 bopd (1,880 boepd) from their Eagle Ford well to the east of Leighton.

Texon has a gross 2,724 acres in this area covered by the Mosman and Leighton leases and continues to look to expand its position. The current leases include 100% Working Interest ("WI") in Leighton in 460 acres, and 70% WI in 830 acres at Leighton and a 100% WI in the 1,434 acres in Mosman.

Tyler Ranch #4 has proven the presence of the Eagle Ford shale under the Leighton leases and the likely presence of the Eagle Ford under the Mosman leases.

Over the next several weeks, specialist technical analysis will be undertaken on the Eagle Ford samples from Tyler Ranch #4 to evaluate the Eagle Ford Shale's oil and gas potential.

PLACEMENT / SHARE PURCHASE PLAN

On 4 August, the Company announced the first stage of its capital raising. A placement of 13.5 million shares at 19 cents per share to sophisticated and institutional investors raised A$2.6m. This was followed by the launching of the Share Purchase Plan on the 14 August which was strongly supported by shareholders who applied for 31,055,454 shares at 19 cents per share and raised a further A$5.9m. A total of 44,558,379 new ordinary shares were issued in the two raisings and brings the Company's ordinary fully paid issued shares to 134,577,879.

The A$8.5m raised has been directed towards continuing the drilling of production wells in the Leighton field and to seek additional acreage in the Leighton area. So far three more Leighton wells have been drilled and an additional 290 acres over the Mosman and Leighton projects have been acquired.

SALE OF FRIO PRODUCTION AND PROSPECTS

A letter of intent to purchase two of the Company's producing wells from the Frio reservoir and six leased but undrilled Frio prospects for US$860,000 was received and announced in August. The buyer had until 17 August 2009 to finalise the Sale and Purchase Agreement with payment by 11 September 2009. The potential buyer was unable to raise sufficient funds at that time. They have entered discussions with an alternate capital provider with the intention of closing the transaction in 1 to 2 months.

LEASING

During the quarter the Company increased its acreage holding in the Leighton and Mosman areas from 2,434 acres to 2,724 acres. The Company continues to pursue additional leases in the same area.

For the complete Texon Petroleum Quarterly Report for the period ending 30 September 2009, please click the link below:

http://www.abnnewswire.net/media/en/docs/61671-ASX-TXN-215345.pdf

Contact

Dr John Armstrong Chairman Brisbane: +61-7-3211-1122 Mr David Mason Chief Executive Officer Brisbane: +61-7-3211-1122 Houston: +1-281-419-4976