Texon Petroleum Limited (ASX:TXN) Quarterly Report For The Period Ended 31 December 2009

Brisbane, Jan 29, 2010 AEST (ABN Newswire) - Texon Petroleum Limited (ASX:TXN) is pleased to provide the Quarterly Report for the period ended 31 December 2009.

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

The fifth Leighton well, Tyler Ranch #4, was drilled in October 2009 and intersected 197 ft of oil and gas shows in the Olmos, Eagle Ford Shale (EFS) and Buda/Edwards reservoirs. After obtaining reservoir data from the Eagle Ford and Edwards/Buda formations, the well was completed in the Leighton Olmos reservoir. Following fracture stimulation in mid November the well flowed at an initial rate of 480 boepd and was then placed on production. This brought the total number of producing wells to five and continued the 100% drilling success rate in the Leighton field.

The added production came at an opportune time to capture the improved oil prices of US$75-80/bbl and the higher natural gas prices of US$5.70/mmbtu currently. In addition, because of the high natural gas liquids content and high heating value of the Leighton gas, it attracts approximately a 40% premium, compared with dry gas.

EAGLE FORD SHALE (EFS)

With the successful drilling of the Tyler Ranch #4 into the Eagle Ford and the continuing success industry is having in developing this widespread resource play, the EFS has become on a risk / reward basis the highest ranked asset in Texon's portfolio.

The electric log response of the Eagle Ford in Tyler Ranch #4 was considered by Independent consultants NuTech Energy Alliance to be similar to the liquids rich Eagle Ford which is being developed in the Hawkville area, some 19 kms south west of the Company's leases where initial flow rates were up to 13mmcfgepd.

Other EFS wells along trend and to the east have had initial rates of 11- 17mmcfegpd which included up to 500bopd. NuTech advised that the log calculated porosities and permeabilities of the Eagle Ford in TR #4 are in line with better quality Eagle Ford wells. Based on the Company's analyses the Leighton/Mosman-Rockingham leasehold lies in a liquids rich trend where 50 to 150 barrels of oil per million cubic feet of gas are being produced from Eagle Ford wells in the area.

Based on the NuTech analysis and the expected recovery from the EFS wells currently being produced by other companies in the area, the Company estimates that the EFS reservoirs in Leighton, Mosman and Rockingham contain 292 bcfe (48.6 mmboe) to the Company's current Working Interest.

A well in the Mosman-Rockingham area is planned to be drilled in late February this year to test the extent of the Olmos and EFS reservoirs. Should this well prove successful it will indicate the presence of the EFS across Texon's leasehold of 4,549 acres in the Leighton/Mosman-Rockingham area and the productivity of the oil rich Olmos Leighton reservoir in the Mosman-Rockingham area.

The Company considers that the total resource potential at Texon's current working Interest in the Leighton/Mosman-Rockingham area from both the Olmos and Eagle Ford reservoirs is 60mmboe.

                  ---------------                    EFS    OLMOS                  (mmboe) (mmboe)------------------------------------------------Leighton            11       4Mosman-Rockingham   38       7------------------------------------------------                    49      11   Total: 60 mmboe------------------------------------------------

INDUSTRY EAGLE FORD SHALE ACTIVITY

Industry drilling activity in the Eagle Ford Shale has increased in the areas surrounding the Company's Leighton, and Mosman-Rockingham leases with a number of large US independents continuing to drill closer to the Company's acreage. One Eagle Ford well is being drilled within 3.5 km of the Company's Mosman-Rockingham leases by Swift Energy. In the Hawkville field 19 kms to the south west of Rockingham, Petrohawk has averaged initial rates of 8.7mmcfegpd from 16 wells. Please refer to the Company's press release dated 28 January 2010 for more detail.

BUSINESS PLAN PROGRESS

In November the Company released its updated business plan. Progress has been made on several fronts.

Production Increase

With drilling focused on Leighton, production has increased 16% over the 3rd quarter with oil making up 38% of the total production for the quarter and 58% of the revenue.

After drilling five Leighton wells there remain 26 potential drill sites consisting of 14 Proved undeveloped locations, 10 Probable locations and 2 other locations on Leighton.

Increased Lease Position

The Company's leasehold increased with the acquisition of 1,835 acres at Rockingham taking the Company's total gross reservoir acres to 9,500 under lease including 4,549 EFS acres and 3,000 Olmos acres.

The EFS under Leighton, Mosman and Rockingham is now the highest ranked asset of the Company's business with an estimated resource potential of 48.6mmboe to the Company's WI.

The Company is seeking additional Eagle Ford acreage.

Future Drilling

It is planned to commence drilling in the Mosman-Rockingham area in late February 2010 with Texon retaining a 100% WI. In addition three development wells are planned to be drilled in Leighton this year.

Partial sale of equity in the Leighton Olmos reservoir is progressing with a number of parties evaluating the Leighton asset. Proceeds of the sale could potentially be used to fund the drilling of an EFS horizontal well in Q2/Q3 2010 without having to farm down Texon's interest.

High Impact Gas Prospects

Texon is actively marketing its high impact gas prospects to industry with a view to drilling one this year with little or no cost exposure to the Company.

Sale of Frio Production and Prospects

Due to the failure of a potential buyer to complete the transaction as announced in the last quarter, the properties have been placed with a broker.

PRODUCTION

Production for the quarter was:

                    -----------------------------------                    Gas (mcf)   Oil (bbl)  Total (mcfe)-------------------------------------------------------Gross                233,978     27,829      400,952Nett (Texon share)   145,069     14,779      233,744-------------------------------------------------------Year to date (12 months):                    -----------------------------------                    Gas (mcf)   Oil (bbl)  Total (mcfe)-------------------------------------------------------Gross                877,844     64,095    1,262,414Nett (Texon share)   570,600     34,524      777,744-------------------------------------------------------

Gross average daily production for the December quarter was 2,543 mcfgpd and 302 bopd (Texon's share: 1,577 mcfgpd and 161 bopd) from 10 producing wells.

Daily production as of 25 January 2010 was Gross: 2,383 mcfgpd and 252 bopd (Texon's share: 1,472 mcfgpd and 133 bopd).

CORPORATE

Peter Dighton resigned as a director of Texon to allow him to spend more time on other business interests.

The Board thanks Peter for his contributions during the formation of Texon and during his time as a Director.

For the complete Texon Petroleum Quarterly Report for the period ended 31 December 2009, please click the link below:

http://www.abnnewswire.net/media/en/docs/62174-ASX-TXN-217770.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 (Houston is 15 hours behind Aust Eastern Standard time)