TXCO Resources Inc. (the "Company") entered into a joint exploration agreement ("JEA") with Millenium E&P Resource Fund I, LLC ("Millenium") on December 31, 2008. The agreement calls for Millenium to provide $825,000 in initial funds for the drilling and completion of a well to test the Georgetown formation in the Burr "C" project. The JEA also provides the options for Millenium to participate in up to two additional wells. In each well, Millenium will fund 100% of the cost of drilling and completion and will earn a 50% working interest in the well. The Company will serve as operator on the wells covered by the JEA.

J. Michael Muckleroy, an outside director of the Company, serves as Chief Executive Officer of Millenium, and holds a 47.5% equity interest in M&M Energy, an affiliate of Millenium. As a result of his equity ownership in M&M Energy, Mr. Muckleroy will receive a 1.1875% working interest following the payout of any successful well drilled under the JEA.

The foregoing summary of the JEA does not purport to be complete and is qualified by reference to the complete text of the JEA, which is filed as Exhibits 10.1 hereto and incorporated by reference herein in its entirety.

(d) Exhibits.

Exhibit Number  Description

10.1              Joint Exploration Agreement between TXCO
                Resources Inc. and Millenium E&P Resource Fund
                I, LLC.