SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C. 20549
                    ----------------------------
                             FORM 10-K
       (Mark One)
     [X]         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2002      Commission File No. 1-10437

                                  OR

   [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

For the transition period from    to     Commission File No. 1-10437

                     TEXAS VANGUARD OIL COMPANY
       (Exact  name of registrant as specified in its charter)
          Texas                                             74-2075344
(State or other jurisdiction of                            (IRS Employer
 incorporation or organization)                          Identification No.)

9811 Anderson Mill Rd., Suite 202
     Austin, Texas                                            78750
(Address of Principal Executive Offices)                    (Zip Code)

  Registrant's telephone number, including area code (512)  331-6781

    Securities Registered Pursuant to Section 12(b) of the Act:

                        Title of each class: None

        Name of each exchange of which registered: Not applicable

     Securities registered pursuant to Section 12(b) of the Act:

                     Common Stock, $.05 Par Value
                           (Title of Class)

Indicate by check mark whether the registrant (1) has  filed all reports
required to be filed by  Section 13 or 15(d) of  the Securities Exchange
Act of  1934 during the  preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X or No ___.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation  S-K is not  contained herein, and will not be contained, to the
best of registrant's knowledge,  in definitive proxy or information statements
incorporated by reference in Part III  of this  Form 10-K or  any amendment to
this Form 10-K. [X]

As of March 5, 2003, there were 1,416,587 shares of the registrant's Common
Stock outstanding;  the aggregate  market value of the share of Common Stock
held by non-affiliates of the  registrant (314,347 shares), based on average
bid and asked prices on the aforesaid date, was $795,297.91.

                 DOCUMENTS INCORPORATED BY REFERENCE

The registrant's definitive proxy statement regarding the election of directors
at the registrant's 2003 Annual Stockholders' Meeting filed or to be filed with
the Commission  on or before April 30, 2003, has been incorporated by reference
in Part III of this report.


                                PART I


ITEM  1.  BUSINESS

General

   Texas Vanguard Oil Company (the "Company" or "Registrant") was incorporated
under  the laws of the state of Texas on December 4, 1979. The business of the
Company  is  to  engage  in the  acquisition,  exploration,  development,  and
operation of onshore oil and gas  properties in the United States, principally
in  Texas.   In  April 1980,  the Company  completed a  public offering of its
securities netting  approximately $1,250,000 from the sale of 1,500,000 shares
of common stock to the public.

  The Company engages in oil and natural gas exploration, development and
production  in Texas, New Mexico,  and  Wyoming.  Generally, the  Company
acquires  operated  working interests  in producing oil  and natural  gas
properties which it further develops.

   The executive offices of the Company are located at 9811 Anderson Mill Rd.,
Suite 202, Austin, Texas 78750 and its telephone number is (512) 331-6781.

Markets for Oil and Gas

   The market for the Company's primary products, oil and gas, depends upon a
number of factors, including the availability of other domestic production,
crude oil imports, the proximity and size of oil and gas pipelines and general
fluctuations in the supply and demand for oil and gas. At present, the Company
sells all of its production to traditional industry purchasers,such as
pipeline and crude oil companies, who have the facilities to transport the
oil and gas from the well site. The Company has recorded revenues in excess
of 10% of total revenue from  Aquila Southwest (15% in 2001), Duke Energy/GPM
(32% in 2002, 39% in 2001 and 36% in 2000), EOTT Energy (23% in 2000) and
Plains Marketing (46% in 2002, 32% in 2001 and 25% in 2000). The Company does
not believe that the loss of major customers would have a material adverse
effect on the Company because oil production can be sold to any other oil
company at a comparable price. Oil sales are not made under a written contract
and the purchaser and price are not specified in the division order for subject
properties. The nature of the Company's business is not seasonal except to
the extent that adverse weather conditions could affect oil and gas
exploration and production activities. The Company currently has no intention
of refining or marketing its own oil and gas.  Since the Company engages
independent contractors for the drilling of any wells, it does not plan to
own any significant amount of drilling equipment. The Company does not
contemplate any material product research and development, any material
acquisition of plants or equipment, or any material changes in its number
of employees in the near future.

Competition

   The oil and gas industry is highly competitive in all aspects. The Company
competes with major oil companies, numerous independent oil and gas producers,
individual proprietors, and investment programs. Many of these competitors
possess financial and personnel resources substantially in excess of those which
are available to the Company and may, therefore, be able to pay greater amounts
for desirable leases and to define, evaluate, bid for, and purchase a greater
number of potential producing prospects than the Company's own resources permit.
The Company's ability to generate resources will depend not only on its ability
to develop existing properties, but also on its ability to identify and acquire
proven and unproven acreage and prospects for future exploration.

Environmental Matters

   The Company's operations are subject to numerous federal, state and local
laws and regulations controlling the discharge of materials into the environment
or otherwise relating to the protection of the environment. Such matters have
not had a material effect on operations of the Company to date, but the Company
cannot predict whether such matters will have any material effect on its capital
expenditures, earnings or competitive position in the future.

Regulations

  The production and sale of crude oil and natural gas are currently subject to
extensive regulation of both federal and state authorities. At the federal
level, there are price regulations, windfall profits tax, and income tax laws.
At the state level, there are severance taxes, proration of production, spacing
of wells, prevention and clean-up of pollution and permits to drill and produce
oil and gas. Although compliance with their laws and regulations has not had a
material adverse effect on the Company's operations, the Company cannot predict
whether its future operations will be adversely affected thereby.

Employees

   At December 31, 2002, the executive officers and directors were as follows:

                    Name                         Offices Held

               Linda R. Watson                   Chairman of the Board
                                                 and Director

               William G. Watson                 President, Cheif Executive
                                                 Officer and Director

               Teresa N. Nuckols                 Secretary

               Robert L. Patterson               Director



   William G. Watson, (age 54), received his B.A. degree from Texas Tech
University in 1970 and his M.S. degree from The University of Texas at
Arlington in 1974. He has been a director or Robert Watson, Inc., and is
a director and President of William Watson, Inc., an independent geological
consulting firm, which he founded in 1983, for more than the last five years.
He was a director and Vice President of the Company from 1982 until 1997.  He
was elected President of the Company on September 27, 2002, after the untimely
death of the Company's President and CEO, Robert N. Watson, Jr.

   Linda R. Watson (age 59), received her B.A. degree from The University of
Texas at Austin in 1966. She has been a director and Secretary-Treasurer of
Robert Watson, Inc. for more than the last five years and is now President
of Robert Watson, Inc. She has been a Director of the Company since 1982.
Also, she was the wife of Robert N. Watson, Jr.

   Teresa N. Nuckols (age 43), received her B.B.A. degree from Saint Edwards
University in 1988.  She has been an employee of the Company since 1989.

    Robert L. Patterson (age 63), received his B.S. and M.S. degrees from The
University of Texas at Austin in 1963 and 1964. He was employed by Union Oil
Company of California from 1965 through 1975, serving in various engineering
capacities. He was a Vice President of Argonaut Energy Corporation from 1976
through 1982. He was the President of Medallion Equipment Corporation  and
President of Argonaut Energy Corporation from July, 1985 through January, 1989.
He has also been an independent consulting petroleum engineer since 1983.

  The Company's officers actively manage the Company's activities. There are
no employment contracts with any officers. At December 31, 2002, the Company
had three full-time salaried employees. From time to time the Company engages
independent petroleum engineers, geologists and landmen on a fee basis.
Both William Watson and Linda Watson are directors of companies as previously
described which have oil and gas interests.Due to this situation a conflict of
interest may arise. However, there have been no such conflicts in the past
five years.

ITEM 2. PROPERTIES

  The Company owns no significant properties other than oil and gas properties.
It leases approximately 2,000 square feet of space for its executive offices at
9811 Anderson Mill Rd., Suite 202, Austin, Texas 78750. The Company  currently
has a month-to-month lease with a company owned by the Chairman of the Company
for these  facilities, which  began  on  July 1, 2002.   The rent for these
facilities is $1,900 per  month which is the  same as would  be charged to an
unaffiliated party.

Well Activity

   All of the Company's oil and gas working and royalty interests, reserves and
activities are located onshore in the continental United States. The following
table sets forth the  acquisition activity of the Company, for the years ended
December 31, 1998 through 2002.

Fiscal years         Oil                      Gas                   Dry
  ended
December 31,   Gross    Net            Gross        Net      Gross       Net

1998            34     22.22             23       15.12       ---       ---
1999            38     32.61              5        3.91       ---       ---
2000            26     18.45              0        1.22       ---       ---
2001             3      9.46              2        2.31       ---       ---
2002*            5      7.08              8        2.00       ---       ---

(1)   A gross well is a well in which the Company has an interest.

(2)   A net well is 100% of the working interest in a well. If the Company has
      a 12.5% working interest in a well, .125 is shown in the net well column.

(3)   A dry well is a well found to be incapable of producing oil or gas in
      sufficient quantities to justify completion of the well.

(4)   In 2000 the net gas interest is larger than the gross gas interest
      because the Company purchased additional interests in gas wells in
      which it already owned an interest.

(5)   In 2001 the net oil and gas interest is larger than the gross oil and
      gas interest because the Company purchased additional interest in oil
      and gas wells in which it already owned an interest.

(*)   In 2002, the Company participated in the drilling of 5 new wells.  All
      5 wells are classified as oil wells (5 gross oil, 2.45 net oil).

   The Company is not obligated to provide a fixed and determinable quantity of
oil or gas in the future under existing contracts or agreements.

Significant Properties

   Over the past three years, the Company has made  investments in proven oil
and gas properties that in the aggregate have been significant to the Company.
None  of the  individual properties  has cost  more  than 15%  of the average
balance in oil and gas properties at the time of purchase.  These investments
have been made in  different fields  and areas,  primarily in  south and west
Texas. At December  31, 2001, the Company  does not have  any single property
that is significant enough to materially affect its operations.

   As of December 31, 2002, the Company has pledged its interest in certain
properties  and  well  equipment  against bank notes payable.   None of the
individual properties  are significant.  Copies of  the loan documents have
been included as an exhibit to the Form 10-K.

 Production Wells and Acreage

   The following table sets forth by Texas, Wyoming, and New Mexico counties
the Company's gross and  net  productive  wells and  developed acreage as of
December 31, 2002.

                       Producing Wells (a)                    Developed
                       Oil            Gas                     Acreage (a)
County          Gross   Net     Gross        Net          Gross           Net

Bastrop (b)      87    62.36      41       34.88       3,155.00       2,586.00
Burleson          2     1.27     ---         ---       1,259.00         617.00
Chaves (c)      ---      ---       1         .50         160.00          80.00
Crane (b)         9     7.95       3         .97         240.00          98.00
DeWitt (b)      ---      ---       2         .16         160.00          12.00
Eastland (b)    ---      ---       4         .09         122.00           1.00
Fayette (b)      11    10.06     ---         ---       1,653.00       1,533.00
Garza (b)         3      .05     ---         ---          30.00           1.00
Grimes            1     1.00     ---         ---         320.00         320.00
Howard (b)        1      .02     ---         ---          40.00           1.00
Kent (b)          9      .73     ---         ---         360.00          29.00
Lea (b)(c)        2      ---       1         .07         400.00          22.00
Lee (b)         108    77.61       4        2.98       2,539.00       1,867.00
Lipscomb          1      .03     ---         ---          80.00           3.00
Martin            2     1.82     ---         ---         120.00         113.00
Midland           1      .02     ---         ---          80.00           2.00
Nolan (b)         1      .03     ---         ---          40.00           1.00
Parker (b)      ---      ---       1         .01         137.00           1.00
Ward            ---      ---       2         .16         720.00          29.00
Washington (b)    3     1.11     ---         ---         854.00           0.00
Weston (d)        3      .90     ---         ---         120.00          36.00
Wilson (b)        1      .95     ---         ---          80.00          76.00
             ------   -------  -----       -----       --------       --------
                245   165.91      59       39.82      12,669.00       7,428.20

(a)   A gross well is a well in which the Company owns a working interest. A
      net well is the fractional interest owned by the Company. Gross acres are
      the total acres in a lease. Net acres are gross acres times the Company's
      interest.
(b)   The Company owns overriding royalty interest in these counties.
(c)   The Chaves, Eddy and Lea County wells are located in New Mexico.
(d)   Weston County wells are located in Wyoming.


Reserve Quantity Information

   For information required by Statement of Financial Accounting Standards No.
69, "Disclosures About Oil and Gas Producing Activities," see the "Supplemental
Oil and Gas Information" section included in Item 8. This section also includes
estimates of proven oil and gas reserves.

OIL AND GAS STATISTICS

  The following summarizes the net oil and gas production, average sales prices
and production costs per unit for the years ended December 31, 2002, 2001
and 2000.


                                             2002       2001           2000
  Oil:
     Production volume (barrels)            73,006     79,705         82,328
     Average sales price per barrel   $      22.57      23.90          27.73
  Gas:
     Production volume (MCF)               461,115    562,341        597,100
     Average sales price per MCF      $       2.45      4.04           2.89

  Average production costs per
     equivalent barrel                $      17.86     19.80          13.37


   The worldwide crude oil prices of 2002 continue to fluctuate in 2003.
The Company  cannot predict how prices will vary during  2003 and  what
effect  they will ultimately have on the Company.

UNDEVELOPED ACREAGE


   The following table sets forth by county the Company's gross and net
undeveloped acreage as of December 31, 2002.

           County               Gross                Net
          Bastrop, TX         2,240.00            1,766.00
          Crane, TX             240.00              209.00
          Crosby, TX          1,120.00              560.00
          DeWitt, TX            308.00               47.00
          Eastland, TX          199.00                2.00
          Eddy, NM              370.00               22.00
          Fayette, TX           172.00               82.00
          Garza, TX           3,250.00              789.00
          Howard, TX             40.00                1.00
          Kent, TX            3,880.00            1,478.00
          Lea, NM             1,095.00              630.00
          Lee, TX             1,801.00            1,361.00
          Martin, TX             40.00               33.00
          Midland, TX           133.00                3.00
          Weston, WY            600.00              105.00
          Wilson, TX            130.00              123.00
          Winkler, TX           702.00              702.00
                             ---------            --------
                             16,320.00            7,913.00
                             =========            ========

All of the 7,913.00 net undeveloped acres under lease are being held by
production.

ITEM 3. LEGAL PROCEEDINGS

   The Company knows of no material litigation pending, threatening or
contemplated, or unsatisfied judgments against it, or any other proceeding in
which  the Company is a party. The Company knows of no material legal actions
pending or threatening or judgments entered against any officers on the board
of directors of the Company in their capacity as such.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   No matters were submitted to a vote of the security holders during the
quarter ended December 31, 2002.

                               PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
        STOCKHOLDER MATTERS

   The Company's common stock is  quoted  on  the  OTC Bulletin Board with the
symbol (TVOC). The range of high and low sales price for each quarterly period
during the past two years is as follows:

                                           Sales Price
                                     High                Low
      Fiscal 2002

        First Quarter               2.250               2.200
        Second Quarter              3.250               2.300
        Third Quarter               2.250               2.050
        Fourth Quarter              2.070               2.050

      Fiscal 2001

        First Quarter               2.875               2.125
        Second Quarter              4.450               2.750
        Third Quarter               3.100               2.300
        Fourth Quarter              2.500               2.200


   At December 31, 2002, the approximate number of holders of record of the
Company's common stock was 504.  The Company has not paid any dividends and has
no present plans to do so in the immediate future.

ITEM 6. SELECTED FINANCIAL DATA

                                       Years ended December 31,
                          2002        2001        2000         1999        1998

Oil and gas sales  $ 3,086,950   4,395,458   4,200,297   2,122,057   1,298,183
Total revenue        3,557,542   4,849,022   4,502,830   2,405,050   1,493,456
Total expenses      (3,775,572) (5,210,533) (4,174,514) (2,151,522) (1,279,115)
Net earnings (loss)   (143,900)   (238,597)    168,567     167,329     169,341
Net earnings (loss)
   per share            (.10)       (.17)        .12        .12         .12
Total assets         5,169,673   6,690,772   7,524,234  5,484,246    4,332,767
Short-term debt        939,664   4,138,411   3,944,609  1,648,316    1,718,615
Long-term debt       2,000,000     239,640     691,274  1,210,588      482,606
Total liabilities    3,325,994   4,701,693   5,296,558  3,425,137    2,440,987
Stockholders equity  1,843,679   1,989,079   2,227,676  2,059,109    1,891,780


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

ANALYSIS OF FINANCIAL CONDITION

During the years ended December 31, 2002 and 2001 cash decreased by $1,369,472
and $306,703, respectively. During the year ended December 31, 2000 cash
increased by $2,542,337. The cash flow from operating activities in 2002 was
approximately $421,027, a decrease of $156,200 from 2001. The cash flow from
operating activities in 2001 was approximately $577,227, a decrease of
$966,544 from 2000. The significant use of cash, other than for operating
expenses, has been investments in producing oil and gas properties of
$306,570, $707,144, and $752,636 in 2002, 2001 and 2000, respectively.
In each of the last three years, the Company's investment in producing oil
and gas properties was  provided by cash flow from operating activities,
sales of other oil and gas properties, and from borrowings on notes payable
to banks.

   In 2002 and 2001 the Company also increased cash by $28,000 and $141,481,
respectively, through the sales of producing  oil and gas properties. The
Company plans to continue to  sell selected  properties  when it is more
economical to sell them rather than produce them. As of December 31, 2002,
the Company had a cash balance of $2,671,820 which represents approximately
91% of its notes payable as compared to the December 31, 2001, cash balance
of $4,041,292 which represented approximately 92% of its notes payable.

   Working capital at December 31, 2002 increased to 2.47 to 1 from .98 to 1
at December 31, 2001.  The Company continued it's policy of making strategic
investments in  producing oil and gas properties in the same or similar fields
to  properties  already  operated by the Company, which are primarily financed
with short-term notes payable and cash from operations.

LIQUIDITY AND CAPITAL RESOURCES

   During the current fiscal year, the Company's liquidity has remained strong
enough to meet its short-term cash needs. The sources of liquidity and capital
resources are generated from cash on hand, cash provided by operations and from
credit available from financial institutions. Management believes the Company
will be able to meet its current operating needs through internally generated
cash from operations. Management believes that oil and gas  property investing
activities in 2003 can be financed through cash on hand, cash  from  operating
activities, and bank borrowings. The Company anticipates continued investments
in proven oil and gas properties in 2003 when they can be purchased  at prices
that will provide a short payback period. If bank credit is not available, the
Company may not be able to continue  its  policy  of continued  investment  in
strategic oil and gas  properties.  The Company cannot predict how oil and gas
prices will fluctuate during 2003 and what effect they will ultimately have on
the Company, but management believes that the Company will be able to generate
sufficient cash from  operations  to service  its bank  debt and  provide  for
maintaining current  production of its oil and gas properties.The Company had
no significant commitments for capital expenditures at December 31, 2002.

   As of December 31, 2002, the Company owed $235,075 and $2,000,000 to a bank
secured by producing oil and gas properties and well equipment purchased by
the Company. The notes are due in August 2003 and December 2002, respectively
(see note 3 of notes to financial statements for further explanation).

ANALYSIS OF RESULTS OF OPERATIONS

  From 1999 to 2000 oil and gas sales increased 98%, from 2000 to 2001 oil
and gas sales increased 5%, and from 2001 to 2002 oil and gas sales decreased
by 30%. In 2000, oil production volume increased by 36% at the same
time as the average  price  per barrel increased by  62% to $27.73. Also,
in 2000, the gas production volume decreased by 6% while the average price
per MCF increased by 55% to $2.89. In 2001, oil production volume decreased
by 3% at the same time as the average price per barrel decreased by 14% to
$23.90. Also, in 2001, the gas production volume decreased by 6% while the
average price increased 40% to $4.04 per MCF.  In 2002, oil production volume
decreased by 8% at the same time as the average price per barrel decreased
by 6% to $22.57. Also, in 2002, the gas production volume decreased by 18%
while the average price decreased 39% to $2.45 per MCF.The fluctuation in oil
and gas prices is solely attributable to changes in market prices.

   Oil and gas production expenses decreased in 2002 by 20% while oil and gas
production expenses increased in 2001 and 2000 by 41% and 104%, respectively.
These increases are primarily attributable to an increase in the number of
properties owned and operated by the Company and the higher lease operating
costs  associated with operating more producing properties.

  Interest expense increased by 43% in 2002 over 2001 due to higher average
outstanding balances while interest expense decreased by 42% in 2001 over
2000 due to lower average outstanding balances.

   Depreciation, depletion and amortization varies from year to year because of
changes in reserve estimates, changes in quantities of oil and gas produced, as
well  as  the  acquisition, discovery or sale of producing properties. In 2002,
depletion decreased in conjunction with the 8% decrease in oil production
volume and the 18% decrease in gas production volume.

Total general and administrative expenses increased $29,843 in 2002, $104,046
in 2001 and $58,803 in 2000.

   In 2002, 2001 and 2000, the Company provided provisions of approximately
$275,000, $1,015,500 and $738,899, respectively, for the impairment of value
of oil and gas properties due to less than expected production history of
specific wells and for wells that were plugged and abandoned.

   Inflation is not anticipated to have a significant impact on the Company's
operations.

FORWARD-LOOKING STATEMENTS

   This Management's Discussion and Analysis of Financial Condition and Results
of  Operations  and  other sections of this Annual Report on Form 10(k) contain
forward-looking statements that are based on current expectations and estimates
about the oil and gas  industry and  other  factors  impacting  the  Company's
operations and financial condition.  These  statements  are not  guarantees of
future performance and involve  certain risks,  uncertainties and assumptions.
Therefore,  actual outcomes and performance may differ materially from what is
expressed in such forward-looking statements.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                    INDEPENDENT AUDITORS' REPORT





The Board of Directors
Texas Vanguard Oil Company:


We have audited the accompanying balance sheets of Texas Vanguard Oil Company
(the Company) as of December 31, 2002 and 2001, and the related statements of
earnings, stockholders' equity and  cash flows  for the years ended December
31, 2002, 2001 and 2000. These financial statements  are  the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our  audits in accordance  with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable  assurance  about  whether  the  financial  statements  are free of
material  misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in  the financial statements.  An audit
also  includes  assessing  the  accounting  principles  used  and  significant
estimates made by  management,  as  well as  evaluating  the overall financial
statement  presentation. We believe that our audits provide a reasonable basis
for our opinion.

In  our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Texas Vanguard Oil Company as
of  December 31, 2002 and 2001, and the results of its operations and its cash
flows for the years ended December 31, 2002, 2001 and 2000 in conformity with
U.S. generally accepted accounting principles.


Sprouse & Anderson, L.L.P.
Austin, Texas

March 7, 2003


                        TEXAS VANGUARD OIL COMPANY

                                 Balance Sheets

                          December 31, 2002 and 2001

                                    ASSETS
                                                          2002          2001
Current assets:
    Cash (including certificates of deposit of
       $700,000 in 2002 and 2001, pledged)          $  2,671,820    4,041,292
    Trade accounts receivable, net of allowance
       for doubtful accounts of $0 and $0 in
       2002 and 2001, respectively                       143,961      194,360
    Other receivables                                        ---       20,000
                                                       ----------   ---------
            Total current assets                       2,815,781    4,255,652
                                                       ----------   ---------
Oil and gas properties, partially pledged,
    successful efforts method of accounting:
       Proven properties                               3,506,181    3,474,611
       Unproven properties                               166,630      166,630
Office furniture and equipment, partially pledged        204,446      240,019
                                                       ---------    ---------
                                                       3,877,257    3,881,260
Less accumulated depreciation, depletion and
    amortization                                      (1,624,865)  (1,447,140)
                                                       ---------    ---------
                                                       2,252,392    2,434,120
                                                       ---------    ---------
Investments                                              100,500          ---
                                                       ---------    ---------
Other assets                                               1,000        1,000
                                                       ---------    ---------
TOTAL ASSETS                                        $  5,169,673    6,690,772
                                                       =========    =========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Trade accounts payable                          $    195,115      185,240
    Income tax payable                                     4,973          ---
    Notes payable and current installments of
       long-term debt                                    939,664    4,138,411
                                                       ---------    ---------
            Total current liabilities                  1,139,752    4,323,651
                                                       ---------    ---------
Deferred tax liability                                   186,242      138,402
Long-term debt, excluding current installments         2,000,000      239,640
                                                       ---------    ---------
            Total Liability                            3,325,994    4,701,693

Commitments

Stockholders' equity:
    Common stock, par value $.05; authorized
     12,500,000 shares; 1,416,587 and 1,417,087
     in 2002 and 2001, respectively, issued
     and outstanding                                      70,829       70,854
    Additional paid-in capital                         1,888,530    1,890,005
    Accumulated earnings (deficit)                      (115,680)      28,220
                                                       ---------    ---------
            Total stockholders' equity                 1,843,679    1,989,079
                                                       ---------    ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY          $  5,169,673    6,690,772
                                                       =========    =========

See accompanying notes to financial statements.

                        TEXAS VANGUARD OIL COMPANY
                         Statements of Earnings

                Years ended December 31, 2002, 2001 and 2000

                                            2002        2001        2000

Revenues:
    Oil and gas sales                $  3,086,950   4,395,458   4,200,297
    Well operation fees                   163,959     180,411     183,253
    Other, net                            228,291     192,362     101,739
    Gain on sale of oil and
      gas property                         28,000      41,481         ---
    Interest income                        50,342      39,310      17,541
                                        ---------   ---------   ---------
       Total revenues                   3,557,542   4,849,022   4,502,830
                                        ---------   ---------   ---------
Expenses:
  Production cost                       2,734,791   3,433,226   2,432,114
  Depreciation, depletion
    and amortization                      184,840     250,902     528,451
  Interest expense                        133,841      93,648     161,839
  General and administrative              447,100     417,257     313,211
  Impairment in value of
    oil and gas property                  275,000   1,015,500     738,899
                                        ---------   ---------   ---------
       Total expenses                   3,775,572   5,210,533   4,174,514
                                        ---------   ---------   ---------
  Earnings (loss) before income tax      (218,030)   (361,511)    328,316

Income Taxes:
  Provision for income tax (benefit)      (74,130)   (122,914)    159,749
                                         --------   ---------   ---------
Net earnings (loss)                  $   (143,900)   (238,597)    168,567
                                         ========   =========   =========
Weighted average number of
    shares outstanding                  1,416,864   1,417,087   1,417,087
                                        =========   =========   =========

Basic and diluted earnings
  (loss) per share                   $      (.10)       (.17)         .12
                                        =========   =========   =========

See accompanying notes to financial statements.

                             TEXAS VANGUARD OIL COMPANY
                         Statements of Stockholders' Equity

                    Years ended December 31, 2002, 2001 and 2000

                                                          Additional
                                       Common Stock        Paid-in  Accumulated
                                     Shares     Amount     Capital   (Deficit)/
						                      Earnings

Balances at December 31, 2000     1,417,087     70,854   1,890,005    266,817

   Net earnings                         ---        ---         ---   (238,597)
                                  ---------   --------   ---------   ---------
Balances at December 31, 2001     1,417,087     70,854   1,890,005     28,220

Repurchase and cancellation
  of common stock                      (500)       (25)     (1,475)       ---

   Net earnings (loss)                  ---        ---         ---   (143,900)
                                  ---------   --------   ---------   --------
Balances at December 31, 2002     1,416,587     70,829   1,888,530   (115,680)
                                  =========   ========   =========   =========

See accompanying notes to financial statements.

                           TEXAS VANGUARD OIL COMPANY

                            Statements of Cash Flows

                Years ended December 31, 2002, 2001 and 2000

                                               2002         2001         2000

Cash flows from operating activities:
 Net earnings (loss)                     $  (143,900)    (238,597)     168,567
  Adjustments to reconcile net earnings
   to cash provided by operating
   activities:
    Depreciation, depletion
      and amortization                       184,840      250,902      528,451
   (Gain) loss on sale of oil and
      gas properties                         (28,000)     (41,481)         ---
    Impairment in value of oil and
      gas property                           275,000    1,015,500      738,899
  Changes in assets and liabilities:
    (Increase) decrease in receivables        70,399      (72,065)      13,413
    Increase (decrease) in payables           14,848     (212,576)     167,896
    Increase (decrease) in deferred
      federal income tax                      47,840     (124,456)       9,659
    Increase (decrease) in deferred
      revenue                                    ---          ---      (83,114)
                                            ---------    ---------    ---------
Net cash provided by
  operating activities                       421,027      577,227    1,543,771
                                            ---------    ---------    ---------
Cash flows from investing activities:
 Purchase of investments                    (100,500)         ---          ---
 Proceeds from sale of oil and
  gas properties                              28,000      141,481          ---
 Additions to oil and gas properties        (306,570)    (707,144)    (752,636)
 Proceeds from sale of equipment              28,458       15,660          ---
 Purchases of equipment                          ---      (76,123)     (25,776)
                                            ---------    ---------    ---------
   Net cash used in investing activities    (350,612)    (626,126)    (778,412)
                                            ---------    ---------    ---------
Cash flows from financing activities:
 Borrowings on notes payable               1,600,000    3,700,000    3,500,000
 Repayments of notes payable              (3,038,387)  (3,957,831)  (1,723,022)
 Repurchase of common stock                   (1,500)         ---          ---
                                           ---------    ---------    ---------
   Net cash provided (used) by
     financing activities                 (1,439,887)    (257,831)   1,776,978
                                           ---------    ---------    ---------
   Net increase (decrease) in cash        (1,369,472)    (306,730)   2,542,337

   Cash and cash equivalents at
     beginning of year                     4,041,292    4,348,022    1,805,685
                                           ---------     --------     --------
   Cash and cash equivalents at
     end of year                         $ 2,671,820    4,041,292    4,348,022
                                          ==========   ==========   ==========
Supplemental disclosure of
  cash flow information:
 Interest paid                           $   133,841       93,648      161,839
                                          ==========   ==========   ==========

See accompanying notes to financial statements.


                             TEXAS VANGUARD OIL COMPANY

                           Notes to Financial Statements

                          December 31, 2002, 2001 and 2000


(1) Significant Accounting Policies

Description of Business - Texas  Vanguard Oil Company  (the Company) engages in
the acquisition, exploration, development, and operation of onshore oil and gas
properties  in  the United  States,  principally  in Texas.   The  Company owns
interests in producing properties and undeveloped  oil and gas leases in Texas,
Wyoming and New Mexico.  The Company sells all of its production to traditional
industry  purchasers  who have the facilities to transport the oil and gas from
the well site.

Oil and Gas Properties - The Company follows the "successful efforts" method of
accounting  for oil and gas exploration and production operations. Accordingly,
costs incurred  in  the acquisition  and exploratory  drilling  of oil and gas
properties are initially capitalized and  either subsequently  expensed if the
properties are determined not  to have  proved  reserves, or reclassified as a
proven property if proved reserves are discovered.Costs of drilling development
wells are capitalized. Geological,  geophysical, carrying and production costs
are charged to expense as incurred.

Costs related to acquiring unproved lease and royalty acreage are periodically
assessed for possible impairment of value. If the assessment indicates impair-
ment, the costs are charged to expense. During the years ended December 31,
2002, 2001, and 2000 the Company recognized impairment losses of $275,000,
$1,015,500 and $738,999, respectively.

Depreciation, depletion and amortization of proved oil and gas property costs,
including  related equipment and facilities, are provided using the units-of-
production method on a property by property basis.

Office Furniture and Equipment - Office furniture and equipment is stated at
cost.  Depreciation is computed using the straight-line method, based on the
following estimated useful lives:

          Office furniture and equipment         7 years
          Automotive equipment                   5 years

Investments -  The Company has an investment in a private, closely held
corporation that is valued at fair value for financial statement purposes.
Fair value is based on capitalized earnings and return on investment.

Federal Income taxes - The Company uses the "asset  and liability method" of
income tax accounting which bases the  amount  of current  and  future taxes
payable on the events recognized in the financial statements and on tax laws
existing at the balance  sheet date.   The effect on deferred tax assets and
liabilities  of a  change in tax rates is recognized in income in the period
that includes enactment date.

Cash and Cash Equivalents - The Company considers cash and cash equivalents to
consist of demand deposits and certificates of deposit.

Concentration of Credit Risk -  The  Company  sells all  of  its production
to traditional industry purchasers. Oil sales are not made under a written
contract and the purchaser and price are not specified in the division order
for the subject property. The Company has recorded revenues in excess of 10%
of total revenue from two customers in 2002, three customers in 2001, and
three customers in 2000 as follows: 2002 - 46%, 32%, 2001 - 39%, 32%, 15%,
and 2000 - 36%, 25%, 23%. The  Company does not believe the loss of these
customers  would  have a material adverse effect on its operations as it could
sell its production to other gathering companies.

Use of Estimates - Consistent  with  the  requirements  of  generally  accepted
accounting principles, management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities in order to
prepare  these  financial statements.   Actual  results could differ from those
estimates.

(2) Investments

During 2002, the Company purchased a profit-only interest in a privately,
closely held company at a cost of $100,000.

At December 31, 2002 the fair value was determined to be $100,000, and as such
there was no unrealized gain or loss, and therefore no other comprehensive
income or loss to recognize at December 31, 2002.

The Company held other investments at year-end totaling less that $500.

(3) Notes Payable and Long-term Debt

The Company had notes payable and long-term debt to banks as follows at
 December 31:
                                                           2002          2001

A note with a bank secured by oil and gas properties.
  The original amount of the note was  $1,718,028.
  Interest accrues at .5% above the prime rate,
  with monthly payments of principal of $36,000 plus
  accrued interest. The note matures in August 2003.      235,075      667,075

Line of credit with a bank under which it may borrow
  up to $3,000,000. Interest payable monthly at prime
  rate plus .5%, secured by oil and gas properties.
  The line of credit matured in December 2002. This
  line of credit was renewed with a different bank
  subsequent to year-end. The terms of the renewal
  included monthly interest payments at prime plus
  .5%, secured by oil and gas properties. The line
  of credit matures on February 12, 2005.               2,000,000    3,000,000

Line of credit with a bank under which it may borrow
  up to $700,000. Interest payable quarterly at 6.75%,
  secured by $700,000 of certificates of deposit. The
  line of credit matures on April 25, 2002.                   ---      700,000

Line of credit with a bank under which it may borrow
  up to $700,000. Interest payable quarterly at 6.75%,
  secured by $700,000 of certificates of deposit. The
  line of credit matures on April 25, 2003.               700,000          ---

Other notes payable, due on demand or in
  monthly installments, maturing on various
  dates through September, 2003, secured by equipment.      4,589       10,976
                                                        ---------    ---------
    Total debt                                          2,939,664    4,378,051
Less current installments                                (939,664)  (4,138,411)
                                                        ---------    ---------
Long-term bank debt, excluding current installments  $  2,000,000      239,640
                                                        =========    =========



Future maturities of long-term debt are as follows:

            2003           $  939,664
            2004                  ---
            2005            2,000,000
                            ---------
                  Total    $2,939,664
                            =========

(4) Related Party Transactions

The Company and an entity owned by the Chairman of the Company have an agree-
ment  whereby  the latter  provides  the  Company general corporate management
services. The affiliated company received $210,000, $201,000, and $174,000 as
compensation  for performance  of those services  during  the  years  ended
December 31, 2002, 2001  and  2000, respectively. Effective January 1, 2002
the agreement was continued with terms of $18,500 per month through December
31, 2003.

The Company leases office space from a company owned by the Chairman of the
Company  under a non-cancelable operating lease expiring June 30, 2003.
Rent expense incurred under this lease was $22,200, $22,800 and $19,800
for the years ended December 31, 2002, 2001, and 2000, respectively.
Future minimum lease payments for 2003 are $11,400.

Robert Watson, Inc. and William Watson, Inc.,both own small interests
in a number of the properties that the Company has interests in. Each company
also owns interest in other similar properties in which the Company does
not have an interest.  None of the Company's other directors
own interests in any oil and gas properties in areas in which the Company
operates. The Company presently acquires all of its own properties.

During the years ended December 31,2002, 2001 and 2000, a Director of the
Company and related party received $72,320 $51,500 and $22,000, respectively
for engineering consultant work.

During the year ended December 31, 2002 an officer of the Company purchased
a vehicle from the Company for $28,458, resulting in no gain or loss to the
Company.

In addition, the Company purchases materials and services from two businesses
in which the Chairman of the Company owns an interest. These purchases
represent less than 10% of the Company's total oil field purchases.

During the year ended December 31, 2002, the Company purchased an investment
in a private, closely-held corporation that is valued at fair value for
financial statement purposes. The purchse of services from this related party
totaled $193,155 for the year ended 2002.

(5) Federal Income Taxes

The actual federal income tax expense differs from the "expected" tax
expense computed by applying the US Federal corporate income tax rate of
34% to income before income taxes as follows:

                                                  2002        2001      2000

Current  tax expense at statutory rate     $        ---        ---    150,000
Deferred tax (benefit)                          (74,130)  (122,914)     9,659
                                              _________   ________   ________
                                           $    (74,130)  (122,914)   159,749
                                              =========   ========   =======


The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities at December 31, 2002 and 2001 is presented below:

                                                            2002        2001
   Deferred tax asset:
     Net operating loss carryforward                $         ---         ---
                                                        ---------   ---------
     Net deferred tax asset                                   ---         ---
                                                        ---------   ---------

   Deferred tax liability:
     Office furniture and equipment and oil
      and gas property, due to differences in
      depreciation and abandonment                      (186,242)   (138,402)
                                                        ---------   ---------
   Total deferred tax liability                     $   (186,242)   (138,402)
                                                        =========   =========


The Company has  accumulated  losses for  Federal  income tax  purposes  of
approximately $230,000, $-0- and $-0- as of December 31, 2002, 2001
and 2000, respectively, which may be carried forward and used to reduce
taxable income in future years. The carryforwards begin to expire in 2027.

(6) Fair Value of Financial Instruments

Based on the borrowing rates currently available to the Company for bank loans
with  similar  terms and  average  maturities, the fair value of notes payable
approximates market value at December 31, 2002.

(7) Subsequent Events

Subsequent to year-end, the Company has issued a letter of credit in the
amount of $250,000 to a third party in order to meet the party's standard
licensing requirements.

Subsequent to December 31, 2002, the Company obtained a new $3,000,000 line
of credit at prime rate plus .5%, which expires in February 2005.

                      TEXAS VANGUARD OIL COMPANY

                 SUPPLEMENTAL OIL AND GAS INFORMATION

             Years ended December 31, 2002, 2001 and 2000
                             (Unaudited)

Reserve Quantity Information  (Unaudited)

The  following  reserve related information is based on estimates prepared by
management of the Company. Reserve estimates are inherently imprecise and are
continually subject  to  revisions  based on  production  history, results of
additional exploration and development, price of oil and gas and other factors.
All of the Company's oil and gas reserves are located in the United States.

                            2002                   2001                2000
                        Oil       Gas         Oil        Gas       Oil      Gas
                       BBLS       MCF        BBLS        MCF      BBLS      MCF

Proved developed
 and undeveloped
 reserves:
Beginning of year  951,412  7,180,417  1,065,744  7,988,672  784,268  8,074,537
Revisions of
 previous estimate  21,550   (465,726)  (101,367)  (688,502)  94,257  (516,233)
Extensions
 and Discoveries       ---        ---        ---        ---    1,953      1,167
Purchase of
 minerals in place  22,921     87,820     66,740    442,588  267,594  1,026,301
Sale of minerals       ---        ---        ---        ---      ---        ---
Production         (73,006)  (461,115)   (79,705)  (562,341) (82,328) (597,100)
                  --------- ---------  ---------  --------- --------  --------
End of year        922,877  6,341,396    951,412  7,180,417 1,065,744 7,988,672
                  ========= =========  =========  ========= ========= =========
Proved developed
   reserves:
Beginning of year  951,412  7,180,417  1,065,744  7,988,672   784,268 8,074,537
End of year        922,877  6,341,396    951,412  7,180,417 1,065,744 7,988,672

Standardized Measure of Discounted Future Net Cash Flows (Unaudited)

The following is a standardized measure of discounted future net cash flows and
changes therein relating to proved  oil and gas reserves. Future net cash flows
were computed using year-end prices and costs and relate to existing proved oil
and gas reserves in which the enterprise has  mineral  interests.  The  Company
cannot predict  price  fluctuations  which may  occur in the future. Future
income tax expenses were provided  after  estimated  utilization  of Federal
income tax loss carryforwards.

                                                          December 31,
                                         2002           2001           2000

Future cash inflows                 $ 41,173,230     37,347,266     58,065,418
Future production
  and development costs              (20,628,693)   (19,294,773)   (24,292,586)
Future income tax expenses            (5,724,646)   ( 4,840,426)    (9,796,114)
                                     ------------   ------------   ------------
     Future net cash flows            14,819,891     13,212,067     23,976,718

10% annual discount for
  estimated timing of cash flows      (6,975,044)    (4,955,521)    (9,818,074)
                                     ------------   ------------   ------------
Standardized measure of
  discounted future net cash flows  $  7,844,847      8,256,546     14,158,644
                                    ============   ============   ============

                              TEXAS VANGUARD OIL COMPANY

                    SUPPLEMENTAL OIL AND GAS INFORMATION, CONTINUED
                                   (Unaudited)

The following are the principal sources of change in the standardized measure
of discounted future net cash flows:

                                                2002         2001         2000

Changes:
Sale of oil and gas produced, net of
 production costs                        $  (352,159)    (962,232)  (1,772,933)
Net changes in prices and production
 costs                                      (459,699)  (1,038,973)     363,080
Purchase of minerals in place                 60,345      176,064      922,259
Extensions and discoveries                       ---          ---        4,541
 Sales                                           ---          ---          ---
Revisions of previous quantity estimates    (131,114)    (778,521)      92,042
Accretion of discount                        825,655    1,415,864    1,008,023
Other                                       (354,727)  (4,714,300)   3,461,406
                                           ----------   ----------    ---------
    Net changes                             (411,699)  (5,902,098)   4,078,418

Beginning balance - standardized measure
 of discounted future net cash flows       8,256,546   14,158,644   10,080,226
                                          ----------   ----------   ----------
Ending balance - standardized measure
 of discounted future net cash flows     $ 7,844,847    8,256,546   14,158,644
                                          ==========   ==========   ==========

The Company has not filed with or included in reports to any Federal authority
or agency other than the Securities and Exchange Commission any estimates of
total proved net oil and gas reserves.

Capitalized Costs Relating to Oil and Gas Producing Activities

                                                  Years ended December 31,
                                               2002         2001         2000

Unproven oil and gas properties
    (including wells in progress)        $   166,630      166,630      166,630

Proven oil and gas properties              3,506,181    3,474,611    3,882,968

Accumulated depletion and amortization    (1,504,724)  (1,350,377)  (1,126,604)
                                          ----------   ----------   ----------
Net capitalized costs                    $ 2,168,087    2,290,864    2,922,994
                                          ==========   ==========   ==========

Costs Incurred in Oil and Gas Property
 Acquisition, Exploration and Development Activities

                                              Years ended December 31,
                                               2002      2001       2000

Acquisition of properties - unproven    $       ---       ---        ---
Acquisition of properties - proven          306,570   707,144    752,636
Exploration costs                               ---       ---        ---
Development costs                               ---       ---        ---

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

                                    PART III

Items 10, 11, 12 and 13 constituting Part III of Form 10-K have been omitted
from this annual report pursuant to the provisions of Instruction G(3) to Form
10-K, as the Company will file a definitive proxy statement pursuant to
Regulation 14A under the Securities Exchange Act of 1934 within 120 days after
the close of its fiscal year.

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1). Financial Statements.

Independent Auditors' Report, Balance Sheets at December 31, 2002 and 2001 and
the related Statements of Earnings, Stockholders' Equity, and Cash Flows for
each of the years in the three-year period ended December 31, 2002, and notes
to financial statements are included in Item 8.

(a)(2) Financial Statement Schedules

Not applicable.

(a)(3). Exhibits

Number    Description of Document

3      Copies of Articles of Incorporation and Bylaws - Incorporated by
       reference to Exhibits 4a and 4b to Registration Statement No. 2-66693
       filed by registrant on Form S-2.

3.1    Articles of Amendment to authorize capitalization of common stock,
       previously filed as exhibits to Form 8-K dated May 27, 1983.

3.2    Certificate of Amendment dated February 20, 1990 of Articles of
       Incorporation and Articles of Amendment dated February 16, 1990 to the
       Articles of Incorporation. Filed as Exhibit to 1989 Form 10-K.

10.1   Incentive Stock Option Plan, previously filed as Exhibit 5b to
       Registration Statement No. 2-66693 filed by registrant on Form S-2.

10.2   Management contract between Texas Vanguard Oil Company and Robert Watson
       Inc., previously filed with Form 8-K dated January 30, 1988.

10.4   Note payable to First State Bank  dated April 25, 2002.

10.5   Note payable to Bank United dated July 29, 1999.

10.6   Note payable to Bank United dated December 1, 2001.

99.1   Certificate of Chief Executive Officer and Chief Financial Officer

99.2   Certification of Periodic Financial Reports

(b). Reports on Form 8-K

       Form 8-K filed on October 10, 2002.

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       TEXAS VANGUARD OIL COMPANY



                                       By: William G. Watson
                                           William G. Watson, President
                                           March 25, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.




William G. Watson                          Teresa N. Nuckols
William G. Watson, President,              Teresa N. Nuckols, Secretary
Director, Principal Executive              March 25, 2003
Officer and Principal Financial
and Accounting Officer
March 25, 2003

Linda R. Watson                             Robert L. Patterson
Linda R. Watson, Director                   Robert L. Patterson, Director
and Chairman of the Board                   March 25, 2003
March 25, 2003


OFFICERS AND DIRECTORS                CORPORATE INFORMATION

William G. Watson                     CORPORATE OFFICE
President, Chief Executive            9811 Anderson Mill Road, Suite 202
Officer and Director                  Austin, Texas 78750

Linda R. Watson
Chairman of the Board                 INDEPENDENT ACCOUNTANTS
and Director                          Sprouse & Anderson, L.L.P.
                                      Austin, Texas
Teresa Nuckols
Secretary

Robert L. Patterson
Director                              TRANSFER AGENT
                                      Computershare Trust Company, Inc.
                                      P.O. Box 1596
                                      Denver, Colorado 80228

                                      COMMON STOCK
                                      Quoted on OTC Bulletin Board
                                      Symbol: TVOC

                                      2002 ANNUAL SHAREHOLDERS MEETING
                                      June 12, 2003, at 10:00 A.M.
                                      9811 Anderson Mill Road, Suite 202
                                      Austin, Texas 78750

EXHIBITS:

                               EXHIBIT 10.4

COMMERCIAL REVOLVING OR DRAW NOTE:

First State Bank ("Lender")
8045 Mesa Drive
Austin, Texas 78731
Travis County

Texas Vanguard Oil Company ("Borrower")
PO Box 202650
Austin, Texas 78720
TERMS:
Interest Rate:         6.75%
Principal Amount:     $700,000.00
Funding Date:          April 25, 2002
Maturity Date:         April 25, 2003

Promise to Pay: Texas Vanguard Oil Company ("Borrower") promises to pay First
State Bank ("Lender"), or order, in lawful money of the United State of America
the principal sum of SEVEN-HUNDRED THOUSAND AND NO/100 DOLLARS, ($700,000.00)
or so much as may be outstanding, together at the rate of 6.75% per annum
on the unpaid outstanding principal balance of each advance.  Interest shall
be calculated from the date of each advance until repayment of each advance
maturity, whichever occurs first.

Choice of Usury Ceiling and interest rate:  The interest rate of this Note has
been implemented under the "Weekly Rate" as referred to in Section 303.002
and 300.003 of the Texas Finance Code.However, Lender reserves the right to
implement a different interest rate and to renew such rate, provided Lender
complies with the requirements of Sections 303.101, 102, and 103 of the Texas
Finance Code.

Payment:  Borrower will pay this loan on demand, or if no demand is made, in
one payment of all outstanding principal plus all accrued unpaid interest on
April 25, 2002.  In addition, Borrower will pay regular quarterly payments of
accrued unpaid interest beginning July 25, 2001, and all subsequent interest
payments are due on the same day of each quarter after that.  Interest on this
note is computed on a 365/366 simple interest basis; that is, by applying the
ratio of the annual interest rate over the number of days in a year (366 during
leap years), multiplied by the outstanding principal balance, multiplied by
the actual number of days the principal balance is outstanding.  Borrower will
pay Lender at Lender's address shown above or at such other place Lender may
designate in writing.  Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and lay charges.
Notwithstanding any other provision of this Note, Lender will not charge
interest on any undisbursed loan proceeds.  No scheduled payment, whether of
principal or interest or both, will be due unless sufficient loan funds have
been disbursed by the scheduled payment date to justify the payment.

Prepayment:  Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due.  Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments of accrued unpaid interest.  Rather, they will reduce the
principal balance due.

Post Maturity Rate: The Post Maturity Rate on this Note is 18.000% per annum.
Borrower will pay interest on all sums due after final maturity, whether by
acceleration or otherwise, at that rate.

Default:  Borrower will be in default if any of the following happens:  (a)
Borrower fails to make any payment when due.  (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender.  (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement
in favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrowers obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now
or at the time made or furnished.  (e) Borrower becomes insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrower's property on or inn which Lender has a lien or
security interest.  This includes a garnishment of any of Borrower's accounts
with Lender.  (g) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this Note. (h)
A material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is
impaired. (i) Lender in good faith deems itself insecure.

Lender's Rights:  Upon default, Lender may declare the entire indebtedness,
including the unpaid principal on this Note, all accrued unpaid interest, and
all other amounts, cost and expenses for which Borrower is responsible under
this Note or any other agreement with Lender pertaining to this loan,
immediately due, without notice, and then Borrower will pay that amount.

Attorney's Fees; Expenses: Upon default, Lender may hire an attorney to help
collect this Note if Borrower does not pay, and Borrower will pay Lender's
reasonable attorneys' fees.  Borrower also will pay Lender all other amounts
actually incurred by Lender as court costs, lawful fees for filing, recording,
or releasing to any public office any instrument securing this loan; the
reasonable cost actually expended for repossessing, storing, preparing for
sale, and selling any security; and fees for noting a lien on or transferring
a certificate of title to any motor vehicle offered as security for this loan,
or premiums or identifiable charges received in  connection with the sale of

Governing Law: This Note will be governed by, construed and enforced in
accordance with the laws of the State of Texas and applicable Federal Laws.
This note has been accepted by Lender in the State of Texas.

Choice of Venue: If there is a lawsuit, and if the transaction evidenced by
this Note occurred in Bell County, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Bell County, State of Texas.

Right of Setoff: To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account.)  This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law.  Borrower authorized Lender, to
the extent permitted by applicable law, to charge or setoff all sums owing on
the indebtedness against any and all such accounts.

Line of Credit: This Note evidences a revolving line of credit.  Advances under
this Note may be requested only in writing by Borrower or by an authorized
person. All communications, instructions, or directions by telephone or other
wise to Lender are to be directed to Lender's office shown above. The following
party or parties are authorized to request advances under the line of credit
until Lender receives from Borrower at Lender's address shown above written
notice of revocation of their authority: Robert Watson, Jr., President.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender.  The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs.  Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of the Note or any agreement that Borrower or
any guarantor has with Lender, including this agreement made in connection with
the signing of this Note;(b) Borrower or any guarantor ceases doing business or
is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good faith
deems itself insecure under this Note or any other agreement between Lender
and Borrower:  This revolving line of credit shall not be subject to Chapter
346 of the Texas Finance Code.

Dishonored Check Charge: In the event a check offered in full or partial
payment on this loan is returned unpaid, Lender may charge a fee for the
purpose of defraying the expense incident to handling such returned check,
and borrower agrees to pay such fee.  The fee shall not exceed the maximum
amount permitted under applicable law.

Prior Note: THE PROMISSORY NOTE #311100 dated 12/12/2000 & dated 04/25/2000
from TEXAS VANGUARD OIL COMPANY TO FSBCT.

Successor Interests: The terms of this Note shall be binding upon Borrower,
and upon Borrower's heirs, personal representatives, successors and assigns,
and shall inure to the benefit of Lender and its successors and assigns.

General Provisions: Notice: Under no circumstances (and not withstanding any
other provisions of this Note) shall the interest charge, collected, or
contracted for on this Note exceed the maximum rate permitted by law.
The term "maximum rate permitted by law" as used in this Note means
the greater of (a) the maximum rate of interest permitted under federal or
other law applicable to the indebtedness evidenced by this Note, or (b) the
higher, as of the date of this Note, of the "Weekly Ceiling" or the "Quarterly
Ceiling" as referred to in Sections 303.002, 303.003, and 303.006 of the
Texas Finance Code. If any part of this  Note cannot be enforced, this fact
will not affect the rest of the Note. Borrower does not agree or intend to
pay, and Lender does not agree or intend to contract for, charge, collect,
take, reserve or receive (collectively referred to herein as "charge or
collect"), any amount in the nature of interest or in the nature of a fee
for this loan, which would in any way or event (including demand, prepayment,
or acceleration) cause Lender to charge or collect more for this loan than
the maximum Lender would be permitted to charge or collect by federal law or
the law of the State of Texas (as applicable). Any such excess interest or
unauthorized fee shall, instead of anything state to the contrary, be applied
first to reduce the principal balance of this loan, and when the principal has
been paid in full, be refunded to Borrower. The right to accelerate maturity
of sums due under this Note does not include the right to accelerate any
interest which has not otherwise accrued on the date of such acceleration,
and Lender does not intend to charge or collect any unearned interest in the
event of acceleration.  All sums paid or agreed to be paid to Lender for the
use, forbearance or detention of sums due hereunder shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of the loan evidenced by this Note until payment in
full so that the rate or amount of interest on account of the loan evidenced
hereby does not exceed the applicable usury ceiling.  Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive presentment, demand for payment,
notice of dishonor, notice of intent to accelerate the maturity of this Note,
and notice of acceleration of the maturity of this Note. Upon any accommodation
maker or endorser, shall be released from liability. All such parties agree
that Lender may renew or extend (repeatedly and for any length of time) this
loan or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the collateral without
the consent of or notice to anyone.  All such parties also agree that Lender
may modify this loan without the consent of or notice to anyone other than
the party with whom the modification is made.  The obligations under this
Note are joint and several.

Prior to signing this note, Borrower read and understood all of the provisions
of this Note. Borrower agrees to the terms of the note and acknowledges receipt
of a completed copy of this Promissory Note.

Borrower:
Texas Vanguard Oil Company

Signed: Robert N.Watson, Jr.,  President
Texas Vanguard Oil Company


                               EXHIBIT 10.5

VARIABLE RATE COMMERCIAL PROMISSORY NOTE:

Bank United ("Lender")
401 West Texas
Midland, Texas 79701
Midland County

Texas Vanguard Oil Company ("Borrower")
PO Box 202650
Austin, Texas 78720
TERMS:
Interest Rate:         Variable
Principal Amount:     $1,718,027.98
Funding Date:          July 29, 1999
Maturity Date:         August 1, 2003
Customer Number:       053769
Loan Number:           700-053769-0004

PROMISE TO PAY:

For value received, Borrower promises to pay to the order of Lender indicated
above the principal amount of ONE MILLION, SEVEN-HUNDRED EIGHTEEN THOUSAND AND
TWENTY-SEVEN AND 98/100 Dollars ($1,718,027.98), together with interest from
date until maturity on the unpaid principal balance thereof from time to time
outstanding at the Stated Rate and with interest on all past due amounts, both
principal and accrued interest, at the Past Due Rate, provided, that for the
full term of this Note the interest rate produced by the aggregate of all sums
paid or agreed to be paid to the holder of this Note for the use, forbearance
or detention of the debt evidenced hereby shall not exceed the Ceiling Rate.

This Note is described in and is subject to the terms and provisions of that
certain Loan Agreement dated July 29, 1997 as amended by those certain First,
Second, and Third Amendments to Loan Agreement dated July 29, 1998, December
23, 1998, and July 29, 1999 (hereinafter collectively referred to as the
"Loan Agreement") by, between and among Bank United, Maker and Robert N. Watson
Jr. As "Guarantor". The Loan Agreement, among other things, contains provisions
regarding the "Borrowing Base," as defined in the Loan Agreement and for accel-
eration of the maturity hereof upon the happening or omission of certain stated
events upon the terms and conditions therein specified.

"Stated Rate" means, on any day, a rate per annum equal to the Prime Rate from
time to time in effect plus one-half percent (.5%), provided, that if
on any day the Stated Rate shall exceed the Ceiling Rate for that day, then the
Stated Rate shall be fixed at the Ceiling Rate on that day and on each day
thereafter until the total amount of interest accrued at the Stated Rate on the
unpaid balance of this Note equals the total amount of interest which would
have accrued if there were no Ceiling Rate.

"Prime Rate" for purposes of this Note shall mean the current rate of interest
per annum as published in the Southwest Edition of the Wall Street Journal as
the Prime Rate in effect until the next Change Date.  The Prime Rate may change
and each change in the Prime Rate shall be effective on the date of publication
of said change (referred to as "Change Date") until the next Change Date. Each
change in the Prime Rate shall be effective without special notice to the Maker
or any other person or entity.  The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
If, for any reason, the Prime Rate is no longer available at the time of the
change, the Payee will choose a new index based upon a comparable measure and
comparable information and Payee will notify Maker of the substitution of any
such new index.

"Past Due Rate" means, on any day, a rate per annum equal to eighteen percent
(18%). All past due payments shall bear interest from the due date thereof
until paid at the Past Due Rate.

"Ceiling Rate" means, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable federal or Texas law permits
the higher interest rate, stated as a rate per annum.  On each day, if any,
that Chapter 302 ("Chapter 302") of the Finance Code of Texas Revised Civil
Statutes (the "Texas Finance Code") establishes the Ceiling Rate, the Ceiling
Rate shall be the "indicated rate ceiling" as defined in Chapter 302 for that
day. Payee may from time to time, as to current and future balances, implement
any other ceiling under Chapter 302 by notice to Maker, if and to the extent
permitted by, Chapter 302.

Interest on the amount of this Note shall be computed from the date of this
Note. Interest shall be computed for the actual number of days elapsed and on
the basis of a year consisting of 360 days, unless the Highest Lawful Rate
would thereby be exceeded or the designation of a 360 day year is prohibited by
state or federal law as of the date of this note, in which event to the extent
necessary to avoid exceeding the Highest Lawful Rate or state or federal laws,
interest shall be computed on the basis of the actual number of days elapsed in
the applicable calendar year in which accrued.

Without notice to the Maker or any other person or entity, the Prime Rate and
the Ceiling Rate shall each automatically fluctuate upward and downward as and
in the amount by which the Prime Rate and the maximum nonusurious rate of
interest, respectively, fluctuate.

If, for any reason whatsoever, the interest paid or received on this Note during
the full term of this Note shall produce a rate which exceeds the Ceiling Rate,
the holder of this Note shall refund to the Payer or, at the holder's option,
credit against the principal of this Note such portion of said interest as
shall be necessary to cause the interest paid on this Note to produce a rate
equal to the Ceiling Rate.  All sums paid or forbearance or detention of the
indebtedness evidenced hereby shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts throughout the
full term of this Note, so that the interest rate is uniform throughout the
full term of this Note.

The above sum and accrued interest shall be due and payable in forty-seven (47)
monthly principal installments of THIRTY-SIX THOUSAND DOLLARS ($36,000.00)
each, plus interest accrued on the unpaid principal balance to the date of
each installment, payment beginning September 1, 1999 and continuing on the
1st day of each month thereafter, until and including July 1, 2003 and then
in one installment of the entire unpaid principal balance, plus accrued
unpaid interest, on August 1, 2003.

Unless otherwise agreed to, in writing, or otherwise required by applicable
law, payments will be applied first to accrued, unpaid interest, then to
current principal, and any remaining amount to any unpaid collection costs,
late charges and other charges and the balance to the principal in inverse
order of maturity, provided, however, upon delinquency or other default,
Payee reserves the right to apply payments among principal, interest, late
charges, collection costs and other charges at its discretion.  The Maker may
at any time pay the full amount or any part of this Note without the payment
of any premium or fee.

This Note along with the Revolving Line of Credit Note described below is
secured by a Deed of Trust, Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated July 29, 1997 as amended by that
certain First Amendment to Deed of Trust dated July 29, 1998, as amended by
that certain Second Amendment to Deed of Trust dated December 23, 1998 and
as amended by that certain Third Amendment to Deed of Trust dated July 29,
1999 (hereinafter collectively referred to as "Deed of Trust"), from Maker
(herein also sometimes referred to as "Grantor") originally to John E. Grist,
Trustee and now to Randolph C. Henson, as Substitute Trustee, for the benefit
of Payee, covering any and all of Maker's interest, whether now owned or
hereafter acquired, in and to various oil and gas interests including leasehold
royalty, mineral and overriding royalty interests, located in Bastrop, Crane,
DeWitt, Fayette, Kent and Lee Counties, Texas, a portion of which properties
have been acquired with funds advanced under the terms of this Note.
Additionally, this Note is subject to the terms and conditions of the Loan
Agreement set out above.  Failure to describe all or part of the security
shall not be considered as a waiver of such security.

At the option of the owner or holder hereof, all amounts due and unpaid
hereunder shall be accelerated and shall become immediately due and payable
upon the occurrence of any of the following events: default in the making of
any payment as herein agreed or in the payment of any principal or interest
due under any other indebtedness of Maker, whether primary or secondary, to
Payee including, but not limited to, that certain Revolving Line of Credit
Note dated July 29, 1999 have an original commitment amount of $1,000,000.00
executed by Maker and payable to Payee ("Revolving Line of Credit Note");
the failure of Maker to keep and perform any covenants herein or in the Deed
of Trust and Loan Agreement described above or any other agreements otherwise
made with Payee; any event that threatens the value of the collateral; any
event that cast doubt on the ability of Maker to repay the loan;the dissolution
of Maker; any proceedings or arrangements in bankruptcy by or against Maker;
Maker becomes insolvent; or any assignments or receiverships, whether in or
out of court, of Maker or any of Maker's property for the benefit of Maker's
creditors.

Payee may exercise any other available remedies, and failure to exercise any
remedy shall not constitute a waiver at any other time.

In addition to all principal and accrued interest on this Note, the Maker agrees
to pay (a) all reasonable costs and expenses incurred by all owners and holders
of this Note in any probate, reorganization, bankruptcy or any other proceeding
for the establishment or collection or any amount hereunder, or in collecting
this Note through any such proceedings, and (b) reasonable attorney's fees
when and if this Note is placed in the hands of an attorney for collection
after default.

The Maker and all Co-Makers, Sureties and Guarantors severally waive notice
(including but not limited to, notice of intent to accelerate and notice of
acceleration), demand, presentment for payment, protest and the filing of suit
for the purpose of fixing liability and consent that the time of payment hereof
may be extended and re-extended from time to time without notice to him, and
they agree that his, her or its liability on or with respect to this Note shall
note be affected by any release of or change in any security at any time
existing or by any failure to perfect or to maintain perfection or any lien
on or security interest in any such security.

If all or any part of the property securing this Note or any interest in it is
sold or transferred without Payee's prior written consent, Payee may, at its
option, require immediate payment in full of all sums secured by the Deed of
Trust securing this Note.  However, this options shall not be exercised by
Payee if exercise is prohibited by state or federal law as of the date of this
Note and the Deed of Trust.

If any word, phrase, clause, paragraph, part, portion or provision hereof is
held to be invalid, the remainder hereof shall nevertheless be valid as
though it had been entered into without such invalid word, phrase, clause,
paragraph, part, portion or provision.

Payee reserves the right, exercisable in Payee's sole discretion and without
notice to Maker or any other person, to sell participations, to assign its
interest or both, in all or any part of this Note or the debt evidenced by
this Note.

When this instrument is executed by more than one person, corporation or other
legal entity, it shall be construed as though "Maker" were written "Makers"
and as though the pronouns and verbs in their number were changed to correspond
and in such case, each of the Makers shall be bound jointly and severally with
one another to keep, observe and perform the covenants, agreements, obligations
and liabilities imposed by this instrument upon the "Maker".

This Note is given in renewal, extension and consolidation, but expressly not
in extinguishment, of those certain Promissory Notes (1) dated July 29, 1997
as amended on July 29, 1998 and December 23, 1998 in the original principal
amount of $1,232,699.87, (2) dated July 29, 1998 as amended on December 23, 1998
having an original commitment amount of $600,000.00 and (3) dated December 23,
1998 in the original principal amount of $600,000.00, executed by Maker for
the benefit of Midland American Bank now known as Bank United ("Original
Notes"), which Original Notes are secured by the Deed of Trust described above.
Any liens, assignments and security interests securing the payment of said
Original Notes are hereby ratified, confirmed, renewed, extended, rearranged
and brought forward as security for the payment of this Note.

Unless otherwise specified below, this Note shall be construed under and
governed by the laws of the State of Texas (including applicable federal law),
but in any event Chapter 346 of the Finance Code of Tex. Rev. Civ. Stat. Ann.
(which regulates certain revolving loan accounts and revolving triparty
accounts) shall not apply to the loan evidenced by this Note.

The Maker warrants and represents to the Payee, and to all other owners and/or
holders of the indebtedness evidenced hereby, that (1) all loans evidenced by
the Note are and shall be "business loans" as such term is used in the
Depository Institution Regulation and Monetary Control Act of 1980 as amended,
and (2) such loans are for business, commercial, investment or similar purposes
and not primarily for personal, family, household or agricultural use as such
terms are used in Chapter 1 of the Texas Credit Code.

This loan is payable in full on August 1, 2003 or upon acceleration for any
reason. At maturity you must repay the entire principal balance of the loan
and unpaid interest then due. The Bank is under no obligation to refinance the
loan at that time. You will therefore, be required to make payment out of other
assets that you may own or you will have to find a lender, which may be the
bank you have this loan with, willing to lend you the money. If you refinance
this loan at maturity, you may have to pay some or all of the closing costs
normally associated with a new loan even if you obtain refinancing from the
same bank.

NOTICE: This term promissory note and the revolving line of credit note, the
Deed of Trust and accompanying crude oil and gas purchaser letters, UCC-1
Financing Statements, guaranties and loan agreement constitute a loan agreement
as defined in section 26.02(a) of the Texas Business & Commerce Code, and
represents the final agreement between the parties and may note be contradicted
by evidence to prior, contemporaneous or subsequent oral agreements of the
parties.  There are no unwritten oral agreements between the Parties.

Dated the 29th day of July, 1999 although executed on the 25th day of August,
1999.


By: TEXAS VANGUARD OIL COMPANY
    ROBERT N. WATSON, JR.
    PRESIDENT


                               EXHIBIT 10.6

PROMISSORY NOTE (REVOLVING LINE OF CREDIT):

Bank United ("Lender")
401 West Texas
Midland, Texas 79701
Midland County

Texas Vanguard Oil Company ("Borrower")
PO Box 202650
Austin, Texas 78720

TERMS:
Interest Rate:         Variable
Principal Amount:     $3,000,000.00
Funding Date:          December 1, 2001
Maturity Date:         December 1, 2002
Loan Number:           700-053769-0006

For value received, Borrower promises to pay to the order of Lender indicated
above the principal amount of THREE MILLION DOLLARS ($3,000,000.00), or so much
thereof as may be advanced hereunder prior to maturity, together with interest
from date until maturity on the unpaid principal balance thereof from time to
time outstanding at the Stated Rate and with interest on all past due amounts,
both principal and accrued interest, at the Past Due Rate, provided, that for
the full term of this Note the interest rate produced by the aggregate of all
sums paid or agreed to be paid to the holder of this Note for the use, for-
bearance or detention of the debt evidenced hereby shall not exceed the Ceiling
Rate.

This Note is described in and is subject to the terms and provisions of that
certain Loan Agreement dated July 29, 1997 as amended by those certain First,
Second,Third and Fourth Amendments to Loan Agreement dated July 29, 1998,
December 23, 1998, July 29, 1999 and October 1, 2000 (hereinafter collectively
referred to as the "Loan Agreement") by, between and among Bank United, Maker
and Robert N. Watson Jr.as "Guarantor". The Loan Agreement, among other things,
contains provisions regarding the "Borrowing Base," as defined in the Loan
Agreement and for acceleration of the maturity hereof upon the happening or
omission of certain stated events upon the terms and conditions therein
specified.

"Stated Rate" means, on any day, a rate per annum equal to the Prime Rate from
time to time in effect plus  one-half percent (.5%), provided, that if
on any day the Stated Rate shall exceed the Ceiling Rate for that day, then the
Stated Rate shall be fixed at the Ceiling Rate on that day and on each day
thereafter until the total amount of interest accrued at the Stated Rate on the
unpaid balance of this Note equals the total amount of interest which would
have accrued if there were no Ceiling Rate.

"Prime Rate" for purposes of this Note shall mean the current rate of interest
per annum as published in the Southwest Edition of the Wall Street Journal as
the Prime Rate in effect until the next Change Date.  The Prime Rate may change
and each change in the Prime Rate shall be effective on the date of publication
of said change (referred to as "Change Date") until the next Change Date. Each
change in the Prime Rate shall be effective without special notice to the Maker
or any other person or entity.  The Prime Rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged to any customer.
If, for any reason, the Prime Rate is no longer available at the time of the
change, the Payee will choose a new index based upon a comparable measure and
comparable information and Payee will notify Maker of the substitution of any
such new index.

"Past Due Rate" means, on any day, a rate per annum equal to eighteen percent
(18%). All past due payments shall bear interest from the due date thereof
until paid at the Past Due Rate.

"Ceiling Rate" means, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable federal or Texas law permits
the higher interest rate, stated as a rate per annum.  On each day, if any,
that Chapter 302 ("Chapter 302") of the Finance Code of Texas Revised Civil
Statutes (the "Texas Finance Code") establishes the Ceiling Rate, the Ceiling
Rate shall be the "indicated rate ceiling" as defined in Chapter 302 for that
day. Payee may from time to time, as to current and future balances, implement
any other ceiling under Chapter 302 by notice to Maker, if and to the extent
permitted by, Chapter 302.

Interest on the amount of each advance of this note shall be computed on the
amount of each advance from the date of each advance. Interest shall be
computed for the actual number of days elapsed and on the basis of a year
consisting of 360 days, unless the Highest Lawful Rate would thereby be
exceeded or the designation of a 360 day year is prohibited by state or federal
law as of the date of this note, in which event to the extent necessary to
avoid exceeding the Highest Lawful Rate or state or federal laws, interest
shall be computed on the basis of the actual number of days elapsed in the
applicable calendar year in which accrued.

Without notice to the Maker or any other person or entity, the Prime Rate and
the Ceiling Rate shall each automatically fluctuate upward and downward as and
in the amount by which the Prime Rate and the maximum nonusurious rate of
interest, respectively, fluctuate.

If, for any reason whatsoever the interest paid or received on this Note during
the full term of this Note shall produce a rate which exceeds the Ceiling Rate,
the holder of this Note shall refund to the Payer or, at the holder's option,
credit against the principal of this Note such portion of said interest as
shall be necessary to cause the interest paid on this Note to produce a rate
equal to the Ceiling Rate.  All sums paid or forbearance or detention of the
indebtedness evidenced hereby shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts throughout the
full term of this Note, so that the interest rate is uniform throughout the
full term of this Note.

The above sum and accrued interest shall be due and payable as follows:

(a) Interest shall be due and payable monthly as it accrues on the unpaid
principal balance to the date of each installment, payment beginning
November  1, 2000 and continuing on the 1st day of each month thereafter
until and including September 1, 2001.

(b) On October 1, 2001, the remaining balance, including principal and
interest, then remaining unpaid on this Note shall be due and payable.

This note is a revolving line of credit having an original commitment amount
of $3,000,000.00. The unpaid principal balance of this Note at any time shall
be the total of amounts loaned or advanced by the holder hereof less the amount
of all payments or prepayments of principal made herein by or for Maker. Maker
may use all or any part of the credit provided for herein at any time before
December 1, 2002. Maker may borrow, repay and reborrow hereunder and there is no
limitation on the number of advances made hereunder so long as the total unpaid
balance, at any time outstanding, does not exceed $3,000,000.00.

Unless otherwise agreed to, in writing, or otherwise required by applicable
law, payments will be applied first to accrued, unpaid interest, then to
current principal, and any remaining amount to any unpaid collection costs,
late charges and other charges and the balance to the principal in inverse
order of maturity, provided, however, upon delinquency or other default,
Payee reserves the right to apply payments among principal, interest, late
charges, collection costs and other charges at its discretion.  The Maker may
at any time pay the full amount or any part of this Note without the payment
of any premium or fee.

This Note along with the Term Promissory Note described below is
secured by a Deed of Trust, Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated July 29, 1997 as amended by that
certain First Amendment to Deed of Trust dated July 29, 1998, as amended by
that certain Second Amendment to Deed of Trust dated December 23, 1998
as amended by that certain Third Amendment to Deed of Trust dated July 29,
1999  and as amended by that certain Fourth Amendment to Deed of Trust dated
October 1, 2000 (hereinafter collectively referred to as "Deed of Trust"),
from Maker (herein also sometimes referred to as "Grantor") originally to John
E. Grist, Trustee and now to Randolph C. Henson, as Substitute Trustee, for the
benefit of Payee, covering any and all of Maker's interest, whether now owned
or hereafter acquired, in and to various oil and gas interests including
leasehold royalty, mineral and overriding royalty interests,located in Bastrop,
Crane, DeWitt, Fayette, Kent and Lee Counties, Texas. Additionally, this Note
is subject to the terms and conditions of the Loan Agreement set out above.
Failure to describe all or part of the security shall not be considered as a
waiver of such security.

At the option of the owner or holder hereof, all amounts due and unpaid
hereunder shall be accelerated and shall become immediately due and payable
upon the occurrence of any of the following events: default in the making of
any payment as herein agreed or in the payment of any principal or interest
due under any other indebtedness of Maker, whether primary or secondary, to
Payee including, but not limited to, that certain Revolving Line of Credit
Note dated July 29, 1999 as amended on October 1, 2000, executed by Maker and
payable to Payee in the original principal amount of $1,718,027.98 (hereinafter
referred to collectively as "Term Note"); the failure of Maker to keep and
perform any covenants herein or in the Deed of Trust and Loan Agreement
described above or any other agreements otherwise made with Payee; any event
that threatens the value of the collateral; any event that cast doubt on the
ability of Maker to repay the loan;the dissolution of Maker; any proceedings
or arrangements in bankruptcy by or against Maker; Maker becomes insolvent; or
any assignments or receiverships, whether in or out of court, of Maker or any
of Maker's property for the benefit of Maker's creditors. Payee may exercise
any other available remedies, and failure to exercise any remedy shall not
constitute a waiver at any other time.

In addition to all principal and accrued interest on this Note the Maker agrees
to pay (a) all reasonable costs and expenses incurred by all owners and holders
of this Note in any probate, reorganization, bankruptcy or any other proceeding
for the establishment or collection or any amount hereunder, or in collecting
this Note through any such proceedings, and (b) reasonable attorney's fees
when and if this Note is placed in the hands of an attorney for collection
after default.

The Maker and all Co-Makers, Sureties and Guarantors severally waive notice
(including but not limited to, notice of intent to accelerate and notice of
acceleration), demand, presentment for payment, protest and the filing of suit
for the purpose of fixing liability and consent that the time of payment hereof
may be extended and re-extended from time to time without notice to him, and
they agree that his, her or its liability on or with respect to this Note shall
note be affected by any release of or change in any security at any time
existing or by any failure to perfect or to maintain perfection or any lien
on or security interest in any such security.

If all or any part of the property securing this Note or any interest in it is
sold or transferred without Payee's prior written consent, Payee may, at its
option, require immediate payment in full of all sums secured by the Deed of
Trust securing this Note.  However, this options shall not be exercised by
Payee if exercise is prohibited by state or federal law as of the date of this
Note and the Deed of Trust.

If any word, phrase, clause, paragraph, part, portion or provision hereof is
held to be invalid, the remainder hereof shall nevertheless be valid as
though it had been entered into without such invalid word, phrase, clause,
paragraph, part, portion or provision.

Payee reserves the right, exercisable in Payee's sole discretion and without
notice to Maker or any other person, to sell participations, to assign its
interest or both, in all or any part of this Note or the debt evidenced by
this Note.

When this instrument is executed by more than one person, corporation or other
legal entity, it shall be construed as though "Maker" were written "Makers"
and as though the pronouns and verbs in their number were changed to correspond
and in such case, each of the Makers shall be bound jointly and severally with
one another to keep, observe and perform the covenants, agreements, obligations
and liabilities imposed by this instrument upon the "Maker".

This note is given in renewal and extension, but expressly not in
extinguishment, of that certain Promissory Note dated July 29, 1999 having an
original commitment amount of $1,000,000.00 executed by Maker and payable to
Payee ("Original Note"), which Note is secured by the Deed of Trust described
above.  All liens, assignments and security interests securing the payment of
said Original Note are hereby ratified, confirmed, renewed, extended,
rearranged and brought forward as security for the payment of this Note.


Unless otherwise specified below, this Note shall be construed under and
governed by the laws of the State of Texas (including applicable federal law),
but in any event Chapter 346 of the Finance Code of Tex. Rev. Civ. Stat. Ann.
(which regulates certain revolving loan accounts and revolving triparty
accounts) shall not apply to the loan evidenced by this Note.

The Maker warrants and represents to the Payee, and to all other owners and/or
holders of the indebtedness evidenced hereby, that (1) all loans evidenced by
the Note are and shall be "business loans" as such term is used in the
Depository Institution Regulation and Monetary Control Act of 1980 as amended,
and (2) such loans are for business, commercial, investment or similar purposes
and not primarily for personal, family, household or agricultural use as such
terms are used in Chapter 1 of the Texas Credit Code.

This loan is payable in full on December 1,2002 or upon acceleration for any
reason. At maturity you must repay the entire principal balance of the loan
and unpaid interest then due. The Bank is under no obligation to refinance the
loan at that time. You will therefore, be required to make payment out of other
assets that you may own or you will have to find a lender, which may be the
bank you have this loan with, willing to lend you the money. If you refinance
this loan at maturity, you may have to pay some or all of the closing costs
normally associated with a new loan even if you obtain refinancing from the
same bank.

NOTICE: This Revolving Line of Credit Note, The Term Promissory Note, The
Deed of Trust and accompanying crude oil and gas purchaser letters, UCC-1
Financing Statements, guaranties and loan agreement constitute a loan agreement
as defined in section 26.02(a) of the Texas Business & Commerce Code, and
represents the final agreement between the parties and may note be contradicted
by evidence to prior, contemporaneous or subsequent oral agreements of the
parties.  There are no unwritten oral agreements between the Parties.

Dated the 1st day of December, 2001.


BORROWER: TEXAS VANGUARD OIL COMPANY
          ROBERT N. WATSON, JR.
          PRESIDENT


EXHIBIT 99.1:
CERTIFICATE OF CHIEF FINANCIAL OFFICER AND CHIEF FINANCIAL OFFICER

I, William Watson, certify that:

1.  I have reviewed this annual report on Form 10-K of Texas Vanguard Oil
Company (TVOC).

2.  Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report.

3.  Based on my knowledge, the financial statements and other financial
information included in this annual report fairly present, in all
material respects, the financial condition, results of operations and cash
flows of TVOC as of, and for, the periods presented in this annual report.

4.  Texas Vanguard Oil Company's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-14 and 15d-14) for
TVOC and we have:

a)  designed such disclosure controls and procedures to ensure that material
information relating to TVOC, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b)  evaluated the effectiveness of TVOC disclosure controls and procedures
as of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date.

c)  presented in this annual report our conclusions about the effective-
ness of the disclosure controls and procedures based on our evaluation as
of the Evaluation Date.

5.  TVOC's other certifying officers and I have disclosed, based on our
most recent evaluation, to our auditors and the audit committee of TVOC's
board of directors:

a)  all significant deficiencies in the design or operation of internal
controls which could adversely affect TVOC's ability to record, process,
summarize and report financial data and have identified for TVOC's auditors
any material weaknesses in internal controls; and

b)  any fraud, whether or not material, that involves management or other
employees who have a significant role in TVOC's internal controls.

6.  TVOC's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

March 25, 2003


By /s/ William G. Watson
------------------------
William G. Watson, President
(Principal Financial and Accounting Officer)


EXHIBIT 99.2:  CERTIFICATION OF PERIODIC FINANCIAL REPORTS

The undersigned hereby certifies that this Annual Report on Form 10-K
for the fiscal year ended December 31, 2002, fully complies with the
requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act
of 1934 and that the information contained in this report fairly presents,
in all material respects, the financial conditions and results of operations
of Texas Vanguard Oil Company.

Date:  March 25, 2003            By/s/ William G. Watson
                                 --------------------------
                                 William G. Watson, President
                                (Principal Financial and Accounting Officer)