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, 1999      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 9, 2000, there were 1,417,087 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 (316,572 shares), based on average
bid and asked prices on the aforesaid date, was $385,743.00.

                 DOCUMENTS INCORPORATED BY REFERENCE

The registrant's definitive proxy statement regarding the election of directors
at the registrant's 1999 Annual Stockholders' Meeting filed or to be filed with
the Commission  on or before April 30, 2000, 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 (18% in 1999, 21% in 1998 and 12% in 1997), GPM
(33% in 1999, 18% in 1998 and 19% in 1997), Genesis Oil (15% in 1997), Scurlock
Permian (18% in 1999, 14% in 1998, and 20%in 1997,) and EOTT Energy (22% in
1999, 22% in 1998 and 17% in 1997). 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, 1999, the executive officers and directors were as follows:
<TABLE>
<CAPTION>
                    Name                          Offices Held
               <S>                                <C>
               Robert N. Watson, Jr.              President, Chairman of the
                                                  Board, Chief Executive Officer
                                                  and Director

               Linda R. Watson                    Secretary, Treasurer and
                                                  Director

               Robert L. Patterson                Director
</TABLE>


   Robert N. Watson, Jr. (age 57), received his B.A. and B.B.A. degrees from
The University of Texas at Austin in 1966 and 1967. He is a director and
President of Robert Watson, Inc., an oil and gas and real estate development
firm, which he founded in 1969. He has been a director of the Company and its
Chief Executive Officer since 1982.

   Linda R. Watson (age 56), 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. Also, she is the wife of
Robert N. Watson, Jr.

    Robert L. Patterson (age 60), 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 and they earn no salary. In addition to
the Company's officers, at December 31, 1999, the Company had one full-time
salaried employee. From time to time the Company engages independent petroleum
engineers, geologists and landmen on a fee basis. Robert Watson is a director
of a company as previously described which has 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.

   Robert Watson, Inc.  owns a small interest in a number of the properties
that the Company has interests in as well as 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.

  The Company and a management company owned by the President of the Company
extended an agreement whereby the latter provides the Company general corporate
management services.  This  agreement is the same as could be obtained from an
independent third party. The affiliated company will receive $14,500 per month,
for one year, effective  January 1, 2000 as compensation for those services.
The affiliated company received $150,000, $150,000,and $150,000 as compensation
for performance of these services during the years ended December 31, 1999,
1998 and 1997, respectively.

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 one  year lease with a company owned by the President of the Company for
these  facilities  which will  expire  on  June 30, 2000.   The rent for these
facilities is $1,600 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, 1995 through 1999.
<TABLE>
<CAPTION>

   Fiscal years ended            Oil                               Gas                   Dry
       December 31,        Gross             Net            Gross        Net      Gross       Net
       <S>                  <C>            <C>               <C>       <C>          <C>       <C>

       1995                 38             23.35              8        3.35         ---       ---
       1996                 21             18.97              3        2.08         ---       ---
       1997                 30             17.72              1        1.11         ---       ---
       1998                 34             22.22             23       15.12         ---       ---
       1999                 38             32.61              5        3.91         ---       ---
</TABLE>

(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.

   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, 1999, the Company  does not have  any single property
that is significant enough to materially affect its operations.

   As of December 31, 1999, 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, 1999.
<TABLE>
<CAPTION>
                                      Producing Wells (a)                             Developed
                              Oil                            Gas                     Acreage (a)
   County           Gross              Net            Gross        Net          Gross           Net
   <S>              <C>              <C>               <C>       <C>         <C>            <C>
   Bastrop           82              55.17              41       31.05       2,453.85       1,717.87
   Burleson           1                .79             ---         ---          40.00          31.60
   Chaves (c)       ---                ---               1         .50         160.00          80.00
   Crane (b)          8               6.86               3         .97         200.00          98.45
   DeWitt           ---                ---               2         .16         160.00          12.43
   Eastland (b)     ---                ---               4         .09         122.00           1.30
   Fayette (b)        3               2.06             ---         ---         400.00         320.00
   Garza (b)          3                .05             ---         ---          30.00            .47
   Howard (b)         1                .02             ---         ---          40.00            .63
   Kent (b)           8               1.29             ---         ---         320.00          51.40
   Lea (b)(c)         2                ---               1         .07         400.00          22.25
   Lee               97              65.35               4        2.91       2,113.41       1,421.57
   Lipscomb           1                .03             ---         ---          80.00           2.50
   Martin             2               1.82             ---         ---         120.00         112.78
   Midland            1                .02             ---         ---          80.00           1.67
   Nolan (b)          1                .03             ---         ---          40.00           1.25
   Parker (b)       ---                ---               1         .01         136.91            .83
   Pecos              1                .70             ---         ---          40.00          28.00
   Ward             ---                ---               2         .16         720.00          29.20
   Weston (d)         3                .90             ---         ---         120.00          36.17
   Wilson (b)         1                .95             ---         ---          80.00          76.00
                 ------            -------           -----       -----       --------       --------
                    215             136.04              59       35.92       7,856.17       4,046.37
</TABLE>

(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, 1999, 1998
and 1997.
<TABLE>
<CAPTION>

                                             1999       1998           1997
  <S>                                 <C>             <C>             <C>
  Oil:
     Production volume (barrels)            60,669     49,357         47,434
     Average sales price per barrel   $      17.14      12.16          19.30
  Gas:
     Production volume (MCF)               635,686    434,374        324,462
     Average sales price per MCF      $       1.87      1.69           2.40

  Average production costs per
     equivalent barrel                $       7.16      5.97           5.88

</TABLE>

   The worldwide crude oil prices of 1999 continue to fluctuate in 2000.
The Company  cannot predict how prices will vary during  2000 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, 1999.
<TABLE>
<CAPTION>

           County               Gross                Net
          <S>                <C>                  <C>
          Bastrop, TX         2,296.69            1,647.47
          Crane, TX             240.00              205.76
          Crosby, TX          1,120.00              560.00
          DeWitt, TX            308.00               47.37
          Eastland, TX          199.30                2.37
          Eddy, NM              370.00               22.36
          Fayette, TX            96.00                5.91
          Garza, TX           3,250.00              789.28
          Howard, TX             40.00                 .63
          Kent, TX            3,960.00            1,518.00
          Lea, NM             1,094.90              629.90
          Lee, TX             1,827.28            1,210.17
          Martin, TX             40.00               32.78
          Midland, TX           133.33                2.78
          Pecos, TX             280.00              196.00
          Weston, WY            600.00              104.75
          Wilson, TX            129.51              123.03
          Winkler, TX           701.60              701.60
                             ---------            --------
                             16,686.61            7,800.16
                             =========            ========
</TABLE>

All of the 7,800.16 net undeveloped acres under lease are being held by
production.

ITEM 3. LEGAL PROCEEDINGS



   On March 16, 1998, the Company, Robert N. Watson, Jr., (President, CEO and
Chairman of the Board), and Linda R. Watson (Secretary-Treasurer) entered into
a consent cease and desist order to settle allegations by the Securities and
Exchange Commission (Commission) that they had violated Sections 9(a)(2), 10(b)
13(d), and 16(a) of the Exchange Act and Rules 10b-5, 13d-2, 16a-2, and 16a-3.
Under terms of the settlement, without admitting or denying any of the
Commission's allegations, the Company, Mr. Watson and Ms. Watson consented to
the entry of an order pursuant to Section 21C of the Exchange Act that each
would cease and desist from committing or causing any future violation of
Sections 9(a)(2), 10(b), 13(d), 16(a) and Rules 10b-5, 13d-2, 16a-2, and 16a-3.
The Commission's allegations related to the Watsons' and the Company's
purchases of stock from December 1994 to May 1996 which were alleged to have
been made in order to maintain the Company's Boston Stock Exchange (BSE)
listing, which the BSE delisted in May of 1996.  The Commission did not allege
nor did the Watsons make any sales of the Company's stock.  No financial
sanctions were sought nor ordered by the Commission.

   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, 1999.

                               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:
<TABLE>
<CAPTION>
                                           Sales Price
                                     High                Low
      <S>                           <C>                 <S>
      Fiscal 1999

        First Quarter               1.125               0.750
        Second Quarter              1.375               0.750
        Third Quarter               1.375               1.062
        Fourth Quarter              1.375               1.062

      Fiscal 1998

        First Quarter               1.375               0.875
        Second Quarter              1.375               0.750
        Third Quarter               1.375               0.750
        Fourth Quarter              1.125               0.750
</TABLE>

   At December 31, 1999, the approximate number of holders of record of the
Company's common stock was 545.  The Company has not paid any dividends and has
no present plans to do so in the immediate future.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>

<CAPTION>
                                       Years ended December 31,
                            1999        1998        1997         1996        1995
<S>                  <C>           <C>          <C>         <C>          <C>
Oil and gas sales    $  2,122,057   1,298,183    1,496,133    1,230,785     729,536
Total revenue           2,405,050   1,493,456    1,663,995    1,403,772     896,580
Total expenses         (2,151,522) (1,279,115)  (1,305,175)  (1,100,188)   (767,799)
Net earnings (loss)       167,329     169,341      236,820      258,175      86,695
Net earnings (loss)
   per share                .12         .12          .17          .18         .06
Total assets            5,484,246   4,332,767    3,704,635   3,235,502    2,473,759
Short-term debt         1,648,316   1,718,615      944,605   1,074,329      935,009
Long-term debt          1,210,588     482,606      802,396     560,755      252,247
Total liabilities       3,425,137   2,440,987    1,982,196   1,749,883    1,234,352
Stockholders equity  $  2,059,109   1,891,780    1,722,439   1,485,619    1,239,407
</TABLE>

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

ANALYSIS OF FINANCIAL CONDITION

 During the years ended December 31, 1999 and 1997, cash increased by $705,883
and $120,026, respectively. During the year ended December 31, 1998, cash
decreased by $5,462. The cash flow from operating activities in 1999 was
approximately $948,452, an increase of $612,736 from 1998.  Cash flow from
operating activities in 1998 was approximately $335,716, a decrease of $289,754
from 1997. The significant use of cash, other  than for  operating  expenses,
has  been investments  in  producing  oil  and gas properties of $798,522,
$805,768, and $617,361 in 1999, 1998 and 1997, 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 1999 and 1998 the Company also increased cash by $1,000 and $10,370
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, 1999,
the Company had a cash balance of $1,805,685 which represents approximately
63% of its notes payable as compared to the December 31, 1998, cash balance
of $1,099,802 which represented approximately 50% of its notes payable.

   Working capital at December 31, 1999 increased to 1.00 to 1 from .66 to 1
at December 31, 1998.  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 2000 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 2000 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 2000 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, 1999.

   As of December 31, 1999, the Company owed $1,534,768 and $1,000,000 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 August 2000, respectively
(see note 2 of notes to financial statements for further explanation).

ANALYSIS OF RESULTS OF OPERATIONS

   From 1996 to 1997 oil and gas sales increased  approximately  22%, and from
1997 to 1998 oil and gas sales decreased  approximately 13%,  and from 1998 to
1999 oil and gas sales increased 63%. In 1997, oil production volume increased
by 14% at the same time as the average  price  per barrel increased  by  4% to
$19.30.  Also, in 1997,  the gas production volume increased by 25%  which was
complemented by an increase in the average price per MCF to $2.40.In 1998, oil
production volume increased by 4% at the same time as the  average price  per
barrel  decreased by 37% to $12.16. Also, in 1998, the gas  production  volume
increased  by 34% while the average price decreased 30% to $1.69 per MCF. In
1999, oil production volume increased by 23% at the same time  as the average
price per barrel increased by 41% to 17.14. Also, in 1999, the gas production
volume increased  by 46% while the average  price per  MCF was  $1.87. The
fluctuation in oil and gas prices is solely attributable to changes in market
prices.

   Oil and gas production expenses increased in 1999, 1998  and 1997 by 64%,
22% and 24%, 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 the 23%, 4%  and  14% increase,
respectively, in oil production volume and the 46%, 34% and 25% increase,
respectively, in gas production volume.

  Interest expense increased by 47% in 1999 over 1998 due to higher average
outstanding balances as compared to a decrease of 15% in 1998 over 1997 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 1999,
depletion increased in conjunction with the 23% increase in oil production
volume and the 46% increase in gas production volume.

Total general and administrative expenses in 1999, 1998 and 1997 were
comparable to prior years as the Company made every effort to control
the level of these type expenses.

   In 1999, 1998 and 1997, the Company provided provisions of approximately
$242,389, $60,165 and $170,678, 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, 1999 and 1998, and the related statements of
earnings, stockholders' equity and  cash flows  for the years then ended. 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.  The financial statements of Texas Vanguard Oil Company as of
December 31,1997 were audited by other auditors whose report dated February 27,
1998, expressed an unqualified opinion on those statements.

We  conducted  our  audits  in  accordance  with  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, 1999 and 1998, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.


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

February 22, 2000

<TABLE>

                        TEXAS VANGUARD OIL COMPANY

                                 Balance Sheets

                          December 31, 1999 and 1998

<CAPTION>
                                     ASSETS
                                                            1999          1998
<S>                                                   <C>             <C>
Current assets:
    Cash (including certificates of deposit of
       $200,000 in 1999 and 1998, pledged)            $  1,805,685    1,099,802
    Trade accounts receivable                              155,708       87,860
                                                         ----------   ---------
            Total current assets                         1,961,393    1,187,662
                                                         ----------   ---------
Oil and gas properties, partially pledged,
    successful efforts method of accounting:
       Proven properties                                 3,870,177    3,327,677
       Unproven properties                                 166,630      166,630
Office furniture and equipment, partially pledged          182,434       97,891
                                                         ---------    ---------
                                                         4,219,241    3,592,198
      Less accumulated depreciation, depletion and
    amortization                                          (697,388)    (449,293)
                                                         ---------    ---------
                                                         3,521,853    3,142,905
                                                         ---------    ---------
Other assets                                                 1,000        2,200
                                                         ---------    ---------
    TOTAL ASSETS                                      $  5,484,246    4,332,767
                                                         =========    =========
</TABLE>

<TABLE>
<CAPTION>
                 LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                 <C>               <C>
Current liabilities:
    Trade accounts payable                          $      229,920       72,766
    Notes payable and current installments of
       long-term debt                                    1,648,316    1,718,615
    Deferred revenue                                        83,114          ---
                                                         ---------    ---------
Total current liabilities                                1,961,350    1,791,381
                                                         ---------    ---------
Deferred tax liability                                     253,199      167,000
Long-term debt, excluding current installments           1,210,588      482,606
                                                         ---------    ---------
Total Liability                                          3,425,137    2,440,987

Commitments

Stockholders' equity:
    Common stock, par value $.05; authorized
    12,500,000 shares; 1,417,087 issued and
    outstanding in 1999 and 1998,
    respectively                                            70,854       70,854
    Additional paid-in capital                           1,890,005    1,890,005
    Accumulated earnings (deficit)                          98,250      (69,079)
                                                         ---------    ---------
Total stockholders' equity                               2,059,109    1,891,780
                                                         ---------    ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $  5,484,246    4,332,767
                                                         =========    =========

<FN>
See accompanying notes to financial statements.
</TABLE>

<TABLE>
                        TEXAS VANGUARD OIL COMPANY
                         Statements of Earnings

                Years ended December 31, 1999, 1998 and 1997
<CAPTION>
                                                        1999        1998        1997
<S>                                              <C>            <C>         <C>
Revenues:
    Oil and gas sales                            $  2,122,057   1,298,183   1,496,133
    Well operation fees                               176,244     147,304     146,613
    Other, net                                         96,751      37,369      10,335
     Interest income                                    9,998      10,600      10,914
                                                    ---------   ---------   ---------
       Total revenues                               2,405,050   1,493,456   1,663,995
                                                    ---------   ---------   ---------
Expenses:
  Production cost                                   1,192,821     726,429     596,678
  Depreciation, depletion and amortization            273,960     117,648     136,370
  Interest expense                                    181,960     123,848     145,391
  General and administrative                          254,408     251,025     251,058
  Impairment in value of oil and gas property         242,389      60,165     170,678
  Loss on sale of oil and gas property                  6,155         ---       5,000
                                                    ---------   ---------   ---------
       Total expenses                               2,151,522   1,279,115   1,305,175
                                                    ---------   ---------   ---------
  Earnings before income taxes                        253,528     214,341     358,820

Income Taxes:
  Deferred federal income tax expense                  86,199      45,000     122,000
                                                     --------   ---------   ---------
Net earnings                                     $    167,329     169,341     236,820
                                                     ========   =========   =========
Weighted average number of
    shares outstanding                              1,417,087   1,417,087   1,417,087
                                                    =========   =========   =========

Basic and diluted earnings per share             $       .12          .12         .17
                                                    =========   =========   =========

<FN>
See accompanying notes to financial statements.
</TABLE>

<TABLE>
                             TEXAS VANGUARD OIL COMPANY
                         Statements of Stockholders' Equity

                    Years ended December 31, 1999, 1998 and 1997

<CAPTION>
                                                             Additional
                                          Common Stock        Paid-in   Accumulated
                                        Shares     Amount     Capital     Deficit

<S>                                   <C>         <C>        <C>         <C>


Balances at December 31, 1996         1,417,087     70,854   1,890,005   (475,240)

   Net earnings                             ---        ---         ---    236,820
                                      ---------   --------   ---------   ---------
Balances at December 31, 1997         1,417,087     70,854   1,890,005   (238,420)

   Net earnings                             ---        ---         ---    169,341
                                      _________   ________   _________   ________
Balances at December 31, 1998         1,417,087     70,854   1,890,005    (69,079)

   Net earnings                             ---        ---         ---    167,329

Balances at December 31, 1999         1,417,087     70,854   1,890,005     98,250
                                      =========   ========   =========   =========

<FN>
See accompanying notes to financial statements.
</TABLE>

<TABLE>
                           TEXAS VANGUARD OIL COMPANY

                            Statements of Cash Flows

                Years ended December 31, 1999, 1998 and 1997
<CAPTION>
                                                                1999         1998         1997
<S>                                                      <C>              <C>         <C>
Cash flows from operating activities:
  Net earnings                                           $    167,329      169,341      236,820
  Adjustments to reconcile net earnings
    to cash provided by operating activities:
      Depreciation, depletion and amortization                273,960      117,648      136,370
      (Gain) loss on sale of oil and gas properties             6,155       (8,553)       5,000
      Deferred federal income tax expense                      86,199       45,000      122,000
      Impairment in value of oil and gas property             242,389       60,165      170,678
      Changes in assets and liabilities:
        (Increase) decrease in trade accounts
          receivable                                          (67,848)      (7,456)     (43,794)
        Increase (decrease) in trade accounts payable         157,154      (40,429)      (1,604)
        Increase (decrease) in deferred revenue                83,114          ---          ---
                                                             ---------    ---------    ---------
    Net cash provided by operating activities                 948,452      335,716      625,470
                                                             ---------    ---------    ---------
Cash flows from investing activities:
  Proceeds from sale of oil and gas properties                  1,000       10,370          ---
  Additions to oil and gas properties                        (798,522)    (805,768)    (617,361)
  Additions to furniture and equipment                            ---          ---          ---
  Proceeds from sale of equipment                               6,900          ---          ---
  Purchases of equipment                                     (109,631)         ---          ---
                                                             ---------    ---------    ---------
    Net cash used in investing activities                    (900,253)    (795,398)    (617,361)
                                                             ---------    ---------    ---------
Cash flows from financing activities:
  Borrowings on notes payable                               3,368,581    1,400,000      343,578
  Repayments of notes payable                              (2,710,897)    (945,780)    (231,661)
                                                             ---------    ---------    ---------
    Net cash provided by financing activities                 657,684      454,220      111,917
                                                             ---------    ---------    ---------
    Net increase (decrease) in cash                           705,883       (5,462)     120,026

    Cash and cash equivalents at
      beginning of year                                     1,099,802    1,105,264      985,238
                                                            ---------     --------     --------
    Cash and cash equivalents at
      end of year                                        $  1,805,685    1,099,802    1,105,264
                                                            ==========   ==========   ==========
Supplemental disclosure of cash flow information:
  Interest paid                                          $    181,789      123,848      145,391
                                                            ==========   ==========   ==========
<FN>
Supplemental disclosure of non cash investing and financing activity:
  See note 5.

See accompanying notes to financial statements.
</TABLE>


                             TEXAS VANGUARD OIL COMPANY

                           Notes to Financial Statements

                          December 31, 1999, 1998 and 1997


(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.

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.

The  Financial  Accounting  Standards  Board  issued  Statement  of  Financial
Accounting  Standards No. 121,  Accounting  for  the Impairment  of Long-Lived
Assets to  be  Disposed of ("Statement 121")  in March 1995 for implementation
in fiscal  years beginning  after  December 15, 1995.  The statement addresses
the impact on an enterprise's financial statements when circumstances indicate
the carrying amount of an asset may not  be recoverable.  The  Company adopted
Statement 121  as of  January 1, 1996. There  was no  material impact  on  the
financial statements at adoption.  There has been on impairment loss recognized
in the current year financial statements.

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

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 four customers in 1999, four customers in 1998 and five  customers
in 1997 as follows: 1999 - 33%, 22%, 18%, 18%, 1998 - 21%, 22%, 18%, 14%, and
1997 - 12%, 15% 17%, 19%, 20%. 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.

Earnings Per Share - In February 1997, the FASB issued SFAS 128, "Earnings Per
Share" ("SFAS 128") which established  standards for  computing and presenting
earnings per share ("EPS") by replacing the presentation of primary EPS with a
presentation of basic EPS. Primary EPS includes common stock equivalents while
basic EPS excludes them.  This change simplifies the  computation  of EPS.  It
also requires dual presentation of basic and fully diluted EPS on the face  of
the  income statement  for all entities with complex capital  structures.  The
Company adopted SFAS 128 effective December 31, 1997 and there was no material
impact on its financial statements at adoption.

Recent Accounting Announcements   -   In June  1997,  FASB  issued  SFAS 130,
"Reporting Comprehensive Income" (SFAS 130").  SFAS 130 established disclosure
standards for reporting comprehensive income in a full set of general purpose
financial statements.  SFAS 130 is  effective for fiscal years beginning after
December 15, 1997.  The Company adopted SFAS 130 effective December 31, 1998,
and there was no material impact on the financial statements at adoption.

In June 1997, the FASB issued  SFAS 131,  "Disclosures about Segments of  an
Enterprise and Related  Information"  ("SFAS 131")  which  is  effective  for
periods beginning after December 15, 1997. SFAS establishes standards for the
way that  public business  enterprises  report  information  about  operating
segments  in annual  financial statements and requires that those enterprises
report  selected  information about  operating  segments in interim financial
reports issued to  stockholders.  It  also  establishes standards for related
disclosures about products and services, geographic areas and major customers.
The Company adopted SFAS 131 effective December 31, 1998,  and  there  was no
material impact on the financial statements at adoption.
<TABLE>
(2) Notes Payable

<CAPTION>
The Company had notes payable and long-term debt to banks as follows at
 December 31:
                                                              1999          1998
<S>                                                     <C>                <C>
Line of credit with a bank under which it may borrow
  up to $200,000. Interest payable quarterly at 6.85%,
  secured by $200,000 of certificates of deposit. The
  line of credit matures on April 28, 2000.             $    200,000       200,000

A note with a bank secured by oil and gas properties.
  The original value of the note was $600,000.
  Interest accrues at .5% above the prime  rate
  (7.75% at December 31, 1998), with monthly
  payments of $12,500 plus accrued interest. The
  note matures on July 29, 1999.                                 ---       600,000

A note with a bank secured by oil and gas properties.
  The original amount of the note was   $1,232,700 in
  1997. Interest accrues at .5% above the prime rate
  (7.75% at December 31, 1998), with monthly payments
  of principal of $26,000 plus interest.  The note
  matures on July 29, 2001.                                      ---       789,868


Line of credit with a bank under which it may borrow up
  to $600,000.  Interest payable monthly at prime rate
  plus .5% (7.75% at December 31, 1998), secured by oil
  and gas properties.                                            ---       600,000

Other notes payable, due on demand or in
  monthly installments, maturing on various
  dates through September, 2003, secured by equipment.        53,136        11,353

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.       1,534,768           ---

Line of credit with a bank under which it may borrow
  up to $1,000,000. Interest payable monthly at prime
  rate plus .5%, secured by oil and gas properties.
  The line of credit matures in August 2000.               1,000,000            ---

Promissory notes with Robert Watson, Inc. The
  original amounts of the notes were $100,000.
  Interest accrues at 10%, with interest
  payments due monthly. The principal amount
  is due on March 23, 2002.                                   50,000            ---

A promissory note with Linda R. Watson. The
original amount of the note was $21,000.
Interest accrues at 10%, with interest payments
due monthly. The principal amount is due on
April 12, 2002.                                               21,000            ---

                                                           ---------     ---------
Total bank debt                                            2,858,904     2,201,221
Less current installments                                 (1,648,316)   (1,718,615)
                                                           ---------     ---------
Long-term bank debt, excluding current installments     $  1,210,588       482,606
                                                           =========       =======
</TABLE>

All notes and long-term debt are personally guaranteed by Robert N. Watson, Jr.
President.


Future maturities of long-term debt are as follows:

<TABLE>
            <S>            <C>
            2000           $1,648,316
            2001              444,609
            2002              516,720
            2003              249,259
                            ---------
                  Total    $2,858,904
                            =========
</TABLE>

                             Texas Vanguard Oil Company

                            Notes to Financial Statements



(3) Related Party Transactions

The Company and a company owned by the President of the Company have an agree-
ment  whereby  the latter  provides  the  Company general corporate management
services. None of the Company's officers earn a salary. The affiliated company
received $150,000, $150,000, and $150,000 as compensation  for performance  of
those services  during  the  years  ended  December 31, 1999, 1998  and  1997,
respectively. Effective January 1, 2000 the agreement was continued with terms
of $14,500 per month through December 31, 2000.

The Company leases office space from a company owned by the President of the
Company  under a non-cancelable operating lease. Rent expense incurred under
this lease was $17,100 and $15,000 for the years ended December 31, 1999 and
1998, respectively.  Future minimum lease payments are as follows:
<TABLE>
                      <S>     <C>
                      2000    $     9,600
                                   ======
</TABLE>

As of December 31, 1999 and 1998 the Company had notes payable to individual
directors of the Company in the amounts of $71,000 and $-0-, respectively.
The notes are unsecured, bear interest at 10%, and are due in March 2002.

As of  December 31, 1997,  the Company  had a  note payable to an individual
director of the Company in the amount of $21,000.  The note is due on demand
and  bears interest at 10% and is unsecured.  The note was paid during 1998.


(4) Federal Income Taxes
<TABLE>
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:
<CAPTION>
                                                                1999        1998      1997
   <S>                                                    <C>             <C>       <C>
   Current  tax expense at statutory rate                 $        ---     72,876    122,000
   Deferred tax (benefit)                                       86,199    (27,876)       ---
                                                              _________   ________   _______
                                                          $     86,199     45,000    122,000
                                                              =========   ========   =======
</TABLE>
                             Texas Vanguard Oil Company

                           Notes to Financial Statements

(4) Federal Income Taxes cont.

<TABLE>
<CAPTION>
The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities at December 31, 1999 and 1998 is presented below:

                                                                        1999        1998
   <S>                                                          <C>              <C>
   Deferred tax asset:
     Net operating loss carryforward                            $      49,070     122,252
                                                                     ---------   ---------
     Net deferred tax asset                                            49,070     122,252
                                                                     ---------   ---------

   Deferred tax liability:
     Office furniture and equipment and oil and gas property,
      due to differences in depreciation and abandonment             (302,269)   (289,252)
                                                                     ---------   ---------
   Total deferred tax liability                                 $    (253,199)   (167,000)
                                                                     =========   =========

</TABLE>

The Company currently has no Federal income tax liability.

The Company has  accumulated  losses for  Federal  income tax  purposes  of
approximately $144,000, $360,000 and $359,000 as of December 31, 1999, 1998
and 1997, respectively, which may be carried forward and used to reduce
taxable income in future years. The carryforwards begin to expire in 2009.

(5) 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, 1999.

(6) Subsequent Events

During  1998, the Securities and Exchange Commission (SEC) entered an
order in an administrative proceeding against the Company, Robert N. Watson
Jr., and Linda R. Watson (the Respondents).  The proceeding was directed to
alleged stock purchases made by the Company, Robert N. Watson, Jr. and Linda R.
Watson from December 1994 to May 1996 with the alleged intent to increase the
Company's stock price in order to maintain its listing on the Boston Stock
Exchange. The respondents, without admitting or denying any of the allegations,
have consented to the order issued by the SEC to cease and desist from
committing or causing any violation, or any future violation, of Sections
9(a)(2), 10(b), 13(d) and 16(a) of the Exchange Act and Rules 10b-5, 13d-2,
16a-2, and 16a-3 promulgated thereunder.

                      TEXAS VANGUARD OIL COMPANY

                 SUPPLEMENTAL OIL AND GAS INFORMATION

             Years ended December 31, 1999, 1998 and 1997
                             (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.
<TABLE>
<CAPTION>
                                      1999                       1998                       1997
                                 Oil        Gas             Oil         Gas            Oil         Gas
                                BBLS        MCF            BBLS         MCF           BBLS         MCF
<S>                          <C>         <C>            <C>          <C>           <C>          <C>
Proved developed
   and undeveloped
   reserves:
Beginning of year              532,866    6,335,643        589,677    4,017,066       590,924    3,913,319
Revisions of
   previous estimates           39,906      310,080       (134,306)   1,065,501       (72,921)      41,566
Extensions
   and Discoveries                 ---          ---          9,111        8,536        19,377          ---
Purchase of
   minerals in place           272,164    2,064,501        117,741    1,692,921        99,731      386,643
Sale of minerals                   ---          ---            ---       14,007           ---          ---
Production                     (60,668)    (635,687)       (49,357)    (434,374)      (47,434)    (324,462)
                             ----------   ----------     ----------   ----------    ----------   ---------
End of year                    784,268    8,074,537        532,866    6,355,643       589,677    4,017,066
                             ==========   ==========     ==========   ==========    ==========   =========
Proved developed
   reserves:
Beginning of year              532,866    6,335,643        589,677    4,017,066       590,924    3,913,319
End of year                    784,268    8,074,537        532,866    6,355,643       589,677    4,017,066
</TABLE>

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.
<TABLE>
<CAPTION>
                                                          December 31,
                                                     1999           1998           1997
<S>                                         <C>                <C>            <C>
Future cash inflows                         $    42,261,801     17,864,686     21,580,020
Future production and development costs         (19,548,730)    (8,694,333)   (10,480,296)
Future income tax expenses                       (6,032,465)    (1,685,710)    (2,510,533)
                                                ------------   ------------   ------------
     Future net cash flows                       16,680,606      7,484,643      8,589,191

10% annual discount for estimated
 timing of cash flows                            (6,600,380)    (3,098,297)    (3,400,245)
                                                ------------   ------------   ------------
Standardized measure of discounted
 future net cash flows                      $    10,080,226      4,386,346      5,188,946
                                                ============   ============   ============
</TABLE>

                              TEXAS VANGUARD OIL COMPANY

                    SUPPLEMENTAL OIL AND GAS INFORMATION, CONTINUED
                                   (Unaudited)
<TABLE>
The following are the principal sources of change in the standardized measure of
discounted future net cash flows:
<CAPTION>
                                                          1999         1998         1997
<S>                                               <C>              <C>          <C>
Changes:
    Sale of oil and gas produced, net of
      production costs                            $   (1,861,714)  (1,137,988)  (1,331,340)
    Net changes in prices and production costs           664,361     (342,888)    (669,657)
    Purchase of minerals in place                        994,781      348,974      213,728
    Extensions and discoveries                               ---        8,254       24,512
        Sales                                                ---       (2,115)         ---
    Revisions of previous quantity estimates             151,501      137,819     (253,051)
    Accretion of discount                                438,635      518,895      719,454
    Other                                              5,306,316     (333,551)    (709,242)
                                                      ----------   ----------    ----------
        Net changes                                    5,693,880     (802,600)  (2,005,596)

Beginning balance - standardized measure
    of discounted future net cash flows                4,386,346    5,188,946    7,194,542
                                                      ----------   ----------   -----------
Ending balance - standardized measure of
    discounted future net cash flows              $   10,080,226    4,386,346    5,188,946
                                                      ==========   ==========   ==========
</TABLE>

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.

<TABLE>
Capitalized Costs Relating to Oil and Gas Producing Activities
<CAPTION>
                                                       Years ended December 31,
                                                      1999         1998         1997
<S>                                           <C>             <C>           <C>
Unproven oil and gas properties
    (including wells in progress)             $     166,630      166,630      166,630

Proven oil and gas properties                     3,870,177    3,327,677    2,593,991

Accumulated depletion and amortization             (623,516)    (375,162)    (276,407)
                                                  ----------   ----------   ----------
Net capitalized costs                         $   3,413,291    3,119,145    2,484,214
                                                  ==========   ==========   ==========
</TABLE>

<TABLE>
Costs Incurred in Oil and Gas Property
 Acquisition, Exploration and Development Activities
<CAPTION>
                                              Years ended December 31,
                                               1999      1998       1997
<S>                                     <C>           <C>        <C>
Acquisition of properties - unproven    $       ---       ---        ---
Acquisition of properties - proven          700,284   678,041    409,396
Exploration costs                               ---       ---        ---
Development costs                            98,238   127,727    207,966
</TABLE>

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, 1999 and 1998 and
the related Statements of Earnings, Stockholders' Equity, and Cash Flows for
each of the years in the three-year period ended December 31, 1999, and notes
to financial statements are included in Item 8.

(a)(2) Financial Statement Schedules

Not applicable.

<TABLE>
(a)(3). Exhibits
<CAPTION>
Number    Description of Document
<S>    <C>
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 28, 1999.

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

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

</TABLE>

(b). Reports on Form 8-K

       None filed during the quarter ended December 31, 1999.

                                   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: Robert N. Watson, Jr.
                                           Robert N. Watson, Jr., President
                                           March 24, 2000

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.




Robert N. Watson, Jr.
Robert N. Watson, Jr., President,
Director, Chairman of the Board,
Principal Executive Officer and
Principal Financial and Accounting
Officer
March 24, 2000

Linda R. Watson                             Robert L. Patterson
Linda R. Watson, Secretary and              Robert L. Patterson, Director
Treasurer, Director                         March 24, 2000
March 24, 2000


OFFICERS AND DIRECTORS                CORPORATE INFORMATION

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

Linda R. Watson
Secretary/Treasurer                   INDEPENDENT ACCOUNTANTS
and Director                          Sprouse & Winn, L.L.P.
                                      Austin, Texas
Robert L. Patterson
Director                              TRANSFER AGENT
                                      American Securities Transfer & Trust,Inc.
                                      P.O. Box 1596
                                      Denver, Colorado 80201

                                      COMMON STOCK
                                      Quoted on OTC Bulletin Board
                                      Symbol: TVOC

                                      1999 ANNUAL SHAREHOLDERS MEETING
                                      June 8, 2000, 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
<TABLE>
<CAPTION>
TERMS:
<S>                    <C>
Interest Rate:         6.85%
Principal Amount:     $200,000.00
Funding Date:          April 28, 1999
Maturity Date:         April 28, 2000
</TABLE>

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 TWO-HUNDRED THOUSAND AND NO/100 DOLLARS, ($200,000.00)
or so much as may be outstanding, together at the rate of 6.85% 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 303.201 of
the Texas Finance Code and Articles 1D.002 and 1D.003 of the Texas Credit Title.
However, Lender reserves the right to implement a different interest rate and
to renew such rate, provided Lender complies with the requirements of Sections
303.401, 402, and 403 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 28, 2000.  In addition, Borrower will pay regular quarterly payments of
accrued unpaid interest beginning July 28, 1999, 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.

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.

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 Sec. 346
of the Texas Finance Code.

Renewal and Extension:  This Note is given in renewal and extension and not in
novation of the following indebtedness:  The Promissory Note #10020400 from
Texas Vanguard Oil Company to FSB dated 04-28-1998.

General Provisions: This Note is payable on demand.  The inclusion of specific
default provisions or rights of Lender shall not preclude Lender's right to
declare payment of this Note on demand.  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.

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 the 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
<TABLE>
<CAPTION>
TERMS:
<S>                    <C>
Interest Rate:         Variable
Principal Amount:     $1,718,027.98
Funding Date:          July 29, 1999
Maturity Date:         August 1, 2003
Customer Number:       053769
Loan Number:           700-053769-04
</TABLE>

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 and one-half percent (1.5%), 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

<TABLE>
<CAPTION>
TERMS:
<S>                    <C>
Interest Rate:         Variable
Principal Amount:     $1,000,000.00
Funding Date:          July 29, 1999
Maturity Date:         August 1, 2000
Customer Number:       053769
Loan Number:           700-053769-05
</TABLE>

For value received, Borrower promises to pay to the order of Lender indicated
above the principal amount of ONE MILLION DOLLARS ($1,000,000.00), 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, 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 and one-half percent (1.5%), 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
September 1, 1999 and continuing on the 1st day of each month thereafter
until and including July 1, 2000.

(b) On August 1, 2000, 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 $1,000,000.00. 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
August 1, 2000. 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 $1,000,000.00.

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 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".

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


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