Costilla Energy to Seek Bondholder Consent for Preferred Stock Dividend; Year-End Reserve Estimates Reported

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Costilla Energy to Seek Bondholder Consent for Preferred Stock Dividend; Year-End Reserve Estimates Reported

    MIDLAND, Texas, March 15 /PRNewswire/ -- Costilla Energy, Inc.
(Nasdaq: COSE) reported today that it is seeking consent from the holders of
its 10 1/4% Senior Notes for the company to pay dividends at the annual rate
of 8 1/2% on $65 million of new redeemable preferred stock pursuant to the
recently announced alliance with ONEOK, Inc. (NYSE: OKE).  The company plans
to complete the consent solicitation by March 26th so that its pending
transaction to acquire assets from Pioneer Natural Resources Company
(NYSE: PXD; Toronto) remains on schedule for closing on
March 31, 1999.
    Concurrent with Costilla's closing of the Pioneer transaction, ONEOK will
invest $65 million in the new Costilla redeemable preferred stock and purchase
certain gas properties, plants and facilities, which are part of the Pioneer
properties located in the Texas Panhandle, Oklahoma and Kansas, for
$35 million.  The redeemable preferred stock will have a liquidation value of
$65 million.  Costilla will be obligated to redeem the redeemable preferred
stock in 2007, but may redeem the stock at any time for the liquidation value,
assuming the company's common stock has been trading at or above $4.00 per
share for 20 consecutive days prior to the redemption date.  Additionally,
ONEOK will purchase 5,000 shares of convertible redeemable preferred stock for
$500,000.  The convertible redeemable preferred shares will be redeemable in
2007 for $500,000, and will be convertible at any time into five million
shares of Costilla common stock.
    Costilla also reported that, based on year-end SEC pricing of $1.75 per
Mcf of natural gas and $9.50 per barrel of crude oil (prices which have since
improved substantially) the company's proved reserves at January 1, 1999 were
estimated at 171.7 Billion cubic feet of natural gas equivalent (Bcfe) with a
SEC PV-10 of approximately $117.8 million.  Assuming closing of the Pioneer
acquisition with an effective date of January 1, 1999, Costilla's reserves at
January 1, 1999, excluding the ONEOK transaction properties, will be
approximately 451.3 Bcfe with a PV-10, based on year-end SEC pricing, of
approximately $255.1 million.  Not included in this value are 11 million
undeveloped mineral acres, 210,000 gross undeveloped leasehold acres, and
licenses to associated seismic data which are a part of the Pioneer
transaction.
    Costilla Energy, Inc. is an independent energy company actively engaged in
the exploration, acquisition and development of oil and gas properties, with
operations primarily in the Permian Basin of Texas and New Mexico, South and
East Texas, and the Rocky Mountain regions.  Headquartered in Midland, Texas,
the Company and its predecessors have been in business since 1988.  The
Company's common stock is traded on the Nasdaq National Market under the
symbol COSE.  Additional information about Costilla is available on the
Internet at http://www.costillaenergy.com.
    Certain statements in this news release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995.  Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual results,
performance, or achievements of Costilla Energy, Inc. to be materially
different from any future results, performance, or achievements expressed or
implied by such forward-looking statements.  Such factors include, among
others, the following: the volatility of oil and gas prices; the Company's
ability to replace its oil and gas reserves; the availability of capital
resources; the reliance upon estimates of proved reserves; operating hazards
and uninsured risks; competition; government regulation; and the ability of
the Company to implement its business strategy.  Additional information is
available in the Company's filings with the Securities and Exchange
Commission, which are incorporated by this reference as though fully set forth
herein.

SOURCE Costilla Energy, Inc.

http://www.costillaenergy.com
Company News On-Call:

http://www.prnewswire.com/comp/126873.html or fax,
800-758-5804, ext. 126873
CONTACT:
Mike Grella, President & Chief Executive
Officer, or Guy McCrary, Manager, Investor Relations, both of
Costilla Energy, Inc., 915-683-3092