Costilla Issues New Convertible Preferred Stock

    MIDLAND, Texas, June 3 /PRNewswire/ -- Costilla Energy, Inc.
(Nasdaq: COSE) announced today the closing of the sale to affiliates of Enron
Corp. (NYSE: ENE) of 50,000 shares of a new series of convertible preferred
stock priced at $1,000 per share, representing an investment in Costilla of
$50 million.
    "We are very pleased with this investment in our company, and believe that
it signifies the recognition by Enron of our record of performance and the
potential value of our company's prospects," said Mike Grella, president and
CEO of Costilla.  "This transaction reinforces the great confidence we have in
the future of Costilla."
    Costilla will use the proceeds to pay off existing bank debt and for
general corporate purposes.
    According to Grella, "Costilla will deploy the funds from this investment
to support our ongoing growth strategies, and to reinforce our balance sheet
with additional equity."
    Over the four years ended Dec. 31, 1997, Costilla's proved reserves
grew at the compound annual growth rate (CAGR) of 60 percent through combined
strategies of aggressive drilling and acquisitions of under-valued properties.
The company's average daily production grew at the CAGR of 98 percent for the
same four-year period.  Given its previously announced hedging position,
Costilla's drilling plans are currently focused on deep gas targets primarily
in South and East Texas.
    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.
    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.

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