Company Completes Sale of Previously Announced Senior Notes
                  Acquisition of Manti Properties Completed

    MIDLAND, Texas, Jan. 28 /PRNewswire/ -- Costilla Energy, Inc.
(Nasdaq: COSE) reported today that its previously announced Migl-Mitchell #1
discovery well has been potentialed at a calculated absolute open flow of 116
million cubic feet per day (MMCFD).  The well, in which the company has a
100 percent working interest, is currently producing gas at a sustained
rate of 5.4 million cubic feet per day (MMCFD), with 10,700 pounds of flowing
tubing pressure on a 10/64-inch choke.  The Company plans to double daily
production, to 11 MMCFD, or approximately 1,800 barrels of oil equivalent,
upon installation of additional pipeline capacity anticipated during the next
week.
    "The Migl-Mitchell is the biggest single well in Costilla's history,"
said Mike Grella, Costilla's president and chief executive officer.  "I
believe these initial production rates are indicative of the long-term
potential of our South Texas properties."
    Costilla holds 7,865 acres on the Migl-Mitchell prospect in the
Southwest Speaks field of Lavaca County, Texas.  The Company is presently
drilling its second Migl-Mitchell well, which is expected to reach the total
depth objective of 15,000 feet within two weeks.
    Continuing its aggressive drilling program, Costilla is currently
participating in 12 wells that are in various stages of drilling or
completing.  In 1997, Costilla drilled 100 productive oil and gas wells,
continuing its 80 percent rate of drilling success.
    "With more than 95 percent of our current daily oil production hedged
with a floor of $18.50 per barrel, now is an excellent time for Costilla
to continue our aggressive drilling program," said Grella.
    The Company also reported that it completed the previously announced
sale of $80 million in aggregate principal amount of new 10 1/4 percent
Senior Notes, due 2006, by private offering.  The new notes have the same
terms and are governed by the same indenture as the outstanding $100 million
in aggregate principal amount of the Company's 10 1/4 percent Senior Notes.
Proceeds from the sale of the new notes have been used to reduce existing bank
indebtedness and for corporate working capital.
    "We are extremely pleased and most gratified by the sale of these notes --
a clear demonstration of confidence in Costilla's future," said Grella.
"This transaction not only streamlines our balance sheet, but also provides
the availability of capital needed to achieve our ongoing strategy of growth
by successful drilling."
    The company also reported that it completed the previously announced
acquisition of producing properties and associated acreage from Manti
Resources, Inc.  The acquisition adds significantly to Costilla's properties
in the Scott & Hopper and Pita Fields of Brooks County, Texas.  The Company
has a 100 percent working interest in these properties.
    Costilla Energy, Inc. is an independent energy company 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.
    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.  These factors are discussed
in more detail in the Company's prospectus for its initial public offering of
common stock.
    For additional information about Costilla Energy, Inc.,  free of charge
via fax, dial 1-800-PRO-INFO and use ticker symbol "COSE."

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