JUNE 21, 2001 – San Antonio, Texas – South Texas Drilling & Exploration, Inc. (AMEX:PDC) today reported record revenues, EBITDA and net income for the fiscal fourth quarter and year ended March 31, 2001.

Revenues for the fourth quarter of 2001 were $14.4 million, an increase of 146 percent from $5.9 million in the same quarter last year. EBITDA, defined as earnings before interest, taxes, depreciation and amortization, increased 473 percent to $3.3 million in the fourth quarter of 2001, compared to $576,000 in the same period last year. Net income attributable to common shareholders in the fourth quarter of 2001 was $1.35 million or $0.09 per diluted share, compared to net loss of $229,000 or $0.03 loss per share during the fourth quarter of 2000.

Average rig utilization for the fourth quarter of 2001 was 93 percent, up from 52 percent in the comparable period. Revenue days increased 163 percent to 1,007 days during the fourth quarter compared to 383 days for the same period last year. Drilling margins increased to 24.9 percent, or $3.6 million, up from drilling margins of 12.2 percent, or $717,000 in the fourth quarter of 2000.

Revenues for fiscal 2001 were $50.2 million, an increase of 158 percent from $19.5 million in fiscal 2000. EBITDA increased 271 percent in 2001 to $7.6 million from $2.0 million in 2000. Net income attributable to common shareholders was $2.4 million or $0.19 per diluted share in 2001, compared to a net loss attributable to common shareholders of $0.38 million or $0.06 loss per share in 2000.

Average rig utilization for 2001 was 91 percent. Revenue days increased 117 percent to 3,463 days compared to 1,598 days for 2000. Drilling margins grew to 16.8 percent, or $8.5 million, up from 13.4 percent, or $2.6 million in 2000.

Michael E. Little, South Texas Drilling’s Chairman and Chief Executive Officer, stated, “Our record fourth quarter reflects a strong increase in demand for land drilling rigs in our markets and the increase in our drilling rig fleet from eight to 16 rigs at the end of fiscal 2001. With the sharp rise in oil and gas prices, oil and gas exploration and production companies have dramatically increased their capital spending budgets. Moving quickly to take advantage of these opportunities, we have expanded our fleet, which by September 2001 will consist of 20 land drilling rigs with depth ranges of 8,000-18,000 feet.

“Our strategy is to continue building a premium fleet through acquisition and construction, including state-of-the-art new-builds, and to position ourselves as the contractor of choice for our customers,” added Mr. Little. “Currently we have contracted to construct two new technologically advanced 1700-hp land drilling rigs which employ the first ever alternating-current (“AC”) drive motor to power its hoisting systems. With this and other technological advancements, these rigs will have several advantages over many rigs operating in our markets, including greater mobility; increased control, efficiency and reliability; improved safety features; and improved environmental characteristics. The first of these rigs is scheduled to begin working under contract in July 2001.”

South Texas Drilling’s management team will be holding a conference call on Thursday, June 21, 2001, at 11:00 a.m. eastern time. To participate in the call, dial 913-981-4900 at least ten minutes before the conference call begins and ask for the South Texas Drilling conference call. A replay of the call will be available approximately two hours after the call ends and will be accessible until June 28, 2001. To access the replay, dial 719-457-0820 and enter the pass code 713524.

Investors, analysts and the general public will also have the opportunity to listen to the conference call over the Internet by accessing http://www.easterlyir.com. To listen to the live call on the web, please visit the Easterly Investor Relations web site at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live web cast, an archive will be available shortly after the call. For more information, please contact Lisa Elliott at Easterly Investor Relations at (713) 529-6600 or email lisae@easterly.com.

South Texas Drilling & Exploration, Inc. provides contract land drilling services under the name Pioneer Drilling Co., Ltd. to independent and major oil and gas operators drilling wells in central, south and east Texas. The Company’s fleet consists of 17 land drilling rigs that can reach depths of 8,000-18,000 feet. South Texas Drilling also has two 1700-hp technologically advanced land rigs under construction and one newly acquired National 110UE 1500-hp being refurbished.

This press release contains various forward-looking statements and information that are based on management’s belief as well as assumptions made by and information currently available to management. Forward-looking information includes statements regarding the Company’s business strategy, capital spending by oil and gas companies and the Company’s expectations regarding its new rigs.

Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Such statements are subject to certain risks, uncertainties and assumptions, including, among other matters: general and regional economic conditions and industry trends; the continued strength of the contract land drilling industry in the geographic areas where the Company operates; decisions about onshore exploration and development projects to be made by oil and gas companies; the highly competitive nature of the contract land drilling business; the Company’s future financial performance, including availability, terms and deployment of capital; the continued availability of qualified personnel; and changes in governmental regulations, including those relating to the environment.

Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. These risks, as well as others, are discussed in greater detail in the Company’s filings with the Securities and Exchange Commission, including the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2001.

  SOUTH TEXAS DRILLING & EXPLORATION, INC.
  Statements of Operations

                        Three Months Ended         Twelve Months Ended
                         3/31/01       3/31/00      3/31/01       3/31/00
  Revenues:
   Contract drilling $14,381,309    $5,849,371  $49,935,853   $19,391,025
   Other                  58,573        23,088      269,546        92,086
   Total operating
    revenues          14,439,882     5,872,459   50,205,399    19,483,111

  Costs & Expenses:
   Contract drilling  10,790,395     5,132,223   41,476,824    16,775,108
   Depreciation        1,267,631       609,625    3,737,533     1,808,557
   General & adm.        347,765       164,076    1,116,727       658,174
   Total operating
    costs             12,405,791     5,905,924   46,331,084    19,241,839

  Operating profit
   (loss)              2,034,091       (33,465)   3,874,315       241,272

  Other income (expense):
   Interest expense     (256,857)     (107,443)    (888,863)     (350,606)
   Interest income        51,619        34,909      316,025        85,407
   Other                 536,486       (42,808)     536,486       (41,408)
   Total other           331,248      (115,342)     (36,352)     (306,607)

  Earnings before
   taxes               2,365,339      (148,807)   3,837,963       (65,335)

  Income taxes           952,719         4,247    1,135,174        14,283

  Net income           1,412,620      (153,054)   2,702,789       (79,618)

  Preferred dividends     60,000        75,999      274,630       303,999

  Net to common       $1,352,620     $(229,053)  $2,428,159     $(383,617)

  Earnings (loss) per share:
   Basic                    0.11         (0.03)        0.22         (0.06)
   Diluted                  0.09         (0.03)        0.19         (0.06)
  Weighted average number
  of shares outstanding:
   Basic              12,116,799     6,666,062   11,137,171     6,242,140
   Diluted            14,663,273     6,666,062   13,901,101     6,242,140

  Operating statistics:
   Utilization rate         93.0%         52.0%        91.0%         66.0%
   Revenue days            1,007           383        3,463         1,598
   Drilling margin    $3,590,914      $717,148   $8,459,029    $2,615,917
   Drilling margin/day    $3,566        $1,872       $2,443        $1,637
   Drilling margin %
    of revenue              24.9%         12.2%        16.8%         13.4%
   EBITDA             $3,301,722      $576,160   $7,611,848    $2,049,829
   EBITDA as % of
    revenues                22.9%          9.8%        15.2%         10.5%