3TEC Energy Corporation Reports Capital Budget and Estimates for 2001 and Announces Meeting with Equity Research Analysts.

Business/Energy Editors

HOUSTON--(BUSINESS WIRE)--Jan. 18, 2001

3TEC Energy Corporation ("3TEC") (Nasdaq:TTEN) announced today a 2001 capital expenditure budget of $63 million. This represents a substantial increase from 3TEC's 2000 capital budget of $23 million. The 2001 budget will be 79% developmental and 21% exploratory. Approximately half of the budget, $31 million, will be spent developing 3TEC's East Texas assets, which includes the properties to be acquired in the recently announced Classic Resources Inc. ("Classic") transaction. The majority of the exploration budget, $12 million, will be directed towards 3TEC's Gulf Coast prospects, including the Southwest Three-Way and Beta prospects in the Breton Sound area, in the state waters of Louisiana. Subject to rig availability, the company anticipates spudding two of its exploration prospects at Breton Sound early in the first half of 2001.

3TEC estimates that it will be able to increase its 2001 daily production 25% solely from developmental drilling. 3TEC's 2000 exit rate met its target of 80 million cubic feet of gas equivalent (MMcfe) per day and expects to grow that to a year-end 2001 exit rate of 100 MMcfe per day. In doing so, 3TEC expects to increase its gas component of production from 70% for fiscal 2000 to 84% by the fourth quarter of 2001. 3TEC expects to produce between 32 and 34 billion cubic feet of gas equivalent (Bcfe) for 2001 for an average range of 87 MMcfe to 93 MMcfe per day. Exploratory drilling success will be additive to the above production estimates. 3TEC is currently entirely unhedged for both its oil and gas production.

On a per unit of production basis, 3TEC estimates that it will be able to reduce its lease operating expenses by nearly 40% from its expected 2000 rate, or from 60 cents per thousand cubic feet of gas equivalent (Mcfe) for 2000 to 37 cents per Mcfe for 2001. The savings will be largely due to increased production from lower operating cost wells and portfolio rationalizations coupled with the Classic transaction. However, some of the savings will be offset by higher production taxes due to higher commodity prices. 3TEC anticipates paying 28 cents per Mcfe of production taxes for 2000 but if 3TEC realizes better than an average price of $4.65 for gas in 2001 and $24 for oil, then 3TEC may pay over 34 cents per Mcfe. 3TEC expects to be a 50% cash taxpayer as well for 2001.

The company will meet with equity research analysts on Thursday, January 18, 2001 to discuss its (i) 2000 drilling results, (ii) 2001 capital expenditure budget, (iii) proposed acquisition of Classic, (iv) planned divestiture program, and (v) guidance on 2001 business objectives. Materials to be covered with the participants in this meeting will be posted to the company's web site prior to the start of the meeting. Promptly after the meeting, 3TEC will additionally post a transcript of the commentary associated with the media materials, along with a question and answer summary.

Further information on these and other operational matters may be obtained at 3TEC's Web site, www.3tecenergy.com, in the Operations section.

Floyd C. Wilson, Chairman and Chief Executive Officer of 3TEC, stated, "Our 2001 capital program reflects our strong internal inventory of drilling prospects. This program, while heavily weighted towards developmental locations, includes a significant exposure to high-impact, 3-D based exploratory projects and should result in production and reserve growth during 2001. After the closing of Classic, the company will continue to have the financial flexibility to make additional accretive acquisitions in our core operating areas of East and South Texas and the Gulf Coast region. It is our hope that 3TEC can grow its assets in these core areas through both the drill bit and opportunistic acquisitions, with a continued emphasis on natural gas."

3TEC Energy Corporation is engaged in the acquisition, development, production and exploration of oil and natural gas, with properties geographically concentrated in East Texas and the Gulf Coast regions. 3TEC also owns significant properties in the Permian and San Juan basins and in the Mid-Continent region.

The information contained in this press release may contain projections, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, environmental risks, drilling, producing and operating risks, risks related to exploration and development, uncertainties about the estimates of reserves, government regulation, competition and the ability of the Company to meet its stated business goals.