TEXAS VANGUARD OIL CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2004 Commission File No. 1-10437

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to Commission File No. 1-10437

TEXAS VANGUARD OIL COMPANY
(Exact name of registrant as specified in its charter)
Texas 74-2075344
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

9811 Anderson Mill Rd., Suite 202
Austin, Texas 78750
(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code (512) 331-6781

Securities Registered Pursuant to Section 12(b) of the Act:

Title of each class: None

Name of each exchange of which registered: Not applicable

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.05 Par Value
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X or No ___.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]

As of March 8, 2005, there were 1,416,587 shares of the registrant's Common
Stock outstanding; the aggregate market value of the share of Common Stock
held by non-affiliates of the registrant (314,347 shares), based on average
bid and asked prices on the aforesaid date, was $1,351,692.00.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant's definitive proxy statement regarding the election of directors
at the registrant's 2004 Annual Stockholders' Meeting filed or to be filed with
the Commission on or before April 30, 2004, has been incorporated by reference
in Part III of this report.

PART I

ITEM 1. BUSINESS

General

Texas Vanguard Oil Company (the "Company" or "Registrant") was incorporated
under the laws of the state of Texas on December 4, 1979. The business of the
Company is to engage in the acquisition, exploration, development, and
operation of onshore oil and gas properties in the United States, principally
in Texas. In April 1980, the Company completed a public offering of its
securities netting approximately $1,250,000 from the sale of 1,500,000 shares
of common stock to the public.

The Company engages in oil and natural gas exploration, development and
production in Texas, New Mexico, and Wyoming. Generally, the Company
acquires operated working interests in producing oil and natural gas
properties which it further develops.

The executive offices of the Company are located at 9811 Anderson Mill Rd.,
Suite 202, Austin, Texas 78750 and its telephone number is (512) 331-6781.

Markets for Oil and Gas

The market for the Company's primary products, oil and gas, depends upon a
number of factors, including the availability of other domestic production,
crude oil imports, the proximity and size of oil and gas pipelines and general
fluctuations in the supply and demand for oil and gas. At present, the Company
sells all of its production to traditional industry purchasers,such as
pipeline and crude oil companies, who have the facilities to transport the
oil and gas from the well site. The Company has recorded revenues in excess
of 10% of total revenue from ETC Texas/Aquila Southwest (10% in 2003),
Duke Energy/GPM (30% in 2004, 36% in 2003 and 32% in 2002), and
Plains Marketing (45% in 2004, 43% in 2003 and 46% in 2002). The Company does
not believe that the loss of major customers would have a material adverse
effect on the Company because oil production can be sold to any other oil
company at a comparable price. Oil sales are not made under a written contract
and the purchaser and price are not specified in the division order for subject
properties. The nature of the Company's business is not seasonal except to
the extent that adverse weather conditions could affect oil and gas
exploration and production activities. The Company currently has no intention
of refining or marketing its own oil and gas. Since the Company engages
independent contractors for the drilling of any wells, it does not plan to
own any significant amount of drilling equipment. The Company does not
contemplate any material product research and development, any material
acquisition of plants or equipment, or any material changes in its number
of employees in the near future.

Competition

The oil and gas industry is highly competitive in all aspects. The Company
competes with major oil companies, numerous independent oil and gas producers,
individual proprietors, and investment programs. Many of these competitors
possess financial and personnel resources substantially in excess of those which
are available to the Company and may, therefore, be able to pay greater amounts
for desirable leases and to define, evaluate, bid for, and purchase a greater
number of potential producing prospects than the Company's own resources permit.
The Company's ability to generate resources will depend not only on its ability
to develop existing properties, but also on its ability to identify and acquire
proven and unproven acreage and prospects for future exploration.

Environmental Matters

The Company's operations are subject to numerous federal, state and local
laws and regulations controlling the discharge of materials into the environment
or otherwise relating to the protection of the environment. Such matters have
not had a material effect on operations of the Company to date, but the Company
cannot predict whether such matters will have any material effect on its capital
expenditures, earnings or competitive position in the future.

Regulations

The production and sale of crude oil and natural gas are currently subject
to extensive regulation of both federal and state authorities. At the federal
level there are price regulations and income tax laws. At the state level,
there are severance taxes, proration of production, spacing of wells,
prevention and clean-up of pollution and permits to drill and produce oil
and gas. Although compliance with their laws and regulations has not had a
material adverse effect on the Company's operations, the Company cannot
predict whether its future operations will be adversely affected thereby.

Employees

At December 31, 2004, the executive officers and directors were as follows:

Name Offices Held

Linda R. Watson Chairman of the Board
and Director

William G. Watson President, Chief Executive
Officer and Director

Teresa N. Nuckols Secretary

Robert L. Patterson Director

William G. Watson, (age 56), received his B.A. degree from Texas Tech
University in 1970 and his M.S. degree from The University of Texas at
Arlington in 1974. He has been a director or Robert Watson, Inc., and is
a director and President of William Watson, Inc., an independent geological
consulting firm, which he founded in 1983, for more than the last five years.
He was a director and Vice President of the Company from 1982 until 1997. He
was elected President of the Company on September 27, 2002, after the untimely
death of the Company's President and CEO, Robert N. Watson, Jr.

Linda R. Watson (age 61), received her B.A. degree from The University of
Texas at Austin in 1966. She has been a director and Secretary-Treasurer of
Robert Watson, Inc. for more than the last five years and is now President
of Robert Watson, Inc. She has been a Director of the Company since 1982.
Also, she was the wife of Robert N. Watson, Jr.

Teresa N. Nuckols (age 45), received her B.B.A. degree from Saint Edwards
University in 1988. She has been an employee of the Company since 1989. She
was elected Secretary of the Company in 2002.

Robert L. Patterson (age 65), received his B.S. and M.S. degrees from The
University of Texas at Austin in 1963 and 1964. He was employed by Union Oil
Company of California from 1965 through 1975, serving in various engineering
capacities. He was a Vice President of Argonaut Energy Corporation from 1976
through 1982. He was the President of Medallion Equipment Corporation and
President of Argonaut Energy Corporation from July, 1985 through January, 1989.
He has also been an independent consulting petroleum engineer since 1983.

The Company's officers actively manage the Company's activities. There are
no employment contracts with any officers. At December 31, 2004, the Company
had two full-time salaried employees. From time to time the Company engages
independent petroleum engineers, geologists and landmen on a fee basis.
Both William Watson and Linda Watson are directors of companies as previously
described which have oil and gas interests.Due to this situation a conflict of
interest may arise. However, there have been no such conflicts in the past
five years.

ITEM 2. PROPERTIES

The Company owns no significant properties other than oil and gas properties.
It leases approximately 2,000 square feet of space for its executive offices at
9811 Anderson Mill Rd., Suite 202, Austin, Texas 78750. The Company currently
has a month-to-month lease with a company owned by the Chairman of the Company
for these facilities, which began on July 1, 2002. The rent for these
facilities is $2,000 per month which is the same as would be charged to an
unaffiliated party.

Well Activity

All of the Company's oil and gas working and royalty interests, reserves and
activities are located onshore in the continental United States. The following
table sets forth the acquisition activity of the Company, for the years ended
December 31, 2000 through 2004.

Fiscal years Oil Gas Dry
ended
December 31, Gross Net Gross Net Gross Net

2000 26 18.45 0 1.22 --- ---
2001 3 9.46 2 2.31 --- ---
2002* 5 7.08 2 2.00 --- ---
2003# 4 7.45 2 0.35 1 0.1
2004 4 6.60 1 1.22 --- ---

(1) A gross well is a well in which the Company has an interest.

(2) A net well is made up of 100% of the working interest in a well. If the
Company has a 12.5% working interest in a well, .125 is shown in the net
well column.

(3) A dry well is a well found to be incapable of producing oil or gas in
sufficient quantities to justify completion of the well.

(4) In each of the last five years, the net oil interest and/or the net gas
interest is larger than the gross oil interest or gross gas interest
because the Company purchased additional interests in oil and/or gas
wells in which it already owned an interest.

(*) In 2002, the Company participated in the drilling of 5 new wells. All
5 wells are classified as oil wells (5 gross oil, 2.45 net oil).

(#) In 2003, the Company participated in the drilling of one new well. The
well was deemed non-commercial and was plugged.

The Company is not obligated to provide a fixed and determinable quantity of
oil or gas in the future under existing contracts or agreements.

Significant Properties

Over the past three years, the Company has made investments in proven oil
and gas properties that in the aggregate have been significant to the Company.
None of the individual properties has cost more than 15% of the average
balance in oil and gas properties at the time of purchase. These investments
have been made in different fields and areas, primarily in south and central
Texas. At December 31, 2004, the Company does not have any single property
that is significant enough to materially affect its operations.

As of December 31, 2004, the Company has pledged its interest in certain
properties and well equipment against bank notes payable. None of the
individual properties are significant. Copies of the loan documents have
been included as an exhibit to the Form 10-K.

Production Wells and Acreage

The following table sets forth by Texas, Wyoming, and New Mexico counties
the Company's gross and net productive wells and developed acreage as of
December 31, 2004.

Producing Wells (a) Developed
Oil Gas Acreage (a)
County Gross Net Gross Net Gross Net

Bastrop (b) 87 67.29 41 34.99 3,154.81 2,658.46
Burleson 2 1.30 --- --- 1,258.66 618.48
Chaves (c) --- --- 1 .50 160.00 80.00
Crane (b) 9 8.00 1 .02 160.00 60.41
DeWitt (b) --- --- 2 .16 160.00 12.43
Eastland (b) --- --- 4 .09 122.00 1.30
Fayette (b) 12 11.04 --- --- 1,733.49 1,611.69
Garza (b) 3 .05 --- --- 30.00 .47
Grimes 1 1.00 --- --- 319.05 319.05
Hidalgo --- --- 2 .25 320.00 40.38
Howard (b) 1 .02 --- --- 40.00 .63
Kent (b) 27 .67 --- --- 360.00 26.61
Lea (b)(c) 2 --- 1 .07 400.00 22.25
Lee (b) 113 87.03 5 4.54 2,946.41 2,086.73
Lipscomb 1 .03 --- --- 80.00 2.50
Martin 2 1.82 --- --- 120.00 112.78
Midland 1 .02 --- --- 80.00 1.67
Nolan (b) 1 .03 --- --- 40.00 1.25
Parker (b) --- --- 1 .01 136.91 .83
Ward --- --- 2 .16 720.00 29.20
Washington (b) 3 .21 --- --- 853.98 85.40
Weston (d) 3 .90 --- --- 120.00 36.17
Wilson (b) 1 .95 --- --- 80.00 76.00
------ ------- ----- ----- -------- --------
269 180.36 60 40.79 13,395.31 7,884.69

(a) A gross well is a well in which the Company owns either a working
interest or a royalty interest. A net well is the fractional interest
owned by the Company. Gross acres are the total acres in a lease. Net
acres are the gross acres times the Company's interest.
(b) The Company owns overriding royalty interest in these counties.
(c) Chaves and Lea Counties are located in New Mexico.
(d) Weston County is located in Wyoming.

Reserve Quantity Information

For information required by Statement of Financial Accounting Standards No.
69, "Disclosures About Oil and Gas Producing Activities," see the "Supplemental
Oil and Gas Information" section included in Item 8. This section also includes
estimates of proven oil and gas reserves.

OIL AND GAS STATISTICS

The following summarizes the net oil and gas production, average sales prices
and production costs per unit for the years ended December 31, 2004, 2003
and 2002.

2004 2003 2002
Oil:
Production volume (barrels) 67,252 63,058 73,006
Average sales price per barrel $ 38.44 28.88 22.57
Gas:
Production volume (MCF) 413,250 395,234 461,115
Average sales price per MCF $ 5.04 4.47 2.45

Average production costs per
equivalent barrel $ 23.55 18.75 17.86

The worldwide crude oil prices of 2004 continue to fluctuate in 2005.
The Company cannot predict how prices will vary during 2005 and what
effect they will ultimately have on the Company.

UNDEVELOPED ACREAGE

The following table sets forth by county the Company's gross and net
undeveloped acreage as of December 31, 2004.

County Gross Net
Bastrop, TX 2,240.32 1,793.67
Crane, TX 240.00 208.52
Crosby, TX 1,120.00 560.00
DeWitt, TX 308.00 47.37
Eastland, TX 199.30 2.37
Eddy, NM 370.00 22.36
Fayette, TX 172.31 82.22
Garza, TX 3,250.00 789.28
Howard, TX 40.00 .63
Kent, TX 4,865.00 1,480.37
Lea, NM 1,094.90 629.90
Lee, TX 1,881.28 1,471.90
Martin, TX 40.00 32.78
Midland, TX 133.33 2.78
Weston, WY 600.00 104.75
Wilson, TX 129.51 123.03
Winkler, TX 701.60 701.60
--------- --------
17,385.55 8,053.53
========= ========

All of the 8,053.53 net undeveloped acres under lease are being held by
production.

ITEM 3. LEGAL PROCEEDINGS

The Company knows of no material litigation pending, threatening or
contemplated, or unsatisfied judgments against it, or any other proceeding in
which the Company is a party. The Company knows of no material legal actions
pending or threatening or judgments entered against any officers on the board
of directors of the Company in their capacity as such.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the security holders during the
quarter ended December 31, 2004.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

The Company's common stock is quoted on the OTC Bulletin Board with the
symbol (TVOC.OB). The range of high and low sales price for each quarterly
period during the past two years is as follows:

Sales Price
High Low
Fiscal 2004

First Quarter 3.400 2.750
Second Quarter 3.000 2.200
Third Quarter 3.000 2.300
Fourth Quarter 4.000 2.400

Fiscal 2003

First Quarter 3.000 2.050
Second Quarter 2.950 2.050
Third Quarter 2.050 1.900
Fourth Quarter 3.060 1.700

At December 31, 2004, the approximate number of holders of record of the
Company's common stock was 488. The Company has not paid any dividends and has
no present plans to do so in the immediate future.

ITEM 6. SELECTED FINANCIAL DATA

Years ended December 31,
2004 2003 2002 2001 2000

Oil and gas sales $ 5,035,532 3,757,649 3,086,950 4,395,458 4,200,297
Total revenue 5,422,624 4,366,554 3,557,542 4,849,022 4,502,830
Total expenses (4,122,888) (3,403,567) (3,775,572) (5,210,533) (4,174,514)
Net earnings (loss) 853,980 692,971 (143,900) (238,597) 167,567
Net earnings (loss)
per share .60 .49 (.10) (.17) .12
Total assets 7,808,400 7,165,170 5,169,673 6,690,772 7,524,234
Short-term debt 618,166 874,094 939,664 4,138,411 3,944,609
Long-term debt 3,014,569 2,832,579 2,000,000 239,640 691,274
Total liabilities 4,417,770 4,628,520 3,325,994 4,701,693 5,296,558
Stockholders equity 3,390,630 2,536,650 1,843,679 1,989,079 2,227,676

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

ANALYSIS OF FINANCIAL CONDITION

During the years ended December 31, 2004 and 2003 cash increased by $738,749
And $1,742,641 respectively. During the year ended December 31, 2002 cash
decreased by $1,369,472. The cash flow from operating activities in 2004
was approximately $975,204, a decrease of $653,054 from 2003. The cash flow
from operating activities in 2003 was approximately $1,628,258, an increase
of $1,207,231 from 2002. The significant use of cash, other than for operating
expenses, has been investments in producing oil and gas properties of
$120,739, $707,793, and $306,570 in 2004, 2003 and 2002, respectively.
In each of the last three years, the Company's investment in producing oil
and gas properties was provided by cash flow from operating activities,
sales of other oil and gas properties, and from borrowings on notes payable
to banks.

In 2002 the Company increased cash by $28,000, through the sales of
producing oil and gas properties. The Company plans to continue to sell
selected properties when it is more economical to sell them rather than
produce them. As of December 31, 2004,the Company had a cash balance of
$5,153,210 which represents approximately 142% of its notes payable as
compared to the December 31, 2003, cash balance of $4,414,461 which
represented approximately 119% of its notes payable.

Working capital at December 31, 2004 increased to 5.42 to 1 from 3.37 to 1
at December 31, 2003. The Company continued its policy of making strategic
investments in producing oil and gas properties in the same or similar fields
to properties already operated by the Company, which are primarily financed
with short-term notes payable and cash from operations.

LIQUIDITY AND CAPITAL RESOURCES

During the current fiscal year, the Company's liquidity has remained strong
enough to meet its short-term cash needs. The sources of liquidity and capital
resources are generated from cash on hand, cash provided by operations and from
credit available from financial institutions. Management believes the Company
will be able to meet its current operating needs through internally generated
cash from operations. Management believes that oil and gas property investing
activities in 2005 can be financed through cash on hand, cash from operating
activities, and bank borrowings. The Company anticipates continued investments
in proven oil and gas properties in 2005 when they can be purchased at prices
that will provide a short payback period. If bank credit is not available, the
Company may not be able to continue its policy of continued investment in
strategic oil and gas properties. The Company cannot predict how oil and gas
prices will fluctuate during 2005 and what effect they will ultimately have on
the Company, but management believes that the Company will be able to generate
sufficient cash from operations to service its bank debt and provide for
maintaining current production of its oil and gas properties. The Company had
no significant commitments for capital expenditures at December 31, 2004.

As of December 31, 2004, the Company owed $561,465 and $2,750,000 to a bank
secured by producing oil and gas properties and well equipment purchased by
the Company. The notes are due in December 2006 (see note 3 of notes to
financial statements for further explanation).

ANALYSIS OF RESULTS OF OPERATIONS

From 2001 to 2002 oil and gas sales decreased 30%, from 2002 to 2003 oil and
gas sales increased by 22%, and from 2003 to 2004 oil and gas sales increased
by 34%. In 2002, oil production volume decreased by 8% at the same time as
the average price per barrel decreased by 6% to $22.57. Also, in 2002,
the gas production volume decreased by 18% while the average price decreased
39% to $2.45 per MCF. In 2003, oil production volume decreased by 14% at the
same time as the average price per barrel increased by 28% to $28.88. Also,
in 2003, the gas production volume decreased by 14% while the average price
per MCF increased by 82% to $4.47. In 2004, oil production volume increased
by 7% at the same time as the average price per barrel increased by 33% to
$38.44. Also, in 2004, the gas production volume increased by 5% while
the average price increased 13% to $5.04 per MCF. The fluctuation in oil
and gas prices is solely attributable to changes in market prices.

Oil and gas production expenses increased in 2004 by 29% while oil and
gas production expenses decreased in 2003 and 2002 by 8% and 20%,respectively.
Increased production expenses for 2004 are largely associated with workover
activities.

Interest expense decreased by 52%in 2004 over 2003 and 17% in 2003 over
2002 due to lower average outstanding balances.

Depreciation, depletion and amortization varies from year to year because of
changes in reserve estimates, changes in quantities of oil and gas produced, as
well as the acquisition, discovery or sale of producing properties. Depletion
increased 30% in 2004 as compared to a 22% increase in depletion in 2003.

Total general and administrative expenses increased $70,343 in 2004 and
$29,843 in 2002 while total general and administrative expenses decreased
$33,759 in 2003.

In 2004, 2003, and 2002, the Company provided provisions of approximately
$51,808, $149,986 and $275,000, respectively, for the impairment of value
of oil and gas properties due to less than expected production history of
specific wells and for wells that were plugged and abandoned.

Inflation is not anticipated to have a significant impact on the Company's
operations.

CONTRACTUAL OBLIGATIONS OF COMPANY

The Companys contractual obligations as of December 31, 2004 are as follows:

Contractual Obligations: 2005 2004 2003 Thereafter Total

Long Term Debt Obligations $ 618,166 3,007,487 7,082 --- 3,632,735
======= ========= ===== ==== =========

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Annual Report on Form 10(k) contain
forward-looking statements that are based on current expectations and estimates
about the oil and gas industry and other factors impacting the Company's
operations and financial condition. These statements are not guarantees of
future performance and involve certain risks, uncertainties and assumptions.
Therefore, actual outcomes and performance may differ materially from what is
expressed in such forward-looking statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Texas Vanguard Oil Company:

We have audited the accompanying balance sheets of Texas Vanguard Oil Company
(the Company) as of December 31, 2004 and 2003, and the related statements of
earnings, stockholders' equity and cash flows for the years ended December
31, 2004, 2003 and 2002. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company has determined
that it is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Texas Vanguard Oil Company as
of December 31, 2004 and 2003, and the results of its operations and its cash
flows for the years ended December 31, 2004, 2003 and 2002 in conformity with
U.S. generally accepted accounting principles.

Sprouse & Anderson, L.L.P.
Austin, Texas

March 11, 2005

TEXAS VANGUARD OIL COMPANY

Balance Sheets

December 31, 2004 and 2003

ASSETS
2004 2003
Current assets:
Cash (including certificates of deposit of
$700,000 in 2004 and 2003, pledged) $ 5,153,210 4,414,461
Trade accounts receivable, net of allowance
for doubtful accounts of $0 and $0 in
2004 and 2003, respectively 203,391 119,654
---------- ---------
Total current assets 5,356,601 4,534,115
---------- ---------
Oil and gas properties, partially pledged,
successful efforts method of accounting:
Proven properties 4,132,921 4,063,987
Unproven properties 166,630 166,630
Office furniture and equipment, partially pledged 207,873 186,698
--------- ---------
4,507,424 4,417,315
Less accumulated depreciation, depletion and
amortization (2,056,625) (1,787,760)
--------- ---------
2,450,799 2,629,555
--------- ---------
Investments -0- 500
--------- ---------
Other assets 1,000 1,000
--------- ---------
TOTAL ASSETS $ 7,808,400 7,165,170
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Trade accounts payable $ 273,426 269,178
Taxes payable 62,500 192,730
Asset retirement obligation, current portion 34,720 8,339
Notes payable and current installments of
long-term debt 618,166 874,094
--------- ---------
Total current liabilities 988,812 1,344,341
--------- ---------
Deferred tax liability 251,249 269,967
Asset retirement obligation, less current portion 163,140 181,633
Long-term debt, excluding current installments 3,014,569 2,832,579
--------- ---------
Total Liabilities 4,417,770 4,628,520

Commitments

Stockholders' equity:
Common stock, par value $.05; authorized
12,500,000 shares; 1,416,587 in 2004 and 2003,
issued and outstanding 70,829 70,829
Additional paid-in capital 1,888,530 1,888,530
Accumulated earnings (deficit) 1,431,271 577,291
--------- ---------
Total stockholders' equity 3,390,630 2,536,650
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,808,400 7,165,170
========= =========

See accompanying notes to financial statements.

TEXAS VANGUARD OIL COMPANY
Statements of Earnings

Years ended December 31, 2004, 2003 and 2002

2004 2003 2002

Revenues:
Oil and gas sales $ 5,035,532 3,757,649 3,086,950
Well operation fees 142,541 156,544 163,959
Other, net 200,860 399,578 228,291
Gain on sale of oil and
gas property --- --- 28,000
Interest income 43,691 52,783 50,342
--------- --------- ---------
Total revenues 5,422,624 4,366,554 3,557,542
--------- --------- ---------
Expenses:
Production cost 3,240,696 2,503,009 2,734,791
Depreciation, depletion
and amortization 293,139 225,477 184,840
Interest expense 53,561 111,754 133,841
General and administrative 483,684 413,341 447,100
Impairment in value of
oil and gas property 51,808 149,986 275,000
Loss on sale of oil and gas
Property --- --- ---
--------- --------- ---------
Total expenses 4,122,888 3,403,567 3,775,572
--------- --------- ---------
Earnings (loss) before income tax 1,299,736 962,987 (218,030)

Income Taxes:
Provision for income tax (benefit) 445,756 263,275 (74,130)
-------- --------- ---------
Earnings (loss) before change
in accounting principle 853,980 699,712 (143,900)

Cumulative effect of change in
accounting principle, net of tax --- (6,741) ---
-------- --------- ---------
Net earnings (loss) $ 853,980 692,971 (143,900)
======== ========= =========
Weighted average number of
shares outstanding 1,416,587 1,416,587 1,416,864
========= ========= =========

Basic and diluted earnings
(loss) per share $ .60 .49 (.10)
========= ========= =========

See accompanying notes to financial statements.

TEXAS VANGUARD OIL COMPANY
Statements of Stockholders' Equity

Years ended December 31, 2004, 2003 and 2002

Additional
Common Stock Paid-in Accumulated
Shares Amount Capital (Deficit)/
Earnings

Balances at December 31, 2001 1,417,087 70,854 1,890,005 28,220

Repurchase and cancellation
of common stock (500) (25) (1,475) ---

Net earnings (loss) --- --- --- (143,900)
--------- -------- --------- --------
Balances at December 31, 2002 1,416,587 70,829 1,888,530 (115,680)

Net earnings --- --- --- 692,971
--------- -------- --------- ---------
Balances at December 31, 2003 1,416,587 70,829 1,888,530 577,291

Net earnings (loss) --- --- --- 853,980
_________ ______ _________ ________
Balances at December 31, 2004 1,416,587 $ 70,829 1,888,530 1,431,271
========= ======== ========= ==========

See accompanying notes to financial statements.

TEXAS VANGUARD OIL COMPANY

Statements of Cash Flows

Years ended December 31, 2004, 2003 and 2002

2004 2003 2002

Cash flows from operating activities:
Net earnings (loss) $ 853,980 692,971 (143,900)
Adjustments to reconcile net earnings
to cash provided by operating
activities:
Depreciation, depletion
and amortization 293,139 225,477 184,840
(Gain) loss on sale of equipment (3,173) --- ---
(Gain) loss on sale of oil and
gas properties --- --- (28,000)
Impairment in value of oil and
gas property 51,808 149,986 275,000
Changes in assets and liabilities:
(Increase) decrease in receivables (83,737) 24,307 70,399
Increase (decrease) in payables
and accrued expenses (118,094) 451,792 14,848
Increase (decrease) in deferred
federal income tax (18,719) 83,725 47,840
--------- --------- ---------
Net cash provided by
operating activities 975,204 1,628,258 421,027
--------- --------- ---------
Cash flows from investing activities:
Purchase of investments --- --- (100,500)
Proceeds from disposal of investments 500 100,000 ---
Proceeds from sale of oil and
gas properties --- --- 28,000
Additions to oil and gas properties (120,739) (707,793) (306,570)
Proceeds from sale of equipment 12,000 21,743 28,458
Purchases of equipment (54,277) (66,576) ---
--------- --------- ---------
Net cash used in investing activities (162,516) (652,626) (350,612)
--------- --------- ---------
Cash flows from financing activities:
Borrowings on notes payable 3,872,514 3,763,489 1,600,000
Repayments of notes payable (3,946,453) (2,996,480) (3,038,387)
Repurchase of common stock --- --- (1,500)
--------- --------- ---------
Net cash provided (used) by
financing activities (73,939) 767,009 (1,439,887)
--------- --------- ---------
Net increase (decrease) in cash 738,749 (1,742,641) (1,369,472)

Cash and cash equivalents at
beginning of year 4,414,461 2,671,820 4,041,292
--------- -------- --------
Cash and cash equivalents at
end of year $ 5,153,210 4,414,461 2,671,820
========== ========== ==========
Supplemental disclosure of
cash flow information:
Interest paid $ 53,561 111,754 133,841
========== ========== ==========

See accompanying notes to financial statements.

TEXAS VANGUARD OIL COMPANY

Notes to Financial Statements

December 31, 2004, 2003 and 2002

(1) Significant Accounting Policies

Description of Business - Texas Vanguard Oil Company (the Company) engages in
the acquisition, exploration, development, and operation of onshore oil and gas
properties in the United States, principally in Texas. The Company owns
interests in producing properties and undeveloped oil and gas leases in Texas,
Wyoming and New Mexico. The Company sells all of its production to traditional
industry purchasers who have the facilities to transport the oil and gas from
the well site.

Oil and Gas Properties - The Company follows the "successful efforts" method of
accounting for oil and gas exploration and production operations. Accordingly,
costs incurred in the acquisition and exploratory drilling of oil and gas
properties are initially capitalized and either subsequently expensed if the
properties are determined not to have proved reserves, or reclassified as a
proven property if proved reserves are discovered.Costs of drilling development
wells are capitalized. Geological, geophysical, carrying and production costs
are charged to expense as incurred.

Costs related to acquiring unproven lease and royalty acreage are periodically
assessed for possible impairment of value. If the assessment indicates impair-
ment, the costs are charged to expense.

Depreciation, depletion and amortization of proved oil and gas property costs,
including related equipment and facilities, are provided using the units-of-
production method on a property by property basis.

Office Furniture and Equipment - Office furniture and equipment is stated at
cost. Depreciation is computed using the straight-line method, based on the
following estimated useful lives:

Office furniture and equipment 7 years
Automotive equipment 5 years

Investments - The Company had an investment in a private, closely held
corporation that was valued at fair value for financial statement purposes.
During 2003, the closely held company dissolved, and the Company received
A liquidating distribution.

Federal Income taxes - The Company uses the "asset and liability method" of
income tax accounting which bases the amount of current and future taxes
payable on the events recognized in the financial statements and on tax laws
existing at the balance sheet date. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes enactment date.

Cash and Cash Equivalents - The Company considers cash and cash equivalents to
consist of demand deposits and certificates of deposit.

Concentration of Credit Risk - The Company sells all of its production
to traditional industry purchasers. Oil sales are not made under a written
contract and the purchaser and price are not specified in the division order
for the subject property. The Company has recorded revenues in excess of 10%
of total revenue from two customers in 2004, three customers in 2003, and
two customers in 2002 as follows: 2004 - 45%, 30%, 2003 - 43%, 36%, 10%
and 2002 - 46%, 32%. The Company does not believe the loss of these
customers would have a material adverse effect on its operations as it could
sell its production to other gathering companies.

In addition, the Company maintains its cash accounts in several commercial
banks. Accounts in the banks are guaranteed by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. At December 31, 2004 and 2003, the Company
had cash in excess of FDIC coverage.

Use of Estimates - Consistent with the requirements of generally accepted
accounting principles, management of the Company has made a number of estimates
and assumptions relating to the reporting of assets and liabilities in order to
prepare these financial statements. Actual results could differ from those
estimates.

(2) Investments

During 2002, the Company purchased a profit-only interest in a privately,
closely held company at a cost of $100,000. At December 31, 2002 the fair
value was determined to be $100,000, and as such there was no unrealized
gain or loss, and therefore no other comprehensive income or loss to
recognize at December 31, 2002.

During 2003, the closely held company dissolved, and the Company received a
liquidating distribution. No gain or loss was realized as the distribution
was considered a return on capital, and therefore no other comprehensive
income or loss is recognized at December 31, 2003.

The Company held other investments at December 31, 2003 totaling less that $500.

(3) Notes Payable and Long-term Debt

The Company had notes payable and long-term debt to banks as follows at
December 31:
2004 2003

A note with a bank secured by oil and gas properties.
The original amount of the note was $735,074.
Interest accrues at .5% above the prime rate,
with monthly payments of $30,628 plus accrued
interest. The note matures February 12, 2005. --- 428,794

A note with a bank secured by oil and gas properties.
The original value of the note was $622,514. Interest
accrues at .5% above the prime rate, with monthly
payments of $25,938.08 plus accrued interest.
The note matures December 15, 2006. 561,465 ---

Line of credit with a bank under which it may borrow
up to $3,000,000. Interest payable monthly at prime
rate plus .5%, secured by oil and gas properties.
the line of credit matures on February 12, 2005.
this line of credit was renewed with the same terms,
secured by oil and gas properties and a letter of
credit of $250,000. The line of credit matures on
December 15, 2006. 2,750,000 2,750,000

Line of credit with a bank under which it may borrow
up to $700,000. Interest payable quarterly at 6.35%,
secured by $700,000 in certificates of deposit. The
line of credit matures on April 25, 2004. --- 500,000

Line of credit with a bank under which it may borrow
Up to $700,000. Interest payable quarterly at 3.50%,
Secured by $700,000 in certificates of deposit. The
Line of credit matures on April 23, 2005. 300,000 ---

Note payable with a bank secured by a vehicle.
The original value of the note was $28,415.
Interest accrues at 4.6%. The note matures
on November 16, 2007. 21,270 27,879

--------- ---------
Total debt 3,632,735 3,706,673
Less current installments (618,166) (874,094)
--------- ---------
Long-term bank debt, excluding current installments $ 3,014,569 2,832,579
========= =========

Future maturities of long-term debt are as follows:

2005 $ 618,166
2006 3,007,487
2007 7,082
---------
Total $3,632,735
=========

The note payable with a $561,465 balance as of December 31, 2004 has a
restrictive covenant, among others, that requires the Company to maintain
a cash flow to debt service ratio of not less than 1.25 to 1.00. The
Company was not in violation of the aforementioned, or other, restrictive
covenants for any quarter during the years ended December 31, 2004 or 2003.

(4) Related Party Transactions

The Company and an entity owned by the Chairman of the Company have an agree-
ment whereby the latter provides the Company general corporate management
services. The affiliated company received $222,000, $222,000, and $210,000 as
compensation for performance of those services during the years ended
December 31, 2004, 2003 and 2002, respectively. Effective January 1, 2005
the agreement was continued with terms of $19,000 per month through December
31, 2005.

The Company leases office space from a company owned by the Chairman
of the Company under a month-to-month operating lease. Rent expense
incurred under this lease was $22,800, $22,800 and $22,200 for the years
ended December 31, 2004, 2003, and 2002, respectively.

Robert Watson, Inc. and William Watson, Inc.,both own small interests
in a number of the properties that the Company has interests in. Each company
also owns interest in other similar properties in which the Company does
not have an interest. None of the Company's other directors
own interests in any oil and gas properties in areas in which the Company
operates. The Company presently acquires all of its own properties.

During the years ended December 31,2004, 2003 and 2002, a Director of the
Company received $60,000 $60,000 and $72,320, respectively for engineering
consultant work.

During the year ended December 31, 2002 an officer of the Company purchased
a vehicle from the Company for $28,458, resulting in no gain or loss to the
Company.

In addition, the Company purchases materials and services from two businesses
in which the Chairman of the Company owns an interest. These purchases
represent less than 10% of the Company's total oil field purchases.

During the year ended December 31, 2002, the Company purchased an investment
in a private, closely-held corporation that is valued at fair value for
financial statement purposes. The purchase of services from this related party
totaled $193,155 for the year ended 2002 and $85,105 for the year ended
December 31, 2003. As of December 31, 2003, the private, closely-held
corporation was dissolved, and the Company received a return of capital of
$100,000.

(5) Federal Income Taxes

The actual federal income tax expense differs from the "expected" tax
expense computed by applying the US Federal corporate income tax rate of
34% to income before income taxes as follows:

2004 2003 2002

Current tax expense at statutory rate $ 464,475 179,550 ---
Deferred tax (benefit) (18,719) 83,725 (74,130)
_________ ________ ________
$ 445,756 263,275 (74,130)
========= ======== ========

The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities at December 31, 2004 and 2003 is presented below:

2004 2003
Deferred tax asset:
Net operating loss carryforward $ --- ---
--------- ---------
Net deferred tax asset --- ---
--------- ---------

Deferred tax liability:
Office furniture and equipment and oil
and gas property, due to differences in
depreciation and abandonment (251,249) (269,967)
--------- ---------
Total deferred tax liability $ (251,249) (269,967)
========= =========

The Company has accumulated losses for Federal income tax purposes of
approximately $-0-, $-0- and $230,000, as of December 31, 2004, 2003
and 2002, respectively, which may be carried forward and used to reduce
taxable income in future years. The accumulated losses were utilized in 2003.

(6) Fair Value of Financial Instruments

Based on the borrowing rates currently available to the Company for bank loans
with similar terms and average maturities, the fair value of notes payable
approximates market value at December 31, 2004 and 2003.

(7) Asset Retirement Obligation

In June 2001, the FASB issued FAS 143,Accounting for Asset Retirement
Obligations. FAS 143 requires that an asset retirement obligation (ARO)
associated with the retirement of a tangible long-lived asset be recognized
as a liability in the period in which it is incurred or becomes determinable
(as defined by the standard), with an associated increase in the carrying
amount of the related long-lived asset. The cost of the tangible asset,
including the initially recognized asset retirement cost, is depreciated
over the useful life of the asset. The ARO is recorded at fair value, and
accretion expense will be recognized over time as the discounted liability
is accreted to its expected settlement value. The fair value of the ARO
is measured using expected future cash outflows discounted at the companys
credit-adjusted risk-free interest rate. The provisions of this statement apply
to legal obligations associated with the retirement of long-lived assets that
result from the acquisition, development, and operation of a long-lived asset.

Texas Vanguard Oil Company, Inc. adopted SFAS 143 as of January 1, 2003. The
adoption of SFAS 143, resulted in a January 1, 2003 cumulative effect adjustment
to record a $197,542 increase in the carrying values of proved properties and a
$204,283 increase in non-current abandonment liabilities. The net impact of
these items was to record $6,741, net of tax, as a cumulative effect adjustment
of a change in accounting principle in our Statement of Income for 2003. The
asset obligation relates to costs to plug and abandon oil and gas properties
of the Company.

2004 2003
Asset retirement obligation
Beginning of year $ 189,972 204,283
Liabilities incurred during the period 21,263 2,383
Settlements --- ---
Accretion expense 11,170 11,379
Revisions in estimated cash flow (24,545) (28,073)
-------- --------
Asset retirement obligation
End of year $ 197,860 189,972
======== ========

The following pro-forma financial information summarized the impact of Statement
143 on 2002 financial information as if the statement had been applied
retroactively to January 1, 2002.

December 31, 2002
As reported Pro-forma

Operating loss $ (218,030) (224,771)

Net income (143,900) (150,641)

Loss per common share
basic and diluted (0.10) (0.11)

The Board of Directors
Texas Vanguard Oil Company:

INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTAL INFORMATION

Our report on our audit of the basic financial statements of Texas Vanguard
Oil Company for 2004 appears on page 12. The audit was made for the purpose
of forming an opinion on those statements taken as a whole. The supplemental
material presented in the following section of this report is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of
measurement and presentation of the required supplementary information.
However, we did not audit the information and express no opinion on it.

Sprouse & Anderson, L.L.P.
March 11, 2005

TEXAS VANGUARD OIL COMPANY

SUPPLEMENTAL OIL AND GAS INFORMATION

Years ended December 31, 2004, 2003 and 2002
(Unaudited)

Reserve Quantity Information (Unaudited)

The following reserve related information is based on estimates prepared by
management of the Company. Reserve estimates are inherently imprecise and are
continually subject to revisions based on production history, results of
additional exploration and development, price of oil and gas and other factors.
All of the Company's oil and gas reserves are located in the United States.

2004 2003 2002
Oil Gas Oil Gas Oil Gas
BBLS MCF BBLS MCF BBLS MCF

Proved developed
and undeveloped
reserves:
Beginning of year 989,011 6,539,396 922,877 6,341,396 951,414 7,180,417
Revisions of
previous estimate (11,277) (291,648) 88,500 252,675 21,500 (465,726)
Extensions
and Discoveries --- --- --- --- --- ---
Purchase of
minerals in place 23,882 140,929 40,692 340,559 22,921 87,820
Sale of minerals --- --- --- --- --- ---
Production (67,252) (413,250) (63,058) (395,234) (73,006) (461,115)
--------- --------- -------- --------- -------- ---------
End of year 934,364 5,975,427 989,011 6,539,396 922,877 6,341,396
========= ========= ======== ========= ========= =========
Proved developed
reserves:
Beginning of year 989,011 6,539,396 922,877 6,341,396 951,412 7,180,417
End of year 934,364 5,975,427 989,011 6,539,396 922,877 6,341,396

Standardized Measure of Discounted Future Net Cash Flows (Unaudited)

The following is a standardized measure of discounted future net cash flows and
changes therein relating to proved oil and gas reserves. Future net cash flows
were computed using year-end prices and costs and relate to existing proved oil
and gas reserves in which the enterprise has mineral interests. The Company
cannot predict price fluctuations which may occur in the future. Future
income tax expenses were provided after estimated utilization of Federal
income tax loss carryforwards.

December 31,
2004 2003 2002

Future cash inflows $ 61,338,070 53,100,051 41,173,230
Future production
and development costs (25,366,016) (23,774,850) (20,628,693)
Future income tax expenses (10,768,963) ( 8,390,979) (5,724,646)
------------ ------------ ------------
Future net cash flows 25,203,091 20,934,222 14,819,891

10% annual discount for
estimated timing of cash flows (15,050,859) (12,721,019) (6,975,044)
------------ ------------ ------------
Standardized measure of
discounted future net cash flows $ 10,152,232 8,213,203 7,844,847
============ ============ ============

TEXAS VANGUARD OIL COMPANY

SUPPLEMENTAL OIL AND GAS INFORMATION, CONTINUED
(Unaudited)

The following are the principal sources of change in the standardized measure
of discounted future net cash flows:

2004 2003 2002

Changes:
Sale of oil and gas produced, net of
production costs $ (1,799,796) (1,257,140) (352,159)
Net changes in prices and production
costs (966,860) (470,853) (459,699)
Purchase of minerals in place 131,847 127,939 60,345
Extensions and discoveries --- --- ---
Sales --- --- ---
Revisions of previous quantity estimates (223,911) 428,395 (131,114)
Accretion of discount 821,320 784,485 825,655
Other 3,976,429 755,530 (354,727)
---------- ---------- ---------
Net changes 1,939,029 368,356 (411,699)

Beginning balance - standardized measure
of discounted future net cash flows 8,213,203 7,844,847 8,256,546
---------- ---------- ----------
Ending balance - standardized measure
of discounted future net cash flows $10,152,232 8,213,203 7,844,847
========== ========== ==========

The Company has not filed with or included in reports to any Federal authority
or agency other than the Securities and Exchange Commission any estimates of
total proved net oil and gas reserves.

Capitalized Costs Relating to Oil and Gas Producing Activities

Years ended December 31,
2004 2003 2002

Unproven oil and gas properties
(including wells in progress) $ 166,630 166,630 166,630

Proven oil and gas properties 4,132,921 4,063,987 3,506,181

Accumulated depletion and amortization (1,963,081) (1,699,955) (1,504,724)
---------- ---------- ----------
Net capitalized costs $ 2,336,470 2,560,662 2,168,087
========== ========== ==========

Costs Incurred in Oil and Gas Property
Acquisition, Exploration and Development Activities

Years ended December 31,
2004 2003 2002

Acquisition of properties - unproven $ --- --- ---
Acquisition of properties - proven 120,739 707,793 306,570
Exploration costs --- --- ---
Development costs --- --- ---

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

The Company, under the supervision and with the participation of its manage-
ment, including the principal executive officer and principal financial
officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act as of the end of the period
covered by our report. Based upon that evaluation, our principal executive
officer and principal financial officer concluded as of the Evaluation Date
that our disclosure controls and procedures were effective such that the
information to be disclosed in the reports filed or submitted under the
Act is accumulated and communicated to management, including the principal
executive and principal financial officers, to allow timely decisions
regarding required disclosures.

PART III

Items 10, 11, 12 and 13 constituting Part III of Form 10-K have been omitted
from this annual report pursuant to the provisions of Instruction G(3) to Form
10-K, as the Company will file a definitive proxy statement pursuant to
Regulation 14A under the Securities Exchange Act of 1934 within 120 days after
the close of its fiscal year.

PART IV

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed to the Company by Sprouse & Anderson, L.L.P. for
the audit of Texas Vanguard Oil Companys annual financial statements
included in the 10K and for the review of the financial statements included
in its quarterly reports on Form 10-Q for the fiscal years ended December
31, 2004 and 2003 totaled $17,500 and $22,500, respectively.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1). Financial Statements.

Independent Auditors' Report, Balance Sheets at December 31, 2004 and 2003 and
the related Statements of Earnings, Stockholders' Equity, and Cash Flows for
each of the years in the three-year period ended December 31, 2004, and notes
to financial statements are included in Item 8.

(a)(2) Financial Statement Schedules

Not applicable.

(a)(3). Exhibits

Number Description of Document

3 Copies of Articles of Incorporation and Bylaws - Incorporated by
reference to Exhibits 4a and 4b to Registration Statement No. 2-66693
filed by registrant on Form S-2.

3.1 Articles of Amendment to authorize capitalization of common stock,
previously filed as exhibits to Form 8-K dated May 27, 1983.

3.2 Certificate of Amendment dated February 20, 1990 of Articles of
Incorporation and Articles of Amendment dated February 16, 1990 to the
Articles of Incorporation. Filed as Exhibit to 1989 Form 10-K.

10.1 Incentive Stock Option Plan, previously filed as Exhibit 5b to
Registration Statement No. 2-66693 filed by registrant on Form S-2.

10.2 Management contract between Texas Vanguard Oil Company and Robert Watson
Inc., previously filed with Form 8-K dated January 30, 1988.

10.4 Note payable to Fort Worth National Bank dated April 23, 2004.

10.5 Note payable to First American Bank dated December 15, 2004.

10.6 Note payable to First American Bank dated December 15, 2004.

99.1 Certificate of Chief Executive Officer and Chief Financial Officer

99.2 Certification of Periodic Financial Reports

(b). Reports on Form 8-K

None filed during the quarter ended December 31, 2004.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

TEXAS VANGUARD OIL COMPANY

By: William G. Watson
William G. Watson, President
March 28, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

William G. Watson Rober L. Patterson
William G. Watson, President, Robert L. Patterson, Director
Director, Chief Executive March 28, 2005
Officer and Principal Financial
and Accounting Officer
March 28, 2005

Linda R. Watson Teresa N. Nuckols
Linda R. Watson, Director Teresa N. Nuckols, Secretary
and Chairman of the Board March 28, 2005
March 28, 2005

OFFICERS AND DIRECTORS CORPORATE INFORMATION

Linda R. Watson CORPORATE OFFICE
Chairman of the Board 9811 Anderson Mill Road, Suite 202
and Director Austin, Texas 78750

William G. Watson
President, Chief Executive INDEPENDENT ACCOUNTANTS
Officer and Director Sprouse & Anderson, L.L.P.
Austin, Texas
Teresa Nuckols
Secretary

Robert L. Patterson
Director TRANSFER AGENT
Computershare Trust Company, Inc.
P.O. Box 1596
Denver, Colorado 80228

COMMON STOCK
Quoted on OTC Bulletin Board
Symbol: TVOC.OB

CORPORATE GOVERNANCE
The Company has adopted a Code of Ethics
for its executive officers, directors and
employees which is available upon request
free of charge from:
Investor Relations
9811 Anderson Mill Road, Suite 202
Austin, Texas 78750

2004 ANNUAL SHAREHOLDERS MEETING
June 9, 2005, at 10:00 A.M.
9811 Anderson Mill Road, Suite 202
Austin, Texas 78750

EXHIBITS:

EXHIBIT 10.4

COMMERCIAL REVOLVING OR DRAW NOTE:

Fort Worth National Bank ("Lender")
Austin Banking Center
8200 N. Mopac, Suite 130
Austin, Texas 78759

Texas Vanguard Oil Company ("Borrower")
PO Box 202650
Austin, Texas 78720

TERMS:
Interest Rate: 3.50%
Principal Amount: $700,000.00
Funding Date: April 23, 2004
Maturity Date: April 23, 2005

For value received, I promise to Pay to you, or your order, at your
address listed above the Principal sum of SEVEN-HUNDRED THOUSAND AND
NO/100 DOLLARS, ($700,000.00).

XX Multiple Advance: The principal sum shown above is the maximum amount
of principal I can borrow under this note. On 4/23/2004 I will receive
the amount of $450,308.20 and future principal advances are contemplated.

Conditions: As agreed upon by bank and borrower.

XX Open End Credit: You and I agree that I may borrow up to the maximum
principal sum more than one time. This feature is subject to all other
conditions and expires on April 23, 2005.

Interest: I agree to pay interest on the outstanding principal balance from
04/23/2004 at the rate of 3.500% per year until April 23, 2005.

Accrual Method: Interest will be calculated on a 360/30 basis.

Post Maturity Rate: I agree to pay interest on the unpaid balance of this
Note owing after maturity, and until paid in full, as state below: On the
Same fixed or variable rate basis in effect before maturity (as indicated
above).

XX Late Charge: If a payment is made more than 10 days after it is due, I
agree to pay a late charge of 5.000% of payment.

XX Interest: I agree to pay accrued interest on demand, but if no demand is
made then monthly beginning 05/23/2004

XX Principal: I agree to pay the principal on demand, but if no demand is
made then on 04/23/2005.

Purpose: The purpose of this loan is revolving line of credit for business
expenses.

Security: Fort Worth National Bank Certificate of Deposit Number 13656 in
the amount of $700,000.00 along with any renewals or replacements thereof.

XX Specific Property Description: The Property includes, but is not limited
by, the following: Fort Worth National Bank Certificate of Deposit Number
13656 in the amount of $700,000.00 along with any renewals of replacements
thereof.

This Written Loan Agreement represents the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous, or
subsequent oral agreements of the parties.

There are no unwritten oral agreements between the parties.

Signatures: I agree to the terms of this note and security agreement
(including those on pages 1 and 2). I have received a copy of this note
and security agreement on todays date.

Texas Vanguard Oil Company

Signed: Linda Watson, C.O.B./Director

Signature for Lender: Patrick S. Maloy, President

EXHIBIT 10.5

TERM PROMISSORY NOTE:

First American Bank, SSB ("Lender")
500 West Illinois, Suite 10
Midland, Texas 79701
Midland County

Texas Vanguard Oil Company ("Borrower")
PO Box 202650
Austin, Texas 78720
TERMS:
Interest Rate: Variable
Principal Amount: $622,514.00
Funding Date: December 15, 2004
Maturity Date: December 15, 2006
Loan Number: 700062938
PROMISE TO PAY:

For value received, Texas Vanguard Oil Company, a Texas Corporation
("Borrower"), whose address is PO Box 202650, Austin, TX 78720-2650
promises to pay to the order of First American Bank, SSB ("Lender"
or "Payee") the sum of SIX HUNDRED TWENTY-TWO THOUSAND FIVE HUNDRED FOURTEEN
DOLLARS ($622,514.00), together with interest on the unpaid principal balance
thereof from date hereof until maturity at the rate hereinafter provided,
both principal and interest payable as hereinafter provided in lawful money
of the United States of America at Lender's offices at 500 West Illinois,
Suite 10, Midland, TX 79701 or at such place as from time to time may be
designated by the holder of this Note.

This Note, that certain Revolving Line of Credit Note dated as of the date of
this Note having an original commitment amount of $3,000,000.00 executed by
Borrower and payable to Lender ("Line of Credit Note") and that certain Letter
of Credit Note or Agreement dated on or about the date of this Note have a face
amount of $250,000.00 executed by Borrower and payable to Lender ("Letter of
Credit Note") in support of a Letter of Credit in favor of the Texas Railroad
Commission are described in and are subject to the terms and provisions of that
certain Loan Agreement ("Loan Agreement") dated as of the date of this Note by
and between Borrower and Lender. The Loan Agreement, among other things,
contains provisions regarding the amount that Lender is required to advance
under the terms of the Line of Credit Note ("the Borrowing Base"), provisions
for acceleration of the maturity hereof upon the happening or omission of
certain stated events upon the terms and conditions therein specified.

"Stated Rate" means, on any day, a rate per annum equal to the Prime Rate from
time to time in effect plus one-half of one percent (.5%), provided, that (a)
if on any day the Stated Rate shall exceed the Highest Lawful Rate for that day
then the Stated Rate shall be fixed at the Highest Lawful Rate on that day and
on each day thereafter until the total amount of interest accrued at the Stated
Rate on the unpaid balance of this Note equals the total amount of interest
which would have accrued if there were no Highest Lawful Rate and/or (b) the
Stated Rate shall not be less than five and one-half percent (5.50%).

As used herein the following terms shall have the meanings set forth below:

"Prime Rate" means the fluctuating per annum rate of interest which is
published in the Wall Street Journal as the Prime Rate, or if, but only if,
such Prime Rate or index is no longer available or if such Prime Rate is no
longer ascertainable, Lender (or its successors) will substitute an index
determined by Lender to be comparable, in its sole discretion, which rate shall
become the "Prime Rate". In the event The Wall Street Journal publishes more
than one interest rate as the Prime Rate, the Prime Rate used herein shall be
the highest of said published rates, unless Lender (or its successors) notifies
Borrower in writing of Lender's (or its successor's) intent to use one of the
lower published rates as the prime rate. The interest rate on this Note will
change each time and as of the date that the Prime Rate or applicable index
rate changes. The Prime Rate may not be the lowest rate of interest charged
by Lender to its customers.

"Highest Lawful Rate" means the maximum nonusurious rate of interest that
Lender is permitted under applicable law to contract for, take, charge or
receive with respect to the indebtedness evidenced by this Note.

The above sum and accrued interest shall be due and payable in twenty-three
(23) monthly principal installments of Twenty-Five Thousand Nine Hundred
Thirty-Eight dollars and Eight cents($25,938.08) each, plus interest accrued
on the unpaid principal balance to the date of each installment, beginning
January 15, 2005, and continuing on the 15th date of each month thereafter
until and including November 15, 2006, and then in one installment of the
entire unpaid principal balance plus accrued unpaid interest on
December 15, 2006.

All past due principal and/or interest or installments thereof shall bear
interest from maturity at the Highest Lawful Rate.

This Note, the Line of Credit Note and Letter of Credit Note described above
are secured by a Deed of Trust, Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated as of the date of this Note from
Borrower (hereinafter sometimes referred to as "Grantor," whether one or
more) to Robert Nordhaus, Trustee for the benefit of the Lender covering any
and all of Grantor's interest, whether now owned or hereafter acquired, in and
to various leasehold and associated net revenue and overriding royalty
interests in oil and gas wells and leases along with personal property
associated therewith and proceeds derived therefrom located in the state of
Texas(hereinafter referred to as "Security Documents"). Failure to describe
all or part of the security shall not be considered as a waiver of such
security.

Upon the failure to pay any installment of the principal or interest on this
Note as above promised or upon the occurrence of a default or event of default
specified in the Line of Credit Note, Letter of Credit Note, the Loan Agreement
and/or the Security Documents described above, the holder of this Note or any
part thereof shall have the option of declaring the principal balance hereof
and the interest accrued herein to be immediately due and payable.

Borrower shall have the right to prepay, without penalty, at any time and from
time to time prior to maturity, all or any part of the unpaid principal
balance of this Note and/or all or any part of the interest accrued to the
date of such prepayment, provided that any such principal thus paid is
accompanied by accrued interest on such principal.

It is the intent of the Payee of the Note and the undersigned in the execution
of this Note and all other instruments now or hereafter securing this Note
to contract in strict compliance with applicable usury law. In furtherance
thereof, the said Lender and the undersigned stipulate and agree that none of
the terms and provisions contained in this Note, or in any other instrument
executed in connection herewith, shall ever be construed to create a contract
to pay for the use, forbearance or detention of money, at a rate in excess of
the Highest Lawful Rate; that neither the undersigned nor any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of
this Note shall ever be obligated or required to pay interest on this Note
at a rate in excess of the Highest Lawful Rate; and that the provisions of this
paragraph shall control over all other provisions of this Note and any other
instruments now or hereafter executed in connection herewith which may be
in apparent conflict herewith. The holder of this Note expressly disavows
any intention to charge or collect excessive unearned interest or finance
charges in the event the maturity of this Note is accelerated. If the maturity
of this Note shall be accelerated for any reason of if the principal of this
Note is paid prior to the end of the term of this Note, and as a result
thereof the interest received for the actual period of existence of the loan
evidenced by this Note exceeds the Highest Lawful Rate, the holder of this
Note shall, at its option, either refund to the undersigned the amount of such
excess or credit the amount of such excess against the principal balance of
this Note then outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of such excess
interest. In the event that the said Lender or any other holder of this Note
shall contract for, charge or receive any amount or amounts and/or any other
thing of value which are determined to constitute interest which would equal
to interest in excess of the Highest Lawful Rate shall, upon such determination
at the option of the Holder of this Note, be either immediately returned to
the undersigned or credited against the principal balance of this Note then
outstanding, in which event any and all penalties of any kind under applicable
law as a result of such excess shall be inapplicable. By execution of this
Note the undersigned acknowledges that it believes the loan evidenced by this
Note to be non-usurious and agrees that if, at any time the undersigned should
have reason to believe that such loan is in fact usurious, it will give the
holder of this Note notice of such condition and the undersigned agrees that
said holder shall have ninety (90) days in which to make appropriate refund
or other adjustment in order to correct such condition if in fact such exists.
The term "applicable law" as used in this Note shall mean the laws of the
State of Texas or the laws of the United States, whichever laws allow the
greater rate of interest, as such laws now exist or may be changed or amended
or come into effect in the future.

Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through bankruptcy, probate or other court
proceeding or if this Note is placed in the hands of attorneys for collection
after default, the undersigned and all endorsers, guarantors and sureties of
this Note jointly and severally agree to pay to the holder of this Note in
addition to the principal and interest due and payable herein all the costs
and expenses of said holder in enforcing this Note including, without
limitation, reasonable attorneys' fees and legal expenses.

This Note is given in renewal and extension, but expressly not in extinguishment
Of that certain Promissory Note dated February 12, 2003 having an original face
Value amount of $735,074.00 executed by Borrower and payable to Lender
("Original Note"), which Original Note is secured by the Deed of Trust setout
above. All Liens, assignments and security interests securing the payment of
said Original Note are hereby ratified, confirmed, renewed, extended,
rearranged and brought forward as security for the payment of this Note.

The undersigned and all endorsers, guarantors and sureties of this Note and
all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and
nonpayment of this Note, notice of acceleration, notice of intention to
accelerate the maturity of this Note, protest and notice of protest, diligence
in collecting, and the bringing of suit against any other party, and agree to
all renewals, extensions, modifications, partial payments, releases or
substitutions of security, in whole or in party, with or without notice, before
or after maturity.

This Note and the Rights and Duties of the parties hereunder shall be governed
for all purposes by the law of the state of Texas and the law of the United
States applicable to transactions within such state.

This loan is payable in full on December 15, 2006 or upon acceleration for any
reason permitted under this note. At maturity you must repay the entire
principal balance of the loan and unpaid interest then due. The Lender is under
no obligation to refinance the loan at that time. You will therefore, be
required to make payment out of other assets that you may own or you will have
to find a lender, which may be the Lender you have this loan with, willing to
lend you the money. If you refinance this loan at maturity, you may have to pay
some or all of the closing costs normally associated with a new loan even if
you obtain refinancing from the same Lender.

NOTICE: This term note, the line of credit note, the Letter of Credit, the
Security Documents and accompanying UCC-1 Financing Statements and Loan
Agreement and/or any and all other documents executed at or near the time of
execution of this document constitute a "Loan Agreement" as defined in section
26.02(a) of the Texas Business & Commerce Code, and represents the final
agreement between the parties and may not be contradicted by evidence to
prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the Parties.

Dated the date set out above, although executed on this 16th day of December
2004.

By: TEXAS VANGUARD OIL COMPANY
WILLIAM G. WATSON
PRESIDENT

EXHIBIT 10.6

PROMISSORY NOTE (REVOLVING LINE OF CREDIT):

First American Bank, SSB ("Lender")
500 West Illinois, Suite 10
Midland, Texas 79701
Midland County

Texas Vanguard Oil Company ("Borrower")
PO Box 202650
Austin, Texas 78720

TERMS:
Interest Rate: Variable
Principal Amount: $3,000,000.00
Funding Date: December 15, 2004
Maturity Date: December 15, 2006
Loan Number: 028799
PROMISE TO PAY:

For value received, Texas Vanguard Oil Company, a Texas Corporation
("Borrower"), whose address is PO Box 202650, Austin, TX 78720-2650
promises to pay to the order of First American Bank, SSB ("Lender"
or "Payee") the sum of THREE-MILLION DOLLARS ($3,000,000.00), or so much
thereof as may be advanced by Lender prior to maturity, together with interest
on the unpaid principal balance thereof from date hereof until maturity at
the rate hereinafter provided, both principal and interest payable as
hereinafter provided in lawful money of the United States of America at
Lender's offices at 500 West Illinois, Suite 10, Midland, TX 79701 or at
such place as from time to time may be designated by the holder of this Note.

This Note, that certain Term Promissory Note dated as of the date of
this Note in the original principal amount of $622,514.00 executed by
Borrower and payable to Lender ("Term Note") and that certain Letter
of Credit Note or Agreement dated on or about October 31, 2004 having a face
amount of $250,000.00 executed by Borrower and payable to Lender ("Letter of
Credit Note") in support of a Letter of Credit in favor of the Texas Railroad
Commission are described in and are subject to the terms and provisions of that
certain Loan Agreement ("Loan Agreement") dated as of the date of this Note by
and between Borrower and Lender. The Loan Agreement, among other things,
contains provisions regarding the amount that Lender is required to advance
under the terms of the Line of Credit Note ("the Borrowing Base"), provisions
for acceleration of the maturity hereof upon the happening or omission of
certain stated events upon the terms and conditions therein specified and the
payment of a non-refundable origination fee at closing of $13,750.00.

"Stated Rate" means, on any day, a rate per annum equal to the Prime Rate from
time to time in effect plus one-half of one percent (.5%), provided, that (a)
if on any day the Stated Rate shall exceed the Highest Lawful Rate for that day
then the Stated Rate shall be fixed at the Highest Lawful Rate on that day and
on each day thereafter until the total amount of interest accrued at the Stated
Rate on the unpaid balance of this Note equals the total amount of interest
which would have accrued if there were no Highest Lawful Rate and/or (b) the
Stated Rate shall not be less than four and three-quarters percent (5.50%).

As used herein the following terms shall have the meanings set forth below:

"Prime Rate" means the fluctuating per annum rate of interest which is
published in the Wall Street Journal as the Prime Rate, or if, but only if,
such Prime Rate or index is no longer available or if such Prime Rate is no
longer ascertainable, Lender (or its successors) will substitute an index
determined by Lender to be comparable, in its sole discretion, which rate shall
become the "Prime Rate". In the event The Wall Street Journal publishes more
than one interest rate as the Prime Rate, the Prime Rate used herein shall be
the highest of said published rates, unless Lender (or its successors) notifies
Borrower in writing of Lender's (or its successor's) intent to use one of the
lower published rates as the prime rate. The interest rate on this Note will
change each time and as of the date that the Prime Rate or applicable index
rate changes. The Prime Rate may not be the lowest rate of interest charged
by Lender to its customers.

"Highest Lawful Rate" means the maximum nonusurious rate of interest that
Lender is permitted under applicable law to contract for, take, charge or
receive with respect to the indebtedness evidenced by this Note.

The above sum and accrued interest shall be due and payable as follows:

(a) Interest shall be due and payable monthly as it accrues on the unpaid
principal balance to the date of each installment, payment beginning January
15, 2005, and continuing on the 15th day of each month thereafter until
and including November 15, 2006.

(b) On December 15, 2006, the remaining balance, including principal and
interest, then remaining unpaid on this Note shall be due and payable.

This Note is a Revolving Line of Credit Promissory Note having a face
amount of $3,000,000.00 but an initial commitment amount described in
the Loan Agreement. The unpaid principal balance of this Note at any
time shall be the total of all amounts loaned or advanced by the holder
hereof less the amount of all payments or prepayments of principal made
hereon by or for Maker. Maker may use all or any part of the credit
provided for herein at any time before December 15, 2006, subject to the
Borrowing Base limitation set out in the Loan Agreement. Maker may borrow,
repay and reborrow hereunder and there is no limitation on the number of
advances made hereunder so long as the total unpaid balance, at any time
outstanding, does not exceed the lessor of (a) $3,000,000.00 or (b) the
Borrowing Base as set out in the Loan Agreement.

Upon the failure to pay any installment of the principal or interest on this
Note as above promised or upon the occurrence of a default or event of default
specified in the Term Note, Letter of Credit Note, the Loan Agreement and/or
the Security Documents described below, the holder of this Note or any part
thereof shall have the option of declaring the principal balance hereof and
the interest accrued hereon to be immediately due and payable.

All past due principal and/or interest or installments thereof shall bear
interest from maturity at the Highest Lawful Rate.

This Note, the Term Note and Letter of Credit Note described above
are secured by a Deed of Trust, Mortgage, Security Agreement, Assignment of
Production and Financing Statement dated as of the date of this Note from
Borrower (hereinafter sometimes referred to as "Grantor," whether one or
more) to Robert Nordhaus, Trustee for the benefit of the Lender covering any
and all of Grantor's interest, where now owned or hereafter acquired, in and
to various leasehold and associated net revenue and overriding royalty
interests in oil and gas wells and leases along with personal property
associated therewith and proceeds derived therefrom located in the state of
Texas (hereinafter referred to as "Security Documents"). Failure to describe
all or part of the security shall not be considered as a waiver of such
security.

Upon the failure to pay any installment of the principal or interest on this
Note as above promised or upon the occurrence of a default or event of default
specified in the Term Note, the Loan Agreement and/or the Security Documents
described above, the holder of this Note or any part thereof shall have the
option of declaring the principal balance hereof and the interest accrued
hereon to be immediately due and payable.

Borrower shall have the right to prepay, without penalty, at any time and from
time to time prior to maturity, all or any part of the unpaid principal
balance of this Note and/or all or any part of the interest accrued to the
date of such prepayment, provided that any such principal thus paid is
accompanied by accrued interest on such principal.

It is the intent of the Payee of the Note and the undersigned in the execution
of this Note and all other instruments now or hereafter securing this Note
to contract in strict compliance with applicable usury law. In furtherance
thereof, the said Lender and the undersigned stipulate and agree that none of
the terms and provisions contained in this Note, or in any other instrument
executed in connection herewith, shall ever be construed to create a contract
to pay for the use, forbearance or detention of money, at a rate in excess of
the Highest Lawful Rate; that neither the undersigned nor any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of
this Note shall ever be obligated or required to pay interest on this Note
at a rate in excess of the Highest Lawful Rate; and that the provisions of this
paragraph shall control over all other provisions of this Note and any other
instruments now or hereafter executed in connection herewith which may be
in apparent conflict herewith. The holder of this Note expressly disavows
any intention to charge or collect excessive unearned interest or finance
charges in the event the maturity of this Note is accelerated. If the maturity
of this Note shall be accelerated for any reason or if the principal of this
Note is paid prior to the end of the term of this Note, and as a result
thereof the interest received for the actual period of existence of the loan
evidenced by this Note exceeds the Highest Lawful Rate, the holder of this
Note shall, at its option, either refund to the undersigned the amount of such
excess or credit the amount of such excess against the principal balance of
this Note then outstanding and thereby shall render inapplicable any and all
penalties of any kind provided by applicable law as a result of such excess
interest. In the event that the said Lender or any other holder of this Note
shall contract for, charge or receive any amount or amounts and/or any other
thing of value which are determined to constitute interest which would equal
to interest in excess of the Highest Lawful Rate shall, upon such determination
at the option of the Holder of this Note, be either immediately returned to
the undersigned or credited against the principal balance of this Note then
outstanding, in which event any and all penalties of any kind under applicable
law as a result of such excess shall be inapplicable. By execution of this
Note the undersigned acknowledges that it believes the loan evidenced by this
Note to be non-usurious and agrees that if, at any time the undersigned should
have reason to believe that such loan is in fact usurious, it will give the
holder of this Note notice of such condition and the undersigned agrees that
said holder shall have ninety (90) days in which to make appropriate refund
or other adjustment in order to correct such condition if in fact such exists.
The term "applicable law" as used in this Note shall mean the laws of the
State of Texas or the laws of the United States, whichever laws allow the
greater rate of interest, as such laws now exist or may be changed or amended
or come into effect in the future.

Should the indebtedness represented by this Note or any part thereof be
collected at law or in equity or through bankruptcy, probate or other court
proceeding or if this Note is placed in the hands of attorneys for collection
after default, the undersigned and all endorsers, guarantors and sureties of
this Note jointly and severally agree to pay to the holder of this Note in
addition to the principal and interest due and payable hereon all the costs
and expenses of said holder in enforcing this Note including, without
limitation, reasonable attorneys' fees and legal expenses.

This Note is given in renewal and extension, but expressly not in extinguishment
Of that certain Revolving Line of Credit dated February 12, 2003 having a face
amount of $3,000,000.00 executed by Borrower and payable to Lender ("Original
Note"), which Original Note is secured by the Deed of Trust set out above. All
liens, assignments and security interests securing the payment of said Original
Note are hereby ratified, confirmed, renewed, extended, rearranged and
brought forward as security for the payment of this Note.

The undersigned and all endorsers, guarantors and sureties of this Note and
all other persons liable or to become liable on this Note severally waive
presentment for payment, demand, notice of demand and of dishonor and
nonpayment of this Note, notice of acceleration, notice of intention to
accelerate the maturity of this Note, protest and notice of protest, diligence
in collecting, and the bringing of suit against any other party, and agree to
all renewals, extensions, modifications, partial payments, releases or
substitutions of security, in whole or in party, with or without notice, before
or after maturity.

This Note and the Rights and Duties of the parties hereunder shall be governed
for all purposes by the law of the state of Texas and the law of the United
States applicable to transactions within such state.

This loan is payable in full on December 15, 2006 or upon acceleration for any
reason permitted under this note. At maturity you must repay the entire
principal balance of the loan and unpaid interest then due. The Lender is under
no obligation to refinance the loan at that time. You will therefore, be
required to make payment out of other assets that you may own or you will have
to find a lender, which may be the Lender you have this loan with, willing to
lend you the money. If you refinance this loan at maturity, you may have to pay
some or all of the closing costs normally associated with a new loan even if
you obtain refinancing from the same Lender.

NOTICE: This line of credit note, the term note, the Letter of Credit, the
Security Documents and accompanying UCC-1 Financing Statements and Loan
Agreement and/or any and all other documents executed at or near the time of
execution of this document constitute a "Loan Agreement" as defined in section
26.02(a) of the Texas Business & Commerce Code, and represents the final
agreement between the parties and may note be contradicted by evidence to
prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the Parties.

Dated the date set out above, although executed on this 16th day of December
2004.

By: TEXAS VANGUARD OIL COMPANY
WILLIAM G. WATSON
PRESIDENT

EXHIBIT 99.1:
CERTIFICATE OF CHIEF FINANCIAL OFFICER AND CHIEF FINANCIAL OFFICER

I, William Watson, certify that:

1. I have reviewed this annual report on Form 10-K of Texas Vanguard Oil
Company (TVOC).

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report.

3. Based on my knowledge, the financial statements and other financial
information included in this annual report fairly present, in all
material respects, the financial condition, results of operations and cash
flows of TVOC as of, and for, the periods presented in this annual report.

4. Texas Vanguard Oil Company's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-14 and 15d-14) for
TVOC and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to TVOC, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of TVOC disclosure controls and procedures
as of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date.

c) presented in this annual report our conclusions about the effective-
ness of the disclosure controls and procedures based on our evaluation as
of the Evaluation Date.

5. TVOC's other certifying officers and I have disclosed, based on our
most recent evaluation, to our auditors and the audit committee of TVOC's
board of directors:

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect TVOC's ability to record, process,
summarize and report financial data and have identified for TVOC's auditors
any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in TVOC's internal controls.

6. TVOC's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

March 28, 2005

By /s/ William G. Watson
- ------------------------
William G. Watson, President
(Principal Financial and Accounting Officer)

EXHIBIT 99.2: CERTIFICATION OF PERIODIC FINANCIAL REPORTS

The undersigned hereby certifies that this Annual Report on Form 10-K
for the fiscal year ended December 31, 2004, fully complies with the
requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act
of 1934 and that the information contained in this report fairly presents,
in all material respects, the financial conditions and results of operations
of Texas Vanguard Oil Company.

Date: March 28, 2005 By/s/ William G. Watson
--------------------------
William G. Watson, President
(Principal Financial and Accounting Officer)