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Mexco Energy Corporation

January 4, 2010

(MXC - AMEX)

Price	$9.30
Price range 2009	$9.30
Market cap	$17.6M
Enterprise value	$18.64M
Stockholders' equity	$10.9M

Common shares outstanding:

1,890,000

Insiders own: 64%

CONCLUSION AND RECOMMENDATION

Mexco Energy can surprise the market with a rapid explosion of EPS. Such event can set in motion a series of transactions that will reward the current stockholders in a possibly unusual manner.

1. In the September quarter of 2009, operating revenue dropped to $746,000 (down from $1.6M) and net income to $158,000 (down from $511,000 in fiscal 2008).

MEXCO ENERGY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION
(Unaudited)

Three months ended
September 30

2009

2008

Six months ended
September 30

2009

2008

Total operating revenues

746,294

1,601,806

1,404,47

3,281,127

Operating expenses:

Production

269,251

357,753

510,224

692,741

Accretion of asset retirement obligation

7,879

7,266

15,607

14,204

Deprecation, depletion and amortization

275,072

240,962

538,534

479,807

General and administration

198,229

199,239

430,414

480,900

Total operating expenses

750,431

805,220

1,494,779

1,667,652

Operating profit (loss)

(4,137)

796,586

(90,308)

1,613,475

Net Income

158,350

511,115

90,347

1,049,904

Earnings per common share:

Basic

Diluted

0.08
0.08

0.27
0.26

0.05
0.05

0.58
0.55

Weighted average common shares outstanding:

Basic

Diluted

1,883,248
1,942,514

1,873,127
1,975,453

1,880,944
1,945,702

1,817,962
1,922,568

2. The selling price in the September, 2009 quarter was $3.04 per mcf.

3. The selling price for the March quarter 2010 is projected at $6.00 per mcf. Thus, the extra price would add $750,000 to both revenues and pre-tax income.

	March quarter 2009
Pre-tax	$150 750 $900,000
Per share	45¢
Annualized	$1.80

4. In 2010, the expected growth is not further price increase but acquisition of additional "territory". Additional gas wells.

5. With an earnings power between $1.50 and $2.00, the stock can appreciate to $15. Market cap would then be $30M.

6. A $15 price, clean balance sheet can enable MXC to raise $10M equity. The equity base of the company could change drastically.

	September 2009 ($, MIL)		Fiscal 2010	$10M issue Fiscal 2011
Total shareholders' equity	$11,126			10,000
		600	3,000	3,000
Total		11,700	14,700	27,700

Accordingly, we can project the following:

(To be attained in two years)

	Now	Sept. 2011
Shareholders' equity	11,120	27,700
Long-term debt	1.30	+10,000
EPS	60¢	2.00

OVERVIEW

At the New York Mercantile Exchange (NYMEX), prices for futures contracts also rose with expectations of higher demand in response to this month's trend of colder-than-normal temperatures. The futures contract for January 2010 delivery increased by $0.56 on the week to $5.462 per MMBtu.
The price of crude oil increased by $1.97 per barrel, or 2.8 percent, during the report week. The West Texas Intermediate (WTI) crude oil price ended trading on Wednesday at $72.64 per barrel or $12.52 per MMBtu.

At the NYMEX, the price of the near-month contract for January delivery increased $0.56, or nearly 12 percent, during the report week to $5.462 per MMBtu. The increase occurred possibly in response to expectations of continued extreme cold in consuming regions of the country, thus increasing space-heating demand. The early cold has also reduced concerns regarding the abundance of natural gas in storage, which reached a record high this fall. Nonetheless, the January 2010 contract is trading much lower than the settlement prices of contracts for comparable months over the last 2 years. The January 2009 and January 2008 contracts expired at $6.136 per MMBtu and $7.172 per MMBtu, respectively.

MEXICO ENERGY CORP. (MXC) has interest in 2,350 oil and gas wells and owns leasehold interests in 300,000 gross acres. It has proven reserves of 10,000 billion cubic feet of natural gas and 200,000 barrels of oil.

Mexico Energy Corporation is an independent, publicly-owned oil and gas company engaged in acquiring and developing oil and gas properties and the exploration for and production of oil and gas. Mexico Energy Corporation, a Colorado corporation founded in 1972, currently conducts all of its drilling, exploration and production activities in the United States. All of its oil and gas assets are located in the United States and all of its revenues are derived from sales to customers within the United States, primarily in the Permian Basin of West Texas.

Mexico focused primarily on the exploration for and development of natural gas reserves and, secondarily, oil reserves. In addition to exploration and development, Mexico acquires interests in producing and non-producing oil and gas leases from land owners and leaseholders in areas considered favorable for oil and gas exploration, development and production.

Mexico also engages in the business of acquiring proved reserves and continually searches for opportunities to acquire proved oil and gas properties, including royalties and mineral interests with development potential.

Oil and gas sales. Revenue from oil and gas sales was $1,391,754 for the six months ended September 30, 2009, a 57% decrease from $3,267,797 for the same period of fiscal 2009. This resulted from a decrease in oil and gas prices partially offset by an increase in gas production. Average gas prices were $3.06 per mcf for the first six months of fiscal 2010, a decrease from $9.24 per mcf for the first six months of fiscal 2009. Average oil prices were $50.12 per barrel for the first six months of fiscal 2010, a decrease from $117.25 per barrel for the first six months of fiscal 2009. Oil and gas production quantities were 8,,710 mcf for the first six months of fiscal 2010 and 8,713 barrels and 243,143 mcf for the first six months of fiscal 2009, an increase of 18% in gas production and no change in oil production.

	SIX MONTHS ENDING SEPTEMBER 30
	2008	2009
Gas price mcf	$9.24	$3.06
Oil	$113.25	$50.23
Gas production	$243,000	$286,000 + 18%

Crude oil and natural gas prices have fluctuated significantly in recent years. During the second quarter of fiscal 1009, oil and gas prices began trending downward, while drilling, completion and operating costs remained high. The effect of declining product prices on business is significant. Lower product prices reduce cash flow from operations and diminish the present value of oil and gas reserves. Lower product prices also offer MXC less incentive to assume the drilling risks that are inherent in the business. The volatility of the energy markets make it extremely difficult to predict future oil and natural gas price movements with any certainty.

CORPORATE HISTORY

Mexco Energy Corporation is an independent, publicly owned oil and gas company engaged in acquiring and developing oil and gas properties and the exploration for and production of oil and gas. Mexco Energy Corporation, a Colorado corporation founded in 1972, currently conducts all of its drilling, exploration and production activities in the United States. All of its oil and gas assets are located in the United States and all of its revenues are derived from sales to customers within the United States, primarily in the Permian Basin of West Texas.

Mexco focuses primarily on the exploration for and development primarily of natural gas reserves and secondarily oil reserves.

In addition to exploration and development, Mexco acquires interests in producing and non-producing oil and gas leases from landowners and leaseholders in areas considered favorable for oil and gas exploration, development and production.

Mexco also engages in the business of acquiring proved reserves and continually searches for opportunities to acquire proved oil and gas properties, including royalties and mineral interests with development potential.

Mexco common stock is listed and trades on the American Stock Exchange under the symbol MXC.

MEXCO IS A HISTORICAL CHANGE IN THE
NATURAL GAS INDUSTRY

KEY NATURAL GAS MARKET FACTORS

While U.S. natural gas prices are soft today, there are strong indications that market forces will create a strong natural gas price recovery in 2010 and 2011.

The laws of supply and demand remain intact.
- Dramatically reduced rig counts and accelerating decline curves will lead to sharply lower supply in 2010 and 1H2011.
- First year U.S. decline rates are >25%, i.e. >15 bcf/day
- The gas-directed rig count has plunged by -55% from the 2008 peak and has held steady most of the summer and fall at -700 rigs.
- Following a natural lag from completion and well connection work, U.S. natural gas production is likely to decline substantially in 2010.

Storage may be near spring 2009 levels by spring 2010.

Only higher prices will adequately refill storage for 2010/2011 winter.
- Using price, the market will have to incentivize increased U.S. drilling.

MEXCO IS A SMALL, BUT RESPECTED,
NATURAL GAS PRODUCER

TOP 20 U.S. NATURAL GAS PRODUCERS
Company	Ticker	Q3 2008	U.S. gas rigs drilling on 12/04/09 (e)	U.S. gas rigs drilling on 8/29/08 (e)
XTO	XTO	1,949	41	78
Chesapeake	CHK	2,138	108	143
Newfield	NFX	488	15	23
Questar	STR	439	13	26
Totals		23,789	404	679

THE REVENGE FACTOR WITH HIGHER PRICES

•	Spot natural gas has increased to $6.00 from less than $4.00 in six months.

•	Spot one-year has first dropped from $6.00 in 2006 to $1.50 in early 2009, and increased to $5.50 by December 2009.

•	Real production can only take place between $7.00 and $9.00.

Natural Gas Rotary Rig Count Increases to 757.
The natural gas rotary rig count was 757 as of December 11, according to Baker Hughes Incorporated. The current count increased by 9 from the previous week. The number of natural gas rotary rigs has fallen about 40 percent since the beginning of 2009. The rig count has generally increased since the summer of 2009, following a steep decline beginning in fall of 2008. The horizontal rig count, which includes both oil and natural gas rigs, also increased during the week to 558, close to its level at the beginning of the year. The horizontal rig count has risen for the last 14 weeks, while the vertical rig count, which is currently at 412, has been oscillating over the past few months. However, the vertical rig count, which also includes both oil and natural gas rigs, generally appears to be increasing. Changes in the rig count generally lag changes in the Henry Hub spot price by several weeks or more (see Figure). However, those responses appear to be muted in recent months.

Mexco has a tiny capitalization. However, the Midland, Texas based company is well integrated in the local community.

However, acquiring new fields, there is a further earnings expansion, creating a $15 price possibility.

An experienced management team can raise additional capital and build -- at favorable prices -- a leverage growth for current stockholders.

Disclaimer

Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.