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<SEC-DOCUMENT>0001012709-02-001603.txt : 20021213
<SEC-HEADER>0001012709-02-001603.hdr.sgml : 20021213
<ACCEPTANCE-DATETIME>20021213170751
ACCESSION NUMBER:		0001012709-02-001603
CONFORMED SUBMISSION TYPE:	SC 13D
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20021213

SUBJECT COMPANY:	

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MEXCO ENERGY CORP
		CENTRAL INDEX KEY:			0000066418
		STANDARD INDUSTRIAL CLASSIFICATION:	CRUDE PETROLEUM & NATURAL GAS [1311]
		IRS NUMBER:				840627918
		STATE OF INCORPORATION:			CO
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		SC 13D
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	005-20883
		FILM NUMBER:		02857562

	BUSINESS ADDRESS:	
		STREET 1:		214 W TEXAS AVENUE
		STREET 2:		SUITE 1101
		CITY:			MIDLAND
		STATE:			TX
		ZIP:			79701
		BUSINESS PHONE:		9156821119

	MAIL ADDRESS:	
		STREET 1:		214 W TEXAS AVENUE
		STREET 2:		SUITE 1101
		CITY:			MIDLAND
		STATE:			TX
		ZIP:			79701

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MILLER OIL CO
		DATE OF NAME CHANGE:	19800702

FILED BY:		

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			FALCON BAY OPERATING LLC
		CENTRAL INDEX KEY:			0001207520
		IRS NUMBER:				752903123
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		SC 13D

	BUSINESS ADDRESS:	
		STREET 1:		600 N MARIENFELO
		CITY:			MIDLAND
		STATE:			TX
		ZIP:			79701
		BUSINESS PHONE:		9156827424

	MAIL ADDRESS:	
		STREET 1:		600 N MARIENFELO
		CITY:			MIDLAND
		STATE:			TX
		ZIP:			79701
</SEC-HEADER>
<DOCUMENT>
<TYPE>SC 13D
<SEQUENCE>1
<FILENAME>falcon13d-1202.txt
<DESCRIPTION>MEXCO ENERGY CORPORATION
<TEXT>

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   ----------

                                  SCHEDULE 13D
                                 (RULE 13D-101)

             INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
            TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO
                                  RULE 13D-2(A)

                           (AMENDMENT NO. ________)1

                            Mexco Energy Corporation
- --------------------------------------------------------------------------------
                                (Name of Issuer)

                          Common Stock, $.50 par value
- --------------------------------------------------------------------------------
                         (Title of Class of Securities)

                                    592770101
- --------------------------------------------------------------------------------
                                 (CUSIP Number)

                                Richard R. Albro
                          Falcon Bay Operating, L.L.C.
                          600 N. Marienfeld, Suite 900
                              Midland, Texas 79701
                                  915-682-7424
- --------------------------------------------------------------------------------
                  (Name, Address and Telephone Number of Person
                Authorized to Receive Notices and Communications)

                                December 5, 2002
- --------------------------------------------------------------------------------
             (Date of Event Which Requires Filing of This Statement)

     If the filing  person has  previously  filed a statement on Schedule 13G to
report the  acquisition  that is the subject of this Schedule 13D, and is filing
this  schedule  because  of Rule  13d-1(e),  13d-1(f)  or  13d-1(g),  check  the
following box [ ]

          Note.  Schedules filed in paper format shall include a signed original
     and five copies of the schedule, including all exhibits. See Rule 13d-7 for
     other parties to whom copies are to be sent.

                         (Continued on following pages)

- ---------------------
     1    The  remainder  of this cover page shall be filled out for a reporting
person's  initial  filing on this  form with  respect  to the  subject  class of
securities,  and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.

     The  information  required on the remainder of this cover page shall not be
deemed to be "filed"  for the purpose of Section 18 of the  Securities  Exchange
Act of 1934 or otherwise  subject to the liabilities of that section of the Act,
but  shall be  subject  to all other  provisions  of the Act  (however,  see the
Notes).

                                Page 1 of 5 Pages
<PAGE>

- --------------------                                           -----------------
CUSIP NO. 592770101                    13D                     PAGE 2 OF 5 PAGES
         -----------                                               ---  ---
- --------------------                                           -----------------

- --------------------------------------------------------------------------------
1    NAMES OF REPORTING PERSONS
     I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

          Falcon Bay Operating, L.L.C.
- --------------------------------------------------------------------------------
2    CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*                   (a) [ ]
                                                                         (b) [ ]

- --------------------------------------------------------------------------------
3    SEC USE ONLY


- --------------------------------------------------------------------------------
4    SOURCE OF FUNDS*

          00
- --------------------------------------------------------------------------------
5    CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
     TO ITEM 2(d) or 2(e)                                                    [ ]

- --------------------------------------------------------------------------------
6    CITIZENSHIP OR PLACE OF ORGANIZATION

          Texas
- --------------------------------------------------------------------------------
               7    SOLE VOTING POWER

                         107,500
               -----------------------------------------------------------------
 NUMBER OF     8    SHARED VOTING POWER
   SHARES
BENEFICIALLY
  OWNED BY     -----------------------------------------------------------------
    EACH       9    SOLE DISPOSITIVE POWER
 REPORTING
PERSON WITH              107,500
               -----------------------------------------------------------------
               10   SHARED DISPOSITIVE POWER


- --------------------------------------------------------------------------------
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

          107,500
- --------------------------------------------------------------------------------
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]


- --------------------------------------------------------------------------------
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

          5.8%
- --------------------------------------------------------------------------------
14   TYPE OF REPORTING PERSON*

          00
- --------------------------------------------------------------------------------
                      *SEE INSTRUCTIONS BEFORE FILLING OUT!

                                Page 2 of 5 Pages
<PAGE>

ITEM 1. SECURITY AND ISSUER

     This  statement  relates to the common  stock,  $.50 par value (the "Common
Stock") of Mexco Energy Corporation,  a Colorado corporation (the "Issuer"). The
address of the  principle  executive  offices  of the Issuer is 214 West  Texas,
Suite 1101, Midland, Texas 79701.

ITEM 2. IDENTITY AND BACKGROUND

     The reporting person filing this statement is Falcon Bay Operating,  L.L.C.
("Falcon Bay"), which is a limited liability company organized under the laws of
the State of Texas.  The address of its principal  business and principal office
is 600 N. Marienfeld,  Suite 900, Midland,  Texas 79701.  Falcon Bay's principal
business is the acquisition  and  development of oil and gas properties.  Falcon
Bay has not,  during  the last five (5)  years,  been  convicted  in a  criminal
proceeding or been a party to a civil proceeding of a judicial or administrative
body of competent  jurisdiction,  and as a result of such proceeding,  was or is
subject to a judgment,  decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws.

     With respect to Instruction C of the General  Instructions to Schedule 13D,
the following information is provided for the following persons as the officers,
managers and controlling  persons of Falcon Bay in response to Items (a) through
(f) of Item 2 of Schedule 13D:

     1.   (a)  W. Michael Ford
          (b)  600 N. Marienfeld, Suite 900, Midland, Texas 79701
          (c)  President and Member of Falcon Bay
          (d)  No
          (e)  No
          (f)  United States

     2.   (a)  Richard R. Albro
          (b)  600 North Marienfeld, Suite 900, Midland, Texas 79701
          (c)  Vice President and Member of Falcon Bay
          (d)  No
          (e)  No
          (f)  United States

     3.   (a)  Anthony B. Sam
          (b)  600 North Marienfeld, Suite 900, Midland, Texas 79701
          (c)  Vice President and Member of Falcon Bay
          (d)  No
          (e)  No
          (f)  United States

ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION

     Pursuant to that certain Exploration Agreement dated as of December 5, 2002
by and  between  the Issuer and Falcon Bay (the  "Exploration  Agreement"),  the
Issuer issued to Falcon Bay on December 5, 2002 a Common Stock Purchase  Warrant
to purchase  107,500  shares of Common Stock (the  "Outstanding  Warrant").  The
Outstanding  Warrant is exercisable at a purchase price of $5.00 per share,  and
expires on December  5, 2004.  The number of shares  covered by the  Outstanding
Warrant  are  subject  to  adjustment  upon any  stock  split,  stock  dividend,
reorganization, reclassification, merger, sale of all or

                                Page 3 of 5 Pages
<PAGE>

substantially  all  of the  assets  of  the  Issuer,  and  similar  events.  The
acquisition  of the  Outstanding  Warrant  (which  includes the right to acquire
shares of Common Stock within sixty (60) days upon  exercise of the  Outstanding
Warrant) is the basis for Falcon Bay filing this  Schedule  13D. In exchange for
the Outstanding Warrant and other consideration  described below, Falcon Bay has
agreed to provide  the  Issuer  with the right to  participate  in and share the
promotional  interests on certain oil and gas prospects and lease sales to third
parties  pursuant  and subject to the terms and  conditions  of the  Exploration
Agreement. A copy of the Outstanding Warrant is attached as an exhibit hereto.

ITEM 4. PURPOSE OF TRANSACTION

     The purpose of the acquisition by Falcon Bay of beneficial ownership of the
shares  represented  by the  Outstanding  Warrant  was to  serve  as part of the
consideration given by the Issuer to Falcon Bay under the Exploration Agreement.

     (a)  As discussed under Item 6 below,  Falcon Bay may acquire an additional
warrant  and  other  shares  of  Common  Stock  pursuant  to  the  terms  of the
Exploration Agreement.

ITEM 5. INTEREST IN SECURITIES OF ISSUER

     (a)  Falcon  Bay   beneficially   owns  107,500   shares  of  Common  Stock
represented by the Outstanding Warrant,  constituting  approximately 5.8% of the
total issued and  outstanding  shares of Common  Stock,  based upon its right to
acquire such shares upon exercise of the  Outstanding  Warrant within sixty (60)
days of the date hereof.  None of the persons  other than Falcon Bay  identified
under Item 2 hereof beneficially own any shares of Common Stock.

     (b)  Falcon  Bay has the sole power to vote or direct the vote and the sole
power to  dispose or to direct  the  disposition  of all of the shares of Common
Stock which it beneficially owns as described above.

     (c)  Other than the acquisition of the  Outstanding  Warrant on December 5,
2002, none of the persons identified in (a) above effected any transactions with
respect to the Common Stock for a period of sixty (60) days prior to the date of
this Schedule 13D.

     (d)  None.

     (e)  Not applicable.

ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.

     Upon  closing of the sale of four (4)  selected  oil and gas  prospects  to
third parties  pursuant to the Exploration  Agreement,  the Issuer will issue to
Falcon Bay an additional common stock purchase warrant to purchase an additional
322,500 shares of Common Stock (the "Future Warrant").  Falcon Bay does not have
any  beneficial  ownership to the shares which may become  subject to the Future
Warrant at this time,  and any rights or interests  in or to the Future  Warrant
are  contingent  upon  the  satisfaction  of the  conditions  set  forth  in the
Exploration  Agreement and the issuance of the Future  Warrant.  If issued,  the
Future Warrant will be  exercisable at a purchase price of $5.00 per share,  and
will  expire  two (2)  years  after the  expiration  of the  Issuer's  option to
participate in the last of the four (4) oil and gas prospects.

                                Page 4 of 5 Pages
<PAGE>

     Also pursuant to the  Exploration  Agreement,  the Issuer has the option to
acquire interests in selected oil and gas properties by exchanging  unregistered
Common Stock for such interests. For purposes of this exchange, the Common Stock
will be valued at 84% of the average price of the Common Stock for the longer of
(i) the period from the date of the sale of the oil and gas  property  until the
spud date of the initial  well drilled on that  property,  or (ii) the sixty day
period after the date of the sale of the oil and gas property.

     Falcon Bay has certain  registration  rights with  respect to the shares of
Common Stock which it may acquire through exercise of the Outstanding Warrant or
the  Future  Warrant  or  otherwise  acquire  under the  Exploration  Agreement,
pursuant to that certain  Registration  Rights Agreement dated as of December 5,
2002 by and between the Issuer and Falcon Bay. A copy of the Registration Rights
Agreement is attached as an exhibit hereto.

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS

     7.1. - Common  Stock  Warrant No. 1 issued by Mexco Energy  Corporation  to
Falcon Bay Energy,  L.L.C.  to purchase  107,500 shares of Common Stock of Mexco
Energy Corporation.

     7.2 -  Registration  Rights  Agreement  dated as of December 5, 2002 by and
between Mexco Energy Corporation and Falcon Bay Operating, L.L.C.

SIGNATURE

     After  reasonable  inquiry and to the best of my  knowledge  and belief,  I
certify that the information  set forth in this statement is true,  complete and
correct.

   December 11, 2002                    FALCON BAY OPERATING, L.L.C.
- -----------------------
         Date
                                        By: /s/ Richard R. Albro
                                           -------------------------------------
                                            Richard R. Albro, Vice President

                                Page 5 of 5 Pages
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT NO.                        DESCRIPTION OF EXHIBIT
- -----------                        ----------------------

   7.1         Common Stock Warrant No. 1 issued by Mexco Energy  Corporation to
               Falcon Bay Energy,  L.L.C.  to purchase  107,500 shares of Common
               Stock of Mexco Energy Corporation.

   7.2         Registration Rights Agreement dated as of December 5, 2002 by and
               between Mexco Energy Corporation and Falcon Bay Operating, L.L.C.

                                  Exhibit Index

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-7.1
<SEQUENCE>3
<FILENAME>falconex72-1202.txt
<DESCRIPTION>COMMON STOCK WARRANT
<TEXT>

                                     WARRANT

                                  COMMON STOCK

NO. 1                                                             107,500 Shares

                            MEXCO ENERGY CORPORATION
             (Incorporated under the laws of the State of Colorado)

     This is to certify that for value received FALCON BAY ENERGY LLC or assigns
(hereinafter  called the "Holder" or "Holders",  as the case may be) is entitled
to purchase from MEXCO ENERGY CORPORATION (hereinafter called the "Company"), at
any time after 5:00 p.m.  (Texas Time) on December 5, 2002, and before 5:00 p.m.
(Texas Time) on December 5, 2004, 107,500 fully paid and  non-assessable  shares
of Common Stock, par value $.50 per share of the Company,  such shares not being
registered under the Securities Act of 1933 as amended (the "Act")  (hereinafter
called  "Common  Stock") at a price of $5.00 per share  (hereinafter  called the
"Warrant Price").

     The  Warrant  Price  and the  number of shares  purchasable  hereunder  are
subject to adjustment as hereinafter provided.

     This  Warrant may be  exercised  by the Holder for an  aggregate of 107,500
shares of Common Stock and is issued pursuant to the terms of an Agreement dated
December 5, 2002, between the Company and Holders. This Warrant and any Warrants
issued in exchange therefor or in replacement  thereof are hereinafter  referred
to as the "Warrants".

     This Warrant may be exercised by the Holder as  hereinabove  provided as to
the whole or any part of the shares of Common Stock covered  hereby by surrender
of this Warrant at the  principal  office of any  transfer  agent for the Common
Stock,  or, if the  Company  shall not have any  transfer  agent for the  Common
Stock,  at the principal  office of the Company (any such transfer agent, or the
Company acting hereunder, being hereinafter

<PAGE>

called the  "Warrant  Agent"),  with the  statement  of  election  to  subscribe
attached  hereto duly  executed  and upon  payment to the Company of the Warrant
Price for shares so purchased in cash or by cashier's check or bank draft in New
York Clearing House funds.  Thereupon (except that if, upon such date, the stock
transfer  books of the Company  shall be closed,  then upon the next  succeeding
date on which such transfer books are open) this Warrant shall be deemed to have
been  exercised  and the person  exercising  the same to have become a Holder of
record of shares of Common  Stock (or of the other  securities  or  property  to
which such person is entitled upon such  exercise)  purchased  hereunder for all
purposes,  and  certificates  for such shares so purchased shall be delivered to
the purchaser within a reasonable time (not exceeding 10 days,  except while the
transfer  books of the Company are closed)  after this  Warrant  shall have been
exercised  as set forth  hereinabove.  If this  Warrant  shall be  exercised  in
respect of a part only of the shares of Common Stock covered hereby,  the Holder
shall be entitled to receive a similar  Warrant of like tenor and date  covering
the  number of shares  in  respect  of which  this  Warrant  shall not have been
exercised.

     This  Warrant  is  exchangeable,  upon the  surrender  hereof by the Holder
hereof at said principal  office of the Warrant Agent,  for new Warrants of like
tenor and date  representing  in the  aggregate  the right to subscribe  for and
purchase  the  number  of  shares  which  may be  subscribed  for and  purchased
hereunder.

     The Company  covenants  and agrees that all shares which may be issued upon
the exercise of the rights  represented by this Warrant will, upon issuance,  be
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges  with respect to the issue  thereof  (other than taxes in respect of any
transfer).  The Company  further  covenants  and agrees that,  during the period
within which the rights represented by this Warrant may

WARRANT - Page 2
<PAGE>

be  exercised,  the Company  will at all times have  authorized  and  reserved a
sufficient  number of shares of Common  Stock to provide for the exercise of the
rights represented by this Warrant.

     The rights of the Holder of this Warrant  shall be subject to the following
terms and conditions:

     1.1  In case  the  Company  shall  hereafter  at any  time  (i)  change  by
split-up,  subdivision or combination the number of outstanding shares of Common
Stock into a  different  number of shares of Common  Stock  with or without  par
value, or (ii) declare and pay a dividend in shares of Common Stock,  the number
of shares of Common Stock which immediately prior to such change or dividend the
Holder of this  Warrant  shall have been  entitled to purchase  pursuant to this
Warrant shall be increased or decreased in direct  proportion to the increase or
decrease,  respectively,  in the  number of shares of Common  Stock  outstanding
immediately  prior to such change or dividend,  and the Warrant  Price in effect
immediately  prior to such change shall be increased or  decreased,  as the case
may be, in inverse proportion to such increase or decrease in the number of such
shares  outstanding  immediately  prior to such  change  or  dividend.  Any such
adjustment  shall  become  effective  on the  effective  date of such  split-up,
subdivision or combination, or the record date of such dividend, as the case may
be. For the  purposes of this  Section 1.1 the number of shares of Common  Stock
outstanding  at any given time shall not include  shares in the  treasury of the
Company  but shall  include  shares  issuable  in respect to scrip  certificates
representing fractional interests with respect to Common Stock.

     1.2  In case of any capital  reorganization or any  reclassification of the
capital  stock  of the  Company  (other  than a change  in par  value of a stock
split-up) or in case of the

WARRANT - Page 3
<PAGE>

consolidation or merger of the Company with another corporation,  or in any case
of any sale,  transfer or other  disposition  to another  corporation  of all or
substantially all the property,  assets, business and goodwill of the Company as
an entirety,  as the case may be, the Holder of this Warrant shall thereafter be
entitled  to  purchase  for  the  aggregate   Warrant  Price  payable  hereunder
immediately  prior thereto in order to exercise  this Warrant in full,  the kind
and amount of shares of stock and other securities and property receivable, upon
such capital reorganization,  reclassification of capital stock,  consolidation,
merger, sale, transfer or other disposition, by a Holder of the number of shares
of Common  Stock  which this  Warrant  entitled  the Holder  thereof to purchase
immediately prior to such capital  reorganization,  reclassification  of capital
stock,  consolidation,  merger, sale, transfer or other disposition;  and in any
such case  appropriate  provisions  herein set forth with  respect to rights and
interests  thereafter  of the  Holder  of  this  Warrant,  to the end  that  the
provisions  set forth  herein  (including  the  specified  changes  in and other
adjustments  of the Warrant Price) shall  thereafter be  applicable,  as near as
reasonably  may be,  in  relation  to any  shares or other  property  thereafter
purchasable upon the exercise of this Warrant.

     1.3  In case the Company  shall  hereafter  at any time  declare a dividend
(other than a dividend payable in shares of Common Stock or a cash dividend paid
out of  retained  earnings)  upon  shares of Common  Stock,  the  Holder of this
Warrant shall, upon exercise of this Warrant in whole or in part, be entitled to
receive,  in addition to the number of shares of Common Stock  deliverable  upon
such exercise  pursuant  hereto  (including any shares  deliverable  pursuant to
Section  1.1) against  payment of the  aggregate  Warrant  Price  therefor,  but
without further  consideration,  the cash, stock or other securities or property
which the Holder of this Warrant  would have  received as  dividends  (otherwise
than a cash

WARRANT - Page 4
<PAGE>

dividend  paid out of retained  earnings and  otherwise  than a dividend paid in
shares of Common Stock) if continuously  since the date set forth at the foot of
this  Warrant  such  Holder  (i) had been the  Holder of record of the number of
shares of  Common  Stock  deliverable  upon such  exercise  hereof  and (ii) had
retained  all  dividends  in stock or other  securities  (other  than a dividend
payable in shares of Common Stock and otherwise than a cash dividend paid out of
retained earnings) paid or payable in respect of said number of shares of Common
Stock or in respect of any such stock or other  securities so paid or payable as
such dividends.

     1.4 No certificates  for fractional  shares of Common Stock shall be issued
upon the exercise of this Warrant,  but in lieu thereof the Company shall,  upon
exercise  in full of this  Warrant,  purchase  out of  funds  legally  available
therefor any such  fractional  interest from the Holder or Holders for an amount
in cash equal to the current market value of such fractional interest calculated
to the nearest cent,  computed on the basis of the mean between the high bid and
low asked prices, as reported by the applicable  quotation system, of the Common
Stock in the market on the most  recent day within ten days prior to the date of
such  exercise  for which both bid and asked prices shall have been so reported,
or, if the Common Stock is listed on a stock exchange located in the City of New
York,  the last  reported  sale price on such exchange on such day; and if there
shall have been no sale on said day, then the  computation  shall be made on the
basis of the last reported sale price on such exchange  within ten days prior to
such date.  If there have been no  reported  bid and asked  prices,  or reported
sales prices, as the case may be, within such ten days, the current market value
shall be fixed in a manner determined in good faith by the Board of Directors of
the Company.

WARRANT - Page 5
<PAGE>

     1.5  Whenever the Warrant Price is adjusted As herein provided, the Company
shall in the event of any dispute between the Company and the Holder cause to be
filed with the Warrant Agent a statement of the Company's  independent certified
public accountants  showing the adjusted Warrant Price which shall be conclusive
and  binding on the  parties.  Such  statement  shall show in detail the factors
requiring such adjustment,  including a statement of the consideration  received
by the Company for any additional securities issued.  Whenever the Warrant Price
is adjusted,  the Company will  forthwith  cause a notice stating the adjustment
and the Warrant Price to be mailed to the  registered  Holder of this Warrant at
the address of such Holder shown on the books of the Company. Where appropriate,
such notice may be given in advance and included as part of a notice required to
be mailed under the provisions of Section 1.6.

     1.6  In case at any time:

          (i)  the  Company  shall pay any  dividend  payable  in stock upon its
     Common Stock or make any  distribution  (other than cash  dividends) to the
     Holders of its Common Stock; or

          (ii) the Company shall offer for  subscription pro rata to the Holders
     of its  Common  Stock  any  additional  shares of stock of any class or any
     other rights; or

          (iii) the Company  shall  effect  any  capital  reorganization  or any
     reclassification  of or  change  in the  outstanding  capital  stock of the
     Company (other than a change in par value, or a change from par value to no
     par  value,  or a  change  from no par  value  to par  value,  or a  change
     resulting from a subdivision or combination of outstanding shares of Common
     Stock),  or any  consolidation  or merger or any  sale,  transfer  or other
     disposition of all or substantially all of its

WARRANT - Page 6
<PAGE>

     property,  assets, business and goodwill as an entirety or the liquidation,
     dissolution or winding up of the Company; or

          (iv) the  Company  shall  declare a  dividend  (other  than a dividend
     payable in shares of Common Stock or a cash  dividend  paid out of retained
     earnings) upon shares of its Common "Stock;

then,  in any such case,  the Company shall cause notice at least ten days prior
to the record date or the date on which the transfer  books of the Company shall
be closed to be mailed to the Warrant Agent and to the registered Holder of this
Warrant at the address of such Holder  shown on the books of the  Company.  Such
notice  shall  also  specify  the date on which the books of the  Company  shall
close,  or  a  record  be  taken,  for  such  stock  dividend,  distribution  or
subscription  rights,  or the  estimated  date on which  such  reclassification,
reorganization, consolidation, merger, sale, transfer, disposition, liquidation,
dissolution,  winding up or dividend,  as the case may be, shall take place, and
the date of  participation  therein by the  Holders of Common  Stock if any such
date is to be fixed, and shall also set forth such fact with respect thereto, as
shall be  reasonably  necessary  to  indicate  the effect of such  action on the
rights  of the  Holders  of the  Warrants.  Such  notice  shall not be deemed an
admission that any right of the Holder hereof has accrued.

     1.7  In case at any time the Company  shall pay any cash  dividend  payable
upon its Common Stock,  then in any such case, the Company shall cause notice at
least ten (10) days prior to the record date for such cash  dividend or the date
on which the transfer books of the Company shall be closed,  to be given by mail
to the registered  Holder of this Warrant at the address of such Holder shown on
the books of the Company,  and such notice shall  specify the amount of the cash
dividend and the date on which the books of the Company

WARRANT - Page 7
<PAGE>

shall close, or a record be taken,  for such cash dividend;  provided,  however,
that such notice need not be mailed if shares of the Company's  Common Stock are
listed on a national  securities exchange located in the City of New York, N.Y.,
and the Company has complied with its agreement  with such exchange with respect
to notice thereto of such cash dividend.

     2.1  At any time after  December  5, 2002 any Holder or Holders may request
in writing to the Company  that it take such  action,  at the Holder or Holders'
expense,  as may be necessary in order to permit such Holder or Holders publicly
to offer and sell the shares of Common  Stock  issuable  or issued to him, it or
them on the exercise of the Warrants in  compliance  with  applicable  state and
Federal law.

     3.1  The issue of any stock or other  certificate upon the exercise of this
Warrant shall be made without charge to the registered Holder hereof for any tax
in respect of the issue of such certificate.  The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue and  delivery of any  certificate  in a name other than that of the
registered  Holder of this  Warrant,  and the  Company  shall not be required to
issue or  deliver  any such  certificate  unless and until the person or persons
requesting  the issue  thereof shall have paid to the Company the amount of such
tax or shall have  established to  satisfaction of the Company that such tax has
been paid.

     3.2  This  Warrant,  which  is not  registered  under  the  Act,  shall  be
transferable only to "accredited" investors in conformity with the Act. Any such
transfer  shall  be made  upon  surrender  of this  Warrant,  with  the  form of
Assignment  attached hereto duly executed by the registered  Holder hereof or by
his attorney duly  authorized in writing,  to the Warrant Agent at its principal
office hereinabove referred to, and thereupon there shall be issued in

WARRANT - Page 8
<PAGE>

the name of the transferee or transferees,  in exchange for this Warrant,  a new
Warrant or Warrants of like tenor and date,  representing  in the  aggregate the
right to  subscribe  for and  purchase  the  number of shares,  or such  portion
thereof  as shall be  transferred,  which may be  subscribed  for and  purchased
hereunder  and if there shall be any balance of such shares not so  transferred,
there shall be issued in the name of the  registered  Holder of this Warrant,  a
new Warrant or Warrants of like tenor and date representing in the aggregate the
right to  subscribe  for and  purchase the balance of the number of shares which
may be subscribed  for and purchased  hereunder.  In the case of any transfer of
this Warrant,  or any part hereof, the person,  firm or corporation to whom such
transfer  is made shall agree with the Company in writing to be bound by, and to
observe, all of the terms and conditions herein set forth.

     3.3  If this Warrant shall be lost,  stolen,  mutilated or  destroyed,  the
Company  may  instruct  the  Warrant  Agent,  on such terms as to  indemnity  or
otherwise as the Company may in its discretion impose, to issue a new Warrant of
like denomination,  tenor and date as the Warrant so lost, stolen,  mutilated or
destroyed.  Any  such new  Warrant  shall  constitute  an  original  contractual
obligation of the Company, whether or not the allegedly lost, stolen, mutilated,
or destroyed Warrant shall be at any time enforceable by anyone.

     3.4  The Company and any  Warrant  Agent may deem and treat the  registered
Holder of this  Warrant as the  absolute  owner of this Warrant for all purposes
and shall not be affected by any notice to the contrary.

     3.5  This  Warrant  shall  not  entitle  the  Holder  to  any  rights  of a
shareholder  of the  Company,  either at law or in  equity,  including,  without
limitation,  the right to vote,  to receive  dividends  and other  distributions
(except as permitted by this Agreement), to

WARRANT - Page 9
<PAGE>

exercise  any  preemptive  rights  or to  receive  any  notice  of  meetings  of
shareholders or of any other proceedings of the Company.

     3.6  This  Warrant,  in all  events,  shall  not be  exercisable  prior  to
December 5, 2002 and shall be wholly void and have no effect  after  December 5,
2004.

     3.7  This Warrant shall be governed by the laws of the State of Texas.

Dated:  December 5, 2002.

                                        MEXCO ENERGY CORPORATION

                                        By ____________________________
                                               President

WARRANT - Page 10
<PAGE>

                              ELECTION TO SUBSCRIBE

                                                    Date: ________________, 2002

     The undersigned  hereby  subscribes for ___________ of the shares of Common
Stock covered by the within Warrant and tenders  payment  herewith in the amount
of $_____________ in accordance with the terms thereof:

Issue certificate(s) for said stock to:      Deliver certificate(s) against
                                             counter recipient by mail to:

- ---------------------------                  -----------------------------
(Name)                                       (Name)

- ---------------------------                  -----------------------------
(Taxpayer Identification No.)                (Street and Number)

- ---------------------------                  -----------------------------
(Street and Number)                          (City, State and Zip)

- ---------------------------
(City, State and Zip)

and if said  number of  shares  shall not be all of the  shares  covered  by the
within  Warrant,  that a new Warrant for the balance of the shares  remaining be
registered in the name of, and delivered as follows:

Issue Warrant for said shares to:            Deliver Warrant against counter
                                             receipt by mail to:
- ---------------------------                  ------------------------------
(Name)                                       (Name)

- ---------------------------                  -----------------------------
(Taxpayer Identification No.)                (Street and Number)

- ---------------------------                  -----------------------------
(Street and Number)                          (City, State and Zip)

- ---------------------------
(City, State and Zip)

WARRANT - Page 11
<PAGE>

                                        Very truly yours,


                                        ----------------------------------
                                        (Signature of Subscriber or Agent)


     For value  received  _________________________  hereby  sells,  assigns and
transfers unto the persons named in Exhibit A hereto, all of whom are accredited
investors  within the meaning of the Securities Act of 1933, as amended,  in the
respective  amounts  set  forth  opposite  their  respective  names the right to
purchase an  aggregate  of 107,500 of the shares of Common Stock of MEXCO ENERGY
CORPORATION, a Colorado corporation,  which rights are represented by the within
Warrant, and does hereby irrevocably constitute and appoint ____________________
attorney to transfer said rights on the books of the within named Company,  with
full power of substitution in the premises.


                                        ------------------------------

                                        By:
                                           ---------------------------
Dated:
      --------------------------


In the Presence of

- --------------------------------

WARRANT - Page 12

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-7.2
<SEQUENCE>4
<FILENAME>falconex73-1202.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT
<TEXT>

                          REGISTRATION RIGHTS AGREEMENT


                          dated as of December 5, 2002


                                      among


                            MEXCO ENERGY CORPORATION


                                       and


                                   The Holders

<PAGE>

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION  RIGHTS AGREEMENT (this  "AGREEMENT")  dated as of December 5,
2002 among Mexco Energy Corporation, a Colorado corporation (the "COMPANY"), and
the Holders named on the signature  pages of this Agreement  (collectively  with
their respective successors and assigns, the "HOLDERS").

                                    RECITALS
                                    --------

     WHEREAS,  pursuant  to  that  certain  Exploration  Agreement  dated  as of
December  5,  2002,  by  and  among   Company  and  the  Holders   ("EXPLORATION
AGREEMENT"),  the Holders acquired Warrants (as defined below) to purchase up to
107,500 shares of the Company's Common Stock (as defined below) from the Company
(and acquired the contingent right to acquire an additional  322,500 Warrants to
purchase shares of the Company's Common Stock),  and extended to the Company the
option for the Company to issue to the Holders an additional undetermined number
of shares of Common Stock pursuant to Section 3.3 of the Exploration  Agreement;
and

     WHEREAS,  the parties hereto hereby desire to set forth the Holders' rights
and the  Company's  obligations  to cause  the  registration  of the  securities
acquired  upon  exercise of the  Warrants  and upon  issuance of the  additional
shares of Common Stock  pursuant to the  Securities Act of 1933, as amended (the
"1933 Act");

     NOW, THEREFORE,  and for good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

     Section 1.     Definitions and Usage.
                    ---------------------

          As used in this Agreement:

          1.1. Definitions.
               -----------

     "AGENT"  means the  principal  placement  agent on an agented  placement of
Registrable Securities.

     "BOARD" means the Board of Directors of the Company.

     "COMMISSION" means the Securities and Exchange Commission.

     "COMMON  STOCK" means the Common  Stock of the Company,  par value $.50 per
share.

     "HOLDERS"  means each of the  purchasers  of the  Warrants  pursuant to the
Exploration  Agreement and such persons who may be issued  additional  shares of
Common Stock pursuant to the Exploration  Agreement and their  respective  legal
successors  and assigns and  Transferees  at all times as such Persons shall own
Registrable Securities.

<PAGE>

     "MAJORITY  SELLING  HOLDERS" means those Selling Holders whose  Registrable
Securities included in such registration represent a majority of the Registrable
Securities of all Selling Holders included therein.

     "PERSON" means any  individual,  corporation,  partnership,  joint venture,
association,    joint-stock   company,   limited   liability   company,   trust,
unincorporated   organization   or  government  or  other  agency  or  political
subdivision thereof.

     "PIGGYBACK REGISTRATION" shall have the meaning set forth in SECTION 2.

     "REGISTER,"  "REGISTERED," and "REGISTRATION" shall refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance  with the 1933 Act, and the declaration or ordering by the Commission
of effectiveness of such registration statement or document.

     "REGISTRABLE  SECURITIES"  means:  (i) the shares of Common Stock  issuable
upon  exercise  of any  of the  Warrants  owned  by a  Holder  on  the  date  of
determination; (ii) any shares of Common Stock issued pursuant to Section 3.3 of
the Exploration Agreement.

     "REGISTRABLE   SECURITIES  THEN  OUTSTANDING"  means,  with  respect  to  a
specified determination date, the Registrable Securities owned by all Holders on
such date.

     "REGISTRATION EXPENSES" shall have the meaning set forth in SECTION 5.1.

     "SELLING HOLDERS" means, with respect to a specified  registration pursuant
to this  Agreement,  Holders whose  Registrable  Securities are included in such
registration.

     "TRANSFER"  means and  includes the act of selling,  giving,  transferring,
creating a trust  (voting or  otherwise),  assigning or  otherwise  disposing of
other than pledging,  hypothecating  or otherwise  transferring as security (and
correlative words shall have correlative  meanings);  PROVIDED HOWEVER, that any
transfer or other  disposition upon foreclosure or other exercise of remedies of
a secured  creditor after an event of default under or with respect to a pledge,
hypothecation or other transfer as security shall constitute a "Transfer."

     "UNDERWRITERS'  REPRESENTATIVE" means the managing underwriter,  or, in the
case of a co-managed  underwriting,  the managing underwriter  designated as the
Underwriters' Representative by the co-managers.

     "VIOLATION" shall have the meaning set forth in SECTION 6.1.

     "1934 ACT" means the Securities Exchange Act of 1934, as amended.

     "WARRANT" means the warrants to purchase Common Stock issued by the Company
pursuant to the Exploration Agreement.

                                       2
<PAGE>

     1.2. Usage.
          -----

     (i)  References  to a  Person  are  also  references  to  its  assigns  and
successors  in  interest  (by means of merger,  consolidation  or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).

     (ii) References to Registrable Securities "owned" by a Holder shall include
Registrable  Securities  beneficially owned by such Person but which are held of
record in the name of a nominee, trustee, custodian, or other agent.

     (iii) References to a document are to it as amended,  waived and  otherwise
modified  from time to time and  references  to a statute or other  governmental
rule  are to it as  amended  and  otherwise  modified  from  time to  time  (and
references  to any provision  thereof shall include  references to any successor
provision).

     (iv) References  to Sections or to  Schedules  or Exhibits  are to sections
hereof or schedules or exhibits hereto, unless the context otherwise requires.

     (v)  The "date of" any notice or request given  pursuant to this  Agreement
shall be determined in accordance with SECTION 10.2.

     Section 2.     Piggyback Registration.
                    ----------------------

     2.1. If at any time the Company  proposes to register,  whether for its own
account or for the  account of  shareholders  of the Company (or if for a Holder
other  than  pursuant  to SECTION 2  hereof),  securities  under the 1933 Act in
connection  with a public  offering  solely for cash on Form S-1, S-2 or S-3 (or
any replacement or successor forms), the Company shall promptly give each Holder
of Registrable Securities written notice of such registration.  Upon the written
request of each Holder  given within 20 days  following  the date of such notice
and  subject to SECTION  2.2,  the  Company  shall  cause to be included in such
registration  statement and use its best efforts to be registered under the 1933
Act all the Registrable Securities that each such Holder shall have requested to
be registered (a "PIGGYBACK REGISTRATION");  PROVIDED,  HOWEVER, that such right
of inclusion shall not apply to any  registration  statement  covering solely an
underwritten   offering  of   non-convertible   debt   securities,   unless  the
Underwriters'  Representative or Agent expressly  consents thereto.  The Company
shall  have the  absolute  right to  withdraw  or cease to  prepare  or file any
registration  statement  for any offering  referred to in this SECTION 2 without
any obligation or liability to any Holder.

     2.2. If the Underwriters'  Representative or Agent shall advise the Company
in writing (with a copy to each Selling Holder) that, in its opinion, the amount
of Registrable  Securities requested to be included in such offering pursuant to
any such Piggyback Registration would materially adversely affect such offering,
or the timing  thereof,  then the  Company  will  include  in such  registration
statement, to the extent of the amount and class which the Company is so advised
can be sold without such material  adverse effect in such offering:  First,  all
securities  proposed  to be sold by the  Company for its own account or, if such
registration is

                                       3
<PAGE>

being  effected for the account of any security  holder of the Company,  for the
account of such security holder; second, the Registrable Securities requested to
be included in such  registration by Holders pursuant to this SECTION 2, and all
other securities being registered pursuant to the exercise of contractual rights
comparable to the rights granted in this SECTION 2, pro rata based on the amount
of such  securities then owned by such holders;  and third all other  securities
requested to be included in such registration.

     2.3. Each  Holder  shall be  entitled  to have its  Registrable  Securities
included in an  unlimited  number of  Piggyback  Registrations  pursuant to this
SECTION 2.

     Section 3.     REGISTRATION  PROCEDURES.  Whenever required under SECTION 2
to effect the registration of any Registrable Securities,  the Company shall, as
expeditiously as practicable:

     3.1. Prepare and file with the  Commission a  registration  statement  with
respect to such  Registrable  Securities  and use the Company's  best efforts to
cause such registration statement to become effective;  PROVIDED,  HOWEVER, that
before  filing a  registration  statement or  prospectus  or any  amendments  or
supplements  thereto,  including  documents  incorporated by reference after the
initial filing of the registration statement and prior to effectiveness thereof,
the  Company  shall  furnish  to one firm of  counsel  for the  Selling  Holders
(selected by Majority  Selling Holders) copies of all such documents in the form
substantially  as  proposed  to be filed with the  Commission  at least four (4)
business  days prior to filing for review  and  comment by such  counsel,  which
opportunity  to comment  shall  include an absolute  right to control or contest
disclosure if the applicable  Selling Holder reasonably  believes that it may be
subject to controlling  person liability under  applicable  securities laws with
respect thereto.

     3.2. Prepare and file with the Commission  such  amendments and supplements
to such  registration  statement and the prospectus used in connection with such
registration  statement as may be necessary to comply with the provisions of the
1933 Act and rules  thereunder with respect to the disposition of all securities
covered by such registration  statement. If the registration statement is for an
underwritten  offering,  the Company shall amend the  registration  statement or
supplement the  prospectus  whenever  required by the terms of the  underwriting
agreement entered into pursuant to SECTION 4.2.

     3.3. Furnish to each  Selling  Holder of  Registrable  Securities,  without
charge, such numbers of copies of the registration statement,  any pre-effective
or post-effective amendments thereto, the prospectus, including each preliminary
prospectus and any amendments or supplements thereto, in each case in conformity
with the requirements of the 1933 Act and the rules  thereunder,  and such other
related documents as any such Selling Holder may reasonably  request in order to
facilitate  the  disposition  of  Registrable  Securities  owned by such Selling
Holder.

     3.4. Use the  Company's  best  efforts  (i) to  register  and  qualify  the
securities covered by such registration statement under such other securities or
Blue Sky laws of such states or jurisdictions  as shall be reasonably  requested
by the Underwriters' Representative or Agent (as applicable, or if inapplicable,
the Majority  Selling  Holders),  and (ii) to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or obtain the

                                       4
<PAGE>

lifting of any suspension of the qualification (or exemption from qualification)
of  the  offer  and  transfer  of  any of  the  Registrable  Securities,  in any
jurisdiction,  at the earliest  possible  moment;  PROVIDED,  HOWEVER,  that the
Company shall not be required in connection  therewith or as a condition thereto
to qualify to do business or to file a general  consent to service of process in
any such states or jurisdictions.

     3.5. In the event of any underwritten or agented  offering,  enter into and
perform the Company's  obligations  under an  underwriting  or agency  agreement
(including indemnification and contribution obligations), in usual and customary
form,  with the  managing  underwriter  or  underwriters  of or agents  for such
offering. The Company shall also cooperate with the Majority Selling Holders and
the Underwriters'  Representative or Agent for such offering in the marketing of
the Registerable Securities,  including making available the Company's officers,
accountants, counsel, premises, books and records for such purpose.

     3.6. Promptly  notify  each  Selling  Holder  of any stop  order  issued or
threatened to be issued by the Commission in connection  therewith (and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered).

     3.7. Make generally  available to the Company's  security holders copies of
all periodic  reports,  proxy statements,  and other information  referred to in
SECTION 8.1.

     3.8. Make available for inspection by any Selling  Holder,  any underwriter
participating  in such offering and the  representatives  of such Selling Holder
and underwriter (but not more than one firm of counsel to such Selling Holders),
all financial and other  information  as shall be reasonably  requested by them,
and provide the Selling Holder,  any underwriter  participating in such offering
and the  representatives  of such Selling Holder and underwriter the opportunity
to discuss the business affairs of the Company with its principal executives and
independent   public  accountants  who  have  certified  the  audited  financial
statements  included  in  such  registration  statement,  in  each  case  all as
necessary to enable them to exercise  their due diligence  responsibility  under
the 1933 Act; PROVIDED,  HOWEVER,  that information that the Company determines,
in good faith, to be  confidential  and which the Company advises such Person in
writing is  confidential  shall not be  disclosed  unless  such  Person  signs a
confidentiality  agreement reasonably satisfactory to the Company, or unless the
related  Selling Holder of Registrable  Securities  agrees to be responsible for
such Person's breach of confidentiality on terms reasonably  satisfactory to the
Company.

     3.9. Use the Company's best efforts to obtain a so-called  "comfort letter"
from its independent  public  accountants,  and legal opinions of counsel to the
Company  addressed to the Selling  Holders,  in customary form and covering such
matters  of the type  customarily  covered by such  letters,  and in a form that
shall be reasonably  satisfactory to Majority Selling Holders. The Company shall
furnish to each Selling  Holder a signed  counterpart of any such comfort letter
or legal  opinion.  Delivery  of any such  opinion  or comfort  letter  shall be
subject  to  the   recipient   furnishing   such  written   representations   or
acknowledgments as are customarily  provided by selling shareholders who receive
such comfort letters or opinions.

                                       5
<PAGE>

     3.10. Provide and cause to be maintained a transfer agent and registrar for
all Registrable Securities covered by such registration statement from and after
a date not later than the effective date of such registration statement.

     3.11.  Use all  reasonable  efforts  to cause  the  Registrable  Securities
covered by such registration statement (i) to be listed on a national securities
exchange or included  for  quotation in a recognized  trading  market,  on which
similar  securities issued by the Company are then listed or included,  and (ii)
to be  registered  with or  approved  by  such  other  United  States  or  state
governmental  agencies  or  authorities  as may be  necessary  by  virtue of the
business  and  operations  of the  Company  to enable  the  Selling  Holders  of
Registrable  Securities  to  consummate  the  disposition  of  such  Registrable
Securities.

     3.12.  Take such  other  actions  as are  reasonably  required  in order to
expedite or facilitate the  disposition of  Registrable  Securities  included in
each such registration statement.

     Section  4.    HOLDERS'  OBLIGATIONS.  It shall be a condition precedent to
the  obligations  of the Company to take any action  pursuant to this  Agreement
with respect to the Registrable  Securities of any Selling Holder of Registrable
Securities that such Selling Holder shall:

     4.1. Furnish to the Company such information regarding such Selling Holder,
the number of the Registrable Securities owned by it, and the intended method of
disposition of such  securities as shall be required to effect the  registration
of such Selling  Holder's  Registrable  Securities,  and to  cooperate  with the
Company in preparing such registration statement;

     4.2. Agree to sell its  Registrable  Securities to the  underwriters at the
same price and on substantially  the same terms and conditions as the Company or
the other  Persons on whose behalf the  registration  statement  was being filed
have agreed to sell their securities, and to execute the underwriting agreement.

     Section 5.     EXPENSES  OF  REGISTRATION.   Expenses  in  connection  with
registrations pursuant to this Agreement shall be allocated and paid as follows:

     5.1. The  Company  shall  bear  and pay all pay all  expenses  incurred  in
connection  with any  registration,  filing,  or  qualification  of  Registrable
Securities with respect to each Piggy Back  Registration for each Selling Holder
(which right may be assigned to any Person to whom  Registrable  Securities  are
Transferred as permitted by SECTION 7), including all  registration,  filing and
National Association of Securities Dealers,  Inc. fees, all fees and expenses of
complying with securities or Blue Sky laws, all word processing, duplicating and
printing  expenses,  messenger and delivery  expenses,  the reasonable  fees and
disbursements  of counsel  for the  Company,  and of the  Company's  independent
public accountants, including the expenses of "cold comfort" letters required by
or incident to such  performance  and  compliance,  but  excluding  underwriting
discounts and  commissions  relating to Registrable  Securities  (which shall be
paid on a pro rata basis by the Selling  Holder of Registrable  Securities)  and
the  reasonable  fees and  disbursements  of one firm of counsel for the Selling
Holders of Registrable Securities (selected by the Majority Selling Holders)(the
"REGISTRATION EXPENSES").

                                       6
<PAGE>

     5.2. Any  failure  of the  Company  to pay  any  Registration  Expenses  as
required by this  SECTION 5 shall not  relieve  the  Company of its  obligations
under this Agreement.

     Section 6.     INDEMNIFICATION; CONTRIBUTION. If any Registrable Securities
are included in a registration statement under this Agreement:

     6.1. To the extent permitted by applicable law, the Company shall indemnify
and hold harmless each Selling  Holder,  each Person,  if any, who controls such
Selling  Holder within the meaning of the 1933 Act, and each officer,  director,
partner,  and  employee  of such  Selling  Holder and such  controlling  Person,
against any and all losses, claims, damages,  liabilities and expenses (joint or
several),   including   attorneys'  fees  and   disbursements  and  expenses  of
investigation,  incurred  by such party  pursuant  to any  actual or  threatened
action,  suit,  proceeding  or  investigation,  or to which any of the foregoing
Persons may become  subject under the 1933 Act, the 1934 Act or other federal or
state laws, insofar as such losses,  claims,  damages,  liabilities and expenses
arise out of or are based upon any of the  following  statements,  omissions  or
violations (collectively a "VIOLATION"):

          (i)  Any untrue  statement or alleged  untrue  statement of a material
fact  contained  in  such  registration  statement,  including  any  preliminary
prospectus  or  final  prospectus   contained  therein,  or  any  amendments  or
supplements thereto;

          (ii) The omission or alleged omission to state therein a material fact
required to be stated therein,  or necessary to make the statements  therein not
misleading; or

          (iii) Any violation  or alleged  violation  by the Company of the 1933
Act, the 1934 Act, any applicable state securities law or any rule or regulation
promulgated  under the 1933 Act, the 1934 Act or any applicable state securities
law;

PROVIDED,  HOWEVER, that the indemnification  required by this SECTION 6.1 shall
not  apply to  amounts  paid in  settlement  of any such  loss,  claim,  damage,
liability or expense if such  settlement is effected  without the consent of the
Company  (which  consent  shall  not be  unreasonably  withheld),  nor shall the
Company be liable in any such case for any such loss, claim,  damage,  liability
or  expense to the  extent  that it arises  out of or is based upon a  Violation
which  occurs  in  reliance  upon and in  conformity  with  written  information
furnished  to  the  Company  by  the  indemnified  party  expressly  for  use in
connection with such registration statement.

     6.2. To the extent  permitted  by  applicable  law,  each  Selling  Holder,
severally and not jointly,  shall indemnify and hold harmless the Company,  each
of its  directors,  each of its officers who shall have signed the  registration
statement,  each Person,  if any, who controls the Company within the meaning of
the 1933 Act, any other Selling Holder, any controlling Person of any such other
Selling Holder and each officer,  director,  partner, and employee of such other
Selling Holder and such controlling Person,  against any and all losses, claims,
damages, liabilities and expenses (joint and several), including attorneys' fees
and disbursements and expenses of investigation, incurred by such party pursuant
to any actual or threatened  action,  suit,  proceeding or investigation,  or to
which any of the foregoing Persons may otherwise

                                       7
<PAGE>

become  subject under the 1933 Act, the 1934 Act or other federal or state laws,
insofar as such losses, claims,  damages,  liabilities and expenses arise out of
or are based upon any  Violation,  in each case to the  extent  (and only to the
extent)  that such  Violation  occurs in reliance  upon and in  conformity  with
written  information  furnished  by such  Selling  Holder  expressly  for use in
connection   with   such   registration;   PROVIDED,   HOWEVER,   that  (x)  the
indemnification  required by this SECTION 6.2 shall not apply to amounts paid in
settlement of any such loss, claim,  damage,  liability or expense if settlement
is effected  without the consent of the relevant  Selling  Holder of Registrable
Securities,  which consent  shall not be  unreasonably  withheld,  and (y) in no
event  shall the  amount of any  indemnity  under  this  SECTION  6.2 exceed the
proceeds from the applicable offering received by such Selling Holder.

     6.3. Promptly after receipt by an indemnified party under this SECTION 6 of
notice of the  commencement of any action,  suit,  proceeding,  investigation or
threat thereof made in writing for which such indemnified party may make a claim
under this SECTION 6, such  indemnified  party shall deliver to the indemnifying
party a written notice of the commencement  thereof and the  indemnifying  party
shall have the right to  participate  in,  and,  to the extent the  indemnifying
party so desires,  jointly with any other  indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the parties.
The  failure  to  deliver  written  notice to the  indemnifying  party  within a
reasonable  time following the  commencement  of any such action,  if materially
prejudicial   to  its  ability  to  defend  such  action,   shall  relieve  such
indemnifying  party of any liability to the indemnified party under this SECTION
6 to the extent of such material prejudice  resulting  therefrom,  but shall not
relieve  the  indemnifying  party  of any  liability  that  it may  have  to any
indemnified  party  otherwise  than  pursuant  to this  SECTION  6. Any fees and
expenses  incurred by the  indemnified  party  (including  any fees and expenses
incurred in connection with  investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified  party, as incurred,  within thirty
(30)  days of  written  notice  thereof  to the  indemnifying  party.  Any  such
indemnified  party shall have the right to employ  separate  counsel in any such
action,  claim or proceeding and to participate in the defense thereof,  but the
fees and  expenses of such  counsel  shall be the  expenses of such  indemnified
party unless (i) the indemnifying party has agreed to pay such fees and expenses
or (ii) the indemnifying  party shall have failed to promptly assume the defense
of such action,  claim or proceeding or (iii) such indemnified  party shall have
been advised by counsel that there may be one or more legal  defenses  available
to it  which  are  different  from or in  addition  to  those  available  to the
indemnifying  party  and that the  assertion  of such  defenses  would  create a
conflict of interest such that counsel employed by the indemnifying  party could
not  faithfully  represent  the  indemnified  party  (in  which  case,  if  such
indemnified  party notifies the indemnifying  party in writing that it elects to
employ  separate  counsel  at  the  expense  of  the  indemnifying   party,  the
indemnifying  party  shall  not have the  right to assume  the  defense  of such
action,  claim or  proceeding  on behalf  of such  indemnified  party,  it being
understood,  that the  indemnifying  party shall not, in connection with any one
such  action,  claim or  proceeding  or separate  but  substantially  similar or
related actions,  claims or proceedings in the same jurisdiction  arising out of
the same general  allegations or  circumstances,  unless it otherwise agrees, be
liable for the  reasonable  fees and expenses of more than one separate  firm of
attorneys  (together  with  appropriate  local counsel) at any time for all such
indemnified parties, unless in the reasonable judgment of such indemnified party
a conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such action, claim or

                                       8
<PAGE>

proceeding,  in which event the indemnifying party shall be obligated to pay the
fees and expenses of such additional counsel or counsels), then, and in the case
of clauses (i), (ii) and (iii) above, the indemnifying  party shall pay all such
fees and expenses. No indemnifying party shall be liable to an indemnified party
for any  settlement  of any  action,  proceeding  or claim  without  the written
consent of the  indemnifying  party,  which  consent  shall not be  unreasonably
withheld.

     6.4. If  the   indemnification   required  by  this   Section  6  from  the
indemnifying  party is unavailable to an indemnified  party hereunder in respect
of any losses,  claims,  damages,  liabilities  or expenses  referred to in this
SECTION 6:

          (a)  The indemnifying  party, in lieu of indemnifying such indemnified
party,  shall contribute to the amount paid or payable by such indemnified party
as a result of such losses,  claims,  damages,  liabilities  or expenses in such
proportion as is appropriate  to reflect the relative fault of the  indemnifying
party and  indemnified  parties in connection with the actions which resulted in
such losses,  claims,  damages,  liabilities  or expenses,  as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any Violation has been committed by, or relates to information  supplied
by, such indemnifying  party or indemnified  parties,  and the parties' relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such Violation. The amount paid or payable by a party as a result of the losses,
claims,  damages,  liabilities and expenses referred to above shall be deemed to
include,  subject to the  limitations  set forth in SECTION 6.1 and SECTION 6.2,
any  legal  or other  fees or  expenses  reasonably  incurred  by such  party in
connection with any investigation or proceeding.

          (b)  The parties  hereto agree that it would not be just and equitable
if  contribution  pursuant  to this  SECTION  6.4  were  determined  by pro rata
allocation or by any other method of allocation which does not take into account
the equitable  considerations referred to in SECTION 6.4(a). No Person guilty of
fraudulent  misrepresentation  (within the meaning of Section  11(f) of the 1933
Act) shall be  entitled  to  contribution  from any Person who was not guilty of
such fraudulent misrepresentation.

     6.5. If indemnification is available under this SECTION 6, the indemnifying
parties shall  indemnify each  indemnified  party to the full extent provided in
this SECTION 6 without regard to the relative fault of such  indemnifying  party
or indemnified party or any other equitable consideration referred to in SECTION
6.4.

     6.6. The  obligations of the Company and the Selling Holders of Registrable
Securities  under this SECTION 6 shall survive the completion of any offering of
Registrable   Securities  pursuant  to  a  registration   statement  under  this
Agreement, and otherwise.

     Section 7.     TRANSFER OF  REGISTRATION  RIGHTS.  Rights  with  respect to
Registrable  Securities  may be  Transferred  by such  Holder  to any  Person in
connection  with the Transfer of Registrable  Securities to such Person,  in all
cases,  if Transferor  shall have delivered to the Secretary of the Company,  no
later than 15 days following the date of the Transfer,  written  notification of
such Transfer setting forth the name of the Transferor, name and address of the

                                       9
<PAGE>

Transferee,  and the number of Warrants and/or shares of Registrable  Securities
which shall have been so Transferred.

     Section 8.     COVENANTS  OF THE  COMPANY.  The Company  hereby  agrees and
covenants as follows:

     8.1. The  Company  shall,  at such time as any  securities  of the  Company
become registered for sale under the 1933 Act, file as and when applicable, on a
timely  basis,  all reports  required to be filed by it under the 1934 Act,  and
take such further action as may be reasonably  required from time to time and as
may be within the  reasonable  control of the Company,  to enable the Holders to
Transfer  Registrable  Securities without registration under the 1933 Act within
the limitation of the exemptions  provided by Rule 144 under the 1933 Act or any
similar rule or regulation hereafter adopted by the Commission.

     8.2. The  Company  shall not,  directly or  indirectly,  (x) enter into any
merger,  consolidation or  reorganization  in which the Company shall not be the
surviving  corporation or (y) Transfer or agree to Transfer all or substantially
all  the  Company's  assets,   unless  prior  to  such  merger,   consolidation,
reorganization or asset Transfer,  the surviving  corporation or the Transferee,
respectively,  shall have  agreed in writing  to assume the  obligations  of the
Company  under this  Agreement,  and for that  purpose  references  hereunder to
"REGISTRABLE  SECURITIES"  shall be deemed to include the  securities  which the
Holders of Registrable  Securities  would be entitled to receive in exchange for
Registrable   Securities   pursuant  to  any  such  merger,   consolidation   or
reorganization.

     8.3. The  Company  shall not grant to any  Person  (other  than a Holder of
Registrable  Securities) any  registration  rights with respect to securities of
the Company.

     Section 9.     ASSIGNMENT;   BENEFIT.   This   Agreement  and  all  of  the
provisions  hereof  shall be binding  upon and shall inure to the benefit of the
parties hereto and their respective heirs, assigns, executors, administrators or
successors;  PROVIDED, HOWEVER, that except as specifically provided herein with
respect  to certain  matters,  neither  this  Agreement  nor any of the  rights,
interests or obligations hereunder shall be assigned or delegated by the Company
without  the prior  written  consent of Holders  owning  Registrable  Securities
possessing a majority in number of the Registrable Securities outstanding on the
date as of which such delegation or assignment is to become effective.  A Holder
may Transfer its rights  hereunder to a successor in interest to the Registrable
Securities owned by such assignor only as permitted by SECTION 7.

     Section 10.    Miscellaneous.
                    -------------

     10.1. GOVERNING LAW. THIS  AGREEMENT  SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF TEXAS,  WITHOUT  GIVING  REGARD TO THE
CONFLICT OF LAWS PRINCIPLES THEREOF.

     10.2. NOTICES. Any  and  all  notices,   designations,   consents,  offers,
acceptances,  or any other  communication  provided for herein shall be given in
writing delivered personally

                                       10
<PAGE>

(including delivery by courier or by facsimile if received during normal working
hours) or by registered or certified mail, addressed,  if to the Company, to the
attention of N.C. Taylor,  President;  and, if to a Holder, to him, her or it at
the address indicated for such Holder on the appropriate signature page attached
hereto;  or to such other  address as may be  designated  in writing by any such
party. Except as otherwise provided in this Agreement, each such notice shall be
deemed  given  when  delivered  or on a date  which is four (4) days after it is
mailed in any post  office or branch  post office  regularly  maintained  by the
United States Postal Service (registered or certified,  with postage prepaid and
properly addressed).

     10.3. AMENDMENT. This  Agreement  may be  amended  with the  consent of the
Company  and the  Company  may take any  action  herein  prohibited,  or omit to
perform any act herein required to be performed by it, only if the Company shall
have  obtained  the written  consent of Holders  owning  Registrable  Securities
possessing a majority in number of the Registrable  Securities then  outstanding
to such amendment, action or omission to act.

     10.4. WAIVER. No failure or delay on the part of the parties or any of them
in exercising any right, power or privilege hereunder, nor any course of dealing
between the parties or any of them shall  operate as a waiver of any such right,
power or privilege  nor shall any single or partial  exercise of any such right,
power or privilege  preclude  the  simultaneous  or later  exercise of any other
right, power or privilege. The rights and remedies herein expressly provided are
cumulative  and are not exclusive of any rights or remedies which the parties or
any of them would  otherwise  have. No notice to or demand on the Company in any
case shall  entitle  the  Company  to any other or  further  notice or demand in
similar or other circumstances or constitute a waiver of the rights of the other
parties or any of them to take any other or further action in any  circumstances
without notice or demand.

     10.5. ENTIRE AGREEMENT;  INTEGRATION.  This Agreement  supersedes all prior
agreements  between  or among any of the  parties  hereto  with  respect  to the
subject matter  contained  herein and therein,  and such  agreements  embody the
entire understanding among the parties relating to such subject matter.

     10.6. INJUNCTIVE RELIEF.  Each of the parties hereto  acknowledges  that in
the  event  of a  breach  by any of  them  of any  material  provision  of  this
Agreement, the aggrieved party may be without an adequate remedy at law. Each of
the  parties  therefore  agrees  that in the event of such a breach  hereof  the
aggrieved party may elect to institute and prosecute proceedings in any court of
competent  jurisdiction  to  enforce  specific  performance  or  to  enjoin  the
continuing breach hereof. By seeking or obtaining any such relief, the aggrieved
party shall not be precluded from seeking or obtaining any other relief to which
it may be entitled.

     10.7. COUNTERPARTS. This  Agreement  may  be  executed  in  any  number  of
counterparts,  each of  which  shall  be an  original,  and all of  which  shall
together  constitute one and the same instrument.  All signatures need not be on
the same counterpart.

     10.8. SEVERABILITY. Any provision of this  Agreement  which is  prohibited,
unenforceable  or  not  authorized  in  any  jurisdiction   shall,  as  to  such
jurisdiction, be ineffective to the extent of such prohibition, unenforceability
or nonauthorization without invalidating the

                                       11
<PAGE>

remaining  provisions  hereof  or  affecting  the  validity,  enforceability  or
legality of such provision in any other  jurisdiction.  The parties hereto agree
to  negotiate  in good faith to replace any  illegal,  invalid or  unenforceable
provision of this Agreement with a legal, valid and enforceable  provision that,
to the extent possible, will preserve the economic bargain of this Agreement.

     10.9. TERMINATION.  This Agreement  may  be  terminated  at any  time  by a
written  instrument  signed by the parties hereto.  Unless sooner  terminated in
accordance  with the preceding  sentence,  this Agreement  (other than SECTION 7
hereof)  shall  terminate  in its  entirety  on such  date as there  shall be no
Registrable  Securities  outstanding;  PROVIDED that any  securities  previously
subject to this Agreement shall not be Registrable Securities following the sale
of any such shares in an offering registered pursuant to this Agreement.

     10.10. ATTORNEYS' FEES. In any action or proceeding  brought to enforce any
provision of this Agreement,  or where any provision  hereof is validly asserted
as a defense,  the  successful  party shall be  entitled  to recover  reasonable
attorneys'  fees  (including any fees incurred in any appeal) in addition to its
costs and expenses and any other available remedy.

     10.11. NO THIRD PARTY BENEFICIARIES. Nothing herein expressed or implied is
intended  to confer  upon any  person,  other than the  parties  hereto or their
respective permitted assigns, successors,  heirs and legal representatives,  any
rights,  remedies,  obligations  or  liabilities  under  or by  reason  of  this
Agreement.


               THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

                                       12
<PAGE>

     IN WITNESS  WHEREOF,  this  Agreement has been duly executed by the parties
hereto as of the date first written above.

COMPANY

MEXCO ENERGY CORPORATION,
a Colorado corporation


By:
   --------------------------------------------------
Name:
     ------------------------------------------------
Title:
      -----------------------------------------------

HOLDERS

FALCONBAY OPERATING, L.L.C.
A Texas corporation


By:
   --------------------------------------------------
Name:
     ------------------------------------------------
Title:
      -----------------------------------------------

Address for Notice:

600 N. Marienfeld, Suite 900
Midland, Texas 79701

                                       13

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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