<HTML>
<HEAD>
<TITLE>SECURITIES AND EXCHANGE COMMISSION</TITLE>
</HEAD>
<BODY LINK="#0000ff" VLINK="#800080">

<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=638>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER"><B>UNITED STATES</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">WASHINGTON, D.C. 20549</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">-----------------------------------</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">FORM 8-K</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">CURRENT REPORT</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER">PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER">--------------------------------------</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">October 10, 2000</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER">Date of Report (Date of Earliest Event Reported)</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">GLADSTONE RESOURCES, INC.</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<B><P ALIGN="CENTER">State of Delaware</B></TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">1-1525</TD>
<TD WIDTH="34%" VALIGN="TOP">
<P ALIGN="CENTER">91-0234563</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<P ALIGN="CENTER">(State or other Jurisdiction</P>
<P ALIGN="CENTER">of Incorporation)</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(Commission File Number)</TD>
<TD WIDTH="34%" VALIGN="TOP">
<P ALIGN="CENTER">(IRS Employer</P>
<P ALIGN="CENTER">Identification No.)</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="34%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="34%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">3500 Oak Lawn, Suite 590, LB 49</B></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">Dallas, Texas</B></TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<B><P ALIGN="CENTER">75219</B></TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(Address of Principal Executive Offices)</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P ALIGN="CENTER">(Zip Code)</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="50%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">214-528-9710</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER">(Registrant's Telephone Number, Including Area Code)</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<P ALIGN="JUSTIFY">&nbsp;</P>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=638>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</P>
<B><P>ITEM 2.</B></TD>
<TD WIDTH="88%" VALIGN="TOP">
<B><P>ACQUISITION OR DISPOSITION OF ASSETS</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">&#9;On October 10, 2000, Gladstone Energy, Inc. (the "Company") disposed of 100% of the Company's interest in and to the Company's San Juan County, New Mexico properties (the "Disposition"). The purchaser of the interest was EXCO
Resources, Inc., 5735 Pineland, Suite 235, Dallas, TX 75231 for a purchase price of $267,000.00. The sale of the 100% interest in the San Juan properties represents approximately 26.8% of the Company's oil and gas interests.</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=2>
<P ALIGN="JUSTIFY">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The use of the funds from the sale have not been determined.</TD>
</TR>
</TABLE>


<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=638>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P><B>ITEM 7.</B></TD>
<TD WIDTH="88%" VALIGN="TOP">
<B><P>FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS</B></TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">(a.)&nbsp;&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>Financial statements - not applicable.<BR>
</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">(b.)&nbsp;&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>Pro forma financial information.<BR>
</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>1)&nbsp;&nbsp;Gladstone Energy, Inc. proforma balance sheet as of June 30, 2000 (unaudited).</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>2)&nbsp;&nbsp;Gladstone Energy, Inc. proforma statement of operations for the year ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 1999 (unaudited)</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>3)&nbsp;&nbsp;Gladstone Energy, Inc. pro forma statement of income for the six months ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;June 30, 2000 (unaudited).<BR>
</TD>
</TR>
<TR><TD WIDTH="12%" VALIGN="TOP">
<P ALIGN="RIGHT">(c.)&nbsp;&nbsp;</TD>
<TD WIDTH="88%" VALIGN="TOP">
<P>The exhibits listed on the accompanying Exhibit Index immediately following the signature page are filed as part of, or incorporated by reference into, this Current Report of Form 8-K.</TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">GLADSTONE ENERGY, INC. <BR>
PRO FORMA FINANCIAL STATEMENTS</P>
<P ALIGN="CENTER">JUNE 30, 2000</P>
</B><P ALIGN="JUSTIFY">On October 10, 2000, the Company completed the sale of 100% of the Company's interest in and to the San Juan County, New Mexico properties. </P>
<P ALIGN="JUSTIFY">The transaction will be recorded as a gain on sale of assets sold at their fair values.</P>
<P ALIGN="JUSTIFY">The pro forma financial statements may not be indicative of the actual results of the sale. The accompanying proforma financial statements should be read in connection with the historical statements of Gladstone Energy, Inc.</P>
<B><P ALIGN="CENTER">GLADSTONE ENERGY, INC. <BR>
PRO FORMA BALANCE SHEET<BR>
(UNAUDITED)<BR>
<BR>
JUNE 30, 2000</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=732>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER"><BR>
Historical<BR>
<U>statements</B></U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER"><BR>
Prior Pro Forma<BR>
<U>adjustments</B></U></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">Current Pro Forma<BR>
<U>&nbsp;&nbsp;adjustments&nbsp;</B></U></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER"><BR>
Pro Forma<BR>
<U>Results&nbsp;&nbsp;&nbsp;</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>ASSETS:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>CURRENT ASSETS:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Cash</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;41,494&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1,000&nbsp; (2)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;267,000&nbsp;&nbsp;(4)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;309,494&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Accounts receivable</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;57,373</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;(13,527</U>)&nbsp;(1)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10,677</U>)&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;33,169</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL CURRENT ASSETS</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">98,867&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(12,527)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">256,323&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">342,663&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>PROPERTY AND EQUIPMENT:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Gas and oil properties (successful efforts method)</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">929,476&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">(102,022) (1)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">(534,757)&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">292,697&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Field equipment</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18,628</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;18,628</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">948,104&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(102,022)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(534,757)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">311,325&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Accumulated depletion and depreciation</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;(510,824</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,472</U> &nbsp;(1)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;425,930</U>&nbsp;&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;(64,422</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL PROPERTY AND EQUIPMENT</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">437,280&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(81,550)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(108,827)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">246,903&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>OTHER ASSETS:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Cost in excess of amount assigned to net assets<BR>
&nbsp;&nbsp;in New Mexico at date of acquisition, net of <BR>
&nbsp;&nbsp;amortization</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">33,690&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">(33,690)&nbsp;&nbsp;(5)</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Loan origination fees, net of amortization</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,770</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,770</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL OTHER ASSETS</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;38,460</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;(33,690</U>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,770</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>TOTAL ASSETS</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;574,607</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(94,077</U>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;113,806</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;594,336</U>&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>LIABILITIES AND STOCKHOLDERS' EQUITY:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>CURRENT LIABILITIES:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Accounts payable</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,911&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2,141)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,770&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Installment note payable to bank</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;55,000</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(55,000</U>) (1)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL CURRENT LIABILITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">67,911&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">(57,141)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">10,770&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>LONG-TERM LIABILITIES:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Long term portion of note payable to bank</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;145,000</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">(145,000</U>)&nbsp;(1)</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL LONG-TERM LIABILITIES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">145,000&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">(145,000)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>STOCKHOLDERS' EQUITY:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Common stock</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">849&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">849&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Capital in excess of stated value</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">1,379,285&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">1,379,285&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="36%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Retained earning (deficit)</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">(1,018,438</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;108,064</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;113,806</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">(&nbsp;&nbsp;&nbsp;&nbsp;796,568</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;361,696</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;108,064</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;113,806</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;583,566</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="7%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="35%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="14%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="42%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=1><P>TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;574,607</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;(94,077</U>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="14%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;113,806</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="13%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;594,336</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">See Notes to Pro Forma Financial Statements (Unaudited)</P>
<P ALIGN="CENTER">GLADSTONE ENERGY, INC. <BR>
PRO FORMA STATEMENT OF OPERATIONS<BR>
(UNAUDITED)<BR>
FOR THE YEAR ENDING DECEMBER 31, 1999</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=696>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER"><BR>
Historical<BR>
<U>statements</B></U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">Prior <BR>
Pro Forma<BR>
<U>adjustments (1)</B></U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">Current<BR>
Pro Forma<BR>
<U>adjustments (5)</B></U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER"><BR>
Pro Forma<BR>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;results&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>SALES:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Gas and oil</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;223,943&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(48,360)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(56,031)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;119,552&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>COST OF SALES:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Production taxes</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;24,346&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(4,388)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(4,419)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">15,539&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Well operating expense</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;72,242</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(14,947</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(19,686</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp; &nbsp;37,609</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL COST OF SALES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; 96,588</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(19,335</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(24,105</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;53,148</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>GROSS PROFIT ON SALES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;127,355</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(29,025</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(31,926</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp; &nbsp;66,404</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>EXPENSES:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Oil and gas prospect expense</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">24,491 &nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">24,491&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Dry hole and abandonment loss </B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">114,388 &nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">114,388&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Depletion</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">56,973&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(9,768)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(21,710)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">25,495&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Depreciation and amortization</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">8,724&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(6,338)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">2,386&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>General and administrative</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">43,115&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">43,115&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Interest</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">9,862&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(2,958)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">6,904&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Taxes</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">8,050&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">8,050&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Legal, auditing and accounting</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;75,501</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;75,501</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL EXPENSES</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;341,104</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;(12,726</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;(28,048</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;300,330</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(213,749)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(16,299)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(3,878)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(233,926)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>OTHER INCOME</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Interest and dividend income</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,683</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9,683</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>Income (loss) before taxes</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(204,066)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(16,299)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(3,878)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(224,243)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>Income taxes</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>NET INCOME (LOSS)</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;(204,066</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(16,299</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;(3,878</U>)&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;(224,243</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>EARNINGS/(LOSS) PER SHARE:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Basic:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.24</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.02</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.00</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.26</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="33%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Diluted:</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.24</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.02</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.00</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.26</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="38%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER">See Notes to Pro Forma Financial Statements (Unaudited)</P>
</B><P ALIGN="CENTER">&nbsp;</P>
<B><P ALIGN="CENTER">GLADSTONE ENERGY, INC. <BR>
PRO FORMA STATEMENT OF OPERATIONS<BR>
(UNAUDITED)<BR>
FOR THE SIX MONTHS ENDING JUNE 30, 2000</P></B>
<P ALIGN="CENTER"><CENTER><TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=696>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER"><BR>
Historical<BR>
<U>statements</B></U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">Prior <BR>
Pro Forma<BR>
<U>adjustments (1)</B></U></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER">Current <BR>
Pro Forma<BR>
<U>adjustments (5)</B></U></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="CENTER"><BR>
Pro Forma<BR>
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;results&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></U></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>SALES:</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Gas and oil</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;220,830&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(53,733)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(38,499)&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;$&nbsp;&nbsp;&nbsp;&nbsp;128,598&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>COST OF SALES:</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Production taxes</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;24,871&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(6,476)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;(3,043)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">15,352&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Well operating expense</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39,315</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7,850</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(12,175</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp; &nbsp;19,290</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL COST OF SALES</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;64,186</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(14,326</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(15,218</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;34,642</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>GROSS PROFIT ON SALES</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;156,644</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(39,407</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(23,281</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp; 93,956</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>EXPENSES:</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Dry hole and abandonment loss </B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">84,975 &nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">84,975&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Depletion</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">44,508&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(9,742)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(10,842)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">23,924&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Depreciation and amortization</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">7,849&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(682)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(3,189)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">3,978&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>General and administrative</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">24,222&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">24,222&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Interest</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">10,886&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(10,886)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Taxes</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">2,452&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">- &nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">2,452&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Legal, auditing and accounting</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;14,730</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp; -&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;14,730</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP">
<B><FONT SIZE=2><P>TOTAL EXPENSES</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;189,622</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;(21,310</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;(14,031</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">154,281</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(32,978)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(18,097)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(9,250)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(60,325)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="6%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="31%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>OTHER INCOME</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Interest and dividend income</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp; </U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>Income (loss) before taxes</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(32,959)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(18,097)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(9,250)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">(60,306)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>Income taxes</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><U><FONT SIZE=2><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;</U>&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>NET INCOME (LOSS)</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(32,959</U>)&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(18,097</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(9,250</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;(60,306</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<B><FONT SIZE=2><P>EARNINGS/(LOSS) PER SHARE:</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Basic:</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.04</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.02</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.01</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.07</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="5%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="32%" VALIGN="TOP" COLSPAN=2>
<B><FONT SIZE=2><P>Diluted:</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.04</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.02</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="16%" VALIGN="TOP">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.01</U>)&nbsp;&nbsp;</B></FONT></TD>
<TD WIDTH="15%" VALIGN="BOTTOM">
<B><FONT SIZE=2><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(.07</U>)&nbsp;&nbsp;</B></FONT></TD>
</TR>
<TR><TD WIDTH="37%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="16%" VALIGN="BOTTOM">
<P>&nbsp;</TD>
<TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>
</CENTER></P>

<B><P ALIGN="CENTER">See Notes to Pro Forma Financial Statements (Unaudited)</P>
</B><P ALIGN="CENTER">&nbsp;</P>
<B><P ALIGN="CENTER">&nbsp;</P></B>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=637>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P ALIGN="CENTER"><B>GLADSTONE ENERGY, INC. </B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">NOTES TO PRO FORMA FINANICAL STATEMENTS</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<B><P ALIGN="CENTER">JUNE 30, 2000</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(1)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 30% of the Righthand Creek oil property as of June 30, 2000, and the six month period ending June 30, 2000.</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(2)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the cash proceeds from the sale of the Righthand Creek property.</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Gross proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;201,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Note Payoff</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;<U>(200,000</U>)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Net proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(3)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the estimated gain for proforma financial statement purposes for the sale of Righthand Creek property:</B></TD>
</TR>
<TR><TD VALIGN="TOP" COLSPAN=4>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Sales price</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;201,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Cost of 30% of property</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(102,022)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Accumulated depletion and depreciation</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp; <U>&nbsp;&nbsp; &nbsp;&nbsp;20,472</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Estimated gain</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;119,450</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(4)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the cash proceeds from the sale of the San Juan, New Mexico property:</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Gross proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;267,000</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Net proceeds</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;267,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(5)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 100% of the San Juan, New Mexico gas properties on October 10, 2000, but effective for production purposes as of August 1, 2000, for
the six months ended June 30, 2000.</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<B><P>(6)</B></TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<B><P>To reflect the estimated gain for proforma financial statement purposes for the sale of the San Juan New Mexico property:</B></TD>
</TR>
<TR><TD WIDTH="15%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="85%" VALIGN="TOP" COLSPAN=3>
<P>&nbsp;</TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Sales price</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;&nbsp;&nbsp;267,000&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Cost of property</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(534,757)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Cost in excess of assets purchased</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;(337,000)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Accumulated depletion and depreciation</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;425,930&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Accumulated amortization</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">&nbsp; <U>&nbsp;&nbsp; &nbsp;303,310</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<B><P>Estimated gain</B></TD>
<TD WIDTH="27%" VALIGN="TOP">
<B><P ALIGN="RIGHT">$&nbsp;&nbsp;<U>&nbsp;&nbsp;124,483</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></TD>
</TR>
<TR><TD WIDTH="22%" VALIGN="TOP" COLSPAN=2>
<P>&nbsp;</TD>
<TD WIDTH="51%" VALIGN="TOP">
<P>&nbsp;</TD>
<TD WIDTH="27%" VALIGN="TOP">
<P>&nbsp;</TD>
</TR>
</TABLE>

<B><P ALIGN="CENTER">&nbsp;</P>
<P ALIGN="CENTER">SIGNATURES</P>
</B><P ALIGN="JUSTIFY">&#9;Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.</P><DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>
<DIR>

<B><P ALIGN="JUSTIFY">GLADSTONE ENERGY, INC.</P>
</B><P ALIGN="JUSTIFY">&nbsp;</P>
<P>By:&#9;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<BR>
</U>&#9;Johnathan M. Hill<BR>
&#9;<I>President</P></DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>
</DIR>

</I><B><P ALIGN="CENTER">EXHIBIT INDEX</P></B>
<TABLE CELLSPACING=0 BORDER=0 CELLPADDING=1 WIDTH=638>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY"><B><U>EXHIBIT NO.</U>&#9;</B></TD>
<TD WIDTH="82%" VALIGN="TOP" HEIGHT=25>
<B><U><P ALIGN="JUSTIFY">DESCRIPTION</B></U></TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY">2.1&#9;&#9;&#9;</TD>
<TD WIDTH="82%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY">Purchase and Sale Agreement made and entered into as of the 10<SUP>th</SUP> day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser.<BR>
</TD>
</TR>
<TR><TD WIDTH="18%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY">2.2</TD>
<TD WIDTH="82%" VALIGN="TOP" HEIGHT=25>
<P ALIGN="JUSTIFY">Assignment and Bill of Sale dated October 10, 2000, effective as to accounting for production as of August 1, 2000.</TD>
</TR>
</TABLE>

<P ALIGN="JUSTIFY">&nbsp;</P></BODY>
</HTML>
[{"type": "8-K", "sequence": "1", "filename": "0001.htm", "secsgml_size_bytes": 74384}]
{"company-data": {"conformed-name": "GLADSTONE ENERGY INC", "cik": "0000041656", "assigned-sic": "1311", "irs-number": "910234563", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-01525", "film-number": "745594"}, "business-address": {"street1": "3500 OAK LAWN AVE", "street2": "SUITE 590", "city": "DALLAS", "state": "TX", "zip": "75219", "phone": "2145289710"}, "mail-address": {"street1": "3500 OAK LAWN AVE", "street2": "SUITE 590", "city": "DALLAS", "state": "TX", "zip": "75219"}, "former-company": [{"former-conformed-name": "GLADSTONE RESOURCES INC", "date-changed": "19920703"}, {"former-conformed-name": "GLADSTONE MOUNTAIN MINING CO", "date-changed": "19730307"}]}
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------------------------------
October 10, 2000
Date of Report (Date of Earliest Event Reported)
GLADSTONE RESOURCES, INC.
State of Delaware
1-1525
91-0234563
(State or other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
3500 Oak Lawn, Suite 590, LB 49
Dallas, Texas
75219
(Address of Principal Executive Offices)
(Zip Code)
214-528-9710
(Registrant's Telephone Number, Including Area Code)
ITEM 2.
ACQUISITION OR DISPOSITION OF ASSETS
On October 10, 2000, Gladstone Energy, Inc. (the "Company") disposed of 100% of the Company's interest in and to the Company's San Juan County, New Mexico properties (the "Disposition"). The purchaser of the interest was EXCO
Resources, Inc., 5735 Pineland, Suite 235, Dallas, TX 75231 for a purchase price of $267,000.00. The sale of the 100% interest in the San Juan properties represents approximately 26.8% of the Company's oil and gas interests.
The use of the funds from the sale have not been determined.
ITEM 7.
FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a.)
Financial statements - not applicable.
(b.)
Pro forma financial information.
1)  Gladstone Energy, Inc. proforma balance sheet as of June 30, 2000 (unaudited).
2)  Gladstone Energy, Inc. proforma statement of operations for the year ending      December 31, 1999 (unaudited)
3)  Gladstone Energy, Inc. pro forma statement of income for the six months ending      June 30, 2000 (unaudited).
(c.)
The exhibits listed on the accompanying Exhibit Index immediately following the signature page are filed as part of, or incorporated by reference into, this Current Report of Form 8-K.
GLADSTONE ENERGY, INC.
PRO FORMA FINANCIAL STATEMENTS
JUNE 30, 2000
On October 10, 2000, the Company completed the sale of 100% of the Company's interest in and to the San Juan County, New Mexico properties.
The transaction will be recorded as a gain on sale of assets sold at their fair values.
The pro forma financial statements may not be indicative of the actual results of the sale. The accompanying proforma financial statements should be read in connection with the historical statements of Gladstone Energy, Inc.
GLADSTONE ENERGY, INC.
PRO FORMA BALANCE SHEET
(UNAUDITED)
JUNE 30, 2000
Historical
statements
Prior Pro Forma
adjustments
Current Pro Forma
adjustments
Pro Forma
Results
ASSETS:
CURRENT ASSETS:
Cash
$        41,494
$           1,000  (2)
$   267,000  (4)
$     309,494
Accounts receivable
57,373
(13,527
) (1)
(10,677
) (5)
33,169
TOTAL CURRENT ASSETS
98,867
(12,527)
256,323
342,663
PROPERTY AND EQUIPMENT:
Gas and oil properties (successful efforts method)
929,476
(102,022) (1)
(534,757) (5)
292,697
Field equipment
18,628
-
-
18,628
948,104
(102,022)
(534,757)
311,325
Accumulated depletion and depreciation
(510,824
)
20,472
(1)
425,930
(5)
(64,422
)
TOTAL PROPERTY AND EQUIPMENT
437,280
(81,550)
(108,827)
246,903
OTHER ASSETS:
Cost in excess of amount assigned to net assets
in New Mexico at date of acquisition, net of
amortization
33,690
-
(33,690)  (5)
-
Loan origination fees, net of amortization
4,770
-
-
4,770
TOTAL OTHER ASSETS
38,460
-
(33,690
)
4,770
TOTAL ASSETS
$
574,607
$
(94,077
)
$
113,806
$
594,336
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable
$         12,911
$       (2,141)
$        -
$       10,770
Installment note payable to bank
55,000
(55,000
) (1)
-
-
TOTAL CURRENT LIABILITIES
67,911
(57,141)
-
10,770
LONG-TERM LIABILITIES:
Long term portion of note payable to bank
145,000
(145,000
) (1)
-
-
TOTAL LONG-TERM LIABILITIES
145,000
(145,000)
-
-
STOCKHOLDERS' EQUITY:
Common stock
849
-
-
849
Capital in excess of stated value
1,379,285
-
-
1,379,285
Retained earning (deficit)
(1,018,438
)
108,064
113,806
(    796,568
)
TOTAL STOCKHOLDERS' EQUITY
361,696
108,064
113,806
583,566
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
574,607
$
(94,077
)
$
113,806
$
594,336
See Notes to Pro Forma Financial Statements (Unaudited)
GLADSTONE ENERGY, INC.
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDING DECEMBER 31, 1999
Historical
statements
Prior
Pro Forma
adjustments (1)
Current
Pro Forma
adjustments (5)
Pro Forma
results
SALES:
Gas and oil
$        223,943
$        (48,360)
$       (56,031)
$    119,552
COST OF SALES:
Production taxes
24,346
(4,388)
(4,419)
15,539
Well operating expense
72,242
(14,947
)
(19,686
)
37,609
TOTAL COST OF SALES
96,588
(19,335
)
(24,105
)
53,148
GROSS PROFIT ON SALES
127,355
(29,025
)
(31,926
)
66,404
EXPENSES:
Oil and gas prospect expense
24,491
-
-
24,491
Dry hole and abandonment loss
114,388
-
-
114,388
Depletion
56,973
(9,768)
(21,710)
25,495
Depreciation and amortization
8,724
-
(6,338)
2,386
General and administrative
43,115
-
-
43,115
Interest
9,862
(2,958)
-
6,904
Taxes
8,050
-
-
8,050
Legal, auditing and accounting
75,501
-
-
75,501
TOTAL EXPENSES
341,104
(12,726
)
(28,048
)
300,330
(213,749)
(16,299)
(3,878)
(233,926)
OTHER INCOME
Interest and dividend income
9,683
-
-
9,683
Income (loss) before taxes
(204,066)
(16,299)
(3,878)
(224,243)
Income taxes
-
-
-
-
NET INCOME (LOSS)
$
(204,066
)
$
(16,299
)
$
(3,878
)
$
(224,243
)
EARNINGS/(LOSS) PER SHARE:
Basic:
$
(.24
)
$
(.02
)
$
(.00
)
$
(.26
)
Diluted:
$
(.24
)
$
(.02
)
$
(.00
)
$
(.26
)
See Notes to Pro Forma Financial Statements (Unaudited)
GLADSTONE ENERGY, INC.
PRO FORMA STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDING JUNE 30, 2000
Historical
statements
Prior
Pro Forma
adjustments (1)
Current
Pro Forma
adjustments (5)
Pro Forma
results
SALES:
Gas and oil
$        220,830
$        (53,733)
$       (38,499)
$    128,598
COST OF SALES:
Production taxes
24,871
(6,476)
(3,043)
15,352
Well operating expense
39,315
(7,850
)
(12,175
)
19,290
TOTAL COST OF SALES
64,186
(14,326
)
(15,218
)
34,642
GROSS PROFIT ON SALES
156,644
(39,407
)
(23,281
)
93,956
EXPENSES:
Dry hole and abandonment loss
84,975
-
-
84,975
Depletion
44,508
(9,742)
(10,842)
23,924
Depreciation and amortization
7,849
(682)
(3,189)
3,978
General and administrative
24,222
-
-
24,222
Interest
10,886
(10,886)
-
-
Taxes
2,452
-
-
2,452
Legal, auditing and accounting
14,730
-
-
14,730
TOTAL EXPENSES
189,622
(21,310
)
(14,031
)
154,281
(32,978)
(18,097)
(9,250)
(60,325)
OTHER INCOME
Interest and dividend income
19
-
-
19
Income (loss) before taxes
(32,959)
(18,097)
(9,250)
(60,306)
Income taxes
-
-
-
-
NET INCOME (LOSS)
$
(32,959
)
$
(18,097
)
$
(9,250
)
$
(60,306
)
EARNINGS/(LOSS) PER SHARE:
Basic:
$
(.04
)
$
(.02
)
$
(.01
)
$
(.07
)
Diluted:
$
(.04
)
$
(.02
)
$
(.01
)
$
(.07
)
See Notes to Pro Forma Financial Statements (Unaudited)
GLADSTONE ENERGY, INC.
NOTES TO PRO FORMA FINANICAL STATEMENTS
JUNE 30, 2000
(1)
To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 30% of the Righthand Creek oil property as of June 30, 2000, and the six month period ending June 30, 2000.
(2)
To reflect the cash proceeds from the sale of the Righthand Creek property.
Gross proceeds
$    201,000
Note Payoff
(200,000
)
Net proceeds
$        1,000
(3)
To reflect the estimated gain for proforma financial statement purposes for the sale of Righthand Creek property:
Sales price
$    201,000
Cost of 30% of property
(102,022)
Accumulated depletion and depreciation
20,472
Estimated gain
$
119,450
(4)
To reflect the cash proceeds from the sale of the San Juan, New Mexico property:
Gross proceeds
$
267,000
Net proceeds
$    267,000
(5)
To reflect the elimination of assets, liabilities, income and expenses relating to and resulting from the sale of 100% of the San Juan, New Mexico gas properties on October 10, 2000, but effective for production purposes as of August 1, 2000, for
the six months ended June 30, 2000.
(6)
To reflect the estimated gain for proforma financial statement purposes for the sale of the San Juan New Mexico property:
Sales price
$    267,000
Cost of property
(534,757)
Cost in excess of assets purchased
(337,000)
Accumulated depletion and depreciation
425,930
Accumulated amortization
303,310
Estimated gain
$
124,483
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
GLADSTONE ENERGY, INC.
By:
Johnathan M. Hill
President
EXHIBIT INDEX
EXHIBIT NO.
DESCRIPTION
2.1
Purchase and Sale Agreement made and entered into as of the 10
th
day of October, 2000 between Gladstone Energy, Inc., as Seller, and EXCO Resources, Inc., as Purchaser.
2.2
Assignment and Bill of Sale dated October 10, 2000, effective as to accounting for production as of August 1, 2000.