<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended SEPTEMBER 30, 1999

                                       OR

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

                        Commission file number 333-52263*

                          MICHAEL PETROLEUM CORPORATION
             (Exact name of registrant as specified in its charter)

              Texas                                        76-0510239
  (State or other jurisdiction of                       (I.R.S. Employer
   incorporation or organization)                     Identification Number)

                             13101 Northwest Freeway
                                    Suite 320
                              Houston, Texas 77040
           (Address of principal executive offices including zip code)

                                 (713) 895-0909
              (Registrant's telephone number, including area code)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                 Yes [X] No [ ]

* The Commission File Number refers to a Form S-4 Registration Statement filed
by the Registrant under the Securities Act of 1933 which was declared effective
on July 22, 1998.

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

As of November 12, 1999, there were 10,000 shares of the Registrant's Common
Stock, par value $0.10 per share, outstanding.

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          MICHAEL PETROLEUM CORPORATION

                           CONSOLIDATED BALANCE SHEETS
                  (IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,     DECEMBER 31,
                                                                         1999              1998
                                                                     -------------     ------------
                                                                      (UNAUDITED)
<S>                                                                  <C>               <C>
ASSETS

Current assets:
   Cash and cash equivalents                                            $     385        $     430
   Accounts receivable                                                     10,450            6,366
   Note receivable                                                          1,036            1,500
   Prepaid expenses and other                                                 551              655
                                                                     -------------     ------------
       Total current assets                                                12,422            8,951
Oil and gas properties, (successful efforts method) at cost               176,968          155,867
Less: accumulated depreciation, depletion and
  amortization                                                            (36,878)         (24,989)
                                                                     -------------     ------------
                                                                          140,090          130,878
Other assets                                                                5,210            7,453
                                                                     -------------     ------------

       TOTAL ASSETS                                                     $ 157,722        $ 147,282
                                                                     =============     ============

LIABILITIES AND STOCKHOLDER'S DEFICIT

Current liabilities:
   Accounts payable                                                     $  11,521        $   8,925
   Accrued liabilities                                                      9,013            4,630
   Current portion of long-term debt                                      156,051               41
                                                                     -------------     ------------
       Total current liabilities                                          176,585           13,596
Long-term debt                                                                 10          144,842
                                                                     -------------     ------------
       Total liabilities                                                  176,595          158,438

Commitments and contingencies

Stockholder's deficit:
   Preferred stock ($.10 par value, 50,000,000 shares authorized,
     no shares issued and outstanding)                                         --               --
   Common stock ($.10 par value, 100,000,000 shares
     authorized, 10,000 shares issued and outstanding)                          1                1
   Additional paid-in capital                                                 610              610
   Accumulated deficit                                                    (19,484)         (11,767)
                                                                     -------------     ------------
       Total stockholder's deficit                                        (18,873)         (11,156)
                                                                     -------------     ------------
       TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT                      $ 157,722        $ 147,282
                                                                     =============     ============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                     2

<PAGE>


                          MICHAEL PETROLEUM CORPORATION

                      CONSOLIDATED STATEMENT OF OPERATIONS
                            (IN THOUSANDS OF DOLLARS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                       THREE MONTHS                     NINE MONTHS
                                                     ENDED SEPTEMBER 30,             ENDED SEPTEMBER 30,
                                                  ------------------------        ------------------------
                                                    1999            1998            1999            1998
                                                  --------        --------        --------        --------
<S>                                               <C>             <C>             <C>             <C>
Revenues:
   Oil and natural gas sales                      $ 10,310        $  6,749        $ 25,310        $ 16,446

Operating expenses:
   Production costs                                  1,483           1,233           4,355           2,833
   Exploration                                          35              39             109             118
   Depreciation, depletion and
      amortization
                                                     4,090           3,921          11,913           8,420
   General and administrative                          639             294           1,759             811
                                                  --------        --------        --------        --------
                                                     6,247           5,487          18,136          12,182
                                                  --------        --------        --------        --------

Operating income                                     4,063           1,262           7,174           4,264
                                                  --------        --------        --------        --------
Other income (expense):
   Interest income and other                             5              61            (423)            275
   Interest expense                                 (4,332)         (4,052)        (12,592)         (8,469)
                                                  --------        --------        --------        --------

                                                    (4,327)         (3,991)        (13,015)         (8,194)
                                                  --------        --------        --------        --------
Loss before income taxes and extraordinary
  item                                                (264)         (2,729)         (5,841)         (3,930)

Income tax expense (benefit) before
extraordinary item                                       -            (955)          1,876          (1,376)
                                                  --------        --------        --------        --------
Net loss before extraordinary item                    (264)         (1,774)         (7,717)         (2,554)

Extraordinary item:  extinguishment of debt
(net of tax of $285)                                     -               -               -            (531)
                                                  --------        --------        --------        --------
Net loss                                          $   (264)       $ (1,774)       $ (7,717)       $ (3,085)
                                                  ========        ========        ========        ========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                       3

<PAGE>


                          MICHAEL PETROLEUM CORPORATION

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                            (IN THOUSANDS OF DOLLARS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                            NINE MONTHS
                                                                         ENDED SEPTEMBER 30,
                                                                    ---------------------------
                                                                       1999             1998
                                                                    ----------       ----------
<S>                                                                 <C>              <C>
Cash flows from operating activities:
  Net loss                                                          $  (7,717)       $  (3,085)
Adjustments to reconcile net loss to
   net cash provided by operating activities:
    Depreciation, depletion and amortization                           11,913            8,420
    Allowance for bad debts                                               518               --
    Gain on sale of oil and natural gas properties                         --              (50)
    Increase in deferred tax valuation allowance                        1,876               --
    Deferred income tax benefit                                            --           (1,376)
    Extraordinary item - extinguishment of debt                            --              470
    Amortization of debt issuance costs                                   612              414
    Amortization of deferred loss on early termination
    of commodity swap agreement                                           374              464
    Amortization of discount of debt                                      179              146
    Changes in operating assets and liabilities:
      Accounts and notes receivable                                    (4,139)          (4,333)
      Prepaid expenses and other                                           55           (2,021)
      Accounts payable                                                    908            3,423
      Accrued liabilities                                               4,383            7,855
      Other                                                                 9               35
                                                                    ----------       ----------
Net cash provided by operating activities                               8,971           10,362
                                                                    ----------       ----------

Cash flows from investing activities:
    Additions to oil and natural gas properties                       (19,437)         (99,002)
    Proceeds from the sale of oil and natural gas properties              150
    Prepaid natural gas contract as consideration
         for non-producing oil and gas properties                          --           (9,994)
                                                                    ----------       ----------
Net cash used in investing activities                                 (19,437)        (108,846)
                                                                    ----------       ----------

Cash flows from financing activities:
    Proceeds from long-term debt                                       11,000          141,603
    Payments on long-term debt                                            (29)         (29,305)
    Additions to deferred loan costs                                       --           (5,552)
    Additions to deferred costs                                          (550)              --
                                                                    ----------       ----------
Net cash provided by financing activities                              10,421          106,746
                                                                    ----------       ----------

Net (decrease) increase in cash and cash equivalents                      (45)           8,262

Cash and cash equivalents, beginning of period                            430              782
                                                                    ----------       ----------
Cash and cash equivalents, end of period                            $     385        $   9,044
                                                                    ==========       ==========

Non-cash transactions:
Changes in accounts payable related to capital expenditures         $   1,688               --
Non-producing oil and gas properties acquired through
  delivery of natural gas                                                  --        $   3,743
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                       4

<PAGE>

                          MICHAEL PETROLEUM CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION

     Michael Petroleum Corporation, a Texas corporation (the "Company") is a
     wholly owned subsidiary of Michael Holdings, Inc., a Texas corporation. The
     consolidated financial statements included herein have been prepared by the
     Company and are unaudited, and do not contain all information required
     by generally accepted accounting principles. In the opinion of
     management, all material adjustments, consisting of normal recurring
     adjustments, considered necessary to present fairly the results of
     operations have been included. Due to seasonal fluctuations, the results
     of operations for the interim periods are not necessarily indicative of
     operating results for the entire fiscal year. The consolidated financial
     statements in this Form 10-Q should be read in conjunction with the
     audited consolidated financial statements and notes thereto included in
     the Company's Annual Report on Form 10-K for the year ended December 31,
     1998.

2.   LONG-TERM DEBT AND LIQUIDITY

     In April 1998, the Company issued $135 million 11 1/2% Senior Notes due
     2005 (the "Senior Notes") and in May 1998 entered into a four-year $50
     million credit facility (the "Credit Facility") with Christiania Bank og
     KreditKasse ("Christiania") in which the initial borrowing base was $30
     million.

     The Credit Facility borrowing base was to be redetermined semiannually by
     Christiania based on the Company's proved oil and natural gas reserves.
     Effective April 1, 1999, the borrowing base was reduced to $23 million. The
     effective interest rate under the Credit Facility for the year ended
     December 31, 1998 and the nine months ended September 30, 1999 was 6.8% and
     8.3%, respectively. The Company and Christiania have entered into two
     amendments and executed two waivers of financial covenant violations to the
     Credit Agreement during 1999, including an amendment requiring the
     principal amount outstanding to be decreased by monthly mandatory
     reductions in the borrowing base of $1.5 million per month effective
     October 31, 1999. Effective September 20, 1999, Christiania resumed
     charging the default rate of interest, increasing the interest rate an
     additional 2% per annum on the outstanding balance. The Company has paid
     interest accrued as of October 31, 1999, but has not paid the principal
     reduction amount due October 31, 1999, and is in default under the
     terms of the Credit Facility.

     Beginning in the second quarter of 1999, representatives of the Company and
     its financial advisor have met with certain holders of the Senior Notes to
     seek financial restructuring alternatives. An interest payment on the
     Senior Notes of approximately $7.8 million was due on October 1, 1999, but
     not paid by the Company. The indenture covering the Senior Notes provides
     for a 30-day grace period before an event of default exists as a result of
     the nonpayment of interest. The 30-day grace period expired on October 31,
     1999 without payment of interest on the Senior Notes, and, as a result, an
     Event of Default has occurred under the Indenture with respect to the
     Senior Notes. The Indenture provides that in the event of an Event of
     Default, the entire indebtedness under the Senior Notes may be declared due
     and payable. The Company is currently seeking an agreement-in-principle
     with holders of the Senior Notes to forbear from exercising their remedies,
     pending an agreement to effect a consensual restructuring or alternative
     transaction concerning the Company and its indebtedness. No assurances can
     be given that any such agreement can be reached outside of bankruptcy, or
     if so, its ultimate terms and conditions. The Company is continuing to
     negotiate with holders of Senior Notes and Christiania in an effort to
     effect a consensual restructuring of the Company's indebtedness or an
     alternative transaction, which could be implemented in connection with
     court-supervised bankruptcy proceedings. At September 30, 1999, the Company
     had deferred approximately $545,000 of costs pertaining to the Company's
     planned capital restructuring. Should the planned restructuring not occur,
     this amount would be charged to operations.

     Pursuant to the cross default provisions contained in the indenture
     governing the Senior Notes and in the Credit Facility, a default under
     either the Senior Notes or the Credit Facility constitutes a default under
     the other instrument. Both the Senior Notes and the Credit Facility have
     been classified as current obligations as of September 30, 1999 in the
     consolidated balance sheet as a result of these events.

                                       5
<PAGE>

     The Company's financial statements as of September 30, 1999 have been
     prepared on a going concern basis which contemplates the realization of
     assets and the settlement of liabilities and commitments in the normal
     course of business. These financial statements do not include any
     adjustments to reflect the possible future effects on the recoverability
     and classification of assets or the amounts or classification of
     liabilities that may result from the outcome of these uncertainties
     discussed in the preceding paragraphs. Due to the number of uncertainties
     discussed above, many of which are outside the control of the Company,
     there can be no assurance that the Company will be able to consummate any
     operational or financial restructuring outside of bankruptcy proceedings.

3.   PRO FORMA RESULTS

     In March and April 1998, the Company acquired oil and gas properties
     totaling approximately $89.3 million. Accordingly, revenues and expenses
     from these properties have been included in the Company's statement of
     operations from the date of purchase. Assuming the properties were acquired
     January 1, 1998, the unaudited pro forma revenues and loss from continuing
     operations for the nine months ended September 30, 1998 were $20,341,000
     (unaudited) and $3,218,000 (unaudited), respectively.

4.   RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires
     all derivatives to be recognized in the statement of financial position as
     either assets or liabilities and measured at fair value. In addition, all
     hedging relationships must be designated, reassessed and documented
     pursuant to the provisions of SFAS 133. This statement was initially
     effective for financial statements for fiscal years beginning after June
     15, 1999. However, in June 1999, the Financial Accounting Standards Board
     issued SFAS No. 137, which delayed the effective date of SFAS 133 to fiscal
     years beginning after June 15, 2000. The Company has not yet completed its
     evaluation of the impact of the provisions of SFAS No. 133.

5.   DEFERRED INCOME TAXES

     Deferred income taxes reflect the net tax effects of (a) temporary
     differences between the carrying amounts of assets and liabilities for
     financial reporting purposes and the amounts used for income tax purposes,
     and (b) operating loss carryforwards. At December 31, 1998, the Company had
     a net operating loss carryforward of $19.5 million. Realization of deferred
     tax assets associated with the net operating loss carryforward is dependent
     upon generating sufficient taxable income prior to their expiration. The
     status of the Company's current and future drilling program and uncertainty
     about the availability of capital resulted in uncertainty as to whether
     sufficient taxable income will be available to utilize the entire net
     operating loss carryforward. Therefore, a valuation allowance totaling $1.9
     million was established at June 30, 1999 to provide for the portion of the
     net operating loss carryforward which may not be realized. As discussed in
     Note 2, the Company is in discussions with its Senior Note holders. These
     discussions may result in a significant stock ownership change which would
     significantly affect the timing of the utilization of the net operating
     loss carryforward. The valuation allowance related to tax assets could be
     further adjusted in the near term if such restructuring were to occur, as
     well as changes in estimates of future taxable income.

6.   SUBSEQUENT EVENTS

     On October 27, 1999, Christiania terminated its two costless collar
     contracts with the Company. Under the terms of the termination agreement,
     the Company is required to pay Christiania approximately $1.3 million. Each
     contract hedged a monthly volume of 150,000 MMbtu (pertaining to
     approximately 18% of the company production) with floor prices of $1.98 and
     $2.15 and ceiling prices of $2.22 and $2.36, respectively. The loss on the
     terminated hedge contracts will be deferred and recognized in the
     consolidated statement of operations as the underlying physical transaction
     occurs.

                                       6

<PAGE>

     During October 1999, two outside directors of the Company, Bryant H. Patton
     and Jack I. Tompkins, resigned.

          ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The following is management's discussion and analysis of certain
significant factors that have affected certain aspects of the Company's
financial position and operating results during the periods included in the
accompanying unaudited condensed consolidated financial statements. For
supplemental information, it is suggested that this Item 2 be read in
conjunction with the corresponding section included in the Company's 1998 Annual
Report on Form 10-K (the "1998 Form 10-K") as filed with the Securities and
Exchange Commission.

GENERAL

     The Company is an independent energy company engaged in the acquisition,
development and production of oil and natural gas, principally in the Lobo Trend
of South Texas. The Company began operations in 1983, and, since its inception,
increased its reserve base and production as a result of acquisitions and
development of oil and natural gas properties. In March and April 1998, the
Company completed acquisitions adding approximately 51,000 gross acres (48,400
net acres) in the Lobo Trend for an aggregate purchase price of approximately
$89.3 million. For the nine months ended September 30, 1999, the Company
participated in the drilling of 21 gross (15 net) natural gas wells, 14 gross
(12 net) of which were completed as productive wells, compared to 19 gross (14
net) natural gas wells drilled, and 15 gross (10 net) completed in the same
period of 1998.

     From October 1, 1999 through November 12, 1999, the Company participated in
the drilling of 3 gross (2 net) natural gas wells, of which two were in the
process of being completed, and one was still drilling.

     The Company utilizes the "successful efforts" method of accounting for its
oil and natural gas activities as described in Note 1 of the Notes to
Consolidated Financial Statements in the Company's 1998 Form 10-K.

RESULTS OF OPERATIONS

     The following table summarizes production volumes, average sale prices and
operating revenues for the Company's oil and natural gas operations for the
three-month and nine-month periods ended September 30, 1999 and 1998:

<TABLE>
<CAPTION>
                                             THREE MONTHS                NINE MONTHS
                                           ENDED SEPTEMBER 30,        ENDED SEPTMEBER 30,
                                         ----------------------      ----------------------
                                           1999          1998          1999          1998
                                         --------      --------      --------      --------
     <S>                                  <C>           <C>           <C>           <C>
     Production volumes:
       Oil and condensate (MBbls)              35            18            90            53
       Natural gas (Mmcf)                   3,761         3,186        10,627         7,583

     Average sales prices:
       Oil and condensate (per Bbl)       $ 19.08       $ 10.73       $ 15.21       $ 11.89
       Natural gas (per Mcf)                 2.57          2.06          2.25          2.09

     Operating revenues ($ 000's):
       Oil and condensate                 $   663       $   193       $ 1,369       $   630
       Natural gas                          9,647         6,556        23,941        15,816
                                         --------      --------      --------      --------
            Total                         $10,310       $ 6,749       $25,310       $16,446
                                         ========      ========      ========      ========
</TABLE>

                                       7

<PAGE>

COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998

     Oil and natural gas revenues for the three months ended September 30, 1999
increased 54% to $10.3 million from $6.7 million for the three months ended
September 30, 1998. Production volumes for oil and natural gas for the second
quarter ended September 30, 1999 increased 20% to 3,968 MMcfe from 3,294 MMcfe
for the third quarter of 1998. Average natural gas prices increased 25% to $2.57
per Mcf for 1999 from $2.06 per Mcf for 1998. The increase in oil and natural
gas production was a result of the new wells brought on line resulting from the
Company's drilling program.

     Oil and natural gas production costs for the three months ended September
30, 1999 increased 25% to $1.5 million from $1.2 million for the three months
ended September 30, 1998, primarily due to the increase in the number of
producing wells as a result of the Company's development program. Production
costs per equivalent unit remained unchanged at $0.37 per Mcfe for the three
months ended September 30, 1999, compared to the same period in 1998.

     Depreciation, depletion and amortization ("DD&A") expense for the three
months ended September 30, 1999 increased 5% to $4.1 million from $3.9 million
for the same period in 1998. The increase in DD&A expense was due to higher
productive volumes. The DD&A rate decreased from $1.19 per Mcfe for the three
months ended September 30, 1998 to $1.03 per Mcfe for the same period in 1999.
The higher rate in the prior year included a $725,000 impairment charge
recognized for the three months ended September 30, 1998. The 1999 DD&A rate
included cost overruns and below average reserves per well on certain wells
drilled in 1998 and 1999.

     General and administrative expenses for the three months ended September
30, 1999 increased 117% to $639,000 from $294,000 for the three months ended
September 30, 1998 due to salaries and related benefits for new professional
employees, and increases in insurance, engineering, legal and professional fees
and office expenses. General and administrative expenses per equivalent unit
increased to $0.16 per Mcfe for the three months ended September 30, 1999 from
$0.09 per Mcfe for the three months ended September 30, 1998.

     Interest expense, net of capitalized interest, and loan amortization costs
for the three months ended September 30, 1999 increased 5% to $4.3 million from
$4.1 million for the same period in 1998. The increase was due to the higher
level of outstanding debt on the Credit Facility for the three months ended
September 30, 1999 compared to the same period of 1998.

     There was no income tax benefit for the three months ended September 30,
1999, as a valuation allowance of $91,000 was recorded by the Company as
compared to an income tax benefit of $955,000 for the same period in 1998. The
valuation allowance recorded by the Company is the sole reconciling item between
the expected tax benefit and the recorded tax amount. The Company's net
operating loss carryforward was partially reserved as of September 30, 1999 as
the status of the current and future drilling program and uncertainty about the
availability of capital resulted in uncertainty as to whether sufficient taxable
income will be available to utilize the entire net operating loss carryforward.
Any restructuring of the Company's indebtedness may result in a significant
stock ownership change which would significantly affect the timing of the
utilization of the net operating loss carryforward. The valuation allowance
related to tax assets could be adjusted in the near term if such restructuring
were to occur, as well as for changes in estimates of future taxable income.

     At September 30, 1999, the Company had deferred approximately $545,000 of
costs pertaining to the Company's planned capital restructuring discussed under
"Liquidity and Capital Resources." Should the planned restructuring not occur,
this amount would be charged to operations.

     The net loss for the three months ended September 30, 1999 was $264,000
compared to a net loss of $1.8 million for the three months ended September 30,
1998, primarily as a result of the factors discussed above.


COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 1999 AND 1998

     Oil and natural gas revenues for the nine months ended September 30, 1999
increased 54% to $25.3 million from $16.4 million for the nine months ended
September 30, 1998. Production volumes for oil and natural gas for

                                       8

<PAGE>

the nine months ended September 30, 1999 increased 41% to 11,166 MMcfe from
7,901 MMcfe for the first nine months of 1998. Average natural gas prices
increased 8% to $2.25 per Mcf for nine months ended September 30, 1999 from
$2.09 per Mcf for the same period in 1998. The increase in natural gas
production was due to the acquisitions of additional properties in 1998, plus
new wells brought on line resulting from the Company's drilling program.

     Oil and natural gas production costs for the nine months ended September
30, 1999 increased 57% to $4.4 million from $2.8 million for the nine months
ended September 30, 1998 primarily due to the increase in the number of
producing wells. The production costs per equivalent unit increased to $0.39 per
Mcfe for the nine months ended September 30, 1999 from $0.36 per Mcfe for the
nine months ended September 30, 1998.

     DD&A expense for the nine months ended September 30, 1999 increased 42% to
$11.9 million from $8.4 million for the same period in 1998. The increase in
DD&A expense was due to higher production volumes. The DD&A rate decreased from
$1.07 per Mcfe for the nine months ended September 30, 1998 to $1.03 per Mcfe
for the same period in 1999. The higher rate in the prior year included
impairment charges of $1.4 million that were recognized for the nine months
ended September 30, 1998. These 1998 impairment charges were due to development
dry holes drilled on oil and gas leases that incurred a reduction in the
estimated proved reserves. The 1999 DD&A rate included cost overruns and below
average reserves per well on certain wells drilled in 1998 and 1999.

     General and administrative expenses for the nine months ended September 30,
1999 increased 122% to $1.8 million from $811,000 for the nine months ended
September 30, 1998 due to salaries and related benefits for new professional
employees, plus the increases in insurance, engineering, legal and professional
fees, and office expenses. General and administrative expenses per equivalent
unit increased to $0.16 per Mcfe for the nine months ended September 30, 1999
from $0.10 per Mcfe for the nine months ended September 30, 1998.

     Interest expense, net of capitalized interest, and loan amortization costs
for the nine months ended September 30, 1999 increased 48% to $12.6 million from
$8.5 million for the same period in 1998. The increase was due to the higher
level of outstanding debt for the nine months ended September 30, 1999 compared
to the same period of 1998.

     For the nine months ended September 30, 1999, the Company recorded in
interest income and other, an allowance for bad debts totaling $518,000
pertaining to a $1.5 million note receivable from a Texas limited liability
company. The reserve was established as a result of a contract cancellation by a
third party with a joint venture partner of the Texas limited liability company.
If the cancellation matter is not resolved, additional bad debt charges may be
incurred.

     The income tax expense was $1.9 million for the nine months ended September
30, 1999 as a valuation allowance of $4.0 million was recorded by the Company as
compared to an income tax benefit of $1.4 million for the same period in 1998.
The valuation allowance recorded by the Company is the sole reconciling item
between the expected tax benefit and the recorded tax amount. The Company's net
operating loss carryforward was partially reserved as of September 30, 1999 as
the status of the current and future drilling program and uncertainty about the
availability of capital resulted in uncertainty as to whether sufficient taxable
income will be available to utilize the entire net operating loss carryforward.
Any restructuring of the Company's indebtedness may result in a significant
stock ownership change which would significantly affect the timing of the
utilization of the net operating loss carryforward. The valuation allowance
related to tax assets could be adjusted in the near term due to changes in
estimates of future taxable income.

     The extraordinary loss of $531,000 (net of the income tax benefit of
$285,000) for the nine months ended September 30, 1998 was due to an
extinguishment of the previous credit facility. No extraordinary items were
recognized in the nine months ended September 30, 1999.

     The net loss for the nine months ended September 30, 1999 was $7.7 million
compared to a loss of $3.1 million for the nine months ended September 30, 1998,
primarily as a result of the factors discussed above.

                                       9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     In April 1998, the Company issued $135 million of Senior Notes and in
May 1998 entered into a Credit Facility with Christiania ("Christiania") in
which the initial borrowing base was $30 million.

     The Credit Facility borrowing base was to be redetermined semiannually by
Christiania based on the Company's proved oil and natural gas reserves.
Effective April 1, 1999, the borrowing base was reduced to $23 million. The
Company and Christiania have entered into two amendments and executed two
waivers of debt covenant violations to the Credit Agreement during 1999,
including an amendment requiring the principal amount outstanding to be
decreased by monthly mandatory reductions in the borrowing base of $1.5 million
per month effective October 31, 1999. Effective September 20, 1999, Christiania
resumed charging the default rate of interest, increasing the interest rate an
additional 2% per annum on the outstanding balance. The Company has paid
interest accrued as of October 31, 1999, but has not paid the principal
reduction amount due October 31, 1999, and is in default under the terms of
the Credit Facility.

     Beginning in the second quarter of 1999, representatives of the Company
and its financial advisor have met with certain holders of the Senior Notes
to seek financial restructuring alternatives. An interest payment on the
Senior Notes of approximately $7.8 million was due on October 1, 1999, but
not paid by the Company. The indenture covering the Senior Notes provides for
a 30-day grace period before an event of default exists as a result of the
nonpayment of interest. The 30-day grace period expired on October 31, 1999
without payment of interest on the Senior Notes, and, as a result, an Event
of Default occurred under the Indenture with respect to the Senior Notes. The
Indenture provides that in the event of an Event of Default, the entire
indebtedness under the Senior Notes may be declared due and payable. The
Company is currently seeking an agreement -in- principle with holders of the
Senior Notes to forbear from exercising their remedies, pending an agreement
to effect a consensual restructuring or alternative transaction concerning
the Company and its indebtedness. No assurances can be given that any such
agreements can be reached outside of bankruptcy, or if so, their ultimate
terms and conditions. The Company is continuing to negotiate with holders of
Senior Notes and Christiania in an effort to effect a consensual
restructuring of the Company's indebtedness or an alternative transaction,
which could be implemented in connection with court-supervised bankruptcy
proceedings.

     Pursuant to the cross default provisions contained in the indenture
governing the Senior Notes and in the Credit Facility, a default under either
the Senior Notes or the Credit Facility constitutes a default under the other
instrument. Both the Senior Notes and the Credit Facility have been classified
as current obligations of the Company as of September 30, 1999 as a result of
these events.

     At September 30, 1999, the Company had cash and cash equivalents of
$385,000, consisting primarily of short-term money market investments, compared
to $430,000 at December 31, 1998. The working capital deficit was $164.2 million
at September 30, 1999 compared to a working capital deficit of $4.7 million at
December 31, 1998, primarily due to the classification of the Senior Notes and
the indebtedness under the Credit Facility as a current obligation.

     Cash flows provided by operating activities from the Company's operations
were approximately $9.0 million and $10.4 million for the nine months ended
September 30, 1999 and 1998, respectively. The decrease in operating cash flows
for the nine months ended September 30, 1999 over the same period in 1998 was
primarily due to timing differences regarding collection of receivables and
payment of obligations.

     Cash flows used in investing activities by the Company were $19.4 million
and $108.8 million for the nine months ended September 30, 1999 and 1998,
respectively. Property additions during 1998 totaling approximately $90.0
million resulted primarily from the 1998 acquisitions and the drilling and
development activities described above.

     Cash flows provided by financing activities were $10.4 million and $106.7
million for the nine months ended September 30, 1999 and 1998, respectively.
During the nine months ended September 30, 1998, the Senior Notes were issued to
fund the property acquisitions, whereas funds received in 1999 pertained to
amounts borrowed under the Credit Facility.

     The Company's outstanding indebtedness (and the payment and other
defaults under the terms of the Senior Notes and Credit Facility) and the
Company's current lack of funding available from other sources have effected

                                       10
<PAGE>

the Company's operations, including (i) an increase in the Company's
vulnerability to adverse changes in industry conditions due to its leveraged
position, and (ii) stress on the Company's ability to fund its developmental
and other capital expenditures.

     The Company's financial statements as of September 30, 1999 have been
prepared on a going concern basis which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. These financial statements do not include any adjustments to reflect
the possible future effects on the recoverability and classification of assets
or the amounts or classification of liabilities that may result from the outcome
of these uncertainties discussed in the preceding paragraphs. Due to the number
of uncertainties discussed above, many of which are outside the control of the
Company, there can be no assurance that the Company will be able to consummate
any operational or financial restructuring outside of bankruptcy proceedings.

CAPITAL EXPENDITURES

     Capital expenditures for the nine months ended September 30, 1999 totaled
$21.1 million compared to $108.9 million in 1998.

     The Company expects to continue to experience working capital requirements
due to the Company's current development program. The Company's estimated
capital expenditure budget for 1999 is $25.0 million. Substantially all of the
1999 capital expenditures have been used to fund drilling activities, lease
acquisitions and 3-D seismic surveys in the Company's project areas. The Company
anticipates drilling a total of 26 gross (19 net) wells in 1999. Because
borrowings under the Credit Facility or other sources are not currently
available, cash flows from operations will not allow the Company to fully
implement its present development drilling strategy. The Company will require
capital from sources other than the Credit Facility in order for the Company to
fully implement its development drilling strategy for the foreseeable future. It
is possible that minimal amounts of debtor-in-possession financing may be made
available to the Company to partially fund its capital expenditures if the
Company became subject to court-supervised bankruptcy proceedings; however, no
assurances could be given that such financing would be made available, and if
so, on terms favorable to the Company. In the event that additional capital is
not available, capital expenditures are expected to be further reduced. Actual
amounts to be expended by the Company will depend upon a number of factors,
including the extent of cash flows from operations available, the ability of the
Company to negotiate the terms of a restructuring of its indebtedness or an
alternative transaction with its current lenders and creditors, and potentially,
the approval of the bankruptcy court.

FINANCING ARRANGEMENTS

CREDIT FACILITY

     In May 1998, the Company entered into its Credit Facility with Christiania
as lender and administrative agent. The Credit Facility provided for loans in an
outstanding principal amount not to exceed $50.0 million at any one time,
subject to a borrowing base to be determined semi-annually (each April and
October) by the administrative agent (the initial borrowing base was $30.0
million), and the issuance of letters of credit in an outstanding face amount
not to exceed $6.0 million at any one time with the face amount of all
outstanding letters of credit reducing, dollar-for-dollar, the availability of
loans under the Credit Facility.

     The Credit Facility borrowing base was to be redetermined semiannually by
Christiania based on the Company's proved oil and natural gas reserves.
Effective April 1, 1999, the borrowing base was reduced to $23 million. The
Company and Christiania have entered into two amendments and executed two
waivers of debt covenant violations to the Credit Agreement during 1999,
including an amendment requiring the principal amount outstanding to be
decreased by monthly mandatory reductions in the borrowing base of $1.5 million
per month effective October 31, 1999. Effective September 20, 1999, Christiania
resumed charging the default rate of interest, increasing the interest rate an
additional 2% per annum on the outstanding balance. The Company has paid
interest accrued as of October 31, 1999, but has not paid the principal
reduction amount due October 31, 1999, and is in default under the terms of
the Credit Facility.

                                       11

<PAGE>

SENIOR NOTES

     The Indenture governing the Senior Notes contains certain covenants
that, among other things, limit the ability of the Company to incur
additional indebtedness, pay dividends, repurchase equity interests or make
other Restricted Payments (as defined in the Indenture), create liens, enter
into transactions with affiliates, sell assets or enter into certain mergers
and consolidations. The Company is continuing to negotiate with holders of
Senior Notes and Christiania in an effort to effect a consensual
restructuring of the Company's indebtedness or an alternative transaction,
which could be implemented in connection with court-supervised bankruptcy
proceedings. (see "Liquidity and Capital Resources").

HEDGING ACTIVITIES

     In an effort to achieve more predictable cash flows and earnings and reduce
the effects of volatility of the price of oil and natural gas on the Company's
operations, the Company has hedged in the past, and in the future expects to
hedge oil and natural gas prices through the use of swap contracts, put options
and costless collars. While the use of these hedging arrangements limits the
downside-risk of adverse price movements, it also limits future gains from
favorable movements. The Company accounts for these transactions as hedging
activities and, accordingly, gains and losses are included in oil and natural
gas revenues in the periods in which the related production occurs. The Company
does not engage in hedging arrangements in which the production amounts are in
excess of the Company's actual production.

     The fair value of the put option and costless collars in effect at
September 30, 1999 and 1998 were approximately ($2.7 million) and $1.0
million, respectively. All prices are relative to the Houston Ship Channel
Index. The costless collars have a price range from a floor of $1.98 per
MMBtu to a ceiling of $2.385 per MMBtu through April 30, 2000 pertaining to
approximately 55% of the Company's estimated natural gas production. The
Company has also granted an option for another costless collar to be in
effect from May 1, 2000 to October 31, 2000. Under the option, the Company
would agree to hedge a monthly volume of 300,000 MMbtu with a floor price of
$2.10 and a ceiling price of $2.40 per MMBtu. The option must be exercised
within two business days of April 30, 2000.

     On October 27, 1999, Christiania terminated its two costless collar
contracts with the Company. Under the terms of the termination agreement, the
Company is required to pay Christiania approximately $1.3 million. Each
contract hedged a monthly volume of 150,000 MMbtu (pertaining to
approximately 18% of the Company's production) with floor prices of $1.98 and
$2.15 and ceiling prices of $2.22 and $2.36, respectively. After giving
effect to the termination of these contracts, the Company currently has put
options and costless collars in effect pertaining to approximately 44% of the
Company's estimated natural gas production. The loss on the terminated hedge
contracts will be deferred and recognized in the consolidated statement of
operations as the underlying physical transaction occurs.

CAUTIONARY STATEMENT FOR PURPOSES OF FORWARD LOOKING STATEMENTS

     Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of this Quarterly Report on Form 10-Q contains
projections and other forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. These statements can be
identified by the use of forward-looking terminology, such as "believes,"
"expects," "may," "should" or "anticipates" or the negative thereof or
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. In addition, all statements other than statements of
historical facts included in this Quarterly Report, including, without
limitation, statements regarding the results of any debt restructuring or
other alternatives for the Company, possible outcomes of the Company's
negotiations with its creditors, achievement of the Company's drilling and
development program objectives, amendment of or waiver under the Company's
credit facilities, availability of additional sources of capital funding,
future governmental regulation, oil and natural gas reserves, future drilling
and development opportunities and operations, future acquisitions, future
production of oil and natural gas (and the prices thereof and the costs
therefor), anticipated results of hedging activities, the need for and
availability of additional capital, future capital expenditures, Year 2000
compliance issues, and future net cash flows, are forward-looking statements
and may contain certain information concerning financial results, economic
conditions, trends and known uncertainties. Such statements reflect the
Company's current views with respect to future events and financial performance,
and involve risks and uncertainties. Actual results could differ materially
from those projected in the forward-looking statements as a result of these
various
                                       12
<PAGE>

risks and uncertainties, including, without limitation, (i) risks associated
with the Company's substantial leverage, (ii) factors such as natural gas
price fluctuations and markets, uncertainties of estimates of reserves and
future net revenues, competition in the oil and natural gas industry, risks
associated with oil and natural gas operations, risks associated with future
acquisitions, risks associated with the Company's future capital requirements
and the availability of sources of capital and regulatory and environmental
risks, (iii) adverse changes to the properties and leases acquired in 1998 or
the failure of the Company to achieve the anticipated benefits of such
acquisitions, (iv) the extent of "Year 2000" compliance by the Company's
suppliers and customers and the Company's information and embedded
technologies, and (v) adverse changes in the market for the Company's oil and
natural gas production. For a more detailed description of these and certain
other risks associated with the Company's operations, see "Risk Factors" in
the 1998 Form 10-K.

YEAR 2000 COMPLIANCE

     Many computer systems have been designed using software that processes
transactions using two digits to represent the year. This type of software will
generally require modifications to function properly with dates after December
31, 1999. The same issue applies to microprocessors embedded in machinery and
equipment, such as gas compressors and pipeline meters. The impact of failing to
identify and correct this problem could be significant to the Company's ability
to operate and report results, as well as potentially exposing the Company to
third party liability.

     The Company has substantially completed making necessary modifications to
its internal information computer systems in preparation for the Year 2000. The
Company estimates that the total related costs for its Year 2000 project will be
approximately $10,000, funded by cash from operations. Actual costs to date have
been less than $10,000.

     The Company has completed its review of the Year 2000 compliance status of
field equipment, including compressor stations, gas control systems and data
logging equipment. Accordingly, the Company has determined that these systems
are Year 2000 compliant.

     The Company has identified significant third parties whose Year 2000
compliance could affect the Company and is still in the process of formally
inquiring about their Year 2000 status. The Company has received responses to
less than 50% of its inquiries. Despite its efforts to assure that such third
parties are Year 2000 compliant, the Company cannot provide assurance that all
significant third parties will achieve compliance in a timely manner. A third
party's failure to achieve Year 2000 compliance could result in a material
adverse effect on the Company's operations and cash flow. The potential effect
of Year 2000 non-compliance by third parties is currently unknown.

     Project costs and the timetable for Year 2000 compliance are based on
management's best estimates. In developing these estimates, assumptions were
made regarding future events including, among other things, the availability of
certain resources and the continued cooperation of the Company's customers and
suppliers. Actual costs and timing may differ from management's estimates due to
unexpected difficulties in obtaining trained personnel, locating and correcting
relevant computer code and other factors. Management does not expect the costs
of the Company's Year 2000 project to have a material adverse effect on the
Company's financial position, results of operations or cash flows. Presently,
based on information available, the Company cannot conclude that any failure of
the Company or third parties to achieve Year 2000 compliance will not adversely
effect the Company.

     The Company has designated personnel responsible to not only identify and
respond to these issues, but also to develop a contingency plan in the event
that a problem arises after the turn of the century. The Company is currently
identifying appropriate contingency plans in the event of potential problems
resulting from failure of the Company's or significant third party computer
systems on January 1, 2000. Specific contingency plans have been developed in
response to the results of testing that is substantially completed, as well as
the assessed probability and risk of system or equipment failure. These
contingency plans include installing backup computer systems or equipment,
temporarily replacing systems or equipment with manual processes, and
identifying alternative suppliers, serve companies and purchasers. The Company
expects these plans to be completed by early December 1999.

                                       13

<PAGE>

     The most likely worst-case scenario of any Year 2000 non-compliance
problems affecting the Company would involve the disruption of utilities,
particularly electricity in the Company's headquarters and in the field. It is
believed that any disruption of utilities would be corrected in a relatively
short amount of time. However, a long-term disruption could adversely affect the
Company's business reputation, results of operation and financial condition.

EFFECTS OF INFLATION AND CHANGES IN PRICE

     The Company's results of operations and cash flows are affected by changes
in oil and natural gas prices. If the price of oil and natural gas increases
(decreases), there could be a corresponding increase (decrease) in the operating
costs that the Company is required to bear for operations, as well as an
increase (decrease) in revenues. Inflation has had only a minimal effect on the
Company.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There have been no material changes regarding market risk and the
Company's derivative instruments during the nine months ended September 30,
1999 other than that noted below. Accordingly, no additional disclosures have
been provided in accordance with Regulation S-K, Item 305(c). The derivative
instruments consist of costless collars that have a price range from a floor
of $1.98 per MMBtu to a ceiling of $2.385 per MMBtu through April 30, 2000
pertaining to approximately 55% of the Company's estimated natural gas
production. The Company has also granted an option for another costless
collar to be in effect from May 1, 2000 to October 31, 2000. Under the
option, the Company would agree to hedge a monthly volume of 300,000 MMbtu
with a floor price of $2.10 and a ceiling price of $2.40 per MMBtu. The
option must be exercised within two business days of April 30, 2000.

     On October 27, 1999, Christiania terminated its two costless collar
contracts with the Company. Under the terms of the termination agreement, the
Company is required to pay Christiania approximately $1.3 million. Each contract
hedged a monthly volume of 150,000 MMbtu (pertaining to approximately 18% of the
Company's production) with floor prices of $1.98 and $2.15 and ceiling prices of
$2.22 and $2.36, respectively. The loss on the terminated hedge contracts will
be deferred and recognized in the consolidated statement of operations as the
underlying physical transaction occurs.

                                       14

<PAGE>

                           PART II - OTHER INFORMATION

<TABLE>
<S>                                                                                              <C>
Item 1.  Legal Proceedings....................................................................   Not Applicable

Item 2.  Changes in Securities and Use of Proceeds............................................   Not Applicable

Item 3.  Defaults upon Senior Securities

         The Company's Senior Notes and Credit Facility are currently in default.
See Part I, Item 2. "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Financial Arrangements."

Item 4.  Submission of Matters to a Vote of Security Holders..................................   Not Applicable

Item 5.  Other Information....................................................................   Not Applicable
</TABLE>

Item 6.  Exhibits and Reports on Form 8-K:

         (a) The following exhibits are filed as part of this report:

              27.1*  Financial Data Schedule.

         (b) Reports on Form 8-K filed during the quarter ended September 30,
1999 and thereafter:

     On August 27, 1999, the Company filed a Current Report on Form 8-K, Item 5
     - "Other Events" with respect to the reporting of the Company's proved oil
     and natural gas reserves as of June 30, 1999.

     On September 30, 1999, the Company filed a Current Report on Form 8-K, Item
     5 - "Other Events" with respect to the Company's revised debt restructuring
     proposal regarding its Senior Notes.

     On October 5, 1999, the Company filed a Current Report on Form 8-K, Item 5
     - "Other Events" with respect to the Company's meetings with and proposals
     to the unofficial committee of the holders of the Company's Senior Notes
     and their financial advisors.

     On October 31, 1999, the Company filed a Current Report on Form 8-K, Item 5
     - "Other Events" with respect to the expiration of the 30-day grace period
     resulting in an Event of Default under the Indenture governing the Senior
     Notes.

     * Filed herewith

                                       15


<PAGE>


SIGNATURES

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



                                       MICHAEL PETROLEUM CORPORATION
                                               (REGISTRANT)



Date    November 15, 1999         By       /s/   Glenn D. Hart
        -----------------            ------------------------------------------
                                      Glenn D. Hart
                                      Chief Executive Officer and Chairman
                                      of the Board


Date   November 15, 1999          By       /s/   Michael G. Farmar
       -----------------             ------------------------------------------
                                      Michael G. Farmar
                                      President and Chief Operating Officer


Date   November 15, 1999          By       /s/   Robert L. Swanson
       -----------------             ------------------------------------------
                                      Robert L. Swanson
                                      Vice President, Finance


Date   November 15, 1999          By       /s/   Scott R. Sampsell
       -----------------             ------------------------------------------
                                      Scott R. Sampsell
                                      Vice President, Controller and Treasurer


                                       16