<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 JUNE 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 August 11, 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>

                                                                 JUNE 30,    DECEMBER 31,
                                                                   1999         1998
                                                                ---------    ------------
                                                               (UNAUDITED)
<S>                                                            <C>           <C>
ASSETS

Current assets:
   Cash and cash equivalents                                    $   1,072      $     430
   Accounts receivable                                              7,702          6,366
   Note receivable                                                  1,036          1,500
   Prepaid expenses and other                                         575            655
                                                                ---------      ---------
       Total current assets                                        10,385          8,951
Oil and gas properties, (successful efforts method) at cost       172,402        155,867
Less: accumulated depreciation, depletion and amortization        (32,783)       (24,989)
                                                                ---------      ---------
                                                                  139,619        130,878
Other assets                                                        5,245          7,453
                                                                ---------      ---------

       TOTAL ASSETS                                             $ 155,249      $ 147,282
                                                                ---------      ---------
                                                                ---------      ---------


LIABILITIES AND STOCKHOLDER'S DEFICIT

Current liabilities:
   Accounts payable                                             $  13,141      $   8,925
   Accrued liabilities                                              4,663          4,630
   Current portion of long-term debt                               23,110             41
                                                                ---------      ---------
       Total current liabilities                                   40,914         13,596
Long-term debt                                                    132,944        144,842
                                                                ---------      ---------
       Total liabilities                                          173,878        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                                            (19,220)       (11,767)
                                                                ---------      ---------
       Total stockholder's deficit                                (18,609)       (11,156)
                                                                ---------      ---------

       TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT              $ 155,249      $ 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                         SIX MONTHS
                                                         ENDED JUNE 30,                      ENDED JUNE 30,
                                                  -----------------------------        ----------------------------
                                                     1999             1998                 1999           1998
                                                  ------------     ------------        -------------   ------------
<S>                                               <C>               <C>                <C>             <C>
Revenues:
   Oil and natural gas sales                          $ 7,981          $ 6,437             $ 15,000        $ 9,697

Operating expenses:
   Production costs                                     1,519            1,125                2,872          1,600
   Exploration                                             26               79                   74             79
   Depreciation, depletion and amortization             4,169            3,150                7,823          4,499
   General and administrative                             642              256                1,120            517
                                                  -----------     ------------        -------------   ------------
                                                        6,356            4,610               11,889          6,695
                                                  -----------     ------------        -------------   ------------

Operating income                                        1,625            1,827                3,111          3,002
                                                  -----------     ------------        -------------   ------------

Other income (expense):
   Interest income and other                             (501)             198                 (428)           214
   Interest expense                                    (4,263)          (3,527)              (8,260)        (4,417)
                                                  -----------     ------------        -------------   ------------

                                                       (4,764)          (3,329)              (8,688)        (4,203)
                                                  -----------     ------------        -------------   ------------

Loss before income taxes and extraordinary  item
                                                       (3,139)          (1,502)              (5,577)        (1,201)
Income tax expense (benefit) before
   extraordinary item                                   1,876             (526)               1,876           (421)
                                                  -----------     ------------        -------------   ------------
Net loss before extraordinary item                     (5,015)            (976)             (7,453)           (780)

Extraordinary item:  extinguishment of debt
   (net of tax of $285)                                     -             (531)                   -           (531)
                                                  -----------     ------------        -------------   ------------
Net loss                                              $(5,015)         $(1,507)            $(7,453)        $(1,311)
                                                  -----------     ------------        -------------   ------------
                                                  -----------     ------------        -------------   ------------
</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>

                                                                               SIX MONTHS
                                                                             ENDED JUNE 30,
                                                                       ---------------------------
                                                                          1999            1998
                                                                       ------------    -----------
<S>                                                                    <C>             <C>
Cash flows from operating activities:
  Net loss                                                               $ (7,453)      $ (1,311)
Adjustments to reconcile net income (loss) to
   net cash provided by operating activities:
    Depreciation, depletion and amortization                                7,823          4,499
    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                                                 -           (421)
    Extraordinary item - extinguishment of debt                                 -            470
    Amortization of debt issuance costs                                       408            213

    Amortization of deferred loss on early
      termination of commodity swap agreement                                 274            245
    Amortization of discount of debt                                          119            117
    Changes in operating assets and liabilities:
      Accounts and notes receivable                                        (1,346)        (3,321)
      Prepaid expenses and other                                               42         (2,051)
      Accounts payable                                                      1,935            884
      Accrued liabilities                                                      34          3,680
      Other                                                                     -             35
                                                                       ----------    -----------
Net cash provided by operating
        activities                                                          4,230          2,989
                                                                       ----------    -----------

Cash flows from investing activities:
     Additions to oil and natural gas properties                          (14,280)       (87,591)
     Prepaid natural gas contract as consideration
        for non-producing oil and gas properties                                -         (9,994)
                                                                       ----------    -----------
Net cash used in investing activities                                     (14,280)       (97,585)
                                                                       ----------    -----------

Cash flows from financing activities:
    Proceeds from long-term debt                                           11,000        133,602
    Payments on long-term debt                                                (20)       (29,295)
    Additions to deferred loan costs                                            -         (5,163)
    Additions to deferred costs                                              (288)             -
                                                                       ----------    -----------
Net cash provided by financing activities                                  10,692         99,144
                                                                       ----------    -----------

Net increase in cash and cash equivalents                                     642          4,548
                                                                       ----------    -----------
Cash and cash equivalents, beginning of period                                430            782
Cash and cash equivalents, end of period                                 $  1,072       $  5,330
                                                                       ----------    -----------
                                                                       ----------    -----------

Non-cash transactions:
Changes in accounts payable related to
  capital expenditures                                                   $  2,280              -
Non-producing oil and gas properties
 acquired through delivery of natural gas                                       -       $  7,485

</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, condensed 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 May 1998, the Company entered into a four-year credit facility (the
     "Credit Facility") with Christiania Bank og KreditKasse ("Christiania")
     which provided for maximum loan amounts totaling $50.0 million, subject
     to borrowing base limitations. The borrowing base was to be redetermined
     semiannually by Christiania based on the Company's proved oil and
     natural gas reserves. Although the initial borrowing base was $30
     million, the borrowing base, effective April 1, 1999, was reduced to $23
     million. The stated maturity date of all indebtedness under the Credit
     Facility is May 28, 2002. The effective interest rate under the Credit
     Facility for the year ended December 31, 1998 and the six months ended
     June 30, 1999 was 6.8% and 7.6%, respectively. As of June 30, 1999, the
     Company was in violation of two financial covenants (the minimum current
     ratio and the interest coverage ratio) under the Credit Facility. The
     Company and Christiania had entered into a First Amendment to the Credit
     Agreement dated effective March 29, 1999, amending one of the financial
     covenants (interest coverage ratio), and increasing the interest rate
     charged under the Credit Facility by 0.5%. The Company is currently
     negotiating with Christiania with regards to a temporary waiver of the
     covenant violations or an amendment to the Credit Facility to bring the
     Company into temporary compliance. Effective June 7, 1999, Christiania
     began charging the default rate of interest, increasing the interest
     rate an additional 2% per annum on the outstanding balance. Should the
     Company fail to secure and maintain an amendment or waiver with regard
     to these financial covenants, Christiania would have the right to
     declare all outstanding indebtedness under the Credit Facility to be due
     and payable. Pursuant to the cross default provisions contained in the
     indenture governing the Company's $135 million 11 1/2% Senior Notes due
     2005 (the "Senior Notes"), written notice by Christiania to the Company
     of the acceleration of the Credit Facility would constitute an event of
     default under the terms of the Senior Notes. Commencing on October 31,
     1999, the principal amount outstanding under the Credit Facility must be
     decreased by monthly mandatory reductions in the borrowing base of $1.5
     million per month.

     On June 29, 1999, representatives of the Company and its financial
     advisor met with certain holders of the Company's Senior Notes regarding
     the restructuring of the Company's senior indebtedness. The Company's
     financial advisor was engaged on April 22, 1999 to seek financial
     restructuring alternatives and subsequently conducted preliminary
     discussions with Senior Note holders regarding these alternatives.
     Specifically, the Company discussed a proposal to exchange the Senior
     Notes for Common Stock of the Company representing, after giving effect
     to the exchange, approximately 93% of the outstanding Common Stock of
     the Company. Under this proposal, existing stockholders of Michael
     Holdings, Inc., the Company's parent corporation, and management of the
     Company, would own approximately 7% of the outstanding Common Stock
     after giving effect to the exchange, and would also be issued warrants
     to acquire up to approximately an additional 20% of the Common Stock of
     the Company. A restructuring of the Company's Senior Note indebtedness
     could be implemented outside of insolvency proceedings or in connection
     with court-supervised bankruptcy proceedings, depending on the degree of
     Noteholder support for the alternative chosen. The proposed
     restructuring would substantially reduce debt service requirements and
     increase cash flow from operations and borrowing capacity in order to
     expand the Company's development program. If a restructuring does not
     occur, the Company will pursue other financing or restructuring
     alternatives. No predictions can be made by management with respect to
     the outcome of this matter.

                                      5
<PAGE>



3.   PRO FORMA RESULTS

     In March and April 1998, the Company acquired oil and gas properties for
     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 six months ended June 30, 1998 were $13,592,000 (unaudited) and
     $1,444,000 (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 net operating loss carryforwards 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 current 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 made a restructuring proposal to the Senior Note holders on
     June 29, 1999.  The proposal may result in a significant stock ownership
     change which would significantly effect 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.

         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.



                                       6
<PAGE>



For the six months ended June 30, 1999, the Company participated in the
drilling of 14 gross (11 net) natural gas wells, 9 gross (8 net) of which
were completed as productive wells.

         From July 1, 1999 through August 11, 1999, the Company participated in
the drilling of 3 gross (2 net) natural gas wells, of which one has been
completed, one is in the process of being completed, and one is 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 six-month periods ended June 30, 1999 and 1998:

<TABLE>
<CAPTION>

                                                            THREE MONTHS                        SIX MONTHS
                                                           ENDED JUNE 30,                     ENDED JUNE 30,
                                                     ---------------------------         --------------------------
                                                         1999            1998                1999           1998
                                                     ------------    -----------         ------------    ----------
       <S>                                           <C>             <C>                 <C>             <C>
       Production volumes:
         Oil and condensate (MBbls)                           30             23                   55            35
         Natural gas (Mmcf)                                3,517          2,909                6,866         4,397

       Average sales prices:
         Oil and condensate (per Bbl)                     $14.37         $11.22              $ 12.78        $12.39
         Natural gas (per Mcf)                              2.15           2.12                 2.08          2.11

       Operating revenues ($ 000's):
         Oil and condensate                               $  428         $  261              $   706        $  437
         Natural gas                                       7,553          6,176               14,294         9,260
                                                     ------------    -----------         ------------    ----------
              Total                                       $7,981         $6,437              $15,000        $9,697
                                                     ------------    -----------         ------------    ----------
                                                     ------------    -----------         ------------    ----------
</TABLE>


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

         Oil and natural gas revenues for the three months ended June 30, 1999
increased 24% to $7.98 million from $6.44 million for the three months ended
June 30, 1998. Production volumes for oil and natural gas for the second quarter
ended June 30, 1999 increased 21% to 3,696 MMcfe from 3,047 MMcfe for the second
quarter of 1998. Average natural gas prices increased 1% to $2.15 per Mcf for
1999 from $2.12 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 June
30, 1999 increased 35% to $1.52 million from $1.13 million for the three months
ended June 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 increased to $0.41 per Mcfe for the three months ended June 30,
1999 from $0.37 per Mcfe for the three months ended June 30, 1998. The increase
in the rate per equivalent unit was due to higher severance and ad valorem taxes
accrued in 1999, plus increased workover expenses.

         Depreciation, depletion and amortization ("DD&A") expense for the three
months ended June 30, 1999 increased 32% to $4.17 million from $3.15 million for
the same period in 1998. The increase in DD&A expense was due to higher
productive volumes and an increase in the depletion rate per Mcfe from $1.03 for
the three months ended June 30, 1998 to $1.13 for the same period in 1999. The
increase in rate was primarily due to cost overruns and below average reserves
discovered per well. No impairment charges were recognized in either period.


                                       7
<PAGE>




         General and administrative expenses for the three months ended June 30,
1999 increased 151% to $642,000 from $256,000 for the three months ended June
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
$0.17 per Mcfe for the three months ended June 30, 1999 from $0.08 per Mcfe for
the three months ended June 30, 1998.

         Interest expense, net of capitalized interest, and loan amortization
costs for the three months ended June 30, 1999 increased 21% to $4.26 million
from $3.53 million for the same period in 1998. The increase was due to the
higher level of outstanding debt for the three months ended June 30, 1999
compared to the same period of 1998.

         At June 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.  Although
management presently believes that the remaining balance of the notes
receivable will be collected, if the cancellation of the contract is not
resolved, additional bad debt charges may be incurred.

         The income tax expense was $1.88 million for the three months ended
June 30, 1999, as a valuation allowance of $2.97 million was recorded by the
Company as compared to an income tax benefit of $526,000 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 of $19.5 million at
December 31, 1998 was partially reserved as of June 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. The Company made a restructuring proposal to the Senior Note
holders on June 29, 1999 (see "Liquidity and Capital Resources"). The
proposal 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 the assets could be further
adjusted in the near term of such restructuring were to occur, as well as
changes in estimates of future taxable income.

         At June 30, 1999, the Company had deferred approximately $300,000 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 June 30, 1999 was $5.01
million compared to a net loss of $1.51 million for the three months ended
June 30, 1998, primarily as a result of the factors discussed above.

COMPARISON OF SIX MONTH PERIODS ENDED JUNE 30, 1999 AND 1998

         Oil and natural gas revenues for the six months ended June 30, 1999
increased 55% to $15.00 million from $9.70 million for the six months ended June
30, 1998. Production volumes for oil and natural gas for the six months ended
June 30, 1999 increased 56% to 7,198 MMcfe from 4,607 MMcfe for the first six
months of 1998. Average natural gas prices decreased 1% to $2.08 per Mcf for six
months ended June 30, 1999 from $2.11 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 six months ended June 30,
1999 increased 79% to $2.87 million from $1.60 million for the six months ended
June 30, 1998 primarily due to the increase in the number of producing wells.
The production costs per equivalent unit increased to $.40 per Mcfe for the six
months ended June 30, 1999 from $.35 per Mcfe for the six months ended June 30,
1998. The increase in the rate per equivalent unit was due to higher severance
and ad valorem taxes accrued in 1999, plus increased workover expenses.

         DD&A expense for the six months ended June 30, 1999 increased 74% to
$7.82 million from $4.50 million for the same period in 1998. The increase in
DD&A expense was due to higher production volumes and an increase in the
depreciation and depletion rate per Mcfe from $.98 for the six months ended June
30, 1998 to $1.09 for the same period in 1999. The increase in rate was
primarily due to cost overruns and below average reserves discovered per well.
No impairment charges were recognized in either period.

         General and administrative expenses for the six months ended June 30,
1999 increased 117% to $1.12 million from $517,000 for the six months ended June
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 six months ended June 30, 1999 from $0.11
per Mcfe for the six months ended June 30, 1998.


                                      8
<PAGE>



         Interest expense, net of capitalized interest, and loan amortization
costs for the six months ended June 30, 1999 increased 87% to $8.26 million from
$4.42 million for the same period in 1998. The increase was due to the higher
level of outstanding debt for the six months ended June 30, 1999 compared to the
same period of 1998.

         At June 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. Although
management presently believes that the remaining balance of the note
receivable will be collected, if the cancellation of the contract is not
resolved, additional bad debt charges may be incurred.

         The income tax expense was $1.9 million for the six months ended
June 30, 1999 as a valuation allowance of $3.8 million was recorded by the
Company as compared to an income tax benefit of $421,000 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 of $19.5 million at
December 31, 1998 was partially reserved as of June 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. The Company made a restructuring proposal to the Senior Note
holders on June 29, 1999 (See "Liquidity and Capital Resources"). The
proposal 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.

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

         The net loss for the six months ended June 30, 1999 was $7.45 million
compared to a loss of $1.31 million for the six months ended June 30, 1998,
primarily as a result of the factors discussed above.


LIQUIDITY AND CAPITAL RESOURCES

         At current natural gas price levels and production volumes, the
Company will not be able to collectively fund drilling expenditures for its
already-reduced level of development operations, reduce the aging on its
accounts payable, commence amortization of the $23 million principal balance
outstanding on the Credit Facility as presently scheduled, and pay the
October 1, 1999 interest under the Senior Notes. If an agreement cannot be
reached with the Senior Note holders, it is unlikely the Company will make
the interest payment due on October 1, 1999 under the Senior Notes.

         The Company has no borrowing capacity under its Credit Facility due
to borrowing base reductions effective March 31, 1999, and effective June 7,
1999 began paying the default rate of interest under the Credit Agreement.
The Company is currently negotiating an amendment to or temporary waiver of
the terms of the Credit Agreement with Christiania. In any event, management
does not believe that a long-term resolution of its lending relationship with
Christiania will be concluded and believes that additional borrowings from
Christiania will not be made available. No assurances can be given that
funding from these or any other sources will be made available. Should the
Company fail to secure and maintain an amendment or waiver with regards to
its financial covenants under the Credit Agreement or replace the Christiania
facility, Christiania may declare all outstanding indebtedness under the
Credit Facility to be due and payable which would constitute an event of
default under the Senior Notes Indenture.

                                      9
<PAGE>

         On June 29, 1999, representatives of the Company and its financial
advisor met with certain holders of the Company's Senior Notes regarding the
restructuring of the Company's senior indebtedness. The Company's financial
advisor was engaged on April 22, 1999 to seek financial restructuring
alternatives and subsequently conducted preliminary discussions with Note
holders regarding these alternatives. The Company proposed to the holders
representing more than one-half of the outstanding Senior Notes to exchange the
Senior Notes for Common Stock of the Company representing, after giving effect
to the exchange, approximately 93% of the outstanding Common Stock of the
Company. Under this proposal, existing stockholders of Michael Holdings, Inc.,
the Company's parent corporation, and management of the Company, would own
approximately 7% of the outstanding Common Stock after giving effect to the
exchange, and would also be issued warrants to acquire up to approximately an
additional 20% of the Common Stock of the Company. The proposed restructuring
would substantially reduce debt service requirements and increase cash flow
from operations and borrowing capacity in order to expand the development
program. To date, the Senior Note holders have not responded to Company
representatives concerning this proposal.

         A restructuring of the Company's Senior Note indebtedness could be
implemented outside of insolvency proceedings or in connection with
court-supervised bankruptcy proceedings, depending on the degree of
Noteholder support for the alternative chosen. The proposal is preliminary in
nature and no predictions can be made by Company management as to the degree
of success the Company may achieve in its negotiations with Noteholders,
whether a restructuring of its Senior Note indebtedness will be accomplished
on the terms described above, if at all, whether such a restructuring can be
effected outside of bankruptcy, if at all, or if accomplished, whether the
Company will be able to achieve its business plan objectives following any
such restructuring. If a restructuring does not occur the Company will pursue
other financing or restructuring alternatives.

         At June 30, 1999, the Company had cash and cash equivalents of $1.07
million, consisting primarily of short-term money market investments, compared
to $430,000 at December 31, 1998. The working capital deficit was $30.53 million
at June 30, 1999 compared to a working capital deficit of $4.65 million at
December 31, 1998 primarily due to the classification of $23.0 million
outstanding indebtedness under the Credit Facility as a current obligation.

         Cash flows provided by operating activities from the Company's
operations were approximately $4.23 million and $2.99 million for the six months
ended June 30, 1999 and 1998, respectively. The increase in operating cash flows
for the six months ended June 30, 1999 over the same period in 1998 was
primarily due to increased production, revenue and operating income as a result
of the 1998 acquisitions and the Company's drilling program.

         Cash flows used in investing activities by the Company were $14.28
million and $97.59 million for the six months ended June 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 $10.69 million and
$99.14 million for the six months ended June 30, 1999 and 1998, respectively.
During the six months ended June 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 to fund the Company's drilling
program.

CAPITAL EXPENDITURES

         Capital expenditures for the six months ended June 30, 1999 totaled
$16.56 million compared to $97.59 million in 1998.

         The Company expects to continue to experience working capital
requirements due to the Company's current development program. As of August
11, 1999, the Company's capital expenditure budget for 1999 had been adjusted
to $25.0 million. Substantially all of the 1999 capital expenditures will be
used to fund drilling activities, lease acquisitions and 3-D seismic surveys
in the Company's project areas. The Company anticipates drilling 24 gross (20
net) wells in 1999. Because borrowings under the Credit Facility are not
currently available, cash flows from operations will not allow the Company to
fully implement its present development drilling strategy. In addition, the
terms of the Company's Senior Notes indebtedness contain certain negative and
other financial covenants which may limit the Company's

                                      10
<PAGE>



capital expenditures. See "Financing Arrangements". The Company will
require capital from sources other than the Credit Facility in order for the
Company to fully implement its development drilling strategy in 1999 and for the
foreseeable future. In the event that additional capital is not available,
capital expenditures are expected to be further reduced, which could adversely
affect the Company's future financial condition, cash flows and results of
operations.


FINANCING ARRANGEMENTS

CREDIT FACILITY

         In May 1998, the Company entered into its Credit Facility with
Christiania as lender and administrative agent, pursuant to the terms of the
Credit Facility. 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. Although the initial borrowing base was $30 million, the
borrowing base effective April 1, 1999 was reduced to $23 million. See
"-Liquidity and Capital Resources" above.

         Under the current terms of the Credit Facility, the principal balance
outstanding is due and payable on May 28, 2002, and each letter of credit shall
be reimbursable by the Company when drawn, or if not then otherwise reimbursed,
paid pursuant to a loan under the Credit Facility. Commencing on October 31,
1999, and continuing until its stated maturity, the maximum amount available for
borrowings and letters of credit under the Credit Facility will not only be
adjusted (increased or decreased, as applicable) by the semi-annual borrowing
base determination, but also (i) decreased by monthly mandatory reductions in
the borrowing base of $1.5 million per month and (ii) adjusted for sales of
collateral having an aggregate value exceeding the lesser of $4.0 million per
year or 5% of the Company's total proved reserve values. At August 11, 1999, the
Company had drawn all of the $23 million then available under the Credit
Facility. Both the Company and Christiania may also initiate two unscheduled
redeterminations of the borrowing base during any consecutive twelve-month
period. If the sum of the outstanding principal balance and amount of
outstanding letters of credit (both drawn and undrawn) exceeds the borrowing
base, the Company shall, within 30 days, either repay such excess in full or
provide additional collateral acceptable to Christiania.

         Effective June 7, 1999, Christiania began charging the default rate
of interest on the entire outstanding balance. Accordingly, the Company is
currently incurring an additional 2% per annum interest charge on the $23.0
million of outstanding Credit Facility borrowings. The regular interest rate
for borrowings under the Credit Facility is determined at either (i) the ABR
rate, or (ii) the Eurodollar Rate plus 4.25%, at the election of the Company.
The "ABR" rate is the higher of (i) Christiania Bank's prime rate then in
effect, (ii) the secondary market rate for three-month certificates of
deposit plus 3.5% or (iii) the federal funds rate then in effect plus 3.0%.
The Credit Facility is secured by substantially all of the oil and natural
gas assets of the Company, including accounts receivable, equipment and
gathering systems.

         The Credit Facility contains certain covenants by the Company,
including (i) limitations on additional indebtedness and on guaranties by the
Company except as permitted under the Credit Facility, (ii) limitations on
additional investments except those permitted under the Credit Facility and
(iii) restrictions on dividends or distributions on or repurchases or
redemptions of capital stock by the Company except for those involving
repurchases of Michael Holdings, Inc. capital stock which may not exceed
$500,000 in any fiscal year. In addition, the Credit Facility requires the
Company to maintain and comply with certain financial covenants and ratios,


                                      11
<PAGE>




including a minimum interest coverage ratio, a minimum current ratio and a
covenant requiring that the Company's general and administrative expenses may
not exceed 12.5% of the Company's gross revenues in a calendar year.

         The Company and Christiania entered into a First Amendment to the
Credit Agreement, amending one of the financial covenants (interest coverage
ratio), and increasing the interest rate charged under the Credit Facility by
0.5%. As of June 30, 1999, the Company was in violation of two financial
covenants (the interest coverage and the minimum current ratio) under the
Credit Facility. The Company is currently negotiating with Christiania with
regard to a temporary waiver of the covenant violations or an amendment to
the Credit Facility to bring the Company into temporary compliance. Should
the company fail to secure and maintain such an amendment or waiver with
regard to these financial covenants, Christiania would have the right to
declare all outstanding indebtedness under the Credit Facility to be due and
payable. Pursuant to the cross default provisions contained in the indenture
governing the Company's $135 million Senior Notes, written notice by
Christiania to the Company of the acceleration of the Credit Facility would
constitute an event of default under the Senior Notes Indenture.

SENIOR NOTES

         The indenture governing the Senior Notes (the "Indenture") 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. Pursuant to the cross default provisions
contained in the indenture governing the $135 million Senior Notes, upon
written notice by Christiania to the Company of the acceleration of the
maturity of the Credit Facility resulting from the events of default, if
uncured, the Senior Notes would, upon their acceleration become due and
payable. On June 29, 1999, representatives of the Company and its financial
advisor met with certain holders representing more than one-half of the
outstanding Senior Notes of the Company's $135 million 11 1/2% Senior Notes
due 2005 regarding the restructuring of the Company's senior indebtedness
(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 June
30, 1999 and 1998 were approximately ($1.3 million) and $92,000, respectfully.
All prices are relative to the Houston Ship Channel Index. The costless
collars have a range in price 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.


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 Company's business strategy, the results
of any restructuring alternatives 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

                                     12
<PAGE>



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 risks and uncertainties, including, without limitation, (i)
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, (ii) adverse changes to the
properties and leases acquired in 1998 or the failure of the Company to
achieve the anticipated benefits of such acquisitions, (iii) the extent of
"Year 2000" compliance by the Company's suppliers and customers and the
Company's information and embedded technologies, (iv) adverse changes in the
market for the Company's oil and natural gas production, and (v) risks
associated with the Company's substantial leverage, including risks that
additional capital and cash flow from operations will be insufficient to
cover future interest payments. 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 currently 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 substantially 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 have 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

                                      13
<PAGE>




contingency plans may 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 December 1999.

         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 operations 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


HEDGING ACTIVITIES

There have been no material changes regarding market risk and the Company's
derivative instruments during the six months ended June 30, 1999. 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 range in price 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 production.




                                   14
<PAGE>



                                             PART II - OTHER INFORMATION

<TABLE>
<CAPTION>

<S>      <C>                                                                                     <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 Credit Facility is 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

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

</TABLE>

         (A) .....EXHIBITS.  The following exhibits are filed as
                             part of this report:


EXHIBIT NO.

              27.1*  Financial Data Schedule.

         * Filed herewith


         (B) Reports on Form 8-K during the quarter ended June 30, 1999:

             On June 30, 1999, the Company filed a Current Report dated June 29,
             1999 on Form 8-K Item 5 - Other Events with respect to the press
             release announcing the Company's meetings with and proposals to
             its Senior Note holders.










                                      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       AUGUST 16, 1999         By       /s/   GLENN D. HART
         -------------------           ----------------------------------------
                                       Glenn D. Hart
                                       Chief Executive Officer and Chairman
                                            of the Board


Date       AUGUST 16, 1999         By       /s/   MICHAEL G. FARMAR
         -------------------           ----------------------------------------
                                       Michael G. Farmar
                                       President and Chief Operating Officer



Date       AUGUST 16, 1999         By       /s/   ROBERT L. SWANSON
         ------------------            ----------------------------------------
                                       Robert L. Swanson
                                       Vice President, Finance


Date       AUGUST 16, 1999         By       /s/   SCOTT R. SAMPSELL
         -------------------           ----------------------------------------
                                       Scott R. Sampsell
                                       Vice President, Controller and Treasurer





                                   16