SECURITIES AND EXCHANGE COMMISSION
                    Washington, D.C.  20549

                          FORM 10-QSB

[X]   QUARTERLY REPORT UNDER SECTION 12(g) OF THE
                SECURITIES EXCHANGE ACT OF 1934

     For the quarterly period ended:  June 30, 2001

OR

[  ]  TRANSITION REPORT UNDER SECTION 12(g)
                  OF THE EXCHANGE ACT

For the transition period from __________ to __________

             Commission File No. 33-55254-32

                  CHANCELLOR GROUP, INC.
 __________________________________________________________
  (Exact name of small business issuer as specified in its
                         charter)

Nevada                                   87-0438647
________                                 ____________
(State or other jurisdiction of         (I.R.S. Employer
Incorporation or organization)           Identification  No.)

     1800 E. Sahara, Suite 107, Las Vegas, Nevada  89104
_____________________________________________________________
 (Address of principal executive offices, including zip code)


Issuer's Telephone Number:  (702) 938-0261


______________________________________________________
 (Former name, former address and former fiscal year,
              if changed since last report)


Check whether the Issuer (1) filed all
reports required to be filed by Section 12(g)
of the Exchange Act during the past 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
    ____       ____

   As of June 30, 2001, 40,862,261 shares of common stock
were outstanding.

Transitional Small Business Disclosure Format:

Yes    X   No
     ____    ____





TABLE OF CONTENTS
Form 10-QSB
2nd Quarter Ended June 30, 2001


Chancellor Group, Inc.

                                                           Page

PART I:  FINANCIAL INFORMATION

            Item 1.

            Consolidated Balance Sheet                       2
            Consolidated Statement Of Operations             3
            Consolidated Statement Of Cash Flows             4
            Notes To Consolidated Financial Statements       5


            Item 2.

            Management's Discussion And
            Analysis Or Plan Of Operation                    8

PART II:  OTHER INFORMATION                                  9


SIGNATURES                                                  10





<PAGE>



              PART I.   FINANCIAL INFORMATION


<PAGE>                              1




ITEM 1.                CHANCELLOR GROUP, INC.
                     CONSOLIDATED BALANCE SHEET
                            JUNE 30, 2001
                             (UNAUDITED)

                               ASSETS


Cash                                  $    16,300
Accounts receivable                         4,909
                                    _____________
  Current assets                           21,209

Equipment (net of
  accumulated depreciation of $749)         7,835
Deposits                                      500
Other receivables                          37,500
Oil and gas properties
   Leases                                  84,905
   Development costs (net of
      accumulated amortization of $862)    14,461
Production rights                       1,700,000
                                    _____________

Total Assets                          $ 1,866,410
                                    =============


            LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

     Accounts payable                 $   135,261
     Notes payable - current              700,000
                                     ____________
       Total current liabilities          835,261

Notes payable                           1,000,000
                                     ____________
Total Liabilities                       1,835,261
                                     ____________


Stockholders' equity

     Common stock: $.001 par
       value, 250,000,000 shares
       authorized, 40,862,261
       shares issued
       & outstanding                      40,862
     Preferred Series B stock:
       $1,000 par value,
       250,000 shares authorized,
       none issued and outstanding             -

     Paid in capital                   2,857,907

     Accumulated deficit             ( 2,867,620)
                                    ____________

Total Stockholders' Equity                31,149
                                    ____________
Total Liabilities And
 Stockholders' Equity               $  1,866,410
                                    ============

See Notes to Consolidated Financial Statements


<PAGE>	                               2



                         CHANCELLOR GROUP, INC.
                  CONSOLIDATED STATEMENT OF OPERATIONS
                              (UNAUDITED)



                                Three Months Ended    Six Months Ended
                                     June 30,             June 30,
                                2000          2001    2000        2001
                                ____          ____    ____        ____


Sales                        $       -     $   4,909  $       -  $      4,909

Operating expenses             155,984       621,770    274,369     1,248,475
                             _________     _________  _________   ___________
Income (loss) from
 operations                   (155,984)     (616,861)  (274,369)   (1,243,566)
                             _________     _________  _________   ___________

Income (loss) before provision
 for income taxes             (155,984)     (616,861)  (274,369)   (1,243,566)

Provision for income tax             -             -          -             -
                             _________     _________  _________   ___________


Net income (loss)            $(155,984)    $(616,861) $(274,369)  $(1,243,566)
                             =========     =========  =========   ===========

Net income (loss) per share
(Basic and fully diluted)    $(     *)     $(   .02)  $(     *)    $(   .04)
                             =========     =========  =========    =========

Weighted average number of
common shares outstanding   20,805,361    33,913,928 20,805,361   31,437,794
                            ==========    ========== ==========   ==========
*less than $.01 per share

See Notes to Consolidated Financial Statements


<PAGE>	  	                            3


                       CHANCELLOR GROUP, INC.
                 CONSOLIDATED STATEMENT OF CASH FLOWS
                             (UNAUDITED)

                                                 Six Months Ended
                                                     June 30,
                                                2000          2001
                                                ____          ____

Cash Flows From Operating Activities:

   Net income (loss)                         $(274,639)   $(1,243,566)

   Adjustments to reconcile net
   income (loss) to net cash
   provided by (used for)
   operating activities:

       Depreciation                                              574
       Amortization                                          326,237
       Accounts receivable                                    (4,909)
       Other receivables                                     (37,500)
       Compensatory stock issuances            121,383     1,066,130
       Accounts pay. and accrued expenses       (1,829)     (322,133)
                                             _________     _________
         Net cash provided
         by (used for)
         operating activities                 (155,085)     (215,167)
                                             _________     _________

Cash Flows from Investing Activities:

     Fixed assets                                             (6,500)
     Oil and gas properties                                  (80,323)
                                             _________     _________
         Net cash provided
         by (used for)
         investing activities                                (86,823)
                                             _________     _________

Cash Flows from Financing Activities:

     Sales of common stock                     146,350       340,490
     Contributed capital                        18,804             -
     Payments on notes payable                               (30,000)

                                             _________     _________
         Net cash provided
         by (used for)
         financing activities                  165,154       310,490
                                             _________     _________

Net Increase (Decrease) In Cash                 10,069         8,500

Cash At The Beginning Of The Period                  -         7,800
                                             _________     _________

Cash At The End Of The Period                $  10,069     $  16,300
                                             =========     =========

During the six months ended June 30, 2001 the Company issued
notes payable for $1,700,000 in exchange for oil and gas
production rights.


See Notes to Consolidated Financial Statements


<PAGE>                           4


                    CHANCELLOR GROUP, INC.
            Notes to Consolidated Financial Statements
                           (Unaudited)


Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited financial statements have been
prepared in accordance with the instructions to
Form 10-QSB and do not include all of the information and
disclosures required by generally accepted accounting
principles for complete financial statements. All
adjustments which are, in the opinion of management,
necessary for a fair presentation of the results of
operations for the interim periods have been made and are
of a recurring nature unless otherwise disclosed herein.
The results of operations for such interim periods are not
necessarily indicative of operations for a full year.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of
Chancellor Group, Inc., and its wholly owned subsidiaries Radly Petroleum, Inc.
("Radly"), Lichfield Petroleum America, Inc. ("Lichfield"), and Getty
Petroleum, Inc. ("Getty"). These entities are collectively hereinafter
referred to as "the Company". All intercompany accounts and transactions
have been eliminated.

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss)
by the weighted average number of shares of common outstanding. Warrants,
stock options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.

Note 2. Acquisition

In January, 2001 the Company contracted to purchase certain oil and gas
leases in Greenwood County, Kansas containing proved, producing oil and
gas reserves. An engineering report completed in June, 1999 estimated that
approximately 2,300,000 barrels of oil are recoverable from the properties.
The Company issued $1,700,000 in notes to be paid over two years, toward the
purchase price of the same amount. Title to the properties will remain with
the sellers until the notes and accrued interest are paid in full, and until
the Company meets certain drilling and production obligations pursuant to
the contract. The Company does have the right to drill and operate wells
on the properties, and to receive income from producing wells, as long as
contractual payment terms are met to the sellers.

Note 3. Contingencies

The Company has suffered recurring losses from operations. To meet working
capital needs and to fund business operations, the Company plans to
continue raising capital through accessing public markets, and through
development of its oil and gas properties.



<PAGE>                         5

                      CHANCELLOR GROUP, INC.
                Supplemental Information (Unaudited)

                    Period Ended June 30, 2001

Capitalized Costs Relating to Oil and Gas
Producing Activities at June 30, 2001
------------------------------------------

Unproved oil and gas properties          $         -
Proved oil and gas properties                100,228
Support equipment and facilities               6,500
                                         -----------
                                             106,728
Less accumulated depreciation,
depletion, amortization, and
impairment                                (    1,228)
                                         -----------
Net capitalized costs                    $   105,500
                                         ===========


Costs Incurred in Oil and Gas Producing
Activities for the Period
Ended June 30, 2001
---------------------------------------

Property acquisition costs
     Proved                              $    65,000
     Unproved                                      -
Exploration costs                                  -
Development costs                             21,823


Results of Operations for Oil and Gas Producing
Activities for the Period Ended June 30, 2001
-------------------------------------------------

Oil and gas sales                        $     4,909
Gain on sale of oil and gas properties             -
Gain on sale of oil and gas leases                 -
Production costs                              20,678
Exploration expenses                               -
Depreciation, depletion,
  and amortization                           326,603
                                         -----------
                                                   -
Income tax expense                                 -
                                         -----------
Results of operations for oil and gas
  producing activities (excluding
  corporate overhead and financing
  costs)                                 $  (301,016)
                                         ===========


Reserve Information

     The following estimates of proved and proved developed reserve
quantities and related standardized measure of discounted net cash flow
are estimates only, and do not purport to reflect realizable values or
fair market values of the Company's reserves. The Company emphasizes that
reserve estimates are inherently imprecise and that estimates of new
discoveries are more imprecise than those of producing oil and gas
properties. Accordingly, these estimates are expected to change as future
information becomes available. All of the Company's reserves are located
in the United States.
     Proved reserves are estimated reserves of crude oil (including
condensate and natural gas liquids) and natural gas that geological and
engineering data demonstrate with reasonable certainty to be recoverable
in future years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are those expected to be recovered
through existing wells, equipment, and operating methods.
     The standardized measure of discounted future net cash flows is
computed by applying year end prices of oil and gas (with consideration of
price changes only to the extent provided by contractual arrangements)
to the estimated future production of proved oil and gas reserves, less
estimated future expenditures (based on year end costs) to be incurred in
developing and producing the proved reserves, less estimated future income
tax expenses (based on year end statutory tax rates, with consideration of
future tax rates already legislated) to be incurred on pretax net cash flows
less tax basis of the properties and available credit, and assuming
continuation of existing economic conditions. The estimated future net cash
flows are then discounted using a rate of 10 percent a year to reflect
the estimated timing of the future cash flows.

<PAGE>                                 6

                        CHANCELLOR GROUP, INC.
           Supplemental Information (Unaudited) - Continued
                      Period Ended June 30, 2001

Reserve Information
-------------------
                                                Oil            Gas
                                               (Bbls)         (Bcf)
                                               ------         ------
Proved developed and undeveloped reserves
     Beginning of period                            -         348.50
     Revisions of previous estimates                -              -
     Improved recovery                              -              -
     Purchases of minerals in place                 -              -
     Extensions and discoveries                     -              -
     Production                                     -              -
     Sales of minerals in place                     -              -
                                              -------        -------
     End of period                                  -         348.50
                                              =======        =======
Proved developed reserves
     Beginning of period                            -              -
     End of period                                  -              -

Standardized Measure of Discounted Future
     Net Cash Flows at June 30, 2001

     Future cash inflows                               $1,477,550,041
     Future production costs                             (245,054,769)
     Future development costs                            ( 32,535,000)
     Future income tax expenses                          (407,986,493)
                                                        -------------
                                                          791,973,779
     Future net cash flows (10% annual discount for
         estimated timing of cash flows)                  489,051,180
                                                        -------------
Standardized measures of discounted future net cash
     flows relating to proved oil and gas reserves      $ 489,051,180
                                                        =============

The following reconciles the change in the standardized measure of
discounted future net cash flow during the six months
ended June 30, 2001.

Beginning of period                                     $ 489,051,180
Sales of oil and gas produced, net of production costs         (   xx)
Net changes in prices and production costs                     (   xx)
Extensions, discoveries, and improved recovery,
   less related costs                                              xx
Development costs incurred during the period which
   were previously estimated                                       xx
Net change in estimated future development costs                   xx
Revisions of previous quantity estimates                       (   xx)
Net change from purchases and sales of minerals in place       (   xx)
Accretion of discount                                              xx
Net change in income taxes                                     (   xx)
Other                                                          (   xx)
                                                        -------------
End of period                                           $ 489,051,180
                                                        =============


<PAGE>                                  7


                       CHANCELLOR GROUP, INC.

ITEM 2.  Management's Discussion and Analysis or Plan of
         Operation

The Company was originally incorporated in Utah in 1986 and reincorporated in
Nevada in 1993. In July, 1995, the Company acquired all of the issued capital
of two Kentucky based gas operations, Delstar Gas Systems, Inc. ("DGS") and
Northstar Gas Systems, Inc. ("NGS"), covering gas reserves and gas
transmission systems respectively. In December 1995, the Company formed a
wholly owned subsidiary in the state of Kentucky, Delstar Resources, Inc.
("DRI"). This subsidiary acquired additional freehold real estate and gas
reserves for $5,425,000. In September, 1997, the Company acquired 100%
ownership of Radly Petroleum, Inc. ("Radly"), a Texas corporation, in exchange
for approximately 80% of the Company's outstanding common stock. In July, 1998
the Company acquired 100% ownership of Lichfield Petroleum America, Inc.,
("Lichfield"), a Texas corporation. In January, 2001 the Company acquired
for $1,700,000, certain oil and gas leases containing over 5,000,000 barrels
of proved developed and producing reserves of light sweet crude oil, as well
as natural gas ("The Shinkle Field" located in Greenwood County, Kansas). In
June 2001 the Glass Mountain leases owned by Radly and Lichfield were
reassigned to Getty, so that the project acreage is controlled by a single
entity. Radly and Lichfield will be wound up in the 2001 fiscal 3rd. quarter.
Chancellor Group, Inc., Radly, Lichfield, DGS, NGS, and DRI operate and remain
as separate legal entities. The Company has taken an impairment writedown of
the assets of DGS, NGS, and DRI until such time as certain disputes relating
to the original acquisition agreements for DGS and NGS by and between the
Company and the former owners of those subsidiaries are resolved. Management
expects that such dispute will be resolved
in the Company's favor in a legal action planned  to commence later in the 2001
fiscal year.

The Company's officers and directors are implementing a comprehensive
business plan, through which the Company is raising new equity capital to
finance the initial development work of its existing Texas gas assets;
the continuing development and restoration of the Shinkle Field in Kansas;
recover operating control of and finance the redevelopment of the extensive
Kentucky gas assets, and acquire interests in several important new drilling
and development projects.

Results of Operations

The results for the quarter ended June 30, 2001 show a net decrease of $337,241
in current liabilities to $835,261, compared to $1,172,502 for the previous
quarterly period, ending March 31, 2001.
Long term liabilities in the same period remained at $1,000,000 and total
liabilities stood at $1,835,261, a decrease of $337,241. Total assets stated
on the balance sheet, which exclude the Company's oil and gas reserves,
decreased during the quarter from $2,061,892 to $1,866,410. The Company
generated a loss in the period under review of $616,861. The Company
generated revenue of $4,909 from ongoing operations during the period covered
by this report. A comparison with figures for the corresponding period
s, as the Company had not at that time commenced trading.

The sole activities of the Company during the quarter were the limited
initial production of crude oil from the Shinkle Field, and the preparation
for the growth, financing, and development of the Company's business and
assets, including in particular the commencement of work to restore to
production the newly acquired Shinkle Field property, in Greenwood County,
Kansas. The Shinkle Field contains approximately 5 million recoverable
barrels of light crude oil, classified "proved producing", in addition to
substantial but not as yet not formally qualified and quantified reserves of
natural gas, and coal bed methane.

The Company incurred general and administrative expenses of $616,861 during the
period under review, compared to $626,705 during the first quarter to
March 31, 2001.

During the quarter, the Company issued 11,208,000 shares of restricted
and non-restricted common stock. Included in this figure is 8 million shares
of common stock issued to convert the previously outstanding 48,000 preferred
shares issued in 1998 to partly fund the acquisition of Lichfield Petroleum
America Inc.



Liquidity and Capital Resources

The consolidated Balance Sheet as of June 30, 2001 reports a decrease in
total assets to $1,866,410. Current assets stood at $21,909 and long term
assets were $1,844,501. Current liabilities stood at $835,261 (compared to
$1,172,502 at the end of the previous quarter), comprised principally of the
current portion of notes payable, and accounts payable arising from general
day to day operations of the Company.

Day to day general operating expenses may from time to time be paid out of
pocket by officers of the Company, and from time to time these expenses are
invoiced to the Company for payment. Additionally during the quarter the
Company made a series of restricted common stock placements to raise
additional working capital. During the quarter the Company received
$758,620 in proceeds from such placements, of which $204,490 were cash and
$554,130 were non-cash items, and as of June 30, 2001 had a net cash
balance of $16,300.

The Company at balance sheet date was undertaking a series of small
private debt and equity placements to raise up to $750,000. The Company
believes it will raise all of this amount during the third quarter 2001.
These funds are to be used to repay certain current indebtedness
of the Company, and enable it to meet certain other operating expenses
and capital expenditures relating to the ongoing redevelopment and
expansion of the Company's Shinkle Field property in Kansas.

Impact of inflation

The Company believes that its activities are not, at this time, materially
affected by inflation.





PART II.  OTHER INFORMATION


Item 1.	Legal Proceedings - None

Item 2.	Changes in Securities -

            During the second quarter the Company received notice to
            convert, and did convert, the issued and outstanding 48,000 shares
            of preferred stock, to eight million shares of restricted
            common stock.

Item 3.	Defaults Upon Senior Securities - None

Item 4.	Submission of Matters To A Vote of Securities Holders - None

Item 5.	Other Information - None

Item 6.	Exhibits and Reports on Form 8-K - None




                         SIGNATURES

Pursuant to the requirements of Section 12(g) the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized,
on July 30th, 2001.

CHANCELLOR GROUP, INC.


By: /s/Ashraf Khan
Ashraf Khan
Chairman/CEO
Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated, on July 30th, 2001.

/s/Ashraf Khan
Ashraf Khan
Chairman and Chief Executive Officer,
Director

/s/Shane X.G. Rodgers
Shane X.G. Rodgers
Vice Chairman and President,
Director

/s/William H. Stinson
William H. Stinson
Director

/s/Bassam Abu-Ghazaleh
Bassam Abu-Ghazaleh
Director