FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

For the fiscal year ended        December 31, 1997
                          --------------------------------

                                       OR

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES  EXCHANGE  ACT OF  1934  [NO  FEE REQUIRED]

For the transition period from                       to

Commission file Number         1-4668

                     COASTAL CARIBBEAN OILS & MINERALS, LTD.

             (Exact name of registrant as specified in its charter)

               BERMUDA                                               NONE
State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization                               Identification No.)

   Clarendon House
   Church Street
   Hamilton, Bermuda  HM DX                                          NONE

 (Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code              (441) 295-1422

Securities registered pursuant to Section 12(b) of the Act:

           Title of each class                          Name of each exchange on
                                                            which registered

Common Stock, par value $.12 per share                    Boston Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  NONE



<PAGE>


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.

                                                        |X|   Yes      |_|    No

Indicate by check mark if disclosure of delinquent filers pursuant to  Item  405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this  Form  10-K
or any amendment to this Form 10-K.                                         [X]

The  aggregate  market value of the common stock held by  non-affiliates  of the
registrant was approximately $60,006,000 (U.S.) at February 4, 1998.

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

Common stock,  par value $.12 per share,  40,056,358  shares  outstanding  as of
February 4, 1998.

                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy statement of Coastal Caribbean Oils & Minerals, Ltd. related to the Annual
Meeting of  Shareholders  for the fiscal year ended December 31, 1997,  which is
incorporated into Part III of this Form 10-K.


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page

                                     PART I

Item 1.       Business.                                                       4

Item 2.       Properties.                                                     9

Item 3.       Legal Proceedings.                                             14

Item 4.       Submission of Matters to a Vote of Security Holders.           17


                                     PART II


Item 5.       Market for the Company's Common Stock
              and Related Stockholder Matters.                               18

Item 6.       Selected Financial Data.                                       20

Item 7.       Management's Discussion and Analysis of
              Financial Condition and Results of Operations.                 21

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk     23

Item 8.       Financial Statements and Supplementary Data.                   24

Item 9.       Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure.                        42


                                    PART III


Item 10.      Directors and Executive Officers of the Company.               42

Item 11.      Executive Compensation.                                        42

Item 12.      Security Ownership of Certain Beneficial Owners
              and Management.                                                42

Item 13.      Certain Relationships and Related Transactions.                42

                                     PART IV

Item 14.      Exhibits, Financial Statement Schedules, and
              Reports on Form 8-K.                                           43
--------------------
All monetary figures set forth are expressed in United States currency.



<PAGE>


                                     PART I

Item 1.  Business.

         (a)      General Development of Business.

                  Coastal  Caribbean  Oils & Minerals,  Ltd.  (the  "Company" or
"Coastal  Caribbean"),  a Bermuda  corporation,  is engaged through its majority
owned  subsidiary in the exploration  for oil and gas reserves.  At December 31,
1997, Coastal Caribbean's principal asset was its subsidiary,  Coastal Petroleum
Company  ("Coastal  Petroleum").  Coastal  Petroleum's  principal assets are its
nonproducing  oil, gas and mineral leases and royalty  interests in the State of
Florida.  Coastal  Petroleum  has made no  commercial  discoveries  on the lands
covered by these leases.

                  Coastal  Petroleum is the lessee under State of Florida leases
relating  to the  exploration  for and  production  of oil,  gas and minerals on
approximately 3,700,000 acres of submerged lands along the Gulf Coast  and under
certain inland lakes and rivers.  The leases  provide for a working  interest in
approximately 1,250,000 acres and a royalty interest in approximately  2,450,000
acres  covered  by  the  leases.   Coastal  Petroleum  has  made  no  commercial
discoveries on its leaseholds.

                  Coastal Petroleum  has been  involved in  various lawsuits for
many years. Currently, Coastal Petroleum is a party to two actions (the "Florida
Litigation")  in which two basic  claims are being  contested:  Whether  Coastal
Petroleum may obtain an oil and gas  exploration  drilling permit and the amount
of the required surety,  and whether certain royalty  interests owned by Coastal
Petroleum  have been  confiscated  by the State of  Florida,  entitling  Coastal
Petroleum to compensation for such confiscation.  In addition, Coastal Caribbean
is a party to one  additional  action in which  Coastal  Caribbean  claims  that
certain of its royalty  interests  have been  confiscated  by the State.  During
1997, the Company  actively pursued the Florida  Litigation.  See Item 3. "Legal
Proceedings" for a more complete discussion of the litigation.

                   In 1997, Coastal Petroleum  continued its efforts to obtain a
permit to drill an oil and gas exploration well (the St. George Island prospect)
on its leases.  Its application  for such a  permit was  delayed by  the Florida
Department of Environmental Protection ("DEP")  on the basis that further public
hearings were required.  Also during 1997, Coastal Petroleum filed 12 additional
applications for drilling permits  (1296-1307).  Coastal Petroleum  subsequently
furnished additional data as requested by the DEP on these 12 applications,  but
objected  to  certain  of the DEP  requests  for  data.  Coastal  Petroleum  has
petitioned  for a formal  administrative  hearing to  resolve  the  dispute  for
additional  data.  The Company is continuing  its program to evaluate its leases
and  identify  potential  drilling  prospects.  On November 6, 1997,  additional
hearings  were  concluded  and a ruling is expected in late March or early April
1998. See Item 3. "Legal  Proceedings."  Coastal  Petroleum spent  approximately
$504,000 in 1997 in connection with its program to identify  potential  drilling
prospects.

<PAGE>

                   In  1990,  the  State of  Florida  enacted  legislation  that
prohibits drilling or exploration for oil or gas on Florida's offshore  acreage.
The law does  not  apply  to  areas  where  Coastal  Petroleum  is  entitled  to
conduct exploration.  However, in those areas where Coastal Petroleum has only a
royalty interest,  the law  effectively  prohibits  production  of oil  and gas,
rendering it impossible for  Coastal Petroleum  to collect  royalties from those
areas.  Coastal  Petroleum's  lawsuit  on  the  issue  is  part  of  the Florida
Litigation.

         (b)      Financial Information About Industry Segments.

                  Because the Company is engaged in only one  industry,  namely,
oil, gas and mineral exploration and development, this item is not applicable to
the  Company.  See  Item 8 for  general  financial  information  concerning  the
Company.

         (c)      Narrative Description of the Business.

                  Coastal  Caribbean was organized by a special  enabling act of
the Bermuda Legislature passed on January 15, 1962 which permitted the filing of
a Memorandum of  Association  on February 14, 1962. The Company is the successor
to Coastal Caribbean Oils, Inc., a Panamanian  corporation  organized on January
31, 1953 to be the holding company for Coastal Petroleum Company.

                  Coastal Petroleum caused oil and gas exploration to take place
on its leases prior to the onset of litigation  in 1968 and has  conducted  more
limited exploration since that time sufficient to meet the drilling requirements
under the leases. In 1996, the company initiated a program to identify potential
drilling  prospects  which  continued  into  1997.  No  commercial  oil  or  gas
discoveries have been made on these  properties;  therefore,  the Company has no
proved  reserves  of oil  and  gas  and has  had no  production.  See  "Item  2.
"Properties."

                  (i)      Principal Products.

                           Not applicable.

                  (ii)     Status of Product or Segment.

                           Not applicable.

                  (iii)    Raw Materials.

                           Not applicable.

                  (iv)     Patents, Licenses, Franchises and Concessions Held.

                           See Item 2. "Properties."

<PAGE>

                           The  acreage  covered  by  the  Company's  leases  is
located for the most part along offshore  areas on the Gulf Coast of Florida and
in submerged  and unsubmerged  lands under  certain bays, inlets,  riverbeds and
lakes,  of which  Lake Okeechobee  is the largest.  See  Item  2.  The  drilling
requirements and annual lease rental obligations  have been  suspended  by order
of the Circuit Court of the Second Judicial District in Leon County.

                           In the  inverse  condemnation  litigation  now  being
appealed to the U.S. Supreme Court, the Company claims that the royalty interest
has been taken by the State of Florida  and that it is entitled  to compensation
for such taking.  See "Item 3. Legal Proceedings."

                  (v)      Seasonality of Business.

                           The Company's business is not seasonal.

                  (vi)     Working Capital Items.

                           The majority of  the Company's current  assets are in
the form  of cash  and cash  equivalents.  See Item 8. "Financial Statements and
Supplementary Data."

                  (vii)    Customers.

                           Not applicable.

                  (viii)   Backlog.

                           Not applicable.

                  (ix)     Renegotiation  of Profits or Termination of Contracts
                           or Contract or  Subcontracts  at the  Election of the
                           Government.

                           Not applicable.

                  (x)      Competitive Conditions in the Business.

                           Competition  in the oil and gas industry is  intense.
The Company  must  compete  with  companies  which  have  substantially  greater
resources available to them.  In addition, the industry as a whole must  compete
with other industries in supplying the energy  needs of commerce and the general
public.  Furthermore,  competitive conditions  may be substantially  affected by
energy legislation which may be adopted  from time to time.  It is not  possible
to predict the nature of any such  legislation  which may  ultimately be adopted
or its effects upon the future operations of the Company.

                  (xi)     Research and Development.

                           Not applicable.

<PAGE>

                  (xii)    Environmental Regulation.

                           The operations of Coastal Caribbean  and its right to
obtain  interests in and hold properties or to do business may be affected to an
unpredictable extent  by limitations imposed  by the laws and  regulations which
are now  in effect or  which may be adopted  by the  jurisdictions in  which the
Company carries on business.  As discussed  under Item 3.  "Legal  Proceedings,"
the State of Florida has enacted legislation that Coastal Petroleum believes has
had the  effect of confiscating  Coastal Petroleum's  royalty interest.  Further
measures that have been or might be imposed include increased bond requirements,
conservation,  proration,  curtailment,  cessation or other forms of limiting or
controlling production of hydrocarbons or minerals, as well as price controls or
rationing or other  similar restrictions.  In particular,  environmental control
and energy conservation laws and regulations adopted by federal, state and local
authorities  may  have to be  complied  with  by  leaseholders  such as  Coastal
Petroleum.  It is not possible to predict the nature of any further  legislation
or  regulation  that might  ultimately be adopted or its effects upon the future
operations of Coastal Caribbean or Coastal Petroleum.

                  (xiii)   Number of Persons Employed by Registrant.

                           The  Company  currently  has  three  employees.   The
Company  relies heavily  on consultants  for legal,  accounting,  geological and
administrative services.  The Company  uses consultants  because it is more cost
effective than employing a larger full time staff.

                  (d)      Financial Information About Foreign and Domestic
                           Operations and Export Sales.

                           (1)      Identifiable Assets.

                                    All of the  Company's  assets are located in
the United  States.  See Item 1(a) "General Development of Business."

                                    Since  the  Company  is a  development stage
company,  the  balance  of  the information required under this paragraph is not
applicable to the Company.  See Item 8.

                           (2)      Risks Attendant to Foreign Operations.

                                    Not applicable.

                           (3)      Data which are not Indicative  of Current or
                                    Future Operations.

                                    Not applicable.



<PAGE>










The following  graphic  presentation  has been  omitted,  but the following is a
description of the omitted material:



             Map showing Coastal Lease Areas in the State of Florida



<PAGE>


Item 2.  Properties.

Properties

         Coastal  Petroleum,  a  Florida  corporation,   holds  certain  working
interests in  nonproducing  oil, gas and mineral leases  covering  approximately
1,250,000 acres, and a royalty interest in approximately 2,450,000 acres, in and
offshore the State of Florida.  No commercial oil or gas  discoveries  have been
made on the  properties  covered by these  leases and Coastal  Petroleum  has no
proved reserves of oil or gas and has had no significant production.

         Coastal  Petroleum  caused oil and gas exploration to take place on its
leases prior to the onset of litigation  in 1968 and has conducted  more limited
exploration  since that time until 1996. The amount of exploration  expenditures
during  the  years  1997,  1996 and  1995 was  $504,000,  $282,000  and  $3,000,
respectively.   Coastal   Petroleum   believes  all  drilling  and   exploration
obligations imposed by Coastal Petroleum leases have been satisfied to date.

         As a result of events discussed below,  Coastal Petroleum  believes its
royalty interest  effectively has been  confiscated by the State of Florida.  On
July 23, 1990,  Coastal Petroleum filed a complaint against the State of Florida
(the  "State")  in the  Circuit  Court of the  Second  Judicial  Circuit in Leon
County,  Florida seeking full compensation for the confiscation of its petroleum
and mineral leases. On August 5, 1996, the Court ruled in favor of the State and
Coastal  Petroleum  has  filed an  appeal of the  decision.  On August 6,  1997,
Florida's  First District Court of Appeal ruled against the Company.  On January
28, 1998, the Florida Supreme Court refused to review the decision.  The lawsuit
was initiated in response to (i) a policy adopted by the Governor and Cabinet on
May 8, 1990  prohibiting  drilling,  exploration  or  production  of oil and gas
resources  in the  sovereign  waters of the State of Florida  and (ii) a Florida
statute effective August 1, 1990 prohibiting  petroleum production from offshore
Florida acreage.  Pre-existing  leases,  such as Coastal Petroleum's leases, are
exempt from the prohibition of this law. See Item 3. "Legal Proceedings."

         In 1941, Arnold Oil Explorations, Inc., later renamed Coastal Petroleum
Company in 1947,  entered  into a contract  with the  Trustees  of the  Internal
Improvement Trust Fund of the State of Florida (the  "Trustees"),  in whom title
to publicly owned lands in the State of Florida,  including  bottoms of salt and
fresh  waters,  is  irrevocably  vested,  for the  exploration  of oil,  gas and
minerals on such lands.  Pursuant  to an option to lease in this  contract,  the
Trustees and Coastal  Petroleum entered into three leases between 1944 and 1946.
The acreage  covered by these leases is located for the most part along offshore
areas on the Gulf Coast of Florida and in submerged  lands under  certain  bays,
inlets, riverbeds and lakes, of which Lake Okeechobee is the largest.



<PAGE>


         In 1968, Coastal Petroleum sued the Secretary of the Army of the United
States in a dispute  regarding  certain mineral rights. In 1969, as part of that
litigation,  the  Trustees  claimed  that the leases  were  invalid and had been
forfeited.  Coastal  Petroleum and the Trustees  settled their  disagreement  in
1976.

         Under the terms of the 1976 settlement agreement, the two leases (224-A
and 224-B) bordering the Gulf Coast were divided into three areas,  each running
the entire length of the coastline from Apalachicola Bay to the Naples area: (1)
The inner area,  including rivers,  bays, and harbors,  extends seaward from the
Florida shoreline a distance of 4.36 statute miles (5,280 feet per statute mile)
into the Gulf,  covers  approximately  2.25 million  acres,  and is subject to a
royalty interest payable to Coastal Petroleum. This interest is a 6 1/4% royalty
on the  wellhead  value of all oil and gas,  25  cents  per long ton on  sulfur,
receivable in cash or in kind at Coastal Petroleum's option, and a 5% royalty on
production  or the market value of other  minerals.  (2) The middle area,  three
statute miles wide and covering more than 800,000 acres, was released by Coastal
Petroleum to the Trustees,  and Coastal Caribbean has no further interest in the
area.  (3)  Coastal  Petroleum  presently  owns a 100%  working  interest in the
outside  area,  which  extends  seaward an  additional  three  statute miles and
borders federal offshore acreage.  This area,  exceeding 800,000 acres,  remains
subject to royalties  payable to the State of Florida of 12 1/2% on oil and gas,
$.50 per long ton of sulfur and 10% on other minerals.  The Florida  legislature
has enacted statutes designed to protect the Big Bend Seagrass Aquatic Preserve,
an area  covering  approximately  one  quarter  of Coastal  Petroleum's  working
interest area.  However,  the legislation and legislative  history recognize and
preserve Coastal Petroleum's prior rights as granted by the leases.

         Coastal  Petroleum retains a 100% working interest in 450,000 acre Lake
Okeechobee  which is a part of Lease 248 and which is also  subject to royalties
payable to the State of Florida of 12 1/2% on oil and gas,  $.50 per long ton of
sulfur and 10% on other  minerals.  Pursuant to its settlement with the State of
Florida in 1976, Coastal Petroleum agreed not to conduct  exploration,  drilling
or mining operations on Lake Okeechobee without the prior approval of the State.
As to the balance of this lease,  covering  approximately 200,000 acres, Coastal
Petroleum  retains royalty  interests of 6 1/4% on oil, gas and sulfur and 5% on
other minerals.

         Under the 1976 settlement agreement with the Trustees, the three leases
have a term of 40 years  beginning  from January 6, 1976 and require the payment
of an annual  rental of $59,247;  if oil, gas or minerals are being  produced in
economically sustainable quantities at January 6, 2016, these operations will be
allowed to  continue  until they  become  uneconomic.  Further,  the  settlement
agreement  provides that the drilling  requirements shall be governed by Chapter
20680, Laws of Florida,  Acts of 1941, and that all other drilling  requirements
are waived.  Under the 1941 Act, a lessee is required to drill at least one test
well on lands  leased  in each  five year  period  under the term of the  lease.
Coastal   Petroleum   believes  it  is  current  in   fulfilling   its  drilling
requirements.  The  Court  in  the  Florida  Litigation  has  suspended  Coastal
Petroleum's obligations, pending the outcome of that litigation.


<PAGE>


         Since 1987,  Coastal  Petroleum has drilled three shallow test wells on
Leases 224-A and 224-B.  This  exploration  utilized a technique  developed  and
tested  earlier by Coastal  Petroleum  which detects  radiation  emanating  from
phosphate and associated uranium at greater depth. These tests were inconclusive
as to those  minerals.  These test wells had the prior  approval  of the Florida
Department  of Natural  Resources  and Coastal  Petroleum  believes they met the
drilling requirements of the two leases.

         Other  work  during  the  1987-90  period  included  planning  for  and
attempting  to  acquire  a permit  for a  seismic  and  gravity  survey  of Lake
Okeechobee.   After  considerable  work,  the  application  was  withdrawn  from
consideration  because of environmental  concerns  expressed by the Governor and
the Trustees.

         In 1992 Coastal Petroleum was granted an additional  geophysical permit
for seismic,  gravity and magnetic work, on its offshore leases.  Magnetics were
run on a large portion of 224-A. Work was suspended for a few months and the DNR
ruled that a new  permit  application  would be  required  to renew  operations.
Coastal  Petroleum's new application for a geophysical  permit received approval
in January 1997. The Company began the magnetic work during January 1998 and has
filed for a one year extension of time to complete the work.

         See Item 3. "Legal Proceedings" for a  discussion  of the impact of the
current status of the Florida Litigation on exploration activities.

         The following charts reflect the acreage and annual rental  obligations
resulting  from  the  1976  settlement  agreement  with  the  Trustees  and  the
approximate acreage under lease at December 31, 1997:

                          Acreage after 1976 Settlement

                             Current                Current            Current
                             Working                Royalty             Annual
                            Interest               Interest             Rental
224-A and 224-B              800,000              2,250,000            $39,261
248                          450,000                200,000             19,986
                           ---------              ---------            -------
                           1,250,000              2,450,000            $59,247
                           =========              =========            =======
                                      

<PAGE>


                    Acreage under lease at December 31, 1997

                              Gross Acres (*)                 Net Acres (**)
                       Undeveloped     Developed        Undeveloped    Developed
Working interest        1,250,000         -0-            1,250,000        -0-
Royalty interest        2,450,000         -0-              153,125        -0-
                        ---------        -----           ---------       -----
    Total               3,700,000         -0-            1,403,125        -0-
                        =========       =======          =========      =======
                                                                        
*        A gross acre is an acre in which a working interest is owned.
**       A net acre is  deemed  to exist  when the sum of  fractional  ownership
         working interests in gross acres equals one. The number of net acres is
         the sum of the  fractional  working  interests  owned  in  gross  acres
         expressed as whole numbers and fractions thereof.

         The drilling  requirements and the annual rental  obligations set forth
above have been  suspended by order of the Circuit Court of the Second  Judicial
District in Leon County.

Disclosure Concerning Oil and Gas Operations.

         Since the properties in which the Company has interests are undeveloped
and nonproducing,  items 2 through 4 of Securities Exchange Act Industry Guide 2
are not applicable.

(5)      Undeveloped Acreage.

         The  Company's  undeveloped  acreage  as of  December  31,  1997 was as
follows:

                                         Gross Acres           Net Acres

          Working Interest                 1,250,000           1,250,000
          Royalty Interest                 2,450,000             153,125
                                           ---------            --------

          Total                            3,700,000           1,403,125
                                           =========           =========


<PAGE>


(6)       Drilling Activity.

          No drilling  has taken place since May 1987 when two  shallow  mineral
test wells were drilled on lease 224-B.

(7)       Present Activities.

          The  Company is  continuing  its  program to  evaluate  its leases and
identify potential drilling prospects.

(8)       Delivery Commitments.

          None.

<PAGE>


Item 3.           Legal Proceedings.

         Coastal Petroleum has been involved in various lawsuits for many years.
Currently, Coastal Petroleum is a party to two actions in which two basic claims
are  being  contested:  Whether  Coastal  Petroleum  may  obtain  an oil and gas
exploration  drilling permit and the amount of the required surety,  and whether
certain royalty  interests owned by Coastal  Petroleum have been  confiscated by
the State of Florida,  entitling  Coastal  Petroleum  to  compensation  for such
confiscation.  In addition,  Coastal  Caribbean is a party to another  action in
which Coastal  Caribbean claims that certain of its royalty  interests have been
confiscated  by  the  State.  Also  during  1997,  Coastal  Petroleum  filed  12
additional  applications for drilling  permits  (1296-1307).  Coastal  Petroleum
subsequently  furnished  additional  data as  requested  by the DEP on  these 12
applications,  but  objected to certain of the DEP  requests  for data.  Coastal
Petroleum expects to petition the Division of Administrative Hearings to resolve
the dispute.

1.       Coastal  Petroleum  Company   v.   State  Department  of  Environmental
Protection,  (Case No.  96-03226,  First District  Court  of  Appeal).  Drilling
Permit Litigation.

         In  1993,  Coastal  Petroleum  applied  to the  Florida  Department  of
Environmental Protection (the "Department") for a permit to drill an exploratory
oil and gas well off Apalachicola,  Florida.  The proposed well would be located
in an area included  within Lease 224A. The Department  subsequently  denied the
application for issuance of a drilling permit for various reasons  including the
requirement for a $1.9 billion bond.  Coastal Petroleum  appealed the actions of
the  Department  to the  Florida  First  District  Court of  Appeal  ("Court  of
Appeal").  After  two  decisions  by the  Court of  Appeal  in favor of  Coastal
Petroleum,  the  Florida  Supreme  Court in July 1996  denied  the  Department's
petition to review an April 1996 Court of Appeal  decision.  The Florida Supreme
Court had also refused to review an earlier Court of Appeal decision.

         On August 16, 1996, the Department  notified Coastal  Petroleum that it
was  prepared  to  issue  the  drilling  permit  subject  to  Coastal  Petroleum
publishing a Notice of Intent to Issue  ("Notice") the permit.  The Notice would
allow  interested  parties to request  administrative  hearings  on the  permit.
Coastal  Petroleum  refused to publish the Notice and filed a petition  with the
Court of Appeal on August 27, 1996 to order the  Department  to issue the permit
without the requirement of the Notice and without further delay.

         On  September  10,  1996,  the Court of  Appeal  issued an order to the
Department to show cause why the permit  should not be granted.  On February 10,
1997, the court denied Coastal Petroleum's petition for a writ of certiorari.

         On May 28, 1997,  the Oil and Gas Drilling  Bill (SB550) was enacted in
Florida.  The new  legislation  requires  that a surety will now be based on the
projected  cleanup costs and possible  natural  resource damage  associated with
offshore drilling as estimated by the Department of Environmental Protection and
as set up by the  Governor  and Cabinet.  Previously,  the  required  surety was
satisfied  by a payment of $4,000 to the  Mineral  Trust Fund in the first year,
with a  maximum  $30,000  per year and a  payment  of  $1,500  per well for each
subsequent  year.  On September  9, 1997,  the State of Florida set a new surety
amount of $4.25  billion as a  precondition  for the  issuance  of the  drilling
permit.


<PAGE>


         During  1997,  the  Company  published  a Notice of the DEP's intent to
issue  the  permit.  On  October  20,  1997,  a  public  hearing  on the  permit
application  was held and it was  concluded  on  November  6, 1997.  The hearing
included  the  Company's  appeal  of the $4.25  billion  surety  requirement.  A
decision  by the  administrative  law judge is  expected  by late March or early
April 1998.

2.       Coastal  Petroleum  Company   v.  Honorable  Lawton  Chiles  (Case  No.
96-03035, First District Court of Appeal).  Royalty Litigation.

         In 1990,  a Florida  statute  became  effective  prohibiting  petroleum
production from offshore  Florida  acreage.  The statute does not affect Coastal
Petroleum's  right to drill for oil and gas in the working  interest area of its
leases.  However,  as a result of the statute,  production of oil and gas is now
prohibited  in those areas of Coastal  Petroleum's  leases  where it owns only a
royalty  interest.  Coastal  Petroleum  therefore  will be unable to receive any
royalties from these areas, because oil and gas production has been prohibited.

         A trial  was held  before  the  Circuit  Court of the  Second  Judicial
Circuit  in Leon  County  (Tallahassee)  from May 6-9,  1996 on the issue of the
taking of the  royalty  interest.  On August 5, 1996,  the trial  court ruled in
favor of the State and found  that  there was no taking of  Coastal  Petroleum's
royalty  interest.  Coastal  Petroleum  appealed  that  decision to the Court of
Appeal and on August 6, 1997, the Court of Appeal ruled against the Company.  On
January 28, 1998, the Florida Supreme Court refused to review the decision.  The
Company expects to appeal this decision to the U.S. Supreme Court.

3.       Cottingham v. State of Florida,  (Case No. 94-768-CA-01,  Circuit Court
of the Second Judicial Circuit in Leon County).  Royalty Litigation.

         The  offshore  areas  covered by Coastal  Petroleum's  original  leases
(prior to the 1976  Settlement  Agreement)  are subject to certain other royalty
interests held by third parties,  including Coastal Caribbean.  Several of those
third parties,  including Coastal Caribbean,  have instituted a separate lawsuit
against the State.  That lawsuit  claims that their royalty  interests have been
confiscated as a result of the State's actions discussed above and that they are
entitled to compensation for that taking.

         The lawsuit by the royalty  holders  involves  issues  similar to those
raised in Coastal  Petroleum's  lawsuit  that claims that its royalty  interests
have been taken,  although  the cases are  different  in certain  respects.  For
example,  many of the royalty  holders  were not parties to the 1976  Settlement
Agreement,  and the State's argument that the terms of the Settlement  Agreement
insulate it from taking claims does not apply to those royalty holders. The case
is currently pending before the Circuit Court in Tallahassee.

         Any recovery made in the royalty holder's lawsuit would be shared among
the various  plaintiffs in that lawsuit,  including  Coastal Caribbean.  Coastal
Petroleum would not share in any such recovery. 

<PAGE>

Counsel

         Mr.  Robert J. Angerer of  Tallahassee,  Florida is Coastal Petroleum's
trial counsel in the Florida Litigation.  Mr. Angerer,  age 51, is a graduate of
the University of Michigan  (B.S.E.  1969) and received his law degree with high
honors from Florida  State  University  in 1974.  The firm of  Reasoner & Fox of
Washington, D.C. had also participated  in the litigation.  Mr. C. Dean Reasoner
was a member of this firm and was also a director of Coastal Caribbean until his
resignation on March 20, 1997.

Fee Arrangements

         In connection with the Florida  Litigation against the State of Florida
described  herein,  Coastal  Petroleum has agreed to pay the following firms, in
addition to their  charges on a time spent  basis,  a total of 6% in  contingent
fees based upon any net recovery from execution on or  satisfaction  of judgment
or from settlement of such lawsuit as follows:

                                               Percent of net recovery
                  Reasoner & Fox                         2.0
                  Robert J. Angerer                      1.5
                  Other counsel                          2.5

         Coastal  Petroleum has also assigned  3.4% of net  recoveries  from the
Florida Litigation to its officers and others.

Uncertainty

         No assurances can be given that Coastal  Petroleum or Coastal Caribbean
will  prevail  on any of the  issues  set forth  above,  that they will  recover
compensation for any of their claims, or that a drilling permit will be granted.
In  addition,  even if  Coastal  Petroleum  were to prevail on any or all of the
issues to be  decided,  no  assurance  can be given that  Coastal  Caribbean  or
Coastal Petroleum will have sufficient financial resources to survive until such
decisions  become  final or to drill any wells for which  permits are  received.
There is also no assurance that any wells drilled will be successful and lead to
production of any oil or gas in commercial quantities.



<PAGE>


Item 4.           Submission of Matters to a Vote of Security Holders.

                  None.

Executive Officers of the Company.

          The following  information  with respect to the executive  officers of
the Company is furnished  pursuant to Instruction 3 to Item 401(b) of Regulation
S-K.

<TABLE>
<CAPTION>
                                                                                       Other Positions
                                   Office           Length of Service                   Held With The
          Name         Age          Held              as an Officer                       Company

<S>                    <C>   <C>                   <C>                    <C>
Benjamin W. Heath      83         President        Since 1953             Director
Phillip W. Ware        48      Vice President      Since 1982             Director, President of Coastal Petroleum

James R. Joyce         57     Treasurer, Asst.     Since 1994             Secretary-Treasurer of Coastal Petroleum
                             Secretary and Chief
                              Financial Officer
</TABLE>

         All  officers  of the  Company  are  elected  annually  by the Board of
Directors and serve at the pleasure of the Board of Directors.

         The Company is not aware of any arrangements or understandings  between
any of the  individuals  named  and any  other  person  pursuant  to  which  any
individual named above was selected as an officer.



<PAGE>


                                     PART II

Item 5.           Market for the Company's Common Stock and Related
                  Stockholder Matters.

         (a)      Market Information.

                  The  principal  market for the  Company's  common stock is the
Boston  Stock  Exchange.  The  quarterly  high and low  closing  prices  on that
exchange during the last two years were as follows:

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

1997          1st quarter        2nd quarter       3rd quarter       4th quarter
----          -----------        -----------       -----------       -----------

High             4 3/4              2 1/2             2 1/8             2 3/8
Low             2 1/16             1 9/16            1 7/16             1 5/8
--------------------------------------------------------------------------------

1996          1st quarter        2nd quarter       3rd quarter       4th quarter
----          -----------        -----------       -----------       -----------

High             2 3/8              2 5/8             3 3/8             3 1/2
Low              1 1/4             1 9/16             1 3/4            2 1/16
--------------------------------------------------------------------------------

         (b)      Holders.

                  The  approximate  number of record  holders  of the  Company's
common stock at February 4,1998 was approximately 12,900.

         (c)      Dividends.

                  The Company has never paid a dividend on its capital stock and
will be unable to do so until its deficit, ($25,101,000 at December 31, 1997) is
eliminated.

                  The  Company's  Memorandum of  Association  and By-Laws do not
permit the Company to repurchase or redeem shares of its common stock.



<PAGE>


         Foreign Exchange Control Regulations

                  The Company is subject to the  applicable  laws of The Islands
of Bermuda relating to exchange  control,  but has the permission of the Foreign
Exchange  Control of Bermuda to carry on business  in, to receive,  disburse and
hold United States  dollars and dollar  securities  under its  designation as an
External  Account  Company.  The Company has been  advised  that,  although as a
matter of law it is possible for such designation to be revoked, there is little
precedent for revocation under Bermuda law.

         Taxes

                  Coastal Caribbean is a Bermuda corporation.  Bermuda currently
imposes  no taxes on  corporate  income or  capital  gains  realized  outside of
Bermuda. Any amounts received by Coastal Caribbean from United States sources as
dividends,  interest,  or other fixed or determinable  annual or periodic gains,
profits and income,  will be subject to a 30% United States  withholding tax. In
addition,  any dividends from its domestic subsidiary,  Coastal Petroleum,  will
not be eligible for the 100% dividends received deduction, which is allowable in
the case of a United  States parent  corporation.  Shares of the Company held by
persons  who are  citizens  or  residents  of the United  States are  subject to
federal estate and gift and local inheritance  taxation.  Any dividends received
by such  persons  will also be  subject  to  federal,  State  and  local  income
taxation.  The foregoing rules are of general  application only, and reflect law
in force as of the date of this report.

                  A convention between Bermuda and the United States relating to
mutual assistance on tax matters became operative in 1988.



<PAGE>


Item 6.           Selected Consolidated Financial Information

         The  following  selected  consolidated  financial  information  for the
Company  insofar as it  relates  to each of the five  years in the period  ended
December 31, 1997 has been extracted from the Company's  consolidated  financial
statements.



<TABLE>
<CAPTION>
                                           1997             1996             1995            1994             1993
                                           ($)              ($)              ($)             ($)              ($)

<S>                                    <C>              <C>                <C>             <C>              <C>      
Net loss                               (1,611,000)      (1,148,000)        (880,000)       (719,000)        (223,000)
                                       ===========      ===========        =========       =========        =========

Net loss per share
(Basic and Diluted)                          (.04)            (.03)            (.03)           (.02)            (.01)
                                             =====            =====            =====           =====            =====

Cash and securities available           3,749,000        5,789,000          308,000         648,000          682,000
                                        =========        =========        =========       =========        =========

Cost associated with leasehold
  interests in oil, gas and
  mineral properties (unproved)         4,395,000        3,944,000        3,689,000       3,689,000        3,689,000
                                        =========        =========        =========       =========        =========

Total assets                            8,462,000       10,021,000        4,128,000       4,375,000        4,662,000
                                        =========       ==========        =========       =========        =========

Shareholders' equity:
  Common stock                          4,807,000        4,805,000        4,004,000       4,004,000        4,004,000
  Capital in excess                    28,693,000       28,443,000       22,395,000      21,795,000       21,165,000
  Accumulated deficit                 (25,102,000)     (23,490,000)     (22,342,000)    (21,463,000)     (20,744,000)
                                      ------------     ------------     ------------    ------------     ------------
                                        8,398,000        9,758,000        4,057,000       4,336,000        4,425,000
                                        =========        =========        =========       =========        =========
</TABLE>



<PAGE>


Item 7.          Management's Discussion and Analysis of Financial Condition and
                 Results of Operations

(1)      Liquidity and Capital Resources

                              Short Term Liquidity

         At December 31 1997,  Coastal Caribbean had approximately  $3.7 million
of cash and  securities  available.  These  funds  are  expected  to be used for
general  corporate  purposes,  including  exploration  and  development  and  to
continue the litigation against the State of Florida.

                               Long Term Liquidity

         The Company estimates that as much as $500,000 per year may be required
in connection with the Florida litigation.  The Company expects that the Florida
litigation  will  continue at least  through  1998,  although the State may take
actions that could  lengthen that period.  The Company has a program to evaluate
its  leases  which is  estimated  to cost  approximately  $500,000  for 1998 and
$500,000  for 1999,  and is subject to the  outcome of the  Florida  litigation.
During  1997,  the Company  spent  approximately  $504,000  under the program to
identify potential drilling prospects.

         The  Company's  oil and  gas  properties  are  currently  unproved  and
undeveloped.  The Company  has  applied for a drilling  permit from the State of
Florida to drill an  exploratory  well (the St. George  Island  prospect) in the
water near Apalachicola, Florida. The State of Florida has resisted the issuance
of a drilling permit. If the Company is successful in obtaining a state drilling
permit, then the Company must also do the following:

         1.       Obtain a federal drilling permit.

         2.       Finance  drilling  of the  well,  which is  estimated  to cost
                  approximately $5 million.

         3.       Begin  drilling the well within one year of the date the state
                  permit is issued.

         In 1997,  the Company  filed 12  additional  applications  for drilling
permits. The Company has objected to certain requests for additional data by the
State of Florida DEP and the Company has petitioned for a formal  administrative
hearing to resolve the dispute.


<PAGE>



         The Company does not currently have assets sufficient to fund all these
expenditures to drill the St. George Island  prospect and any other  exploration
wells,  if all of the permits were  granted.  If oil and/or gas is discovered in
commercial quantities,  a production program would require additional permitting
and construction of production,  storage and delivery systems. The Company would
be required to seek additional financing or partners to fund these expenditures.

(2)      Results of Operations

         The Company has never had  substantial  revenues  and has operated at a
loss each year since its  inception  in 1953.  The Company has been  involved in
litigation  since  1968 and its total  legal  expenses  have been  approximately
$2,123,000  during the period 1997,  1996 and 1995. The legal expenses  incurred
related  primarily  to the  Florida  Litigation.  These fees can be  expected to
continue at the same or a higher level until the Florida Litigation is resolved.
A termination date of this litigation  cannot be predicted with any certainty at
this time.

1997 vs. 1996

         The Company recorded a loss of $1,611,000 for 1997,  compared to a loss
of $1,148,000 in 1996.

         Interest  income and other  income  increased  to $279,000 in 1997 from
$192,000 in 1996  due to the funds  available for  investment from  the May 1996
rights offering to shareholders.

         Legal fees and costs  increased 43% in 1997 to  $1,047,000  compared to
$731,000 in the prior year. These costs increased due to (1) the various appeals
filed in connection with the State of Florida's  opposition to the issuance of a
drilling permit,  (2) the appeal of the adverse decision that there has not been
a  taking  of  the  Company's  royalty  interests,  and  (3)  the  October  1997
administrative hearing regarding the issuance of the pending drilling permit.

         Administrative  expenses  increased 32% in 1997 to $448,000 compared to
$339,000 in 1996. The primary reason for the increase is the first time purchase
of directors' and officers'  liability  insurance in 1996 and an increase in the
amount of coverage in 1997 ($75,000). In addition,  directors' fees increased by
$19,000 in 1997.

         Shareholder  communications  increased  101%  from  $94,000  in 1996 to
$188,000 in 1997. In 1996,  the Company saved the cost of printing and mailing a
separate annual report by utilizing the May 1996 rights  offering  prospectus in
lieu of an annual  report.  In  addition,  the cost of printing and mailing also
increased  in 1997  because  of the  size of the  documents  and the  number  of
mailings. In 1997, the Company also mailed a special report to shareholders.


<PAGE>


         Exploration  costs increased from $27,000 in 1996 to $53,000 in 1997 in
connection with the Company's program to identify potential drilling  prospects.
These expenses do not include the  exploration  expenditures  totaling  $504,000
that were capitalized.

1996 vs. 1995

         The Company recorded a loss of $1,148,000 for 1996,  compared to a loss
of $880,000 in 1995.

         Interest income and other  income  increased  to $192,000  in 1996 from
$15,000 in 1995  due to  the funds  available for  investment from the  May 1996
rights offering to shareholders.

         Legal fees and costs  increased  111% in 1996 to  $731,000  compared to
$346,000 in the prior year.  These costs  increased due to increased  litigation
activities  in the  Florida  Litigation.  In  addition,  the  Company  agreed to
reimburse  Lykes Minerals Corp. in 1996 for certain legal expenses in the amount
of $201,416 that Lykes had incurred in connection with the Florida Litigation on
the basis that the expenses had directly benefited the Company.

         Administrative  expenses  increased 11% in 1996 to $339,000 compared to
$306,000  in 1995.  The  primary  reason  for the  increase  was the first  time
purchase of Director's and Officers' liability insurance.

         Exploration  costs  increased from $3,000 in 1995 to $27,000 in 1996 in
connection with the Company's program to identify potential drilling  prospects.
These expenses do not include the  exploration  expenditures  totaling  $255,000
that were capitalized.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.

         The information  required by this item is not applicable to the Company
until the fiscal year ending December 31, 1998.



<PAGE>


Item 8.  Financial Statements and Supplementary Data.


                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Coastal Caribbean Oils & Minerals, Ltd.

We have audited the accompanying consolidated balance sheet of Coastal Caribbean
Oils & Minerals,  Ltd. (a development stage company) as of December 31, 1997 and
1996, and the related  consolidated  statements of operations,  cash flows,  and
common  stock and capital in excess of par value from  inception to December 31,
1997 and for each of the three  years in the period  ended  December  31,  1997.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Coastal
Caribbean  Oils &  Minerals,  Ltd.  at  December  31,  1997  and  1996,  and the
consolidated  results of its  operations  and its cash flows from  inception  to
December 31, 1997 and for each of the three years in the period  ended  December
31, 1997, in conformity with generally accepted accounting principles.




                                                   ERNST & YOUNG LLP


Hartford, Connecticut
February 5, 1998



<PAGE>


                     COASTAL CARIBBEAN OILS & MINERALS, LTD.
                             (A Bermuda Corporation)
                           A Development Stage Company

                           CONSOLIDATED BALANCE SHEET
                           (Expressed in U.S. dollars)

                                                             December 31,

                                                          1997          1996
                                                      -----------   -----------
                      ASSETS

Current assets:
  Cash and cash equivalents                           $   316,333   $   424,330
  Accounts receivable                                      77,302       105,115
  U.S. Government securities                            3,433,035     3,341,820
  Prepaid insurance                                       213,840       178,868
                                                      -----------   -----------
          Total current assets                          4,040,510     4,050,133
                                                      -----------   -----------

U.S. Government securities                                      -     2,001,441
Unproved oil, gas and mineral properties
  (full cost method)                                    4,395,132     3,943,520
Other                                                      26,765        25,644
                                                      -----------   -----------
                                                      $ 8,462,407   $10,020,738
                                                      ===========   ===========

         LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued liabilities            $    63,975   $   262,422
                                                      -----------   -----------

Minority interests                                              -             -

Shareholders' equity:
  Common stock, par value $.12 per share:
    Authorized - 250,000,000 shares
    Outstanding - 40,056,358 and 33,363,632 shares      4,806,763     4,805,563
  Capital in excess of par value                       28,693,033    28,442,983
                                                      -----------   -----------
                                                       33,499,796    33,248,546
  Deficit accumulated during development
    stage                                             (25,101,364)  (23,490,230)
                                                      -----------   -----------
Total shareholders' equity                              8,398,432     9,758,316
                                                      -----------   -----------
                                                      $ 8,462,407   $10,020,738
                                                      ===========   ===========

                             See accompanying notes.


<PAGE>


                     COASTAL CARIBBEAN OILS & MINERALS, LTD.
                             (A Bermuda Corporation)
                           A Development Stage Company

                      CONSOLIDATED STATEMENT OF OPERATIONS
                           (Expressed in U.S. Dollars)


<TABLE>
<CAPTION>
                                                                                                                        From
                                                                                                                      inception
                                                                                                                   (Jan. 31, 1953
                                                                  Year ended December 31,                         to December 31,)
                                                      1997                 1996                  1995                   1997
                                                  -----------          -----------             --------- 
<S>                                               <C>                  <C>                     <C>                   <C>       
Interest and other income                         $   279,469          $   192,369             $  14,845             $ 3,506,126
                                                  -----------          -----------             --------- 

Expenses:
  Legal fees and costs                              1,046,779              730,831               345,770              11,469,903
  Administrative expenses                             447,622              338,594               306,011               6,369,149
  Salaries                                            156,000              150,667               149,667               2,750,278
  Shareholder communications                          187,644               93,548                90,169               3,436,031
  Exploration costs                                    52,558               26,933                 2,804                 752,594
  Lawsuit judgments                                         -                    -                     -               1,941,916
  Minority interests                                        -                    -                     -                (632,974)
  Other                                                     -                    -                     -                 364,865
  Contractual services                                      -                    -                     -               2,155,728
                                                  -----------          -----------             --------- 
                                                    1,890,603            1,340,573               894,421              28,607,490
                                                  -----------          -----------             --------- 

Net loss                                          $(1,611,134)         $(1,148,204)            $(879,576)
                                                  ============         ============            ==========

Deficit accumulated during
  development stage                                                                                                 $(25,101,364)
                                                                                                                    =============
Net loss per share based on average
  number of shares outstanding during
  the period:
    Basic and Diluted EPS                            $(.04)               $(.03)                $(.03)
                                                     ======               ======                ======

Average number of shares outstanding
    (Basic and Diluted)                            40,055,589           37,477,617            33,363,632
                                                   ==========           ==========            ==========
</TABLE>

                             See accompanying notes.


<PAGE>


                     COASTAL CARIBBEAN OILS & MINERALS, LTD.
                             (A Bermuda Corporation)
                           A Development Stage Company

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                           (Expressed in U.S. Dollars)

<TABLE>
<CAPTION>
                                                                                                                         From
                                                                                                                       inception
                                                                                                                    (Jan. 31, 1953)
                                                                        Year ended December 31,                             to
                                                              1997               1996                1995            Dec. 31, 1997
                                                           -----------        -----------         ----------          ------------
Operating activities:
<S>                                                       <C>                <C>                  <C>                <C>          
Net loss                                                  $(1,611,134)       $(1,148,204)         $(879,576)         $(25,101,364)
Adjustments to reconcile net loss to net cash
  used for operating activities:
    Minority interest                                               -                  -                  -              (632,974)
    Exploration and other                                           -                  -                  -               755,974
    Net change in:
       Accounts receivable                                     27,813            (98,278)             1,154               (77,302)
       Prepaid insurance and other                            (34,972)           (53,526)              (446)             (213,840)
       Current liabilities                                   (198,447)           191,210             32,792                63,975
       Other                                                   (1,121)            34,063            (59,708)              472,140
                                                           -----------        -----------         ----------          ------------
Net cash used for operating activities                     (1,817,861)        (1,074,735)          (905,784)          (24,733,391)
                                                           -----------        -----------         ----------          ------------

Investing activities:
  Additions to oil, gas, and mineral
    properties net of assets acquired
    for common stock                                         (451,612)          (254,952)                 -            (4,395,132)
  U.S. Government securities                                1,910,226         (5,343,261)                 -            (3,433,035)
  Reimbursement of lease rentals and
    other expenses                                                  -                  -                  -             1,243,086
  Purchase of fixed assets                                          -                  -                  -               (61,649)
                                                            ---------         -----------          --------            -----------
Net cash provided by (used) for investing activities
                                                            1,458,614         (5,598,213)                 -            (6,646,730)
                                                            ---------         -----------          --------            -----------

Financing activities:
  Sale of common stock less expenses                                -          6,356,326                  -            26,342,205
  Shares issued upon exercise of
    options                                                    11,250             13,500                  -               884,249
  Sale of shares by subsidiary                                      -                  -                  -               750,000
  Sale of subsidiary shares                                   240,000            480,000            600,000             3,720,000
                                                             --------          ---------           --------            ----------
Net cash provided by financing activities                     251,250          6,849,826            600,000            31,696,454
                                                             --------          ---------           --------            ----------
Net increase (decrease) in cash
  and cash equivalents                                       (107,997)           176,878           (305,784)              316,333
Cash and cash equivalents at
  beginning of period                                         424,330            247,452            553,236                     -
                                                             --------          ---------           --------            ----------
Cash and cash equivalents at
  end of period                                              $316,333           $424,330           $247,452              $316,333
                                                             ========           ========           ========              ========
</TABLE>
                                                      See accompanying notes.

<PAGE>


                     COASTAL CARIBBEAN OILS & MINERALS, LTD.
                             (A Bermuda Corporation)
                           A Development Stage Company

                     CONSOLIDATED STATEMENT OF COMMON STOCK
                       AND CAPITAL IN EXCESS OF PAR VALUE
                           (Expressed in U.S. dollars)
             From inception (January 31, 1953) to December 31, 1997

<TABLE>
<CAPTION>
                                                                                                                      Capital in
                                                                       Number of                 Common                 Excess
                                                                         Shares                  Stock               of Par Value
                                                                       ----------              ----------            ------------
Shares issued for net assets and unrecovered costs
<S>                                                                   <C>                      <C>                    <C>        
   at inception                                                         5,790,210              $  579,021             $ 1,542,868
Shares issued upon sales of common stock (Note 6)                      26,829,486               3,224,014              16,818,844
Shares issued upon exercise of stock options (Note 6)                     510,000                  59,739                 799,760
Market value ($2.375 per share) of shares issued in
  1953 to acquire an investment                                            54,538                   5,454                 124,074
Shares issued in 1953 in exchange for 1/3rd of a 1/60th
  overriding royalty (sold in prior year) in nonproducing
  leases of Coastal Petroleum                                              84,210                   8,421                       -
Market value of shares issued for services rendered
  during the period 1954-1966                                              95,188                   9,673                 109,827
Net transfers to restate the par value of common stock
  outstanding in 1962 and 1970 to $0.12 per share                               -                 117,314                (117,314)
Increase in Company's investment (equity) due to
  capital transactions of Coastal Petroleum in 1976                             -                       -                 117,025
                                                                       ----------              ----------             -----------
Balance at December 31, 1990                                           33,363,632               4,003,636              19,395,084
Sale of subsidiary shares (Note 2)                                              -                       -                 300,000
                                                                       ----------              ----------             -----------
Balance at December 31, 1991                                           33,363,632               4,003,636              19,695,084
Sale of subsidiary shares (Note 2)                                              -                       -                 390,000
                                                                       ----------              ----------             -----------
Balance at December 31, 1992                                           33,363,632               4,003,636              20,085,084
Sale of subsidiary shares (Note 2)                                              -                       -               1,080,000
                                                                       ----------              ----------             -----------
Balance at December 31, 1993                                           33,363,632               4,003,636              21,165,084
Sale of subsidiary shares (Note 2)                                              -                       -                 630,000
                                                                       ----------              ----------             -----------
Balance at December 31, 1994                                           33,363,632               4,003,636              21,795,084
Sale of subsidiary shares (Note 2)                                              -                       -                 600,000
                                                                       ----------              ----------             -----------
Balance at December 31, 1995                                           33,363,632               4,003,636              22,395,084
Sale of common stock                                                    6,672,726                 800,727               5,555,599
Sale of subsidiary shares                                                       -                       -                 480,000
Exercise of stock options                                                  10,000                   1,200                  12,300
                                                                       ----------              ----------             -----------
Balance at December 31, 1996                                           40,046,358               4,805,563              28,442,983
Sale of subsidiary shares                                                       -                       -                 240,000
Exercise of stock options                                                  10,000                   1,200                  10,050
                                                                       ----------              ----------             -----------
Balance at December 31, 1997                                           40,056,358              $4,806,763             $28,693,033
                                                                       ==========              ==========             ===========
</TABLE>

                                                      See accompanying notes.

<PAGE>


                     COASTAL CARIBBEAN OILS & MINERALS, LTD.
                   Notes to Consolidated Financial Statements
                                December 31, 1997

                                                                
1.       Summary of significant accounting policies

Consolidation

         The accompanying consolidated financial statements include the accounts
of  Coastal  Caribbean  Oils &  Minerals,  Ltd.  ("Coastal  Caribbean")  and its
majority   subsidiary,   Coastal  Petroleum   Company   ("Coastal   Petroleum"),
hereinafter  referred to  collectively  as the  Company.  During  1997,  Coastal
Caribbean sold additional  shares of Coastal  Petroleum and reduced its interest
(See Note 2). The Company,  which is engaged in a single industry, is considered
to be a  development  stage  company  since  its  exploration  for oil,  gas and
minerals has not yielded any significant  revenue or reserves.  All intercompany
transactions have been eliminated.

Cash and cash equivalents

         The Company  considers  all highly liquid short term  investments  with
maturities  of  three  months  or less at the  date  of  acquisition  to be cash
equivalents.  Cash and cash  equivalents are carried at cost which  approximates
market value. The components of cash and cash equivalents are as follows:

                                                        December 31,
                                            -----------------------------------
                                              1997                       1996
                                            --------                   --------
Cash                                        $118,859                   $127,990
U.S. Treasury Bills                          197,474                    296,340
                                            --------                   --------
                                            $316,333                   $424,330
                                            ========                   ========

Use of Estimates

         The  preparation of financial  statements in conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. The outcome of the litigation and the ability to develop the
Company's oil and gas properties will have a significant effect on the Company's
financial  position and results of operations.  Actual results could differ from
those estimates.

Unproved oil and gas properties

         The Company follows the full cost method  of accounting for its oil and
gas properties.  All costs, whether successful or unsuccessful,  associated with
property acquisition,  exploration and  development activities  are capitalized.
Since the Company's  properties are  undeveloped and  nonproducing,  capitalized
costs are not being amortized.


<PAGE>



The Company  does not expect to amortize  these costs until there is  production
from the properties.  Production cannot begin until several events occur because
the Company must: (1) obtain state and federal  drilling permits (2) finance the
drilling of an exploratory well,  either with internal  resources or by securing
one  or  more  partners  in  the  drilling  activity,  (3)  discover  commercial
quantities  of oil and/or gas, and (4) finance and begin a  production  program.
The Company  cannot  predict if or when any of these events may occur;  however,
the Company expects that under the most favorable circumstances production would
not begin before 2000.  If the Company  obtains the permits to drill,  the total
cost of drilling an exploration well is currently  estimated to be approximately
$5 million. The Company does not currently have assets sufficient to fund all of
this cost and would be required to seek debt or equity  financing from public or
private sources to drill the exploration well, if a permit were granted.  If oil
and/or gas is discovered in commercial  quantities,  a production  program would
require  additional  permitting  and  construction  of  production,  storage and
delivery systems.  The Company would be required to seek additional financing to
fund these development activities.

         The Company assesses whether its unproved  properties are impaired on a
periodic  basis.  This assessment is based upon work completed on the properties
to  date,  the  expiration  date of its  leases  and  technical  data  from  the
properties  and  adjacent  areas.  These  properties  are  subject to  extensive
litigation  with the State of Florida.  Although the property  interests  may be
impaired by the actions taken by the State,  the likelihood of loss with respect
to the recorded  costs of the leasehold  interests is not probable.  (See Note 5
"Litigation".)  Based on the exploration  activities on the properties completed
to date, the  exploration  and  development  activities of others in the Gulf of
Mexico and the laws applicable to the taking of property, the Company expects to
recover  its  $4.4  million  of  capitalized  costs.  However,  there  can be no
assurance  that it will be  successful  and that  costs  associated  with  these
properties will be realized.

Sale of Subsidiary Shares

         All amounts  realized  from the sale of Coastal  Petroleum  shares have
been credited to capital in excess of par value.

Earnings per share

         Earnings per common share is based upon the weighted  average number of
common and common equivalent shares  outstanding  during the period. In February
1997, the FASB issued  Statement No. 128 Earnings per Share  ("EPS"),  which the
Company  adopted for the year ended December 31, 1997.  The Company's  basic and
diluted  calculations of EPS are the same because the exercise of options is not
assumed in calculating  diluted EPS, as the result would be  anti-dilutive  (the
Company has continuing losses).


<PAGE>



Financial instruments

         The carrying value for cash and cash equivalents,  accounts receivable,
U.S. Government securities and accounts payable approximates fair value based on
anticipated cash flows and current market conditions.

Comprehensive income

         In 1997, the Financial Accounting Standards Board issued FASB Statement
No. 130,  Reporting  Comprehensive  Income. As the Company has no items of other
comprehensive  income,  the net loss for all periods  presented  is equal to the
comprehensive loss.

2.       Coastal Petroleum Company - Minority Interests

         In 1991,  the Company  agreed to sell 10.3% of Coastal  Petroleum  to a
private  investor.  Pursuant  to the  Agreement,  a  4.1%  interest  in  Coastal
Petroleum has been sold for a total  consideration  of $600,000.  The balance of
the 6.2% interest was acquired by Lykes Minerals Corp. ("Lykes").

         In 1992,  Coastal  Caribbean  agreed to sell an additional 20.5% of the
outstanding  shares of Coastal  Petroleum.  Under the sales agreement,  Lykes, a
wholly owned subsidiary of Lykes Bros. Inc., had the option to acquire 60 shares
of Coastal  Petroleum at $40,000 per share through May 1, 1997.  In general,  at
least half of the proceeds of the sale were  required to be used to fund Coastal
Petroleum's  Florida exploration  activities.  The agreement also provided for a
second option for Lykes to purchase shares of Coastal Petroleum (also at $40,000
per share) which had been subject to the other investor's  option under the 1991
agreement described above.

         During  1997,  Lykes  exercised  its  remaining  option to  purchase  6
additional  Coastal  Petroleum  shares for a total of $240,000.  At December 31,
1997, Lykes held 26.7% of Coastal Petroleum at a total cost of $3,120,000.

         The Lykes  agreement  provides  that Lykes is entitled to exchange each
Coastal  Petroleum  share for  100,000  Coastal  Caribbean  shares,  subject  to
adjustment for dilution and other factors. If fully exercised,  that entitlement
would  leave  Lykes with about 16% of Coastal  Caribbean's  outstanding  shares.
Lykes also has the right to exchange  Coastal  Petroleum  shares for  overriding
royalty interests in Coastal Petroleum's  properties.  If Lykes were to exchange
its 26.7% interest in Coastal Petroleum for a royalty interest,  its  overriding
royalty interest in Coastal Petroleum's working-interest acreage would be 3.3%.


<PAGE>



         A  summary  of the sale of  Coastal  Petroleum  shares  under the above
agreements is as follows:

                                        Number of                        Sales
                 Year                  Shares Sold                     Proceeds

                 1991                         6                       $  300,000
                 1992                         9                          390,000
                 1993                        27                        1,080,000
                 1994                        15                          630,000
                 1995                        15                          600,000
                 1996                        12                          480,000
                 1997                         6                          240,000
                                            ---                       ----------
                Total                        90                       $3,720,000
                                            ===                       ==========

         As of  December  31,  1997,  Coastal  Petroleum  shares  were  owned as
follows:

                                                Shares                    %
         Coastal Caribbean                        173                    59.3
         Lykes                                     78                    26.7
         Private investor                          29                     9.9
         Private investor                          12                     4.1
                                                  ---                   -----
                                                  292                   100.0
                                                  ===                   =====

3.       U.S. Government Securities

         At December 31, 1997, the Company has the following amounts invested in
U.S. government securities which are expected to be held until maturity:

                                            Maturity    Amortized
         Security             Par Value       Date         Cost       Fair Value
Federal Home Loan Bank
  Discounted Note             $  500,000    2/11/98     $  487,191    $  493,200
U.S. Treasury Note               500,000    5/31/98        497,969       500,935
U.S. Treasury Note             1,500,000    7/31/98      1,501,270     1,506,090
Federal Farm Credit Bank
  Discounted Note              1,000,000    8/18/98        946,605       953,042
                               ---------                ----------    ----------

Total                         $3,500,000                $3,433,035    $3,453,267
                              ==========                ==========    ==========



<PAGE>


4.       Unproved oil, gas and mineral properties

         Coastal  Petroleum holds three unproved and  nonproducing  oil, gas and
mineral leases granted by the Trustees of the Internal  Improvement  Fund of the
State of Florida (the "Trustees").  These leases cover submerged and unsubmerged
lands,  principally  along the Florida Gulf Coast,  and certain inland lakes and
rivers throughout the State.

          The two leases  bordering the Gulf Coast  have been divided into three
areas, each running the entire length of the coastline from  Apalachicola Bay to
the Naples area.  Coastal Petroleum  has certain royalty  interests in the inner
area,  no interest in the middle  area and  has a 100%  working  interest in the
outside area.

         Coastal  Petroleum also has a 100% working interest in Lake Okeechobee,
and a royalty  interest  in other  areas.  Coastal  Petroleum  has agreed not to
conduct  exploration,  drilling,  or mining operations on said lake, except with
prior approval of the Trustees.

         The  three  leases  have a term of 40 years  from  January  6, 1976 and
require the payment of annual lease rentals of $59,247;  if oil, gas or minerals
are being produced in  economically  sustainable  quantities at January 6, 2016,
these operations will be allowed to continue until they become  uneconomic.  The
drilling  requirements are governed by Chapter 20680,  Laws of Florida,  Acts of
1941.  The  Company  is  current  in  fulfilling   its  drilling   requirements.
Obligations on these leases have been  suspended  temporarily as a result of the
Florida Litigation (See Note 5).

         The working interest areas of the three leases are subject to royalties
payable to the  Trustees of 12 1/2% on oil and gas,  $.50 per long ton of sulfur
and 10% on other  minerals.  The leases are  subject  to  additional  overriding
royalties which  aggregate  1/16th as to oil, gas and sulfur and 13/600ths as to
other  minerals.  The  Coastal  Petroleum  leases  also  are  subject  to a  10%
overriding royalty granted by Coastal Petroleum to Coastal Caribbean.

         The Company has a program to evaluate  its leases which is estimated to
cost  approximately  $500,000 for 1998 and $500,000 for 1999,  and is subject to
the  outcome  of  the  Florida  litigation.   During  1997,  the  Company  spent
approximately   $504,000  under  the  program  to  identify  potential  drilling
prospects.



<PAGE>



         A summary of the cost of  unproved  oil,  gas and  mineral  properties,
accounted for under the full cost method, all of which are located in Florida.

                                                            1997         1996
                                                         ----------   ----------
Lease acquisition costs                                    $914,619     $914,619
Lease and royalty costs (principally legal fees)            591,616      591,616
Lease rentals                                             2,329,280    2,329,280
Dry hole costs                                              587,987      587,987
Other exploratory expenses                                  994,466      542,854
Salaries                                                    466,983      466,983
                                                         ----------   ----------
                                                          5,884,951    5,433,339
                                                         ----------   ----------
Deduct:
  Reimbursement for lease rentals and other expenses      1,243,086    1,243,086
  Proceeds from relinquishment of surface rights            246,733      246,733
                                                         ----------   ----------
                                                          1,489,819    1,489,819
                                                         ----------   ----------
                                                         $4,395,132   $3,943,520
                                                         ==========   ==========

5.       Litigation

          Florida Litigation

         Coastal Petroleum has been involved in various lawsuits for many years.
Currently,  Coastal  Petroleum  is a party to three  actions  in which two basic
claims are being contested:  Whether Coastal Petroleum may obtain an oil and gas
exploration  drilling permit and the amount of the required surety,  and whether
certain royalty  interests owned by Coastal  Petroleum have been  confiscated by
the State of Florida,  entitling  Coastal  Petroleum  to  compensation  for such
confiscation.  In addition,  Coastal  Caribbean is a party to another  action in
which Coastal  Caribbean claims that certain of its royalty  interests have been
confiscated  by  the  State.  Also  during  1997,  Coastal  Petroleum  filed  12
additional  applications for drilling  permits  (1296-1307).  Coastal  Petroleum
subsequently  furnished  additional  data as  requested  by the DEP on  these 12
applications,  but  objected to certain of the DEP  requests  for data.  Coastal
Petroleum expects to petition the Division of Administrative Hearings to resolve
the  dispute.  The Company  estimates  that as much as $500,000  per year may be
required in connection with the Florida litigation. The Company expects that the
Florida  litigation will continue at least through 1998,  although the State may
take actions that could lengthen that period.



<PAGE>


1.       Coastal  Petroleum  Company   v.   State  Department  of  Environmental
Protection, (Case No. 96-03226, First District Court of Appeal). Drilling Permit
Litigation.

         In  1993,  Coastal  Petroleum  applied  to the  Florida  Department  of
Environmental Protection (the "Department") for a permit to drill an exploratory
oil and gas well off Apalachicola,  Florida.  The proposed well would be located
in an area included  within Lease 224A. The Department  subsequently  denied the
application for issuance of a drilling permit for various reasons  including the
requirement for a $1.9 billion bond.  Coastal Petroleum  appealed the actions of
the  Department  to the  Florida  First  District  Court of  Appeal  ("Court  of
Appeal").  After  two  decisions  by the  Court of  Appeal  in favor of  Coastal
Petroleum,  the  Florida  Supreme  Court in July 1996  denied  the  Department's
petition to review an April 1996 Court of Appeal  decision.  The Florida Supreme
Court had also refused to review an earlier Court of Appeal decision.

         On August 16, 1996, the Department  notified Coastal  Petroleum that it
was  prepared  to  issue  the  drilling  permit  subject  to  Coastal  Petroleum
publishing a Notice of Intent to Issue  ("Notice") the permit.  The Notice would
allow  interested  parties to request  administrative  hearings  on the  permit.
Coastal  Petroleum  refused to publish the Notice and filed a petition  with the
Court of Appeal on August 27, 1996 to order the  Department  to issue the permit
without the requirement of the Notice and without further delay.

         On  September  10,  1996,  the Court of  Appeal  issued an order to the
Department to show cause why the permit  should not be granted.  On February 10,
1997, the court denied Coastal Petroleum's petition for a writ of certiorari.

         On May 28, 1997,  the Oil and Gas Drilling  Bill (SB550) was enacted in
Florida.  The new  legislation  requires  that a surety will now be based on the
projected  cleanup costs and possible  natural  resource damage  associated with
offshore drilling as estimated by the Department of Environmental Protection and
as set up by the  Governor  and Cabinet.  Previously,  the  required  surety was
satisfied  by a payment of $4,000 to the  Mineral  Trust Fund in the first year,
with a  maximum  $30,000  per year and a  payment  of  $1,500  per well for each
subsequent  year.  On September  9, 1997,  the State of Florida set a new surety
amount of $4.25  billion as a  precondition  for the  issuance  of the  drilling
permit.

          During  1997,  the Company  published a Notice of the DEP's  intent to
issue  the  permit.  On  October  20,  1997,  a  public  hearing  on the  permit
application  was held and it was  concluded  on  November  6, 1997.  The hearing
included  the  Company's  appeal  of the $4.25  billion  surety  requirement.  A
decision  by the  administrative  law judge is  expected  by late March or early
April 1998.

2.       Coastal  Petroleum  Company   v.  Honorable  Lawton  Chiles  (Case  No.
96-03035, First District Court of Appeal).  Royalty Litigation.

         In 1990,  a Florida  statute  became  effective  prohibiting  petroleum
production from offshore  Florida  acreage.  The statute does not affect Coastal
Petroleum's  right to drill for oil and gas in the working  interest area of its
leases.  However,  as a result of the statute,  production of oil and gas is now
prohibited  in those areas of Coastal  Petroleum's  leases  where it owns only a
royalty  interest.  Coastal  Petroleum  therefore  will be unable to receive any
royalties from these areas, because oil and gas production has been prohibited.

<PAGE>

         A trial  was held  before  the  Circuit  Court of the  Second  Judicial
Circuit  in Leon  County  (Tallahassee)  from May 6-9,  1996 on the issue of the
taking of the  royalty  interest.  On August 5, 1996,  the trial  court ruled in
favor of the State and found  that  there was no taking of  Coastal  Petroleum's
royalty  interest.  Coastal  Petroleum  appealed  that  decision to the Court of
Appeal and on August 6, 1997, the Court of Appeal ruled against the Company.  On
January 28, 1998, the Florida Supreme Court refused to review the decision.  The
Company expects to appeal this decision to the U.S. Supreme Court.

3.       Cottingham  v.  State of Florida, (Case No. 94-768-CA-01, Circuit Court
of the Second  Judicial  Circuit in Leon County).  Royalty Litigation.

         The  offshore  areas  covered by Coastal  Petroleum's  original  leases
(prior to the 1976  Settlement  Agreement)  are subject to certain other royalty
interests held by third parties,  including Coastal Caribbean.  Several of those
third parties,  including Coastal Caribbean,  have instituted a separate lawsuit
against the State.  That lawsuit  claims that their royalty  interests have been
confiscated as a result of the State's actions discussed above and that they are
entitled to compensation for that taking.

         The lawsuit by the royalty  holders  involves  issues  similar to those
raised in Coastal  Petroleum's  lawsuit  that claims that its royalty  interests
have been taken,  although  the cases are  different  in certain  respects.  For
example,  many of the royalty  holders  were not parties to the 1976  Settlement
Agreement,  and the State's argument that the terms of the Settlement  Agreement
insulate it from taking claims does not apply to those royalty holders. The case
is currently pending before the Circuit Court in Tallahassee.

         Any recovery made in the royalty holder's lawsuit would be shared among
the various  plaintiffs in that lawsuit,  including Coastal  Caribbean.  Coastal
Petroleum would not share in any such recovery.


<PAGE>


Fee Arrangements

         In connection with the Florida  Litigation against the State of Florida
described  herein,  Coastal  Petroleum has agreed to pay the following firms, in
addition to their  charges on a time spent  basis,  a total of 6% in  contingent
fees based upon any net recovery from execution on or  satisfaction  of judgment
or from settlement of such lawsuit as follows:

                                                Percent of Net Recovery
                  Reasoner & Fox                          2.0
                  Robert J. Angerer                       1.5
                  Other counsel                           2.5

         Coastal  Petroleum has also assigned  3.4% of net  recoveries  from the
Florida Litigation to its officers and others.

Uncertainty

         No assurances can be given that Coastal  Petroleum or Coastal Caribbean
will  prevail  on any of the  issues  set forth  above,  that they will  recover
compensation for any of their claims, or that a drilling permit will be granted.
In  addition,  even if  Coastal  Petroleum  were to prevail on any or all of the
issues to be  decided,  no  assurance  can be given that  Coastal  Caribbean  or
Coastal Petroleum will have sufficient financial resources to survive until such
decisions  become  final or to drill any wells for which  permits are  received.
There is also no assurance that any wells drilled will be successful and lead to
production of any oil or gas in commercial quantities.

6.       Common Stock

         The Company's  Bye-Law No. 21 provides that any matter to be voted upon
must be approved not only by a majority of the shares voted at such meeting, but
also by a majority in number of the  shareholders  present in person or by proxy
and entitled to vote thereon.

         The Company has been financing its  operations  primarily from sales of
common stock and sales of shares of Coastal Petroleum (See Note 2).

         During 1996, the Company sold  approximately  6.7 million shares to its
shareholders at $1.00 per share. The net proceeds to the Company were $6,356,326
after deducting the $316,400 cost of the offering.

         During July 1997, the  shareholders of the Company approved an increase
in the authorized  capital of the Company from 100,000,000 shares to 250,000,000
shares.


<PAGE>



         The following represents shares issued upon sales of common stock:

                                Number of                      Capital in Excess
                                 Shares        Capital Stock      of Par Value
                   1953          300,000         $ 30,000          $ 654,000
                   1954           53,000            5,300            114,265
                   1955           67,000            6,700            137,937
                   1956           77,100            7,710            139,548
                   1957           95,400            9,540            152,492
                   1958          180,884           18,088            207,135
                   1959          123,011           12,301            160,751
                   1960          134,300           13,430            131,431
                   1961          127,500           12,750             94,077
                   1962            9,900              990              8,036
                   1963          168,200           23,548             12,041
                   1964          331,800           46,452             45,044
                   1965          435,200           60,928            442,391
                   1966          187,000           26,180            194,187
                   1967          193,954           27,153            249,608
                   1968           67,500            9,450            127,468
                   1969            8,200            1,148             13,532
                   1970          274,600           32,952            117,154
                   1971          299,000           35,880             99,202
                   1972          462,600           55,512            126,185
                   1973          619,800           74,376            251,202
                   1974          398,300           47,796             60,007
                   1975                -                -            (52,618)
                   1976                -                -             (8,200)
                   1977          850,000          102,000          1,682,706
                   1978           90,797           10,896            158,343
                   1979        1,065,943          127,914          4,124,063
                   1980          179,831           21,580            826,763
                   1981           30,600            3,672            159,360
                   1983        5,318,862          638,263          1,814,642
                   1985                -                -            (36,220)
                   1986        6,228,143          747,378          2,178,471
                   1987        4,152,095          498,251          2,407,522
                   1990        4,298,966          515,876             26,319
                   1996        6,672,726          800,727          5,555,599
                              ----------       ----------        -----------
                              33,502,212       $4,024,741        $22,374,443
                              ==========       ==========        ===========

         The following represents shares issued upon exercise of stock options:

                   1955           73,000          $ 7,300           $175,200
                   1978            7,000              840              6,160
                   1979          213,570           25,628            265,619
                   1980           76,830            9,219            125,233
                   1981          139,600           16,752            227,548
                   1996           10,000            1,200             12,300
                   1997           10,000            1,200             10,050
                                 -------          -------           --------
                                 530,000          $62,139           $822,110
                                 =======          =======           ========

         Coastal Caribbean has reserved  7,800,000 shares which may be issued in
exchange for Coastal Petroleum shares, as described in Note 2.


<PAGE>



7.       Stock Option Plan

         The Company has elected to follow  Accounting  Principles Board Opinion
No. 25,  "Accounting  for Stock  Issued to  Employees"  (APB No. 25) and related
Interpretations in accounting for its stock options because the alternative fair
value  accounting  provided under FASB Statement No. 123,  "Accounting for Stock
Based  Compensation,"  requires  use of option  valuation  models  that were not
developed  for use in  valuing  stock  options.  Under APB No. 25,  because  the
exercise  price of the Company's  stock  options  equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

         On March 7, 1995,  the Company  adopted a Stock  Option  Plan  covering
1,000,000  shares of the  Company's  common  stock.  On June 17,  1996,  310,000
options to  purchase  common  stock of the Company at $1.35 per share which were
granted in 1995 and expire on March 6,  2000,  were  canceled  and  reissued  to
reflect the May 1996 rights offering.

The following table summarizes stock option activity:

                                                  Stock Options  Price Per Share
Outstanding and exercisable at December 31, 1994        -              $ -
     Granted                                         320,000           1.35
                                                     -------
Outstanding and exercisable at December 31, 1995     320,000           1.35
     Exercised                                       (10,000)          1.35
     Canceled                                       (310,000)          1.35
     Granted                                         372,000           1.13
                                                     -------
Outstanding and exercisable at December 31, 1996     372,000           1.13
     Exercised                                       (10,000)          1.13
                                                     -------
Outstanding and exercisable at December 31, 1997     362,000           1.13
                                                     =======

Available for grant at December 31,1997              618,000
                                                     =======

         Pro forma  information  regarding  net income and earnings per share is
required  by  Statement  123,  and has been  determined  as if the  Company  had
accounted for its stock  options under the fair value method of that  Statement.
The fair value for these  options  was  estimated  at the date of grant  using a
Black-Scholes option pricing model.

         Option  valuation  models  require  the  input  of  highly   subjective
assumptions including the expected stock price volatility.  The assumptions used
in the valuation  model were:  risk free  interest rate - 7%,  expected life - 5
years and expected volatility - 1.2.

<PAGE>


Because the Company's stock options have characteristics significantly different
from  those of traded  options,  and  because  changes in the  subjective  input
assumptions  can  materially  affect the fair value  estimate,  in  management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its stock options.

         For the purpose of pro forma  disclosures,  the estimated fair value of
the  stock  options  is  expensed  in the year of grant  since the  options  are
immediately exercisable. The Company's pro forma information follows:

                                                       Amount         Per Share
Net loss as reported - December 31, 1995            $  (880,000)       $(.03)
Stock option expense                                   (304,000)        (.01)
                                                    ------------       ------
Pro forma net loss                                  $(1,184,000)       $(.04)
                                                    ------------       ------

8.       Income taxes

         Bermuda currently imposes no taxes on corporate income or capital gains
outside of Bermuda. The Company's  subsidiary,  Coastal Petroleum,  has U.S. net
operating loss  carryforwards  for federal and state tax purposes,  which may be
used to reduce its taxable income,  if any, during future years which aggregated
approximately  $11,529,000  at December  31, 1997 and expire in varying  amounts
from 1998 through 2012. For financial reporting purposes,  a valuation allowance
has been  recognized  to  offset  the  deferred  tax  assets  relating  to those
carryforwards.  Significant components of the Company's deferred tax assets were
as follows:

                                               1997                     1996
                                               ----                     ----
Net operating losses                        $4,338,000               $4,169,000
Deferred interest deduction                    242,000                        -
                                            -----------              -----------
Total deferred tax assets                    4,580,000                4,169,000
Valuation allowance                         (4,580,000)              (4,169,000)
                                            -----------              -----------
Net deferred tax assets                     $    -                   $    -
                                            ===========              ===========

9.       Related parties

         Fees were paid or accrued by the Company for legal services rendered by
the law firm of Reasoner & Fox, of which Mr. C. Dean Reasoner, a director of the
Company until his  resignation on March 20, 1997, was a partner.  Reasoner & Fox
billed legal fees of $102,000 and $118,000 for 1996 and 1995, respectively.

         G&O'D INC provides  accounting and  administrative  services and office
facilities and support staff to the Company.  G&O'D INC is owned by Mr. James R.
Joyce,  Treasurer and Assistant  Secretary.  During 1997,  1996 and 1995,  G&O'D
billed fees of $172,160, $169,632 and $176,809, respectively.

         During 1996, the Company  agreed to reimburse  Lykes Minerals Corp. for
certain  legal  expenses  in the amount of $201,416  that Lykes had  incurred in
connection  with the Florida  Litigation  on the basis that these  expenses  had
directly benefited the Company.  This amount is included in accounts payable and
accrued liabilities.



<PAGE>


                                                                
Item 9.           Changes in and Disagreements with Accountants on Accounting
                  and Financial Disclosure.

                  None.


                                    PART III

         For information  concerning Item 10 - Directors and Executive  Officers
of the Company, Item 11 - Executive  Compensation,  Item 12 - Security Ownership
of Certain Beneficial Owners and Management and Item 13 - Certain  Relationships
and Related Transactions, see the Proxy Statement of the Company relative to the
Annual  Meeting of  Stockholders  for the fiscal year ended  December  31, 1997,
which  will  be  filed  with  the  Securities  and  Exchange  Commission,  which
information is incorporated herein by reference. For information concerning Item
10 - Executive Officers of the Company, see Part I.


<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

         (a)      (1)      Financial Statements.

                           The  financial  statements  listed below and included
under Item 8 above are filed as part of this report.
                                                                            Page

Report of Independent Auditors                                               24

Consolidated balance sheet at December 31, 1997 and 1996                     25

Consolidated statement of operations from inception and for each of
  the three years in the period ended December 31, 1997                      26

Consolidated statement of cash flows from inception and for each of
  the three years in the period ended December 31, 1997                      27

Consolidated statement of common stock and capital in excess of
  par value from inception to December 31, 1997                              28

Notes to consolidated financial statements                                   29

                  (2)      Financial Statement Schedules:

                           All schedules  have been  omitted since  the required
information is  not present  or not  present  in  amounts sufficient  to require
submission of the schedule, or because the  information required is  included in
the consolidated financial statements and the notes thereto.

                  (3)      Exhibits.

                           The  following  exhibits  are  filed  as part of this
report:

Item Number

         2.       Plan of acquisition, arrangement, liquidation or succession.

                  None.


<PAGE>


         3.       Articles of incorporation and By-Laws.

                  Memorandum of Association as amended on June 30, 1982, May 14,
                  1985 and  April 7,  1988 and  Bye-laws,  are  incorporated  by
                  reference to  Registration  Statement  No.  33-80183  filed on
                  December 7, 1995.

         4.       Instruments defining the rights of security holders, including
                  indentures.

                  None.

         9.       Voting trust agreement.

                  None.

         10.      Material contracts.

                  (a)  Drilling  Lease  No.  224-A,  as  modified,  between  the
Trustees of the  Internal  Improvement  Fund of the State of Florida and Coastal
Petroleum  Company  dated  February  27, 1947 is  incorporated  by  reference to
Registration Statement No. 33-80183 filed on December 7, 1995.

                  (b)  Drilling  Lease  No.  224-B,  as  modified,  between  the
Trustees of the  Internal  Improvement  Fund of the State of Florida and Coastal
Petroleum  Company  dated  February  27, 1947 is  incorporated  by  reference to
Registration Statement No. 33-80183 filed on December 7, 1995.

                  (c)  Drilling Lease No. 248, as modified, between the Trustees
of the Internal  Improvement Fund of the State of Florida and Coastal  Petroleum
Company dated  February 27, 1947 is  incorporated  by reference to  Registration
Statement No. 33-80183 filed on December 7, 1995.

                  (d)  Settlement  Agreement  dated  January  6,  1976   between
Coastal Petroleum Company and the State of Florida is incorporated by  reference
to Registration Statement No. 33-80183 filed on December 7, 1995.

                  (e)  Complaint of Inverse  Condemnation  by Coastal  Petroleum
Company vs. Honorable Bob Martinez,  Governor,  et al filed July 23, 1990 in the
Circuit Court of the Second Judicial Circuit, in and for Leon County, Florida is
incorporated  by reference  to  Registration  Statement  No.  33-80183  filed on
December 7, 1995.

                  (f)  Agreement  between the Company and John J.  D'Alessandro,
M.D.  dated  December  3,  1991  is incorporated by reference to  Form 8-K dated
December 3, 1991.


<PAGE>


                  (g)  Agreement between the Company and Coastal Petroleum dated
December 3, 1991  is incorporated by  reference to  Form  8-K  dated December 3,
1991.

                  (h)  Agreement   between  Lykes  Minerals  Corp.  and  Coastal
Caribbean  and Coastal  Petroleum  dated  October 16,  1992 is  incorporated  by
reference to Form 10-Q dated November 10, 1992.

                  (i)  Settlement Agreement and General Release dated January 8,
1993 by Mobil Oil  Corporation,  Coastal  Petroleum  and  Coastal  Caribbean  is
incorporated by reference to Form 8-K dated January 11, 1993.

                  (j)  Amended Complaint of Inverse Condemnation  filed February
3, 1993 with the Circuit Court (see (e) above) is  incorporated  by reference to
Form 10-K filed March 18, 1993.

                  (k)  Final Order by State of Florida  dated February  22, 1993
denying  Coastal  Petroleum  Drilling  Permit  Application  is  incorporated  by
reference to Form 10-K filed March 18, 1993.

                  (l)  Order of  Summary  Judgment  dated  September  9, 1993 in
Circuit Court of the Second  Judicial  Circuit  ruling that the State of Florida
has not taken Coastal  Petroleum's  royalty  interest acreage is incorporated by
reference to Form 8-K dated September 9, 1993.

         11.      Statement re computation of per share earnings.

                  See Consolidated Financial Statements under Item 8, above.

         12.      Statement re computation of ratios.

                  None.

         13.      Annual report to security holders.

                  Not applicable.

         16.      Letter re change in certifying accountant.

                  Not applicable.

         18.      Letter re change in accounting principles.

                  Not applicable.


<PAGE>


         20.      Previously unfiled documents.

                  None.

         21.      Subsidiaries of the Company.

                  The Company has one subsidiary,  Coastal Petroleum Company,  a
Florida corporation.

         22.      Published  report  regarding  matters  submitted  to  vote  of
                  security holders.

                  Not applicable.

         23.      Consent of experts and counsel.

                  Consent of Ernst & Young LLP is filed herewith.

         24.      Power of Attorney.

                  Not applicable.

         27.      Financial Data Schedule.

                  Filed herein.

         28.      Information    from  reports   furnished  to  state  insurance
                  regulatory authorities.

                  Not applicable.

         99.      Additional Exhibits.

                  Not applicable.

         (b)      Reports on Form 8-K.

                  On November 12, 1997,  the Company  filed a Current  Report on
Form 8-K to report  that the  administrative  hearing  on its  pending  drilling
permit  application which began in October 20, 1997 was concluded on November 6,
1997 and that a ruling was expected in mid-February 1998.



<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.

                                         COASTAL CARIBBEAN OILS & MINERALS, LTD.
                                                       (Registrant)

                                         By /s/ Benjamin W. Heath
                                            Benjamin W. Heath, President and
                                            Chief Executive Officer


Dated:           February 25, 1998

         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 and in the capacities and on the date indicated.

By /s/ Benjamin W. Heath                        By /s/ James R. Joyce
   Benjamin W. Heath                               James R. Joyce
   President, Director and Chief Executive         Treasurer and Chief Financial
   Officer                                         and Accounting Officer


Dated:  February 25, 1998                       Dated:  February 25, 1998


By /s/ Graham B. Collis                         By /s/ John D. Monroe
   Graham B. Collis                                John D. Monroe
   Director                                        Director


Dated:  February 25, 1998                       Dated:  February 25, 1998


By /s/ Phillip W. Ware                          By /s/ Nicholas B. Dill
   Phillip W. Ware                                 Nicholas B. Dill
   Director                                        Director


Dated:  February 25, 1998                       Dated:  February 25, 1998