U.S. SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C. 20549

                               FORM 10-KSB

[ X ]     Annual Report under Section 13 or 15(d) of the Securities
          Exchange Act of 1934 [Fee Required] for the fiscal year ended:  
            March 31 1997  
          -----------------

[    ]    Transition report under Section 12 or 15(d) of the Securities
          Exchange Act of 1934 [No Fee Required] for the transition period
          from ___________ to ____________

COMMISSION FILE NUMBER:  0-14788
                         -------

                       TATUM PETROLEUM CORPORATION
              ---------------------------------------------
             (Name of small business issuer in its charter)

          Delaware                                        33-0117736
-------------------------------                      -------------------
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                        Identification No.)

                    667-E Lakeview Plaza Boulevard
                        Worthington, OH  43085
                    -------------------------------
          (Address of principal executive offices) (Zip Code)

Issuer's telephone number:  (614) 888-3637
                          ----------------

Securities to be registered under Section 12(b) of the Act:  None 
                                                           ------

Securities registered under Section 12(g) of the Act:
  Common Stock, $.01 par value
------------------------------

Check whether the issuer (1) filed all reports required to be filed by
Section 12 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements
for at least the past 90 days.  Yes  X     No 
                                   -----     -----

Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-b 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-KSB or any amendment
to this Form 10-KSB. [ X ]

Issuer's revenues for its most recent fiscal year: ($1,033,000)
 
Aggregate market value of voting stock held by non-affiliates as of June
30, 1997: There currently is no market for the Registrant's Common Stock.

Shares of Common Stock, $.01 par value, outstanding as of June 30, 1997:
10,418,855

Documents incorporated by reference: none

<PAGE>

                                 PART I

ITEM 1.  DESCRIPTION OF BUSINESS.
--------------------------------

GENERAL

     Tatum Petroleum Corporation, (the "Registrant" or "Company") was
incorporated under the laws of Delaware on July 10, 1985 and became
actively engaged in the exploration for and acquisition, development and
production of oil and gas upon the acquisition of its predecessor entities,
Tatum Petroleum Corporation, a California corporation ("Tatum of
California") incorporated November 28, 1984, and Power Ventures, Inc., a
Colorado corporation (and its wholly-owned subsidiary, Midnight Oil
Company, a Colorado corporation) on June 30, 1986.  The Company
concentrates its activities in areas in which it has accumulated detailed
geographical knowledge and developed management experience.  The
Registrant's oil and gas operations are currently located in California and
Ohio in which the Company owns varying interests in 104 producing wells
with oil constituting 25% of current production and natural gas
constituting 75% of current production (assuming 6 MCF of gas produced
equals one barrel of oil production).

     The Registrant investigates potential opportunities to develop, drill
and/or participate in the development of new oil and gas properties
throughout the Midwest region of the United States.  Its current activities
on a yearly basis include identifying and drilling from 15 to 25 oil and
gas properties on its own behalf or with partners on an equally promoted
basis.  It is likely that any significant expenditures required of the
Registrant in connection with the future expansion of its oil and gas
activities will require additional funding from outside sources in the form
of debt or equity.  There can be no assurance such funding is or will be
available to the Registrant for this purpose.

     From 1986 to 1991, the Registrant's class of common stock was
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended (No. 0-14788).  In 1991, the Registrant de-registered its
securities under the Securities Exchange Act of 1934 in an effort to lower
general overhead expenses.  The Board of Directors has elected to 
re-register its shares under the Securities Exchange Act of 1934 in an effort
to create a trading market for its shares and provide a possible source for
future funding activities if a market should develop.  No trading market
currently exists for the Registrant's common stock.

     The Registrant's corporate offices are located at 667-E Lakeview Plaza
Boulevard, Worthington, OH 43085.  Its telephone number at that address is
(614) 888-3637.

BUSINESS STRATEGY

     The Company's growth strategy is to increase its annualized cash flow
and oil and gas reserves by drilling and completing, on its own behalf and
with others, from 15 to 25 oil and gas prospects per year.  The Company
will develop these prospects each year with a view to taking advantage of
industry advances in seismic and drilling technologies and management's
experience primarily in Ohio.  Of the projected new prospects, between two
(2) and five (5) each year will be intended as higher potential, higher
risk prospects.  As indicated above, the

                                    2

<PAGE>

Company intends to market its prospects on a basis that will allow the
Company to be able to control its risks on each of these prospects.

OPERATIONS

     As of March 31, 1997, the Company was serving as operator for all of
the Company's producing wells and receives a management fee for each well
from the working interest owners.  The Company believes that, as operator,
it is in a better position to control costs, safety and timeliness of work
as well as other critical factors affecting the economics of a well or
property.  The Company presently operates wells which represent virtually
100% of the Company's proved reserves.

CUSTOMERS AND MARKETS

     Three purchasers each represent in excess of 10% of the Registrant's
total oil and gas revenue for the fiscal years ended March 31, 1997 and
1996.  These purchasers are Quaker State, Energy Marketing Services, Inc.
and East Ohio Gas Company.  Prices of Registrant's gas are generally set
unilaterally by the individual buyers based upon prevailing market prices
paid to oil and gas producers in that area.

     Oil produced from the Registrant's wells is sold and gathered by
Quaker State.  The Registrant transports a portion of its gas production
with SOL Ltd., an affiliated entity, over a gas gathering system and a
pipeline owned by that entity that connects to the East Ohio Gas Co. and
Columbia Gas Transmission Corp. pipelines.  During the fiscal years ended
March 31, 1997 and 1996 the Registrant paid approximately $167,000 and
$226,000 in gathering fees and $44,000 and $56,000 in compression fees,
respectively,  for the Company's share of the gas transported over these
lines to SOL Ltd.

     The Registrant's business is not seasonal in nature, except to the
extent that weather conditions at certain times of the year may affect the
Registrant's access to its oil and gas properties and its ability to drill
oil and gas wells.  The impact of inflation on the Company's activities is
minimal.  While gas prices have historically fluctuated between winter and
summer seasons, changes in the market during the last few years have made
such fluctuations unpredictable.  For instance, because local gas utilities
around the country need to refill their gas storage facilities in the
summer, prices may be higher during spring or summer months than during
subsequent winter months when temperatures are warmer than normal.

GAS CONTRACTS

     The Registrant sells substantially all of its natural gas pursuant to
four (4) separate gas purchase agreements with Energy Marketing Services,
Inc. and East Ohio Gas Company, both Ohio corporations.  The agreement with
Energy Marketing Services, Inc. accounts for approximately 38% of the
Company's production sales with prices based on the spot market price for
gas.  This agreement expires in January 1998.  The Company's remaining
natural gas is sold to East Ohio Gas Company pursuant to three (3) separate
agreements at prices ranging from $2.25 to $2.70 per MCF.  The first two
(2) agreements account for 56% of the Company's natural gas sales and
expire in April 1997.  The third agreement with East Ohio Gas Company

                                    3

<PAGE>

accounts for 6% of the Company's gas sales and is based on a spot market
price.  This third agreement expires in May 1997.

COMPETITION

     The Company competes with numerous other companies and individuals,
including many that have significantly greater resources, in virtually all
facets of its business.  Such competitors may be able to pay more for
desirable leases and to evaluate, bid for and purchase a greater number of
properties that the financial or personnel resources of the Company permit. 
The ability of the Company to increase reserves in the future will be
dependent on its ability to select and acquire suitable producing
properties and prospects for future exploration and development.  The
availability of a market for oil and natural gas production depends upon
numerous factors beyond the control of producers, including but not limited
to the availability of other domestic or imported production, the locations
and capacity of pipelines, and the effect of federal and state regulation
on such production.  Domestic oil and natural gas must compete with
imported oil and natural gas, coal, atomic energy, hydroelectric power and
other forms of energy.  The Company does not hold a significant competitive
position in the oil and gas industry.

GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY

     GENERAL

     The Company's exploration and marketing operations are regulated
extensively at the federal, state and local levels.  Gas and oil
exploration, development and production activities are subject to various
laws and regulations governing a wide variety of matters.  For example,
hydrocarbon-producing states have statutes or regulations addressing
conservation practices and the protection of correlative rights, and such
regulations may affect the Company's operations and limit the quantity of
hydrocarbons the Company may produce and sell.  Other regulated matters
include marketing, pricing, transportation, and valuation of royalty
payments.

     At the U.S. federal level, the Federal Energy Regulatory Commission
("FERC") regulates interstate transportation of natural gas under the
Natural Gas Act and regulates the maximum selling prices of certain
categories of gas sold in "first sales" in interstate and intrastate
commerce under the Natural Gas Policy Act.  Effective January 1, 1993, the
Natural Gas Wellhead Decontrol Act deregulated natural gas prices for all
"first sales" of natural gas, which includes sales by the Company of its
own production.  As a result, all sales of the Company's natural gas
produced in the U.S. may be sold at market prices, unless otherwise
committed by contract.

     The Company's gas sales are affected by regulation of intrastate and
interstate gas transportation.  In an attempt to promote competition, the
FERC has issued a series of orders which have altered significantly the
marketing and transportation of natural gas.  The Company believes that
these changes have generally improved the Company's access to
transportation and have enhanced the marketability of its natural gas
production.  To date, the Company has not experienced any material adverse
effect on gas marketing as a result of these FERC orders; however, the
Company cannot predict what new regulations may be adopted by the FERC and

                                    4

<PAGE>


other regulatory authorities, or what effect subsequent regulations may
have on its future gas marketing.

     The Company also is subject to laws and regulations concerning
occupational safety and health.  It is not anticipated that the Company
will be required in the near future to expend amounts that are material in
the aggregate to the Company's overall operations by reason of occupational
safety and health laws and regulations, but inasmuch as such laws and
regulations are frequently changed, the Company is unable to predict the
ultimate cost of compliance.

     ENVIRONMENTAL REGULATIONS

     Various federal, state and local laws and regulations covering the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, may affect the operations and costs of the
Company.  It is not anticipated that the Company will be required in the
near future to expend amounts that are material in relation to its total
capital expenditure program by reason of environmental laws and
regulations.  However, inasmuch as such laws and regulations are frequently
changed, the Company is unable to predict the ultimate cost of compliance.

     STATE REGULATION OF OIL AND GAS PRODUCTION

     State statutes and regulations require permits for drilling
operations, drilling bonds and reports concerning operations.  Most states
in which the Company owns and operates properties have statutes, rules or
regulations governing conservation matters, including the unitization or
pooling of oil and gas properties, establishing of maximum rates of
production from oil and gas wells and the spacing of such wells.  Many
states also restrict production to the market demand for oil and gas.  Such
statutes and regulations may limit the rate at which oil and gas could
otherwise be produced from the Company's properties.  Some states have
enacted statutes prescribing ceiling prices for gas sold within their
state.  The Company's Ohio production is not currently subject to price
regulation.  However, the Company is unable to predict whether production
rate limitations or price regulations may be imposed in the future.

TITLE TO PROPERTIES

     As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time properties believed to be suitable for
drilling operations are acquired by the Company.  Prior to the commencement
of drilling operations, a thorough title examination of the drill site
tract is conducted by independent attorneys.  Once production from a given
well is established, the Company prepares a division order title report
indicating the proper parties and percentages for payment of production
proceeds, including royalties.  The Company believes that titles to its
leasehold properties are good and defensible in accordance with standards
generally acceptable in the oil and gas industry.

OFFICE AND OPERATIONS FACILITIES

     The Company's corporate offices are located in Worthington, Ohio which
it leases pursuant to a lease which expires in May 1998.  Minimum future
lease payments under the non-

                                    5

<PAGE>

cancelable lease for the years ending March 31, 1998 and 1999 are $18,000
and $3,000, respectively, for a total of $21,000.  Total rental expense
charged to operations was $18,000 and $16,400 for the years ended 1997 and
1996, respectively.

     The Company believes its office space is sufficient for the
foreseeable future.

LEGAL PROCEEDINGS

     The Company is not engaged in any material pending legal proceedings
to which the Company or its subsidiary is a party or to which any of its
property is subject except as set forth in Part II of this Registration
Statement.

EMPLOYEES

     At March 31, 1997, the Company and its subsidiaries employed 7 full
time persons.  Four (4) of the Registrant's employees are responsible for
field operations.









                                    6

<PAGE>

ITEM 2.  DESCRIPTION OF PROPERTY.
--------------------------------

OIL AND GAS RESERVES

     The table below sets forth the Company's quantities of proved
reserves, as estimated by consulting independent petroleum engineers, all
of which are located in the continental U.S., and the present value of
estimated future net revenues from these reserves on a non-escalated basis
discounted by 10 percent per year as of the last two fiscal years ending
March 31, 1997 and 1996.  Reserve estimates are inherently imprecise and
are subject to revisions based on production history, results of additional
exploration and development, prices of oil and gas and other factors
outside the Company's control.

                                                  Year Ended
                                                   March 31,
                                           ------------------------
                                           1997                1996
 Estimated Proved Gas Reserves
   (MCF)                                 4,365,000           3,212,000
 Estimated Proved Oil Reserves
   (Bbls)                                  134,000              97,000
 Present Value of Future Net
   Revenues (before future
   income tax expense)                      $8,594             $13,345

     Reference should be made to Supplemental Oil and Gas Information on
pages F-11 - F-13 of this Registration Statement for additional information
pertaining to the Company's proved oil and gas reserves.  During fiscal
1997 the Company did not file any reports that include estimates of total
proved net oil or gas reserves with any federal agency other than the
Securities and Exchange Commission.

PRODUCTION

     The following table sets forth the Company's net oil and gas
production for the last two fiscal years.

                                                  Year Ended
                                                   March 31,
                                           ------------------------
                                           1997                1996

 Natural Gas (MCF)                         972,000           1,039,000
 Crude Oil & Condensate (Bbls)              30,000              35,000

                                    7

<PAGE>

AVERAGE SALES PRICES AND PRODUCTION COSTS

     The following table sets forth the average gross sales price and the
average production cost per unit of oil and gas produced, including
production taxes, for the last two fiscal years.  For purposes of
calculating production cost per equivalent MCF, barrels of oil have been
converted at a ratio of six MCF of gas for each barrel of oil:

                                                  Year Ended
                                                   March 31,
                                            ------------------------
                                            1997                1996
 Average Sales Price                                                  
   Gas (per MCF)                             $2.18               $2.50
   Oil (per Bbl)                            $20.00              $17.00
 Average Production Cost Per
   Equivalent MCF                            $0.47               $0.39

PRODUCING WELLS AND DEVELOPMENT ACREAGE

     The following table sets forth, as of March 31, 1997, the approximate
number of gross and net producing oil and gas wells and their related
developed acres owned by the Registrant. Productive wells are producing
wells and wells capable of production, including shut-in wells. Developed
acreage consists of acres spaced or assignable to productive wells.

               PRODUCING WELLS               DEVELOPED ACRES
     -----------------------------------     ---------------
           OIL                 GAS            GROSS     NET
     ----------------     --------------      -----     ---
     GROSS       NET      GROSS     NET
      24        20.42      80      56.05     12,278    8,254

UNDEVELOPED ACREAGE

     At March 31, 1997, the Registrant held undeveloped acreage as set
forth below:


                                    UNDEVELOPED ACRES
                                  ----------------------
     LOCATION                     GROSS           NET  
     Ohio                         11,947         11,947


     The following table sets forth the expiration dates of the gross and
net acres subject to its oil and gas leases summarized in the table of
undeveloped acreage.



                                    8

<PAGE>

                                                    ACRES EXPIRING
                                                 --------------------
                                                 GROSS            NET  
     Twelve Months Ending:
     March 31, 1998                               1,952          1,952
     March 31, 1999                               2,696          2,696
     March 31, 2000                               2,046          2,046
     March 31, 2001 and later                     5,253          5,253


DRILLING ACTIVITIES

     The Company's drilling activities for the years ended March 31, 1997
and 1996 are set forth below:

                                     MARCH 31,            MARCH 31,
                                       1997                 1996
                                  ----------------     ----------------
                                  GROSS        NET     GROSS       NET
     Exploratory:
         Productive                   2       1.17         0         0
         Dry                          3       2.00         2      1.47

     Development:
         Productive                  12       6.55        14      8.45
         Dry                          2       1.13         2      1.50

     The Company's drilling activities are conducted on a contract basis
with independent drilling contractors.









                                    9

<PAGE>

                                 PART II


ITEM 3.  LEGAL PROCEEDINGS.
--------------------------

     The Company is not engaged in any material pending legal proceedings
to which the Company is a party or to which any of its properties is
subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
--------------------------------------------------------------

     Not applicable.

ITEM 5.  MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
------------------------------------------------------------------------
AND OTHER SHAREHOLDER MATTERS.
-----------------------------

     (a)  MARKET INFORMATION.
     
     There is no public market for the Registrant's shares of common stock. 
To date, the Registrants common stock is traded only sporadically in the
over-the-counter market.  To the Registrant's knowledge, such transactions
when, and if, they occur have been isolated agency trades, or inter-dealer
transactions, neither of which represent the existence of a customary
trading market.

     (b)  HOLDERS.

     The number of record holders of the Registrant's common stock on March
31, 1997 was approximately 388.

     (c)  DIVIDENDS.

     The Registrant has never paid dividends with respect to its common
stock and currently does not have any plans to pay cash dividends in the
future as it intends to retain future earnings to finance the growth of the
business. There are no contractual restrictions on the Registrant's present
or future ability to pay dividends. Future dividend policy is subject to
the discretion of the Board of Directors and is dependent upon a number of
factors, including future earnings, capital requirements and the financial
condition of the Registrant. 



                                   10

<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS.
------------------------------------------------------------------

     THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933.  SUCH FORWARD-
LOOKING STATEMENTS MAY BE FOUND IN THIS SECTION AND UNDER "DESCRIPTION OF
BUSINESS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS" 
AND "PROPERTIES."  ACTUAL EVENTS OR RESULTS COULD DIFFER MATERIALLY FROM
THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS
FACTORS.

YEAR ENDED MARCH 31, 1997 VS. 1996
----------------------------------


RESULTS OF OPERATIONS
---------------------

     The Company had net loss from operations for the year ended March 31,
1997 totaling ($1,033,000) or ($.10) per share of common stock, compared to
net income of $476,000 or $.05 per share for the prior year.  The decrease
in net income was primarily a result of impairment and depletion expenses
recognized in the current year.  These costs were substantially higher due
to the lower price of gas at year end which impacted the Company's analysis
of reserves, thereby shortening the expected economic life of numerous
wells.


REVENUES
--------

     Oil and gas sales for the current fiscal year totaled $2,754,000
compared to revenues of $3,083,000 for the prior fiscal year for a decrease
of $329,000 or 10.7%.  Oil production decreased from 34,615 barrels to
29,556 barrels for a net decrease of 5,059 barrels or 14.6%.  Gas
production for the current year totaled 971,826 MCFs compared to 1,039,039
MCFs for the prior year, a net decrease of 67,213 MCFs or 6.5%.  The gas
production decrease was primarily a result of one exceptional well, which
accounted for 22% of this year's gas production, compared to 32% of the
prior year production.  The decrease in revenue is due to the return of
lower gas prices at the current year end which are consistent with
historical prices, compared to the unusually high gas prices at the prior
year end.

     Drilling arrangement income for the current year totaled $37,000, a
decrease of 61% (or $58,000) from prior year revenues of $95,000.  This
decrease was due to the decrease of outside investors participating in the
current year drilling programs.

     Management fee income increased from $114,000 to $148,000, during the
current fiscal year, for a 29.8% increase or $34,000.  The increase in
revenue is a result of the Company managing additional wells that were
brought into production during the current fiscal year.


COSTS AND EXPENSES
------------------

     Oil and gas production costs for the current year totaled $543,000 for
a 1.3% (or $7,000) increase over prior year costs of $536,000. There is
virtually no difference for the two periods presented.

                                   11

<PAGE>

     General and administrative expenses totaled $803,000 for the current
year as compared to $653,000 for the prior year for a total increase of
22.9%.  Five percent of this increase was due to additional legal fees
incurred with regard to the Company's settlement of lawsuits with Columbia
Gas.  Nine percent was due to salary increases caused by the hiring of an
additional employee, and year end bonuses, while the remaining 8.9% was a
combination of increased accounting fees, taxes and other expenses.

     Depreciation, depletion and amortization costs for the current year
totaled $1,019,000 for an increase of $591,000 (or 138%) over prior year
costs of $428,000.  This increase was due to an increase in depreciable
assets owned by the Company, and by revisions of reserve quantity
estimates, primarily due to the decrease in the price of gas at year end.

     Impairment of oil and gas properties for the current fiscal year
totaled $974,000 compared to $67,000 in the prior year, an increase of
1,354%.  This increase is attributable to the lower price of gas at year
end which impacted the Company's reserves, thereby shortening the economic
life used by reserve analyses on numerous wells. Prices declined by more
than 50% during the 4th quarter of the current year compared to the prior
year end and the Company is doing more exploration in a new zone which has
the potential to be very productive but involves more risk with a longer
payout of investment.  The Company is required by statement of Accounting
Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS (FAS
121) to analyze assets at the lowest level that cash flow can be
determined.  The Company generally only has one well in each field and thus
cash flows were analyzed on a well-by-well basis.  Some of the wells in
this new zone were very productive and others were not.  Under FAS 121, the
positive cash flows from the productive wells cannot be used to offset
other less productive wells.  Thus, even though this new zone may prove to
be very productive, the Company was still required to record the
impairment.

     Exploration costs and dry hole costs decreased a total of 13.5% from
$895,000 in the prior year to $774,000 during the current year.  The
Company's approach to exploration has not changed significantly from the
prior year, however, dry hole costs decreased 38% from the prior year.


OTHER INCOME (EXPENSE)
----------------------

     Other income (expense) for the current year totaled ($40,000), a
decrease of ($103,000) from prior year revenues of $63,000.  This decrease
was a result of cost in the current year to plug and abandon certain wells
compared to a gain in the prior year on the sale of oil and gas properties.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     During the fiscal year ended March 31, 1997, the Company experienced
a decrease in working capital from $(391,000) in the prior year to
$(602,000) in the current year.  This decrease of $211,000 was due in
general to the recording of the lawsuit settlement.  Cash as of March 31,
1997 was $227,000, a $189,000 decrease from the prior year of $416,000. 
This was

                                   12

<PAGE>

primarily due to a decrease in cash provided by operations from $1,284,000
for the year ended March 31, 1996 compared to $1,147,000 for the year ended
March 31, 1997.  The Company also used $130,000 in the current year to
repay the line of credit.  Cash used in investing activities decreased
$87,000 from the ($1,206,000) for the year ended March  31, 1997 compared
to ($1,293,000) for the period ended March 31, 1996.
 
     The Company used it's line-of-credit along with outside investors to
facilitate the drilling of 19 wells during fiscal year 1997.  Five of these
wells were dry holes.  Of the 14 commercial wells, the Company retained an
average of 55.17% working interest.

     The Company anticipates continuing the use of outside investors and
bank borrowings to facilitate its working capital needs and its drilling
activities for the next fiscal year.









                                   13

<PAGE>

ITEM 7. FINANCIAL STATEMENTS.
----------------------------

                                                                     PAGE
                                                                     ----


INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . . . .F-2

BALANCE SHEETS - March 31, 1997. . . . . . . . . . . . . . . . . . . .F-3

STATEMENTS OF OPERATIONS - For the Years Ended March 31, 1997
     and 1996  . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-4

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - For the Period from
     April 1, 1995 to March 31, 1997 . . . . . . . . . . . . . . . . .F-5

STATEMENTS OF CASH FLOWS - For the Years Ended March 31, 1997
     and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-6

NOTES TO FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . .F-7









                                   F-1

<PAGE>

                      INDEPENDENT AUDITOR'S REPORT





The Board of Directors
Tatum Petroleum Corporation
Worthington, Ohio


We have audited the accompanying balance sheet of Tatum Petroleum
Corporation as of March 31, 1997, and the related statements of operations,
stockholders' equity, and cash flows for the years ended March 31, 1997 and
1996.  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 financial statements referred to above present fairly,
in all material respects, the financial position of Tatum Petroleum
Corporation as of March 31, 1997, and the results of its operations and its
cash flows for the years ended March 31, 1997 and 1996, in conformity with
generally accepted accounting principles.




HEIN + ASSOCIATES LLP


Denver, Colorado
May 23, 1997



<PAGE>

                       TATUM PETROLEUM CORPORATION
                                    
                              BALANCE SHEET
                             MARCH 31, 1997


                                 ASSETS
                                 ------

CURRENT ASSETS:
  Cash                                                     $  227,000 
  Receivables:
    Oil and gas                                               326,000 
    Joint interest owners                                      48,000 
    Related party                                             124,000 
  Inventory                                                    66,000 
                                                           ---------- 
      Total current assets                                    791,000 

PROPERTY AND EQUIPMENT, at cost:
  Oil and gas producing properties (using the
    successful efforts method of accounting):
      Proved                                                7,111,000 
      Unproved                                                546,000 
  Other equipment                                             168,000 
                                                           ---------- 
                                                            7,825,000 
  Less accumulated depreciation, depletion,
    amortization and impairment                            (5,436,000)
                                                           ---------- 
                                                            2,389,000 

OTHER ASSETS                                                   17,000 
                                                           ---------- 

TOTAL ASSETS                                               $3,197,000 
                                                           ========== 


                  LIABILITIES AND STOCKHOLDERS' EQUITY
                  ------------------------------------

CURRENT LIABILITIES:
  Note payable                                             $  230,000 
  Accounts payable                                            193,000 
  Revenue and ad valorem taxes payable                        389,000 
  Advances from working interest owners                       127,000 
  Accrued liabilities                                          88,000 
  Current taxes payable                                        30,000 
  Settlement accrual - current                                336,000 
                                                           ---------- 
      Total current liabilities                             1,393,000 

ACCRUED SETTLEMENT                                            230,000 

COMMITMENTS (NOTE 5)

STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value; authorized
  15,000,000 shares,
    10,418,855 shares issued and outstanding                  104,000 
  Additional paid-in capital                                4,877,000 
  Accumulated deficit                                      (3,407,000)
                                                           ---------- 
      Total stockholders' equity                            1,574,000 
                                                           ---------- 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                 $3,197,000 
                                                           ========== 



          SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

                                   F-3

<PAGE>

                       TATUM PETROLEUM CORPORATION

                        STATEMENTS OF OPERATIONS



                                                         MARCH 31,
                                                 -------------------------
                                                   1997             1996
                                                 --------         --------
NET REVENUES:
 Oil and gas sales                              $2,754,000       $3,083,000 
 Drilling arrangement income                        37,000           95,000 
 Operating fees                                    148,000          114,000 
                                                ----------       ---------- 
                                                 2,939,000        3,292,000 

COSTS AND EXPENSES:
 Oil and gas production costs                      543,000          536,000 
 General and administrative expenses               803,000          653,000 
 Depreciation, depletion and amortization        1,019,000          428,000 
 Impairment of oil and gas properties              974,000           67,000 
 Exploration costs                                 552,000          587,000 
 Dry hole costs                                    192,000          308,000 
 Legal settlements, net                             99,000             -    
                                                ----------       ---------- 
                                                 4,182,000        2,579,000 
                                                ----------       ---------- 

OTHER INCOME (EXPENSE)                             (40,000)          63,000 
                                                ----------       ---------- 

INCOME (LOSS) BEFORE INCOME TAXES               (1,283,000)         776,000 
                                                ----------       ---------- 

INCOME TAX BENEFIT (EXPENSE):
 Current                                           (30,000)         (20,000)
 Deferred                                          280,000         (280,000)
                                                ----------       ---------- 
                                                   250,000         (300,000)
                                                ----------       ---------- 

NET INCOME (LOSS)                              $(1,033,000)      $  476,000 
                                                ==========       ========== 

NET INCOME (LOSS) PER SHARE                    $      (.10)      $      .05 
                                                ==========       ========== 

WEIGHTED AVERAGE SHARES OUTSTANDING             10,418,855       10,418,855 
                                                ==========       ========== 






          SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

                                   F-4

<PAGE>

                       TATUM PETROLEUM CORPORATION

              STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
        FOR THE PERIOD FROM APRIL 1, 1995 THROUGH MARCH 31, 1997



<TABLE>
<CAPTION>

                                COMMON STOCK         ADDITIONAL
                           ---------------------      PAID-IN    ACCUMULATED
                            SHARES       AMOUNT       CAPITAL      DEFICIT         TOTAL
                           --------     --------     ---------    ---------      --------
<S>                       <C>          <C>          <C>          <C>            <C>
BALANCES, April 1, 1995   10,418,855   $  104,000   $4,877,000   $(2,850,000)   $2,131,000 

 Net income                     -            -            -          476,000       476,000 
                           ---------   ----------   ----------   -----------    ---------- 

BALANCES, March 31, 1996  10,418,855      104,000    4,877,000    (2,374,000)    2,607,000 

 Net loss                       -            -            -       (1,033,000)   (1,033,000)
                          ----------   ----------   ----------   -----------    ---------- 

BALANCES, March 31, 1997  10,418,855   $  104,000   $4,877,000   $(3,407,000)   $1,574,000 
                          ==========   ==========   ==========   ===========    ========== 

</TABLE>












          SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

                                   F-5

<PAGE>

                       TATUM PETROLEUM CORPORATION

                        STATEMENTS OF CASH FLOWS


                                                         MARCH 31,
                                                 -------------------------
                                                   1997             1996
                                                 --------         --------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                             $(1,033,000)      $  476,000 
 Adjustments to reconcile to net cash
    provided by operating activities:
     Depreciation, depletion and
      amortization                               1,019,000          428,000 
     Impairment of oil and gas properties          974,000           67,000 
     Deferred income taxes                        (280,000)         280,000 
     (Gain) loss on disposal of equipment           44,000          (46,000)
     Loss of expired leases                         59,000             -    
     Changes in operating assets and
      liabilities:
       Receivables                                 187,000         (317,000)
       Inventory                                   (47,000)          (9,000)
       Prepaid expenses and other                    2,000             -    
       Payables                                   (360,000)         360,000 
       Accrued liabilities                         582,000           45,000 
                                                ----------       ---------- 
     Net cash provided by operating
      activities                                 1,147,000        1,284,000 

CASH FLOWS FROM INVESTING ACTIVITIES:                       
 Purchases of property and equipment            (1,224,000)      (1,370,000)
 Proceeds from sale of property and
  equipment                                         18,000           77,000 
                                                ----------       ---------- 
     Net cash used in investing
      activities                                (1,206,000)      (1,293,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Borrowings on line-of-credit                    2,240,000        1,400,000 
 Repayments on line-of-credit                   (2,370,000)      (1,300,000)
                                                ----------       ---------- 
     Net cash provided by (used in)
      financing activities                        (130,000)         100,000 

NET INCREASE (DECREASE) IN CASH                   (189,000)          91,000 

CASH, beginning of year                            416,000          325,000 
                                                ----------       ---------- 

CASH, end of year                               $  227,000       $  416,000 
                                                ==========       ========== 

SUPPLEMENTAL CASH FLOW INFORMATION:
 Cash paid for interest                         $   24,000       $   19,000 
                                                ==========       ========== 

 Cash paid for income taxes                     $   20,000       $     -    
                                                ==========       ========== 

          SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.

                                   F-6

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



1.  NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
    --------------------------------------------------------

    NATURE OF OPERATIONS - Tatum Petroleum Corporation (Tatum) was
    incorporated in 1984, as a Delaware corporation.  The Company's
    principal operations include the acquisition, exploration and
    development of oil and gas properties.

    INVENTORY - Inventory represents oil field equipment recorded at the
    lower of cost or market, and valued using the specific identification
    method.

    OIL AND GAS PROPERTIES - The Company's investment in oil and gas
    properties is accounted for under the successful efforts method of
    accounting.  Under this method all costs associated with property
    acquisition, successful exploratory wells and all developmental wells
    are capitalized.  Items charged to expense include geological and
    geophysical costs, property carrying costs, costs of unsuccessful
    exploratory wells and oil and gas production costs.  Oil and gas
    properties are assessed periodically by management of the Company to
    determine whether impairment has occurred. Capitalized costs of proved
    properties are amortized using the unit-of-production method on the
    basis of estimated proved oil and gas reserves.  Costs of exploratory
    wells in progress are capitalized and excluded from depletion until
    such time as proved reserves are established or impairment is
    determined, generally not greater than one year from completion of
    drilling.  Gains on the sale of unproved properties and on drilling
    arrangement income are recognized on the cost recovery method whereby
    proceeds are first applied to recover all related property and
    drilling costs before any gain is recognized.  In addition, for
    exploratory wells, a portion of the gain may be deferred to offset
    estimated future drilling costs on an interest retained in the related
    property.  Income from drilling arrangements is recognized under the
    completed contract method.

    ENVIRONMENTAL COSTS - The Company believes that the cost to plug and
    abandon its wells will be offset by the salvage value of the equipment
    on those wells.  Consequently, costs to plug and abandon wells are not
    accrued for over the live of the related wells.

    OTHER PROPERTY AND EQUIPMENT - Depreciation of other equipment is
    computed using the straight-line method over the estimated useful
    lives of the assets of three to five years. Expenditures for
    maintenance and repairs are expensed as incurred, whereas expenditures
    for improvements, replacements and major renewals are capitalized. 
    Gains and losses from retirement or replacement of other property and
    equipment are included in operations.

    OPERATING FEES - As operator of oil and gas properties, the Company
    receives management fees from oil and gas partnerships for the service
    provided.  These fees are recorded as income when earned.

                                   F-7

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



    ACCOUNTING 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 these financial statements and the accompanying notes. 
    The actual results could differ from those estimates.

    The Company's provision for depreciation and depletion of capitalized
    costs of developed oil and gas properties is determined based upon the
    estimated quantities of proved oil and gas reserves.  The Company's
    reserve estimates are determined by an independent petroleum
    engineering firm.  However, management emphasizes that reserve
    estimates are inherently imprecise and that estimates of new
    discoveries are more imprecise than those of producing oil and gas
    properties.  Accordingly, these estimates are expected to change as
    future information becomes available.

    As discussed in Note 2, the Company periodically evaluates the
    carrying value of its developed oil and gas properties for impairment
    by comparison to future net revenues for such properties.

    Based upon current prices and costs, prices for natural oil and gas
    have typically been volatile, therefore, estimates as to impairment
    are inherently more imprecise due to changing prices and other factors
    in the reserve estimation process.

    FAIR VALUE OF FINANCIAL INSTRUMENTS - The estimated fair values of
    financial instruments under SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE
    OF FINANCIAL INSTRUMENTS, are determined at discrete points in time
    based on relevant market information.  The Company's financial
    instruments consist of mainly of cash, accounts receivable, accounts
    payable, and the accrued litigation settlement.  The Company believes
    that the fair value of its financial instruments approximate the book
    value, due to the short-term nature of the instruments.

    STOCK-BASED COMPENSATION - In 1997, the Company adopted the disclosure
    requirements of SFAS 123 "Accounting for Stock-Based Compensation." 
    The Company had no stock-based compensation for either employees or
    non-employees, and has no options, warrants or other stock incentives
    outstanding.

    CASH AND CASH EQUIVALENTS - For purposes of the statements of cash
    flows, the Company considers all highly liquid debt instruments
    purchased with an original maturity of three months or less to be cash
    equivalents.

    NET INCOME (LOSS) PER SHARE - Net income (loss) per share is based on
    the weighted average number of shares outstanding.

                                   F-8

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



    RECLASSIFICATIONS - Certain reclassifications have been made to
    conform 1996 financial statements to the presentation in 1997.  The
    reclassifications had no effect on net income.


2.  IMPAIRMENT OF OIL AND GAS PROPERTIES:
    ------------------------------------

    The Company adopted Statement of Financial Accounting Standards No.
    121, "Accounting for Impairment of Long-Lived Assets" in 1997.  This
    statement limits net capitalized costs of proved and unproved oil and
    gas properties to the aggregate undiscounted future net revenues (the
    "Ceiling") related to each field.  The Company generally has only one
    well in each field.  If the net capitalized costs exceed the Ceiling,
    impairment is provided to reduce the carrying value of the properties
    in the field to estimated actual value.  The impairment is included in
    accumulated depreciation, depletion, amortization, and impairments. 
    In 1997 and 1996, the Company recognized impairments of $974,000 and
    $67,000, respectively.  The primary factor causing the impairment was
    the decline in natural gas prices in the Ohio region during the
    Company's fourth quarter.


3.  INCOME TAXES:
    ------------

    The Company accounts for income taxes under the liability method,
    whereby differences between book and tax income are reported as
    deferred tax assets or liabilities. 

    The Company follows the policy of expensing all intangible drilling
    and development costs for income tax purposes, whereas such costs are
    capitalized for successful wells for financial reporting purposes. 
    Other timing differences relate to depreciation and depletion methods
    used for tax and financial reporting.

    Deferred tax assets and liabilities consist of the following:

                                                           MARCH 31,
                                                           ---------
                                                             1997
                                                           ---------
           Deferred assets (liabilities):
              Net operating loss carryforward             $  428,000 
              Property and equipment basis
               differences                                  (325,000)
                                                           --------- 

           Net deferred tax asset                            103,000 
              Valuation allowance                           (103,000)
                                                           --------- 

           Net deferred                                    $    -    
                                                           ========= 

                                   F-9

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



    Total income tax expense differed from the amounts computed by
    applying the Federal statutory tax rates to pretax income as follows:

                                                     1997             1996
                                                   --------         --------

        Total expense computed by                     (34)%             34 %
         applying the U.S. statutory rate
        State taxes                                    (3)%              4 %
        Increase in valuation allowance                 8 %              - %
        Operating loss carryforwards                    - %             (2)%
        Effect of alternative minimum
         tax and other                                  9 %              3 %
                                                      ----             ---- 
                                                      (20)%             39 %
                                                      ====             ==== 

    The Company has available, subject to applicable limitations, tax net
    operating loss carryforwards (NOL's) of approximately $1,100,000 to
    reduce future taxable income.  These NOL's, if not utilized, will
    expire in the years 2003 through 2011.


4.  NOTE PAYABLE:
    ------------

    The Company has a line-of-credit of $400,000, subject to a borrowing
    base equal to a percentage of qualified receivables with interest at
    prime plus 1.5% (total of 10% at March 31, 1997).  As of March 31,
    1997, there was $230,000 outstanding under the line-of-credit.  The
    line-of-credit expires in September 1997 and is collateralized by a
    first lien on the Company's accounts receivable, and a negative pledge
    covering all of the Company's assets.


5.  COMMITMENTS:
    -----------

    The Company leases its office space, with monthly payments of $1,500
    through May 1998.

    Total rental expense charged to operations was $18,000 and $16,400 for
    the years ended March 31, 1997 and 1996, respectively.

    CONCENTRATIONS OF CREDIT RISK - Credit risk represents the accounting
    loss that would be recognized at the reporting date if counterparties
    failed completely to perform as contracted.  Concentrations of credit
    risk (whether on or off balance sheet) that arise from financial
    instruments exist for groups of customers or counterparties when they
    have similar economic characteristics that would cause their ability
    to meet contractual

                                  F-10

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



    obligations to be similarly effected by changes in economic or other
    conditions described below.  In accordance with FASB Statement No. 105,
    DISCLOSURE OF INFORMATION ABOUT FINANCIAL INSTRUMENTS WITH OFF-BALANCE-
    SHEET RISK AND FINANCIAL INSTRUMENTS WITH CONCENTRATIONS OF CREDIT RISK,
    the credit risk amounts shown do not take into account the value of any
    collateral or security.

    The Company operates in one industry segment, oil and gas.  A
    geographic concentration exists because the Company's customers are
    generally located in the Eastern United States.  Approximately 77% of
    the Company's 1997 oil and gas revenues are from gas production, which
    is mostly purchased by two customers.  All of the Company's oil is
    purchased by one customer.  The Company does not believe it is
    dependent upon any customers, due to the nature of its production. 
    Financial instruments that subject the Company to credit risk consist
    principally of accounts receivable.

    During fiscal year 1997, the Company maintained an uninsured money
    market account with a financial institution.

    SETTLEMENTS - In April 1997, the Company entered into a settlement
    agreement in order, among other things, to avoid additional costs of
    continued litigation.  A signed release by both parties has been
    formalized and the Company has accrued the net present value of the
    settlement as of March 31, 1997, which is $34,000 per month to be paid
    over 18 months.  This agreement is collateralized by certain oil and
    gas wells.

    In October 1996, the Company received from a affiliate of the party to
    the above litigation a bankruptcy settlement of approximately
    $467,000.

    The above legal settlements have been reflected net in the statement
    of operations.


6.  RELATED PARTY TRANSACTIONS:
    --------------------------

    The Company transports a portion of its gas production over a gas
    gathering system and a pipeline which are owned by an entity
    affiliated with the president.  During the years ended March 31, 1997
    and 1996, the Company paid approximately $167,000 and $226,000 in
    gathering fees and $44,000 and $56,000 in compression fees for the
    Company's share of gas transported over these lines to the entity. 
    Additional fees for company gas transported over another pipeline
    previously owned by the Company of approximately $36,000 and $34,000
    in 1997 and 1996, respectively, have been forgiven in exchange for
    administration services the Company provides the pipeline.

    Related parties also participate in the majority of wells drilled and
    operated by the Company, generally on the same basis as other third
    party interest.

                                  F-11

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



7.  DEFINED CONTRIBUTION PLAN:
    -------------------------

    The Company has a Simple IRA retirement plan (the Plan).  Eligible
    employees may make voluntary contributions to the Plan, which are
    matched by the Company up to 3% of the employee's compensation.  The
    amount of employee contributions is limited as specified in the Plan. 
    The Company made contributions of approximately $3,000 at March 31,
    1997.


8.  DISCLOSURES ABOUT OIL AND GAS PRODUCING ACTIVITIES:
    --------------------------------------------------

    All oil and gas operations of the Company are conducted in the United
    States.  Capitalized costs relating to oil and gas producing
    activities are as follows:

                                                          MARCH 31,
                                                 -------------------------
                                                   1997             1996
                                                 --------         --------
      Proved oil and gas producing
       properties                               $7,036,000       $5,681,000 
      Wells in progress                             75,000          454,000 
      Unproved properties                          546,000          475,000 
                                                ----------       ---------- 
                                                 7,657,000        6,610,000 

      Accumulated depreciation,
       depletion, amortization,
       and impairment                           (5,260,000)      (3,400,000)
                                                ----------       ---------- 

                                                $2,397,000       $3,210,000 
                                                ==========       ========== 


    Costs incurred in oil and gas producing activities, whether
    capitalized or expensed, during the two years ended December 31, 1997
    and 1996 are as follows: 

                                                   1997             1996
                                                 --------         --------
      Acquisition costs                         $  130,912       $  148,000 
                                                ==========       ========== 

      Exploration costs                         $2,063,000       $1,863,000 
                                                ==========       ========== 


    The Company had no development cost, as each new well was drilled on
    a new reservoir.

                                  F-12

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



    ESTIMATED QUANTITIES OF PROVED OIL AND GAS RESERVES (UNAUDITED) -
    Proved oil and gas reserves are the estimated quantities of crude oil,
    which geological and engineering data demonstrate with reasonable
    certainty to be recoverable in future years from known reservoirs
    under existing economic and operating conditions.  Proved developed
    oil and gas reserves are those expected to be recovered through
    existing wells with existing equipment and operating methods. 
    However, reserve information should not be construed as the current
    market value of the Company's oil and gas reserves or the costs that
    would be incurred to obtain equivalent reserves.  Reserve calculations
    involve the estimation of future net recoverable reserves of oil and
    gas and the timing and amount of future net revenues to be received
    therefrom.  These estimates are based on numerous factors, many of
    which are variable and uncertain.  Accordingly, it is common for the
    actual production and revenues to vary from earlier estimates.


    Reserve estimates for recently drilled wells are subject to
    substantial upward or downward revisions after production history
    obtained.  Hence, reserve estimates and estimates of future net
    revenues from production may be subject to substantial revision from
    year to year.  Reserve information presented herein is based on
    reports prepared by independent petroleum engineers for 1997 and 1996.

    Set forth below is the unaudited summary of the changes in the net
    quantities of the Company's proved oil and gas reserves as of March
    31, 1997 and 1996:

                                      1997                     1996
                             ----------------------   ----------------------
                             Oil (bbls)   Gas (mcf)   Oil (bbls)   Gas (mcf)
                             ----------   ---------   ----------   ---------
     Proved developed
      reserves,
      beginning
      of year                    97,000   3,212,000       99,000   3,218,000 
        Production              (30,000)   (972,000)     (35,000) (1,039,000)
        Discoveries,
         extensions and
         other additions         33,000   1,204,000       26,000     773,000 
        Revisions of
         previous
         estimates               34,000     921,000        7,000     260,000 
                              ---------   ---------    ---------   --------- 

     Proved developed
      reserves, end
      of year                   134,000   4,365,000       97,000   3,212,000 
                              =========   =========    =========   ========= 


     STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (UNAUDITED) -
     Statement of Financial Accounting Standards No. 69 prescribes
     guidelines for computing a standardized

                                  F-13

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



     measure of future net cash flows and changes therein relating to
     estimated proved reserves.  The Company has followed these guidelines
     which are briefly discussed below.

     Future cash inflows and future production and development costs are
     determined by applying year-end prices and costs to the estimated
     quantities of oil and gas to be produced.  Estimated future income
     taxes are computed using current statutory income tax rates including
     consideration for estimated future statutory depletion and tax
     credits.  The resulting future net cash flows are reduced to present
     value amounts by applying a 10% annual discount factor.

     The Company does not have reserve information prepared by an
     independent reserve engineer for proved undeveloped reserves as it
     believes such reserves would not be material to the Company's total
     reserves and ultimate recovery of undeveloped reserves is still
     uncertain.

     The assumptions used to compute the standardized measure are those
     prescribed by the Financial Accounting Standards Board and, as such,
     do not necessarily reflect the Company's expectations for actual
     revenues to be derived from those reserves nor their present worth. 
     The limitations inherent in the reserve quantity estimation process,
     as discussed previously, are equally applicable to the standardized
     measure computations since these estimates are the basis for the
     valuation process.

                                                         MARCH 31,
                                                 -------------------------
                                                   1997             1996
                                                 --------         --------

        Future cash inflows                    $12,016,000      $16,638,000 
        Future production costs                 (3,422,000)      (3,023,000)
        Future income tax expense               (2,532,000)      (4,046,000)
                                               -----------      ----------- 
        Future net cash flows                    6,062,000        9,569,000 

        10% annual discount for
             estimated timing of
             cash flows                         (1,819,000)      (3,862,000)
                                               -----------      ----------- 
        Standardized measure of
             discounted future
             net cash flows                    $ 4,243,000      $ 5,707,000 
                                               ===========      =========== 



                                  F-14

<PAGE>

                       TATUM PETROLEUM CORPORATION

                      NOTES TO FINANCIAL STATEMENTS



    The following are the principal sources of change in the standardized
    measure of discounted future net cash flows for the year ended March
    31, 1997:


         Standardized measure, March 31, 1996                  $5,707,000 
            Sales of oil and gas, net of production costs      (2,211,000)
            Extensions, discoveries and other additions           862,000
            Net change due to revisions in
             quantity estimates                                 1,471,000 
            Net change due to changes in prices
             and production costs                              (1,135,000)
            Timing and other, net                              (2,082,000)
            Net change in income taxes                          1,060,000 
            Accretion of discount                                 571,000 
                                                               ---------- 

         Standardized measure, March 31, 1997                  $4,243,000 
                                                               ========== 









                                  F-15

<PAGE>

ITEM 8.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
--------------------------------------------------------------

    None.









                                   15

<PAGE>

                                PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
---------------------------------------------------------------------

    (a)(b)    IDENTIFICATION OF DIRECTORS, EXECUTIVE OFFICERS AND
              SIGNIFICANT EMPLOYEES.

    The following sets forth certain information with respect to the
officers and directors of the Registrant.


     Name                Age              Position
     ----                ---              --------

Zachary T. Tatum         44        President, Chief Financial Officer,
                                   Chief Executive Officer and a Director
                                   since 1985

Lori J. Powell           38        Secretary, Treasurer and a Director
                                   since 1995

John E. Reynolds         62        Director since 1985

     The directors of the Registrant are elected to hold office until the
next annual meeting of shareholders and until their respective successors
have been elected and qualified.  Officers of the Registrant are elected by
the Board of Directors and hold office until their successors are elected
and qualified.

     The Registrant has no audit or compensation committee.

     Biographical information concerning each director and executive
officer, including business experience for the past five years is as
follows:

     ZACHARY T. TATUM graduated from California State University at
Fullerton in 1975 with a degree in business/marketing.  After graduation,
he was employed part-time by Allison Drilling Company and worked in Eastern
Colorado.  In 1977, he acquired a producing property in the Pyramid Hills
Oil Field, Kings County, California, which he operated until the property
was sold in May, 1985.  From 1979 to the present, he has been involved in
sponsoring limited partnerships and joint ventures to drill oil and gas
wells in the States of California, Ohio and West Virginia.  Mr. Tatum is
also president and a director of the following inactive corporations:
Energy Exploration Corp., a Nevada corporation, of Strata Exploration,
Inc., an Ohio corporation, and of Tatum Petroleum Ohio, Inc., an Ohio
corporation.  Mr. Tatum devotes full time to the Registrant.

     LORI J. POWELL has been the Registrant's controller since 1991 and a
Director since 1995.  She is responsible for the Registrant's financial
statements, filings, contracts and day to day accounting matters.  Ms.
Powell obtained a B.S. degree from Azusa Pacific University in 1983 and
devotes full time to the Registrant.

                                   16

<PAGE>

     JOHN E. REYNOLDS is the president of Keyline Sales, Inc., Downey,
California, which sells plumbing supplies to the wholesale trade.  Mr.
Reynolds is also an investor in other oil and gas ventures.

     (c)  FAMILY RELATIONSHIPS.

     There are no family relationships between or among any officer and
director.

     (d)  INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.

     No officer, director, significant employee, promoter or control person
of the Registrant has been involved in any event of the type described in
Item 401(d) of Regulation S-B during the past five years.

ITEM 11.  EXECUTIVE COMPENSATION.
--------------------------------

     (a)  GENERAL.

     The Registrant's President, Mr. Zachary T. Tatum, is the only officer
whose total compensation exceeds $100,000 during the Registrant's most
recent fiscal year.

     (b)  SUMMARY COMPENSATION TABLE.

     The following table sets forth certain information regarding the
compensation paid or accrued by the Registrant to or for the account of the
Chief Executive Officer and each of the Officers of the Registrant whose
total annual compensation exceeded $100,000 during the fiscal years ended
March 31, 1995, 1996 and 1997:

<TABLE>
<CAPTION> 

                               Annual Compensation                          Long Term Compensation
                   -------------------------------------------  ---------------------------------------------

 Name and                                                       Restricted
 Principal                                        Other Annual    Stock   Options/   LTIP         All Other
 Position          Year    Salary     Bonuses($)  Compensation    Awards    SARS   Payouts($)   Compensation
--------           ----    ------     ---------   ------------    ------    ----   ----------   ------------
<S>                <C>     <C>        <C>          <C>             <C>       <C>      <C>          <C>
Zachary T. Tatum   1997    $300,000   $22,950      $    -0-        -0-       -0-      -0-          -0-
President and      1996    $300,000     -0-        $    -0-        -0-       -0-      -0-          -0-
Chief Executive    1995    $300,000     -0-        $    -0-        -0-       -0-      -0-          -0-
Officer

</TABLE>

     (c)  OPTION/SAR GRANTS TABLE.

     Not applicable.

     (d)  AGGREGATED OPTION/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR
          VALUE TABLE.

     Not applicable.

                                   17

<PAGE>

     (e)  TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE.

     Not applicable.

     (f)  COMPENSATION OF DIRECTORS.

     STANDARD ARRANGEMENTS.  The Registrant  pays its directors $100 per
meeting of the Board of Directors attended.  Directors also receive
reimbursement for out-of-pocket expenses incurred by them in connection
with the business of the Registrant.

     OTHER ARRANGEMENTS.  The Registrant has no other arrangements pursuant
to which any director of the Registrant was compensated during the year
ended March 31, 1997, for services as a director.

     (g)  EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
          CHANGE-IN-CONTROL ARRANGEMENTS.

     None.

     (h)  REPORTING ON REPRICING OF OPTIONS/SARS.

     Not Applicable.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
-----------------------------------------------------------------------

     (a)(b)    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT.

     The following table sets forth, as of March 31, 1997 the ownership of
the Registrant's Common Stock by (i) each Director of the Registrant, (ii)
all Executive Officers and Directors of the Registrant as a group, and
(iii) all persons known by the Registrant to own more than 5% of the
Registrant's Common Stock.

                                                Beneficial Ownership (1)
                                                ------------------------

     Name                              Number of Shares            Percentage
     ----                              ----------------            ----------

Zachary T. Tatum                         6,653,812 (2)                63.8%
667-E Lakeview Plaza Blvd.
Worthington, OH 43085

John E. Reynolds                            88,056                      Nil
11711 Woodruff Ave.
Downey, CA 90241

                                   18

<PAGE>

Lori J. Powell                                   0                        0
667-E Lakeview Plaza Blvd.
Worthington, OH 43085

All Directors and Officers               6,741,868                    64.7%
as a Group (3 persons)
_________________________________
(1)  Calculated pursuant to Rule 13d-3(d) of the Securities Exchange Act of
     1934.  Unless otherwise stated below, each such person has sole voting
     and investment power with respect to all such shares.  Under Rule
     13d-3(d), shares not outstanding which are subject to options,
     warrants, rights or conversion privileges exercisable within 60 days
     are deemed outstanding for the purpose of calculating the number and
     percentage owned by such person, but are not deemed outstanding for
     the purpose of calculating the percentage owned by each other person
     listed.

(2)  Includes 1,447,592 shares held by Tatum Petroleum Ohio, 356,872 shares
     held by Energy Exploration Corporation, 490,959 shares held by Strata
     Exploration Corporation and 13,781 shares held by Devonian
     Exploration, Inc., all or which may be deemed to be beneficially owned
     by Zachary T. Tatum.

     (c)  CHANGES IN CONTROL.

     No understandings, arrangements or agreements are known by management
at this time which would result in a change in control of the Registrant.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------

     (a)(b)    TRANSACTIONS WITH MANAGEMENT AND OTHERS.

     The Registrant transports a portion of its gas production over a gas
gathering system and a pipeline which are owned by SOL Ltd., a company
owned by the wife of the Registrant's president, Mr. Zachary T. Tatum. 
During the years ended March 31, 1997 and 1996, the Registrant paid
approximately $167,000 and $226,000 in gathering fees and $44,000 and
$56,000 in compression fees, respectively, for the Registrant's share of
gas transported over these lines to the entity.

     The Company's Board of Directors and its officers are subject to
certain provisions of Delaware law which are designed to eliminate or
minimize the effects of certain potential conflicts of interest.  In
addition, the Board of Directors has adopted a policy that provides that
any transaction between the Company and an interested party must be fully
disclosed to the Board of Directors, and that a majority of the directors
not otherwise interested in the transaction (including a majority of
disinterested directors) must make a determination that such transaction is
fair, competitive and commercially reasonable and on terms and conditions
not less favorable to the Company than those available from unaffiliated
third parties.

     (c)  PARENTS OF THE REGISTRANT.

     Zachary T. Tatum may be deemed to be the parent of the Registrant. 
See Item 4 above for information concerning the basis of control and
percentage of voting securities owned by Mr. Tatum.

                                   19

<PAGE>

     (d)  TRANSACTIONS WITH PROMOTERS.

     Information required by Item 404 of Regulation S-B is not required to
be presented inasmuch as the Registrant has been organized for more than
five years.

ITEM 13.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
--------------------------------------------------------------------------


     Number         Description
     ------         -----------

     (a)(1)         See index to Consolidated Financial Statements at Item 7.

     (a)(2)         All other schedules have been omitted because the required
                    information is inapplicable or is shown in the notes to the
                    financial statements.

     (a)(3)         Exhibits:
                    --------

     (b)            None. 

     (c)            No reports on Form 8-K were filed by the Company during the
                    last quarter of the fiscal year ended March 31, 1997.









                                   20

<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.


                                         TATUM PETROLEUM CORPORATION



Date: July 14, 1997                     By  /s/ ZACHARY T. TATUM
                                          ------------------------------------
                                          Zachary T. Tatum, President, Chief 
                                           Executive Officer, Principal
                                           Financial and Accounting Officer


     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 dates indicated.

SIGNATURES                  TITLE                               DATE
----------                  -----                               ----

/s/ ZACHARY T. TATUM        President, Chief Financial      July 14, 1997
---------------------       Officer, Chief Executive
Zachary T. Tatum            Officer and a Director


/s/ LORI J. POWELL          Secretary, Treasurer and a      July 14, 1997
---------------------       Director
Lori J. Powell


/s/ JOHN E. REYNOLDS        Director                        July 14, 1997
---------------------
John E. Reynolds



                                   21