FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the quarterly period ended March 31, 2004.

                                       OR

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

For the transition period from ________________ to ________________.


                        Commission File Number: 0 - 7261


                            CHAPARRAL RESOURCES, INC.
              ----------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

          Delaware                                             84-0630863
-------------------------------                            ------------------
(State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                            Identification No.)

                           2 Gannett Drive, Suite 418
                          White Plains, New York 10604
                    (Address of Principal Executive Offices)

Registrant's telephone number, including area code: (866) 559-3822


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, and (2) has been subject to such filing
requirements for the past 90 days.

         YES  |X|          NO  |_|

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

         YES  |_|          NO  |X|

         As of May 10, 2004 the Registrant had 38,209,502 shares of its common
stock, par value $0.0001 per share, issued and outstanding.
<PAGE>




                            CHAPARRAL RESOURCES, INC.
                                    FORM 10-Q
                                 MARCH 31, 2004

                                TABLE OF CONTENTS

PART I. SUMMARIZED FINANCIAL INFORMATION                                  PAGE
                                                                          ----

Item l.    Financial Statements

           Consolidated Condensed Balance Sheets as of
            March 31, 2004 and December 31, 2003                            1

           Consolidated Condensed Statements of Operations
            for the Three Months Ended March 31, 2004 and 2003              3

           Consolidated Condensed Statements of Cash Flows
            for the Three Months Ended March 31, 2004 and 2003              4

           Notes to Consolidated Condensed Financial Statements             6

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                             14

Item 3.    Quantitative and Qualitative Disclosures About Market Risk      18

Item 4.    Controls and Procedures                                         19

PART II.   OTHER INFORMATION


Item 6.    Exhibits and Reports on Form 8-K                                20

           Signature                                                       21

<PAGE>
<TABLE>
<CAPTION>


                          Part I - Summarized Financial Information

                                 Item 1 - Financial Statements

                                   Chaparral Resources, Inc.
                             Consolidated Condensed Balance Sheets
                                         (In Thousands)

                                                         March 31,               December 31,
                                                           2004                     2003
                                                       (Unaudited)
                                                        -------------------------------------
<S>                                                     <C>                      <C>
Assets
Current assets:
   Cash and cash equivalents                            $   5,193                  $   2,639
   Accounts receivable:
     Oil sales receivable                                     366                        215
     VAT receivable                                         3,081                      2,907
   Prepaid expenses                                         3,826                      1,940
   Prepaid expenses to affiliates                             536                      1,296
   Crude oil inventory                                         42                        544
                                                        ------------------------------------

Total current assets                                       13,044                      9,541

Long- term deposits                                           215                       --
Materials and supplies                                      2,482                      3,188
Property, plant and equipment:
   Oil and gas properties, full cost:
   Properties subject to depletion                        125,694                    118,347
   Properties not subject to depletion                      2,325                      2,942
                                                        ------------------------------------
                                                          128,019                    121,289
Other Property, plant and equipment                        10,508                      9,408
                                                        ------------------------------------
                                                          138,527                    130,697
Less - accumulated depreciation,
 depletion, and amortization                              (48,754)                   (44,758)
                                                        ------------------------------------
Property, plant and equipment, net                         89,773                     85,939

Total assets                                            $ 105,514                  $  98,668
                                                        ====================================

See accompanying notes.

                                                   1
<PAGE>


                                        Chaparral Resources, Inc.
                            Consolidated Condensed Balance Sheets (continued)
                                               (In Thousands)

                                                                           March 31,         December 31,
                                                                             2004                2003
                                                                         (Unaudited)
                                                                         -------------------------------
Liabilities and stockholders' equity
Current liabilities:
   Accounts payable                                                      $   9,223             $   6,086
   Accounts payable to affiliates                                            1,281                 1,143
   Accrued liabilities:
     Accrued compensation                                                      286                   949
     Other accrued liabilities                                               1,297                 1,571
     Current income tax liability                                             --                       3
     Accrued interest payable                                                  924                   776
   Current portion of loans payable to affiliates                           14,000                12,000
                                                                         -------------------------------
Total current liabilities                                                   27,011                22,528

Accrued production bonus                                                       242                   190
Loans payable to affiliates                                                 21,393                21,284
Deferred tax liability                                                       3,488                 3,057
Minority interest                                                            5,701                 4,635
Long-term assets retirement obligation                                         875                   804

Stockholders' equity:
   Common stock - authorized, 100,000,000
     shares of  $0.0001 par value; issued and outstanding,
     38,209,502 shares as of March 31, 2004 and
     December 31, 2003                                                           4                     4
   Capital in excess of par value                                          107,226               107,226
   Preferred stock - 1,000,000 shares authorized, 925,000 shares
       undesignated. Issued and outstanding - none                            --                    --
   Accumulated deficit                                                     (60,426)              (61,060)
                                                                         -------------------------------
Total stockholders' equity                                                  46,804                46,170
                                                                         -------------------------------
Total liabilities and stockholders' equity                               $ 105,514             $  98,668
                                                                         ===============================

See accompanying notes.

                                                   2
<PAGE>


                                   Chaparral Resources, Inc.
                     Consolidated Condensed Statements of Operations (Unaudited)
                              (In Thousands, Except Share Data)

                                                                        For the Three Months Ended
                                                                    ---------------------------------
                                                                      March 31,           March 31,
                                                                        2004                 2003
                                                                    ---------------------------------

Revenue                                                             $     15,609         $      7,813
Costs and expenses:
   Transportation costs                                                    3,153                1,663
   Operating expenses                                                      2,210                1,122
   Depreciation and depletion                                              4,386                2,438
   Advisory fee                                                               75                   75
   Accretion expense                                                          25                   14
   General and administrative                                              1,649                1,411
                                                                    ---------------------------------
Total costs and expenses                                                  11,498                6,723
                                                                    ---------------------------------
Income from operations                                                     4,111                1,090
Other income (expense):
   Interest income                                                            45                    5
   Interest expense                                                       (1,234)              (1,121)
   Minority interest                                                      (1,066)                (518)
   Currency exchange loss                                                    (80)                 (65)
   Gain/(Loss) on disposition of assets                                     --                     (8)
                                                                    ---------------------------------

Income/(Loss) before income taxes and cumulative effect of
   change in accounting principle                                          1,776                 (617)
Income tax expense                                                         1,142                  352
                                                                    ---------------------------------
Income/(Loss) before cumulative effect of change in
   accounting principle                                                      634                 (969)
Cumulative effect of change in accounting principle,
   net of tax                                                               --                  1,018
                                                                    ---------------------------------
Net income available to common
   Stockholders                                                     $        634         $         49
                                                                    =================================

Basic and diluted earnings per share:
Income/(Loss) per share before cumulative effect of change in
accounting principle                                                $       0.02         $      (0.03)
Cumulative effect of change in accounting principle                         --                   0.03
Net income per share                                                $       0.02         $       0.00
Weighted average number of shares outstanding (basic and
diluted)                                                              38,209,502           38,209,502


See accompanying notes.

                                              3


<PAGE>


                                            Chaparral Resources, Inc.
                            Consolidated Condensed Statements of Cash Flows (Unaudited)
                                                  (In Thousands)


                                                                 For the Three Months Ended
                                                                 --------------------------
                                                                 March 31,        March 31,
                                                                   2004             2003
                                                                 -------------------------
Cash flows from operating activities
Net income                                                       $   634           $    49
Adjustments to reconcile net income to
   net cash provided by operating activities:
     Depreciation, depletion, and amortization                     4,386             2,438
     Loss/(gain) on disposition of furniture and fixtures           --                   8
     Cumulative effect of change in accounting
         principal                                                  --              (1,018)
     Deferred income taxes                                           431              --
     Accretion expense                                                25                14
     Amortization of note discount                                   109                59
     Minority interest                                             1,066               518
Changes in assets and liabilities:
     (Increase) decrease in:
       Accounts receivable                                          (325)             (333)
       Prepaid expenses                                           (1,341)              (63)
       Crude oil inventory                                           112              (545)
     Increase (decrease) in:
       Accounts payable and accrued liabilities                      903             1,208
       Accrued interest payable                                      148               106
       Accrued production bonus                                       52                39
                                                                 -------------------------
Net cash provided by operating activities                        $ 6,200           $ 2,480
                                                                 -------------------------

Cash flows from investing activities
Additions to property, plant, and equipment                      $(1,100)          $  (207)
Capital expenditures on oil and gas properties                    (5,252)           (3,744)
Materials and supplies inventory                                     706              (986)
                                                                 --------------------------
Net cash used by investing activities                            $(5,646)          $(4,937)
                                                                 -------------------------
                                             4

<PAGE>


                                    Chaparral Resources, Inc.
             Consolidated Condensed Statements of Cash Flows (continued) (Unaudited)
                                      (In Thousands)

                                                                     For the Three Months Ended
                                                                   ------------------------------
                                                                   March 31,          March 31,
                                                                     2004                   2003
                                                                   ------------------------------
Cash flows from financing activities
Proceeds from loans from affiliates                                $ 2,000                $  --
                                                                   ------------------------------
Net cash provided by financing activities                          $ 2,000                $  --
                                                                   ------------------------------

Net increase (decrease) in cash and
   cash equivalents                                                $ 2,554                $(2,457)
Cash and cash equivalents at beginning
   of period                                                         2,639                  4,295
                                                                   ------------------------------
Cash and cash equivalents at end of period                         $ 5,193                $ 1,838
                                                                   ==============================

Supplemental cash flow disclosure
     Interest paid                                                 $ 1,045                $ 1,109
     Income taxes paid                                             $   713                $  --
Supplemental schedule of non-cash
   investing and financing activities
     Non-cash additions to oil and gas properties                  $ 1,432                $  --

See accompanying notes.

                                                 5

</TABLE>

<PAGE>


                            Chaparral Resources, Inc
              Notes to Consolidated Condensed Financial Statements
                                   (Unaudited)

1. General

Chaparral Resources, Inc. ("Chaparral") was incorporated in the state of
Colorado on January 13, 1972, principally to engage in the exploration,
development and production of oil and gas properties. Chaparral focuses
substantially all of its efforts on the exploration and development of the
Karakuduk Field, an oil field located in the Central Asian Republic of
Kazakhstan. In 1999, Chaparral reincorporated from Colorado to Delaware.

The consolidated financial statements include the accounts of Chaparral and its
greater than 50% owned subsidiaries, Closed Type JSC Karakudukmunay ("KKM"),
Central Asian Petroleum (Guernsey) Limited ("CAP-G"), Korporatsiya Mangistau
Terra International ("MTI"), Road Runner Services Company ("RRSC"), Chaparral
Acquisition Corporation ("CAC"), and Central Asian Petroleum, Inc. ("CAP-D").
Chaparral owns 80% of the common stock of CAP-G directly and 20% indirectly
through CAP-D. Hereinafter, Chaparral and its subsidiaries are collectively
referred to as the "Company." All significant inter-company transactions have
been eliminated.

As of March 31, 2004, Chaparral owns a 60% interest in KKM, a Kazakhstan Joint
Stock Company of Closed Type. KKM was formed to engage in the exploration,
development, and production of oil and gas properties in the Republic of
Kazakhstan. KKM's only significant investment is in the Karakuduk Field, an
onshore oil field in the Mangistau region of the Republic of Kazakhstan. On
August 30, 1995, KKM entered into an agreement with the Ministry of Oil and Gas
Industry for Exploration, Development and Production of Oil in the Karakuduk Oil
Field in the Mangistau region of the Republic of Kazakhstan (the "Agreement").
KKM's rights and obligations regarding the exploration, development, and
production of underlying hydrocarbons in the Karakuduk Field are determined by
the Agreement.

KKM's rights to the Karakuduk Field may be terminated under certain conditions
specified in the Agreement. The term of the Agreement is 25 years commencing
from the date of KKM's registration. The Agreement can be extended to a date
agreed between the Ministry of Energy and Mineral Resources and KKM as long as
production of petroleum and/or gas is continued in the Karakuduk Field.

KKM is owned jointly by CAP-G (50%), MTI (10%) and KazMunayGaz JSC ("KMG")
(40%). In May 2002, Chaparral increased its ownership in KKM from 50% to 60%
through the acquisition of 100% of the outstanding stock of MTI, a Kazakh
company. KMG, the national petroleum company of Kazakhstan, is owned by the
government of the republic of Kazakhstan.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted. Reference should be made to
the relevant notes to the financial statements for both Chaparral and KKM
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003.

The information furnished herein was taken from the books and records of the
Company without audit. However, such information reflects all adjustments, which
are, in the opinion of management, normal recurring adjustments necessary for
the fair statement of the results for the interim periods presented. The results
of operations for the interim periods are not necessarily indicative of the
results to be expected for any future interim period or for the year.

Use of Estimates

Application of generally accepted accounting principles requires the use of
estimates, judgments and assumptions that affect the reported amounts of assets
and liabilities as of the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The determination of proved oil and gas reserve quantities and the
application of the full cost method of accounting exploration and production
activities requires management to make numerous estimates and judgments. The
change in the estimate of oil and gas reserves as January 1, 2004, offset by the
increase in future estimated development cost, reduced the Company's effective
depletion rate by $.32 per barrel from $6.18 per barrel to $5.86 per barrel
during the three months ending March 31, 2003 and 2004, respectively.

                                       6


<PAGE>


                            Chaparral Resources, Inc
        Notes to Consolidated Condensed Financial Statements (continued)
                                   (Unaudited)

2. Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities,
an interpretation of ARB 51." The primary objectives of this interpretation are
to provide guidance on the identification of entities for which control is
achieved through means other than through voting rights ("variable interest
entities") and how to determine when and which business enterprise (the "primary
beneficiary") should consolidate the variable interest entity. This new model
for consolidation applies to an entity in which either (i) the equity investors
(if any) do not have a controlling financial interest; or (ii) the equity
investment at risk is insufficient to finance that entity's activities without
receiving additional subordinated financial support from other parties. In
addition, FIN 46 requires that the primary beneficiary, as well as all other
enterprises with a significant variable interest in a variable interest entity,
make additional disclosures. Certain disclosure requirements of FIN 46 were
effective for financial statements issued after January 31, 2003.

In December 2003, the FASB issued FIN No. 46 (revised December 2003),
"Consolidation of Variable Interest Entities" ("FIN 46-R") to address certain
FIN 46 implementation issues. The effective dates and impact of FIN 46 and FIN
46-R are as follows:

         (i) Special purpose entities ("SPEs") created prior to February 1,
         2003. Chaparral must apply either the provisions of FIN 46 or early
         adopt the provisions of FIN 46-R at the end of the first interim or
         annual reporting period ending after December 15, 2003.

         (ii) Non-SPEs created prior to February 1, 2003. Chaparral is required
         to adopt FIN 46-R at the end of the first interim or annual reporting
         period ending after March 15, 2004.

         (iii) All entities, regardless of whether a SPE, that were created
         subsequent to January 31, 2003. The provisions of FIN 46 were
         applicable for variable interests in entities obtained after January
         31, 2003. Chaparral is required to adopt FIN 46-R at the end of the
         first interim or annual reporting period ending after March 15, 2004.

The adoption of the provisions applicable to SPEs and all other variable
interests obtained after January 31, 2003 did not have a material impact on the
Company's consolidated financial position or results of operations.. In
addition, the adoption of FIN 46-R on March 15, 2004 had no effect on the
Company's consolidated financial position or results of operations.

The Emerging Issues Task Force ("EITF") was deliberating on EITF No. 04-2
"Whether Mineral Rights Are Tangible or Intangible Assets" and EITF No. 03-S
"Application of FASB Statement No. 142, Goodwill and Other Intangible Assets, to
Oil and Gas Companies." The issue was whether Statements of Financial Accounting
Standards ("SFAS") 142 requires registrants to reclassify costs associated with
mineral rights, including both proved and unproved leasehold acquisition costs,
as intangible assets in the balance sheet, apart from other capitalized oil and
gas property costs. Historically, the Company and other oil and gas companies
have included the cost of these oil and gas leasehold interests as part of oil
and gas properties and provided the disclosures required by SFAS No. 69,
"Disclosures about Oil and Gas Producing Activities". In March 2004, the EITF
released a consensus on EITF Issue No. 04-2 that stated mineral rights are
tangible assets. Additionally, the FASB has issued guidance that would amend
SFAS 141 and 142 to exclude mineral rights from the definition of intangible
assets.

                                       7


<PAGE>


                            Chaparral Resources, Inc
        Notes to Consolidated Condensed Financial Statements (continued)
                                   (Unaudited)

3. Going Concern

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has a working capital
deficiency as of March 31, 2004 and there are uncertainties relating to the
Company's ability to meet projected cash flow requirements through 2004. In
addition, a number of oil producers within Kazakhstan are required to supply a
portion of their crude oil production to the local refineries to meet domestic
energy needs, which generates substantially less revenue than oil sold on the
export market. During the first quarter ended March 31, 2004, the Company's
export quota has been limited to approximately 87% of the Company's production
available for sale. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of these uncertainties.

The Company is seeking to alleviate these conditions by; (i) increasing cash
flows available from the sale of crude oil production from the Karakuduk Field.
The Company expects to finance the development of the Karakuduk Field primarily
through the production and sale of crude oil. The Company plans to increase its
daily production by commissioning the water injection facilities, installing
further pumps, and drilling an additional 12 wells this year. Accordingly,
management expects production to increase from approximately 8,000 barrels,
average daily production for the three months ended March 31, 2004, to
approximately 13,000 barrels of oil per day by year-end 2004; (ii) obtaining
100% export of all hydrocarbons produced from the Karakuduk Field, as provided
under the terms of the Agreement, through discussions with the Government of
Kazakhstan. On July 17, 2003, the Company took the first step towards the
commencement of arbitration proceedings in Switzerland for the breach of the
Agreement by the Government of Kazakhstan by initiating a required three-month
period of consultation with the Government. The Government indicated an interest
in trying to resolve this matter during the consultation period. Although the
consultation period has expired, the Company continues to seek an amicable
resolution with the Government on this matter rather than proceeding with
arbitration. If the matter cannot be resolved in a satisfactory manner, the
Company has, however, reserved the right to commence formal arbitration
proceedings pursuant to its contractual arrangements with the Government; and
(iii) The Company is also trying to obtain additional debt financing to cover
any deficiencies which may occur in the near term, including extending the KKM's
credit facility with JSC Kazkommertsbank ("Kazkommertsbank") or implementing a
revolving line of credit to meet short-term working capital needs.

No assurances can be provided, however, that oil production will be increased
and that if arbitration is instituted, it will be successful or that if
successful, the Company will be able to enforce the award in Kazakhstan, or that
the Company will be able to export 100% or a significant portion of its
production and that the Company will be able to obtain additional financing and
cash flow from operations to meet working capital requirements in the future.

4. Prepaid Expenses

The breakdown of Prepaid expenses is as follows:

                                                     March 31,      December 31,
           Description                                 2004            2003
           -----------                              (Thousands)      (Thousands)
                                                    ---------------------------

Prepaid transportation costs to KTO                 $  536            $1,296
Advanced payments for materials and supplies         2,301             1,616
Prepaid insurance                                      195               210
Prepaid taxes                                        1,203              --
Other prepaid expenses                                 127               114
                                                    ------------------------
Total prepaid expenses                              $4,362            $3,236
                                                    ========================


                                       8

<PAGE>


                            Chaparral Resources, Inc
        Notes to Consolidated Condensed Financial Statements (continued)
                                   (Unaudited)

4. Prepaid Expenses (continued)

Prepaid transportation costs represent prepayments to CJSC KazTransOil ("KTO"),
a 100% subsidiary of KMG, for export tariffs necessary to sell oil on the export
market, which is expensed in the period the related oil revenue is recognized.
Advanced payments for materials and supplies represent prepayments for general
materials and supplies to be used in the development of the Karakuduk Field.

5. Asset Retirement Obligation

Effective January 1, 2003, the Company changed its method of accounting for
asset retirement obligations in accordance with FASB Statement No. 143,
Accounting for Asset Retirement Obligations. Previously, the Company used an
amount equal to the undiscounted cash flows associated with the asset retirement
obligation ("ARO") in determining depreciation, depletion, and amortization
("DD&A") rates. Under the new accounting method, the Company now recognizes
asset retirement obligations in the period in which they are incurred if a
reasonable estimate of a fair value can be made. The associated asset retirement
costs are capitalized as part of the carrying amount of the long-lived asset.

The cumulative effect of the change on prior years resulted in a gain of $1.02
million, net of tax of $436,000, or $0.02 per share, which is included in income
for the three months ended March 31, 2003.

Since 1995, the business of Chaparral has been the development of the Karakuduk
Field. The Company is still in the early stages of development and continues to
develop the field by drilling additional wells, expansion of its oil storage
capacity, installation of additional gathering and processing facilities, and
the full implementation of the central processing facility. The Company is
legally required under the Agreement to restore the field to its original
condition. The Company recognized the fair value of its liability for an asset
retirement obligation as of January 1, 2003 in the amount of $516,000 and
capitalized that cost as part of the cost basis of its oil and gas properties
and depletes it using the units of production method over proved reserves.

On February 12, 2003, the Company commenced a new drilling campaign to further
develop and commercially produce the oil reserves in the Karakuduk Field. As a
result of the new drilling campaign, the Company revised its estimate of
retirement costs to include expected additions to the Karakuduk Field during
2003 and 2004. This change in estimate did not result in any charge to income
for the periods ended March 31, 2004 and 2003. The following table describes all
changes to the Company's asset retirement obligation liability:


                                                    March 31,        March 31,
                                                       2004            2003
                                                  (In Thousands)  (In Thousands)
                                                  -----------------------------
Asset retirement obligation
   at beginning of period                             $804            $  --
Liability recognized in transition                      --               516
Accretion expense                                       25                14
Revision in estimated cash flows                        46                28
                                                      ----------------------
Asset retirement obligation at end of period          $875              $558
                                                      ======================

                                       9
<PAGE>


                            Chaparral Resources, Inc
        Notes to Consolidated Condensed Financial Statements (continued)
                                   (Unaudited)

6. Loans from Affiliates

CAIH Note
---------

In May 2002, the Company borrowed $4 million from Central Asian Industrial
Holdings, N.V. ("CAIH") in exchange for a three year note bearing interest at
12% per annum (the "CAIH Note"). Along with the CAIH Note, CAIH received a
warrant to purchase 3,076,923 shares of the Company's common stock at $1.30 per
share (the "CAIH Warrant"). The CAIH Note was recorded net of a $2.47 million
discount, based on the fair market value of the CAIH Warrant. The discount is
amortized using the effective interest rate over the life of the CAIH Note. The
principal balance of the CAIH Note is due on May 10, 2005 and accrued interest
is payable quarterly.

In June 2002, the Company prepaid $2 million of the $4 million outstanding
principal balance of the CAIH Note. As a result, the Company recognized an
extraordinary loss on the early extinguishment of debt of $1.22 million from the
write-off of 50% of the unamortized discount on the CAIH Note. The Company
recognized $170,000 in interest expense on the CAIH Note for the three months
ended March 31, 2004, including $61,000 of interest on outstanding principal and
$109,000 in discount amortization. Comparably, the Company recognized $118,000
in interest expense on the CAIH Note for the three months ended March 31, 2003,
including $59,000 of interest on outstanding principal and $59,000 in discount
amortization.

In March 2004, the Company re-borrowed the $2 million prepaid in June 2002,
re-establishing the original principal balance of the CAIH note. All terms of
the original promissory note remain in effect.

KKM Credit Facility
-------------------

In May 2002, KKM established a five-year, $33 million credit line ("KKM Credit
Facility") with Kazkommertsbank, an affiliate of CAIH. The KKM Credit Facility
consists of a $30 million non-revolving line and a $3 million revolving line,
both of which were fully borrowed by KKM in May 2002. The Company recognized
$1.13 million and $1.16 million of interest expense on the KKM Credit Facility
for the three months ended March 31, 2004 and 2003, respectively.

The non-revolving portion of the KKM Credit Facility accrues simple interest at
an annual rate of 14% and is repayable over a five-year period with final
maturity in May 2007. Accrued interest is payable quarterly, beginning in
December 2002, and KKM began making quarterly principal payments in May 2003. As
of March 31, 2004, the Company has repaid $3 million in principal and the
Company and Kazkommertsbank have agreed to defer the principal payment of $1
million until May 31, 2004. The principal payment of $1 million was originally
due on February 6, 2004 together with $983,000 in interest. The Company paid the
$983,000 interest on February 6, 2004. A principal payment of $2 million and
interest of $945,000 due on May 6, 2004 under the non-revolving portion of the
KKM Credit Facility was effected on May 6, 2004.

The revolving portion of the KKM Credit Facility accrues simple interest at an
annual rate of 14%. The revolver is loaned to KKM for short-term periods up to
one year, but KKM has the right to re-borrow the funds through May 2006 with
final repayment due in May 2007. The initial $3 million revolving loan to KKM
was subject to a three month term. The principal balance was repaid in July 2002
and KKM immediately re-borrowed another $3 million with a maturity date of July
31, 2003. KKM repaid the $3 million due on July 31, 2003 and exercised its right
to re-borrow another $3 million with a maturity date of August 8, 2004. In
addition, on December 30, 2003, Kazkommertsbank increased the revolving portion
of the KKM Credit Facility from $3 million to $5 million. On the same date, KKM
borrowed the additional $2 million to finance ongoing operations. The additional
$2 million accrued interest at 14% and principal and interest is due in full on
June 30, 2004. All amounts due in 2004 under the revolving portion of the KKM
Credit Facility are classified as current as of March 31, 2004. Accrued interest
on the revolving loan is payable at maturity, except as noted.

                                       10
<PAGE>


                            Chaparral Resources, Inc
        Notes to Consolidated Condensed Financial Statements (continued)
                                   (Unaudited)

6. Loans from Affiliates (continued)

The original KKM Credit Facility included repayment terms of three years and
four years for the non-revolving and revolving portions of the KKM Credit
Facility, respectively, with an option to extend the final maturity date for
repayment of the entire KKM Credit Facility to five years. KKM exercised the
option to extend the repayment term to five years for the entire KKM Credit
Facility as of May 2002.

The Company is subject to certain pledges, covenants, and other restrictions
under the KKM Credit Facility, including, but not limited to, the following:

     (i)  CAP-G pledged its 50% interest in KKM to Kazkommertsbank as collateral
          for the KKM Credit Facility;

     (ii) Chaparral has provided a written guarantee to Kazkommertsbank that it
          will repay the KKM Credit facility in the event KKM fails to do so;

     (iii) KKM may not incur additional indebtedness or pledge its assets to
          another party without the written consent of Kazkommertsbank; and

     (iv) KKM may not pay dividends without the written consent of
          Kazkommertsbank.

The KKM Credit Facility stipulates certain events of default, including, but not
limited to, KKM's inability to meet the terms of the KKM Credit Facility, KKM's
failure to meet it obligations to third parties in excess of $100,000, and the
Company's involvement in legal proceedings in excess of $100,000 where an
adverse judgment against the Company occurs or is expected to occur. If an event
of default does occur and is not waived by the lender, Kazkommertsbank has a
right to call the KKM Credit Facility immediately due and payable and/or
exercise its security interest by enforcing its collateral right on the
Company's shares in KKM. Furthermore, in the event of a material adverse change
in the financial or credit markets, Kazkommertsbank has a right to unilaterally
alter any terms and conditions of the KKM Credit Facility, including the rate of
interest, by written request. KKM may either agree to the amended terms or repay
the outstanding KKM Credit Facility within 10 days of notification.

The maturity schedule of the Company's indebtedness as of March 31, 2004, is as
follows:

                                        Principal
                       During          Amount Due
                     ----------------------------

                        2004           12,000,000
                        2005           12,000,000
                        2006            8,000,000
                        2007            4,000,000
                       --------------------------
                       Total         $ 36,000,000

7. Income Taxes

Income tax expense as reported entirely relates to foreign income taxes provided
on the Company's operations within the Republic of Kazakhstan. KKM's principal
agreement with the government of the Republic of Kazakhstan for the exploration,
development and production of oil in the Karakuduk Field specifies the income
taxes and other taxes applicable to KKM, which is subject to the tax laws of the
Republic of Kazakhstan. The Company has used the best estimates available to
determine its current and deferred tax liabilities within Kazakhstan.

                                       11

<PAGE>


                            Chaparral Resources, Inc
        Notes to Consolidated Condensed Financial Statements (continued)
                                   (Unaudited)

8. Operating Leases

The Company entered into a sublease agreement extending from March 2000 through
November 2003. At the expiration date of the lease, the Company moved its
registered office from Houston to New York. In addition, the Company entered
into a new 6 month lease agreement for reduced office space at a new location in
Houston; as of March 31, 2004 this lease was renewed for a further 6 months. The
Company also maintains an executive office in Almaty, Kazakhstan. The Almaty
office is subleased from Nasikhat, an affiliate of Kazkommertsbank, for
approximately $3,000 per month renewable at the Company's option on September 1,
2004. As of March 31, 2004, the Company's future minimum annual lease payments
through the contractual term of these leases are $23,000, all due in 2004.

9. Capital Commitments

As of March 31, 2004, the Company has a drilling contract with
KazMunayGas-Drilling ("KMGD"), an affiliate of KMG, for one development drilling
rig currently operating in the Karakuduk Field. The rig is contracted through
December 31, 2004. The minimum payments under the drilling contract with KMGD
for 2004 are $5.52 million. The Company's other drilling and operations related
contracts can either be cancelable within 30 days or are on a call-off (as
required) basis.

The Company has no other significant commitments other than those incurred
during the normal performance of the work program to develop the Karakuduk
field.

10. Related Party Transactions

In 2003, the Company approved a one-year agreement with OJSC Kazkommerts
Securities ("KKS"), an affiliate of Kazkommertsbank. The agreement is effective
as of January 7, 2003 and provides for KKS to assist the Company's senior
management with financial advisory and investment banking services. In
consideration for these services KKS received a monthly fee of $25,000 (the
"Advisory Fee").

Kazkommerts Policy, an affiliate of Kazkommertsbank, is the major insurer of KKM
oil and gas activities. The current insurance policy expires in November 2004.

KKM has a contract to transport 100% of its oil sales through the pipeline owned
and operated by KTO, a wholly owned subsidiary of KMG, the 40% minority
shareholder in KKM. The rates for transportation are in accordance with those
approved by the government of the Republic of Kazakhstan. Currently, the use of
the KTO pipeline system is the only viable method of exporting KKM's production.
As KTO notifies KKM of the export sales allocated to KKM on a monthly basis, KTO
controls both the volume and transportation cost of export sales.

KKM makes a prepayment for crude transportation based upon the allocation of
export sales received from KTO. This prepayment includes pipeline costs charged
by the operators of the Russian and Ukrainian pipeline systems and are dependent
upon the point of sale of KKM's exports. For the three months ended March 31,
2004, KKM paid $2.3 million to KTO and $3.1 million, including change in prepaid
transportation to KTO, were recognized as transportation costs for sales during
the first quarter of 2004. At March 31, 2004, KKM had a prepayment balance of
$536,000 with KTO in respect of sales to be made in April 2004. Comparably for
the three months ended March 31, 2003, KKM paid $1.0 million to KTO and $1.6
million, including change in prepaid transportation to KTO, were recognized as
transportation costs for sales during the period. At December 31, 2003, KKM had
a prepayment balance of $1.3 with KTO in respect of sales to be made in January
2004.

KTO charges KKM for associated costs of oil storage within their pipeline
system, sales commission, and customs clearance fees in respect to export sales.
KTO also provides KKM with water through the Volga Water pipeline. Amounts
recognized for these services during the three months ended March 31, 2004 and
2003 were $92,000 and $69,000. Remaining outstanding as of March 31, 2004 and
March 31, 2003 were balances of $157,000 and $78,000 respectively.

                                       12

<PAGE>


                            Chaparral Resources, Inc
        Notes to Consolidated Condensed Financial Statements (continued)
                                   (Unaudited)

10. Related Party Transactions (continued)

As mentioned above, KKM has a drilling contract with KMGD for one development
drilling rig currently operating in the Karakuduk Field. The rig is contracted
through December 31, 2004.

The total amounts of the transactions with the above related companies for the
three months ended March 31, 2004 and 2003 are as follows:

                                          2004                      2003
                                       (Thousands)               (Thousands)
                                       -----------               -----------
Kazkommerts Policy                       $   177                 $   125
KKS                                      $    75                 $    75
KTO                                      $ 3,162                 $ 1,650
KMGD                                     $ 1,232                 $   363


Accounts Payable Balance to affiliates as of March 31, 2004 December 31, 2003


                                          2004                     2003
                                       (Thousands)              (Thousands)
                                       -----------              -----------
Kazkommerts Policy                       $    73                  $    48
KKS                                      $    75                  $    --
KTO                                      $   157                  $    97
KMGD                                     $   976                  $   998
                                         --------------------------------
                                         $ 1,281                  $ 1,143
                                         ================================


The loans with Kazkommertsbank and CAIH are disclosed in Note 6 and the drilling
contract with KMGD is described in Note 9, the lease with Nasikhat is described
in Note 8, and prepaid transportation to KTO in Note 4.


11. Contingencies

Taxation
--------

The existing legislation with regard to taxation in the Republic of Kazakhstan
is constantly evolving as the Government manages the transition from a command
to a market economy. Tax and other laws applicable to the Company are not always
clearly written and their interpretation is often subject to the opinions of the
local or main State Tax Service. Instances of inconsistent opinions between
local, regional and national tax authorities are not unusual.

Basis of Accounting
-------------------

KKM maintains its statutory books and records in accordance with U.S. generally
accepted accounting principles ("GAAP") and calculates taxable income or loss
using the existing Kazakh tax legislation in effect on August 30, 1995, the date
the Agreement was signed. The Company considers these accounting methods correct
under the terms of the Agreement. The Republic of Kazakhstan currently requires
companies to comply with Kazakh accounting regulations and to calculate tax
profits or losses in accordance with these regulations as well as the prevailing
tax law.

                                       13

<PAGE>


Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

1. Liquidity and Capital Resources

General Liquidity Considerations
--------------------------------

Going Concern:
--------------

Our financial statements have been presented on the basis that it is a going
concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. We have a working capital
deficiency as of March 31, 2004 and there are uncertainties relating to our
ability to meet projected cash flow requirements through 2004. In addition, a
number of oil producers within Kazakhstan are required to supply a portion of
their crude oil production to the local refineries to meet domestic energy
needs, which generates substantially less revenue than oil sold on the export
market. During the first quarter ended March 31, 2004, our export quota has been
limited to approximately 87% of our production available for sale. These
conditions raise substantial doubt about our ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of these uncertainties.

We are seeking to alleviate these conditions by; (i) increasing cash flows
available from the sale of crude oil production from the Karakuduk Field. We
expect to finance the development of the Karakuduk Field primarily through the
production and sale of crude oil. We plan to increase our daily production by
implementation of the water injection facilities, installation of further pumps,
and the drilling of an additional 12 wells this year. Accordingly, we expect
production to increase from approximately 8,000 barrels, average daily
production for the three months ended March 31, 2004, to approximately 13,000
barrels of oil per day by year-end 2004; (ii) obtaining 100% export of all
hydrocarbons produced from the Karakuduk Field, as provided under the terms of
the Agreement, through discussions with the Government of Kazakhstan. On July
17, 2003, we took the first step towards the commencement of arbitration
proceedings in Switzerland for the breach of the Agreement by the Government of
Kazakhstan by initiating a required three-month period of consultation with the
Government. The Government indicated an interest in trying to resolve this
matter during the consultation period. Although the consultation period has
expired, we continue to seek an amicable resolution with the Government on this
matter rather than proceeding with arbitration. If the matter cannot be resolved
in a satisfactory manner, we have, however, reserved the right to commence
formal arbitration proceedings pursuant to its contractual arrangements with the
Government; and (iii) we are also trying to obtain additional debt financing to
cover any deficiencies which may occur in the near term, including extending the
KKM's credit facility with Kazkommertsbank or implementing a revolving line of
credit to meet short term working capital needs.

No assurances can be provided, however, that oil production will be increased
and that if arbitration is instituted, it will be successful or that if
successful, we will be able to enforce the award in Kazakhstan, or that the we
will be able to export 100% or a significant portion of its production and that
the we will be able to obtain additional financing and cash flow from operations
to meet working capital requirements in the future.

Liquidity and Capital Resources
-------------------------------

We expect to finance the continued development of the Karakuduk Field primarily
through cash flows from the sale of crude oil and external financing as
necessary. We have agreed with Kazkommertsbank to defer a principal payment of
$1 million originally due on February 6, 2004, under the non-revolving portion
of the KKM Credit Facility, until May 31, 2004.

In the first quarter of 2004 two drilling rigs were in operation. One rig
drilled 4 production wells (including one well under completion), and the other
rig drilled two water supply wells. Two workover rigs also were in operation
during the period completing wells, installing and repairing pumps and
converting wells from producers to water injectors. A fifth production well was
also spudded prior to the end of the quarter.

                                       14

<PAGE>


As of March 31, 2004, our well stock had risen from 45 producing wells as of
December 31, 2003 to 48 producing wells. Of the 48 producing wells, two wells
were under completion and two wells were shut-in. During the first quarter 2004,
one producing well was converted to water injection making a total of 5 water
injection wells, of which one was operational with four awaiting commissioning
of the water injection facility. The water injection facility was commissioned
during April 2004. In addition, as of March 31, 2004, the water supply well
count had risen to 5 water source wells from 3 water source wells as of December
31, 2003.

During the first quarter of 2004 we converted 9 wells to artificial lift (8
using sucker rod pumps and 1 using electrical submersible pumps)

As of May 10, 2004, our daily oil production is approximately 8,500 barrels per
day from 45 of the 49 productive wells in the field. The remaining 4 wells are
shut-in for various reasons including completion operations, installation of
additional gathering lines / equipment, bottom hole pressure readings, formation
pressure surveys, and additional workover, water injection and stimulation
operations to bring wells on production.

For the remaining nine months of 2004, we plan to increase our daily production
by putting into operation the water injection facility, installing further
pumps, and drilling an additional 12 wells. Accordingly, management expects the
Karakuduk Field production to increase from approximately 8,000 barrels, average
daily production for the three months ended March 31, 2004, to approximately
13,000 barrels of oil per day by year-end 2004, having drilled a total of 16
additional wells in the year.

We successfully initiated a "pilot" reservoir pressure maintenance program
during 2003 by the injection of water into one well. We witnessed a favorable
increase in the reservoir pressure on surrounding well production performance.

In December 2003, our production peaked at over 12,000 barrels of oil per day
and daily production averaged over 11,000 barrels of oil per day for the month.
For the full implementation of the reservoir pressure maintenance program and to
ensure that gasification of the reservoir and reservoir pressure decline is not
accelerated due to delays in the implementation of this program, we have taken a
number of preventative measures in this regard so that ultimate reservoir
recovery will not be negatively affected. We have reduced choke sizes and shut
in a number of wells for pressure monitoring and analysis purposes. Until the
reservoir pressure maintenance program has been fully implemented, we cannot
fully maximize well productivity. As a result, our oil production decreased from
11,000 barrels per day average during December 2003 to our current level of
approximately 8,500 barrels per day as of May 10, 2004.

While the reservoir pressure maintenance program was commissioned during April
2004, we do not anticipate a tangible benefit in terms of increased production
levels until the third quarter of 2004.

Our short and long-term liquidity is also impacted by local oil sales
obligations imposed on oil and gas producers within Kazakhstan to supply local
energy needs (the domestic market does not permit world market prices to be
obtained, resulting in approximately $10 to $12 lower cash flow per barrel), and
our ability to obtain export quota necessary to sell our crude oil production on
the international market. Under the terms of the Agreement, we have a right to
export, and receive export quota for 100% of the production from the Karakuduk
Field. The Government has not allocated sufficient export quota to allow us to
sell all of our available crude oil production on the world market. We are
taking steps to reduce our local market obligations and to obtain an export
quota that will enable us to sell all of our crude oil production. On July 17,
2003, we took the first step towards the commencement of arbitration proceedings
in Switzerland for the breach of the Agreement by the Government of Kazakhstan
by initiating a required three-month period of consultation with the Government.
Although the consultation period has expired, we continue to seek an amicable
resolution with the Government on this matter rather than proceeding with
arbitration. If the matter can not be resolved in a satisfactory manner, we
have, however, reserved our right to commence formal arbitration proceedings
pursuant to our contractual arrangements with the Government.

                                       15
<PAGE>


No assurances can be provided, however, that if arbitration is instituted, it
will be successful or that if successful, Chaparral will be able to enforce the
award in Kazakhstan, or that we will be able to export 100% or a significant
portion of its production and that we will be able to obtain additional
financing and cash flow from operations to meet working capital requirements in
the future.

Capital Commitments and Other Contingencies
-------------------------------------------

As of March 31, 2004, the Company has a drilling contract with KMG for one
development drilling rig currently operating in the Karakuduk Field. The rig is
contracted through December 31, 2004. The minimum payments under the drilling
contract with KMGD for 2004 are $5.52 million. The Company's other drilling and
operations related contracts can either be cancelable within 30 days or are on a
call-off (as required) basis.

The Company has no other significant commitments other than those incurred
during the normal performance of the work program to develop the Karakuduk
field.

Our operations may be subject to other regulations by the government of the
Republic of Kazakhstan or other regulatory bodies responsible for the area in
which the Karakuduk Field is located. In addition to taxation, customs
declarations and environmental controls, regulations may govern such things as
drilling permits and production rates. Drilling permits could become difficult
to obtain or prohibitively expensive. Production rates could be set so low that
they would make production unprofitable. These regulations may substantially
increase the costs of doing business and may prevent or delay the starting or
continuation of any given exploration or development project.

All regulations are subject to future changes by legislative and administrative
action and by judicial decisions. Such changes could adversely affect the
petroleum industry in general, and us in particular. It is impossible to predict
the effect that any current or future proposals or changes in existing laws or
regulations may have on our operations.


2. Results from Operations

Results of Operations for the Three Months Ended March 31, 2004 Compared
to the Three Months Ended March 31, 2003
--------------------------------------------------------------------------------

Our operations for the three months ended March 31, 2004 resulted in a net
income of $634,000 compared to a net income of $49,000 as of March 31, 2003. The
$585,000 increase in our net income primarily relates to the net of higher sales
revenue and related operating expenses as a result of higher sales volumes,
offset by the absence in the first quarter of 2004 of the one time gain, the
result of the adoption of SFAS 143, reported in the first quarter of 2003.

Revenues. Revenues were $15.6 million for the first quarter of 2004 compared
with $7.81 million for the first quarter of 2003. The $7.8 million increase is
the result of higher oil export sales quota received during the first quarter
2004 and higher oil prices received during the first quarter 2004 as compared to
the same period of 2003. During the first quarter 2004, we sold approximately
721,000 barrels of crude oil, recognizing $15.6 million, or $21.65 per barrel,
in revenue. Comparably, we sold approximately 364,000 barrels of crude oil,
recognizing $7.81 million in revenue, or $21.47 per barrel, for the first
quarter 2003.

Transportation and Operating expenses. Transportation costs for the first
quarter 2004 were $3.15 million, or $4.37 per barrel, and operating costs
associated with sales were $2.21 million, or $3.07 per barrel. Comparatively,
transportation costs for the first quarter 2003 were $1.66 million, or $4.57 per
barrel, and operating costs associated with sales were $1.12 million, or $3.08
per barrel. The decrease in transportation cost is caused by lower volumes held
in the pipeline pending sale, while operating costs per barrel remained at the
same level.

                                       16

<PAGE>


Depreciation and Depletion. Depreciation and depletion expense was $4.38 million
for the first quarter of 2004 compared with $2.44 million for the first quarter
of 2003. The $1.94 million increase is the result of higher oil volumes sold net
of slightly lower effective depletion rates during the first quarter 2004.
During the first quarter 2004, the Company recognized a total amortization
expense of $4.22 million or $5.86 per barrel, compared to $2.25 million or $6.18
per barrel in depletion expense for the first quarter 2003. The decrease in the
effective depletion rate of $0.32 per barrel is due to additions to the
Company's estimated proved oil and gas reserves partially offset by an increase
in capital expenditures for the development of the field for future years.

Estimates of our proved oil and gas reserves are prepared by an independent
engineering company in accordance with guidelines established by the Securities
and Exchange Commission ("SEC"). Those guidelines require that reserve estimates
be prepared under existing economic and operating conditions with no provisions
for increases in commodity prices, except by contractual arrangement. Estimation
of oil and gas reserve quantities is inherently difficult and is subject to
numerous uncertainties. Such uncertainties include the projection of future
rates of production, export allocation, and the timing of development
expenditures. The accuracy of the estimates depends on the quality of available
geological and geophysical data and requires interpretation and judgment.
Estimates may be revised either upward or downward by results of future
drilling, testing or production. In addition, estimates of volumes considered to
be commercially recoverable fluctuate with changes in commodity prices and
operating costs. Our estimates of reserves are expected to change as additional
information becomes available. A material change in the estimated volumes of
reserves could have an impact on the DD&A rate calculation and the financial
statements

Interest Expense. Interest expense increased from $1.12 million for the first
quarter 2003 to $1.23 million for the first quarter 2004, due to higher
financing costs as a result of additional temporary borrowings for operational
purposes and less capitalized interest. Interest expense for the quarter ended
March 31, 2004 reflects a loan discount of $109,000 and is net of capitalized
interest of $68,000. Comparably, interest expense for the quarter ended March
31, 2003 reflects an additional loan discount of $59,000 and is net of
capitalized interest of $152,000.

General and Administrative Expense. General and administrative costs increased
from $1.41 million for the three months ended March 31, 2003 to $1.64 million
for the three months ended March 31, 2004. The increase of $230,000 is due to
higher payroll costs and higher travel costs.

Cumulative effect of change in accounting principal. As a result of the adoption
of SFAS 143, the company recognized a gain of $1.02 million as a cumulative
effect of change in accounting principal for the first quarter 2003, absent in
the first quarter of 2004.

3. Commodity Prices for Oil and Gas

Our revenues, profitability, growth and value are highly dependent upon the
price of oil. Market conditions make it difficult to estimate prices of oil or
the impact of inflation on such prices. Oil prices have been volatile, and it is
likely they will continue to fluctuate in the future. Various factors beyond our
control affect prices for oil, including supplies of oil available worldwide and
in Kazakhstan, the ability of OPEC to agree to maintain oil prices and
production controls, political instability or armed conflict in Kazakhstan or
other oil producing regions, the price of foreign imports, the level of consumer
demand, the price and availability of alternative fuels, the availability of
transportation routes and pipeline capacity, and changes in applicable laws and
regulations.

4. Inflation

We cannot control prices received from our oil sales and to the extent we are
unable to pass on increases in operating costs, we may be affected by inflation.
The devaluation of the Tenge, the currency of the Republic of Kazakhstan, can
significantly decrease the value of the monetary assets that we hold in
Kazakhstan as well as our assets in that country that are based on the Tenge.
KKM retains the majority of its cash and cash equivalents in U.S. dollars, but
KKM's statutory tax basis in its assets, tax loss carry-forwards, and VAT
receivables are all denominated in Tenge and subject to the effects of
devaluation. Local tax laws allow basis adjustments to offset the impact of
inflation on statutory tax basis assets, but there is no assurance that any
adjustments will be sufficient to offset the effects of inflation in whole or in

                                       17

<PAGE>


part. If not, KKM may be subject to much higher income tax liabilities within
Kazakhstan due to inflation and or devaluation of the local currency.
Additionally, devaluation may create uncertainty with respect to the future
business climate in Kazakhstan and to our investment in that country. As of
March 31, 2004, the exchange rate was 138.88 Tenge per U.S. Dollar compared to
144.22 as of December 31, 2003.

5. Critical Accounting Policies

The preparation of the Company's consolidated financial statements requires the
Company to make estimates, assumptions and judgments that affect the Company's
assets, liabilities, revenues and expenses and disclosure of contingent assets
and liabilities. The Company bases these estimates and assumptions on historical
data and trends, current fact patterns, expectations and other sources of
information it believes are reasonable. Actual results may differ from these
estimates under different conditions. For a full description of the Company's
critical accounting policies, see Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations in the Company's 2003 Annual
Report on Form 10-K.

6. Special Note Regarding Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements." Forward-looking statements relate to future events
or our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "estimates," "believes," "predicts," "potential," "likely,"
or "continue," or by the negative of such terms or comparable terminology.
Forward- looking statements are predictions based on current expectations that
involve a number of risks and uncertainties. Actual events may differ
materially. In evaluating forward-looking statements, you should consider
various factors, including the risks discussed above. These factors may cause
our actual results to differ materially from any forward-looking statement.

Although we believe that these statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements, and you are
encouraged to exercise caution in considering such forward-looking statements.
Unless otherwise required by law, we are not under any duty to update any of the
forward-looking statements after the date of this Quarterly Report on Form 10-Q
to conform these statements to actual results.

Item 3 - Quantitative and Qualitative Disclosures About Market Risks

Foreign Currency

The functional currency is the U.S. Dollar. All transactions arising in
currencies other than U.S. dollars, including assets, liabilities, revenue,
expenses, gains, or losses are measured and recorded into U.S. dollars using the
exchange rate in effect on the date of the transaction.

Cash and other monetary assets held and liabilities denominated in currencies
other than U.S. dollars are translated at exchange rates prevailing as of the
balance sheet date (138.88 and 144.22 Kazakh Tenge per U.S. Dollar as of March
31, 2004 and December 31, 2003, respectively). Non-monetary assets and
liabilities denominated in currencies other than U.S. dollars have been
translated at the estimated historical exchange rate prevailing on the date of
the transaction. Exchange gains and losses arising from translation of non-U.S.
dollar amounts at the balance sheet date are recognized as an increase or
decrease in income for the period.

The devaluation of the Tenge, the currency of the Republic of Kazakhstan, can
significantly decrease the value of the monetary assets that we hold in
Kazakhstan as well as our assets in that country that are based on the Tenge.
KKM retains the majority of cash and cash equivalents in U.S. dollars in bank
accounts within Kazakhstan, but KKM's statutory tax basis in its assets, tax
loss carry-forwards, and VAT receivables are all denominated in Tenge and
subject to the effects of devaluation. Local tax laws allow basis adjustments to
offset the impact of inflation on statutory tax basis assets, but there is no
assurance that any adjustments will be sufficient to offset the effects of
inflation in whole or in part. If not, KKM may be subject to much higher income
tax liabilities within Kazakhstan due to inflation and/or devaluation of the
local currency. Additionally, devaluation may create uncertainty with respect to
the future business climate in Kazakhstan and to our investment in that country.

                                       18

<PAGE>


The Tenge is not a convertible currency outside of the Republic of Kazakhstan.
The translation of tenge denominated assets and liabilities in these financial
statements does not indicate Chaparral could realize or settle these assets and
liabilities in U.S. dollars.

Commodity Prices for Oil

Our revenues, profitability, growth and value are highly dependent upon the
price of oil. Market conditions make it difficult to estimate prices of oil or
the impact of inflation on such prices. Oil prices have been volatile, and it is
likely they will continue to fluctuate in the future. Various factors beyond our
control affect prices for oil, including supplies of oil available worldwide and
in Kazakhstan, the ability of OPEC to agree to maintain oil prices and
production controls, political instability or armed conflict in Kazakhstan or
other oil producing regions, the price of foreign imports, the level of consumer
demand, the price and availability of alternative fuels, the availability of
transportation routes and pipeline capacity, and changes in applicable laws and
regulations.

In addition, under the terms of our Agreement with the government of the
Republic of Kazakhstan, the Company has the right to export, and receive export
quota for, 100% of the production from the Karakuduk Field. However, oil
producers within Kazakhstan are required to supply a portion of their crude oil
production to the local market to meet domestic energy needs. Local market oil
prices are significantly lower than prices obtainable on the export market. For
the period ended March 31, 2004, the company sold 96,000 barrels of crude oil,
or 13% of its total oil sales, to the local market, compared to 24,000 barrels,
or 6%, during the quarter ended March 31, 2003. Local market prices obtained by
the Company are approximately $10 to $12 per barrel below export market prices,
net of transportation costs. We have attempted, in accordance with our
Agreement, to effect the 100% export of all hydrocarbons produced from the
Karakuduk Field, through discussions with the Government of Kazakhstan. We plan
to continue to work with the Government to increase our export quota and
minimize or eliminate future local sales requirements. The Company is
considering whether to initiate arbitration proceedings in Switzerland for the
breach of the Agreement by the Government of Kazakhstan. However, no assurances
can be provided that we will be able to export 100% or a significant portion of
our production and that our cash flow from operations will be sufficient to meet
working capital requirements in the future, which may require us to seek
additional debt or equity financing in order to continue to develop the
Karakuduk Field.

Item 4 - Controls and Procedures

     (a)  Evaluation of Disclosure Controls and Procedures. We maintain
          disclosure controls and procedures designed to provide reasonable
          assurance that information required to be disclosed in the periodic
          reports we file with the SEC is recorded, processed, summarized and
          reported within the time periods specified in the rules of the SEC. We
          carried out an evaluation as of March 31, 2004, under the supervision
          and the participation of our management, including our chief executive
          officer and chief financial officer, of the design and operation of
          these disclosure controls and procedures pursuant to Rules 13a-14 and
          15d-14 under the Securities Exchange Act of 1934. Based upon that
          evaluation, our chief executive officer and chief financial officer
          concluded that our disclosure controls and procedures are effective in
          timely alerting them to material information required to be included
          in our periodic SEC filings.

     (b)  Changes in internal controls over financial reporting. There have been
          no significant changes in internal controls over financial reporting
          or other factors subsequent to December 31, 2003.

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<PAGE>


                           Part II- Other Information




Item 6 - Exhibits and Reports on Form 8-K

(a)                  Exhibits

*31(a)               CEO Certification pursuant to Section 302 of the
                     Sarbanes-Oxley Act of 2002.

*31(b)               CFO Certification pursuant to Section 302 of the
                     Sarbanes-Oxley Act of 2002.

*32(a)               CEO Certification pursuant to Section 906 of the
                     Sarbanes-Oxley Act of 2002.

*32(b)               CFO Certification pursuant to Section 906 of the
                     Sarbanes-Oxley Act of 2002.

* Filed herewith.


(b) Reports on Form 8-K

We filed a Current Report on Form 8-K, dated January 9, 2004 to report that
Richard J. Moore had resigned as Chaparral's Vice President-Finance and Chief
Financial Officer. Mr. Moore was replaced by Jonathan S. Wood, currently the
Finance Director of KKM, who assumed the title of Vice President-Finance and
Chief Financial Officer of Chaparral.


                                       20

<PAGE>


Signatures

Pursuant to the requirements 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.

Dated:   May 14, 2004



                            Chaparral Resources, Inc.


                             By:     /s/ Nikolai D. Klinchev
                                    -------------------------------------------
                                    Nikolai D. Klinchev
                                    Chief Executive Officer



                             By:     /s/ Jonathan S. Wood
                                    -------------------------------------------
                                    Jonathan S. Wood,
                                    VP Finance and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

                             By:     /s/ Miguel C. Soto
                                    -------------------------------------------
                                    Miguel C. Soto,
                                    Treasurer and Financial Controller

                                       21