UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 1997

[ ]     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 1-10376

                          EDISTO RESOURCES CORPORATION
             (Exact name of registrant as specified in its charter)

           Delaware                                             54-0883077
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

                       2401 Fountain View Drive, Suite 700
                              Houston, Texas 77057
               (Address of principal executive offices) (Zip Code)



       Registrant's telephone number, including area code:(713) 782-0095


        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]   No [ ]


      APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
                            THE PRECEDING FIVE YEARS:

        Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                             Yes  [X]       No  [ ]

        The number of shares of the Registrant's Common Stock, par value $.01
per share, outstanding at August 6, 1997, was 14,242,045.

                                       -1-
<PAGE>
                          EDISTO RESOURCES CORPORATION

                          Quarterly Report on Form 10-Q
                       for the Quarter Ended June 30, 1997

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                PAGE NO.
I.      FINANCIAL INFORMATION
<S>                                                                                             <C>
        Item 1.Financial Statements of Edisto Resources Corporation:
               Consolidated Balance Sheets                                                         3
               Consolidated Statements of Operations - Six Months Ended June 30, 1997              4
               Consolidated Statements of Operations - Three Months Ended June 30, 1997            5
               Consolidated Statement of Stockholders' Equity                                      6
               Consolidated Statements of Cash Flows                                               7
               Notes to the Consolidated Financial Statements                                      8

        Item 2.Management's Discussion and Analysis of Financial Condition and Results
               of Operations                                                                      16

II.     OTHER INFORMATION

        Item 1.Legal Proceedings                                                                  22

        Item 6.Exhibits and Reports on Form 8-K                                                   22
</TABLE>
                                                   -2-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                        JUNE 30,        DECEMBER 31,
                                                                                                         1997                1996
                                                                                                      ---------           ---------
                                                                                                      (Unaudited)
                      ASSETS
Current assets:
<S>                                                                                                    <C>                <C>      
           Cash and cash equivalents .........................................................         $  76,905          $  71,765
           Restricted cash ...................................................................               333                333
           Margin deposits ...................................................................                56                979
           Accounts receivable ...............................................................             8,472              9,835
           Other current assets ..............................................................               766              1,547
                                                                                                       ---------          ---------
               Total current assets ..........................................................            86,532             84,459

Property and equipment:
           Oil and gas properties using the successful
              efforts method of accounting ...................................................           118,117            117,306
           Other .............................................................................               685                641
           Less - accumulated depreciation, depletion and amortization........................           (64,148)           (63,147)
                                                                                                       ---------          ---------
                                                                                                          54,654             54,800

Other noncurrent assets ......................................................................             2,095              2,178
                                                                                                       ---------          ---------
                                                                                                       $ 143,281          $ 141,437
                                                                                                       =========          =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
           Accounts payable ..................................................................         $   7,711          $   9,840
           Accrued liabilities and other .....................................................             8,075              9,863
           Deferred revenue ..................................................................             1,905              2,113
                                                                                                       ---------          ---------
               Total current liabilities .....................................................            17,691             21,816

Long-term liabilities:
           Long-term debt ....................................................................                 3              4,003
           Deferred revenue ..................................................................               530                559
           Minority interest .................................................................            13,996             10,850
           Other noncurrent liabilities ......................................................             5,556              7,486
                                                                                                       ---------          ---------
                                                                                                          20,085             22,898

Commitments and contingencies

Stockholders' equity:
           Common stock, $.01 par value, 50,000,000 shares authorized,
            14,238,551 issued at June 30, 1997 and 13,930,052
             issued at December 31, 1996 .....................................................               142                139
           Additional paid-in capital ........................................................            72,699             70,675
           Retained earnings .................................................................            33,063             26,308
           Foreign currency translation ......................................................               (37)               (37)
           Treasury stock, at cost, 52,214 shares at June 30,
               1997 and  December 31, 1996 ...................................................              (362)              (362)
                                                                                                       ---------          ---------
               Total stockholders' equity ....................................................           105,505             96,723
                                                                                                       ---------          ---------
                                                                                                       $ 143,281          $ 141,437
                                                                                                       =========          =========
</TABLE>
      See the accompanying notes to the consolidated financial statements.

                                       -3-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)



                                                       SIX MONTHS    SIX MONTHS
                                                          ENDED         ENDED
                                                        JUNE 30,       JUNE 30,
                                                           1997          1996
                                                         --------      --------
Oil and gas revenues ...............................     $ 25,917      $ 22,033

Costs and expenses:
  Lease operating and production taxes .............        6,573         8,502
  Abandonment and exploration costs ................        1,252           921
  Depreciation, depletion and amortization .........        7,305         9,100
  General and administrative .......................        3,168         2,898
                                                         --------      --------
                                                           18,298        21,421
                                                         --------      --------
       Operating income ............................        7,619           612
                                                         --------      --------

Other income (expense):
  Interest income ..................................        2,044           589
  Interest expense .................................          (72)         (677)
  Gain on asset sales ..............................           87         1,165
  Minority interest ................................       (2,637)         (379)
  Other, net .......................................          (30)          438
                                                         --------      --------
                                                             (608)        1,136
                                                         --------      --------
Income before income taxes .........................        7,011         1,748

Income tax provisions ..............................         (256)         (277)
                                                         --------      --------

Income from continuing operations ..................        6,755         1,471
                                                         --------      --------

Discontinued operations:
 Income from gas marketing operations ..............         --           1,472
                                                         --------      --------
    Net income .....................................     $  6,755      $  2,943
                                                         ========      ========

Net income per common share:
   Continuing operations ...........................     $    .48      $    .11
   Discontinued operations .........................         --             .12
                                                         --------      --------
   Net income per common share .....................     $    .48      $    .23
                                                         ========      ========

Weighted average common shares
   outstanding .....................................       14,019        12,930

      See the accompanying notes to the consolidated financial statements.

                                       -4-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

                                                      THREE MONTHS  THREE MONTHS
                                                          ENDED         ENDED
                                                         JUNE 30,      JUNE 30,
                                                           1997          1996
                                                         --------      --------
Oil and gas revenues ...............................     $ 12,247      $ 10,513

Costs and expenses:
  Lease operating and production taxes .............        3,105         4,109
  Abandonment and exploration costs ................          161           879
  Depreciation, depletion and amortization .........        3,682         4,896
  General and administrative .......................        1,621         1,030
                                                         --------      --------
                                                            8,569        10,914
                                                         --------      --------
       Operating income ............................        3,678          (401)
                                                         --------      --------

Other income (expense):
  Interest income ..................................        1,052           285
  Interest expense .................................          (16)         (307)
  Gain on asset sales ..............................          (35)          352
  Minority interest ................................       (1,301)          203
  Other, net .......................................           43           102
                                                         --------      --------
                                                             (257)          635
                                                         --------      --------
Income before income taxes .........................        3,421           234

Income tax provisions ..............................         (158)         (107)
                                                         --------      --------

Income from continuing operations ..................        3,263           127
                                                         --------      --------

Discontinued operations:
 Income from gas marketing operations ..............         --          (1,287)
                                                         --------      --------
    Net income .....................................     $  3,263      $ (1,160)
                                                         ========      ========

Net income per common share:
   Continuing operations ...........................     $    .23      $    .01
   Discontinued operations .........................         --            (.10)
                                                         --------      --------
   Net income per common share .....................     $    .23      $   (.09)
                                                         ========      ========
Weighted average common shares
   outstanding .....................................       14,091        13,440
                                                         ========      ========

      See the accompanying notes to the consolidated financial statements.

                                       -5-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                              NUMBER OF               ADDITIONAL                 FOREIGN
                                               COMMON      COMMON      PAID-IN      RETAINED     CURRENCY     TREASURY
                                               SHARES      STOCK       CAPITAL      EARNINGS   TRANSLATION     STOCK          TOTAL
                                               ------       ----       -------       -------       ----        -----        --------
<S>                                            <C>          <C>        <C>           <C>           <C>         <C>          <C>     
Stockholder's equity,
  December 31, 1996 ....................       13,930       $139       $70,675       $26,308       $(37)       $(362)       $ 96,723

Net income .............................         --          --           --           6,755        --          --             6,755
Common stock issued
   pursuant to 1996 bonus
   plan ................................            6        --             55          --          --          --                55
Exercise of employee stock
   options .............................          303          3         1,969          --          --          --             1,972
                                               ------       ----       -------       -------       ----        -----        --------

Stockholder's equity,
  June 30, 1997 ........................       14,239       $142       $72,699       $33,063       $(37)       $(362)       $105,505
                                               ======       ====       =======       =======       ====        =====        ========

</TABLE>
      See the accompanying notes to the consolidated financial statements.

                                       -6-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                              SIX MONTHS   SIX MONTHS
                                                                                 ENDED       ENDED
                                                                                JUNE 30,    JUNE 30,
                                                                                  1997        1996
                                                                                --------    --------
<S>                                                                             <C>         <C>     
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income ..............................................................   $  6,755    $  2,943
    Adjustments to reconcile net income to net cash
      provided  by operating activities:
    Depreciation, depletion and amortization ................................      7,305       8,337
    Impairment of oil and gas properties ....................................       --         1,120
    Abandonments and exploration costs ......................................        665         781
    Gains on sales of assets ................................................        (87)     (1,167)
    Equity in income of affiliates ..........................................       --          (241)
    Minority interest expense ...............................................      2,637         379
    Other ...................................................................        110         807
    Changes in assets and liabilities:
      Accounts receivable and inventory .....................................      1,754     (15,760)
      Accounts payable and accrued liabilities ..............................     (3,690)     14,780
      Other .................................................................       (518)      1,377
                                                                                --------    --------
         Net cash provided by operating activities ..........................     14,931      13,356
                                                                                --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Net proceeds from sales of assets .........................................        768       3,874
 (Purchase) sale of hedging instruments .....................................      1,110      (2,647)
  Acquisition, exploration and development costs ............................     (9,534)     (4,721)
  Payments to affiliates ....................................................       --            79
  Purchase of other current and noncurrent assets ...........................       (107)       (820)
                                                                                --------    --------
        Net cash used in investing activities ...............................     (7,763)     (4,235)
                                                                                --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on long-term debt and capital leases .............................     (4,000)     (7,945)
  Exercised employee stock options ..........................................      1,972        --
  Repurchase of common shares ...............................................       --          (173)
  Stock issue on exercise of warrants .......................................       --         8,941
  Currency translation ......................................................       --            11
                                                                                --------    --------
        Net cash provided by (used in) financing activities .................     (2,028)        834
                                                                                --------    --------

Net increase in cash and cash equivalents ...................................      5,140       9,955
Cash and cash equivalents, including restricted cash,
  at beginning of period ....................................................     72,098      33,697
                                                                                --------    --------
Cash and cash equivalents, including restricted cash,
  at end of period ..........................................................   $ 77,238    $ 43,652
                                                                                ========    ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period
for:
  Interest ..................................................................   $    238    $    888
                                                                                ========    ========
  Taxes .....................................................................   $    606    $    410
                                                                                ========    ========
</TABLE>
      See the accompanying notes to the consolidated financial statements.

                                       -7-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996

(1)   ORGANIZATION AND PRESENTATION

      The accompanying consolidated financial statements include the accounts of
Edisto Resources Corporation, a Delaware corporation ( the "Company" or
"Edisto"), and its consolidated subsidiaries. On December 10, 1996, the Company
sold substantially all of the assets of its gas marketing subsidiaries, Energy
Source, Inc. and Energy Source Canada, Inc. (collectively "Energy Source"), to
two subsidiaries of Pacific Gas Transmission Company. Since this sale, the
Company's only line of business has been oil and gas exploration and production
which is conducted through a 72% interest in Convest Energy Corporation
("Convest"), an independent oil and gas exploration and production company
listed on the American Stock Exchange. Edisto owns 7,598,771 shares of Convest
Common Stock.

      References to the "Company" or "Edisto" shall refer to Edisto Resources
Corporation and all of its consolidated subsidiaries, including Convest.
References to "Convest" shall refer only to Convest.

      These financial statements should be read in conjunction with the audited
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. Reference also is made
to the "Management's Discussion and Analysis of Financial Condition and Results
of Operations" included elsewhere in this report.

      The information presented in this Form 10-Q is unaudited, but in the
opinion of management reflects all adjustments (all of which were normal and
recurring) necessary to fairly present such information. Interim results are not
necessarily indicative of a full year of operations.

(2)   PROPOSED MERGER WITH FORCENERGY INC

      On June 19, 1997, Edisto, Convest, Forcenergy Inc ("Forcenergy") (NYSE
"FEN"), and a Forcenergy subsidiary executed a definitive Agreement and Plan of
Merger (the "Merger Agreement") providing for Edisto and Convest to be merged
into Forcenergy.

      Under the Merger Agreement, (a) each issued and outstanding share of
Edisto Common Stock will be converted into the right to receive (I) $4.886 in
cash and (ii) a fractional interest in a share of Forcenergy Common Stock equal
to $5.064 divided by the Weighted Average Trading Price of Forcenergy Common
Stock and (b) each issued and outstanding share of Convest Common Stock will be
converted into the right to receive a fractional interest in a share of
Forcenergy Common Stock equal to $8.88 divided by the Weighted Average Trading
Price of Forcenergy Common Stock; PROVIDED, HOWEVER, that in no event will the
Weighted Average Trading Price of Forcenergy Common Stock be less than $28.96
nor more than $34.96. The "Weighted Average Trading Price" of Forcenergy Common
Stock will be calculated by taking the average of the following daily
calculations for each of the ten trading days ending two trading days prior to
the closing date for the Merger: (I) grouping together all shares of Forcenergy
Common Stock traded on such day at the same trading price, (ii) multiplying the
aggregate number of shares in each price group by the trading price for such
group to calculate a product (the total sold shares value) for each group, (iii)
adding all of such products from each group, and (iv) dividing the resulting
total by the aggregate number of shares traded on such trading day. Cash will be
paid in lieu of fractional shares of Forcenergy Common Stock. The transaction is
expected to close in October 1997.

      The majority shareholders of Edisto and Convest have agreed to vote their
respective shares in favor of the transaction thereby assuring the required
shareholder approval for the Merger Agreement. Investment funds and accounts
managed by TCW Special Credits and Oaktree Capital Management, L.L.C., which
hold slightly in excess of 51% of Edisto's Common Stock, have agreed to vote for
the transaction. In addition, such investment funds and accounts have
contractually agreed not to sell 80% of the Forcenergy Common Stock received in
the transaction for a period of six months after the closing. Edisto currently
owns approximately 72% of the outstanding shares of Common Stock of Convest, and
has agreed in the Merger Agreement to vote its shares of Convest Common Stock in
favor of the transaction.

      The accompanying financial statements have been prepared on a going
concern basis and do not reflect any adjustments related to the proposed merger.

                                       -8-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

EDISTO

      CASH AND CASH EQUIVALENTS. Cash equivalents consist of short-term highly
liquid investments which are readily convertible into cash and have original
maturities of three months or less. The Company's investment policy for its
available cash balances allows for investment in high grade short-term debt
issues as well as investments in money market accounts and overnight investments
with major financial institutions. At June 30, 1997, the Company had cash and
cash equivalents, including restricted cash, of $77.2 million of which $7.4
million was held at Convest.

      NET INCOME PER SHARE. Net income per share is computed based on the
weighted average number of shares outstanding which were 14,019,317 and
12,929,661 for the six months ended June 30, 1997 and 1996, respectively, and
14,090,803 and 13,440,269 for the three months ended June 30, 1997 and 1996,
respectively. No effect has been given to options outstanding under the
Company's stock option plans because their effect is antidilutive or immaterial.

      USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.
Actual results could differ from those estimates.

      INCOME TAXES . Edisto records income taxes in accordance with the
Financial Accounting Standards Board - Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS 109 requires
the balance sheet approach of income tax accounting whereby deferred income
taxes are provided at the balance sheet date for the differences existing in the
tax basis of assets and liabilities and their financial statement carrying
amounts.

      PRINCIPLES OF CONSOLIDATION AND RECLASSIFICATIONS. All significant
intercompany balances and transactions have been eliminated. Certain
reclassifications have been made to the 1996 consolidated financial statements
to conform to the presentation for 1997.

CONVEST

      RECLASSIFICATIONS AND CONSOLIDATION. Certain reclassifications have been
made to prior year financial statements to conform to the presentation for 1997.
All significant intercompany accounts and activities have been eliminated.

      RESTRICTED CASH. Restricted cash consists of $333,000 of certificates of
deposit held by various financial institutions. The certificates of deposit are
held in escrow as collateral for letters of credit issued for (I) lease payments
on certain offshore platforms and (ii) estimated plugging and abandonment costs
expected to be incurred on certain onshore oil and gas properties.

      PROPERTY AND EQUIPMENT. Convest follows the successful efforts method of
accounting for its oil and gas properties. Costs of productive wells,
developmental drilling expenditures, including developmental dry holes, and
productive leases are capitalized. Exploratory drilling costs, including
stratigraphic test wells, are initially capitalized, but charged to expense if
and when the well is determined to be unsuccessful. The capitalized costs of oil
and gas properties are charged to operations as depreciation, depletion and
amortization using the unit-of-production method based on the ratio of current
production to proved recoverable oil and gas reserves (as defined by the
Securities and Exchange Commission) on a lease by lease basis. Reserve estimates
for Convest's properties were prepared or audited by independent petroleum
engineering firms at year end. Gas is converted to equivalent barrels of oil on
an energy content basis of 6 Mcf of gas to 1 barrel of oil. Depreciation,
depletion and amortization per equivalent unit of oil production was $4.74 and
$4.83 for the six month periods ended June 30, 1997 and 1996, respectively, and
$4.51 and $4.60 for the three month periods ended June 30, 1997 and 1996,
respectively. Oil and gas leasehold costs are capitalized when incurred.
Unproved properties are assessed periodically on a property-by-property basis
and impairments in value are charged to expense. Exploratory expenses, including
geological and geophysical expenses and annual delay rentals, are charged to
expense as incurred.

     Under Statement of Financial Accounting Standards No. 121 ("SFAS 121")
regarding accounting for the impairment of long-lived assets, Convest is
required to recognize an impairment loss for its proved oil and gas properties
if the carrying value of such properties

                                       -9-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(i.e., total capitalized costs less accumulated depreciation and depletion)
exceeds the undiscounted expected future cash flows attributable to such
properties. Convest must assess the need for an impairment of capitalized costs
of oil and gas properties on a property-by-property basis. If an impairment is
indicated based on undiscounted expected future cash flows, then an impairment
loss is recognized to the extent that net capitalized costs exceed expected
future cash flows. During the second quarter of 1996, it was determined that one
of Convest's offshore properties had experienced a permanent decline in
production. Accordingly, Convest recorded an impairment loss of approximately
$1.1 million during the second quarter of 1996. No such provision has been
required during 1997.

      OTHER PROPERTY, PLANT AND EQUIPMENT. Other fixed assets are recorded at
cost and depreciated over their estimated useful lives using the straight-line
method of depreciation.

      ABANDONMENT RESERVE. Convest records its estimate of future abandonment
costs of offshore properties. Such costs are accrued using a unit-of-production
method based upon estimated proved recoverable reserves. Abandonment costs are
estimated under current regulations using current costs and are reviewed
periodically and adjusted as new information becomes available. Abandonment
costs on onshore properties are typically nominal due to the salvage value of
well equipment.

      Convest is a party to a settlement with the United States Minerals
Management Service relating to estimated plugging and abandonment costs for 14
Gulf of Mexico OCS leases. Pursuant to this settlement, the operator of the
leases, Convest and other co-lessees were required to provide security for
payment of such costs through quarterly payments to an Abandonment Fund. During
the first quarter of 1997, Convest made its final scheduled payment under the
Abandonment Fund, and accordingly, is no longer subject to additional future
payments.

      As of June 30, 1997 and December 31, 1996, Convest had made payments
totaling approximately $4.8 million and $4.2 million to the Abandonment Fund,
respectively. These payments were applied to the total long-term abandonment
reserve of $7.5 million and $7.7 million, as of June 30, 1997 and December 31,
1996, respectively, resulting in a net long-term abandonment reserve of $2.7
million and $3.5 million as of those dates. The current portion of the
abandonment reserve was $2.1 million and $2.3 million as of June 30, 1997 and
December 31, 1996, respectively. The current portion of the abandonment reserve
is included in "Accrued Liabilities and Other" and the noncurrent portion is
included in "Other Noncurrent Liabilities" in the consolidated financial
statements.

      LEASE OPERATING EXPENSES. In connection with a 1992 sale of certain future
production volumes of oil to Enron Reserve Acquisition Corp., Convest
established a reserve for the expenses associated with the volumes sold and
amortizes this reserve as the volumes are delivered. As of June 30, 1997 and
December 31, 1996, the current balance of this reserve was $1.6 million,
respectively, and the long-term balance was $2.8 million and $3.7 million,
respectively, and were presented in "Accrued Liabilities and Other" and "Other
Noncurrent Liabilities," respectively, in the consolidated financial statements.

      GAS BALANCING. Convest uses the entitlement method of accounting for gas
imbalances. Receivables resulting from undertakes of gas production at June 30,
1997 and December 31, 1996 were $2.4 million and $2.3 million, respectively, and
are included in "Accounts Receivable - Oil and Gas Production" and "Other
Noncurrent Assets" in the consolidated financial statements. Deferred revenue
and payables resulting from overtakes of gas production at June 30, 1997 and
December 31, 1996 were $2.4 million and $2.7 million, respectively, and are
included in "Current Liabilities - Deferred Revenue" and "Long-Term Liabilities
- Deferred Revenue" in the consolidated financial statements.

      ACCOUNTING FOR INCOME TAXES. Convest records income taxes in accordance
with the Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS 109 requires
the balance sheet approach of income tax accounting whereby deferred income
taxes are provided at the balance sheet date for the differences existing in the
tax basis of assets and liabilities and their financial statement carrying
amounts.

      CONCENTRATION OF CREDIT RISK. Convest's oil and gas production revenues
are derived principally from uncollateralized sales to customers in the oil and
gas industry. The concentration of credit risk in a single industry affects
Convest's overall exposure to credit risk because customers may be similarly
affected by changes in economic and other conditions. Convest has not
experienced significant credit losses on receivables from such sales.

      NET INCOME PER SHARE. Net income per share is computed based on the
weighted average number of shares outstanding which were 10,472,100 and
10,412,722 for the six months ended June 30, 1997 and 1996, respectively, and
10,508,115 and 10,412,722 for

                                      -10-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the three months ended June 30, 1997 and 1996, respectively. No effect has been
given to options outstanding under Convest's stock option plans because their
effect is antidilutive or immaterial.

      RISK MANAGEMENT/HEDGING ACTIVITIES. Convest from time to time engages in
commodity hedging activities to minimize the risk of market fluctuations
associated with the price of crude oil and natural gas production. The hedging
objectives include assurance of stable and known cash flows and fixed favorable
prices. The hedges are effected through the purchase and sale of futures
contracts on the New York Mercantile Exchange ("NYMEX") and over the counter
price swap agreements. The credit risk of futures contracts is limited due to
the daily cash settlement of the net change in the value of open contracts and
because of certain NYMEX procedures. Gains or losses on Convest's hedging
agreements are deferred and recognized as oil and gas sales revenue when the
hedged transaction occurs.

      STATEMENT OF CASH FLOWS. For purposes of the consolidated statements of
cash flows, Convest considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

      USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
All significant estimates are discussed herein.

(4)   DISCONTINUED OPERATIONS

      From 1990 until December 1996, Edisto conducted natural gas marketing
operations through Energy Source. On December 10, 1996, Energy Source sold
substantially all of its assets to Pacific Gas Transmission Company, a
subsidiary of PG&E Corporation (NYSE "PCG"). The sales price was $23.3 million
in cash, plus the working capital of Energy Source at July 31, 1996
(approximately $20.0 million). The sales price, however, is subject to
adjustment after the closing by the adjusted consolidated net income or loss of
Energy Source from August 1, 1996 to November 30, 1996. The Company and PGT have
not yet finalized the purchase price adjustment. Under the Purchase Agreement,
Edisto also retained certain assets and liabilities of Energy Source. In
connection with this sale, Edisto recognized a gain of approximately $15.3
million during 1996, net of approximately $700,000 of income tax.

      As a condition to the sale, Edisto retained the rights and liabilities
associated with the gas purchase and supply contracts with three of Energy
Source's Canadian trading partners, each of whom defaulted under their contracts
and sought protection under Canadian bankruptcy laws. Edisto also retained as
assets approximately 1.2 Bcf of natural gas in storage which the storage
operator failed to deliver.
Edisto is pursuing its claims in each of these matters.

      Pursuant to the Purchase Agreement, Edisto also retained the liabilities
and counterclaims against PanEnergy Corporation and Panhandle Eastern Pipe Line
Company under a lawsuit in the District Court of Harris County, Texas. This
lawsuit is described in Note 10 --"Commitments and Contingencies" herein.

      Separate from the lawsuit with Panhandle, Edisto retained as an asset all
rights to receive a refund from Panhandle under a proposed settlement of certain
rate cases pending before the Federal Energy Regulatory Commission. In April
1997, the settlement was finalized and Panhandle acknowledged Edisto's right to
receive a refund of approximately $1.0 million, but offset it against amounts
which Panhandle claims are owed to it by the Company. This refund is included in
Accounts Receivable on the accompanying Consolidated Balance Sheet at June 30,
1997 and December 31, 1996.

                                      -11-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5)   CONSOLIDATING BALANCE SHEETS

      Set forth below are the Consolidating Balance Sheets of Edisto and its
consolidated subsidiary, Convest, at June 30, 1997.


                                       CONSOLIDATING BALANCE SHEETS
                                              JUNE 30, 1997
                                              (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                      CONSOLIDATED
                                                    EDISTO (1)  CONVEST   ELIMINATIONS   EDISTO
                                                     --------   --------    ---------    --------
ASSETS:
<S>                                                  <C>        <C>         <C>          <C>     
    Cash and cash equivalents ....................   $ 69,869   $  7,369    $    --      $ 77,238
    Margin deposits ..............................       --           56         --            56
    Accounts receivable ..........................      1,714      7,130         (372)      8,472
    Other current assets .........................          4        762         --           766
                                                     --------   --------    ---------    --------
        Total current assets .....................     71,587     15,317         (372)     86,532
                                                     --------   --------    ---------    --------
    Property and equipment, net ..................         72     54,582         --        54,654
                                                     --------   --------    ---------    --------
    Investment in Convest ........................     38,414       --        (38,414)       --
                                                     --------   --------    ---------    --------
    Other assets .................................         27      2,618         (550)      2,095
                                                     --------   --------    ---------    --------
                                                     $110,100   $ 72,517    $ (39,336)   $143,281
                                                     ========   ========    =========    ========
LIABILITIES AND EQUITY:
    Accounts payable .............................   $    615   $  7,467    $    (372)   $  7,710
    Accrued liabilities and other ................      3,379      4,696         --         8,075
    Deferred revenue .............................       --        1,906         --         1,906
                                                     --------   --------    ---------    --------
        Total current liabilities ................      3,994     14,069         (372)     17,691
                                                     --------   --------    ---------    --------
    Long-term debt ...............................       --            3         --             3
    Minority interest ............................       --         --         13,996      13,996
    Other noncurrent liabilities .................         51      6,035         --         6,086
                                                     --------   --------    ---------    --------
        Total long-term liabilities ..............         51      6,038       13,996      20,085
                                                     --------   --------    ---------    --------
    Stockholders' equity .........................    106,055     52,410      (52,960)    105,505
                                                     --------   --------    ---------    --------
                                                     $110,100   $ 72,517    $ (39,336)   $143,281
                                                     ========   ========    =========    ========
</TABLE>
----------------------

    (1) Includes Edisto and its subsidiaries other than Convest.

                                      -12-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6)     HEDGING ACTIVITIES

        As previously stated, Convest conducts its hedging activities through
major financial institutions. Set forth below is the contract amount and term of
all futures contracts held for price risk management purposes by Convest at June
30, 1997 and December 31, 1996:


                            JUNE 30, 1997                 DECEMBER 31, 1996
                      ------------------------        -------------------------
                         OIL             GAS             OIL             GAS
                      --------        --------        --------       ----------
Quantity Sold         30 Mbbls        740 MMCF        90 Mbbls       3,300 MMcf
Maximum Term          3 Months        3 Months        9 Months        10 Months
Average Price          $21.07           $2.38          $22.50           $2.53

        Convest will continue its hedging activities during 1997 in order to
mitigate the volatility of its crude oil and natural gas prices. Gains and
losses realized upon the settlement of Convest's hedge positions are deferred
and recognized as oil and gas sales revenue in the month of the underlying
physical production being hedged. The fair value of Convest's open positions at
June 30, 1997 were $182,150. As a result of fluctuations in the price of crude
oil and natural gas subsequent to June 30, 1997, the stated fair value of
Convest's open positions is not indicative of the value which would be received
if the positions were closed at current prices. The fair value of Convest's
hedges was based on the cost that would have been incurred to buy out those
hedges in a loss position and the consideration that would have been received to
terminate those hedges in a gain position. The cash margin required by the
counterparties to Convest's hedging activities totaled $56,000 and $1.0 million
as of June 30, 1997 and December 31, 1996, respectively, and are included in
other current assets.

(7)     RELATED PARTY TRANSACTIONS

        During December 1996, Edisto sold substantially all of the assets of its
wholly owned gas marketing subsidiary, Energy Source, Inc. , to an unrelated
third party. From January 1995 until its sale in December 1996, Energy Source
had marketed a substantial portion of Convest's gas production. Under the gas
marketing arrangement, Convest received a minimum price of 98% of the index for
the applicable pipeline. In connection with the sale of Energy Source, Convest
and Energy Source agreed to extend the gas marketing arrangement to December 31,
1997. Effective January 1, 1997, the gas marketing arrangement was amended to
increase the price received by Convest from 98% to 100% of the index price for
the applicable pipeline.

        In connection with the Energy Source sale, all Edisto employees other
than Michael Y. McGovern, the Chairman and Chief Executive Officer of Convest
and Edisto, became employees of the purchaser. Subsequently, Edisto's corporate
headquarters were moved to Convest's offices, and Mr. McGovern and four other
employees of Convest have divided their time between Edisto and Convest.
Effective December 1, 1996, Mr. McGovern's base salary and benefits have been
apportioned 70% to Convest and 30% to Edisto. The base salary and benefits of
the other Convest employees who perform work for Edisto also are apportioned
based on the approximate amount of time they work for each company.

        Prior to the sale of Energy Source, Edisto had provided Convest with
access to an AS400 computer system to run its accounting system and had provided
MIS support. The monthly cost to Convest was approximately $12,555 per month. In
connection with the sale of Energy Source, Edisto sold the AS400 computer system
and its MIS personnel became employees of the purchaser of Energy Source. Since
Convest continued to need an AS400 computer system to run its accounting system,
the Energy Source purchaser agreed to provide Convest with access to the AS400
computer system and MIS support through December 31, 1997. The cost to Convest
is $12,645 per month. This agreement may be terminated by Convest at any time
after June 30, 1997 upon 90 days notice.

        In addition, Convest and Edisto have a directors' and officers'
fiduciary insurance policy that covers both companies. The annual insurance
premium was allocated 32% to Convest, for a cost of $96,000 based on the
relative percentage that the assets of Convest bear to the total assets of both
Convest and Edisto.

        Each of the affiliated party transactions described above was approved
by either a special committee of Convest's Board, which was composed of outside
directors with no affiliation to Edisto, or the unanimous consent of Convest's
Board.

                                      -13-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8)     INCOME TAXES

        The Company records current income taxes based on its estimated actual
tax liability for the year. The Company provides for deferred income taxes under
SFAS No. 109 based upon differences between the tax basis of the Company's
assets and liabilities and their financial statement carrying amounts multiplied
by the Company's expected future effective tax rate.

        The Company recorded current income tax expense of $256,000 and $277,000
for the six months ended June 30, 1997 and 1996, respectively, and $158,000 and
$107,000 for the three months ended June 30, 1997 and 1996, respectively. The
Company has provided a valuation allowance against substantially all of its net
deferred tax assets as the "more-likely-than-not" criteria for recognition under
SFAS No. 109 has not been met.

(9)     CONVEST CREDIT FACILITY AND LONG-TERM DEBT

      Convest has a revolving credit facility with Bank One, Texas, N.A. ("Bank
One"), and Compass Bank-Houston which terminates on January 1, 1999. Bank One
serves as agent bank of the facility. The facility is secured by a first lien on
all of Convest's assets, including its oil and gas properties and gas plant. The
borrowing base is redetermined semi-annually on May 31 and November 30 of each
year by the lending banks based on engineering criteria established by the
banks. Interest on borrowings under the facility is computed at (I) the agent
bank's prime lending rate (the "Base Rate") plus 3/4% or (ii) the London
Interbank Offering Rate ("LIBOR") plus 2-3/4%. In addition, Convest pays a
commitment fee equal to 1/2% on any commitment amount in excess of outstanding
borrowings.

      Effective December 1, 1996, the borrowing base was $19.2 million which
reduces by $1.0 million per month beginning January 1, 1997 based on the lending
banks' estimate of production. Effective January 28, 1997 and June 12, 1997, the
borrowing base was reduced by $300,000 and $200,000, respectively, to give
effect to the sale of oil and gas properties securing the credit facility.
Pursuant to the terms of the credit facility, Convest is required to provide the
banks with semi annual estimates of its oil and gas reserves on or before April
1 and October 1 of each year. Due to the proposed merger with Forcenergy, the
banks have agreed to extend the report required on October 1, 1997 until
December 1, 1997. As a result, Convest's borrowing base will continue to reduce
by $1.0 million per month until the updated reports are provided and the
borrowing base has been redetermined.

      After giving effect to the monthly borrowing base reductions and the
reductions resulting from the property sales, Convest's borrowing base under the
credit facility was $12.7 million on June 30, 1997. Convest had no outstanding
borrowings under its credit facility at June 30, 1997 and $4.0 million
outstanding at December 31, 1996. In addition, Convest had $200,000 of letters
of credit outstanding at June 30, 1997 and December 31, 1996, primarily related
to performance bonds issued for oil and gas operations.

(10)        COMMITMENTS AND CONTINGENCIES

          BRUCE W. MCCONKEY, ET AL V. JAMES R. MCNAB, JR., ET AL. (Cause No.
93-002587 in the 125th District Court of Harris County, Texas). In January 1993,
Bruce W. McConkey and two other shareholders of MINT Holding Company ("MINT"),
who collectively hold 20% of the outstanding MINT common stock, filed a lawsuit
against Edisto, MINT and certain of its former directors who were former
officers of Edisto. Edisto owns the remaining 80% of MINT. The lawsuit, among
other things, (I) alleged that MINT constructively terminated Mr. McConkey's
employment as the President and CEO of MINT, thereby breaching his employment
agreement; (ii) alleged that certain directors of MINT breached their fiduciary
duties to the plaintiffs, in their capacity as minority shareholders, and (iii)
asserted derivative claims on behalf of MINT against certain directors for
alleged mismanagement of MINT. Edisto and MINT asserted certain counterclaims
against Mr. McConkey based on an unpaid guaranteed debt and an unpaid promissory
note.

         In October 1996, the trial court granted an interlocutory summary
judgment in favor of Edisto, MINT and the individual defendants on all claims
other than the claims against MINT, including the claim that it constructively
terminated Mr. McConkey's employment. In mid-July 1997, this lawsuit was tried
before a jury and resulted in the following findings: (I) the court found that
Mr. McConkey was constructively discharged by MINT which owes Mr. McConkey
approximately $32,000 for damages and interest; (ii) Mr. McConkey owes
approximately $26,000 to Multiflex on an unpaid promissory note, and (iii) Mr.
McConkey owes approximately $400,000 to Edisto for breaching a guaranty issued
to Edisto. All other relief sought by Mr. McConkey and the other plaintiffs
against

                                      -14-
<PAGE>
                          EDISTO RESOURCES CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Edisto, MINT and the individual defendants was expressly denied. The final
judgment was granted by the trial court on July 29, 1997. It is unknown at this
time whether the plaintiffs will appeal this judgment.

          PANHANDLE EASTERN PIPE LINE COMPANY V. ENERGY SOURCE, INC. (Cause No.
96-60925 in the 152nd District Court of Harris County, Texas). The lawsuit,
which was filed in December 1996, relates to (I) a contract dispute involving
approximately $1.5 million in disputed Annual Revenue Amount and other charges
which PanEnergy and Panhandle Eastern claim are owed by Energy Source under two
gas transportation agreements between the companies, (ii) a claim by Energy
Source that PanEnergy over billed Energy Source by approximately $1.0 million
for services under such transportation contracts which PanEnergy has refused to
refund, (iii) $216,000 in gas balancing penalties paid by Energy Source under
protest for which Edisto is seeking a refund, (iv) a claim by Energy Source
under Texas antitrust laws that PanEnergy exerted unlawful monopoly power and
engaged in anticompetitive conduct to the detriment of Energy Source, and (v) a
claim by Energy Source that PanEnergy tortiously interfered with a prospective
contractual relationship between Energy Source and its largest customer at that
time. Edisto believes that it has meritorious defenses to PanEnergy's claims and
plans to vigorously assert such defenses and its counterclaims against PanEnergy
in the lawsuit. Based on developments of the case to date, the Company's
management does not believe the outcome of this lawsuit will have a material
adverse effect on the Company's consolidated financial position or results of
operations.

      POTENTIAL RETAINED LIABILITIES FROM SALE OF GAS MARKETING OPERATIONS. As a
condition to the sale of the natural gas marketing operations in December 1996,
Edisto retained the rights and liabilities associated with the gas purchase and
supply contracts with three of Energy Source Canada's trading partners. Each of
these trading partners defaulted under their contracts and sought protection
under Canadian bankruptcy laws. Edisto is pursuing its claims in these matters.

      In addition, the Company is named as defendant in several lawsuits arising
in the ordinary course of business. While the outcome of lawsuits and other
proceedings against the Company cannot be predicted with certainty, management
does not expect these matters to have a material adverse effect on the Company's
financial position or results of operations.

                                      -15-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the notes thereto.

                      OVERVIEW AND SIGNIFICANT DEVELOPMENTS

OVERVIEW

        Edisto Resources Corporation, a Delaware corporation (the "Company" or
"Edisto"), conducts its oil and gas operations through its 72% ownership
interest in Convest Energy Corporation ("Convest"), an independent oil and gas
exploration and production company listed on the American Stock Exchange. Edisto
owns 7,598,771 shares of Convest Common Stock. During December 1996, the Company
sold substantially all of the assets of its gas marketing subsidiaries, Energy
Source, Inc. and Energy Source Canada, Inc. (collectively "Energy Source"), for
approximately $43.3 million. Subsequent to the sale of Energy Source, the
Company's only line of business is its oil and gas operations conducted through
its ownership interest in Convest.

FINANCIAL RESULTS

        The significant events during 1997 are described below:

        RESULTS OF OPERATIONS. The Company had net income of $3.3 million for
the quarter ended June 30, 1997, and $6.8 million for the six months ended June
30, 1997. SEE "Results of Operations" below. The following table summarizes the
Company's income between its investment in Convest and other corporate income:

                                              SIX MONTHS     THREE MONTHS
                                                ENDED           ENDED
                                             JUNE 30, 1997   JUNE 30, 1997
                                                ------         ------
                                                     (Unaudited)
Convest Energy Corporation, net of
   minority interest .......................    $6,182         $3,048
Corporate and other ........................       573            215
                                                ------         ------

    Total Operating Income .................    $6,755         $3,263
                                                ======         ======

PROPOSED MERGER WITH FORCENERGY INC

        On June 19, 1997, Edisto, Convest, Forcenergy Inc ("Forcenergy") (NYSE
"FEN"), and a Forcenergy subsidiary executed a definitive Agreement and Plan of
Merger (the "Merger Agreement") providing for Edisto and Convest to be merged
into Forcenergy.

        Under the Merger Agreement, (a) each issued and outstanding share of
Edisto Common Stock will be converted into the right to receive (I) $4.886 in
cash and (ii) a fractional interest in a share of Forcenergy Common Stock equal
to $5.064 divided by the Weighted Average Trading Price of Forcenergy Common
Stock, and (b) each issued and outstanding share of Convest Common Stock will be
converted into the right to receive a fractional interest in a share of
Forcenergy Common Stock equal to $8.88 divided by the Weighted Average Trading
Price of Forcenergy Common Stock; PROVIDED, HOWEVER, that in no event will the
Weighted Average Trading Price of Forcenergy Common Stock be less than $28.96
nor more than $34.96. The "Weighted Average Trading Price" of Forcenergy Common
Stock will be calculated by taking the average of the following daily
calculations for each of the ten trading days ending two trading days prior to
the closing date for the Merger: (I) grouping together all shares of Forcenergy
Common Stock traded on such day at the same trading price, (ii) multiplying the
aggregate number of shares in each price group by the trading price for such
group to calculate a product (the total sold shares value) for each group, (iii)
adding all of such products from each group, and (iv) dividing the resulting
total by the aggregate number of shares traded on such trading day. Cash will be
paid in lieu of fractional shares of Forcenergy Common Stock. The mergers are
expected to close in early October.

        The majority shareholders of Edisto and Convest have agreed to vote
their respective shares in favor of the transaction thereby assuring the
required shareholder approval of the Merger Agreement. In addition, investment
funds and accounts managed by TCW Special Credits and Oaktree Capital
Management, L.L.C., which hold slightly in excess of 51% of Edisto's Common
Stock, have agreed to vote for the transaction. In addition, such investment
funds and accounts have contractually agreed not to sell 80% of the Forcenergy
Common Stock received in the transaction for a period of six months after the
closing. Edisto currently owns approximately 72% of

                                      -16-
<PAGE>
the outstanding shares of Common Stock of Convest, and has agreed in the Merger
Agreement to vote its shares of Convest Common Stock in favor of the
transaction.

        HIGH ISLAND BLOCK 195 DRILLING. During January 1997, Convest
participated in the drilling of an exploratory well on Block 195 of the High
Island area of the Gulf of Mexico to test a prospect identified by 3-D seismic.
The 195 #3 well was directionally drilled to approximately 13,000' and
discovered productive gas sands in the Upper Rob "M". Total cost of the well was
approximately $1.1 million net to Convest's 23.4% working interest.

        During March 1997, Convest participated in an additional exploratory
test well on Block 195 to test a deeper prospect on the block. The 195 #4 well
was directionally drilled to approximately 15,200' and encountered productive
gas sands in the Lower Rob "M". Total cost of the well was approximately $1.4
million net to Convest's 23.4% working interest.

        Gas production from the producing wells on Block 195 is being processed
from an existing platform located on High Island Block 176. During the second
quarter of 1997, Convest participated in the installation of flowlines and
certain facility enhancements on the platform on Block 176 at an aggregate cost
to date of approximately $200,000. Three of the four wells on Block 195 are
currently producing in excess of 60 MMcf of gas per day and the fourth well is
projected to be placed on production during August 1997. Convest has a net
revenue interest of 19.5% in the production from the block. In addition, it is
anticipated that the operator of the High Island Block 195 will propose drilling
an additional well during 1997.

        WEST CAMERON BLOCK 607 DRILLING. In March 1997, Convest participated in
the drilling of an exploratory test well which was drilled from the existing
platform on Block 607 of the West Cameron area of the Gulf of Mexico. The 607
A-4 exploratory well successfully discovered gas reserves in three new sands and
was dually completed. Initial production from the well averaged approximately 20
MMCF of gas per day; however, the well has experienced mechanical problems
allowing water to channel into the wellbore restricting the gas flow rate to
approximately 7 MMcf per day. During July 1997, Convest participated in an
unsuccessful operation to restrict the inflow of water. Convest and the operator
of the property are currently evaluating other operations to minimize the
effects of the water channeling. Convest owns a 49.6% working interest in the
block and a 36.0% net revenue interest. Total cost of the well was approximately
$2.2 million net to Convest's working interest.

        REPAYMENT OF OUTSTANDING DEBT. During the first quarter of 1997, Convest
repaid the remaining $4.0 million of outstanding debt under its long-term credit
facility. Following the debt repayment, the credit facility will continue to be
available for future borrowings if needed. As of August 1, 1997, the borrowing
base under the credit facility was $10.7 million. SEE "Liquidity and Capital
Resources - Credit Facility and Long-Term Debt" below.

                                      -17-
<PAGE>
                              RESULTS OF OPERATIONS

        The following discussion and analysis is based on the historical results
of operations of the Company for the periods indicated. The financial
information set forth below should be reviewed in conjunction with the unaudited
consolidated financial statements of the Company and the notes thereto set forth
elsewhere in this Report.
<TABLE>
<CAPTION>
                                                                            SIX MONTHS ENDED                 THREE MONTHS ENDED
                                                                                JUNE 30,                          JUNE 30,
                                                                        ------------------------          -------------------------
                                                                         1997             1996             1997              1996
                                                                        -------          -------          -------          --------
                                                                               (Unaudited)                      (Unaudited)
                                                                              (in thousands except price data and per BOE data)
<S>                                                                     <C>              <C>              <C>              <C>     
CONVEST ENERGY CORPORATION:

    REVENUE:
       Oil ...................................................          $ 9,457          $ 7,845          $ 4,498          $  4,085
       Gas ...................................................           15,448           13,484            7,345             6,085
       Gas Plant .............................................            1,002              704              400               343
                                                                        -------          -------          -------          --------
                                                                        $25,907          $22,033          $12,243          $ 10,513
                                                                        =======          =======          =======          ========
    PRODUCTION:
       Oil (Mbbls) ...........................................              490              460              254               243
       Gas (MMcf) ............................................            6,213            7,006            3,311             3,434

    AVERAGE SALES PRICE:
       Oil (per Bbl)) ........................................          $ 19.29          $ 17.05          $ 17.66          $  16.81
       Gas  (per Mcf) ........................................          $  2.49          $  1.92          $  2.22          $   1.77

    PRODUCTION EXPENSES ......................................          $ 6,277          $ 8,253          $ 3,029          $  3,982

    ABANDONMENT AND EXPLORATION COSTS ........................          $ 1,147          $   921          $    56          $    878

    GENERAL AND ADMINISTRATIVE EXPENSE .......................          $ 2,188          $ 2,281          $ 1,058          $  1,042

    INTEREST EXPENSE .........................................          $    72          $   674          $    16          $    307

    DEPRECIATION, DEPLETION AND
      AMORTIZATION OF OIL AND GAS PROPERTIES .................          $ 7,225          $ 7,857          $ 3,639          $  3,745

    AVERAGE EXPENSES PER EQUIVALENT BARREL
       ("BOE"):(1)
       Production Costs ......................................          $  4.11          $  5.07          $  3.75          $   4.89
       Depreciation and depletion ............................             4.74          $  4.83          $  4.51          $   4.60

CORPORATE AND OTHER:

       Interest income .......................................          $ 1,873          $   436          $   968          $    215
       General and administrative ............................          $   980          $   617          $   563          $    (12)
       Discontinued operations ...............................          $  --            $ 1,472          $  --            $ (1,287)
</TABLE>
     (1)  Natural gas is converted into oil equivalents at a rate of six Mcf per
          barrel of oil.

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996.

CONVEST ENERGY CORPORATION:

      REVENUES. Oil and gas revenue increased by approximately $3.6 million or
17% between the six months ended June 30, 1997 and 1996. The average price
Convest received for its oil and gas sales increased by 13% and 30%,
respectively, between the corresponding periods. Oil production increased by 7%
between the periods while gas production decreased by 11%. During 1996 and early
1997, Convest participated in 21 new exploratory and development wells of which
16 were successful. As a result of this drilling,

                                      -18-
<PAGE>
production from several of Convest's properties increased substantially. The
additional production associated with Convest's drilling success was partially
offset by the sale or abandonment of a number of marginal properties during 1996
and early 1997 and the effects of depletion on Convest's offshore Gulf of Mexico
gas producing properties. Also, Convest's offshore gas properties are subject to
inherent steep production declines. These declines were partially offset during
1996 and early 1997 by the drilling success mentioned above. In order to
minimize the future effects of such declines, Convest must replace its reserves
through its exploratory and development drilling and acquisition activities.
Convest's gas plant revenue increased by $298,000 or 42% between the
corresponding periods due primarily to higher prices received for output from
the plant.

      PRICE RISK MANAGEMENT/HEDGING. Convest uses a combination of futures
contracts traded on the NYMEX and over the counter price swaps with major
financial institutions to hedge against the volatility of natural gas and oil
prices. Gains and losses recognized upon settlement of Convest's hedge positions
are deferred and recognized as oil and gas sales revenue in the month of the
underlying physical production being hedged. As a result of Convest's hedging
activities, Convest recorded hedging income of approximately $313,000 for the
six month period ended June 30, 1997 and a hedging loss of approximately $4.5
million for the corresponding period of 1996. Such amounts were recorded as oil
and gas sales revenue in the accompanying statements of operations, and
accordingly, such amounts are reflected in the per unit price Convest received
for its oil and gas sales.

      PRODUCTION EXPENSES. Production expenses decreased by approximately $2.0
million or 24% between the corresponding periods. The decrease in lease
operating expenses was primarily due to the aforementioned sale or abandonment
of a number of marginal producing properties during 1996 and early 1997 which
tended to have high operating expense. Production expenses per barrel of oil
equivalent ("BOE") was $4.11 for the six months ended June 30, 1997 compared to
$5.07 for the corresponding period of 1996.

      ABANDONMENT AND EXPLORATION COSTS. Abandonment and exploration costs
increased by approximately $226,000 due to (I) the aforementioned abandonment of
several offshore properties during the first quarter of 1997 and (ii) the write
off of approximately $757,000 associated with two unsuccessful exploratory wells
drilled during the first quarter of 1997 in accordance with the successful
efforts method of accounting. During the second quarter of 1996, Convest
expensed approximately $750,000 of drilling costs associated with two
unsuccessful exploratory test wells.

      GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
decreased by approximately 4% between the corresponding periods due primarily to
the resignation of the former President and Chief Operating Officer and the
former Chief Financial Officer during late 1996. Subsequent to the resignation
of the two former executive officers, neither position has been replaced
resulting in lower salary expense for 1997.

      INTEREST EXPENSE. Interest expense decreased by $602,000 or 89% between
the corresponding periods due to the repayment of all outstanding borrowing
under Convest's credit facility during early 1997.

      DEPRECIATION, DEPLETION AND AMORTIZATION ("DD&A"). DD&A on oil and gas
properties decreased by approximately $632,000 or 8% between the corresponding
periods. The decrease in DD&A was primarily due to a 6% decline in overall
production volumes on a per BOE basis. DD&A per BOE was $4.74 for the six months
ended June 30, 1997 compared to $4.83 for the corresponding period of 1996.

      IMPAIRMENT OF OIL AND GAS PROPERTIES. During the second quarter of 1996,
Convest recorded an impairment of $1.1 million on one of its offshore gas
properties. During the second quarter of 1996, the producing well on the
property experienced permanent mechanical difficulties and, accordingly, the
property was written off in accordance with SFAS 121. No such provision has been
required in 1997.

      GAIN ON ASSET SALES. In January 1996, Convest completed the sale of an
offshore oil and gas property for sale proceeds of approximately $2.0 million.
As a result of the sale, Convest recorded a gain on the property sale of
approximately $620,000 during the first quarter of 1996. Convest has continued
to review its properties with a focus on profitability and as a result has sold
several non-strategic properties with marginal profitability during 1997.
Aggregate sale proceeds totaled approximately $740,000 and resulted in a gain of
approximately $63,000 for the six months ended June 30, 1997.

CORPORATE AND OTHER:

      INTEREST INCOME. Interest income increased by $1.4 million between the
corresponding periods due primarily to the Company having higher cash balances
available for investment. The higher cash balances are a result of the sale of
Energy Source completed in December 1996. The Company invests its available cash
balances in high grade short-term debt issues, money market accounts and
overnight investments with major financial institutions.

     GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased by $363,000 between the corresponding periods. The increase in general
and administrative is primarily due to higher legal fees associated with the
litigation retained by Edisto in connection with the Energy Source asset sale.
In addition, Mr. McGovern received a bonus of $110,000 pursuant to the 1996
bonus

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<PAGE>
plan. The bonus, which was paid one-half in cash and one-half in Edisto Common
Stock, was recorded during the second quarter of 1997.

      DISCONTINUED OPERATIONS. As previously stated, the Company sold
substantially all of the assets of Energy Source during December 1996. For the
six months ended June 30, 1996, income from Energy Source's gas marketing
operations totaled approximately $1.5 million.

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996.

CONVEST ENERGY CORPORATION:

      REVENUES. Oil and gas revenues increased by approximately $1.7 million or
16% between the three months ended June 30, 1997 and the corresponding period of
1996. The average price Convest received for its oil and gas sales increased by
5% and 25%, respectively, between the corresponding periods. Oil production
increased by 5% between the periods while gas production decreased by 4%. As
previously stated, Convest's drilling success during 1996 and early 1997 served
to mitigate the effects of depletion from Convest's oil and gas properties.
Convest's gas plant revenue increased by $57,000 and 17% between the periods due
to higher prices received for output from the plant.

      PRICE RISK MANAGEMENT/HEDGING. As previously stated, Convest uses futures
contracts and price swap agreements to hedge against the volatility of natural
gas and oil prices. For the three months ended June 30, 1997, Convest recorded
hedging income of approximately $406,000 compared to a hedging loss of
approximately $2.3 million for the corresponding period of 1996.

      PRODUCTION EXPENSES. Production expenses decreased by approximately $1.0
million or 24% between the corresponding periods. The decrease in production
expenses was primarily due to the aforementioned sale or abandonment of a number
of marginal producing properties. Production expenses per BOE totaled $3.75 for
the three months ended June 30, 1997 compared to $4.89 for the corresponding
period of 1996.

      ABANDONMENT AND EXPLORATION COSTS. Abandonment and exploration costs
increased by $822,000 or 94% due to the writeoff of two unsuccessful exploratory
wells during the second quarter of 1996 in accordance with the successful
efforts method of accounting.

      INTEREST EXPENSE. Interest expense decreased by $291,000 or 95% due
primarily to the aforementioned repayment of all outstanding borrowings under
Convest's credit facility during early 1997.

      DEPRECIATION, DEPLETION AND AMORTIZATION. DD&A on oil and gas properties
decreased by $106,000 due primarily to the aforementioned production declines.
DD&A per BOE was $4.51 for the three months ended June 30, 1997 compared to
$4.60 for the corresponding period of 1996.

      IMPAIRMENT OF OIL AND GAS PROPERTIES. As previously stated, one of
Convest's offshore gas properties experienced a permanent decline in production
during the second quarter of 1996. In accordance with the applicable accounting
rules, Convest recorded an impairment of approximately $1.1 million during June
1996. No such provision has been required in 1997.

CORPORATE AND OTHER:

      INTEREST INCOME. Interest income increased by $753,000 between the
corresponding periods. As previously stated, the Company has higher cash
balances available for investment due to the Energy Source asset sale completed
during December 1996.

      GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses
increased by $575,000 between the corresponding periods due to the
aforementioned increase in legal fees and the bonus paid to Mr. McGovern which
was paid during the second quarter of 1997.

      DISCONTINUED OPERATIONS. For the three months ended June 30, 1996, Energy
Source reported a loss of approximately $1.3 million related to its gas
marketing operations. As previously stated, Edisto sold substantially all of the
assets of Energy Source during December 1996.

                                      CAPITAL RESOURCES AND LIQUIDITY

EDISTO WORKING CAPITAL

      At June 30, 1997, Edisto had cash and cash equivalents of approximately
$77.2 million, which included $7.4 million of cash and cash equivalents
(including restricted cash) at Convest. In addition, Convest had assets from
risk management activities of $56,000, which consisted primarily of cash on
deposit at brokerage houses, including margin accounts, and receivables from
counterparties in

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<PAGE>
swap transactions. The cash and cash equivalents at Edisto are invested in
short-term, highly liquid investments which are readily convertible into cash
and have original maturities of three months or less.

      At June 30, 1997, Edisto had net working capital totaling $67.6 million
(excluding the $1.2 million of working capital of Convest) comprised primarily
of $69.8 million of cash and cash equivalents. As previous stated, the
substantial increase in available cash balances was primarily attributable to
the sale of the Company's gas marketing operations in December 1996. Proceeds
from the sale of the gas marketing operations totaled $15.3 million (gross
proceeds of $43.3 million less approximately $27.9 million of cash balances held
by the gas marketing subsidiary on the closing date of the sale).

CONVEST WORKING CAPITAL

      Convest had working capital of $1.2 million at June 30, 1997 compared to a
working capital deficit of $2.6 million at December 31, 1996. The primary
contributor to the improvement in Convest's working capital position during 1997
was an overall increase in the price Convest received for its oil and gas
production. The higher oil and gas prices coupled with the additional production
associated with Convest's exploratory and development program enabled Convest to
reduce its current liabilities and accumulate higher cash balances.

      Based on the cash flow from Convest's oil and gas properties, management
believes that Convest has the financial capability to satisfy its 1997 capital
expenditures program while meeting operating needs arising in the ordinary
course of business.

CONVEST CAPITAL EXPENDITURES

      Convest has budgeted capital expenditures totaling $9.7 million for the
remainder of 1997. In addition, Convest anticipates that the operator for the
High Island Block 195 will propose drilling an additional well for which no
costs are currently included in Convest's capital budget. As previously stated,
management believes that the cash flow generated from Convest's properties
coupled with the available borrowings under Convest's credit facility will be
adequate to fund the anticipated capital expenditures for 1997.

CONVEST CREDIT FACILITY AND LONG-TERM DEBT

      On June 26, 1995, Convest entered into a new credit agreement which
terminates January 1, 1999. This facility is secured by a first lien on
substantially all of Convest's assets, including its oil and gas properties and
gas plant. The borrowing base under the credit facility is subject to
redetermination semi-annually (on May 31 and November 30) using engineering
determinations and pricing and other assumptions designated by the bank group.
Effective December 1, 1996, the new borrowing base under the credit facility was
$19.2 million, based on the lending banks' semi-annual redetermination, which
began reducing by $1.0 million per month beginning January 1, 1997. Effective
January 28, 1997 and June 12, 1997, the borrowing base was reduced by $300,000
and $200,000, respectively, to give effect to the sale of oil and gas properties
securing the credit facility. Pursuant to the terms of the credit facility,
Convest is required to provide the banks with semi-annual estimates of its
reserves on or before April 1 and October 1 of each year. Due to the proposed
merger with Forcenergy, the banks have agreed to extend the report due on
October 1, 1997 until December 1, 1997. As a result, Convest's borrowing base
will continue to reduce by $1.0 million per month until the updated reports are
provided and the borrowing base has been redetermined. After giving effect to
the monthly borrowing base reductions and the reduction resulting from the
property sales, Convest's borrowing base under the credit facility was
approximately $10.7 million on August 1, 1997. Based on the scheduled borrowing
base reductions, the Company will have no borrowing capacity under the credit
facility after June 1, 1998 unless the lending banks provide a subsequent
redetermination of the borrowing base based on the reserve estimates to be
provided on December 1, 1997.

      During 1997, Convest repaid the outstanding balance of $4.0 million under
the credit facility. The credit facility, however, will remain available for
future credit needs.

VOLATILITY OF NATURAL GAS AND OIL PRICES

      The revenues generated from oil and gas operations are highly dependant
upon the prices of oil and natural gas. Historically, the markets for natural
gas and oil have been volatile and are likely to continue to be volatile in the
future. Prices for natural gas and oil are subject to wide fluctuation in
response to relatively minor changes in the supply of and demand for natural gas
and oil, market uncertainty and a variety of additional factors that are beyond
the control of Convest. These factors include the level of consumer product
demand, weather conditions, domestic and foreign governmental regulations, the
price and availability of alternative fuels, political conditions in the Middle
East, the foreign supply of natural gas and oil, the price of foreign imports
and overall economic conditions. It is impossible to predict future natural gas
and oil price movements with any certainty. Declines in natural gas and oil
prices may adversely affect Convest's financial condition, liquidity and results
of operations. Lower natural gas and oil prices also may reduce the amount of
Convest's natural gas and oil that can be produced economically.

                                      -21-
<PAGE>
                          PART II -- OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS.

      Note 10 of the "Notes to Consolidated Financial Statements" is
incorporated herein by reference.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K.

(A)   EXHIBITS.

          2.1   - Agreement and Plan of Merger dated as of June 19, 1997 among
                Forcenergy Inc, EDI Acquisition Corporation, Convest Energy
                Corporation and Edisto Resources Corporation (incorporated by
                reference from Exhibit 2.1 to the Registrant's Form 8-K dated
                June 19, 1997.)

          2.2   - Shareholder Agreement dated as of June 19, 1997 among
                Forcenergy Inc and certain shareholders of Edisto Resources
                Corporation holding approximately 51% of the outstanding shares
                of Common Stock of Edisto (incorporated by reference from
                Exhibit 2.2 to the Registrant's Form 8-K dated June 19, 1997.)

(B)   REPORTS ON FORM 8-K.

      Form 8-K dated June 19, 1997 describing the execution of a Plan and
      Agreement of Merger among Edisto Resources Corporation, Convest Energy
      Corporation, Forcenergy Inc and a Forcenergy subsidiary whereby Convest
      and Edisto will be merged into Forcenergy.



                                   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.


                                    EDISTO RESOURCES CORPORATION
                                              (Registrant)



                                    BY:    /S/ STEVEN G. IVES
                                               STEVEN G. IVES
                                       VICE PRESIDENT - CONTROLLER AND
                                           CHIEF ACCOUNTING OFFICER
                                           (PRINCIPAL ACCOUNTING OFFICER)


DATED: AUGUST 14, 1997

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