UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-K/A
 
 
 Amendment No. 1
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT OT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 000-18774
 SPINDLETOP OIL & GAS CO.
  Texas
    
    75-2063001(State or other jurisdiction
    
    (IRS Employerof incorporation or organization)
    
    Identification No.)12850 Spurling Rd., Suite 200, Dallas, TX
    
    75230(Address of principal executive offices)
    
    (Zip Code)
 (972) 644-2581
  Title of Each ClassNone
    
    Name of each exchange on which registeredN/A
 Common Stock, $0.01 par value
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
   APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:
 o o
 (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
  Common Stock, $0.01 par value
    
    7,610,803(Class)
    
    (Outstanding at April 14, 2008)
 DOCUMENTS INCORPORATED BY REFERENCE
 None




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EXPLANATORY NOTE
 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
  - 2 -




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PART I
 Item 1. Description of Business
 GENERAL
    Website Access to Our Reports
 www.spindletopoil.com
 Operating Approach
    - 3 -




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Strategic Business Plans
      - 4 -




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Significant Project Areas
   North Texas Including
the Fort Worth Basin
    
    9,857 gross acres
    
    
    44.87
    %Arkansas
    
    2,936 gross acres
    
    
    13.36
    %East Texas
    
    2,592 gross acres
    
    
    11.80
    %Gulf Coast Texas
    
    2,341 gross acres
    
    
    10.65
    %Alabama
    
    1,480 gross acres
    
    
    6.74
    %West Texas
    
    748 gross acres
    
    
    3.41
    %Louisiana
    
    723 gross acres
    
    
    3.29
    %Texas Panhandle
    
    640 gross acres
    
    
    2.91
    %New Mexico
    
    415 gross acres
    
    
    1.89
    %Oklahoma
    
    237 gross acres
    
    
    1.08
    %Total
    
    21,969 gross acres
    
    
    100.00
    %
     North Texas Including
the Fort Worth Basin
    
    1,926,404 BOE
    
    
    70.32
    %West Texas
    
    233,909 BOE
    
    
    8.53
    %East Texas
    
    166,239 BOE
    
    
    6.07
    %Oklahoma
    
    107,448 BOE
    
    
    3.92
    %Gulf Coast Texas
    
    72,348 BOE
    
    
    2.64
    %Louisiana
    
    57,319 BOE
    
    
    2.09
    %Alabama
    
    53,383 BOE
    
    
    1.95
    %New Mexico
    
    48,169 BOE
    
    
    1.76
    %Arkansas
    
    38,979 BOE
    
    
    1.42
    %Panhandle Texas
    
    18,316 BOE
    
    
    0.67
    %North Dakota
    
    8,406 BOE
    
    
    0.31
    %Wyoming
    
    4,990 BOE
    
    
    0.18
    %Montana
    
    3,430 BOE
    
    
    0.13
    %Michigan
    
    232 BOE
    
    
    0.01
    %Total
    
    2,739,572 BOE
    
    
    100.00
    %
  - 5 -




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Fort Worth Basin/Bend ArchProvince
      Joint Drilling Development of North Texas Barnett Shale Leasehold
   - 6 -




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- 7 -




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Companys Development of North Texas Barnett Shale Leasehold outside of the Joint Drilling
Development Project
   West Texas
   - 8 -




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East Texas
  Oklahoma
   Oil and Natural Gas Reserves
  Proved Developed Producing
    
    292,548 BO and
    
    10.205 BCFGProved Developed Non-Producing
    
    41,665 BO and
    
    0.741 BCFGProved Undeveloped
    
    10,941 BO and
    
    3.419 BCFGTotal Proved Reserves
    
    345,154 BO and
    
    14.367 BCFG
   - 9 -




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Natural Gas Reserves
    
    2,394,461 BOE
    
    
    87
    %Oil Reserves
    
    345,154 BOE
    
    
    13
    %Total Reserves
    
    2,739,615 BOE
    
    
    100
    %Proved Developed Producing
    
    1,993,420 BOE
    
    
    73
    %Proved Developed Non-Producing
    
    165,373 BOE
    
    
    6
    %Proved Undeveloped
    
    580,822 BOE
    
    
    21
    %Total Proved Reserves
    
    2,739,615 BOE
    
    
    100
    %
  The Companys Operated Wells
    
    2,544,536 BOE
    
    
    93
    %Non Operated Wells
    
    195,079 BOE
    
    
    7
    %Total
    
    2,739,615 BOE
    
    
    100
    %
 Financial Information Relating to Industry Segments
  Narrative Description of Business
  Principal Products, Distribution and Availability
   - 10 -




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Patents, Licenses and Franchises
   Dependence on Customers
  Year Ended December 31, (1)Purchaser
    
    2007
    
    
    2006
    
    
    2005Enbridge North Texas
    
    
    36
    %
    
    
    38
    %
    
    
    39
    %Crosstex Energy Services, LP
    
    
    26
    %
    
    
    3
    %
    
    
    5
    %Shell Trading (US) Company
    
    
    6
    %
    
    
    8
    %
    
    
    7
    %Teppco Crude Oil, LP
    
    
    5
    %
    
    
    3
    %
    
    
    
    %Targa Midstream Service, LIM
(formerly Dynegy Midstream Services, LIM
    
    
    3
    %
    
    
    
    %
    
    
    
    %Navajo Refining Co.
    
    
    2
    %
    
    
    
    %
    
    
    
    %Devon Gas Services, L.P
    
    
    2
    %
    
    
    4
    %
    
    
    6
    %ETC Texas Pipeline
    
    
    2
    %
    
    
    5
    %
    
    
    
    %Eastex Crude Company
    
    
    2
    %
    
    
    
    %
    
    
    
    %Empire Pipeline Corp
    
    
    1
    %
    
    
    3
    %
    
    
    
    %Duke Energy Field Services
    
    
    1
    %
    
    
    
    %
    
    
    
    %Plains Marketing, LP.
    
    
    1
    %
    
    
    6
    %
    
    
    6
    %Dynegy Midstream Services, LIM
    
    
    
    %
    
    
    
    %
    
    
    5
    %
 (1)
    
    Percent of Total Oil & Gas Sales  - 11 -




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Development Activities
     Special Tax Provisions
  Employees
   - 12 -




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Financial information about foreign and domestic operations and export sales
  Compliance with Environmental Regulations
  The United States of America v. Spindletop Drilling Company
  - 13 -




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Glossary of Oil and Gas Terms
             - 14 -




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- 15 -




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- 16 -




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Item 1A. Risk Factors
 Risks related directly to our Company
   - 17 -




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We face significant competition, and many of our competitors have resources in excess of our
available resources.
  Exploratory drilling is a speculative activity that may not result in commercially productive
reserves and may require expenditures in excess of budgeted amounts.
   - 18 -




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We are subject to uncertainties in reserve estimates and future net cash flows.
    - 19 -




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We are subject to various operating and other casualty risks that could result in liability
exposure or the loss of production and revenues.
     Certain of our affiliates control a majority of our outstanding common stock, which may affect your
vote as a shareholder.
   - 20 -




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Certain of our affiliates have engaged in business transactions with the Company, which may result
in conflicts of interest.
  Our common stock is traded on the Over-the-Counter Bulletin Board (OTC BB), symbol SPND.
   We do not intend to declare dividends in the foreseeable future.
   - 21 -




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We have substantial capital requirements necessary for undeveloped properties for which we may not
be able to obtain adequate financing.
   - 22 -




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Oil and natural gas prices fluctuate widely and low prices could have a material adverse impact on
our business and financial results.
  We may be responsible for additional costs in connection with abandonment of properties.
   - 23 -




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Risks that Involve the Oil & Gas Industry in General.
 We are subject to various governmental regulations which may cause us to incur substantial costs.
      - 24 -




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We are subject to various environmental risks which may cause us to incur substantial costs.
   - 25 -




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- 26 -




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Item 1B. Unresolved Staff Comments
  Item 2. Properties
 OIL AND GAS PROPERTIES
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Gas and Oil Properties, net (1):Proved developed gas reserves-Mcf (2)
    
    
    10,948,000
    
    
    
    7,353,000
    
    
    
    7,110,000Proved undeveloped gas reserves-Mcf (3)
    
    
    3,419,000
    
    
    
    6,033,000
    
    
    
    7,672,000Total proved gas reserves-Mcf
    
    
    14,367,000
    
    
    
    13,386,000
    
    
    
    14,782,000Proved Developed Crude Oil and Condensate reserves-Bbls (2)
    
    
    334,000
    
    
    
    341,000
    
    
    
    434,000Proved Undeveloped crude oil and Condensate reserves-Bbls (3)
    
    
    11,000
    
    
    
    16,000
    
    
    
    50,000Total proved crude oil and condensate
Reserves-Bbls
    
    
    345,000
    
    
    
    357,000
    
    
    
    484,000
 (1)
    
    The estimate of the net proved oil and gas reserves, future net revenues, and the present value
of future net revenues.(2)
    
    Proved Developed Oil and Gas Reserves are reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.(3)
    
    Proved Undeveloped Reserves are reserves that are expected to be recovered from new wells on
undrilled acreage, or from existing wells where a relatively major expenditure is required for
recompletion. See Footnote 18 to the Financial Statements, Supplemental Reserve Information
(Unaudited), for further explanation of the changes for 2005 through 2007.  - 27 -




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Productive Wells
 
 
  
 
 Gas
    
    
    Oil
    
    
    TotalGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net279
    
    
    
    67.33
    
    
    
    83
    
    
    
    18.97
    
    
    
    362
    
    
    
    86.30
 
 
 Acreage
 
 
  
 
 Undeveloped
    
    
    Developed
    
    
    TotalGross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    Net2,060
    
    
    
    2,054
    
    
    
    122,410
    
    
    
    21,701
    
    
    
    124,470
    
    
    
    23,755
 
 
  
  - 28 -




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Wells Drilled and Completed
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Gross
    
    
    Net
    
    
    Gross
    
    
    Net
    
    
    Gross
    
    
    NetExploratory Wells (1):Productive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-Productive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Development Wells (2):Productive
    
    
    17.000
    
    
    
    4.714
    
    
    
    10.000
    
    
    
    0.627
    
    
    
    14.000
    
    
    
    1.639Non-Productive
    
    
    
    
    
    
    
    
    
    
    1.000
    
    
    
    0.006
    
    
    
    
    
    
    
    Total
    
    
    17.000
    
    
    
    4.714
    
    
    
    11.000
    
    
    
    0.633
    
    
    
    14.000
    
    
    
    1.639Total Exploration & Development Wells:Productive
    
    
    17.000
    
    
    
    4.714
    
    
    
    10.000
    
    
    
    0.627
    
    
    
    14.000
    
    
    
    1.639Non-Productive
    
    
    
    
    
    
    
    
    
    
    1.000
    
    
    
    0.006
    
    
    
    
    
    
    
    Total
    
    
    17.000
    
    
    
    4.714
    
    
    
    11.000
    
    
    
    0.633
    
    
    
    14.000
    
    
    
    1.639
 (1)
    
    An exploratory well is a well drilled to find and produce oil or gas in an unproved area, to
find a new reservoir in a field previously found to be productive of oil or gas in another
reservoir, or to extend a known reservoir.(2)
    
    A development well is a well drilled within the proved area of an oil or gas reservoir to the
depth of a stratigraphic horizon known to be productive.  - 29 -




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For the years ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Oil and Gas Production, net:Natural Gas (Mcf)
    
    
    880,662
    
    
    
    671,527
    
    
    
    655,568
    
    
    
    577,099
    
    
    
    540,799Crude Oil & Condensate (Bbl)
    
    
    24,472
    
    
    
    25,443
    
    
    
    21,323
    
    
    
    23,098
    
    
    
    28,747Average Sales Price per Unit Produced:Natural Gas ($/Mcf)
    
    $
    6.63
    
    
    $
    5.55
    
    
    $
    6.74
    
    
    $
    5.44
    
    
    $
    4.33Crude Oil & Condensate($/Bbl)
    
    $
    65.17
    
    
    $
    53.14
    
    
    $
    52.50
    
    
    $
    38.90
    
    
    $
    25.14Average Production Cost per
Equivalent Barrel (1) (2)
    
    $
    14.36
    
    
    $
    15.14
    
    
    $
    13.38
    
    
    $
    11.69
    
    
    $
    10.41
 (1)
    
    Includes severance taxes and ad valorem taxes.(2)
    
    Gas production is converted to equivalent barrels at the rate of six Mcf per barrel,
representing relative energy content of natural gas to oil.    OFFICE SPACE
     - 30 -




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PIPELINES
   Oilfield Production Equipment
    Item 3. Legal Proceedings
   Item 4. Submission Of Matters Of Security Holders To A Vote
   - 31 -




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PART II
 Item 5. Market For The Companys Common Stock, Related Stockholder Matters And Issuer Purchases Of Equity Securities
   Price Per ShareHigh
    
    
    Low2005First Quarter
    
    
    5.50
    
    
    
    2.00Second Quarter
    
    
    3.55
    
    
    
    2.05Third Quarter
    
    
    4.20
    
    
    
    1.90Fourth Quarter
    
    
    4.80
    
    
    
    3.112006First Quarter
    
    
    5.15
    
    
    
    3.26Second Quarter
    
    
    6.00
    
    
    
    4.57Third Quarter
    
    
    6.25
    
    
    
    4.95Fourth Quarter
    
    
    7.00
    
    
    
    4.502007First Quarter
    
    
    6.10
    
    
    
    5.00Second Quarter
    
    
    6.10
    
    
    
    4.05Third Quarter
    
    
    5.55
    
    
    
    5.00Fourth Quarter
    
    
    5.70
    
    
    
    5.15
  - 32 -




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Price Per ShareHigh
    
    
    Low2008First Quarter
    
    
    6.50
    
    
    
    5.00
    Stock Performance Chart
 
   - 33 -




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Item 6. Selected Financial Data
  For the years ended December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Total Revenue
    
    $
    8,707,000
    
    
    $
    6,174,000
    
    
    $
    6,395,000
    
    
    $
    4,515,000
    
    
    $
    2,458,000Net Income (Loss)
    
    
    1,808,000
    
    
    
    920,000
    
    
    
    1,417,000
    
    
    
    1,266,000
    
    
    
    987,000Earnings per Share
    
    $
    0.24
    
    
    $
    0.12
    
    
    $
    0.19
    
    
    $
    0.16
    
    
    $
    0.13
 As of December 31,2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Total Assets
    
    $
    15,631,000
    
    
    $
    13,024,000
    
    
    $
    11,387,000
    
    
    $
    9,715,000
    
    
    $
    5,395,000Long-Term Debt
    
    
    1,200,000
    
    
    
    1,320,000
    
    
    
    1,440,000
    
    
    
    
    
    
    
    
 Item 7. Managements Discussion And Analysis Of Financial Condition And
Results Of Operations
 Liquidity and Capital Resources
   - 34 -




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Results of Operations:
 2007 Compared to 2006
 
  
         - 35 -




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2006 Compared to 2005
          - 36 -




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Certain Factors That Could Affect Future Operations
   Item 8. Consolidated Financial Statements And
Schedules Index At Page 48
 Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
  Item 9A(T). Controls And Procedures
  
  
  - 37 -




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
    
    pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of a company;
    
    provide reasonable assurance that the transactions are recorded as
necessary to permit preparation of financial statements in accordance
with GAAP, US and that receipts and expenditures of a company are
being made only in accordance with authorization of management and
directors of a company; and
    
    provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of a companys assets
that could have a material effect on the financial statements.
  
  
     - 38 -




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Item 9B. Other Information
  PART III
 Item 10. Directors And Executive Officers Of The Registrant
  Name
    
    Age
    
    PositionChris G. Mazzini
    
    50
    
    Chairman of the Board, Director and PresidentMichelle H. Mazzini
    
    46
    
    Director, Vice President, Secretary, TreasurerDavid E. Allard
    
    49
    
    Director
   Business Experience
   - 39 -




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Key Employees
    - 40 -




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- 41 -




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Family Relationships
  Involvement in Certain Legal Proceedings
  Item 11. Executive Compensation
 Cash Compensation
   Compensation Pursuant to Plan
  Other Compensation
    - 42 -




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Compensation of Directors
  Termination of Employment and Change of Control Arrangement
   - 43 -




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Item 12. Security Ownership Of Certain Beneficial Owners And Management
 Security Ownership of Certain Beneficial Owners and Managers
  Pct Based OnNature of
    
    
    OutstandingName and Address
    
    Number
    
    
    Beneficial
    
    
    Percent ofOf Beneficial Owner
    
    of Shares
    
    
    Ownership
    
    
    ClassChris Mazzini and Michelle Mazzini12850 Spurling Rd., Suite 200
Dallas, Texas 75230
    
    
    5,900,543
    
    
    
    (1
    )
    
    
    77
    %All officers and directors
as a group
    
    
    5,900,543
    
    
    
    
    
    
    
    77
    %West Coast Asset Management, Inc.
Paul J. Orfalea
Lance W. Helfert 
R. Atticus Lowe 
2151 Alessandro Drive, #100
Ventura, CA 93001
    
    
    624,612
    
    
    
    (2
    )
    
    
    8
    %
 (1)
    
    Chris Mazzini directly owns 39,654 shares (1%). Giant Energy Corp., directly owns 5,860,889
shares (76%). Chris Mazzini owns 100% of the common stock of Giant Energy Corp.(2)
    
    According to Amendment No. 1 to Schedule 13G filed with the Commission by these persons for
event occurring December 31, 2007, each of the individually named persons have shared power to vote
or direct a vote as well as shared power to dispose or direct the disposition of the aggregate
amount of stock owned. Changes in control
  Item 13. Certain Relationships And Related Transactions
 Transactions with management and others
   - 44 -




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Certain Business Relationships
     - 45 -




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Item 14. Principal Accounting Fees And Services
  Type of Fees
    
    2007
    
    
    2006
    
    
    2005Audit Fees
    
    $
    33,000
    
    
    $
    14,000
    
    
    $
    14,000Audit related fees
    
    
    
    
    
    
    
    
    
    
    Tax fees
    
    
    
    
    
    
    
    
    
    
    All other fees
    
    
    
    
    
    
    
    
    
    
    
   - 46 -




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PART IV
  (a)
    
    The following documents are filed as a part of this report:
  
 PageReport of Farmer, Fuqua & Huff, P.CIndependent Registered Public Accounting Firm
    
    
    51Consolidated Balance Sheets
    
    
    52Consolidated Statement of Income
    
    
    54Consolidated Statement of Changes in
Stockholders Equity
    
    
    55Consolidated Statements of Cash Flows
    
    
    56Notes to Consolidated Financial Statements
    
    
    57
 
    ExhibitDesignation
    
    Description3.1
    
    
    Articles of Incorporation of Spindletop Oil & Gas Co. (previously filed with our General
Form for Registration of Securities on Form 10, filed with the Commission on August 14, 1990)3.2
    
    
    Bylaws of Spindletop Oil & Gas Co. (previously filed with our General Form for
Registration of Securities on Form 10, filed with the Commission on August 14, 1990)14
    
    
    Code of Ethics for Senior Financial Officers (Incorporated by reference to
Exhibit 14 to the registrants annual report Form 10-K for the fiscal year ended December 31,
2005).21
    *
    
    Subsidiaries of the Registrant31.1
    *
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    *
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    *
    
    Officers Section 1350 Certifications
 
 *
    
    Filed herewith (b)
    
    The Index of Exhibits is included following the Financial Statement Schedules beginning at page
71 of this Report.(c)
    
    The Index to Consolidated Financial Statements and Supplemental Schedules is included following
the signatures, beginning at page 42 of this Report.
  - 47 -




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##### 



Dated: April 14, 2008
    SPINDLETOP OIL & GAS CO.By
    
    /s/ Chris MazziniChris MazziniPresident, Director  
 SignaturesPrincipal Executive Officers:
    
    
    
    Capacity
    
    
    
    Date/s/ Chris Mazzini

Chris Mazzini
    
    
    
    President,
Director
(Chief Executive
Officer)
    
    
    
    April 14, 2008/s/ Michelle Mazzini

Michelle Mazzini
    
    
    
    Vice President, Secretary,
Treasurer, Director
    
    
    
    April 14, 2008/s/ David E. Allard

David E. Allard
    
    
    
    Director
    
    
    
    April 14, 2008/s/ Robert E. Corbin

Robert E. Corbin
    
    
    
    Controller (Principal
Financial and Accounting
Officer)
    
    
    
    April 14, 2008
 
  - 48 -




---



##### 



ExhibitNumber
    
    Description3.1
    
    
    Articles of Incorporation of Spindletop Oil & Gas Co. (previously filed with our General
Form for Registration of Securities on Form 10, filed with the Commission on August 14, 1990)3.2
    
    
    Bylaws of Spindletop Oil & Gas Co. (previously filed with our General Form for
Registration of Securities on Form 10, filed with the Commission on August 14, 1990)14
    
    
    Code of Ethics for Senior Financial Officers (Incorporated by reference to
Exhibit 14 to the registrants annual report Form 10-K for the fiscal year ended December 31,
2005).21
    *
    
    Subsidiaries of the Registrant31.1
    *
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    *
    
    Rule 13a-14(a) Certification of Chief Financial Officer32
    *
    
    Officers Section 1350 Certifications
 
 *
    
    Filed herewith  - 49 -




---



##### 



PageReport of Independent Registered Public Accounting Firm
    
    
    51Consolidated Balance Sheets  December 31, 2007 and 2006
    
    
    52Consolidated Statements of Income for the years
Ended December 31, 2007, 2006 and 2005
    
    
    54Consolidated Statements of Changes in Shareholders
Equity for the years ended December 31, 2007, 2006, and 2005
    
    
    55Consolidated Statements of Cash Flows for the years ended
December 31, 2007, 2006 and 2005
    
    
    56Notes to Consolidated Financial Statements
    
    
    57Schedules for the years ended December 31, 2007, 2006 and 2005II  Valuation and Qualifying Accounts
    
    
    79III  Real Estate and Accumulated Depreciation
    
    
    80
 
   - 50 -




---



##### 



- 51 -




---



##### 



As of December 312007
    
    
    2006ASSETSCurrent AssetsCash and cash equivalents
    
    $
    6,325,000
    
    
    $
    5,759,000Accounts receivable, trade
    
    
    1,413,000
    
    
    
    1,173,000Prepaid expenses, related party
    
    
    
    
    
    
    60,000Prepaid income tax
    
    
    
    
    
    
    426,000Total current assets
    
    
    7,738,000
    
    
    
    7,418,000Property and Equipment, at costOil and gas properties (full cost method)
    
    
    11,041,000
    
    
    
    8,102,000Rental equipment
    
    
    399,000
    
    
    
    399,000Gas gathering systems
    
    
    145,000
    
    
    
    145,000Other property and equipment
    
    
    183,000
    
    
    
    141,00011,768,000
    
    
    
    8,787,000Accumulated depreciation and amortization
    
    
    (5,902,000
    )
    
    
    (5,257,000
    )Total property and equipment, net
    
    
    5,866,000
    
    
    
    3,530,000Real Estate Property, at costLand
    
    
    688,000
    
    
    
    688,000Commercial office building
    
    
    1,542,000
    
    
    
    1,508,000Accumulated depreciation
    
    
    (204,000
    )
    
    
    (120,000
    )Total real estate property, net
    
    
    2,026,000
    
    
    
    2,076,000Other Assets
    
    
    1,000
    
    
    
    Total Assets
    
    $
    15,631,000
    
    
    $
    13,024,000
   - 52 -




---



##### 



As of December 312007
    
    
    2006LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesNotes payable, current portion
    
    $
    120,000
    
    
    $
    120,000Accounts payable and accrued liabilities
    
    
    2,272,000
    
    
    
    2,237,000Income tax payable
    
    
    8,000
    
    
    
    Tax savings benefit payable
    
    
    97,000
    
    
    
    97,000Total current liabilities
    
    
    2,497,000
    
    
    
    2,454,000Non-current LiabilitiesNotes payable, long-term portion
    
    
    1,200,000
    
    
    
    1,320,000Asset Retirement Obligation
    
    
    564,000
    
    
    
    251,000Total non-current liabilities
    
    
    1,764,000
    
    
    
    1,571,000Deferred income tax payable
    
    
    1,855,000
    
    
    
    1,324,000Shareholders EquityCommon stock, $.01 par value; 100,000,000
Shares authorized; 7,677,471 shares
issued and 7,610,803 shares outstanding
at December 31, 2007; 7,677,471 shares
issued and 7,595,803 shares outstanding at
December 31, 2006
    
    
    77,000
    
    
    
    77,000Additional paid-in capital
    
    
    874,000
    
    
    
    850,000Treasury Stock at cost
    
    
    (32,000
    )
    
    
    (40,000
    )Retained earnings
    
    
    8,596,000
    
    
    
    6,788,000Total shareholders equity
    
    
    9,515,000
    
    
    
    7,675,000Total Liabilities and Shareholders Equity
    
    $
    15,631,000
    
    
    $
    13,024,000
   - 53 -




---



##### 



Years Ended December 31,2007
    
    
    2006
    
    
    2005RevenuesOil and gas revenue
    
    $
    7,437,000
    
    
    $
    5,076,000
    
    
    $
    5,541,000Revenue from lease operations
    
    
    212,000
    
    
    
    154,000
    
    
    
    120,000Gas gathering, compression and
Equipment rental
    
    
    179,000
    
    
    
    140,000
    
    
    
    167,000Real estate rental income
    
    
    512,000
    
    
    
    430,000
    
    
    
    302,000Interest income
    
    
    299,000
    
    
    
    275,000
    
    
    
    132,000Other
    
    
    68,000
    
    
    
    99,000
    
    
    
    133,000Total revenue
    
    
    8,707,000
    
    
    
    6,174,000
    
    
    
    6,395,000ExpensesLease operations
    
    
    2,459,000
    
    
    
    2,106,000
    
    
    
    1,747,000Pipeline and rental operations
    
    
    49,000
    
    
    
    50,000
    
    
    
    29,000Real estate operations
    
    
    365,000
    
    
    
    330,000
    
    
    
    484,000Depreciation and amortization
    
    
    728,000
    
    
    
    528,000
    
    
    
    795,000Accretion of asset retirement
obligation
    
    
    24,000
    
    
    
    34,000
    
    
    
    General and administrative
    
    
    2,221,000
    
    
    
    1,534,000
    
    
    
    1,125,000Interest expense
    
    
    86,000
    
    
    
    142,000
    
    
    
    105,000Total expenses
    
    
    5,932,000
    
    
    
    4,724,000
    
    
    
    4,285,000Income before income tax
    
    
    2,775,000
    
    
    
    1,450,000
    
    
    
    2,110,000Current tax provision
    
    
    436,000
    
    
    
    
    
    
    
    360,000Deferred tax provision
    
    
    531,000
    
    
    
    530,000
    
    
    
    333,000967,000
    
    
    
    530,000
    
    
    
    693,000Net income
    
    $
    1,808,000
    
    
    $
    920,000
    
    
    $
    1,417,000Earnings per Share of Common StockBasic
    
    $
    0.24
    
    
    $
    0.12
    
    
    $
    0.19Diluted
    
    $
    0.24
    
    
    $
    0.12
    
    
    $
    0.19Weighted Average Shares Outstanding
    
    
    7,604,269
    
    
    
    7,589,995
    
    
    
    7,573,365Diluted Shares Outstanding
    
    
    7,604,269
    
    
    
    7,589,995
    
    
    
    7,573,365
   - 54 -




---



##### 



AdditionalCommon Stock
    
    
    Paid-In
    
    
    Treasury Stock
    
    
    RetainedShares
    
    
    Amount
    
    
    Capital
    
    
    Shares
    
    
    Amount
    
    
    EarningsBalance at
December 31, 2004
    
    
    7,677,471
    
    
    
    77,000
    
    
    
    806,000
    
    
    
    111,668
    
    
    
    (45,000
    )
    
    
    4,451,000Issuance of 20,000
shares of Common Stock
out of Treasury Stock
as part of an employee
compensation package
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    (20,000
    )
    
    
    3,000
    
    
    
    Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,417,000Balance at
December 31, 2005
    
    
    7,677,471
    
    
    $
    77,000
    
    
    $
    831,000
    
    
    
    91,668
    
    
    $
    (42,000
    )
    
    $
    5,868,000Issuance of 10,000
shares of Common Stock
out of Treasury Stock
as part of an employee
compensation package
    
    
    
    
    
    
    
    
    
    
    19,000
    
    
    
    (10,000
    )
    
    
    2,000
    
    
    
    Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    920,000Balance at
December 31, 2006
    
    
    7,677,471
    
    
    $
    77,000
    
    
    $
    850,000
    
    
    
    81,668
    
    
    $
    (40,000
    )
    
    $
    6,788,000Issuance of 5,000
shares of Common Stock
out of Treasury Stock
as part of an employee
compensation package
    
    
    
    
    
    
    
    
    
    
    9,000
    
    
    
    (5,000
    )
    
    
    2,000
    
    
    
    Issuance of 10,000
shares of Common Stock
out of Treasury Stock
as part of an employee
compensation package
    
    
    
    
    
    
    
    
    
    
    15,000
    
    
    
    (10,000
    )
    
    
    6,000
    
    
    
    Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,808,000Balance at
December 31, 2007
    
    
    7,677,471
    
    
    $
    77,000
    
    
    $
    874,000
    
    
    
    66,668
    
    
    $
    (32,000
    )
    
    $
    8,596,000
   - 55 -




---



##### 



Years Ended December 31,2007
    
    
    2006
    
    
    2005Cash Flows from Operating ActivitiesNet Income
    
    $
    1,808,000
    
    
    $
    920,000
    
    
    $
    1,417,000Reconciliation of net income
to net cash provided by
Operating ActivitiesDepreciation and amortization
    
    
    728,000
    
    
    
    528,000
    
    
    
    795,000Non-cash employee compensation
    
    
    32,000
    
    
    
    21,000
    
    
    
    Changes in prepaid expenses
to related party
    
    
    60,000
    
    
    
    (60,000
    )
    
    
    Changes in accounts receivable
    
    
    (240,000
    )
    
    
    55,000
    
    
    
    (611,000
    )Changes in prepaid income tax
    
    
    427,000
    
    
    
    (426,000
    )
    
    
    190,000Changes in accounts payable
    
    
    35,000
    
    
    
    293,000
    
    
    
    (125,000
    )Changes in current taxes payable
    
    
    8,000
    
    
    
    (20,000
    )
    
    
    20,000Changes in deferred taxes payable
    
    
    531,000
    
    
    
    530,000
    
    
    
    333,000Changes in asset retirement
obligation
    
    
    313,000
    
    
    
    
    
    
    
    Changes in other assets
    
    
    (1,000
    )
    
    
    1,000
    
    
    
    Net cash provided by operating
activities
    
    
    3,701,000
    
    
    
    1,842,000
    
    
    
    2,019,000Cash flows from Investing ActivitiesCapitalized acquisition, exploration
and development costs
    
    
    (2,940,000
    )
    
    
    (1,271,000
    )
    
    
    (619,000
    )Purchase of property and equipment
    
    
    (42,000
    )
    
    
    10,000
    
    
    
    (55,000
    )Capitalized tenant improvements
    
    
    (33,000
    )
    
    
    (210,000
    )
    
    
    Proceeds from sale of properties
    
    
    
    
    
    
    
    
    
    
    23,000Net cash used for investing activities
activities
    
    
    (3,015,000
    )
    
    
    (1,471,000
    )
    
    
    (651,000
    )Cash Flows from Financing ActivitiesRepayment of note payable to a bank
    
    
    (120,000
    )
    
    
    (120,000
    )
    
    
    (240,000
    )Sale of common stock
    
    
    
    
    
    
    
    
    
    
    28,000Net cash used for financing
activities
    
    
    (120,000
    )
    
    
    (120,000
    )
    
    
    (212,000
    )Increase in cash
    
    
    566,000
    
    
    
    251,000
    
    
    
    1,156,000Cash at beginning of period
    
    
    5,759,000
    
    
    
    5,508,000
    
    
    
    4,352,000Cash at end of period
    
    $
    6,325,000
    
    
    $
    5,759,000
    
    
    $
    5,508,000
   - 56 -




---



##### 



Merger and Basis of Presentation
  Organization and Nature of Operations
      Consolidation
   - 57 -




---



##### 



Cash and Cash Equivalents
  Allowance for Doubtful Accounts
  Oil and Gas Properties
 country-by-country
 
  
  Property and Equipment
   straight-line
  - 58 -




---



##### 



Real Estate Property
  
 Investments in Real Estate
 
 
  
 Accounting for Asset Retirement Obligations
   2007
    
    
    2006Carrying amount of asset retirement obligation
    
    $
    251,000
    
    
    $
    239,000Liabilities added
    
    
    374,000
    
    
    
    27,000Liabilities divested or settled
    
    
    (85,000
    )
    
    
    (49,000
    )Current period accretion expenses
    
    
    24,000
    
    
    
    34,000Carrying amount as of December 31,
    
    $
    564,000
    
    
    $
    251,000
  - 59 -




---



##### 



Revenue Recognition
 
 
  
 Income Taxes
    Use of Estimates
   - 60 -




---



##### 



Share-Based Payments
 share-based
 
 Newly issued accounting standards
 
 
 Fair Value Measurements.
 
 
 
 
 
 
 
 
 
 
 
 non-financial
 
 
 The Fair Value Option for Financial Assets and
Financial Liabilitiesincluding an amendment of FASB Statement No. 115. 159 159
  
 - 61 -




---



##### 



Business
Combinations.
 
 
 Noncontrolling Interests in Consolidated Financial
Statements.
 
  December 31,2007
    
    
    2006Trade
    
    $
    370,000
    
    
    $
    530,000Accrued receivable
    
    
    1,057,000
    
    
    
    657,0001,427,000
    
    
    
    1,187,000Less: Allowance for losses
    
    
    (14,000
    )
    
    
    (14,000
    )$
    1,413,000
    
    
    $
    1,173,000
 
  
  - 62 -




---



##### 



December 31,2007
    
    
    2006Trade payables
    
    $
    699,000
    
    
    $
    213,000Production proceeds payable
    
    
    1,070,000
    
    
    
    1,385,000Prepaid drilling costs
    
    
    414,000
    
    
    
    561,000Other
    
    
    89,000
    
    
    
    78,000$
    2,272,000
    
    
    $
    2,237,000
  December 31,2007
    
    
    2006Note payable to a bank with monthly
principal payments of $10,000 plus
Accrued interest; interest at a
variable annual interest rate based
upon an index which is the Treasury
Securities Rate for a term of seven
years, plus 2.20%. The interest rate
is subject to change on the first day
of each seven year anniversary after
the date of the note based on the Index
then in effect. As of the date of the
Loan, the annual interest rate was
6.11%. The note is collateralized by
land and commercial office building,
plus a guarantee by certain related
parties.
    
    $
    1,320,000
    
    
    $
    1,440,000Less current maturities
    
    
    120,000
    
    
    
    120,000Total notes payable, long-term portion
    
    $
    1,200,000
    
    
    $
    1,320,000
  2008
    
    $
    120,0002009
    
    
    120,0002010
    
    
    120,0002011
    
    
    120,0002012
    
    
    120,000thereafter
    
    
    720,000$
    1,320,000
  - 63 -




---



##### 



share-based
  - 64 -




---



##### 



- 65 -




---



##### 



2007
    
    
    2006
    
    
    2005Computed expected tax expense
    
    $
    944,000
    
    
    $
    493,000
    
    
    $
    718,000Miscellaneous timing differences
related to book and tax depletion
differences and the expensing of
intangible drilling costs
    
    
    (508,000
    )
    
    
    (493,000
    )
    
    
    (358,000
    )$
    436,000
    
    
    $
    
    
    
    $
    360,000
  - 66 -




---



##### 



December 31,2007
    
    
    2006Deferred tax assetsDepreciation, depletion and amortization
    
    
    22,000
    
    
    
    247,000Other, net
    
    
    9,000
    
    
    
    9,000Total
    
    
    31,000
    
    
    
    256,000Deferred tax liabilitiesExpired leasehold
    
    
    (58,000
    )
    
    
    (58,000
    )Intangible drilling costs
    
    
    (1,828,000
    )
    
    
    (1,522,000
    )Net deferred tax liability
    
    
    (1,855,000
    )
    
    
    (1,324,000
    )
     2007
    
    
    2006
    
    
    2005Addition (reduction) of Oil & Gas
Properties by recognition of
Asset Retirement Obligation
    
    $
    289,000
    
    
    
    (22,000
    )
    
    $
    239,000$
    289,000
    
    
    $
    (22,000
    )
    
    $
    239,000
    - 67 -




---



##### 



2007
    
    
    2006Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    ValueCash
    
    $
    6,325,000
    
    
    $
    6,325,000
    
    
    $
    5,759,000
    
    
    $
    5,759,000Accounts receivable
    
    
    1,413,000
    
    
    
    1,413,000
    
    
    
    1,173,000
    
    
    
    1,173,000
       - 68 -




---



##### 



Sale of Oil & Gas Properties
    - 69 -




---



##### 



Significant Oil and Gas Purchasers
   Year Ended December 31, (1)Purchaser
    
    2007
    
    
    2006
    
    
    2005Enbridge North Texas
    
    
    36
    %
    
    
    38
    %
    
    
    39
    %Crosstex Energy Services, LP
    
    
    26
    %
    
    
    3
    %
    
    
    5
    %Shell Trading (US) Company
    
    
    6
    %
    
    
    8
    %
    
    
    7
    %Teppco Crude Oil, LP
    
    
    5
    %
    
    
    3
    %
    
    
    
    %Targa Midstream Service, LIM
(formerly Dynegy Midstream Services, LIM
    
    
    3
    %
    
    
    
    %
    
    
    
    %Navajo Refining Co.
    
    
    2
    %
    
    
    
    %
    
    
    
    %Devon Gas Services, L.P
    
    
    2
    %
    
    
    4
    %
    
    
    6
    %ETC Texas Pipeline
    
    
    2
    %
    
    
    5
    %
    
    
    
    %Eastex Crude Company
    
    
    2
    %
    
    
    
    %
    
    
    
    %Empire Pipeline Corp
    
    
    1
    %
    
    
    3
    %
    
    
    
    %Duke Energy Field Services
    
    
    1
    %
    
    
    
    %
    
    
    
    %Plains Marketing, LP.
    
    
    1
    %
    
    
    6
    %
    
    
    6
    %Dynegy Midstream Services, LIM
    
    
    
    %
    
    
    
    %
    
    
    5
    %
 (1)
    
    Percent of Total Oil & Gas Sales    - 70 -




---



##### 



Year Ended December 31,2007
    
    
    2006
    
    
    2005Capitalized costs relating to oil
and gas producing activities:Unproved properties
    
    $
    1,100,000
    
    
    $
    428,000
    
    
    $
    349,000Proved properties
    
    
    9,941,000
    
    
    
    7,674,000
    
    
    
    6,470,000Total capitalized costs
    
    
    11,041,000
    
    
    
    8,102,000
    
    
    
    6,819,000Accumulated amortization
    
    
    (5,249,000
    )
    
    
    (4,631,000
    )
    
    
    (4,196,000
    )Total capitalized costs, net
    
    $
    5,792,000
    
    
    $
    3,471,000
    
    
    $
    2,623,000
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Costs incurred in oil and gas property
acquisition, exploration and
development:Acquisition of properties
    
    $
    1,516,000
    
    
    $
    
    
    
    $
    Development costs
    
    
    1,423,000
    
    
    
    1,283,000
    
    
    
    621,000Total costs incurred
    
    $
    2,939,000
    
    
    $
    1,283,000
    
    
    $
    621,000
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Results of Operations from producing
activities:Sales of oil and gas
    
    $
    7,437,000
    
    
    $
    5,076,000
    
    
    $
    5,541,000Production costs
    
    
    2,459,000
    
    
    
    2,106,000
    
    
    
    1,747,000Amortization of oil and gas
Properties
    
    
    619,000
    
    
    
    435,000
    
    
    
    738,000Total production costs
    
    
    3,078,000
    
    
    
    2,541,000
    
    
    
    2,485,000Total net revenue
    
    $
    4,359,000
    
    
    $
    2,535,000
    
    
    $
    3,056,000
  - 71 -




---



##### 



Year Ended December 31,2007
    
    
    2006
    
    
    2005Sales price per equivalent Mcf
    
    $
    7.24
    
    
    $
    6.16
    
    
    $
    7.07Production costs per equivalent Mcf
    
    $
    2.39
    
    
    $
    2.55
    
    
    $
    2.23Amortization per equivalent Mcf
    
    $
    0.60
    
    
    $
    0.53
    
    
    $
    1.03
 Year Ended December 31,2007
    
    
    2006
    
    
    2005Results of Operations from gas
gathering and equipment rental
activities:Revenue
    
    $
    179,000
    
    
    $
    140,000
    
    
    $
    167,000Operating expenses
    
    
    50,000
    
    
    
    50,000
    
    
    
    29,000Depreciation
    
    
    7,000
    
    
    
    10,000
    
    
    
    10,000Total costs
    
    
    57,000
    
    
    
    60,000
    
    
    
    39,000Total net revenue
    
    $
    122,000
    
    
    $
    80,000
    
    
    $
    128,000
   Year Ended December 31,2007
    
    
    2006
    
    
    2005Revenues: (3)Oil and gas exploration, production
and operations
    
    $
    7,649,000
    
    
    $
    5,230,000
    
    
    $
    5,661,000Gas gathering, compression and
equipment rental
    
    
    179,000
    
    
    
    140,000
    
    
    
    167,000Real estate rental
    
    
    512,000
    
    
    
    430,000
    
    
    
    302,000$
    8,340,000
    
    
    $
    5,800,000
    
    
    $
    6,130,000Depreciation, depletion and
Amortization expense:Oil and gas exploration, production
and operations
    
    $
    673,000
    
    
    $
    471,000
    
    
    $
    738,000Gas gathering, compression and
equipment rental
    
    
    8,000
    
    
    
    10,000
    
    
    
    10,000Real estate rental
    
    
    47,000
    
    
    
    47,000
    
    
    
    47,000$
    728,000
    
    
    $
    528,000
    
    
    $
    795,000
  - 72 -




---



##### 



Year Ended December 31,2007
    
    
    2006
    
    
    2005Income from operations:Oil and gas exploration, production
and operations
    
    $
    4,493,000
    
    
    $
    2,653,000
    
    
    $
    3,176,000Gas gathering, compression and
equipment rental
    
    
    122,000
    
    
    
    80,000
    
    
    
    128,000Real estate rental
    
    
    100,000
    
    
    
    53,000
    
    
    
    (229,000
    )4,715,000
    
    
    
    2,786,000
    
    
    
    3,075,000Corporate and other (1)
    
    
    (2,907,000
    )
    
    
    (1,866,000
    )
    
    
    (1,658,000
    )Consolidated net income (loss)
    
    $
    1,808,000
    
    
    $
    920,000
    
    
    $
    1,417,000Identifiable Assets net of DDA:Oil and gas exploration, production
and operations
    
    $
    5,851,000
    
    
    $
    3,507,000
    
    
    $
    2,682,000Gas gathering, compression and
equipment rental
    
    
    15,000
    
    
    
    23,000
    
    
    
    31,000Real estate rental
    
    
    2,026,000
    
    
    
    2,076,000
    
    
    
    1,937,000$
    7,892,000
    
    
    $
    5,606,000
    
    
    $
    4,650,000Corporate and other (2)
    
    
    7,739,000
    
    
    
    7,418,000
    
    
    
    6,737,000Consolidated total assets
    
    $
    15,631,000
    
    
    $
    13,024,000
    
    
    $
    11,387,000
 Note (1):
    
    Corporate and other includes general and administrative expenses,
other non-operating income and expense and income taxes.Note (2):
    
    Corporate and other includes cash, accounts and notes receivable,
inventory, other property and equipment and intangible assets.Note (3):
    
    All reported revenues are from external customers.  - 73 -




---



##### 



Year Ended December 31,2007
    
    
    2006
    
    
    2005Maintenance and repairs
    
    $
    8,000
    
    
    $
    31,000
    
    
    $
    10,000Production taxes
    
    
    455,000
    
    
    
    290,000
    
    
    
    303,000Taxes, other than payroll and
income taxes
    
    
    49,000
    
    
    
    37,000
    
    
    
    70,000
   Year Ended December 31, 2007First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenue
    
    $
    1,417,000
    
    
    $
    2,160,000
    
    
    $
    1,988,000
    
    
    $
    3,142,000Expense
    
    
    (999,000
    )
    
    
    (1,296,000
    )
    
    
    (1,440,000
    )
    
    
    (2,197,000
    )Operating income
    
    
    418,000
    
    
    
    864,000
    
    
    
    548,000
    
    
    
    945,000Current tax provision
    
    
    (111,000
    )
    
    
    (177,000
    )
    
    
    (10,000
    )
    
    
    (138,000
    )Deferred tax provision
    
    
    (91,000
    )
    
    
    (173,000
    )
    
    
    (147,000
    )
    
    
    (120,000
    )Net income
    
    
    216,000
    
    
    
    514,000
    
    
    
    391,000
    
    
    
    687,000Earnings per share
of common stockBasic
    
    $
    0.03
    
    
    $
    0.07
    
    
    $
    0.05
    
    
    $
    0.09Diluted
    
    $
    0.03
    
    
    $
    0.07
    
    
    $
    0.05
    
    
    $
    0.09
  - 74 -




---



##### 



Year Ended December 31, 2006First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenue
    
    $
    1,561,000
    
    
    $
    1,520,000
    
    
    $
    1,696,000
    
    
    $
    1,397,000Expense
    
    
    (927,000
    )
    
    
    (1,176,000
    )
    
    
    (1,233,000
    )
    
    
    (1,388,000
    )Operating income
    
    
    634,000
    
    
    
    344,000
    
    
    
    463,000
    
    
    
    9,000Current tax provision
    
    
    (2,000
    )
    
    
    (133,000
    )
    
    
    (115,000
    )
    
    
    250,000Deferred tax provision
    
    
    (161,000
    )
    
    
    (91,000
    )
    
    
    (20,000
    )
    
    
    (258,000
    )Net income
    
    
    471,000
    
    
    
    120,000
    
    
    
    328,000
    
    
    
    1,000Earnings per share
of common stockBasic
    
    $
    0.06
    
    
    $
    0.02
    
    
    $
    0.04
    
    
    $
    0.00Diluted
    
    $
    0.06
    
    
    $
    0.02
    
    
    $
    0.04
    
    
    $
    0.00
 Year Ended December 31, 2005First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterRevenue
    
    $
    1,306,000
    
    
    $
    1,503,000
    
    
    $
    1,465,000
    
    
    $
    2,121,000Expense
    
    
    (698,000
    )
    
    
    (898,000
    )
    
    
    (1,037,000
    )
    
    
    (1,652,000
    )Operating income
    
    
    608,000
    
    
    
    605,000
    
    
    
    428,000
    
    
    
    469,000Current tax provision
    
    
    (109,000
    )
    
    
    (140,000
    )
    
    
    (76,000
    )
    
    
    (35,000
    )Deferred tax provision
    
    
    (55,000
    )
    
    
    (40,000
    )
    
    
    (39,000
    )
    
    
    (199,000
    )Net income
    
    
    444,000
    
    
    
    425,000
    
    
    
    313,000
    
    
    
    235,000Earnings per share
of common stockBasic
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.04
    
    
    $
    0.03Diluted
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.04
    
    
    $
    0.03
  - 75 -




---



##### 



Crude Oil
    
    
    Natural GasBbls
    
    
    McfQuantities of Proved Reserves:Balance December 31, 2004
    
    
    418,993
    
    
    
    13,732,132Sales of reserves in place
    
    
    (770
    )
    
    
    (6,113
    )Acquired properties
    
    
    
    
    
    
    Extensions and discoveries
    
    
    6,407
    
    
    
    188,973Revisions of previous estimates
    
    
    80,316
    
    
    
    1,522,389Production
    
    
    (21,323
    )
    
    
    (655,568
    )Balance December 31, 2005
    
    
    483,623
    
    
    
    14,781,813Sales of reserves in place
    
    
    
    
    
    
    Acquired properties
    
    
    
    
    
    
    Extensions and discoveries
    
    
    35,856
    
    
    
    6,098,653Revisions of previous estimates
    
    
    (137,414
    )
    
    
    (6,822,992
    )Production
    
    
    (25,443
    )
    
    
    (671,512
    )Balance December 31, 2006
    
    
    356,622
    
    
    
    13,385,962Sales of reserves in place
    
    
    
    
    
    
    Acquired properties
    
    
    
    
    
    
    Extensions and discoveries
    
    
    12,239
    
    
    
    1,485,603Revisions of previous estimates
    
    
    765
    
    
    
    375,862Production
    
    
    (24,472
    )
    
    
    (880,662
    )Balance December 31, 2007
    
    
    345,154
    
    
    
    14,366,765Proved Developed Reserves:Balance December 31, 2005
    
    
    433,455
    
    
    
    7,109,815Balance December 31, 2006
    
    
    340,870
    
    
    
    7,352,511Balance December 31, 2007
    
    
    334,213
    
    
    
    10,947,481
  - 76 -




---



##### 



- 77 -




---



##### 



Year Ended December 31,2007
    
    
    2006
    
    
    2005Future production revenue
    
    $
    115,233,000
    
    
    $
    81,294,000
    
    
    $
    130,178,000Future development costs
    
    
    (4,601,000
    )
    
    
    (4,778,000
    )
    
    
    (13,831,000
    )Future production costs
    
    
    (26,806,000
    )
    
    
    (21,323,000
    )
    
    
    (25,144,000
    )Future net cash flow before
Federal income tax
    
    
    83,826,000
    
    
    
    55,193,000
    
    
    
    91,203,000Future income taxes
    
    
    (23,471,000
    )
    
    
    (15,454,000
    )
    
    
    (22,941,000
    )Future net cash flows
    
    
    60,355,000
    
    
    
    39,739,000
    
    
    
    68,262,000Effect of 10% annual discounting
    
    
    (18,141,000
    )
    
    
    (14,074,000
    )
    
    
    (40,401,000
    )Standardized measure of
Discounted net cash flows
    
    $
    42,214,000
    
    
    $
    25,655,000
    
    
    $
    27,861,000
  Year Ended December 31,2007
    
    
    2006
    
    
    2005Beginning of the year
    
    $
    25,655,000
    
    
    $
    27,861,000
    
    
    $
    16,891,000Oil and gas sales, net of
production costs
    
    
    (4,978,000
    )
    
    
    (2,970,000
    )
    
    
    (5,541,000
    )Sales of reserves in place
    
    
    
    
    
    
    
    
    
    
    (31,000
    )Net change in prices, net of
production costs
    
    
    20,449,000
    
    
    
    (8,513,000
    )
    
    
    13,063,000Extensions, discoveries and additions
    
    
    7,243,000
    
    
    
    9,251,000
    
    
    
    Changes in production rates,
timing and other
    
    
    
    
    
    
    
    
    
    
    (7,571,000
    )Revisions of quantity estimate
    
    
    (4,083,000
    )
    
    
    (1,592,000
    )
    
    
    11,722,000Effect of income tax
    
    
    (4,638,000
    )
    
    
    (1,158,000
    )
    
    
    (2,361,000
    )Accretion of discount
    
    
    2,566,000
    
    
    
    2,786,000
    
    
    
    1,689,000End of year
    
    $
    42,214,000
    
    
    $
    25,655,000
    
    
    $
    27,861,000
  - 78 -




---



##### 



Beginning
    
    
    
    
    
    Costs &
    
    
    
    
    
    
    EndingDescription
    
    Balance
    
    
    Expenses
    
    
    Deductions
    
    
    BalanceAllowance for
doubtful AccountsDecember 31, 2005
    
    $
    30,000
    
    
    $
    
    
    
    $
    16,000
    
    
    $
    14,000December 31, 2006
    
    $
    14,000
    
    
    $
    
    
    
    $
    
    
    
    $
    14,000December 31, 2007
    
    $
    14,000
    
    
    $
    
    
    
    $
    
    
    
    $
    14,000
  - 79 -




---



##### 



Total CostInitial Cost to Corporation
    
    
    SubsequentDescription
    
    Encumbrances
    
    
    Land
    
    
    Buildings
    
    
    To AcquistnTwo story multi-tenant
garden office building with
sub-grade parking garage
located in Dallas, Texas
    
    
    (b
    )
    
    $
    688,000
    
    
    $
    1,298,000
    
    
    $
    244,000
  Life on whichAccumulated
    
    Depreciation
    
    DateLand
    
    Buildings
    
    Total
    
    Depreciation
    
    Calculated
    
    Acquired$688,000
    
    $1,542,000
    
    $2,230,000
    
    $204,000
    
    (a)
    
    12/27/2004
     Investments in
    
    
    AccumulatedReal Estate
    
    
    DepreciationBalance, December 31, 2005
    
    $
    1,986,000
    
    
    $
    49,000Acquisitions
    
    
    210,000Depreciation expense
    
    
    
    
    
    
    71,000Balance, December 31, 2006
    
    $
    2,196,000
    
    
    $
    120,000Acquisitions
    
    
    34,000Depreciation expense
    
    
    
    
    
    
    84,000Balance, December 31, 2007
    
    $
    2,230,000
    
    
    $
    204,000
  - 80 -




---



##### 



ExhibitDesignation
    
    Description3.1
    
    
    Articles of Incorporation of Spindletop Oil & Gas Co. (previously filed with our General
Form for Registration of Securities on Form 10, filed with the Commission on August 14, 1990)3.2
    
    
    Bylaws of Spindletop Oil & Gas Co. (previously filed with our General Form for
Registration of Securities on Form 10, filed with the Commission on August 14, 1990)14
    
    
    Code of Ethics for Senior Financial Officers (previously filed with our Annual Report Form
10-K for the fiscal year ended December 31, 2005)21
    
    
    Subsidiaries of the Registrant31.1
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer31.2
    
    
    Rule 13a-14(a) Certification of Chief Executive Officer32
    
    
    Officers Section 1350 Certifications
  - 81 -