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

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

For the fiscal year ended      December 31, 1996

                                       OR

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

For the transition period from ____________________ to  ______________________

Commission file Number  1-4668

                     COASTAL CARIBBEAN OILS & MINERALS, LTD.

             (Exact name of registrant as specified in its charter)

        BERMUDA                                               NONE

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

   Clarendon House
   Church Street
   Hamilton 5, Bermuda                                        NONE

(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code       (809) 295-1422

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

          Title of each class                         Name of each exchange on
                                                          which registered

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

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


<PAGE>



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                                                   |X|   Yes      |_|    No

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

The  aggregate  market value of the common stock held by  non-affiliates  of the
registrant was approximately $103,000,000 (U.S.) at February 11, 1997.

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

Common stock,  par value $.12 per share,  40,056,358  shares  outstanding  as of
February 11, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

Proxy statement of Coastal Caribbean Oils & Minerals, Ltd. related to the Annual
Meeting of  Shareholders  for the fiscal year ended December 31, 1996,  which is
incorporated into Part III of this Form 10-K.


<PAGE>


                                TABLE OF CONTENTS

                                                                           Page

                                     PART I

Item 1.   Business.                                                          4

Item 2.   Properties.                                                        9

Item 3.   Legal Proceedings.                                                14

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


                                     PART II


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

Item 6.   Selected Financial Data.                                          20

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

Item 8.   Financial Statements and Supplementary Data.                      24

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


                                    PART III


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

Item 11.  Executive Compensation.                                           42

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

Item 13.  Certain Relationships and Related Transactions.                   42

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and
          Reports on Form 8-K.                                              43

--------------------
All monetary figures set forth are expressed in United States currency.



<PAGE>



                                     PART I


Item 1.  Business.

         (a)      General Development of Business.

                  Coastal  Caribbean  Oils & Minerals,  Ltd.  (the  "Company" or
"Coastal  Caribbean"),  a Bermuda  corporation,  is engaged through its majority
owned  subsidiary in the exploration  for oil and gas reserves.  At December 31,
1996, Coastal Caribbean's principal asset was its subsidiary,  Coastal Petroleum
Company  ("Coastal  Petroleum").  Coastal  Petroleum's  principal assets are its
nonproducing  oil, gas and mineral leases and royalty  interests in the State of
Florida.  Coastal  Petroleum  has made no  commercial  discoveries  on the lands
covered by these leases.

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

         Coastal Petroleum has been involved in various lawsuits for many years.
Currently,   Coastal   Petroleum  is  a  party  to  two  actions  (the  "Florida
Litigation")  in which two basic  claims are being  contested:  Whether  Coastal
Petroleum may obtain an oil and gas exploration  drilling permit without further
public  hearings,  and  whether  certain  royalty  interests  owned  by  Coastal
Petroleum  have been  confiscated  by the State of  Florida,  entitling  Coastal
Petroleum to compensation for such confiscation.  In addition, Coastal Caribbean
is a party to one  additional  action in which  Coastal  Caribbean  claims  that
certain of its royalty  interests  have been  confiscated  by the State.  During
1996, the Company  actively pursued the Florida  Litigation.  See Item 3. "Legal
Proceedings" for a more complete discussion of the litigation.

         In 1996, Coastal Petroleum  continued its efforts to obtain a permit to
drill an oil and gas exploration well on its leases.  Its application for such a
permit has been delayed by the Florida Department of Environmental Protection on
the  basis  that  further  public  hearings  are  required.  See Item 3.  "Legal
Proceedings".  Coastal  Petroleum also spent  approximately  $282,000 in 1996 in
connection with its program to identify potential drilling prospects.

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


<PAGE>


                  (b)      Financial Information About Industry Segments.

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

                  (c)      Narrative Description of the Business.

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

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

                  (i)      Principal Products.

                           Not applicable.

                  (ii)     Status of Product or Segment.

                           Not applicable.

                  (iii)    Raw Materials.

                           Not applicable.

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

                           See Item 2. "Properties".

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


<PAGE>





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

                  (v)      Seasonality of Business.

                           The Company's business is not seasonal.

                  (vi)     Working Capital Items.

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

                  (vii)    Customers.

                           Not applicable.

                  (viii)   Backlog.

                           Not applicable.

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

                           Not applicable.

                  (x)      Competitive Conditions in the Business.

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

                  (xi)     Research and Development.

                           Not applicable.

                  (xii)    Environmental Regulation.

                           The  operations  of   Coastal   Caribbean  and  its
right  to  obtain  interests  in  and   hold  properties  or  to  do  business
may  be  affected  to  an  unpredictable   extent  by  limitations  imposed  by
the   laws  and   regulations  which  are  now  in  effect  or  which  may  be 


<PAGE>


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

                  (xiii)   Number of Persons Employed by Registrant.

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

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

                           (1)      Identifiable Assets.

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

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

                           (2)      Risks Attendant to Foreign Operations.

                                    Not applicable.

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

                                    Not applicable.



<PAGE>










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



             Map showing Coastal Lease Areas in the State of Florida


<PAGE>


Item 2.  Properties.

Properties

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

         Coastal  Petroleum  caused oil and gas exploration to take place on its
leases prior to the onset of litigation  in 1968 but has conducted  more limited
exploration  since that time until 1996. The amount of exploration  expenditures
during  the  years  1996,  1995 and  1994  was  $282,000,  $3,000,  and  $1,000,
respectively.   Coastal   Petroleum   believes  all  drilling  and   exploration
obligations imposed by Coastal Petroleum leases have been satisfied to date.

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

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

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

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

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

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


<PAGE>


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

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

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

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

         The following charts reflect the acreage and annual rental  obligations
resulting  from  the  1976  settlement  agreement  with  the  Trustees  and  the
approximate acreage under lease at December 31, 1996:

                          Acreage after 1976 Settlement

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


<PAGE>


                    Acreage under lease at December 31, 1996

                             Gross Acres (*)                 Net Acres (**)
                      Undeveloped     Developed       Undeveloped     Developed
Working interest       1,250,000         -0-           1,250,000         -0-
Royalty interest       2,450,000         -0-             153,125         -0-
                       ---------        -----           --------        -----
    Total              3,700,000         -0-           1,403,125         -0-
                       =========      ==========       =========      =========

*        A gross acre is an acre in which a working interest is owned.
**       A net acre is  deemed  to exist  when the sum of  fractional  ownership
         working interests in gross acres equals one. The number of net acres is
         the sum of the  fractional  working  interests  owned  in  gross  acres
         expressed as whole numbers and fractions thereof.

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

Disclosure Concerning Oil and Gas Operations.

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

(5)      Undeveloped Acreage.

         The  Company's  undeveloped  acreage  as of  December  31,  1996 was as
follows:

                                              Gross Acres          Net Acres

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

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


<PAGE>


(6)       Drilling Activity.

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

(7)       Present Activities.

          None.

(8)       Delivery Commitments.

          None.

<PAGE>


Item 3.           Legal Proceedings.

         Coastal Petroleum has been involved in various lawsuits for many years.
Currently, Coastal Petroleum is a party to two actions in which two basic claims
are  being  contested:  Whether  Coastal  Petroleum  may  obtain  an oil and gas
exploration drilling permit without further public hearings, and whether certain
royalty  interests owned by Coastal Petroleum have been confiscated by the State
of Florida,  entitling Coastal Petroleum to compensation for such  confiscation.
In addition,  Coastal  Caribbean is a party to another  action in which  Coastal
Caribbean claims that certain of its royalty  interests have been confiscated by
the State.

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

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

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

         On  September  9,  1996,  the  Court of  Appeal  issued an order to the
Department to show cause why the permit  should not be granted.  On December 18,
1996, the Court of Appeal denied the Department's  request for an oral argument.
On February 10, 1997, the court denied Coastal  Petroleum's  petition for a writ
of certiorari.  Since the ruling did not address Coastal  Petroleum's  motion to
have  the DEP  issue a  permit  without  further  delay,  Coastal  Petroleum  is
considering a motion to clarify the decision.


<PAGE>


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

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

         A trial  was held  before  the  Circuit  Court of the  Second  Judicial
Circuit  in Leon  County  (Tallahassee)  from May 6-9,  1996 on the issue of the
taking of the  royalty  interest.  On August 5, 1996,  the trial  court ruled in
favor of the State and found  that  there was no taking of  Coastal  Petroleum's
royalty  interest.  Coastal  Petroleum  appealed  that  decision to the Court of
Appeal and oral argument is scheduled for February 25, 1997.

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

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

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

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


<PAGE>


Counsel

         Mr.  Robert J.  Angerer of Tallahassee, Florida  is Coastal Petroleum's
trial counsel in the  Florida Litigation.  Mr. Angerer, age 50, is a graduate of
the University of Michigan  (B.S.E.  1969) and received his law degree with high
honors from Florida State University in 1974.  The firm of Reasoner, Davis & Fox
of  Washington, D.C.  has also  participated  in the  litigation.  Mr.  C.  Dean
Reasoner  is a member  of this firm and is also a director of Coastal Caribbean.

Fee Arrangements

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

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

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

Uncertainty

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



<PAGE>


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

                  None.

Executive Officers of the Company.

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

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

<S>                   <C>     <C>                        <C>                        <C> 
Benjamin W. Heath     82           President             Since 1953                 Director
Phillip W. Ware       47         Vice President          Since 1982                 Director, President of Coastal Petroleum

James R. Joyce        56        Treasurer, Asst.         Since June 8, 1994         Secretary-Treasurer of Coastal Petroleum
                              Secretary and Chief
                               Financial Officer
</TABLE>

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

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



<PAGE>


                                     PART II

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

         (a)      Market Information.

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

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

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

1995           1st quarter       2nd quarter       3rd quarter       4th quarter
----           -----------       -----------       -----------       -----------

High              2 3/8            3 1/16             2 5/8                2
Low               13/16            1 7/16            1 11/16            1 3/16
--------------------------------------------------------------------------------

         (b)      Holders.

                  The  approximate  number of  record  holders of the  Company's
common stock at February 1,1997 was 13,400.

         (c)      Dividends.

                  The Company has never paid a dividend on its capital stock and
will be unable to do so until its deficit, ($23,490,000 at December 31, 1996) is
eliminated.

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



<PAGE>


         Foreign Exchange Control Regulations

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

         Taxes

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

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



<PAGE>


Item 6.  Selected Consolidated Financial Information

         The  following  selected  consolidated  financial  information  for the
Company  insofar as it  relates  to each of the five  years in the period  ended
December 31, 1996 has been extracted from the Company's  consolidated  financial
statements.

<TABLE>
<CAPTION>
                                                                             Year ended December 31,
                                              --------------------------------------------------------------------------------------

                                                    1996              1995             1994              1993             1992
                                                    ----              ----             ----              ----             ----
                                                    ($)               ($)               ($)              ($)               ($)
<S>                                              <C>              <C>                 <C>             <C>               <C>      
Net loss                                         (1,148,204)         (879,576)         (718,884)        (223,221)         (734,029)
                                                 ===========      ============        ==========      ===========       ===========

Net loss per share                                     (.03)             (.03)             (.02)            (.01)             (.02)
                                                 ===========      ============        ==========      ===========       ===========

Cash and securities available                     5,789,000           308,418           647,702          681,982          (173,600)
                                                 ===========      ============        ==========      ===========       ===========

Cost associated with leasehold
  interests in oil, gas and
  mineral properties (unproved)                   3,943,520         3,688,569         3,688,569        3,688,569         3,688,569
                                                  =========        ==========         =========       ==========        ==========

Total assets                                     10,020,738         4,127,906         4,374,690        4,662,033         4,025,509
                                                 ==========        ==========         =========       ==========        ==========

Shareholders' equity:
  Common stock                                    4,805,563         4,003,636         4,003,636        4,003,636         4,003,636
  Capital in excess                              28,442,983        22,395,084        21,795,084       21,165,084        20,085,084
  Accumulated deficit                           (23,490,230)      (22,342,026)      (21,462,450)     (20,743,565)      (20,520,345)
                                                ------------      ------------     -------------     ------------      ------------
                                                  9,758,316         4,056,694         4,336,270        4,425,155         3,568,375
                                               ============      ============      ============      ===========       ===========
</TABLE>

<PAGE>


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

(1)      Liquidity and Capital Resources

                              Short Term Liquidity

         At December 31 1996,  Coastal Caribbean had approximately  $5.8 million
of cash and  securities  available.  These  funds  are  expected  to be used for
general  corporate  purposes,  including  exploration  and  development  and  to
continue the litigation against the State of Florida.

         On May 29, 1996,  the Company  concluded its offering of  approximately
6.7 million  shares to its  shareholders  at $1.00 per share.  The  offering was
oversubscribed  and the proceeds to the Company were  approximately $6.4 million
after the expenses of the offering.

                               Long Term Liquidity

         The Company estimates that as much as $500,000 per year may be required
in connection with the Florida litigation.  The Company expects that the Florida
litigation  could  continue at least through  1998,  although the State may take
actions that could shorten or lengthen that period. The Company has a program to
evaluate its leases which is estimated to cost  approximately  $500,000 for 1997
and  $1,000,000 for the 1998-1999  period,  and is subject to the outcome of the
Florida litigation.  During 1996, the Company spent approximately $282,000 under
the program to identify potential drilling prospects.

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

         1.       Obtain a federal drilling permit.

         2.       Finance drilling of the well, which is estimated to cost
                  between $10-15 million.

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


<PAGE>



         The Company does not currently have assets sufficient to fund all these
expenditures  to drill the  exploration  well, if a permit were granted.  If oil
and/or gas is discovered in commercial  quantities,  a production  program would
require  additional  permitting  and  construction  of  production,  storage and
delivery  systems.  The Company might seek  additional  financing or partners to
fund these expenditures.

(2)      Results of Operations

         The Company has never had  substantial  revenues  and has operated at a
loss each year since its  inception  in 1953.  The Company has been  involved in
litigation  since  1968 and its total  legal  expenses  have been  approximately
$1,374,000  during the period 1996,  1995 and 1994. The legal expenses  incurred
related  primarily  to the  Florida  Litigation.  These fees can be  expected to
continue at the same or a higher level until the Florida Litigation is resolved.
A termination date of this litigation  cannot be predicted with any certainty at
this time.

1996 vs. 1995

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

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

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

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

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


<PAGE>



1995 vs. 1994

         The Company recorded a loss of $880,000 for 1995, compared to a loss of
$719,000 in 1994.

         Interest  income and  other  income  decreased  33% in  1995 to $15,000
from $22,000 in 1994 due to the decrease in funds available for investment.

         Legal fees and costs  increased  16% in 1995 to  $346,000  compared  to
$297,000 in the prior year.  These costs  increased due to increased  litigation
activities in the Florida Litigation.

         Administrative  expenses  increased 28% in 1995 to $306,000 compared to
$240,000  in 1994.  The  increase  was  attributable  to higher  administrative,
accounting and insurance costs incurred in 1995.

         Salary  expense  increased 22% in 1995 to $150,000 compared to $122,000
in the prior year due to a salary  increase for an officer of the Company and an
increase in staff.

         Shareholder  communications  increased  12%  in  1995 to  $90,000  from
$81,000  in 1994.  The increase was the result of increased mailing and printing
costs in 1995.




<PAGE>


Item 8.  Financial Statements and Supplementary Data.


                         REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Coastal Caribbean Oils & Minerals, Ltd.

We have audited the accompanying consolidated balance sheet of Coastal Caribbean
Oils & Minerals,  Ltd. (a development stage company) as of December 31, 1996 and
1995, and the related  consolidated  statements of operations,  cash flows,  and
common  stock and capital in excess of par value from  inception to December 31,
1996 and for each of the three  years in the period  ended  December  31,  1996.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Coastal
Caribbean  Oils &  Minerals,  Ltd.  at  December  31,  1996  and  1995,  and the
consolidated  results of its  operations  and its cash flows from  inception  to
December 31, 1996 and for each of the three years in the period  ended  December
31, 1996, in conformity with generally accepted accounting principles.



                                             ERNST & YOUNG LLP


Hartford, Connecticut
February 10, 1997



<PAGE>


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

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

                                                             December 31,
                                                         1996           1995
                                                         ----           ----
                     ASSETS

Current assets:
  Cash and cash equivalents                         $    424,330   $    247,452
  Accounts receivable                                    105,115          6,836
  U.S. Government securities                           3,341,820              -
  Prepaid insurance                                      178,868        125,342
                                                      ----------      ---------
          Total current assets                         4,050,133        379,630
                                                       ---------      ---------

U.S. Government securities                             2,001,441              -
Unproved oil, gas and mineral properties (full cost
 method)                                               3,943,520      3,688,568
Other                                                     25,644         59,708
                                                     -----------     ----------
                                                     $10,020,738     $4,127,906
                                                     ===========     ==========

       LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued liabilities           $   262,422     $   71,212
                                                     -----------     ----------

Minority interests                                             -              -

Shareholders' equity:
  Common stock, par value 12 per share:
    Authorized  - 100,000,000 shares
    Outstanding - 40,046,358 and 33,363,632 shares     4,805,563      4,003,636
  Capital in excess of par value                      28,442,983     22,395,084
                                                      ----------     ----------
                                                      33,248,546     26,398,720
  Deficit accumulated during development
    stage                                            (23,490,230)   (22,342,026)
                                                     ------------   ------------
                                                       9,758,316      4,056,694
                                                       ---------    ------------
Total shareholders' equity                           $10,020,738    $ 4,127,906
                                                     ===========    ============

                             See accompanying notes.


<PAGE>


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

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

                                                                                                                          From
                                                                                                                        inception
                                                                                                                     (Jan. 31, 1953
                                                                     Year ended December 31,                        to December 31,)
 
                                                        1996                  1995                   1994                 1996
                                                        ----                  ----                   ----                 ----

<S>                                                  <C>                    <C>                 <C>                     <C>       
Interest and other income                            $ 192,369              $  14,845           $     22,098            $3,226,657
                                                     ---------              ---------           ------------            ----------

Expenses:
  Legal fees and costs                                 730,831                345,770                297,385            10,423,124
  Administrative expenses                              338,594                306,011                239,719             5,921,527
  Salaries                                             150,667                149,667                122,187             2,594,278
  Shareholder communications                            93,548                 90,169                 80,551             3,248,387
  Exploration costs                                     26,933                  2,804                  1,140               700,036
  Lawsuit judgments (recoveries)                             -                      -                      -             1,941,916
  Minority interests                                         -                      -                      -              (632,974)
  Other                                                      -                      -                      -               364,865
  Contractual services                                                              -                       -             2,155,728
                                              ------------------     ----------------       -----------------      ----------------
                                                     1,340,573                894,421                740,982            26,716,887
                                                     ---------              ---------            -----------       ---------------

Net loss                                           $(1,148,204)             $(879,576)             $(718,884)
                                                   ============             ==========             ==========

Deficit accumulated during
  development stage                                                                                                   $(23,490,230)

Average number of shares
  outstanding                                       37,477,617             33,363,632             33,363,632
                                                    ==========             ==========             ==========

Net loss per share based on
  average number of shares
  outstanding during the
  period                                             $(.03)                 $(.03)                 $(.02)
                                                     ======                 ======                 ======

                             See accompanying notes.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>
                                                        COASTAL CARIBBEAN OILS & MINERALS, LTD.
                                                                (A Bermuda Corporation)
                                                               A Development Stage Company
                                                         CONSOLIDATED STATEMENT OF CASH FLOWS
                                                              (Expressed in U.S. Dollars)


                                                                                                                          From
                                                                                                                        inception
                                                                                                                     (Jan. 31, 1953)
                                                                            Year ended December 31,                        to
                                                                   ----------------------------------------
                                                                   1996              1995              1994           Dec. 31, 1996
                                                                   ----              ----              ----           -------------


<S>                                                            <C>                 <C>               <C>               <C>
Operating activities:
Net loss                                                       $(1,148,204)        $(879,576)        $(718,884)        $(23,490,230)
Adjustments to reconcile net loss to net cash used
  for operating activities:
    Minority interest                                                                      -                 -             (632,974)
    Exploration and other                                                                  -                 -              755,974
    Net change in:
       Accounts receivable                                         (98,278)            1,154            (5,906)            (105,115)
       Prepaid insurance and other                                 (53,526)             (446)          (24,220)            (178,868)
       Current liabilities                                         191,210            32,792          (198,458)             262,422
       Other                                                        34,063           (59,708)           54,604              473,261
                                                               ------------        ----------         ---------         ------------
Net cash used for operating activities                          (1,074,735)         (905,784)         (892,864)         (22,915,530)
                                                                -----------        ----------         ---------         ------------

Investing activities:
  Additions to oil, gas, and mineral
    properties net of assets acquired
    for common stock                                              (254,952)                -                  -          (3,943,520)
  U.S. Government securities                                    (5,343,261)                -                  -          (5,343,261)
  Reimbursement of lease rentals and                                                                          -
    other expenses                                                       -                 -                  -           1,243,086
  Purchase of fixed assets                                               -                 -                  -             (61,649)
                                                             --------------    ----------------   --------------         -----------
Net cash used for investing activities                          (5,598,213)                -                  -          (8,105,344)
                                                                -----------    ----------------   --------------         -----------

Financing activities:
  Sale of common stock less expenses                             6,356,326                 -                  -          26,342,205
  Shares issued upon exercise of
    options                                                         13,500                 -                  -             872,999
  Sale of shares by subsidiary                                           -                 -                  -             750,000
  Sale of subsidiary shares                                        480,000           600,000            630,000           3,480,000
                                                                   -------         ---------            -------          -----------
Net cash provided by
  financing activities                                           6,849,826           600,000            630,000          31,445,204
                                                                 ---------         ---------            -------          -----------
Net increase (decrease) in cash
  and cash equivalents                                             176,878          (305,784)          (262,864)            424,330
Cash and cash equivalents at
  beginning of period                                              247,452           553,236            816,100                   -
                                                                   -------           -------            -------          -----------
Cash and cash equivalents at
  end of period                                                   $424,330          $247,452           $553,236            $424,330
                                                                  ========          ========           ========            ========

                             See accompanying notes.
</TABLE>


<PAGE>


<TABLE>
<CAPTION>
                                                         COASTAL CARIBBEAN OILS & MINERALS, LTD.
                                                                (A Bermuda Corporation)
                                                              A Development Stage Company
                                                         CONSOLIDATED STATEMENT OF COMMON STOCK
                                                           AND CAPITAL IN EXCESS OF PAR VALUE
                                                              (Expressed in U.S. dollars)
                                                From inception (January 31, 1953) to December 31, 1996

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

                             See accompanying notes.
</TABLE>




<PAGE>


                     COASTAL CARIBBEAN OILS & MINERALS, LTD.
                   Notes to Consolidated Financial Statements
                                December 31, 1996

1.       Summary of significant accounting policies

Consolidation

         The accompanying consolidated financial statements include the accounts
of  Coastal  Caribbean  Oils &  Minerals,  Ltd.  ("Coastal  Caribbean")  and its
majority   subsidiary,   Coastal  Petroleum   Company   ("Coastal   Petroleum"),
hereinafter  referred to  collectively  as the  Company.  During  1996,  Coastal
Caribbean sold additional  shares of Coastal  Petroleum and reduced its interest
(See Note 2). The Company,  which is engaged in a single industry, is considered
to be a  development  stage  company  since  its  exploration  for oil,  gas and
minerals has not yielded any significant  revenue or reserves.  All intercompany
transactions have been eliminated.

Cash and cash equivalents

         The Company  considers  all highly liquid short term  investments  with
maturities  of  three  months  or less at the  date  of  acquisition  to be cash
equivalents. Cash and cash equivalents at December 31, 1996 were as follows:

                                                      December 31,

                                            1996                       1995
                                            ----                       ----
Cash                                      $127,990                  $  50,018
U.S. Treasury Bills                        296,340                    197,434
                                           -------                    -------
                                          $424,330                   $247,452
                                          ========                   ========

Use of Estimates

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

Unproved oil and gas properties

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


<PAGE>



The Company  does not expect to amortize  these costs until there is  production
from the properties.  Production cannot begin until several events occur because
the Company must: (1) obtain state and federal  drilling permits (2) finance the
drilling of an exploratory well,  either with internal  resources or by securing
one  or  more  partners  in  the  drilling  activity,  (3)  discover  commercial
quantities  of oil and/or gas, and (4) finance and begin a  production  program.
The Company  cannot  predict if or when any of these events may occur;  however,
the Company expects that under the most favorable circumstances production would
not begin before 2000.  If the Company  obtains the permits to drill,  the total
cost of drilling an exploration well is currently estimated to be between $10-15
million.  The Company does not currently  have assets  sufficient to fund all of
this cost and would be required to seek debt or equity  financing from public or
private sources to drill the exploration well, if a permit were granted.  If oil
and/or gas is discovered in commercial  quantities,  a production  program would
require  additional  permitting  and  construction  of  production,  storage and
delivery systems.  The Company would be required to seek additional financing to
fund these development activities.

         The Company assesses whether its unproved  properties are impaired on a
periodic  basis.  This assessment is based upon work completed on the properties
to  date,  the  expiration  date of its  leases  and  technical  data  from  the
properties  and  adjacent  areas.  These  properties  are  subject to  extensive
litigation  with the State of Florida.  Although the property  interests  may be
impaired by the actions taken by the State,  the likelihood of loss with respect
to the recorded  costs of the leasehold  interests is not probable.  (See Note 5
"Litigation".)  Based on the exploration  activities on the properties completed
to date, the  exploration  and  development  activities of others in the Gulf of
Mexico and the laws applicable to the taking of property, the Company expects to
recover  its  $3.9  million  of  capitalized  costs.  However,  there  can be no
assurance  that it will be  successful  and that  costs  associated  with  these
properties will be realized.


Sale of Subsidiary Shares

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


<PAGE>



2.       Agreements for Sale of Coastal Petroleum Shares

         In 1991, the Company agreed to sell up to 10.3% of Coastal Petroleum to
a private  investor.  Pursuant  to the  Agreement,  a 4.1%  interest  in Coastal
Petroleum has been sold for a total consideration of $600,000.

         In 1992,  Coastal  Caribbean  agreed to sell an additional 20.5% of the
outstanding  shares of  Coastal  Petroleum.  Under the  sales  agreement,  Lykes
Minerals Corp. ("Lykes"), a wholly owned subsidiary of Lykes Bros. Inc., had the
option to acquire 60 shares of Coastal  Petroleum  at $40,000 per share  through
May 1, 1997. At least half of the proceeds of the sale generally are required to
be used to fund Coastal Petroleum's Florida exploration activities.

         The  agreement  also provided for a second option for Lykes to purchase
the  shares of Coastal  Petroleum  (also at  $40,000  per share)  which had been
subject to another  investor's option under the 1991 agreement  described above.
At December 31, 1996, Lykes had acquired the 6.2% available under this option.

         As of December 31, 1996, Lykes had an unexercised  option to purchase 6
additional Coastal Petroleum shares by May 1, 1997 for a total of $240,000,  and
had acquired 24.7% of Coastal Petroleum at a total cost of $2,880,000.

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


<PAGE>



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

                                       Number of                        Sales
         Year                         shares sold                      proceeds

         1991                              6                          $  300,000
         1992                              9                             390,000
         1993                             27                           1,080,000
         1994                             15                             630,000
         1995                             15                             600,000
         1996                             12                             480,000
                                         ----                         ----------
         Total                            84                          $3,480,000
                                         ====                         ==========

         As of  December  31,  1996,  Coastal  Petroleum  shares  were  owned as
follows:

                                         Shares                    %
         Coastal Caribbean                 179                    61.3
         Lykes                              72                    24.7
         First investor                     29                     9.9
         Second investor                    12                     4.1
                                           ---                 -------
                                           292                   100.0
                                           ===                   =====

3.       U. S. Government Securities

         At December 31, 1996, the Company has the following amounts invested in
U.S. government securities which are expected to be held until maturity:

<TABLE>
<CAPTION>
                                                                                   Amortized
          Security                   Par value            Maturity Date               Cost               Fair value
          ---------                  ---------            -------------               ----               ----------

<S>                                  <C>                     <C>                    <C>                  <C>         
U.S. Treasury Bill                   $   500,000             Feb. 27, 1997          $   487,361          $    496,020
U.S. Treasury Bill                     1,000,000              May 29, 1997              960,567               978,970
U.S. Treasury Bill                     2,000,000             Aug. 21, 1997            1,893,892             1,933,860
                                       ---------                                      ---------             ---------
Total short term                       3,500,000                                      3,341,820             3,408,850
                                       ---------                                      ---------             ---------

U.S. Treasury Note                       500,000              May 31, 1998              497,969               500,310
U.S. Treasury Note                     1,500,000             Jul. 31, 1998            1,503,472             1,507,035
                                       ---------                                      ---------             ---------
Total long term                        2,000,000                                      2,001,441             2,007,345
                                       ---------                                      ---------             ---------

Total                                 $5,500,000                                     $5,343,261            $5,416,195
                                      ==========                                     ==========            ==========
</TABLE>





<PAGE>


4.       Unproved oil, gas and mineral properties

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

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

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

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

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

         The Company has a program to evaluate  its leases which is estimated to
cost  approximately  $500,000 for 1997 and $1,000,000 for the 1998-1999  period,
and is subject to the  outcome  of the  Florida  litigation.  During  1996,  the
Company spent  approximately  $282,000  under the program to identify  potential
drilling prospects.



<PAGE>



         A summary of the cost of  unproved  oil,  gas and  mineral  properties,
accounted  for under the full cost method,  all of which are located in Florida,
at  December  31,  1996 and 1995 (the  balance  at  December  31,  1995 had been
unchanged since December 31, 1989), are as follows:

                                                           1996         1995
                                                        -----------------------
Lease acquisition costs                                  $914,619    $  914,619
Lease and royalty costs (principally legal fees)          591,616       591,616
Lease rentals                                           2,329,280     2,329,280
Dry hole costs                                            587,987       587,987
Other exploratory expenses                                542,854       287,902
Salaries                                                  466,983       466,983
                                                          -------    ----------
                                                        5,433,339     5,178,387
                                                        ---------    ----------
Deduct:
  Reimbursement for lease rentals and other expenses    1,243,086     1,243,086
  Proceeds from relinquishment of surface rights          246,733       246,733
                                                          -------    ----------
                                                        1,489,819     1,489,819
                                                        ---------    ----------
                                                       $3,943,520    $3,688,568
                                                       ==========    ==========

5.       Litigation

          Florida Litigation

         Coastal Petroleum has been involved in various lawsuits for many years.
Currently,  Coastal  Petroleum  is a party to three  actions  in which two basic
claims are being contested:  Whether Coastal Petroleum may obtain an oil and gas
exploration drilling permit without further public hearings, and whether certain
royalty  interests owned by Coastal Petroleum have been confiscated by the State
of Florida,  entitling Coastal Petroleum to compensation for such  confiscation.
In addition,  Coastal  Caribbean is a party to another  action in which  Coastal
Caribbean claims that certain of its royalty  interests have been confiscated by
the  State.  The  Company  estimates  that as much as  $500,000  per year may be
required in connection with the Florida litigation. The Company expects that the
Florida litigation could continue at least through 1998,  although the State may
take actions that could shorten or lengthen that period.

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

         In  1993,  Coastal  Petroleum  applied  to the  Florida  Department  of
Environmental Protection (the "Department") for a permit to drill an exploratory
oil and gas well off Apalachicola,  Florida.  The proposed well would be located
in an area included  within Lease 224A. The Department  subsequently  denied the
application for issuance of a drilling permit for various reasons  including the
requirement for a $1.9 billion bond.

<PAGE>



Coastal  Petroleum  appealed the actions of the  Department to the Florida First
District Court of Appeal  ("Court of Appeal").  After two decisions by the Court
of Appeal in favor of Coastal Petroleum,  the Florida Supreme Court in July 1996
denied  the  Department's  petition  to  review  an April  1996  Court of Appeal
decision.  The Florida Supreme Court had also refused to review an earlier Court
of Appeal decision.

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

         On  September  9,  1996,  the  Court of  Appeal  issued an order to the
Department to show cause why the permit  should not be granted.  On December 18,
1996, the Court of Appeal denied the Department's  request for an oral argument.
On February 10, 1997,  the court denied the Coastal  Petroleum's  petition for a
writ of certiorari.  Since the ruling did not address Coastal Petroleum's motion
to have the DEP issue a permit  without  further  delay,  Coastal  Petroleum  is
considering a motion to clarify the decision.

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

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

         A trial  was held  before  the  Circuit  Court of the  Second  Judicial
Circuit  in Leon  County  (Tallahassee)  from May 6-9,  1996 on the issue of the
taking of the  royalty  interest.  On August 5, 1996,  the trial  court ruled in
favor of the State and found  that  there was no taking of  Coastal  Petroleum's
royalty  interest.  Coastal  Petroleum  appealed  that  decision to the Court of
Appeal and oral argument is scheduled for February 25, 1997.


<PAGE>


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

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

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

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

Counsel

         Mr.  Robert J.  Angerer of  Tallahassee, Florida is Coastal Petroleum's
trial  counsel in the  Florida  Litigation.  Mr. Angerer,  age 50, is a graduate
of the  University  of Michigan  (B.S.E.  1969) and received his law degree with
high honors from Florida State  University in 1974. Also  participating  in  the
litigation is The firm of Reasoner,  Davis & Fox of Washington,  D.C.  has  also
participated  in the  litigation.  Mr.  C.  Dean  Reasoner  is a member of  this
firm and is also a  director  of  Coastal Caribbean.

Fee Arrangements

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

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

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

Uncertainty

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

6.       Common Stock

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

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

         On May 29, 1996,  the Company  concluded its offering of  approximately
6.7 million  shares to its  shareholders  at $1.00 per share.  The  offering was
oversubscribed  and the proceeds to the Company were $6,356,326  after deducting
the $316,400 cost of the offering.


<PAGE>



         The following represents shares issued upon sales of common stock:

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

         The following represents shares issued upon exercise of stock options:

1955              73,000                    $ 7,300                 $175,200
1978               7,000                        840                    6,160
1979             213,570                     25,628                  265,619
1980              76,830                      9,219                  125,233
1981             139,600                     16,752                  227,548
1996              10,000                      1,200                   12,300
                  ------                      -----                   ------
                 520,000                    $60,939                 $812,060
                 =======                    =======                 ========

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


<PAGE>



7.       Stock Option Plan

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

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

The following table summarizes stock option activity:

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

Available for grant at December 31,1996    618,000
                                           =======
 .
         Pro forma  information  regarding  net income and earnings per share is
required  by  Statement  123,  and has been  determined  as if the  Company  had
accounted for its stock  options under the fair value method of that  Statement.
The fair value for these  options  was  estimated  at the date of grant  using a
Black-Scholes option pricing model.

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

<PAGE>


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

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

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


8.       Income taxes

         Bermuda currently imposes no taxes on corporate income or capital gains
outside of Bermuda. The Company's  subsidiary,  Coastal Petroleum,  has U.S. net
operating loss  carryforwards  at December 31, 1996, which may be used to reduce
its taxable income,  if any, during future years which aggregated  approximately
$10,903,000 and expire in varying amounts from 1997 through 2011.

         Coastal Petroleum had a noncurrent  deferred tax asset of $4,103,000 at
December 31, 1996 and  $4,169,000  at December  31, 1995,  relating to the above
losses.  However,  a valuation  reserve of  $4,103,000  at December 31, 1996 and
$4,169,000 at December 31, 1995 has been  established  because it is more likely
than not at this time that none of the  carryforward  losses will be realized by
Coastal Petroleum.

9.       Related parties

         Fees were paid or accrued by the Company for legal services rendered by
the law firm of Reasoner, Davis & Fox, of which Mr. C. Dean Reasoner, a director
of the  Company,  is a  partner.  Reasoner,  Davis & Fox  billed  legal  fees of
$102,000, $118,000 and $120,000 for 1996, 1995 and 1994, respectively.

         G&O'D INC provides  accounting and  administrative  services and office
facilities  and support staff to the Company.  G&O'D INC was owned during fiscal
1994 by Mr. James R. Joyce,  Treasurer  and Assistant  Secretary  (since June 8,
1994) and Mr. Arthur B. O'Donnell, Treasurer and Assistant Secretary (until June
8, 1994). Mr. O'Donnell retired from G&O'D on June 30, 1994 and Mr. Joyce is now
the sole owner of G&O'D INC.  During 1996,  1995 and 1994,  G&O'D billed fees of
$169,632, $176,809, and $139,305, respectively.

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



<PAGE>



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

         None.


                                    PART III

         For information  concerning Item 10 - Directors and Executive  Officers
of the Company, Item 11 - Executive  Compensation,  Item 12 - Security Ownership
of Certain Beneficial Owners and Management and Item 13 - Certain  Relationships
and Related Transactions, see the Proxy Statement of the Company relative to the
Annual  Meeting of  Stockholders  for the fiscal year ended  December  31, 1996,
which  will  be  filed  with  the  Securities  and  Exchange  Commission,  which
information is incorporated herein by reference. For information concerning Item
10 - Executive Officers of the Company, see Part I.


<PAGE>


                                     PART IV

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

         (a)      (1)      Financial Statements.

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

Report of Independent Auditors                                               24

Consolidated balance sheet at December 31, 1996 and 1995                     25

Consolidated statement of operations from inception and for each of
  the three years in the period ended December 31, 1996                      26

Consolidated statement of cash flows from inception and for each of
  the three years in the period ended December 31, 1996                      27

Consolidated statement of common stock and capital in excess of
  par value from inception to December 31, 1996                              28

Notes to consolidated financial statements                                   29

                  (2)      Financial Statement Schedules:

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

                  (3)      Exhibits.

                           The  following  exhibits  are  filed  as part of this
report:

Item Number

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

                  None.


<PAGE>


         3.       Articles of incorporation and By-Laws.

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

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

                  None.

         9.       Voting trust agreement.

                  None.

         10.      Material contracts.

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

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

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

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

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

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

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

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

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

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

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

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

         11.      Statement re computation of per share earnings.

                  See Consolidated Financial Statements under Item 8, above.

         12.      Statement re computation of ratios.

                  None.

         13.      Annual report to security holders.

                  Not applicable.

         16.      Letter re change in certifying accountant.

                  Not applicable.

         18.      Letter re change in accounting principles.

                  Not applicable.


<PAGE>


         20.      Previously unfiled documents.

                  None.

         21.      Subsidiaries of the Company.

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

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

                  Not applicable.

         23.      Consent of experts and counsel.

                  Consent of Ernst & Young LLP is filed herewith.

         24.      Power of Attorney.

                  Not applicable.

         27.      Financial Data Schedule.

                  Filed herein.

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

                  Not applicable.

         99.      Additional Exhibits.

                  Not applicable.

(b)      Reports on Form 8-K.

                  None.




<PAGE>



                         
                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                         COASTAL CARIBBEAN OILS & MINERALS, LTD.
                                                      (Registrant)

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


Dated:  February 18, 1997

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the date indicated.

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


Dated:  February 18, 1997                            Dated: February 18, 1997
        -----------------                                   -----------------


By /s/ Charles T. Collis                             By /s/ John D. Monroe
   Charles T. Collis                                    John D. Monroe
   Director                                             Director


Dated:  February 18, 1997                            Dated: February 18, 1997
        -----------------                                   -----------------


By /s/ Phillip W. Ware                               By /s/ C. Dean Reasoner
   Phillip W. Ware                                      C. Dean Reasoner
   Director                                             Director


Dated:  February 18, 1997                            Dated: February 18, 1997
        -----------------                                   -----------------


<PAGE>