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SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  TO
 BAYOU CITY EXPLORATION, INC.
  NEVADA
(State or Other Jurisdiction of 
Incorporation of Organization)
    
    61-1306702
(IRS Employer Identification No.)
 
 
 
  þ o
  o þ
    o þ




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PART IFINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTS (UNAUDITED)FINANCIAL STATEMENTS OF REGISTRANTBALANCE SHEETS AS OF MARCH 31, 2007 AND DECEMBER 31, 2006
    
    
    3STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
    
    
    4STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
    
    
    5NOTES TO FINANCIAL STATEMENTS
    
    
    6ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF OPERATIONS
    
    
    9ITEM 3.
    
    CONTROLS AND PROCEDURES
    
    
    14PART IIOTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    15ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    15ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    15ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    15ITEM 5.
    
    OTHER INFORMATION
    
    
    16ITEM 6.
    
    EXHIBITS
    
    
    16EX-31.1EX-31.2EX-32.1EX-32.2
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MARCH 31,
    
    
    DECEMBER 31,2007
    
    
    2006(UNAUDITED)ASSETSCURRENT ASSETS:Cash
    
    $
    170,254
    
    
    $
    1,178,946Accounts receivable:Managed limited partnerships
    
    
    199
    
    
    
    12,883Related parties
    
    
    24,782
    
    
    
    19,081Trade and other
    
    
    143,666
    
    
    
    524,277Prepaid expenses and other current assets
    
    
    25,124
    
    
    
    33,909TOTAL CURRENT ASSETS
    
    
    364,025
    
    
    
    1,769,096PROPERTY AND EQUIPMENT, NET
    
    
    685,706
    
    
    
    595,244OTHER NONCURRENT ASSETS
    
    
    7,024
    
    
    
    7,024TOTAL ASSETS
    
    $
    1,056,755
    
    
    $
    2,371,364LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued expenses
    
    $
    498,677
    
    
    $
    1,034,539Accounts payable-related parties
    
    
    270,823
    
    
    
    223,731AFE advances from JIB owners
    
    
    68,742
    
    
    
    377,439Current portion of long term debt
    
    
    86,299
    
    
    
    86,299TOTAL CURRENT LIABILITIES
    
    
    924,541
    
    
    
    1,722,008LONG TERM LIABILITY-P&A COSTS
    
    
    60,661
    
    
    
    67,291LONG TERM DEBT
    
    
    44,127
    
    
    
    65,483TOTAL LIABILITIES
    
    
    1,029,329
    
    
    
    1,854,782COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    STOCKHOLDERS EQUITY:Preferred Stock, $0.001 par value; 5,000,000 shares
authorized; Series E 23,300 shares issued and outstanding
at March 31, 2007 and December 31, 2006 (liquidation
preference of $233,000 at March 31, 2007 and December 31,
2006)
    
    
    23
    
    
    
    23Common Stock, $0.005 par value; 150,000,000 shares authorized;
26,281,133 shares issued and outstanding at March 31, 2007
and 26,281,133 shares issued and outstanding at December 31, 2006
    
    
    131,406
    
    
    
    131,406Additional paid-in capital
    
    
    13,214,604
    
    
    
    13,214,604Accumulated deficit
    
    
    (13,318,607
    )
    
    
    (12,829,451
    )TOTAL STOCKHOLDERS EQUITY
    
    
    27,426
    
    
    
    516,582TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    1,056,755
    
    
    $
    2,371,364
 
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THREE MONTHS ENDEDMARCH 31,2007
    
    
    2006OPERATING REVENUES:Prospect fees from others
    
    $
    
    
    
    $
    16,666Management fees
    
    
    
    
    
    
    40,000Oil and gas sales
    
    
    4,110
    
    
    
    36,474TOTAL OPERATING REVENUES
    
    
    4,110
    
    
    
    93,140OPERATING COSTS AND EXPENSES:Lease operating expenses
    
    
    18,549
    
    
    
    13,159Impairment, abandonment, and dry hole costs
    
    
    11,598
    
    
    
    Exploration costs
    
    
    29,366
    
    
    
    84,957Depreciation, depletion and amortization
    
    
    15,771
    
    
    
    53,868Accretion expense
    
    
    
    
    
    
    1,000Advertising and marketing costs
    
    
    6,988
    
    
    
    102,035General and administrative costs
    
    
    400,482
    
    
    
    678,476TOTAL OPERATING COSTS
    
    
    482,754
    
    
    
    933,495OPERATING LOSS
    
    
    (478,644
    )
    
    
    (840,355
    )OTHER INCOME (EXPENSE):Interest Expense
    
    
    (3,522
    )
    
    
    (8,059
    )NET LOSS BEFORE INCOME TAX
    
    
    (482,166
    )
    
    
    (848,414
    )Income Tax Provision
    
    
    
    
    
    
    NET LOSS
    
    
    (482,166
    )
    
    
    (848,414
    )SERIES F PREFERRED STOCK CASH DIVIDENDS
    
    
    (6,990
    )
    
    
    (6,990
    )NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
    
    $
    (489,156
    )
    
    $
    (855,404
    )NET LOSS PER COMMON SHARE
    
    $
    (0.02
    )
    
    $
    (0.03
    )Weighted Average Common Shares Outstanding  Basic and Diluted
    
    
    26,281,133
    
    
    
    25,091,373
 
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THREE MONTHS ENDEDMARCH 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (482,166
    )
    
    $
    (848,414
    )Adjustments
to reconcile net loss to net cash flows used in
operating activities:Depreciation, depletion and amortization
    
    
    15,771
    
    
    
    53,868Impairment, abandonment, and dry hole costs
    
    
    11,598
    
    
    
    Accretion expense
    
    
    
    
    
    
    1,000Stock based compensation expense
    
    
    
    
    
    
    252,150Change in operating assets and liabilities:Accounts receivable-trade
    
    
    380,611
    
    
    
    154,913Accounts receivable-related party
    
    
    (5,701
    )
    
    
    203,497Prepaid expense and other assets
    
    
    21,469
    
    
    
    (51,630
    )AFE
advances-JIB owners
    
    
    (308,697
    )
    
    
    76,379Accounts payable-related party
    
    
    47,092
    
    
    
    (39,600
    )Accounts payable and accrued liabilities
    
    
    (535,862
    )
    
    
    88,290Long Term Liability  P&A Costs
    
    
    (6,630
    )
    
    
    NET CASH USED IN OPERATING ACTIVITIES
    
    
    (862,515
    )
    
    
    (109,547
    )CASH FLOW FROM INVESTING ACTIVITIES:Purchase of furniture and computer equipment
    
    
    (11,254
    )
    
    
    (8,742
    )Purchase of oil and gas properties
    
    
    (106,577
    )
    
    
    (294,719
    )Reimbursement of oil and gas properties
    
    
    
    
    
    
    158,072NET CASH USED IN INVESTING ACTIVITIES
    
    
    (117,831
    )
    
    
    (145,389
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments on long term debt
    
    
    (21,356
    )
    
    
    (16,015
    )Proceeds from 2005 US exempt offering
    
    
    
    
    
    
    100,000Proceeds from 2005 Regulation S offering
    
    
    
    
    
    
    80,000Proceeds from exercise of common stock warrants
    
    
    
    
    
    
    400,000Dividends paid
    
    
    (6,990
    )
    
    
    (6,990
    )NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
    
    
    (28,346
    )
    
    
    556,995NET DECREASE IN CASH
    
    
    (1,008,692
    )
    
    
    (302,059
    )CASH AT BEGINNING OF PERIOD
    
    
    1,178,946
    
    
    
    1,307,747CASH AT END OF PERIOD
    
    $
    170,254
    
    
    $
    1,609,806
 
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BAYOU CITY EXPLORATION, INC.
 
 NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
 1. OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 INTERIM REPORTING
   GENERAL
     USE OF ESTIMATES
  RECLASSIFICATIONS
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RECENTLY ISSUED ACCOUNTING STANDARDS
  Fair Value Measures
 The Fair Value Option for Financial Assets and
Financial Liabilities
 SERIES E PREFERRED STOCK DIVIDENDS
   STOCK BASED COMPENSATION
  INCOME TAXES
  2. GOING CONCERN
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3. AFFILIATED OIL AND GAS PARTNERSHIPS
  4. RELATED PARTY TRANSACTIONS
 COMMON STOCK TRANSACTIONS:
  RECEIVABLES & PAYABLES WITH RELATED PARTIES:
    NOTE PAYABLE TO BR GROUP:
  PARTICIPATION AGREEMENT IN OIL AND GAS PROSPECTS:
    8




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5. CONTINGENCIES
   6. SUBSEQUENT EVENTS
   
 MANAGEMENTS DISCUSSION AND ANALYSIS OF OPERATIONS
 GENERAL OPERATIONS
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SIGNIFICANT ACCOUNTING PRONOUNCEMENTS AFFECTING THE COMPANY
   10




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DESCRIPTION OF PROPERTIES
     Key Developed Properties :
      11




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Key Undeveloped Properties :
   RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
  OPERATING REVENUES
  DIRECT OPERATING COSTS
  EXPLORATION COSTS
  12




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OTHER OPERATING EXPENSES
  INCOME TAX PROVISION
  CAPITAL RESOURCES AND FINANCIAL CONDITION
       13




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CONTROLS AND PROCEDURES
    14




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PART II
 
 OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 
 
 SIGNATURES
  BAYOU CITY EXPLORATION, INC.Date: June 11, 2007
    By
    /s/ Robert D. BurrChief Executive Officer and Presidentand Acting Chief Financial Officer 16