<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)
[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended DECEMBER 31, 1999
                                             -----------------

                                       OR

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
       For the transition period from                 to
                                      ---------------    ----------------

                          COMMISSION FILE NUMBER 0-8609

                              BARGO ENERGY COMPANY

          (Exact name of small business issuer as specified in charter)

               TEXAS                                            87-0239185
   (State or other jurisdiction of                           (I.R.S. Employer
    incorporation or organization)                          Identification No.)

      700 LOUISIANA, SUITE 3700
            HOUSTON, TEXAS                                        77002
(Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (713) 236-9792


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

    Title of Class                     Name of each exchange on which registered
        None                                             None
    --------------                     -----------------------------------------


           Securities registered pursuant to section 12(g) of the Act:

                          COMMON STOCK, PAR VALUE $0.01
                          -----------------------------
                                (Title of Class)

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

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B 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-KSB or any amendment to
this Form 10-KSB. [ ]

Registrant's revenues for the most recent fiscal year:  $19,134,000

The aggregate market value of the Company's voting stock held by nonaffiliates
computed at the closing bid price in the over-the-counter market as quoted on
the National Association of Securities Dealers Electronic Bulletin Board system
on March 3, 2000 was approximately $6 million.

As of March 3, 2000, the Company had outstanding 87,932,726 shares of its common
stock, par value $0.01 and 5,000,000 shares of preferred stock, par value $.01.

Transitional Small Business Disclosure Format No [X] Yes [ ]



<PAGE>   2
                                     PREFACE


                 Caution Respecting Forward-Looking Information

                  This report includes "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All
statements other than statements of historical fact included in the Report (and
the exhibits hereto), including without limitation, statements regarding plans
and intentions of management, the Company's financial position and estimated
quantities and net present values of reserves, are forward looking statements.
The Company can give no assurances that the assumptions upon which such
statements are based will prove to have been correct. Important factors that
could cause actual results to differ materially from the Company's expectations
("Cautionary Statements") are disclosed in the section "Risk Factors" included
herein and other periodic reports filed under the Exchange Act, which are herein
incorporated by reference. All subsequent written and oral forward looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified by the Cautionary Statements.

                               CERTAIN DEFINITIONS

         All defined terms under rule 4-10(a) of Regulation S-X promulgated by
the Securities and Exchange Commission ("Commission") shall have their
statutorily prescribed meanings when used in this report. In addition, the
following terms have the meaning set forth below when used herein.

"API" means American Petroleum Institute.

"BOE" means barrel of oil equivalent, converting gas to oil at a ratio of six
Mcf of gas to one barrel of oil.

"BPD" means barrels of oil per day.

"BBL" means barrel of oil.

"BCF" means billion cubic feet of natural gas.

"DEVELOPMENT WELL" means a well drilled within the proved area of an oil or gas
reservoir to the depth of a stratigraphic horizon know to be productive.

"EXPLORATORY WELL" means a well drilled to find and produce oil or gas in an
unproved area, to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir, or to extend a known reservoir.

"MBBL" means thousand barrels of oil.

"MBOE" means thousand BOE.

"MMBBL" means million barrels of oil.

"MMBO" means million barrels of oil.

"MMBTU" means million British thermal units.

"MCFG" means thousand cubic feet of natural gas.

"MMMCFG" means billions cubic feet of natural gas.

"COPAS" means Council of Petroleum Accountants Societies.

"PROVED RESERVES" means the estimated quantities of crude oil, natural gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions, i.e. prices and costs as of
the date the estimate is made. "Proved reserves" may be developed or
undeveloped.

"PV-10 VALUE" means the estimated future net revenue to be generated from the
production of proved reserves discounted to present value using an annual
discount rate of 10%. These amounts are calculated net of estimated production
costs and future development costs, using prices and costs in effect as of a
certain date, without escalation and without giving effect to non-property
related expenses such as general and administrative expenses, debt service,
future income tax expense or depreciation, depletion and amortization.

"RESERVE ENGINEERS" means T.J. Smith & Company, independent petroleum reserve
engineers.



                                       2
<PAGE>   3
--------------------------------------------------------------------------------
                               TABLE OF CONTENTS
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION                                                                  PAGE
-----------------------
<S>                                                                                      <C>
PART I
Items 1. and 2. Business and Properties .............................................      4

Item 3.  Legal Proceedings ...........................................................    18

Item 4.  Submission of Matters to a Vote of Security Holders .........................    19

PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters .......    19

Item 6.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations ...................................................    21

Item 7.  Financial Statements and Supplementary Data .................................    24

Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure ........................................................    24

PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons; Compliance with
         Section 16(a) of the Exchange Act ...........................................    24

Item 10. Executive Compensation .....................................................     27

Item 11. Security Ownership of Certain Beneficial Owners and Management .............     32

Item 12. Certain Relationships and Related Transactions .............................     33

Item 13. Exhibits and Reports on Form 8-K ...........................................     35
</TABLE>



                                       3
<PAGE>   4

PART I

--------------------------------------------------------------------------------
                     ITEMS 1 AND 2. BUSINESS AND PROPERTIES
--------------------------------------------------------------------------------

THE COMPANY

         Bargo Energy Company (the "Company" or "Bargo") is engaged in the
development of oil and natural gas properties located onshore primarily in the
Gulf Coast Region (Texas and Louisiana) and California. The Company's principal
business strategies include (i) maximizing the value of its existing
high-quality, long-life reserves through efficient operating and marketing
practices, (ii) conducting detailed field studies using the latest technology to
identify additional reserves and exploration potential, and (iii) seeking
acquisitions of producing properties, with exploration and development potential
in areas where the Company has operating experience and expertise. Bargo intends
to continue its efforts to aggressively grow the Company's resource base both
through oil and gas property acquisitions and corporate consolidations.

         As of December 31, 1999, the Company's estimated net proved reserves
were 28,999,000 BOE. At December 31, 1998, the Company owned estimated net
proved reserves of 15,144,000 BOE. This represents a 92% increase in estimated
net proved reserves over December 31, 1998. This increase is attributable to the
Company's active acquisition program and a material increase in oil prices from
year-end 1998 to 1999. Approximately 51% of the Company's reserves are proved
developed producing reserves.

RECENT DEVELOPMENTS

         On February 22, 2000, the Company agreed to purchase oil and gas
properties from subsidiaries of Texaco, Inc. for $161.1 million. The effective
date of the purchase is January 1, 2000 and closing is expected to occur late in
the first quarter of this year. The properties are located in the Permian Basin,
East Texas, Oklahoma and Kansas. Aggregate current net production from the
properties totals approximately 9,000 barrels of oil and 11 million cubic feet
of gas per day. Following the acquisition, Bargo will have proven reserves of
approximately 70 million equivalent barrels of oil. The purchase price to be
paid for the properties is subject to reduction if the joint working interest
owners exercise preferential rights to purchase certain properties, or for title
or other environmental defects identified before closing.

         The Company has received commitments from commercial banks to loan the
Company sufficient amounts to finance the entire acquisition and refinance
existing bank indebtedness. Depending on the amount of any adjustments made to
the purchase price, up to $45 million of these loans will mature in nine months
following the closing date. The Company has received commitments from several of
its current stockholders to purchase preferred stock, and has also received a
commitment from one of its lenders to convert a portion of the loan into
preferred stock, in an amount sufficient in the aggregate to repay this nine
month loan in full. These commitments to purchase preferred stock at maturity of
the nine-month loan also provide for the issuance of new common stock.

         The Company does not expect to use the purchase commitments from its
stockholders or the conversion commitment from its lender. The Company intends
to sell non-core properties from this acquisition, of which a portion of the
proceeds would be available to finance repayment of the loan. The Company may
also issue new debt or equity securities to refinance part or all of the bank
loans.

         The consummation of the purchase is subject to various conditions and
no assurances can be made that such purchase will be consummated.



                                       4
<PAGE>   5

STRATEGIC DEVELOPMENTS

         On April 26, 1999, Future Petroleum Corporation, a Utah corporation
"Future"), merged with Bargo Energy Company, a Texas corporation ("Bargo").
Pursuant to the merger, each of the 22,320,066 shares of common stock of Future
outstanding were converted into one share of Bargo's common stock and each of
the 100,000 shares of preferred stock of Future were converted into one share of
Bargo preferred stock. The Company's symbol on the OTC Bulletin Board was
changed from FUPT to BARG.

         On May 14, 1999, the Company issued and sold to Kayne Anderson Energy
Fund, L.P. ("Kayne"), BancAmerica Capital Investors SBIC I, L.P.
("BancAmerica"), Eos Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC
II, L.P. (collectively, "Eos"), Energy Capital Investment Company PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap Energy
Capital Fund III, L.P. (collectively, "EnCap") and SGC Partners II LLC ("SGC"
and together with Kayne, BancAmerica, Eos, EnCap and SGC, the "Investors")
shares of a newly created class of preferred stock. Five million shares of the
Company's Cumulative Redeemable Preferred Stock, Series B ("Preferred Stock")
were issued in exchange for total gross proceeds of $50 million. As additional
consideration, the Company issued an aggregate of 43,815,810 shares of its
common stock to the Investors equal to 40% of the outstanding common stock (on a
fully diluted basis). If the Company redeems all of the outstanding shares of
Preferred Stock prior to May 14, 2001, the Investors must sell back to the
Company 12.5% of the shares of Common Stock originally issued to the Investors.

         Dividends on the Preferred Stock equal to 10% per annum are payable
quarterly. The dividend rate is subject to increase (but in no event to more
than 16%) or decrease (but in no event to less than 10%) based upon the
Company's ratio of assets to liabilities which is calculated on January 1 and
July 1 of each year or at such other time as requested by the Investors. The
Preferred Stock may be redeemed at any time by the Company and must be redeemed
upon the occurrence of certain events, including upon the fifth anniversary of
the issue date or upon a change of control. A change of control is deemed to
occur upon any merger, reorganization, purchase or sale of more than 50% of the
Company's voting securities, the sale of substantially all of the assets of the
Company or at any time Tim Goff ceases to serve as the Company's Chief Executive
Officer. The Company is prohibited from taking certain actions, including
authorizing, creating or issuing any shares of capital stock, amending the
articles of incorporation of the Company and authorizing a merger or change of
control, without the consent of the holders of a majority of the outstanding
shares of Preferred Stock.

         On September 30, 1999 the Company amended and restated its credit
agreement to increase the commitment from Bank of America and two additional
banks to $100 million (see Item 6. MD&A - Liquidity & Capital Resources). The
three-year revolver has a current borrowing base of $55 million.

         In May 1999, Kimberly G. Seekely, Elizabeth Vanderhider and B. Carl
Price resigned from the Company's Board of Directors. At that time, J. Travis
Hain, Daniel M. Weingeist and Brian D. Young were appointed directors of the
Company. Each of Messrs. Hain, Weingeist and Young is affiliated with one of the
Investors. See "Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act."

         In August 1999, the Board of Directors increased the size of the Board
from seven to eight members and appointed Jonathan M. Clarkson as a director.
Mr. Clarkson was also appointed President and Chief Operating Officer of the
Company at that time. In November 1999, the Board of Directors appointed Mr.
Frank Pottow as a director, increasing the size of the Board to nine members.
Mr. Pottow is the Managing Director of SGC Partners II, L.L.C., one of the
Investors. In connection with the appointment of Mr. Clarkson and Mr. Pottow to
the Board of



                                       5
<PAGE>   6

Directors, the Shareholders Agreement among the Company and certain stockholders
of the Company was amended to provide that Mr. Clarkson would be appointed to
the Board of Directors and that Mr. Pottow would be appointed as a
representative of SGC.


OIL AND GAS PROPERTIES

         In September 1999, Bargo acquired interests in approximately 40 leases,
a waterflood unit, over 60 royalty properties and an oil transportation contract
in East Texas (the "East Texas field") from Atlantic Richfield Company. The
acquisition was effective October 1, 1999 and was acquired for approximately $16
million. As of December 31, 1999 estimated net proved reserves attributable to
this acquisition is approximately 4,000 MBOE.

         In May 1999, Bargo acquired interests in the Raccoon Bend field located
in Austin and Waller Counties, Texas from Exxon Corporation. Bargo acquired a
100% working interest and a net revenue interest of approximately 80%. The
acquisition was effective January 1, 1999 and was acquired for approximately $10
million. As of December 31, 1999 estimated net proved reserves attributable to
this acquisition is approximately 4,200 MBOE.

         The Company's properties are located onshore principally in Texas,
Louisiana and California. As of December 31, 1999, the Company owns interests in
a total of 1,224 gross (887 net) producing wells, of which 863 gross wells are
operated by the Company. As of that date, the Company owned 67,686 gross (46,673
net) acres. Generally, production is from depths of less than 12,000 feet. For
additional information about these properties, see "ITEM 7 - Financial
Statements and Supplementary Data".

         In the oil and gas industry and as used herein, the word "gross" well
or acre is a well or acre in which a WI is owned; the number of gross wells is
the total number of wells in which a WI is owned. A "net" well or acre is deemed
to exist when the sum of fractional ownership WIs in gross wells or gross acres
equals one. The number of net wells or acres is the sum of the fractional WIs
owned in gross wells or gross acres.


PRODUCTIVE WELLS AND ACREAGE

         Shown below are tabulations of the productive wells and estimates of
the Company's net interest in total proved reserves of crude oil, condensate,
natural gas liquids and natural gas as of December 31, 1999, based on
information prepared by the Company's Reserve Engineers. All wells are located
in the United States.


<TABLE>
<CAPTION>
                                   PRODUCTIVE WELLS
                                   ----------------
                                   Gross      Net
                                   -----     ------
                         <S>       <C>       <C>
                         Gas         173        63
                         Oil       1,051       824
                                   -----     -----
                         Total     1,224       887
                                   =====     =====
</TABLE>



                                       6
<PAGE>   7

The following table sets forth developed and undeveloped acreage owned by the
Company as of December 31, 1999.


<TABLE>
<CAPTION>
                DEVELOPED ACREAGE    UNDEVELOPED ACREAGE      TOTAL ACREAGE
                GROSS       NET       GROSS        NET      GROSS       NET
                ------     ------     ------      -----     ------     ------
<S>             <C>        <C>        <C>         <C>       <C>        <C>
Texas           38,422     27,224     10,688      9,856     49,110     37,080
New Mexico       2,357      1,789         --         --      2,357      1,789
Oklahoma         5,795      2,684      1,630         98      7,425      2,782
Louisiana        2,088        995         --         --      2,088        995
Mississippi        460         62         --         --        460         62
California       6,246      3,965         --         --      6,246      3,965
                ------     ------     ------      -----     ------     ------
    Total       55,368     36,719     12,318      9,954     67,686     46,673
                ======     ======     ======      =====     ======     ======
</TABLE>


OIL AND NATURAL GAS RESERVES

         Presented below are the estimated quantities of proved developed and
proved undeveloped reserves of oil and natural gas and the Present Value of
Future Net Revenues (before income taxes) owned by the Company as of December
31, 1999.

                     PROVED RESERVES AS OF DECEMBER 31, 1999

<TABLE>
<S>                                                                                           <C>
         Net Oil (MBbls)...................................................................   16,156.3
         Net Natural Gas (MMcf)............................................................   77,054.0
         Total MBOE........................................................................   28,998.6
         Discounted Present Value Before Income Tax, M$.................................... $179,466.4(1)
</TABLE>

         (1) Discounted at 10% present value as of December 31, 1999 (year-end
         prices held constant). The amounts are before income taxes and
         therefore are not the same as the "Standardized Measure" disclosed in
         Note 16 of the Notes to Consolidated Financial Statements.


         The Reserve Engineers prepared the estimates of net proved reserves and
the future net cash flows (and present value thereof) attributable to such
proved reserves. Reserves were estimated using oil and gas prices and production
and development costs in effect on December 31 of each such year, without
escalation. The reserves were determined using both volumetric and production
performance methods.

         Petroleum engineering is not an exact science and involves estimates
based upon numerous factors, many of which are inherently variable and
uncertain. Consequently, reserve estimates are imprecise and are subject to
change as additional information becomes available. Estimates based upon short
periods of production may not be as reliable as those based upon longer
production histories. Further, estimates of oil and gas reserves, of necessity,
are projections based on engineering data. As a result of the uncertainties
inherent in the interpretation of such data, there can be no assurance that the
Company's estimated oil and gas reserves would ultimately be developed.
Estimates of the reserves and future net revenues involve projecting future
results under current operating and economic conditions. Actual production,
revenues, taxes, development expenditures and operating expenses may not occur
as estimated. Product prices vary over time due to market forces, which are
beyond the Company's control. The Company has not filed any reports with other
federal agencies that contain an estimate of total proved net oil and gas
reserves.


         The following table sets forth certain information about the estimated
proved reserves of the Company as of the dates set forth below.



                                       7
<PAGE>   8

PROVED RESERVES

<TABLE>
<CAPTION>
                                       Oil &
                                    Natural gas
                                    -----------
                                      Liquids            Gas
                                    -----------      -----------
                                        (BBLS)           (MCFG)
<S>                                 <C>              <C>
Balance, December 31, 1997            2,179,000        6,139,000
Purchase of minerals in place         3,245,000       55,840,000
Revisions of previous estimates      (1,729,000)       8,584,000
Production                             (126,000)      (1,109,000)
                                    -----------      -----------
Balance, December 31, 1998            3,569,000       69,454,000
Purchase of minerals in place         8,589,000        3,003,000
Revisions of previous estimates       4,626,000        8,398,000
Production                             (627,000)      (3,762,000)
Sales of minerals in place               (1,000)         (39,000)
                                    -----------      -----------
Balance, December 31, 1999           16,156,000       77,054,000
</TABLE>




         The following tables summarize the net production owned by the Company
and produced to its interest, less production and royalties due others, for all
properties in which the Company had an interest during the periods indicated.
The net production to the Company increased during 1999 as a result of the
significant number of oil and gas acquisitions made in 1999 and in the last
quarter of 1998.

OPERATIONS


<TABLE>
<CAPTION>
ANNUAL PRODUCTION                                  1999           1998
-----------------                                ---------     ---------
<S>                                              <C>             <C>
Barrels of oil equivalents (BOE)                 1,254,000       310,833
Natural gas (MCFG)                               3,762,000     1,109,000
Oil, natural gas liquids & condensate (BBLS)       627,000       126,000
</TABLE>


DAILY PRODUCTION
<TABLE>
<CAPTION>
                                  Year Ended December 31,
                                  -----------------------
                                   1999            1998
                                  ------         --------
<S>                               <C>               <C>
Average net daily production
        Gas (MCFG)                10,307           3,038
        Oil and NGL (Bbls)         1,718             345

Average sales price
        Gas ($ per MCFG)         $  2.25         $  2.34
        Oil and NGL ($ per Bbl)  $ 20.10         $  8.46
</TABLE>


         The average production cost per barrel of oil equivalent, which
includes lifting costs (electricity, fuel, water disposal, repairs, maintenance,
pumper, transportation, and similar items), and production taxes, were $6.13 for
1999 and $ 5.88 for 1998. To facilitate comparisons, units of production are
expressed, in common units, with gas converted to a common unit of oil
production on the basis of six MCFG of gas for one Bbl of oil.

         The Company sells gas on a contract basis to one of several purchasers
in each of the areas in which it has productive gas wells. The Company sells oil
at posted field prices to one of



                                       8
<PAGE>   9

several purchasers in each of the areas in which it has productive oil wells.
See "Item 1 and 2. Business and Properties - Oil and Gas Marketing and Major
Customers".


DRILLING ACTIVITIES

         The wells drilled by the Company during the periods indicated are
summarized in the following table.

<TABLE>
<CAPTION>
                              Year Ended December 31,
                        -----------------------------------
                            1999                 1998
                        -------------       ---------------
                        Gross    Net        Gross      Net
                        -----   -----       -----     -----
<S>                     <C>     <C>         <C>       <C>
Development
  Gas                       3     .08           1       .10
  Oil                      --      --          --        --
  Non-productive           --      --          --        --
                        -----   -----       -----     -----


Totals                      3     .08           1       .10
                        =====   =====       =====     =====


Exploratory
  Gas                      --      --          --        --
  Oil                      --      --          --        --
  Non-productive           --      --          --        --
                        -----   -----       -----     -----
Totals                     --      --          --        --
                        =====   =====       =====     =====
</TABLE>



The following describes the Company's principal oil and gas properties:

TEXAS PANHANDLE

         The Company's Texas Panhandle properties have long-lived oil and
natural gas reserves. The Company has identified over 30 Brown Dolomite, Granite
Wash and Moore County Lime development drilling locations in this area. The gas
produced is high in natural gas liquids, which enables the Company to receive
premium prices for its gas sold. In addition, the use of advanced hydraulic
fracturing methods to complete development wells and fracturing up existing
wells has increased recoverable reserves.

         PANHANDLE FIELD. The Company has an interest in and operates 148 wells
in the Panhandle of Texas. These wells are located in Gray, Carson, Hutchinson,
Moore and Roberts Counties, Texas, primarily in the Panhandle Field. This field
is on the Amarillo uplift west of the Anadarko Basin. All of the Company's wells
produce from the Wolfcamp Brown Dolomite of Permian age and the Pennsylvanian
granite wash. Production is primarily oil, natural gas liquids and gas on the
uplift. The Company's wells on the western edge of the Anadarko Basin (Bar Nine
Field) flanking the uplift are located on anticlines along a structural ridge.
These wells produce gas from the same brown dolomite found on the uplift in the
main Panhandle Field.


TEXAS GULF COAST

         EAST TEXAS FIELD. The Company has an interest in 40 leases, a
waterflood unit, over 60 royalty properties and an oil transportation contract
in the field. Current daily net production is 2,789 Bpd and 2.0 MMCF/D from 500
producing wells. The field produces from the Upper Cretaceous age Woodline
sandstone, at depths of approximately 3,600 feet. It is located in East Texas in
Gregg and Rusk Counties.



                                       9
<PAGE>   10

         RACCOON BEND FIELD. This field is located in Austin and Waller
Counties, Texas approximately 45 miles Northwest of Houston. It is a deep seated
salt dome with in excess of 30 pay sands that include the Eocene age Wilcox,
Sparta, Cook Mountain and Yegua formations, the Oligocene age Vicksburg and
Frio, as well as the shallower Miocene. Production is from numerous reservoirs
caused by both structural and stratigraphic traps. A new 3-D seismic program has
been researched, designed, and put out to bid. It is expect that acquisition
will begin in the second quarter of 2000. There have been in excess of 200 wells
drilled in the field of which 77 are actively producing; 12 are salt-water
disposal; and 75 are shut-in. Upside potential lies in behind pipe zones,
waterflooding certain reservoirs, and identifying attic plays and undrilled
traps by virtue of the 3-D. Bargo is the operator and holds a 100% WI and 80%
NRI in 7,316 gross acres (7,060 net acres).

         CROSS CREEK FIELD. The Cross Creek Field is located in northeastern
Harris County, Texas, just north of the city of Houston. It was discovered in
1993 by Chevron and produces from the geopressured upper Wilcox sandstones at a
depth of 11,000 ft. The Wilcox sands are trapped up against the northwest flank
of the prolific Humble salt dome that also produces from the shallower Yegua,
Frio, and Miocene formations. Besides many recompletion opportunities in the
eight producing wellbores, infill drilling opportunities exist. Bargo acts as
operator and holds a 100% WI with 75-80% NRI.

         SAN MIGUEL CREEK FIELD. Located in McMullen County, Texas this field is
operated by Exxon Corporation and Lakewood Operating Co. Bargo's WI ranges from
33% to 50% with NRI from 25% to 40%. The field was discovered in 1953 by Humble
Oil and is a deep seated salt dome with numerous faults both overlaying and
adjacent to the salt plug. The deeper gas production is from the Cretaceous age
Edwards limestone and the shallower oil production is from the Eocene age Wilcox
sandstone. There have been in excess of 70 wells drilled in the field; 12 remain
active. No well has yet penetrated salt, which is estimated at 14,000 ft. Upside
potential lies in gas compression on the mechanical side and also undertaking a
detailed field study to integrate the 3-D seismic survey.

         BRIGHT FALCON FIELD. The Bright Falcon Field is located along the Texas
Gulf Coast in Jackson County. The field is operated by Cox and Perkins. Two
wells are presently producing from the Eocene age, geopressured Yegua sands,
with behind pipe reserves in one of the wells. One additional development
location has been identified on 3-D seismic. This well is expected to spud in
the first quarter of 2000.

         NORTH EAST LIMES FIELD. The Company owns a 10% WI and a 7.5% NRI in
this field in Live Oak County, Texas which is operated by Southern Resources
Company. It produces from three geopressured Wilcox sands (F-1, F-4, F-5) and
there are presently 6 producing wells and 7 additional proved, undeveloped
locations. Most wells also have proved behind pipe reserves.

         CANDY B FIELD. This field produces from Oligocene age, normally
pressured, Frio sandstones. Bargo operates the field and owns a 67.24% WI with a
52.52% NRI. At present there are 2 producing wells with proved behind pipe
reserves and 2 proved undeveloped drilling locations. The field is located along
the Texas Gulf Coast in San Patricio County.



                                       10
<PAGE>   11

CALIFORNIA

         SOUTH COLES LEVEE UNIT. South Coles Levee Unit is located in the
southern end of the San Joaquin Valley, Kern County, California, 15 miles
southwest of the city of Bakersfield. The field lies just southeast of the
petroleum reserve at Elk Hills and was discovered in 1938 by the Ohio Oil
Company (now Marathon Oil Co.) as a result of extensive seismic work. The
discovery well, the "KCL-F" 1 (now the SCLU 74-10) was drilled to a total depth
of 9365' and completed flowing 885 Bpd of 44.5(Degree) gravity oil. The initial
completion was from the Miocene Age, upper Stevens member of the Antelope
formation and designated the F-1 zone. Subsequent drilling discovered a lower
member in 1939 that was called the F-2 zone. Both zones are deepwater, turbidite
sandstones. The field's trap is formed by both structural and stratigraphic
components. Upside opportunities lie in behind pipe zones, infill drilling,
re-initiating the F-1 waterflood, an F-2 waterflood, and shooting a 3-D seismic
program. The field is presently operated by Aera Energy L.L.C. (Mobile-Shell
Joint Venture). Bargo owns a 63.5% WI and 48.6% NRI in 52 currently producing
wells.


LOUISIANA

         NORTH LEROY FIELD. North Leroy Field is located in southern Louisiana
in Vermilion Parish and is operated by Westland Oil Co. and Cajun Minerals.
There are two active wells that produce from Oligocene age Frio sandstones.
There are additional behind pipe reserves as well as one proved, undeveloped
location.


OKLAHOMA

         WAKITA FIELD. The Company owns 1,340 proven producing acres in the Red
Fork trend containing 8 producing wells. A recent uphole recompletion in the
Oread Formation by an offset operator is producing 600 MCF per day. 2 and
possibly 4 wells have uphole recompletion potential in the Oread Formation.
There is also one proven, undeveloped location. The Company has a 100% WI and
87.5% NRI.

         SHAWNEE TOWNSITE FIELD. This field is located in Pottawatomie County,
Oklahoma and is operated by Vintage Petroleum, Inc. The waterflood produces from
the Pennsylvanian age Skinner sandstones. The reservoirs are a series of
fluvial-delta channels and bars. The Company has a 11.2% WI and 8.95% NRI. There
are 5 proved, undeveloped locations.


TITLE TO PROPERTIES

         The Company believes that the title to its oil and gas properties is
good and defensible in accordance with standards generally accepted in the oil
and gas industry, subject to such exceptions which, in the opinion of the
Company, are not so material as to detract substantially from the use or value
of such properties. The Company's properties are typically subject, in one
degree or another, to one or more of the following: royalties and other burdens
and obligations, express or implied, under oil and gas leases; overriding
royalties and other burdens created by the Company or its predecessors in title;
a variety of contractual obligations (including, in some cases, development
obligations) arising under operating agreements, farmout agreements, production
sales contracts and other agreements that may affect the properties or their
titles; back-ins and reversionary interests existing under purchase agreements
and leasehold assignments; liens that arise in the normal course of operations,
such as those for unpaid taxes, statutory liens securing obligations to unpaid
suppliers and contractors and contractual liens under operating agreements;



                                       11
<PAGE>   12

pooling, unitization and communitization agreements, declarations and orders;
and easements, restrictions, rights-of-way and other matters that commonly
affect property. To the extent that such burdens and obligations affect the
Company's rights to production revenues, they have been taken into account in
calculating the Company's NRIs and in estimating the size and value of the
Company's reserves. The Company believes that the burdens and obligations
affecting its properties are conventional in the industry for properties of the
kind owned by the Company.


OIL AND GAS MARKETING AND MAJOR CUSTOMERS

         All of the Company's oil and gas marketing efforts are contracted out
to EnerTrade, Inc., a Texas based oil and gas marketing consulting firm. Our
strategy for product marketing is to achieve the highest market value while
ensuring credit worthiness of the purchaser.

         Gas Sales. Substantially all of the Company's marketing arrangements
are month-to-month contracts structured to be tied to the appropriate regional
index for the location in which the gas is produced. This allows for gas price
hedging, as well as location based hedging. The Company's largest gas volumes
are at South Coles Levee and Cross Creek. South Coles Levee gas is sold on a
month to month contract tied to the SOCAL Border Index with various purchasers
including Southern Energy Marketing and ARCO Western Energy. Cross Creek gas is
sold to Dynegy, Inc. under a long-term market based contract tied to the Houston
Ship Channel Index.

         Oil Sales. The Company's liquid contracts are month-to-month contracts
structured to be tied to the Cushing WTI price with appropriate transparent
adjustments for location, grade, and transportation. The company typically uses
NYMEX prompt month index or a Plats P Plus index for Cushing value. This also
allows for liquid price hedging, as well as location and grade hedging. The
largest liquid volume is from the company's East Texas properties. Oil is
currently sold to Sunoco, Inc. under a month-to-month contract tied to Cushing
Plats P Plus price less a transportation discount.

         Due to the availability of other markets and pipeline connections, the
Company does not believe that the loss of any single oil or natural gas customer
would adversely affect the Company's results of operations.

         The Company implements oil and gas hedges as it deems appropriate to
ensure minimum levels of cash flow or as market conditions are believed to
create an opportunity to increase cash flows. Approximately 50% (or 150,000
MMBTU per month) of current natural gas production was hedged through calendar
year 1999. For the Company's South Coles Levee production a hedge was in place
for 65,000 MMBTU at prices ensuring a floor of $2.00 per MMBTU and a ceiling of
$2.45 per MMBTU based on Southern California border prices. For the Company's
Gulf Coast properties a hedge was in place for 85,000 MMBTU at prices ensuring a
floor of $2.00 per MMBTU and a ceiling of $2.04 per MMBTU based on Houston Ship
Channel pricing. The Company currently has no outstanding natural gas hedges.

         At December 31, 1999 collars were in place for portions of the
Company's oil production for October 1 through September 2000 at floors of
$18.00 and ceilings of $20.75 and $23.08. Contracted volumes total 50,200
barrels per month declining each month to 42,000 barrels. Beginning October 2000
through September 2001 the Company has two swaps in place at $17.55 and $18.05.
Contracted volumes total 41,350 barrels per month declining to 34,300 barrels
per month representing approximately 50% of the Company's projected oil
production.

         Revenue was decreased under the above hedging agreements by
approximately $700,000 for the year ended December 31, 1999.



                                       12
<PAGE>   13

COMPETITION

         The oil and gas industry is highly competitive. Major oil and gas
companies, independent concerns, drilling and production purchase programs and
individual producers and operators are active bidders for desirable oil and gas
properties, as well as the equipment and labor required to operate those
properties. Many competitors have financial resources substantially greater than
those of the Company. Many competitors also have substantially larger staffs and
facilities than those of the Company. The availability of a ready market for the
Company's oil and gas production depends in part on the cost and availability of
alternative fuels, the level of consumer demand, the extent of other domestic
production of oil and gas, the extent of importation of foreign oil and gas, the
cost of and proximity to pipelines and other transportation facilities,
regulations by state and federal authorities and the cost of complying with
applicable environmental regulations.


REGULATION

         General. Domestic development, production and transportation of oil and
gas are extensively regulated at both the federal and state levels. Legislation
affecting the oil and gas industry is under constant review for amendment,
frequently increasing the regulatory burden on the industry. Also, numerous
departments and agencies, both federal and state, have issued rules and
regulations binding on the oil and gas industry and its individual members,
compliance with which is often difficult and costly and some of which carry
substantial penalties for noncompliance. The following discussion of oil and gas
industry regulation is summary in nature and is not intended to cover all
regulatory matters that could affect the Company.

         State Regulation. State statutes and regulations require permits for
drilling operations and construction of gathering lines, as well as drilling
bonds and reports concerning operations, often creating delays in drilling,
completing new wells and connecting completed wells. Texas and other states in
which the Company conducts operations also have statutes and regulations
governing conservation matters, including regulation of the size of drilling and
spacing or proration units, the density of wells that may be drilled and the
unitization or pooling of oil and gas properties. In addition, state
conservation laws establish maximum rates of production from oil and gas wells,
generally prohibit the venting or flaring of gas and impose certain requirements
on the ratability of production. Many states including Texas also have
regulatory mechanisms that attempt to match monthly production to the market
demand for oil and gas. Certain existing statutes or regulations may set limits
below the rates at which oil and gas is currently produced from wells in which
the Company owns an interest or the prices received for its production.

         Federal Regulation. Since the lifting of federal price controls in
1981, sales of crude oil, condensate and natural gas liquids can be made at
uncontrolled market prices. For many years, the sale and transportation of
natural gas in interstate commerce have been subject to regulation under various
federal laws, including the Natural Gas Act of 1938 ("NGA") and the Natural Gas
Policy Act of 1978 ("NGPA"), both of which are administered by the Federal
Energy Regulatory Commission ("FERC"). The provisions of these acts and
regulations are complex. Under these acts, producers and marketers have
historically been required to obtain from FERC certificates to make so called
"first sales" and abandonment authority to discontinue those sales.
Additionally, first sales have been subject to price regulations. However, as a
result of the enactment of the NGPA and the Natural Gas Wellhead Decontrol Act
of 1989, the remaining regulations imposed by the NGA and the NGPA on first
sales were terminated on January 1, 1993. Thus, sales of natural gas may
currently be made at uncontrolled market prices. FERC jurisdiction over
transportation and sales other than first sales has not been affected.

         Commencing in the mid-1980s, FERC promulgated several orders designed
to enhance competition in natural gas markets by requiring that access to the
interstate transportation facilities necessary to reach those markets be
provided on an open nondiscriminatory basis. FERC has also adopted regulations
intended to make intrastate natural gas transportation



                                       13
<PAGE>   14

accessible to gas buyers and sellers on an open nondiscriminatory basis through
procedures under which intrastate pipelines may participate in certain
interstate activities without becoming subject to FERC's full NGPA jurisdiction.
These orders have had a profound influence upon natural gas markets in the
United States and, among other things, have fostered the development of a large
short term or spot market for gas. The most significant of these orders is Order
636.

         FERC issued Order 636 in April 1992 to require further restructuring of
the sales and transportation services provided by interstate pipelines that
perform open access transportation. The changes were intended to improve the
competitive structure of the interstate natural gas pipeline industry and to
create a regulatory framework that put gas sellers into more direct contractual
relations with gas buyers. Order 636 required individual pipeline service
restructuring proceedings designed to "unbundle" the services provided by
interstate pipelines so that producers and purchasers of natural gas may secure
transportation and storage services from the most economical source, whether
interstate pipelines or other parties. These initiatives have substantially
reduced or eliminated the interstate pipelines' traditional role as wholesalers
of natural gas in favor of providing only natural gas storage and transportation
services.

         Although Order 636 does not actually regulate gas producers, FERC has
stated that Order 636 is intended to foster increased competition within all
phases of the natural gas industry. It is unclear what impact, if any, increased
competition within the natural gas industry under Order 636 will have on the
Company as a producer. Furthermore, because the requirements of Order 636 are
still relatively new it is impossible to predict what effect, if any, Order 636
will have on the Company's gas marketing operations.

         The increasing complexity of the energy regulatory environment has
prompted many producers, including the Company, to rely on highly specialized
experts for the conduct of gas marketing operations. The need for these
specialized services is expected to continue.

         Energy Policy Act. The Energy Policy Act of 1992 (the "Energy Act") was
enacted to promote vehicle fuel efficiency and the development of renewable
energy sources such as hydroelectric, solar, wind and geothermal energy. Other
provisions of the Energy Act include initiatives for reducing restrictions on
certain natural gas imports and exports and for expanding and deregulating
natural gas markets. While these provisions could have a positive impact on the
Company's natural gas sales on a long-term basis, any positive impact could be
offset by measures promoting the use of alternative energy sources other than
natural gas. The impact of the Energy Act on the Company has not been material.

         Environmental. The Company's activities are subject to various federal,
state and local laws and regulations designed to protect the environment. The
Company does not conduct activities offshore. Operations on the Company's
onshore properties may generally be liable for clean-up costs to the federal
government for up to $50 million for each discharge of oil or hazardous
substances under the Federal Clean Water Act, up to $350 million for each oil
discharge under the Oil Pollution Act of 1990 and for up to $50 million plus
response costs for hazardous substance contamination under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (Superfund).

         Although no assurances can be made, the Company believes that, absent
the occurrence of an extraordinary event, compliance with existing federal,
state and local laws, rules and regulations regulating the release of materials
in the environment or otherwise relating to the protection of the environment
will not have a material effect upon the capital expenditures, earnings or the
competitive position of the Company with respect to its existing assets and
operations. The Company cannot predict what effect additional regulation or
legislation, enforcement policies thereunder, and claims for damages to
property, employees, other persons and the environment resulting from the
Company's operations could have on its activities.



                                       14
<PAGE>   15

         Management believes that the Company is in compliance with current
applicable environmental laws and regulations and that continued compliance with
existing requirements will not have a material adverse impact on the Company.


EMPLOYEES

         As of December 31, 1999 the Company had eighteen (18) full-time
employees all of whom are associated with the Company's oil and gas activities.
The Company also contracts with various independent contractors for accounting,
engineering, land research and fieldwork.


RISK FACTORS

         VOLATILITY OF OIL AND GAS PRICES; MARKETABILITY OF PRODUCTION. The
Company's revenues, profitability and future growth and the carrying value of
its oil and gas properties are substantially dependent on prevailing prices of
oil and gas. The Company's ability to maintain or increase its borrowing
capacity and to obtain additional capital on attractive terms is also
substantially dependent upon oil and gas prices. Prices for oil and gas are
subject to large fluctuations in response to relatively minor changes in the
supply of and demand for oil and gas, market uncertainty and a variety of
additional factors beyond the control of the Company. Any substantial and
extended decline in the price of oil or gas would have an adverse effect on the
Company's carrying value of its proved reserves, borrowing capacity, revenues,
profitability and cash flows from operations.

         Volatile oil and gas prices make it difficult to estimate the value of
producing properties for acquisition and often cause disruption in the market
for oil and gas producing properties, as buyers and sellers have difficulty
agreeing on such value. Price volatility also makes it difficult to budget for
and project the return on acquisitions and development and exploitation
projects.

         In addition, the marketability of the Company's production depends upon
the availability and capacity of gas gathering systems, pipelines and processing
facilities. Federal and state regulation of oil and gas production and
transportation, general economic conditions and changes in supply and demand all
could adversely affect the Company's ability to produce and market its oil and
natural gas. If market factors were to change dramatically, the financial impact
on the Company could be substantial. The availability of markets and the
volatility of product prices are beyond the control of the Company and represent
a significant risk.

         RISKS OF EXPLORATION AND DEVELOPMENT. Exploration and drilling
activities are generally considered to be of a higher risk than acquisitions of
producing oil and gas properties. Additionally, certain of the Company's wells
seek to discover deposits of gas at deep formations and have more risk than
wells seeking to develop hydrocarbons from shallow formations. No assurances can
be made that the Company will discover oil and gas in commercial quantities in
its exploration and development operations. Expenditure of a material amount of
funds in exploration for oil and gas without discovery of commercial quantities
of reserves will have a material adverse effect upon the Company.

         OPERATING HAZARDS AND UNINSURED RISKS. The Company's operations are
subject to risks inherent in the oil and gas industry, such as blowouts,
cratering, explosions, uncontrollable flows of oil, gas or well fluids, fires,
pollution and other environmental risks. These risks could result in substantial
losses to the Company due to injury and loss of life, severe damage to and
destruction of property and equipment, pollution and other environmental damage
and suspension of operations.

         The Company maintains insurance of various types to cover its
operations, including comprehensive general liability. Amounts in excess of base
coverages are provided by an



                                       15
<PAGE>   16

umbrella liability policy. In addition, the Company maintains operator's extra
expense coverage, which provides coverage for the control of wells drilled
and/or producing and redrilling expenses and pollution coverage for wells out of
control.

         No assurances can be given that the Company will be able to maintain
adequate insurance in the future at rates the Company considers reasonable. The
occurrence of a significant event not fully insured or indemnified against could
materially and adversely affect the Company's financial condition and results of
operations.

         ESTIMATES OF OIL AND GAS RESERVES. This document contains estimates of
oil and gas reserves, and the future net cash flows attributable to those
reserves, prepared by T.J. Smith & Company, Inc., independent petroleum and
geological engineers (the "Reserve Engineers"). There are numerous uncertainties
inherent in estimating quantities of proved reserves and cash flows attributable
to such reserves, including factors beyond the control of the Company and the
Reserve Engineers. Reserve engineering is a subjective process of estimating
underground accumulations of oil and gas that cannot be measured in an exact
manner. The accuracy of an estimate of quantities of reserves, or of cash flows
attributable to such reserves, is a function of the available data, assumptions
regarding future oil and gas prices and expenditures for future development and
exploitation activities, and of engineering and geological interpretation and
judgment. Additionally, reserves and future cash flows may be subject to
material downward or upward revisions, based upon production history,
development and exploitation activities and prices of oil and gas. Actual future
production, revenue, taxes, development expenditures, operating expenses,
quantities of recoverable reserves and the value of cash flows from such
reserves may vary significantly from the assumptions and estimates set forth
herein. In addition, reserve engineers may make different estimates of reserves
and cash flows based on the same available data. In calculating reserves on a
BOE basis, gas was converted to an oil equivalent at the ratio of six Mcf of gas
to one Bbl of oil. While this ratio approximates the energy equivalency of gas
to oil on a Btu basis, it may not represent the relative prices received by the
Company on the sale of its oil and gas production.

         The estimated quantities of proved reserves and the discounted present
value of future net cash flows attributable to estimated proved reserves set
forth in this document were prepared by the Reserve Engineers in accordance with
the rules of the Commission, and are not intended to represent the fair market
value of such reserves.

         ABILITY TO REPLACE RESERVES. The Company's future success depends upon
its ability to find, develop and acquire additional oil and gas reserves that
are economically recoverable. As is generally the case in the Gulf Coast region,
many of the Company's producing properties are characterized by a high initial
production rate, followed by a steep decline in production. As a result, the
Company must locate and develop or acquire new oil and gas reserves to replace
those being depleted by production. Without successful exploration or
acquisition activities, the Company's reserves and revenues will decline
rapidly. No assurances can be given that the Company will be able to find and
develop or acquire additional reserves at an acceptable cost.

         The successful acquisition of producing properties requires an
assessment of recoverable reserves, future oil and gas prices and operating
costs, potential environmental and other liabilities and other factors. Such
assessments are necessarily inexact and their accuracy inherently uncertain. In
addition, no assurances can be given that the Company's exploitation and
development activities will result in any increases in reserves. The Company's
operations may be curtailed, delayed or canceled as a result of lack of adequate
capital and other factors, such as title problems, weather, compliance with
governmental regulations or price controls, mechanical difficulties or shortages
or delays in the delivery of equipment. In addition, the costs of exploration
and development may materially exceed initial estimates.

         SUBSTANTIAL CAPITAL REQUIREMENTS. The Company makes, and will continue
to make, substantial capital expenditures for the exploitation, exploration,
acquisition and production of oil



                                       16
<PAGE>   17

and gas reserves. Historically, the Company has financed these expenditures
primarily with cash generated by operations, proceeds from bank borrowings and
issuance of debt and equity securities. The Company believes that it will have
sufficient cash flows provided by operating activities, proceeds of equity
offerings and borrowings under its credit agreement to fund planned capital
expenditures. The Company makes solicited and unsolicited offers for the
acquisition of oil and gas properties in the normal course of business.

         If revenues or the Company's borrowing base decrease as a result of
lower oil and gas prices, operating difficulties or declines in reserves, the
Company may have limited ability to expend the capital necessary to undertake or
complete future drilling programs. There can be no assurance that additional
debt or equity financing or cash generated by operations will be available to
meet these requirements.

         HEDGING OF PRODUCTION. Part of the Company's business strategy is to
reduce its exposure to the volatility of oil and gas prices by hedging a portion
of its production. See "Item 1 and 2. Business and Properties--Oil and Gas
Marketing and Major Customers." In a typical hedge transaction, the Company will
have the right to receive from the counterparts to the hedge, the excess of the
fixed price specified in the hedge over a floating price based on a market
index, multiplied by the quantity hedged. If the floating price exceeds the
fixed price, the Company is required to pay the counterparts this difference
multiplied by the quantity hedged. The Company is required to pay the difference
between the floating price and the fixed price (when the floating price exceeds
the fixed price) regardless of whether the Company has sufficient production to
cover the quantities specified in the hedge. Significant reductions in
production at times when the floating price exceeds the fixed price could
require the Company to make payments under the hedge agreements even though such
payments are not offset by sales of production. Hedging will also prevent the
Company from receiving the full advantage of increases in oil or gas prices
above the fixed amount specified in the hedge.

         ENVIRONMENTAL AND OTHER REGULATIONS. The Company's operations are
subject to numerous laws and regulations governing the discharge of materials
into the environment or otherwise relating to environmental protection. See
"Item 1 and 2. Business and Properties - Regulation." These laws and regulations
may require the acquisition of a permit before drilling commences, restrict the
types, quantities and concentration of various substances that can be released
into the environment in connection with drilling and production activities,
limit or prohibit drilling activities on certain lands lying within wilderness,
wetlands and other protected areas, require remedial measures to mitigate
pollution from former operations, such as plugging abandoned wells, and impose
substantial liabilities for pollution resulting from the Company's operations.
Moreover, the recent trend toward stricter standards in environmental
legislation and regulation is likely to continue. The enactment of stricter
legislation or the adoption of stricter regulation could have a significant
impact on the operating costs of the Company, as well as on the oil and gas
industry in general.

         The Company's operations could result in liability for personal
injuries, property damage, oil spills, discharge of hazardous materials,
remediation and clean-up costs and other environmental damages. Moreover, the
Company could be liable for environmental damages caused by previous property
owners. As a result, substantial liabilities to third parties or governmental
entities may be incurred, the payment of which could have a material adverse
effect on the Company's financial condition and results of operations. The
Company maintains insurance coverage for its operations, including limited
coverage for sudden and accidental environmental damages, but does not believe
that insurance coverage for environmental damages that occur over time is
available at a reasonable cost. Moreover, the Company does not believe that
insurance coverage for the full potential liability that could be caused by
sudden and accidental environmental damages is available at a reasonable cost.
Accordingly, the Company may be subject to liability or may lose the privilege
to continue exploration or production activities upon substantial portions of
its properties in the event of certain environmental damages.



                                       17
<PAGE>   18

         The Oil Pollution Act of 1990 imposes a variety of regulations on
"responsible parties" related to the prevention of oil spills. The
implementation of new, or the modification of existing, environmental laws or
regulations, including regulations promulgated pursuant to the Oil Pollution Act
of 1990, could have a material adverse impact on the Company.

         MARKETS. The Company's ability to market oil and gas from its wells
depends upon numerous factors beyond the Company's control, including the extent
of domestic production and imports of oil and gas, the proximity of the gas
production to gas pipelines, the availability of capacity in such pipelines, the
demand for oil and gas by utilities and other end users, the availability of
alternative fuel sources, the effects of inclement weather, and state and
federal regulation of oil and gas production and federal regulation of gas sold
or transported in interstate commerce. No assurance can be given that the
Company will be able to market all of the oil or gas produced by the Company or
that favorable prices can be obtained for the oil and gas the Company produces.

         In view of the many uncertainties affecting the supply and demand for
oil, gas and refined petroleum products, the Company is unable to predict future
oil and gas prices and demand or the overall effect such prices and demand will
have on the Company. Management does not believe that the loss of any of the
Company's oil purchasers would have a material adverse effect on the Company's
operations. Additionally, since substantially all of the Company's gas sales are
on the spot market, the loss of one or more gas purchasers should not materially
and adversely affect the Company's financial condition.


MINERAL HOLDINGS

         The Company holds a variety of mineral interests, none of which is in
production. The Company intends to sell these holdings or, in the event that a
sale is not feasible, enter into sublease or joint venture arrangements with
third parties. Pending sale or such arrangements, the Company may drill and
trench to further delineate reserves on certain of the properties. The Company's
mineral holdings are not material to the Company's business.


EXECUTIVE OFFICES

         The Company's principal executive offices, consisting of approximately
19,255 square feet of office space located at 700 Louisiana, Suite 3700,
Houston, Texas 77002, are rented from an unrelated party at a current rate of
$25,884 per month, under a lease expiring August 31, 2002.

--------------------------------------------------------------------------------
                            ITEM 3. LEGAL PROCEEDINGS
--------------------------------------------------------------------------------

         Neither the Company nor any of its property is subject to any material
pending legal proceeding.



                                       18
<PAGE>   19
--------------------------------------------------------------------------------
           ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
--------------------------------------------------------------------------------

         No matters were submitted to a vote of the shareholders during the
fourth quarter of 1999.

                                     PART II

--------------------------------------------------------------------------------
                  ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

         The Company's Common Stock is traded in the over-the-counter market and
is quoted on the OTC Electronic Bulletin Board of the National Association of
Securities Dealers, Inc. under the symbol "BARG". The following table sets forth
the high and low bid quotations for the Company's Common Stock as reported on
the OTC Bulletin Board for the periods indicated, based on interdealer bid
quotations, without markup, markdown, commissions or adjustments (which may not
reflect actual transactions). The Company's Common Stock has traded on a very
limited basis during the preceding three years.

<TABLE>
<CAPTION>
                                    Bid Quotation
                               ----------------------
                                 High         Low
                               ---------    ---------
1999
----
<S>                            <C>           <C>
Quarter ended March 31         $   0.510    $   0.260
Quarter ended June 30          $   0.468    $   0.220
Quarter ended September 30     $   0.687    $   0.156
Quarter ended December 31      $   0.687    $   0.250

1998
----
Quarter ended March 31         $   0.625    $   0.312
Quarter ended June 30          $   0.687    $   0.437
Quarter ended September 30     $   0.531    $   0.343
Quarter ended December 31      $   0.406    $   0.260
</TABLE>


         As of March 3, 2000, the Company's Stock was quoted on the OTC
Electronic Bulletin Board at a closing bid of $2.875.

         On March 3, 2000, the Company had approximately 990 shareholders.

         The Company has not paid dividends on the Common Stock and intends to
retain its cash flow from operations, net of preferred stock dividends, for the
future operation and development of its business. In addition, the Company's
primary credit facility and the terms of the outstanding preferred stock
restrict payments of dividends on its Common Stock.

         The Company has not paid dividends on the Preferred Stock and does not
anticipate paying any in the future.



                                       19
<PAGE>   20

UNREGISTERED SALES OF SECURITIES

         During the three years ending December 31,1999 the Company sold
securities without registration under the Securities Act of 1933 (the
"Securities Act") in the following transactions:

         On April 26, 1999, Future Petroleum Corporation, a Utah corporation
("Future"), merged into Bargo, with Bargo as the surviving corporation. As of
that date, each of the 22,320,066 shares of common stock of Future outstanding
were converted into one share of Bargo's common stock and each of the 100,000
shares of preferred stock of Future outstanding were converted into one share of
Bargo preferred stock. Since the sole purpose of this transaction was to change
the state of incorporation of Future, under Rule 145 promulgated under the
Securities Act of 1933, this transaction was not subject to registration.

         On May 14, 1999, the Company issued and sold to Kayne Anderson Energy
Fund, L.P. ("Kayne"), BancAmerica Capital Investors SBIC I, L.P.
("BancAmerica"), Eos Partners, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC
II, L.P. (collectively, "Eos"), Energy Capital Investment Company PLC, EnCap
Energy Capital Fund III-B, L.P., BOCP Energy Partners, L.P., EnCap Energy
Capital Fund III, L.P. (collectively, "EnCap") and SGC Partners II LLC ("SGC"
and together with Kayne, BancAmerica, Eos, EnCap and SGC, the "Investors")
shares of a newly created class of preferred stock. Five million shares of the
Company's Cumulative Redeemable Preferred Stock, Series B ("Preferred Stock")
were issued in exchange for an aggregate purchase price of $50 million. As
additional consideration, the Company issued an aggregate of 43,815,810 shares
of its common stock to the Investors equal to 40% of the outstanding common
stock (on a fully diluted basis).

         In February 1999, the Company issued 37,720 shares of common stock
pursuant to previously granted stock options at an exercise price of $.267

         In May 1998, the Company issued 150,000 shares of common stock to NCI
Enterprises, Inc. for the acquisition of an interest in the Shawnee Townsite
Unit, valued at $37,500. In conjunction with this transaction, the Company
issued 31,238 common shares to EnCap Equity 1994 and 18,762 shares to Energy
Capital Investment Company PLC valued at $7,809.50 and $4,690.50, respectively.

         In July 1998, the Company issued 110,000 shares of common stock
pursuant to previously granted stock options at an exercise price of $.53125.

         In August 1998, the Company acquired certain producing properties from
BER Partnership, Ltd. for $5.8 million, 4.7 million shares of common stock and a
warrant for 250,000 shares of common stock and the EnCap entities agreed to
modify and extend their outstanding loans in exchange for 2.8 million shares of
common stock. In conjunction with an employment agreement entered into as part
of this transaction, B. Carl Price was issued 350,000 options to purchase common
stock.

         In October 1998, the Company acquired an additional interest in the
Shawnee Townsite Unit and acquired an interest in the Gin Unit from NCI
Reserves, Ltd., Southwest Sulfur & Oil, Inc., Wayne Newkumet, and Castello
Enterprises, Inc. for 280,000 shares of common stock.

         In December 1998, the Company acquired substantially all of the assets
and liabilities of BER Partnership, Ltd. for $2 million and 100,000 shares of
preferred stock.

         In December 1998, the Company issued an aggregate of 8,333,333 shares
of common stock to BEC Partnership and TJG Investments, Inc. in exchange for the
cancellation of outstanding debt aggregating $4 million.



                                       20
<PAGE>   21

         In November 1997, the Company acquired certain producing properties and
partnership interests for $6.6 million and 1,575,000 shares of restricted common
stock.

         During 1997, 1998 and 1999, the Company granted stock options to
various employees.

         The securities issued in the transactions described above (other than
the reincorporation) were issued in reliance on the exemption from the
registration and prospectus delivery requirements of the Securities Act provided
in Section 4(2) thereof. Each purchaser was provided with business and financial
information respecting the Company and was provided with the opportunity to
obtain additional information in order to verify the information provided or to
further inform themselves with respect to the Company. Each of the persons
acquiring such securities acknowledged in writing that such person was obtaining
"restricted securities" as defined in rule 144 under the Securities Act; that
such shares could not be transferred without registration or an available
exemption there from; that such person must bear the economic risk of the
investment for an indefinite period; and that the Company would restrict the
transfer of the securities in accordance with such representations. Such persons
also agreed that any certificates representing such shares would be stamped with
a restrictive legend covering the transfer of such shares. The certificates
representing the foregoing shares bear an appropriate restrictive legend
conspicuously on their face, and stop transfer instructions are noted on the
Company's stock transfer records.

--------------------------------------------------------------------------------
            ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATION
--------------------------------------------------------------------------------

GENERAL

         The Company's revenues, profitability and future growth and the
carrying value of its oil and gas properties are substantially dependent on
prevailing prices of oil and gas and its ability to find, develop and acquire
additional oil and gas reserves that are economically recoverable. The Company's
ability to maintain or increase its borrowing capacity and to obtain additional
capital on attractive terms is also influenced by oil and gas prices.

         Prices for oil and gas are subject to large fluctuations in response to
relatively minor changes in the supply of and demand for oil and gas, market
uncertainty and a variety of additional factors beyond the control of the
Company. These factors include weather conditions in the United States, the
condition of the United States economy, the actions of the Organization of
Petroleum Exporting Countries, governmental regulation, political stability in
the Middle East and elsewhere, the foreign supply of crude oil and natural gas,
the price of foreign imports and the availability of alternate fuel sources. Any
substantial and extended decline in the price of crude oil or natural gas would
have an adverse effect on the Company's carrying value of its proved reserves,
borrowing capacity, revenues, profitability and cash flows from operations.

         The Company uses the full cost method of accounting for the Company's
investment in oil and gas properties. Under the full cost method of accounting,
all costs of acquisition, exploration and development of oil and gas reserves
are capitalized into a "full cost pool." Oil and gas properties in the pool,
plus estimated future expenditures to develop proved reserves and future
abandonment, site remediation and dismantlement costs, are depleted and charged
to operations using the unit of production method based on the portion of
current production to total estimated proved recoverable oil and gas reserves.
To the extent that such capitalized cost (net of depreciation, depletion and
amortization) exceed the discounted future net cash flows on an after-tax basis
of estimated proved oil and gas reserves, such excess costs are charged to
operations.



                                       21
<PAGE>   22

Once incurred, the write down of oil and gas properties is not reversible at a
later date even if oil or natural gas prices increase.

         The Company does not have a specific acquisition budget because of the
unpredictability of the timing and size of forthcoming acquisition activities.
There is no assurance that the Company will be able to identify suitable
acquisition candidates in the future, or that the Company will be successful in
the acquisition of producing properties. In order to finance any possible future
acquisitions, the Company will either use borrowings available under its credit
facility or the Company may seek to obtain additional debt or equity financing
in the public or private capital markets. Further, there can be no assurances
that any future acquisitions made by the Company will be integrated successfully
into the Company's operations or will achieve desired profitability objectives.

         In June 1998 the Financial Accounting Standards Board issued SFAS 133
"Accounting for Derivative Instruments and Hedging Activities". This standard is
effective for fiscal years beginning after June 15, 1999 (January 1, 2000 for
the Company). SFAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of derivatives
are recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. The Company has not yet completed
its evaluation of the impact of the adoption of this new standard.


LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary sources of capital are its cash flows from
operations, borrowings and issuance of debt and equity securities.

         The Company reported net income of $663,000 for the year ended December
31, 1999 compared to net income of $1,408,000 for the year ended December 31,
1998. At December 31, 1999, the Company had working capital of $5,516,000 which
was a $13,550,000 increase from the negative $8,034,000 working capital that the
Company had as of December 31, 1998. This increase in working capital was
primarily a result of the Company amending and restating its credit facility on
September 30, 1999 whereby the terms of the agreement changed from a one-year
revolver (which converted to a term loan) to a straight three-year revolver. In
addition, the Company's working capital has increased as a result of the
property acquisitions referred to above.

         Effective August 14, 1998, the Company entered into a credit agreement
with Bank of America ("Credit Agreement"). Borrowings under the Credit Agreement
are secured by mortgages covering substantially all of the Company's producing
oil and gas properties as well as by certain pledges of the Company's Common
Stock. The Credit Agreement initially provided for a commitment amount of $20
million and a $10.5 million borrowing base ("Borrowing Base"). This Credit
Agreement was amended and increased to $27.5 million on November 15, 1998. In
December 1998, the Company amended and restated the Credit Agreement to increase
the commitment amount to $50 million subject to a borrowing base as determined
by Bank of America on an acquisition by acquisition basis.

         On September 30, 1999 the Company amended and restated the Credit
Agreement to increase the commitment from Bank of America and two additional
banks to $100 million. The three-year revolver has a current borrowing base of
$55 million.

         The Company has a choice of two different interest rates: the Base Rate
or the LIBO Rate. The debt bears interest under the Base Rate (which is the
higher of the lender's "Prime Rate" or the Federal Funds Rate plus .5%) plus an
applicable margin of .75%. The debt bears interest under the LIBO Rate at the
LIBO rate (reserve adjusted) plus 1.75%. The Company may



                                       22
<PAGE>   23

convert any portion of the outstanding debt from one interest rate type to
another in increments of $500,000 with a minimum transfer amount of $1,000,000.
Borrowings under the Credit Agreement were $20,780,000 as of December 31, 1999.


CASH FLOW TO OPERATING ACTIVITIES

         Operating activities of the Company during 1999 provided net cash of
$2,361,000. The Company acquired oil and gas properties totaling $27,900,000 in
1999 (the East Texas acquisition and Raccoon Bend acquisition). Investing
activities in 1999 used net cash of $27,999,000, primarily due to the
acquisitions referred to above. Financing activities in 1999 provided net cash
of $26,772,000 primarily due to the $50 million in gross proceeds from the
issuance of redeemable preferred stock in May 1999, which was reduced by the
repayment of debt.

         Operating activities of the Company during 1998 provided net cash of
$350,000. The Company acquired oil and gas properties totaling $29,857,000 in
1998 with the majority of these acquisitions occurring in the 4th quarter of the
year. Investing activities in 1998 used net cash of $31,692,000, primarily due
to the acquisition of these oil and gas properties. Financing activities in 1998
provided net cash of $32,290,000 primarily due to proceeds from the issuance of
debt.


RESULTS OF OPERATIONS

         Comparison of Years Ended December 31, 1999 and 1998

         Total revenues in 1999 increased to $19,134,000 from $3,679,000 in
1998, primarily due to increased production as a result of the acquisitions the
Company made in 1999 and late in the fourth quarter of 1998. Production costs
increased to $7,685,000 for 1999 from $1,826,000 in 1998 as a result of these
acquisitions. Production and operating costs increased $.25 per BOE, or 4%, to
$6.13 per BOE for 1999, from $5.88, per BOE for 1998. General and administrative
expenses increased to $3,659,000 from $783,000 in 1998 due to increased overhead
associated with the Company's acquisition activities. The Company had net income
of $663,000 in 1999 compared to net income of $1,408,000 in 1998. The Company's
net income before extraordinary items for 1999 is $663,000, which is an increase
of $1,841,000 compared to the net loss before extraordinary items of $1,178,000
in 1998. This increase is attributable to increased production from
acquisitions.


INFLATION

         The Company's activities have not been, and in the near term are not
expected to be, materially affected by inflation. The Company's oil exploration
and production activities are generally affected by prevailing prices for oil,
however.



                                       23
<PAGE>   24
--------------------------------------------------------------------------------
               ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
--------------------------------------------------------------------------------

         The table of contents of the financial statements and supplementary
data included in this report is contained in "ITEM 13. EXHIBITS AND REPORTS ON
FORM 8-K".

--------------------------------------------------------------------------------
              ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                     ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

         None


                                    PART III

--------------------------------------------------------------------------------
      ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
               COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
--------------------------------------------------------------------------------

EXECUTIVE OFFICERS AND DIRECTORS

         The following table sets forth the name, age and position of each
executive officer and director of the Company.

<TABLE>
<CAPTION>
                                                                                                 Director
                                                                                                 Term
         Name                       Age                       Position                           Expires
         ----                       ---                       --------                           -------
<S>                                 <C>              <C>                                         <C>
Tim J. Goff                         41               Chairman of the Board, Chief
                                                     Executive Officer                           2002
Jonathan M. Clarkson                49               President, Chief Operating
                                                     Officer                                     **
Thomas D. Barrow                    53               Director                                    2001
D. Martin Phillips                  46               Director                                    2001
Gary R. Petersen                    53               Director                                    2002
J. Travis Hain                      40               Director                                    **
Daniel M. Weingeist                 36               Director                                    **
Brian D. Young                      46               Director                                    **
V. Frank Pottow                     36               Director                                    **
</TABLE>

** Serves until the next annual meeting of shareholders.



                                       24
<PAGE>   25

         In May 1999, Kimberly G. Seekely, Elizabeth Vanderhider and B. Carl
Price resigned from the Company's Board of Directors. At that time, J. Travis
Hain, Daniel M. Weingeist and Brian D. Young were appointed directors of the
Company.

         In August 1999, the Board of Directors increased the size of the Board
from seven to eight members and appointed Jonathan M. Clarkson as a director.
Mr. Clarkson was also appointed President and Chief Operating Officer of the
Company at that time. In November 1999, the Board of Directors appointed Mr.
Frank Pottow as a director, increasing the size of the Board to nine members.
Mr. Pottow is the Managing Director of SGC Partners II, L.L.C., a stockholder of
the Company. In connection with the appointment of Mr. Clarkson and Mr. Pottow
to the Board of Directors, the Shareholders Agreement among the Company and
certain stockholders of the Company was amended to provide that Mr. Clarkson
would be appointed to the Board of Directors and that Mr. Pottow would be
appointed as a representative of SGC Partners.

         Officers serve at the pleasure of the board of directors. Biographical
information for each of the executive officers and directors is presented below.


TIM J. GOFF

         Mr. Goff was appointed as Chairman of the Board of Directors in August
of 1998 and served as President and Chief Executive Officer from December 1998
until September 1999 when Jonathan M. Clarkson joined the Company as President
and Chief Operating Officer. Mr. Goff has over 18 years of oil and gas industry
experience. Prior to his present position with Future, Mr. Goff was Managing
Principal and Chief Executive Officer of Bargo Energy Company ("Bargo"), which
was formed in 1993 to acquire oil and gas properties. In the five years he ran
Bargo, Mr. Goff acquired more than $100 million of oil and gas properties. Prior
to forming Bargo, Mr. Goff served as Vice President of Special Projects and
Assistant to the Chairman of the Board and CEO of Torch Energy Advisors, Inc. He
holds a Bachelor of Business Administration Degree in Accounting from Central
Arkansas University.

JONATHAN M. CLARKSON

         Mr. Clarkson joined Bargo in September 1999 as President and Chief
Operating Officer. Mr. Clarkson has over 20 years of oil and gas industry
experience. Prior to joining the Company Mr. Clarkson was the Executive Vice
President and Chief Financial Officer of Ocean Energy, Inc. He had served as
Senior Vice President and Chief Financial Officer since October 1989 and from
May 1987 to September 1989, Mr. Clarkson was Ocean's Vice President and
Treasurer. Prior to joining Ocean, Mr. Clarkson served as Senior Vice President
of InterFirst Bank, Dallas, managing commercial lending functions in the Energy
and U.S. Corporate Divisions. Mr. Clarkson received a bachelor of science in
economics from Southern Methodist University and a master of management degree
(MBA) in finance and accounting from the J.L. Kellogg Graduate School of
Management - Northwestern University.

THOMAS D. BARROW

         Thomas D. Barrow has been a director of the Company since August 1998.
Mr. Barrow has over 24 years of oil and gas industry experience. Mr. Barrow was
Managing Principal of Bargo since its formation in 1993. Prior to forming Bargo
with Mr. Goff, he was co-founder and President of Barrow Energy Company, and B&N
Petroleum, Inc., and currently serves as a Director of Nuevo Energy Company, a
New York Stock Exchange listed company.



                                       25
<PAGE>   26

D. MARTIN PHILLIPS

         D. Martin Phillips has been a director of the Company since August
1998. Mr. Phillips is a Managing Director and principal of EnCap Investments
L.C. which is a funds management and investment banking firm which focuses
exclusively on the oil and gas industry. Prior to joining EnCap, Mr. Phillips
served as Senior Vice President in the Energy Banking Group of NCNB Texas
National Bank in Dallas, Texas. He has over 20 years of experience in energy
banking. Mr. Phillips also serves as a Director of Breitburn Energy Company LLC
and is on the board of the Houston Producers' Forum.

GARY R. PETERSEN

         Gary R. Petersen has been a director of the Company since August 1998.
Mr. Petersen is a co-founder and principal of EnCap Investments L.C. with over
25 years of energy experience. EnCap Investments specializes in procuring and
managing institutional capital and providing merchant/investment banking
services for exploration and production companies. Mr. Petersen had previously
served as Senior Vice President and Manager of the Corporate Finance Division of
the Energy Banking Group for Republic Bank Corporation in Houston, Texas. He
holds B.B.A. and M.B.A. degrees in finance from Texas Tech University and has
done post graduate studies at American University in Washington D.C. and the
Stonier Graduate School of Banking at Rutgers University. He is also a member of
the Board of Directors of Nuevo Energy Inc., Belden & Blake Energy Company,
Energy Capital Investment Company and Equus II, Inc.

J. TRAVIS HAIN

         J. Travis Hain has been a director of the Company since May 1999. Mr.
Hain is Managing Director of Bank of America Capital Investors (formerly
NationsBank Capital Investors, a merchant banking unit of Bank of America
Corporation) where in 1992 he founded the Mezzanine Finance Group to make equity
and mezzanine investments on behalf of certain banking subsidiaries. Prior to
joining the bank in 1985, Mr. Hain worked at Manufacturers Hanover Trust. He has
over 5 years of experience in energy banking. Mr. Hain serves on the boards of
directors of FlexSol Holding Corp., Medical Analysis Systems, Inc., Rex
International, Inc. and Tepco Energy Resources, Inc. and the board of managers
of Titan Towers, L.L.C.

DANIEL M. WEINGEIST

         Daniel M. Weingeist has been a director since May 1999. Mr. Weingeist
is Managing Director, Energy Investments, of Kayne Anderson Investment
Management, a registered investment advisor based in Los Angeles. He opened
Kayne Anderson's Houston office in August, 1999 to focus on identifying
investment opportunities as part of Kayne Anderson's focus on energy
transactions. Prior to joining Kayne Anderson, Mr. Weingeist was a Managing
Director and Principal at Torch Energy Advisors, a Houston-based company that
provides capital and specialized outsourcing services. Prior to that he served
as Vice President with EnCap Investments and as a Reservoir Engineer with Exxon.
He holds a B.S. Petroleum Engineering and M.B.A. from the University of Texas

BRIAN D. YOUNG

         Brian D. Young was elected a director of the Company in May 1999. He
has been a General partner of Eos Partners, L.P. (investment partnership) since
January 1994. He is also a director of GSE Lining Technologies, Inc. and Black
Box Corporation.



                                       26
<PAGE>   27

V. FRANK POTTOW

         V. Frank Pottow was elected a director of the Company in November 1999.
He is a Managing Director of SG Capital partners, the North American merchant
banking affiliate of French bank Societe Generale, since 1997. From 1996 to 1997
he was a Managing Director of Thayer Capital Partners, a leveraged buyout fund
based in Washington, DC. From 1992 to 1996 he was a Principal of Odyssey
Partners L.P., a private investment partnership with over $2 billion of capital
under management. Mr. Pottow received a Masters of Business Administration
Degree from Harvard Business School and a Bachelor of Science Degree in
Economics from The Wharton School of Business. Mr. Pottow has been a director of
many private and public companies, including Archer Resources Ltd., Canrise
Resources Ltd., Hugoton Energy Corporation, IPEC Ltd., and Locksley Capital
Partners Inc. He currently serves as a director of Ballard Petroleum LLC and
Macassa Capital Corporation.



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during or respecting its last fiscal year, except as
described below, no person who, at any time during the most recent fiscal year
was a director, officer, beneficial owner of more than 10% of any class of
equity securities of the Company or any other person known to be subject to
Section 16 of the Exchange Act failed to file on a timely basis reports required
by Section 16(a) of the Exchange Act.


         Mr. Frank Pottow filed his individual report on Form 3 late.

--------------------------------------------------------------------------------
                         ITEM 10. EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------

EXECUTIVE OFFICER COMPENSATION

         The following table sets forth, for the time periods indicated, cash
compensation received by persons serving as executive officers of the Company
during the last preceding fiscal year as well as cash compensation received by
the next two most highly compensated employees of the Company. No other
executive officer was paid a salary and bonus that exceeded $100,000 for the
most recent fiscal year.



                                       27
<PAGE>   28

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                    Long Term Compensation
                                                                                    -----------------------------------------------
                                             Annual Compensation                    Awards                    Payouts
-----------------------------------------------------------------------------------------------------------------------------------
         (a)                      (b)      (c)           (d)      (e)               (f)         (g)            (h)       (i)
                                                                  Other                         Securities               All Other
                                                                  Annual            Restricted  Underlying               Compen-
                                  Year                            Compen-           Stock       Options/       LTIP      sation
Name and Principal                Ended    Salary        Bonus    sation            Award(s)    SARs           Payouts
Position                          Dec. 31  ($)           ($)      ($)               (#)         (#)            ($)       ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                               <C>      <C>           <C>      <C>               <C>         <C>
Tim J. Goff,
Chairman & CEO                      1999   $250,000      $50,000   $    --          --          5,654,641(4)    --       $4,800(3)
Director                            1998   $ 25,000(1)

Jonathan M. Clarkson,
President & COO,
Director                            1999   $ 66,666(2)   $    --   $    --          --          5,000,000(5)    --       $2,667(3)

Thomas D. Worley
Vice President - Corp Dev.(7)       1999   $125,000      $25,000   $88,670(6)       --          2,375,039(6)    --       $3,750(3)

Joseph G. Nicknish                  1999   $125,000      $25,000   $88,670(6)       --          2,375,039(6)    --       $3,750(3)
Vice President - Engineering(8)
</TABLE>


     (1) Tim J. Goff became CEO and President of the Company on December 15,
         1998.

     (2) On September 1, 1999, Jonathan M. Clarkson became President and COO of
         the Company.

     (3) Represents Bargo's matching contributions under Bargo's Retirement
         Savings Plan.

     (4) On May 12, 1999, the Company granted to Tim J. Goff 10 year options
         which vest over a three year period from the date of grant under the
         Company's 1999 Stock Incentive Plan. These options have an exercise
         price of $.10 per share, based on the approximate market price (as
         determined by the Company's Board of Directors) of the Company's common
         stock on the date of grant.

     (5) On September 1, 1999, the Company granted to Jonathan M. Clarkson 10
         year options which vest over a three year period from the date of grant
         under the Company's 1999 Stock Incentive Plan. These options have an
         exercise price of $.25 per share, based on the approximate market price
         (as determined by the Company's Board of Directors) of the Company's
         common stock on the date of grant.

     (6) On May 12, 1999, the Company granted to Thomas D. Worley and Joseph G.
         Nicknish 1,903,729 ten year options which vest over a three year period
         from the date of grant under the Company's 1999 Stock Incentive Plan.
         These options have an exercise price of $.10 per share, based on the
         approximate market price (as determined by the Company's Board of
         Directors) of the Company's common stock on the date of grant. In
         addition, in December 1999, in exchange for $3,902 818 shares, the
         Company assumed liabilities for stock to be assigned to the former
         employees of BER, BEC and TJG. The obligation was extinguished when
         Bargo issued options (which were vested immediately) for the shares
         previously due to be assigned to these employees. Thomas D. Worley and
         Joseph G. Nicknish each received 652,269 of these fully vested ten year
         options which are exercisable six months from the date of grant. These
         options have an exercise price of $.01 per share. The Company
         repurchased 180,959 of the fully vested $.01 options from both Thomas
         D. Worley and Joseph G. Nicknish for $.50 per share in December 1999.
         See Note 6 of the Notes to Consolidated Financial Statements for
         further discussion.

     (7) Mr. Worley became an employee of the Company on December 15, 1998.

     (8) Mr. Nicknish became an employee of the Company on December 15, 1998.



                                       28
<PAGE>   29

         The following table sets forth, for the last fiscal year, option grants
to the persons named in the Summary Compensation Table.


                             Option Grants in 1999
<TABLE>
<CAPTION>

                                Number of             Percent of
                               Securities            Total Options
                               Underlying             Granted to            Exercise            Expiration
          Name               Options Granted       Employees in 1999       Price (4)               Date
          ----               ---------------       -----------------       ---------               ----
<S>                          <C>                   <C>                     <C>               <C>
Tim J. Goff                     5,654,641(1)                   22.7%           $0.10         May 12, 2009

Jonathan M. Clarkson
                                5,000,000(2)                   20.1%           $0.25         September 1, 2009

Thomas D. Worley                1,903,729(1)                    7.6%           $0.10         May 12, 2009
                                  471,310(3)                    1.9%           $0.01         December 17, 2009

Joseph G. Nicknish              1,903,729(1)                    7.6%           $0.10         May 12, 2009
                                  471,310(3)                    1.9%           $0.01         December 17, 2009
</TABLE>


(1) The options vest over a three year period from the date of grant (May 12,
    1999).
(2) The options vest over a three year period from the date of grant (September
    1, 1999).
(3) The options are exercisable in full six months from the date of grant
    (December 17, 1999).
(4) Because the Company's common stock trades on a very limited basis, the
    exercise price represents the approximate fair market price of the Company's
    stock as determined by the Board of Directors on the date of grant.


AGGREGATE OPTION EXERCISES IN 1999 AND OPTION VALUES

         The following table sets forth information respecting the exercise of
options during the fiscal year ended December 31, 1999, by executive officers
named in the Summary Compensation Table and the fiscal year end values of
unexercised options.

<TABLE>
<CAPTION>
                                                                       Number of          Value of
                                                                       Securities         Unexercised
                                                                       Underlying         In-the-Money
                                                                       Unexercised        Options
                                                                       Options at FYE     at FYE ($)(1)
                           Shares Acquired               Value         Exercisable/       Exercisable/
      Name                 on Exercise (#)               Realized ($)  Unexercisable      Unexercisable
-------------------------------------------------------------------------------------------------------

<S>                        <C>                           <C>           <C>               <C>
Tim J. Goff                      --                          --         --/5,654,641     $--/$1,374,078
Jonathan M. Clarkson             --                          --         --/5,000,000     $  --/$465,000
Thomas D. Worley                 --                          --         --/2,375,039     $  --/$619,885
Joseph G. Nicknish               --                          --         --/2,375,039     $  --/$619,885
</TABLE>

(1) Based on the closing price of $.343 for the last trade of the year over the
OTC Bulletin Board on December 30, 1999.



                                       29
<PAGE>   30

EMPLOYMENT AGREEMENTS, DEFERRED SALARY AND BENEFITS

         On September 1, 1999, the Company entered into Change of Control
Agreements (the "Agreements") with Tim J. Goff and Jonathan M. Clarkson ("Bargo
Executives") providing for certain benefits to each Bargo Executive in the event
that a "change of control" occurs during the three-year period after the
execution of such agreement. Each Agreement is for a three-year term and is
automatically extended from year-to-year unless either party gives six months
prior notice of termination to the other party; provided that the term of each
Agreement shall be until the later of (i) two years following the date of a
Change of Control which occurs during the term of the Agreements and (ii) until
all of the obligations of the parties are satisfied.

         Pursuant to the Agreements, if any Bargo Executive's employment with
the Company is terminated within 24 months following a change of control by (a)
the Company for cause or disability, (b) by reason of such executive's death or
(c) by such executive other than for good reason, Bargo will pay to such
executive in a single lump sum cash payment an amount equal to all amounts of
compensation, any unreimbursed expenses and any vacation pay that have been
earned or accrued through the date of such termination but have not been paid as
of such date ("Accrued Compensation"). If any Bargo Executive's employment with
the Company is terminated within 24 months following a change of control (or, in
certain cases, within six months prior to a change of control) for any reason
other than as set forth in the prior sentence, each such executive is entitled
to receive a single lump sum cash payment in an amount equal to the sum of (i)
his Accrued Compensation and (ii) an amount determined by multiplying 3.0 times
the executive's annual base salary in effect as of the date of the change of
control or, if greater, any time thereafter. Based on current compensation
levels, the total cash payments which could be incurred if the Bargo Executives
were terminated as a result of a change in control is $1.4 million.

         The Agreements also provide that all stock options held by the Bargo
Executives shall automatically become fully exercisable notwithstanding any
vesting or exercisability provisions.

         The Agreements also provide that if any payments to one of the Bargo
Executives will be subject to any excise tax under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), a "gross-up" payment will be made
to place such executive in the same net after-tax position as would have been
the case if no excise tax had been payable.


STOCK OPTION AND AWARD PLAN

         The Company has adopted, and the shareholders have approved, a 1993
Employee Incentive Plan (the "Plan") intended to advance the interests of the
Company by attracting competent executive personnel and other employees,
ensuring the retention of the services of existing executive personnel and
employees, and providing incentives to all of such personnel to devote the
utmost effort and skill to the advancement and betterment of the Company by
permitting them to participate in the ownership of the Company and thereby
permitting them to share in increases in the value of the Company which they
will help to produce.

         The Plan is administered by the board of directors or a committee
appointed from time to time by the board of directors. Under the Plan, the board
or duly appointed committee may grant stock options, which may be incentive
stock options ("ISOs") as defined in the Internal Revenue Code (the "Code"), or
options which do not qualify as ISOs, to directors and employees of the Company
who, in the opinion of the board or committee, are expected to contribute
materially to the Company's success in the future. All employees of the Company
are eligible to participate in the Plan. A maximum of 800,000 shares, subject to
adjustment for certain events of dilution, are available for grant under the
Plan, provided, however, that in no event may the aggregate fair



                                       30
<PAGE>   31

market value of shares of the Company's common stock with respect to which ISO
is exercisable for the first time in any calendar year exceed $100,000.

         The exercise price of options granted under the Plan may not be less
than 100% of the fair market value of the Company common stock on the date the
option is granted in the case of ISOs (110% of the fair market value in the case
of 10% stockholders). All ISOs granted under the Plan shall expire not later
than ten years from the date of grant (5 years in the case of ISOs granted to
10% stockholders), and all nonqualified options shall expire at such date as the
board or a duly appointed committee shall determine. The option price may be
paid by cash or, at the discretion of the board or a duly appointed committee,
by delivery of common stock or options already owned by the optionee (valued at
their fair market value at the date of exercise), or a combination thereof.

         The aggregate number of shares of common stock with respect to which
options may be granted under the Plan, the number of shares thereof covered by
each outstanding option, and the purchase price per share thereof in each such
option, shall be adjusted for any increase or decrease in the number of issued
shares of common stock of the Company resulting from a recapitalization,
reorganization, merger, consolidation, exchange of shares, stock dividend, stock
split, reverse stock split, or other subdivision or consolidation of shares or
other increase or decrease in such shares effected without receipt by the
Company of consideration approved by the board of directors of the Company (an
"Event of Dilution"), in amounts to prevent substantial dilution or enlargement
of rights granted to or available for eligible employees. In the case of an ISO,
the ratio of the option price to the fair market value of the stock subject to
the option immediately after the change must not be more favorable to the
optionee on a share by share comparison than the ratio of the old option price
to the fair market value of the stock subject to the option immediately before
such transaction. All such adjustments shall be made by the board or a duly
appointed committee, whose good faith determination shall be binding absent
manifest error.

         The board of directors of the Company may from time to time alter,
amend, suspend, or discontinue the Plan with respect to any shares of common
stock as to which options have not been granted. However, no such alteration or
amendment (unless approved by the stockholders) shall (a) increase (except in
the case of an Event of Dilution) the maximum number of shares for which options
may be granted under the Plan either in the aggregate or to any eligible
employee; (b) reduce (except in the case of an Event of Dilution) the minimum
option prices which may be established under the Plan; (c) extend the period or
periods during which options may be granted or exercised; (d) materially modify
the requirements as to eligibility for participation in the Plan; (e) change the
provisions of the preceding paragraph relating to Events of Dilution; or (f)
materially increase the benefits accruing to the eligible employees under the
Plan.

         On June 6, 1998 the shareholders of the Company approved an amendment
to the 1993 Employee Incentive Plan increasing the number of authorized shares
that may be granted under the Plan from 800,000 to 1,600,000 shares. An
important element of the Company's compensation program is the award of stock
options. The increase in the total number of shares that may be granted under
the Plan was made to ensure that select employees maintain a sufficient equity
interest in the Company as stock is issued in connection with the acquisition of
additional oil and gas interests of the Company and for other reasons. All other
provisions of the Plan remain unchanged.

         In May 1999 the Board of Directors adopted the 1999 Stock Incentive
Plan which provides for stock options to be granted to employees with exercise
prices not less than the fair market value of the underlying common stock. These
options will have a term of 10 years from the date of grant and will vest over a
three year period from the date of grant. During the year ended December 31,
1999 approximately 26 million options were granted under this plan to employees
of the company at exercise prices ranging from $.01 to $.50 per share.



                                       31
<PAGE>   32
--------------------------------------------------------------------------------
                         ITEM 11. SECURITY OWNERSHIP OF
                    CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------

         The following table sets forth information with respect to the
ownership of shares of Common Stock and Preferred Stock as of January 31, 2000,
by (i) each director and executive officer of the Company, (ii) all executive
officers and directors of the Company as a group and (iii) each person known by
the Company to own beneficially more than 5% of the outstanding shares of Common
Stock or Preferred Stock. To the Company's knowledge, the persons indicated
below have sole voting and investment power with respect to the shares indicated
as owned by them, except as otherwise stated. The address for each director and
beneficial owner of more than 5% of the outstanding shares of Common Stock is
700 Louisiana, Suite 3700, Houston, Texas 77002, unless otherwise indicated.

<TABLE>
<CAPTION>
                                                     COMMON STOCK(1)                     PREFERRED STOCK(1)
                                      ------------------------------------------ ---------------------------------
                                                                    PERCENT OF                         PERCENT OF
NAME OF BENEFICIAL OWNER                      AMOUNT                  CLASS        AMOUNT                CLASS
------------------------------------  ---------------------  ------------------- ---------------  ----------------
<S>                                    <C>                    <C>                 <C>              <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Thomas D. Barrow(2)                         11,331,958                12.9%            --                  --
Jonathan M. Clarkson                                --                  --             --                  --
Tim J. Goff(5)                              17,792,040                20.2%            --                  --
J. Travis Hain(7)                                   --                  --             --                  --
Gary R. Petersen(4)                                 --                  --             --                  --
D. Martin Phillips(4)                               --                  --             --                  --
V. Frank Pottow(10)                                 --                  --             --                  --
Daniel M. Weingeist(8)                              --                  --             --                  --
Brian D. Young(9)                            4,381,581                 4.9%       500,000                10.0%

Common Stock owned by
  All directors and executive
  Officers as a group(9 persons)            33,505,579                38.1%       500,000                10.0%

5% STOCKHOLDERS:
     Encap Energy Capital
     Fund III, L.P.(3)                       5,583,755                 6.3%       637,185                12.7%
     EnCap Equity 1994, L.P.(3)              2,424,973                 2.7%            --                  --
     EnCap Energy Capital Fund
     III-B L.P.(3)                           4,222,999                 4.8%       481,904                 9.6%
     BOCP Partners, L.P.(3)                  1,366,277                 1.5%       155,911                 3.1%
     Energy Capital Investment
     Co., PLC(3)                             4,241,598                 4.8%       225,000                 4.5%
     BancAmerica Capital
     Investors SBIC I, L.P.(7)              13,144,743                14.9%     1,500,000                30.0%
     Kayne Anderson Energy, LP(8)            8,763,162                 9.9%     1,000,000                20.0%
     SGC Partners II, LLC(10)                4,381,581                 4.9%       500,000                10.0%
     EOS Partners SBIC, L.P.(9)              3,417,633                 3.8%       390,000                 7.8%
     EOS Partners SBIC II, L.P.(9)             638,329                 0.7%        72,500                 1.4%
     EOS Partners, L.P.(9)                     328,619                 0.3%        37,500                 0.8%
       BEC Partnership(11)                   6,370,500                 7.2%            --                  --
      James E. Sowell(6)                     9,208,458                10.4%            --                  --
</TABLE>



                                       32
<PAGE>   33
     (1)  As of March 3, 2000 there were 87,932,726 shares of Common Stock and
          5,000,000 shares of Preferred Stock outstanding.

     (2)  Mr. Barrow's address is P.O. Box 2588, Longview, Texas 75606.

     (3)  The address of EnCap Energy Capital Fund III, L.P., EnCap Energy
          Capital Fund III-B L.P., BOCP Partners, L.P., Energy Capital
          Investment Co., PLC and EnCap Equity 1994, L.P. is 1100 Louisiana,
          Suite 3150, Houston, Texas 77002. EnCap Investments L.C. is the
          general partner of EnCap Equity 1994 L.P. and serves as an investment
          advisor to Energy Capital Investment Co. P.L.C. EnCap Investments L.C.
          disclaims any beneficial ownership of Energy Capital Investments Co.
          P.L.C.'s and EnCap Equity 1994 L.P.'s shares.

     (4)  According to a Schedule 13D/A filed by Energy Capital Investment Co.
          PLC ("Energy PLC"), EnCap Equity 1994, L.P., ("EnCap") and certain of
          their affiliates on September 4, 1998, Messrs. Petersen and Philips
          are not deemed to have beneficial ownership of any of the shares of
          Common Stock held by Energy PLC and EnCap.

     (5)  Mr. Goff shares voting and investment power with TJG Investments, Inc.
          ("TJG") with respect to 1,129,500 shares, with BEC Partnership ("BEC")
          with respect to 6,370,500 shares, and jointly with BOC Operating
          Corporation ("BOC") and BER Partnership L.P. ("BER") with respect to
          1,625,374 shares. Mr. Goff has sole voting and investment power with
          respect to 8,406,666 shares and shares voting and investment power
          with BOC with respect to 260,000 shares of Common Stock.

     (6)  Mr. Sowell's address is 3131 McKinney Avenue, Suite 200, Dallas, TX
          75204.

     (7)  According to a Schedule 13D filed by BancAmerica Capital Investors
          SBIC I, L.P. ("BancAmerica") and certain of their affiliates on May
          21, 1999, Mr. Hain is not deemed to have beneficial ownership of any
          of the shares of Common Stock held by BancAmerica. The address for
          BancAmerica is 100 North Tryon Street, 25th Floor, Charlotte, North
          Carolina 28255.

     (8)  According to a Schedule 13D filed by Kayne Anderson Energy Fund, L.P.
          ("Kayne") and certain of their affiliates on May 18, 1999, Mr.
          Weingeist is not deemed to have beneficial ownership of any of the
          shares of Common Stock held by Kayne. The address for Kayne is 1800
          Avenue of the Stars, Second Floor, Los Angeles, California 90067.

     (9)  According to a Schedule 13D filed by Eos Partners, L.P., Eos Partners
          SBIC, L.P. and Eos Partners SBIC II, L.P. on May 21, 1999, Mr. Young
          may be deemed to have beneficial ownership of the shares of Common
          Stock and Preferred stock held by Eos Partners, L.P., Eos Partners
          SBIC, L.P. and Eos Partners SBIC II, L.P. The address for the
          aforementioned entities is 320 Park Avenue, 22nd Floor, New York, New
          York 10022.

     (10) According to a Schedule 13D filed by SGC Partners II, LLC ("SGC") and
          certain of their affiliates on May 24, 1999, Mr. Pottow is not deemed
          to have beneficial ownership of any of the shares of Common Stock held
          by SGC. The address for SGC is 1221 Avenue of the Americas, 15th
          Floor, New York, New York 10020.

     (11) BEC Partnership shares voting and investment power with Mr. Goff.

--------------------------------------------------------------------------------
             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------
         During the year ended December 31, 1999 the Company incurred field
operating fees of $94,000 and reimbursed direct field expenses in the amount of
$163,000 to Gas Solutions, Ltd. (a Texas limited partnership) in which the
Chairman of the Board and Chief Executive Officer and another Director own a
significant interest. Fees and reimbursed expenses due to Gas Solutions, Ltd.
were $199,000 at December 31, 1999.

         In August 1998, the Company renewed and extended indebtedness to the
EnCap entities, principal shareholders of the Company, in the amount of $7.3
million. In connection with the renewal and extension, EnCap and ECIC were
issues 1,373,097 and 1,471,782 shares of common stock, respectively. The
indebtedness was paid in full in December 1998. Gary R.



                                       33
<PAGE>   34

Petersen and D. Martin Phillips are principals of EnCap Investments L.C. EnCap
Investments L.C. is the general partner of EnCap and serves as an investment
advisor to ECIC.

         On October 15, 1998, the Company acquired certain interests, effective
September 1, 1998, in oil and gas properties located in Texas from BER
Partnership, Ltd. ("BER"), a principal shareholder of the Company at that time.
The properties were on the same date acquired by BER from Chevron, U.S.A. Inc.
for $6.1 million. In consideration for assigning all of its rights and interests
in these properties to the Company per the purchase and sale agreement, BER
received a fee of $166,000 which approximated the net revenue for the month of
September 1998. Tim J. Goff and Thomas D. Barrow are partners of BER.

         On October 15, 1998, the Company issued $4 million in subordinated
promissory notes to BEC and TJG in connection with the acquisition of certain
oil and gas properties from BEC and TJG. Tim J. Goff is the sole shareholder of
TJG. Mr. Goff and Thomas D. Barrow, a director of the Company, are partners of
BEC.

         On October 15, 1998, the Company acquired certain oil and gas
properties from Pledger Partners, Ltd. ("Pledger") for $1 million. Pledger is a
Texas limited partnership owned by BEC and certain EnCap entities.

         On November 19, 1998, the Company acquired interests in oil and gas
properties located in Texas and Louisiana from BER, a principal shareholder of
the Company at that time, for a cash purchase price of $4,354,000. The
properties were on the same date acquired by BER from Cody Energy, Inc., a
Delaware corporation ("Cody Energy"), and Cody Texas, L.P. a Texas limited
partnership ("Cody Texas"), for a purchase price of $4,354,000.

         On December 14, 1998, the Company acquired additional interests in
Texas for a cash purchase price of $3,526,000. The Company acquired the
additional properties from BER, which properties were on the same date acquired
by BER from Cody Energy and Cody Texas.

         On December 15, 1998 the Company acquired substantially all of the
assets and liabilities, including the going concern value, of BER, a principal
shareholder of the Company, for $2 million and 100,000 shares of preferred
stock. In addition, the Company issued 8,333,333 shares of its common stock to
BEC and TJG in exchange for the cancellation of outstanding debt aggregating $4
million associated with the October transaction. BEC and TJG are affiliates of
BER. Tim J. Goff is the sole shareholder of TJG. Mr. Goff and Thomas D. Barrow,
a director of the Company, are partners of BEC.

         As of December 31, 1998, the Company owed BER $521,162 and BEC $53,040
for costs incurred on its behalf.



                                       34
<PAGE>   35
--------------------------------------------------------------------------------
                    ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------------

(a)(1) Financial Statements. The following statements are included in this
report:

<TABLE>
<CAPTION>
TITLE OF DOCUMENT                                                                      PAGE
<S>                                                                                    <C>
         Independent Auditor's Report for the Year Ended December 31, 1999
         and 1998                                                                       F-1

         Consolidated Balance Sheet as of December 31, 1999 and 1998                    F-2

         Consolidated Statements of Operations for the Years Ended
         December 31, 1999 and 1998                                                     F-3

         Consolidated Statement of Changes in Stockholders' Equity for the
         Years Ended December 31, 1999 and 1998                                         F-4

         Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1999 and 1998                                                     F-5

         Notes to Consolidated Financial Statements                                     F-6
</TABLE>


     (a)(2) Exhibits. The following exhibits are included as part of this
report. (See exhibit index in separate exhibit volume):

         (a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT

<S>                        <C>                                                     <C>
      2.                   Plan of acquisition, reorganization, arrangement,       (1)
                           liquidation or succession

      3.                   Articles of Incorporation and By-laws

           3.1             Articles of Incorporation of Bargo Energy Company
                           (Incorporated by reference from Exhibit 3.1 to the
                           Company's Current Report on Form 8-K dated April 26,
                           1999, filed with the Securities and Exchange
                           Commission on April 29, 1999)

           3.2             Agreement and Plan of Merger, dated as of April 6,
                           1999 between Future Petroleum Corporation and FPT
                           Corporation (Incorporated by reference from Exhibit
                           2.1 to the Company's Current Report on Form 8-K dated
                           April 26, 1999, filed with the Securities and
                           Exchange Commission on April 29, 1999)

           3.3             By-laws of Bargo Energy Company (Incorporated by
                           reference from Exhibit 3.2 to the Company's Current
                           Report on Form 8-K dated April 26, 1999, filed with
                           the Securities and Exchange Commission on April 29,
                           1999)
</TABLE>



                                       35
<PAGE>   36

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
           3.4             Amendment to Bargo Energy Company By-laws
                           (Incorporated by reference from Exhibit 3.4 to
                           the Company's Quarterly Report on Form 10-QSB
                           for the period ended March 31, 1999, filed with
                           the Securities and Exchange Commission on May
                           21, 1999)

      4.                   Instruments defining the rights of security holders

           4.1             Certificate of Designations of Cumulative Redeemable
                           Preferred Stock, Series B (Incorporated by reference
                           from Exhibit 4.1 to the Company's Quarterly Report on
                           Form 10-QSB for the period ended March 31, 1999,
                           filed with the Securities and Exchange Commission on
                           May 21, 1999)

      9.                   Voting Trust Agreement                                  (1)

     10.                   Material Contracts

          10.1             Second Amended and Restated Shareholders' Agreement,
                           dated May 14, 1999, by and among Bargo Energy
                           Company, B. Carl Price, Don Wm. Reynolds, Energy
                           Capital Investment Company PLC, EnCap Equity 1994
                           Limited Partnership, Bargo Energy Resources, Ltd.,
                           TJG Investments, Inc., BargoEnergy Company, Tim J.
                           Goff, Thomas Barrow, James E. Sowell, BargoOperating
                           Company, Inc., EnCap Energy Capital Fund III-B, L.P.,
                           BOCPEnergy Partners, L.P., EnCap Energy Capital Fund
                           III, L.P., Kayne Anderson Energy Fund, L.P.,
                           BancAmerica Capital Investors SBIC I, L.P., Eos
                           Partners, L.P., Eos Partners SBIC, L.P., Eos Partners
                           SBIC II, L.P., and SGC Partners II LLC. (Incorporated
                           by reference from Exhibit 10.1 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21,1999)

            10.3           Consent and Agreement dated May 14, 1999 between
                           Bargo Energy Company and Bank of America National
                           Trust and Savings Association (Incorporated by
                           reference from Exhibit 10.6 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21, 1999)

            10.4           SBA Side Letter dated May 14, 1999 between Bargo
                           Energy Company and BancAmerica Capital Investors SBIC
                           I, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC
                           II, L.P., and SGC Partners II LLC. (Incorporated by
                           reference from Exhibit 10.7 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21, 1999)
</TABLE>



                                       36
<PAGE>   37

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
            10.5           SBA Side Letter dated May 14, 1999 between Bargo
                           Energy Company, EnCap Equity 1994 Limited
                           Partnership, TJG Investments, Inc. Bargo Energy
                           Company, Bargo Energy Resources, Ltd., Bargo
                           Operating Company, Inc., Tim J. Goff and BancAmerica
                           Capital Investors SBIC I, L.P., Eos Partners SBIC,
                           L.P., Eos Partners SBIC II, L.P., and SGC Partners II
                           LLC. (Incorporated by reference from Exhibit 10.8 to
                           the Company's Quarterly Report on Form 10-QSB for the
                           period ended March 31, 1999, filed with the
                           Securities and Exchange Commission on May 21, 1999)

            10.6           Stock Purchase Agreement dated May 14, 1999 between
                           Bargo Energy Company and Energy Capital Investment
                           Company PLC, EnCap Energy Capital Fund III-B, L.P.,
                           BOCP Energy Partners, L.P., EnCap Energy Capital Fund
                           III, L.P., Kayne Anderson Energy Fund, L.P.,
                           BancAmerica Capital Investors SBIC I, L.P., Eos
                           Partners, L.P., Eos Partners SBIC, L.P., Eos Partners
                           SBIC II, L.P., and SGC Partners II LLC. (Incorporated
                           by reference from Exhibit 10.9 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21, 1999)

            10.7           Bargo Energy Company 1999 Stock Incentive Plan
                           (Incorporated by reference from Exhibit 10.10 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended March 31, 1999, filed with the
                           Securities and Exchange Commission on May 21, 1999)

            10.8           Confidentiality and Non-compete Agreement dated May
                           14, 1999 between Bargo Energy Company and Tim J. Goff
                           (Incorporated by reference from Exhibit 10.11 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended March 31, 1999, filed with the
                           Securities and Exchange Commission on May 21, 1999)

            10.9           Second Amended and Restated Credit Agreement, Dated
                           as of September 30, 1999, among Bargo Energy Company,
                           Bank of America, N.A. and Certain Financial
                           Institutions (Incorporated by reference from Exhibit
                           10.10 to the Company's Quarterly Report on Form
                           10-QSB for the period ended September 30, 1999, filed
                           with the Securities and Exchange Commission on
                           November 19, 1999)

            10.10          Registration Rights Agreement among the Company and
                           Bargo Energy Resources, Ltd. dated August 14, 1998
                           (Incorporated by reference from Exhibit 10.1 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended June 30, 1998, filed with the Securities
                           and Exchange Commission on August 25, 1998)
</TABLE>



                                       37
<PAGE>   38

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
            10.11          First Amendment to Registration Rights Agreement
                           among the Company, Bargo Energy Resources, Ltd.,
                           Bargo Energy Company, TJG Investments, Inc. and
                           certain other shareholders dated December 15, 1998
                           (Incorporated by reference from Exhibit 99.2 to the
                           Company's Current Report on Form 8-K dated December
                           15, 1998, filed with the Securities and Exchange
                           Commission on December 30, 1998)

            10.12          Registration Rights Agreement dated November 25,
                           1997, among the Company, Energy Capital Investment
                           Company PLC, and EnCap Equity 1994 Limited
                           Partnership (Incorporated by reference from Exhibit
                           10.05 to the Company's Current Report on Form 8-K
                           dated November 25, 1997, filed with the Securities
                           and Exchange Commission on December 10, 1997)

            10.13          Registration Rights Agreement among the Company,
                           Energy Capital Investment Company PLC and EnCap
                           Equity 1994 Limited Partnership dated August 14, 1998
                           (Incorporated by reference from Exhibit 10.2 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended June 30, 1998, filed with the Securities
                           and Exchange Commission on August 25, 1998)

            10.14          First Amendment to Registration Rights Agreement
                           among the Company, Energy Capital Investment Company
                           PLC and EnCap Equity 1994 Limited Partnership dated
                           December 15, 1998 (Incorporated by reference from
                           Exhibit 99.4 to the Company's Current Report on Form
                           8-K dated December 15, 1998, filed with the
                           Securities and Exchange Commission on December 30,
                           1998)

            10.15          Registration Rights Agreement among the Company, B.
                           Carl Price and certain other shareholders dated
                           August 14, 1998 (Incorporated by reference from
                           Exhibit 10.3 to the Company's Quarterly Report on
                           Form 10-QSB for the period ended June 30, 1998, filed
                           with the Securities and Exchange Commission on August
                           25, 1998)

            10.16          First Amendment to Registration Rights Agreement
                           among the Company, B. Carl Price and certain
                           other shareholders dated December 15, 1998
                           (Incorporated by reference from Exhibit 99.6 to
                           the Company's Current Report on Form 8-K dated
                           December 15, 1998, filed with the Securities and
                           Exchange Commission on December 30, 1998)
</TABLE>



                                       38
<PAGE>   39

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
            10.17          Stock Purchase Warrant by the Company to Bargo Energy
                           Resources, Ltd. dated August 14, 1998 (Incorporated
                           by reference from Exhibit 10.4 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           June 30, 1998, filed with the Securities and Exchange
                           Commission on August 25, 1998)

            10.18          1993 Employee Incentive Plan (Incorporated by
                           reference from the Company's Annual Report on Form
                           10-K for the fiscal year ended December 30, 1993,
                           filed with the Securities and Exchange Commission on
                           May 20, 1994)

            10.19          First Amendment to Second Amended and Restated
                           Shareholder's Agreement, dated August 11, 1999
                           (Incorporated by reference to Exhibit 10.20 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended September 30, 1999, filed with the
                           Securities and Exchange Commission on November 19,
                           1999.

            10.20          Purchase and Sale Agreement between Exxon Corporation
                           and Future Acquisition 1995, Ltd., et al.
                           (Incorporated by reference from Exhibit 2.1 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended June 30, 1999, filed with the Securities
                           and Exchange Commission on August 16, 1999)

            10.21          Purchase and Sale Agreement by and Between
                           Atlantic Richfield Company and Future
                           Acquisition 1995, Ltd. (Incorporated by
                           reference from Exhibit 2.2 to the Company's
                           Quarterly Report on Form 10-QSB for the period
                           ended September, 30, 1999, filed with the
                           Securities and Exchange Commission on November
                           19, 1999)

      11.                  Statement regarding computation of per share earnings   (1)


      13.                  Annual or quarterly reports, Form 10-Q                  (1)

      16.                  Letter on change in certifying accountant               (1)

      18.                  Letter on change in accounting principles               (1)

      21.                  Subsidiaries of the Registrant

      22.                  Published report regarding matters submitted to vote    (1)

      23.                  Consents of experts and counsel

      24.                  Power of attorney                                       (1)

      27.                  Financial data schedule

      99.                  Additional exhibits                                     (1)
</TABLE>

                                       39
<PAGE>   40
-----------------------------------

     (1) Inapplicable to this filing.

(b) REPORTS ON FORM 8-K.

     During the last quarter of the fiscal year ended December 31, 1999, the
     Company filed reports on Form 8-K as follows:


<TABLE>
<CAPTION>
DATE OF EVENT REPORTED             ITEM REPORTED
----------------------             ---------------------------------------------
<S>                                <C>
November 19, 1999                  Item 7.  Financial Statements and Exhibits

October 14, 1999                   Item 5.  Other Events

October 12, 1999                   Item 2.  Acquisition or Disposition of Assets
</TABLE>



                                       40
<PAGE>   41
--------------------------------------------------------------------------------
                                   SIGNATURES
--------------------------------------------------------------------------------

     In accordance with Section 13 or 15(d) of the Exchange Act of 1934, as
amended, Registrant has duly caused this report on form 10-KSB to be signed on
its behalf by the undersigned, thereunto duly authorized, this 10th day of
March, 2000.

                                               BARGO ENERGY COMPANY
                                               (Registrant)


                                               By /s/ JONATHAN M. CLARKSON
                                                 -------------------------------
                                                 Jonathan M. Clarkson, President


    Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this form 10-KSB was signed by the following persons in the capacities
stated on the 10th day of March 2000.

/s/ TIM J. GOFF
----------------------------
Tim J. Goff, Chairman, Chief Executive Officer and Director (principal executive
officer)

/s/ JONATHAN M. CLARKSON
-----------------------------
Jonathan M. Clarkson, President and Director (principal financial and accounting
officer)

/s/ THOMAS D. BARROW
-----------------------------
Thomas D. Barrow, Director

/s/ J. TRAVIS HAIN
-----------------------------
J. Travis Hain, Director

/s/ D. MARTIN PHILLIPS
-----------------------------
D. Martin Phillips, Director

/s/ GARY R. PETERSEN
-----------------------------
Gary R. Petersen, Director

/s/ V. FRANK POTTOW
-----------------------------
V. Frank Pottow, Director

/s/ DANIEL M. WEINGEIST
-----------------------------
Daniel M. Weingeist, Director

/s/ BRIAN D. YOUNG
-----------------------------
Brian D. Young, Director



DATE FILED: MARCH 10, 2000                                   SEC FILE NO. 0-8609
--------------------------------------------------------------------------------

<PAGE>   42

[PRICEWATERHOUSECOOPERS LOGO]



BARGO ENERGY COMPANY
  AND SUBSIDIARIES
(FORMERLY FUTURE PETROLEUM CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


<PAGE>   43

                      [PRICEWATERHOUSECOOPERS LETTERHEAD]


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholders and Board of Directors of
Bargo Energy Company

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of stockholders' equity
present fairly, in all material respects, the financial position of Bargo Energy
Company and its subsidiaries (formerly Future Petroleum Corporation) at December
31, 1999 and 1998, and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. 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 of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP
Houston, Texas
March 3, 2000



<PAGE>   44


BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(in thousands)                                         1999            1998

                                     ASSETS

<S>                                                  <C>            <C>
Current assets:
  Cash and cash equivalents                          $   2,375      $   1,241
  Trade accounts receivable:
    Accrued oil and gas sales                            7,629          2,581
    Joint interest billings                                210             55
    Advance to related party                                19              8
                                                     ---------      ---------
      Total current assets                              10,233          3,885
                                                     ---------      ---------
Property and equipment:
  Oil and gas properties, full cost method              76,107         45,992
  Other                                                    696            648
                                                     ---------      ---------
    Total property and equipment                        76,803         46,640
  Less - accumulated depletion, depreciation
   and amortization                                     (6,220)        (1,566)
                                                     ---------      ---------
    Net property and equipment                          70,583         45,074
                                                     ---------      ---------
Other assets:
  Goodwill, net of accumulated amortization of
   $208 and $8, respectively                             1,792          1,984
  Loan costs, net of accumulated amortization of
   $436 and $25, respectively                            1,890            965
  Other                                                     41             40
                                                     ---------      ---------
    Total other assets                                   3,723          2,989
                                                     ---------      ---------
    Total assets                                     $  84,539      $  51,948
                                                     =========      =========
</TABLE>

   The accompanying notes are an integral part of these financial statements.



<PAGE>   45


BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(in thousands)                                                    1999          1998

                         LIABILITIES AND STOCKHOLDERS' EQUITY

<S>                                                             <C>           <C>
Current liabilities:
  Current portion of long-term debt                             $      6      $  8,952
  Trade accounts payable                                           2,623         1,457
  Accrued oil and gas proceeds payable                             1,805           514
  Accrued interest payable                                            84           430
  Advance from related party                                         199           566
                                                                --------      --------
    Total current liabilities                                      4,717        11,919
                                                                --------      --------
Long-term debt, less current portion                              20,780        30,907
                                                                --------      --------
Deferred tax liability                                             3,085         1,011
                                                                --------      --------
Commitments and contingencies (Note 9)
Redeemable preferred stock; 10% cumulative; $.01
 par value; 5,000,000 and 0 shares authorized and issued,
 respectively, net of unamortized issuance costs                  51,664
                                                                --------
Stockholders' equity:
  Preferred stock, $.01 par value, 0 and 200,000 shares
   authorized, 0 and 100,000 shares issued and outstanding
   at December 31, 1999 and 1998, respectively                                       1
  Common stock, $.01 par value; 120,000,000 and 30,000,000
   shares authorized, 87,932,726 and 22,320,066 shares
   outstanding at December 31, 1999 and 1998, respectively           921           223
  Additional paid-in capital                                       6,878         6,543
  Treasury stock                                                  (2,040)
  Retained earnings (deficit)                                     (1,466)        1,344
                                                                --------      --------
    Total stockholders' equity                                     4,293         8,111
                                                                --------      --------
    Total liabilities and stockholders' equity                  $ 84,539      $ 51,948
                                                                ========      ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>   46


BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(in thousands, except for share data)                   1999              1998


<S>                                                 <C>               <C>
Revenues:
  Oil and gas sales                                 $     19,134      $      3,663
  Well operation fees                                                           16
                                                    ------------      ------------
    Total revenues                                        19,134             3,679
                                                    ------------      ------------
Costs and expenses:
  Lease operations and production taxes                    7,685             1,826
  General and administrative                               3,659               783
  Depletion, depreciation and amortization                 4,898             1,316
                                                    ------------      ------------
    Total expenses                                        16,242             3,925
                                                    ------------      ------------
Other income and expense:
  Interest expense                                         2,378             1,238
  Interest income and other                                   (8)              (19)
                                                    ------------      ------------
    Total other income and expense                         2,370             1,219
                                                    ------------      ------------
Income (loss) before income taxes and
 extraordinary item                                          522            (1,465)
Income tax benefit                                           141               287
                                                    ------------      ------------
Income (loss) before extraordinary item                      663            (1,178)
Extraordinary gain on conversion of debt                                     2,586
                                                    ------------      ------------
Net income                                                   663             1,408
Redeemable preferred stock dividends, including
 accretion (Note 2)                                       (3,473)
                                                    ------------      ------------

Net income (loss) available to common
 shareholders                                       $     (2,810)     $      1,408
                                                    ============      ============
Net income (loss) per common share -
 basic and diluted                                  $      (0.04)     $       0.14

Weighted average common shares
 outstanding                                          75,942,000         9,924,000
</TABLE>

   The accompanying notes are an integral part of these financial statements.



<PAGE>   47

BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

(in thousands, except for share data)

<TABLE>
<CAPTION>
                                                    PREFERRED STOCK               COMMON STOCK            ADDITIONAL
                                                  --------------------       ------------------------      PAID-IN
                                                  SHARES        AMOUNT       SHARES          AMOUNT        CAPITAL

<S>                                               <C>        <C>            <C>          <C>            <C>
Balances, December 31, 1997                                                  5,678,779   $         57   $      4,413

Shares issued for oil and gas properties           100,000           1       5,163,192             52             21
Shares issued for fixed assets                                               2,414,776             24            593
Shares issued for retirement of debt                                         8,495,683             85          1,312
Shares issued for options exercised                                            110,000              1             57
Shares issued for repayment of interest                                        267,400              2             66
Shares issued for services                                                     190,236              2             81
Net income
                                                  --------   ---------       ----------   ------------   ------------
Balances, December 31, 1998                        100,000           1      22,320,066            223          6,543

Stock issuance costs                                                                                            (420)
Shares issued for options exercised                                             37,720                            10
Preferred shares converted to common shares       (100,000)         (1)     26,000,000            260           (259)
Shares issued at reorganization (Note 2)                                    43,815,810            438           (438)
Treasury shares acquired by assignment                                                                         1,951
Treasury shares acquired for cash
Stock options repurchased                                                                                       (509)
Redeemable preferred stock dividends, including
  accretion (Note 2)
Net income
                                                  --------   ---------      ----------   ------------   ------------
Balances, December 31, 1999                             --   $      --      92,173,596   $        921   $      6,878
                                                  ========   =========      ==========   ============   ============

<CAPTION>
                                                        TREASURY STOCK          RETAINED           TOTAL
                                                    -----------------------     EARNINGS        STOCKHOLDERS'
                                                    SHARES           AMOUNT     (DEFICIT)          EQUITY

<S>                                              <C>           <C>            <C>               <C>
Balances, December 31, 1997                                                   $        (64)     $      4,406

Shares issued for oil and gas properties                                                                  74
Shares issued for fixed assets                                                                           617
Shares issued for retirement of debt                                                                   1,397
Shares issued for options exercised                                                                       58
Shares issued for repayment of interest                                                                   68
Shares issued for services                                                                                83
Net income                                                                           1,408             1,408
                                                                              ------------      ------------
Balances, December 31, 1998                                                          1,344             8,111

Stock issuance costs                                                                                    (420)
Shares issued for options exercised                                                                       10
Preferred shares converted to common shares
Shares issued at reorganization (Note 2)
Treasury shares acquired by assignment           (3,902,818)   $     (1,951)
Treasury shares acquired for cash                  (338,052)            (89)                             (89)
Stock options repurchased                                                                               (509)
Redeemable preferred stock dividends, including
  accretion (Note 2)                                                                (3,473)           (3,473)
Net income                                                                             663               663
                                                 ----------    ------------   ------------      ------------
Balances, December 31, 1999                      (4,240,870)   $     (2,040)  $     (1,466)     $      4,293
                                                 ==========    ============   ============      ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.



<PAGE>   48


BARGO ENERGY COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
(in thousands)                                                   1999          1998

<S>                                                            <C>           <C>
Cash flows from operating activities:
  Net income                                                   $    663      $  1,408
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depletion, depreciation and amortization                      4,898         1,316
    Extraordinary gain on conversion of debt                                   (2,586)
    Amortization of debt issue costs                                411
    Amortization of organizational costs                                           45
    Stock issued for services                                                      83
    Stock issued to pay interest expense                                           68
    Deferred income taxes                                          (141)         (287)
                                                               --------      --------
                                                                  5,831            47
    Change in working capital items:
      (Increase) in accounts receivable                          (5,202)       (2,359)
      (Increase) in advances to related parties                     (12)
      Increase in accounts payable and
       accrued liabilities                                        2,111         2,101
      Increase (decrease) in advances from related parties         (367)          561
                                                               --------      --------
        Net cash provided by operating activities                 2,361           350
                                                               --------      --------
Cash flows from investing activities:
  Acquisition of oil and gas properties                         (27,900)      (29,857)
  Acquisition of assets                                              (2)       (2,000)
  Acquisition of property and equipment                             (97)
  Decrease in notes receivable and deferred gain                                   53
  Decrease in lease operating rights                                               96
  Other                                                                            16
                                                               --------      --------
        Net cash (used in) investing activities                 (27,999)      (31,692)
                                                               --------      --------
Cash flows from financing activities:
  Proceeds from issuance of debt                                 18,935        44,505
  Proceeds from issuance of redeemable preferred stock           50,000
  Stock issuance costs                                           (2,229)
  Purchase of treasury stock                                        (89)
  Repurchase of stock options                                      (509)
  Repayment of debt                                             (38,009)      (11,283)
  Debt issue costs                                               (1,337)         (990)
  Proceeds from exercise of stock options                            10            58
                                                               --------      --------
        Net cash provided by financing activities                26,772        32,290
                                                               --------      --------
Net increase in cash                                              1,134           948
Cash and cash equivalents, beginning of year                      1,241           293
                                                               --------      --------
Cash and cash equivalents, end of year                         $  2,375      $  1,241
                                                               ========      ========
Supplemental information:
  Cash paid during the year for interest                       $  2,162      $    739

NON-CASH INVESTING AND FINANCING ACTIVITIES

See Notes 4, 6 and 8.
</TABLE>

   The accompanying notes are an integral part of these financial statements.



<PAGE>   49


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     COMPANY OPERATIONS

     Bargo Energy Company (formerly Future Petroleum Corporation) (the Company
     or Bargo) is engaged primarily in the acquisition, development and
     production of oil and gas reserves and operation of oil and gas wells.

     The accompanying financial statements include the accounts of the Company
     and its wholly-owned subsidiaries, Alaska Eldorado Gold Company (AEG),
     Future Cal-Tex Corporation (FCT), Future Energy Corporation (FEC) and
     Future Petroleum Corporation of Texas (FPCT). In addition, the financial
     statements include the accounts of BMC Development No. 1, Ltd. (BMC),
     Future Acquisition 1995, Ltd. (FAQ) and NCI Shawnee Limited Partnership
     (NCI) (the Partnerships). As of December 31, 1999 and 1998, Bargo and its
     subsidiaries held 100% of the ownership interests of the Partnerships (Note
     4). Intercompany accounts and transactions are eliminated in consolidation.

     On April 26, 1999 (the Effective Date), Future Petroleum Corporation, a
     Utah corporation (Future), merged with Bargo Energy Company, a Texas
     corporation (Bargo). Bargo was incorporated under the name FPT Corporation
     on January 26, 1999 as a wholly-owned subsidiary of Future, solely for the
     purpose of reincorporating Future in Texas.

     The reincorporation occurred pursuant to a merger agreement dated April 6,
     1999 entered into between Future and Bargo (Merger Agreement). In
     accordance with the terms of the Merger Agreement, Future merged into
     Bargo, with Bargo as the surviving corporation. On the Effective Date, each
     of the 22,320,066 shares of Future common stock were converted into one
     share of Bargo's common stock and each of the 100,000 shares of Future's
     preferred stock were converted into one share of Bargo preferred stock.

     The reincorporation merger increased the Company's authorized capital stock
     from 30.2 million shares to 125 million shares. The articles of
     incorporation of Bargo authorize 125 million shares of capital stock, of
     which 120 million shares are common stock and 5 million shares are
     preferred stock. Future's article of incorporation authorized 30 million
     shares of common stock and 200,000 shares of preferred stock.

     OIL AND GAS PROPERTIES

     The Company uses the full-cost method of accounting for its oil and gas
     properties. The Company's properties are all located in the continental
     United States, primarily Texas, Louisiana, California and Oklahoma and;
     therefore, its costs are capitalized in one cost center. Under the
     full-cost method, all costs related to the acquisition, exploration or
     development of oil and gas properties are capitalized into the "full-cost
     pool". Such costs include those related to lease acquisitions, drilling and
     equipping of productive and nonproductive wells, delay rentals, geological
     and geophysical work and certain internal costs directly associated with
     the acquisition, exploration or development of oil and gas properties. Upon
     the sale or disposition of oil and gas properties, no gain or loss is
     recognized, unless such adjustments of the full-cost pool would
     significantly alter the relationship between capitalized costs and proved
     reserves.

                                      -1-

<PAGE>   50


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     Under the full-cost method of accounting, a "full-cost ceiling test" is
     required wherein net capitalized costs of oil and gas properties cannot
     exceed the present value of estimated future net revenues from proved oil
     and gas reserves, discounted at 10%, less any related income tax effects.

     Depletion, depreciation and amortization of oil and gas properties is
     computed using the unit-of-production method based on estimated proved oil
     and gas reserves. Depletion, depreciation and amortization per equivalent
     barrel of oil was approximately $3.68 and $3.61 for the years ended
     December 31, 1999 and 1998.

     OTHER PROPERTY

     Other property and equipment consists of office furniture, fixtures,
     equipment and leasehold improvements, which are carried at cost.
     Depreciation is provided using the straight-line method over estimated
     useful lives ranging from three to 39 years. Gain or loss on retirement or
     sale or other disposition of assets is included in income in the period of
     disposition.

     INCOME TAXES

     Deferred income taxes are recorded for the temporary differences between
     the tax and financial statement bases of assets and liabilities and
     adjusted when new tax rates are enacted.

     NET INCOME (LOSS) PER COMMON SHARE

     Net income or loss per common share is based on the weighted average number
     of common shares outstanding. In accordance with SFAS 128, "Earnings Per
     Share," income available to common stockholders is reduced by the amount of
     dividends on cumulative preferred stock and accretion of related stock
     issuance costs. The Company's common stock equivalents, which consisted of
     stock options and warrants, were antidilutive in 1999 and 1998.

     CASH EQUIVALENTS

     The Company considers cash and unrestricted interest-bearing deposits with
     original maturities of three months or less to be cash equivalents.

     USE OF ESTIMATES AND CERTAIN SIGNIFICANT ESTIMATES

     The preparation of the Company's financial statements in conformity with
     generally accepted accounting principles requires the Company's management
     to make estimates and assumptions that affect the amounts reported in
     these financial statements and accompanying notes. Significant assumptions
     are required in the valuation of proved oil and gas reserves which, as
     described above, may affect the amounts at which oil and gas properties are
     recorded. Actual results could differ from those estimates.

     STOCK-BASED COMPENSATION

     The Company accounts for stock options and warrants granted to directors
     and employees pursuant to APB Opinion No. 25, "Accounting for Stock Issued
     to Employees", and related interpretations.

                                      -2-

<PAGE>   51


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     GOODWILL

     The excess of the Company's cost over its underlying net assets is being
     amortized using the straight-line method over the estimated remaining life
     of the assets over a period not to exceed 10 years. Such amortization is
     included in depreciation, depletion and amortization.

     The Company periodically evaluates the propriety of the carrying amount of
     goodwill, as well as the amortization period, to determine whether current
     events or circumstances warrant adjustments to the carrying value and/or
     revised estimates of useful lives. At this time, the Company believes no
     such impairment has occurred and no reduction in useful lives is warranted.

     CONCENTRATION OF BUSINESS

     The Company's business is concentrated in the sale of petroleum-based
     products. Market conditions of the oil and gas industry, particularly the
     price of oil and gas, influence the results and level of the Company's
     business.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     The reported amounts of the Company's financial instruments (including
     cash, receivables, payables, and debt) approximate fair value due to the
     short maturities of these investments or market rates of interest.

2.   PREFERRED STOCK ISSUANCE

     On May 14, 1999, the Company closed a transaction pursuant to which it
     issued and sold to Kayne Anderson Energy Fund, L.P. (Kayne), BancAmerica
     Capital Investors SBIC I, L.P. (BancAmerica), Eos Partners, L.P., Eos
     Partners SBIC, L.P., Eos Partners SBIC II, L.P. (collectively, Eos), Energy
     Capital Investment Company PLC, EnCap Energy Capital Fund III-B, L.P.,
     BOCP Energy Partners, L.P., EnCap Energy Capital Fund III, L.P.
     (collectively, EnCap) and SGC Partners II LLC (SGC and together with Kayne,
     BancAmerica, Eos, EnCap and SGC, the Investors) shares of a newly created
     class of preferred stock. Five million shares of the Company's Cumulative
     Redeemable Preferred Stock, Series B (Preferred Stock) were issued in
     exchange for an aggregate purchase price of $50 million. As additional
     consideration, the Company issued an aggregate of 43,815,810 shares of its
     common stock to the Investors equal to 40% of the outstanding common stock
     (on a fully diluted basis). If the Company redeems all of the outstanding
     shares of Preferred Stock prior to May 14, 2001, the Investors must sell
     back to the Company 12.5% of the shares of Common Stock originally issued
     to the Investors.

     Dividends on the Preferred Stock equal to 10% per annum are payable
     quarterly. The dividend rate is subject to increase (but in no event to
     more than 16%) or decrease (but in no event to less than 10%) based upon
     the Company's ratio of assets to liabilities which is calculated on January
     1 and July 1 of each year or at such other time as requested by the
     Investors. The dividend rate on the preferred stock was 10% in 1999. The
     Preferred Stock may be redeemed at any time by the Company and must be
     redeemed upon the occurrence of certain events, including upon the fifth
     anniversary of the issue date or upon a change of control. The Preferred
     Stock is redeemable for $50 million and unpaid cumulative dividends. A
     change of control is deemed to occur upon any merger,

                                       -3-

<PAGE>   52


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     reorganization, purchase or sale of more than 50% of the Company's voting
     securities, the sale of substantially all of the assets of the Company or
     at any time Tim Goff ceases to serve as the Company's Chief Executive
     Officer. The Company is prohibited from taking certain actions, including
     authorizing, creating or issuing any shares of capital stock, amending the
     articles of incorporation of the Company and authorizing a merger or change
     of control, without the consent of the holders of a majority of the
     outstanding shares of Preferred Stock.

     As of December 31, 1999, holders of shares of the Series B Preferred were
     entitled to receive, when, and if declared by the Board of Directors, as
     legally available, cumulative dividends totaling $3,243,578. Issuance costs
     totaling $1,809,000 related to the offering are being accreted ratably over
     five years. As of December 31, 1999, $229,000 of issuance costs had been
     accreted into the Series B Preferred Stock.

3.   RELATED-PARTY TRANSACTIONS

     As of December 31, 1998, the Company owed Bargo Energy Resources Ltd.
     (BER) $521,000 and BEC Partnership (BEC) $53,000 for costs incurred on its
     behalf. As of December 31, 1998, BER and BEC had a combined 78% common
     ownership interest in the Company's outstanding stock. The Chairman of the
     Board and Chief Executive Officer of the Company has a material interest in
     both BER and BEC.

     At December 31, 1999, Pledger Partners, Ltd. (Pledger) owed the Company
     $19,000 for costs incurred on its behalf. At December 31, 1999, all of the
     partners in Pledger were also shareholders of the Company.

     During the year ended December 31, 1999 the Company incurred field
     operating fees of $94,000 and reimbursed direct field expenses in the
     amount of $163,000 to Gas Solutions, Ltd. (a Texas limited partnership) in
     which the Chairman of the Board and Chief Executive Officer and another
     Director own a significant interest. Fees and reimbursed expenses due to
     Gas Solutions, Ltd. were $199,000 at December 31, 1999.

     See Notes 4 and 6 for additional related party disclosures.

4.   INVESTMENTS IN PARTNERSHIP AND OIL AND GAS PROPERTY ACQUISITIONS

     On September 13, 1999, the Company acquired interests in 40 leases, a
     waterflood unit, over 60 royalty properties and an oil transportation
     contract in the East Texas Field from Atlantic Richfield Company effective
     October 1, 1999. The purchase price was approximately $16 million.

     On May 14,1999, FAQ acquired certain interests, effective January 1, 1999,
     in the Raccoon Bend field located in Austin and Waller Counties, Texas from
     Exxon Corporation. The Company purchased a 100% working interest and a net
     revenue interest approximating 80% of this field, which has approximately
     65 active wells. These interests were acquired for a gross purchase price
     of $10 million.

     On December 22, 1998, FCT acquired certain additional interests in the
     South Coles Levee Field located in Kern County, California, effective
     December 1, 1998. BER assigned to FCT all of its rights and interests in a
     purchase and sale agreement with Chevron U.S.A., Inc. for the purchase of
     these interests. The interests were acquired for a gross purchase price of
     $3,500,000.

                                      -4-

<PAGE>   53


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,1999 AND 1998
--------------------------------------------------------------------------------

     On December 15, 1998, the Company entered into an Asset Purchase Agreement
     with an effective date of November 1, 1998, with BER and BEC.

     BER sold, assigned and transferred to the Company certain assets,
     consisting primarily of personnel, contracts to purchase oil and gas
     properties, financing contacts and all rights to the name "Bargo". Certain
     owned or leased real property and personal property were transferred along
     with the related lease agreements. All office supplies, files, records,
     logs, customer and supplier lists, sales records and similar type office
     items were transferred. Certain receivables and liabilities relating to the
     period starting with the effective date were also transferred. In return,
     the Company paid BER $2 million cash and issued 100,000 shares of Company
     preferred stock to BER (each preferred share is convertible to 260 shares
     of Company common stock).

     On December 14, 1998, FAQ acquired certain interests, effective August 1,
     1998, in the Bright Falcon Field located in Jackson County, Texas, and the
     Giddings Field located in Fayette, Brazos and Burleson Counties, Texas. BER
     assigned to FAQ all of its rights and interests in a purchase and sale
     agreement with Cody Energy, Inc. and Cody Texas, L.P., for the purchase of
     these interests. The interests were acquired for a gross purchase price of
     $3,526,000.

     On November 19, 1998 FAQ acquired certain interests, effective August 1,
     1998, in the Foster Field located in Ector County, Texas, the San Miguel
     Creek Field located in McMullen County, Texas, the Turtle Creek Field
     located in Matagorda County, Texas, the Cheniere Field located in Ouachita
     Parish, Louisiana, and the Leroy North Field located in Vermilion Parish,
     Louisiana. BER assigned to FAQ all of its rights and interests in a
     purchase and sale agreement with Cody Energy, Inc. and Cody Texas, L.P., to
     facilitate the closing of this transaction. The interests were acquired for
     a gross purchase price of $4,354,000.

     On October 15, 1998, the Company, through NCI, acquired additional
     interests, effective August 1, 1998, in the Shawnee Townsite Unit. The
     interests were acquired from NCI 1990, Ltd., NCI Reserves, Ltd. and three
     other parties in exchange for 116,676 shares of the Company's common stock
     and $375,000 cash, before purchase price adjustments.

     On October 15, 1998, the Company acquired certain interests, effective
     August 1, 1998 in the Gin Unit located in Dawson County, Texas. The
     interests were acquired from NCI Properties, Ltd. in exchange for 163,324
     shares of the Company's common stock and $493,000 cash, before purchase
     price adjustments.

     On October 15, 1998, FAQ acquired certain interests from Chevron, U.S.A.
     Inc., effective September 1, 1998, in the Cross Creek Field located in
     Harris County, Texas. In consideration for assigning to FAQ all of its
     rights and interests in the Cross Creek Field purchase and sale agreement
     with Chevron, BER received a fee of $166,000 which approximated the net
     revenue for the month of September 1998. The interests were acquired for a
     gross purchase price of $6,100,000.

                                      -5-

<PAGE>   54


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     On October 15, 1998, FAQ acquired certain interests, effective September 1,
     1998, in the N.E. Limes Field located in Live Oak County, Texas, the Bruce
     Roy Field located in Wharton County, Texas, the Candy Field located in San
     Patricio County, Texas, the Sand Hills Field located in Crane County,
     Texas, the Bluitt Field located in Roosevelt County, New Mexico and the N.
     Yellow Creek Field located in Wayne and Clarke Counties, Mississippi. These
     interests were acquired from BEC and TJG Investments, Inc. (TJG) for a
     gross purchase price of $3,000,000 cash and the issuance of $4,000,000 in
     subordinated debt, as further described in Note 5.

     On October is, 1998, FAQ acquired certain interests, effective September
     1, 1998, in the Buna Field located in Jasper County, Texas. These interests
     were acquired from Pledger for a gross purchase price of $1,000,000.

     On August 14, 1998, the Company acquired an interest, effective August 1,
     1998, in the South Coles Levee Field located in Kern County, California, as
     a result of the merger of FCT with a subsidiary of BER (the previous owner
     of this interest). At closing, the Company paid approximately $5.8 million
     cash, issued 4,695,869 shares of the Company's common stock and a warrant
     to purchase 250,000 shares of the Company's common stock, as further
     described in Note 6.

     On May 1, 1998, the Company acquired the interests of NCI, a limited
     partnership which owns interest in the Shawnee Townsite Unit located in
     Pottawatomie County, Oklahoma. The general partnership interest was
     acquired from NCI Enterprises, Inc. for 150,000 shares of the Company's
     common stock. The limited partnership interests were acquired from EnCap
     Equity 1994 Limited Partnership and Energy Capital Investment Company PLC
     for 50,000 shares of the Company's common stock and the issuance of
     $660,000 in promissory notes (Note 5).

     The following unaudited pro forma information is presented as if the
     interests in the partnerships and the oil and gas properties had been
     acquired at the beginning of the respective periods. The following table
     includes only those acquisitions deemed to be significant under regulations
     as prescribed by the Securities and Exchange Commission.

<TABLE>
<CAPTION>
                            1999            1998

<S>                      <C>             <C>
Revenues                 $30,244,000     $30,643,000
Net income                 5,983,000       4,514,000
Net income per share            0.03            0.45
</TABLE>

5.   LONG-TERM DEBT

     BANK OF AMERICA DEBT

     On August 14, 1998, the Company entered into a Credit Agreement with Bank
     of America providing for a $20 million revolving line of credit (the Credit
     Agreement). This line of credit was amended and increased to $27.5 million
     on November 15, 1998, and to

                                      -6-

<PAGE>   55


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     $50 million on December 4,1998. The line of credit was comprised of two
     tranches, Tranche A (a revolving line of credit to convert to a four-year
     term loan on December 4, 1999) and Tranche B (a revolving line of credit).

     At December 31, 1998, the Tranche A loan commitment amount was $38 million,
     of which $30.9 million had been borrowed, In connection with the May 14,
     1999 equity transaction (Note 2), the Company paid down Tranche A to $2.5
     million.

     At December 31, 1998, the Tranche B loan commitment amount was $12
     million, of which $8.9 million had been borrowed. The Company repaid the
     full amount outstanding under Tranche B with the May 14, 1999 equity
     transaction.

     On September 30, 1999 the Company amended and restated the Credit Agreement
     to increase the commitment from Bank of America and two additional banks to
     $100 million. The revolver has a borrowing base of $55 million and is due
     in 2002.

     The Credit Agreement is secured by the Company's interest in underlying oil
     and gas properties and contains certain restrictive covenants, the more
     significant of which require the Company to maintain (as defined in the
     Credit Agreement) a quarterly minimum tangible net worth requirement, a
     quarterly minimum current ratio and a quarterly interest coverage ratio.

     The Company has a choice of two different interest rates; the Base Rate or
     the LIBO Rate. The debt bears interest under the Base Rate (which is the
     higher of the lender's "Prime Rate" of the Federal Funds Rate plus .5%)
     plus an applicable margin of .75%. The debt bears interest under the LIBO
     Rate at the LIBO rate (reserve adjusted) plus 1.75%. The Company may
     convert any portion of the outstanding debt from one interest rate type to
     another in increments of $500,000 with a minimum transfer amount of
     $1,000,000. Borrowings under the Credit Agreement are approximately $20.8
     million as of December 31, 1999.

     The Company is subject to various commitment and other fees associated with
     the Credit Agreement above. At December 31, 1999 and 1998, there were
     $84,255 and $430,000, respectively, of accrued interest and fees payable.

     Long-term debt maturing in each year subsequent to December 31, 1999 is as
     follows:

<TABLE>
<S>                         <C>
2000                        $         --
2001                                  --
2002                          20,780,000
2003                                  --
2004                                  --
                            ------------
         Total              $ 20,780,000
                            ============
</TABLE>

                                      -7-

<PAGE>   56


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     ENCAP DEBT

     The EnCap creditors (Encap) consist of EnCap Equity 1994 Limited
     Partnership, Energy Capital Investment Company PLC and Gecko Booty 1994 I
     Limited Partnership.

     For the period from January 1, 1998 through April 30, 1998, the EnCap debt
     carried an interest rate of 10% per annum and required monthly payments of
     interest only. In May 1998, under the promissory notes, in addition to the
     monthly interest payments, monthly principal payments in the amount of
     $68,750 were to begin and continue through maturity on May 31, 2003.

     On May 1, 1998, the promissory notes were amended and renewed in order for
     the Company to borrow an additional $660,000 from EnCap to finance the
     acquisition of NCI (Note 4). Additionally, the monthly interest-only
     payments were extended through December 1998. Beginning in January 1999,
     in addition to the monthly interest payments, monthly principal payments in
     the amount of $75,625 were to begin and continue through maturity on
     December 31, 2003.

     On August 14, 1998, these promissory notes were amended, renewed and
     subordinated to facilitate the Company's revolving line of credit agreement
     with Bank of America (described below). The Company retired $1,585,000 of
     the EnCap debt in conjunction with this restructuring transaction, leaving
     a principal balance outstanding at August 14, 1998 of $5,500,000. Future
     interest payment dates were revised from monthly to quarterly.
     Additionally, EnCap was issued 2,844,859 shares of the Company's common
     stock. On December 29, 1998, the Company paid EnCap in full for the
     remaining principal of $5,500,000 and all accrued interest through that
     date.

     Cash paid to EnCap for interest during the year ended December 31, 1998
     totaled $638,391.

     BEC/TJC DEBT

     On October 15, 1998, the Company issued $4,000,000 in subordinated
     promissory notes to BEC and TJG in connection with the acquisition of
     certain oil and gas properties from BEC and TJG (Note 4). The debt carried
     an interest rate of 10% per annum with a maturity date of December 31,
     2003.

     On December 15, 1998, BEC and TJG canceled this indebtedness in return for
     common stock of the Company; the Company issued 7,078,333 of the Company's
     common stock to BEC and 1,255,000 shares of the Company's common stock to
     TJG. Additionally, BEG conveyed certain assets, primarily consisting of
     office furniture and equipment, to the Company. In connection with this
     transaction, the Company realized an approximate $2.6 million nontaxable
     extraordinary gain.

                                       -8-

<PAGE>   57


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

6.   STOCKHOLDERS' EQUITY

     As of December 31, 1998, the Company had 200,000 shares of preferred stock
     authorized with a par value of $.01. There were 100,000 shares issued and
     outstanding as of December 31, 1998. Pursuant to the reincorporation merger
     (Note 1), each of the 100,000 shares of Bargo preferred stock were
     converted into 260 shares of Bargo common stock and 26,000,000 common
     shares were issued.

     In 1998, the Company issued 100,000 preferred shares and 16,741,287 common
     shares, in conjunction with various oil and gas property acquisitions and
     the restructuring of certain indebtedness (as further described in Notes 4
     and 5).

     On August 14, 1998, in conjunction with the acquisition of an interest in
     the South Coles Levee Field (as further described in Note 4), the Company
     issued warrants to purchase 250,000 shares of the Company's common stock.
     The warrants have an exercise price of $.43 per share and are exercisable
     until August 14, 2003.

     During 1999, in exchange for 3,902,818 shares, Bargo assumed liabilities
     for stock to be assigned to the former employees of BER, BEC, and TJG. The
     obligation was extinguished when Bargo issued options (which vested
     immediately) for the shares previously due to be assigned to these former
     employees. The transaction had no impact on 1999 results of operations
     since the transaction was capital in nature and the options granted were
     not dependent on employment with Bargo. In December 1999, the Company
     repurchased a portion of such options (totaling 1,020,408 shares) for
     $509,000.

7.   STOCK OPTIONS AND WARRANTS

     1999 STOCK INCENTIVE PLAN

     In May 1999, the Company adopted the 1999 Stock Incentive Plan which
     provides for stock options to be granted to employees with exercise prices
     not less than the fair market value of the underlying common stock. These
     have a term of ten years from the date of grant and generally vest over a
     three year period from the date of grant. During the year ended December
     31, 1999 approximately 26 million options were granted under this plan,
     including the 3.9 million options discussed in Note 6, to employees of the
     Company at exercise prices ranging from $0.01 to $0.50 per share. As of
     December 31, 1999, 25 million options were outstanding, with a weighted
     average exercise price of $0.13 per share.

     For all options granted during 1999, the market price of the Company's
     common stock on the grant date was approximately equal to the exercise
     price.

     If not previously exercised, all options outstanding at December 31, 1999
     will expire in 2009.

                                      -9-

<PAGE>   58


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     1993 EMPLOYEE INCENTIVE PLAN

     The Company has a stock option plan, under which key employees may be
     granted options to purchase the Company's common stock at prices equal to
     market value at the date of grant (110% of market value for stockholders
     with more than 10% of the outstanding stock). The options may be exercised
     anytime within five to ten years of the date of grant.

     The following is a summary of activity under this stock option plan for the
     years ended December 31,1999 and 1998:

<TABLE>
<CAPTION>
                                            1999                      1998
                                   ----------------------     ----------------------
                                                 WEIGHTED                   WEIGHTED
                                                 AVERAGE                    AVERAGE
                                    NUMBER       EXERCISE      NUMBER       EXERCISE
                                   OF SHARES      PRICE       OF SHARES      PRICE

<S>                                 <C>          <C>           <C>          <C>
Outstanding, beginning of year      737,844      $   0.41      387,844      $   0.41

   Cancelled or expired             (40,124)         0.24           --            --
   Granted                               --            --      460,000          0.44
   Exercised                        (37,720)         0.27     (110,000)         0.53
                                    -------      --------      -------      --------

Outstanding, end of year            660,000      $   0.43      737,844      $   0.41
                                    =======      ========      =======      ========
</TABLE>

     All options outstanding at December 31, 1999 and 1998, and those exercised
     during 1999 and 1998, were granted to employees or stockholders of the
     Company. For all options granted during 1999 and 1998, the market price of
     the Company's common stock on the grant date was approximately equal to the
     exercise price.

     If not previously exercised, options outstanding at December 31, 1999 will
     expire as follows:

<TABLE>
<CAPTION>
                                               WEIGHTED
                                               AVERAGE
                         NUMBER                EXERCISE
                        OF SHARES               PRICE

<S>                      <C>                    <C>
2001                      20,000                $ 0.44
2002                     290,000                   .45
2008                     350,000                   .41
                         -------
     Total               660,000
                         =======
</TABLE>

                                      -10-

<PAGE>   59


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     WARRANTS AND OTHER STOCK OPTIONS

     The Company has also granted warrants and other options which are
     summarized as follows for the years ended December 31, 1999, and 1998:

<TABLE>
<CAPTION>
                               1999                   1998
                      ---------------------   ---------------------
                                   WEIGHTED                WEIGHTED
                                   AVERAGE                 AVERAGE
                       NUMBER      EXERCISE    NUMBER      EXERCISE
                      OF SHARES     PRICE     OF SHARES     PRICE

<S>                    <C>         <C>          <C>        <C>
Outstanding,
 beginning of year     275,000     $  0.62      25,000     $  2.50

Granted to BER              --          --     250,000        0.43
                       -------     -------     -------     -------
Outstanding,
 end of year           275,000     $  0.62     275,000     $  0.62
                       =======     =======     =======     =======
</TABLE>

     All outstanding warrants and other options were exercisable at December 31,
     1999. If not previously exercised, all warrants and other options
     outstanding at December 31, 1999 will expire by the year 2008.

     PRO FORMA STOCK-BASED COMPENSATION DISCLOSURES

     As described in Note 1, the Company applies APB Opinion No. 25 and related
     interpretations in accounting for its stock options. Accordingly, no
     compensation cost has been recognized for grants of options to employees
     since the exercise prices were not lower than the market prices of the
     Company's common stock on the measurement date. Had compensation been
     determined based on the estimated fair value at the measurement dates for
     awards under those plans consistent with the method prescribed by SFAS No.
     123, the Company's 1999 and 1998 net income and earnings (loss) per share
     would have been changed to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
 (in thousands, except for share data)  1999            1998

<S>                                   <C>              <C>
Net income:
  As reported                         $   663          $ 1,408
  Pro forma                               110            1,320

Net income (loss) per share of
 common stock:
  As reported                         $ (0.04)         $  0.14
  Pro forma                             (0.04)            0.13
</TABLE>

                                      -11-

<PAGE>   60


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     The estimated fair value of each employee option and warrant granted in
     1999 and 1998 was estimated on the date of grant using the Black-Scholes
     option-pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31,
                                      -----------------------
                                       1999            1998

<S>                                     <C>          <C>
Expected volatility                     188%         28% to 68%
Risk-free interest rate                6.41%              6.57%
Expected term (in years)                 10                  9
</TABLE>

8.   INCOME TAXES

     The Company's provision (benefit) for income taxes was comprised entirely
     of deferred income taxes for the years ended December 31, 1999 and 1998.

     The primary reasons for the difference between tax expense (benefit) at the
     statutory federal income tax rate and the Company's provision (benefit) for
     income taxes were:

<TABLE>
<CAPTION>
                                              1999           1998

<S>                                        <C>            <C>
Theoretical tax at 34%                     $ 177,000      $(498,000)
Release of valuation allowance for net
 operating losses in prior year             (353,000)            --
Valuation allowance on net operating
 losses                                           --        193,000
Other                                         35,000         18,000
                                           ---------      ---------
                                           $(141,000)     $(287,000)
                                           =========      =========
</TABLE>

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets and liabilities as of December 31, 1999
     and 1998 were as follows:

<TABLE>
<CAPTION>
                               1999             1998

<S>                          <C>              <C>
Oil and gas properties       $ 4,047,000      $ 1,536,000
Net operating loss            (1,249,000)      (1,165,000)
Valuation allowance              287,000          640,000
                             -----------      -----------
Net deferred tax liability   $ 3,085,000      $ 1,011,000
                             ===========      ===========
</TABLE>

                                      -12-

<PAGE>   61


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     At December 31, 1999, the Company has approximately $3.7 million of net
     operating loss carryforwards, $2.6 million of which are subject to
     limitations under Section 382 of the Internal Revenue Code and expire
     between 2000 and 2019. A valuation allowance has been provided to the
     extent that the Company believes the net operating losses (NOL's) will
     expire unutilized. In 1999, $353,000 of the valuation allowance was
     released based upon the improved financial condition of the Company and
     revisions to projected future taxable income. The significant increase in
     deferred taxes for oil and gas properties is a result of acquisitions.
     Since the increase is a noncash item, it is not reflected in the statement
     of cash flows.

9.   COMMITMENTS AND CONTINGENCIES

     The Company has an operating lease for 19,255 square feet of office space
     which expires on August 31, 2002. Under the terms of the lease agreement,
     the Company is liable for fixed, monthly rent payments. The Company
     incurred office rent expense of $255,000 and $221,000, respectively for the
     years ended December 31, 1999 and 1998, respectively. Minimum future
     noncancelable lease payments for the years ended December 31, are as
     follows:

<TABLE>
<S>                          <C>
2000                         $ 313,000
2001                           313,000
2002                           209,000
2003                                --
2004                                --
</TABLE>

     In the course of its normal business affairs, the Company is subject to
     possible loss contingencies arising from federal, state, and local
     environmental, health, and safety laws and regulations and third-party
     litigation. There are no matters which, in the opinion of management, will
     have a material adverse effect on the financial position, results of
     operations, or cash flows of the Company.

10.  FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

     Financial instruments that subject the Company to credit risk consist
     principally of accounts and notes receivable. The receivables are primarily
     from companies in extractive industries. No single receivable is considered
     to be sufficiently material as to constitute a concentration. The Company
     does not ordinarily require collateral for accounts receivable, but in the
     case of receivables for joint operations, the Company often has the ability
     to offset amounts due against the participant's share of production from
     the related party. No allowance for doubtful accounts was considered
     necessary at December 31, 1999 and 1998.

                                      -13-

<PAGE>   62

BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

11.  MAJOR CUSTOMERS

     In 1999, three customers accounted for approximately 24%, 16%, and 12% of
     the Company's revenues. In 1998, one of these purchasers accounted for
     approximately 24% of the Company's revenues.

12.  HEDGING ACTIVITIES

     The Company engages in certain hedging activities related to the purchase
     and delivery of oil and gas in the future. Such activities are accounted
     for in accordance with Statement of Financial Accounting Standard No. 80,
     "Accounting for Futures Contracts" (SFAS 80). The losses on hedging
     contracts are included as a reduction of net revenues.

     Approximately 50% (or 150,000 MMBTU per month) of current natural gas
     production was hedged through calendar year 1999. For the Company's South
     Coles Levee production a hedge was in place for 65,000 MMBTU at prices
     ensuring a floor of $2.00 per MMBTU and a ceiling of $2.45 per MMBTU based
     on Southern California border prices. For the Company's Gulf Coast
     properties, a hedge was in place for 85,000 MMBTU at prices ensuring a
     floor of $2.00 per MMBTU and a ceiling of $2.04 per MMBTU based on Houston
     Ship Channel pricing.

     At December 31, 1999, collars were in place for portions of the Company's
     oil production from October 1999 through September 2000 at floors of $18.00
     and ceilings of $20.75 and $23.08. Contracted volumes total 50,200 barrels
     per month declining each month to 42,000 barrels. Beginning October 2000
     through September 2001, the Company has two swaps in place at $17.55 and
     $18.05. Contracted volumes total 41,350 barrels per month declining to
     34,300 barrels per month, representing approximately 50% of the Company's
     projected oil production.

13.  SUBSEQUENT EVENT

     On February 22, 2000, the Company announced its intention to purchase
     significant operating assets from various subsidiaries of Texaco Inc. for
     an estimated purchase price of $161 million. The purchase price to be paid
     for the properties is subject to reduction if the joint working interest
     owners exercise preferential rights to purchase certain properties, or for
     other environmental defects identified before closing. The Company has
     received commitments from commercial banks to loan the Company sufficient
     amounts to finance the entire acquisition and replace existing bank
     indebtedness. The Company expects to close this acquisition late in the
     first quarter of 2000.

                                      -14-

<PAGE>   63


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

14.  FINANCIAL DATA FOR OIL AND GAS PRODUCING ACTIVITIES

     The following table sets forth certain information with respect to the oil
     and gas producing activities of the Company:

<TABLE>
<CAPTION>
                                                     1999              1998

<S>                                               <C>               <C>
Costs incurred in oil and gas producing
 activities:
  Acquisition of proved properties                $ 27,881,000      $ 33,155,000
  Development costs                                  2,234,000           103,000
                                                  ------------      ------------
    Total                                         $ 30,115,000      $ 33,258,000
                                                  ============      ============
Net capitalized costs related to oil and gas
 producing activities:
  Proved properties                               $ 76,107,000      $ 45,992,000
  Less - accumulated depletion, depreciation,
   amortization and impairment                      (6,135,000)       (1,507,000)
                                                  ------------      ------------
Net oil and gas property costs                    $ 69,972,000      $ 44,485,000
                                                  ============      ============
</TABLE>

                                      -15-

<PAGE>   64


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

15.  OIL AND GAS RESERVE DATA (UNAUDITED)

     The following table, based on information prepared by independent petroleum
     engineers, summarizes changes in the estimates of the Company's net
     interest in total proved reserves of crude oil and condensate, natural gas
     liquids and natural gas, all of which are domestic reserves:

<TABLE>
<CAPTION>
                                           OIL AND
                                           NATURAL
                                         GAS LIQUIDS       NATURAL GAS
                                            (BBLS)            (MCF)

     <S>                                  <C>              <C>
     Balance, January 1, 1998              2,179,000        6,139,000
     Purchase of minerals in place         3,245,000       55,840,000
     Revisions of previous estimates      (1,729,000)       8,584,000
     Production                             (126,000)      (1,109,000)
                                          ----------       ----------
     Balance, December 31, 1998            3,569,000       69,454,000
     Purchase of minerals in place         8,589,000        3,003,000
     Revisions of previous estimates       4,626,000        8,398,000
     Production                             (627,000)      (3,762,000)
     Sales of minerals in place               (1,000)         (39,000)
                                          ----------       ----------
     Balance, December 31, 1999           16,156,000       77,054,000
                                          ==========       ==========













</TABLE>

     At December 31, 1999 and 1998, respectively, 10,528,600 and 2,935,700
     barrels of oil and natural gas liquids and 52,516,700 and 50,066,000 mcf of
     natural gas were classified as proved developed.

     Proved oil and gas reserves are the estimated quantities of crude oil,
     condensate, natural gas liquids and natural gas which geological and
     engineering data demonstrate with reasonable certainty to be recoverable in
     future years from known reservoirs under existing economic and operating
     conditions. Proved developed oil and gas reserves are reserves that can be
     expected to be recovered through existing wells with existing equipment and
     operating methods. The above estimated net interests in proved reserves are
     based upon subjective engineering judgments and may be affected by the
     limitations inherent in such estimation. The process of estimating reserves
     is subject to continual revision as additional information becomes
     available as a result of drilling, testing, reservoir studies and
     production history. There can be no assurance that such estimates will not
     be materially revised in subsequent periods.

                                      -16-

<PAGE>   65


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

16.  STANDARDIZED MEASURE OF CHANGES IN FUTURE NET REVENUES (UNAUDITED)

     The standardized measure of discounted future net cash flows at December
     31, 1999 and 1998 relating to proved oil and gas reserves is set forth
     below. The assumptions used to compute the standardized measure are those
     prescribed by the Financial Accounting Standards Board and as such, do not
     necessarily reflect the Company's expectations of actual revenues to be
     derived from those reserves nor their present worth. The limitations
     inherent in the reserve quantity estimation process are equally applicable
     to the standardized measure computations since these estimates are the
     basis for the valuation process.

<TABLE>
<CAPTION>
                                           1999                1998

<S>                                    <C>                <C>
Future cash inflows                    $ 572,790,000      $ 185,660,000
Future production costs                 (221,861,000)       (75,262,000)
Future development costs                 (38,562,000)       (12,814,000)
Future income tax expense                (86,105,000)       (22,077,000)
                                       -------------      -------------
Future net cash flows                    226,262,000         75,507,000
10% annual discount for estimated
 timing of cash flows                   (101,818,000)       (33,978,000)
                                       -------------      -------------

Standardized measure of discounted
 future net cash flows                 $ 124,444,000      $  41,529,000
                                       =============      =============
</TABLE>

                                      -17-

<PAGE>   66


BARGO ENERGY COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------

     Future net cash flows were computed using year-end prices and costs, and
     year-end statutory tax rates (adjusted for permanent differences) that
     relate to existing proved oil and gas reserves at year-end. The following
     are the principal sources of change in the standardized measure of
     discounted future net cash flows:

<TABLE>
<CAPTION>
                                          1999                1998

<S>                                   <C>                <C>
Sale of oil and gas produced, net
 of production costs                  $ (11,449,000)     $  (1,697,000)
Purchase of minerals in place            74,518,000         43,464,000
Net changes in prices and
 production costs                        37,400,000         (4,974,000)
Sales of minerals in place                  (65,000)                --
Revisions and other                      13,573,000            393,000
Accretion of discount                     4,153,000          1,128,000
Net change in income taxes              (35,215,000)        (8,068,000)
                                      -------------      -------------
Net change                               82,915,000         30,246,000
Balance, beginning of year               41,529,000         11,283,000
                                      -------------      -------------
Balance, end of year                  $ 124,444,000      $  41,529,000
                                      =============      =============
</TABLE>

                                      -18-
<PAGE>   67
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
      2.                   Plan of acquisition, reorganization, arrangement,       (1)
                           liquidation or succession

      3.                   Articles of Incorporation and By-laws

           3.1             Articles of Incorporation of Bargo Energy Company
                           (Incorporated by reference from Exhibit 3.1 to the
                           Company's Current Report on Form 8-K dated April 26,
                           1999, filed with the Securities and Exchange
                           Commission on April 29, 1999)

           3.2             Agreement and Plan of Merger, dated as of April 6,
                           1999 between Future Petroleum Corporation and FPT
                           Corporation (Incorporated by reference from Exhibit
                           2.1 to the Company's Current Report on Form 8-K dated
                           April 26, 1999, filed with the Securities and
                           Exchange Commission on April 29, 1999)

           3.3             By-laws of Bargo Energy Company (Incorporated by
                           reference from Exhibit 3.2 to the Company's Current
                           Report on Form 8-K dated April 26, 1999, filed with
                           the Securities and Exchange Commission on April 29,
                           1999)

           3.4             Amendment to Bargo Energy Company By-laws
                           (Incorporated by reference from Exhibit 3.4 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended March 31, 1999, filed with the
                           Securities and Exchange Commission on May
                           21, 1999)

      4.                   Instruments defining the rights of security holders

           4.1             Certificate of Designations of Cumulative Redeemable
                           Preferred Stock, Series B (Incorporated by reference
                           from Exhibit 4.1 to the Company's Quarterly Report on
                           Form 10-QSB for the period ended March 31, 1999,
                           filed with the Securities and Exchange Commission on
                           May 21, 1999)

      9.                   Voting Trust Agreement                                  (1)

     10.                   Material Contracts

          10.1             Second Amended and Restated Shareholders' Agreement,
                           dated May 14, 1999, by and among Bargo Energy
                           Company, B. Carl Price, Don Wm. Reynolds, Energy
                           Capital Investment Company PLC, EnCap Equity 1994
                           Limited Partnership, Bargo Energy Resources, Ltd.,
                           TJG Investments, Inc., BargoEnergy Company, Tim J.
                           Goff, Thomas Barrow, James E. Sowell, BargoOperating
                           Company, Inc., EnCap Energy Capital Fund III-B, L.P.,
                           BOCPEnergy Partners, L.P., EnCap Energy Capital Fund
                           III, L.P., Kayne Anderson Energy Fund, L.P.,
                           BancAmerica Capital Investors SBIC I, L.P., Eos
                           Partners, L.P., Eos Partners SBIC, L.P., Eos Partners
                           SBIC II, L.P., and SGC Partners II LLC. (Incorporated
                           by reference from Exhibit 10.1 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21,1999)

            10.3           Consent and Agreement dated May 14, 1999 between
                           Bargo Energy Company and Bank of America National
                           Trust and Savings Association (Incorporated by
                           reference from Exhibit 10.6 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21, 1999)

            10.4           SBA Side Letter dated May 14, 1999 between Bargo
                           Energy Company and BancAmerica Capital Investors SBIC
                           I, L.P., Eos Partners SBIC, L.P., Eos Partners SBIC
                           II, L.P., and SGC Partners II LLC. (Incorporated by
                           reference from Exhibit 10.7 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21, 1999)
</TABLE>



<PAGE>   68

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
            10.5           SBA Side Letter dated May 14, 1999 between Bargo
                           Energy Company, EnCap Equity 1994 Limited
                           Partnership, TJG Investments, Inc. Bargo Energy
                           Company, Bargo Energy Resources, Ltd., Bargo
                           Operating Company, Inc., Tim J. Goff and BancAmerica
                           Capital Investors SBIC I, L.P., Eos Partners SBIC,
                           L.P., Eos Partners SBIC II, L.P., and SGC Partners II
                           LLC. (Incorporated by reference from Exhibit 10.8 to
                           the Company's Quarterly Report on Form 10-QSB for the
                           period ended March 31, 1999, filed with the
                           Securities and Exchange Commission on May 21, 1999)

            10.6           Stock Purchase Agreement dated May 14, 1999 between
                           Bargo Energy Company and Energy Capital Investment
                           Company PLC, EnCap Energy Capital Fund III-B, L.P.,
                           BOCP Energy Partners, L.P., EnCap Energy Capital Fund
                           III, L.P., Kayne Anderson Energy Fund, L.P.,
                           BancAmerica Capital Investors SBIC I, L.P., Eos
                           Partners, L.P., Eos Partners SBIC, L.P., Eos Partners
                           SBIC II, L.P., and SGC Partners II LLC. (Incorporated
                           by reference from Exhibit 10.9 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           March 31, 1999, filed with the Securities and
                           Exchange Commission on May 21, 1999)

            10.7           Bargo Energy Company 1999 Stock Incentive Plan
                           (Incorporated by reference from Exhibit 10.10 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended March 31, 1999, filed with the
                           Securities and Exchange Commission on May 21, 1999)

            10.8           Confidentiality and Non-compete Agreement dated May
                           14, 1999 between Bargo Energy Company and Tim J. Goff
                           (Incorporated by reference from Exhibit 10.11 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended March 31, 1999, filed with the
                           Securities and Exchange Commission on May 21, 1999)

            10.9           Second Amended and Restated Credit Agreement, Dated
                           as of September 30, 1999, among Bargo Energy Company,
                           Bank of America, N.A. and Certain Financial
                           Institutions (Incorporated by reference from Exhibit
                           10.10 to the Company's Quarterly Report on Form
                           10-QSB for the period ended September 30, 1999, filed
                           with the Securities and Exchange Commission on
                           November 19, 1999)

            10.10          Registration Rights Agreement among the Company and
                           Bargo Energy Resources, Ltd. dated August 14, 1998
                           (Incorporated by reference from Exhibit 10.1 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended June 30, 1998, filed with the Securities
                           and Exchange Commission on August 25, 1998)
</TABLE>



<PAGE>   69

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
            10.11          First Amendment to Registration Rights Agreement
                           among the Company, Bargo Energy Resources, Ltd.,
                           Bargo Energy Company, TJG Investments, Inc. and
                           certain other shareholders dated December 15, 1998
                           (Incorporated by reference from Exhibit 99.2 to the
                           Company's Current Report on Form 8-K dated December
                           15, 1998, filed with the Securities and Exchange
                           Commission on December 30, 1998)

            10.12          Registration Rights Agreement dated November 25,
                           1997, among the Company, Energy Capital Investment
                           Company PLC, and EnCap Equity 1994 Limited
                           Partnership (Incorporated by reference from Exhibit
                           10.05 to the Company's Current Report on Form 8-K
                           dated November 25, 1997, filed with the Securities
                           and Exchange Commission on December 10, 1997)

            10.13          Registration Rights Agreement among the Company,
                           Energy Capital Investment Company PLC and EnCap
                           Equity 1994 Limited Partnership dated August 14, 1998
                           (Incorporated by reference from Exhibit 10.2 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended June 30, 1998, filed with the Securities
                           and Exchange Commission on August 25, 1998)

            10.14          First Amendment to Registration Rights Agreement
                           among the Company, Energy Capital Investment Company
                           PLC and EnCap Equity 1994 Limited Partnership dated
                           December 15, 1998 (Incorporated by reference from
                           Exhibit 99.4 to the Company's Current Report on Form
                           8-K dated December 15, 1998, filed with the
                           Securities and Exchange Commission on December 30,
                           1998)

            10.15          Registration Rights Agreement among the Company, B.
                           Carl Price and certain other shareholders dated
                           August 14, 1998 (Incorporated by reference from
                           Exhibit 10.3 to the Company's Quarterly Report on
                           Form 10-QSB for the period ended June 30, 1998, filed
                           with the Securities and Exchange Commission on August
                           25, 1998)

            10.16          First Amendment to Registration Rights Agreement
                           among the Company, B. Carl Price and certain other
                           shareholders dated December 15, 1998 (Incorporated by
                           reference from Exhibit 99.6 to the Company's Current
                           Report on Form 8-K dated December 15, 1998, filed
                           with the Securities and Exchange Commission on
                           December 30, 1998)
</TABLE>



<PAGE>   70

<TABLE>
<CAPTION>
EXHIBIT NUMBER             TITLE OF DOCUMENT
<S>                        <C>                                                     <C>
            10.17          Stock Purchase Warrant by the Company to Bargo Energy
                           Resources, Ltd. dated August 14, 1998 (Incorporated
                           by reference from Exhibit 10.4 to the Company's
                           Quarterly Report on Form 10-QSB for the period ended
                           June 30, 1998, filed with the Securities and Exchange
                           Commission on August 25, 1998)

            10.18          1993 Employee Incentive Plan (Incorporated by
                           reference from the Company's Annual Report on Form
                           10-K for the fiscal year ended December 30, 1993,
                           filed with the Securities and Exchange Commission on
                           May 20, 1994)

            10.19          First Amendment to Second Amended and Restated
                           Shareholder's Agreement, dated August 11, 1999
                           (Incorporated by reference to Exhibit 10.20 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended September 30, 1999, filed with the
                           Securities and Exchange Commission on November 19,
                           1999.

            10.20          Purchase and Sale Agreement between Exxon Corporation
                           and Future Acquisition 1995, Ltd., et al.
                           (Incorporated by reference from Exhibit 2.1 to the
                           Company's Quarterly Report on Form 10-QSB for the
                           period ended June 30, 1999, filed with the Securities
                           and Exchange Commission on August 16, 1999)

            10.21          Purchase and Sale Agreement by and Between
                           Atlantic Richfield Company and Future
                           Acquisition 1995, Ltd. (Incorporated by
                           reference from Exhibit 2.2 to the Company's
                           Quarterly Report on Form 10-QSB for the period
                           ended September, 30, 1999, filed with the
                           Securities and Exchange Commission on November
                           19, 1999)

       11.                 Statement regarding computation of per share earnings   (1)


       13.                 Annual or quarterly reports, Form 10-Q                  (1)

       16.                 Letter on change in certifying accountant               (1)

       18.                 Letter on change in accounting principles               (1)

       21.                 Subsidiaries of the Registrant

       22.                 Published report regarding matters submitted to vote    (1)

       23.                 Consents of experts and counsel

       24.                 Power of attorney                                       (1)

       27.                 Financial data schedule

       99.                 Additional exhibits                                     (1)
</TABLE>



-----------------------------------

     (1) Inapplicable to this filing.