<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, 1998

                                       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
                                                ------

                          FUTURE PETROLEUM CORPORATION
       -----------------------------------------------------------------
         (Exact name of small business issuer as specified in charter)

            UTAH                                              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 [ ] No
[X]

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-KB 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: $3,679,000

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 31, 1999, was approximately $1,746,702.

As of March 31, 1999, the Company had outstanding 22,357,786 shares of its
common stock, par value $0.01 and 100,000 shares of preferred stock, par value
$.01.

                      DOCUMENTS INCORPORATED BY REFERENCE



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



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                                    PREFACE


                 Caution Respecting Forward-Looking Information

                  This report includes "forward-looking statements" within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical fact included in this report
regarding the Company's financial position, estimated quantities and net
present values of reserves, business strategy, plans and objectives for future
operations and covenant compliance, are forward-looking statements. Although
the Company believes that the assumptions upon which such forward-looking
statements are based are reasonable, it can give no assurances that such
assumptions 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 below under "Risk Factors" and
elsewhere in this report. 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.

"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.

"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" 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.

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                               TABLE OF CONTENTS
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<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION                                                                                             PAGE
                                                                                                                    ----

<S>                                                                                                                  <C>
PART I
1.  Business........................................................................................................  4

2.  Properties...................................................................................................... 16

3.  Legal Proceedings............................................................................................... 19

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

PART II

5.  Market for Registrant's Common Equity and Related Stockholder Matters........................................... 20

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

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

8.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............................ 25

PART III

9.  Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
    Exchange Act.................................................................................................... 25

10. Executive Compensation.......................................................................................... 28

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

12. Certain Relationships and Related Transactions.................................................................. 34

13. Exhibits and Reports on Form 8-K................................................................................ 36
</TABLE>


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                                     PART I

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                                ITEM 1. BUSINESS

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THE COMPANY

         Future Petroleum Corporation (the "Company" or "Future") is engaged
through its subsidiaries and subsidiary partnerships 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 newest 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. In 1998, through a
change in management and the establishment of a credit facility with Bank of
America, the Company was able to implement an aggressive acquisition program.
Going forward, the Company intends to continue to actively acquire producing
oil and gas reserves along with the exploitation of its existing properties.

         As of December 31, 1998, the Company owned approximately 15,145,000
barrels of oil equivalent proved reserves. Approximately 54% of the Company's
reserves are proved developed producing reserves. Quantities stated as
equivalent barrels of oil reserves are based on a factor of six mcf of natural
gas per barrel of oil. See "Item 2. Properties - Reserves."

STRATEGIC DEVELOPMENTS

         On August 14, 1998, the Company acquired from Bargo Energy Resources,
Ltd. ("Resources") their interest in the South Coles Levee Unit for a purchase
price of $5.8 million, 4.7 million shares of Common Stock and a warrant to
purchase an additional 250,000 shares of Common Stock ("August Transaction").
In connection with this transaction, EnCap Equity 1994, L.P, a Texas limited
partnership ("EnCap") and Energy Capital Investment Company PLC, an English
investment company ("ECIC") (together are the "EnCap Entities") agreed to
modify and extend their outstanding loans to the Company in the amount of
approximately $7.3 million in exchange for 2.8 million shares of Common Stock.

         Also in connection with the August Transaction, Resources, the EnCap
Entities, Mr. B. Carl Price, Mr. Don Wm. Reynolds (Mr. Price and Mr. Reynolds
together are the "Price Group") and Future entered into a Stockholders'
Agreement whereby all parties agreed to cause the Board of Directors of Future
to be composed of seven persons. Each party further agreed to vote their shares
of Common Stock in connection with the election of directors of the Company for
two nominees of Resources, two nominees of the EnCap Entities, and three
nominees of the Price Group. In addition, the parties to the Stockholders'
Agreement agreed that one of Resources nominees would be the Chairman of the
Board of Directors of the Company. Accordingly, Mr. Robert D. Price and Mr. D.
William Reynolds, Jr. agreed to resign from Future's Board of Directors. Mr.
Tim J. Goff, who was also appointed Chairman of the Board of Future, and Mr.
Thomas D. Barrow were appointed to serve as Resources nominees, and Mr. Gary R.
Petersen and Mr. D. Martin Phillips were appointed to serve as the EnCap
Entities' nominees.

         In connection with the August Transaction, Future entered into a $20
million credit agreement with Bank of America National Trust and Savings
Association ("Bank of America") with a borrowing base initially set at $10.5
million. Pursuant to pledge agreements dated August

                                       4

<PAGE>   5


14, 1998 ("August Pledge Agreements"), Resources, the EnCap Entities and the
Price Group pledged their shares of Common Stock to secure Future's borrowings
under the credit agreement.

         In December 1998, the Company amended and restated its credit
agreement with Bank of America 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.

         As of December 15, 1998, the Company acquired substantially all of the
assets and liabilities of Resources, including Resources' trained staff of
professional geologists, engineers, landmen, accountants and other employees,
for $2 million cash and 100,000 shares of Preferred Stock ("December
Transaction"). In addition, the Company issued an aggregate of 8,333,333 shares
of Common Stock to Bargo Energy Company, a Texas general partnership ("Bargo
Energy") and TJG Investments, Inc. ("TJG") in exchange for the cancellation of
outstanding debt aggregating $4 million. In connection with this transaction,
the Company, Resources, Bargo, TJG, the Price Group and the EnCap Entities
entered into an Amended and Restated Stockholders' Agreement whereby Resource's
board representation was increased from two director nominees to four director
nominees and the Price Group's board representation was decreased from three
director nominees to one director nominee.

         All of the shares of Common Stock and Preferred Stock issued pursuant
to the December Transaction as well as the shares of Common Stock issuable upon
conversion of the Preferred Stock are subject to pledge agreements, each of
which is dated December 15, 1998 ("December Pledge Agreements") between the
stockholders and Bank of America. The December Pledge Agreements secure
Future's borrowings under its credit agreement with Bank of America. If an
event of default occurs under the credit agreement, the bank will have the
right to vote all of the shares of Future subject to the December Pledge
Agreements and, following foreclosure on the shares, will have the right to
sell the shares as provided in the December Pledge Agreements and applicable
law.

         Also in connection with the December transaction, the Company agreed
to file an information statement with the Commission to change its name to
Bargo Energy Company from Future Petroleum Corporation, reincorporate the
Company in Texas and increase the number of shares of Common Stock Future is
authorized to issue

         In December 1998, the Company entered into a term sheet with entities
affiliated with the EnCap Entities and other institutional investors not
affiliated with the EnCap Entities or the Company pursuant to which the
investors would purchase $50 million of a new class of cumulative redeemable
preferred stock of the Company, and would receive warrants or an amount of
shares of Common Stock representing 40% of the outstanding Common Stock on a
fully diluted basis (the "Pending Transaction"). The term sheet is a
non-binding expression of interest, and is not a commitment on the part of the
investors or the Company. Among other things, the investment pursuant to the
term sheet is subject to completion of due diligence by the investors and
satisfactory documentation. The parties have not completed due diligence and
consummation of the transaction is subject to material contingencies beyond the
control of the Company. Final terms of any transaction will be subject to the
approval of a majority of the directors of the Company who are not affiliated
with any of the investors. As a result, no assurances can be made as to the
terms of the Pending Transaction or that the investors will purchase preferred
stock or any other security of the Company.

                                       5

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DEVELOPMENT PROPERTIES

         Oil and Gas Holdings. The Company's properties are located onshore
principally in Texas, Louisiana and California. As of March 31, 1999, the
Company owns interests in a total of 486 gross (334 net) producing wells, of
which 267 wells are operated by the Company. As of that date, the Company had
oil and gas rights in leases comprising 51,687 gross (34,553net) acres.

TEXAS PANHANDLE

         The Company's Texas Panhandle properties offer long lived oil and
natural gas reserves. There are over 30 proved Brown Dolomite, Granite Wash and
Moore County Lime development drilling locations. The gas produced is high in
natural gas liquids which enables the Company to receive premium prices for its
gas sold. In addition, the implementation of advanced hydraulic fracturing to
new development wells and refracturing existing wells have proven to recover
additional reserves.

         PANHANDLE FIELD. The Company has an interest in and operates 166 wells
in the Panhandle of Texas. These wells are located in Gray, Carson, Hutchinson,
Moore and Roberts Counties, Texas. Most of the wells are located 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.


NORTH TEXAS

         WICHITA COUNTY REGULAR FIELD. The Company owns and operates wells in
the Wichita Regular Field in Wichita County, Texas. The field is on the Bend
Arch north of the Fort Worth basin. The pay zones are the Gunsight sand, the
Thomas sand and an unconsolidated 600' sand. The Gunsight sand is presently
under waterflood. All of these sands are Pennsylvanian in age. The trap is a
combination of statigraphy and structure. The Company is presently performing
remedial recompletions, stimulations and improvements to the waterflood. The
Company owns a 100% working interest ("WI") and 75%-87.5% net revenue interest
("NRI") in this field.

PERMIAN BASIN

         EDMISSION CLEARFORK. The Company operates and intends to flood its
Edmission Clearfork project in Lubbock County, Texas. Two existing floods that
have produced more secondary oil from the waterfloods than they produced under
the primary phase of production directly offset the property. The Company has a
100% WI in this field.

         AZALEA FIELD. The Company has an interest in 17 producing wells and
one commercial Salt Water Disposal well in the Azalea Field, located
approximately 8 miles Southeast of Midland, Texas in Midland county. It is in
the east central portion of the Midland geological Basin. It is near the edge
of the Grayburg-San Andres shelf as it swings across the basin from the Central
Basin Platform on the west to the eastern shelf on the east. The field is an
anticlinal dome caused by drape over of a carbonate bioherm. The leases are on
or near the crest of the anticline. The potential pays are in the Grayburg,
Permian age sands and carbonates and the San Andres, also Permian, Carbonates
(dolomite and limestone). It is the intention of the Company and its partner to
drill infill wells to both pay zones and to start a waterflood in order to
increase the recovery of oil. Potential increases in production and reserves
could increase the Company's reserve base substantially. The Company has
completed the drilling of two

                                       6

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development wells. The results of these wells indicate that up to 80% of the
original oil in place still remains in the reservoir and that a portion of the
remaining oil in place can be recovered by a waterflood. The Company holds a
50% WI and a 37.5% - 40% NRI.

         CASEY & SHIPP STRAWN FIELDS. The Company owns a 33% WI and a 29% NRI
in these fields in Lea County, New Mexico which is located on a large Penn Reef
Trend. There are 4 existing wells and one proved undeveloped location
identified by 3-D seismic.

         FOSTER/COWDEN FIELDS. The Foster/Cowden Fields are located in West
Texas in Ector County. Future is the operator and holds a 100% WI and 87.5% NRI
in 7 producing wells. Five wells produce from the Permian age Grayburg
formation, of which one well is presently shut-in in the Grayburg awaiting a
workover. Two wells produce in the Pennsylvanian age Canyon formation. One well
is an injection well. Future also owns a 25% WI in a co-op injection well
operated by Altura Energy. Low maintenance and long life characterize Grayburg
production.

         SAND HILLS FIELD. This field located in Crane County, Texas is
operated by Gruy Petroleum and Burlington Resources, Inc. Future owns WI's
ranging from 33.33% to 50% with NRI of 25% to 40.6%. There are presently 18
active wells that produce from the McKnight, Judkins, Tubb, Holt and
Witchita-Albany sands of Permian age.

         GIN UNIT FIELD. Located in Dawson County, Texas this field is operated
by Texaco, Inc. Future holds a 5% WI and 4% NRI in 12 producing wells. The
waterflood also has 8 injector wells and produces from the Gin sand which is
part of the Permian age Strawn Formation.


TEXAS GULF COAST

         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 which also produces from the shallower Yegua,
Frio, and Miocene formations. Besides many recompletion opportunities in the
eight producing wellbores, other infill drilling opportunities exist and are
being better defined at this time by interpretation of a 3-D seismic survey.
Future 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. Future'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; eleven 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.

         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 5 producing wells and 8 additional proved, undeveloped
locations. Most wells also have proved behind pipe reserves.

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         CANDY B FIELD. This field produces from Oligocene age, normally
pressured, Frio sandstones. Future 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.

         BUNA FIELD. This field is located in Jasper County, Texas. Two wells
produce from the Eocene age, geopressured Wilcox sandstone on 550 gross acres.
Future is the operator with a 100% WI and an 87.5% NRI.

         BRUCE ROY FIELD. This field produces from the Eocene age, geopressured
Yegua sandstone. Future owns both operated and non-operated interests in 4
active wells. The other field operators are Ken Petroleum and United Oil &
Minerals. The field is located in Wharton County, Texas. There are additional
proved non-producing reserves.

         TURTLE CREEK FIELD. The Turtle Creek Field produces from Oligocene age
Frio sandstones and is located along the Texas Gulf Coast in Matagorda County.
The field is operated by Aviara Energy. Production is from one well with proved
behind pipe reserves in 2 zones. Additional potential exists in other sands on
the lease block.

         GIDDINGS FIELD. This field produces from the Cretaceous age Austin
Chalk and is located in Brazos County, Texas. Future is the operator and owns
100% WI and 81.5% NRI in 13 producing wells (primarily horizontal).


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). Future 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 which produce from Oligocene age Frio sandstones.
There are additional behind pipe reserves as well as one proved, undeveloped
location.

         CHENIERE FIELD. This field is located in northeast Louisiana in
Ouachita Parish and is operated by Brammer-Keystone. Production is from
Jurassic age retrograde condensate Cotton Valley sandstones. The field was
discovered in May 1961 and unitized in November 1966. A natural gas cycling
program was initiated in July 1967 and reservoir blowdown commenced in the fall
of 1988.

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OKLAHOMA

         RED FORK TREND. The Company owns 1,340 proven producing acres on the
trend containing 8 producing wells. A recent uphole recompletion in the Oread
Formation by an offset operator is producing 600 MCF per day. The Company,
after reviewing its own logs on its existing wells, believes that 2 and
possibly 4 wells have uphole recompletion potential in the Oread Formation.

         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.



NEW MEXICO

         BLUITT FIELD. The Bluitt field produces from the Permian age Wolfcamp
formation. It is operated by H.L. Brown Jr. and is located in Roosevelt County,
New Mexico. The Company owns interests in 5 producing wells.


MISSISSIPPI

         NORTH YELLOW CREEK FIELD. This field is located in Wayne County,
Mississippi and operated by Palmer Petroleum. Production is from the Cretaceous
age Tuscaloosa Pilot sand. Nine wells are presently active.



EXPLORATION PROPERTIES

         PRICE RANCH FIELD. The Price Ranch, located in the Texas Panhandle,
contains 8,390 net acres. Three prospective features have been identified along
a producing anticlinal trend using well control and 2-D seismic. A 3-D seismic
survey will be utilized to further delineate the three features and to select
drilling locations. The Company operates 1 producing well on the property and
has a 98% WI and a 75% NRI.

         CUMBERLAND FIELD. The Cumberland Field is located in Bryan and
Marshall Counties, Oklahoma. The field has a northwest-southeast orientation
and is located on a structural high associated with the southwest fault block
(horst) of a large northwest-southeast oriented horst and graben fault system.
Cumberland field has produced over 73 MMBBLS and over 54 MMMCFG. A substantial
amount of remaining barrels of oil should be producible using present day
recovery methods and oil prices. Proven gas reserves remaining to be produced
are estimated to be at least 30 BCFG. Cumberland field was discovered in 1940.
Producing formations range from the Arbuckle Dolomites (Ordovician in age) up
through the Simpson Sands, Viola and Hunton Limestones, Woodford Chert and
Sycamore Siltstones (Pennsylvanian age). The Simpson Sands are the oil
reservoirs. They also hold a large share of the gas as attic gas in their gas
caps. The Company has obtained oil and gas leases on the flanks of this field.
Major oil companies have conducted an extensive 3-D seismic study of this area
with the idea of extending this field and further developing the remaining
reserves. This extension field is operated by Quintin Little Oil Company and
the Company has an interest in one well.

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<PAGE>   10


MARKETING

         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 absolute credit worthiness of the purchaser.

         Gas Sales. Current marketing arrangements generally are month to month
contracts structured to be tied to the Henry Hub price or the appropriate
regional index for the location. This allows for absolute gas price hedging, as
well as location based hedging, as determined by Company management. 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 price with appropriate transparent
adjustments for location, grade, and transportation. This also allows for
absolute liquid price hedging, as well as location and grade hedging, as
determined by Company management. The largest liquid volume is at South Coles
Levee. South Coles Levee oil and NGLs are sold to EOTT at the appropriate
regional indexes.

         Company management chooses to implement pricing hedges as necessary to
guarantee certain cash flow requirements or as market conditions create
opportunity. For 1999, Future has two hedges in place. For the Company's South
Coles Levee production a hedge is 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 is 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. Future has no
hedges in place for liquid production.


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

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<PAGE>   11


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 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

                                      11

<PAGE>   12


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.

         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

         The Company has twenty-three (23) full-time employees all of whom are
associated with the Company's oil and gas activities. Of the twenty-three (23)
employees, eighteen are salaried management personnel, and five are field
personnel. The Company also contracts with various independent contractors for
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,

                                      12

<PAGE>   13


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 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

                                      13

<PAGE>   14


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 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 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. Business--Marketing." 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.

                                      14

<PAGE>   15


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. Business - 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.

         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

                                      15

<PAGE>   16


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.



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

                               ITEM 2. PROPERTIES

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

OIL AND GAS PROPERTIES

         The Company's significant oil and gas properties are located in
Harris, Gray, Carson, Hutchinson, Moore, McMullen, Live Oak, Jasper and Jackson
Counties in Texas; Vermilion Parish in Louisiana; Grant and Pottawatomie
Counties in Oklahoma; and Kern County, California. 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, 1998, 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          116                            60
                           Oil          370                           274     
                                        ---                           ---
                           Totals       486                           334     
                                        ===                           ===
</TABLE>

The following table sets forth developed and undeveloped acreage owned by the
Company as of December 31, 1998.

<TABLE>
<CAPTION>
                   DEVELOPED ACREAGE      UNDEVELOPED ACREAGE        TOTAL ACREAGE
                  -------------------     -------------------       ----------------
                   GROSS        NET         GROSS        NET        GROSS      NET
                  ------       ------     ---------     -----       ------    ------
<S>               <C>          <C>          <C>         <C>         <C>       <C>   
Texas             22,423       15,103       10,688      9,856       33,111    24,959
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             39,369       24,599       12,318      9,954       51,687    34,553
                  ======       ======       ======      =====       ======    ======
</TABLE>

                                      16

<PAGE>   17


RESERVES

         The Company's independent Reserve Engineers prepared the estimates of
the 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, and were otherwise prepared in accordance with
the Commission regulations regarding disclosure of oil and gas reserve
information.

         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 shore
periods of production may not be 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 which 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.

<TABLE>
<CAPTION>
                                                                       PROVED RESERVES 
                                                                ---------------------------

                                                                    Oil &                     
                                                                  Natural gas                   
                                                                    Liquids          Gas
                                                                -------------    ----------
                                                                    (BBLS)          (MCFG)
<S>                                                             <C>               <C>      
             Balance, January 1, 1996                               113,000       1,220,000
             Purchase of minerals in place                            5,000              --
             Revisions of previous estimates                        (56,000)       (767,000)
             Abandonment of minerals                                 (3,000)       (181,000)
             Production                                              (7,000)        (29,000)
                                                                  ---------      ----------
             Balance, December 31, 1996                              52,000         243,000
             Purchase of minerals in place                        2,071,000       6,176,000

             Revisions of previous estimates                         89,000        (220,000)
             Production                                             (33,000)        (60,000)
                                                                  ---------      ----------
             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                     (1,728,700)      8,583,500
             Production                                            (126,000)     (1,109,000)
                                                                  ---------      ----------
             Balance, December 31, 1998                           3,569,300      69,453,500
                                                                  =========      ==========
</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 1998 as a result of the
significant number of oil and gas acquisitions made in 1998. (See "ITEM 1. -
BUSINESS.")

                                      17

<PAGE>   18


OPERATIONS

<TABLE>
<CAPTION>
ANNUAL PRODUCTION                                       1998             1997              1996

<S>                                                    <C>              <C>               <C>   
Barrels of oil equivalents (Boe)                       310,833          43,000            11,833
Natural gas (Mcf)                                    1,109,000          60,000            29,000
Oil, natural gas liquids & condensate (MBbls)          126,000          33,000             7,000
</TABLE>


DAILY PRODUCTION

<TABLE>
<CAPTION>
                                                                    Year Ended December 31,           
                                                       ----------------------------------------------
                                                        1998                 1997              1996
                                                       ------               -------           -------
<S>                                                    <C>                  <C>               <C>
Average net daily production
         Gas (MCFG)                                     3,038                   164                79
         Oil and NGL (Bbls)                               345                    90                19

Average sales price
         Gas ($ per MCFG)                              $ 2.34               $  1.91           $  2.82
         Oil and NGL ($ per Bbl)                       $ 8.46               $ 14.58           $ 21.32
</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 $ 5.87 for 1998, $9.74 for 1997, and $15.80 for 1996. 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 several purchasers in each of the areas in
which it has productive oil wells. See "ITEM 1. Business - Marketing".


DRILLING ACTIVITIES

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

<TABLE>
<CAPTION>
                                                        Year Ended December 31,                     
                           ------------------------------------------------------------------------------
                           1998                      1997                               1996              
                           -----                     -----                              ----              
                           Gross       Net           Gross               Net            Gross         Net
                           -----       ---           -----               ---            -----         ---

<S>                           <C>      <C>              <C>            <C>                 <C>        <C>
Development
  Gas                          1       .10              --                --                1         .15
  Oil                         --        --               2                 2                2         .14
  Non-productive              --        --              --                --               --          --      
                           -----       ---           -----             -----            -----         ---

Totals                         1       .10               2                 2                3         .29      
                           =====       ===           =====             =====            =====         ===


Exploratory
  Gas                         --        --              --                --               --          --
  Oil                         --        --               1             .0042               --          --
  Non-productive              --        --              --                --               --          --  
                           -----       ---           -----             -----            -----         ---
Totals                        --        --               1             .0042               --          --  
                           =====       ===           =====             =====            =====         ===     
</TABLE>

                                      18

<PAGE>   19


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; 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.

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
14,885 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
$20,010 per month, under a lease expiring August 31, 2002.

         The Company also maintains a field operations office at Pampa, Texas.

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

                           ITEM 3. LEGAL PROCEEDINGS

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

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

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

          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 1998.

                                      19

<PAGE>   20


                                    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 "FUPT". 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 two years.

<TABLE>
<CAPTION>
                                                   Bid Quotation 
                                             ------------------------
                                              High               Low     
                                             ------            ------
1998
----
<S>                                          <C>               <C>   
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

1997
----
Quarter ended March 31                      $ 0.875            $0.1875
Quarter ended June 30                       $ 1.000            $ 0.625
Quarter ended September 30                  $0.9687            $0.6562
Quarter ended December 31                   $ 0.625            $ 0.250
</TABLE>


         As of March 31, 1999, immediately prior to the date of this report,
the Company's Stock was quoted on the OTC Electronic Bulletin Board at a
closing bid of $0.391.

         On March 31, 1999, the Company had approximately 860 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 restricts payments of dividends on its Common Stock.


UNREGISTERED SALES OF SECURITIES

         During 1998, the year covered by this report, the Company sold
securities without registration under the Securities Act of 1933 (the
"Securities Act") in the following transactions:

         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, L.P. and 18,762 shares to
Energy Capital Investment Company PLC valued at $7,809.50 and $4,690.50,
respectively.

                                      20

<PAGE>   21


         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
Resources 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.
See "ITEM 1. Business - Strategic Developments".

         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 Resources for $2 million and 100,000 shares of Preferred
Stock. See "ITEM 1. Business - Strategic Developments".

         In December 1998, the Company issued an aggregate of 8,333,333 shares
of Common Stock to Bargo and TJG in exchange for the cancellation of
outstanding debt aggregating $4 million. See "ITEM 1. Business - Strategic
Developments".

         The securities issued in the transactions described above were issued
in reliance on the exemption from the registration and prospectus delivery
requirements of the Securities Act provided in ss. 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 therefrom; 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

                                      21

<PAGE>   22
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. Once incurred, the writedown 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 the
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 $1,408,000 for the year ended
December 31, 1998 compared to a consolidated net loss of $12,000 for the year
ended December 31, 1997. At December 31, 1998, the Company had negative working
capital of $8,034,000, which was a $7,763,000 increase from the $271,000 working
capital deficit that the Company had as of December 31, 1997. This decrease in
working capital was due primarily to the current portion of long term debt
resulting from the acquisition of proved reserves referred to above. Management
believes cash flow from those reserves along with the possible issuance of
additional equity will be sufficient to eliminate the working capital deficit.

         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. See "Item 1. Business - Strategic Developments." 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. The Credit Agreement is
comprised of two Tranches, Tranche A and Tranche B.

                                      22

<PAGE>   23


          At December 31, 1998, the Tranche A loan commitment amount was $38
million, of which $30.9 million had been borrowed. The Company has a choice of
two different interest rates under the Tranche A loan, the Base Rate or the
LIBO Rate. The debt bears interest under the Base Rate at the higher of the
lender's "Reference Rate" or the Federal Funds Rate plus .5%. The debt bears
interest under the LIBO Rate at the LIBO rate (reserve adjusted) plus 2%. The
Company may convert any portion of the outstanding debt from one interest rate
type to another in increments of $50,000 with a minimum transfer amount of
$250,000. The Company may borrow, pay, reborrow and repay under the Credit
Facility until December 4, 1999, on which date, the revolving credit line
converts to a four-year term loan with quarterly principal installments.

         At December 31, 1998, the Tranche B loan commitment amount was $12
million, of which $8.945 million had been borrowed. The Company has a choice of
two different interest rates under the Tranche B loan, the Base Rate or the
LIBO Rate. The debt bears interest under the Base Rate at the higher of the
lender's "Reference Rate" plus 2% (through April 4, 1999, and plus 4%
thereafter until maturity) or the Federal Funds Rate plus 2.5% (through April
4, 1999, and plus 4.5% thereafter until maturity). The debt bears interest
under the LIBO Rate at the LIBO rate (reserve adjusted) plus 4% (through April
4, 1999, and plus 6% thereafter until maturity). The Company may convert any
portion of the outstanding debt from one interest rate type to another in
increments of $50,000 with a minimum transfer amount of $250,000. On June 4,
1999 the Company must repay in full all amounts outstanding under Tranche B.


CASH FLOW TO OPERATING ACTIVITIES

         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.

         Operating activities of the Company during 1997 provided net cash of
$154,000. The Company purchased two (2) partnerships and the assets of a third
for $6.6 million and 1,575,000 shares of the Company's common stock. Investing
activities in 1997 provided net cash of $16,000, primarily due from cash in the
purchased partnerships. Financing activities in 1997 provided net cash of
$9,000 primarily due to proceeds from the exercise of stock options.

RESULTS OF OPERATIONS

         Comparison of Years Ended December 31, 1998 and 1997

         Total revenues in 1998 increased to $3,679,000 from $772,000 in 1997,
primarily due to the acquisition of oil and gas properties. Production costs
increased due to the purchase of these proved reserves. General and
administrative expenses increased to $783,000 from $154,000 in 1997 due to
the acquisition of Resources and increased overhead associated with the
Company's increased acquisition activity. The Company had net income of
$1,408,000 in 1998 compared to a net loss of $12,000 in 1997, primarily due to
the acquisition of proved reserves. The majority of the cash flow generated
from these additional reserves was primarily used to pay interest costs.

         Comparison of Years Ended December 31, 1997 and 1996

         Total revenues in 1997 increased to $772,000 from $378,000 in 1996,
primarily due to the acquisition of two (2) partnerships and the assets of a
third. Production costs increased due to the purchase of the proved reserves.
General and administrative expenses increased to

                                      23

<PAGE>   24


$154,000 from $120,000 in 1996. The Company incurred a net loss in 1997 of
$12,000 compared to net income of $119,000 in 1996, primarily due to $102,000
being recognized in 1996 for the sale of mining properties, which did not recur
in 1997.


INFLATION

         The Company's activities have not been, and in the near term are not
expected to be, materially affected by inflation.


YEAR 2000 ISSUE

         Year 2000 issues result from the inability of computer programs or
computerized equipment to accurately calculate, store or use a date subsequent
to December 31, 1999. The erroneous date can be interpreted in a number of
different ways; typically the Year 2000 is interpreted as the year 1900. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business. Because the
Company's software systems are relatively new, the Company was aware of and
considered Year 2000 issues at the time of purchase or development of such
systems. In addition, the Company has recently completed an assessment of its
core financial and operational software systems to ensure compliance. The
licensor of the Company's core financial software system has certified that
such software is Year 2000 compliant. Additionally, other less critical
software systems and various types of equipment have been assessed and are
believed to be compliant.

         The Company believes that the potential impact, if any, of these less
critical systems not being Year 2000 compliant will at most require employees
to manually complete otherwise automated tasks or calculations and it should
not impact the Company's ability to continue exploration, drilling, production
or sales activities. The Company has initiated and will continue to have formal
communications with its significant suppliers, business partners and customers
to determine the extent to which the Company is vulnerable to those third
parties' failure to correct their own Year 2000 issues. There can be no
guarantee, however, that the systems of other companies on which the Company's
systems rely will be timely converted, or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems would
not have a material adverse effect on the Company.

         The Company has determined it has no exposure to contingencies related
to the Year 2000 issue with respect to products sold to third parties. The
Company has and will utilize both internal and external resources to complete
tasks and perform testing necessary to address the Year 2000 issue. The Company
has substantially completed the Year 2000 project. The Company has not
incurred, and does not anticipate that it will incur, any significant costs
relating to the assessment and remediation of Year 2000 issues.

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

              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".

                                      24

<PAGE>   25


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

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

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


         On February 15, 1999 the Company engaged PricewaterhouseCoopers LLP
("PWC") as its independent auditors. Hein & Associates LLP ("Hein") was
dismissed by approval of the Company's Board of Directors. This change was
reported on Form 8-K filed with the SEC on February 25, 1999.

         During the Company's two most recent fiscal years there were no
disagreements with Hein on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Hein would have caused
Hein to make reference to the subject matter of the disagreement in its report
on the financial statements for such years.


                                    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                         40               Chairman of the Board, Chief
                                                     Executive Officer, President                2002
B. Carl Price                       40               Vice-President, Director                    2002
Thomas D. Barrow                    52               Director                                    2001
D. Martin Phillips                  45               Director                                    2001
Gary R. Petersen                    52               Director                                    2002
Mary E. Vanderhider                 34               Director, Vice President of
                                                     Administration, Secretary                   2000
Kimberly G. Seekely                 37               Director, Chief Financial Officer           2000
</TABLE>


         The articles of incorporation of the Company provide that the board of
directors shall be divided into three classes of approximately equal size, with
the directors in each class elected for a three-year term. In connection with
the August Transaction, Resources, the EnCap Entities, the Price Group and the
Company entered into a Shareholders' Agreement whereby the parties

                                      25

<PAGE>   26
thereto agreed to cause the Board of Directors of Future to be composed of
seven persons. Each party further agreed to vote their shares of Common Stock in
connection with the election of directors of the Company for two nominees of
Resources, two nominees of the EnCap Entities and three nominees of the Price
Group. In addition, the parties to the Shareholders' Agreement agreed that one
of the nominees of Resources would be the Chairman of the Board of Directors of
the Company. The parties to the Shareholders' Agreement have also granted to
each other certain rights of first refusal and tag along rights with respect to
proposed transfers of their Common Stock. Pursuant to the December Transaction,
Resource's (and certain of its affiliates) board representation was increased
from three director nominees to four director nominees and the Price Group's
board representation was decreased from three director nominees to one director
nominee. Pursuant to the Pending Transaction, Resources board representation
would decrease, while the board representation of certain investors would
increase. No assurances can be given, however, that the Pending Transaction will
be consummated or as to the final terms of the Pending Transaction. See "Item 1.
Business Strategic Developments."

         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

         Since December 1998, Tim J. Goff has served as the Company's president
and chief executive officer. Mr. Goff was appointed as Chairman of the Board of
Directors in August of 1998. 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.

B. CARL PRICE

         Since December 1998, B. Carl Price has served as a vice president of
the Company. From 1993 until the transaction with Resources in December 1998,
he served as the Company's President. He continues to serve as a director of
the Company, a position he has held since 1993. He attended Oklahoma State
University where he majored in business. Mr. Price has been a landman since the
mid 1980's where he gained much experience by initiating, managing, acquiring
and operating oil and gas ventures and properties.

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.

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.

                                      26

<PAGE>   27

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 RepublicBank 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.

MARY E. VANDERHIDER

         Mary E. Vanderhider has been the corporate secretary, vice president
of administration and a director of the Company since December 1998. Prior to
her affiliation with Future, she served as Vice President of Bargo where she
began as one of the founders in 1993. Ms. Vanderhider attended Stephen F.
Austin State University where she majored in business administration.

KIMBERLY G. SEEKELY

         Kimberly G. Seekely has been a director of the Company since December
1998. Prior to her affiliation with Future, she worked for Bargo as its chief
accounting officer. Ms. Seekely has over 14 years of financial and private
industry experience. Ms. Seekely attended Bowling Green State University where
she received a Bachelor of Science in Business Administration. She is a
certified public accountant.


COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

         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.

B. Carl Price filed one late Report on Form 4, regarding a transaction for the
exercise of certain stock options on September 8, 1998, for a transaction in
April 1998.

                                      27

<PAGE>   28


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

                        ITEM 10. EXECUTIVE COMPENSATION

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

EXECUTIVE OFFICER COMPENSATION

         The following table sets forth, for each of the last three fiscal
years, cash compensation received by any person serving as chief executive
officer of the Company during the last preceding fiscal year. No other
executive officer was paid a salary and bonus that exceeded $100,000 for the
most recent fiscal year.


                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                          Long Term Compensation    
                                                                               --------------------------------------------
                                    Annual Compensation                               Awards                 Payouts           
------------------------------------------------------------------             ----------------------    ------------------
         (a)                (b)       (c)     (d)           (e)                   (f)         (g)          (h)       (i)
                                                           Other                           Securities                
                                                           Annual              Restricted  Underlying             All Other
                          Year                             Compen-               Stock      Options/       LTIP    Compen-
Name and Principal        Ended      Salary   Bonus        sation               Award(s)      SARs       Payouts   sation
Position (1)              Dec. 31     ($)      ($)          ($)                   (#)         (#)          ($)       ($)      
------------------        -------    ------   -----        -------             ----------  ----------    -------  ---------

<S>                        <C>      <C>         <C>     <C>                         <C>    <C>              <C>       <C>
B. Carl Price,             1998     $92,708     --       $28,500(2)                 --      350,000(3)      --        --
Vice President, Director   1997     $12,000     --       $50,300(2)                 --      200,000(4)      --        --
                           1996     $12,000     --       $21,583(2)                 --           --         --        --

Tim J. Goff,
CEO                        1998     $25,000     --            --                    --           --         --        --
President, Director
</TABLE>


(1) On December 15, 1998 in conjunction with the acquisition of Resources, Tim
J. Goff became CEO and President of the Company and B. Carl Price, who had
served as CEO and President during 1997 and 1996, became Vice President. Future
agreed to reimburse Resources for salaries and expenses from the effective date
of November 1, 1998.

(2) Represents amounts paid during 1998, 1997 and 1996 to Price Oil & Gas Co.,
a company owned by Mr. Price, for consulting services provided to the Company.

(3) On August 14, 1998, the Company granted to B. Carl Price a ten-year option
to purchase 350,000 shares at an exercise price of $.40625, based on the
approximate market price of the Company's common stock on the date of grant.

(4) On January 10, 1997, the Company granted to B. Carl Price five-year options
to purchase 200,000 shares, respectively, at $0.44275 per share, based on the
approximate market price of the Company's common stock on the date of grant.

                                      28

<PAGE>   29


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


                             Option Grants in 1998

<TABLE>
<CAPTION>
                               Number of              Percent of
                              Securities             Total Options
                              Underlying              Granted to            Exercise              Expiration
         Name               Options Granted        Employees in 1998         Price                   Date
         ----               ---------------        -----------------         -----                   ----

<S>                             <C>                                         <C>                  <C>
B. Carl Price                   350,000                                     $0.40625  (1)        August 14, 2008

Tim J. Goff                          --                          --               --                          --
</TABLE>


 (1)  The option was granted on August 14, 1998. The price of the Common Stock
      on the OTC Bulletin Board on August 14, 1998 was $.40625 and all options
      were vested upon issue.



AGGREGATE OPTION EXERCISES IN 1998 AND OPTION VALUES

         The following table sets forth information respecting the exercise of
options during the fiscal year ended December 31, 1998, 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      FY End  at FY End ($)
                           Shares Acquired                           Exercisable/        Exercisable/
         Name              on Exercise (#)     Value Realized ($)   Unexercisable       Unexercisable
         ----              ---------------     ------------------   -------------       -------------

<S>                                 <C>                     <C>      <C>                 <C>       
B. Carl Price.............          --                      --       587,720/--          $ 2,494/--
Tim J. Goff...............          --                      --            --/--             $ --/--
</TABLE>


EMPLOYMENT AGREEMENTS, DEFERRED SALARY AND BENEFITS

         On August 14, 1998, the Company entered into an Amended and Restated
Executive Employment Agreement with B. Carl Price. The agreement is for a
three-year term and is automatically extended for an additional year upon each
anniversary of the effective date unless terminated. The minimum annual
compensation is $125,000 subject to adjustments and bonuses. At the option of
Mr. Price, a portion of the compensation may be paid in stock of the Company,
based on the market price of the stock. See "ITEM 11. Security Ownership of
Certain Principal Stockholders and Management".

                                      29

<PAGE>   30

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 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;

                                      30

<PAGE>   31

(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.

                                      31

<PAGE>   32


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

                         ITEM 11. SECURITY OWNERSHIP OF
                 CERTAIN PRINCIPAL STOCKHOLDERS AND MANAGEMENT

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

         The following table sets forth information with respect to the
ownership of shares of Common Stock and Preferred Stock as of March 31, 1999,
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...............          8,666,666.658(2)        27.9%        33,333.33        33.3%
     Tim J. Goff....................         21,944,858.658(3)        70.2%        33,333.33(4)     33.3%
     Gary R. Petersen (5)...........                     --                               --          --
     D. Martin Phillips (5).........                     --                               --          --
     B. Carl Price..................              1,740,000(6)         7.6%               --          --
     Kimberly G. Seekely............                     --                               --          --
     Mary Elizabeth Vanderhider.....                     --                               --          --

Common Stock owned by
  All directors and executive
  Officers as a group (7 persons)...         32,351,525.306           79.77%       66,666.66        66.7%

5% STOCKHOLDERS:
     Energy Capital Investments
        Co. PLC(7)..................              2,269,886           10.2%               --          --
 
     EnCap Equity 1994, L.P.(7).....              2,424,973           10.9%               --          --
     TJG Investments, Inc...........              1,255,000(8)         5.6%               --          --
     Bargo Energy Company...........              7,078,333(9)        31.7%               --          --
     James E. Sowell................          8,666,666.684(10)       27.9%        33,333.33       33.33%
     Bargo Operating Company,
       Inc..........................              5,204,859(11)       22.8%            1,000(12)       1%
     Bargo Energy Resources,
        Ltd...........................            4,944,859(13)       21.9%               --          --
     Don Wm. Reynolds...............                753,362            3.4%(14)           --          --
</TABLE>

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

(1)      As of March 31, 1999 there were 22,357,786 shares of Common Stock and
         100,000 shares of Preferred Stock outstanding. Each share of Preferred
         Stock may be converted into 260 shares of Common Stock. All shares of
         Preferred Stock are convertible within 60 days from March 31, 1999.

                                      32

<PAGE>   33


(2)      All of the shares of Common Stock beneficially owned by Mr. Barrow
         represent shares that may be acquired within 60 days from March 31,
         1999 upon the conversion of the Preferred Stock owned by Mr. Barrow.
         Mr. Barrow's address is P.O. Box 2588, Longview, Texas  75606.

(3)      Mr. Goff shares voting and investment power with TJG Investments, Inc.
         ("TJG") with respect to 1,255,000 shares, with Bargo Energy Company
         ("Bargo Energy") with respect to 7,078,333 shares, and jointly with
         Bargo Operating Company, Inc. ("Bargo Operating") and Bargo Energy
         Resources, Ltd. ("Resources") with respect to 4,694,859 shares. In
         addition Mr. Goff shares voting and investment power jointly with
         Bargo Operating and Resources with respect to a warrant to purchase
         250,000 shares of Common Stock which may be exercised within 60 days
         from March 31, 1999. The remaining shares represent shares which may
         be acquired upon conversion of outstanding Preferred Stock within 60
         days from March 31, 1999. Mr. Goff has sole voting and investment
         power with respect to 8,406,666.67 shares of Common Stock which may be
         acquired upon conversion of Preferred Stock and shares voting and
         investment power with Bargo Operating with respect to 260,000 shares
         of Common Stock which may be acquired upon conversion of Preferred
         Stock.

(4)      Includes 1,000 shares of Preferred Stock for which Mr. Goff shares
         voting and investment power with Bargo Operating and 32,333.33 shares
         of Preferred Stock over which Mr. Goff has sole voting and investment
         power.

(5)      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.

(6)      Includes 550,000 shares of Common Stock that may be acquired pursuant
         to employee stock options which may be exercised immediately. Also
         includes 63,131 shares of Common Stock, the maximum number of shares
         which Mr. Price has the right to acquire during the 60 days following
         March 31, 1999 under an employment agreement with Future. Under this
         agreement, Mr. Price may elect to receive all or a portion of his
         salary in shares of Common Stock at a price per share of $0.33 per
         share until December 31, 1999. From January 1, 1999 and until the
         employment agreement terminates, the purchase price per share is the
         average midpoint between the bid and asked price of the Common Stock
         on the OTC Bulletin Board for the last five days of the calendar year
         prior to the year the compensation is earned. The 63,131 shares
         included in the foregoing table represents the maximum number of
         shares which Mr. Price could acquire during the 60-day period
         following March 31, 1999 if he converted all of his salary into shares
         of Common Stock.

(7)      The address of Energy Capital Investments 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.

(8)      TJG shares voting and investment power with respect to these shares
         with Tim J. Goff.

(9)      Bargo Energy shares voting and investment power with respect to these
         shares with Tim J. Goff.

(10)     All of the shares of Common Stock beneficially owned by Mr. Sowell
         represent shares that may be acquired within 60 days from March 31,
         1999 upon the conversion of the Preferred Stock owned by Mr. Sowell.
         Mr. Sowell's address is 3131 McKinney Avenue, Suite 200, Dallas, Texas
         75204.

(11)     Bargo Operating shares voting and investment power with respect to
         4,694,859 shares jointly with Tim J. Goff and Resources. In addition,
         Bargo Operating shares voting and investment power jointly with Tim J.
         Goff and Resources with respect to a warrant to purchase 250,000
         shares of Common Stock which may be exercised within 60 days from
         March 31, 1999. Bargo Operating also shares voting and investment
         power with Tim J. Goff with respect to 260,000 shares of Common Stock
         which may be acquired upon conversion of Preferred Stock within 60
         days from March 31, 1999.

(12)     Bargo Operating shares voting and investment power with respect to
         these shares with Tim J. Goff.

                                      33

<PAGE>   34

(13)     Resources shares voting and investment power jointly with Tim J. Goff
         and Bargo Operating with respect to 4,694,859 shares and a warrant to
         purchase 250,000 shares of Common Stock which may be exercised within
         60 days from March 31, 1999.

(14)     Mr. Reynolds is party to an Amended and Restated Stockholders
         Agreement between the Company, Resources, Energy PLC, EnCap and
         certain other stockholders, by virtue of which Mr. Reynolds may be
         deemed to beneficially own over 5% of the outstanding Common Stock.
         Mr. Reynolds disclaims such beneficial ownership.


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

            ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


         In November 1997, the Company entered into a five-year agreement with
Robert Price for rental of certain property used as a storage yard. The minimum
annual compensation anticipated by the agreement is $15,600. A portion of the
compensation may be paid in stock of the Company based on the market price of
the stock, as specified in the agreement. For the year ended December 31, 1998,
the Company issued to Robert Price 37,143 common shares of the Company pursuant
to the agreement.

         Price Oil & Gas Co., a company owned by B. Carl Price, provides
certain consulting services to the Company. For the year ended December 31,
1998, Price Oil & Gas Co. was paid $28,500 for such services.

         Pursuant to the August Transaction, Future renewed and extended
indebtedness owed 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 issued 1,373,097 and 1,471,782 shares of Common Stock,
respectively. The indebtedness was paid in full in connection with the December
Transaction. Gary R. 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 Resources, a
principal shareholder of the Company. The properties were on the same date
acquired by Resources 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, Resources received a fee of
$166,000 which approximated the net revenue for the month of September 1998.

         On October 15, 1998, the Company issued $4 million in subordinated
promissory notes to Bargo Energy and TJG in connection with the acquisition of
certain oil and gas properties from Bargo Energy and TJG.

         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 Bargo Energy and certain EnCap entities.

         On November 19, 1998, the Company acquired interests in oil and gas
properties located in Texas and Louisiana from Resources, a principal
shareholder of the Company, for a cash purchase price of $4,354,000. The
properties were on the same date acquired by Resources 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.

                                      34

<PAGE>   35

         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 Resources, which properties were on the same date
acquired by Resources 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 Resources, a
principal shareholder of the Company, for $2 million and 100,000 shares of
Preferred Stock. In addition, Future issued 8,333,333 shares of its common
stock to Bargo Energy and TJG in exchange for the cancellation of outstanding
debt aggregating $4 million associated with the October transaction. Bargo
Energy and TJG are affiliates of Resources. Tim J. Goff is the sole shareholder
of TJG. Mr. Goff and Thomas D. Barrow, a director of the Company, are partners
of Bargo Energy.

         As of December 31, 1998, the Company owes Resources $521,162 and Bargo
Energy $53,040 for costs incurred on its behalf.

                                      35

<PAGE>   36


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

                     ITEM 13. EXHIBITS 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, 1998                       F-1

         Independent Auditor's Report for the Years Ended December 31, 1997 and 1996             F-2

         Consolidated Balance Sheet as of December 31, 1998 and 1997                             F-3

         Consolidated Statements of Operations for the Years Ended
         December 31, 1998, 1997 and 1996                                                        F-4

         Consolidated Statement of Changes in Stockholders' Equity for the
         Period from January 1, 1996, through December 31, 1998                                  F-5

         Consolidated Statements of Cash Flows for the Years Ended
         December 31, 1998, 1997 and 1996                                                        F-6

         Notes to Consolidated Financial Statements                                              F-7
</TABLE>


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

                                 EXHIBIT LIST


<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
    Item 2                   Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
--------------- ------------------------------------------------------------------------------------------------------

     2.1                       Purchase and Sale  Agreement  dated May 1, 1998 by and among      Incorporated by
                               the Company,  Energy Capital  Investment  Company PLC, EnCap        Reference(1)
                               Equity 1994 Limited Partnership and NCI Enterprises, Inc.

     2.2                       Agreement  and Plan of Merger  dated  August 14, 1998 by and      Incorporated by
                               among the Company,  Bargo Energy  Resources,  Ltd.,  SCL-CAL        Reference(1)
                               Company and Future-Cal-Tex Corporation

     2.3                       Purchase and Sale  Agreement  between  Bargo Energy  Company      Incorporated by
                               and TJG Investment,  Inc., as Sellers,  and the Company,  as        Reference(2)
                               Buyer, dated October 15, 1998

     2.4                       Purchase and Sale Agreement between Pledger Partners,  Ltd.,      Incorporated by
                               as Seller and the Company, as Buyer, dated October 15, 1998         Reference(2)
</TABLE>

                                      36

<PAGE>   37


<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
     2.5                       Purchase  and Sale  Agreement  between NCI  Reserves,  Ltd.,      Incorporated by
                               Southwest Sulfur & Oil, Inc.,  Wayne Newkumet,  and Castello        Reference(2)
                               Enterprises,  Inc., as Sellers,  and the Company,  as Buyer,
                               dated October 15, 1998

     2.6                       Purchase and Sale Agreement  between NCI  Properties,  Ltd.,      Incorporated by
                               as Seller, and the Company, as Buyer, dated October 15, 1998        Reference(2)

     2.7                       Purchase and Sale Agreement  between Bargo Energy Resources,      Incorporated by
                               Ltd., as Seller,  and the Company,  as Buyer,  dated October        Reference(2)
                               15, 1998

     2.8                       Purchase and Sale Agreement  between Bargo Energy Resources,      Incorporated by
                               Ltd., as Seller,  and the Company,  as Buyer, dated November        Reference(3)
                               13, 1998

     2.9                       Asset Purchase  Agreement and Plan of  Reorganization  dated      Incorporated by
                               December  15, 1998 by and among the  Company,  Bargo  Energy        Reference(4)
                               Resources,  Ltd.,  Bargo Energy Company and TJG Investments,
                               Inc

     2.10                      Purchase and Sale Agreement  dated November 25, 1997, by and      Incorporated by
                               among the Company,  Energy Capital  Investment  Company PLC,        Reference(6)
                               EnCap Equity 1994 Limited Partnership,  and Gecko Booty 1994
                               I Limited Partnership

    Item 3                                      Articles of Incorporation and Bylaws
--------------- ------------------------------------------------------------------------------------------------------

     3.11                      Articles of Restatement of the Articles of Incorporation          Incorporated by
                                                                                                   Reference(5)

     3.2                       Bylaws                                                            Incorporated by
                                                                                                   Reference(5)

    Item 4                    Instruments Defining the Rights of Security Holders, Including Indentures
--------------- ------------------------------------------------------------------------------------------------------

     4.1                       Articles of Restatement of the Articles of Incorporation          Incorporated by
                                                                                                   Reference(5)

     4.2                       Bylaws                                                            Incorporated by
                                                                                                   Reference(5)

     4.3                       Agreement  dated August 14, 1998 by and among B. Carl Price,      Incorporated by
                               Bargo Energy  Resources,  Ltd.,  Energy  Capital  Investment        Reference(1)
                               Company PLC, and EnCap Equity 1994 Limited Partnership

     4.4                       Certificate of Designation of Convertible  Preferred  Stock,      Incorporated by
                               Series A                                                            Reference(4)
</TABLE>

                                      37

<PAGE>   38


<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
   Item 10                                               Material Contracts
--------------- ------------------------------------------------------------------------------------------------------

     10.1                      Promissory  Note dated November 25, 1997 from the Company to      Incorporated by
                               Gecko booty 1994 I Limited Partnership                              Reference(6)

     10.2                      Promissory  Note dated  November 25, 1997,  from the Company      Incorporated by
                               to Energy Capital Investment Company, PLC                           Reference(6)

     10.3                      Amendment  to Renewal  Promissory  Note dated May 1, 1998 by      Incorporated by
                               the Company to Energy Capital  Investment  Company PLC dated        Reference(1)
                               August 14, 1998

     10.4                      Renewal  Promissory  Note of the  Company  payable to Energy      Incorporated by
                               Capital Investment Company PLC dated October 15, 1998               Reference(2)

     10.5                      Promissory  Note dated  November 25, 1997,  from the Company      Incorporated by
                               to EnCap Equity 1994 Limited Partnership                            Reference(6)

     10.6                      Amendment  to Renewal  Promissory  Note dated May 1, 1998 by      Incorporated by
                               the Company to EnCap Equity 1994 Limited  Partnership  dated        Reference(1)
                               August 14, 1998

     10.7                      Renewal  Promissory  Note of the  Company  payable  to EnCap      Incorporated by
                               Equity 1994 Limited Partnership dated October 15, 1998              Reference(2)

     10.8                      Note  Restructuring  Agreement  by and  among  the  Company,      Incorporated by
                               Energy  Capital  Investment  Company PLC,  EnCap Equity 1994        Reference(1)
                               Limited   Partnership   and  Gecko   Booty  1994  I  Limited
                               Partnership dated August 14, 1998

     10.9                      Credit  Agreement  between  the  Company and Bank of America      Incorporated by
                               National Trust and Savings Association dated August 14, 1998        Reference(1)

    10.10                      Amendment No. 1 to Credit Agreement  between Bank of America      Incorporated by
                               National  Trust and  Savings  Association  and the  Company,        Reference(3)
                               dated November 16, 1998

    10.11                      Amended and Restated  Credit  Agreement  between the Company      Incorporated by
                               and Bank of America  National Trust and Savings  Association        Reference(4)
                               dated December 4, 1998

    10.12                      Amended and Restated Secured  Promissory Note of the Company      Incorporated by
                               payable  to Bank  of  America  National  Trust  and  Savings        Reference(3)
                               Association dated November 18, 1998
</TABLE>

                                      38

<PAGE>   39

<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
    10.12                      Master  Subordination  Agreement  by  and  between  Bank  of      Incorporated by
                               America  National Trust and Savings  Association  and Energy        Reference(1)
                               Capital   Investment  Company  PLC  and  EnCap  Equity  1994
                               Limited Partnership dated August 14, 1998

    10.13                      First  Amendment  to Master  Subordination  Agreement by and      Incorporated by
                               among   Bank  of   America   National   Trust  and   Savings        Reference(2)
                               Association  and  Energy  Capital  Investment  Company  PLC,
                               EnCap   Equity  1994  Limited   Partnership,   Bargo  Energy
                               Company, and TJG Investments, Inc., dated October 15, 1998

    10.14                      Subordination   Agreement  by  and  among  Bank  of  America      Incorporated by
                               National  Trust and Savings  Association  and Energy Capital        Reference(2)
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited
                               Partnership,  Bargo  Energy  Company,  and TJG  Investments,
                               Inc., dated October 15, 1998

    10.15                      Intercreditor  and Collateral  Agency Agreement by and among      Incorporated by
                               Energy  Capital  Investment  Company PLC,  EnCap Equity 1994        Reference(2)
                               Limited   Partnership,   Bargo  Energy   Company,   and  TJG
                               Investments, Inc., dated October 15, 1998

    10.16                      Promissory  Note of the  Company  payable  to  Bargo  Energy      Incorporated by
                               Company in the principal  amount of $3,397,600 dated October        Reference(2)
                               15, 1998

    10.17                      Promissory Note of the Company  payable to TJG  Investments,      Incorporated by
                               Inc. in the principal  amount of $602,400  dated October 15,        Reference(2)
                               1998

    10.18                      Security  Agreement  dated May 1, 1998  between  the Company      Incorporated by
                               and Energy  Capital  Investment  Company  PLC,  EnCap Equity        Reference(1)
                               1994  Limited  Partnership,  and Gecko  Booty 1994 I Limited
                               Partnership

    10.19                      First  Amendment  to  Security   Agreement   between  Energy      Incorporated by
                               Capital  Investment  Company PLC,  EnCap Equity 1994 Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,   as  secured   parties,   and   NCI-Shawnee   Limited
                               Partnership, as debtor, dated October 15, 1998

    10.20                      First  Amendment  to  Security   Agreement   between  Energy      Incorporated by
                               Capital  Investment  Company PLC,  EnCap Equity 1994 Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc., as secured  parties,  and Future Cal-Tex  Corporation,
                               as debtor, dated October 15, 1998
</TABLE>

                                      39

<PAGE>   40

<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
    10.21                      Second  Amendment  to  Security   Agreement  between  Energy      Incorporated by
                               Capital  Investment  Company PLC,  EnCap Equity 1994 Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as secured  parties,  and the Company,  Future Energy
                               Corporation,    Future   Petroleum    Corporation,    Future
                               Acquisitions  1995,  Ltd., and BMC Development No. 1 Limited
                               Partnership, as debtors, dated October 15, 1998

    10.22                      First  Amendment  to  Security  Agreement  between  Bank  of      Incorporated by
                               America National Trust and Savings  Association,  as lender,        Reference(3)
                               and each of the Company,  Future Energy Corporation,  Future
                               Petroleum  Corporation,   Future  CAL-TEX  Corporation,  BMC
                               Development No. 1 Limited  Partnership,  Future  Acquisition
                               1995,  Ltd.,  and  NCI-Shawnee   Limited   Partnership,   as
                               debtors, dated November 18, 1998

    10.23                      Guaranty  dated  April 30,  1998 by the  Company in favor of      Incorporated by
                               Energy  Capital  Investment  Company PLC,  EnCap Equity 1994        Reference(1)
                               Limited   Partnership,   and  Gecko  Booty  1994  I  Limited
                               Partnership

    10.24                      Second   Amendment  to  Guaranty   between   Energy  Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as sellers,  and Future  Energy  Corporation,  Future
                               Petroleum   Corporation,   BMC  Development  No.  1  Limited
                               Partnership,   and  Future   Acquisition   1995,   Ltd.,  as
                               guarantors, dated October 15, 1998

    10.25                      First   Amendment  to  Guaranty   between   Energy   Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc., as sellers,  and NCI-Shawnee Limited  Partnership,  as
                               guarantor, dated October 15, 1998

    10.26                      First   Amendment  to  Guaranty   between   Energy   Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as  sellers  and  Future  Cal-Tex   Corporation,   as
                               guarantor, dated October 15, 1998
</TABLE>

                                      40

<PAGE>   41

<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
    10.27                      First   Amendment  to  Guaranty   between  Bank  of  America      Incorporated by
                               National Trust and Savings Association,  as lender, and each        Reference(3)
                               of the Company, Future Energy Corporation,  Future Petroleum
                               Corporation,  Future CAL-TEX  Corporation,  BMC  Development
                               No. 1 Limited  Partnership,  Future  Acquisition 1995, Ltd.,
                               and NCI-Shawnee Limited  Partnership,  as guarantors,  dated
                               November 18, 1998

    10.28                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Bargo Energy Resources,  Ltd. dated        Reference(1)
                               August 14, 1998

    10.29                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Energy Capital  Investment  Company        Reference(1)
                               PLC dated August 14, 1998

    10.30                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings   Association   and  EnCap   Equity   1994   Limited        Reference(1)
                               Partnership dated August 14, 1998

    10.31                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and B. Car Price dated August 14, 1998          Reference(1)

    10.32                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association  and Don Wm.  Reynolds dated August 14,        Reference(1)
                               1998

    10.33                      Second Amendment to Pledge Agreement  between Energy Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as secured  parties,  and the Company,  Future Energy
                               Corporation,  and Future Petroleum Corporation,  as debtors,
                               dated October 15, 1998

    10.34                      First Amendment to Pledge Agreement  between Bank of America      Incorporated by
                               National  Trust and Savings  Association,  as secured party,        Reference(3)
                               and each of the Company,  Future Energy Corporation,  Future
                               Petroleum  Corporation,  EnCap  Equity  1994,  Ltd.,  Energy
                               Capital  Investment  Company PLC,  Bargo  Energy  Resources,
                               Ltd, B. Carl Price, and Don Wm. Reynolds, as debtors,  dated
                               November 18, 1998

    10.35                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Bargo Energy Company dated December        Reference(4)
                               15, 1998
</TABLE>

                                      41

<PAGE>   42

<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
    10.36                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings   Association  and  TJG   Investments,   Inc.  dated        Reference(4)
                               December 15, 1998

    10.37                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and James Sowell dated December 15, 1998        Reference(4)

    10.38                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Thomas D. Barrow dated December 15,        Reference(4)
                               1998

    10.39                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and Tim J. Goff dated December 15, 1998         Reference(4)

    10.40                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and Bargo Operating Company,  Inc. dated        Reference(4)
                               December 15, 1998

    10.41                      Registration  Rights  Agreement  among the Company and Bargo      Incorporated by
                               Energy Resources, Ltd. dated August 14, 1998                        Reference(1)

    10.42                      First Amendment to Registration  Rights  Agreement among the      Incorporated by
                               Company,   Bargo  Energy   Resources,   Ltd.,  Bargo  Energy        Reference(4)
                               Company,   TJG   Investments,   Inc.   and   certain   other
                               shareholders dated December 15, 1998

    10.43                      Registration  Rights  Agreement  dated  November  25,  1997,      Incorporated by
                               among the Company,  Energy Capital  Investment  Company PLC,        Reference(6)
                               and EnCap Equity 1994 Limited Partnership

    10.44                      Registration  Rights  Agreement  among the  Company,  Energy      Incorporated by
                               Capital   Investment  Company  PLC  and  EnCap  Equity  1994        Reference(1)
                               Limited Partnership dated August 14, 1998

    10.45                      First Amendment to Registration  Rights  Agreement among the      Incorporated by
                               Company,  Energy  Capital  Investment  Company PLC and EnCap        Reference(4)
                               Equity 1994 Limited Partnership dated December 15, 1998

    10.46                      Registration  Rights  Agreement  among the Company,  B. Carl      Incorporated by
                               Price and certain other shareholders dated August 14, 1998          Reference(1)

    10.47                      First Amendment to Registration  Rights  Agreement among the      Incorporated by
                               Company,  B. Carl Price and certain other shareholders dated        Reference(4)
                               December 15, 1998
</TABLE>

                                      42

<PAGE>   43

<TABLE>
<CAPTION>
Exhibit                                              Title of Document                                Location
Number                                               -----------------                                --------
------

<S>                          <C>                                                                 <C>
    10.48                      Stock  Purchase  Warrant  by the  Company  to  Bargo  Energy      Incorporated by
                               Resources, Ltd. dated August 14, 1998                               Reference(1)

    10.49                      Voting  Agreement  dated  November  25,  1997  among B. Carl      Incorporated by
                               Price, Don Wm. Reynolds,  Energy Capital  Investment Company        Reference(6)
                               PLC, and EnCap Equity 1994 Limited Partnership

    10.50                      Shareholders'  Agreement  by and  among the  Company,  Bargo      Incorporated by
                               Energy Resources,  Ltd., Energy Capital  Investment  Company        Reference(1)
                               PLC,  EnCap Equity 1994 Limited  Partnership,  B. Carl Price
                               and Don Wm. Reynolds dated August 14, 1998

    10.51                      Amended and  Restated  Shareholders'  Agreement by and among      Incorporated by
                               the Company,  Bargo Energy  Resources,  Ltd., Energy Capital        Reference(4)
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited
                               Partnership,  B. Carl Price, Don Wm. Reynolds,  Bargo Energy
                               Company,   TJG   Investments,   Inc.   and   certain   other
                               shareholders dated December 15, 1998

    10.52                      Amended and Restated  Employment  Agreement of B. Carl Price      Incorporated by
                               dated August 14, 1998                                               Reference(1)

    10.53                      Agreement  between the Company and Don Wm. Reynolds dated as      Incorporated by
                               of November 18, 1997                                                Reference(1)

    10.54                      Agreement  between the Company and Robert  Price dated as of      Incorporated by
                               November 18, 1997                                                   Reference(1)

    10.55                      1993 Employee Incentive Plan                                      Incorporated by
                                                                                                   Reference(5)

    10.56                      Renewal Promissory Note of the Company payable to Energy             This Filing
                               Capital Investment Company PLC dated May 1, 1998

    10.57                      Renewal Promissory Note of the Company payable to EnCap              This Filing
                               Equity 1994 Limited Partnership dated May 1, 1998

    10.58                      Security Agreement between Energy Capital Investment                 This Filing
                               Company PLC and EnCap Equity 1994 Limited Partnership,
                               as secured parties, and the Company, Future Energy
                               Corporation, Future Petroleum Corporation, Future Acquisitions
                               1995, Ltd., and BMC Development No. 1 Limited Partnership,
                               as debtors, dated November 25, 1997

    10.59                      First Amendment to Security Agreement between Energy Capital         This Filing
                               Investment Company PLC and EnCap Equity 1994 Limited Partnership,
                               as secured parties, and the Company, Future Energy Corporation,
                               Future Petroleum Corporation, Future Acquisitions 1995, Ltd., and 
                               BMC Development No. 1 Limited Partnership, as debtors, dated
                               May 1, 1998

    10.60                      Guaranty between Energy Capital Investment Company PLC, EnCap        This Filing
                               Equity 1994 Limited Partnership, and Gecko Booty 1994 I Limited
                               Partnership, as sellers, and Future Energy Corporation, Future 
                               Petroleum Corporation, BMC Development No. 1 Limited Partnership, 
                               and Future Acquisition 1995, Ltd., as guarantors, dated November
                               25, 1997

    10.61                      Pledge Agreement between Energy Capital Investment Company PLC,      This Filing
                               EnCap Equity 1994 Limited Partnership, and Gecko Booty 1994 I 
                               Limited Partnership, as secured parties, and the Company, Future
                               Energy Corporation, and Future Petroleum Corporation, as debtors,
                               dated November 25, 1997
                                           
   Item 21                                                  Subsidiaries
----------------------------------------------------------------------------------------------------------------------
    21.1                       Schedule of Subsidiaries                                             This Filing
 
    27.1                       Financial Data Schedule                                              This Filing

</TABLE>


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

(1)      Incorporated herein by reference from the Company's Quarterly Report
         on Form 10-QSB for the fiscal quarter ended June 30, 1998, filed with
         the Securities Exchange and Commission on August 20, 1998. (file no.
         000-08609)

(2)      Incorporated herein by reference from the Company's Current report on
         Form 8-K filed with the Securities and Exchange Commission on October
         30, 1998. (file no. 000-08609)

                                      43

<PAGE>   44

(3)      Incorporated herein by reference from the Company's Current Report on
         Form 8-K filed with the Securities and Exchange Commission on December
         4, 1998. (file no. 000-08609)

(4)      Incorporated herein by reference from the Company's Current Report on
         Form 8-K filed with the Securities and Exchange Commission on December
         30, 1998. (file no. 000-08609)

(5)      Incorporated herein by reference from the Company's Annual Report on
         Form 10-K for the fiscal year ended December 31, 1993, filed with the
         Securities and Exchange Commission on May 20, 1994. (file no.
         000-08609)

(6)      Incorporated herein by reference from the Company's Current Report on
         Form 8-K filed with the Securities and Exchange Commission on December
         10, 1997.

(b)      REPORTS ON FORM 8-K.

         During the last quarter of the fiscal year ended December 31, 1998,
         the Company filed reports on Form 8-K as follows:


<TABLE>
<CAPTION>
              DATE OF EVENT REPORTED                                       ITEM REPORTED
------------------------------------------------------     --------------------------------------------------

<S>                                                        <C>                                     
December 17, 1998                                          Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements

December 15, 1998                                          Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements

November 19, 1998                                          Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements

October 30, 1998                                           Item 7.  Financial Statements

October 15, 1998                                           Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements
</TABLE>

                                      44

<PAGE>   45


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

                                   SIGNATURES

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

     Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, Registrant has duly caused this amendment to its annual report on form
10-KSB to be signed on its behalf by the undersigned; thereunto duly
authorized, this 19th day of April, 1999.

                                       FUTURE PETROLEUM CORPORATION
                                       (Registrant)


                                       By /s/ Tim J. Goff
                                          --------------------------------------
                                          Tim J. Goff, 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 19th day of April, 1999.



         /s/ Tim J. Goff                                      
-----------------------------------------------------------------
Tim J. Goff, President and Director (principal executive officer)




         /s/ B. Carl Price                                    
-----------------------------------------------------------------
B. Carl Price, Vice - President and Director



         /s/ Mary Elizabeth Vanderhider
-----------------------------------------------------------------
Mary Elizabeth Vanderhider, Corporate Secretary, Director



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



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



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



         /s/ Kimberly G. Seekely                              
-----------------------------------------------------------------
Kimberly G. Seekely, Director (principal accounting officer)



DATE FILED: APRIL 19, 1999                                  SEC FILE NO. 0-8609
------------------------------------------------------------------------------

                                      45

<PAGE>   46


                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholders and Board of Directors of
Future Petroleum Corporation

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity present fairly, in all material respects, the financial
position of Future Petroleum Corporation and its subsidiaries (the Company) at
December 31, 1998 and the results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles. 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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards 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 audit provides a reasonable basis
for the opinion expressed above.



PRICEWATERHOUSECOOPERS LLP

Houston, Texas
April 14, 1999

                                      F-1

<PAGE>   47

<PAGE>   48

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Future Petroleum Corporation
Dallas, Texas

We have audited the accompanying consolidated balance sheet of Future Petroleum
Corporation as of December 31, 1997, and the related consolidated statements of 
operations, changes in stockholders' equity and cash flows for the years ended 
December 31, 1997 and 1996. These financial statements are the responsibility 
of the Company's management. Our responsibility is to express an opinion on 
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the consolidated financial position of Future Petroleum 
Corporation as of December 31, 1997, and the results of its consolidated 
operations and cash flows for the years ended December 31, 1997 and 1996, in 
conformity with generally accepted accounting principles.

Hein+Associates LLP

March 20, 1998
Dallas, Texas

                                      F-2
<PAGE>   49

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    1998          1997
                                                 -----------   -----------
<S>                                              <C>           <C>          
                     ASSETS

Current assets:                                 
 Cash and cash equivalents                       $ 1,241,000   $   293,000  
 Trade accounts receivable                         2,636,000       278,000  
 Due from affiliates                                   8,000                
                                                 -----------   -----------  
    Total current assets                           3,885,000       571,000  
                                                 -----------   -----------  

Property and equipment:                           
 Oil and gas properties, full cost method         45,992,000    12,134,000
 Other                                               648,000        44,000
                                                 -----------   -----------
    Total property and equipment                  46,640,000    12,178,000
Less - accumulated depletion, depreciation
 and amortization                                 (1,566,000)     (330,000)
                                                 -----------   -----------
    Net property and equipment                    45,074,000    11,848,000
                                                 -----------   -----------
Other assets:
 Goodwill, net                                     1,984,000
 Loan costs, net of accumulated amortization         
   of $25,000                                        965,000              
 Note receivable                                                    93,000
 Lease operating rights                                             96,000
 Mining properties held for sale                      40,000        40,000
 Other                                                              31,000
                                                 -----------   -----------
    Total other assets                             2,989,000       260,000
                                                 -----------   -----------
    Total assets                                 $51,948,000   $12,679,000
                                                 ===========   ===========

      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Current portion of long-term debt               $ 8,952,000   $   504,000
 Trade accounts parable                            1,457,000       233,000   
 Accrued oil and gas proceeds payable                514,000        59,000   
 Accrued interest payable                            430,000
 Advance from related party                          566,000         6,000   
 Deferred gain                                                      40,000    
                                                 -----------   -----------
Long-term debt, less current potion               11,919,000       842,000  
                                                 -----------   -----------
Deferred tax liability                            30,907,000     6,133,000  
                                                 -----------   -----------
Commitments and contingencies (Note 9)             1,011,000     1,298,000  
                                                 -----------   -----------
Stockholders' equity     
 Preferred stock, $.01 par value, 200,000 shares               
  authorized; 100,000 and 0 shares issued and
   outstanding at December 31, 1998 and 1997,
   respectively                                        1,000
 Common stock, $.01 par value; 30,000,000 shares
  authorized; 22,320,066 and 5,678,779 shares
    issued and outstanding                           223,000        57,000
 Additional paid-in capital                        6,543,000     4,413,000
 Retained earnings (deficit)                       1,344,000       (64,000)
                                                 -----------   -----------
     Total stockholders' equity                    8,111,000     4,406,000
                                                 -----------   -----------
     Total liabilities and stockholders' equity  $51,948,000   $12,679,000
                                                 ===========   ===========
</TABLE>


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

                                      F-3
<PAGE>   50

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    1998            1997            1996
                                                ------------    ------------    ------------

<S>                                             <C>             <C>             <C>         
Revenues:
  Oil and gas sales                             $  3,663,000    $    596,000    $    224,000
  Well operation fees                                 16,000         176,000         154,000
                                                ------------    ------------    ------------
      Total revenues                               3,679,000         772,000         378,000
                                                ------------    ------------    ------------
Costs and expenses:
  Lease operations and production taxes            1,826,000         419,000         187,000
  General and administrative                         783,000         154,000         120,000
  Depletion, depreciation and amortization         1,316,000         191,000          99,000
                                                ------------    ------------    ------------
      Total expenses                               3,925,000         764,000         406,000
                                                ------------    ------------    ------------
Other income and expense:
  Interest expense                                 1,238,000          69,000           6,000
  Gain on sale of assets                                                            (102,000)
  Interest income and other                          (19,000)        (42,000)        (83,000)
                                                ------------    ------------    ------------
      Total other income and expense               1,219,000          27,000        (179,000)
                                                ------------    ------------    ------------
Income (loss) before income taxes and
 extraordinary item                               (1,465,000)        (19,000)        151,000

Income tax benefit (expense)                         287,000           7,000         (32,000)
                                                ------------    ------------    ------------

Income (loss) before extraordinary item           (1,178,000)        (12,000)        119,000

Extraordinary gain on conversion of debt           2,586,000
                                                ------------    ------------    ------------

Net income (loss)                               $  1,408,000    $    (12,000)   $    119,000
                                                ============    ============    ============

Net income (loss) per common share -
  basic and diluted                             $       0.14    $         --    $        .03 
                                                ============    ============    ============

Weighted average common shares
  outstanding                                      9,924,000       4,280,000       3,472,000    
</TABLE>


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

                                      F-4

<PAGE>   51

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                       ADDITIONAL                          TOTAL  
                                              PREFERRED STOCK         COMMON STOCK       PAID-IN        RETAINED       STOCKHOLDERS'
                                            SHARES      AMOUNT     SHARES     AMOUNT    CAPITAL     EARNINGS (DEFICIT)     EQUITY
                                            ------      ------   ----------  --------  ----------   -----------------    ----------
<S>                                          <C>        <C>       <C>        <C>       <C>          <C>                  <C>       
Balances, December 31, 1995                      --     $   --    3,426,903  $ 35,000  $1,016,000   $        (171,000)   $  880,000

Shares issued for options exercised                                  59,876                15,000                            15,000 
Net income                                                                                                    119,000       119,000
                                            -------      -----   ----------  --------  ----------   -----------------    ----------

Balances, December 31, 1996                      --     $   --    3,486,779    35,000   1,031,000             (52,000)    1,014,000

Shares issued for oil and gas properties                          1,980,000    20,000   3,349,000                         3,369,000
Shares issued for options exercised                                 200,000     2,000      28,000                            30,000
Shares issued for services                                           12,000                 5,000                             5,000
Net loss                                                                                                      (12,000)      (12,000)
                                            -------      -----   ----------  --------  ----------   -----------------    ----------

Balances, December 31, 1997                      --     $   --    5,678,779    57,000   4,413,000             (64,000)    4,406,000

Shares issued for oil and gas properties    100,000      1,000    5,163,192    52,000      21,000                            74,000
Shares issued for fixed assets                                    2,414,776    24,000     593,000                           617,000
Shares issued for retirement of debt                              8,495,683    85,000   1,312,000                         1,397,000
Shares for options exercised                                        110,000     1,000      57,000                            58,000
Shares issued for payment of interest                               267,400     2,000      66,000                            68,000
Shares issued for services                                          190,236     2,000      81,000                            83,000
Net income                                                                                                  1,408,000     1,408,000
                                            -------      -----   ----------  --------  ----------   -----------------    ----------
Balances, December 31, 1998                 100,000      1,000   22,320,066  $223,000  $6,543,000   $       1,344,000    $8,111,000
                                            =======      =====   ==========  ========  ==========   =================    ==========
</TABLE>

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

                                      F-5

<PAGE>   52

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                          1998                    1997                    1996
                                                     -------------            ------------            -----------

<S>                                                  <C>                      <C>                     <C>        
Cash flows from operating activities:
 Net income (loss)                                   $   1,408,000            $    (12,000)           $   119,000
 Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
    Depletion, depreciation and amortization             1,316,000                 191,000                 99,000
    Reserve for bad debts                                                           53,000
    Gain on sale of assets                                                                               (102,000)
    Extraordinary gain on conversion of debt            (2,586,000)
    Amortization of organizational costs                    45,000
    Stock issued for services                               83,000                   5,000
    Stock issued to pay interest expense                    68,000
    Deferred income taxes                                 (287,000)                 (7,000)                32,000
    Change in working capital items:
      Increase in accounts receivable                   (2,358,000)                (31,000)              (122,000)
      Increase (decrease) in accounts payable
        and accrued liabilities                          2,101,000                 (28,000)                98,000
      Increase (decrease) in due to affiliates             560,000                 (20,000)                41,000
      Other                                                                          3,000                  3,000
                                                     -------------            ------------            -----------
        Net cash provided by (used in) operating 
         activities                                        350,000                 154,000                168,000
                                                     -------------            ------------            -----------
Cash flows from investing activities:
 Acquisition of oil and gas properties                 (29,857,000)
 Acquisition of assets                                  (2,000,000)
 Acquisition of property and equipment                                            (182,000)              (166,000)
 Decrease in notes receivable and deferred gain             53,000
 Proceeds from sale of mining properties and
  collection of associated notes receivable                                         12,000                244,000
 Cash in partnerships upon acquisition                                             186,000
 Decrease in lease operating rights                         96,000
 Other                                                      16,000                                         27,000
                                                     -------------            ------------            -----------
        Net cash provided by (used in) investing
         activities                                    (31,692,000)                 16,000                105,000
                                                     -------------            ------------            -----------
Cash flows from financing activities:
 Proceeds from issuance of debt                         44,505,000                                         28,000
 Repayment of debt                                     (11,283,000)                (21,000)              (153,000)
 Debt issue costs                                         (990,000)
 Proceeds from exercise of stock options                    58,000                  30,000
 Change in overdrafts payable                                                                             (34,000)
                                                     -------------            ------------            -----------
        Net cash provided by (used in) financing
         activities                                     32,290,000                   9,000               (159,000)
                                                     -------------            ------------            -----------
Net increase (decrease) in cash                            948,000                 179,000                114,000
Cash and cash equivalents, beginning of year               293,000                 114,000
                                                     -------------            ------------            -----------

Cash and cash equivalents, end of year               $   1,241,000            $    293,000            $   114,000
                                                     =============            ============            ===========
</TABLE>

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

                                      F-6
<PAGE>   53

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 1998        1997        1996
                                               --------    --------    --------
<S>                                            <C>         <C>         <C>     
Supplemental Information:     
    Cash paid during the year for interest     $742,000    $ 69,000    $  6,000
                                               --------    --------    --------
</TABLE>

Noncash investing and financing activities - In 1997, the Company acquired
interest in oil and gas partnerships and oil and gas properties for notes
payable of $6,600,000 and common stock valued at $3,369,000. In 1996, a related
party exercised options for 59,876 shares of common stock in exchange for the
payment of a liability in the amount of $15,000. In 1996, the Company's oil and
gas properties increased $190,000 based on its share of Partnership property
additions funded by the limited partner.

In 1998, the Company acquired interests in oil and gas properties and other
assets for notes payable of $4,000,000, and preferred and common stock valued
at $691,000.

In 1998, the Company redeemed notes payable in the amount of $5,585,000 in
exchange for 11,178,192 shares of common stock.

                                      F-7

<PAGE>   54

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

1.       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         COMPANY OPERATIONS

         Future Petroleum Corporation (the Company or FPC) 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, 1998 and 1997, FPC and its subsidiaries held 100% of the
         ownership interests of the Partnerships (Note 4). Intercompany
         accounts and transactions are eliminated in consolidation.

         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.

         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.  

                                      F-8

<PAGE>   55

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         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 $4.23, $4.44 and $8.37 for
         the years ended December 31, 1998, 1997 and 1996.

         MINING PROPERTIES HELD FOR SALE

         Mining properties held for sale are recorded at the lower of cost or
         estimated net realizable value.

         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

         The Company accounts for its income taxes in accordance with Statement
         of Financial Accounting Standards (SFAS) No. 109, "Accounting for
         Income Taxes". SFAS 109 requires that deferred income tax be 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. The Company's common stock
         equivalents, which consisted of stock options and warrants, were
         antidilutive in 1998, 1997 and 1996.

         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. Actual
         results could differ from those estimates. 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. It is at least reasonably possible those
         estimates could be revised in the near term and those revisions could
         be material.

         STOCK-BASED COMPENSATION

         In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
         Compensation", which requires recognition of the value of


                                      F-9
<PAGE>   56
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         stock options and warrants granted based on an option pricing model.
         However, as permitted by SFAS No. 123, the Company continues to
         account 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.

         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 and payables) approximate fair value due to the
         short maturities of these investments.

         ENVIRONMENTAL MATTERS

         Environmental expenditures that relate to current operations are
         expensed or capitalized as appropriate. Expenditures that relate to an
         existing condition caused by past operations, and which do not
         contribute to current or future revenue generation, are expensed.
         Liabilities are recorded when environmental assessments and/or
         remedial efforts are probable, and the costs can be reasonably
         estimated. Generally, the timing of the accruals coincides with the
         completion of a feasibility study of the Company's commitment to a
         formal plan of action.

         RECLASSIFICATIONS

         Certain prior year balances have been reclassified to conform with the
         current year presentation.

                                     F-10
<PAGE>   57
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

2.       RELATED-PARTY TRANSACTIONS

         As of December 31, 1998, the Company owes Bargo Energy Resources (BER)
         $521,000 and Bargo Energy Company (BEC) $53,000 for costs incurred on
         its behalf. BER and BEC have a combined 33 2/3% 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.
 
         Included in well operation fees in 1997 and 1996 is $163,000 and
         $134,000, respectively, earned from operating the wells of FAQ (Note
         3) prior to the Company's acquisition of the other interests in FAQ.

         At December 31, 1997, the Company owed a company owned by the
         president of the Company approximately $27,000 for accrued consulting
         fees and operating advances.

         See Note 3 for additional related party disclosures.

3.       INVESTMENTS IN PARTNERSHIP AND OIL AND GAS PROPERTY ACQUISITIONS

         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 FPC 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 FPC common stock and the issuance of $660,000
         in promissory notes (Note 4).

         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, FPC paid
         approximately $5.8 million cash, issued 4,695,869 shares of FPC common
         stock and a warrant to purchase 250,000 shares of FPC common stock, as
         further described in Note 5.

         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 FPC common stock
         and $375,000 cash, before purchase price adjustments.


                                     F-11
<PAGE>   58
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         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 FPC 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 cash.

         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 4. TJG is owned 100% by Tim J. Goff who is
         the Chairman of the Board and Chief Executive Officer of FPC.

         On October 15, 1998, FAQ acquired certain interests, effective
         September 1, 1998, in the Buna Field located in Jasper County, Texas.
         These interests were acquired from Pledger Partners, Ltd. (a Texas
         limited partnership owned by BEC and certain EnCap entities) for
         $1,000,000 cash, before purchase price adjustments.

         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 cash.

         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 cash.



                                     F-12
<PAGE>   59
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         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 cash.

         In December 1995, the Company contributed a substantial portion of its
         oil and gas properties to Future Acquisition 1995, Ltd. (FAQ), a
         limited partnership in which the Company is the general partner. As a
         result of entering into the partnership, the Company became the
         operator of a majority of the partnership properties. The Company's
         investment was recorded at book value and was allocated to oil and gas
         properties and lease operating rights based on the relative fair
         values of those assets. The limited partners contributed cash, which
         was used to acquire and develop oil and gas properties. Through
         October 1997, revenues and costs and expenses were generally allocated
         either 15% and 85% or 3% and 97% to the Company and the limited
         partners, respectively, depending on the property. Certain acquisition
         and development costs were allocated 100% to the limited partners. The
         Company accounted for its investment in FAQ as a pro rata
         consolidation prior to the Company's acquisition of the remaining
         interest in FAQ, which is described below.

         The carrying value of the operating rights were amortized over the
         estimated life of the partnership's oil and gas reserves. The
         amortization was $10,000 and $22,000 in 1997 and 1996, respectively,
         and is included in depletion, depreciation and amortization in the
         accompanying statement of operations.

         In November 1997, the Company purchased all the limited partners'
         interest in FAQ, 100% of the BMC Development No. 1, Ltd. Partnership
         (BMC) and all of the assets of a third partnership for a total of
         $6,600,000 in notes payable and 1,575,000 shares of the Company's
         common stock. The limited partners of FAQ were also the principal
         owners of the interests in BMC and the other partnership. The
         acquisition was accounted for as a purchase and the operations of the
         acquired assets are included with those of the Company beginning in
         November 1997. The stock was recorded at $3,131,000 based on the
         estimated fair market values of the net assets acquired. The fair
         market values were estimated primarily by reference to appraisals that
         were obtained for the oil and gas properties. In connection with the
         acquisition of FAQ, the Company acquired certain of the property
         interests to which it had previously assigned value to the associated
         lease operating rights. The estimated value of the loss of such
         third-party operating rights was considered to be part of the
         consideration paid for the net assets acquired. The amount of $267,000
         was thus transferred from lease operating rights to oil and gas
         properties in the recording of the acquisition.


                                     F-13
<PAGE>   60
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         The following unaudited pro forma information is presented as if the
         asset acquisitions and the interests in the partnerships had been
         acquired at the beginning of the respective periods:

<TABLE>
<CAPTION>
                                                1998           1997
                                            -----------    -----------
<S>                                         <C>            <C>
         Revenues                           $13,848,000    $27,092,000
         Net loss (income)                     (961,000)     5,759,000 
         Net loss (income) per share        $     (0.07)   $      0.42
</TABLE>

4.       LONG-TERM DEBT

         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 3). 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 FPC 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.


                                     F-14
<PAGE>   61
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         BEC/TJG 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 3). 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 FPC
         common stock to BEC and 1,255,000 shares of FPC common stock to TJG.
         Additionally, BEC 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
         non-taxable extraordinary gain.

         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 $50 million on December
         4, 1998. The line of credit is comprised of two tranches, Tranche A
         and Tranche B.

         At December 31, 1998, the Tranche A loan commitment amount was $38
         million, of which $30.9 million had been borrowed. Tranche A is a
         revolving line of credit, with interest payable quarterly and will
         convert to a four-year term loan on December 4, 1999. The term loan
         will then be payable in 16 equal quarterly principal installments. The
         Company has a choice of two different interest rates under the Tranche
         A loan, the Base Rate or the LIBOR Rate. The debt bears interest under
         the Base Rate at the higher of the lender's "Reference Rate" or the
         Federal Funds Rate plus .5%. The debt bears interest under the LIBOR
         Rate at the LIBOR rate (reserve adjusted) plus 2%. The Company may
         convert any portion of the outstanding debt from one interest rate
         type to another in increments of $50,000 with a minimum transfer
         amount of $250,000. The Base Rate of 7.75%, representing the lender's
         Reference Rate, was in effect on the Tranche A loan at December 31,
         1998.

         At December 31, 1998, the Tranche B loan commitment amount was $12
         million, of which $8.9 million had been borrowed. Tranche B is a
         revolving line of credit, with interest payable quarterly, and matures
         on June 5, 1999. The Company has a choice of two different interest
         rates under the Tranche B loan, the Base Rate or the LIBOR Rate. The
         debt bears interest under the Base Rate at the higher of the lender's
         "Reference Rate" plus 2% (through April 4, 1999, and plus 4% thereafter
         until maturity) or the Federal Funds Rate plus (2.5% through April 4,
         1999, and plus 4.5% thereafter until maturity). The debt bears interest
         under the LIBOR Rate at the LIBOR rate (reserve adjusted) plus 4%
         (through April 4, 1999, and plus 6% thereafter) until maturity. The
         Company may convert any portion of the outstanding debt from one
         interest rate type to another in increments of $50,000 with a minimum
         transfer amount of $250,000. The Base Rate of 9.75%, representing the
         lender's Reference Rate plus 2%, was in effect on the Tranche B loan at
         December 31, 1998. The Company expects to settle Tranche B through a
         combination of cash from operations together with proceeds secured from
         equity or debt issuances.



                                     F-15
<PAGE>   62

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         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 minimum quarterly debt to capitalization ratio, a
         quarterly minimum current ratio, and a quarterly interest coverage
         ratio. At December 31, 1998, the Company was in compliance with the
         quarterly minimum current ratio and the quarterly interest coverage
         ratio requirements, and had received a waiver from Bank of America on
         the quarterly minimum tangible net worth and the minimum quarterly debt
         capitalization ratio requirements with which it was not in compliance
         at December 31, 1998.

         Cash paid to Bank of America for commitments and other fees during the
         year ended December 31, 1998 was approximately $775,000. At December
         31, 1998, there were $430,000 of accrued interest and fees payable.
         The carrying value of the debt is considered to represent fair value
         at December 31, 1998.

         Long-term debt maturing in each year subsequent to December 31, 1998
         is as follows:

<TABLE>
<S>                                             <C>        
                         1999                   $ 8,952,000
                         2000                     7,732,000
                         2001                     7,725,000
                         2002                     7,725,000
                         2003                     7,725,000
</TABLE>

5.       STOCKHOLDERS' EQUITY

         The Company has 200,000 shares of preferred stock authorized with a
         par value of $.01. There were 100,000 and 0 shares issued and
         outstanding as of December 31, 1998 and 1997, respectively. The
         preferred shares may be issued in series with the relative rights and
         preferences designated by the Company's Board of Directors.

                                     F-16
<PAGE>   63

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         The Company has 30,000,000 shares of common stock authorized with a
         par value of $.01. There were 22,320,066 shares issued and outstanding
         as of December 31, 1998.

         In 1998, the Company issued 100,000 preferred 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 3 and 4).

         On August 14, 1998, in conjunction with the acquisition of an interest
         in the South Coles Levee Field (as further described in Note 3), the
         Company issued warrants to purchase 250,000 shares of FPC common
         stock. The warrants have an exercise price of $.43 per share and are
         exercisable until August 14, 2003.

         In connection with the purchase of certain oil and gas properties in
         1995, the Company issued warrants to purchase 50,000 shares to the
         seller as part of the transaction. Warrants to purchase 25,000 shares
         were not exercised prior to expiration in December 1997; warrants to
         purchase 12,500 shares have an exercise price of $2 per share and are
         exercisable until December 2000; and warrants to purchase 12,500
         shares have an exercise price of $3 per share and are exercisable
         until December 2000.

6.       STOCK BASED COMPENSATION

         STOCK OPTION 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 that 10% of the outstanding stock). The options
         may be exercised anytime within five years of the date of grant.


                                     F-17
<PAGE>   64

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         The following is a summary of activity under this stock option plan
         for the years ended December 31,1998 and 1997:

<TABLE>
<CAPTION>
                                                     1998                       1997
                                           ------------------------   ------------------------
                                                          WEIGHTED                   WEIGHTED
                                                          AVERAGE                    AVERAGE
                                             NUMBER       EXERCISE      NUMBER       EXERCISE
                                            OF SHARES      PRICE       OF SHARES      PRICE
                                           ----------    ----------   ----------    ----------

<S>                                        <C>           <C>          <C>           <C>       
Outstanding, beginning of year                387,844    $     0.41      297,844    $     0.20

  Cancelled or expired
  Granted                                     460,000          0.44      290,000          0.45
  Exercised                                  (110,000)         0.53     (200,000)         0.15
                                           ----------    ----------   ----------    ----------

Outstanding, end of year                      737,844    $     0.41      387,844    $     0.41
                                           ==========    ==========   ==========    ==========
</TABLE>

         All the options outstanding at December 31, 1998 and 1997, and those
         exercised during 1998 and 1997, were granted to officers or
         stockholders of the Company. For all options granted during 1998 and
         1997, 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, 1998
         will expire as follows:

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

<S>                             <C>          <C>
                     1999         77,844   $       0.25
                     2001         20,000           0.44
                     2002        290,000           0.45
                     2008        350,000           0.41
                              ----------
                       Total     737,844
                              ==========
</TABLE>

                                     F-18

<PAGE>   65

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         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, 1998 and 1997:

<TABLE>
<CAPTION>
                                                     1998                       1997
                                           ------------------------   ------------------------
                                                          WEIGHTED                   WEIGHTED
                                                          AVERAGE                    AVERAGE
                                             NUMBER       EXERCISE      NUMBER       EXERCISE
                                            OF SHARES      PRICE       OF SHARES      PRICE
                                           ----------    ----------   ----------    ----------

<S>                                        <C>           <C>          <C>           <C>       
Outstanding, beginning of year                 25,000    $     2.50      337,500    $     1.12

  Granted to BER                              250,000          0.43                           
  Expired or cancelled                                                  (312,500)         1.00
                                           ----------    ----------   ----------    ----------

Outstanding, end of year                      275,000          0.62       25,000          2.50
                                           ==========    ==========   ==========    ==========
</TABLE>

         All outstanding warrants and other options were exercisable at
         December 31, 1998. If not previously exercised, all warrants and other
         options outstanding at December 31, 1998 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 1998 and 1997 net
         income (loss) and earnings (loss) per share would have been changed to
         the pro forma amounts indicated below.

<TABLE>
<CAPTION>
                                                   1998           1997
                                                ---------      ---------- 

<S>                                             <C>            <C>        
Net income (loss) applicable to common
  stockholders:
  As reported                                  $1,408,000      $  (12,000)
  Pro forma                                     1,320,000         (39,000)

Net income (loss) per share of common stock:
  As reported                                  $       .14     $       --
  Pro forma                                            .13          (0.01)
</TABLE>


                                     F-19
<PAGE>   66
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         The estimated fair value of each employee option and warrant granted
         in 1998 and 1997 was estimated on the date of grant using the 
         Black-Scholes option-pricing model with the following weighted average
         assumptions:

<TABLE>
<CAPTION>
                                         1998               1997
                                    --------------    --------------

<S>                                 <C>               <C>
Expected volatility                   28% to 68%        64% to 102%
Risk-free interest rate                  6.57%        6.13% to 6.50%
Expected dividends                        --                --
Expected terms (in years)                 9                  5

</TABLE>

7.       INCOME TAXES

         The Company's provision (benefit) for income taxes was comprised of
         the following for the years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                               1998          1997           1996
                            ---------    ----------      ----------

<S>                         <C>          <C>             <C>       
               Current      $      --    $       --      $       --
               Deferred      (287,000)        (7,000)        32,000
                            ---------    ----------      ----------
                            $(287,000)   $   (7,000)     $   32,000
                            =========    ==========      ==========
</TABLE>

         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>
                                    1998          1997          1996
                                 ----------    ----------    ----------
<S>                              <C>           <C>           <C>       
Theoretical tax at 34%           $ (498,000)   $   (7,000)   $   51,000
Unbenefited loss                    193,000            --            --
Other                                18,000            --       (19,000)
                                 ----------    ----------    ----------
                                 $ (287,000)   $   (7,000)   $   32,000
                                 ==========    ==========    ==========
</TABLE>

                                     F-20
<PAGE>   67
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         The tax effects of temporary differences that give rise to significant
         portions of the deferred tax assets and liabilities as of December 31,
         1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                1998           1997
                                             ----------     ----------
<S>                                          <C>            <C>
Oil and gas properties                       $1,536,000     $1,518,000 
Net operating loss and other                   (525,000)      (220,000)
                                             -----------    ----------
Net deferred tax liability                   $1,011,000     $1,298,000
                                             ==========     ==========
</TABLE>

         At December 31, 1998, the Company had approximately $2.4 million of
         net operating loss carryforwards that are subject to substantial
         limitations under Section 382 of the Internal Revenue Code and expire
         between 2006 and 2008. A valuation allowance has been provided to the
         extent that the Company believes the net operating losses will expire
         unutilized.

8.       ENVIRONMENTAL MATTERS

         Being engaged in oil and gas development, the Company may become
         subject to certain liabilities as they relate to environmental
         clean-up of well sites or other restoration procedures as they relate
         to the drilling of oil and gas wells and the operation thereof. In the
         Company's acquisition of existing or previously drilled well bores,
         the Company may not be aware of what environmental safeguards were
         taken at the time such wells were drilled or during the time that such
         wells were operated. Should it be determined that a liability exists
         with respect to any environmental clean-up or restoration, the
         liability to cure such a violation would most likely fall upon the
         Company. No claim has been made nor has a claim been asserted, nor is
         the Company aware of the existence of any liability which the Company
         may have, as it relates to any environmental clean-up, restoration or
         the violation of any rules or regulations relating thereto.

9.       COMMITMENTS

         The Company has an operating lease for 14,885 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 $221,000 and $12,000 for the
         years ended December 31, 1998 and 1997, respectively. Minimum future
         noncancelable lease payments for the years ended December 31, are as
         follows:


                                     F-21
<PAGE>   68

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

<TABLE>
<S>                                         <C>     
                              1999          $240,000
                              2000           240,000
                              2001           240,000
                              2002           160,000
</TABLE>

         In November 1997, the Company entered into a five-year agreement with a
         former director for rental of certain property used as a storage yard.
         The minimum annual compensation anticipated by the agreement is
         $15,600. A portion of the compensation may be paid in stock of the
         Company based on the market price of the stock, as specified in the
         agreement. For the years ended December 31, 1998 and 1997, the Company
         issued 37,143 and 4,478, respectively, of common shares of the Company
         pursuant to the agreement.

         In November 1997 the Company entered into a five-year agreement with a
         former director for geological consulting services. The minimum annual
         compensation anticipated by the agreement is $18,000. A portion of the
         compensation may be paid in stock of the Company based on the market
         price of the stock as specified in the agreement. For the years ended
         December 31, 1998 and 1997, the Company issued 42,857 and 5,166,
         respectively, of common shares of the Company pursuant to the
         agreement.

         On August 14, 1998, the Company entered into an Amended and Restated
         Executive Employment Agreement with B. Carl Price. The agreement is for
         a three-year term and is automatically extended for an additional year
         upon each anniversary of the effective date unless terminated. The
         minimum annual compensation is $125,000 subject to adjustments and
         bonuses. At the option of Mr. Price, a portion of the compensation may
         be paid in stock of the Company, based on the market price of the
         stock.

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.

         The Company occasionally has cash deposits in excess of FDIC insurance
         limits. The Company believes any risk of loss is remote.

         Management estimates the market values of notes receivable and payable
         based on expected cash flows and believes those market values
         approximate carrying values at December 31, 1998, 1997 and 1996.

11.      MAJOR CUSTOMERS

         In 1998 and 1997, one purchaser accounted for approximately 24% and
         10%, respectively, of the Company's revenues.

12.      ASSET PURCHASE

         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


                                     F-22
<PAGE>   69
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         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 FPC preferred stock to
         BER (each preferred share is convertible to 260 shares of FPC common
         stock).

         All of the shares of common and preferred stock issued pursuant to
         this transaction as well as the shares of common stock issuable upon
         conversion of the preferred stock are subject to pledge agreements
         dated December 15, 1998 between the stockholders and Bank of America.
         These agreements secure the Company's borrowing under its credit
         agreement with Bank of America. If an event of default occurs under
         the credit agreement, the bank will have the right to vote all of the
         shares of FPC subject to these pledge agreements, and following
         foreclosures on the shares, will have the right to sell the shares as
         provided in the pledge agreements and applicable law.

13.      NOTE RECEIVABLE

         The Company had a note receivable at December 31, 1997 of $93,000, net
         of an allowance of $53,000 relating to the sale of mining properties
         in 1994. The note was deemed uncollectible in 1998 and was written off
         by the Company.

14.      FINANCIAL DATA FOR OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)

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


                                     F-23
<PAGE>   70

FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                        1998           1997
                                                    ------------   ------------
<S>                                                 <C>            <C>
Costs incurred in oil and gas producing activities:
  Acquisition of proved properties                  $ 33,155,000   $ 11,265,000
  Development costs                                      103,000         41,000
                                                    ------------   ------------
      Total                                         $ 33,858,000   $ 11,306,000
                                                    ============   ============

Net capitalized costs related to oil and gas       
 producing activities:
  Proved properties                                 $ 45,992,000   $ 12,134,000 
  Less - accumulated depletion, depreciation,
    amortization and impairment                       (1,507,000)      (288,000)
                                                    ------------   ------------

Net oil and gas property costs                      $ 44,485,000   $ 11,846,000
                                                    ============   ============
</TABLE>


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 &
                                                 Natural Gas
                                                   Liquids         Gas
                                                    (BBLS)        (MCFG)  
                                                ------------   ------------
<S>                                             <C>           <C>
Balance, January 1, 1996                             113,000      1,220,000
Purchase of minerals in place                          5,000             --
Revisions of previous estimates                      (56,000)      (767,000)
Abandonment of minerals                               (3,000)      (181,000) 
Production                                            (7,000)       (29,000) 
                                                ------------   ------------ 
Balance, December 31, 1996                            52,000        243,000
Purchase of minerals in place                      2,071,000      6,176,000
Revisions of previous estimates                       89,000       (220,000)
Production                                           (33,000)       (60,000)
                                                ------------   ------------
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                   (1,728,700)     8,583,500
Production                                          (126,000)    (1,109,000)
                                                ------------   ------------
Balance, December 31, 1998                         3,569,300     69,453,500
                                                ============   ============   
</TABLE>

                                     F-24
<PAGE>   71
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         At December 31, 1998 and 1997, respectively, 2,963,300 and 1,306,000
         barrels of oil and natural gas liquids and 50,066,000 and 4,355,000
         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.      STANDARDIZED MEASURE OF CHANGES IN FUTURE NET REVENUES (UNAUDITED)

         The standardized measure of discounted future net cash flows 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>
                                        1998            1997           1996
                                    ------------    ------------    ----------
<S>                                 <C>             <C>             <C>
Future cash inflows                 $185,660,000    $ 50,183,000   $ 2,038,000
Future production costs              (75,262,000)    (19,139,000)   (1,022,000)
Future development costs             (12,814,000)     (3,122,000)              
Future income tax expense            (22,077,000)     (7,408,000)      (48,000)
                                    ------------    ------------   ----------- 
Future net cash flows                 75,507,000      20,514,000       968,000
10% annual discount for estimated 
 timing of cash flows                (33,978,000)     (9,231,000)     (308,000
                                    ------------    ------------   -----------

Standardized measure of discounted 
  future net cash flows             $ 41,529,000    $ 11,283,000   $   660,000   
                                    ============    ============   ===========
</TABLE>

                                     F-25
<PAGE>   72
FUTURE PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
-------------------------------------------------------------------------------

         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>
                                                    1998             1997            1996
                                                ------------     ------------     -----------
<S>                                             <C>              <C>              <C>
Sale of oil and gas produced, net of
  production costs                               $(1,697,000)     $  (177,000)    $   (37,000)
Purchase of minerals in place                     43,464,000       14,525,000          70,000
Abandonment of minerals                                                               (82,000)
Net changes in prices and production costs        (4,974,000)        (230,000)        450,000
Revisions and other                                  393,000          487,000      (1,023,000)
Accretion of discount                              1,128,000           66,000          99,000
Net change in income taxes                        (8,068,000)      (4,048,000)        195,000 
                                                 -----------      -----------     -----------
Net change                                        30,246,000       10,623,000        (328,000)
Balance, beginning of year                        11,283,000          660,000         988,000
                                                 -----------      -----------     ----------- 
Balance, end of year                             $41,529,000      $11,283,000     $   660,000 
                                                 ===========      ===========     ===========
</TABLE>



                                     F-26
<PAGE>   73
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                                              
    Item 2                   Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
--------------- ------------------------------------------------------------------------------------------------------

     2.1                       Purchase and Sale  Agreement  dated May 1, 1998 by and among      Incorporated by
                               the Company,  Energy Capital  Investment  Company PLC, EnCap        Reference(1)
                               Equity 1994 Limited Partnership and NCI Enterprises, Inc.

     2.2                       Agreement  and Plan of Merger  dated  August 14, 1998 by and      Incorporated by
                               among the Company,  Bargo Energy  Resources,  Ltd.,  SCL-CAL        Reference(1)
                               Company and Future-Cal-Tex Corporation

     2.3                       Purchase and Sale  Agreement  between  Bargo Energy  Company      Incorporated by
                               and TJG Investment,  Inc., as Sellers,  and the Company,  as        Reference(2)
                               Buyer, dated October 15, 1998

     2.4                       Purchase and Sale Agreement between Pledger Partners,  Ltd.,      Incorporated by
                               as Seller and the Company, as Buyer, dated October 15, 1998         Reference(2)
</TABLE>

                                  
<PAGE>   74


<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                                        
     2.5                       Purchase  and Sale  Agreement  between NCI  Reserves,  Ltd.,      Incorporated by
                               Southwest Sulfur & Oil, Inc.,  Wayne Newkumet,  and Castello        Reference(2)
                               Enterprises,  Inc., as Sellers,  and the Company,  as Buyer,
                               dated October 15, 1998

     2.6                       Purchase and Sale Agreement  between NCI  Properties,  Ltd.,      Incorporated by
                               as Seller, and the Company, as Buyer, dated October 15, 1998        Reference(2)

     2.7                       Purchase and Sale Agreement  between Bargo Energy Resources,      Incorporated by
                               Ltd., as Seller,  and the Company,  as Buyer,  dated October        Reference(2)
                               15, 1998

     2.8                       Purchase and Sale Agreement  between Bargo Energy Resources,      Incorporated by
                               Ltd., as Seller,  and the Company,  as Buyer, dated November        Reference(3)
                               13, 1998

     2.9                       Asset Purchase  Agreement and Plan of  Reorganization  dated      Incorporated by
                               December  15, 1998 by and among the  Company,  Bargo  Energy        Reference(4)
                               Resources,  Ltd.,  Bargo Energy Company and TJG Investments,
                               Inc

     2.10                      Purchase and Sale Agreement  dated November 25, 1997, by and      Incorporated by
                               among the Company,  Energy Capital  Investment  Company PLC,        Reference(6)
                               EnCap Equity 1994 Limited Partnership,  and Gecko Booty 1994
                               I Limited Partnership

    Item 3                                      Articles of Incorporation and Bylaws
--------------- ------------------------------------------------------------------------------------------------------

     3.11                      Articles of Restatement of the Articles of Incorporation          Incorporated by
                                                                                                   Reference(5)

     3.2                       Bylaws                                                            Incorporated by
                                                                                                   Reference(5)

    Item 4                    Instruments Defining the Rights of Security Holders, Including Indentures
--------------- ------------------------------------------------------------------------------------------------------

     4.1                       Articles of Restatement of the Articles of Incorporation          Incorporated by
                                                                                                   Reference(5)

     4.2                       Bylaws                                                            Incorporated by
                                                                                                   Reference(5)

     4.3                       Agreement  dated August 14, 1998 by and among B. Carl Price,      Incorporated by
                               Bargo Energy  Resources,  Ltd.,  Energy  Capital  Investment        Reference(1)
                               Company PLC, and EnCap Equity 1994 Limited Partnership

     4.4                       Certificate of Designation of Convertible  Preferred  Stock,      Incorporated by
                               Series A                                                            Reference(4)
</TABLE>

                                   
<PAGE>   75


<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                
  Item 10                                               Material Contracts
--------------- ------------------------------------------------------------------------------------------------------

     10.1                      Promissory  Note dated November 25, 1997 from the Company to      Incorporated by
                               Gecko booty 1994 I Limited Partnership                              Reference(6)

     10.2                      Promissory  Note dated  November 25, 1997,  from the Company      Incorporated by
                               to Energy Capital Investment Company, PLC                           Reference(6)

     10.3                      Amendment  to Renewal  Promissory  Note dated May 1, 1998 by      Incorporated by
                               the Company to Energy Capital  Investment  Company PLC dated        Reference(1)
                               August 14, 1998

     10.4                      Renewal  Promissory  Note of the  Company  payable to Energy      Incorporated by
                               Capital Investment Company PLC dated October 15, 1998               Reference(2)

     10.5                      Promissory  Note dated  November 25, 1997,  from the Company      Incorporated by
                               to EnCap Equity 1994 Limited Partnership                            Reference(6)

     10.6                      Amendment  to Renewal  Promissory  Note dated May 1, 1998 by      Incorporated by
                               the Company to EnCap Equity 1994 Limited  Partnership  dated        Reference(1)
                               August 14, 1998

     10.7                      Renewal  Promissory  Note of the  Company  payable  to EnCap      Incorporated by
                               Equity 1994 Limited Partnership dated October 15, 1998              Reference(2)

     10.8                      Note  Restructuring  Agreement  by and  among  the  Company,      Incorporated by
                               Energy  Capital  Investment  Company PLC,  EnCap Equity 1994        Reference(1)
                               Limited   Partnership   and  Gecko   Booty  1994  I  Limited
                               Partnership dated August 14, 1998

     10.9                      Credit  Agreement  between  the  Company and Bank of America      Incorporated by
                               National Trust and Savings Association dated August 14, 1998        Reference(1)

    10.10                      Amendment No. 1 to Credit Agreement  between Bank of America      Incorporated by
                               National  Trust and  Savings  Association  and the  Company,        Reference(3)
                               dated November 16, 1998

    10.11                      Amended and Restated  Credit  Agreement  between the Company      Incorporated by
                               and Bank of America  National Trust and Savings  Association        Reference(4)
                               dated December 4, 1998

    10.12                      Amended and Restated Secured  Promissory Note of the Company      Incorporated by
                               payable  to Bank  of  America  National  Trust  and  Savings        Reference(3)
                               Association dated November 18, 1998
</TABLE>

                                  
<PAGE>   76

<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                                                 
    10.12                      Master  Subordination  Agreement  by  and  between  Bank  of      Incorporated by
                               America  National Trust and Savings  Association  and Energy        Reference(1)
                               Capital   Investment  Company  PLC  and  EnCap  Equity  1994
                               Limited Partnership dated August 14, 1998

    10.13                      First  Amendment  to Master  Subordination  Agreement by and      Incorporated by
                               among   Bank  of   America   National   Trust  and   Savings        Reference(2)
                               Association  and  Energy  Capital  Investment  Company  PLC,
                               EnCap   Equity  1994  Limited   Partnership,   Bargo  Energy
                               Company, and TJG Investments, Inc., dated October 15, 1998

    10.14                      Subordination   Agreement  by  and  among  Bank  of  America      Incorporated by
                               National  Trust and Savings  Association  and Energy Capital        Reference(2)
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited
                               Partnership,  Bargo  Energy  Company,  and TJG  Investments,
                               Inc., dated October 15, 1998

    10.15                      Intercreditor  and Collateral  Agency Agreement by and among      Incorporated by
                               Energy  Capital  Investment  Company PLC,  EnCap Equity 1994        Reference(2)
                               Limited   Partnership,   Bargo  Energy   Company,   and  TJG
                               Investments, Inc., dated October 15, 1998

    10.16                      Promissory  Note of the  Company  payable  to  Bargo  Energy      Incorporated by
                               Company in the principal  amount of $3,397,600 dated October        Reference(2)
                               15, 1998

    10.17                      Promissory Note of the Company  payable to TJG  Investments,      Incorporated by
                               Inc. in the principal  amount of $602,400  dated October 15,        Reference(2)
                               1998

    10.18                      Security  Agreement  dated May 1, 1998  between  the Company      Incorporated by
                               and Energy  Capital  Investment  Company  PLC,  EnCap Equity        Reference(1)
                               1994  Limited  Partnership,  and Gecko  Booty 1994 I Limited
                               Partnership

    10.19                      First  Amendment  to  Security   Agreement   between  Energy      Incorporated by
                               Capital  Investment  Company PLC,  EnCap Equity 1994 Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,   as  secured   parties,   and   NCI-Shawnee   Limited
                               Partnership, as debtor, dated October 15, 1998

    10.20                      First  Amendment  to  Security   Agreement   between  Energy      Incorporated by
                               Capital  Investment  Company PLC,  EnCap Equity 1994 Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc., as secured  parties,  and Future Cal-Tex  Corporation,
                               as debtor, dated October 15, 1998
</TABLE>

                                     

<PAGE>   77

<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                                              
    10.21                      Second  Amendment  to  Security   Agreement  between  Energy      Incorporated by
                               Capital  Investment  Company PLC,  EnCap Equity 1994 Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as secured  parties,  and the Company,  Future Energy
                               Corporation,    Future   Petroleum    Corporation,    Future
                               Acquisitions  1995,  Ltd., and BMC Development No. 1 Limited
                               Partnership, as debtors, dated October 15, 1998

    10.22                      First  Amendment  to  Security  Agreement  between  Bank  of      Incorporated by
                               America National Trust and Savings  Association,  as lender,        Reference(3)
                               and each of the Company,  Future Energy Corporation,  Future
                               Petroleum  Corporation,   Future  CAL-TEX  Corporation,  BMC
                               Development No. 1 Limited  Partnership,  Future  Acquisition
                               1995,  Ltd.,  and  NCI-Shawnee   Limited   Partnership,   as
                               debtors, dated November 18, 1998

    10.23                      Guaranty  dated  April 30,  1998 by the  Company in favor of      Incorporated by
                               Energy  Capital  Investment  Company PLC,  EnCap Equity 1994        Reference(1)
                               Limited   Partnership,   and  Gecko  Booty  1994  I  Limited
                               Partnership

    10.24                      Second   Amendment  to  Guaranty   between   Energy  Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as sellers,  and Future  Energy  Corporation,  Future
                               Petroleum   Corporation,   BMC  Development  No.  1  Limited
                               Partnership,   and  Future   Acquisition   1995,   Ltd.,  as
                               guarantors, dated October 15, 1998

    10.25                      First   Amendment  to  Guaranty   between   Energy   Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc., as sellers,  and NCI-Shawnee Limited  Partnership,  as
                               guarantor, dated October 15, 1998

    10.26                      First   Amendment  to  Guaranty   between   Energy   Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as  sellers  and  Future  Cal-Tex   Corporation,   as
                               guarantor, dated October 15, 1998
</TABLE>

                                    

<PAGE>   78

<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                                           
    10.27                      First   Amendment  to  Guaranty   between  Bank  of  America      Incorporated by
                               National Trust and Savings Association,  as lender, and each        Reference(3)
                               of the Company, Future Energy Corporation,  Future Petroleum
                               Corporation,  Future CAL-TEX  Corporation,  BMC  Development
                               No. 1 Limited  Partnership,  Future  Acquisition 1995, Ltd.,
                               and NCI-Shawnee Limited  Partnership,  as guarantors,  dated
                               November 18, 1998

    10.28                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Bargo Energy Resources,  Ltd. dated        Reference(1)
                               August 14, 1998

    10.29                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Energy Capital  Investment  Company        Reference(1)
                               PLC dated August 14, 1998

    10.30                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings   Association   and  EnCap   Equity   1994   Limited        Reference(1)
                               Partnership dated August 14, 1998

    10.31                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and B. Car Price dated August 14, 1998          Reference(1)

    10.32                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association  and Don Wm.  Reynolds dated August 14,        Reference(1)
                               1998

    10.33                      Second Amendment to Pledge Agreement  between Energy Capital      Incorporated by
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited        Reference(2)
                               Partnership,  Bargo  Energy  Company  and  TJG  Investments,
                               Inc.,  as secured  parties,  and the Company,  Future Energy
                               Corporation,  and Future Petroleum Corporation,  as debtors,
                               dated October 15, 1998

    10.34                      First Amendment to Pledge Agreement  between Bank of America      Incorporated by
                               National  Trust and Savings  Association,  as secured party,        Reference(3)
                               and each of the Company,  Future Energy Corporation,  Future
                               Petroleum  Corporation,  EnCap  Equity  1994,  Ltd.,  Energy
                               Capital  Investment  Company PLC,  Bargo  Energy  Resources,
                               Ltd, B. Carl Price, and Don Wm. Reynolds, as debtors,  dated
                               November 18, 1998

    10.35                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Bargo Energy Company dated December        Reference(4)
                               15, 1998
</TABLE>

                                 
<PAGE>   79

<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                                               
    10.36                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings   Association  and  TJG   Investments,   Inc.  dated        Reference(4)
                               December 15, 1998

    10.37                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and James Sowell dated December 15, 1998        Reference(4)

    10.38                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings  Association and Thomas D. Barrow dated December 15,        Reference(4)
                               1998

    10.39                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and Tim J. Goff dated December 15, 1998         Reference(4)

    10.40                      Pledge Agreement  between Bank of America National Trust and      Incorporated by
                               Savings Association and Bargo Operating Company,  Inc. dated        Reference(4)
                               December 15, 1998

    10.41                      Registration  Rights  Agreement  among the Company and Bargo      Incorporated by
                               Energy Resources, Ltd. dated August 14, 1998                        Reference(1)

    10.42                      First Amendment to Registration  Rights  Agreement among the      Incorporated by
                               Company,   Bargo  Energy   Resources,   Ltd.,  Bargo  Energy        Reference(4)
                               Company,   TJG   Investments,   Inc.   and   certain   other
                               shareholders dated December 15, 1998

    10.43                      Registration  Rights  Agreement  dated  November  25,  1997,      Incorporated by
                               among the Company,  Energy Capital  Investment  Company PLC,        Reference(6)
                               and EnCap Equity 1994 Limited Partnership

    10.44                      Registration  Rights  Agreement  among the  Company,  Energy      Incorporated by
                               Capital   Investment  Company  PLC  and  EnCap  Equity  1994        Reference(1)
                               Limited Partnership dated August 14, 1998

    10.45                      First Amendment to Registration  Rights  Agreement among the      Incorporated by
                               Company,  Energy  Capital  Investment  Company PLC and EnCap        Reference(4)
                               Equity 1994 Limited Partnership dated December 15, 1998

    10.46                      Registration  Rights  Agreement  among the Company,  B. Carl      Incorporated by
                               Price and certain other shareholders dated August 14, 1998          Reference(1)

    10.47                      First Amendment to Registration  Rights  Agreement among the      Incorporated by
                               Company,  B. Carl Price and certain other shareholders dated        Reference(4)
                               December 15, 1998
</TABLE>

                                 
<PAGE>   80

<TABLE>
<CAPTION>
Exhibit                                                                                         
Number                                               Description
------                                               -----------

<S>                          <C>                                                                 
    10.48                      Stock  Purchase  Warrant  by the  Company  to  Bargo  Energy      Incorporated by
                               Resources, Ltd. dated August 14, 1998                               Reference(1)

    10.49                      Voting  Agreement  dated  November  25,  1997  among B. Carl      Incorporated by
                               Price, Don Wm. Reynolds,  Energy Capital  Investment Company        Reference(6)
                               PLC, and EnCap Equity 1994 Limited Partnership

    10.50                      Shareholders'  Agreement  by and  among the  Company,  Bargo      Incorporated by
                               Energy Resources,  Ltd., Energy Capital  Investment  Company        Reference(1)
                               PLC,  EnCap Equity 1994 Limited  Partnership,  B. Carl Price
                               and Don Wm. Reynolds dated August 14, 1998

    10.51                      Amended and  Restated  Shareholders'  Agreement by and among      Incorporated by
                               the Company,  Bargo Energy  Resources,  Ltd., Energy Capital        Reference(4)
                               Investment   Company   PLC,   EnCap   Equity  1994   Limited
                               Partnership,  B. Carl Price, Don Wm. Reynolds,  Bargo Energy
                               Company,   TJG   Investments,   Inc.   and   certain   other
                               shareholders dated December 15, 1998

    10.52                      Amended and Restated  Employment  Agreement of B. Carl Price      Incorporated by
                               dated August 14, 1998                                               Reference(1)

    10.53                      Agreement  between the Company and Don Wm. Reynolds dated as      Incorporated by
                               of November 18, 1997                                                Reference(1)

    10.54                      Agreement  between the Company and Robert  Price dated as of      Incorporated by
                               November 18, 1997                                                   Reference(1)

    10.55                      1993 Employee Incentive Plan                                      Incorporated by
                                                                                                   Reference(5)
    10.56                      Renewal Promissory Note of the Company payable to Energy             This Filing
                               Capital Investment Company PLC dated May 1, 1998

    10.57                      Renewal Promissory Note of the Company payable to EnCap              This Filing
                               Equity 1994 Limited Partnership dated May 1, 1998

    10.58                      Security Agreement between Energy Capital Investment                 This Filing
                               Company PLC and EnCap Equity 1994 Limited Partnership,
                               as secured parties, and the Company, Future Energy
                               Corporation, Future Petroleum Corporation, Future Acquisitions
                               1995, Ltd., and BMC Development No. 1 Limited Partnership,
                               as debtors, dated November 25, 1997

    10.59                      First Amendment to Security Agreement between Energy Capital         This Filing
                               Investment Company PLC and EnCap Equity 1994 Limited Partnership,
                               as secured parties, and the Company, Future Energy Corporation,
                               Future Petroleum Corporation, Future Acquisitions 1995, Ltd., and 
                               BMC Development No. 1 Limited Partnership, as debtors, dated
                               May 1, 1998

    10.60                      Guaranty between Energy Capital Investment Company PLC, EnCap        This Filing
                               Equity 1994 Limited Partnership, and Gecko Booty 1994 I Limited
                               Partnership, as sellers, and Future Energy Corporation, Future 
                               Petroleum Corporation, BMC Development No. 1 Limited Partnership, 
                               and Future Acquisition 1995, Ltd., as guarantors, dated November
                               25, 1997

    10.61                      Pledge Agreement between Energy Capital Investment Company PLC,      This Filing
                               EnCap Equity 1994 Limited Partnership, and Gecko Booty 1994 I 
                               Limited Partnership, as secured parties, and the Company, Future
                               Energy Corporation, and Future Petroleum Corporation, as debtors,
                               dated November 25, 1997
                                           
   Item 21                                                  Subsidiaries
----------------------------------------------------------------------------------------------------------------------
    21.1                       Schedule of Subsidiaries                                             This Filing
 
    27.1                       Financial Data Schedule                                              This Filing
</TABLE>


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

(1)      Incorporated herein by reference from the Company's Quarterly Report
         on Form 10-QSB for the fiscal quarter ended June 30, 1998, filed with
         the Securities Exchange and Commission on August 20, 1998. (file no.
         000-08609)

(2)      Incorporated herein by reference from the Company's Current report on
         Form 8-K filed with the Securities and Exchange Commission on October
         30, 1998. (file no. 000-08609)

                                   
<PAGE>   81

(3)      Incorporated herein by reference from the Company's Current Report on
         Form 8-K filed with the Securities and Exchange Commission on December
         4, 1998. (file no. 000-08609)

(4)      Incorporated herein by reference from the Company's Current Report on
         Form 8-K filed with the Securities and Exchange Commission on December
         30, 1998. (file no. 000-08609)

(5)      Incorporated herein by reference from the Company's Annual Report on
         Form 10-K for the fiscal year ended December 31, 1993, filed with the
         Securities and Exchange Commission on May 20, 1994. (file no.
         000-08609)

(6)      Incorporated herein by reference from the Company's Current Report on
         Form 8-K filed with the Securities and Exchange Commission on December
         10, 1997.

(b)      REPORTS ON FORM 8-K.

         During the last quarter of the fiscal year ended December 31, 1998,
         the Company filed reports on Form 8-K as follows:


<TABLE>
<CAPTION>
              DATE OF EVENT REPORTED                                       ITEM REPORTED
------------------------------------------------------     --------------------------------------------------

<S>                                                        <C>                                     
December 17, 1998                                          Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements

December 15, 1998                                          Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements

November 19, 1998                                          Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements

October 30, 1998                                           Item 7.  Financial Statements

October 15, 1998                                           Item 2.  Acquisition or Disposition of Assets
                                                           Item 7.  Financial Statements
</TABLE>