U.S. Securities And Exchange Commission
                             Washington, D.C. 20549


                                   FORM 10-QSB



[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the quarterly period ended September 30, 2004

                                       OR

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the transition period from                 to
                                        ---------------    -------------------


                           Commission File No. 0-31547


                            AMERICAN OIL & GAS, INC.
        (Exact name of small business issuer as specified in its charter)


          Nevada                                                88-0451554
-----------------------------                               -------------------
  (State or jurisdiction of                                  (I.R.S. Employer
incorporation or organization)                              Identification No.)


  1050 17th Street, Suite 1850, Denver, CO                        80265
  ----------------------------------------                       --------
  (Address of principal executive offices)                      (Zip Code)


        Registrant's telephone number, including area code (303) 991-0173
                                                           --------------

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

                     (APPLICABLE ONLY TO CORPORATE ISSUERS)

     State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:

The total shares of $.001 Par Value Common Stock outstanding at November 12,
2004 was 29,006,202


     Transitional Small Business Disclosure Format (Check One) Yes [ ] No [ X ]


<PAGE>


                            AMERICAN OIL & GAS, INC.
                                   FORM 10-QSB
                                      INDEX


PART I.    FINANCIAL INFORMATION

         Item 1.  Financial Statements.....................................  3

                  Balance Sheets - September 30, 2004 (Unaudited)
                  and December 31, 2003 ...................................  3

                  Statements of Operations - Three Months and
                  Nine Months Ended September 30, 2004 and
                  September 30, 2003 (Unaudited)...........................  4

                  Statements of Cash Flows - Nine Months Ended
                  September 30, 2004 and September 30, 2003 (Unaudited)....  5

                  Notes to Financial Statements............................  6

                  Summary of Significant Accounting Policies...............  6

                  Item 2.  Management's Plan of Operation and Discussion
                  and Analysis of Financial Condition and Results
                  of Operations............................................  9

         Item 3. Controls and Procedures...................................  12

PART II. OTHER INFORMATION

         Item 2 Unregistered Sales of Equity Securities and
                Use of Proceeds............................................  13

         Item 6.  Exhibits ................................................  13


Signatures.................................................................  13

         Exhibit 31.1 Certification
         Exhibit 31.2 Certification
         Exhibit 32.1 Certification
         Exhibit 32.2 Certification


                                       2
<PAGE>
<TABLE>
<CAPTION>


                                             PART I
ITEM 1. FINANCIAL STATEMENTS

                                      AMERICAN OIL & GAS, INC.
                                         BALANCE SHEETS
                                                                             9/30/04                12/31/03
                                              ASSETS                       (UNAUDITED)
     CURRENT ASSETS
<S>                                                                        <C>                    <C>
        Cash and cash equivalents                                          $  6,641,058           $  1,066,458
        Receivables                                                             183,719                 45,742
        Advances and prepaids                                                     9,142                 66,789
                                                                           ------------           ------------
           Total Current Assets                                               6,833,919              1,178,989
                                                                           ------------           ------------

     PROPERTY AND EQUIPMENT
        Office equipment                                                          7,221                  7,221
        Producing oil and gas properties                                        973,762              1,167,279
       Undeveloped oil and gas properties                                       899,401                790,019
                                                                           ------------           ------------
            Total property and equipment                                      1,880,384              1,964,519
        Less-accumulated depreciation, depletion and amortization              (133,297)               (33,475)
                                                                           ------------           ------------
            Net property and equipment                                        1,747,087              1,931,044
                                                                           ------------           ------------
                                                                           $  8,581,006           $  3,110,033
                                                                           ============           ============

                             LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES
        Accounts payable and accrued liabilities                           $     81,025           $    408,348
        Preferred dividends payable                                              30,126                 18,020
                                                                           ------------           ------------
           Total current liabilities                                            111,151                426,368
                                                                           ------------           ------------

     LONG TERM LIABILITIES
        Asset retirement obligations                                             14,347                 30,688
                                                                           ------------           ------------

     COMMITMENTS AND CONTINGENCIES

     STOCKHOLDERS' EQUITY
        Series A preferred stock, $.001 par value,
         authorized 175,000 shares
        Issued and outstanding - 67,000 shares at
         9/30/04 and 12/31/03                                                        67                     67
        Common stock, $.001 par value, authorized
         100,000,000 shares
         Issued and outstanding - 29,006,202 shares at
          9/30/04and 24,388,702 shares at 12/31/03                               29,006                 24,389
        Additional paid-in capital                                           10,001,070              4,018,601
        Deferred compensation expense                                          (211,875)              (423,750)
        Accumulated  (deficit)                                               (1,362,760)              (966,330)
                                                                           ------------           ------------
                                                                              8,455,508              2,652,977
                                                                           ------------           ------------
                                                                           $  8,581,006           $  3,110,033
                                                                           ============           ============


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

                                                          3
<PAGE>


                                                           AMERICAN OIL & GAS, INC.
                                                           STATEMENTS OF OPERATIONS
                                                                 (UNAUDITED)


                                                      Three                Three               Nine                Nine
                                                      Months               Months              Months              Months
                                                      Ended                Ended               Ended               Ended
                                                     9/30/04              9/30/03             9/30/04             9/30/03
REVENUES
   Oil and gas sales                               $    259,781        $     29,853        $    407,458        $     29,853
                                                   ------------        ------------        ------------        ------------
                                                        259,781              29,853             407,458              29,853

OPERATING EXPENSES
   Lease operating                                       31,383              12,995              66,306              12,995
   General and administrative                           217,588             210,036             640,401             587,340
   Depletion, depreciation and amortization              62,756               9,073             104,320               9,073

                                                   ------------        ------------        ------------        ------------
                                                        311,727             232,104             811,027             609,408

OTHER INCOME
   Investment income                                      6,221                --                 7,139                --

                                                   ------------        ------------        ------------        ------------
NET (LOSS)                                              (45,725)           (202,251)           (396,430)           (579,555)

Less dividends on preferred stock                        15,494               5,137              46,146               5,137

NET (LOSS) TO COMMON
                                                   ------------        ------------        ------------        ------------
STOCKHOLDERS-BASIC AND DILUTED                     $    (61,219)       $   (207,388)       $   (442,576)       $   (584,692)
                                                   ============        ============        ============        ============

NET (LOSS) PER COMMON

SHARE-BASIC AND DILUTED                            $      --           $      (0.01)       $      (0.02)       $      (0.02)
                                                   ============        ============        ============        ============

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING                            26,910,740          23,631,344          25,539,076          23,678,413
                                                   ============        ============        ============        ============


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

                                                              4
<PAGE>


                                       AMERICAN OIL & GAS, INC.
                                       STATEMENTS OF CASH FLOWS
                                              (UNAUDITED)
                                                                     9/30/04                  9/30/03
                                                                   -----------              -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)                                                         $  (396,430)             $  (579,555)
Adjustments to reconcile net (loss) to
   net cash (used) by operating activities
     Stock issued for services                                          50,125                   70,625
     Deferred compensation                                             211,875                     --
     Accretion of asset retirement obligation                            4,498                      660
     Depletion, depreciation and amortization                           99,822                    8,413
Changes in assets and liabilities
   (Increase) in receivables                                           (87,977)                 (29,853)
   (Increase) in other assets                                             --                     (6,492)
   Decrease in advances and prepaids                                    57,645                   (7,899)

   (Decrease) increase in A/P and accrued liabilities                 (352,321)                  22,067
                                                                   -----------              -----------
Net cash (used) by operating activities                               (412,763)                (522,034)

CASH FLOWS FROM INVESTING ACTIVITIES
    Cash paid for office equipment                                        --                     (1,716)
    Proceeds from sale of oil and gas properties                     1,582,073                     --
   Cash paid for oil and gas properties                             (1,558,240)              (1,435,531)
                                                                   -----------              -----------
Net cash provided (used) by investing activities                        23,833               (1,437,247)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from sale of common stock                                6,025,000                3,598,875
   Proceeds from exercise of common stock warrants                      25,000                     --
   Preferred dividends paid                                            (34,040)                    --
   Cash paid for offering costs                                        (52,430)                (272,908)
                                                                   -----------              -----------
Net cash provided by financing activities                            5,963,530                3,325,967

                                                                   -----------              -----------
NET INCREASE IN CASH                                                 5,574,600                1,366,686

CASH, BEGINNING OF PERIODS                                           1,066,458                   83,516
                                                                   -----------              -----------
CASH, END OF PERIODS                                               $ 6,641,058              $ 1,450,202
                                                                   ===========              ===========

SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION
   Cash paid for interest                                          $      --                $      --
                                                                   ===========              ===========

SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
   Stock issued for services                                       $   108,025              $      --
                                                                   ===========              ===========
   Stock based deferred compensation                               $   211,875              $    70,625
                                                                   ===========              ===========
   Warrants issued for oil and gas consulting services             $    10,537              $      --
                                                                   ===========              ===========


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

                                                    5
</TABLE>

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          Notes to Financial Statements
                                   (UNAUDITED)
                               September 30, 2004

     The accompanying interim financial statements of American Oil & Gas, Inc.
are unaudited. In the opinion of management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the interim period. The results of
operations for the period ended September 30, 2004 are not necessarily
indicative of the operating results for the entire year.

     We have prepared the financial statements included herein pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. We believe the
disclosures made are adequate to make the information not misleading and
recommend that these condensed financial statements be read in conjunction with
the financial statements and notes included in our Form 10-KSB for the year
ended December 31, 2003.

Nature of Business

     The Company is an independent energy company engaged in the exploration,
development and acquisition of crude oil and natural gas reserves and production
in the western United States.

     The Company's fiscal year end is December 31.

Note 1 - Significant Accounting Policies

     USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

     CASH EQUIVALENTS - For purposes of reporting cash flows, we consider as
cash equivalents all highly liquid investments with a maturity of three months
or less at the time of purchase. At September 30 2004, we had $1,017,139 in cash
equivalents.

     OIL AND GAS PROPERTIES - The Company follows the full cost method of
accounting for oil and gas operations. Under this method, all costs related to
the exploration for, and development of, oil and gas reserves are capitalized on
a country-by-country basis. Costs include lease acquisition costs, geological
and geophysical expenses, overhead directly related to exploration and
development activities and costs of drilling both productive and non-productive
wells. Proceeds from the sale of properties are applied against capitalized
costs, without any gain or loss being recognized, unless such a sale would
significantly alter the rate of depletion and depreciation.

     DEPLETION, DEPRECIATION AND AMORTIZATION - Depletion of exploration and
development costs and depreciation of production equipment is provided using the
unit-of-production method based upon estimated proven oil and gas reserves. The
costs of significant unevaluated properties are excluded from costs subject to
depletion. For depletion and depreciation purposes, relative volumes of oil and


                                       6

<PAGE>


gas production and reserves are converted at the energy equivalent conversion
rate of six thousand cubic feet of natural gas to one barrel of crude oil.

     CEILING TEST - In applying the full cost method, the Company performs a
ceiling test whereby the carrying value of oil and gas properties and production
equipment, net of recorded future income taxes and the accumulated provision for
site restoration and abandonment costs, is compared annually to an estimate of
future net cash flow from the production of proven reserves. Costs related to
undeveloped oil and gas properties are excluded from the ceiling tests.
Discounted net cash flow is estimated using year end prices, less estimated
future general and administrative expenses, financing costs and income taxes.
Should this comparison indicate an excess carrying value, the excess is charged
against earnings.

     REVENUE RECOGNITION - The Company recognizes oil and gas revenues from its
interests in producing wells as oil and gas is produced and sold from these
wells.

     IMPAIRMENT - The Company has adopted SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," which requires that long-lived
assets to be held and used be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Oil and gas properties accounted for using the full cost method of
accounting, a method utilized by the Company, are excluded from this
requirement, but will continue to be subject to the ceiling test limitations.

     SHARE BASED COMPENSATION- In October 1995, SFAS No. 123 "Accounting for
Stock Based Compensation" was issued. This standard defines a fair value based
method of accounting for employee stock options or similar equity instruments.
This statement gives entities a choice of recognizing related compensation
expense to employees by adopting the fair value method or to continue to measure
compensation using the intrinsic value approach under Accounting Principles
Board ("APB") Opinion No. 25. The Company has elected to utilize APB No. 25 for
measurement; and will, pursuant to SFAS No. 123, disclose on a supplemental
basis the pro forma effects on net income and earnings per share of using the
fair value measurement criteria.

     INCOME TAXES - We have adopted the provisions of SFAS No. 109, "Accounting
for Income Taxes". SFAS 109 requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.

Note 2 - Oil and Gas Properties

     In June 2001, the FASB issued SFAS No. 141, "Business Combinations" ("SFAS
No. 141") and SFAS No. 142, "Goodwill and Intangible Assets" ("SFAS No. 142").
SFAS Nos. 141 and 142 became effective on July 1, 2001 and January 1, 2002,
respectively. SFAS No. 141 requires all business combinations initiated after
June 30, 2001 to be accounted for using the purchase method. Additionally, SFAS
No. 141 requires companies to disaggregate and report separately from goodwill
certain intangible assets. SFAS No. 142 establishes new guidelines for
accounting for goodwill and other intangible assets. Under SFAS No. 142,
goodwill and certain other intangible assets are not amortized, but rather are
reviewed annually for impairment. One interpretation that was considered
relative to these standards was that oil and gas mineral rights held under lease
and other contractual arrangements representing the right to extract such
reserves for both undeveloped and developed leaseholds should be classified
separately from oil and gas properties, as intangible assets on the Company's
consolidated balance sheets. In April 2004, the Financial Accounting Standards
Board amended SFAS Nos. 141 and 142 and clarified the interpretation by defining


                                       7

<PAGE>


mineral rights, such as oil and gas mineral rights, as tangible assets.
Accordingly, the guidelines for accounting for intangible assets as provided in
SFAS No. 142 would not apply to oil and gas mineral rights. In accordance with
this new guideline, the Company will continue to classify its contractual rights
to extract oil and gas reserves as tangible oil and gas properties.

     The Company has adopted Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" ("SFAS No. 143"), which
provides accounting requirements for retirement obligations associated with
tangible long-lived assets, including the timing of liability recognition,
initial measurement of the liability, allocation of asset retirement costs to
expense, subsequent measurement of the liability, and financial statement
disclosures. SFAS No. 143 requires that asset retirement costs be capitalized
along with the cost of the related long-lived asset. The asset retirement costs
should then be allocated to expense using a systematic and rational method. The
following table sets forth the changes in the asset retirement obligations:


   Beginning asset retirement obligation at December 31, 2003       $ 30,688
   Asset retirement obligation accretion                               4,498
   Asset retirement obligation additions                              17,626
   Asset retirement obligation adjustment                            (38,465)
   Payments on asset retirement obligation                               --
                                                                    ---------
   Ending asset retirement obligation at June 30, 2004              $ 14,347
                                                                    =========

     (1)  Includes the reduction in the asset retirement obligation resulting
          from the Company's sale of a majority of its interest in certain
          producing coal bed methane wells located in the Powder River Basin of
          Wyoming.

     During the nine months ended September 30, 2004, the Company sold 90% of
its interest in approximately 4,100 gross undeveloped acres and 90% of its
interest in seven producing coalbed methane wells located in the Powder River
Basin of Wyoming and received sales proceeds of approximately $1.255 million.
The Company also sold one-third of its interests in its Big Sky project for
$326,247 in cash. Because these sales did not significantly alter the
relationship between capitalized costs and proved reserves with respect to its
oil and gas properties, proceeds from this sale were applied against capitalized
costs without any gain or loss being recognized.

Note 3 - Common Stock

     In September 2004, the Company received $4,500,000 in gross proceeds in a
private placement from six accredited investors. The Company sold 3,000,000
shares of its common stock at $1.50 per share. The Company paid a placement fee
of $45,000 in cash and issued 30,000 shares, valued at $57,900 (which was the
market price of the stock on the date of closing) to an individual who assisted
in securing the placement. The Company expects to pay approximately $25,000 in
additional placement and registration related expenses.

     In March 2004, the Company received $1,525,000 in gross proceeds in a
private placement from two accredited investors. The Company sold 1,525,000
shares of our common stock at $1.00 per share and issued 1,525,000 warrants to
purchase 1,525,000 shares at an exercise price of $1.00 per share. 25,000
warrants were exercised and 1,500,000 of the warrants expired unexercised on
August 31, 2004. The Company did not pay a placement commission or agent fee
associated with this funding and provided for piggyback registration rights. In
conjunction with this sale, the Company sold one-third of its interests in the
Big Sky Project in Richland County, Montana for cash of $326,247 to an entity
related to the investor that purchased 1.5 million of the units.

     During the nine months ended September 30, 2004, 37,500 shares of common
stock were issued to a Director for serving as Director, Designated Financial
Expert and as Chairman of the Audit Committee. The shares were paid to a company
wholly owned by the Director and the shares were valued at $50,125 based on the
non-discounted trading price of the Company's stock as of the date of issuance.


                                       8

<PAGE>


Note 4 - Related Party Transactions

     During the quarter and nine months ended September 30, 2004, the Company
reimbursed Tower Energy Corporation for the Company's share of oil and gas
related expenditures and administrative related expenditures in the amount of
$32,706 and $101,611, respectively. We also paid a total of $6,543 and $20,520,
respectively, for the quarter and nine months ended September 30, 2004, to Tower
for the Company's share of the office lease where the Company shares office
space with Tower. Patrick O'Brien, our Chief Executive Officer and Chairman, and
Kendell Tholstrom, another of our directors, together own a majority of Tower.

ITEM 2. MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS

     This discussion and analysis should be read in conjunction with the
accompanying financial statements and related notes. Our discussion and analysis
of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States of America requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of any contingent liabilities at the financial statement date and
reported amounts of revenue and expenses during the reporting period. On an
on-going basis we review our estimates and assumptions. Our estimates were based
on our historical experience and other assumptions that we believe to be
reasonable under the circumstances. Actual results are likely to differ from
those estimates under different assumptions or conditions, but we do not believe
such differences will materially affect our financial position or results of
operations.


     Our critical accounting policies, the policies we believe are most
important to the presentation of our financial statements and require the most
difficult, subjective and complex judgments, are outlined in our notes to
financial statements.


     This quarterly report contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. These statements relate to
future events or to our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. There are a number of factors that could cause our actual
results to differ materially from those indicated by such forward-looking
statements.

Overview

     We are an independent oil and gas exploration and production company,
engaged in the exploration, development and acquisition of crude oil and natural
gas reserves and production in the western United States. The following oil and
gas exploration/development project updates should be read in conjunction with
our annual report on Form 10-KSB for our calendar year ended December 31, 2003.

     At September 30, 2004, we own interests in six gross (.243 net) producing
wells at our Big Sky project, and during the quarter ended September 30, 2004
these wells produced a cumulative total of 115,975 barrels of oil equivalent
(3,688 boe net to the Company's interest). We expect to participate in four


                                        9

<PAGE>


additional wells and own interests in 10 gross wells (approximately 7/10th's of
one net well) in our Big Sky project by year-end 2004. Including the wells
drilled during 2004, we anticipate participating in a total of 52 gross
(approximately 2.5 net wells) in this project over the next three years. In
March 2003, we sold one third of out interest in this project for $326,247 in
cash. We currently own a 13.3% interest in approximately 12,000 net leasehold
acres.

     We recently signed an agreement for a private company to drill either two
horizontal or four vertical wells to test the Mowry formation at our southern
Powder River Basin Wyoming, Krejci oil project. The private company will retain
100% working interest in each well drilled and in three of the eight offset
locations surrounding that well. We expect to benefit not only from the
information received from drilling, but also from the addition of one or more
proved undeveloped locations for each successful well drilled. The agreement
covers approximately 20,000 gross (approximately 10,000 net) leasehold acres out
of a total of approximately 39,000 gross (approximately 19,000 net) leasehold
acres. Under a continuous drilling obligation, the private company has the right
to drill up to 10 additional wells and earn three more offset locations for each
well drilled. We have retained the right to participate in any or all drilling
and could own working interests of up to 18.75% in the each of the private
company initial and offset wells, 31.25% to 50% in the other offset locations
and 50% in all other acreage. The private company has commenced the evaluation
process by drilling an initial well in order to attempt various completion
techniques. Several wells are planned and various drilling and completion
techniques are expected to be employed.

     During June 2004, we entered into an option agreement which will allow us
to earn a 50% interest in approximately 103,000 gross (approximately 98,000 net)
undeveloped leasehold acres in Converse and Niobrara counties, Wyoming, in the
area we call our Douglas project. We have a 50% interest in the option acquired,
and Tower and North Finn have the remaining 50% interest. We have identified
multiple exploration opportunities within the identified acreage block.

     Our initial focus in the Douglas project will be on the Fetter Field, which
is a Niobrara/Frontier natural gas field originally discovered in the 1960's.
The Niobrara/Frontier here is in an over-pressured area of the Powder River
Basin, and occurs at about 11,500 feet. There have been a number of wells
drilled at various times over the past 40 years and there is current production
in the field from four 1990's wells that are owned by others. We believe that
the potential economics from new wells drilled here could be enhanced by: 1)
advances in drilling equipment that could significantly reduce drilling times,
thereby reducing drilling costs, 2) advances in drilling techniques, such as
under-balanced and horizontal drilling that could enable us to reduce or
eliminate reservoir damage and increase reservoir contact, resulting in enhanced
flow rates, and 3) advances in stimulation technologies, primarily fracturing
techniques that have been used successfully in other areas to increase
production profiles and lengthen productive lives of wells. As an additional
advantage, there is a natural gas processing facility with excess capacity
located within our acreage that, if we are successful with initial drilling,
should enable us to immediately connect wells to sales lines. We continue to
perform geological and engineering evaluations and have begun to present this
project to potential joint venture participants.

     We have evaluated our ownership in the approximately 4,400 gross (2,200 net
to our interest) leasehold acres in the Powder River Basin of Wyoming, in areas
we refer to as West Recluse, Glasgow and Bill and in the seven currently
producing wells that we own at West Recluse. Because this is not a core area of
development and because we feel our other projects offer greater opportunity for
larger development potential, we sold a major portion of our ownership in this
area on September 30, 2004. We sold 90% of our interest in this acreage position
and 90% of our interest in the existing seven producing West Recluse wells. As
part of the agreement, we retained a 5% carried working interest in all
additional wells drilled on this acreage. We received sales proceeds of
approximately $1.255 million.


                                       10

<PAGE>


Results of Operations

     The following discussion should be read in conjunction with the audited
financial statements and notes thereto included in our annual report on Form
10-KSB for the fiscal year ended December 31, 2003; and should further be read
in conjunction with the financial statements and notes thereto included in this
report.

The quarter ended September 30, 2004 compared with the quarter ended September
30, 2003.

     We recorded losses of $45,725 (nil per common share) and $202,251 (one cent
per common share) for the quarters ended September 30, 2004 and 2003,
respectively. Our revenues from oil and gas production increased from $29,853
for the third quarter ended September 30, 2003 to $259,781 for the third quarter
ended September 30, 2004.

     For the quarter ended September 30, 2004, we recorded $94,159 in revenues
from the sale of 24,158 MCF of natural gas for an average net price of $3.90 per
MCF, and $165,622 in revenues from the sale of 3,860 barrels of oil for an
average net price of $42.91 per barrel. Lease operating expenses and production
taxes were $31,383, or $3.98 per barrel of oil equivalent ("boe") produced,
resulting in net income from oil and gas operations of $228,398. We recorded
depreciation, depletion and amortization expense associated with our oil and gas
operations for the quarter ended September 30, 2004 of $58,472, or $7.42 per
boe.

     For the prior year quarter ended September 30, 2003, we recorded $29,853 in
revenues from the sale of 9,129 MCF of natural gas for an average net price of
$3.27 per MCF, and there were no sales of oil production. Lease operating
expenses and production taxes were $12,995, or $8.54 per boe, resulting in net
income from oil and gas operations of $16,858. We recorded depreciation,
depletion and amortization expense associated with our oil and gas operations
for the quarter ended September 30, 2003 of $7,953, or $5.23 per boe.

     We recorded $217,588 and $210,036 in general and administrative expenses
during the quarters ended September 30, 2004 and 2003, respectively. Included in
the quarters ended September 30, 2004 and 2003 is a non-cash charge of $70,625
to compensation expense to reflect the pro-rata quarterly value of common stock
to be paid to our President and CFO through the second quarter of 2005, as a
component of his employment agreement. Included in the quarter ended September
30, 2004 is a $23,875 non-cash charge to Directors' expense for the value of
common stock paid to one of our Directors.

The nine months ended September 30, 2004 compared with the nine months ended
September 30, 2003.

     We recorded losses of $396,430 (two cents per common share) and $579,555
(two cents per common share) for the nine months ended September 30, 2004 and
2003, respectively. Our revenues from oil and gas production increased from
$29,853 for the nine months ended September 30, 2003 to $407,458 for the nine
months ended September 30, 2004.

     For the nine months ended September 30, 2004, we recorded $187,286 in
revenues from the sale of 47,519 MCF of natural gas for an average net price of
$3.94 per MCF, and $220,172 in revenues from the sale of 5,447 barrels of oil
for an average net price of $40.42 per barrel. Lease operating expenses and
production taxes were $66,306, or $4.96 per boe, resulting in net income from
oil and gas operations of $341,152. We recorded depreciation, depletion and
amortization expense associated with our oil and gas operations for the nine
monhs ended September 30, 2004 of $97,069, or $7.26 per boe.

     For the prior year nine month period ended September 30, 2003, we recorded
$29,835 in revenues from the sale of 9,129 MCF of natural gas for an average net
price of $3.27 per MCF, and there were no sales of oil production. Lease
operating expenses and production taxes were $12,995, or $8.54 per boe,


                                       11

<PAGE>


resulting in net income from oil and gas operations of $16,858. We recorded
depreciation, depletion and amortization expense associated with our oil and gas
operations for the nine months ended September 30, 2003 of $7,953, or $5.23 per
boe.

     We recorded $640,401 and $587,340 in general and administrative expenses
during the nine months ended September 30, 2004 and 2003, respectively. Included
in the nine months ended September 30, 2004 and 2003 is a non-cash charge of
$211,875 and $70,625, respectively, in compensation expense, to reflect the
pro-rata quarterly value of common stock to be paid to our President and CFO
through the second quarter of 2005, as a component of his employment agreement.
Included in the nine months ended September 30, 2004 is a $50,125 non-cash
charge to Directors' expense for the value of common stock paid to one of our
Directors.


Liquidity and Capital Resources

     During the nine months ended September 30, 2004, we received a total of
$4,500,000 through the sale of 3,000,000 shares of common stock. We also
received a total of $1,525,000 (approximately $1,518,000 net of fees and
commissions) through the sale of 1,525,000 shares of common stock at $1.00 per
share. We received approximately $1,255,000 from the sale of a portion of our
interest in seven producing coalbed methane gas wells and approximately 4,100
undeveloped coalbed methane acres. We also received a total of $326,247 from the
sale of one-third of our interests in our Big Sky Project. At September 30,
2004, we had a working capital amount of approximately $6,723,000.

     We anticipate that our current cash position will be sufficient to fund our
known cash requirements for the next 12 months, although we intend to continue
financing efforts to support additional oil and gas operations. We anticipate
our total cash requirements for the next 12 months to be approximately
$2,800,000 to fund drilling operations at our Big Sky Project, to fund our
general and administrative expenses and to fund other oil and gas related costs
such as land and geological costs. We expect to be able to fund these
requirements with existing capital and expected cash flow from oil and gas
operations. We may require additional capital to fund drilling and other related
costs in our identified and in other projects. Accordingly, we may need to raise
additional capital through sale of equity or debt.

     We have not entered into any commodity swap arrangements or hedging
transactions. Although we have no current plans to do so, we may enter into
commodity swap and/or hedging transactions in the future in conjunction with oil
and gas production. We have no off-balance sheet arrangements. We paid
$1,558,240 during the nine months ended September 30, 2004 for drilling and
completion costs, leasehold costs, acquisition of acreage and delay rentals with
respect to our identified oil and gas projects.

ITEM 3.  CONTROLS AND PROCEDURES

     In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an
evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of September 30, 2004 to provide reasonable
assurance that information required to be disclosed in our reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms.

     There has been no change in our internal controls over financial reporting
that occurred during the quarter ended September 30, 2004 that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.


                                       12
<PAGE>


                                    PART II.
                                OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and use of Proceeds

                  On September 28, 2004, the Company completed a private
         placement of common stock, pursuant to which the Company sold a total
         of 3,000,000 shares of its common stock at a price of $1.50 per share.
         Pursuant to this offering, the Company paid a placement fee of $45,000
         in cash and issued 30,000 shares to an individual who assisted in
         securing the private placement.

                  On March 19, 2004, the Company sold 1,525,000 shares of its
         common stock at a price of $1.00 per share. The Company did not pay a
         placement commission or fee in connection with this sale.

Item 6. Exhibits.


-----------------------------------------------------------------------------
EXHIBIT NO.                        DESCRIPTION
-----------------------------------------------------------------------------
3(i)             Articles of Incorporation of the Company.(1)
---------------------------- ----------------------- ------------------------
3(ii)           Bylaws of the Company (as revised on December 12, 2002).(2)
-----------------------------------------------------------------------------
31.1            302 Certification of Chief Executive Officer
-----------------------------------------------------------------------------
31.2            302 Certification of Chief Financial Officer
-----------------------------------------------------------------------------
32.1            906 Certification of Chief Executive Officer
-----------------------------------------------------------------------------
32.2            906 Certification of Chief Financial Officer
-----------------------------------------------------------------------------

----------------
(1)  Incorporated by reference from the Company's Form 10-SB, file number
     000-31547, filed on September 18, 2000.
(2)  Incorporated by reference from the Company's Form 10-KSB/A, filed on
     November 18, 2003.


                                   SIGNATURES
                                   ----------

     In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

       Signatures                     Title                         Date
       ----------                     -----                         ----


 /s/ Patrick D.  O'Brien    Chief Executive Officer and       November 15, 2004
------------------------    Chairman of The Board of
Patrick D. O'Brien          Directors



 /s/ Andrew P. Calerich     President, Chief Financial         November 15, 2004
-----------------------     Officer and Director
Andrew P. Calerich


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