<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 October 31, 1998
                                       OR
   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                         SECURITIES EXCHANGE ACT OF 1934

                          Commission File Number 211662

                           FRONTIER OIL & GAS COMPANY
             (Exact Name of Registrant as Specified in its Charter)

         DELAWARE                                         76-0392937
(State or Other Jurisdiction of                        (I.R.S Employer
 Incorporation or Organization)                         Identification No.)

               9839 WHITHORN DRIVE
               SUITE B
               HOUSTON, TEXAS                                77095
(Address of Principal Executive Offices)                  (Zip Code)


       Registrant's telephone number, including area code: (281) 856 6199

        Securities registered pursuant to Section 12(b) of the Act: None

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

                                 TITLE OF CLASS

                     COMMON STOCK, PAR VALUE $0.02 PER SHARE

               INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS, AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.
YES [ ]    NO [X]

               INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS
PURSUANT TO ITEM 405 OF REGULATION S-B IS NOT CONTAINED HEREIN, AND WILL NOT BE
CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR
INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB
OR ANY AMENDMENT TO THIS FORM 10-KSB. [X]


                                       1
<PAGE>   2
  REGISTRANT'S REVENUES FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998 .... $80,344

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

      INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTION 12, 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT.
YES [ ]   NO [ ]

      AS OF OCTOBER 31, 1998, THERE WERE 3,313,519 SHARES OF REGISTRANT'S STOCK
OUTSTANDING. THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT CANNOT BE DETERMINED AT THIS TIME. THE LAST
QUOTED HIGH BID AND LOW ASKED PRICES IN THE OVER-THE-COUNTER MARKET WERE $.03
AND $.01, RESPECTIVELY, ON SEPTEMBER 20, 1985.


NOTE:  THE EXHIBIT INDEX (PART IV, ITEM 1) APPEARS ON PAGES 24 AND 25.



                                       2
<PAGE>   3
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION:                                                PAGE
-----------------------                                                 ----
<S>                                                                     <C>
                                    PART I


1      Business                                                            5

2      Properties and Production                                          12

3      Legal Proceedings                                                  16

4      Submission of Matters to a Vote of Security Holders                16


                                     PART II

5     Market for Registrant's Common Stock and Related
      Security Holder Matters                                             17

6     Management's Discussion and Analysis of Financial
      Conditions and Results of Operations                                18

7     Financial Statements and Supplementary Data                         19

8     Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure                                                19

                                    PART III

9.    Directors and Executive Officers of the Registrant                  20

10.   Executive Compensation                                              21

11.   Security Ownership of Certain Beneficial Owners and
      Management                                                          22

12.   Certain Relationships and Related Transactions                      23

</TABLE>


                                       3
<PAGE>   4
<TABLE>
                                    PART IV
<S>                                                                      <C>
13.   Exhibits, Financial Statements, Schedules and Reports              24
      on Form 8-K
</TABLE>



                                       4
<PAGE>   5
                                     PART I

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

                                ITEM 1. BUSINESS

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



Frontier Oil & Gas Company, is a Delaware corporation ("Frontier" or the
"Company") with its principal business offices at 9839 Whithorn Drive, Suite B,
Houston, Texas 77095. The Company's primary business is acting as general
partner for a Partnership, described below, which holds an interest in certain
coal seam gas properties in Rio Arriba County, New Mexico. The Company seeks to
acquire and develop oil and gas properties. Previously, the Company, through its
predecessors, acquired non-producing oil and gas leases, which it assigned to
third parties for cash and a residual interest. Those properties are currently
developed and held by production. The Company also previously engaged in the
production and sale of oil and gas. The Company, through 1998, brokered the sale
of coal seam gas properties which generate tax credits under the internal
revenue code.

FRONTIER PRODUCTION LIMITED PARTNERSHIP. Pursuant to an agreement effective as
of July 1, 1993, the Company sold all of its Fruitland Coal Seam gas properties
in the Carracas Canyon Federal Unit in Rio Arriba County, New Mexico, to
Frontier Production Limited Partnership (the "Partnership"), a Texas Limited
Partnership, of which the Company is the general partner and FAR Gas
Acquisitions Corporation is the limited partner. The Company, as general
partner, manages the properties and, after expenses, is entitled to 1.0% of the
revenues of the Partnership, and is obligated for 1.0% of the expenses. The
limited partner is entitled to 99.0% of the revenues and is obligated for 99.0%
of the expenses.

The purchase price paid by the Partnership to the Company was $1,812,652, of
which $25,152 was paid in cash, with the balance to be paid in deferred payments
which bear interest at 7.25% per annum. The sum of $240,000 was paid to the
Company in quarterly installments of principal and interest, commencing October
1, 1993. The balance of $1,547,500 is payable pursuant to a reserved production
payment, when, as and if gas is produced and sold. In addition, the Partnership
is obligated to make quarterly incentive payments to the Company, equal to 35%
of the value of the Section 29 tax credits earned from all natural gas produced
and sold from the property through December 31, 2002. During the one year period
ended October 31, 1998, the Company earned $23,148 in incentive payments and was
paid $38,736 in respect of the reserved production payment. After the
Partnership has produced and sold 1,170,000 Mcf of gas, the Company, as general
partner, will be entitled to 70.0% of the Partnership revenues and be obligated
for 70.0% of the expenses, and the limited partner's interest will be reduced to
30.0%. To date, the Partnership has produced and sold 605,791 Mcf of gas.



                                       5

<PAGE>   6
The $1,547,500 production payment is payable solely from the sale of production
when, as and if produced. If the gas prices in effect at October 31, 1998 were
to remain constant, the Company would be unable to collect the principal and
interest amounts due under the contractual terms of the production payment.
Management has measured the possible impairment of the collectability of the
production payment, based on current reserve studies, by using the present value
of future cash flows discounted at the contractual 7.25% interest rate. At
October 31, 1998 a valuation allowance to adjust the receivable to the amount
currently expected to be collected was calculated. At October 31, 1998, the date
of the engineering evaluation of the reserves supporting the production payment,
the price of natural gas was $1.50 per Mmbtu, resulting in the valuation of
$886,123 of such reserves as of that date. This reserve may be changed in the
future depending upon gas prices actually realized by the Partnership. The
collectability of the interest and the principal amount of the production
payment depends on the price of natural gas over the period the contractual
volume is delivered. It cannot be predicted at this time whether or not the
Registrant will ultimately collect all or a substantial portion of the
production payment, together with the contractual interest. If natural gas
prices average approximately $2.06 per Mcf over the period of time required to
produce the 1,170,000 Mcf, but prior to December 31, 2002, the full amount of
the production payment will be recovered by the Registrant.

The incentive payment is dependent only on volume of gas produced and is not
related to gas prices, but is based on 35% of the federal tax credits under
Section 29 of the Internal Revenue Code of 1986, as amended, ("Internal Revenue
Code") allocable to production from the properties. The MMbtu amount is adjusted
annually and will be so adjusted in each year through December 31, 2002,
depending upon the percentage change in GNP implicit price deflator for the
preceding calendar year, and has increased between 2% and 5% per year since the
enactment of Section 29 of the Internal Revenue Code. The credit for calendar
1998 is approximately $1.0552 per MMbtu produced effective January 1, 1998. The
market price of natural gas will have no effect on the amount of the incentive
payments.

AGREEMENTS WITH DELTA PARTNERS, INC. AND DELTA ASSOCIATES, INC. In December
1991, through a predecessor, the Company entered into a joint venture agreement
with Delta Partners, Inc., a Nevada corporation to provide for: (i) management
services; (ii) additional working capital; and, (iii) an ongoing business
relationship. The joint venture included (a) a management agreement; (b) a
subscription agreement; (c) a stock option agreement; and (d) an oil and gas
prospects agreement. Effective January 1, 1994, certain principal shareholders
of Delta Partners, Inc. dissolved that corporation and formed Delta Associates,
Inc., a Texas corporation, herein collectively referred to as "Delta" unless the
context requires otherwise. The agreement between the Company and Delta
Associates, Inc., expired on January 1, 1999. Since the expiration of the
initial term, the Company and Delta have continued to work together by mutual
consent with Dennis Jones, acting as a Consulting Manager and President of the
Company; that arrangement will continue until October 31, 1999.



                                       6
<PAGE>   7
Under the 1991 agreements, Delta purchased 428,571 shares of the Company for
a purchase price of $180,000. The subscription payment to the Company was in the
form of quarterly advances which were, in turn, paid back to Delta as management
fees. Additionally, Delta was granted options at $0.42 per share; and, at
October 31, 1998, Delta owned 979,464 shares. The stock options issued to Delta
has a term of five (5) years from January 1, 1994 and provides for exercise at
any time in whole or in part. The options contain anti-dilution provisions in
the event of a stock split, stock dividend, any other change in the character or
amount of the Company's stock or in the event of a business combination of the
Company with another entity. The option agreement provides for restrictions on
transfer of the stock including restrictions on transfer in the event of a
future underwriting of the Company's stock. The Delta options will expire on
January 1, 1999.

Under the 1991 agreements, Frontier had an option under which it might acquire
an interest in oil and gas prospects developed by Delta. Under the Oil and Gas
Prospects Option Agreement, Delta granted to the Company an option to purchase a
fifty percent (50%) interest in any oil and gas prospect developed by Delta for
a period of five (5) years. The initial term was extended and now runs for five
(5) years, commencing January 1, 1994. The option relates to the net interest
retained by Delta (after all overrides, working interests and concessions to
third parties) with respect to any oil and gas prospect developed by Delta
throughout the option term. From 1996 through 1998, Delta had developed no
producing properties under which the Company could have purchased an interest;
that agreement will expire on January 1, 1999.

SECTION 29 TAX CREDITS

In April 1995, the Company agreed with Meridian Investments, Inc., ("Meridian")
of Quincy, Massachusetts, under which Meridian has engaged the Company to assist
in the identification of companies producing qualified Section 29 tax credit
interests to be passed on to Meridian's institutional clients.

The Company has acted as a non-exclusive agent to identify the names of
companies willing to consider the sale of its Section 29 tax credits. In a
transaction arranged by the Company, one of Meridian's institutional clients
acquired all of the outstanding stock of FAR Gas Acquisitions Corporation of
Denver, Colorado. The transaction was concluded in December 1996 and resulted in
a fee being paid to the Company of $253,000; $92,000 of which was paid in cash
and the balance of which is to be paid in installments over 5 years. The
agreement between the Company and Meridian expired on April 13, 1996 and the
Company is no longer actively pursuing tax credit deals.

GENERAL. Since it commenced business, the Company or its predecessors,
associates, or joint venture partners, participated in the drilling of 41
exploration and 13 development wells. Of the 41 exploration wells drilled, 14
were completed as oil or gas discoveries and 27 were abandoned as dry holes.
Subsequently, two of the completed exploration wells were abandoned, and 10 were
sold. Eleven of the 13 development wells were completed, but all have been sold
or abandoned.



                                       7
<PAGE>   8
At this date, the Company holds a 17.5% working interest in a well in Sweetwater
County, Wyoming which is presently shut in, see "Properties and Production". The
Company's only materially important assets are its interest as general partner
of the Partnership and the reserved production payment owed to the Company by
the Partnership.

OTHER OPERATIONS:

NET OIL AND GAS PRODUCTION. The following presents the net quantities of oil and
gas produced from the Partnership's oil and gas interests for the year ended
October 31, 1998:

<TABLE>
<CAPTION>
                                          Year Ended
                                        October 31, 1998
                                        ----------------
<S>                                     <C>
              Oil (bbls.)                      0
              Gas (mcf.)                  70,246
</TABLE>

               All such gas was produced from the Rio Arriba Properties
described below.

OIL AND GAS CONTRACTS AND PRICES. The gas produced from the Rio Arriba
Properties is dedicated to Northwest Pipeline Corporation with the price being
based on the spot prices in the San Juan basin, reduced by Northwest's
system-wide costs for transportation, gathering, processing, etc. Prices were as
high as $2.80 per Mcf in November 1997, but have been as low as $1.24 per Mcf in
September 1998.

The average sales price per Mcf of gas sold by the Partnership for the period
indicated and the average production (lifting) expense per Mcf of gas for that
period were as follows:

<TABLE>
<CAPTION>
                                                 Year Ended
                                              October 31, 1998
                                              ----------------
<S>                                           <C>
Average Sales Price per Mcf (Gas)                 $   1.67
Average Production Expense per Mcf (Gas)          $   0.21
</TABLE>

Gas production from the Rio Arriba Properties is under contract with Northwest
Pipeline Corporation. The Company considers this contract material to its
business.

TOTAL GROSS AND PRODUCTIVE WELLS AND UNDEVELOPED ACREAGE. At October 31, 1998,
the Partnership had an interest in 16 gross productive gas wells located on
4,763 gross productive acres.

The Partnership's working interest in four wells is .0996875 located on 127.6
net acres and .0746474 in one well located on 23.88 net acres. The Partnership
has an additional overriding royalty interest of .00398437 in a total of sixteen
wells located on 20.399744 net acres.

The following table sets forth the Partnership's total gross and net productive
wells and developed acreage as of October 31, 1998:



                                       8
<PAGE>   9
Developed Acreage*      Gross Productive Wells     Net Productive Wells
Gross         Net       Oil    Gas                    Oil           Gas
-----         ---       ---    ---                    ---           ---
1,240.00     127.60      0      4                       0          .3988
  320.00      23.88      0      1                       0          .0746
3,202.93      20.40      0     11                       0          .0478

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


               * The Partnership's interest is in a total of 4,763 acres. The
               Partnership has a working interest in the first five wells and an
               overriding royalty interest in the remaining wells. The
               Partnership derives its interest in the Carracas Canyon Federal
               Unit through its Overriding Royalty interest under the 4,763
               acres, convertible to a working interest in certain areas deemed
               to have reached payout. Four (4) producing wells have converted
               to a working interest covering 1,240 acres in the participating
               area and another productive well covering 320 acres. The
               Partnership has an unconverted Overriding Royalty under eleven
               (11) other wells in the participating area.

EMPLOYEES. At October 31, 1998, the Company had two (2) employees. In addition
to this staff, Frontier periodically will utilize the services of part-time
consultants.

OPERATING HAZARDS AND UNINSURED RISKS. The Company's operations are subject to
all the risks inherent in the exploration for and production of oil and gas,
including blowouts, cratering and fires, all of which can result in damage to or
destruction of oil and gas wells or formations, producing facilities or
property, personal injury or loss of life, or pollution damages. The Company
generally will carry insurance against various of these risks but because
insurance with respect to certain of such risks is either not available or is
limited in its coverage, the Company may elect not to insure due to prohibitive
premium costs. The occurrence of an event not fully insured against could result
in the Company incurring substantial costs. Notwithstanding the foregoing, the
Company does not expect to be the operator of any wells in which it has an
interest. In general, the terms of any operating agreements will provide for the
operator to insure against most of these risks.

TITLE TO PROPERTIES. The Company will follow practices customary in the industry
with respect to title matters. Prior to the commencement of any drilling
operations, a title examination will be conducted to determine defects in title.
In the event that material defects or disputes exist with respect to title, the
Company could suffer title failures or incur substantial costs in attempting to
remedy such title defects or resolve such disputes.

The properties owned and to be owned by the Company or the Partnership will be
subject to royalty, overriding royalties and other outstanding interests
customary in the industry.

COMPETITION AND MARKETS. The Company and the Partnership compete and will
compete with numerous other companies and individuals in their oil and gas
activities. Their competitors include foreign producing countries, the major oil
companies and other independent oil companies, most of



                                       9
<PAGE>   10
which have financial resources, staffs and facilities substantially greater than
the Company's or the Partnership's.

Evaluation of geological and engineering data, identification and acquisition of
suitable prospects, and other aspects of the business require the Company to use
consultants to provide skilled and experienced evaluations.

Competition is encountered from other independent oil companies and from major
oil companies in acquiring properties. Many competitors have financial resources
and staffs larger than those available to the Company and its future success
will depend in large part upon its ability to discover reserves by selecting and
acquiring suitable prospects.

For oil and gas produced from leases in which the Company or the Partnership own
or will own an economic interest, the availability of a ready market for
production and the prices obtained for production will depend upon a number of
factors beyond its control, the effects of which cannot be accurately predicted.
Such factors include: the extent of domestic production and imports of oil; the
competitive position of oil and gas as a source of energy vis-a-vis coal, atomic
energy, hydroelectric power, and other energy forms; the availability and
capacity of pipelines and other means of transportation; and the effect of
federal and state regulations on production, transportation and sale of oil and
gas.

In addition, the Company will face competition in connection with the formation
of oil and gas investment programs. The sale of limited partnership and other
investment programs in all forms is highly competitive, particularly with
respect to programs which have been registered under securities laws for sale to
the public. Oil and gas programs are generally offered for sale to persons with
substantial financial resources and persons who are interested in obtaining
certain tax advantages from these investments. These persons are limited in
number. The competition for oil and gas investment money is intense, and the
Company will compete with other companies which can demonstrate successful
operations of prior programs to prospective investors, as well as with companies
which have substantially greater resources and more extensive operating
histories.

REGULATION. The production and sale of oil and natural gas in the United States
are subject to extensive regulations by both federal and state authorities,
particularly with respect to pricing, allowable rates of production, marketing
and environmental matters.

NATURAL GAS REGULATION. The Natural Gas Policy Act of 1978 ("NGPA") provided for
federal regulation of well-head sales of natural gas and scheduled future
deregulation of well-head sales of some categories of natural gas. Certain
"high-cost natural gas" was deregulated effective November 1, 1979. "New"
natural gas and some "intrastate" gas became deregulated effective January 1,
1985. On July 26, 1989, the Natural Gas Wellhead Decontrol Act of 1989 (the
"Decontrol Act") was enacted. The Decontrol Act amends the NGPA to remove, as of
certain dates ranging from July 27, 1989 to January 1, 1993, all remaining
federal price controls from natural gas.



                                       10
<PAGE>   11
FEDERAL CRUDE OIL REGULATION. In 1989, President Reagan eliminated all federal
price and allocation controls on United States oil production and marketing. The
order allows all crude oil and refined products to be sold at free market
prices. This action may be modified by future Presidential or Congressional
action. Controls may be reinstated by Congress, which may also adopt new
legislation extending price and allocation controls or imposing new ones.

PROPOSED LEGISLATION. As a general rule, there are federal proposals relating to
the regulation of the oil and gas industry being considered by Congress which,
if enacted, could have a material effect on the business of the Company. Such
proposals include a broad based energy tax based on Btu content, restrictions on
the use of natural gas and crude oil, the introduction of the federal government
directly into the energy business through the purchase and allocation of
imported crude oil and petroleum products, the creation of a federally-owned oil
company to compete directly with privately-owned companies, and the freezing or
otherwise controlling of the price of oil and gas.

ENVIRONMENTAL REGULATIONS. The Company is subject to various federal, state and
local provisions regarding environmental matters, the existence of which is not
expected materially to hinder or adversely affect the Company's business.
Although the Company does not believe its expected business operations will
impair environmental quality, compliance with federal, state and local
regulations which have been enacted or may be adopted relating to the discharge
of materials into the environment could have a material adverse effect on its
capital expenditures, earnings and competitive position. Since inception,
neither FEC nor Frontier has made any material capital expenditures for
environmental control and neither would expect to make any such expenditures.

STATE REGULATIONS. The operations of the Company will be subject to regulation
by state conservation commissions which have authority to issue permits prior to
the commencement of drilling activities, establish allowable rates of
production, control spacing of wells, protect against waste, and aid in the
conservation of natural gas and oil. Typical of state regulatory requirements
are regulations promulgated by government agencies which require, among other
things, a permit to drill and to produce oil or gas, requirements for protecting
fresh water horizons and to insure that wells will be properly plugged and
abandoned.

FEDERAL INCOME TAXATION. The operation of the Company, as is generally the case
in the oil and gas industry, is significantly affected by the impact of federal
income tax laws. Over the years, Congress has substantially reduced the
availability of deductions with respect to oil and gas production.

In addition to the foregoing, the federal tax laws require that the actual cost
of equipment on producing properties such as pipe, casing, tubing, storage
tanks, pumps and other items considered to have a salvage value, be capitalized
and be charged to expense through acceptable depreciation methods. Lease
acquisition costs on producing properties must be capitalized and may be
recovered through the allowance for depletion, if the lease produces, or as a
loss if the lease does not produce and is determined to be worthless or is
abandoned, or as an offset against sales proceeds in determining the gain on
sale from the sale or disposition of the lease. Geological and geophysical



                                       11
<PAGE>   12
costs must be capitalized and recovered in the same manner as lease acquisition
costs. Operating costs after a well is drilled and equipped are deductible as
ordinary business expenses.

In addition to the foregoing, federal tax laws have many provisions applicable
to corporations in general which have an impact on the potential tax liability
of the Company. Any adverse change in the existing provisions of the Internal
Revenue Code, including the reduction or elimination of percentage depletion or
the enactment of an incremental federal tax on oil and gas production, could
have a materially adverse impact on the Company's operations. The natural gas
produced by the Company and the Partnership from the Rio Arriba Properties (see
"Properties and Production" below) qualifies for certain Federal income tax
credits under Section 29 of the Internal Revenue Code. Section 29 was designed
to encourage the development of alternative, qualified fuels such as methane
associated with coal beds, and provides a credit for the production and sale of
such fuels until December 31, 2002. Under Section 29, the initial credit
commenced at $3.00 for the Btu equivalent of one barrel of oil. For the purposes
of the Act, one barrel of oil is assumed to have 5.8 times the Btu value of one
Mcf of gas (one Mcf of gas is the rough equivalent of one MMbtu of oil). In
1987, the $3.00 credit adjusted annually for inflation, was $4.49 per barrel;
the usable tax credit per Mcf of gas is obtained by dividing the credit amount
by 5.8, which worked out to be approximately 77 cents per Mcf in 1987. The
credit is adjusted annually for inflation.

Since the tax credit is calculated on the amount of qualified fuel produced, and
is not related to the income from the fuel produced, the credit will offset not
only tax liability on the income from the qualified fuel, but may also offset
the tax on other income, to the extent such tax exceeds the alternate minimum
tax payable by a taxpayer. The incentive payment payable to the Company pursuant
to the sale of its Fruitland Coal Seam gas production to the Partnership is
based on approximately 35% of the Section 29 credits earned by the Partnership.
(See "Frontier Limited Partnership" above).

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

                        ITEM 2. PROPERTIES AND PRODUCTION

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

The Partnership has producing and non-producing oil and gas interests in New
Mexico and the Company has non-producing interests in Wyoming as summarized in
the following table:

<TABLE>
<CAPTION>
                                              Overriding and
                                                Production
                    Approximate    Working       Royalty            Net Rev.
Location              Acreage     Interest       Interest           Interest
--------            -----------   --------    --------------        --------
<S>                 <C>           <C>         <C>                   <C>
Rio Arriba County,     1,240*       12.5%           -0-              9.96875%
  New Mexico             320*       10.0%           -0-              7.46474%
                       3,203*         -0-            2%             0.398437%
</TABLE>



                                       12
<PAGE>   13
<TABLE>
<CAPTION>
                                              Overriding and
                                                Production
                    Approximate    Working       Royalty            Net Rev.
Location              Acreage     Interest       Interest           Interest
--------            -----------   --------    --------------        --------
<S>                 <C>           <C>         <C>                   <C>
Sweetwater County,
  Wyoming               640        17.5%            -0-             13.9125%
</TABLE>

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

*              The Partnership's interest in the Carracas Canyon Federal Unit is
               limited to a total of 4,763 acres. It owns the working interest
               shown in the 1,240 and 320 acre tracts and an overriding royalty
               interest in the remaining 3,203 acres. The Partnership derives
               its interest in the Carracas Canyon Federal Unit through its
               Overriding Royalty interest under the 4,763 acres, convertible to
               a working interest in certain areas deemed to have reached pay
               out. Four (4) producing wells have converted to a working
               interest covering 1,240 acres in the participating area and
               another productive well covering 320 acres. The Partnership has
               an unconverted Overriding Royalty under eleven (11) other wells
               in the participating area.

RIO ARRIBA COUNTY, NEW MEXICO: In June of 1985 FEC agreed to sell to Amoco
Production Company ("Amoco") all of its 50% working interest in leases acquired
from Kenai Oil & Gas, Inc. under 5,082.93 acres, and to acquire from Exeter
Exploration Company, and to sell to Amoco, the remaining 50% working interest.
The leases had expiration dates between August, 1985 to April, 1987. On July 15,
1985, FEC completed the sale of its 100% working interest under those leases,
retaining an overriding royalty of 2% and agreeing with Amoco that the overrides
would be convertible to 15% of the working interest after payout.

To prevent the expiration of the leases, Amoco farmed out to Jerome P. McHugh &
Associates ("McHugh") and McHugh included those leases in the formation of the
Carracas Canyon, a Federal Exploratory Unit ("Unit").

McHugh assembled and included in its application for the Unit a total of
30,720.31 acres. The Unit was applied for in October of 1986 and FEC, as a
royalty owner, ratified and joined in its formation. In 1989, McHugh and
partners commenced development drilling on the Carracas Canyon Unit.

The leases contain a total of 4,762.93 acres. One of the leases (NM-28812) was
split by the Amoco-Kindermac farmout agreement such that wells located in two of
the sections (1,240 acres) cannot be converted to a working interest, but under
which the Partnership continues to retain its 2% overriding royalty for the life
of the wells. Wells on the remaining areas of that lease can be converted to a
12.5% working interest at payout. Payout is to be calculated on a lease by lease
basis. Even though there are areas within the NM-28812 lease that cannot be
converted, all wells on the lease still contribute toward payout. The other two
leases both carry a 2% overriding royalty that is convertible to a full 15%
working interest payout. The terms of all of the leases are the same.

In developing the Unit, McHugh drilled and completed 62 wells through October
31, 1993. Under 5 wells, the Company elected to convert its overriding royalty
interest to a 12.5% working interest in June of 1992. Such interests are now
owned by the Partnership.



                                       13
<PAGE>   14
The operator, Nassau Resources, Inc. ("Nassau"), has elected to shut in several
of the wells under which the Partnership is entitled to receive royalties and
management has no input or control over the operation of any completed well
where it has only an overriding royalty. No information in respect of wells
completed during development of the Unit has been furnished to the Partnership;
the Unit operator is under no obligation to furnish such information, nor does
management anticipate that it will be contacted in the future in respect of the
intention of the operator to flow or shut-in any well. However, on wells where
the Partnership now owns an operating working interest, the operator is required
to provide operating information and any plan in respect of future drilling and
development.

One of the 62 wells on the Unit is a water disposal well. All of the wells were
drilled through the Fruitland coal seams to depths of 3,500 to 4,000 feet. Of
the 62 wells drilled, there have been 22 wells drilled on acreage where the
Company has an interest. There is a potential for additional development on
those leases. There are other horizons which produce in the basin from strata
other than the Fruitland Coal Seam.

The operator's election not to put all wells on production is due to relatively
high operating costs and low gas prices. The Company has been advised that the
operator has elected to produce only the most prolific wells. As economics
improve, management believes that the operator will elect to put additional
wells on production. As of October 31, 1998 there were 16 wells producing and,
of those wells, the Partnership has a 12.5% working interest under 4 of those
wells and a 10.0% working interest under one well.

Revenue is being distributed according to the participant's respective revenue
interests in the "participating areas". The participating area is comprised of
320 acre units that are assigned to the wells that are producing within the
participating area. The interest in the gas produced is then calculated from the
interest in the participating area. The Partnership's revenue interest in the
wells now producing is .003984. As wells are placed on production, the operator
circulates new division orders for the gas produced.

Gas is being sold on the spot market and it is taken into the Northwest pipeline
system; it is also gathered via the Northwest gathering system. Northwest
charges a flat $.30 per Mcf for gathering. Historically, the operator has
provided the compression and dehydration, but in November 1991, Northwest
assumed those duties and thereby cut the operating cost to the Unit owners.

There is some additional development possible within the Unit on the approved
320 acre spacing; however, all of the Partnership's acreage is considered fully
developed under the present spacing rules for the Unit. There is ultimately the
possibility of infill drilling on the Unit, should future regulations allow 160
acre spacing; management believes reduced spacing is not likely and no study of
potential infill reserves has been made.

The 63 wells drilled through October 31, 1998 are completed in the Fruitland
coal seams. A typical well shows about 18 feet of coal seams located at a depth
of 3,880 ft. to 3,960 ft., with the bulk of



                                       14
<PAGE>   15
the coal concentrated in a single seam. The wells on the east side of the unit
average about 17 feet of coal, while the total area averages 20 feet. The
thickest coals are located on the north side of the Unit with individual seam
thickness of up to 22 feet.

The production payment payable to the Company from the production from the Rio
Arriba County properties owned by the Partnership is the principal asset of the
Company. See "Item 1. Business - Frontier Production Limited Partnership" above.
The firm of Fairchild, Ancell and Wells, independent petroleum engineers,
evaluated all of the Partnership's interests in Rio Arriba County. The report
estimates the present value of such properties at October 31, 1998 to be
$687,000, exclusive of the value of Section 29 tax credits referred to below
after discounting total projected cash flow under existing wells by 10% per
annum. Estimated future net cash flow (undiscounted) at such date is $1,132,448.
The value of the Section 29 credits is dependent upon the total taxable income
of the owner from year to year. The Company will realize some additional value
available to it because of the incentive payments from the Partnership pursuant
to the Frontier Production Limited Partnership Agreement. For the year ended
October 31, 1998 the Company received $23,148 in incentive payments from the
Partnership.

The estimated reserves indicated above are estimates only and should not be
construed as being exact quantities. Such estimated reserves, therefore, may or
may not be recovered and if recovered in amounts which are more or less than the
estimated amounts, the revenues therefrom will correspondingly increase or
decrease.

The present value of estimated future net cash flow is computed by discounting
the aggregate estimated future net cash flow by ten percent (10%). The 10%
discount rate does not purport to represent the time-value of money nor the rate
of return a third party might deem necessary in properly evaluating the
producing properties for purchase. The present values so determined do not
necessarily represent the fair market value of the properties.

No estimates of Company's total proven net oil or gas reserves have been filed
with or included in any report to any federal authority or agency.

SWEETWATER COUNTY, WYOMING: The other asset of Frontier is a seventeen and
one-half percent (17.5%) working interest in the Hay Reservoir-Great Divide in
Sweetwater County, Wyoming in which one gas well was drilled in 1982. All
revenue produced from 1990 to date has been applied to operating costs
attributed to the Company's interest. The 640 acres being held by production
carries royalties and overriding royalties totaling twenty and one-half percent
(20.5%), with the remaining seventy-nine and one-half percent (79.5%) net
revenue interest allocated to the working interest owners. The Company's net
revenue interest is 13.9125%. A substantial amount of gas was produced prior to
1990 and sold without accounting to Frontier Energy Corporation (FEC) or
Frontier for its interest and a dispute exists between the present operator and
all prior operators. The gas previously sold from the drilled well qualified as
Section 107 priced gas under the Natural Gas Policy Act of 1978 ("NGPA") and
accordingly was deregulated. The well is presently shut-in, and management
believes the well to be non-commercial at this time. No value is ascribed to
this asset



                                       15
<PAGE>   16
in the Company's ongoing business, nor is it recorded in the financial
statements.

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

                            ITEM 3. LEGAL PROCEEDINGS

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

The Company is not a party to any legal proceedings.

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

           ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

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

The Company's principal shareholders, holding sufficient shares to conduct
business in lieu of an annual meeting, elected to do so on September 15, 1998.
The only matter voted was in respect of the election of three (3) directors for
the ensuing year until the next annual meeting.

There were an aggregate of 3,313,519 shares outstanding and entitled to vote at
such date of which 2,949,636 shares were represented in person or by proxy. The
following persons were elected as directors:

<TABLE>
<CAPTION>
                                                    Votes for
                                                    ---------
<S>                                                 <C>
         Robert M. Davant                           2,949,636
         Dennis A. Jones                            2,949,636
         Lani Kirsch                                2,949,636
</TABLE>



                                       16
<PAGE>   17
                                    PART II.

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

            ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
                             SECURITY HOLDER MATTERS

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

The outstanding registered common stock of Frontier Energy Corporation was last
quoted Over-The-Counter by the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") under the symbol "FROG" in 1985. The
reported high and low bid prices are shown below for the indicated periods:

<TABLE>
<CAPTION>
                                           High Bid       Low Bid
                                           --------       -------
<S>                                        <C>            <C>
For Fiscal Year Ended June 30, 1985:
  First Quarter                            $   .625       $   .50
  Second Quarter                           $   .3125      $   .25
</TABLE>


The above represent high and low bid prices of FEC's Common Stock through
January 31, 1985 were as reported by NASDAQ. After January 31, 1985, there were
not sufficient stock transactions to establish a meaningful high or low bid
price.

On September 20, 1985, the high bid and low asked prices in the Over-The-Counter
market for FEC's Common Stock were $.03 and $.01 respectively. On September 20,
1985 there were 6,392,121 shares issued and outstanding which were held by 969
shareholders.

The prices presented are bid and asked prices which represent prices between
broker-dealers and do not include retail markdowns or any commissions to the
broker-dealer. The prices do not reflect prices in actual transactions.

The Company has not paid any cash dividends of shares on its common stock. The
Company anticipates that for the foreseeable future, its earnings, if any, will
be retained for use in its business and no cash dividends will be paid on its
common stock.

In October 1992, Frontier Oil and Gas Company became the successor to Frontier
Energy Corporation through reorganization and recapitalization of the company.
As of October 31, 1998 there were 3,313,519 shares outstanding and which were
held by approximately 969 shareholders. There has not been any active trading of
the common stock since the reorganization and recapitalization.



                                       17
<PAGE>   18
--------------------------------------------------------------------------------

                  ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

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


The Company's principal source of revenue is receipts derived from the
production payment receivable from Frontier Production Limited Partnership in
respect of production from the Fruitland Coal Seam gas properties in the
Carracas Canyon Federal Unit in New Mexico, as more fully described in Item 1.
under Business.

The $1,547,500 production payment is payable solely from the sale of reserves
when, as and if produced. The ultimate amount of principal and interest
collectable on the production payment depends on the price of gas and also
the volume of production realized. If the gas prices in effect at October 31,
1998 were to remain constant, the Company would be unable to collect the
principal and interest amounts due under the contractual terms of the production
payment. Management measures annually the amount of possible impairment of the
production payment based on the current reserve study, by using the present
value of future cash flows discounted at the contractual 7.25% interest rate.

An independent engineering company evaluation of the reserves supporting the
production payment at October 31, 1998, used a current market price of gas of
$1.50 per MMbtu versus $2.52 at October 31, 1997 and also projected a slight
increase in the estimated future reserves of 12,575Mcf. Both events resulted in
a significantly lower valuation of the future reserves and the production
payment in the amount of $219,318.

It cannot currently be predicted whether or not the Company will ultimately
collect all of the principal and interest under the terms of the production
payment.

The Company also receives an incentive cash payment based on production equal to
35% of the tax credits generated from production. The incentive payment is based
on the volume of gas produced which determines the amount of Section 29 tax
credits allowed. Changes in market price have no effect on the amount of
incentive payments to the Company. The amount of incentive payments decreased
from 1997 because of a decrease in the volume of production during the year. The
Section 29 remaining tax credits will expire on December 31, 2002 and the
incentive payments will stop, but are expected to approximate $96,000 over the
next four years.

The Company's other source of revenue is derived from commission income received
as consideration for brokering Section 29 tax credits.



                                       18
<PAGE>   19
Interest income increased $31,445 in 1998 over 1997 because of a $507,526
increase in 1997 in the estimated production payment collectable based on the
higher price of gas in 1997 versus 1996. However, net income decreased from a
gain of $528,864 in 1997 to a loss of $419,549 in 1998. This change in net
income reflects primarily two factors. In 1997 the Company recognized $252,145
of commission income from brokering Section 29 tax credit properties. No such
income was recognized in 1998 and the Company does not expect any material
amount of such commission income to recur in the future. The other factor
resulted from a $507,526 increase in 1997 and a $219,318 decrease in 1998 in the
estimated production payment collectable.

General and administrative expenses decreased $7,716 in 1998 primarily because
of a decrease in professional fees incurred.

Management believes its capital resources and financial condition are adequate
for its present operations. The Company presently looks to its principal
shareholders to cover its short term financial requirements, either in the form
of equity or guarantees of short term debt. In 1998, cash increased to $4,874
from $471 in 1997. Its obligation on its line of credit increased from $26,172
to $47,405.

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

               ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

The financial statements and supplementary schedules are filed with this report
and appear after Part IV.

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

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

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

Item 4.  Change in Registrant's Certifying Accountant


         None



                                       19
<PAGE>   20
                                    PART III.

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

           ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

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


The directors and executive officers of the Company for the fiscal year ended
October 31, 1998 and until the next annual meeting of shareholders are:

<TABLE>
<CAPTION>
    Name                             First Elected                       Position
    ----                             -------------                       --------
<S>                                  <C>                                 <C>
Robert M. Davant                     October 1992                        Chairman of the Board
                                                                         of Directors, Chief Executive
                                                                         Officer and Treasurer

Dennis A. Jones                      October 1992                        Director, President and
                                                                         Chief Operating Officer

Lani Kirsch                          April 1993                          Director

Pauline A. Wilbraham                 June 1995                           Secretary
</TABLE>

Robert M. Davant, age 67. Mr. Davant served as a director of FEC from 1982. Mr.
Davant graduated from the University of Texas in 1960 and received his L.L.B.
from the University of Houston in 1963. Mr. Davant is also a director of
Seacoast Services, Inc., a Texas corporation engaged in the development of oil
field equipment.

Dennis A. Jones, age 48. During the five year period ended February, 1991, Mr.
Jones was Executive Vice President of Brehm Oil and Brehm Investment Group. He
also served during such period as chief operating officer of Brehm-Basin
Exploration, a joint venture between Brehm and Basin Exploration in Lafayette,
Louisiana. Mr. Jones is President of the Company. Mr. Jones graduated from the
University of Mississippi in 1973, and received his juris doctor from
Mississippi College of Law in 1976. Mr. Jones is a founder, director and
minority shareholder of Delta.

Lani Kirsch, age 66. Ms. Kirsch's principal occupation for at least the last six
years has been as Chairman of the Board of Kirsch Builders Supply, Inc., a
building supply and lumber company located in Frankfort, Illinois. Ms. Kirsch is
a founder, director and major shareholder of Delta which owns a substantial
interest in the Company.

Pauline A. Wilbraham, age 54. Ms. Wilbraham managed the international sales
office in London, England, for CRC-Crose International, Inc., a pipeline
equipment manufacturer and subsidiary of Crutcher Resources Corporation,
Houston, Texas. She was transferred to CRC in Houston in 1978 and in 1983 joined
Frontier Energy Corporation as office administrator.



                                       20
<PAGE>   21
--------------------------------------------------------------------------------

                         ITEM 10. EXECUTIVE COMPENSATION

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

During the year ended October 31, 1998, the Company paid direct compensation as
follows:

<TABLE>
<CAPTION>
         Name of Individual Annual
         or Identity of Group                       Capacity                     Compensation
         -------------------------                  --------                     ------------
<S>                                                 <C>                          <C>
         Robert M. Davant                           CEO                          $60,000

         Dennis A. Jones                            President                      *

         Pauline A. Wilbraham                       Secretary                    $36,400

         All officers and
         directors as a group
         (4 persons)
</TABLE>


* Mr. Jones compensation is as a consultant to the Company.

The Company paid Mr. Davant a salary as its CEO. Except as set forth above, the
Company has not paid any compensation to officers or directors.

The Company expects to pay the following compensation during the coming year:

<TABLE>
<CAPTION>
          Name of Individual
          or Identity of Group                       Capacity                    Compensation
          --------------------                       --------                    ------------
<S>                                                  <C>                         <C>
          Robert M. Davant                           CEO                         $60,000

          Dennis A. Jones                            President                      *

          Pauline A. Wilbraham                       Secretary                   $34,800

          All officers and
          directors as a group
          (4 persons)
</TABLE>


* Mr. Jones' compensation is as a consultant to the Company. Mr. Jones is
President but is not expected to devote all of his time to the business of the
Company.



                                       21
<PAGE>   22
None of the officers of the Company are employed under an employment agreement
and the Company has no bonus, pension or profit sharing plans. The Company has a
stock option plan under which options to purchase 40,000 shares of its common
stock (adjusted to reflect current capitalization) may be granted to key persons
in the form of incentive stock options (at 100% of fair market value) or
non-statutory stock options (at discounts from fair market value). No options
are presently issued under the Plan.


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

                     ITEM 11. SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

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

As of October 31, 1998, the number of shares of Frontier Common Stock (assuming
full dilution) owned by each person who is known by Frontier to own beneficially
more than 5% of its outstanding Stock, by each person who is a director of
Frontier, and by all executive officers and directors as a group is:

<TABLE>
<CAPTION>
                         Amount and Nature of
Name and Address         Beneficial Ownership(1)      Percentage
----------------         -----------------------      ----------
<S>                      <C>                          <C>
Robert M. Davant(3)          1,439,078                   41.43 %

Lani Kirsch(2)               1,302,857                   32.12 %

Dennis A. Jones(2)             201,905                    5.64 %

Frances O'Brien Riley(3)       207,654                    5.99 %

Pauline A. Wilbraham            45,424                    1.31 %

Officers and Directors
as a Group (4 persons)       2,989,264                   71.72 %

</TABLE>


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

(1) The persons named in the table have sole voting and investment power with
   respect to all shares of Common Stock shown as beneficially owned by each of
   them subject to community property laws, where applicable, and except as
   indicated below.



                                       22
<PAGE>   23
(2) Delta Associates, Inc. owns 979,464 shares and options to purchase an
    additional 639,584 shares at $0.42 per share.

(3) Mr. Davant and Ms. Riley acquired their respective shares pursuant to the
    reorganization and recapitalization of Frontier Energy Corporation ("FEC")
    in exchange for creditor claims against FEC.


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

                         ITEM 12. CERTAIN RELATIONSHIPS
                            AND RELATED TRANSACTIONS

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


Dennis A. Jones, the President of Frontier is also a founder and substantial
stockholder of Delta. Lani Kirsch, who owns 32.12% of the common stock of the
Company and is a Director, is also a founder and substantial stockholder of
Delta.

Thomas A. Morris, who was deceased on June 20, 1995, was formerly the Secretary
of the Company and also the owner of 341,767 shares. During 1996 and 1995,
respectively, Mr. Morris and his estate sold to Robert M. Davant 41,767 and
100,000 shares of his stock. The balance of 200,000 shares are the subject of an
escrow agreement between the Estate of Thomas A. Morris and the Company. The
Company is acquiring the shares to be placed in the treasury and has issued a
non-recourse promissory note in the amount of $60,000, payable over 60 months in
payment of those shares. The escrow provides for the delivery of 40,000 shares
after the payment of $12,000 in each one year payment period. To date, the
Company has repurchased 40,000 shares.



                                       23
<PAGE>   24
                                     PART IV

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

               ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES
                             AND REPORTS ON FORM 8-K

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

<TABLE>
<CAPTION>

1.  EXHIBITS
    --------
<S>       <C>

    2.1    Disclosure Statement and Plan of Reorganization dated May 29,
           1992.*

    2.2    Order of Confirmation dated October 5, 1992.**

    3.1    Articles of Incorporation of the Company.**

    3.2    Bylaws of the Company as currently in effect.**

    3.3    Specimen copy of the Company's common share certificate.**

    4.1    Form of Warrant to Purchase Common Stock of the Company.**

    10.1   1984 Stock Option Plan.***

    10.2   Purchase Agreement between the Company and its
           predecessor, Frontier Energy Corporation, effective
           October 31, 1992.**

    10.3   [Left Blank Intentionally]

    10.4   Farmout Agreement with Amoco Production dated September 22,
           1987.*

    10.5   Joint Venture Agreement dated December 18, 1991 with Delta
           Partners, Inc.*

    10.6   Management Agreement dated December 18, 1991 with Delta
           Partners, Inc.*

    10.7   Subscription and Contribution Agreement dated December 18, 1991
           with Delta Partners, Inc., as amended. *
</TABLE>



                                       24
<PAGE>   25
<TABLE>
<S>        <C>
    10.8   Stock Option Agreement dated December 18, 1991, with Delta
           Partners, Inc. as amended. *

    10.9   Oil and Gas Prospects Option Agreement dated December 18, 1991,
           as amended.*

    10.10  Agreement of Limited Partnership of Frontier Production Limited
           Partnership dated July 1, 1993.****

    10.11  Purchase and Sale Agreement dated July 1, 1993 between Frontier Oil &
           Gas Company and Frontier Production Limited Partnership.****

    10.12  Assignment, Bill of Sale and Conveyance with Reservation of
           Production Payment dated July 1, 1993 between Frontier Oil & Gas
           Company and Frontier Production Limited Partnership.****

    10.13  Joint Venture Agreement with Delta Associates, Inc.*****
</TABLE>

2.             FINANCIAL STATEMENTS:

               Audited Balance Sheets as of October 31, 1998 and 1997 and
               Statements of Operations, Shareholders' Equity, and Cash Flows
               for the years ended October 31, 1998 and 1997.

3.             REPORTS ON FORM 8-K:

               None

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

*      Incorporated by reference to the exhibits bearing the same reference and
       contained in Form 10-KSB of the Company's predecessor for the fiscal year
       ended June 30, 1992.

**     Incorporated by reference to the exhibits bearing the same reference and
       contained in Form 10-KSB of the Company for the fiscal year ended October
       31, 1992.

***    Incorporated by reference to the exhibit bearing the same reference and
       contained in Form 10-K of the Company's predecessor (FEC) for the fiscal
       year ended June 30, 1984.

****   Incorporated by reference to the exhibits bearing the same reference and
       contained in Form 8-K filed by the Company July 29, 1993.

*****  The same agreement incorporated by reference under Exhibit 10.5 as an
       extension of the Agreement dated December 18, 1991 with Delta Partners,
       Inc.



                                       25
<PAGE>   26
                           FRONTIER OIL & GAS COMPANY

                              FINANCIAL STATEMENTS

                            OCTOBER 31, 1998 and 1997



                                       26
<PAGE>   27
                           FRONTIER OIL & GAS COMPANY

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----
<S>                                                                     <C>
Independent Auditor's Report                                            28

Financial Statements:

    Balance Sheets                                                      29

    Statements of Operations                                            30

    Statements of Changes in Shareholders' Equity                       31

    Statements of Cash Flows                                            32

Notes to Financial Statements                                          33-43

Unaudited Supplementary Oil and Gas Information                        44-46
</TABLE>



                                       27
<PAGE>   28
                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Frontier Oil & Gas Company

We have audited the accompanying balance sheets of Frontier Oil & Gas Company as
of October 31, 1998 and 1997, and the related statements of operations, changes
in shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Frontier Oil & Gas Company at
October 31, 1998 and 1997, and the results of its operations and its cash flows
for the periods then ended in conformity with generally accepted accounting
principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary oil and gas information
on pages 44 through 46 is not a required part of the basic financial statements,
but is supplementary information required by the Financial Accounting Standards
Board and Securities and Exchange Commission. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the
methods of measurement and presentation of the supplementary information.
However, we did not audit the information and express no opinion on it.


                          /s/ HARPER & PEARSON COMPANY


Houston, Texas
March 23, 2000



                                       28
<PAGE>   29
                           FRONTIER OIL & GAS COMPANY
                                 Balance Sheets
                            October 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                                          1998              1997
                                                                      -----------        ----------
<S>                                                                   <C>                <C>
                                     ASSETS
Current Assets
  Cash                                                                $     4,874        $      471
  Accounts receivable, related parties                                     12,398            51,311
  Commission income receivable, current                                    29,100            30,550
  Related party production payment receivable, net                         67,905           114,426
  Prepaid expenses                                                             --             1,241
                                                                      -----------        ----------

Total current assets                                                      114,277           197,999

Commission income receivable                                               83,454           115,429
Related party production payment receivable, net                          482,621           694,154
Furniture and equipment, net of accumulated depreciation                    3,968             6,968
Investment in partnership                                                   4,581             4,573
Investment in oil and gas properties                                           --             5,434
                                                                      -----------       -----------

Total assets                                                          $   688,901        $1,024,557
                                                                      ===========        ==========
                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
  Accounts payable                                                    $   187,996       $   119,136
  Lines of credit                                                          47,405            26,172
  Current portion of treasury stock note payable                           38,561            12,561
                                                                      -----------       -----------

Total current liabilities                                                 273,962           157,869
                                                                      -----------       -----------

Treasury stock note payable                                                    --            34,000
                                                                      -----------       -----------

Commitments

Shareholders' equity:
  Preferred stock 100,000 shares authorized; $1.00 par value,
    no shares outstanding                                                      --                --
  Common stock, 25,000,000 shares authorized; $.02 par value,
    3,513,519 and 3,509,233 shares issued, and 3,313,519 and
    3,309,233 shares outstanding at 1998 and 1997, respectively            70,270            70,184
  Capital in excess of par                                              1,875,278         1,873,564
  Treasury stock, 200,000 shares, at cost                                 (60,000)          (60,000)
  Retained deficit                                                     (1,470,609)       (1,051,060)
                                                                      -----------       -----------

Total shareholders' equity                                                414,939           832,688
                                                                      -----------       -----------

Total liabilities and shareholders' equity                            $   688,901       $ 1,024,557
                                                                      ===========       ===========
</TABLE>


SEE NOTES TO FINANCIAL STATEMENTS



                                       29
<PAGE>   30

                           FRONTIER OIL & GAS COMPANY

                            Statements of Operations
                      Years Ended October 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                           1998                      1997
                                                           ----                      ----
<S>                                                  <C>                       <C>
Revenues:
  Interest income                                    $    56,847               $    25,402
  Incentive income                                        23,148                    30,325
  Commission income                                           --                   252,145
  Other income                                               349                     1,996
                                                     -----------               -----------

                                                          80,344                   309,868
                                                     -----------               -----------
Other Income (Expenses):
  General and administration expenses                   (274,283)                 (281,999)
  Interest Expense                                        (6,292)                   (6,531)
  (Loss) gain on production payment receivable          (219,318)                  507,526
                                                     -----------               -----------

                                                        (499,893)                  218,996
                                                     -----------               -----------
Net (loss) income                                    $  (419,549)              $   528,864
                                                     ===========               ===========

Basic and fully diluted (loss) income per share      $      (.13)              $       .16
                                                     ===========               ===========

Weighted average shares outstanding                    3,312,448                 3,309,233
                                                     ===========               ===========
</TABLE>





SEE NOTES TO FINANCIAL STATEMENTS



                                       30
<PAGE>   31
                           FRONTIER OIL & GAS COMPANY
                  Statements of Changes in Shareholders' Equity
                      Years ended October 31, 1998 and 1997

<TABLE>
<CAPTION>
                                COMMON STOCK
                                -----------              CAPITAL IN        TREASURY       RETAINED
                           SHARES           AMOUNT      EXCESS OF PAR       STOCK          DEFICIT         TOTAL
                          --------        ---------     -------------      --------      ----------      ---------
<S>                       <C>             <C>           <C>               <C>            <C>             <C>
BALANCE AT
   OCTOBER 31, 1996       3,309,233       $  70,184     $ 1,873,564       $ (60,000)     $(1,579,924)    $ 303,824

NET INCOME                       --              --              --              --          528,864       528,864
                          ----------------------------------------------------------------------------------------

 BALANCE AT
  OCTOBER 31, 1997        3,309,233          70,184       1,873,564         (60,000)      (1,051,060)      832,688

STOCK ISSUED                  4,286              86           1,714              --               --         1,800

NET LOSS                         --              --              --              --         (419,549)     (419,549)
                          ----------------------------------------------------------------------------------------

BALANCE AT
OCTOBER 31, 1998          3,313,519       $  70,270     $ 1,875,278       $ (60,000)     $(1,470,609)    $ 414,939
                          ========================================================================================
</TABLE>




SEE NOTES TO FINANCIAL STATEMENTS



                                       31
<PAGE>   32
                           FRONTIER OIL & GAS COMPANY
                            Statements of Cash Flows
                      Years Ended October 31, 1998 and 1997


<TABLE>
<CAPTION>
                                                                    1998          1997
                                                                 ----------     ---------
<S>                                                              <C>            <C>
Cash flows from operating activities:
  Net (loss) income                                              $(419,549)     $ 528,864
  Adjustments:
    Depreciation                                                     3,000          3,000
    Loss (gain) on adjustment of related party production
     payment receivable                                            219,318       (507,526)
    Loss on investment in oil and gas properties                     5,434             --
    Changes in current assets and liabilities:
      Accounts receivable, related parties                          38,913        (38,845)
      Commission income receivable                                  33,425       (145,979)
      Prepaid expenses                                               1,241          3,204
      Accounts payable                                              68,860         54,325
                                                                 ---------      ---------

Net cash used by operating activities                              (49,358)      (102,957)
                                                                 ---------      ---------

Cash flows from investing activities:
  Collections on related party production payment receivable        38,736        110,319
  Investment in partnership                                             (8)          (316)
  Investment in oil and gas properties                                  --         (5,434)
                                                                 ---------      ---------

Net cash provided by investing activities                           38,728        104,569
                                                                 ---------      ---------

Cash flows from financing activities:
  Proceeds from sale of stock                                        1,800             --
  Borrowings on line of credit                                      41,235         28,900
  Repayments on line of credit                                     (20,002)       (24,503)
  Repayment of treasury stock note payable                          (8,000)       (11,616)
                                                                 ---------      ---------

Net cash provided (used) by financing activities                    15,033         (7,219)
                                                                 ---------      ---------

Net increase (decrease) in cash                                      4,403         (5,607)

Cash at beginning of year                                              471          6,078
                                                                 ---------      ---------

Cash at end of year                                              $   4,874      $     471
                                                                 =========      =========

Supplemental disclosure of cash flow information:
  Cash paid for interest                                         $   6,292      $   6,531
                                                                 =========      =========
</TABLE>




SEE NOTES TO FINANCIAL STATEMENTS



                                       32
<PAGE>   33
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997


NOTE 1 - REORGANIZATION AND SUCCESSION OF FRONTIER ENERGY CORPORATION

          Frontier Oil & Gas Company ("Frontier" or "the Company"), is a
          Delaware corporation formed in 1992 for the purpose of acquiring all
          of the assets and contractual rights of Frontier Energy Corporation
          ("FEC") in exchange for common stock of the Company. FEC was a Utah
          corporation organized in 1983, primarily involved in acquisition,
          exploration and development of oil and gas properties, particularly
          natural gas coal seams.

          The Company's primary business purposes are (i) to act as general
          partner for Frontier Production Limited Partnership (the
          "Partnership") (see Note 3) and, (ii) to acquire and develop
          additional properties with Delta Associates, Inc. (formerly Delta
          Partners, Inc.) ("Delta").

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Estimates

          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management 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 the reported amounts of revenues
          and expenses during the reporting period. Actual results could differ
          from those estimates.

          Financial instruments and credit risk

          Financial instruments which potentially subject the Company to credit
          risk include cash, accounts receivable and the production payment
          receivable. The Company maintains its cash with major domestic banks
          and investment companies. The terms of these deposits are on demand to
          minimize risk. The Company has not incurred losses related to these
          deposits. Accounts receivable consist primarily of incentive payments
          receivable. The incentive payments receivable and the production
          payment receivable are collectible solely from oil, gas and other
          hydrocarbons produced and sold from the oil and gas properties sold to
          the Partnership (see Notes 4 and 5). Reserves of oil, gas and other
          hydrocarbons are estimated and may or may not be recovered. If
          recovered in amounts which are more or less than the estimated
          amounts, the revenues therefrom will correspondingly increase or
          decrease. The market prices for the production also will impact
          revenues from the sales of production.



                                       33
<PAGE>   34
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                          and October 31, 1998 and 1997


NOTE - 2 SUMMARY OF SIGNIFICANT ACCOUNTING PROCEDURES (CONTINUED)

          Fair Value of Financial Instruments

          At October 31, 1998 and 1997, the Company estimates that the fair
          values of financial instruments approximate their recorded costs.

          Furniture and Equipment

          Furniture and equipment are stated at cost less accumulated
          depreciation. Depreciation for financial reporting purposes is
          computed using the straight-line method over an estimated useful life
          of five years.

          When properties are retired or otherwise disposed of, the cost thereof
          and the applicable accumulated depreciation and amortization are
          removed from the respective accounts and the resulting gain or loss is
          reflected in earnings.

          Oil and gas properties

          Frontier utilizes the full cost method of accounting for oil and gas
          exploration, development and production activities. Accordingly, all
          costs associated with acquisition, exploration and development of oil
          and gas reserves are capitalized in each cost center and amortized
          ratably as reserves within the cost center are produced. Should
          amortizable costs within a cost center exceed the present value of the
          estimated future net cash flows from proven reserves, the excess is
          charged to expense during the year in which the excess occurs.

          The provision for depreciation, depletion and amortization of
          capitalized costs is computed on a composite unit-of-production
          method, based on estimated proven reserves. All capitalized costs
          associated with proven reserves currently are included in the
          computation of such provision.

          Costs of acquiring unusually significant unproven properties for
          future development and associated development costs are excluded from
          costs amortized until the amount of proven reserves attributable to
          the properties has been determined. Until such a determination is
          made, the properties and development projects are assessed
          individually to ascertain whether impairment has occurred. If
          impairment is indicated, the amount of the impairment is expensed.



                                       34
<PAGE>   35
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING PROCEDURES (CONTINUED)

          Gains and losses are recognized only upon sales or dispositions of
          significant amounts of oil and gas reserves. The proceeds of all other
          sales or dispositions are accounted for as reductions in the cost of
          oil and gas properties.

          Revenue Recognition

          Revenues primarily result from incentive payments and interest income
          on the related party production payment receivable.

NOTE 3 - INVESTMENT IN PARTNERSHIP

          On July 1, 1993, Frontier entered into a partnership agreement with
          Far Gas Acquisitions Corporation ("Far Gas") to form Frontier
          Production Limited Partnership (the "Partnership"), under which
          Frontier is the 1% general partner and Far Gas the 99% limited
          partner. In December of 1996, KLT Gas, Inc. of Kansas City, Missouri
          purchased all of the stock of Far Gas. In December of 1996, KLT Gas,
          Inc., of Kansas City, Missouri, purchased all of the stock of Far Gas.
          The Partnership was formed to acquire all of Frontier's interests in
          the oil and gas properties described in Note 4. Income or losses of
          the Partnership are allocated in accordance with provisions of the
          partnership agreement; generally based on the above percentages.

               The results of the Partnership's operations are as follows:

<TABLE>
<CAPTION>
                                                     Unaudited
                                                  1998         1997
                                               ---------     --------
<S>                                             <C>          <C>
               Sales                            $119,617     $161,329
                                                ========     ========

               Net Loss                         $ 85,899     $129,653
                                                ========     ========
</TABLE>

NOTE 4 - OIL AND GAS PROPERTIES

          On July 29, 1993, the Company sold to the Partnership all of its
          interests in the Fruitland Coal Seam gas properties in the Carracas
          Canyon Federal Unit located in New Mexico pursuant to a Purchase and
          Sales Agreement (the "Agreement"). The effective date of the Agreement
          was July 1, 1993. The interests sold included, among other things, all
          of the Company's right in the leases, land and wells and production
          therefrom, rights in and to all



                                       35
<PAGE>   36
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997


          NOTE 4 - OIL AND GAS PROPERTIES (CONTINUED)

          agreements, product purchase and sale contracts and Section 29 federal
          tax credits ("Section 29 Credits") to which the Company was entitled
          by virtue of production from its working interests in nonconventional
          fuel sources and coal seam gas wells.

          The purchase price paid by the Partnership was $1,812,652, of which
          (i) $25,152 was paid in cash, (ii) $240,000 is to be paid over three
          years in quarterly installments of principal plus interest at 7.25%
          per annum, and (iii) $1,547,500 is payable pursuant to a reserved
          production payment, plus interest at 7.25% per annum. The properties
          sold to the Partnership represented substantially all the producing
          assets of the Company. The net book value of the properties sold was
          approximately $1,429,568, resulting in a deferred gain of $383,084 at
          the date of sale. Subsequently, this deferred gain was eliminated in
          connection with the recording of a valuation allowance primarily
          established during the year ended October 31, 1993 (see Note 5).

          The Agreement provides for the Company to receive a quarterly
          incentive payment per MMbtu of natural gas produced and sold from the
          properties through December 31, 2002. Such payments are to be adjusted
          annually by an amount equal to annual percentage changes in the GNP
          implicit price deflator. Under the incentive payment, the Partnership
          is obligated to make quarterly payments to the Company equal to 35% of
          the value of the tax credits earned from all natural gas produced from
          its properties. The credit allowable for volumes produced in 1998 was
          $1.0552 per Mmbtu produced.

          For the period ended October 31, 1998 and October 31, 1997, there was
          70,246 mcf and 86,773 mcf, respectively, produced from the properties
          sold to the Partnership.



                                       36
<PAGE>   37
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997



NOTE 5 - PRODUCTION PAYMENT RECEIVABLES

          Related party production payment receivables consist of the following:

<TABLE>
<CAPTION>
                             1998              1997
                          ----------          -------
Principal
---------
<S>                      <C>              <C>
Beginning of year        $ 1,213,773      $ 1,324,092
Collections                  (38,736)        (110,319)
                         -----------      -----------
End of year                1,175,037        1,213,773
                         -----------      -----------

Valuation Allowance

Beginning of year            405,193          912,719
Adjustment                   219,318         (507,526)
                         -----------      -----------
End of year                  624,511          405,193
                         -----------      -----------

Net                          550,526          808,580
Less current portion         (67,905)        (114,426)
                         -----------      -----------

Long-term                $   482,621      $   694,154
                         ===========      ===========
</TABLE>


          The production payment receivable is dependent on the production and
          sales of the assigned production from the oil and gas properties sold
          to the Partnership. Based on prices in effect at October 31, 1998, it
          is probable that the Company will be unable to collect the aggregate
          principal and interest amounts scheduled in the Agreement. The Company
          has estimated the present value of future cash flows from production
          from these properties, based on an October 31, 1998 reserve study
          prepared by independent petroleum engineers, discounted at the
          contractually stated 7.25% interest rate.



                                       37
<PAGE>   38
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997


NOTE 5 - PRODUCTION PAYMENT RECEIVABLE (CONTINUED)

          Actual future cash flows could vary significantly from the amounts
          estimated in the reserve study due to changes in the production, gas
          prices or expenses realized by the Partnership which could cause the
          valuation allowance to change materially in the near term. During
          fiscal years 1998 and 1997, the Company recognized (losses) gains
          amounting to $(219,318) and $507,526 relating solely to changes in the
          valuation allowance. The Company recognized interest income amounting
          to $56,847 and $25,402 on this production payment receivable during
          fiscal years 1998 and 1997.

          As of October 31, 1998, discounted annual maturities of the production
          payment receivable, net of the current valuation allowance of
          $624,511, are estimated as follows:

<TABLE>
<CAPTION>
                 Year Ending
                 October 31,
                 -----------
                 <S>                                   <C>
                    1999                               $  67,905
                    2000                                  63,038
                    2001                                  58,535
                    2002                                  54,743
                    2003                                  29,181
                    Thereafter                           277,124
                                                       ---------

                                                       $ 550,526
                                                       =========
</TABLE>

NOTE 6 - FURNITURE AND EQUIPMENT

          Cost and accumulated depreciation of furniture and equipment is as
          follows at October 31:

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

                    Cost                         $ 18,174      $ 18,174
                    Accumulated depreciation      (14,206)      (11,206)
                                                 ---------     ---------

                                                 $  3,968      $  6,968
                                                 =========     =========
</TABLE>



                                       38
<PAGE>   39
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997


NOTE 7 - COMMISSION INCOME RECEIVABLE

          The commission income receivable is the result of negotiating the sale
          of Section 29 tax credits between two unrelated parties. The
          receivable is payable based on tax credit dollars awarded the
          purchaser and is payable through March 2003. Actual collections could
          vary from the amount accrued.

NOTE 8 - INCOME TAXES

          On October 31, 1998, the Company had tax basis net operating loss and
          investment tax credit carryforwards, subject to limitations described
          below, totaling approximately $3,394,000 and $640, respectively. These
          carryforwards expire as follows:

<TABLE>
<CAPTION>
                 Year Ending                   Net Operating                 Investment
                 October 31,                      Losses                    Tax Credits
                 -----------                   -------------                ------------
                 <S>                           <C>                          <C>

                    1999                       $    672,000                    $    640
                    2004                            948,000                           -
                    2005                            272,000                           -
                    2006                            262,000                           -
                    2007                             12,000                           -
                    2008                            319,000                           -
                    2009                            181,000                           -
                    2010                            344,000                           -
                    2011                            184,000                           -
                    2013                            200,000                           -
                                               ------------                    --------

                                               $  3,394,000                    $    640
                                               ============                    ========
</TABLE>

          No tax benefit has been reported in the accompanying financial
          statements because the Company believes there is at least a 50% chance
          that the net operating loss and investment tax credit carryforwards
          will expire unused (approximately $1,006,000 and $663,000 expired
          during the years ended October 31, 1998 and 1997, respectively).
          Accordingly, the $1,155,000 tax benefit of these carryforwards has
          been offset by a valuation allowance of the same amount.

          Deferred income taxes result from timing differences in reporting
          income and expenses for financial statement and income tax purposes.
          The primary sources of deferred income taxes result from: (i) net
          operating loss carryforwards, (ii) the use of different methods of
          depreciation for income tax and financial statement purposes; and,
          (iii) the installment sales method for income tax purposes to
          recognize the gain on the sale of oil and gas properties.



                                       39
<PAGE>   40
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997



NOTE 7 - INCOME TAXES (CONTINUED)

          The Company's deferred tax assets and liabilities at June 30 are as
          follows:

<TABLE>
<CAPTION>
                                                          1998             1997
                                                      -----------      -----------
<S>                                                   <C>              <C>
Current deferred tax assets:
Loss carryforwards                                    $ 1,155,000      $ 1,428,000
                                                      -----------      -----------

Deferred income taxes, long-term:
Depreciation                                                   --           (1,001)
Production payment receivable valuation allowance         212,334          137,776
                                                      -----------      -----------

  Total deferred income taxes, long term                  212,334          136,765
                                                      -----------      -----------

  Total deferred assets                                 1,367,334        1,564,765

Valuation allowance                                    (1,367,334)      (1,564,765)
                                                      -----------      -----------

  Total net deferred income taxes                     $        --      $        --
                                                      ===========      ===========
</TABLE>


          The deferred tax asset value allowance decreased by $197,431 and by
          $357,508 for the years ended October 31, 1998 and 1997, respectively,
          due mainly to an expiration of certain net operating loss
          carryforwards and changes in the production payment valuation
          allowance.

          For federal income tax purposes, options granted to Delta Partners,
          Inc. in December 1991 (see Note 12) resulted in an ownership change as
          defined in Section 382 of the Internal Revenue Code of 1954, as
          amended (the "Code"). The Code imposes substantial limitations on the
          use of tax carryforwards which have originated prior to such changes
          in ownership.

          The differences between the effective rate of income tax expense
          (benefit) at October 31, 1998 and 1997 and the amounts which would be
          determined by applying the statutory U.S. income tax rate of 34% to
          income (loss) before income tax expense (benefit) are explained below
          according to the tax implications of various items of income or
          expense.



                                       40
<PAGE>   41
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997



NOTE 8 - INCOME TAXES (CONTINUED)

<TABLE>
<CAPTION>
                                                    1998            1997
                                                  ----------      --------
<S>                                               <C>            <C>
Provision for income tax (benefit) expense
  at U.S. statutory rates                         $(142,647)     $ 179,814
Increase (decrease) in tax provision
  resulting from:
       Non-deductible entertainment expense              --          2,593
       Net operating loss carryforward              142,647       (182,407)
                                                  ---------      ---------

Income tax expense                                $      --      $      --
                                                  =========      =========
</TABLE>



NOTE 9 - LINES OF CREDIT

          On October 31, 1998 and 1997, the Company has a line of credit with a
          financial institution that provides for maximum borrowings of $40,000
          bearing interest at prime plus 6.75% (13% at October 31, 1998). This
          line is personally guaranteed by an officer of the Company.
          Outstanding balances amount to $35,405 and $26,172 at 1998 and 1997,
          respectively.

          On October 31, 1998, the Company has an additional line of credit with
          a different financial institution that provides for maximum borrowings
          of $16,000 bearing interest at prime plus 2% (10.5% at October 31,
          1998). The outstanding balance at 1998 amounts to $12,000.

NOTE 10 - TREASURY STOCK NOTE PAYABLE TO RELATED PARTY

          In July 1996, the Company entered into an escrow agreement with a
          stockholder to acquire from the Thomas A. Morris Estate, 200,000
          shares of the Company's stock for $60,000. The note is payable in
          monthly installments of $1,000 plus interest at 6%. At December 31,
          1998, the Company was delinquent in its payments, thus the entire
          outstanding balance has been included in current liabilities on the
          accompanying balance sheet.

NOTE 11 - COMMITMENTS

          The Company leases office space for $2,719 per month under an
          operating lease agreement on a month to month basis.

          Total rent expense under operating leases for the periods ending
          October 31, 1998 and 1997 was $36,373 and $28,185, respectively.



                                       41
<PAGE>   42
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997



NOTE 12 - RELATED PARTY TRANSACTIONS

          Frontier granted to Delta an option to purchase 1,190,476 shares of
          Frontier's common stock at $0.42 per share. Management fees are paid
          from funds received through Delta's exercise of these options. Delta
          has exercised options to purchase 550,893 of Frontier's common stock
          at $0.42 per share through October 31, 1998.

          The stock option issued to Delta may be exercised at any time in whole
          or in part through January 1, 1999. The option contains anti-dilution
          provisions in the event of stock split, stock dividend, other changes
          in the character or amount of Frontier's stock, or in the event of a
          business combination of Frontier with another entity. The option
          agreement provides for restrictions on transfer of the stock including
          restrictions on transfer in the event of a future underwriting of
          Frontier's stock.

          Frontier has an option under which it may acquire an interest in oil
          and gas prospects developed by Delta. Under the oil and gas prospects
          option agreement described below, Frontier is entitled to exercise the
          option with respect to a particular prospect upon payment of an amount
          equal to one-half (1/2) of the amounts Delta paid out as its cost for
          prospect generation and acquisition.

          Under the oil and gas prospects option agreement, Delta granted
          Frontier an option to purchase a 50% interest in any oil and gas
          prospects developed by Delta. The option relates to the net interest
          retained by Delta (after overrides, working interests and concessions
          to third parties) with respect to any oil and gas prospect developed
          by Delta throughout the option term. The purchase price of the option
          interest shall be the sum of: (a) the Company's pro rata portion (up
          to one-half) of all Delta's out-of-pocket expenses incurred in the
          generation, development and sale of such prospect (not including any
          provision for Delta's overhead); plus (b) a bonus of 10% of the
          purchase price if Delta has retained an interest in a prospect which
          shall then be productive. The purchase price shall be payable in cash
          at the time of each exercise. Frontier may elect to pay the bonus in
          either cash or in Frontier's common stock at a price equal to the
          market price of Frontier's common stock at the time of exercise of
          this option.

NOTE 13 - SUBSEQUENT EVENT

          The Company is currently conducting conversations about the sale of
          the production payment receivable. There are no assurances that the
          sale of this receivable will be concluded.



                                       42
<PAGE>   43
                           FRONTIER OIL & GAS COMPANY

                          Notes to Financial Statements
                            October 31, 1998 and 1997



NOTE 14 - BUSINESS SEGMENT AND MAJOR CUSTOMER INFORMATION

          Prior to the sale of oil and gas properties noted in Note 4, the
          Company was engaged in the exploration and development of oil and gas
          properties in only one cost center, the United States.

          All gas produced by the Partnership, during the periods ended October
          31, 1998 and 1997 was sold to Northwest Pipeline Corporation.



                                       43
<PAGE>   44
                           FRONTIER OIL & GAS COMPANY

                 Unaudited Supplementary Oil and Gas Information
                            October 31, 1998 and 1997


Pursuant to the sale of oil and gas properties, described in Note 4, information
provided for the periods ended October 31, 1998 and 1997 relate to Frontier
Production Limited Partnership.

Capitalized costs

Total capitalized costs relating to oil and gas exploration and development were
as follows:

<TABLE>
<CAPTION>
                                                    1998              1997
                                                 -----------      -----------
<S>                                              <C>              <C>
Oil and gas properties being amortized           $ 1,897,024      $ 1,873,897
Less: accumulated depletion and amortization        (825,964)        (727,574)
                                                 -----------      -----------

Net capitalized costs                            $ 1,071,060      $ 1,146,323
                                                 ===========      ===========
</TABLE>

Costs Incurred

No costs relating to oil and gas property acquisition, exploration or
development activities were incurred during the periods October 31, 1998 and
1997.

Results from oil and gas operations

The following summarizes the results of operations for oil and gas producing
activities:

<TABLE>
<CAPTION>
                                       1998           1997
                                    ---------      ---------
<S>                                 <C>            <C>
Gas Sales                           $ 119,617      $ 161,329
                                    ---------      ---------

Production expenses                    37,003         31,675
Depletion                              98,390        118,051
                                    ---------      ---------
                                      135,393        149,726
                                    ---------      ---------
Results of operations from
producing activities (excluding
corporate overhead)                 $ (15,776)     $  11,603
                                    =========      =========
</TABLE>


see independent auditor's report at page 28



                                       44
<PAGE>   45
                           FRONTIER OIL & GAS COMPANY

                 Unaudited Supplementary Oil and Gas Information
                            October 31, 1998 and 1997



Oil and gas reserve data

The following presents the Partnership's estimates of its proven natural gas
reserves. Proven developed reserves are the estimated quantities of natural gas
which geological and engineering data demonstrated with reasonable certainty to
be recoverable by primary producing mechanisms in future years from known
producing reservoirs under existing economic and operating conditions. In
general, the estimated proven producing reserves are supported by actual
production. The Partnership emphasizes that these estimates are inherently
imprecise and may change as further information becomes available.

Gas reserves are stated in thousands of cubic feet (Mcf). All reserves are
located within the United States. There were no proven undeveloped reserves as
at October 31, 1998 or 1997.

<TABLE>
<CAPTION>
                                                     Gas (Mcf)
                                                    ----------
<S>                                                 <C>
           At October 31, 1996                        839,000
             Production                              (86,773)
             Revision of previous estimate             78,773
                                                    ---------
           At October 31, 1997                        831,000
             Production                              (70,246)
             Revision of previous estimate           (12,575)
                                                     --------
           At October 31, 1998                        748,179
                                                    =========
</TABLE>


The Standardized Measure of Discounted Future Net Cash Flows

The standardized measure of discounted future net cash flows represents the
value of such net cash flows discounted at 10%. The standardized measure does
not purport to be an estimate of the fair market value of the Partnership's
proven reserves. An estimate of fair value would also take into account, among
other things, the expected recovery of reserves in excess of proven reserves,
anticipated changes in future prices and costs, and a discount factor more
representative of the time value of money and the risks inherent in producing
oil and gas.

Estimates of cash inflows and production expenses are based on those currently
being experienced by the Partnership. A gas price of $1.50 per MMbtu was used
for October 31, 1998 in the estimation of future cash inflows. No provision for
federal income taxes has been made, as the Partnership's net operating loss
carryforwards, Section 29 Credits, and overhead expenses are allocated to the
individual partners.


see independent auditor's report at page 28



                                       45
<PAGE>   46
                           FRONTIER OIL & GAS COMPANY

                 Unaudited Supplementary Oil and Gas Information
                              October 1998 and 1997


The Standardized Measure of Discounted Future Net Cash Flows (continued)

The following presents the Partnership's estimates of the standardized measure
of discounted future net cash flows from future production of proven oil and gas
reserves.

<TABLE>
<CAPTION>
                                                                               October 31,
                                                                                   1998
                                                                               ------------
<S>                                                                            <C>
               Future cash inflows                                             $ 1,411,320
               Future production expenses                                         (525,197)
                                                                               -----------

               Future net cash flow                                                886,123
               Discount for estimated timing of cash flows at 10%                 (348,880)
                                                                               -----------

               Standardized measure of discounted future net
                 cash flows                                                    $   537,243
                                                                               ===========
</TABLE>

The following summarizes changes in the standardized measure of discounted
future net cash flows:

<TABLE>
<S>                                                                            <C>
               At October 31, 1996                                             $   379,084
               Sales, net of production expenses                                  (129,654)
               Net changes in prices and revision of quantity estimate             489,599
                                                                               -----------

               At October 31, 1997                                                 739,029
               Sales, net of production expenses                                   (82,614)
               Net changes in prices and revision of quantity estimate            (119,172)
                                                                               -----------

               At October 31, 1998                                             $   537,243
                                                                               ===========
</TABLE>


In management's opinion, the accretion of discount is insignificant and
therefore has not been presented.



see independent auditor's report at page 28



                                       46
<PAGE>   47
                                   SIGNATURES


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


                                        FRONTIER OIL & GAS COMPANY
                                                (Registrant)


                                     By /s/  Robert M. Davant
                                       -----------------------------------------
                                     Robert M. Davant
                                     Chairman and Chief Executive Officer

                                     Date    July 12, 2000


               In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.


Date    July 12, 2000                  /s/  Robert M. Davant
       --------------               ------------------------
                                    Robert M. Davant
                                    Chairman of the Board, Chief
                                    Executive Officer and Treasurer (Chief
                                    Financial Officer and Principal Accounting
                                    Officer)

Date    July 12, 2000                  /s/  Dennis A. Jones
       --------------               -----------------------
                                    Dennis A. Jones
                                    President and Director


Date    July 12, 2000                  /s/  Lani Kirsch
       --------------                -----------------------
                                     Lani Kirsch
                                     Director


Date    July 12, 2000                  /s/  Pauline A. Wilbraham
       --------------               ----------------------------
                                    Pauline A. Wilbraham
                                    Secretary



                                       47