UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                               Amendment No. 1 to
                                   FORM 10-K/A


              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2004

                        Commission File Number: 000-25386

                                 FX ENERGY, INC.
              -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

                  Nevada                                     87-0504461
      -------------------------------                   -------------------
      (State or other jurisdiction of                    (I.R.S. Employer
       incorporation or organization)                   Identification No.)

   3006 Highland Drive, Suite 206, Salt Lake City, Utah           84106
   ----------------------------------------------------         ----------
         (Address of principal executive offices)               (Zip Code)


Registrant's telephone number, including area code:    Telephone (801) 486-5555
                                                       Facsimile (801) 486-5575

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

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

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

                         Common Stock, Par Value $0.001
                         ------------------------------
                                (Title of Class)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 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 the past 90 days. Yes [X] No [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) 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-K or any amendment to this Form 10-K. [X]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [X] No [ ]

         State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such common
equity, as of the last business day of the registrant's most recently completed
second fiscal quarter. As of June 30, 2004, the aggregate market value of the
voting and nonvoting common equity held by nonaffiliates of the registrant was
$258,178,000.

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. As of March 4, 2005,
FX Energy had outstanding 34,526,843 shares of its common stock, par value
$0.001.

         DOCUMENTS INCORPORATED BY REFERENCE. FX Energy's definitive Proxy
Statement in connection with the 2005 Annual Meeting of Stockholders is
incorporated by reference in response to Part III of this Annual Report.


Explanatory Note: This amendment is filed to delete a reference to natural gas
                  amounts in the Fences I area that did not meet the SEC
                  definition of proved reserves under Rule 4-10(a) of Regulation
                  S-X.

<PAGE>

                   SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

         This report contains statements about the future, sometimes referred to
as "forward-looking" statements. Forward-looking statements are typically
identified by the use of the words "believe," "may," "could," "should,"
"expect," "anticipate," "estimate," "project," "propose," "plan," "intend" and
similar words and expressions. Statements that describe our future strategic
plans, goals or objectives are also forward-looking statements. We intend that
the forward-looking statements will be covered by the safe harbor provisions for
forward-looking statements contained in Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934.

         Readers of this report are cautioned that any forward-looking
statements, including those regarding us or our management's current beliefs,
expectations, anticipations, estimations, projections, strategies, proposals,
plans or intentions, are not guarantees of future performance or results of
events and involve risks and uncertainties, such as:

         o        future drilling and other exploration schedules and sequences
                  for various wells and other activities;

         o        the future results of drilling individual wells and other
                  exploration and development activities;

         o        future variations in well performance as compared to initial
                  test data;

         o        the ability to economically develop and market discovered
                  reserves;

         o        the prices at which we may be able to sell oil or gas;

         o        foreign currency exchange rate fluctuations;

         o        exploration and development priorities and the financial and
                  technical resources of Polish Oil and Gas Company, our
                  principal strategic relationship in Poland;

         o        uncertainties inherent in estimating quantities of proved
                  reserves and actual production rates and associated costs;

         o        future events that may result in the need for additional
                  capital;

         o        the cost of additional capital that we may require and
                  possible related restrictions on our future operating or
                  financing flexibility;

         o        our future ability to attract industry or financial
                  participants to share the costs of exploration, exploitation,
                  development and acquisition activities;

         o        future plans and the financial and technical resources of
                  industry or financial participants;

         o        uncertainties of certain terms to be determined in the future
                  relating to our oil and gas interests, including exploitation
                  fees, royalty rates and other matters;

         o        uncertainties regarding future political, economic,
                  regulatory, fiscal, taxation and other policies in Poland and
                  the European Union; and

         o        other factors that are not listed above.

         The forward-looking information is based on present circumstances and
on our predictions respecting events that have not occurred, that may not occur,
or that may occur with different consequences from those now assumed or
anticipated. Actual events or results may differ materially from those discussed
in the forward-looking statements. The forward-looking statements included in
this report are made only as of the date of this report.

                                       2
<PAGE>

                                     PART I

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

Introduction

         We are an independent oil and gas company focused on exploration,
development and production opportunities in the Republic of Poland in
association with the Polish Oil and Gas Company, or POGC, and others, as
discussed below. We believe the cooperative working environment with POGC in
Poland allows us to operate effectively with in-country operating and technical
personnel, access geological and geophysical data readily, and interact in
general with governmental and industry contacts in Poland.

         We are focused on Poland because we believe it provides attractive oil
and gas exploration and production opportunities. In our view, these
opportunities exist because the country was closed to competition from foreign
oil and gas companies for many decades. As a result, we believe its known
productive areas are underexplored, underdeveloped and underexploited today.
Poland is a net importer of oil and gas, and we believe its fiscal regime is
favorable to foreign investment, which reinforce the attractiveness of Poland.

         We believe the gas-bearing Rotliegendes sandstone reservoir rock in
Poland's Permian Basin is a direct analog to the Southern North Sea gas basin
offshore England, and represents a largely untapped source of potentially
significant gas reserves. We believe that we are uniquely positioned, because of
our land position, our relationship with POGC, our significant working
interests, and our current financial condition, to exploit this untapped
potential and create substantial growth in oil and gas reserves and cash flows
for our stockholders.

         References to us in this report include FX Energy, Inc., our
subsidiaries and the entities or enterprises organized under Polish law in which
we have an interest and through which we conduct our activities in that country.
See "Oil and Gas Terms" at the end of this item for definitions of certain
industry terms.

Strategy

         We seek the rewards of high potential exploration while endeavoring to
minimize our exposure to the risks normally associated with exploration.
Historically, we have compensated for our small size and limited capital with
farmout arrangements in which we have conveyed interests in our exploration
projects in exchange for contributions of financial and technical resources by
larger industry participants. As a result of significant improvements in our
financial position during the past two years and the formation of our Technical
Advisory Panel discussed below, we now anticipate that we will rely principally
on our own financial and technical resources, including expert consultants, in
identifying and drilling prospects for our own account or under our sharing
arrangements with POGC.

         We concentrate on acreage in productive fairways or geologic trends
where we believe we have the opportunity to find significant gas and oil
reserves with lower risk. Our strategy is to:

         o        acquire large acreage positions in areas of known productive
                  fairways, particularly where there has been little or no
                  exploration for many years;

         o        carry out the work necessary to advance these properties
                  toward exploration drilling, including collecting, evaluating
                  and reprocessing data, acquiring new data, identifying
                  prospects that we believe merit drilling, and preparing a
                  detailed exploration work program; and

         o        either drill these prospects for our own account, or where
                  circumstances may warrant in the future, market interests in
                  these properties to industry participants on terms that will
                  provide all or a portion of the funds necessary for
                  exploration.

                                       3
<PAGE>

         Our primary strategic relationship is with POGC, a fully integrated oil
and gas company owned by the Treasury of the Republic of Poland, which is
Poland's principal domestic oil and gas exploration entity. Under our existing
agreements, POGC provides us with access to exploration opportunities,
previously-collected exploration data, and technical and operational support.

Technical and Advisory Panel

         We have created a Technical and Advisory Panel consisting of
individuals with decades of combined experience to advise and consult with
management in connection with the four current principal project areas discussed
below. The panel's responsibilities include assisting us in defining and
exploiting the potential of our projects in Poland and in attracting funding
and/or industry participation for that effort as we deem necessary. The
Technical and Advisory Panel includes the following three individuals:

         Richard Hardman, CBE, has built a career in international exploration
over the past 40 years in the upstream oil and gas industry as a geologist in
Libya, Kuwait, Colombia, and Norway. In the United Kingdom, his career
encompasses almost the whole of the exploration history of the North Sea-1969 to
the present. With Amerada Hess from 1983 to 2002 as Exploration Director and
later Vice President Exploration, he was responsible for key Amerada North Sea
and international discoveries, including Valhall, Scott and South Arne fields.
Mr. Hardman was made Commander of the British Empire in the New Year Honours,
1998, and has served as the Chairman of the Petroleum Society of Great Britain,
President of the Geological Society, and President of the European Region of
AAPG Europe. Mr. Hardman was appointed to our board of directors in October
2003, and was designated the Chairman of our Technical and Advisory Panel.

         Steven McTiernan has over 30 years of diverse energy industry and
banking experience as a petroleum engineer with Amoco, Mesa, and British
Petroleum, and as a banker with Chase Manhattan, CIBC and NatWest. He was the
Global Head of Oil & Gas for Chase in New York and for CIBC and NatWest in
London. Mr. McTiernan advised FX Energy in connection with the 2003 farmout of
the Fences I project area to CalEnergy Gas (Holdings) Ltd. Mr. McTiernan is
currently assisting us in our gas contract negotiations with POGC and our
long-term gas marketing strategic planning.

         Robert J.J. Hardy, Ph.D., served 11 years with Amerada Hess from 1990
to 2001 where he was in charge of the geophysical operations group in London
with responsibility for Northwest Europe (including the North Sea) and
International. He has considerable experience in all aspects of the design,
acquisition and processing of 2-D, 3-D and 4-D geophysical projects and has
applied advanced analytical methodologies on over 500 geophysical projects. Dr.
Hardy holds a Ph.D. in Geophysics from Cambridge University and a B.Sc. Geology
and Geophysics 1st Class from the University of Durham. Dr. Hardy is guiding our
seismic data acquisition, processing and reprocessing projects in the Fences and
Wilga project areas.

Project Area Summary

         Our ongoing activities in Poland are conducted in four project areas:
Fences I, II and III, and Wilga. We are currently working almost exclusively on
the three Fences project areas, where we believe the gas-bearing Rotliegendes
sandstone reservoir rock in Poland's Permian Basin is a direct analog to the
Southern North Sea gas basin offshore England. We are focused in the Fences area
because there have been substantial gas reserves developed and produced by POGC
in this Rotliegendes trend, and we have concluded that there are likely to be
substantial additional gas and oil reserves in the same horizons that can be
identified through the application of geophysical techniques that have not
previously been applied in this area in Poland. Our recent Rusocin well, which
discovered a gas accumulation in a stratigraphic trap, is a model of this
strategy.

                                       4
<PAGE>

     Fences

         The Fences I project area is 265,000 acres (1,074 sq. km.) in western
Poland's Permian Basin. Several gas fields located in the Fences I block are
excluded or "fenced off" from our exploration acreage. These fields, discovered
by POGC between 1974 and 1982, produce from Rotliegendes sandstone reservoirs.
We entered into an agreement in April 2000 with POGC to explore this area and by
December 31, 2004, had spent $16.0 million on exploration costs in the Fences I
project area to earn a 49% interest.

         The Fences II project area is 670,000 acres (2,715 sq. km.) located
north of and contiguous with the Fences I block. POGC's Radlin field forms part
of the Fences II's southern border. Under a January 2003 agreement, we have the
right to earn a 49% interest from POGC, subject to satisfactory completion of
our obligations in Fences I and our expenditure of $4.0 million in exploration
costs. We satisfied the earning requirements in early 2005 by continuing our
ongoing two-dimensional, or 2-D, seismic data reprocessing, along with drilling
the initial well at the Sroda prospect.

         The Fences III project area is 770,000 acres (3,122 sq. km.) located
approximately 25 miles south of Fences I, where we own 100% of the exploration
rights. As with the Fences I block, several gas fields located in the Fences III
block are fenced off from the exploration acreage. These fields, discovered by
POGC between 1967 and 1976, produce from both Rotliegendes sandstone and
Zechstein carbonate (Ca1 and Ca2) reservoirs.

         The Fences I, II and III project areas (a total of 1.7 million gross
acres or 6,911 sq. km.) are all within an area of underexplored Rotliegendes
sandstone. To our knowledge, no exploration program focused on Rotliegendes gas
reserves has been undertaken in Poland using the technology available today, and
no sustained exploration effort has been made in the three Fences project areas
for Rotliegendes gas fields in the last 20 years.

         During the balance of 2005, our objectives with respect to the Fences
areas are to:

         o        continue developing a complete subsurface seismic and
                  geological picture of the Rotliegendes and Zechstein carbonate
                  (Ca1 and Ca2) horizons across our entire acreage, in the
                  process building an inventory of drill-ready prospects;

         o        drill approximately five wells, subject to the exploration
                  priorities and financial and technical resources of our
                  partner, POGC, and the ability of our technical group to
                  acquire and assimilate new technical data;

         o        build the necessary infrastructure to begin producing our
                  Zaniemysl discovery and begin planning for production from
                  other potential discoveries; and

         o        endeavor to expand our holdings in and around the Fences and
                  perhaps other areas.

         More detailed information concerning the Fences area and our
exploration history there can be found under the section Exploration,
Development and Production Activities below.

     Wilga

         The Wilga project area in central southeast Poland consists of
exploration rights on approximately 250,000 gross acres held by us and POGC in
Block 255, where the Wilga 2 discovery well is located. We have for some years
held a 45% working interest in the Wilga project area; however, our former
partner, Apache Corporation, recently surrendered its interest so that,
effective January 31, 2005, we have an 82% working interest and are the
operator; POGC holds the remaining 18% working interest. We and our partners
successfully completed an extended flow test on the Wilga 2, confirming that the
well is capable of producing at a commercial rate. We plan to place this well
into commercial production as soon as we have negotiated an acceptable gas
contract with a suitable buyer, which will enable us to begin construction of
production facilities. We plan to discuss with POGC further exploration for the
block during the next few months.

                                       5
<PAGE>

Exploration, Development and Production Activities

     Polish Exploration Rights

         As of December 31, 2004, we had earned oil and gas exploration rights
in Poland in the following gross acreage components:
<TABLE>
<CAPTION>
                                                                Operator
                                                     -------------------------------     Gross
                                                       FX Energy          POGC          Acreage
                                                     --------------- --------------- ---------------
         <S>                                             <C>              <C>          <C>
         Project Area:
           Fences I..................................                      X              265,000
           Fences II.................................                      X              670,000
           Fences III................................     X                               770,000
           Wilga.....................................     X                               250,000
                                                                                     ---------------
             Total gross acreage.....................                                   1,955,000
                                                                                     ===============
</TABLE>

         As we explore and evaluate our acreage in Poland, we expect to
increasingly focus our operational and financial efforts on known productive
trends and recent discoveries. As we do so, we may elect not to retain our
interest in acreage that we determine carries a higher exploration risk.

     Exploratory Activities in Poland

         Fences I Project Area

         In April 2000, we agreed to spend $16.0 million on exploration costs in
the Fences I project area to earn a 49% interest. As of December 31, 2004, we
had completed the $16.0 million earn-in requirement. As a result, POGC is
obligated to pay its 51% share of any further costs. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation:
Introduction--Fences I Commitment and Settlement for further information on how
the commitment was satisfied.

         The Rotliegendes is the primary target horizon throughout most of the
Fences I project area, at depths from approximately 2,800 to 3,200 meters,
except along the extreme southwest portion where the target reservoir is
carbonates of the lower Permian. During 2000, we drilled the Kleka 11, our first
Rotliegendes target, which began producing in early 2001. In 2003, we agreed to
assign our interest in the Kleka 11 well, including accrued gas sales proceeds
and proceeds from ongoing production during 2003 and 2004 to POGC as a credit
against our earning requirement in Fences I. By December 31, 2004, we had met
our earning requirement without crediting assignment of the Kleka well, so we
have agreed with POGC not to assign our interest in the Kleka 11 well, subject
to the completion of formal documentation.

         During 2001, we drilled the Mieszkow 1, an exploratory dry hole. The
Mieszkow well demonstrated the need to apply modern seismic data processing and
to assure careful handling of velocities in seismic data interpretation. In 2002
and 2003, we acquired, processed and interpreted a substantial amount of seismic
data.

         In January 2003, we entered into a farmout agreement with CalEnergy
Gas, the upstream gas business unit of MidAmerican Energy Holdings Company,
whereby CalEnergy Gas had the right, but not the obligation, to earn a 24.5%
interest in the entire Fences I project area by spending a total of $10.4
million, including the cost to drill two wells and certain cash payments to us.


         The operating committee approved the Zaniemysl prospect as the first
well to be drilled under the CalEnergy Gas farmout agreement and drilling
commenced in October 2003. In February 2004, we announced that the Zaniemysl-3
exploratory well in the Fences I project area was commercial and encountered
approximately 38 net meters (125 feet) of porous gas-bearing Rotliegendes
sandstone. During a drill stem test of the top 18 meters (59 feet) of the
structure, the well flowed at a stabilized rate of approximately 12.5 MMcf of
gas per day. Together with our partners, POGC and CalEnergy Gas, we have begun
development work to build facilities and connect to the pipeline grid through a
pipeline to be built by POGC to produce gas from the Zaniemysl structure at a
permitted rate of 10 MMcf of gas per day. Gas production is scheduled to
commence by the end of 2005.


                                       6
<PAGE>

         Following completion of the Zaniemysl-3 well in early 2004, CalEnergy
Gas requested more than a six-month extension in which to undertake an
additional technical evaluation before committing to an additional exploration
well. We and POGC elected instead to proceed without delay to select a specific
drill site in the Rusocin prospect in Fences I and to proceed with drilling as
soon as possible. Accordingly, CalEnergy Gas did not complete its earning
requirement and no longer has the right to participate in the Fences I project
area, except for the approximately 45,000 acres surrounding the Zaniemysl field
referred to as the Greater Zaniemysl Area, or GZA. The GZA was established to
allow the two companies to put the Zaniemysl discovery into production while
exploring together for other nearby natural gas opportunities that would have
the potential to add economic value to the overall Zaniemysl project.

         The GZA quantifies the acreage earned by CalEnergy Gas at 45,220 acres,
covering approximately 17% of Fences I, and will require CalEnergy Gas to pay
$250,000 of our share of geological and geophysical work on the GZA project.
Both companies anticipate additional seismic data acquisition and reprocessing
in the expanded project. We and CalEnergy Gas each hold a 24.5% interest in the
GZA, and POGC holds a 51% interest.

         Outside of the CalEnergy Gas GZA, during the second half of 2004, we
drilled with POGC the Rusocin-1 well, the first well intentionally focused on a
stratigraphic trap in the Rotliegendes. In a January 2005 initial drill stem
test, the well flowed gas from an 18 meter (59 feet) section of the Rotliegendes
sandstone target reservoir. The top of the Rotliegendes was encountered at
approximately 2,747 meters. Results of the initial drill stem test indicate that
the reservoir may extend beyond the mapped faults, suggesting a larger reservoir
along the Wolsztyn High. We believe the well may have discovered the lower edge
of a pinch-out at the top of the Rotliegendes sandstone with 20-25% porosity.

         We are testing the Rusocin well to determine whether it is commercial.
If warranted, we will propose to POGC, the operator, one or more appraisal wells
on the Rusocin prospect. At the same time, we are completing geological and
geophysical work on the Lugi prospect, another stratigraphic test of the
pinch-out play. During the remainder of 2005, we plan to acquire new 2-D seismic
data on selected structural prospects as well as along the apparent
stratigraphic trap trend; we are also considering acquiring new
three-dimensional, or 3-D seismic data along the stratigraphic trap trend. We
intend to propose additional wells, both exploratory and appraisal, as our
technical staff approves specific projects.

         Fences II Project Area

         In early 2002, Conoco, Inc., Ruhrgas and POGC drilled a dry hole in the
northeast of the Fences II area. The well, although dry, did confirm the
presence of reservoir quality Rotliegendes sandstone at a depth of more than
3,700 meters, which we believe makes virtually the entire block prospective for
Rotliegendes, subject to accurate geophysical resolution of the trapping
features.

         A significant amount of geological and geophysical work that was
completed by POGC and Conoco before Conoco's withdrawal from the project at the
end of 2002 was made available to us by POGC. During 2003 and 2004, we
reprocessed and interpreted approximately 2,600 kilometers of 2-D seismic data
to complement the 1,200 kilometers reprocessed in 2002 in order to develop a
more complete subsurface model of the Rotliegendes and Zechstein horizons. In
the second half of 2004, we received operating committee approval to drill the
Sroda prospect, a structural feature modeled on POGC's Radlin field. Although
slowed by mechanical problems, drilling operations should conclude in
approximately the first quarter of 2005. We have identified several other
prospects near Sroda. We are also working to identify prospects in adjacent
areas on the southeastern end of Fences II and may seek to expand our
exploration rights accordingly.

                                       7
<PAGE>

         Fences III Project Area

         We have assembled the existing seismic data, which includes seismic
data on approximately the northern third of the Fences III project area. We
expect to finish reprocessing and interpreting this data in the first quarter of
2005 and, if results warrant, plan to acquire new 2-D seismic data in the second
and third quarters of 2005 to identify leads and prospects that merit drilling.
We also plan to tender in the second quarter of 2005 for a multi-well drilling
contract that will then make it possible for us to drill without delay if and as
prospects are approved by our technical group.

         Wilga Project Area

         In January 2005, we announced plans to begin working with POGC to bring
the Wilga well into production. The well is expected to produce at a rate of 5-6
MMcf of gas and 230 Bbls of condensate per day when it begins production. The
Wilga well was drilled in 2000 and as of December 31, 2004, has gross proved
reserves of 6.3 Bcf and 247,000 barrels of condensate. Effective January 31,
2005, we are the operator of the Wilga project area and own an 82% interest.
POGC owns an 18% interest.

         Prior to January 2005, Apache Corp. was the operator and a 45% interest
owner in the Wilga area. In connection with its exit from Poland, Apache
relinquished its interest in the Wilga area, which then reverted to us and POGC
ratably by virtue of our existing agreements with POGC and Apache.

     Exploratory Activities in the United States

         Nevada

         During 2004, we drilled the East Inselberg well to a total depth of
1,322 feet in a 680-acre lease block near our existing Trap Spring / Munson
Ranch producing area. The well encountered shows of oil, and we are testing to
determine whether it is commercial. Makoil is the operator and owns a 50%
working interest, and we own the remaining 50%. We plan to drill several
additional exploratory wells this year in Railroad Valley near our existing
producing properties.

The Republic of Poland

         The Republic of Poland is located in central Europe, has a population
of approximately 39 million people, and covers an area comparable in size to New
Mexico. During 1989, Poland peacefully asserted its independence and became a
parliamentary democracy. Since 1989, Poland has enacted comprehensive economic
reform programs and stabilization measures that have enabled it to form a
free-market economy and turn its economic ties from the east to the west, with
most of its current international trade with the countries of the European Union
and the United States. The economy has undergone extensive restructuring in the
post-communist era. The Polish government credits foreign investment as a
forceful growth factor in successfully creating a stable free-market economy.

         Since its transition to a market economy and a parliamentary democracy,
Poland has experienced significant economic growth and political change. Poland
has developed and is refining legal, tax and regulatory systems characteristic
of parliamentary democracies with interpretation and procedural safeguards. The
Polish government has taken steps to harmonize Polish legislation with that of
the European Union, which it joined in May of 2004.

         Poland has created an attractive legal framework and fiscal regime for
oil and gas exploration by actively encouraging investment by foreign companies
to offset its lack of capital to further explore its oil and gas resources. In
July 1995, Poland's Council of Ministers approved a program to restructure and
privatize the Polish petroleum sector. So far under this plan, a refinery
located in Plock has been privatized as a publicly-held company with its stock
trading on the London and Warsaw stock exchanges. We expect that the gas
distribution segments of POGC will be privatized next, followed by the
exploration, production and oilfield services segment. Increased participation
by Western companies using Western capital in the oil and gas sector is
consistent with the approved privatization policy.

                                       8
<PAGE>

         Prior to becoming a parliamentary democracy during 1989, the
exploration and development of Poland's oil and gas resources were hindered by a
combination of foreign influence, a centrally-controlled economy, limited
financial resources, and a lack of modern exploration technology. As a result,
Poland is currently a net energy importer. Oil is imported primarily from
countries of the former Soviet Union and the Middle East, and gas is imported
primarily from Russia.

Polish Properties

     Legal Framework

         General Usufruct and Concession Terms

         All of our rights in Poland have been awarded pursuant to the
Geological and Mining Law, which specifies the process for obtaining domestic
exploration and exploitation rights. Under the Geological and Mining Law, the
concession authority enters into mining usufruct (lease) agreements that grant
the holder the exclusive right to explore for oil and gas in a designated area
or to exploit the designated oil and/or gas field for a specified period under
prescribed terms and conditions. The holder of the mining usufruct covering
exploration must also acquire an exploration concession by applying to the
concession authority and providing the opportunity for comment by local
governmental authorities.

         The concession authority has granted us oil and gas exploration rights
on the Fences III and Wilga project areas, and has granted POGC oil and gas
exploration rights on the Fences I and II project areas. The agreements divide
these areas into blocks, generally containing approximately 250,000 acres each.
Concessions have been acquired for exploration in all areas that lie within
existing usufructs. The exploration period begins after the date of the last
concession signed under each respective usufruct. We believe all material
concession terms have been satisfied to date.

         If commercially viable oil or gas is discovered, the concession owner
then applies for an exploitation concession, as provided by the usufructs,
generally with a term of 25 to 30 years or as long as commercial production
continues. Upon the grant of the exploitation concession, the concession owner
may become obligated to pay a fee, to be negotiated, but expected to be less
than 1% of the market value of the estimated recoverable reserves in place. The
concession owner would also be required to pay a royalty on any production, the
amount of which will be set by the Council of Ministers, within a range
established by legislation for the mineral being extracted. The royalty rate for
high-methane gas is currently less than $0.05 per Mcf. This rate could be
increased or decreased by the Council of Ministers to a rate between $0.02 and
$0.10 per Mcf (the current statutory minimum and maximum royalty rates). Local
governments will receive 60% of any royalties paid on production. The holder of
the exploitation concession must also acquire rights to use the land from the
surface owner and could be subject to significant delays in obtaining the
consents of local authorities or satisfying other governmental requirements
prior to obtaining an exploitation concession.

         Fences I Project Area

         The Fences I project area consists of a single oil and gas exploration
concession controlled by POGC. Three producing fields (Radlin, Kleka and Kaleje)
lie within the concession boundary, but are excluded from the Fences I
concession. The concession is for a period of six years ending in September 2007
and carried certain work requirements during the first three years, all of which
have been completed.

         Fences II Project Area

         The Fences II project area consists of four oil and gas exploration
concessions controlled by POGC. The concessions have expiration dates ranging
from July 2006 to August 2007, with three-year extension rights. Remaining work
commitments in the aggregate include acquiring 70 kilometers of 3-D seismic
data, 250 kilometers of new 2-D seismic data, reprocessing 100 kilometers of
seismic data and drilling four wells.

                                       9
<PAGE>

         Fences III Project Area

         The Fences III project area consists of a single oil and gas
exploration concession held by us. Several producing fields lie within the
concession boundaries, but are excluded from the Fences III project area. The
concession is for a period of six years ending in December 2009 and carries a
work requirement during the first two years, which includes the reprocessing of
100 kilometers of existing 2-D seismic data, acquiring 100 kilometers of new 2-D
seismic data, and analysis and interpretation of existing well data. Beginning
in the third year, there is a drilling requirement of one well.

         Wilga/Block 255 Project Area

         The Wilga project area consists of a single oil and gas exploration
concession controlled by us. All work commitments have been completed.

         As of December 31, 2004, all required usufruct/concession payments had
been made for each of the above project areas.

     Production, Transportation and Marketing

         Poland has a network of gas pipelines and crude oil pipelines
traversing the country serving major metropolitan, commercial, industrial and
gas production areas, including significant portions of our acreage. Poland has
a well-developed infrastructure of hard-surfaced roads and railways over which
we believe oil produced could be transported for sale. There are refineries in
Gdansk and Plock in Poland and one in Germany near the western Polish border
that we believe could process crude oil produced in Poland. Should we choose to
export any oil or gas we produce, we will be required to obtain prior
governmental approval.

         During early 2001, we and POGC constructed a pipeline from the Kleka 11
well approximately four kilometers to POGC's Radlin field gas processing
facility and began selling gas produced to POGC at a price of $2.02 per MMBTU
under a five-year contract that may be terminated by us with a 90-day written
notice. As part of our restructured agreement with POGC, we agreed in 2003 to
assign our interest in the Kleka 11 well, including amounts representing unpaid
gas sales, to POGC to reduce our outstanding obligation to POGC. Accordingly, we
received no net gas production from the Kleka 11 well in 2004 and 2003. See Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operation: Introduction--Fences I Commitment and Settlement for further
information concerning the Kleka 11 well.

         We did not record any oil or gas production in Poland during 2004 and
2003. The following table sets forth our average net daily gas production,
average sales price and average production costs associated with our Polish gas
production during the past three years:
<TABLE>
<CAPTION>
                                                                                2004           2003           2002
                                                                                ----           ----           ----
         <S>                                                                    <C>             <C>          <C>
         Polish producing property data:
           Average daily net gas production (Mcf)......................          --             --              494
           Average sales price per MMBTU(1)............................          --             --           $ 2.02
           Average production costs per Mcf(2).........................          --             --           $ 0.16
--------------------
</TABLE>
(1)  Gross sales prices before downward adjustment of $0.44 per Mcf for caloric
     content.
(2)  Production costs include lifting costs (electricity, fuel, water, disposal,
     repairs, maintenance, pumper, transportation and similar items). Production
     costs do not include such items as G&A costs, depreciation, depletion or
     Polish income taxes.

                                       10
<PAGE>

United States Properties

     Producing Properties

         In the United States, we currently produce oil in Montana and Nevada.
All of our producing properties, except for the Rattlers Butte field (an
exploratory discovery during 1997), were purchased during 1994. A summary of our
average daily production, average working interest and net revenue interest for
our United States producing properties during 2004 follows:
<TABLE>
<CAPTION>
                                                     Average Daily Production
                                                              (Bbls)                Average           Average
                                                    ----------------------------    Working         Net Revenue
                                                       Gross           Net         Interest          Interest
                                                    ------------- -------------- -------------- --------------------
         <S>                                           <C>           <C>             <C>             <C>
         United States producing properties:
           Montana:
             Cut Bank............................        243           210             99.6%           86.4%
             Bears Den...........................          9             7             98.0            81.0
             Rattlers Butte......................         19             1              6.3             5.1
                                                    ------------- --------------
               Total.............................        271           218
                                                    ------------- --------------
           Nevada:
             Trap Spring.........................          8             1             21.6            18.9
             Munson Ranch........................         35            12             36.0            34.1
             Bacon Flat..........................         27             3             16.9            12.5
                                                    ------------- --------------
               Total.............................         70            16
                                                    ------------- --------------
                 Total United States producing
                    properties...................        341           234
                                                    ============= ==============
</TABLE>

         In Montana, we operate the Cut Bank and Bears Den fields and have an
interest in the Rattlers Butte field, which is operated by an industry partner.
Production in the Cut Bank field commenced with the discovery of oil in the
1940s at an average depth of approximately 2,900 feet. The Southwest Cut Bank
Sand Unit, which is the core of our interest in the field, was originally formed
by Phillips Petroleum Company in 1963. An initial pilot waterflood program was
started in 1964 by Phillips and eventually encompassed the entire unit with
producing wells on 40- and 80-acre spacing. In the Cut Bank field, we own an
average working interest of 99.6% in 99 producing oil wells, 25 active injection
wells and one active water supply well. The Bears Den field was discovered in
1929 and has been under waterflood since 1990. In the Bears Den field, we own a
98% working interest in three active water injection wells and five producing
oil wells, which produce oil at a depth of approximately 2,430 feet. The
Rattlers Butte field was discovered during 1997. In the Rattlers Butte field, we
own a 6.3% working interest in two oil wells producing at a depth of
approximately 5,800 feet and one active water injection well.

         In Nevada, we operate the Trap Spring and Munson Ranch fields and have
an interest in the Bacon Flat field, which is operated by an industry partner.
The Trap Spring field was discovered in 1976. In the Trap Spring field, we
produce oil from a depth of approximately 3,700 feet from one well, with a
working interest of 21.6%. The Munson Ranch field was discovered in 1988. In the
Munson Ranch field, we produce oil at an average depth of 3,800 feet from five
wells, with an average working interest of 36%. The Bacon Flat field was
discovered in 1981. In the Bacon Flat field, we produce oil from one well at a
depth of approximately 5,000 feet, with a 16.9% working interest.

                                       11
<PAGE>

     Production, Transportation and Marketing

         The following table sets forth our average net daily oil production,
average sales price and average production costs associated with our United
States oil production during 2004, 2003 and 2002:
<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                              -------------------------------------
                                                                                 2004         2003         2002
                                                                              -----------  -----------  -----------
<S>                                                                            <C>          <C>          <C>
         United States producing property data:
           Average daily net oil production (Bbls)..........................      234          234          249
           Average sales price per Bbl......................................   $36.34       $26.29       $21.19
           Average production costs per Bbl(1)..............................   $18.85       $17.22       $14.59
-----------------
</TABLE>
(1)  Production costs include lifting costs (electricity, fuel, water, disposal,
     repairs, maintenance, pumper, transportation and similar items) and
     production taxes. Production costs do not include such items as G&A costs,
     depreciation, depletion, state income taxes or federal income taxes.

         We sell oil at posted field prices to one of several purchasers in each
of our production areas. In July 2003, we began selling the majority of our
Montana production, which represents over 85% of our total oil sales, to CENEX,
a regional refiner and marketer. From June 2002 through June 2003, we sold our
Montana production to Plains Marketing Canada L.P. For the first half of 2002
the bulk of our total oil sales were also to CENEX. Posted prices are generally
competitive among crude oil purchasers. Our crude oil sales contracts may be
terminated by either party upon 30 days' notice.

     Oilfield Services - Drilling Rig and Well-Servicing Equipment

         In Montana, we perform, through our drilling subsidiary, FX Drilling
Company, Inc., a variety of third-party contract oilfield services, including
drilling, workovers, location work, cementing and acidizing. We currently have a
drilling rig capable of drilling to a vertical depth of 6,000 feet, a workover
rig, two service rigs, cementing equipment, acidizing equipment and other
associated oilfield servicing equipment.

Proved Reserves

         Proved reserves are the estimated quantities of crude oil and natural
gas that geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known reserves under existing economic
and operating conditions. Our proved oil and gas reserve quantities and values
are based on estimates prepared by independent reserve engineers in accordance
with guidelines established by the Securities and Exchange Commission, or SEC.
Operating costs, production taxes and development costs were deducted in
determining the quantity and value information. Such costs were estimated based
on current costs and were not adjusted to anticipate increases due to inflation
or other factors. No price escalations were assumed and no amounts were deducted
for general overhead, depreciation, depletion and amortization, interest expense
and income taxes. The proved reserve quantity and value information is based on
the weighted average price on December 31, 2004, of $36.69 per Bbl for oil in
the United States and $35.39 per Bbl of oil and $1.91 per Mcf of gas in Poland.
The determination of oil and gas reserves is based on estimates and is highly
complex and interpretive, as there are numerous uncertainties inherent in
estimating quantities and values of proved reserves, projecting future rates of
production and timing and amount of development expenditures. The estimated
present value, discounted at 10% per annum, of the future net cash flows, or
PV-10 Value, was determined in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 69, "Disclosure About Oil and Gas Activities," and SEC
guidelines. Our proved reserve estimates are subject to continuing revisions as
additional information becomes available or assumptions change.

         Estimates of our proved United States oil reserves were prepared by
Larry Krause Consulting, an independent engineering firm in Billings, Montana.
Estimates of our proved Polish gas reserves were prepared by Troy-Ikoda Limited,
an independent engineering firm in the United Kingdom. No estimates of our
proved reserves have been filed with or included in any report to any other
federal agency during 2004.

                                       12
<PAGE>

         The following summary of proved reserve information as of December 31,
2004, represents estimates net to us only and should not be construed as exact:
<TABLE>
<CAPTION>
                                    United States                         Poland
                              --------------------------- ----------------------------------------      Total
                                 Oil        PV-10 Value       Oil          Gas       PV-10 Value     PV-10 Value
                              -----------  -------------- ------------ ------------ -------------- -----------------
                               (MBbls)         (In          (MBbls)       (MMcf)         (In             (In
                                             thousands)                               thousands)       thousands)
<S>                                <C>        <C>              <C>       <C>         <C>              <C>
Proved reserves:
  Developed producing........      809        $    5,134        --        1,011      $      814       $     5,948
  Undeveloped................       --                --       111        9,187          12,277            12,277
                              -----------  -------------- ------------ ------------ -------------- -----------------
    Total....................      809        $    5,134       111       10,198      $   13,091       $    18,225
                              ===========  ============== ============ ============ ============== =================
</TABLE>

         Gas reserves in Poland include 1.0 Bcf of gas attributable to the Kleka
11 well, which we agreed in 2003 to convey to POGC; in early 2004, we and POGC
agreed that we would not convey the Kleka 11 well, subject to completing final
documentation. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation: Introduction--Fences I Commitment and
Settlement, for further information concerning the Kleka 11 well.

Drilling Activities

         The following table sets forth the exploratory wells that we drilled
during the years ended December 31, 2004, 2003 and 2002:
<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                 -------------------------------------------------------------------
                                                         2004                   2003                   2002
                                                 ---------------------  ---------------------  ---------------------
                                                   Gross       Net       Gross        Net       Gross        Net
                                                 ---------- ----------  ---------  ----------  ---------  ----------
         <S>                                       <C>          <C>      <C>        <C>          <C>        <C>
         Discoveries:
           United States.......................     --          --        --         --           --         --
           Poland..............................      2.0         0.7      --         --           --         --
                                                 ---------- ----------  ---------  ----------  ---------  ----------
             Total.............................      2.0         0.7      --         --           --         --
                                                 ---------------------  ---------  ----------  ---------  ----------

         Exploratory dry holes:
           United States.......................     --          --        --         --           --         --
           Poland..............................     --          --        --         --           --         --
                                                 ---------- ----------  ---------  ----------  ---------  ----------
             Total.............................     --          --        --         --           --         --
                                                 ---------- ----------  ---------  ----------  ---------  ----------

         Total wells drilled...................      2.0         0.7      --         --           --         --
                                                 ========== ==========  =========  ==========  =========  ==========
</TABLE>

         We did not complete any exploratory wells in 2003 and 2002, and we did
not drill any development wells during 2003 and 2002. At December 31, 2004,
drilling operations were in progress at the Sroda-4 well in Poland and the East
Inselberg well in Nevada.

Wells and Acreage

         As of December 31, 2004, our producing gross and net well count
consisted of the following:


                                                          Number of Wells
                                                      ------------------------
                                                        Gross         Net
                                                      -----------  -----------
         Well count:
           United States(1)..........................     118.0       112.0
           Poland(2).................................       1.0         0.5
                                                      -----------  -----------
             Total...................................     119.0       112.5
                                                      ===========  ===========
---------------
(1) All of our United States wells are producing oil wells. We have no gas
    production in the United States.
(2) Consists of Kleka 11 well, which we agreed in 2003 to convey to POGC; in
    early 2004, we and POGC agreed that we would not convey the Kleka 11 well,
    subject to completing final documentation. See Item 7. Management's
    Discussion and Analysis of Financial Condition and Results of Operation:
    Introduction-- Fences I Commitment and Settlement, for further information
    concerning the Kleka 11 well.


                                       13
<PAGE>

         The following table sets forth our gross and net acres of developed and
undeveloped oil and gas acreage as of December 31, 2004:
<TABLE>
<CAPTION>
                                                                   Developed                    Undeveloped
                                                          ----------------------------  ----------------------------
                                                             Gross           Net           Gross           Net
                                                          ----------------------------  ----------------------------
<S>                                                           <C>            <C>              <C>           <C>
         United States:
           Montana......................................      10,732         10,418           1,150         1,057
           Nevada.......................................         400            128           7,132         4,151
                                                          -------------  -------------  ------------- --------------
              Total.....................................      11,132         10,546           8,282         5,208
                                                          -------------  -------------  ------------- --------------

         Poland: (1)
           Fences I project area........................         225            110         265,000       119,000
           Fences II project area.......................          --             --         670,000       328,000
           Fences III project area......................          --             --         770,000       770,000
           Wilga project area(2)........................         543            244         250,000       113,000
                                                          -------------  -------------  ------------- --------------
               Total Polish acreage.....................         768            354       2,450,000     2,361,000
                                                          -------------  -------------  ------------- --------------

         Total Acreage..................................      11,900         10,900       2,459,142     2,367,424
                                                          =============  =============  ============= ==============
-------------------
</TABLE>
(1) All gross undeveloped Polish acreage is rounded to the nearest 50,000 acres
    and net undeveloped Polish acreage is rounded to the nearest 1,000 acres.
(2) Effective January 31, 2005, our interest changed to 82%, increasing our net
    acreage to 205,000 acres.

Government Regulation

     Poland

         Our activities in Poland are subject to political, economic and other
uncertainties, including the adoption of new laws, regulations or administrative
policies that may adversely affect us or the terms of our exploration or
production rights; political instability and changes in government or public or
administrative policies; export and transportation tariffs and local and
national taxes; foreign exchange and currency restrictions and fluctuations;
repatriation limitations; inflation; environmental regulations and other
matters. These operations in Poland are subject to the Geological and Mining Law
dated as of September 4, 1994, and the Protection and Management of the
Environment Act dated as of January 31, 1980, which are the current primary
statutes governing environmental protection. Agreements with the government of
Poland respecting our areas create certain standards to be met regarding
environmental protection. Participants in oil and gas exploration, development
and production activities generally are required to (1) adhere to good
international petroleum industry practices, including practices relating to the
protection of the environment; and (2) prepare and submit geological work plans,
with specific attention to environmental matters, to the appropriate agency of
state geological administration for its approval prior to engaging in field
operations such as seismic data acquisition, exploratory drilling and field-wide
development. Poland's regulatory framework respecting environmental protection
is not as fully developed and detailed as that which exists in the United
States. We intend to conduct our operations in Poland in accordance with good
international petroleum industry practices and, as they develop, Polish
requirements.

         As Poland continues to progress towards its stated goal of becoming a
member of the European Union, it is expected to pass further legislation aimed
at harmonizing Polish environmental law with that of the European Union. The
European Union Treaty of Accession will require divestment by the Polish
government of certain portions of the oil and gas business. Changes in the
industry ownership may affect the business climate where we operate.

     United States

         State and Local Regulation of Drilling and Production

         Our exploration and production operations are subject to various types
of regulation at the federal, state and local levels. Such regulation includes
requiring permits for the drilling of wells, maintaining bonding requirements in
order to drill or operate wells and regulating the location of wells, the method

                                       14
<PAGE>

of drilling and casing wells, the surface use and restoration of properties upon
which wells are drilled, and the plugging and abandoning of wells. Our
operations are also subject to various conservation laws and regulations. These
include the regulation of the size of drilling and spacing units or proration
units and the density of wells that may be drilled and the unitization or
pooling of oil and gas properties. In this regard, some states allow the forced
pooling or integration of tracts to facilitate exploration while other states
rely on voluntary pooling of lands and leases. In addition, state conservation
laws establish maximum rates of production from oil and gas wells, generally
prohibit the venting or flaring of gas, and impose certain requirements
regarding the ratability of production.

         Our oil production is affected to some degree by state regulations.
States in which we operate have statutory provisions regulating the production
and sale of oil and gas, including provisions regarding deliverability. Such
statutes and related regulations are generally intended to prevent waste of oil
and gas and to protect correlative rights to produce oil and gas between owners
of a common reservoir. Certain state regulatory authorities also regulate the
amount of oil and gas produced by assigning allowable rates of production to
each well or proration unit.

         Environmental Regulations

         The federal government and various state and local governments have
adopted laws and regulations regarding the control of contamination of the
environment. These laws and regulations may require the acquisition of a permit
by operators before drilling commences, restrict the types, quantities and
concentration of various substances that can be released into the environment in
connection with drilling and production activities, limit or prohibit drilling
activities on certain lands lying within wilderness, wetlands and other
protected areas, and impose substantial liabilities for pollution resulting from
our operations. These laws and regulations may also increase the costs of
drilling and operation of wells. We may also be held liable for the costs of
removal and damages arising out of a pollution incident to the extent set forth
in the Federal Water Pollution Control Act, as amended by the Oil Pollution Act
of 1990, or OPA `90. In addition, we may be subject to other civil claims
arising out of any such incident. As with any owner of property, we are also
subject to clean-up costs and liability for hazardous materials, asbestos or any
other toxic or hazardous substance that may exist on or under any of our
properties. We believe that we are in compliance in all material respects with
such laws, rules and regulations and that continued compliance will not have a
material adverse effect on our operations or financial condition. Furthermore,
we do not believe that we are affected in a significantly different manner by
these laws and regulations than our competitors in the oil and gas industry.

         The Comprehensive Environmental Response, Compensation and Liability
Act, or CERCLA, also known as the "Superfund" law, imposes liability, without
regard to fault or the legality of the original conduct, on certain classes of
persons who are considered to be responsible for the release of a "hazardous
substance" into the environment. These persons include the owner or operator of
the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of the hazardous substances. Under CERCLA,
such persons may be subject to joint and several liability for the costs of
cleaning up the hazardous substances that have been released into the
environment, for damages to natural resources, and for the costs of certain
health studies. Furthermore, it is not uncommon for neighboring landowners and
other third parties to file claims for personal injury and property damage
allegedly caused by hazardous substances or other pollutants released into the
environment.

         The Resource Conservation and Recovery Act, or RCRA, and regulations
promulgated thereunder govern the generation, storage, transfer and disposal of
hazardous wastes. RCRA, however, excludes from the definition of hazardous
wastes "drilling fluids, produced waters and other wastes associated with the
exploration, development, or production of crude oil, gas or geothermal energy."
Because of this exclusion, many of our operations are exempt from RCRA
regulation. Nevertheless, we must comply with RCRA regulations for any of our
operations that do not fall within the RCRA exclusion.

         The OPA `90 and related regulations impose a variety of regulations on
responsible parties related to the prevention of oil spills and liability for
damages resulting from such spills. OPA `90 establishes strict liability for
owners of facilities that are the site of a release of oil into "waters of the
United States." While OPA `90 liability more typically applies to facilities
near substantial bodies of water, at least one district court has held that OPA
`90 liability can attach if the contamination could enter waters that may flow
into navigable waters.

                                       15
<PAGE>

         Stricter standards in environmental legislation may be imposed on the
oil and gas industry in the future, such as proposals made in Congress and at
the state level from time to time, that would reclassify certain oil and gas
exploration and production wastes as "hazardous wastes" and make the
reclassified wastes subject to more stringent and costly handling, disposal and
clean-up requirements. The impact of any such changes, however, would not likely
be any more burdensome to us than to any other similarly situated company
involved in oil and gas exploration and production.

         Federal and Indian Leases

         A substantial part of our producing properties in Montana consist of
oil and gas leases issued by the Bureau of Land Management or by the Blackfeet
Tribe under the supervision of the Bureau of Indian Affairs. Our activities on
these properties must comply with rules and orders that regulate aspects of the
oil and gas industry, including drilling and operating on leased land and the
calculation and payment of royalties to the federal government or the governing
Indian nation. Our operations on Indian lands must also comply with applicable
requirements of the governing body of the tribe involved including, in some
instances, the employment of tribal members. We believe we are currently in full
compliance with all material provisions of such regulations.

         Safety and Health Regulations

         We must also conduct our operations in accordance with various laws and
regulations concerning occupational safety and health. Currently, we do not
foresee expending material amounts to comply with these occupational safety and
health laws and regulations. However, since such laws and regulations are
frequently changed, we are unable to predict the future effect of these laws and
regulations.

Title to Properties

         We rely on sovereign ownership of exploration rights and mineral
interests by the Polish government in connection with our activities in Poland
and have not conducted and do not plan to conduct any independent title
examination. We regularly consult with our Polish legal counsel when doing
business in Poland.

         Nearly all of our United States working interests are held under leases
from third parties. We typically obtain a title opinion concerning such
properties prior to the commencement of drilling operations. We have obtained
such title opinions or other third-party review on nearly all of our producing
properties, and we believe that we have satisfactory title to all such
properties sufficient to meet standards generally accepted in the oil and gas
industry. Our United States properties are subject to typical burdens, including
customary royalty interests and liens for current taxes, but we have concluded
that such burdens do not materially interfere with the use of such properties.
Further, we believe the economic effects of such burdens have been appropriately
reflected in our acquisition cost of such properties and reserve estimates.
Title investigation before the acquisition of undeveloped properties is less
thorough than that conducted prior to drilling, as is standard practice in the
industry.

Employees and Consultants

         As of December 31, 2004, we had 33 employees, consisting of seven in
Salt Lake City, Utah; 20 in Oilmont, Montana; one in Greenwich, Connecticut;
three in Houston, Texas, one in the United Kingdom, and one in Poland. Our
employees are not represented by a collective bargaining organization. We
consider our relationship with our employees to be satisfactory. We also
regularly engage technical consultants to provide specific geological,
geophysical and other professional services. Our executive officers and other
management employees regularly travel to Poland to supervise activities
conducted by others under contract on our behalf.

Offices and Facilities

         Our corporate offices, located at 3006 Highland Drive, Salt Lake City,
Utah, contain approximately 3,010 square feet and are rented at $2,960 per month
under a month-to-month agreement. In Montana, we own a 16,160 square foot
building located at the corner of Central and Main in Oilmont. In Poland, we
rent a small office suite for $1,400 per month in Warsaw, at Al. Jerozolimskie
65/79, as an office of record in Poland.

                                       16
<PAGE>

Oil and Gas Terms

         The following terms have the indicated meaning when used in this
report:

         "Bbl" means oilfield barrel.

         "Bcf" means billion cubic feet of natural gas.

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

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

         "Field" means an area consisting of a single reservoir or multiple
         reservoirs all grouped on or related to the same individual geological
         structural feature and/or stratigraphic conditions.

         "Gross" acres and "gross" wells means the total number of acres or
         wells, as the case may be, in which an interest is owned, either
         directly or though a subsidiary or other Polish enterprise in which we
         have an interest.

         "Horizon" means an underground geological formation that is the portion
         of the larger formation that has sufficient porosity and permeability
         to constitute a reservoir.

         "MBbls" means thousand oilfield barrels.

         "Mcf" means thousand cubic feet of natural gas.

         "MMBTU" means million British thermal units, a unit of heat energy used
         to measure the amount of heat that can be generated by burning gas or
         oil.

         "MMcf" means million cubic feet of natural gas.

         "Net" means, when referring to wells or acres, the fractional ownership
         working interests held by us, either directly or through a subsidiary
         or other Polish enterprise in which we have an interest, multiplied by
         the gross wells or acres.

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

         "PV-10 Value" means the estimated future net revenue to be generated
         from the production of proved reserves discounted to present value
         using an annual discount rate of 10.0%. These amounts are calculated
         net of estimated production costs and future development costs, using
         prices and costs in effect as of a certain date, without escalation and
         without giving effect to non property-related expenses, such general
         and administrative costs, debt service, future income tax expense or
         depreciation, depletion and amortization.

         "Reservoir" means a porous and permeable underground formation
         containing a natural accumulation of producible oil and/or gas that is
         confined by impermeable rock or water barriers and that is distinct and
         separate from other reservoirs.

         "Usufruct" means the Polish equivalent of a U.S. oil and gas lease.

                                       17
<PAGE>

                                     PART IV

--------------------------------------------------------------------------------
               ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
--------------------------------------------------------------------------------

(a) The following documents are filed as part of this report or incorporated
herein by reference.


         1.   Financial Statements. See the original annual report on Form 10-K
              for the year ended December 31, 2004, filed March 15, 2005:


         2.   Supplemental Schedules. The Financial Statement schedules have
              been omitted because they are not applicable or the required
              information is otherwise included in the accompanying consolidated
              financial statements and the notes thereto.

         3.   Exhibits. The following exhibits are included as part of this
              report:
<TABLE>
<CAPTION>
  Exhibit
  Number*                      Title of Document                                       Location
------------ ----------------------------------------------------- -------------------------------------------------
<S>          <C>                                                   <C>
   Item 3    Articles of Incorporation and Bylaws
------------ -----------------------------------------------------
    3.01     Restated and Amended Articles of Incorporation        Incorporated by reference from the quarterly
                                                                   report on Form 10-Q for the quarter ended
                                                                   September 30, 2000, filed November 7, 2000.

    3.02     Bylaws                                                Incorporated by reference from the annual report
                                                                   on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.


             Instruments Defining the
   Item 4    Rights of Security Holders
------------ -----------------------------------------------------
    4.01     Specimen Stock Certificate                            Incorporated by reference from the registration
                                                                   statement on Form SB-2, SEC File No. 33-88354-D.

    4.02     Form of Designation of Rights, Privileges, and        Incorporated by reference from the annual
             Preferences of Series A Preferred Stock               report on Form 10-K for the period ended
                                                                   December 31, 2003, filed March 15, 2004.

    4.03     Form of Rights Agreement dated as of April 4, 1997,   Incorporated by reference from the annual
             between FX Energy, Inc. and Fidelity Transfer Corp.   report on Form 10-K for the period ended
                                                                   December 31, 2003, filed March 15, 2004.

                                       18
<PAGE>
<CAPTION>
  Exhibit
  Number*                      Title of Document                                       Location
------------ ----------------------------------------------------- -------------------------------------------------
<S>          <C>                                                   <C>
  Item 10    Material Contracts
------------ -----------------------------------------------------
   10.26     Frontier Oil Exploration Company 1995 Stock Option    Incorporated by reference from the annual report
             and Award Plan**                                      on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.27     FX Energy, Inc. 1996 Stock Option and Award Plan**    Incorporated by reference from the annual report
                                                                   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.28     FX Energy, Inc. 1997 Stock Option and Award Plan**    Incorporated by reference from the annual report
                                                                   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.29     FX Energy, Inc. 1998 Stock Option and Award Plan**    Incorporated by reference from the annual report
                                                                   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.30     Employment Agreements between FX Energy, Inc. and     Incorporated by reference from the registration
             each of David Pierce and Andrew Pierce, effective     statement on Form SB-2, SEC File No. 33-88354-D.
             January 1, 1995**

   10.32     Form of Stock Option with related schedule (D.        Incorporated by reference from the registration
             Pierce and A. Pierce)**                               statement on Form SB-2, SEC File No. 33-88354-D.

   10.39     Employment Agreement between FX Energy, Inc. and      Incorporated by reference from the registration
             Jerzy B. Maciolek**                                   statement on Form S-1, SEC File No. 333-05583,
                                                                   filed June 10, 1996.

   10.42     Employment Agreement between FX Energy, Inc. and      Incorporated by reference from the annual report
             Scott J. Duncan**                                     on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.52     Form of Indemnification Agreement between FX Energy,  Incorporated by reference from the annual report
             Inc. and certain directors, with related schedule**   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.53     Agreement on Cooperation in Exploration of            Incorporated by reference from the quarterly
             Hydrocarbons on Foresudetic Monocline dated           report on Form 10-Q for the quarter ended
             April 11, 2000, between Polskie Gornictwo Naftowe I   March 31, 2000, filed May 15, 2000.
             Gazownictwo S.A. (POGC) and FX Energy Poland,
             Sp. z o.o. relating to Fences I project area

   10.59     Sales / Purchase Agreement Special Provisions         Incorporated by reference from the annual report
             between Plains Marketing Canada, L.P. and FX          on Form 10-K for the period ended December 31,
             Drilling Company Inc. agreed April 29, 2002           2002, filed March 27, 2003.

   10.60     Form of Non-Qualified Stock Option awarded August     Incorporated by reference from the annual report
             14, 2002, with related schedule**                     on Form 10-K for the period ended December 31,
                                                                   2002, filed March 27, 2003.

   10.62     Agreement Regarding Cooperation within the Poznan     Incorporated by reference from the annual report
             Area (Fences II) entered into January 8, 2003, by     on Form 10-K for the period ended December 31,
             and between Polskie Gornictwo Naftowe i Gazownictwo   2002, filed March 27, 2003.
             S.A. and FX Energy Poland Sp. z o.o.

                                       19
<PAGE>
<CAPTION>
  Exhibit
  Number*                      Title of Document                                       Location
------------ ----------------------------------------------------- -------------------------------------------------
<S>          <C>                                                   <C>
  Item 10    Material Contracts (continued)
------------ -----------------------------------------------------
   10.63     Settlement Agreement Regarding the Fences I Area      Incorporated by reference from the annual report
             entered into January 8, 2003, by and between Polskie  on Form 10-K for the period ended December 31,
             Gornictwo Naftowe i Gazownictwo S.A. and FX Energy    2002, filed March 27, 2003.
             Poland Sp. z o.o.

   10.64     Farmout Agreement Entered into by and between         Incorporated by reference from the annual report
             FX Energy Poland Sp. z o.o. and CalEnergy Power       on Form 10-K for the period ended December 31,
             (Polska) Sp. z o.o. Covering the "Fences Area" in     2002, filed March 27, 2003.
             the Foresudetic Monocline made as of January 9, 2003

   10.65     Letter Agreement between Rolls-Royce Power Ventures   Incorporated by reference from the annual report
             Limited and FX Energy, Inc. dated February 6, 2003    on Form 10-K for the period ended December 31,
                                                                   2002, filed March 27, 2003.

   10.66     Amendment Agreement No. 1 to 9.5% Convertible         Incorporated by reference from the annual report
             Secured Note between FX Energy, Inc. and Rolls-Royce  on Form 10-K for the period ended December 31,
             Power Ventures Limited dated March 10, 2003           2002, filed March 27, 2003.

   10.67     FX Energy, Inc. 1999 Stock Option and Award Plan**    Incorporated by reference from the annual report
                                                                   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.68     FX Energy, Inc. 2000 Stock Option and Award Plan**    Incorporated by reference from the annual report
                                                                   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.69     FX Energy, Inc. 2001 Stock Option and Award Plan**    Incorporated by reference from the annual report
                                                                   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.70     FX Energy, Inc. 2003 Long-Term Incentive Plan         Incorporated by reference from the annual report
                                                                   on Form 10-K for the period ended December 31,
                                                                   2003, filed March 15, 2004.

   10.72     FX Energy, Inc. Placement Agency Agreement with CDC   Incorporated by reference from the current
             Securities dated April 13, 2004                       report on Form 8-K dated April 13, 2004, filed
                                                                   April 16, 2004.

   10.73     FX Energy, Inc. Underwriting Agreement with           Incorporated by reference from the current
             I-Bankers Securities Incorporated dated               report on Form 8-K dated April 13, 2004, filed
             April 13, 2004                                        April 16, 2004.

   10.74     Greater Zaniemysl Area Agreement made as of March     Incorporated by reference from the quarterly
             12, 2004, among FX Energy Poland Sp. z o.o. and       report on Form 10-Q for the period ended
             CalEnergy Resources Poland Sp. z o.o.                 March 31, 2004, filed May 11, 2004.


   10.75     Form of Indemnification Agreement between FX Energy,  Incorporated by reference from the annual report
             Inc. and directors and officers with related          on Form 10-K for the year ended December 31,
             schedule**                                            2004, filed March 15, 2005.

   10.76     Supplemental Indemnification Agreement between FX     Incorporated by reference from the annual report
             Energy, Inc. and Dennis B. Goldstein**                on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.

   10.77     Description of compensation arrangement with          Incorporated by reference from the annual report
             executive officers and directors**                    on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.

                                       20
<PAGE>
<CAPTION>
  Exhibit
  Number*                      Title of Document                                       Location
------------ ----------------------------------------------------- -------------------------------------------------
<S>          <C>                                                   <C>
  Item 10    Material Contracts (continued)
------------ -----------------------------------------------------

   10.78     Form of Employment Agreement with related schedule**  Incorporated by reference from the
                                                                   annual report on Form 10-K for the
                                                                   year ended December 31, 2004, filed
                                                                   March 15, 2005.

   10.79     Change in Control Compensation Agreement with         Incorporated by reference from the annual report
             related schedule**                                    on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.

   10.80     FX Energy, Inc. 401(k) Stock Bonus Plan**             Incorporated by reference from the annual report
                                                                   on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.

   10.81     FX Energy, Inc. 2004 Long-Term Incentive Plan**       Incorporated by reference from the annual report
                                                                   on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.


  Item 21    Subsidiaries of the Registrant
------------ -----------------------------------------------------

   21.01     Schedule of Subsidiaries                              Incorporated by reference from the annual report
                                                                   on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.


  Item 23    Consents of Experts and Counsel
------------ -----------------------------------------------------

   23.01     Consent of PricewaterhouseCoopers LLP, independent    Incorporated by reference from the annual report
             registered public accounting firm                     on Form 10-K for the year ended December 31,
                                                                   2004, filed March 15, 2005.

   23.02     Consent of Larry D. Krause, Petroleum Engineer        Incorporated by reference from the annual
                                                                   report on Form 10-K for the year ended December
                                                                   31, 2004, filed March 15, 2005.

   23.03    Consent of Troy-Ikoda Limited, Petroleum Engineers     Incorporated by reference from the
                                                                   annual report on Form 10-K for the
                                                                   year ended December 31, 2004, filed
                                                                   March 15, 2005.



  Item 31    Rule 13a-14(a)/15d-14(a) Certifications
------------ -----------------------------------------------------
   31.01     Certification of Chief Executive Officer Pursuant to  This filing.
             Rule 13a-14

   31.02     Certification of Chief Financial Officer Pursuant to  This filing.
             Rule 13a-14

  Item 32    Section 1350 Certifications
------------ -----------------------------------------------------

   32.01     Certification of Chief Executive Officer Pursuant to  Incorporated by reference from the annual report
             18 U.S.C. Section 1350, as Adopted Pursuant to        on Form 10-K for the year ended December 31,
             Section 906 of the Sarbanes-Oxley Act of 2002         2004, filed March 15, 2005.

   32.02     Certification of Chief Financial Officer Pursuant to  Incorporated by reference from the annual report
             18 U.S.C. Section 1350, as Adopted Pursuant to        on Form 10-K for the year ended December 31,
             Section 906 of the Sarbanes-Oxley Act of 2002         2004, filed March 15, 2005.
----------------

</TABLE>
*    All exhibits are numbered with the number preceding the decimal indicating
     the applicable SEC reference number in Item 601, and the number following
     the decimal indicating the sequence of the particular document. Omitted
     numbers in the sequence refer to documents previously filed as an exhibit,
     but no longer required.
**   Identifies each management contract or compensatory plan or arrangement
     required to be filed as an exhibit, as required by Item 15(a)(3) of Form
     10-K.

                                       21
<PAGE>
--------------------------------------------------------------------------------
                                   SIGNATURES
--------------------------------------------------------------------------------


         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment no. 1 to
report to be signed on its behalf by the undersigned, thereunto duly authorized.


                                      FX ENERGY, INC. (Registrant)


Dated:  March 10, 2006                By: /s/ David N. Pierce
                                          --------------------------------------
                                          David N. Pierce
                                          President and Chief Executive Officer


Dated:  March 10, 2006                By: /s/ Thomas B. Lovejoy
                                          --------------------------------------
                                          Thomas B. Lovejoy
                                          Chief Financial Officer

                                       22