SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-QSB

|[X]   | QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGEACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001    
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                              
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGEACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO _________

Commission File No. 1-12334

FORTUNE NATURAL RESOURCES CORPORATION(Exact Name of
Registrant as specified in its charter)

|Delaware(State or other jurisdiction ofincorporation or organization) | 95-4114732(I.R.S. EmployerIdentification No.)
|--------------------------------------------------------------------- | ---------------------------------------------

|One Commerce Green, 515 W. Greens Rd.,Suite 720, Houston, Texas(Address of principal Executive Offices) | 77067(Zip Code)
|------------------------------------------------------------------------------------------------------- | ---------------

281-872-1170Issuer's telephone number

N/A(Former name or former address, if changed since last report)

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

Applicable only to corporate issuers:

State the number of shares outstanding of each of the issuers classes of common equity, as of the
latest practicable date.

16,471,772 as of October 31, 2001

Transition small business disclosure format (check one)  Yes  
  No  X

---

PART I  FINANCIAL INFORMATION

ITEM 1.   Financial Statements

FORTUNE NATURAL RESOURCES CORPORATION
BALANCE SHEETS

ASSETS

`September 30,  December 31,
                                                                   2001          2000
                                                               ------------   ------------
                                                                (Unaudited)     (Audited)
CURRENT ASSETS:
   Cash and cash equivalents ................................  $    806,000   $  1,028,000
   Accounts receivable ......................................       242,000        647,000
   Prepaid expenses .........................................        25,000         25,000
                                                               ------------   ------------
      Total Current Assets ..................................     1,073,000      1,700,000
                                                               ------------   ------------
PROPERTY AND EQUIPMENT:
   Oil and gas properties, accounted for
     using the full cost method .............................    28,432,000     27,848,000
   Office and other .........................................       396,000        392,000
                                                               ------------   ------------
                                                                 28,828,000     28,240,000
   Less--accumulated depletion, depreciation and amortization   (24,682,000)   (22,511,000)
                                                               ------------   ------------
                                                                  4,146,000      5,729,000
                                                               ------------   ------------

TOTAL ASSETS ................................................  $  5,219,000   $  7,429,000
                                                               ============   ============

                LIABILITIES AND STOCKHOLDERS' EQUITY
                                                               September 30,  December 31,
                                                                   2001          2000
                                                               ------------   ------------
                                                                (Unaudited)     (Audited)
CURRENT LIABILITIES:
   Current portion of long-term debt ......................... $          -   $     10,000
   Accounts payable ..........................................       43,000         64,000
   Accrued expenses ..........................................       72,000         73,000
   Royalties and working interests payable ...................       55,000         60,000
   Accrued interest ..........................................       69,000         69,000
                                                               ------------   ------------
      Total Current Liabilities ..............................      239,000        276,000
                                                               ------------   ------------
LONG-TERM DEBT ...............................................    2,295,000      2,295,000
                                                               ------------   ------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock, $1.00 par value:
      Authorized--2,000,000 shares
      Issued and outstanding--None ...........................            -              -
   Common stock, $.01 par value:
      Authorized--40,000,000 shares
      Issued and outstanding 16,471,772 and 16,413,806 at
        September 30, 2001 and December 31, 2000, respectively      165,000        164,000
   Capital in excess of par value ............................   32,149,000     32,117,000
   Accumulated deficit .......................................  (29,629,000)   (27,423,000)
                                                               ------------   ------------
NET STOCKHOLDERS' EQUITY .....................................    2,685,000      4,858,000
                                                               ------------   ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................... $  5,219,000   $  7,429,000
                                                               ============   ============`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF OPERATIONS

`September 30,  September 30,
                                                               2001           2000
                                                           ------------   ------------
                                                                   (Unaudited)
REVENUES
   Sales of oil and gas, net of royalties ...............  $  1,580,000   $  1,793,000
   Other income .........................................        34,000         26,000
                                                           ------------   ------------
                                                              1,614,000      1,819,000
                                                           ------------   ------------

COSTS AND EXPENSE
   Production and operating .............................       463,000        438,000
   Provision for depletion, depreciation and amortization       471,000        699,000
   General and administrative ...........................       977,000        852,000
   Interest .............................................       209,000        207,000
   Impairment to oil and gas properties .................     1,700,000           --
                                                           ------------   ------------
                                                              3,820,000      2,196,000
                                                           ------------   ------------

LOSS BEFORE EXTRAORDINARY ITEM ..........................    (2,206,000)      (377,000)
   Extraordinary loss on early extinguishments of debt ..             -       (118,000)
                                                           ------------   ------------

NET LOSS ................................................  $ (2,206,000)  $   (495,000)
                                                           ============   ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ..............    16,459,428     15,682,359
                                                           ============   ============

NET LOSS PER COMMON SHARE (BASIC AND DILUTED)
   Net loss before extraordinary item ...................  $      (0.13)  $      (0.02)
   Extraordinary item ...................................             -          (0.01)
                                                           ------------   ------------
      Net loss per common share .........................  $      (0.13)  $      (0.03)
                                                           ============   ============`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF OPERATIONS

`September 30,  September 30,
                                                               2001           2000
                                                           ------------   ------------
                                                                  (Unaudited)
REVENUES
   Sales of oil and gas, net of royalties ...............  $    265,000   $    777,000
   Other income .........................................         9,000         15,000
                                                           ------------   ------------
                                                                274,000        792,000
                                                           ------------   ------------

COSTS AND EXPENSES
   Production and operating .............................       140,000        153,000
   Provision for depletion, depreciation and amortization       162,000        280,000
   General and administrative ...........................       304,000        288,000
   Interest .............................................        70,000         69,000
   Impairment to oil and gas properties .................     1,700,000              -
                                                           ------------   ------------
                                                              2,376,000        790,000
                                                           ------------   ------------

NET INCOME (LOSS) .......................................  $ (2,102,000)  $      2,000
                                                           ============   ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ..............    16,469,664     16,382,385
                                                           ============   ============
NET INCOME (LOSS) PER COMMON SHARE
   (BASIC AND DILUTED) ..................................  $      (0.13)  $          -
                                                           ============   ============`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION STATEMENT OF STOCKHOLDERS EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001

`Common Stock          Capital in                      Stock-
                                        -----------------------    Excess of     Accumulated      holders'
                                          Shares       Amount      Par Value        Deficit       Equity
                                        ----------   ----------   ------------   ------------   ----------
BALANCE, December 31, 2000 .........    16,413,806   $  164,000   $ 32,117,000   $(27,423,000)  $4,858,000

Common stock contributed to
   401(k) Plan .....................        48,773            -         24,000              -       24,000
Common stock issued for
   directors' fees .................         8,694        1,000          5,000              -        6,000
Common stock issued for
   exercise of stock options .......           500            -              -              -            -
Common stock warrants
   issued for director fees ........             -            -          3,000              -        3,000
Common stock returned to treasury               (1)           -              -              -            -
Net loss ...........................             -            -              -     (2,206,000)  (2,206,000)
                                        ----------   ----------   ------------   ------------   ----------
BALANCE, September 30, 2001
   (unaudited) .....................    16,471,772   $  165,000   $ 32,149,000   $(29,629,000)  $2,685,000
                                        ==========   ==========   ============   ============   ==========`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION
STATEMENTS OF CASH FLOWS

`September 30,  September 30,
                                                                          2001           2000
                                                                      ------------   ------------
                                                                              (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss.........................................................  $ (2,206,000)  $   (495,000)
   Adjustments to reconcile net loss to net
     cash provided by operating activities:
      Depletion, depreciation and amortization .....................       471,000        699,000
      Common stock issued for directors' fees ......................         9,000         22,000
      Common stock issued for 401(k) Plan contribution .............        24,000              -
      Impairment to oil and gas properties......                         1,700,000              -
      Common stock issued in connection with
        extraordinary loss on early extinguishment of debt..........             -        118,000
                                                                      ------------   ------------
        Cash flow before changes in operating assets and liabilities        (2,000)       344,000
   Changes in operating assets and liabilities:
      Accounts receivable ..........................................       405,000       (284,000)
      Prepaids .....................................................             -         (4,000)
      Accounts payable and accrued expenses ........................       (22,000)             -
      Royalties and working interests payable ......................        (5,000)        45,000
      Accrued interest .............................................             -        (28,000)
      Other ........................................................             -         70,000
                                                                      ------------   ------------
   Net cash provided by operating activities .......................       376,000        143,000
                                                                      ------------   ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Expenditures for oil and gas properties..........................      (584,000)      (524,000)
   Expenditures for other property and equipment ...................        (4,000)             -
                                                                      ------------   ------------
   Net cash used in investing activities............................      (588,000)      (524,000)
                                                                      ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of long-term debt .....................................       (10,000)             -
   Proceeds from issuance of common stock ..........................             -        786,000
   Expenditures for offering costs .................................             -        (23,000)
                                                                      ------------   ------------
   Net cash provided by (used in) financing activities .............       (10,000)       763,000
                                                                      ------------   ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...............      (222,000)       382,000

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......................     1,028,000        294,000
                                                                      ------------   ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD............................  $    806,000   $    676,000
                                                                      ============   ============

Supplemental information:
   Interest paid in cash............................................  $    209,000   $    207,000
Non-cash transactions
   Common stock issued for 401(k) Plan contribution ................             -         19,000
   Common stock issued for conversion of notes .....................             -        930,000`

See accompanying notes to financial statements.

---

FORTUNE NATURAL RESOURCES CORPORATION

NOTES TO FINANCIAL STATEMENTSSeptember 30, 2001

(1)    Line of Business and Summary of Significant
Accounting Policies and Procedures

The condensed
financial statements at September 30, 2001, and
for the periods then ended included herein have been prepared by
Fortune Natural Resources Corporation, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission.  Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and
regulations.  However, Fortune believes that the disclosures are
adequate to make the information presented not misleading.  These
condensed financial statements should be read in conjunction with
the financial statements and the notes thereto included in
Fortune's latest annual report on Form 10-KSB.  In Fortune's
opinion, the financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary to
present fairly its financial position and the results of its
operations and its cash flows for the dates and periods presented.
The results of the operations for these interim periods are not
necessarily indicative of the results for the full year.

(2)    Long-Term Debt

At September 30, 2001,
a summary of long-term debt is as follows:

`September 30, December 31,
                                                                     2001         2000
                                                                 ------------  ------------
     Convertible Subordinated Notes due December 31, 2007......  $  2,295,000  $  2,295,000

     Credit Lyonnais credit facility due January 11, 2001......             -        10,000
                                                                 ------------  ------------
                                                                    2,295,000     2,305,000
      Less current installments................................             -        10,000
                                                                 ------------  ------------
      Long-term debt, excluding current installments             $  2,295,000  $  2,295,000
                                                                 ============  ============`

Fortune's subordinated
notes are convertible by the holders
into common stock at $0.75 per share and/or redeemable by Fortune
at par.  The notes are unsecured and can be subordinated to any
secured debt.  The notes bear interest at a rate of 12% per year,
payable quarterly.  The cost incurred to issue the original notes
has been amortized as additional interest expense over the 18-month
period ended May 1, 1999, the first date that the notes were
convertible.  As a result of this amortization of issuance costs,
the effective interest rate of the notes over this 18-month period
was 21.2%.  If any notes are held to maturity, the effective
interest rate to maturity on those notes will be 13.4%.

---

In February and
March 2000, holders of $930,000 of Fortune's
12% notes that were convertible at approximately $0.33 per share,
converted those notes into 2,821,162 shares of common stock.
Fortune paid the noteholders who converted a premium equal to one
year's prepaid interest plus certain accrued interest.  This
premium was paid in Fortune common stock valued at $0.75 per share,
resulting in the issuance of an additional 158,132 shares to the
noteholders who converted.  This premium was expensed during the
first quarter of 2000 as an extraordinary loss on early
extinguishment of debt.  As a result of this note conversion,
Fortune's annual cash interest expense was reduced by $111,600.

Fortune's  credit
facility with Credit Lyonnais New York Branch
expired  January 11, 2001.  The $10,000  outstanding  balance of this
credit  facility  was  repaid  in the  first  quarter  of  2001.  The
interest rate on the facility was 1.25% above Credit  Lyonnais'  base
rate.

(3)    Income Tax Expense

No provision
for income taxes was required for the nine months
ended September 30, 2001 and 2000.

At September 30, 2001,
Fortune estimates it had cumulative net
operating loss carryforwards for federal income tax purposes of
approximately $24 million, of which approximately $7 million is
subject to restrictions under I.R.C. 382.  These loss carryforwards
are available to offset future federal taxable income, if any.  The
net operating losses expire from 2002 through 2020.  Fortune is
uncertain as to the recoverability of the above deferred tax assets
and has therefore applied a 100% valuation allowance.

(4)    Legal Proceedings

There are no
material pending legal proceedings involving any
of Fortune's properties or which involve a claim for damages which
exceed 10% of Fortune's current assets.

(5)    Computation of Loss Per Share

Basic net loss
per common share is computed by dividing net
loss by the weighted average number of common shares outstanding.
Diluted loss per common share does not differ from basic loss per
common share because the issuance or conversion of additional
securities would have an antidilutive effect.

(6)    Impairment to Oil and Gas properties

As a result of
decreases in oil and gas prices, Fortune's
evaluated, net capitalized oil and gas property costs exceed its
proved reserve value ceiling by $1,700,000.  Consequently, Fortune
expensed this excess as a non-cash impairment to oil and gas
properties as of September 30, 2001.  The value of Fortune's proved
reserves is determined using oil and gas prices in effect at the
end of each period for which a ceiling test is performed.  If
prices increase after the end the period, those higher prices may
be used in lieu of period-end prices to calculate a lower
impairment expense.  The oil and gas prices in effect at September
30, 2001 of approximately $20.48 per Bbl and $1.98 per Mcf,
respectively, would have resulted in a $3.1 million impairment
expense.  However, Fortune used the most recent prices of
approximately $17.01 per Bbl for oil and $2.87 per Mcf for gas to
record the lower impairment expense of $1,700,000 for the current
quarter.  Oil and gas prices continue to be volatile and there is
risk that Fortune will incur additional impairments to its oil and
gas property costs if such prices decline again or if Fortune has
significant downward revisions in its estimated proved reserves.

---

(7)    New Accounting Pronouncements

The Financial
Accounting Standards Board ("FASB") has recently
issued Statement of Financial Accounting Standards ("SFAS") No.
141, `Business Combinations," SFAS No. 142, "Goodwill and Other
Intangible Assets," SFAS No. 143, "Accounting for Asset Retirement
Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."

SFAS No. 141,
"Business Combinations," requires the use of the
purchase method of accounting for all business combinations
initiated after June 30, 2001, SFAS No. 142, "Goodwill and Other
Intangible Assets", addresses accounting for the acquisition of
intangible assets and accounting for goodwill and other intangible
assets after they have been initially recognized in the financial
statements.  Fortune does not currently have goodwill or other
similar intangible assets; therefore, the adoption of the new
standard on January 1, 2002, will not have a material effect on
Fortune's financial statements.

SFAS No. 143,
"Accounting for Asset Retirement Obligations,"
addresses accounting and reporting for obligations associated with
the retirement of tangible long-lived assets and the associated
asset retirement costs.  SFAS No. 143 will be effective for Fortune
January 1, 2003 and early adoption is encouraged.  SFAS No. 143
requires that the fair value of a liability for an asset's
retirement obligation be recorded in the period in which it is
incurred and the corresponding cost capitalized by increasing the
carrying amount of the related long-lived asset.  The liability is
accreted to its then present value each period, and the capitalized
cost is depreciated over the useful life of the related asset.  If
the liability is settled for an amount other than the recorded
amount, a gain or loss is recognized.  Currently, Fortune does
accrue for certain dismantlement costs through depletion and is
therefore evaluating the impact the new standard will have on its
financial statements.

SFAS No. 144,
"Accounting for the Impairment or Disposal of
Long-Lived Assets," is effective for Fortune January 1, 2002, and
addresses accounting and reporting for the impairment or disposal
of long-lived assets.  SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" and APB Opinion No. 30,
"Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business."  SFAS No. 144 retains the
fundamental provisions of SFAS No. 121 and expands the reporting of
discontinued operations to include all components of an entity with
operations that can be distinguished from the rest of the entity
and that will be eliminated from the ongoing operations of the
entity in a disposal transaction.  Fortune estimates that the new
standard will not have a material impact on its financial
statements.

---

ITEM 2. Managements Discussion and Analysis of Financial
Conditionand Results of Operations

Financial Condition

At September 30,
2001, Fortune reported working capital of
$834,000, a cash balance of $806,000 and no short-term debt.
Fortune's only debt is its $2,295,000 of 12% subordinated
convertible notes, which are due December 31, 2007.  Although oil
and gas prices have declined since the first quarter of 2001, and
reached a low point at the end of the third quarter of 2001, they
have rebounded recently.

Fortune reported
positive cash flow in 2000 and the first
quarter of 2001 because of higher oil and gas prices and increased
production from successful drilling and workover activity discussed
below.  Fortune is now experiencing negative cash flow; however,
its liquidity has improved since the end of 1999.  During February
through May 2000, Fortune took steps to improve its short-term
liquidity by raising net proceeds of $763,000 through the sale of
common stock and the exercise of common stock warrants.  Also,
during February and March 2000, $930,000 of Fortune's 12%
convertible notes was converted to common stock.  The remaining
notes are convertible into common stock at $0.75 per share.

As a result
of decreases in oil and gas prices, Fortune's
evaluated, net capitalized oil and gas property costs exceed its
proved reserve value ceiling by $1,700,000.  Consequently, Fortune
expensed this excess as a non-cash impairment to oil and gas
properties as of September 30, 2001.  The value of Fortune's proved
reserves is determined using oil and gas prices in effect at the
end of each period for which a ceiling test is performed.  If
prices increase after the end the period, those higher prices may
be used in lieu of period-end prices to calculate a lower
impairment expense.  Fortune used the current prices of
approximately $17.01 per Bbl for oil and $2.87 per Mcf for gas to
determine the impairment expense for the current quarter.  This
impairment expense is the primary factor in Fortune's loss
increasing to $2,102,000 for the third quarter of 2001 versus
$2,000 of income reported for the same period of 2001.

Fortune's cash
flow before changes in operating assets and
liabilities was $(2,000) and $(231,000) for the nine months and
three months ended September 30, 2001, respectively.  This recent
negative cash flow trend results primarily from a recent
significant decline in production and the decline in prices.  As
previously reported, the South Timbalier Block 86 well, which
contributed $257,000 of revenues during the third quarter of last
year, stopped producing in March 2001 and has since produced only
briefly in August 2001.  Production from this well had been
declining since reaching a peak in May 2000.  Mechanical problems
with the salt-water disposal system at La Rosa field from August
2001 through September 2001 resulted in lower production from that
field during the third quarter of 2001.  Repairs were completed
during October that should allow field production to increase
during the fourth quarter of 2001.

Drilling and
completion delays have also hindered our efforts
to add new production.  The Cadiz Brooks #3 was completed later
than expected and we have not yet completed the West Point Dill
13-1 well.  The Gamble Gully Gas Unit # 5 was also completed later
than expected and its rate of production is less than expected.
Furthermore, shortages of equipment and contractors have
contributed to delays in spudding wells at La Rosa; however, the
recent B.D. Rooke C-10 discovery began producing in September
2001.  These projects are discussed below.

Fortune has
additional drilling planned for the remainder of
2001.  Two more wells are planned for La Rosa and another well was
recently begun at Gamble Gully.  Furthermore, workover programs are
ongoing at La Rosa and AWP Field.  We continue to look for success
from our drilling program to reverse the recent negative trend in
production and cash flow.

---

Results of Operations

Comparison of 2001 Operating Results to 2000

Quarter ended September 30, 2001 and 2000

Fortune's oil
and gas prices decreased 18% and 32%,
respectively, in the third quarter 2001 versus the same 2000
period.  Fortune's oil and gas production also decreased 32% and
54%, respectively.  Fortune's production gains that resulted from
successful drilling and workover operations over the past year at
Cadiz, Cutoff Field, La Rosa and Gamble Gully were not sufficient
to offset the loss of our well at South Timbalier Block 86,
mechanical difficulties at La Rosa discussed above and declines
from depletion.  Continued delays in completing the West Point
discovery have also prevented that well from contributing to third
quarter 2001 revenues.  Consequently, Fortune's oil and gas
revenues for the quarter ended September 30, 2001 decreased 66% to
$265,000 compared to $777,000 reported during the third quarter of
2000.

Analysis of
change in oil and gas revenues -

`Quarter Ended
                                      September 30,
                                    ------------------  Percent
                                      2001     2000     Change
                                    --------  --------  --------
           Production
             Oil  -  Bbl               2,000     2,900    (32)%
             Gas  -  Mcf              73,100   159,400    (54)%
           Prices
             Oil  -  $/Bbl            $25.23    $30.61    (18)%
             Gas  -  $/Mcf              2.94      4.32    (32)%
           Revenues
             Oil                    $ 50,000  $ 88,000    (44)%
             Gas                     215,000   689,000    (69)%`

In early 2000,
the South Timbalier 86 well was recompleted and
began producing at a significantly higher rate beginning in
February 2000.  During the third quarter of 2000, the well produced
approximately 55,700 cubic feet of gas, 370 barrels of oil and
generated $257,000 of oil and gas revenue net to Fortune's
interest.  This well stopped producing on March 13, 2001 and the
operator of the well has informed us that the well produced
approximately 2 million cubic feet of gas per day for a brief
period during August 2001.  Further operations are planned to
attempt to restore production but there is no assurance that
production will resume.  Fortune currently owns a 4% overriding
royalty interest in this well.

Third quarter
2001 La Rosa field gas production declined over
the same quarter of 2000 as well as over second quarter of 2001
primarily because of mechanical difficulties in the primary salt
water disposal well in the field.  Constraints in disposing of salt
water, which is produced with the oil and gas, resulted in
production curtailments and delays in adding new production.  The
salt water disposal well was repaired in October and the operator
of the field has begun restoring production.

The Gamble
Gully Gas Unit #5 discovery began producing in
April 2001 and is currently producing approximately 120 MCFD.
Fortune has an approximate 24% net revenue interest in this well.

---

Analysis of
change in selected expenses -

`Quarter Ended
                                                          September 30,
                                                   -------------------------    Percent
                                                       2001         2000        Change
                                                   -----------   -----------   ----------
        Production and operating expense           $   140,000   $   153,000      (8)%
           -  per MCFE                                    1.65          0.87      90 %
        Depreciation, depletion and amortization       162,000       280,000     (42)%
           -  per MCFE                                    1.91          1.59      20 %`

Production and
operating expense decreased by $13,000 for the
third quarter of 2001 versus 2000 because of lower production taxes
that resulted from the lower revenues.  Lower production during the
most recent quarter contributed to the higher per MCFE operating
cost this year.

Fortune's provision
for depletion, depreciation and
amortization (DD&A) decreased by $118,000 in the third quarter of
2001 as compared to 2000 because of the lower production.  The
higher DD&A rate per MCFE results from higher property costs in
relation to proved reserves.  This rate is calculated before
considering the third quarter 2001 ceiling impairment.  As
discussed above, the low oil and gas prices at September 30, 2001
resulted in Fortune incurring an impairment to oil and gas
properties of $2,650,000 on that date.

`September 30,
                                           ---------------------    Percent
                                              2001       2000       Change
                                           ---------   ---------   ---------

      General and administrative expense   $ 304,000   $ 288,000       6%
      Interest expense                        70,000      69,000       1%`

Nine months ended September 30, 2001 and 2000

Lower oil and
gas production and lower oil prices resulted in
lower oil and gas revenues for the first nine months of 2001
compared to the same 2000 period.  The impairment to oil and gas
properties discussed above is the primarily factor in Fortune's net
loss increasing to $2,206,000 during 2001 compared to a net loss of
$495,000 for the same 2000 period.

Analysis of
change in oil and gas revenues -

`Nine Months Ended
                                         September 30,
                                    ----------------------    Percent
                                        2001       2000       Change
                                    ----------  ----------  ----------
           Production
             Oil  -  Bbl                 6,000       9,600     (37)%
             Gas  -  Mcf               263,900     422,200     (37)%
           Prices
             Oil  -  $/Bbl              $26.29      $29.09     (10)%
             Gas  -  $/Mcf                5.39        3.59      50 %
           Revenues
             Oil                      $158,000    $279,000     (43)%
             Gas                     1,422,000   1,514,000      (6)%`

---

The production
declines discussed above were the primary
contributors to the decrease in production and the decrease in oil
and gas revenue from 2000 to 2001.

Analysis of
change in selected expenses -

`Nine Months Ended
                                                       September 30,
                                                   --------------------    Percent
                                                      2001       2000      Change
                                                   ---------  ---------  ----------

        Production and operating expense           $ 463,000  $ 438,000      6 %
           -  per MCFE                                  1.54       0.91     69 %
        Depreciation, depletion and amortization     471,000    699,000    (33)%
           -  per MCFE                                  1.57       1.46      8 %`

Production and
operating expense increased by $25,000 for the
first nine months of 2001 versus 2000 because of higher production
taxes and more producing properties in 2001.  These factors, along
with lower production, also contributed to the higher 2001
operating cost per MCFE.

Fortune's
provision for DD&A decreased by $228,000 in the
first nine months of 2001 as compared to 2000 primarily because of
lower production.

`Nine Months Ended
                                               September 30,
                                           ----------------------    Percent
                                              2001        2000       Change
                                           ----------  ----------  ----------
      General and administrative expense   $  977,000  $  852,000      15%
      Interest expense                        209,000     207,000       1%`

General and
administrative expense increased $125,000 for the
first nine months of 2001 versus 2000 because of higher costs in
most categories of overhead.  Also during 2000, Fortune incurred a
$118,000 non-cash extraordinary loss on early extinguishments of
debt in 2000 which represents a premium equal to one year's
interest paid in common stock to noteholders who converted their
12% convertible subordinated notes to common stock.

Liquidity and Capital Resources

Cash Balance,
Working Capital and Cash Flows from Operating Activities

Fortune reported
cash flow of $(161,000) from its operating
activities during the third quarter of 2001 compared to $310,000
during the same 2000 period.  Before considering the effect of
changes in operating assets and liabilities, cash flow was a
negative $231,000 during the second quarter of 2001 compared to a
positive $291,000 during the same 2000 period.  As discussed above,
lower production and lower oil and gas prices accounts for this significant
decrease in cash flow.  Fortune is attempting to reverse this
negative trend in cash flow by seeking to invest its capital
resources in successful exploration and development projects.

---

Analysis of
changes in selected liquidity measures -

`As of
                                  --------------------------
                                  September 30, December 31,     Percent
                                      2001          2000         Change
                                  ------------  ------------  ------------
      Cash balance                $    806,000  $  1,028,000      (22)%
      Net working capital              834,000     1,424,000      (41)%
      Long-term debt                 2,295,000     2,295,000        -


                                          Quarter ended September 30,
                                          ----------------------------     Percent
                                              2001           2000          Change
                                          -------------  -------------  -----------
      Cash flow from operations before
         changes in operating assets
         and liabilities                  $    (231,000) $     291,000       N/A
      Adjustment for change in operating
         assets and liabilities                  70,000         19,000       268%
                                          -------------  -------------  -----------
      Cash flow from operating activities $    (161,000) $     310,000       N/A
                                          =============  =============  ===========`

Lower production
and lower oil prices for the first nine
months of 2001 contributed to the lower cash flow during the period
versus the same 2000 period.

`Nine months ended
                                                 September 30,
                                          ----------------------------     Percent
                                              2001           2000          Change
                                          -------------  -------------  -----------

      Cash flow from operations before
         changes in operating assets
         and liabilities                  $      (2,000) $     344,000       N/A
      Adjustment for change in operating
         assets and liabilities                 378,000       (201,000)      N/A
                                          -------------  -------------  -----------
      Cash flow from operating activities $     376,000  $     143,000       163%
                                          =============  =============  ===========`

Cash Used in
Investing Activities - Capital Expenditures

Expenditures
for oil and gas properties for the first nine
months of 2001 were $584,000 compared to $524,000 for the same
period in 2000.

The 2001
expenditures include primarily:

- drilling and completing the successful Brooks #3 well at Cadiz prospect;
- drilling and completing the successful Gamble Gully Koemel #1 sidetrack well;
- drilling and completing the successful La Rosa B.D. Rooke C-10 well;
- drilling the unsuccessful La Rosa B.D. Rooke C-11 well;
- land, seismic and well cost for the West Point prospect which Fortune is attempting to complete;
- the multiple well recompletion program at La Rosa; and
- seismic interpretation costs and delay rentals at Espiritu Santo Bay and La Rosa.

---

The 2000
expenditures include primarily:

- expenditures for the unsuccessful completion attempt at the Espiritu Santo Bay 210 #6.
- drilling and completion expenditures for the successful Brook #1 well at Cadiz prospect;
- drilling and completion expenditures for the successful Bacon prospect Ivy 24-11;
- drilling and completion for the successful La Rosa Rooke C-6 and C-7 wells;
- expenditures for the multiple well recompletion program at La Rosa; and
- expenditures for the attempted recompletion at Estherwood prospect in Louisiana that was abandoned in January 2000.

The 2001
activities are discussed below.

Logging results
of the Brooks #3 well at the Cadiz 3-D seismic
prospect indicate that the well encountered approximately 55 feet
of net pay in Slick sand and up to 160 feet of prospective net pay
in the Luling sand.  The well began producing in early July 2001 at
approximately 1.5 million cubic feet of gas per day.  Fortune owns
a 5.25% net revenue interest in this well.  The well was drilled on
a 3-D seismic anomaly generated from 3-D seismic licensed by
Fortune and farmed-out to Prime Energy Corporation.

The Gamble Gully
Gas Unit #5 (previously called the Koemel #1)
was completed in the first quarter of 2001 and began producing in
April 2001 at approximately 130 mcfd.  Fortune has an approximate
24% net revenue interest in this project.

Logging
results of the West Point Dill #13-9 well, the initial
exploratory well at the West Point Prospect, indicated that the
well encountered apparent pay in multiple formations.  Attempts to
complete three of the potentially productive zones have been
unsuccessful.  The operator is currently attempting a completion in
the Chandler sand.  Fortune incurred approximately $132,000 through
September 30, 2001 to acquire and drill this well.  Fortune owns a
20% working interest in the West Point Prospect.

In
response to historically high oil and gas prices earlier this year, the partners
in the La Rosa field formulated a re-completion program to increase production
which is continuing. Recompletions of wells have resulted in additional
production and further activity is planned. Fortune and its partners recently
reprocessed their 24-square mile proprietary 3-D seismic using pre-stack time
migration. Fortune believes this reprocessing has significantly enhanced the
data. The operator has proposed four new wells from this data. The first well
spud in late July and was plugged and abandoned in early August. The second
well, the B.D. Rooke C-10, was completed in September 2001 and the third well is
expected to be spud as soon as a drilling rig is available. Fortune owns an
18.75% working interest in the four new prospects in the La Rosa Field
(approximate 15% net revenue interest) and will spend approximately $30,000 to
$40,000 to drill each well. Completion costs will average approximately $20,000
per well to Fortunes interest.

Fortune
and its partners are continuing to work the 3-D seismic data and refine our
shallow and deep prospects in Espiritu Santo Bay. The operator and another
partner are continuing their efforts to farmout their interest in certain of
their deep rights, and we do not expect a deep well to be spud until after they
have farmed out at least a portion of their interest.

Oil and Gas Prices

Conditions outside
of our control influence the prices we
receive for oil and gas.  Currently, spot prices are approximately
$17.01 per barrel for oil production and $2.87 per MCF for gas.

---

Forward Looking Statements

This Form 10-QSB
contains forward-looking statements.
Forward-looking statements include statements regarding future oil
and gas production and prices, future cash flow and cash
requirements, future exploration and development spending, future
drilling and operating plans and results, reserve and production
potential of Fortune's properties and prospects, Fortune's business
strategy, and management's plans and expectations.  Actual events
or results could differ materially from those discussed in the
forward-looking statements as a result of various risk factors
including the factors described below.

Fortune's
reliance on exploratory projects increases the risks
inherent in the oil and gas industry.  Our current investments are
primarily in exploration projects, where the risks are
substantially greater than projects involving already producing
formations.  We anticipate that one or more of our next wells will
be designed to test formations that are deeper than known
production in Espiritu Santo Bay.  These formations have not been
extensively tested to date.  The exploration risks, therefore, are
higher on this project than they might be where a greater number of
underground references exist.  Fortune has realized less success
than originally anticipated in drilling some of its recent
prospects and a substantial number of our future projects could
experience similar results.

Fortune has
incurred net losses for each of the last several
years.  Fortune has incurred substantial net losses in certain
prior years and year to date 2001.  Until Fortune experiences
either increased production or increased prices, this trend will
continue.

Accounting rules
may result in additional write-downs of
property values. We report our operations using the full-cost
method of accounting for oil and gas properties.  Under these
rules, all exploration and development costs are capitalized.  The
net capitalized costs of properties may not exceed a "ceiling"
limit of the tax-effected present value of estimated future net
revenues from proved reserves, discounted at 10%, plus the lower of
cost or fair market value of unproved properties.  This requires
calculating future revenues at the unescalated prices in effect as
of the end of each fiscal quarter.  If prices increase after the
end of a quarter but before we report our operating results, those
higher prices may be used in lieu of period-end prices to reduce or
eliminate a write-down.  A  write-down is required if the net
capitalized costs of the properties exceed the ceiling limit, even
if price declines are only temporary.   The risk that we will be
required to write down the carrying value of our properties
increases when oil and gas prices are depressed or unusually
volatile or when previously unevaluated properties carried at cost
are determined to be worth less than that cost.  We recognized a
$1,700,000 impairment during the third quarter of 2001.  This
write-down was determined using prices which had increased after
the end of the third quarter.  Had we used prices in effect at
September 30, 2001, the write-down would have been approximately
$3.1 million.  As a result of continued volatile oil and gas
prices, we may incur further impairments in the future.

Oil and gas
reserves are depleting assets.  Fortune's future
cash flow and income are highly dependent on our ability to find or
acquire additional reserves to replace those currently producing.
Although Fortune increased its reserves from 1999 to 2000, reserves
had been declining in prior years.  Without adding additional
reserves in the future, our oil and gas reserves and production
will decline.

---

Fortune's
estimates of proved reserves and future net revenue
may not be accurate.  Fortune's proved reserve data represent
estimates which may prove to be incorrect over time.  The accuracy
of any reserve estimate is a function of available data and of
engineering and geological interpretation and judgment.  The
estimates are based upon certain assumptions about future
production levels, future drilling, future oil and gas prices and
future operating costs, some or all of which will likely change
over time. Estimates and classifications of the economically
recoverable oil and gas reserves by different engineers or by the
same engineers at different times may vary substantially.  Certain
of Fortune's proved reserves have a short production history and
approximately 52% of Fortune's proved reserves as of December 31,
2000 were undeveloped.  Undeveloped reserves require significant
expenditures of capital before production can commence.  Estimates
of undeveloped reserves and those with a short production history
are inherently more uncertain than estimates of producing reserves
with a long production history.

Our production
is volatile and may be dependent upon a limited
number of producing wells.  In 1999, Fortune's well at South
Timbalier Block 76 was our most prolific producer accounting for
over 30% of our oil and gas revenues.  In early 2000, a
recompletion of a well at South Timbalier Block 86 resulted in that
well becoming our most prolific producer, accounting for
approximately 28% of our oil and gas revenues in 2000.  On
September 28, 2000, the Cut Off field recompletion resulted in that
well becoming our most prolific producer, accounting for
approximately 25% of our fourth quarter 2000 oil and gas revenues.
During the third quarter of 2001, these wells combined accounted
for only 20% of Fortune oil and gas revenues and no single well
that Fortune currently owns accounts for more than 20% or our oil
and gas revenues.  Because the South Timbalier Block 86 well and
the Cut Off field wells have a limited production history, it is
difficult to predict accurately their production decline rates or
ultimate reserves.  The South Timbalier Block 86 well is currently
shut in and there is no assurance that production can be resumed.
This well accounted for 14% of Fortune's first quarter 2001 oil and
gas revenues.  Although the concentration of production in a few
well bores has been reduced recently, Fortune has historically been
reliant on individually significant wells and that reliance may
return.  A significant curtailment or loss of production from an
individually significant well for a prolonged period before we
could replace that well could have a material adverse effect on our
projected operating results and financial condition.

Our need for
working capital may affect our level of
participation in various projects.  Investment in oil and gas
exploration requires the commitment of substantial amounts of
capital over significant periods of time.  We may not have
sufficient liquid capital resources to participate at our existing
working interest level if the operators of any of our properties
accelerate the drilling and development schedule or if we incur
unexpected significant expenditures or reduced production.  If we
do not participate in the capital expenditures for any project, our
interest in that project will be substantially reduced or lost
entirely.

Fortune has
substantial debt due in 2007.  At September 30,
2001, Fortune had $2,295,000 of 12% subordinated convertible notes
outstanding that are due December 31, 2007.  All of these notes are
convertible by the holder at $0.75 per share or redeemable by
Fortune at par.  Fortune has realized significant net losses that
have resulted in an accumulated deficit of approximately $31
million at September 30, 2001.  Fortune also realized negative cash
flows in calendar years 1999 and 1998 and during the latest two
quarters of 2001.  Based on these historical operating results,
historical fluctuating oil and gas prices and the uncertainties of
projecting long-term production and cash flows from current oil and
gas prices and reserves, there is risk that Fortune's cash flow
will not increase sufficiently to allow us to repay the convertible
subordinated notes or to make the required quarterly interest
payments as they become due.  In the event that Fortune defaults in
the payment of interest or principal obligations on this debt, it
would become immediately due and payable.

---

In the event
that Fortune's cash flow does not increase or
management determines to accelerate the growth plans for Fortune,
we may require additional equity and/or debt financing to service
our notes if they are not converted to equity.  Fortune's
projections of production, cash flow and capital requirements are
based upon numerous assumptions about the future, including: oil
and gas prices, production decline rates, estimates of oil and gas
reserves, costs, absence of major operating disruptions and
catastrophes, timing of projects and markets for our production.
See the other risk factors herein for a discussion of risks
associated with Fortune and future projections made by us.  If we
do not experience a sufficient increase in cash flow or we
experience increases in capital requirements, and we are unable to
raise capital, we may need to take other steps to maintain our
ability to service the notes.  Those steps might include reducing
overhead, foregoing our participation in projects or selling
assets.

Fortune is dependent
on operators, consultants and partners
over whom it has little control.  Since we do not operate our
projects, we are dependent on other oil and gas companies to
conduct operations in a prudent, competent, and timely manner.

Additional factors.
Additional risks that apply to Fortune in
the oil and gas industry in general but that could cause actual
events to vary from those discussed in this annual report include,
among others:  material uninsured losses; dependence on key
personnel; limited market for Fortune stock; potential stock
dilution by exercise or conversion of common stock equivalent;
adverse change in governmental regulation; inability to obtain
critical supplies and equipment, personnel and consultants; and
inability to access capital to pursue our plans.

ITEM 3.   Quantitative and Qualitative Disclosures about Market Risk

Not applicable to
small business filer.

---

PART II - OTHER INFORMATION

ITEM 1.    Legal Proceedings

See note 4 of the
footnotes to the financial statements in Part I herein for a description of legal proceedings.

ITEM 2.    Change in Securities

None

ITEM 3.    Defaults Upon Senior Securities

None

ITEM 4.    Submission of Matters to a Vote of
Securities Holders

None

ITEM 5. Other Information

None

---

ITEM 6.    Exhibits and Reports on Form 8-K

(a)    EXHIBITS

| | Exhibit No. | Description                                                                                                           
| | ----------- | ----------------------------------------------------------------------------------------------------------------------
| | 10.1*       | Form of Option Exercise Grant and Extension
Agreement, as amended, between all executives and directors and Registrant

(b)    REPORTS ON FORM 8-K / 8K-A

A report on
Form 8-K was filed with the Securities and Exchange
Commission on November 13, 2001 to report Fortune's press release of its third
quarter 2001 financial reesults.

*Filed herewith.

---

SIGNATURES

Pursuant to the
requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

| | FORTUNE NATURAL RESOURCES CORPORATION
| | -------------------------------------

| | By:    /s/ Tyrone J. Fairbanks                                     
| | -------------------------------------------------------------------
| | Tyrone J. Fairbanks     
     President and Chief Executive Officer

| | By:    /s/ J. Michael Urban                                                                        
| | ---------------------------------------------------------------------------------------------------
| | J. Michael Urban     
     Vice President and Chief Financial
               and Accounting Officer

Date:      November 13, 2001