SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q



X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT 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                                     95-4114732
      (State or other jurisdiction of                     (I.R.S. Employer
       incorporation or organization)                    Identification No.)

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



                                  281-872-1170
                                  ------------
                            Issuer's telephone number


                          Fortune Petroleum Corporation
 ------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         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.

                         12,123,917 as of June 30, 1997
                    ----------------------------------------



<PAGE>
                      FORTUNE NATURAL RESOURCES CORPORATION
                                 BALANCE SHEETS

<TABLE>
                                     ASSETS
<CAPTION>
                                                                                   June 30,      December 31,
                                                                                     1997           1996
                                                                                ------------    ------------
                                                                                 (Unaudited)      (Audited)
<S>                                                                             <C>             <C>
CURRENT ASSETS:
     Cash and cash equivalents ..............................................   $  3,259,000    $  2,174,000
     Accounts receivable ....................................................        470,000         695,000
     Prepaid expenses .......................................................          7,000          25,000
                                                                                ------------    ------------
         Total Current Assets ...............................................      3,736,000       2,894,000
                                                                                ------------    ------------

PROPERTY AND EQUIPMENT:
     Oil and gas properties, accounted for
       using the full cost method ...........................................     25,000,000      23,079,000
     Office and other .......................................................        415,000         375,000
                                                                                ------------    ------------
                                                                                  25,415,000      23,454,000
     Less--accumulated depletion, depreciation and amortization .............    (16,714,000)    (12,545,000)
                                                                                ------------    ------------

                                                                                   8,701,000      10,909,000
                                                                                ------------    ------------
OTHER ASSETS:
     Materials, supplies and other ..........................................         95,000         188,000
     Debt issuance costs (net of accumulated
       amortization of $274,000 and $238,000 at June 30, 1997
       and December 31, 1996, respectively) .................................        101,000          51,000
     Restricted cash ........................................................              0       2,293,000
                                                                                ------------    ------------
                                                                                     196,000       2,532,000
                                                                                ------------    ------------

TOTAL ASSETS ................................................................   $ 12,633,000    $ 16,335,000
                                                                                ============    ============
</TABLE>

<TABLE>
                      LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
                                                                                   June 30,     December 31,
                                                                                     1997           1996
                                                                                ------------    ------------
<S>                                                                             <C>             <C>
CURRENT LIABILITIES:
     Current portion of long term debt ......................................   $  1,016,000    $  2,253,000
     Accounts payable .......................................................        607,000          84,000
     Accrued expenses .......................................................        781,000          77,000
     Royalties and working interests payable ................................         56,000         103,000
     Accrued interest .......................................................         60,000         101,000
                                                                                ------------    ------------
         Total Current Liabilities ..........................................      2,520,000       2,618,000
                                                                                ------------    ------------

LONG-TERM DEBT,  net of current portion .....................................        800,000         680,000
                                                                                ------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred stock, $1.00 par value:
         Authorized--2,000,000 shares
         Issued and outstanding--None .......................................              0               0
     Common stock, $.01 par value :
         Authorized--40,000,000 shares
         Issued and outstanding 12,123,917 and 11,853,663 at June 30, 1997
         and December 31, 1996, respectively ................................        121,000         119,000
     Capital in excess of par value .........................................     30,269,000      29,273,000
     Accumulated deficit ....................................................    (21,077,000)    (16,355,000)
                                                                                ------------    ------------
NET STOCKHOLDERS' EQUITY ....................................................      9,313,000      13,037,000
                                                                                ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................................   $ 12,633,000    $ 16,335,000
                                                                                ============    ============
</TABLE>
                 See accompanying notes to financial statements.

                                       2
<PAGE>
                      FORTUNE NATURAL RESOURCES CORPORATION
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                  For the Six Months Ended
                                                                                ----------------------------
                                                                                   June 30,       June 30,
                                                                                     1997           1996*
                                                                                -------------   ------------
                                                                                         (Unaudited)
<S>                                                                             <C>             <C>
REVENUES
     Sales of oil and gas, net of royalties .................................   $  1,804,000    $  1,819,000
     Other income ...........................................................        106,000         119,000
                                                                                ------------    ------------
                                                                                   1,910,000       1,938,000
                                                                                ------------    ------------

COSTS AND EXPENSES
     Production and operating ...............................................        736,000         780,000
     Provision for depletion, depreciation and amortization .................        969,000         630,000
     Impairment to oil and gas properties ...................................      3,200,000               0
     General and administrative .............................................      1,012,000       1,061,000
     Office relocation and severance ........................................              0         110,000
     Debt conversion expense ................................................        316,000               0
     Stock offering cost ....................................................        269,000               0
     Interest ...............................................................        130,000         233,000
                                                                                ------------    ------------
                                                                                   6,632,000       2,814,000
                                                                                ------------    ------------

LOSS BEFORE PROVISION FOR INCOME TAXES ......................................     (4,722,000)       (876,000)
PROVISION FOR INCOME TAXES ..................................................              0               0
                                                                                ------------    ------------

NET LOSS ....................................................................   $ (4,722,000)   $   (876,000)
                                                                                ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ........................     12,049,593      11,210,001
                                                                                ============    ============

NET LOSS PER COMMON SHARE ...................................................   $      (0.39)   $      (0.08)
                                                                                ============    ============

*Restated
</TABLE>

                 See accompanying notes to financial statements.

                                       3
<PAGE>
                      FORTUNE NATURAL RESOURCES CORPORATION
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                 For the Three Months Ended
                                                                                ----------------------------
                                                                                   June 30,        June 30,
                                                                                     1997            1996*
                                                                                ------------    ------------
                                                                                         (Unaudited)
<S>                                                                             <C>             <C>
REVENUES
     Sales of oil and gas, net of royalties .................................   $    691,000    $    594,000
     Other income ...........................................................         54,000          54,000
                                                                                ------------    ------------
                                                                                     745,000         648,000
                                                                                ------------    ------------

COSTS AND EXPENSES
     Production and operating ...............................................        543,000         495,000
     Provision for depletion, depreciation and amortization .................        485,000         198,000
     Impairment to oil and gas properties ...................................      3,000,000               0
     General and administrative .............................................        459,000         535,000
     Office relocation and severance ........................................              0           5,000
     Stock offering cost ....................................................        155,000               0
     Interest ...............................................................         62,000         113,000
                                                                                ------------    ------------
                                                                                   4,704,000       1,346,000
                                                                                ------------    ------------

LOSS BEFORE PROVISION FOR INCOME TAXES ......................................     (3,959,000)       (698,000)
PROVISION FOR INCOME TAXES ..................................................              0               0
                                                                                ------------    ------------

NET LOSS ....................................................................   $ (3,959,000)   $   (698,000)
                                                                                ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ........................     12,123,918      11,250,922
                                                                                ============    ============

NET LOSS PER COMMON SHARE ...................................................   $      (0.33)   $      (0.06)
                                                                                ============    ============

*Restated
</TABLE>

                 See accompanying notes to financial statements.

                                       4
<PAGE>
<TABLE>

                      FORTUNE NATURAL RESOURCES CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                     AND THE SIX MONTHS ENDED JUNE 30, 1997
<CAPTION>

                                                    Common Stock            Capital in
                                              --------------------------     Excess of     Accumulated
                                                Shares         Amount        Par Value        Deficit           Net
                                              ----------    ------------   ------------    ------------    ------------
<S>                                           <C>           <C>            <C>             <C>             <C>
BALANCE, January 1, 1996* ...............     11,139,709    $    111,000   $ 27,228,000    $(15,025,000)   $ 12,314,000

Common stock issued for
    exercise of stock options ...........         46,150           1,000        114,000               0         115,000
Common stock issued for
    exercise of warrants ................        255,638           3,000        813,000               0         816,000
Common stock issued for
    directors' fees .....................          1,395               0          4,000               0           4,000
Common stock canceled and
    stock issuance cost .................         (1,227)              0        (31,000)              0         (31,000)
Common stock issued for
    stock offerings .....................        412,000           4,000      1,145,000               0       1,149,000
Common stock returned to treasury .......             (2)              0              0               0               0
Net loss ................................              0               0              0      (1,330,000)     (1,330,000)
                                              ----------    ------------   ------------    ------------    ------------

BALANCE, December 31, 1996 ..............     11,853,663    $    119,000   $ 29,273,000    $(16,355,000)   $ 13,037,000
                                              ----------    ------------   ------------    ------------    ------------

Common stock issued for
    exercise of stock options ...........          6,400               0         18,000               0          18,000
Common stock issued for
    exercise of warrants ................         45,000               0         89,000               0          89,000
Common stock issued in exchange
    for debentures, net of offering costs        218,858           2,000        889,000               0         891,000
Common stock returned to treasury .......             (4)              0              0               0               0
Net loss ................................              0               0              0      (4,722,000)     (4,722,000)
                                              ----------    ------------   ------------    ------------    ------------

BALANCE, June 30, 1997 (unaudited) ......     12,123,917    $    121,000   $ 30,269,000    $(21,077,000)   $  9,313,000
                                              ==========    ============   ============    ============    ============

*Restated
</TABLE>

                 See accompanying notes to financial statements.


                                       5
<PAGE>
<TABLE>

                      FORTUNE NATURAL RESOURCES CORPORATION
                            STATEMENTS OF CASH FLOWS

<CAPTION>

                                                                                 For the Six Months Ended
                                                                                --------------------------
                                                                                  June 30,        June 30,
                                                                                    1997           1996*
                                                                                -----------    -----------
                                                                                        (Unaudited)
<S>                                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss ...............................................................   $(4,722,000)   $  (876,000)
     Adjustments to reconcile net loss to net
       cash provided by operating activities:
         Common stock issued for directors' fees ............................             0          4,000
         Depletion, depreciation and amortization ...........................       969,000        630,000
         Non-cash compensation expense ......................................        42,000              0
         Amortization of deferred financing cost ............................        28,000         36,000
         Impairment of oil and gas assets ...................................     3,200,000              0
         Debt conversion expense ............................................       316,000              0
         Stock offering cost ................................................       269,000              0
     Changes in assets and liabilities:
         Accounts receivable ................................................       225,000        678,000
         Prepaids ...........................................................        18,000         47,000
         Accounts payable and accrued expenses ..............................     1,227,000       (144,000)
         Royalties and working interest payable .............................       (47,000)       (80,000)
         Accrued interest ...................................................       (41,000)       (15,000)
                                                                                -----------    -----------
     Net cash provided by operating activities ..............................     1,484,000        280,000
                                                                                -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Expenditures for oil and gas properties ................................    (2,124,000)    (1,328,000)
     Restricted cash used ...................................................       138,000        122,000
     Return of exploration venture restricted cash ..........................     2,154,000              0
     Proceeds from sale of properties and equipment .........................       203,000      1,961,000
     Expenditures for other property and equipment and other assets .........      (129,000)      (245,000)
                                                                                -----------    -----------
     Net cash provided by investing activities ..............................       242,000        510,000
                                                                                -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Repayment of long term debt ............................................      (450,000)    (1,529,000)
     Proceeds from issuance of common stock .................................       103,000        902,000
     Expenditures for debenture exchange and stock offering .................      (294,000)       (27,000)
                                                                                -----------    -----------
     Net cash used in financing activities ..................................      (641,000)      (654,000)
                                                                                -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS ...................................     1,085,000        136,000

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..............................     2,174,000      1,888,000
                                                                                -----------    -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....................................   $ 3,259,000    $ 2,024,000
                                                                                ===========    ===========
Supplemental information:
     Interest paid in cash ..................................................   $   103,000    $   197,000
Non-cash transactions
     Common stock issued or issuable as directors' fees .....................             0          4,000
     Common stock issued for conversion of debt .............................       975,000              0


*Restated
</TABLE>

                 See accompanying notes to financial statements


                                       6
<PAGE>

                      FORTUNE NATURAL RESOURCES CORPORATION
                         PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements

                          NOTES TO FINANCIAL STATEMENTS
                                  June 30, 1997

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

       The condensed  financial  statements at June 30, 1997,  and for the three
months and six months then ended  included  herein have been prepared by Fortune
Natural  Resources  Corporation  ("Fortune" or the  "Company"),  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 generally accepted accounting  principles
have been condensed or omitted pursuant to such Rules and Regulations,  although
the Company  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 the
Company's latest annual report on Form 10-K/A.  Certain  reclassifications  have
been made to prior  period  amounts to conform to  presentation  in the  current
period.  In the opinion of the Company,  the  financial  statements  reflect all
adjustments,  consisting  only of normal  recurring  adjustments,  necessary  to
present  fairly the  financial  position  of the Company as of June 30, 1997 and
December 31, 1996,  the results of its  operations  for the three months and six
months ended June 30, 1997 and June 30, 1996,  and cash flows for the six months
ended June 30, 1997 and 1996.  The results of the  operations  for such  interim
periods are not necessarily indicative of the results for the full year.

       In the  fourth  quarter  of 1996,  the  Company  changed  its  method  of
accounting  for oil and gas operations  from the successful  efforts to the full
cost method.  All prior year  financial  statements  presented  herein have been
restated to reflect the change.

       The Company has in place a  shareholder  rights plan which is designed to
distribute  preferred stock purchase  rights to holders of the Company's  Common
Stock in the event a person acquires beneficial  ownership of fifteen percent or
more of the  Company's  stock or  commences a tender offer which would result in
ownership  of fifteen  percent or more of such  Common  Stock.  The plan,  which
expires February 28, 2007, provides for the issuance of a fraction of a share of
a new series of junior preferred stock of the Company for each outstanding share
of the Company's stock. Depending on the circumstances, such new preferred stock
will  enable the  holders to either buy  additional  shares of the  Company at a
discount or buy an interest in any acquiring entity.


(2)    Long-Term Debt

        At June 30, 1997, a summary of long-term debt is as follows:
<TABLE>
<CAPTION>

                                                                                  June 30,     December 31,
                                                                                    1997           1996
                                                                                -----------    -----------
        <S>                                                                     <C>            <C>
        Convertible  Subordinated  Debentures of $1,725,000
           (net of discount of $12,000 and $57,000) due 
           December 31, 1997,  including interest of 10 1/2%
           per annum paid semi-annually....................................     $ 1,016,000    $ 1,683,000

        Bank One credit facility due October 1, 1997 including  
           interest at 1.5% over Bank One, Texas, NA's prime rate 
           payable monthly, refinanced in July 1997 (see below)............          800,000     1,250,000
                                                                                ------------   -----------

        Total long-term debt...............................................        1,816,000     2,933,000
        Less current installments..........................................        1,016,000     2,253,000
                                                                                ------------   -----------

        Long-term debt, excluding current installments.....................     $    800,000   $   680,000
                                                                                ============   ===========
</TABLE>


                                       7
<PAGE>
       The 10 1/2%  Convertible  Subordinated  Debentures  due December 31, 1997
bear an effective interest rate of 12.13% and are convertible into shares of the
Company's  Common Stock, at a conversion  price of $6.32 per share or 158 shares
per Debenture.  On,  February 26, 1997, the Company closed an Exchange Offer for
these Debentures which resulted in $697,000 ($680,000 net of discount) principal
amount of Debentures  being  converted to 218,858  shares of Common  Stock.  The
Company also issued 174,250 Common Stock  Warrants to the  Debentureholders  who
exchanged their  Debentures in connection  with the Exchange  Offer.  The Common
Stock Warrants are  exercisable  for a period of three years,  one-half at $4.00
per share and one-half at $5.00 per share.  Subsequent  to the  conversion,  the
remaining  balance due on the  Debentures  at December  31, 1997 is  $1,028,000.
Furthermore, the Company recorded a non-cash debt conversion expense of $316,000
during  the  first  quarter  of  1997.  The  non-cash  debt  conversion  expense
represents  the  difference  between the fair market  value of all of the Common
Stock and Common Stock Warrants issued in connection with the Exchange Offer and
the fair market  value of the lower  number of Common Stock that could have been
issued upon the  conversion of the Debentures  under the Indenture  prior to the
Exchange  Offer.  For  purposes of  calculating  the  non-cash  debt  conversion
expense,  the  Company  valued  the  218,858  shares of Common  Stock  issued in
connection  with the Exchange Offer at $547,502  ($2.625 per share) based on the
closing price of the Common Stock on the American Stock Exchange on February 26,
1997. The Company estimated the value of the Common Stock Warrants issued to the
Debentureholders  at $8,713  ($0.05 per warrant).  As of December 31, 1996,  the
Company classified,  as long term liabilities,  the portion, net of discount, of
the Debentures that were converted to Common Stock in the Exchange Offer.

         The  Bank  One,  Texas,   N.A.  ("Bank  One")  credit  facility  was  a
reserve-base  borrowing  facility secured by substantially  all of the Company's
oil  and gas  reserves.  The  Bank  One  facility  contained  various  financial
covenants,  was due October 1, 1997, bore interest at 1.5% over Bank One's prime
rate and required monthly principal  payments of $75,000.  On July 11, 1997, the
Company  refinanced its debt under the Bank One credit facility by entering into
a $20 million  credit  facility  with Credit  Lyonnais New York Branch  ("Credit
Lyonnais").  The Credit Lyonnais  facility is due July 11, 1999, with a one-year
extension  option.  Under the new credit  facility,  the Company  may  initially
borrow up to a pre-determined  borrowing base, for general corporate purposes at
either 1.25% above  Credit  Lyonnais'  base rate or 4% above LIBOR.  The initial
borrowing  base,  currently  set at $2 million,  was  calculated  based upon the
Company's  December 31, 1996 oil and gas reserves and is subject to  semi-annual
review.  The Credit  Lyonnais  facility  is secured by a mortgage  on all of the
Company's  existing  proved  oil and gas  properties.  Upon  closing  the credit
facility on July 11, 1997, Fortune  transferred the $800,000 balance of its bank
debt to the Credit Lyonnais facility. Accordingly, the $800,000 debt balance has
been  classified as long-term debt on the Company's June 30, 1997 balance sheet.
The  Company  is also  required  to pay a  commitment  fee of 0.5% on the unused
portion of the borrowing  base. A portion of the borrowing  base is reserved for
repayment of the Company's Convertible Subordinated Debentures, if necessary.

       The Company's  maturities of long-term debt over the next three years are
as follows:

                     Year                         Debt
                   --------                     --------
                     1997                    $  1,016,000
                     1998                               0
                     1999                         800,000
                                             ------------
                                             $  1,816,000
                                             ============

(3)    Income Tax Expense

       No  provision  for income taxes was required for the three months and six
months ended June 30, 1997.

       At June 30, 1997,  the Company  estimates it had cumulative net operating
loss  carryforwards  for federal  income tax  purposes of $15 million  which are
significantly   restricted  under  IRC  Section  382.  These  carryforwards  are
available  to  offset  future  federal  taxable  income,  if any,  with  various
expirations  through 2010. The Company is uncertain as to the  recoverability of
the above  deferred  tax  assets  and has  therefore  applied  a 100%  valuation
allowance.

                                       8
<PAGE>
       The Company has  available IRC Section 29 Tax Credits that may be used to
reduce  or  eliminate  any  corporate  taxable  income in  future  years.  It is
uncertain at this time to what extent the Company will be able to utilize  these
federal tax credits,  as their utilization is dependent upon the amount, if any,
of future  federal income tax incurred,  after  application of the Company's net
operating loss carryforwards.


(4)    Legal Proceedings

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

       On April 16, 1996,  Fortune was served with two  lawsuits  which had been
filed in the Federal  District Court in New York by purchasers of Fortune Common
Stock in an offering in December 1995 under Regulation S. Under the terms of the
subscription  agreement pursuant to which the plaintiffs  acquired their shares,
each was entitled to receive  additional  shares of Fortune  Common Stock if the
market price fell below a stated level during a specified  period  following the
40-day  holding  period  prescribed by  Regulation  S. Fortune  responded to the
suits,  admitting  that the stock price  declined  but alleged  that  suspicious
trading activity in Fortune stock occurred  immediately  prior to and during the
time  period in which the  additional-share  allocation  was  computed.  Fortune
believes that it has discovered  evidence of active market  manipulation  in the
Common Stock by these  plaintiffs;  accordingly,  it has commenced a countersuit
for damages  suffered by the Company and its  shareholders  as a result of these
acts.  Discovery is continuing in these actions and Fortune  intends to continue
to vigorously defend its position in this litigation.


(5)    Computation of Loss Per Share

       Primary  loss per common  share is computed  by dividing  net loss by the
weighted  average  number of common and common  equivalent  shares  outstanding.
Common  equivalent  shares are shares  which may be  issuable  upon  exercise of
outstanding  stock options and warrants;  however,  they are not included in the
computation  for the six months and three month period ended June 30, 1997 since
they would not have a dilutive effect on earnings per share.

       Fully  diluted  earnings  per common share are not  presented,  since the
conversion of the Company's 10 1/2%  Convertible  Subordinated  Debentures would
have an anti-dilutive effect.


 (6)   Return of exploration venture restricted cash

     On June 4, 1997,  the Company  exercised  its right  under the  exploration
agreement between it and Zydeco Exploration,  Inc. ("Zydeco") to have unexpended
capital contributions  returned to Fortune.  Under the terms of the February 13,
1995  agreement,  Fortune  contributed  a total of  $4,800,000  which  was to be
expended for certain  leasehold and seismic costs incurred by the venture within
the Transition Zone and Timbalier  Trench areas of offshore  Louisiana.  Of that
total,  $2,154,000 remained unspent as of June 4, 1997. This amount was returned
to Fortune in June 1997.  Fortune will retain its current  undivided 50% working
interest in each of the existing exploration projects that are currently subject
to the agreement.  The Company's 50% working interest in each project is subject
to a proportionate  reduction in the event that Zydeco expends  additional funds
on such project.


(7)    Impairment to oil and gas properties

        In connection  with  requesting the return of unexpended  funds from its
exploration  venture with Zydeco,  the Company  reviewed for impairment its $4.3
million  remaining  unevaluated  investment  in the Zydeco  exploration  venture
properties. The $4.3 million investment includes the value of the Fortune Common
Stock that was issued in 1995 to acquire its interest in the exploration venture
as well as the funds that  Fortune  has  incurred  for leases and seismic in the
exploration  venture. As a result of this review,  Fortune impaired $2.6 million
of costs associated with the Zydeco exploration venture properties.  The Company
also impaired its $300,000  remaining  unevaluated  investment in its New Mexico
properties.  Furthermore,  the Company's  unsuccessful well at South 


                                       9
<PAGE>

Lake Arthur was charged to the evaluated  property account in the second quarter
of  1997.  As a  result,  the  Company  recorded  an  impairment  to oil and gas
properties during the second quarter of 1997 of $3.0 million.


(8)     Subsequent Events

        On July 1,  1997,  the  Company's  shareholders  approved  a  change  of
corporate name from Fortune  Petroleum  Corporation to Fortune Natural Resources
Corporation at the annual meeting of  shareholders.  Fortune  Natural  Resources
Corporation is the name under which the Company has been doing business in Texas
and Louisiana since it began operations in those states.

        On  July  17,  1997  Fortune  was  advised  by a  private  Houston-based
independent  oil and gas company which  previously  signed a letter of intent on
May 20,  1997,  that it did not intend to acquire a farmout  from Fortune of its
50% working interest in South Timbalier Block 47.


                                       10
<PAGE>

                      FORTUNE NATURAL RESOURCES CORPORATION

ITEM 2.  Management's Discussion and Analysis of Financial Condition 
         and Results of Operations

Comparisons of  1997 operating results to 1996.

         During the three  months and six months  periods  ended June 30,  1997,
Fortune had net losses of $3,959,000  and  $4,722,000  compared to net losses of
$698,000 and $876,000 for the same 1996 periods.  The increase in losses in 1997
is primarily  attributable  to the $316,000  non-cash  debt  conversion  expense
incurred in connection with closing the Company's Exchange Offer on February 26,
1997 and the $3,200,000 non-cash  impairments to oil and gas properties recorded
in 1997. (See Notes 2, 6 and 7 to the financial statements included herein.)

       In spite of lower oil and gas prices,  net oil and gas revenues increased
by  $97,000  (16%) in the  second  quarter  of 1997,  compared  to the same 1996
period.  1997  revenues  were higher  because they  included  revenues  from the
Company's 1996 exploration  discovery at East Bayou Sorrel which began producing
from  permanent  production  facilities  in January  1997.  1997  revenues  were
adversely  affected by shutting in the South  Timbalier Block 76 well from March
24, 1997 to April 19, 1997 for a workover.  However, the same well was also shut
in from April 29, 1996 to June 15, 1996 for another workover. Oil and gas prices
decreased 14% and 17% in the second quarter of 1997 vs. 1996, respectively.

       Net oil and gas  revenues  in the first half of 1997 were  comparable  to
revenues for the same 1996 period.  1996  revenues  included  revenues  from the
Company's California  properties that were sold in February and March 1996 and a
higher  ownership  interest at South  Timbalier  Block 76 through March 1996. On
March 8, 1996, the Company sold 25% of its interest in the South Timbalier Block
76 for  $940,000  pursuant  to a  preexisting  arrangement.  Both  1996 and 1997
revenues were adversely  affected by the workovers  discussed above.  Offsetting
the above decreases was the commencement of production at East Bayou Sorrel from
permanent  production  facilities in January 1997. The first development well at
East Bayou Sorrel was completed and placed on permanent production facilities on
June 23, 1997 at 1,931 BOPD and 3.2 MMCFD. The Company has a 12.9% before-payout
working  interest in this field.  Oil production  increased 33% during the first
half of 1997 vs. 1996 as a result of this  discovery.  Gas production  decreased
19% during the first half of 1997 vs. 1996,  primarily  because of the sale of a
portion of South Timbalier Block 76, as discussed above.

       Natural gas prices on the Company's production averaged $2.20 per MCF for
the  second  quarter  of 1997 as  compared  to $2.66  per MCF for the same  1996
period.  For the first half of 1997, the Company's  natural gas prices  averaged
$2.67 per MCF as compared to $2.61 per MCF for the same 1996 period.  Oil prices
averaged $18.43 per barrel for the second quarter of 1997 compared to $21.37 per
barrel for the same 1996 period.  For the first half of 1997,  the Company's oil
prices  averaged $19.76 per barrel as compared to $18.40 per barrel for the same
1996 period

       Production and operating expense increased by $48,000 (10%) in the second
quarter of 1997 compared to 1996. Both 1996 and 1997 were adversely  affected by
the workovers at South Timbalier Block 76 costing approximately $300,000 in 1996
and $400,000 in 1997. Production and operating expense in the first half of 1997
decreased  by $44,000  (6%),  compared  to the same 1996  period.  The  decrease
results  primarily from the Company's sale of its high operating cost California
properties in early 1996.

       In the  second  quarter  of  1997,  general  and  administrative  expense
decreased  by $76,000  (14%) over 1996.  In the first half of 1997,  general and
administrative expense decreased by $49,000 (5%) over 1996. The Company incurred
non-recurring office relocation and severance cost of $110,000 in the first half
of 1996 in connection  with the Company's move to Houston.  In the first half of
1997, the Company  expensed  $269,000 of costs associated with a public offering
that the Company withdrew on April 25, 1997.

                                       11
<PAGE>
       Interest  expense  decreased by $51,000  (45%) for the second  quarter of
1997 over 1996 due to the lower debt  balance.  Interest  expense  decreased  by
$103,000 for the first half of 1997 vs. 1996 for the same reason.  The Company's
provision for  depletion,  depreciation  and  amortization  (DD&A)  increased by
$287,000  (145%) in the second  quarter of 1997 as compared  to 1996  because of
higher  property costs and lower proved  reserves in 1997. DD&A increased in the
first half of 1997 vs.  1996 for the same  reason.  See note 7 to the  financial
statements  included  herein for a discussion of the $3.2 million  impairment to
oil and gas properties in 1997.

Liquidity and Capital Resources

       Fortune's  operating  cash flow  increased  for the first half of 1997 to
$1,484,000 as compared to $280,000 for 1996.  Lower  production  and  operating,
general and administrative and interest expense in 1997, as discussed above, and
an increase in accounts  payable  and  accrued  liabilities  contributed  to the
increase. The Company's working capital increased to $1,216,000 at June 30, 1997
as  compared  to $276,000 at December  31,  1996.  The  significant  increase in
working  capital  at June 30,  1997  primarily  results  from the  return to the
Company  of  previously  restricted  cash  and  the  refinancing  of the  credit
facility. In June 1997, Zydeco returned to the Company $2,154,000 of exploration
venture cash under the terms of the venture agreement, as discussed in Note 6 to
the  financial  statements.  The cash was  previously  reported on the Company's
balance sheet as restricted cash in other assets.  On July 11, 1997, the Company
refinanced its bank credit facility and extended the maturity of its $800,000 of
bank  debt to July 11,  1999.  Accordingly,  the bank debt was  reclassified  to
long-term  liabilities  as of  June  30,  1997.  See  note  2 to  the  financial
statements.

       Fortune's  internal liquidity and capital resources in the near term will
consist of working  capital  and cash flow from its oil and gas  operations  and
approximately  $1.1 million of unused  borrowing  capacity  under its new credit
facility.

       Cash  expenditures  for oil and gas properties for the first half of 1997
were  $2,124,000  as  compared to  $1,328,000  for 1996.  The 1997  expenditures
include  primarily  the  acquisition  of an  additional  interest  at East Bayou
Sorrel,  an exploratory  well at South Lake Arthur,  a development  well at East
Bayou Sorrel and seismic and land  acquisition at Espiritu Santo Bay.  Fortune's
net capital  expenditures  for 1997 are currently  estimated to be approximately
$3.4 million for its exploration and development activities. The Company intends
to provide for these expenditures with its available cash and its cash flow from
operations.  Should  funds not be  available  to the  Company  as  required  for
participation in the projects, the Company can reduce its working interest share
of the projects.  With respect to the Zydeco joint venture projects, the Company
can put all or part of its interest back to Zydeco for an overriding royalty and
after-payout  working  interest.   Should  the  Company's  working  interest  in
exploration projects be reduced, the Company would not derive as great a benefit
in the event of an exploration success.

       Conditions  outside  of the  Company's  control  influence  the  price it
receives  for oil and gas.  As of July  28,  1997,  the  Company  was  receiving
approximately  $19.50 per barrel as an average price for its oil  production and
$2.20 per MCF as an average price for its gas production.

       In  February  1997,  the  Financial  Accounting  Standards  Board  issued
Statement 128,  "Earnings Per Share" (Statement 128).  Statement 128 changes the
calculation  and  financial  statement   presentation  of  earnings  per  share.
Statement  128  requires  the  restatement  of prior  period  earnings per share
amounts.  The Statement  will be effective for financial  statements  issued for
periods beginning after December 15, 1997. The Company does not believe that the
adoption of Statement 128 will have an impact on the loss per share  information
presented herein.

       Effective  December 1997, the Company will be required to adopt Statement
of Financial  Accounting  Standards No. 129,  "Disclosure of  Information  about
Capital Structure" ("SFAS 129"). SFAS 129 requires that all entities disclose in
summary form within the financial  statement the pertinent rights and privileges
of the  various  securities  outstanding.  An entity is to  disclose  within the
financial  statement the number of shares issued upon conversion,  exercise,  or
satisfaction  of  required  conditions  during at least the most  recent  annual
fiscal  period  and any  subsequent  interim  period  presented.  Other  special
provisions apply to preferred and redeemable  stock. The Company will adopt SFAS
129 in the fourth quarter of 1997.


                                       12
<PAGE>
       In June 1997,  the  Financial  Accounting  Standards  Board (FASB) issued
Statement of Financial  Accounting  Standards No. 130, "Reporting  Comprehensive
Income" ("SFAS 130"),  which establishes  standards for reporting and display of
comprehensive income and its components.  The components of comprehensive income
refer to revenues,  expenses, gains and losses that are excluded from net income
under current  accounting  standards,  including  foreign  currency  translation
items, minimum pension liability  adjustments and unrealized gains and losses on
certain  investments in debt and equity  securities.  SFAS 130 requires that all
items  that  are  recognized  under   accounting   standards  as  components  of
comprehensive  income be reported in a financial  statement  displayed  in equal
prominence with the other financial statements; the total of other comprehensive
income for a period is required to be  transferred to a component of equity that
is  separately  displayed in a statement of financial  position at the end of an
accounting  period.  SFAS 130 is effective  for both interim and annual  periods
beginning after December 15, 1997.

       In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131,  "Disclosures about Segments of an Enterprise and Related  Information"
("SFAS 131"). SFAS 131 establishes  standards for the way public enterprises are
to report  information about operating  segments in annual financial  statements
and requires the reporting of selected  information about operating  segments in
interim financial reports issued to shareholders.  It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS 131 is effective for periods beginning after December 15, 1997.


Forward Looking Statements

       This Report on Form 10-Q contains  forward-looking  statements within the
meaning of Section 27A of the Securities Act of 1933. Forward looking statements
include statements  regarding:  future oil and gas production and prices, future
exploration  and  development  spending,  future  drilling and operating  plans,
reserve and production  potential of the Company's  properties and prospects and
the Company's  strategy.  Actual events or results could differ  materially from
those discussed in the forward-looking statements as a result of various factors
including, without limitation, the factors set forth below and elsewhere in this
10-Q, and in the Company's annual report on Form 10-K/A.

       Exploration Risks. The business of exploring for and, to a lesser extent,
of acquiring and developing oil and gas properties is an inherently  speculative
activity that involves a high degree of business and  financial  risk.  Although
available  geological and geophysical  information can provide  information with
respect to a  potential  oil or gas  property,  it is  impossible  to  determine
accurately the ultimate production  potential,  if any, of a particular property
or well.

       Dependence on a Limited  Number of Wells.  Over one-half of the Company's
oil and gas  revenues,  cash flow and proved oil and gas  reserves is  currently
accounted  for by three wells,  the South  Timbalier  Block 76 well and the East
Bayou Sorrel wells.  Although the East Bayou Sorrel well only began producing in
December  1996,  this field is  expected  to have a  significant  impact on 1997
operations.  The South Timbalier Block 76 well was recently  shut-in for repairs
and was  shut-in for over two months  during 1996 as the result of a  mechanical
failure. A significant  curtailment or loss of production from these wells for a
prolonged  period  before the Company  could  replace the  reserves  through new
discoveries  or  acquisitions  would  have  a  material  adverse  effect  on the
Company's projected operating results and financial condition in 1997.

       Volatility of Oil and Gas Prices. The Company's  revenues,  profitability
and future rate of growth are  substantially  dependent upon  prevailing  market
prices for natural gas and oil,  which can be  extremely  volatile and in recent
years have been depressed by excess domestic and imported supplies.

       Uncertainty  of  Estimates of Proved  Reserves  and Future Net  Revenues.
There are numerous  uncertainties  inherent in  estimating  quantities of proved
reserves and in projecting  future rates of production and timing of development
expenditures,  including  many  factors  beyond  the  control  of the  producer.
Estimating quantities of proved reserves is inherently imprecise. Such estimates
are based upon  certain  assumptions  about  future  production  levels,  future
natural gas and crude oil prices and future operating costs made using currently
available geologic engineering and economic data, some or all of which may prove
to be incorrect over time.

                                       13
<PAGE>
       Operating  and  Weather  Hazards.   The  cost  and  timing  of  drilling,
completing and operating wells is often  uncertain.  Drilling  operations may be
curtailed,  delayed or canceled  as a result of a variety of factors,  including
unexpected drilling conditions,  equipment failures,  accidents, adverse weather
conditions,  encountering  unexpected  formations  or  pressures in drilling and
completion operations, corrosive or hazardous substances,  mechanical failure of
equipment,  blowouts,  cratering  and fires.  These  conditions  could result in
damage or injury to, or  destruction  of,  formations,  producing  facilities or
other property or could result in personal  injuries,  loss of life or pollution
of the environment.

       Additional factors.  Additional factors that could cause actual events to
vary from those  discussed  above and  elsewhere in this report  include,  among
others:   loss  of  key  company  personnel;   adverse  change  in  governmental
regulation;  inability to obtain critical supplies and equipment,  personnel and
consultants; and inability to access capital to pursue the Company's plans.


                                       14
<PAGE>

                      FORTUNE NATURAL RESOURCES CORPORATION

                           PART II - OTHER INFORMATION

ITEM 2. Changes in Securities

       The Company's board of directors unanimously adopted a shareholder rights
plan which is designed to distribute  preferred stock purchase rights to holders
of the  Company's  Common  Stock  in the  event  a  person  acquires  beneficial
ownership  of fifteen  percent or more of the  Company's  stock or  commences  a
tender offer which would result in ownership of fifteen  percent or more of such
Common Stock.

       The plan, which expires February 28, 2007, provides for the issuance of a
fraction of a share of a new series of junior preferred stock of the Company for
each outstanding share of the Company's stock.  Depending on the  circumstances,
such new preferred stock will enable the holders to either buy additional shares
of the Company at a discount or buy an interest in any acquiring entity.

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

       The annual meeting of  shareholders of the Company was held July 1, 1997.
The following matters were voted on at that meeting:
<TABLE>
<CAPTION>

                                                                                             Broker
            Matter                   Votes in Favor    Votes Opposed       Abstain         Non-Votes
----------------------------------   --------------   --------------   --------------   --------------
<S>                                      <C>               <C>                <C>            <C>
Election of Tyrone J. Fairbanks
  to Board of Directors                  10,178,916                0          277,221                0

Election of Dean W. Drulias
  to Board of Directors                  10,180,149                0          275,988                0

Election of Daniel R. Shaughnessy
  to Board of Directors                  10,180,169                0          275,968                0

Name Change (1)                          10,271,302           55,188          129,647                0

Power of Directors to Set 
  Board Size (2)                          4,080,293          526,532           51,668        5,797,644

Restriction on Rights of 
  Shareholders to Call Meeting (3)        3,821,579          730,058          106,856        5,797,644

Adoption of 1998 Multi-Year
  Stock Option Plan                       3,295,291        1,172,877          190,325        5,797,644

Ratification of KPMG Peat Marwick
  as Company Auditors                    10,135,108          288,206           32,823                0

</TABLE>

1.   A proposal to amend the Company's  Certificate of  Incorporation  to change
     the Company's name from Fortune  Petroleum  Corporation to Fortune  Natural
     Resources Corporation.

2.   A proposal to amend the Company's  Certificate of  Incorporation to provide
     that only the members of the  Company's  board of directors  may change the
     size of the Company's  board.  The proposal failed to collect the votes, an
     absolute majority of shares outstanding, necessary for passage.

3.   A proposal to amend the Company's  Certificate of  Incorporation to provide
     that no action  required to be taken by the Company's  stockholders  may be
     taken  without a meeting and to  specifically  prohibit  stockholders  from
     taking any action by written  consent.  The proposal  failed to collect the
     votes, an absolute majority of shares outstanding, necessary for passage.


                                       15
<PAGE>

ITEM 5.

       On July 11, 1997, the Company refinanced its bank debt by entering into a
$20 million credit facility with Credit Lyonnais New York Branch.  See Note 2 to
the financial statements included herein.

ITEM 6.  Exhibits and Reports on Form 8-K

(a)      EXHIBITS

         Exhibit No.     Description
         -----------     -------------------------------------------------------

             3.1*        Articles of Incorporation
             3.2*        Amendment to Articles of Incorporation
             3.3*        By-laws
             4.1*        Shareholder Rights Plan dated March 21, 1997
            10.1*        Credit Agreement between Fortune Natural  Resources
                           Corporation and Credit Lyonnais New York Branch and 
                           Certain Lenders dated July 11, 1997.
            10.2*        Employment Agreement dated June 1, 1997 by and between 
                           Fortune and Tyrone J. Fairbanks
            27.1*        Financial Data Schedule
            99.1         Notes to Financial  Statements  included in the  
                           Registrant's  Form 10-KSB filed for the fiscal year 
                           ended December 31, 1995 incorporated herein by 
                           reference.

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

         A report on Form 8-K dated June 16, 1997 was filed with the  Securities
and Exchange  Commission (the "Commission") to report that Fortune exercised its
right under the February 13, 1995  exploration  agreement  between it and Zydeco
Exploration,  Inc.  to have all  unexpended  capital  contributions  returned to
Fortune.




*Filed herewith.

                                       16
<PAGE>

                      FORTUNE NATURAL RESOURCES CORPORATION

                                   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:  July 29, 1997