SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549


                                  FORM 10-K/A
                                Amendment No. 1


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

(Mark  One)
[X]     Annual report pursuant to section 13 or 15(d) of the Securities Exchange
        Act  of  1934  for  the  fiscal  year  ended  December  31,  2003  or
[ ]     Transition  report  pursuant  to section 13 or 15(d) of the Securities
        Exchange Act of 1934 for the transition period from        to
                                                           --------  -----------

Commission  file  number  0-8773
                          ------

                                  CRESTED CORP.
--------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

         Colorado                                            84-0608126
------------------------------                    ------------------------------
(State or other jurisdiction of                          (I.R.S.  Employer
incorporation or organization)                          Identification  No.)

   877  North  8th  West
       Riverton,  WY                                          82501
------------------------------                    ------------------------------
(Address of principal executive offices)                   (Zip  Code)

Registrant's Telephone Number, including area code:       (307) 856-9271
                                                  ------------------------------

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

                                      NONE
--------------------------------------------------------------------------------

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

                         COMMON STOCK, $0.001 PAR VALUE
--------------------------------------------------------------------------------
                                (Title of Class)

     Indicate  by  check  mark  whether the Registrant (1) has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
Registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.  YES   [X]  NO  [ ]

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

     The  aggregate  market  value of the voting stock held by non-affiliates of
the  Registrant  as of June 30, 2003 computed by reference to the average of the
bid  and  asked prices for the Registrant's common stock as reported by National
Quotation  Bureau  on  Pink  Sheets  for  the week then ended, was approximately
$3,613,896.

           Class                                   Outstanding at March 26, 2004
------------------------------                    ------------------------------
Common Stock, $0.001 par value                          17,133,098  shares

Documents  incorporated  by  reference:  Portions  of the documents listed below
---------------------------------------
have  been  incorporated by reference into the indicated parts of this report as
---
specified  in  the  responses  to  the  item  numbers  involved:

     Proxy Statement for the Meeting of Shareholders to be held June 2004, into
     Part III of the filing.

     Indicate by check mark if disclosure of delinquent filers, pursuant to Item
405  of Regulation S-K is not contained herein and will not be contained, to the
best  of  the  Registrant's  knowledge,   in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part  III  of this Form 10-K or any
amendment  to  this  Form  10-K.  [ ]


                                        1
<PAGE>


                DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

     This  Annual  Report  on  Form  10-K  includes "forward-looking statements"
within  the  meaning  of  Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of historical
fact  included in this Report, are forward-looking statements, including without
limitation  the  statements  under  Management's   Discussion  and  Analysis  of
Financial  Condition  and  Results of Operations and the disclosures about Rocky
Mountain  Gas,  Inc.  and  plans  for developing its coalbed methane acreage. In
addition,  whenever  words like "expect," "anticipate" or "believe" are used, we
are  making  forward-looking  statements.

     Although  we believe that our forward-looking statements are reasonable, we
don't  know  if  our  expectations  will  prove to be correct.  Important future
factors  that  could cause actual results to differ materially from expectations
include:  Domestic consumption rates for natural gas; domestic market prices for
natural  gas,  uranium, gold, and molybdenum; the amounts of gas we will be able
to  produce  from our coalbed methane properties; the availability of permits to
drill and operate coalbed methane wells; whether and when gas transmission lines
will  be  built  to  reasonable proximity to our coalbed methane properties; and
whether  and  on what terms the capital necessary to develop our properties  can
be  obtained.  The  forward-looking statements should be carefully considered in
the  context  of  all  the  information  set  forth  in  this  Annual  Report.

                                     PART I

ITEM  1  AND  ITEM  2.  BUSINESS  AND  PROPERTIES.

(A)     GENERAL.

     Crested Corp. is a Colorado corporation (formed in 1970) in the business of
acquiring,  exploring,  developing and/or selling or leasing mineral properties.
In  this  Annual  Report,  "we,"  "Company"  or "Crested" refer to Crested Corp.
unless  otherwise specifically noted.  Our fiscal year ends December 31; this is
the first full year of our new fiscal year (the prior year ended May 31, and the
last  Annual  Report was a transition report for the seven months ended December
31,  2002  (filed  March  31,  2003)).

     In  2003,  most of our business activity was devoted to the coalbed methane
("CBM")  business, which is conducted through Rocky Mountain Gas, Inc ("RMG"), a
non-consolidated  affiliate  of  the  Company.

     In  2003,  RMG transferred certain of its CBM assets including a producing,
and  several  non-producing,  CBM  properties  to  Pinnacle  Gas Resources, Inc.
("Pinnacle"),  a  newly-organized  Delaware  corporation.  Other parties to this
transaction  included  CCBM, Inc. and its parent company Carrizo Oil & Gas, Inc.
("CRZO")  of  Houston  Texas; and seven affiliates of Credit Suisse First Boston
Private  Equity.  As a result of the transaction, RMG became a 37.5% shareholder
of  Pinnacle  and  RMG  accounts  for  its investment on the equity method.  RMG
recorded  revenues  from  gas sales from mid-2002 until the transfer to Pinnacle
was  completed in mid-2003.  See "Transaction with Pinnacle Gas Resources, Inc."

     On  January  30,  2004,  RMG  acquired  producing  and   non-producing  CBM
properties  located  near   Gillette,  Wyoming,  from  Hi-Pro   Production,  LLC
("Hi-Pro").  These  properties  contain  proven  gas  reserves. A portion of the
purchase  price  was  paid  with  a  loan from institutional lenders under a $25
million mezzanine lending facility, which was established in connection with the
Hi-Pro  purchase;  additional  loans  will  be  available  to  acquire  more CBM
properties,  subject  to  lenders'  approval.  In the first quarter of 2004, RMG
raised  $1.8  million  in  working  capital  from  institutional  investors. See
"Coalbed  Methane  -  RMG  Equity  Financing."


                                        2
<PAGE>


     RMG's  properties  are  located in Wyoming and southeastern Montana.  As of
the  filing  date  of  this Annual Report, RMG holds approximately 264,300 gross
(128,200  net)  mineral  acres  of  CBM  properties under leases and options.  A
limited  amount of exploratory drilling and testing was conducted on some of the
non-producing properties in 2003, but in general, significant additional work is
needed  before  we  can  determine if those properties contain gas reserves.  No
prediction  is  made  when  such  determinations  can  be  made.

     In  2003,  the Company sold an indirect subsidiary (Canyon Resources) which
owns  commercial  properties  in  Ticaboo,  Utah.  See  "Oil  and Gas, and Other
Properties."  Canyon  Resources was acquired in the 1990s from a utility as part
of  an  acquisition of uranium properties and a uranium mill near Ticaboo, Utah.
The  uranium  properties  and mill, presently inactive, have not been sold.  See
"Inactive  Mining  Properties  -  Uranium."

     Historically, gas prices for production in the Powder River Basin (our area
of  activity)  have  been  lower  than  national  prices due to limited pipeline
"takeaway  capacity."  This  limitation was somewhat eased in late 2002 and 2003
by  new  pipeline  construction  and  enlargement of existing lines, and will be
further  improved with more capacity in 2005.  For example, a new large pipeline
is  planned  to  be in service in January 2005, running from the Cheyenne hub in
Cheyenne,  Wyoming,  to  Kansas.  See  "Gas  Markets."

     However,  on  both  historical  and  seasonal  bases,  gas prices have been
volatile.  A  return  to  low  gas  prices,  particularly  if  aggravated by the
negative  price  differential experienced by Powder River Basin producers, could
adversely  impact  not  only  the  economics  of current production but also the
economics  of  exploration  projects as they move into production in the future.

     Crested and U.S. Energy Corp.("USE") originally were independent companies,
with  two  common affiliates (John L. Larsen and Max T. Evans; Mr. Evans died in
February 2002).  In 1980, Crested and USE formed a joint venture ("USECC") to do
business  together  (unless one or the other elected not to pursue an individual
project).  As a result of USE funding certain of Crested's obligations from time
to  time  (due  to  Crested's lack of cash on hand), Crested subsequently paid a
portion  of  this  debt  by  issuing  common  stock  to  USE,  Crested  became a
majority-owned  subsidiary  of  USE in fiscal 1993.  In fiscal 2001, the Company
issued  another  6,666,666 shares of its common stock to reduce its debt owed to
USE  by  $3.0  million, which increased USE's ownership of Crested to 71.5%. All
the  operations  of  the  Company  are  in  the  United  States.

     Principal  executive  offices  of Crested are located in the Glen L. Larsen
building  at  877  North  8th  Street  West,  Riverton, Wyoming 82501, telephone
307-856-9271.  RMG  has  a  field  office  in  Gillette,  Wyoming.

     Most  of  the  Company's operations are conducted through subsidiaries, the
USECC Joint Venture with USE, and jointly-owned subsidiaries of Crested and USE.

b)  NARRATIVE  DESCRIPTION  OF  BUSINESS  (INCLUDING  ITEM  2  -  PROPERTIES).

COALBED  METHANE

     GENERAL.

     Rocky Mountain Gas, Inc. ("RMG") was incorporated in Wyoming on November 1,
1999  for  business in the coalbed methane industry in Wyoming and Montana.  The
Company owns 39.8% of RMG as of December 31, 2003 (as of the date of this Annual
Report,  39.1%  ).


                                        3
<PAGE>


     In  2003,  RMG  transferred  all of its interest in certain coalbed methane
properties,  including  a  producing  property,  to Pinnacle Gas Resources, Inc.
("Pinnacle").  At the same time, Carrizo Oil & Gas, Inc.'s subsidiary CCBM, Inc.
(with  which  RMG  has  an  agreement to jointly acquire and explore properties)
transferred  to  Pinnacle  all  of  its  interests  in  the same properties, and
affiliates  of  Credit  Suisse  First  Boston  contributed  equity  financing to
Pinnacle.  See  "Transaction  with  Pinnacle  Gas  Resources,  Inc."

     On  January  30,  2004,  RMG  (through  its  wholly-owned,  newly organized
subsidiary  RMG I LLC, "RMGI") acquired coalbed methane properties in the Powder
River  Basin  of  Wyoming.  See  "Acquisition  of  Producing  and  Non-Producing
Properties  from  Hi-Pro  Production,  LLC."  Part  of  the  purchase  price was
financed  under  a  $25  million  mezzanine  credit  facility.

     RMG  I  plans  to  drill five development wells on the Hi-Pro properties in
2004 and upgrade existing infrastructure to improve gas production, and, subject
to  raising  equity  funding,  drill  up to 120 exploratory wells on undeveloped
Hi-Pro  acreage  in  2004  and  2005.

     In  addition,  RMG  plans to drill exploratory wells on the Castle Rock and
Oyster  Ridge  properties,  and  seek to acquire other producing coalbed methane
properties,  primarily  in  Wyoming.  Financing  may   be  available  under  the
mezzanine  credit  facility for acquisitions, if approved by the lenders.  As of
the  filing  date  of  this  Annual  Report, RMG does not have any agreements to
acquire other producing properties.  RMG raised $1.8 million of equity financing
in  the  first  quarter  of  2004.

     As  of  the filing date of this Annual Report, RMG holds leases and options
on approximately 264,300 gross mineral acres of federal, state and private (fee)
land  in  the  Powder River Basin ("PRB") of Wyoming and Montana and adjacent to
the  Green  River  Basin  of  Wyoming,  not  including acreage held by Pinnacle.

     As  of the filing date of this Annual Report, there are 108 producing wells
on  the  properties  bought  by  RMG  from  Hi-Pro Production, LLC.  RMG owns an
average  58%  working  interest  (46.4%  average  net  revenue  interest, before
deduction  of overriding royalty interests held by lenders) in these properties.

     From  RMG's  inception through December 31, 2003, 72 exploratory wells have
been  drilled,  almost  all  with  funds provided by industry partner CCBM, Inc.
("CCBM") and former industry partner SENGAI (see below). 43 of the wells were on
properties transferred to Pinnacle Gas Resources, Inc. in mid-2003.  The balance
of 29 wells (15 of which have been plugged and abandoned) are on properties held
by  RMG.  Reserves  have not been established for any of the properties on which
these  wells  were  drilled.

     The  Castle  Rock  property  in  southeast  Montana  , and the Oyster Ridge
property  adjacent  to  the  Green  River  Basin  (southwest Wyoming), are large
properties  which  will  require  the drilling of numerous exploratory wells and
extended  dewatering  for  each  group or "pod" of wells (possibly as much as 24
months  after  drilling  and completion) before an assessment of reserves can be
made.

     Among  the  uncertainties  we  face  in  determining if our coalbed methane
investments  will  yield  value  are  the  following: Prices for gas sold in the
Powder  River Basin are typically lower than national prices, and therefore, the
economics  of  Powder  River  Basin  properties  can  be adversely affected more
readily  by lower gas prices. The Hi-Pro properties, and all revenues therefrom,
are  pledged  to  service  $3,635,000  of debt. To continue exploration efforts,
additional capital (in addition to RMG's one-half of remaining balance under the
CCBM  $5.0  million drilling commitment, which one half of remaining balance was
$305,100  at  December 31, 2003) will be needed. Permitting issues for new wells
on  undeveloped  acreage  may  be  delayed.  An  unfavorable confluence of these
uncertainties  could  result  in  a  write-down  of  the carrying value of those
properties  which  don't  produce  enough gas at low prices to be economic; in a
write-down  of  the  carrying  value  of  other properties which need more wells
drilled  and  dewatered  to  establish  or  improve  the  economics


                                        4
<PAGE>


of  production;  and/or  the  delay  (whether from lack of capital or permitting
problems)  in  establishing  reserves  for the larger prospects where many wells
will  have  to  be  drilled  to  assess  their  value.

     Certain  technical  terms  used  in the oil and gas industry appear in this
Annual  Report.  The  following  are general definitions of those terms: Working
interests percentages of a mineral lease total 100%; the working interest owners
together (an aggregate of 100%) pay all of the costs to hold undeveloped leases,
drill  and  complete  wells  on  leases,  and  produce  minerals from the leased
property  (including  pump costs, gathering and transmission costs and marketing
costs).  Net  revenue  interests  are  the  percentages  of production which the
working  interest  owners  own,  after deduction for payment of royalties to the
owners  of  the  minerals  under  lease  (private  parties,  the  Bureau of Land
Management,  or the State, as applicable).  Owners of royalty interests pay none
of  the  costs  to  drill, complete, or operate wells on a lease.  An overriding
royalty  interest  is  carved  out of the total net revenue interest; overriding
royalty  interest  holders  pay none of the costs to hold, drill, or produce the
minerals.  All  owners  pay  their  share  of  ad  valorem  and severance taxes.

     TRANSACTION  WITH  PINNACLE  GAS  RESOURCES,  INC.

     On  June  23, 2003, RMG, CCBM, Inc. ("CCBM") and its parent company Carrizo
Oil  &  Gas,  Inc.;  and  seven affiliates of Credit Suisse First Boston Private
Equity  (the "CSFB Parties") signed and closed agreements for a transaction with
Pinnacle.  The transaction included: (1) the contribution to Pinnacle by RMG and
CCBM  of  all of their ownership of a portion of the CBM properties owned by RMG
and  CCBM,  in  exchange  for  common  stock  and options to buy common stock in
Pinnacle;  and  (2)  $17,640,000 cash to Pinnacle by the CSFB Parties for common
stock  and series A preferred stock of Pinnacle, and warrants to purchase series
A  preferred  stock  of  Pinnacle.

     Pinnacle is a private corporation. Only such information about Pinnacle, as
its  board of directors elects to release, is available to the public. All other
information  about  Pinnacle  is  subject  to confidentiality agreements between
Pinnacle,  RMG,  and  the  other  parties  to  the  June  2003  transaction.

     At December 31, 2003, RMG's ownership in Pinnacle's common stock was 37.5%.
RMG's  ownership  of  Pinnacle  on a fully-diluted basis will change if the CSFB
Parties  fund  subsequent  capital  requests from Pinnacle and/or exercise their
warrants  to  buy  equity  in Pinnacle, and/or if RMG and/or CCBM exercise their
options  to  buy  equity in Pinnacle, or other events occur.  See the discussion
under  Pinnacle  Equity  Transaction  below.

     Immediately  following,  and  in connection with, the transaction, Pinnacle
acquired  additional  producing  and non-producing CBM properties located in the
Powder River Basin of Wyoming from Gastar Exploration, Ltd. ("Gastar," listed on
the  Toronto  Stock  Exchange),  referred  to below as the "Gastar acquisition."

     The  transaction  and the follow-on Gastar acquisition provide (1) Pinnacle
the  funded  opportunity  to  explore  and  develop the contributed and acquired
assets,  and  to  acquire and explore, and if warranted, develop, additional CBM
properties  in  Wyoming and Montana; and (2) RMG (through its ownership interest
in  Pinnacle)  opportunity  to  benefit  (on a passive basis) from the continued
development  of  the  contributed assets and other properties which Pinnacle may
acquire  in  the  future.  Since  June  2003,  Pinnacle  has acquired additional
acreage,  and  drilled  numerous  exploratory  and  development  wells.

     RMG  now has interests in approximately 264,300 gross (128,200 net) mineral
acres:(A) 173,400 gross (66,900 net) acres in the Castle Rock, Oyster Ridge, and
Baggs  properties,  which were not contributed to Pinnacle (these properties are
operated  by  RMG and held with its industry partner CCBM, Inc.); and (B) 52,700
gross  (47,000  net)  mineral  acres  acquired  from Hi-Pro Production, LLC. The
acreage  total  does  not


                                        5
<PAGE>


reflect properties held by Pinnacle. The acreage total for Oyster Ridge includes
the  proposed  acquisition  from  Kerr McGee (38,184 gross, 11,455 fully diluted
net).  See  "Oyster  Ridge".

     CCBM  is a wholly-owned subsidiary of Carrizo Oil & Gas, Inc. ("Carrizo," a
Nasdaq listed company).  Carrizo, CCBM and RMG entered into an agreement in July
2001 for CCBM to buy a 50% interest in, and fund exploration and development of,
RMG's  CBM  properties then owned.  Prior to and in connection with the Pinnacle
transaction,  CCBM  paid  RMG  approximately  $1.8  million cash to complete its
purchase  of  50%  of  RMG's  contributed  CBM properties, thus enabling CCBM to
contribute  its interests in the CBM properties to Pinnacle as having been fully
paid  for.  See  "Continuing  Operations of RMG, Continuing Agreement with CCBM,
and  the  AMI  Agreement,  After  the  Pinnacle  Transaction"  below.

   -  PINNACLE  EQUITY  TRANSACTION

     Pinnacle is authorized to issue common stock (100 million shares, $0.01 par
value)  and preferred stock (100 million shares, $0.01 par value).  Pinnacle has
established  series A preferred stock with the following provisions: Liquidation
preference  of  $100.00  per  share; 10.5% compounded cumulative annual dividend
(12.5%  after  July 1, 2010); redeemable at Pinnacle's option after July 1, 2004
at  a premium declining to par after July 1, 2009 (mandatory redemption if there
is  a  change  in control of RMG or CCBM); and with voting rights (a) pari passu
with  the  common  stock  on  regular  matters,  and (b) as a separate class, to
authorize  changes  in  the  series  A preferred stock, to authorize issuance of
stock  senior  to or in parity with the series A preferred stock, to approve any
reorganization   or   merger  of   Pinnacle,  to   approve  Pinnacle's  sale  of
substantially  all  its  assets,  and  similar  matters.

     Pinnacle's  board  of  directors has eight directors (two each from RMG and
CCBM,  and  four  from  the  CSFB  Parties).

     The chart below summarizes (a) the contributions made by the parties to the
transaction  at  the  closing,  and  (b)  as  of  the  closing,  the  subsequent
contributions  which  would  be  made  by the CSFB Parties in response to future
capital  requests from Pinnacle. As of the filing date of this Annual Report, as
a  result of a capital request funded after the closing by the CSFB parties, RMG
owns  37.5%  of  the  common  stock  of  Pinnacle.

<TABLE>
<CAPTION>
                               Equity in Pinnacle
                         ------------------------------
                                               Series A       Equity        Rights in Pinnacle
Parties    Contribution      Common Stock   Preferred Stock  Warrants(1)  Options Common Stock(2)
-------    ------------      ------------   ---------------  -----------  -----------------------
<S>                            <C>           <C>              <C>              <C>                                  <C>
RMG        All CBM           75,000 shares          -0-         -0-            30,000 shares
           properties
           (except Castle
           Rock, Baggs
           and Oyster Ridge)

CCBM       All CBM           75,000 shares          -0-         -0-            30,000 shares
           properties
           (except Castle
           Rock, Baggs
           and Oyster Ridge)

CSFB       $   17,640,000    50,000 shares    130,000 shares    130,000        -0-
Parties

CSFB       $ 11,760,000(3)                    120,000 shares    120,000            -0-
Parties
____________________________
</TABLE>


                                        6
<PAGE>


     (1)          At  $100  per  share  of  common  stock.
     (2)          Options to buy common stock at $100.00 per share, as increased
                  by 10%  per  annum  compounded quarterly  for the first 15,000
                  shares,  and  20%  per  annum  for  the  second 15,000 shares.
     (3)          Commitment  to fund subsequent capital requests from Pinnacle,
                  not more  than  $11,760,000,  if made prior to July  1,  2004,
                  for development workon CBM  wells,  or  (if  approved  by CSFB
                  Parties)  a  property  acquisition.  The commitment  price  is
                  $980,000 for each  10,000 shares of  series A  stock  (coupled
                  with  warrants  to  purchase  10,000  shares  of common stock,
                  exercisable at $100 per share).

     As  a  result,  RMG has recorded its 37.5% equity investment in Pinnacle at
the  carrying value of its coalbed methane properties of approximately $922,600.

     Sanders  Morris  Harris  Inc.  ("SMH") of Houston, Texas acted as financial
advisor to RMG on the Pinnacle transaction.  For its services in connection with
the  transaction  and the Gastar acquisition, SMH was paid $650,000 by Pinnacle.
As  additional  compensation  for  SMH's  services,  USE  issued  to  SMH 50,000
restricted shares of common stock and warrants to purchase (until June 30, 2006)
another  50,000 restricted shares of common stock (at $5.00 per share).  SMH did
not  receive  any  equity  or  equity  rights in Pinnacle in connection with the
transaction  or  the  Gastar  acquisition.

  -   GASTAR  ACQUISITION

     With  proceeds  from  the CSFB financing, Pinnacle paid Gastar $6.2 million
for  approximately  50%  of  Gastar's working interest in existing producing and
non-producing  CBM  properties  which  included  95 producing wells in the early
stages  of  dewatering  and approximately 36,529 gross developed and undeveloped
acres.  The majority of the leases are either part of or located adjacent to the
producing  Bobcat  property,  which  RMG  and  CCBM  contributed  to  Pinnacle.

     Pinnacle  also  agreed  to  fund up to $14.5 million of future drilling and
development  costs  on behalf of Gastar and Pinnacle prior to December 31, 2005,
on  the  properties  purchased  from  Gastar.

  -   CONTINUING  OPERATIONS OF RMG, CONTINUING AGREEMENT WITH CCBM, AND THE AMI
AGREEMENT  AFTER  THE  PINNACLE  TRANSACTION

     RMG  retained  ownership,  with CCBM, of the Castle Rock, Oyster Ridge, and
Baggs  projects,  totaling  about  189,000  gross acres (currently about 173,400
gross   acres  net  of  15,200  gross  acres  returned  to  Anadarko  after  the
transaction  date  and  expiration  of one lease). RMG and CCBM plan to continue
exploration  and development activities on these properties as well as acquiring
other  properties  in  Wyoming and Montana, under their July 2001 agreement (see
"Carrizo - Purchase and Sale Agreement").  Presently there are no agreements for
RMG  and  CCBM  to  acquire  producing  properties.

     CCBM  paid  RMG  approximately $1.8 million for CCBM's outstanding purchase
obligation  (under  the  July  2001  agreement)  on  CCBM's  interests  in those
properties  it contributed to Pinnacle.  The balance on the note at December 31,
2003  was  $836,200.  The  balance  of  CCBM's  original  purchase obligation is
payable  in  monthly installments of approximately $52,800 through November 2004
with  a  balloon  payment  of  $282,400  due  on  December  31,  2004.

     In connection with the transaction with Pinnacle, RMG and Pinnacle signed a
transition  services  agreement, for Pinnacle to pay RMG to assist in setting up
operational   accounting  systems   for  Pinnacle  through  December  2003.  The
agreement  was  terminated  by  RMG  effective  January  1,  2004.

     Also  in  connection  with the transaction, RMG, CCBM, Carrizo, USE and the
CSFB Parties signed an area of mutual interest ("AMI") agreement: Until June 23,
2008, Pinnacle has the right to acquire from the


                                        7
<PAGE>


other parties up to 100% of any interest  in  oil  and  gas leases, or interests
therein or mineral interests or rights to acquire same, which the  other parties
acquire, at the same price paid or payable  by  the  other  parties,  within the
Powder River Basin in Montana  and  Wyoming  (excluding  most  of  Powder  River
County, Montana). The original AMI agreement between CCBM and RMG from July 2001
is superseded by the new AMI agreement, except for areas  outside  the  new  AMI
agreement territory, wherein the original  agreement  is  still  in  effect.

     With  respect  to the properties acquired from Hi-Pro (see below), CCBM and
Pinnacle waived their rights to buy any of the producing or undeveloped acreage.

     ACQUISITION  OF  PRODUCING  AND  NON-PRODUCING  PROPERTIES  FROM  HI-PRO
PRODUCTION,  LLC

     On  January  30,  2004,  RMG I, LLC ("RMG I"), a wholly-owned subsidiary of
RMG,  purchased  coalbed  methane  properties  from Hi-Pro for $6,800,000.  This
transaction  was  closed  after  December  31,  2003.  See  the subsequent event
footnote  to  the  financial  statements  in  this  Annual  Report.

     The purchased properties (all located in the Powder River Basin of Wyoming)
include  247 completed wells and 40,120 undeveloped fee acres.  As of the filing
date  for  this  Annual  Report,  108  wells now are producing approximately 5.9
million  cubic feet (Mmcf) of gas per day (approximately 3.1 Mmcf per day net to
RMG  I).  Net  daily  Mmcf sales are less than gross production, due to produced
gas  being  consumed  to run compressors, and from adjustments by purchasers for
thermal  content  (gas  is  sold  based  on  BTU  heat  content).

     RMG  I  owns an average 58% working (average 46.4% net revenue) interest in
the  producing  wells  and proved developed acreage, and a 100% working (average
80%  net  revenue)  interest in all of the undeveloped acreage.  The net revenue
interest  percentage  after  deduction of the overriding royal interests held by
lenders  (see "Mezzanine Credit Facility") are 44.66% for the producing and five
future  wells to the Wyodak coal, and 78.0% for production from deeper coals and
all  of  the  undeveloped  acreage.

     The  transaction  was  structured  as  an asset purchase, with RMG I as the
purchaser,  in  connection with the establishment of a mezzanine credit facility
for  up  to  $25,000,000  of  secured  loans  to acquire and develop more proven
coalbed  methane  reserves.  RMG may utilize RMG I for future acquisitions (none
are  presently under contract or agreement in principle).  See "Mezzanine Credit
Facility."  A  substantial  portion of the cash consideration paid to Hi-Pro was
funded  with the initial advance on the credit facility.  RMG replaced Hi-Pro as
the  contract  operator  for  89%  of  the  wells  that  were  acquired.

     RMG  negotiated  the  purchase  based  on  the  $7,113,000  present  value,
discounted  10%,  of  gas  reserves  recoverable  (and  the estimated future net
revenues  to  be  derived)  from  proved  reserves  in the Hi-Pro properties, as
estimated  as of November 1, 2003 by Netherland Sewell and Associates, Inc.  See
"Reserve  Date"  below  for  the  estimate  as  of  December  31,  2003.

     The  $6,800,000  purchase  price  reflects  a  deduction, negotiated by the
parties  in  January  2004,  to  account for the decrease in gas production from
October  2003  due  to the impact on production from deferred maintenance on the
properties,  and  the  expected  cost  of  such  maintenance work after closing.


                                        8
<PAGE>


-     TERMS  OF  THE  PURCHASE.  The  purchase  price  of  $6,800,000  was paid:

  x  $776,700  cash  by  RMG.
  x  $588,300  net  revenues  from  November 1, 2003 to December 31, 2003, which
          were  retained  by  Hi-     Pro.(1)
  x  $500,000  by  USE's  30  day promissory note (secured by 166,667 restricted
          shares  of  USE  common     stock,  valued  at  $3.00  per  share).
  x  $600,000  by 200,000 restricted shares of USE common stock (valued at $3.00
          per  share).(2)
  x  $700,000  by 233,333 restricted shares of RMG common stock (valued at $3.00
          per  share).(3)
  x  $3,635,000  cash,  loaned  to RMG I under the credit facility agreement.(4)
      ---------
     $6,800,000

  (1)     RMG paid all January operating costs at closing. Net revenues from the
          purchased  properties  for  January  2003  were  credited  to  RMG I's
          obligations  under  the  credit facility agreement. These net revenues
          were considered by the parties to be a reduction in the purchase price
          which  RMG  otherwise would have paid at the January 30, 2004 closing.
  (2)     USE has agreed to file a resale registration statement with the SEC to
          cover public  resale  of  these  200,000  shares.
  (3)     From November  1,  2004 to November 1, 2006, the  RMG  shares shall be
          convertible at Hi-Pro's sole election into restricted shares of common
          stock  of  USE.  The number of USE shares to be issued to Hi-Pro shall
          equal  (A)  the  number  of  RMG shares to be converted, multiplied by
          $3.00  per share, divided by (B) the average closing sale price of the
          shares  of  USE for the 10 trading days prior to notice of conversion.
          The  conversion  right  is  exercisable  cumulatively,  as to at least
          16,666  RMG  shares  per  conversion.
  (4)     See  "Mezzanine  Credit  Facility."

  -   PROPERTIES  PURCHASED.

      RESERVE  DATA

     Netherland  Sewell  and  Associates,  Inc.  ("NSAI,"  Houston,  Texas),
independent petroleum engineers.  have prepared a report on the proved reserves,
as  of  December  31,  2003,  estimating  recoverable  reserves  from the Hi-Pro
properties,  and  the  present  value  (discounted  10%)  of  future  cash  flow
therefrom.  NSAI's  report  takes into account fixed pricing for some production
in  2004  and 2005, reflects the reduction in RMG's net revenue interests due to
the  overriding royalty interests held by lenders, and (except for fixed pricing
in  2004  and  2005)  is  based on the Henry Hub Spot market price of $5.965 per
mmbtu,  adjusted  by  lease for energy content, transportation fees and regional
price  differentials  on  December  31,  2003,  without  price  escalation.

                                                     NET PRESENT
                                 RESERVES               VALUE
                                 (Mmcf)           (discounted at 10%)
                                 ------           -------------------
Proved Developed Producing      2,206.490             $4,589,600
Proved Developed Non-Producing    464.423             $1,084,800
Proved Undeveloped                733.780             $1,382,000
                                  -------             ----------
Total                           3,404.693             $7,056,400

     The  present  value, discounted 10% value ("PV10 value") was prepared after
ad valorm and production taxes on a pre-income tax basis, and is not intended to
represent  the current market value of the estimated gas reserves purchased from
Hi-Pro.  The PV10 discount factor is not the same as the standardized measure of
present  value  calculations  which are determined on an after-income tax basis.

     Reserves  as  of  November  1, 2003 were calculated by NSAI based on actual
production  up  to  June 30, 2003, with production decline curves to November 1,
2003  estimated based on that production, resulting in


                                        9
<PAGE>


total net  proven  reserves of 4,034.5  Mmcf.  For estimates  as of December 31,
2003, NSAI was supplied with actual  production  data through that date. Because
actual production was below the production predicted for the same time period by
the November 1, 2003 decline  curves,  the  decline  curves for the later report
had a lower starting point  on January 1,  2004 and a  steeper  rate of decline.
These new decline curves thus  predict lower  future  production (3,404.693 Mmcf
net to RMG) as of December 31,  2003.

     We  expect  production  in  2004  from  producing  wells,  and hence proven
reserves  (after  adjustments  for  actual  gas  produced),  will  increase  as
maintenance  work now in progress (which had been deferred by Hi-Pro in the last
two  quarters of 2003) is completed in the second quarter 2004. The reduction in
the  present  value,  discounted  10%,  of  proven  reserves at November 1, 2003
($7,113,000)  as  compared  to  December  31,  2003 ($7,056,400)  was  less than
1%, notwithstanding the decreased volume of reserves, due  to  the  higher price
at  the later date compared with prices used in the November  1,  2003  estimate
$4.50 per mcf in 2003, $4.29 in 2004, and $4.25 in 2005).

     There  are  numerous  uncertainties inherent in estimating gas reserves and
their  estimated  values.  Reservoir  engineering  is  a  subjective  process of
estimating  underground  accumulations  of  gas that cannot be measured exactly.
Estimates  of  economically recoverable gas, and the future net cash flows which
may  be  realized  from the reserves, necessarily depend on a number of variable
factors  and  assumptions,  such as historical production from the area compared
with  production  from  other  areas,  the  assumed  effects  of  regulations by
government  agencies,  assumptions  about future gas prices and operating costs,
severance  and  excise taxes, development costs, work-over costs, remedial costs
and abandonment obligations. The outcomes in fact may vary considerably from the
assumptions.

     The PV10 value takes into account RMG I's contracts to sell 2,000 Mmbtu per
day in 2004 at a fixed price of $4.76 per Mmbtu, and 1,000 Mmbtu per day in 2005
at  a  fixed  price of $4.14 per Mmbtu.  From time to time, RMG I may sign fixed
price  contracts for more production.  In addition, gas market prices will vary,
possibly  by  significant amounts, throughout each year, and on an average basis
from  year  to  year.  For these reasons, the cash flow realized from production
likely  will  vary  from  the  estimates of cash flow used to determine the PV10
value.

     Estimates of the economically recoverable quantities of gas attributable to
any  particular  property, the classification of reserves as to proved developed
and  proved  undeveloped  based on risk of recovery, and estimates of the future
net  cash flows expected from the properties, as prepared by different engineers
or by the same engineers but at different times, may vary substantially, and the
estimates  may  be  revised  up  or  down  as  assumptions  change.

     In addition, it is likely that actual production volumes will vary from the
estimates.

     The  PV10  discount  factor,  which  is  required  by  the  SEC  for use in
calculating  discounted  future  net  cash  flows for reporting purposes, is not
necessarily  the  most  appropriate  discount factor, based on interest rates in
effect  in  the  financial  markets, and risks associated with the gas business.

     The business of exploring for, developing, or acquiring reserves is capital
intensive.  To  the  extent  operating cash flow is reduced and external capital
becomes  unavailable  or  limited,  RMG's  ability to make the necessary capital
investment  to maintain or expand the gas reserves asset base would be impaired.
There  is  no  assurance  future  exploration,  development,  and  acquisition
activities will result in additional proved reserves.  Even if revenues increase
because  of higher gas prices, increased exploration and development costs could
neutralize  cash  flows  from  the  increased  revenues.

     -     FUTURE  PLANS  FOR  THE  HI-PRO  PRODUCTION  PROPERTIES

     In the second quarter of 2004, RMG I plans to drill five proven undeveloped
locations  to the Wyodak coal, continue a remedial work over program on a number
of  existing  wells,  and  upgrade  the  gas  gathering


                                       10
<PAGE>


and pipeline facilities included  in  the  purchase. The  work  over  program is
estimated to cost $250,000 and will be funded by the working interest  partners.
The drilling and gathering upgrade  is estimated to cost approximately $640,000,
and is being funded  with  a  loan  from  the  mezzanine  credit  facility.  The
programs are designed to enhance production from current levels. After the 5 new
wells  to the Wyodak are drilled,  there  will be no more undrilled locations on
the currently producing  properties  available  for the Wyodak coal.  The  first
coals of interest under the undeveloped  acreage  are  the  Anderson and  Canyon
coals (for example under the Reno  property);  the  Wyodak coal is  not  present
under the undeveloped acreage.  In  addition  to the 5 new wells, RMG-I plans to
hook  up 2  additional wells that were previously drilled  by Hi-Pro and  are in
close proximity to the 5 new wells.

     The  Wyodak  coal  formation  is  200  to  600 feet from surface.  Existing
infrastructure  for  the  Wyodak  wells (gathering lines, compressors, and water
disposal)  should  significantly  reduce  drilling  and completion costs for new
wells  to  the  deeper Dannar and Moyer coals (1,100 to 1,800 feet).  Subject to
raising  capital, up to 120 wells could be drilled and completed to these deeper
coals  in  2004  and 2005, all on locations now producing from the Wyodak.  This
development  activity  is contingent upon obtaining future financing.  We do not
expect  that  funding  for this activity will be available through the mezzanine
credit  facility.

     No  reserves have been established for the Dannar and Moyer coals.  Because
no  other  operators  are  producing  gas  from or dewatering these coals in the
vicinity  of the Hi-Pro properties, we expect several pods of wells will have to
be  drilled  and  completed  to  these coals, with an extended dewatering period
(which  could  be  up  to  24 months), before significant gas production begins.

     RMG  is  also  developing  plans to put five coalbed methane wells from the
Reno  property  on  production  during  2004.  The Reno property was part of the
Hi-Pro  acquisition.  The  target  coals  on  the Reno property are the Anderson
coal,  which  is  about  600-650  feet  in  depth  and  approximately 40 feet in
thickness  and  the Canyon coal which is about 700-850 feet in depth and 35 feet
in  thickness.

     Four  wells  were  previously drilled by Hi-Pro at the Reno property, which
were  completed in both the Anderson and Canyon coals, with slotted screening in
each.  In  addition,  in  March 2004, RMG I drilled a fifth well, which has been
completed in the Canyon coal.  The shallower Anderson coal may be completed at a
later  date.  Four  additional  well  locations exist at the Reno property based
upon  80-acre  spacing.

     The  Reno property consists of 760 gross and net acres, all on fee acreage.
It  is  located  in  Campbell  County,  Wyoming, approximately 50 miles south of
Gillette.  RMG  owns  a  100%  working  interest  in  this  property.

  -   MEZZANINE  CREDIT  FACILITY.

     RMG I has signed a credit agreement with Petrobridge Investment Management,
LLC  (Houston  ,  Texas)  as lead arranger, and institutional lenders, for up to
$25,000,000 of loans to RMG I. The loan commitment is through June 30, 2006. All
loans  will  have  a  three  year  term  from  funding  date.

     Funding  to  acquire  and/or improve any project is subject to the lenders'
approval  of  the  transaction  and  RMG  I's  development  plan.

     The  first  loan ($4,340,000 on January 29, 2004) under the credit facility
has been applied to the Hi-Pro asset purchase ($3,700,000) including transaction
costs  and  professional fees; and for a Phase I development program ($640,000).

     Terms  for  all  loans  under  the  credit  facility include the following:

    x     Principal  is  not  amortized,  but interest must be paid monthly. All
          revenues from the properties owned by RMG I (including all current and
          new  wells)  is  paid to a lock box account controlled


                                       11
<PAGE>


          by  the  lenders,  from  which  is  paid  by  the  lenders,  the lease
          operating costs, revenue distributions, RMG I operating  fees and  RMG
          pumping fees (all approved by  the lenders).  With  the  exception  of
          operating and  pumping  fees, no  revenues  will be available  for RMG
          operations until all loans are paid off.

    x     The loans are secured by all of RMG I's properties and by RMG's equity
          interest  in  RMG  I.

    x     The  lenders, in the aggregate, receive an overriding royalty interest
          of  3% of production from the wells producing when the acquisition was
          closed,  and  2%  of  production  from  new wells on an 8/8ths working
          interest  basis,  proportionately  reduced where less than 100% of the
          working  interest  is  owned  by RMG I. For the Hi-Pro properties, the
          3%  rate  applies  to  all  wells (producing and to be drilled) to the
          Wyodak formation (an aggregate override of 1.74%), and 2% to all wells
          to  deeper  formations  (aggregate  override to be determined based on
          working interest ownership by well). Override payments to the  lenders
          are  not applied to the loan balances. The percentage  of overrides on
          future  properties  may  vary.

    x     Negative  covenants: RMG I will not permit the ratio of (a) total debt
          to  EBITDA  to exceed 2.00 to 1.00; (b) EBITDA to interest expense and
          rents  (lease expense) to be less than 3.00 to 1.00; c) current assets
          to  current  liabilities  to  be  less than 1.00 to 1.00; or (d) PV 10
          (proved  developed  producing  reserves) to total debt to be less than
          1.00  to  1.00.  All  these  ratios are to be determined quarterly. In
          addition,  RMG  I  shall  not  permit net sales volume of gas from its
          properties  to  be less than 270 Mmcf, 230 Mmcf, 230 Mmcf and 210 Mmcf
          for  each  quarter  in 2004, or less than 180 Mmcf per quarter in 2005
          and  the  first  two  quarters  of  2006.

     At  closing  of  the  Hi-Pro  acquisition,  USE issued to the participating
lenders  three  year  warrants  to  purchase a total of 318,465 shares of common
stock  of  USE  (subject to vesting) at $3.30 cash per share.  At closing of the
Hi-Pro  Acquisition,  warrants  on 63,693 shares vested.  The remaining warrants
will  vest  at  the rate of the right to buy one USE share for each $78.50 which
RMG  I  subsequently  borrows  under  the  credit  facility.  Regardless of when
vested,  all  warrants  will  expire  on the earlier of January 30, 2007, or the
180th  day  after  USE  notifies  the  warrantholders  that USE' stock price has
achieved  or  exceeded $6.60 per share for a consecutive 15 business day period.
USE  has  agreed  to  file a registration statement with the SEC to cover public
resale  of  the  warrant  shares.

     The  preceding  is  a summary of some of the terms of the credit agreement,
and  is qualified by the text of the agreement, filed with this Annual Report as
an  exhibit.

-     RMG  EQUITY  TRANSACTION

     In  the  first  quarter of  2004, RMG raised $1,800,000 of equity financing
from  the  sale  of  shares  of Series A Preferred Stock in RMG, and warrants to
purchase  shares  of  common stock of USE, to institutional investors.  Proceeds
are  being  used for RMG working capital.  The terms of the securities sold are:

    x     600,000  shares  of  Series  A Preferred Stock at $3.00 per share. The
          Series  A  Preferred  Stock  bears  a  10%  cumulative annual dividend
          (payable on March 1 of each year, beginning March 1, 2005), payable at
          RMG's  election in cash or shares of common stock of RMG (at $3.00 per
          share)  or  shares  of  common  stock  of USE (at 90% of USE' weighted
          average  closing price for the five days prior to closing, referred to
          as  the  "set  price"). The Series A Preferred Stock is convertible at
          the holder's election into shares of common stock of RMG, at $3.00 per
          share,  or  shares  of  common  stock  of  USE at the set price, until
          February  2006,  at which time all Series A Preferred Stock shares not
          previously  converted  shall automatically be converted into shares of
          common  stock  of  RMG.  The  Series  A  Preferred  Stock  carries  a
          liquidation  preference  of  $4.05  per  share.


                                       12
<PAGE>


    x     Warrants to purchase 150,000 shares of common stock of USE, at the set
          price.  The  investors  did  not  pay additional consideration for the
          warrants  issued  in  connection  with  the  purchase  of the Series A
          Preferred  Stock.  The  warrants  are  exercisable  as  to  25% of the
          underlying  shares beginning in May 2004, and an additional 25% of the
          underlying  shares  on each of the six months, nine months, and twelve
          months  thereafter, at which time the warrants are exercisable for the
          full  number  of  underlying  shares.  USE  may  call the warrants for
          exercise  if  USE's volume weighted average price (VWAP) for its stock
          exceeds  $6.00  for  any  consecutive  15  trading  days; warrants not
          exercised by the tenth trading day after a call notice is sent will be
          cancelled.

    x     The number of shares of RMG or USE common stock issuable in payment of
          dividends  on, or conversion of, the Series A Preferred Stock, and the
          number  of  shares  of  common  stock  of  USE  issuable  on  exercise
          of  the  warrants,  are  subject  to  adjustment  in certain events to
          protect  the  holders from dilution. The first anti-dilutive provision
          is  'full  ratchet':  If  RMG  or USE issue shares of common stock, or
          derivative  securities exercisable for or convertible into such shares
          of common stock, at a price less than $3.00 per share for RMG stock or
          the  set  price  for  USE  stock,  at  any  time until 30 days after a
          registration  statement  (to  be  filed  by  USE)  has  been  declared
          effective by the SEC to permit the resale to the public by the holders
          of  the  USE  common  stock  issuable  on  payment  of  dividends,  in
          conversion,  and on exercise of warrants, then the issue price for the
          dividends and conversions, and the exercise price of the warrants (for
          RMG  and  USE common stock, as applicable) shall be reduced (ratcheted
          down)  to  equal  the  lower issue price, until the 30th day after the
          registration  statement  is  declared  effective.

          The  second  anti-dilutive provision would take effect after that 30th
          day: The issue price would be adjusted up to a fully weighted adjusted
          price, and would continue to be adjusted for any other issuance by RMG
          or USE of stock or derivative securities at a price less than $3.00 or
          the  set  price,  as applicable, until the Series A Preferred Stock is
          converted  to  common  stock or RMG or USE, or until the expiration of
          the  warrants,  as  applicable.  As  an  example  of  fully  weighted
          anti-dilution  protection,  if  RMG  were  to sell 3,200,000 shares of
          common  stock at $2.50 per share, the dividend and conversion price on
          the  Series  A  Preferred  Stock  would  be  $2.91.

     The  preceding  is a summary of some of the terms of the Series A Preferred
stock  designation,  and  the  USE warrants, and is qualified by the text of the
documents  filed  with  this  Annual  Report  as  exhibits.

     VOLUMES, PRICES AND GAS OPERATING EXPENSE - BOBCAT PROPERTY (TRANSFERRED TO
PINNACLE  GAS  RESOURCES,  INC.  IN  JUNE  2003)

     This table shows RMG's 27.6% working (22% net revenue) sales volumes of gas
produced,  average  sales  prices  received for gas sold, and average production
costs for those sales, for the seven months ended December 31, 2002, and for the
year ended December, 2003, all from the Bobcat property which was transferred to
Pinnacle  in  June  2003.

                                         Year  Ended        Seven  Months  Ended
                                     December  31,  2003     December  31,  2002
                                     -------------------     -------------------

          Sales volumes (mcf)               81,516                 64,314
          Average sales price per mcf(1)     $3.71                  $1.86
          Average cost (per mcf)(2)          $1.91                  $1.91

     (1)  From  time  to time, we sold some of the production at a set price and
          the balance at daily market prices. For the six months ended June  30,
          2003, we  sold  37.0%  of our share of  production at contract  prices
          and 63.0% at the market.  There were no gas sales after June 30, 2003.


                                       13
<PAGE>


     (2)  Includes  direct  lifting  costs  (labor,  repairs   and  maintenance,
          materials  and  supplies,  workover  costs,  insurance  and  property,
          gathering,  compression,  marketing  and  severance  taxes).

   ACQUISITION  AND  EXPLORATION CAPITAL  EXPENDITURES - ALL  PROPERTIES THROUGH
   DECEMBER  31,  2003

     From  inception on November 1, 1999 through December 31, 2003, RMG incurred
net  acquisition  (purchase  price  and  holding  costs)  and  exploration costs
(drilling  and  completion) on CBM properties of approximately $1,353,900, which
does  not  include  approximately  $2,194,900 funded by CCBM on RMG's behalf for
leasehold,  drilling  and  completion costs.  Unproved properties on the balance
sheet  at December 31, 2003 reflect the reduction (by $5,143,000) to reflect the
reduction  of the natural gas properties in accordance with the full cost method
of accounting as a result of principal payments made by CCBM under its agreement
with  RMG and by payments from other industry partners.  The foregoing data does
not  include  $922,600  spent by RMG on properties transferred to Pinnacle.  The
$922,600  was  recorded  at  December  31,  2003  as  an investment in Pinnacle.

     The  following  table  shows  certain information regarding the gross costs
incurred  by  RMG.  Costs  associated with the Hi-Pro acquisition after December
31,  2003  are  not  included.

                                  Year Ended    Seven Months Ended   Year Ended
                                  December 31,     December 31,       May  31,
                                  ------------     ------------     ------------
                                      2003             2002             2002
                                  ------------     ------------     ------------
             Acquisition costs    $    107,100     $    936,200     $    192,600
             Development               158,300           97,200           87,400
                                  ------------     ------------     ------------
                                  $    265,400     $  1,033,400     $    280,000
                                  ============     ============     ============

     The  acquisition costs included amounts paid for properties, delay rentals,
lease   option   payments,   and  general   and  administrative  costs  directly
attributable  to  the  acquisitions.

     The  recorded   amounts  for  acquisition  and   exploration  of  $265,400,
$1,033,400,  and  $280,000  represent  1.1%,  3.6%,  and 1.0% of total assets at
December  31,  2003,  December  31,  2002,  and  May  31,  2002,  respectively.

     We  use  the full-cost method of accounting for gas properties.  Under this
method,  all  acquisition  and exploration costs are capitalized in a "full-cost
pool"  as  incurred.   Depletion  of  the   pool  will  be  recorded  using  the
unit-of-production  method.  To  the  extent  capitalized costs in the full-cost
pool  (net  of  depreciation,  depletion  and  amortization and related deferred
taxes)  exceed the present value (using a 10% discount rate) of estimated future
net  pre-tax  cash  flows  from  proved  gas  reserves as established by reserve
reports,  the  excess  costs  will  be  charged  to  operations.

     All  acquisition and exploration costs for a property are capitalized until
such  time  as  reserves  can  be  established, or not, for the property.  If no
reserves  are  established,  those  capitalized costs will be transferred to the
amortization  base and be subject to an impairment test.  To the extent reserves
are  established  for  an  exploration  property to be less than such costs, the
costs  will  be written-down to the amount of present value of the reserves.  In
this event, assets would decrease and expenses would increase.  Once incurred, a
write-down  of  gas  properties  can't  later  be  reversed.

     In  addition,  if  future  exploration  work  (in  particular  the  larger
prospects)  is delayed because of lack of capital or permitting delays, or both,
with  the  result  that  it cannot be established whether or not proved reserves
exist  on  the  properties,  the exploration costs for those properties would be
written-off.


                                       14
<PAGE>


     COALBED  METHANE  PROPERTIES

     As  of  the  filing  of  this  Annual Report, we hold leases and options to
develop  approximately 264,300 gross mineral acres (including 69,895 acres under
options  -  see "Oyster Ridge" below) under leases from the United States Bureau
of  Land  Management, the states of Wyoming and Montana, and private landowners.
Table 1 shows the total gross and net lease acres held in each prospect, and the
amount  of  such  acreage  held by  RMG  and by  companies with  which  RMG  has
agreements (CCBM,  Inc. and  Quaneco,L.L.C.).  These agreements  are  summarized
under "Carrizo - Purchase and Sale Agreement" and "Quaneco - Agreement." Acreage
data assumes CCBM completes its obligations;  CCBM  will  own  its  50%  working
interest in wells drilled under CCBM's  drilling  fund  commitment,  but if CCBM
does not complete its purchase obligations, CCBM  would be entitled to a reduced
working interest in the remaining  undrilled  acreage.

     CCBM  currently  has purchase rights to acquire a 6.25% working interest in
the  Castle  Rock  prospect, and owns a 6.25% working interest in eight wells in
Castle  Rock,  which  were  drilled  by  Suncor Energy Natural Gas America, Inc.
("SENGAI").  RMG's and CCBM's interests in the Castle Rock prospect, as shown in
Table  1,  reflect  the completion of SENGAI's drilling program in late calendar
2001.  SENGAI  elected  not  to  exercise  its option under an Option and Farmin
Agreement  on  February  8,  2002.

     Prospects  are  evaluated  for  coal  potential  using available public and
industry  data, taking into account proximity to other positions held by RMG and
existing  or planned gas transmission lines, and whether drilling and production
permits  can be obtained and the costs thereof.  The final decision to acquire a
prospect is made by the executive officers of RMG.  Well drilling and testing is
done  by  outside contract drilling companies.  Drilling results (cores, gas and
water  flow  rates,  and other data) are evaluated by RMG staff, using customary
technical methods, to determine if any coal zones encountered in the well should
be  completed  for  production.  Completion requires setting casing pipe down to
the  coal zone(s), installing pumps, and installing and setting up the necessary
surface  equipment  (for  example,  water disposal lines and water holding tanks
and/or  holding  ponds for evaluation wells, pending production permitting), and
dewatering  the well sufficiently so production can start.  The decision whether
to  complete  the  well  is  made  by  the  executive  officers  of  RMG.

     Table  1  reflects  RMG's,  Quaneco's and CCBM's acreage position as of the
filing  of  this  Annual  Report.  Table 1 does not reflect the reduction in net
acreage held by RMG if Anadarko Petroleum, Inc. exercises its options to back-in
for  a  25%  working  interest on 31,711 gross acres or Kerr McGee exercises its
option  to  back-in  for a 40% working interest on 38,184 gross acres within the
Oyster  Ridge prospect.  Also, 69,895 of the acres shown as held in Oyster Ridge
assume we continue to earn acreage under the drill-to-earn-acreage provisions of
the  option  agreements  with  Anadarko  and  Kerr  McGee.  See  "Description of
Prospects  -  Oyster  Ridge"  below.

TABLE  1

--------------------------------------------------------------------------------
       Project
       and Date       Gross Lease   Net Lease   RMG Net   Quaneco Net   CCBM Net
       Acquired           Acres       Acres      Acres       Acres        Acres
--------------------------------------------------------------------------------
     Castle Rock         123,840      111,567    48,811      55,784       6,973
      Jan. 2000
     Oyster Ridge         87,642       87,642    32,380        0         32,380
      Dec. 1999
     Baggs North             120          120        60        0             60
      Jan. 2000
       Hi-Pro             52,740       51,938    46,974        0             0
      Jan.2003
--------------------------------------------------------------------------------
      TOTAL              264,342      251,267    128,225     55,784      39,413
--------------------------------------------------------------------------------


                                       15
<PAGE>


     RMG owns a 43.75% working interest (35% net revenue interest) in the Castle
Rock prospect on 123,840 gross and 111,567 net acres in southeast Montana.  CCBM
can  purchase a 6.25% working interest in RMG's acreage (6,973 net acres) of the
Castle  Rock prospect if they meet certain payment obligations. In July 2001, we
sold  a 50% working interest in all our coalbed methane leases, except at Castle
Rock,  to  CCBM  for  $7,500,000, plus other consideration.  The acreage data in
Table  1  reflects  these  transactions.

     CCBM  agreed  to pay up to $5,000,000 for drilling and completing CBM wells
on  the properties owned by RMG and CCBM.  RMG has a carried working interest in
all  of  the  wells drilled on properties owned in July 2001 (after the Pinnacle
transaction,  those properties consist of the Castle Rock, Baggs, and the Oyster
Ridge  property  (not including the Kerr-McKee earn-in acreage)).  To date, CCBM
has  not indicated whether they will participate in the Kerr McGee acreage under
the  AMI  agreement  as  it  is  still under review by CCBM under the AMI review
timeline.  CCBM  has  the right to participate as to 50% of the working interest
we  acquire in properties RMG or RMG I acquires in the future; if CCBM elects to
participate,  RMG  or RMG I would not have a carried interest in wells on future
properties.

     A  total  of 72 wells have been drilled on RMG acreage through December 31,
2003:  Five in (former) fiscal year 2001; 53 in (former) fiscal year 2002; 12 in
the  seven  months  ended December 31, 2002; and 2 in 2003. 43 of the wells were
drilled  on  properties  transferred  to  Pinnacle in mid-2003.  Nineteen of the
wells  were  drilled  by  SENGAI  in Castle Rock under the terms of a option and
farm-in  agreement.  Eleven  of those 19 wells were stratigraphic wells and have
been  plugged by SENGAI; 8 of those 19 wells were completed and are owned by RMG
(93.75%  working  interest)  and CCBM (6.25% working interest), as Quaneco opted
out of maintaining a working interest in the 8 wells. Other than the Castle Rock
wells,  RMG and CCBM both have a 50% working interest in all of these wells (see
Table  2  below).

     As  of  December 31, 2003, CCBM and RMG have spent approximately $2,194,900
of  the  $2,500,000  drilling  fund  CCBM is committed to spend on RMG's behalf.
This  reflects  a  reduction  of  $391,000  for  RMG's  participation  in two of
Carrizo's  Gulf  Coast wells.  We are relying on the $305,100 balance to pay for
continued  drilling  and  completion  work  on  the Castle Rock and Oyster Ridge
properties,  as  to  which  RMG  will  have  a  carried working interest with no
financial obligation of RMG for drilling and completion costs until the drilling
fund  is  exhausted.  For  other  properties  we acquire in which CCBM elects to
participate,  CCBM would bear 50% of drilling and completion costs for their 50%
working  interest.

     Future  annual financial obligations for coalbed methane properties consist
of  approximately $173,100 gross in rental fees to the lessors for 2004 ($81,800
net  to  RMG).

     Table  2 lists the number of wells drilled, the total exploration costs and
the  remaining  number  of wells currently permitted for drilling as of December
31,  2003.  Wells  permitted  for  drilling  on the Hi-Pro properties are shown;
exploration  costs  and  numbers  of  wells drilled by Hi-Pro Production are not
shown.

TABLE  2

<TABLE>
<CAPTION>


                  FY 2001            FY 2002         New Year 2002         FY 2003
Prospect      6/1/00-5/31/01     6/1/01-5/31/02     6/1/02-12/31/02     1/1/03-12/31/03          TOTAL         Remaining
              Wells        $     Wells        $     Wells         $     Wells         $     Wells         $     Permits
---------------------------------------------------------------------------------------------------------------------------
<S>           <C>         <C>    <C>         <C>    <C>          <C>    <C>          <C>
Castle
Rock           3*   $283,900    19**  $2,500,000          $   4,300      0            0     22   $2,788,200        5
---------------------------------------------------------------------------------------------------------------------------
Oyster
Ridge          2     150,500      5      464,200              3,400      0            0    7***     618,100        4
---------------------------------------------------------------------------------------------------------------------------
Hi-Pro        n/a        n/a     n/a         n/a     n/a        n/a     n/a           0     n/a         n/a        9
---------------------------------------------------------------------------------------------------------------------------
TOTAL          5    $434,400     24   $2,964,200          $   7,700      0            0     29   $3,406,300        18
</TABLE>

     *     one  well  has  been  plugged  and  abandoned
     **    drilled  by  SENGAI,  11  have  been  plugged  and  abandoned
     ***   includes  3  wells  that  have  been  plugged  and  abandoned


                                       16
<PAGE>


     CARRIZO  -  PURCHASE  AND  SALE  AGREEMENT.  On July 10, 2001, RMG closed a
Purchase  and  Sale  Agreement  with CCBM, Inc., a Delaware corporation which is
wholly-owned  by  Carrizo  Oil  &  Gas,  Inc., Houston, Texas (NMS "CRZO").  The
agreement between CCBM and RMG is intended to finance the further exploration of
the  properties  held  in  Montana  and Wyoming, and to acquire and develop more
properties.

     RMG  assigned  CCBM  an undivided 50% interest in all of RMG's then current
coalbed  methane  properties  (with the exception of Castle Rock of which only a
6.25%  working  interest  was  assigned) for a purchase price of $7,500,000 by a
promissory note payable in principal amounts of $125,000 per month plus interest
at  an annual rate of 8%, over 41 months (starting July 31, 2001) with a balloon
payment due on the forty-second month.  This note was reduced in connection with
CCBM's  contribution  of  properties to Pinnacle (see "Transaction with Pinnacle
Gas  Resources,  Inc.  - Continuing Operations of RMG, Continuing Agreement with
CCBM,  and  the AMI Agreement, after the Pinnacle Transaction"), and the balance
on the note is secured with a 50% undivided interest in the remaining properties
(Oyster  Ridge  and  Baggs  North  but  not  Hi-Pro).

     CCBM has the right to participate in other properties RMG may acquire under
an  area of mutual interest ("AMI") agreement.  This agreement has been modified
by  the  AMI  agreement signed in connection with the Pinnacle transaction; CCBM
waived  its right to participate in the Hi-Pro acquisition.   For information on
the  original  AMI agreement, see "Carrizo - Purchase and Sale Agreement" in the
Annual  Report  (Form  10-K/A1)  for  the former fiscal year ended May 31, 2002.

     In addition to its one-half share of revenues in proportion to its one-half
share  of  the  working  interest,  CCBM  was entitled to a credit (applied as a
prepayment  of  the  purchase  price  for  the  undivided  50% interest in RMG's
acreage), equal to 20% of RMG's net revenue interest from wells drilled with the
$5,000,000  drilling  budget,  until  the amount of that credit in favor of CCBM
equals  $1,250,000.  At  the  formation of Pinnacle, CCBM paid RMG approximately
$1.8  million to complete its purchase price of the contributed properties.  The
payment  of  $1.8  million was a reduction to the principal on the original $7.5
million  note from CCBM.  The $1.25 million that CCBM was to recover from 20% of
RMG's  revenue  interest  on  the  contributed properties was netted against the
total  purchase  price  on  the  contributed  properties  which yielded the $1.8
million  cash  payment.  CCBM is not entitled to any additional disproportionate
revenue  distributions.

     QUANECO  -  AGREEMENT.  On  January  3,  2000,  RMG purchased a 50% working
interest  and 40% net revenue interest in the Castle Rock and Kirby prospects in
the  Powder River Basin of southeast Montana consisting of approximately 185,000
net  mineral  acres  from  Quaneco,  L.L.C.  (formerly  Quantum  Energy, L.L.C.,
Cleveland,  Ohio  and Oklahoma City, Oklahoma).  The acreage includes 88,409 net
acres  of Bureau of Land Management ("BLM") land; 14,916 net acres of state land
(Montana),  and 82,775 net acres of fee land.  In fiscal 2000 and 2001, RMG paid
Quaneco  the  cash  purchase price of $5,500,000 for the acreage plus a drilling
commitment of $2,500,000.  RMG and CCBM transferred their interests in the Kirby
prospect  to  Pinnacle  in  mid-2003.

     For  information  on  the Quaneco agreement, see "Quaneco Agreement" in the
Annual  Report  (Form  10-K/A1) for the (former) fiscal year ended May 31, 2002.


                                       17
<PAGE>


DESCRIPTION  OF  PROSPECTS

     Leases of federal mineral rights are obtained from the United States Bureau
of  Land Management ("BLM") and expire from 2004 to 2009, unless RMG establishes
production  on  the  lease,  in which event the lease is held so long as coalbed
methane  or  other  gas  or oil is produced.  A royalty interest of 12.5% on the
production is paid to the BLM.  State leases expire from 2004 to 2009 in Wyoming
and  Montana, unless RMG establishes production on the lease, in which event the
lease  is  held so long as coalbed methane or other gas or oil is produced.  The
royalty  paid to the State of Wyoming is from 12.5 % to 16.67%, and 12.5% to the
State of Montana.  Annual renewal fees for non-producing Federal leases is $1.50
to  $2.00  per  acre,  and $1.00 and $2.75 for non-producing Wyoming and Montana
leases.

     An environmental group has filed a lawsuit against the BLM, RMG and others,
challenging  the  validity  of  numerous BLM leases in the Powder River Basin of
Montana.  See  Item  3,  Legal  Proceedings  ("Rocky  Mountain Gas Litigation").

     Leases  on  private  (fee)  land  for  coalbed methane and conventional gas
expire  at various times from 2004 to 2011, unless production is established, in
which  event the lease is held so long as there is production.  The landowner is
paid a royalty from production of 12.5% to 20.0% , depending on the lease terms.

     Table  3  presents total acreage (developed and undeveloped) held by RMG at
December  31,  2003, and the Hi-Pro acreage as of the filing date of this Annual
Report.

TABLE  3

<TABLE>
<CAPTION>
                                                                  Net        Net        Net
                                                      Net         Leased     Leased     Leased
                                 Gross      Net       Leased      from       from       from
                                 Leased     Leased    from        State of   State of   Private
Prospect                         Acres      Acres     BLM         Wyoming    Montana    Owners
                                -------    -------    --------    -------    -------    ------
<S>                       <C>            <C>      <C>       <C>      <C>      <C>
Castle Rock                     123,840    111,567      55,104          0     10,860    45,603
Oyster Ridge*                    20,306     20,306      17,107        639          0     2,560
Baggs North                         120        120           0        120          0         0
Hi-Pro (undeveloped)             40,120     40,120           0        112          0    40,008
                                 ------     ------      ------      -----     ------    ------
Total Undeveloped Acres         184,386    172,113      72,211        871     10,860    88,171
Hi-Pro (developed)               12,620     11,818         460        280          0    11,078
                                -------    -------      ------      -----     ------    ------
Total Acres                     197,006    183,931      72,671      1,151     10,860    99,249
                                =======    =======      ======      =====     ======    ======
</TABLE>

     *Does  not  include  29,151  acres under option from Anadarko Petroleum and
38,184  acres  under  option  from Kerr McGee.  See "Description of Properties -
Oyster  Ridge."

     RMG's  properties  and  mineral  leases of BLM, state and fee lands require
annual  cash  payments of approximately $173,100 during 2004.  CCBM is obligated
for  $59,600 of the $173,100 required to keep undeveloped coalbed methane leases
in  effect.

     CASTLE ROCK:  The Castle Rock project consists of 123,840 gross and 111,567
net  acres  located  in  the  northeastern  portion of the Powder River Basin of
Montana,  west  of  Broadus,  Montana.  Coals  present  are  in


                                       18
<PAGE>


the  Tongue  River  member  of the Fort Union formation and appear comparable to
coals  currently  being  developed  by  other operators south of the Castle Rock
acreage  near  the Montana/Wyoming border.  Currently, there are no pipelines in
this  area.

     OYSTER  RIDGE:  The Oyster Ridge project consists of two acreage positions:
(1) 49,457 gross and net acres located in southwestern Wyoming in the Ham's Fork
Coal  Field  adjacent to the Green River Basin; RMG and CCBM have a 100% working
interest  (50%  each)  in  20,765  acres  within  this  play, which is held with
Anadarko  Petroleum,  Inc. Oyster Ridge; and (2) 38,184 gross and net acres held
by  Kerr-McGee Rocky Mountain Corporation, which are at the north and south ends
of  the  Anadarko  acreage.

     The  area  is  prospective  for coalbed methane production from two primary
Cretaceous  age  coals,  the Frontier and the Adaville. The Kern River pipeline,
which  services southern California, crosses the property.  Through December 31,
2003,  $799,500  has  been  spent  on  drilling  and completion at Oyster Ridge.

     (1)  Anadarko  Petroleum, Inc. is successor to Union Pacific Land Resources
Corporation,  which  sold the acreage subject to UPLRC's back-in option to third
parties,  from  whom  RMG  acquired  the  acreage  in  December  1999.

     The  agreement with Anadarko is a drill-to-earn-acreage agreement: RMG must
drill  at least four wells each year, each on a new section (640 acres), to earn
a  lease  on  each  drilled section, and also to keep in force previously earned
leases  in the 31,711 acres area.  Wells drilled by our seller, and by RMG (with
CCBM),  have  earned  2,560 acres, which are included in the 20,306 acres leased
presently.

     Another  29,151  gross  acres in the Oyster Ridge project are subject to an
option held by Anadarko Petroleum, Inc. to participate as a 25% working interest
owner  on  all  wells  drilled  each  year.  Anadarko  has  not  yet  elected to
participate,  and  has  no working interest in the wells drilled to date on this
prospect.  If  Anadarko  elects  to  participate in the future, working interest
ownership  in  affected  wells would be 37.5% RMG, 37.5% CCBM, and 25% Anadarko.

     (2)  On  February  27, 2004, RMG signed a letter of intent to enter into an
earn-in  agreement  to  acquire  a  60%  working  interest from Kerr-McGee Rocky
Mountain  Corporation  ("KM")  in  38,184 gross and net mineral acres held by KM
under  federal  and  Wyoming  state leases. When executed, the earn-in agreement
will  be for a total of six years, with three phases: drilling commitment, pilot
program,  and  development  program.  The  earn-in  agreement  is expected to be
executed  by  March  31,  2004.  The  following  is  a  summary  of  terms.

     Drilling  Commitment.  On  or  before  September  30, 2004, RMG will drill,
complete  and  attempt to produce for at least 30 days (at its sole expense) two
coalbed  methane  wells  (one to the Frontier coal seams and one to the Adaville
Cretaceous  coal seams), to earn 60% of KM's working and net revenue interest in
the  640  acre section surrounding each well, down to the deepest depth drilled.
Drilling  and completion costs for the two wells will be a minimum of  $300,000.
RMG will receive all production revenues from each well until RMG reaches payout
(total  drilling  and  completion  costs)  from the wells, at which time KM will
begin  to  participate  for  its  40%  working  interest.  KM's  leases  will be
delivered  to  RMG  with  a  82.5%  net  revenue  interest.

     Pilot  Program.  If  RMG  determines  the  drilling  program  results to be
favorable,  in  its exclusive judgment, a pilot program for four wells (at RMG's
sole  expense)  will  be  initiated  by  September  30,  2005.

     Development  Program.  If  RMG  determines  the pilot program results to be
favorable, in its exclusive judgment, RMG will notify KM by December 31, 2005 of
its  election  to  commit  to  a  development  program.


                                       19
<PAGE>


If  this  commitment  is  made, RMG shall drill at least 10 wells per year on KM
lands  beginning  in 2006. Each well will earn for RMG a 60% working interest in
the  640  acre section surrounding the well, and each lease will be delivered to
RMG  with  a  82.5%  net revenue interest. KM may elect to participate for a 40%
working interest in any development well. If KM elects not to participate in the
first  well in the section, KM will be deemed to relinquish the 40% working (and
associated  net  revenue)  interest  in the well until RMG reaches payout. If KM
elects not to participate in the second well in any section previously earned by
RMG,  then KM shall have relinquished all of its interest in the entire section.

     RMG  will  be  the  operator  for  each  stage  of  the  KM  project.

     As  of  the  filing  date  of  this  Annual Report, CCBM has not determined
whether  to  participate with RMG in the Kerr-McGee earn-in agreement.  However,
our  net  acreage  calculations  assume  that  CCBM  will  participate.

     BAGGS  NORTH:  This  prospect  contains  120 gross and net acres located in
Carbon  County,  Wyoming.  This  State  lease is located 7 miles north of Baggs,
Wyoming.  RMG  holds  a 50% working interest in this prospect.  To date, RMG has
not  conducted  any  significant  exploration  on  the  property.

GENERAL  INFORMATION  ABOUT  COALBED  METHANE.

     Methane  is  the  primary commercial component of natural gas produced from
conventional gas wells.  Methane also exists in its natural state in coal seams.
Natural  gas  produced  from  conventional  wells  generally  contains  other
hydrocarbons  in  varying amounts which require the natural gas to be processed.
Methane  gas  produced  from  coalbeds  generally  contains  only methane and is
pipeline-quality  gas  after  simple  water  dehydration.

     Coalbed  methane  ("CBM") production is similar to conventional natural gas
production  in  terms   of  the  physical  producing  facilities.  However,  the
subsurface  mechanisms  that  allow  gas  movement  to  the  wellbore  are  very
different.  Conventional  natural  gas  wells  require  a  porous  and permeable
reservoir, hydrocarbon migration and a natural structural or stratigraphic trap.
Coalbed  methane  is  stored  in four ways: 1) as free gas within the micropores
(pores  with  a  diameter  of  less  than .0025 inch) and cleats (set of natural
fractures  in  the  coal;  2)  as  dissolved gas in water within the coal; 3) as
absorbed  gas  held  by  molecular  attraction  on surfaces of macerals (organic
constituents  that  comprise the coal mass), micropores, and cleats in the coal;
and  4)  as  absorbed  gas within the molecular structure of the coal molecules.
Coals at shallower depth with good cleat development contain significant amounts
of  free  and  dissolved  gas while the percentage of absorbed methane generally
increases  with  increasing pressure (depth) and coal rank.  Coalbed methane gas
is  released  by  pressure  changes  when  the water in the coal is removed.  In
contrast  to conventional gas wells, new coalbed methane wells initially produce
water  for  several  months.  As the formation water pressure decreases, methane
gas  is  released  from  the  structure.

     Methane  production  is a direct result of reducing the hydrostatic (water)
pressure  in  the  coal  formation.  Three  principal  stages  are  involved:

    x     Drill wells (typically eight or more in a 'pod') down to the same coal
          formation,  in  contiguous 80 acre spacing per well; test the water in
          the  formation  and  test coal samples taken from the formation. Water
          testing  determines if the geochemical environment of the coal seam is
          conducive  to  the  formation  of  CBM.
    x     Install  gathering lines to hook up and put wells on pump to "dewater"
          the  coal formation. Hydrostatic pressure must be reduced to about 50%
          of  initial pressure before enough data is obtained (water flow rates,
          CBM  gas  flows)  to  determine  how  much  CBM  the  wells  may


                                       20
<PAGE>


          produce.  This  dewatering  stage may take 6 to 18 months, and in some
          instances  24  months  (where  there is no dewatering of the coal seam
          occurring  from  wells  drilled  by  others  on  adjacent properties).
    x     Installing  (or  have a transmission company install) a compressor and
          transport  line  to  carry produced gas to a gas transmission line for
          sale  to  end users. Gas production starts gradually then continues to
          grow  in volume as hydrostatic pressure is reduced; optimal production
          won't  occur  until  hydrostatic pressure is reduced approximately 90%
          from  initial  levels.

COALBED  METHANE  WELL  PERMITTING

     Operators  drilling  for  coalbed  methane  are  subject  to many rules and
regulations  and  must  obtain  drilling, water discharge and other permits from
various  governmental  agencies  depending  on the type of mineral ownership and
location  of  the  property.  Intermittent  delays in the permitting process can
reasonably  be expected throughout the development of all RMG projects.  As with
all  governmental  permit  processes, there is no assurance that permits will be
issued  in a timely fashion or in a form consistent with the plan of operations.

     Drilling  and  production  operations  on  our Powder River Basin leases in
Wyoming and Montana are subject to environmental rules, requirements and permits
issued  by  various  federal authorities for drilling and operating on all land,
regardless  of ownership, and state and local regulatory agencies for land owned
by  the  state  or in fee by private interests.  The primary Federal agency with
related responsibilities is the Bureau of Land Management of the U.S. Department
of  the  Interior  ("BLM")  which  has  imposed  environmental  limitations  and
conditions  on  coalbed  methane  drilling,  production and related construction
activities  on federal leases in the PRB.  These conditions and requirements are
imposed  through  Records  of  Decision ("ROD") issued pursuant to Environmental
Impact  Statements ("EIS").  The BLM may also impose site-specific conditions on
development  activities, such as drilling and the construction of rights-of-way,
before  it  approves  required  applications  for  permits to drill and plans of
development.

     In  April  2003  the  BLM  issued Records of Decision finalizing two impact
statements:  The  Powder  River  Basin Oil and Gas EIS (PRB-EIS) for the Wyoming
portion  of  the basin, and the Statewide Oil and Gas EIS and Proposed Amendment
for  the  Powder  River  and  Billings  Resource  Management  Plans  in Montana.
Together, the impact statements authorize the development of some 77,000 coalbed
methane  gas  wells in the Powder River Basin, most of which would be drilled on
the  Wyoming  side  of  the  basin.

     With  the  EIS  completed,  the  BLM  will  be able to consider drilling or
development  proposals  in  the  geographic  areas  studied, however, before any
permits  are approved, the BLM will conduct an additional round of environmental
review  to  identify  site-specific  environmental  impacts  and  appropriate
mitigation  measures.  Three  lawsuits have been filed challenging the Record of
Decisions,  however,  no  stays  have  been issued. (See I.3. Legal Proceedings,
Rocky  Mountain  Gas,  Inc.)

     The  state-based  environmental  agencies primarily concern themselves with
the  issuance  of  permits  related  to  drilling,  land,  air quality and water
discharge.  The primary state-based agencies for which coalbed methane operators
are  subject  to  include:

    x     Wyoming  Department  of  Environmental  Quality  ("WDEQ")
    x     Wyoming  Oil  and  Gas  Conservation  Commission  ("WOGCC")
    x     Montana  Department  of  Environmental  Quality  ("MDEQ")
    x     Montana  Board  of  Oil  and  Gas  Conservation  ("MBOGC")


                                       21
<PAGE>


     While  the  BLM is primarily responsible for issuing broadly based EISs for
each  state,  its  jurisdiction  over related matters and the actual issuance of
drilling permits is primarily reserved for federal leases.  Permits for drilling
on  state  or  fee  owned  land  are  issued  by  the  WOGCC  and  MBOGC.

     In  contrast  to  Wyoming,  Montana  authorities  have  been  very  slow in
undertaking  CBM  environmental studies and granting permits to drill wells.  In
fact,  to  date,  only  the  Redstone (Fidelity) project is producing CBM gas in
Montana.  With  the  exception  of a relatively small number of drilling permits
available  from earlier issuance (including those held by RMG which have allowed
some  drilling  on  the  Castle Rock project), a drilling moratorium had been in
effect  during  the  last  three  years,  prior  to  the  approval  of  the  two
environmental  impact  statements.

     The  DEQs  are  primarily  responsible  for  issuing  air quality and water
discharge  permits, among other things.  Water disposal has been and is expected
to  continue  to  be  a  significant issue, particularly with respect to coalbed
methane  gas production, which typically entails substantial water production at
least  during  the  dewatering  phase  of completion of a new well.  The primary
issue  of  concern  is  the  salinity  content  in  the produced water, which is
measured  by  the  sodium  absorption  ratio  ("SAR"),  which,  depending upon a
location,  can  range  from  slightly  less  than  that  in  surface  water to a
substantially greater amount.  Due to the discrepancies of the SAR content found
in  water  from  coalbed  methane  wells,  the disposal of this water is tightly
regulated.  If  the  SAR  content  is low, the water can be used for irrigation,
livestock  drinking  water  or  even  as  a water supply for cities.  If the SAR
content  is  higher,  the water quality does not merit use for drinking water or
irrigation and, under these measures, the DEQ has outlined various other methods
of  water  disposal.  Man-made  ponds  may also be built right beside the wells,
enabling  the  wells  to  drain  their  water  into  the  ponds  (called surface
discharge).  Additionally, there might be drainages which the produced water can
flow into.  Finally, the water might be reinjected through wells into the ground
below  levels from which the water was produced.  Thus far, the vast majority of
associated water produced has been discharged on the surface, primarily captured
in  reservoirs  and  ponds  and  allowed  to  evaporate.

     Overall,  RMG  has  not experienced any difficulty in obtaining air quality
and  water  discharge  permits from the WDEQ, and those permits are in place for
the  Hi-Pro  properties.  RMG  has  not has applied for such permits in Montana.

     The  following  summarizes  permits  now  in  place.

Table  4

                                                   Expiration
     Prospect          Remaining  Permits          or  Renewal  Date
     --------          ------------------          -----------------
     Castle  Rock               5                  May - July 2004
     Hi-Pro                     9                  August - September 2004
     Oyster  Ridge              4                  September  2004
                       ------------------
       Total                   18

     Drilling permits issued by the State of Wyoming allow one year for drilling
completion;  permits  issued  by  the  State  of  Montana  allow  six  months.

     Once  drilled,  all  wells  in  Wyoming are subject to a National Pollution
Discharge  Elimination  System  ("NPDES")  permit  relating to water testing and
discharge.  All  wells in the Castle Rock prospect remain subject to the Montana
Board  of  Oil  and Gas Commission approval.  Upon completion of drilling, wells
are  subject  to  monthly  reporting  regarding  status  and  production  to the
respective  state  agencies  in  which  they  are  located.


                                       22
<PAGE>


     Due  to the low pressure characteristics of the coalbeds, the production of
coalbed  methane  is  dependent  on  the installation of multi-stage compression
facilities.  Gas  is  gathered  from  the  wells, and transported to a low level
compression  station, then on to a high level compression station and finally to
the  transmission  pipeline.  The  water  is  commonly collected through another
pipeline  from  each  of  the  wells  and  pumped  into  a  surface  reservoir.

     Companies  involved  in  coalbed methane production generally outsource gas
gathering, compression and transmission. RMG and industry partners have and will
likely continue to outsource their compression and gathering to third parties at
fixed  charges  per  mcf  transported.

GAS  MARKETS

     Gas production from the Powder River Basin is significant.  Since this area
is sparsely populated, most of the gas must be exported to distant markets.  The
existing Wyoming pipeline infrastructure is already substantial and continues to
expand  with gathering systems and intrastate lines, yet is ultimately dependent
on large interstate pipelines.  With the exception of a portion of the gathering
systems,  this  pipeline  system  is typically owned and operated by independent
mid-stream  energy  companies,  rather than oil and gas operators. The pipelines
generally  will not be financed and constructed until appropriate amounts of gas
have  been proven and committed for transport on the new lines.  While the total
current take away capacity from the PRB is approximately 1.25 billion cubic feet
per  day (Bcfd), excess capacity over current production rates does not exist in
all  locations  and  not all producers have a ready market for the sale of their
gas  at  all  times.  Some  major  producers  in  the region reserve portions of
pipeline  capacity  beyond  their  current  requirements, resulting in less than
stated maximum capacity being available for other producers.  In addition, total
stated  capacity  is  unavailable  at  times  as  pipelines  are  shut  down for
maintenance  or  construction  activities.

     Based  on  the  existing  pipeline systems and the gas sales markets in its
area  of  operations  in  Wyoming,  RMG  expects that, at least for the next few
years,  the  markets  in which it sells its gas, and the spot prices to which it
will  be  subject,  will  be  dependent  upon  three  major  sales  points:

    x     The  Colorado  Interstate  Gas  ("CIG")  station  near  Cheyenne  in
          southeastern  Wyoming,  which  primarily  feeds  regional  markets  or
          markets  in  the  Midwest.

    x     The  Ventura market ("Ventura") located in Ventura, Iowa, which prices
          gas  on  the  Northern  Border  pipeline  where  it interconnects with
          Northern  Natural  Gas  and  feeds  markets in the Northern Plains and
          Midwest.

    x     The  Opal  market  ("Opal") in southwestern Wyoming, which delivers to
          the  Kern  River  pipeline  for  delivery to Utah, Nevada, Arizona and
          California.

          PIPELINES  THAT  SERVE  THE  CIG  MARKET

     Two  large  diameter  intrastate  pipelines, the Fort Union and the Thunder
Creek,  were  constructed  in  the  Basin  in  1999,  and  gathering  system
infrastructure  has  continued to grow significantly. These two major intrastate
pipelines  currently  provide almost 1.1 Bcfd capacity, flowing south out of the
Basin  to  the  CIG  Hub  in  Southeast  Wyoming.

    x     Fort  Union.  The  Fort Union Gas Gathering pipeline consists of a 106
          ------------
          mile,  24 inch,  434  Mmcfd  capacity  line  completed  in August 1999
          and a 20" pipeline  with  a  capacity  of  200  Mmcfd


                                       23
<PAGE>


          completed in September  2001.  It is believed  that capacity  could be
          increased by another  200  Mmcfd  by  adding additional compression to
          this  line.

    x     Thunder.  Creek. Thunder Creek Gas Services pipeline is a 126-mile, 24
          --------
          inch pipeline which commenced  operations on September 1, 1999  with a
          capacity  of  450  Mmcfd.

     The  Hi-Pro  production is delivered to the Thunder Creek pipeline where it
is  carried  south  and  delivered  to  the  CIG  market.

     El  Paso Corporation's subsidiary Cheyenne Plains Gas Pipeline Co. received
approval  from  the  Federal  Energy  Regulatory  Commission  in  March 2004 for
construction  of  a  new 380 mile pipeline from Cheyenne, Wyoming to Greensburg,
Kansas,  with a capacity of 560 Mmcf per day.  Cheyenne Plains has announced its
intent  to  apply  to  the FERC for permission to enlarge the line to handle 760
Mmcf  per  day.   This line, with the enlarged capacity, is expected by Cheyenne
Plains  to be in-service in January 2005, and may help narrow the negative price
differential  for  CIG  prices  compared  to  national  prices.

     PIPELINES  THAT  SERVE  THE  VENTURA  MARKET

     There  are  currently two significant pipelines capable of transporting gas
out  of  the  Basin to the north, the Bitter Creek pipeline, which connects with
the  Northern  Border interstate pipeline and the Grasslands pipeline.  However,
one additional line that is well along in its planning stage, would also deliver
gas  to  the  Northern  Border  pipeline.  Descriptions  are  as  follows:

    x     Bitter Creek.  The Bitter Creek pipeline  is  owned by Williston Basin
          -------------
          Interstate  Pipeline  Company  ("WBI"), a  subsidiary of MDU Resources
          Group, Inc. It  was  completed  in 2001 with  initial capacity  of 150
          Mmcfd.

    x      Grasslands.  In response to  the need  for expandable  access  to the
           -----------
           Ventura market,  the Grasslands pipeline, also owned byWBI, went into
           service in  November 2003.  It is a 245  mile, 16  inch line  with an
           initial capacity of 80 Mmcfd  and  expandable  to  200  Mmcfd.

     THE  OPAL  MARKET

     The  Opal  market,  in southwestern Wyoming, is a major pipeline connection
point,  with  several  intrastate  and  interstate lines connecting to the major
interstate  Kern  River  line  (with  a recently enlarged capacity of 1.73 Bcfd,
delivering  to  markets  in Utah, Nevada, Arizona and California.  If the Oyster
Ridge  property  is  put  into  production,  gas could be sold into this market.

GAS  PRICES

     Historically, spot gas prices received by producers at the Ventura, CIG and
Opal  markets have generally been at discounts to the NYMEX front month contract
and Henry Hub spot cash prices, although with lesser discounts during the winter
months.  Prices  at  CIG  can trade at a further discount to the Ventura prices,
and  again  with  an  even higher discount during the second and third quarters,
because  CIG  is  partially  based  on  local  demand which can drop outside the
heating  season,  while  Ventura  serves  larger  national markets and is highly
correlated  to  Chicago  market  prices.

     The  negative  price  differential  in  the prices realized by Powder River
Basin  producers  in  2003,  as  compared to prices realized on the national gas
market,  ranged from 10% to 45% (higher outside the heating season). This larger
than  normal  negative spread resulted from a combination of (i) rapidly growing
CBM


                                       24
<PAGE>


and  conventional gas production volumes in this region, (ii) the curtailment of
both  of  the  primary  lines taking gas south out of the PRB due to maintenance
and/or  construction  (Fort  Union  and  Thunder  Creek), (iii) large amounts of
current pipeline capacity controlled by the larger producers, and (iv) restraint
in  new  pipeline  construction  from  both  regulatory  delays and hesitancy to
construct  new  lines  by  the  pipeline  companies.

     The  negative  price  differential  in  the  fourth  quarter 2003 and first
quarter 2004 narrowed in comparison  to the fourth quarter 2002.  However, there
is  no  guarantee  that  increased  capacity  will  eliminate the negative price
differential  or  even  significantly  reduce  it.

INACTIVE  MINING  PROPERTIES  -  URANIUM

     GENERAL.  We  have  interests  in  several  uranium-bearing  properties  in
Wyoming  and  Utah  and  in  a uranium processing mill in southeastern Utah (the
"Shootaring  Mill"  in Garfield County).  All the uranium-bearing properties are
in  areas  which produced significant amounts of uranium in the 1970s and 1980s.
At  some  future  date,  we  could sell, develop and/or operate these properties
(directly  or  through  a  subsidiary company or a joint venture) with companies
having  the  necessary  capital to mine and mill the uranium bearing material to
produce  uranium concentrates ("U3O8") for sale to public utilities that operate
nuclear  powered electricity generating plants.  Currently there is no operating
uranium  mill  in Wyoming and it would take a substantial increase in the market
price  of  uranium  concentrate  over a period of time before a company with the
financial  wherewithal  would build a mill and place the deposits in production.
Therefore,  until  uranium  oxide  prices  improve  significantly,  the  uranium
properties  will  remain  shut  down.

     At  the  dates of the consolidated balance sheets in this Report, there are
no  values  carried  on  the  balance  sheets  for  uranium  properties.

     SHEEP  MOUNTAIN  -  WYOMING

     Unpatented  lode  mining claims, underground and open pit uranium mines and
mining equipment in the Crooks Gap area are located on Sheep Mountain in Fremont
County,  Wyoming.  From December 21, 1988 to June 1, 1998, these properties were
held  by Sheep Mountain Partners ("SMP").  On June 1, 1998, the Company received
back  from  SMP  all  of the Sheep Mountain mineral properties and equipment, in
partial  settlement  of  certain  disputes  with  Nukem,  Inc. ("Nukem") and its
subsidiary Cycle Resource Investment Corp. ("CRIC").  The judgment against Nukem
impressing  the  CIS  uranium  supply contracts in a constructive trust with SMP
remains  unresolved.  See  "Legal  Proceedings."

     We  have  recorded  reclamation  liabilities  for  the SMP properties.  All
historical  costs  in  the  SMP  properties were offset against a monetary award
which  was  received  from  Nukem  during  fiscal  1999.

     UTAH

     Plateau  Resources Limited ("Plateau") is a wholly-owned subsidiary of USE.
In  2003,  reclamation work on uranium properties (the Tony M, Velvet, and Woods
Complex)  in San Juan County, Utah was completed.  Although Crested does not own
any  of  Plateau's  common stock, it participates in all Plateau cash flows on a
50-50  basis  with  USE.


                                       25
<PAGE>


     PLATEAU'S  SHOOTARING  CANYON  MILL  AND  PROPERTIES

     In  August 1993, USE purchased from Consumers Power Company ("CPC"), all of
the  outstanding  stock  of  Plateau  which  owns  the Shootaring Canyon uranium
processing  mill  and  support  facilities in southeastern Utah (the "Shootaring
Mill")  for  a  nominal  cash consideration.  The Shootaring Mill holds a source
materials  license  from  the  NRC.  In  the  purchase of the stock from CPC, we
agreed  to various obligations, as disclosed in USE's 1998 Form 10-K at pages 15
and  16.

     The  Shootaring  Mill is located in southeastern Utah and occupies 19 acres
of  a  265  acre plant site.  The mill was designed to process 750 tpd, but only
operated  on  a  trial  basis  for  two  months in mid-summer of 1982.  In 1984,
Plateau  placed the mill on standby because CPC had canceled the construction of
an  additional  nuclear  energy  plant.

     For  information  on  the  Shootaring mill facility and related real estate
property  at  Ticaboo,  please  see  "Plateau's  Shootaring  Canyon  Mill  and
Properties" in the annual report (Form 10-K/A1) for the former fiscal year ended
May  31,  2002.

     THE  GREEN  MOUNTAIN  MINING  VENTURE  ("GMMV")  PROJECT

     For  information on the GMMV agreement, see "Green Mountain Mining Venture"
in  the  annual report (Form 10-K/A1) for the (former) fiscal year ended May 31,
2002.

     SHEEP  MOUNTAIN  PARTNERS  ("SMP")

     SMP PARTNERSHIP.  In February 1988, Crested and USE acquired uranium mines,
mining equipment and mineralized properties (Sheep Mountain Mines) at Crooks Gap
in  south-central  Fremont  County,  Wyoming,  from Western Nuclear, Inc.  These
Crooks  Gap  mining  properties  are  adjacent  to  the  Green  Mountain uranium
properties.  USECC  mined  and  milled  uranium  ore from one of the underground
Sheep  Mines  during  fiscal  1988  and  1989.  In  December 1988, USECC sold 50
percent  of  the  interests  in  the Crooks Gap properties to Nukem's subsidiary
Cycle Resource Investment Corporation ("CRIC") for cash.  The parties thereafter
contributed  the  properties  to  and formed Sheep Mountain Partners ("SMP"), in
which  USECC  received  an  undivided  50  percent  interest.  SMP is a Colorado
general  partnership  formed on December 21, 1988, between USECC and Nukem, Inc.
then  of  Stamford,  CT  ("Nukem")  through  its  wholly-owned  subsidiary CRIC.

     SMP was directed by a management committee, with three members appointed by
USECC  and  three  members  appointed  by Nukem/CRIC.  The committee has not met
since  1991  as a result of the SMP arbitration/litigation.  During fiscal 1991,
disputes  arose between the SMP partners which resulted in litigation.  See Item
3,  Legal  Proceedings.

     PROPERTIES.  Crested, USE and/or USECC own 98 unpatented lode mining claims
and  a  644  acre  Wyoming  State  Mineral  Lease  in  the  Crooks  Gap  area.

     An  ion exchange plant located on the properties (to remove natural soluble
uranium  from  mine  water)  was  reclaimed  and  the  plant  disposed of at the
Sweetwater  Mill  impoundment  facility  in  fiscal  2002.

     Permits  to  operate  existing  mines  (now  shut  down)  on the Crooks Gap
properties  had  been  issued  by  the State of Wyoming, but amendments would be
needed to re-open them. A NPDES water discharge permit under the Clean Water Act
has  been obtained; monitoring and treatment of water removed from the mines and
discharged  in  nearby Crooks Creek is generally required. However, for the last
three  years,  USECC  has  not


                                       26
<PAGE>


discharged  wastewater  into  Crooks  Creek,  and  the  water  instead  is being
discharged into the USECC McIntosh Pit at the Sweetwater mill owned by Kennecott
(the  Sweetwater  mill  had  been  part  of  the Green Mountain Mining venture).

INACTIVE  MINING  PROPERTIES  -  GOLD

     SUTTER  GOLD  MINING  COMPANY.  In fiscal 1991, USE acquired an interest in
Sutter  properties  located in the Mother Lode Mining District of Amador County,
California.  The  entire  Lincoln  Project  (which  is  the  name we use for the
properties)  is  owned  by  Sutter  Gold  Mining  Company, a Wyoming corporation
("SGMC"), and an affiliate of Crested.  Crested accounts for its 1.5% investment
in  SGMC  using  the  equity  method.

     This property has never been in production.  Persistent low prices for gold
made  financing  difficult,  and  in fiscal 1999 resulted in a substantial write
down  of  the  SGMC  properties.

     Due  to  the depressed gold prices in the past, litigation (since resolved)
and  lack of funding, SGMC has deferred the start of construction of a gold mill
complex  and  extension  of  existing  underground workings.  A tourist visitors
center  has  been  set up (see below) and leased to a third party for $1,500 per
month  plus  a 4% gross royalty on revenues.  There is one caretaker employee at
the  Sutter  operation.  The  conditional  use  permit  is being kept current as
necessary  to  allow  for  possible  mining  activities on the properties in the
future.

     In  1998  and  1999,  SGMC took impairments (write-downs) in the amounts of
$1,500,000  and  $10,718,800,  respectively,  of  the carrying value of the gold
properties.  These  two  impairments  wrote off almost 85% of SGMC investment in
these  properties.  As  a  result  of  low  market  prices for gold at the time,
management  of  SGMC  determined  that  they  could  not produce gold from these
properties  at  a  profit. The impairments taken in 1998 and 1999 resulted in no
value  for  mine exploration, and the remaining assets relating to this property
include  raw  land  which is no longer needed for mining activity, and buildings
and  equipment.  A  significant  portion  of  the  raw  land  has  been  sold.

     Management  of SGMC has not obtained a final feasibility study to support a
determination  that  the Sutter property contains proven or probable reserves of
gold.

     In  late 2003, SGMC signed a letter of intent for an acquisition of SGMC by
Globemin  Resources  Inc.,  a  British Columbia corporation listed on the TSX-V.
Completion of the acquisition is subject to negotiation and execution of a share
exchange  agreement, approval by the TSX-V, Canadian regulatory authorities, and
the  boards  of  directors and shareholders, if necessary, of SGMC and Globemin.
If  the acquisition is consummated, a majority of the stock of Globemin would be
owned  by  the  (former)  SGMC  shareholders.  Globemin thereafter would seek to
raise  financing in Canada to begin mining the Lincoln Project and build a mill.

     PROPERTIES.  SGMC  holds  approximately  435  acres  of surface and mineral
rights:  (87  acres  of  surface  rights  (owned),  73  acres  of surface rights
(leased),  146 acres of mineral rights (leased), and 289 acres of mineral rights
(owned),  all  on  patented  mining  claims  near  Sutter  Creek, Amador County,
California.  The  properties  are located in the western Sierra Nevada Mountains
at  from  1,000  to  1,500  feet  in elevation; year round climate is temperate.
Access  is  by  California  State Highway 16 from Sacramento to California State
Highway  49,  then  by paved county road approximately .4 mile outside of Sutter
Creek.

     Surface  and  mineral  rights  holding  costs,  and property taxes, will be
approximately  $130,000  and  $9,900  for  2004.


                                       27
<PAGE>


     The  leases  are  for varying terms and require rental fees, annual royalty
payments  and  payment  of  real  property  taxes  and  insurance.

     PERMITS.  The  Amador  County Board of Supervisors has issued a Conditional
Use  Permit  ("CUP")  allowing  mining  of  the  SGMC and milling of production,
subject  to  conditions  relating  to  land use, environmental and public safety
issues,  road  construction and improvement, and site reclamation.  Applications
will  be made in the second quarter of 2004 to California regulatory authorities
for a waste water discharge permit to allow the Company to utilize mill tails as
mine  backfill  and  to  store  tails  in  a  surface  fill  unit.

     VISITORS  CENTER.  In  fiscal  2000,  SGMC spent approximately $298,000 for
surface  infrastructure  related  to improving access to the mine site, and to a
lesser  extent  tourist  related  improvements.  The  visitors  center  is being
operated  by  a  third party.  The visitors center is an exhibit of the pictures
and  memorabilia  from  mining  operations  on  other  properties  in the Sutter
district  in  the  nineteenth  century,  and  a  guided  tour of the underground
workings  at  the  Lincoln  Project.  Revenues  from this tourist operation were
$48,800  for  2003,
$49,200  for  the  seven months ended December 31, 2002, and $41,200 in (former)
fiscal  year  2002.  These  revenues  offset a majority of costs for holding the
Sutter  properties.

MOLYBDENUM

     As  a  holder  of  royalty,  reversionary  and  certain  other interests in
properties  located  at Mt. Emmons near Crested Butte, Colorado, Crested and USE
are entitled to receive annual advance royalties of 50,000 pounds of molybdenum,
or  cash  equivalent.  AMAX  Inc. (which was acquired by Cyprus Minerals Company
and  was  renamed  Cyprus  Amax  Minerals  Company  in November 1993, then later
acquired  later  by  Phelps Dodge) delineated a deposit of molybdenum containing
approximately  146,000,000  tons  of  mineralization  averaging 0.43% molybdenum
disulfide  on  the  properties  of  USE  and  Crested.

     Advance  royalties are required to be paid in quarterly installments until:
(i)  commencement  of  production;  (ii)  failure  to  obtain  certain licenses,
permits,  etc.,  that are required for production; or (iii) AMAX's return of the
properties  to  Crested  and  USE.  The  advance  royalty  payments  reduce  the
operating  royalties  (6% of gross production proceeds) which would otherwise be
due out of production.  There is no obligation to repay the advance royalties if
the property is not placed in production.  Crested recognized $60,300 of advance
royalty  revenues  in (former) fiscal 2001.  Phelps Dodge ceased making payments
in  July  2001.

     Crested  and  USE also are entitled to receive $2,000,000 if the Mt. Emmons
properties  are  put  into  production and, in the event of a sale of Mt. Emmons
Mining Company (which owns the properties) or of its interest in the properties,
Crested  and  USE  are  entitled to receive 15% of the first $25,000,000 of sale
proceeds.

     AMAX  Inc.  and  its  successor companies have sought to put the Mt. Emmons
molybdenum  property  into  production for 20 years.  Due to local opposition to
mining (the property is close to the Crested Butte, Colorado recreational resort
area)  and AMAX's successors' failure to diligently pursue obtaining the permits
needed  to  start  mining,  we know of no plans at this time to put the property
into  production.

     Crested  and  USE  are  in  litigation  with  Phelps  Dodge  concerning the
properties  and  related  agreements,  see  "Item  3  -  Legal  Proceedings."


                                       28
<PAGE>


OIL  AND  GAS  AND  OTHER  PROPERTIES

     FORT  PECK  LUSTRE  FIELD  (MONTANA).  We  operate  a  small oil production
facility  (three  wells)  at  the  Lustre  Oil  Field  on  the  Ft.  Peck Indian
Reservation  in  northeastern  Montana.  We receive a fee based on oil produced.
This fee and other assets of the Company collateralize a $750,000 line of credit
from  a  bank.

     WYOMING.  The  Company  and  USE  own a 14-acre tract in Riverton, Wyoming,
with  a  two-story  30,400  square  foot  office building (including underground
parking).  The  first  floor is rented to nonaffiliates and government agencies;
the  second floor is occupied by the Company and USE.  The property is mortgaged
to the WDEQ as security for future reclamation work on the Sheep Mountain Crooks
Gap  uranium  properties.

     The Company and USE also own a fixed base aircraft facility at the Riverton
Regional  Airport,  including  a  10,000  square  foot aircraft hangar and 7,000
square  feet  of  associated  offices  and facilities.  This facility is on land
leased  from  the  City of Riverton for a term ending December 16, 2005, with an
option  to  renew  on  mutually  agreeable  terms  for five years.  The aircraft
fueling  operation  to  the  public  was  shut  down  late  in  fiscal  2002.

     The  Company  and USE own three mountain sites covering 16 acres in Fremont
County,  Wyoming.

     COLORADO.  USECC  owns  182 acres of undeveloped land in and near Gunnison,
Colorado.

     UTAH.    On August 14, 2003, USE's wholy-owned subsidiary Plateau Resources
Limited  (and  Plateau's  wholly-owned subsidiary Canyon Homesteads, Inc.)  sold
all  of the outstanding stock of Canyon Homesteads to The Cactus Group, LLC, for
$3,470,000:  $349,250  cash  and  $3,120,750  with  The Cactus Group's five year
promissory  note.  The  note  is secured with all the assets of The Cactus Group
and  Canyon  (and  is  personally guaranteed by the six principals of The Cactus
Group).  The  note  is  payable  monthly  (with  annual interest at 7.5%) with a
$2,940,581  balloon  payment  due  in  August  2008.

     The  sold properties are in Ticaboo, Utah, near Lake Powell, and included a
motel,  restaurant  and lounge, convenience store, recreational boat storage and
service  facility,  and  improved  residential  and  mobile  home lots.  Crested
receives credit for 50% of all cash received as a result of the sale of Ticaboo.

                            RESEARCH AND DEVELOPMENT

     No  research and development expenditures have been incurred, either on the
Company's account or sponsored by customers, during the past three fiscal years.

                                  ENVIRONMENTAL

     GENERAL.  Operations  are  subject to various federal, state and local laws
and  regulations  regarding  the  discharge of materials into the environment or
otherwise relating to the protection of the environment, including the Clean Air
Act,  the  Clean Water Act, the Resource Conservation and Recovery Act ("RCRA"),
and  the  Comprehensive  Environmental  Response  Compensation  Liability  Act
("CERCLA").  With  respect  to mining operations conducted in Wyoming, Wyoming's
mine  permitting  statutes,  Abandoned  Mine  Reclamation  Act  and  industrial
development  and  siting  laws and regulations also impact us.  Similar laws and
regulations  in  California affect SGMC operations and Utah laws and regulations
effect  Plateau's  operations.

     Management  believes  the  Company  complies  in all material respects with
existing  environmental  regulations.


                                       29
<PAGE>


     As  of  December  31,  2003,  we  have estimated reclamation obligations of
$1,053,300.  We  anticipate  paying  for  those reclamation efforts over several
years.  For  further  information  on  the  approximate  reclamation  costs
(decommissioning, decontamination and other reclamation efforts for which we are
primarily  responsible  or  potentially  responsible),  see  note  J  to  the
consolidated  financial  statements  included  with  this  report.

     OTHER  ENVIRONMENTAL COSTS.  Actual costs for compliance with environmental
laws  may  vary  considerably  from  estimates,  depending  upon such factors as
changes  in environmental laws and regulation (e.g., the new Clean Air Act), and
conditions  encountered  in  minerals  exploration  and  mining.  USE  does  not
anticipate  that  expenditures  to  comply with laws regulating the discharge of
materials  into  the environment, or which are otherwise designed to protect the
environment,  will  have  any  substantial  adverse  impact  on  the competitive
position  of  the  Company.

                                    EMPLOYEES

     As  of  the  filing  date  of  this  Annual  Report,  USE  had 34 full-time
employees,  including  11  employees  working  only  for  RMG.  Crested  uses
approximately  50  percent of the time of USE employees, and reimburses USE on a
cost  reimbursement  basis.

                              MINING CLAIM HOLDINGS

     TITLE.  Nearly all the uranium mining properties held by the Company are on
federal  unpatented  claims.  Unpatented  claims are located upon federal public
land  pursuant to procedure established by the General Mining Law.  Requirements
for  the  location  of a valid mining claim on public land depend on the type of
claim  being  staked,  but  generally  include  discovery  of valuable minerals,
erecting a discovery monument and posting thereon a location notice, marking the
boundaries  of  the  claim  with monuments, and filing a certificate of location
with the county in which the claim is located and with the BLM.  If the statutes
and  regulations  for  the  location  of  a  mining claim are complied with, the
locator obtains a valid possessory right to the contained minerals.  To preserve
an  otherwise valid claim, a claimant must also pay certain rental fees annually
to the federal government (currently $100 per claim) and make certain additional
filings  with  the  county  and  the  BLM.  Failure to pay such fees or make the
required  filings  may render the mining claim void or voidable.  Because mining
claims  are  self-initiated  and  self-maintained,  they  possess  some  unique
vulnerabilities  not  associated  with  other types of property interests. It is
impossible  to  ascertain  the  validity of unpatented mining claims solely from
public real estate records and it can be difficult or impossible to confirm that
all  of the requisite steps have been followed for location and maintenance of a
claim.  If  the  validity  of  an  unpatented  mining claim is challenged by the
government,  the  claimant  has  the  burden  of  proving  the  present economic
feasibility  of  mining  minerals located thereon.  Thus, it is conceivable that
during times of falling metal prices, claims which were valid when located could
become  invalid  if  challenged.

     PROPOSED  FEDERAL  LEGISLATION.  The  U.S.  Congress  has,  in  legislative
sessions  in  recent  years,  actively  considered  several  proposals for major
revision  of  the  General  Mining  Law, which governs mining claims and related
activities  on federal public lands.  If any of the recent proposals become law,
it  could result in the imposition of a royalty upon production of minerals from
federal  lands  and  new  requirements  for  mined  land  reclamation  and other
environmental control measures.  It remains unclear whether the current Congress
will  pass such legislation and, if passed, the extent such new legislation will
affect existing mining claims and operations.  The effect of any revision of the
General  Mining  Law  on operations cannot be determined conclusively until such
revision  is  enacted;  however,  such legislation could materially increase the
carrying  costs  of  mineral  properties which are located on federal unpatented
mining  claims, and could increase both the capital and operating costs for such
projects  and  impair  the  ability  to  hold  or  develop  such  properties.


                                       30
<PAGE>


ITEM  3.  LEGAL  PROCEEDINGS

     Material  pending  proceedings  are  summarized  below.  Certain  of  the
Company's  affiliates  are involved in ordinary routine litigation incidental to
their  business.  Other  proceedings  which  were  pending during the year ended
December  31,  2003  have  been  settled  or  otherwise  finally  resolved.

SHEEP  MOUNTAIN  PARTNERS  ARBITRATION/LITIGATION

     In  1991,  disputes  arose between Crested and USE d/b/a/ USECC, and Nukem,
Inc. and its subsidiary Cycle Resource Investment Corp. ("CRIC"), concerning the
formation  and  operation  of  their equally owned Sheep Mountain Partners (SMP)
partnership.  Arbitration proceedings were initiated by CRIC in June 1991 and in
July  1991,  USECC  filed  a  lawsuit against Nukem, CRIC and others in the U.S.
District  Court  of Colorado in Civil No. 91B1153.  The Federal Court stayed the
arbitration  proceedings and discovery proceeded.   In February 1994, all of the
parties  agreed  to  consensual and binding arbitration of all of their disputes
over  SMP  before  an  arbitration  panel  (the  "Panel").

     After  73  hearing  days, the Panel entered an Order and Award on April 18,
1996  and  clarified  the  Order  on July 3, 1996, finding generally in favor of
Crested  and  USE on certain of their claims and imposed a constructive trust in
favor  of  Sheep  Mountain  Partners  on uranium contracts Nukem entered into to
purchase  uranium  from  CIS  republics.  The  Panel also awarded SMP damages of
$31,355,070 against Nukem.  USECC filed a petition for confirmation of the Order
and  on  June  27, 1997, the U.S. District Court confirmed the Panel's Orders in
its  Second  Amended  Judgment.

          Thereafter, Nukem/CRIC appealed the Judgment to the 10th Circuit Court
Of Appeals ("CCA").  On October  22, 1998,  the 10th  CCA issued  an  Order  and
Judgment affirming  the  U.S.  District  Court's Second Amended Judgment without
modification.  The ruling affirmed (i) the imposition of a constructive trust in
favor  of  SMP  on  Nukem's rights to purchase CIS uranium, the uranium acquired
pursuant  to  those rights, and the profits therefrom; and (ii) the damage award
in  favor  of  SMP  against  Nukem.  The  10th  CCA held that the Panel's Awards
"clearly  retains  both  a  constructive  trust  and  a  damage  award," and the
                                                 ---
Arbitration Awards and the Second Amended Judgment were "clear and unambiguous."

     On February 8, 1999, the U.S. District Court ordered Nukem to pay USECC the
balance  of the damage award. Nukem did so, but then moved for a satisfaction of
judgment without accounting for the monies earned in the Constructive Trust. The
District  Court  denied  Nukem's motion and Nukem filed its second appeal to the
10th  CCA.  On  October  16,  2000, the 10th CCA again affirmed the order of the
District  Court. The 10th CCA held that Nukem had not "provided an accounting of
the  partnership  assets,"  finding that "the district court order presented for
our  review  does not decide which CIS contracts are covered by the constructive
trust."

     On  November  3, 2000, USECC filed a motion for a further accounting of the
Constructive Trust. On February 15, 2001, the District Court entered an Order of
Reference  appointing  a  Special  Master  to  "conduct  an  accounting"  of the
Constructive Trust. The accounting was conducted and on May 1, 2003, the Special
Master  filed  his Report with the District Court. Both parties filed objections
to  the  Report. On July 30, 2003, the U.S. District Court adopted the Report in
part  and  rejected it in part. Judgment was then entered by the Court on August
1,  2003  in  favor  of  USECC  and  against Nukem in the amount of $20,044,183.

     On  August  15,  2003,  Nukem  filed a "Motion to Remand to the Arbitration
Panel  or  in the Alternative, to Alter, Amend and/or Correct the Court's August
1,  2003  Judgment  and  July  30, 2003 Order," and a "Motion to Correct Certain
Findings  or Statements in the Court's Order of July 30, 2003." On the same day,


                                       31
<PAGE>


USECC  filed  a  motion under Fed.R.Civ.P. 52(b) and 59(e) to alter or amend the
July  30,  2003 Order and the August 1, 2003 Judgment. The District Court denied
the  parties' motions on September 10 and 11, 2003, respectively. Nukem's appeal
and  USECC's  cross-appeal  followed. Nukem's opening brief was filed on January
16,  2004  and  on  February  24,  2004,  USECC  filed  an  opening brief in its
cross-appeal  and  an answer to Nukem's brief. Nukem has until March 29, 2004 or
any extension thereof to file an answer to USECC's opening brief. USECC may then
file  a reply brief 14 days after service of Nukem's answer. Management believes
that  the ultimate outcome of this matter will not have an adverse effect on the
Company's  financial  condition  or  result  of  operations.

CONTOUR  DEVELOPMENT  LITIGATION

     On  July  28,  1998, USE and Crested  filed a lawsuit in the U. S. District
Court  of  Colorado  in  Case No. 98WM1630, against Contour Development Company,
L.L.C.  and  entities  and  persons associated with Contour Development Company,
L.L.C.  (together,  "Contour") seeking compensatory and consequential damages of
more  than $1.3 million from the defendants for dealings in real estate owned by
USE  and  Crested  in  Gunnison,  Colorado.  The  Contour  defendants asserted a
counterclaim asking for payment of attorneys fee and costs.  The parties settled
the  litigation in 2004.  In the settlement, USE and Crested received $25,000 in
cash; two lots in the City of Gunnison, Colorado (one of which has been sold for
a  net of $65,326 and the other lot is under contract to sell for $180,000), and
an  additional  five  development  lots  covering  175  acres north of Gunnison,
Colorado.

PHELPS  DODGE  LITIGATION

     Crested  and USE, d/b/a USECC, were served with a lawsuit on June 19, 2002,
filed in the U.S. District Court of Colorado (Case No. 02-B-0796(PAC)) by Phelps
Dodge  Corporation  (PD)  and its subsidiary, Mt. Emmons Mining Company (MEMCO),
over  contractual  obligations  in  USECC's  agreement  with  PD's  predecessor
companies,  concerning  mining  properties  on  Mt.  Emmons, near Crested Butte,
Colorado.

     The  litigation  stems  from agreements that date back to 1974 when Crested
and  USE leased the mining claims from AMAX Inc., PD's predecessor company.  The
mining  claims  cover  one  of  the  world's  largest  and  richest  deposits of
molybdenum  discovered  by AMAX.  AMAX reportedly spent over $200 million on the
acquisition,  exploration  and  mine  planning  activities  on  the  Mt.  Emmons
properties.

     The  complaint  filed  by  PD  and  MEMCO  seeks  a determination that PD's
acquisition  of Cyprus Amax was not a sale. Under a 1986 agreement between USECC
and  AMAX,  if AMAX sold MEMCO or its interest in the mining properties, Crested
and  USE  would receive 15% (7.5% each) of the first $25 million of the purchase
price  ($3.75  million).  In 1991, Cyprus Minerals Company acquired AMAX to form
Cyprus  Amax Minerals Co.  USECC's counter and cross-claims allege that in 1999,
PD  formed  a  wholly-owned  subsidiary  CAV  Corporation,  for  the  purpose of
purchasing  the  controlling  interest  of  Cyprus  Amax  and  its  subsidiaries
(including  MEMCO)  at  an  estimated  value  in  cash and PD stock exceeding $1
billion and making Cyprus Amax a subsidiary of PD.  Therefore, USECC asserts the
acquisition  of  Cyprus  Amax  by PD was a sale of MEMCO and the properties that
triggers  the  obligation  of  Cyprus  Amax  to pay USECC the $3.75 million plus
interest.

     The  other  issue in the litigation is whether USECC must, under terms of a
1987  Royalty  Deed,  accept  PD's  and  MEMCO's  conveyance  of  the Mt. Emmons
properties  back  to  USECC,  which properties now include a plant to treat mine
water,  costing  in  excess  of  $1 million a year to operate in compliance with
State  of Colorado regulations. PD's and MEMCO's claim seek to obligate USECC to
assume  the  operating costs of the water treatment plant. USECC refuses to have
the  water  treatment  plant  included  in  the  return  of  the


                                       32
<PAGE>


properties because, the USECC counterclaim argues, the properties must be in the
same  condition  as  when  they were acquired by AMAX before the water treatment
plant  was  constructed  by  AMAX.

     As  added  counterclaims,  USECC  seeks  (i)  damages  for  PD's  breach of
covenants  of  good  faith  and  fair  dealing; (ii) damages for PD's failure to
develop  the  Mt.  Emmons  properties  and  not  protecting  USECC's rights as a
revisionary  owner  of  the  mining  rights to the properties, (iii) damages for
unjust  enrichment  of  PD; (iv) damages for breach of the PD's fiduciary duties
owed  to  USECC  as  revisionary  owner  of  the property, and for neglecting to
maintain  the  mining  rights  and  interests  in  the  properties.

     On March 17, 2003, PD filed additional motions for partial summary judgment
on various claims. On January 22, 2004, the District Court heard the motions and
responses  of  USECC and additional briefs were thereafter filed with the Court.
The  Court  is  considering  the  motions. Management believes that the ultimate
outcome  of  this  matter  will  not  have  an  adverse  affect on the Company's
financial  condition  or  result  of  operations.

ROCKY  MOUNTAIN  GAS,  INC.  (RMG)

LITIGATION  INVOLVING  LEASES  ON  COALBED  METHANE  PROPERTIES  IN  MONTANA

     On  or  about April 1, 2001, RMG was served with a Second Amended Complaint
wherein the Northern Plains Resource Council had filed suit in the U.S. District
Court  of  Montana,  Billings  Division in Case No. CV-01-96-BLG-RWA against the
United  States Bureau of Land Management ("BLM"), RMG, certain of its affiliates
(including  Crested and USE) some 20 other defendants.  The plaintiff is seeking
to  cancel  oil  and  gas  leases issued to RMG et. al. by the BLM in the Powder
River  Basin  of  Montana  and  for  other  relief.

     The  basis  for  the  complaint  appears  to  be that the BLM's regulations
require  the  BLM to respond to objections filed by persons owning land or lease
rights  adjacent to the coalbed properties which the BLM is offering to lease to
the  public.  The argument of plaintiff appears to be that if objections are not
responded  to  by  the  BLM prior to issuing CBM leases, the leases are invalid.
Based on this argument, the plaintiff appears to have been successful in forcing
cancellation  of  some CBM leases granted to others in the Powder River Basin of
Montana,  because the BLM did not respond to some objecting adjacent landowners.
However,  all  of  the  BLM leases in Montana held by RMG (none are held by U.S.
Energy  Corp.  or  Crested Corp. in their own corporate names) are at least four
years  old,  and there is no record of any objections being made to the issue of
those  leases.

     Based on filings in the case to date, it appears that the BLM is taking the
initiative in responding to the plaintiff.  We believe RMG's leases were validly
issued  in  compliance  with  BLM procedures, and do not believe the plaintiff's
lawsuit  will  adversely  affect  any  of  RMG's  Montana  BLM  leases.

LAWSUITS  CHALLENGING  BLM'S  RECORDS  OF  DECISIONS

     Three  lawsuits are currently pending in the Montana Federal District Court
challenging  BLM's  Records  of Decisions for the Powder River Basin Oil and Gas
EIS  (PRB-EIS)  for  the Wyoming portion of the basin, and the Statewide Oil and
Gas  EIS  and  Proposed  Amendment  for  the  Powder River and billings Resource
Management  Plans in Montana.  Neither the Company, nor RMG is a party to any of
these  lawsuits.


                                       33
<PAGE>


LITIGATION  INVOLVING  DRILLING  ON  A  COALBED  METHANE  LEASE

     A  drilling  company,  Eagle  Energy  Services,  LLC  filed a lien on RMG's
leasehold  in  southwestern  Wyoming  for  drilling  services performed at RMG's
Oyster  Ridge  Property and filed a lawsuit foreclosing the lien. Eagle Energy's
bank,  Community  First National Bank of Sheridan, Wyoming, filed a similar suit
for the same amount on an assignment from Eagle Energy against RMG, Eagle Energy
Services,  LLC  and others who guaranteed a loan to Eagle Energy in Civil Action
No.  C02-9-328  in  the 4th Judicial District of Sheridan County, Wyoming. Eagle
Energy's  claim  is  for  a  contract  to  drill a well for coalbed methane. RMG
terminated  the  agreement because of the dangerous conditions of Eagle Energy's
equipment and other reasons. The claim against RMG is for approximately $49,300.
Negotiations  to  settle  the lien and lawsuits are pending. Management believes
that  the ultimate outcome of this matter will not have a material affect on the
Company's  financial  condition  or  result  of  operations.

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

     On  June  6, 2003, the annual meeting of shareholders was held and the only
issue  considered  was  the  re-election of the three directors: John L. Larsen,
Daniel  P.  Svilar  and Michael D. Zwickl.  These directors were reelected for a
term  expiring  at the next succeeding annual meeting and until their successors
are duly elected or appointed and qualified.  With respect to the re-election of
the  three  directors,  the  votes  cast  were  as  follows:

     Name  of  Director            For             Abstain
     ------------------            ---             -------

     John  L.  Larsen          15,584,751          19,550
     Daniel  P.  Svilar        15,584,201          21,100
     Michael  D.  Zwickl       15,587,301          17,000


                                       34
<PAGE>


                                     PART II

ITEM  5.     MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED STOCKHOLDER
             MATTERS.

(a)     Market  information.
        -------------------

     The  principal  trading market for the Registrant's Common Stock, $.001 par
value,  is  the  over-the-counter  market.  Prices  are reported by the National
Quotation  Bureau  on Pink Sheets.  The range of high and low bid quotations for
the  Common  Stock  is set forth below for each quarter in the two most recently
completed  fiscal  years.  Retail  markup  or  markdown, or commissions, are not
reflected.

<TABLE>
<CAPTION>
                                                       High    Low
                                                       ----    ---
<S>                                        <C>    <C>
Calendar year ended December 31, 2003
-----------------------------------------
Fourth quarter ended 12/21/03                          0.31   0.19
Third quarter ended 09/30/03                           0.87   0.27
Second quarter ended 06/30/03                          0.84   0.50
First quarter ended 03/31/03                           0.54   0.44

Transition period ended December 31, 2002
-----------------------------------------
Month Ended 12/31/02                                  $0.65  $0.45
Second quarter ended 11/30/02                          0.72   0.45
First quarter ended 8/31/02                            0.71   0.26

Fiscal year ended May 31, 2002
-----------------------------------------
Fourth quarter ended 5/31/02                          $0.55  $0.37
Third quarter ended 2/29/02                            0.60   0.33
Second quarter ended 11/30/01                          0.50   0.20
First quarter ended 8/31/01                            0.45   0.25
</TABLE>

(b)     Holders.

     (b)(1)  At  March  23,  2004  there  were  1,716 stockholders of record for
                 ----------------
Crested  common  stock.

     (b)(2)  Not  applicable.

(c)     Crested  has  not  paid  any  cash  dividends with respect to its common
stock.  There  are  no  contractual  restrictions on Crested's present or future
ability  to  pay cash dividends, however, Crested intends to retain any earnings
in  the  near  future  for  operations.

(d)     During the year ended December 31, 2003, Crested issued 18,822 shares of
its  Common  Stock  to  its  outside  directors  for  services  rendered.


                                       35
<PAGE>


ITEM  6.  SELECTED  FINANCIAL  DATA.

     The  following  tables  show certain selected historical financial data for
Crested  for  the  year ended December 31, 2003, the seven months ended December
31,  2002  and  December  31, 2001 and the four fiscal years ended May 31, 2002.
The  selected  financial  data  is  derived  from  and  should  be read with the
financial  statements  for  Crested.

<TABLE>
<CAPTION>

                                          December 31,                              May 31,
                           -------------------------------------  ---------------------------------------------------
                              2003         2002         2001         2002         2001          2000         1999
                           -----------  -----------  -----------  -----------  -----------  ------------  -----------
<S>                       <C>           <C>           <C>           <C>           <C>           <C>            <C>
                                                     (unaudited)
Current assets            $     3,300   $    3,300   $    3,300   $    3,300   $    3,200   $     3,000   $   46,600
Current liabilities         9,408,300    8,553,900    6,397,400    7,560,700    5,740,200    10,230,200    7,015,200
Working capital deficit    (9,405,000)  (8,550,600)  (6,394,100)  (7,557,400)  (5,737,000)  (10,227,200)  (6,968,600)
Total assets                4,387,100    5,889,900    5,763,200    6,054,100    6,221,100     6,495,800    4,742,200
Long-term obligations(1)    1,268,900      964,000      964,000      964,000      964,000       964,000      725,900
Shareholders' deficit      (6,300,200)  (3,638,100)  (1,608,300)  (2,480,700)    (493,200)   (4,742,300)  (1,822,500)
<FN>

(1)  Includes  $1,053,300 of accrued reclamation costs on uranium properties at December 31, 2003; $748,400 at December 31,
2002,  2001  and  May  31,  2002,  2001  and  2000,  respectively;  and  $725,900  at  May  31,  1999.
</TABLE>

<TABLE>
<CAPTION>
                            For  the  Year
                                Ended       For the Seven Months Ended
                             December  31,         December  31,                    For  Years  Ended  May  31,
                             ------------- ---------------------------- ------------------------------------------------------

                                  2003          2002          2001          2002          2001          2000          1999
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------
<S>                           <C>           <C>           <C>           <C>           <C>           <C>           <C>
                                                          (unaudited)
Revenues                      $        --   $        --   $        --   $        --   $ 3,891,500   $    73,100   $    86,800
Income (loss) before equity
In (loss) of affiliates and
and income taxes                 (263,300)     (102,400)     (117,000)     (175,000)    3,702,400      (194,600)     (786,100)
Equity in loss of
affiliates                     (2,114,600)   (1,055,000)     (998,200)   (1,823,900)   (2,496,700)   (5,085,200)   (1,165,600)
Cumulative effect of
  Accounting change              (293,800)           --            --            --            --            --            --
                              ------------  ------------  ------------  ------------  ------------  ------------  ------------

Net income (loss)             $(2,671,700)  $(1,157,400)  $(1,115,200)  $(1,998,900)  $ 1,205,700   $(5,279,800)  $(1,951,700)
                              ============  ============  ============  ============  ============  ============  ============

Net income (loss)
per share                     $     (0.16)  $     (0.07)  $     (0.07)  $     (0.12)  $       .12   $      (.51)  $      (.19)
                              ============  ============  ============  ============  ============  ============  ============

Cash dividends per share      $       -0-   $       -0-   $       -0-   $       -0-   $       -0-   $       -0-   $       -0-
                              ============  ============  ============  ============  ============  ============  ============
</TABLE>


                                       36
<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

     The  following  is  Management's  Discussion  and  Analysis  of significant
factors  which  have  affected  the  Company's  liquidity, capital resources and
results  of operations during the periods included in the accompanying financial
statements.  The  discussion  contains  forward-looking  statements that involve
risks  and  uncertainties.  Due  to  uncertainties in the minerals business, the
Company's actual results may differ materially from the results discussed in any
such  forward-looking  statements.

GENERAL  OVERVIEW

     The Company historically has been involved in the acquisition, exploration,
development  and  production  of  properties  prospective for hard rock minerals
including  lead,  zinc,  silver,  molybdenum,  gold,  uranium,  oil  and gas and
commercial  real  estate  properties.  The  Company  participates  in  all these
ventures  with  U.S.  Energy Corp. ("USE") which now owns approximately 71.5% of
the  Company's  common  stock, through a non consolidated affiliate, USECC Joint
Venture  ("USECC").  The  Company and USE have entered into partnerships through
which  they  either  joint venture or lease  properties with non-related parties
for  the development and production of certain of their mineral properties.  Due
to  either  depressed  metal  market  prices  or  disputes  in  certain  of  the
partnerships,  all  mineral  properties  have either been sold, reclaimed or are
held  in  a care and maintenance status.  See Item 3 above.  The Company has had
no production from any of its mineral properties during the periods from May 31,
2001  through  December  31,  2003  except  coalbed  methane.

     The  Company  and USE formed Rocky Mountain Gas, Inc. ("RMG") to enter into
the  coalbed  methane  (CBM)  business  in  1999.  The acquisition of leases and
acreage  for  the exploration, development and production of coalbed methane has
become  the  primary  business  focus of the Company.  At December 31, 2003, the
Company,  on  a  consolidated  basis,  owned 39.8% of RMG.  RMG has purchased or
leased  acreage  for  CBM  exploration  and  development.  RMG  has entered into
various  agreements  and  joint  operating agreements to develop and produce CBM
from these properties.  Management of the Company plan to create value in RMG by
growing  RMG  into  an industry recognized producer of CBM.  Management believes
that  the  fundamentals  of  natural  gas supply and demand are, and will remain
favorable  well  into  the  future.  Management  further  believes  that  the
investments  the Company has made in RMG will provide a solid base of cash flows
into  the  future.

          The  price  that  RMG  receives for its CBM production is based on the
Colorado  Interstate  Gas  Index ("CIG") for the Northern Rockies.  Historically
the highest prices realized on the CIG over a twelve month period are during the
months  of December and January and the lowest prices realized are in the months
of  late  summer  or early fall.  Calendar 2003 did not follow this trend as gas
prices rose from a low of $3.14 per mcf (thousand cubic feet) in January 2003 to
a high of $5.01 per mcf in March 2003.  The following table represents a summary
of  historical  CIG  prices:
<TABLE>
<CAPTION>
                                            Prices  per  mcf
                                            ----------------

                        2003             2002            2001            2000
                      ---------       ---------       ---------       ----------
<S>               <C>    <C>    <C>    <C>
12 Month High         $    5.01       $    3.33       $    8.63       $    5.95
12 Month Low          $    3.14       $    1.09       $    1.05       $    2.15
12 Month Average      $    3.98       $    1.97       $    3.50       $    3.37

December 31           $    4.44       $    3.33       $    2.13       $    5.95
</TABLE>


                                       37
<PAGE>


     Although  management  believes  that gas prices will increase over the long
term from present levels, no assurance can be given that will happen. Gas prices
are  directly affected by 1) weather conditions which impact heating and cooling
requirements;  2)  electrical  generation  needs  and 3) the amount of gas being
produced  by  companies  in  the  gas  production business. May of the Company's
industry  competitors  are  very  large  international  companies  that are well
funded.  All  of  these factors are variable and cannot be accurately predicted.

     A  major  component  of  the  Company's future cash flow projections is the
ultimate  resolution  of  litigation  with  Nukem,  Inc.  ("Nukem")  over issues
relating to Sheep Mountain Partners ("SMP") assets.  On August 1, 2003, the U.S.
District  Court  of  Colorado entered a Judgment in favor of the Company and USE
against Nukem in the amount of $20,044,183.  Nukem has appealed this Judgment to
the  10th  Circuit  Court  of Appeals ("CCA").  The Company and USE have filed a
cross-appeal  and  answer to Nukem's appeal.  See Item 3 above.  Should the 10th
CCA  affirm  the District Court's Order and Judgment and or grant the additional
claims  made  by  the  Company  and  USE,  the  liquidity of the Company will be
significantly impacted as it is entitled to 50% of any award received.  Although
no assurance can be given as to the outcome of the appeal, Nukem was required to
post  a  supersedeas  bond  in  the  full  amount of the Judgment with interest.

LIQUIDITY  AND  CAPITAL  RESOURCES

     The Company has relied on its major shareholder USE, to fund its portion of
operations  and  working  capital  requirements  for the periods covered by this
Report.  As  of  December 31, 2003 the Company had a very nominal amount of cash
on  hand, had incurred a shareholders' deficit of $6.3 million and had a working
capital  deficit  of  $9.4  million.  The  principal  component  of this working
capital  deficit  was  an  account payable to USE of $9.4 million.  During prior
periods,  the Company has negotiated reductions of the amount due USE by issuing
shares  of  its  common  stock  as payment.  USE has agreed not to call the note
during  the next 14 months.  Should the Nukem litigation be resolved in favor of
the  Company  and  USE, a significant portion of the Company's receipts would be
applied  to  the USE debt.  The litigation may or may not be finally resolved in
2004.

CAPITAL  RESOURCES

     A major component of capital resources in the near future is the settlement
of  the  litigation with Nukem. Should the 10th CCA affirm the Judgment (without
modification)  of  the  U.S.  District  Court  of Colorado, the net award to the
Company  would  be  approximately  $10  million.

     The  Company  holds interests in RMG and the investments that RMG has made.
Currently it is not management's position to sell these interests but should the
need  arise  to  reduce  debt  or  should  other  investments  become available,
management  may  monetize  the  RMG  investments  and apply the proceeds to debt
reduction  or  alternate  investments.

     The  Company,  jointly  with  USE,  has  a  $750,000  line of credit with a
commercial  bank.  The line of credit is secured by certain real estate holdings
and  equipment  jointly  owned  with USE. At December 31, 2003, the full line of
credit  was  available  to the Company and USE. The line of credit could be used
for  short  term  working  capital  needs  associated  with  operations.


                                       38
<PAGE>


     The  capital  resources at December 31, 2003, are not sufficient to satisfy
all  the  capital requirements of the Company.  To provide the capital resources
needed  for  the  next  fiscal  year,  the  Company will need to (1) continue to
successfully  negotiate  the  terms  of  its debt with USE, (2) collect accounts
receivable  which  are  held  jointly  with USE that are not consolidated but in
which  the  Company  benefits  when the cash is collected, (3) assist RMG in its
development  of  coalbed  methane  properties  including  the  funding  of  that
development,  and  (4)  successfully  resolve  the  Nukem  litigation.

CAPITAL  REQUIREMENTS

     The  direct  capital  requirements  of  the  Company during 2004 remain its
General  and  Administrative costs and expenses.  The general and administrative
cash  requirements  during  the year ended December 31, 2003 were $162,900.  The
cash  requirements  for  the  seven  months ended December 31, 2002 and the year
ended  May  31,  2002 were $100,300 and $163,600, respectively.  Management does
not  anticipate  entering  into  any  business  ventures which will increase the
general  and  administrative  expenses  until  sufficient  capital resources are
available.

     The  Company  also  is required to fund its portion of operations of USECC.
Due to reduced operations, these expenses have decreased during the past several
years.  The amount of cash required for the Company's portion of USECC's capital
requirements  during  the  year  ended December 31, 2003, the seven months ended
December  31,  2002,  and  the  fiscal  years  ended  May  31, 2002 and 2001 was
$611,800,  $892,900,  $1,656,800  and  $2,360,300,  respectively.  The  capital
resources  for  the  USECC  operations  continue  to  be  provided by USE. It is
anticipated  that  the  requirement  during  calendar  2004 will approximate the
amount  spent  in  calendar  2003.

     The  Company's cash requirements for funding USE operations include general
and  administrative costs and stand-by costs for mining properties.  The Company
also  participates  in  all  cash  flows generated by the Sheep Mountain uranium
Properties,  the  Plateau  Resources  uranium  properties  and  the  Sutter Gold
properties.

                         MAINTAINING URANIUM PROPERTIES
                         ------------------------------

     SMP  URANIUM  PROPERTIES

     The  care  and maintenance costs associated with the Sheep Mountain uranium
mineral  properties  (of  which the Company is responsible for 50%) decreased by
$11,500  during  the  year  ended December 31, 2003 to approximately $16,500 per
month.  Included  in the average monthly cost during the year ended December 31,
2003  is ongoing reclamation work on the SMP properties.  It is anticipated that
a  total  of  $125,000  in  reclamation  costs  will  be  conducted during 2004.

     PLATEAU  RESOURCES  URANIUM  PROPERTIES

     We  are  contractually  obligated  to  fund 50% of the cash requirements of
Plateau  and  also  share  in  50%  of  any  cash  receipts  of  Plateau. USE is
responsible  for  the  other  50%.  Plateau  owned  the Ticaboo townsite, motel,
convenience  store,  boat  storage, restaurant and lounge. During the year ended
December  31,  2003,  the  Company  and USE sold their interests in the townsite
operations  to a non-affiliated entity, The Cactus Group ("Cactus"). As a result
of  the  sale of the townsite, USE received a promissory note from Cactus in the
amount  of $3,120,700. USE is to receive $203,000 in payments from Cactus during
calendar  2004.  All  of these payments will be applied to interest only and the
Company  will  receive  50%  of the benefit of the receipt of them. (See Note E)


                                       39
<PAGE>


     Additionally,  Plateau  owns  and  maintains  the  Tony  M uranium mine and
Shootaring  Canyon  Uranium Mill (the "Shootaring Mill").  During the year ended
December  31,  2003,  Plateau requested a change in the status of the Shootaring
Mill  from  active  to  reclamation from the NRC.  The NRC granted the change in
license  status  which  generated  a  surplus  in  the  cash  bond  account  of
approximately  $2.9 million which was released to Plateau.  The Company received
the  benefit  of  this  release  of  cash.

     During  the  year  ended December 31, 2003, Plateau performed approximately
$209,600  in reclamation on the Velvet and Tony M mines and the Shootaring Mill.
It  is  estimated  that the Company and USE will incur approximately $500,000 in
reclamation  related  costs during calendar 2004. The Company is responsible for
one  half  of these expenditures. Although reclamation has been initiated on the
Plateau  properties,  management of the Company and USE continue to evaluate the
future  of the properties as a result of the significant increases in the market
price  for  uranium  to  approximately  $17  per  pound  U3O8 in March 2004 from
approximately  $10.10  in  March  2003.

     The  cash  costs  per  month,  including  reclamation costs, at the Plateau
properties  during  calendar  2003  were approximately $100,000 per month. These
costs  are projected to decrease to $50,000 to $75,000 per month during the year
ending  December  31,  2004.  The  Company  and  USE  share these costs equally.

     SUTTER  GOLD  MINING  COMPANY  (SGMC)PROPERTIES

     Because  of  the recent increase in the price of gold, management of Sutter
Gold  has  decided to place the properties controlled by it into production.  No
extensive  development  work  or  mill construction will be initiated until such
time as funding from either debt or equity sources is in place.  The goal of the
Company's  management  is  to  have  the  SGMC properties be self supporting and
thereby  not  requiring any capital resource commitment from the Company or USE.
Until  such time as Sutter is able to raise its own capital, the Company and USE
will  continue  to  fund SGMC on a one eighth - seven eighths basis.  Management
projects  that the total cash costs to be incurred in getting Sutter funded will
not  exceed $120,000, one eighth of which will be the obligation of the Company.
(See  Note  J)

                    DEVELOPMENT OF COALBED METHANE PROPERTIES
                  ---------------------------------------------

     The  majority  of the costs during the year ended December 31, 2003 for the
development  of RMG's coalbed methane properties was funded through an agreement
that  RMG  entered into with CCBM, Inc. ("CCBM") a subsidiary of Carrizo Oil and
Gas  of  Houston,  Texas.  At  December  31,  2003 the balance remaining for the
benefit  of  RMG's portion only under this arrangement was $305,100.  After this
drilling  commitment  is  completed  by  CCBM, RMG will have to fund its working
interest  amount  on  wells  drilled.

     During  the  year  ended  December  31,  2003,  RMG and CCBM entered into a
Subscription  and Contribution Agreement with Credit Suisse First Boston Private
Equity  parties  ("CSFB") to form Pinnacle Gas Resources, Inc. ("Pinnacle") As a
result  of  the  formation  RMG  and  CCBM  contributed  certain undeveloped and
producing  coalbed  methane  properties  to Pinnacle. RMG has the opportunity to
increase its ownership in Pinnacle by advancing cash to purchase common stock in
Pinnacle  through  the exercise of options, but that increase would be offset to
the  extent  other parties contribute additional capital to Pinnacle. See Part I
"Transaction  with  Pinnacle Gas Resources, Inc." Management of the Company does
not  anticipate  exercising  these  options  during calendar 2004 unless surplus
capital resources are received. RMG has no capital commitments on the properties
contributed  to  Pinnacle.  (See  Note  E)

     RMG  continues  to  pursue other investment and production opportunities in
the  CBM  business.  On  January  30,  2004,  RMG  purchased  the  assets  of  a
non-affiliated  entity  which  included  both  producing  and


                                       40
<PAGE>


non-producing  properties.  The purchase of these CBM assets was accomplished by
the  issuance  of  common  stock  and warrants of both RMG and USE and cash, the
majority  of  which  was  borrowed  as  a  result of mezzanine financing through
Petrobridge  Investment  Management,  LLC. (See Part I "Acquisition of Producing
and  Non-Producing  Properties  from  Hi-Pro  Production, LLC" and Note N to the
financial  statements  in  this  Annual  Report).

     Management  of the Company believes that RMG's recent investment as well as
the  development  of  its unproven properties will be financed through cash that
RMG  has  on hand as well as equity and industry partner financings. None of the
Company's  capital  resources  should  be needed therefore to fund operations or
development  work  of  RMG  during  2004.

     All  cash flows from gas production on the Hi-Pro properties are pledged to
pay the acquisition debt.  See Note N to the financial statements in this Annual
Report  and  Part  I, Acquisition of Producing and Non-Producing Properties from
Hi-Pro  Production,  LLC.  The  acquisition  debt  also  requires  minimum  net
production  volumes  through  June 30, 2006 and maintenance of financial ratios.
The  Hi-Pro  properties are held by RMG I, LLC, a wholly-owned subsidiary of RMG
and  are  the  sole  collateral  for  the  debt.

     In  addition,  we  don't  expect  the  lenders  under  the mezzanine credit
facility  to  fund more than the drilling and completion of five wells on proved
undeveloped  locations  on  the  properties.  Future equity financing by RMG, or
industry  financings,  will be needed for RMG I, LLC to drill and complete wells
on  the  substantial  undeveloped  acreage acquired from Hi-Pro.  New production
from  this acreage could be needed to service the acquisition debt to offset the
impact  of  declining  production  from  the producing properties and/or low gas
prices.

RESULTS  OF  OPERATIONS

YEAR  ENDED  DECEMBER  31,  2003  COMPARED  TO  YEAR  ENDED  MAY  31,  2002
---------------------------------------------------------------------------

     The  Company  continued  to have no revenues from operations as its mineral
properties are all on a care and maintenance status.  The real estate properties
and other ventures that the Company participates in are not consolidated but are
reported  as  equity  losses  from  affiliates.

     Effective  January  1,  2003,  the Company adopted SFAS 143 "Accounting for
Asset  Retirement  Obligations."  As  a result of adopting SFAS 143, the Company
recorded  $90,900  of  accretion in relation to its reclamation liability on the
SMP  uranium  properties which was netted against the Company's cash expended on
SMP  reclamation  of  $70,700  for  a  net  expense of $11,200. The Company also
recognized a $293,800 cumulative effect as a result of the adoption of SFAS 143.
The  Company  did  not  have  similar  expenses or cumulative effects during the
fiscal  year  ended  May  31,  2002.

     The  Company  recognized equity losses of $2,114,600 from affiliates during
the  year ended December 31, 2003.  The reason for the increase of $290,700 over
the  twelve  months ended May 31, 2002 is the increased activities in RMG during
the  year  ended December 31, 2003.  The equity loss recorded for the year ended
December  31,  2003 compared to the seven months ended December 31, 2002 and the
fiscal  years  ended  May  31,  2002  and  2001  is  as  follows:


                                       41
<PAGE>


<TABLE>
<CAPTION>
                Year Ended   Seven Months Ended
               December  31,    December  31,         Year  Ended  May  31,
               ------------     ------------    --------------------------------
                   2003             2002             2002              2001
              --------------    ------------    --------------    --------------
<S>    <C>           <C>           <C>           <C>
     USECC    $  (1,667,100)    $  (897,300)    $  (1,639,000)    $  (2,210,600)
     RMG           (447,500)       (157,700)         (184,900)         (286,100)
              --------------    ------------    --------------    --------------
              $  (2,114,600)    $(1,055,000)    $  (1,823,900)    $  (2,496,700)
              ==============    ============    ==============    ==============
</TABLE>

     Effective  January  1,  2003  the  Company adopted SFAS 143 "Accounting for
Asset  Retirement  Obligations"  which  requires  the Company to record the fair
value of the reclamation liability on its shut down mining and gas properties as
of  the  date that the liability is incurred. The Company is further required to
accrete  the  total  liability  for the full value of the future liability. As a
result  of adopting this new accounting policy the Company recorded a cumulative
effect  of  accounting  change  of  $293,800.

     The  Company  recorded  a net loss of $2,671,700 or $0.16 per share  during
the  year  ended  December 31, 2003 as compared to a loss of $1,998,900 or $0.12
per  share  during  the  fiscal  year  ended  May  31,  2002

SEVEN MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE SEVEN MONTHS ENDED DECEMBER
--------------------------------------------------------------------------------
31,  2001
---------

     The  Company  had no revenues during the seven month periods ended December
31,  2002  and  2001.

     Costs  and  expenses  during the seven month period ended December 31, 2002
decreased  by $14,600 to $102,400 from the amount of costs and expenses incurred
during  the  seven  month  period  ended  December  31, 2001.  This decrease was
primarily  as  a result of reductions in overhead relative to government filings
and the funding of the USE Employee Stock Option Plan for the employees that the
Company  uses  to  conduct  its business. These reductions in costs and expenses
were  offset  by  a  small  increase  in  contract  services.

     During  the  seven months ended December 31, 2002 the Company recognized an
equity  loss  from affiliates of $1,055,000.  This equity loss was realized from
USECC  and  RMG  in  the  amounts  of  $897,300 and $157,700, respectively.  The
increase  during  the  seven  months ended December 31, 2002 of $56,800 from the
equity  loss recognized during the seven months ended December 31, 2001 was as a
result  of  an  increase  of  the  work  performed  in the natural gas business.

     The  Company  recognized  a  loss  of $1,157,400 for the seven months ended
December  31,  2002  as  compared to the loss of $1,115,200 for the seven months
ended  December  31,  2001  for  the  same  reasons  mentioned  above.

FISCAL  2002  COMPARED  TO  FISCAL  2001
----------------------------------------

     The  Company  had  no  revenues  during the fiscal year ended May 31, 2002.
Mineral  Revenues  decreased  $60,300 from revenues for the previous year.  This
decrease  was  a  result  of  Phelps  Dodge  suspending  the  payment of advance
royalties  on  the  Mt.  Emmons  molybdenum  property.  The  Company and USE are
involved  in  a  legal action with Phelps Dodge to reinstate the advance royalty
payments.  See  Item  3  above.

     During  fiscal  2001,  the  Company  recognized  $3,566,400  in  litigation
settlement  revenues.  These  revenues  came  as  a  result  of  a settlement of
litigation  with Kennecott Energy on the Green Mountain Mining Venture.  Of this
amount,  $2,000,000 was a non-cash recognition of a deferred purchase option for
cash  received  in  a  prior  period.  No  litigation  settlement  revenues were
recognized  during  fiscal  2002.


                                       42
<PAGE>


     Costs  and  expenses  decreased  by  $14,100 during fiscal 2002 from fiscal
2001.  This  decrease  was  as  a  result  of reductions in the workforce of the
Company and USE.  The reduction in workforce reduced the Company's obligation to
fund  retirement  benefits.  The  Company recorded an equity loss from USECC and
RMG  in  the  amounts  of  $1,823,900  and  $2,496,700 for fiscal 2002 and 2001,
respectively.

     Operations  for  fiscal  2002, resulted in a loss of $1,998,800 compared to
net  earnings  of  $1,205,700  for  fiscal  2001.

RECENT  ACCOUNTING  PRONOUNCEMENTS

     In July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting  for Asset Retirement Obligations."  The statement requires entities
to  record  the  fair value of a liability for legal obligations associated with
the  retirement  of  obligations  of tangible long-lived assets in the period in
which  it  is  incurred.  When  the  liability is initially recorded, the entity
increases the carrying amount of the related long-lived asset.  Accretion of the
liability  is  recognized  each  period, and the capitalized cost is depreciated
over the useful life of the related asset.  Upon settlement of the liability, an
entity either settles the obligation for its recorded amount or incurs a gain or
loss  upon  settlement.  The  Company  implemented  the  pronouncement effective
January  1,  2003.

     The  Company  has  reviewed  other  current outstanding statements from the
Financial  Accounting  Standards  Board  and  does not believe that any of those
statements  will  have  a material adverse affect on the financial statements of
the  Company  when  adopted.

EFFECTS  OF  CHANGES  IN  PRICES
--------------------------------

     Mineral  operations  are  significantly  affected  by  changes in commodity
prices.  As  prices  for a particular mineral increase, prices for prospects for
that  mineral also increase, making acquisitions of such properties more costly,
and sales advantageous.  Conversely, a price decline facilitates acquisitions of
properties  containing  that  mineral,  but  makes sales of such properties more
difficult.  Operational  impacts  of  changes  in  mineral  commodity prices are
common  in  the  mining  industry.

     NATURAL  GAS  AND  OIL.  Our  decisions  to expand into the coalbed methane
industry  were predicated on the projections for natural gas prices.  We believe
that  the  energy  demands  of  the United States of America will sustain higher
natural  prices.  The recent increase in price of oil will not materially affect
our  operations  for  fiscal  2004.

     URANIUM AND GOLD. Changes in the prices of uranium and gold will affect our
operational  decisions  the  most.  Currently,  both  gold  and  uranium  have
experienced an increase in price. We continually evaluate market trends and data
and  are  seeking  financing  or a joint venture to place the Company's gold and
uranium  properties  in  production.  We  are  currently evaluating our gold and
uranium  properties  as  market  prices  have  increased to the level that these
properties  could  produce  profitably.  Management  is evaluating how long this
trend  will  continue  and at what level market prices for gold and uranium will
settle  at  for  the  long  term.

     MOLYBDENUM.  Changes in prices of molybdenum are not expected to materially
affect  our  operations  during  fiscal  2004.

     CONTRACTUAL  OBLIGATIONS. The Company had two contractual obligations as of
December  31,  2003:  Debt  to  USE of $9,408,300, which is due upon demand, and
asset  retirement  obligations of $1,053,300 which will be paid over a period of
five  to  seven  years.


                                       43
<PAGE>


ITEM  8.  FINANCIAL  STATEMENTS

     Financial  statements  meeting  the  requirements of Regulation S-X for the
Company  follow  immediately.


                                       44
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
            -------------------------------------------------------

Crested  Corp.  Board  of  Directors

We  have audited the accompanying balance sheets of Crested Corp. as of December
31,  2003  and  2002  and May 31, 2002 and the related statements of operations,
shareholders'  deficit  and cash flows for the year ended December 31, 2003, the
seven months ended December 31, 2002 and the fiscal years ended May 31, 2002 and
2001.  These  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  based  on  our  audits.

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

In  our  opinion,  the financial statements referred to above present fairly, in
all  material  respects,  the financial position of Crested Corp. as of December
31,  2003,  and  2002,  and May 31, 2002 and the results of their operations and
their  cash  flows  for the year ended December 31, 2003, the seven months ended
December  31,  2002  and  the  fiscal  years  ended  May  31,  2002 and 2001, in
conformity with accounting principles generally accepted in the United States of
America.

As  discussed  in  Note A to the financial statements effective January 1, 2003,
the  Company  adopted  Statement  of  Financial  Accounting  Standards  No.  143
Accounting  for  Asset  Retirement  Obligations,  and  changed  its  method  of
accounting  for  asset  retirement  obligations.

The  accompanying  financial  statements have been prepared assuming the Company
will  continue  as  a  going  concern.  As  discussed in Note A to the financial
statements,  the Company has experienced significant losses from operations.  In
addition, the Company has a working capital deficit of $9,405,000 as of December
31,  2003,  the  substantial  portion  of which is owed to an affiliated entity.
These  factors  raise  substantial  doubt  about  the  ability of the Company to
continue as a going concern.  Management's plans in regards to these matters are
also  described  in  Note  A.  The  financial  statements  do  not  include  any
adjustments  that  might  result  from  the  outcome  of  this  uncertainty.




GRANT  THORNTON  LLP


Oklahoma  City,  Oklahoma,
February  27,  2004


                                       45
<PAGE>


                                  CRESTED CORP.
                                  BALANCE SHEET
                                     ASSETS
<TABLE>
<CAPTION>
                                                            December 31,             May 31,
                                                   ----------------------------- --------------
<S>                                                <C>             <C>            <C>
                                                         2003           2002           2002
                                                   --------------  -------------  -------------
CURRENT ASSETS:
  Cash and cash equivalents                        $       3,300   $      3,300   $      3,300

INVESTMENTS IN AFFILIATES                              4,373,800      5,876,600      6,038,700

PROPERTIES AND EQUIPMENT
  Library                                                 10,000         10,000         10,000
  Developed oil properties, full cost method             886,800        886,800        886,800
                                                   --------------  -------------  -------------
PROPERTIES AND EQUIPMENT                                 896,800        896,800        896,800
  Less accumulated depreciation,
  depletion and amortization                            (886,800)      (886,800)      (886,800)
                                                   --------------  -------------  -------------
                                                          10,000         10,000         10,000
OTHER ASSETS
  Other assets                                                --             --          2,100
                                                   --------------  -------------  -------------
                                                              --             --          2,100
                                                   --------------  -------------  -------------
                                                   $   4,387,100   $  5,889,900   $  6,054,100
                                                   ==============  =============  =============

                      LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Debt to affiliate                                $   9,408,300   $  8,553,900   $  7,560,700

COMMITMENT TO FUND EQUITY INVESTEES                      215,600        215,600        215,600

ASSET RETIREMENT OBLIGATION                            1,053,300        748,400        748,400

COMMITMENTS AND CONTINGENCIES

FORFEITABLE COMMON STOCK, $.001 par value
  15,000 shares issued, forfeitable until earned          10,100         10,100         10,100

SHAREHOLDERS' DEFICIT
  Preferred stock, $.001 par value;
     100,000 shares authorized
    none issued or outstanding                                --             --             --
  Common stock, $.001 par value; unlimited shares
    authorized; 17,118,098, 17,099,276
    and 17,099,276 respectively
    shares issued and outstanding                         17,200         17,200         17,200
  Additional paid-in capital                          11,804,800     11,795,200     11,795,200
  Accumulated deficit                                (18,122,200)   (15,450,500)   (14,293,100)
                                                   --------------   ------------   ------------
TOTAL SHAREHOLDERS' DEFICIT                           (6,300,200)    (3,638,100)    (2,480,700)
                                                   --------------  -------------  -------------
                                                   $   4,387,100   $  5,889,900   $  6,054,100
                                                   ==============  =============  =============
</TABLE>
        The accompanying notes are an integral part of these statements.


                                       46
<PAGE>


                                  CRESTED CORP.
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                Year Ended    7 mos Ended
                                                December 31,  December 31,      Year Ended May 31,
                                                ------------  ------------  --------------------------

                                                    2003          2002          2002          2001
                                                ------------  ------------  ------------  ------------
<S>                                             <C>           <C>           <C>           <C>
REVENUES:
   Mineral revenue                              $        --   $        --   $        --   $    60,300
   Interest                                              --            --            --           200
   Litigation settlement                                 --            --            --     3,566,400
   Other                                                 --            --            --       264,600
                                                ------------  ------------  ------------  -----------
                                                         --            --            --     3,891,500

COSTS AND EXPENSES:
   Accreation of asset retirement obligation         90,900            --            --            --
   General and administrative                       172,400       102,400       175,000       189,100
                                                ------------  ------------  ------------  ------------
                                                    263,300       102,400       175,000       189,100
                                                ------------  ------------  ------------  ------------

(LOSS) INCOME BEFORE EQUITY LOSS, PROVISION
   FOR INCOME TAXES AND CUMULATIVE
   EFFECT OF ACCOUNTING CHANGE                     (263,300)     (102,400)     (175,000)    3,702,400

EQUITY IN LOSS OF AFFILIATES                     (2,114,600)   (1,055,000)   (1,823,900)   (2,496,700)
                                                ------------  ------------  ------------  ------------

(LOSS) INCOME BEFORE PROVISION FOR INCOME
  TAXES AND CUMULATIVE
  EFFECT OF ACCOUNTING CHANGE                    (2,377,900)   (1,157,400)   (1,998,900)    1,205,700

PROVISION FOR INCOME TAXES                               --            --            --            --
                                                ------------  ------------  ------------  ------------

(LOSS) INCOME BEFORE CUMULATIVE EFFECT
  OF ACCOUNING CHANGE                            (2,377,900)   (1,157,400)   (1,998,900)    1,205,700

CUMULATIVE EFFECT OF
   ACCOUNTING CHANGE                               (293,800)           --            --            --
                                                ------------  ------------  ------------  ------------

NET (LOSS) INCOME                               $(2,671,700)  $(1,157,400)  $(1,998,900)  $ 1,205,700
                                                ============  ============  ============  ============

PER SHARE DATA
NET (LOSS) INCOME PER SHARE, BASIC AND DILUTED
   FROM CONTINUED OPERATIONS                    $     (0.14)  $     (0.07)  $     (0.12)  $      0.12
   FROM EFFECT OF ACCOUNTING CHANGE                   (0.02)           --            --            --
   BASIC AND DILUTED                            $     (0.16)  $     (0.07)  $     (0.12)  $      0.12
                                                ============  ============  ============  ============

BASIC  AND DILUTED WEIGHTED AVERAGE
   SHARES OUTSTANDING                            17,117,374    17,099,276    17,075,320    10,448,505
                                                ============  ============  ============  ============
</TABLE>

          The accompanying notes are an integral part of these statements.


                                       47
<PAGE>


                                  CRESTED CORP.
                        STATEMENT OF SHAREHOLDERS' DEFICIT
<TABLE>
<CAPTION>
                                                       Additional                    Total
                                    Common Stock        Paid-In     Accumulated
                                 -------------------
                                                                                  Shareholders'
                                   Shares    Amount     Capital       Deficit       Deficit
                                 ----------  -------  -----------  -------------  ------------
<S>                              <C>         <C>      <C>          <C>            <C>
 Balance May 31, 2000            10,316,664  $10,400  $ 8,747,200  $(13,499,900)  $(4,742,300)

 Issuance of stock to directors      40,000       --        9,600            --         9,600

 Release of forfeitable status       50,000      100       33,700            --        33,800

 Issuance of common stock
    to retire debt                6,666,666    6,700    2,993,300            --     3,000,000

 Net income                              --       --           --     1,205,700     1,205,700
                                 ----------   ------   ----------   ------------   -----------
 Balance May 31, 2001            17,073,330   17,200   11,783,800   (12,294,200)     (493,200)

 Issuance of stock to directors      25,946       --       11,400            --        11,400

 Net loss                                --       --           --    (1,998,900)   (1,998,900)
                                 ----------   ------   ----------   ------------   -----------
 Balance May 31, 2002            17,099,276   17,200   11,795,200   (14,293,100)   (2,480,700)

 Net loss                                --       --           --    (1,157,400)   (1,157,400)
                                 ----------   ------   ----------   ------------   -----------
 Balance December 31, 2002       17,099,276   17,200   11,795,200   (15,450,500)   (3,638,100)

 Issuance of stock to directors      18,822       --        9,600            --         9,600

 Net loss                                --       --           --    (2,671,700)   (2,671,700)
                                 ----------   ------   ----------   ------------   -----------
 Balance December 31, 2003       17,118,098  $17,200  $11,804,800  $(18,122,200)  $(6,300,200)
                                 ==========  =======  ===========  =============  ============
<FN>
Total Shareholders' Deficit at December 31, 2003, December 31, 2002 May 31, 2002
and May 31, 2001 does not include 15,000 shares currently issued but forfeitable
if  certain  conditions  are  not  met  by  the  recipients.
</TABLE>

          The accompanying notes are an integral part of this statement.


                                       48
<PAGE>


                                  CRESTED CORP.
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                        For the     For the seven
                                                      year ended    months ended       For the year ended
                                                      December 31,  December 31,            May 31,
                                                      ------------  ------------  --------------------------

                                                          2003          2002          2002          2001
                                                      ------------  ------------  ------------  ------------
<S>                                                   <C>           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                   $(2,671,700)  $(1,157,400)  $(1,998,900)  $ 1,205,700
  Adjustments to reconcile net (loss) income to net
    cash (used in) provided by operating activities:
      Equity in loss of affiliates                      2,114,600     1,055,000     1,823,900     2,496,700
      Deferred GMMV purchase option                            --            --            --    (2,000,000)
      Accretion of asset retirement obligation             90,900            --            --            --
      Cumulative effect of accounting change              293,800            --            --            --
      Noncash compensation                                  9,600            --        11,400         9,600
      Decrease in asset retirement obligation             (79,800)           --            --            --
      Net changes in assets and liabilities                    --         2,100            --            --
                                                      ------------  ------------  ------------  ------------
NET CASH (USED IN) PROVIDED BY
  OPERATING ACTIVITIES:                                  (242,600)     (100,300)     (163,600)    1,712,000

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of property and equipment                 --            --            --       138,500
  Investment in affiliates                               (611,800)     (892,900)   (1,656,800)   (2,360,300)
                                                      ------------  ------------  ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES:                   (611,800)     (892,900)   (1,656,800)   (2,221,800)

CASH FLOWS FROM FINANCING ACTIVITES:
  Net activity on debt to affiliate                       854,400       993,200     1,820,500       510,000
                                                      ------------  ------------  ------------  ------------

NET (DECREASE) INCREASE IN
  CASH AND CASH EQUIVALENTS                                    --            --           100           200

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF PERIOD                                       3,300         3,300         3,200         3,000
                                                      ------------  ------------  ------------  ------------

CASH AND CASH EQUIVALENTS AT
  END OF PERIOD                                       $     3,300   $     3,300   $     3,300   $     3,200
                                                      ============  ============  ============  ============

SUPPLEMENTAL DISCLOSURES:
  Interest paid                                       $         -   $         -   $         -   $         -
                                                      ============  ============  ============  ============

  Income tax paid                                     $        --   $        --   $        --   $        --
                                                      ============  ============  ============  ============

NONCASH INVESTING AND FINANCING ACTIVITIES:
  Issuance of stock to outside directors              $     9,600   $        --   $    11,400   $     9,600
                                                      ============  ============  ============  ============

  Issuance of stock for affiliate debt                $        --   $        --   $        --   $ 3,000,000
                                                      ============  ============  ============  ============
</TABLE>

          The accompanying notes are an integral part of these statements.


                                       49
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001


A.     BUSINESS  ORGANIZATION  AND  OPERATIONS:

     Crested Corp. (the "Company" or "Crested") was incorporated in the State of
Colorado  on  September  18,  1970.  It engages in the acquisition, exploration,
sale  and/or  development  of  mineral  and  coalbed methane gas properties, the
production  of petroleum properties and marketing of minerals and/or methane gas
primarily  through equity investees.  Principal mineral interests are in coalbed
methane,  uranium,  gold  and  molybdenum.  Only  coalbed  methane was producing
during  the  year  ended December 31, 2003.  The Company also holds various real
estate  properties.  These  properties  are  managed  through a non consolidated
joint  venture  discussed  below  and  in  Note  B.

     The Company and U.S. Energy Corp. ("USE"), an approximate 71.5% shareholder
of  the  Company,  were  engaged  in  the standby and maintenance of two uranium
properties,  one  a  joint  venture with Kennecott Uranium Company ("Kennecott")
known  as  the  Green  Mountain Mining Venture ("GMMV"), and the second known as
Sheep  Mountain  Partners ("SMP").  Both of these ventures have been involved in
significant  litigation  (see  Note  J).  Sutter Gold Mining Company ("SGMC"), a
Wyoming  corporation,  manages  the  Company's  and  USE's  interest  in  gold
properties.  Rocky  Mountain  Gas,  Inc.  ("RMG"),  was formed in fiscal 2000 to
consolidate  all  coalbed  methane  gas  operations of the Company and USE.  The
Company  owns  and  controls approximately 39.8% of RMG as of December 31, 2003.

     The  Company  changed  its  year  end  to December 31 from May 31 effective
December  31,  2002.

MANAGEMENTS  PLAN

     The Company has generated significant net losses prior to and including the
year  ended December 31, 2003 resulting in an accumulated deficit of $18,122,200
at  December  31,  2003.  The  Company  also  has  a  working capital deficit of
$9,405,000  at  December  31,  2003  that  includes  $9,408,300 due to USE.  The
Company  experienced  negative  cash flows from operations of $242,600, $100,300
and  $163,000  for  the  year  ended  December  31, 2003, the seven months ended
December  31,  2002  and  the fiscal year ended May 31, 2002, respectively.  The
Company had positive cash flows from operations during the fiscal year ended May
31,  2001  of  $1,712,000.  At  December  31,  2003,  the  Company does not have
sufficient  cash  or cash flows from operations to meet its obligations.  All of
these factors raise substantial doubt about the Company's ability to continue as
a  going  concern  during  the  upcoming  year.

     The  Company has historically relied on, and continues to rely on, advances
from  USE  to  fund  its current operating requirements. It is uncertain whether
this funding will continue. The Company has certain assets that are unencumbered
that  could  be  sold to generate cash. However, there can be no assurances that
any  funds  generated  from  the  sale  of assets will be sufficient to meet the
Company's  obligations.

     In  order to improve the liquidity of the Company, management intends to do
the  following:

 x   Collect  amounts  due  under  the terms of certain notes receivable that it
     shares  the  cash  proceeds of with USE and their subsidiaries. These notes
     receivable are as a result of the sale of certain coalbed methane interests
     and  real  estate  interests  to  non-affiliated  entities.


                                       50
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

 x   Assist  RMG  in  obtaining  financing  for  the  development of its coalbed
     methane  properties  and  the  acquisition  of  additional  developed  and
     undeveloped  coalbed  methane  properties.
 x   Raise  equity  funds  through  private  placements  of  RMG  common  stock.
 x   Concluding  the litigation with Nukem, Inc. ("Nukem") at December 31, 2003,
     the  Company and USE were awarded a $20 million plus judgment against Nukem
     and  its  affiliates. Nukem has appealed this judgment to the Tenth Circuit
     Court  of  Appeals.

B.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES:

INVESTMENTS

     Investments  in joint ventures and 20% to 50% owned companies are accounted
for  using  the  equity method.  The Company accounts for its 3.7% investment in
USE  using  the  equity  method  because  the Company is controlled by USE.  The
Company's  investment  in  SGMC,  RMG  and  USECC  Joint  Venture  ("USECC") are
accounted  for  using  the  equity  method  (see  Note  E).

CASH  EQUIVALENTS

     The  Company  considers  all  highly  liquid  investments  with  original
maturities  of  three  months  or  less  to  be  cash  equivalents.

PROPERTIES  AND  EQUIPMENT

     The  Company  capitalizes all costs related to the acquisition, exploration
and  development  of  mineral  properties.  Capitalized  costs  are  charged  to
operations  when the properties are determined to have declined in value or have
been  abandoned.  The  Company currently has no net capitalized costs associated
with  mineral  properties.

     Oil  and  gas  properties  are  accounted  for  using the full cost method.
Capitalized  costs  plus  any  future  development  costs  are  amortized by the
units-of-production method using proved reserves.  Capitalized costs are subject
to  an  impairment  test  which  limits  capitalized  costs  less  accumulated
amortization  and  related  deferred income taxes to the present value of future
net  revenues  using  current  prices  and  operating  costs  discounted at 10%.

     Depreciation  of  vehicles,  machinery  and  equipment  was provided by the
straight-line method over the estimated useful lives of the related assets.  All
such  vehicles,  machinery  and  equipment  have  been  fully  depreciated.

LONG-LIVED  ASSETS

     The  Company  evaluates its long-lived assets for impairment when events or
changes  in  circumstances  indicate that the related carrying amount may not be
recoverable.  If the sum of estimated future cash flows on an undiscounted basis
is  less  than  the carrying amount of the related asset, an asset impairment is
considered  to  exist.  The  related  impairment  loss  is measured by comparing
estimated  future cash flows on a discounted basis to the carrying amount of the
asset.  Changes in significant assumptions underlying future cash flow estimates
may  have  a  material effect on the Company's financial position and results of
operations.  An  uneconomic commodity market price, if sustained for an extended
period  of  time,  or  an  inability  to  obtain


                                       51
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

financing  necessary  to  develop  the  mineral  interests  may  result in asset
impairment.  As  of  December 31, 2003, management believes no impairment of the
Company's  long-lived  assets  exists.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

     The  carrying  amount  of  cash  equivalents  and  other  current  assets
approximates  fair  value because of the short term nature of those instruments.
It  is  not  practicable to determine fair value of debt to affiliate carried at
$9,408,300  and  $8,553,900  respectively  at  December  31,  2003  and  2002.

REVENUE  RECOGNITION

     Advance  royalties which are repayable only from future production or which
are  non-refundable  are  recognized  as  revenue when received.  Non-refundable
option  deposits  are  recognized  as  revenue  when  the  option  expires.

INCOME  TAXES

     The  Company accounts for income taxes under the provisions of Statement of
Financial  Accounting  Standards  No.  109  ("SFAS 109"), "Accounting for Income
Taxes".  This  statement  requires recognition of deferred income tax assets and
liabilities  for  the  expected future income tax consequences, based on enacted
tax laws, of temporary differences between the financial reporting and tax bases
of  assets,  liabilities  and  carry  forwards.

     SFAS  109  requires  recognition  of  deferred  tax assets for the expected
future  effects of all deductible temporary differences, loss carry-forwards and
tax  credit  carry-forwards.  Deferred  tax  assets  are then reduced, if deemed
necessary, by a valuation allowance for any tax benefits which, based on current
circumstances,  are  not  expected  to  be  realized.

NET  (LOSS)  INCOME  PER  SHARE

     The  Company  reports  net (loss) income per share pursuant to Statement of
Financial  Accounting  Standards  No.  128 ("SFAS 128").  SFAS 128 specifies the
computation,  presentation  and  disclosure requirements for earnings per share.
Basic  earnings  per  share  is computed based on the weighted average number of
common  shares outstanding.  Diluted earnings per share is computed based on the
weighted  average  number  of  common  shares  outstanding  adjusted  for  the
incremental  shares  attributed to outstanding options to purchase common stock,
if  dilutive.

USE  OF  ESTIMATES

     The  preparation  of  financial  statements  in  conformity with accounting
principles  generally  accepted  in  the  United  States  of  America  requires
management  to  make estimates and assumptions.  These estimates and assumptions
affect  the  reported  amounts  of  assets  and  liabilities  and  disclosure of
contingent  assets  and liabilities at the date of the financial statements, and
the  reported  amounts  of  revenues  and  expenses during the reporting period.
Actual  results  could  differ  from  those  estimates.


                                       52
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

RECENT  ACCOUNTING  PRONOUNCEMENTS

     SFAS  143  Effective  January  1,  2003,  the Company adopted SFAS No. 143,
"Accounting  for  Asset  Retirement  Obligation."  The  statement  requires  the
Company  to  record the fair value of the reclamation liability on its shut down
mining  and  gas  properties as of the date that the liability is incurred.  The
statement  further  requires  that the Company review the liability each quarter
and  determine  if a change in estimate is required as well as accrete the total
liability  on  a  quarterly  basis  for  the  future  liability.

     The  Company  will  also  deduct  any actual funds expended for reclamation
during  the  quarter  in  which  it  occurs.  As  a result of the Company taking
impairment  allowances  in  prior periods on its shut down mining properties, it
has  no  remaining  book  value  for  these  properties.

     The  following  is  a  reconciliation  of  the  total  liability  for asset
     retirement  obligations

     Balance  December  31,  2002                     $       748,400
     Impact  of  adoption  of  SFAS  No.  143                 293,800
     Addition  to  Liability                                     --
     Liability  Settled                                       (79,800)
     Accretion  Expense                                        90,900
                                                      ---------------
     Balance  December  31,  2003                     $     1,053,300
                                                      ===============

     The  following  table  shows the Company's net income (loss) and net income
(loss)  per  share on a pro forma basis as if the provisions of SFAS No. 143 had
been  applied  retroactively  in  all  periods  presented.

<TABLE>
<CAPTION>
                                                      Seven Month
                                        Year ended       ended
                                        December 31,  December 31,         Year ended

                                            2003          2002          2002         2001
                                        ------------  ------------  ------------  -----------
<S>                                     <C>           <C>           <C>           <C>
NET INCOME (LOSS):
  Reported net income (loss)
    from continuing operations          $(2,377,900)  $(1,157,400)  $ (1,998,900) $1,205,700
  Pro-Forma adjustments
    net of tax                                   --       (34,900)      (57,100)     (52,500)
                                        ------------  ------------  ------------  -----------
  Pro-Forma net income (loss)           $(2,377,900)  $(1,192,300)  $(2,056,000)  $1,153,200
                                        ============  ============  ============  ===========

PER SHARE OF COMMON STOCK:
  Reported net income (loss) basic
    from continuing operations          $     (0.14)  $     (0.07)  $     (0.12)  $     0.12
  Pro-Forma adjustments
    net of tax                                   --            --            --        (0.01)
                                        ------------  ------------  ------------  -----------
  Pro-Forma net income (loss) basis     $     (0.14)  $     (0.07)  $     (0.12)  $     0.11
                                        ============  ============  ============  ===========

  Reported net income (loss) diluted    $     (0.14)  $     (0.07)  $     (0.12)  $     0.12
  Pro-Forma adjustments                          --            --            --        (0.01)
                                        ------------  ------------  ------------  -----------
  Pro-Forma net income (loss) diluted   $     (0.14)  $     (0.07)  $     (0.12)  $     0.11
                                        ============  ============  ============  ===========
</TABLE>


                                       53
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

C.   RELATED-PARTY  TRANSACTIONS:

     The  Company does not have employees, but utilizes USE's employees and pays
for  one-half of these costs under the USECC Joint Venture Agreement.  The Board
of  Directors of USE adopted the U.S. Energy Corp. 1989 Employee Stock Ownership
Plan  ("ESOP")  in 1989, for the benefit of USE's employees.  As of December 31,
2003, December 31, 2002 and May 31, 2002 and 2001, the Board of Directors of USE
contributed  76,294, 43,867, 70,075 and 53,837shares of USE stock to the ESOP at
prices of $3.10, $3.08, $3.29 and $5.35 per share, respectively.  The Company is
responsible  for  one-half  of  the  value  of  these contributions or $118,300,
$67,600,  $118,400  and  $144,000  for  the year ended December 31, 2003 and the
seven  months ended December 31, 2002 and the years ended May 31, 2002 and 2001,
respectively,  which was advanced through debt to affiliate.  As of December 31,
2003,  all  shares of USE stock that have been contributed to the ESOP have been
allocated.  The  estimated  fair  value  of  shares  that  are  not  vested  is
approximately  $84,800.

D.   INVESTMENTS  IN  AFFILIATES:

     The  Company's  investments  in  affiliates  are  as  follows:

<TABLE>
<CAPTION>
                                                   December 31,       At May 31,
                                               --------------------   ----------

                                     Ownership   2003       2002         2002
                                     --------- --------   ---------   ----------
<S>                                <C>       <C>          <C>          <C>
     RMG                                39.8% $     --    $ 447,500   $ 605,200
     USECC                              50.0% 4,367,100   5,422,400   5,426,800
     SGMC                                1.5%   (85,500)    (85,500)    (85,500)
     Yellow Stone Fuels Corp. ("YSFC")  13.2%  (130,100)   (130,100)   (130,100)
     USE                                 3.7%       --          --          --
     Others                            various    6,700       6,700       6,700
</TABLE>

     At  December 31, 2003 and 2002 and May 31, 2002, investments of $4,373,800,
$5,876,600  and  $6,038,700,  respectively,  are  presented  as  investments  in
affiliates in the accompanying balance sheets.  A liability of $215,600 has been
presented as a commitment to fund equity investees as of December 31, 2003, 2002
and May 31, 2002 for these investments in affiliates that the Company must fund.

     Equity  (loss)  gain from investments accounted for by the equity method is
as  follows:

<TABLE>
<CAPTION>


            Year Ended     Seven Months Ended
            December 31,      December 31,            Year Ended May 31,
          ---------------    -------------    ----------------------------------

               2003              2002              2002                2001
          ---------------    -------------    ---------------    ---------------
<S>    <C>           <C>           <C>           <C>

USECC     $   (1,667,100)    $   (897,300)    $   (1,639,000)    $   (2,210,600)
SGMC            --            --            --            --                 --
YSFC            --            --            --            --                 --
RMG             (447,500)        (157,700)          (184,900)          (286,100)
USE             --            --            --            --                 --
          ---------------    -------------    ---------------    ---------------
          $   (2,114,600)    $ (1,055,000)    $   (1,823,900)    $   (2,496,700)
          ===============    =============    ===============    ===============
</TABLE>


                                       54
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

                       CONDENSED COMBINED BALANCE SHEETS:
                                EQUITY INVESTEES

<TABLE>
<CAPTION>
                                      Year Ended  Seven Months Ended  Year Ended
                                      December 31,   December 31,       May 31,
                                     -------------   ------------   ------------
                                            2003          2002          2002
                                     -------------   ------------   ------------
<S>                                <C>          <C>          <C>

     Current assets                  $ 17,871,200   $  20,112,900   $ 18,601,900
     Non-current assets                11,753,700      16,619,900     22,256,700
                                     -------------   ------------   ------------
                                     $ 29,624,900   $  36,732,800   $ 40,858,600
                                     =============   ============   ============

     Current liabilities             $  3,641,600   $  5,872,700    $  4,787,300
     Reclamation and other liabilities 12,120,700     12,404,700      11,897,800
     Excess in assets                  13,862,600     18,455,400      24,173,500
                                     -------------   ------------   ------------
                                     $ 29,624,900   $ 36,732,800    $ 40,858,600
                                     =============   ============   ============
</TABLE>

                  CONDENSED COMBINED STATEMENTS OF OPERATIONS:
                                EQUITY INVESTEES
<TABLE>
<CAPTION>
                      Year Ended   Seven Months Ended
                      December 31,    December 31,        Year Ended May 31,
                      ------------   -------------  -------------   ------------
                          2003           2002            2002           2001
                      ------------   -------------  -------------   ------------
<S>                        <C>           <C>           <C>           <C>
     Revenues         $  1,021,700   $    563,500   $  1,250,500    $ 8,249,900
     Costs and expenses (8,881,600)    (3,939,200)    (8,565,500)   (10,794,400)
     Other income
     and expenses         (422,200)      (309,600)       682,500        242,600
                      ------------   -------------  -------------   ------------
Net loss              $ (8,282,100)  $ (3,685,300)  $ (6,632,500)   $(2,301,900)
                      =============  =============  =============   ============
</TABLE>

     Condensed  combined  balance  sheets  and  statements  of operations of the
Company's  equity  investees  include  USECC,  RMG,  SGMC,  YSFC  and  USE.

E.   MINERAL  TRANSACTIONS  AND  MINING  PROPERTIES:

GMMV

     During  fiscal  1990,  the  Company  and USE entered into an agreement with
Kennecott,  a  wholly-owned, indirect subsidiary of The RTZ Corporation PLC, for
Kennecott  to  acquire  a  50% interest in certain uranium mineral properties in
Wyoming known as the Green Mountain Properties.  During the life of the venture,
the  parties  entered  into  various  amendments  to  the  GMMV  Agreement.

     As a result of sustained depressed uranium prices, the GMMV properties were
maintained  on a shut down basis.  During fiscal 2000, certain differences arose
in  the GMMV and Kennecott sued the Company and USE.  On September 11, 2000, the
parties  settled  all  disputes  and  Kennecott  paid  the Company and USE $3.25
million  and  assumed reclamation liability for the Sweetwater Mill, Jackpot and
Big  Eagle  Mine  properties.  (See  Note  J).


                                       55
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

SMP

     During  fiscal  1989,  Crested  and  USE,  through  USECC,  entered into an
agreement  to  sell  a  50%  interest  in  their  Sheep Mountain properties to a
subsidiary  of  Nukem  Inc., CRIC.  USECC and CRIC immediately contributed their
50%  interests  in  the  properties to a newly-formed partnership, SMP.  SMP was
established  to  further  develop and mine the uranium claims on Sheep Mountain,
acquire  uranium  supply  contracts  and market uranium.  Certain disputes arose
among  USECC,  CRIC and its parent Nukem, Inc. over the operation of SMP.  These
disputes  have been in litigation/arbitration for the past thirteen years.   See
Note  J  for  the  status  of  the  related  litigation/arbitration.

     Due  to  the  litigation  and  arbitration  proceedings  involving SMP, the
Company  has  expensed all of its costs related to SMP and has no carrying value
of  its  investment  in  SMP at December 31, 2003, December 31, 2002 and May 31,
2002.  (See  Note  J).

PHELPS  DODGE

     During prior years, the Company and USE conveyed interests in mining claims
to  AMAX Inc. ("AMAX") in exchange for cash, royalties, and other consideration.
AMAX  merged  with Cyprus Minerals ("Cyprus Amax") which was purchased by Phelps
Dodge Mining Company ("Phelps Dodge") in December 1999.  The properties have not
been  placed  into  production  as  of  December  31,  2003.

     Amax  and  later  Cyprus  Amax  paid  the Company and USE an annual advance
royalty  of  50,000  (25,000  lbs.  each)  pounds  of  molybdenum  (or  its cash
equivalent).  During  fiscal 2000, Phelps Dodge assumed this obligation and made
its  first  advance  royalty  payment  to  the  Company and USE during the first
quarter  of  2001.  Phelps  Dodge is entitled to a partial credit against future
royalties  for  any  advance  royalty  payments made, but such royalties are not
refundable  if  the  properties  are  not  placed  into production.  The Company
recognized  $60,300  of  revenue  from  the  advance royalty payments during the
fiscal  year  ended May 31, 2001.  If Phelps Dodge formally decides to place the
properties into production, it is obligated to pay $2,000,000 to the Company and
USE.

     Per  the  contract with AMAX, the Company and USE are to receive 15% of the
first  $25,000,000, or $3,750,000, if the properties are sold, which the Company
and  USE believe occurred when Phelps Dodge purchased Cyprus Amax.  Phelps Dodge
filed suit against the Company and USE on June 19, 2002 regarding these matters.
(See  Note  J).

SUTTER  GOLD  MINING  COMPANY

     Sutter  Gold  Mining  Company  ("SGMC")  was established in 1990 to conduct
operations  on  mining  leases  and  to produce gold from the Lincoln Project in
California.

     SGMC  has  not  generated  any  significant revenue and has no assurance of
future revenue.  All acquisition and mine development costs since inception were
capitalized.  Due  to  the  decline  in  the spot price for gold and the lack of
adequate  financing,  SGMC  has  put  the property on a shut down status and has
taken  an  impairment  on  the  associated  assets.

     During  fiscal  2000,  a  visitor's  center  was  developed  and  became
operational.  SGMC  has  leased the visitor's center to partially cover stand-by
costs  of the property. At December 31, 2003, the spot market price for gold had
attained  levels  that  management believes will allow SGMC to produce gold from
the  property  on


                                       56
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

an economic basis. This conclusion is based on engineering analysis completed on
the property. Management of SGMC is therefore pursuing the equity capital market
and  non-affiliated  investors  to  obtain  sufficient  capital  to complete the
development  of  the  mine,  construct  a  mill  and  place  the  property  into
production.  However,  there can be no assurance that any funds will be obtained
and  the  development  of  the  mine  will  occur.  (See  Note  N).

PLATEAU  RESOURCES  LIMITED

     During  fiscal  1994,  USE  entered  into an agreement with Consumers Power
Company  to  acquire  all  the  issued  and  outstanding common stock of Plateau
Resources  Limited  ("Plateau"),  a  Utah  corporation.  Plateau  owns a uranium
processing  mill  and  support  facilities  and certain other real estate assets
through  its  wholly-owned  subsidiary, Canyon Homesteads, Inc., in southeastern
Utah.  USE  paid  nominal cash consideration for the Plateau stock and agreed to
assume  all  environmental  liabilities and reclamation bonding obligations.  At
December  31, 2003, Plateau has a cash security in the amount of $6.8 million to
cover reclamation and annual licensing of the properties (see Note J).  Although
the  Company  has no ownership in Plateau, Directors of the Company and USE have
agreed  to  divide  equally a portion of certain reclamation obligations above a
defined  amount,  and  will  share  equally  in  the  cash  flows  derived  from
operations.

     The  Company  and  USE  are  currently  evaluating  the best utilization of
Plateau's  assets.  Evaluations  are  ongoing to determine when, or if, the mine
and  mill  properties  should  be placed into production.  The primary factor in
these  evaluations  relates  to  uranium  market  prices.

     Due  to  uranium  market  conditions in 2002, Plateau decided to change the
license  status from operational back to reclamation and filed a new reclamation
plan.  The  Nuclear Regulatory Commission (NRC) reviewed the revised reclamation
and  decommissioning  plan  and  agreed  to  a  $6.1  million  reclamation plan.
Therefore,  Plateau received about $2.9 million of excess reclamation bond funds
on  the Shootaring Canyon Uranium Mill. During the year ended December 31, 2003,
management  of  Plateau  determined  that the mine and mill properties should be
reclaimed.

     On  August  1,  2003,  the  Company  and  USE sold interests in the Ticaboo
Townsite  in southern Utah as a result of Plateau entering into a Stock Purchase
Agreement  to  sell  all  the  outstanding  shares  of  Canyon  Homesteads, Inc.
("Canyon")  to  The  Cactus Group LLC, a newly formed Colorado limited liability
company.  The  Cactus Group purchased all of the outstanding stock of Canyon for
$3,370,000.  Of  that  amount,  $349,300  was  paid  in  cash at closing and the
balance  of  $3,120,700  is  to  be  paid  under the terms of a promissory note.

     Pursuant  to  the note agreement, the Company and USE are to receive $5,000
per  month  for  the  months  of November 2003 to March 2004 and $10,000 for the
months  of  November  2004 to March 2005 and $24,000 per month for the months of
April  to  October  2004 and $24,000 per month on a monthly basis after March of
2005  from  The  Cactus  Group  until  August  of 2008, at which time, a balloon
payment  of $2.8 million is due.  The note is secured with all the assets of The
Cactus  Group and Canyon along with personal guarantees by the six principals of
The  Cactus  Group.  As  additional consideration for the sale, the Company will
also receive the first $210,000 in gross proceeds from the sale of either single
family or mobile home lots in Ticaboo.  The Company shares these cash flows on a
50-50  basis  with  USE.


                                       57
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

ROCKY  MOUNTAIN  GAS,  INC.

     During  fiscal 2000, the Company and USE organized Rocky Mountain Gas, Inc.
("RMG")  to  enter  into  the  coalbed methane gas/natural gas business.  RMG is
engaged  in  the  acquisition  of  coalbed methane gas properties and the future
exploration,  development  and  production of methane gas from those properties.
At  December  31,  2003,  RMG  is  owned  39.8% by the Company and 47.5% by USE.

     On  January  3,  2000,  RMG  entered into an agreement with Quantum Energy,
L.L.C. (Quantum formed a subsidiary "Quaneco" to conduct its business with RMG))
to purchase a 50% working interest and 40% net revenue interest in approximately
185,000  acres  of  unproven  leasehold  interests  in the Powder River Basin of
southeastern  Montana.  RMG  also  acquired a 100% working interest (82% revenue
interest) in 65,247 net mineral acres in southwest Wyoming during the year ended
May,  31,  2000


CCBM
----

     On  July  10, 2001, RMG completed a sale of gas properties to CCBM, Inc., a
Delaware corporation, which is wholly-owned by Carrizo Oil & Gas, Inc., Houston,
Texas  (NMS  "CRZO").  The  agreement  between  CCBM  and  RMG is to finance the
further development of coalbed methane acreage currently owned by RMG in Montana
and  Wyoming,  and to acquire and develop more acreage in Wyoming and the Powder
River  Basin  of  Montana.

     RMG  is  the  designated operator under a Joint Operating Agreement ("JOA")
between RMG and CCBM, which will govern all operations on the properties subject
to  a  Purchase and Sale Agreement between RMG and CCBM, subject to pre-existing
JOA's  with  other  entities, and operations or properties in the area of mutual
interest ("AMI").  CCBM has the right to participate in other properties RMG may
acquire  under  the  area  of  mutual  interest  ("AMI").

     RMG  assigned  CCBM  an  undivided  50%  interest  in all of RMG's existing
coalbed  methane  properties  (with the exception of Castle Rock of which only a
6.25% working interest was assigned) for a sales price of $7,500,000 in the form
of  a  non-recourse promissory note payable in principal amounts of $125,000 per
month  plus  interest  at an annual rate of 8% over 41 months (starting July 31,
2001)  with  a  balloon  payment  due  on  the forty-second month.  This note is
accounted  for  on  a  cash  basis because it is non-recourse with its principal
payments  reducing  the  natural gas properties in accordance with the full cost
method  of  accounting.  The  balance due under the note at December 31, 2003 is
$863,200  due  to  a  principal  reduction  of  approximately $1.5 million. (See
Pinnacle  below)  The  properties  sold  to  CCBM consisted of the Kirby, Oyster
Ridge,  Clearmont,  Sussex,  Finley, Baggs North, and Gillette North properties.
CCBM's  50%  undivided  interest  is  pledged  back  to RMG to collateralize the
promissory  note.

     To start development, and as part of the consideration for the acquisition,
CCBM  agreed  to pay $5,000,000 to drill and complete from 30 to 60 wells on the
coalbed  properties.  RMG  is "carried" for its 50% interest in these wells, and
will not be required to pay any of such costs.  After the initial $5,000,000 has
been  spent,  RMG  and  CCBM  each  will  pay  for  their  50% share of costs in
subsequent  wells,  and also will pay for their 50% share of operating costs for
the  wells  drilled  and  completed  in  this  drilling program.  Without CCBM's
consent,  none  of the drilling funds can be used for operations associated with
water  disposal  wells,  gas  compression  beyond  100  PSIG,  or for facilities
downstream  of  compression  beyond  100  PSIG.  CCBM  will  earn  a 50% working
interest  in  each  well  location  (80  acres)  and  gas  production therefrom,
regardless  of the status of payments on the promissory note.  The balance under
the  work  commitment  at  December  31,


                                       58
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

2003  was  $305,100.  In  2003,  a portion of these interests were exchanged for
common  stock  of  Pinnacle  Gas  Resources  (See  Pinnacle  below).

Bobcat
------

     On April 12, 2002, RMG signed an agreement to purchase working interests in
approximately  1,940  gross  acres  of  coalbed methane properties in the Powder
River  Basin  of  Wyoming.  The  contract  closed on June 4, 2002.  RMG paid the
seller  $500,000  cash and another $150,000 by having USE issue 37,500 shares of
its restricted common stock to the seller; CCBM paid $500,000 cash to the seller
and  CRZO  issued its restricted shares of common stock valued at $150,000.  The
properties  are  located  approximately  25 miles north of Gillette, in Campbell
County,  Wyoming.  In  2003,  these interests were exchanged for common stock of
Pinnacle  Gas  Resources  (see  Pinnacle  below).

Pinnacle
--------

     On June 23, 2003, a Subscription and Contribution Agreement was executed by
RMG, CCBM, and the seven affiliates of Credit Suisse First Boston Private Equity
("CSFB  Parties").  Under  the  Agreement,  RMG  and CCBM contributed certain of
their respective interests, having an estimated fair value of approximately $7.5
million  each,  carried  on  RMG's books at a cost of $922,600, comprised of (1)
leases  in the Clearmont, Kirby, Arvada and Bobcat CBM project areas and (2) oil
and  gas reserves in the Bobcat project area, to a newly formed entity, Pinnacle
Gas  Resources,  Inc., a Delaware corporation ("Pinnacle").  In exchange for the
contribution  of  these  assets,  RMG and CCBM each received 37.5% of the common
stock  of  Pinnacle ("Pinnacle Common Stock") as of the closing date and options
to  purchase  Pinnacle  Common  Stock  ("Pinnacle  Stock  Options").  The  CFSB
contributed  $5.0  million  for  25%  of  the  common  stock  of  Pinnacle.

      CSFB  also contributed approximately $13.0  million of cash to Pinnacle in
return  for  the  Redeemable  Preferred  Stock  of Pinnacle ("Pinnacle Preferred
Stock"),  and  warrants to purchase Pinnacle Common Stock ("Pinnacle Warrants").
The  CSFB  Parties  also  agreed  to  contribute  additional cash, under certain
circumstances,  of  up to approximately $11.8 million to Pinnacle to fund future
drilling, development and acquisitions.  The CSFB Parties currently have greater
than  50%  of  the  voting  power  of  the  Pinnacle capital stock through their
ownership  of  Pinnacle  Common  Stock  and  Pinnacle  Preferred  Stock.

     Currently,  on  a  fully diluted basis, assuming that all parties exercised
their  Pinnacle  Warrants  and  Pinnacle Options, the CSFB Parties, RMG and CCBM
would  have  ownership  interests  of  approximately  46.2%,  26.9%  and  26.9%,
respectively.  On  a  fully-diluted basis, assuming the additional $11.8 million
of  cash  was  contributed  by  the  CSFB  Parties and all Pinnacle Warrants and
Pinnacle Options were exercised by all parties, the CSFB Parties would own 54.6%
of  Pinnacle  and  RMG  and  CCBM  would  each  own  22.7%  of  Pinnacle.

     Prior  to  and  in  connection with its contribution of assets to Pinnacle,
CCBM  paid  RMG  approximately  $1.8  million in cash as part of its outstanding
purchase  obligation  on  the coalbed methane property interests CCBM previously
acquired  from RMG.  CCBM was also given a credit of $1,250,000 against the note
payable  pursuant to the original Purchase and Sale Agreement which allowed CCBM
to recover $1,250,000 from 20% of RMG's net revenue interest from any production
from  the properties contributed to Pinnacle.  After these payments and credits,
there was a balance of approximate $1.2 million remaining on the note receivable
from  CCBM  to  RMG.  At  December  31,  2003,  the  balance  on  the  note


                                       59
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

receivable  for  CCBM  was  $863,200.  The  principal  reductions  to  the  note
receivable  from  CCBM  reduced  the monthly principal payments to $53,000.  The
receipt of payments from CCBM on the note receivable are accounted for on a cash
basis  because  it  is  non-recourse.

     Pinnacle is a private corporation.  Only such information about Pinnacle as
its board of directors  elects to release is available to the public.  All other
information  about  Pinnacle  is  subject  to confidentiality agreements between
Pinnacle,  RMG,  and  the  other  parties  to  the  June  2003  transaction.

F.  OIL  AND  GAS  INFORMATION:

     Costs related to the oil and gas activities of the Company were incurred as
follows:


<TABLE>
<CAPTION>
     For  the     For  the  seven     For  the
     year  ended     months  ended     year  ended
                                         December 31,   December 31,   May  31,
                                        -------------- -------------- ----------
                                             2003           2002        2002
                                          ---------      ---------    ---------
<S>                                       <C>       <C>       <C>
     Company's share of equity method
       investees' cost of property acquisition,
       exploration and development        $ 103,800      $ 288,400    $ 228,100
                                          =========      =========    =========
</TABLE>

     The  Company  had the following aggregate capitalized costs relating to the
Company's  oil  and  gas  activities  as  follows:
<TABLE>
<CAPTION>
                                                December 31,            May 31,
                                          ------------------------    ----------

                                             2003           2002        2002
                                          ---------      ---------    ---------
<S>                                          <C>       <C>         <C>
     Proved oil and gas properties        $ 886,800      $  886,800   $  886,800
        Less accumulated depreciation,
        depletion and amortization          886,800         886,800      886,800
                                          ---------      ----------   ----------

                                          $     --       $       --   $       --
                                          =========      ==========   ==========
     Company's share of equity method investees'
        net capitalized costs             $ 470,900      $1,961,600   $2,585,800
                                          =========      ==========   ==========
</TABLE>

No  depreciation,  depletion  or  amortization expense was recorded for the year
ended December 31, 2003, the seven months ended December 31, 2002 and the fiscal
years  ended  May  31,  2002  and  2001  respectively.


                                       60
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

G.  DEBT:

     Obligations  of  the  Company consist of advances payable to USE, which are
due upon demand.  The obligation is due to U.S. Energy for funding a majority of
the operations of USECC, of which 50% is the responsibility of the Company.  All
advances  payable  to  USE  are  classified  as current as of December 31, 2003,
December  31,  2002  and May 31, 2002 as a result of USE's unilateral ability to
modify  the  repayment  terms.

<TABLE>
<CAPTION>
                                               December 31,            May 31,
                                        --------------------------  ------------

                                            2003          2002          2002
                                        ------------  ------------  ------------
<S>                              <C>         <C>         <C>
     Advances payable - U.S. Energy
       balance payable  in full on
       demand (see Note A)              $  9,408,300  $  8,553,900  $  7,560,700
                                        ============  ============  ============
<FN>

     As of December 31, 2003, the Company and USE had a $ 750,000 line of credit
with  a  commercial  bank.  The line of credit bears interest at a variable rate
(5%  as  of December 31, 2003).  The weighted average interest rate for the year
ended  December  31,  2003  was  5.12%.  As  of  December 31, 2003, there was no
outstanding  balance  due  under  the  line  of  credit.  This line of credit is
secured  by a share of the net proceeds of fees from production of oil wells and
certain  assets  of  USECC.
</TABLE>

H.     INCOME  TAXES:

       The  components  of  deferred taxes as of December 31, 2003 and  2002 and
       May 31, 2002  are  as  follows:

<TABLE>
<CAPTION>
                                                 December 31,          May 31,
                                          ------------------------- ------------
                                              2003         2002         2002
                                          ------------ ------------ ------------
<S>                                        <C>           <C>           <C>
     Deferred tax assets:
       Deferred compensation              $     3,400  $   172,700  $   131,200
       Deferred gains                         106,100      106,100      106,100
       Non-deductible allowances              104,600      288,500      288,500
       Net operating loss carry-forwards    5,085,900    4,306,400    3,636,200
       Tax credits                             15,000       15,000       15,000
       Tax basis in excess of book basis         --           --         57,000
                                          ------------ ------------ ------------
     Total deferred tax assets              5,315,000    4,888,700    4,234,000

     Deferred tax liabilities:
       Basis difference of investments       (235,600)    (131,800)        --
       Development and exploration costs      (36,100)     (36,100)     (36,100)
                                          ------------ ------------ ------------
     Total deferred tax liabilities          (271,700)    (167,900)     (36,100)
                                          ------------ ------------ ------------

     Net deferred tax assets
     - all non-current                      5,043,300    4,720,800    4,197,900

     Valuation Allowance                   (5,043,300)  (4,720,800)  (4,197,900)
                                          ------------ ------------ ------------
     Net deferred tax asset               $      --    $      --    $      --
                                          ============ ============ ============
</TABLE>

     At  December  31,  2003,  the Company had available, for federal income tax
purposes,  net  operating loss carry-forwards of approximately $14,959,000 which
expire  from  2006  through  2022.  The  Company  has


                                       61
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

established  a  valuation  allowance for the full amount of the net deferred tax
assets  due  to  the  recurring losses of the Company and the uncertainty of the
Company's  ability  to  generate  future  taxable  income  to  utilize  the  NOL
carry-forwards. In addition, the use of the NOL carry-forwards may be limited by
Internal  Revenue  Service  provisions  governing  significant change in company
ownership.

     The  valuation allowance increased $322,500 for the year ended December 31,
2003,  increased  $522,900  for  the  seven  months  ended December 31, 2002 and
increased (decreased) $255,900 and $(1,490,000) for the years ended May 31, 2002
and  2001,  respectively.

     The income tax provision is different from the amounts computed by applying
the  statutory  federal income tax rate to income before taxes.  The reasons for
these  differences  are  as  follows:

<TABLE>
<CAPTION>
                                               Seven
                                Year Ended Months Ended
                               December 31, December 31,   Year Ended May 31,
                               ------------ -----------  -----------------------

                                   2003         2002        2002        2001
                               ------------ -----------  ---------- ------------
<S>                              <C>         <C>         <C>         <C>
     Expected federal income tax
        expense (benefit)      $ (808,500)  $ (394,000)  $(679,600)  $  410,000
     Losses from subsidiaries not
        consolidated for tax purposes,
        utilization of net operating
        losses and other          486,000     (128,900)    423,700    1,080,000
     Valuation allowance          322,500      522,900     255,900   (1,490,000)
                               ------------ -----------  ---------- ------------
     Income taxes              $      --    $      --    $     --   $      --
                               ============ ===========  ========== ============
<FN>

     There  were  no taxes payable as of December 31, 2003, 2002 or, May 31, 2002
or  2001.
</TABLE>

I.     SHAREHOLDERS'  EQUITY:

     The  Boards  of  Directors  of  the Company from time to time, issued stock
bonuses  to  certain  directors,  employees and third parties.  These shares are
forfeitable  to  the  Company  until earned.  The Company is responsible for the
compensation  expense  related to these issuances.   For the year ended December
31,  2003,  the seven months ended December 31, 2002 and the years ended May 31,
2002 and 2001, the Company did not recognize compensation expense resulting from
these  issuances.  A  schedule of forfeitable shares for Crested is set forth in
the  following  table:


                                       62
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

       Issue                    Number               Issue         Total
       Date                   of Shares              Price      Compensation
       -----                  ---------              -----      ------------

     June 1990                  25,000               $1.06     $     26,562
     December 1990               7,500                 .50            3,750
     January 1993                6,500                 .22            1,430
     January 1994                6,500                 .28            1,828
     January 1995                6,500                 .19            1,230
     January 1996                5,000               .3125            1,600
     January 1997                8,000               .9375            7,500
     Release of Earned Shares  (50,000)                            (33,800)
                              --------                         -----------
     Balance at
      December 31, 2003          15,000                        $     10,100
                              =========                        ============


J.   COMMITMENTS,  CONTINGENCIES  AND  OTHER:

LEGAL  PROCEEDINGS

     Material  pending  proceedings  are  summarized  below.  Certain  of  the
Company's  affiliates  are involved in ordinary routine litigation incidental to
their  business.  Other  proceedings  which  were  pending during the year ended
December  31,  2003  have  been  settled  or  otherwise  finally  resolved.

SHEEP  MOUNTAIN  PARTNERS  ARBITRATION/LITIGATION

     In  1991,  disputes  arose  between  the  Crested and USE d/b/a/ USECC, and
Nukem,  Inc.  and  its  subsidiary  Cycle  Resource  Investment  Corp. ("CRIC"),
concerning  the  formation  and  operation of their equally owned Sheep Mountain
Partners  (SMP)  partnership.  Arbitration proceedings were initiated by CRIC in
June 1991 and in July 1991, USECC filed a lawsuit against Nukem, CRIC and others
in  the U.S. District Court of Colorado in Civil No. 91B1153.  The Federal Court
stayed  the arbitration proceedings and discovery proceeded.   In February 1994,
all  of the parties agreed to consensual and binding arbitration of all of their
disputes  over  SMP  before  an  arbitration  panel  (the  "Panel").

     After  73  hearing  days, the Panel entered an Order and Award on April 18,
1996  and  clarified  the  Order  on July 3, 1996, finding generally in favor of
Crested  and  USE on certain of their claims and imposed a constructive trust in
favor  of  Sheep  Mountain  Partners  on uranium contracts Nukem entered into to
purchase  uranium  from  CIS  republics.  The  Panel also awarded SMP damages of
$31,355,070 against Nukem.  USECC filed a petition for confirmation of the Order
and  on  June  27, 1997, the U.S. District Court confirmed the Panel's Orders in
its  Second  Amended  Judgment.

     Thereafter,  Nukem/CRIC  appealed the Judgment to the 10th Circuit Court of
Appeals  ("CCA"). On October 22, 1998, the 10th CCA issued an Order and Judgment
affirming  the  U.S.  District  Court's  Second  Amended  Judgment  without
modification.  The ruling affirmed (i) the imposition of a constructive trust in
favor  of  SMP  on  Nukem's rights to purchase CIS uranium, the uranium acquired
pursuant  to  those rights, and the profits therefrom; and (ii) the damage award
in  favor  of  SMP  against  Nukem.  The  10th  CCA held that the Panel's Awards
"clearly  retains  both  a  constructive  trust  and  a  damage  award," and the
                                                 ---
Arbitration Awards and the Second Amended Judgment were "clear and unambiguous."


                                       63
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

     On February 8, 1999, the U.S. District Court ordered Nukem to pay USECC the
balance of the damage award.  Nukem did so, but then moved for a satisfaction of
judgment  without  accounting  for  the monies earned in the Constructive Trust.
The  District  Court  denied Nukem's motion and Nukem filed its second appeal to
the 10th CCA.  On October 16, 2000, the 10th CCA again affirmed the order of the
District Court.  The 10th CCA held that Nukem had not "provided an accounting of
the  partnership  assets,"  finding that "the district court order presented for
our  review  does not decide which CIS contracts are covered by the constructive
trust."

     On  November  3, 2000, USECC filed a motion for a further accounting of the
Constructive Trust. On February 15, 2001, the District Court entered an Order of
Reference  appointing  a  Special  Master  to  "conduct  an  accounting"  of the
Constructive Trust. The accounting was conducted and on May 1, 2003, the Special
Master  filed  his Report with the District Court. Both parties filed objections
to  the  Report. On July 30, 2003, the U.S. District Court adopted the Report in
part  and  rejected it in part. Judgment was then entered by the Court on August
1,  2003  in  favor  of  USECC  and  against Nukem in the amount of $20,044,183.

     On  August  15,  2003,  Nukem  filed a "Motion to Remand to the Arbitration
Panel  or  in the Alternative, to Alter, Amend and/or Correct the Court's August
1,  2003  Judgment  and  July  30, 2003 Order," and a "Motion to Correct Certain
Findings  or Statements in the Court's Order of July 30, 2003." On the same day,
USECC  filed  a  motion under Fed.R.Civ.P. 52(b) and 59(e) to alter or amend the
July  30,  2003 Order and the August 1, 2003 Judgment. The District Court denied
the  parties' motions on September 10 and 11, 2003, respectively. Nukem's appeal
and  USECC's  cross-appeal  followed. Nukem's opening brief was filed on January
16,  2004  and  on  February  24,  2004,  USECC  filed  an  opening brief in its
cross-appeal  and  an answer to Nukem's brief. Nukem has until March 29, 2004 or
any  extensions  thereof  to  file an answer to USECC's opening brief. USECC may
then  file  a  reply  brief  14 days after service of Nukem's answer. Management
believes  that  the  ultimate  outcome  of  this matter will not have an adverse
affect  on  the  Company's  financial  condition  or  result  of  operations.

CONTOUR  DEVELOPMENT  LITIGATION

     On  July  28,  1998, USE and Crested  filed a lawsuit in the U. S. District
Court  of  Colorado  in  Case No. 98WM1630, against Contour Development Company,
L.L.C.  and  entities  and  persons associated with Contour Development Company,
L.L.C.  (together,  "Contour") seeking compensatory and consequential damages of
more  than $1.3 million from the defendants for dealings in real estate owned by
USE  and  Crested  in  Gunnison,  Colorado.  The  Contour  defendants asserted a
counterclaim asking for payment of attorneys fee and costs.  The parties settled
the  litigation in 2004.  In the settlement, USE and Crested received $25,000 in
cash; two lots in the City of Gunnison, Colorado (one of which has been sold for
a  net of $65,326 and the other lot is under contract to sell for $180,000), and
an  additional  five  development  lots  covering  175  acres north of Gunnison,
Colorado.

     See  "Business  -  Commercial Operations - Real Estate and Other Commercial
Operations  -  Colorado  Properties"  above.

PHELPS  DODGE  LITIGATION

     Crested  and USE, d/b/a USECC, were served with a lawsuit on June 19, 2002,
filed in the U.S. District Court of Colorado (Case No. 02-B-0796(PAC)) by Phelps
Dodge  Corporation  (PD)  and its subsidiary, Mt. Emmons Mining Company (MEMCO),
over  contractual  obligations  in  USECC's  agreement


                                       64
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

with  PD's  predecessor  companies,  concerning mining properties on Mt. Emmons,
near  Crested  Butte,  Colorado.

     The  litigation  stems  from agreements that date back to 1974 when Crested
and USE leased the  mining claims from AMAX Inc., PD's predecessor company.  The
mining  claims  cover  one  of  the  world's  largest  and  richest  deposits of
molybdenum  discovered  by AMAX.  AMAX reportedly spent over $200 million on the
acquisition,  exploration  and  mine  planning  activities  on  the  Mt.  Emmons
properties.

     The  complaint  filed  by  PD  and  MEMCO  seeks  a determination that PD's
acquisition  of Cyprus Amax was not a sale. Under a 1986 agreement between USECC
and  AMAX,  if AMAX sold MEMCO or its interest in the mining properties, Crested
and  USE  would receive 15% (7.5% each) of the first $25 million of the purchase
price  ($3.75  million).  In 1991, Cyprus Minerals Company acquired AMAX to form
Cyprus  Amax Minerals Co.  USECC's counter and cross-claims allege that in 1999,
PD  formed  a  wholly-owned  subsidiary  CAV  Corporation,  for  the  purpose of
purchasing  the  controlling  interest  of  Cyprus  Amax  and  its  subsidiaries
(including  MEMCO)  at  an  estimated  value  in  cash and PD stock exceeding $1
billion and making Cyprus Amax a subsidiary of PD.  Therefore, USECC asserts the
acquisition  of  Cyprus  Amax  by PD was a sale of MEMCO and the properties that
triggers  the  obligation  of  Cyprus  Amax  to pay USECC the $3.75 million plus
interest.

     The  other  issue in the litigation is whether USECC must, under terms of a
1987  Royalty  Deed,  accept  PD's  and  MEMCO's  conveyance  of  the Mt. Emmons
properties  back  to  USECC,  which properties now include a plant to treat mine
water,  costing  in  excess  of  $1 million a year to operate in compliance with
State of Colorado regulations.  PD's and MEMCO's claim seek to obligate USECC to
assume  the operating costs of the water treatment plant.  USECC refuses to have
the  water treatment plant included in the return of the properties because, the
USECC  counterclaim argues, the properties must be in the same condition as when
they  were  acquired by AMAX before the water treatment plant was constructed by
AMAX.

     As  added  counterclaims,  USECC  seeks  (i)  damages  for  PD's  breach of
covenants  of  good  faith  and  fair  dealing; (ii) damages for PD's failure to
develop  the  Mt.  Emmons  properties  and  not  protecting USECC's  rights as a
reversionary  owner  of  the  mining rights to the properties, (iii) damages for
unjust  enrichment  of  PD; (iv) damages for breach of the PD's fiduciary duties
owed  to  USECC  as  reversionary  owner  of the property, and for neglecting to
maintain  the  mining  rights  and  interests  in  the  properties.

     On March 17, 2003, PD filed additional motions for partial summary judgment
on various claims. On January 22, 2004, the District Court heard the motions and
responses  of  USECC and additional briefs were thereafter filed with the Court.
The  Court  is  considering  the  motions. Management believes that the ultimate
outcome  of  this  matter  will  not  have  an  adverse  affect on the Company's
financial  condition  or  result  of  operations.


ROCKY  MOUNTAIN  GAS,  INC.  (RMG)

LITIGATION  INVOLVING  LEASES  ON  COALBED  METHANE  PROPERTIES  IN  MONTANA

     On  or  about April 1, 2001, RMG was served with a Second Amended Complaint
wherein the Northern Plains Resource Council had filed suit in the U.S. District
Court  of  Montana,  Billings  Division in Case No. CV-01-96-BLG-RWA against the
United  States Bureau of Land Management ("BLM"), RMG, certain of its affiliates
(including  Crested  and  USE)  and  some  20 other defendants. The plaintiff is
seeking  to


                                       65
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

cancel  oil  and gas leases issued to RMG et. al. by the BLM in the Powder River
Basin  of  Montana  and  for  other  relief.

     The  basis  for  the  complaint  appears  to  be that the BLM's regulations
require  the  BLM to respond to objections filed by persons owning land or lease
rights  adjacent to the coalbed properties which the BLM is offering to lease to
the  public.  The argument of plaintiff appears to be that if objections are not
responded  to  by  the  BLM prior to issuing CBM leases, the leases are invalid.
Based on this argument, the plaintiff appears to have been successful in forcing
cancellation  of  some CBM leases granted to others in the Powder River Basin of
Montana,  because the BLM did not respond to some objecting adjacent landowners.
However,  all  of the BLM leases in Montana held by RMG (none are held by USE or
Crested  in their own corporate names) are at least four years old, and there is
no  record  of  any  objections  being  made  to  the  issue  of  those  leases.

     Based on filings in the case to date, it appears that the BLM is taking the
initiative in responding to the plaintiff.  We believe RMG's leases were validly
issued  in  compliance  with  BLM procedures, and do not believe the plaintiff's
lawsuit  will  adversely  affect  any  of  RMG's  Montana  BLM  leases.

LAWSUITS  CHALLENGING  BLM'S  RECORDS  OF  DECISIONS

     Three  lawsuits are currently pending in the Montana Federal District Court
challenging  BLM's  Records  of Decisions for the Powder River Basin Oil and Gas
EIS  (PRB-EIS)  for  the Wyoming portion of the basin, and the Statewide Oil and
Gas  EIS  and  Proposed  Amendment  for  the  Powder River and billings Resource
Management  Plans in Montana.  Neither the Company, nor RMG is a party to any of
these  lawsuits.

LITIGATION  INVOLVING  DRILLING  ON  A  COALBED  METHANE  LEASE

     A  drilling  company,  Eagle  Energy  Services,  LLC  filed a lien on RMG's
leasehold  in  southwestern  Wyoming  for  drilling  services performed at RMG's
Oyster  Ridge  Property and filed a lawsuit foreclosing the lien. Eagle Energy's
bank,  Community  First National Bank of Sheridan, Wyoming, filed a similar suit
for the same amount on an assignment from Eagle Energy against RMG, Eagle Energy
Services,  LLC  and others who guaranteed a loan to Eagle Energy in Civil Action
No.  C02-9-328  in  the 4th Judicial District of Sheridan County, Wyoming. Eagle
Energy's  claim  is  for  a  contract  to  drill a well for coalbed methane. RMG
terminated  the  agreement because of the dangerous conditions of Eagle Energy's
equipment  and other reasons. The claim against RMG is for $49,309. Negotiations
to  settle  the  lien  and  lawsuits  are  pending. Management believes that the
ultimate outcome of the matters will not have a material effect on the Company's
financial  condition  or  result  of  operations.

RECLAMATION  AND  ENVIRONMENTAL  LIABILITIES

     Most  of  the  Company's  and  USE's  exploration activities are subject to
federal  and  state  regulations that require the Company and USE to protect the
environment.  The  Company  and  USE conduct their operations in accordance with
these  regulations.  The  Company's  and  USE's  current  estimates  of  their
reclamation  obligations  and  their  current  level  of expenditures to perform
ongoing  reclamation may change in the future. At the present time, however, the
Company  and  USE  cannot  predict the outcome of future regulation or impact on
costs.  Nonetheless,  the  Company  and USE have recorded their best estimate of
future  reclamation  and  closure  costs  based  on  currently  available facts,
technology  and  enacted laws and regulations. Certain regulatory agencies, such
as  the  Nuclear  Regulatory  Commission  ("NRC"), the Bureau of Land Management
("BLM")  and the Wyoming Department of Environmental Quality ("WDEQ") review the


                                       66
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

Company's  and USE's reclamation, environmental and decommissioning liabilities.
The  Company  and  USE  believe  the  recorded amounts are consistent with those
reviews and related bonding requirements. To the extent that production on their
properties  is delayed, interrupted or discontinued because of regulation or the
economics of the properties, the future earnings of the Company and USE would be
adversely  affected. The Company and USE believe they have accrued all necessary
reclamation  costs  and  there are no additional contingent losses or unasserted
claims  to  be  disclosed  or  recorded.

     The majority of the Company's and USE's environmental obligations relate to
former mining properties acquired by the Company and USE.  Since the Company and
USE  currently  do  not  have  properties in production, the Company's and USE's
policy  of  providing  for  future  reclamation  and  mine  closure  costs  on a
unit-of-production basis has not resulted in any significant annual expenditures
or  costs.  For  the  obligations  recorded  on  acquired  properties, including
site-restoration,  closure  and  monitoring  costs,  actual  expenditures  for
reclamation  will  occur  over several years in the future.  The Company and USE
also  do  not  believe  that  any significant capital expenditures to monitor or
reduce  hazardous  substances  or  other  environmental  impacts  are  currently
required.  As  a  result, the near term reclamation obligations are not expected
to  have  a  significant  impact  on  the  Company's  liquidity.

     As  of  December 31, 2003, estimated reclamation obligations related to the
above  mentioned  mining properties total $7,264,700.  Crested's portion of this
obligation  is  $1,053,300,  which  is  reflected  on  the  balance sheet of the
Company.  The  remaining  balance  of $6,211,400 is an obligation of USE and its
other  affiliates, (excluding Crested).  The Company is obligated for 50% of any
reclamation  costs  in excess of current estimated reclamation obligations.  The
Company,  however,  does  not  expect  that  estimated reclamation costs will be
exceeded.

     The  Company  and  USE  currently have three properties or investments that
account for most of their environmental obligations, SMP, Plateau and SGMC.  The
environmental obligations and the nature and extent of cost sharing arrangements
with  other  potentially  responsible parties, as well as any uncertainties with
respect  to  joint  and several liability of each are discussed in the following
paragraphs:

     SMP
     ---

     The  Company  and  USE  are  equally  responsible  for  the  reclamation
obligations, environmental liabilities and liabilities for injuries to employees
in  mining  operations  with  respect  to  the  Sheep  Mountain properties.  The
reclamation  obligations,  which are established by regulatory authorities, were
reviewed  by  the  Company,  USE  and the regulatory authorities during the year
ended  December 31, 2003 and the balance in the reclamation liability account at
December 31, 2003 of $2,106,600 (2 accrued by Crested) is believed by management
to  be  adequate.  The  Company  and  USE are self bonded for this obligation by
mortgaging  certain  of  their  real estate assets, including the Glen L. Larsen
building,  and  by  posting  cash  bonds.

     GMMV
     ----

     During  fiscal  1991,  the  Company  and USE acquired mineral properties on
Green  Mountain  known  as  the  Big  Eagle  Property.  The GMMV also acquired a
uranium  mill  known  as  the Sweetwater Mill.  As part of the settlement of the
GMMV  litigation with Kennecott in September 2000, the Company was released from
any and all reclamation and environmental obligations related to the GMMV except
the  Ion  Exchange Plant.  During fiscal 2002, the Company and USE completed the
required  reclamation on the Ion Exchange Plant.  A final reclamation report has
been  submitted  to  the regulatory agencies.  Although this report has not been
audited  by  the  regulatory agency, no further reclamation cost is anticipated.


                                       67
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

     SUTTER  GOLD  MINING  COMPANY
     -----------------------------

     SGMC's  mineral  properties  are  currently  in a shut down status and have
never  been  in  production.  SGMC  has  recorded  a reclamation liability as of
December  31,  2003  that  is  covered  by  a  $27,400  reclamation  cash  bond.

     PLATEAU  RESOURCES,  LIMITED
     ----------------------------

     The environmental and reclamation obligations acquired with the acquisition
of  Plateau include obligations relating to the Shootaring Mill.  As of December
31,  2003,  the  reclamation liability on the Plateau properties was $5,364,000.
Plateau  held  a  cash  deposit  for  reclamation  in  the amount of $6,778,700.

EXECUTIVE  COMPENSATION

     The  Company and USE are committed to pay the surviving spouse or dependant
children  of  certain  of  their  officers one years' salary and an amount to be
determined  by  the  Boards  of  Directors,  for  a  period  of up to five years
thereafter.  This  commitment  applies  only  in the event of the death or total
disability  of  those officers who are full-time employees of the Company at the
time  of  total  disability  or  death.  Certain  officers  and  employees  have
employment  agreements  with  the Company and USE.  The maximum compensation due
under  these  agreements for the officers covered by the agreement for the first
year  after  their  deaths,  should  they  die  in the same year, is $311,400 at
December  31,  2003.


                                       68
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

K.   TRANSITION  PERIOD  COMPARATIVE  DATA

     The  following  table  presents certain financial information for the seven
months  ended  December  31,  2002  and  2001,  respectively:

<TABLE>
<CAPTION>
                                                    Seven  Months  Ended
                                                        December  31,
                                                 --------------------------

                                                     2002          2001
                                                 ------------  ------------
                                                               (Unaudited)
<S>                                          <C>           <C>
     Revenues                                     $        --   $        --

     Costs and expenses                               102,400       117,000
                                                 ------------  ------------
     Loss before equity in affiliates                (102,400)     (117,000)

     Equity in loss in affiliates                  (1,055,000)     (998,200)
                                                 ------------  ------------
     Loss before income taxes                      (1,157,400)   (1,115,200)

     Provision for income taxes                            --            --
                                                 ------------  ------------
     Net loss                                     $(1,157,400)  $(1,115,200)
                                                 ============  ============

     PER SHARE DATA:
       Revenues                                     $        --   $        --

       Costs and expenses                                  0.01          0.01
                                                   ------------  ------------
       Loss before equity loss                            (0.01)        (0.01)

       Equity in loss of affiliates                       (0.06)        (0.06)
                                                   ------------  ------------
       Loss before income taxes                           (0.07)        (0.07)

       Provision for income taxes                            --            --
                                                   ------------  ------------
       Net loss basic and diluted                   $     (0.07)  $     (0.07)
                                                   ============  ============

     Weighted average common shares outstanding

       Basic and diluted                             17,099,276    17,073,330
                                                   ============  ============
</TABLE>


                                       69
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

M.   SELECTED  QUARTERLY  FINANCIAL  DATA  (UNAUDITED)

<TABLE>
<CAPTION>
                                                     Three  Months  Ended
                                    ------------------------------------------------------
                                      March 31,      June 30,   September 30, December 31,
                                        2003          2003          2003          2003
                                    ------------  ------------  ------------  ------------
<S>                                 <C>           <C>           <C>           <C>

Operating revenues                  $        --   $        --   $        --   $        --

Operating loss                          (59,200)      (75,200)      (64,200)      (64,700)

Equity in loss from affiliate          (373,500)   (1,026,800)     (371,200)     (343,100)
                                    ------------  ------------  ------------  ------------

Net loss                            $  (726,500)  $(1,102,000)  $  (435,400)  $  (407,800)
                                    ============  ============  ============  ============

Loss per share, basic and diluted   $     (0.04)  $     (0.06)  $     (0.03)  $     (0.02)
                                    ============  ============  ============  ============

Basic and diluted weighted average
shares outstanding                   17,115,137    17,118,098    17,118,098    17,118,098
                                    ============  ============  ============  ============
</TABLE>


<TABLE>
<CAPTION>


                                                     Three  Months  Ended
                                    ------------------------------------------------------
                                      May  31,    February  28, November  30,  August 31,
                                        2002          2002          2001          2001
                                    ------------  ------------  ------------  ------------
<S>                                 <C>           <C>           <C>           <C>
Operating revenues                  $        --   $        --   $        --   $        --

Operating loss                          (37,300)      (38,300)      (51,400)      (48,000)

Equity in loss from affiliate          (505,800)     (502,800)     (237,100)     (578,200)
                                    ------------  ------------  ------------  ------------

Net loss                            $  (543,100)  $  (541,100)  $  (288,500)  $  (626,200)
                                    ============  ============  ============  ============

Loss per share, basic and diluted   $     (0.03)  $     (0.03)  $     (0.02)  $     (0.04)
                                    ============  ============  ============  ============

Basic and diluted weighted average
    shares outstanding               17,073,330    17,073,330    17,073,330    17,073,330
                                    ============  ============  ============  ============
</TABLE>


                                       70
<PAGE>


                                  CRESTED CORP.
                          NOTES TO FINANCIAL STATEMENTS
                 DECEMBER 31, 2003, 2002 AND MAY 31, 2002, 2001
                                  (Continued)

N.   SUBSEQUENT  EVENT

ROCKY  MOUNTAIN  GAS,  INC.

     On January 30, 2004, the Company's affiliate, RMG, acquired Wyoming coalbed
methane  (CBM)  properties  from  a non-affiliated party.  The purchase price of
$6.8  million  was  paid with $5.0 million of cash, $500,000 in a 30 day secured
note, $600,000 in restricted USE stock and $700,000 in restricted RMG stock. RMG
financed  $3.7  million  of  the  cash component from a recently established $25
million  credit  facility  arranged  by  Petrobridge  Investment Management, LLC
(Petrobridge),  a  mezzanine lender headquartered in Houston, TX.  As defined by
the  agreement,  terms  under  the  credit  facility  include the following: (1)
Advances  under  the  credit  facility  are subject to lenders approval; (2) All
revenues  from  oil and gas properties securing the credit facility will be paid
to  a  lock box controlled by the lender.  All disbursements for lease operating
costs, revenue distributions and operating expenses will require approval by the
lender  before distributions are made; and (3) The Company must maintain certain
financial  ratios  and  production  volume,  among  other  things.

     The properties acquired include 247 completed wells of which 138 wells were
producing  at  the time of the acquisition, approximately 6.0 million cubic feet
of  gas  per  day  (Mmcfd)  (approximately  3.2  Mmcfd  net  to  RMG) and 40,120
undeveloped fee acres, of which RMG owns 100%. RMG will operate 89% of the wells
and  owns  an  average  58%  working  interest in the producing wells and a 100%
working  interest  in  all of the undeveloped acreage.  The properties purchased
serve  as  the  sole  collateral for the credit facility.  With the acquisition,
RMG's  gross  and  net  acreage  holdings  increase to approximately 264,300 and
128,200,  respectively.

SUTTER  GOLD  MINING  CO.

     On  January  5,  2004,  the  Company  and USE through Sutter entered into a
Letter of Intent to merge, via a reverse takeover, with Globemin Resources, Inc.
a  public company headquartered in Vancouver, Canada.  Pursuant to the Letter of
Intent,  after  the  reverse  takeover is closed, Sutter plans on raising equity
funds  and begin further exploration work on the properties and the construction
of  a  new  secondary  access  raise  to  comply  with  US  Mine  Safety  Health
Administration  regulations  and improve ventilation as well as to better define
known  mineralization.  The  exploration  work  will  be  run  through the Comet
mineralized  zone  as  soon  as  funds are made available through equity or debt
financing.  The  current  resource  production  plan  is to produce initially, a
stockpile  of  mineralized  material  sufficient  to  operate  a  mill  at  300
tons-per-day  (tpd)  while  the  mill  is  being  built.  The  second  stage  of
development will be to construct a conventional 300 tpd mill on site, which will
be  designed  so  that  it  can  easily  be  expanded to accommodate the planned
production  of  500  tpd.  Closing  of  the  reverse  takeover  is  subject  to
negotiation  and  approval  of the share exchange agreement by the Directors and
Shareholders of both companies, and approval by Canadian regulatory authorities.


                                       71
<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               --------------------------------------------------


To  Board  of  Directors  U.S.  Energy  Corp.  and  Crested  Corp.:

We  have  audited  the  accompanying  balance  sheets  of USECB Joint Venture (a
Wyoming  Joint  Venture)  as of December 31, 2003 and 2002 and May 31, 2002, and
the  related  statements of operations, partners' capital and cash flows for the
year  ended  December 31, 2003, the seven months ended December 31, 2002 and the
fiscal  years  ended  May 31, 2002 and 2001.  These financial statements are the
responsibility  of  the  Partnership's  management.  Our  responsibility  is  to
express  an  opinion  on  these  financial  statements  based  on  our  audits.

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

In  our  opinion,  the  financial  statements  present  fairly,  in all material
respects,  the financial position of USECB Joint Venture as of December 31, 2003
and  2002 and May 31, 2002, and the results of its operations and its cash flows
for  the  year ended December 31, 2003, the seven months ended December 31, 2002
and  the  fiscal years ended May 31, 2002 and 2001 in conformity with accounting
principles  generally  accepted  in  the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared  assuming  the
Partnership  will  continue  as  a going concern.  As discussed in Note A to the
financial  statements,  the  Partnership has experienced significant losses from
operations  during  three  of  the  periods  presented.  These  factors  raise
substantial  doubt  about  the ability of the partnership to continue as a going
concern.  Management's  plans  in regards to these matters are also described in
Note  A.  The  financial  statements  do  not include any adjustments that might
result  from  the  outcome  of  this  uncertainty.


GRANT  THORNTON  LLP

Oklahoma  City,  Oklahoma
June  20,  2004


                                       72
<PAGE>


                              USECB JOINT VENTURE
                                 BALANCE SHEETS
                                     ASSETS
<TABLE>
<CAPTION>


                                          DECEMBER 31,    DECEMBER 31,     MAY 31,
                                              2003            2002           2002
                                         --------------  --------------  ------------
<S>                                      <C>             <C>             <C>
  CURRENT ASSETS:
    Cash                                 $     176,200   $     525,000   $   536,800
    Accounts receivable,
      net of allowance of $27,800                9,900              --        37,500
    Inventory                                   21,800           9,700        23,900
    Current portion of notes receivable         56,100         148,600       229,000
    Prepaid insurance                           98,500         137,400        57,500
                                         --------------  --------------  ------------
     TOTAL CURRENT ASSETS                      362,500         820,700       884,700

  PROPERTIES AND EQUIPMENT
    Land and improvements                      561,200         561,200       743,900
    Buildings and improvements               4,498,200       4,498,300     4,706,200
    Equipment                                3,403,000       3,371,100     3,227,000
    Other                                       35,900          35,900        35,900
                                         --------------  --------------  ------------
                                             8,498,300       8,466,500     8,713,000
    Less accumulated depreciation           (3,796,200)     (3,513,200)   (3,524,800)
                                         --------------  --------------  ------------
                                             4,702,100       4,953,300     5,188,200

  OTHER ASSETS
    Restricted cash                            247,500         145,300       154,700
    Notes receivable
      Trade                                      8,500          17,300        36,800
      Related parties                        5,756,100       7,786,200     7,497,900
    Deposits and other                         355,400         351,100       348,300
                                         --------------  --------------  ------------
                                             6,367,500       8,299,900     8,037,700
                                         --------------  --------------  ------------
                                         $  11,432,100   $  14,073,900   $14,110,600
                                         ==============  ==============  ============
</TABLE>


                                       73
<PAGE>


                              USECB JOINT VENTURE
                                 BALANCE SHEETS
                            LIABILITIES AND CAPITAL
<TABLE>
<CAPTION>


                                           DECEMBER 31,   DECEMBER 31,     MAY 31,
                                               2003           2002          2002
                                           -------------  -------------  -----------
<S>                                        <C>            <C>            <C>
  CURRENT LIABILITIES:
    Accounts payable                       $     436,700  $     317,200  $   327,100
    Accrued expenses                              97,600         96,600       11,900
    Current portion of long-term debt            136,800        202,100      295,400
    Other current liabilities                      5,000          5,000        5,000
                                           -------------  -------------  -----------
  TOTAL CURRENT LIABILITIES                      676,100        620,900      639,400

  HEALTH INSURANCE OBLIGATIONS                   247,500        176,700      149,100

  LONG TERM DEBT, net of current portion       1,271,100      1,637,300    1,516,100

  COMMITMENTS AND CONTINGENCIES (Note F)

  CAPITAL
    U. S. Energy                               4,618,700      5,819,500    5,903,000
    Crested Corp                               4,618,700      5,819,500    5,903,000
                                           -------------  -------------  -----------
                                               9,237,400     11,639,000   11,806,000
                                           -------------  -------------  -----------
                                           $  11,432,100  $  14,073,900  $14,110,600
                                           =============  =============  ===========
</TABLE>


                                       74
<PAGE>


                              USECB JOINT VENTURE
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                              SEVEN MONTHS
                                   YEAR ENDED    ENDED
                                  DECEMBER 31, DECEMBER 31,      YEAR ENDED MAY 31,

                                     2003          2002          2002          2001
                                 ------------  ------------  ------------  ------------
<S>                              <C>           <C>           <C>           <C>
  OPERATING REVENUES:
    Commercial operations        $   103,700   $    94,000   $   231,100   $    98,600
    Sale of uranium                       --            --            --       334,300
    Management fees                  427,100       197,500       378,900       533,600
                                 ------------  ------------  ------------  ------------
                                     530,800       291,500       610,000       966,500

  OPERATING COSTS AND EXPENSES:
     Commercial operations           237,900       146,500       230,600       294,200
     Mine holding costs            1,500,500       596,600     1,465,300     2,495,300
     General and Administrative    2,448,500     1,412,900     2,662,800     2,801,800
                                 ------------  ------------  ------------  ------------
                                   4,186,900     2,156,000     4,358,700     5,591,300
                                 ------------  ------------  ------------  ------------

  OPERATING LOSS                  (3,656,100)   (1,864,500)   (3,748,700)   (4,624,800)

  OTHER INCOME & EXPENSES
    Sale of Assets                     1,200       160,700       693,400       512,200
    Interest Income                   42,500        25,500        42,500        59,000
    Other                                 --        27,800        13,400        89,300
    Litigation settlement                 --            --            --     7,132,800
    Interest Expense                (194,600)      (83,100)     (197,300)     (219,300)
                                 ------------  ------------  ------------  ------------
                                    (150,900)      130,900       552,000     7,574,000
                                 ------------  ------------  ------------  ------------

  (LOSS) INCOME FROM
    CONTINUING OPERATIONS         (3,807,000)   (1,733,600)   (3,196,700)    2,949,200

  DISCONTINUED OPERATIONS                 --            --       (81,300)     (237,700)
                                 ------------  ------------  ------------  ------------

  NET (LOSS) INCOME              $(3,807,000)  $(1,733,600)  $(3,278,000)  $ 2,711,500
                                 ============  ============  ============  ============
</TABLE>


                                       75
<PAGE>


                               USECB JOINT VENTURE
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                           SEVEN MONTH
                                                       YEAR ENDED          PERIOD ENDED        FISCAL YEAR ENDED
                                                     DECEMBER 31,          DECEMBER 31,        YEAR ENDED MAY 31,
                                                     ------------          ------------    --------------------------

                                                          2003               2002              2002          2001
                                                     --------------  --------------------  ------------  ------------
<S>                                                  <C>             <C>                   <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income                                  $  (3,807,000)  $        (1,733,600)  $(3,278,000)  $ 2,711,500
  Adjustments to reconcile net (loss) income
    to net cash used in operating activities:
      Depreciation, depletion and amortization             303,000               172,300       357,800       630,300
      Gain on sale of assets                                (1,200)             (160,700)     (693,400)     (512,200)
      Write off of properties                                   --                21,500            --            --
      Change in other assets                                (4,300)               (2,800)      (17,700)       (2,300)
      Change in health insurance obligations                70,800                27,600        35,700       (97,000)
      Net changes in components of working capital
        Accounts receivable                                 (9,900)               37,500     1,248,600      (262,000)
        Inventory                                          (12,100)               14,200         4,700         5,100
        Current portion of notes receivable                 92,500                80,400            --            --
        Prepaid insurance                                   38,900               (79,900)       (7,200)      (33,900)
        Accounts payable                                   119,500                (9,900)     (485,800)      (17,700)
        Deferred income                                         --                    --            --    (4,000,000)
        Accrued expenses                                     1,000                84,700       (12,700)      (60,500)
                                                     --------------  --------------------  ------------  ------------
NET CASH USED IN
  OPERATING ACTIVITIES                                  (3,208,800)           (1,548,700)   (2,848,000)   (1,638,700)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of property and equipment              32,800               557,200     1,073,700     1,948,600
  Purchase of property and equipment                       (83,400)             (355,400)     (176,700)   (1,645,400)
  Net activity on restricted cash                         (102,200)                9,400       (77,100)      142,100
  Net activity on notes receivable affiliates            2,030,100              (288,300)      128,600    (2,013,300)
  Proceeds advanced on notes receivable                         --                    --      (260,500)      (16,300)
  Payments from notes receivable                             8,800                19,500        37,000       147,500
                                                     --------------  --------------------  ------------  ------------
NET CASH PROVIDED BY (USED IN)
  INVESTING ACTIVITIES                                   1,886,100               (57,600)      725,000    (1,436,800)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Contributions from partners                            1,405,400             1,566,600     3,313,600     1,572,800
  Proceeds from third party debt                           150,500               392,800       379,100     2,138,800
  Repayments of debt                                      (582,000)             (364,900)   (1,087,700)     (581,300)
                                                     --------------  --------------------  ------------  ------------
NET CASH PROVIDED BY
  FINANCING ACTIVITIES                                     973,900             1,594,500     2,605,000     3,130,300
                                                     --------------  --------------------  ------------  ------------


                                       76
<PAGE>


                              USECB JOINT VENTURE
                            STATEMENTS OF CASH FLOWS
                                  (CONTINUED)

                                                                           SEVEN MONTH
                                                       YEAR ENDED          PERIOD ENDED        FISCAL YEAR ENDED
                                                     DECEMBER 31,          DECEMBER 31,        YEAR ENDED MAY 31,
                                                     ------------          ------------    --------------------------

                                                          2003               2002              2002          2001
                                                     --------------  --------------------  ------------  ------------

NET (DECREASE) INCREASE IN CASH
   AND CASH EQUIVALENTS                              $    (348,800)  $           (11,800)  $   482,000   $    54,800

CASH AND CASH EQUIVALENTS
  AT THE BEGINNING OF THE PERIOD                           525,000               536,800        54,800            --
                                                     --------------  --------------------  ------------  ------------

CASH AND CASH EQUIVALENTS
  AT THE END OF THE PERIOD                           $     176,200   $           525,000   $   536,800   $    54,800
                                                     ==============  ====================  ============  ============

SUPPLEMENTAL DISCLOSURES:
  Interest paid                                      $     194,600   $            83,100   $   197,300   $   219,300
                                                     ==============  ====================  ============  ============
</TABLE>


                                       77
<PAGE>


                               USECB JOINT VENTURE
                    STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                      FROM MAY 31, 2000 TO DECEMBER 31, 2003
<TABLE>
<CAPTION>

                             U.S. Energy    Crested Corp.      Total
                            -------------  ---------------  ------------
<S>                         <C>            <C>              <C>
 Balance May 31, 2000       $  3,743,050   $    3,743,050   $ 7,486,100

 Capital contributions           786,400          786,400     1,572,800

 Net income                    1,355,750        1,355,750     2,711,500
                            -------------  ---------------  ------------
 Balance May 31, 2001          5,885,200        5,885,200    11,770,400

 Capital contributions         1,656,800        1,656,800     3,313,600

 Net loss                     (1,639,000)      (1,639,000)   (3,278,000)
                            -------------  ---------------  ------------
 Balance May 31, 2002          5,903,000        5,903,000    11,806,000

 Capital contributions           783,300          783,300     1,566,600

 Net loss                       (866,800)        (866,800)   (1,733,600)
                            -------------  ---------------  ------------
 Balance December 31, 2002     5,819,500        5,819,500    11,639,000

 Capital contributions           702,700          702,700     1,405,400

 Net loss                     (1,903,500)      (1,903,500)   (3,807,000)
                            -------------  ---------------  ------------
 Balance December 31, 2003  $  4,618,700   $    4,618,700   $ 9,237,400
                            =============  ===============  ============
</TABLE>


                                       78
<PAGE>


                              USECB JOINT VENTURE

                          NOTES TO FINANCIAL STATEMENTS
            DECEMBER 31, 2003 AND 2002, MAY 31, 2002 AND MAY 31, 2001

A.     BUSINESS  ORGANIZATION  AND  OPERATIONS:

     USECB  Joint  Venture was formed in the State of Wyoming on August 1, 1981.
USECB  (the  "Partnership"  or  "USECB")  is equally owned by U. S. Energy Corp.
("USE")  and  its  subsidiary  Crested Corp. ("Crested"). As such it manages the
acquisition,  exploration,  holding,  sale  and/or  development  of  mineral and
coalbed  methane  gas  properties,  the  production  of petroleum properties and
marketing  of  minerals and methane gas. Principal mineral interests held by USE
and  Crested  are  in coalbed methane, uranium, gold and molybdenum. The uranium
and  gold  properties  are  currently all in a shut down status. USE and Crested
also  hold  various  real and personal properties used in commercial activities.

     The Partnership has generated significant net losses prior to and including
the  year  ended  December  31, 2003. The Partnership also has a working capital
deficit  of  $313,600 at December 31, 2003. The Partnership experienced negative
cash  flows from operations of $3,208,800, $1,545,700, $2,848,000 and $1,638,700
for  the  year ended December 31, 2003, the seven months ended December 31, 2002
and  the  fiscal year ended May 31, 2002 and 2001, respectively. At December 31,
2003,  the  Partnership  does  not  have  sufficient  cash  or  cash  flows from
operations to meet its obligations. All of these factors raise substantial doubt
about  the  Partnership's  ability  to  continue  as  a going concern during the
upcoming  year.

     The  Partnership  has  historically  relied  on,  and continues to rely on,
contributions  from  USE and Crested to fund its current operating requirements.
It  is uncertain whether this funding will continue. The Partnership has certain
assets that are unencumbered that could be sold to generate cash. However, there
can  be  no  assurances that any funds generated from the sale of assets will be
sufficient  to  meet  the  Partnership's  obligations.

     The  year  end  for USECB was changed to December 31 effective December 31,
2002.

B.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES:

CASH  EQUIVALENTS

     The  Partnership  considers  all  highly  liquid  investments with original
maturities  of  three  months  or  less  to be cash equivalents. The Partnership
maintains  its  cash  and cash equivalents in bank deposit accounts which exceed
federally insured limits. At December 31, 2003, the Partnership had its cash and
cash  equivalents  with  one  financial  institution.  The  Partnership  has not
experienced  any  losses  in such accounts and believes it is not exposed to any
significant  credit  risk  on  cash  and  cash  equivalents.

RESTRICTED  CASH

     Under  its  health  insurance  plan for employees, the partnership deposits
cash  in  a  restricted account to fund the payment of potential insurance claim
obligations.

ACCOUNTS  RECEIVABLE

     The  majority  of  the  Partnership's  accounts  receivable  are  due  from
affiliates of USE and Crested. The Partnership determines any required allowance
by  considering a number of factors including length of  time


                                       79
<PAGE>


accounts  receivable  are  past due and the Partnership's previous loss history.
The  Partnership  writes off accounts receivable when they become uncollectible,
and  payments  subsequently  received  on  such  receivables are credited to the
allowance  for  doubtful  accounts.

INVENTORIES

     Inventories  consist  of  aviation  fuel  and  gold  and  silver  bullion.
Inventories are stated at lower of cost or market using the average cost method.

PROPERTIES  AND  EQUIPMENT

     Land, buildings, improvements, machinery and equipment are carried at cost.
Depreciation  of  buildings,  improvements,  machinery and equipment is provided
principally by the straight-line method over estimated useful lives ranging from
3  to  45  years.  Following  is  a breakdown of the lives over which assets are
depreciated.

               Office Equipment                     3 to 5 years
               Field Tools and Hand Equipment       5 to 7 years
               Vehicles and Trucks                  3 to 7 years
               Heavy Equipment                      7 to 10 years
               Service Buildings                    20 years
               Corporate Headquarters' Building     45 years

LONG-LIVED  ASSETS

     The  Partnership evaluates its long-lived assets for impairment when events
or changes in circumstances indicate that the related carrying amount may not be
recoverable.  If the sum of estimated future cash flows on an undiscounted basis
is  less  than  the  carrying  amount  of the related asset, asset impairment is
considered  to  exist.  The  related  impairment  loss  is measured by comparing
estimated  future cash flows on a discounted basis to the carrying amount of the
asset.  Changes in significant assumptions underlying future cash flow estimates
may  have  a material effect on the Partnership's financial position and results
of  operations.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

     The carrying amount of cash equivalents, receivables, other current assets,
accounts  payable  and  accrued  expenses approximates fair value because of the
short-term  nature of those instruments. The recorded amounts for short-term and
long-term  debt, approximate fair market value due to the variable nature of the
interest  rates  on the short term debt, and the fact that interest rates remain
generally  unchanged  from  issuance  of  the  long  term  debt.

REVENUE  RECOGNITION

     Revenues from real estate operations are from the rental of office space in
office buildings in Riverton, Wyoming. Airport operations consist of the sale of
aviation  fuel,  repair  and maintenance of aircraft and rental of hanger space.
All these revenues are reported on a gross revenue basis and are recorded at the
time  the  service  is  provided.

     Revenues  from  mineral  sales consist of the sale of uranium to a delivery
contract  and  the  sale of that contract to a third party supplier. The sale of
uranium  is  reported  on  a  net  basis.  The Partnership purchased


                                       80
<PAGE>


all  uranium delivered under supply contracts from the open market as all of USE
and  Crested's  uranium  operations  are  shut  down.

     Management  fees  are recorded as a percentage of actual costs for services
provided  for  affiliated entities for which the Partnership provides management
services.  The  Partnership  is  also  paid  a management fee for overseeing oil
production on the Fort Peck Reservation in Montana. Management fees are recorded
when  the  service  is  provided.

INCOME  TAXES

     No  provision  for  income taxes is recorded in the financial statements of
the  Partnership  due to the fact that it is a joint venture and, therefore, not
subject to income tax. The tax effects of the Partnership's operations accrue to
the  members.

USE  OF  ESTIMATES

     The  preparation  of  financial  statements  in  conformity with accounting
principles  generally  accepted  in  the  United  States  of  America  requires
management  to  make  estimates and assumptions. These estimates and assumptions
affect  the  reported  amounts  of  assets  and  liabilities  and  disclosure of
contingent  assets  and liabilities at the date of the financial statements, and
the  reported  amounts  of  revenues  and  expenses during the reporting period.
Actual  results  could  differ  from  those  estimates.

RECLASSIFICATIONS

     Certain  reclassifications  have  been  made in the prior periods financial
statements  in  order  to  conform  with  the  presentation  for  the 2003 year.


RECENT  ACCOUNTING  PRONOUNCEMENTS

     The  Partnership  has  reviewed  current  outstanding  statements  from the
Financial  Accounting  Standards  Board  and  does not believe that any of those
statements  will  have  a material adverse affect on the financial statements of
the  Partnership.

C.     RELATED  PARTY  TRANSACTIONS:

     The  Partnership  provides  management  and  administrative  services  for
affiliates  under  the  terms  of various management agreements. The Partnership
operates  the  Glen L. Larsen office complex; holds interests in various mineral
operations;  conducts  oil  and  gas operations; and transacts all operating and
payroll  expenses  for  USE  and  Crested  and  their  subsidiaries.

D.     DEBT:

LINES  OF  CREDIT
-----------------

     The  Partnership has a $750,000 line of credit from a commercial bank.  The
line of credit has a variable interest rate (5.0% as of December 31, 2003).  The
weighted  average  interest rate for the year ended December 31, 2003 was 5.12%.
As of December 31, 2003, none of the line of credit had been borrowed.  The line
of  credit  is  collateralized  by  certain real property and a share of the net
proceeds  of  fees from production from certain oil wells and matured on June 1,
2004.  Effective  June  29,  2004,  the line of credit had been extended through
December  31,  2004.


                                       81
<PAGE>


LONG-TERM  DEBT-CONTINUED
-------------------------

     The  components of long-term debt as of December 31, 2003, 2002 and May 31,
2002  are  as  follows:

<TABLE>
<CAPTION>

                                                   December  31,        May  31,
                                             ------------------------  -----------

                                                2003         2002         2002
                                             -----------  -----------  -----------
<S>                                          <C>          <C>          <C>
Installment notes to financial institutions
  collateralized by equipment; interest
  at 5.0% to 9.0%, matures in 2004-2009      $1,407,900   $1,839,400   $1,611,600
Less current portion                           (136,800)    (202,100)    (295,400)
                                             -----------  -----------  -----------
                                             $1,271,100   $1,637,300   $1,316,200
                                             ===========  ===========  ===========
</TABLE>

     Principal  requirements on long-term debt are $136,800, $104,200; $107,200;
$1,046,300;  $11,700  and  $1,700  for the years ended December 31, 2004 through
2008,  and  thereafter,  respectively.

E.  COMMITMENTS,  CONTINGENCIES  AND  OTHER:

SHEEP  MOUNTAIN  PARTNERS  ARBITRATION/LITIGATION

     During  fiscal 1989, USE and Crested, through the Partnership, entered into
an  agreement  to  sell  a  50% interest in their Sheep Mountain properties to a
subsidiary  of  Nukem  Inc., CRIC. USE, Crested and CRIC immediately contributed
their  50%  interests  in the properties to a newly-formed partnership, SMP. SMP
was  established  to  further  develop  and  mine  the  uranium  claims on Sheep
Mountain,  acquire  uranium  supply  contracts  and  market  uranium.

     In  1991,  disputes  arose  between USE and Crested and Nukem, Inc. and its
subsidiary  Cycle  Resource  Investment Corp. ("CRIC"), concerning the formation
and  operation of their equally owned Sheep Mountain Partners (SMP) partnership.
Arbitration  proceedings  were  initiated by CRIC in June 1991 and in July 1991,
USECB  filed a lawsuit against Nukem, CRIC and others in the U.S. District Court
of  Colorado  in  Civil  No.  91B1153.  The Federal Court stayed the arbitration
proceedings and discovery proceeded. In February 1994, all of the parties agreed
to  consensual  and binding arbitration of all of their disputes over SMP before
an  arbitration  panel  (the  "Panel").

     After  73  hearing  days, the Panel entered an Order and Award on April 18,
1996  and clarified the Order on July 3, 1996, finding generally in favor of USE
and Crested on certain of their claims and imposed a constructive trust in favor
of  Sheep  Mountain Partners on uranium contracts Nukem entered into to purchase
uranium  from  CIS  Republics. The Panel also awarded SMP damages of $31,355,070
against  Nukem. USECB filed a petition for confirmation of the Order and on June
27,  1997,  the  U.S.  District Court confirmed the Panel's Orders in its Second
Amended  Judgment.

     Thereafter,  Nukem/CRIC  appealed the Judgment to the 10th Circuit Court of
Appeals  ("CCA"). On October 22, 1998, the 10th CCA issued an Order and Judgment
affirming  the  U.S.  District  Court's  Second  Amended  Judgment  without
modification.  The ruling affirmed (i) the imposition of a constructive trust in
favor  of  SMP  on  Nukem's rights to purchase CIS uranium, the uranium acquired
pursuant  to  those rights, and the profits therefrom; and (ii) the damage award
in  favor  of  SMP  against  Nukem.  The  10th  CCA held that the Panel's Awards
"clearly  retains  both  a  constructive  trust  and  a  damage  award," and the
                                                 ---
Arbitration Awards and the Second Amended Judgment were "clear and unambiguous."

     On February 8, 1999, the U.S. District Court ordered Nukem to pay USECB the
balance  of the damage award. Nukem did so, but then moved for a satisfaction of
judgment  without  accounting  for  the


                                       82
<PAGE>


monies  earned  in  the  Constructive  Trust.  The District Court denied Nukem's
motion  and  Nukem filed its second appeal to the 10th CCA. On October 16, 2000,
the  10th  CCA again affirmed the order of the District Court. The 10th CCA held
that  Nukem  had not "provided an accounting of the partnership assets," finding
that  "the  district  court order presented for our review does not decide which
CIS  contracts  are  covered  by  the  constructive  trust."

     On  November  3, 2000, USECC filed a motion for a further accounting of the
Constructive Trust. On February 15, 2001, the District Court entered an Order of
Reference  appointing  a  Special  Master  to  "conduct  an  accounting"  of the
Constructive Trust. The accounting was conducted and on May 1, 2003, the Special
Master  filed  his Report with the District Court. Both parties filed objections
to  the  Report. On July 30, 2003, the U.S. District Court adopted the Report in
part  and  rejected it in part. Judgment was then entered by the Court on August
1,  2003  in  favor  of  USECC  and  against Nukem in the amount of $20,044,183.

     On  August  15,  2003,  Nukem  filed a "Motion to Remand to the Arbitration
Panel  or  in the Alternative, to Alter, Amend and/or Correct the Court's August
1,  2003  Judgment  and  July  30, 2003 Order," and a "Motion to Correct Certain
Findings  or Statements in the Court's Order of July 30, 2003." On the same day,
USECC  filed  a  motion under Fed.R.Civ.P. 52(b) and 59(e) to alter or amend the
July  30,  2003 Order and the August 1, 2003 Judgment. The District Court denied
the  parties' motions on September 10 and 11, 2003, respectively. Nukem's appeal
and  USECC's  cross-appeal followed. All required briefs have been filed by both
parties  for  consideration  by  the  Tenth Circuit Court of Appeals. Management
believes  that  the  ultimate  outcome  of  this matter will not have an adverse
affect  on  the  Partnership's  financial  condition  or  results of operations.

F.     DISCONTINUED  OPERATIONS.

     During  the third quarter of the fiscal year ended May 31, 2002, USECB made
the  decision  to  discontinue  its  drilling/construction  segment.  The assets
associated  with  this  business  segment  were  sold  and  or converted for use
elsewhere  by  USECB. The financial statements for the fiscal year ended May 31,
2001  have  been  revised  to  present  the  effect  of discontinued operations.

G.     TRANSITION  PERIOD  COMPARATIVE  DATA

<TABLE>
<CAPTION>


                                             Seven  Months  Ended
                                                December  31,
                                          --------------------------

                                              2002          2001
                                          ------------  ------------
<S>                                       <C>           <C>
                                                        (Unaudited)

Revenues                                  $   291,500   $   258,300

    Cost and Expenses                       2,156,000     2,782,800
                                          ------------  ------------
    Operating Loss                         (1,864,500)   (2,524,500)

    Other Income and Expenses                 130,900       411,100
                                          ------------  ------------
  Loss before Discontinued Operations      (1,733,600)   (2,113,400)

    Discontinued Operations, net of tax            --       (99,600)
                                          ------------  ------------

  Net Loss                                $(1,733,600)  $(2,213,000)
                                          ============  ============
</TABLE>


                                       83
<PAGE>


H.     SELECTED  QUARTERLY  FINANCIAL  DATA  (UNAUDITED)

<TABLE>
<CAPTION>


                                                            Three  Months  Ended
                                ----------------------------------------------------------------------------

                                    December 31,       September 30,        June 30,           March 31,
<S>                             <C>                   <C>               <C>                <C>                <C>
                                       2003                2003               2003               2003
                                --------------------  ----------------  -----------------  -----------------

Operating Revenues              $           107,400   $       124,600   $        163,500   $        135,300
                                ====================  ================  =================  =================

Operating (loss)                $        (1,436,200)  $    (1,244,000)  $       (250,900)  $       (725,000)
                                ====================  ================  =================  =================

(Loss) income from operations   $        (1,502,600)  $    (1,276,200)  $       (290,400)  $       (737,800)

Discontinued operations         $                --   $            --   $             --   $             --
                                --------------------  ----------------  -----------------  -----------------

Net loss                        $        (1,502,600)  $    (1,276,200)  $       (290,400)  $       (737,800)
                                ====================  ================  =================  =================


                                                       Month Ended                Three Months Ended
                                                   --------------------  -----------------------------------
                                                       December 31,        November 30,        August 31,
                                                           2002                2002               2002
                                                   --------------------  ----------------  -----------------

Operating Revenues                                 $            65,900   $       115,900   $        109,700
                                                   ====================  ================  =================

Operating (loss)                                   $          (356,000)  $      (848,900)  $       (659,600)
                                                   ====================  ================  =================

(Loss) income from operations                      $          (392,800)  $      (671,700)  $       (669,100)

Discontinued operations                            $                --   $            --   $             --
                                                   --------------------  ----------------  -----------------

Net (loss)                                         $          (392,800)  $      (671,700)  $       (669,100)
                                                   ====================  ================  =================


                                                               Three Months Ended
                                ----------------------------------------------------------------------------
                                       May 31,           February 28,      November 30,       August 31,
                                        2002                2002              2001               2001
                                --------------------  ----------------  -----------------  -----------------

Operating Revenues              $           114,800   $        36,100   $        328,400   $        130,700
                                ====================  ================  =================  =================

Operating (loss)                $          (834,000)  $      (977,100)  $       (754,800)  $     (1,182,800)
                                ====================  ================  =================  =================

(Loss) income from operations   $          (675,400)  $    (1,015,500)  $       (372,100)  $     (1,133,700)

Discontinued operations         $            33,700   $       (19,500)  $       (102,100)  $          6,600
                                --------------------  ----------------  -----------------  -----------------

Net (loss) income               $          (641,700)  $    (1,035,000)  $       (474,200)  $     (1,127,100)
                                ====================  ================  =================  =================
</TABLE>


                                       84
<PAGE>



ITEM  9.     CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING
AND  FINANCIAL  DISCLOSURE

     Not  applicable.

ITEM  9A.     CONTROLS  AND  PROCEDURES

     The  Company's  Principal Executive Officer and Principal Financial Officer
have  reviewed  and  evaluated  the  effectiveness  of  the Company's disclosure
controls  and  procedures  (as defined in Exchange Act Rule 240.13a-15(e)) as of
the  end  of  the  period covered by this report.  Based on that evaluation, the
Principal  Executive  Officer and the Principal Financial Officer have concluded
that  the  Company's current disclosure controls and procedures are effective to
ensure  that  information  required to be disclosed by the Company in reports it
files  or  submits under the Exchange Act is recorded, processed, summarized and
reported  within  the  time  periods  specified  in  the Securities and Exchange
Commission's  rules  and  forms.  There  was no change in the Company's internal
controls  that  occurred during the fourth quarter of the period covered by this
report  that  has  materially  affected,  or is reasonably likely to affect, the
Company's  internal  controls  over  financial  reporting.


                                       85
<PAGE>


                                    PART III

     In  the event a definitive proxy statement containing the information being
incorporated  by  reference  into  this Part III is not filed within 120 days of
December  31,  2003, we will file such information under cover of a Form 10-K/A.

ITEM  10.     DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.

     The  information  required by Item 10 with respect to directors and certain
executive  officers  is  incorporated herein by reference to our Proxy Statement
for  the  Meeting  of  Shareholders  to be held in June 2004, under the captions
"Proposal  1:  Election  of  Directors," Filing of Reports Under Section 16(a),"
and  "Business  Experience  and  Other Directorships of Directors and Nominees."
The  information  regarding  the  remaining  executive  officers  follows:

     The company has adopted a Code of Ethics. A copy of the Code of Ethics will
be  provided  to  any  person, without charge, upon written request addressed to
Daniel  P.  Svilar,  Secretary,  877  N.  8th  W.,  Riverton,  WY  82501.

INFORMATION  CONCERNING  EXECUTIVE  OFFICERS  WHO  ARE  NOT  DIRECTORS.

     The  following  information is provided pursuant to Instruction 3, Item 401
of  Reg.  S-K, regarding certain of the executive officers of Crested who is not
also  a  director.

     ROBERT  SCOTT  LORIMER,  age  53, has been the Chief Accounting Officer for
both  USE  and  Crested for more than the past five years.  Mr. Lorimer also has
been  Chief  Financial  Officer  for both of these companies since May 25, 1991,
their  Treasurer since December 15, 1990, and Vice President Finance since April
1998.  He  serves  at  the  will  of  each  board  of  directors.  There  are no
understandings  between  Mr.  Lorimer and any other person, pursuant to which he
was named as an officer, and he has no family relationship with any of the other
executive  officers or directors of Use or Crested.  During the past five years,
he  has  not  been  involved  in  any  Reg.  S-K  Item 401(f) listed proceeding.

ITEM  11.     EXECUTIVE  COMPENSATION.

     The  information required by Item 11 is incorporated herein by reference to
the  Proxy  Statement  for  the Meeting of Shareholders to be held in June 2004,
under  the  caption  "Director's  Fees  and  Other  Compensation."

ITEM  12.     SECURITY  OWNERSHIP  OF  CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  information required by Item 12 is incorporated herein by reference to
the  Proxy  Statement  for  the Meeting of Shareholders to be held in June 2004,
under  the  caption  "Principal  Holders  of  Voting  Securities."

ITEM  13.     CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.

     The  information required by Item 13 is incorporated herein by reference to
the  Proxy  Statement  for  the Meeting of Shareholders to be held in June 2004,
under  the  caption  "Certain  Relationships  and  Related  Transactions."


                                       86
<PAGE>


ITEM  14.     PRINCIPAL  ACCOUNTING  FEES  AND  SERVICES

     (1)  -  (4)     Grant  Thornton LLP billed us as follows for the year ended
December  31,  2003  and  the  seven  months  ended  December  31,  2002:

                             Year Ended             Seven Months Ended
                          December 31, 2003       Ended December 31, 2002

     Audit Fees(a)          $     27,600               $     24,100

     Audit-Related Fees(b)  $     --                   $     --

     Tax Fees(c)            $     5,500                $     2,800

     All Other Fees(d):     $     --                   $     --

(a)     Includes fees for audit of the annual financial statements and review of
quarterly  financial  information  filed  with  the  Securities  and  Exchange
Commission  ("SEC").

(b)     For assurance and related services that were reasonably related to the
performance  of  the audit or review of the financial statements, which fees are
not  included in the Audit Fees category.  The Company had no Audit-Related Fees
for  the  periods  ended  December  31,  2003,  and  2002,  respectively.

(c)     For  tax  compliance, tax advice, and tax planning services, relating to
any  and  all  federal  and state tax returns as necessary for the periods ended
December  31,  2003  and  2002,  respectively.

(d)     For services in respect of  any and all other reports as required by the
SEC  and  other  governing  agencies.

     (5)(i)     Our  audit  committee approves the terms of engagement before we
engage Grant Thornton for audit and non-audit services, except as to engagements
for  services  outside  the  scope of the original terms, in which instances the
services  have  been  provided pursuant to pre-approval policies and procedures,
established  by the audit committee.  These pre-approval policies and procedures
are  detailed  as  to  the  category  of service and the audit committee is kept
informed  of  each service provided. These policies and procedures, and the work
performed  pursuant  thereto,  do  not  include  delegation  any  delegation  to
management  of  the  audit  committees  responsibilities  under  the  Securities
Exchange  Act  of  1934.

     (5)(ii)  The  percentage  of  services provided for Audit-Related Fees, Tax
Fees  and All Other Fees, which services were delivered pursuant to pre-approval
policies  and  procedures  established  by the audit committee, in 2003 (and the
seven  months  ended  December 31, 2002) were: Audit-Related Fees 83% (90%); Tax
Fees  17%  (10%);  and  All  Other  Fees  0%  (0%).


                                       87
<PAGE>


                                    PART IV

ITEM  15.     EXHIBITS,  FINANCIAL  STATEMENTS,  FINANCIAL  STATEMENT SCHEDULES,
REPORTS  AND  FORM  8-K.

(a)     The following financial statements are filed as a part of this Report as
Item  8:

                                                                        Page No.
                                                                       ---------
(1)     Financial  Statements

        Registrant  and  Affiliate

        Report  of  Independent  Public  Accountants
        Grant  Thornton  LLP . . . . . . . . . . . . . . . . . . . . . . . . .45

        Balance  Sheets  -  December  31,  2003  and  2002
           May  31,  2002. . . . . . . . . . . . . . . . . . . . . . . . . . .46

        Statements  of  Operations
        for  the  Year  ended  December  31,  2003,  the  seven  months  ended
        December 31, 2002 and the Years Ended May 31, 2002 and 2001. . . . . .47

        Statements  of  Shareholders'
        Deficit for the Year ended December 31, 2003, the seven months ended
        December 31, 2002 and the Years Ended May 31, 2002 and 2001. . . . . .48

        Statements  of  Cash  Flows
        for the Year ended December 31, 2003, the seven months ended
        December 31, 2002 and the Years Ended May 31, 2002 and 2001. . . . . .49

        Notes  to  Financial  Statements. . . . . . . . . . . . . . . . . .50-71


        Report  of  Independent  Public  Accountants
        Grant  Thornton  LLP  . . . . . . . . . . . . . . . . . . . . . . . . 72

        USECB Joint Venture Balance Sheets December 31, 2003 and 2002
        May 31, 2002  . . . . . . . . . . . . . . . . . . . . . . . . . . .73-74

        USECB  Joint  Venture  Statements  of  Operations
        for the Year ended December 31, 2003,
        the seven months ended December 31, 2002
        and the years Ended May 31, 2002 and 2001 . . . . . . . . . . . . . . 75

        USECB  Joint  Venture  Statements  of  Cash  Flows
        for  the  Year ended December 31, 2003,
        the seven months ended December 31, 2002
        and  the  years  Ended  May  31,  2002  and  2001 . . . . . . . . .76-77

        USECB Joint Venture Statements of Changes in Partners' Capital
        from May 31, 2000 to December 31, 2003  . . . . . . . . . . . . . . . 78

        USECB Joint Venture Notes to Financial Statements . . . . . . . . .79-84


(2)     All  other  schedules have been omitted because the required information
        is  inapplicable or  is  shown  in  the  notes to  financial statements.


                                       88
<PAGE>


(3)     Exhibits  Required  to  be  Filed.

     Exhibit                                                          Sequential
       No.             Title  of  Exhibit                              Page  No.
     ------            ------------------                             ----------

     3.1       Restated  Articles of Incorporation. . . . . . . . . . . . . .[1]

     3.1(a)    Articles of Amendment to the Articles
               of Incorporation of Rocky Mountain Gas, Inc.
               (to establish Series A Preferred Stock in March 2004). . . . . .*

   3.2-3.3     [intentionally  left  blank]

     3.4       By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . .[2]

     4.1       USE  1998  Incentive  Stock  Option  Plan
               and  Form  of  Stock  Option  Agreement. . . . . . . . . . . .[6]

     4.2       Form  of  Stock  Option  Agreement  and
               Schedule,  Options  granted  1992. . . . . . . . . . . . . . .[4]

     4.3       Form  of  Stock  Option  Agreement  and
               Schedule,  Options  granted  1/96. . . . . . . . . . . . . . .[4]

     4.4       USE  Restricted  Stock  Bonus  Plan
               as  Amended  through  2/94). . . . . . . . . . . . . . . . . .[4]

     4.5       Amendment  to  USE  1998  Incentive  Stock  Option  Plan
               (To  Include  Family  Transferability  of  Options
               Under  SEC  Rule  16b)). . . . . . . . . . . . . . . . . . . .[9]

     4.6       Form  of  Stock  Option  Agreement  and
               Schedule,  Options  granted  January 10,  2001). . . . . . . .[9]

     4.7       USE  1996  Stock  Award  Program  (Plan)). . . . . . . . . . .[5]

     4.8       USE  Restated  1996  Stock  Award  Plan  and  Amendment
               to  USE  1990  Restricted  Stock Bonus  Plan). . . . . . . . .[5]

     4.9       USE  2001  Stock  Award  Plan). . . . . . . . . . . . . . . .[10]

     10.1      Promissory  Note from  Crested  to  USE  (5/31/97)). . . . . .[5]

     10.2      Management  Agreement  -  USE  -  CC). . . . . . . . . . . . .[3]

     10.3      Joint  Venture  Agreement  -  Registrant and USE). . . . . . .[2]

  10.4-10.58   [intentionally  left  blank]


                                       89
<PAGE>


     10.59     Closing  Agreement  -  Addendum  to  Agreement
               for Purchase and Sale of Assets (see Exhibit 10.60). . . . . .[9]

     10.60     Agreement  for  Purchase  and  Sale  of  Assets
               (Rocky Mountain Gas, Inc. and Quantum  Energy LLC)). . . . . .[7]

     10.61     Purchase  and  Sale  Agreement
               CCBM,  Inc.  (subsidiary  of  Carrizo  Oil  &  Gas,  Inc.)
               and  Rocky  Mountain  Gas,  Inc.) . . . . . . . . . . . . . .[10]

  10.62-10.66  [intentionally left blank]

     10.67     Contribution and Subscription Agreement (to which
               RMG, Pinnacle Gas Resources and others are parties). . . . . [22]

     10.68     Purchase and Sale Agreement, with three amendments
               (for purchase of Hi-Pro assets). . . . . . . . . . . . . . . [24]

     10.69     Credit Agreement (mezzanine credit facility with
               Petrobridge Investment Management). . . . . . . . . . . . . .[24]

     14.0      Code of Ethics. . . . . . . . . . . . . . . . . . . . . . . . .*

     21        Subsidiaries  of Registrant). . . . . . . . . . . . . . . . . [9]

     23.0      Consent of Netherland, Sewell & Associates, Inc., independent
               petroleum  engineers. . . . . . . . . . . . . . . . . . . . . .*

     31.1      Certification under Rule 13a-14(a) John L. Larsen . . . . . . .*

     31.2      Certification under Rule 13a-14(a) Robert Scott Lorimer . . . .*

     32.1      Certification under Rule 13a-14(b) John L. Larsen . . . . . . .*

     32.2      Certification under Rule 13a-14(b) Robert Scott Lorimer. . . . *

*  Filed herewith

By  Reference
-------------

[1]       Incorporated  by  reference  from  the  like-numbered  exhibits to the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  1989.

[2]       Incorporated  by  reference  from  the  like-numbered  exhibits to the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  1990.

[3]       Incorporated  by  reference  from  the  like-numbered  exhibits to the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  1991.

[4]       Incorporated  by  reference  from  the  like-numbered  exhibits of the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  1996.


                                       90
<PAGE>


[5]       Incorporated  by  reference  from  the  like-numbered  exhibits of the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  1997.

[6]       Incorporated  by  reference  from  the  like-numbered  exhibits of the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  1998.

[7]       Incorporated  by  reference  from  the  like-number  exhibit  of  the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  2000.

[8]       [intentionally left blank]

[9]       Incorporated  by  reference  from  the  like-number  exhibit  of  the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  2001.

[10]      Incorporated  by  reference  from  the  like-number  exhibit  of  the
          Registrant's  Form  10-K  for  the  year  ended  May  31,  2002.

[11]-[21] [intentionally left blank]

[22]      Incorporated by reference from the exhibit filed with the Registrant's
          Form 8-K, filed July 22, 2003

[23]      [intentionally left blank]

[24]      Incorporated by reference from the exhibit filed with the Registrant's
          Form 8-K, filed February 17, 2004.

(b)       Reports  filed  on  Form  8-K.

          During  the  fourth  quarter  ended  December 31, 2003, the Registrant
          filed  one  report  on  Form  8-K  dated  December  24,  2003.

(c)       Required exhibits follow the signature page and are listed above under
          Item  15  (a)(3).

(d)       Required financial statement of significant 50% or less owned investee
          will  be  filed  by  an  amendment.


                                       91
<PAGE>


                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its  behalf  by  the  undersigned,  thereunto  duly  authorized.

     CRESTED  CORP.
(Registrant)


Date:     March  26,  2004                 By:        /s/  John  L.  Larsen
                                                     ---------------------------
                                                     JOHN  L.  LARSEN,
                                                     Chief  Executive  Officer

     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by  the  following  persons  on  behalf of the
Registrant  and  in  the  capacities  and  on  the  dates  indicated.


Date:     March  26,  2004                 By:       /s/  John  L.  Larsen
                                                    ---------------------------
                                                    JOHN L. LARSEN, Director


Date:     March  26,  2004                 By:       /s/  Daniel  P.  Svilar
                                                    ---------------------------
                                                    DANIEL P. SVILAR, Director


Date:     March  26,  2004                 By:       /s/  Michael  D.  Zwickl
                                                    ---------------------------
                                                    MICHAEL D. ZWICKL, Director


Date:     March  26,  2004                 By:       /s/  Robert Scott Lorimer
                                                    ---------------------------
                                                    ROBERT SCOTT LORIMER,
                                                    Principal Financial Officer
                                                    and Chief Accounting Officer


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