<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549
                                  FORM 10-QSB

                                        

     [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

                 For the quarterly period ended March 31, 1999

                                       or
                                        
     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

           For the period from________________to___________________.


     --------------------------------------------------------------------
                                        
                        Commission file number 0-19753


                           GOTHIC ENERGY CORPORATION
            (Exact name of registrant as specified in its charter)


     Oklahoma                                              22-2663839
     (State or other jurisdiction of                    (IRS Employer
     incorporation or organization)                     Identification No.)



             5727 South Lewis, #700, Tulsa, Oklahoma    74105-7148
                   (Address of principal executive offices)


                                 918-749-5666
             (Registrant's telephone number, including area code)



     Check whether the issuer (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 
               -----     -----
 

                    APPLICABLE ONLY TO CORPORATE  ISSUERS:
                                        
     As of May 13, 1999, 16,291,640 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
<PAGE>
 
                           GOTHIC ENERGY CORPORATION
                         GOTHIC PRODUCTION CORPORATION
                                        

                               TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

                                                                            PAGE
     Item 1 - Financial Statements
 
     Consolidated Unaudited Balance Sheet
     December 31, 1998 and March 31,1999................................     3
 
     Consolidated Unaudited Statement of Operations
     Three months ended March 31, 1998 and 1999.........................     4
 
     Consolidated Unaudited Statement of Cash Flows
     Three months ended March 31, 1998 and 1999.........................     5
 
     Notes to Unaudited Consolidated Financial Statements...............     6
 
     Report of Review by Independent Accountants........................     8
 
     Item 2 - Management's Discussion and Analysis
 
     Management's Discussion and Analysis or Plan of Operation..........     9
                                        

PART II - OTHER INFORMATION

     Item 6 - Exhibits and Reports on Form 8-K..........................    14
 
     Signatures.........................................................    15
                                        

                                       2
<PAGE>
 
                   GOTHIC ENERGY CORPORATION AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                        (in thousands, except par value)
                                        
<TABLE>
<CAPTION>
                                                                     December 31,                March 31,
                             ASSETS                                      1998                      1999
                             ------                               ------------------        ------------------
                                                                                                (Unaudited)
<S>                                                               <C>                       <C>
Current assets:
  Cash and cash equivalents                                            $   2,289                 $   5,691
  Natural gas and oil receivables                                          7,236                     8,032
  Receivable from officers and employees                                      55                        52
  Other                                                                      221                       224
                                                                       ---------                 ---------
  Total current assets                                                     9,801                    13,999
                                                                       
Property and equipment:                                                
  Natural gas and oil properties on full cost method:                  
    Properties being amortized                                           242,012                   244,539
    Unproved properties not subject to amortization                        2,862                     3,524
  Equipment, furniture and fixtures                                        3,327                     3,522
  Accumulated depreciation, depletion and amortization                   (33,201)                  (38,486)
                                                                       ---------                 ---------
Property and equipment, net                                              215,000                   213,099
Other assets, net                                                         12,487                    11,955
                                                                       ---------                 ---------
Total assets                                                           $ 237,288                 $ 239,053
                                                                       =========                 =========
                                                                       
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
                                                                       
Current liabilities:                                                   
  Accounts payable trade                                               $   3,208                 $   2,547
  Revenues payable                                                         6,031                     6,277
  Accrued interest expense                                                 4,358                    10,893
  Other accrued liabilities                                                  253                       193
                                                                       ---------                 ---------
Total current liabilities                                                 13,850                    19,910
                                                                       
Long-term debt, net                                                      301,179                   304,962
Gas imbalance and other liabilities                                        6,180                     3,707
                                                                       
Stockholders' equity (deficit):                                        
  Series B Preferred Stock, Par Value $.05, authorized                
    165,000 shares; 54,187 shares issued and outstanding                  36,945                    39,010
  Common stock, par value $.01, authorized 100,000,000 shares;         
    issued and outstanding 16,261,640 and 16,291,640 shares                  162                       163
  Additional paid in capital                                              42,996                    43,011
  Accumulated deficit                                                   (163,845)                 (171,531)
  Note receivable                                                           (179)                     (179)
                                                                       ---------                 ---------
Total stockholders' equity (deficit)                                     (83,921)                  (89,526)
                                                                       ---------                 ---------
Total liabilities and stockholders' equity (deficit)                   $ 237,288                 $ 239,053
                                                                       =========                 =========
</TABLE>
                             See accompanying notes

                                       3
<PAGE>
 
                   GOTHIC ENERGY CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (In thousands, except per share amounts)
                                  (Unaudited)
                                        
<TABLE> 
<CAPTION> 
                                        
                                                                        For the three months ended
                                                                                  March 31,
                                                               ----------------------------------------------
                                                                        1998                      1999
                                                               --------------------      --------------------
<S>                                                            <C>                       <C> 
Revenues:
  Natural gas and oil sales                                           $ 16,516                   $10,853
  Well operations                                                          586                       617
                                                                      --------                   -------
                                                                      
    Total Revenues                                                      17,102                    11,470
                                                                      
Costs and expenses:                                                   
  Lease operating expenses                                               4,664                     2,339
  Depletion, depreciation and amortization                               7,444                     5,285
  General and administrative expense                                       913                       971
                                                                      --------                   -------
                                                                      
Operating income                                                         4,081                     2,875
Interest expense and amortization of debt issuance costs                (8,033)                   (9,277)
Interest and other income                                                  166                       781
Loss on sale of investments                                               (265)                        -
                                                                      --------                   -------
                                                                      
Loss before extraordinary item                                          (4,051)                   (5,621)
                                                                      
Loss on early extinguishment of debt                                    27,061                         -
                                                                      --------                   -------
                                                                      
Net loss                                                               (31,112)                   (5,621)
                                                                      
Preferred dividend ($26.32 and $29.59 per preferred share)                 974                     1,603
Preferred dividend - amortization of  preferred discount                     -                       462
                                                                      --------                   -------
                                                                      
Net loss available for common shares                                  $(32,086)                  $(7,686)
                                                                      ========                   =======
                                                                      
Loss per common share before extraordinary item,                      
   basic and diluted                                                  $   (.31)                  $  (.47)
                                                                      ========                   =======
                                                                      
Net loss per common share, basic and diluted                          $  (1.97)                  $  (.47)
                                                                      ========                   =======
                                                                      
Weighted average common shares outstanding                              16,261                    16,281
                                                                      ========                   =======
</TABLE>

                             See accompanying notes

                                       4
<PAGE>
 
                   GOTHIC ENERGY CORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                  (Unaudited)
<TABLE> 
<CAPTION> 

                                                                             For the three months ended
                                                                                       March 31,
                                                                    ----------------------------------------------
                                                                             1998                      1999
                                                                    --------------------      --------------------
<S>                                                                 <C>                       <C> 
Cash flows from operating activities:
    Net loss                                                              $ (31,112)                  $(5,621)
Adjustments to reconcile net loss to net cash provided
    by operating activities:
    Depreciation, depletion and amortization                                  7,444                     5,285
    Amortization of discount and loan costs                                     920                       414
    Accretion of interest on discount notes                                       -                     2,283
    Loss on early extinguishment of debt                                     27,061                         -
 
Changes in assets and liabilities:
    Increase in accounts receivable                                          (4,971)                     (793)
    Increase in other current assets                                            (62)                       (3)
    Increase (decrease)  in accounts and revenues payable                     4,128                      (415)
    Increase (decrease) in accrued liabilities                               (1,164)                    6,475
    Decrease in gas imbalance liability                                           -                       (76)
                                                                          ---------                   -------
 
Net cash provided by operating activities                                 $   2,244                   $ 7,549
 
Net cash used by investing activities:
    Collection of note receivable from officer and director                     167                         -
    Purchase of available-for-sale investments                                 (462)                        -
    Proceeds from sale of investment                                            724                         -
    Proceeds from sale of property and equipment                              4,000                     2,095
    Purchase of property and equipment                                     (214,511)                   (2,839)
    Property development costs                                               (2,635)                   (4,875)
                                                                          ---------                   -------
 
Net cash used by investing activities                                     $(212,717)                  $(5,619)
 
Cash flows from financing activities:
    Proceeds from short-term borrowings                                      60,000                         -
    Payment of short-term borrowings                                         (1,500)                        -
    Proceeds from long-term borrowings                                      132,684                     1,500
    Payments of long-term borrowings                                         (4,500)                        -
    Proceeds from sale of preferred stock, net                               36,475                         -
    Payment of loan fees                                                    (26,114)                      (28)
                                                                          ---------                   -------
 
Net cash provided by financing activities                                 $ 197,045                   $ 1,472
 
Net change in cash and cash equivalents                                     (13,428)                    3,402
Cash and cash equivalents, beginning of period                               16,722                     2,289
                                                                          ---------                   -------
Cash and cash equivalents, end of period                                  $   3,294                   $ 5,691
                                                                          =========                   =======
 
Supplemental disclosure of interest paid                                  $   7,113                   $ 6,579
                                                                          =========                   =======
</TABLE>

                             See accompanying notes

                                       5
<PAGE>
 
                   GOTHIC ENERGY CORPORATION AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                        
NOTE 1.  GENERAL AND ACCOUNTING POLICIES

  Organization and Nature of Operations--The consolidated financial statements
include the accounts of Gothic Energy Corporation, a "holding company", and its
subsidiary, Gothic Production Corporation ("Gothic Production") since its
formation in April of 1998, (collectively referred to as the ''Company''). All
significant intercompany balances and transactions have been eliminated. The
Company is primarily engaged in the business of acquiring, developing and
exploiting natural gas and oil reserves in Oklahoma, Texas, New Mexico and
Kansas. Substantially all of the Company's natural gas and oil production is
being sold regionally in the ''spot market'' or under short-term contracts, not
extending beyond twelve months.

  Preparation of Financial Statements  - The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those estimates.
The December 31, 1998 consolidated balance sheet data was derived from the
audited financial statements but does not include all disclosures required by
generally accepted accounting principles.  The financial statements should be
read in conjunction with the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.

  In the opinion of management of the Company, the accompanying financial
statements contain all adjustments, none of which were other than normal
recurring accruals, necessary to present fairly the financial position of the
Company as of March 31, 1999, and the results of its operations and cash flows
for the periods ended March 31, 1998 and 1999.  The results of operations for
the 1999 period is not necessarily indicative of the results of operations to be
expected for the full year.

  Loss per common share - Loss per common share before extraordinary item and
net loss per common share are computed in accordance with Statement of Financial
Accounting Standards No. 128 ("FAS 128").  Presented on the Consolidated
Statement of Operations is a reconciliation of loss available to common
shareholders.  There is no difference between actual weighted average shares
outstanding, which are used in computing basic loss per share and diluted
weighted average shares, which are used in computing diluted loss per share
because the effect of outstanding options and warrants would be antidilutive.
Warrants and options to purchase approximately 21,575,000 shares were
outstanding as of March 31, 1999 which were not included in the computation of
diluted loss per share.

  Recently issued Financial Accounting Pronouncements -   In June 1998, the FASB
issued Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities".  FAS 133 is effective for fiscal years beginning after June 15,
1999, but earlier application is permitted as of the beginning of any fiscal
quarter subsequent to June 15, 1998.  FAS 133 standardizes the accounting for
derivative instruments by requiring that all derivatives be recognized as assets
and liabilities and measured at fair value.  Upon the Statement's initial
application, all derivatives are required to be recognized in the statement of
financial position as either assets or liabilities and measured at fair value.
In addition, all existing hedging relationships must be designated, reassessed,
documented and the accounting conformed to the provisions of FAS 133.  Due to
the limited nature of the Company's hedging activities, the Company does not
expect the adoption of FAS 133 to have a significant impact on its financial
position or results of operations when adopted.

NOTE 2.  GOING CONCERN

  The Company incurred a significant net loss in 1998, due principally to a
decline in commodity prices during the year.  This commodity price decline
required the Company to write down the carrying value of its natural gas and oil
properties by $76,000,000.  More significantly, the commodity price decline has
continued to affect the ongoing revenues and cash flows of the Company,
resulting in a net loss of $5,621,000 for the three months ended March 31, 1999.

                                       6
<PAGE>
 
NOTE 2.  GOING CONCERN (Continued)

  It is the intention of the Company to continue to spend available cash flow
(EBITDA less cash interest payable on Senior Secured Notes) on the development
of natural gas and oil properties.  With commodity prices continuing to reflect
the excess of supply in the overall system, the prices of natural gas continue
to be depressed.  These depressed prices affect the Company's ability to
generate sufficient reserves to replace current production.  Absent an overall
increase in commodity prices, the Company will continue to be limited in its
ability to increase production and related cash flow to a level sufficient to
meet its ongoing financial covenants under its Credit Facility.  The price of
natural gas and oil has recently been increasing, but there is no assurance that
it will continue to increase or remain at the current level.

NOTE 3.  NATURAL GAS AND OIL PROPERTIES

  In early 1999, the natural gas and oil industry experienced a downturn in
natural gas prices.  Utilizing natural gas and oil prices in effect at March 31,
1999, the Company's calculation of its ceiling with respect to costs capitalized
associated with its natural gas and oil properties indicated that a write-down
of $46 million before taxes was warranted.  Subsequent to March 31, 1999, both
natural gas and oil prices have increased to levels which indicate no such
impairment, and accordingly, no write-down of the Company's natural gas and oil
properties has been reflected in the accompanying statement of operations.
Future declines in natural gas and oil prices experienced by the Company could
cause the Company in the near term to reduce the carrying value of its natural
gas and oil properties.

NOTE 4.  SUMMARIZED FINANCIAL INFORMATION

  Gothic Production Corporation was organized in March 1998 as a wholly owned
subsidiary of the Company.  On April 27, 1998, the Company transferred to Gothic
Production its ownership in all its natural gas and oil properties.  Following
is the summarized financial information related to Gothic Production  as of
March 31, 1999 and for the three month period ended March 31, 1999. (in
thousands)

<TABLE>
<CAPTION>
                                                              As of  March 31, 1999
                              ---------------------------------------------------------------------------------------
                                                                                                 Gothic Energy        
                                    Gothic Energy               Gothic Production                Corporation   
                                     Corporation                   Corporation                   Consolidated         
                                     -----------                -----------------               --------------
<S>                           <C>                               <C>                             <C>
Current assets                         $   -                         $ 13,999                      $ 13,999
Non-current assets                       1,982                        223,072                       225,054
Current liabilities                        -                           19,910                        19,910
Non-current liabilities                 68,462                        240,207                       308,669
</TABLE>

<TABLE>
<CAPTION>
                                                      For the three months ended March 31, 1999
                              ---------------------------------------------------------------------------------------
                                                                                                 Gothic Energy        
                                    Gothic Energy               Gothic Production                Corporation   
                                     Corporation                   Corporation                   Consolidated         
                                     -----------                -----------------               --------------
<S>                           <C>                               <C>                             <C>
Total revenues                         $  -                          $11,470                        $11,470
Operating costs and
   expenses                               -                            8,595                          8,595
Interest expense and
   amortization of debt
   issuance cost                         2,355                         6,922                          9,277
Net loss                                (2,355)                       (3,266)                        (5,621)
 
</TABLE>

                                       7
<PAGE>
 
INDEPENDENT ACCOUNTANT'S REPORT



To the Board of Directors and Stockholders:

     We have reviewed the accompanying consolidated balance sheet of Gothic
Energy Corporation and Subsidiaries as of March 31, 1999 and the related
consolidated statements of operations and cash flows for the three-month periods
ended March 31, 1998 and 1999.  These financial statements are the
responsibility of the Company's management.

     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants.  A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters.  It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole.  Accordingly, we do not express such an opinion.

     Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.

     We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of  December 31, 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended (not presented herein); and in our report dated
March 12, 1999, we expressed an unqualified opinion on those consolidated
financial statements.  Our report included an explanatory paragraph that
described the substantial doubt about the Company's ability to continue as a
going concern, as discussed in Note 2 to those statements.  In our opinion, the
information set forth in the accompanying consolidated balance sheet as of
December 31, 1998 is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.



PricewaterhouseCoopers LLP


Tulsa, Oklahoma
May 14, 1999

                                       8
<PAGE>
 
Item 2 - Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------

     The following is management's discussion and analysis of certain
significant factors which have affected the Company's earnings, financial
condition and liquidity during the periods included in the accompanying
Consolidated Financial Statements.

General

     The Company's results of operations have been significantly affected by its
acquisition of producing natural gas and oil properties over the last three
years.  During the first quarter of 1998, the Company completed the Amoco
Acquisition for a purchase price of approximately $242.0 million.  This
acquisition included approximately 240.0 Bcfe.  The Amoco Acquisition was
financed primarily through borrowings under the Company's Credit Facility.

     The following table reflects certain summary operating data for the periods
presented:

Results of Operations

<TABLE>
<CAPTION>
                                                         Quarter Ended March 31,
                                                        1998                 1999
                                                   --------------      ----------------
                                                     (in thousands, unless otherwise
                                                                indicated)
<S>                                                <C>                 <C> 
Net Production:
   Oil (Mbbls)                                                 86                    40
   Natural gas (Mmcf)                                       6,956                 6,422
   Natural gas equivalent (Mmcfe)                           7,472                 6,662
 
Oil and Natural Gas Sales:
   Oil                                                    $ 1,299               $   481
   Natural gas                                             15,217                10,372
                                                          -------               -------
   Total                                                  $16,516               $10,853
                                                          =======               =======
 
Average Sales Price:
   Oil (Bbl)                                              $ 15.10               $ 12.03
   Natural gas (Mcf)                                         2.19                  1.62
   Natural gas equivalent (Mcfe)                             2.21                  1.63
 
Expenses ($ per Mcfe):
   Lease operating/(1)(2)/                                $  0.48               $  0.24
   General and administrative/(3)/                           0.09                  0.15
   Depreciation, depletion and                               0.99                  0.77
    amortization/(4)/
</TABLE>
-------------------------------------------------
(1)  Includes lease operating costs and direct field costs only.
(2)  The 1998 lease operating expense amount includes $1.1 million of non-
     recurring costs associated with the Amoco Acquisition transition.
(3)  Excludes a non-recurring severance payment to a former officer in 1998.
(4)  Represents depreciation, depletion and amortization of oil and natural gas
     properties only.

                                       9
<PAGE>
 
Item 2 - Management's Discussion and Analysis or Plan of Operation (Continued)
------------------------------------------------------------------------------

    Quarter Ended March 31, 1999 Compared with Quarter Ended March 31, 1998

  Revenues were $11.5 million for the quarter ended March 31, 1999, as compared
to $17.1 million for the quarter ended March 31, 1998.  This represents a 33%
decrease in total revenue for the period.  Natural gas and oil sales for the
quarter ended March 31, 1999 decreased $5.6 million (34%)  to $10.9 million,
with $481,000 from oil sales and $10.4 million from natural gas sales, as
compared to natural gas and oil sales of $16.5 million for the quarter ended
March 31, 1998, with $1.3 million from oil sales and $15.2 million from natural
gas sales.  The decrease in natural gas and oil sales was primarily the result
of lower commodity prices within the natural gas and oil industry and the sale
of properties by the Company subsequent to the first quarter of 1998.  Of the
$5.6 million decrease in comparable natural gas and oil sales, approximately
$3.6 million was the result of the lower commodity prices and approximately $2.0
million was the result of lower production volumes resulting from property
sales.  Oil sales in 1999 were based on the sale of 40,000 barrels at an average
price of $12.03 per barrel as compared to 86,000 barrels at an average price of
$15.10 per barrel in 1998.  Natural gas sales in 1999 were based on the sale of
6,422,000 Mcf at an average price of $1.62 per Mcf compared to 6,956,000 Mcf at
an average price of $2.19 per Mcf in 1998.

  The Company incurred lease operating expenses for the quarter ended March 31,
1999 of $2.3 million compared with lease operating expenses of $4.7 million for
the quarter ended March 31, 1998.  Lease operating expenses include
approximately $731,000 and $1.1 million, respectively, in production taxes which
the Company incurred from its share of production in 1999 and 1998.  The
decrease in lease operating expenses is primarily due to the sale of oil
properties in the Johnson Ranch and Brushy Draw areas.  Lease operating expenses
as a percentage of natural gas and oil sales were 22% in 1999 as compared to 28%
in 1998.

  Depreciation, depletion and amortization expense was $5.3 million for the
quarter ended March 31, 1999 as compared to $7.4 million for the quarter ended
March 31, 1998.  The decrease resulted primarily from the writedown of natural
gas and oil properties in 1998 and the decreased production associated with the
properties sold in 1998.

  General and administrative costs were $971,000 for the quarter ended March 31,
1999, as compared to $913,000 for the quarter ended March 31, 1998.  This
increase was primarily the result of additional personnel and other costs
related to the Amoco Acquisition and the administrative costs incurred in
operating the wells acquired from Amoco.  General and administrative costs per
Mcfe increased from $0.12 in 1998 to $0.15 in 1999.

  Interest and debt issuance costs were $9.3 million for the quarter ended March
31, 1999 as compared to $8.0 million for 1998.  The increase primarily relates
to interest, and costs associated with the 11 1/8% Senior Secured Notes and the
14 1/8% Senior Secured Discount Notes issued as part of the Company's
recapitalization in April 1998.  The Company incurred interest costs of $6.5
million related to the 11 1/8% Senior Secured Notes, $2.3 million related to the
14 1/8% Senior Secured Discount Notes, $42,000 with Bank One, Texas, NA and
$414,000 as amortization of loan costs.

  The Company earned $781,000 in interest and other income during the quarter
ended March 31, 1999 compared to $166,000 in 1998.  The 1999 amount includes
$720,000 from the sale of seismic data.

  The Company recorded an extraordinary loss on early extinguishment of debt in
the amount of $27.1 million (reflecting the payment of $20.8 million in consent
fees and the write-off of  $6.2 million in unamortized discount and debt issue
costs) in the quarter ending March 31, 1998.  The loss was recognized as a
result of amendments to the Company's 12 1/4% Senior Notes which constituted a
substantial modification to the terms of these notes.

  The Company also incurred $2.1 million in preferred dividends and amortization
of preferred discount costs on its Series B Preferred Stock during the quarter
ended March 31, 1999, compared to $974,000 in preferred dividends on its Series
A Preferred Stock in 1998.

                                       10
<PAGE>
 
Item 2 - Management's Discussion and Analysis or Plan of Operation (Continued)
------------------------------------------------------------------------------

  The profitability and revenues of the Company are dependent, to a significant
extent, upon prevailing spot market prices for natural gas and oil. In the past,
natural gas and oil prices and markets have been volatile. Prices are subject to
wide fluctuations in response to changes in supply of and demand for natural gas
and oil, market uncertainty and a variety of additional factors that are beyond
the control of the Company. Such factors include political conditions, weather
conditions, government regulations, the price and availability of alternative
fuels and overall economic conditions. 

  In April 1999, the Company entered into a hedge agreement in the form of a
collar with respect to the production of 50,000 MMBTU of natural gas per day
during the period of May through October 1999.  The collar places a floor of
$1.80 per MMBTU and a ceiling of $2.26 per MMBTU for the effective price of
natural gas received by the Company.  Additionally, in March 1999 the Company
entered into a similar collar agreement with respect to the production of 50,000
MMBTU per month during the period of April through October 1999 at a floor price
of $1.65 per MMBTU and a ceiling of $2.16 per MMBTU.  The Company will pay the
other party $0.05 per MMBTU per month over the term of the agreement.

  In early 1999, the natural gas and oil industry experienced a downturn in
natural gas prices.  Utilizing natural gas and oil prices in effect at March 31,
1999, the Company's calculation of its ceiling with respect to costs capitalized
associated with its natural gas and oil properties indicated that a write-down
of $46 million before taxes was warranted.  Subsequent to March 31, 1999, both
natural gas and oil prices have increased to levels which indicate no such
impairment, and accordingly, no write-down of the Company's natural gas and oil
properties has been reflected in the accompanying statement of operations.
Future declines in natural gas and oil prices experienced by the Company could
cause the Company in the near term to reduce the carrying value of its natural
gas and oil properties.

Liquidity and Capital Resources

General

  Since 1994, the Company's principal sources of cash have been bank borrowings,
the sale of equity and debt securities and cash flow from operations.  The
following summary table reflects comparative cash flows for the Company for the
quarters ended March 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                                                            Quarter ended March 31,
                                                                          1998                   1999
                                                                    ----------------       ----------------
                                                                     (in thousands)        
<S>                                                                 <C>                    <C>
     Net cash provided by operating activities                              $  2,244                 $7,549
     Net cash used in investing activities                                   212,717                  5,619
     Net cash provided by financing activities                               197,045                  1,472
</TABLE>

  Net cash provided by operations was $7.5 million for the quarter ended March
31, 1999 as compared to net cash provided of $2.2 million for the same period in
1998.  The operating cash flows for the quarter ended March 31, 1999 reflect the
decrease in income from operations resulting from lower commodity prices and
production volumes, partially offset by changes in working capital.

  The Company used $5.6 million of net cash in investing activities for the
quarter ended March 31, 1999 compared to net cash used of $212.7 million for the
same period in 1998.  This includes well enhancement costs of approximately $4.9
million and approximately $2.8 million in cash paid for property acquisitions.
These uses were partially offset by proceeds of $2.1 million received from the
sale of substantially all of the Company's Johnson Ranch operations.

                                       11
<PAGE>
 
Item 2 - Management's Discussion and Analysis or Plan of Operation (Continued)
------------------------------------------------------------------------------

  Net cash provided by financing activities for the quarter ended March 31, 1999
was $1.5 million compared to $197.0 million provided in 1998. The March 31, 1999
amount includes proceeds from the Company's credit facility of $1.5 million,
partially offset by the payment of $28,000 in bank and other loan fees.

Outstanding Indebtedness and Other Securities

Credit Facility.
--------------- 

  On April 27, 1998, Gothic Production, with the Company as guarantor, entered
into the Credit Facility.  The Credit Facility consists of a revolving line of
credit, with an initial Borrowing Base of $25,000,000.  Borrowings initially are
limited to being available for the acquisition and development of natural gas
and oil properties, letters of credit and general corporate purposes.  The
Borrowing Base will be redetermined at least semi-annually and was initially
redetermined on October 1, 1998.  Upon completion of the April 1, 1999
redetermination, the borrowing base remained at $25,000,000.  The principal is
due at maturity, April 30, 2001.  Interest is payable monthly calculated at the
Bank One Base Rate, as determined from time to time by Bank One.  Gothic
Production may elect to calculate interest under a London Interbank Offered Rate
("LIBOR") plus 1.5% (or up to 2.0% in the event the loan balance is greater than
75% of the Borrowing Base).  Gothic Production is required to pay a commitment
fee on the unused portion of the Borrowing Base equal to  1/2 of 1% per annum.
Under the Credit Facility, Bank One holds first priority liens on substantially
all of the natural gas and oil properties of Gothic Production, whether
currently owned or hereafter acquired.  As of March 31, 1999, Gothic Production
had $1,500,000 outstanding under the Credit Facility.

  The Credit Facility requires, among other things, semi-annual engineering
reports covering oil and natural gas reserves on the basis of which semi-annual
and other redeterminations of the borrowing base and monthly commitment
reduction are made. The Credit Facility, as amended on May 7, 1999, also
includes various affirmative and negative covenants, including, among others,
(i) prohibitions against additional indebtedness unless approved by the lenders,
subject to certain exceptions, (ii) prohibitions against the creation of liens
on the assets of the Company, subject to certain exceptions, (iii) prohibitions
against cash dividends, (iv) prohibitions against hedging positions unless
consented to by Bank One, (v) prohibitions on asset sales, subject to certain
exceptions, (vi) restrictions on mergers or consolidations, (vii) a requirement
to maintain a ratio of current assets to current liabilities of 1.0 to 1.0, and
(viii) a minimum interest coverage ratio of not less than 1.2 to 1.0 for the
quarter ended March 31, 1999, 1.25 to 1.0 for the quarter ended June 30, 1999,
1.50 to 1.0 for the quarter ended September 30, 1999, 1.75 to 1.0 for the
quarter ended December 31, 1999 and 2.0 to 1.0 for each remaining quarter
starting with the quarter ending March 31, 2000. The Credit Facility includes
covenants prohibiting cash dividends, distributions and loans or advances to
third parties, subject to certain exceptions. If Gothic Production is required
to purchase or redeem any portion of the 11 1/8% Senior Secured Notes, or if any
portion of the 11 1/8% Senior Secured Notes become due, the Borrowing Base is
subject to reduction. Gothic Production is required to escrow interest payments
due on the Senior Secured Notes at such times as its borrowings under the Credit
Facility equal or exceed 75% of the Borrowing Base. Events of default include
the non-payment of principal, interest or fees, a default under other
outstanding indebtedness, a breach of the representations and warranties
contained in the loan agreement, material judgements, bankruptcy or insolvency,
a default under certain covenants not cured within a grace period, and a change
in the management or control of the Company.

Future Capital Requirements and Resources

  The Company's capital requirements relate to the acquisition, exploration,
enhancement, development and operation of natural gas and oil properties.  In
general, because the natural gas and oil reserves the Company has acquired are
depleted by production over time, the success of its business strategy is
dependent upon a continuous acquisition, exploitation, enhancement, and
development program.  In order to achieve profitability and generate cash flow,
the Company will be dependent upon acquiring or developing additional natural
gas and oil properties or entering into joint natural gas and oil well
development arrangements.  The Company currently has $23.5 million in borrowing
capacity available under its Credit Facility.

                                       12
<PAGE>
 
Year 2000 Computer Issues

  The Company has reviewed its computer systems and hardware to locate potential
operational problems associated with the year 2000.  Such review will continue
until all potential problems are located and resolved.  The Company believes
that all year 2000 problems in its computer systems have been or will be
resolved in a timely manner and have not caused and will not cause disruption of
its operations or have a material adverse effect on its financial condition or
results of operations.  However, it is possible that the Company's cash flows
could be disrupted by year 2000 problems experienced by outside operators of its
wells, buyers of its natural gas and oil, financial institutions or other
persons.  The Company is unable to quantify the effect, if any, of year 2000
computer problems that may be experienced by these third parties.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995.

  With the exception of historical matters, the matters discussed in this Report
are "forward-looking statements" as defined under the Securities Exchange Act of
1934, as amended, that involve risks and uncertainties.  Forward-looking
statements include, but are not limited to, the matters described below, as well
as Notes 2 and 3 to Notes to Consolidated Financial Statements herein, "Item 2.
Management's Discussion and Analysis or Plan of Operations -General," "- Quarter
Ended March 31, 1999 Compared with Quarter Ended March 31, 1998," "- Liquidity
and Capital Resources." Such forward-looking statements relate to the Company's
ability to attain and maintain profitability and cash flow, the stability of and
future prices for oil and gas, the ability of the Company to expand through
acquisitions and to redeploy its equipment among regional operations, the
ability of the Company to raise additional capital to meet its requirements and
to obtain additional financing, its ability to successfully implement its
business strategy, and its ability to maintain compliance with the covenants of
its various loan documents and other agreements pursuant to which securities
have been issued. The inability of the Company to meet these objectives or the
consequences on the Company from adverse developments in general economic
conditions, adverse developments in the oil and gas industry, and other factors
could have a material adverse effect on the Company. The Company cautions
readers that various risk factors described above and in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998 could cause the
Company's operating results to differ materially from those expressed in any
forward-looking statements made by the Company and could adversely affect the
Company's financial condition and its ability to pursue its business strategy.

                                       13
<PAGE>
 
PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits:

               15 -   Letter Regarding Unaudited Interim Financial Information

               27 -   Financial Data Schedule

          (b)  Reports on Form 8-K

               During the quarter ended March 31, 1999, the Company did not file
               any Current Reports on Form 8-K.

                                       14
<PAGE>
 
                                  SIGNATURES


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


                                   GOTHIC ENERGY CORPORATION



Date:  May 14, 1999                By:  /s/ Michael Paulk
                                        -----------------------------------
                                        MICHAEL PAULK,
                                        President, Chief Executive Officer


Date:  May 14, 1999                By:  /s/ Steven P. Ensz
                                        -----------------------------------
                                        STEVEN P. ENSZ,
                                        Vice President of Finance, Chief 
                                        Financial Officer


Date:  May 14, 1999                By:  /s/ Andrew McGuire
                                        -----------------------------------
                                        ANDREW MCGUIRE,
                                        Controller

                                       15